<PAGE> 1
Registration No. 33-88578
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Post-Effective Amendment No. 5
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 VARIABLE LIFE INSURANCE
SEPARATE ACCOUNT ONE
B. Name of Depositor: THE TRAVELERS LIFE AND ANNUITY 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 Life and Annuity Company
One Tower Square
Hartford, Connecticut 06183
It is proposed that this filing will become effective (check appropriate box):
______ immediately upon filing pursuant to paragraph (b)
__X___ on May 1, 2000 pursuant to paragraph (b)
______ 60 days after filing pursuant to paragraph (a)(1)
______ on __________ pursuant to paragraph (a)(1) of Rule 485.
If appropriate, check the following box:
______ this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
______ Check the box if it is proposed that this filing will become
effective on ____ at ___ pursuant to Rule 487. ______
<PAGE> 2
RECONCILIATION AND TIE BETWEEN
FORM N-8B-2 AND PROSPECTUS
<TABLE>
<CAPTION>
Item No. of
Form N-8B-2 CAPTION IN PROSPECTUS
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<S> <C>
1 Cover page
2 Cover page
3 Safekeeping of the Separate Account's Assets
4 Distribution of the Policy
5 The Separate Account
6 The Separate Account
7 Not applicable
8 Not applicable
9 Legal Proceedings and Opinion
10 Prospectus Summary; The Insurance Company; The Separate Account; The Investment Options; The
Policy; Transfers of Cash Value; Policy Surrenders and Cash Surrender Value; Voting Rights;
Dividends
11 The Separate Account; The Investment Options
12 The Investment Options
13 Charges and Deductions; Distribution of the Policies
14 The Policy
15 The Policy
16 The Separate Account; The Investment Options; Allocation of Premium Payments
17 Prospectus Summary; Right to Cancel Period; Policy Surrenders and Cash Surrender Value; Policy
Loans; Exchange Rights
18 The Investment Options; Charges and Deductions; Federal Tax Considerations
19 Reports to Policy Owners
20 The Insurance Company
21 Policy Loans
22 Not applicable
23 Not applicable
24 Not applicable
25 The Insurance Company
26 Not applicable
27 The Insurance Company
28 The Insurance Company; Management
29 The Insurance Company
30 Not applicable
31 Not applicable
32 Not applicable
33 Not applicable
34 Not applicable
35 Distribution of the Policy
36 Not applicable
37 Not applicable
38 Distribution of the Policy
39 Distribution of the Policy
40 Not applicable
41 Distribution of the Policy
42 Not applicable
43 Not applicable
44 Valuation of the Separate Account
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Item No. of
Form N-8B-2 CAPTION IN PROSPECTUS
- ----------- ---------------------
<S> <C>
45 Not applicable
46 The Policy; Valuation of the Separate Account; Transfers of Cash Value; Policy
Surrenders and Cash
Surrender Value
47 The Separate Account; The Investment Options
48 The Insurance Company
49 Safekeeping of the Separate Account's Assets
50 Not applicable
51 Prospectus Summary; The Insurance Company; The Policy; Death Benefits; Policy
Lapse and Reinstatement
52 The Separate Account; The Investment Options; Investment Managers
53 Federal Tax Considerations
54 Not applicable
55 Not applicable
56 Not applicable
57 Not applicable
58 Not applicable
59 Financial Statements
</TABLE>
<PAGE> 4
VINTAGELIFE
INDIVIDUAL VARIABLE LIFE INSURANCE POLICY
<TABLE>
<S> <C>
THE TRAVELERS LIFE AND ANNUITY COMPANY PROSPECTUSES
CONTRACT PROSPECTUS
TRAVELERS SERIES TRUST MAY 1, 2000
</TABLE>
<PAGE> 5
PROSPECTUS
This Prospectus describes VintageLife, a modified single premium individual
variable life insurance policy (the "Policy") offered by The Travelers Life and
Annuity Company (the "Company") and funded by The Travelers Variable Life
Insurance Separate Account One ("Separate Account One"). Separate Account One
invests in certain mutual funds that are referred to in this Prospectus as
"Investment Options." Although the Policy can operate as a single premium
policy, additional premium payments may be made under certain circumstances
provided there are no outstanding policy loans. The minimum Initial Premium
required to issue a Policy is $25,000.
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 law 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, and loan interest due but not paid in cash subject to the Grace
Period provision.
We offer two death benefits under the Policy -- the "Level Option" and the
"Variable Option." Under either option, the death benefit will never be less
than the Amount Insured (less any outstanding Policy loans or Monthly Deduction
Amounts due and unpaid). You choose one at the time you apply for the Policy,
however, you may change the death benefit option, subject to certain conditions.
Because the Policy is designed to operate generally as a single premium policy,
in all but very limited circumstances the Policy will be treated as a modified
endowment contract for federal income tax purposes. 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 MAY 1, 2000.
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<S> <C>
Glossary Of Special Terms.................. 3
Prospectus Summary......................... 5
General Description........................ 10
How The Policy Works....................... 10
Payments Made Under the Policy......... 10
Applying Premium Payments.............. 11
The Investment Options..................... 12
Policy Benefits and Rights................. 14
Transfers of Cash Value.................. 14
Telephone Transfers...................... 14
Automated Transfers...................... 14
Lapse and Reinstatement.................. 14
Exchange Rights.......................... 15
Right to Cancel.......................... 15
Access to Cash Value....................... 15
Policy Loans........................... 15
Cash Value and Cash Surrender Value.... 16
Death Benefit.............................. 17
Payment of Proceeds.................... 18
Payment Options........................ 19
Maturity Benefits.......................... 19
Maturity Extension Rider................. 19
Charges and Deductions..................... 20
Monthly Deduction Amount................... 20
Cost of Insurance Charge............... 20
State Premium Tax Charge............... 20
Charges for Supplemental Benefit....... 21
Charges Against the Separate Account..... 21
Mortality and Expense Risk Charge...... 21
Administrative Expense Charge.......... 21
Underlying Fund Fees..................... 21
Surrender Charges........................ 21
Partial Surrenders..................... 21
Free Withdrawal Allowance.............. 22
Transfer Charge.......................... 22
Reduction or Elimination of Charges...... 22
The Separate Account and Valuation......... 22
The Travelers Variable Life Insurance
Separate Account One................... 22
How the Cash Value Varies.............. 23
Accumulation Unit Value................ 23
Net Investment Factor.................. 23
Changes To The Policy...................... 23
General................................ 23
Changes in Stated Amount............... 24
Changes in Death Benefit Option........ 24
Additional Policy Provisions............... 24
Assignment............................... 24
Limit on Right to Contest and Suicide
Exclusion.............................. 24
Misstatement as to Sex and Age........... 25
Voting Rights............................ 25
Disregard of Voting Instructions......... 25
Other Matters.............................. 25
Statements to Policy Owners.............. 25
Suspension of Valuation.................. 25
Dividends................................ 26
Mixed and Shared Funding................. 26
Distribution............................. 26
Legal Proceedings and Opinion............ 26
Experts.................................. 26
Federal Tax Considerations................. 27
General.................................. 27
Tax Status of the Policy................. 27
Definition of Life Insurance........... 27
Diversification........................ 27
Investor Control....................... 28
Tax Treatment of Policy Benefits......... 28
In General............................. 28
Modified Endowment Contracts........... 29
Exchanges.............................. 29
Aggregation of Modified Endowment
Contracts............................ 30
Policies which are not Modified
Endowment Contracts.................. 30
Treatment of Loan Interest............. 30
The Company's Income Taxes............. 30
The Company................................ 30
IMSA..................................... 31
Management................................. 31
Directors of The Travelers Life and
Annuity Company........................ 31
Senior Officers of The Travelers Life and
Annuity Company........................ 32
Illustrations.............................. 33
Appendix A-Performance Information......... 39
Example of Policy Charges.................. 40
Appendix B-Representative Stated Amounts... 41
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.
AVERAGE NET GROWTH RATE -- an annual measurement of growth, used to determine
the next year's mortality and expense risk charge. For each Policy Owner, the
rate is determined each Policy Year as follows: total daily earnings of the
Investment Option(s) you select, divided by the average amount you allocated
during the Policy Year. The daily earnings are measured using the net asset
value per share of the Investment Options.
BENEFICIARY(IES) -- the person(s) named to receive the Death Benefit following
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 Life
and Annuity Company located at One Tower Square, Hartford, Connecticut 06183.
COVERAGE AMOUNT -- an amount equal to the Death Benefit minus the Cash Value.
DEATH BENEFIT -- the amount payable to the Beneficiary if the Insured dies while
the Policy is in force.
DEDUCTION DATE -- the day in each Policy Month on which the Monthly Deduction
Amount is deducted from the Policy's Cash Value.
GRACE PERIOD -- the period during which the Policy remains in force after the
Company has given notice to the Policy Owner that the Cash Surrender Value of
the Policy is insufficient to pay the Monthly Deduction Amount due or loan
interest due but not paid in cash.
INITIAL PREMIUM -- the Premium Payment made in connection with the issuance of a
Policy.
INSURED -- the person on whose life the Policy is issued.
INVESTMENT OPTIONS -- the open-end management investment companies or portfolios
thereof to which you may allocate premiums and Cash Value under Separate Account
One.
ISSUE DATE -- the date on which the Policy is issued by the Company for delivery
to the Policy Owner. Policies which replace existing company contracts will
maintain the issue date of the original policy.
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.
LOAN ACCOUNT VALUE -- the amount of any policy loan, plus capitalized loan
interest, plus the net rate of return credited to the Loan Account.
MATURITY DATE -- the anniversary of the Policy Date on which the Insured is age
100.
MINIMUM AMOUNT INSURED -- a percentage of Cash Value required to qualify this
Policy as life insurance under federal tax law.
MONTHLY DEDUCTION AMOUNT -- a monthly charge, deducted from the Policy's Cash
Value, which is comprised of the Cost of Insurance charge, the deduction for
premium tax, any administrative charge, and any charge for supplemental
benefits.
POLICY DATE -- the date on which the Policy becomes effective, which date is
used to determine all future cyclical transactions under the Policy (i.e.,
Deduction Dates, Policy Months, Policy Years).
POLICY MONTH -- monthly periods computed from the Policy Date.
POLICY OWNER (YOU, YOUR OR OWNER) -- the person(s) having rights to benefits
under the Policy during the lifetime of the Insured; the Policy Owner may or may
not be the Insured.
3
<PAGE> 8
POLICY YEARS -- annual periods computed from the Policy Date.
SEPARATE ACCOUNT ONE -- The Travelers Variable Life Insurance Separate Account
One, a separate account established by The Travelers Life and Annuity Company
for the purpose of funding this Policy.
STATED AMOUNT -- the amount used to determine the Death Benefit under the
Policy.
UNDERLYING FUND -- the underlying mutual fund(s) that correspond to each
Investment Option. Each Investment Option invests directly in an Underlying
Fund.
VALUATION DATE -- a day on which Accumulation Units are 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 the close of trading on the New
York Stock Exchange.
VALUATION PERIOD -- the period between the close of business on successive
Valuation Dates.
4
<PAGE> 9
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------
WHAT IS VARIABLE LIFE INSURANCE?
The Modified single premium individual 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.
The Policy has a Death Benefit, Cash Surrender Value and other features
traditionally associated with a fixed benefit whole life insurance policy. The
Policy is "variable" because unlike the fixed benefits of an ordinary whole life
insurance contract, the Cash Value and, under certain circumstances, the Death
Benefit of the Policy may increase or decrease depending on the investment
experience of the Investment Options to which the premium payment(s) and cash
value have been allocated. The Cash Value will also vary to reflect partial cash
surrenders and Monthly Deduction Amounts. In accordance with the Continuation of
Insurance provision of the Policy, the Policy will remain in effect until the
Cash Surrender Value is insufficient to cover the Monthly Deduction Amount and
loan interest due but not paid. There is no minimum guaranteed Cash Value or
Cash Surrender Value and the Policy Owner bears the investment risk associated
with an investment in the Investment Options. (See "Valuation of the Separate
Account.")
SUMMARY OF VINTAGELIFE FEATURES
INVESTMENT OPTIONS: The Policy is funded by The Travelers Variable Life
Insurance Separate Account One ("Separate Account One"), a registered unit
investment trust separate account established by The Travelers Life and Annuity
Company (the "Company"). A Policy Owner allocates premium payments to one or
more of the Investment Options available to Separate Account One. 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. The following
Investment Options are currently available under the Policy:
GREENWICH STREET SERIES FUND
Total Return Portfolio
SMITH BARNEY CONCERT ALLOCATION SERIES, INC.
Select Balanced Portfolio
Select Conservative Portfolio
Select Growth Portfolio
Select High Growth Portfolio
Select Income 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 International Equity Portfolio
Smith Barney Large Cap Value Portfolio
Smith Barney Money Market Portfolio
The Travelers Managed Income Portfolio
Van Kampen Enterprise Portfolio
TRAVELERS SERIES TRUST
MFS Emerging Growth Portfolio
Zero Coupon Bond Portfolio 2000
Zero Coupon Bond Portfolio 2005
Additional Portfolios may be added from time to time. For more information see
"The Investment Options." Refer to each Investment Option's prospectus for a
complete description of the investment objectives, restrictions and other
material information.
PREMIUMS: The minimum Initial Premium is $25,000. Although the Policy can
operate as a single premium policy, you can make additional payments under
certain circumstances, provided there are no outstanding policy loans. If there
are any outstanding loans, any payment received will be
5
<PAGE> 10
treated first as a repayment of the loan rather than an additional premium
payment. (See "Additional Premium Payments.") No premiums can be accepted if
they would disqualify the Policy as life insurance under federal tax law.
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.
After the Policy Date and until the applicant's right to cancel has expired, the
Initial Premium will be allocated to the Smith Barney Money Market Portfolio.
After the expiration of the Right to Cancel Period, the cash value will be
distributed to each Investment Options in the percentages indicated on your
application.
RIGHT TO EXAMINE POLICY: You may return your Policy for any reason and receive
a full refund of your premium by mailing us the Policy and a written request for
cancellation within a specified period.
DEATH BENEFITS: At time of application, you select a death benefit option.
Under certain conditions you may be able to change the death benefit option at a
later date. The options available are:
- LEVEL OPTION (OPTION 1): the death benefit will be equal to the greater
of the Stated Amount or the Minimum Amount Insured.
- VARIABLE OPTION (OPTION 2): the death benefit will be equal to the
greater of the Stated Amount plus the Cash Value or the Minimum Amount
Insured.
POLICY VALUES: As with other types of insurance policies, VintageLife will
accumulate a Cash Value. The Cash Value of the Policy will increase or decrease
to reflect the investment experience of the Investment Options. Monthly charges
and any partial surrenders taken will also decrease the Cash Value. There is no
minimum guaranteed Cash Value.
- ACCESS TO POLICY VALUES: You may borrow against your Policy's Cash
Surrender Value. The maximum loan amount allowable is 90% of the Cash
Surrender Value, subject to state approval. The Company will charge
interest on the outstanding amounts of the loan, which interest must be
paid by you in advance.
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.
GRACE PERIOD: If the Cash Surrender Value of your Policy becomes less than the
amount needed to pay the Monthly Deduction Amount due or loan interest due but
not paid in cash, you will have 61 days to pay a premium that is sufficient to
cover the Monthly Deduction Amount and any loan interest due. 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. In almost all cases, the
Policy will be 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. Policies which are not MECs receive preferential tax
treatment with respect to certain distributions.
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:
- MONTHLY DEDUCTION -- deductions taken from the value of your Policy each
month to cover cost of insurance charges, the deduction for premium tax
and any 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 9 years and for 9
years after requesting an increase in coverage. The surrender charge
consists of a percent of premium charge and a per thousand of face amount
charge.
- PARTIAL SURRENDER CHARGE -- applies if you surrender part of the value of
your Policy.
ASSET-BASED CHARGES:
- MORTALITY AND EXPENSE RISK CHARGE -- applies to the assets of the
Investment Options on a daily basis which equals an annual rate of 0.90%.
This rate is reduced to 0.75% for the current policy year if the Average
Net Growth Rate is 6.5% or greater during the previous policy year.
- ADMINISTRATIVE EXPENSE CHARGE -- applies to the assets of the Investment
Options on a daily basis which equals an annual rate of 0.40%.
- 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.
These fees are shown below as a percentage of average daily net assets of
each Investment Option as of December 31,1999 unless noted otherwise.
7
<PAGE> 12
VINTAGELIFE
2000 FUND EXPENSES
<TABLE>
<CAPTION>
<S> <C> <C> <C>
MANAGEMENT OTHER TOTAL
FUND NAME FEE EXPENSES EXPENSES
- ------------------------------------------------------------ ---- ---- -----
GREENWICH STREET SERIES FUND:
- ----------------------------------------------------------------------------------------------
Total Return Portfolio 0.75% 0.04% 0.79%
- ----------------------------------------------------------------------------------------------
SMITH BARNEY CONCERT ALLOCATION SERIES, INC.:
- ----------------------------------------------------------------------------------------------
Select Balanced Portfolio(1) 0.35% 0.76% 1.11%
- ----------------------------------------------------------------------------------------------
Select Conservative Portfolio(1) 0.35% 0.72% 1.07%
- ----------------------------------------------------------------------------------------------
Select Growth Portfolio(1) 0.35% 0.88% 1.23%
- ----------------------------------------------------------------------------------------------
Select High Growth Portfolio(1) 0.35% 0.89% 1.24%
- ----------------------------------------------------------------------------------------------
Select Income Portfolio(1) 0.35% 0.67% 1.02%
- ----------------------------------------------------------------------------------------------
TRAVELERS SERIES FUND INC.:
- ----------------------------------------------------------------------------------------------
AIM Capital Appreciation Portfolio(2) 0.80% 0.04% 0.84%
- ----------------------------------------------------------------------------------------------
Alliance Growth Portfolio(2) 0.80% 0.02% 0.82%
- ----------------------------------------------------------------------------------------------
MFS Total Return Portfolio(2) 0.80% 0.04% 0.84%
- ----------------------------------------------------------------------------------------------
Putnam Diversified Income Portfolio(2) 0.75% 0.08% 0.83%
- ----------------------------------------------------------------------------------------------
Smith Barney High Income Portfolio(2) 0.60% 0.06% 0.66%
- ----------------------------------------------------------------------------------------------
Smith Barney International Equity Portfolio(2) 0.90% 0.10% 1.00%
- ----------------------------------------------------------------------------------------------
Smith Barney Large Cap Value Portfolio(2) 0.65% 0.02% 0.67%
- ----------------------------------------------------------------------------------------------
Smith Barney Money Market Portfolio(2) 0.50% 0.04% 0.54%
- ----------------------------------------------------------------------------------------------
Travelers Managed Income Portfolio(2) 0.65% 0.11% 0.76%
- ----------------------------------------------------------------------------------------------
Van Kampen Enterprise Portfolio(2) 0.70% 0.03% 0.73%
- ----------------------------------------------------------------------------------------------
TRAVELERS SERIES TRUST:
- ----------------------------------------------------------------------------------------------
MFS Emerging Growth Portfolio 0.75% 0.12% 0.87%
- ----------------------------------------------------------------------------------------------
Zero Coupon Bond Fund Portfolio (Series 2000) 0.10% 0.05% 0.15%
- ----------------------------------------------------------------------------------------------
Zero Coupon Bond Fund Portfolio (Series 2005) 0.10% 0.05% 0.15%
- ----------------------------------------------------------------------------------------------
</TABLE>
(1) Each Portfolio of the Smith Barney Concert Select Series (a "fund of funds")
invests in the shares of other mutual funds. The Management Fee for each
portfolio is 0.35%, and they have no direct expenses. The "Other Expenses"
figure reflects an indirect charge of the expenses of the underlying funds;
it is a weighted average of the expense ratios for the underlying funds in
which each portfolio is expected to be invested during the current fiscal
year. See the Fund prospectus (regarding Y shares) for information on the
equity/fixed income (including money market) investment target and range for
each portfolio, and for the expense ratios for the underlying funds. Such
ratios range from 0.45% to 3.22%.
(2) 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.
(3) The Portfolio Management Fee for the Appreciation Portfolio, the Total
Return, and the Diversified Strategic Income Portfolio includes 0.20% for
fund administration.
8
<PAGE> 13
[THIS PAGE INTENTIONALLY LEFT BLANK.]
9
<PAGE> 14
GENERAL DESCRIPTION
- --------------------------------------------------------------------------------
This prospectus describes a modified single premium individual variable life
insurance Policy offered by The Travelers Life and Annuity Company ("Company").
The policy offers:
- 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
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 initial premium you plan to pay; minimum of $25,000
- 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 one premium payment and direct it to one or more of the available
investment options. (Under Certain Circumstances, you may be allowed to make
additional purchase payments). 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.
If your Policy is in effect when the insured dies, we will pay your beneficiary
the death benefit (less any outstanding loan account balance and any monthly
deduction amount due but not paid). Your Policy will stay in effect as long as
the Policy's cash surrender value can pay the Policy's monthly charges and any
loan interest due but not paid in cash.
Your Policy becomes effective once our underwriting staff has approved the
application and once the first premium payment has been made. The Policy Date is
the date we use to determine all future transactions on the policy, for example,
the deduction dates, policy months, policy years. The Policy Date may be before
or the same date as the Issue Date (the date the policy was issued). The Issue
Date may be less than the Policy Date if the Issue Date was adjusted for
contestability purposed on an internal coverage replacement. During the
underwriting period, any premium paid will be held in a non-interest bearing
account.
