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UNIVERSAL ANNUITY
PROSPECTUS
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This prospectus describes Universal Annuity, a flexible premium variable annuity
Contract (the "Contract") issued by The Travelers Insurance Company (the
"Company," "us" or "we").
The Contract's value will vary daily to reflect the investment experience of the
funding options you select and the interest credited to the Fixed (Flexible
Annuity) Account. The variable funding options are:
MANAGED SEPARATE ACCOUNTS
Travelers Growth and Income Stock Account ("Account GIS")
Travelers Money Market Account
("Account MM")
Travelers Quality Bond Account
("Account QB")
Travelers Timed Aggressive Stock Account ("Account TAS")
Travelers Timed Growth and Income Stock
Account ("Account TGIS")
Travelers Timed Short-Term Bond Account ("Account TSB")
TRAVELERS FUND U FOR VARIABLE ANNUITIES
Capital Appreciation Fund
Dreyfus Stock Index Fund
High Yield Bond Trust
Managed Assets Trust
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
DREYFUS VARIABLE INVESTMENT FUND
Small Cap Portfolio
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND
VIP Equity Income Portfolio
VIP Growth Portfolio
VIP High Income Portfolio
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND II
VIP II Asset Manager Portfolio
TEMPLETON VARIABLE PRODUCTS SERIES FUND
Templeton Asset Allocation Fund
(Class 1)
Templeton Bond Fund (Class 1)
Templeton Stock Fund (Class 1)
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 Cap Value Portfolio
TRAVELERS SERIES TRUST
Disciplined Mid Cap Stock Portfolio
Social Awareness Stock Portfolio
U.S. Government Securities Portfolio
Utilities Portfolio
THE FIXED ACCOUNT IS DESCRIBED IN APPENDIX A. SOME OF THE FUNDING OPTIONS MAY
NOT BE AVAILABLE IN ALL STATES. THIS PROSPECTUS MUST BE ACCOMPANIED BY THE
CURRENT PROSPECTUSES FOR FUND U'S UNDERLYING FUNDS. PLEASE READ AND RETAIN THEM
FOR FUTURE REFERENCE.
This prospectus provides the information that you should know before investing.
You can receive additional information by requesting a Statement of Additional
Information ("SAI") dated May 1, 1999. The SAI has been filed with the
Securities and Exchange Commission ("SEC") and is incorporated by reference into
this prospectus. To request a free copy write to The Travelers Insurance
Company, Annuity Services, One Tower Square, Hartford, Connecticut 06183-5030,
call 1-800-842-9368, or access the SEC's website (http://www.sec.gov). See
Appendix C 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.
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 OCTOBER 4, 1999
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TABLE OF CONTENTS
<TABLE>
<S> <C>
Summary......................................... 3
Fee Table....................................... 6
Condensed Financial Information................. 8
The Variable Annuity Contract................... 9
Contract Owner Inquiries...................... 9
Purchase Payments............................. 9
Accumulation Units............................ 9
The Funding Options........................... 9
Transfers..................................... 12
Dollar-Cost Averaging (Automated
Transfers)................................ 12
Asset Allocation Advice..................... 13
Tactical Asset Allocation Services............ 14
Tactical Asset Allocation Risks............. 14
Access to your Contract Values................ 15
Systematic Withdrawals...................... 15
Charges and Deductions........................ 16
General..................................... 16
Withdrawal Charge........................... 16
Free Withdrawal Allowance................... 18
Premium Tax................................. 18
Administrative Charge....................... 18
Mortality and Expense Risk Charge........... 18
Funding Option Expenses..................... 18
Tactical Asset Allocation Services Fees..... 18
Managed Separate Account: Management and
Fees...................................... 19
Ownership Provisions.......................... 20
Types of Ownership.......................... 20
Beneficiary................................. 20
Annuitant................................... 21
Death Benefit................................. 21
Payment of Proceeds......................... 21
Death Proceeds after the Maturity Date...... 22
The Annuity Period.............................. 22
Maturity Date............................... 22
Allocation of Annuity....................... 23
Variable Annuity............................ 23
How We Determine the First Annuity Payment.. 23
How We Determine Payments after the First
Annuity Payment........................... 23
Fixed Annuity............................... 23
Payout Options................................ 24
Election of Options......................... 24
Annuity Options............................. 24
Income Options.............................. 25
Miscellaneous Contract Provisions............... 25
Right to Return............................. 25
Termination of Individual Contract.......... 26
Termination of Group Contract or Account.... 26
Distribution from One Account to Another
Account................................... 27
Required Reports............................ 27
Change of Contract.......................... 27
Assignment.................................. 28
Suspension of Payments...................... 28
Other Information............................... 28
The Insurance Company....................... 28
Financial Statements........................ 28
IMSA........................................ 28
Year 2000 Compliance........................ 29
Distribution of Variable Annuity
Contracts................................. 29
Conformity with State and Federal Laws...... 29
Voting Rights............................... 30
Legal Proceedings and Opinions.............. 30
The Separate Accounts........................... 31
Performance Information..................... 31
Federal Tax Considerations...................... 32
General Taxation of Annuities............... 32
Types of Contracts: Qualified or
Nonqualified.............................. 32
Investor Control............................ 33
Mandatory Distributions for Qualified
Plans..................................... 33
Nonqualified Annuity Contracts.............. 33
Qualified Annuity Contracts................. 34
Penalty Tax for Premature Distributions..... 34
Diversification Requirements................ 34
Managed Separate Accounts....................... 34
The Travelers Growth and Income Stock Account
For Variable Annuities (Account GIS).......... 35
The Travelers Quality Bond Account For Variable
Annuities (Account QB)........................ 36
The Travelers Money Market Account For Variable
Annuities (Account MM)........................ 37
The Travelers Timed Growth and Income Stock
Account For Variable Annuities (Account
TGIS)......................................... 39
The Travelers Timed Short-Term Bond Account For
Variable Annuities (Account TSB).............. 40
The Travelers Timed Aggressive Stock Account For
Variable Annuities (Account TAS).............. 41
The Travelers Timed Bond Account For Variable
Annuities(Account TB)......................... 42
Investments, Practices and Risks of the Managed
Separate Accounts............................. 43
Investments at a Glance......................... 46
Appendix A (The Fixed Account).................. A-1
Appendix B (Condensed Financial Information).... B-1
Appendix C (Contents of Statement of Additional
Information................................... C-1
</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 Units.............................. 9
Annuitant....................................... 21
Annuity Payments................................ 22
Annuity Unit.................................... 9
Cash Surrender Value............................ 15
Cash Value...................................... 9
Contract Date................................... 9
Contract Owner (You, Your or Owner)............. 9
Contract Year................................... 9
Funding Option(s)............................... 9
Income Payments................................. 25
Individual Account.............................. 9
Managed Separate Account........................ 19
Maturity Date................................... 22
Owner's Account................................. 9
Participant..................................... 9
Participant's Interest.......................... 9
Purchase Payment................................ 9
Written Request................................. 9
</TABLE>
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SUMMARY:
TRAVELERS UNIVERSAL ANNUITY
THIS SUMMARY DETAILS SOME OF THE MORE IMPORTANT POINTS THAT YOU SHOULD KNOW AND
CONSIDER BEFORE PURCHASING THE CONTRACT. PLEASE READ THE PROSPECTUS CAREFULLY.
CAN YOU GIVE ME A DESCRIPTION OF THE VARIABLE ANNUITY CONTRACT? The Contract 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 and/or to
the Fixed (Flexible Annuity) Account. The variable funding options are designed
to produce a higher rate of return than the Fixed Account; however, this is not
guaranteed. You may gain or lose money in the funding options.
The Contract, like all deferred variable annuity contracts has two phases: the
accumulation phase and the payout phase. During the accumulation phase, under a
qualified contract, 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. During the accumulation phase,
under a nonqualified Contract, earnings on your after-tax contributions
accumulate on a tax-deferred basis and are taxed as income when you make a
withdrawal. The income 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.
During the payout phase, you may choose to receive income payments from the
Fixed Account or the variable funding options. If you want to receive scheduled
payments from your annuity, you can choose from a number of annuity options.
Once you elect an annuity option or an income option 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. If amounts are
directed to the variable funding options, the dollar amount of your payments may
increase or decrease.
WHO SHOULD PURCHASE THIS CONTRACT? The Contract is currently available for use
in connection with (1) individual nonqualified purchases; (2) Individual
Retirement Annuities (IRA) or IRA Rollover pursuant to Section 408 of the
Internal Revenue Code of 1986, as amended; and (3) qualified retirement plans
("Plan") which include contracts qualifying under Section 401(a), 403(b), 408(b)
or 457 of the Internal Revenue 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 and other non-tax related benefits.
You may purchase a qualified Contract with an initial payment of at least $20,
except in the case of an IRA, for which the minimum initial payment is $1,000.
Under a qualified Contract, you may make additional payments of at least $20.
For nonqualified Contracts, the minimum initial purchase payment is $1,000, and
$100 thereafter.
WHO IS THE CONTRACT ISSUED TO? If you purchase an individual contract, you are
the contract owner. If a group "allocated" contract is purchased, we issue
certificates to the individual participants. Where we refer to "you," we are
referring to the individual contract owner, or to the group participant, as
applicable. For convenience, we refer to both contracts and certificates as
"contracts."
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We issue group contracts in connection with retirement plans. Depending on your
retirement plan provisions, certain features and/or funding options described in
this prospectus may not be available to you (for example, dollar-cost averaging,
the CHART program, etc.). 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. 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
the Fixed Account and any or all of the variable 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. Refer to the SAI for performance information for
each funding option. Past performance is not a guarantee of future results.
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 the
minimum, we would always allow at least one transfer every six months.
WHAT EXPENSES WILL BE ASSESSED UNDER THE CONTRACT? The Contract has insurance
features and investment features, and there are costs related to each. For each
contract we deduct a semiannual administrative charge of $15. The annual
insurance charge is 1.25% of the amounts you direct to the variable funding
options. Each funding option also charges for management, any applicable asset
allocation fee and other expenses. Please refer to the Fee Table for more
information about the charges.
If you withdraw amounts from the Contract, we may deduct a withdrawal charge.
The charge equals 5% of each purchase payment if withdrawn within 5 years of the
payment date. If you withdraw all amounts under the Contract, or if you begin
receiving annuity/income payments, the Company may be required by your state to
deduct a premium tax.
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 payments. Under a
nonqualified Contract, payments are made with after-tax dollars, and any
earnings accumulate tax-deferred. You will be taxed on these earnings when they
are withdrawn from the Contract.
If you own a qualified Contract, and 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
distribution amount required by federal law. 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.
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HOW MAY I ACCESS MY MONEY? You can take withdrawals any time during the
accumulation phase. A withdrawal charge may apply. After the first contract
year, you may withdraw up to 10% of the cash value (as of the end of the
previous contract year) without a deferred sales charge. Of course, you may have
to pay income taxes, a federal tax penalty or premium taxes on any money you
take out.
You may choose to receive monthly, quarterly, semiannual or annual
("systematic") withdrawals of at least $50 if your Contract's cash value is
$5,000 or more. All applicable sales charges and premium taxes will be deducted.
WHAT IS THE DEATH BENEFIT UNDER THE CONTRACT? The death benefit applies upon
the first death of the owner, joint owner or annuitant. Assuming you are the
Annuitant, if you die before you move to the income phase, the person you have
chosen as your beneficiary will receive a death benefit. 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.
Any amount paid will be reduced by any applicable premium tax, outstanding loans
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 as compared to a
single one-time purchase. Dollar cost averaging requires regular
investments regardless of fluctuating price levels, and does not
guarantee a profit nor prevent loss in a declining market. Potential
investors should consider their financial ability to continue
purchases through periods of low price levels.
- TACTICAL ASSET ALLOCATION PROGRAM. If allowed, you may elect to enter
into a separate Tactical Asset Allocation services agreement with
registered investment advisers who provide Tactical Asset Allocation
services. These agreements permit the registered investment advisers
to act on your behalf by transferring all or a portion of the Cash
Value from one Market Timed Account to another. The registered
investment advisers can transfer funds only from one Market Timed
Account to another Market Timed Account. Purchase Payments are
allocated to the following Funding Options when you participate in the
Tactical Asset Allocation Program: Travelers Timed Growth and Income
Stock Account; Travelers Timed Short-Term Bond Account and Travelers
Timed Aggressive Stock Account. The Tactical Asset Allocation Program
and applicable fees are fully described in a separate Disclosure
Statement.
- ASSET ALLOCATION ADVICE. If allowed, you may elect to enter into a
separate advisory agreement with Copeland Financial Services, Inc.
("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.
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FEE TABLE
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ACCOUNTS GIS, QB, MM, TGIS, TSB, TAS AND TB
FUND U AND ITS UNDERLYING FUNDS
CONTRACT CHARGES AND EXPENSES
<TABLE>
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CONTINGENT DEFERRED SALES CHARGE (as a percentage of
purchase payments withdrawn)
If withdrawn within 5 years after the purchase
payment is made..................................... 5.00%
If withdrawn 5 or more years after the purchase
payment is made..................................... 0%
SEMIANNUAL CONTRACT ADMINISTRATIVE CHARGE.............. $15
ANNUAL SEPARATE ACCOUNT EXPENSES
MORTALITY AND EXPENSE RISK CHARGE (as a percentage of
average net assets of
Managed Separate Accounts and Fund U)............... 1.25%
FUNDING OPTION EXPENSES:
(as a percentage of average daily net assets of the funding
option as of December 31, 1998, unless otherwise noted.)
</TABLE>
<TABLE>
<CAPTION>
MARKET ANNUAL
INVESTMENT ALTERNATIVE MANAGEMENT FEE TIMING FEE(1) EXPENSES(2)
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<S> <C> <C> <C>
MANAGED SEPARATE ACCOUNTS
Travelers Growth and Income Stock Account (GIS).. 0.56% n/a 0.56%
Travelers Money Market Account (MM).............. 0.32% n/a 0.32%
Travelers Quality Bond Account (QB).............. 0.32% n/a 0.32%
Travelers Timed Aggressive Stock Account (TAS)... 0.35% 1.25% 1.60%
Travelers Timed Bond Account (TB)*............... 0.50% 1.25% 1.75%
Travelers Timed Growth and Income Stock Account
(TGIS)......................................... 0.32% 1.25% 1.57%
Travelers Timed Short-Term Bond Account (TSB).... 0.32% 1.25% 1.57%
</TABLE>
* Travelers Timed Bond Account. Not available to new Contract Owners.
<TABLE>
<CAPTION>
TOTAL
ANNUAL OPERATING
MANAGEMENT FEE OTHER EXPENSES EXPENSES
(AFTER EXPENSE (AFTER EXPENSE (AFTER EXPENSE
REIMBURSEMENT) REIMBURSEMENT) REIMBURSEMENT)
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UNDERLYING FUNDING OPTIONS
Capital Appreciation Fund............................ 0.75% 0.10% 0.85%
Dreyfus Stock Index Fund............................. 0.25% 0.01% 0.26%
High Yield Bond Trust................................ 0.50% 0.32% 0.82%
Managed Assets Trust................................. 0.50% 0.10% 0.60%
AMERICAN ODYSSEY FUNDS, INC.
Core Equity Fund................................. 0.56% 0.09% 0.65%
Emerging Opportunities Fund...................... 0.73% 0.14% 0.87%(3)
Global High-Yield Bond Fund...................... 0.63% 0.15% 0.78%(4)
Intermediate-Term Bond Fund...................... 0.49% 0.11% 0.60%
International Equity Fund........................ 0.60% 0.13% 0.73%
Long-Term Bond Fund.............................. 0.50% 0.10% 0.60%
AMERICAN ODYSSEY FUNDS, INC.**
Core Equity Fund................................. 0.56% 1.34% 1.90%
Emerging Opportunities Fund...................... 0.73% 1.39% 2.12%(3)
Global High-Yield Bond Fund...................... 0.63% 1.40% 2.03%(4)
Intermediate-Term Bond Fund...................... 0.49% 1.36% 1.85%
International Equity Fund........................ 0.60% 1.38% 1.98%
Long-Term Bond Fund.............................. 0.50% 1.35% 1.85%
DREYFUS VARIABLE INVESTMENT FUND
Small Cap Portfolio.............................. 0.75% 0.02% 0.77%
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND
Equity Income Portfolio.......................... 0.49% 0.08% 0.57%(5)
Growth Portfolio................................. 0.59% 0.07% 0.66%(5)
High Income Portfolio............................ 0.58% 0.12% 0.70%
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND II
Asset Manager Portfolio.......................... 0.54% 0.09% 0.63%(5)
</TABLE>
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<TABLE>
<CAPTION>
TOTAL
ANNUAL OPERATING
MANAGEMENT FEE OTHER EXPENSES EXPENSES
(AFTER EXPENSE (AFTER EXPENSE (AFTER EXPENSE
REIMBURSEMENT) REIMBURSEMENT) REIMBURSEMENT)
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TEMPLETON VARIABLE PRODUCTS SERIES FUND
Templeton Asset Allocation Fund.................. 0.60% 0.18% 0.78%
Templeton Bond Fund.............................. 0.50% 0.23% 0.73%
Templeton Stock Fund............................. 0.70% 0.19% 0.89%
TRAVELERS SERIES FUND, INC.
Alliance Growth Portfolio........................ 0.80% 0.02% 0.82%(6)
G.T. Global Strategic Income Portfolio*.......... 0.80% 0.23% 1.03%(6)
MFS Total Return Portfolio....................... 0.80% 0.04% 0.84%(6)
Putnam Diversified Income Portfolio.............. 0.75% 0.12% 0.87%(6)
Smith Barney High Income Portfolio............... 0.60% 0.07% 0.67%(6)
Smith Barney International Equity Portfolio...... 0.90% 0.10% 1.00%(6)
Smith Barney Large Cap Value Portfolio
(formerly Smith Barney Income and Growth
Portfolio)..................................... 0.65% 0.03% 0.68%(6)
THE TRAVELERS SERIES TRUST
Disciplined Mid Cap Stock Portfolio.............. 0.70% 0.25% 0.95%(7)
Social Awareness Stock Portfolio................. 0.65% 0.19% 0.84%
U.S. Government Securities Portfolio............. 0.32% 0.13% 0.45%
Utilities Portfolio.............................. 0.65% 0.15% 0.80%
</TABLE>
NOTES:
The purpose of this Fee Table is to help you understand the various costs and
expenses that you will bear, directly or indirectly, under the Contract. The
information, except as noted, reflects expenses of the managed separate accounts
as well as Fund U and its underlying funds for the fiscal year ending December
31, 1998. For additional information, including possible waivers or reductions
of these expenses, see "Charges and Deductions." Expenses shown do not include
premium taxes, which may apply. "Other Expenses" include operating costs of the
Separate Account or fund. These expenses are reflected in each Fund's net asset
value and are not deducted from the account value under the Contract.
* Not available to new Contract Owners.
** Includes 1.25% CHART asset allocation fee.
(1) Contract Owners may discontinue market timing services at any time and
thereby avoid any subsequent fees for those services by transferring to a
non-timed account.
(2) These figures do not include the mortality and expense risk fee which is
deducted from the daily unit values of the separate account.
(3) Management Fees for the AMERICAN ODYSSEY EMERGING OPPORTUNITIES FUND reflect
the period 05/01/98 to 12/31/98. May 1, 1998, the Fund adopted its current
fee structure.
(4) Fees and expenses for the AMERICAN ODYSSEY GLOBAL HIGH YIELD BOND FUND
reflect the period 05/01/98 to 12/31/98. On May 1, 1998, the Fund adopted
its current fee structure and investment objective and strategy.
(5) A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, certain funds, or FMR on behalf of
certain funds, have entered into arrangements with their custodian whereby
credits realized. As a result of uninvested cash balances were used to
reduce custodian expenses. Without these reductions, the Total Annual
Operating Expenses in this table would have been 0.64% for VIP II ASSET
MANAGER PORTFOLIO, 0.58% for VIP EQUITY INCOME PORTFOLIO, and 0.68% for VIP
GROWTH PORTFOLIO.
(6) Expenses are as of October 31, 1998 (the Fund's fiscal year end). There were
no fees waived or expenses reimbursed for these funds in 1998.
(7) Other Expenses reflect the current expense reimbursement arrangement with
Travelers where 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 arrangement, the Total Annual Operating Expenses for the
Portfolio would have been 1.22% for the TRAVELERS DISCIPLINED MID CAP STOCK
PORTFOLIO.
