<PAGE> 1
Registration Statement No. 2-88637
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 21
TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
A. Exact Name of Trust: THE TRAVELERS FUND UL FOR VARIABLE LIFE INSURANCE
B. Name of Depositor: THE TRAVELERS INSURANCE COMPANY
C. Complete Address of Depositor's Principal Executive Offices:
One Tower Square,
Hartford, Connecticut 06183
D. Name and Complete Address of Agent for Service:
Ernest J. Wright, Secretary
The Travelers Insurance Company
One Tower Square
Hartford, Connecticut 06183
It is proposed that this filing will become effective (check appropriate box):
immediately upon filing pursuant to paragraph (b)
- -------
X on May 1, 2000 pursuant to paragraph (b)
- -------
60 days after filing pursuant to paragraph (a)(1)
- -------
on __________ pursuant to paragraph (a)(1) of Rule 485.
- -------
If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
- ------- previously filed post-effective amendment.
Check the box if it is proposed that this filing will become
- ------- effective on ____ at ___ pursuant to Rule 487. ______
<PAGE> 2
RECONCILIATION AND TIE BETWEEN
FORM N-8B-2 AND THE PROSPECTUS
<TABLE>
<CAPTION>
Item No. of
Form N-8B-2 CAPTION IN PROSPECTUS
- ----------- ---------------------
<S> <C>
1 Cover page
2 Cover page
3 Not applicable
4 The Insurance Company; Distribution
5 The Travelers Fund UL for Variable Life Insurance
6 The Travelers Fund UL for Variable Life Insurance
7 Not applicable
8 Not applicable
9 Legal Proceedings and Opinion
10 Prospectus Summary; The Insurance Company; The Travelers
Fund UL for Variable Life Insurance, The Investment
Options; The Policy; Transfers of Cash Value; Cash Value
and Cash Surrender Value; Voting Rights; Disregard of
Voting Rights; Dividends; Lapse and Reinstatement
11 Prospectus Summary; The Investment Options
12 Prospectus Summary; The Investment Options
13 Charges and Deductions; Distribution of the Policies
14 The Policy
15 Prospectus Summary; Allocation of Premium Payments
16 The Investment Options; Allocation of Premium Payments
17 Prospectus Summary; Right to Cancel Period; Cash Value and
Cash Surrender Value; Policy Loans; Exchange Rights
18 The Investment Options; Charges and Deductions; Federal
Tax Considerations; Dividends
19 Statements to Policy Owners
20 Not applicable
21 Policy Loans
22 Not applicable
23 Not applicable
24 Not applicable
25 The Insurance Company
26 Not applicable
27 The Insurance Company
28 The Insurance Company; Management
29 The Insurance Company
30 Not applicable
31 Not applicable
32 Not applicable
33 Not applicable
34 Not applicable
35 The Insurance Company; Distribution of the Policies
36 Not applicable
37 Not applicable
38 Distribution of the Policy
39 The Insurance Company; Distribution of the Policies
40 Not applicable
41 The Insurance Company; Distribution of the Policies
42 Not applicable
43 Not applicable
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Item No. of
Form N-8B-2 CAPTION IN PROSPECTUS
- ----------- ---------------------
<S> <C>
44 Allocation of Premium Payments; Accumulation Unit Values
45 Not applicable
46 Cash Value and Cash Surrender Value
47 The Investment Options
48 Not applicable
49 Not applicable
50 Not applicable
51 Prospectus Summary; The Insurance Company; The Policy;
Death Benefits and Lapse and Reinstatement
52 The Investment Options; Substitution
53 Federal Tax Considerations
54 Not applicable
55 Not applicable
56 Not applicable
57 Not applicable
58 Not applicable
59 Financial Statements
</TABLE>
<PAGE> 4
THE TRAVELERS MARKETLIFE(SM)
INDIVIDUAL VARIABLE UNIVERSAL LIFE INSURANCE POLICIES
<TABLE>
<S> <C>
FUND UL
CAPITAL APPRECIATION FUND
MANAGED ASSETS TRUST PROSPECTUSES
MONEY MARKET PORTFOLIO
TRAVELERS SERIES TRUST MAY 1, 2000
</TABLE>
The Travelers Insurance Company, One Tower Square, Hartford, Connecticut 06183 X
Telephone: (800) 334-4298
<PAGE> 5
PROSPECTUS
This Prospectus describes The Travelers MarketLife(sm), an individual variable
universal (flexible premium) life insurance Policy (the "Policy") offered by The
Travelers Insurance Company (the "Company"). A Policy Owner may choose the
amount of life insurance coverage desired with a minimum Stated Amount of
$50,000. The premium payment may be allocated by the Policy Owner to one or more
of the variable funding options (the "Investment Options").
During the Policy's Right to Cancel Period, the Applicant may return the Policy
to the Company for a refund. The Right to Cancel Period expires on the latest of
ten days after you receive the Policy, ten days after we mail or deliver to you
a written Notice of Right to Cancel, or 45 days after the Applicant signs the
application for insurance (or later if state laws requires).
There is no guaranteed minimum Cash Value for a Policy. The Cash Value of the
Policy will vary to reflect the investment performance of the Investment Options
to which you have directed your premium payments you bear the investment risk
under this policy. The Cash Value is reduced by the various fees and charges
assessed under the Policy, as described in this Prospectus. The Policy will
remain in effect for as long as the Cash Surrender Value can pay the monthly
Policy charges (subject to the Late Period provision) or for a longer period as
may be provided under the Lapse Protection Guarantee Rider.
We offer two death benefits under the Policy -- the "Level Option" and the
"Variable Option." Under either option, the death benefit will never be less
than the Amount Insured (less any outstanding Policy loans or Monthly Deduction
Amounts due and unpaid or any Accelerated Benefit Payment Lien). You choose one
at the time you apply for the Policy, however you may change the death benefit
option, subject to certain conditions.
This Policy may be or become a modified endowment Policy under federal tax law.
If so, any partial withdrawal, Policy surrender or loan may result in adverse
tax consequences or penalties.
REPLACING EXISTING INSURANCE WITH THIS POLICY MAY NOT BE TO YOUR ADVANTAGE.
EACH OF THE INVESTMENT OPTION PROSPECTUSES ARE INCLUDED WITH THE PACKAGE
CONTAINING THIS PROSPECTUS. ALL PROSPECTUSES SHOULD BE READ AND RETAINED FOR
FUTURE REFERENCE.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS COMPLETE OR TRUTHFUL. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
VARIABLE LIFE INSURANCE POLICIES ARE NOT DEPOSITS OF ANY BANK AND ARE NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, OR ANY OTHER
GOVERNMENT AGENCY.
THE DATE OF THIS PROSPECTUS IS MAY 1, 2000.
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<S> <C>
Glossary of Special Terms.............. 3
Prospectus Summary..................... 5
General Description.................... 10
How the Policy Works................... 10
Beneficiary.......................... 10
Applying Premium Payments............ 10
The Investment Options................. 11
Policy Benefits and Rights............. 14
Transfers of Cash Value.............. 14
Telephone Transfers.................. 15
Automated Transfers.................. 15
Dollar-Cost Averaging............. 15
Portfolio Rebalancing............. 15
Lapse and Reinstatement.............. 15
Lapse Protection Guarantee Rider..... 16
Exchange Rights...................... 16
Right to Cancel...................... 16
Access to Cash Values.................. 16
Policy Loans......................... 16
Cash Value and Cash Surrender
Value............................. 17
Death Benefit.......................... 18
Payment of Proceeds............... 19
Payment Options................... 20
Maturity Benefits...................... 20
Maturity Extension Rider.......... 20
Charges and Deductions................. 21
Charges Against Premium.............. 21
Front-End Sales Charge............ 21
State Premium Tax Charge.......... 21
Monthly Deduction Amount............. 22
Cost of Insurance Charge.......... 22
Policy Administrative Expense
Charge.......................... 22
Charges for Supplemental Benefit
Provisions...................... 22
Charges Against the Separate
Account........................... 22
Mortality and Expense Risk
Charge.......................... 22
Administrative Expense Charge..... 22
Underlying Fund Fees................. 23
Surrender Charges.................... 23
Percent of Premium Charge......... 23
Per Thousand of Stated Amount
Charge.......................... 23
Transfer Charge...................... 24
Reduction or Elimination of
Charges........................... 24
The Separate Account and Valuation..... 24
The Travelers Fund UL for Variable
Life Insurance (Fund UL )......... 24
How the Cash Value Varies............ 25
Accumulation Unit Value.............. 25
Net Investment Factor................ 25
Changes to the Policy.................. 25
General.............................. 25
Changes in Stated Amount............. 26
Changes in Death Benefit Option...... 26
Additional Policy Provisions........... 26
Assignment........................... 26
Limit on Right to Contest and Suicide
Exclusion......................... 26
Misstatement as to Sex and Age....... 27
Voting Rights........................ 27
Disregard of Voting Instructions..... 27
For Policies Sold Prior to May 1,
1998.............................. 27
Policies Sold Prior to July 12,
1995.............................. 28
Other Matters.......................... 28
Statements to Policy Owners.......... 28
Suspension of Valuation.............. 29
Dividends............................ 29
Mixed and Shared Funding............. 29
Distribution......................... 29
Legal Proceedings and Opinion........ 29
Experts.............................. 30
Federal Tax Considerations............. 30
General.............................. 30
Tax Status of the Policy............. 30
Definition of Life Insurance...... 30
Diversification................... 31
Investor Control.................. 31
Tax Treatment of Policy Benefits..... 32
In General........................ 32
Modified Endowment Contracts...... 32
Exchanges......................... 33
Aggregation of Modified Endowment
Contracts....................... 33
Policies which are not Modified
Endowment Contracts............. 33
Treatment of Loan Interest........ 33
The Company's Income Taxes........ 34
The Company............................ 34
IMSA................................. 34
Management............................. 35
Directors of The Travelers Insurance
Company........................... 35
Senior Officers of The Travelers
Insurance Company................. 35
Example of Policy Charges.............. 36
Performance Information................ 36
Illustrations.......................... 39
Appendix
A -- Annual Minimum Premiums........... 52
B -- Surrender Charges................. 53
C -- Current Monthly Administrative
Charge............................... 54
C(1) -- Guaranteed Monthly
Administrative Charge................ 56
Financial Statements -- Fund UL
Financial Statements -- The Travelers
Insurance Company
</TABLE>
2
<PAGE> 7
GLOSSARY OF SPECIAL TERMS
- --------------------------------------------------------------------------------
The following terms are used throughout the Prospectus, and have the indicated
meanings:
ACCUMULATION UNIT -- a standard of measurement used to calculate the values
allocated to the Investment Options.
ANNUAL MINIMUM PREMIUM -- the Policy Owner must pay a first premium greater than
or equal to one-quarter of this amount for the Policy to be issued. (Please
refer to Appendix A.)
BENEFICIARY(IES) -- the person(s) named to receive the benefits of this Policy
at the Insured's death.
CASH SURRENDER VALUE -- the Cash Value less any outstanding Policy loan,
Accelerated Benefit Lien and surrender charges.
CASH VALUE -- the current value of Accumulation Units credited to each of the
Investment Options available under the Policy, plus the value of the Loan
Account.
COMPANY'S HOME OFFICE -- the principal executive offices of The Travelers
Insurance Company located at One Tower Square, Hartford, Connecticut 06183.
DEDUCTION DATE -- the day in each Policy Month on which the Monthly Deduction
Amount is deducted from the Policy's Cash Value.
INSURED -- the person on whose life the Policy is issued.
INVESTMENT OPTIONS -- the segments of the Separate Account or Portfolio to which
you may allocate premiums or Cash Value under Fund UL.
ISSUE DATE -- the date on which the Policy is issued by the Company for delivery
to the Policy Owner. Policies which replace existing company contracts will
maintain the issue date of the original policy.
LAPSE PROTECTION GUARANTEE RIDER -- a rider which provides that the Policy will
not lapse during the first three Policy Years if a required amount of premium is
paid. (Not available in all states.)
LOAN ACCOUNT -- an account in the Company's general account to which we transfer
the amount of any Policy loan, and to which we credit and charge a fixed rate of
interest.
MATURITY DATE -- The anniversary of the Policy Date on which the Insured is age
95.
MINIMUM AMOUNT INSURED -- the amount of Death Benefit required to qualify this
Policy as life insurance under federal tax law.
MONTHLY DEDUCTION AMOUNT -- the amount of charges deducted from the Policy's
Cash Value which includes cost of insurance charges, administrative charges, and
any charges for supplemental benefits.
MONTHLY PREMIUM THRESHOLD -- an amount shown on the Policy Summary page, the
cumulative amount of which must be paid during the first three Policy Years in
order for the Lapse Protection Guarantee to be in effect.
NET AMOUNT AT RISK -- an amount equal to the Death Benefit minus the Cash Value.
NET PREMIUM -- the amount of each premium payment applied to purchase
Accumulation Units under the Policy, less the deduction of front-end sales
charges and premium tax charges.
PLANNED PREMIUM -- the amount of premium which the Policy Owner chooses to pay
to the Company on a scheduled basis, and for which the Company will bill the
Policy Owner, either annually, semiannually or through automatic monthly
checking account deductions.
3
<PAGE> 8
POLICY DATE -- the date on which the Policy, benefits and provisions of the
Policy become effective.
POLICY MONTH -- monthly periods computed from the Policy Date.
POLICY OWNER (YOU, YOUR OR OWNER) -- the person having rights to benefits under
the Policy during the lifetime of the Insured; the Policy Owner may or may not
be the Insured.
POLICY YEARS -- annual periods computed from the Policy Date.
SEPARATE ACCOUNT -- assets set aside by The Travelers Insurance Company, for
this class of policies and certain policies, the investment experience of which
is kept separate from that of other assets of The Travelers Insurance Company;
for example, The Travelers Fund UL for Variable Life Insurance.
STATED AMOUNT -- the amount originally selected by the Policy Owner used to
determine the Death Benefit, or as may be increased or decreased as described in
this Prospectus.
UNDERLYING FUND -- the underlying mutual fund(s) that correspond to each
Investment Option. Each Investment Option invests directly in an underlying
fund.
VALUATION DATE -- a day on which the Separate Account is valued. A Valuation
Date is any day on which the New York Stock Exchange is open for trading. The
value of Accumulation Units will be determined as of 4:00 p.m. Eastern Time on
each Valuation Date.
VALUATION PERIOD -- the period between the close of business on successive
Valuation Dates.
4
<PAGE> 9
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------
WHAT IS VARIABLE UNIVERSAL LIFE INSURANCE?
The Flexible Premium Variable Universal Life Insurance Policy is designed to
provide insurance protection on the life of the Insured and to build Cash Value.
Like other life insurance, it provides an income-tax free death benefit that is
payable to the Beneficiary upon the Insured's death. Unlike traditional,
fixed-premium life insurance, the Policy allows you, as the owner, to allocate
your premium, or transfer Cash Value to various Investment Options. These
Investment Options include equity, bond, money market and other types of
portfolios. Your Cash Value may increase or decrease daily, depending on
investment return. There is no minimum amount guaranteed as it would be in a
traditional life insurance policy.
INVESTMENT OPTIONS: You have the ability to choose from a wide variety of
well-known Investment Options. These professionally managed stock, bond and
money market funding options cover a broad spectrum of investment objectives and
risk tolerance. Currently, the following Investment Options (subject to state
availability) are available under Fund UL:
<TABLE>
<S> <C>
Capital Appreciation Fund TRAVELERS SERIES FUND INC.:
Dreyfus Stock Index Fund AIM Capital Appreciation Portfolio
Managed Assets Trust Alliance Growth Portfolio
Money Market Portfolio MFS Total Return Portfolio
Putnam Diversified Income Portfolio
DEUTSCHE ASSET MANAGEMENT VIT FUNDS: Smith Barney High Income Portfolio
EAFE Equity Index Fund Smith Barney Large Cap Value Portfolio
Small Cap Index Fund Smith Barney Large Capitalization Growth
Portfolio
FRANKLIN TEMPLETON VARIABLE INSURANCE
PRODUCTS TRUST: TRAVELERS SERIES TRUST:
Templeton Asset Strategy Fund (Class I) U.S. Government Securities Portfolio
Templeton Global Income Securities Fund Utilities Portfolio
(Class I) Zero Coupon Bond Portfolio 2000
Templeton Growth Securities Fund (Class I) Zero Coupon Bond Portfolio 2005
GREENWICH STREET SERIES FUND: VARIABLE INSURANCE PRODUCTS FUND (FIDELITY):
Equity Index Portfolio Equity Income Portfolio -- Initial Class
Total Return Portfolio Growth Portfolio -- Initial Class
High Income Portfolio -- Initial Class
JANUS ASPEN SERIES:
Aggressive Growth Portfolio -- Service VARIABLE INSURANCE PRODUCTS FUND II
Shares (FIDELITY):
Global Technology Portfolio -- Service Asset Manager Portfolio -- Initial Class
Shares
Worldwide Growth Portfolio -- Service
Shares
</TABLE>
Additional Portfolios may be added from time to time. For more information see
"The Investment Options." Refer to each Fund's prospectus for a complete
description of the investment objectives, restrictions and other material
information.
PREMIUMS: When applying for your Policy, you state how much you intend to pay,
and whether you will pay annually, semiannually or monthly via checking account
deductions. You may also make unscheduled premium payments in any amount. No
premium payments will be accepted if receipt of such premiums would disqualify
the Policy as life insurance under applicable federal tax laws.
You indicate on your application what percentage of each Net Premium you would
like allocated to the Investment Options. You may change your allocations by
writing to the Company or, if you have an authorization form on file, by calling
1-800-334-4298.
During the underwriting period, any premium paid will be held in a non-interest
bearing account. After the Policy Date and until the applicants' right to cancel
has expired, your Net Premium will be invested in the Money Market Portfolio.
After that, the cash value will be distributed to each Investment Option in the
percentages indicated on your application.
5
<PAGE> 10
RIGHT TO EXAMINE POLICY: You may return your Policy for any reason and receive
a full refund of your premium by mailing us the Policy and a written request for
cancellation within a specified period.
DEATH BENEFITS: At time of application, you select a death benefit option.
Under certain conditions you may be able to change the death benefit option at a
later date. The options available are:
- LEVEL OPTION (OPTION 1): the death benefit will be equal to the greater
of the Stated Amount or the Minimum Amount Insured.
- VARIABLE OPTION (OPTION 2): the death benefit will be equal to the
greater of the Stated Amount plus the Cash Value or the Minimum Amount
Insured.
POLICY VALUES: As with other types of insurance policies, MarketLife will
accumulate a Cash Value. The Cash Value of the Policy will increase or decrease
to reflect the investment experience of the Investment Options. Monthly charges
and any partial surrenders taken will also decrease the Cash Value. There is no
minimum guaranteed Cash Value.
- ACCESS TO POLICY VALUES: You may borrow against your Policy's Cash
Surrender Value. The maximum loan amount allowable is 100% of the Cash
Surrender Value, subject to state approval. After year 13, the Company
offers zero net cost loans. (For Policies issued after July 12, 1995 and
before May 1, 1998, the maximum loan allowed is 90% of the Cash Surrender
Value. For Policies issued prior to July 12, 1995, the maximum loan
allowed is 80% of the Cash Surrender Value.) (See "Policy Loans" for loan
impact on coverage and policy values.)
You may cancel all or a portion of your Policy while the Insured is living and
receive all or a portion of the Cash Surrender Value. Depending on the amount of
time the Policy has been in force, there may be a charge for the partial or full
surrender.
TRANSFERS OF POLICY VALUES: You may transfer all or a portion of your Cash
Value among the Investment Options. You may do this by writing to the Company
or, with the proper authorization, by calling 1-800-334-4298.
You can use automated transfers to take advantage of dollar cost
averaging -- investing a fixed amount at regular intervals. For example, you
might have a set amount transferred from a relatively conservative Investment
Option to a more aggressive one, or to several others.
LAPSE PROTECTION GUARANTEE RIDER: This Rider allows for your Policy to remain
in effect for the first three Policy Years. You are required to pay at least the
cumulative applicable Monthly Premium Threshold displayed on your Policy's
Contract Summary page. If there have been changes in Stated Amounts and/or
riders, there will be an adjustment to Monthly Threshold and this new Threshold
must now be met from the effective date of the coverage change. Any loans or
partial surrenders are deducted from premium paid to determine if the Lapse
Protection Guarantee is in effect.
LATE PERIOD: If the Cash Surrender Value of your Policy becomes less than the
amount needed to pay the Monthly Deduction Amount, and the Lapse Protection
Guarantee Rider is not in effect, you will have 61 days to pay a premium that is
sufficient to cover the Monthly Deduction Amount. If the premium is not paid,
your Policy will lapse.
EXCHANGE RIGHTS: During the first two Policy Years, you can exchange this
Policy for one that provides benefits that do not vary with the investment
return of the Investment Options.
TAX CONSEQUENCES: Currently, the federal tax law excludes all Death Benefit
payments from the gross income of the Beneficiary. At any point in time, the
Policy may become a modified endowment contract ("MEC"). A MEC has an
income-first taxation of all loans, pledges, collateral assignments or partial
surrenders. A 10% penalty tax may be imposed on such income distributed
6
<PAGE> 11
before the Policy Owner attains age 59 1/2. The Company has established
safeguards for monitoring whether a Policy may become a MEC.
CHARGES AND DEDUCTIONS: Your Policy is subject to the following charges, which
compensate the Company for administering and distributing the Policy, as well as
paying Policy benefits and assuming related risks. These charges are summarized
below, and explained in detail under "Charges and Deductions."
POLICY CHARGES:
- SALES AND PREMIUM EXPENSE CHARGES -- A sales charge and a premium tax
charge are applied to each premium based on the size of your Policy.
<TABLE>
<CAPTION>
PREMIUM TOTAL
STATED SALES TAX PREMIUM
AMOUNT CHARGE CHARGE EXPENSE
------ ------ ------- -------
<S> <C> <C> <C>
less than $500,000 2.5% 2.5% 5.0%
$500,000 to $999,999 2.0% 2.5% 4.5%
$1,000,000 and over 0% 2.5% 2.5%
</TABLE>
This charge pays some distribution expenses and state and local premium
taxes.
- MONTHLY DEDUCTION -- deductions taken from the value of your Policy each
month to cover cost of insurance charges, the monthly administrative
expense charges and charges for optional benefits.
- FULL SURRENDER CHARGE -- applies if you surrender your Policy for its
full Cash Value or the Policy lapses, during the first 10 years and for
10 years after requesting an increase in coverage. The surrender charge
consists of a percent of premium charge and a per thousand of face amount
charge.
- PARTIAL SURRENDER CHARGE -- applies if you surrender part of the value of
your Policy.
ASSET-BASED CHARGES:
- MORTALITY AND EXPENSE RISK CHARGE -- applies to the assets of the
Investment Options on a daily basis which equals an annual rate of .80%
for the first fifteen years and subject to state availability, for
policies issued after May 1, 1998 .25% thereafter. (For Policies issued
prior to July 12, 1995, the charge is 0.60% for all Policy Years.) (For
Policies issued after July 12, 1995, and prior to May 1, 1998, the charge
for the first fifteen years is .80% and .45% thereafter).
- ADMINISTRATIVE EXPENSE CHARGE -- applies to the assets of the Investment
Options on a daily basis which equals an annual rate of .10% for the
first fifteen years and 0% thereafter. (For Policies issued prior to July
12, 1995, there is no administrative charge.)
- UNDERLYING FUND FEES -- the separate account purchases shares of the
Underlying Funds on a net asset value basis. The shares purchased already
reflect the deduction of investment advisory fees and other expenses. The
fees are shown below as a percentage of average daily net assets of each
Investment Option as of December 31, 1999, unless noted otherwise.
7
<PAGE> 12
UNDERLYING FUND FEES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
MANAGEMENT OTHER TOTAL
FEE EXPENSES EXPENSES
(AFTER EXPENSE (AFTER EXPENSE (AFTER EXPENSE
FUND NAME REIMBURSEMENT) 12B-1 FEES REIMBURSEMENT) REIMBURSEMENT)
Capital Appreciation Fund (Janus) 0.75% 0.08% 0.83%
Dreyfus Stock Index Fund 0.25% 0.01% 0.26%
Travelers Managed Assets Trust 0.50% 0.10% 0.60%
Travelers Money Market(1) 0.32% 0.08% 0.40%
DEUTCHE VIT FUNDS:
EAFE Equity Index Fund(2) 0.26% 0.39% 0.65%
Small Cap Index Fund(2) 0.13% 0.32% 0.45%
GREENWICH STREET SERIES FUND:
Smith Barney Equity Index Portfolio(9) 0.21% 0.07% 0.28%
Smith Barney Total Return Portfolio(10) 0.75% 0.04% 0.79%
JANUS ASPEN SERIES:
Aggressive Growth -- Service Shares(3) 0.65% 0.25% 0.02% 0.92%
Global Technology -- Service Shares(3) 0.65% 0.25% 0.13% 1.03%
Worldwide Growth -- Service Shares(3) 0.65% 0.25% 0.05% 0.95%
FRANKLIN TEMPLETON VARIABLE INSURANCE
PRODUCTS SERIES TRUST:
Templeton Asset Strategy Fund(5) 0.60% 0.18% 0.78%
Templeton Global Income Securities(6) 0.60% 0.05% 0.65%
Templeton Growth Securities Fund(7) 0.83% 0.05% 0.88%
TRAVELERS SERIES FUND, INC.:
AIM Capital Appreciation Portfolio(8) 0.80% 0.04% 0.84%
Alliance Growth Portfolio(8) 0.80% 0.02% 0.82%
MFS Total Return Portfolio(8) 0.80% 0.04% 0.84%
Putnam Diversified Income Portfolio(8) 0.75% 0.08% 0.83%
Smith Barney High Income Portfolio(8) 0.60% 0.06% 0.66%
Smith Barney Large Cap Value(8) 0.65% 0.02% 0.67%
Smith Barney Large Cap Growth(8) 0.75% 0.11% 0.86%
TRAVELERS SERIES TRUST:
Travelers U.S. Govt Securities 0.32% 0.16% 0.48%
Utilities Portfolio (SB) 0.65% 0.23% 0.88%
Zero Coupon Bond Portfolio 2000 0.10% 0.05% 0.15%
Zero Coupon Bond Portfolio 2005 0.10% 0.05% 0.15%
VARIABLE INSURANCE PRODUCTS FUND:
Equity Income Portfolio -- Initial
Class(4) 0.48% 0.08% 0.56%
Growth Portfolio -- Initial Class(4) 0.58% 0.07% 0.65%
High Income Portfolio -- Initial Class 0.58% 0.11% 0.69%
VARIABLE INSURANCE PRODUCTS FUND II:
Asset Manager Portfolio -- Initial
Class(4) 0.53% 0.09% 0.62%
</TABLE>
( 1) Other Expenses have been restated to reflect the current expense
reimbursement arrangement with Travelers Insurance Company. Travelers has
agreed to reimburse the Portfolio for the amount by which its aggregate
expenses (including the management fee, but excluding brokerage
commissions, interest charges and taxes) exceeds 0.40%. Without such
arrangement, Total Expenses would have been 0.50% for the Money Market
Portfolio.
( 2) These fees reflect a voluntary expense reimbursement arrangement whereby
the Adviser has agreed to reimburse the funds. Without such arrangement,
the Management Fee and Other Expenses for the Deutsche VIT EAFE Equity
Index Fund and Small Cap Index Fund would have been 0.45% and 0.69%, and
0.35% and 0.83%, respectively. Effective April 2000, the Trust's name was
changed from BT Insurance Funds Trust to Deutsche Asset Management VIT
Funds.
( 3) Expenses are based on the estimated expenses that the new Service Shares
Class of each Portfolio expects to incur in its initial fiscal year. All
expenses are shown without the effect of offset arrangements.
( 4) A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, through arrangements with certain funds,
or FMR on behalf of certain funds, custodian, credits realized as a result
of uninvested cash balances were used to reduce a portion of each
applicable fund's expenses. Without these reductions, the total operating
expenses presented in the table would have been 0.57% for Equity-Income
Portfolio, 0.66% for Growth Portfolio, and 0.63% for Asset Manager
Portfolio.
8
<PAGE> 13
( 5) On 2/8/00, fund shareholders approved a merger and reorganization to merge
the assets of Templeton Global Asset Allocation Fund into Templeton Asset
Allocation Fund (which then changed its name to Templeton Asset Strategy
Fund), effective 5/1/00. The table shows restated total expenses based upon
the new fees and assets of Templeton Asset Allocation Fund as of 12/31/99,
and not the assets of the combined fund on 5/1/00. However if the table
reflected both the new fees and the combined assets, the funds expenses
after 5/1/00 would be estimated as: Management Fees 0.60%, Other expenses
0.14% and Total Fund Operating Expenses 0.74%.
( 6) On 2/8/00, a merger and reorganization was approved to merge the assets of
Templeton Bond Fund into Templeton Global Income Securities Fund, effective
5/1/00. The above table shows restated total expenses based upon the fees
and assets of Templeton Global Income Securities Fund as of 12/31/99, and
not the assets of the combined fund on 5/1/00. However if the table
reflected the combined assets, the funds expenses after 5/1/00 would be
estimated as: Management Fees 0.60%, Other expenses 0.04% and Total Fund
Operating Expenses 0.64%. The Funds administration fee is paid indirectly
through the management fee.
( 7) On 2/8/00, a merger and reorganization was approved to merge the assets of
Templeton Stock Fund into Templeton Global Growth Fund (which then changed
its name to Templeton Growth Securities Fund), effective 5/1/00. The above
table shows restated total expenses based upon the fees and assets of
Templeton Global Growth Fund as of 12/31/99, and not the assets of the
combined fund on 5/1/00. However if the table reflected the combined
assets, the funds expenses after 5/1/00 would be estimated as: Management
Fees 0.80%, Other expenses 0.05% and Total Fund Operating Expenses 0.85%.
The Funds administration fee is paid indirectly through the management fee.
( 8) Expenses are as of October 31, 1999 (the Funds fiscal year end). There were
no fees waived or expenses reimbursed for these funds in 1999.
( 9) The Portfolio Management Fee for Equity Index Portfolio includes 0.06% for
fund administration.
(10) The Portfolio Management Fee for the Appreciation Portfolio, the Total
Return, and the Diversified Strategic Income Portfolio includes 0.20% for
fund administration.
9
<PAGE> 14
GENERAL DESCRIPTION
- --------------------------------------------------------------------------------
This prospectus describes an individual flexible premium variable universal life
insurance Policy offered by The Travelers Insurance Company ("Company"). The
policy offers:
- Flexible premium payments (you select the timing and amount of the
premium)
- A selection of investment options
- A choice of two death benefit options
- Loans and partial withdrawal privileges
- The ability to increase or decrease the Policy's face amount of insurance
- Additional benefits through the use of optional riders
This Policy is both an insurance product and a security. The Policy is first and
foremost a life insurance Policy with death benefits, Cash Values and other
features traditionally associated with life insurance. The Policy is a security
because the Cash Value and, under certain circumstances, the Amount Insured, and
Death Benefit may increase or decrease depending on the investment experience of
the Investment Options chosen.
THE APPLICATION. In order to become a policy owner, you must submit an
application to the Company. You must provide evidence of insurability. On the
application, you will also indicate:
- the amount of insurance desired (the "stated amount"); minimum of $50,000
- your choice of the two death benefit options
- the beneficiary(ies), and whether or not the beneficiary is irrevocable
- your choice of investment options.
Our underwriting staff will review the application, and, if approved, we will
issue the Policy.
HOW THE POLICY WORKS
- --------------------------------------------------------------------------------
You make premium payments and direct them to one or more of the available
investment options. The Policy's Cash Value will increase or decrease depending
on the performance of the investment options you select. In the case of death
benefit option 2, the death benefit will also vary based on the investment
options' performance.
BENEFICIARY
The Applicant names the Beneficiary in the application for the Policy. The
Policy Owner may change the Beneficiary (unless irrevocably named) during the
Insured's lifetime by sending a written request to the Company. If no
Beneficiary is living when the Insured dies, the Death Benefit will be paid to
the Policy Owner, if living; otherwise, the Death Benefit will be paid to the
Policy Owner's estate.
Your Policy becomes effective once our underwriting staff has approved the
application and once the first premium payment has been made. The Policy Date is
the date we use to determine all future transactions on the policy, for example,
the deduction dates, policy months, policy years. The Policy Date may be before
or the same date as the Issue Date (the date the policy was issued). During the
underwriting period, any premium paid will be held in a non-interest bearing
account. Your policy will stay in effect as long as the policy's cash surrender
value can pay the policy's monthly charges.
APPLYING PREMIUM PAYMENTS
We apply the first premium on the later of the Policy Date or the date we
receive it at our Home Office. During the Right to Cancel Period, we allocate
net premiums to the Money Market
10
<PAGE> 15
Portfolio. At the end of the Right to Cancel Period, we direct the net premiums
to the investment option(s) selected on the application, unless you give us
other directions.
The investment options are segments of the separate account. They correspond to
underlying funds with the same names. The available investment options are
listed below.
We credit your policy with accumulation units of the investment option(s) you
have selected. We calculate the number of accumulation units by dividing your
net premium payment by each investment option's accumulation unit value computed
after we receive your payment.
THE INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
You may allocate Premium Payments to one or more of the available Investment
Options. The Investment Options currently available under the Policy may be
added, withdrawn or substituted as permitted by applicable state or federal law.
We would notify you before making such a change. Please read carefully the
complete risk disclosure in each Portfolio's prospectus before investing. For
more detailed information on the investment advisers and their services and
fees, please refer to the prospectuses for the Investment Options. In addition,
Travelers has entered into agreements with either the investment adviser or
distributor of certain of the underlying funds in which the adviser or
distributor pays us a fee for providing administrative services, which fee may
vary. The fee is ordinarily based upon an annual percentage of the average
aggregate net amount invested in the underlying funds on behalf of the Separate
Account.
The Investment Options currently available under Fund UL are as follows:
<TABLE>
<CAPTION>
INVESTMENT OPTION INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
----------------- -------------------- -----------------------------
<S> <C> <C>
Capital Appreciation Fund Seeks growth of capital through the Travelers Asset Management
use of common stocks. Income is not an International Company LLC
objective. The Fund invests ("TAMIC")
principally in common stocks of small Subadviser: Janus Capital
to large companies which are expected Corp.
to experience wide fluctuations in
price in both rising and declining
markets.
Dreyfus Stock Index Fund Seeks to provide investment results Mellon Equity
that correspond to the price and yield
performance of publicly traded common
stocks in the aggregate, as
represented by the Standard & Poor's
500 Composite Stock Price Index.
Managed Assets Trust Seeks high total investment return TAMIC
through a fully managed investment Subadviser: Travelers
policy in a portfolio of equity, debt Investment Management Company
and convertible securities. ("TIMCO")
Money Market Portfolio Seeks high current income from short- TAMIC
term money market instruments while
preserving capital and maintaining a
high degree of liquidity.
DEUTSCHE ASSET MANAGEMENT
VIT FUNDS
EAFE Equity Index Fund Seeks to replicate, before deduction Bankers Trust Global
of expenses, the total return Investment Management
performance of the EAFE index.
</TABLE>
11
<PAGE> 16
<TABLE>
<CAPTION>
INVESTMENT OPTION INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
----------------- -------------------- -----------------------------
<S> <C> <C>
Small Cap Index Fund Seeks to replicate, before deduction Bankers Trust Global
of expenses, the total return Investment Management
performance of the Russell 2000 index.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Templeton Asset Strategy Seeks a high level of total return Templeton Investment Counsel,
Fund (Class 1) with reduced risk over the long term Inc.
through a flexible policy of investing
in stocks of companies in any nation
and debt obligations of companies and
governments of any nation.
Templeton Global Income Seeks high current income by investing Franklin Advisers, Inc.
Securities Fund (Class 1) primarily in debt securities of compa- Subadviser: Templeton
nies, governments and government Investment Counsel, Inc.
agencies of various nations throughout
the world.
Templeton Growth Seeks capital growth by investing Templeton Global Advisers
Securities Fund (Class 1) primarily in common stocks issued by Limited
companies, large and small, in various
nations throughout the world.
GREENWICH STREET
SERIES FUND
Equity Index Portfolio Seeks to replicate, before deduction Travelers Investment
of expenses, the total return Management Company
performance of the S&P 500 index.
Total Return Portfolio An equity portfolio that seeks to pro- SSB Citi Fund Management LLC
vide total return, consisting of ("SSB Citi")
long-term capital appreciation and
income. The Portfolio will invest
primarily in a diversified portfolio
of dividend-paying common stocks.
JANUS ASPEN SERIES
Aggressive Growth Seeks long-term capital growth by Janus Capital
Portfolio -- Service investing primarily in common stocks
Shares selected for their growth potential,
normally investing at least 50% in the
equity assets of medium-sized
companies.
Global Technology Seeks long-term capital growth by Janus Capital
Portfolio -- Service investing primarily in equity
Shares securities of U.S. and foreign
companies, normally investing at least
65% of its total assets in companies
likely to benefit significantly from
advances in technology.
Worldwide Growth Seeks growth of capital in a manner Janus Capital
Portfolio -- Service consistent with preservation of
Shares capital by investing primarily in
common stocks of companies of any size
throughout the world.
</TABLE>
12
<PAGE> 17
<TABLE>
<CAPTION>
INVESTMENT OPTION INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
----------------- -------------------- -----------------------------
<S> <C> <C>
TRAVELERS SERIES FUND INC.
AIM Capital Appreciation Seeks capital appreciation by Travelers Investment Adviser
Portfolio investing principally in common stock, ("TIA")
with emphasis on medium-sized and Subadviser: AIM Capital
smaller emerging growth companies. Management Inc.
Alliance Growth Portfolio Seeks long-term growth of capital by TIA
investing predominantly in equity Subadviser: Alliance Capital
securities of companies with a Management L.P.
favorable outlook for earnings and
whose rate of growth is expected to
exceed that of the U.S. economy over
time. Current income is only an
incidental consideration.
MFS Total Return Seeks to obtain above-average income TIA
Portfolio (compared to a portfolio entirely Subadviser: MFS
invested in equity securities)
consistent with the prudent employment
of capital. Generally, at least 40% of
the Portfolio's assets will be
invested in equity securities.
Putnam Diversified Income Seeks high current income consistent TIA
Portfolio with preservation of capital. The Subadviser: Putnam Investment
Portfolio will allocate its Management, Inc.
investments among the U.S. Government
Sector, the High Yield Sector, and the
International Sector of the
fixed-income securities markets.
Smith Barney High Income Seeks high current income. Capital SSB Citi
Portfolio appreciation is a secondary objective.
The Portfolio will invest at least 65%
of its assets in high-yielding
corporate debt obligations and
preferred stock.
Smith Barney Large Cap Seeks current income and long-term SSB Citi
Value Portfolio growth of income and capital by
investing primarily, but not
exclusively, in common stocks.
Smith Barney Large Seeks long-term growth of capital by SSB Citi
Capitalization Growth investing in equity securities of
Portfolio companies with large market
capitalizations.
TRAVELERS SERIES TRUST
U.S. Government Seeks to select investments from the TAMIC
Securities Portfolio point of view of an investor concerned
primarily with highest credit quality,
current income and total return. The
assets of the U.S. Government Securi-
ties Portfolio will be invested in
direct obligations of the United
States, its agencies and
instrumentalities.
</TABLE>
13
<PAGE> 18
<TABLE>
<CAPTION>
INVESTMENT OPTION INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
----------------- -------------------- -----------------------------
<S> <C> <C>
Utilities Portfolio Seeks to provide current income by SSB Citi
investing in equity and debt
securities of companies in the utility
industries.
Zero Coupon Bond Fund Seeks to provide as high an investment TAMIC
Portfolio (Series 2000 return as consistent with the
and Series 2005) preservation of capital investing in
primarily zero coupon securities that
pay cash income but are acquired by
the Portfolio at substantial discounts
from their values at maturity. The
Zero Coupon Bond Fund Portfolios may
not be appropriate for Policy Owners
who do not plan to have their premiums
invested in shares of the Portfolios
for the long term or until maturity.
VARIABLE INSURANCE
PRODUCTS FUND
Equity-Income Seeks reasonable income by investing Fidelity Management &
Portfolio -- Initial primarily in income-producing equity Research Company ("FMR")
Class securities; in choosing these
securities, the portfolio manager will
also consider the potential for
capital appreciation.
Growth Seeks capital appreciation by purchas- FMR
Portfolio -- Initial ing common stocks of well-known,
Class established companies, and small
emerging growth companies, although
its investments are not restricted to
any one type of security. Capital
appreciation may also be found in
other types of securities, including
bonds and preferred stocks.
High Income Portfolio -- Seeks to obtain a high level of FMR
Initial Class current income by investing primarily
in high yielding, lower-rated,
fixed-income securities, while also
considering growth of capital.
VARIABLE INSURANCE
PRODUCTS FUND II
Asset Manager Seeks high total return with reduced FMR
Portfolio -- Initial risk over the long-term by allocating
Class its assets among stocks, bonds and
short-term fixed-income instruments.
</TABLE>
POLICY BENEFITS AND RIGHTS
- --------------------------------------------------------------------------------
TRANSFERS OF CASH VALUE
As long as the Policy remains in effect, you may transfer the Cash Value between
Investment Options. We reserve the right to restrict the number of free
transfers to four times in any Policy Year and to charge $10 for each additional
transfer; however, there is currently no charge for transfers. We also reserve
the right to restrict transfers by any market timing firm or any other third
14
<PAGE> 19
party authorized to initiate transfers on behalf of multiple contract owners. We
may, among other things, not accept: 1) the transfer instructions of any agent
acting under a power of attorney on behalf of more than one owner or (2) the
transfer or exchange instructions of individual owners who have executed
pre-authorized transfer forms which are submitted by marketing timing firms or
other third parties on behalf of more than one owner. We further reserve the
right to limit transfers that we determine will disadvantage other contract
owners.
We calculate the number of Accumulation Units involved using the Accumulation
Unit Values we determine at the end of the business day on which we receive the
request.
TELEPHONE TRANSFERS
The Policy Owner may make the request in writing by mailing such request to the
Company at its Home Office, or by telephone (if an authorization form is on
file) by calling 1-800-334-4298. The Company will take reasonable steps to
ensure that telephone transfer requests are genuine. These steps may include
seeking proper authorization and identification prior to processing telephone
requests. Additionally, the Company will confirm telephone transfers. Any
failure to take such measures may result in the Company's liability for any
losses due to fraudulent telephone transfer requests.
AUTOMATED TRANSFERS
DOLLAR-COST AVERAGING
You may establish automated transfers of Policy Values on a monthly or quarterly
basis from any Investment Option(s) to any other Investment Option(s) through
written request or other method acceptable to the Company. You must have a
minimum total Policy Value of $1,000 to enroll in the Dollar-Cost Averaging
program. The minimum total automated transfer amount is $100.
You may start or stop participation in the Dollar-Cost Averaging program at any
time, but you must give the Company at least 30 days' notice to change any
automated transfer instructions that are currently in place. Automated transfers
are subject to all of the other provisions and terms of the Policy. The Company
reserves the right to suspend or modify transfer privileges at any time and to
assess a processing fee for this service.
Before transferring any part of the Policy Value, Policy Owners should consider
the risks involved in switching between investments available under this Policy.
Dollar cost averaging requires regular investments regardless of fluctuating
price levels, and does not guarantee profits or prevent losses in a declining
market. Potential investors should consider their financial ability to continue
purchases through periods of low price levels.
PORTFOLIO REBALANCING
You may elect to have the Company periodically reallocate values in your policy
to match your original (or your latest) funding option allocation request.
LAPSE AND REINSTATEMENT
Except as provided below under "Lapse Protection Guarantee," the Policy will
remain in effect until the Cash Surrender Value of the Policy on any Deduction
Date can no longer cover the Monthly Deduction Amount or loan interest due but
not paid in cash. If this happens, we will notify you in writing that if the
amount shown in the notice is not paid within 61 days (the "Late Period"), the
Policy may lapse. The amount shown will be enough to pay the deduction amount
due. The Policy will continue through the Late Period, but if no payment is
received by us, it will terminate at the end of the Late Period. If the person
Insured under the Policy dies during the Late Period, the Death Benefit payable
will be reduced by the Monthly Deduction Amount due plus the amount of any
outstanding loan. (See "Death Benefit," below.)
If the Policy lapses, you may reinstate the Policy by paying the reinstatement
premium (and any applicable charges) shown in the Policy. You may request
reinstatement within three years of lapse (unless a different period is required
under applicable state law). Upon reinstatement, the
15
<PAGE> 20
Policy's Cash Value will equal the Net Premium. In addition, the Company
reserves the right to require satisfactory evidence of insurability.
LAPSE PROTECTION GUARANTEE RIDER
You may add a Lapse Protection Guarantee Rider to the Policy (as long as the
Insured is not a substandard risk). The Lapse Protection Guarantee Rider benefit
provides that if during the first three Policy Years (the "Guarantee Period")
the total premiums paid under the Policy, less any Loan Account Value or partial
surrenders, equal or exceed the cumulative applicable Monthly Premium Threshold
shown on the Policy Summary Page of the Policy, a Lapse Protection Guarantee
will be in effect. (This rider is not available in all jurisdictions.) This
rider provides that the Policy will not lapse during the next Policy Month even
if the Cash Surrender Value is insufficient to pay the Monthly Deduction Amount
due, provided the next Policy Month is within the Guarantee Period. The Premium
Threshold will change if the Policy Owner makes a change in the Stated Amount or
adds or eliminates supplemental benefit riders under the Policy. In such event,
the Company will send the Policy Owner notice of the new applicable Premium
Threshold which must be met until the expiration of the Guarantee Period in
order for the guarantee to remain in effect.
EXCHANGE RIGHTS
Once the Policy is in effect, it may be exchanged during the first 24 months for
a non-variable permanent individual life insurance policy issued by the Company
(or an affiliated company) on the life of the Insured. Benefits under the new
life insurance policy will be as described in that policy. No evidence of
insurability will be required. You have the right to select the same Death
Benefit or Net Amount At Risk as the former Policy at the time of exchange. Cost
of insurance rates will be based on the same risk classification as those of the
former Policy. Any outstanding Policy loan must be repaid before we will make an
exchange. In addition, there may be an adjustment for the difference in Cash
Value between the two Policies.
RIGHT TO CANCEL
An Applicant may cancel the Policy by returning it via mail or personal delivery
to the Company or to the agent who sold the Policy. The Policy must be returned
by the latest of:
(1) 10 days after delivery of the Policy to you
(2) 45 days of completion of the Policy application
(3) 10 days after the Notice of Right to Cancel has been mailed or
delivered to the Applicant whichever is latest, or
(4) later if required by state law.
We will refund the greater of all premium payments or the sum of:
(1) the difference between the premium paid, including any fees or charges,
and the amounts allocated to the Investment Option(s),
(2) the value of the amounts allocated to the Investment Option(s) on the
date on which the Company receives the returned Policy, and
(3) any fees and other charges imposed on amounts allocated to the
Investment Option(s).
We will make the refund within seven days after we receive your returned policy.
ACCESS TO CASH VALUES
- --------------------------------------------------------------------------------
POLICY LOANS
A Policy Owner may obtain a cash loan from the Company secured by the Policy not
to exceed 90% of the Policy's Cash Value (determined on the day on which the
Company receives the written loan request), less any surrender penalties (which
include a percent of premium charge
16
<PAGE> 21
and per thousand of Stated Amount charge). The amount of any Accelerated Benefit
Payment Lien is added to the outstanding loan to determine if there is cash
available for a loan. For Policy loans taken after January 1, 2001, subject to
state availability, it is anticipated the maximum loan amount will be increased
to 100% from 90%. Subject to state law, no loan requests may be made for amounts
of less than $100.
If there is a loan outstanding at the time a subsequent loan request is made,
the amount of the outstanding loan will be added to the new loan request. The
Company will charge interest on the outstanding amounts of the loan, which
interest must be paid in advance by the Policy Owner. For Policies issued after
July 12, 1995, during the first thirteen Policy Years, the full Loan Account
Value will be charged an annual interest rate of 7.4%; thereafter 3.85% will be
charged. For Policies issued prior to July 12, 1995 (or where state approval has
not been received), refer to "Policies Sold Prior to July 12, 1995," if
applicable.
The amount of the loan will be transferred as of the date the loan is made on a
pro rata basis from each of the Investment Options attributable to the Policy
(unless the Policy Owner states otherwise) to another account (the "Loan
Account"). Amounts in the Loan Account will be credited by the Company with a
fixed annual rate of return of 4% (6% in New York and Massachusetts) and will
not be affected by the investment performance of the Investment Options. When
loan repayments are made, the amount of the repayment will be deducted from the
Loan Account and will be reallocated based upon premium allocation percentages
among the Investment Options applicable to the Policy (unless the Policy Owner
states otherwise). The Company will make the loan to the Policy Owner within
seven days after receipt of the written loan request.
An outstanding loan amount decreases the Cash Surrender Value. If a maximum loan
is taken or a loan is not repaid, it permanently decreases the Cash Surrender
Value, which could cause the Policy to lapse (see "Lapse and Reinstatement").
For example, if a Policy has a Cash Surrender Value of $10,000, the Policy Owner
may take a loan of 90% or $9,000, leaving a new Cash Surrender Value of $1,000.
In addition, the Death Benefit actually payable would be decreased because of
the outstanding loan. Furthermore, even if the loan is repaid, the Death Benefit
and Cash Surrender Value may be permanently affected since the Policy Owner was
not credited with the investment experience of an Investment Option on the
amount in the Loan Account while the loan was outstanding. All or any part of a
loan secured by a Policy may be repaid while the Policy is still in effect.
CASH VALUE AND CASH SURRENDER VALUE
The Cash Value of a Policy changes on a daily basis and will be computed on each
Valuation Date. The Cash Value will vary to reflect the investment experience of
the Investment Options, as well as any partial Cash Surrenders, Monthly
Deduction Amount, daily Separate Account charges, and any additional premium
payments. There is no minimum guaranteed Cash Value.
The Cash Value of a particular Policy is related to the net asset value of the
Investment Options to which premium payments on the Policy have been allocated.
The Cash Value on any Valuation Date is calculated by multiplying the number of
Accumulation Units credited to the Policy in each Investment Options as of the
Valuation Date by the current Accumulation Unit Value of that Investment Option,
then adding the collective result for each of the Investment Options credited to
the Policy, and finally adding the value (if any) of the Loan Account. A Policy
Owner may withdraw Cash Value from the Policy, or transfer Cash Value among the
Investment Options, on any day that the Company is open for business.
As long as the Policy is in effect, a Policy Owner may elect, without the
consent of the Beneficiary (provided the designation of Beneficiary is not
irrevocable), to surrender the Policy and receive its "Cash Surrender Value";
i.e., the Cash Value of the Policy determined as of the day the Company receives
the Policy Owner's written request, less any outstanding Policy loan, less any
Accelerated
17
<PAGE> 22
Benefit Payment Lien, and less any applicable Surrender Charges. For full
surrenders, the Company will pay the Cash Surrender Value of the Policy within
seven days following its receipt of the written request, or on the date
requested by the Policy Owner, whichever is later. The Policy will terminate on
the Deduction Date next following the Company's receipt of the written request,
or on the Deduction Date next following the date on which the Policy Owner
requests the surrender to become effective, whichever is later.
In the case of partial surrenders, the Cash Surrender Value will be equal to the
net amount requested to be surrendered minus any applicable Surrender Charges.
The deduction from Cash Value for a partial surrender will be made on a pro rata
basis against the Cash Value of each of the Investment Options attributable to
the Policy (unless the Policy Owner states otherwise in writing).
