<PAGE> 1
Registration Statement No. 333-96519
811-03927
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
A. Exact Name of Trust: THE TRAVELERS FUND UL 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)
___________ on ___________ pursuant to paragraph (b)
___________ 60 days after filing pursuant to paragraph (a)(1)
___________ on __________ pursuant to paragraph (a)(1) of Rule 485.
If appropriate, check the following box:
____________ this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
E. Title of securities being registered:
Variable Life Insurance Policies.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940 the
Registrant hereby declares that an indefinite amount of its
Variable Life Insurance Policies is being registered under the
Securities Act of 1933.
F. Approximate date of proposed public offering:
<PAGE> 2
As soon as practicable following the effectiveness of the Registration
Statement
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
________ Check the box if it is proposed that this filing will become
effective on ____ at ___ pursuant to Rule 487. ______
<PAGE> 3
RECONCILIATION AND TIE BETWEEN
FORM N-8B-2 AND 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 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 Company; The Travelers Fund UL for Variable Life
Insurance, The Investment Options; How the Policy Works; Transfers of Cash Value;
The Separate Account and Valuation; Voting Rights; Disregard of Voting
Instructions; Dividends; Lapse and Reinstatement
11 Prospectus Summary; The Investment Options
12 Prospectus Summary; The Investment Options
13 Charges and Deductions; Distribution
14 How the Policy Works
15 Prospectus Summary; Applying Premium Payments
16 The Investment Options; Applying Premium Payments
17 Prospectus Summary; Right to Cancel; The Separate Account and Valuation;
Policy Loans; Exchange Rights
18 The Investment Options; Charges and Deductions; Federal Tax Considerations;
Dividends
19 Statements to Policy Owners
20 Not applicable
21 Policy Loans
22 Not applicable
23 Not applicable
24 Not applicable
25 The Company
26 Not applicable
27 The Company
28 The Company; Management
29 The Company
30 Not applicable
31 Not applicable
32 Not applicable
33 Not applicable
34 Not applicable
35 The Company; Distribution
36 Not applicable
37 Not applicable
38 Distribution
39 The Company; Distribution
40 Not applicable
41 The Company; Distribution
42 Not applicable
43 Not applicable
44 Applying Premium Payments; Accumulation Unit Values
45 Not applicable
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
Item No. of
Form N-8B-2 CAPTION IN PROSPECTUS
- ------------ ---------------------
<S> <C>
46 The Separate Account and Valuation; Access to Cash Values
47 The Investment Options
48 Not applicable
49 Not applicable
50 Not applicable
51 Prospectus Summary; The Company; How the Policy Works; Death Benefits and Lapse
and Reinstatement
52 The Investment Options
53 Federal Tax Considerations
54 Not applicable
55 Not applicable
56 Not applicable
57 Not applicable
58 Not applicable
59 Financial Statements
</TABLE>
<PAGE> 5
PROSPECTUS
This Prospectus describes The Travelers Variable Life, 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 the policy. The Cash Value is reduced by the various fees and charges
assessed under the Policy, as described in this Prospectus. The Policy will
remain in effect for as long as the Cash Surrender Value can pay the monthly
Policy charges (subject to the Grace Period provision), or for a longer period
as may be provided under the Lapse Protection Guarantee Rider.
We offer two death benefits under the Policy -- the "Level Option" and the
"Variable Option." Under either option, the death benefit will never be less
than the Amount Insured (less any outstanding Policy loans or Monthly Deduction
Amounts due and unpaid). You choose one at the time you apply for the Policy,
however you may change the death benefit option, subject to certain conditions.
This Policy may be or become a modified endowment Policy under federal tax law.
If so, any partial withdrawal, Policy surrender or loan may result in adverse
tax consequences or penalties.
REPLACING EXISTING INSURANCE WITH THIS POLICY MAY NOT BE TO YOUR ADVANTAGE.
EACH OF THE INVESTMENT OPTION PROSPECTUSES ARE INCLUDED WITH THE PACKAGE
CONTAINING THIS PROSPECTUS. ALL PROSPECTUSES SHOULD BE READ AND RETAINED FOR
FUTURE REFERENCE.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
VARIABLE LIFE INSURANCE POLICIES ARE NOT DEPOSITS OF ANY BANK AND ARE NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, OR ANY OTHER
GOVERNMENT AGENCY.
THE DATE OF THIS PROSPECTUS IS JUNE 2, 2000.
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<S> <C>
Glossary of Special Terms............. 3
Prospectus Summary.................... 5
General Description................... 10
How the Policy Works.................. 10
Beneficiary......................... 10
Applying Premium Payments........... 10
The Investment Options................ 11
Policy Benefits and Rights............ 14
Transfers of Cash Value............. 14
Telephone Transfers................. 14
Automated Transfers................. 14
Dollar-Cost Averaging............ 14
Portfolio Rebalancing............ 15
Lapse and Reinstatement............. 15
Additional Insurance Benefits....... 15
Lapse Protection Guarantee Rider.... 15
Exchange Rights..................... 16
Right to Cancel..................... 16
Access to Cash Values................. 16
Policy Loans........................ 16
Cash Value and Cash Surrender
Value............................ 17
Death Benefit......................... 17
Payment of Proceeds.............. 19
Payment Options.................. 19
Maturity Benefits..................... 20
Coverage Extension Rider......... 20
Maturity Extension Rider......... 20
Charges and Deductions................ 20
General.......................... 20
Charges Against Premium............. 21
Front-End Sales Charge........... 21
State Premium Tax Charge......... 21
DAC Charge....................... 21
Monthly Deduction Amount............ 21
Cost of Insurance Charge......... 22
Administrative Expense Charge.... 22
Charges for Supplemental Benefit
Provisions..................... 22
Charges Against the Separate
Account.......................... 22
Mortality and Expense Risk
Charge......................... 22
Underlying Fund Fees................ 22
Surrender Charges................... 22
Transfer Charge..................... 23
Reduction or Elimination of
Charges.......................... 23
The Separate Account and Valuation.... 23
The Travelers Fund UL for Variable
Life Insurance (Fund UL )........ 23
How the Cash Value Varies........... 24
Accumulation Unit Value............. 24
Net Investment Factor............... 24
Changes to the Policy................. 24
General............................. 24
Changes in Stated Amount............ 25
Changes in Death Benefit Option..... 25
Additional Policy Provisions.......... 25
Assignment.......................... 25
Limit on Right to Contest & Suicide
Exclusion........................ 25
Misstatement as to Sex and Age...... 26
Voting Rights....................... 26
Other Matters......................... 26
Statements to Policy Owners......... 26
Suspension of Valuation............. 26
Dividends........................... 26
Mixed and Shared Funding............ 27
Distribution........................ 27
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................ 33
Example of Policy Charges............. 33
Illustrations......................... 34
Performance Information............... 36
Appendix A............................ A-1
Financial Statements of the Separate
Account
Financial Statements of the Company
</TABLE>
2
<PAGE> 7
GLOSSARY OF SPECIAL TERMS
- --------------------------------------------------------------------------------
The following terms are used throughout the Prospectus, and have the indicated
meanings:
ACCUMULATION UNIT -- a standard of measurement used to calculate the values
allocated to the Investment Options.
BENEFICIARY(IES) -- the person(s) named to receive the benefits of this Policy
at the Insured's death.
CASH SURRENDER VALUE -- the Cash Value less any outstanding Policy loan and
surrender charges.
CASH VALUE -- the current value of Accumulation Units credited to each of the
Investment Options available under the Policy, plus the value of the Loan
Account.
COMPANY'S HOME OFFICE -- the principal executive offices of The Travelers
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.
LAPSE PROTECTION GUARANTEE RIDER -- a rider which provides that the Policy will
not lapse if a required amount of premium is paid. (Not available in all
states.)
LAPSE PROTECTION PREMIUM -- an amount shown on the Policy Summary page, the
cumulative amount of which must be paid in order for the Lapse Protection
Guarantee to be in effect.
LOAN ACCOUNT -- an account in the Company's general account to which we transfer
the amount of any Policy loan, and to which we credit and charge a fixed rate of
interest.
MATURITY DATE -- The anniversary of the Policy Date on which the Insured is age
100.
MINIMUM AMOUNT INSURED -- the amount of Death Benefit required to qualify this
Policy as life insurance under federal tax law.
MONTHLY DEDUCTION AMOUNT -- the amount of charges deducted from the Policy's
Cash Value which includes cost of insurance charges, administrative charges, and
any charges for supplemental benefits.
NET AMOUNT AT RISK -- an amount equal to the Death Benefit minus the Cash Value.
NET PREMIUM -- the amount of each premium payment applied to purchase
Accumulation Units under the Policy, less the deduction of sales expense
charges, premium tax charges, and Deferred Acquisition Cost Charge (DAC).
PLANNED PREMIUM -- the amount of premium which the Policy Owner chooses to pay
to the Company on a scheduled basis, and for which the Company will bill the
Policy Owner, either annually, semiannually or through automatic monthly
checking account deductions.
POLICY DATE -- the date on which the Policy, benefits and provisions of the
Policy become effective.
POLICY MONTH -- monthly periods computed from the Policy Date.
POLICY OWNER (YOU, YOUR OR OWNER) -- the person having rights to benefits under
the Policy during the lifetime of the Insured; the Policy Owner may or may not
be the Insured.
POLICY YEARS -- annual periods computed from the Policy Date.
SEPARATE ACCOUNT -- assets set aside by The Travelers Insurance Company, for
this class of policies and certain policies, the investment experience of which
is kept separate from that of
3
<PAGE> 8
other assets of The Travelers Life and Annuity 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 a Fund.
VALUATION DATE -- a day on which the Separate Account is valued. A Valuation
Date is any day on which the New York Stock Exchange is open for trading. The
value of Accumulation Units will be determined as of 4:00 p.m. Eastern time.
VALUATION PERIOD -- the period between the close of business on successive
Valuation Dates.
4
<PAGE> 9
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------
WHAT IS FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE?
The Flexible Premium Variable Life Insurance Policy is designed to provide
insurance protection on the life of the Insured and to build Cash Value. Like
other life insurance it provides an income-tax free death benefit that is
payable to the Beneficiary upon the Insured's death. Unlike traditional,
fixed-premium life insurance, the Policy allows you, as the owner, to allocate
your premium, or transfer Cash Value to various Investment Options. These
Investment Options include equity, bond, money market and other types of
portfolios. Your Cash Value may increase or decrease daily, depending on
investment return. There is no minimum amount guaranteed as it would be in a
traditional life insurance policy.
INVESTMENT OPTIONS: You have the ability to choose from a wide variety of
well-known Investment Options. These professionally managed stock, bond and
money market funding options cover a broad spectrum of investment objectives and
risk tolerance. Currently, the following Investment Options (subject to state
availability) are available under Fund UL: (Funds offered may change)
<TABLE>
<S> <C>
Capital Appreciation Fund GREENWICH STREET SERIES FUND:
Dreyfus Stock Index Fund Equity Index Portfolio (Class I)
Managed Assets Trust Total Return Portfolio
Money Market Portfolio JANUS ASPEN SERIES:
Aggressive Growth Portfolio -- Service Shares
DEUTSCHE ASSET MANAGEMENT VIT TRUST: Global Technology Portfolio -- Service
EAFE Equity Index Fund Shares Worldwide Growth
Small Cap Index Fund Portfolio -- Service Shares
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND: TRAVELERS SERIES FUND, INC.:
Equity Income Portfolio -- Initial Class AIM Capital Appreciation Portfolio
Growth Portfolio -- Initial Class Alliance Growth Portfolio
High Income Portfolio -- Initial Class MFS Total Return Portfolio
Putnam Diversified Income Portfolio
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND Smith Barney High Income Portfolio
II: Smith Barney Large Capitalization Growth
Asset Manager Portfolio -- Initial Class Smith Barney Large Cap Value Portfolio
FRANKLIN TEMPLETON VARIABLE INSURANCE TRAVELERS SERIES TRUST:
PRODUCTS TRUSTS: U.S. Government Securities Portfolio
Templeton Growth Securities Fund (Class 1) Zero Coupon Bond Portfolio 2005
</TABLE>
Additional Investment Options may be added from time to time. For more
information see "The Investment Options." Refer to each Fund's prospectus for a
complete description of the investment objectives, restrictions and other
material information.
PREMIUMS: When applying for your Policy, you state how much you intend to pay,
and whether you will pay annually, semiannually or monthly via checking account
deductions. You may also make unscheduled premium payments in any amount. No
premium payments will be accepted if receipt of such premiums would disqualify
the Policy as life insurance under applicable federal tax laws.
You indicate on your application what percentage of each Net Premium you would
like allocated to the Investment Options. You may change your allocations by
writing to the Company or by calling 1-800-334-4298.
During the underwriting period, any premium paid will be held in a non-interest
bearing account. After the Policy Date, your Net Premium will be distributed to
each Investment Option in the percentages indicated on your application.
RIGHT TO EXAMINE POLICY: You may return your Policy for any reason and receive
either (depending on state law) a refund of premiums paid less any loans, or a
refund of cash value less
5
<PAGE> 10
any loans plus any charges that were deducted by mailing us the Policy and a
written request for cancellation within a specified period.
DEATH BENEFITS: At time of application, you select a death benefit option.
Under certain conditions you may be able to change the death benefit option at a
later date. The options available are:
- LEVEL OPTION (OPTION 1): the death benefit will be equal to the greater
of the Stated Amount or the Minimum Amount Insured.
- VARIABLE OPTION (OPTION 2): the death benefit will be equal to the
greater of the Stated Amount plus the Cash Value or the Minimum Amount
Insured.
POLICY VALUES: As with other types of non-term insurance policies, this Policy
will accumulate a Cash Value. The Cash Value of the Policy will increase or
decrease to reflect the investment experience of the Investment Options. Monthly
charges and any partial surrenders taken will also decrease the Cash Value.
There is no minimum guaranteed Cash Value.
- ACCESS TO POLICY VALUES: You may borrow against your Policy's Cash
Surrender Value. The maximum loan amount allowable is 100% of the Cash
Value, less surrender penalties.
You may cancel all or a portion of your Policy while the Insured is living and
receive all or a portion of the Cash Surrender Value. Depending on the amount of
time the Policy has been in force, there may be a charge for the partial or full
surrender.
TRANSFERS OF POLICY VALUES: You may transfer all or a portion of your Cash
Value among the Investment Options. You may do this by writing to the Company or
calling 1-800-334-4298.
You can use automated transfers to take advantage of dollar cost
averaging -- investing a fixed amount at regular intervals. For example, you
might have a set amount transferred from a relatively conservative Investment
Option to a more aggressive one, or to several others.
LAPSE PROTECTION GUARANTEE RIDER: This Rider allows for your Policy to remain
in effect until the Insured's death. You are required to pay at least the
cumulative applicable Lapse Protection Premium displayed on your Policy Summary
page. Any loans or partial surrenders are deducted from premium paid to
determine if the Lapse Protection Guarantee is in effect.
GRACE PERIOD: If the Cash Surrender Value of your Policy becomes less than the
amount needed to pay the Monthly Deduction Amount, and the Lapse Protection
Guarantee Rider is not in effect, you will have 61 days to pay a premium that is
sufficient to cover the Monthly Deduction Amount. If the premium is not paid,
your Policy will lapse.
EXCHANGE RIGHTS: During the first two Policy Years, you can exchange this
Policy for one that provides benefits that do not vary with the investment
return of the Investment Options.
TAX CONSEQUENCES: Currently, the federal tax law excludes all Death Benefit
payments from the gross income of the Beneficiary. At any point in time, the
Policy may become a modified endowment contract ("MEC"). A MEC has an
income-first taxation of all loans, pledges, collateral assignments or partial
surrenders. A 10% penalty tax may be imposed on such income distributed before
the Policy Owner attains age 59 1/2. The Company has established safeguards for
monitoring whether a Policy may become a MEC.
CHARGES AND DEDUCTIONS: Your Policy is subject to the following charges, which
compensate the Company for administering and distributing the Policy, as well as
paying Policy benefits and assuming related risks. These charges are summarized
below, and explained in detail under "Charges and Deductions."
6
<PAGE> 11
POLICY CHARGES:
- SALES AND PREMIUM EXPENSE CHARGES -- A sales charge, a premium tax
charge, and a Deferred Acquisition Cost ("DAC") charge are applied to
each premium.
<TABLE>
<CAPTION>
TOTAL
PREMIUM
STATED SALES PREMIUM EXPENSE
AMOUNT CHARGE TAX DAC CHARGE
- ------------------- ------ ------- ------- -------
<S> <C> <C> <C> <C>
$50,000 - $4,999,999 1.50% 2.25% 1.25% 5.0%
$5,000,000+ 0 2.25% 1.25% 3.5%
</TABLE>
- MONTHLY DEDUCTION -- deductions taken from the value of your Policy each
month to cover cost of insurance charges, the monthly administrative
expense charges and charges for optional benefits.
- FULL SURRENDER CHARGE -- applies if you surrender your Policy for its
full Cash Value or the Policy lapses, during the first 10 years and for
10 years after requesting an increase in coverage. The surrender charge
is a per thousand of stated amount charge.
- PARTIAL SURRENDER CHARGE -- applies if you surrender part of the Cash
Value of your Policy.
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 .85%
for the first 15 years and .20% thereafter.
- UNDERLYING FUND FEES -- the separate account purchases shares of the
Underlying Funds on a net asset value basis. The shares purchased already
reflect the deduction of investment advisory fees and other expenses. The
fees are shown in the table below.
7
<PAGE> 12
TRAVELERS VARIABLE LIFE
2000 FUND EXPENSES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
MANAGEMENT OTHER TOTAL
FEE EXPENSES EXPENSES
(AFTER EXPENSE (AFTER EXPENSE (AFTER EXPENSE
FUND NAME REIMBURSEMENT) 12B-1 FEES REIMBURSEMENT) REIMBURSEMENT)
Capital Appreciation Fund (Janus) 0.75% 0.08% 0.83%
Dreyfus Stock Index Fund 0.25% 0.01% 0.26%
Managed Assets Trust 0.50% 0.10% 0.60%
Money Market(1) 0.32% 0.08% 0.40%
DEUTCHE ASSET MANAGEMENT VIT TRUST:
EAFE Equity Index Fund(2) 0.26% 0.39% 0.65%
Small Cap Index Fund(2) 0.13% 0.32% 0.45%
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND:
Equity Income Portfolio Initial Class(4) 0.48% 0.08% 0.57%
Growth Portfolio Initial Class(4) 0.58% 0.07% 0.66%
High Income Portfolio Initial Class 0.58% 0.11% 0.69%
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND
II:
Asset Manager Portfolio Initial Class(4) 0.53% 0.09% 0.63%
GREENWICH STREET SERIES FUND:
Equity Index Portfolio(7) 0.21% 0.07% 0.28%
Total Return Portfolio(8) 0.75% 0.04% 0.79%
JANUS ASPEN SERIES FUND:
Aggressive Growth(3) 0.65% 0.25% 0.02% 0.92%
Global Technology(3) 0.65% 0.25% 0.13% 1.03%
Worldwide Growth(3) 0.65% 0.25% 0.05% 0.95%
FRANKLIN TEMPLETON VARIABLE INSURANCE
PRODUCTS TRUST:
Templeton Growth Securities Fund(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%
Putnam Diversified Income Portfolio(6) 0.75% 0.08% 0.83%
Smith Barney High Income Portfolio(6) 0.60% 0.06% 0.66%
Smith Barney Large Cap Value(6) 0.65% 0.02% 0.67%
Smith Barney Large Cap Growth(6) 0.75% 0.11% 0.86%
TRAVELERS SERIES TRUST:
U.S. Govt Securities 0.32% 0.16% 0.48%
Zero Coupon Bond Portfolio 2005 0.10% 0.05% 0.15%
</TABLE>
(1) Other Expenses have been restated to reflect the current expense
reimbursement arrangement with Travelers Insurance Company. Travelers has
agreed to reimburse the Portfolio for the amount by which its aggregate
expenses (including the management fee, but excluding brokerage commissions,
interest charges and taxes) exceeds 0.40%. Without such arrangement, Total
Expenses would have been 0.50% for the Money Market Portfolio.
(2) These fees reflect a voluntary expense reimbursement arrangement whereby the
Adviser has agreed to reimburse the funds. Without such arrangement, the
Management Fee, Other Expenses and Total Expenses for the Deutsche VIT EAFE
Equity Index Fund and Small Cap Index Fund would have been 0.45%, 0.69%, and
1.14% and 0.35%, 0.83%, and 1.18%, respectively. Effective April 2000, the
Trust's name was changed from BT Insurance Funds Trust to Deutsche Asset
Management VIT Funds.
(3) Expenses are based on the estimated expenses that the new Service Shares
Class of each Portfolio expects to incur in its initial fiscal year. All
expenses are shown without the effect of offset arrangements.
8
<PAGE> 13
(4) A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, through arrangements with certain funds,
or FMR on behalf of certain funds, custodian, credits realized as a result
of uninvested cash balances were used to reduce a portion of each applicable
fund 's expenses. With these reductions, the total operating expenses
presented in the table are 0.56% for Equity-Income Portfolio, 0.65% for
Growth Portfolio, and 0.62% for Asset Manager Portfolio.