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EXAMPLE*
Assuming a 5% annual return on assets, a $1,000 investment would be subject to
the following expenses:
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<TABLE>
<CAPTION>
IF CONTRACT IS SURRENDERED AT THE IF CONTRACT IS NOT SURRENDERED OR
END OF PERIOD SHOWN ANNUITIZED AT END OF PERIOD SHOWN:
------------------------------------- -------------------------------------
INVESTMENT ALTERNATIVE 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MANAGED SEPARATE ACCOUNTS
Account GIS.......................... $70 $112 $157 $231 $20 $ 62 $107 $231
Account MM........................... 68 105 144 205 18 55 94 205
Account QB........................... 68 105 144 205 18 55 94 205
Account TAS.......................... 81 143 209 334 31 93 159 334
Account TB**......................... 82 148 216 348 32 98 166 348
Account TGIS......................... 80 142 207 331 30 92 157 331
Account TSB.......................... 80 142 207 331 30 92 157 331
UNDERLYING FUNDING OPTIONS
Capital Appreciation Fund............... 73 121 172 261 23 71 122 261
Dreyfus Stock Index Fund................ 67 103 141 199 17 53 91 199
High Yield Bond Trust................... 73 120 170 258 23 70 120 258
Managed Assets Trust.................... 71 113 159 235 21 63 109 235
AMERICAN ODYSSEY FUNDS, INC.(1)
Core Equity Fund..................... 71 115 161 240 21 65 111 240
Emerging Opportunities Fund.......... 73 122 173 263 23 72 123 263
Global High-Yield Bond Fund.......... 72 119 168 253 22 69 118 253
Intermediate-Term Bond Fund.......... 71 113 159 235 21 63 109 235
International Equity Fund............ 72 117 165 248 22 67 115 248
Long-Term Bond Fund.................. 71 113 159 235 21 63 109 235
AMERICAN ODYSSEY FUNDS, INC.(2)
Core Equity Fund..................... 83 152 223 361 33 102 173 361
Emerging Opportunities Fund.......... 86 159 234 381 36 109 184 381
Global High-Yield Bond Fund.......... 85 156 229 373 35 106 179 373
Intermediate-Term Bond Fund.......... 83 151 221 357 33 101 171 357
International Equity Fund............ 84 154 227 369 34 104 177 369
Long-Term Bond Fund.................. 83 151 221 357 33 101 171 357
DREYFUS VARIABLE INVESTMENT FUND
Small Cap Portfolio.................. 72 119 168 252 22 69 118 252
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND
Equity Income Portfolio.............. 70 112 157 232 20 62 107 232
Growth Portfolio..................... 71 115 162 241 21 65 112 241
High Income Portfolio................ 72 116 164 245 22 66 114 245
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND II
Asset Manager Portfolio.............. 71 114 160 238 21 64 110 238
TEMPLETON VARIABLE PRODUCTS SERIES FUND
Templeton Asset Allocation Fund...... 72 119 168 253 22 69 118 253
Templeton Bond Fund.................. 72 117 165 248 22 67 115 248
Templeton Stock Fund................. 73 122 174 265 23 72 124 265
TRAVELERS SERIES FUND, INC.
Alliance Growth Portfolio............ 73 120 170 258 23 70 120 258
G.T. Global Strategic Income
Portfolio** 78 128 182 279 28 78 132 279
MFS Total Return Portfolio........... 73 121 171 260 23 71 121 260
Putnam Diversified Income
Portfolio.......................... 73 122 173 263 23 72 123 263
Smith Barney High Income Portfolio... 71 116 162 242 21 66 112 242
Smith Barney International Equity
Portfolio.......................... 75 125 179 276 25 75 129 276
Smith Barney Large Cap Value
Portfolio
(formerly Smith Barney Income and
Growth Portfolio).................. 71 116 163 243 21 66 113 243
THE TRAVELERS SERIES TRUST
Disciplined Mid Cap Stock
Portfolio.......................... 74 124 177 271 24 74 127 271
Social Awareness Stock Portfolio..... 73 121 171 260 23 71 121 260
U.S. Government Securities
Portfolio.......................... 69 109 151 219 19 59 101 219
Utilities Portfolio.................. 73 119 169 256 23 69 119 256
</TABLE>
* THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THE
EXAMPLE REFLECTS THE $15 SEMIANNUAL CONTRACT FEE AS AN ANNUAL CHARGE OF
0.171% OF ASSETS.
** Not currently available to new Contract Owners in most states.
(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.
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
See Appendix B, page B-1.
8
<PAGE> 9
THE VARIABLE ANNUITY CONTRACT
- --------------------------------------------------------------------------------
Travelers Universal Annuity is designed to help you accumulate money for
retirement. Certificates are issued to individual participants under a group
contract. Under the Contract, you (the contract owner or participant, as
applicable) make purchase payments to us and we credit them to your account. We
promise to pay you an income in the form of annuity or income payments,
beginning on a future date that you choose, the maturity date. The purchase
payments accumulate tax deferred in the funding options that you select. You
assume the risk of gain or loss according to the performance of the funding
options. The cash value is the amount of purchase payments, plus or minus any
investment experience or interest. The cash value also reflects all withdrawals
made and charges deducted. There is generally no guarantee that at the maturity
date the cash 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 this contract
date is called a contract year. The record of accumulation units credited to an
owner is called the owner's account. The record of accumulation units credited
to a participant is called the individual account, or participant's interest.
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 our Home Office in a form and content satisfactory to us.
CONTRACT OWNER INQUIRIES
If you have any questions about the Contract, call the Company's Home Office at
1-800-599-9460.
PURCHASE PAYMENTS
The initial purchase payment must be paid before the Contract becomes effective.
Minimum purchase payment amounts are:
- IRAs: $1,000
- Other tax-qualified retirement plans: $20 per participant (subject to plan
requirements)
- Nonqualified contacts: $1,000; minimum of $100 for subsequent payment
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
received in good order will be credited within one business day. Our business
day ends when the New York Stock Exchange closes, usually 4:00 p.m. Eastern
time.
ACCUMULATION UNITS
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 may increase or decrease from day to day. When we receive a
purchase payment, we determine the number of accumulation units credited to the
Contract by dividing the amount directed to each funding option by the value of
the accumulation unit. We calculate the value of an accumulation unit for each
funding option each day after the New York Stock Exchange closes. After the
value is calculated, your account is credited. The period between the contract
effective date and the maturity date is the accumulation period. During the
annuity period (i.e., after the maturity date), you are credited with annuity
units.
THE FUNDING OPTIONS
You choose which of the variable funding options to have your purchase payments
allocated to. These include the managed separate accounts and the subsections of
Fund U, which invest in the underlying mutual 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 mutual fund. Since each option has
varying degrees
9
<PAGE> 10
of risk, please read the prospectuses carefully before investing. You may obtain
additional copies of the prospectuses by contacting your registered
representative or by calling 1-800-842-8573.
From time to time we may add new funding options. Some of the funding options
may not be available in every state due to various insurance regulations or in
every plan, due to plan restrictions.
The current funding options are listed below, along with their investment
advisers and any subadviser:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
INVESTMENT INVESTMENT INVESTMENT
OPTIONS OBJECTIVE ADVISER/SUBADVISER
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MANAGED SEPARATE ACCOUNTS
Travelers Growth and Seeks long-term accumulation of principal through Travelers Asset Management
Income Stock Account capital appreciation and retention of net investment International Corporation
income. ("TAMIC")
Subadviser: Travelers
Investment Management
Company ("TIMCO")
Travelers Money Market Seeks preservation of capital, a high degree of TAMIC
Account liquidity and the highest possible current income
available from certain short-term money market
securities.
Travelers Quality Bond Seeks current income, moderate capital volatility and TAMIC
Account total return.
Travelers Timed Seeks growth of capital by investing primarily in a TIMCO
Aggressive Stock Account broadly diversified portfolio of common stocks.
Travelers Timed Growth Seeks long-term accumulation of principal through TIMCO
and Income Stock capital appreciation and retention of net investment
income.
Travelers Timed Short- Seeks high current income with limited price volatility. TIMCO
Term Bond Account
FUNDING OPTIONS
Capital Appreciation Fund Seeks growth of capital through the use of common TAMIC
stocks. Income is not an objective. The Fund invests Subadviser: Janus Capital
principally in common stocks of small to large companies Corp.
which are expected to experience wide fluctuations in
price in both rising and declining markets.
Dreyfus Stock Index Fund Seeks to provide investment results that correspond to Mellon Equity Securities
the price and yield performance of publicly traded
common stocks in the aggregate, as represented by the
Standard & Poor's 500 Composite Stock Price Index.
High Yield Bond Trust Seeks generous income. The assets of the High Yield Bond TAMIC
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 fully TAMIC
managed investment policy in a portfolio of equity, debt Subadviser: TIMCO
and convertible securities.
AMERICAN ODYSSEY FUNDS,
INC.
Core Equity Fund Seeks maximum long-term total return by investing American Odyssey Funds
primarily in common stocks of well-established Management, Inc.
companies. Subadviser: Equinox
Capital Management, LLC.
Emerging Opportunities Seeks maximum long-term total return by investing American Odyssey Funds
Fund primarily in common stocks of small, rapidly growing Management, Inc.
companies. Subadvisers: SG Cowen
Asset Management and
Chartwell Investment
Partners
Global High-Yield Bond Seeks maximum long-term total return (capital American Odyssey Funds
Fund appreciation and income) by investing primarily in Management, Inc.
high-yield debt securities from the United States and Subadviser: Credit Suisse
abroad. Asset Management
</TABLE>
10
<PAGE> 11
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
INVESTMENT INVESTMENT INVESTMENT
OPTIONS OBJECTIVE ADVISER/SUBADVISER
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
AMERICAN ODYSSEY FUNDS, INC. (CONTINUED)
Intermediate-Term Bond Seeks maximum long-term total return by investing American Odyssey Funds
Fund primarily in intermediate-term corporate debt Management, Inc.
securities, U.S. government securities, mortgage-related Subadviser: TAMIC
securities and asset-backed securities, as well as money
market instruments.
International Equity Fund Seeks maximum long-term total return by investing American Odyssey Funds
primarily in common stocks of established non-U.S. Management, Inc.
companies. Subadviser: Bank of
Ireland Asset Management
(U.S.) Limited
Long-Term Bond Fund Seeks maximum long-term total return by investing American Odyssey Funds
primarily in long-term corporate debt securities, U.S. Management, Inc.
government securities, mortgage-related securities, and Subadviser: Western Asset
asset-backed securities, as well as money market Management Company
instruments.
DREYFUS VARIABLE INVESTMENT FUND
Small Cap Portfolio Seeks to maximize capital appreciation. The Dreyfus Corporation
FIDELITY'S VARIABLE
INSURANCE PRODUCTS FUND
VIP Equity Income Seeks reasonable income by investing primarily in Fidelity Management &
Portfolio income- producing equity securities, in choosing these Research Company
securities, the portfolio manager will also consider the
potential for capital appreciation.
VIP Growth Portfolio Seeks capital appreciation by purchasing common stocks Fidelity Management &
of well-known, established companies, and small emerging Research Company
growth companies, although its investments are not
restricted to any one type of security. Capital
appreciation may also be found in other types of
securities, including bonds and preferred stocks.
VIP High Income Portfolio Seeks to obtain a high level of current income by Fidelity Management &
investing primarily in high yielding, lower-rated, Research Company
fixed-income securities, while also considering growth
of capital.
FIDELITY'S VARIABLE
INSURANCE PRODUCTS FUND II
VIP II Asset Manager Seeks high total return with reduced risk over the Fidelity Management &
Portfolio long-term by allocating its assets among stocks, bonds Research Company
and short-term fixed-income instruments.
TEMPLETON VARIABLE PRODUCTS
SERIES FUND
Templeton Asset Seeks a high level of total return with reduced risk Templeton Investment
Allocation Fund (Class 1) over the long term through a flexible policy of Counsel, Inc.
investing in stocks of companies in any nation and debt
obligations of companies and governments of any nation.
Templeton Bond Fund Seeks high current income by investing primarily in debt Templeton Global Bond
(Class 1) securities of companies, governments and government Managers
agencies of various nations throughout the world.
Templeton Stock Fund Seeks capital growth by investing primarily in common Templeton Investment
(Class 1) stocks issued by companies, large and small, in various Counsel, Inc.
nations throughout the world.
TRAVELERS SERIES FUND, INC.
Alliance Growth Portfolio Seeks long-term growth of capital by investing Travelers Investment
predominantly in equity securities of companies with a Adviser ("TIA")
favorable outlook for earnings and whose rate of growth Subadviser: Alliance
is expected to exceed that of the U.S. economy over Capital Management L.P.
time. Current income is only an incidental
consideration.
MFS Total Return Seeks to obtain above-average income (compared to a TIA
Portfolio portfolio entirely invested in equity securities) Subadviser: Massachusetts
consistent with the prudent employment of capital. Financial Services Company
Generally, at least 40% of the Portfolio's assets will ("MFS")
be invested in equity securities.
Putman Diversified Income Seeks high current income consistent with preservation TIA
Portfolio of capital. The Portfolio will allocate its investments Subadviser: Putnam
among the U.S. Government Sector, the High Yield Sector, Investment Management,
and the International Sector of the fixed income Inc.
securities markets.
</TABLE>
11
<PAGE> 12
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
INVESTMENT INVESTMENT INVESTMENT
OPTIONS OBJECTIVE ADVISER/SUBADVISER
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TRAVELERS SERIES FUND, INC.
(CONTINUED)
Smith Barney High Income Seeks high current income. Capital appreciation is a SSBC Fund Management Inc.
Portfolio secondary objective. The Portfolio will invest at least ("SSBC")
65% of its assets in high-yielding corporate debt
obligations and preferred stock.
Smith Barney Seeks total return on assets from growth of capital and SSBC
International Equity income by investing at least 65% of its assets in a
Portfolio diversified portfolio of equity securities of
established non-U.S. issuers.
Smith Barney Large Cap Seeks current income and long-term growth of income and SSBC
Value Portfolio capital by investing primarily, but not exclusively, in
common stocks.
THE TRAVELERS SERIES TRUST
Disciplined Mid Cap Stock Seeks growth of capital by investing primarily in a TAMIC
Portfolio broadly diversified portfolio of common stocks. Subadvisor: TIMCO
Social Awareness Stock Seeks long-term capital appreciation and retention of SSBC
Portfolio 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.
U.S. Government Seeks to select investments from the point of view of an TAMIC
Securities Portfolio investor concerned primarily with highest credit
quality, current income and total return. The assets of
the U.S. Government Securities Portfolio will be
invested in direct obligations of the United States, its
agencies and instrumentalities.
Utilities Portfolio Seeks to provide current income by investing in equity SSBC
and debt securities of companies in the utility
industries.
</TABLE>
TRANSFERS
- --------------------------------------------------------------------------------
Up to 30 days before the maturity date, you may transfer all or part of the cash
value among available variable funding options. 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 transfer request, and to limit
transfers to one in any six-month period. This does not apply to transfers by
third party market timing services among timed funding options. During the
annuity period, transfers are allowed only with our consent. Please refer to
Appendix A for information regarding transfers between the Fixed Account and the
variable funding options.
Since the available funding options have different investment advisory fees, a
transfer from one funding option to another could result in higher or lower
investment advisory fees. (See "Investment Advisory Fees.") We reserve the right
to modify transfer privileges at any time and to charge for transfers upon 30
days' notice to the contract owner (where permitted by law).
DOLLAR COST AVERAGING (AUTOMATED TRANSFERS)
Dollar cost averaging or the pre-authorized transfer program (the "DCA Program")
allows you (the Owner, or Participant, if permitted,) to transfer a set dollar
amount to other funding options on a monthly or quarterly basis during the
accumulation phase of the Contract so that more accumulation units are purchased
in a funding option if the value per unit is low and fewer accumulation units
are purchased if the value per unit is high. Therefore, a lower-than-average
cost per unit may be achieved over the long run.
12
<PAGE> 13
You may elect the DCA Program through written request or other method acceptable
to the Company. Certain minimums may apply to enroll in the program and to
amounts transferred.
You may establish pre-authorized transfers of contract values from the Fixed
Account, subject to certain restrictions. Under the DCA Program, automated
transfers from the Fixed Account may not deplete your Fixed Account Value in
less than twelve months from your enrollment in the DCA Program.
In addition to the DCA Program, Travelers may credit increased interest rates to
contract owners under an administrative Special DCA Program established at the
discretion of Travelers, depending on availability and state law. Under this
program, the contract owner may pre-authorize level transfers to any of the
funding options under either a 6 Month Program or 12 Month Program. The 6 Month
Program and the 12 Month Program will generally have different credited interest
rates. Under the 6 Month Transfer Program, the interest rate can accrue up to 6
months on funds in the Special DCA Program and all purchase payments and accrued
interest must be transferred on a level basis to the selected funding option in
6 months. Under the 12 Month Program, the interest rate can accrue up to 12
months on funds in the Special DCA Program and all purchase payments and accrued
interest in this Program must be transferred on a level basis to the selected
funding options in 12 months.
The pre-authorized transfers will begin after the initial Program purchase
payment and complete enrollment instructions are received by Travelers. If
complete Program enrollment instructions are not received by the Company within
15 days of receipt of the initial Program purchase payment, the entire balance
in the Program will be credited with the non-Program interest rate then in
effect for the Fixed Account.
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. If you stop the Special DCA Program
and elect to remain in the Fixed Account, your contract value will be credited
for the remainder of 6 or 12 months with the interest rate for non-Program
funds.
A contract owner may only have one DCA Program or Special DCA Program in place
at one time. Any subsequent purchase payments received by the Company within the
Program period selected will be allocated to the current funding options over
the remainder of that Program transfer period, unless otherwise directed by the
contract owner.
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
You may elect to enter into a separate advisory agreement with Copeland
Financial Services, Inc. ("Copeland"), an affiliate of the Company. Copeland
provides asset allocation advice under its CHART Program(R), which is fully
described in a separate Disclosure Statement. Under the CHART Program, purchase
payments and cash values are allocated among the six American Odyssey Funds.
Copeland's charge for this advisory service is a maximum of 1.50% of the assets
subject to the CHART Program. This fee is currently reduced by 0.25%, the amount
of the fee paid to the investment manager of American Odyssey Funds, and it is
further reduced for assets over $25,000. Another reduction is made for
participants in plans subject to ERISA with respect to amounts allocated to the
American Odyssey Intermediate-Term Bond Fund because that Fund has as its
subadviser an affiliate of Copeland. A $30 initial fee is also charged. The
CHART Program fee will be paid by quarterly withdrawals from the cash values
allocated to the American Odyssey Funds. The Company will not treat these
withdrawals as taxable distributions. The CHART Program may not be available in
all marketing programs through which the Universal Annuity Contract is sold.
13
<PAGE> 14
TACTICAL ASSET ALLOCATION SERVICES
- --------------------------------------------------------------------------------
Accounts TGIS, TSB and TAS ("Market Timed Accounts") are funding options
available to individuals who have entered into tactical asset allocation
services agreements ("Tactical Asset Allocation agreements") with registered
investment advisers who provide tactical asset allocation services ("registered
investment advisers"). These agreements allow the registered investment advisers
to act on your behalf by transferring all or a portion of your cash value units
from one Market Timed Account to another. The registered investment advisers can
transfer funds only from one Market Timed Account to another Market Timed
Account.
You may transfer account values from any of the Market Timed Accounts to any of
the other funding options. However, if you are in a Market Timed Account,
transfer all current account values and direct all future allocations to a
non-timed Funding option, the tactical asset allocation agreements with the
registered investment advisers automatically terminate. If this occurs, the
registered investment advisers no longer have the right to transfer funds on
your behalf. Partial withdrawals from the Market Timed Accounts do not affect
the tactical asset allocation agreements.
Copeland, a registered investment adviser and an affiliate of the Company,
provides Tactical Asset Allocation services for a fee. The fee equals 1.25%
annually of the current value of the assets subject to the program. Copeland
also charges a $30 program application fee. If you terminate your tactical asset
allocation agreement and decide to reenter an agreement, the tactical asset
allocation fees will be reassessed, and a new $30 application fee will be
charged by Copeland.
We deduct the tactical asset allocation fee from the assets of the Market Timed
Accounts according to a payment method for which the Company, Accounts TGIS, TSB
and, TAS, the original principal underwriter of the Contracts, and Copeland
obtained an exemptive order from the SEC on February 7, 1990 ("asset charge
payment method"). Although the Tactical Asset Allocation agreements are between
you and Copeland; we are solely responsible for payment of the fee to Copeland.
On each Valuation Date, we deduct the amount necessary to pay the fee from each
Market Timed Account and, in turn, pay that amount to Copeland. This is the only
payment method available to those who enter into tactical asset allocation
agreements. Individuals in the Market Timed Accounts may use unaffiliated market
timing investment advisers with our approval and if such advisers agree to an
arrangement substantially identical to the asset charge payment method.
You are asked to approve annually the terms of the Distribution and Management
Agreement in order to continue the asset charge payment method. Because the
tactical asset allocation services are provided according to individual
agreements between you and the registered investment advisers, the Boards of
Managers of the Market Timed Accounts do not exercise any supervisory or
oversight role for services or the related fees.
Under the asset charge payment method, the daily deductions for market timing
fees are not treated by the Company as taxable distributions. (See "Federal Tax
Considerations".)
TACTICAL ASSET ALLOCATION RISKS
If you invest in the Market Timed Accounts without a tactical asset allocation
agreement, you may bear a higher proportion of the expenses associated with
Separate Account portfolio turnover. In addition, those who allocate amounts to
these Accounts without a tactical asset allocation agreement will still have the
tactical asset allocation fees deducted on a daily basis. We intend to identify
any such individuals and restore to their accounts, no less frequently than
monthly, an amount equal to the deductions for the tactical asset allocation
fees. However, this restored amount will not reflect any investment experience
of the fees deducted.
If you participate in a tactical asset allocation agreement, you may be subject
to the following additional risks: (1) higher transaction costs; (2) higher
portfolio turnover rate; (3) investment return goals not being achieved by the
registered investment advisers which provide Tactical Asset Allocation services;
and (4) higher account expenses for depleting and, then starting up the
14
<PAGE> 15
account. Actions by the registered investment advisers which provide tactical
asset allocation services may also increase risks generally found in any
investment, i.e., the failure to achieve an investment objective, and possible
lower yield. In addition, if more than one Tactical Asset Allocation strategy
uses a Market Timed Account, those who invest in the Market Timed Account when
others are transferred into or out of that Account by the registered investment
advisers may bear part of the direct costs incurred by those individuals who
were transferred. For example, if 90% of a Market Timed Account is under one
tactical asset allocation strategy, and those funds are transferred into or out
of that Account, those constituting the other 10% of the Market Timed Account
may bear a higher portion of the expense for the transfer.