PAYMENTS MADE UNDER THE POLICY
INITIAL PREMIUM. The Initial Premium is due on or before the Policy Date and is
payable in full at the Company's Home Office. The Initial Premium is the
guideline single premium for the life insurance coverage provided under the
Policy, as determined in accordance with the Internal Revenue Code of 1986, as
amended (the "Code"). The minimum Initial Premium is $25,000. Additional Premium
Payments may be made under the Policy, as described below. However, if there are
any outstanding policy loans, any payment received will be treated first as
repayment of loans rather than as an additional Premium Payment.
The Initial Premium purchases a Death Benefit equal to the Policy's Stated
Amount (if Option 1 is selected), or to the Policy's Stated Amount plus the Cash
Value (if Option 2 is selected). The
10
<PAGE> 15
relationship between the Initial Premium and the Stated Amount depends on the
age, sex (where permitted by state law) and risk class of the Insured.
Generally, the same Initial Premium will purchase a higher Stated Amount for a
younger insured than for an older insured. Likewise, the same Initial Premium
will purchase a slightly higher Stated Amount for a female insured than for a
male insured of the same age. Also, the same Initial Premium will purchase a
higher Stated Amount for a standard Insured than for a substandard Insured.
Representative Stated Amounts per dollar of Initial Premium are set forth in
Appendix B.
ADDITIONAL PREMIUM PAYMENTS. The circumstances under which additional Premium
Payments can be made under the Policy are as follows:
1. INCREASES IN STATED AMOUNT -- You may request an increase in Stated
Amount at any time. If your request is approved, the Company will
require you to make an additional Premium Payment in order for an
increase in Stated Amount to become effective. The minimum additional
Premium Payment permitted by the Company in connection with an increase
in Stated Amount is $1,000. (See "Changes in Stated Amount.")
2. TO PREVENT LAPSE -- If the Cash Surrender Value on any Deduction Day is
insufficient to cover the Monthly Deduction Amount or loan interest due
but not paid, then you must make an additional Premium Payment during
the Grace Period sufficient to cover the Monthly Deduction Amount and
loan interest due in order to prevent lapse. The minimum amount of any
payment that may be required to be made in this circumstance will be
stated in the notice mailed to you in accordance with the Policy;
payments in excess of the amount required to prevent lapse will be
considered a payment "at your discretion" and consequently subject to
the rules described below. If you do not make a sufficient payment, the
Policy will lapse and terminate without value. (See "Lapse and
Reinstatement.")
3. AT YOUR DISCRETION -- Additional Premium Payments may be made at your
discretion so long as the payment plus the total of all premiums
previously paid does not exceed the maximum premium limitation derived
from the guideline premium test for life insurance prescribed by the
Code. Because of the test, the maximum premium limitation will
ordinarily equal the Initial Premium for a number of years after the
Policy has been issued. Therefore, discretionary additional Premium
Payments normally will not be permitted during the early years of the
Policy. Discretionary additional Premium Payments must be at least $250,
and may not be paid on or after the Maturity Date.
Any Additional Premium Payments made under the Policy may be subject to new
evidence of insurability. Payments received in excess of any Loan Account Value
will be treated as an additional Premium Payment.
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 Smith Barney Money Market Portfolio. At the end of the Right
to Cancel Period, we direct the net premiums to the investment option(s)
selected on the application, unless you give us other directions.
The investment options are segments of the separate account. They correspond to
underlying funds with the same names. The available investment options are
listed below.
We credit your policy with accumulation units of the investment option(s) you
have selected. We calculate the number of accumulation units by dividing your
net premium payment by each investment option's accumulation unit value computed
after we receive your payment.
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<PAGE> 16
THE INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
You may allocate Premium Payments to one or more of the available Investment
Options. The Investment Options currently available under the Policy may be
added, withdrawn or substituted as permitted by applicable state or federal law.
We would notify you before making such a change. Please read carefully the
complete risk disclosure in each Portfolio's prospectus before investing. For
more detailed information on the investment advisers and their services and
fees, please refer to the prospectuses for the Investment Options. In addition,
Travelers has entered into agreements with either the investment adviser or
distributor of certain of the underlying funds in which the adviser or
distributor pays us a fee for providing administrative services, which fee may
vary. The fee is ordinarily based upon an annual percentage of the average
aggregate net amount invested in the underlying funds on behalf of the Separate
Account.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
INVESTMENT OPTION INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
GREENWICH STREET SERIES FUND
Total Return Portfolio An equity portfolio that seeks to provide SSBC Fund Management LLC ("SSB
total return, consisting of long-term Citi")
capital appreciation and income. The
Portfolio will invest primarily in a
diversified portfolio of dividend-paying
common stocks.
SMITH BARNEY CONCERT ALLOCATION
SERIES, INC.
Select Balanced Portfolio Seeks a balance of growth of capital and Travelers Investment Adviser
income by investing in a select group of ("TIA")
mutual funds.
Select Conservative Portfolio Seeks income and, secondarily, long-term TIA
growth of capital by investing in a select
group of mutual funds.
Select Growth Portfolio Seeks long-term growth of capital by TIA
investing in a select group of mutual funds.
Select High Growth Portfolio Seeks capital appreciation by investing in a TIA
select group of mutual funds.
Select Income Portfolio Seeks high current income by investing in a TIA
select group of mutual funds.
TRAVELERS SERIES FUND, INC.
AIM Capital Appreciation Seeks capital appreciation by investing TIA
Portfolio principally in common stock, with emphasis Subadviser: AIM Capital
on medium-sized and smaller emerging growth Management Inc.
companies.
Alliance Growth Portfolio Seeks long-term growth of capital by TIA
investing predominantly in equity securities Subadviser: Alliance Capital
of companies with a favorable outlook for Management L.P.
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 Portfolio Seeks to obtain above-average income TIA
(compared to a portfolio entirely invested Subadviser: Massachusetts
in equity securities) consistent with the Financial Services Company
prudent employment of capital. Generally, at ("MFS")
least 40% of the Portfolio's assets will be
invested in equity securities.
Putnam Diversified Income Seeks high current income consistent with TIA
Portfolio preservation of capital. The Portfolio will Subadviser:
allocate its investments among the U.S. Putnam Investment Management,
Government Sector, the High Yield Sector, Inc.
and the International Sector of the fixed
income securities markets.
</TABLE>
12
<PAGE> 17
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
INVESTMENT OPTION INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TRAVELERS SERIES FUND, INC.
(CONT'D)
Smith Barney High Income Seeks high current income. Capital SSB Citi
Portfolio appreciation is a secondary objective. The
Portfolio will invest at least 65% of its
assets in high-yielding corporate debt
obligations and preferred stock.
Smith Barney International Seeks total return on assets from growth of SSB Citi
Equity Portfolio capital and income by investing at least 65%
of its assets in a diversified portfolio of
equity securities of established non-U.S.
issuers.
Smith Barney Large Cap Value Seeks current income and long-term growth of SSB Citi
Portfolio income and capital by investing primarily,
but not exclusively, in common stocks.
Smith Barney Money Market Seeks maximum current income and SSB Citi
Portfolio preservation of capital by investing in high
quality, short-term money market
instruments. An investment in this fund is
neither insured nor guaranteed by the U.S.
Government, and there is no assurance that a
stable $1 value per share will be
maintained.
The Travelers Managed Income Seeks high current income consistent with TIA
Portfolio prudent risk of capital through investments
in corporate debt obligations, preferred
stocks, and obligations issued or guaranteed
by the U.S. Government or its agencies or
instrumentalities.
Van Kampen Enterprise Seeks capital appreciation through SSBC
Portfolio investment in securities believed to have Subadviser: Van Kampen Asset
above-average potential for capital Management, Inc
appreciation. Any income received on such
securities is incidental to the objective of
capital appreciation.
THE TRAVELERS SERIES TRUST
MFS Emerging Growth Portfolio Seeks long-term growth of capital. Dividend Travelers Asset Management
and interest income from portfolio International Company LLC
securities, if any, is incidental. ("TAMIC")
Subadviser:
MFS
Zero Coupon Bond Fund Seeks to provide as high an investment TAMIC
Portfolio (Series 2000) 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.
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>
13
<PAGE> 18
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 in any Policy Year and to charge $10 for each additional
transfer; however, there is currently no charge for transfers. We also reserve
the right to restrict transfers by any market timing firm or any other third
party authorized to initiate transfers on behalf of multiple contract owners. We
may, among other things, not accept: (1) the transfer instructions of any agent
acting under a power of attorney on behalf of more than one owner, or (2) the
transfer or exchange instructions of individual owners who have executed
pre-authorized transfer forms which are submitted by market timing firms or
other third parties on behalf of more than one owner. We further reserve the
right to limit transfers that we determine will disadvantage other contract
owners.
The number of Accumulation Units credited to the investment option as a result
of the transfer will be determined by dividing the transferred amount by the
Accumulation Unit Value of that investment option. The Accumulation Unit Value
will be determined on the Valuation Date on which the Company receives the
written request for a transfer.
TELEPHONE TRANSFERS
The Policy Owner may make the request in writing by mailing such request to the
Company at its Home Office, or by telephone (if an authorization form is on
file) by calling 1-800-334-4298. The Company will take reasonable steps to
ensure that telephone transfer requests are genuine. These steps may include
seeking proper authorization and identification prior to processing telephone
requests. Additionally, the Company will confirm telephone transfers. Any
failure to take such measures may result in the Company's liability for any
losses due to fraudulent telephone transfer requests.
AUTOMATED TRANSFERS
DOLLAR-COST AVERAGING
You may establish automated transfers of Policy Values on a monthly or quarterly
basis from any Investment Option(s) to any other Investment Option(s) through
written request or other method acceptable to the Company. You must have a
minimum total Policy Value of $5,000 to enroll in the Dollar-Cost Averaging
program. The minimum total automated transfer amount is $100.
You may start or stop participation in the Dollar-Cost Averaging program at any
time, but you must give the Company at least 30 days' notice to change any
automated transfer instructions that are currently in place. Automated transfers
are subject to all of the other provisions and terms of the Policy. The Company
reserves the right to suspend or modify transfer privileges at any time and to
assess a processing fee for this service.
Before transferring any part of the Policy Value, Policy Owners should consider
the risks involved in switching between investments available under this Policy.
Dollar cost averaging requires regular investments regardless of fluctuating
price levels, and does not guarantee profits or prevent losses in a declining
market. Potential investors should consider their financial ability to continue
purchases through periods of low price levels.
PORTFOLIO REBALANCING
You may elect to have the Company periodically reallocate values in your policy
to match your original (or your latest) funding option allocation request.
LAPSE AND REINSTATEMENT
The Policy will remain in effect until the Cash Surrender Value of the Policy
can no longer cover the Monthly Deduction Amount or loan interest due but not
paid. 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
14
<PAGE> 19
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 and unpaid loan interest. (See "Death Benefit,"
below.)
If the Policy lapses, you may reinstate the Policy by paying the reinstatement
premium (and any applicable charges) shown in the Policy. You may request
reinstatement within three years of lapse (unless a different period is required
under applicable state law). Upon reinstatement, the Policy's Cash Value will
equal the Net Premium. In addition, the Company reserves the right to require
satisfactory evidence of insurability.
EXCHANGE RIGHTS
Once the Policy is in effect, it may be exchanged during the first 24 months for
a general account life insurance policy issued by the Company (or an affiliated
company) on the life of the Insured. Benefits under the new life insurance
policy will be as described in that policy. No evidence of insurability will be
required. You have the right to select the same Death Benefit or Net Amount At
Risk as the former Policy at the time of exchange. Cost of insurance rates will
be based on the same risk classification as those of the former Policy. Any
outstanding Policy loan must be repaid before we will make an exchange. In
addition, there may be an adjustment for the difference in Cash Value between
the two Policies.
RIGHT TO CANCEL
An Applicant may cancel the Policy by returning it via mail or personal delivery
to the Company or to the agent who sold the Policy. The Policy must be returned
by the latest of:
(1) 10 days after delivery of the Policy to you
(2) 45 days of completion of the Policy application
(3) 10 days after the Notice of Right to Cancel has been mailed or
delivered to the Applicant whichever is latest, or
(4) later if required by state law.
We will refund the greater of all premium payments or the sum of:
(1) the difference between the premium paid, including any fees or charges,
and the amounts allocated to the Investment Option(s),
(2) the value of the amounts allocated to the Investment Option(s) on the
date on which the Company receives the returned Policy, and
(3) any fees and other charges imposed on amounts allocated to the
Investment Option(s).
We will make the refund within seven days after we receive your returned policy.
ACCESS TO CASH VALUES
- --------------------------------------------------------------------------------
POLICY LOANS
A Policy Owner may obtain a cash loan from the Company secured by the Policy not
to exceed 90% of the Policy's Cash Value (determined on the day on which the
Company receives the written loan request), less any surrender penalties (See
"Surrender Charges"). 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. Loans made during the
first ten Policy Years will be made at a 2% net cost on principal, and a 1% net
cost on earnings. Loans made after the tenth Policy Year will be made at 2% net
cost on
15
<PAGE> 20
principal and 0% net cost on earnings. Additionally, loans may be taken at any
time at 0% net cost for the purchase of a Travelers long-term care policy, where
permitted by state law.
Loans will be taken from earnings first, and then from premium.
For these purposes, "earnings" represents any unloaned Cash Value, minus the
total premiums paid under the Policy. Loans taken against earnings will be
charged an interest rate of 4.75% during the first ten Policy Years, and 3.85%
for Policy Year 11 and thereafter. Loans taken against premium will be charged
an interest rate of 5.65% in all Policy Years. Amounts in the Loan Account will
be credited by the Company with a fixed annual rate of return of 4%, and will
not be affected by the investment performance of the Investment Options. The
rate of return credited to amounts held in the Loan Account will be transferred
back to the Investment Options on a pro rata basis after each Policy Year. The
Policy's "Loan Account Value" is equal to amounts transferred from the
Investment Options to the Loan Account when a loan is taken, plus capitalized
loan interest, plus the net rate of return credited to the Loan Account that has
not yet been transferred back to the Investment Options. Loan repayments reduce
the Loan Account Value, and increase the Cash Value in the Investment Options.
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 Massachusetts) and will not be affected
by the investment performance of the Investment Options. When loan repayments
are made, the amount of the repayment will be deducted from the Loan Account and
will be reallocated based upon premium allocation percentages among the
Investment Options applicable to the Policy (unless the Policy Owner states
otherwise). The Company will make the loan to the Policy Owner within seven days
after receipt of the written loan request.
An outstanding loan amount decreases the Cash Surrender Value. If a maximum loan
is taken or a loan is not repaid, it permanently decreases the Cash Surrender
Value, which could cause the Policy to lapse (see "Lapse and Reinstatement").
For example, if a Policy has a Cash Surrender Value of $10,000, the Policy Owner
may take a loan of 90% or $9,000, leaving a new Cash Surrender Value of $1,000.
In addition, the Death Benefit actually payable would be decreased because of
the outstanding loan. Furthermore, even if the loan is repaid, the Death Benefit
and Cash Surrender Value may be permanently affected since the Policy Owner was
not credited with the investment experience of an Investment Option on the
amount in the Loan Account while the loan was outstanding. All or any part of a
loan secured by a Policy may be repaid while the Policy is still in effect.
CASH VALUE AND CASH SURRENDER VALUE
The Cash Value of a Policy changes on a daily basis and will be computed on each
Valuation Date. The Cash Value will vary to reflect the investment experience of
the Investment Options, as well as any partial Cash Surrenders, Monthly
Deduction Amount, daily Separate Account charges, and any additional premium
payments. There is no minimum guaranteed Cash Value.
The Cash Value of a particular Policy is related to the net asset value of the
Investment Options to which premium payments on the Policy have been allocated.
The Cash Value on any Valuation Date is calculated by multiplying the number of
Accumulation Units credited to the Policy in each Investment Options as of the
Valuation Date by the current Accumulation Unit Value of that Investment Option,
then adding the collective result for each of the Investment Options credited to
the Policy, and finally adding the value (if any) of the Loan Account. A Policy
Owner may withdraw Cash Value from the Policy, or transfer Cash Value among the
Investment Options, on any day that the Company is open for business.
As long as the Policy is in effect, a Policy Owner may elect, without the
consent of the Beneficiary (provided the designation of Beneficiary is not
irrevocable), to surrender the Policy and receive its
16
<PAGE> 21
"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 Deduction Date next following the Company's receipt of the written request,
or on the Deduction Date next following the date on which the Policy Owner
requests the surrender to become effective, whichever is later.
In the case of partial surrenders, the Cash Surrender Value will be equal to the
amount requested to be surrendered minus any applicable Surrender Charges. The
deduction from Cash Value for a partial surrender will be made on a pro rata
basis against the Cash Value of each of the Investment Options attributable to
the Policy (unless the Policy Owner states otherwise in writing).
In addition to reducing the Cash Value of the Policy, partial cash surrenders
will reduce the Death Benefit payable under the Policy. Under Option 1, the
Stated Amount of the Policy will be reduced by the amount of the partial cash
surrender. Under Option 2, the Cash Value, which is part of the Death Benefit,
will be reduced by the amount of the partial cash surrender. The Company may
require return of the Policy to record such reduction.
DEATH BENEFIT
- --------------------------------------------------------------------------------
The Death Benefit under the Policy is the amount paid to the Beneficiary upon
the Insured's death. The Death Benefit will be reduced by any outstanding
charges, fees and Policy loans. All or part of the Death Benefit may be paid in
cash or applied to one or more of the payment options described in the following
pages.
You may elect one of two Death Benefit options. As long as the Policy remains in
effect, the Company guarantees that the Death Benefit under either option will
be at least the current Stated Amount of the Policy less any outstanding Policy
loan and unpaid Deduction Amount due. The Death Benefit under either option may
vary with the Cash Value of the Policy. Under Option 1 (the "Level Option"), the
Death Benefit will be equal to the Stated Amount of the Policy or, if greater, a
specified multiple of Cash Value (the "Minimum Amount Insured"). Under Option 2
(the "Variable Option"), the Death Benefit will be equal to the Stated Amount of
the Policy plus the Cash Value (determined as of the date of the Insured's
death) or, if greater, the Minimum Amount Insured.
The Minimum Amount Insured is the amount required to qualify the Policy as a
life insurance Policy under the current federal tax law. Under that law, the
Minimum Amount Insured equals a stated percentage of the Policy's Cash Value
determined as of the first day of each Policy Month. The percentages differ
according to the attained age of the Insured. The Minimum Amount Insured is set
forth in the Policy and may change as federal income tax laws or regulations
change. The following is a schedule of the applicable percentages. For 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>
17
<PAGE> 22
Federal tax law imposes another cash funding limitation on cash value life
insurance Policies that may increase the Minimum Amount Insured shown above.
This limitation known as the "guideline premium limitation," generally applies
during the early years of variable universal life insurance Policies.
The following examples demonstrate the relationship between the Death Benefit,
the Cash Surrender Value and the Minimum Amount Insured under Options 1 and 2 of
the Policy. The examples assume an Insured of age 40, a Minimum Amount Insured
of 250% of Cash Value (assuming the preceding table is controlling as to Minimum
Amount Insured), and no outstanding Policy loan.
OPTION 1 -- "LEVEL" DEATH BENEFIT
STATED AMOUNT: $50,000
In the following examples of an Option 1 "Level" Death Benefit, the Death
Benefit under the Policy is generally equal to the Stated Amount of $50,000.
Since the Policy is designed to qualify as a life insurance Policy, the Death
Benefit cannot be less than the Minimum Amount Insured (or, in this example,
250% of the Cash Value).
EXAMPLE ONE. If the Cash Value of the Policy equals $10,000, the Minimum Amount
Insured would be $25,000 ($10,000 x 250%). Since the Death Benefit in the Policy
is the greater of the Stated Amount ($50,000) or the Minimum Amount Insured
($25,000), the Death Benefit would be $50,000.
EXAMPLE TWO. If the Cash Value of the Policy equals $40,000, the Minimum Amount
Insured would be $100,000 ($40,000 x 250%). The resulting Death Benefit would be
$100,000 since the Death Benefit is the greater of the Stated Amount ($50,000)
or the Minimum Amount Insured ($100,000).
OPTION 2 -- "VARIABLE" DEATH BENEFIT
STATED AMOUNT: $50,000
In the following examples of an Option 2 "Variable" Death Benefit, the Death
Benefit varies with the investment experience of the applicable Investment
Options and will generally be equal to the Stated Amount plus the Cash Value of
the Policy (determined on the date of the Insured's death). The Death Benefit
cannot, however, be less than the Minimum Amount Insured (or, in this example,
250% of the Cash Value).
EXAMPLE ONE. If the Cash Value of the Policy equals $10,000, the Minimum Amount
Insured would be $25,000 ($10,000 x 250%). The Death Benefit ($60,000) would be
equal to the Stated Amount ($50,000) plus the Cash Value ($10,000), unless the
Minimum Amount Insured ($25,000) was greater.
EXAMPLE TWO. If the Cash Value of the Policy equals $60,000, then the Minimum
Amount Insured would be $150,000 ($60,000 x 250%). The resulting Death Benefit
would be $150,000 because the Minimum Amount Insured ($150,000) is greater than
the Stated Amount plus the Cash Value ($50,000 + $60,000 = $110,000).