In addition to reducing the Cash Value of the Policy, partial cash surrenders
will reduce the Death Benefit payable under the Policy. Under Option 1, the
Stated Amount of the Policy will be reduced by the amount of the partial cash
surrender. Under Option 2, the Cash Value, which is part of the Death Benefit,
will be reduced by the amount of the partial cash surrender. The Company may
require return of the Policy to record such reduction.
DEATH BENEFIT
- --------------------------------------------------------------------------------
The Death Benefit under the Policy is the amount paid to the Beneficiary upon
the Insured's death. The Death Benefit will be reduced by any outstanding
charges, any Accelerated Benefit Payment Lien, fees and Policy loans. All or
part of the Death Benefit may be paid in cash or applied to one or more of the
payment options described in the following pages.
You may elect one of two Death Benefit options. As long as the Policy remains in
effect, the Company guarantees that the Death Benefit under either option will
be at least the current Stated Amount of the Policy less any outstanding Policy
loan, any Accelerated Benefit Payment Lien, and any unpaid Deduction Amount due.
The Death Benefit under either option may vary with the Cash Value of the
Policy. Under Option 1 (the "Level Option"), the Death Benefit will be equal to
the Stated Amount of the Policy or, if greater, a specified multiple of Cash
Value (the "Minimum Amount Insured"). Under Option 2 (the "Variable Option"),
the Death Benefit will be equal to the Stated Amount of the Policy plus the Cash
Value (determined as of the date of the Insured's death) or, if greater, the
Minimum Amount Insured.
The Minimum Amount Insured is the amount required to qualify the Policy as a
life insurance Policy under the current federal tax law. Under that law, the
Minimum Amount Insured equals a stated percentage of the Policy's Cash Value
determined as of the first day of each Policy Month. The percentages differ
according to the attained age of the Insured. The Minimum Amount Insured is set
forth in the Policy and may change as federal income tax laws or regulations
change. The following is a schedule of the applicable percentages. For attained
ages not shown, the applicable percentages will decrease evenly:
<TABLE>
<CAPTION>
ATTAINED AGE PERCENTAGE
- ------------ ----------
<S> <C>
0-40 250
45 215
50 185
55 150
60 130
65 120
70 115
75 105
95+ 100
</TABLE>
18
<PAGE> 23
Federal tax law imposes another cash funding limitation on cash value life
insurance Policies that may increase the Minimum Amount Insured shown above.
This limitation known as the "guideline premium limitation," generally applies
during the early years of variable universal life insurance Policies.
The following examples demonstrate the relationship between the Death Benefit,
the Cash Surrender Value and the Minimum Amount Insured under Options 1 and 2 of
the Policy. The examples assume an Insured of age 40, a Minimum Amount Insured
of 250% of Cash Value (assuming the preceding table is controlling as to Minimum
Amount Insured), and no outstanding Policy loan.
OPTION 1 -- "LEVEL" DEATH BENEFIT
STATED AMOUNT: $50,000
In the following examples of an Option 1 "Level" Death Benefit, the Death
Benefit under the Policy is generally equal to the Stated Amount of $50,000.
Since the Policy is designed to qualify as a life insurance Policy, the Death
Benefit cannot be less than the Minimum Amount Insured (or, in this example,
250% of the Cash Value).
EXAMPLE ONE. If the Cash Value of the Policy equals $10,000, the Minimum Amount
Insured would be $25,000 ($10,000 x 250%). Since the Death Benefit in the Policy
is the greater of the Stated Amount ($50,000) or the Minimum Amount Insured
($25,000), the Death Benefit would be $50,000.
EXAMPLE TWO. If the Cash Value of the Policy equals $40,000, the Minimum Amount
Insured would be $100,000 ($40,000 x 250%). The resulting Death Benefit would be
$100,000 since the Death Benefit is the greater of the Stated Amount ($50,000)
or the Minimum Amount Insured ($100,000).
OPTION 2 -- "VARIABLE" DEATH BENEFIT
STATED AMOUNT: $50,000
In the following examples of an Option 2 "Variable" Death Benefit, the Death
Benefit varies with the investment experience of the applicable Investment
Options and will generally be equal to the Stated Amount plus the Cash Value of
the Policy (determined on the date of the Insured's death). The Death Benefit
cannot, however, be less than the Minimum Amount Insured (or, in this example,
250% of the Cash Value).
EXAMPLE ONE. If the Cash Value of the Policy equals $10,000, the Minimum Amount
Insured would be $25,000 ($10,000 x 250%). The Death Benefit ($60,000) would be
equal to the Stated Amount ($50,000) plus the Cash Value ($10,000), unless the
Minimum Amount Insured ($25,000) was greater.
EXAMPLE TWO. If the Cash Value of the Policy equals $60,000, then the Minimum
Amount Insured would be $150,000 ($60,000 x 250%). The resulting Death Benefit
would be $150,000 because the Minimum Amount Insured ($150,000) is greater than
the Stated Amount plus the Cash Value ($50,000 + $60,000 = $110,000).
PAYMENT OF PROCEEDS
Death Benefits are payable within seven days after we receive satisfactory proof
of the Insured's death. The amount of Death Benefit paid may be adjusted to
reflect any Policy loan, any Accelerated Benefit Payment Lien, any material
misstatements in the Policy application as to age or sex of the Insured, and any
amounts payable to an assignee under a collateral assignment of the Policy. (See
"Assignment.")
Subject to state law, if the Insured commits suicide within two years following
the Issue Date, limits on the amount of Death Benefit paid will apply. (See
"Limit on Right to Contest and Suicide
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<PAGE> 24
Exclusion.") In addition, if the Insured dies during the 61-day period after the
Company gives notice to the Policy Owner that the Cash Surrender Value of the
Policy is insufficient to meet the Monthly Deduction Amount due against the Cash
Value of the Policy, then the Death Benefit actually paid to the Policy Owner's
Beneficiary will be reduced by the amount of the Deduction Amount that is due
and unpaid. (See "Cash Value and Cash Surrender Value," for effects of partial
surrenders on Death Benefits.)
PAYMENT OPTIONS
We will pay policy proceeds in a lump sum, unless you or the Beneficiary select
one of the Company's payment options. We may defer payment of proceeds which
exceed the Death Benefit for up to six months from the date of the request for
the payment. A combination of options may be used. The minimum amount that may
be placed under a payment option is $5,000 unless we consent to a lesser amount.
Proceeds applied under an option will no longer be affected by the investment
experience of the Investment Options.
The following payment options are available under the Policy:
OPTION 1 -- Payments of a Fixed Amount
OPTION 2 -- Payments for a Fixed Period
OPTION 3 -- Amounts Held at Interest
OPTION 4 -- Monthly Life Income
OPTION 5 -- Joint and Survivor Level Amount Monthly Life Income
OPTION 6 -- Joint and Survivor Monthly Life Income-Two-thirds to Survivor
OPTION 7 -- Joint and Last Survivor Monthly Life Income-Monthly Payment
Reduces on Death of First Person Named
OPTION 8 -- Other Options
We will make any other arrangements for periodic payments as may be agreed upon.
If any periodic payment due any payee is less than $100, we may make payments
less often. If we have declared a higher rate under an option on the date the
first payment under an option is due, we will base the payments on the higher
rate.
MATURITY BENEFITS
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The Maturity Date is the anniversary of the Policy Date on which the Insured is
age 95. If the Insured is living on the Maturity Date, the Company will pay you
the Policy's Cash Value less any outstanding Policy loan or unpaid Deduction
Amount. You must surrender the Policy to us before we make a payment, at which
point the Policy will terminate and we will have no further obligations under
the Policy.
MATURITY EXTENSION RIDER
When the Insured reaches age 94, and at any time during the twelve months
thereafter, you may request that coverage be extended beyond the Maturity Date
(the "Maturity Extension Benefit"). This Maturity Extension Benefit may not be
available in all jurisdictions. If we receive such request before the Maturity
Date, the Policy will continue until the earlier of the death of the Insured or
the date on which the Policy Owner requests that the Policy terminate. When the
Maturity Extension Benefit ends, a Death Benefit consisting of the Cash Value
less any Policy Loan or Accelerated Benefit Payment Lien will be paid. The Death
Benefit is based on the experience of the Investment Options selected and is not
guaranteed. After the Maturity Date, periodic Deduction Amounts will no longer
be charged against the Cash Value and additional premiums will not be accepted.
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We intend that the Policy and the Maturity Extension Rider will be considered
life insurance for tax purposes. The Death Benefit is designed to comply with
Section 7702 of the Internal Revenue Code of 1986, as amended, or other
equivalent section of the Code. However, we do not give tax advice, and cannot
guarantee that the Death Benefit and Cash Value will be exempt from any future
tax liability. The tax results of any benefits under the Maturity Extension
provision depend upon interpretation of the Internal Revenue Code. You should
consult your own personal tax adviser prior to the exercise of the Maturity
Extension Rider to assess any potential tax liability.
CHARGES AND DEDUCTIONS
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CHARGES AGAINST PREMIUM
GENERAL
We deduct the charges described below. The charges are for services and benefits
we provide, costs and expenses we incur, and risks we assume under the Policies.
Services and benefits we provide include:
- the ability for you to make withdrawals and surrenders under the
Policies;
- the ability for you to obtain a loan under the Policies;
- the death benefit paid on the death of the Insured;
- the available funding options and related programs (including dollar-cost
averaging and portfolio rebalancing);
- administration of the various elective options available under the
Policies; and
- the distribution of various reports to policy owners.
Costs and expenses we incur include:
- expenses associated with underwriting applications, increases in the
stated amount, and riders;
- losses associated with various overhead and other expenses associated
with providing the services and benefits provided by the Policies;
- sales and marketing expenses including commission payments to your sales
agent; and
- other costs of doing business.
Risks we assume include:
- that insureds may live for a shorter period of time than estimated
resulting in the payment of greater death benefits than expected; and
- that the costs of providing the services and benefits under the Policies
will exceed the charges deducted.
FRONT-END SALES CHARGE
When we receive a Premium Payment, and before allocation of the payment among
the Investment Options, we deduct a front-end sales charge. For Stated Amounts
less than $500,000, the charge is 2.5%. The charge is 2% for Stated Amounts from
$500,000 to $999,999, and for Stated Amounts of $1,000,000 or greater, there is
no front-end sales charge. Additional charges may be assessed upon any full or
partial surrender. (See "Surrender Charges".)
STATE PREMIUM TAX CHARGE
A charge of 2.5% of each premium payment will be deducted for state premium
taxes (for reimbursement for the payment of the taxes by the Company). These
taxes owed by the Company vary from state to state and currently range from
0.75% to 3.5%; 2.5% is an average. Because there
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is a range of premium taxes, a Policy Owner may pay a premium tax charge that is
higher or lower than the premium tax actually assessed or not assessed in his or
her jurisdiction.
The Company also reserves the right to charge the assets of each Investment
Option for a reserve for any income taxes payable by the Company on the assets
attributable to that Investment Option. (See "Federal Tax Considerations.")
MONTHLY DEDUCTION AMOUNT
We will deduct a Monthly Deduction Amount to cover certain charges and expenses
incurred in connection with the Policy. The Monthly Deduction Amount is deducted
pro rata from each of the Investment Options' values attributable to the Policy.
The amount is deducted on the first day of each Policy Month (the "Deduction
Date"), beginning on the Policy Date. The dollar amount of the Deduction Amount
will vary from month to month. The Monthly Deduction Amount consists of the Cost
of Insurance Charge, Policy Administrative Expense Charge and Charges for any
Supplemental Benefit Provision. These are described below:
COST OF INSURANCE CHARGE
The amount of the Cost of Insurance deduction depends on the amount of insurance
coverage on the date of the deduction and the current cost per dollar for
insurance coverage. The cost per dollar of insurance coverage varies annually
and is based on age, sex and risk class of the Insured.
POLICY ADMINISTRATIVE EXPENSE CHARGE
For the first three Policy Years, an administrative charge is deducted monthly
from the Policy's Cash Value. This charge also applies to increases in the
Stated Amount (excluding Cost of Living Adjustments and increases in Stated
Amounts due to Death Benefit Option changes.) This charge is used to cover
expenses associated with issuing the Policy.
The charge currently varies by issue age, Stated Amount and smoker/non-smoker
classification (see Appendix C for chart of current charges). The current Policy
administrative charges are lower than the guaranteed maximum charges. (See
Appendix C(1) for the guaranteed maximum charges.)
CHARGES FOR SUPPLEMENTAL BENEFIT PROVISIONS
The Company will include a supplemental benefits charge in the Monthly Deduction
Amount if you have elected any supplemental benefit provision for which there is
a charge. The amount of this charge will vary depending upon the actual
supplemental benefits selected.
CHARGES AGAINST THE SEPARATE ACCOUNT
MORTALITY AND EXPENSE RISK CHARGE
We deduct a daily charge for mortality and expense risks. This charge is at an
annual rate of 0.80% for the first fifteen (15) Policy Years, and 0.25%
thereafter. For policies issued after July 12, 1995 and prior to May 1, 1998,
this charge is at an annual rate of .80% for the first fifteen (15) Policy
Years, and .45% thereafter. This charge compensates us for various risks
assumed, benefits provided and expenses incurred. For policies issued prior to
July 12, 1995, the charge is at an annual rate of .60% all years. Refer to
"Policies Sold Prior to May 1, 1998" if applicable.
ADMINISTRATIVE EXPENSE CHARGE
We deduct a daily charge for administrative expenses incurred by us. For
Policies issued after July 12, 1995, the charge equals an annual rate of 0.10%
of the assets in the Investment Options for the first fifteen (15) Policy Years
and 0% thereafter. Refer to "Policies Sold Prior to May 1, 1998," if applicable.
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UNDERLYING FUND FEES
When you allocate money to the Investment Options, the Separate Account
purchases shares of the corresponding Underlying Funds at net asset value. The
net asset value reflects investment advisory fees and other expenses already
deducted. The investment advisory fees and other expenses paid to each of the
Underlying Funds are described in the individual Fund prospectuses for the
Investment Options and in the Policy prospectus summary. These are not direct
charges under the Policy; they are indirect because they affect each Investment
Option's accumulation unit value.
SURRENDER CHARGES
There are two types of surrender charges that can apply under the Policy: a
Percent of Premium Charge and a Per Thousand of Stated Amount Charge equal to a
specified amount for each $1,000 of Stated Amount. These surrender charges apply
during the first ten Policy Years (or the first ten years following an increase
in Stated Amount other than an increase for a Cost of Living Adjustment or a
change in Death Benefit option). Both charges apply upon a full surrender of the
Policy. Only the Percent of Premium Charge applies upon a partial surrender.
PERCENT OF PREMIUM CHARGE
A Percent of Premium surrender charge will be assessed upon a full or partial
surrender of the Policy during the first ten Policy Years (and during the first
ten years following an increase in Stated Amount). The charge will be the
smallest of:
(a) 6% of the amount of Cash Value being surrendered; or
(b) 6% of the amount of premiums actually paid within the five years
preceding the surrender; or
(c) 9% of the total Annual Minimum Premiums for each full or partial Policy
Year during the five years preceding the surrender, whether paid or
not. (See Appendix A, "Annual Minimum Premiums.")
For example, for a 45-year old male with a Stated Amount of $150,000 who pays a
premium of $1,969 per year for five years (a total of $9,845), and then fully
surrenders the Policy for its Cash Value of $7,485 (assuming a 6% rate of
return), the Percent of Premium surrender charge would be $449, because (a) is
$449 (6% of $7,485); (b) is $591 (6% of the $9,845 in premiums paid); and (c) is
approximately $682 (9% of the annual minimum premium for five years). The
smallest, $449, is the applicable charge.
PER THOUSAND OF STATED AMOUNT CHARGE
A Per Thousand of Stated Amount surrender charge is imposed on full surrenders,
but not on partial surrenders, and applies only during the first ten Policy
Years or the ten years following an increase in Stated Amount (other than an
increase for a Cost of Living Adjustment or a change in Death Benefit Option).
The charge is equal to a specified dollar amount for each $1,000 of Stated
Amount to which it applies, and will apply only to that portion of the Stated
Amount (except for increases excluded above) which has been in effect for less
than ten years.
The Per Thousand of Stated Amount Charge varies by original issue age, and
increases with the issue age of the Insured. For Stated Amounts of $499,999 or
less, this charge varies in the first year from $2.04 per $1,000 of Stated
Amount for issue ages of 4 years or less, to $25.40 per $1,000 of Stated Amount
for issue ages of 65 years or higher. The charge is lower for Stated Amounts
over $499,999, and even lower for Stated Amounts over $999,999.
Additionally, the charge decreases by 10% each year over the ten-year period.
For example, for a 45-year old with a Stated Amount of $150,000, the charge in
the first year is $7.18 for each $1,000 of Stated Amount, or $1,077. The charge
decreases 10%, or approximately $0.72, each year, so in
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the fifth year, it is $4.31 for each $1,000 of Stated Amount, or $646.50; in the
tenth year, it is $0.72 for each $1,000, or $108.
This charge is designed to compensate the Company for administrative expenses
not covered by other administrative charges. This charge may be reduced or
eliminated when sales are made under certain arrangements. (See "Reduction or
Elimination of Sales Charges and Administrative Charges" below.) The Per
Thousand of Stated Amount surrender charges are set forth in Appendix B.
TRANSFER CHARGE
There is currently no charge for transfers. The Company reserves the right to
limit free transfers of Cash Value from one Investment Option to another by the
Policy Owner to four times in any Policy Year, and to charge $10 for any
additional transfers.
REDUCTION OR ELIMINATION OF CHARGES
We may offer the Policy in arrangements where an employer or trustee will own a
group of policies on the lives of certain employees, or in other situations
where groups of policies will be purchased at one time. We may reduce or
eliminate the mortality and expense risk charge, sales or surrender charges and
administrative charges in such arrangements to reflect the reduced sales
expenses, administrative costs and/or mortality and expense risks expected as a
result of sales to a particular group.
We will not reduce or eliminate the withdrawal charge, mortality and expense
risk charge or the administrative charge if the reduction or elimination will be
unfairly discriminatory to any person.
THE SEPARATE ACCOUNT AND VALUATION
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THE TRAVELERS FUND UL FOR VARIABLE LIFE INSURANCE (FUND UL)
The Travelers Fund UL for Variable Life Insurance was established on November
10, 1983 under the insurance laws of the state of Connecticut. It is registered
with the Securities and Exchange Commission ("SEC") as a unit investment trust
under the Investment Company Act of 1940. A Registration Statement has been
filed with the Securities and Exchange Commission under the Securities Act of
1933, as amended. This Prospectus does not contain all information set forth in
the Registration Statement, its amendments and exhibits. You may access the
SEC's website (http://www.sec.gov) to view the entire Registration Statement.
This registration does not mean that the SEC supervises the management or the
investment practices or policies of the Separate Account.
The assets of Fund UL are invested exclusively in shares of the Investment
Options. The operations of Fund UL are also subject to the provisions of Section
38a-433 of the Connecticut General Statutes which authorizes the Connecticut
Insurance Commissioner to adopt regulations under it. Under Connecticut law, the
assets of Fund UL will be held for the exclusive benefit of Policy Owners and
the persons entitled to payments under the Policy. The assets held in Fund UL
are not chargeable with liabilities arising out of any other business which the
Company may conduct. Any obligations arising under the Policy are general
corporate obligations of the Company.
All investment income of and other distributions to each Investment Option are
reinvested in shares of corresponding underlying fund at net asset value. The
income and realized gains or losses on the assets of each Investment Option are
separate and are credited to or charged against the Investment Option without
regard to income, gains or losses from any other Investment Option or from any
other business of the Company. The Company purchases shares of the Fund in
connection with premium payments allocated according to the Policy Owners'
directions, and redeems Fund shares to meet Policy obligations. We will also
make adjustments in reserves, if
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required. The Investment Options are required to redeem Fund shares at net asset
value and to make payment within seven days.
HOW THE CASH VALUE VARIES. We calculate the Policy's Cash Value each day the
New York Stock Exchange is open for trading (a "valuation date"). A Policy's
Cash Value reflects a number of factors, including Premium Payments, partial
withdrawals, loans, Policy charges, and the investment experience of the
Investment Option(s) chosen. The Policy's Cash Value on a valuation date equals
the sum of all accumulation units for each Investment Option chosen, plus the
Loan Account Value.
The Separate Account purchases shares of the underlying funds at net asset value
(i.e., without a sales charge). The Separate Account receives all dividends and
capital gains distributions from each underlying fund, and reinvests in
additional shares of that fund. The Accumulation Unit Value reflects the
reinvestment of any dividends or capital gains distributions declared by the
underlying fund. The Separate Account will redeem underlying fund shares at
their net asset value, to the extent necessary to make payments under the
Policy.
In order to determine Cash Value, Cash Surrender Value, policy loans and the
number of Accumulation Units to be credited, we use the values calculated as of
4:00 p.m. Eastern time on each valuation date we receive the written request, or
payment in good order, at our Home Office.
ACCUMULATION UNIT VALUE. Accumulation Units measure the value of the Investment
Options. The value for each Investment Option's Accumulation Unit is calculated
on each valuation date. The value equals the Accumulation Unit value for the
preceding valuation period multiplied by the underlying fund's Net Investment
Factor during the next Valuation Period. (For example, to calculate Monday's
valuation date price, we would multiply Friday's Accumulation Unit Value by
Monday's net investment factor.)
The Accumulation Unit Value may increase or decrease. The number of Accumulation
Units credited to your Policy will not change as a result of the Investment
Option's investment experience.
NET INVESTMENT FACTOR. For each Investment Option, the value of its
Accumulation Unit depends of the net rate of return for the corresponding
underlying fund. We determine the net rate of return at the end of each
Valuation Period (that is, the period of time beginning at 4:00 p.m. Eastern
time and ending at 4:00 p.m. Eastern time on the next Valuation Date). The net
rate of return reflects the investment performance of the investment option,
includes any dividends or capital gains distributed, and is net of the Separate
Account charges.
CHANGES TO THE POLICY
- --------------------------------------------------------------------------------
GENERAL
Once the policy is issued, you may make certain changes. Some of these changes
will not require additional underwriting approval; some changes will. Certain
requests must be made in writing, as indicated below:
WRITTEN CHANGES REQUIRING UNDERWRITING APPROVAL:
- increases in the stated amount of insurance;
- changing the death benefit from Option 1 to Option 2
WRITTEN CHANGES NOT REQUIRING UNDERWRITING APPROVAL:
- decreases in the stated amount of insurance
- changing the death benefit from Option 2 to Option 1
- changes to the way your premiums are allocated (Note: with the proper
authorization, you can also make these changes by telephone)
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<PAGE> 30
- changing the beneficiary (unless irrevocably named)
Written requests for changes should be sent to the Company's Home Office at One
Tower Square, Hartford, Connecticut, 06183. The Company's telephone number is
(860) 277-0111.
CHANGES IN STATED AMOUNT
You may request in writing an increase or decrease in the Policy's Stated
Amount, provided that the Stated Amount after any decrease may not be less than
the minimum amount of $50,000. For purposes of determining the cost of insurance
charge, a decrease in the Stated Amount will reduce the Stated Amount in the
following order:
1) against the most recent increase in the Stated Amount;
2) to other increases in the reverse order in which they occurred;
3) to the initial Stated Amount.
A decrease in Stated Amount in a substantially funded Policy may cause a cash
distribution that is includable in the gross income of the Policy Owner.
For increases in the Stated Amount, we may require a new application and
evidence of insurability as well as an additional premium payment. The effective
date of any increase will be shown on the new Policy Summary which we will send.
The effective date of any increase in the Stated Amount will generally be the
Deduction Date next following either the date of a new application or, if
different, the date requested by the Applicant. There is an additional Policy
Administrative Charge and a Per Thousand of Stated Amount Surrender Charge
associated with a requested increase in Stated Amount. There is no additional
charge for a decrease in Stated Amount.
CHANGES IN DEATH BENEFIT OPTION
You may change the Death Benefit option by sending a written request to the
Company. There is no direct tax consequence of changing a Death Benefit option,
except as described under "Tax Treatment of Policy Benefits." However, the
change could affect future values of Net Amount At Risk, and with some Option 2
to Option 1 changes involving substantially funded Policies, there may be a cash
distribution which is included in your gross income. The cost of insurance
charge which is based on the Net Amount At Risk may be different in the future.
A change from Option 1 to Option 2 will not be permitted if the change results
in a Stated Amount of less than $50,000. A change from Option 1 to Option 2 also
subject to underwriting. Contact your registered representative for more
information.
ADDITIONAL POLICY PROVISIONS
- --------------------------------------------------------------------------------
ASSIGNMENT
The Policy may be assigned as collateral for a loan or other obligation. The
Company is not responsible for any payment made or action taken before receipt
of written notice of such assignment. Proof of interest must be filed with any
claim under a collateral assignment.
LIMIT ON RIGHT TO CONTEST AND SUICIDE EXCLUSION
We may not contest the validity of the Policy after it has been in effect during
the Insured's lifetime for two years from the Issue Date. Subject to state law,
if the Policy is reinstated, the two-year period will be measured from the date
of reinstatement. Each requested increase in Stated Amount is contestable for
two years from its effective date (subject to state law). In addition, if the
Insured commits suicide during the two-year period following issue, subject to
state law, the Death Benefit will be limited to the premiums paid less (i) the
amount of any partial surrender, (ii) the amount of any outstanding Policy loan,
and (iii) the amount of any unpaid Deduction
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<PAGE> 31
Amount due. During the two-year period following an increase, the Death Benefit
in the case of suicide will be limited to an amount equal to the Deduction
Amount paid for such increase.
MISSTATEMENT AS TO SEX AND AGE
If there has been a misstatement with regard to sex or age, benefits payable
will be adjusted to what the Policy would have provided with the correct
information. A misstatement with regard to sex or age in a substantially funded
Policy may cause a cash distribution that is includable in whole or in part in
the gross income of the Policy Owner.
VOTING RIGHTS
The Company is the legal owner of the underlying fund shares. However, we
believe that when an underlying fund solicits proxies, we are required to obtain
from policy owners who have chosen those investment options instructions on how
to vote those shares. When we receive those instructions, we will vote all of
the shares we own in proportion to those instructions. This will also include
any shares we own on our own behalf. If we determine that we no longer need to
comply with this voting method, we will vote on the shares in our own right.
DISREGARD OF VOTING INSTRUCTIONS
When permitted by state insurance regulatory authorities, we may disregard
voting instructions if the instructions would cause a change in the investment
objective or policies of the Separate Account or an Investment Option, or if it
would cause the approval or disapproval of an investment advisory Policy of an
Investment Option. In addition, we may disregard voting instructions in favor of
changes in the investment policies or the investment adviser of any Investment
Options which are initiated by a Policy Owner if we reasonably disapprove of
such changes. A change would be disapproved only if the proposed change is
contrary to state law or prohibited by state regulatory authorities, or if we
determine that the change would have an adverse effect on our general account
(i.e., if the proposed investment policy for an Investment Option may result in
overly speculative or unsound investments.) If we do disregard voting
instructions, a summary of that action and the reasons for such action would be
included in the next annual report to Policy Owners.
FOR POLICIES SOLD PRIOR TO MAY 1, 1998
The following pertains to policies sold between July 12, 1995 and May 1, 1998
(or sold after May 1, 1998 in the states where the new policy has not yet been
approved).
MORTALITY AND EXPENSE RISK CHARGE. The current charge is at an annual rate of
0.80% for years one through fifteen and 0.45% thereafter.
ADMINISTRATIVE EXPENSE CHARGE. The charge is 0.10% for years one through
fifteen and 0.00% thereafter.
ILLUSTRATIONS
The values shown in these illustrations vary according to assumptions used for
charges, and gross rates of returns. For the first fifteen Policy Years, the
current and guaranteed charges consist of 0.80% for mortality and expense risks,
0.10% for administrative expenses and an average of the Investment Option
expenses and thereafter, 0.45% for mortality and expense risks, 0.00% for
administrative expenses and an average of the Investment Option expenses.
The charge for Investment Option expenses reflected in the illustration assumes
that Cash Value is allocated equally among all investment Options and that no
Policy Loans are outstanding, and is the average of the investment advisory fees
and other expenses charged by each of the Investment Options during the last
audited calendar year.
After deduction of these amounts, the illustrated gross annual rates of 0%, 6%
and 12% correspond to approximate net annual rates of -1.56%, 4.44% and 10.44%,
respectively on a current and
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<PAGE> 32
guaranteed basis for the first fifteen Policy Years and to approximate net
annual rates of -1.11%, 4.89% and 10.89%, respectively on a current and
guaranteed basis thereafter.
POLICIES SOLD PRIOR TO JULY 12, 1995
The following pertains to Policies sold prior to July 12, 1995 (or sold
subsequent to July 12, 1995 in states where the new Policy had not yet been
approved).
MORTALITY AND EXPENSE RISK CHARGE. The current charge is at an annual rate of
0.60% of the assets in the Separate Account, however the policy provides that
the maximum charge for mortality and expense risks will not exceed .80%
ADMINISTRATION EXPENSE CHARGE. The maximum charge is equivalent, on an annual
basis, to 0.10% of the assets in the Separate Account, however, the Company does
not currently assess this charge.
CONTRACT LOANS. During the first 10 policy years, the full Loan Account Value
will be charged an annual interest rate of 7.4% (6% in the Virgin Islands).
During Contract Years 11, 12 and 13, 25%, 50% and 75% of the Loan Account Value,
respectively, will be charged a reduced rate of 3.85% (5.66% in New York and
Massachusetts). Thereafter, 100% of the Loan Account Value will be charged the
reduced rate.
ILLUSTRATIONS
The values shown in these illustrations vary according to assumptions used for
charges, and gross rates of returns. The current charges use 0.60% for mortality
and expense risks and an average of the Investment Option expenses. The
guaranteed charges use 0.80% for mortality and expense risks, 0.10% for
administrative expenses and an average of the Investment Option expenses.
The charge for Investment Option expenses reflected in the illustration assumes
that Cash Value is allocated equally among all investment Options and that no
Policy Loans are outstanding, and is the average of the investment advisory fees
and other expenses charged by each of the Investment Options during the last
audited calendar year.
After deduction of these amounts, the illustrated gross annual rates of 0%, 6%
and 12% correspond to approximate net annual rates of -1.26%, 4.74% and 10.74%,
respectively on a current basis and to approximate net annual rates of -1.56%,
4.44% and 10.44%, respectively on a guaranteed basis.
OTHER MATTERS
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STATEMENTS TO POLICY OWNERS
We will maintain all records relating to the Separate Account and the Investment
Options. At least once each Policy Year, we will send you a statement containing
the following information:
- the Stated Amount and the Cash Value of the Policy (indicating the number
of Accumulation Units credited to the Policy in each Investment Option
and the corresponding Accumulation Unit Value);
- the date and amount of each premium payment;
- the date and amount of each Monthly Deduction;
- the amount of any outstanding Policy loan as of the date of the
statement, and the amount of any loan interest charged on the Loan
Account;
- the date and amount of any partial cash surrenders and the amount of any
partial surrender charges;
- the annualized cost of any supplemental benefits purchased under the
Policy; and
- a reconciliation since the last report of any change in Cash Value and
Cash Surrender Value.
We will also send any other reports required by any applicable state or federal
laws or regulations.
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SUSPENSION OF VALUATION
We reserve the right to suspend or postpone the date of any payment of any
benefit or values for any Valuation Period (1) when the New York Stock Exchange
("Exchange") is closed; (2) when trading on the Exchange is restricted; (3) when
the SEC determines so that disposal of the securities held in the Underlying
Funds is not reasonably practicable or the value of the Investment Option's net
assets cannot be determined; or (4) during any other period when the SEC, by
order, so permits for the protection of security holders.
DIVIDENDS
No dividends will be paid under the Policy.
MIXED AND SHARED FUNDING
It is conceivable that in the future it may not be advantageous for variable
life insurance and variable annuity Separate Accounts to invest in the
Investment Options simultaneously. This is called mixed funding. Certain funds
may be available to variable products of other companies not affiliated with
Travelers. This is called "shared funding." Although we -- and the funds -- do
not anticipate any disadvantages either to variable life insurance or to
variable annuity Policy Owners, the Investment Options' Boards of Directors
intend to monitor events to identify any material conflicts that may arise and
to determine what action, if any, should be taken. If any of the Investment
Options' Boards of Directors conclude that separate mutual funds should be
established for variable life insurance and variable annuity Separate Accounts,
the Company will bear the attendant expenses, but variable life insurance and
variable annuity Policy Owners would no longer have the economies of scale
resulting from a larger combined fund. Please consult the prospectuses of the
Investment Options for additional information.
DISTRIBUTION
The Company intends to sell the Policies in all jurisdictions where it is
licensed to do business and where the Policy is approved. The Policies will be
sold by life insurance sales representatives who are registered representatives
of the Company or certain other registered broker-dealers. The maximum
commission payable by the Company for distribution would be no greater than 50%
of the actual premium paid in the first twelve months. Any sales representative
or employee will have been qualified to sell variable life insurance Policies
under applicable federal and state laws. Each broker/dealer is registered with
the Securities and Exchange Commission under the Securities Exchange Act of 1934
and all are members of the National Association of Securities Dealers, Inc.
CFBDS, Inc. serves as principal underwriter of the Policies. It is anticipated
that Travelers Distribution LLC, an affiliated company, will become the
principal underwriter in 2000.
LEGAL PROCEEDINGS AND OPINION
There are no pending legal proceedings affecting the Separate Account. There is
one material pending legal proceeding, other than ordinary routine litigation
incidental to business, to which the Company is a party.
In March 1997, a purported class action entitled Patterman v. The Travelers,
Inc., et al. was commenced in the Superior Court of Richmond County, Georgia,
alleging, among other things, violations of the Georgia RICO statute and other
state laws by an affiliate of the Company, Primerica Financial Services, Inc.
and certain of its affiliates. Plaintiffs seek unspecified compensatory and
punitive damages and other relief. In October 1997, defendants answered the
complaint, denied liability and asserted numerous affirmative defenses. In
February 1998, on defendants' motion, the Superior Court of Richmond County
transferred the lawsuit to the Superior Court of Gwinnett County, Georgia.
Plaintiffs appealed the transfer order, and in December 1998 the Court of
Appeals of the State of Georgia reversed the lower court's decision. Defendants
petitioned the Georgia Supreme Court to hear an appeal from the decision of the
Court of Appeals, and the
29
<PAGE> 34
petition was granted in May 1998. In September 1999, oral argument on
defendants' petition was heard and, on February 28, 2000, the Georgia Supreme
Court affirmed the Georgia County Appeals and remanded the matter to the
Superior Court of Richmond County. In March 2000, defendants moved the Georgia
Supreme Court to reconsider its February 28, 2000 decision, and that motion
remains pending. Proceedings in the trial court have been stayed pending appeal.
Defendants intend to vigorously contest the litigation.
Legal matters in connection with the federal laws and regulations affecting the
issue and sale of the Contract described in this prospectus, as well as the
organization of the Company, its authority to issue variable life contracts
under Connecticut law and the validity of the forms of the variable life
contracts under Connecticut law, have been reviewed by the General Counsel of
the Company.
EXPERTS
The financial statements of Fund UL as of December 31, 1999 and for the year
ended December 31, 1999 have been included herein and in the registration
statement in reliance upon the report of KPMG LLP, independent certified public
accountants and upon the authority of said firm as experts in accounting and
auditing.
The consolidated financial statements of The Travelers Insurance Company and
Subsidiaries as of December 31, 1999 and 1998, and for each of the years in the
three-year period ended December 31, 1999, have been included herein and in the
registration statement in reliance upon the report of KPMG LLP, independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing.
FEDERAL TAX CONSIDERATIONS
- --------------------------------------------------------------------------------
GENERAL
The following is a general discussion of the federal income tax considerations
relating to the Policies. This discussion is based upon the Company's
understanding of the federal income tax laws as they are currently interpreted
by the Internal Revenue Service ("IRS"). These laws are complex, and tax results
may vary among individuals. A person contemplating the purchase of or the
exercise of elections under a Policy should seek competent tax advice.
IT SHOULD BE UNDERSTOOD THAT THIS IS NOT AN EXHAUSTIVE DISCUSSION OF ALL TAX
QUESTIONS THAT MIGHT ARISE UNDER THE POLICIES. NO ATTEMPT HAS BEEN MADE TO
ADDRESS ANY FEDERAL ESTATE TAX OR STATE AND LOCAL TAX CONSIDERATIONS WHICH MAY
ARISE IN CONNECTION WITH A POLICY. FOR COMPLETE INFORMATION, A QUALIFIED TAX
ADVISOR SHOULD BE CONSULTED.
THE COMPANY DOES NOT GUARANTEE THE TAX STATUS OF ANY POLICY AND THE FOLLOWING
TAX DISCUSSION IS BASED ON THE COMPANY'S UNDERSTANDING OF FEDERAL INCOME TAX
LAWS AS THEY ARE CURRENTLY INTERPRETED. THE COMPANY CANNOT GUARANTEE THAT THOSE
LAWS OR INTERPRETATIONS WILL REMAIN UNCHANGED.
TAX STATUS OF THE POLICY
DEFINITION OF LIFE INSURANCE
Section 7702 of the Code sets forth a definition of a life insurance contract
for federal tax purposes. Guidance as to how Section 7702 is to be applied,
however, is limited. Although the Secretary of the Treasury (the "Treasury") is
authorized to prescribe regulations implementing Section 7702, and while
proposed regulations and other limited, interim guidance has been issued, final
regulations have not been adopted. If a Policy were determined not to be a life
insurance contract for purposes of Section 7702, such Policy would not provide
the tax advantages normally provided by a life insurance policy.
30
<PAGE> 35
With respect to a Policy issued on the basis of a standard rate class, the
Company believes (largely in reliance on IRS Notice 88-128 and the proposed
regulations under Section 7702) that such a Policy should meet the Section 7702
definition of a life insurance contract. There is less guidance on the
application of the rules with respect to a Policy that is issued on a
substandard basis (i.e., a premium class involving higher than standard
mortality risk). Thus, it is not clear whether such a Policy would satisfy
Section 7702, particularly if the Policy Owner pays the full amount of premiums
permitted under the Policy.
The Company reserves the right to make changes in the Policy if such changes are
deemed necessary to attempt to assure its qualification as a life insurance
contract for tax purposes.
DIVERSIFICATION
Section 817(h) of the Code provides that separate account investments (or the
investments of a mutual fund, the shares of which are owned by separate accounts
of insurance companies) underlying the Policy must be "adequately diversified"
in accordance with Treasury regulations in order for the Policy to qualify as
life insurance. The Treasury Department has issued regulations prescribing the
diversification requirements in connection with variable contracts. The Separate
Account, through the Investment Options, intends to comply with these
requirements. Although the Company does not control the Investment Options, it
intends to monitor the investments of the Investment Options to ensure
compliance with the diversification requirements prescribed by the Treasury
Department.
INVESTOR CONTROL
In certain circumstances, owners of variable life insurance contracts may be
considered the owners, for federal income tax purposes, of the assets of the
separate accounts used to support their contract. In those circumstances, income
and gains from the separate account assets would be includable in the variable
contract owner's gross income each year. The IRS has stated in published rulings
that a variable contract owner will be considered the owner of separate account
assets if the contract owner possesses incidents of ownership in those assets,
such as the ability to exercise investment control over the assets. The Treasury
has also announced, in connection with the issuance of regulations concerning
diversification, that those regulations "do not provide guidance concerning the
circumstances in which investor control of the investments of a segregated asset
account may cause the investor (i.e., the Policy Owner), rather than the
insurance company, to be treated as the owner of the assets in the account."
This announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which policyholders may direct their
investments to particular Investment Options without being treated as owners of
the underlying assets." As of the date of this prospectus, no such guidance has
been issued.
The ownership rights under the Policy are similar to, but different in certain
respects from, those described by the IRS in rulings in which it determined that
the policy owners received the desired tax benefits because they were not owners
of separate account assets. For example, a Policy Owner of this Policy has
additional flexibility in allocating payments and cash values. These differences
could result in the Policy Owner being treated as the owner of the assets of the
Separate Account. In addition, the Company does not know what standard will be
set forth in the regulations or rulings which the Treasury is expected to issue,
nor does the Company know if such guidance will be issued. The Company therefore
reserves the right to modify the Policy as necessary to attempt to prevent the
Policy Owner from being considered the owner of a pro rata share of the assets
of the Separate Account.
The remaining tax discussion assumes that the Policy qualifies as a life
insurance contract for federal income tax purposes.
31
<PAGE> 36
TAX TREATMENT OF POLICY BENEFITS
IN GENERAL
The Company believes that the proceeds and cash value increases of a Policy
should be treated in a manner consistent with a fixed-benefit life insurance
policy for federal income tax purposes. Thus, the Death Benefit under the Policy
should be excludable from the gross income of the Beneficiary.
In addition, the Policy Owner will generally not be deemed to be in constructive
receipt of the Cash Value, including increments thereof, until there is a
distribution. The tax consequences of distribution from, and loans taken from or
secured by, a Policy depend on whether the Policy is classified as a "Modified
Endowment Contract." However, whether a Policy is or is not a Modified Endowment
Contract, upon a complete surrender or lapse of a Policy or when benefits are
paid at a Policy's maturity date, if the amount received plus the amount of
indebtedness exceeds the total investment in the Policy, the excess will
generally be treated as ordinary income subject to tax.
Depending on the circumstances, the exchange of a Policy, a change in the
Policy's Death Benefit Option, a Policy loan, a partial withdrawal, a surrender,
a change in ownership, or an assignment of the Policy may have federal income
tax consequences. In addition, federal, state and local transfer, and other tax
consequences of ownership or receipt of Policy proceeds depend on the
circumstances of each Owner or beneficiary. Therefore, it is important to check
with a tax adviser prior to the purchase of a policy.
MODIFIED ENDOWMENT CONTRACTS
A modified endowment contract is defined under tax law as any policy that
satisfies the present legal definition of a life insurance contract but which
fails to satisfy a 7-pay test. This failure could occur with contracts entered
into after June 21, 1988, or with certain older contracts materially changed
after that date. A Section 1035 exchange of an older contract into a contract
after that date will not by itself cause the new contract to be a modified
endowment contract if the older contract had not become one prior to the
exchange. However, the new contract must be re-tested under the 7-pay test
rules.
A contract fails to satisfy the 7-pay test if the cumulative amount of premiums
paid under the contract at any time during the first seven contract years
exceeds the sum of the net level premiums that would have been paid on or before
such time had the contract provided for paid-up future benefits after the
payment of seven level annual premiums. If a material change in the contract
occurs either during the first seven contract years, or later, a new seven-year
testing period is begun. A decrease to Stated Amount made in the first seven
years will cause a retest of the cumulative amount of premiums. Decreases made
after the first seven contract years are not considered a material change,
provided no other material changes have occurred prior. Tax regulations or other
guidance will be needed to fully define those transactions which are material
changes. The Company has established safeguards for monitoring whether a
contract may become a modified endowment contract.
Loans and partial withdrawals from, as well as collateral assignments of,
Policies that are modified endowment contracts will be treated as distributions
to the Policy Owner for tax purposes. All pre-death distributions (including
loans, partial withdrawals and collateral assignments) from these Policies will
be included in gross income on an income-first basis to the extent of any income
in the Policy (the cash value less the Policy Owner's investment in the Policy)
immediately before the distribution.
The law also imposes a 10% penalty tax on pre-death distributions (including
loans, collateral assignments, partial withdrawals and complete surrenders) from
modified endowment contracts to the extent they are included in income, unless a
specific exception to the penalty applies. The penalty does not apply to amounts
which are distributed on or after the date on which the taxpayer attains age
59 1/2, because the taxpayer is disabled, or as substantially equal periodic
payments over the taxpayer's life (or life expectancy) or over the joint lives
(or joint life expectancies) of the taxpayer and his or her beneficiary.
Furthermore, if the loan interest is
32
<PAGE> 37
capitalized by adding the amount due to the balance of the loan, the amount of
the capitalized interest will be treated as an additional distribution subject
to income tax as well as the 10% penalty tax, if applicable, to the extent of
income in the Policy.
The Death Benefit of a modified endowment contract remains excludable from the
gross income of the Beneficiary to the extent described above in "Tax Treatment
of Policy Benefits." Furthermore, no part of the investment growth of the Cash
Value of a modified endowment contract is includable in the gross income of the
Contract Owner unless the contract matures, is distributed or partially
surrendered, is pledged, collaterally assigned, or borrowed against, or
otherwise terminates with income in the contract prior to death. A full
surrender of the contract after age 59 1/2 will have the same tax consequences
as noted above in "Tax Treatment of Policy Benefits."
EXCHANGES
Any Policy issued in exchange for a modified endowment contract will be subject
to the tax treatment accorded to modified endowment contracts. However, the
Company believes that any Policy received in exchange for a life insurance
contract that is not a modified endowment contract will generally not be treated
as a modified endowment contract if the face amount of the Policy is greater
than or equal to the death benefit of the policy being exchanged. The payment of
any premiums at the time of or after the exchange may, however, cause the Policy
to become a modified endowment contract. A prospective purchaser should consult
a qualified tax advisor before authorizing the exchange of his or her current
life insurance contract for a Policy.
AGGREGATION OF MODIFIED ENDOWMENT CONTRACTS
In the case of a pre-death distribution (including a loan, partial withdrawal,
collateral assignment or complete surrender) from a Policy that is treated as a
modified endowment contract, a special aggregation requirement may apply for
purposes of determining the amount of the income on the Policy. Specifically, if
the Company or any of its affiliates issues to the same Policy Owner more than
one modified endowment contract within a calendar year, then for purposes of
measuring the income on the Policy with respect to a distribution from any of
those Policies, the income on the Policy for all those Policies will be
aggregated and attributed to that distribution.
POLICIES WHICH ARE NOT MODIFIED ENDOWMENT CONTRACTS
Unlike loans from modified endowment contracts, a loan from a Policy that is not
a modified endowment contract will be considered indebtedness of the Owner and
no part of a loan will constitute income to the Owner. However, the treatment of
loans taken after the 13th Policy Year, is unclear; such loans might be
considered a withdrawal instead of indebtedness for federal tax purposes.
Pre-death distributions from a Policy that is not a modified endowment contract
will generally not be included in gross income to the extent that the amount
received does not exceed the Policy Owner's investment in the Policy. (An
exception to this general rule may occur in the case of a decrease or change
that reduces the benefits provided under a Policy in the first 15 years after
the Policy is issued and that results in a cash distribution to the Policy
Owner. Such a cash distribution may be taxed in whole or in part as ordinary
income to the extent of any gain in the Policy.) Further, the 10% penalty tax on
pre-death distributions does not apply to Policies that are not modified
endowment contracts.
Certain changes to Policies that are not modified endowment contracts may cause
such Policies to be treated as modified endowment contracts. A Policy Owner
should therefore consult a tax advisor before effecting any change to a Policy
that is not a modified endowment contract.
TREATMENT OF LOAN INTEREST
If there is any borrowing against the Policy, the interest paid on loans may not
be tax deductible.
33
<PAGE> 38
THE COMPANY'S INCOME TAXES
The Company is taxed as a life insurance company under federal income tax law.
Presently, the Company does not expect to incur any income tax on the earnings
or the realized capital gains attributable to Fund UL. However, the Company may
assess a charge against the Investment Options for federal income taxes
attributable to those accounts in the event that the Company incurs income or
capital gains or other tax liability attributable to Fund UL under future tax
law.
THE COMPANY
- --------------------------------------------------------------------------------
The Travelers Insurance Company (the "Company") is a stock insurance company
chartered in 1864 in Connecticut and has been engaged in the insurance business
since that time. The Company writes individual life insurance and individual and
group annuity contracts on a non-participating basis, and acts as depositor for
the Separate Account assets. The Company is licensed to conduct life insurance
business in all states of the United States, the District of Columbia, Puerto
Rico, Guam, the U.S. and British Virgin Islands, and the Bahamas. The Company's
obligations as depositor for Fund UL may not be transferred without notice to
and consent of Policy Owners.
The Company is an indirect wholly owned subsidiary of Citigroup Inc., a
financial services holding company. The Company's principal executive offices
are located at One Tower Square, Hartford, Connecticut 06183, telephone number
(860) 277-0111.
The Company is subject to Connecticut law governing insurance companies and is
regulated and supervised by the Connecticut Commissioner of Insurance. An annual
statement in a prescribed form must be filed with the Commissioner on or before
March 1 in each year covering the operations of the Company for the preceding
year and its financial condition on December 31 of such year. The Company's
books and assets are subject to review or examination by the Commissioner, and a
full examination of its operations is conducted at least once every four years.
In addition, the Company is subject to the insurance laws and regulations of any
jurisdiction in which it sells its insurance Policies, as well as to various
federal and state securities laws and regulations.
IMSA
The Company is a member of the Insurance Marketplace Standards Association
("IMSA"), and as such may use the IMSA logo and IMSA membership in its
advertisements. Companies that belong to IMSA subscribe to a set of ethical
standards covering the various aspects of sales and service for individually
sold life insurance and annuities. IMSA members have adopted policies and
procedures that demonstrate a commitment to honesty, fairness and integrity in
all customer contacts involving the sale and service of individual life
insurance and annuity products.
34
<PAGE> 39
MANAGEMENT
- --------------------------------------------------------------------------------
DIRECTORS OF THE TRAVELERS INSURANCE COMPANY
The following are the Directors and Executive Officers of The Travelers
Insurance Company. Unless otherwise indicated, the principal business address
for all individuals is the Company's Home Office at One Tower Square, Hartford,
Connecticut 06183. References to Citigroup include, prior to December 31, 1993,
Primerica Corporation or its predecessors, and prior to October 8, 1998,
Travelers Group, Inc.
<TABLE>
<CAPTION>
DIRECTOR
NAME AND POSITION SINCE PRINCIPAL BUSINESS
----------------- -------- ------------------
<S> <C> <C>
George C. Kokulis.......... 1996 President and Chief Executive Officer since April
2000,
Director Executive Vice President (7/1999 to 3/2000), Senior
Vice President (1995-1999), Vice President (1993-1995)
of The Travelers Insurance Company.
Katherine M. Sullivan...... 1996 Senior Vice President since May 1996 and General
Director Counsel from May 1996 to August 1999 of The Travelers
Insurance Company; Senior Vice President and General
Counsel (1994-1996) Connecticut Mutual; Special
Counsel & Chief of Staff (1988-1994) Aetna Life &
Casualty.
Marc P. Weill*............. 1994 Senior Vice President-Investments since 1993 and Chief
Director Investment Officer since 1995 of The Travelers
Insurance Company; Senior Vice President and Chief
Investment Officer of Citigroup Inc. since 1992; Vice
President (1990-1992), Primerica Corporation; Vice
President (1989-1990), Smith Barney Inc.
</TABLE>
- ---------------
* Principal business address: Citigroup Inc., 153 East 53rd St., New York, New
York 10043
SENIOR OFFICERS OF THE TRAVELERS INSURANCE COMPANY
The following are the Senior Officers of The Travelers Insurance Company, other
than the Directors listed above, as of the date of this Prospectus. Unless
otherwise indicated, the principal business address for all individuals listed
is One Tower Square, Hartford, Connecticut 06183.
<TABLE>
<CAPTION>
NAME POSITION WITH INSURANCE COMPANY
---- -------------------------------
<S> <C>
Stuart Baritz........................ Senior Vice President
Jay S. Fishman....................... Senior Vice President
Barry Jacobson....................... Senior Vice President
Russell H. Johnson................... Senior Vice President
Glenn D. Lammey...................... Executive Vice President, Chief
Financial Officer, Chief Accounting
Officer and Controller
Marla Berman Lewitus................. Senior Vice President and General
Counsel
Brendan Lynch........................ Senior Vice President
Warren H. May........................ Senior Vice President
Kathleen A. Preston.................. Senior Vice President
Mary Jean Thornton................... Executive Vice President and
Chief Information Officer
David A. Tyson....................... Senior Vice President
F. Denney Voss....................... Senior Vice President
</TABLE>
Information relating to the management of the underlying funds is contained in
the applicable prospectuses.