ACCESS TO YOUR CONTRACT VALUES
- --------------------------------------------------------------------------------
Under a group Contract, before a participant's maturity date, we will pay all or
any portion of that participant's cash surrender value to the owner or
participant, as provided in the plan. A Group contract owner's account may be
surrendered for cash without the consent of any participant, as provided in the
plan.
Under an Individual Contract, the contract owner may redeem all or any portion
of the cash surrender value any time before the maturity date. You must submit a
written request for withdrawal. We will make withdrawals pro rata from all the
funding options unless you specify the funding option(s) from which surrender is
to be made. The cash surrender value will be determined as of the business day
after we receive the surrender request at our Home Office.
We may defer payment of any cash surrender value for up to seven days after we
receive the request in good order. The cash surrender value equals the Contract
or Account cash value less any applicable withdrawal charge, outstanding cash
loans, and any premium tax not previously deducted. The cash surrender value may
be more or less than the purchase payments made depending on the value of the
Contract or account at the time of surrender. For information about withdrawals
from your payout option after the Maturity Date (with no life contingency),
refer to the Statement of Additional Information.
For those participating in the Texas Optional Retirement Program, withdrawals
may only be made upon termination of employment, retirement or death as provided
in the Texas Optional Retirement Program.
Participants in Section 403(b) tax deferred annuity plans may not withdraw
certain salary reduction amounts before reaching age 59 1/2, unless withdrawn
due to separation from service, death, disability or hardship. (See "Federal Tax
Considerations.")
SYSTEMATIC WITHDRAWALS
Each contract year, you may elect to take monthly, quarterly, semiannual or
annual systematic withdrawals of a specified dollar amount. Any applicable
premium taxes will be deducted. To elect this option, an election form provided
by the Company must be completed. Systematic withdrawals may be stopped at any
time, provided the Company receives at least 30 days' written notice.
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 permitted by law).
Each systematic withdrawal is subject to federal income tax 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 withdrawal.
15
<PAGE> 16
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 Travelers
Sales agents, 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, the administrative charges
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 (deferred sales charge) of 5% will apply
if a purchase payment is withdrawn within five years of its payment date. This
deferred sales charge is deducted only from purchase payments withdrawn, not on
growth. For this calculation, the five years is measured from the first day of
the month the payment is made.
In the case of a partial withdrawal, payments made first will be considered to
be withdrawn first ("first in, first out"). In no event may the withdrawal
charge exceed 5% of premiums paid in the five years immediately preceding the
withdrawal date, nor may the charge exceed 5% of the
16
<PAGE> 17
amount withdrawn. Unless the Company receives instructions to the contrary, the
withdrawal charge will be deducted from the amount requested.
For purposes of the withdrawal charge calculation, withdrawals will be deemed to
be taken in the following order:
(a) from any purchase payments to which no withdrawal charge applies;
(b) from any remaining free withdrawal allowance (as described below) after
reduction by the amount of (a);
(c) from any purchase payments to which withdrawal charges apply (on a
first-in, first-out basis); and, finally
(d) from any Contract earnings.
NOTE: Any free withdrawals taken will not reduce purchase payments still subject
to a withdrawal charge.
We will not deduct a withdrawal charge (1) from the distribution of death
proceeds; or (2) after the first contract year, upon election of an annuity
payout (based upon life expectancy); or (3) made due to minimum distribution
requirements.
The withdrawal charge will be waived if:
- - an annuity payout is begun;
- - an income option of at least three years' duration (without right of
withdrawal) is begun after the first contract year;
- - the participant under a group Contract or annuitant under an individual
Contract dies;
- - the participant under a group Contract or annuitant under an individual
Contract becomes disabled (as defined by the Internal Revenue Service)
subsequent to purchase of the Contract;
- - the participant under a group Contract, or annuitant under an individual
Contract, under a tax-deferred annuity plan (403(b) plan) retires after age
55, provided the Contract has been in effect five years or more and provided
the payment is made to the contract owner or participant, as provided in the
plan;
- - the participant under a group Contract, or annuitant under an individual
Contract, under an IRA plan reaches age 70 1/2, provided the certificate, has
been in effect five years or more;
- - the participant under a group Contract, or annuitant under an individual
Contract, under a qualified pension or profit-sharing plan (including a 401(k)
plan) retires at or after age 59 1/2, provided the certificate or Contract, as
applicable has been in effect five years or more; or if refunds are made to
satisfy the anti-discrimination test. (For those under Certificates issued
before May 1, 1992, the withdrawal charge will also be waived if the
participant or annuitant retires at normal retirement age (as defined by the
Plan), provided the Certificate or Contract, as applicable has been in effect
one year or more);
- - the participant under a Section 457 deferred compensation plan retires and the
Certificate has been in effect five years or more, or if a financial hardship
or disability withdrawal has been allowed by the Plan administrator under
applicable Internal Revenue Service ("IRS") rules;
- - for group Contracts, the participant under a Section 457 deferred compensation
plan established by the Deferred Compensation Board of the state of New York
or a "public employer" in that state (as defined in Section 5 of the New York
State Finance Laws) terminates employment. The withdrawal charge will also be
waived for such a plan at the termination date specified in the Contract; or
- - for group Contracts, the participant under a pension or profit-sharing plan,
including a 401(k) plan, Section 457 deferred compensation plan, or a tax
deferred annuity plan
17
<PAGE> 18
(403(b) plan) that is subject to the Employee Retirement Income Security Act
of 1974 ("ERISA") retires at normal retirement age (as defined by the plan) or
terminates employment, provided that the contract owner purchases this
Contract in conjunction with a group unallocated flexible annuity contract
issued by the Company.
FREE WITHDRAWAL ALLOWANCE
Beginning in the second Contract year, you may withdraw up to 10% of the cash
value annually without a withdrawal charge. (If you have purchase payments no
longer subject to a withdrawal charge, the maximum you may withdraw without a
withdrawal charge is the greater of (a) the free withdrawal allowance, or (b)
the total amount of purchase payments no longer subject to a withdrawal charge.
Note: Any free withdrawal taken will reduce purchase payments no longer subject
to a withdrawal charge.) IRA Contract owners who have Contracts, issued before
May 1, 1994, have a 20% free withdrawal allowance annually after the first year.
Free withdrawals from IRA plans are only available after the participant reaches
age 59 1/2. We calculate the free withdrawal amount as of the Contract
anniversary date before the surrender date. The free withdrawal allowance does
not apply to full surrenders. For 403(b) plan participants, partial and full
withdrawals (surrenders) may be subject to restrictions. (See "Federal Tax
Considerations.")
PREMIUM TAX
Certain state and local governments impose 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.
Where required, we will deduct any applicable premium taxes from the cash 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.
ADMINISTRATIVE CHARGE
We deduct a semiannual administrative charge of $15 for each individual account
maintained. The administrative charge will be deducted from the account in June
and December of each year. The first charge will be prorated (i.e. calculated)
from the date of purchase. A prorated charge will also be made if the Contract
is completely withdrawn or terminated. This charge does not apply after an
annuity payout has begun. The administrative charge will be deducted from the
cash value by canceling accumulation units in each funding option on a pro rata
basis.
MORTALITY AND EXPENSE RISK CHARGE
Each business day, the Company deducts a mortality and expense risk ("M&E")
charge from amounts held in the Separate Accounts. This charge, on an annual
basis, is 1.25% of the Separate Account value. (This charge equals 0.003425% for
each business day.) We reserve the right to lower this charge at any time.
FUNDING OPTION EXPENSES
The charges and expenses of the funding options are summarized in the fee table
and are described in the accompanying prospectuses.
TACTICAL ASSET ALLOCATION SERVICES FEES
In connection with the tactical asset allocation services provided to
participants in Accounts TGIS, TSB and TAS, Copeland receives a fee equal on an
annual basis to 1.25% of the current value of the assets subject to the program.
The Company deducts this fee daily from the assets of the Market Timed Accounts.
Copeland also charges a $30 tactical asset allocation application fee.
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<PAGE> 19
Participants may discontinue tactical asset allocation services at any time and
avoid any subsequent fees for those services by transferring to a non-timed
account. (See "Market Timing Services.")
MANAGED SEPARATE ACCOUNTS: MANAGEMENT AND FEES
The investments and administration of each managed separate account are under
the direction of a Board of Managers. Subject to the authority of each Board of
Managers, TIMCO and TAMIC furnish investment management and advisory services as
indicated in the Investment Option Chart. Additionally, the Board of Managers
for each managed separate account annually selects an independent public
accountant, reviews the terms of the management and investment advisory
agreements, recommends any changes in the fundamental investment policies (and
submits any such changes to contract owners at the annual meeting), and takes
any other actions necessary in connection with the operation and management of
the managed separate accounts.
The Travelers Investment Management Company ("TIMCO") is a registered investment
adviser that has provided investment advisory services since its incorporation
in 1967. Its principal offices are located at One Tower Square, Hartford,
Connecticut, and it is a wholly owned subsidiary of Salomon Smith Barney
Holdings Inc., which is a wholly owned subsidiary of Citigroup Inc., a bank
services holding company. TIMCO provides investment management and advisory
services to Accounts TGIS, TSB and TAS. The fees are as follows:
<TABLE>
<CAPTION>
ACCOUNT ANNUAL MANAGEMENT FEE
------- ---------------------
<S> <C>
Account TAS.......................... 0.35% of average daily net assets
Account TGIS......................... 0.3233% of average daily net assets
Account TSB.......................... 0.3233% of average daily net assets
</TABLE>
Travelers Asset Management International Corporation ("TAMIC") is a registered
investment adviser that has provided investment advisory services since its
incorporation in 1978. Its principal offices are located at One Tower Square,
Hartford, Connecticut, and it is an indirect wholly owned subsidiary of
Citigroup Inc., a bank holding company. TAMIC provides investment and management
and advisory services to Accounts GIS, QB, MM and TB.
<TABLE>
<CAPTION>
ACCOUNT ANNUAL MANAGEMENT FEE
------- ---------------------
<S> <C>
0.65% of the first $500,000,000,
Account GIS.......................... plus
0.55% of the next $500,000,000,
plus
0.50% of the next $500,000,000,
plus
0.45% of the next $500,000,000,
plus
0.40% of amounts over
$2,000,000,000
(of Account GIS's aggregate net
asset value)
0.50% of the first $50,000,000,
Account TB........................... plus
0.40% of the next $100,000,000,
plus
0.30% of the next $100,000,000,
plus
0.25% of amounts over $250,000,000
(of Account TB's aggregate net
asset value)
Account QB........................... 0.3233% of average daily net assets
Account MM........................... 0.3233% of average daily net assets
</TABLE>
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<PAGE> 20
TAMIC also supervises the subadvisor of Account GIS, TIMCO. According to the
terms of this written subadvisory agreement, TAMIC will pay TIMCO a fee
equivalent on an annual basis to the following:
<TABLE>
<CAPTION>
AGGREGATE
ANNUAL NET ASSET
SUBADVISORY VALUE OF
FEE THE ACCOUNT
- ----------- -----------
<C> <S> <C>
0.45 % of the first $ 700,000,000 plus
0.275% of the next $ 300,000,000 plus
0.25 % of the next $ 500,000,000 plus
0.225% of the next $ 500,000,000 plus
0.20 % of amounts over $ 2,000,000,000
</TABLE>
TIMCO also acts as investment adviser or subadviser for:
- other investment companies used to fund variable products
- individual and pooled pension and profit-sharing accounts
- affiliated companies of The Travelers Insurance Company.
TAMIC also acts as investment adviser or subadviser for:
- other investment companies used to fund variable products
- individual and pooled pension and profit-sharing accounts and domestic
insurance companies affiliated with The Travelers Insurance Company
- nonaffiliated insurance companies.
OWNERSHIP PROVISIONS
- --------------------------------------------------------------------------------
TYPES OF OWNERSHIP
Contract Owner ("you"). If you purchase an individual contract, you are the
contract owner. If a group "allocated" contract is purchased, we issue
certificates to the individual participants. Where we refer to "you," we are
referring to the individual contract owner, or to the group participant, as
applicable. For convenience, we refer to both contracts and certificates as
"contracts."
You receive all payments while the annuitant is alive unless you direct them to
an alternate recipient. An alternate recipient does not become the contract
owner.
Joint Owner. For nonqualified contracts only, joint owners (i.e., spouses) may
be named in a written request before the contract is in effect. Joint owners may
independently exercise transfers allowed under the Contract. All other rights of
ownership must be exercised by both owners. Joint owners own equal shares of any
benefits accruing or payments made to them. All rights of a joint owner end at
death if the other joint owner survives. If the first joint owner to die is also
the annuitant, the death benefit will be paid to the beneficiary if there is no
contingent annuitant. If the first joint owner to die is not the annuitant, the
entire interest under the contract will pass to the surviving joint owner.
BENEFICIARY
You name the beneficiary in a written request. Generally, the beneficiary has
the right to receive any remaining contractual benefits upon the death of the
annuitant or the contract owner. If more than one beneficiary survives the
annuitant, they will share equally in benefits unless the Company receives other
instructions, by written request before the death of the annuitant or contract
owner.
With nonqualified contracts, as discussed under "Death Benefit," the beneficiary
named in the contract may differ from the designated beneficiary. (For example,
the designated beneficiary may be the joint owner). In such cases, the
designated beneficiary receives the contract benefits (rather than the
beneficiary) upon your death.
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<PAGE> 21
Unless an irrevocable beneficiary has been named, you have the right to change
any beneficiary by written request during the lifetime of the annuitant and
while the Contract continues.
ANNUITANT
The annuitant is designated in the Contract (on the Specifications page), and is
the individual on whose life the maturity date and the amount of the monthly
annuity payments depend. The annuitant may not be changed after the contract is
in effect.
For nonqualified Contracts only, where the owner and the annuitant are not the
same person, the contract owner may also name one individual as a contingent
annuitant by written request before the Contract becomes effective. If the
annuitant dies prior to the maturity date while the owner is still living, and a
contingent annuitant has been named, the contingent annuitant becomes the
annuitant and the Contract continues. However, if the annuitant who is also the
owner dies before the maturity date, the death benefit is paid to the
beneficiary. The contingent annuitant does not become the annuitant and is not
entitled to receive any contract benefits. A contingent annuitant may not be
changed, deleted or added after the Contract becomes effective.
DEATH BENEFIT
- --------------------------------------------------------------------------------
The following death benefit applies to all contracts that include a death
benefit. We calculate the death benefit amount as of the date our Home Office
receives proof of death. All amounts will be reduced by any outstanding loans
and any premium taxes due.
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------
INDIVIDUAL CONTRACT GROUP CONTRACT
- ------------------------------------------------------------------------------------------------------
IF ANNUITANT DIES ON OR AFTER AGE 75, AND BEFORE THE IF PARTICIPANT DIES ON OR AFTER AGE 75, AND
MATURITY DATE: BEFORE THE MATURITY DATE:
- ------------------------------------------------------------------------------------------------------
Amount paid: the cash value of the contract Amount paid: the participant's interest
under the contract
- ------------------------------------------------------------------------------------------------------
IF ANNUITANT DIES BEFORE AGE 75, AND BEFORE THE IF PARTICIPANT DIES BEFORE AGE 75, AND
MATURITY DATE: BEFORE THE MATURITY DATE:
- ------------------------------------------------------------------------------------------------------
Amount paid: the greater of (1),(2) or (3) below: Amount paid: the greatest of (1), (2) or (3)
below:
- ------------------------------------------------------------------------------------------------------
(1) the cash value (1) the participant's interest
- ------------------------------------------------------------------------------------------------------
(2) the total purchase payments made, less any prior (2) the total purchase payments made on
withdrawals or loans behalf of the participant, less any
prior withdrawals or loans
- ------------------------------------------------------------------------------------------------------
(3) the cash value on the 5(th) multiple contract (3) the participant's interest on the 5(th)
year anniversary (i.e., 5(th), 10(th), 15(th), multiple certificate year anniversary
etc.) less any withdrawals made since that (i.e., 5(th), 10(th), 15(th), etc.) less
anniversary before we receive proof of death. any withdrawals made since that
anniversary before we receive proof of
death.
- ------------------------------------------------------------------------------------------------------
</TABLE>
PAYMENT OF PROCEEDS
Under an individual contract, the death benefit will generally be paid to the
beneficiary. Under a group contract, the death benefit will be paid to the
contract owner, or the beneficiary, as provided in the plan.
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<PAGE> 22
The process of paying death benefit proceeds under various situations is
described below. 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.
DEATH OF ANNUITANT WHO IS THE CONTRACT OWNER. The Company will pay the proceeds
to the beneficiary(ies), or if none, to the contract owner's estate.
The death benefit proceeds must be distributed to the beneficiary within five
years of the contract owner's death. Or, the beneficiary may elect to receive
payments from an annuity which begins within one year of the contract owner's
death and which is payable over the life of the beneficiary or over a period not
exceeding the beneficiary's life expectancy.
Under a nonqualified contract, if the beneficiary is the contract owner's
spouse, he or she may elect to continue the contract as the new contract owner
rather than receiving the distribution. In such case, the distribution rules
applicable when a contract owner dies generally will apply when that spouse, as
contract owner, dies.
DEATH OF ANNUITANT WHO IS NOT THE CONTRACT OWNER (NONQUALIFIED CONTRACTS ONLY).
The Company will pay the death proceeds to the beneficiary.
DEATH OF CONTRACT OWNER WHO IS NOT THE ANNUITANT (NONQUALIFIED CONTRACTS ONLY).
The Company will pay the proceeds to any surviving joint owner, or if none, to
the beneficiary(ies), or if none, to the contract owner's estate. If the
surviving joint owner (or if none, the beneficiary) is the Contract Owner's
spouse, he or she may elect to continue the contract as the new contract owner
rather than receiving the distribution.
ENTITY AS OWNER. In the case of a nonqualified Contract owned by a nonnatural
person (e.g. a trust or other entity), the death benefit will be paid only upon
the death of the annuitant.
DEATH PROCEEDS AFTER THE MATURITY DATE
If any owner or the annuitant dies on or after the maturity date, the Company
will pay the beneficiary a death benefit consisting of any benefit remaining
under the annuity or income option then in effect.
THE ANNUITY PERIOD
- --------------------------------------------------------------------------------
MATURITY DATE
Under the Contract, you can receive scheduled annuity payments. You can choose
the month and the year in which those payments begin (maturity date). You can
also choose among payout plans (annuity or income options). While the annuitant
is alive, you can change your selection any time up to the maturity date.
Annuity payments will begin on the maturity date stated in the
Contract/Certificate unless it has been fully surrendered or the proceeds have
been paid to the beneficiary before that 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; or (c) for the joint lifetime of the
annuitant and another person, and thereafter during the lifetime of the
survivor. Income options that are not based on any lifetime are also available.
We may require proof that the annuitant is 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. Under
nonqualified contracts, unless you elect otherwise, the maturity date will be
the annuitant's 75th birthday or ten years after the effective date of the
contract, if later. Under qualified contracts, the maturity date must be before
the individual's 70th birthday, unless we consent to a later date.
At least 30 days before the original maturity date, you may extend the maturity
date to any time prior to the annuitant's 85th birthday or to a later date with
our 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 the death of the contract owner, or with
qualified contracts upon either the later of the contract owner's attainment of
age 70 1/2 or year of
22
<PAGE> 23
retirement; or the death of the contract owner. You should seek independent tax
advice regarding the election of minimum required distributions.
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 contract 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.")
VARIABLE ANNUITY
You may choose to receive annuity payments that are based on the performance of
one or more of the variable funding options. This is called a variable payout
because the amount you receive each month will increase or decrease depending on
how the variable funding options perform. When you annuitize, we will credit you
with annuity units. An annuity unit measures the dollar value of an annuity
payment. We determine the number of annuity units to credit you with by dividing
the first monthly annuity payment for each funding option by the accumulation
unit value for that funding option as of 14 days before the annuity payments
begin. The number of annuity units (but not their value) remains fixed during
the annuity period.
HOW WE DETERMINE THE 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 annuity payments begin less any premium taxes due.
The first monthly payment amount depends on the annuity option elected and the
annuitant's adjusted age. The Contract contains a formula for determining the
adjusted age. We calculate the first monthly payment by multiplying the benefit
per $1,000 applied, shown in the Contract tables, by the number of thousands of
dollars of Contract value applied to the annuity option. We also factor in an
assumed daily net investment factor of 3.5%. This assumed daily net investment
factor is used to determine the guaranteed payout rates shown. If net investment
rates are higher at the time annuitization is selected, payout rates will be
higher than those shown. Payout rates will not be lower than those shown. We
reserve the right to require satisfactory proof of an annuitant's age before we
make the first annuity payment.
HOW WE DETERMINE THE PAYMENTS AFTER THE FIRST. The dollar amount of all annuity
payments after the first will change from month to month based on the investment
performance of the applicable funding options. The total amount of each annuity
payment will equal 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 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 "Variable Annuity," except that the amount
applied to begin the annuity will be the cash value, determined as of the date
annuity payments begin. 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.