(5) On 2/8/00, a merger and reorganization was approved to merge the assets of
Templeton Stock Fund into Templeton Global Growth Fund (which then changed
its name to Templeton Growth Securities Fund), effective 5/1/00. The above
table shows restated total expenses based upon the fees and assets of
Templeton Global Growth Fund as of 12/31/99, and not the assets of the
combined fund on 5/1/00. However, if the table reflected the combined
assets, the fund's expenses after 5/1/00 would be estimated as: Management
Fees 0.80%, Other Expenses 0.05%, and Total Annual Operating Expenses 0.85%.
The Fund's administration fee is paid indirectly through the management fee.
(6) Expenses are as of October 31, 1999 (the Fund's fiscal year end). There were
no fees waived or expenses reimbursed for these funds in 1999.
(7) The Portfolio Management Fee for Equity Index Portfolio includes 0.06% for
fund administration.
(8) The Portfolio Management Fee for the Appreciation Portfolio, the Total
Return, and the Diversified Strategic Income Portfolio includes 0.20% for
fund administration.
9
<PAGE> 14
GENERAL DESCRIPTION
- --------------------------------------------------------------------------------
This prospectus describes an individual flexible premium variable life insurance
Policy offered by The Travelers 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 policy charges, for example, the deduction
dates, policy months, policy years. The Policy Date may be before or the same
date as the Issue Date (the date the policy was issued). During the underwriting
period, any premium paid will be held in a non-interest bearing account. Your
policy will stay in effect as long as the policy's cash surrender value can pay
the policy's monthly charges (subject to state variations).
APPLYING PREMIUM PAYMENTS
We apply the first premium on the later of the Policy Date or the date we
receive it at our Home Office. During the Right to Cancel Period, we allocate
net premiums to the Investment Options selected by you.
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<PAGE> 15
The investment options are segments of the separate account. They correspond to
underlying funds with the same names. The available investment options are
listed below.
We credit your policy with accumulation units of the investment option(s) you
have selected. We calculate the number of accumulation units by dividing your
net premium payment by each investment option's accumulation unit value computed
after we receive your payment.
THE INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
You may allocate premium payments to one or more of the available Investment
Options. The Investment Options currently available under the Policy may be
added, withdrawn or substituted as permitted by applicable state or federal law.
We would notify you before making such a change. Please read carefully the
complete risk disclosure in each Investment Option's prospectus before
investing. For more detailed information on the investment advisers and their
services and fees, please refer to the prospectuses for the Investment Options.
In addition, Travelers has entered into agreements with either the investment
adviser or distributor of certain of the underlying funds in which the adviser
or distributor pays us a fee for providing administrative services, which fee
may vary. The fee is ordinarily based upon an annual percentage of the average
aggregate net amount invested in the underlying funds on behalf of the Separate
Account.
The Investment Options currently available under Fund UL 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 TRUST
EAFE Equity Index Fund Seeks to replicate, before deduction Bankers Trust Global
of expenses, the total return Investment Management
performance of the EAFE index.
Small Cap Index Fund Seeks to replicate, before deduction Bankers Trust Global
of expenses, the total return Investment Management
performance of the Russell 2000 index.
FIDELITY'S VARIABLE
INSURANCE PRODUCTS FUND
Equity Income Seeks reasonable income by investing Fidelity Management &
Portfolio -- Initial primarily in income-producing equity Research Company ("FMR")
Class securities; in choosing these
securities, the portfolio manager will
also consider the potential for
capital appreciation.
</TABLE>
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<PAGE> 16
<TABLE>
<CAPTION>
INVESTMENT OPTION INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
----------------- -------------------- -----------------------------
<S> <C> <C>
Growth Portfolio -- Seeks capital appreciation by purchas- FMR
Initial Class 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
Initial Class current income by investing primarily
in high yielding, lower-rated,
fixed-income securities, while also
considering growth of capital.
FIDELITY'S VARIABLE INSURANCE
PRODUCTS FUND II
Asset Manager Seeks high total return with reduced FMR
Portfolio -- Initial risk over the long-term by allocating
Class its assets among stocks, bonds and
short-term fixed-income instruments.
FRANKLIN TEMPLETON VARIABLE
INSURANCE PRODUCTS TRUST
Templeton Growth Seeks high current income by investing Templeton Global
Securities Fund primarily in debt securities of compa- Advisors Limited
(Class 1) nies, governments and government
agencies of various nations throughout
the world.
GREENWICH STREET
SERIES FUND
Equity Index Portfolio Seeks to replicate, before deduction TIMCO
of expenses, the total return
performance of the S&P 500 index.
Total Return Portfolio An equity portfolio that seeks to pro- SSB Citi Funds Management LLC
vide total return, consisting of ("SSBC")
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 Corporation
Portfolio -- Service investing primarily in common stocks (Janus)
Shares selected for their growth potential,
normally investing at least 50% in the
equity assets of medium-sized
companies.
Worldwide Growth Seeks long-term growth of capital in a Janus
Portfolio -- Service manner consistent with the
Shares preservation of capital. It pursues
its objective by investing primarily
in common stocks of companies of any
size throughout the world. The
Portfolio normally invests in issuers
from at least five different coun-
tries, including the United States.
The Portfolio may at times invest in
fewer than five countries or even a
single country.
</TABLE>
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<PAGE> 17
<TABLE>
<CAPTION>
INVESTMENT OPTION INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
----------------- -------------------- -----------------------------
<S> <C> <C>
Global Technology Seeks long-term growth of capital. It Janus
Portfolio -- Service pursues its objective by investing
Shares primarily in equity securities of US
and foreign companies selected for
their growth potential. Normally, it
invests at least 65% of its total
assets in securities of companies that
the portfolio manager believes will
benefit significantly from advances or
improvements in technology.
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: Massachusetts
invested in equity securities) Financial Services
consistent with the prudent employment
of capital. Generally, at least 40% of
the Portfolio's assets will be
invested in equity securities.
Putnam Diversified Income Seeks high current income consistent TIA
Portfolio with preservation of capital by Subadviser: Putnam Investment
allocating its investments among the Management, Inc.
following three sectors of the
fixed-income securities markets, a
U.S. Government Sector, a High Yield
Sector and an International Sector.
Smith Barney High Income Seeks high current income. Capital SSBC
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 SSBC
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 SSBC
Capitalization Growth investing primarily in equity
Portfolio securities of companies with large
market capitalization.
</TABLE>
13
<PAGE> 18
<TABLE>
<CAPTION>
INVESTMENT OPTION INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
----------------- -------------------- -----------------------------
<S> <C> <C>
TRAVELERS SERIES TRUST
U.S. Government Seeks to select investments from the TAMIC
Securities Portfolio point of view of an investor concerned
primarily with highest credit quality,
current income and total return. The
assets of the U.S. Government Securi-
ties Portfolio will be invested in
direct obligations of the United
States, its agencies and
instrumentalities.
Zero Coupon Bond Fund Seeks to provide as high an investment TAMIC
Portfolio Series 2005 return as consistent with the
preservation of capital investing in
primarily zero coupon securities that
pay cash income but are acquired by
the Portfolio at substantial discounts
from their values at maturity. The
Zero Coupon Bond Fund Portfolios may
not be appropriate for Policy Owners
who do not plan to have their premiums
invested in shares of the Portfolios
for the long term or until maturity.
</TABLE>
POLICY BENEFITS AND RIGHTS
- --------------------------------------------------------------------------------
TRANSFERS OF CASH VALUE
As long as the Policy remains in effect, you may make transfers of Cash Value
between Investment Options. We reserve the right to restrict the number of free
transfers to four times (twelve times in New York) in any Policy Year and to
charge $10 for each additional transfer; however, there is currently no charge
for transfers.
We calculate the number of Accumulation Units involved using the Accumulation
Unit Values we calculate at the end of the business day on which we receive the
transfer request.
TELEPHONE TRANSFERS
The Policy Owner may make the request in writing by mailing such request to the
Company at its Home Office, or by telephone (if an authorization form is on
file) by calling 1-800-334-4298. The Company will take reasonable steps to
ensure that telephone transfer requests are genuine. These steps may include
seeking proper authorization and identification prior to processing telephone
requests. Additionally, the Company will confirm telephone transfers. Any
failure to take such measures may result in the Company's liability for any
losses due to fraudulent telephone transfer requests.
AUTOMATED TRANSFERS
DOLLAR-COST AVERAGING
You may establish automated transfers of Policy Values on a monthly or quarterly
basis from any Investment Option(s) to any other Investment Option(s) through
written request or other method acceptable to the Company. You must have a
minimum of $5,000 in the fund from which amounts will be transferred out of to
enroll in the Dollar-Cost Averaging program. The minimum total automated
transfer amount is $100.
You may start or stop participation in the Dollar-Cost Averaging program at any
time, but you must give the Company at least 30 days' notice to change any
automated transfer instructions that are currently in place. Automated transfers
are subject to all of the other provisions and terms of the
14
<PAGE> 19
Policy. The Company reserves the right to suspend or modify transfer privileges
at any time and to assess a processing fee for this service.
Before transferring any part of the Policy Value, Policy Owners should consider
the risks involved in switching between investments available under this Policy.
Dollar cost averaging requires regular investments regardless of fluctuating
price levels, and does not guarantee profits or prevent losses in a declining
market. Potential investors should consider their financial ability to continue
purchases through periods of low price levels.
PORTFOLIO REBALANCING
You may elect to have the Company periodically reallocate values in your policy
to match your original (or your latest) funding option allocation request.
LAPSE AND REINSTATEMENT
Except as provided below under "Lapse Protection Guarantee Rider", the Policy
will remain in effect until the Cash Surrender Value of the Policy can no longer
cover the Monthly Deduction Amount. If this happens we will notify you in
writing that if the amount shown in the notice is not paid within 61 days (the
"Grace Period"), the Policy may lapse. The amount shown will be enough to pay
the deduction amount due. The Policy will continue through the Grace Period, but
if no payment is received by us, it will terminate at the end of the Grace
Period. If the person Insured under the Policy dies during the Grace Period, the
Death Benefit payable will be reduced by the Monthly Deduction Amount due plus
the amount of any outstanding loan. (See "Death Benefit," below.)
If the Policy lapses, you may reinstate the Policy by paying the reinstatement
premium (and any applicable charges) shown in the Policy. You may request
reinstatement within three years of lapse (unless a different period is required
under applicable state law). Upon reinstatement, the Policy's Cash Value will be
equal to the amount provided by the Net Premium. In addition, the Company
reserves the right to require satisfactory evidence of insurability.
ADDITIONAL INSURANCE BENEFITS (RIDERS)
Subject to certain requirements, there are ten riders which may be added to your
base Policy including the primary insured term, spouse term, child term,
accidental death benefit, cost of living adjustment, waiver of deduction amount,
specified amount payment and lapse protection guarantee rider. The last rider is
described below. The Coverage Extension Rider and the Maturity Extension Rider
are described under the "Maturity Benefits" section. There may be additional
costs associated with these riders. Depending on your circumstances, it may be
less costly to purchase more Death Benefit Coverage under the primary insured
term rider than under the base variable policy.
LAPSE PROTECTION GUARANTEE RIDER
You may elect to have a Lapse Protection Guarantee Rider added to the Policy at
issue (provided that the Insured meets all underwriting requirements for this
Rider). The Lapse Protection Guarantee Rider benefit provides that if during the
lifetime of the Insured the total premiums paid under the Policy, less any Loan
Account Value and partial surrenders, equal or exceed the cumulative applicable
Lapse Protection Premium shown on the Policy Summary Page of the Policy, a Lapse
Protection Guarantee will be in effect. (This feature may be included in the
base policy in some jurisdictions and may not be available in all
jurisdictions.) This rider provides that the Policy will not lapse during the
next Policy Month even if the Cash Surrender Value is insufficient to pay the
Monthly Deduction Amount due. The Lapse Protection Premium will change if the
Policy Owner makes a change in the Stated Amount or adds or eliminates
supplemental benefit riders under the Policy. In such event, the Company will
send the Policy Owner notice of the new applicable Lapse Protection Premium
which must be met in order for the guarantee to remain in effect. The lapse
protection premium requirement increases after the 10th policy year.
15
<PAGE> 20
EXCHANGE RIGHTS
Once the Policy is in effect, it may be exchanged during the first 24 months for
a form of non-variable permanent individual general account life insurance
policy issued by the Company (or an affiliated company, if allowed by state law)
on the life of the Insured. Benefits under the new life insurance policy will be
as described in that policy. No evidence of insurability will be required. You
have the right to select the same Death Benefit or Net Amount At Risk as the
former Policy at the time of exchange. Cost of insurance rates will be based on
the same risk classification as those of the former Policy. Any outstanding
Policy loan must be repaid before we will make an exchange. In addition, there
may be an adjustment for the difference in Cash Value between the two Policies.
RIGHT TO CANCEL
An Applicant may cancel the Policy by returning it via mail or personal delivery
to the Company or to the agent who sold the Policy. The Policy must be returned
by the latest of:
(1) 10 days after delivery of the Policy to you
(2) 45 days of completion of the Policy application
(3) 10 days after the Notice of Right to Cancel has been mailed or
delivered to the Applicant whichever is latest, or
(4) later if required by state law.
We will refund either (depending on state law) any premiums paid less any loans,
or the Cash Value of the Policy on the date we receive the returned Policy, plus
any charges that were deducted, less any Loan Account Value.
We will make the refund within seven days after we receive your returned policy.
ACCESS TO CASH VALUES
- --------------------------------------------------------------------------------
POLICY LOANS
A Policy Owner may obtain a cash loan from the Company secured by the Policy not
to exceed 100% of the Policy's Cash Value (determined on the day on which the
Company receives the written loan request), less any surrender penalties.
Subject to state law, no loan requests may be made for amounts of less than
$500.
If there is a loan outstanding at the time a subsequent loan request is made,
the amount of the outstanding loan will be added to the new loan request. The
Company will charge interest on the outstanding amounts of the loan, which
interest must be paid in advance by the Policy Owner. During the first fifteen
(15) Policy Years, the full Loan Account Value will be charged an annual
interest rate of 5.66% (7.4% in NY & MA); thereafter 4.76% (6.54% in NY & MA)
will be charged.
The amount of the loan will be transferred as of the date the loan is made on a
pro rata basis from each of the Investment Options attributable to the Policy
(unless the Policy Owner states otherwise) to another account (the "Loan
Account"). Amounts in the Loan Account will be credited by the Company with a
fixed annual rate of return of 4% (6% in New York and Massachusetts) and will
not be affected by the investment performance of the Investment Options. When
loan repayments are made, the amount of the repayment will be deducted from the
Loan Account and will be reallocated based upon premium allocation percentages
among the Investment Options applicable to the Policy (unless the Policy Owner
states otherwise). The Company will make the loan to the Policy Owner within
seven days after receipt of the written loan request.
16
<PAGE> 21
An outstanding loan amount decreases the Cash Surrender Value. If a loan is
taken or a loan is not repaid, it permanently decreases the Cash Surrender
Value, which could cause the Policy to lapse (see "Lapse and Reinstatement.")
For example, if a Policy has a Cash Surrender Value of $10,000, the Policy Owner
may take a loan of 100% or $10,000, leaving a new Cash Surrender Value of $0.00.
In addition, the Death Benefit actually payable would be decreased because of
the outstanding loan. Furthermore, even if the loan is repaid, the Death Benefit
and Cash Surrender Value may be permanently affected since the Policy Owner was
not credited with the investment experience of an Investment Option on the
amount in the Loan Account while the loan was outstanding. All or any part of a
loan secured by a Policy may be repaid while the Policy is still in effect.
CASH VALUE AND CASH SURRENDER VALUE
The Cash Value of a Policy changes on a daily basis and will be computed on each
Valuation Date. The Cash Value will vary to reflect the investment experience of
the Investment Options, as well as any partial Cash Surrenders, Monthly
Deduction Amount, daily Separate Account charges, and any additional premium
payments. There is no minimum guaranteed Cash Value.
The Cash Value of a particular Policy is related to the net asset value of the
Investment Options to which premium payments on the Policy have been allocated.
The Cash Value on any Valuation Date is calculated by multiplying the number of
Accumulation Units credited to the Policy in each Investment 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 requested by the Policy Owner, whichever is
later. The Policy will terminate on the date of the Company's receipt of the
written request, or on the date the Policy Owner requests the surrender to
become effective, whichever is later.
In the case of partial surrenders, the Cash Surrender Value will be equal to the
amount requested to be surrendered minus any applicable Surrender Charges. The
deduction from Cash Value for a partial surrender will be made on a pro rata
basis against the Cash Value of each of the Investment Options attributable to
the Policy (unless the Policy Owner states otherwise in writing).
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.
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<PAGE> 22
You may elect one of two Death Benefit options. As long as the Policy remains in
effect, the Company guarantees that the Death Benefit under either option will
be at least the current Stated Amount of the Policy less any outstanding Policy
loan and unpaid monthly Deduction Amount due. The Death Benefit under either
option may vary with the Cash Value of the Policy. Under Option 1 (the "Level
Option"), the Death Benefit will be equal to the Stated Amount of the Policy or,
if greater, a specified multiple of Cash Value (the "Minimum Amount Insured").
Under Option 2 (the "Variable Option"), the Death Benefit will be equal to the
Stated Amount of the Policy plus the Cash Value (determined as of the date of
the Insured's death) or, if greater, the Minimum Amount Insured.
The Minimum Amount Insured is the amount required to qualify the Policy as a
life insurance Policy under the current federal tax law. Under that law, the
Minimum Amount Insured equals a stated percentage of the Policy's Cash Value
determined as of the first day of each Policy Month. The percentages differ
according to the attained age of the Insured. The Minimum Amount Insured is set
forth in the Policy and may change as federal income tax laws or regulations
change. The following is a schedule of the applicable percentages. For attained
ages not shown, the applicable percentages will decrease evenly:
<TABLE>
<CAPTION>
ATTAINED AGE PERCENTAGE
- ------------ ----------
<S> <C>
0-40 250
45 215
50 185
55 150
60 130
65 120
70 115
75 105
95+ 100
</TABLE>
Federal tax law imposes another cash funding limitation on cash value life
insurance Policies that may increase the Minimum Amount Insured shown above.
This limitation known as the "guideline premium limitation," generally applies
during the early years of variable universal life insurance Policies.
The following examples demonstrate the relationship between the Death Benefit,
the Cash Surrender Value and the Minimum Amount Insured under Options 1 and 2 of
the Policy. The examples assume an Insured of age 40, a Minimum Amount Insured
of 250% of Cash Value (assuming the preceding table is controlling as to Minimum
Amount Insured), and no outstanding Policy loan.
OPTION 1 -- "LEVEL" DEATH BENEFIT
STATED AMOUNT: $50,000
In the following examples of an Option 1 "Level" Death Benefit, the Death
Benefit under the Policy is generally equal to the Stated Amount of $50,000.
Since the Policy is designed to qualify as a life insurance Policy, the Death
Benefit cannot be less than the Minimum Amount Insured (or, in this example,
250% of the Cash Value).
EXAMPLE ONE. If the Cash Value of the Policy equals $10,000, the Minimum Amount
Insured would be $25,000 ($10,000 x 250%). Since the Death Benefit in the Policy
is the greater of the 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).
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<PAGE> 23
OPTION 2 -- "VARIABLE" DEATH BENEFIT
STATED AMOUNT: $50,000
In the following examples of an Option 2 "Variable" Death Benefit, the Death
Benefit varies with the investment experience of the applicable Investment
Options and will generally be equal to the Stated Amount plus the Cash Value of
the Policy (determined on the date of the Insured's death). The Death Benefit
cannot, however, be less than the Minimum Amount Insured (or, in this example,
250% of the Cash Value).
EXAMPLE ONE. If the Cash Value of the Policy equals $10,000, the Minimum Amount
Insured would be $25,000 ($10,000 x 250%). The Death Benefit ($60,000) would be
equal to the Stated Amount ($50,000) plus the Cash Value ($10,000), unless the
Minimum Amount Insured ($25,000) was greater.
EXAMPLE TWO. If the Cash Value of the Policy equals $60,000, then the Minimum
Amount Insured would be $150,000 ($60,000 x 250%). The resulting Death Benefit
would be $150,000 because the Minimum Amount Insured ($150,000) is greater than
the Stated Amount plus the Cash Value ($50,000 + $60,000 = $110,000).
PAYMENT OF PROCEEDS
Death Benefits are payable within seven days after we receive satisfactory proof
of the Insured's death. The amount of Death Benefit paid may be adjusted to
reflect any Policy loan, any material misstatements in the Policy application as
to age or sex of the Insured, and any amounts payable to an assignee under a
collateral assignment of the Policy. (See "Assignment.")
Subject to state law, if the Insured commits suicide within two years following
the Issue Date, limits on the amount of Death Benefit paid will apply. (See
"Limit on Right to Contest and Suicide Exclusion.") In addition, if the Insured
dies during the Grace Period then the Death Benefit actually paid to the Policy
Owner's Beneficiary will be reduced by the amount of the Deduction Amount that
is due and unpaid. (See "Cash Value and Cash Surrender Value," for effects of
partial surrenders on Death Benefits.)
