<PAGE> 1
VINTAGE UNIVERSAL LIFE
ANNUAL REPORT
DECEMBER 31, 1996
THE TRAVELERS VARIABLE LIFE INSURANCE
SEPARATE ACCOUNT THREE
[TRAVELERSLIFE LOGO]
The Travelers Insurance Company
The Travelers Life and Annuity Company
One Tower Square
Hartford, CT 06183
<PAGE> 2
THE TRAVELERS VARIABLE LIFE INSURANCE
SEPARATE ACCOUNT THREE
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<S> <C> <C>
ASSETS:
Investments in eligible funds at market value:
The Travelers Series Trust:
Zero Coupon Bond Fund Portfolio Series 1998, 1,158 shares (cost $11,776)................. $ 11,568
Zero Coupon Bond Fund Portfolio Series 2000, 5,324 shares (cost $53,579)................. 53,029
Zero Coupon Bond Fund Portfolio Series 2005, 37,501 shares (cost $366,285)............... 373,883
Travelers Series Fund Inc.:
Alliance Growth Portfolio, 68,401 shares (cost $1,050,107)............................... 1,147,766
Van Kampen American Capital Enterprise Portfolio, 29,710 shares (cost $440,601).......... 469,712
TBC Managed Income Portfolio, 1,581 shares (cost $16,819)................................ 16,921
Smith Barney High Income Portfolio, 25,399 shares (cost $298,004)........................ 300,723
Smith Barney International Equity Portfolio, 55,016 shares (cost $659,294)............... 690,995
Smith Barney Income and Growth Portfolio, 24,518 shares (cost $354,175).................. 369,236
Smith Barney Money Market Portfolio, 1,085,663 shares (cost $1,085,663).................. 1,085,663
Putnam Diversified Income Portfolio, 22,857 shares (cost $263,403)....................... 264,451
MFS Total Return Portfolio, 67,110 shares (cost $862,942)................................ 883,844
AIM Capital Appreciation Portfolio, 66,141 shares (cost $697,113)........................ 729,533
Smith Barney Series Fund:
Total Return Portfolio, 35,638 shares (cost $513,944).................................... 560,592
------------
Total Investments (cost $6,673,705)................................................... $ 6,957,916
Receivables:
Dividends.................................................................................. 23,111
Premium payments and transfers from other Travelers accounts............................... 68
Other assets................................................................................. 15
------------
Total Assets............................................................................. 6,981,110
------------
LIABILITIES:
Payable for contract surrenders and transfers to other Travelers accounts.................... 9,529
Accrued liabilities.......................................................................... 1,065
------------
Total Liabilities........................................................................ 10,594
------------
NET ASSETS: $ 6,970,516
============
</TABLE>
See Notes to Financial Statements
-1-
<PAGE> 3
THE TRAVELERS VARIABLE LIFE INSURANCE
SEPARATE ACCOUNT THREE
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends.................................................................................... $ 176,298
EXPENSES:
Insurance charges............................................................................ $ 29,048
Administrative fees.......................................................................... 12,827
------------
Total expenses............................................................................. 41,875
------------
Net investment income.................................................................... 134,423
------------
REALIZED GAIN AND CHANGE IN UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Realized gain from investment transactions:
Proceeds from investments sold............................................................. 5,811,247
Cost of investments sold................................................................... 5,782,288
------------
Net realized gain........................................................................ 28,959
Change in unrealized gain (loss) on investments:
Unrealized loss at December 31, 1995....................................................... (2,936)
Unrealized gain at December 31, 1996....................................................... 284,211
------------
Net change in unrealized gain (loss) for the year........................................ 287,147
------------
Net realized gain and change in unrealized gain (loss)................................ 316,106
------------
Net increase in net assets resulting from operations......................................... $ 450,529
============
</TABLE>
See Notes to Financial Statements
-2-
<PAGE> 4
THE TRAVELERS VARIABLE LIFE INSURANCE
SEPARATE ACCOUNT THREE
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
THE PERIOD DECEMBER 4, 1995 (DATE OPERATIONS COMMENCED)
TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
OPERATIONS:
Net investment income............................................................................. $ 134,423 $ 4,510
Net realized gain (loss) from investment transactions............................................. 28,959 (7)
Net change in unrealized gain (loss) on investments............................................... 287,147 (2,936)