PAYMENT OF PROCEEDS
Death Benefits are payable within seven days after we receive satisfactory proof
of the Insured's death. The amount of Death Benefit paid may be adjusted to
reflect any Policy loan, any Monthly Deductions Amount due but unpaid, any
material misstatements in the Policy application as to age or sex of the
Insured, and any amounts payable to an assignee under a collateral assignment of
the Policy. (See "Assignment".)
Subject to state law, if the Insured commits suicide within two years following
the Issue Date limits on the amount of Death Benefit paid will apply. (See
"Limit on Right to Contest and Suicide Exclusion,") In addition, if the Insured
dies during the 61-day period after the Company gives notice to the Policy Owner
that the Cash Surrender Value of the Policy is insufficient to meet the Monthly
Deduction Amount due against the Cash Value of the Policy, then the Death
Benefit
18
<PAGE> 23
actually paid to the Policy Owner's Beneficiary will be reduced by the amount of
the Deduction Amount that is due and unpaid. (See "Cash Value and Cash Surrender
Value," for effects of partial surrenders on Death Benefits.)
PAYMENT OPTIONS
We will pay policy proceeds in a lump sum, unless you or the Beneficiary select
one of the Company's payment options. We may defer payment of proceeds which
exceed the Death Benefit for up to six months from the date of the request for
the payment. A combination of options may be used. The minimum amount that may
be placed under a payment option is $5,000 unless we consent to a lesser amount.
Proceeds applied under an option will no longer be affected by the investment
experience of the Investment Options.
The following payment options are available under the Policy:
OPTION 1 -- Payments of a Fixed Amount
OPTION 2 -- Payments for a Fixed Period
OPTION 3 -- Amounts Held at Interest
OPTION 4 -- Monthly Life Income
OPTION 5 -- Joint and Survivor Level Amount Monthly Life Income
OPTION 6 -- Joint and Survivor Monthly Life Income-Two-thirds to Survivor
OPTION 7 -- Joint and Last Survivor Monthly Life Income-Monthly Payment
Reduces on Death of First Person Named
OPTION 8 -- Other Options
We will make any other arrangements for periodic payments as may be agreed upon.
If any periodic payment due any payee is less than $100, we may make payments
less often. If we have declared a higher rate under an option on the date the
first payment under an option is due, we will base the payments on the higher
rate.
MATURITY BENEFITS
- --------------------------------------------------------------------------------
If the Insured is living on the Maturity Date, the Company will pay you the
Policy's Cash Value less any outstanding Policy loan or unpaid Deduction Amount.
You must surrender the Policy to us before we make a payment, at which point the
Policy will terminate and we will have no further obligations under the Policy.
MATURITY EXTENSION RIDER
When the Insured reaches age 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 request before the Maturity
Date, the Policy will continue until the earlier of the death of the Insured or
the date on which the Policy Owner requests that the Policy terminate. When the
Maturity Extension Benefit ends, a Death Benefit consisting of the Cash Value
less any 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.
We intend that the Policy and the Maturity Extension Benefit will be considered
life insurance for tax purposes. The Death Benefit is designed to comply with
Section 7702 of the Internal Revenue Code of 1986, as amended, or other
equivalent section of the Code. However, we do not give tax advice, and cannot
guarantee that the Death Benefit and Cash Value will be exempt from any future
tax liability. The tax results of any benefits under the Maturity Extension
provision depend upon interpretation of the Internal Revenue Code. You should
consult your own personal tax adviser prior to the exercise of the Maturity
Extension Benefit to assess any potential tax liability.
19
<PAGE> 24
CHARGES AND DEDUCTIONS
- --------------------------------------------------------------------------------
GENERAL
We deduct the charges described below. The charges are for services and benefits
we provide, costs and expenses we incur, and risks we assume under the Policies.
Services and benefits we provide include:
- the ability for you to make withdrawals and surrenders under the
Policies;
- the ability for you to obtain a loan under the Policies;
- the death benefit paid on the death of the Insured;
- the available funding options and related programs (including dollar-cost
averaging and portfolio rebalancing);
- administration of the various elective options available under the
Policies; and
- the distribution of various reports to policy owners.
Costs and expenses we incur include:
- expenses associated with underwriting applications, increases in the
stated amount, and riders;
- losses associated with various overhead and other expenses associated
with providing the services and benefits provided by the Policies;
- sales and marketing expenses including commission payments to your Smith
Barney Financial Consultant; 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.
MONTHLY DEDUCTION AMOUNT
We will deduct a Monthly Deduction Amount to cover certain charges and expenses
incurred in connection with the Policy. The Monthly Deduction Amount is deducted
pro rata from each of the Investment Options' values attributable to the Policy.
The amount is deducted on the first day of each Policy Month (the "Deduction
Date"), beginning on the Policy Date. The dollar amount of the Deduction Amount
will vary from month to month. The Monthly Deduction Amount consists of the Cost
of Insurance Charge, deduction for premium tax and any Charges for Supplemental
Benefit Provisions. These are described below:
COST OF INSURANCE CHARGE
The amount of the Cost of Insurance deduction depends on the amount of insurance
coverage on the date of the deduction and the current cost per dollar for
insurance coverage. The cost per dollar of insurance coverage varies annually
and is based on age, sex and risk class of the Insured.
STATE PREMIUM TAX CHARGES
Premium tax charges are not deducted at the time that a premium is made,
although the Company does pay state premium taxes attributable to a particular
Policy when those taxes are incurred. To reimburse the Company for payment of
such taxes, during the first ten years following a premium payment made before
the 10th Policy Anniversary, a premium tax charge of 0.20% per year will apply.
Premium taxes vary from state to state and currently range from 0.75% to 3.5%.
Because
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there is a range of premium tax rates, you may pay premium tax charges in total
that are higher or lower than the premium tax actually assessed or not assessed
in your jurisdiction.
CHARGES FOR SUPPLEMENTAL BENEFIT PROVISIONS
If you elect any supplemental benefits for which there is a charge, the Company
will include a supplemental benefits charge in the Monthly Deduction Amount. The
amount of this charge will vary depending upon the actual supplemental benefits
selected.
CHARGES AGAINST THE SEPARATE ACCOUNT
MORTALITY AND EXPENSE RISK CHARGE
We deduct a daily charge for mortality and expense risks. This charge is at an
annual rate of 0.90%. The annual rate will be reduced to 0.75% for the current
Policy Year if the Average net Growth Rate is 6.5% or greater during the
previous Policy Year. This determination is made on an annual basis. This charge
compensates us for various risks assumed, benefit provided and expenses
incurred.
ADMINISTRATIVE EXPENSE CHARGE
We deduct a daily charge for administrative expenses incurred by us. The charge
is set at an annual rate of 0.40% of the assets in the Investment Options.
UNDERLYING FUND FEES
Separate Account One purchases shares of the 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 Funds are described in the individual Fund prospectuses for
the Investment Options.
SURRENDER CHARGES
A percent of premium surrender charge will be imposed upon full surrenders of
the Policy that occur within nine (9) years after the Company has received any
Premium Payments under the Policy. For partial surrenders a percentage of amount
surrendered will be charged. This charge is intended to cover certain expenses
relating to the sale of the Policy, including commissions to registered
representatives and other promotional expenses. To the extent that the surrender
charges assessed under the Policy are less than the sales commissions paid with
respect to the Policy, the Company will pay the shortfall from its general
account assets, which will include any profits it may derive from charges
imposed under the Policy. (See also "Cash Value and Cash Surrender Value.")
Surrenders charges are determined as follows:
<TABLE>
<CAPTION>
YEARS SINCE FULL SURRENDERS PARTIAL SURRENDERS
PREMIUM PAYMENT MADE (% OF PREMIUM) (% OF AMOUNT SURRENDERED)
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
up to 2 years 7.5% 7.5%
3 or 4 7% 7%
5 6.5% 6.5%
6 6% 6%
7 5% 5%
8 4% 4%
9 3% 3%
Year 10 and Thereafter 0% 0%
</TABLE>
PARTIAL SURRENDERS. The Company will impose a surrender charge equal to a
percentage of the amount surrendered for partial surrenders in excess of the
free withdrawal amount described below. The surrender charge will be limited so
that the total charge for partial surrenders will not exceed the charge that
would apply to a full surrender of the Policy.
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For purposes of determining the surrender charge percentage that will apply to a
partial surrender, surrender charges are calculated on a "last-in, first-out
basis." This means that any partial withdrawal in excess of the free withdrawal
amount will be taken against premiums in the reverse order in which they were
made, if more than one premium was paid under the Policy. Surrender charges will
be assessed only against that portion of the partial withdrawal taken from
premium payment(s).
FREE WITHDRAWAL ALLOWANCE. The Company will permit partial surrenders of the
Policy's earnings in an amount of up to 10% of the Policy's Cash Value each year
(beginning with the Second Policy Year) without the imposition of a surrender
charge. The amount of Cash Value available for free withdrawal will be
determined on the Policy Anniversary on or immediately prior to the date that
the partial surrender request is received. The amount of earnings available for
withdrawal will be determined on the date the request for such withdrawal is
received by the Company.
TRANSFER CHARGE
There is currently no charge for transfers. The Company reserves the right to
limit free transfers of Cash Value from one Investment Option to another by the
Policy Owner to four times in any Policy Year, and to charge $10 for any
additional transfers.
REDUCTION OR ELIMINATION OF CHARGES
We may offer the Policy in arrangements where an employer or trustee will own a
group of policies on the lives of certain employees, or in other situations
where groups of policies will be purchased at one time. We may reduce or
eliminate the mortality and expense risk charge, 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 VARIABLE LIFE INSURANCE SEPARATE ACCOUNT ONE (SEPARATE ACCOUNT
ONE)
The Travelers Variable Life Insurance Separate Account One was established on
September 23, 1994 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 Separate Account One are invested exclusively in shares of the
Investment Options. The operations of Separate Account One 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 Separate Account One will be held for the
exclusive benefit of Policy Owners and the persons entitled to payments under
the Policy. The assets held in Separate Account One 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 and other distributions of the Investment Options are
payable to Separate Account One. All such income and/or distributions are
reinvested in shares of the respective underlying fund at net asset value.
Shares of the underlying funds are currently sold only to life insurance company
separate accounts to fund variable annuity and variable life insurance
contracts.
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<PAGE> 27
HOW THE CASH VALUE VARIES. We calculate the Policy's Cash Value each day the
New York Stock Exchange is open for trading (a "valuation date"). A Policy's
Cash Value reflects a number of factors, including Premium Payments, partial
withdrawals, loans, Policy charges, and the investment experience of the
Investment Option(s) chosen. The Policy's Cash Value on a valuation date equals
the sum of all accumulation units for each Investment Option chosen, plus the
Loan Account Value.
The Separate Account purchases shares of the underlying funds at net asset value
(i.e., without a sales charge). The Separate Account receives all dividends and
capital gains distributions from each underlying fund, and reinvests in
additional shares of that fund. The Accumulation Unit Value reflects the
reinvestment of any dividends or capital gains distributions declared by the
underlying fund. The Separate Account will redeem underlying fund shares at
their net asset value, to the extent necessary to make payments under the
Policy.
In order to determine Cash Value, Cash Surrender Value, policy loans and the
number of Accumulation Units to be credited, we use the values calculated as of
4:00 p.m. Eastern time on each valuation date we receive the written request, or
payment in good order, at our Home Office.
ACCUMULATION UNIT VALUE. Accumulation Units measure the value of the Investment
Options. The value for each Investment Option's Accumulation Unit is calculated
on each valuation date. The value equals the Accumulation Unit value for the
preceding valuation period multiplied by the underlying fund's Net Investment
Factor during the next Valuation Period. (For example, to calculate Monday's
valuation date price, we would multiply Friday's Accumulation Unit Value by
Monday's net investment factor.)
The Accumulation Unit Value may increase or decrease. The number of Accumulation
Units credited to your Policy will not change as a result of the Investment
Option's investment experience.
NET INVESTMENT FACTOR. For each Investment Option, the value of its
Accumulation Unit depends of the net rate of return for the corresponding
underlying fund. We determine the net rate of return at the end of each
Valuation Period (that is, the period of time beginning at 4:00 p.m. Eastern
time, and ending at 4:00 p.m. Eastern time on the next Valuation Date). The net
rate of return reflects the investment performance of the investment option,
includes any dividends or capital gains distributed, and is net of the Separate
Account charges.
CHANGES TO THE POLICY
- --------------------------------------------------------------------------------
GENERAL
Once the policy is issued, you may make certain changes. Some of these changes
will not require additional underwriting approval; some changes will. Certain
requests must be made in writing, as indicated below:
WRITTEN CHANGES REQUIRING UNDERWRITING APPROVAL:
- increases in the stated amount of insurance;
- changing the death benefit from Option 1 to Option 2
WRITTEN CHANGES NOT REQUIRING UNDERWRITING APPROVAL:
- decreases in the stated amount of insurance
- changing the death benefit from Option 2 to Option 1
- changes to the way your premiums are allocated (Note: with proper
authorization on file, you can also make these changes by telephone)
- changing the beneficiary (unless irrevocably named)
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Written requests for changes should be sent to the Company's Home Office at One
Tower Square, Hartford, Connecticut, 06183. The Company's telephone number is
(860) 277-0111.
CHANGES IN STATED AMOUNT
You may request in writing an increase or decrease in the Policy's Stated
Amount, provided that the Stated Amount after any decrease may not be less than
the minimum amount of $25,000. 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 no additional charge
for a decrease in Stated Amount.
CHANGES IN DEATH BENEFIT OPTION
You may change the Death Benefit option by sending a written request to the
Company. There is no direct tax consequence of changing a Death Benefit option,
except as described under "Tax Treatment of Policy Benefits." However, the
change could affect future values of Net Amount At Risk, and with some Option 2
to Option 1 changes involving substantially funded Policies, there may be a cash
distribution which is included in your gross income. The cost of insurance
charge which is based on the Net Amount At Risk may be different in the future.
A change from Option 1 to Option 2 will not be permitted if the change results
in a Stated Amount of less than $25,000. A charge from Option 1 to Option 2 also
subject to underwriting. Contact your registered representative for more
information.
ADDITIONAL POLICY PROVISIONS
- --------------------------------------------------------------------------------
ASSIGNMENT
The Policy may be assigned as collateral for a loan or other obligation. The
Company is not responsible for any payment made or action taken before receipt
of written notice of such assignment. Proof of interest must be filed with any
claim under a collateral assignment.
LIMIT ON RIGHT TO CONTEST AND SUICIDE EXCLUSION
We may not contest the validity of the Policy after it has been in effect during
the Insured's lifetime for two years from the Issue Date. Subject to state law,
if the Policy is reinstated, the two-year period will be measured from the date
of reinstatement. Each requested increase in Stated Amount is contestable for
two years from its effective date (subject to state law). In addition, if the
Insured commits suicide during the two-year period following issue, subject to
state law, the Death Benefit will be limited to the premiums paid less (i) the
amount of any partial surrender, (ii) the amount of any outstanding Policy loan,
and (iii) the amount of any unpaid Deduction Amount due. During the two-year
period following an increase, the portion of the Death Benefit attributable to
the increase in the case of suicide will be limited to an amount equal to the
premium paid for such increase (subject to state law).
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<PAGE> 29
MISSTATEMENT AS TO SEX AND AGE
If there has been a misstatement with regard to sex or age, benefits payable
will be adjusted to what the Policy would have provided with the correct
information. A misstatement with regard to sex or age in a substantially funded
Policy may cause a cash distribution that is includable in whole or in part in
the gross income of the Policy Owner.
VOTING RIGHTS
The Company is the legal owner of the underlying fund shares. However, we
believe that when an underlying fund solicits proxies, we are required to obtain
from policy owners who have chosen those investment options instructions on how
to vote those shares. When we receive those instructions, we will vote all of
the shares we own in proportion to those instructions. This will also include
any shares we own on our own behalf. If we determine that we no longer need to
comply with this voting method, we will vote on the shares in our own right.
DISREGARD OF VOTING INSTRUCTIONS
When permitted by state insurance regulatory authorities, we may disregard
voting instructions if the instructions would cause a change in the investment
objective or policies of the Separate Account or an Investment Option, or if it
would cause the approval or disapproval of an investment advisory Policy of an
Investment Option. In addition, we may disregard voting instructions in favor of
changes in the investment policies or the investment adviser of any Investment
Options which are initiated by a Policy Owner if we reasonably disapprove of
such changes. A change would be disapproved only if the proposed change is
contrary to state law or prohibited by state regulatory authorities, or if we
determine that the change would have an adverse effect on our general account
(i.e., if the proposed investment policy for an Investment Option may result in
overly speculative or unsound investments.) If we do disregard voting
instructions, a summary of that action and the reasons for such action would be
included in the next annual report to Policy Owners.
OTHER MATTERS
- --------------------------------------------------------------------------------
STATEMENTS TO POLICY OWNERS
We will maintain all records relating to the Separate Account and the Investment
Options. At least once each Policy Year, we will send you a statement containing
the following information:
- the Stated Amount and the Cash Value of the Policy (indicating the number
of Accumulation Units credited to the Policy in each Investment Option
and the corresponding Accumulation Unit Value);
- the date and amount of each premium payment;
- the date and amount of each Monthly Deduction;
- the amount of any outstanding Policy loan as of the date of the
statement, and the amount of any loan interest charged on the Loan
Account;
- the date and amount of any partial cash surrenders and the amount of any
partial surrender charges;
- the annualized cost of any supplemental benefits purchased under the
Policy; and
- a reconciliation since the last report of any change in Cash Value and
Cash Surrender Value.
We will also send any other reports required by any applicable state or federal
laws or regulations.
SUSPENSION OF VALUATION
We reserve the right to suspend or postpone the date of any payment of any
benefit or values for any Valuation Period (1) when the New York Stock Exchange
("Exchange") is closed; (2) when trading on the Exchange is restricted; (3) when
the SEC determines so that disposal of the
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<PAGE> 30
securities held in the Underlying Funds is not reasonably practicable or the
value of the Investment Option's net assets cannot be determined; or (4) during
any other period when the SEC, by order, so permits for the protection of
security holders.
DIVIDENDS
No dividends will be paid under the Policy.
MIXED AND SHARED FUNDING
It is conceivable that in the future it may not be advantageous for variable
life insurance and variable annuity Separate Accounts to invest in the
Investment Options simultaneously. This is called mixed funding. Certain funds
may be available to variable products of other companies not affiliated with
Travelers. This is called "shared funding." Although we -- and the funds -- do
not anticipate any disadvantages either to variable life insurance or to
variable annuity Policy Owners, the Investment Options' Boards of Directors
intend to monitor events to identify any material conflicts that may arise and
to determine what action, if any, should be taken. If any of the Investment
Options' Boards of Directors conclude that separate mutual funds should be
established for variable life insurance and variable annuity Separate Accounts,
the Company will bear the attendant expenses, but variable life insurance and
variable annuity Policy Owners would no longer have the economies of scale
resulting from a larger combined fund. Please consult the prospectuses of the
Investment Options for additional information.
DISTRIBUTION
The Company intends to sell the Policies in all jurisdictions where it is
licensed to do business and where the Policy is approved. The Policies will be
sold by life insurance sales representatives who are registered representatives
of the Company or certain other registered broker-dealers. The maximum
commission payable by the Company for distribution will be 6.50% of premiums.
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 some
time in 2000.
LEGAL PROCEEDINGS AND OPINION
There are no pending material legal proceedings affecting the Policy, Separate
Account or any of the Investment Options. Legal matters in connection with
federal laws and regulations affecting the issue and sale of the Policy
described in this Prospectus and the organization of the Company, its authority
to issue the Policy under Connecticut law and the validity of the forms of the
Policy under Connecticut law have been passed on by the General Counsel of the
Company.
EXPERTS
The financial statements of Separate Account One 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 financial statements of The Travelers Life and Annuity Company 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.
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<PAGE> 31
FEDERAL TAX CONSIDERATIONS
- --------------------------------------------------------------------------------
GENERAL
The following is a general discussion of the federal income tax considerations
relating to the Policies. This discussion is based upon the Company's
understanding of the federal income tax laws as they are currently interpreted
by the Internal Revenue Service ("IRS"). These laws are complex, and tax results
may vary among individuals. A person contemplating the purchase of or the
exercise of elections under a Policy should seek competent tax advice.
IT SHOULD BE UNDERSTOOD THAT THIS IS NOT AN EXHAUSTIVE DISCUSSION OF ALL TAX
QUESTIONS THAT MIGHT ARISE UNDER THE POLICIES. NO ATTEMPT HAS BEEN MADE TO
ADDRESS ANY FEDERAL ESTATE TAX OR STATE AND LOCAL TAX CONSIDERATIONS WHICH MAY
ARISE IN CONNECTION WITH A POLICY. FOR COMPLETE INFORMATION, A QUALIFIED TAX
ADVISOR SHOULD BE CONSULTED.
THE COMPANY DOES NOT GUARANTEE THE TAX STATUS OF ANY POLICY AND THE FOLLOWING
TAX DISCUSSION IS BASED ON THE COMPANY'S UNDERSTANDING OF FEDERAL INCOME TAX
LAWS AS THEY ARE CURRENTLY INTERPRETED. THE COMPANY CANNOT GUARANTEE THAT THOSE
LAWS OR INTERPRETATIONS WILL REMAIN UNCHANGED.