PAYMENT OPTIONS
We will pay policy proceeds in a lump sum, unless you or the Beneficiary select
one of the Company's payment options. We may defer payment of proceeds which
exceed the Death Benefit for up to six months from the date of the request for
the payment. A combination of options may be used. The minimum amount that may
be placed under a payment option is $5,000 unless we consent to a lesser amount.
Proceeds applied under an option will no longer be affected by the investment
experience of the Investment Options.
The following payment options are available under the Policy:
OPTION 1 -- Payments of a Fixed Amount
OPTION 2 -- Payments for a Fixed Period
OPTION 3 -- Amounts Held at Interest
OPTION 4 -- Monthly Life Income
OPTION 5 -- Joint and Survivor Level Amount Monthly Life Income
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
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<PAGE> 24
declared a higher rate under an option on the date the first payment under an
option is due, we will base the payments on the higher rate.
MATURITY BENEFITS
- --------------------------------------------------------------------------------
The Maturity Date is the anniversary of the Policy Date on which the Insured is
age 100. If the Insured is living on the Maturity Date, the Company will pay you
the Policy's Cash Value less any outstanding Policy loan or unpaid Deduction
Amount. You must surrender the Policy to us before we make a payment. After
payment, we will have no further obligation under the Policy.
COVERAGE EXTENSION RIDER
The Coverage Extension rider allows coverage to be extended beyond the Maturity
Date as long as there is Cash Value in the Contract. Upon request from the
owner, the Company will continue to keep the policy in force until the death of
the Insured or request for payment of the full cash surrender value, as defined
by this rider, prior to the death of the Insured. The death benefit will equal
the amount insured, less any outstanding loans. This Rider can be selected only
from the policy anniversary when the Insured is age 99 to the Maturity Date. Any
monthly deduction amounts due must be paid for this rider to take effect. There
is no charge for this rider, however, it is available only if the Insured's
Issue age is 80 or less.
MATURITY EXTENSION RIDER
When the Insured reaches age 99, and at any time during the twelve months
thereafter, you may request that coverage be extended beyond the Maturity Date
(the "Maturity Extension Benefit"). This Maturity Extension Benefit may not be
available in all jurisdictions. If we receive such a request before the Maturity
Date and any past Monthly Deduction Amounts have been paid, the Policy will
continue until the earlier of the Insured's Death or the date on which you
request that the Policy terminate. When the Maturity Extension Benefit ends, a
Death Benefit consisting of the Cash Value less any Loan Account Value will be
paid. The Death Benefit is based on the experience of the Investment Options
selected and is not guaranteed. After the Maturity Date, periodic Deduction
Amounts will no longer be charged against the Cash Value and additional premiums
will not be accepted. This rider is available for Issue Ages 81 to 85.
We intend that the Policy and the Maturity Extension Rider will be considered
life insurance for tax purposes. The Death Benefit is designed to comply with
Section 7702 of the Internal Revenue Code of 1986, as amended, or other
equivalent section of the Code. However, the Company does not give tax advice,
and cannot guarantee that the Death Benefit and Cash Value will be exempt.
CHARGES AND DEDUCTIONS
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GENERAL
We deduct the charges described below. The charges are for services and benefits
we provide, costs and expenses we incur, and risks we assume under the Policies.
Services and benefits we provide include:
- the ability for you to make withdrawals 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;
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- the available funding option and related programs (including dollar-cost
averaging and portfolio rebalancing);
- administration of the various elective options available under the
Policies; and
- the distribution of various reports to policy owners.
Costs and expenses we incur include:
- expenses associated with underwriting applications, increases in the
stated amount, and riders;
- losses associated with various overhead and other expenses associated
with providing the services and benefits provided by the Policies;
- sales and marketing expenses including commission payments to your sales
agent; and
- other costs of doing business.
Risks we assume include:
- that insureds may live for a shorter period of time than estimated
resulting in the payment of greater death benefits than expected; and
- that the costs of providing the services and benefits under the Policies
will exceed the charges deducted.
CHARGES AGAINST PREMIUM
FRONT-END SALES CHARGE
When we receive a Premium Payment, and before allocation of the payment among
the Investment Options, we deduct a front-end sales charge of 1.5% of premium
(waived if policy stated amount plus primary insured term benefit is at least
$5,000,000).
STATE PREMIUM TAX CHARGE
A charge of 2.25% of each premium payment will be deducted for state premium
taxes (tax chargeback in Oregon) (except for Policies issued in the Commonwealth
of Puerto Rico where no premium tax is deducted). These taxes vary from state to
state and currently range from 0.75% to 3.5%; 2.5% is an average. Because there
is a range of premium taxes, a Policy Owner may pay a premium tax charge that is
higher or lower than the premium tax actually assessed or not assessed in his or
her jurisdiction.
DEFERRED ACQUISITION COST CHARGE
A charge of 1.25% of each premium payment will be deducted, which compensates
the Company for expenses associated with its federal income tax liability
relating to its receipt of premium.
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
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of the Cost of Insurance Charge, Policy Administrative Expense Charge and
Charges for any Supplemental Benefit Provision. These are described below:
COST OF INSURANCE CHARGE
The amount of the Cost of Insurance deduction depends on the amount of insurance
coverage on the date of the deduction and the current cost per dollar for
insurance coverage. The cost per dollar of insurance coverage varies annually
and is based on issue age, policy year, sex and risk class of the Insured.
ADMINISTRATIVE EXPENSE CHARGE
An administrative charge is deducted monthly from the Policy's Cash Value. This
charge consists of a per thousand charge for the first three Policy years and
for three years following any increases in the Stated Amount (excluding Cost of
Living Adjustments and increases in Stated Amounts due to Death Benefit Option
changes.) This charge is used to cover expenses associated with issuing the
Policy.
The charge varies by issue age and Stated Amount.
For policies with Stated amounts of less than $100,000, there is an additional
$6 per month administrative charge until the Maturity Date.
CHARGES FOR SUPPLEMENTAL BENEFIT PROVISIONS (RIDERS)
The Company will include a supplemental benefits charge in the Monthly Deduction
Amount if you have elected any supplemental benefit provision for which there is
a charge. The amount of this charge will vary depending upon the actual
supplemental benefits selected.
CHARGES AGAINST THE SEPARATE ACCOUNT
MORTALITY AND EXPENSE RISK CHARGE
We deduct a daily charge for mortality and expense risks. This charge is at an
annual rate of .85% for the first fifteen (15) Policy Years, and 0.20%
thereafter. This charge compensates us for various risks assumed, benefits
provided, and expenses incurred.
UNDERLYING FUND FEES
When you allocate money to the Investment Options, the Separate Account
purchases shares of the corresponding Underlying Funds at net asset value. The
net asset value reflects investment advisory fees and other expenses already
deducted. The investment advisory fees and other expenses paid by each of the
underlying Mutual Funds are described in the individual fund prospectuses for
the Investment Options and in the Policy prospectus summary. These are not
direct charges under the Policy; they are indirect because they affect each
Investment Option's accumulation unit value.
SURRENDER CHARGES
A Per Thousand of Stated Amount Surrender Charge is imposed on full and partial
surrenders, and applies only during the first ten Policy Years or the ten years
following an increase in Stated Amount (other than an increase for a Cost of
Living Adjustment or a change in Death Benefit Option). The charge is equal to a
specified dollar amount for each $1,000 of Stated Amount to which it applies,
and will apply only to that portion of the Stated Amount (except for increases
excluded above) which has been in effect for less than ten years.
The Per Thousand of Stated Amount Charge varies by original issue age, and
increases with the issue age of the Insured. This charge varies in the first
year from $2.04 per $1,000 of Stated Amount for issue ages of 4 years or less,
to $25.40 per $1,000 of Stated Amount for issue ages of 65 years or higher.
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Additionally, the charge decreases by 10% each year over the ten-year period.
For example, for a 45-year old with a Stated Amount of $150,000, the charge in
the first year is $7.18 for each $1,000 of Stated Amount, or $1,077. The charge
decreases 10%, or approximately $0.72, each year, so in the fifth year, it is
$4.31 for each $1,000 of Stated Amount, or $646.50; in the tenth year, it is
$0.72 for each $1,000, or $108.
This charge is designed to compensate the Company for administrative expenses
not covered by other administrative charges. This charge may be reduced or
eliminated when sales are made under certain arrangements. (See "Reduction or
Elimination of Charges" below.) The Per Thousand of Stated Amount surrender
charges are set forth in Appendix A.
TRANSFER CHARGE
There is currently no charge for transfers. The Company reserves the right to
limit free transfers of Cash Value from one Investment Option to another by the
Policy Owner to four times (twelve times in New York) in any Policy Year, and to
charge $10 for any additional transfers.
REDUCTION OR ELIMINATION OF CHARGES
We may offer the Policy in arrangements where an employer or trustee will own a
group of policies on the lives of certain employees, or in other situations
where groups of policies will be purchased at one time. We may reduce or
eliminate the mortality and expense risk charge, sales or surrender charges and
administrative charges in such arrangements to reflect the reduced sales
expenses, administrative costs and/or mortality and expense risks expected as a
result of sales to a particular group.
We will not reduce or eliminate the withdrawal charge, mortality and expense
risk charge or the administrative charge if the reduction or elimination will be
unfairly discriminatory to any person.
THE SEPARATE ACCOUNT AND VALUATION
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THE TRAVELERS FUND UL 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
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redeems Fund shares to meet Policy obligations. We will also make adjustments in
reserves, if required. The Investment Options are required to redeem Fund shares
at net asset value and to make payment within seven days.
HOW THE CASH VALUE VARIES. We calculate the Policy's Cash Value each day the
New York Stock Exchange is open for trading (a "valuation date"). A Policy's
Cash Value reflects a number of factors, including Premium Payments, partial
withdrawals, loans, Policy charges, and the investment experience of the
Investment Option(s) chosen. The Policy's Cash Value on a valuation date equals
the sum of all accumulation units times the unit value for each Investment
Option chosen, plus the Loan Account Value.
The Separate Account purchases shares of the underlying funds at net asset value
(i.e., without a sales charge). The Separate Account receives all dividends and
capital gains distributions from each underlying fund, and reinvests in
additional shares of that fund. The Accumulation Unit Value reflects the
reinvestment of any dividends or capital gains distributions declared by the
underlying fund. The Separate Account will redeem underlying fund shares at
their net asset value, to the extent necessary to make payments under the
Policy.
In order to determine Cash Value, Cash Surrender Value, policy loans and the
number of Accumulation Units to be credited, we use the values calculated as of
the close of business on each valuation date we receive the written request, or
payment in good order, at our Home Office.
ACCUMULATION UNIT VALUE. Accumulation Units measure the value of the Investment
Options. The value for each Investment Option's Accumulation Unit is calculated
on each valuation date. The value equals the Accumulation Unit value for the
preceding valuation period multiplied by the underlying fund's Net Investment
Factor during the next Valuation Period. (For example, to calculate Monday's
valuation date price, we would multiply Friday's Accumulation Unit Value by
Monday's net investment factor.)
The Accumulation Unit Value may increase or decrease. The number of Accumulation
Units credited to your Policy will not change as a result of the Investment
Option's investment experience.
NET INVESTMENT FACTOR. For each Investment Option, the value of its
Accumulation Unit depends on the net rate of return for the corresponding
underlying fund. We determine the net rate of return at the end of each
Valuation Period (that is, the period of time beginning at 4:00 p.m. Eastern
time, and ending at 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
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- changes to the way your premiums are allocated (Note: you can also make
these changes by telephone)
- changing the beneficiary (unless irrevocably named)
Written requests for changes should be sent to the Company's Home Office at One
Tower Square, Hartford, Connecticut, 06183. The Company's telephone number is
(860) 277-0111.
CHANGES IN STATED AMOUNT
You may request in writing an increase (after the first policy year) or decrease
(after the second policy year) in the Policy's Stated Amount, provided that the
Stated Amount after any decrease may not be less than the minimum amount of
$50,000. For purposes of determining the cost of insurance charge, a decrease in
the Stated Amount will reduce the Stated Amount in the following order:
1) against the most recent increase in the Stated Amount;
2) to other increases in the reverse order in which they occurred;
3) to the initial Stated Amount.
A decrease in Stated Amount in a substantially funded Policy may cause a cash
distribution that is includable in the gross income of the Policy Owner.
For increases in the Stated Amount, we may require a new application and
evidence of insurability as well as an additional premium payment. The effective
date of any increase will be shown on the new Policy Summary which we will send.
The effective date of any increase in the Stated Amount will generally be the
Deduction Date next following either the date of a new application or, if
different, the date requested by the Applicant. There is an additional Policy
Administrative Charge and a Per Thousand of Stated Amount Surrender Charge
associated with a requested increase in Stated Amount. A proportional surrender
charge applies for requested decreases in Stated Amount. The charge is
determined by dividing the amount of the decrease by the total Stated Amount and
multiplying by the full surrender charge.
CHANGES IN DEATH BENEFIT OPTION
You may change the Death Benefit option by sending a written request to the
Company. There is no direct tax consequence of changing a Death Benefit option,
except as described under "Tax Treatment of Policy Benefits." However, the
change could affect future values of Net Amount At Risk, and with some Option 2
to Option 1 changes involving substantially funded Policies, there may be a cash
distribution which is included in your gross income. The cost of insurance
charge which is based on the Net Amount At Risk may be different in the future.
A change from Option 1 to Option 2 will not be permitted if the change results
in a Stated Amount of less than $50,000. A change from Option 1 to Option 2 is
also subject to underwriting. Contact your registered representative for more
information.
ADDITIONAL POLICY PROVISIONS
- --------------------------------------------------------------------------------
ASSIGNMENT
The Policy may be assigned as collateral for a loan or other obligation. The
Company is not responsible for any payment made or action taken before receipt
of written notice of such assignment. Proof of interest must be filed with any
claim under a collateral assignment.
LIMIT ON RIGHT TO CONTEST AND SUICIDE EXCLUSION
We may not contest the validity of the Policy after it has been in effect during
the Insured's lifetime for two years from the Issue Date. Subject to state law,
if the Policy is reinstated, the two-year period will be measured from the date
of reinstatement. Each requested increase in Stated Amount is contestable for
two years from its effective date (subject to state law). In addition, if
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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.
OTHER MATTERS
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STATEMENTS TO POLICY OWNERS
We will maintain all records relating to the Separate Account and the Investment
Options. At least once each Policy Year, we will send you a statement containing
the following information:
- the Stated Amount and the Cash Value of the Policy (indicating the number
of Accumulation Units credited to the Policy in each Investment Option
and the corresponding Accumulation Unit Value);
- the date and amount of each premium payment;
- the date and amount of each Monthly Deduction;
- the amount of any outstanding Policy loan as of the date of the
statement, and the amount of any loan interest charged on the Loan
Account;
- the date and amount of any partial cash surrenders and the amount of any
partial surrender charges or decrease charges;
- the annualized cost of any supplemental benefits purchased under the
Policy; and
- a reconciliation since the last report of any change in Cash Value and
Cash Surrender Value.
We will also send any other reports required by any applicable state or federal
laws or regulations.
SUSPENSION OF VALUATION
We reserve the right to suspend or postpone the date of any payment of any
benefit or values for any Valuation Period (1) when the New York Stock Exchange
("Exchange") is closed; (2) when trading on the Exchange is restricted; (3) when
the SEC determines that disposal of the securities held in the Underlying Funds
is not reasonably practicable or the value of the Investment Option's net assets
cannot be determined; or (4) during any other period when the SEC, by order, so
permits for the protection of security holders.
DIVIDENDS
No dividends will be paid under the Policy.
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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. However, it is
anticipated that Travelers Distribution LLC, an affiliated company, will become
principal underwriter sometime in 2000.
LEGAL PROCEEDINGS AND OPINION
There are no pending material legal proceedings affecting the Separate Account.
Legal matters in connection with the federal laws and regulations affecting the
issue and sale of the Contract described in this prospectus, as well as the
organization of the Company, its authority to issue variable life contracts
under Connecticut law and the validity of the forms of the variable life
contracts under Connecticut law, have been reviewed by the General Counsel of
the Company.
EXPERTS
The financial statements of Fund UL 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
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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.
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
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<PAGE> 33
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.
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
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regulations or other guidance will be needed to fully define those transactions
which are material changes. The Company has established safeguards for
monitoring whether a contract may become a modified endowment contract.
Loans and partial withdrawals from, as well as collateral assignments of,
Policies that are modified endowment contracts will be treated as distributions
to the Policy Owner for tax purposes. All pre-death distributions (including
loans, partial withdrawals and collateral assignments) from these Policies will
be included in gross income on an income-first basis to the extent of any income
in the Policy (the cash value less the Policy Owner's investment in the Policy)
immediately before the distribution.
The law also imposes a 10% penalty tax on pre-death distributions (including
loans, collateral assignments, partial withdrawals and complete surrenders) from
modified endowment contracts to the extent they are included in income, unless a
specific exception to the penalty applies. The penalty does not apply to amounts
which are distributed on or after the date on which the taxpayer attains age
59 1/2, because the taxpayer is disabled, or as substantially equal periodic
payments over the taxpayer's life (or life expectancy) or over the joint lives
(or joint life expectancies) of the taxpayer and his or her beneficiary.
Furthermore, if the loan interest is capitalized by adding the amount due to the
balance of the loan, the amount of the capitalized 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.
30
<PAGE> 35
Pre-death distributions from a Policy that is not a modified endowment contract
will generally not be included in gross income to the extent that the amount
received does not exceed the Policy Owner's investment in the Policy. (An
exception to this general rule may occur in the case of a decrease or change
that reduces the benefits provided under a Policy in the first 15 years after
the Policy is issued and that results in a cash distribution to the Policy
Owner. Such a cash distribution may be taxed in whole or in part as ordinary
income to the extent of any gain in the Policy.) Further, the 10% penalty tax on
pre-death distributions does not apply to Policies that are not modified
endowment contracts.
Certain changes to Policies that are not modified endowment contracts may cause
such Policies to be treated as modified endowment contracts. A Policy Owner
should therefore consult a tax advisor before effecting any change to a Policy
that is not a modified endowment contract.
TREATMENT OF LOAN INTEREST
If there is any borrowing against the Policy, the interest paid on loans may not
be tax deductible.
THE COMPANY'S INCOME TAXES
The Company is taxed as a life insurance company under federal income tax law.
Presently, the Company does not expect to incur any income tax on the earnings
or the realized capital gains 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 continuously 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 Fund UL. The Company is licensed to conduct life insurance
business in all the 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. 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.
31
<PAGE> 36
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 Life and Annuity Company.
Glenn D. Lammey............ 2000 Executive Vice President since May 2000 and Chief
Director Financial Officer, Chief Accounting Officer and
Controller since March 2000 of The Travelers Insurance
Company; Executive Vice President, Claim Services
(1997-2000), Senior Vice President, Corporate
(1996-1997) of Travelers Property Casualty Corp.; Vice
President (1988) and Chief Financial Officer (1992)
Personal Lines of The Travelers Insurance Company.
Marla Berman Lewitus....... 2000 Senior Vice President and General Counsel since August
Director 1999 of The Travelers Insurance Company; Associate
General Counsel (11/98-7/99), Assistant General
Counsel (11/91-7/93) of Citigroup Inc.; Senior Counsel
(11/91-7/93) Primerica Corporation.
Katherine M. Sullivan...... 1996 Senior Vice President since May 1996 and General
Director Counsel from May 1996 to August 1999 of The Travelers
Life and Annuity Company; Senior Vice President and
General Counsel (1994-1996) Connecticut Mutual;
Special Counsel & Chief of Staff (1988-1994) Aetna
Life & Casualty.
Marc P. Weill*............. 1994 Senior Vice President-Investments since 1993 and Chief
Director Investment Officer since 1995 of The Travelers Life
and Annuity Company; Senior Vice President and Chief
Investment Officer of Citigroup Inc. since 1992; Vice
President (1990-1992), Primerica Corporation; Vice
President (1989-1990), Smith Barney Inc.
</TABLE>
- ---------------
* Principal business address: Citigroup Inc., 153 East 53rd St., New York, New
York 10043
32
<PAGE> 37
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.
EXAMPLE OF POLICY CHARGES
- --------------------------------------------------------------------------------
The following chart illustrates the surrender charges and Monthly Deduction
Amounts that would apply under a Policy based on the assumptions listed below.
Surrender charges and Monthly Deductions Amounts generally will be higher for an
Insured who is older than the assumed Insured, and lower for an Insured who is
younger (assuming the Insureds have the same risk classification). Cost of
Insurance rates go up each year as the Insured becomes a year older.
Male, Issue Age 55
Preferred, Non-Smoker
Annual Premium: $30,000.00
Hypothetical Gross Annual Investment
Rate of Return: 8%
Face Amount: $1,000,000
Level Death Benefit Option
Current Charges
<TABLE>
<CAPTION>
TOTAL MONTHLY DEDUCTION
FOR THE POLICY YEAR
-----------------------
ADMINISTRATIVE
CUMULATIVE COST OF CHARGES AND
POLICY GROSS INSURANCE MONTHLY
YEAR PREMIUM SURRENDER CHARGES CHARGES POLICY CHARGES
- ------ ---------- ----------------- --------- --------------
<S> <C> <C> <C> <C>
1 $ 30,000.00 $13,010.00 $4,936.23 $2,940.00
2 $ 60,000.00 $11,710.00 $4,877.44 $2,940.00
3 $ 90,000.00 $10,410.00 $4,871.84 $2,940.00
5 $150,000.00 $ 7,810.00 $4,743.50 $1,500.00
10 $300,000.00 $ 1,300.00 $4,250.98 $1,500.00
</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.