------------ ------------
Net increase in net assets resulting from operations............................................ 450,529 1,567
------------ ------------
UNIT TRANSACTIONS:
Participant premium payments
(applicable to 7,306,792 and 232,440 units, respectively)....................................... 7,516,947 233,982
Participant transfers from other Travelers accounts
(applicable to 5,161,526 and 129,995 units, respectively)....................................... 5,671,103 130,824
Contract surrenders
(applicable to 64,125 and 1,487 units, respectively)............................................ (69,391) (1,501)
Participant transfers to other Travelers accounts
(applicable to 6,632,386 and 129,809 units, respectively)....................................... (6,832,721) (130,823)
------------ ------------
Net increase in net assets resulting from unit transactions................................... 6,285,938 232,482
------------ ------------
Net increase in net assets................................................................. 6,736,467 234,049
NET ASSETS:
Beginning of period............................................................................... 234,049 -
------------ ------------
End of period..................................................................................... $ 6,970,516 $ 234,049
============ ============
</TABLE>
See Notes to Financial Statements
-3-
<PAGE> 5
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Variable Life Insurance Separate Account Three ("Separate
Account Three") is a separate account of The Travelers Insurance Company
("The Travelers"), an indirect wholly owned subsidiary of Travelers Group
Inc., and is available for funding certain variable life insurance
contracts issued by The Travelers. Separate Account Three is registered
under the Investment Company Act of 1940, as amended, as a unit investment
trust.
Participant premium payments applied to Separate Account Three are invested
in one or more eligible funds in accordance with the selection made by the
contract owner. As of December 31, 1996, the eligible funds available
under Separate Account Three are: Zero Coupon Bond Fund Portfolio Series
1998, Zero Coupon Bond Fund Portfolio Series 2000 and Zero Coupon Bond Fund
Portfolio Series 2005 of The Travelers Series Trust; Alliance Growth
Portfolio, Van Kampen American Capital Enterprise Portfolio (formerly
American Capital Enterprise Portfolio), TBC Managed Income Portfolio, Smith
Barney High Income Portfolio, Smith Barney International Equity Portfolio,
Smith Barney Income and Growth Portfolio, Smith Barney Money Market
Portfolio, Putnam Diversified Income Portfolio, MFS Total Return Portfolio
and AIM Capital Appreciation Portfolio of Travelers Series Fund Inc.
(formerly Smith Barney/Travelers Series Fund Inc.); and Total Return
Portfolio of Smith Barney Series Fund. All eligible funds are managed by
affiliates of The Travelers. The Travelers Series Trust and Smith Barney
Series Fund are registered as Massachusetts business trusts. Travelers
Series Fund Inc. is incorporated under Maryland law. Not all funds are
available in all states.
The following is a summary of significant accounting policies consistently
followed by Separate Account Three in the preparation of its financial
statements.
SECURITY VALUATION. Investments are valued daily at the net asset values
per share of the underlying funds.
FEDERAL INCOME TAXES. The operations of Separate Account Three form a part
of the total operations of The Travelers and are not taxed separately. The
Travelers is taxed as a life insurance company under the Internal Revenue
Code of 1986, as amended (the "Code"). Under existing federal income tax
law, no taxes are payable on the investment income of Separate Account
Three. Separate Account Three 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.
Security transactions are accounted for on the trade date. Dividend income
is recorded on the ex-dividend date.
2. INVESTMENTS
Purchases and sales of investments aggregated $12,223,279 and $5,811,247,
respectively, for the year ended December 31, 1996. Realized gains and
losses from investment transactions are reported on an identified cost
basis. The cost of investments in eligible funds was $6,673,705 at
December 31, 1996. Gross unrealized appreciation for all investments at
December 31, 1996 was $284,969. Gross unrealized depreciation for all
investments at December 31, 1996 was $758.
3. CONTRACT CHARGES
Insurance charges are paid for the mortality and expense risks assumed by
The Travelers. These charges are equivalent to 0.90% of the average net
assets of Separate Account Three on an annual basis. (Contracts in this
category are identified as Price I in Note 4.) For any contract year that
follows a contract year in which the participant's average net fund growth
rate (as described in the prospectus) is 6.5% or greater, these charges
will be reduced to 0.75%. (Contracts in this category are identified as
Price II in Note 4.)
Administrative fees are paid for administrative expenses incurred by The
Travelers. This charge is equivalent to 0.40% of the average net assets of
Separate Account Three on an annual basis.
