1
Registration Statement No. 333-56952
811-03927
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO 1 TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
A. Exact Name of Trust: THE TRAVELERS FUND UL FOR VARIABLE LIFE INSURANCE
B. Name of Depositor: THE TRAVELERS INSURANCE COMPANY
C. Complete Address of Depositor's Principal Executive Offices:
One Tower Square,
Hartford, Connecticut 06183
D. Name and Complete Address of Agent for Service:
Ernest J. Wright, Secretary
The Travelers Insurance Company
One Tower Square
Hartford, Connecticut 06183
It is proposed that this filing will become effective (check appropriate box):
- ----------- immediately upon filing pursuant to paragraph (b)
- ----------- on ___________ pursuant to paragraph (b)
- ----------- 60 days after filing pursuant to paragraph (a)(1)
- ----------- on __________ pursuant to paragraph (a)(1) of Rule 485.
If appropriate, check the following box:
- ----------- this post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
E. Title of securities being registered:
Variable Life Insurance Policies.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940 the
Registrant hereby declares that an indefinite amount of its Variable
Life Insurance Policies is being registered under the Securities Act of
1933.
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F. Approximate date of proposed public offering:
As soon as practicable following the effectiveness of the Registration
Statement
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
- ----------- Check the box if it is proposed that this filing will become
effective on ____ at ___ pursuant to Rule 487. ______
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RECONCILIATION AND TIE BETWEEN
FORM N-8B-2 AND THE PROSPECTUS
------------------------------
Item No. of
Form N-8B-2 CAPTION IN PROSPECTUS
- ----------- ---------------------
1 Cover page
2 Cover page
3 Not applicable
4 The Company; Distribution
5 The Travelers Fund UL for Variable Life Insurance
6 The Travelers Fund UL for Variable Life Insurance
7 Not applicable
8 Not applicable
9 Legal Proceedings and Opinion
10 Prospectus Summary; The Company; The Travelers
Fund UL for Variable Life Insurance, The
Investment Options; How the Policy Works;
Transfers of Cash Value; The Separate Account and
Valuation; Voting Rights; Disregard of Voting
Instructions; Dividends; Lapse and Reinstatement
11 Prospectus Summary; The Investment Options
12 Prospectus Summary; The Investment Options
13 Charges and Deductions; Distribution
14 How the Policy Works
15 Prospectus Summary; Applying Premium Payments
16 The Investment Options; Applying Premium Payments
17 Prospectus Summary; Right to Cancel; The Separate
Account and Valuation; Policy Loans; Exchange
Rights
18 The Investment Options; Charges and Deductions;
Federal Tax Considerations; Dividends
19 Statements to Policy Owners
20 Not applicable
21 Policy Loans
22 Not applicable
23 Not applicable
24 Not applicable
25 The Company
26 Not applicable
27 The Company
28 The Company; Management
29 The Company
30 Not applicable
31 Not applicable
32 Not applicable
33 Not applicable
34 Not applicable
35 The Company; Distribution
36 Not applicable
37 Not applicable
38 Distribution
39 The Company; Distribution
40 Not applicable
41 The Company; Distribution
42 Not applicable
43 Not applicable
44 Applying Premium Payments; Accumulation Unit
Values
45 Not applicable
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Item No. of
Form N-8B-2 CAPTION IN PROSPECTUS
- ----------- ---------------------
46 The Separate Account and Valuation; Access to Cash
Values
47 The Investment Options
48 Not applicable
49 Not applicable
50 Not applicable
51 Prospectus Summary; The Company; How the Policy
Works; Death Benefits and Lapse and Reinstatement
52 The Investment Options
53 Federal Tax Considerations
54 Not applicable
55 Not applicable
56 Not applicable
57 Not applicable
58 Not applicable
59 Financial Statements
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TRAVELERS VARIABLE SURVIVORSHIP LIFE II
INDIVIDUAL VARIABLE UNIVERSAL LIFE INSURANCE POLICIES
PROSPECTUS
JUNE 20, 2001
The Travelers Insurance Company, One Tower Square, Hartford, Connecticut 06183 X
Telephone: (800) 334-4298
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PROSPECTUS
This Prospectus describes Travelers Variable Survivorship Life II, a variable
universal (flexible premium) life insurance Policy (the "Policy") offered by The
Travelers Insurance Company (the "Company"). The Policy is designed to insure
two individuals. We will pay the beneficiary the death benefit upon the second
death of the two named Insureds. The Policy Owner ("you") choose the amount of
life insurance coverage desired with a minimum Stated Amount of $100,000. You
direct the net premium payment to one or more of the variable funding options
(the "Investment Options").
During the Policy's Right to Cancel Period, the Applicant may return the Policy
to the Company for a refund (see the "Right to Cancel" section for more
details). The Right to Cancel Period expires on the latest of ten days after you
receive the Policy, ten days after we mail or deliver to you a written Notice of
Right to Cancel, or 45 days after the Applicant signs the application for
insurance (or later if state laws requires).
The Policy has no guaranteed minimum Cash Value. The Cash Value of the Policy
will vary to reflect the investment performance of the Investment Options to
which you have directed your premium payments. You bear the investment risk
under this Policy. The Cash Value is reduced by the various fees and charges
assessed under the Policy, as described in this Prospectus. The Policy will
remain in effect for as long as the Cash Surrender Value can pay the monthly
Policy charges and loan interest due but not paid in cash (subject to the Grace
Period provision), or for a longer period as may be provided under the Lapse
Protection Guarantee Rider.
We offer two death benefits under the Policy -- the "Level Option" and the
"Variable Option." Under either option, the death benefit will never be less
than the Amount Insured (less any outstanding Policy loans or Monthly Deduction
Amounts due and unpaid). You choose one at the time you apply for the Policy,
however you may change the death benefit option, subject to certain conditions.
This Policy may be or become a modified endowment Policy under federal tax law.
If so, any partial withdrawal, Policy surrender or loan may result in adverse
tax consequences or penalties.
REPLACING EXISTING INSURANCE WITH THIS POLICY MAY NOT BE TO YOUR ADVANTAGE.
EACH OF THE UNDERLYING FUND 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 HAVE APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS COMPLETE OR TRUTHFUL. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
VARIABLE LIFE INSURANCE POLICIES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED
OR GUARANTEED BY ANY BANK, NOR ARE THEY FEDERALLY INSURED OR OTHERWISE PROTECTED
BY THE FDIC, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY; THEY ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL INVESTMENT.
THE DATE OF THIS PROSPECTUS IS JUNE 20, 2001.
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TABLE OF CONTENTS
Glossary of Special Terms............. 3
Prospectus Summary.................... 5
General Description................... 11
The Application..................... 11
How the Policy Works.................. 11
Applying Premium Payments........... 11
The Investment Options................ 12
Policy Benefits and Rights............ 16
Transfers of Cash Value............. 16
Telephone Transfers.............. 16
Automated Transfers................. 16
Dollar Cost Averaging............ 16
Portfolio Rebalancing............ 17
Additional Insurance Benefits
(Riders)......................... 18
Exchange Rights..................... 18
Right to Cancel..................... 19
Access to Cash Values................. 19
Policy Loans........................ 19
Consequences..................... 19
Policy Surrenders................... 19
Full Surrenders.................. 19
Partial Withdrawals.............. 20
Death Benefit......................... 20
Option 1............................ 21
Option 2............................ 21
Payment of Proceeds................. 21
Payment Options..................... 21
Maturity Benefits..................... 22
Maturity Extension Rider............ 22
Coverage Extension Rider............ 22
Charges and Deductions................ 23
General............................. 23
Charges Against Premium............. 23
Front-End Sales Charge........... 23
State Premium Tax Charge......... 23
DAC Charge....................... 24
Monthly Deduction Amount............ 24
Cost of Insurance Charge......... 24
Policy Administrative Expense
Charge......................... 24
Charges for Supplemental Benefit
Provisions..................... 24
Charges Against the Separate
Account.......................... 24
Mortality and Expense Risk
Charge......................... 24
Administrative Expense Charge.... 24
Underlying Fund Expenses............ 24
Surrender Charges................... 25
Transfer Charge..................... 25
Reduction or Elimination of
Charges.......................... 25
The Separate Account and Valuation.... 25
The Travelers Fund UL for Variable
Life Insurance (Fund UL)......... 25
How the Cash Value Varies........ 26
Accumulation Unit Value.......... 26
Net Investment Factor............ 26
Changes to the Policy................. 27
General............................. 27
Changes in Stated Amount............ 27
Changes in Death Benefit Option..... 27
Additional Policy Provisions.......... 27
Assignment.......................... 27
Limit on Right to Contest and
Suicide Exclusion................ 28
Misstatement as to Sex and Age...... 28
Voting Rights....................... 28
Disregard of Voting Instructions.... 28
Other Matters......................... 29
Statements to Policy Owners......... 29
Suspension of Valuation............. 29
Dividends........................... 29
Mixed and Shared Funding............ 29
Distribution........................ 30
Legal Proceedings and Opinion....... 30
Experts............................. 30
Federal Tax Considerations............ 31
The Company........................... 35
Management............................ 36
Directors of The Travelers Insurance
Company.......................... 36
Senior Officers of The Travelers
Insurance Company................ 36
Example of Policy Charges............. 37
Illustrations......................... 37
Appendix A (Performance
Information)........................ A-1
Financial Statements of the Separate
Account
Financial Statements of the Company
2
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GLOSSARY OF SPECIAL TERMS
- --------------------------------------------------------------------------------
ACCUMULATION UNIT -- a standard of measurement used to calculate the values
allocated to the Investment Options.
AMOUNT INSURED -- equals the Stated Amount if Death Benefit Option 1 is
selected; equals the Stated Amount plus Cash Value if Death Benefit Option 2 is
selected. The Amount Insured will always be at least equal to the Minimum Amount
Insured described on the Policy Summary.
BENEFICIARY(IES) -- the person(s) named to receive the benefits of this Policy
at the Second Death.
CASH SURRENDER VALUE -- the Cash Value less any outstanding Policy loan and
applicable surrender charges.
CASH VALUE -- the current value of Accumulation Units credited to each of the
Investment Options available under the Policy, plus the value of the Loan
Account.
COMPANY'S HOME OFFICE -- the principal executive offices of The Travelers
Insurance Company located at One Tower Square, Hartford, Connecticut 06183.
DEATH BENEFIT -- the amount payable to the Beneficiary if the Second Death
occurs while this 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.
INSUREDS -- the two people on whose lives the Policy is issued.
INVESTMENT OPTIONS -- the segments of the Separate Account to which you may
allocate premiums or Cash Value. Each Investment Option invests directly in a
corresponding Underlying Fund.
ISSUE DATE -- the date on which a new Policy is issued by the Company for
delivery to the Policy Owner.
LAPSE PROTECTION GUARANTEE RIDER (IN BASE POLICY IN NEW YORK) -- a rider which
provides that the Policy will not lapse during the first ten Policy Years if a
required amount of premium is paid. (Not available in all states.)
LOAN ACCOUNT -- an account in the Company's general account to which we transfer
the amount of any Policy loan, and to which we credit and charge a fixed rate of
interest.
MATURITY DATE -- The anniversary of the Policy Date on which the younger Insured
is age 100.
MINIMUM AMOUNT INSURED -- the amount of Death Benefit required to qualify this
Policy as life insurance under federal tax law.
MONTHLY DEDUCTION AMOUNT -- the amount of charges deducted from the Policy's
Cash Value which includes cost of insurance charges, administrative charges, and
any charges for supplemental benefits.
MONTHLY LAPSE PROTECTION PREMIUM -- an amount shown on the Policy Summary page,
the cumulative amount of which must be paid during the first ten Policy Years in
order for the Lapse Protection Guarantee to be in effect.
NET AMOUNT AT RISK -- an amount equal to the Amount Insured minus the Cash
Value.
NET PREMIUM -- the amount of each premium payment, minus the deduction of any
front-end sales charges, premium tax charges and federal deferred acquisition
cost charge.
PLANNED PREMIUM -- the amount of premium which the Policy Owner chooses to pay
to the Company on a scheduled basis, and for which the Company will bill the
Policy Owner, either annually, semiannually or through automatic monthly
checking account deductions.
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POLICY DATE -- the date on which the Policy, benefits and provisions of the
Policy become effective.
POLICY MONTH -- monthly periods computed from the Policy Date.
POLICY OWNER(S) (YOU, YOUR OR OWNER) -- the person(s) having rights to benefits
under the Policy during the lifetime of the Insureds; the Policy Owner(s) may or
may not be the Insured(s).
POLICY YEARS -- annual periods computed from the Policy Date.
SECOND DEATH -- the second death of the two Insureds under this policy. If we
are unable to determine which death was second based on the Due Proof of Death,
the younger Insured's death will be considered the second death, unless you and
we agree otherwise.
SEPARATE ACCOUNT -- assets set aside by The Travelers Insurance Company, the
investment performance of which is kept separate from that of other assets of
The Travelers Insurance Company; for example, The Travelers Fund UL for Variable
Life Insurance ("Fund UL").
STATED AMOUNT -- the amount originally selected by the Policy Owner used to
determine the Death Benefit, or as may be increased or decreased as described in
this Prospectus.
UNDERLYING FUND -- the underlying mutual fund that corresponds to each
Investment Option. Each Investment Option invests directly in an Underlying
Fund.
VALUATION DATE -- a day on which the Separate Account is valued. A Valuation
Date is any day on which the New York Stock Exchange is open for trading and the
Company is open for business. The value of Accumulation Units will be determined
as of 4:00 p.m. Eastern time.
VALUATION PERIOD -- the period between the close of business on successive
Valuation Dates.
WE, US, OUR -- The Travelers Insurance Company.
4
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PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------
WHAT IS VARIABLE SURVIVORSHIP LIFE INSURANCE?
This Flexible Premium Variable Survivorship Life Insurance Policy is designed to
provide insurance protection on the lives of two Insureds and to build Cash
Value. Like other survivorship life insurance, it provides an income-tax free
death benefit that is payable to the Beneficiary upon the second death of the
two Insureds. 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 which in turn invest in the corresponding Underlying
Funds. These Investment Options include equity, bond, money market and other
types of portfolios. Your Cash Value will change daily, depending on investment
return. No minimum amount is guaranteed as in a traditional life insurance
policy.
INVESTMENT OPTIONS: You have the ability to choose from a wide variety of
Investment Options. The Investment Options invest directly in the Underlying
Funds. These professionally managed stock, bond and money market funds cover a
broad spectrum of investment objectives and risk tolerance. The following
Investment Options (subject to state availability) are available currently:
TRAVELERS VARIABLE SURVIVORSHIP LIFE II
Capital Appreciation Fund (Janus)
Managed Assets Trust
Travelers Money Market Portfolio
ALLIANCE VARIABLE PRODUCT SERIES FUND, INC.
Premier Growth Portfolio -- Class B
AMERICAN VARIABLE INSURANCE SERIES
Global Growth Fund -- Class 2
Growth Fund -- Class 2
Growth-Income Fund -- Class 2
AYCO SERIES TRUST
Ayco Large Cap Growth Fund I
CREDIT SUISSE WARBURG PINCUS TRUST
Emerging Markets Portfolio
DEUTSCHE ASSET MANAGEMENT VIT FUNDS
EAFE(R) Equity Index Fund (Bankers Trust)
Small Cap Index Fund (Bankers Trust)
DREYFUS VARIABLE INVESTMENT FUND
Small Cap Portfolio -- Initial Shares
FRANKLIN TEMPLETON VARIABLE INSURANCE
PRODUCTS TRUST
Franklin Small Cap Fund -- Class 2
GREENWICH STREET SERIES FUND
Equity Index Portfolio -- Class I
Fundamental Value Portfolio (Smith Barney)
JANUS ASPEN SERIES
Aggressive Growth Portfolio -- Service Shares
Global Technology Portfolio -- Service Shares
Worldwide Growth Portfolio -- Service Shares
PIMCO VARIABLE INSURANCE TRUST
Total Return Bond Portfolio
PUTNAM VARIABLE TRUST
Putnam VT International Growth Fund --
Class IB Shares
Putnam VT Voyager II Fund -- Class IB Shares
TRAVELERS SERIES FUND INC.
AIM Capital Appreciation Portfolio
Alliance Growth Portfolio
MFS Total Return Portfolio
Putnam Diversified Income Portfolio
Smith Barney Aggressive Growth Portfolio
Smith Barney High Income Portfolio
Smith Barney International All Cap Growth
Portfolio
Smith Barney Large Cap Value Portfolio
Smith Barney Large Capitalization Growth Portfolio
THE TRAVELERS SERIES TRUST
Convertible Bond Portfolio
Equity Income Portfolio (Fidelity)
Large Cap Portfolio (Fidelity)
MFS Mid Cap Growth Portfolio
U.S. Government Securities Portfolio
VAN KAMPEN LIFE INVESTMENT TRUST
Emerging Growth Portfolio
VARIABLE INSURANCE PRODUCTS FUND II (FIDELITY)
Contrafund(R) Portfolio -- Service Class
Additional Investment Options may be added from time to time. For more
information, see "The Investment Options." Refer to each Underlying Fund's
prospectus for a complete description of the investment objectives, restrictions
and other material information.
PREMIUMS: When applying for your Policy, you state how much you intend to pay,
and whether you will pay annually, semiannually or monthly via checking account
deductions. You may also make unscheduled premium payments in any amount. No
premium payments will be accepted if
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receipt of such premiums would disqualify the Policy as life insurance under
applicable federal tax laws.
You indicate on your application what percentage of each net premium you would
like allocated to the Investment Options. You may change your allocations by
writing to the Company or, with proper authorization, by calling 1-800-334-4298.
During the underwriting period, any premium paid will be held in a non-interest
bearing account. Your Net Premium will be distributed to each Investment Option
in the percentages indicated on your application on the later of the Policy Date
or the next Valuation Date (subject to state law).
RIGHT TO EXAMINE POLICY: You may return your Policy for any reason and receive
either (depending on state law) a refund of premiums paid, less any loans, or a
refund of Cash Value less any loans plus any charges that were deducted by
mailing us the Policy and a written request for cancellation within a specified
period. (See "Right to Cancel").
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 Amount Insured will equal the greater of
the Stated Amount or the Minimum Amount Insured upon the second death of
the two Insureds while the policy is in effect.
- VARIABLE OPTION (OPTION 2): the Amount Insured will equal the greater of
the Stated Amount of the Policy plus the Cash Value or the Minimum Amount
Insured upon the second death of the two Insureds while the policy is in
effect.
POLICY VALUES: As with other types of insurance policies, this Policy can
accumulate a Cash Value. The Cash Value of the Policy will increase or decrease
to reflect the investment performance 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 up to 100% of your Policy's Cash
Surrender Value. (See "Policy Loans" for loan impact on coverage and
policy values.)
You may cancel all or a portion of your Policy while either of the Insureds are
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, minus the value of outstanding loan accounts, among the Investment
Options. You may do this by writing to the Company or, with proper
authorization, calling 1-800-334-4298.
You can use automated transfers to take advantage of dollar cost
averaging -- investing a fixed amount at regular intervals. For example, you
might have a set amount transferred from a relatively conservative Investment
Option to a more aggressive one, or to several others.
LAPSE PROTECTION GUARANTEE RIDER (IN BASE POLICY IN NEW YORK): This rider
allows for your Policy to remain in effect for the first ten Policy Years,
regardless of the performance of the Investment Options that you select. You
must pay at least the cumulative Monthly Lapse Protection Premium displayed on
your Policy's Summary page. Any loans or partial surrenders are deducted from
premium paid to determine if the Lapse Protection Premium Requirement has been
met.
GRACE PERIOD: If the Cash Surrender Value of your Policy becomes less than the
amount needed to pay the Monthly Deduction Amount, and the Lapse Protection
Guarantee Rider is not in effect, you will have 31 days (subject to state law)
to pay a premium to cover the Monthly Deduction Amount. If the premium is not
paid, your Policy will lapse.
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12
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 (subject to certain restrictions contained in
your contract).
TAX CONSEQUENCES: Currently, the federal tax law excludes all Death Benefit
payments from the gross income of the Beneficiary. At any point in time, the
Policy may become a modified endowment contract ("MEC"). A MEC has an
income-first taxation of all loans, pledges, collateral assignments or partial
surrenders. A 10% penalty tax may be imposed on such income distributed before
the older Policy Owner attains age 59 1/2. The Company has established
safeguards for monitoring whether a Policy may become a MEC.
CHARGES AND DEDUCTIONS: Your Policy is subject to charges, which compensate the
Company for administering and distributing the Policy, as well as paying Policy
benefits and assuming related risks. These charges are summarized below, and
explained in detail under "Charges and Deductions."
POLICY CHARGES:
- SALES AND PREMIUM TAX CHARGES -- A sales charge, a premium tax charge and
a deferred acquisition cost charge are applied to each premium. The
charges are as follows:
TOTAL
SALES PREMIUM DAC PREMIUM
CHARGE TAX* CHARGE EXPENSE
------ ------- ------ -------
2.5% 2.25% 1.25% 6.00%
* Where prohibited by state law, premium taxes will not be charged.
- MONTHLY DEDUCTION -- deductions taken from the value of your Policy each
month to cover Cost of Insurance Charges, administrative expense charges
and charges for optional benefits.
- SURRENDER CHARGE -- applies if you surrender your Policy for all or a
portion of its Cash Value or the Policy lapses, during the first 15 years
(subject to state law) and for 15 years (subject to state law) after an
increase in coverage. The surrender charge consists of a per thousand of
stated amount charge and varies by original issue ages, sexes and
smoker/nonsmoker status and with the issue ages of the Insureds. Subject
to state law, the maximum surrender charge under the policy per thousand
of stated amount would be $44.90. (See the "Surrender Charges" section
for more information).
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 0.80%
for the first fifteen years and 0.35% thereafter.
- ADMINISTRATIVE EXPENSE CHARGE -- applies to the assets of the Investment
Options on a daily basis which equals an annual rate of 0.10% for the
first fifteen years and 0% thereafter.
- UNDERLYING FUND FEES -- the separate account purchases shares of the
Underlying Funds on a net asset value basis. The shares purchased already
reflect the deduction of investment advisory fees and other expenses.
These are summarized in the chart below.
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UNDERLYING FUND FEES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS OF THE UNDERLYING FUND
AS OF DECEMBER 31, 2000, UNLESS OTHERWISE NOTED)
- -----------------------------------------------------------------------------------------------------------------------
TOTAL ANNUAL
OPERATING
MANAGEMENT FEE OTHER EXPENSES EXPENSES
(AFTER EXPENSE (AFTER EXPENSE (AFTER EXPENSE
FUNDING OPTIONS: REIMBURSEMENT) 12B-1 FEES REIMBURSEMENT) REIMBURSEMENT)
- -----------------------------------------------------------------------------------------------------------------------
CAPITAL APPRECIATION FUND (JANUS) 0.81% 0.02% 0.83%
- -----------------------------------------------------------------------------------------------------------------------
MANAGED ASSETS TRUST 0.56% 0.03% 0.59%
- -----------------------------------------------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO 0.38% 0.02% 0.40%
- -----------------------------------------------------------------------------------------------------------------------
ALLIANCE VARIABLE PRODUCT SERIES FUND,
INC.
- -----------------------------------------------------------------------------------------------------------------------
Premier Growth Portfolio -- Class B* 1.00% 0.25% 0.05% 1.30%
- -----------------------------------------------------------------------------------------------------------------------
AMERICAN VARIABLE INSURANCE SERIES
- -----------------------------------------------------------------------------------------------------------------------
Global Growth Fund -- Class 2* 0.66% 0.25% 0.04% 0.95%
- -----------------------------------------------------------------------------------------------------------------------
Growth Fund -- Class 2* 0.36% 0.25% 0.02% 0.63%
- -----------------------------------------------------------------------------------------------------------------------
Growth-Income Fund -- Class 2* 0.34% 0.25% 0.01% 0.60%
- -----------------------------------------------------------------------------------------------------------------------
AYCO SERIES TRUST
- -----------------------------------------------------------------------------------------------------------------------
Ayco Large Cap Growth Fund I 0.80% 0.20% 1.00%
- -----------------------------------------------------------------------------------------------------------------------
CREDIT SUISSE WARBURG PINCUS TRUST
- -----------------------------------------------------------------------------------------------------------------------
Emerging Markets Portfolio 1.09% 0.31% 1.40%(1)
- -----------------------------------------------------------------------------------------------------------------------
DEUTSCHE ASSET MANAGEMENT VIT FUNDS
- -----------------------------------------------------------------------------------------------------------------------
EAFE(R) Equity Index Fund 0.45% 0.20% 0.65%(2)
- -----------------------------------------------------------------------------------------------------------------------
Small Cap Index Fund 0.35% 0.10% 0.45%(2)
- -----------------------------------------------------------------------------------------------------------------------
DREYFUS VARIABLE INVESTMENT FUND
- -----------------------------------------------------------------------------------------------------------------------
Small Cap Portfolio -- Initial Shares 0.75% 0.03% 0.78%(3)
- -----------------------------------------------------------------------------------------------------------------------
FRANKLIN TEMPLETON VARIABLE INSURANCE
PRODUCTS TRUST
- -----------------------------------------------------------------------------------------------------------------------
Franklin Small Cap Fund -- Class 2* 0.49% 0.25% 0.28% 1.02%(4)
- -----------------------------------------------------------------------------------------------------------------------
GREENWICH STREET SERIES FUND
- -----------------------------------------------------------------------------------------------------------------------
Equity Index Portfolio -- Class I
Shares 0.21% 0.02% 0.23%(5)
- -----------------------------------------------------------------------------------------------------------------------
Fundamental Value Portfolio 0.75% 0.04% 0.79%(6)
- -----------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES
- -----------------------------------------------------------------------------------------------------------------------
Aggressive Growth
Portfolio -- Service Shares* 0.65% 0.25% 0.02% 0.92%
- -----------------------------------------------------------------------------------------------------------------------
Global Technology
Portfolio -- Service Shares* 0.65% 0.25% 0.04% 0.94%
- -----------------------------------------------------------------------------------------------------------------------
Worldwide Growth Portfolio -- Service
Shares* 0.65% 0.25% 0.05% 0.95%
- -----------------------------------------------------------------------------------------------------------------------
PIMCO VARIABLE INSURANCE TRUST
- -----------------------------------------------------------------------------------------------------------------------
Total Return Bond Portfolio 0.25% 0.40% 0.65%(7)
- -----------------------------------------------------------------------------------------------------------------------
PUTNAM VARIABLE TRUST
- -----------------------------------------------------------------------------------------------------------------------
Putnam VT International Growth
Fund -- Class IB Shares* 0.76% 0.25% 0.18% 1.19%
- -----------------------------------------------------------------------------------------------------------------------
Putnam VT Voyager II Fund -- Class IB
Shares* 0.70% 0.25% 0.30% 1.25%(8)
- -----------------------------------------------------------------------------------------------------------------------
8
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- -----------------------------------------------------------------------------------------------------------------------
TOTAL ANNUAL
OPERATING
MANAGEMENT FEE OTHER EXPENSES EXPENSES
(AFTER EXPENSE (AFTER EXPENSE (AFTER EXPENSE
FUNDING OPTIONS: REIMBURSEMENT) 12B-1 FEES REIMBURSEMENT) REIMBURSEMENT)
- -----------------------------------------------------------------------------------------------------------------------
THE TRAVELERS SERIES TRUST
- -----------------------------------------------------------------------------------------------------------------------
Convertible Bond Portfolio 0.66% 0.14% 0.80%(9)
- -----------------------------------------------------------------------------------------------------------------------
Equity Income Portfolio (Fidelity) 0.75% 0.07% 0.82%(10)
- -----------------------------------------------------------------------------------------------------------------------
Large Cap Portfolio (Fidelity) 0.75% 0.07% 0.82%(10)
- -----------------------------------------------------------------------------------------------------------------------
MFS Mid Cap Growth Portfolio 0.86% 0.04% 0.90%
- -----------------------------------------------------------------------------------------------------------------------
U.S. Government Securities Portfolio 0.39% 0.09% 0.48%
- -----------------------------------------------------------------------------------------------------------------------
TRAVELERS SERIES FUND INC.
- -----------------------------------------------------------------------------------------------------------------------
AIM Capital Appreciation Portfolio 0.80% 0.03% 0.83%(11)
- -----------------------------------------------------------------------------------------------------------------------
Alliance Growth Portfolio 0.80% 0.01% 0.81%(11)
- -----------------------------------------------------------------------------------------------------------------------
MFS Total Return Portfolio 0.80% 0.04% 0.84%(11)
- -----------------------------------------------------------------------------------------------------------------------
Putnam Diversified Income Portfolio 0.75% 0.12% 0.87%(11)
- -----------------------------------------------------------------------------------------------------------------------
Smith Barney Aggressive Growth
Portfolio 0.80% 0.19% 0.99%(11)
- -----------------------------------------------------------------------------------------------------------------------
Smith Barney High Income Portfolio 0.60% 0.06% 0.66%(11)
- -----------------------------------------------------------------------------------------------------------------------
Smith Barney International All Cap
Growth Portfolio 0.90% 0.08% 0.98%(11)
- -----------------------------------------------------------------------------------------------------------------------
Smith Barney Large Cap Value
Portfolio 0.65% 0.01% 0.66%(11)
- -----------------------------------------------------------------------------------------------------------------------
Smith Barney Large Capitalization
Growth Portfolio 0.75% 0.02% 0.77%(11)
- -----------------------------------------------------------------------------------------------------------------------
VAN KAMPEN LIFE INVESTMENT TRUST
- -----------------------------------------------------------------------------------------------------------------------
Emerging Growth Portfolio 0.70% 0.05% 0.75%
- -----------------------------------------------------------------------------------------------------------------------
VARIABLE INSURANCE PRODUCTS FUND II
- -----------------------------------------------------------------------------------------------------------------------
Contrafund(R) Portfolio -- Service
Class* 0.57% 0.10% 0.09% 0.76%(12)
- -----------------------------------------------------------------------------------------------------------------------
* The 12b-1 fees deducted from these classes cover certain distribution,
shareholder support and administrative services provided by intermediaries
(the insurance company, broker dealer or other service providers).
1. Fee waivers, expense reimbursements, or expense credits reduced expenses for
the EMERGING MARKETS PORTFOLIO during 2000, but this may be discontinued at
any time. Without such arrangements, the Management Fees, Other Expenses and
Total Annual Operating Expenses would equal 1.25%, 0.42% and 1.67%,
respectively. The Other Expenses are based on annualized estimates of
expenses for the fiscal year ending December 31, 2000, net of any fee
waivers or expense reimbursements.
2. These fees reflect a voluntary expense reimbursement arrangement whereby the
Adviser has agreed to reimburse the funds. Without such arrangement, Other
Expenses and Total Annual Operating Expenses for the EAFE(R) EQUITY INDEX
FUND and the SMALL CAP INDEX FUND would have been 0.47% and 0.92%, and 0.34%
and 0.69%, respectively.
3. Total Annual Operating Expenses for the SMALL CAP PORTFOLIO -- INITIAL
SHARES do not include interest expense, loan commitment fees, and dividends
on securities sold short. These figures are for the year ended December 31,
2000. Actual expenses in future years may be higher or lower than the fees
given.
4. The Fund's Class 2 distribution plan or "rule 12b-1 plan" is described in
the Fund's prospectus. Total Annual Operating Expenses differ from the ratio
of expenses to average net assets shown in the Financial Highlights table
included in the Fund's Annual Report to Shareholders for the fiscal year
ended December 31, 2000 because they have been restated due to a new
management agreement effective May 1, 2000. The manager has agreed in
advance to reduce its fee to reflect reduced services resulting from the
Fund's investment in a Franklin Templeton money fund. This reduction is
required by the Fund's Board of Trustees and an order of the Securities and
Exchange Commission. Without this reduction, Management Fees, 12b-1 Fees,
Other Expenses, and Total Annual Operating Expenses for the FRANKLIN SMALL
CAP FUND -- CLASS 2 would have been 0.53%, 0.25%, 0.28%, and 1.06%,
respectively.
5. The Management Fee includes 0.06% for fund administration.
6. The Management Fee includes 0.20% for fund administration.
7. "Other Expenses" reflects a 0.25% administrative fee and 0.01% representing
organizational expenses and pro rata Trustees' fees for the TOTAL RETURN
BOND PORTFOLIO. PIMCO has contractually agreed to reduce Total Annual
Operating
9
15
Expenses to the extent they would exceed, due to the payment of
organizational expenses and Trustees' fees, 0.65% of average daily net
assets for the TOTAL RETURN BOND PORTFOLIO. Without such reductions, Total
Annual Operating Expenses for the fiscal year ended December 31, 2000 would
have been 0.66%. Under the Expense Limitation Agreement, PIMCO may recoup
these waivers and reimbursements in future periods, not exceeding three
years, provided total expenses, including such recoupment, do not exceed the
annual expense limit.
8. The Total Annual Operating Expenses for the VT VOYAGER FUND II -- CLASS IB
SHARES are based on estimated expenses. This fund commenced operations on
September 1, 2000.
9. Travelers Insurance Company has agreed to reimburse the CONVERTIBLE BOND
PORTFOLIO for expenses for the period ended December 31, 2000 which exceeded
0.80%. Without such voluntary arrangements, the actual annualized Total
Annual Operating Expenses would have been 0.90%.
10. TAMIC or the fund has entered into varying arrangements with third parties
who either paid or reduced a portion of the fund's expenses. Without such
expense reductions, Total Annual Operating Expenses for the EQUITY INCOME
PORTFOLIO and the LARGE CAP PORTFOLIO would have been 0.87% and 0.84%,
respectively.
11. Expenses are as of October 31, 2000 (the Fund's fiscal year end). There were
no fees waived or expenses reimbursed for these funds in 2000.