33
<PAGE> 38
ILLUSTRATIONS
- --------------------------------------------------------------------------------
The following pages are intended to illustrate hypothetically how the Cash
Value, Cash Surrender Value and Death Benefit can change over time for Policies
issued to a 55-year old male. The difference between the Cash Value and the Cash
Surrender Value in these illustrations reflects the Surrender Charge that would
be incurred upon a full surrender of the Policy.
Two pages of values are shown. One page illustrates the assumption that the
maximum Guaranteed Cost of Insurance Rates allowable under the Policy are
charged in all years. The other page illustrates the assumption that the current
scale of Cost of Insurance Rates are charged in all years. The Cost of Insurance
Rates charged vary by age, sex (where permitted by state law) and underwriting
classification.
The values shown in these illustrations vary according to assumptions used for
charges, and gross rates of investment returns. For the first fifteen Policy
Years, the current and guaranteed charges consist of 0.85% for mortality and
expense risks and 0.67% for Investment Option expenses and thereafter 0.20% for
mortality and expense risks and 0.67% for Investment Option expenses. The charge
for Investment Option expenses reflected in the illustrations assumes that Cash
Value is allocated equally among all Investment Options and that no Policy Loans
are outstanding, and is an average of the investment advisory fees and other
expenses charged by each of the Investment Options during the most recent
audited calendar year. After deduction of these amounts, the illustrated gross
annual investment rates of return of 0%, 6%, and 12% correspond to approximate
net annual rates of -1.52%, 4.48%, and 10.48%, respectively on a current and
guaranteed basis during the first fifteen Policy Years, and to approximate net
annual rates of -0.87%, 5.13%, and 11.13%, respectively on a current and
guaranteed basis thereafter. The actual charges under a Policy for expenses of
the Investment Options will depend on the actual allocation of Cash Value and
may be higher or lower than those illustrated.
As stated above, the examples illustrate values that would result based upon
hypothetical uniform gross investment rates of return of 0%, 6% and 12%. The
values would be different from those shown if the gross rates averaged 0%, 6%,
and 12% over a period of years, but fluctuated above and below those averages.
The illustrations also assume that premiums are paid as indicated, no policy
loans are made, no increases or decreases to the Stated Amount are requested, no
partial surrenders are made, and no charges for transfers between funds are
incurred.
The illustrations do not reflect any charges for federal income taxes against
Fund UL, since the Company is not currently deducting such charges from Fund UL.
However, such charges may be made in the future, and in that event, the gross
annual investment rates of return would have to exceed 0%, 6% and 12% by an
amount sufficient to cover the tax charges in order to produce the Death
Benefits, Cash Values and Cash Surrender Values illustrated.
The second column of each Illustration shows the amount that would accumulate if
an amount equal to the Premium Payment was invested to earn interest (after
taxes) at 5%, compounded annually.
Upon request, the Company will provide a comparable personalized illustration
based upon the proposed Insured's age, sex, underwriting classification, the
specified insurance benefits, and the premium requested. The illustration will
show average fund expenses or, if requested, actual fund expenses. The
hypothetical gross annual investment return assumed in such an illustration will
not exceed 12%.
34
<PAGE> 39
TRAVELERS VARIABLE LIFE
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE POLICY
LEVEL DEATH BENEFIT OPTION
ILLUSTRATED WITH GUARANTEED CHARGES
<TABLE>
<S> <C>
Male, Issue Age 55 Face Amount: $1,000,000
Preferred, Non-Smoker Annual Premium: $30,000.00
</TABLE>
<TABLE>
<CAPTION>
TOTAL
PREMIUMS DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
WITH 5% --------------------------------- ------------------------------ ------------------------------
YEAR INTEREST 0% 6% 12% 0% 6% 12% 0% 6% 12%
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 31,500.00 1,000,000 1,000,000 1,000,000 15,994 17,318 18,649 2,984 4,308 5,639
2 64,575.00 1,000,000 1,000,000 1,000,000 30,943 34,607 38,447 19,233 22,897 26,737
3 99,303.75 1,000,000 1,000,000 1,000,000 44,828 51,847 59,516 34,418 41,437 49,106
4 135,768.94 1,000,000 1,000,000 1,000,000 59,048 70,486 83,515 49,938 61,376 74,405
5 174,057.38 1,000,000 1,000,000 1,000,000 72,099 89,065 109,220 64,289 81,255 101,410
6 214,260.25 1,000,000 1,000,000 1,000,000 83,882 107,498 136,778 77,372 100,988 130,268
7 256,473.27 1,000,000 1,000,000 1,000,000 94,273 125,673 166,344 89,073 120,473 161,144
8 300,796.93 1,000,000 1,000,000 1,000,000 103,112 143,446 198,090 99,212 139,546 194,190
9 347,336.78 1,000,000 1,000,000 1,000,000 110,229 160,667 232,234 107,629 158,067 229,634
10 396,203.61 1,000,000 1,000,000 1,000,000 115,454 177,188 269,063 112,854 174,588 266,463
15 679,724.75 1,000,000 1,000,000 1,000,000 107,260 244,698 511,341 107,260 244,698 511,341
20 1,041,577.55 1,000,000 1,000,000 1,040,819 7,789 269,795 972,728 7,789 269,795 972,728
</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.
35
<PAGE> 40
TRAVELERS VARIABLE LIFE
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE POLICY
LEVEL DEATH BENEFIT OPTION
ILLUSTRATED WITH CURRENT CHARGES
<TABLE>
<S> <C>
Male, Issue Age 55 Face Amount: $1,000,000
Preferred, Non-Smoker Annual Premium: $30,000.00
</TABLE>
<TABLE>
<CAPTION>
TOTAL
PREMIUMS DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
WITH 5% --------------------------------- ------------------------------- -------------------------------
YEAR INTEREST 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 31,500.00 1,000,000 1,000,000 1,000,000 21,738 23,246 24,757 8,728 10,236 11,747
2 64,575.00 1,000,000 1,000,000 1,000,000 43,190 47,589 52,178 31,480 35,879 40,468
3 99,303.75 1,000,000 1,000,000 1,000,000 64,295 73,022 82,494 53,885 62,612 72,084
4 135,768.94 1,000,000 1,000,000 1,000,000 86,514 101,104 117,578 77,404 91,994 108,468
5 174,057.38 1,000,000 1,000,000 1,000,000 108,427 130,515 156,460 100,617 122,705 148,650
6 214,260.25 1,000,000 1,000,000 1,000,000 130,066 161,354 199,596 123,556 154,844 193,086
7 256,473.27 1,000,000 1,000,000 1,000,000 151,445 193,706 247,471 146,245 188,506 242,271
8 300,796.93 1,000,000 1,000,000 1,000,000 172,456 227,540 300,512 168,556 223,640 296,612
9 347,336.78 1,000,000 1,000,000 1,000,000 193,054 262,892 359,269 190,454 260,292 356,669
10 396,203.61 1,000,000 1,000,000 1,000,000 213,278 299,883 424,432 210,678 297,283 421,832
15 679,724.75 1,000,000 1,000,000 1,004,068 302,376 507,428 872,662 302,376 507,428 872,662
20 1,041,577.55 1,000,000 1,000,000 1,780,493 379,079 787,390 1,664,012 379,079 787,390 1,664,012
</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.
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 .85% mortality and expense risk charge. The
rates of return do not reflect the 1.5% front-end sales charge, the 2.25% state
premium tax charge or the 1.25% DAC charge (all of which are deducted from
premium payments) nor do they reflect surrender charges or Monthly Deduction
Amounts. The surrender charges and Monthly Deduction Amounts for a hypothetical
Insured are depicted in the Example
36
<PAGE> 41
following the Rates of Returns. Information about the Charges and Deductions
assessed under the Policy, can be found on page 20. Illustrations of how these
charges affect Cash Values and Death Benefits, begin on page 35. The performance
information described in this prospectus, may be used from time to time in
advertisement for the Policy, subject to National Association of Securities
Dealers, Inc. ("NASD") and applicable state approval and guidelines.
The table below shows the net annual rates of return for accumulation units of
investment options available through this Policy.
AVERAGE ANNUAL RETURNS THROUGH 12/31/1999
<TABLE>
<CAPTION>
FUND
INCEPTION
UNDERLYING INVESTMENT OPTIONS ONE YEAR THREE YEARS FIVE YEARS TEN YEARS DATE
----------------------------- -------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
STOCK FUNDS
AIM Capital Appreciation Portfolio 41.58% 22.24% -- -- 10/10/95
Alliance Growth Portfolio 30.97% 28.85% 29.60% -- 06/16/94
Capital Appreciation Fund (Janus) 51.97% 44.82% 39.07% 23.30% 03/18/82
Deutsche VIT EAFE Equity Index Fund 26.33% -- -- -- 08/22/97
Deutsche VIT Small Cap Index Fund 19.00% -- -- -- 08/25/97
Dreyfus Stock Index Fund 19.46% 25.93% 26.82% 16.58% 09/29/89
Fidelity VIP Equity Income Portfolio 5.36% 13.92% 17.48% 13.41% 10/09/86
Fidelity VIP Growth Portfolio 36.09% 31.98% 28.46% 18.79% 10/09/86
Janus Aspen Ser. Aggressive Growth n/a n/a n/a n/a n/a
Janus Aspen Ser. Global Technology n/a n/a n/a n/a n/a
Janus Aspen Series Worldwide Growth n/a n/a n/a n/a n/a
Smith Barney Equity Index Portfolio 19.59% 26.22% 27.39% -- 10/16/91
Smith Barney Large Cap Growth 30.05% -- -- -- 05/06/98
Smith Barney Large Cap Value -0.83% 10.61% 16.16% -- 06/16/94
Smith Barney Total Return Portfolio 20.89% 13.33% 17.46% -- 10/16/91
Templeton Growth Securities Fund 27.85% 12.45% 16.41% 12.50% 08/31/88
BOND FUNDS:
Fidelity VIP High Income Portfolio 7.16% 5.81% 9.83% 11.41% 09/19/85
Putnam Diversified Income Portfolio 0.20% 2.18% 5.87% -- 06/16/94
Smith Barney High Income Portfolio 1.67% 4.51% 8.37% -- 06/16/94
Travelers US Govt Securities -4.99% 5.00% 7.48% -- 01/24/92
Travelers Zero Coupon Bond 2005 -6.27% 4.88% -- -- 10/11/95
BALANCED FUNDS:
Fidelity VIP II Asset Mgr Portfolio 10.06% 14.45% 14.54% 12.08% 09/06/89
MFS Total Return Portfolio 1.71% 10.54% 13.77% -- 06/16/94
Travelers Managed Assets Trust 13.16% 17.82% 18.32% 12.00% 08/06/82
MONEY MARKET FUND:
Travelers Money Market(1) 4.04% 4.08% 3.76% 3.69% 10/01/81
</TABLE>
The information presented in the above chart represents the percentage change in
the value of an accumulation unit of the underlying investment options for the
periods indicated, and reflects all expenses of the underlying funds, 0.85%
mortality and expense risk charge for the first fifteen years and 0.20%
thereafter against amounts allocated to the underlying funds. The rates of
return do not reflect the 1.5% front-end sales charge, 2.25% state premium tax
charge, and 1.25% deferred acquisition cost charge (all of which are deducted
from premium payments) nor do they reflect surrender charges or monthly
deduction amounts. These charges would reduce the average annual return
reflected.
(1) An investment in Money Market Portfolio is neither insured nor guaranteed by
the United States Government. There is no assurance that a stable $1.00
value will be maintained.
37
<PAGE> 42
TRAVELERS VARIABLE LIFE HYPOTHETICAL EXAMPLE*
Male Preferred Non-smoker Age 55
Level Death Benefit of $1,000,000 and annual premium payments of $30,000
<TABLE>
<CAPTION>
ONE YEAR FIVE YEARS
------------------------------- --------------------------------
CASH CASH
TOTAL CASH SURRENDER TOTAL CASH SURRENDER
UNDERLYING INVESTMENT OPTION INVESTMENT VALUE VALUE INVESTMENT VALUE VALUE
---------------------------- ---------- ----- --------- ---------- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
STOCK FUNDS
AIM Capital Appreciation Portfolio 30,000 32,251 19,241 n/a n/a n/a
Alliance Growth Portfolio 30,000 29,554 16,544 150,000 260,206 252,396
Capital Appreciation Fund (Janus) 30,000 34,898 21,888 150,000 337,423 329,613
Deutsche VIT EAFE Equity Index Fund 30,000 28,379 15,369 n/a n/a n/a
Deutsche VIT Small Cap Index Fund 30,000 26,524 13,514 n/a n/a n/a
Dreyfus Stock Index Fund 30,000 26,641 13,631 150,000 240,667 232,857
Fidelity VIP Equity Income Portfolio 30,000 23,085 10,075 150,000 183,961 176,151
Fidelity VIP Growth Portfolio 30,000 30,855 17,845 150,000 252,058 244,248
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 30,000 26,673 13,663 150,000 244,574 236,764
Smith Barney Large Cap Growth 30,000 29,322 16,312 n/a n/a n/a
Smith Barney Large Cap Value 30,000 21,530 8,520 150,000 176,998 169,188
Smith Barney Total Return Portfolio 30,000 27,001 13,991 150,000 183,874 176,064
Templeton Growth Securities Fund 30,000 28,764 15,754 150,000 178,300 170,490
BOND FUNDS:
Fidelity VIP High Income Portfolio 30,000 21,738 8,728 150,000 146,594 138,784
Putnam Diversified Income Portfolio 30,000 23,539 10,529 150,000 129,989 122,179
Smith Barney High Income Portfolio 30,000 22,158 9,148 150,000 140,274 132,464
Travelers US Govt Securities 30,000 20,489 7,479 150,000 136,547 128,737
Travelers Zero Coupon Bond 2005 30,000 20,167 7,157 n/a n/a n/a
BALANCED FUNDS:
Fidelity VIP II Asset Mgr Portfolio 30,000 24,269 11,259 150,000 168,712 160,902
MFS Total Return Portfolio 30,000 22,167 9,157 150,000 164,905 157,095
Travelers Managed Assets Trust 30,000 25,048 12,038 150,000 188,583 180,773
MONEY MARKET FUND:
Travelers Money Market 30,000 22,753 9,743 150,000 121,845 114,035
</TABLE>
The charges used in the above example consist of a front-end sales charge of
1.5%, a state premium tax charge of 2.25%, a deferred acquisition cost charge of
1.25%, the 0.85% mortality and expense risk charge, all expenses of the
underlying funds, and monthly deduction charges including cost of insurance. The
benefits illustrated above may differ from other policies as a result of
differences in investment allocation, premium timing and amount, death benefit
type, as well as age and underwriting classification of the insured (which could
result in higher cost of insurance). Because Travelers Variable Life is a
variable universal life insurance policy, actual performance should always be
considered in conjunction with the level of death benefit and cash values.
* These hypothetical examples show the effect of the performance quoted on the
cash values. Performance, loans, and withdrawals will affect the cash value
and death benefit of your policy. Since the values of the portfolio will
fluctuate, the cash value at any time may be more or less than the total
principal investment made, including at the time of surrender of the policy,
when surrender charges may apply.
38
<PAGE> 43
THIS PAGE INTENTIONALLY LEFT BLANK.
<PAGE> 44
APPENDIX A
- --------------------------------------------------------------------------------
SURRENDER PENALTIES PER THOUSAND OF ISSUE AND INCREASE AMOUNT
<TABLE>
<CAPTION>
DURATION
ISSUE --------------------------------------------------------------------------
AGE 1 2 3 4 5 6 7 8 9 10
----- ----- ----- ----- ----- ----- ----- ----- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 2.04 1.84 1.63 1.43 1.22 1.02 0.82 0.61 0.41 0.20
1 2.04 1.84 1.63 1.43 1.22 1.02 0.82 0.61 0.41 0.20
2 2.04 1.84 1.63 1.43 1.22 1.02 0.82 0.61 0.41 0.20
3 2.04 1.84 1.63 1.43 1.22 1.02 0.82 0.61 0.41 0.20
4 2.04 1.84 1.63 1.43 1.22 1.02 0.82 0.61 0.41 0.20
5 2.19 1.97 1.75 1.53 1.31 1.10 0.88 0.66 0.44 0.22
6 2.19 1.97 1.75 1.53 1.31 1.10 0.88 0.66 0.44 0.22
7 2.21 1.99 1.77 1.55 1.33 1.11 0.88 0.66 0.44 0.22
8 2.23 2.01 1.78 1.56 1.34 1.12 0.89 0.67 0.45 0.22
9 2.26 2.03 1.81 1.58 1.36 1.13 0.90 0.68 0.45 0.23
10 2.39 2.15 1.91 1.67 1.43 1.20 0.96 0.72 0.48 0.24
11 2.46 2.21 1.97 1.72 1.48 1.23 0.98 0.74 0.49 0.25
12 2.54 2.29 2.03 1.78 1.52 1.27 1.02 0.76 0.51 0.25
13 2.65 2.39 2.12 1.86 1.59 1.33 1.06 0.80 0.53 0.27
14 2.75 2.48 2.20 1.93 1.65 1.38 1.10 0.83 0.55 0.28
15 2.76 2.48 2.21 1.93 1.66 1.38 1.10 0.83 0.55 0.28
16 2.77 2.49 2.22 1.94 1.66 1.39 1.11 0.83 0.55 0.28
17 2.79 2.51 2.23 1.95 1.67 1.40 1.12 0.84 0.56 0.28
18 2.82 2.54 2.26 1.97 1.69 1.41 1.13 0.85 0.56 0.28
19 2.90 2.61 2.32 2.03 1.74 1.45 1.16 0.87 0.58 0.29
20 2.86 2.57 2.29 2.00 1.72 1.43 1.14 0.86 0.57 0.29
21 2.93 2.64 2.34 2.05 1.76 1.47 1.17 0.88 0.59 0.29
22 2.99 2.69 2.39 2.09 1.79 1.50 1.20 0.90 0.60 0.30
23 3.04 2.74 2.43 2.13 1.82 1.52 1.22 0.91 0.61 0.30
24 3.06 2.75 2.45 2.14 1.84 1.53 1.22 0.92 0.61 0.31
25 3.08 2.77 2.46 2.16 1.85 1.54 1.23 0.92 0.62 0.31
26 3.14 2.83 2.51 2.20 1.88 1.57 1.26 0.94 0.63 0.31
27 3.25 2.93 2.60 2.28 1.95 1.63 1.30 0.98 0.65 0.33
28 3.37 3.03 2.70 2.36 2.02 1.69 1.35 1.01 0.67 0.34
29 3.47 3.12 2.78 2.43 2.08 1.74 1.39 1.04 0.69 0.35
30 3.49 3.14 2.79 2.44 2.09 1.75 1.40 1.05 0.70 0.35
31 3.64 3.28 2.91 2.55 2.18 1.82 1.46 1.09 0.73 0.36
32 3.78 3.40 3.02 2.65 2.27 1.89 1.51 1.13 0.76 0.38
33 3.92 3.53 3.14 2.74 2.35 1.96 1.57 1.18 0.78 0.39
34 4.08 3.67 3.26 2.86 2.45 2.04 1.63 1.22 0.82 0.41
35 4.19 3.77 3.35 2.93 2.51 2.10 1.68 1.26 0.84 0.42
36 4.43 3.99 3.54 3.10 2.66 2.22 1.77 1.33 0.89 0.44
37 4.66 4.19 3.73 3.26 2.80 2.33 1.86 1.40 0.93 0.47
38 4.91 4.42 3.93 3.44 2.95 2.46 1.96 1.47 0.98 0.49
39 5.14 4.63 4.11 3.60 3.08 2.57 2.06 1.54 1.03 0.51
40 5.69 5.12 4.55 3.98 3.41 2.85 2.28 1.71 1.14 0.57
41 6.05 5.45 4.84 4.24 3.63 3.03 2.42 1.82 1.21 0.61
42 6.41 5.77 5.13 4.49 3.85 3.21 2.56 1.92 1.28 0.64
43 6.76 6.08 5.41 4.73 4.06 3.38 2.70 2.03 1.35 0.68
44 7.13 6.42 5.70 4.99 4.28 3.57 2.85 2.14 1.43 0.71
45 7.18 6.46 5.74 5.03 4.31 3.59 2.87 2.15 1.44 0.72
46 7.66 6.89 6.13 5.36 4.60 3.83 3.06 2.30 1.53 0.77
</TABLE>
A-1
<PAGE> 45
<TABLE>
<CAPTION>
DURATION
ISSUE --------------------------------------------------------------------------
AGE 1 2 3 4 5 6 7 8 9 10
----- ----- ----- ----- ----- ----- ----- ----- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
47 8.14 7.33 6.51 5.70 4.88 4.07 3.26 2.44 1.63 0.81
48 8.63 7.77 6.90 6.04 5.18 4.32 3.45 2.59 1.73 0.86
49 9.11 8.20 7.29 6.38 5.47 4.56 3.64 2.73 1.82 0.91
50 10.00 9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00
51 10.67 9.60 8.54 7.47 6.40 5.34 4.27 3.20 2.13 1.07
52 11.35 10.22 9.08 7.95 6.81 5.68 4.54 3.41 2.27 1.14
53 12.02 10.82 9.62 8.41 7.21 6.01 4.81 3.61 2.40 1.20
54 12.70 11.43 10.16 8.89 7.62 6.35 5.08 3.81 2.54 1.27
55 13.01 11.71 10.41 9.11 7.81 6.51 5.20 3.90 2.60 1.30
56 13.99 12.59 11.19 9.79 8.39 7.00 5.60 4.20 2.80 1.40
57 14.97 13.47 11.98 10.48 8.98 7.49 5.99 4.49 2.99 1.50
58 15.96 14.36 12.77 11.17 9.58 7.98 6.38 4.79 3.19 1.60
59 16.93 15.24 13.54 11.85 10.16 8.47 6.77 5.08 3.39 1.69
60 17.91 16.12 14.33 12.54 10.75 8.96 7.16 5.37 3.58 1.79
61 19.52 17.57 15.62 13.66 11.71 9.76 7.81 5.86 3.90 1.95
62 21.12 19.01 16.90 14.78 12.67 10.56 8.45 6.34 4.22 2.11
63 22.73 20.46 18.18 15.91 13.64 11.37 9.09 6.82 4.55 2.27
64 24.34 21.91 19.47 17.04 14.60 12.17 9.74 7.30 4.87 2.43
65 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
66 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
67 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
68 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
69 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
70 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
71 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
72 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
73 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
74 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
75 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
76 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
77 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
78 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
79 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
80 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
81 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
82 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
83 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
84 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
85 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
</TABLE>
A-2
<PAGE> 46
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> 47
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> 48
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> 49
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> 50
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> 51
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> 52
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> 53
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> 54
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> 55
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> 56
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> 57
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> 58
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> 59
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> 60
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> 61
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> 62
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> 63
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> 64
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> 65
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> 66
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> 67
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> 68
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> 69
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> 70
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> 71
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> 72
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 $839
================================================================================================== ============= =============
</TABLE>
See Notes to Consolidated Financial Statements.