-4-
<PAGE> 6
NOTES TO FINANCIAL STATEMENTS - CONTINUED
3. CONTRACT CHARGES (CONTINUED)
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 no contingent surrender charges for
the year ended December 31, 1996 and the period December 4, 1995 (date
operations commenced) to December 31, 1995.
4. NET CONTRACT OWNERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31, 1996
------------------------------------------------------------
UNIT NET
UNITS VALUE ASSETS
----- ----- ------
<S> <C> <C> <C>
The Travelers Series Trust
Zero Coupon Bond Fund Portfolio Series 1998
Price I................................................ 11,880 $ 1.025 $ 12,179
Zero Coupon Bond Fund Portfolio Series 2000
Price I................................................ 54,981 1.013 55,722
Zero Coupon Bond Fund Portfolio Series 2005
Price I................................................ 393,923 0.994 391,640
Travelers Series Fund Inc.
Alliance Growth Portfolio
Price I................................................ 852,007 1.318 1,123,117
Price II............................................... 18,536 1.321 24,477
Van Kampen American Capital Enterprise Portfolio
Price I................................................ 355,017 1.229 436,297
Price II............................................... 27,097 1.231 33,353
TBC Managed Income Portfolio
Price I................................................ 16,739 1.010 16,907
Smith Barney High Income Portfolio
Price I................................................ 234,385 1.148 268,963
Price II............................................... 27,591 1.150 31,718
Smith Barney International Equity Portfolio
Price I................................................ 578,127 1.195 690,917
Smith Barney Income and Growth Portfolio
Price I................................................ 305,299 1.179 359,808
Price II............................................... 7,940 1.180 9,372
Smith Barney Money Market Portfolio
Price I................................................ 1,031,783 1.045 1,077,958
Putnam Diversified Income Portfolio
Price I................................................ 230,611 1.066 245,906
Price II............................................... 17,331 1.068 18,508
MFS Total Return Portfolio
Price I................................................ 712,693 1.138 811,353
Price II............................................... 63,475 1.140 72,378
AIM Capital Appreciation Portfolio
Price I................................................ 618,631 1.158 716,195
Price II............................................... 11,415 1.160 13,236
Smith Barney Series Fund
Total Return Portfolio
Price I................................................ 420,517 1.293 543,715
Price II............................................... 12,968 1.295 16,797
-----------------
Net Contract Owners' Equity....................................................................... $ 6,970,516
=================
</TABLE>
-5-
<PAGE> 7
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. SCHEDULE OF SEPARATE ACCOUNT THREE OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE PERIOD DECEMBER 4, 1995
(DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
ZERO COUPON BOND ZERO COUPON BOND
FUND PORTFOLIO FUND PORTFOLIO
SERIES 1998 SERIES 2000
--------------------------- -----------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends................................................. $ 625 $ - $ 2,715 $ -
------------ ------------- ------------ -------------
EXPENSES:
Insurance charges......................................... 50 - 168 -
Administrative fees....................................... 22 - 74 -
------------ ------------- ------------ -------------
Net investment income (loss)........................ 553 - 2,473 -
------------ ------------- ------------ -------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold........................ 99 - 467 -
Cost of investments sold.............................. 97 - 453 -
------------ ------------- ------------ -------------
Net realized gain (loss)............................ 2 - 14 -
------------ ------------- ------------ -------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of period............ - - - -
Unrealized gain (loss) end of period.................. (208) - (550) -
------------ ------------- ------------ -------------
Net change in unrealized gain (loss) for the period. (208) - (550) -
------------ ------------- ------------ -------------
Net increase in net assets
resulting from operations........................... 347 - 1,937 -
------------ ------------- ------------ -------------
UNIT TRANSACTIONS:
Participant premium payments.............................. - - - -
Participant transfers from other Travelers accounts....... 11,928 - 54,107 -
Contract surrenders....................................... (96) - (322) -
Participant transfers to other Travelers accounts......... - - - -
------------ ------------- ------------ -------------
Net increase in net assets resulting
from unit transactions.............................. 11,832 - 53,785 -
------------ ------------- ------------ -------------