35
<PAGE> 40
EXAMPLE OF POLICY CHARGES
- --------------------------------------------------------------------------------
The following chart illustrates the surrender charges and Monthly Deduction
Amounts that would apply under a Policy based on the assumptions listed below.
Surrender charges and Monthly Deductions Amounts generally will be higher for an
Insured who is older than the assumed Insured, and lower for an Insured who is
younger (assuming the Insureds have the same risk classification). Cost of
Insurance rates go up each year as the Insured becomes a year older.
Male, Age 45
Preferred Non-smoker
Annual Premium: $1,968.75
Hypothetical Gross Annual Investment
Rate of Return: 8%
Face Amount: $150,000
Level Death Benefit Option
Current Charges
<TABLE>
<CAPTION>
TOTAL MONTHLY DEDUCTION
FOR THE POLICY YEAR
---------------------------
COST OF ADMINISTRATIVE
POLICY CUMULATIVE INSURANCE CHARGES AND
YEAR PREMIUMS SURRENDER CHARGES CHARGES MONTHLY
- ------ ---------- ----------------- --------- POLICY CHARGES
<S> <C> <C> <C> <C>
1 $ 1,968.75 $1,186.92 $431.37 $144.00
2 $ 3,937.50 $1,184.60 $457.06 $144.00
3 $ 5,906.25 $1,182.27 $480.38 $144.00
5 $ 9,843.75 $1,177.57 $539.95 $ 0.00
10 $19,687.50 $1,165.61 $684.10 $ 0.00
</TABLE>
Hypothetical results shown above are illustrative only and are based on the
Hypothetical Gross Annual Investment Rate of Return shown above. This
Hypothetical Gross Annual Investment Rate of Return should not be deemed to be a
representation of past or future investment results. Actual Investment results
may be more or less than shown. No representations can be made that the
hypothetical rates assumed can be achieved for any one year or sustained over a
period of time.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, Fund UL's Investment Options may show the percentage change
in the value of an Accumulation Unit based on the performance of the Investment
Option over a period of time, usually for the past one-, two-, three-, five-,
and ten-year periods determined by dividing the increase (decrease) in value for
that unit by the Accumulation Unit Value at the beginning of the period.
For Investment Options of Fund UL that invest in underlying funds that were in
existence prior to the date on which the Investment Option became available
under the Policy, average annual rates of return may include periods prior to
the inception of the Investment Option. Performance calculations for Investment
Options with pre-existing Investment Options will be calculated by adjusting the
actual returns of the Investment Options to reflect the charges that would have
been assessed under the Investment Options had the Investment Option been
available under Fund UL during the period shown.
The following performance information represents the percentage change in the
value of an Accumulation Unit of the Investment Options for the periods
indicated, and reflects all expenses of the Investment Options. The chart
reflects the guaranteed maximum .80% mortality and expense risk charge and .10%
administrative expense risk charge. The rates of return do not reflect the 2.5%
front-end sales charge or the 2.5% state premium tax charge (both of which are
deducted from premium payments) nor do they reflect surrender charges or Monthly
Deduction Amounts. The surrender charges and Monthly Deduction Amounts for a
hypothetical Insured are depicted in the Example following the Rates of Returns.
For information about the Charges and Deductions assessed under the Policy, see
page 19. For illustrations of how these charges affect Cash Values and Death
Benefits, see the Illustrations beginning on page 38. The performance
36
<PAGE> 41
information described in this prospectus, may be used from time to time in
advertisement for the Policy, subject to National Association of Securities
Dealers, Inc. ("NASD") and applicable state approval and guidelines.
The table below shows the net annual rates of return for accumulation units of
investment options available through MarketLife.
AVERAGE ANNUAL RETURNS THROUGH 12/31/99
<TABLE>
<CAPTION>
FUND
INCEPTION
UNDERLYING INVESTMENT OPTIONS ONE YEAR THREE YEARS FIVE YEARS TEN YEARS DATE
----------------------------- -------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
STOCK FUNDS:
AIM Capital Appreciation Portfolio 41.58% 22.24% -- -- 10/10/95
Alliance Growth Portfolio 30.97% 28.85% 29.60% -- 06/16/94
Capital Appreciation Fund (Janus) 51.97% 44.82% 39.07% 23.30% 03/18/82
Deutsche VIT EAFE Equity Index Fund 26.33% -- -- -- 08/22/97
Deutsche VIT Small Cap Index Fund 19.00% -- -- -- 08/25/97
Dreyfus Stock Index Fund 19.46% 25.93% 26.82% 16.58% 09/29/89
Fidelity VIP Equity Income Portfolio 5.36% 13.92% 17.48% 13.41% 10/09/86
Fidelity VIP Growth Portfolio 36.09% 31.98% 28.46% 18.79% 10/09/86
Janus Aspen Ser. Aggressive Growth n/a n/a n/a n/a n/a
Janus Aspen Ser. Global Technology n/a n/a n/a n/a n/a
Janus Aspen Series Worldwide Growth n/a n/a n/a n/a n/a
Smith Barney Equity Index Portfolio 19.59% 26.22% 27.39% -- 10/16/91
Smith Barney Large Cap Growth 30.05% -- -- -- 05/06/98
Smith Barney Large Cap Value -0.83% 10.61% 16.16% -- 06/16/94
Smith Barney Total Return Portfolio 20.89% 13.33% 17.46% -- 10/16/91
Templeton Growth Securities Fund 27.85% 12.45% 16.41% 12.50% 08/31/88
Utilities Portfolio (SB) -0.97% 12.90% 14.42% -- 02/04/94
BOND FUNDS:
Fidelity VIP High Income Portfolio 7.16% 5.81% 9.83% 11.41% 09/19/85
Putnam Diversified Income Portfolio 0.20% 2.18% 5.87% -- 06/16/94
Smith Barney High Income Portfolio 1.67% 4.51% 8.37% -- 06/16/94
Templeton Global Income Securities -6.69% 0.22% 4.44% 5.04% 08/31/88
Travelers US Govt Securities -4.99% 5.00% 7.48% -- 01/24/92
Travelers Zero Coupon Bond 2000 2.39% 5.06% -- -- 10/11/95
Travelers Zero Coupon Bond 2005 -6.27% 4.88% -- -- 10/11/95
BALANCED FUNDS:
Fidelity VIP II Asset Mgr Portfolio 10.06% 14.45% 14.54% 12.08% 09/06/89
MFS Total Return Portfolio 1.71% 10.54% 13.77% -- 06/16/94
Templeton Asset Strategy Fund 21.69% 13.66% 15.97% 12.01% 08/31/88
Travelers Managed Assets Trust 13.16% 17.82% 18.32% 12.00% 08/06/82
MONEY MARKET FUND:
Travelers Money Market(1) 4.04% 4.08% 3.76% 3.69% 10/01/81
</TABLE>
The information presented in the above chart represents the percentage change in
the value of an accumulation unit of the underlying investment options for the
periods indicated, and reflects all expenses of the underlying funds, 0.80%
mortality and expense risk charge and 0.10% administrative expense charge
against amounts allocated to the underlying funds. The rates of return do not
reflect the 2.5% front-end sales charge or the 2.5% state premium tax charge
(both of which are deducted from premium payments) nor do they reflect surrender
charges or monthly deduction amounts. These charges would reduce the average
annual return reflected.
(1) An investment in Money Market Portfolio is neither insured nor guaranteed by
the United States Government. There is no assurance that a stable $1.00
value will be maintained.
37
<PAGE> 42
MARKETLIFE HYPOTHETICAL EXAMPLE *
Male nonsmoker age 45 with a level death benefit
of $150,000 and annual premium payments of $1,968.75
<TABLE>
<CAPTION>
ONE YEAR FIVE YEARS
------------------------------------ ------------------------------------
TOTAL ACCUMULATED SURRENDER TOTAL ACCUMULATED SURRENDER
UNDERLYING INVESTMENT OPTION INVESTMENT VALUE VALUE INVESTMENT VALUE VALUE
---------------------------- ---------- ----------- --------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
STOCK FUNDS
AIM Capital Appreciation Portfolio 1,969 1,926 733 N/A N/A N/A
Alliance Growth Portfolio 1,969 1,757 575 9,844 15,155 13,918
Capital Appreciation Fund (Janus) 1,969 2,092 896 9,844 19,751 18,514
Deutsche VIT EAFE Equity Index Fund 1,969 1,684 506 N/A N/A N/A
Deutsche VIT Small Cap Index Fund 1,969 1,568 397 N/A N/A N/A
Dreyfus Stock Index Fund 1,969 1,576 404 9,844 13,994 12,757
Fidelity VIP Equity Income Portfolio 1,969 1,354 196 9,844 10,633 9,396
Fidelity VIP Growth Portfolio 1,969 1,839 651 9,844 14,671 13,433
Janus Aspen Ser. Aggressive Growth N/A N/A N/A N/A N/A N/A
Janus Aspen Ser. Global Technology N/A N/A N/A N/A N/A N/A
Janus Aspen Series Worldwide Growth N/A N/A N/A N/A N/A N/A
Smith Barney Equity Index Portfolio 1,969 1,578 406 9,844 14,226 12,989
Smith Barney Large Cap Growth 1,969 1,743 561 N/A N/A N/A
Smith Barney Large Cap Value 1,969 1,258 105 9,844 10,221 8,984
Smith Barney Total Return Portfolio 1,969 1,598 425 9,844 10,628 9,391
Templeton Growth Securities Fund 1,969 1,708 529 9,844 10,298 9,061
Utilities Portfolio (SB) 1,969 1,255 103 9,844 9,697 8,469
BOND FUNDS:
Fidelity VIP High Income Portfolio 1,969 1,382 222 9,844 8,426 7,274
Putnam Diversified Income Portfolio 1,969 1,274 120 9,844 7,447 6,354
Smith Barney High Income Portfolio 1,969 1,297 142 9,844 8,053 6,923
Templeton Global Income Securities 1,969 1,166 19 9,844 7,119 6,045
Travelers US Govt Securities 1,969 1,193 44 9,844 7,833 6,717
Travelers Zero Coupon Bond 2000 1,969 1,308 152 N/A N/A N/A
Travelers Zero Coupon Bond 2005 1,969 1,173 26 N/A N/A N/A
BALANCED FUNDS:
Fidelity VIP II Asset Mgr Portfolio 1,969 1,428 265 9,844 9,731 8,501
MFS Total Return Portfolio 1,969 1,297 142 9,844 9,507 8,290
Templeton Asset Strategy Fund 1,969 1,611 437 9,844 10,162 8,925
Travelers Managed Assets Trust 1,969 1,476 311 9,844 10,907 9,669
MONEY MARKET FUND:
Travelers Money Market 1,969 1,344 177 9,844 6,968 5,903
</TABLE>
The charges used in the above example consist of a front-end sales charge of
2.5%, a state premium tax charge of 2.5%, the 0.80% mortality and expense risk
charge and 0.10% administrative expense charge, all expenses of the underlying
funds, and monthly deduction charges including cost of insurance.
The benefits illustrated above may differ from other policies as a results of
differences in investment allocation, premium timing and amount, death benefit
type, as well as age and underwriting classification of the insured ( which
could result in higher cost of insurance ). Because Marketlife is a variable
universal life insurance policy, actual performance should always be considered
in conjunction with the level of death benefit and cash values.
* These hypothetical examples show the effect of the performance quoted on cash
values. Performance, loans and withdrawals will affect the cash value and
death benefit of your policy. Since the values of the portfolios will
fluctuate, the cash value at any time may be more or less than the total
principal investment made, including at the time of surrender of the policy,
when surrender charges may apply.
38
<PAGE> 43
ILLUSTRATIONS
- --------------------------------------------------------------------------------
The following pages are intended to illustrate how the Account Value, Cash
Surrender Value and Death Benefit can change over time for Policies issued to a
45 year old male and a 45 year old female. The difference between the Account
Value and the Cash Surrender Value in these illustrations represents the
Surrender Charge that would be incurred upon a full surrender of the Policy.
The illustrations assume that premiums are paid as indicated, no Policy loans
are made, no increases or decreases to the Stated Amount are requested, no
partial surrenders are made, and no charges for transfers between funds are
incurred.
For both male and female age 45, there are two pages of values. One page
illustrates the assumption that the maximum Guaranteed Cost of Insurance Rates,
the monthly administrative charge, mortality and expense risk charge, and
administrative expense charge allowable under the Policy are charged in all
years. The other page illustrates the assumption that the current scale of Cost
of Insurance Rates and other charges are charged in all years. The Cost of
Insurance Rates charged vary by age, sex and underwriting classification, and
the monthly administrative charge varies by age, amount of insurance and
smoker/non-smoker classification for current charges. The illustrations reflect
a deduction of 5% from each annual premium for premium tax (2.5%) and front end
sales charge (2.5%).
The values shown in these illustrations vary according to assumptions used for
charges, and gross rates of investment returns. For the first fifteen Policy
Years, the current and guaranteed charges consist of 0.80% for mortality and
expense risks, 0.10% for administrative expenses, and .66% for Investment Option
expenses and thereafter 0.25% for mortality and expense risks, 0.00% for
administrative expenses, and .66% for Investment Option expenses.
The charge for Investment Option expenses reflected in the illustrations assumes
that Cash Value is allocated equally among all Investment Options and that no
Policy Loans are outstanding, and is an average of the investment advisory fees
and other expenses charged by each of the Investment Options during the most
recent audited calendar year.
The Investment Option expenses for some of the Investment Options reflect an
expense reimbursement agreement currently in effect, as shown in the Policy
prospectus summary. Although these reimbursement arrangements are expected to
continue in subsequent years, the effect of discontinuance could be higher
expenses charged to Policy Owners.
After deduction of these amounts, the illustrated gross annual investment rates
of return of 0%, 6%, and 12% correspond to approximate net annual rates of
- -1.56%, 4.44%, and 10.44%, respectively on a current and guaranteed basis during
the first fifteen Policy Years, and to approximate net annual rates of -.91%,
5.09%, and 11.09%, respectively on a current and guaranteed basis thereafter.
For illustrations shown for policies issued prior to May 1, 1998, see "Policies
Issued Prior to May 1, 1998" for the applicable charges and fees.
The illustrations do not reflect any charges for federal income taxes against
the Separate Account, since the Company is not currently deducting such charges
from the Separate Account. However, such charges may be made in the future, and
in that event, the gross annual investment rates of return would have to exceed
0%, 6% and 12% by an amount sufficient to cover the tax charges in order to
produce the Death Benefits, Account Values and Cash Surrender Values
illustrated.
Upon request, the Company will provide a comparable illustration based upon the
proposed Insured's age, sex, underwriting classification, the specified
insurance benefits, and the premium requested. The illustration will show
average fund expenses or, if requested, actual fund expenses. The hypothetical
gross annual investment return assumed in such an illustration will not exceed
12%.
39
<PAGE> 44
MARKETLIFE
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY
LEVEL DEATH BENEFIT OPTION
ILLUSTRATED WITH CURRENT CHARGES**
<TABLE>
<S> <C>
Female, Issue Age 45 Face Amount $150,000
Preferred, Non-Smoker Annual Premium $1,595.63
</TABLE>
<TABLE>
<CAPTION>
TOTAL
PREMIUMS DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
WITH 5% ------------------------------ ------------------------------ ------------------------------
YEAR INTEREST 0% 6% 12% 0% 6% 12% 0% 6% 12%
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,675 150,000 150,000 150,000 1,004 1,079 1,155 0 0 8
2 3,435 150,000 150,000 150,000 1,978 2,192 2,415 891 1,091 1,301
3 5,282 150,000 150,000 150,000 2,916 3,332 3,785 1,880 2,271 2,697
4 7,221 150,000 150,000 150,000 3,957 4,646 5,426 2,965 3,613 4,346
5 9,258 150,000 150,000 150,000 4,957 5,994 7,215 4,013 4,988 6,135
6 11,396 150,000 150,000 150,000 5,917 7,377 9,166 5,023 6,396 8,149
7 13,641 150,000 150,000 150,000 6,837 8,798 11,300 5,996 7,889 10,391
8 15,999 150,000 150,000 150,000 7,720 10,261 13,638 6,934 9,460 12,837
9 18,474 150,000 150,000 150,000 8,564 11,766 16,201 7,869 11,071 15,506
10 21,073 150,000 150,000 150,000 9,365 13,311 19,010 8,778 12,724 18,423
15 36,153 150,000 150,000 150,000 12,568 21,531 37,642 12,568 21,531 37,642
20 55,399 150,000 150,000 150,000 14,735 31,547 69,724 14,735 31,547 69,724
</TABLE>
These hypothetical rates of returns are illustrative only and should not be
considered a representation of past or future investment results. Actual
investment results may be more or less than those shown and will depend on a
number of factors. The Account Values and Cash Surrender Values will be
different from those shown if the actual rates of return averaged 0%, 6%, or 12%
over a period of years but fluctuated above or below the average for individual
contract years. No representation can be made that these rates of return can be
achieved for any one year or sustained over a period of time.
** Current cost of insurance charges, mortality and expense risk charge, monthly
administrative charge and administrative expense charge.
40
<PAGE> 45
MARKETLIFE
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY
LEVEL DEATH BENEFIT OPTION
ILLUSTRATED WITH GUARANTEED CHARGES**
<TABLE>
<S> <C>
Female, Issue Age 45 Face Amount $150,000
Preferred, Non-Smoker Annual Premium $1,595.63
</TABLE>
<TABLE>
<CAPTION>
TOTAL
PREMIUMS DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
WITH 5% ------------------------------ ------------------------------ ------------------------------
YEAR INTEREST 0% 6% 12% 0% 6% 12% 0% 6% 12%
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,675 150,000 150,000 150,000 521 581 641 0 0 0
2 3,435 150,000 150,000 150,000 1,000 1,152 1,313 0 114 265
3 5,282 150,000 150,000 150,000 1,435 1,711 2,016 488 748 1,034
4 7,221 150,000 150,000 150,000 2,251 2,698 3,209 1,362 1,781 2,262
5 9,258 150,000 150,000 150,000 3,013 3,685 4,483 2,185 2,817 3,568
6 11,396 150,000 150,000 150,000 3,716 4,670 5,845 2,955 3,851 4,956
7 13,641 150,000 150,000 150,000 4,359 5,650 7,302 3,667 4,880 6,433
8 15,999 150,000 150,000 150,000 4,935 6,617 8,856 4,316 5,897 8,055
9 18,474 150,000 150,000 150,000 5,440 7,566 10,516 4,898 6,896 9,821
10 21,073 150,000 150,000 150,000 5,873 8,495 12,292 5,413 7,909 11,705
15 36,153 150,000 150,000 150,000 6,992 12,841 23,502 6,992 12,841 23,502
20 55,399 150,000 150,000 150,000 5,897 16,420 41,351 5,897 16,420 41,351
</TABLE>
These hypothetical rates of returns are illustrative only and should not be
considered a representation of past or future investment results. Actual
investment results may be more or less than those shown and will depend on a
number of factors. The Account Values and Cash Surrender Values will be
different from those shown if the actual rates of return averaged 0%, 6%, or 12%
over a period of years but fluctuated above or below the average for individual
contract years. No representation can be made that these rates of return can be
achieved for any one year or sustained over a period of time.
** Guaranteed cost of insurance charges, mortality and expense risk charge,
monthly administrative charge and administrative expense charge.
41
<PAGE> 46
MARKETLIFE
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY
LEVEL DEATH BENEFIT OPTION
ILLUSTRATED WITH CURRENT CHARGES**
<TABLE>
<S> <C>
Male, Issue Age 45 Face Amount $150,000
Preferred, Non-Smoker Annual Premium $1,968.75
</TABLE>
<TABLE>
<CAPTION>
TOTAL
PREMIUMS DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
WITH 5% ------------------------------ ------------------------------ ------------------------------
YEAR INTEREST 0% 6% 12% 0% 6% 12% 0% 6% 12%
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,067 150,000 150,000 150,000 1,270 1,364 1,458 117 205 294
2 4,238 150,000 150,000 150,000 2,495 2,763 3,042 1,376 1,628 1,890
3 6,517 150,000 150,000 150,000 3,676 4,199 4,767 2,595 3,086 3,620
4 8,910 150,000 150,000 150,000 4,956 5,821 6,799 3,905 4,717 5,637
5 11,423 150,000 150,000 150,000 6,179 7,478 9,008 5,162 6,383 7,821
6 14,061 150,000 150,000 150,000 7,353 9,181 11,421 6,374 8,091 10,291
7 16,831 150,000 150,000 150,000 8,477 10,928 14,058 7,538 9,907 13,037
8 19,740 150,000 150,000 150,000 9,554 12,728 16,950 8,659 11,815 16,037
9 22,794 150,000 150,000 150,000 10,583 14,579 20,122 9,777 13,773 19,315
10 26,001 150,000 150,000 150,000 11,548 16,469 23,590 10,850 15,771 22,891
15 44,607 150,000 150,000 150,000 15,474 26,658 46,823 15,474 26,658 46,823
20 68,354 150,000 150,000 150,000 17,325 38,419 86,671 17,325 38,419 86,671
</TABLE>
These hypothetical rates of returns are illustrative only and should not be
considered a representation of past or future investment results. Actual
investment results may be more or less than those shown and will depend on a
number of factors. The Account Values and Cash Surrender Values will be
different from those shown if the actual rates of return averaged 0%, 6%, or 12%
over a period of years but fluctuated above or below the average for individual
contract years. No representation can be made that these rates of return can be
achieved for any one year or sustained over a period of time.
** Current cost of insurance charges, mortality and expense risk charge, monthly
administrative charge and administrative expense charge.
42
<PAGE> 47
MARKETLIFE
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY
LEVEL DEATH BENEFIT OPTION
ILLUSTRATED WITH GUARANTEED CHARGES**
<TABLE>
<S> <C>
Male, Issue Age 45 Face Amount $150,000
Preferred, Non-Smoker Annual Premium $1,968.75
</TABLE>
<TABLE>
<CAPTION>
TOTAL
PREMIUMS DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
WITH 5% ------------------------------ ------------------------------ ------------------------------
YEAR INTEREST 0% 6% 12% 0% 6% 12% 0% 6% 12%
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,067 150,000 150,000 150,000 716 791 868 0 0 0
2 4,238 150,000 150,000 150,000 1,367 1,564 1,771 316 501 695
3 6,517 150,000 150,000 150,000 1,951 2,312 2,709 973 1,312 1,685
4 8,910 150,000 150,000 150,000 2,894 3,475 4,140 1,966 2,512 3,137
5 11,423 150,000 150,000 150,000 3,758 4,624 5,655 2,886 3,700 4,669
6 14,061 150,000 150,000 150,000 4,535 5,752 7,257 3,724 4,868 6,283
7 16,831 150,000 150,000 150,000 5,215 6,846 8,946 4,471 6,005 7,978
8 19,740 150,000 150,000 150,000 5,788 7,894 10,720 5,119 7,098 9,807
9 22,794 150,000 150,000 150,000 6,243 8,882 12,579 5,653 8,133 11,773
10 26,001 150,000 150,000 150,000 6,570 9,796 14,524 6,067 9,101 13,825
15 44,607 150,000 150,000 150,000 5,970 12,812 25,724 5,970 12,812 25,724
20 68,354 150,000 150,000 150,000 227 11,593 41,095 227 11,593 41,095
</TABLE>
These hypothetical rates of returns are illustrative only and should not be
considered a representation of past or future investment results. Actual
investment results may be more or less than those shown and will depend on a
number of factors. The Account Values and Cash Surrender Values will be
different from those shown if the actual rates of return averaged 0%, 6%, or 12%
over a period of years but fluctuated above or below the average for individual
contract years. No representation can be made that these rates of return can be
achieved for any one year or sustained over a period of time.
** Guaranteed cost of insurance charges, mortality and expense risk charge,
monthly administrative charge and administrative expense charge.
43
<PAGE> 48
MARKETLIFE POLICIES ISSUED BETWEEN JULY 12, 1995 AND MAY 1, 1998
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY
LEVEL DEATH BENEFIT OPTION
ILLUSTRATED WITH CURRENT CHARGES**
<TABLE>
<S> <C>
Female, Issue Age 45 Face Amount $150,000
Preferred, Non-Smoker Annual Premium $1,595.63
</TABLE>
<TABLE>
<CAPTION>
TOTAL
PREMIUMS DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
WITH 5% ------------------------------ ------------------------------ ------------------------------
YEAR INTEREST 0% 6% 12% 0% 6% 12% 0% 6% 12%
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,675 150,000 150,000 150,000 1,004 1,079 1,155 0 0 8
2 3,435 150,000 150,000 150,000 1,978 2,192 2,415 891 1,091 1,301
3 5,282 150,000 150,000 150,000 2,916 3,332 3,785 1,880 2,271 2,697
4 7,221 150,000 150,000 150,000 3,957 4,646 5,426 2,965 3,613 4,346
5 9,258 150,000 150,000 150,000 4,957 5,994 7,215 4,013 4,988 6,135
6 11,396 150,000 150,000 150,000 5,917 7,377 9,166 5,023 6,396 8,149
7 13,641 150,000 150,000 150,000 6,837 8,798 11,300 5,996 7,889 10,391
8 15,999 150,000 150,000 150,000 7,720 10,261 13,638 6,934 9,460 12,837
9 18,474 150,000 150,000 150,000 8,564 11,766 16,201 7,869 11,071 15,506
10 21,073 150,000 150,000 150,000 9,365 13,311 19,010 8,778 12,724 18,423
15 36,153 150,000 150,000 150,000 12,568 21,531 37,642 12,568 21,531 37,642
20 55,399 150,000 150,000 150,000 14,590 31,252 69,104 14,590 31,252 69,104
</TABLE>
These hypothetical rates of returns are illustrative only and should not be
considered a representation of past or future investment results. Actual
investment results may be more or less than those shown and will depend on a
number of factors. The Account Values and Cash Surrender Values will be
different from those shown if the actual rates of return averaged 0%, 6%, or 12%
over a period of years but fluctuated above or below the average for individual
contract years. No representation can be made that these rates of return can be
achieved for any one year or sustained over a period of time.
** Current cost of insurance charges, mortality and expense risk charge, monthly
administrative charge and administrative expense charge.
44
<PAGE> 49
MARKETLIFE POLICIES ISSUED BETWEEN JULY 12, 1995 AND MAY 1, 1998
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY
LEVEL DEATH BENEFIT OPTION
ILLUSTRATED WITH GUARANTEED CHARGES**
<TABLE>
<S> <C>
Female, Issue Age 45 Face Amount $150,000
Preferred, Non-Smoker Annual Premium $1,595.63
</TABLE>
<TABLE>
<CAPTION>
TOTAL
PREMIUMS DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
WITH 5% ------------------------------ ------------------------------ ------------------------------
YEAR INTEREST 0% 6% 12% 0% 6% 12% 0% 6% 12%
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,675 150,000 150,000 150,000 521 581 641 0 0 0
2 3,435 150,000 150,000 150,000 1,000 1,152 1,313 0 114 265
3 5,282 150,000 150,000 150,000 1,435 1,711 2,016 488 748 1,034
4 7,221 150,000 150,000 150,000 2,251 2,698 3,209 1,362 1,781 2,262
5 9,258 150,000 150,000 150,000 3,013 3,685 4,483 2,185 2,817 3,568
6 11,396 150,000 150,000 150,000 3,716 4,670 5,845 2,955 3,851 4,956
7 13,641 150,000 150,000 150,000 4,359 5,650 7,302 3,667 4,880 6,433
8 15,999 150,000 150,000 150,000 4,935 6,617 8,856 4,316 5,897 8,055
9 18,474 150,000 150,000 150,000 5,440 7,566 10,516 4,898 6,896 9,821
10 21,073 150,000 150,000 150,000 5,873 8,495 12,292 5,413 7,909 11,705
15 36,153 150,000 150,000 150,000 6,992 12,841 23,502 6,992 12,841 23,502
20 55,399 150,000 150,000 150,000 5,821 16,248 40,964 5,821 16,248 40,964
</TABLE>
These hypothetical rates of returns are illustrative only and should not be
considered a representation of past or future investment results. Actual
investment results may be more or less than those shown and will depend on a
number of factors. The Account Values and Cash Surrender Values will be
different from those shown if the actual rates of return averaged 0%, 6%, or 12%
over a period of years but fluctuated above or below the average for individual
contract years. No representation can be made that these rates of return can be
achieved for any one year or sustained over a period of time.
** Guaranteed cost of insurance charges, mortality and expense risk charge,
monthly administrative charge and administrative expense charge.
45
<PAGE> 50
MARKETLIFE POLICIES ISSUED BETWEEN JULY 12, 1995 AND MAY 1, 1998
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY
LEVEL DEATH BENEFIT OPTION
ILLUSTRATED WITH CURRENT CHARGES**
<TABLE>
<S> <C>
Male, Issue Age 45 Face Amount $150,000
Preferred, Non-Smoker Annual Premium $1,968.75
</TABLE>
<TABLE>
<CAPTION>
TOTAL
PREMIUMS DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
WITH 5% ------------------------------ ------------------------------ ------------------------------
YEAR INTEREST 0% 6% 12% 0% 6% 12% 0% 6% 12%
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,067 150,000 150,000 150,000 1,270 1,364 1,458 117 205 294
2 4,238 150,000 150,000 150,000 2,495 2,763 3,042 1,376 1,628 1,890
3 6,517 150,000 150,000 150,000 3,676 4,199 4,767 2,595 3,086 3,620
4 8,910 150,000 150,000 150,000 4,956 5,821 6,799 3,905 4,717 5,637
5 11,423 150,000 150,000 150,000 6,179 7,478 9,008 5,162 6,383 7,821
6 14,061 150,000 150,000 150,000 7,353 9,181 11,421 6,374 8,091 10,291
7 16,831 150,000 150,000 150,000 8,477 10,928 14,058 7,538 9,907 13,037
8 19,740 150,000 150,000 150,000 9,554 12,728 16,950 8,659 11,815 16,037
9 22,794 150,000 150,000 150,000 10,583 14,579 20,122 9,777 13,773 19,315
10 26,001 150,000 150,000 150,000 11,548 16,469 23,590 10,850 15,771 22,891
15 44,607 150,000 150,000 150,000 15,474 26,658 46,823 15,474 26,658 46,823
20 68,354 150,000 150,000 150,000 17,147 38,053 85,892 17,147 38,053 85,892
</TABLE>
These hypothetical rates of returns are illustrative only and should not be
considered a representation of past or future investment results. Actual
investment results may be more or less than those shown and will depend on a
number of factors. The Account Values and Cash Surrender Values will be
different from those shown if the actual rates of return averaged 0%, 6%, or 12%
over a period of years but fluctuated above or below the average for individual
contract years. No representation can be made that these rates of return can be
achieved for any one year or sustained over a period of time.
** Current cost of insurance charges, mortality and expense risk charge, monthly
administrative charge and administrative expense charge.
46
<PAGE> 51
MARKETLIFE POLICIES ISSUED BETWEEN JULY 12, 1995 AND MAY 1, 1998
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY
LEVEL DEATH BENEFIT OPTION
ILLUSTRATED WITH GUARANTEED CHARGES**
<TABLE>
<S> <C>
Male, Issue Age 45 Face Amount $150,000
Preferred, Non-Smoker Annual Premium $1,968.75
</TABLE>
<TABLE>
<CAPTION>
TOTAL
PREMIUMS DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
WITH 5% ------------------------------ ------------------------------ ------------------------------
YEAR INTEREST 0% 6% 12% 0% 6% 12% 0% 6% 12%
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,067 150,000 150,000 150,000 716 791 868 0 0 0
2 4,238 150,000 150,000 150,000 1,367 1,564 1,771 316 501 695
3 6,517 150,000 150,000 150,000 1,951 2,312 2,709 973 1,312 1,685
4 8,910 150,000 150,000 150,000 2,894 3,475 4,140 1,966 2,512 3,137
5 11,423 150,000 150,000 150,000 3,758 4,624 5,655 2,886 3,700 4,669
6 14,061 150,000 150,000 150,000 4,535 5,752 7,257 3,724 4,868 6,283
7 16,831 150,000 150,000 150,000 5,215 6,846 8,946 4,471 6,005 7,978
8 19,740 150,000 150,000 150,000 5,788 7,894 10,720 5,119 7,098 9,807
9 22,794 150,000 150,000 150,000 6,243 8,882 12,579 5,653 8,133 11,773
10 26,001 150,000 150,000 150,000 6,570 9,796 14,524 6,067 9,101 13,825
15 44,607 150,000 150,000 150,000 5,970 12,812 25,724 5,970 12,812 25,724
20 68,354 150,000 150,000 150,000 180 11,438 40,681 180 11,438 40,681
</TABLE>
These hypothetical rates of returns are illustrative only and should not be
considered a representation of past or future investment results. Actual
investment results may be more or less than those shown and will depend on a
number of factors. The Account Values and Cash Surrender Values will be
different from those shown if the actual rates of return averaged 0%, 6%, or 12%
over a period of years but fluctuated above or below the average for individual
contract years. No representation can be made that these rates of return can be
achieved for any one year or sustained over a period of time.
** Guaranteed cost of insurance charges, mortality and expense risk charge,
monthly administrative charge and administrative expense charge.
47
<PAGE> 52
MARKETLIFE POLICIES ISSUED PRIOR TO JULY 12, 1995
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY
LEVEL DEATH BENEFIT OPTION
ILLUSTRATED WITH CURRENT CHARGES**
<TABLE>
<S> <C>
Female, Issue Age 45 Face Amount $150,000
Preferred, Non-Smoker Annual Premium $1,595.63
</TABLE>
<TABLE>
<CAPTION>
TOTAL
PREMIUMS DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
WITH 5% ------------------------------ ------------------------------ ------------------------------
YEAR INTEREST 0% 6% 12% 0% 6% 12% 0% 6% 12%
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,675 150,000 150,000 150,000 1,008 1,083 1,158 0 0 12
2 3,435 150,000 150,000 150,000 1,989 2,203 2,427 900 1,102 1,312
3 5,282 150,000 150,000 150,000 2,936 3,354 3,809 1,899 2,292 2,720
4 7,221 150,000 150,000 150,000 3,989 4,683 5,468 2,995 3,647 4,385
5 9,258 150,000 150,000 150,000 5,005 6,050 7,281 4,058 5,041 6,198
6 11,396 150,000 150,000 150,000 5,983 7,458 9,265 5,085 6,472 8,248
7 13,641 150,000 150,000 150,000 6,924 8,910 11,442 6,078 8,000 10,533
8 15,999 150,000 150,000 150,000 7,830 10,408 13,833 7,038 9,607 13,032
9 18,474 150,000 150,000 150,000 8,700 11,955 16,463 8,005 11,260 15,768
10 21,073 150,000 150,000 150,000 9,530 13,549 19,353 8,943 12,962 18,766
15 36,153 150,000 150,000 150,000 12,903 22,132 38,723 12,903 22,132 38,723
20 55,399 150,000 150,000 150,000 14,808 31,816 70,506 14,808 31,816 70,506
</TABLE>
These hypothetical rates of returns are illustrative only and should not be
considered a representation of past or future investment results. Actual
investment results may be more or less than those shown and will depend on a
number of factors. The Account Values and Cash Surrender Values will be
different from those shown if the actual rates of return averaged 0%, 6%, or 12%
over a period of years but fluctuated above or below the average for individual
contract years. No representation can be made that these rates of return can be
achieved for any one year or sustained over a period of time.
** Current cost of insurance charges, mortality and expense risk charge, monthly
administrative charge and administrative expense charge.
48
<PAGE> 53
MARKETLIFE POLICIES ISSUED PRIOR TO JULY 12, 1995
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY
LEVEL DEATH BENEFIT OPTION
ILLUSTRATED WITH GUARANTEED CHARGES**
<TABLE>
<S> <C>
Female, Issue Age 45 Face Amount $150,000
Preferred, Non-Smoker Annual Premium $1,595.63
</TABLE>
<TABLE>
<CAPTION>
TOTAL
PREMIUMS DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
WITH 5% ------------------------------ ------------------------------ ------------------------------
YEAR INTEREST 0% 6% 12% 0% 6% 12% 0% 6% 12%
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,675 150,000 150,000 150,000 521 581 641 0 0 0
2 3,435 150,000 150,000 150,000 1,000 1,152 1,313 0 114 265
3 5,282 150,000 150,000 150,000 1,435 1,711 2,016 488 748 1,034
4 7,221 150,000 150,000 150,000 2,251 2,698 3,209 1,362 1,781 2,262
5 9,258 150,000 150,000 150,000 3,013 3,685 4,483 2,185 2,817 3,568
6 11,396 150,000 150,000 150,000 3,716 4,670 5,845 2,955 3,851 4,956
7 13,641 150,000 150,000 150,000 4,359 5,650 7,302 3,667 4,880 6,433
8 15,999 150,000 150,000 150,000 4,935 6,617 8,856 4,316 5,897 8,055
9 18,474 150,000 150,000 150,000 5,440 7,566 10,516 4,898 6,896 9,821
10 21,073 150,000 150,000 150,000 5,873 8,495 12,292 5,413 7,909 11,705
15 36,153 150,000 150,000 150,000 6,992 12,841 23,502 6,992 12,841 23,502
20 55,399 150,000 150,000 150,000 5,654 15,867 40,104 5,654 15,867 40,104
</TABLE>
These hypothetical rates of returns are illustrative only and should not be
considered a representation of past or future investment results. Actual
investment results may be more or less than those shown and will depend on a
number of factors. The Account Values and Cash Surrender Values will be
different from those shown if the actual rates of return averaged 0%, 6%, or 12%
over a period of years but fluctuated above or below the average for individual
contract years. No representation can be made that these rates of return can be
achieved for any one year or sustained over a period of time.
** Guaranteed cost of insurance charges, mortality and expense risk charge,
monthly administrative charge and administrative expense charge.
49
<PAGE> 54
MARKETLIFE POLICIES ISSUED PRIOR TO JULY 12, 1995
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY
LEVEL DEATH BENEFIT OPTION
ILLUSTRATED WITH CURRENT CHARGES**
<TABLE>
<S> <C>
Male, Issue Age 45 Face Amount $150,000
Preferred, Non-Smoker Annual Premium $1,968.75
</TABLE>
<TABLE>
<CAPTION>
TOTAL
PREMIUMS DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
WITH 5% ------------------------------ ------------------------------ ------------------------------
YEAR INTEREST 0% 6% 12% 0% 6% 12% 0% 6% 12%
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,067 150,000 150,000 150,000 1,275 1,369 1,463 122 210 298
2 4,238 150,000 150,000 150,000 2,508 2,776 3,056 1,389 1,641 1,904
3 6,517 150,000 150,000 150,000 3,702 4,226 4,797 2,618 3,112 3,648
4 8,910 150,000 150,000 150,000 4,997 5,867 6,851 3,943 4,760 5,686
5 11,423 150,000 150,000 150,000 6,239 7,549 9,091 5,218 6,450 7,899
6 14,061 150,000 150,000 150,000 7,436 9,282 11,545 6,451 8,187 10,416
7 16,831 150,000 150,000 150,000 8,586 11,067 14,235 7,640 10,046 13,214
8 19,740 150,000 150,000 150,000 9,692 12,912 17,194 8,788 11,999 16,281
9 22,794 150,000 150,000 150,000 10,753 14,815 20,449 9,947 14,009 19,642
10 26,001 150,000 150,000 150,000 11,754 16,767 24,019 11,055 16,068 23,321
15 44,607 150,000 150,000 150,000 15,891 27,409 48,178 15,891 27,409 48,178
20 68,354 150,000 150,000 150,000 17,427 38,776 87,685 17,427 38,776 87,685
</TABLE>
These hypothetical rates of returns are illustrative only and should not be
considered a representation of past or future investment results. Actual
investment results may be more or less than those shown and will depend on a
number of factors. The Account Values and Cash Surrender Values will be
different from those shown if the actual rates of return averaged 0%, 6%, or 12%
over a period of years but fluctuated above or below the average for individual
contract years. No representation can be made that these rates of return can be
achieved for any one year or sustained over a period of time.
** Current cost of insurance charges, mortality and expense risk charge, monthly
administrative charge and administrative expense charge.
50
<PAGE> 55
MARKETLIFE POLICIES ISSUED PRIOR TO JULY 12, 1995
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY
LEVEL DEATH BENEFIT OPTION
ILLUSTRATED WITH GUARANTEED CHARGES**
<TABLE>
<S> <C>
Male, Issue Age 45 Face Amount $150,000
Preferred, Non-Smoker Annual Premium $1,968.75
</TABLE>
<TABLE>
<CAPTION>
TOTAL
PREMIUMS DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
WITH 5% ------------------------------ ------------------------------ ------------------------------
YEAR INTEREST 0% 6% 12% 0% 6% 12% 0% 6% 12%
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,067 150,000 150,000 150,000 716 791 868 0 0 0
2 4,238 150,000 150,000 150,000 1,367 1,564 1,771 316 501 695
3 6,517 150,000 150,000 150,000 1,951 2,312 2,709 973 1,312 1,685
4 8,910 150,000 150,000 150,000 2,894 3,475 4,140 1,966 2,512 3,137
5 11,423 150,000 150,000 150,000 3,758 4,624 5,655 2,886 3,700 4,669
6 14,061 150,000 150,000 150,000 4,535 5,752 7,257 3,724 4,868 6,283
7 16,831 150,000 150,000 150,000 5,215 6,846 8,946 4,471 6,005 7,978
8 19,740 150,000 150,000 150,000 5,788 7,894 10,720 5,119 7,098 9,807
9 22,794 150,000 150,000 150,000 6,243 8,882 12,579 5,653 8,133 11,773
10 26,001 150,000 150,000 150,000 6,570 9,796 14,524 6,067 9,101 13,825
15 44,607 150,000 150,000 150,000 5,970 12,812 25,724 5,970 12,812 25,724
20 68,354 150,000 150,000 150,000 76 11,094 39,759 76 11,094 39,759
</TABLE>
These hypothetical rates of returns are illustrative only and should not be
considered a representation of past or future investment results. Actual
investment results may be more or less than those shown and will depend on a
number of factors. The Account Values and Cash Surrender Values will be
different from those shown if the actual rates of return averaged 0%, 6%, or 12%
over a period of years but fluctuated above or below the average for individual
contract years. No representation can be made that these rates of return can be
achieved for any one year or sustained over a period of time.
** Guaranteed cost of insurance charges, mortality and expense risk charge,
monthly administrative charge and administrative expense charge.
51
<PAGE> 56
APPENDIX A
ANNUAL MINIMUM PREMIUMS
(Per Thousand of Stated Amount)
<TABLE>
<CAPTION>
AGE MALE FEMALE
- --- ---- ------
<S> <C> <C>
0 2.80 2.42
1 2.69 2.47
2 2.59 2.48
3 2.58 2.47
4 2.58 2.47
5 2.58 2.47
6 2.58 2.47
7 2.60 2.49
8 2.62 2.52
9 2.66 2.56
10 2.72 2.62
11 2.80 2.68
12 2.89 2.76
13 3.01 2.84
14 3.13 2.94
15 3.25 3.04
16 3.38 3.16
17 3.51 3.28
18 3.62 3.40
19 3.72 3.47
20 3.81 3.53
21 3.90 3.60
22 3.98 3.67
23 4.05 3.73
24 4.08 3.71
25 4.13 3.76
26 4.30 3.93
27 4.45 4.09
28 4.61 4.26
29 4.76 4.41
30 4.92 4.60
31 5.12 4.80
32 5.32 5.02
33 5.52 5.22
34 5.74 5.46
35 5.98 5.71
36 6.33 6.01
37 6.66 6.31
38 7.01 6.64
39 7.34 6.97
40 7.69 7.34
41 8.17 7.75
42 8.66 8.18
43 9.14 8.62
44 9.63 9.11
45 10.11 9.59
46 10.79 10.13
47 11.47 10.70
</TABLE>
<TABLE>
<CAPTION>
AGE MALE FEMALE
- --- ---- ------
<S> <C> <C>
48 12.15 11.29
49 12.83 11.89
50 13.51 12.51
51 14.42 13.18
52 15.34 13.86
53 16.24 14.53
54 17.16 15.29
55 18.07 16.10
56 19.43 17.11
57 20.79 18.20
58 22.16 19.35
59 23.52 20.51
60 24.88 21.68
61 27.11 22.98
62 29.34 24.27
63 31.57 25.59
64 33.80 27.01
65 36.03 28.57
66 38.86 30.12
67 41.70 31.63
68 44.52 33.29
69 47.36 35.39
70 49.76 37.75
71 54.39 40.67
72 59.04 44.16
73 63.71 48.15
74 68.41 52.54
75 72.60 57.27
76 80.21 62.20
77 87.34 67.37
78 94.52 73.00
79 101.76 79.30
80 109.06 86.49
81 120.34 94.56
82 131.76 103.39
83 143.32 112.96
84 155.03 123.28
85 166.88 138.49
86 170.39 149.27
87 177.17 159.84
88 191.28 171.55
89 208.18 185.73
90 241.15 203.75
91 254.21 225.63
92 282.60 250.53
93 314.35 278.47
94 349.51 309.50
</TABLE>
APPENDIX A -- ANNUAL MINIMUM PREMIUMS
52
<PAGE> 57
APPENDIX B
PER THOUSAND OF STATED AMOUNT SURRENDER CHARGE
(First Year)
<TABLE>
<CAPTION>
STATED AMOUNT
---------------------------------------
ISSUE $50,000 $500,000 $1,000,000
AGE TO $499,999 TO $999,999 AND ABOVE
- ----- ----------- ----------- ----------
<S> <C> <C> <C>
0 2.04 1.84 1.63
1 2.04 1.84 1.63
2 2.04 1.84 1.63
3 2.04 1.84 1.63
4 2.04 1.84 1.63
5 2.19 1.97 1.75
6 2.19 1.97 1.75
7 2.21 1.99 1.77
8 2.23 2.01 1.78
9 2.26 2.03 1.81
10 2.39 2.15 1.91
11 2.46 2.21 1.97
12 2.54 2.29 2.03
13 2.65 2.39 2.12
14 2.75 2.48 2.20
15 2.76 2.48 2.21
16 2.77 2.49 2.22
17 2.79 2.51 2.23
18 2.82 2.54 2.26
19 2.90 2.61 2.32
20 2.86 2.57 2.29
21 2.93 2.64 2.34
22 2.99 2.69 2.39
23 3.04 2.74 2.43
24 3.06 2.75 2.45
25 3.08 2.77 2.46
26 3.14 2.83 2.51
27 3.25 2.93 2.60
28 3.37 3.03 2.70
29 3.47 3.12 2.78
30 3.49 3.14 2.79
31 3.64 3.28 2.91
32 3.78 3.40 3.02
</TABLE>
<TABLE>
<CAPTION>
STATED AMOUNT
---------------------------------------
ISSUE $50,000 $500,000 $1,000,000
AGE TO $499,999 TO $999,999 AND ABOVE
- ----- ----------- ----------- ----------
<S> <C> <C> <C>
33 3.92 3.53 3.14
34 4.08 3.67 3.26
35 4.19 3.77 3.35
36 4.43 3.99 3.54
37 4.66 4.19 3.73
38 4.91 4.42 3.93
39 5.14 4.63 4.11
40 5.69 5.12 4.55
41 6.05 5.45 4.84
42 6.41 5.77 5.13
43 6.76 6.08 5.41
44 7.13 6.42 5.70
45 7.18 6.46 5.74
46 7.66 6.89 6.13
47 8.14 7.33 6.51
48 8.63 7.77 6.90
49 9.11 8.20 7.29
50 10.00 9.00 8.00
51 10.67 9.60 8.54
52 11.35 10.22 9.06
53 12.02 10.82 9.62
54 12.70 11.43 10.16
55 13.01 11.71 10.41
56 13.99 12.69 11.19
57 14.97 13.47 11.98
58 15.96 14.36 12.77
59 16.93 15.24 13.54
60 17.91 16.12 14.33
61 19.52 17.57 15.82
62 21.12 19.01 16.90
63 22.73 20.46 18.18
64 24.34 21.91 19.47
65+ 25.40 22.85 20.32
</TABLE>
APPENDIX B -- PER THOUSAND OF STATED AMOUNT SURRENDER CHARGE
53
<PAGE> 58
APPENDIX C
CURRENT MONTHLY ADMINISTRATIVE CHARGE
(Per Thousand of Stated Amount)
Applicable for Three Years Following Issue or Increase
NON-SMOKERS
<TABLE>
<CAPTION>
STATED AMOUNT
--------------------------------------
ISSUE $50,000 $250,000 $1,000,000
AGE TO $249,999 TO $999,999 AND ABOVE
- ----- ----------- ----------- ----------
<S> <C> <C> <C>
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20 0.08 0.00 0.00
21 0.08 0.00 0.00
22 0.08 0.00 0.00
23 0.08 0.00 0.00
24 0.08 0.00 0.00
25 0.08 0.00 0.00
26 0.08 0.00 0.00
27 0.08 0.00 0.00
28 0.08 0.00 0.00
29 0.08 0.00 0.00
30 0.08 0.00 0.00
31 0.08 0.00 0.00
32 0.08 0.00 0.00
</TABLE>
<TABLE>
<CAPTION>
STATED AMOUNT
--------------------------------------
ISSUE $50,000 $250,000 $1,000,000
AGE TO $249,999 TO $999,999 AND ABOVE
- ----- ----------- ----------- ----------
<S> <C> <C> <C>
33 0.08 0.00 0.00
34 0.08 0.00 0.00
35 0.08 0.00 0.00
36 0.08 0.00 0.00
37 0.08 0.00 0.00
38 0.08 0.00 0.00
39 0.08 0.00 0.00
40 0.08 0.00 0.00
41 0.08 0.00 0.00
42 0.08 0.00 0.00
43 0.08 0.00 0.00
44 0.08 0.00 0.00
45 0.08 0.00 0.00
46 0.08 0.00 0.00
47 0.09 0.00 0.00
48 0.09 0.00 0.00
49 0.10 0.00 0.00
50 0.10 0.00 0.00
51 0.11 0.00 0.00
52 0.11 0.00 0.00
53 0.12 0.00 0.00
54 0.12 0.00 0.00
55 0.12 0.00 0.00
56 0.13 0.00 0.00
57 0.13 0.00 0.00
58 0.14 0.00 0.00
59 0.14 0.00 0.00
60 0.15 0.00 0.00
61 0.15 0.00 0.00
62 0.15 0.00 0.00
63 0.15 0.00 0.00
64 0.15 0.00 0.00
65+ 0.15 0.00 0.00
</TABLE>
APPENDIX C -- CURRENT MONTHLY ADMINISTRATIVE CHARGE
54
<PAGE> 59
APPENDIX C (CONT'D)
CURRENT MONTHLY ADMINISTRATIVE CHARGE
(Per Thousand of Stated Amount)
Applicable for Three Years Following Issue or Increase
SMOKERS
<TABLE>
<CAPTION>
STATED AMOUNT
--------------------------------------
ISSUE $50,000 $500,000 $1,000,000
AGE TO $499,999 TO $999,999 AND ABOVE
- ----- ----------- ----------- ----------
<S> <C> <C> <C>
0 0.12 0.08 0.00
1 0.12 0.08 0.00
2 0.12 0.08 0.00
3 0.12 0.08 0.00
4 0.12 0.08 0.00
5 0.12 0.08 0.00
6 0.13 0.08 0.00
7 0.14 0.08 0.00
8 0.15 0.08 0.00
9 0.16 0.08 0.00
10 0.16 0.08 0.00
11 0.16 0.08 0.00
12 0.16 0.08 0.00
13 0.16 0.08 0.00
14 0.16 0.08 0.00
15 0.16 0.08 0.00
16 0.16 0.08 0.00
17 0.16 0.08 0.00
18 0.16 0.08 0.00
19 0.16 0.08 0.00
20 0.16 0.08 0.00
21 0.16 0.08 0.00
22 0.16 0.08 0.00
23 0.16 0.08 0.00
24 0.16 0.08 0.00
25 0.16 0.08 0.00
26 0.16 0.09 0.00
27 0.17 0.09 0.00
28 0.17 0.09 0.00
29 0.18 0.09 0.00
30 0.18 0.09 0.00
31 0.18 0.09 0.00
32 0.18 0.09 0.00
</TABLE>
<TABLE>
<CAPTION>
STATED AMOUNT
--------------------------------------
ISSUE $50,000 $500,000 $1,000,000
AGE TO $499,999 TO $999,999 AND ABOVE
- ----- ----------- ----------- ----------
<S> <C> <C> <C>
33 0.19 0.09 0.00
34 0.19 0.09 0.00
35 0.19 0.09 0.00
36 0.20 0.09 0.00
37 0.21 0.10 0.00
38 0.22 0.10 0.00
39 0.23 0.10 0.00
40 0.23 0.10 0.00
41 0.24 0.10 0.00
42 0.24 0.10 0.00
43 0.24 0.10 0.00
44 0.24 0.10 0.00
45 0.24 0.10 0.00
46 0.25 0.11 0.00
47 0.26 0.11 0.00
48 0.27 0.11 0.00
49 0.28 0.11 0.00
50 0.29 0.15 0.00
51 0.30 0.15 0.00
52 0.32 0.15 0.00
53 0.33 0.15 0.00
54 0.34 0.15 0.00
55 0.35 0.15 0.00
56 0.35 0.15 0.00
57 0.35 0.15 0.00
58 0.36 0.15 0.00
59 0.36 0.15 0.00
60 0.36 0.15 0.00
61 0.38 0.15 0.00
62 0.38 0.15 0.00
63 0.38 0.15 0.00
64 0.39 0.15 0.00
65+ 0.39 0.15 0.00
</TABLE>
55
<PAGE> 60
APPENDIX C(1)
GUARANTEED MONTHLY ADMINISTRATIVE CHARGE
(Per Thousand of Stated Amount)
Applicable for Three Years Following Issue or Increase
SMOKERS AND NON-SMOKERS
<TABLE>
<CAPTION>
STATED AMOUNT
--------------------------------------
ISSUE $50,000 $500,000 $1,000,000
AGE TO $499,999 TO $999,999 AND ABOVE
- ----- ----------- ----------- ----------
<S> <C> <C> <C>
0 0.16 0.08 0.00
1 0.16 0.08 0.00
2 0.16 0.08 0.00
3 0.16 0.08 0.00
4 0.16 0.08 0.00
5 0.16 0.08 0.00
6 0.16 0.08 0.00
7 0.16 0.08 0.00
8 0.16 0.08 0.00
9 0.16 0.08 0.00
10 0.16 0.08 0.00
11 0.16 0.08 0.00
12 0.16 0.08 0.00
13 0.16 0.08 0.00
14 0.16 0.08 0.00
15 0.16 0.08 0.00
16 0.16 0.08 0.00
17 0.16 0.08 0.00
18 0.16 0.08 0.00
19 0.16 0.08 0.00
20 0.16 0.08 0.00
21 0.16 0.08 0.00
22 0.16 0.08 0.00
23 0.16 0.08 0.00
24 0.16 0.08 0.00
25 0.16 0.08 0.00
26 0.16 0.09 0.00
27 0.17 0.09 0.00
28 0.17 0.09 0.00
29 0.18 0.09 0.00
30 0.18 0.09 0.00
31 0.18 0.09 0.00
32 0.18 0.09 0.00
</TABLE>
<TABLE>
<CAPTION>
STATED AMOUNT
--------------------------------------
ISSUE $50,000 $500,000 $1,000,000
AGE TO $499,999 TO $999,999 AND ABOVE
- ----- ----------- ----------- ----------
<S> <C> <C> <C>
33 0.19 0.09 0.00
34 0.19 0.09 0.00
35 0.19 0.09 0.00
36 0.20 0.09 0.00
37 0.21 0.10 0.00
38 0.22 0.10 0.00
39 0.23 0.10 0.00
40 0.23 0.10 0.00
41 0.24 0.10 0.00
42 0.24 0.10 0.00
43 0.24 0.10 0.00
44 0.24 0.10 0.00
45 0.24 0.10 0.00
46 0.25 0.11 0.00
47 0.26 0.11 0.00
48 0.27 0.11 0.00
49 0.28 0.11 0.00
50 0.29 0.15 0.00
51 0.30 0.15 0.00
52 0.32 0.15 0.00
53 0.33 0.15 0.00
54 0.34 0.15 0.00
55 0.35 0.15 0.00
56 0.35 0.15 0.00
57 0.35 0.15 0.00
58 0.36 0.15 0.00
59 0.36 0.15 0.00
60 0.36 0.15 0.00
61 0.38 0.15 0.00
62 0.38 0.15 0.00
63 0.38 0.15 0.00
64 0.39 0.15 0.00
65+ 0.39 0.15 0.00
</TABLE>
APPENDIX C(1) -- GUARANTEED MONTHLY ADMINISTRATIVE CHARGE
56
<PAGE> 61
THIS PAGE INTENTIONALLY LEFT BLANK.