F-2
<PAGE> 73
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ 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 $56,548
============================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE> 74
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN RETAINED EARNINGS AND
ACCUMULATED OTHER CHANGES IN EQUITY FROM NON-OWNER SOURCES
($ 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 $1,151
===========================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE> 75
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH
($ 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> 76
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> 77
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> 78
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> 79
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> 80
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> 81
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> 82
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 $201.3 billion at December 31,
1999 and 1998.
The Company writes workers' compensation business through its Accident
Department. This business is ceded 100% to an affiliate, The Travelers
Indemnity Company.
F-12
<PAGE> 83
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
A summary of reinsurance financial data reflected within the consolidated
statements of income and balance sheets is presented below ($ 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> 84
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 $500 million in
1999, 1998 and 1997, respectively.
F-14
<PAGE> 85
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
4. SHAREHOLDER'S EQUITY (continued)
Accumulated Other Changes in Equity from Non-Owner Sources, Net of Tax
Changes in each component of Accumulated Other Changes in Equity from Non-Owner
Sources were as follows:
<TABLE>
<CAPTION>
ACCUMULATED OTHER
NET UNREALIZED FOREIGN CHANGES IN EQUITY FROM
GAIN (LOSS) ON CURRENCY NON-OWNER SOURCES
INVESTMENT SECURITIES TRANSLATION
($ 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> 86
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> 87
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> 88
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> 89
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> 90
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> 91
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> 92
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 $195 million, by an
affiliate. Minimum future capital lease payments are not significant.
The Company is reimbursed for use of furniture and equipment through cost
sharing agreements by its affiliates.
F-22
<PAGE> 93
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
10. FEDERAL INCOME TAXES
EFFECTIVE TAX RATE
<TABLE>
<CAPTION>
($ 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 $17 million for each of the years
ended December 31, 1999, 1998 and 1997.
F-23
<PAGE> 94
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
The net deferred tax liabilities at December 31, 1999 and 1998 were
comprised of the tax effects of temporary differences related to the
following assets and liabilities:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
($ 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> 95
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 $199
------------------------------------------------------------------------------------------------------
</TABLE>
F-25
<PAGE> 96
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Changes in net unrealized investment gains (losses) that are reported as
accumulated other changes in equity from non-owner sources or unrealized
gains on Citigroup stock in shareholder's equity were as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1999 1998 1997
($ 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 $506 million, which were reported in
1997, related to appreciation of Citigroup common stock.
F-26
<PAGE> 97
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Fixed Maturities
The amortized cost and fair value of investments in fixed maturities were
as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
GROSS GROSS
DECEMBER 31, 1999 AMORTIZED UNREALIZED UNREALIZED FAIR
($ 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> 98
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
$1.4 billion of GNMA, FNMA or FHLMC mortgage-backed pass-through securities
at December 31, 1999 and 1998, respectively. Virtually all of these
securities are rated AAA.
F-28
<PAGE> 99
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Equity Securities
The cost and fair values of investments in equity securities were as
follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
GROSS GROSS
EQUITY SECURITIES: UNREALIZED UNREALIZED FAIR
($ 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 $2,749
==================================================================================================
</TABLE>
Underperforming mortgage loans include delinquent mortgage loans, loans in
the process of foreclosure, foreclosed loans and loans modified at interest
rates below market.
F-29
<PAGE> 100
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Aggregate annual maturities on mortgage loans at December 31, 1999 are as
follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
YEAR ENDING DECEMBER 31,
($ 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> 101
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> 102
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 $6.2
billion of liabilities are surrenderable without charge. More than 12.7% of
these relate to individual life products. These risks would have to be
underwritten again if transferred to another carrier, which is considered a
significant deterrent against withdrawal by long-term policyholders.
Insurance liabilities that are surrendered or withdrawn are reduced by
outstanding policy loans and related accrued interest prior to payout.
F-32
<PAGE> 103
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
14. RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
The following table reconciles net income to net cash provided by operating
activities:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1999 1998 1997
($ 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> 104
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 $63,531
-----------------------------------------------------------------------------------------------------------------
</TABLE>
F-34
<PAGE> 105
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
TRAVELERS LIFE & PRIMERICA LIFE
1998 ($ 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 $49,440
-----------------------------------------------------------------------------------------------------------------
</TABLE>
The amount of investments in equity method investees and total expenditures
for additions to long-lived assets other than financial instruments,
long-term customer relationships of a financial institution, mortgage and
other servicing rights, deferred policy acquisition costs, and deferred tax
assets, were not material.
F-35
<PAGE> 106
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
BUSINESS SEGMENT RECONCILIATION:
($ 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> 107
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> 108
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
1. The facing sheet.
2. The Prospectus.
3. The undertaking to file reports.
4. The signatures.
Written consents of the following persons:
A. Consent of Kathleen A. McGah, Deputy 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 11 below.)
B. Consent and Actuarial Opinion of Mahir Dugentas pertaining to the
illustrations contained in the prospectus.
C. Consent of KPMG LLP, Independent Certified Public Accountants.
D. Powers of Attorney. (See Exhibit 12 below.)
EXHIBITS
1. Resolution of the Board of Directors of The Travelers 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.)
2. Not Applicable.
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 the Registration Statement on Form N-4, File No. 333-60227,
filed November 9, 1998.)
4. None
5. Form of Variable Life Insurance Contracts. .
6(a). Charter of The Travelers Insurance Company, as amended on October
19, 1994. (Incorporated herein by reference to Exhibit 6(a) to the
Registration Statement filed on Form N-4, File No. 333-40193, filed
November 13, 1997.)
6(b). By-Laws of The Travelers Insurance Company, as amended on October
20, 1994. (Incorporated herein by reference to Exhibit 6(b) to the
Registration Statement filed on Form N-4, File No. 333-40193, filed
November 13, 1997.)
7. None
<PAGE> 109
8. Participation Agreements. (Incorporated herein by reference to
Exhibit 8 to Pre-Effective Amendment No. 1 to the Registration
Statement on Form S-6, File No. 333-96521, filed May 24, 2000.)
9. None
10. Form of Application for Variable Life Insurance Contracts.
(Incorporated herein by reference to Exhibit 10 to Post-Effective
Amendment No. 1 to the Registration Statement on Form S-6, File No.
333-15053, filed April 24, 1998.)
11. Opinion of counsel as to the legality of the securities being
registered.
12(a). Power of Attorney authorizing Ernest J. Wright or Kathleen A. McGah
as signatory for Marc P. Weill. (Incorporated herein by reference
to Exhibits 15(a) and 15(b) to the Registration Statement on Form
S-6 filed April 28, 1995 and April 25, 1997.)
12(b). Power of Attorney authorizing Ernest J. Wright or Kathleen A. McGah
as signatory for J. Eric Daniels. (Incorporated herein by reference
to Exhibit 12(b) to the Registration Statement on Form S-6, File No.
333-69771, filed December 28, 1998.)
12(c). Power of Attorney authorizing Ernest J. Wright or Kathleen A. McGah
as signatory for Jay S. Benet. (Incorporated herein by reference to
Exhibit 12(c) to Post Effective Amendment No. Pre-Effective
Amendment No. 20 to the Registration Statement on Form S-6, File No.
3-88637, filed on April 26, 1999.)
12(d). Powers of Attorney authorizing Ernest J. Wright or Kathleen A. McGah
as signatory for George C. Kokulis and Katherine M. Sullivan.
(Incorporated herein by reference to Exhibits 15(b) to the
Registration Statement on Form S-6 filed April 25, 2000.)
12(e) Powers of Attorney authorizing Ernest J. Wright or Kathleen A. McGah
as signatory for Glenn D. Lamey and Marla Berman Lewitus.
(Incorporated herein by reference to Exhibit 12(e) to Pre-Effective
Amendment No. 1 to the Registration Statement on Form S-6, File No.
333-96515, filed May 24, 2000.)
<PAGE> 110
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant, The
Travelers Fund UL for Variable Life Insurance, has duly caused this registration
statement to be signed on its behalf by the undersigned thereunto duly
authorized, in the city of Hartford and state of Connecticut, on the 24th day of
May 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 24th day of May 2000.
<TABLE>
<S> <C>
*GEORGE C. KOKULIS Director, Chairman of the Board, President
- -------------------------- and Chief Executive Officer
(George C. Kokulis) (Principal Executive Officer
*GLENN D. LAMMEY Director, Executive Vice President, Chief Financial
- -------------------------- Officer, Chief Accounting Officer and Controller
(Glenn D. Lammey) (Principal Financial Officer)
*MARLA BERMAN LEWITUS Director, Senior Vice President and
- -------------------------- General Counsel
(Marla Berman Lewitus)
*KATHERINE M. SULLIVAN Director
- --------------------------
(Katherine M. Sullivan)
*MARC P. WEILL Director
- --------------------------
(Marc P. Weill)
</TABLE>
*By: /s/Ernest J. Wright, Attorney-in-Fact
<PAGE> 111
<TABLE>
<CAPTION>
EXHIBIT INDEX
- --------------
Written Consents Method of Filing
- ----------------- ----------------
<S> <C>
A. Consent of Kathleen A. McGah, Deputy General Counsel, See Exhibit 11
to filing of of her opinion as an exhibit to this Registration below
Statement and to the reference to her opinion under the caption
"Legal Proceedings and Opinion" in the Prospectus.
B. Consent and Actuarial Opinion of Mahir Dugentas pertaining to Electronically
the illustrations contained in the prospectus.
C. Consent of KPMG LLP, Independent Certified Public Accountants Electronically
EXHIBITS
5. Form of Variable Life Insurance Contracts. Electronically
11. Opinion of counsel as to the legality of the securities Electronically
being registered.
</TABLE>
<PAGE> 1
Attachment B
Re: Travelers Variable Life (File No. 333-96519)
The Travelers Fund UL for Variable Life Insurance
Dear Sir or Madam:
In my capacity as Actuary of The Travelers Insurance Company, I have provided
actuarial advice concerning Travelers Variable Life product. I also provided
actuarial advice concerning the preparation of the Registration Statement on
Form S-6, File No. 333-96519 (the "Registration Statement") for filing with the
Securities and Exchange Commission under the Securities Act of 1933 in
connection with the Policy.
In my opinion the illustrations of benefits under the Policies included in the
prospectus under the caption "Illustrations of Death Benefit, Cash Values and
Cash Surrender Values" are, based on the assumptions stated in the
illustrations, consistent with the provisions of the Policies. Also, in my
opinion the age selected in the illustrations is representative of the manner
in which the Policies operate.
I hereby consent to the use of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/s/Mahir Dugentas, ASA, MAAA
Pricing Actuary
Product Development
May 23, 2000
<PAGE> 1
ATTACHMENT C
Consent of Independent Certified Public Accountants
Board of Directors
The Travelers 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
May 23, 2000
<PAGE> 1
THE TRAVELERS INSURANCE COMPANY - ONE TOWER SQUARE - HARTFORD, CT 06183
A STOCK COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
We will pay the Death Benefit to the Beneficiary upon receipt at Our Office of
Due Proof of the Insured's Death while this policy is in force. Refer to the
"Death Benefit" provision on Page 5 and to the "Policy Values" section on Page 6
for information on determining the amount payable upon the Insured's Death.
READ YOUR POLICY CAREFULLY
This is a legal contract between You and Us.
RIGHT TO CANCEL
We want You to be satisfied with the policy that You have purchased. We urge You
to examine it closely. If, for any reason, You are not satisfied, You may return
the policy to Us or to the agent from whom it was purchased for cancellation
within the latest of:
1. ten days after the policy was delivered to You; or
2. ten days after We have mailed or delivered the Notice of the
Right to Cancel to You; or
3. forty-five days after the date the application for this policy
was signed.
Within seven days after We receive Your returned policy, We will refund to You
all premiums paid, less any Loan Account value. After the policy is returned, it
will be considered as if it were never in effect.
Signed at Hartford, Connecticut
/s/ [SIG]
President
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
PREMIUMS PAYABLE UNTIL EARLIER OF MATURITY OR INSURED'S DEATH
INSURANCE PAYABLE UPON DEATH OF INSURED
NON-PARTICIPATING
THE AMOUNT AND/OR DURATION OF THE DEATH BENEFIT AND OTHER VALUES PROVIDED BY
THIS POLICY ARE BASED ON THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT(S).
VALUES ARE VARIABLE, MAY INCREASE OR DECREASE, AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT.
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Right to Cancel Policy Jacket
Policy Summary Page 3
Definitions Page 4
Benefits--Basic Policy Page 5
Policy Values Page 6
Premium and Valuation Provisions Page 7
Continuation of Insurance, Grace Period and Reinstatement Page 8
Exchange Option Page 9
Ownership Rights Page 9
General Provisions Page 10
Settlement Options
A copy of the application and any riders follows the Settlement Options.
</TABLE>
<PAGE> 3
POLICY SUMMARY
INSURED: JOHN DOE STATED AMOUNT: $ 50,000
POLICY NUMBER: 1234567 POLICY DATE: JUN 1, 2000
AGE: 35 ISSUE DATE: JUN 1, 2000
MATURITY DATE: JUN 1, 2065 MONTHLY DEDUCTION DAY: 1ST
OF EACH MONTH
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BENEFIT DESCRIPTION
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INITIAL STATED AMOUNT: $50,000
INITIAL PREMIUM: $391.00
PLANNED PREMIUM: $391.00
PLANNED PREMIUM PAYABLE: MONTHLY
INSURANCE OPTION: 1 (LEVEL OPTION)
MINIMUM STATED AMOUNT: $50,000
MINIMUM AMOUNT INSURED: THE PERCENTAGE OF THE CASH VALUE, BASED ON THE
INSURED'S AGE, REQUIRED FOR THE POLICY TO
QUALIFY AS LIFE INSURANCE ACCORDING TO FEDERAL
INCOME TAX LAWS. SEE TABLE IN POLICY FOR
DETAILS
MINIMUM INCREASE AMOUNT:$50,000
MINIMUM LOAN AMOUNT: $500
MAXIMUM LOAN AMOUNT: 100% OF (CASH VALUE LESS SURRENDER PENALTIES)
AS OF THE DAY WE RECEIVE YOUR LOAN REQUEST
ANNUAL LOAN INTEREST POLICY YEARS 1-15: 5.66% IN ADVANCE
RATE CHARGED: POLICY YEARS 16 AND THEREAFTER: 4.76% IN ADVANCE
ANNUAL LOAN INTEREST
RATE CREDITED: 4.00% IN ARREARS
FULL SURRENDER CHARGE: APPLIES FOR THE FIRST 10 POLICY YEARS PER THOUSAND OF
INITIAL STATED AMOUNT, AND FOR THE FIRST 10 POLICY
YEARS FOLLOWING ANY APPLIED FOR STATED AMOUNT INCREASE
PER THOUSAND OF INCREASE AMOUNT, AS FOLLOWS:
POLICY CHARGE POLICY CHARGE
YEAR PER $1000 YEAR PER $1000
1 $ 4.19 6 $ 2.10
2 $ 3.77 7 $ 1.68
3 $ 3.35 8 $ 1.26
4 $ 2.93 9 $ .84
5 $ 2.51 10 $ .42
MINIMUM PARTIAL SURRENDER AMOUNT: $ 500
L-TVLDB PAGE 3(A)
<PAGE> 4
POLICY SUMMARY
INSURED: JOHN DOE STATED AMOUNT: $ 50,000
POLICY NUMBER: 1234567 POLICY DATE: JUN 1, 2000
AGE: 35 ISSUE DATE: JUN 1, 2000
MATURITY DATE: JUN 1, 2065 MONTHLY DEDUCTION DAY: 1ST
OF EACH MONTH
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BENEFIT DESCRIPTION
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PARTIAL SURRENDER CHARGE: IN PROPORTION TO THE CHARGE THAT WOULD APPLY TO A FULL
SURRENDER. THE PROPORTION WILL BE COMPUTED AS THE
SURRENDER AMOUNT DIVIDED BY (CASH VALUE MINUS LOAN
ACCOUNT VALUE). WHEN THE PARTIAL SURRENDER IS MADE,
FUTURE SURRENDER CHARGES WILL BE REDUCED BY THE SAME
PROPORTION.
CHARGE FOR REQUESTED IN PROPORTION TO THE CHARGE THAT WOULD
STATED AMOUNT DECREASE: APPLY TO A FULL SURRENDER. THE PROPORTION
WILL BE COMPUTED AS THE AMOUNT OF THE REQUESTED STATED
AMOUNT DECREASE DIVIDED BY THE TOTAL STATED AMOUNT
THAT WAS IN EFFECT IMMEDIATELY PRIOR TO THE REQUESTED
DECREASE. WHEN THE REQUESTED DECREASE IS MADE, FUTURE
SURRENDER CHARGES WILL BE REDUCED BY THE SAME
PROPORTION.
SALES EXPENSE CHARGE: 1.50% OF EACH PREMIUM PAID, WAIVED IF POLICY
STATED AMOUNT PLUS PRIMARY INSURED TERM BENEFIT
IS AT LEAST $5,000,000
PREMIUM TAX CHARGE: 2.25% OF EACH PREMIUM PAID
FEDERAL DEFERRED
ACQUISITION COST CHARGE: 1.25% OF EACH PREMIUM PAID
MONTHLY ADMINISTRATIVE $ .08 PER THOUSAND OF INITIAL STATED
EXPENSE CHARGES: AMOUNT FOR THE FIRST THREE YEARS FROM THE
EFFECTIVE DATE AND FOR THE FIRST THREE YEARS
FROM THE EFFECTIVE DATE OF EACH REQUESTED STATED
AMOUNT INCREASE; PLUS $6 PER MONTH UNTIL MATURITY
DATE IF STATED AMOUNT IS LESS THAN $100,000
INTEREST FACTOR: 1.00327374
RATE CLASS: MALE , PREFERRED PLUS, NONSMOKER
L-TVLDB PAGE 3(B)
<PAGE> 5
POLICY SUMMARY
INSURED: JOHN DOE STATED AMOUNT: $ 50,000
POLICY NUMBER: 1234567 POLICY DATE: JUN 1, 2000
AGE: 35 ISSUE DATE: JUN 1, 2000
MATURITY DATE: JUN 1, 2065 MONTHLY DEDUCTION DAY: 1ST
OF EACH MONTH
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BENEFIT DESCRIPTION
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[SEPARATE ACCOUNT:
THE TRAVELERS FUND UL FOR VARIABLE LIFE INSURANCE
INVESTMENT OPTIONS:
CAPITAL APPRECIATION FUND
DREYFUS STOCK INDEX FUND
MANAGED ASSETS TRUST
TRAVELERS MONEY MARKET PORTFOLIO
DEUTSCHE ASSET MANAGEMENT VIT FUNDS:
EAFE EQUITY INDEX FUND
SMALL CAP INDEX FUND
VARIABLE INSURANCE PRODUCTS FUND:
EQUITY-INCOME PORTFOLIO - INITIAL CLASS
GROWTH PORTFOLIO - INITIAL CLASS
HIGH INCOME PORTFOLIO - INITIAL CLASS
VARIABLE INSURANCE PRODUCTS FUND II:
ASSET MANAGER PORTFOLIO - INITIAL CLASS
TRAVELERS SERIES TRUST:
U.S. GOVERNMENT SECURITIES PORTFOLIO
ZERO COUPON BOND PORTFOLIO 2005
GREENWICH STREET SERIES FUND:
EQUITY INDEX PORTFOLIO -CLASS I
TOTAL RETURN PORTFOLIO
TRAVELERS SERIES FUND INC.:
AIM CAPITAL APPRECIATION PORTFOLIO
ALLIANCE GROWTH PORTFOLIO
MFS TOTAL RETURN PORTFOLIO
PUTNAM DIVERSIFIED INCOME PORTFOLIO
SMITH BARNEY HIGH INCOME PORTFOLIO
SMITH BARNEY LARGE CAPITALIZATION GROWTH PORTFOLIO
SMITH BARNEY LARGE CAP VALUE PORTFOLIO
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST:
TEMPLETON GLOBAL SECURITIES FUND - CLASS I
JANUS ASPEN SERIES:
AGGRESSIVE GROWTH PORTFOLIO - SERVICE SHARES
GLOBAL TECHNOLOGY PORTFOLIO - SERVICE SHARES
WORLDWIDE GROWTH PORTFOLIO - SERVICE SHARES]
L-TVLDB PAGE 3(C)
<PAGE> 6
POLICY SUMMARY
INSURED: JOHN DOE STATED AMOUNT: $ 50,000
POLICY NUMBER: 1234567 POLICY DATE: JUN 1, 2000
AGE: 35 ISSUE DATE: JUN 1, 2000
MATURITY DATE: JUN 1, 2065 MONTHLY DEDUCTION DAY: 1ST
OF EACH MONTH
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BENEFIT DESCRIPTION
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THE MAXIMUM INVESTMENT OPTION DAILY DEDUCTION FOR ALL INVESTMENT OPTIONS (IN
BASIS POINTS) IS .2329 FOR POLICY YEARS 1-15, AND .0548 FOR POLICY YEARS 16 AND
AFTER.