12. Actual annual operating expenses were lower because a portion of the
brokerage commissions that the fund paid was used to reduce the fund's
expenses, and/or because through arrangements with the fund's custodian,
credits realized as a result of uninvested cash balances were used to reduce
a portion of the fund's custodian expenses. Without such reduction, Total
Annual Operating Expenses for the CONTRAFUND(R) PORTFOLIO -- SERVICE CLASS
would have been 0.74%.
10
16
GENERAL DESCRIPTION
- --------------------------------------------------------------------------------
This prospectus describes a flexible premium variable survivorship life
insurance policy offered by The Travelers Insurance Company. It provides life
insurance protection on two lives (the Insureds), and pays policy proceeds upon
the Second Death of the two Insureds while the policy is in effect. The policy
offers:
- Flexible premium payments (you select the timing and amount of the
premium)
- A selection of investment options
- A choice of two death benefit options
- Loans and partial withdrawal privileges
- The ability to increase or decrease the Policy's stated amount of
insurance
- Additional benefits through the use of optional riders
This Policy is both an insurance product and a security. The Policy is first and
foremost a life insurance Policy with death benefits, Cash Values and other
features traditionally associated with life insurance. The Policy is a security
because the Cash Value and, under certain circumstances, the Amount Insured and
Death Benefit may increase or decrease depending on the investment experience of
the Investment Options chosen.
THE APPLICATION. In order to become a policy owner, each Insured must submit an
application with information about the two proposed Insureds. The Insureds must
provide evidence of insurability. On the application, you will also indicate:
- the amount of insurance desired (the "Stated Amount"); minimum of
$100,000
- your choice of the two death benefit options
- the beneficiary(ies), and whether or not the beneficiary is irrevocable
- your choice of investment options.
Our underwriting staff will review the application, and, if approved, we will
issue the Policy.
HOW THE POLICY WORKS
- --------------------------------------------------------------------------------
You make premium payments and direct them to one or more of the available
Investment Options. The Policy's Cash Value will increase or decrease depending
on the performance of the Investment Options you select. In the case of death
benefit option 2, the death benefit will also vary based on the Investment
Options' performance.
If your Policy is in effect upon the Second Death of the two Insureds, we will
pay your beneficiary the Amount Insured plus any additional rider death benefit
(less any outstanding loans 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.
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).
APPLYING PREMIUM PAYMENTS
During the underwriting period, any premium paid will be held in a non-interest
bearing account. After the underwriting period, we apply the first premium to
the Investment Options on the later of the Policy Date or the next Valuation
Date after we receive it at our Home Office. During the Right to Cancel Period,
we allocate Net Premiums to the Investment Options selected by you (subject to
state law).
11
17
The Investment Options are segments of the Separate Account. They correspond to
Underlying Funds with the same names. The available Investment Options are
listed below.
We credit your policy with accumulation units of the Investment Option(s) you
have selected. We calculate the number of Accumulation Units by dividing your
Net Premium payment by each Investment Option's Accumulation Unit Value computed
after we receive your payment.
THE INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
The Investment Options currently available under Fund UL are listed below. There
is no assurance that an Investment Option will achieve its stated objectives. We
may add, withdraw or substitute Investment Options from time to time. Any
changes will comply with applicable state and federal laws. We would notify you
before making such a change. For more detailed information on the investment
advisers and their services and fees, please refer to the Underlying Funds'
prospectuses which are included with and must accompany this prospectus. 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. Please read carefully the complete risk disclosure in each Underlying
Funds' prospectus before investing.
FUNDING OPTION INVESTMENT OBJECTIVE ADVISER/SUBADVISER
-------------- -------------------- ------------------
Capital Appreciation Fund Seeks growth of capital through the use of Travelers Asset Management
(Janus) common stocks. Income is not an objective. International Company LLC
The Fund invests principally in common ("TAMIC")
stocks of small to large companies which Subadviser: Janus Capital
are expected to experience wide Corp. ("Janus")
fluctuations in price both in rising and
declining markets.
Managed Assets Trust Seeks high total investment return through TAMIC
a fully managed investment policy in a Subadviser: Travelers
portfolio of equity, debt and convertible Investment Management Co.
securities. ("TIMCO")
Travelers Money Market Seeks high current income from short-term TAMIC
Portfolio money market instruments while preserving
capital and maintaining a high degree of
liquidity.
ALLIANCE VARIABLE PRODUCT
SERIES FUND, INC.
Premier Growth Portfolio -- Seeks long-term growth of capital by Alliance Capital Management
Class B investing primarily in equity securities
of a limited number of large, carefully
selected, high quality U.S. companies that
are judged likely to achieve superior
earning momentum.
AMERICAN VARIABLE INSURANCE
SERIES
Global Growth Fund -- Class Seeks capital appreciation by investing Capital Research and Man-
2 primarily in common stocks of companies agement Company
located around the world.
Growth Fund -- Class 2 Seeks capital appreciation by investing Capital Research and Man-
primarily in common stocks of companies agement Company
that appear to offer superior
opportunities for growth and capital.
Growth-Income Fund -- Class Seeks capital appreciation and income by Capital Research and Man-
2 investing primarily in common stocks or agement Company
other securities which demonstrate the
potential for appreciation and/or
dividends.
12
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FUNDING OPTION INVESTMENT OBJECTIVE ADVISER/SUBADVISER
-------------- -------------------- ------------------
AYCO SERIES TRUST
Ayco Large Cap Growth Fund I Seeks long-term growth of capital by The Ayco Company, L.P.
investing primarily in the common stocks
of large capitalization companies. The
investment approach is a combination of
fundamental analysis of individual
companies with a top-down economic and
market sector analysis.
CREDIT SUISSE WARBURG PINCUS TRUST
Emerging Markets Portfolio Seeks long-term growth of capital by Credit Suisse Asset Manage-
investing primarily in equity securities ment, LLC
of non-U.S. issuers consisting of
companies in emerging securities markets.
DEUTSCHE ASSET MANAGEMENT
VIT FUNDS
EAFE(R) Equity Index Fund Seeks to replicate, before deduction of Bankers Trust Company
(Bankers Trust) expenses, the total return performance of
the EAFE index.
Small Cap Index Fund Seeks to replicate, before deduction of Bankers Trust Company
(Bankers Trust) expenses, the total return performance of
the Russell 2000 index.
DREYFUS VARIABLE INVESTMENT
FUND
Small Cap Seeks to maximize capital appreciation. The Dreyfus Corporation
Portfolio -- Initial Shares The portfolio primarily invests in
small-cap companies with total market
values of less than $2 billion at the time
of purchase.
FRANKLIN TEMPLETON VARIABLE
INSURANCE PRODUCTS TRUST
Franklin Small Cap Fund -- Seeks long-term capital growth. The Fund Franklin Advisers, Inc.
Class 2 seeks to accomplish its objective by
investing primarily (normally at least 65%
of its assets) in equity securities of
smaller capitalization growth companies.
GREENWICH STREET SERIES FUND
Equity Index Portfolio-Class Seeks to replicate, before deduction of TIMCO
I Shares expenses, the total return performance of
the S&P 500 Index.
Fundamental Value Portfolio Seeks long-term capital growth with Smith Barney Fund Manage-
current income as a secondary objective. ment LLC ("SBFM")
JANUS ASPEN SERIES
Aggressive Growth Seeks long-term capital growth by Janus
Portfolio -- Service Shares investing primarily in common stocks
selected for their growth potential,
normally investing at least 50% in the
equity assets of medium-sized companies.
Global Technology Seeks long-term capital growth by Janus
Portfolio -- Service Shares investing primarily in equity securities
of the U.S. and foreign companies,
normally investing at least 65% of its
total assets in companies likely to
benefit significantly from advances in
technology.
13
19
FUNDING OPTION INVESTMENT OBJECTIVE ADVISER/SUBADVISER
-------------- -------------------- ------------------
Worldwide Growth Seeks growth of capital in a manner Janus
Portfolio -- Service Shares consistent with preservation of capital by
investing primarily in common stocks of
companies of any size throughout the
world.
PIMCO VARIABLE INSURANCE
TRUST
Total Return Bond Portfolio Seeks maximum total return, consistent Pacific Investment Manage-
with preservation of capital and prudent ment Company
investment management, by investing
primarily in investment-grade debt
securities.
PUTNAM VARIABLE TRUST
Putnam VT International Seeks capital appreciation by investing Putnam Management ("Putnam")
Growth Fund -- Class IB mostly in common stocks of companies
Shares outside the United States.
Putnam VT Voyager II Seeks capital appreciation by investing Putnam
Fund -- Class IB Shares mainly in common stocks of U.S. companies
with a focus on growth stocks.
TRAVELERS SERIES FUND INC.
AIM Capital Appreciation Seeks capital appreciation by investing Travelers Investment Adviser
Portfolio principally in common stock, with emphasis ("TIA")
on medium-sized and smaller emerging Subadviser: Alliance Capital
growth companies. Management L.P.
Alliance Growth Portfolio Seeks long-term growth of capital. Current TIA
income is only an incidental Subadviser: Alliance Capital
consideration. The Portfolio invests Management L.P.
predominantly in equity securities of
companies with a favorable outlook for
earnings and whose rate of growth is
expected to exceed that of the U.S.
economy over time.
MFS Total Return Portfolio (a balanced portfolio) Seeks to obtain TIA
above-average income (compared to a port- Subadviser: Massachusetts
folio entirely invested in equity Financial Services Company
securities) consistent with the prudent ("MFS")
employment of capital. Generally, at least
40% of the Portfolio's assets are invested
in equity securities.
Putnam Diversified Income Seeks high current income consistent with TIA
Portfolio preservation of capital. The Portfolio Subadviser: Putnam
will allocate its investments among the
U.S. Government Sector, the High Yield
Sector, and the International Sector of
the fixed income securities markets.
Smith Barney Aggressive Seeks capital appreciation by investing SBFM
Growth Portfolio primarily in common stocks of companies
that are experiencing, or have the
potential to experience, growth of
earnings, or that exceed the average
earnings growth rate of companies whose
securities are included in the S&P 500.
Smith Barney High Income Seeks high current income. Capital SBFM
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.
14
20
FUNDING OPTION INVESTMENT OBJECTIVE ADVISER/SUBADVISER
-------------- -------------------- ------------------
Smith Barney International Seeks total return on assets from growth SBFM
All Cap Growth Portfolio of capital and income by investing at
least 65% of its assets in a diversified
portfolio of equity securities of
established and non U.S. International
Portfolio.
Smith Barney Large Cap Value Seeks current income and long-term growth SBFM
Portfolio of income and capital by investing
primarily, but not exclusively, in common
stocks.
Smith Barney Large Seeks long-term growth of capital by SBFM
Capitalization Growth investing in equity securities of
Portfolio companies with large market
capitalizations.
THE TRAVELERS SERIES TRUST
Convertible Bond Portfolio Seeks current income and capital apprecia- TAMIC
tion by investing in convertible bond
securities and in combinations of
nonconvertible fixed-income securities and
warrants or call options that together
resemble convertible securities.
Equity Income Portfolio Seeks reasonable income by investing at TAMIC
(Fidelity) least 65% in income-producing equity secu- Subadviser: Fidelity Manage-
rities. The balance may be invested in all ment & Research Co. ("FMR")
types of domestic and foreign securities,
including bonds. The Portfolio seeks to
achieve a yield that exceeds that of the
securities comprising the S&P 500. The
Subadviser also considers the potential
for capital appreciation.
Large Cap Portfolio Seeks long-term growth of capital by TAMIC
(Fidelity) investing primarily in equity securities Subadviser: FMR
of companies with large market
capitalizations.
MFS Mid Cap Growth Portfolio Seeks to obtain long-term growth of TAMIC
capital by investing, under normal market Subadviser: MFS
conditions, at least 65% of its total
assets in equity securities of companies
with medium market capitalization which
the investment adviser believes have above
average growth potential.
U.S. Government Securities Seeks to select investments from the point TAMIC
Portfolio of view of an investor concerned primarily
with the highest credit quality, current
income and total return. The assets of the
Portfolio will be invested in direct
obligations of the United States, its
agencies and instrumentalities.
VAN KAMPEN LIFE INVESTMENT
TRUST
Emerging Growth Portfolio Seeks capital appreciation by investing Van Kampen Asset Manage-
primarily in common stocks of companies ment Inc.
considered to be emerging growth
companies.
15
21
FUNDING OPTION INVESTMENT OBJECTIVE ADVISER/SUBADVISER
-------------- -------------------- ------------------
VARIABLE INSURANCE
PRODUCTS FUND II
Contrafund(R) Portfolio Seeks long-term capital appreciation by FMR
(Fidelity) -- Service Class investing primarily in common stocks of
companies whose value the adviser believes
is not fully recognized by the public.
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 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.
We calculate the number of Accumulation Units involved using the Accumulation
Unit Values normally calculated as of 4:00 p.m. Eastern time on each Valuation
Date on which we receive the request.
TELEPHONE TRANSFERS. The Policy Owner may make the request in writing by
mailing such request to the Company at its Home Office, or by telephone (if an
authorization form is on file) by calling 1-800-334-4298. The Company will take
reasonable steps to ensure that telephone transfer requests are genuine. These
steps may include seeking proper authorization and identification prior to
processing telephone requests. Additionally, the Company will confirm telephone
transfers. Any failure to take such measures may result in the Company's
liability for any losses due to fraudulent telephone transfer requests.
AUTOMATED TRANSFERS
DOLLAR-COST AVERAGING. You may establish automated transfers of Policy Values
on a monthly or quarterly basis from any Investment Option(s) to any other
available Investment Option(s) through written request or other method
acceptable to the Company. You must have a minimum total Policy Value of $1,000
to enroll in the Dollar-Cost Averaging program. The minimum total automated
transfer amount is $100.
You may start or stop participation in the Dollar-Cost Averaging program at any
time, but you must give the Company at least 30 days' notice to change any
automated transfer instructions that are currently in place. Automated transfers
are subject to all of the other provisions and terms of the Policy. The Company
reserves the right to suspend or modify transfer privileges at any time and to
assess a processing fee for this service.
Before transferring any part of the Policy Value, Policy Owners should consider
the risks involved in switching between investments available under this Policy.
Dollar-cost averaging requires regular investments regardless of fluctuating
price levels, and does not guarantee profits or prevent losses in a declining
market. Potential investors should consider their financial ability to continue
purchases through periods of low price levels.
16
22
PORTFOLIO REBALANCING. Once you allocate your Net Premium among the Investment
Options, the performance of each Underlying Fund may cause your allocation to
shift. You may elect to have the Company periodically reallocate values in your
policy.
LAPSE AND REINSTATEMENT
Except as described under "Lapse Protection Guarantee," the Policy will remain
in effect until the Cash Surrender Value of the Policy can no longer cover the
Monthly Deduction Amount and any 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 31 days (subject to state law) (the "Grace Period"), the Policy
may lapse. The amount shown will be enough to pay the deduction amount due. The
Policy will continue through the Grace Period, but if no payment is received by
Us, it will terminate at the end of the Grace Period. If the last of the two
Insureds dies during the Grace Period, the Death Benefit payable will be reduced
by the Monthly Deduction Amount due plus the amount of any outstanding loan.
(See "Death Benefit," below.)
If the Policy lapses, you may reinstate the Policy by paying the reinstatement
premium (and any applicable charges) stated in the lapse notice. 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 plus any cash value as of the date of the lapse. In
addition, we will require satisfactory evidence of insurability of both
Insureds.
17
23
ADDITIONAL INSURANCE BENEFITS (RIDERS)
Subject to certain requirements, one or more of the following additional
insurance benefits may be added to your base Policy by rider. There may be
additional costs associated with these Riders. Certain riders may not be
available in all states. The descriptions below are intended to be general; the
terms of the Policy riders providing the additional benefits may vary from state
to state, and the Policy should be consulted. Depending on your circumstances,
it may be less costly to purchase more death benefit coverage under the Annual
Renewable Term rider than under the basic variable policy.
- --------------------------------------------------------------------------------------------------
POLICY SPLIT OPTION RIDER Allows the policy to be split into two equal policies
in the event of divorce (2 years after the final
decree) or repeal of the Unlimited Marital Deduction
Act.
- --------------------------------------------------------------------------------------------------
SCHEDULED INCREASE OPTION RIDER Allows automatic increases in the face amount on a set
schedule.
- --------------------------------------------------------------------------------------------------
ANNUAL RENEWABLE TERM Provides additional insurance protection on either or
both Insureds.
- --------------------------------------------------------------------------------------------------
COST OF LIVING ADJUSTMENT RIDER Allows automatic increases in the face amount based on
increases in the Consumer Price Index.
- --------------------------------------------------------------------------------------------------
LAPSE PROTECTION GUARANTEE RIDER This rider is available only with Death Benefit Option
1 (subject to state law) and may not be available in
all jurisdictions. The Rider provides that if, during
the first ten Policy Years, the total premiums paid,
less any outstanding loans or partial surrenders,
equals or exceeds the cumulative Monthly Coverage
Protection Premium shown in the Policy, a Lapse
Protection Guarantee will apply. With this rider, the
Policy will not lapse on a monthly deduction day even
if the Cash Surrender Value is not enough to cover the
Monthly Deduction Amount due provided the monthly
deduction day is within the first ten Policy Years.
The Monthly Lapse Protection Premium will change to
reflect any increases you make to the Stated Amount or
changes to supplemental benefit riders under the
Policy. If you make a change, we will send you an
updated Monthly Lapse Protection Premium that must be
met until the ten-year period expires. The rider will
be cancelled if you switch to Death Benefit Option 2
(subject to state variation).
- --------------------------------------------------------------------------------------------------
COVERAGE EXTENSION RIDER See description in the "Maturity Benefits" section.
- --------------------------------------------------------------------------------------------------
MATURITY EXTENSION RIDER See description in the "Maturity Benefits" section.
- --------------------------------------------------------------------------------------------------
EXCHANGE RIGHTS
Once the Policy is in effect, you may exchange it during the first 24 months for
a non-variable survivorship life insurance policy issued by the Company (or an
affiliated company) on the lives of the Insureds. 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 used as of this
Policy's issue date. 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.
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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 the Policy Owner,
(2) 45 days after the date the Policy application was signed, or
(3) 10 days after the Notice of the Right to Cancel has been mailed or
delivered to the Policy Owner
(or later if required by state law).
We will refund either (depending on state law): (a) all premiums paid less any
loans, or (b) the Cash Value of the Policy on the date we receive the returned
Policy, plus any charges that were deducted, less any Loans. We will make the
refund within seven days after we receive your returned policy.
ACCESS TO CASH VALUES
- --------------------------------------------------------------------------------
POLICY LOANS
You may borrow up to 100% of the Policy's Cash Surrender Value. This amount will
be determined on the day we receive the written loan request. The loan request
must be at least $500 (unless state law requires a different minimum). We will
make the loan within seven days of our receipt of the written loan request.
If you have a loan outstanding and request a second loan, we will add the amount
of the outstanding loan to the loan request. We charge interest on the
outstanding amount of the loan(s), and you must pay this interest in advance.
During the first fifteen Policy Years, the full Loan Account Value will be
charged an annual interest rate of 5.66% (7.4% in NY and MA); thereafter 3.85%
(4.31% on a guaranteed basis) (5.66% (6.10% on a guaranteed basis) in NY and MA)
will be charged (subject to state approval).
We will transfer the amount of the loan from each Investment Option on a pro
rata basis, as of the date the loan is made. We transfer the loan amount to the
Loan Account, and credit the Loan Account with a fixed annual rate of 4% (6% in
New York and Massachusetts). Amounts held in the Loan Account will not be
affected by the investment performance of the Investment Options. As you repay
the loan, we deduct the amount of the loan repayment from the Loan Account and
reallocate the payments among the Investment Options according to your current
instructions. You may repay all or any part of a loan secured by the Policy
while the Policy is still in effect.
CONSEQUENCES. Your Cash Surrender Value is reduced by the amount of any
outstanding loan(s). While a loan is not repaid, it decreases the Cash Surrender
Value, which could cause the Policy to lapse. Additionally, the Death Benefit
payable will be decreased by the value of any outstanding loan. Also, even if a
loan is repaid, the Death Benefit and Cash Surrender Value may be permanently
affected since you do not receive any investment experience on the outstanding
loan amount held in the Loan Account.
POLICY SURRENDERS
You may withdraw all or a portion of the Cash Surrender Value from the Policy on
any day that the Company is open for business.
FULL SURRENDERS. As long as the Policy is in effect, you may surrender the
Policy and receive its Cash Surrender Value. (You may request a surrender
without the beneficiary's consent provided the beneficiary has not been
designated "irrevocable." If so, you will need the beneficiary's consent.) The
Cash Surrender Value will be determined as of the date we receive the written
request at our Home Office. The Cash Surrender Value is the Cash Value, minus
any outstanding Policy loans, and any surrender charge.
19
25
For full surrenders, we will pay you within seven days after we receive the
request in good order. The Policy will terminate on the date we receive your
written surrender request.
PARTIAL WITHDRAWALS. You may request a partial withdrawal from the Policy. The
amount paid to you will be the net amount requested. We will deduct the net
amount surrendered plus any applicable surrender charge pro rata from all
Investment Options, unless you give us other written instructions.
In addition to reducing the Policy's Cash Value, partial withdrawals will reduce
the Death Benefit payable under the Policy. Under Option 1, the Policy's Stated
Amount will be reduced by the withdrawal amount. Under Option 2, the Policy's
Cash Value, which is part of the Death Benefit, will be reduced by the
withdrawal amount. We may require you to return the Policy to record this
reduction.
DEATH BENEFIT
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The Death Benefit under the Policy is the amount paid to the Beneficiary upon
the Second Death of the two Insureds. 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. 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 last 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 younger 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:
ATTAINED AGE OF
YOUNGER INSURED PERCENTAGE
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0-40 250
45 215
50 185
55 150
60 130
65 120
70 115
75 105
95+ 100
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 Death Benefit
Option 1. The examples
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assume two Insureds, both 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
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 $100,000. 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 ($100,000) or the Minimum Amount Insured
($25,000), the Death Benefit would be $100,000.
EXAMPLE TWO. If the Cash Value of the Policy equals $60,000, the Minimum Amount
Insured would be $150,000 ($60,000 x 250%). The resulting Death Benefit would be
$150,000 since the Death Benefit is the greater of the Stated Amount ($100,000)
or the Minimum Amount Insured ($150,000).
OPTION 2 -- VARIABLE DEATH BENEFIT
In the following examples of an Option 2 Variable Death Benefit, the Death
Benefit varies with the investment performance 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 second 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 ($110,000) would be
equal to the Stated Amount ($100,000) 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 $100,000, then the Minimum
Amount Insured would be $250,000 ($100,000 x 250%). The resulting Death Benefit
would be $250,000 because the Minimum Amount Insured ($250,000) is greater than
the Stated Amount plus the Cash Value ($100,000 + $100,000 = $200,000).
PAYMENT OF PROCEEDS
Death Benefits are payable within seven days after we receive satisfactory proof
of the Second Insured's death. The amount of Death Benefit paid will 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".) If no beneficiary is living when both Insureds
have died, the Death Benefit will be paid to the Policy Owner, if living,
otherwise, the Death Benefit will be paid to the Policy Owner's estate.
Subject to state law, if one or both of the Insureds commit 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 Second Insured dies during the 31-day period after the Company gives notice
to the Policy Owner that the Cash Surrender Value of the Policy is insufficient
to meet the Monthly Deduction Amount due against the Cash Value of the Policy,
then the Death Benefit actually paid to the Policy Owner's Beneficiary will be
reduced by the amount of the Deduction Amount that is due and unpaid. (See "Cash
Value and Cash Surrender Value," for effects of partial surrenders on Death
Benefits.)
PAYMENT OPTIONS
We will pay policy proceeds in a lump sum, unless you or the Beneficiary selects
one of the Company's payment options. 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
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applied under an option will no longer be affected by the investment performance
of the Investment Options.
The following payment options are available under the Policy:
OPTION 1 -- Payments of a Fixed Amount
OPTION 2 -- Payments for a Fixed Period
OPTION 3 -- Amounts Held at Interest
OPTION 4 -- Monthly Life Income
OPTION 5 -- Joint and Survivor Level Amount Monthly Life Income
OPTION 6 -- Joint and Survivor Monthly Life Income-Two-thirds to Survivor
OPTION 7 -- Joint and Last Survivor Monthly Life Income-Monthly Payment
Reduces on Death of First Person Named
OPTION 8 -- Other Options
We will make any other arrangements for periodic payments as may be agreed upon.
If any periodic payment due any payee is less than $100, we may make payments
less often. If we have declared a higher rate under an option on the date the
first payment under an option is due, we will base the payments on the higher
rate.
MATURITY BENEFITS
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If at least one 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. We will
have no further obligations under the Policy.
The following riders may not be available in all jurisdictions.
MATURITY EXTENSION RIDER
On the policy anniversary in the year in which the younger Insured reaches age
99, and at any time during the twelve months thereafter, you may request that
coverage be extended beyond the Maturity Date (the "Maturity Extension
Benefit"). This Maturity Extension Benefit may not be available in all
jurisdictions. If we receive such a request before the Maturity Date, the Policy
will continue until the earlier of the Second Insured's death or the date on
which you request that the Policy terminate. When the Maturity Extension Benefit
ends, a Death Benefit consisting of the Cash Value less any loan outstanding
will be paid. The Death Benefit is based on the experience of the Investment
Options selected and is not guaranteed. After the Maturity Date, periodic
Deduction Amounts will no longer be charged against the Cash Value and
additional premiums will not be accepted. This Rider is available for Issue Ages
81-85.
We intend that the Policy and the Maturity Extension Rider will be considered
life insurance for tax purposes. The Death Benefit is designed to comply with
Section 7702 of the Internal Revenue Code of 1986, as amended, or other
equivalent section of the Code. However, the Company does not give tax advice,
and cannot guarantee that the Death Benefit and Cash Value will be exempt from
any future tax liability. The tax results of any benefits under the Maturity
Extension provision depend upon interpretation of the Internal Revenue Code. You
should consult your own personal tax adviser prior to the exercise of the
Maturity Extension Rider to assess any potential tax liability.
COVERAGE EXTENSION RIDER
The Coverage Extension rider allows coverage to be extended beyond the maturity
date as long as there is cash value in the contract. Upon request from the
owner, the Company will continue to keep the Policy in force until the Second
Death or the earlier request for payment of the full cash surrender value, as
defined by this rider. The death benefit will equal the Amount Insured, less any
outstanding loans. It can be selected only from the policy anniversary when the
younger Insured is age 99 to maturity date. Any monthly deduction amounts due
must be paid upon maturity for this
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rider to take effect. There is no charge for this rider, however, the rider is
available only if each Insured's issue age is 80 or less.
CHARGES AND DEDUCTIONS
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GENERAL
We deduct the charges described below. The charges are for service 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 Second Death;
- - the available Investment Options and related programs (including dollar-cost
averaging and portfolio rebalancing);
- - administration of the various elective options available under the Policies;
and
- - the distribution of various reports to policy owners.
Costs and expenses we incur include:
- - expenses associated with underwriting applications, increases in the Stated
Amount, and riders;
- - losses associated with various overhead and other expenses associated with
providing the services and benefits provided by the Policies;
- - sales and marketing expenses including commission payments to your sales
agent; and
- - other costs of doing business.
Risks we assume include:
- - that the 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.
The amount of a charge may not necessarily correspond to the costs associated
with providing the services or benefits indicated by the designated charge. For
example, the Surrender Charge we collect may not fully cover all of the sales
and distribution expenses we actually incur. We also may profit on one or more
of the charges. We may use any such profits for any corporate purpose, including
the payment of sales expenses.
CHARGES AGAINST PREMIUM
FRONT-END SALES CHARGE. When we receive a Premium Payment, and before
allocation of the payment among the Investment Options, we deduct a front-end
sales charge of 2.5% of the Premium Payment. Additional charges may be assessed
upon any full or partial surrender. (See "Surrender Charges.")
STATE PREMIUM TAX CHARGE. A charge of 2.25% of each premium payment will be
deducted for state premium taxes (tax charge back in Oregon) (except for
Policies issued in the Commonwealth of Puerto Rico where no premium tax is
deducted). These taxes owed by the Company vary from state to state and
currently range from 0.75% to 3.5%; 2.25% is an average. Because there is a
range of premium taxes, a Policy Owner may pay a premium tax charge that is
higher or lower than the premium tax actually assessed or not assessed against
the Company in his or her jurisdiction.
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DEFERRED ACQUISITION COST CHARGE. A charge of 1.25% of each premium payment
will be deducted, which compensates the Company for expenses associated with its
federal income tax liability relating to its receipt of premium.
The Company also reserves the right to charge the assets of each Investment
Option for a reserve for any income taxes payable by the Company on the assets
attributable to that Investment Option. (See "Federal Tax Considerations.")
MONTHLY DEDUCTION AMOUNT
We will deduct a Monthly Deduction Amount to cover certain charges and expenses
incurred in connection with the Policy. The Monthly Deduction Amount is deducted
pro rata from each of the Investment Options values attributable to the Policy.
The amount is deducted on the first day of each Policy Month (the "Deduction
Date"), beginning on the Policy Date. The dollar amount of the Deduction Amount
will vary from month to month. The Monthly Deduction Amount consists of the Cost
of Insurance Charge, Policy Administrative Expense Charge, and Charges for any
Supplemental Benefit Provisions. These are described below:
COST OF INSURANCE CHARGE. The Cost of Insurance Charge is a significant charge
under your policy because it is the primary charge for the death benefit we
provide you. We determine the Cost of Insurance in a manner that reflects the
anticipated mortality of the Insureds. Because the Cost of Insurance depends on
a number of factors (age, gender (where applicable), policy duration), the cost
will vary from policy to policy. The amount of the Cost of Insurance deduction
also 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.
POLICY ADMINISTRATIVE EXPENSE CHARGE. For the first six Policy Years, an
administrative charge is deducted monthly from the Policy's Cash Value. This
charge also applies to increases in the Stated Amount (excluding increases due
to the scheduled increase option rider, the Cost of Living Adjustment Rider and
increases in Stated Amounts due to Death Benefit Option changes). This charge is
used to cover expenses associated with issuing the Policy. The amount charged
varies by issue age and will be stated in the Policy. Additionally, there is a
monthly $20.00 charge for Stated Amounts less than $750,000 until the Maturity
Date which is used to cover expenses associated with maintaining the policy.
CHARGES FOR SUPPLEMENTAL BENEFIT PROVISIONS. The Company will include a
supplemental benefits charge in the Monthly Deduction Amount if you have elected
any supplemental benefit provision for which there is a charge. The amount of
this charge will vary depending upon the actual supplemental benefits selected.
CHARGES AGAINST THE SEPARATE ACCOUNT
MORTALITY AND EXPENSE RISK CHARGE. We deduct a daily charge for mortality and
expense risks. This charge is at an annual rate of 0.80% of the assets in the
Investment Options for the first fifteen (15) Policy Years, and 0.35% of the
assets in the Investment Options thereafter. This charge compensates us for
various risks assumed, benefits provided and expenses incurred.
ADMINISTRATIVE EXPENSE CHARGE. We deduct a daily charge for administrative
expenses incurred by the Company. The charge equals on an annual basis 0.10% of
the amounts in the Investment Options for the first fifteen (15) Policy Years
and 0% thereafter.
UNDERLYING FUND EXPENSES
When you allocate money to the Investment Options, the Separate Account
purchases shares of the corresponding Underlying Funds at net asset value. The
net asset value reflects investment advisory fees and other expenses already
deducted. The investment advisory fees and other expenses paid by each of the
Underlying Funds are described in the individual Underlying Fund prospectuses.
These are not direct charges under the Policy; they are indirect because they
affect each Investment Option's accumulation unit value.
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SURRENDER CHARGES
A contingent surrender charge may apply under the Policy. The charge, calculated
as a Per Thousand of Stated Amount Charge equals a specified amount for each
$1,000 of Stated Amount. The maximum surrender charge is included in each
Policy. The charges are in compliance with each state's nonforfeiture law. These
surrender charges apply during the first 15 Policy Years (subject to state law)
(or the first 15 years (subject to state law) following an increase in Stated
Amount other than an increase due to a scheduled increase option rider cost of
living adjustment rider or a change in Death Benefit option). The charge applies
to a full or partial surrender of the Policy.
The Per Thousand of Stated Amount Charge varies by original issue ages, sexes
and smoker/ nonsmoker status, and the issue ages of the Insureds.
The charge decreases by 1/15 (approximately 6.6%) each year over the
fifteen-year period. For example, for a 65-year-old male nonsmoker and a
65-year-old female nonsmoker with a Stated Amount of $1,000,000, the maximum
charge in the first year is $39.99 for each $1,000 of Stated Amount, or
$39,990.00. The charge decreases 1/15, or approximately $2.67, each year, so in
the fifth year, it is $29.32 for each $1,000 of Stated Amount, or $29,320.00; in
the fifteenth year, it is $2.67 for each $1,000 of stated amount, or $2,670.00.
As an extreme example, for a 70-year-old female smoker and a 70-year-old female
smoker with a Stated Amount of $1,000,000, the maximum charge in the first year
is $44.90 for each $1,000 of Stated Amount (subject to state law). The charge
decreases 1/15 each year.
This charge is designed to compensate the Company for administrative expenses
not covered by other administrative charges. This charge may be reduced or
eliminated when sales are made under certain arrangements. (See "Reduction or
Elimination of Sales Charges and Administrative Charges" below.)
TRANSFER CHARGE
There is currently no charge for transfers between Investment Options. Further
restrictions on transfers are described in the Policy Benefits and Rights
section.