23
<PAGE> 24
PAYOUT OPTIONS
- --------------------------------------------------------------------------------
ELECTION OF OPTIONS
On the maturity date, we will pay the amount due under the Contract in one lump
sum, or in accordance with the payment option selected by the contract owner.
Election of an annuity option or an income option must be made in writing in a
form satisfactory to the Company. Any election made during the lifetime of the
group Contract participant, or the annuitant under an individual Contract, must
be made by the participant, as provided in the plan or the contract owner, as
applicable. The terms of options elected may be restricted to meet the contract
qualification requirements of Section 401(a)(9) of the Internal Revenue Code.
Income options differ from annuity options in that the amount of the payments
made under income options are unrelated to the length of life of any person.
Thus, the participant may outlive the payment period. Although the Company
continues to deduct the charge for mortality and expense risks, it assumes no
mortality risks for amounts applied under any income option.
The minimum amount that can be placed under an annuity option or income option,
is $2,000 unless we consent to a lesser amount. If any monthly periodic payment
due is less than $20, we reserve the right to make payments at less frequent
intervals. Annuity options and income options may be elected on a monthly,
quarterly, semiannual or annual basis.
AUTOMATIC OPTION -- Unless we are directed otherwise by the owner, if the
participant is living and has a spouse and no election has been made, the
Company will, on that participant's maturity date, pay to the participant the
first of a series of annuity payments based on the life of the participant as
the primary payee and the participant's spouse in accordance with Option 5
below.
Unless the plan provides otherwise, if the participant has no spouse, the
Company will, on the maturity date, pay to the participant the first of a series
of annuity payments based on the life of the participant, in accordance with
Option 2 with 120 monthly payments assured.
ANNUITY OPTIONS
OPTION 1 -- LIFE ANNUITY -- NO REFUND: The Company will make annuity payments
during the lifetime of the person on whose life the payments are based,
terminating with the last payment preceding death. While this option offers the
maximum periodic payment, there is no assurance of a minimum number of payments,
nor is there a 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 the lifetime of the person on
whose life payments are based, 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, payments will be continued during the remainder of the period to the
beneficiary designated. The beneficiary may instead receive a single sum
settlement equal to the discounted value of the future payments with the
interest rate equivalent to the assumption originally used when the annuity
began.
OPTION 3 -- UNIT REFUND LIFE ANNUITY: The Company will make annuity payments
during the lifetime of the person on whose life payments are based, terminating
with the last payment due before the death of that person, provided that, at
death, the beneficiary will receive in one sum the current dollar value of the
number of annuity units equal to (a) minus (b) (if that difference is positive)
where: (a) is the total amount applied under the option divided by the annuity
unit value on the due date of the first annuity payment, and (b) is the product
of the number of the annuity units represented by each payment and the number of
payments made.
OPTION 4 -- JOINT AND LAST SURVIVOR LIFE ANNUITY -- NO REFUND: The Company will
make annuity payments during the joint lifetime of the two persons on whose
lives payments are based, and during the lifetime of the survivor. No further
payments will be made following the death of the
24
<PAGE> 25
survivor. There is no assurance of a minimum number of payments, nor is there a
provision for a death benefit upon the survivor's death.
OPTION 5 -- JOINT AND LAST SURVIVOR LIFE ANNUITY -- ANNUITY REDUCES ON DEATH OF
PRIMARY PAYEE: The Company will make annuity payments during the lifetime of the
two persons on whose lives payments are based. One of the two persons will be
designated as the primary payee. The other will be designated as the secondary
payee. On the death of the secondary payee, if survived by the primary 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, if survived by the secondary
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 following the
death of the survivor.
OPTION 6 -- OTHER ANNUITY OPTIONS: The Company will make any other arrangements
for annuity payments as may be mutually agreed upon.
INCOME OPTIONS
Income payments are periodic payments made by the Company which are not based on
the life of the participant.
The cash surrender value used to determine the amount of any income payment will
be calculated as of 14 days before the date an income payment is due and will be
determined on the same basis as the cash surrender value during the Accumulation
Phase, including the deduction for mortality and expense risks.
While income options do not directly involve mortality risks for the Company, an
individual may elect to apply the remaining cash surrender value to provide an
annuity at the guaranteed rates even though income payments have been received
under an income option. Before an owner or participant makes any income option
election, he or she should consult a tax adviser as to any adverse tax
consequences the election might have.
OPTION 1 -- PAYMENTS OF A FIXED AMOUNT: The Company will make equal payments of
the amount elected until the cash surrender value applied under this option has
been exhausted. The final payment will include any amount insufficient to make
another full payment.
OPTION 2 -- PAYMENTS FOR A FIXED PERIOD: The Company will make payments for the
number of years selected. The amount of each payment will be equal to the
remaining cash surrender value applied under this option divided by the number
of remaining payments.
OPTION 3 -- INVESTMENT INCOME: The Company will make payments for the period
agreed on. The amount payable will be equal to the excess, if any, of the cash
surrender value under this option over the amount applied under this option. No
payment will be made if the cash surrender value is less than the amount
applied, and it is possible that no payments would be made for a period of time.
Payments under this option are not considered to be annuity payments and are
taxable in full as ordinary income. (See "Federal Tax Considerations.") This
option will generally be inappropriate under federal tax law for periods that
exceed the Participant's attainment of age 70 1/2.
MISCELLANEOUS CONTRACT PROVISIONS
- --------------------------------------------------------------------------------
RIGHT TO RETURN
For all individual Contracts, the Contract may be returned for a full refund of
the Contract's cash value (including charges) within ten days after the delivery
of the Contract to the contract owner, unless state law requires a longer
period. The contract owner bears the investment risk during the right to return
period; therefore, the cash value returned may be greater or less than the
purchase
25
<PAGE> 26
payment made under the Contract. However, if applicable state law so requires,
or if the Contract was purchased in an Individual Retirement Annuity, the
purchase payment will be returned in full. All cash values will be determined as
of the valuation date next following the Company's receipt of the contract
owner's written request for refund.
For group Contracts issued in the state of New York, during the 20 days after
receiving a certificate, the participant may return it to us, by mail or in
person, if for any reason the participant has changed his or her mind. Upon
return of the certificate, the Company will refund to the contract owner the sum
of all purchase payments made under the Contract, and will make the separate
accounts whole if the accumulation value has declined.
The right to return is not available to participants of the Texas Optional
Retirement Program.
TERMINATION OF INDIVIDUAL CONTRACT
You do not need to make any purchase payments after the first to keep the
Contract in effect. However, unless otherwise specified by state law, we reserve
the right to terminate the Contract on any business day if the cash value as of
that date is less than $1,000 and no purchase payments have been made for at
least two years. 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
value less any applicable premium tax, and less any applicable administrative
charge.
TERMINATION OF GROUP CONTRACT OR ACCOUNT
TERMINATION BY OWNER -- If an owner or a participant terminates an account, in
whole or in part, while the contract remains in effect; and the value of the
terminated account is to be either paid in cash to you or to a participant; or
transferred to any other funding vehicle, the Company will pay or transfer the
cash surrender value of the terminated account.
If this Contract is terminated, whether or not the plan is terminated; and the
owner or the participant, as provided in the plan, elect that values are not to
be paid out in cash or transferred, the Company reserves the right to agree to
apply a participant's interest either as instructed by the owner or the
participant, or under one of the options described under "Options in the Event
of Termination of a Participant."
TERMINATION BY PARTICIPANT -- If a participant terminates an individual account,
in whole or in part, while the contract remains in effect; and the value of the
terminated individual account is to be either paid in cash to the participant,
or transferred to any other funding vehicle, the Company will pay or transfer
the cash surrender value of the terminated account.
TERMINATION BY THE COMPANY AND TERMINATION AMOUNT -- If the cash value in a
participant's individual account is less than the termination amount stated in
the Contract, and no premium has been applied to the account for at least three
years, the Company reserves the right to terminate that account, and to move the
cash value of that participant's individual account to the owner's account.
If the plan does not allow for this movement to the owner's account, the cash
value, less any applicable premium tax not previously deducted, will be paid to
that participant or to the owner, as provided in the plan.
We reserve the right to terminate this Contract on any valuation date if:
1. there is no cash value in any participant's individual account, and
2. the cash value of the owner's account, if any, is less than $500, and
3. premium has not been paid for at least three years.
26
<PAGE> 27
If this Contract is terminated, the cash value of the owner's account, if any,
less any applicable premium tax not previously deducted will be paid to you.
Termination will not occur until 31 days after the Company has mailed notice of
termination to the group contract owner or the participant, as provided in the
plan, at the last known address; and to any assignee of record.
OPTIONS IN THE EVENT OF TERMINATION OF A PARTICIPANT -- In the event that,
before a participant's maturity date, that participant terminates participation
in the plan, the owner or that participant, as provided in the plan, with
respect to that participant's interest may elect:
1. If that participant is at least 50 years of age, to have that
participant's interest applied to provide an annuity option or an income
option.
2. If the Contract is continued, to have that participant's interest
applied to continue as a paid-up deferred annuity for that participant,
(i.e., the cash value remains in the Contract and the annuity becomes
payable under the same terms and conditions as the annuity that would
have otherwise been payable at the maturity date).
3. To have the owner or that participant, as provided in the plan, receive
that participant's interest in cash.
4. If that participant becomes a participant under another group contract
of this same type which is in effect with us, to transfer that
participant's interest to that group contract.
5. To make any other arrangements as may be mutually agreed on.
If this Contract is continued, any cash value to which a terminating participant
is not entitled under the plan, will be moved to the owner's account.
AUTOMATIC BENEFIT -- In the event of termination, unless otherwise provided in
the Plan, a participant's interest will continue as a paid-up deferred annuity
in accordance with option 2. above, if this Contract is continued. Or, if this
Contract is terminated, will be paid in cash to the Owner or to that
participant, as provided in the plan.
ANNUITY PAYMENTS -- Termination of this contract or the plan will not affect
payments being made under any annuity option which began before the date of
termination.
DISTRIBUTION FROM ONE ACCOUNT TO ANOTHER ACCOUNT
Under a group Contract, the owner may, as provided for in the plan, distribute
the cash value from the owner's account to one or more individual accounts. No
distribution will be allowed between individual accounts.
The owner may, as required by and provided for in the plan, move the cash value
from any or all individual accounts to the owner's account without a charge.
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, the Company will furnish a report showing
the number of accumulation units credited to the Contract in each funding option
and the corresponding accumulation unit values as of the date of the report. The
Company will keep all records required under federal or state laws.
CHANGE OF CONTRACT
For group Contracts, the Company may, at any time, make any changes, including
retroactive changes, in the Contract to the extent that the change is required
to meet the requirements of any federal law or regulation to which the Company
is subject.
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Except as provided in the paragraph immediately above, no change may be made in
the Contract before the fifth anniversary of the contract date, and in no event
will changes be made with respect to payments being made by the Company under
any annuity option which has commenced prior to the date of change. On and after
the fifth anniversary of the contract date, the Company reserves the right to
change the termination amount (see "Termination of Contract or Account"), the
calculation of the net investment rate and the unit values, and the annuity
tables. Any change in the annuity tables will be applicable only to premiums
received under the Contract after the change. The ability to make such change
lessens the value of mortality and expense guarantees. Other changes (including
changes to the administrative charge) may be applicable to all owners' accounts
and individual accounts under the Contract, to only the owners' accounts and
individual accounts established after the change, or to only premiums received
under the Contract after the date of change as the Company declares at the time
of change. The Company will give notice to the owner at least 90 days before the
date the change is to take effect.
ASSIGNMENT
The participant may not assign his or her rights under a group Contract. The
owner may assign his or her rights under an individual or a group Contract if
allowed by the plan.
SUSPENSION OF PAYMENTS
If a national stock exchange is closed (except for holidays or weekends), or
trading is restricted due to an existing emergency as defined by the SEC so that
disposal of the separate account's investments or determination of its net asset
value is not reasonably practicable, or the Commission has ordered that the
right of redemption (surrender) be suspended for the protection of contract
owners, the Company may postpone all procedures (including making annuity
payments) which require valuation of separate accounts until the stock exchange
is reopened and trading is no longer restricted.
OTHER INFORMATION
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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. It is licensed to conduct a 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.
FINANCIAL STATEMENTS
The financial statements for the insurance company are located in the Statement
of Additional Information. The financial statements for the separate accounts
will be available through annual reports to shareholders. These reports are
accessible through the SEC's website that appears on page 1 of the prospectus.
IMSA
The Company is a member of the Insurance Marketplace Standards Association
("IMSA"), and as such may use the IMSA logo and IMSA membership in its
advertisements. Companies that belong to IMSA subscribe to a set of ethical
standards covering the various aspects of sales and service for individually
sold life insurance and annuities. IMSA members have adopted policies and
procedures that demonstrate a commitment to honesty, fairness and integrity in
all customer contacts involving the sale and service of individual life
insurance and annuity products.
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YEAR 2000 COMPLIANCE
The Company is highly dependent on computer systems and system applications for
conducting its ongoing business functions. In 1996, the Company began the
process of identifying, assessing and implementing changes to computer programs
necessary to address the Year 2000 issue and developed a comprehensive plan to
address the issue. This issue involves the ability of computer systems that have
time sensitive programs to recognize properly the Year 2000. The inability to do
so could result in major failures or miscalculations that would disrupt the
Company's ability to meet its customer and other obligations on a timely basis.
The Company has achieved compliance with respect to its business critical
systems in accordance with its Year 2000 plan and has completed the process of
certification to validate compliance. An ongoing re-certification process will
be put in place for fourth quarter 1999 to ensure all systems and products
remain compliant.
The total cost associated with the required modifications and conversions is
expected to be between $25 million and $35 million and is being expensed as
incurred in the period 1996 through 1999. The Company has incurred approximately
$28 million to date on these efforts. The Company also has third party
customers, financial institutions, vendors and others with which it conducts
business and has confirmed their plans to address and resolve Year 2000 issues
on a timely basis. While it is likely that these efforts by third party vendors
and customers will be successful, it is possible that a series of failures by
third parties could have a material adverse effect on the Company's results of
operations in future periods.
In addition, the Company has developed business resumption contingency plans to
address perceived risks associated with the Year 2000 effort. These plans
address the possibility of internal systems failures and the possibility of
failure of systems or processes outside the Company's control. These business
resumption contingency plans would enable business critical units to function
beginning January 1, 2000 in the event of an unexpected failure. Preparations
for the management of the date change will continue through 1999.
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 and distributor of the
Contracts is CFBDS, Inc., 21 Milk St., Boston, MA. CFBDS, Inc. is not affiliated
with the Company or the Separate Account.
Up-front compensation paid to sales representatives will not exceed 7.00% 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. 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 legal requirements of any governmental agency to
which the Company, the Contract or the contract owner is subject. In states
where contract owner approval is required, we will comply.
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VOTING RIGHTS
The contract owner or participant, as applicable, has certain voting rights in
the funding options. The number of votes which an owner or participant, as
provided in the plan, may cast in the accumulation period is equal to the number
of accumulation units credited to the account under the Contract. During the
annuity period, the group participant or the individual contract owner may cast
the number of votes equal to (i) the reserve related to the Contract divided by
(ii) the value of an accumulation unit. During the annuity period, the voting
rights of a participant or, under an individual Contract, an annuitant, will
decline as the reserve for the Contract declines.
Upon the death of the person authorized to vote under the Contract, all voting
rights will vest in the beneficiary of the Contract, except in the case of
nonqualified individual Contracts, where the surviving spouse may succeed to the
ownership.
FUND U. In accordance with its view of present applicable law, the Company will
vote shares of the underlying funds at regular and special meetings of the
shareholders of the funds in accordance with instructions received from persons
having a voting interest in Fund U. The Company will vote shares for which it
has not received instructions in the same proportion as it votes shares for
which it has received instructions. However, if the 1940 Act or any regulation
thereunder should be amended, or if the present interpretation thereof should
change, and as a result the Company determines that it is permitted to vote
shares of the mutual funds in its own right, it may elect to do so.
The number of shares which a person has a right to vote will be determined as of
the date concurrent with the date established by the respective mutual fund for
determining shareholders eligible to vote at the meeting of the fund, and voting
instructions will be solicited by written communication before the meeting in
accordance with the procedures established by the mutual fund.
Each person having a voting interest in Fund U will receive periodic reports
relating to the fund(s) in which he or she has an interest, proxy material and a
form with which to give such instructions with respect to the proportion of the
fund shares held in Fund U corresponding to his or her interest in Fund U.
ACCOUNTS GIS, QB, MM, TGIS, TSB, TAS AND TB. Contract owners participating in
Accounts GIS, QB, MM, TGIS, TSB, TAS or TB will be entitled to vote at their
meetings on (i) any change in the fundamental investment policies of or other
policies related to the accounts requiring the owners' approval; (ii) amendment
of the investment advisory agreements; (iii) election of the members of the
Board of Managers of the accounts; (iv) ratification of the selection of an
independent public accountant for the accounts; (v) any other matters which, in
the future, under the 1940 Act require the owners' approval; and (vi) any other
business which may properly come before the meeting.
The number of votes which each contract owner or a participant may cast,
including fractional votes, shall be determined as of the date to be chosen by
the Board of Managers within 75 days of the date of the meeting, and at least 20
days' written notice of the meeting will be given.
Votes for which participants under a group Contract are entitled to instruct the
owner, but for which the owner has received no instructions, will be cast by the
owner for or against each proposal to be voted on only in the same proportion as
votes for which instructions have been received.
LEGAL PROCEEDINGS AND OPINIONS
There are no pending material legal proceedings affecting the separate accounts.
There is one material pending legal proceeding, other than ordinary routine
litigation incidental to the 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, violations of the Georgia RICO statute and other state laws by an
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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.
Pending appeal, proceedings in the trial court have been stayed. Defendants
intend to vigorously contest the litigation.
Legal matters in connection with federal laws and regulations affecting the
issue and sale of the Contract described in this Prospectus as well as the
organization of the Company, its authority to issue variable 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 Company.
THE SEPARATE ACCOUNTS
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THE SEPARATE ACCOUNTS
Two different types of separate accounts are available to Fund the Contracts
described in this prospectus. The first type, Fund U, is a unit investment trust
registered with the SEC under the 1940 Act. Fund U's assets are invested
exclusively in the shares of the underlying funds.
The second type of separate account available under the Contract, the "managed
separate accounts," (Accounts GIS, QB, MM, TGIS, TSB, TAS and TB) are
diversified, open-end management investment companies registered with the SEC
under the 1940 Act. The assets of the managed separate accounts are invested
directly in securities such as stocks, bonds or money market instruments which
are compatible with the stated investment policies of each separate account.
Each of the separate accounts available in connection with the Contract has
different investment objectives and fundamental investment policies.
The separate accounts were established on the following dates: Fund U -- May 16,
1983; Account GIS -- September 22, 1967; Account QB -- July 29, 1974; Account
MM -- December 29, 1981; Accounts TGIS and TSB -- October 30, 1986; and Accounts
TAS and TB -- January 2, 1987.
Under Connecticut law, the assets of the separate accounts will be held for the
exclusive benefit of its owners. Income, gains and losses, whether or not
realized, for assets allocated to the separate accounts, are in accordance with
the applicable annuity contracts, credited to or charged against the separate
accounts without regard to other income, gains or losses of the Company. The
assets in the separate accounts are not chargeable with liabilities arising out
of any other business which the Company may conduct. The obligations arising
under the variable annuity contracts are obligations of the Company.
For each managed separate account, neither the investment objective nor the
fundamental investment restrictions, as described in the SAI, can be changed
without a vote of the majority of the outstanding voting securities of the
Accounts, as defined by the 1940 Act.
PERFORMANCE INFORMATION
From time to time, the Company may advertise several types of historical
performance for the funding options of Fund U. The Company may also advertise
the standardized average annual total returns of Accounts GIS, QB, MM, TGIS,
TSB, TAS, TB and Fund U, calculated in a manner prescribed by the SEC, 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. These quotations
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reflect the deduction of all recurring charges during each period (on a pro rata
basis in the case of fractional periods). The deduction for the annual
administrative charge is converted to a percentage of assets based on the actual
fee collected, divided by the average net assets for Contracts sold. 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 calender year-to-date, and for the past one-, three-,
five- and ten-year periods. Nonstandardized total returns will not reflect the
deduction of the annual contract administrative 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 before they became available under
the Separate Account, the standardized average annual total returns may be
accompanied by returns showing 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 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 the Separate Account and the variable funding
options.
FEDERAL TAX CONSIDERATIONS
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The following description of the federal income tax consequences under this
Contract is not exhaustive and 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 advisor regarding your personal situation. For your
information, a more detailed 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.
TYPES OF CONTRACTS: QUALIFIED OR NONQUALIFIED
If you purchase an annuity contract with proceeds of an eligible rollover
distribution from any pension plan, specially sponsored program, or individual
retirement annuity (IRA) with pre-tax dollars, your contract is referred to as a
qualified contract. Some examples of qualified contracts are: IRAs, 403(b)
annuities, pension and profit-sharing plans (including 401(k) plans), Keogh
Plans and certain other qualified deferred compensation plans. An exception to
this is a qualified plan called a Roth IRA. Under Roth IRAs, after-tax
contributions accumulate until maturity, when amounts (including earnings) may
be withdrawn tax-free. If you purchase the contract on an individual basis and
with after-tax dollars and not under one of the programs described above, your
contract is referred to as nonqualified.