Net increase in net assets.......................... 12,179 - 55,722 -
NET ASSETS:
Beginning of period................................... - - - -
------------ ------------- ------------ -------------
End of period......................................... $ 12,179 $ - $ 55,722 $ -
============ ============= ============ =============
<CAPTION>
ZERO COUPON BOND
FUND PORTFOLIO
SERIES 2005
------------------------
1996 1995
---- ----
<S> <C> <C>
INVESTMENT INCOME:
Dividends................................................. $ 17,813 $ -
------------ ----------
EXPENSES:
Insurance charges......................................... 1,871 -
Administrative fees....................................... 832 -
------------ ----------
Net investment income (loss)........................ 15,110 -
------------ ----------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold........................ 143,755 -
Cost of investments sold.............................. 137,717 -
------------ ----------
Net realized gain (loss)............................ 6,038 -
------------ ----------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of period............ - -
Unrealized gain (loss) end of period.................. 7,598 -
------------ ----------
Net change in unrealized gain (loss) for the period. 7,598 -
------------ ----------
Net increase in net assets
resulting from operations........................... 28,746 -
------------ ----------
UNIT TRANSACTIONS:
Participant premium payments.............................. - -
Participant transfers from other Travelers accounts....... 504,315 -
Contract surrenders....................................... (5,076) -
Participant transfers to other Travelers accounts......... (136,345) -
------------ ----------
Net increase in net assets resulting
from unit transactions.............................. 362,894 -
------------ ----------
Net increase in net assets.......................... 391,640 -
NET ASSETS:
Beginning of period................................... - -
------------ ----------
End of period......................................... $ 391,640 $ -
============ ==========
</TABLE>
-6-
<PAGE> 8
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
VAN KAMPEN
AMERICAN CAPITAL TBC MANAGED SMITH BARNEY
ALLIANCE GROWTH PORTFOLIO ENTERPRISE PORTFOLIO INCOME PORTFOLIO HIGH INCOME PORTFOLIO
- ---------------------------- ---------------------------- --------------------------- ----------------------------
1996 1995 1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
$ 42,246 $ 592 $ 1,328 $ 658 $ 741 $ - $ 17,135 $ 1,118
- ------------ ------------- ------------ ------------- ------------ ------------- ------------ -------------
4,402 4 1,790 4 108 - 1,160 6
1,891 2 790 2 31 - 517 2
- ------------ ------------- ------------ ------------- ------------ ------------- ------------ -------------
35,953 586 (1,252) 652 602 - 15,458 1,110
- ------------ ------------- ------------ ------------- ------------ ------------- ------------ -------------
48,032 45 69,063 46 14,296 - 6,114 61
44,860 46 62,757 47 14,376 - 6,031 63
- ------------ ------------- ------------ ------------- ------------ ------------- ------------ -------------
3,172 (1) 6,306 (1) (80) - 83 (2)
- ------------ ------------- ------------ ------------- ------------ ------------- ------------ -------------
(424) - (369) - - - (967) -
97,659 (424) 29,111 (369) 102 - 2,719 (967)
- ------------ ------------- ------------ ------------- ------------ ------------- ------------ -------------
98,083 (424) 29,480 (369) 102 - 3,686 (967)
- ------------ ------------- ------------ ------------- ------------ ------------- ------------ -------------
137,208 161 34,534 282 624 - 19,227 141
- ------------ ------------- ------------ ------------- ------------ ------------- ------------ -------------
- - - - - - - -
1,015,173 19,480 455,052 19,480 30,519 - 257,425 25,973
(7,881) (43) (3,537) (43) (160) - (2,028) (57)
(16,504) - (36,118) - (14,076) - - -
- ------------ ------------- ------------ ------------- ------------ ------------- ------------ -------------
990,788 19,437 415,397 19,437 16,283 - 255,397 25,916
- ------------ ------------- ------------ ------------- ------------ ------------- ------------ -------------
1,127,996 19,598 449,931 19,719 16,907 - 274,624 26,057
19,598 - 19,719 - - - 26,057 -
- ------------ ------------- ------------ ------------- ------------ ------------- ------------ -------------
$ 1,147,594 $ 19,598 $ 469,650 $ 19,719 $ 16,907 $ - $ 300,681 $ 26,057
============ ============= ============ ============= ============ ============= ============ =============
</TABLE>
-7-
<PAGE> 9
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. SCHEDULE OF SEPARATE ACCOUNT THREE OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE PERIOD DECEMBER 4, 1995
(DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
SMITH BARNEY SMITH BARNEY INCOME
INTERNATIONAL EQUITY PORTFOLIO AND GROWTH PORTFOLIO
------------------------------ ---------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends................................................. $ 656 $ - $ 8,374 $ -