REDUCTION OR ELIMINATION OF CHARGES
We may offer the Policy in arrangements where an employer or trustee will own a
group of policies on the lives of certain employees, or in other situations
where groups of policies will be purchased at one time. We may reduce or
eliminate the mortality and expense risk charge, sales or surrender charges and
administrative charges in such arrangements to reflect the reduced sales
expenses, administrative costs and/or mortality and expense risks expected as a
result of sales to a particular group.
We will not reduce or eliminate the withdrawal charge, mortality and expense
risk charge or the administrative charge if the reduction or elimination will be
unfairly discriminatory to any person.
THE SEPARATE ACCOUNT AND VALUATION
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THE TRAVELERS FUND UL FOR VARIABLE LIFE INSURANCE (FUND UL)
The Travelers Fund UL for Variable Life Insurance was established on November
10, 1983 under the insurance laws of the state of Connecticut. It is registered
with the Securities and Exchange Commission ("SEC") as a unit investment trust
under the Investment Company Act of 1940. A Registration Statement has been
filed with the Securities and Exchange Commission under the Securities Act of
1933, as amended. This Prospectus does not contain all information set forth in
the Registration Statement, its amendments and exhibits. You may access the
SEC's website (http://www.sec.gov) to view the entire Registration Statement.
This registration does not mean
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that the SEC supervises the management or the investment practices or policies
of the Separate Account.
The assets of Fund UL are invested exclusively in shares of the Investment
Options. The operations of Fund UL are also subject to the provisions of Section
38a-433 of the Connecticut General Statutes which authorizes the Connecticut
Insurance Commissioner to adopt regulations under it. Under Connecticut law, the
assets of Fund UL will be held for the exclusive benefit of Policy Owners. The
assets held in Fund UL are not chargeable with liabilities arising out of any
other business which the Company may conduct. Any obligations arising under the
Policy are general corporate obligations of the Company.
All investment income of and other distributions to each Investment Option are
reinvested in shares of the corresponding Underlying Fund at net asset value.
The income and realized gains or losses on the assets of each Investment Option
are separate and are credited to or charged against the Investment Option
without regard to income, gains or losses from any other Investment Option or
from any other business of the Company. The Company purchases shares of the
Underlying Fund in connection with premium payments allocated according to the
Policy Owners' directions, and redeems Underlying Fund shares to meet Policy
obligations. We will also make adjustments in reserves, if required. The Company
is required to redeem Underlying Fund shares from the Investment Options at net
asset value and to make payment within seven days.
HOW THE CASH VALUE VARIES. We calculate the Policy's Cash Value each day the
New York Stock Exchange is open for trading (a "Valuation Date"). A Policy's
Cash Value reflects a number of factors, including premium payments, partial
surrenders, loans, Policy charges, and the investment performance of the
Investment Option(s) chosen. The Policy's Cash Value on a Valuation Date equals
the sum of all Accumulation Units multiplied by the Accumulation Unit Value for
each Investment Option chosen, plus the Loan Account Value.
The Separate Account purchases shares of the Underlying Funds at net asset value
(i.e., without a sales charge). The Separate Account receives all dividends and
capital gains distributions from each Underlying Fund, and reinvests in
additional shares of that Underlying Fund. The Accumulation Unit Value reflects
the reinvestment of any dividends or capital gains distributions declared by the
Underlying Fund. The Separate Account will redeem Underlying Fund shares at
their net asset value, to the extent necessary to make payments under the
Policy.
In order to determine Cash Value, Cash Surrender Value, policy loans and the
number of Accumulation Units to be credited, we use the values calculated as of
the close of business on each Valuation Date we receive the written request, or
payment in good order, at our Home Office.
ACCUMULATION UNIT VALUE. Accumulation Units measure the value of the Investment
Options. The value for each Investment Option's Accumulation Unit is calculated
on each Valuation Date. The value equals the Accumulation Unit value for the
preceding valuation period multiplied by the Underlying Fund's Net Investment
Factor during the next Valuation Period. (For example, to calculate Monday's
Valuation Date price, we would multiply Friday's Accumulation Unit Value by
Monday's Net Investment Factor.)
The Accumulation Unit Value may increase or decrease. The number of Accumulation
Units credited to your Policy will not change as a result of the Investment
Option's investment performance.
NET INVESTMENT FACTOR. For each Investment Option, the value of its
Accumulation Unit depends on the net rate of return for the corresponding
Underlying Fund. We determine the net rate of return at the end of each
Valuation Period (that is, the period of time beginning at 4:00 p.m. Eastern
time, and ending at 4:00 p.m. Eastern time on the next Valuation Date). The net
rate of return reflects the investment performance of the Investment Option,
includes any dividends or capital gains distributed, and is net of the Separate
Account charges.
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CHANGES TO THE POLICY
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GENERAL
Once the policy is issued, you may make certain changes. Some of these changes
will not require additional underwriting approval; some changes will. Certain
requests must be made in writing, as indicated below:
WRITTEN CHANGES REQUIRING UNDERWRITING APPROVAL:
- increases in the stated amount of insurance;
- changing the death benefit from Option 1 to Option 2 (subject to state
law)
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)
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
A Policy Owner may request an increase after the first policy year ($100,000
minimum increase) or decrease after the second policy year in the Policy's
Stated Amount, provided that the Stated Amount after any decrease may not be
less than the minimum amount of $100,000. The request must be made in writing
and, for increases only, while both Insureds are under age 85. 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 will require a new application and
evidence of insurability as well as an additional premium payment. The effective
date of any increase will be shown on the new Policy Summary which we will send.
The effective date of any increase in the Stated Amount will generally be the
Deduction Date next following either the date of a new application or, if
different, the date requested by the Applicant. There is an additional Policy
Administrative Charge and a Per Thousand of Stated Amount Surrender Charge
associated with a requested increase in Stated Amount. A proportional surrender
charge applies for requested decreases in Stated Amount. The charge is
determined by dividing the amount of the decrease by the total Stated Amount and
multiplying by the full surrender charge.
CHANGES IN DEATH BENEFIT OPTION
Provided both Insureds are alive, you may change the Death Benefit option from
Option 1 to Option 2. If at least one of the Insureds is alive, you may request
a change from Option 2 to Option 1. All requests must be made in writing. 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
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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 $100,000. Subject to state law, a change from
Option 1 to Option 2 is also subject to underwriting.
ADDITIONAL POLICY PROVISIONS
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ASSIGNMENT
The Policy may be assigned as collateral for a loan or other obligation. The
Company is not responsible for any payment made or action taken before receipt
of written notice of such assignment. Proof of interest must be filed with any
claim under a collateral assignment.
LIMIT ON RIGHT TO CONTEST AND SUICIDE EXCLUSION
The Company may not contest the validity of the Policy after it has been in
effect during the lifetime of at least one of the Insureds 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 one or both of the Insureds 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 and (ii) the amount of any outstanding Policy loan. 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 Deduction Amount paid for such increase (subject to state law) and
if the policy is reinstated, the two year period will be measured from the date
of reinstatement.
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
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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
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STATEMENTS TO POLICY OWNERS
We will maintain all records relating to the Separate Account and the Investment
Options. At least once each Policy Year, we will send you a statement containing
the following information:
- the Stated Amount and the Cash Value of the Policy (indicating the number
of Accumulation Units credited to the Policy in each Investment Option
and the corresponding Accumulation Unit Value);
- the date and amount of each Premium Payment;
- the date and amount of each Monthly Deduction;
- the amount of any outstanding Policy loan as of the date of the
statement, and the amount of any loan interest charged on the outstanding
Loan;
- the date and amount of any partial 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 that disposal of the securities held in the Underlying Funds
is not reasonably practicable or the value of the Investment Option's net assets
cannot be determined; or (4) during any other period when the SEC, by order, so
permits for the protection of security holders.
DIVIDENDS
No dividends will be paid under the Policy.
MIXED AND SHARED FUNDING
It is conceivable that in the future it may not be advantageous for variable
life insurance and variable annuity Separate Accounts to invest in the
Investment Options simultaneously. This is called mixed funding. Certain funds
may be available to variable products of other companies not affiliated with
Travelers. This is called "shared funding." Although we -- and the Underlying
Funds -- do not anticipate any disadvantages either to variable life insurance
or to variable annuity Policy Owners, the Underlying Funds' 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 Underlying
Funds' 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 mutual fund. Please consult the prospectuses of
the Underlying Funds for additional information.
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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 to the
broker-dealer will not exceed 99% of the target premium and 5.0% of the excess
premium paid in the first contract year. The maximum commission payable will not
exceed 5.0% of the annual renewal premium paid in contract years 2-10 and will
not exceed 4% of the annual renewal premium paid after contract year 10. In
addition, Tower Square Securities, Inc., an affiliate of the Company, receives
additional incentive payments from the Company relating to its sale of the
Contracts. From time to time, the Company may pay or permit other promotional
incentives, in cash, credit or other compensation.
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. Travelers Distribution LLC, One Tower
Square, Hartford, CT an affiliated company, serves as principal underwriter of
the Policies.
LEGAL PROCEEDINGS AND OPINION
There are no pending material legal proceedings affecting the Separate Account.
There is one material legal proceeding affecting the Company. In March 1997, a
purported class action entitled Patterman v. The Travelers, Inc., et al. was
commenced in the Superior Court of Richmond County, Georgia, alleging, among
other things, violations of the Georgia RICO statute and other state laws by an
affiliate of the Company, Primerica Financial Services, Inc. and certain of its
affiliates. Plaintiffs seek unspecified compensatory and punitive damages and
other relief. From February 1998 through April 2000, various motions for
transfer of the lawsuit were heard and appealed. In April 2000, the matter was
remanded to the Superior Court of Richmond County by the Georgia Supreme Court.
Also, in April 2000 defendants moved for summary judgement on all counts of the
complaint. Discovery commenced in May 2000. Defendants intend to vigorously
contest the litigation.
Legal matters in connection with the federal laws and regulations affecting the
issue and sale of the Contract described in this prospectus, as well as the
organization of the Company, its authority to issue variable life contracts
under Connecticut law and the validity of the forms of the variable life
contracts under Connecticut law, have been reviewed by the Deputy General
Counsel of the Company.
EXPERTS
The consolidated financial statements and schedules of The Travelers Insurance
Company and subsidiaries as of December 31, 2000 and 1999, and for each of the
years in the three-year period ended December 31, 2000, have been included
herein and in the registration statement in reliance upon the reports of KPMG
LLP, independent certified public accountants, appearing elsewhere herein, and
upon the authority of said firm as experts in accounting and auditing.
The financial statements of The Travelers Fund UL for Variable Life Insurance as
of December 31, 2000 and for each of the years in the three-year period ended
December 31, 2000 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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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 Underlying Fund, it
intends to monitor the investments of the Underlying Fund to ensure compliance
with the diversification requirements prescribed by the Treasury Department.
INVESTOR CONTROL
In certain circumstances, owners of variable life insurance contracts may be
considered the owners, for federal income tax purposes, of the assets of the
Separate Accounts used to support their contract. In those circumstances, income
and gains from the Separate Account assets would
31
37
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.
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
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38
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.
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
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39
aggregation requirement may apply for purposes of determining the amount of the
income on the Policy. Specifically, if the Company or any of its affiliates
issues to the same Policy Owner more than one modified endowment contract within
a calendar year, then for purposes of measuring the income on the Policy with
respect to a distribution from any of those Policies, the income on the Policy
for all those Policies will be aggregated and attributed to that distribution.
POLICIES WHICH ARE NOT MODIFIED ENDOWMENT CONTRACTS
Unlike loans from modified endowment contracts, a loan from a Policy that is not
a modified endowment contract will be considered indebtedness of the Owner and
no part of a loan will constitute income to the Owner. However, the treatment of
loans taken after the 15th 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 Fund UL. However, the Company may
assess a charge against the Investment Options for federal income taxes
attributable to those accounts in the event that the Company incurs income or
capital gains or other tax liability attributable to Fund UL under future tax
law.
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THE COMPANY
- --------------------------------------------------------------------------------
The Travelers Insurance Company (the "Company") is a stock insurance company
chartered in 1864 in Connecticut and has been engaged in the insurance business
since that time. The Company writes individual life insurance and individual and
group annuity contracts on a non-participating basis, and acts as depositor for
the Separate Account assets. The Company is licensed to conduct life insurance
business in all states of the United States, the District of Columbia, Puerto
Rico, Guam, the U.S. and British Virgin Islands, and the Bahamas. The Company's
obligations as depositor for Fund UL may not be transferred without notice to
and consent of Policy Owners.
The Company is an indirect wholly owned subsidiary of Citigroup Inc., a
financial services holding company. The Company's principal executive offices
are located at One Tower Square, Hartford, Connecticut 06183, telephone number
(860) 277-0111.
The Company is subject to Connecticut law governing insurance companies and is
regulated and supervised by the Connecticut Commissioner of Insurance. An annual
statement in a prescribed form must be filed with the Commissioner on or before
March 1 in each year covering the operations of the Company for the preceding
year and its financial condition on December 31 of such year. The Company's
books and assets are subject to review or examination by the Commissioner, and a
full examination of its operations is conducted at least once every four years.
In addition, the Company is subject to the insurance laws and regulations of any
jurisdiction in which it sells its insurance Policies, as well as to various
federal and state securities laws and regulations.
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MANAGEMENT
- --------------------------------------------------------------------------------
DIRECTORS OF THE TRAVELERS INSURANCE COMPANY
The following are the Directors and Executive Officers of The Travelers
Insurance Company. Unless otherwise indicated, the principal business address
for all individuals is the Company's Home Office at One Tower Square, Hartford,
Connecticut 06183. References to Citigroup include, prior to December 31, 1993,
Primerica Corporation or its predecessors, and prior to October 8, 1998,
Travelers Group Inc.
DIRECTOR
NAME AND POSITION SINCE PRINCIPAL BUSINESS
----------------- -------- ------------------
George C. Kokulis.......... 1996 President and Chief Executive Officer since April
2000,
Director Executive Vice President (July/1999 to March/2000),
Senior Vice President (1995-1999), Vice President
(1993-1995) of The Travelers Insurance Company.
William R. Hogan........... 2001 Senior Vice President of The Travelers Insurance
Director Company since June 2000; Senior Vice President and
Actuary (1996-1997) Actuary (1991-1996), Assistant
Actuary (1988-1991) of the Travelers Insurance
Company.
Glenn D. Lammey............ 2000 Executive Vice President since May 2000, and Chief
Director Financial Officer, Chief Accounting Officer and
Controller since March 2000 of The Travelers Insurance
Company; Executive Vice President, Claim Services
(1997-2000), Senior Vice President (1996-1997) of
Travelers Property Casualty Corp.; Vice President and
Chief Financial Officer (1992) Personal Lines of The
Travelers Insurance Company.
Marla Berman Lewitus....... 2000 Senior Vice President and General Counsel since August
Director 1999 of The Travelers Insurance Company; Associate
General Counsel (1998-1999), Assistant General Counsel
(1995-1998), Senior Counsel (1991-1995) of Citigroup
Inc.
- ---------------
* Principal business address: Citigroup Inc., 153 East 53rd St., New York, New
York 10043
SENIOR OFFICERS OF THE TRAVELERS INSURANCE COMPANY
The following are the Senior Officers of The Travelers Insurance Company, other
than the Directors listed above, as of the date of this Prospectus. Unless
otherwise indicated, the principal business address for all individuals listed
is One Tower Square, Hartford, Connecticut 06183.
NAME POSITION WITH INSURANCE COMPANY
---- -------------------------------
Mary Jean Thornton................... Executive Vice President and
Chief Information Officer
Stuart Baritz........................ Senior Vice President
William H. Heyman*................... Senior Vice President
Brendan Lynch........................ Senior Vice President
Warren H. May........................ Senior Vice President
Laura Pantaleo....................... Senior Vice President
Kathleen A. Preston.................. Senior Vice President
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NAME POSITION WITH INSURANCE COMPANY
---- -------------------------------
Robert J. Price*..................... Senior Vice President
David A. Tyson....................... Senior Vice President
F. Denney Voss*...................... Senior Vice President
- ---------------
* Principal business address: 399 Park Avenue, New York, New York 10043
Information relating to the management of the Underlying Funds is contained in
the applicable prospectuses.
EXAMPLE OF POLICY CHARGES
- --------------------------------------------------------------------------------
The following chart illustrates the surrender charges and Monthly Deduction
Amounts that would apply under a Policy based on the assumptions listed below.
Surrender charges and Monthly Deductions Amounts generally will be higher for an
Insured who is older than the assumed Insured, and lower for an Insured who is
younger (assuming the Insureds have the same risk classification). Cost of
Insurance rates go up each year as the Insured becomes a year older.
Male, Age 65 Female, Age 65 Face Amount: $1,000,000
Preferred Non-smoker Preferred Non-smoker Level Death Benefit Option
Annual Premium: $10,050.89 Current Charges
Hypothetical Gross Annual Investment
Rate of Return: 8%
TOTAL MONTHLY DEDUCTION
FOR THE POLICY YEAR
--------------------------
CUMULATIVE ADMINISTRATIVE
CUMULATIVE SALES AND COST OF CHARGES AND
POLICY GROSS PREMIUM TAX SURRENDER INSURANCE MONTHLY
YEAR PREMIUM CHARGES CHARGES CHARGES POLICY CHARGES
------ ---------- ----------- --------- --------- --------------
1 $ 10,050.89 $ 603.05 $39,990.00 $ 143.26 $963.05
2 $ 20,101.78 $1,206.11 $37,320.00 $ 454.30 $963.05
3 $ 30,152.67 $1,809.16 $34,650.00 $ 809.84 $963.05
5 $ 50,254.45 $3,015.27 $29,320.00 $1,674.93 $963.05
10 $100,508.90 $6,030.53 $15,990.00 $4,714.02 $603.05
Hypothetical results shown above are illustrative only and are based on the
Hypothetical Gross Annual Investment Rate of Return shown above. This
Hypothetical Gross Annual Investment Rate of Return should not be deemed to be a
representation of past or future investment results. Actual investment results
may be more or less than shown. No representations can be made that the
hypothetical rates assumed can be achieved for one year or sustained over a
period of time.
ILLUSTRATIONS
- --------------------------------------------------------------------------------
The following pages are intended to illustrate how the Cash Value, Cash
Surrender Value and Death Benefit can change over time for Policies issued to a
65 year old male and a 65 year old female. The difference between the Cash Value
and the Cash Surrender Value in these illustrations represents the Surrender
Charge that would be incurred upon a full surrender of the Policy. The
illustrations assume that premiums are paid as indicated, no Policy loans are
made, no increases or decreases to the Stated Amount are requested, no partial
surrenders are made, and no charges for transfers between funds are incurred.
One example illustrates that the maximum Guaranteed Cost of Insurance Rates, the
monthly administrative charge, mortality and expense risk charge, and
administrative expense charge allowable under the Policy are charged in all
years. The other example illustrates that the current scale of Cost of Insurance
Rates and other charges are charged in all years. The Cost of Insurance
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43
Rates charged vary by age, sex and underwriting classification, and the monthly
administrative charge varies by age, amount of insurance and smoker/non-smoker
classification for current charges. The illustrations reflect a deduction of 6%
from each annual premium for premium tax (2.25%), front end sales charge (2.5%)
and DAC tax (1.25%).
The values shown in these illustrations vary according to assumptions used for
charges, and gross rates of investment returns. For the first fifteen Policy
Years, the current and guaranteed charges consist of 0.80% for mortality and
expense risks, 0.10% for administrative expenses, and 0.82% for Underlying Fund
expenses and thereafter, 0.35% for mortality and expense risks, 0.00% for
administrative expenses, and 0.82% for Underlying Fund expenses.
The charge for Underlying Fund expenses reflected in the illustrations assumes
that Cash Value is allocated equally among all Investment Options and is an
arithmetic average of the investment advisory fees and other expenses charged by
each of the available Investment Options during the most recent audited calendar
year. The Underlying Fund expenses for some of the Underlying Funds reflect an
expense reimbursement agreement currently in effect, as shown in the Policy
prospectus summary. Although these reimbursement arrangements are expected to
continue in subsequent years, the effect of discontinuance could be higher
expenses charged to Policy Owners.
After deduction of these amounts, the illustrated gross annual investment rates
of return of 0%, 6%, and 12% correspond to approximate net annual rates of
- -1.72, 4.28, and 10.28, respectively on a current and guaranteed basis during
the first fifteen Policy Years, and to approximate net annual rates of -1.17,
4.83, and 10.83, respectively on a current and guaranteed basis thereafter.
The actual charges under a Policy for expenses of the Underlying Funds will vary
from year to year and will depend on the actual allocation of Cash Value and may
be higher or lower than those illustrated.
The illustrations do not reflect any charges for federal income taxes against
Fund UL, since the Company is not currently deducting such charges from Fund UL.
However, such charges may be made in the future, and in that event, the gross
annual investment rates of return would have to exceed 0%, 6% and 12% by an
amount sufficient to cover the tax charges in order to produce the Death
Benefits, Account Values and Cash Surrender Values illustrated.
Under normal circumstances, the Company, through its agent will provide you a
comparable illustration based upon the proposed Insured's age, sex, underwriting
classification, the specified insurance benefits, and the premium requested. The
illustration will show the weighted average Underlying Fund expenses, arithmetic
average Underlying Fund expenses and/or the actual Underlying Fund expenses
depending upon what you request. An explanation of how the Underlying Fund
expenses are calculated will appear on the illustration. The hypothetical gross
annual investment return assumed in such an illustration will not exceed 12%.
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44
VARIABLE SURVIVORSHIP LIFE II
LEVEL DEATH BENEFIT OPTION
ILLUSTRATED WITH GUARANTEED CHARGES
Male Preferred Nonsmoker Age 65 and Female Preferred Nonsmoker Age 65
Stated Amount 1,000,000
Annual Premium $10,050.89
TOTAL
PREMIUMS DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
WITH 5% --------------------------------- ------------------------ ------------------------
YEAR INTEREST 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ---- -------- --------- --------- --------- ------ ------ ------ ------ ------ ------
1 10,553 1,000,000 1,000,000 1,000,000 8,618 9,345 9,709 0 0 0
2 21,635 1,000,000 1,000,000 1,000,000 16,370 18,529 19,653 0 0 0
3 33,270 1,000,000 1,000,000 1,000,000 23,115 27,383 29,697 0 0 517
4 45,487 1,000,000 1,000,000 1,000,000 28,700 35,716 39,681 1,760 8,776 12,741
5 58,314 1,000,000 1,000,000 1,000,000 32,942 43,291 49,397 8,252 18,601 24,707
6 71,784 1,000,000 1,000,000 1,000,000 35,600 49,803 58,564 13,150 27,353 36,114
7 85,926 1,000,000 1,000,000 1,000,000 36,711 55,215 67,175 16,511 35,015 46,975
8 100,776 1,000,000 1,000,000 1,000,000 35,485 58,638 74,357 17,525 40,678 56,397
9 116,368 1,000,000 1,000,000 1,000,000 31,382 59,384 79,428 15,672 43,674 63,718
10 132,740 1,000,000 1,000,000 1,000,000 23,773 56,627 81,549 10,303 43,157 68,079
15 227,728 0 0 1,000,000 0 0 4,388 0 0 2,148
20 348,959 0 0 0 0 0 0 0 0 0
VARIABLE SURVIVORSHIP LIFE II
LEVEL DEATH BENEFIT OPTION
ILLUSTRATED WITH CURRENT CHARGES
Male Preferred Nonsmoker Age 65 and Female Preferred Nonsmoker Age 65
Stated Amount 1,000,000
Annual Premium $10,050.89
TOTAL
PREMIUMS DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
WITH 5% --------------------------------- -------------------------- --------------------------
YEAR INTEREST 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ---- -------- --------- --------- --------- ------ ------- ------- ------ ------- -------
1 10,553 1,000,000 1,000,000 1,000,000 8,787 9,521 9,888 0 0 0
2 21,635 1,000,000 1,000,000 1,000,000 17,114 19,318 20,465 0 0 0
3 33,270 1,000,000 1,000,000 1,000,000 24,943 29,363 31,756 0 183 2,576
4 45,487 1,000,000 1,000,000 1,000,000 32,231 39,620 43,782 5,291 12,680 16,842
5 58,314 1,000,000 1,000,000 1,000,000 38,930 50,046 56,565 14,240 25,356 31,875
6 71,784 1,000,000 1,000,000 1,000,000 45,011 60,617 70,151 22,561 38,167 47,701
7 85,926 1,000,000 1,000,000 1,000,000 50,766 71,643 84,937 30,566 51,443 64,737
8 100,776 1,000,000 1,000,000 1,000,000 55,783 82,730 100,622 37,823 64,770 82,662
9 116,368 1,000,000 1,000,000 1,000,000 60,010 93,827 117,256 44,300 78,117 101,546
10 132,740 1,000,000 1,000,000 1,000,000 63,397 104,888 134,903 49,927 91,418 121,433
15 227,728 1,000,000 1,000,000 1,000,000 67,204 159,267 243,043 64,964 157,027 240,803
20 348,959 1,000,000 1,000,000 1,000,000 47,854 215,757 412,832 47,854 215,757 412,832
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 Cash 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.
39
45
APPENDIX A
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, we may show investment performance for the Investment
Options, 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.
For Investment Options of Fund UL that invest in Underlying Funds that were in
existence prior to the date on which the Investment Option became available
under the Policy, average annual rates of return may include periods prior to
the inception of the Investment Option. Performance calculations for Investment
Options with pre-existing Underlying Funds will be calculated by adjusting the
actual returns of the Investment Options to reflect the charges that would have
been assessed under the Investment Options had the Investment Option been
available under Fund UL during the period shown.
The following performance information represents the percentage change in the
value of an Accumulation Unit of the Investment Options for the periods
indicated, and reflects all expenses of the Underlying Funds. The chart reflects
the guaranteed maximum .80% mortality and expense risk charge and .10%
administrative expense risk charge. The rates of return do not reflect the
front-end sales charge or the state premium tax charge (both of which are
deducted from premium payments) nor do they reflect surrender charges, DAC
charge or Monthly Deduction Amounts. These charges would reduce the average
annual return reflected.
The surrender charges and Monthly Deduction Amounts for a hypothetical Insured
are depicted in the Example following the Rates of Returns. See "Charges and
Deductions" for more information regarding fees assessed under the Policy. For
illustrations of how these charges affect Cash Values and Death Benefits, see
"Illustrations." The performance information described in this prospectus may be
used from time to time in advertisement for the Policy, subject to National
Association of Securities Dealers, Inc. ("NASD") and applicable state approval
and guidelines.
The table below shows the net annual rates of return for accumulation units of
Investment Options available through the Variable Survivorship Life II Policy.
AVERAGE ANNUAL RETURNS THROUGH 12/31/2000
FUND
INCEPTION
UNDERLYING INVESTMENT OPTIONS YTD 1 YEAR 3 YEAR 5 YEAR 10 YEAR DATE
- ----------------------------- ------ ------ ------ ------ ------- ---------
DOMESTIC STOCK FUNDS:
AIM Capital Appreciation Portfolio -17.35% -17.35% 10.85% 11.44% -- 10/10/95
Alliance Growth Portfolio -21.44% -21.44% 9.58% 16.28% -- 06/16/94
Alliance Premier Growth Port-Class B -17.50% -17.50% 16.46% 20.51% -- 06/26/92
American Growth Fund -- Class 2 3.48% 3.48% 29.18% 25.40% 20.95% 02/08/84
American Growth-Income Fund-Class 2 6.92% 6.92% 11.24% 14.94% 14.41% 02/28/85
Ayco Large Cap Growth Fund I -- -- -- -- -- 11/29/00
Capital Appreciation Fund (Janus) -26.89% -26.89% 21.20% 23.02% 20.28% 03/18/82
Deutsche VIT Small Cap Index Fund -9.00% -9.00% 1.63% -- -- 08/25/97
Dreyfus VIF Small Cap Portfolio 12.29% 12.29% 9.46% 11.89% 33.21% 08/31/90
Equity Income Portfolio (Fidelity) 8.13% 8.13% 7.76% -- -- 08/30/96
Fidelity VIPII Contrafund
Portfolio -- Svc -10.70% -10.70% 12.31% 15.97% -- 01/31/95
Franklin Small Cap Fund -- Class 2 22.27% 22.27% -- -- -- 05/01/98
Janus A.S. Aggressive Growth -- Svc Shr -37.78% -37.78% 22.73% 17.13% -- 09/13/93
Large Cap Portfolio (Fidelity) -15.34% -15.34% 13.41% -- -- 08/30/96
A-1
46
FUND
INCEPTION
UNDERLYING INVESTMENT OPTIONS YTD 1 YEAR 3 YEAR 5 YEAR 10 YEAR DATE
- ----------------------------- ------ ------ ------ ------ ------- ---------
MFS Mid Cap Growth Portfolio 8.36% 8.36% -- -- -- 03/23/98
Putnam VT Voyager II Fund -- Class 1B -- -- -- -- -- 09/29/00
Smith Barney Aggressive Growth Port 18.07% 18.07% 36.93% 27.16% 22.21% 12/31/85
Smith Barney Equity Index Class I -12.47% -12.47% 10.08% 16.62% -- 10/16/91
Smith Barney Fundamental Value Port 17.12% 17.12% 13.73% 15.87% -- 10/16/91
Smith Barney Large Cap Growth Port -9.89% -9.89% -- -- -- 05/06/98
Smith Barney Large Cap Value Port 10.25% 10.25% 5.93% 12.07% -- 06/16/94
Van Kampen Emerging Growth Portfolio -10.96% -10.96% 34.78% 27.52% -- 07/03/95
INTERNATIONAL STOCK FUNDS:
American Global Growth Fund-Class 2 -19.57% -19.57% 19.82% -- -- 04/30/97
Credit Suisse Warburg Pincus Emerging
Markets Port -32.31% -32.31% 0.41% -- -- 12/31/97
Deutsche VIT EAFE Equity Index Fund -17.84% -17.84% 7.76% -- -- 08/22/97
Janus A.S. Global Technology -- Svc Shr -- -- -- -- -- 01/18/00
Janus A.S. Worldwide Growth -- Svc Shr -19.18% -19.18% 18.92% 20.90% -- 09/13/93
Putnam VT Int'l Growth Fund -- Class 1B -10.47% -10.47% 18.50% -- -- 01/02/97
Smith Barney Int'l All Cap Growth 6.25% 6.25% 10.86% 12.60% 14.61% 02/18/86
DOMESTIC BOND FUNDS:
PIMCO Total Return Bond Portfolio 9.29% 9.29% 4.40% -- -- 12/31/97
Putnam Diversified Income Portfolio -0.67% -0.67% -0.27% 2.52% -- 06/16/94
Smith Barney High Income Portfolio -8.66% -8.66% -2.61% 3.15% -- 06/16/94
Travelers Convertible Bond Portfolio 11.49% 11.49% -- -- -- 05/01/98
Travelers U.S. Government Securities 14.66% 14.66% 5.92% 5.92% -- 01/24/92
BALANCED FUNDS:
MFS Total Return Portfolio 14.96% 14.96% 8.93% 11.91% -- 06/16/94
Travelers Managed Assets Trust -4.08% -4.08% 9.30% 12.00% 11.41% 08/06/82
MONEY MARKET FUND:
Travelers Money Market Portfolio 5.21% 5.21% 4.41% 4.09% 3.46% 10/01/81
The information presented in the above chart represents the percentage change in
the value of an accumulation unit of the underlying investment options for the
periods indicated, and reflects all expenses of the underlying funds, 0.80%
mortality and expense risk charge and 0.10% administrative expense charge
against amounts allocated to the underlying funds. The rates of return do not
reflect the 2.5% front-end sales charge, 1.25% deferred acquisition cost charge,
or the 2.25% state premium tax charge (both of which are deducted from premium
payments) nor do they reflect surrender charges or monthly deduction amounts.
These charges would reduce the average annual return reflected.
(1) An investment in Money Market Portfolio is neither insured nor guaranteed by
the United States Government. There is no assurance that a stable $1.00
value will be maintained.