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INVESTOR CONTROL
In certain circumstances, owners of variable annuity contracts may be considered
the owners, for federal income tax purposes, of the assets of the separate
accounts used to support their contract. In those circumstances, income and
gains from the separate account assets would be includable in the variable
contract owner's gross income.
The IRS has stated in published rulings that a variable contract owner will be
considered the owner of separate account assets if the contract owner possesses
incidents of ownership in those assets, such as the ability to exercise
investment control over the assets. The U.S. Treasury Department has also
announced, in connection with the issuance of regulations concerning
diversification, that those regulations "do not provide guidance concerning the
circumstances in which investor control of the investments of a segregated asset
account may cause the investor (i.e., the contract owner), rather than the
insurance company, to be treated as the owner of the assets in the account."
This announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which policyholders may direct their
investments to particular sub-accounts without being treated as owners of the
underlying assets." As of the date of this prospectus, no such guidance has been
issued.
The ownership rights under the Contract are similar to, but different in certain
respects from, those described by the IRS in rulings in which it determined that
the owners were not owners of separate account assets. For example, a contract
owner or participant of this Contract has additional flexibility in allocating
payments and cash values. These differences could result in the contract owner
being treated as the owner of the assets of Fund U. In addition, the Company
does not know what standard will be set forth in the regulations or rulings
which the Treasury is expected to issue, nor does the Company know if such
guidance will be issued. The Company therefore reserves the right to modify the
Contract as necessary to attempt to prevent the contract owner from being
considered the owner of a pro rata share of the assets of Fund U.
The remaining tax discussion assumes that the Contract qualifies as an annuity
contract for federal income tax purposes.
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 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.
NONQUALIFIED ANNUITY CONTRACTS
As the owner of a nonqualified annuity, you do not receive any tax benefit
(deduction or deferral of income) on purchase payments, but you will not be
taxed on increases in the value of your Contract until a distribution
occurs -- either as a withdrawal (distribution made prior to the maturity date),
or as annuity payments. When a withdrawal is made, you are taxed on the amount
of the withdrawal that is considered earnings. Similarly, when you receive an
annuity payment, part of each payment is considered a return of your purchase
payments and will not be taxed. The remaining portion of the annuity payment
(i.e., any earnings) will be considered ordinary income for tax purposes.
If a nonqualified annuity is owned by other than an individual, however, (e.g.,
by a corporation), increases in the value of the Contract attributable to
purchase payments made after February 28, 1986 are includable in income
annually. Furthermore, for Contracts issued after April 22, 1987, if you
transfer the contract without adequate consideration all deferred increases in
value will be includable in your income at the time of the transfer.
If you make a partial withdrawal, this money will generally be taxed as first
coming from earnings, (income in the Contract), and then from your purchase
payments. These withdrawn earnings are includable in your income. (See "Penalty
Tax for Premature Distributions" below). There is
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income in the Contract to the extent the cash value exceeds your investment in
the Contract. The investment in the Contract equals the total purchase payments
you paid less any amount received previously which was excludable from gross
income. Any direct or indirect borrowing against the value of the Contract or
pledging of the Contract as security for a loan will be treated as a cash
distribution under the tax law.
Federal tax law requires that nonqualified annuity contracts meet minimum
mandatory distribution requirements upon the death of the contract owner,
including the first of joint owners. If these requirements are not met, the
surviving joint owner, or the beneficiary, will have to pay taxes prior to
distribution. The distribution required depends, among other things, upon
whether an annuity option is elected or whether the new contract owner is the
surviving spouse. We will administer Contracts in accordance with these rules
and we will notify you when you should begin receiving payments.
QUALIFIED ANNUITY CONTRACTS
Under a qualified annuity, since amounts paid into the Contract have generally
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, and also special rules
regarding Roth IRAs. We have provided a more complete discussion in the SAI.
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 tax-qualified plans.
DIVERSIFICATION REQUIREMENTS
The Code states that in order to qualify for the tax benefits described above,
investments made in the separate account of any nonqualified variable annuity
Contract must satisfy certain diversification requirements. Tax regulations
define how separate accounts must be diversified. We monitor the investments
constantly and believe that our accounts are adequately diversified. We intend
to administer all Contracts subject to this provision of law in a manner that
will maintain adequate diversification.
MANAGED SEPARATE ACCOUNTS
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As described earlier in this prospectus, there are various funding options
available to you under your Universal Annuity contract. You may select from
several underlying funding options, which are described in detail in separate
prospectuses. In addition, you may choose to invest in one or more of the
Managed Separate Accounts (the "Accounts") also offered through your Contract.
Detailed information regarding these Accounts such as investment objectives,
investment techniques, risk factors and management of the Accounts, is provided
below. Not all funding options or Accounts may be available to you. Please refer
to your Contract. There can be no assurance that the Accounts' investment
objectives will be achieved.
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THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES (ACCOUNT GIS)
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INVESTMENT ADVISER: TIMCO
PORTFOLIO MANAGER: Sandip Bhagat
INVESTMENT OBJECTIVE: Long-term accumulation of principal through capital
appreciation and retention of net investment income.
KEY INVESTMENTS: Common stock of large U.S. companies.
SELECTION PROCESS: Account GIS invests primarily in stocks of large U.S.
companies representing a wide range of industries. Stock selection is based on a
quantitative screening process which favors companies that achieve earnings
growth above consensus expectations, and whose stocks offer attractive relative
value. In order to achieve consistent performance, TIMCO manages Account GIS to
mirror the overall risk, sector weightings and growth/value style
characteristics of the Standard & Poor's 500 Stock Index ("S&P 500"). The S&P
500 is a value-weighted equity index comprised mainly of large-company stocks.
ADDITIONAL INVESTMENTS, INVESTMENT STRATEGIES AND TECHNIQUES: Account GIS, to a
lesser extent, will invest in other securities. A complete description of all
investments, and their associated risks, is contained in the SAI. These
additional investments include, but are not limited to, the following:
- fixed-income securities such as bonds and notes,
including U.S. Government securities;
- exchange-traded stock index futures
- covered call options, put options
- foreign securities
For a complete list of all investments available to Account GIS, please refer to
the "Investments at a Glance" table at the end of this section and in the SAI.
PRINCIPAL RISK FACTORS: Account GIS is most subject to equities risk. For a
complete discussion of equities risk and other risks carried by the investments
of Account GIS, please refer to the "Investments, Practices and Risks" section
of this prospectus. Please see the SAI for a detailed description of all
investments, and their associated risks, available to Account GIS.
FUNDAMENTAL INVESTMENT POLICIES
The fundamental investment policies of Account GIS permit it to:
1. invest up to 5% of its assets in the securities of any one issuer
(exclusive of securities issued or guaranteed by the United States
government, its agencies or instrumentalities);
2. borrow from banks in amounts of up to 5% of its assets, but only for
emergency purposes;
3. purchase interests in real estate represented by securities for which
there is an established market;
4. make loans through the acquisition of a portion of a privately placed
issue of bonds, debentures or other evidences of indebtedness of a type
customarily purchased by institutional investors;
5. acquire up to 10% of the voting securities of any one issuer (it is the
present practice of Account GIS not to exceed 5% of the voting
securities of any one issuer);
6. make purchases on margin in the form of short-term credits which are
necessary for the clearance of transactions; and place up to 5% of its
net asset value in total margin deposits for positions in futures
contracts; and
7. invest up to 5% of its assets in restricted securities (securities which
may not be publicly offered without registration under the Securities
Act of 1933).
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THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES (ACCOUNT QB)
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INVESTMENT ADVISER: TAMIC
PORTFOLIO MANAGER: F. Denney Voss
INVESTMENT OBJECTIVE: Current income, moderate capital volatility and total
return.
KEY INVESTMENTS: Investment grade debt securities and money market instruments.
SELECTION PROCESS: The adviser expects that the Fund's investments generally
will maintain an average duration of 5 years or less. Investment in longer term
obligations may be made if the manager decides that the investment yields
justify a longer term commitment. No more than 25% of the value of the Account's
total assets will be invested in any one industry. The portfolio will be
actively managed and, under certain market conditions, investments may be sold
prior to maturity.
ADDITIONAL INVESTMENTS, INVESTMENT STRATEGIES AND TECHNIQUES: Account QB may
invest in many types of fixed-income securities and employ various types of
strategies. A complete description of all investments, and their associated
risks, is contained in the SAI. These additional investments include, but are
not limited to, the following:
- treasury bills
- repurchase agreements
- commercial paper
- certificates of deposit
- banker's acceptances
- bonds, notes, debentures
- convertible securities
- when-issued securities
- interest rate future contracts
For a complete list of all investments available to Account QB, please refer to
the "Investments at a Glance" table at the end of this section and in the SAI.
PRINCIPAL RISK FACTORS: Account QB is most subject to fixed-income securities
risk. For a complete discussion of fixed-income securities risk and other risks
carried by the investments of Account QB, please refer to the "Investments,
Practices and Risks" section of this prospectus.
FUNDAMENTAL INVESTMENT POLICIES
The fundamental investment policies of Account QB permit it to:
1. invest up to 15% of the value of its assets in the securities of any one
issuer (exclusive of obligations of the United States government and its
instrumentalities, for which there is no limit);
2. borrow from banks in amounts of up to 5% of its assets, but only for
emergency purposes;
3. purchase interests in real estate represented by securities for which
there is an established market;
4. make loans through the acquisition of a portion of a privately placed
issue of bonds, debentures or other evidences of indebtedness of a type
customarily purchased by institutional investors;
5. acquire up to 10% of the voting securities of any one issuer (it is the
present practice of Account QB not to exceed 5% of the voting securities
of any one issuer); and
6. make purchases on margin in the form of short-term credits which are
necessary for the clearance of transactions; and place up to 5% of its
net asset value in total margin deposits for positions in futures
contracts.
36
<PAGE> 37
THE TRAVELERS MONEY MARKET ACCOUNT
FOR VARIABLE ANNUITIES (ACCOUNT MM)
- --------------------------------------------------------------------------------
INVESTMENT ADVISER: TAMIC
PORTFOLIO MANAGER: Emil J. Molinaro, Jr.
INVESTMENT OBJECTIVE: Preservation of capital, a high degree of liquidity and
high current income
KEY INVESTMENTS: Money market instruments.
SELECTION PROCESS: The Account is a "money market" Account that invests in high
quality U.S. dollar denominated money market instruments. High quality
instruments generally are rated in the highest rating category by national
rating agencies or are deemed comparable. Eligible securities must have a
remaining maturity of 13 months or less (subject to certain exceptions). The
Account's manager selects from the following or other similar investments, as
described in the "Investments at a Glance" table at the end of this section and
in the SAI.
COMMERCIAL PAPER AND
SHORT-TERM CORPORATE DEBT Commercial paper is short-term unsecured
promissory notes issued by corporations to
finance their short-term credit needs. Commercial
paper is usually sold at a discount and is issued
with a maturity of not more than 9 months.
Short-term corporate debt that the Fund may
purchase includes notes and bonds issued by
corporations to finance longer-term credit needs.
These debt securities are issued with maturities
of more than 9 months. The Account may purchase
short-term corporate debt with a remaining
maturity of 397 days or less at the time of
purchase.
U.S. GOVERNMENT MONEY MARKET
SECURITIES These are short-term debt instruments issued or
guaranteed by the U.S. Government or its
agencies, instrumentalities or
government-sponsored enterprises. The full faith
and credit of the United States does not back all
U.S. Government securities. For example,
securities issued by Fannie Mae are supported by
that agency's right to borrow from the U.S.
Treasury under certain circumstances. Other U.S.
government securities, such as those issued by
the Federal Farm Credit Banks Funding
Corporation, are supported only by the credit of
the entity that issued them.
CREDIT AND LIQUIDITY
ENHANCEMENTS Enhancements include letters of credit,
guarantees, puts and demand features, and
insurance provided by domestic or foreign
entities such as banks and other financial
institutions. Credit and liquidity enhancements
are designed to enhance the credit quality of an
instrument to eligible security status. However,
they expose the Fund to the credit risk of the
entity providing the credit or liquidity
enhancement. Changes in the credit quality of the
provider could affect the value of the security
and the Fund's share price.
PUT FEATURES Entitle the holder to put or sell a security back
to the issuer or another party who issued the
put. Demand features, standby commitments, and
tender options are types of put features. In
exchange for getting the put, the Fund may accept
a lower rate of interest. The Fund evaluates the
credit quality of the put provider as well as the
issuer, if a different party. The put
37
<PAGE> 38
provider's creditworthiness affects the credit
quality of the investment.
VARIABLE AND FLOATING RATE
SECURITIES Have interest rates that adjust periodically,
which may be either at specific intervals or
whenever an external benchmark rate changes.
Interest-rate adjustments are designed to help
maintain a stable price for the security.
REPURCHASE AGREEMENTS These agreements permit the Account to buy a
security at one price and, at the same time,
agree to sell it back at a higher price. Delays
or losses to the Account could result if the
other party to the agreement defaults or becomes
insolvent.
RISK FACTORS
Corporate debt securities held by the Account may be subject to several types of
investment risk, including market or interest-rate risk. This risk relates to
the change in market value caused by fluctuations in prevailing interest rates
and credit risk, which, in turn, relates to the ability of the issuer to make
timely interest payments and to repay the principal at maturity. Short-term
corporate debt is less subject to market or interest-rate risk than longer-term
corporate debt. Certain corporate debt securities may be subject to call or
income risk. This risk appears during periods of falling interest rates and
involves the possibility that securities with high interest rates will be
prepaid or "called" by the issuer prior to maturity.
Because interest rates on money market instruments fluctuate in response to
economic factors, rates on the Account's short-term investments and the daily
dividends paid to its shareholders will vary, rising or falling with short-term
interest rates generally. Yields from short-term securities may be lower than
yields from longer-term securities. Also, the value of the Account's securities
generally varies inversely with interest rates, the amount of outstanding debt
and other factors. This means that the value of the Account's investments
usually increases as short-term interest rates fall and decreases as short-term
interest rates rise.
Account investments may be unprofitable in a time of sustained high inflation.
In addition, the Account's investments in certificates of deposit issued by U.S.
branches of foreign banks and foreign branches of U.S. banks involve somewhat
more risk, but also more potential reward, than investments in comparable
domestic obligations.
FUNDAMENTAL INVESTMENT POLICIES
The fundamental investment policies of Account MM permit it to:
1. invest up to 25% of its assets in the securities of issuers in any
single industry (exclusive of securities issued by domestic banks and
savings and loan associations, or securities issued or guaranteed by the
United States government, its agencies, authorities or
instrumentalities); neither all finance companies, as a group, nor all
utility companies, as a group, are considered a single industry for the
purpose of this restriction;
2. invest up to 5% of its assets in the securities of any one issuer, other
than securities issued or guaranteed by the United States Government.
However, Account MM may invest up to 25% of its total assets in first
tier securities, as defined in Rule 2a-7, of a single issuer for a
period of up to three business days after the purchase thereof;
3. acquire up to 10% of the outstanding securities of any one issuer
(exclusive of securities issued or guaranteed by the United States
government, its agencies or instrumentalities);
4. borrow money from banks on a temporary basis in an aggregate amount not
to exceed one third of Account MM's assets (including the amount
borrowed); and
38
<PAGE> 39
5. pledge, hypothecate or transfer, as security for indebtedness, any
securities owned or held by Account MM as may be necessary in connection
with any borrowing mentioned above and in an aggregate amount of up to
5% of Account MM's assets.
THE TRAVELERS TIMED GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES (ACCOUNT TGIS)
- --------------------------------------------------------------------------------
INVESTMENT ADVISER: TIMCO
PORTFOLIO MANAGERS: Sandip Bhagat
INVESTMENT OBJECTIVE: Long-term accumulation of principal through capital
appreciation and retention of net investment income.
KEY INVESTMENTS: Common stock of large U.S. companies.
SELECTION PROCESS: Account TGIS invests primarily in stocks of large U.S.
companies representing a wide range of industries, while maintaining a highly
marketable portfolio in order to accommodate cash flows associated with
market-timing moves. Stock selection is based on a quantitative screening
process which favors companies that achieve earnings growth above consensus
expectations, and whose stocks offer attractive relative value. In order to
achieve consistent performance, TIMCO manages Account TGIS to mirror the overall
risk, sector weightings and growth/value style characteristics of the Standard &
Poor's 500 Stock Index ("S&P 500"). The S&P 500 is a value-weighted equity index
comprised mainly of large-company stocks.
ADDITIONAL INVESTMENTS, INVESTMENT STRATEGIES AND TECHNIQUES: Account TGIS will
also use exchange-traded financial futures contracts to facilitate market-timed
moves, and as a hedge to protect against changes in stock prices or interest
rates. Account TGIS, to a lesser extent, may invest in other securities. These
additional investments include, but are not limited to, the following:
- fixed-income securities such as bonds and notes;
- including U.S. Government securities
- covered call options, put options
- foreign securities
For a complete list of all investments available to Account TGIS, please refer
to the "Investments at a Glance" table at the end of this section and in the
SAI.
PRINCIPAL RISK FACTORS: Account TGIS is most subject to equities risk and
market-timing risk. For a complete discussion of these and other risks carried
by the investments of Account GIS, please refer to the "Investments, Practices
and Risks" section of this prospectus. Please see the SAI for a detailed
description of all investments, and their associated risks, available to Account
TGIS.
FUNDAMENTAL INVESTMENT POLICIES
The fundamental investment policies of Account TGIS are the same as Account GIS.
(See "Account GIS -- Fundamental Investment Policies.")
39
<PAGE> 40
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT
FOR VARIABLE ANNUITIES (ACCOUNT TSB)
- --------------------------------------------------------------------------------
INVESTMENT ADVISER: TIMCO
PORTFOLIO MANAGER: Emil Molinaro, Jr.
INVESTMENT OBJECTIVE High current income with limited price volatility while
maintaining a high degree of liquidity.
KEY INVESTMENTS: High quality fixed-income securities.
SELECTION PROCESS: The Account invests in high quality U.S. dollar denominated
instruments. High quality instruments generally are rated in the highest rating
category by national rating agencies or are deemed comparable. The weighted
average maturity of the portfolio is not expected to exceed 9 months. The
Account's manager selects from the following or other similar investments, as
described in the "Investments at a Glance" table at the end of this section and
in the SAI.
COMMERCIAL PAPER AND
SHORT-TERM CORPORATE DEBT Commercial paper is short-term unsecured
promissory notes issued by corporations to
finance their short-term credit needs. Commercial
paper is usually sold at a discount and is issued
with a maturity of not more than 9 months.
Short-term corporate debt that the Fund may
purchase includes notes and bonds rated at least
AA with final maturities of 18 months or less at
time of purchase.
U.S. GOVERNMENT SECURITIES These are short-term debt instruments issued or
guaranteed by the U.S. Government or its
agencies, instrumentalities or
government-sponsored enterprises. The full faith
and credit of the United States does not back all
U.S. Government securities. For example,
securities issued by Fannie Mae are supported by
that agency's right to borrow from the U.S.
Treasury under certain circumstances. Other U.S.
Government securities, such as those issued by
the Federal Farm Credit Banks Funding
Corporation, are supported only by the credit of
the entity that issued them.
REPURCHASE AGREEMENTS Permit the Account to buy a security at one price
and, at the same time, agree to sell it back at a
higher price. Delays or losses to the Account
could result if the other party to the agreement
defaults or becomes insolvent.
RISK FACTORS
Corporate debt securities held by the Account may be subject to several types of
investment risk, including market or interest-rate risk. This risk relates to
the change in market value caused by fluctuations in prevailing interest rates
and credit risk, which, in turn, relates to the ability of the issuer to make
timely interest payments and to repay the principal at maturity. Short-term
corporate debt is less subject to market or interest-rate risk than longer-term
corporate debt. Certain corporate debt securities may be subject to call or
income risk. This risk appears during periods of falling interest rates and
involves the possibility that securities with high interest rates will be
prepaid or "called" by the issuer prior to maturity.
Because interest rates on money market instruments fluctuate in response to
economic factors, rates on the Account's short-term investments and the daily
dividends paid to its shareholders will vary, rising or falling with short-term
interest rates generally. Yields from short-term securities may
40
<PAGE> 41
be lower than yields from longer-term securities. Also, the value of the
Account's securities generally varies inversely with interest rates, the amount
of outstanding debt and other factors. This means that the value of the
Account's investments usually increases as short-term interest rates fall and
decreases as short-term interest rates rise.
FUNDAMENTAL INVESTMENT POLICIES
The fundamental investment policies of Account TSB permit it to:
1. invest up to 25% of its assets in the securities of issuers in any
single industry (exclusive of securities issued by domestic banks and
savings and loan associations, or securities issued or guaranteed by the
United States government, its agencies, authorities or
instrumentalities); neither all finance companies, as a group, nor all
utility companies, as a group, are considered a single industry for the
purpose of this restriction;
2. invest up to 10% of its assets in the securities of any one issuer,
including repurchase agreements with any one bank or dealer (exclusive
of securities issued or guaranteed by the United States government, its
agencies or instrumentalities);
3. acquire up to 10% of the outstanding securities of any one issuer
(exclusive of securities issued or guaranteed by the United States
government, its agencies or instrumentalities);
4. borrow money from banks on a temporary basis in an aggregate amount not
to exceed one third of Account TSB's assets (including the amount
borrowed); and
5. pledge, hypothecate or transfer, as security for indebtedness, any
securities owned or held by Account TSB as may be necessary in
connection with any borrowing mentioned above and in an aggregate amount
of up to 5% of Account TSB's assets.