<PAGE> 62
MARKETLIFE
INDIVIDUAL VARIABLE UNIVERSAL LIFE INSURANCE CONTRACTS
ISSUED BY
THE TRAVELERS INSURANCE COMPANY
HARTFORD, CONNECTICUT
L-11843 May, 2000
<PAGE> 63
IN-VEST
INDIVIDUAL VARIABLE UNIVERSAL LIFE INSURANCE POLICIES
<TABLE>
<S> <C>
PROSPECTUSES
MAY 1, 2000
</TABLE>
The Travelers Insurance Company, One Tower Square, Hartford, Connecticut 06183 X
Telephone: (800) 334-4298
<PAGE> 64
PROSPECTUS
This Prospectus describes The Travelers IN-VEST, an individual variable
universal (flexible premium) life insurance Policy (the "Policy") offered by The
Travelers Insurance Company (the "Company"). A Policy Owner may choose the
amount of life insurance coverage desired with a minimum Stated Amount of
$75,000. The premium payment may be allocated by the Policy Owner to one or more
of the variable funding options (the "Investment Options").
During the Policy's Right to Cancel Period, the Applicant may return the Policy
to the Company for a refund. The Right to Cancel Period expires on the latest of
ten days after you receive the Policy, ten days after we mail or deliver to you
a written Notice of Right to Cancel, or 45 days after the Applicant signs the
application for insurance (or later if state laws requires).
There is no guaranteed minimum Cash Value for a Policy. The Cash Value of the
Policy will vary to reflect the investment performance of the Investment Options
to which you have directed your premium payments. You bear the investment risk
under this policy. The Cash Value is reduced by the various fees and charges
assessed under the Policy, as described in this Prospectus. The Policy will
remain in effect for as long as the Cash Surrender Value can pay the monthly
Policy charges and loan interest due but not paid in cash (subject to the Late
Period provision).
We offer two death benefits under the Policy -- the "Level Option" and the
"Variable Option." Under either option, the death benefit will never be less
than the Amount Insured (less any outstanding Policy loans or Monthly Deduction
Amounts due and unpaid). You choose one at the time you apply for the Policy,
however you may change the death benefit option, subject to certain conditions.
This Policy may be or become a modified endowment Policy under federal tax law.
If so, any partial withdrawal, Policy surrender or loan may result in adverse
tax consequences or penalties.
REPLACING EXISTING INSURANCE WITH THIS POLICY MAY NOT BE TO YOUR ADVANTAGE.
EACH OF THE INVESTMENT OPTION PROSPECTUSES ARE INCLUDED WITH THE PACKAGE
CONTAINING THIS PROSPECTUS. ALL PROSPECTUSES SHOULD BE READ AND RETAINED FOR
FUTURE REFERENCE.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS COMPLETE OR TRUTHFUL. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
VARIABLE LIFE INSURANCE POLICIES ARE NOT DEPOSITS OF ANY BANK AND ARE NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, OR ANY OTHER
GOVERNMENT AGENCY.
THE DATE OF THIS PROSPECTUS IS MAY 1, 2000.
<PAGE> 65
TABLE OF CONTENTS
<TABLE>
<S> <C>
Glossary of Special Terms.............. 3
Prospectus Summary..................... 5
General Description.................... 10
How the Policy Works................... 10
Beneficiary.......................... 10
Applying Premium Payments............ 10
The Investment Options................. 11
Policy Benefits and Rights............. 14
Transfers of Cash Value.............. 14
Telephone Transfers.................. 14
Automated Transfers.................. 14
Dollar-Cost Averaging............. 14
Portfolio Rebalancing............. 15
Lapse and Reinstatement.............. 15
Exchange Rights...................... 15
Right to Cancel...................... 15
Access to Cash Values.................. 16
Policy Loans......................... 16
Cash Value and Cash Surrender
Value............................. 16
Death Benefit.......................... 17
Payment of Proceeds............... 18
Payment Options................... 19
Maturity Benefits...................... 19
Charges and Deductions................. 19
Charges Against Premium.............. 19
Front-End Sales Charge............ 19
State Premium Tax Charge.......... 20
Monthly Deduction Amount............. 20
Cost of Insurance Charge.......... 20
Policy Administrative Expense
Charge.......................... 20
Charges for Supplemental Benefit
Provisions...................... 20
Charges Against the Separate
Account........................... 20
Mortality and Expense Risk
Charge.......................... 20
Administrative Expense Charge..... 20
Underlying Fund Fees................. 21
Surrender Charges.................... 21
Percent of Premium Charge......... 21
Per Thousand of Stated Amount
Charge.......................... 21
Transfer Charge...................... 22
Reduction or Elimination of
Charges........................... 22
The Separate Account and Valuation..... 22
The Travelers Fund UL for Variable
Life Insurance (Fund UL )......... 22
How the Cash Value Varies............ 23
Accumulation Unit Value.............. 23
Net Investment Factor................ 23
Changes to the Policy.................. 24
General.............................. 24
Changes in Stated Amount............. 24
Changes in Death Benefit Option...... 24
Additional Policy Provisions........... 25
Assignment........................... 25
Limit on Right to Contest and Suicide
Exclusion......................... 25
Misstatement as to Sex and Age....... 25
Voting Rights........................ 25
Disregard of Voting Instructions..... 25
Other Matters.......................... 26
Statements to Policy Owners.......... 26
Suspension of Valuation.............. 26
Dividends............................ 26
Mixed and Shared Funding............. 26
Distribution......................... 26
Legal Proceedings and Opinion........ 27
Experts.............................. 27
Federal Tax Considerations............. 27
General.............................. 27
Tax Status of the Policy............. 28
Definition of Life Insurance...... 28
Diversification................... 28
Investor Control.................. 28
Tax Treatment of Policy Benefits..... 29
In General........................ 29
Modified Endowment Contracts...... 29
Exchanges......................... 30
Aggregation of Modified Endowment
Contracts....................... 30
Policies which are not Modified
Endowment Contracts............. 30
Treatment of Loan Interest........ 31
The Company's Income Taxes........ 31
The Company............................ 31
IMSA................................. 31
Management............................. 32
Directors of The Travelers Insurance
Company........................... 32
Senior Officers of The Travelers
Insurance Company................. 32
Example of Policy Charges.............. 33
Performance Information................ 33
Illustrations.......................... 35
Appendix
A -- Annual Minimum Premiums........... 40
B -- Surrender Charges................. 41
C -- Monthly Administrative Charge..... 42
Financial Statements -- Fund UL
Financial Statements -- The Travelers
Insurance Company
</TABLE>
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<PAGE> 66
GLOSSARY OF SPECIAL TERMS
- --------------------------------------------------------------------------------
The following terms are used throughout the Prospectus, and have the indicated
meanings:
ACCUMULATION UNIT -- a standard of measurement used to calculate the values
allocated to the Investment Options.
ANNUAL MINIMUM PREMIUM -- the Policy Owner must pay a first premium greater than
or equal to one-quarter of this amount for the Policy to be issued. (Please
refer to Appendix A.)
BENEFICIARY(IES) -- the person(s) named to receive the benefits of this Policy
at the Insured's death.
CASH SURRENDER VALUE -- the Cash Value less any outstanding Policy loan and
surrender charges.
CASH VALUE -- the current value of Accumulation Units credited to each of the
Investment Options available under the Policy, plus the value of the Loan
Account.
COMPANY'S HOME OFFICE -- the principal executive offices of The Travelers
Insurance Company located at One Tower Square, Hartford, Connecticut 06183.
DEDUCTION DATE -- the day in each Policy Month on which the Monthly Deduction
Amount is deducted from the Policy's Cash Value.
INSURED -- the person on whose life the Policy is issued.
INVESTMENT OPTIONS -- the segments of the Separate Account or Portfolio to which
you may allocate premiums or Cash Value under Fund UL.
ISSUE DATE -- the date on which a Policy is issued by the Company for delivery
to a Policy Owner who is not replacing existing life insurance issued by the
Company.
LOAN ACCOUNT -- an account in the Company's general account to which we transfer
the amount of any Policy loan, and to which we credit and charge a fixed rate of
interest.
MATURITY DATE -- The anniversary of the Policy Date on which the Insured is age
95.
MINIMUM AMOUNT INSURED -- the amount of Death Benefit required to qualify this
Policy as life insurance under federal tax law.
MONTHLY DEDUCTION AMOUNT -- the amount of charges deducted from the Policy's
Cash Value which includes cost of insurance charges, administrative charges, and
any charges for supplemental benefits.
NET AMOUNT AT RISK -- an amount equal to the Death Benefit minus the Cash Value.
NET PREMIUM -- the amount of each premium payment applied to purchase
Accumulation Units under the Policy, less the deduction of front-end sales
charges and premium tax charges.
PLANNED PREMIUM -- the amount of premium which the Policy Owner chooses to pay
to the Company on a scheduled basis, and for which the Company will bill the
Policy Owner, either annually, semiannually or through automatic monthly
checking account deductions.
POLICY DATE -- the date on which the Policy, benefits and provisions of the
Policy become effective.
POLICY MONTH -- monthly periods computed from the Policy Date.
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<PAGE> 67
POLICY OWNER (YOU, YOUR OR OWNER) -- the person having rights to benefits under
the Policy during the lifetime of the Insured; the Policy Owner may or may not
be the Insured.
POLICY YEARS -- annual periods computed from the Policy Date.
SEPARATE ACCOUNT -- assets set aside by The Travelers Insurance Company, the
investment experience of which is kept separate from that of other assets of The
Travelers Insurance Company; for example, The Travelers Fund UL for Variable
Life Insurance.
STATED AMOUNT -- the amount originally selected by the Policy Owner used to
determine the Death Benefit, or as may be increased or decreased as described in
this Prospectus.
UNDERLYING FUND -- the underlying mutual fund(s) that correspond to each
Investment Option. Each Investment Option invests directly in an Underlying
Fund.
VALUATION DATE -- a day on which the Separate Account is valued. A Valuation
Date is any day on which the New York Stock Exchange is open for trading. The
value of Accumulation Units will be determined as of 4:00 p.m.
VALUATION PERIOD -- the period between the close of business on successive
Valuation Dates.
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<PAGE> 68
PROSPECTUS SUMMARY
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WHAT IS VARIABLE UNIVERSAL LIFE INSURANCE?
The Flexible Premium Variable Universal Life Insurance Policy is designed to
provide insurance protection on the life of the Insured and to build Cash Value.
Like other life insurance, it provides an income-tax free death benefit that is
payable to the Beneficiary upon the Insured's death. Unlike traditional,
fixed-premium life insurance, the Policy allows you, as the owner, to allocate
your premium, or transfer Cash Value to various Investment Options. These
Investment Options include equity, bond, money market and other types of
portfolios. Your Cash Value may increase or decrease daily, depending on
investment return. There is no minimum amount guaranteed as it would be in a
traditional life insurance policy.
INVESTMENT OPTIONS: You have the ability to choose from a wide variety of
well-known Investment Options. These professionally managed stock, bond and
money market funding options cover a broad spectrum of investment objectives and
risk tolerance. Currently, the following Investment Options (subject to state
availability) are available under Fund UL:
<TABLE>
<S> <C>
Capital Appreciation Fund FRANKLIN TEMPLETON VARIABLE PRODUCTS
Dreyfus Stock Index Fund INSURANCE TRUST(1)
Managed Assets Trust Templeton Asset Strategy Fund (Class 1)(2)
Money Market Portfolio Templeton Global Income Securities Fund(3)
(Class 1)
VARIABLE INSURANCE PRODUCTS FUND (FIDELITY) Templeton Growth Securities Fund(4)
Equity Income Portfolio (Class 1)
Growth Portfolio
High Income Portfolio TRAVELERS SERIES FUND, INC.
AIM Capital Appreciation Portfolio
VARIABLE INSURANCE PRODUCTS FUND II Alliance Growth Portfolio
(FIDELITY) MFS Total Return Portfolio
VIP II Asset Manager Portfolio Smith Barney High Income Portfolio
Smith Barney Large Cap Value Portfolio
GREENWICH STREET SERIES FUND
Total Return Portfolio TRAVELERS SERIES TRUST
U.S. Government Securities Portfolio
Utilities Portfolio
Zero Coupon Bond Portfolio 2000
Zero Coupon Bond Portfolio 2005
</TABLE>
(1) formerly Templeton Variable Products Securities Fund
(2) formerly offered as Templeton Securities Fund (Class 1)
(3) formerly offered as Templeton Global Bond Fund (Class 1)
(4) formerly offered as Templeton Global Stock Fund (Class 1)
Additional Portfolios may be added from time to time. For more information see
"The Investment Options." Refer to each Fund's prospectus for a complete
description of the investment objectives, restrictions and other material
information.
PREMIUMS: When applying for your Policy, you state how much you intend to pay,
and whether you will pay annually, semiannually or monthly via checking account
deductions. You may also make unscheduled premium payments in any amount. No
premium payments will be accepted if receipt of such premiums would disqualify
the Policy as life insurance under applicable federal tax laws.
You indicate on your application what percentage of each Net Premium you would
like allocated to the Investment Options. You may change your allocations by
writing to the Company or by calling 1-800-334-4298 (if you have an
authorization form on file).
During the underwriting period, any premium paid will be held in a non-interest
bearing account. After the Policy Date and until the applicants' right to cancel
has expired, your Net Premium will
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<PAGE> 69
be invested in the Money Market Portfolio. After that, the cash value will be
distributed to each Investment Option in the percentages indicated on your
application.
RIGHT TO EXAMINE POLICY: You may return your Policy for any reason and receive
a full refund of your premium by mailing us the Policy and a written request for
cancellation within a specified period.
DEATH BENEFITS: At time of application, you select a death benefit option.
Under certain conditions you may be able to change the death benefit option at a
later date. The options available are:
- LEVEL OPTION (OPTION 1): the death benefit will be equal to the greater
of the Stated Amount or the Minimum Amount Insured.
- VARIABLE OPTION (OPTION 2): the death benefit will be equal to the
greater of the Stated Amount plus the Cash Value or the Minimum Amount
Insured.
POLICY VALUES: As with other types of insurance policies, the Policy will
accumulate a Cash Value. The Cash Value of the Policy will increase or decrease
to reflect the investment experience of the Investment Options. Monthly charges
and any partial surrenders taken will also decrease the Cash Value. There is no
minimum guaranteed Cash Value.
- ACCESS TO POLICY VALUES: You may borrow against your Policy's Cash
Surrender Value. The maximum loan amount allowable is 90% of the Cash
Surrender Value.
You may cancel all or a portion of your Policy while the Insured is living and
receive all or a portion of the Cash Surrender Value. Depending on the amount of
time the Policy has been in force, there may be a charge for the partial or full
surrender.
TRANSFERS OF POLICY VALUES: You may transfer all or a portion of your Cash
Value among the Investment Options. You may do this by writing to the Company,
or if you have the proper authorization form on file, by calling 1-800-334-4298.
You can use automated transfers to take advantage of dollar cost
averaging -- investing a fixed amount at regular intervals. For example, you
might have a set amount transferred from a relatively conservative Investment
Option to a more aggressive one, or to several others.
LATE PERIOD: If the Cash Surrender Value of your Policy becomes less than the
amount needed to pay the Monthly Deduction Amount, and the Lapse Protection
Guarantee Rider is not in effect, you will have 61 days to pay a premium that is
sufficient to cover the Monthly Deduction Amount. If the premium is not paid,
your Policy will lapse.
EXCHANGE RIGHTS: During the first two Policy Years, you can exchange this
Policy for one that provides benefits that do not vary with the investment
return of the Investment Options.
TAX CONSEQUENCES: Currently, the federal tax law excludes all Death Benefit
payments from the gross income of the Beneficiary. At any point in time, the
Policy may become a modified endowment contract ("MEC"). A MEC has an
income-first taxation of all loans, pledges, collateral assignments or partial
surrenders. A 10% penalty tax may be imposed on such income distributed before
the Policy Owner attains age 59 1/2. The Company has established safeguards for
monitoring whether a Policy may become a MEC.
CHARGES AND DEDUCTIONS: Your Policy is subject to the following charges, which
compensate the Company for administering and distributing the Policy, as well as
paying Policy benefits and assuming related risks. These charges are summarized
below, and explained in detail under "Charges and Deductions."
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<PAGE> 70
POLICY CHARGES:
- SALES AND PREMIUM EXPENSE CHARGES -- A sales charge and a premium tax
charge are applied to each premium based on the size of your Policy.
<TABLE>
<CAPTION>
TOTAL
STATED SALES PREMIUM PREMIUM
AMOUNT CHARGE TAX EXPENSE
------ ------ ------- -------
<S> <C> <C> <C>
less than $500,000 2.5% 2.5% 5.0%
$500,000 to $999,999 2.0% 2.5% 4.5%
$1,000,000 and over 0% 2.5% 2.5%
</TABLE>
This charge pays some distribution expenses and state and local premium
taxes.
- MONTHLY DEDUCTION -- deductions taken from the value of your Policy each
month to cover cost of insurance charges, the monthly administrative
expense charges and charges for optional benefits.
- FULL SURRENDER CHARGE -- applies if you surrender your Policy for its
full Cash Value or the Policy lapses, during the first 10 years and for
10 years after requesting an increase in coverage. The surrender charge
consists of a percent of premium charge and a per thousand of face amount
charge.
- PARTIAL SURRENDER CHARGE -- applies if you surrender part of the value of
your Policy.
ASSET-BASED CHARGES:
- MORTALITY AND EXPENSE RISK CHARGE -- applies to the assets of the
Investment Options on a daily basis which currently equals an annual rate
of .60% (guaranteed not to exceed .80%).
- ADMINISTRATIVE EXPENSE CHARGE -- applies to the assets of the Investment
Options on a daily basis at a maximum annual rate of .10%. The Company is
not currently assessing this charge.
- UNDERLYING FUND FEES -- the separate account purchases shares of the
Underlying Funds on a net asset value basis. The shares purchased already
reflect the deduction of investment advisory fees and other expenses. The
fees are shown in the table below.
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UNDERLYING FUND FEES
<TABLE>
<CAPTION>
TOTAL
ANNUAL
MANAGEMENT OTHER OPERATING
FEE EXPENSES EXPENSES
(AFTER EXPENSE (AFTER EXPENSE (AFTER EXPENSE
FUND NAME REIMBURSEMENT) 12B-1 FEES REIMBURSEMENT) REIMBURSEMENT)
<S> <C> <C> <C> <C>
Capital Appreciation Fund 0.75% 0.08% 0.83%
Dreyfus Stock Index Fund 0.25% 0.01% 0.26%
Managed Assets Trust 0.50% 0.10% 0.60%
Money Market(1) 0.32% 0.08% 0.40%
VARIABLE INSURANCE PRODUCTS FUND
Equity Income Portfolio(2) 0.48% 0.08% 0.56%
Growth Portfolio(2) 0.58% 0.07% 0.65%
High Income Portfolio 0.58% 0.11% 0.69%
VARIABLE INSURANCE PRODUCTS FUND II
Asset Mgr Portfolio(2) 0.53% 0.09% 0.62%
FRANKLIN TEMPLETON VARIABLE PRODUCTS
INSURANCE TRUST
Templeton Asset Strategy Fund (Class
1)(3) 0.60% 0.18% 0.78%
Templeton Global Income Securities
(Class 1)(4) 0.60% 0.05% 0.65%
Templeton Growth Securities Fund
(Class 1)(5) 0.83% 0.05% 0.88%
TRAVELERS SERIES FUND, INC.:
AIM Capital Appreciation Portfolio(6) 0.80% 0.04% 0.84%
Alliance Growth Portfolio(6) 0.80% 0.02% 0.82%
MFS Total Return Portfolio(6) 0.80% 0.04% 0.84%
Smith Barney High Income Portfolio(6) 0.60% 0.06% 0.66%
Smith Barney Large Cap Value(6) 0.65% 0.02% 0.67%
GREENWICH STREET SERIES FUND
Smith Barney Total Return Portfolio(7) 0.75% 0.04% 0.79%
TRAVELERS SERIES TRUST:
Travelers U.S. Govt Securities Portfolio 0.32% 0.16% 0.48%
Utilities Portfolio (SB) 0.65% 0.23% 0.88%
Zero Coupon Bond Portfolio 2000 0.10% 0.05% 0.15%
Zero Coupon Bond Portfolio 2005 0.10% 0.05% 0.15%
</TABLE>
(1) Other Expenses have been restated to reflect the current expense
reimbursement arrangement with Travelers Insurance Company. Travelers has
agreed to reimburse the Portfolio for the amount by which its aggregate
expenses (including the management fee, but excluding brokerage commissions,
interest charges and taxes) exceeds 0.40%. Without such arrangement, Total
Expenses would have been 0.50% for the Money Market Portfolio.
(2) A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, through arrangements with certain funds,
or FMR on behalf of certain funds, custodian, credits realized as a result
of uninvested cash balances were used to reduce a portion of each applicable
fund 's expenses. Without these reductions, the total operating expenses
presented in the table would have been 0.57% for Equity-Income Portfolio,
0.66% for Growth Portfolio, and 0.63% for Asset Manager Portfolio.
(3) On 2/8/00, fund shareholders approved a merger and reorganization to merge
the assets of Templeton Global Asset Allocation Fund into Templeton Asset
Allocation Fund (which then changed its name to Templeton Asset Strategy
Fund), effective 5/1/00. The table shows restated total expenses based upon
the new fees and assets of Templeton Asset Allocation Fund as of 12/31/99,
and not the assets of the combined fund on 5/1/00. However, if the table
reflected both the new fees and the combined assets, the fund's expenses
after 5/1/00 would be estimated as: Management Fees 0.60%, Other Expenses
0.14%, and Total Annual Operating Expenses 0.74%.
(4) On 2/8/00, a merger and reorganization was approved to merge the assets of
Templeton Bond Fund into Templeton Global Income Securities Fund, effective
5/1/00. The above table shows restated total expenses based upon the fees
and assets of Templeton Global Income Securities Fund as of 12/31/99, and
not the assets of the combined fund on 5/1/00. However, if the table
reflected the combined assets, the fund's expenses after 5/1/00 would be
estimated as: Management Fees 0.60%, Other Expenses 0.04%, and Total Annual
Operating Expenses 0.64%. The Fund's administration fee is paid indirectly
through the management fee.
(5) On 2/8/00, a merger and reorganization was approved to merge the assets of
Templeton Stock Fund into Templeton Global Growth Fund (which then changed
its name to Templeton Growth Securities Fund), effective 5/1/00. The above
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<PAGE> 72
table shows restated total expenses based upon the fees and assets of
Templeton Global Growth Fund as of 12/31/99, and not the assets of the
combined fund on 5/1/00. However, if the table reflected the combined
assets, the fund's expenses after 5/1/00 would be estimated as: Management
Fees 0.80%, Other Expenses 0.05%, and Total Annual Operating Expenses 0.85%.
The Fund's administration fee is paid indirectly through the management fee.
(6) Expenses are as of October 31, 1999 (the Fund's fiscal year end). There were
no fees waived or expenses reimbursed for these funds in 1999.
(7) The Portfolio Management Fee for the Appreciation Portfolio, the Total
Return, and the Diversified Strategic Income Portfolio includes 0.20% for
fund administration.
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GENERAL DESCRIPTION
- --------------------------------------------------------------------------------
This prospectus describes an individual flexible premium variable universal life
insurance Policy offered by The Travelers Insurance Company ("Company"). The
policy offers:
- Flexible premium payments (you select the timing and amount of the
premium)
- A selection of investment options
- A choice of two death benefit options
- Loans and partial withdrawal privileges
- The ability to increase or decrease the Policy's face amount of insurance
- Additional benefits through the use of optional riders
This Policy is both an insurance product and a security. The Policy is first and
foremost a life insurance Policy with death benefits, Cash Values and other
features traditionally associated with life insurance. The Policy is a security
because the Cash Value and, under certain circumstances, the Amount Insured, and
Death Benefit may increase or decrease depending on the investment experience of
the Investment Options chosen.
THE APPLICATION. In order to become a policy owner, you must submit an
application to the Company. You must provide evidence of insurability. On the
application, you will also indicate:
- the amount of insurance desired (the "stated amount"); minimum of $75,000
- your choice of the two death benefit options
- the beneficiary(ies), and whether or not the beneficiary is irrevocable
- your choice of investment options.
Our underwriting staff will review the application, and, if approved, we will
issue the Policy.
HOW THE POLICY WORKS
- --------------------------------------------------------------------------------
You make premium payments and direct them to one or more of the available
investment options. The Policy's Cash Value will increase or decrease depending
on the performance of the investment options you select. In the case of death
benefit option 2, the death benefit will also vary based on the investment
options' performance.
BENEFICIARY
The Applicant names the Beneficiary in the application for the Policy. The
Policy Owner may change the Beneficiary (unless irrevocably named) during the
Insured's lifetime by sending a written request to the Company. If no
Beneficiary is living when the Insured dies, the Death Benefit will be paid to
the Policy Owner, if living; otherwise, the Death Benefit will be paid to the
Policy Owner's estate.
Your Policy becomes effective once our underwriting staff has approved the
application and once the first premium payment has been made. The Policy Date is
the date we use to determine all future transactions on the policy, for example,
the deduction dates, policy months, policy years. During the underwriting
period, any premium paid will be held in a non-interest bearing account. Your
policy will stay in effect as long as the policy's cash surrender value can pay
the policy's monthly charges and loan interest due but not paid in cash.
APPLYING PREMIUM PAYMENTS
We apply the first premium on the later of the Policy Date or the date we
receive it at our Home Office. During the Right to Cancel Period, we allocate
net premiums to the Money Market
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<PAGE> 74
Portfolio. At the end of the Right to Cancel Period, we direct the net premiums
to the investment option(s) selected on the application, unless you give us
other directions.
The investment options are segments of the separate account. They correspond to
underlying funds with the same names. The available investment options are
listed below.
We credit your policy with accumulation units of the investment option(s) you
have selected. We calculate the number of accumulation units by dividing your
net premium payment by each investment option's accumulation unit value computed
after we receive your payment.
THE INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
You may allocate Premium Payments to one or more of the available Investment
Options. The Investment Options currently available under the Policy may be
added, withdrawn or substituted as permitted by applicable state or federal law.
We would notify you before making such a change. Please read carefully the
complete risk disclosure in each Portfolio's prospectus before investing. For
more detailed information on the investment advisers and their services and
fees, please refer to the prospectuses for the Investment Options. In addition,
Travelers has entered into agreements with either the investment adviser or
distributor of certain of the underlying funds in which the adviser or
distributor pays us a fee for providing administrative services, which fee may
vary. The fee is ordinarily based upon an annual percentage of the average
aggregate net amount invested in the underlying funds on behalf of the Separate
Account.
The Investment Options currently available under Fund UL are as follows:
<TABLE>
<CAPTION>
INVESTMENT OPTION INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
----------------- -------------------- -----------------------------
<S> <C> <C>
Capital Appreciation Fund Seeks growth of capital through the Travelers Asset Management
use of common stocks. Income is not an International Corporation
objective. The Fund invests ("TAMIC")
principally in common stocks of small Subadviser: Janus Capital
to large companies which are expected Corp.
to experience wide fluctuations in
price in both rising and declining
markets.
Dreyfus Stock Index Fund Seeks to provide investment results Mellon Equity
that correspond to the price and yield
performance of publicly traded common
stocks in the aggregate, as
represented by the Standard & Poor's
500 Composite Stock Price Index.
Managed Assets Trust Seeks high total investment return TAMIC
through a fully managed investment Subadviser: Travelers
policy in a portfolio of equity, debt Investment Management Company
and convertible securities. ("TIMCO")
Money Market Portfolio Seeks high current income from short- TAMIC
term money market instruments while
preserving capital and maintaining a
high degree of liquidity.
</TABLE>
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<PAGE> 75
<TABLE>
<CAPTION>
INVESTMENT OPTION INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
----------------- -------------------- -----------------------------
<S> <C> <C>
VARIABLE INSURANCE
PRODUCTS FUND
Equity-Income Portfolio Seeks reasonable income by investing Fidelity Management &
primarily in income-producing equity Research Company ("FMR")
securities; in choosing these
securities, the portfolio manager will
also consider the potential for
capital appreciation.
Growth Portfolio Seeks capital appreciation by purchas- FMR
ing common stocks of well-known,
established companies, and small
emerging growth companies, although
its investments are not restricted to
any one type of security. Capital
appreciation may also be found in
other types of securities, including
bonds and preferred stocks.
High Income Portfolio Seeks to obtain a high level of FMR
current income by investing primarily
in high yielding, lower-rated,
fixed-income securities, while also
considering growth of capital.
VARIABLE INSURANCE
PRODUCTS FUND II
Asset Manager Portfolio Seeks high total return with reduced FMR
risk over the long-term by allocating
its assets among stocks, bonds and
short-term fixed-income instruments.
FRANKLIN TEMPLETON VARIABLE
INSURANCE PRODUCTS TRUST
Templeton Asset Strategy Seeks a high level of total return Templeton Investment Counsel,
Fund (Class 1) with reduced risk over the long term Inc.
through a flexible policy of investing
in stocks of companies in any nation
and debt obligations of companies and
governments of any nation.
Templeton Global Income Seeks high current income by investing Franklin Advisers, Inc.
Securities Fund (Class 1) primarily in debt securities of compa- Subadviser: Templeton
nies, governments and government Investment Counsel, Inc.
agencies of various nations throughout
the world.
Templeton Growth Seeks capital growth by investing Templeton Global Advisors
Securities Fund (Class 1) primarily in common stocks issued by Limited
companies, large and small, in various
nations throughout the world.
</TABLE>
12
<PAGE> 76
<TABLE>
<CAPTION>
INVESTMENT OPTION INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
----------------- -------------------- -----------------------------
<S> <C> <C>
GREENWICH STREET
SERIES FUND
Total Return Portfolio An equity portfolio that seeks to pro- SSB CitiFund Management LLC
vide total return, consisting of ("SSB Citi")
long-term capital appreciation and
income. The Portfolio will invest
primarily in a diversified portfolio
of dividend-paying common stocks.
TRAVELERS SERIES FUND, INC.
AIM Capital Appreciation Seeks capital appreciation by Travelers Investment Adviser
Portfolio investing principally in common stock, ("TIA")
with emphasis on medium-sized and Subadviser: AIM Capital
smaller emerging growth companies. Management Inc.
Alliance Growth Portfolio Seeks long-term growth of capital by TIA
investing predominantly in equity Subadviser: Alliance Capital
securities of companies with a Management L.P.
favorable outlook for earnings and
whose rate of growth is expected to
exceed that of the U.S. economy over
time. Current income is only an
incidental consideration.
MFS Total Return Seeks to obtain above-average income TIA
Portfolio (compared to a portfolio entirely Subadviser: MFS
invested in equity securities)
consistent with the prudent employment
of capital. Generally, at least 40% of
the Portfolio's assets will be
invested in equity securities.
Smith Barney High Income Seeks high current income. Capital SSB Citi
Portfolio appreciation is a secondary objective.
The Portfolio will invest at least 65%
of its assets in high-yielding
corporate debt obligations and
preferred stock.
Smith Barney Large Cap Seeks current income and long-term SSB Citi
Value Portfolio growth of income and capital by
investing primarily, but not
exclusively, in common stocks.
TRAVELERS SERIES TRUST
U.S. Government Seeks to select investments from the TAMIC
Securities Portfolio point of view of an investor concerned
primarily with highest credit quality,
current income and total return. The
assets of the U.S. Government Securi-
ties Portfolio will be invested in
direct obligations of the United
States, its agencies and
instrumentalities.
Utilities Portfolio Seeks to provide current income by SSB Citi
investing in equity and debt
securities of companies in the utility
industries.
</TABLE>
13
<PAGE> 77
<TABLE>
<CAPTION>
INVESTMENT OPTION INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
----------------- -------------------- -----------------------------
<S> <C> <C>
Zero Coupon Bond Fund Seeks to provide as high an investment TAMIC
Portfolio (Series 2000 return as consistent with the
and Series 2005) preservation of capital investing in
primarily zero coupon securities that
pay cash income but are acquired by
the Portfolio at substantial discounts
from their values at maturity. The
Zero Coupon Bond Fund Portfolios may
not be appropriate for Policy Owners
who do not plan to have their premiums
invested in shares of the Portfolios
for the long term or until maturity.
</TABLE>
POLICY BENEFITS AND RIGHTS
- --------------------------------------------------------------------------------
TRANSFERS OF CASH VALUE
As long as the Policy remains in effect, you may transfer the Cash Value between
Investment Options. We reserve the right to restrict the number of free
transfers to four times in any Policy Year and to charge $10 for each additional
transfer; however, there is currently no charge for transfers.
We calculate the number of Accumulation Units involved using the Accumulation
Unit Values we determine at the end of the business day on which we receive the
request.
TELEPHONE TRANSFERS
The Policy Owner may make the request in writing by mailing such request to the
Company at its Home Office, or by telephone (if an authorization form is on
file) by calling 1-800-334-4298. The Company will take reasonable steps to
ensure that telephone transfer requests are genuine. These steps may include
seeking proper authorization and identification prior to processing telephone
requests. Additionally, the Company will confirm telephone transfers. Any
failure to take such measures may result in the Company's liability for any
losses due to fraudulent telephone transfer requests.
AUTOMATED TRANSFERS
DOLLAR-COST AVERAGING
You may establish automated transfers of Policy Values on a monthly or quarterly
basis from any Investment Option(s) to any other Investment Option(s) through
written request or other method acceptable to the Company. You must have a
minimum total Policy Value of $1,000 to enroll in the Dollar-Cost Averaging
program. The minimum total automated transfer amount is $100.
You may start or stop participation in the Dollar-Cost Averaging program at any
time, but you must give the Company at least 30 days' notice to change any
automated transfer instructions that are currently in place. Automated transfers
are subject to all of the other provisions and terms of the Policy. The Company
reserves the right to suspend or modify transfer privileges at any time and to
assess a processing fee for this service.
Before transferring any part of the Policy Value, Policy Owners should consider
the risks involved in switching between investments available under this Policy.
Dollar cost averaging requires regular investments regardless of fluctuating
price levels, and does not guarantee profits or prevent losses
14
<PAGE> 78
in a declining market. Potential investors should consider their financial
ability to continue purchases through periods of low price levels.
PORTFOLIO REBALANCING
You may elect to have the Company periodically reallocate values in your policy
to match your original (or your latest) funding option allocation request.
LAPSE AND REINSTATEMENT
The Policy will remain in effect until the Cash Surrender Value of the Policy
can no longer cover the Monthly Deduction Amount or loan interest due and not
paid in cash. If this happens, we will notify you in writing that if the amount
shown in the notice is not paid within 61 days (the "Late Period"), the Policy
may lapse. The amount shown will be enough to pay the deduction amount due. The
Policy will continue through the Late Period, but if no payment is received by
us, it will terminate at the end of the Late Period. If the person Insured under
the Policy dies during the Late Period, the Death Benefit payable will be
reduced by the Monthly Deduction Amount due, the loan interest due and unpaid
plus the amount of any outstanding loan. (See "Death Benefit," below.)
If the Policy lapses, you may reinstate the Policy by paying the reinstatement
premium (and any applicable charges) shown in the Policy. You may request
reinstatement within three years of lapse (unless a different period is required
under applicable state law). Upon reinstatement, the Policy's Cash Value will
equal the Net Premium. In addition, the Company reserves the right to require
satisfactory evidence of insurability.
EXCHANGE RIGHTS
Once the Policy is in effect, it may be exchanged during the first 24 months for
a general account life insurance policy issued by the Company (or an affiliated
company) on the life of the Insured. Benefits under the new life insurance
policy will be as described in that policy. No evidence of insurability will be
required. You have the right to select the same Death Benefit or Net Amount At
Risk as the former Policy at the time of exchange. Cost of insurance rates will
be based on the same risk classification as those of the former Policy. Any
outstanding Policy loan must be repaid before we will make an exchange. In
addition, there may be an adjustment for the difference in Cash Value between
the two Policies.
RIGHT TO CANCEL
An Applicant may cancel the Policy by returning it via mail or personal delivery
to the Company or to the agent who sold the Policy. The Policy must be returned
by the latest of:
(1) 10 days after delivery of the Policy to you
(2) 45 days of completion of the Policy application
(3) 10 days after the Notice of Right to Cancel has been mailed or
delivered to the Applicant whichever is latest, or
(4) later if required by state law.
We will refund the greater of all premium payments or the sum of:
(1) the difference between the premium paid, including any fees or charges,
and the amounts allocated to the Investment Option(s),
(2) the value of the amounts allocated to the Investment Option(s) on the
date on which the Company receives the returned Policy, and
(3) any fees and other charges imposed on amounts allocated to the
Investment Option(s).
We will make the refund within seven days after we receive your returned policy.
15
<PAGE> 79
ACCESS TO CASH VALUES
- --------------------------------------------------------------------------------
POLICY LOANS
A Policy Owner may obtain a cash loan from the Company secured by the Policy not
to exceed 90% of the Policy's Cash Value (determined on the day on which the
Company receives the written loan request), less any surrender penalties.
Subject to state law, no loan requests may be made for amounts of less than
$100.
If there is a loan outstanding at the time a subsequent loan request is made,
the amount of the outstanding loan will be added to the new loan request. The
Company will charge interest on the outstanding amounts of the loan, which
interest must be paid in advance by the Policy Owner. The full Loan Account
Value will be charged an annual interest rate of 7.4% (6% in the Virgin
Islands).
The amount of the loan will be transferred as of the date the loan is made on a
pro rata basis from each of the Investment Options attributable to the Policy
(unless the Policy Owner states otherwise) to another account (the "Loan
Account"). Amounts in the Loan Account will be credited by the Company with a
fixed annual rate of return of 4% (6% in New York and Massachusetts) and will
not be affected by the investment performance of the Investment Options. When
loan repayments are made, the amount of the repayment will be deducted from the
Loan Account and will be reallocated based upon premium allocation percentages
among the Investment Options applicable to the Policy (unless the Policy Owner
states otherwise). The Company will make the loan to the Policy Owner within
seven days after receipt of the written loan request.
An outstanding loan amount decreases the Cash Surrender Value. If a maximum loan
is taken or a loan is not repaid, it may permanently decrease the Cash Surrender
Value, which could cause the Policy to lapse (see "Lapse and Reinstatement").
For example, if a Policy has a Cash Surrender Value of $10,000, the Policy Owner
may take a loan of 90% or $9,000, leaving a new Cash Surrender Value of $1,000.
In addition, the Death Benefit actually payable would be decreased because of
the outstanding loan. Furthermore, even if the loan is repaid, the Death Benefit
and Cash Surrender Value may be permanently affected since the Policy Owner was
not credited with the investment experience of an Investment Option on the
amount in the Loan Account while the loan was outstanding. All or any part of a
loan secured by a Policy may be repaid while the Policy is still in effect.
CASH VALUE AND CASH SURRENDER VALUE
The Cash Value of a Policy changes on a daily basis and will be computed on each
Valuation Date. The Cash Value will vary to reflect the investment experience of
the Investment Options, as well as any partial Cash Surrenders, Monthly
Deduction Amount, daily Separate Account charges, and any additional premium
payments. There is no minimum guaranteed Cash Value.
The Cash Value of a particular Policy is related to the net asset value of the
Investment Options to which premium payments on the Policy have been allocated.
The Cash Value on any Valuation Date is calculated by multiplying the number of
Accumulation Units credited to the Policy in each Investment Options as of the
Valuation Date by the current Accumulation Unit Value of that Investment Option,
then adding the collective result for each of the Investment Options credited to
the Policy, and finally adding the value (if any) of the Loan Account. A Policy
Owner may withdraw Cash Value from the Policy, or transfer Cash Value among the
Investment Options, on any day that the Company is open for business.
As long as the Policy is in effect, a Policy Owner may elect, without the
consent of the Beneficiary (provided the designation of Beneficiary is not
irrevocable), to surrender the Policy and receive its "Cash Surrender Value";
i.e., the Cash Value of the Policy determined as of the day the Company receives
the Policy Owner's written request, less any outstanding Policy loan, and less
any applicable Surrender Charges. For full surrenders, the Company will pay the
Cash Surrender Value of the Policy within seven days following its receipt of
the written request, or on the date
16
<PAGE> 80
requested by the Policy Owner, whichever is later. The Policy will terminate on
the Deduction Date next following the Company's receipt of the written request,
or on the Deduction Date next following the date on which the Policy Owner
requests the surrender to become effective, whichever is later.
In the case of partial surrenders, the Cash Surrender Value will be equal to the
net amount requested to be surrendered minus any applicable Surrender Charges.
The deduction from Cash Value for a partial surrender will be made on a pro rata
basis against the Cash Value of each of the Investment Options attributable to
the Policy (unless the Policy Owner states otherwise in writing).
In addition to reducing the Cash Value of the Policy, partial cash surrenders
will reduce the Death Benefit payable under the Policy. Under Option 1, the
Stated Amount of the Policy will be reduced by the amount of the partial cash
surrender. Under Option 2, the Cash Value, which is part of the Death Benefit,
will be reduced by the amount of the partial cash surrender. The Company may
require return of the Policy to record such reduction.
DEATH BENEFIT
- --------------------------------------------------------------------------------
The Death Benefit under the Policy is the amount paid to the Beneficiary upon
the Insured's death. The Death Benefit will be reduced by any outstanding
charges, fees and Policy loans. All or part of the Death Benefit may be paid in
cash or applied to one or more of the payment options described in the following
pages.
You may elect one of two Death Benefit options. As long as the Policy remains in
effect, the Company guarantees that the Death Benefit under either option will
be at least the current Stated Amount of the Policy less any outstanding Policy
loan and unpaid Deduction Amount due. The Death Benefit under either option may
vary with the Cash Value of the Policy. Under Option 1 (the "Level Option"), the
Death Benefit will be equal to the Stated Amount of the Policy or, if greater, a
specified multiple of Cash Value (the "Minimum Amount Insured"). Under Option 2
(the "Variable Option"), the Death Benefit will be equal to the Stated Amount of
the Policy plus the Cash Value (determined as of the date of the Insured's
death) or, if greater, the Minimum Amount Insured.
The Minimum Amount Insured is the amount required to qualify the Policy as a
life insurance Policy under the current federal tax law. Under that law, the
Minimum Amount Insured equals a stated percentage of the Policy's Cash Value
determined as of the first day of each Policy Month. The percentages differ
according to the attained age of the Insured. The Minimum Amount Insured is set
forth in the Policy and may change as federal income tax laws or regulations
change. The following is a schedule of the applicable percentages for contracts
issued after January 1, 1985. For attained ages not shown, the applicable
percentages will decrease evenly:
<TABLE>
<CAPTION>
ATTAINED AGE PERCENTAGE:
------------ -----------
<S> <C>
0 - 40 250
45 215
50 185
55 150
60 130
65 120
70 115
75 105
95+ 100
</TABLE>
Federal tax law imposes another cash funding limitation on cash value life
insurance Policies that may increase the Minimum Amount Insured shown above.
This limitation known as the "guideline
17
<PAGE> 81
premium limitation," generally applies during the early years of variable
universal life insurance Policies.
The following examples demonstrate the relationship between the Death Benefit,
the Cash Surrender Value and the Minimum Amount Insured under Options 1 and 2 of
the Policy. The examples assume an Insured of age 40, a Minimum Amount Insured
of 250% of Cash Value (assuming the preceding table is controlling as to Minimum
Amount Insured), and no outstanding Policy loan.
OPTION 1 -- "LEVEL" DEATH BENEFIT
STATED AMOUNT: $75,000
In the following examples of an Option 1 "Level" Death Benefit, the Death
Benefit under the Policy is generally equal to the Stated Amount of $75,000.
Since the Policy is designed to qualify as a life insurance Policy, the Death
Benefit cannot be less than the Minimum Amount Insured (or, in this example,
250% of the Cash Value).
EXAMPLE ONE. If the Cash Value of the Policy equals $10,000, the Minimum Amount
Insured would be $25,000 ($10,000 x 250%). Since the Death Benefit in the Policy
is the greater of the Stated Amount ($75,000) or the Minimum Amount Insured
($25,000), the Death Benefit would be $75,000.
EXAMPLE TWO. If the Cash Value of the Policy equals $40,000, the Minimum Amount
Insured would be $100,000 ($40,000 x 250%). The resulting Death Benefit would be
$100,000 since the Death Benefit is the greater of the Stated Amount ($75,000)
or the Minimum Amount Insured ($100,000).
OPTION 2 -- "VARIABLE" DEATH BENEFIT
STATED AMOUNT: $75,000
In the following examples of an Option 2 "Variable" Death Benefit, the Death
Benefit varies with the investment experience of the applicable Investment
Options and will generally be equal to the Stated Amount plus the Cash Value of
the Policy (determined on the date of the Insured's death). The Death Benefit
cannot, however, be less than the Minimum Amount Insured (or, in this example,
250% of the Cash Value).
EXAMPLE ONE. If the Cash Value of the Policy equals $10,000, the Minimum Amount
Insured would be $25,000 ($10,000 x 250%). The Death Benefit ($85,000) would be
equal to the Stated Amount ($75,000) plus the Cash Value ($10,000), unless the
Minimum Amount Insured ($25,000) was greater.
EXAMPLE TWO. If the Cash Value of the Policy equals $60,000, then the Minimum
Amount Insured would be $150,000 ($60,000 x 250%). The resulting Death Benefit
would be $150,000 because the Minimum Amount Insured ($150,000) is greater than
the Stated Amount plus the Cash Value ($75,000 + $60,000 = $135,000).
PAYMENT OF PROCEEDS
Death Benefits are payable within seven days after we receive satisfactory proof
of the Insured's death. The amount of Death Benefit paid may be adjusted to
reflect any Policy loan, any material misstatements in the Policy application as
to age or sex of the Insured, and any amounts payable to an assignee under a
collateral assignment of the Policy. (See "Assignment.")
Subject to state law, if the Insured commits suicide within two years following
the Issue Date limits on the amount of Death Benefit paid will apply. (See
"Limit on Right to Contest and Suicide Exclusion.") In addition, if the Insured
dies during the 61-day period after the Company gives notice to the Policy Owner
that the Cash Surrender Value of the Policy is insufficient to meet the
18
<PAGE> 82
Monthly Deduction Amount due against the Cash Value of the Policy, then the
Death Benefit actually paid to the Policy Owner's Beneficiary will be reduced by
the amount of the Deduction Amount that is due and unpaid. (See "Cash Value and
Cash Surrender Value," for effects of partial surrenders on Death Benefits.)
PAYMENT OPTIONS
We will pay policy proceeds in a lump sum, unless you or the Beneficiary select
one of the Company's payment options. We may defer payment of proceeds which
exceed the Death Benefit for up to six months from the date of the request for
the payment. A combination of options may be used. The minimum amount that may
be placed under a payment option is $5,000 unless we consent to a lesser amount.