A-2
47
HYPOTHETICAL EXAMPLE(1)
Male Preferred NonSmoker Age 65 and Female Preferred Nonsmoker Age 65 with a
level death
benefit of $1,000,000 and an annual investment of $10,050.89
ONE YEAR FIVE YEARS
------------------------------------ ------------------------------------
TOTAL ACCUMULATED SURRENDER TOTAL ACCUMULATED SURRENDER
UNDERLYING INVESTMENT OPTIONS INVESTMENT VALUE VALUE INVESTMENT VALUE VALUE
----------------------------- ---------- ----------- --------- ---------- ----------- ---------
DOMESTIC STOCK FUNDS:
AIM Capital Appreciation Portfolio 10,051 7,361 0 50,254 57,841 33,151
Alliance Growth Portfolio 10,051 6,982 0 50,254 66,876 42,186
Alliance Premier Growth Port-Class B 10,051 7,347 0 50,254 75,741 51,051
American Growth Fund -- Class 2 10,051 9,292 0 50,254 87,227 62,537
American Growth-Income Fund -- Class 2 10,051 9,611 0 50,254 64,261 39,571
Ayco Large Cap Growth Fund I N/A N/A N/A N/A N/A N/A
Capital Appreciation Fund (Janus) 10,051 6,478 0 50,254 81,463 56,773
Deutsche VIT Small Cap Index Fund 10,051 8,135 0 N/A N/A N/A
Dreyfus VIF Small Cap Portfolio 10,051 10,110 0 50,254 58,634 33,944
Equity Income Portfolio (Fidelity) 10,051 9,723 0 N/A N/A N/A
Fidelity VIPII Contrafund Portfolio -- Svc 10,051 7,977 0 50,254 66,263 41,573
Franklin Small Cap Fund -- Class 2 10,051 11,037 0 N/A N/A N/A
Janus A.S. Aggressive Growth -- Svc Shr 10,051 5,472 0 50,254 68,582 43,892
Large Cap Portfolio (Fidelity) 10,051 7,547 0 N/A N/A N/A
MFS Mid Cap Growth Portfolio 10,051 9,745 0 N/A N/A N/A
Putnam VT Voyager II Fund -- Class 1B N/A N/A N/A N/A N/A N/A
Smith Barney Aggressive Growth Port 10,051 10,646 0 50,254 91,709 67,019
Smith Barney Equity Index Class I 10,051 7,813 0 50,254 67,554 42,864
Smith Barney Fundamental Value Port 10,051 10,558 0 50,254 66,067 41,377
Smith Barney Large Cap Growth Port 10,051 8,052 0 N/A N/A N/A
Smith Barney Large Cap Value Port 10,051 9,920 0 50,254 58,954 34,264
Van Kampen Emerging Growth Portfolio 10,051 7,953 0 50,254 92,650 67,960
INTERNATIONAL STOCK FUNDS:
American Global Growth Fund -- Class 2 10,051 7,156 0 N/A N/A N/A
Credit Suisse Warburg Pincus Emerging Markets
Port 10,051 5,977 0 N/A N/A N/A
Deutsche VIT EAFE Equity Index Fund 10,051 7,316 0 N/A N/A N/A
Janus A.S. Global Technology-Svc Shr N/A N/A N/A N/A N/A N/A
Janus A.S. Worldwide Growth -- Svc Shr 10,051 7,192 0 50,254 76,607 51,917
Putnam VT Int'l Growth Fund -- Class 1B 10,051 7,998 0 N/A N/A N/A
Smith Barney Int'l All Cap Growth 10,051 9,549 0 50,254 59,904 35,214
DOMESTIC BOND FUNDS:
PIMCO Total Return Bond Portfolio 10,051 9,831 0 N/A N/A N/A
Putnam Diversified Income Portfolio 10,051 8,907 0 50,254 43,919 19,229
Smith Barney High Income Portfolio 10,051 8,166 0 50,254 44,797 20,107
Travelers Convertible Bond Portfolio 10,051 10,035 0 N/A N/A N/A
Travelers U.S. Government Securities 10,051 10,330 0 50,254 48,838 24,148
BALANCED FUNDS:
MFS Total Return Portfolio 10,051 10,358 0 50,254 58,669 33,979
Travelers Managed Assets Trust 10,051 8,591 0 50,254 58,829 34,139
MONEY MARKET FUND:
Travelers Money Market Portfolio 10,051 9,452 0 50,254 46,134 21,444
The charges used in the above example consist of a front-end sales charge of
2.5%, a state premium tax charge of 2.25%, a deferred acquisition cost premium
charge of 1.25%, the 0.80% mortality and expense risk charge and 0.10%
administrative expense charge, all expenses of the underlying funds, and monthly
deduction charges including cost of insurance.
A-3
48
The benefits illustrated above may differ from other policies as a results of
differences in investment allocation, premium timing and amount, death benefit
type, as well as age and underwriting classification of the insured ( which
could result in higher cost of insurance ). Because this is a variable universal
life insurance policy, actual performance should always be considered in
conjunction with the level of death benefit and cash values.
(1) These hypothetical examples show the effect of the performance quoted on the
cash values. Performance, loans, and withdrawals will affect the cash value
and death benefit of your policy. Since the values of the portfolios will
fluctuate, the cash value at any time may be more or less than the total
principal investment made, including at the time of surrender of the policy,
when surrender charges may apply.
A-4
49
THIS PAGE INTENTIONALLY LEFT BLANK.
50
ANNUAL REPORT
DECEMBER 31, 2000
THE TRAVELERS FUND UL
FOR VARIABLE LIFE INSURANCE
[TRAVELERS INSURANCE LOGO]
The Travelers Insurance Company
The Travelers Life and Annuity Company
One Tower Square
Hartford, CT 06183
51
THE TRAVELERS FUND UL
FOR VARIABLE LIFE INSURANCE
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2000
ASSETS:
Investments at market value:
Capital Appreciation Fund, 220,946 shares (cost $14,905,384).............................. $ 18,119,805
High Yield Bond Trust, 9,772 shares (cost $91,461)........................................ 85,704
Managed Assets Trust, 326,187 shares (cost $6,060,504).................................... 5,851,797
Money Market Portfolio, 5,599,950 shares (cost $5,599,950)................................ 5,599,950
American Odyssey Funds, Inc , 35,884 shares (cost $538,824)............................... 611,610
Deutsche Asset Management VIT Funds, 22,561 shares (cost $274,081)........................ 250,894
Dreyfus Stock Index Fund, 325,707 shares (cost $10,297,273)............................... 11,074,045
Franklin Templeton Variable Insurance Products Trust, 1,026,874 shares (cost $15,907,039). 15,369,762
Greenwich Street Series Fund, 84,772 shares (cost $1,573,985)............................. 1,949,942
Janus Aspen Series, 16,670 shares (cost $474,387)......................................... 384,360
The Travelers Series Trust, 393,625 shares (cost $4,523,167).............................. 4,866,971
Travelers Series Fund Inc , 767,937 shares (cost $14,993,602)............................. 15,724,628
Variable Insurance Products Fund, 1,112,832 shares (cost $29,674,146)..................... 31,338,439
Variable Insurance Products Fund II, 304,002 shares (cost $4,871,461)..................... 4,864,030
-------------
Total Investments (cost $109,785,264)................................................... $ 116,091,937
Receivables:
Dividends.................................................................................. 10,506
Premium payments and transfers from other Travelers accounts............................... 122,341
Other assets................................................................................. 115
----------------
Total Assets............................................................................ 116,224,899
----------------
LIABILITIES:
Payables:
Contract surrenders and transfers to other Travelers accounts............................. 22,924
Insurance charges......................................................................... 22,914
Administrative charges.................................................................... 1,979
Accrued liabilities......................................................................... 210
----------------
Total Liabilities....................................................................... 48,027
----------------
NET ASSETS: $ 116,176,872
================
See Notes to Financial Statements
-1-
52
THE TRAVELERS FUND UL
FOR VARIABLE LIFE INSURANCE
STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
2000 1999 1998
---- ---- ----
INVESTMENT INCOME:
Dividends.................................................... $ 10,462,575 $ 5,860,336 $ 5,453,417
------------- ------------- -------------
EXPENSES:
Insurance charges............................................ 867,160 707,393 530,563
Administrative charges....................................... 72,301 56,164 38,285
------------- ------------- -------------
Total expenses............................................. 939,461 763,557 568,848
------------- ------------- -------------
Net investment income.................................... 9,523,114 5,096,779 4,884,569
------------- ------------- -------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold............................. 27,138,319 21,933,684 20,652,837
Cost of investments sold................................... 25,793,748 19,227,722 18,056,633
------------- ------------- -------------
Net realized gain (loss)................................. 1,344,571 2,705,962 2,596,204
------------- ------------- -------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year................... 26,205,612 13,494,916 8,096,664
Unrealized gain (loss) end of year......................... 6,306,673 26,205,612 13,494,916
------------- ------------- -------------
Net change in unrealized gain (loss) for the year........ (19,898,939) 12,710,696 5,398,252
------------- ------------- -------------
Net realized gain (loss) and change in unrealized gain
(loss) ................................................. (18,554,368) 15,416,658 7,994,456
------------- ------------- -------------
Net increase (decrease) in net assets resulting from
operations ................................................ $ (9,031,254) $ 20,513,437 $ 12,879,025
============= ============= =============
See Notes to Financial Statements
-2-
53
54
THE TRAVELERS FUND UL
FOR VARIABLE LIFE INSURANCE
STATEMENT OF CHANGES IN NET ASSETS FOR THE
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
2000 1999 1998
---- ---- ----
OPERATIONS:
Net investment income......................................................... $ 9,523,114 $ 5,096,779 $ 4,884,569
Net realized gain (loss) from investment transactions......................... 1,344,571 2,705,962 2,596,204
Net change in unrealized gain (loss) on investments........................... (19,898,939) 12,710,696 5,398,252
-------------- -------------- -------------
Net increase (decrease) in net assets resulting from operations............. (9,031,254) 20,513,437 12,879,025
-------------- -------------- -------------
UNIT TRANSACTIONS:
Participant premium payments
(applicable to 9,853,423 and 10,017,984 and 12,749,964 units, respectively).. 23,140,642 20,657,234 22,622,231
Participant transfers from other Travelers accounts
(applicable to 6,331,656 and 7,423,069 and 8,850,476 units, respectively).... 16,703,183 17,182,307 16,644,515
Contract surrenders
(applicable to 6,500,029 and 4,624,266 and 5,653,725 units, respectively).... (14,744,531) (10,470,687) (10,097,307)
Participant transfers to other Travelers accounts
(applicable to 9,018,171 and 8,969,541 and 10,422,931 units, respectively)... (17,206,558) (18,399,253) (17,682,682)
Other payments to participants
(applicable to 8,893 and 38,160 and 220,614 units, respectively)............. (26,288) (106,976) (458,339)
-------------- -------------- -------------
Net increase in net assets resulting from unit transactions................... 7,866,448 8,862,625 11,028,418
-------------- -------------- -------------
Net increase (decrease) in net assets....................................... (1,164,806) 29,376,062 23,907,443
NET ASSETS
Beginning of year............................................................. 117,341,678 87,965,616 64,058,173
-------------- -------------- -------------
End of year................................................................... $ 116,176,872 $ 117,341,678 $ 87,965,616
============== ============== =============
See Notes to Financial Statements
-3-
55
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Fund UL for Variable Life Insurance ("Fund UL") is a separate
account of The Travelers Insurance Company ("The Travelers"), an indirect wholly
owned subsidiary of Citigroup Inc., and is available for funding certain
variable life insurance contracts issued by The Travelers. Fund UL is registered
under the Investment Company Act of 1940, as amended, as a unit investment
trust. The Travelers interest in the net assets of Fund UL was $1,386,448 at
December 31, 2000. Fund UL is comprised of InVest, The Travelers MarketLife,
Travelers Variable Survivorship Life, The Travelers Variable Life Accumulator
and The Travelers Variable Life products.
Participant premium payments applied to Fund UL are invested in one or more
sub-accounts in accordance with the selection made by the owner. As of December
31, 2000, the investments comprising Fund UL were: Capital Appreciation Fund;
High Yield Bond Trust; Managed Assets Trust; Money Market Portfolio; Core Equity
Fund, Emerging Opportunities Fund, Global High-Yield Bond Fund,
Intermediate-Term Bond Fund, International Equity Fund and Long-Term Bond Fund
of American Odyssey Funds, Inc.; EAFE(R) Equity Index Fund and Small Cap Index
Fund of Deutsche Asset Management VIT Funds (formerly BT Insurance Funds Trust);
Dreyfus Stock Index Fund; Templeton Asset Strategy Fund - Class 1 (formerly
Templeton Asset Allocation Fund - Class 1), Templeton Global Income Securities
Fund - Class 1 (formerly Templeton Bond Fund - Class 1) and Templeton Growth
Securities Fund - Class 1 (formerly Templeton Stock Fund - Class 1) of Franklin
Templeton Variable Products Trust (formerly Templeton Variable Products Series
Fund); Equity Index Portfolio - Class I Shares and Total Return Portfolio of
Greenwich Street Series Fund; Aggressive Growth Portfolio - Service Shares,
Global Technology Portfolio - Service Shares and Worldwide Growth Portfolio -
Service Shares of Janus Aspen Series; U.S. Government Securities Portfolio,
Utilities Portfolio and Zero Coupon Bond Portfolio Series 2005 of The Travelers
Series Trust; AIM Capital Appreciation Portfolio, Alliance Growth Portfolio, MFS
Total Return Portfolio, Putnam Diversified Income Portfolio, Smith Barney High
Income Portfolio, Smith Barney Large Capitalization Growth Portfolio and Smith
Barney Large Cap Value Portfolio of Travelers Series Fund Inc.; Equity-Income
Portfolio - Initial Class, Growth Portfolio - Initial Class and High Income
Portfolio - Initial Class of Variable Insurance Products Fund (formerly
Fidelity's Variable Insurance Products Fund); and Asset Manager Portfolio of
Variable Insurance Products Fund II (formerly Fidelity's Variable Insurance
Products Fund II).
All funds are Massachusetts business trusts, except for Travelers Series Fund
Inc. and Dreyfus Stock Index Fund which are incorporated under Maryland law.
Capital Appreciation Fund, High Yield Bond Trust, Managed Assets Trust, Money
Market Portfolio, American Odyssey Funds, Inc., Greenwich Street Series Fund,
The Travelers Series Trust and Travelers Series Fund Inc. are managed by
affiliates of The Travelers. Not all funds may be available in all states or to
all contract owners.
Effective December 18, 1998, the Zero Coupon Bond Fund Portfolio Series 1998 of
The Travelers Series Trust was fully liquidated. Effective December 15, 2000,
the Zero Coupon Bond Fund Portfolio Series 2000 of The Travelers Series Trust
was fully liquidated.
On February 8, 2000, a reorganization was approved by the shareholders that
combined the assets of Templeton Bond Fund Class 1 into Templeton Global Income
Securities Fund - Class 1, effective May 1, 2000. At the effective date, Fund UL
held 49,976 shares of Templeton Bond Fund Class 1 having a market value of
$463,911 which were exchanged for 43,034 shares of Templeton Global Income
Securities Fund - Class 1 equal in value.
On February 8, 2000, a reorganization was approved by the shareholders that
combined the assets of Templeton Stock Fund Class 1 into Templeton Growth
Securities Fund - Class 1, effective May 1, 2000. At the effective date, Fund UL
held 507,279 shares of Templeton Stock Fund Class 1 having a market value of
$9,809,053 which were exchanged for 758,627 shares of Templeton Growth
Securities Fund - Class 1 equal in value.
The following is a summary of significant accounting policies consistently
followed by Fund UL in the preparation of its financial statements.
-4-
56
NOTES TO FINANCIAL STATEMENTS - CONTINUED
SECURITY VALUATION. Investments are valued daily at the net asset values per
share of the underlying funds.
SECURITY TRANSACTIONS. Security transactions are accounted for on the trade
date. Dividend income is recorded on the ex-dividend date.
FEDERAL INCOME TAXES. The operations of Fund UL form a part of the total
operations of The Travelers and are not taxed separately. The Travelers is taxed
as a life insurance company under the Internal Revenue Code of 1986, as amended
(the "Code"). Under existing federal income tax law, no taxes are payable on the
investment income of Fund UL. Fund UL is not taxed as a "regulated investment
company" under Subchapter M of the Code.
OTHER. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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
$44,436,133 and $27,138,319, respectively, for the year ended December 31, 2000.
Realized gains and losses from investment transactions are reported on an
average cost basis. The cost of investments in eligible funds was $109,785,264
at December 31, 2000. Gross unrealized appreciation for all investments at
December 31, 2000 was $8,260,988. Gross unrealized depreciation for all
investments at December 31, 2000 was $1,954,315.
3. CONTRACT CHARGES
Insurance charges are paid for the mortality and expense risks assumed by The
Travelers and administrative charges are paid for administrative expenses. Each
business day, The Travelers deducts a mortality and expense risk charge and, in
some cases, an administrative expense charge, which are reflected in the
calculation of unit values. The mortality and expense risk charge equals a
maximum, on an annual basis, of 0.85%, of the amounts held in each variable
funding option. The administrative charge which applies only to Price II, III
and IV contracts (as defined below), equals, on an annual basis, 0.10% of the
amounts held in each variable funding option for the first fifteen policy years
only.
For price I contracts (all InVest contracts, MarketLife contracts issued prior
to July 12, 1995, and MarketLife Contracts issued on or after July 12, 1995
where state approval for Enhanced MarketLife had not yet been received), the
insurance charges are 0.60%. Price II contracts are broken down into three
categories: for all MarketLife Contracts issued on or after July 12, 1995, and
prior to May 1, 1998 where state approval for Enhanced MarketLife has been
received, the insurance charges are 0.80% for the first fifteen policy years,
then 0.45% thereafter; for MarketLife Contracts issued after May 1, 1998 in
states that had approved the mortality and expense reduction, the insurance
charges are 0.80% for the first fifteen policy years, then 0.25% thereafter; and
for all Variable Survivorship Life contracts, the insurance charges are 0.80%
for the first fifteen policy years, then 0.35% thereafter. For Price III
contracts (all Travelers Variable Life Accumulator contracts), the insurance
charges are 0.65% for the first fifteen policy years, then 0.20% thereafter. For
Price IV contracts (all Travelers Variable Life contracts), the insurance
charges are 0.85% for the first fifteen policy years, then 0.20% thereafter.
The Travelers receives contingent surrender charges on full or partial contract
surrenders. Such charges are computed by applying various percentages to
premiums and/or stated contract amounts (as described in the prospectus). The
Travelers received $409,862, $313,425 and $307,722 in satisfaction of such
contingent surrender charges for the years ended December 31, 2000, 1999 and
1998, respectively.
-5-
57
NOTES TO FINANCIAL STATEMENTS - CONTINUED
4. NET CONTRACT OWNERS' EQUITY
DECEMBER 31, 2000
---------------------------------------------
UNIT NET
UNITS VALUE ASSETS
------- ------- --------
CAPITAL APPRECIATION FUND
Price I.......................................... 1,392,655 $ 5.162 $ 7,187,951
Price II......................................... 2,155,921 5.078 10,948,136
Price III........................................ - 0.777 -
Price IV......................................... - 0.776 -
High Yield Bond Trust
Price I.......................................... 30,916 2.775 85,785
Managed Assets Trust
Price I.......................................... 649,819 3.606 2,343,260
Price II......................................... 989,252 3.548 3,509,776
Price III........................................ - 0.958 -
Price IV......................................... - 0.957 -
Money Market Portfolio
Price I.......................................... 516,230 1.784 921,015
Price II......................................... 2,690,315 1.755 4,722,534
Price III........................................ - 1.029 -
Price IV......................................... - 1.028 -
American Odyssey Funds, Inc
Core Equity Fund..................................
Price I.......................................... 32,573 2.135 69,530
Emerging Opportunities Fund.......................
Price I.......................................... 184,328 1.969 363,013
Global High-Yield Bond Fund.......................
Price I.......................................... 2,626 1.215 3,191
Intermediate-Term Bond Fund.......................
Price I.......................................... 2,039 1.344 2,741
International Equity Fund.........................
Price I.......................................... 84,847 1.937 164,323
Long-Term Bond Fund...............................
Price I.......................................... 5,803 1.598 9,274
Deutsche Asset Management VIT Funds
EAFE(R) Equity Index Fund
Price I.......................................... 25,746 0.942 24,249
Price II......................................... 112,777 0.938 105,810
Price III........................................ - 0.887 -
Price IV......................................... - 0.886 -
Small Cap Index Fund
Price I.......................................... 13,459 1.085 14,603
Price II......................................... 98,255 1.080 106,153
Price III........................................ - 0.938 -
Price IV......................................... - 0.937 -
-6-
58
NOTES TO FINANCIAL STATEMENTS - CONTINUED
4. NET CONTRACT OWNERS' EQUITY (CONTINUED)
DECEMBER 31, 2000
---------------------------------------------
UNIT NET
UNITS VALUE ASSETS
Dreyfus Stock Index Fund -------- ------- ---------
Price I.................................................. 761,972 $ 3.035 $ 2,312,581
Price II................................................. 2,933,857 2.986 8,760,855
Price III................................................ - 0.909 -
Price IV................................................. - 0.908 -
Franklin Templeton Variable Insurance Products Trust
Templeton Asset Strategy Fund - Class 1
Price I.................................................. 1,442,423 2.015 2,906,167
Price II................................................. 910,065 1.982 1,804,045
Templeton Global Income Securities Fund - Class 1
Price I.................................................. 119,599 1.244 148,736
Price II................................................. 296,220 1.224 362,457
Templeton Growth Securities Fund - Class 1
Price I.................................................. 2,495,581 2.230 5,565,865
Price II................................................. 2,085,743 2.194 4,576,885
Price III................................................ - 1.037 -
Price IV................................................. - 1.036 -
Greenwich Street Series Fund
Equity Index Portfolio - Class I Shares
Price I.................................................. 4,786 1.001 4,790
Price II................................................. 121,713 0.997 121,280
Price III................................................ - 0.910 -
Price IV................................................. - 0.909 -
Total Return Portfolio
Price I.................................................. 38,416 2.271 87,242
Price II................................................. 776,490 2.236 1,736,392
Price III................................................ - 1.125 -
Price IV................................................. - 1.124 -
Janus Aspen Series
Aggressive Growth Portfolio - Service Shares
Price I.................................................. 23,949 0.677 16,210
Price II................................................. 177,383 0.676 119,932
Price III................................................ - 0.665 -
Price IV................................................. - 0.664 -
Global Technology Portfolio - Service Shares
Price I.................................................. 781 0.675 527
Price II................................................. 72,455 0.674 48,821
Price III................................................ - 0.667 -
Price IV................................................. - 0.666 -
-7-
59
NOTES TO FINANCIAL STATEMENTS - CONTINUED
4. NET CONTRACT OWNERS' EQUITY (CONTINUED)
DECEMBER 31, 2000
---------------------------------------------
UNIT NET
UNITS VALUE ASSETS
------------- ----------- ----------
Janus Aspen Series (continued)
Worldwide Growth Portfolio - Service Shares
Price I........................................... 69,141 $ 0.802 $ 55,420
Price II.......................................... 186,241 0.801 149,125
Price III......................................... - 0.820 -
Price IV.......................................... - 0.819 -
The Travelers Series Trust
US Government Securities Portfolio
Price I........................................... 183,356 1.544 283,025
Price II.......................................... 1,580,705 1.519 2,400,601
Price III......................................... - 1.091 -
Price IV.......................................... - 1.090 -
Utilities Portfolio
Price I........................................... 90,271 2.447 220,902
Price II.......................................... 90,649 2.408 218,253
Zero Coupon Bond Fund Portfolio Series 2005
Price I........................................... 1,023,087 1.386 1,418,417
Price II.......................................... 244,195 1.365 333,295
Price III......................................... - 1.086 -
Price IV.......................................... - 1.085 -
Travelers Series Fund Inc
AIM Capital Appreciation Portfolio
Price I........................................... 292,597 1.748 511,506
Price II.......................................... 1,914,924 1.723 3,299,271
Price III......................................... - 0.817 -
Price IV.......................................... - 0.816 -
Alliance Growth Portfolio
Price I........................................... 290,520 2.358 685,087
Price II.......................................... 2,906,091 2.321 6,743,487
Price III......................................... - 0.832 -
Price IV.......................................... - 0.831 -
MFS Total Return Portfolio
Price I........................................... 108,875 1.957 213,052
Price II.......................................... 1,086,522 1.926 2,092,445
Price III......................................... - 1.128 -
Price IV.......................................... - 1.127 -
Putnam Diversified Income Portfolio
Price I........................................... - 1.001 -
Price II.......................................... 765 0.998 763
Price III......................................... - 0.989 -
Price IV.......................................... - 0.988 -
-8-
60
NOTES TO FINANCIAL STATEMENTS - CONTINUED
4. NET CONTRACT OWNERS' EQUITY (CONTINUED)
DECEMBER 31, 2000
-------------------------------------------------
UNIT NET
UNITS VALUE ASSETS
-------- ------- --------
Travelers Series Fund Inc (continued)
Smith Barney High Income Portfolio
Price I .......................................... 16,546 $ 1.176 $ 19,461
Price II ......................................... 388,094 1.159 449,754
Price III ........................................ - 0.927 -
Price IV ......................................... - 0.926 -
Smith Barney Large Capitalization Growth Portfolio
Price I .......................................... - 0.874 -
Price II ......................................... 103,152 0.873 90,003
Price III ........................................ - 0.878 -
Price IV ......................................... - 0.877 -
Smith Barney Large Cap Value Portfolio
Price I .......................................... 98,459 1.953 192,329
Price II ......................................... 745,373 1.923 1,433,572
Price III ........................................ - 1.123 -
Price IV.......................................... - 1.122 -
Variable Insurance Products Fund
Equity-Income Portfolio - Initial Class
Price I........................................... 1,889,469 2.504 4,730,744
Price II.......................................... 2,417,609 2.464 5,955,551
Price III......................................... - 1.096 -
Price IV.......................................... - 1.095 -
Growth Portfolio - Initial Class
Price I........................................... 2,622,394 3.082 8,082,728
Price II.......................................... 3,413,339 3.033 10,350,919
Price III......................................... - 0.854 -
Price IV.......................................... - 0.853 -
High Income Portfolio - Initial Class
Price I........................................... 882,645 1.194 1,053,747
Price II.......................................... 999,099 1.175 1,173,555
Price III......................................... - 0.810 -
Price IV.......................................... - 0.810 -
Variable Insurance Products Fund II
Asset Manager Portfolio - Initial Class
Price I........................................... 2,112,774 1.761 3,719,644
Price II.......................................... 661,645 1.732 1,146,087
Price III......................................... - 0.961 -
Price IV.......................................... - 0.960 -
---------------
Net Contract Owners' Equity................................................... $ 116,176,872
===============
-9-
61
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. STATEMENT OF INVESTMENTS
INVESTMENTS NO. OF MARKET
SHARES VALUE
---------------- ----------------
CAPITAL APPRECIATION FUND (15.6%)
Total (Cost $14,905,384) 220,946 $ 18,119,805
---------------- ----------------
HIGH YIELD BOND TRUST (0.1%)
Total (Cost $91,461) 9,772 85,704
---------------- ----------------
MANAGED ASSETS TRUST (5.0%)
Total (Cost $6,060,504) 326,187 5,851,797
---------------- ----------------
MONEY MARKET PORTFOLIO (4.8%)
Total (Cost $5,599,950) 5,599,950 5,599,950
---------------- ----------------
AMERICAN ODYSSEY FUNDS, INC. (0.5%)
Core Equity Fund (Cost $81,169) 4,965 69,415
Emerging Opportunities Fund (Cost $308,464) 21,052 362,722
Global High-Yield Bond Fund (Cost $3,653) 356 3,192
Intermediate-Term Bond Fund (Cost $2,718) 260 2,712
International Equity Fund (Cost $133,581) 8,387 164,294
Long-Term Bond Fund (Cost $9,239) 864 9,275
---------------- ----------------
Total (Cost $538,824) 35,884 611,610
---------------- ----------------
DEUTSCHE ASSET MANAGEMENT VIT FUNDS (0.2%)
EAFE(R)Equity Index Fund (Cost $144,540) 11,680 130,110
Small Cap Index Fund (Cost $129,541) 10,881 120,784
---------------- ----------------
Total (Cost $274,081) 22,561 250,894
---------------- ----------------
DREYFUS STOCK INDEX FUND (9.6%)
Total (Cost $10,297,273) 325,707 11,074,045
---------------- ----------------
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (13.2%)
Templeton Asset Strategy Fund - Class 1 (Cost $4,873,756) 245,202 4,712,773
Templeton Global Income Securities Fund - Class 1 (Cost $539,166) 44,316 510,968
Templeton Growth Securities Fund - Class 1 (Cost $10,494,117) 737,356 10,146,021
---------------- ----------------
Total (Cost $15,907,039) 1,026,874 15,369,762
---------------- ----------------
GREENWICH STREET SERIES FUND (1.7%)
Equity Index Portfolio - Class I Shares (Cost $134,984) 3,893 126,124
Total Return Portfolio (Cost $1,439,001) 80,879 1,823,818
---------------- ----------------
Total (Cost $1,573,985) 84,772 1,949,942
---------------- ----------------
-10-
62
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. STATEMENT OF INVESTMENTS (CONTINUED)
NO. OF MARKET
SHARES VALUE
---------------- ----------------
JANUS ASPEN SERIES (0.3%)
Aggressive Growth Portfolio - Service Shares (Cost $170,636) 3,763 $ 135,343
Global Technology Portfolio - Service Shares (Cost $69,418) 7,464 48,891
Worldwide Growth Portfolio - Service Shares (Cost $234,333) 5,443 200,126
---------------- ----------------
Total (Cost $474,387) 16,670 384,360
---------------- ----------------
THE TRAVELERS SERIES TRUST (4.2%)
U.S. Government Securities Portfolio (Cost $2,590,442) 219,651 2,684,132
Utilities Portfolio (Cost $354,264) 22,415 430,812
Zero Coupon Bond Fund Portfolio Series 2005 (Cost $1,578,461) 151,559 1,752,027
---------------- ----------------
Total (Cost $4,523,167) 393,625 4,866,971
---------------- ----------------
TRAVELERS SERIES FUND INC. (13.6%)
AIM Capital Appreciation Portfolio (Cost $3,348,476) 210,311 3,808,731
Alliance Growth Portfolio (Cost $7,364,183) 298,827 7,425,852
MFS Total Return Portfolio (Cost $2,077,906) 129,764 2,304,609
Putnam Diversified Income Portfolio (Cost $754) 71 745
Smith Barney High Income Portfolio (Cost $575,812) 46,417 469,280
Smith Barney Large Capitalization Growth Portfolio (Cost $95,653) 6,059 90,036
Smith Barney Large Cap Value Portfolio (Cost $1,530,818) 76,488 1,625,375
---------------- ----------------
Total (Cost $14,993,602) 767,937 15,724,628
---------------- ----------------
VARIABLE INSURANCE PRODUCTS FUND (27.0%)
Equity-Income Portfolio - Initial Class (Cost $9,448,040) 418,725 10,685,872
Growth Portfolio - Initial Class (Cost $17,053,065) 422,181 18,428,216
High Income Portfolio - Initial Class (Cost $3,173,041) 271,926 2,224,351
---------------- ----------------
Total (Cost $29,674,146) 1,112,832 31,338,439
---------------- ----------------
VARIABLE INSURANCE PRODUCTS FUND II (4.2%)
Asset Manager Portfolio - Initial Class
Total (Cost $4,871,461) 304,002 4,864,030
---------------- ----------------
TOTAL INVESTMENTS (100%)
(COST $109,785,264) $ 116,091,937
================
-11-
63
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF FUND UL OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
CAPITAL APPRECIATION FUND HIGH YIELD BOND TRUST
------------------------------------- -------------------------------------
2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ----
INVESTMENT INCOME:
Dividends ........................................ $ 761,471 $ 347,156 $ 225,348 $ 8,570 $ 8,706 $ 15,178
------------ ----------- ------------ ----------- ------------ ------------
EXPENSES:
Insurance charges ................................ 149,862 104,820 56,699 831 1,195 1,309
Administrative charges ........................... 12,050 8,180 4,562 - - -
------------ ----------- ------------ ----------- ------------ ------------
Net investment income (loss) ................. 599,559 234,156 164,087 7,739 7,511 13,869
------------ ----------- ------------ ----------- ------------ ------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ................. 1,326,938 4,044,199 672,903 136,838 152,789 118,763
Cost of investments sold ....................... 842,540 2,342,631 405,494 138,639 140,553 106,699
------------ ----------- ------------ ----------- ------------ ------------
Net realized gain (loss) ..................... 484,398 1,701,568 267,409 (1,801) 12,236 12,064
------------ ----------- ------------ ----------- ------------ ------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year ....... 9,367,070 4,618,531 930,111 776 11,936 25,465
Unrealized gain (loss) end of year ............. 3,214,421 9,367,070 4,618,531 (5,757) 776 11,936
------------ ----------- ------------ ----------- ------------ ------------
Net change in unrealized gain (loss) for ..... (6,152,649) 4,748,539 3,688,420 (6,533) (11,160) (13,529)
------------ ----------- ------------ ----------- ------------ ------------
Net increase (decrease) in net assets
resulting from operations .................... (5,068,692) 6,684,263 4,119,916 (595) 8,587 12,404
------------ ----------- ------------ ----------- ------------ ------------
UNIT TRANSACTIONS:
Participant premium payments ..................... 3,201,580 2,193,850 1,722,876 13,897 19,019 26,399
Participant transfers from other Traveler accounts 3,889,299 2,493,744 2,709,937 5,014 119,534 57,870
Contract surrenders .............................. (2,002,901) (1,816,312) (792,310) (28,283) (43,214) (47,347)
Participant transfers to other Travelers accounts (755,818) (3,414,877) (417,132) (109,147) (113,219) (77,740)
Other payments to participants ................... (2,064) (24,894) (160,978) - - -
------------ ----------- ------------ ----------- ------------ ------------
Net increase (decrease) in net assets
resulting from unit transactions ............. 4,330,096 (568,489) 3,062,393 (118,519) (17,880) (40,818)
------------ ----------- ------------ ----------- ------------ ------------
Net increase (decrease) in net assets ........ (738,596) 6,115,774 7,182,309 (119,114) (9,293) (28,414)
NET ASSETS:
Beginning of year .............................. 18,874,683 12,758,909 5,576,600 204,899 214,192 242,606
------------ ----------- ------------ ----------- ------------ ------------
End of year .................................... $18,136,087 $18,874,683 $12,758,909 $ 85,785 $ 204,899 $ 214,192
============ =========== ============ =========== ============ ============
-12-
64
NOTES TO FINANCIAL STATEMENTS - CONTINUED
MANAGED ASSETS TRUST MONEY MARKET PORTFOLIO CORE EQUITY FUND
- ------------------------------------- -------------------------------------- -------------------------------------
2000 1999 1998 2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ---- ---- ---- ----
$ 762,488 $ 232,540 $ 149,710 $ 299,731 $ 186,888 $ 154,385 $ 4,922 $ 12,031 $ 8,470
- ------------- ----------- ----------- ------------ ------------ ------------ ------------ ----------- ------------
37,744 21,120 14,505 38,391 28,956 24,039 446 484 448
2,945 1,064 527 4,189 3,167 2,618 - - -
- ------------- ----------- ----------- ------------ ------------ ------------ ------------ ----------- ------------
721,799 210,356 134,678 257,151 154,765 127,728 4,476 11,547 8,022
- ------------- ----------- ----------- ------------ ------------ ------------ ------------ ----------- ------------
635,567 331,109 532,152 8,955,834 4,355,185 6,111,697 4,189 3,987 9,623
610,903 281,585 429,702 8,955,834 4,355,185 6,111,697 4,403 3,219 5,694
- ------------- ----------- ----------- ------------ ------------ ------------ ------------ ----------- ------------
24,664 49,524 102,450 - - - (214) 768 3,929
- ------------- ----------- ----------- ------------ ------------ ------------ ------------ ----------- ------------
609,486 458,461 264,796 - - - 5,029 18,049 19,500
(208,707) 609,486 458,461 - - - (11,754) 5,029 18,049
- ------------- ----------- ----------- ------------ ------------ ------------ ------------ ----------- ------------
(818,193) 151,025 193,665 - - - (16,783) (13,020) (1,451)
- ------------- ----------- ----------- ------------ ------------ ------------ ------------ ----------- ------------
(71,730) 410,905 430,793 257,151 154,765 127,728 (12,521) (705) 10,500
- ------------- ----------- ----------- ------------ ------------ ------------ ------------ ----------- ------------
970,691 486,163 491,683 6,182,431 6,258,921 6,741,925 7,122 7,926 10,400
2,059,611 665,914 330,398 1,287,276 3,802,796 1,519,284 - - 61
(639,230) (316,082) (510,867) (912,623) (870,163) (1,028,727) (3,941) (3,926) (4,443)
(150,356) (182,067) (140,305) (9,081,041) (4,436,241) (7,713,789) (514) (1,201) (5,618)
- (8,562) - - (399) - - - -
- ------------- ----------- ----------- ------------ ------------ ------------ ------------ ----------- ------------
2,240,716 645,366 170,909 (2,523,957) 4,754,914 (481,307) 2,667 2,799 400
- ------------- ----------- ----------- ------------ ------------ ------------ ------------ ----------- ------------
2,168,986 1,056,271 601,702 (2,266,806) 4,909,679 (353,579) (9,854) 2,094 10,900
3,684,050 2,627,779 2,026,077 7,910,355 3,000,676 3,354,255 79,384 77,290 66,390
- ------------- ----------- ----------- ------------ ------------ ------------ ------------ ----------- ------------
$5,853,036 $3,684,050 $2,627,779 $ 5,643,549 $ 7,910,355 $ 3,000,676 $ 69,530 $ 79,384 $ 77,290
============= =========== =========== ============ ============ ============ ============ =========== ============
-13-
65
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF FUND UL OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (CONTINUED)
EMERGING OPPORTUNITIES FUND GLOBAL HIGH-YIELD BOND FUND
------------------------------------- -------------------------------------
2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ----
INVESTMENT INCOME:
Dividends .......................................... $ 16,871 $ 23,702 $ - $ 316 $ 201 $ 1
------------ ----------- ------------ ----------- ------------ ------------
EXPENSES:
Insurance charges .................................. 2,131 1,640 1,554 20 18 20
Administrative charges ............................. - - - - - -
------------ ----------- ------------ ----------- ------------ ------------
Net investment income (loss) .................... 14,740 22,062 (1,554) 296 183 (19)
------------ ----------- ------------ ----------- ------------ ------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ................... 35,262 53,729 57,345 67 65 96
Cost of investments sold ......................... 29,124 55,317 64,399 71 67 102
------------ ----------- ------------ ----------- ------------ ------------
Net realized gain (loss) ........................ 6,138 (1,588) (7,054) (4) (2) (6)
------------ ----------- ------------ ----------- ------------ ------------
Change in unrealized gain (loss) on investments: ...