TAX STATUS OF THE POLICY
DEFINITION OF LIFE INSURANCE
Section 7702 of the Code sets forth a definition of a life insurance contract
for federal tax purposes. Guidance as to how Section 7702 is to be applied,
however, is limited. Although the Secretary of the Treasury (the "Treasury") is
authorized to prescribe regulations implementing Section 7702, and while
proposed regulations and other limited, interim guidance has been issued, final
regulations have not been adopted. If a Policy were determined not to be a life
insurance contract for purposes of Section 7702, such Policy would not provide
the tax advantages normally provided by a life insurance policy.
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.
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<PAGE> 32
INVESTOR CONTROL
In certain circumstances, owners of variable life insurance contracts may be
considered the owners, for federal income tax purposes, of the assets of the
separate accounts used to support their contract. In those circumstances, income
and gains from the separate account assets would be includable in the variable
contract owner's gross income each year. The IRS has stated in published rulings
that a variable contract owner will be considered the owner of separate account
assets if the contract owner possesses incidents of ownership in those assets,
such as the ability to exercise investment control over the assets. The Treasury
has also announced, in connection with the issuance of regulations concerning
diversification, that those regulations "do not provide guidance concerning the
circumstances in which investor control of the investments of a segregated asset
account may cause the investor (i.e., the Policy Owner), rather than the
insurance company, to be treated as the owner of the assets in the account."
This announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which policyholders may direct their
investments to particular Investment Options without being treated as owners of
the underlying assets." As of the date of this prospectus, no such guidance has
been issued.
The ownership rights under the Policy are similar to, but different in certain
respects from, those described by the IRS in rulings in which it determined that
the policy owners received the desired tax benefits because they were not owners
of separate account assets. For example, a Policy Owner of this Policy has
additional flexibility in allocating payments and cash values. These differences
could result in the Policy Owner being treated as the owner of the assets of the
Separate Account. In addition, the Company does not know what standard will be
set forth in the regulations or rulings which the Treasury is expected to issue,
nor does the Company know if such guidance will be issued. The Company therefore
reserves the right to modify the Policy as necessary to attempt to prevent the
Policy Owner from being considered the owner of a pro rata share of the assets
of the Separate Account.
The remaining tax discussion assumes that the Policy qualifies as a life
insurance contract for federal income tax purposes.
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.
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MODIFIED ENDOWMENT CONTRACTS
A modified endowment contract is defined under tax law as any policy that
satisfies the present legal definition of a life insurance contract but which
fails to satisfy a 7-pay test. This failure could occur with contracts entered
into after June 21, 1988, or with certain older contracts materially changed
after that date. A Section 1035 exchange of an older contract into a contract
after that date will not by itself cause the new contract to be a modified
endowment contract if the older contract had not become one prior to the
exchange. However, the new contract must be re-tested under the 7-pay test
rules.
A contract fails to satisfy the 7-pay test if the cumulative amount of premiums
paid under the contract at any time during the first seven contract years
exceeds the sum of the net level premiums that would have been paid on or before
such time had the contract provided for paid-up future benefits after the
payment of seven level annual premiums. If a material change in the contract
occurs either during the first seven contract years, or later, a new seven-year
testing period is begun. A decrease to Stated Amount made in the first seven
years will cause a retest of the cumulative amount of premiums. Decreases made
after the first seven contract years are not considered a material change,
provided no other material changes have occurred prior. Tax regulations or other
guidance will be needed to fully define those transactions which are material
changes. The Company has established safeguards for monitoring whether a
contract may become a modified endowment contract.
Loans and partial withdrawals from, as well as collateral assignments of,
Policies that are modified endowment contracts will be treated as distributions
to the Policy Owner for tax purposes. All pre-death distributions (including
loans, partial withdrawals and collateral assignments) from these Policies will
be included in gross income on an income-first basis to the extent of any income
in the Policy (the cash value less the Policy Owner's investment in the Policy)
immediately before the distribution.
The law also imposes a 10% penalty tax on pre-death distributions (including
loans, collateral assignments, partial withdrawals and complete surrenders) from
modified endowment contracts to the extent they are included in income, unless a
specific exception to the penalty applies. The penalty does not apply to amounts
which are distributed on or after the date on which the taxpayer attains age
59 1/2, because the taxpayer is disabled, or as substantially equal periodic
payments over the taxpayer's life (or life expectancy) or over the joint lives
(or joint life expectancies) of the taxpayer and his or her beneficiary.
Furthermore, if the loan interest is 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.
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AGGREGATION OF MODIFIED ENDOWMENT CONTRACTS
In the case of a pre-death distribution (including a loan, partial withdrawal,
collateral assignment or complete surrender) from a Policy that is treated as a
modified endowment contract, a special aggregation requirement may apply for
purposes of determining the amount of the income on the Policy. Specifically, if
the Company or any of its affiliates issues to the same Policy Owner more than
one modified endowment contract within a calendar year, then for purposes of
measuring the income on the Policy with respect to a distribution from any of
those Policies, the income on the Policy for all those Policies will be
aggregated and attributed to that distribution.
POLICIES WHICH ARE NOT MODIFIED ENDOWMENT CONTRACTS
Unlike loans from modified endowment contracts, a loan from a Policy that is not
a modified endowment contract will be considered indebtedness of the Owner and
no part of a loan will constitute income to the Owner. However, the treatment of
loans taken on earnings after the 10th Policy Year is unclear; such loans might
be considered a withdrawal instead of indebtedness for federal tax purposes.
Pre-death distributions from a Policy that is not a modified endowment contract
will generally not be included in gross income to the extent that the amount
received does not exceed the Policy Owner's investment in the Policy. (An
exception to this general rule may occur in the case of a decrease or change
that reduces the benefits provided under a Policy in the first 15 years after
the Policy is issued and that results in a cash distribution to the Policy
Owner. Such a cash distribution may be taxed in whole or in part as ordinary
income to the extent of any gain in the Policy.) Further, the 10% penalty tax on
pre-death distributions does not apply to Policies that are not modified
endowment contracts.
Certain changes to Policies that are not modified endowment contracts may cause
such Policies to be treated as modified endowment contracts. A Policy Owner
should therefore consult a tax advisor before effecting any change to a Policy
that is not a modified endowment contract.
TREATMENT OF LOAN INTEREST
If there is any borrowing against the Policy, the interest paid on loans may not
be tax deductible.
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 Separate Account One. 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 Separate Account One
under future tax law.
THE COMPANY
- --------------------------------------------------------------------------------
The Travelers Life and Annuity Company (the "Company") is a stock insurance
company which has been continuously engaged in the insurance business since its
incorporation in the state of Connecticut in 1973. The Company writes individual
life insurance and individual and group annuity contracts on a non-participating
basis, and acts as depositor for Separate Account One. The Company is licensed
to conduct life insurance business in a majority of the states of the United
States, and intends to seek licensure in the remaining states, except New York.
The Company's obligations as depositor for Separate Account One 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.
30
<PAGE> 35
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.
MANAGEMENT
- --------------------------------------------------------------------------------
DIRECTORS OF THE TRAVELERS LIFE AND ANNUITY COMPANY
The following are the Directors and Executive Officers of The Travelers Life and
Annuity 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.
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
Insurance 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
31
<PAGE> 36
SENIOR OFFICERS OF THE TRAVELERS LIFE AND ANNUITY COMPANY
The following are the Senior Officers of The Travelers Life and Annuity 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
Barry Jacobson....................... Senior Vice President
Russell H. Johnson................... Senior Vice President
Glenn D. Lammey...................... Executive Vice President, Chief
Financial Officer, Chief Accounting
Officer and Controller
Marla Berman Lewitus................. Senior Vice President and General
Counsel
Brendan Lynch........................ Senior Vice President
Warren H. May........................ Senior Vice President
Kathleen A. Preston.................. Senior Vice President
Mary Jean Thornton................... Executive Vice President and
Chief Information Officer
David A. Tyson....................... Senior Vice President
F. Denney Voss....................... Senior Vice President
</TABLE>
Information relating to the management of the underlying funds is contained in
the applicable prospectuses.
32
<PAGE> 37
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 45-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 for each Death Benefit Option (Level and
Variable). 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 illustrations also reflect a monthly deduction of 0.016667% for the first
ten years following the Initial Premium for premium taxes.
The values shown in these illustrations vary according to assumptions used for
charges, and gross rates of investment returns. The charges consist of 0.90% for
mortality and expense risks, 0.40% for administrative expenses, and 0.81% for
Investment Option expenses. The 12% illustration will assume that the mortality
and expense risk charge has been reduced to 0.75% in the second policy year and
thereafter. 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% and 6%
correspond to approximate net annual rates of -2.11% and 3.89%, respectively.
The illustrated gross annual investment rate of return of 12% corresponds to an
approximate net annual rate of return of 9.89% in the first Policy Year, and
10.04% 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
Separate Account Three, since the Company is not currently deducting such
charges from Separate Account Three. 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%.
33
<PAGE> 38
THIS PAGE INTENTIONALLY LEFT BLANK.
34
<PAGE> 39
VINTAGE LIFE
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICY
LEVEL DEATH BENEFIT OPTION
ILLUSTRATED WITH CURRENT COST OF INSURANCE CHARGES
Male, Issue Age 45 Face Amount: $106,918
Non-Smoker Single Premium: $25,000
<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 26,250 106,918 106,918 106,918 24,189 25,681 27,172 22,314 23,806 25,297
2 27,563 106,918 106,918 106,918 23,376 26,369 29,582 21,501 24,494 27,707
3 28,941 106,918 106,918 106,918 22,557 27,064 32,217 20,807 25,314 30,467
4 30,388 106,918 106,918 106,918 21,733 27,765 35,100 19,983 26,015 33,350
5 31,907 106,918 106,918 106,918 20,899 28,471 38,255 19,274 26,846 36,630
6 33,502 106,918 106,918 106,918 20,052 29,179 41,710 18,552 27,679 40,210
7 35,178 106,918 106,918 106,918 19,189 29,887 45,495 17,939 28,637 44,245
8 36,936 106,918 106,918 106,918 18,304 30,589 49,644 17,304 29,589 48,644
9 38,783 106,918 106,918 106,918 17,399 31,291 54,201 16,649 30,541 53,451
10 40,722 106,918 106,918 106,918 16,464 31,981 59,205 16,464 31,981 59,205
15 51,973 106,918 106,918 125,742 11,510 35,729 93,837 11,510 35,729 93,837
20 66,332 106,918 106,918 182,084 5,040 38,944 149,250 5,040 38,944 149,250
</TABLE>
These hypothetical rates of return 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
VINTAGE LIFE
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICY
LEVEL DEATH BENEFIT OPTION
ILLUSTRATED WITH GUARANTEED COST OF INSURANCE CHARGES
Male, Issue Age 45 Face Amount: $106,918
Non-Smoker Single Premium: $25,000
<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 26,250 106,918 106,918 106,918 24,039 25,527 27,015 22,164 23,652 25,140
2 27,563 106,918 106,918 106,918 23,064 26,044 29,243 21,189 24,169 27,368
3 28,941 106,918 106,918 106,918 22,072 26,548 31,670 20,322 24,798 29,920
4 30,388 106,918 106,918 106,918 21,060 27,038 34,314 19,310 25,288 32,564
5 31,907 106,918 106,918 106,918 20,024 27,509 37,200 18,399 25,884 35,575
6 33,502 106,918 106,918 106,918 18,958 27,957 40,350 17,458 26,457 38,850
7 35,178 106,918 106,918 106,918 17,854 28,373 43,790 16,604 27,123 42,540
8 36,936 106,918 106,918 106,918 16,705 28,752 47,552 15,705 27,752 46,552
9 38,783 106,918 106,918 106,918 15,500 29,083 51,669 14,750 28,333 50,919
10 40,722 106,918 106,918 106,918 14,231 29,360 56,182 14,231 29,360 56,182
15 51,973 106,918 106,918 117,267 6,752 29,976 87,513 6,752 29,976 87,513
20 66,332 0 106,918 167,851 0 27,552 137,583 0 27,552 137,583
</TABLE>
These hypothetical rates of return 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.
36
<PAGE> 41
VINTAGE LIFE
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICY
VARIABLE DEATH BENEFIT OPTION
ILLUSTRATED WITH CURRENT COST OF INSURANCE CHARGES
Male, Issue Age 45 Face Amount: $106,918
Non-Smoker Single Premium: $25,000
<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 26,250 131,037 132,524 134,011 24,119 25,606 27,093 22,244 23,731 25,218
2 27,563 130,151 133,126 136,320 23,233 26,208 29,402 21,358 24,333 27,527
3 28,941 129,260 133,724 138,828 22,342 26,806 31,910 20,592 25,056 30,160
4 30,388 128,360 134,314 141,552 21,442 27,396 34,634 19,692 25,646 32,884
5 31,907 127,449 134,893 144,510 20,531 27,975 37,592 18,906 26,350 35,967
6 33,502 126,525 135,457 147,720 19,607 28,539 40,802 18,107 27,039 39,302
7 35,178 125,581 136,000 151,203 18,663 29,082 44,285 17,413 27,832 43,035
8 36,936 124,614 136,516 154,980 17,696 29,598 48,062 16,696 28,598 47,062
9 38,783 123,626 137,008 159,082 16,708 30,090 52,164 15,958 29,340 51,414
10 40,722 122,606 137,460 163,527 15,688 30,542 56,609 15,688 30,542 56,609
15 51,973 117,239 139,519 193,210 10,321 32,601 86,292 10,321 32,601 86,292
20 66,332 110,452 139,757 238,504 3,534 32,839 131,586 3,534 32,839 131,586
</TABLE>
These hypothetical rates of return 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.
37
<PAGE> 42
VINTAGE LIFE
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICY
VARIABLE DEATH BENEFIT OPTION
ILLUSTRATED WITH GUARANTEED COST OF INSURANCE CHARGES
Male, Issue Age 45 Face Amount: $106,918
Non-Smoker Single Premium: $25,000
<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 26,250 130,842 132,323 133,804 23,924 25,405 26,886 22,049 23,530 25,011
2 27,563 129,750 132,700 135,868 22,832 25,782 28,950 20,957 23,907 27,075
3 28,941 128,641 133,047 138,089 21,723 26,129 31,171 19,973 24,379 29,421
4 30,388 127,509 133,358 140,478 20,591 26,440 33,560 18,841 24,690 31,810
5 31,907 126,352 133,628 143,047 19,434 26,710 36,129 17,809 25,085 34,504
6 33,502 125,165 133,847 145,807 18,247 26,929 38,889 16,747 25,429 37,389
7 35,178 123,938 134,007 148,767 17,020 27,089 41,849 15,770 25,839 40,599
8 36,936 122,665 134,095 151,938 15,747 27,177 45,020 14,747 26,177 44,020
9 38,783 121,337 134,099 155,331 14,419 27,181 48,413 13,669 26,431 47,663
10 40,722 119,946 134,006 158,956 13,028 27,088 52,038 13,028 27,088 52,038
15 51,973 111,941 131,993 181,974 5,023 25,075 75,056 5,023 25,075 75,056
20 66,332 0 125,283 214,186 0 18,365 107,268 0 18,365 107,268
</TABLE>
These hypothetical rates of return 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.
38
<PAGE> 43
APPENDIX A
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, Separate Account Three'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, determined by dividing the
increase (decrease) in value for that unit by the Accumulation Unit Value at the
beginning of the period. Separate Account Three commenced operations on
September 5, 1995. All Investment Options of Separate Account Three invest in
Investment Options that were in existence prior to the date on which the
Investment Options became available under the Policy. Average annual rates of
return include periods prior to the inception of the Investment Option, and are
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 Separate Account Three 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, as well as the
0.90% mortality and expense risk charge and the 0.40% administrative expense
charge assessed against the Investment Options. The rates of return do not
reflect surrender charges or Monthly Deduction Amounts (which are depicted in
the Example following the Rates of Return), nor do they reflect a reduction in
mortality and expense risk charges which may apply under certain circumstances.
For information about the Charges assessed under the Policy, see "Charges and
Deductions." For illustrations of how these charges affect Cash Values and Death
Benefits, see "Illustrations."
AVERAGE RATES OF RETURN (SINCE INCEPTION)
FOR PERIODS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
FUND
INCEPTION
INVESTMENT OPTIONS 1 YEAR 3 YEARS DATE
------------------ ------ ------- ---------
<S> <C> <C> <C>
STOCK FUNDS:
AIM Capital Appreciation Portfolio.................. 41.18% 21.84% 10/10/95
Alliance Growth Portfolio........................... 30.59% 28.46% 06/20/94
Smith Barney Select Growth.......................... 14.64% -- 02/05/97
Smith Barney Select High Growth..................... 25.22% -- 02/05/97
MFS Emerging Growth Portfolio....................... 74.60% 40.46% 08/30/96
Smith Barney International Equity................... 65.67% 20.86% 06/20/94
Smith Barney Large Cap Value........................ -1.23% 10.22% 06/20/94
Smith Barney Total Return Portfolio................. 20.49% 12.93% 11/21/94
Van Kampen Enterprise Portfolio..................... 24.34% 24.94% 06/21/94
BOND FUNDS:
Smith Barney Select Conservative.................... 2.79% -- 02/05/97
Smith Barney Select Income.......................... -0.65% -- 02/05/97
Putnam Diversified Inc Portfolio.................... -0.20% 1.78% 06/20/94
Smith Barney High Income Portfolio.................. 1.27% 4.11% 06/22/94
Travelers Managed Income Portfolio.................. -0.42% 3.81% 06/28/94
Zero Coupon Bond Portfolio 2000..................... 1.98% 4.64% 10/11/95
Zero Coupon Bond Portfolio 2005..................... -6.64% 4.48% 10/11/95
BALANCED FUNDS:
Smith Barney Select Balanced........................ 6.18% -- 02/05/97
MFS Total Return Portfolio.......................... 1.31% 10.15% 06/20/94
MONEY MARKET FUND:
Smith Barney Money Market........................... 3.42% 3.62% 06/20/94
</TABLE>
39
<PAGE> 44
EXAMPLE OF POLICY CHARGES
- --------------------------------------------------------------------------------
The following chart illustrates the surrender charges and Monthly Deduction
Amounts (including the Cost of Insurance charges and the deduction for premium
tax) 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.
<TABLE>
<S> <C>
Male, Issue Age 45, Non-Smoker Face Amount: $106,918
Annual Premium: $25,000.00 Variable Death Benefit Option
Hypothetical Gross Annual Investment Rate of Return: 10%* Current Charges
</TABLE>
<TABLE>
<CAPTION>
TOTAL MONTHLY DEDUCTION
FOR THE POLICY YEAR
SURRENDER CHARGE ---------------------------
POLICY CUMULATIVE AS % OF CUM. COST OF INSURANCE PREMIUM
YEAR PREMIUMS PREM. CHARGES TAX
- ------ ---------- ---------------- ----------------- -------
<S> <C> <C> <C> <C>
1 $25,000.00 7.5% $387.23 $51.50
2 $25,000.00 7.5% $413.35 $53.18
3 $25,000.00 7.0% $440.62 $55.32
5 $25,000.00 6.5% $500.53 $59.79
10 $25,000.00 0.0% $716.31 $65.87
</TABLE>
* Hypothetical investment results shown above are illustrative only and should
not be deemed a representation of past or future investment results. Actual
investment results may be more or less than those shown. Hypothetical
investment results may be different from those shown if the actual rates of
return averaged 10%, but fluctuated above or below that average for individual
policy years. No representations can be made that the hypothetical rates
assumed can be achieved for any one year or sustained over any period of time.
40
<PAGE> 45
APPENDIX B
REPRESENTATIVE STATED AMOUNTS
- --------------------------------------------------------------------------------
The following table represents the Single Premium Factors for the determination
of the Stated Amount per dollar of Gross Premium, varying by Male and Female
(applicable to standard lives).