INFORMATION ABOUT THE SEPARATE ACCOUNT IS PROVIDED IN THE PROSPECTUS FOR
THE POLICY AND THE SEPARATE ACCOUNT. YOU SHOULD CAREFULLY REVIEW
THE PROSPECTUS.
WE RESERVE THE RIGHT TO LIMIT FREE TRANSFERS AMONG THE INVESTMENT OPTIONS TO
FOUR TIMES IN ANY POLICY YEAR AND TO CHARGE A $10 FEE FOR EACH ADDITIONAL
TRANSFER THAT WE ALLOW.
PREMIUM FOR THE BASIC POLICY MAY BE PAID UNTIL THE EARLIER OF THE MATURITY DATE
OR THE INSURED'S DEATH. CHARGES FOR RIDERS ARE PAYABLE TO THE EARLIER OF THE
APPLICABLE EXPIRY DATE OR THE INSURED'S DEATH. NO INSURANCE WILL BE IN EFFECT
UNLESS AT LEAST ONE DEDUCTION AMOUNT HAS BEEN PAID.
COVERAGE UNDER THIS POLICY MAY END PRIOR TO THE MATURITY DATE IF PREMIUM
PAYMENT AND/OR INVESTMENT EXPERIENCE ARE INSUFFICIENT TO CONTINUE INSURANCE TO
SUCH DATE.
L-TVLDB PAGE 3(D)
<PAGE> 7
POLICY SUMMARY
INSURED: JOHN DOE STATED AMOUNT: $ 50,000
POLICY NUMBER: 1234567 POLICY DATE: JUN 1, 2000
AGE: 35 ISSUE DATE: JUN 1, 2000
MATURITY DATE: JUN 1, 2065 MONTHLY DEDUCTION DAY: 1ST
OF EACH MONTH
<TABLE>
<CAPTION>
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TABLE OF MAXIMUM MONTHLY GUARANTEED COST OF INSURANCE RATES
(MONTHLY RATE PER $1000 OF COVERAGE AMOUNT)
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POLICY MAXIMUM POLICY MAXIMUM POLICY MAXIMUM POLICY MAXIMUM
YEAR RATE YEAR RATE YEAR RATE YEAR RATE
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
1 0.18150 18 0.69760 35 3.21700 52 15.87440
2 0.19360 19 0.76490 36 3.52680 53 17.26970
3 0.20780 20 0.83900 37 3.88180 54 18.71940
4 0.22410 21 0.91900 38 4.29100 55 20.23610
5 0.24240 22 1.00420 39 4.75550 56 21.84550
6 0.26340 23 1.09410 40 5.26770 57 23.59540
7 0.28590 24 1.19050 41 5.81880 58 25.57450
8 0.31020 25 1.29590 42 6.40060 59 28.00750
9 0.33650 26 1.41320 43 7.00680 60 31.40160
10 0.36500 27 1.54520 44 7.64310 61 36.79810
11 0.39560 28 1.69490 45 8.33070 62 44.65000
12 0.42780 29 1.86310 46 9.09340 63 58.04500
13 0.46220 30 2.04930 47 9.95610 64 78.36080
14 0.49950 31 2.25090 48 10.94090 65 82.27880
15 0.54020 32 2.46630 49 12.04620
16 0.58590 33 2.69610 50 13.25080
17 0.63840 34 2.94350 51 14.53250
</TABLE>
RATE CLASS: MALE ,PREFERRED PLUS,NONSMOKER
THE RATES USED FOR THE COST OF INSURANCE DEDUCTION ARE GUARANTEED NOT TO EXCEED
THE MAXIMUM RATES SHOWN ABOVE. THE RATES ARE BASED ON THE 1980 COMMISSIONERS
STANDARD ORDINARY SEX DISTINCT MORTALITY TABLE. THE COST OF INSURANCE IS
DEDUCTED ON THE MONTHLY DEDUCTION DAY.
L-TVLDB PAGE 3(COI)
<PAGE> 8
DEFINITIONS
ACCUMULATION UNIT: a standard of measurement used to determine the values in
each Investment Option.
AGE: age as of the Insured's most recent birthday.
AMOUNT INSURED: equals the Stated Amount if Death Benefit Option 1 is selected;
equals the Stated Amount plus Cash Value if Death Benefit Option 2 is selected.
The Amount Insured will always be at least equal to the Minimum Amount Insured
described on the Policy Summary.
BENEFICIARY(IES): the person(s) named to receive the benefits of this policy
upon the death of the Insured.
CASH SURRENDER VALUE: the Cash Value less any Loan Account value and applicable
surrender charges.
CASH VALUE: the sum of the values held in the Investment Options and the Loan
Account.
COVERAGE AMOUNT: the Amount Insured less the Cash Value.
DEATH BENEFIT: the amount payable to the Beneficiary if the Insured's death
occurs while this policy is in force. See "Death Benefit" provision on Page 5
for details.
DEDUCTION AMOUNT: a monthly charge deducted from the Cash Value. See "Deduction
Amount" provision on Page 6 for detail on components of this charge.
DEDUCTION DAY: the day of each month on which the Deduction Amount is deducted.
Shown on the Policy Summary.
DUE PROOF OF INSURED'S DEATH: a copy of a certified death certificate; a copy of
a certified decree of a court of a competent jurisdiction as to the finding of
death; a written statement by a medical doctor who attended the deceased; or any
other proof satisfactory to Us.
IN WRITING: in a written form satisfactory to Us and received at Our Office.
INSURED: the person whose life is insured under this policy. Shown on the Policy
Summary.
INVESTMENT OPTION: an open-ended management investment company, or a portfolio
thereof, to which values may be directed under the Separate Account. Shown on
the Policy Summary.
ISSUE DATE: the date on which We issue the policy. Shown on the Policy Summary.
LOAN ACCOUNT: the account to which We transfer the amount of any policy loan.
MATURITY DATE: an anniversary of the Policy Date on which the policy matures
(see Maturity Benefit, page 5). Shown on the Policy Summary.
MAXIMUM INVESTMENT OPTION DAILY DEDUCTION: the maximum charge that We deduct
from each Investment Option to cover Our mortality and expense risk charges.
Shown on the Policy Summary.
MINIMUM AMOUNT INSURED: a stated percentage of the Cash Value determined as of
the first day of the Policy Month, as specified on "Minimum Amount Insured
Table" in policy.
NET PREMIUM: Premium paid less the Sales Expense Charge, Premium Tax Charge and
Federal Deferred Acquisition Cost Charge as shown on the Policy Summary.
OUR OFFICE: The Travelers Insurance Company, Policyholder Services, One Tower
Square, Hartford, Connecticut 06183-5071 or any other office which We may
designate for the purpose of administering this policy.
POLICY ANNIVERSARY: an anniversary of the Policy Date.
POLICY DATE: the date on which the policy becomes effective. Shown on the Policy
Summary.
POLICY MONTH: twelve one-month periods during the Policy Year, each of which
begins on the Policy Date or the Deduction Day.
POLICY YEAR: each successive twelve-month period; the first beginning with the
Policy Date.
SEPARATE ACCOUNT: the Separate Account that We established for this class of
policies and certain other policies. The Separate Account is shown on the Policy
Summary and is divided into segments that correspond to the Investment Options.
STATED AMOUNT: a dollar amount used to determine the Death Benefit of the
policy. Shown on the Policy Summary.
VALUATION DATE: a date on which policy values are determined. This is any day on
which the New York Stock Exchange is open for trading. VALUATION PERIOD: the
period between successive valuations.
WE, US, OUR: The Travelers Insurance Company.
YOU, YOUR: the owner(s) of this policy.
<PAGE> 9
BENEFITS--BASIC POLICY
DEATH BENEFIT
Upon receipt at Our Office of Due Proof of the Insured's Death while the policy
is in force, We will pay to the Beneficiary the Death Benefit of the policy. The
Death Benefit will be the Amount Insured at the time of the Insured's death,
less any:
1. Loan Account value;
2. Deduction Amount due but not paid; and
3. amount payable to an assignee under a collateral assignment of the
policy.
The Death Benefit may be limited as provided under the Misstatement and Suicide
provisions on Page 10. The Death Benefit depends on the Death Benefit Option
that is in effect on the date of the Insured's death, and is affected by any
increase or decrease to the Initial Stated Amount. Benefits provided by any
rider attached to this policy will end according to the termination provision(s)
therein.
MATURITY BENEFIT
If the Insured is living on the Maturity Date, We will pay You the Cash Value as
of the Maturity Date, less any:
1. Loan Account value;
2. Deduction Amount due but not paid; and
3. amount payable to an assignee under a collateral assignment of the
policy.
Upon maturity, insurance will end and We will have no other obligation under
this policy. We will request that You return the policy to Us.
DEATH BENEFIT OPTIONS AND AMOUNT INSURED
There are two Death Benefit Options. Under Option 1 (the Level Death Benefit
Option), the Amount Insured is the greater of the Stated Amount or any Minimum
Amount Insured on the date of the Insured's death. Under Option 2 (the Variable
Death Benefit Option), the Amount Insured is the greater of the Stated Amount
plus the Cash Value, or any Minimum Amount Insured on the date of the Insured's
death.
You may request a change in Death Benefit Option while the Insured is living and
this policy is in force. We will require evidence of insurability satisfactory
to Us if You request a change from Option 1 to Option 2. We will effect the
change on the later of the Deduction Day on or following the day We receive the
request, or the Deduction Day on or immediately following Your requested
effective date. If You request a change from Option 2 to Option 1, the Stated
Amount will be increased by the Cash Value. If You request a change from Option
1 to Option 2, the Stated Amount will be decreased by the Cash Value.
The remaining Amount Insured and the remaining Stated Amount in effect after any
change may not be less than the respective minimum amounts shown on the Policy
Summary.
REQUESTED CHANGES IN STATED AMOUNT
Increases -- After the first Policy Year and prior to the Policy Anniversary on
which the Insured is Age 86, You may request an increase to the Stated Amount.
The request must be made In Writing. We will not allow a requested increase to
the Stated Amount for less than the Minimum Increase Amount shown on the Policy
Summary. The increase will be effective on the date shown on the supplemental
Policy Summary that We will send You. We will require evidence of insurability
satisfactory to Us if You request an increase.
Decreases -- After the second Policy Year, You may request a decrease to the
Stated Amount. The decrease will be effective on the later of the Deduction Day
on or following Our receipt of Your request, or the Deduction Day on or
immediately following Your requested effective date. There is a charge for
requested Stated Amount decreases as shown on the Policy Summary.
The decrease will be applied as follows: first against the most recent increase
to the Stated Amount; then to other increases in the Stated Amount in the
reverse order in which they occurred; and last, to the Initial Stated Amount.
After any change, the Stated Amount in effect may not be less than the Minimum
Stated Amount shown on the Policy Summary. We will send You a supplemental
Policy Summary reflecting any change.
<PAGE> 10
POLICY VALUES
CASH VALUE
The Cash Value on the Policy Date is equal to the initial Net Premium minus the
Deduction Amount due. On each Valuation Date, the Cash Value is equal to the sum
of the accumulated values in the Investment Options plus any Loan Account value.
The accumulated value in an Investment Option equals a times b where:
a is the number of Accumulation Units on the Valuation Date; and
b is the then current Accumulation Unit Value for that Investment Option.
Policy values on other days are calculated in a manner consistent with this
method.
DEDUCTION AMOUNT
On each Deduction Day, the Deduction Amount is deducted from the Cash Value
minus Loan Account value. The first Deduction Day is the Policy Date. The
Deduction Day is shown on the Policy Summary.
The Deduction Amount will be charged monthly against each Investment Option in
proportion to the value of each Investment Option on each Deduction Day. The
Deduction Amount is equal to:
1. The cost of insurance; plus
2. The Monthly Administrative Expense charge shown on the Policy Summary; plus
3. The cost of any supplemental benefits for which a separate charge is shown
on the Policy Summary; plus
4. Any other applicable charges shown on the Policy Summary.
The maximum guaranteed cost of insurance for any month is equal to c times the
result of a minus b where:
a is the Amount Insured for the month divided by the Death Benefit
Interest Factor shown on the Policy Summary;
b is the Cash Value on the Deduction Day;
c is the cost for each $1,000 of Coverage Amount shown in the Table of
Maximum Monthly Guaranteed Cost of Insurance Rates on the Policy
Summary, divided by $1,000.
The maximum guaranteed cost of insurance rates shown on the Policy Summary are
based on the Insured's age, sex and rate class for the Initial Stated Amount and
each increase in the Stated Amount. We may use rates lower than those shown. We
will base any future changes in these rates only on Our future expectations as
to mortality, expenses and persistency. Nothing in this policy will be affected
by Our actual mortality and expenses. We will determine the current rates for
the Initial Stated Amount and for each increase to the Stated Amount at the
start of each Policy Year and will guarantee them for that Policy Year. Any
change that We make in the current rates will be on a uniform basis for insureds
of the same age, sex, duration and rate class.
When the Amount Insured is equal to the Minimum Amount Insured shown on the
Policy Summary, We will use the rate class for the most recent increase that
required evidence of insurability to determine the cost of insurance.
If You have selected Death Benefit Option 1 and have made increases in the
Stated Amount, the Cash Value will first be considered a part of the Initial
Stated Amount. If the Cash Value exceeds the Initial Stated Amount, it will then
be considered a part of the additional Stated Amount resulting from increases in
the order of those increases.
The Deduction Amount for the following month will be taken out of the Cash Value
on the Deduction Day. If the Cash Surrender Value is not enough to pay the
Deduction Amount due and no further premiums are paid, the Grace Period will go
into effect (see Grace Period provision, Page 9).
CASH SURRENDER VALUE
The Cash Surrender Value is equal to the Cash Value less any Loan Account value
and applicable surrender charges. It will not be less than the minimum Cash
Surrender Value required by the insurance laws of the state in which this policy
is delivered. A detailed statement of the method of calculating the Cash
Surrender Values has been filed with the insurance department of the state in
which this policy is delivered.
<PAGE> 11
CASH SURRENDER
While the Insured is living and this policy is in force, You may request a full
or partial surrender In Writing. You may do so without the consent of any
Beneficiary, unless irrevocably named. We will calculate Your Cash Surrender
Value as of the day We receive Your request In Writing and will pay this amount
within seven days after such request. A surrender charge may apply as shown on
the Policy Summary.
If you request a full surrender, the policy will end on the date that We receive
Your request In Writing along with the policy.
We will not make a partial surrender to You for less than the Minimum Partial
Surrender Amount shown on the Policy Summary. The amount of any partial cash
surrender may not exceed the Cash Surrender Value. If You request a partial
surrender, then the Death Benefit, Amount Insured, and Cash Value will be
reduced by the amount surrendered, including any applicable partial surrender
charge (as shown on the Policy Summary). Additionally, under Death Benefit
Option 1, the Stated Amount will be reduced by the amount of the surrender,
including any applicable surrender charge. The deduction from the Cash Value
will be made on a pro-rata basis against the Cash Value of each Investment
Option, unless You request otherwise In Writing. After the reduction, the Amount
Insured and Stated Amount must be no less than the respective minimum amounts
shown on the Policy Summary.
POLICY LOANS
We will make a loan to You with the policy as security if You assign this policy
to Us while it is in force. We will not make a loan to You or increase an
outstanding loan for less than the Minimum Loan Amount shown on the Policy
Summary. We will pay the loan amount within seven days after We receive Your
loan request In Writing.
Loan amounts will be transferred from the Investment Options to the Loan Account
in proportion to the Cash Value in each Investment Option as of the date that
the loan is made, unless You request otherwise. A Loan Account will be
maintained while a loan is outstanding and credited at the Annual Loan Interest
Rate Credited shown on the Policy Summary. The value of the Loan Account is the
amount of any outstanding loan plus any interest that We credit to the Loan
Account, less any interest that We transfer to the Investment Options.
The total Loan Account value may not exceed the Maximum Loan Amount shown on the
Policy Summary. Interest on the loan will be payable in advance, at the
beginning of each Policy Year, at the Annual Loan Interest Rate Charged shown on
the Policy Summary. Interest not paid when due will be added to the Loan Account
Value and will bear interest at the same rate.
While the Insured is living and the policy is in effect, all or part of any loan
may be repaid. Unless You request otherwise, payment received while there is an
outstanding loan on the policy will be applied as follows: first, towards
repayment of any loan interest due; next, towards repayment of the loan
principal; and last, as a premium payment to the policy. The amount of the
repayment will be transferred from the Loan Account and will be allocated among
the Investment Options in proportion to the outstanding loan amount associated
with each Investment Option. You may not repay a loan that exists at the end of
the Grace Period (see provision on Page 9) unless You reinstate this policy.
The Grace Period provision will go into effect if the Loan Account Value exceeds
the Cash Value less applicable surrender charges.
PREMIUM AND VALUATION PROVISIONS
PREMIUM
Insurance under this policy will take effect when We have received Your payment
of at least one Deduction Amount. All premiums are payable at Our Office or to
one of Our authorized representatives.
The amount and frequency of the Planned Premium are shown on the Policy Summary.
You may request a change in the amount and frequency of the Planned Premium,
provided that such change would not disqualify the policy as life insurance
under federal tax law.
Premium payments are flexible. At any time before the Maturity Date, additional
premium payments may be made, provided that the premium payment plus the total
of all premiums already paid does not exceed the limits prescribed by federal
income tax laws or regulations to qualify the policy as life insurance.
Additionally, We reserve the right to require evidence of insurability before We
accept any additional premium payment that would increase the Coverage Amount.
PAYMENT MODE
Premiums may be paid annually, semi-annually or by other arrangement with Our
consent. The payment mode may be changed with Our approval.
<PAGE> 12
PREMIUM ALLOCATION
Net Premium payments will be applied to provide Accumulation Units which will be
credited to the Investment Options that You have selected in the proportion
stated in Your application, or as You have instructed Us most recently.
INVESTMENT OPTION VALUATION
ACCUMULATION UNITS
The number of Accumulation Units to be credited to each Investment Option once a
premium payment has been received by Us will be determined by dividing the Net
Premium applied to that Investment Option by the current Accumulation Unit Value
of that Investment Option.
ACCUMULATION UNIT VALUE
The value of an Accumulation Unit for each Investment Option was initially set
at $1.00. We will determine the Accumulation Unit value for each Investment
Option on each Valuation Date by multiplying the value on the immediately
preceding Valuation Date by the corresponding net investment factor (see Net
Investment Factor provision below) for that Investment Option for the Valuation
Period just ended.
The value of an Accumulation Unit on any date other than a Valuation Date will
be equal to its value as of the next Valuation Date.
NET INVESTMENT FACTOR
The net investment factor is a factor applied to measure the investment
performance of an Investment Option from one Valuation Period to the next. The
net investment factor for an Investment Option for any Valuation Period is
determined by dividing a by b and subtracting c where:
a is
1. the net asset value per share of the Investment Option as of the
Valuation Date; plus
2. the per-share amount of any dividend or capital gain
distributions by the Investment Option if the ex-dividend date
occurs in the Valuation Period just ended; plus or minus
3. a per-share charge or credit, as We may determine on the
Valuation Date for tax reserves; and
b is
1. the net asset value per share of the Investment Option as of the
last prior Valuation Date; plus or minus
2. the per-share or per-unit charge or credit for tax reserves as of
the end of the last prior Valuation Date; and
c is the applicable Investment Option deduction for the Valuation
Period.