Unrealized gain (loss) beginning of year........... 44,272 (25,853) (12,045) (20) (151) (31)
Unrealized gain (loss) end of year ................ 54,258 44,272 (25,853) (461) (20) (151)
------------ ----------- ------------ ----------- ------------ ------------
Net change in unrealized gain (loss) for the..... 9,986 70,125 (13,808) (441) 131 (120)
------------ ----------- ------------ ----------- ------------ ------------
Net increase (decrease) in net assets
resulting from operations........................ 30,864 90,599 (22,416) (149) 312 (145)
------------ ----------- ------------ ----------- ------------ ------------
UNIT TRANSACTIONS:
Participant premium payments ....................... 38,061 42,790 49,542 101 77 94
Participant transfers from other Travelers accounts 7,155 3,772 4,306 - - -
Contract surrenders ................................ (29,730) (41,231) (22,358) (145) (117) (152)
Participant transfers to other Travelers accounts .. (12,688) (20,286) (43,052) - (10) -
Other payments to participants ..................... - - - - - -
------------ ----------- ------------ ----------- ------------ ------------
Net increase (decrease) in net assets
resulting from unit transactions................ 2,798 (14,955) (11,562) (44) (50) (58)
------------ ----------- ------------ ----------- ------------ ------------
Net increase (decrease) in net assets .......... 33,662 75,644 (33,978) (193) 262 (203)
NET ASSETS:
Beginning of year ............................... 329,351 253,707 287,685 3,384 3,122 3,325
------------ ----------- ------------ ----------- ------------ ------------
End of year ..................................... $ 363,013 $ 329,351 $ 253,707 $ 3,191 $ 3,384 $ 3,122
============ =========== ============ =========== ============ ============
-14-
66
NOTES TO FINANCIAL STATEMENTS - CONTINUED
INTERMEDIATE-TERM BOND FUND INTERNATIONAL EQUITY FUND LONG-TERM BOND FUND
- --------------------------------------- ------------------------------------- -------------------------------------
2000 1999 1998 2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ---- ---- ---- ----
$ 134 $ 162 $ 8 $ 7,992 $ - $ 7,253 $ 566 $ 958 $ 188
- ------------- ------------ ------------ ------------ ------------ ----------- ------------ ----------- ------------
15 11 9 1,009 840 738 55 63 96
- - - - - - - - -
- ------------- ------------ ------------ ------------ ------------ ----------- ------------ ----------- ------------
119 151 (1) 6,983 (840) 6,515 511 895 92
- ------------- ------------ ------------ ------------ ------------ ----------- ------------ ----------- ------------
32 15 65 12,469 12,347 28,558 1,218 2,791 77,573
33 16 63 9,147 10,281 21,351 1,273 2,919 75,868
- ------------- ------------ ------------ ------------ ------------ ----------- ------------ ----------- ------------
(1) (1) 2 3,322 2,066 7,207 (55) (128) 1,705
- ------------- ------------ ------------ ------------ ------------ ----------- ------------ ----------- ------------
(33) 97 (22) 56,149 16,023 12,462 (514) 581 1,244
(6) (33) 97 30,713 56,149 16,023 36 (514) 581
- ------------- ------------ ------------ ------------ ------------ ----------- ------------ ----------- ------------
27 (130) 119 (25,436) 40,126 3,561 550 (1,095) (663)
- ------------- ------------ ------------ ------------ ------------ ----------- ------------ ----------- ------------
145 20 120 (15,131) 41,352 17,283 1,006 (328) 1,134
- ------------- ------------ ------------ ------------ ------------ ----------- ------------ ----------- ------------
485 484 404 17,977 17,898 21,538 1,065 1,171 1,382
7 6 16 2,555 2,966 4,669 - - -
(83) (81) (86) (9,609) (9,368) (23,931) (1,361) (414) (811)
(11) (10) (10) (5,850) (6,137) (8,587) - (2,715) (77,176)
- - - - - - - - -
- ------------- ------------ ------------ ------------ ------------ ----------- ------------ ----------- ------------
398 399 324 5,073 5,359 (6,311) (296) (1,958) (76,605)
- ------------- ------------ ------------ ------------ ------------ ----------- ------------ ----------- ------------
543 419 444 (10,058) 46,711 10,972 710 (2,286) (75,471)
2,198 1,779 1,335 174,381 127,670 116,698 8,564 10,850 86,321
- ------------- ------------ ------------ ------------ ------------ ----------- ------------ ----------- ------------
$ 2,741 $ 2,198 $ 1,779 $ 164,323 $ 174,381 $ 127,670 $ 9,274 $ 8,564 $ 10,850
============= ============ ============ ============ ============ =========== ============ =========== ============
-15-
67
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF FUND UL OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (CONTINUED)
EAFE(R) EQUITY INDEX FUND SMALL CAP INDEX FUND
------------------------------------- -------------------------------------
2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ----
INVESTMENT INCOME:
Dividends ......................................... $ 2,160 $ 273 $ - $ 624 $ 64 $ -
------------ ----------- ------------ ----------- ------------ ------------
EXPENSES:
Insurance charges ................................. 542 6 - 735 2 -
Administrative charges ............................ 55 1 - 83 - -
------------ ----------- ------------ ----------- ------------ ------------
Net investment income (loss).................... 1,563 266 - (194) 62 -
------------ ----------- ------------ ----------- ------------ ------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ................... 24,863 94 - 35,191 48 -
Cost of investments sold ......................... 27,642 88 - 35,788 47 -
------------ ----------- ------------ ----------- ------------ ------------
Net realized gain (loss) ........................ (2,779) 6 - (597) 1 -
------------ ----------- ------------ ----------- ------------ ------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year ......... 429 - - 253 - -
Unrealized gain (loss) end of year ............... (14,430) 429 - (8,757) 253 -
------------ ----------- ------------ ----------- ------------ ------------
Net change in unrealized gain (loss) for the year (14,859) 429 - (9,010) 253 -
------------ ----------- ------------ ----------- ------------ ------------
Net increase (decrease) in net assets
resulting from operations ...................... (16,075) 701 - (9,801) 316 -
------------ ----------- ------------ ----------- ------------ ------------
UNIT TRANSACTIONS:
Participant premium payments ...................... 9,750 2,585 - 40,237 241 -
Participant transfers from other Travelers accounts 157,266 2,804 - 123,834 6,280 -
Contract surrenders ............................... (7,052) (109) - (22,190) (435) -
Participant transfers to other Travelers accounts (19,794) (17) - (17,698) (28) -
Other payments to participants .................... - - - - - -
------------ ----------- ------------ ----------- ------------ ------------
Net increase (decrease) in net assets
resulting from unit transactions ............... 140,170 5,263 - 124,183 6,058 -
------------ ----------- ------------ ----------- ------------ ------------
Net increase (decrease) in net assets .......... 124,095 5,964 - 114,382 6,374 -
NET ASSETS:
Beginning of year ................................ 5,964 - - 6,374 - -
------------ ----------- ------------ ----------- ------------ ------------
End of year ...................................... $ 130,059 $ 5,964 $ - $ 120,756 $ 6,374 $ -
============ =========== ============ =========== ============ ============
-16-
68
NOTES TO FINANCIAL STATEMENTS - CONTINUED
TEMPLETON ASSET STRATEGY FUND - TEMPLETON GLOBAL INCOME SECURITIES FUND -
DREYFUS STOCK INDEX FUND CLASS 1 CLASS 1
- --------------------------------------- ------------------------------------------- ------------------------------------------
2000 1999 1998 2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ---- ---- ---- ----
$ 285,178 $ 166,826 $ 80,837 $ 883,703 $ 635,252 $ 240,092 $ 27,478 $ 26,131 $ 32,614
- ------------- ------------ ------------ ------------ ----------- ----------- ------------ ----------- ------------
82,819 58,963 37,009 32,283 29,831 28,173 3,530 4,762 4,333
8,445 5,681 3,583 1,795 1,542 1,263 334 478 421
- ------------- ------------ ------------ ------------ ----------- ----------- ------------ ----------- ------------
193,914 102,182 40,245 849,625 603,879 210,656 23,614 20,891 27,860
- ------------- ------------ ------------ ------------ ----------- ----------- ------------ ----------- ------------
1,624,418 875,515 1,348,144 512,640 1,105,518 460,332 221,201 128,661 83,313
1,341,651 693,541 890,692 520,530 1,020,236 337,833 241,167 134,781 81,836
- ------------- ------------ ------------ ------------ ----------- ----------- ------------ ----------- ------------
282,767 181,974 457,452 (7,890) 85,282 122,499 (19,966) (6,120) 1,477
- ------------- ------------ ------------ ------------ ----------- ----------- ------------ ----------- ------------
2,344,255 1,182,152 523,266 699,008 474,929 587,676 (46,856) 12,791 6,720
776,772 2,344,255 1,182,152 (160,983) 699,008 474,929 (28,198) (46,856) 12,791
- ------------- ------------ ------------ ------------ ----------- ----------- ------------ ----------- ------------
(1,567,483) 1,162,103 658,886 (859,991) 224,079 (112,747) 18,658 (59,647) 6,071
- ------------- ------------ ------------ ------------ ----------- ----------- ------------ ----------- ------------
(1,090,802) 1,446,259 1,156,583 (18,256) 913,240 220,408 22,306 (44,876) 35,408
- ------------- ------------ ------------ ------------ ----------- ----------- ------------ ----------- ------------
2,512,144 1,864,556 1,357,520 581,385 628,987 727,391 90,095 93,816 165,218
1,962,992 2,006,864 2,205,447 113,331 222,681 244,926 20,031 52,412 79,798
(1,249,712) (705,299) (758,259) (478,583) (645,930) (430,422) (172,093) (72,307) (66,688)
(928,414) (879,560) (1,144,166) (256,685) (782,698) (308,864) (67,495) (74,704) (38,486)
(14,715) (3,175) - - - (869) - - -
- ------------- ------------ ------------ ------------ ----------- ----------- ------------ ----------- ------------
2,282,295 2,283,386 1,660,542 (40,552) (576,960) 232,162 (129,462) (783) 139,842
- ------------- ------------ ------------ ------------ ----------- ----------- ------------ ----------- ------------
1,191,493 3,729,645 2,817,125 (58,808) 336,280 452,570 (107,156) (45,659) 175,250
9,881,943 6,152,298 3,335,173 4,769,020 4,432,740 3,980,170 618,349 664,008 488,758
- ------------- ------------ ------------ ------------ ----------- ----------- ------------ ----------- ------------
$ 11,073,436 $ 9,881,943 $ 6,152,298 $ 4,710,212 $ 4,769,020 $ 4,432,740 $ 511,193 $ 618,349 $ 664,008
============= ============ ============ ============ =========== =========== ============ =========== ============
-17-
69
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF FUND UL OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (CONTINUED)
TEMPLETON GROWTH SECURITIES EQUITY INDEX PORTFOLIO -
FUND - CLASS I CLASS I SHARES
------------------------------------- -------------------------------------
2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ----
INVESTMENT INCOME:
Dividends ...................................... $ 2,175,749 $ 800,720 $ 813,730 $ 328 $ - $ -
------------ ----------- ------------ ----------- ------------ ------------
EXPENSES:
Insurance charges .............................. 68,657 60,210 59,343 520 2 -
Administrative charges ......................... 4,491 4,010 3,758 60 - -
------------ ----------- ------------ ----------- ------------ ------------
Net investment income (loss) ................ 2,102,601 736,500 750,629 (252) (2) -
------------ ----------- ------------ ----------- ------------ ------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ............... 1,352,899 1,823,221 1,561,814 22,041 - -
Cost of investments sold ..................... 1,398,425 1,873,595 1,456,190 22,133 - -
------------ ----------- ------------ ----------- ------------ ------------
Net realized gain (loss) ..................... (45,526) (50,374) 105,624 (92) - -
------------ ----------- ------------ ----------- ------------ ------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year ..... 1,066,650 (452,700) 539,409 145 - -
Unrealized gain (loss) end of year ........... (348,096) 1,066,650 (452,700) (8,860) 145 -
------------ ----------- ------------ ----------- ------------ ------------
Net change in unrealized gain (loss)for the
year....................................... (1,414,746) 1,519,350 (992,109) (9,005) 145 -
------------ ----------- ------------ ----------- ------------ ------------
Net increase (decrease) in net assets
resulting from operations ..................... 642,329 2,205,476 (135,856) (9,349) 143 -
------------ ----------- ------------ ----------- ------------ ------------
UNIT TRANSACTIONS:
Participant premium payments ................... 1,155,938 1,327,773 2,075,969 25,542 64 -
Participant transfers from other Travelers ..... 579,888 390,488 1,558,785 128,747 5,870 -
Contract surrenders ............................ (1,132,630) (937,367) (722,676) (18,425) (239) -
Participant transfers to other Travelers ....... (853,208) (1,512,327) (1,548,621) (6,283) - -
Other payments to participants ................. (51) (18,391) (55,834) - - -
------------ ----------- ------------ ----------- ------------ ------------
Net increase (decrease) in net assets
resulting from unit transactions ............ (250,063) (749,824) 1,307,623 129,581 5,695 -
------------ ----------- ------------ ----------- ------------ ------------
Net increase (decrease) in net assets ....... 392,266 1,455,652 1,171,767 120,232 5,838 -
NET ASSETS:
Beginning of year ............................. 9,750,484 8,294,832 7,123,065 5,838 - -
------------ ----------- ------------ ----------- ------------ ------------
End of year ................................... $10,142,750 $9,750,484 $ 8,294,832 $ 126,070 $ 5,838 $ -
============ =========== ============ =========== ============ ============
-18-
70
NOTES TO FINANCIAL STATEMENTS - CONTINUED
AGGRESSIVE GROWTH PORTFOLIO GLOBAL TECHNOLOGY PORTFOLIO
TOTAL RETURN PORTFOLIO - SERVICE SHARES - SERVICE SHARES
----------------------------------------- ------------------------------------- -------------------------------------
2000 1999 1998 2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ---- ---- ---- ----
$ 106,185 $ 77,045 $ 46,880 $ 591 $ - $ - $ 297 $ - $ -
------------- ------------ ------------ ------------ ------------ ----------- ------------ ----------- ------------
12,166 9,794 7,284 290 - - 192 - -
1,467 1,176 863 33 - - 24 - -
------------- ------------ ------------ ------------ ------------ ----------- ------------ ----------- ------------
92,552 66,075 38,733 268 - - 81 - -
------------- ------------ ------------ ------------ ------------ ----------- ------------ ----------- ------------
71,405 193,461 84,997 22,601 - - 1,456 - -
57,953 167,367 67,822 26,614 - - 1,657 - -
------------- ------------ ------------ ------------ ------------ ----------- ------------ ----------- ------------
13,452 26,094 17,175 (4,013) - - (201) - -
------------- ------------ ------------ ------------ ------------ ----------- ------------ ----------- ------------
214,149 69,832 87,967 - - - - - -
384,817 214,149 69,832 (35,293) - - (20,527) - -
------------- ------------ ------------ ------------ ------------ ----------- ------------ ----------- ------------
170,668 144,317 (18,135) (35,293) - - (20,527) - -
------------- ------------ ------------ ------------ ------------ ----------- ------------ ----------- ------------
276,672 236,486 37,773 (39,038) - - (20,647) - -
------------- ------------ ------------ ------------ ------------ ----------- ------------ ----------- ------------
248,979 187,035 181,561 16,424 - - 4,517 - -
91,859 66,368 176,508 175,088 - - 67,093 - -
(87,562) (76,644) (106,689) (2,723) - - (1,540) - -
(17,374) (151,484) (17,224) (13,609) - - (75) - -
- - - - - - - - -
------------- ------------ ------------ ------------ ------------ ----------- ------------ ----------- ------------
235,902 25,275 234,156 175,180 - - 69,995 - -
------------- ------------ ------------ ------------ ------------ ----------- ------------ ----------- ------------
512,574 261,761 271,929 136,142 - - 49,348 - -
1,311,060 1,049,299 777,370 - - - - - -
------------- ------------ ------------ ------------ ------------ ----------- ------------ ----------- ------------
$ 1,823,634 $ 1,311,060 $ 1,049,299 $ 136,142 $ - $ - $ 49,348 $ - $ -
============= ============ ============ ============ ============ =========== ============ =========== ============
-19-
71
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF FUND UL OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (CONTINUED)
WORLDWIDE GROWTH PORTFOLIO -
SERVICE SHARES U.S. Government Securities Portfolio
------------------------------------- -------------------------------------
2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ----
INVESTMENT INCOME:
Dividends .......................................... $ 4,445 $ - $ - $ 132,138 $ 268 $ 250,408
------------ ----------- ------------ ----------- ------------ ------------
EXPENSES:
Insurance charges .................................. 533 - - 18,917 24,227 14,906
Administrative charges ............................. 55 - - 2,178 2,844 1,708
------------ ----------- ------------ ----------- ------------ ------------
Net investment income (loss) .................... 3,857 - - 111,043 (26,803) 233,794
------------ ----------- ------------ ----------- ------------ ------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ................... 18,126 - - 672,984 1,013,561 311,524
Cost of investments sold ......................... 20,572 - - 702,411 1,066,899 281,520
------------ ----------- ------------ ----------- ------------ ------------
Net realized gain (loss) ........................ (2,446) - - (29,427) (53,338) 30,004
------------ ----------- ------------ ----------- ------------ ------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .......... - - - (133,644) (55,253) 46,013
Unrealized gain (loss) end of year ................ (34,207) - - 93,690 (133,644) (55,253)
------------ ----------- ------------ ----------- ------------ ------------
Net change in unrealized gain (loss) for the year (34,207) - - 227,334 (78,391) (101,266)
------------ ----------- ------------ ----------- ------------ ------------
Net increase (decrease) in net assets
resulting from operations ....................... (32,796) - - 308,950 (158,532) 162,532
------------ ----------- ------------ ----------- ------------ ------------
UNIT TRANSACTIONS:
Participant premium payments ....................... 22,499 - - 163,751 268,091 488,039
Participant transfers from other Travelers accounts 233,216 - - 148,336 188,129 1,294,349
Contract surrenders ................................ (10,054) - - (157,436) (191,052) (145,232)
Participant transfers to other Travelers accounts .. (8,320) - - (138,139) (849,466) (224,377)
Other payments to participants ..................... - - - - - -
------------ ----------- ------------ ----------- ------------ ------------
Net increase (decrease) in net assets
resulting from unit transactions ................ 237,341 - - 16,512 (584,298) 1,412,779
------------ ----------- ------------ ----------- ------------ ------------
Net increase (decrease) in net assets ........... 204,545 - - 325,462 (742,830) 1,575,311
NET ASSETS:
Beginning of year ................................. - - - 2,358,164 3,100,994 1,525,683
------------ ----------- ------------ ----------- ------------ ------------
End of year ....................................... $ 204,545 $ - $ - $2,683,626 $ 2,358,164 $ 3,100,994
============ =========== ============ =========== ============ ============
-20-
72
NOTES TO FINANCIAL STATEMENTS - CONTINUED
ZERO COUPON BOND FUND PORTFOLIO SERIES ZERO COUPON BOND FUND PORTFOLIO SERIES
UTILITIES PORTFOLIO 1998 2000
- --------------------------------------- ------------------------------------- ---------------------------------------
2000 1999 1998 2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ---- ---- ---- ----
$ 9,418 $ 35,271 $ 12,250 $ - $ - $ 63,083 $ 165,760 $ - $ 68,351
------------ ------------ ----------- ----------- ------------ ----------- ------------ ---------- ------------
2,767 3,065 1,659 - - 6,692 8,364 7,721 7,338
195 217 87 - - 10 115 56 44
------------ ------------ ----------- ----------- ------------ ----------- ------------ ---------- ------------
6,456 31,989 10,504 - - 56,381 157,281 (7,777) 60,969
------------ ------------ ----------- ----------- ------------ ----------- ------------ ----------- ------------
197,072 48,491 34,296 - - 1,186,548 1,524,520 16,786 34,245
177,419 43,356 27,593 - - 1,186,192 1,540,958 16,144 33,205
------------ ------------ ----------- ----------- ------------ ----------- ------------ ----------- ------------
19,653 5,135 6,703 - - 356 (16,438) 642 1,040
------------ ------------ ----------- ----------- ------------ ----------- ------------ ----------- ------------
18,023 55,396 30,111 - - 2,394 67,573 26,688 7,987
76,548 18,023 55,396 - - - - 67,573 26,688
------------ ------------ ----------- ----------- ------------ ----------- ------------ ----------- ------------
58,525 (37,373) 25,285 - - (2,394) (67,573) 40,885 18,701
------------ ------------ ----------- ----------- ------------ ----------- ------------ ----------- ------------
84,634 (249) 42,492 - - 54,343 73,270 33,750 80,710
------------ ------------ ----------- ----------- ------------ ----------- ------------ ----------- ------------
45,063 54,978 59,758 - - 342 30,769 24,454 4,538
53,456 131,622 98,449 - - - 95,947 22,805 26,367
(67,681) (30,314) (31,913) - - (1,170,656) (1,324,041) (10,574) (5,944)
(136,806) (28,197) (13,516) - - (9,182) (193,406) (98) (21,675)
- (863) - - - - - - -
------------ ------------ ----------- ----------- ------------ ----------- ------------ ----------- ------------
(105,968) 127,226 112,778 - - (1,179,496) (1,390,731) 36,587 3,286
------------ ------------ ----------- ----------- ------------ ----------- ------------ ----------- ------------
(21,334) 126,977 155,270 - - (1,125,153) (1,317,461) 70,337 83,996
460,489 333,512 178,242 - - 1,125,153 1,317,461 1,247,124 1,163,128
------------ ------------ ----------- ----------- ------------ ----------- ------------ ----------- ------------
$ 439,155 $ 460,489 $ 333,512 $ - $ - $ - $ - $ 1,317,461 $ 1,247,124
============ ============ =========== =========== ============ =========== ============ =========== ============
-21-
73
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF FUND UL OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (CONTINUED)
ZERO COUPON BOND FUND PORTFOLIO SERIES AIM CAPITAL APPRECIATION
2005 PORTFOLIO
------------------------------------- -------------------------------------
2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ----
INVESTMENT INCOME:
Dividends .......................................... $ 76,068 $ - $ 74,703 $ 91,908 $ - $ 1,994
------------ ----------- ------------ ----------- ------------ ------------
EXPENSES:
Insurance charges .................................. 9,896 9,560 8,639 30,727 16,919 11,508
Administrative charges ............................. 256 215 142 3,470 1,936 1,313
------------ ----------- ------------ ----------- ------------ ------------
Net investment income (loss) .................... 65,916 (9,775) 65,922 57,711 (18,855) (10,827)
------------ ----------- ------------ ----------- ------------ ------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold .................... 52,211 195,466 95,551 360,813 207,909 262,115
Cost of investments sold .......................... 49,216 185,010 88,033 245,322 167,443 203,919
------------ ----------- ------------ ----------- ------------ ------------
Net realized gain (loss) ........................ 2,995 10,456 7,518 115,491 40,466 58,196
------------ ----------- ------------ ----------- ------------ ------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .......... 42,477 138,833 60,360 1,170,353 292,791 93,128
Unrealized gain (loss) end of year ................ 173,566 42,477 138,833 460,255 1,170,353 292,791
------------ ----------- ------------ ----------- ------------ ------------
Net change in unrealized gain (loss) for the year 131,089 (96,356) 78,473 (710,098) 877,562 199,663
------------ ----------- ------------ ----------- ------------ ------------
Net increase (decrease) in net assets
resulting from operations ....................... 200,000 (95,675) 151,913 (536,896) 899,173 247,032
------------ ----------- ------------ ----------- ------------ ------------
UNIT TRANSACTIONS:
Participant premium payments ....................... 33,571 32,216 63,688 762,103 416,419 510,445
Participant transfers from other Travelers accounts 108,510 96,144 114,346 865,725 268,208 216,820
Contract surrenders ................................ (27,583) (87,776) (10,152) (319,184) (200,427) (179,247)
Participant transfers to other Traveler accounts ... (21,409) (61,806) (80,311) (173,368) (51,335) (99,943)
Other payments to participants ..................... - - - - - (54,459)
------------ ----------- ------------ ----------- ------------ ------------
Net increase (decrease) in net assets
resulting from unit transactions ................ 93,089 (21,222) 87,571 1,135,276 432,865 393,616
------------ ----------- ------------ ----------- ------------ ------------
Net increase (decrease) in net assets ........... 293,089 (116,897) 239,484 598,380 1,332,038 640,648
NET ASSETS:
Beginning of year ................................. 1,458,623 1,575,520 1,336,036 3,212,397 1,880,359 1,239,711
------------ ----------- ------------ ----------- ------------ ------------
End of year ....................................... $ 1,751,712 $1,458,623 $ 1,575,520 $ 3,810,777 $ 3,212,397 $ 1,880,359
============ =========== ============ =========== ============ ============
-22-
74
NOTES TO FINANCIAL STATEMENTS - CONTINUED
ALLIANCE GROWTH PORTFOLIO MFS TOTAL RETURN PORTFOLIO PUTNAM DIVERSIFIED INCOME PORTFOLIO
- --------------------------------------- ------------------------------------- -------------------------------------
2000 1999 1998 2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ---- ---- ---- ----
$ 595,170 $ 316,357 $ 208,151 $ 118,031 $ 150,268 $ 59,754 $ - $ - $ -
- ------------- ------------ ------------ ------------ ------------ ----------- ------------ ------------ -----------
60,881 43,895 26,480 15,657 15,556 10,341 3 - -
7,009 5,015 2,973 1,785 1,687 1,097 - - -
- ------------- ------------ ------------ ------------ ------------ ----------- ------------ ------------ -----------
527,280 267,447 178,698 100,589 133,025 48,316 (3) - -
- ------------- ------------ ------------ ------------ ------------ ----------- ------------ ------------ -----------
1,097,409 470,676 420,518 690,008 287,627 199,816 184 - -
911,972 345,251 269,565 687,244 276,420 151,321 187 - -
- ------------- ------------ ------------ ------------ ------------ ----------- ------------ ------------ -----------
185,437 125,425 150,953 2,764 11,207 48,495 (3) - -
- ------------- ------------ ------------ ------------ ------------ ----------- ------------ ------------ -----------
2,402,120 1,125,311 554,376 40,216 150,664 115,974 - - -
61,669 2,402,120 1,125,311 226,703 40,216 150,664 (9) - -
- ------------- ------------ ------------ ------------ ------------ ----------- ------------ ------------ -----------
(2,340,451) 1,276,809 570,935 186,487 (110,448) 34,690 (9) - -
- ------------- ------------ ------------ ------------ ------------ ----------- ------------ ------------ -----------
(1,627,734) 1,669,681 900,586 289,840 33,784 131,501 (15) - -
- ------------- ------------ ------------ ------------ ------------ ----------- ------------ ------------ -----------
1,758,624 1,014,363 795,707 255,187 349,714 422,994 169 - -
1,304,557 840,746 1,026,827 226,037 211,825 597,781 802 - -
(1,073,900) (396,145) (471,438) (171,064) (106,368) (134,335) (193) - -
(266,133) (409,846) (145,042) (403,724) (229,586) (28,238) - - -
(1,337) (5,028) - - - - - - -
- ------------- ------------ ------------ ------------ ------------ ----------- ------------ ------------ -----------
1,721,811 1,044,090 1,206,054 (93,564) 225,585 858,202 778 - -
- ------------- ------------ ------------ ------------ ------------ ----------- ------------ ------------ -----------
94,077 2,713,771 2,106,640 196,276 259,369 989,703 763 - -
7,334,497 4,620,726 2,514,086 2,109,221 1,849,852 860,149 - - -
- ------------- ------------ ------------ ------------ ------------ ----------- ------------ ------------ -----------
$ 7,428,574 $ 7,334,497 $ 4,620,726 $ 2,305,497 $ 2,109,221 $1,849,852 $ 763 $ - $ -
============= ============ ============ ============ ============ =========== ============ ============= ==========
-23-
75
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF FUND UL OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (CONTINUED)
SMITH BARNEY LARGE CAPITALIZATION
SMITH BARNEY HIGH INCOME PORTFOLIO GROWTH PORTFOLIO
------------------------------------- -------------------------------------
2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ----
INVESTMENT INCOME:
Dividends .......................................... $ 43,764 $ 57,482 $ 47,805 $ 4 $ - $ -
------------ ----------- ------------ ----------- ------------ ------------
EXPENSES:
Insurance charges .................................. 3,753 6,462 5,337 158 - -
Administrative charges ............................. 453 781 646 20 - -
------------ ----------- ------------ ----------- ------------ ------------
Net investment income (loss) .................... 39,558 50,239 41,822 (174) - -
------------ ----------- ------------ ----------- ------------ ------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold .................... 431,746 178,470 52,415 4,342 - -
Cost of investments sold .......................... 468,304 193,299 49,894 4,631 - -
------------ ----------- ------------ ----------- ------------ ------------
Net realized gain (loss) ........................ (36,558) (14,829) 2,521 (289) - -
------------ ----------- ------------ ----------- ------------ ------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .......... (58,623) (37,007) 17,011 - - -
Unrealized gain (loss) end of year ................ (106,532) (58,623) (37,007) (5,617) - -
------------ ----------- ------------ ----------- ------------ ------------
Net change in unrealized gain (loss) for the year (47,909) (21,616) (54,018) (5,617) - -
------------ ----------- ------------ ----------- ------------ ------------
Net increase (decrease) in net assets
resulting from operations ....................... (44,909) 13,794 (9,675) (6,080) - -
------------ ----------- ------------ ----------- ------------ ------------
UNIT TRANSACTIONS:
Participant premium payments ....................... 93,734 94,467 271,273 8,365 - -
Participant transfers from other Travelers accounts 60,274 105,702 93,719 94,962 - -
Contract surrenders ................................ (430,357) (49,330) (37,279) (3,976) - -
Participant transfers to other Travelers accounts .. (25,320) (138,279) (14,923) (3,268) - -
Other payments to participants ..................... - - - - - -
------------ ----------- ------------ ----------- ------------ ------------
Net increase (decrease) in net assets
resulting from unit transactions ................ (301,669) 12,560 312,790 96,083 - -
------------ ----------- ------------ ----------- ------------ ------------
Net increase (decrease) in net assets ........... (346,578) 26,354 303,115 90,003 - -
NET ASSETS:
Beginning of year ................................. 815,793 789,439 486,324 - - -
------------ ----------- ------------ ----------- ------------ ------------
End of year ....................................... $ 469,215 $ 815,793 $ 789,439 $ 90,003 $ - $ -
============ =========== ============ =========== ============ ============
-24-
76
NOTES TO FINANCIAL STATEMENTS - CONTINUED
SMITH BARNEY LARGE CAP VALUE PORTFOLIO EQUITY-INCOME PORTFOLIO - INITIAL CLASS GROWTH PORTFOLIO - INITIAL CLASS
- --------------------------------------- --------------------------------------- -------------------------------------
2000 1999 1998 2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ---- ---- ---- ----
$ 52,209 $ 82,453 $ 30,988 $ 880,247 $ 472,928 $ 519,007 $ 2,143,420 $ 1,449,423 $ 1,383,745
- ------------- ------------ ------------ ------------ ------------ ----------- ------------ ------------ -----------
11,294 14,788 6,869 71,114 77,319 61,249 146,064 102,726 74,825
1,296 1,763 806 5,444 5,724 4,053 11,199 7,034 4,553
- ------------- ------------ ------------ ------------ ------------ ----------- ------------ ------------ -----------
39,619 65,902 23,313 803,689 389,885 453,705 1,986,157 1,339,663 1,304,367
- ------------- ------------ ------------ ------------ ------------ ----------- ------------ ------------ -----------
999,016 1,165,430 117,248 2,290,488 1,502,723 1,027,285 2,213,349 1,582,444 2,882,351
1,023,087 1,227,403 85,342 2,297,478 1,293,047 773,339 1,675,299 1,179,040 2,088,775
- ------------- ------------ ------------ ------------ ------------ ----------- ------------ ------------ -----------
(24,071) (61,973) 31,906 (6,990) 209,676 253,946 538,050 403,404 793,576
- ------------- ------------ ------------ ------------ ------------ ----------- ------------ ------------ -----------
(70,093) 96,699 80,809 1,415,727 1,524,296 1,324,425 6,357,580 3,278,485 1,692,557
94,557 (70,093) 96,699 1,237,832 1,415,727 1,524,296 1,375,151 6,357,580 3,278,485
- ------------- ------------ ------------ ------------ ------------ ----------- ------------ ------------ -----------
164,650 (166,792) 15,890 (177,895) (108,569) 199,871 (4,982,429) 3,079,095 1,585,928
- ------------- ------------ ------------ ------------ ------------ ----------- ------------ ------------ -----------
180,198 (162,863) 71,109 618,804 490,992 907,522 (2,458,222) 4,822,162 3,683,871
- ------------- ------------ ------------ ------------ ------------ ----------- ------------ ------------ -----------
301,244 417,490 197,772 1,346,994 1,662,705 1,821,387 2,208,040 2,016,287 2,688,152
167,309 1,290,167 208,276 549,316 1,509,824 782,438 1,942,978 2,428,944 577,474
(217,730) (145,106) (123,446) (1,333,650) (1,071,048) (1,111,405) (1,811,286) (1,572,248) (1,397,298)
(134,966) (1,106,250) (49,428) (1,496,131) (1,349,462) (466,177) (822,246) (952,751) (2,484,960)
- - - (1,507) (10,330) (125,412) (1,802) (35,273) (59,946)
- ------------- ------------ ------------ ------------ ------------ ----------- ------------ ------------ -----------
115,857 456,301 233,174 (934,978) 741,689 900,831 1,515,684 1,884,959 (676,578)
- ------------- ------------ ------------ ------------ ------------ ----------- ------------ ------------ -----------
296,055 293,438 304,283 (316,174) 1,232,681 1,808,353 (942,538) 6,707,121 3,007,293
1,329,846 1,036,408 732,125 11,002,469 9,769,788 7,961,435 19,376,185 12,669,064 9,661,771
- ------------- ------------ ------------ ------------ ------------ ----------- ------------ ------------ -----------
$ 1,625,901 $ 1,329,846 $ 1,036,408 $ 10,686,295 $ 11,002,469 $ 9,769,788 $ 18,433,647 $ 19,376,185 $ 12,669,06
============= ============ ============ ============ ============ =========== ============ ============ ===========