<TABLE>
<CAPTION>
MALE FEMALE
- ---------------------------- ----------------------------
AGE SP FAC AGE SP FAC AGE SP FAC AGE SP FAC
- --- -------- --- ------- --- -------- --- -------
<S> <C> <C> <C> <C> <C> <C> <C>
20 12.65742 51 3.32670 20 16.15463 51 4.13678
21 12.20773 52 3.19482 21 15.48558 52 3.97060
22 11.76323 53 3.06987 22 14.83810 53 3.81237
23 11.32222 54 2.95167 23 14.21155 54 3.66170
24 10.88482 55 2.83985 24 13.60662 55 3.51803
25 10.45123 56 2.73405 25 13.02272 56 3.38078
26 10.02300 57 2.63380 26 12.45932 57 3.24928
27 9.60257 58 2.53865 27 11.91653 58 3.12290
28 9.19198 59 2.44827 28 11.39430 59 3.00125
29 8.79287 60 2.36238 29 10.89240 60 2.88420
30 8.40647 61 2.28087 30 10.41067 61 2.77188
31 8.03383 62 2.20360 31 9.94865 62 2.66457
32 7.67547 63 2.13053 32 9.50535 63 2.56258
33 7.33157 64 2.06153 33 9.08002 64 2.46607
34 7.00238 65 1.99645 34 8.67288 65 2.37482
35 6.68772 66 1.93500 35 8.28367 66 2.28843
36 6.38750 67 1.87688 36 7.91217 67 2.20637
37 6.10155 68 1.82180 37 7.55883 68 2.12805
38 5.82963 69 1.76950 38 7.22327 69 2.05307
39 5.57132 70 1.71990 39 6.90517 70 1.98132
40 5.32610 71 1.67297 40 6.60400 71 1.91287
41 5.09358 72 1.62875 41 6.31898 72 1.84795
42 4.87303 73 1.58733 42 6.04912 73 1.78683
43 4.66378 74 1.54873 43 5.79305 74 1.72965
44 4.46520 75 1.51285 44 5.54958 75 1.67632
45 4.27672 76 1.47945 45 5.31792 76 1.62663
46 4.09775 77 1.44823 46 5.09715 77 1.58023
47 3.92765 78 1.41890 47 4.88652 78 1.53675
48 3.76588 79 1.39115 48 4.68553 79 1.49587
49 3.61205 80 1.36485 49 4.49387 80 1.45742
50 2.46573 50 4.31108
</TABLE>
41
<PAGE> 46
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<PAGE> 47
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<PAGE> 48
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<PAGE> 49
VINTAGELIFE
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
INDIVIDUAL VARIABLE LIFE INSURANCE POLICIES
ISSUED BY
THE TRAVELERS LIFE AND ANNUITY COMPANY HARTFORD, CONNECTICUT
L-12415 May, 2000
<PAGE> 50
ANNUAL REPORT
DECEMBER 31, 1999
THE TRAVELERS VARIABLE LIFE INSURANCE
SEPARATE ACCOUNT ONE
[TRAVELERS/LIFE & ANNUITY LOGO]
The Travelers Insurance Company
The Travelers Life and Annuity Company
One Tower Square
Hartford, CT 06183
<PAGE> 51
THE TRAVELERS VARIABLE LIFE INSURANCE
SEPARATE ACCOUNT ONE
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<S> <C> <C>
ASSETS:
Investments in eligible funds at market value:
Greenwich Street Series Fund, 330,216 shares (cost $5,408,520) ................ $ 6,650,545
Smith Barney Concert Allocation Series Inc., 26,104 shares (cost $305,115) .... 321,384
The Travelers Series Trust, 221,901 shares (cost $2,812,283) .................. 3,949,897
Travelers Series Fund Inc., 8,965,521 shares (cost $43,796,501) ............... $57,401,920
------------
Total Investments (cost $52,322,419) ........................................ $ 68,323
Receivables:
Dividends ..................................................................... 14,485
Premium payments and transfers from other Travelers accounts .................. 38
------------
Total Assets ................................................................ 68,338,269
------------
LIABILITIES:
Payables:
Contract surrenders and transfers to other Travelers accounts ................. 38
Insurance charges ............................................................. 13,272
Administrative fees .......................................................... 6,628
------------
Total Liabilities ........................................................... 19,938
------------
NET ASSETS: $68,318,331
============
</TABLE>
See Notes to Financial Statements
-1-
<PAGE> 52
THE TRAVELERS VARIABLE LIFE INSURANCE
SEPARATE ACCOUNT ONE
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends ................................................................... $ 2,397,721
EXPENSES:
Insurance charges ........................................................... $ 481,628
Administrative fees ......................................................... 234,475
------------
Total expenses ............................................................ 716,103
------------
Net investment income ................................................... 1,681,618
------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ............................................ 20,319,801
Cost of investments sold .................................................. 19,600,270
------------
Net realized gain (loss) ................................................ 719,531
Change in unrealized gain (loss) on investments:
Unrealized gain at December 31, 1998 ........................................ 7,240,118
Unrealized gain at December 31, 1999 ........................................ 16,001,327
------------
Net change in unrealized gain (loss) for the year ......................... 8,761,209
------------
Net realized gain (loss) and change in unrealized gain (loss) ............ 9,480,740
------------
Net increase in net assets resulting from operations .......................... $11,162,358
============
</TABLE>
See Notes to Financial Statements
-2-
<PAGE> 53
THE TRAVELERS VARIABLE LIFE INSURANCE
SEPARATE ACCOUNT ONE
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
OPERATIONS:
Net investment income ...................................................... $ 1,681,618 $ 1,411,505
Net realized gain (loss) from investment transactions ...................... 719,531 785,260
Net change in unrealized gain (loss) on investments ........................ 8,761,209 2,772,425
------------- -------------
Net increase in net assets resulting from operations ..................... 11,162,358 4,969,190
------------- -------------
UNIT TRANSACTIONS:
Participant premium payments
(applicable to 5,422,603 and 13,971,696 units, respectively) ............ 6,181,967 15,399,481
Participant transfers from other Travelers accounts
(applicable to 11,179,771 and 10,633,309 units, respectively) ........... 15,512,601 15,068,220
Growth rate intra-fund transfers in
(applicable to 16,094,881 and 9,467,029 units, respectively) ............ 25,803,896 13,558,388
Contract surrenders
(applicable to 975,631 and 599,831 units, respectively) ................. (1,432,950) (816,829)
Participant transfers to other Travelers accounts
(applicable to 14,861,481 and 14,233,046 units, respectively) ........... (17,734,576) (16,185,232)
Growth rate intra-fund transfers out
(applicable to 16,126,937 and 9,474,012 units, respectively) ............ (25,803,896) (13,558,388)
Other payments to participants
(applicable to 189,522 units) ........................................... (338,135) -
------------- -------------
Net increase in net assets resulting from unit transactions .............. 2,188,907 13,465,640
------------- -------------
Net increase in net assets ............................................. 13,351,265 18,434,830
NET ASSETS:
Beginning of year .......................................................... 54,967,066 36,532,236
------------- -------------
End of year ................................................................ $ 68,318,331 $ 54,967,066
============= =============
</TABLE>
See Notes to Financial Statements
-3-
<PAGE> 54
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Variable Life Insurance Separate Account One ("Separate Account
One") is a separate account of The Travelers Life and Annuity Company
("Travelers Life"), which is a wholly owned subsidiary 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 Travelers Life. Separate Account One is registered under
the Investment Company Act of 1940, as amended, as a unit investment trust.
Separate Account One is comprised of the VintageLife product.
Participant premium payments applied to Separate Account One are invested in
one or more eligible funds in accordance with the selection made by the
contract owner. As of December 31, 1999, the eligible funds available under
Separate Account One were: Zero Coupon Bond Fund Portfolio Series 2000, Zero
Coupon Bond Fund Portfolio Series 2005 and MFS Emerging Growth Portfolio of
The Travelers Series Trust; Alliance Growth Portfolio, Van Kampen Enterprise
Portfolio, Travelers Managed Income Portfolio (formerly TBC Managed Income
Portfolio), Smith Barney High Income Portfolio, Smith Barney International
Equity Portfolio, Smith Barney Large Cap Value Portfolio, Smith Barney Money
Market Portfolio, Putnam Diversified Income Portfolio, MFS Total Return
Portfolio and AIM Capital Appreciation Portfolio of Travelers Series
Fund Inc.; Total Return Portfolio of Greenwich Street Series Fund; and Select
High Growth Portfolio, Select Growth Portfolio, Select Balanced Portfolio,
Select Conservative Portfolio and Select Income Portfolio of Smith Barney
Concert Allocation Series Inc. The Travelers Series Trust and Greenwich
Street Series Fund are registered as Massachusetts business trusts. Travelers
Series Fund Inc. and Smith Barney Concert Allocation Series Inc. are
incorporated under Maryland law. All eligible funds are managed
by affiliates of The Travelers. Not all funds may be available in all states
or to all contract owners.
The following is a summary of significant accounting policies consistently
followed by Separate Account One in the preparation of its financial
statements.
SECURITY VALUATION. Investments are valued daily at the net asset values per
share of the underlying funds.
SECURITY TRANSACTIONS. Security transactions are accounted for on the trade
date. Dividend income is recorded on the ex-dividend date.
FEDERAL INCOME TAXES. The operations of Separate Account One form a part of
the total operations of Travelers Life and are not taxed separately.
Travelers Life 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
One. Separate Account One 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 $26,258,884 and $20,319,801, 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
$52,322,419 at December 31, 1999. Gross unrealized appreciation for all
investments at December 31, 1999 was $16,123,292. Gross unrealized
depreciation for all investments at December 31, 1999 was $121,965.
-4-
<PAGE> 55
NOTES TO FINANCIAL STATEMENTS - CONTINUED
3. CONTRACT CHARGES
Insurance charges are paid for the mortality and expense risks assumed by
Travelers Life. Each business day, Travelers Life deducts a mortality and
expense risk charge which is reflected in the calculation of unit values.
This charge equals, on an annual basis, 0.90% of the amount held in each
funding option. (Contracts in this category are identified as Price 1 in Note
5.) 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 2 in Note 5.)
Administrative fees are paid for administrative expenses. This fee is also
deducted each business day and reflected in the calculation of unit values.
This charge equals, on an annual basis, 0.40% of the amounts held in each
funding option.
Travelers Life 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). Travelers Life received $11,813 and $4,407 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,
Separate Account One changed its basis of reporting realized gains and losses
for investment transactions from an identified 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
-----------------------------------------------
UNIT NET
UNITS VALUE ASSETS
----- ----- ------
<S> <C> <C> <C>
Greenwich Street Series Fund
Total Return Portfolio
Price 1 .................................. 1,191,849 $1.861 $2,218,074
Price 2 .................................. 2,365,857 1.873 4,430,533
Smith Barney Concert Allocation Series Inc.
Select Balanced Portfolio
Price 1 .................................. 14,014 1.123 15,734
Price 2 .................................. 133,245 1.126 150,029
Select Conservative Portfolio
Price 1 .................................. - 1.070 -
Price 2 .................................. 19,606 1.073 21,036
Select Growth Portfolio
Price 1 .................................. - 1.302 -
Price 2 .................................. 44,388 1.307 57,999
Select Income Portfolio
Price 1 .................................. 520 1.000 520
Price 2 .................................. 75,762 1.002 75,948
</TABLE>
-5-
<PAGE> 56
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. NET CONTRACT OWNERS' EQUITY (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-----------------------------------------------
UNIT NET
UNITS VALUE ASSETS
----- ----- ------
<S> <C> <C> <C>
The Travelers Series Trust
MFS Emerging Growth Portfolio
Price 1 ...................................... 319,128 $2.644 $ 843,872
Price 2 ...................................... 613,247 2.655 1,627,869
Zero Coupon Bond Fund Portfolio Series 2000
Price 1 ...................................... 298,463 1.161 346,621
Price 2 ...................................... 206,817 1.168 241,631
Zero Coupon Bond Fund Portfolio Series 2005
Price 1 ...................................... 324,484 1.134 367,945
Price 2 ...................................... 456,563 1.141 520,822
Travelers Series Fund Inc.
AIM Capital Appreciation Portfolio
Price 1 ...................................... 569,800 2.092 1,192,192
Price 2 ...................................... 3,109,343 2.105 6,545,293
Alliance Growth Portfolio
Price 1 ...................................... 992,020 2.792 2,769,538
Price 2 ...................................... 4,226,479 2.809 11,873,749
MFS Total Return Portfolio
Price 1 ...................................... 1,520,991 1.521 2,313,772
Price 2 ...................................... 2,814,133 1.531 4,307,142
Putnam Diversified Income Portfolio
Price 1 ...................................... 755,295 1.124 849,089
Price 2 ...................................... 796,589 1.131 900,861
Smith Barney International Equity Portfolio
Price 1 ...................................... 493,255 2.109 1,040,397
Price 2 ...................................... 1,929,870 2.122 4,095,214
Smith Barney Money Market Portfolio
Price 1 ...................................... 4,962,244 1.162 5,766,897
Price 2 ...................................... 739,028 1.170 864,312
Smith Barney High Income Portfolio
Price 1 ...................................... 1,144,132 1.295 1,481,504
Price 2 ...................................... 850,247 1.303 1,107,858
Smith Barney Large Cap Value Portfolio
Price 1 ...................................... 1,121,417 1.577 1,768,794
Price 2 ...................................... 1,650,798 1.587 2,619,726
Travelers Managed Income Portfolio
Price 1 ...................................... 446,517 1.130 504,479
Price 2 ...................................... 186,978 1.136 212,481
Van Kampen Enterprise Portfolio
Price 1 ...................................... 632,081 2.395 1,514,072
Price 2 ...................................... 2,353,716 2.410 5,672,328
------------
Net Contract Owners' Equity .................................................... $68,318,331
============
</TABLE>
-6-
<PAGE> 57
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. STATEMENT OF INVESTMENTS
<TABLE>
<CAPTION>
INVESTMENT OPTIONS NO. OF MARKET
SHARES VALUE
----------- -------------
<S> <C> <C>
GREENWICH STREET SERIES FUND (9.7%)
Total Return Portfolio
Total (Cost $5,408,520) 330,216 $ 6,650,545
----------- -------------
SMITH BARNEY CONCERT ALLOCATION SERIES INC. (0.5%)
Select Balanced Portfolio (Cost $157,523) 13,426 165,807
Select Conservative Portfolio (Cost $20,443) 1,797 21,043
Select Growth Portfolio (Cost $48,446) 4,086 58,025
Select Income Portfolio (Cost $78,703) 6,795 76,509
----------- -------------
Total (Cost $305,115) 26,104 321,384
----------- -------------
THE TRAVELERS SERIES TRUST (5.8%)
MFS Emerging Growth Portfolio (Cost $1,390,371) 82,912 2,472,432
Zero Coupon Bond Fund Portfolio Series 2000 (Cost $561,045) 55,512 588,432
Zero Coupon Bond Fund Portfolio Series 2005 (Cost $860,867) 83,477 889,033
----------- -------------
Total (Cost $2,812,283) 221,901 3,949,897
----------- -------------
TRAVELERS SERIES FUND INC. (84.0%)
AIM Capital Appreciation Portfolio (Cost $4,545,378) 373,897 7,739,660
Alliance Growth Portfolio (Cost $9,499,807) 445,482 14,647,464
MFS Total Return Portfolio (Cost $6,283,744) 408,065 6,622,888
Putnam Diversified Income Portfolio (Cost $1,824,629) 152,880 1,750,480
Smith Barney International Equity Portfolio (Cost $2,897,494) 223,641 5,137,044
Smith Barney Money Market Portfolio (Cost $6,618,764) 6,618,764 6,618,764
Smith Barney High Income Portfolio (Cost $2,629,942) 214,417 2,590,157
Smith Barney Large Cap Value Portfolio (Cost $4,012,812) 225,004 4,389,820
Travelers Managed Income Portfolio (Cost $723,019) 62,309 717,182
Van Kampen American Enterprise Portfolio (Cost $4,760,912) 241,062 7,188,461
----------- -------------
Total (Cost $43,796,501) 8,965,521 57,401,920
----------- -------------
TOTAL INVESTMENT OPTIONS (100%)
(COST $52,322,419) $68,323,746
=============
</TABLE>
-7-
<PAGE> 58
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF SEPARATE ACCOUNT ONE OPERATIONS AND CHANGES IN NET ASSETS FOR THE
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
TOTAL RETURN PORTFOLIO SELECT BALANCED PORTFOLIO
---------------------------- --------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ............................................... $ 370,915 $ 297,701 $ 5,263 $ 520
------------ ------------ ------------ -----------
EXPENSES:
Insurance charges ....................................... 50,554 44,782 6,319 489
Administrative fees ..................................... 24,428 22,263 2,857 218
------------ ------------ ------------ -----------
Net investment income (loss) ...................... 295,933 230,656 (3,913) (187)
------------ ------------ ------------ -----------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ....................... 772,652 225,198 1,888,367 1,671
Cost of investments sold ............................. 687,756 176,533 1,822,354 1,690
------------ ------------ ------------ -----------
Net realized gain (loss) .......................... 84,896 48,665 66,013 (19)
------------ ------------ ------------ -----------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year ............. 493,169 589,708 5,851 -
Unrealized gain (loss) end of year ................... 1,242,025 493,169 8,284 5,851
------------ ------------ ------------ -----------
Net change in unrealized gain (loss) for the year . 748,856 (96,539) 2,433 5,851
------------ ------------ ------------ -----------
Net increase (decrease) in net assets
resulting from operations ......................... 1,129,685 182,782 64,533 5,645
------------ ------------ ------------ -----------
UNIT TRANSACTIONS:
Participant purchase payments ........................... - (2) - -
Participant transfers from other Travelers accounts ..... 308,665 1,418,102 1,862,323 120,207
Administrative and asset allocation charges ............. 3,534,395 1,680,187 146,756 -
Contract surrenders ..................................... (86,951) (94,033) (26,969) (1,029)
Participant transfers to other Travelers accounts ....... (571,488) (132,383) (1,858,947) -
Growth rate intra-fund transfer out ..................... (3,534,395) (1,680,187) (146,756) -
Other payments to participants .......................... (67,174) - - -
------------ ------------ ------------ -----------
Net increase (decrease) in net assets
resulting from unit transactions .................. (416,948) 1,191,684 (23,593) 119,178
------------ ------------ ------------ -----------
Net increase (decrease) in net assets ............. 712,737 1,374,466 40,940 124,823
NET ASSETS:
Beginning of year .................................... 5,935,870 4,561,404 124,823 -
------------ ------------ ------------ -----------
End of year .......................................... $ 6,648,607 $ 5,935,870 $ 165,763 $124,823
============ ============ ============ ===========
<CAPTION>
SELECT CONSERVATIVE PORTFOLIO
-------------------------------
1999 1998
---- ----
<S> <C> <C>
INVESTMENT INCOME:
Dividends ............................................... $ 866 $ 274
--------- --------
EXPENSES:
Insurance charges ....................................... 215 99
Administrative fees ..................................... 104 43
--------- --------
Net investment income (loss) ...................... 547 132
--------- --------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ....................... 6,176 5,174
Cost of investments sold ............................. 6,027 5,483
--------- --------
Net realized gain (loss) .......................... 149 (309)
--------- --------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year ............. 579 -
Unrealized gain (loss) end of year ................... 600 579
--------- --------
Net change in unrealized gain (loss) for the year . 21 579
--------- --------
Net increase (decrease) in net assets
resulting from operations ......................... 717 402
--------- --------
UNIT TRANSACTIONS:
Participant purchase payments ........................... - -
Participant transfers from other Travelers accounts ..... 193 25,979
Administrative and asset allocation charges ............. 26,060 -
Contract surrenders ..................................... (653) (292)
Participant transfers to other Travelers accounts ....... (5,310) -
Growth rate intra-fund transfer out ..................... (26,060) -
Other payments to participants .......................... - -
--------- --------
Net increase (decrease) in net assets
resulting from unit transactions .................. (5,770) 25,687
--------- --------
Net increase (decrease) in net assets ............. (5,053) 26,089
NET ASSETS:
Beginning of year .................................... 26,089 -
--------- --------
End of year .......................................... $ 21,036 $26,089
========= ========
</TABLE>
-8-
<PAGE> 59
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
ZERO COUPON BOND FUND
SELECT GROWTH PORTFOLIO SELECT INCOME PORTFOLIO MFS EMERGING GROWTH PORTFOLIO PORTFOLIO SERIES 1998
------------------------- ------------------------- ------------------------------- -------------------------
1999 1998 1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1,613 $ 943 $ 64,804 $ 1,407 $ - $ - $ - $ 13,431
---------- --------- ------------ --------- ----------- ---------- --------- ----------
515 425 10,200 345 9,783 5,380 - 1,974
247 195 4,561 153 4,785 2,506 - 1,040
---------- --------- ------------ --------- ----------- ---------- --------- ----------
851 323 50,043 909 (14,568) (7,886) - 10,417
---------- --------- ------------ --------- ----------- ---------- --------- ----------
20,781 1,596 3,442,257 1,288 149,272 193,784 - 280,325
17,973 1,494 3,533,597 1,319 113,379 160,718 - 282,185
---------- --------- ------------ --------- ----------- ---------- --------- ----------
2,808 102 (91,340) (31) 35,893 33,066 - (1,860)
---------- --------- ------------ --------- ----------- ---------- --------- ----------
4,685 (672) (374) - 177,583 1,628 - (2,681)
9,579 4,685 (2,194) (374) 1,082,060 177,583 - -
---------- --------- ------------ --------- ----------- ---------- --------- ----------
4,894 5,357 (1,820) (374) 904,477 175,955 - 2,681
---------- --------- ------------ --------- ----------- ---------- --------- ----------
8,553 5,782 (43,117) 504 925,802 201,135 - 11,238
---------- --------- ------------ --------- ----------- ---------- --------- ----------
- 1 - - - 31,169 - 3
18,149 142 1,899,706 78,008 736,741 507,404 - 3,890
35,364 16,893 76,036 - 708,883 333,615 - 53,944
(1,328) (994) (43,517) (812) (16,721) (11,045) - (3,587)
(18,852) (136) (1,814,304) - (128,389) (148,933) - (274,369)
(35,364) (16,893) (76,036) - (708,883) (333,615) - (53,944)
- - - - - - - -
---------- --------- ------------ --------- ----------- ---------- --------- ----------
(2,031) (987) 41,885 77,196 591,631 378,595 - (274,063)
---------- --------- ------------ --------- ----------- ---------- --------- ----------