Proceeds applied under an option will no longer be affected by the investment
experience of the Investment Options.
The following payment options are available under the Policy:
OPTION 1 -- Payments of a Fixed Amount
OPTION 2 -- Payments for a Fixed Period
OPTION 3 -- Amounts Held at Interest
OPTION 4 -- Monthly Life Income
OPTION 5 -- Joint and Survivor Level Amount Monthly Life Income
OPTION 6 -- Joint and Survivor Monthly Life Income-Two-thirds to Survivor
OPTION 7 -- Joint and Last Survivor Monthly Life Income-Monthly Payment
Reduces on Death of First Person Named
OPTION 8 -- Other Options
We will make any other arrangements for periodic payments as may be agreed upon.
If any periodic payment due any payee is less than $100, we may make payments
less often. If we have declared a higher rate under an option on the date the
first payment under an option is due, we will base the payments on the higher
rate.
MATURITY BENEFITS
- --------------------------------------------------------------------------------
The Maturity Date is the anniversary of the Policy Date on which the Insured is
age 95. If the Insured is living on the Maturity Date, the Company will pay you
the Policy's Cash Value less any outstanding Policy loan or unpaid Deduction
Amount. You must surrender the Policy to us before we make a payment, at which
point the Policy will terminate and we will have no further obligations under
the Policy.
CHARGES AND DEDUCTIONS
- --------------------------------------------------------------------------------
CHARGES AGAINST PREMIUM
FRONT-END SALES CHARGE
When we receive a Premium Payment, and before allocation of the payment among
the Investment Options, we deduct a front-end sales charge. For Stated Amounts
less than $500,000 the charge is 2.5%. The charge is 2% for Stated Amounts from
$500,000 to $999,999, and for Stated Amounts of $1,000,000 or greater, there is
no front-end sales charge. Additional charges may be assessed upon any full or
partial surrender. (See "Surrender Charges".)
19
<PAGE> 83
STATE PREMIUM TAX CHARGE
A charge of 2.5% of each premium payment will be deducted for state premium
taxes (except for Policies issued in the Commonwealth of Puerto Rico where no
premium tax is deducted). These taxes owned by the Company vary from state to
state and currently range from 0.75% to 3.5%; 2.5% is an average. Because there
is a range of premium taxes, a Policy Owner may pay a premium tax charge that is
higher or lower than the premium tax actually assessed against the Company in
his or her jurisdiction.
The Company also reserves the right to charge the assets of each Investment
Option for a reserve for any income taxes payable by the Company on the assets
attributable to that Investment Option. (See "Federal Tax Considerations.")
MONTHLY DEDUCTION AMOUNT
We will deduct a Monthly Deduction Amount to cover certain charges and expenses
incurred in connection with the Policy. The Monthly Deduction Amount is deducted
pro rata from each of the Investment Options' values attributable to the Policy.
The amount is deducted on the first day of each Policy Month (the "Deduction
Date"), beginning on the Policy Date. The dollar amount of the Deduction Amount
will vary from month to month. The Monthly Deduction Amount consists of the Cost
of Insurance Charge, Policy Administrative Expense Charge and Charges for any
Supplemental Benefit Provision. These are described below:
COST OF INSURANCE CHARGE
The amount of the Cost of Insurance deduction depends on the amount of insurance
coverage on the date of the deduction and the current cost per dollar for
insurance coverage. The cost per dollar of insurance coverage varies annually
and is based on age, sex, risk class of the Insured and state of issue.
POLICY ADMINISTRATIVE EXPENSE CHARGE
For the first three Policy Years, an administrative charge is deducted monthly
from the Policy's Cash Value. This charge also applies to the first three years
following increases in the Stated Amount (excluding Cost of Living Adjustments
and increases in Stated Amounts due to Death Benefit Option changes.) This
charge is used to cover expenses associated with issuing the Policy. The charge
currently varies by issue age and Stated Amount (see Appendix C).
CHARGES FOR SUPPLEMENTAL BENEFIT PROVISIONS
The Company will include a supplemental benefits charge in the Monthly Deduction
Amount if you have elected any supplemental benefit provision for which there is
a charge. The amount of this charge will vary depending upon the actual
supplemental benefits selected.
CHARGES AGAINST THE SEPARATE ACCOUNT
MORTALITY AND EXPENSE RISK CHARGE
We deduct a daily charge for mortality and expense risks. The current charge is
at an annual rate of 0.60%; however, the Policy provides that the maximum charge
for mortality and expense risks will not exceed 0.80%. This charge compensates
us for various risks assumed, benefits provided and expenses incurred.
ADMINISTRATIVE EXPENSE CHARGE
We reserve the right to deduct a daily charge for administrative expenses we
incur. The maximum charge equals an annual rate of 0.10%; however, we do not
currently assess this charge.
20
<PAGE> 84
UNDERLYING FUND FEES
When you allocate money to the Investment Options, the Separate Account
purchases shares of the corresponding Underlying Funds at net asset value. The
net asset value reflects investment advisory fees and other expenses already
deducted. The investment advisory fees and other expenses paid to each of the
Underlying Funds are described in the individual Fund prospectuses for the
Investment Options and in the Policy prospectus summary. These are not direct
charges under the Policy; they are indirect because they affect each Investment
Option's accumulation unit value.
SURRENDER CHARGES
There are two types of surrender charges that can apply under the Policy: a
Percent of Premium Charge and a Per Thousand of Stated Amount Charge equal to a
specified amount for each $1,000 of Stated Amount. These surrender charges apply
during the first ten Policy Years (or the first ten years following an increase
in Stated Amount other than an increase for a Cost of Living Adjustment or a
change in Death Benefit option). Both charges apply upon a full surrender of the
Policy. Only the Percent of Premium Charge applies upon a partial surrender.
PERCENT OF PREMIUM CHARGE
A Percent of Premium surrender charge will be assessed upon a full or partial
surrender of the Policy during the first ten Policy Years (and during the first
ten years following an increase in Stated Amount). The charge will be the
smallest of:
(a) 6% of the amount of Cash Value being surrendered; or
(b) 6% of the amount of premiums actually paid within the five years
preceding the surrender; or
(c) 9% of the total Annual Minimum Premiums for each full or partial Policy
Year during the five years preceding the surrender, whether paid or
not. (See Appendix A, "Annual Minimum Premiums.")
For example, for a 45-year old male with a Stated Amount of $150,000 who pays a
premium of $1,969 per year for five years (a total of $9,845), and then fully
surrenders the Policy for its Cash Value of $7,485 (assuming a 6% rate of
return), the Percent of Premium surrender charge would be $449, because (a) is
$449 (6% of $7,485); (b) is $591 (6% of the $9,845 in premiums paid); and (c) is
approximately $682 (9% of the annual minimum premium for five years). The
smallest, $449, is the applicable charge.
PER THOUSAND OF STATED AMOUNT CHARGE
A Per Thousand of Stated Amount surrender charge is imposed on full surrenders,
but not on partial surrenders, and applies only during the first ten Policy
Years or the ten years following an increase in Stated Amount (other than an
increase for a Cost of Living Adjustment or a change in Death Benefit Option).
The charge is equal to a specified dollar amount for each $1,000 of Stated
Amount to which it applies, and will apply only to that portion of the Stated
Amount (except for increases excluded above) which has been in effect for less
than ten years.
The Per Thousand of Stated Amount Charge varies by original issue age, and
increases with the issue age of the Insured. For Stated Amounts of $499,999 or
less, this charge varies in the first year from $2.04 per $1,000 of Stated
Amount for issue ages of 4 years or less, to $25.40 per $1,000 of Stated Amount
for issue ages of 65 years or higher. The charge is lower for Stated Amounts
over $499,999, and even lower for Stated Amounts over $999,999.
Additionally, the charge decreases by 10% each year over the ten-year period.
For example, for a 45-year old with a Stated Amount of $150,000, the charge in
the first year is $7.18 for each $1,000 of Stated Amount, or $1,077. The charge
decreases 10%, or approximately $0.72, each year, so in
21
<PAGE> 85
the fifth year, it is $4.31 for each $1,000 of Stated Amount, or $646.50; in the
tenth year, it is $0.72 for each $1,000, or $108.
This charge is designed to compensate the Company for administrative expenses
not covered by other administrative charges. This charge may be reduced or
eliminated when sales are made under certain arrangements. (See "Reduction or
Elimination of Sales Charges and Administrative Charges" below.) The Per
Thousand of Stated Amount surrender charges are set forth in Appendix B.
TRANSFER CHARGE
There is currently no charge for transfers. The Company reserves the right to
limit free transfers of Cash Value from one Investment Option to another by the
Policy Owner to four times in any Policy Year, and to charge $10 for any
additional transfers. We reserve the right to restrict transfers by any market
timing firm or any other third party authorized to initiate transfers on behalf
of multiple contract owners. We may, among other things, not accept: 1) the
transfer instructions of any agent acting under a power of attorney on behalf of
more than one owner, or 2) the transfer or exchange instructions of individual
owners who have executed pre-authorized transfer forms which are submitted by
market timing firms or other third parties on behalf of more than one owner. We
further reserve the right to limit transfers that we determine will disadvantage
other contract owners.
REDUCTION OR ELIMINATION OF CHARGES
We may offer the Policy in arrangements where an employer or trustee will own a
group of policies on the lives of certain employees, or in other situations
where groups of policies will be purchased at one time. We may reduce or
eliminate the mortality and expense risk charge, sales or surrender charges and
administrative charges in such arrangements to reflect the reduced sales
expenses, administrative costs and/or mortality and expense risks expected as a
result of sales to a particular group.
We will not reduce or eliminate the withdrawal charge, mortality and expense
risk charge or the administrative charge if the reduction or elimination will be
unfairly discriminatory to any person.
THE SEPARATE ACCOUNT AND VALUATION
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THE TRAVELERS FUND UL FOR VARIABLE LIFE INSURANCE (FUND UL)
The Travelers Fund UL for Variable Life Insurance was established on November
10, 1983 under the insurance laws of the state of Connecticut. It is registered
with the Securities and Exchange Commission ("SEC") as a unit investment trust
under the Investment Company Act of 1940. A Registration Statement has been
filed with the Securities and Exchange Commission under the Securities Act of
1933, as amended. This Prospectus does not contain all information set forth in
the Registration Statement, its amendments and exhibits. You may access the
SEC's website (http://www.sec.gov) to view the entire Registration Statement.
This registration does not mean that the SEC supervises the management or the
investment practices or policies of the Separate Account.
The assets of Fund UL are invested exclusively in shares of the Investment
Options. The operations of Fund UL are also subject to the provisions of Section
38a-433 of the Connecticut General Statutes which authorizes the Connecticut
Insurance Commissioner to adopt regulations under it. Under Connecticut law, the
assets of Fund UL will be held for the exclusive benefit of Policy Owners and
the persons entitled to payments under the Policy. The assets held in Fund UL
are not chargeable with liabilities arising out of any other business which the
Company may conduct. Any obligations arising under the Policy are general
corporate obligations of the Company.
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All investment income of and other distributions to each Investment Option are
reinvested in shares of corresponding underlying fund at net asset value. The
income and realized gains or losses on the assets of each Investment Option are
separate and are credited to or charged against the Investment Option without
regard to income, gains or losses from any other Investment Option or from any
other business of the Company. The Company purchases shares of the Fund in
connection with premium payments allocated according to the Policy Owners'
directions, and redeems Fund shares to meet Policy obligations. We will also
make adjustments in reserves, if required. The Investment Options are required
to redeem Fund shares at net asset value and to make payment within seven days.
HOW THE CASH VALUE VARIES. We calculate the Policy's Cash Value each day the
New York Stock Exchange is open for trading (a "valuation date"). A Policy's
Cash Value reflects a number of factors, including Premium Payments, partial
withdrawals, loans, Policy charges, and the investment experience of the
Investment Option(s) chosen. The Policy's Cash Value on a valuation date equals
the sum of all accumulation units for each Investment Option chosen, plus the
Loan Account Value.
The Separate Account purchases shares of the underlying funds at net asset value
(i.e., without a sales charge). The Separate Account receives all dividends and
capital gains distributions from each underlying fund, and reinvests in
additional shares of that fund. The Accumulation Unit Value reflects the
reinvestment of any dividends or capital gains distributions declared by the
underlying fund. The Separate Account will redeem underlying fund shares at
their net asset value, to the extent necessary to make payments under the
Policy.
In order to determine Cash Value, Cash Surrender Value, policy loans and the
number of Accumulation Units to be credited, we use the values calculated as of
4:00 p.m. Eastern time on each valuation date we receive the written request, or
payment in good order, at our Home Office.
ACCUMULATION UNIT VALUE. Accumulation Units measure the value of the Investment
Options. The value for each Investment Option's Accumulation Unit is calculated
on each valuation date. The value equals the Accumulation Unit value for the
preceding valuation period multiplied by the underlying fund's Net Investment
Factor during the next Valuation Period. (For example, to calculate Monday's
valuation date price, we would multiply Friday's Accumulation Unit Value by
Monday's net investment factor.)
The Accumulation Unit Value may increase or decrease. The number of Accumulation
Units credited to your Policy will not change as a result of the Investment
Option's investment experience.
NET INVESTMENT FACTOR. For each Investment Option, the value of its
Accumulation Unit depends of the net rate of return for the corresponding
underlying fund. We determine the net rate of return at the end of each
Valuation Period (that is, the period of time beginning at 4:00 p.m. Eastern
time, and ending at 4:00 p.m. Eastern time on the next Valuation Date). The net
rate of return reflects the investment performance of the investment option,
includes any dividends or capital gains distributed, and is net of the Separate
Account charges.
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CHANGES TO THE POLICY
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GENERAL
Once the policy is issued, you may make certain changes. Some of these changes
will not require additional underwriting approval; some changes will. Certain
requests must be made in writing, as indicated below:
WRITTEN CHANGES REQUIRING UNDERWRITING APPROVAL:
- increases in the stated amount of insurance;
- changing the death benefit from Option 1 to Option 2
WRITTEN CHANGES NOT REQUIRING UNDERWRITING APPROVAL:
- decreases in the stated amount of insurance
- changing the death benefit from Option 2 to Option 1
- changes to the way your premiums are allocated (Note: you can also make
these changes by telephone upon completion of the proper authorization
forms)
- changing the beneficiary (unless irrevocably named)
Written requests for changes should be sent to the Company's Home Office at One
Tower Square, Hartford, Connecticut, 06183. The Company's telephone number is
(860) 277-0111.
CHANGES IN STATED AMOUNT
You may request in writing an increase or decrease in the Policy's Stated
Amount, provided that the Stated Amount after any decrease may not be less than
the minimum amount of $75,000. For purposes of determining the cost of insurance
charge, a decrease in the Stated Amount will reduce the Stated Amount in the
following order:
1) against the most recent increase in the Stated Amount;
2) to other increases in the reverse order in which they occurred;
3) to the initial Stated Amount.
A decrease in Stated Amount in a substantially funded Policy may cause a cash
distribution that is includable in the gross income of the Policy Owner.
For increases in the Stated Amount, we may require a new application and
evidence of insurability as well as an additional premium payment. The effective
date of any increase will be shown on the new Policy Summary which we will send.
The effective date of any increase in the Stated Amount will generally be the
Deduction Date next following either the date of a new application or, if
different, the date requested by the Applicant. There is an additional Policy
Administrative Charge and a Per Thousand of Stated Amount Surrender Charge
associated with a requested increase in Stated Amount. There is no additional
charge for a decrease in Stated Amount.
CHANGES IN DEATH BENEFIT OPTION
You may change the Death Benefit option by sending a written request to the
Company. There is no direct tax consequence of changing a Death Benefit option,
except as described under "Tax Treatment of Policy Benefits." However, the
change could affect future values of Net Amount At Risk, and with some Option 2
to Option 1 changes involving substantially funded Policies, there may be a cash
distribution which is included in your gross income. The cost of insurance
charge which is based on the Net Amount At Risk may be different in the future.
A change from Option 1 to Option 2 will not be permitted if the change results
in a Stated Amount of less than $75,000. A change from Option 1 to Option 2 also
subject to underwriting. Contact your registered representative for more
information.
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ADDITIONAL POLICY PROVISIONS
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ASSIGNMENT
The Policy may be assigned as collateral for a loan or other obligation. The
Company is not responsible for any payment made or action taken before receipt
of written notice of such assignment. Proof of interest must be filed with any
claim under a collateral assignment.
LIMIT ON RIGHT TO CONTEST AND SUICIDE EXCLUSION
We may not contest the validity of the Policy after it has been in effect during
the Insured's lifetime for two years from the Issue Date. Subject to state law,
if the Policy is reinstated, the two-year period will be measured from the date
of reinstatement. Each requested increase in Stated Amount is contestable for
two years from its effective date (subject to state law). In addition, if the
Insured commits suicide during the two-year period following issue, subject to
state law, the Death Benefit will be limited to the premiums paid less (i) the
amount of any partial surrender, (ii) the amount of any outstanding Policy loan,
and (iii) the amount of any unpaid Deduction Amount due. During the two-year
period following an increase, the Death Benefit in the case of suicide will be
limited to an amount equal to the Deduction Amount paid for such increase.
MISSTATEMENT AS TO SEX AND AGE
If there has been a misstatement with regard to sex or age, benefits payable
will be adjusted to what the Policy would have provided with the correct
information. A misstatement with regard to sex or age in a substantially funded
Policy may cause a cash distribution that is includable in whole or in part in
the gross income of the Policy Owner.
VOTING RIGHTS
The Company is the legal owner of the underlying fund shares. However, we
believe that when an underlying fund solicits proxies, we are required to obtain
from policy owners who have chosen those investment options instructions on how
to vote those shares. When we receive those instructions, we will vote all of
the shares we own in proportion to those instructions. This will also include
any shares we own on our own behalf. If we determine that we no longer need to
comply with this voting method, we will vote on the shares in our own right.
DISREGARD OF VOTING INSTRUCTIONS
When permitted by state insurance regulatory authorities, we may disregard
voting instructions if the instructions would cause a change in the investment
objective or policies of the Separate Account or an Investment Option, or if it
would cause the approval or disapproval of an investment advisory Policy of an
Investment Option. In addition, we may disregard voting instructions in favor of
changes in the investment policies or the investment adviser of any Investment
Options which are initiated by a Policy Owner if we reasonably disapprove of
such changes. A change would be disapproved only if the proposed change is
contrary to state law or prohibited by state regulatory authorities, or if we
determine that the change would have an adverse effect on our general account
(i.e., if the proposed investment policy for an Investment Option may result in
overly speculative or unsound investments.) If we do disregard voting
instructions, a summary of that action and the reasons for such action would be
included in the next annual report to Policy Owners.
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OTHER MATTERS
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STATEMENTS TO POLICY OWNERS
We will maintain all records relating to the Separate Account and the Investment
Options. At least once each Policy Year, we will send you a statement containing
the following information:
- the Stated Amount and the Cash Value of the Policy (indicating the number
of Accumulation Units credited to the Policy in each Investment Option
and the corresponding Accumulation Unit Value);
- the date and amount of each premium payment;
- the date and amount of each Monthly Deduction;
- the amount of any outstanding Policy loan as of the date of the
statement, and the amount of any loan interest charged on the Loan
Account;
- the date and amount of any partial cash surrenders and the amount of any
partial surrender charges;
- the annualized cost of any supplemental benefits purchased under the
Policy; and
- a reconciliation since the last report of any change in Cash Value and
Cash Surrender Value.
We will also send any other reports required by any applicable state or federal
laws or regulations.
SUSPENSION OF VALUATION
We reserve the right to suspend or postpone the date of any payment of any
benefit or values for any Valuation Period (1) when the New York Stock Exchange
("Exchange") is closed; (2) when trading on the Exchange is restricted; (3) when
the SEC determines so that disposal of the securities held in the Underlying
Funds is not reasonably practicable or the value of the Investment Option's net
assets cannot be determined; or (4) during any other period when the SEC, by
order, so permits for the protection of security holders.
DIVIDENDS
No dividends will be paid under the Policy.
MIXED AND SHARED FUNDING
It is conceivable that in the future it may not be advantageous for variable
life insurance and variable annuity Separate Accounts to invest in the
Investment Options simultaneously. This is called mixed funding. Certain funds
may be available to variable products of other companies not affiliated with
Travelers. This is called "shared funding." Although we -- and the funds -- do
not anticipate any disadvantages either to variable life insurance or to
variable annuity Policy Owners, the Investment Options' Boards of Directors
intend to monitor events to identify any material conflicts that may arise and
to determine what action, if any, should be taken. If any of the Investment
Options' Boards of Directors conclude that separate mutual funds should be
established for variable life insurance and variable annuity Separate Accounts,
the Company will bear the attendant expenses, but variable life insurance and
variable annuity Policy Owners would no longer have the economies of scale
resulting from a larger combined fund. Please consult the prospectuses of the
Investment Options for additional information.
DISTRIBUTION
The Company intends to sell the Policies in all jurisdictions where it is
licensed to do business and where the Policy is approved. The Policies will be
sold by life insurance sales representatives who are registered representatives
of the Company or certain other registered broker-dealers. The maximum
commission payable by the Company for distribution would be no greater than 50%
of the actual premium paid in the first twelve months. Any sales representative
or employee will have been qualified to sell variable life insurance Policies
under applicable federal and state laws. Each broker/dealer is registered with
the Securities and Exchange Commission under the Securities Exchange Act of 1934
and all are members of the National Association of Securities Dealers, Inc.
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CFBDS, Inc. serves as principal underwriter of the Policies. However, it is
currently anticipated that Travelers Distribution LLC, an affiliated
broker-dealer, may become the principal underwriter for the contracts during the
year 2000.
LEGAL PROCEEDINGS AND OPINION
There are no pending legal proceedings affecting the Separate Account. There is
one material pending legal proceeding, other than ordinary routine litigation
incidental to business, to which the Company is a party.
In March 1997, a purported class action entitled Patterman v. The Travelers,
Inc., et al. was commenced in the Superior Court of Richmond County, Georgia,
alleging, among other things, violations of the Georgia RICO statute and other
state laws by an affiliate of the Company, Primerica Financial Services, Inc.
and certain of its affiliates. Plaintiffs seek unspecified compensatory and
punitive damages and other relief. In October 1997, defendants answered the
complaint, denied liability and asserted numerous affirmative defenses. In
February 1998, on defendants' motion, the Superior Court of Richmond County
transferred the lawsuit to the Superior Court of Gwinnett County, Georgia.
Plaintiffs appealed the transfer order, and in December 1998 the Court of
Appeals of the State of Georgia reversed the lower court's decision. Defendants
petitioned the Georgia Supreme Court to hear an appeal from the decision of the
Court of Appeals, and the petition was granted in May 1998. In September 1999,
oral argument on defendants' petition was heard and, on February 28, 2000, the
Georgia Supreme Court affirmed the Georgia County Appeals and remanded the
matter to the Superior Court of Richmond County. In March 2000, defendants moved
the Georgia Supreme Court to reconsider its February 28, 2000 decision, and that
motion remains pending. Proceedings in the trial court have been stayed pending
appeal. Defendants intend to vigorously contest the litigation.
Legal matters in connection with the federal laws and regulations affecting the
issue and sale of the Contract described in this prospectus, as well as the
organization of the Company, its authority to issue variable life contracts
under Connecticut law and the validity of the forms of the variable life
contracts under Connecticut law, have been reviewed by the General Counsel of
the Company.
EXPERTS
The financial statements of Fund UL as of December 31, 1999 and for the year
ended December 31, 1999, have been included herein and in the registration
statement in reliance upon the report of KPMG LLP, independent certified public
accountants and upon the authority of said firm as experts in accounting and
auditing.
The consolidated financial statements of The Travelers Insurance Company and
subsidiaries as of December 31, 1999 and 1998, and for each of the years in the
three-year period ended December 31, 1999, have been included herein and in the
registration statement in reliance upon the report of KPMG LLP, independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing.
FEDERAL TAX CONSIDERATIONS
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GENERAL
The following is a general discussion of the federal income tax considerations
relating to the Policies. This discussion is based upon the Company's
understanding of the federal income tax laws as they are currently interpreted
by the Internal Revenue Service ("IRS"). These laws are complex, and tax results
may vary among individuals. A person contemplating the purchase of or the
exercise of elections under a Policy should seek competent tax advice.
IT SHOULD BE UNDERSTOOD THAT THIS IS NOT AN EXHAUSTIVE DISCUSSION OF ALL TAX
QUESTIONS THAT MIGHT ARISE UNDER THE POLICIES. NO ATTEMPT HAS BEEN MADE TO
ADDRESS ANY FEDERAL ESTATE TAX OR STATE AND LOCAL TAX CONSIDERATIONS WHICH MAY
ARISE IN CONNECTION WITH A POLICY. FOR COMPLETE INFORMATION, A QUALIFIED TAX
ADVISOR SHOULD BE CONSULTED.
THE COMPANY DOES NOT GUARANTEE THE TAX STATUS OF ANY POLICY AND THE FOLLOWING
TAX DISCUSSION IS BASED ON THE COMPANY'S UNDERSTANDING OF FEDERAL INCOME TAX
LAWS AS THEY ARE CURRENTLY
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INTERPRETED. THE COMPANY CANNOT GUARANTEE THAT THOSE LAWS OR INTERPRETATIONS
WILL REMAIN UNCHANGED.
TAX STATUS OF THE POLICY
DEFINITION OF LIFE INSURANCE
Section 7702 of the Code sets forth a definition of a life insurance contract
for federal tax purposes. Guidance as to how Section 7702 is to be applied,
however, is limited. Although the Secretary of the Treasury (the "Treasury") is
authorized to prescribe regulations implementing Section 7702, and while
proposed regulations and other limited, interim guidance has been issued, final
regulations have not been adopted. If a Policy were determined not to be a life
insurance contract for purposes of Section 7702, such Policy would not provide
the tax advantages normally provided by a life insurance policy.
With respect to a Policy issued on the basis of a standard rate class, the
Company believes (largely in reliance on IRS Notice 88-128 and the proposed
regulations under Section 7702) that such a Policy should meet the Section 7702
definition of a life insurance contract. There is less guidance on the
application of the rules with respect to a Policy that is issued on a
substandard basis (i.e., a premium class involving higher than standard
mortality risk). Thus, it is not clear whether such a Policy would satisfy
Section 7702, particularly if the Policy Owner pays the full amount of premiums
permitted under the Policy.
The Company reserves the right to make changes in the Policy if such changes are
deemed necessary to attempt to assure its qualification as a life insurance
contract for tax purposes.
DIVERSIFICATION
Section 817(h) of the Code provides that separate account investments (or the
investments of a mutual fund, the shares of which are owned by separate accounts
of insurance companies) underlying the Policy must be "adequately diversified"
in accordance with Treasury regulations in order for the Policy to qualify as
life insurance. The Treasury Department has issued regulations prescribing the
diversification requirements in connection with variable contracts. The Separate
Account, through the Investment Options, intends to comply with these
requirements. Although the Company does not control the Investment Options, it
intends to monitor the investments of the Investment Options to ensure
compliance with the diversification requirements prescribed by the Treasury
Department.
INVESTOR CONTROL
In certain circumstances, owners of variable life insurance contracts may be
considered the owners, for federal income tax purposes, of the assets of the
separate accounts used to support their contract. In those circumstances, income
and gains from the separate account assets would be includable in the variable
contract owner's gross income each year. The IRS has stated in published rulings
that a variable contract owner will be considered the owner of separate account
assets if the contract owner possesses incidents of ownership in those assets,
such as the ability to exercise investment control over the assets. The Treasury
has also announced, in connection with the issuance of regulations concerning
diversification, that those regulations "do not provide guidance concerning the
circumstances in which investor control of the investments of a segregated asset
account may cause the investor (i.e., the Policy Owner), rather than the
insurance company, to be treated as the owner of the assets in the account."
This announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which policyholders may direct their
investments to particular Investment Options without being treated as owners of
the underlying assets." As of the date of this prospectus, no such guidance has
been issued.
The ownership rights under the Policy are similar to, but different in certain
respects from, those described by the IRS in rulings in which it determined that
the policy owners received the desired tax benefits because they were not owners
of separate account assets. For example, a Policy Owner of this Policy has
additional flexibility in allocating payments and cash values. These
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differences could result in the Policy Owner being treated as the owner of the
assets of the Separate Account. In addition, the Company does not know what
standard will be set forth in the regulations or rulings which the Treasury is
expected to issue, nor does the Company know if such guidance will be issued.
The Company therefore reserves the right to modify the Policy as necessary to
attempt to prevent the Policy Owner from being considered the owner of a pro
rata share of the assets of the Separate Account.
The remaining tax discussion assumes that the Policy qualifies as a life
insurance contract for federal income tax purposes.
TAX TREATMENT OF POLICY BENEFITS
IN GENERAL
The Company believes that the proceeds and cash value increases of a Policy
should be treated in a manner consistent with a fixed-benefit life insurance
policy for federal income tax purposes. Thus, the Death Benefit under the Policy
should be excludable from the gross income of the Beneficiary.
In addition, the Policy Owner will generally not be deemed to be in constructive
receipt of the Cash Value, including increments thereof, until there is a
distribution. The tax consequences of distribution from, and loans taken from or
secured by, a Policy depend on whether the Policy is classified as a "Modified
Endowment Contract." However, whether a Policy is or is not a Modified Endowment
Contract, upon a complete surrender or lapse of a Policy or when benefits are
paid at a Policy's maturity date, if the amount received plus the amount of
indebtedness exceeds the total investment in the Policy, the excess will
generally be treated as ordinary income subject to tax.
Depending on the circumstances, the exchange of a Policy, a change in the
Policy's Death Benefit Option, a Policy loan, a partial withdrawal, a surrender,
a change in ownership, or an assignment of the Policy may have federal income
tax consequences. In addition, federal, state and local transfer, and other tax
consequences of ownership or receipt of Policy proceeds depend on the
circumstances of each Owner or beneficiary. Therefore, it is important to check
with a tax adviser prior to the purchase of a policy.
MODIFIED ENDOWMENT CONTRACTS
A modified endowment contract is defined under tax law as any policy that
satisfies the present legal definition of a life insurance contract but which
fails to satisfy a 7-pay test. This failure could occur with contracts entered
into after June 21, 1988, or with certain older contracts materially changed
after that date. A Section 1035 exchange of an older contract into a contract
after that date will not by itself cause the new contract to be a modified
endowment contract if the older contract had not become one prior to the
exchange. However, the new contract must be re-tested under the 7-pay test
rules.
A contract fails to satisfy the 7-pay test if the cumulative amount of premiums
paid under the contract at any time during the first seven contract years
exceeds the sum of the net level premiums that would have been paid on or before
such time had the contract provided for paid-up future benefits after the
payment of seven level annual premiums. If a material change in the contract
occurs either during the first seven contract years, or later, a new seven-year
testing period is begun. A decrease to Stated Amount made in the first seven
years will cause a retest of the cumulative amount of premiums. Decreases made
after the first seven contract years are not considered a material change,
provided no other material changes have occurred prior. Tax regulations or other
guidance will be needed to fully define those transactions which are material
changes. The Company has established safeguards for monitoring whether a
contract may become a modified endowment contract.
Loans and partial withdrawals from, as well as collateral assignments of,
Policies that are modified endowment contracts will be treated as distributions
to the Policy Owner for tax purposes. All pre-death distributions (including
loans, partial withdrawals and collateral assignments) from these Policies will
be included in gross income on an income-first basis to the extent of any income
in
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the Policy (the cash value less the Policy Owner's investment in the Policy)
immediately before the distribution.
The law also imposes a 10% penalty tax on pre-death distributions (including
loans, collateral assignments, partial withdrawals and complete surrenders) from
modified endowment contracts to the extent they are included in income, unless a
specific exception to the penalty applies. The penalty does not apply to amounts
which are distributed on or after the date on which the taxpayer attains age
59 1/2, because the taxpayer is disabled, or as substantially equal periodic
payments over the taxpayer's life (or life expectancy) or over the joint lives
(or joint life expectancies) of the taxpayer and his or her beneficiary.
Furthermore, if the loan interest is capitalized by adding the amount due to the
balance of the loan, the amount of the capitalized interest will be treated as
an additional distribution subject to income tax as well as the 10% penalty tax,
if applicable, to the extent of income in the Policy.
The Death Benefit of a modified endowment contract remains excludable from the
gross income of the Beneficiary to the extent described above in "Tax Treatment
of Policy Benefits." Furthermore, no part of the investment growth of the Cash
Value of a modified endowment contract is includable in the gross income of the
Contract Owner unless the contract matures, is distributed or partially
surrendered, is pledged, collaterally assigned, or borrowed against, or
otherwise terminates with income in the contract prior to death. A full
surrender of the contract after age 59 1/2 will have the same tax consequences
as noted above in "Tax Treatment of Policy Benefits."
EXCHANGES
Any Policy issued in exchange for a modified endowment contract will be subject
to the tax treatment accorded to modified endowment contracts. However, the
Company believes that any Policy received in exchange for a life insurance
contract that is not a modified endowment contract will generally not be treated
as a modified endowment contract if the face amount of the Policy is greater
than or equal to the death benefit of the policy being exchanged. The payment of
any premiums at the time of or after the exchange may, however, cause the Policy
to become a modified endowment contract. A prospective purchaser should consult
a qualified tax advisor before authorizing the exchange of his or her current
life insurance contract for a Policy.
AGGREGATION OF MODIFIED ENDOWMENT CONTRACTS
In the case of a pre-death distribution (including a loan, partial withdrawal,
collateral assignment or complete surrender) from a Policy that is treated as a
modified endowment contract, a special aggregation requirement may apply for
purposes of determining the amount of the income on the Policy. Specifically, if
the Company or any of its affiliates issues to the same Policy Owner more than
one modified endowment contract within a calendar year, then for purposes of
measuring the income on the Policy with respect to a distribution from any of
those Policies, the income on the Policy for all those Policies will be
aggregated and attributed to that distribution.
POLICIES WHICH ARE NOT MODIFIED ENDOWMENT CONTRACTS
Unlike loans from modified endowment contracts, a loan from a Policy that is not
a modified endowment contract will be considered indebtedness of the Owner and
no part of a loan will constitute income to the Owner. However, the treatment of
loans taken after the 13th Policy Year, is unclear; such loans might be
considered a withdrawal instead of indebtedness for federal tax purposes.
Pre-death distributions from a Policy that is not a modified endowment contract
will generally not be included in gross income to the extent that the amount
received does not exceed the Policy Owner's investment in the Policy. (An
exception to this general rule may occur in the case of a decrease or change
that reduces the benefits provided under a Policy in the first 15 years after
the Policy is issued and that results in a cash distribution to the Policy
Owner. Such a cash distribution may be taxed in whole or in part as ordinary
income to the extent of any gain in the Policy.) Further, the 10% penalty tax on
pre-death distributions does not apply to Policies that are not modified
endowment contracts.
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Certain changes to Policies that are not modified endowment contracts may cause
such Policies to be treated as modified endowment contracts. A Policy Owner
should therefore consult a tax advisor before effecting any change to a Policy
that is not a modified endowment contract.
TREATMENT OF LOAN INTEREST
If there is any borrowing against the Policy, the interest paid on loans may not
be tax deductible.
THE COMPANY'S INCOME TAXES
The Company is taxed as a life insurance company under federal income tax law.
Presently, the Company does not expect to incur any income tax on the earnings
or the realized capital gains attributable to Fund UL. However, the Company may
assess a charge against the Investment Options for federal income taxes
attributable to those accounts in the event that the Company incurs income or
capital gains or other tax liability attributable to Fund UL under future tax
law.
THE COMPANY
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The Travelers Insurance Company (the "Company") is a stock insurance company
chartered in 1864 in Connecticut and has been engaged in the insurance business
since that time. The Company writes individual life insurance and individual and
group annuity contracts on a non-participating basis, and acts as depositor for
the Separate Account assets. The Company is licensed to conduct life insurance
business in all states of the United States, the District of Columbia, Puerto
Rico, Guam, the U.S. and British Virgin Islands, and the Bahamas. The Company's
obligations as depositor for Fund UL may not be transferred without notice to
and consent of Policy Owners.
The Company is an indirect wholly owned subsidiary of Citigroup Inc., a
financial services holding company. The Company's principal executive offices
are located at One Tower Square, Hartford, Connecticut 06183, telephone number
(860) 277-0111.
The Company is subject to Connecticut law governing insurance companies and is
regulated and supervised by the Connecticut Commissioner of Insurance. An annual
statement in a prescribed form must be filed with the Commissioner on or before
March 1 in each year covering the operations of the Company for the preceding
year and its financial condition on December 31 of such year. The Company's
books and assets are subject to review or examination by the Commissioner, and a
full examination of its operations is conducted at least once every four years.
In addition, the Company is subject to the insurance laws and regulations of any
jurisdiction in which it sells its insurance Policies, as well as to various
federal and state securities laws and regulations.
IMSA
The Company is a member of the Insurance Marketplace Standards Association
("IMSA"), and as such may use the IMSA logo and IMSA membership in its
advertisements. Companies that belong to IMSA subscribe to a set of ethical
standards covering the various aspects of sales and service for individually
sold life insurance and annuities. IMSA members have adopted policies and
procedures that demonstrate a commitment to honesty, fairness and integrity in
all customer contacts involving the sale and service of individual life
insurance and annuity products.
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MANAGEMENT
- --------------------------------------------------------------------------------
DIRECTORS OF THE TRAVELERS INSURANCE COMPANY
The following are the Directors and Executive Officers of The Travelers
Insurance Company. Unless otherwise indicated, the principal business address
for all individuals is the Company's Home Office at One Tower Square, Hartford,
Connecticut 06183. References to Citigroup include, prior to December 31, 1993,
Primerica Corporation or its predecessors, and prior to October 8, 1998,
Travelers Group Inc.
<TABLE>
<CAPTION>
DIRECTOR
NAME AND POSITION SINCE PRINCIPAL BUSINESS
----------------- -------- ------------------
<S> <C> <C>
George C. Kokulis.......... 1996 President and Chief Executive Officer since April
2000,
Director Executive Vice President (7/1999 to 3/2000), Senior
Vice President (1995-1999), Vice President (1993-1995)
of The Travelers Insurance Company.
Katherine M. Sullivan...... 1996 Senior Vice President since May 1996 and General
Director Counsel from May 1996 to August 1999 of The Travelers
Insurance Company; Senior Vice President and General
Counsel (1994-1996) Connecticut Mutual; Special
Counsel & Chief of Staff (1988-1994) Aetna Life &
Casualty.
Marc P. Weill*............. 1994 Senior Vice President-Investments since 1993 and Chief
Director Investment Officer since 1995 of The Travelers
Insurance Company; Senior Vice President and Chief
Investment Officer of Citigroup Inc. since 1992; Vice
President (1990-1992), Primerica Corporation; Vice
President (1989-1990), Smith Barney Inc.
</TABLE>
- ---------------
* Principal business address: Citigroup Inc., 153 East 53rd St., New York, New
York 10043
SENIOR OFFICERS OF THE TRAVELERS INSURANCE COMPANY
The following are the Senior Officers of The Travelers Insurance Company, other
than the Directors listed above, as of the date of this Prospectus. Unless
otherwise indicated, the principal business address for all individuals listed
is One Tower Square, Hartford, Connecticut 06183.
<TABLE>
<CAPTION>
NAME POSITION WITH INSURANCE COMPANY
---- -------------------------------
<S> <C>
Stuart Baritz........................ Senior Vice President
Jay S. Fishman....................... Senior Vice President
Barry Jacobson....................... Senior Vice President
Russell H. Johnson................... Senior Vice President
Glenn D. Lammey...................... Executive Vice President, Chief
Financial Officer, Chief Accounting
Officer and Controller
Marla Berman Lewitus................. Senior Vice President and General
Counsel
Brendan Lynch........................ Senior Vice President
Warren H. May........................ Senior Vice President
Kathleen A. Preston.................. Senior Vice President
Mary Jean Thornton................... Executive Vice President and
Chief Information Officer
David A. Tyson....................... Senior Vice President
F. Denney Voss....................... Senior Vice President
</TABLE>
Information relating to the management of the underlying funds is contained in
the applicable prospectuses.
32
<PAGE> 96
EXAMPLE OF POLICY CHARGES
- --------------------------------------------------------------------------------
The following chart illustrates the surrender charges and Monthly Deduction
Amounts that would apply under a Policy based on the assumptions listed below.
Surrender charges and Monthly Deduction Amounts generally will be higher for an
Insured who is older than the assumed Insured, and lower for an Insured who is
younger (assuming the Insureds have the same risk classification). Cost of
insurance rates go up each year as the Insured becomes a year older.
Male, Age 45
Non-Smoker
Annual Net Premium: $1,895.63
Hypothetical Gross Annual Investment
Rate of Return: 8%
Face Amount: $150,000
Level Death Benefit Option
Current Charges
<TABLE>
<CAPTION>
TOTAL MONTHLY DEDUCTION
FOR THE POLICY YEAR
-----------------------
COST OF
POLICY CUMULATIVE INSURANCE ADMINISTRATIVE
YEAR PREMIUMS SURRENDER CHARGES CHARGES CHARGES
- ------ ---------- ----------------- --------- --------------
<S> <C> <C> <C> <C>
1 $ 1,895.63 $1,181.14 $464.93 $432.00
2 $ 3,791.26 $1,177.20 $494.74 $432.00
3 $ 5,686.89 $1,173.25 $528.00 $432.00
5 $ 9,478.15 $1,165.27 $595.75 $ 0
10 $18,956.30 $1,144.91 $790.52 $ 0
</TABLE>
Hypothetical results shown above are illustrative only and are based on the
Hypothetical Gross Annual Investment Rate of Return shown above. This
Hypothetical Gross Annual Investment Rate of Return should not be deemed to be a
representation of past or future investment results. Actual investment results
may be more or less than those shown. No representations can be made that the
hypothetical rates assumed can be achieved for any one year or sustained over
any period of time.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, Fund UL's Investment Options may show the percentage change
in the value of an Accumulation Unit based on the performance of the Investment
Option over a period of time, usually for the past one-, two-, three-, five-,
and ten-year periods determined by dividing the increase (decrease) in value for
that unit by the Accumulation Unit Value at the beginning of the period.
For Investment Options of Fund UL that invest in underlying funds that were in
existence prior to the date on which the Investment Option became available
under the Policy, average annual rates of return may include periods prior to
the inception of the Investment Option. Performance calculations for Investment
Options with pre-existing Investment Options will be calculated by adjusting the
actual returns of the Investment Options to reflect the charges that would have
been assessed under the Investment Options had the Investment Option been
available under Fund UL during the period shown.
The following performance information represents the percentage change in the
value of an Accumulation Unit of the Investment Options for the periods
indicated, and reflects all expenses of the Investment Options. The chart
reflects the guaranteed maximum .80% mortality and expense risk charge and .10%
administrative expense risk charge. The rates of return do not reflect the 2.5%
front-end sales charge or the 2.5% state premium tax charge (both of which are
deducted from premium payments) nor do they reflect surrender charges or Monthly
Deduction Amounts. The surrender charges and Monthly Deduction Amounts for a
hypothetical Insured are depicted in the Example following the Rates of Returns.
For information about the Charges and Deductions assessed under the Policy, see
page 18. For illustrations of how these charges affect Cash Values and Death
Benefits, see the Illustrations beginning on page 35. The performance
information described in this prospectus, may be used from time to time in
advertisement for the Policy, subject to National Association of Securities
Dealers, Inc. ("NASD") and applicable state approval and guidelines.
33
<PAGE> 97
The table below shows the net annual rates of return for accumulation units of
investment options available through MarketLife.
AVERAGE ANNUAL RETURNS THROUGH 12/31/1999
<TABLE>
<CAPTION>
FUND
INCEPTION
UNDERLYING INVESTMENT OPTIONS ONE YEAR THREE YEARS FIVE YEARS TEN YEARS DATE
- ----------------------------- -------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
STOCK FUNDS:
AIM Capital Appreciation Portfolio 41.58% 22.24% -- -- 10/10/95
Alliance Growth Portfolio 30.97% 28.85% 29.60% -- 06/16/94
Capital Appreciation Fund 51.97% 44.82% 39.07% 23.30% 03/18/82
Dreyfus Stock Index Fund 19.46% 25.93% 26.82% 16.58% 09/29/89
Equity Income Portfolio 5.36% 13.92% 17.48% 13.41% 10/09/86
Growth Portfolio 36.09% 31.98% 28.46% 18.79% 10/09/86
Smith Barney Large Cap Value -0.83% 10.61% 16.16% -- 06/16/94
Total Return Portfolio 20.89% 13.33% 17.46% -- 10/16/91
Templeton Growth Securities Fund 27.85% 12.45% 16.41% 12.50% 08/31/88
Utilities Portfolio -0.97% 12.90% 14.42% -- 02/04/94
BOND FUNDS:
High Income Portfolio 7.16% 5.81% 9.83% 11.41% 09/19/85
Smith Barney High Income Portfolio 1.67% 4.51% 8.37% -- 06/16/94
Templeton Global Income Securities -6.69% 0.22% 4.44% 5.04% 08/31/88
US Govt Securities -4.99% 5.00% 7.48% -- 01/24/92
Zero Coupon Bond 2000 2.39% 5.06% -- -- 10/11/95
Zero Coupon Bond 2005 -6.27% 4.88% -- -- 10/11/95
BALANCED FUNDS:
Asset Mgr Portfolio 10.06% 14.45% 14.54% 12.08% 09/06/89
MFS Total Return Portfolio 1.71% 10.54% 13.77% -- 06/16/94
Templeton Asset Strategy Fund 21.69% 13.66% 15.97% 12.01% 08/31/88
Managed Assets Trust 13.16% 17.82% 18.32% 12.00% 08/06/82
MONEY MARKET FUND:
Money Market(1) 4.04% 4.08% 3.76% 3.69% 10/01/81
</TABLE>
The information presented in the above chart represents the percentage change in
the value of an accumulation unit of the underlying investment options for the
periods indicated, and reflects all expenses of the underlying funds, 0.80%
mortality and expense risk charge and 0.10% administrative expense charge
against amounts allocated to the underlying funds. The rates of return do not
reflect the 2.5% front-end sales charge or the 2.5% state premium tax charge
(both of which are deducted from premium payments) nor do they reflect surrender
charges or monthly deduction amounts. These charges would reduce the average
annual return reflected.
(1) An investment in Money Market Portfolio is neither insured nor guaranteed by
the United States Government. There 1 is no assurance that a stable $1.00
value will be maintained.
34
<PAGE> 98
ILLUSTRATIONS
- --------------------------------------------------------------------------------
The following pages are intended to illustrate how the Account Value, Cash
Surrender Value and Death Benefit can change over time for Policies issued to a
45 year old male and a 45 year old female. The difference between the Account
Value and the Cash Surrender Value in these illustrations represents the
Surrender Charge that would be incurred upon a full surrender of the Policy.
The illustrations assume that premiums are paid as indicated, no Policy loans
are made, no increases or decreases to the Stated Amount are requested, no
partial surrenders are made, and no charges for transfers between funds are
incurred.
For both male and female age 45, there are two pages of values. One page
illustrates the assumption that the maximum Guaranteed Cost of Insurance Rates,
the monthly administrative charge, mortality and expense risk charge, and
administrative expense charge allowable under the Policy are charged in all
years. The other page illustrates the assumption that the current scale of Cost
of Insurance Rates and other charges are charged in all years. The Cost of
Insurance Rates charged vary by age, sex and underwriting classification, and
the monthly administrative charge varies by age and amount of insurance. The
illustrations reflect a deduction of 5% from each annual premium for premium tax
(2.5%) and front end sales charge (2.5%).
The values shown in these illustrations vary according to the assumptions used
for expense charges, credited interest and mortality charges. Interest is
assumed to be credited to the Account Value at the net investment rate of
return, which is equal to the hypothetical gross investment rate of return (0%,
6% or 12%) minus either 1.53% for guaranteed charges, or 1.23% for current
charges. The guaranteed charge consists of 0.80% for mortality and expense
risks, 0.10% for administrative expenses, and .63% for Investment Option
expenses. The current charge consists of 0.60% for mortality and expense risks,
and .63% for Investment Option expenses.
The charge for Investment Option expenses reflected in the illustrations assumes
that Cash Value is allocated equally among all Investment Options and that no
Policy Loans are outstanding, and is an average of the investment advisory fees
and other expenses charged by each of the Investment Options during the most
recent audited calendar year.
The Investment Option expenses for some of the Investment Options reflect an
expense reimbursement agreement currently in effect, as shown in the Policy
prospectus summary. Although these reimbursement arrangements are expected to
continue in subsequent years, the effect of discontinuance could be higher
expenses charged to Policy Owners.
After deduction of these amounts, the illustrated gross annual investment rates
of return of 0%, 6%, and 12% correspond to approximate net annual rates of
- -1.53%, 4.47%, and 10.47%, respectively on a guaranteed basis, and to
approximate net annual rates of -1.23%, 4.77% and 10.77%, respectively on a
current basis.
The illustrations do not reflect any charges for federal income taxes against
the Separate Account, since the Company is not currently deducting such charges
from the Separate Account. However, such charges may be made in the future, and
in that event, the gross annual investment rates of return would have to exceed
0%, 6% and 12% by an amount sufficient to cover the tax charges in order to
produce the Death Benefits, Account Values and Cash Surrender Values
illustrated.
Upon request, the Company will provide a comparable illustration based upon the
proposed Insured's age, sex, underwriting classification, the specified
insurance benefits, and the premium requested. The illustration will show
average fund expenses or, if requested, actual fund expenses. The hypothetical
gross annual investment return assumed in such an illustration will not exceed
12%.
35
<PAGE> 99
IN-VEST
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY
LEVEL DEATH BENEFIT OPTION
ILLUSTRATED WITH CURRENT CHARGES**
<TABLE>
<S> <C>
Female, Issue Age 45 Face Amount: $150,000
Non-smoker Annual Premium: $1,798.13
</TABLE>
<TABLE>
<CAPTION>
TOTAL
PREMIUMS DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
WITH 5% ------------------------------ ------------------------------ ------------------------------
YEAR INTEREST 0% 6% 12% 0% 6% 12% 0% 6% 12%
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,888 150,000 150,000 150,000 836 910 986 0 0 0
2 3,870 150,000 150,000 150,000 1,652 1,855 2,069 584 775 976
3 5,952 150,000 150,000 150,000 2,436 2,823 3,246 1,429 1,793 2,191
4 8,138 150,000 150,000 150,000 3,616 4,256 4,983 2,644 3,246 3,930
5 10,433 150,000 150,000 150,000 4,747 5,724 6,875 3,816 4,734 5,816
6 12,842 150,000 150,000 150,000 5,835 7,233 8,942 4,947 6,260 7,867
7 15,372 150,000 150,000 150,000 6,894 8,799 11,219 6,050 7,840 10,249
8 18,029 150,000 150,000 150,000 7,919 10,421 13,727 7,121 9,559 12,865
9 20,819 150,000 150,000 150,000 8,903 12,095 16,483 8,153 11,340 15,728
10 23,748 150,000 150,000 150,000 9,828 13,806 19,499 9,181 13,158 18,851
15 40,741 150,000 150,000 150,000 13,660 23,083 39,794 13,660 23,083 39,794
20 62,430 150,000 150,000 150,000 15,721 33,413 73,057 15,721 33,413 73,057
</TABLE>
These hypothetical rates of returns are illustrative only and should not be
considered a representation of past or future investment results. Actual
investment results may be more or less than those shown and will depend on a
number of factors. The Account Values and Cash Surrender Values will be
different from those shown if the actual rates of return averaged 0%, 6%, or 12%
over a period of years but fluctuated above or below the average for individual
contract years. No representation can be made that these rates of return can be
achieved for any one year or sustained over a period of time.