------------ ------------- ------------ -------------
EXPENSES:
Insurance charges......................................... 2,851 - 1,047 -
Administrative fees....................................... 1,285 - 481 -
------------ ------------- ------------ -------------
Net investment income (loss)........................ (3,480) - 6,846 -
------------ ------------- ------------ -------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold........................ 55,450 - 8,241 -
Cost of investments sold.............................. 51,992 - 7,586 -
------------ ------------- ------------ -------------
Net realized gain (loss)............................ 3,458 - 655 -
------------ ------------- ------------ -------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of period............ - - - -
Unrealized gain (loss) end of period.................. 31,701 - 15,061 -
------------ ------------- ------------ -------------
Net change in unrealized gain (loss) for the period. 31,701 - 15,061 -
------------ ------------- ------------ -------------
Net increase in net assets
resulting from operations........................... 31,679 - 22,562 -
------------ ------------- ------------ -------------
UNIT TRANSACTIONS:
Participant premium payments.............................. - - - -
Participant transfers from other Travelers accounts....... 675,175 - 349,020 -
Contract surrenders....................................... (5,762) - (2,173) -
Participant transfers to other Travelers accounts......... (10,175) - (229) -
------------ ------------- ------------ -------------
Net increase in net assets resulting
from unit transactions.............................. 659,238 - 346,618 -
------------ ------------- ------------ -------------
Net increase in net assets.......................... 690,917 - 369,180 -
NET ASSETS:
Beginning of period................................... - - - -
------------ ------------- ------------ -------------
End of period......................................... $ 690,917 $ - $ 369,180 $ -
============ ============= ============ =============
<CAPTION>
SMITH BARNEY
MONEY MARKET PORTFOLIO
--------------------------
1996 1995
---- ----
<S> <C> <C>
INVESTMENT INCOME:
Dividends................................................. $ 35,383 $ 467
------------ ----------
EXPENSES:
Insurance charges......................................... 6,616 84
Administrative fees....................................... 2,951 38
------------ ----------
Net investment income (loss)........................ 25,816 345
------------ ----------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold........................ 5,258,439 130,064
Cost of investments sold.............................. 5,258,439 130,064
------------ ----------
Net realized gain (loss)............................ - -
------------ ----------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of period............ - -
Unrealized gain (loss) end of period.................. - -
------------ ----------
Net change in unrealized gain (loss) for the period. - -
------------ ----------
Net increase in net assets
resulting from operations........................... 25,816 345
------------ ----------
UNIT TRANSACTIONS:
Participant premium payments.............................. 7,516,947 233,982
Participant transfers from other Travelers accounts....... 3,943 958
Contract surrenders....................................... (22,964) (1,216)
Participant transfers to other Travelers accounts......... (6,549,030) (130,823)
------------ ----------
Net increase in net assets resulting
from unit transactions.............................. 948,896 102,901
------------ ----------
Net increase in net assets.......................... 974,712 103,246
NET ASSETS:
Beginning of period................................... 103,246 -
------------ ----------
End of period......................................... $ 1,077,958 $ 103,246
============ ==========
</TABLE>
-8-
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
PUTNAM AIM CAPITAL
DIVERSIFIED INCOME PORTFOLIO MFS TOTAL RETURN PORTFOLIO APPRECIATION PORTFOLIO TOTAL RETURN PORTFOLIO
- ---------------------------- ----------------------------- --------------------------- ----------------------------
1996 1995 1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
$ 14,072 $ - $ 25,738 $ 1,838 $ 699 $ - $ 8,773 $ -
- ------------ -------------- ------------ ------------- ------------ ------------- ------------ -------------
1,179 - 2,709 15 3,188 - 1,909 -
526 - 1,209 6 1,368 - 850 -
- ------------ -------------- ------------ ------------- ------------ ------------- ------------ -------------
12,367 - 21,820 1,817 (3,857) - 6,014 -
- ------------ -------------- ------------ ------------- ------------ ------------- ------------ -------------
58,679 - 31,996 152 65,648 - 50,968 -
57,370 - 30,021 155 62,993 - 47,596 -
- ------------ -------------- ------------ ------------- ------------ ------------- ------------ -------------
1,309 - 1,975 (3) 2,655 - 3,372 -
- ------------ -------------- ------------ ------------- ------------ ------------- ------------ -------------
- - (1,176) - - - - -