6,522 4,795 (1,232) 77,700 1,517,433 579,730 - (262,825)
51,477 46,682 77,700 - 954,308 374,578 - 262,825
---------- --------- ------------ --------- ----------- ---------- --------- ----------
$ 57,999 $ 51,477 $ 76,468 $77,700 $2,471,741 $ 954,308 $ - $ -
========== ========= ============ ========= =========== ========== ========= ==========
</TABLE>
-9-
<PAGE> 60
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF SEPARATE ACCOUNT ONE OPERATIONS AND CHANGES IN NET ASSETS FOR THE
YEARS ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
<TABLE>
<CAPTION>
ZERO COUPON BOND FUND ZERO COUPON BOND FUND
PORTFOLIO SERIES 2000 PORTFOLIO SERIES 2005
----------------------- ----------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ............................................... $ - $ 32,036 $ - $ 46,437
---------- ---------- ---------- ----------
EXPENSES:
Insurance charges ....................................... 4,783 4,178 7,507 6,647
Administrative fees ..................................... 2,339 2,177 3,703 3,350
---------- ---------- ---------- ----------
Net investment income (loss) ...................... (7,122) 25,681 (11,210) 36,440
---------- ---------- ---------- ----------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ....................... 15,548 14,142 37,900 26,877
Cost of investments sold ............................. 15,116 13,577 36,283 24,154
---------- ---------- ---------- ----------
Net realized gain (loss) .......................... 432 565 1,617 2,723
---------- ---------- ---------- ----------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year ............. 8,743 1,746 82,407 32,155
Unrealized gain (loss) end of year ................... 27,387 8,743 28,166 82,407
---------- ---------- ---------- ----------
Net change in unrealized gain (loss) for the year . 18,644 6,997 (54,241) 50,252
---------- ---------- ---------- ----------
Net increase (decrease) in net assets
resulting from operations ......................... 11,954 33,243 (63,834) 89,415
---------- ---------- ---------- ----------
UNIT TRANSACTIONS:
Participant purchase payments ........................... - 2 - 1
Participant transfers from other Travelers accounts ..... 698 33,612 4,094 215,876
Administrative and asset allocation charges ............. 339,309 125,043 350,952 410,066
Contract surrenders ..................................... (8,264) (8,139) (15,028) (14,549)
Participant transfers to other Travelers accounts ....... (823) (567) (15,127) (6,506)
Growth rate intra-fund transfer out ..................... (339,309) (125,043) (350,952) (410,066)
Other payments to participants .......................... - - - -
---------- ---------- ---------- ----------
Net increase (decrease) in net assets
resulting from unit transactions .................. (8,389) 24,908 (26,061) 194,822
---------- ---------- ---------- ----------
Net increase (decrease) in net assets ............. 3,565 58,151 (89,895) 284,237
NET ASSETS:
Beginning of year .................................... 584,687 526,536 978,662 694,425
---------- ---------- ---------- ----------
End of year .......................................... $ 588,252 $ 584,687 $ 888,767 $ 978,662
========== ========== ========== ==========
<CAPTION>
AIM CAPITAL APPRECIATION
PORTFOLIO
-----------------------------
1999 1998
---- ----
<S> <C> <C>
INVESTMENT INCOME:
Dividends ............................................... $ - $ 6,709
------------ ------------
EXPENSES:
Insurance charges ....................................... 44,667 37,703
Administrative fees ..................................... 22,540 18,757
------------ ------------
Net investment income (loss) ...................... (67,207) (49,751)
------------ ------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ....................... 646,700 403,308
Cost of investments sold ............................. 515,292 316,192
------------ ------------
Net realized gain (loss) .......................... 131,408 87,116
------------ ------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year ............. 1,049,500 402,339
Unrealized gain (loss) end of year ................... 3,194,282 1,049,500
------------ ------------
Net change in unrealized gain (loss) for the year . 2,144,782 647,161
------------ ------------
Net increase (decrease) in net assets
resulting from operations ......................... 2,208,983 684,526
------------ ------------
UNIT TRANSACTIONS:
Participant purchase payments ........................... 262 (34,489)
Participant transfers from other Travelers accounts ..... 687,303 1,349,182
Administrative and asset allocation charges ............. 2,492,556 1,378,141
Contract surrenders ..................................... (72,990) (65,039)
Participant transfers to other Travelers accounts ....... (543,866) (274,365)
Growth rate intra-fund transfer out ..................... (2,492,556) (1,378,141)
Other payments to participants .......................... (31,657) -
------------ ------------
Net increase (decrease) in net assets
resulting from unit transactions .................. 39,052 975,289
------------ ------------
Net increase (decrease) in net assets ............. 2,248,035 1,659,815
NET ASSETS:
Beginning of year .................................... 5,489,450 3,829,635
------------ ------------
End of year .......................................... $ 7,737,485 $ 5,489,450
============ ============
</TABLE>
-10-
<PAGE> 61
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
PUTNAM DIVERSIFIED INCOME SMITH BARNEY INTERNATIONAL
ALLIANCE GROWTH PORTFOLIO MFS TOTAL RETURN PORTFOLIO PORTFOLIO EQUITY PORTFOLIO
- ---------------------------- ------------------------------ ------------------------------ ------------------------------
1999 1998 1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
$ 627,611 $ 447,950 $ 488,446 $ 234,290 $ 107,643 $ 63,092 $ 10,983 $ -
- ------------ ------------ ------------ ----------- ----------- ----------- ------------ ------------
91,300 58,186 55,207 40,945 16,072 11,688 27,909 22,988
45,791 28,821 27,000 20,073 7,552 5,658 13,827 11,558
- ------------ ------------ ------------ ----------- ----------- ----------- ------------ ------------
490,520 360,943 406,239 173,272 84,019 45,746 (30,753) (34,546)
- ------------ ------------ ------------ ----------- ----------- ----------- ------------ ------------
646,159 532,083 1,030,207 370,771 468,377 251,910 253,471 260,883
467,371 359,686 964,471 275,124 490,741 232,480 207,435 216,663
- ------------ ------------ ------------ ----------- ----------- ----------- ------------ ------------
178,788 172,397 65,736 95,647 (22,364) 19,430 46,036 44,220
- ------------ ------------ ------------ ----------- ----------- ----------- ------------ ------------
2,468,787 1,196,570 728,180 537,381 (7,488) 66,658 255,799 134,005
5,147,658 2,468,787 339,144 728,180 (74,149) (7,488) 2,239,550 255,799
- ------------ ------------ ------------ ----------- ----------- ----------- ------------ ------------
2,678,871 1,272,217 (389,036) 190,799 (66,661) (74,146) 1,983,751 121,794
- ------------ ------------ ------------ ----------- ----------- ----------- ------------ ------------
3,348,179 1,805,557 82,939 459,718 (5,006) (8,970) 1,999,034 131,468
- ------------ ------------ ------------ ----------- ----------- ----------- ------------ ------------
289 (2,667) 280 (33,829) - 3 - 18
2,492,735 2,871,418 1,577,246 2,184,229 406,099 868,738 298,923 593,554
5,015,527 2,240,715 2,827,410 1,333,510 884,165 449,069 1,663,570 1,060,055
(227,063) (114,306) (198,609) (82,188) (103,303) (62,555) (138,299) (43,363)
(456,508) (412,184) (788,561) (213,546) (368,207) (186,425) (104,712) (237,302)
(5,015,527) (2,240,715) (2,827,410) (1,333,510) (884,165) (449,069) (1,663,570) (1,060,055)
(53,574) - (77,640) - - - (5,288) -
- ------------ ------------ ------------ ----------- ----------- ----------- ------------ ------------
1,755,879 2,342,261 512,716 1,854,666 (65,411) 619,761 50,624 312,907
- ------------ ------------ ------------ ----------- ----------- ----------- ------------ ------------
5,104,058 4,147,818 595,655 2,314,384 (70,417) 610,791 2,049,658 444,375
9,539,229 5,391,411 6,025,259 3,710,875 1,820,367 1,209,576 3,085,953 2,641,578
- ------------ ------------ ------------ ----------- ----------- ----------- ------------ ------------
$14,643,287 $ 9,539,229 $ 6,620,914 $ 6,025,259 $1,749,950 $1,820,367 $ 5,135,611 $ 3,085,953
============ ============ ============ =========== =========== =========== ============ ============
</TABLE>
-11-
<PAGE> 62
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF SEPARATE ACCOUNT ONE OPERATIONS AND CHANGES IN NET ASSETS FOR THE
YEARS ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
<TABLE>
<CAPTION>
SMITH BARNEY MONEY MARKET SMITH BARNEY HIGH INCOME
PORTFOLIO PORTFOLIO
--------------------------------- --------------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ............................................... $ 234,031 $ 228,416 $ 200,075 $ 169,433
------------ ------------- ------------ -----------
EXPENSES:
Insurance charges ....................................... 43,927 41,046 23,989 20,993
Administrative fees ..................................... 20,002 18,564 11,262 10,643
------------ ------------- ------------ -----------
Net investment income (loss) ...................... 170,102 168,806 164,824 137,797
------------ ------------- ------------ -----------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ....................... 8,930,400 10,644,045 565,453 384,631
Cost of investments sold ............................. 8,930,400 10,644,045 575,544 346,152
------------ ------------- ------------ -----------
Net realized gain (loss) .......................... - - (10,091) 38,479
------------ ------------- ------------ -----------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year ............. - - 82,166 297,926
Unrealized gain (loss) end of year ................... - - (39,785) 82,166
------------ ------------- ------------ -----------
Net change in unrealized gain (loss) for the year . - - (121,951) (215,760)
------------ ------------- ------------ -----------
Net increase (decrease) in net assets
resulting from operations ......................... 170,102 168,806 32,782 (39,484)
------------ ------------- ------------ -----------
UNIT TRANSACTIONS:
Participant purchase payments ........................... 6,180,811 15,419,844 25 65
Participant transfers from other Travelers accounts ..... 3,025,232 1,022,032 227,326 959,475
Administrative and asset allocation charges ............. 946,691 453,849 1,662,633 924,661
Contract surrenders ..................................... (113,473) (121,241) (184,405) (40,730)
Participant transfers to other Travelers accounts ....... (9,486,859) (13,287,058) (412,680) (309,441)
Growth rate intra-fund transfer out ..................... (946,691) (453,849) (1,662,633) (924,661)
Other payments to participants .......................... - - - -
------------ ------------- ------------ -----------
Net increase (decrease) in net assets
resulting from unit transactions .................. (394,289) 3,033,577 (369,734) 609,369
------------ ------------- ------------ -----------
Net increase (decrease) in net assets ............. (224,187) 3,202,383 (336,952) 569,885
NET ASSETS:
Beginning of year .................................... 6,855,396 3,653,013 2,926,314 2,356,429
------------ ------------- ------------ -----------
End of year .......................................... $ 6,631,209 $ 6,855,396 $ 2,589,362 $2,926,314
============ ============= ============ ===========
<CAPTION>
SMITH BARNEY LARGE CAP VALUE
PORTFOLIO
---------------------------------
1999 1998
---- ----
<S> <C> <C>
INVESTMENT INCOME:
Dividends ............................................... $ 164,347 $ 147,289
------------ ------------
EXPENSES:
Insurance charges ....................................... 38,095 32,326
Administrative fees ..................................... 18,359 15,976
------------ ------------
Net investment income (loss) ...................... 107,893 98,987
------------ ------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ....................... 791,571 330,113
Cost of investments sold ............................. 691,868 240,119
------------ ------------
Net realized gain (loss) .......................... 99,703 89,994
------------ ------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year ............. 650,296 539,297
Unrealized gain (loss) end of year ................... 377,008 650,296
------------ ------------
Net change in unrealized gain (loss) for the year . (273,288) 110,999
------------ ------------
Net increase (decrease) in net assets
resulting from operations ......................... (65,692) 299,980
------------ ------------
UNIT TRANSACTIONS:
Participant purchase payments ........................... 300 (5)
Participant transfers from other Travelers accounts ..... 751,007 1,177,380
Administrative and asset allocation charges ............. 2,529,164 1,509,749
Contract surrenders ..................................... (110,090) (62,771)
Participant transfers to other Travelers accounts ....... (706,906) (255,480)
Growth rate intra-fund transfer out ..................... (2,529,164) (1,509,749)
Other payments to participants .......................... (29,151) -
------------ ------------
Net increase (decrease) in net assets
resulting from unit transactions .................. (94,840) 859,124
------------ ------------
Net increase (decrease) in net assets ............. (160,532) 1,159,104
NET ASSETS:
Beginning of year .................................... 4,549,052 3,389,948
------------ ------------
End of year .......................................... $ 4,388,520 $ 4,549,052
============ ============
</TABLE>
-12-
<PAGE> 63
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
TRAVELERS MANAGED INCOME
PORTFOLIO VAN KAMPEN ENTERPRISE PORTFOLIO COMBINED
---------------------------- ---------------------------------- ---------------------------------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
$ 22,793 $ 42,136 $ 98,331 $ 232,164 $ 2,397,721 $ 1,964,228
---------- ---------- ------------ ------------ ------------- -------------
6,494 6,925 44,092 33,585 481,628 370,704
3,013 3,315 22,105 16,709 234,475 182,019
---------- ---------- ------------ ------------ ------------- -------------
13,286 31,896 32,134 181,870 1,681,618 1,411,505
---------- ---------- ------------ ------------ ------------- -------------
164,060 253,916 490,450 389,864 20,319,801 14,571,579
164,663 229,663 360,000 259,042 19,600,270 13,786,319
---------- ---------- ------------ ------------ ------------- -------------
(603) 24,253 130,450 130,822 719,531 785,260
---------- ---------- ------------ ------------ ------------- -------------
10,678 39,118 1,229,557 632,515 7,240,118 4,467,693
(5,837) 10,678 2,427,549 1,229,557 16,001,327 7,240,118
---------- ---------- ------------ ------------ ------------- -------------
(16,515) (28,440) 1,197,992 597,042 8,761,209 2,772,425
---------- ---------- ------------ ------------ ------------- -------------
(3,832) 27,709 1,360,576 909,734 11,162,358 4,969,190
---------- ---------- ------------ ------------ ------------- -------------
- (3) - 19,370 6,181,967 15,399,481
46,045 535,274 1,170,116 1,103,718 15,512,601 15,068,220
344,993 362,687 2,219,432 1,226,204 25,803,896 13,558,388
(14,687) (33,144) (70,600) (57,012) (1,432,950) (816,829)
(147,066) (193,135) (305,971) (253,402) (17,734,576) (16,185,232)
(344,993) (362,687) (2,219,432) (1,226,204) (25,803,896) (13,558,388)
- - (73,651) - (338,135) -
---------- ---------- ------------ ------------ ------------- -------------
(115,708) 308,992 719,894 812,674 2,188,907 13,465,640
---------- ---------- ------------ ------------ ------------- -------------
(119,540) 336,701 2,080,470 1,722,408 13,351,265 18,434,830
836,500 499,799 5,105,930 3,383,522 54,967,066 36,532,236
---------- ---------- ------------ ------------ ------------- -------------
$ 716,960 $ 836,500 $ 7,186,400 $ 5,105,930 $ 68,318,331 $ 54,967,066
========== ========== ============ ============ ============= =============
</TABLE>
-13-
<PAGE> 64
NOTES TO FINANCIAL STATEMENTS - CONTINUED
8. SCHEDULE OF UNITS FOR SEPARATE ACCOUNT ONE FOR THE YEARS ENDED DECEMBER 31,
1999 AND 1998
<TABLE>
<CAPTION>
TOTAL RETURN PORTFOLIO SELECT BALANCED PORTFOLIO
--------------------------- ---------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Units beginning of year ...................... 3,832,046 3,051,751 118,053 -
Units purchased and
transferred from other Travelers accounts .. 2,297,644 2,052,523 1,876,903 119,080
Units redeemed and
transferred to other Travelers accounts .... (2,571,984) (1,272,228) (1,847,697) (1,027)
----------- ----------- ----------- ---------
Units end of year ............................ 3,557,706 3,832,046 147,259 118,053
=========== =========== =========== =========
<CAPTION>
SELECT CONSERVATIVE PORTFOLIO
-----------------------------
1999 1998
---- ----
<S> <C> <C>
Units beginning of year ...................... 25,067 -
Units purchased and
transferred from other Travelers accounts .. 25,005 25,356
Units redeemed and
transferred to other Travelers accounts .... (30,466) (289)
--------- --------
Units end of year ............................ 19,606 25,067
========= ========
</TABLE>
<TABLE>
<CAPTION>
SELECT GROWTH PORTFOLIO SELECT INCOME PORTFOLIO MFS EMERGING GROWTH PORTFOLIO
------------------------- ----------------------- -----------------------------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Units beginning of year ...................... 45,301 46,248 77,186 - 629,282 327,674
Units purchased and
transferred from other Travelers accounts .. 45,080 15,433 1,963,029 78,008 808,784 685,380
Units redeemed and
transferred to other Travelers accounts .... (45,993) (16,380) (1,963,933) (822) (505,691) (383,772)
-------- -------- ----------- -------- --------- ---------
Units end of year ............................ 44,388 45,301 76,282 77,186 932,375 629,282
======== ======== =========== ======== ========= =========
</TABLE>
<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 ...................... - 244,090 511,213 489,816 803,502 632,728
Units purchased and
transferred from other Travelers accounts .. - 53,372 298,677 142,158 308,335 545,226
Units redeemed and
transferred to other Travelers accounts .... - (297,462) (304,610) (120,761) (330,790) (374,452)
---- --------- --------- --------- -------- ---------
Units end of year ............................ - - 505,280 511,213 781,047 803,502
==== ========= ========= ========= ======== =========
</TABLE>
<TABLE>
<CAPTION>
AIM CAPITAL APPRECIATION
PORTFOLIO ALLIANCE GROWTH PORTFOLIO
--------------------------- ---------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Units beginning of year ...................... 3,692,106 2,981,929 4,448,786 3,204,642
Units purchased and
transferred from other Travelers accounts .. 2,027,382 2,014,928 3,261,251 2,768,051
Units redeemed and
transferred to other Travelers accounts .... (2,040,345) (1,304,751) (2,491,538) (1,523,907)
----------- ----------- ----------- -----------
Units end of year ............................ 3,679,143 3,692,106 5,218,499 4,448,786
=========== =========== =========== ===========
<CAPTION>
MFS TOTAL RETURN PORTFOLIO
---------------------------
1999 1998
---- ----
<S> <C> <C>
Units beginning of year ...................... 4,003,041 2,719,511
Units purchased and
transferred from other Travelers accounts .. 2,905,251 2,422,803
Units redeemed and
transferred to other Travelers accounts .... (2,573,168) (1,139,273)
----------- -----------
Units end of year ............................ 4,335,124 4,003,041
=========== ===========
</TABLE>
-14-
<PAGE> 65
NOTES TO FINANCIAL STATEMENTS - CONTINUED
8. SCHEDULE OF UNITS FOR SEPARATE ACCOUNT ONE FOR THE YEARS ENDED DECEMBER 31,
1999 AND 1998 (CONTINUED)
<TABLE>
<CAPTION>
PUTNAM DIVERSIFIED INCOME SMITH BARNEY INTERNATIONAL
PORTFOLIO EQUITY PORTFOLIO
-------------------------- ----------------------------
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Units beginning of year ...................... 1,613,850 1,065,400 2,415,924 2,175,509
Units purchased and
transferred from other Travelers accounts .. 1,152,450 1,159,090 1,355,132 1,296,620
Units redeemed and
transferred to other Travelers accounts .... (1,214,416) (610,640) (1,347,931) (1,056,205)
----------- ---------- ----------- -----------
Units end of year .......................... 1,551,884 1,613,850 2,423,125 2,415,924
=========== ========== =========== ===========
<CAPTION>
SMITH BARNEY MONEY MARKET
PORTFOLIO
-----------------------------
1999 1998
<C> <C>
Units beginning of year ...................... 6,097,992 3,369,561
Units purchased and
transferred from other Travelers accounts .. 8,871,828 15,310,363
Units redeemed and
transferred to other Travelers accounts .... (9,268,548) (12,581,932)
----------- ------------
Units end of year ............................ 5,701,272 6,097,992
=========== ============
</TABLE>
<TABLE>
<CAPTION>
SMITH BARNEY HIGH INCOME SMITH BARNEY LARGE CAP VALUE
PORTFOLIO PORTFOLIO
-------------------------- ------------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Units beginning of year ...................... 2,282,622 1,822,547 2,841,367 2,297,582
Units purchased and
transferred from other Travelers accounts .. 1,473,621 1,448,411 2,014,711 1,748,933
Units redeemed and
transferred to other Travelers accounts .... (1,761,864) (988,336) (2,083,863) (1,205,148)
----------- ---------- ----------- -----------
Units end of year ............................ 1,994,379 2,282,622 2,772,215 2,841,367
=========== ========== =========== ===========
<CAPTION>
TRAVELERS MANAGED INCOME
PORTFOLIO
--------------------------
1999 1998
---- ----
<S> <C> <C>
Units beginning of year ...................... 735,975 456,522
Units purchased and
transferred from other Travelers accounts .. 343,783 805,605
Units redeemed and
transferred to other Travelers accounts .... (446,263) (526,152)
--------- ---------
Units end of year ............................ 633,495 735,975
========= =========
</TABLE>
<TABLE>
<CAPTION>
VAN KAMPEN ENTERPRISE PORTFOLIO COMBINED
--------------------------------- ------------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Units beginning of year ...................... 2,641,879 2,164,537 36,815,192 27,050,047
Units purchased and
transferred from other Travelers accounts .. 1,668,389 1,380,694 32,697,255 34,072,034
Units redeemed and
transferred to other Travelers accounts .... (1,324,471) (903,352) (32,153,571) (24,306,889)
----------- ---------- ------------ ------------
Units end of year ............................ 2,985,797 2,641,879 37,358,876 36,815,192
=========== ========== ============ ============
</TABLE>
-15-
<PAGE> 66
INDEPENDENT AUDITORS' REPORT
To the Owners of Variable Life Insurance Contracts of
The Travelers Variable Life Insurance Separate Account One:
We have audited the accompanying statement of assets and liabilities of The
Travelers Variable Life Insurance Separate Account One 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 Variable Life
Insurance Separate Account One 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
-16-
<PAGE> 67
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 Variable Life Insurance Separate Account
One or Separate Account One's underlying funds. It should not be used in
connection with any offer except in conjunction with the Prospectus for The
Travelers Variable Life Insurance Separate Account One product(s) offered by The
Travelers Life and Annuity Company and the Prospectuses for the underlying
funds, which collectively contain all pertinent information, including the
applicable sales commissions.