THE TRAVELERS TIMED AGGRESSIVE STOCK ACCOUNT
FOR VARIABLE ANNUITIES (ACCOUNT TAS)
- --------------------------------------------------------------------------------
INVESTMENT ADVISER: TIMCO
PORTFOLIO MANAGER: Sandip Bhagat
INVESTMENT OBJECTIVE: Growth of capital
KEY INVESTMENTS: Common stock of mid-size U.S. companies
SELECTION PROCESS: In selecting investments for the portfolio, TIMCO identifies
stocks which appear to be undervalued. A computer model reviews over one
thousand stocks using fundamental and technical criteria such as price relative
to book value, earnings growth and momentum, and the change in price relative to
a broad composite stock index.
Computer-aided analysis may also be used to match certain characteristics of the
portfolio, such as industry sector representation, to the characteristics of a
market index, or to impose a tilt toward certain attributes. Account TAS
currently focuses on mid-sized domestic companies with market capitalizations
that fall between $500 million and $10 billion.
ADDITIONAL INVESTMENTS, INVESTMENT STRATEGIES AND TECHNIQUES: Account TAS may
invest in smaller or larger companies without limitation. A complete description
of all investments, and their associated risks, is contained in the SAI. These
additional investments include, but are not limited to, the following:
- convertible securities
- rights and warrants
- foreign securities
- illiquid securities
- money market instruments
- call or put options
41
<PAGE> 42
In addition, Account TAS will use exchange-traded futures contracts to
facilitate market-timed moves. for a complete list of all investments available
to Account TAS, please refer to the "Investments at a Glance" table at the end
of this section and in the SAI.
PRINCIPAL RISK FACTORS: Account TAS is most subject to equities risk, including
smaller companies risk, and market-timing risk. For a complete discussion of
these types of risk as well as other risks carried by the investments of Account
TAS, please refer to the "Investments, Practices and Risks" Section of this
prospectus. Please see the SAI for a detailed description of all investments,
and their associated risks, available to Account TAS.
FUNDAMENTAL INVESTMENT POLICIES
The fundamental investment policies of Account TAS permit it to:
1. invest up to 5% of its assets in the securities of any one issuer;
2. borrow money from banks in amounts of up to 10% of its assets, but only
as a temporary measure for emergency or extraordinary purposes;
3. pledge up to 10% of its assets to secure borrowings;
4. invest up to 25% of its assets in the securities of issuers in the same
industry; and
5. invest up to 10% of its assets in repurchase agreements maturing in more
than seven days and securities for which market quotations are not
readily available.
THE TRAVELERS TIMED BOND ACCOUNT FOR VARIABLE ANNUITIES
(ACCOUNT TB)
- --------------------------------------------------------------------------------
NOTE: The Travelers Timed Bond Account is not currently available to new
contract owners.
INVESTMENT ADVISER: TAMIC
PORTFOLIO MANAGER: Richard John
INVESTMENT OBJECTIVE: Current income and total return.
KEY INVESTMENTS: Highest credit quality debt securities.
SELECTION PROCESS: Account TB invests primarily in direct or indirect
obligations of the United States and its instrumentalities, and in obligations
of independent Federal Agencies. These debt securities include, but are not
limited to Treasury Bills, Treasury Notes and Treasury Bonds. Some examples of
the U.S. instrumentalities, enterprises or agencies in whose Securities the
Account may invest are:
<TABLE>
<S> <C>
- - Government National Mortgage - Export -- Import Bank of the U.S.
Association
- Farm Credit System
- - Small Business Administration
- Federal Home Loan Mortgage
- - Federal Housing Association Corporation
- Student Loan Marketing Association
</TABLE>
For a complete list of all investments available to Account TB, please refer to
the "Investments at a Glance" at the end of this section and in the SAI.
ADDITIONAL INVESTMENTS, INVESTMENT STRATEGIES AND TECHNIQUES: In addition,
Account TB may use exchange-traded futures contracts to facilitate market timed
moves, and as a hedge to protect against changes in interest rates. A complete
description of all investments and associated risks is contained in the SAI.
These additional investments include, but are not limited to :
- money market investments
- when-issued securities
- covered call options
42
<PAGE> 43
PRINCIPAL RISK FACTORS: Account TB is most subject to fixed-income securities
risk and market timing risk. For a complete discussion of these and other risks
carried by the investments of Account TB, please refer to the "Investments,
Practices and Risks" section of this prospectus. Please see the SAI for a
detailed description of all investments, and their associated risks, available
to Account TB.
FUNDAMENTAL INVESTMENT POLICIES
The fundamental investment policies of Account TB permit it to:
1. invest up to 5% of its assets in the securities of any one issuer
(exclusive of securities of the United States government, its agencies
or instrumentalities, for which there is no limit);
2. borrow money from banks in amounts of up to 10% of its assets, but only
as a temporary measure for emergency or extraordinary purposes;
3. pledge up to 10% of its assets to secure borrowings;
4. invest up to 25% of its assets in the securities of issuers in the same
industry (exclusive of securities of the U.S. government, its agencies
or instrumentalities, for which there is no limit); and
5. invest up to 10% of its assets in repurchase agreements maturing in more
than seven days.
INVESTMENTS, PRACTICES AND RISKS OF THE MANAGED SEPARATE ACCOUNTS
- --------------------------------------------------------------------------------
Each Account invests in various instruments subject to its particular investment
policy. The Accounts invest in some or all of the following, as indicated below
and in the Statement of Additional Information. For a free copy of the Statement
of Additional Information, see the front cover of this prospectus.
EQUITIES
(GIS, QB, TAS, TGIS) Equity securities include common and preferred
stock, warrants, rights, depository receipts and
shares, trust certificates, and real estate
instruments.
Equities are subject to market risk. Many factors
affect the stock market prices and dividend
payouts of equity investments. These factors
include general business conditions, investor
confidence in the economy, and current conditions
in a particular industry or company. Each company
determines whether or not to pay dividends on
common stock. Equity securities are subject to
financial risks relating to the issuer's earning
stability and overall financial soundness.
Smaller and emerging growth companies are
particularly sensitive to these factors.
Equity securities that are traded
over-the-counter may be more volatile than
exchange-listed stocks, and the Fund may
experience difficulty in purchasing or selling
these securities at a fair price.
When you sell your shares, they may be worth more
or less than what you paid for them.
FIXED INCOME INVESTMENTS
(All Accounts) Each Account may invest in fixed income
securities. Fixed income securities include U.S.
government securities, certificates of deposit,
and short-term money market instruments. Fixed
income securities may have all types of interest
rate payment and reset terms, including fixed
rate, adjustable rate, zero coupon, contingent,
deferred, payment in kind and auction rate
features.
43
<PAGE> 44
The value of debt securities varies inversely
with interest rates. This means generally that
the value of these investments increases as
short-term interest rates fall and decreases as
short-term interest rates rise. Yields from
short-term securities normally may be lower than
yields from longer-term securities. A bond's
price is affected by its issuer's credit quality.
An issuer may not always make payments on a fixed
income security. Some fixed income securities,
such as mortgage-backed securities are subject to
prepayment risk, which occurs when an issuer can
prepay the principal owed on a security before
its maturity.
High-yield, high-risk securities, commonly called
"junk bonds," are considered speculative. While
generally providing greater income than
investments in higher-quality securities, these
securities will involve greater risk of principal
and income (including the possibility of default
or bankruptcy of the issuers of the security).
TACTICAL ASSET ALLOCATION
RISKS
(TAS, TGIS, TG, TSB) If you participate in a tactical asset allocation
agreement, you may be subject to the following
additional risks: (1) higher transaction costs;
(2) higher portfolio turnover rate; (3)
investment return goals not being achieved by the
registered investment advisers which provide
tactical asset allocation services; and (4)
higher account expenses for depleting and, then
starting up the account. Actions by the
registered investment advisers which provide
tactical asset allocation services may also
increase risks generally found in any investment,
i.e., the failure to achieve an investment
objective, and possible lower yield. In addition,
if more than one tactical asset allocation
strategy uses a Market Timed Account, those who
invest in the Market Timed Account when others
are transferred into or out of that Account by
the registered investment advisers may bear part
of the direct costs incurred by those individuals
who were transferred. For example, if 90% of a
Market Timed Account is under one tactical asset
allocation strategy, and those funds are
transferred into or out of that Account, those
constituting the other 10% of the Market Timed
Account may bear a higher portion of the expense
for the transfer.
FOREIGN SECURITIES
(GIS, QB, TAS, TGIS) An investment in foreign securities involves risk
in addition to those of U.S. securities,
including possible political and economic
instability and the possible imposition of
exchange controls or other restrictions on
investments. The Account also bears an
"information" risk associated with the different
accounting, auditing, and financial reporting
standards in many foreign countries. If an
Account invests in securities denominated or
quoted in currencies other than the U.S. dollar,
changes in foreign currency rates relative to the
U.S. dollar will affect the U.S. dollar value of
the Account's assets.
44
<PAGE> 45
DERIVATIVES AND HEDGING
TECHNIQUES
(GIS, QB, TAS, TGIS, TB) An Account may use derivative contracts, such as
futures and options on securities, may be used
for any of the following purposes:
- To hedge against the economic impact of
adverse changes in the market value of its
securities, due to changes in stock market
prices, currency exchange rates or interest
rates;
- As a substitute for buying or selling
securities
- To enhance return
Even a small investment in derivative contracts
can have a big impact on an Account's stock
market, currency and interest rate exposure.
Therefore, using derivatives can
disproportionately increase losses and reduce
opportunities for gain when stock prices,
currency rates or interest rates are changing.
For a more complete description of derivative and
hedging techniques and their associated risks,
please refer to the Statement of Additional
Information.
OTHER RISK FACTORS
SELECTION RISK
(GIS, QB, TAS, TGIS) Account investors are subject to selection risk
in that a strategy used, or stock selected, may
fail to have the desired effect. Specifically,
stocks believed to show potential for capital
growth may not achieve that growth. Strategies or
instruments used to hedge against a possible risk
or loss may fail to protect against the
particular risk or loss.
TEMPORARY DEFENSIVE POSITIONS
(All Accounts) The Accounts may depart from principal investment
strategies in response to adverse market,
economic or political conditions by taking
temporary defensive positions in various types of
money market and short-term debt securities. If
an Account takes a temporary defensive position,
it is not pursuing its investment goal.
45
<PAGE> 46
INVESTMENTS AT A GLANCE
- --------------------------------------------------------------------------------
Each Account invests in various instruments subject to its particular investment
policies. The Accounts invest in some or all of the following, as indicated
below. These techniques and practices are described together with their risks,
in the SAI.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT TECHNIQUES GIS MM QB TAS TGIS TSB TB
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Affiliated Bank Transactions
- ---------------------------------------------------------------------------------------------------------------------------------
American Depositary Receipts X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
Asset-Backed Mortgage Securities X X
- ---------------------------------------------------------------------------------------------------------------------------------
Bankers Acceptances X X X X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
Buying Put and Call Options X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
Certificates of Deposit X X X X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
Commercial Paper X X X X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
Convertible Securities X X
- ---------------------------------------------------------------------------------------------------------------------------------
Corporate Asset-Backed Securities X
- ---------------------------------------------------------------------------------------------------------------------------------
Debt Securities X X X X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
Emerging Market Securities
- ---------------------------------------------------------------------------------------------------------------------------------
Equity Securities X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
Floating & Variable Rate Instruments X X X X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
Foreign Securities X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
Forward Contracts on Foreign Currency
- ---------------------------------------------------------------------------------------------------------------------------------
Futures Contracts X X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
Illiquid Securities X X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
Indexed Securities X
- ---------------------------------------------------------------------------------------------------------------------------------
Index Futures Contracts X X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Company Securities X X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
Investment in Unseasoned Companies X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
Lending Portfolio Securities X X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
Letters of Credit X X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
Loan Participations
- ---------------------------------------------------------------------------------------------------------------------------------
Options on Foreign Currencies
- ---------------------------------------------------------------------------------------------------------------------------------
Options on Index Futures Contracts X X X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
Options on Stock Indices X X
- ---------------------------------------------------------------------------------------------------------------------------------
Other Direct Indebtedness X X
- ---------------------------------------------------------------------------------------------------------------------------------
Real Estate-Related Instruments X X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements X X X X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
Reverse Repurchase Agreements X X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
Short Sales "Against the Box"
- ---------------------------------------------------------------------------------------------------------------------------------
Short-Term Money Market Instruments X X X X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
Swap Agreements
- ---------------------------------------------------------------------------------------------------------------------------------
Temporary Bank Borrowing X X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
U.S. Government Securities X X X X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
Variable Amount Master Demand Notes X X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
When-Issued and Delayed Delivery Securities X X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
Writing Covered Call Options X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
46
<PAGE> 47
APPENDIX A
- --------------------------------------------------------------------------------
THE FIXED ACCOUNT
The Fixed Account is secured by part of the general assets of the Company. The
general assets of the Company include all assets of the Company other than those
held in the Separate Account or any other separate account sponsored by the
Company or its affiliates. In the contract, we refer to this account as the
"flexible annuity account."
The staff of the SEC does not generally review the disclosure in the prospectus
relating to the Fixed Account. Disclosure regarding the Fixed Account and the
general account may, however, be subject to certain provisions of the federal
securities laws relating to the accuracy and completeness of statements made in
the prospectus.
Under the Fixed Account, the Company assumes the risk of investment gain or
loss, guarantees a specified interest rate, and guarantees a specified periodic
annuity payment. The investment gain or loss of the Separate Account or any of
the funding options does not affect the Fixed Account portion of the contract
owner's contract value, or the dollar amount of fixed annuity payments made
under any payout option.
We guarantee that, at any time, the Fixed Account contract value will not be
less than the amount of the purchase payments allocated to the Fixed Account,
plus interest credited as described above, less any applicable premium taxes or
prior surrenders. If the contract owner effects a surrender, the amount
available from the Fixed Account will be reduced by any applicable withdrawal
charge as described under "Charges and Deductions" in this prospectus.
Purchase payments allocated to the Fixed Account and any transfers made to the
Fixed Account become part of the Company's general account which supports
insurance and annuity obligations. Neither the general account nor any interest
therein is registered under, nor subject to the provisions of the Securities Act
of 1933 or Investment Company Act of 1940. We will invest the assets of the
Fixed Account at our discretion. Investment income from such Fixed Account
assets will be allocated to us and to the Contracts participating in the Fixed
Account.
Investment income from the Fixed Account allocated to us includes compensation
for mortality and expense risks borne by us in connection with Fixed Account
Contracts. The amount of such investment income allocated to the Contracts will
vary from year to year in our sole discretion at such rate or rates as the
Company prospectively declares from time to time.
The initial rate for any allocations into the Fixed Account is guaranteed for
one year from the date of such allocation. Subsequent renewal rates will be
guaranteed for the calendar quarter. We also guarantee that for the life of the
Contract we will credit interest at not less than 3.5% per year. Any interest
credited to amounts allocated to the Fixed Account in excess of 3.5% per year
will be determined in our sole discretion. You assume the risk that interest
credit to the Fixed Account may not exceed the minimum guarantee of 3.5% for any
given year.
TRANSFERS
Under nonqualified contracts, you may make transfers from the Fixed Account to
any other available funding option(s) twice a year during the 30 days following
the semiannual anniversary of the Contract effective date. The transfers are
limited to an amount of up to 10% of the Fixed Account Value on the semiannual
Contract effective date anniversary. (This restriction does not apply to
transfers from the Dollar Cost Averaging Program or to transfers under qualified
contracts.) We reserve the right to waive this restriction.
Automated transfers from the Fixed Account to any of the funding options may
begin at any time. Automated transfers from the Fixed Account may not deplete
your Fixed Account value in a period of less than twelve months from your
enrollment in the Dollar Cost Averaging program.
A-1
<PAGE> 48
THIS PAGE INTENTIONALLY LEFT BLANK.
<PAGE> 49
APPENDIX
B
CONDENSED FINANCIAL INFORMATION
- -------------------------------------------------------------------------
THE TRAVELERS FUND U FOR VARIABLE ANNUITIES
ACCUMULATION UNIT VALUES
<TABLE>
<CAPTION>
1998 1997 1996 1995
-------------------- ------------------- ------------------- -------------------
Q NQ Q NQ Q NQ Q NQ
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CAPITAL APPRECIATION FUND*
Unit Value at beginning of year... $ 3.779 $ 3.920 $ 3.034 $ 3.146 $ 2.396 $ 2.485 $ 1.779 $ 1.845
Unit Value at end of year......... 6.033 6.257 3.779 3.920 3.034 3.146 2.396 2.485
Number of units outstanding at end
of year (thousands)............. 104,732 11,574 84,250 9,791 64,294 7,828 45,979 4,415
HIGH YIELD BOND TRUST
Unit Value at beginning of year... $ 3.261 $ 3.295 $ 2.833 $ 2.863 $ 2.472 $ 2.498 $ 2.167 $ 2.189
Unit Value at end of year......... 3.432 3.468 3.261 3.295 2.833 2.863 2.472 2.498
Number of units outstanding at end
of year (thousands)............. 6,959 1,011 6,673 973 5,312 657 4,592 498
MANAGED ASSETS TRUST
Unit Value at beginning of year... $ 3.720 $ 4.004 $ 3.105 $ 3.342 $ 2.763 $ 2.975 $ 2.201 $ 2.369
Unit Value at end of year......... 4.462 4.802 3.720 4.004 3.105 3.342 2.763 2.975
Number of units outstanding at end
of year (thousands)............. 53,900 5,958 53,841 5,164 55,055 4,632 57,020 4,114
<CAPTION>
<S> <C> <C>
CAPITAL APPRECIATION FUND*
Unit Value at beginning of year... $ 1.892 $ 1.962
Unit Value at end of year......... 1.779 1.845
Number of units outstanding at end
of year (thousands)............. 40,160 3,605
HIGH YIELD BOND TRUST
Unit Value at beginning of year... $ 2.222 $ 2.245
Unit Value at end of year......... 2.167 2.189
Number of units outstanding at end
of year (thousands)............. 4,708 585
MANAGED ASSETS TRUST
Unit Value at beginning of year... $ 2.281 $ 2.455
Unit Value at end of year......... 2.201 2.369
Number of units outstanding at end
of year (thousands)............. 58,355 4,813
</TABLE>
<TABLE>
<CAPTION>
1993 1992 1991 1990
------------------- ------------------- ------------------- -------------------
Q NQ Q NQ Q NQ Q NQ
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CAPITAL APPRECIATION FUND*
Unit Value at beginning of year... $ 1.665 $ 1.727 $ 1.433 $ 1.487 $ 1.075 $ 1.114 $ 1.157 $ 1.200
Unit Value at end of year......... 1.892 1.962 1.665 1.727 1.433 1.487 1.075 1.114
Number of units outstanding at end
of year (thousands)............. 30,003 2,825 16,453 1,020 12,703 887 11,356 553
HIGH YIELD BOND TRUST
Unit Value at beginning of year... $ 1.974 $ 1.994 $ 1.767 $ 1.785 $ 1.418 $ 1.433 $ 1.573 $ 1.590
Unit Value at end of year......... 2.222 2.245 1.976 1.994 1.767 1.785 1.418 1.433
Number of units outstanding at end
of year (thousands)............. 5,066 603 4,730 428 4,018 344 4,045 341
MANAGED ASSETS TRUST
Unit Value at beginning of year... $ 2.111 $ 2.273 $ 2.034 $ 2.189 $ 1.691 $ 1.821 $ 1.671 $ 1.799
Unit Value at end of year......... 2.281 2.455 2.111 2.273 2.034 2.189 1.691 1.821
Number of units outstanding at end
of year (thousands)............. 63,538 4,490 65,926 4,120 58,106 3,359 51,489 2,744
<CAPTION>
<S> <C> <C>
- -----------------------------------------------------------------
CAPITAL APPRECIATION FUND*
Unit Value at beginning of year... $ 1.015 $ 1.052
Unit Value at end of year......... 1.157 1.200
Number of units outstanding at end
of year (thousands)............. 12,038 495
HIGH YIELD BOND TRUST
Unit Value at beginning of year... $ 1.571 $ 1.588
Unit Value at end of year......... 1.573 1.590
Number of units outstanding at end
of year (thousands)............. 6,074 573
MANAGED ASSETS TRUST
Unit Value at beginning of year... $ 1.331 $ 1.433
Unit Value at end of year......... 1.671 1.799
Number of units outstanding at end
of year (thousands)............. 47,104 2,836
</TABLE>
Q = Qualified
NQ = NonQualified
The financial statements of Fund U are contained in the Annual Report
which should be read along with this information and which is
incorporated by reference into the SAI. The consolidated financial
statements of The Travelers Insurance Company and Subsidiaries are
contained in the SAI.
* Prior to May 1, 1994, the Capital Appreciation Fund was known as the
Aggressive Stock Trust.
B-1
<PAGE> 50
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
THE TRAVELERS FUND U FOR VARIABLE ANNUITIES
ACCUMULATION UNIT VALUES
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
DREYFUS STOCK INDEX FUND (1/92)*
Unit Value at beginning of year.................... $ 2.456 $ 1.870 $ 1.546 $ 1.144 $ 1.148 $ 1.064 $ 1.000
Unit Value at end of year.......................... 3.110 2.456 1.870 1.546 1.144 1.148 1.064
Number of units outstanding at end of year
(thousands)...................................... 147,531 109,317 66,098 43,247 31,600 26,789 12,089
AMERICAN ODYSSEY FUNDS, INC.