** Current cost of insurance charges, mortality and expense risk charge, monthly
administrative charge and administrative expense charge.
36
<PAGE> 100
IN-VEST
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY
LEVEL DEATH BENEFIT OPTION
ILLUSTRATED WITH GUARANTEED CHARGES**
<TABLE>
<S> <C>
Female, Issue Age 45 Face Amount: $150,000
Non-smoker Annual Premium: $1,798.13
</TABLE>
<TABLE>
<CAPTION>
TOTAL
PREMIUMS DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
WITH 5% ------------------------------ ------------------------------ ------------------------------
YEAR INTEREST 0% 6% 12% 0% 6% 12% 0% 6% 12%
-----------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,888 150,000 150,000 150,000 712 783 854 0 0 0
2 3,870 150,000 150,000 150,000 1,379 1,566 1,763 327 503 688
3 5,952 150,000 150,000 150,000 2,000 2,348 2,730 1,019 1,346 1,706
4 8,138 150,000 150,000 150,000 3,002 3,569 4,216 2,067 2,600 3,208
5 10,433 150,000 150,000 150,000 3,946 4,802 5,816 3,063 3,868 4,820
6 12,842 150,000 150,000 150,000 4,832 6,047 7,540 4,004 5,146 6,549
7 15,372 150,000 150,000 150,000 5,656 7,300 9,400 4,886 6,431 8,430
8 18,029 150,000 150,000 150,000 6,412 8,555 11,405 5,705 7,719 10,543
9 20,819 150,000 150,000 150,000 7,096 9,809 13,566 6,454 9,053 12,810
10 23,748 150,000 150,000 150,000 7,708 11,059 15,902 7,137 10,412 15,254
15 40,741 150,000 150,000 150,000 9,715 17,313 31,071 9,715 17,313 31,071
20 62,430 150,000 150,000 150,000 9,293 22,937 54,730 9,293 22,937 54,730
</TABLE>
These hypothetical rates of returns are illustrative only and should not be
considered a representation of past or future investment results. Actual
investment results may be more or less than those shown and will depend on a
number of factors. The Account Values and Cash Surrender Values will be
different from those shown if the actual rates of return averaged 0%, 6%, or 12%
over a period of years but fluctuated above or below the average for individual
contract years. No representation can be made that these rates of return can be
achieved for any one year or sustained over a period of time.
** Guaranteed cost of insurance charges, mortality and expense risk charge,
monthly administrative charge and administrative expense charge.
37
<PAGE> 101
IN-VEST
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY
LEVEL DEATH BENEFIT OPTION
ILLUSTRATED WITH CURRENT CHARGES**
<TABLE>
<S> <C>
Male, Issue Age 45 Face Amount: $150,000
Non-smoker Annual Premium: $1,895.63
</TABLE>
<TABLE>
<CAPTION>
TOTAL
PREMIUMS DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
WITH 5% ------------------------------ ------------------------------ ------------------------------
YEAR INTEREST 0% 6% 12% 0% 6% 12% 0% 6% 12%
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,990 150,000 150,000 150,000 888 967 1,046 0 0 0
2 4,080 150,000 150,000 150,000 1,734 1,949 2,174 661 863 1,075
3 6,275 150,000 150,000 150,000 2,536 2,944 3,389 1,523 1,906 2,325
4 8,579 150,000 150,000 150,000 3,728 4,399 5,162 2,750 3,381 4,098
5 10,998 150,000 150,000 150,000 4,865 5,883 7,086 3,926 4,884 6,014
6 13,539 150,000 150,000 150,000 5,953 7,406 9,185 5,058 6,423 8,096
7 16,206 150,000 150,000 150,000 6,992 8,965 11,478 6,142 7,997 10,479
8 19,007 150,000 150,000 150,000 7,977 10,560 13,983 7,175 9,669 13,092
9 21,947 150,000 150,000 150,000 8,904 12,189 16,721 8,154 11,404 15,937
10 25,035 150,000 150,000 150,000 9,757 13,837 19,703 9,081 13,161 19,027
15 42,950 150,000 150,000 150,000 13,000 22,522 39,581 13,000 22,522 39,581
20 65,815 150,000 150,000 150,000 13,409 31,049 71,433 13,409 31,049 71,433
</TABLE>
These hypothetical rates of returns are illustrative only and should not be
considered a representation of past or future investment results. Actual
investment results may be more or less than those shown and will depend on a
number of factors. The Account Values and Cash Surrender Values will be
different from those shown if the actual rates of return averaged 0%, 6%, or 12%
over a period of years but fluctuated above or below the average for individual
contract years. No representation can be made that these rates of return can be
achieved for any one year or sustained over a period of time.
** Current cost of insurance charges, mortality and expense risk charge, monthly
administrative charge and administrative expense charge.
38
<PAGE> 102
IN-VEST
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY
LEVEL DEATH BENEFIT OPTION
ILLUSTRATED WITH GUARANTEED CHARGES**
<TABLE>
<S> <C>
Male, Issue Age 45 Face Amount: $150,000
Non-smoker Annual Premium: $1,895.63
</TABLE>
<TABLE>
<CAPTION>
TOTAL
PREMIUMS DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
WITH 5% ------------------------------ ------------------------------ ------------------------------
YEAR INTEREST 0% 6% 12% 0% 6% 12% 0% 6% 12%
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,990 150,000 150,000 150,000 647 719 791 0 0 0
2 4,080 150,000 150,000 150,000 1,231 1,415 1,609 188 361 543
3 6,275 150,000 150,000 150,000 1,749 2,084 2,453 783 1,098 1,445
4 8,579 150,000 150,000 150,000 2,626 3,163 3,779 1,714 2,219 2,798
5 10,998 150,000 150,000 150,000 3,424 4,225 5,179 2,572 3,325 4,222
6 13,539 150,000 150,000 150,000 4,136 5,261 6,652 3,350 4,406 5,715
7 16,206 150,000 150,000 150,000 4,752 6,258 8,197 4,037 5,452 7,275
8 19,007 150,000 150,000 150,000 5,262 7,204 9,812 4,624 6,449 8,921
9 21,947 150,000 150,000 150,000 5,654 8,084 11,493 5,098 7,383 10,709
10 25,035 150,000 150,000 150,000 5,916 8,883 13,239 5,453 8,242 12,562
15 42,950 150,000 150,000 150,000 4,990 11,205 23,008 4,990 11,205 23,008
20 65,815 150,000 150,000 150,000 0 8,476 34,361 0 8,476 34,361
</TABLE>
These hypothetical rates of returns are illustrative only and should not be
considered a representation of past or future investment results. Actual
investment results may be more or less than those shown and will depend on a
number of factors. The Account Values and Cash Surrender Values will be
different from those shown if the actual rates of return averaged 0%, 6%, or 12%
over a period of years but fluctuated above or below the average for individual
contract years. No representation can be made that these rates of return can be
achieved for any one year or sustained over a period of time.
** Guaranteed cost of insurance charges, mortality and expense risk charge,
monthly administrative charge and administrative expense charge.
39
<PAGE> 103
APPENDIX A
ANNUAL MINIMUM PREMIUMS
(Per Thousand of Stated Amount)
<TABLE>
<CAPTION>
AGE MALE FEMALE
- --- ---- ------
<S> <C> <C>
0 2.80 2.42
1 2.69 2.47
2 2.59 2.48
3 2.58 2.47
4 2.58 2.47
5 2.58 2.47
6 2.58 2.47
7 2.60 2.49
8 2.62 2.52
9 2.66 2.56
10 2.72 2.62
11 2.80 2.68
12 2.89 2.76
13 3.01 2.84
14 3.13 2.94
15 3.25 3.04
16 3.38 3.16
17 3.51 3.28
18 3.62 3.40
19 3.72 3.47
20 3.81 3.53
21 3.90 3.60
22 3.98 3.67
23 4.05 3.73
24 4.08 3.71
25 4.13 3.76
26 4.30 3.93
27 4.45 4.09
28 4.61 4.26
29 4.76 4.41
30 4.92 4.60
31 5.12 4.80
32 5.32 5.02
33 5.52 5.22
34 5.74 5.46
35 5.98 5.71
36 6.33 6.01
37 6.66 6.31
38 7.01 6.64
39 7.34 6.97
40 7.69 7.34
41 8.17 7.75
42 8.66 8.18
43 9.14 8.62
44 9.63 9.11
45 10.11 9.59
46 10.79 10.13
47 11.47 10.70
</TABLE>
<TABLE>
<CAPTION>
AGE MALE FEMALE
- --- ---- ------
<S> <C> <C>
48 12.15 11.29
49 12.83 11.89
50 13.51 12.51
51 14.42 13.18
52 15.34 13.86
53 16.24 14.53
54 17.16 15.29
55 18.07 16.10
56 19.43 17.11
57 20.79 18.20
58 22.16 19.35
59 23.52 20.51
60 24.88 21.68
61 27.11 22.98
62 29.34 24.27
63 31.57 25.59
64 33.80 27.01
65 36.03 28.57
66 38.86 30.12
67 41.70 31.63
68 44.52 33.29
69 47.36 35.39
70 49.76 37.75
71 54.39 40.67
72 59.04 44.16
73 63.71 48.15
74 68.41 52.54
75 72.60 57.27
76 80.21 62.20
77 87.34 67.37
78 94.52 73.00
79 101.76 79.30
80 109.06 86.49
81 120.34 94.56
82 131.76 103.39
83 143.32 112.96
84 155.03 123.28
85 166.88 138.49
86 170.39 149.27
87 177.17 159.84
88 191.28 171.55
89 208.18 185.73
90 241.15 203.75
91 254.21 225.63
92 282.60 250.53
93 314.35 278.47
94 349.51 309.50
</TABLE>
APPENDIX A -- ANNUAL MINIMUM PREMIUMS
40
<PAGE> 104
APPENDIX B
PER THOUSAND OF STATED AMOUNT SURRENDER CHARGE
(First Year)
<TABLE>
<CAPTION>
STATED AMOUNT
---------------------------------------
ISSUE $75,000 $500,000 $1,000,000
AGE TO $499,999 TO $999,999 AND ABOVE
- ----- ----------- ----------- ----------
<S> <C> <C> <C>
0 2.04 1.84 1.63
1 2.04 1.84 1.63
2 2.04 1.84 1.63
3 2.04 1.84 1.63
4 2.04 1.84 1.63
5 2.19 1.97 1.75
6 2.19 1.97 1.75
7 2.21 1.99 1.77
8 2.23 2.01 1.78
9 2.26 2.03 1.81
10 2.39 2.15 1.91
11 2.46 2.21 1.97
12 2.54 2.29 2.03
13 2.65 2.39 2.12
14 2.75 2.48 2.20
15 2.76 2.48 2.21
16 2.77 2.49 2.22
17 2.79 2.51 2.23
18 2.82 2.54 2.26
19 2.90 2.61 2.32
20 2.86 2.57 2.29
21 2.93 2.64 2.34
22 2.99 2.69 2.39
23 3.04 2.74 2.43
24 3.06 2.75 2.45
25 3.08 2.77 2.46
26 3.14 2.83 2.51
27 3.25 2.93 2.60
28 3.37 3.03 2.70
29 3.47 3.12 2.78
30 3.49 3.14 2.79
31 3.64 3.28 2.91
32 3.78 3.40 3.02
</TABLE>
<TABLE>
<CAPTION>
STATED AMOUNT
---------------------------------------
ISSUE $75,000 $500,000 $1,000,000
AGE TO $499,999 TO $999,999 AND ABOVE
- ----- ----------- ----------- ----------
<S> <C> <C> <C>
33 3.92 3.53 3.14
34 4.08 3.67 3.26
35 4.19 3.77 3.35
36 4.43 3.99 3.54
37 4.66 4.19 3.73
38 4.91 4.42 3.93
39 5.14 4.63 4.11
40 5.69 5.12 4.55
41 6.05 5.45 4.84
42 6.41 5.77 5.13
43 6.76 6.08 5.41
44 7.13 6.42 5.70
45 7.18 6.46 5.74
46 7.66 6.89 6.13
47 8.14 7.33 6.51
48 8.63 7.77 6.90
49 9.11 8.20 7.29
50 10.00 9.00 8.00
51 10.67 9.60 8.54
52 11.35 10.22 9.06
53 12.02 10.82 9.62
54 12.70 11.43 10.16
55 13.01 11.71 10.41
56 13.99 12.69 11.19
57 14.97 13.47 11.98
58 15.96 14.36 12.77
59 16.93 15.24 13.54
60 17.91 16.12 14.33
61 19.52 17.57 15.82
62 21.12 19.01 16.90
63 22.73 20.46 18.18
64 24.34 21.91 19.47
65+ 25.40 22.85 20.32
</TABLE>
APPENDIX B -- PER THOUSAND OF STATED AMOUNT SURRENDER CHARGE
41
<PAGE> 105
APPENDIX C
MONTHLY ADMINISTRATIVE CHARGE
(PER THOUSAND OF STATED AMOUNT)
APPLICABLE FOR THREE YEARS FOLLOWING ISSUE OR INCREASE
<TABLE>
<CAPTION>
STATED AMOUNT
--------------------------------
$75,000 $500,000 $1,000,000
ISSUE TO TO AND
AGE $499,999 $999,999 ABOVE
- ----- -------- -------- ----------
<S> <C> <C> <C>
0 0.16 0.08 0.00
1 0.16 0.08 0.00
2 0.16 0.08 0.00
3 0.16 0.08 0.00
4 0.16 0.08 0.00
5 0.16 0.08 0.00
6 0.16 0.08 0.00
7 0.16 0.08 0.00
8 0.16 0.08 0.00
9 0.16 0.08 0.00
10 0.16 0.08 0.00
11 0.16 0.08 0.00
12 0.16 0.08 0.00
13 0.16 0.08 0.00
14 0.16 0.08 0.00
15 0.16 0.08 0.00
16 0.16 0.08 0.00
17 0.16 0.08 0.00
18 0.16 0.08 0.00
19 0.16 0.08 0.00
20 0.16 0.08 0.00
21 0.16 0.08 0.00
22 0.16 0.08 0.00
23 0.16 0.08 0.00
24 0.16 0.08 0.00
25 0.16 0.08 0.00
26 0.16 0.09 0.00
27 0.17 0.09 0.00
28 0.17 0.09 0.00
29 0.18 0.09 0.00
30 0.18 0.09 0.00
31 0.18 0.09 0.00
32 0.18 0.09 0.00
</TABLE>
<TABLE>
<CAPTION>
STATED AMOUNT
--------------------------------
$75,000 $500,000 $1,000,000
ISSUE TO TO AND
AGE $499,999 $999,999 ABOVE
- ----- -------- -------- ----------
<S> <C> <C> <C>
33 0.19 0.09 0.00
34 0.19 0.09 0.00
35 0.19 0.09 0.00
36 0.20 0.09 0.00
37 0.21 0.10 0.00
38 0.22 0.10 0.00
39 0.23 0.10 0.00
40 0.23 0.10 0.00
41 0.24 0.10 0.00
42 0.24 0.10 0.00
43 0.24 0.10 0.00
44 0.24 0.10 0.00
45 0.24 0.10 0.00
46 0.25 0.11 0.00
47 0.26 0.11 0.00
48 0.27 0.11 0.00
49 0.28 0.11 0.00
50 0.29 0.15 0.00
51 0.30 0.15 0.00
52 0.32 0.15 0.00
53 0.33 0.15 0.00
54 0.34 0.15 0.00
55 0.35 0.15 0.00
56 0.35 0.15 0.00
57 0.35 0.15 0.00
58 0.36 0.15 0.00
59 0.36 0.15 0.00
60 0.36 0.15 0.00
61 0.38 0.15 0.00
62 0.38 0.15 0.00
63 0.38 0.15 0.00
64 0.39 0.15 0.00
65+ 0.39 0.15 0.00
</TABLE>
42
<PAGE> 106
IN-VEST
INDIVIDUAL VARIABLE UNIVERSAL LIFE INSURANCE CONTRACTS
ISSUED BY
THE TRAVELERS INSURANCE COMPANY
HARTFORD, CONNECTICUT
L-11166 May, 2000
<PAGE> 107
ANNUAL REPORT
DECEMBER 31, 1999
THE TRAVELERS FUND UL
FOR VARIABLE LIFE INSURANCE
[TRAVELERS LIFE&ANNUITY LOGO]
The Travelers Insurance Company
The Travelers Life and Annuity Company
One Tower Square
Hartford, CT 06183
<PAGE> 108
THE TRAVELERS FUND UL
FOR VARIABLE LIFE INSURANCE
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
ASSETS:
Investments in eligible funds at market value:
<S> <C> <C>
American Odyssey Funds, Inc., 33,778 shares (cost $492,722) ...................... $ 597,605
BT Insurance Funds Trust, 988 shares (cost $11,661) .............................. 12,343
Capital Appreciation Fund, 173,512 shares (cost $9,510,997) ...................... 18,878,067
Dreyfus Stock Index Fund, 257,056 shares (cost $7,539,535) ....................... 9,883,790
Fidelity's Variable Insurance Products Fund, 1,087,158 shares (cost $26,282,289) . 33,849,777
Fidelity's Variable Insurance Products Fund II, 293,756 shares (cost $4,684,952) . 5,484,426
Greenwich Street Series Fund, 65,275 shares (cost $1,102,900) .................... 1,317,194
High Yield Bond Trust, 21,640 shares (cost $204,154) ............................. 204,930
Managed Assets Trust, 174,462 shares (cost $3,075,146) ........................... 3,684,632
Money Market Portfolio, 7,893,624 shares (cost $7,893,624) ....................... 7,893,624
Templeton Variable Products Series Fund, 665,895 shares (cost $13,422,701) ....... 15,141,503
The Travelers Series Trust, 498,792 shares (cost $5,601,405) ..................... 5,595,834
Travelers Series Fund Inc., 644,041 shares (cost $11,320,794) .................... 14,804,767
-------------
Total Investments (cost $91,142,880) .......................................... $ 117,348,492
Receivables:
Dividends ........................................................................ 18,430
Purchase payments and transfers from other Travelers accounts .................... 1,243
-------------
Total Assets .................................................................. 117,368,165
-------------
LIABILITIES:
Payables:
Contract surrenders and transfers to other Travelers accounts ................... 4,307
Insurance charges ............................................................... 20,473
Administrative fees ............................................................. 1,665
Accrued liabilities .............................................................. 42
-------------
Total Liabilities ............................................................. 26,487
-------------
NET ASSETS: 117,341,678
=============
</TABLE>
See Notes to Financial Statements
-1-
<PAGE> 109
THE TRAVELERS FUND UL
FOR VARIABLE LIFE INSURANCE
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends .................................................................. $ 5,860,336
EXPENSES:
Insurance charges .......................................................... $ 707,393
Administrative charges ..................................................... 56,164
-----------
Total expenses ............................................................ 763,557
------------
Net investment income .................................................... 5,096,779
------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ............................................ 21,933,684
Cost of investments sold .................................................. 19,227,722
-----------
Net realized gain (loss) ............................................... 2,705,962
Change in unrealized gain (loss) on investments:
Unrealized gain at December 31, 1998 ....................................... 13,494,916
Unrealized gain at December 31, 1999 ....................................... 26,205,612
-----------
Net change in unrealized gain (loss) for the year ......................... 12,710,696
------------
Net realized gain (loss) and change in unrealized gain (loss) ............ 15,416,658
------------
Net increase in net assets resulting from operations ........................ $ 20,513,437
============
</TABLE>
See Notes to Financial Statements
-2-
<PAGE> 110
THE TRAVELERS FUND UL
FOR VARIABLE LIFE INSURANCE
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
OPERATIONS:
<S> <C> <C>
Net investment income .......................................... $ 5,096,779 $ 4,884,569
Net realized gain (loss) from investment transactions .......... 2,705,962 2,596,204
Net change in unrealized gain (loss) on investments ............ 12,710,696 5,398,252
------------- -------------
Net increase in net assets resulting from operations ........ 20,513,437 12,879,025
------------- -------------
UNIT TRANSACTIONS:
Participant premium payments
(applicable to 10,017,984 and 12,749,964 units, respectively)... 20,657,234 22,622,231
Participant transfers from other Travelers accounts
(applicable to 7,423,069 and 8,850,476 units, respectively) .... 17,182,307 16,644,515
Contract surrenders
(applicable to 4,624,266 and 5,653,725 units, respectively) .... (10,470,687) (10,097,307)
Participant transfers to other Travelers accounts
(applicable to 8,969,541 and 10,422,931 units, respectively) ... (18,399,253) (17,682,682)
Other payments to participants
(applicable to 38,160 and 220,614 units, respectively) ......... (106,976) (458,339)
------------- -------------
Net increase in net assets resulting from unit transactions .... 8,862,625 11,028,418
------------- -------------
Net increase in net assets .................................. 29,376,062 23,907,443
NET ASSETS:
Beginning of year .............................................. 87,965,616 64,058,173
------------- -------------
End of year .................................................... $ 117,341,678 $ 87,965,616
============= =============
</TABLE>
See Notes to Financial Statements
-3-
<PAGE> 111
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Fund UL for Variable Life Insurance ("Fund UL") is a separate
account of The Travelers Insurance Company ("The Travelers"), an indirect
wholly owned subsidiary of Citigroup Inc., and is available for funding
certain variable life insurance contracts issued by The Travelers. Fund UL
is registered under the Investment Company Act of 1940, as amended, as a
unit investment trust. The Travelers interest in the net assets of Fund UL
was $2,452,904 at December 31, 1999. Fund UL is comprised of InVest, The
Travelers Market Life and Travelers Variable Survivorship Life products.
Participant premium payments applied to Fund UL are invested in one or more
eligible funds in accordance with the selection made by the owner. As of
December 31, 1999, the eligible funds available under Fund UL were: Managed
Assets Trust; High Yield Bond Trust; Capital Appreciation Fund; Money Market
Portfolio; U.S. Government Securities Portfolio, Utilities Portfolio, Zero
Coupon Bond Fund Portfolio Series 2000 and Zero Coupon Bond Fund Portfolio
Series 2005 of The Travelers Series Trust; Alliance Growth Portfolio, Smith
Barney Large Cap Value Portfolio, Smith Barney High Income Portfolio, MFS
Total Return Portfolio, Putnam Diversified Income Portfolio and AIM Capital
Appreciation Portfolio of Travelers Series Fund Inc.; Total Return Portfolio
and Equity Index Portfolio of Greenwich Street Series Fund (all of which are
managed by affiliates of The Travelers); Templeton Bond Fund (Class 1),
Templeton Stock Fund (Class 1) and Templeton Asset Allocation Fund (Class 1)
of Templeton Variable Products Series Fund; High Income Portfolio, Growth
Portfolio and Equity-Income Portfolio of Fidelity's Variable Insurance
Products Fund; Asset Manager Portfolio of Fidelity's Variable Insurance
Products Fund II; EAFE Equity Index Fund and Small Cap Index Fund of BT
Insurance Funds Trust; and Dreyfus Stock Index Fund. All of the funds are
Massachusetts business trusts, except for Travelers Series Fund Inc. and
Dreyfus Stock Index Fund which are incorporated under Maryland law. Not all
funds may be available in all states or to all contract owners.
The following is a summary of significant accounting policies consistently
followed by Fund UL in the preparation of its financial statements.
SECURITY VALUATION. Investments are valued daily at the net asset values per
share of the underlying funds.
SECURITY TRANSACTIONS. Security transactions are accounted for on the trade
date. Dividend income is recorded on the ex-dividend date.
FEDERAL INCOME TAXES. The operations of Fund UL form a part of the total
operations of The Travelers and are not taxed separately. The Travelers is
taxed as a life insurance company under the Internal Revenue Code of 1986,
as amended (the "Code"). Under existing federal income tax law, no taxes are
payable on the investment income of Fund UL. Fund UL is not taxed as a
"regulated investment company" under Subchapter M of the Code.
OTHER. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. INVESTMENTS
The aggregate costs of purchases and proceeds from sales of investments were
$36,363,703 and $21,933,684, respectively, for the year ended December 31,
1999. Realized gains and losses from investment transactions are reported on
an average cost basis. The cost of investments in eligible funds was
$91,142,880 at December 31, 1999. Gross unrealized appreciation for all
investments at December 31, 1999 was $26,721,215. Gross unrealized
depreciation for all investments at December 31, 1999 was $515,603.
-4-
<PAGE> 112
NOTES TO FINANCIAL STATEMENTS - CONTINUED
3. CONTRACT CHARGES
Insurance charges are paid for the mortality and expense risks assumed by
The Travelers. Each business day, The Travelers deducts a mortality and
expense risk charge which is reflected in the calculation of unit values.
This charge equals a maximum, on an annual basis, of 0.80%, of the amounts
held in each variable funding option. For Price I contracts (all InVest
Contracts, MarketLife Contracts issued prior to July 12, 1995, and
MarketLife Contracts issued on or after July 12, 1995 where state approval
for Enhanced MarketLife had not yet been received), the insurance charges
were 0.60%. For Price II contracts (all MarketLife Contracts issued on or
after July 12, 1995, and prior to May 1,1998, where state approval for
Enhanced MarketLife has been received, MarketLife Contracts issued after May
1, 1998 and Variable Survivorship Life), the insurance charges are 0.80% for
the first fifteen policy years, then 0.45%, 0.25% and 0.35%, respectively,
thereafter.
The administrative charges are paid for administrative expense. This fee is
also deducted each business day and reflected in the calculation of unit
values. This charge equals a maximum , on an annual basis, 0.10% of the
amounts held in each variable funding option for the first fifteen policy
years and eliminated thereafter.
The Travelers receives contingent surrender charges on full or partial
contract surrenders. Such charges are computed by applying various
percentages to premiums and/or stated contract amounts (as described in the
prospectus). The Travelers received $313,425 and $307,722 in satisfaction of
such contingent surrender charges for the years ended December 31, 1999 and
1998, respectively.
4. CHANGE IN ACCOUNTING
On January 1, 1999, in conjunction with the implementation of a new system,
Fund UL changed its basis of reporting realized gains and losses for
investment transactions from an identified cost basis to an average cost
basis. The accounting change had no effect on net assets.
5. NET CONTRACT OWNERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-------------------------------------------
ACCUMULATION UNIT NET
UNITS VALUE ASSETS
----- ----- ------
<S> <C> <C> <C>
American Odyssey Funds, Inc.
American Odyssey Core Equity Fund
Price I ................................. 31,434 $ 2.525 $ 79,384
American Odyssey Emerging Opportunities Fund
Price I ................................. 182,999 1.800 329,351
American Odyssey Global High-Yield Bond Fund
Price I ................................. 2,662 1.271 3,384
American Odyssey Intermediate-Term Bond Fund
Price I ................................. 1,732 1.269 2,198
American Odyssey International Equity Fund
Price I ................................. 82,315 2.118 174,381
American Odyssey Long-Term Bond Fund
Price I ................................. 5,985 1.431 8,564
BT Insurance Funds Trust
EAFE Equity Index Fund
Price I ................................. 1,318 1.137 1,499
Price II ................................. 3,931 1.136 4,465
Small Cap Index Fund
Price I ................................. 1,166 1.136 1,325
Price II ................................. 4,452 1.134 5,049
</TABLE>
-5-
<PAGE> 113
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. NET CONTRACT OWNERS' EQUITY (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1999
------------------------------------------------------------------------
ACCUMULATION UNIT NET
UNITS VALUE ASSETS
----- ----- ------
Capital Appreciation Fund
<S> <C> <C> <C>
Price I ....................................... 1,297,829 $ 6.647 $ 8,626,330
Price II ....................................... 1,562,435 6.559 10,248,353
Dreyfus Stock Index Fund
Price I ....................................... 782,335 3.366 2,633,146
Price II ....................................... 2,182,415 3.321 7,248,797
Fidelity's Variable Insurance Products Fund
Equity-Income Portfolio
Price I ....................................... 2,225,802 2.323 5,171,103
Price II ....................................... 2,543,500 2.293 5,831,366
Growth Portfolio
Price I ....................................... 2,671,976 3.483 9,307,269
Price II ....................................... 2,929,253 3.437 10,068,916
High Income Portfolio
Price I ....................................... 941,904 1.549 1,459,254
Price II ....................................... 1,310,697 1.529 2,003,873
Fidelity's Variable Insurance Products Fund II
Asset Manager Portfolio
Price I ....................................... 2,272,510 1.844 4,189,611
Price II ....................................... 710,992 1.819 1,293,514
Greenwich Street Series Fund
Equity Index Portfolio
Price I ....................................... 809 1.108 896
Price II ....................................... 4,468 1.106 4,942
Total Return Portfolio
Price I ....................................... 28,198 1.896 53,474
Price II ....................................... 671,422 1.873 1,257,586
High Yield Bond Trust
Price I ....................................... 74,111 2.765 204,899
Managed Assets Trust
Price I ....................................... 645,901 3.687 2,381,691
Price II ....................................... 357,908 3.639 1,302,359
Money Market Portfolio
Price I ....................................... 601,104 1.690 1,015,967
Price II ....................................... 4,133,537 1.668 6,894,388
</TABLE>
-6-
<PAGE> 114
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. NET CONTRACT OWNERS' EQUITY (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-------------------------------------------------------------------
ACCUMULATION UNIT NET
UNITS VALUE ASSETS
----- ----- ------
Templeton Variable Products Series Fund
Templeton Asset Allocation Fund (Class 1)
<S> <C> <C> <C>
Price I ................................................ 1,498,731 $ 2.021 $ 3,029,114
Price II ............................................... 872,350 1.995 1,739,906
Templeton Bond Fund (Class 1)
Price I ................................................ 128,362 1.188 152,527
Price II ............................................... 397,243 1.173 465,822
Templeton Stock Fund (Class 1)
Price I ................................................ 2,572,038 2.089 5,372,416
Price II ............................................... 2,123,966 2.061 4,378,068
The Travelers Series Trust
U.S. Government Securities Portfolio
Price I ................................................ 166,426 1.357 225,840
Price II ............................................... 1,592,346 1.339 2,132,324
Utilities Portfolio
Price I ................................................ 106,551 1.981 211,092
Price II ............................................... 127,567 1.955 249,397
Zero Coupon Bond Fund Portfolio Series 2000
Price I ................................................ 1,001,963 1.231 1,233,215
Price II ............................................... 69,322 1.215 84,246
Zero Coupon Bond Fund Portfolio Series 2005
Price I ................................................ 1,009,337 1.222 1,233,513
Price II ............................................... 186,548 1.207 225,110
Travelers Series Fund Inc.
AIM Capital Appreciation Portfolio
Price I ................................................ 176,990 1.963 347,402
Price II ............................................... 1,476,578 1.940 2,864,995
Alliance Growth Portfolio
Price I ................................................ 284,525 2.901 825,450
Price II ............................................... 2,273,250 2.863 6,509,047
MFS Total Return Portfolio
Price I ................................................ 229,373 1.688 387,143
Price II ............................................... 1,033,639 1.666 1,722,078
Smith Barney High Income Portfolio
Price I ................................................ 20,570 1.287 26,471
Price II ............................................... 620,679 1.272 789,322
Smith Barney Large Cap Value Portfolio
Price I ................................................ 79,926 1.737 138,861
Price II ............................................... 694,165 1.716 1,190,985
-------------------------
Net Contract Owners' Equity $ 117,341,678
=========================
</TABLE>
-7-
<PAGE> 115
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. STATEMENT OF INVESTMENTS
<TABLE>
<CAPTION>
INVESTMENT OPTIONS NO. OF MARKET
SHARES VALUE
------------ ------------
<S> <C> <C>
AMERICAN ODYSSEY FUNDS, INC. (0.5%)
American Odyssey Core Equity Fund (Cost $74,366) 4,509 $ 79,395
American Odyssey Emerging Opportunities Fund (Cost $285,363) 20,075 329,635
American Odyssey Global High-Yield Bond Fund (Cost $3,407) 329 3,387
American Odyssey Intermediate-Term Bond Fund (Cost $2,234) 212 2,201
American Odyssey International Equity Fund (Cost $118,257) 7,810 174,406
American Odyssey Long-Term Bond Fund (Cost $9,095) 843 8,581
------------ ------------
Total (Cost $492,722) 33,778 597,605
------------ ------------
BT INSURANCE FUNDS TRUST (0.0%)
EAFE Equity Index Fund (Cost $5,539) 439 5,968
Small Cap Index Fund (Cost $6,122) 549 6,375
------------ ------------
Total (Cost $11,661) 988 12,343
------------ ------------
CAPITAL APPRECIATION FUND (16.1%)
Total (Cost $9,510,997) 173,512 18,878,067
------------ ------------
DREYFUS STOCK INDEX FUND (8.4%)
Total (Cost $7,539,535) 257,056 9,883,790
------------ ------------
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND (28.9%)
Equity-Income Portfolio (Cost $9,589,080) 428,036 11,004,807
Growth Portfolio (Cost $13,023,195) 352,827 19,380,775
High Income Portfolio (Cost $3,670,014) 306,295 3,464,195
------------ ------------
Total (Cost $26,282,289) 1,087,158 33,849,777
------------ ------------
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND II (4.7%)
Asset Manager Portfolio
Total (Cost $4,684,952) 293,756 5,484,426
------------ ------------
GREENWICH STREET SERIES FUND (1.1%)
Equity Index Portfolio (Cost $5,694) 163 5,839
Total Return Portfolio (Cost $1,097,206) 65,112 1,311,355
------------ ------------
Total (Cost $1,102,900) 65,275 1,317,194
------------ ------------
HIGH YIELD BOND TRUST (0.2%)
Total (Cost $204,154) 21,640 204,930
------------ ------------
MANAGED ASSETS TRUST (3.1%)
Total (Cost $3,075,146) 174,462 3,684,632
------------ ------------
MONEY MARKET PORTFOLIO (6.7%)
Total (Cost $7,893,624) 7,893,624 7,893,624
------------ ------------
</TABLE>
-8-
<PAGE> 116
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
NO. OF MARKET
SHARES VALUE
------------ ------------
<S> <C> <C>
TEMPLETON VARIABLE PRODUCTS SERIES FUND (12.9%)
Templeton Asset Allocation Fund (Class 1) (Cost $4,071,052) 204,110 $ 4,770,060
Templeton Bond Fund (Class 1) (Cost $665,331) 61,909 618,475
Templeton Stock Fund (Class 1) (Cost $8,686,318) 399,876 9,752,968
------------ ------------
Total (Cost $13,422,701) 665,895 15,141,503
------------ ------------
THE TRAVELERS SERIES TRUST (4.8%)
U.S. Government Securities Portfolio (Cost $2,492,391) 208,554 2,358,747
Utilities Portfolio (Cost $442,553) 28,949 460,576
Zero Coupon Bond Fund Portfolio Series 2000 (Cost $1,250,092) 124,308 1,317,665
Zero Coupon Bond Fund Portfolio Series 2005 (Cost $1,416,369) 136,981 1,458,846
------------ ------------
Total (Cost $5,601,405) 498,792 5,595,834
------------ ------------
TRAVELERS SERIES FUND INC. (12.6%)
AIM Capital Appreciation Portfolio (Cost $2,042,644) 155,217 3,212,997
Alliance Growth Portfolio (Cost $4,933,836) 223,113 7,335,956
MFS Total Return Portfolio (Cost $2,069,373) 129,981 2,109,589
Smith Barney High Income Portfolio (Cost $874,594) 67,547 815,971
Smith Barney Large Cap Value Portfolio (Cost $1,400,347) 68,183 1,330,254
------------ ------------
Total (Cost $11,320,794) 644,041 14,804,767
------------ ------------
TOTAL INVESTMENT OPTIONS (100%)
(COST $91,142,880) $117,348,492
============
</TABLE>
-9-
<PAGE> 117
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF FUND UL OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
AMERICAN ODYSSEY AMERICAN ODYSSEY
AMERICAN ODYSSEY CORE EMERGING GLOBAL HIGH-YIELD
EQUITY FUND OPPORTUNITIES FUND BOND FUND
---------------------- ---------------------- ---------------------
1999 1998 1999 1998 1999 1998
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ............................................... $ 12,031 $ 8,470 $ 23,702 $ - $ 201 $ 1
--------- --------- --------- --------- --------- ---------
EXPENSES:
Insurance charges ....................................... 484 448 1,640 1,554 18 20
Administrative charges .................................. - - - - - -
--------- --------- --------- --------- --------- ---------
Net investment income (loss) ........................ 11,547 8,022 22,062 (1,554) 183 (19)
--------- --------- --------- --------- --------- ---------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ........................ 3,987 9,623 53,729 57,345 65 96
Cost of investments sold .............................. 3,219 5,694 55,317 64,399 67 102
--------- --------- --------- --------- --------- ---------
Net realized gain (loss) ............................ 768 3,929 (1,588) (7,054) (2) (6)
--------- --------- --------- --------- --------- ---------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .............. 18,049 19,500 (25,853) (12,045) (151) (31)
Unrealized gain (loss) end of year .................... 5,029 18,049 44,272 (25,853) (20) (151)
--------- --------- --------- --------- --------- ---------
Net change in unrealized gain (loss) for the year ... (13,020) (1,451) 70,125 (13,808) 131 (120)
--------- --------- --------- --------- --------- ---------
Net increase (decrease) in net assets
resulting from operations ........................... (705) 10,500 90,599 (22,416) 312 (145)
--------- --------- --------- --------- --------- ---------
UNIT TRANSACTIONS:
Participant premium payments ............................ 7,926 10,400 42,790 49,542 77 94
Participant transfers from other Travelers accounts ..... - 61 3,772 4,306 - -
Contract surrenders ..................................... (3,926) (4,443) (41,231) (22,358) (117) (152)
Participant transfers to other Travelers accounts ....... (1,201) (5,618) (20,286) (43,052) (10) -
Other payments to participants .......................... - - - - - -
--------- --------- --------- --------- --------- ---------
Net increase (decrease) in net assets
resulting from unit transactions .................... 2,799 400 (14,955) (11,562) (50) (58)
--------- --------- --------- --------- --------- ---------
Net increase (decrease) in net assets ............... 2,094 10,900 75,644 (33,978) 262 (203)
NET ASSETS:
Beginning of year ..................................... 77,290 66,390 253,707 287,685 3,122 3,325
--------- --------- --------- --------- --------- ---------
End of year ........................................... $ 79,384 $ 77,290 $ 329,351 $ 253,707 $ 3,384 $ 3,122
========= ========= ========= ========= ========= =========
</TABLE>
-10-
<PAGE> 118
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
AMERICAN ODYSSEY AMERICAN ODYSSEY AMERICAN ODYSSEY
INTERMEDIATE-TERM INTERNATIONAL LONG-TERM EAFE EQUITY
BOND FUND EQUITY FUND BOND FUND INDEX FUND
- ---------------------- ---------------------- ---------------------- -----------------
1999 1998 1999 1998 1999 1998 1999 1998
- --------- --------- --------- --------- --------- --------- --------- ----
<S> <C> <C> <C> <C> <C> <C> <C>
$ 162 $ 8 $ - $ 7,253 $ 958 $ 188 $ 273 $ -
- --------- --------- --------- --------- --------- --------- --------- ----
11 9 840 738 63 96 6 -
- - - - - - 1 -
- --------- --------- --------- --------- --------- --------- --------- ----
151 (1) (840) 6,515 895 92 266 -
- --------- --------- --------- --------- --------- --------- --------- ----
15 65 12,347 28,558 2,791 77,573 94 -
16 63 10,281 21,351 2,919 75,868 88 -
- --------- --------- --------- --------- --------- --------- --------- ----
(1) 2 2,066 7,207 (128) 1,705 6 -
- --------- --------- --------- --------- --------- --------- --------- ----
97 (22) 16,023 12,462 581 1,244 - -
(33) 97 56,149 16,023 (514) 581 429 -
- --------- --------- --------- --------- --------- --------- --------- ----
(130) 119 40,126 3,561 (1,095) (663) 429 -
- --------- --------- --------- --------- --------- --------- --------- ----
20 120 41,352 17,283 (328) 1,134 701 -
- --------- --------- --------- --------- --------- --------- --------- ----
484 404 17,898 21,538 1,171 1,382 2,585 -
6 16 2,966 4,669 - - 2,804 -
(81) (86) (9,368) (23,931) (414) (811) (109) -
(10) (10) (6,137) (8,587) (2,715) (77,176) (17) -
- - - - - - - -
- --------- --------- --------- --------- --------- --------- --------- ----
399 324 5,359 (6,311) (1,958) (76,605) 5,263 -
- --------- --------- --------- --------- --------- --------- --------- ----
419 444 46,711 10,972 (2,286) (75,471) 5,964 -
1,779 1,335 127,670 116,698 10,850 86,321 - -
- --------- --------- --------- --------- --------- --------- --------- ----
$ 2,198 $ 1,779 $ 174,381 $ 127,670 $ 8,564 $ 10,850 $ 5,964 $ -
========= ========= ========= ========= ========= ========= ========= ====
</TABLE>
-11-
<PAGE> 119
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF FUND UL OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
<TABLE>
<CAPTION>
SMALL CAP INDEX FUND CAPITAL APPRECIATION FUND
--------------------- ----------------------------
1999 1998 1999 1998
------------ ----- ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ............................................... $ 64 $ - $ 347,156 $ 225,348
------------ ----- ------------ ------------
EXPENSES:
Insurance charges ....................................... 2 - 104,820 56,699
Administrative charges .................................. - - 8,180 4,562
------------ ----- ------------ ------------
Net investment income (loss) ........................ 62 - 234,156 164,087
------------ ----- ------------ ------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ........................ 48 - 4,044,199 672,903
Cost of investments sold .............................. 47 - 2,342,631 405,494
------------ ----- ------------ ------------
Net realized gain (loss) ............................ 1 - 1,701,568 267,409
------------ ----- ------------ ------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .............. - - 4,618,531 930,111
Unrealized gain (loss) end of year .................... 253 - 9,367,070 4,618,531
------------ ----- ------------ ------------
Net change in unrealized gain (loss) for the year ... 253 - 4,748,539 3,688,420
------------ ----- ------------ ------------
Net increase (decrease) in net assets
resulting from operations ........................... 316 - 6,684,263 4,119,916
------------ ----- ------------ ------------
UNIT TRANSACTIONS:
Participant premium payments ............................ 241 - 2,193,850 1,722,876
Participant transfers from other Travelers accounts ..... 6,280 - 2,493,744 2,709,937
Contract surrenders ..................................... (435) - (1,816,312) (792,310)
Participant transfers to other Travelers accounts ....... (28) - (3,414,877) (417,132)
Other payments to participants .......................... - - (24,894) (160,978)
------------ ----- ------------ ------------
Net increase (decrease) in net assets
resulting from unit transactions .................... 6,058 - (568,489) 3,062,393
------------ ----- ------------ ------------
Net increase (decrease) in net assets ............... 6,374 - 6,115,774 7,182,309
NET ASSETS:
Beginning of year ..................................... - - 12,758,909 5,576,600
------------ ----- ------------ ------------
End of year ............................................. $ 6,374 $ - $ 18,874,683 $ 12,758,909
============ ===== ============ ============
<CAPTION>
DREYFUS STOCK INDEX FUND
----------------------------
1999 1998
------------ ------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends ............................................... $ 166,826 $ 80,837
------------ ------------
EXPENSES:
Insurance charges ....................................... 58,963 37,009
Administrative charges .................................. 5,681 3,583
------------ ------------
Net investment income (loss) ........................ 102,182 40,245
------------ ------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ........................ 875,515 1,348,144
Cost of investments sold .............................. 693,541 890,692
------------ ------------
Net realized gain (loss) ............................ 181,974 457,452
------------ ------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .............. 1,182,152 523,266
Unrealized gain (loss) end of year .................... 2,344,255 1,182,152
------------ ------------
Net change in unrealized gain (loss) for the year ... 1,162,103 658,886
------------ ------------
Net increase (decrease) in net assets
resulting from operations ........................... 1,446,259 1,156,583
------------ ------------
UNIT TRANSACTIONS:
Participant premium payments ............................ 1,864,556 1,357,520
Participant transfers from other Travelers accounts ..... 2,006,864 2,205,447
Contract surrenders ..................................... (705,299) (758,259)
Participant transfers to other Travelers accounts ....... (879,560) (1,144,166)
Other payments to participants .......................... (3,175) -
------------ ------------
Net increase (decrease) in net assets
resulting from unit transactions .................... 2,283,386 1,660,542
------------ ------------
Net increase (decrease) in net assets ............... 3,729,645 2,817,125
NET ASSETS:
Beginning of year ..................................... 6,152,298 3,335,173
------------ ------------
End of year ............................................. $ 9,881,943 $ 6,152,298
============ ============
</TABLE>
-12-
<PAGE> 120
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
EQUITY-INCOME PORTFOLIO GROWTH PORTFOLIO HIGH INCOME PORTFOLIO ASSET MANAGER PORTFOLIO
- ---------------------------- ---------------------------- ---------------------------- ----------------------------
1999 1998 1999 1998 1999 1998 1999 1998
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 472,928 $ 519,007 $ 1,449,423 $ 1,383,745 $ 368,897 $ 403,352 $ 408,334 $ 555,132
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
77,319 61,249 102,726 74,825 27,163 27,571 35,275 31,590
5,724 4,053 7,034 4,553 2,278 2,305 1,315 953
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
389,885 453,705 1,339,663 1,304,367 339,456 373,476 371,744 522,589
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
1,502,723 1,027,285 1,582,444 2,882,351 1,116,548 2,208,102 1,064,819 673,448
1,293,047 773,339 1,179,040 2,088,775 1,193,024 2,203,983 959,958 558,510
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
209,676 253,946 403,404 793,576 (76,476) 4,119 104,861 114,938
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
1,524,296 1,324,425 3,278,485 1,692,557 (224,114) 370,469 737,449 714,532
1,415,727 1,524,296 6,357,580 3,278,485 (205,819) (224,114) 799,474 737,449
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
(108,569) 199,871 3,079,095 1,585,928 18,295 (594,583) 62,025 22,917
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
490,992 907,522 4,822,162 3,683,871 281,275 (216,988) 538,630 660,444
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
1,662,705 1,821,387 2,016,287 2,688,152 495,575 856,339 677,119 867,895
1,509,824 782,438 2,428,944 577,474 135,586 2,321,318 110,106 394,346
(1,071,048) (1,111,405) (1,572,248) (1,397,298) (315,040) (391,089) (756,021) (372,107)
(1,349,462) (466,177) (952,751) (2,484,960) (1,045,396) (2,081,017) (599,200) (423,123)
(10,330) (125,412) (35,273) (59,946) - - (61) (841)
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
741,689 900,831 1,884,959 (676,578) (729,275) 705,551 (568,057) 466,170
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
1,232,681 1,808,353 6,707,121 3,007,293 (448,000) 488,563 (29,427) 1,126,614
9,769,788 7,961,435 12,669,064 9,661,771 3,911,127 3,422,564 5,512,552 4,385,938
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 11,002,469 $ 9,769,788 $ 19,376,185 $ 12,669,064 $ 3,463,127 $ 3,911,127 $ 5,483,125 $ 5,512,552
============ ============ ============ ============ ============ ============ ============ ============
</TABLE>
-13-
<PAGE> 121
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF FUND UL OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
<TABLE>
<CAPTION>
EQUITY INDEX
PORTFOLIO TOTAL RETURN PORTFOLIO
-------------------- --------------------------
1999 1998 1999 1998
----------- ----- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ............................................... $ - $ - $ 77,045 $ 46,880
----------- ----- ----------- -----------
EXPENSES:
Insurance charges ....................................... 2 - 9,794 7,284
Administrative charges .................................. - - 1,176 863
----------- ----- ----------- -----------
Net investment income (loss) ........................ (2) - 66,075 38,733
----------- ----- ----------- -----------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ........................ - - 193,461 84,997
Cost of investments sold .............................. - - 167,367 67,822
----------- ----- ----------- -----------
Net realized gain (loss) ............................ - - 26,094 17,175
----------- ----- ----------- -----------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .............. - - 69,832 87,967
Unrealized gain (loss) end of year .................... 145 - 214,149 69,832
----------- ----- ----------- -----------
Net change in unrealized gain (loss) for the year ... 145 - 144,317 (18,135)
----------- ----- ----------- -----------
Net increase (decrease) in net assets
resulting from operations ........................... 143 - 236,486 37,773
----------- ----- ----------- -----------
UNIT TRANSACTIONS:
Participant premium payments ............................ 64 - 187,035 181,561
Participant transfers from other Travelers accounts ..... 5,870 - 66,368 176,508
Contract surrenders ..................................... (239) - (76,644) (106,689)
Participant transfers to other Travelers accounts ....... - - (151,484) (17,224)
Other payments to participants .......................... - - - -
----------- ----- ----------- -----------
Net increase (decrease) in net assets
resulting from unit transactions .................... 5,695 - 25,275 234,156
----------- ----- ----------- -----------
Net increase (decrease) in net assets ............... 5,838 - 261,761 271,929
NET ASSETS:
Beginning of year ..................................... - - 1,049,299 777,370
----------- ----- ----------- -----------
End of year ........................................... $ 5,838 $ - $ 1,311,060 $ 1,049,299
=========== ===== =========== ===========
<CAPTION>
HIGH YIELD BOND TRUST
--------------------------
1999 1998
----------- -----------
<S> <C> <C>
INVESTMENT INCOME:
Dividends ............................................... $ 8,706 $ 15,178
----------- -----------
EXPENSES:
Insurance charges ....................................... 1,195 1,309
Administrative charges .................................. - -
----------- -----------
Net investment income (loss) ........................ 7,511 13,869
----------- -----------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ........................ 152,789 118,763
Cost of investments sold .............................. 140,553 106,699
----------- -----------
Net realized gain (loss) ............................ 12,236 12,064
----------- -----------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .............. 11,936 25,465
Unrealized gain (loss) end of year .................... 776 11,936
----------- -----------
Net change in unrealized gain (loss) for the year ... (11,160) (13,529)
----------- -----------
Net increase (decrease) in net assets
resulting from operations ........................... 8,587 12,404
----------- -----------
UNIT TRANSACTIONS:
Participant premium payments ............................ 19,019 26,399
Participant transfers from other Travelers accounts ..... 119,534 57,870
Contract surrenders ..................................... (43,214) (47,347)
Participant transfers to other Travelers accounts ....... (113,219) (77,740)
Other payments to participants .......................... - -
----------- -----------
Net increase (decrease) in net assets
resulting from unit transactions .................... (17,880) (40,818)
----------- -----------
Net increase (decrease) in net assets ............... (9,293) (28,414)
NET ASSETS:
Beginning of year ..................................... 214,192 242,606
----------- -----------
End of year ........................................... $ 204,899 $ 214,192
=========== ===========
</TABLE>
-14-
<PAGE> 122
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
TEMPLETON ASSET ALLOCATION TEMPLETON BOND FUND
MANAGED ASSETS TRUST MONEY MARKET PORTFOLIO FUND (CLASS 1) (CLASS 1)
- -------------------------- -------------------------- -------------------------- --------------------------
1999 1998 1999 1998 1999 1998 1999 1998
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 232,540 $ 149,710 $ 186,888 $ 154,385 $ 635,252 $ 240,092 $ 26,131 $ 32,614
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
21,120 14,505 28,956 24,039 29,831 28,173 4,762 4,333
1,064 527 3,167 2,618 1,542 1,263 478 421
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
210,356 134,678 154,765 127,728 603,879 210,656 20,891 27,860
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
331,109 532,152 4,355,185 6,111,697 1,105,518 460,332 128,661 83,313
281,585 429,702 4,355,185 6,111,697 1,020,236 337,833 134,781 81,836
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
49,524 102,450 - - 85,282 122,499 (6,120) 1,477
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
458,461 264,796 - - 474,929 587,676 12,791 6,720
609,486 458,461 - - 699,008 474,929 (46,856) 12,791
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
151,025 193,665 - - 224,079 (112,747) (59,647) 6,071
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
410,905 430,793 154,765 127,728 913,240 220,408 (44,876) 35,408
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
486,163 491,683 6,258,921 6,741,925 628,987 727,391 93,816 165,218
665,914 330,398 3,802,796 1,519,284 222,681 244,926 52,412 79,798
(316,082) (510,867) (870,163) (1,028,727) (645,930) (430,422) (72,307) (66,688)
(182,067) (140,305) (4,436,241) (7,713,789) (782,698) (308,864) (74,704) (38,486)
(8,562) - (399) - - (869) - -
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
645,366 170,909 4,754,914 (481,307) (576,960) 232,162 (783) 139,842
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
1,056,271 601,702 4,909,679 (353,579) 336,280 452,570 (45,659) 175,250
2,627,779 2,026,077 3,000,676 3,354,255 4,432,740 3,980,170 664,008 488,758
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
$ 3,684,050 $ 2,627,779 $ 7,910,355 $ 3,000,676 $ 4,769,020 $ 4,432,740 $ 618,349 $ 664,008
=========== =========== =========== =========== =========== =========== =========== ===========
</TABLE>
-15-
<PAGE> 123
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF FUND UL OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
<TABLE>
<CAPTION>
TEMPLETON STOCK U.S. GOVERNMENT
FUND (CLASS 1) SECURITIES PORTFOLIO
-------------------------- --------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ............................................... $ 800,720 $ 813,730 $ 268 $ 250,408
----------- ----------- ----------- -----------
EXPENSES:
Insurance charges ....................................... 60,210 59,343 24,227 14,906
Administrative charges .................................. 4,010 3,758 2,844 1,708
----------- ----------- ----------- -----------
Net investment income (loss) ........................ 736,500 750,629 (26,803) 233,794
----------- ----------- ----------- -----------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ........................ 1,823,221 1,561,814 1,013,561 311,524
Cost of investments sold .............................. 1,873,595 1,456,190 1,066,899 281,520
----------- ----------- ----------- -----------
Net realized gain (loss) ............................ (50,374) 105,624 (53,338) 30,004
----------- ----------- ----------- -----------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .............. (452,700) 539,409 (55,253) 46,013
Unrealized gain (loss) end of year .................... 1,066,650 (452,700) (133,644) (55,253)
----------- ----------- ----------- -----------
Net change in unrealized gain (loss) for the year ... 1,519,350 (992,109) (78,391) (101,266)
----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations ........................... 2,205,476 (135,856) (158,532) 162,532
----------- ----------- ----------- -----------
UNIT TRANSACTIONS:
Participant premium payments ............................ 1,327,773 2,075,969 268,091 488,039
Participant transfers from other Travelers accounts ..... 390,488 1,558,785 188,129 1,294,349
Contract surrenders ..................................... (937,367) (722,676) (191,052) (145,232)
Participant transfers to other Travelers accounts ....... (1,512,327) (1,548,621) (849,466) (224,377)
Other payments to participants .......................... (18,391) (55,834) - -
----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from unit transactions .................... (749,824) 1,307,623 (584,298) 1,412,779
----------- ----------- ----------- -----------
Net increase (decrease) in net assets ............... 1,455,652 1,171,767 (742,830) 1,575,311
NET ASSETS:
Beginning of year ..................................... 8,294,832 7,123,065 3,100,994 1,525,683
----------- ----------- ----------- -----------
End of year ........................................... $ 9,750,484 $ 8,294,832 $ 2,358,164 $ 3,100,994
=========== =========== =========== ===========
<CAPTION>
UTILITIES PORTFOLIO
--------------------------
1999 1998
----------- -----------
<S> <C> <C>
INVESTMENT INCOME:
Dividends ............................................... $ 35,271 $ 12,250
----------- -----------
EXPENSES:
Insurance charges ....................................... 3,065 1,659
Administrative charges .................................. 217 87
----------- -----------
Net investment income (loss) ........................ 31,989 10,504
----------- -----------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ........................ 48,491 34,296
Cost of investments sold .............................. 43,356 27,593
----------- -----------
Net realized gain (loss) ............................ 5,135 6,703
----------- -----------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .............. 55,396 30,111
Unrealized gain (loss) end of year .................... 18,023 55,396
----------- -----------
Net change in unrealized gain (loss) for the year ... (37,373) 25,285
----------- -----------
Net increase (decrease) in net assets
resulting from operations ........................... (249) 42,492
----------- -----------
UNIT TRANSACTIONS:
Participant premium payments ............................ 54,978 59,758
Participant transfers from other Travelers accounts ..... 131,622 98,449
Contract surrenders ..................................... (30,314) (31,913)
Participant transfers to other Travelers accounts ....... (28,197) (13,516)
Other payments to participants .......................... (863) -
----------- -----------
Net increase (decrease) in net assets
resulting from unit transactions .................... 127,226 112,778
----------- -----------
Net increase (decrease) in net assets ............... 126,977 155,270
NET ASSETS:
Beginning of year ..................................... 333,512 178,242
----------- -----------
End of year ........................................... $ 460,489 $ 333,512
=========== ===========
</TABLE>
-16-
<PAGE> 124
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
ZERO COUPON BOND ZERO COUPON BOND ZERO COUPON BOND
FUND PORTFOLIO FUND PORTFOLIO FUND PORTFOLIO AIM CAPITAL
SERIES 1998 SERIES 2000 SERIES 2005 APPRECIATION PORTFOLIO
- ------------------- -------------------------- -------------------------- --------------------------
1999 1998 1999 1998 1999 1998 1999 1998
- ----- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ - $ 63,083 $ - $ 68,351 $ - $ 74,703 $ - $ 1,994