-25-
77
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF FUND UL OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (CONTINUED)
HIGH INCOME PORTFOLIO -
INITIAL CLASS
----------------------------------------
2000 1999 1998
---- ---- ----
INVESTMENT INCOME:
Dividends ................................................... $ 226,570 $ 368,897 $ 403,352
------------ ------------ ------------
EXPENSES:
Insurance charges ........................................... 20,900 27,163 27,571
Administrative charges ...................................... 1,638 2,278 2,305
------------ ------------ ------------
Net investment income (loss) ......................... 204,032 339,456 373,476
------------ ------------ ------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold .......................... 862,918 1,116,548 2,208,102
Cost of investments sold ................................ 1,027,650 1,193,024 2,203,983
------------ ------------ ------------
Net realized gain (loss) ............................. (164,732) (76,476) 4,119
------------ ------------ ------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year ................ (205,819) (224,114) 370,469
Unrealized gain (loss) end of year ...................... (948,690) (205,819) (224,114)
------------ ------------ ------------
Net change in unrealized gain (loss) for the year ... (742,871) 18,295 (594,583)
------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations ........................... (703,571) 281,275 (216,988)
------------ ------------ ------------
UNIT TRANSACTIONS:
Participant premium payments ................................ 457,515 495,575 856,339
Participant transfers from other Travelers accounts ......... 109,683 135,586 2,321,318
Contract surrenders ......................................... (428,879) (315,040) (391,089)
Participant transfers to other Travelers accounts ........... (670,573) (1,045,396) (2,081,017)
Other payments to participants .............................. - - -
------------ ------------ ------------
Net increase (decrease) in net assets
resulting from unit transactions .................... (532,254) (729,275) 705,551
------------ ------------ ------------
Net increase (decrease) in net assets ............... (1,235,825) (448,000) 488,563
NET ASSETS:
Beginning of year ....................................... 3,463,127 3,911,127 3,422,564
------------ ------------ ------------
End of year ............................................. $ 2,227,302 $ 3,463,127 $ 3,911,127
============ ============ ============
ASSET MANAGER PORTFOLIO -
INITIAL CLASS
-------------------------------------
2000 1999 1998
---- ---- ----
INVESTMENT INCOME:
Dividends ................................................... $ 578,069 $ 408,334 $ 555,132
----------- ----------- -----------
EXPENSES:
Insurance charges ........................................... 33,894 35,275 31,590
Administrative charges ...................................... 1,217 1,315 953
----------- ----------- -----------
Net investment income (loss) ......................... 542,958 371,744 522,589
----------- ----------- -----------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold .......................... 726,004 1,064,819 673,448
Cost of investments sold ................................ 696,471 959,958 558,510
----------- ----------- -----------
Net realized gain (loss) ............................. 29,533 104,861 114,938
----------- ----------- -----------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year ................ 799,474 737,449 714,532
Unrealized gain (loss) end of year ...................... (7,431) 799,474 737,449
----------- ----------- -----------
Net change in unrealized gain (loss) for the year ... (806,905) 62,025 22,917
----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations ........................... (234,414) 538,630 660,444
----------- ----------- -----------
UNIT TRANSACTIONS:
Participant premium payments ................................ 534,593 677,119 867,895
Participant transfers from other Travelers accounts ......... 71,029 110,106 394,346
Contract surrenders ......................................... (567,101) (756,021) (372,107)
Participant transfers to other Travelers accounts ........... (416,689) (599,200) (423,123)
Other payments to participants .............................. (4,812) (61) (841)
----------- ----------- -----------
Net increase (decrease) in net assets
resulting from unit transactions .................... (382,980) (568,057) 466,170
----------- ----------- -----------
Net increase (decrease) in net assets ............... (617,394) (29,427) 1,126,614
NET ASSETS:
Beginning of year ....................................... 5,483,125 5,512,552 4,385,938
----------- ----------- -----------
End of year ............................................. $4,865,731 $5,483,125 $5,512,552
=========== =========== ===========
-26-
78
NOTES TO FINANCIAL STATEMENTS - CONTINUED
COMBINED
--------------------------------------------------
2000 1999 1998
---- ---- ----
$ 10,462,575 $ 5,860,336 $ 5,453,417
------------- ------------- -------------
867,160 707,393 530,563
72,301 56,164 38,285
------------- ------------- -------------
9,523,114 5,096,779 4,884,569
------------- ------------- -------------
27,138,319 21,933,684 20,652,837
25,793,748 19,227,722 18,056,633
------------- ------------- -------------
1,344,571 2,705,962 2,596,204
------------- ------------- -------------
26,205,612 13,494,916 8,096,664
6,306,673 26,205,612 13,494,916
------------- ------------- -------------
(19,898,939) 12,710,696 5,398,252
------------- ------------- -------------
(9,031,254) 20,513,437 12,879,025
------------- ------------- -------------
23,140,642 20,657,234 22,622,231
16,703,183 17,182,307 16,644,515
(14,744,531) (10,470,687) (10,097,307)
(17,206,558) (18,399,253) (17,682,682)
(26,288) (106,976) (458,339)
------------- ------------- -------------
7,866,448 8,862,625 11,028,418
------------- ------------- -------------
(1,164,806) 29,376,062 23,907,443
117,341,678 87,965,616 64,058,173
------------- ------------- -------------
$116,176,872 $117,341,678 $ 87,965,616
============= ============= =============
-27-
79
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF UNITS FOR FUND UL
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
CAPITAL APPRECIATION FUND HIGH YIELD BOND TRUST
----------------------------------- --------------------------------------
2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ----
Units beginning of year ........................ 2,860,264 2,947,093 2,064,967 74,111 80,415 96,477
Units purchased and transferred from
other Travelers accounts ................... 1,120,954 928,298 1,302,276 6,790 49,896 32,454
Units redeemed and transferred to
other Travelers accounts ................... (432,642) (1,015,127) (420,150) (49,985) (56,200) (48,516)
---------- ----------- ---------- ----------- ----------- -----------
Units end of year .............................. 3,548,576 2,860,264 2,947,093 30,916 74,111 80,415
========== =========== ========== =========== =========== ===========
MANAGED ASSETS TRUST MONEY MARKET PORTFOLIO
----------------------------------- --------------------------------------
2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ----
Units beginning of year ........................ 1,003,809 811,671 754,052 4,734,641 1,869,424 2,176,965
Units purchased and transferred from
other Travelers accounts ................... 850,776 340,535 280,545 4,354,627 6,112,593 5,259,108
Units redeemed and transferred to
other Travelers accounts ................... (215,514) (148,397) (222,926) (5,882,723) (3,247,376) (5,566,649)
---------- ----------- ---------- ----------- ----------- -----------
Units end of year .............................. 1,639,071 1,003,809 811,671 3,206,545 4,734,641 1,869,424
========== =========== ========== =========== =========== ===========
CORE EQUITY FUND EMERGING OPPORTUNITIES FUND
----------------------------------- --------------------------------------
2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ----
Units beginning of year ........................ 31,434 30,336 29,927 182,999 191,574 197,206
Units purchased and transferred from
other Travelers accounts ................... 3,055 3,053 4,410 23,164 33,112 40,292
Units redeemed and transferred to
other Travelers accounts ................... (1,916) (1,955) (4,001) (21,835) (41,687) (45,924)
---------- ----------- ---------- ----------- ----------- -----------
Units end of year .............................. 32,573 31,434 30,336 184,328 182,999 191,574
========== =========== ========== =========== =========== ===========
GLOBAL HIGH-YIELD BOND FUND INTERMEDIATE-TERM BOND FUND
----------------------------------- --------------------------------------
2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ----
Units beginning of year ........................ 2,662 2,703 2,753 1,732 1,415 1,145
Units purchased and transferred from
other Travelers accounts ................... 79 64 78 379 389 349
Units redeemed and transferred to
other Travelers accounts ................... (115) (105) (128) (72) (72) (79)
---------- ----------- ---------- ----------- ----------- -----------
Units end of year .............................. 2,626 2,662 2,703 2,039 1,732 1,415
========== =========== ========== =========== =========== ===========
-28-
80
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF UNITS FOR UL
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, 1998 (CONTINUED)
INTERNATIONAL EQUITY FUND LONG-TERM BOND FUND
----------------------------------- --------------------------------------
2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ----
Units beginning of year ........................ 82,315 79,390 82,883 5,985 7,329 63,209
Units purchased and transferred from
other Travelers accounts ................... 10,129 12,044 17,163 713 812 976
Units redeemed and transferred to
other Travelers accounts ................... (7,597) (9,119) (20,656) (895) (2,156) (56,856)
----------- ---------- ----------- ---------- ----------- -----------
Units end of year .............................. 84,847 82,315 79,390 5,803 5,985 7,329
=========== ========== =========== ========== =========== ===========
EAFE(R) EQUITY INDEX FUND SMALL CAP INDEX FUND
----------------------------------- --------------------------------------
2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ----
Units beginning of year ........................ 5,249 - - 5,618 - -
Units purchased and transferred from
other Travelers accounts ................... 161,887 5,371 - 141,205 6,057 -
Units redeemed and transferred to
other Travelers accounts ................... (28,613) (122) - (35,109) (439) -
----------- ---------- ----------- ---------- ----------- -----------
Units end of year .............................. 138,523 5,249 - 111,714 5,618 -
=========== ========== =========== ========== =========== ===========
TEMPLETON ASSET STRATEGY
DREYFUS STOCK INDEX FUND FUND - CLASS I
----------------------------------- --------------------------------------
2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ----
Units beginning of year ........................ 2,964,750 2,207,470 1,521,389 2,371,081 2,686,853 2,549,205
Units purchased and transferred from
other Travelers accounts ................... 1,411,166 1,283,679 1,449,234 348,360 478,138 599,350
Units redeemed and transferred to
other Travelers accounts ................... (680,087) (526,399) (763,153) (366,953) (793,910) (461,702)
----------- ---------- ----------- ---------- ----------- -----------
Units end of year .............................. 3,695,829 2,964,750 2,207,470 2,352,488 2,371,081 2,686,853
=========== ========== =========== ========== =========== ===========
TEMPLETON GLOBAL INCOME TEMPLETON GROWTH SECURITIES
SECURITIES FUND - CLASS I FUND - CLASS I
----------------------------------- --------------------------------------
2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ----
Units beginning of year ........................ 525,605 526,893 411,910 4,696,004 5,118,661 4,415,842
Units purchased and transferred from
other Travelers accounts ................... 94,878 120,426 201,540 824,389 974,763 2,139,769
Units redeemed and transferred to
other Travelers accounts ................... (204,664) (121,714) (86,557) (939,069) (1,397,420) (1,436,950)
----------- ---------- ----------- ---------- ----------- -----------
Units end of year .............................. 415,819 525,605 526,893 4,581,324 4,696,004 5,118,661
=========== ========== =========== ========== =========== ===========
-29-
81
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF UNITS FOR FUND UL
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (CONTINUED)
EQUITY INDEX PORTFOLIO - CLASS
I SHARES TOTAL RETURN PORTFOLIO
----------------------------------- --------------------------------------
2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ----
Units beginning of year ........................ 5,277 - - 699,620 677,132 521,673
Units purchased and transferred from
other Travelers accounts ................... 144,247 5,496 - 166,289 150,912 236,730
Units redeemed and transferred to
other Travelers accounts ................... (23,025) (219) - (51,003) (128,424) (81,271)
----------- ---------- ----------- ---------- ----------- -----------
Units end of year .............................. 126,499 5,277 - 814,906 699,620 677,132
=========== ========== =========== ========== =========== ===========
AGGRESSIVE GROWTH PORTFOLIO - GLOBAL TECHNOLOGY PORTFOLIO -
SERVICE SHARES SERVICE SHARES
----------------------------------- --------------------------------------
2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ----
Units beginning of year ........................ - - - - - -
Units purchased and transferred from
other Travelers accounts ................... 223,117 - - 75,111 - -
Units redeemed and transferred to
other Travelers accounts ................... (21,785) - - (1,875) - -
----------- ---------- ----------- ---------- ----------- -----------
Units end of year .............................. 201,332 - - 73,236 - -
=========== ========== =========== ========== =========== ===========
WORLDWIDE GROWTH PORTFOLIO -
SERVICE SHARES U.S. GOVERNMENT SECURITIES PORTFOLIO
----------------------------------- --------------------------------------
2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ----
Units beginning of year ........................ - - - 1,758,772 2,198,008 1,181,099
Units purchased and transferred from
other Travelers accounts ................... 276,902 - - 217,930 332,517 1,290,041
Units redeemed and transferred to
other Travelers accounts ................... (21,520) - - (212,641) (771,753) (273,132)
----------- ---------- ----------- ---------- ----------- -----------
Units end of year .............................. 255,382 - - 1,764,061 1,758,772 2,198,008
=========== ========== =========== ========== =========== ===========
ZERO COUPON BOND FUND PORTFOLIO
UTILITIES PORTFOLIO SERIES 1998
----------------------------------- ---------------------------------------
2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ----
Units beginning of year ........................ 234,118 167,846 105,266 - - 1,008,353
Units purchased and transferred from
other Travelers accounts ................... 43,810 95,688 88,338 - - 306
Units redeemed and transferred to
other Travelers accounts ................... (97,008) (29,416) (25,758) - - (1,008,659)
----------- ---------- ----------- ---------- ----------- -----------
Units end of year .............................. 180,920 234,118 167,846 - - -
=========== ========== =========== ========== =========== ===========
-30-
82
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF UNITS FOR FUND UL
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (CONTINUED)
ZERO COUPON FUND PORTFOLIO ZERO COUPON BOND FUND PORTFOLIO
SERIES 2000 SERIES 2005
----------------------------------- ----------------------------------------
2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ----
Units beginning of year ........................ 1,071,285 1,040,957 1,038,056 1,195,885 1,213,663 1,147,679
Units purchased and transferred from
other Travelers accounts ................... 102,163 39,191 27,282 110,244 102,310 141,687
Units redeemed and transferred to
other Travelers accounts ................... (1,173,448) (8,863) (24,381) (38,847) (120,088) (75,703)
----------- ---------- ----------- ------------ ------------ ------------
Units end of year .............................. - 1,071,285 1,040,957 1,267,282 1,195,885 1,213,663
=========== ========== =========== ============ ============ ============
AIM CAPITAL APPRECIATION PORTFOLIO ALLIANCE GROWTH PORTFOLIO
----------------------------------- ----------------------------------------
2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ----
Units beginning of year ........................ 1,653,568 1,371,702 1,053,016 2,557,775 2,112,618 1,469,867
Units purchased and transferred from
other Travelers accounts ................... 793,684 452,453 587,375 1,136,435 777,779 969,293
Units redeemed and transferred to
other Travelers accounts ................... (239,731) (170,587) (268,689) (497,599) (332,622) (326,542)
----------- ---------- ----------- ------------ ------------ ------------
Units end of year .............................. 2,207,521 1,653,568 1,371,702 3,196,611 2,557,775 2,112,618
=========== ========== =========== ============ ============ ============
MFS TOTAL RETURN PORTFOLIO PUTNAM DIVERSIFIED INCOME PORTFOLIO
----------------------------------- ---------------------------------------
2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ----
Units beginning of year ........................ 1,263,012 1,127,421 580,164 - - -
Units purchased and transferred from
other Travelers accounts ................... 275,882 337,308 651,137 959 - -
Units redeemed and transferred to
other Travelers accounts ................... (343,497) (201,717) (103,880) (194) - -
----------- ---------- ----------- ------------ ----------- -----------
Units end of year .............................. 1,195,397 1,263,012 1,127,421 765 - -
=========== ========== =========== ============ =========== ===========
SMITH BARNEY LARGE CAPITALIZATION GROWTH
SMITH BARNEY HIGH INCOME PORTFOLIO PORTFOLIO
----------------------------------- ---------------------------------------
2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ----
Units beginning of year ........................ 641,249 630,959 386,886 - - -
Units purchased and transferred from
other Travelers accounts ................... 125,087 158,530 285,317 111,234 - -
Units redeemed and transferred to
other Travelers accounts ................... (361,696) (148,240) (41,244) (8,082) - -
----------- ---------- ----------- ------------ ----------- -----------
Units end of year .............................. 404,640 641,249 630,959 103,152 - -
=========== ========== =========== ============ =========== ===========
-31-
83
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF UNITS FOR FUND UL
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (CONTINUED)
SMITH BARNEY LARGE CAP VALUE PORTFOLIO EQUITY-INCOME PORTFOLIO INITIAL CLASS
-------------------------------------- ----------------------------------------
2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ----
Units beginning of year ........................ 774,091 598,565 460,366 4,769,302 4,467,025 4,031,218
Units purchased and transferred from
other Travelers accounts ................... 267,858 908,608 241,488 833,006 1,359,251 1,251,314
Units redeemed and transferred to
other Travelers accounts ................... (198,117) (733,082) (103,289) (1,295,230) (1,056,974) (815,507)
----------- ---------- ----------- ------------ ------------ ------------
Units end of year .............................. 843,832 774,091 598,565 4,307,078 4,769,302 4,467,025
=========== ========== =========== ============ ============ ============
GROWTH PORTFOLIO - INITIAL CLASS HIGH INCOME PORTFOLIO - INITIAL CLASS
----------------------------------- ----------------------------------------
2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ----
Units beginning of year ........................ 5,601,229 4,992,277 5,270,282 2,252,601 2,731,506 2,267,970
Units purchased and transferred from
other Travelers accounts ................... 1,194,897 1,493,625 1,562,195 398,871 417,814 2,120,094
Units redeemed and transferred to
other Travelers accounts ................... (760,393) (884,673) (1,840,200) (769,728) (896,719) (1,656,558)
----------- ---------- ----------- ------------ ------------ ------------
Units end of year .............................. 6,035,733 5,601,229 4,992,277 1,881,744 2,252,601 2,731,506
=========== ========== =========== ============ ============ ============
ASSET MANAGER PORTFOLIO -
INITIAL CLASS COMBINED
----------------------------------- ----------------------------------------
2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ----
Units beginning of year ........................ 2,983,502 3,309,553 3,007,464 47,009,545 43,200,459 37,897,289
Units purchased and transferred from
other Travelers accounts ................... 334,802 460,341 820,299 16,185,079 17,441,053 21,600,440
Units redeemed and transferred to
other Travelers accounts ................... (543,885) (786,392) (518,210) (15,527,093) (13,631,967) (16,297,270)
----------- ---------- ----------- ------------ ------------ ------------
Units end of year .............................. 2,774,419 2,983,502 3,309,553 47,667,531 47,009,545 43,200,459
=========== ========== =========== ============ ============ ============
-32-
84
INDEPENDENT AUDITORS' REPORT
The Board of Directors of The Travelers Insurance Company and Owners of
Variable Life Insurance Contracts of The Travelers Fund UL for Variable Life
Insurance:
We have audited the accompanying statement of assets and liabilities of The
Travelers Fund UL for Variable Life Insurance (comprised of the sub-accounts
listed in note 1) (collectively, "the Account") as of December 31, 2000, and
the related statements of operations and changes in net assets for each of the
years in the three-year period then ended. These financial statements are the
responsibility of the Account's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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, 2000, 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 Account as of December
31, 2000, the results of its operations and changes in its net assets for each
of the years in the three-year period then ended in conformity with accounting
principles generally accepted in the United States of America.
KPMG LLP
Hartford, Connecticut
February 15, 2001
-33-
85
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86
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87
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88
Independent Auditors
KPMG LLP
Hartford, Connecticut
This report is prepared for the general information of contract owners and is
not an offer of units of The Travelers Fund UL for Variable Life Insurance or
shares of Fund UL's underlying funds. It should not be used in connection with
any offer except in conjunction with the Prospectus for The Travelers Fund UL
product(s) for Variable Life Insurance offered by The Travelers Insurance
Company and the Prospectuses for the underlying funds, which collectively
contain all pertinent information, including the applicable sales commissions.
89
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholder
The Travelers Insurance Company:
We have audited the accompanying consolidated balance sheets of The Travelers
Insurance Company and subsidiaries as of December 31, 2000 and 1999, and the
related consolidated statements of income, changes in retained earnings and
accumulated other changes in equity from non-owner sources and cash flows for
each of the years in the three-year period ended December 31, 2000. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of The Travelers
Insurance Company and subsidiaries as of December 31, 2000 and 1999, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States of America.
/s/ KPMG LLP
Hartford, Connecticut
January 16, 2001
F-1
90
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
($ in millions)
FOR THE YEAR ENDED DECEMBER 31, 2000 1999 1998
---- ---- ----
REVENUES
Premiums $1,966 $1,728 $1,727
Net investment income 2,730 2,506 2,185
Realized investment gains (losses) (77) 113 149
Fee income 505 432 370
Other revenues 130 89 70
- ------------------------------------------------------------------------------------
Total Revenues 5,254 4,868 4,501
- ------------------------------------------------------------------------------------
BENEFITS AND EXPENSES
Current and future insurance benefits 1,752 1,505 1,462
Interest credited to contractholders 1,038 937 876
Amortization of deferred acquisition costs 347 315 275
General and administrative expenses 463 519 505
- ------------------------------------------------------------------------------------
Total Benefits and Expenses 3,600 3,276 3,118
- ------------------------------------------------------------------------------------
Income before federal income taxes 1,654 1,592 1,383
- ------------------------------------------------------------------------------------
Federal income taxes
Current 462 409 442
Deferred 89 136 39
- ------------------------------------------------------------------------------------
Total Federal Income Taxes 551 545 481
- ------------------------------------------------------------------------------------
Net income $1,103 $1,047 $902
====================================================================================
See Notes to Consolidated Financial Statements.
F-2
91
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in millions)
DECEMBER 31, 2000 1999
- -------------------------------------------------------------------------------------
ASSETS
Fixed maturities, available for sale at fair value
(including $1,494 at December 31, 2000 subject
to securities lending agreements) $26,812 $23,866
Equity securities, at fair value 592 784
Mortgage loans 2,187 2,285
Real estate held for sale 31 236
Policy loans 1,249 1,258
Short-term securities 2,136 1,283
Trading securities, at fair value 1,870 1,678
Other invested assets 2,356 2,098
- -------------------------------------------------------------------------------------
Total Investments 37,233 33,488
- -------------------------------------------------------------------------------------
Cash 150 85
Investment income accrued 442 395
Premium balances receivable 97 109
Reinsurance recoverables 3,977 3,234
Deferred acquisition costs 2,989 2,688
Separate and variable accounts 24,006 22,199
Other assets 1,399 1,333
- -------------------------------------------------------------------------------------
Total Assets $70,293 $63,531
- -------------------------------------------------------------------------------------
LIABILITIES
Contractholder funds $19,394 $17,567
Future policy benefits and claims 13,300 12,563
Separate and variable accounts 23,994 22,194
Deferred federal income taxes 284 23
Trading securities sold not yet purchased, at fair value 1,109 1,098
Other liabilities 3,818 2,466
- -------------------------------------------------------------------------------------
Total Liabilities 61,899 55,911
- -------------------------------------------------------------------------------------
SHAREHOLDER'S EQUITY
Common stock, par value $2.50; 40 million shares authorized,
issued and outstanding 100 100
Additional paid-in capital 3,848 3,819
Retained earnings 4,342 4,099
Accumulated other changes in equity from non-owner sources 104 (398)
- -------------------------------------------------------------------------------------
Total Shareholder's Equity 8,394 7,620
- -------------------------------------------------------------------------------------
Total Liabilities and Shareholder's Equity $70,293 $63,531
=====================================================================================
See Notes to Consolidated Financial Statements.
F-3
92
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN RETAINED EARNINGS AND ACCUMULATED
OTHER CHANGES IN EQUITY FROM NON-OWNER SOURCES
($ in millions)
STATEMENTS OF CHANGES IN RETAINED EARNINGS 2000 1999 1998
- ------------------------------------------------------------------------------------
Balance, beginning of year $ 4,099 $ 3,602 $2,810
Net income 1,103 1,047 902
Dividends to parent 860 550 110
- ------------------------------------------------------------------------------------
Balance, end of year $ 4,342 $ 4,099 $3,602
====================================================================================
STATEMENTS OF ACCUMULATED OTHER CHANGES
IN EQUITY FROM NON-OWNER SOURCES
- ------------------------------------------------------------------------------------
Balance, beginning of year $ (398) $ 598 $ 535
Unrealized gains (losses), net of tax 502 (996) 62
Foreign currency translation, net of tax 0 0 1
- ------------------------------------------------------------------------------------
Balance, end of year $ 104 $ (398) $ 598
====================================================================================
SUMMARY OF CHANGES IN EQUITY
FROM NON-OWNER SOURCES
- ------------------------------------------------------------------------------------
Net Income $ 1,103 $ 1,047 $ 902
Other changes in equity from non-owner sources 502 (996) 63
- ------------------------------------------------------------------------------------
Total changes in equity from non-owner sources $ 1,605 $ 51 $ 965
====================================================================================
See Notes to Consolidated Financial Statements.
F-4
93
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH
($ in millions)
FOR THE YEAR ENDED DECEMBER 31, 2000 1999 1998
- -------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Premiums collected $ 1,986 $ 1,715 $ 1,763
Net investment income received 2,489 2,365 2,021
Other revenues received 865 537 419
Benefits and claims paid (1,193) (1,094) (1,127)
Interest credited to contractholders (1,046) (958) (918)
Operating expenses paid (970) (1,013) (751)
Income taxes paid (490) (393) (506)
Trading account investments purchases, net (143) (80) (38)
Other (258) (104) 12
- -------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 1,240 975 875
- -------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of investments
Fixed maturities 4,257 4,103 2,608
Mortgage loans 380 662 722
Proceeds from sales of investments
Fixed maturities 10,840 12,562 13,390
Equity securities 397 100 212
Real estate held for sale 244 219 53
Purchases of investments
Fixed maturities (17,836) (18,129) (18,072)
Equity securities (7) (309) (194)
Mortgage loans (264) (470) (457)
Policy loans, net 9 599 15
Short-term securities (purchases) sales, net (810) 316 (495)
Other investments purchases, net (461) (413) (550)
Securities transactions in course of settlement, net 944 (463) 192
- -------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (2,307) (1,223) (2,576)
- -------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Contractholder fund deposits 6,022 5,764 4,383
Contractholder fund withdrawals (4,030) (4,946) (2,565)
Dividends to parent company (860) (550) (110)
- -------------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 1,132 268 1,708
- -------------------------------------------------------------------------------------------------
Net increase in cash 65 20 7
Cash at December 31, previous year 85 65 58
- -------------------------------------------------------------------------------------------------
Cash at December 31, current year $ 150 $ 85 $ 65
=================================================================================================
See Notes to Consolidated Financial Statements.
F-5
94
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies used in the preparation of the accompanying
financial statements follow.
BASIS OF PRESENTATION
The Travelers Insurance Company (TIC, together with its subsidiaries, the
Company), is a wholly owned subsidiary of The Travelers Insurance Group Inc.
(TIGI), an indirect wholly owned subsidiary of Citigroup Inc. (Citigroup), a
diversified holding company whose businesses provide a broad range of
financial services to consumer and corporate customers around the world. The
consolidated financial statements include the accounts of the Company and its
insurance and non-insurance subsidiaries on a fully consolidated basis. The
primary insurance entities of the Company are TIC and its subsidiaries, The
Travelers Life and Annuity Company (TLAC), Primerica Life Insurance Company
(Primerica Life), and its subsidiaries, Primerica Life Insurance Company of
Canada, CitiLife Financial Limited (CitiLife) and National Benefit Life
Insurance Company (NBL). Significant intercompany transactions and balances
have been eliminated.
The financial statements and accompanying footnotes of the Company are
prepared in conformity with generally accepted accounting principles in the
United States of America (GAAP). The preparation of financial statements in
conformity with GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and benefits and expenses during the
reporting period. Actual results could differ from those estimates.
Certain prior year amounts have been reclassified to conform to the 2000
presentation.
ACCOUNTING CHANGES
ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND
EXTINGUISHMENTS OF LIABILITIES
In September 2000, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 140, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities, a replacement of FASB Statement No. 125" (FAS 140). Provisions
of FAS 140 primarily relating to transfers of financial assets and
securitizations that differ from provisions of FAS 125 are effective for
transfers taking place after March 31, 2001. Special purpose entities (SPEs)
used in securitizations that are currently qualifying SPEs under FAS 125 will
continue to be treated as qualifying SPEs so long as they issue no new
beneficial interests and accept no new asset transfers after March 31, 2001,
other than transfers committed to prior to that date. Under FAS 140
qualifying SPEs are not consolidated by the transferor. It is not expected
that there will be a significant effect on the Company's results of
operations, financial condition or liquidity relating to a change in
consolidation status for existing qualifying SPEs under FAS 140. FAS 140 also
amends the accounting for collateral and requires new disclosures for
collateral, securitizations, and retained interests in securitizations. These
provisions are effective for financial statements for fiscal years ending
after December 15, 2000. The accounting for collateral, as amended, requires
(a) certain assets pledged as collateral to be separately reported in the
consolidated balance sheet from assets not so encumbered and (b) disclosure
of assets pledged as collateral that have not been reclassified and
separately reported. The change in accounting for collateral did not have a
significant effect on the Company's results of operations, financial
condition or liquidity. See Note 4.