AMERICAN ODYSSEY CORE EQUITY FUND (6/93)*
Unit Value at beginning of period.................. $ 2.143 $ 1.647 $ 1.354 $ .990 $ 1.012 $ 1.000 --
Unit Value at end of period........................ 2.445 2.143 1.647 1.354 .990 1.012 --
Number of units outstanding at end of period
(thousands)...................................... 187,872 185,895 170,552 137,330 100,082 37,136 --
AMERICAN ODYSSEY EMERGING OPPORTUNITIES FUND
(5/93)*
Unit Value at beginning of period.................. $ 1.541 $ 1.460 $ 1.526 $ 1.168 $ 1.079 $ 1.000 --
Unit Value at end of period........................ 1.390 1.541 1.460 1.526 1.168 1.079 --
Number of units outstanding at end of period
(thousands)...................................... 187,717 162,146 122,877 103,815 73,838 27,011 --
AMERICAN ODYSSEY GLOBAL HIGH-YIELD BOND FUND**
(5/93)*
Unit Value at beginning of period.................. $ 1.183 $ 1.129 $ 1.102 $ 1.006 $ 1.020 $ 1.000 --
Unit Value at end of period........................ 1.125 1.183 1.129 1.102 1.006 1.020 --
Number of units outstanding at end of period
(thousands)...................................... 70,747 48,929 44,077 24,416 17,611 8,201 --
AMERICAN ODYSSEY INTERMEDIATE-TERM BOND FUND
(6/93)*
Unit Value at beginning of period.................. $ 1.229 $ 1.157 $ 1.128 $ .993 $ 1.035 $ 1.000 --
Unit Value at end of period........................ 1.317 1.229 1.157 1.128 .993 1.035 --
Number of units outstanding at end of period
(thousands)...................................... 93,456 86,914 78,211 68,878 50,403 19,564 --
AMERICAN ODYSSEY INTERNATIONAL EQUITY FUND (5/93)*
Unit Value at beginning of period.................. $ 1.592 $ 1.534 $ 1.274 $ 1.084 $ 1.180 $ 1.000 --
Unit Value at end of period........................ 1.806 1.592 1.534 1.274 1.084 1.180 --
Number of units outstanding at end of period
(thousands)...................................... 161,690 143,959 121,896 70,364 47,096 16,944 --
AMERICAN ODYSSEY LONG-TERM BOND FUND (6/93)*
Unit Value at beginning of period.................. $ 1.352 $ 1.221 $ 1.221 $ .990 $ 1.085 $ 1.000 --
Unit Value at end of period........................ 1.456 1.352 1.221 1.221 .990 1.085 --
Number of units outstanding at end of period
(thousands)...................................... 170,067 159,728 137,075 101,376 70,928 25,467 --
DREYFUS VARIABLE INVESTMENT FUND
SMALL CAP PORTFOLIO (5/98)*
Unit Value at beginning of period.................. $ 1.000 -- -- -- -- -- --
Unit Value at end of period........................ 0.860 -- -- -- -- -- --
Number of units outstanding at end of period
(thousands)...................................... 4,815 -- -- -- -- -- --
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND
EQUITY-INCOME PORTFOLIO (7/93)*
Unit Value at beginning of period.................. $ 2.118 $ 1.674 $ 1.484 $ 1.112 $ 1.052 $ 1.000 --
Unit Value at end of period........................ 2.335 2.118 1.674 1.484 1.112 1.052 --
Number of units outstanding at end of period
(thousands)...................................... 243,964 237,050 205,636 153,463 78,856 13,414 --
GROWTH PORTFOLIO (1/92)*
Unit Value at beginning of year.................... $ 2.201 $ 1.805 $ 1.594 $ 1.192 $ 1.207 $ 1.024 $ 1.000
Unit Value at end of year.......................... 3.033 2.201 1.805 1.594 1.192 1.207 1.024
Number of units outstanding at end of year
(thousands)...................................... 295,980 289,002 274,892 229,299 176,304 101,260 30,240
HIGH INCOME PORTFOLIO (2/92)*
Unit Value at beginning of year.................... $ 2.052 $ 1.766 $ 1.568 $ 1.316 $ 1.354 $ 1.138 $ 1.000
Unit Value at end of year.......................... 1.939 2.052 1.766 1.568 1.316 1.354 1.138
Number of units outstanding at end of year
(thousands)...................................... 49,347 48,895 40,309 32,601 25,813 17,381 4,875
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND II
(1/92)*
ASSET MANAGER PORTFOLIO
Unit Value at beginning of year.................... $ 1.879 $ 1.577 $ 1.394 $ 1.207 $ 1.301 $ 1.088 $ 1.000
Unit Value at end of year.......................... 2.135 1.879 1.577 1.394 1.207 1.301 1.088
Number of units outstanding at end of year
(thousands)...................................... 226,655 240,064 249,050 270,795 282,474 162,413 30,207
</TABLE>
B-2
<PAGE> 51
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
THE TRAVELERS FUND U FOR VARIABLE ANNUITIES
ACCUMULATION UNIT VALUES (CONTINUED)
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
TEMPLETON VARIABLE PRODUCTS SERIES FUND:
TEMPLETON ASSET ALLOCATION FUND (1/92)* (CLASS 1)
Unit Value at beginning of year.................... $ 2.070 $ 1.815 $ 1.546 $ 1.277 $ 1.333 $ 1.070 $ 1.000
Unit Value at end of year.......................... 2.176 2.070 1.815 1.546 1.277 1.333 1.070
Number of units outstanding at end of year
(thousands)...................................... 105,824 124,603 113,809 107,460 103,407 51,893 13,888
TEMPLETON BOND FUND (1/92)* (CLASS 1)
Unit Value at beginning of year.................... $ 1.367 $ 1.351 $ 1.250 $ 1.101 $ 1.172 $ 1.065 $ 1.000
Unit Value at end of year.......................... 1.447 1.367 1.351 1.250 1.101 1.172 1.065
Number of units outstanding at end of year
(thousands)...................................... 9,863 10,502 10,260 10,527 10,186 8,014 3,477
TEMPLETON STOCK FUND (1/92)* (CLASS 1)
Unit Value at beginning of year.................... $ 2.211 $ 2.001 $ 1.655 $ 1.338 $ 1.385 $ 1.047 $ 1.000
Unit Value at end of year.......................... 2.211 2.211 2.001 1.655 1.338 1.385 1.047
Number of units outstanding at end of year
(thousands)...................................... 164,479 180,876 154,614 122,937 101,462 43,847 10,433
TRAVELERS SERIES FUND
ALLIANCE GROWTH PORTFOLIO (2/95)*
Unit Value at beginning of period.................. $ 2.091 $ 1.640 $ 1.284 $ 1.000 -- -- --
Unit Value at end of period........................ 2.664 2.091 1.640 1.284 -- -- --
Number of units outstanding at end of period
(thousands)...................................... 31,613 19,535 10,809 2,498 -- -- --
G.T. GLOBAL STRATEGIC INCOME PORTFOLIO*** (3/95)*
Unit Value at beginning of period.................. $ 1.487 $ 1.402 $ 1.195 $ 1.000 -- -- --
Unit Value at end of period........................ 1.446 1.487 1.402 1.195 -- -- --
Number of units outstanding at end of period
(thousands)...................................... 240 222 242 162 -- -- --
MFS TOTAL RETURN PORTFOLIO (2/95)*
Unit Value at beginning of period.................. $ 1.630 $ 1.362 $ 1.205 $ 1.000 -- -- --
Unit Value at end of period........................ 1.798 1.630 1.362 1.205 -- -- --
Number of units outstanding at end of period
(thousands)...................................... 22,751 14,655 7,302 2,734 -- -- --
PUTNAM DIVERSIFIED INCOME PORTFOLIO (3/95)*
Unit Value at beginning of period.................. $ 1.282 $ 1.206 $ 1.128 $ 1.000 -- -- --
Unit Value at end of period........................ 1.275 1.282 1.206 1.128 -- -- --
Number of units outstanding at end of period
(thousands)...................................... 7,549 5,171 2,375 774 -- -- --
SMITH BARNEY HIGH INCOME PORTFOLIO (3/95)*
Unit Value at beginning of period.................. $ 1.412 $ 1.256 $ 1.124 $ 1.000 -- -- --
Unit Value at end of period........................ 1.400 1.412 1.256 1.124 -- -- --
Number of units outstanding at end of period
(thousands)...................................... 2,256 1,307 553 138 -- -- --
SMITH BARNEY INTERNATIONAL EQUITY PORTFOLIO (2/95)*
Unit Value at beginning of period.................. $ 1.339 $ 1.321 $ 1.137 $ 1.000 -- -- --
Unit Value at end of period........................ 1.408 1.339 1.321 1.137 -- -- --
Number of units outstanding at end of period
(thousands)...................................... 8,376 7,634 5,777 593 -- -- --
SMITH BARNEY LARGE CAP VALUE PORTFOLIO (2/95)*
(formerly Smith Barney Income and Growth Portfolio)
Unit Value at beginning of period.................. $ 1.843 $ 1.474 $ 1.246 $ 1.000 -- -- --
Unit Value at end of period........................ 1.999 1.843 1.474 1.246 -- -- --
Number of units outstanding at end of period
(thousands)...................................... 13,038 10,871 6,133 1,747 -- -- --
TRAVELERS SERIES TRUST
DISCIPLINED MID CAP STOCK PORTFOLIO (5/98)*
Unit Value at beginning of period.................. $ 1.000 -- -- -- -- -- --
Unit Value at end of period........................ 1.040 -- -- -- -- -- --
Number of units outstanding at end of period
(thousands)...................................... 1,388 -- -- -- -- -- --
SOCIAL AWARENESS STOCK PORTFOLIO (5/92)*
Unit Value at beginning of period.................. $ 2.176 $ 1.731 $ 1.461 $ 1.109 $ 1.153 $ 1.086 $ 1.000
Unit Value at end of period........................ 2.842 2.176 1.731 1.461 1.109 1.153 1.086
Number of units outstanding at end of year
(thousands)...................................... 13,305 9,539 6,355 4,841 3,499 2,920 1,332
</TABLE>
B-3
<PAGE> 52
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
THE TRAVELERS FUND U FOR VARIABLE ANNUITIES
ACCUMULATION UNIT VALUES (CONTINUED)
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
TRAVELERS SERIES TRUST (CONTINUED)
U.S. GOVERNMENT SECURITIES PORTFOLIO (1/92)*
Unit Value at beginning of period.................. $ 1.472 $ 1.323 $ 1.321 $ 1.074 $ 1.153 $ 1.066 $ 1.000
Unit Value at end of period........................ 1.602 1.472 1.323 1.321 1.074 1.153 1.066
Number of units outstanding at end of period
(thousands)...................................... 36,339 22,809 19,054 21,339 22,709 22,142 8,566
UTILITIES PORTFOLIO (2/94)*
Unit Value at beginning of period.................. $ 1.686 $ 1.363 $ 1.284 $ 1.005 $ 1.000 -- --
Unit Value at end of period........................ 1.969 1.686 1.363 1.284 1.005 -- --
Number of units outstanding at end of period
(thousands)...................................... 16,378 12,539 13,258 11,918 5,740 -- --
</TABLE>
* Represents date money was first applied to funding option through Separate
Account.
** Formerly American Odyssey Short-Term Bond Fund. The name, investment
objectives and investment subadviser were changed pursuant to a shareholder
vote effective May 1, 1998.
*** Not currently available to new Contract Owners in most states.
The financial statements of Fund U are contained in the Annual Report which
should be read along with this information and which is incorporated by
reference into the SAI. The consolidated financial statements of The Travelers
Insurance Company and Subsidiaries are contained in the SAI.
"Number of units outstanding at end of period" may include units for contract
owners in the payout phase.
B-4
<PAGE> 53
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES
PER UNIT DATA FOR AN ACCUMULATION AND ANNUITY UNIT OUTSTANDING THROUGHOUT EACH
YEAR
The following information on per unit data has been audited by
PricewaterhouseCoopers LLP, independent accountants. Their report on the per
unit data for each of the five years in the period ended December 31, 1998 is
contained in the Account GIS Annual Report which should be read along with this
information and which is incorporated by reference into the SAI. The
consolidated financial statements of The Travelers Insurance Company and
Subsidiaries are contained in the SAI.
<TABLE>
<CAPTION>
CONTRACTS ISSUED ON OR AFTER TO MAY 16, 1983 1998 1997 1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER UNIT DATA
Total investment income................ $ .234 $ .228 $ .212 $ .205 $ .189 $ .184 $ .188 $ .198
Operating expenses..................... .303 .228 .175 .140 .115 .106 .098 .091
-------- -------- -------- ------- ------- ------- ------- -------
Net investment income (loss)........... (.069) .000 .037 .065 .074 .078 .090 .107
Unit Value at beginning of year........ 14.955 11.371 9.369 6.917 7.007 6.507 6.447 5.048
Net realized and change in unrealized gains
(losses)............................. 4.367 3.584 1.965 2.387 (.164) .422 (.030) 1.292
-------- -------- -------- ------- ------- ------- ------- -------
Unit Value at end of year.............. $ 19.253 $ 14.955 $ 11.371 $ 9.369 $ 6.917 $ 7.007 $ 6.507 $ 6.447
======== ======== ======== ======= ======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase (decrease) in unit value... $ 4.30 $ 3.58 $ 2.00 $ 2.45 $ (.09) $ .50 $ .06 $ 1.40
Ratio of operating expenses to average net
assets............................... 1.81% 1.70% 1.70% 1.70% 1.65% 1.57% 1.58% 1.58%
Ratio of net investment income (loss) to
average net assets................... (.41)% .00% .36% .79% 1.05% 1.15% 1.43% 1.86%
Number of units outstanding at end of year
(thousands).......................... 32,051 29,545 27,578 26,688 26,692 28,497 29,661 26,235
Portfolio turnover rate................ 50% 64% 85% 96% 103% 81% 189% 319%
CONTRACTS ISSUED PRIOR TO MAY 16, 1983 1998 1997 1996 1995 1994 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------------------
SELECTED PER UNIT DATA
Total investment income................ $ .243 $ .233 $ .216 $ .208 $ .192 $ .189 $ .192 $ .201
Operating expenses..................... .272 .201 .154 .123 .100 .092 .085 .077
-------- -------- -------- ------- ------- ------- ------- -------
Net investment income (loss)........... (.029) .032 .062 .085 .092 .097 .107 .124
Unit Value at beginning of year........ 15.510 11.763 9.668 7.120 7.194 6.664 6.587 5.145
Net realized and change in unrealized gains
(losses)............................. 4.536 3.715 2.033 2.463 (.166) .433 (.030) 1.318
-------- -------- -------- ------- ------- ------- ------- -------
Unit Value at end of year.............. $ 20.017 $ 15.510 $ 11.763 $ 9.668 $ 7.120 $ 7.194 $ 6.664 $ 6.587
======== ======== ======== ======= ======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase (decrease) in unit value... $ 4.51 $ 3.75 $ 2.10 $ 2.55 $ (.07) $ .53 $ .08 $ 1.44
Ratio of operating expenses to average net
assets............................... 1.56% 1.45% 1.45% 1.45% 1.41% 1.33% 1.33% 1.33%
Ratio of net investment income (loss) to
average net assets................... (.16)% .24% .60% 1.02% 1.30% 1.40% 1.67% 2.11%
Number of units outstanding at end of year
(thousands).......................... 13,894 15,194 16,554 17,896 19,557 21,841 22,516 24,868
Portfolio turnover rate................ 50% 64% 85% 96% 103% 81% 189% 319%
<CAPTION>
<S> <C> <C>
- -----------------------------------------------------------------------------------
SELECTED PER UNIT DATA
Total investment income................ $ .192 $ .191
Operating expenses..................... .079 .095
------- -------
Net investment income (loss)........... .113 .096
Unit Value at beginning of year........ 5.295 4.191
Net realized and change in unrealized gains
(losses)............................. (.360) 1.008
------- -------
Unit Value at end of year.............. $ 5.048 $ 5.295
======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase (decrease) in unit value... $ (.25) $ 1.10
Ratio of operating expenses to average net
assets............................... 1.57% 1.58%
Ratio of net investment income (loss) to
average net assets................... 2.25% 2.33%
Number of units outstanding at end of year
(thousands).......................... 19,634 15,707
Portfolio turnover rate................ 54% 27%
CONTRACTS ISSUED PRIOR TO MAY 16, 1983 1990 1989
- -----------------------------------------------------------------------------------------------------
SELECTED PER UNIT DATA
Total investment income................ $ .199 $ .191
Operating expenses..................... .069 .066
------- -------
Net investment income (loss)........... .130 .125
Unit Value at beginning of year........ 5.383 4.250
Net realized and change in unrealized gains
(losses)............................. (.368) 1.008
------- -------
Unit Value at end of year.............. $ 5.145 $ 5.383
======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase (decrease) in unit value... $ (.24) $ 1.13
Ratio of operating expenses to average net
assets............................... 1.33% 1.33%
Ratio of net investment income (loss) to
average net assets................... 2.50% 2.56%
Number of units outstanding at end of year
(thousands).......................... 28,053 31,326
Portfolio turnover rate................ 54% 27%
</TABLE>
B-5
<PAGE> 54
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES
PER UNIT DATA FOR AN ACCUMULATION AND ANNUITY UNIT OUTSTANDING THROUGHOUT EACH
YEAR
The following information on per unit data has been audited by
PricewaterhouseCoopers LLP, independent accountants. Their report on the per
unit data for each of the five years in the period ended December 31, 1998 is
contained in the Account QB Annual Report which should be read along with this
information and which is incorporated by reference into the SAI. The
consolidated financial statements of The Travelers Insurance Company and
Subsidiaries are contained in the SAI.
<TABLE>
<CAPTION>
CONTRACTS ISSUED ON OR AFTER MAY 16, 1983 1998 1997 1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER UNIT DATA
Total investment income............... $ .350 $ .342 $ .368 $ .319 $ .310 $ .299 $ .311 $ .299
Operating expenses.................... .088 .082 .078 .073 .069 .067 .061 .056
------- ------- ------- ------- ------- ------- ------- -------
Net investment income................. .262 .260 .290 .246 .241 .232 .250 .243
Unit Value at beginning of year....... 5.393 5.060 4.894 4.274 4.381 4.052 3.799 3.357
Net realized and change in unrealized
gains (losses)...................... .110 .073 (.124) .374 (.348) .097 .003 .199
------- ------- ------- ------- ------- ------- ------- -------
Unit Value at end of year............. $ 5.765 $ 5.393 $ 5.060 $ 4.894 $ 4.274 $ 4.381 $ 4.052 $ 3.799
======= ======= ======= ======= ======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase (decrease) in unit value... $ .37 $ .33 $ .17 $ .62 $ (.11) $ .33 $ .25 $ .44
Ratio of operating expenses to average
net assets.......................... 1.57% 1.57% 1.57% 1.57% 1.57% 1.57% 1.58% 1.57%
Ratio of net investment income to
average net assets.................. 4.71% 5.00% 5.87% 5.29% 5.62% 5.41% 6.38% 6.84%
Number of units outstanding at end of
year (thousands).................... 21,251 21,521 24,804 27,066 27,033 28,472 20,250 17,211
Portfolio turnover rate............... 438% 196% 176% 138% 27% 24% 23% 21%
CONTRACTS ISSUED PRIOR TO MAY 16, 1983 1998 1997 1996 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------------------
SELECTED PER UNIT DATA
Total investment income............... $ .363 $ .353 $ .379 $ .328 $ .318 $ .306 $ .317 $ .304
Operating expenses.................... .076 .071 .067 .063 .059 .058 .050 .048
------- ------- ------- ------- ------- ------- ------- -------
Net investment income................. .287 .282 .312 .265 .259 .248 .267 .256
Unit Value at beginning of year....... 5.593 5.234 5.050 4.400 4.498 4.150 3.880 3.421
Net realized and change in unrealized
gains (losses)...................... .114 .077 (.128) .385 (.357) .100 .003 .203
------- ------- ------- ------- ------- ------- ------- -------
Unit Value at end of year............. $ 5.994 $ 5.593 $ 5.234 $ 5.050 $ 4.400 $ 4.498 $ 4.150 $ 3.880
======= ======= ======= ======= ======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase (decrease) in unit value... $ .40 $ .36 $ .18 $ .65 $ (.10) $ .35 $ .27 $ .46
Ratio of operating expenses to average
net assets.......................... 1.33% 1.33% 1.33% 1.33% 1.33% 1.33% 1.33% 1.33%
Ratio of net investment income to
average net assets.................. 4.96% 5.25% 6.12% 5.54% 5.87% 5.66% 6.61% 7.09%
Number of units outstanding at end of
year (thousands).................... 6,880 7,683 8,549 9,325 10,694 12,489 13,416 14,629
Portfolio turnover rate............... 438% 196% 176% 138% 27% 24% 23% 21%
<CAPTION>
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
SELECTED PER UNIT DATA
Total investment income............... $ .277 $ .270
Operating expenses.................... .048 .047
------- -------
Net investment income................. .229 .223
Unit Value at beginning of year....... 3.129 2.852
Net realized and change in unrealized
gains (losses)...................... (.001) .054
------- -------
Unit Value at end of year............. $ 3.357 $ 3.129
======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase (decrease) in unit value... $ .23 $ .28
Ratio of operating expenses to average
net assets.......................... 1.57% 1.57%
Ratio of net investment income to
average net assets.................. 7.06% 7.44%
Number of units outstanding at end of
year (thousands).................... 14,245 13,135
Portfolio turnover rate............... 41% 33%
CONTRACTS ISSUED PRIOR TO MAY 16, 1983 1990* 1989
- --------------------------------------------------------------------------------------------------------------------------------
SELECTED PER UNIT DATA
Total investment income............... $ .281 $ .270
Operating expenses.................... .040 .035
------- -------
Net investment income................. .241 .235
Unit Value at beginning of year....... 3.181 2.892
Net realized and change in unrealized
gains (losses)...................... (.001) .054
------- -------
Unit Value at end of year............. $ 3.421 $ 3.181
======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase (decrease) in unit value... $ .24 $ .29
Ratio of operating expenses to average
net assets.......................... 1.33% 1.33%
Ratio of net investment income to
average net assets.................. 7.31% 7.60%
Number of units outstanding at end of
year (thousands).................... 16,341 18,248
Portfolio turnover rate............... 41% 33%
</TABLE>
B-6
<PAGE> 55
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES
PER UNIT DATA FOR AN ACCUMULATION AND ANNUITY UNIT OUTSTANDING THROUGHOUT EACH
YEAR
The following information on per unit data has been audited by
PricewaterhouseCoopers LLP, independent accountants. Their report on the per
unit data for each of the five years in the period ended December 31, 1998 is
contained in the Account MM Annual Report which should be read along with this
information and which is incorporated by reference into the SAI. The
consolidated financial statements of The Travelers Insurance Company and
Subsidiaries are contained in the SAI.