- ----- ----------- ----------- ----------- ----------- ----------- ----------- -----------
- 6,692 7,721 7,338 9,560 8,639 16,919 11,508
- 10 56 44 215 142 1,936 1,313
- ----- ----------- ----------- ----------- ----------- ----------- ----------- -----------
- 56,381 (7,777) 60,969 (9,775) 65,922 (18,855) (10,827)
- ----- ----------- ----------- ----------- ----------- ----------- ----------- -----------
- 1,186,548 16,786 34,245 195,466 95,551 207,909 262,115
- 1,186,192 16,144 33,205 185,010 88,033 167,443 203,919
- ----- ----------- ----------- ----------- ----------- ----------- ----------- -----------
- 356 642 1,040 10,456 7,518 40,466 58,196
- ----- ----------- ----------- ----------- ----------- ----------- ----------- -----------
- 2,394 26,688 7,987 138,833 60,360 292,791 93,128
- - 67,573 26,688 42,477 138,833 1,170,353 292,791
- ----- ----------- ----------- ----------- ----------- ----------- ----------- -----------
- (2,394) 40,885 18,701 (96,356) 78,473 877,562 199,663
- ----- ----------- ----------- ----------- ----------- ----------- ----------- -----------
- 54,343 33,750 80,710 (95,675) 151,913 899,173 247,032
- ----- ----------- ----------- ----------- ----------- ----------- ----------- -----------
- 342 24,454 4,538 32,216 63,688 416,419 510,445
- - 22,805 26,367 96,144 114,346 268,208 216,820
- (1,170,656) (10,574) (5,944) (87,776) (10,152) (200,427) (179,247)
- (9,182) (98) (21,675) (61,806) (80,311) (51,335) (99,943)
- - - - - - - (54,459)
- ----- ----------- ----------- ----------- ----------- ----------- ----------- -----------
- (1,179,496) 36,587 3,286 (21,222) 87,571 432,865 393,616
- ----- ----------- ----------- ----------- ----------- ----------- ----------- -----------
- (1,125,153) 70,337 83,996 (116,897) 239,484 1,332,038 640,648
- 1,125,153 1,247,124 1,163,128 1,575,520 1,336,036 1,880,359 1,239,711
- ----- ----------- ----------- ----------- ----------- ----------- ----------- -----------
$ - $ - $ 1,317,461 $ 1,247,124 $ 1,458,623 $ 1,575,520 $ 3,212,397 $ 1,880,359
===== =========== =========== =========== =========== =========== =========== ===========
</TABLE>
-17-
<PAGE> 125
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF FUND UL OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
<TABLE>
<CAPTION>
ALLIANCE GROWTH PORTFOLIO MFS TOTAL RETURN PORTFOLIO
------------------------------ ------------------------------
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ............................................. $ 316,357 $ 208,151 $ 150,268 $ 59,754
------------- ------------- ------------- -------------
EXPENSES:
Insurance charges ..................................... 43,895 26,480 15,556 10,341
Administrative charges ................................ 5,015 2,973 1,687 1,097
------------- ------------- ------------- -------------
Net investment income (loss) ...................... 267,447 178,698 133,025 48,316
------------- ------------- ------------- -------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ...................... 470,676 420,518 287,627 199,816
Cost of investments sold ............................ 345,251 269,565 276,420 151,321
------------- ------------- ------------- -------------
Net realized gain (loss) .......................... 125,425 150,953 11,207 48,495
------------- ------------- ------------- -------------
Change in unrealized gain (loss) on investments:
Unrealized gain(loss) beginning of year ............. 1,125,311 554,376 150,664 115,974
Unrealized gain(loss) end of year ................... 2,402,120 1,125,311 40,216 150,664
------------- ------------- ------------- -------------
Net change in unrealized gain (loss) for the year.. 1,276,809 570,935 (110,448) 34,690
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations ......................... 1,669,681 900,586 33,784 131,501
------------- ------------- ------------- -------------
UNIT TRANSACTIONS:
Participant premium payments .......................... 1,014,363 795,707 349,714 422,994
Participant transfers from other Travelers accounts ... 840,746 1,026,827 211,825 597,781
Contract surrenders ................................... (396,145) (471,438) (106,368) (134,335)
Participant transfers to other Travelers accounts ..... (409,846) (145,042) (229,586) (28,238)
Other payments to participants ........................ (5,028) - - -
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from unit transactions .................. 1,044,090 1,206,054 225,585 858,202
------------- ------------- ------------- -------------
Net increase (decrease) in net assets ............. 2,713,771 2,106,640 259,369 989,703
NET ASSETS:
Beginning of year ................................... 4,620,726 2,514,086 1,849,852 860,149
------------- ------------- ------------- -------------
End of year ......................................... $ 7,334,497 $ 4,620,726 $ 2,109,221 $ 1,849,852
============= ============= ============= =============
<CAPTION>
SMITH BARNEY HIGH INCOME
PORTFOLIO
------------------------------
1999 1998
------------- -------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends ............................................. $ 57,482 $ 47,805
------------- -------------
EXPENSES:
Insurance charges ..................................... 6,462 5,337
Administrative charges ................................ 781 646
------------- -------------
Net investment income (loss) ...................... 50,239 41,822
------------- -------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ...................... 178,470 52,415
Cost of investments sold ............................ 193,299 49,894
------------- -------------
Net realized gain (loss) .......................... (14,829) 2,521
------------- -------------
Change in unrealized gain (loss) on investments:
Unrealized gain(loss) beginning of year ............. (37,007) 17,011
Unrealized gain(loss) end of year ................... (58,623) (37,007)
------------- -------------
Net change in unrealized gain (loss) for the year.. (21,616) (54,018)
------------- -------------
Net increase (decrease) in net assets
resulting from operations ......................... 13,794 (9,675)
------------- -------------
UNIT TRANSACTIONS:
Participant premium payments .......................... 94,467 271,273
Participant transfers from other Travelers accounts ... 105,702 93,719
Contract surrenders ................................... (49,330) (37,279)
Participant transfers to other Travelers accounts ..... (138,279) (14,923)
Other payments to participants ........................ - -
------------- -------------
Net increase (decrease) in net assets
resulting from unit transactions .................. 12,560 312,790
------------- -------------
Net increase (decrease) in net assets ............. 26,354 303,115
NET ASSETS:
Beginning of year ................................... 789,439 486,324
------------- -------------
End of year ......................................... $ 815,793 $ 789,439
============= =============
</TABLE>
-18-
<PAGE> 126
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
SMITH BARNEY LARGE CAP
VALUE PORTFOLIO COMBINED
- ------------------------------ ------------------------------
1999 1998 1999 1998
- ------------- ------------- ------------- -------------
<S> <C> <C> <C>
$ 82,453 $ 30,988 $ 5,860,336 $ 5,453,417
- ------------- ------------- ------------- -------------
14,788 6,869 707,393 530,563
1,763 806 56,164 38,285
- ------------- ------------- ------------- -------------
65,902 23,313 5,096,779 4,884,569
- ------------- ------------- ------------- -------------
1,165,430 117,248 21,933,684 20,652,837
1,227,403 85,342 19,227,722 18,056,633
- ------------- ------------- ------------- -------------
(61,973) 31,906 2,705,962 2,596,204
- ------------- ------------- ------------- -------------
96,699 80,809 13,494,916 8,096,664
(70,093) 96,699 26,205,612 13,494,916
- ------------- ------------- ------------- -------------
(166,792) 15,890 12,710,696 5,398,252
- ------------- ------------- ------------- -------------
(162,863) 71,109 20,513,437 12,879,025
- ------------- ------------- ------------- -------------
417,490 197,772 20,657,234 22,622,231
1,290,167 208,276 17,182,307 16,644,515
(145,106) (123,446) (10,470,687) (10,097,307)
(1,106,250) (49,428) (18,399,253) (17,682,682)
- - (106,976) (458,339)
- ------------- ------------- ------------- -------------
456,301 233,174 8,862,625 11,028,418
- ------------- ------------- ------------- -------------
293,438 304,283 29,376,062 23,907,443
1,036,408 732,125 87,965,616 64,058,173
- ------------- ------------- ------------- -------------
$ 1,329,846 $ 1,036,408 $ 117,341,678 $ 87,965,616
============= ============= ============= =============
</TABLE>
-19-
<PAGE> 127
NOTES TO FINANCIAL STATEMENTS - CONTINUED
8. SCHEDULE OF UNITS FOR FUND UL
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
AMERICAN ODYSSEY
AMERICAN ODYSSEY CORE EMERGING AMERICAN ODYSSEY GLOBAL
EQUITY FUND OPPORTUNITIES FUND HIGH-YIELD BOND FUND
------------------------ ------------------------ ------------------------
1999 1998 1999 1998 1999 1998
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Units beginning of year ............... 30,336 29,927 191,574 197,206 2,703 2,753
Units purchased and transferred from
other Travelers accounts ............ 3,053 4,410 33,112 40,292 64 78
Units redeemed and transferred to
other Travelers accounts ............ (1,955) (4,001) (41,687) (45,924) (105) (128)
---------- ---------- ---------- ---------- ---------- ----------
Units end of year ..................... 31,434 30,336 182,999 191,574 2,662 2,703
========== ========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
AMERICAN ODYSSEY AMERICAN ODYSSEY AMERICAN ODYSSEY
INTERMEDIATE-TERM INTERNATIONAL LONG-TERM
BOND FUND EQUITY FUND BOND FUND
------------------------ ------------------------ ------------------------
1999 1998 1999 1998 1999 1998
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Units beginning of year ............... 1,415 1,145 79,390 82,883 7,329 63,209
Units purchased and transferred from
other Travelers accounts ............ 389 349 12,044 17,163 812 976
Units redeemed and transferred to
other Travelers accounts ............ (72) (79) (9,119) (20,656) (2,156) (56,856)
---------- ---------- ---------- ---------- ---------- ----------
Units end of year ..................... 1,732 1,415 82,315 79,390 5,985 7,329
========== ========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
CAPITAL APPRECIATION
EAFE EQUITY INDEX FUND SMALL CAP INDEX FUND FUND
------------------------ ------------------------ ------------------------
1999 1998 1999 1998 1999 1998
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Units beginning of year ............... - - - - 2,947,093 2,064,967
Units purchased and transferred from
other Travelers accounts ............ 5,371 - 6,057 - 928,298 1,302,276
Units redeemed and transferred to
other Travelers accounts ............ (122) - (439) - (1,015,127) (420,150)
---------- ---------- ---------- ---------- ---------- ----------
Units end of year ..................... 5,249 - 5,618 - 2,860,264 2,947,093
========== ========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
DREYFUS STOCK INDEX FUND EQUITY-INCOME PORTFOLIO GROWTH PORTFOLIO
------------------------ ------------------------ ------------------------
1999 1998 1999 1998 1999 1998
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Units beginning of year ............... 2,207,470 1,521,389 4,467,025 4,031,218 4,992,277 5,270,282
Units purchased and transferred from
other Travelers accounts ............ 1,283,679 1,449,234 1,359,251 1,251,314 1,493,625 1,562,195
Units redeemed and transferred to
other Travelers accounts ............ (526,399) (763,153) (1,056,974) (815,507) (884,673) (1,840,200)
---------- ---------- ---------- ---------- ---------- ----------
Units end of year ..................... 2,964,750 2,207,470 4,769,302 4,467,025 5,601,229 4,992,277
========== ========== ========== ========== ========== ==========
</TABLE>
-20-
<PAGE> 128
NOTES TO FINANCIAL STATEMENTS - CONTINUED
8. SCHEDULE OF UNITS FOR FUND UL
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
<TABLE>
<CAPTION>
HIGH INCOME PORTFOLIO ASSET MANAGER PORTFOLIO EQUITY INDEX PORTFOLIO
------------------------ ------------------------ ------------------------
1999 1998 1999 1998 1999 1998
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Units beginning of year ............... 2,731,506 2,267,970 3,309,553 3,007,464 - -
Units purchased and transferred from
other Travelers accounts ............ 417,814 2,120,094 460,341 820,299 5,496 -
Units redeemed and transferred to
other Travelers accounts ............ (896,719) (1,656,558) (786,392) (518,210) (219) -
---------- ---------- ---------- ---------- ---------- ----------
Units end of year ..................... 2,252,601 2,731,506 2,983,502 3,309,553 5,277 -
========== ========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURN PORTFOLIO HIGH YIELD BOND TRUST MANAGED ASSETS TRUST
------------------------ ------------------------ ------------------------
1999 1998 1999 1998 1999 1998
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Units beginning of year ............... 677,132 521,673 80,415 96,477 811,671 754,052
Units purchased and transferred from
other Travelers accounts ............ 150,912 236,730 49,896 32,454 340,535 280,545
Units redeemed and transferred to
other Travelers accounts ............ (128,424) (81,271) (56,200) (48,516) (148,397) (222,926)
---------- ---------- ---------- ---------- ---------- ----------
Units end of year ..................... 699,620 677,132 74,111 80,415 1,003,809 811,671
========== ========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
TEMPLETON ASSET TEMPLETON BOND
MONEY MARKET PORTFOLIO ALLOCATION FUND (CLASS 1) FUND (CLASS 1)
------------------------ ------------------------ ------------------------
1999 1998 1999 1998 1999 1998
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Units beginning of year ............... 1,869,424 2,176,965 2,686,853 2,549,205 526,893 411,910
Units purchased and transferred from
other Travelers accounts ............ 6,112,593 5,259,108 478,138 599,350 120,426 201,540
Units redeemed and transferred to
other Travelers accounts ............ (3,247,376) (5,566,649) (793,910) (461,702) (121,714) (86,557)
---------- ---------- ---------- ---------- ---------- ----------
Units end of year ..................... 4,734,641 1,869,424 2,371,081 2,686,853 525,605 526,893
========== ========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
TEMPLETON STOCK U.S. GOVERNMENT
FUND (CLASS 1) SECURITIES PORTFOLIO UTILITIES PORTFOLIO
------------------------ ------------------------ ------------------------
1999 1998 1999 1998 1999 1998
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Units beginning of year ............... 5,118,661 4,415,842 2,198,008 1,181,099 167,846 105,266
Units purchased and transferred from
other Travelers accounts ............ 974,763 2,139,769 332,517 1,290,041 95,688 88,338
Units redeemed and transferred to
other Travelers accounts ............ (1,397,420) (1,436,950) (771,753) (273,132) (29,416) (25,758)
---------- ---------- ---------- ---------- ---------- ----------
Units end of year ..................... 4,696,004 5,118,661 1,758,772 2,198,008 234,118 167,846
========== ========== ========== ========== ========== ==========
</TABLE>
-21-
<PAGE> 129
NOTES TO FINANCIAL STATEMENTS - CONTINUED
8. SCHEDULE OF UNITS FOR FUND UL
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
<TABLE>
<CAPTION>
ZERO COUPON BOND FUND ZERO COUPON BOND FUND ZERO COUPON BOND FUND
PORTFOLIO SERIES 1998 PORTFOLIO SERIES 2000 PORTFOLIO SERIES 2005
-------------------------- -------------------------- --------------------------
1999 1998 1999 1998 1999 1998
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Units beginning of year ............... - 1,008,353 1,040,957 1,038,056 1,213,663 1,147,679
Units purchased and transferred from
other Travelers accounts ............ - 306 39,191 27,282 102,310 141,687
Units redeemed and transferred to
other Travelers accounts ............ - (1,008,659) (8,863) (24,381) (120,088) (75,703)
----------- ----------- ----------- ----------- ----------- -----------
Units end of year ..................... - - 1,071,285 1,040,957 1,195,885 1,213,663
=========== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
AIM CAPITAL APPRECIATION
PORTFOLIO ALLIANCE GROWTH PORTFOLIO MFS TOTAL RETURN PORTFOLIO
-------------------------- -------------------------- --------------------------
1999 1998 1999 1998 1999 1998
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Units beginning of year ............... 1,371,702 1,053,016 2,112,618 1,469,867 1,127,421 580,164
Units purchased and transferred from
other Travelers accounts ............ 452,453 587,375 777,779 969,293 337,308 651,137
Units redeemed and transferred to
other Travelers accounts ............ (170,587) (268,689) (332,622) (326,542) (201,717) (103,880)
----------- ----------- ----------- ----------- ----------- -----------
Units end of year ..................... 1,653,568 1,371,702 2,557,775 2,112,618 1,263,012 1,127,421
=========== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
SMITH BARNEY HIGH INCOME SMITH BARNEY LARGE CAP
PORTFOLIO VALUE PORTFOLIO COMBINED
-------------------------- -------------------------- --------------------------
1999 1998 1999 1998 1999 1998
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Units beginning of year ............... 630,959 386,886 598,565 460,366 43,200,459 37,897,289
Units purchased and transferred from
other Travelers accounts ............ 158,530 285,317 908,608 241,488 17,441,053 21,600,440
Units redeemed and transferred to
other Travelers accounts ............ (148,240) (41,244) (733,082) (103,289) (13,631,967) (16,297,270)
----------- ----------- ----------- ----------- ----------- -----------
Units end of year ..................... 641,249 630,959 774,091 598,565 47,009,545 43,200,459
=========== =========== =========== =========== =========== ===========
</TABLE>
-22-
<PAGE> 130
INDEPENDENT AUDITORS' REPORT
To the Owners of Variable Life Insurance Contracts of
The Travelers Fund UL for Variable Life Insurance:
We have audited the accompanying statement of assets and liabilities of The
Travelers Fund UL for Variable Life Insurance as of December 31, 1999, and the
related statement of operations for the year then ended and the statement of
changes in net assets for each of the two years in the period then ended. These
financial statements are the responsibility of management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of shares owned as of December 31, 1999, by correspondence with the
underlying funds. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Travelers Fund UL for
Variable Life Insurance as of December 31, 1999, the results of its operations
for the year then ended and the changes in its net assets for each of the two
years in the period then ended, in conformity with generally accepted accounting
principles.
/s/ KPMG LLP
Hartford, Connecticut
February 18, 2000
-23-
<PAGE> 131
Independent Auditors
KPMG LLP
Hartford, Connecticut
This report is prepared for the general information of contract owners and is
not an offer of shares of The Travelers Fund UL for Variable Life Insurance or
Fund UL's underlying funds. It should not be used in connection with any offer
except in conjunction with the Prospectus for The Travelers Fund UL product(s)
for Variable Life Insurance offered by The Travelers Insurance Company and the
Prospectuses for the underlying funds, which collectively contain all pertinent
information, including the applicable sales commissions.
FNDUL (Annual) (12-99) Printed in U.S.A.
<PAGE> 132
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholder
The Travelers Insurance Company and Subsidiaries:
We have audited the accompanying consolidated balance sheets of The Travelers
Insurance Company and Subsidiaries as of December 31, 1999 and 1998, and the
related consolidated statements of income, changes in retained earnings and
accumulated other changes in equity from non-owner sources and cash flows for
each of the years in the three-year period ended December 31, 1999. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of The Travelers
Insurance Company and Subsidiaries as of December 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1999, in conformity with generally accepted
accounting principles.
/s/ KPMG LLP
Hartford, Connecticut
January 18, 2000
F-1
<PAGE> 133
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
($ in millions)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
REVENUES
Premiums $1,738 $1,740 $1,583
Net investment income 2,506 2,185 2,037
Realized investment gains 113 149 199
Other revenues 521 440 354
- -------------------------------------------------------------------------------------------------- ------------- -------------
Total Revenues 4,878 4,514 4,173
- -------------------------------------------------------------------------------------------------- ------------- -------------
BENEFITS AND EXPENSES
Current and future insurance benefits 1,515 1,475 1,341
Interest credited to contractholders 937 876 829
Amortization of deferred acquisition costs 315 275 252
General and administrative expenses 519 505 468
- -------------------------------------------------------------------------------------------------- ------------- -------------
Total Benefits and Expenses 3,286 3,131 2,890
- -------------------------------------------------------------------------------------------------- ------------- -------------
Income from continuing operations before federal income taxes 1,592 1,383 1,283
- -------------------------------------------------------------------------------------------------- ------------- -------------
Federal income tax expense
Current 409 442 434
Deferred 136 39 10
- -------------------------------------------------------------------------------------------------- ------------- -------------
Total Federal Income Taxes 545 481 444
- -------------------------------------------------------------------------------------------------- ------------- -------------
Net income $1,047 $902 $839
================================================================================================== ============= =============
</TABLE>
See Notes to Consolidated Financial Statements.
F-2
<PAGE> 134
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in millions)
<TABLE>
<CAPTION>
DECEMBER 31, 1999 1998
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Fixed maturities, available for sale at fair value (cost, $24,500, $22,973) $23,866 $23,893
Equity securities, at fair value (cost, $691, $474) 784 518
Mortgage loans 2,285 2,606
Real estate held for sale 236 143
Policy loans 1,258 1,857
Short-term securities 1,283 1,098
Trading securities, at market value 1,678 1,186
Other invested assets 2,098 2,251
- ----------------------------------------------------------------------------------------------------------------------------
Total Investments 33,488 33,552
- ----------------------------------------------------------------------------------------------------------------------------
Cash 85 65
Investment income accrued 395 393
Premium balances receivable 178 99
Reinsurance recoverables 3,234 3,387
Deferred acquisition costs 2,688 2,317
Separate and variable accounts 22,199 15,313
Other assets 1,264 1,422
- ----------------------------------------------------------------------------------------------------------------------------
Total Assets $63,531 $56,548
- ----------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Contractholder funds $17,567 $16,739
Future policy benefits and claims 12,563 12,326
Separate and variable accounts 22,194 15,305
Deferred federal income taxes 23 422
Trading securities sold not yet purchased, at market value 1,098 873
Other liabilities 2,466 2,783
- ----------------------------------------------------------------------------------------------------------------------------
Total Liabilities 55,911 48,448
- ----------------------------------------------------------------------------------------------------------------------------
SHAREHOLDER'S EQUITY
Common stock, par value $2.50; 40 million shares authorized, issued and outstanding 100 100
Additional paid-in capital 3,819 3,800
Retained earnings 4,099 3,602
Accumulated other changes in equity from non-owner sources (398) 598
- ----------------------------------------------------------------------------------------------------------------------------
Total Shareholder's Equity 7,620 8,100
- ----------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholder's Equity $63,531 $56,548
============================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE> 135
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN RETAINED EARNINGS AND
ACCUMULATED OTHER CHANGES IN EQUITY FROM NON-OWNER SOURCES
($ in millions)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN RETAINED EARNINGS 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of year $3,602 $2,810 $2,471
Net income 1,047 902 839
Dividends to parent 550 110 500
- -----------------------------------------------------------------------------------------------------------
Balance, end of year $4,099 $3,602 $2,810
===========================================================================================================
- -----------------------------------------------------------------------------------------------------------
STATEMENTS OF ACCUMULATED OTHER CHANGES
IN EQUITY FROM NON-OWNER SOURCES
- -----------------------------------------------------------------------------------------------------------
Balance, beginning of year $598 $535 $223
Unrealized gains (losses), net of tax (996) 62 313
Foreign currency translation, net of tax 0 1 (1)
- -----------------------------------------------------------------------------------------------------------
Balance, end of year $(398) $598 $535
===========================================================================================================
- -----------------------------------------------------------------------------------------------------------
SUMMARY OF CHANGES IN EQUITY
FROM NON-OWNER SOURCES
- -----------------------------------------------------------------------------------------------------------
Net Income $1,047 $902 $839
Other changes in equity from non-owner sources (996) 63 312
- -----------------------------------------------------------------------------------------------------------
Total changes in equity from non-owner sources $51 $965 $1,151
===========================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE> 136
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH
($ in millions)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Premiums collected $1,715 $1,763 $1,519
Net investment income received 2,365 2,021 2,059
Other revenues received 537 419 373
Benefits and claims paid (1,094) (1,127) (1,230)
Interest credited to contractholders (958) (918) (853)
Operating expenses paid (1,013) 751) (638)
Income taxes paid (393) (506) (368)
Trading account investments purchases, net (80) (38) (54)
Other (104) 12 18
- ---------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 975 875 826
- ---------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of investments
Fixed maturities 4,103 2,608 2,259
Mortgage loans 662 722 663
Proceeds from sales of investments
Fixed maturities 12,562 13,390 7,592
Equity securities 100 212 341
Mortgage loans - - 207
Real estate held for sale 219 53 169
Purchases of investments
Fixed maturities (18,129) (18,072) (11,143)
Equity securities (309) (194) (483)
Mortgage loans (470) 457) (771)
Policy loans, net 599 15 38
Short-term securities (purchases) sales, net 316 495) (2)
Other investments purchases, net (413) (550) (260)
Securities transactions in course of settlement, net (463) 192 311
- ---------------------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (1,223) (2,576) (1,079)
- ---------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Redemption of commercial paper, net - - (50)
Contractholder fund deposits 5,764 4,383 3,544
Contractholder fund withdrawals (4,946) (2,565) (2,757)
Dividends to parent company (550) (110) (500)
- ---------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 268 1,708 237
- ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash 20 7 (16)
- ---------------------------------------------------------------------------------------------------------------------
Cash at December 31, $85 $65 $58
====================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE> 137
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies used in the preparation of the accompanying
financial statements follow.
Basis of Presentation
The Travelers Insurance Company (TIC), together with its subsidiaries (the
Company), is a wholly owned subsidiary of The Travelers Insurance Group
Inc. (TIGI), an indirect wholly owned subsidiary of Citigroup Inc.
(Citigroup). The consolidated financial statements include the accounts of
the Company and its insurance and non-insurance subsidiaries on a fully
consolidated basis. The primary insurance entities of the Company are TIC
and its subsidiaries, The Travelers Life and Annuity Company (TLAC),
Primerica Life Insurance Company (Primerica Life), and its subsidiaries,
Primerica Life Insurance Company of Canada and National Benefit Life
Insurance Company (NBL).
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and benefits and
expenses during the reporting period. Actual results could differ from
those estimates.
Certain prior year amounts have been reclassified to conform to the 1999
presentation.
ACCOUNTING CHANGES
Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities
Effective January 1, 1997, the Company adopted Statement of Financial
Accounting Standards No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities" (FAS 125). This
statement establishes accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities. These
standards are based on an approach that focuses on control. Under this
approach, after a transfer of financial assets, an entity recognizes the
financial and servicing assets it controls and the liabilities it has
incurred, derecognizes financial assets when control has been surrendered
and derecognizes liabilities when extinguished. FAS 125 provides standards
for distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings. Effective January 1, 1998, the
Company adopted the collateral provisions of FAS 125 that were not
effective until 1998 in accordance with Statement of Financial Accounting
Standards No. 127, "Deferral of the Effective Date of Certain Provisions of
SFAS 125." The adoption of the collateral provisions of FAS 125 created
additional assets and liabilities on the Company's consolidated statement
of financial position related to the recognition of securities provided and
received as collateral. There was no impact on the Company's results of
operations from the adoption of the collateral provisions of FAS 125.
F-6
<PAGE> 138
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use During the third quarter of 1998, the Company adopted
(effective January 1, 1998) the Accounting Standards Executive Committee of
the American Institute of Certified Public Accountants' Statement of
Position 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use" (SOP 98-1). SOP 98-1 provides guidance on
accounting for the costs of computer software developed or obtained for
internal use and for determining when specific costs should be capitalized
or expensed. The adoption of SOP 98-1 did not have a material impact on the
Company's financial condition, results of operations or liquidity.
Accounting by Insurance and Other Enterprises for Insurance - Related
Assessments
In January 1999, the Company adopted (effective January 1, 1999) Statement
of Position 97-3, "Accounting by Insurance and Other Enterprises for
Insurance-Related Assessments" (SOP 97-3). SOP 97-3 provides guidance for
determining when an entity should recognize a liability for guaranty-fund
and other insurance-related assessments, how to measure that liability, and
when an asset may be recognized for the recovery of such assessments
through premium tax offsets or policy surcharges. The adoption of this SOP
had no impact on the Company's financial condition, results of operations
or liquidity.
ACCOUNTING POLICIES
Investments
Fixed maturities include bonds, notes and redeemable preferred stocks. Fair
values of investments in fixed maturities are based on quoted market prices
or dealer quotes or, if these are not available, discounted expected cash
flows using market rates commensurate with the credit quality and maturity
of the investment. Also included in fixed maturities are loan-backed and
structured securities, which are amortized using the retrospective method.
The effective yield used to determine amortization is calculated based upon
actual historical and projected future cash flows, which are obtained from
a widely-accepted securities data provider. Fixed maturities are classified
as "available for sale" and are reported at fair value, with unrealized
investment gains and losses, net of income taxes, charged or credited
directly to shareholder's equity.
Equity securities, which include common and nonredeemable preferred stocks,
are classified as "available for sale" and carried at fair value based
primarily on quoted market prices. Changes in fair values of equity
securities are charged or credited directly to shareholder's equity, net of
income taxes.
Mortgage loans are carried at amortized cost. A mortgage loan is considered
impaired when it is probable that the Company will be unable to collect
principal and interest amounts due. For mortgage loans that are determined
to be impaired, a reserve is established for the difference between the
amortized cost and fair market value of the underlying collateral. In
estimating fair value, the Company uses interest rates reflecting the
higher returns required in the current real estate financing market.
Impaired loans were insignificant at December 31, 1999 and 1998.
F-7
<PAGE> 139
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Real estate held for sale is carried at the lower of cost or fair value
less estimated cost to sell. Fair value of foreclosed properties is
established at the time of foreclosure by internal analysis or external
appraisers, using discounted cash flow analyses and other accepted
techniques. Thereafter, an allowance for losses on real estate held for
sale is established if the carrying value of the property exceeds its
current fair value less estimated costs to sell. There was no such
allowance at December 31, 1999 and 1998.
Trading securities and related liabilities are normally held for periods
less than six months. These investments are marked to market with the
change recognized in net investment income during the current period.
Short-term securities, consisting primarily of money market instruments and
other debt issues purchased with a maturity of less than one year, are
carried at amortized cost which approximates market.
Other invested assets include partnership investments and real estate joint
ventures accounted for on the equity method of accounting. Undistributed
income is reported in net investment income.
Accrual of income is suspended on fixed maturities or mortgage loans that
are in default, or on which it is likely that future payments will not be
made as scheduled. Interest income on investments in default is recognized
only as payment is received.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses derivative financial instruments, including financial
futures contracts, options, forward contracts, interest rate swaps,
currency swaps, and equity swaps, as a means of hedging exposure to
interest rate and foreign currency risk. Hedge accounting is used to
account for derivatives. To qualify for hedge accounting the changes in
value of the derivative must be expected to substantially offset the
changes in value of the hedged item. Hedges are monitored to ensure that
there is a high correlation between the derivative instruments and the
hedged investment.
Gains and losses arising from financial futures contracts are used to
adjust the basis of hedged investments and are recognized in net investment
income over the life of the investment.
Payments to be received or made under interest rate swaps are accrued and
recognized in net investment income. Swaps hedging investments are carried
at fair value with unrealized gains and losses, net of taxes, charged or
credited directly to shareholder's equity. Interest rate and currency swaps
hedging liabilities are off-balance sheet.
Forward contracts, interest rate options and equity swaps were not
significant at December 31, 1999 and 1998. Information concerning
derivative financial instruments is included in Note 5.
INVESTMENT GAINS AND LOSSES
Realized investment gains and losses are included as a component of pre-tax
revenues based upon specific identification of the investments sold on the
trade date. Also included are gains and losses arising from the
remeasurement of the local currency value of foreign investments to U.S.
dollars, the functional currency of the Company. The foreign exchange
effects of Canadian operations are included in unrealized gains and losses.
F-8
<PAGE> 140
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
POLICY LOANS
Policy loans are carried at the amount of the unpaid balances that are not
in excess of the net cash surrender values of the related insurance
policies. The carrying value of policy loans, which have no defined
maturities, is considered to be fair value.
DEFERRED ACQUISITION COSTS
Costs of acquiring individual life insurance, annuities and long-term care
business, principally commissions and certain expenses related to policy
issuance, underwriting and marketing, all of which vary with and are
primarily related to the production of new business, are deferred.
Acquisition costs relating to traditional life insurance, including term
insurance and long-term care insurance, are amortized in relation to
anticipated premiums; universal life in relation to estimated gross
profits; and annuity contracts employing a level yield method. For life
insurance, a 15 to 20-year amortization period is used; for long-term care
business, a 10 to 20-year period is used, and a seven to 20-year period is
employed for annuities. Deferred acquisition costs are reviewed
periodically for recoverability to determine if any adjustment is required.
Adjustments, if any, are charged to income.
VALUE OF INSURANCE IN FORCE
The value of insurance in force is an asset recorded at the time of
acquisition of an insurance company. It represents the actuarially
determined present value of anticipated profits to be realized from life
insurance, annuities and health contracts at the date of acquisition using
the same assumptions that were used for computing related liabilities where
appropriate. The value of insurance in force was the actuarially determined
present value of the projected future profits discounted at interest rates
ranging from 14% to 18%. Traditional life insurance and guaranteed
renewable health policies are amortized in relation to anticipated
premiums; universal life is amortized in relation to estimated gross
profits; and annuity contracts are amortized employing a level yield
method. The value of insurance in force is reviewed periodically for
recoverability to determine if any adjustment is required. Adjustments, if
any, are charged to income.
SEPARATE AND VARIABLE ACCOUNTS
Separate and variable accounts primarily represent funds for which
investment income and investment gains and losses accrue directly to, and
investment risk is borne by, the contractholders. Each account has specific
investment objectives. The assets of each account are legally segregated
and are not subject to claims that arise out of any other business of the
Company. The assets of these accounts are carried at market value. Certain
other separate accounts provide guaranteed levels of return or benefits and
the assets of these accounts are primarily carried at market value. Amounts
assessed to the contractholders for management services are included in
revenues. Deposits, net investment income and realized investment gains and
losses for these accounts are excluded from revenues, and related liability
increases are excluded from benefits and expenses.
GOODWILL
Goodwill represents the cost of acquired businesses in excess of net assets
and is being amortized on a straight-line basis principally over a 40-year
period. The carrying amount is regularly reviewed for indication of
impairment in value that in the view of management would be other than
temporary. If it is determined that goodwill is unlikely to be recovered,
impairment is recognized on a discounted cash flow basis.
F-9
<PAGE> 141
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
CONTRACTHOLDER FUNDS
Contractholder funds represent receipts from the issuance of universal
life, corporate owned life insurance, pension investment and certain
deferred annuity contracts. Contractholder fund balances are increased by
such receipts and credited interest and reduced by withdrawals, mortality
charges and administrative expenses charged to the contractholders.
Interest rates credited to contractholder funds range from 3.5% to 10.0%.
FUTURE POLICY BENEFITS
Future policy benefits represent liabilities for future insurance policy
benefits. Benefit reserves for life insurance and annuities have been
computed based upon mortality, morbidity, persistency and interest
assumptions applicable to these coverages, which range from 2.5% to 10.0%,
including adverse deviation. These assumptions consider Company experience
and industry standards. The assumptions vary by plan, age at issue, year of
issue and duration. Appropriate recognition has been given to experience
rating and reinsurance.
OTHER LIABILITIES
Included in Other Liabilities is the Company's estimate of its liability
for guaranty fund and other insurance-related assessments. State guaranty
fund assessments are based upon the Company's share of premium written or
received in one or more years prior to an insolvency occurring in the
industry. Once an insolvency has occurred, the Company recognizes a
liability for such assessments if it is probable that an assessment will be
imposed and the amount of the assessment can be reasonably estimated. At
December 31, 1999, the Company had a liability of $21.9 million for
guaranty fund assessments and a related premium tax offset recoverable of
$4.7 million. The assessments are expected to be paid over a period of
three to five years and the premium tax offsets are expected to be realized
over a period of 10 to 15 years.
SECURITIES LOANED
Securities loaned are recorded at the amount of cash received as
collateral. The Company receives cash collateral in an amount in excess of
the market value of securities loaned. The Company monitors the market
value of securities loaned on a daily basis with additional collateral
obtained as necessary.
PERMITTED STATUTORY ACCOUNTING PRACTICES
The Company's insurance subsidiaries, domiciled principally in Connecticut
and Massachusetts, prepare statutory financial statements in accordance
with the accounting practices prescribed or permitted by the insurance
departments of the states of domicile. Prescribed statutory accounting
practices include certain publications of the National Association of
Insurance Commissioners (NAIC) as well as state laws, regulations, and
general administrative rules. Permitted statutory accounting practices
encompass all accounting practices not so prescribed. The impact of any
permitted accounting practices on statutory surplus of the Company is not
material.
The NAIC recently completed a process intended to codify statutory
accounting practices for certain insurance enterprises. As a result of this
process, the NAIC will issue a revised statutory Accounting Practices and
Procedures Manual - version effective January 1, 2001 (the revised Manual)
that will be effective for years beginning January 1, 2001. It is expected
that the State of Connecticut will require that, effective January 1, 2001,
insurance companies domiciled in Connecticut prepare their statutory basis
financial statements in accordance with the revised Manual subject to any
deviations prescribed or permitted
F-10
<PAGE> 142
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
by the Connecticut insurance commissioner. The Company has not yet
determined the impact that this change will have on the statutory capital
and surplus of its insurance subsidiaries.
PREMIUMS
Premiums are recognized as revenues when due. Reserves are established for
the portion of premiums that will be earned in future periods and for
deferred profits on limited-payment policies that are being recognized in
income over the policy term.
OTHER REVENUES
Other revenues include management fees for variable annuity separate
accounts; surrender, mortality and administrative charges and fees earned
on investment, universal life and other insurance contracts; and revenues
of non-insurance subsidiaries.
CURRENT AND FUTURE INSURANCE BENEFITS
Current and future insurance benefits represent charges for mortality and
morbidity related to fixed annuities, universal life, term life and health
insurance benefits.
INTEREST CREDITED TO CONTRACTHOLDERS
Interest credited to contractholders represents amounts earned by universal
life, corporate owned life insurance, pension investment and certain
deferred annuity contracts in accordance with contract provisions.
FEDERAL INCOME TAXES
The provision for federal income taxes is comprised of two components,
current income taxes and deferred income taxes. Deferred federal income
taxes arise from changes during the year in cumulative temporary
differences between the tax basis and book basis of assets and liabilities.
A deferred federal income tax asset is recognized to the extent that future
realization of the tax benefit is more likely than not, with a valuation
allowance for the portion that is not likely to be recognized.
FUTURE APPLICATION OF ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (FAS 133). In June 1999, the
FASB issued Statement of Financial Standards No. 137 "Deferral of the
Effective Date of FASB Statement No. 133" (FAS 137) which allows entities
which have not adopted FAS 133 to defer its effective date to all fiscal
quarters of all fiscal years beginning after June 15, 2000. FAS 133
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives), and for hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the consolidated balance sheet and measure those instruments
at fair value. If certain conditions are met, a derivative may be
specifically designated as (a) a hedge of the exposure to changes in the
fair value of a recognized asset or liability or an unrecognized firm
commitment, (b) a hedge of the exposure to variable cash flows of a
recognized asset or liability or of a forecasted transaction, or (c) a
hedge of the foreign currency exposure of a net investment in a foreign
F-11
<PAGE> 143
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
operation, an unrecognized firm commitment, an available-for-sale security,
or a foreign-currency-denominated forecasted transaction. The accounting
for changes in the fair value of a derivative (that is, gains and losses)
depends on the intended use of the derivative and the resulting
designation. Upon initial application of FAS 133, hedging relationships
must be designated anew and documented pursuant to the provisions of this
statement. The Company adopted the deferral provisions of FAS 137,
effective January 1, 2000 and has not yet determined the impact that FAS
133 will have on its consolidated financial statements.
2. COMMERCIAL PAPER AND LINES OF CREDIT
TIC has issued commercial paper directly to investors in prior years. No
commercial paper was outstanding at December 31, 1999 or December 31, 1998.
TIC must maintain bank lines of credit at least equal to the amount of the
outstanding commercial paper. Citigroup and TIC have an agreement with a
syndicate of banks to provide $1.0 billion of revolving credit, to be
allocated to Citigroup or the Company. TIC's participation in this
agreement is limited to $250 million. The agreement consists of a five-year
revolving credit facility that expires in June 2001. At December 31, 1999
and 1998, no credit under this agreement was allocated to TIC. Under this
facility the Company is required to maintain certain minimum equity and
risk-based capital levels. At December 31, 1999, the Company was in
compliance with these provisions. If TIC had borrowings outstanding on this
facility, the interest rate would be based upon LIBOR plus a contractually
negotiated margin.
3. REINSURANCE
The Company participates in reinsurance in order to limit losses, minimize
exposure to large risks, provide additional capacity for future growth and
to effect business-sharing arrangements. Reinsurance is accomplished
through various plans of reinsurance, primarily yearly renewable term
coinsurance and modified coinsurance. The Company remains primarily liable
as the direct insurer on all risks reinsured.
Since 1997 universal life business was reinsured under an 80%/20% quota
share reinsurance program and term life business was reinsured under a
90%/10% quota share reinsurance program. Prior to 1997, the Company
reinsured all of its life business via first dollar quota share treaties on
an 80%/20% basis. Maximum retention of $1.5 million is generally reached on
policies in excess of $7.5 million. For other plans of insurance, it is the
policy of the Company to obtain reinsurance for amounts above certain
retention limits on individual life policies, which limits vary with age
and underwriting classification. Generally, the maximum retention on an
ordinary life risk is $1.5 million. Total inforce business ceded under
reinsurance contracts is $222.5 billion and $201.3 billion at December 31,
1999 and 1998.
The Company writes workers' compensation business through its Accident
Department. This business is ceded 100% to an affiliate, The Travelers
Indemnity Company.
F-12
<PAGE> 144
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
A summary of reinsurance financial data reflected within the consolidated
statements of income and balance sheets is presented below ($ in millions):
<TABLE>
<CAPTION>
WRITTEN PREMIUMS 1999 1998 1997
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Direct $2,274 $2,310 $2,148
Assumed from:
Non-affiliated companies - - 1
Ceded to:
Affiliated companies (206) (242) (280)
Non-affiliated companies (322) (317) (273)
------------------------------------------------------------------------------------------------------
Total Net Written Premiums $1,746 $1,751 $1,596
======================================================================================================
</TABLE>
<TABLE>
<CAPTION>
EARNED PREMIUMS 1999 1998 1997
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Direct $2,248 $1,949 $2,170
Assumed from:
Non-affiliated companies - - 1
Ceded to:
Affiliated companies (193) (251) (321)
Non-affiliated companies (327) (308) (291)
------------------------------------------------------------------------------------------------------
Total Net Earned Premiums $1,728 $1,390 $1,559
======================================================================================================
</TABLE>
Reinsurance recoverables at December 31, 1999 and 1998 include amounts
recoverable on unpaid and paid losses and were as follows ($ in millions):
<TABLE>
<CAPTION>
REINSURANCE RECOVERABLES 1999 1998
------------------------------------------------------------------------------------------------------
<S> <C> <C>
Life and Accident and Health Business:
Non-affiliated companies $1,221 $1,297
Property-Casualty Business:
Affiliated companies 2,013 2,090
------------------------------------------------------------------------------------------------------
Total Reinsurance Recoverables $3,234 $3,387
======================================================================================================
</TABLE>
Total reinsurance recoverables at December 31, 1999 and 1998 include $569
million and $640 million, respectively, from The Metropolitan Life
Insurance Company in connection with the sale of the Company's group life
insurance and related businesses in 1995.
F-13
<PAGE> 145
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
4. SHAREHOLDER'S EQUITY
Shareholder's Equity and Dividend Availability
The Company's statutory net income, which includes the statutory net income
of all insurance subsidiaries, was $890 million, $702 million and $754
million for the years ended December 31, 1999, 1998 and 1997, respectively.
The Company's statutory capital and surplus was $5.03 billion and $4.95
billion at December 31, 1999 and 1998, respectively.
The Company is currently subject to various regulatory restrictions that
limit the maximum amount of dividends available to be paid to its parent
without prior approval of insurance regulatory authorities. Statutory
surplus of $679 million is available in 2000 for dividend payments by the
Company without prior approval of the Connecticut Insurance Department. In
addition, under a revolving credit facility, the Company is required to
maintain certain minimum equity and risk-based capital levels. The Company
was in compliance with these covenants at December 31, 1999 and 1998. The
Company paid dividends of $550 million, $110 million and $500 million in
1999, 1998 and 1997, respectively.
F-14
<PAGE> 146
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
4. SHAREHOLDER'S EQUITY (continued)
Accumulated Other Changes in Equity from Non-Owner Sources, Net of Tax
Changes in each component of Accumulated Other Changes in Equity from Non-Owner
Sources were as follows:
<TABLE>
<CAPTION>
ACCUMULATED OTHER
NET UNREALIZED FOREIGN CHANGES IN EQUITY FROM
GAIN (LOSS) ON CURRENCY NON-OWNER SOURCES
INVESTMENT SECURITIES TRANSLATION
($ in millions) ADJUSTMENTS
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE, JANUARY 1, 1997 $232 $(9) $223
Unrealized gain on investment securities,
net of tax of $239 442 - 442
Less: reclassification adjustment for gains
included in net income, net of tax of $70 129 - 129
Foreign currency translation adjustment,
net of tax of $0 - (1) (1)
- -------------------------------------------------------------------------------------------------------------------------------
CURRENT PERIOD CHANGE 313 (1) 312
- -------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1997 545 (10) 535
Unrealized gains on investment securities,
net of tax of $85 159 - 159
Less: reclassification adjustment for gains
included in net income, net of tax of $52 97 - 97
Foreign currency translation adjustment,
net of tax of $2 - 1 1
- -------------------------------------------------------------------------------------------------------------------------------
CURRENT PERIOD CHANGE 62 1 63
- -------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1998 607 (9) 598
Unrealized losses on investment securities,
net of tax of $497 (923) - (923)
Less: reclassification adjustment for gains
included in net income, net of tax of $40 73 - 73
- -------------------------------------------------------------------------------------------------------------------------------
CURRENT PERIOD CHANGE (996) - (996)
- -------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1999 $(389) $(9) $(398)
===============================================================================================================================
</TABLE>
F-15
<PAGE> 147
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
5. DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS
Derivative Financial Instruments
The Company uses derivative financial instruments, including financial
futures, interest rate swaps, currency swaps, options and forward contracts
as a means of hedging exposure to interest rate, equity price, and foreign
currency risk on anticipated transactions or existing assets and
liabilities. The Company, through a subsidiary that is a broker/dealer,
Tribeca Investments LLC (Tribeca) holds and issues derivative instruments
for trading purposes. All of these derivative financial instruments have
off-balance sheet risk. Financial instruments with off-balance sheet risk
involve, to varying degrees, elements of credit and market risk in excess
of the amount recognized in the balance sheet. The contract or notional
amounts of these instruments reflect the extent of involvement the Company
has in a particular class of financial instrument. However, the maximum
loss of cash flow associated with these instruments can be less than these
amounts. For interest rate swaps, currency swaps, options and forward
contracts, credit risk is limited to the amount that it would cost the
Company to replace the contracts. Financial futures contracts and purchased
listed option contracts have little credit risk since organized exchanges
are the counterparties. The Company as a writer of option contracts has no
credit risk since the counterparty has no performance obligation after it
has paid a cash premium.