TRANSFERS BETWEEN INVESTMENT OPTIONS
As long as this policy is in effect, You may request that We transfer all or a
part of the Cash Value (minus Loan Account value) from an Investment Option to
any other Investment Option available under this policy at the time of request.
Such transfers must be in accordance with Our rules. We reserve the right to
limit the number of free transfers between Investment Options as described on
the Policy Summary. We reserve the right to charge the fee shown on the Policy
Summary for transfers beyond that number.
Transfers between Investment Options will result in the addition or deletion of
Accumulation Units having a total value equal to the dollar amount being
transferred to or from a particular Investment Option. The number of
Accumulation Units will be determined by dividing the amount transferred by the
Accumulation Unit Value of the Investment Options involved as of the next
Valuation Date after We receive Your request for transfer at Our Office.
CONTINUATION OF INSURANCE, GRACE PERIOD AND REINSTATEMENT
CONTINUATION OF INSURANCE
Subject to the "Grace Period" provision below, if sufficient premium payments
are not made, this policy will continue until the day on which the Cash
Surrender Value is not enough to pay the Deduction Amount due, or until the
Maturity Date, if earlier.
The Continuation of Insurance benefit will not be less than the minimum benefit
required by the insurance laws of the state in which this policy is delivered.
<PAGE> 13
GRACE PERIOD
Thirty days after the Cash Surrender Value is insufficient to pay the Deduction
Amount due, We will send You a notice of required premium to Your last known
address. If the required premium is not paid within 31 days after the notice is
sent, the policy will lapse. The policy will have no Cash Value. The policy will
continue through the Grace Period, but if the required payment has not been
received at Our Office, the policy will terminate at the end of the Grace
Period.
REINSTATEMENT
This policy may be reinstated at any time within three years from the date to
which the Deduction Amount was paid, if:
1. the policy was not surrendered for cash; and
2. evidence of insurability acceptable to Us is furnished; and
3. all Deduction Amounts past due are paid; and
4. premium at least equal to the following three Deduction Amounts
is paid; and
5. all Loan Account value is repaid or restored.
Upon reinstatement, the Cash Value of the policy will be the amount provided by
the premium paid, plus any Cash Value as of the date of lapse.
EXCHANGE OPTION
During the first two Policy Years that this policy is in effect, You may
exchange this policy for a form of non-variable permanent individual life
insurance which We, or one of Our affiliates, then regularly issue for the
amount exchanged. No evidence of insurability will be required. We will issue
the policy as provided below:
1. the amount of insurance under the new policy cannot exceed the Death
Benefit of this policy at the time of the exchange; and
2. the Issue Date of the new policy will be the same as the Issue Date
of this policy; and
3. the Insured under the new policy will be the same as the Insured
under this policy; and
4. the premium for the new policy will be based on the Insured's age
under this policy; and
5. the new policy will be based on the same rate class used as of this
policy's Issue Date; or, if the same rate class is not available
under the new policy, then the new policy will be based on the class
that the Insured qualifies for based on his/her insurability as of
this policy's Issue Date.
Any Loan Account value must be repaid prior to the issuance of the new policy.
Rider benefits included with this policy will be included with the new policy
only if such rider benefits are available with the new policy, and will be
subject to Our rules then in effect.
An exchange made pursuant to this provision is subject to an equitable
adjustment in payments and Cash Values to reflect variance, if any, in the
payments and Cash Values under this policy and the new policy.
OWNERSHIP RIGHTS
OWNERSHIP
The original owner(s) is (are) shown on the application. While the Insured is
living, You may exercise all rights and options that this policy provides and
that We permit without the consent of any Beneficiary, unless irrevocably named.
Ownership is transferable by assignment. No assignment is binding on Us until We
receive a copy of the assignment In Writing. We will not determine if an
assignment is valid. Proof of interest must be filed with any claim under a
collateral assignment.
BENEFICIARY
The original Beneficiary is stated in the application. Unless the Beneficiary is
irrevocably named, You may name a new Beneficiary while the Insured is living
and while this policy is in force by notifying Us In Writing. Any change will be
effective from the date You signed the notice of change, even if the Insured's
death occurs prior to Our receipt of the notice. We will have no further
responsibility for any payment that We made before the notice was received at
Our Office.
If no Beneficiary survives the Insured, You will be the Beneficiary. If You are
the Insured and no Beneficiary is living at the time of Your death, Your estate
will be the Beneficiary. The rights of any collateral assignee may affect the
interest of the Beneficiary.
<PAGE> 14
GENERAL PROVISIONS
ENTIRE CONTRACT
The entire contract consists of this policy and the application, a copy of which
is attached. The policy is issued in consideration of the application and the
payment of premium. We will not use any statement to void this policy or to deny
a claim under it, unless that statement is contained in an attached written
application. All statements in the application will be considered as being made
to the best knowledge and belief of the applicant and not as promises of truth.
CHANGES
This policy may only be altered by a written agreement signed by one of Our
officers.
NO DIVIDENDS
This policy is non-participating. It does not share in Our surplus earnings, so
You will receive no dividends under it.
MISSTATEMENT
If the age and/or sex of the Insured was incorrectly stated in the application,
all benefits will be adjusted to the amount which would have been purchased at
the correct age and/or sex, based on the most recent cost of insurance charge.
Proof of age may be filed at any time at Our Office.
SUICIDE
If within two years from the Issue Date, the Insured's death occurs and is due
to suicide while sane or insane, the Death Benefit will be limited to the
premiums paid less the Loan Account value, any Deduction Amount due, and the
amount of any partial surrenders.
If You have applied for an increase to the Stated Amount, the Suicide exclusion
period will be begin on the effective date of the increase with respect to
payment of the increase.
If this policy is reinstated, the Suicide exclusion period will begin on the
reinstatement date.
CONTESTABILITY
No misstatements made in any application for this policy will be used to contest
payment of any Death Benefit after the policy has been in force during the
lifetime of the Insured for two years from the Issue Date.
If You have applied for an increase to the Stated Amount, the contestability
period will begin on the effective date of the increase with respect to payment
of the increase.
If this policy is reinstated, the contestability period will begin on the
reinstatement date.
SEPARATE ACCOUNT
We have exclusive and absolute ownership and control of the assets of the
Separate Account and the associated Investment Options. The assets of the
Separate Account will be available to cover the liabilities of Our general
account only to the extent that those assets exceed the reserves and other
policy liabilities of the Separate Account arising under the variable life
insurance policies supported by the Separate Account. The assets of the Separate
Account will be valued on each Valuation Date. Our determination of the value of
an Accumulation Unit by the method described in this policy will be conclusive.
To the extent required by law, the investment policy of the Separate Account
will not be changed without the approval of the Insurance Commissioner of
Connecticut. If required, this approval process is on file with the Commissioner
of the state where this policy is issued for delivery.
SUBSTITUTION OF SEPARATE ACCOUNT OR INVESTMENT OPTION
If the use of a Separate Account or Investment Option is no longer possible, or
in Our judgment becomes inappropriate for the purposes of this policy, We may
substitute another Separate Account or Investment Option without Your consent.
Substitution may be made with respect to both existing premium payments and
investment of future premium payments. However, no such substitution will be
made without notice to You and without prior approval of the Securities and
Exchange Commission and the approval of the Insurance Commissioner of the state
where this policy is issued for delivery, to the extent required by law. We may
also add other Investment Options under the policy.
<PAGE> 15
EMERGENCY PROCEDURE
We reserve the right to suspend or postpone the date of any payment of any
benefit or values (including the payments of cash surrenders and policy loans)
for any Valuation Period (1) when the New York Stock Exchange is closed (except
for holidays or weekends); (2) when trading on the Exchange is restricted; (3)
when an emergency exists as determined by the Securities and Exchange Commission
so that disposal of the securities held in the Separate Account is not
reasonably practicable or it is not reasonably practicable to determine the
value of the Separate Account's net assets; or (4) when the Securities and
Exchange Commission has ordered that the right of surrender be suspended for
Your protection; or (5) during any other period when the Securities and Exchange
Commission, by order, so permits for Your protection. Any provision of this
policy that specifies a Valuation Date or provides for surrenders or loans will
be superseded by this Emergency Procedure.
VOTING RIGHTS
If current law requires, You will be entitled to certain voting rights with
respect to the Investment Options to which You have allocated premiums.
If current law requires, You will be entitled to instruct Us how to vote at
meetings of the shareholders of the Investment Options. We will determine the
number of votes to which You will be entitled to instruct Us. If there is a
change in the law which permits Us to vote the shares of the Investment Options
without direction from You, We reserve the right to do so.
MATURITY OF AN INVESTMENT OPTION
If any Cash Value is attributable to an Investment Option having a specified
maturity date, the Cash Value in that Investment Option as of such maturity date
will be allocated to the Money Market Investment Option specified on the Policy
Summary, unless You request otherwise. We will send written notice to Your last
known address at least thirty days in advance of the maturity date of that
Investment Option. To select an allocation to an Investment Option other than
the Money Market Investment Option, We must receive Your notification In Writing
at least seven days before the maturity date of the Investment Option.
ANNUAL STATEMENT
As often as required by law, but at least once in each Policy Year, We will send
You a statement showing:
1. the Cash Value, Stated Amount and Amount Insured; and
2. the premiums paid, deductions, surrenders and loans made during
the preceding Policy Year; and
3. total Loan Account value.
ILLUSTRATIVE REPORTS
You may request an up-to-date illustrative report of values based on past
results and current assumptions.
We will provide the illustrative report within a reasonable time and for a
reasonable service fee not to exceed $15, unless prohibited by state law.
<PAGE> 16
MINIMUM AMOUNT INSURED TABLE
<TABLE>
<CAPTION>
Insured's Age Cash Value Percentage Insured's Age Cash Value Percentage
------------- ---------------------
<S> <C> <C> <C>
0-40 250% 60 130%
41 243% 61 128%
42 236% 62 126%
43 229% 63 124%
44 222% 64 122%
45 215% 65 120%
46 209% 66 119%
47 203% 67 118%
48 197% 68 117%
49 191% 69 116%
50 185% 70 115%
51 178% 71 113%
52 171% 72 111%
53 164% 73 109%
54 157% 74 107%
55 150% 75 - 90 105%
56 146% 91 104%
57 142% 92 103%
58 138% 93 102%
59 134% 94 101%
95+ 100%
</TABLE>
<PAGE> 17
PRIMARY INSURED TERM RIDER
This Rider is made a part of the policy to which it is attached. Except where
this Rider provides otherwise, it is subject to all conditions of the policy.
DEFINITIONS
Primary Insured - The person named as the Insured for the policy to which this
Rider is attached.
Primary Insured Term Benefit - shown in the rider information section of the
Policy Summary.
BENEFIT
If the Primary Insured's death occurs while the policy and this Rider are in
force, then We will pay the Primary Insured Term Benefit to the Beneficiary upon
Our receipt of Due Proof of the Insured's death. We will deduct from the Primary
Insured Term Benefit any unpaid charges due to Us at the time of death. If no
Beneficiary survives the Primary Insured, You will be the Beneficiary. If You
are the Primary Insured and no Beneficiary survives Your death, Your estate will
be the Beneficiary. The rights of any collateral assignee may affect the
interest of the Beneficiary.
TERM
Subject to the Termination provision, this Rider is effective until the Expiry
Date shown for the Rider on the Policy Summary.
CHARGE
This Rider is issued in consideration of the application for it and the
deduction of the additional charge shown on the Policy Summary. The maximum
guaranteed cost per $1,000 of the Primary Insured Term Benefit is determined on
each Deduction Day. It is based on the Primary Insured's age, sex and rate
class, and duration of coverage.
We may use rates less than those shown. We will base these rates on our
expectations as to future experience. Any change We make to the current rates
will be on a uniform basis for insureds of the same age, sex, rate class and
duration of coverage. The current rates will never exceed the maximum guaranteed
rates shown.
CHANGE IN AMOUNT
No increases to the Primary Insured Term Benefit amount will be allowed.
Any time after the second Policy Anniversary, You may request a decrease to the
Primary Insured Term Benefit amount. Such request must be made In Writing. A
decrease will be effective on the later of the Deduction Day on or immediately
following Our receipt of Your request, or the Deduction Day on or immediately
following Your requested effective date.
The amount of insurance remaining after the decrease must be at least equal to
the Minimum Primary Insured Term Benefit shown on the Policy Summary.
ISSUE DATE
The Issue Date of this Rider is the same as that of the policy unless otherwise
shown on the Policy Summary.
CONTESTABILITY
When applied to this Rider, the contestability period will begin on this Rider's
Issue Date.
MISSTATEMENT
If the age and/or sex of the Primary Insured was incorrectly stated in the
application, all benefits under this Rider will be adjusted to the amount that
the charge paid would have purchased at the correct age and/or sex.
SUICIDE
If within two years from the Issue Date of this Rider, the Primary Insured's
death occurs and is due to suicide while sane or insane, the amount payable
under this Rider will be limited to the charges paid for this Rider.
CONVERSION OPTION
You may convert insurance under this Rider to a permanent policy if all past due
charges have been paid, and You notify Us In Writing by the earlier of:
a. 31 days after the Conversion Expiry Date for this Rider shown on the Policy
Summary; or
b. 31 days after termination of this Rider (if termination occurs prior to the
Conversion Expiry Date).
No evidence of insurability will be required. The new policy will be an
individual Flexible Premium Adjustable Life Insurance Policy that We regularly
offer at the time of conversion.
<PAGE> 18
We will issue the new policy as follows:
1. the new policy will be based on the same rate class used as of this
Rider's Issue Date; or, if the same rate class is not available under the
new policy, then the new policy will be based on the class that the
Primary Insured qualifies for based on his/her insurability as of this
Rider's Issue Date; and
2. the charge will be based on the Primary Insured's age;
3. the Policy Date will be the date on which the conversion is made, which is
the first Deduction Day following Our receipt of Your request for
conversion;
4. the Issue Date will be the same as the Issue Date of this Rider;
5. the amount of insurance cannot exceed the Primary Insured Term Benefit in
effect at the time of conversion.
If the conversion option of this Rider is exercised, but the Primary Insured's
death occurs within sixty days after the conversion date and prior to the
deduction of any charge on the new policy, then We will pay the Primary Insured
Term Benefit as if the Primary Insured's death had occurred prior to Your
request for conversion.
TERMINATION
This Rider will terminate on the earliest of:
1. subject to the Grace Period provision of the policy, the date on which the
Cash Surrender Value would not be enough to pay charges due for the policy
or the Rider; or
2. the Deduction Day following Your request, In Writing, for termination of
this Rider; or
3. policy termination or maturity; or
4. the Expiry Date of this Rider as shown on the Policy Summary; or
5. conversion of all of the insurance under this Rider.
THE TRAVELERS INSURANCE COMPANY
/s/ [SIG]
President
<PAGE> 19
SPOUSE TERM INSURANCE RIDER
This Rider is made a part of the policy to which it is attached. Except where
this Rider provides otherwise, it is subject to all conditions of the policy.
DEFINITIONS
Spouse - The person named in the Spouse Term Insurance Rider section of the
Policy Summary.
Spouse Term Insurance Benefit - shown in the rider information section of the
Policy Summary.
BENEFIT
If the Spouse's death occurs while the policy and this Rider are in force, then
We will pay the Spouse Term Insurance Benefit to the Beneficiary upon Our
receipt of Due Proof of the Spouse's death. We will deduct from the Spouse Term
Insurance Benefit any unpaid charges due to Us at the time of death. If no
Beneficiary survives the Spouse, You will be the Beneficiary. If You are the
Spouse and no Beneficiary survives Your death, Your estate will be the
Beneficiary. The rights of any collateral assignee may affect the interest of
the Beneficiary.
TERM
Subject to the Termination provision, this Rider is effective until the Expiry
Date shown for the Rider on the Policy Summary.
CHARGE
This Rider is issued in consideration of the application for it and the
deduction of the additional charge shown on the Policy Summary. The maximum
guaranteed cost per $1,000 of the Spouse Term Insurance Benefit is determined on
each Deduction Day. It is based on the Spouse's age, sex and rate class, and
duration of coverage.
We may use rates less than those shown. We will base these rates on our
expectations as to future experience. Any change We make to the current rates
will be on a uniform basis for insureds of the same age, sex, rate class and
duration of coverage. The current rates will never exceed the maximum guaranteed
rates shown.
CHANGE IN AMOUNT
No increases to the Spouse Term Insurance Benefit amount will be allowed.
Any time after the second Policy Anniversary, You may request a decrease to the
Spouse Term Insurance Benefit amount. Such request must be made In Writing. A
decrease will be effective on the later of the Deduction Day on or immediately
following Our receipt of Your request, or the Deduction Day on or immediately
following Your requested effective date.
The amount of insurance remaining after the decrease must be at least equal to
the Minimum Spouse Term Insurance Benefit shown on the Policy Summary.
ISSUE DATE
The Issue Date of this Rider is the same as that of the policy unless otherwise
shown on the Policy Summary.
CONTESTABILITY
When applied to this Rider, the contestability period will begin on this Rider's
Issue Date.
MISSTATEMENT
If the age and/or sex of the Spouse was incorrectly stated in the application,
all benefits under this Rider will be adjusted to the amount that the charge
paid would have purchased at the correct age and/or sex.
SUICIDE
If within two years from the Issue Date of this Rider, the Spouse's death occurs
and is due to suicide while sane or insane, the amount payable under this Rider
will be limited to the charges paid for this Rider.
CONVERSION OPTION
You may convert insurance under this Rider to a permanent policy if all past due
charges have been paid, and You notify Us In Writing by the earlier of:
a. 31 days after the Conversion Expiry Date for this Rider shown on the Policy
Summary; or
b. 31 days after termination of this Rider (if termination occurs prior to the
Conversion Expiry Date).
No evidence of insurability will be required. The new policy will be an
individual Flexible Premium Adjustable Life Insurance Policy that We regularly
offer at the time of conversion.
<PAGE> 20
CONVERSION OPTION (CONT'D)
We will issue the new policy as follows:
1. the new policy will be based on the same rate class used as of this
Rider's Issue Date; or, if the same rate class is not available under the
new policy, then the new policy will be based on the class that the Spouse
qualifies for based on his/her insurability as of this Rider's Issue Date;
2. the charge will be based on the Spouse's age;
3. the Policy Date will be the date on which the conversion is made, which is
the first Deduction Day following Our receipt of Your request for conversion;
4. the Issue Date will be the same as the Issue Date of this Rider;
5. the amount of insurance cannot exceed the Spouse Term Insurance Benefit in
effect at the time of conversion.
If the conversion option of this Rider is exercised, but the Spouse's death
occurs within sixty days after the conversion date and prior to the deduction of
any charge on the new policy, then We will pay the Spouse Term Insurance Benefit
as if the Spouse's death had occurred prior to Your request for conversion.
TERMINATION
This Rider will terminate on the earliest of:
1. subject to the Grace Period provision of the policy, the date on which the
Cash Surrender Value would not be enough to pay charges due for the policy or
the Rider; or
2. the Deduction Day following Your request, In Writing, for termination of this
Rider; or
3. policy termination or maturity; or
4. the Expiry Date of this Rider as shown on the Policy Summary; or
5. conversion of all of the insurance under this Rider.
THE TRAVELERS INSURANCE COMPANY
/s/ [SIG]
President
<PAGE> 21
CHILD TERM INSURANCE RIDER
This Rider is made a part of the policy to which it is attached. Except where
this Rider provides otherwise, it is subject to all conditions and limitations
of the policy.
DEFINITIONS
Covered Child - a child, stepchild or legally adopted child of the Insured who
is at least fifteen days old and no more than seventeen years old, and:
a. on whose life insurance was approved; or
b. who was born to or adopted by the Insured while this Rider is in effect.
Insured - the Insured under the policy as shown on the Policy Summary.
Beneficiary - unless otherwise stated in the application, the Beneficiary at the
death of each Covered Child is:
a. the Insured, if living; otherwise
b. the executors or administrators of the estate of the Covered Child.
After the Insured's death, You may not change the Beneficiary designation.
BENEFITS - If any Covered Child under this Rider dies while the policy and this
Rider are in force, We will pay the Beneficiary the Child Term Benefit when We
receive Due Proof of the Covered Child's death. We will subtract from the Child
Term Benefit any unpaid charges due to Us at the time of death.
The Child Term Benefit provided at the death of a Covered Child is $1,000
multiplied by the number of units shown for this Rider on the Policy Summary.
CONVERSION - Insurance under this Rider may be converted to a permanent plan of
life insurance if:
1. the Covered Child whose insurance coverage is to be converted notifies Us In
Writing; and
2. all past due Deduction Amounts for the policy and this Rider have been paid;
and
3. the insurance provided by this Rider on the life of the Covered Child
requesting conversion has continued for its full term or terminated due to
the death of the Insured.
Insurance under this Rider may be converted within thirty-one days after
termination without evidence of insurability. The new policy will be a permanent
plan of life insurance which We then regularly issue for the amount requested at
the Covered Child's age.