1,048 - 20,902 (1,176) 32,420 - 46,648 -
- ------------ -------------- ------------ ------------- ------------ ------------- ------------ -------------
1,048 - 22,078 (1,176) 32,420 - 46,648 -
- ------------ -------------- ------------ ------------- ------------ ------------- ------------ -------------
14,724 - 45,873 638 31,218 - 56,034 -
- ------------ -------------- ------------ ------------- ------------ ------------- ------------ -------------
- - - - - - - -
278,960 - 809,251 64,933 717,667 - 508,568 -
(3,912) - (6,179) (142) (5,448) - (3,853) -
(25,358) - (30,643) - (14,006) - (237) -
- ------------ -------------- ------------ ------------- ------------ ------------- ------------ -------------
249,690 - 772,429 64,791 698,213 - 504,478 -
- ------------ -------------- ------------ ------------- ------------ ------------- ------------ -------------
264,414 - 818,302 65,429 729,431 - 560,512 -
- - 65,429 - - - - -
- ------------ -------------- ------------ ------------- ------------ ------------- ------------ -------------
$ 264,414 $ - $ 883,731 $ 65,429 $ 729,431 $ - $ 560,512 $ -
============ ============== ============ ============= ============ ============= ============ =============
</TABLE>
-9-
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. SCHEDULE OF SEPARATE ACCOUNT THREE OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE PERIOD DECEMBER 4, 1995
(DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
COMBINED
--------------------------------------
1996 1995
---- ----
<S> <C> <C>
INVESTMENT INCOME:
Dividends................................................. $ 176,298 $ 4,673
----------------- ------------------
EXPENSES:
Insurance charges......................................... 29,048 113
Administrative fees....................................... 12,827 50
----------------- ------------------
Net investment income (loss)........................ 134,423 4,510
----------------- ------------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold........................ 5,811,247 130,368
Cost of investments sold.............................. 5,782,288 130,375
----------------- ------------------
Net realized gain (loss)............................ 28,959 (7)
----------------- ------------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of period............ (2,936) -
Unrealized gain (loss) end of period.................. 284,211 (2,936)
----------------- ------------------
Net change in unrealized gain (loss) for the period. 287,147 (2,936)
----------------- ------------------
Net increase in net assets
resulting from operations........................... 450,529 1,567
----------------- ------------------
UNIT TRANSACTIONS:
Participant premium payments.............................. 7,516,947 233,982
Participant transfers from other Travelers accounts....... 5,671,103 130,824
Contract surrenders....................................... (69,391) (1,501)
Participant transfers to other Travelers accounts......... (6,832,721) (130,823)
----------------- ------------------
Net increase in net assets resulting
from unit transactions.............................. 6,285,938 232,482
----------------- ------------------
Net increase in net assets.......................... 6,736,467 234,049
NET ASSETS:
Beginning of period................................... 234,049 -
----------------- ------------------
End of period......................................... $ 6,970,516 $ 234,049
================= ==================
</TABLE>
-10-
<PAGE> 12
REPORT OF INDEPENDENT ACCOUNTANTS
To the Owners of Variable Life Insurance Contracts of
The Travelers Variable Life Insurance Separate Account Three:
We have audited the accompanying statement of assets and liabilities of The
Travelers Variable Life Insurance Separate Account Three as of December 31,
1996, and the related statement of operations for the year then ended and the
statement of changes in net assets for each of the applicable periods ended
December 31, 1996 and 1995. 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, 1996, by
correspondence with 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 Variable Life
Insurance Separate Account Three as of December 31, 1996, the results of its
operations for the year then ended and the changes in its net assets for each
of the applicable periods ended December 31, 1996 and 1995, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 7, 1997
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Independent Accountants
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
This report is prepared for the general information of contract owners and is
not an offer of shares of The Travelers Variable Life Insurance Separate
Account Three or Separate Account Three's underlying funds. It should not be
used in connection with any offer except in conjunction with the Prospectuses
for the Variable Universal Life Insurance products offered by The Travelers
Insurance Company and the Prospectuses for the underlying funds, which
collectively contain all pertinent information, including the applicable sales
commissions.
VG-SEP3 (Annual) (12-96) Printed in U.S.A.