<TABLE>
<CAPTION>
CONTRACTS ISSUED ON OR AFTER MAY 16, 1983 1998 1997 1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER UNIT DATA
Total investment income............... $ .133 $ .128 $ .121 $ .127 $ .087 $ .065 $ .077 $ .118
Operating expenses.................... .038 .036 .035 .034 .032 .031 .031 .030
-------- -------- ------- ------- ------- ------- ------- -------
Net investment income................. .095 .092 .086 .093 .055 .034 .046 .088
Unit Value at beginning of year....... 2.355 2.263 2.177 2.084 2.029 1.995 1.949 1.861
-------- -------- ------- ------- ------- ------- ------- -------
Unit Value at end of year............. $ 2.450 $ 2.355 $ 2.263 $ 2.177 $ 2.084 $ 2.029 $ 1.995 $ 1.949
======== ======== ======= ======= ======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase in unit value............ $ .10 $ .09 $ .09 $ .09 $ .06 $ .03 $ .05 $ .09
Ratio of operating expenses to average
net assets.......................... 1.57% 1.57% 1.57% 1.57% 1.57% 1.57% 1.57% 1.57%
Ratio of net investment income to
average net assets.................. 3.95% 4.02% 3.84% 4.36% 2.72% 1.68% 2.33% 4.66%
Number of units outstanding at end of
year (thousands).................... 41,570 36,134 38,044 35,721 39,675 34,227 42,115 55,013
CONTRACTS ISSUED PRIOR TO MAY 16, 1983 1998 1997 1996 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------------------
SELECTED PER UNIT DATA
Total investment income............... $ .138 $ .134 $ .125 $ .130 $ .091 $ .067 $ .079 $ .120
Operating expenses.................... .033 .032 .030 .030 .028 .027 .027 .026
-------- -------- ------- ------- ------- ------- ------- -------
Net investment income................. .105 .102 .095 .100 .063 .040 .052 .094
Unit Value at beginning of year....... 2.443 2.341 2.246 2.146 2.083 2.043 1.991 1.897
-------- -------- ------- ------- ------- ------- ------- -------
Unit Value at end of year............. $ 2.548 $ 2.443 $ 2.341 $ 2.246 $ 2.146 $ 2.083 $ 2.043 $ 1.191
======== ======== ======= ======= ======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase in unit value............ $ .11 $ .10 $ .10 $ .10 $ .06 $ .04 $ .05 $ .09
Ratio of operating expenses to average
net assets.......................... 1.33% 1.33% 1.33% 1.33% 1.33% 1.33% 1.33% 1.33%
Ratio of net investment income to
average net assets.................. 4.20% 4.27% 4.10% 4.61% 2.98% 1.93% 2.58% 4.90%
Number of units outstanding at end of
year (thousands).................... 91 105 112 206 206 218 227 262
<CAPTION>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
SELECTED PER UNIT DATA
Total investment income............... $ .149 $ .156
Operating expenses.................... .029 .027
------- -------
Net investment income................. .120 .129
Unit Value at beginning of year....... 1.741 1.612
------- -------
Unit Value at end of year............. $ 1.861 $ 1.741
======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase in unit value............ $ .12 $ .13
Ratio of operating expenses to average
net assets.......................... 1.57% 1.57%
Ratio of net investment income to
average net assets.................. 6.68% 7.65%
Number of units outstanding at end of
year (thousands).................... 67,343 57,916
CONTRACTS ISSUED PRIOR TO MAY 16, 1983 1990* 1989
- --------------------------------------------------------------------------------------------------------------------------------
SELECTED PER UNIT DATA
Total investment income............... $ .151 $ .156
Operating expenses.................... .024 .021
------- -------
Net investment income................. .127 .135
Unit Value at beginning of year....... 1.770 1.635
------- -------
Unit Value at end of year............. $ 1.897 $ 1.770
======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase in unit value............ $ .13 $ .14
Ratio of operating expenses to average
net assets.......................... 1.33% 1.33%
Ratio of net investment income to
average net assets.................. 6.93% 7.81%
Number of units outstanding at end of
year (thousands).................... 326 367
</TABLE>
* On May 1, 1990, TAMIC replaced TIMCO as the investment adviser for Account MM.
B-7
<PAGE> 56
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
THE TRAVELERS TIMED GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES
PER UNIT DATA FOR AN ACCUMULATION UNIT OUTSTANDING THROUGHOUT EACH PERIOD
The following information on per unit data has been audited by
PricewaterhouseCoopers LLP, independent accountants. Their report on the per
unit data for each of the five years in the period ended December 31, 1998 is
contained in the Account TGIS Annual Report which should be read along with this
information and which is incorporated by reference into the SAI. The
consolidated financial statements of The Travelers Insurance Company and
Subsidiaries are contained in the SAI.
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER UNIT DATA
Total investment income........... $ .064 $ .075 $ .061 $ .083 $ .064 $ .043 $ .046 $ .045
Operating expenses................ .110 .090 .069** .057** .041** .042** .045** .045**
------- ------- ------- ------- ------- ------- ------- -------
Net investment income (loss)...... (.046) (.015) (.008) .026 .023 .001 .001 --
Unit Value at beginning of year... $ 3.526 $ 2.717 $ 2.263 $ 1.695 $ 1.776 $ 1.689 $ 1.643 $ 1.391
Net realized and change in
unrealized gains (losses)....... .988 .824 .462 .542 (.104) 0.086 0.045 0.252
------- ------- ------- ------- ------- ------- ------- -------
Unit Value at end of year......... $ 4.468 $ 3,526 $ 2.717 $ 2.263 $ 1.695 $ 1.776 $ 1.689 $ 1.643
======= ======= ======= ======= ======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL
DATA
Net increase (decrease) in unit
value........................... $ .94 $ .81 $ .45 $ .57 $ (.08) $ .09 $ .05 $ .25
Ratio of operating expenses to
average net assets*............. 2.82% 2.82%** 2.82%** 2.82%** 2.82%** 2.82%** 2.82%** 2.82%**
Ratio of net investment income
(loss) to average net assets*... (1.16)% (.45)% (.34)% 1.37% 1.58% 0.08% 0.78% 1.33%
Number of units outstanding at end
of year (thousands)............. 25,192 60,312 68,111 105,044 29,692 -- 217,428 --
Portfolio turnover rate........... 81% 63% 81% 79% 19% 70% 119% 489%
<CAPTION>
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
SELECTED PER UNIT DATA
Total investment income........... $ .099 $ .161
Operating expenses................ .034** .023
------- -------
Net investment income (loss)...... .065 .138
Unit Value at beginning of year... $ 1.447 $ 1.108
Net realized and change in
unrealized gains (losses)....... (.121) .201
------- -------
Unit Value at end of year......... $ 1.391 $ 1.447
======= =======
SIGNIFICANT RATIOS AND ADDITIONAL
DATA
Net increase (decrease) in unit
value........................... $ (.06) $ .34
Ratio of operating expenses to
average net assets*............. 2.41%** 1.57%
Ratio of net investment income
(loss) to average net assets*... 1.86% 2.81%
Number of units outstanding at end
of year (thousands)............. 5,708 --
Portfolio turnover rate........... 653% 149%
</TABLE>
* Annualized
** Effective May 1, 1990, market timing fees are included in operating
expenses. Prior to May 1, 1990, market timing fee payments were made by
separate check from a contract owner, and were not recorded in the financial
statements of Account TGIS, or by contractual surrender to the extent
allowed under federal tax law.
B-8
<PAGE> 57
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT FOR VARIABLE ANNUITIES*
PER UNIT DATA FOR AN ACCUMULATION UNIT OUTSTANDING THROUGHOUT EACH YEAR
The following information on per unit data has been audited by
PricewaterhouseCoopers LLP, independent accountants. Their report on the per
unit data for each of the five years in the period ended December 31, 1998 is
contained in the Account TSB Annual Report which should be read along with this
information and which is incorporated by reference into the SAI. The
consolidated financial statements of The Travelers Insurance Company and
Subsidiaries are contained in the SAI.
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER UNIT DATA
Total investment income........... $ .078 $ .077 $ .057 $ .074 $ .055 $ .041 $ .054 $ .076
Operating expenses................ .040 .039** .030** .035** .036** .037** .041** .036**
------- ------- ------- ------- ------- ------- ------- -------
Net investment income............. .038 0.38 .027 .039 .019 .004 .013 .040
Unit value at beginning of year... 1.399 1.361 1.333 1.292 1.275 1.271 1.258 1.218
Net realized and change in
unrealized gains (losses)***.... .000 .000 .001 .002 (.002) -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Unit value at end of year......... $ 1.437 $ 1.399 $ 1.361 $ 1.333 $ 1.292 $ 1.275 $ 1.271 $ 1.258
======= ======= ======= ======= ======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL
DATA
Net increase in unit value........ $ .04 $ .04 $ .03 $ .04 $ .02 $ -- $ .01 $ .04
Ratio of operating expenses to
average net assets****.......... 2.82% 2.82%** 2.82%** 2.82%** 2.82%** 2.82%** 2.82%** 2.82%**
Ratio of net investment income to
average net assets****.......... 2.71% 2.77% 2.47% 3.17% 1.45% .39% 1.12% 3.07%
Number of units outstanding at end
of year (thousands)............. 137,067 47,262 54,565 -- 216,713 353,374 173,359 439,527
<CAPTION>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
SELECTED PER UNIT DATA
Total investment income........... $ .099 $ .102
Operating expenses................ .030** .017
------- -------
Net investment income............. .069 .085
Unit value at beginning of year... 1.149 1.064
Net realized and change in
unrealized gains (losses)***.... -- --
------- -------
Unit value at end of year......... $ 1.218 $ 1.149
======= =======
SIGNIFICANT RATIOS AND ADDITIONAL
DATA
Net increase in unit value........ $ .07 $ .09
Ratio of operating expenses to
average net assets****.......... 2.41%** 1.57%
Ratio of net investment income to
average net assets****.......... 5.89% 7.63%
Number of units outstanding at end
of year (thousands)............. 369,769 360,074
</TABLE>
* Prior to May 1, 1994, the Account was known as The Travelers Timed Money
Market Account for Variable Annuities.
** Effective May 1, 1990, market timing fees are included in operating
expenses. Prior to May 1, 1990, market timing fee payments were made by
separate check from a contract owner, and were not recorded in the financial
statements of Account TSB, or by contractual surrender to the extent allowed
under federal tax law.
*** Effective May 2, 1994, Account TSB was authorized to invest in securities
with a maturity of greater than one year. As a result, net realized and
change in unrealized gains (losses) are no longer included in total
investment income.
**** Annualized.
B-9
<PAGE> 58
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
THE TRAVELERS TIMED AGGRESSIVE STOCK ACCOUNT FOR VARIABLE ANNUITIES
PER UNIT DATA FOR AN ACCUMULATION UNIT OUTSTANDING THROUGHOUT EACH YEAR
The following information on per unit data has been audited by
PricewaterhouseCoopers LLP, independent accountants. Their report on the per
unit data for each of the five years in the period ended December 31, 1998 is
contained in the Account TAS Annual Report which should be read along with this
information and which is incorporated by reference into the SAI. The
consolidated financial statements of The Travelers Insurance Company and
Subsidiaries are contained in the SAI.
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER UNIT DATA
Total investment income........... $ .056 $ .063 $ .041 $ .042 $ .036 $ .037 $ .041 $ .044
Operating expenses................ .098 .085 .069** .057** .049** .048** .043** .039**
-------- -------- ------- ------- ------- ------- ------- -------
Net investment income (loss)...... (.042) (.022) (.028) (.015) (.013) (.011) (.002) .005
Unit Value at beginning of year... 3.389 2.623 2.253 1.706 1.838 1.624 1.495 1.136
Net realized and unrealized gains
(losses)........................ .560 .788 .398 .562 (.119) .225 .131 .354
-------- -------- ------- ------- ------- ------- ------- -------
Unit Value at end of year......... $ 3.907 $ 3.389 $ 2.623 $ 2.253 $ 1.706 $ 1.838 $ 1.624 $ 1.495
======== ======== ======= ======= ======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL
DATA
Net increase (decrease) in unit
value........................... .52 $ .77 $ .37 $ .55 $ (.13) $ .21 $ (.13) $ .36
Ratio of operating expenses to
average net assets*............. 2.85% 2.85%** 2.84%** 2.83%** 2.80%** 2.82%** 2.93%** 2.99%**
Ratio of net investment income
(loss) to average net assets*... (1.21)% (.76)% (1.13)% (.74)% (.72)% (.80)% (.12)% .37%
Number of units outstanding at end
of year (thousands)............. 16,452 25,865 30,167 45,575 25,109 43,059 20,225 19,565
Portfolio turnover rate........... 113% 92% 98% 113% 142% 71% 269% 261%
<CAPTION>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
SELECTED PER UNIT DATA
Total investment income........... $ .045 $ .052
Operating expenses................ .073** .051
------- -------
Net investment income (loss)...... (.028) .001
Unit Value at beginning of year... 1.189 1.059
Net realized and unrealized gains
(losses)........................ (.025) .129
------- -------
Unit Value at end of year......... $ 1.136 $ 1.189
======= =======
SIGNIFICANT RATIOS AND ADDITIONAL
DATA
Net increase (decrease) in unit
value........................... $ (.05) $ .13
Ratio of operating expenses to
average net assets*............. 2.64%** 1.95%
Ratio of net investment income
(loss) to average net assets*... (3.73)% .91%
Number of units outstanding at end
of year (thousands)............. 5,585 --
Portfolio turnover rate........... 0% 77%
</TABLE>
* Annualized
** Effective May 1, 1990, market timing fees are included in operating expenses.
Prior to May 1, 1990, market timing fee payments were made by separate check
from a contract owner and were not recorded in the financial statements of
Account TAS, or by contractual surrender to the extent allowed under federal
tax law.
+ On May 1, 1990, TIMCO replaced Keystone Custodian Funds, Inc. as the
investment adviser for Account TAS.
B-10
<PAGE> 59
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
THE TRAVELERS TIMED BOND ACCOUNT FOR VARIABLE ANNUITIES*
PER UNIT DATA FOR AN ACCUMULATION UNIT OUTSTANDING THROUGHOUT EACH YEAR
The following information on per unit data for 1997 and prior has been audited
by PricewaterhouseCoopers LLP, independent accountants. The consolidated
financial statements of The Travelers Insurance Company and Subsidiaries are
contained in the SAI.
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER UNIT DATA
Total investment income........... .000 $ .025 $ .033 $ .071 $ .007 $ .054 $ .051
Operating expenses................ .000 .011 .015*** .031*** .006*** .036*** .032***
------- ------- ------- ------- ------- ------- -------
Net investment income............. .000 .014 .018 .040 .001 .018 .019
Unit Value at beginning of year... $ 1.273 1.232 1.383 1.215 1.234 1.132 1.087
Net realized and change in
unrealized gains (losses)....... .000 .027 (.169) .128 (.020) .084 .026
------- ------- ------- ------- ------- ------- -------
Unit Value at end of year......... $ 1.273 $ 1.273 $ 1.232 $ 1.383 $ 1.215 $ 1.234 $ 1.132
======= ======= ======= ======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL
DATA
Net increase (decrease) in unit
value........................... $ .00 $ .04 $ (.15) $ .17 $ (.02) $ .10 $ .05
Ratio of operating expenses to
average net assets**............ -- 3.00%*** 3.00%*** 3.00%*** 3.00%*** 3.00%*** 2.99%***
Ratio of net investment income to
average net assets**............ -- 3.64% 3.48% 3.98% 1.02% 1.48% 1.71%
Number of units outstanding at end
of year (thousands)............. -- -- -- 11,466 -- 20,207 21,868
Portfolio turnover rate........... -- 129% 153% 117% -- 190% 505%
<CAPTION>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
SELECTED PER UNIT DATA
Total investment income........... $ .052 $ .072 $ .147
Operating expenses................ .031*** .018*** .023
------- ------- -------
Net investment income............. .021 .054 .124
Unit Value at beginning of year... .994 1.036 1.114
Net realized and change in
unrealized gains (losses)....... .072 (.096) (.202)
------- ------- -------
Unit Value at end of year......... $ 1.087 $ .994 $ 1.036
======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL
DATA
Net increase (decrease) in unit
value........................... $ .09 $ (.04) $ (.08)
Ratio of operating expenses to
average net assets**............ 3.00%*** 2.58%*** 2.02%
Ratio of net investment income to
average net assets**............ 3.07% 3.88% 11.15%
Number of units outstanding at end
of year (thousands)............. 19,521 14,115 660
Portfolio turnover rate........... 627% 370% 10%
</TABLE>
* This Fund is not available to new Contract Owners, and had no assets in 1998.
Therefore, there is no 1998 Annual Report for Account TB.
** Annualized
*** Effective May 1, 1990, market timing fees are included in operating
expenses. Prior to May 1, 1990, market timing fee payments were made by
separate check from a contract owner, and were not recorded in the financial
statements of Account TB, or by contractual surrender to the extent allowed
under federal tax law.
+ On May 1, 1990, TAMIC replaced Keystone Custodian Funds, Inc. as the
investment adviser for Account TB.
B-11
<PAGE> 60
THIS PAGE INTENTIONALLY LEFT BLANK.
<PAGE> 61
APPENDIX C
- --------------------------------------------------------------------------------
CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
The Statement of Additional Information contains more specific information and
financial statements relating to The Travelers Insurance Company. A list of the
contents of the Statement of Additional Information is set forth below:
Description of The Travelers Insurance Company and The Separate Accounts
The Insurance Company
The Separate Accounts
Mixed and Shared Funding
Investment Objectives, Policies and Risks
Description of Certain Types of Investments and Investment Techniques
Available to the Separate Accounts
Investment Restrictions
The Travelers Growth and Income Stock Account For Variable Annuities
The Travelers Timed Growth and Income Stock Account for Variable
Annuities
The Travelers Timed Aggressive Stock Account for Variable Annuities
The Travelers Quality Bond Account for Variable Annuities
The Travelers Timed Bond Account for Variable Annuities
The Travelers Money Market Account for Variable Annuities
The Travelers Timed Short-Term Bond Account for Variable Annuities
Investment Management and Advisory Services
Advisory Fees
TIMCO
TAMIC
Valuation of Assets
Net Investment Factor
Federal Tax Considerations
Performance Data
Yield Quotations of Account MM
Average Annual Total Return Quotations of Accounts GIS, QB, MM, TGIS,
TSB, TAS, TB and Fund U
The Board of Managers
Administrative Services
Distribution and Principal Underwriting Agreement
Securities Custodian
Independent Accountants
Financial Statements
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
COPIES OF THE STATEMENT OF ADDITIONAL INFORMATION DATED MAY 1, 1999 (FORM NO.
L-11165S) ARE AVAILABLE WITHOUT CHARGE. TO REQUEST A COPY, PLEASE CLIP THIS
COUPON ON THE DOTTED LINE, ENTER YOUR NAME AND ADDRESS IN THE SPACES PROVIDED
BELOW, AND MAIL TO: THE TRAVELERS INSURANCE COMPANY, ANNUITY SERVICES, ONE TOWER
SQUARE, HARTFORD, CONNECTICUT 06183-5030.
Name:
Address:
C-1
<PAGE> 62
THIS PAGE INTENTIONALLY LEFT BLANK.
<PAGE> 63
THIS PAGE INTENTIONALLY LEFT BLANK.
<PAGE> 64
THE TRAVELERS UNIVERSAL ANNUITY
INDIVIDUAL AND GROUP
VARIABLE ANNUITY CONTRACTS
ISSUED BY
THE TRAVELERS INSURANCE COMPANY
L-11165 Printed in U.S.A.
TIC Ed. 5-99