The new policy will be issued as provided below:
1. the amount of insurance on the life of each Covered Child may not exceed the
Child Term Benefit which was in force at the time of termination;
2. the Covered Child's rate class under the new policy will be standard;
3. the charge will be based on the Covered Child's age;
4. the Policy Date of the new policy will be the date on which conversion is
made; and
5. the Issue Date of the new policy will be the same as the Issue Date of this
Rider.
If any Covered Child requests conversion of insurance under this Rider, but dies
during the thirty-one day period allowed for conversion and before the first
charge on the new policy has been deducted, then We will pay the Child Term
Benefit as if the death had occurred prior to the request for conversion.
CHARGE - This Rider is issued in consideration of the application for it and the
deduction of the additional charge shown for this Rider on the Policy Summary.
The charge for this Rider is deducted under the same conditions as the charge
for the policy.
ISSUE DATE - The Issue Date of this Rider is the same as the Issue Date of the
policy unless otherwise shown for this Rider on the Policy Summary.
<PAGE> 22
CONTESTABILITY - We will not contest insurance coverage on the life of any
Covered Child after the Issue Date of this Rider.
SUICIDE - If, within two years from the Issue Date of this Rider, the Insured
commits suicide, while sane or insane:
1. the amount payable will be limited to the charges paid for this Rider; and
2. We will have no other obligations under this Rider except as stated in the
Conversion provision of this Rider.
TERMINATION - This Rider will terminate on the earliest of:
1. Subject to the Grace Period provision of the policy, the date on which the
Cash Surrender Value is insufficient to pay the charges due for the policy
or this Rider; or
2. the Deduction Day next following Your request In Writing to terminate this
Rider; or
3. policy termination (subject to the 'Conversion' provision); or
4. the Expiry Date of this Rider as shown on the Policy Summary; or
5. with respect to each Covered Child, conversion of insurance on his or her
life; or
6. with respect to each Covered Child, his or her twenty-fifth birthday.
THE TRAVELERS INSURANCE COMPANY
/s/ [SIG]
President
<PAGE> 23
ACCIDENTAL DEATH BENEFIT RIDER
This Rider is made a part of the policy to which it is attached. Except where
this Rider provides otherwise, it is subject to all conditions of the policy.
BENEFIT
The Accidental Death Benefit is shown on the Policy Summary page for this Rider.
We will pay the Accidental Death Benefit if an accident that occurs while this
Rider is in force causes the Insured's death within ninety days after the
accident. The Insured's death must be due to bodily injuries which are the
direct and independent cause of death. Except in the case of drowning or
internal injury revealed by autopsy, an injury must be evidenced by a visible
wound or contusion.
EXCLUSIONS
We will not pay the Accidental Death Benefit if the Insured's death results
from, and/or is contributed to by:
1. any bodily or mental infirmity or disease; or
2. war, whether declared or not, or any act of war or international armed
conflict; or
3. operating, learning to operate or serving as a crew member of any aircraft or
aerial navigation device; or
4. suicide while sane or insane.
ISSUE DATE
The Issue Date of this Rider is the same as the Issue Date of the basic policy
unless otherwise shown on the Policy Summary.
CONTESTABILITY
When applied to this Rider, the contestability period will begin on this Rider's
Issue Date.
CHARGE
This Rider is issued in consideration of the application for it and the
deduction of the additional charge shown on the Policy Summary. The charge for
this Rider is deducted under the same conditions as the charge for the policy.
AUTOPSY
We reserve the right to make an autopsy if allowed by law.
TERMINATION
This Rider will terminate on the earliest of:
1. Subject to the Grace Period provision of the policy, the date on which the
Cash Surrender Value would not be enough to pay charges due for the policy
or this Rider; or
2. failure to pay any charges due for this Rider or the basic policy; or
3. the Deduction Day following Your request, In Writing, to terminate this
Rider; or
4. the Expiry Date of this Rider as shown on the Policy Summary; or
5. policy termination or maturity.
THE TRAVELERS INSURANCE COMPANY
/s/ [SIG]
President
<PAGE> 24
COST OF LIVING ADJUSTMENT RIDER
This Rider is made a part of the policy to which it is attached. Except where
this Rider provides otherwise, it is subject to all conditions and limitations
of the policy.
DEFINITION
Consumer Price Index (CPI) -means the Consumer Price Index for all Urban
Consumers published by the United States Department of Labor for the September
of the calendar year immediately preceding the effective date of the increase.
We may change to another index that We consider appropriate if:
a. publication of the CPI is discontinued, delayed or otherwise not available
for this use; or
b. any change in the composition, base or method of computation of the CPI makes
its continued use inappropriate, in Our opinion, for determining cost of
living increases.
BENEFIT
This Rider provides increases to the Stated Amount of the policy based on
changes in the CPI. We will determine the increased Stated Amount on each Policy
Anniversary.
We will determine the increase by multiplying the number of Cost of Living Units
shown on the Policy Summary by the ratio of a divided by b, where:
a is the change in the CPI between the current Policy Anniversary
and the later of the effective date of the last increase and the
effective date of this Rider; and
b is the CPI on the effective date of this Rider.
In no event will the Death Benefit be reduced due to this calculation. If the
increase as calculated above is less than the Minimum Increase Amount for this
Rider as shown on the Policy Summary, an increase will not be made.
The amount of any single increase made under this Rider will be limited to the
Maximum Increase Amount for this Rider as shown on the Policy Summary. The total
of increases provided by this Rider cannot exceed the Total Increase Limit for
this Rider as shown on the Policy Summary.
CHARGE - This Rider is issued in consideration of the application for it and the
deduction of the additional charge shown for this Rider on the Policy Summary.
The charge for this Rider is deducted under the same conditions as the charge
for the policy. The maximum guaranteed charge for the cost of living increase
will be based on the Insured's age and current rate class.
ISSUE DATE - The Issue Date of this Rider is the same as the Issue Date of the
policy unless otherwise shown for this Rider on the Policy Summary.
CONTESTABILITY - When applied to this Rider, the contestability period will
begin on this Rider's Issue Date.
SUICIDE - If, within two years from the Issue Date of this Rider, the Insured
commits suicide while sane or insane, the amount payable under this Rider will
be limited to the charges paid for this Rider.
TERMINATION - This Rider will terminate on the earliest of:
1. Subject to the Grace Period provision of the policy, the date on which the
Cash Surrender Value is insufficient to pay the charges due for the policy
or this Rider; or
2. failure to pay any charges due for this Rider or the basic policy; or
3. the Deduction Day next following Your request In Writing to terminate this
Rider; or
4. policy termination; or
5. the Expiry Date of this Rider as shown on the Policy Summary; or
6. the effective date of a decrease to the Stated Amount; or
7. the date on which the Total Increase Limit for this Rider (as shown on the
Policy Summary) is reached; or
8. Your rejection of an increase under this Rider; or
9. the effective date of the first benefit payment under the Waiver of
Deduction Amount Rider.
THE TRAVELERS INSURANCE COMPANY
/s/ [SIG]
President
<PAGE> 25
WAIVER OF DEDUCTION AMOUNT RIDER
This Rider is made a part of the policy to which it is attached. Except where
this Rider provides otherwise, it is subject to all conditions and limitations
of such policy.
DEFINITIONS
Disability - For the purposes of this Rider, a Disability must:
1. result from bodily injury or disease;
2. begin while the policy and Rider are in force;
3. exist for a period of not less than six consecutive months; and
4. prevent the Insured from being Employed as defined below.
If the Insured was Employed on the date Disability began, the Insured must be
unable to perform:
1. for the first twenty-four months of Disability, the substantial and material
duties of his or her own occupation as of the date of Disability; and
thereafter
2. Employment for which the Insured is or can become reasonably fitted by
education, training or experience.
If the Insured was not Employed (except if the sole occupation was that of a
student or managing a household) on the date Disability began, the Insured must
be unable to perform:
1. for the first twenty-four months of Disability, his or her reasonable and
customary activities as of the date of Disability; and thereafter
2. Employment for which he or she is or can become reasonably fitted by
education, training or experience.
If the Insured's sole occupation was that of student or managing a household on
the date Disability began, he or she must be unable to perform that occupation.
We will consider the Insured to be disabled, even if he or she is Employed, upon
the entire and permanent loss of:
1. sight in both eyes; or
2. the use of both hands or both feet; or
3. the use of one hand and one foot.
Employed/Employment - For the purposes of this Rider, Employed/Employment means
engaged or engagement in any occupation for wages or profit.
BENEFITS
The Deduction Amounts eligible for waiver are shown on the Policy Summary page
for this Rider. While this Rider is in effect and during the Disability of the
Insured, We will waive the eligible Deduction Amounts, and will restore to the
Cash Value any eligible Deduction Amount that was paid during the Disability.
If the Disability occurs before the Policy Anniversary on which the Insured is
age sixty, benefits will continue until the Maturity Date of the policy or the
end of the Insured's Disability, whichever is earlier.
If the Disability occurs on or after the Policy Anniversary on which the Insured
is age sixty, but before the Policy Anniversary on which he or she is age
sixty-five, benefits under this Rider will continue to the Policy Anniversary on
which the Insured is age sixty-five or the end of the Insured's Disability,
whichever is earlier.
If the Disability occurs on or after the Policy Anniversary on which the Insured
is age sixty-five, there will be no benefits under this Rider.
We will not waive or restore any Deduction Amount that was due more than one
year prior to notice of claim under this Rider.
The provisions, values and benefits of the basic policy will be the same as if
the Deduction Amounts were paid to Us. In any settlement under the policy, We
will not deduct any Deduction Amounts that were waived.
<PAGE> 26
DEATH BENEFIT OPTION
If You elected Death Benefit Option 1 under the basic policy, We will
automatically change it to Option 2 on the Deduction Day following the date the
Insured's Disability began. The new Stated Amount will be the Option 1 Stated
Amount on that Deduction Day, less the Cash Value on that Deduction Day. The new
Option 2 Stated Amount will continue unchanged until termination of the policy.
CHANGES
If the policy is changed to another plan of insurance, the benefits provided by
this Rider will not be included as part of the new policy, unless evidence of
insurability satisfactory to Us is furnished at that time and if a similar Rider
is available with the new policy. If the policy is changed while We are waiving
the Deduction Amount, We will not waive the Deduction Amount on the new policy.
NOTICE OF CLAIM
Notice of claim must be given to Us In Writing:
1. during the lifetime of the Insured; and
2. during the period of Disability; and
3. within one year after the start of Disability.
We will not deny or reduce a claim if it is shown that notice of claim was given
as soon as reasonably possible
PROOF OF LOSS
We may require proof of Disability no more than once a year. We will not waive
further Deduction Amounts if proof is not furnished or if Disability has
terminated.
END OF DISABILITY
The benefits for Disability will end if and when the Insured's Disability ends.
The Deduction Amounts due after that will not be waived.
CHARGE
This Rider is issued in consideration of the application for it and the
deduction of the additional charge for it. The rates and the method of
determining the Rider charge are described on the Policy Summary.
ISSUE DATE
The Issue Date of this Rider is the same as that of the policy unless otherwise
shown for the Rider on the Policy Summary.
CONTESTABILITY
When applied to this Rider, the contestability period will begin on this Rider's
Issue Date.
TERMINATION
This Rider will terminate on the earliest of:
1. Subject to the Grace Period provision of the Policy, the date on which the
Cash Surrender Value would not be enough to pay charges for the policy or
this Rider; or
2. failure to pay any charges due for this Rider or the basic policy; or
3. policy termination or maturity; or
4. the Deduction Day following Your request In Writing for termination of this
Rider; or
5. the Expiry Date of this Rider as shown on the Policy Summary, except with
respect to payment of benefits for a Disability that began prior to the
Policy Anniversary on which the Insured was age sixty as described in the
second paragraph of the "Benefits" provision of this Rider.
THE TRAVELERS INSURANCE COMPANY
/s/ [SIG]
President
<PAGE> 27
SPECIFIED AMOUNT PAYMENT RIDER
This Rider is made a part of the policy to which it is attached. Except where
this Rider provides otherwise, it is subject to all conditions and limitations
of the policy.
DEFINITIONS
Disability - For the purposes of this Rider, a Disability must:
1. result from bodily injury or disease;
2. begin while the policy and Rider are in force;
3. exist for a period of not less than six consecutive months; and
4. prevent the Insured from being Employed as defined below.
If the Insured was Employed on the date Disability began, the Insured must be
unable to perform:
1. for the first twenty-four months of Disability, the substantial and material
duties of his or her own occupation as of the date of Disability; and
thereafter
2. Employment for which the Insured is or can become reasonably fitted by
education, training or experience.
If the Insured was not Employed (except if the sole occupation was that of a
student or managing a household) on the date Disability began, the Insured must
be unable to perform:
1. for the first twenty-four months of Disability, his or her reasonable and
customary activities as of the date of Disability; and thereafter
2. Employment for which he or she is or can become reasonably fitted by
education, training or experience.
If the Insured's sole occupation was that of student or managing a household on
the date Disability began, he or she must be unable to perform that occupation.
We will consider the Insured to be disabled, even if he or she is Employed, upon
the entire and permanent loss of:
1. sight in both eyes; or
2. the use of both hands or both feet; or
3. the use of one hand and one foot.
Employed/Employment - For the purposes of this Rider, Employed/Employment means
engaged or engagement in any occupation for wages or profit.
Specified Amount - The amount that You have selected to be credited to the Cash
Value of the policy during the Insured's Disability. This amount is shown on the
Policy Summary for this Rider. You may request an increase to the Specified
Amount at any time while this Rider is in force. You may request a decrease to
the Specified Amount any time after the second Policy Anniversary and while this
Rider is in force. We reserve the right to decrease the Specified Amount if You
request a reduction to the benefits provided by the policy.
BENEFITS
While the policy and this Rider are in effect and during the Disability of the
Insured, We will credit the Specified Amount to the policy's Cash Value on each
Policy Anniversary. The first amount that We will credit will be equal to the
result of (a x b) divided by twelve, where:
a equals the Specified Amount; and
b equals the number of months from the start of the Disability to
the first Policy Anniversary that follows the start of the
Disability.
If the Disability occurs before the Policy Anniversary on which the Insured is
age sixty, benefits will continue until the Maturity Date of the policy or the
end of the Insured's Disability, whichever is earlier. In no event will benefits
under this Rider be paid past the Maturity Date, regardless of whether the
policy coverage is extended beyond this date.
If the Disability occurs on or after the Policy Anniversary on which the Insured
is age sixty, but before the Policy Anniversary on which he or she is age
sixty-five, benefits under this Rider will continue to the Policy Anniversary on
which the Insured is age sixty-five or the end of the Insured's Disability,
whichever is earlier.
If the Disability occurs on or after the Policy Anniversary on which the Insured
is age sixty-five, there will be no benefits under this Rider.
<PAGE> 28
We will not credit any Specified Amount that was due to be paid more than one
year prior to notice of claim under this Rider. In any settlement under the
policy, We will not deduct from the proceeds any Specified Amounts that were
credited.
We will not credit any Specified Amount if payment would disqualify the policy
as life insurance.
CHANGES
If the policy is changed to another plan of insurance, the benefits provided by
this Rider will not be included as part of the new policy, unless evidence of
insurability satisfactory to Us is furnished at that time and if a similar Rider
is available under the new policy. If the policy is changed during the
Disability of the Insured, We will not credit the Specified Amount to the new
policy.
NOTICE OF CLAIM
Notice of claim must be given to Us In Writing:
1. during the lifetime of the Insured; and
2. during the period of Disability; and
3. within one year after the start of Disability.
We will not deny or reduce a claim if it is shown that notice of claim was given
as soon as reasonably possible
PROOF OF LOSS
We may require proof of Disability no more than once a year. We will not credit
further Specified Amounts if proof is not furnished or if Disability has
terminated.
END OF DISABILITY
The benefits for Disability as defined above will end if and when the Disability
of the Insured ceases. The Specified Amount will not be credited after
Disability has ended.
CHARGE
This Rider is issued in consideration of the application for it and the
deduction of the additional charge for it. The rates and the method of
determining the Rider charge are described on the Policy Summary.
ISSUE DATE
The Issue Date of this Rider is the same as that of the policy unless otherwise
shown for the Rider on the Policy Summary.
CONTESTABILITY
When applied to this Rider, the contestability period will begin on this Rider's
Issue Date.
TERMINATION
This Rider will terminate on the earliest of:
1. Subject to the Grace Period provision of the policy, the date on which the
Cash Surrender Value would not be enough to pay charges for the policy or
this Rider; or
2. failure to pay any charges due for this Rider or the basic policy; or
3. policy termination; or
4. the policy Maturity Date, regardless of whether the policy coverage is
extended beyond this date; or
5. the Deduction Day following Your request In Writing for termination of this
Rider; or
6. the Expiry Date of this Rider as shown on the Policy Summary, except with
respect to payment of benefits for a Disability that began prior to the
Policy Anniversary on which the Insured was age sixty as described in the
second paragraph of the "Benefits" provision of this Rider.
THE TRAVELERS INSURANCE COMPANY
/s/ [SIG]
President
<PAGE> 29
EXTENSION OF COVERAGE RIDER
This Rider is made a part of the policy on the date specified on the
supplemental Policy Summary. Except where this Rider provides otherwise, it is
subject to all conditions of the policy.
BENEFIT - One year prior to the Maturity Date and at any time in the twelve
calendar months thereafter, You may request that coverage be extended beyond the
Maturity Date. If We have received Your request In Writing prior to the Maturity
Date, and any past due Deduction Amounts have been paid, then We will continue
this policy in force beyond the Maturity Date. The policy will be continued
until the earlier of the Insured's death or the date that We receive Your
request for full surrender In Writing. All other riders and supplemental
benefits will terminate on the Maturity Date.
The Death Benefit after the Maturity Date will be equal to the Amount Insured as
of the date of the Insured's death, minus any Loan Account value and any amounts
payable under a collateral assignment of the policy. After the Maturity Date,
Deduction Amounts will not be charged, and additional premium payments will not
be accepted. Interest on loans will continue to accrue and will be added to the
total Loan Account value. Loan repayments will be accepted.
All other provisions of the policy relating to the payment of the Death Benefit
apply to the Death Benefit after the Maturity Date. The Death Benefit and policy
values are based on the experience of the Investment Options selected, and are
variable and not guaranteed.
TAXATION - The policy with which this Rider is used is intended to qualify as a
life insurance policy for Federal tax purposes. The amount payable under this
policy upon the death of the Insured is intended to qualify for the Federal
income tax exclusion. The provisions of the policy are to be interpreted to
ensure such tax qualification, not withstanding any other provision to the
contrary.
The policy may be surrendered prior to the Insured's death for its Cash
Surrender Value. Such a surrender will be treated as a taxable distribution.
THE COMPANY DOES NOT GIVE TAX ADVICE. NO LANGUAGE IN THIS RIDER SHOULD BE
CONSTRUED TO MEAN THAT THE DEATH BENEFIT AND CASH VALUE WILL BE EXEMPT FROM ANY
FUTURE TAX LIABILITY. THE TAX RESULTS OF ANY BENEFITS RECEIVED UNDER THIS RIDER
DEPEND UPON INTERPRETATION OF THE INTERNAL REVENUE CODE. YOU SHOULD CONSULT WITH
YOUR PERSONAL TAX ADVISOR PRIOR TO THE EXERCISE OF THIS OPTION TO ASSESS ANY
POTENTIAL TAX LIABILITY.
THE TRAVELERS INSURANCE COMPANY
/s/ [SIG]
President
<PAGE> 1
Exhibit 11
KATHLEEN A. McGAH
Deputy General Counsel
Legal Division - 8 MS
Telephone: (860) 277-7389
Fax: (860) 277-0842
May 24, 2000
The Travelers Insurance Company
The Travelers Fund UL Variable Life Insurance
One Tower Square
Hartford, Connecticut 06183
Gentlemen:
With reference to the Registration Statement, File No. 333-96519, on
Form S-6, filed by The Travelers Insurance Company and The Travelers Fund UL for
Variable Life Insurance with the Securities and Exchange Commission covering
variable life insurance policies, I have examined such documents and such law as
I have considered necessary and appropriate, and on the basis of such
examination, it is my opinion that:
1. The Travelers Insurance Company is duly organized and existing
under the laws of the State of Connecticut and has been duly
authorized to do business and to issue variable life insurance
policies by the Insurance Commissioner of the State of Connecticut.
2. The Travelers Fund UL for Variable Life Insurance is a duly
authorized and validly existing separate account established
pursuant to Section 38a-433 of the Connecticut General Statutes.
3. The variable life insurance policies covered by the above
Registration Statement, and all pre- and post-effective amendments
relating thereto, will be approved and authorized by the Insurance
Commissioner of the State of Connecticut and when issued will be
valid, legal and binding obligations of The Travelers Insurance
Company and The Travelers Fund UL for Variable Life Insurance.
4. Assets of The Travelers Fund UL for Variable Life Insurance are not
chargeable with liabilities arising out of any other business The
Travelers Insurance Company may conduct.
I hereby consent to the filing of this opinion as an exhibit to the
above-referenced Registration Statement and to the reference to this opinion
under the caption "Legal Proceedings and Opinion" in the Prospectus constituting
a part of the Registration Statement.
Very truly yours,
/s/Kathleen A. McGah
Deputy General Counsel
The Travelers Insurance Company