The Company monitors creditworthiness of counterparties to these financial
instruments by using criteria of acceptable risk that are consistent with
on-balance sheet financial instruments. The controls include credit
approvals, limits and other monitoring procedures.
The Company uses exchange-traded financial futures contracts to manage its
exposure to changes in interest rates which arise from the sale of certain
insurance and investment products, or the need to reinvest proceeds from
the sale or maturity of investments. To hedge against adverse changes in
interest rates, the Company enters long or short positions in financial
futures contracts which offset asset price changes resulting from changes
in market interest rates until an investment is purchased or a product is
sold.
Margin payments are required to enter a futures contract and contract gains
or losses are settled daily in cash. The contract amount of futures
contracts represents the extent of the Company's involvement, but not
future cash requirements, as open positions are typically closed out prior
to the delivery date of the contract.
At December 31, 1999 and 1998, the Company held financial futures contracts
with notional amounts of $255 million and $459 million, respectively. These
financial futures had a deferred gain of $1.8 million and a deferred loss
of $.5 million in 1999, and a deferred gain of $3.3 million and a deferred
loss of $.1 million in 1998. Total gains of $6.9 million and $1.5 million
from financial futures were deferred at December 31, 1999 and 1998,
respectively, relating to anticipated investment purchases and investment
product sales, and are reported as other liabilities. At December 31, 1999
and 1998, the Company's futures contracts had no fair value because these
contracts were marked to market and settled in cash daily.
F-16
<PAGE> 148
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
The Company enters into interest rate swaps in connection with other
financial instruments to provide greater risk diversification and better
match assets and liabilities. Under interest rate swaps, the Company agrees
with other parties to exchange, at specified intervals, the difference
between fixed-rate and floating-rate interest amounts calculated by
reference to an agreed notional principal amount. The Company also enters
into basis swaps in which both legs of the swap are floating with each
based on a different index. Generally, no cash is exchanged at the outset
of the contract and no principal payments are made by either party. A
single net payment is usually made by one counterparty at each due date.
Swap agreements are not exchange-traded so they are subject to the risk of
default by the counterparty.
At December 31, 1999 and 1998, the Company held interest rate swap
contracts with notional amounts of $1,498.2 million and $1,077.9 million,
respectively. The fair value of these financial instruments was $25.3
million (gain position) and $26.3 million (loss position) at December 31,
1999 and was $5.6 million (gain position) and $19.6 million (loss position)
at December 31, 1998. The fair values were determined using the discounted
cash flow method. At December 31, 1999, the Company held swap contracts
with affiliate counterparties with a notional amount of $207.5 million and
a fair value of $22.6 million (loss position).
The Company enters into currency swaps in connection with other financial
instruments to provide greater risk diversification and better match assets
purchased in U.S. Dollars with corresponding funding agreements issued in
foreign currencies. Under currency swaps, the Company agrees with other
parties to exchange, at specified intervals, foreign currency for U.S.
Dollars based upon interest amounts calculated by reference to an agreed
notional principal amount. Generally, there is an exchange of foreign
currency for U.S. Dollars at the outset of the contract based upon the
prevailing foreign exchange rate. Swap agreements are not exchange traded
so they are subject to the risk of default by the counterparty.
At December 31, 1999 and 1998, the Company held currency swap contracts
with notional amounts of $732.7 million and $10.0 million, respectively.
The fair value of these financial instruments was $59.2 million (loss
position) at December 31, 1999 and $.4 million (gain position) at December
31, 1998. The fair values were determined using the discounted cash flow
method.
The Company uses equity option contracts to manage its exposure to changes
in equity market prices that arise from the sale of certain insurance
products. To hedge against adverse changes in the equity market prices, the
Company enters long positions in equity option contracts with major
financial institutions. These contracts allow the Company, for a fee, the
right to receive a payment if the Standard and Poor's 500 Index falls below
agreed upon strike prices.
At December 31, 1999 and 1998, the Company held equity options with
notional amounts of $275.4 million and zero, respectively. The fair value
of these financial instruments was $32.6 million (gain position) at
December 31, 1999. The fair value of these contracts represent the
estimated replacement cost as quoted by independent third party brokers.
The off-balance sheet risks of interest rate options, equity swaps and
forward contracts were not significant at December 31, 1999 and 1998.
The off-balance sheet risk of derivative instruments held for trading
purposes was not significant at December 31, 1999 and 1998.
F-17
<PAGE> 149
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Financial Instruments with Off-Balance Sheet Risk
In the normal course of business, the Company issues fixed and variable
rate loan commitments and has unfunded commitments to partnerships. The
off-balance sheet risk of these financial instruments was not significant
at December 31, 1999 and 1998. The Company had unfunded commitments to
partnerships with a value of $459.7 million at December 31, 1999.
Fair Value of Certain Financial Instruments
The Company uses various financial instruments in the normal course of its
business. Certain insurance contracts are excluded by Statement of
Financial Accounting Standards No. 107, "Disclosure about Fair Value of
Financial Instruments", and therefore are not included in the amounts
discussed.
At December 31, 1999 and 1998, investments in fixed maturities had a
carrying value and a fair value of $23.9 billion and $23.9 billion,
respectively. See Notes 1 and 12.
At December 31, 1999 mortgage loans had a carrying value of $2.3 billion
and a fair value of $2.3 billion and in 1998 had a carrying value of $2.6
billion and a fair value of $2.8 billion. In estimating fair value, the
Company used interest rates reflecting the current real estate financing
market.
Citigroup Preferred Stock included in other invested assets had a carrying
value and fair value of $987 million at December 31, 1999 and 1998.
At December 31, 1999, contractholder funds with defined maturities had a
carrying value of $5.0 billion and a fair value of $4.7 billion, compared
with a carrying value and a fair value of $3.3 billion at December 31,
1998. The fair value of these contracts is determined by discounting
expected cash flows at an interest rate commensurate with the Company's
credit risk and the expected timing of cash flows. Contractholder funds
without defined maturities had a carrying value of $10.1 billion and a fair
value of $9.9 billion at December 31, 1999, compared with a carrying value
of $10.4 billion and a fair value of $10.2 billion at December 31, 1998.
These contracts generally are valued at surrender value.
The carrying values of $228 million and $144 million of financial
instruments classified as other assets approximated their fair values at
December 31, 1999 and 1998, respectively. The carrying values of $1.2
billion and $2.3 billion of financial instruments classified as other
liabilities also approximated their fair values at December 31, 1999 and
1998, respectively. Fair value is determined using various methods,
including discounted cash flows, as appropriate for the various financial
instruments.
The assets of separate accounts providing a guaranteed return had a
carrying value and a fair value of $251 million at December 31, 1999,
compared with a carrying value and a fair value of $235 million at December
31, 1998. The liabilities of separate accounts providing a guaranteed
return had a carrying value and a fair value of $251 million at December
31, 1999, compared with a carrying value and a fair value of $209 million
and $206 million, respectively, at December 31, 1998.
The carrying values of cash, trading securities and trading securities sold
not yet purchased are carried at fair value. The carrying values of
short-term securities and investment income accrued approximated their fair
values.
The carrying value of policy loans, which have no defined maturities, is
considered to be fair value.
F-18
<PAGE> 150
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
6. COMMITMENTS AND CONTINGENCIES
Financial Instruments with Off-Balance Sheet Risk
See Note 5 for a discussion of financial instruments with off-balance sheet
risk.
Litigation
In March 1997, a purported class action entitled Patterman v. The
Travelers, Inc., et al. was commenced in the Superior Court of Richmond
County, Georgia, alleging, among other things, violations of the Georgia
RICO statute and other state laws by an affiliate of the Company, Primerica
Financial Services, Inc. and certain of its affiliates. Plaintiffs seek
unspecified compensatory and punitive damages and other relief. In October
1997, defendants answered the complaint, denied liability and asserted
numerous affirmative defenses. In February 1998, on defendants' motion, the
Superior Court of Richmond County transferred the lawsuit to the Superior
Court of Gwinnett County, Georgia. Plaintiffs appealed the transfer order,
and in December 1998 the Court of Appeals of the State of Georgia reversed
the lower court's decision. Defendants petitioned the Georgia Supreme Court
to hear an appeal from the decision of the Court of Appeals, and the
petition was granted in May 1998. In September 1999, oral argument on
defendants' petition was heard and, on February 28, 2000, the Georgia
Supreme Court affirmed the Georgia Court of Appeals and remanded the matter
to the Superior Court of Richmond County. In March 2000, defendants moved
the Georgia Supreme Court to reconsider its February 28, 2000 decision, and
that motion remains pending. Proceedings in the trial court have been
stayed pending appeal. Defendants intend to vigorously contest the
litigation.
The Company is also a defendant or co-defendant in various other litigation
matters in the normal course of business. Although there can be no
assurances, as of December 31, 1999, the Company believes, based on
information currently available, that the ultimate resolution of these
legal proceedings would not be likely to have a material adverse effect on
its results of operations, financial condition or liquidity.
7. BENEFIT PLANS
Pension and Other Postretirement Benefits
The Company participates in a qualified, noncontributory defined benefit
pension plan sponsored by Citigroup. In addition, the Company provides
certain other postretirement benefits to retired employees through a plan
sponsored by TIGI. The Company's share of net expense for the qualified
pension and other postretirement benefit plans was not significant for
1999, 1998 and 1997. Through plans sponsored by TIGI, the Company also
provides defined contribution pension plans for certain agents. Company
contributions are primarily a function of production. The expense for these
plans was not significant in 1999, 1998 and 1997.
401(k) Savings Plan
Substantially all of the Company's employees are eligible to participate in
a 401(k) savings plan sponsored by Citigroup. Effective January 1, 1997,
the Company discontinued matching contributions for the majority of its
employees. The Company's expenses in connection with the 401(k) savings
plan were not significant in 1999, 1998 and 1997.
F-19
<PAGE> 151
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
8. RELATED PARTY TRANSACTIONS
The principal banking functions, including payment of salaries and
expenses, for certain subsidiaries and affiliates of TIGI are handled by
two companies. The Company handles banking functions for the life and
annuity operations of Travelers Life & Annuity and some of its
non-insurance affiliates. The Travelers Indemnity Company handles banking
functions for the property-casualty operations, including most of its
property-casualty insurance and non-insurance affiliates. Settlements
between companies are made at least monthly. The Company provides various
employee benefits coverages to employees of certain subsidiaries of TIGI.
The premiums for these coverages were charged in accordance with cost
allocation procedures based upon salaries or census. In addition,
investment advisory and management services, data processing services and
claims processing services are shared with affiliated companies. Charges
for these services are shared by the companies on cost allocation methods
based generally on estimated usage by department.
The Company maintains a short-term investment pool in which its insurance
affiliates participate. The position of each company participating in the
pool is calculated and adjusted daily. At December 31, 1999 and 1998, the
pool totaled approximately $2.6 billion and $2.3 billion, respectively. The
Company's share of the pool amounted to $1.0 billion and $793 million at
December 31, 1999 and 1998, respectively, and is included in short-term
securities in the consolidated balance sheet.
Included in short-term investments at December 31, 1998 was a 90-day
variable rate note receivable from Citigroup. The rate was based upon the
AA financial commercial paper rate plus 14 basis points. The rate at
December 31, 1998 was 5.47%. The balance, which was $500 million at
December 31, 1998, was paid in full on February 25, 1999. Interest accrued
at December 31, 1998 was $2.2 million. Interest earned was $3.9 million and
$9.4 million in 1999 and 1998, respectively.
The Company markets deferred annuity products and life and health insurance
through its affiliate, Salomon Smith Barney Financial Consultants (SSB).
Premiums and deposits related to these products were $1.4 billion, $1.3
billion, and $1.0 billion in 1999, 1998 and 1997, respectively.
At December 31, 1999 and 1998 the Company had outstanding loaned securities
to SSB for $123.0 million and $39.7 million, respectively.
Included in other invested assets is a $987 million investment in Citigroup
preferred stock at December 31, 1999 and 1998, carried at cost.
The Company sells structured settlement annuities to the insurance
subsidiaries of Travelers Property Casualty Corp. (TAP) in connection with
the settlement of certain policyholder obligations. Such premiums and
deposits were $156 million, $104 million, and $88 million for 1999, 1998
and 1997, respectively. Reserves and contractholder funds related to these
annuities amounted to $798 million and $787 million in 1999 and 1998,
respectively.
In the ordinary course of business, the Company purchases and sells
securities through affiliated broker-dealers. These transactions are
conducted on an arm's length basis.
F-20
<PAGE> 152
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Primerica Life has entered into a General Agency Agreement with Primerica
Financial Services, Inc. (Primerica), that provides that Primerica will be
Primerica Life's general agent for marketing all insurance of Primerica
Life. In consideration of such services, Primerica Life agreed to pay
Primerica marketing fees of no less than $10 million based upon U.S. gross
direct premiums received by Primerica Life. In each of 1999 and 1998 the
fees paid by Primerica Life were $12.5 million.
In 1998 Primerica became a distributor of products for Travelers Life &
Annuity. Primerica sold $903 million and $256 million of deferred annuities
in 1999 and 1998, respectively.
The Company participates in a stock option plan sponsored by Citigroup that
provides for the granting of stock options in Citigroup common stock to
officers and key employees. To further encourage employee stock ownership,
during 1997 Citigroup introduced the WealthBuilder stock option program.
Under this program, all employees meeting certain requirements have been
granted Citigroup stock options.
The Company applies Accounting Principles Board Opinion No. 25 (APB 25) and
related interpretations in accounting for stock options. Since stock
options under the Citigroup plans are issued at fair market value on the
date of award, no compensation cost has been recognized for these awards.
FAS 123 provides an alternative to APB 25 whereby fair values may be
ascribed to options using a valuation model and amortized to compensation
cost over the vesting period of the options.
Had the Company applied FAS 123 in accounting for Citigroup stock options,
net income would have been the pro forma amounts indicated below:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1999 1998 1997
($ in millions)
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income, as reported $1,047 $902 $839
FAS 123 pro forma adjustments, after tax (16) (13) (9)
------------------------------------------------------------------------------------------------------
Net income, pro forma $1,031 $889 $830
------------------------------------------------------------------------------------------------------
</TABLE>
F-21
<PAGE> 153
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
9. LEASES
Most leasing functions for TIGI and its subsidiaries are administered by
TAP. Rent expense related to all leases is shared by the companies on a
cost allocation method based generally on estimated usage by department.
Net rent expense was $30 million, $24 million, and $15 million in 1999,
1998 and 1997, respectively.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
YEAR ENDING DECEMBER 31, MINIMUM OPERATING RENTAL
($ in millions) PAYMENTS
--------------------------------------------------------------------------
<S> <C>
2000 $38
2001 42
2002 41
2003 41
2004 41
Thereafter 273
--------------------------------------------------------------------------
Total Rental Payments $476
=========================================================================
</TABLE>
Future sublease rental income of approximately $79 million will partially
offset these commitments. Also, the Company will be reimbursed for 50% of
the rental expense for a particular lease totaling $195 million, by an
affiliate. Minimum future capital lease payments are not significant.
The Company is reimbursed for use of furniture and equipment through cost
sharing agreements by its affiliates.
F-22
<PAGE> 154
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
10. FEDERAL INCOME TAXES
EFFECTIVE TAX RATE
<TABLE>
<CAPTION>
($ in millions)
--------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1999 1998 1997
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income Before Federal Income Taxes $1,592 $1,383 $1,283
Statutory Tax Rate 35% 35% 35%
--------------------------------------------------------------------------------------------------------
Expected Federal Income Taxes 557 484 449
Tax Effect of:
Non-taxable investment income (19) (5) (4)
Other, net 7 2 (1)
--------------------------------------------------------------------------------------------------------
Federal Income Taxes $ 545 $ 481 $ 444
========================================================================================================
Effective Tax Rate 34% 35% 35%
--------------------------------------------------------------------------------------------------------
</TABLE>
COMPOSITION OF FEDERAL INCOME TAXES
<TABLE>
<CAPTION>
Current:
<S> <C> <C> <C>
United States $377 $418 $410
Foreign 32 24 24
--------------------------------------------------------------------------------------------------------
Total 409 442 434
--------------------------------------------------------------------------------------------------------
Deferred:
United States 143 40 10
Foreign (7) (1) --
--------------------------------------------------------------------------------------------------------
Total 136 39 10
--------------------------------------------------------------------------------------------------------
Federal Income Taxes $545 $481 $444
========================================================================================================
</TABLE>
Additional tax benefits attributable to employee stock plans allocated
directly to shareholder's equity were $17 million for each of the years
ended December 31, 1999, 1998 and 1997.
F-23
<PAGE> 155
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
The net deferred tax liabilities at December 31, 1999 and 1998 were
comprised of the tax effects of temporary differences related to the
following assets and liabilities:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
($ in millions) 1999 1998
---- ----
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred Tax Assets:
Benefit, reinsurance and other reserves $ 645 $ 616
Operating lease reserves 70 76
Investments, net 11 --
Other employee benefits 106 103
Other 142 135
-----------------------------------------------------------------------------------------------------------------
Total 974 930
-----------------------------------------------------------------------------------------------------------------
Deferred Tax Liabilities:
Deferred acquisition costs and value of insurance in force (773) (673)
Investments, net -- (489)
Other (124) (90)
-----------------------------------------------------------------------------------------------------------------
Total (897) (1,252)
-----------------------------------------------------------------------------------------------------------------
Net Deferred Tax (Liability) Asset Before Valuation Allowance 77 (322)
Valuation Allowance for Deferred Tax Assets (100) (100)
-----------------------------------------------------------------------------------------------------------------
Net Deferred Tax Liability After Valuation Allowance $ (23) $ (422)
-----------------------------------------------------------------------------------------------------------------
</TABLE>
The Company and its life insurance subsidiaries file a consolidated federal
income tax return. Federal income taxes are allocated to each member of the
consolidated group on a separate return basis adjusted for credits and
other amounts required by the consolidation process. Any resulting
liability will be paid currently to the Company. Any credits for losses
will be paid by the Company to the extent that such credits are for tax
benefits that have been utilized in the consolidated federal income tax
return.
The $100 million valuation allowance is sufficient to cover any capital
losses on investments that may exceed the capital gains able to be
generated in the life insurance group's consolidated federal income tax
return based upon management's best estimate of the character of the
reversing temporary differences. Reversal of the valuation allowance is
contingent upon the recognition of future capital gains or a change in
circumstances that causes the recognition of the benefits to become more
likely than not. There was no change in the valuation allowance during
1999. The initial recognition of any benefit produced by the reversal of
the valuation allowance will be recognized by reducing goodwill.
At December 31, 1999, the Company had no ordinary or capital loss
carryforwards.
F-24
<PAGE> 156
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
The policyholders surplus account, which arose under prior tax law, is
generally that portion of the gain from operations that has not been
subjected to tax, plus certain deductions. The balance of this account is
approximately $932 million. Income taxes are not provided for on this
amount because under current U.S. tax rules such taxes will become payable
only to the extent such amounts are distributed as a dividend or exceed
limits prescribed by federal law. Distributions are not contemplated from
this account. At current rates the maximum amount of such tax would be
approximately $326 million.
11. NET INVESTMENT INCOME
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1999 1998 1997
($ in millions) ---- ---- ----
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GROSS INVESTMENT INCOME
Fixed maturities $1,806 $1,598 $1,460
Mortgage loans 235 295 291
Joint ventures and partnerships 141 74 55
Trading 141 43 57
Other, including policy loans 287 240 263
------------------------------------------------------------------------------------------------------
2,610 2,250 2,126
------------------------------------------------------------------------------------------------------
Investment expenses 104 65 89
------------------------------------------------------------------------------------------------------
Net investment income $2,506 $2,185 $2,037
------------------------------------------------------------------------------------------------------
</TABLE>
12. INVESTMENTS AND INVESTMENT GAINS (LOSSES)
Realized investment gains (losses) for the periods were as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1999 1998 1997
($ in millions) ---- ---- ----
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REALIZED INVESTMENT GAINS
Fixed maturities $(23) $111 $ 71
Equity securities 7 6 (9)
Mortgage loans 29 21 59
Real estate held for sale 108 16 67
Other (8) (5) 11
------------------------------------------------------------------------------------------------------
Total Realized Investment Gains $113 $149 $199
------------------------------------------------------------------------------------------------------
</TABLE>
F-25
<PAGE> 157
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Changes in net unrealized investment gains (losses) that are reported as
accumulated other changes in equity from non-owner sources or unrealized
gains on Citigroup stock in shareholder's equity were as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1999 1998 1997
($ in millions) ---- ---- ----
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
UNREALIZED INVESTMENT GAINS (LOSSES)
Fixed maturities $(1,554) $ 91 $ 446
Equity securities 49 13 25
Other (30) (169) 520
-------------------------------------------------------------------------------------------------------------
Total Unrealized Investment Gains (Losses) (1,535) (65) 991
-------------------------------------------------------------------------------------------------------------
Related taxes (539) (20) 350
-------------------------------------------------------------------------------------------------------------
Change in unrealized investment gains (losses) (996) (45) 641
Transferred to paid in capital, net of tax -- (585) --
Balance beginning of year 598 1,228 587
-------------------------------------------------------------------------------------------------------------
Balance End of Year $ (398) $ 598 $1,228
-------------------------------------------------------------------------------------------------------------
</TABLE>
Included in Other in 1998 is the unrealized loss on Citigroup common stock
of $167 million prior to the conversion to preferred stock. Also included
in Other were unrealized gains of $506 million, which were reported in
1997, related to appreciation of Citigroup common stock.
F-26
<PAGE> 158
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Fixed Maturities
The amortized cost and fair value of investments in fixed maturities were
as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
GROSS GROSS
DECEMBER 31, 1999 AMORTIZED UNREALIZED UNREALIZED FAIR
($ in millions) COST GAINS LOSSES VALUE
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE:
Mortgage-backed securities - CMOs and
pass-through securities $ 5,081 $ 22 $ 224 $ 4,879
U.S. Treasury securities and obligations of
U.S. Government and government agencies and
authorities 1,032 14 53 993
Obligations of states, municipalities and
political subdivisions 214 -- 31 183
Debt securities issued by foreign governments 811 35 10 836
All other corporate bonds 13,938 69 384 13,623
Other debt securities 3,319 30 99 3,250
Redeemable preferred stock 105 4 7 102
-------------------------------------------------------------------------------------------------------------------
Total Available For Sale $24,500 $ 174 $ 808 $23,866
-------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
GROSS GROSS
DECEMBER 31, 1998 AMORTIZED UNREALIZED UNREALIZED FAIR
($ in millions) COST GAINS LOSSES VALUE
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE:
Mortgage-backed securities - CMOs and
pass-through securities $ 4,717 $ 147 $ 11 $ 4,853
U.S. Treasury securities and obligations of
U.S. Government and government agencies and
authorities 1,563 186 3 1,746
Obligations of states, municipalities and
political subdivisions 239 18 -- 257
Debt securities issued by foreign governments 634 41 3 672
All other corporate bonds 13,025 532 57 13,500
Other debt securities 2,709 106 38 2,777
Redeemable preferred stock 86 3 1 88
------------------------------------------------------------------------------------------------------------------
Total Available For Sale $22,973 $ 1,033 $ 113 $23,893
------------------------------------------------------------------------------------------------------------------
</TABLE>
F-27
<PAGE> 159
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Proceeds from sales of fixed maturities classified as available for sale
were $12.6 billion, $13.4 billion and $7.6 billion in 1999, 1998 and 1997,
respectively. Gross gains of $200 million, $314 million and $170 million
and gross losses of $223 million, $203 million and $99 million in 1999,
1998 and 1997, respectively, were realized on those sales.
Fair values of investments in fixed maturities are based on quoted market
prices or dealer quotes or, if these are not available, discounted expected
cash flows using market rates commensurate with the credit quality and
maturity of the investment. The fair value of investments for which a
quoted market price or dealer quote are not available amounted to $4.8
billion and $4.8 billion at December 31, 1999 and 1998, respectively.
The amortized cost and fair value of fixed maturities at December 31, 1999,
by contractual maturity, are shown below. Actual maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
AMORTIZED
($ in millions) COST FAIR VALUE
--------------------------------------------------------------------------------------
<S> <C> <C>
MATURITY:
Due in one year or less $1,624 $1,622
Due after 1 year through 5 years 6,633 6,599
Due after 5 years through 10 years 5,257 5,132
Due after 10 years 5,905 5,634
--------------------------------------------------------------------------------------
19,419 18,987
--------------------------------------------------------------------------------------
Mortgage-backed securities 5,081 4,879
--------------------------------------------------------------------------------------
Total Maturity $24,500 $23,866
--------------------------------------------------------------------------------------
</TABLE>
The Company makes investments in collateralized mortgage obligations
(CMOs). CMOs typically have high credit quality, offer good liquidity, and
provide a significant advantage in yield and total return compared to U.S.
Treasury securities. The Company's investment strategy is to purchase CMO
tranches which are protected against prepayment risk, including planned
amortization class (PAC) tranches. Prepayment protected tranches are
preferred because they provide stable cash flows in a variety of interest
rate scenarios. The Company does invest in other types of CMO tranches if a
careful assessment indicates a favorable risk/return tradeoff. The Company
does not purchase residual interests in CMOs.
At December 31, 1999 and 1998, the Company held CMOs classified as
available for sale with a fair value of $3.8 billion and $3.4 billion,
respectively. Approximately 52% and 54%, respectively, of the Company's CMO
holdings are fully collateralized by GNMA, FNMA or FHLMC securities at
December 31, 1999 and 1998. In addition, the Company held $1.1 billion and
$1.4 billion of GNMA, FNMA or FHLMC mortgage-backed pass-through securities
at December 31, 1999 and 1998, respectively. Virtually all of these
securities are rated AAA.
F-28
<PAGE> 160
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Equity Securities
The cost and fair values of investments in equity securities were as
follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
GROSS GROSS
EQUITY SECURITIES: UNREALIZED UNREALIZED FAIR
($ in millions) COST GAINS LOSSES VALUE
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1999
Common stocks $195 $123 $ 4 $314
Non-redeemable preferred stocks 496 15 41 470
-------------------------------------------------------------------------------------------------------------------
Total Equity Securities $691 $138 $45 $784
-------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1998
Common stocks $129 $44 $ 3 $170
Non-redeemable preferred stocks 345 10 7 348
-------------------------------------------------------------------------------------------------------------------
Total Equity Securities $474 $54 $10 $518
-------------------------------------------------------------------------------------------------------------------
</TABLE>
Proceeds from sales of equity securities were $100 million, $212 million
and $341 million in 1999, 1998 and 1997, respectively. Gross gains of $15
million, $30 million and $53 million and gross losses of $8 million, $24
million and $62 million in 1999, 1998 and 1997, respectively, were realized
on those sales.
Mortgage Loans and Real Estate Held For Sale
At December 31, 1999 and 1998, the Company's mortgage loan and real estate
held for sale portfolios consisted of the following:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
($ in millions) 1999 1998
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Current Mortgage Loans $2,228 $2,370
Underperforming Mortgage Loans 57 236
--------------------------------------------------------------------------------------------------
Total Mortgage Loans 2,285 2,606
--------------------------------------------------------------------------------------------------
Real Estate Held For Sale - Foreclosed 223 112
Real Estate Held For Sale - Investment 13 31
--------------------------------------------------------------------------------------------------
Total Real Estate 236 143
--------------------------------------------------------------------------------------------------
Total Mortgage Loans and Real Estate Held for Sale $2,521 $2,749
==================================================================================================
</TABLE>
Underperforming mortgage loans include delinquent mortgage loans, loans in
the process of foreclosure, foreclosed loans and loans modified at interest
rates below market.
F-29
<PAGE> 161
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Aggregate annual maturities on mortgage loans at December 31, 1999 are as
follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
YEAR ENDING DECEMBER 31,
($ in millions)
-----------------------------------------------------------------------
<S> <C>
Past Maturity $ 39
2000 162
2001 172
2002 137
2003 131
2004 140
Thereafter 1,504
-----------------------------------------------------------------------
Total $2,285
=======================================================================
</TABLE>
Trading Securities
Trading securities of the Company are held in Tribeca.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
($ in millions) 1999 1998
-------------------------------------------------------------------------------------------
TRADING SECURITIES OWNED
<S> <C> <C>
Convertible bond arbitrage $1,045 $754
Merger arbitrage 421 427
Other 212 5
-------------------------------------------------------------------------------------------
Total $1,678 $1,186
-------------------------------------------------------------------------------------------
TRADING SECURITIES SOLD NOT YET PURCHASED
Convertible bond arbitrage $799 $521
Merger arbitrage 299 352
-------------------------------------------------------------------------------------------
Total $1,098 $873
-------------------------------------------------------------------------------------------
</TABLE>
The Company's trading portfolio investments and related liabilities are
normally held for periods less than six months. Therefore, expected future
cash flows for these assets and liabilities are expected to be realized in
less than one year.
F-30
<PAGE> 162
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Concentrations
At December 31, 1999 and 1998, the Company had an investment in Citigroup
Preferred Stock of $987 million. See Note 8.
The Company maintains a short-term investment pool for its insurance
affiliates in which the Company also participates. See Note 8.
The Company had concentrations of investments, primarily fixed maturities,
in the following industries:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
($ in millions) 1999 1998
--------------------------------------------------------------------------
<S> <C> <C>
Banking $1,906 $2,131
Electric Utilities 1,653 1,513
Finance 1,571 1,346
--------------------------------------------------------------------------
</TABLE>
The Company held investments in Foreign Banks in the amount of $1,012
million and $997 million at December 31, 1999 and 1998, respectively, which
are included in the table above. Also, below investment grade assets
included in the preceding table were not significant.
Included in fixed maturities are below investment grade assets totaling
$2.2 billion and $2.1 billion at December 31, 1999 and 1998, respectively.
The Company defines its below investment grade assets as those securities
rated "Ba1" or below by external rating agencies, or the equivalent by
internal analysts when a public rating does not exist. Such assets include
publicly traded below investment grade bonds and certain other privately
issued bonds and notes that are classified as below investment grade.
Mortgage loan investments are relatively evenly dispersed throughout the
United States, with no significant holdings in any one state. Also, there
is no significant mortgage loan investment in a particular property type.
F-31
<PAGE> 163
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
The Company monitors creditworthiness of counterparties to all financial
instruments by using controls that include credit approvals, limits and
other monitoring procedures. Collateral for fixed maturities often includes
pledges of assets, including stock and other assets, guarantees and letters
of credit. The Company's underwriting standards with respect to new
mortgage loans generally require loan to value ratios of 75% or less at the
time of mortgage origination.
Non-Income Producing Investments
Investments included in the consolidated balance sheets that were
non-income producing for the preceding 12 months were insignificant.
Restructured Investments
The Company had mortgage loans and debt securities that were restructured
at below market terms at December 31, 1999 and 1998. The balances of the
restructured investments were insignificant. The new terms typically defer
a portion of contract interest payments to varying future periods. The
accrual of interest is suspended on all restructured assets, and interest
income is reported only as payment is received. Gross interest income on
restructured assets that would have been recorded in accordance with the
original terms of such loans was insignificant in 1999 and in 1998.
Interest on these assets, included in net investment income was
insignificant in 1999 and 1998.
13. DEPOSIT FUNDS AND RESERVES
At December 31, 1999, the Company had $27.0 billion of life and annuity
deposit funds and reserves. Of that total, $13.8 billion is not subject to
discretionary withdrawal based on contract terms. The remaining $13.2
billion is for life and annuity products that are subject to discretionary
withdrawal by the contractholder. Included in the amount that is subject to
discretionary withdrawal is $2.1 billion of liabilities that are
surrenderable with market value adjustments. Also included are an
additional $4.9 billion of life insurance and individual annuity
liabilities which are subject to discretionary withdrawals, and have an
average surrender charge of 4.6%. In the payout phase, these funds are
credited at significantly reduced interest rates. The remaining $6.2
billion of liabilities are surrenderable without charge. More than 12.7% of
these relate to individual life products. These risks would have to be
underwritten again if transferred to another carrier, which is considered a
significant deterrent against withdrawal by long-term policyholders.
Insurance liabilities that are surrendered or withdrawn are reduced by
outstanding policy loans and related accrued interest prior to payout.
F-32
<PAGE> 164
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
14. RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
The following table reconciles net income to net cash provided by operating
activities:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1999 1998 1997
($ in millions) ---- ---- ----
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Income From Continuing Operations $ 1,047 $ 902 $ 839
Adjustments to reconcile net income to net cash provided by
operating activities:
Realized gains (113) (149) (199)
Deferred federal income taxes 136 39 10
Amortization of deferred policy acquisition costs 315 275 252
Additions to deferred policy acquisition costs (686) (566) (471)
Investment income (221) (202) (32)
Premium balances (23) 23 (64)
Insurance reserves and accrued expenses 421 348 111
Other 99 205 380
---------------------------------------------------------------------------------------------------------------------
Net cash provided by operations $ 975 $ 875 $ 826
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
</TABLE>
15. NON-CASH INVESTING AND FINANCING ACTIVITIES
Significant non-cash investing and financing activities include the
acquisition of real estate through foreclosures of mortgage loans amounting
to $205 million in 1999, the transfer of Citigroup common stock to
Citigroup preferred stock valued at $987 million in 1998 and the conversion
of $119 million of real estate held for sale to other invested assets as a
joint venture in 1997.
F-33
<PAGE> 165
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
16. OPERATING SEGMENTS
The Company has two reportable business segments that are separately
managed due to differences in products, services, marketing strategy and
resource management. The business of each segment is maintained and
reported through separate legal entities within the Company. The management
groups of each segment report separately to the common ultimate parent,
Citigroup Inc.
The TRAVELERS LIFE & ANNUITY business segment consolidates primarily the
business of The Travelers Insurance Company and The Travelers Life and
Annuity Company. Travelers Life & Annuity offers individual annuity, group
annuity, individual life and long-term care products distributed by the
Company and TLAC under the Travelers name. Among the range of individual
products offered are fixed and variable deferred annuities, payout
annuities and term, universal and variable life and long-term care
insurance. The group products include institutional pensions, including
guaranteed investment contracts, payout annuities, group annuities to
employer-sponsored retirement and savings plans and structured finance
transactions.
The PRIMERICA LIFE business segment consolidates primarily the business of
Primerica Life Insurance Company, Primerica Life Insurance Company of
Canada and National Benefit Life Insurance Company. The Primerica Life
business segment offers individual life products, primarily term insurance,
to customers through a nationwide sales force of approximately 80,000 full
and part-time licensed Personal Financial Analysts.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies (see Note 1), except that
management also includes receipts on long-duration contracts (universal
life-type and investment contracts) as deposits along with premiums in
measuring business volume.
BUSINESS SEGMENT INFORMATION:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
TRAVELERS LIFE & PRIMERICA LIFE
1999 ($ in millions) ANNUITY INSURANCE TOTAL
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Business Volume:
Premiums $ 666 $ 1,072 $ 1,738
Deposits 11,220 -- 11,220
------- ------- -------
Total business volume $11,886 $ 1,072 $12,958
Net investment income 2,249 257 2,506
Interest credited to contractholders 937 -- 937
Amortization of deferred acquisition costs 127 188 315
Federal income taxes on Operating Income 319 186 505
Operating Income (excludes realized gains or
losses and the related FIT) $ 619 $ 355 $ 974
Segment Assets $56,615 $ 6,916 $63,531
-----------------------------------------------------------------------------------------------------------------
</TABLE>
F-34
<PAGE> 166
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
TRAVELERS LIFE & PRIMERICA LIFE
1998 ($ in millions) ANNUITY INSURANCE TOTAL
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Business Volume:
Premiums $ 683 $1,057 $ 1,740
Deposits 7,693 -- 7,693
------- ------ -------
Total business volume $ 8,376 $1,057 $ 9,433
Net investment income 1,965 220 2,185
Interest credited to contractholders 876 -- 876
Amortization of deferred acquisition costs 88 187 275
Federal income taxes on Operating Income 260 170 430
Operating Income (excludes realized gains or
losses and the related FIT) $ 493 $ 312 $ 805
Segment Assets $49,646 $6,902 $56,548
-----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
TRAVELERS LIFE PRIMERICA LIFE
1997 ($ in millions) & ANNUITY INSURANCE TOTAL
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Business Volume:
Premiums $ 548 $1,035 $ 1,583
Deposits 5,276 -- 5,276
------- ------ -------
Total business volume $ 5,824 $1,035 $ 6,859
Net investment income 1,836 201 2,037
Interest credited to contractholders 829 -- 829
Amortization of deferred acquisition costs 68 184 252
Federal income taxes on Operating Income 221 153 374
Operating Income (excludes realized gains or
losses and the related FIT) $ 427 $ 283 $ 710
Segment Assets $42,330 $7,110 $49,440
-----------------------------------------------------------------------------------------------------------------
</TABLE>
The amount of investments in equity method investees and total expenditures
for additions to long-lived assets other than financial instruments,
long-term customer relationships of a financial institution, mortgage and
other servicing rights, deferred policy acquisition costs, and deferred tax
assets, were not material.
F-35
<PAGE> 167
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
BUSINESS SEGMENT RECONCILIATION:
($ in millions)
----------------------------------------------------------------------------------------------------------
REVENUES 1999 1998 1997
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total business volume $12,958 $9,433 $6,859
Net investment income 2,506 2,185 2,037
Realized investment gains 113 149 199
Other revenues 521 440 354
Elimination of deposits (11,220) (7,693) (5,276)
----------------------------------------------------------------------------------------------------------
Total revenues $4,878 $4,514 $4,173
==========================================================================================================
OPERATING INCOME 1999 1998 1997
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total operating income of business segments $ 974 $805 $710
Realized investment gains net of tax 73 97 129
----------------------------------------------------------------------------------------------------------
Income from continuing operations $1,047 $902 $839
==========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
ASSETS 1999 1998 1997
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total assets of business segments $63,531 $56,548 $49,440
==========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
REVENUE BY PRODUCTS 1999 1998 1997
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred Annuities $5,694 $4,198 $3,303
Group and Payout Annuities 7,275 5,326 3,737
Individual Life and Health Insurance 2,434 2,270 2,102
Other (a) 695 413 307
Elimination of deposits (11,220) (7,693) (5,276)
----------------------------------------------------------------------------------------------------------
Total Revenue $4,878 $4,514 $4,173
==========================================================================================================
</TABLE>
(a) Other represents revenue attributable to unallocated capital and run-off
businesses.
The Company's revenue was derived almost entirely from U.S. domestic
business. Revenue attributable to foreign countries was insignificant.
The Company had no transactions with a single customer representing 10% or
more of its revenue.
F-36
<PAGE> 168
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned Registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents and reports as may be prescribed by any rule or regulation of the
Commission heretofore or hereafter duly adopted pursuant to authority conferred
in that section.
RULE 484 UNDERTAKING
Sections 33-770 et seq, inclusive of the Connecticut General Statutes ("C.G.S.")
regarding indemnification of directors and officers of Connecticut corporations
provides in general that Connecticut corporations shall indemnify their
officers, directors and certain other defined individuals against judgments,
fines, penalties, amounts paid in settlement and reasonable expenses actually
incurred in connection with proceedings against the corporation. The
corporation's obligation to provide such indemnification generally does not
apply unless (1) the individual is wholly successful on the merits in the
defense of any such proceeding; or (2) a determination is made (by persons
specified in the statute) that the individual acted in good faith and in the
best interests of the corporation and in all other cases, his conduct was at
least not opposed to the best interests of the corporation, and in a criminal
case he had no reasonable cause to believe his conduct was unlawful; or (3) the
court, upon application by the individual, determines in view of all of the
circumstances that such person is fairly and reasonably entitled to be
indemnified, and then for such amount as the court shall determine. With respect
to proceedings brought by or in the right of the corporation, the statute
provides that the corporation shall indemnify its officers, directors and
certain other defined individuals, against reasonable expenses actually incurred
by them in connection with such proceedings, subject to certain limitations.
Citigroup Inc. also provides liability insurance for its directors and officers
and the directors and officers of its subsidiaries, including the Registrant.
This insurance provides for coverage against loss from claims made against
directors and officers in their capacity as such, including, subject to certain
exceptions, liabilities under the federal securities laws.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
UNDERTAKING TO REPRESENT REASONABLENESS OF CHARGES
The Company hereby represents that the aggregate charges under the Policy of the
Registrant described herein are reasonable in relation to the services rendered,
the expenses expected to be incurred, and the risks assumed by the Company.
<PAGE> 169
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
1. The facing sheet.
2.a The MarketLife Prospectus.
2.b The In-Vest Prospectus.
3. The undertaking to file reports.
4. The signatures.
ATTACHMENTS:
A Consent of Katherine M. Sullivan, General Counsel, to filing of her
opinion as an exhibit to this Registration Statement and to the
reference to her opinion under the caption "Legal Proceedings and
Opinion" in the Prospectus. (See Exhibit 12 below.)
B. Consent and Actuarial Opinion pertaining to the illustrations
contained in the prospectus.
C. Consent of KPMG LLP, Independent Certified Public Accountants.
D. Powers of Attorney. (See Exhibit 15 below.)
EXHIBITS
Copies of all exhibits which are required by Section IX, Paragraph A, of Form
N-8B-2:
1. Resolution of the Board of Directors of The Travelers Insurance
Company authorizing the establishment of the Registrant.
(Incorporated herein by reference to Exhibit No. 1 to Post-Effective
Amendment No. 17 to the Registration Statement on Form S-6 filed
April 29, 1996.)
3(a). Distribution and Principal Underwriting Agreement among the
Registrant, The Travelers Insurance Company and CFBDS, Inc.
(Incorporated herein by reference to Exhibit 3(a) to Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-4, File No.
333-60227, filed November 9, 1998.)
3(b). Selling Agreement. (Incorporated herein by reference to Exhibit 3(b)
to Pre-Effective Amendment No. 1 to the Registration Statement on
Form N-4, File No. 333-60227, filed November 9, 1998.)
3(c). Agents Agreements, including schedule of sales commissions.
(Incorporated herein by reference to Exhibit 3(c) to Post-Effective
Amendment No. 18 to the Registration Statement on Form S-6 filed
April 25, 1997.)
4. None
5. Form of Variable Universal Life Insurance Contracts. (Incorporated
herein by reference to Exhibit No. 5 to Post-Effective Amendment No.
17 to the Registration Statement on Form S-6 filed April 29, 1996.)
<PAGE> 170
6(a). Charter of The Travelers Insurance Company, as amended on October 19,
1994. (Incorporated herein by reference to Exhibit 3(a)(i) to the
Registration Statement filed on Form S-2, File No. 33-58677, filed
via Edgar on April 18, 1995.)
6(b). By-Laws of The Travelers Insurance Company, as amended on October 20,
1994. (Incorporated herein by reference to Exhibit 3(b)(i) to the
Registration Statement filed on Form S-2, File No. 33-58677, filed
via Edgar on April 18, 1995.)
7. None
8. Participation Agreements among Variable Insurance Products Fund,
Fidelity Distributors Corporation and The Travelers Insurance
Company; Variable Insurance Products Fund II, Fidelity Distributors
Corporation and The Travelers Insurance Company; Templeton Variable
Products Series Fund, Templeton Funds Distributor, Inc. and The
Travelers Insurance Company; and between The Travelers Insurance
Company and Dreyfus Stock Index Fund. (Incorporated herein by
reference to Exhibits 8(a), 8(b), 8(c) and 8(d), respectively to
Post-Effective Amendment No. 29 to the Registration Statement on Form
N-4, File No. 2-79529 filed on April 19, 1996.)
9. None
10. Form of Application for Variable Universal Life Insurance Contracts.
(Incorporated herein by reference to Exhibit 10 to Post-Effective
Amendment No. 19 to the Registration Statement on Form S-6 filed
April 24, 1998.)
11. Specimen of each security being registered. (See Exhibit 5. above.)
12. Opinion of counsel as to the legality of the securities being
registered. (Incorporated herein by reference to Exhibit 12 to
Post-Effective Amendment No. 19 to the Registration Statement on Form
S-6 filed April 24, 1998.)
13. Actuarial Memorandum Concerning Transfer and Redemption Procedures,
as required by Rule 6e-3(T)(b)(12)(ii). (Incorporated herein by
reference to Exhibit 13 to Post-Effective Amendment No. 17 to the
Registration Statement on Form S-6 filed April 29, 1996.)
15(a). Powers of Attorney authorizing Jay S. Fishman or Ernest J. Wright as
signatory for Robert I. Lipp, Charles O. Prince, III, Marc P. Weill,
Irwin R. Ettinger, Michael A. Carpenter and Donald T. DeCarlo.
(Incorporated herein by reference to Exhibit 15(a) to Post-Effective
Amendment No. 15 to the Registration Statement on Form S-6, filed
April 28, 1995.)
15(b). Powers of Attorney authorizing Ernest J. Wright or Kathleen A. McGah
as signatory for George C. Kokulis, Katherine M. Sullivan and Glenn
D. Lammey.
<PAGE> 171
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant, The
Travelers Fund UL for Variable Life Insurance, certifies that it meets all of
the requirements for effectiveness of this post-effective amendment to this
registration statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this amendment to this registration statement to be signed
on its behalf by the undersigned thereunto duly authorized, in the City of
Hartford, State of Connecticut, on April 25, 2000.
THE TRAVELERS FUND UL FOR VARIABLE LIFE INSURANCE
(Registrant)
THE TRAVELERS INSURANCE COMPANY
(Depositor)
By:*GLENN D. LAMMEY
------------------------------------------
Glenn D. Lammey, Chief Financial Officer,
Chief Accounting Officer and Controller
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities indicated
on the 25th day of April 2000.
*GEORGE C. KOKULIS Director, President and Chief Executive
- ---------------------------- Officer (Principal Executive Officer)
(George C. Kokulis)
*KATHERINE M. SULLIVAN Director
- ----------------------------
(Katherine M. Sullivan)
*MARC P. WEILL Director
- ----------------------------
(Marc P. Weill)
*By: /s/Ernest J. Wright, Attorney-in-Fact
<PAGE> 172
EXHIBIT INDEX
<TABLE>
<CAPTION>
ATTACHMENT or EXHIBIT Method of Filing
- --------------------- ----------------
<S> <C>
ATTACHMENTS
B. Consent and Actuarial Opinion pertaining to the Electronically
illustrations contained in the prospectus.
C Consent of KPMG LLP, Independent Certified Public Accountants Electronically
Exhibits
15(b). Powers of Attorney authorizing Ernest J. Wright or Kathleen A. Electronically
McGah as signatory for George C. Kokulis, Katherine M. Sullivan
And Glenn D. Lammey.
</TABLE>
<PAGE> 1
ATTACHMENT B
Re: Travelers' MarketLife and Invest (File No. 2-88637)
Dear Sir or Madam:
In my capacity as Actuary of The Travelers Insurance Company, I have provided
actuarial advice concerning Travelers' MarketLife and InVest Life products. I
also provided actuarial advice concerning the preparation of the Registration
Statement on Form S-6, File No. 2-88637 (the "Registration Statement") for
filing with the Securities and Exchange Commission under the Securities Act of
1933 in connection with the Policy.
In my opinion the illustrations of benefits under the Policies included in the
prospectus under the caption "Illustrations of Death Benefit, Cash Values and
Cash Surrender Values" are, based on the assumptions stated in the
illustrations, consistent with the provisions of the Policies. Also, in my
opinion the age selected in the illustrations is representative of the manner in
which the Policies operate.
I hereby consent to the use of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/s/Mahir Dugentas, ASA, MAAA
Pricing Actuary
Product Development
April 25, 2000
<PAGE> 1
ATTACHMENT C
Consent of Independent Certified Public Accountants
Board of Directors
The Travelers Insurance Company
We consent to the use of our reports included herein and to the reference to our
firm under the heading "Experts" in the prospectus.
/s/KPMG LLP
Hartford, Connecticut
April 25, 2000
<PAGE> 1
EXHIBIT 15(b)
THE TRAVELERS FUND UL FOR VARIABLE LIFE INSURANCE
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, GEORGE C. KOKULIS of Simsbury, Connecticut, Director, President
and Chief Executive Officer of The Travelers Insurance Company (hereafter the
"Company"), do hereby make, constitute and appoint ERNEST J. WRIGHT, Secretary
of said Company, and KATHLEEN A. McGAH, Assistant Secretary of said Company, or
either one of them acting alone, my true and lawful attorney-in-fact, for me,
and in my name, place and stead, to sign registration statements on behalf of
said Company on Form S-6 or other appropriate form under the Securities Act of
1933 for The Travelers Fund UL for Variable Life Insurance, a separate account
of the Company dedicated specifically to the funding of variable life insurance
contracts to be offered by said Company, and further, to sign any and all
amendments thereto, including post-effective amendments, that may be filed by
the Company on behalf of said registrant.
IN WITNESS WHEREOF, I have hereunto set my hand this 10th day of April
2000.
/s/George C. Kokulis
Director, President and Chief Executive Officer
The Travelers Insurance Company
<PAGE> 2
THE TRAVELERS FUND UL FOR VARIABLE LIFE INSURANCE
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, KATHERINE M. SULLIVAN of Longmeadow, Massachusetts, a Director
of The Travelers Insurance Company (hereafter the "Company"), do hereby make,
constitute and appoint ERNEST J. WRIGHT, Secretary of said Company, and KATHLEEN
A. McGAH, Assistant Secretary of said Company, or either one of them acting
alone, my true and lawful attorney-in-fact, for me, and in my name, place and
stead, to sign registration statements on behalf of said Company on Form S-6 or
other appropriate form under the Securities Act of 1933 for The Travelers Fund
UL for Variable Life Insurance, a separate account of the Company dedicated
specifically to the funding of variable life insurance contracts to be offered
by said Company, and further, to sign any and all amendments thereto, including
post-effective amendments, that may be filed by the Company on behalf of said
registrant.
IN WITNESS WHEREOF, I have hereunto set my hand this 31st day of March
2000.
/s/Katherine M. Sullivan
Director
The Travelers Insurance Company
<PAGE> 3
THE TRAVELERS FUND UL FOR VARIABLE LIFE INSURANCE
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, GLENN D. LAMMEY of Simsbury, Connecticut, Chief Financial
Officer, Chief Accounting Officer and Controller of The Travelers Insurance
Company (hereafter the "Company"), do hereby make, constitute and appoint ERNEST
J. WRIGHT, Secretary of said Company, and KATHLEEN A. McGAH, Assistant Secretary
of said Company, or either one of them acting alone, my true and lawful
attorney-in-fact, for me, and in my name, place and stead, to sign registration
statements on behalf of said Company on Form S-6 or other appropriate form under
the Securities Act of 1933 for The Travelers Fund UL for Variable Life
Insurance, a separate account of the Company dedicated specifically to the
funding of variable life insurance contracts to be offered by said Company, and
further, to sign any and all amendments thereto, including post-effective
amendments, that may be filed by the Company on behalf of said registrant.
IN WITNESS WHEREOF, I have hereunto set my hand this 31st day of March
2000.
/s/Glenn D. Lammey
Chief Financial Officer,
Chief Accounting Officer and Controller
The Travelers Insurance Company