F-6
95
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR
INTERNAL USE
During the third quarter of 1998, the Company adopted the Accounting
Standards Executive Committee of the American Institute of Certified Public
Accountants' (AcSEC) Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use" (SOP 98-1). SOP
98-1 provides guidance on accounting for the costs of computer software
developed or obtained for internal use and for determining when specific
costs should be capitalized or expensed. The adoption of SOP 98-1 did not
have a material impact on the Company's financial condition, results of
operations or liquidity.
ACCOUNTING POLICIES
INVESTMENTS
Fixed maturities include bonds, notes and redeemable preferred stocks. 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. 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.
Equity securities, which include common and non-redeemable preferred stocks,
are classified as "available for sale" and carried at fair value based
primarily on quoted market prices. Changes in fair values of equity
securities are charged or credited directly to shareholder's equity, net of
income taxes.
Mortgage loans are carried at amortized cost. A mortgage loan is considered
impaired when it is probable that the Company will be unable to collect
principal and interest amounts due. For mortgage loans that are determined to
be impaired, a reserve is established for the difference between the
amortized cost and fair market value of the underlying collateral. In
estimating fair value, the Company uses interest rates reflecting the higher
returns required in the current real estate financing market. Impaired loans
were insignificant at December 31, 2000 and 1999.
Real estate held for sale is carried at the lower of cost or fair value less
estimated cost to sell. Fair value of foreclosed properties is established at
the time of foreclosure by internal analysis or external appraisers, using
discounted cash flow analyses and other accepted techniques. Thereafter, an
allowance for losses on real estate held for sale is established if the
carrying value of the property exceeds its current fair value less estimated
costs to sell. There was no such allowance at December 31, 2000 and 1999.
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.
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
96
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Trading securities and related liabilities are normally held for periods less
than six months. These investments are marked to market with the change
recognized in net investment income during the current period.
Other invested assets include partnership investments and real estate joint
ventures accounted for on the equity method of accounting. Undistributed
income is reported in net investment income. Also included in other invested
assets is an investment in Citigroup Preferred Stock. See Note 14.
Accrual of income is suspended on fixed maturities or mortgage loans that are
in default, or on which it is likely that future payments will not be made as
scheduled. Interest income on investments in default is recognized only as
payment is received.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses derivative financial instruments, including financial
futures contracts, options, forward contracts, interest rate swaps, currency
swaps and equity swaps, as a means of hedging exposure to interest rate,
equity price and foreign currency risk. Hedge accounting is generally 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.
Derivatives that do not qualify for hedge accounting are marked to market
with changes in market value reflected in the consolidated statement of
income.
Gains and losses arising from financial futures contracts are used to adjust
the basis of hedged investments and are recognized in net investment income
over the life of the investment.
Payments to be received or made under interest rate swaps are accrued and
recognized in net investment income. Swaps hedging investments are carried at
fair value with unrealized gains and losses, net of taxes, charged or
credited directly to shareholder's equity. Interest rate, currency options
and currency swaps hedging liabilities are off-balance sheet.
Gains and losses arising from equity index options are marked to market with
changes in market value reflected in realized investment gains (losses).
Forward contracts, interest rate options and equity swaps were not
significant at December 31, 2000 and 1999. Information concerning derivative
financial instruments is included in Note 12.
INVESTMENT GAINS AND LOSSES
Realized investment gains and losses are included as a component of pre-tax
revenues based upon specific identification of the investments sold on the
trade date. Also included are gains and losses arising from the remeasurement
of the local currency value of foreign investments to U.S. dollars, the
functional currency of the Company. The foreign exchange effects of Canadian
operations are included in unrealized gains and losses.
F-8
97
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
DEFERRED ACQUISITION COSTS
Costs of acquiring individual life insurance and annuities, principally
commissions and certain expenses related to policy issuance, underwriting and
marketing, all of which vary with and are primarily related to the production
of new business, are deferred. Acquisition costs relating to traditional life
insurance, including term insurance, are amortized in relation to anticipated
premiums; universal life in relation to estimated gross profits; and annuity
contracts employing a level yield method. For life insurance, a 15 to 20-year
amortization period is used; for long-term care insurance, a 10 to 20-year
period is used, and a seven to 20-year period is employed for annuities.
Deferred acquisition costs are reviewed periodically for recoverability to
determine if any adjustment is required. Adjustments, if any, are charged to
income.
VALUE OF INSURANCE IN FORCE
The value of insurance in force is an asset that was recorded at the time of
acquisition of the Company by Citigroup's predecessor. It represents the
actuarially determined present value of anticipated profits to be realized
from life insurance, annuities and health contracts at the date of
acquisition using the same assumptions that were used for computing related
liabilities where appropriate. The value of insurance in force was the
actuarially determined present value of the projected future profits
discounted at interest rates ranging from 14% to 18%. Traditional life
insurance and guaranteed renewable health policies are amortized in relation
to anticipated premiums; universal life is amortized in relation to estimated
gross profits; and annuity contracts are amortized employing a level yield
method. The value of insurance in force, which is included in other assets,
is reviewed periodically for recoverability to determine if any adjustment is
required. Adjustments, if any, are charged to income. The carrying value at
December 31, 2000 and 1999 was $170 million and $215 million, respectively.
SEPARATE AND VARIABLE ACCOUNTS
Separate and variable accounts primarily represent funds for which investment
income and investment gains and losses accrue directly to, and investment
risk is borne by, the contractholders. Each account has specific investment
objectives. The assets of each account are legally segregated and are not
subject to claims that arise out of any other business of the Company. The
assets of these accounts are carried at market value. Certain other separate
accounts provide guaranteed levels of return or benefits and the assets of
these accounts are primarily carried at market value. Amounts assessed to the
contractholders for management services are included in revenues. Deposits,
net investment income and realized investment gains and losses for these
accounts are excluded from revenues, and related liability increases are
excluded from benefits and expenses.
GOODWILL
Goodwill, which is included in other assets, represents the cost of acquired
businesses in excess of net assets and is being amortized on a straight-line
basis principally over a 40-year period. The carrying amount of $294 million
and $404 million at December 31, 2000 and 1999, respectively, is regularly
reviewed for indication of impairment in value that in the view of management
would be other than temporary. If it is determined that goodwill is unlikely
to be recovered, impairment is recognized on a discounted cash flow basis.
CONTRACTHOLDER FUNDS
Contractholder funds represent receipts from the issuance of universal life,
corporate owned life insurance, pension investment and certain deferred
annuity contracts. Contractholder fund balances are increased by
F-9
98
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
such receipts and credited interest and reduced by withdrawals, mortality
charges and administrative expenses charged to the contractholders. Interest
rates credited to contractholder funds range from 3.5% to 10.0%.
FUTURE POLICY BENEFITS
Future policy benefits represent liabilities for future insurance policy
benefits. Benefit reserves for life insurance and annuities have been
computed based upon mortality, morbidity, persistency and interest
assumptions applicable to these coverages, which range from 2.5% to 8.1%,
including adverse deviation. These assumptions consider Company experience
and industry standards. The assumptions vary by plan, age at issue, year of
issue and duration. Appropriate recognition has been given to experience
rating and reinsurance.
OTHER LIABILITIES
Included in Other Liabilities is the Company's estimate of its liability for
guaranty fund and other insurance-related assessments. State guaranty fund
assessments are based upon the Company's share of premium written or received
in one or more years prior to an insolvency occurring in the industry. Once
an insolvency has occurred, the Company recognizes a liability for such
assessments if it is probable that an assessment will be imposed and the
amount of the assessment can be reasonably estimated. At December 31, 2000
and 1999, the Company had a liability of $22.5 million and $21.9 million,
respectively, for guaranty fund assessments and a related premium tax offset
recoverable of $3.4 million and $4.7 million, respectively. The assessments
are expected to be paid over a period of three to five years and the premium
tax offsets are expected to be realized over a period of 10 to 15 years.
PERMITTED STATUTORY ACCOUNTING PRACTICES
The Company's insurance subsidiaries, domiciled principally in Connecticut
and Massachusetts, prepare statutory financial statements in accordance with
the accounting practices prescribed or permitted by the insurance departments
of the states of domicile. Prescribed statutory accounting practices include
certain publications of the National Association of Insurance Commissioners
(NAIC) as well as state laws, regulations, and general administrative rules.
Permitted statutory accounting practices encompass all accounting practices
not so prescribed. The impact of presently permitted accounting practices on
statutory surplus of the Company is not material.
The NAIC recently completed a process intended to codify statutory accounting
practices for certain insurance enterprises. As a result of this process, the
NAIC will issue a revised statutory Accounting Practices and Procedures
Manual - version effective January 1, 2001 (the revised Manual) that will be
effective for years beginning January 1, 2001. 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. Massachusetts and other states have
addressed compliance with the revised Manual in a similar manner. The Company
has estimated that the impact of this change on statutory capital and surplus
will not be significant.
PREMIUMS
Premiums are recognized as revenues when due. Reserves are established for
the portion of premiums that will be earned in future periods and for
deferred profits on limited-payment policies that are being recognized in
income over the policy term.
F-10
99
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
OTHER REVENUES
Other revenues include management fees for variable annuity separate
accounts; surrender, mortality and administrative charges and fees earned on
investment, universal life and other insurance contracts; and revenues of
non-insurance subsidiaries.
CURRENT AND FUTURE INSURANCE BENEFITS
Current and future insurance benefits represent charges for mortality and
morbidity related to fixed annuities, universal life, term life and health
insurance benefits.
INTEREST CREDITED TO CONTRACTHOLDERS
Interest credited to contractholders represents amounts earned by universal
life, corporate owned life insurance, pension investment and certain deferred
annuity contracts in accordance with contract provisions.
FEDERAL INCOME TAXES
The provision for federal income taxes is comprised of two components,
current income taxes and deferred income taxes. Deferred federal income taxes
arise from changes during the year in cumulative temporary differences
between the tax basis and book basis of assets and liabilities.
STOCK-BASED COMPENSATION
The Company accounts for the stock-based compensation plans using the
accounting method prescribed by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," (APB 25) and has included in the
notes to consolidated financial statements the pro forma disclosures required
by Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (FAS 123). See note 14. The Company accounts for
its stock-based non-employee compensation plans at fair value.
FUTURE APPLICATION OF ACCOUNTING STANDARDS
In June 1998, the FASB issued Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities" (FAS
133). In June 1999, the FASB issued Statement of Financial Standards No. 137,
"Deferral of the Effective Date of FASB Statement No. 133" (FAS 137), which
allows entities that have not yet adopted FAS 133 to defer its effective date
to all fiscal quarters of all fiscal years beginning after June 15, 2000. In
June 2000, the FASB issued Statement of Financial Accounting Standards No.
138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities, an amendment of FASB Statement No. 133," which amends the
accounting and reporting standards of FAS 133. FAS 133 establishes accounting
and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to
as derivatives), and for hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities in the consolidated
balance sheet and measure those instruments at fair value. If certain
conditions are met, a derivative may be specifically designated as (a) a
hedge of the exposure to changes in the fair value of a recognized asset or
liability or an unrecognized firm commitment, (b) a hedge of the exposure to
variable cash flows of a recognized asset or liability or of a forecasted
transaction, or (c) a hedge of the foreign currency exposure of a net
investment in a foreign operation, an unrecognized firm commitment, an
available-for-sale security, or a foreign-currency-denominated forecasted
transaction. The accounting for
F-11
100
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
changes in the fair value of a derivative (that is, gains and losses) depends
on the intended use of the derivative and the resulting designation. Upon
initial application of FAS 133, hedging relationships must be designated anew
and documented pursuant to the provisions of this statement. The Company
adopted the deferral provisions of FAS 137, effective January 1, 2000. The
Company will adopt FAS 133, as amended, as of January 1, 2001.
The Company has determined that the cumulative effect of FAS 133, as amended,
will not be significant. The Company does, however, anticipate a significant
and continuing increase in the complexity of the accounting and the
recordkeeping requirements for hedging activities and for insurance-related
contracts and may make changes to its risk management strategies. The Company
does not expect that FAS 133, as amended, will have a significant impact on
its results of operations, financial condition or liquidity in future
periods.
2. BUSINESS DISPOSITION
Effective July 1, 2000, the Company sold 90% of its individual long-term care
insurance business to General Electric Capital Assurance Company and its
subsidiary in the form of indemnity reinsurance arrangements. The proceeds
were $410 million, resulting in a deferred gain of approximately $150 million
after-tax. The deferred gain will be amortized in relation to anticipated
premiums. Earned premiums were $138 million, $230 million and $200 million in
2000, 1999 and 1998, respectively.
3. OPERATING SEGMENTS
The Company has two reportable business segments that are separately managed
due to differences in products, services, marketing strategy and resource
management. The business of each segment is maintained and reported through
separate legal entities within the Company. The management groups of each
segment report separately to the common ultimate parent, Citigroup Inc.
The TRAVELERS LIFE & ANNUITY business segment consolidates primarily the
business of TIC and TLAC. Travelers Life & Annuity core offerings include
individual annuity, group annuity, individual life and corporate owned life
insurance (COLI) insurance products distributed by TIC and TLAC under the
Travelers name. Among the range of individual products offered are fixed and
variable deferred annuities, payout annuities and term, universal and
variable life insurance. The COLI product is a variable universal life
product distributed through independent specialty brokers. The group products
include institutional pensions, including guaranteed investment contracts,
payout annuities, group annuities to employer-sponsored retirement and
savings plans and structured finance transactions.
The PRIMERICA LIFE INSURANCE business segment consolidates primarily the
business of Primerica Life, Primerica Life Insurance Company of Canada,
CitiLife and NBL. The Primerica Life Insurance business segment offers
individual life products, primarily term insurance, to customers through a
nationwide sales force of approximately 87,000 full and part-time licensed
Personal Financial Analysts.
F-12
101
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies (see Note 1), except that
management also includes receipts on long-duration contracts (universal
life-type and investment contracts) as deposits along with premiums in
measuring business volume. The amount of investments in equity method
investees and total expenditures for additions to long-lived assets other
than financial instruments, long-term customer relationships of a financial
institution, mortgage and other servicing rights, and deferred tax assets,
were not material.
BUSINESS SEGMENT INFORMATION:
----------------------------------------------------------------------------------------------------------
TRAVELERS LIFE PRIMERICA LIFE
2000 ($ in millions) & ANNUITY INSURANCE TOTAL
----------------------------------------------------------------------------------------------------------
Business Volume:
Premiums $ 860 $1,106 $ 1,966
Deposits 11,536 -- 11,536
------- ------ -------
Total business volume $12,396 $1,106 $13,502
Net investment income 2,450 280 2,730
Interest credited to contractholders 1,038 -- 1,038
Amortization of deferred acquisition costs 166 181 347
Total expenditures for deferred acquisition costs 376 272 648
Federal income taxes on Operating Income 381 197 578
Operating Income (excludes realized gains or
losses and the related FIT) $ 777 $ 376 $ 1,153
Segment Assets $62,771 $7,522 $70,293
----------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
TRAVELERS LIFE PRIMERICA LIFE
1999 ($ in millions) & ANNUITY INSURANCE TOTAL
---------------------------------------------------------------------------------------------------------
Business Volume:
Premiums $ 656 $1,072 $ 1,728
Deposits 10,639 -- 10,639
------- ------ -------
Total business volume $11,295 $1,072 $12,367
Net investment income 2,249 257 2,506
Interest credited to contractholders 937 -- 937
Amortization of deferred acquisition costs 127 188 315
Total expenditures for deferred acquisition costs 430 256 686
Federal income taxes on Operating Income 319 186 505
Operating Income (excludes realized gains or
losses and the related FIT) $ 619 $ 355 $ 974
Segment Assets $56,615 $6,916 $63,531
---------------------------------------------------------------------------------------------------------
F-13
102
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
-----------------------------------------------------------------------------------------------------
TRAVELERS LIFE PRIMERICA LIFE
1998 ($ in millions) & ANNUITY INSURANCE TOTAL
-----------------------------------------------------------------------------------------------------
Business Volume:
Premiums $ 670 $1,057 $ 1,727
Deposits 7,437 -- 7,437
------- ------ -------
Total business volume $ 8,107 $1,057 $ 9,164
Net investment income 1,965 220 2,185
Interest credited to contractholders 876 -- 876
Amortization of deferred acquisition costs 88 187 275
Total expenditures for deferred acquisition costs 319 247 566
Federal income taxes on Operating Income 260 170 430
Operating Income (excludes realized gains or
losses and the related FIT) $ 493 $ 312 $ 805
Segment Assets $49,646 $6,902 $56,548
-----------------------------------------------------------------------------------------------------
F-14
103
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
-------------------------------------------------------------------------------------------
BUSINESS SEGMENT RECONCILIATION:
($ in millions)
-------------------------------------------------------------------------------------------
REVENUES 2000 1999 1998
-------------------------------------------------------------------------------------------
Total business volume $ 13,502 $ 12,367 $ 9,164
Net investment income 2,730 2,506 2,185
Realized investment gains (losses) (77) 113 149
Other revenues, including fee income 635 521 440
Elimination of deposits (11,536) (10,639) (7,437)
-------------------------------------------------------------------------------------------
Total revenues $ 5,254 $ 4,868 $ 4,501
===========================================================================================
OPERATING INCOME 2000 1999 1998
-------------------------------------------------------------------------------------------
Total operating income of business segments $ 1,153 $ 974 $ 805
Realized investment gains (losses), net of tax (50) 73 97
-------------------------------------------------------------------------------------------
Income from continuing operations $ 1,103 $ 1,047 $ 902
===========================================================================================
ASSETS 2000 1999 1998
-------------------------------------------------------------------------------------------
Total assets of business segments $ 70,293 $ 63,531 $ 56,548
===========================================================================================
BUSINESS VOLUME AND REVENUES 2000 1999 1998
-------------------------------------------------------------------------------------------
Individual Annuities $ 7,101 $ 5,816 $ 4,326
Group Annuities 6,563 6,572 4,942
Individual Life and Health Insurance 2,445 2,424 2,257
Other (a) 681 695 413
Elimination of deposits (11,536) (10,639) (7,437)
-------------------------------------------------------------------------------------------
Total Revenue $ 5,254 $ 4,868 $ 4,501
===========================================================================================
(a) Other represents revenue attributable to unallocated capital and
run-off businesses.
The Company's revenue was derived almost entirely from U.S. domestic
business. Revenue attributable to foreign countries was insignificant.
The Company had no transactions with a single customer representing 10% or
more of its revenue.
F-15
104
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
4. INVESTMENTS
FIXED MATURITIES
The amortized cost and fair value of investments in fixed maturities were as
follows:
-----------------------------------------------------------------------------------------------------------
GROSS GROSS
DECEMBER 31, 2000 AMORTIZED UNREALIZED UNREALIZED FAIR
($ in millions) COST GAINS LOSSES VALUE
-----------------------------------------------------------------------------------------------------------
AVAILABLE FOR SALE:
Mortgage-backed securities -
CMOs and pass-through securities $ 5,492 $169 $ 34 $ 5,627
U.S. Treasury securities and obligations
of U.S. Government and government
agencies and authorities 1,141 71 5 1,207
Obligations of states, municipalities
and political subdivisions 168 14 1 181
Debt securities issued by foreign
governments 761 18 14 765
All other corporate bonds 14,575 269 253 14,591
Other debt securities 4,217 87 59 4,245
Redeemable preferred stock 201 14 19 196
-----------------------------------------------------------------------------------------------------------
Total Available For Sale $26,555 $642 $385 $26,812
-----------------------------------------------------------------------------------------------------------
GROSS GROSS
DECEMBER 31, 1999 AMORTIZED UNREALIZED UNREALIZED FAIR
($ in millions) COST GAINS LOSSES VALUE
-----------------------------------------------------------------------------------------------------------
AVAILABLE FOR SALE:
Mortgage-backed securities -
CMOs and pass-through securities $ 5,081 $ 22 $224 $ 4,879
U.S. Treasury securities and obligations
of U.S. Government and government
agencies and authorities 1,032 14 53 993
Obligations of states, municipalities and
political subdivisions 214 -- 31 183
Debt securities issued by foreign
governments 811 35 10 836
All other corporate bonds 13,938 69 384 13,623
Other debt securities 3,319 30 99 3,250
Redeemable preferred stock 105 4 7 102
-----------------------------------------------------------------------------------------------------------
Total Available For Sale $24,500 $174 $808 $23,866
-----------------------------------------------------------------------------------------------------------
F-16
105
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Proceeds from sales of fixed maturities classified as available for sale were
$10.8 billion, $12.6 billion and $13.4 billion in 2000, 1999 and 1998,
respectively. Gross gains of $213 million, $200 million and $314 million and
gross losses of $432 million, $223 million and $203 million in 2000, 1999 and
1998, respectively, were realized on those sales.
Fair values of investments in fixed maturities are based on quoted market
prices or dealer quotes or, if these are not available, discounted expected
cash flows using market rates commensurate with the credit quality and
maturity of the investment. The fair value of investments for which a quoted
market price or dealer quote are not available amounted to $4.8 billion at
December 31, 2000 and 1999.
The amortized cost and fair value of fixed maturities at December 31, 2000,
by contractual maturity, are shown below. Actual maturities will differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
--------------------------------------------------------------------------
AMORTIZED
($ in millions) COST FAIR VALUE
--------------------------------------------------------------------------
MATURITY:
Due in one year or less $ 1,556 $ 1,545
Due after 1 year through 5 years 7,789 7,839
Due after 5 years through 10 years 5,606 5,640
Due after 10 years 6,112 6,161
------------------------
21,063 21,185
------------------------
Mortgage-backed securities 5,492 5,627
--------------------------------------------------------------------------
Total Maturity $26,555 $26,812
--------------------------------------------------------------------------
The Company makes investments in collateralized mortgage obligations (CMOs).
CMOs typically have high credit quality, offer good liquidity, and provide a
significant advantage in yield and total return compared to U.S. Treasury
securities. The Company's investment strategy is to purchase CMO tranches
which are protected against prepayment risk, including planned amortization
class (PAC) tranches. Prepayment protected tranches are preferred because
they provide stable cash flows in a variety of interest rate scenarios. The
Company does invest in other types of CMO tranches if a careful assessment
indicates a favorable risk/return tradeoff. The Company does not purchase
residual interests in CMOs.
At December 31, 2000 and 1999, the Company held CMOs classified as available
for sale with a fair value of $4.4 billion and $3.8 billion, respectively.
Approximately 49% and 52%, respectively, of the Company's CMO holdings are
fully collateralized by GNMA, FNMA or FHLMC securities at December 31, 2000
and 1999. In addition, the Company held $1.1 billion of GNMA, FNMA or FHLMC
mortgage-backed pass-through securities at December 31, 2000 and 1999.
Virtually all of these securities are rated AAA.
F-17
106
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
The Company engages in securities lending whereby certain securities from its
portfolio are loaned to other institutions for short periods of time. The
Company generally receives cash collateral from the borrower, equal to at
least the market value of the loaned securities plus accrued interest, and
reinvests it in a short-term investment pool. See Note 14. The loaned
securities remain a recorded asset of the Company, however, the Company
records a liability for the amount of the collateral held, representing its
obligation to return the collateral related to these loaned securities, and
reports that liability as part of other liabilities in the consolidated
balance sheet. At December 31, 2000 and 1999, the Company held collateral of
$1.5 billion and $561.1 million, respectively.
EQUITY SECURITIES
The cost and fair values of investments in equity securities were as follows:
------------------------------------------------------------------------------------------
GROSS GROSS
EQUITY SECURITIES: UNREALIZED UNREALIZED FAIR
($ in millions) COST GAINS LOSSES VALUE
------------------------------------------------------------------------------------------
DECEMBER 31, 2000
Common stocks $139 $ 11 $25 $125
Non-redeemable preferred stocks 492 7 32 467
------------------------------------------------------------------------------------------
Total Equity Securities $631 $ 18 $57 $592
------------------------------------------------------------------------------------------
DECEMBER 31, 1999
Common stocks $195 $123 $ 4 $314
Non-redeemable preferred stocks 496 15 41 470
------------------------------------------------------------------------------------------
Total Equity Securities $691 $138 $45 $784
------------------------------------------------------------------------------------------
Proceeds from sales of equity securities were $397 million, $100 million and
$212 million in 2000, 1999 and 1998, respectively. Gross gains of $107
million, $15 million and $30 million and gross losses of $16 million, $8
million and $24 million in 2000, 1999 and 1998, respectively, were realized
on those sales.
MORTGAGE LOANS AND REAL ESTATE HELD FOR SALE
At December 31, 2000 and 1999, the Company's mortgage loan and real estate
held for sale portfolios consisted of the following:
--------------------------------------------------------------------------------------
($ in millions) 2000 1999
--------------------------------------------------------------------------------------
Current Mortgage Loans $2,144 $2,228
Underperforming Mortgage Loans 43 57
----------------------
Total Mortgage Loans 2,187 2,285
----------------------
Real Estate Held For Sale - Foreclosed 18 223
Real Estate Held For Sale - Investment 13 13
--------------------------------------------------------------------------------------
Total Real Estate 31 236
--------------------------------------------------------------------------------------
Total Mortgage Loans and Real Estate Held for Sale $2,218 $2,521
======================================================================================
Underperforming mortgage loans include delinquent mortgage loans over 90 days
past due, loans in the process of foreclosure and loans modified at interest
rates below market.
F-18
107
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Aggregate annual maturities on mortgage loans at December 31, 2000 are as
follows:
---------------------------------------------
YEAR ENDING DECEMBER 31,
($ in millions)
---------------------------------------------
Past Maturity $ 32
2001 259
2002 152
2003 172
2004 167
2005 124
Thereafter 1,281
---------------------------------------------
Total $2,187
---------------------------------------------
TRADING SECURITIES
Trading securities of the Company are held in Tribeca Investments LLC. See
Note 12.
-------------------------------------------------------------------------
($ in millions) 2000 1999
-------------------------------------------------------------------------
TRADING SECURITIES OWNED
Convertible bond arbitrage $1,474 $1,045
Merger arbitrage 309 421
Other 87 212
-------------------------------------------------------------------------
Total $1,870 $1,678
-------------------------------------------------------------------------
TRADING SECURITIES SOLD NOT YET PURCHASED
Convertible bond arbitrage $ 845 $ 799
Merger arbitrage 205 299
Other 59 --
-------------------------------------------------------------------------
Total $1,109 $1,098
-------------------------------------------------------------------------
The Company's trading portfolio investments and related liabilities are
normally held for periods less than six months. Therefore, expected future
cash flows for these assets and liabilities are expected to be realized in
less than one year.
OTHER INVESTED ASSETS
Other invested assets are composed of the following:
------------------------------------------------------------------------
($ in millions) 2000 1999
------------------------------------------------------------------------
Investment in Citigroup preferred stock $ 987 $ 987
Partnership investments 807 592
Real estate joint ventures 535 502
Other 27 17
------------------------------------------------------------------------
Total $2,356 $2,098
------------------------------------------------------------------------
F-19
108
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
CONCENTRATIONS
At December 31, 2000 and 1999, the Company had an investment in Citigroup
Preferred Stock of $987 million. See Note 14.
The Company maintains a short-term investment pool for its insurance
affiliates in which the Company also participates. See Note 14.
The Company had concentrations of investments, primarily fixed maturities at
fair value, in the following industries:
--------------------------------------------------
($ in millions) 2000 1999
--------------------------------------------------
Electric Utilities $2,244 $1,653
Banking 2,078 1,906
Finance 1,836 1,571
--------------------------------------------------
The Company held investments in foreign banks in the amount of $1,082 million
and $1,012 million at December 31, 2000 and 1999, respectively, which are
included in the table above. Below investment grade assets included in the
preceding table were not significant.
Included in fixed maturities are below investment grade assets totaling $2.0
billion and $2.2 billion at December 31, 2000 and 1999, respectively. The
Company defines its below investment grade assets as those securities rated
"Ba1" or below by external rating agencies, or the equivalent by internal
analysts when a public rating does not exist. Such assets include publicly
traded below investment grade bonds and certain other privately issued bonds
and notes that are classified as below investment grade.
Mortgage loan investments are relatively evenly dispersed throughout the
United States, with no significant holdings in any one state. Also, there is
no significant mortgage loan investment in a particular property type.
The Company monitors creditworthiness of counterparties to all financial
instruments by using controls that include credit approvals, limits and other
monitoring procedures. Collateral for fixed maturities often includes pledges
of assets, including stock and other assets, guarantees and letters of
credit. The Company's underwriting standards with respect to new mortgage
loans generally require loan to value ratios of 75% or less at the time of
mortgage origination.
NON-INCOME PRODUCING INVESTMENTS
Investments included in the consolidated balance sheets that were non-income
producing for the preceding 12 months were insignificant.
RESTRUCTURED INVESTMENTS
The Company had mortgage loans and debt securities that were restructured at
below market terms at December 31, 2000 and 1999. The balances of the
restructured investments were insignificant. The new terms typically defer a
portion of contract interest payments to varying future periods. The accrual
of interest is suspended on all restructured assets, and interest income is
reported only as payment is received. Gross interest income on restructured
assets that would have been recorded in accordance with the original terms of
such loans was insignificant in 2000 and in 1999. Interest on these assets,
included in net investment income, was also insignificant in 2000 and 1999.
F-20
109
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NET INVESTMENT INCOME
---------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 2000 1999 1998
($ in millions)
---------------------------------------------------------------------
GROSS INVESTMENT INCOME
Fixed maturities $2,061 $1,806 $1,598
Mortgage loans 223 235 295
Trading 208 141 43
Joint ventures and partnerships 150 141 74
Other, including policy loans 237 287 240
---------------------------------------------------------------------
Total Gross Investment Income 2,879 2,610 2,250
---------------------------------------------------------------------
Investment expenses 149 104 65
---------------------------------------------------------------------
Net Investment Income $2,730 $2,506 $2,185
---------------------------------------------------------------------
REALIZED AND UNREALIZED INVESTMENT GAINS (LOSSES)
Net realized investment gains (losses) for the periods were as follows:
---------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 2000 1999 1998
($ in millions)
---------------------------------------------------------------------
REALIZED INVESTMENT GAINS (LOSSES)
Fixed maturities $(219) $(23) $111
Equity securities 91 7 6
Mortgage loans 27 29 21
Real estate held for sale 25 108 16
Other (1) (8) (5)
---------------------------------------------------------------------
Total Realized Investment
Gains (Losses) $ (77) $113 $149
---------------------------------------------------------------------
Changes in net unrealized investment gains (losses) that are reported as
accumulated other changes in equity from non-owner sources or unrealized
gains on Citigroup stock in shareholder's equity were as follows:
---------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 2000 1999 1998
($ in millions)
---------------------------------------------------------------------------------------------------
UNREALIZED INVESTMENT GAINS (LOSSES)
Fixed maturities $ 891 $(1,554) $ 91
Equity securities (132) 49 13
Other 14 (30) (169)
---------------------------------------------------------------------------------------------------
Total Unrealized Investment Gains (Losses) 773 (1,535) (65)
---------------------------------------------------------------------------------------------------
Related taxes 271 (539) (20)
---------------------------------------------------------------------------------------------------
Change in unrealized investment gains (losses) 502 (996) (45)
Transferred to paid in capital, net of tax -- -- (585)
Balance beginning of year (398) 598 1,228
---------------------------------------------------------------------------------------------------
Balance End of Year $ 104 $ (398) $ 598
---------------------------------------------------------------------------------------------------
F-21
110
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
In 1998 Citigroup common stock owned by the Company was converted to
Citigroup preferred stock. The balance of unrealized appreciation on the
common stock was transferred to additional paid in capital.
Included in Other in 1998 is the unrealized loss on Citigroup common stock of
$167 million prior to the conversion to preferred stock.
5. REINSURANCE
The Company participates in reinsurance in order to limit losses, minimize
exposure to large risks, provide additional capacity for future growth and to
effect business-sharing arrangements. Reinsurance is accomplished through
various plans of reinsurance, primarily yearly renewable term coinsurance and
modified coinsurance. The Company remains primarily liable as the direct
insurer on all risks reinsured.
Since 1997 universal life business has been reinsured under an 80%/20% quota
share reinsurance program and term life business has been reinsured under a
90%/10% quota share reinsurance program. Maximum retention of $2.5 million is
generally reached on policies in excess of $12.5 million. For other plans of
insurance, it is the policy of the Company to obtain reinsurance for amounts
above certain retention limits on individual life policies, which limits vary
with age and underwriting classification. Generally, the maximum retention on
an ordinary life risk is $2.5 million. Total in-force business ceded under
reinsurance contracts is $252.5 billion and $222.5 billion at December 31,
2000 and 1999.
The Company writes workers' compensation business through its Accident
Department. This business is ceded 100% to an affiliate, The Travelers
Indemnity Company.
A summary of reinsurance financial data reflected within the consolidated
statements of income and balance sheets is presented below ($ in millions):
WRITTEN PREMIUMS 2000 1999 1998
----------------------------------------------------------------------
Direct $2,634 $2,274 $2,310
Assumed from:
Non-affiliated companies -- -- --
Ceded to:
Affiliated companies (195) (206) (242)
Non-affiliated companies (465) (322) (317)
----------------------------------------------------------------------
Total Net Written Premiums $1,974 $1,746 $1,751
======================================================================
EARNED PREMIUMS 2000 1999 1998
----------------------------------------------------------------------
Direct $2,644 $2,248 $2,286
Assumed from:
Non-affiliated companies -- -- --
Ceded to:
Affiliated companies (216) (193) (251)
Non-affiliated companies (462) (327) (308)
----------------------------------------------------------------------
Total Net Earned Premiums $1,966 $1,728 $1,727
======================================================================
F-22
111
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Reinsurance recoverables at December 31, 2000 and 1999 include amounts
recoverable on unpaid and paid losses and were as follows ($ in millions):
REINSURANCE RECOVERABLES 2000 1999
-----------------------------------------------------------
Life and Accident and Health Business:
Non-affiliated companies $2,024 $1,221
Property-Casualty Business:
Affiliated companies 1,953 2,013
-----------------------------------------------------------
Total Reinsurance Recoverables $3,977 $3,234
===========================================================
Reinsurance recoverables include $820 million from General Electric Capital
Assurance Company at December 31, 2000, related to the July 1, 2000 indemnity
reinsurance transaction. Reinsurance recoverables also include $539 million
and $569 million, from The Metropolitan Life Insurance Company as of December
31, 2000 and 1999, respectively.