VG-SEP1 (Annual) (12-99) Printed in U.S.A.
<PAGE> 68
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholder
The Travelers Life and Annuity Company:
We have audited the accompanying balance sheets of The Travelers Life and
Annuity Company as of December 31, 1999 and 1998, and the related 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 financial statements are the
responsibility of the Company's 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. 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 Life and Annuity
Company as of December 31, 1999 and 1998, and the results of its operations and
its 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> 69
THE TRAVELERS LIFE AND ANNUITY COMPANY
STATEMENTS OF INCOME
($ in thousands)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
REVENUES
Premiums $25,270 $23,677 $35,190
Net investment income 177,179 171,003 168,653
Realized investment gains (losses) (4,973) 18,493 44,871
Fee income 54,749 17,718 5,004
Other revenues 13,045 11,168 3,159
- ----------------------------------------------------------------------------------------------------------------------------
Total Revenues 265,270 242,059 256,877
- ----------------------------------------------------------------------------------------------------------------------------
BENEFITS AND EXPENSES
Current and future insurance benefits 78,072 81,371 95,639
Interest credited to contractholders 56,216 51,535 35,165
Amortization of deferred acquisition costs 38,902 15,956 4,944
Operating expenses 11,326 5,012 11,554
- ----------------------------------------------------------------------------------------------------------------------------
Total Benefits and Expenses 184,516 153,874 147,302
- ----------------------------------------------------------------------------------------------------------------------------
Income before federal income taxes 80,754 88,185 109,575
- ----------------------------------------------------------------------------------------------------------------------------
Federal income taxes:
Current 21,738 18,917 33,859
Deferred expense 6,410 11,783 4,344
- ----------------------------------------------------------------------------------------------------------------------------
Total Federal Income Taxes 28,148 30,700 38,203
============================================================================================================================
Net income $52,606 $57,485 $71,372
============================================================================================================================
</TABLE>
See Notes to Financial Statements.
F-2
<PAGE> 70
THE TRAVELERS LIFE AND ANNUITY COMPANY
BALANCE SHEETS
($ in thousands)
<TABLE>
<CAPTION>
DECEMBER 31, 1999 1998
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Fixed maturities, available for sale at fair value (cost, $1,764,329; $1,707,347) $1,713,948 $1,838,681
Equity securities, at fair value (cost, $34,373; $25,826) 33,169 26,685
Mortgage loans 155,719 174,565
Short-term securities 81,119 126,176
Other invested assets 190,622 136,122
- --------------------------------------------------------------------------------------------------------------------------
Total Investments 2,174,577 2,302,229
- --------------------------------------------------------------------------------------------------------------------------
Separate accounts 4,795,165 2,178,474
Deferred acquisition costs 350,088 177,808
Deferred federal income taxes 74,478 12,395
Premium balances receivable 22,420 16,074
Other assets 84,605 57,524
- --------------------------------------------------------------------------------------------------------------------------
Total Assets $7,501,333 $4,744,504
- --------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Future policy benefits $950,959 $963,171
Contractholder funds 1,174,636 947,411
Separate accounts 4,795,165 2,178,474
Other liabilities 114,408 114,690
- --------------------------------------------------------------------------------------------------------------------------
Total Liabilities 7,035,168 4,203,746
- --------------------------------------------------------------------------------------------------------------------------
SHAREHOLDER'S EQUITY
Common stock, par value $100; 100,000 shares authorized,
30,000 issued and outstanding 3,000 3,000
Additional paid-in capital 167,316 167,314
Retained earnings 335,161 282,555
Accumulated other changes in equity from non-owner sources (39,312) 87,889
- --------------------------------------------------------------------------------------------------------------------------
Total Shareholder's Equity 466,165 540,758
- --------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholder's Equity $7,501,333 $4,744,504
==========================================================================================================================
</TABLE>
See Notes to Financial Statements.
F-3
<PAGE> 71
THE TRAVELERS LIFE AND ANNUITY COMPANY
STATEMENTS OF CHANGES IN RETAINED EARNINGS AND ACCUMULATED
OTHER CHANGES IN EQUITY FROM NON-OWNER SOURCES
($ in thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN RETAINED EARNINGS 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of year $282,555 $225,070 $167,698
Net income 52,606 57,485 71,372
Dividends to parent - - 14,000
===========================================================================================================
Balance, end of year $335,161 $282,555 $225,070
===========================================================================================================
- -----------------------------------------------------------------------------------------------------------
STATEMENTS OF ACCUMULATED OTHER CHANGES
IN EQUITY FROM NON-OWNER SOURCES
- -----------------------------------------------------------------------------------------------------------
Balance, beginning of year $87,889 $70,277 $33,856
Unrealized gains (losses), net of tax (127,201) 17,612 36,421
===========================================================================================================
Balance, end of year $(39,312) $87,889 $70,277
===========================================================================================================
- -----------------------------------------------------------------------------------------------------------
SUMMARY OF CHANGES IN EQUITY
FROM NON-OWNER SOURCES
- -----------------------------------------------------------------------------------------------------------
Net Income $52,606 $57,485 $71,372
Other changes in equity from
non-owner sources (127,201) 17,612 36,421
- -----------------------------------------------------------------------------------------------------------
Total changes in equity from
non-owner sources $(74,595) $75,097 $107,793
===========================================================================================================
</TABLE>
See Notes to Financial Statements.
F-4
<PAGE> 72
THE TRAVELERS LIFE AND ANNUITY COMPANY
STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH
($ in thousands)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Premiums collected $24,804 $22,300 $34,553
Net investment income received 150,107 146,158 170,460
Benefits and claims paid (94,503) (90,872) (90,820)
Interest credited to contractholders (50,219) (51,535) (35,165)
Operating expenses paid (235,166) (122,327) (64,698)
Income taxes paid (29,369) (25,214) (22,440)
Other, including fee income 46,028 (46,099) (16,128)
- ----------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by (Used in) Operating Activities (188,318) (75,391) 8,018
- ----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of investments
Fixed maturities 213,402 113,456 81,899
Mortgage loans 28,002 25,462 8,972
Proceeds from sales of investments
Fixed maturities 774,096 1,095,976 856,846
Equity securities 5,146 6,020 12,404
Mortgage loans - - 5,483
Real estate held for sale - - 4,493
Purchases of investments
Fixed maturities (1,025,110) (1,320,704) (1,020,803)
Equity securities (12,524) (13,653) (6,382)
Mortgage loans (8,520) (39,158) (41,967)
Policy loans, net (5,316) (2,010) (1,144)
Short-term securities (purchases) sales, net 45,057 43,054 (88,067)
Other investments (purchases) sales, net (44,621) 1,110 (51,502)
Securities transactions in course of settlement, net (7,033) 36,459 10,526
- ----------------------------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (37,421) (53,988) (229,242)
- ----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Contractholder fund deposits 308,953 211,476 325,932
Contractholder fund withdrawals (83,817) (83,036) (89,145)
Dividends to parent company - - (14,000)
- ----------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 225,136 128,440 222,787
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash (603) (939) 1,563
============================================================================================================================
Cash at December 31, $21 $624 $1,563
============================================================================================================================
</TABLE>
See Notes to Financial Statements.
F-5
<PAGE> 73
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO 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 Life and Annuity Company (the Company) is a wholly owned
subsidiary of The Travelers Insurance Company (TIC), an indirect wholly
owned subsidiary of Citigroup Inc. (Citigroup). The financial statements
and accompanying footnotes of the Company are prepared in conformity with
generally accepted accounting principles. 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.
The Company offers a variety of variable annuity products where the
investment risk is borne by the contractholder, not the Company, and the
benefits are not guaranteed. The premiums and deposits related to these
products are reported in separate accounts. The Company considers it
necessary to differentiate, for financial statement purposes, the results
of the risks it has assumed from those it has not.
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 which 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 statement of financial
position related to the recognition of securities provided and received as
collateral. There was no impact on the results of operations from the
adoption of the collateral provisions of FAS 125.
F-6
<PAGE> 74
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO 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 had no impact on the Company's financial condition,
statement 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 non-redeemable preferred
stocks, are classified as "available for sale" and are 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
current real estate financing market. Impaired loans were insignificant at
December 31, 1999 and 1998.
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.
F-7
<PAGE> 75
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Other invested assets include partnership investments and real estate joint
ventures accounted for on the equity method of accounting. All changes in
equity of these investments are recorded in net investment income.
Accrual of investment income, included in other assets, 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, options, forward contracts and interest rate swaps, as a means of
hedging exposure to foreign currency, equity price changes and/or interest
rate risk on anticipated transactions or existing assets and liabilities.
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.
Forward contracts, and interest rate options were not significant at
December 31, 1999 and 1998. Information concerning derivative financial
instruments is included in Note 4.
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.
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.
SEPARATE ACCOUNTS
The Company has separate account assets and liabilities representing funds
for which investment income and investment gains and losses accrue directly
to, and investment risk is borne by, the contractholders. Each of these
accounts have specific investment objectives. The assets and liabilities of
these accounts are carried at fair value, and amounts assessed to the
contractholders for management services are included in fee income.
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.
F-8
<PAGE> 76
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
DEFERRED ACQUISITION COSTS
Costs of acquiring individual life insurance and annuity 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 are amortized in relation to
anticipated premiums; universal life in relation to estimated gross
profits; and annuity contracts employing a level yield method. A 15 to
20-year amortization period is used for life insurance, 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 annuity
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 an interest rate of 16% for the
annuity business acquired. The 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.
FUTURE POLICY BENEFITS
Benefit reserves represent liabilities for future insurance policy
benefits. Benefit reserves for life insurance and annuity policies have
been computed based upon mortality, morbidity, persistency and interest
assumptions applicable to these coverages, which range from 3.0% to 7.5%,
including a provision for adverse deviation. These assumptions consider
Company experience and industry standards. The assumptions vary by plan,
age at issue, year of issue and duration.
CONTRACTHOLDER FUNDS
Contractholder funds represent receipts from the issuance of universal
life, certain individual annuity contracts, and structured settlement
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 3.3% to 10.0%.
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's liability for guaranty fund assessments
was not significant.
F-9
<PAGE> 77
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
PERMITTED STATUTORY ACCOUNTING PRACTICES
The Company, domiciled in the State of Connecticut, prepares statutory
financial statements in accordance with the accounting practices prescribed
or permitted by the State of Connecticut Insurance Department. 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 the 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 issued 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 by the Connecticut insurance
commissioner. The Company has not yet determined the impact that this
change will have on its statutory capital and surplus.
PREMIUMS
Premiums are recognized as revenues when due. Reserves are established for
the portion of premiums that will be earned in future periods.
FEE INCOME
Fee income includes mortality and equity protection charges and fees earned
on Universal Life and Deferred Annuity businesses.
OTHER REVENUES
Other revenues include surrender, mortality and administrative charges, and
fees earned on investment and other insurance contracts.
FEDERAL INCOME TAXES
The provision for federal income taxes comprises 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. The 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). This statement
establishes accounting and reporting standards for derivative instruments,
F-10
<PAGE> 78
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
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 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 forecasted transaction,
or (c) a hedge of the foreign currency exposure of a net investment in a
foreign 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. FAS 133 was to be effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. However, 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 that have not
adopted FAS 133 to defer its effective date to all fiscal quarters of all
fiscal years beginning after June 15, 2000. The Company expects to adopt
the deferral provisions of FAS 137 and has not yet determined the impact
that FAS 133 will have on its financial statements.
2. 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.
Total in-force business ceded under reinsurance contracts is $12.8 billion
and $8.8 billion at December 31, 1999 and 1998, including $63 million and
$70 million, respectively to TIC. Total life insurance premiums ceded were
$6.5 million, $4.2 million and $2.4 million in 1999, 1998 and 1997,
respectively. Ceded premiums paid to TIC were immaterial for these same
periods.
3. SHAREHOLDER'S EQUITY
Shareholder's Equity and Dividend Availability
The Company's statutory net income (loss) was $(23.4) million, $(3.2)
million and $80.3 million for the years ended December 31, 1999, 1998 and
1997, respectively.
Statutory capital and surplus was $294 million and $328 million 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 $29.4 million is available in 2000 for dividend payments by the
Company without prior approval of the Connecticut Insurance Department.
F-11
<PAGE> 79
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Accumulated Other Changes in Equity from Non-Owner Sources, Net of Tax
Changes in each component of Accumulated Other Changes in Equity From Non-Owner
Sources were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
NET ACCUMULATED
UNREALIZED FOREIGN OTHER CHANGES
GAINS ON CURRENCY IN EQUITY FROM
INVESTMENT TRANSLATION NON-OWNER
($ in thousands) SECURITIES ADJUSTMENT SOURCES
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE, JANUARY 1, 1997 $33,856 $ -- $33,856
Unrealized gains on investment securities,
net of tax of $35,316 65,587 -- 65,587
Less: reclassification adjustment for gains
included in net income, net of tax of $(15,705) (29,166) -- (29,166)
- --------------------------------------------------------------------------------------------------------------------
CURRENT PERIOD CHANGE 36,421 -- 36,421
- --------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1997 70,277 -- 70,277
Unrealized gain on investment securities,
net of tax of $15,957 29,632 -- 29,632
Less: reclassification adjustment for gains
included in net income, net of tax of $(6,473) (12,020) -- (12,020)
- --------------------------------------------------------------------------------------------------------------------
CURRENT PERIOD CHANGE 17,612 -- 17,612
- --------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1998 87,889 -- 87,889
Unrealized gains on investment securities,
net of tax of $(70,234) (130,433) -- (130,433)
Less: reclassification adjustment for losses
included in net income, net of tax of $1,741 3,232 -- 3,232
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
CURRENT PERIOD CHANGE (127,201) -- (127,201)
====================================================================================================================
BALANCE, DECEMBER 31, 1999 $ (39,312) $ -- $ (39,312)
====================================================================================================================
</TABLE>
4. DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS
Derivative Financial Instruments
The Company uses derivative financial instruments, including financial
futures, interest rate 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
does not hold or issue derivative instruments for trading purposes. 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
F-12
<PAGE> 80
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
associated with these instruments can be less than these amounts. For
interest rate swaps, options, and forward contracts, credit risk is limited
to the amounts that it would cost the Company to replace the contracts.
Financial futures contracts and purchased listed option contracts have very
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 that 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 $48.7 million and $41.5 million,
respectively. The deferred gains and/or losses on these contracts were not
significant at December 31, 1999 and 1998. At December 31, 1999 and
1998, the Company's futures contracts had no fair value because these
contracts are marked to market and settled in cash daily.
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. 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.
As of December 31, 1999 and 1998, the Company held interest rate swap
contracts with notional amounts of $231.1 million and $165.3 million,
respectively. The fair value of these financial instruments was $9.5
million (loss position) at December 31, 1999, and was $3.4 million (gain
position) and $.7 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 $43.7 million and a fair value of $4.7 million
(loss position).
F-13
<PAGE> 81
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
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 option contracts
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 values were determined using the discounted
cash flow method.
The off-balance sheet risks of interest rate options and forward contracts
were not significant at December 31, 1999 and 1998.
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 and
joint ventures. The off-balance sheet risk of these financial instruments
was not significant at December 31, 1999 and 1998.
Fair Value of Certain Financial Instruments
The Company uses various financial instruments in the normal course of its
business. Fair values of financial instruments that are considered
insurance contracts are not required to be disclosed and are not included
in the amounts discussed.
At December 31, 1999, investments in fixed maturities had a carrying value
and a fair value of $1.8 billion and $1.7 billion, respectively, compared
with a carrying value and a fair value of $1.7 billion and $1.8 billion,
respectively, at December 31, 1998. See Notes 1 and 10.
At December 31, 1999, mortgage loans had a carrying value of $155.7 million
and a fair value of $156.0 million and in 1998 had a carrying value of
$174.6 million and a fair value of $185.7 million. In estimating fair
value, the Company used interest rates reflecting the current real estate
financing market.
The carrying values of short-term securities and policy loans totaling
$91.3 million and $131.1 million in 1999 and 1998, respectively,
approximated their fair values and are included in other invested assets.
The carrying values of $57.6 million and $36.5 million of financial
instruments classified as other assets approximated their fair values at
December 31, 1999 and 1998, respectively. The carrying values of $100.2
million and $98.4 million 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.
F-14
<PAGE> 82
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
At December 31, 1999, contractholder funds with defined maturities had a
carrying value of $878.9 million and a fair value of $780.5 million,
compared with a carrying value of $725.6 million and a fair value of $698.1
million 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 $481.8 million and a fair value of $409.2 million at December 31, 1999,
compared with a carrying value of $483.0 million and a fair value of $442.5
million at December 31, 1998. These contracts generally are valued at
surrender value.
5. COMMITMENTS AND CONTINGENCIES
Financial Instruments with Off-Balance Sheet Risk
See Note 4.
Litigation
In the ordinary course of business, the Company is a defendant or
co-defendant in various litigation matters incidental to and typical of the
businesses in which it is engaged. In the opinion of the Company's
management, 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.
6. 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 The Travelers Insurance Group Inc. (TIGI), TIC's direct
parent. The Company's share of net expense for the qualified pension and
other postretirement benefit plans was not significant for 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.
7. RELATED PARTY TRANSACTIONS
The principal banking functions, including payment of salaries and
expenses, for certain subsidiaries and affiliates of TIGI, including the
Company, are handled by two companies. TIC 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. TIC provides various employee
benefit
F-15
<PAGE> 83
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
coverages to 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
provided by affiliated companies. Charges for these services are shared by
the companies on cost allocation methods based generally on estimated usage
by department.
TIC maintains a short-term investment pool in which the Company
participates. 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 $31.4 million and $93.1 million at
December 31, 1999 and 1998, respectively, and is included in short-term
securities in the balance sheet.
The Company's TTM Modified Guaranteed Annuity Contracts are subject to a
limited guarantee agreement by TIC in a principal amount of up to $450
million. TIC's obligation is to pay in full to any owner or beneficiary of
the TTM Modified Guaranteed Annuity Contracts principal and interest as and
when due under the annuity contract to the extent that the Company fails to
make such payment. In addition, TIC guarantees that the Company will
maintain a minimum statutory capital and surplus level.
The Company sold structured settlement annuities to the insurance
affiliates of Travelers Property Casualty Corp. (TAP). Premiums and
deposits were $8.9 million and $70.6 million for 1998 and 1997,
respectively. The reduction in premiums and deposits from 1997 to 1998 was
a result of a decision during 1998 to use TIC as the primary issuer of
structured settlement annuities and the Company as the assignment company.
Policy reserves and contractholder fund liabilities associated with these
structured settlements were $766.4 million and $808.7 million at December
31, 1999 and 1998, respectively.
The Company began distributing variable annuity products through its
affiliate, the Financial Consultants of Salomon Smith Barney (SSB) in 1995.
Premiums and deposits related to these products were $1.1 billion, $932.1
million and $615.6 million in 1999, 1998 and 1997, respectively. In 1996,
the Company began marketing various life products through SSB as well. New
premiums related to such products were $40.8 million, $44.5 million and
$24.4 million in 1999, 1998 and 1997, respectively.
During 1998, the Company began distributing deferred annuity products
through its affiliates Primerica Financial Services (Primerica), Citibank,
N.A. (Citibank) and The Copeland Companies (Copeland). Deposits received
from Primerica were $763 million and $216 million. Deposits from Citibank
and Copeland were immaterial for 1999 and 1998.
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 are granted
Citigroup stock options.
Most leasing functions for TIGI and its subsidiaries are handled by TAP.
Rent expense related to these leases is shared by the companies on a cost
allocation method based generally on estimated usage by department. The
Company's rent expense was insignificant in 1999, 1998 and 1997.
F-16
<PAGE> 84
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
At December 31, 1999 and 1998, the Company had investments in Tribeca
Investments, L.L.C., an affiliate of the Company, in the amounts of $22.3
million and $18.3 million, respectively, included in other invested assets.
The Company has loaned $16.6 million of Corporate Bonds to SSB as of
December 31, 1999.
8. FEDERAL INCOME TAXES
The net deferred tax assets at December 31, 1999 and 1998 were comprised of
the tax effects of temporary differences related to the following assets
and liabilities:
<TABLE>
<CAPTION>
($ in thousands) 1999 1998
---- ----
----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred Tax Assets:
Benefit, reinsurance and other reserves $161,629 $121,150
Investments, net 14,270 --
Other 2,394 2,810
----------------------------------------------------------------------------------------------------------------
Total 178,293 123,960
----------------------------------------------------------------------------------------------------------------
Deferred Tax Liabilities:
Investments, net -- (56,103)
Deferred acquisition costs and value of insurance in force (100,537) (51,993)
Other (1,208) (1,399)
----------------------------------------------------------------------------------------------------------------
Total (101,745) (109,495)
----------------------------------------------------------------------------------------------------------------
Net Deferred Tax (Liability) Asset Before Valuation Allowance 76,548 14,465
Valuation Allowance for Deferred Tax Assets (2,070) (2,070)
----------------------------------------------------------------------------------------------------------------
Net Deferred Tax Asset After Valuation Allowance $74,478 $12,395
----------------------------------------------------------------------------------------------------------------
</TABLE>
F-17
<PAGE> 85
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
TIC and its life insurance subsidiaries, including the Company, file a
consolidated federal income tax return. Federal income taxes are allocated
to each member on a separate return basis adjusted for credits and other
amounts required by the consolidation process. Any resulting liability has
been, and will be, paid currently to TIC. Any credits for losses have been,
and will be, paid by TIC to the extent that such credits are for tax
benefits that have been utilized in the consolidated federal income tax
return.
The $2.1 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 provided by the reversal of
the valuation allowance will be recognized by reducing goodwill.
In management's judgment, the $74.5 million "net deferred tax asset after
valuation allowance" as of December 31, 1999, is fully recoverable against
expected future years' taxable ordinary income and capital gains. At
December 31, 1999, the Company had no ordinary or capital loss
carryforwards.
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 $2 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 $700 thousand.
9. NET INVESTMENT INCOME
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
($ in thousands) 1999 1998 1997
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GROSS INVESTMENT INCOME
Fixed maturities $136,039 $130,825 $120,900
Joint venture and partnership income 22,175 22,107 32,336
Mortgage loans 16,126 15,969 14,905
Other 4,417 3,322 2,284
--------------------------------------------------------------------------------------------------------------
178,757 172,223 170,425
--------------------------------------------------------------------------------------------------------------
Investment expenses 1,578 1,220 1,772
--------------------------------------------------------------------------------------------------------------
Net investment income $177,179 $171,003 $168,653
--------------------------------------------------------------------------------------------------------------
</TABLE>
F-18
<PAGE> 86
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
10. INVESTMENTS AND INVESTMENT GAINS (LOSSES)
Realized investment gains (losses) for the periods were as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
($ in thousands) 1999 1998 1997
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REALIZED INVESTMENT GAINS (LOSSES)
Fixed maturities $2,657 $15,620 $29,236
Equity Securities 1,193 1,819 8,385
Other 1,025 525 2,180
Joint venture and partnerships (9,848) 529 5,070
--------------------------------------------------------------------------------------------------------------
Total Realized Investment Gains (Losses) $(4,973) $18,493 $44,871
--------------------------------------------------------------------------------------------------------------
</TABLE>
Changes in net unrealized investment gains (losses) that are included as
accumulated other changes in equity from non-owner sources in shareholder's
equity were as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
($ in thousands) 1999 1998 1997
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
UNREALIZED INVESTMENT GAINS (LOSSES)
Fixed maturities $(181,715) $24,336 $34,451
Other (13,979) 2,760 21,581
--------------------------------------------------------------------------------------------------------------
Total unrealized investment gains (losses) (195,694) 27,096 56,032
Related taxes (68,493) 9,484 19,611
--------------------------------------------------------------------------------------------------------------
Change in unrealized investment gains (losses) (127,201) 17,612 36,421
Balance beginning of year 87,889 70,277 33,856
--------------------------------------------------------------------------------------------------------------
Balance End of Year $(39,312) $87,889 $70,277
--------------------------------------------------------------------------------------------------------------
</TABLE>
F-19
<PAGE> 87
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Fixed Maturities
The amortized cost and fair values of investments in fixed maturities were
as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
GROSS GROSS
DECEMBER 31, 1999 AMORTIZED COST UNREALIZED UNREALIZED FAIR
($ in thousands) GAINS LOSSES VALUE
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE:
Mortgage-backed securities - CMOs and
pass-through securities $211,864 $2,103 $(7,818) $206,149
U.S. Treasury securities and obligations
of U.S. Government and government agencies
and authorities 116,082 2,613 (3,704) 114,991
Obligations of states and political
subdivisions 29,801 7 (3,312) 26,496
Debt securities issued by foreign
governments 44,159 2,813 (198) 46,774
All other corporate bonds 1,358,769 10,351 (52,811) 1,316,309
Redeemable preferred stock 3,654 41 (466) 3,229
-----------------------------------------------------------------------------------------------------------------
Total Available For Sale $1,764,329 $17,928 $(68,309) $1,713,948
-----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
GROSS GROSS
DECEMBER 31, 1998 AMORTIZED COST UNREALIZED UNREALIZED FAIR
($ in thousands) GAINS LOSSES VALUE
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE:
Mortgage-backed securities - CMOs and
pass-through securities $220,105 $ 11,571 $(193) $231,483
U.S. Treasury securities and obligations
of U.S. Government and government agencies
and authorities 289,376 53,782 (274) 342,884
Obligations of states and political
subdivisions 28,749 994 (17) 29,726
Debt securities issued by foreign
governments 40,786 2,966 (375) 43,377
All other corporate bonds 1,124,298 75,870 (13,000) 1,187,168
Redeemable preferred stock 4,033 119 (109) 4,043
-----------------------------------------------------------------------------------------------------------------
Total Available For Sale $1,707,347 $145,302 $(13,968) $1,838,681
-----------------------------------------------------------------------------------------------------------------
</TABLE>
Proceeds from sales of fixed maturities classified as available for sale
were $774 million, $1.1 billion and $857 million in 1999, 1998 and 1997,
respectively. Gross gains of $24.6 million, $32.6 million and $38.1 million
and gross losses of $22.0 million, $17.0 million and $8.9 million in 1999,
1998 and 1997, respectively were realized on those sales.
F-20
<PAGE> 88
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
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 $486.2
million and $427.0 million at December 31, 1999 and 1998, respectively.
The amortized cost and fair value of fixed maturities available for sale at
December 31, 1999, by contractual maturity, are shown below. Actual
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
AMORTIZED FAIR
($ in thousands) COST VALUE
-------------------------------------------------------------------------------------------
<S> <C> <C>
MATURITY:
Due in one year or less $40,556 $40,092
Due after 1 year through 5 years 327,632 322,082
Due after 5 years through 10 years 451,635 441,307
Due after 10 years 732,642 704,318
-------------------------------------------------------------------------------------------
1,552,465 1,507,799
-------------------------------------------------------------------------------------------
Mortgage-backed securities 211,864 206,149
-------------------------------------------------------------------------------------------
Total Maturity $1,764,329 $1,713,948
-------------------------------------------------------------------------------------------
</TABLE>
The Company makes significant 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 with a market value of
$167.7 million and $181.6 million, respectively. The Company's CMO holdings
were 65.9% and 62.9% collateralized by GNMA, FNMA or FHLMC securities at
December 31, 1999 and 1998, respectively.
F-21
<PAGE> 89
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Equity Securities
The cost and market values of investments in equity securities were as
follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
EQUITY SECURITIES: GROSS UNREALIZED GROSS UNREALIZED
($ in thousands) COST GAINS LOSSES FAIR VALUE
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1999
Common stocks $4,966 $ 730 $ (256) $5,440
Non-redeemable preferred stocks 29,407 533 (2,211) 27,729
------------------------------------------------------------------------------------------------------------------
Total Equity Securities $34,373 $1,263 $(2,467) $33,169
------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1998
Common stocks $5,185 $ 889 $(292) $5,782
Non-redeemable preferred stocks 20,641 707 (445) 20,903
------------------------------------------------------------------------------------------------------------------
Total Equity Securities $25,826 $1,596 $(737) $26,685
------------------------------------------------------------------------------------------------------------------
</TABLE>
Proceeds from sales of equity securities were $5.1 million, $6.0 million
and $12.4 million in 1999, 1998 and 1997, respectively. Gross gains of $1.5
million, $2.6 million and $8.6 million were realized on those sales during
1999, 1998 and 1997, respectively.
Gross losses were insignificant during the same periods.
Mortgage Loans
Underperforming assets include delinquent mortgage loans, loans in the
process of foreclosure and loans modified at interest rates below market.
At December 31, 1999 and 1998, the Company's mortgage loan portfolios
consisted of the following:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
($ in thousands) 1999 1998
-----------------------------------------------------------------------------------
<S> <C> <C>
Current Mortgage Loans $151,814 $170,635
Underperforming Mortgage Loans 3,905 3,930
-----------------------------------------------------------------------------------
Total $155,719 $174,565
-----------------------------------------------------------------------------------
</TABLE>
Aggregate annual maturities on mortgage loans at December 31, 1999 are as
follows:
<TABLE>
----------------------------------------------------------------
<S> <C>
($ in thousands)
2000 $20,791
2001 1,563
2002 6,292
2003 4,896
2004 4,167
Thereafter 118,010
================================================================
Total $155,719
================================================================
</TABLE>
F-22
<PAGE> 90
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Concentrations
Significant individual investment concentrations included:
<TABLE>
<CAPTION>
---------------------------------------------------------------------
($ in thousands) 1999 1998
---------------------------------------------------------------------
<S> <C> <C>
Tishman Speyer Joint Venture $63,199 $62,400
Bell South Corp. 23,689 53,322
---------------------------------------------------------------------
</TABLE>
The Company participates in a short-term investment pool maintained by an
affiliate. See Note 7.
Included in fixed maturities are below investment grade assets totaling
$141.4 million and $102.4 million at December 31, 1999 and 1998,
respectively. The Company defines its below investment grade assets as
those securities rated "Ba1" or below by external rating agencies, or the
equivalent by internal analysts when a public rating does not exist. Such
assets include publicly traded below investment grade bonds and certain
other privately issued bonds and notes that are classified as below
investment grade bonds.
The Company's industry concentrations of investments, primarily fixed
maturities, were as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------
($ in thousands) 1999 1998
---------------------------------------------------------------------
<S> <C> <C>
Banking $152,848 $160,713
Transportation 139,519 155,116
Electric utilities 103,897 109,027
Finance 103,385 69,916
Oil & Gas 102,739 45,172
---------------------------------------------------------------------
</TABLE>
The Company held investments in Foreign Banks in the amount of $125 million
and $115 million at December 31, 1999 and 1998, respectively, which are
included in the table above.
Below investment grade assets included in the preceding table were not
significant.
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 December 31, 1999 and 1998 balance sheets that
were non-income producing were insignificant.
F-23
<PAGE> 91
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Restructured Investments
Mortgage loan and debt securities which were restructured at below market
terms at December 31, 1999 and 1998 were insignificant. The new terms of
restructured investments 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 assets was
insignificant. Interest on these assets, included in net investment income,
was insignificant.
11. DEPOSIT FUNDS AND RESERVES
At December 31, 1999, the Company had $2.1 billion of life and annuity
deposit funds and reserves. Of that total, $1.4 billion were not subject to
discretionary withdrawal based on contract terms. The remaining $.7 billion
were life and annuity products that were subject to discretionary
withdrawal by the contractholders. Included in the amount that is subject
to discretionary withdrawal were $.5 billion of liabilities that are
surrenderable with market value adjustments. The remaining $.2 billion of
life insurance and individual annuity liabilities are subject to
discretionary withdrawals with an average surrender charge of 4.9%. The
life insurance risks would have to be underwritten again if transferred to
another carrier, which is considered a significant deterrent for long-term
policyholders. Insurance liabilities that are surrendered or withdrawn from
the Company are reduced by outstanding policy loans and related accrued
interest prior to payout.
12. RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES
The following table reconciles net income to net cash provided by (used in)
operating activities:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1999 1998 1997
---- ---- ----
($ in thousands)
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Income From Continuing Operations $ 52,606 $ 57,485 $ 71,372
Adjustments to reconcile net income to cash provided by
operating activities:
Realized gains (4,973) (18,493) (44,871)
Deferred federal income taxes 6,410 11,783 4,344
Amortization of deferred policy acquisition costs 38,902 15,956 4,944
Additions to deferred policy acquisition costs (211,182) (120,278) (56,975)
Investment income accrued (27,072) (3,821) 908
Premium balances (466) (6,786) (3,450)
Insurance reserves (16,431) (8,431) 3,981
Other (26,112) (2,806) 27,765
------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operations $(188,318) $(75,391) $8,018
------------------------------------------------------------------------------------------------------------------
</TABLE>
13. NON-CASH INVESTING AND FINANCING ACTIVITIES
There were no significant non-cash investing and financing activities
for 1999, 1998 and 1997.
F-24
<PAGE> 92
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> 93
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
- - The facing sheet.
- - The Prospectus.
- - The undertaking to file reports.
- - The signatures.
- - Attachments:
A. Consent of Katherine M. Sullivan, General Counsel, to the 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, 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 Life and Annuity
Company authorizing the establishment of the Registrant. (Incorporated
herein by reference to Exhibit 1 to Pre-Effective Amendment No. 1 to
the Registration Statement on Form S-6, filed August 21, 1995.)
2. Not applicable.
3(a). Distribution and Principal Underwriting Agreement among the Registrant,
The Travelers Life and Annuity 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. 333-60215, filed
November 9, 1998.)
3(b). Selling Agreement. (Incorporated herein by reference to Exhibit 3(b) to
Pre-Effective Amendment No. 1 to the Registration Statement on Form
N-4, File No. 333-60215, filed November 9, 1998.)
3(c). Agents Agreement, including schedule of sales commissions.
(Incorporated herein by reference to Exhibit 3(c) to Post-Effective
Amendment No. 1 to the Registration Statement on Form S-6, filed April
24, 1997.)
4. None
5. Variable Life Insurance Policy. (Incorporated herein by reference to
Exhibit 5 to Pre-Effective Amendment No. 1 to the Registration
Statement on Form S-6, filed August 21, 1995.)
6(a). Charter of The Travelers Life and Annuity Company, as amended on April
10, 1990. (Incorporated herein by reference to Exhibit 3(a) to the
Registration Statement on Form N-4, File No. 33-58131, filed via Edgar
on March 17, 1995.)
6(b). By-Laws of The Travelers Life and Annuity Company, as amended on
October 20, 1994. (Incorporated herein by reference to Exhibit 3(b) to
the Registration Statement on Form N-4, File No. 33-58131, filed via
Edgar on March 17, 1995.)
7. None
8. None
<PAGE> 94
9. None
10. Application for Variable Life Insurance Policy. (Incorporated herein by
reference to Exhibit 10 to Post-Effective Amendment No. 3 to the
Registration Statement on Form S-6, filed April 24, 1998.)
11. Opinion of Counsel, regarding the legality of securities being
registered. (Incorporated herein by reference to Exhibit 11 to
Post-Effective Amendment No. 3 to the Registration Statement on Form
S-6, filed April 24, 1998.)
12. Powers of Attorney authorizing Ernest J. Wright or Kathleen A. McGah as
signatory for Michael A. Carpenter, Jay S. Benet, George C. Kokulis,
Ian R. Stuart, Katherine M. Sullivan, Robert I. Lipp and Marc P. Weill.
(Incorporated herein by reference to Exhibit 12 to Post-Effective
Amendment No. 1 to the Registration Statement on Form S-6, filed April
24, 1997.)
12(b). Powers of Attorney authorizing Ernest J. Wright or Kathleen A. McGah as
signatory for George C. Kokulis, Katherine M. Sullivan and Glenn D.
Lammey.
13. Memorandum concerning transfer and redemption procedures, as required
by Rule 6e-3(T)(b)(12)(ii). (Incorporated herein by reference to
Exhibit 13 to Pre-Effective Amendment No. 1 to the Registration
Statement on Form S-6, filed August 21, 1995.)
<PAGE> 95
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant, The
Travelers Variable Life Insurance Separate Account One, certifies that it meets
all of the requirements for effectiveness of this post-effective amendment to
this registration statement pursuant to Rule 485(b) under the Securities Act of
1933 and has duly caused this post-effective amendment to this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Hartford, State of Connecticut, on the 25th day of
April, 2000.
THE TRAVELERS VARIABLE LIFE INSURANCE SEPARATE ACCOUNT ONE
(Registrant)
THE TRAVELERS LIFE AND ANNUITY COMPANY
(Depositor)
By:*GLENN D. LAMMEY
-----------------------------------------
Glenn D. Lammey, Chief Financial Officer,
Chief Accounting Officer and Controller
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities indicated
on the 25th day of April 2000.
*GEORGE C. KOKULIS Director, President and Chief Executive Officer
- --------------------------- (Principal Executive Officer)
(George C. Kokulis)
*KATHERINE M. SULLIVAN Director
- ---------------------------
(Katherine M. Sullivan)
*MARC P. WEILL Director
- ---------------------------
(Marc P. Weill)
*By: /s/Ernest J. Wright, Attorney-in-Fact
<PAGE> 96
EXHIBIT INDEX
<TABLE>
<CAPTION>
Attachment
or
Exhibit
No. Description Method of Filing
- ------- ----------- ----------------
<S> <C> <C>
ATTACHMENTS:
B. Consent and Actuarial Opinion pertaining to the Electronically
illustrations contained in the Prospectus.
C. Consent of KPMG LLP, Independent Certified Public Accountants. Electronically
EXHIBITS:
12(b). Powers of Attorney authorizing Ernest J. Wright or Electronically
Kathleen A. McGah as signatory for George C. Kokulis,
Katherine M. Sullivan and Glenn D. Lammey.
</TABLE>
<PAGE> 1
ATTACHMENT B
Re: Travelers' VintageLife (File No. 33-88578)
Dear Sir or Madam:
In my capacity as Actuary of The Travelers Life and Annuity Company, I have
provided actuarial advice concerning Travelers' Vintage Life product. I also
provided actuarial advice concerning the preparation of the Registration
Statement on Form S-6, File No. 33-88578 (the "Registration Statement") for
filing with the Securities and Exchange Commission under the Securities Act of
1933 in connection with the Policy.
In my opinion the illustrations of benefits under the Policies included in the
prospectus under the caption "Illustrations of Death Benefit, Cash Values and
Cash Surrender Values" are, based on the assumptions stated in the
illustrations, consistent with the provisions of the Policies. Also, in my
opinion the age selected in the illustrations is representative of the manner in
which the Policies operate.
I hereby consent to the use of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/s/Mahir Dugentas, ASA, MAAA
Pricing Actuary
Product Development
April 25, 2000
<PAGE> 1
ATTACHMENT C
Consent of Independent Certified Public Accountants
Board of Directors
The Travelers Life and Annuity Company
We consent to the use of our reports included herein and to the reference to our
firm under the heading "Experts" in the prospectus.
/s/KPMG LLP
Hartford, Connecticut
April 25, 2000
<PAGE> 1
EXHIBIT 12(b)
THE TRAVELERS VARIABLE LIFE INSURANCE SEPARATE ACCOUNT ONE
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, GEORGE C. KOKULIS of Simsbury, Connecticut, Director, President
and Chief Executive Officer of The Travelers Life and Annuity Company (hereafter
the "Company"), do hereby make, constitute and appoint ERNEST J. WRIGHT,
Secretary of said Company, and KATHLEEN A. McGAH, Assistant Secretary of said
Company, or either one of them acting alone, my true and lawful
attorney-in-fact, for me, and in my name, place and stead, to sign registration
statements on behalf of said Company on Form S-6 or other appropriate form under
the Securities Act of 1933 for The Travelers Variable Life Insurance Separate
Account One, a separate account of the Company dedicated specifically to the
funding of variable life insurance contracts to be offered by said Company, and
further, to sign any and all amendments thereto, including post-effective
amendments, that may be filed by the Company on behalf of said registrant.
IN WITNESS WHEREOF, I have hereunto set my hand this 10th day of April
2000.
/s/George C. Kokulis
Director, President and Chief Executive Officer
The Travelers Life and Annuity Company
<PAGE> 2
THE TRAVELERS VARIABLE LIFE INSURANCE SEPARATE ACCOUNT ONE
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, KATHERINE M. SULLIVAN of Longmeadow, Massachusetts, a Director
of The Travelers Life and Annuity Company (hereafter the "Company"), do hereby
make, constitute and appoint ERNEST J. WRIGHT, Secretary of said Company, and
KATHLEEN A. McGAH, Assistant Secretary of said Company, or either one of them
acting alone, my true and lawful attorney-in-fact, for me, and in my name, place
and stead, to sign registration statements on behalf of said Company on Form S-6
or other appropriate form under the Securities Act of 1933 for The Travelers
Variable Life Insurance Separate Account One, a separate account of the Company
dedicated specifically to the funding of variable life insurance contracts to be
offered by said Company, and further, to sign any and all amendments thereto,
including post-effective amendments, that may be filed by the Company on behalf
of said registrant.
IN WITNESS WHEREOF, I have hereunto set my hand this 31st day of March
2000.
/s/Katherine M. Sullivan
Director
The Travelers Life and Annuity Company
<PAGE> 3
THE TRAVELERS VARIABLE LIFE INSURANCE SEPARATE ACCOUNT ONE
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, GLENN D. LAMMEY of Simsbury, Connecticut, Chief Financial
Officer, Chief Accounting Officer and Controller of The Travelers Life and
Annuity Company (hereafter the "Company"), do hereby make, constitute and
appoint ERNEST J. WRIGHT, Secretary of said Company, and KATHLEEN A. McGAH,
Assistant Secretary of said Company, or either one of them acting alone, my true
and lawful attorney-in-fact, for me, and in my name, place and stead, to sign
registration statements on behalf of said Company on Form S-6 or other
appropriate form under the Securities Act of 1933 for The Travelers Variable
Life Insurance Separate Account One, a separate account of the Company dedicated
specifically to the funding of variable life insurance contracts to be offered
by said Company, and further, to sign any and all amendments thereto, including
post-effective amendments, that may be filed by the Company on behalf of said
registrant.
IN WITNESS WHEREOF, I have hereunto set my hand this 31st day of March
2000.
/s/Glenn D. Lammey
Chief Financial Officer,
Chief Accounting Officer and Controller
The Travelers Life and Annuity Company