6. DEPOSIT FUNDS AND RESERVES
At December 31, 2000 and 1999, the Company had $29.7 billion and $27.0
billion of life and annuity deposit funds and reserves, respectively. Of that
total, $16.4 billion and $13.8 billion is not subject to discretionary
withdrawal based on contract terms. The remaining $13.3 billion and $13.2
billion is for life and annuity products that are subject to discretionary
withdrawal by the contractholder. Included in the amounts that are subject to
discretionary withdrawal is $2.9 billion and $2.1 billion of liabilities that
are surrenderable with market value adjustments. Also included are an
additional $4.9 billion and $4.9 billion of life insurance and individual
annuity liabilities which are subject to discretionary withdrawals, and have
an average surrender charge of 4.5% and 4.6%. In the payout phase, these
funds are credited at significantly reduced interest rates. The remaining
$5.5 billion and $6.2 billion of liabilities are surrenderable without
charge. More than 10.5% and 12.7% of these relate to individual life products
for 2000 and 1999, respectively. These risks would have to be underwritten
again if transferred to another carrier, which is considered a significant
deterrent against withdrawal by long-term policyholders. Insurance
liabilities that are surrendered or withdrawn are reduced by outstanding
policy loans and related accrued interest prior to payout.
7. COMMERCIAL PAPER AND LINES OF CREDIT
TIC has issued commercial paper directly to investors in prior years. No
commercial paper was outstanding at December 31, 2000 or December 31, 1999.
TIC must maintain bank lines of credit at least equal to the amount of the
outstanding commercial paper. Citigroup and TIC have an agreement with a
syndicate of banks to provide $1.0 billion of revolving credit, to be
allocated to Citigroup or TIC. TIC's participation in this agreement is
limited to $250 million. The agreement consists of a five-year revolving
credit facility that expires in June 2001. At December 31, 2000 and 1999, no
credit under this agreement was allocated to TIC. Under this facility TIC is
required to maintain certain minimum equity and risk-based capital levels. At
December 31, 2000, the Company was in compliance with these provisions. If
TIC had borrowings outstanding on this facility, the interest rate would be
based upon LIBOR plus a contractually negotiated margin.
F-23
112
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
8. FEDERAL INCOME TAXES
EFFECTIVE TAX RATE
($ in millions)
----------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 2000 1999 1998
----------------------------------------------------------------------------------
Income Before Federal Income Taxes $ 1,654 $ 1,592 $ 1,383
Statutory Tax Rate 35% 35% 35%
----------------------------------------------------------------------------------
Expected Federal Income Taxes 579 557 484
Tax Effect of:
Non-taxable investment income (19) (19) (5)
Other, net (9) 7 2
----------------------------------------------------------------------------------
Federal Income Taxes $ 551 $ 545 $ 481
==================================================================================
Effective Tax Rate 33% 34% 35%
----------------------------------------------------------------------------------
COMPOSITION OF FEDERAL INCOME TAXES
Current:
United States $ 429 $ 377 $ 418
Foreign 33 32 24
----------------------------------------------------------------------------------
Total 462 409 442
----------------------------------------------------------------------------------
Deferred:
United States 96 143 40
Foreign (7) (7) (1)
----------------------------------------------------------------------------------
Total 89 136 39
----------------------------------------------------------------------------------
Federal Income Taxes $ 551 $ 545 $ 481
==================================================================================
Additional tax benefits attributable to employee stock plans allocated
directly to shareholder's equity for the years ended December 31, 2000, 1999
and 1998 were $24 million, $17 million and $17 million, respectively.
F-24
113
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
The net deferred tax liabilities at December 31, 2000 and 1999 were comprised
of the tax effects of temporary differences related to the following assets
and liabilities:
------------------------------------------------------------------------------------------
($ in millions) 2000 1999
------------------------------------------------------------------------------------------
Deferred Tax Assets:
Benefit, reinsurance and other reserves $ 667 $ 645
Operating lease reserves 66 70
Investments, net -- 11
Other employee benefits 102 106
Other 139 142
------------------------------------------------------------------------------------------
Total 974 974
------------------------------------------------------------------------------------------
Deferred Tax Liabilities:
Deferred acquisition costs and value of insurance in force (843) (773)
Investments, net (308) --
Other (107) (124)
------------------------------------------------------------------------------------------
Total (1,258) (897)
------------------------------------------------------------------------------------------
Net Deferred Tax (Liability) Asset Before Valuation Allowance (284) 77
Valuation Allowance for Deferred Tax Assets 0 (100)
------------------------------------------------------------------------------------------
Net Deferred Tax Liability After Valuation Allowance $ (284) $ (23)
------------------------------------------------------------------------------------------
The Company and its life insurance subsidiaries file a consolidated federal
income tax return. Federal income taxes are allocated to each member of the
consolidated group on a separate return basis adjusted for credits and other
amounts required by the consolidation process. Any resulting liability will
be paid currently to the Company. Any credits for losses will be paid by the
Company to the extent that such credits are for tax benefits that have been
utilized in the consolidated federal income tax return.
The elimination of the valuation allowance for deferred tax assets in 2000
resulted from an analysis of the availability of capital gains to offset
capital losses. In management's opinion, there will be adequate capital gains
to make realization of existing capital losses more likely than not. The
reduction in the valuation allowance was recognized by reducing goodwill.
At December 31, 2000, 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 $932 million. Income taxes are not provided for on this amount
because under current U.S. tax rules such taxes will become payable only to
the extent such amounts are distributed as a dividend or exceed limits
prescribed by federal law. Distributions are not currently contemplated from
this account. At current rates the maximum amount of such tax would be
approximately $326 million.
F-25
114
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
9. SHAREHOLDER'S EQUITY
Shareholder's Equity and Dividend Availability
The Company's statutory net income, which includes the statutory net income
of all insurance subsidiaries, was $981 million, $890 million and $702
million for the years ended December 31, 2000, 1999 and 1998, respectively.
The Company's statutory capital and surplus was $5.16 billion and $5.03
billion at December 31, 2000 and 1999, respectively.
Effective January 1, 2001, the Company will prepare its statutory basis
financial statements in accordance with the revised Manual subject to any
deviations prescribed or permitted by its domicilary insurance commissioners
(see Note 1, Summary of Significant Accounting Policies, Permitted Statutory
Accounting Practices). The Company has estimated that the impact of this
change on statutory capital and surplus will not be significant.
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. A maximum of $984
million is available by the end of the year 2001 for such dividends without
prior approval of the Connecticut Insurance Department. In addition, under a
revolving credit facility, the Company is required to maintain certain
minimum equity and risk-based capital levels. The Company was in compliance
with these covenants at December 31, 2000 and 1999. The Company paid
dividends of $860 million, $550 million and $110 million in 2000, 1999 and
1998, respectively.
F-26
115
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
9. SHAREHOLDER'S EQUITY (CONTINUED)
Accumulated Other Changes in Equity from Non-Owner Sources, Net of Tax
- --------------------------------------------------------------------------------
Changes in each component of Accumulated Other Changes in Equity from Non-Owner
Sources were as follows:
- --------------------------------------------------------------------------------
NET UNREALIZED FOREIGN ACCUMULATED OTHER
GAIN (LOSS) ON CURRENCY CHANGES IN EQUITY
INVESTMENT TRANSLATION FROM NON-OWNER
($ in millions) SECURITIES ADJUSTMENTS SOURCES
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE, JANUARY 1, 1998 $545 $(10) $535
Unrealized gains on investment securities,
Net of tax of $85 159 - 159
Less: reclassification adjustment for gains
Included in net income, net of tax of $52 97 - 97
Foreign currency translation adjustment,
Net of tax of $2 - 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
CURRENT PERIOD CHANGE 62 1 63
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1998 607 (9) 598
Unrealized losses on investment securities,
Net of tax of $497 (923) - (923)
Less: reclassification adjustment for gains
Included in net income, net of tax of $40 73 - 73
- ------------------------------------------------------------------------------------------------------------------------------------
CURRENT PERIOD CHANGE (996) - (996)
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1999 (389) (9) (398)
- ------------------------------------------------------------------------------------------------------------------------------------
Unrealized gain on investment securities,
Net of tax of $297 551 - 551
Less: reclassification adjustment for losses
Included in net income, net of tax of $(27) (50) - (50)
Foreign currency translation adjustment,
Net of tax of $1 - 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
CURRENT PERIOD CHANGE 501 1 502
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2000 112 (8) 104
- ------------------------------------------------------------------------------------------------------------------------------------
F-27
116
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
10. BENEFIT PLANS
Pension and Other Postretirement Benefits
-----------------------------------------
The Company participates in a qualified, noncontributory defined benefit
pension plan sponsored by Citigroup. In addition, the Company provides
certain other postretirement benefits to retired employees through a plan
sponsored by TIGI. The Company's share of net expense for the qualified
pension and other postretirement benefit plans was not significant for
2000, 1999 and 1998.
401(k) Savings Plan
-------------------
Substantially all of the Company's employees are eligible to participate in
a 401(k) savings plan sponsored by Citigroup. The Company's expenses in
connection with the 401(k) savings plan were not significant in 2000, 1999
and 1998.
11. LEASES
Most leasing functions for TIGI and its subsidiaries are administered by
Travelers Property Casualty Corp. (TPC). Rent expense related to all leases
is shared by the companies on a cost allocation method based generally on
estimated usage by department. Net rent expense was $26 million, $30
million, and $24 million in 2000, 1999 and 1998, respectively.
- --------------------------------------------------------------------------------
YEAR ENDING DECEMBER 31, MINIMUM OPERATING
($ in millions) RENTAL PAYMENTS
- --------------------------------------------------------------------------------
2001 $49
2002 48
2003 47
2004 43
2005 41
Thereafter 283
- --------------------------------------------------------------------------------
Total Rental Payments $511
- --------------------------------------------------------------------------------
Future sublease rental income of approximately $90 million will partially
offset these commitments. Also, the Company will be reimbursed for 50% of
the rental expense for a particular lease totaling $182 million, by an
affiliate. Minimum future capital lease payments are not significant.
The Company is reimbursed for use of furniture and equipment through cost
sharing agreements by its affiliates.
F-28
117
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
12. DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS
Derivative Financial Instruments
--------------------------------
The Company uses derivative financial instruments, including financial
futures, interest rate swaps, currency swaps, equity swaps, options and
forward contracts as a means of hedging exposure to interest rate, equity
price, and foreign currency risk on anticipated transactions or existing
assets and liabilities. The Company, through Tribeca Investments LLC, a
subsidiary that is a broker/dealer, holds and issues derivative instruments
for trading purposes. All of these derivative financial instruments have
off-balance sheet risk. Financial instruments with off-balance sheet risk
involve, to varying degrees, elements of credit and market risk in excess
of the amount recognized in the balance sheet. The contract or notional
amounts of these instruments reflect the extent of involvement the Company
has in a particular class of financial instrument. However, the maximum
loss of cash flow associated with these instruments can be less than these
amounts. For interest rate swaps, currency swaps, equity swaps, options and
forward contracts, credit risk is limited to the amount that it would cost
the Company to replace the contracts. Financial futures contracts and
purchased listed option contracts have little credit risk since organized
exchanges are the counterparties. The Company as a writer of option
contracts has no credit risk since the counterparty has no performance
obligation after it has paid a cash premium.
The Company monitors creditworthiness of counterparties to these financial
instruments by using criteria of acceptable risk that are consistent with
on-balance sheet financial instruments. The controls include credit
approvals, limits and other monitoring procedures.
The Company uses exchange-traded financial futures contracts to manage its
exposure to changes in interest rates 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, 2000 and 1999, the Company held financial futures contracts
with notional amounts of $493 million and $255 million, respectively. These
financial futures had no deferred gain or deferred loss in 2000, and a
deferred gain of $1.8 million and a deferred loss of $.5 million in 1999.
Total gains of $6.9 million from financial futures were deferred at
December 31, 1999, relating to anticipated investment purchases and
investment product sales, and are reported as other liabilities. There were
no deferred amounts at December 31, 2000. At December 31, 2000 and 1999,
the Company's futures contracts had no fair value because these contracts
were 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. The Company also enters
F-29
118
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
into basis swaps in which both legs of the swap are floating with each
based on a different index. Generally, no cash is exchanged at the outset
of the contract and no principal payments are made by either party. A
single net payment is usually made by one counterparty at each due date.
Swap agreements are not exchange-traded so they are subject to the risk of
default by the counterparty.
At December 31, 2000 and 1999, the Company held interest rate swap
contracts with notional amounts of $1,904 million and $1,498 million,
respectively. The fair value of these financial instruments was $8.4
million (gain position) and $21.2 million (loss position) at December 31,
2000 and was $25.1 million (gain position) and $26.3 million (loss
position) at December 31, 1999. The fair values were determined using the
discounted cash flow method.
The Company enters into currency swaps in connection with other financial
instruments to provide greater risk diversification and better match assets
purchased in U.S. Dollars with corresponding funding agreements issued in
foreign currencies. Under currency swaps, the Company agrees with other
parties to exchange, at specified intervals, foreign currency for U.S.
Dollars based upon interest amounts calculated by reference to an agreed
notional principal amount. Generally, there is an exchange of foreign
currency for U.S. Dollars at the outset of the contract based upon the
prevailing foreign exchange rate. Swap agreements are not exchange-traded
so they are subject to the risk of default by the counterparty.
At December 31, 2000 and 1999, the Company held currency swap contracts
with notional amounts of $974.0 million and $732.7 million, respectively.
The fair value of these financial instruments was $1.0 million (gain
position) and $144.3 million (loss position) at December 31, 2000,
respectively, and $59.0 million (loss position) at December 31, 1999. The
fair values were determined using the discounted cash flow method.
At December 31, 2000 and 1999, the Company held interest rate, currency and
equity swap contracts with affiliate counterparties with a notional amount
of $168.7 million and $207.5 million, respectively, and a fair value of
$8.3 million (gain position) and $22.6 million (loss position),
respectively.
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, 2000 and 1999, the Company held equity options with
notional amounts of $462.3 million and $275.4 million, respectively. The
fair value of these financial instruments was $14.4 million (gain position)
and $32.6 million (gain position) at December 31, 2000 and 1999,
respectively. The fair value of these contracts represents the estimated
replacement cost as quoted by independent third party brokers.
The off-balance sheet risks of interest rate options, equity swaps and
forward contracts were not significant at December 31, 2000 and 1999.
The off-balance sheet risk of derivative instruments held for trading
purposes was not significant at December 31, 2000 and 1999.
F-30
119
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Financial Instruments with Off-Balance Sheet Risk
-------------------------------------------------
In the normal course of business, the Company issues fixed and variable
rate loan commitments and has unfunded commitments to partnerships. The
off-balance sheet risk of these financial instruments was not significant
at December 31, 2000 and 1999. The Company had unfunded commitments to
partnerships with a value of $491.2 million and $459.8 million at December
31, 2000 and 1999, respectively.
Fair Value of Certain Financial Instruments
-------------------------------------------
The Company uses various financial instruments in the normal course of its
business. Certain insurance contracts are excluded by Statement of
Financial Accounting Standards No. 107, "Disclosure about Fair Value of
Financial Instruments", and therefore are not included in the amounts
discussed.
At December 31, 2000 and 1999, investments in fixed maturities had a
carrying value and a fair value of $26.8 billion and $23.9 billion,
respectively. See Notes 1 and 4.
At December 31, 2000, mortgage loans had a carrying value of $2.2 billion
and a fair value of $2.2 billion and in 1999 had a carrying value of $2.3
billion and a fair value of $2.3 billion. In estimating fair value, the
Company used interest rates reflecting the current real estate financing
market.
Citigroup Preferred Stock, included in other invested assets, had a
carrying value and fair value of $987 million at December 31, 2000 and
1999.
At December 31, 2000, contractholder funds with defined maturities had a
carrying value of $6.8 billion and a fair value of $6.7 billion, compared
with a carrying value and a fair value of $5.0 billion and $4.7 billion at
December 31, 1999. The fair value of these contracts is determined by
discounting expected cash flows at an interest rate commensurate with the
Company's credit risk and the expected timing of cash flows. Contractholder
funds without defined maturities had a carrying value of $10.1 billion and
a fair value of $9.9 billion at December 31, 2000, compared with a carrying
value of $10.1 billion and a fair value of $9.9 billion at December 31,
1999. These contracts generally are valued at surrender value.
The carrying values of $588 million and $228 million of financial
instruments classified as other assets approximated their fair values at
December 31, 2000 and 1999, respectively. The carrying values of $2.4
billion and $1.4 billion of financial instruments classified as other
liabilities also approximated their fair values at December 31, 2000 and
1999, respectively. Fair value is determined using various methods,
including discounted cash flows, as appropriate for the various financial
instruments.
The assets of separate accounts providing a guaranteed return had a
carrying value and a fair value of $376 million at December 31, 2000,
compared with a carrying value and a fair value of $251 million at December
31, 1999. The liabilities of separate accounts providing a guaranteed
return had a carrying value and a fair value of $376 million at December
31, 2000, compared with a carrying value and a fair value of $251 million
at December 31, 1999.
The carrying values of cash, trading securities and trading securities sold
not yet purchased are carried at fair value. The carrying values of
short-term securities and investment income accrued approximated their fair
values.
The carrying value of policy loans, which have no defined maturities, is
considered to be fair value.
F-31
120
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
13. COMMITMENTS AND CONTINGENCIES
Financial Instruments with Off-Balance Sheet Risk
-------------------------------------------------
See Note 12 for a discussion of financial instruments with off-balance
sheet risk.
Litigation
----------
In March 1997, a purported class action entitled Patterman v. The
Travelers, Inc., et al. was commenced in the Superior Court of Richmond
County, Georgia, alleging, among other things, violations of the Georgia
RICO statute and other state laws by an affiliate of the Company, Primerica
Financial Services, Inc. and certain of its affiliates. Plaintiffs seek
unspecified compensatory and punitive damages and other relief. From
February 1998 through April 2000, various motions for transfer of the
lawsuit were heard and appealed. In April 2000, the matter was remanded to
the Superior Court of Richmond County by the Georgia Supreme Court. Also,
in April 2000 defendants moved for summary judgement on all counts of the
complaint. Discovery commenced in May 2000. Defendants intend to vigorously
contest the litigation.
The Company is also a defendant or co-defendant in various other litigation
matters in the normal course of business. Although there can be no
assurances, as of December 31, 2000, the Company believes, based on
information currently available, that the ultimate resolution of these
legal proceedings would not be likely to have a material adverse effect on
its results of operations, financial condition or liquidity.
14. RELATED PARTY TRANSACTIONS
The principal banking functions, including payment of salaries and
expenses, for certain subsidiaries and affiliates of TIGI are handled by
two companies. The Company handles banking functions for the life and
annuity operations of Travelers Life & Annuity and some of its
non-insurance affiliates. The Travelers Indemnity Company handles banking
functions for the property-casualty operations, including most of its
property-casualty insurance and non-insurance affiliates. Settlements
between companies are made at least monthly. The Company provides various
employee benefits coverages to employees of certain subsidiaries of TIGI.
The premiums for these coverages were charged in accordance with cost
allocation procedures based upon salaries or census. In addition,
investment advisory and management services, data processing services and
claims processing services are shared with affiliated companies. Charges
for these services are shared by the companies on cost allocation methods
based generally on estimated usage by department.
The Company maintains a short-term investment pool in which its insurance
affiliates participate. The position of each company participating in the
pool is calculated and adjusted daily. At December 31, 2000 and 1999, the
pool totaled approximately $4.4 billion and $2.6 billion, respectively. The
Company's share of the pool amounted to $1.8 billion and $1.0 billion at
December 31, 2000 and 1999, respectively, and is included in short-term
securities in the consolidated balance sheet.
The Company markets deferred annuity products and life and health insurance
through its affiliate, Salomon Smith Barney (SSB). Premiums and deposits
related to these products were $1.9 billion, $1.4 billion, and $1.3 billion
in 2000, 1999 and 1998, respectively.
F-32
121
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
The Company also markets individual annuity and life and health insurance
through CitiStreet Retirement Services, LLC (formerly The Copeland
Companies) a division of CitiStreet a joint venture between Citigroup and
State Street Bank. Deposits received from CitiStreet Retirement Services,
LLC were $1.8 billion, $1.6 billion and $1.3 billion in 2000, 1999 and
1998, respectively.
During 1998, the Company began distributing individual annuity products
through an affiliate Citibank, NA, (Citibank). Deposits received from
Citibank were $392 million in 2000 and were insignificant in 1999 and 1998.
At December 31, 2000 and 1999 the Company had outstanding loaned securities
to SSB for $234.1 million and $123.0 million, respectively.
Included in other invested assets is a $987 million investment in Citigroup
preferred stock at December 31, 2000 and 1999, carried at cost. Dividends
received on this investment were $32 million in 2000 and $32 million in
1999.
The Company sells structured settlement annuities to the insurance
subsidiaries of TPC in connection with the settlement of certain
policyholder obligations. Such premiums and deposits were $191 million,
$156 million, and $104 million for 2000, 1999 and 1998, respectively.
Reserves and contractholder funds related to these annuities amounted to
$811 million and $798 million in 2000 and 1999, respectively.
In the ordinary course of business, the Company purchases and sells
securities through affiliated broker-dealers. These transactions are
conducted on an arm's length basis.
Primerica Life has entered into a General Agency Agreement with Primerica
Financial Services, Inc. (Primerica), that provides that Primerica will be
Primerica Life's general agent for marketing all insurance of Primerica
Life. In consideration of such services, Primerica Life agreed to pay
Primerica marketing fees of no less than $10 million based upon U.S. gross
direct premiums received by Primerica Life. In each of 2000, 1999, and 1998
the fees paid by Primerica Life were $12.5 million.
In 1998 Primerica became a distributor of products for Travelers Life &
Annuity. Primerica sold $1.03 billion, $903 million and $256 million of
individual annuities in 2000, 1999 and 1998, respectively.
The Company participates in a stock option plan sponsored by Citigroup that
provides for the granting of stock options in Citigroup common stock to
officers and key employees. To further encourage employee stock ownership,
during 1997 Citigroup introduced the WealthBuilder stock option program.
Under this program, all employees meeting certain requirements have been
granted Citigroup stock options. During 2000, Citigroup introduced the
Citigroup 2000 Stock Purchase Plan, which allowed eligible employees of
Citigroup including the Company's employees to enter into fixed
subscription agreements to purchase shares at the market value on the date
of the agreements. Enrolled employees are permitted to make one purchase
prior to the expiration date.
The Company also participates in the Citigroup Capital Accumulation Plan.
Participating officers and other key employees receive a restricted stock
award in the form of Citigroup common stock. These restricted stock awards
generally vest after a three-year period and, except under limited
circumstances, the stock can not be sold or transferred during the
restriction period by the participant, who is required to render service to
the Company during the restricted period.
F-33
122
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Unearned compensation expense associated with the Citigroup restricted
common stock grants, which represents the market value of Citigroup's
common stock at the date of grant is included with other assets in the
Consolidated Balance Sheet and is recognized as a charge to income ratably
over the vesting period. The Company's charge to income was insignificant
during 2000, 1999 and 1998.
The Company applies Accounting Principles Board Opinion No. 25 (APB 25) and
related interpretations in accounting for stock options. Since stock
options under the Citigroup plans are issued at fair market value on the
date of award, no compensation cost has been recognized for these awards.
FAS 123 provides an alternative to APB 25 whereby fair values may be
ascribed to options using a valuation model and amortized to compensation
cost over the vesting period of the options.
Had the Company applied FAS 123 in accounting for Citigroup stock options,
net income would have been the pro forma amounts indicated below:
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2000 1999 1998
($ in millions)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income, as reported $1,103 $1,047 $902
FAS 123 pro forma adjustments, after tax (19) (16) (13)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income, pro forma $1,084 $1,031 $889
- ------------------------------------------------------------------------------------------------------------------------------------
The assumptions used in applying FAS 123 to account for Citigroup stock
options were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Expected volatility of Citigroup Stock 41.5% 44.1% 37.1%
Risk-free interest rate 6.23% 5.29% 5.83%
- ------------------------------------------------------------------------------------------------------------------------------------
Expected annual dividend per Citigroup share $0.78 $0.47 $0.32
- ------------------------------------------------------------------------------------------------------------------------------------
Expected annual forfeiture rate 5% 5% 5%
- ------------------------------------------------------------------------------------------------------------------------------------
F-34
123
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
15. RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
The following table reconciles net income to net cash provided by operating
activities:
- ------------------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 2000 1999 1998
($ in millions)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Income From Continuing Operations $1,103 $1,047 $902
Adjustments to reconcile net income to net cash provided by
operating activities:
Realized (gains) losses 77 (113) (149)
Deferred federal income taxes 89 136 39
Amortization of deferred policy acquisition costs 347 315 275
Additions to deferred policy acquisition costs (648) (686) (566)
Investment income (384) (221) (202)
Premium balances 20 (13) 36
Insurance reserves and accrued expenses 559 411 335
Other 77 99 205
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operations $1,240 $975 $875
- ------------------------------------------------------------------------------------------------------------------------------------
16. NON-CASH INVESTING AND FINANCING ACTIVITIES
Significant non-cash investing and financing activities include the
acquisition of real estate through foreclosures of mortgage loans amounting
to $205 million in 1999 and the conversion of Citigroup common stock into
Citigroup preferred stock valued at $987 million in 1998.
F-35
124
Independent Auditors' Report
The Board of Directors and Shareholder
The Travelers Insurance Company:
Under date of January 16, 2001, we reported on the consolidated balance sheets
of The Travelers Insurance Company and subsidiaries as of December 31, 2000 and
1999, and the related consolidated statements of income, changes in retained
earnings and accumulated other changes in equity from non-owner sources and cash
flows for each of the years in the three-year period ended December 31, 2000,
which are included in this Form 10-K. In connection with our audits of the
aforementioned consolidated financial statements, we also audited the related
financial statement schedules listed in the accompanying index. These financial
statement schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statement schedules
based on our audits.
In our opinion, such financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.
/s/ KPMG LLP
Hartford, Connecticut
January 16, 2001
F-36
125
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
SCHEDULE I
SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN RELATED PARTIES
DECEMBER 31, 2000
($ in millions)
- ------------------------------------------------------------------------------------------------------------------------------------
TYPE OF INVESTMENT AMOUNT SHOWN IN
COST VALUE BALANCE SHEET(1)
- ------------------------------------------------------------------------------------------------------------------------------------
Fixed Maturities:
Bonds:
U.S. Government and government agencies and
Authorities $4,317 $4,479 $4,479
States, municipalities and political subdivisions 169 181 181
Foreign governments 760 765 765
Public utilities 2,147 2,155 2,155
Convertible bonds and bonds with warrants attached 348 345 345
All other corporate bonds 18,612 18,691 18,691
- ------------------------------------------------------------------------------------------------------------------------------------
Total Bonds 26,353 26,616 26,616
Redeemable preferred stocks 201 196 196
- ------------------------------------------------------------------------------------------------------------------------------------
Total Fixed Maturities 26,554 26,812 26,812
- ------------------------------------------------------------------------------------------------------------------------------------
Equity Securities:
Common Stocks:
Banks, trust and insurance companies 19 20 20
Industrial, miscellaneous and all other(2) 75 59 59
- ------------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks 94 79 79
Nonredeemable preferred stocks 492 467 467
- ------------------------------------------------------------------------------------------------------------------------------------
Total Equity Securities 586 546 546
- ------------------------------------------------------------------------------------------------------------------------------------
Mortgage Loans 2,187 2,187
Real Estate Held For Sale 31 31
Policy Loans 1,249 1,249
Short-Term Securities 2,136 2,136
Other Investments(3)(4)(5) 2,963 2,931
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments $35,706 $35,892
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Determined in accordance with methods described in Notes 1 and 4 of the
Notes to Consolidated Financial Statements.
(2) Excludes $46 million related party investment.
(3) Excludes $987 million fair value of Citigroup Inc. preferred stock. See
Note 14 of Notes to Consolidated Financial Statements.
(4) Also excludes $308 million fair value of investment in affiliated
partnership interests.
(5) Includes derivatives marked to market and recorded at fair value in the
balance sheet.
F-37
126
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
SCHEDULE III
SUPPLEMENTARY INSURANCE INFORMATION
($ in millions)
- ------------------------------------------------------------------------------------------------------------------------------------
FUTURE
POLICY
BENEFITS, AMORTIZATION
DEFERRED LOSSES, OTHER POLICY BENEFITS, OF DEFERRED
POLICY CLAIMS AND CLAIMS AND NET CLAIMS POLICY OTHER
ACQUISITION LOSS BENEFITS PREMIUM INVESTMENT AND ACQUISITION OPERATING PREMIUMS
COSTS EXPENSES(1) PAYABLE REVENUE INCOME LOSSES(2) COSTS EXPENSES WRITTEN
- -----------------------------------------------------------------------------------------------------------------------------------
2000
Travelers Life & Annuity $1,291 $29,377 $321 $ 860 $2,450 $2,294 $166 $233 $ 859
Primerica Life 1,698 2,856 140 1,106 280 496 181 230 1,115
- ------------------------------------------------------------------------------------------------------------------------------------
Total $2,989 $32,233 $461 $1,966 $2,730 $2,790 $347 $463 $1,974
====================================================================================================================================
1999
Travelers Life & Annuity $1,081 $26,958 $280 $ 656 $2,249 $1,954 $127 $322 $ 666
Primerica Life 1,607 2,734 158 1,072 257 488 188 197 1,080
- ------------------------------------------------------------------------------------------------------------------------------------
Total $2,688 $29,692 $438 $1,728 $2,506 $2,442 $315 $519 $1,746
====================================================================================================================================
1998
Travelers Life & Annuity $ 779 $26,068 $232 $ 670 $1,965 $1,854 $ 88 $306 $ 683
Primerica Life 1,538 2,619 146 1,057 220 484 187 199 1,068
- ------------------------------------------------------------------------------------------------------------------------------------
Total $2,317 $28,687 $378 $1,727 $2,185 $2,338 $275 $505 $1,751
====================================================================================================================================
(1) Includes contractholder funds.
(2) Includes interest credited to contractholders.
F-38
127
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
SCHEDULE IV
REINSURANCE
($ in millions)
- ----------------------------------------------------------------------------------------------------------------
PERCENTAGE
CEDED TO ASSUMED OF AMOUNT
GROSS OTHER FROM OTHER NET ASSUMED
AMOUNT COMPANIES COMPANIES AMOUNT TO NET
- ----------------------------------------------------------------------------------------------------------------
2000
----
Life Insurance In Force $480,958 $252,498 $3,692 $232,152 1.6%
Premiums:
Life insurance $2,106 $ 330 $ -- $1,776 --
Accident and health insurance 322 132 -- 190 --
Property casualty 216 216 -- -- --
-------- -------- ------ -------- -----
Total Premiums $2,644 $ 678 $ -- $1,966 --
======== ======== ====== ======== =====
1999
----
Life Insurance In Force $457,541 $222,522 $3,723 $238,742 1.6%
Premiums:
Life insurance $ 1,768 $ 313 $-- $ 1,455 --
Accident and health insurance 287 14 -- 273 --
Property casualty 193 193 -- -- --
-------- -------- ------ -------- -----
Total Premiums $ 2,248 $ 520 $ -- $ 1,728 --
======== ======== ====== ======== =====
1998
----
Life Insurance In Force $439,784 $201,294 $ 105 $238,595 --
Premiums:
Life insurance $ 1,784 $ 304 $ -- $ 1,480 --
Accident and health insurance 264 17 -- 247 --
Property casualty 238 238 -- -- --
-------- -------- ------ -------- -----
Total Premiums $ 2,286 $ 559 $ -- $ 1,727 --
======== ======== ====== ======== =====
F-39
128
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.
129
CONTENTS OF REGISTRATION STATEMENT
----------------------------------
This Registration Statement comprises the following papers and documents:
1. The facing sheet.
2. The Prospectus.
3. The undertaking to file reports.
4. The signatures.
Written consents of the following persons:
A. Consent of Counsel, to filing of her opinion as an exhibit to this
Registration Statement and to the reference to her opinion under the
caption "Legal Proceedings and Opinion" in the Prospectus. (See Exhibit
11 below.)
B. Consent and Actuarial Opinion pertaining to the illustrations contained
in the prospectus.
C. Consent of Independent Certified Public Accountants.
D. Powers of Attorney. (See Exhibit 12 below.)
EXHIBITS
- --------
1. Resolution of the Board of Directors of The Travelers Insurance Company
authorizing the establishment of the Registrant. (Incorporated herein
by reference to Exhibit No. 1 to Post-Effective Amendment No. 17 to the
Registration Statement on Form S-6 filed April 29, 1996.)
2. Not Applicable.
3(a). Distribution and Principal Underwriting Agreement among the Registrant,
The Travelers Insurance Company and Travelers Distribution LLC
(Incorporated herein by reference to Exhibit 3(a) to Post Effective
Amendment No. 4 to the Registration Statement on Form N-4, File No.
333-58783 filed February 26, 2001.)
3(b). Selling Agreement.
4. None
5. Form of Variable Life Insurance Contracts.
6(a). Charter of The Travelers Insurance Company, as amended on October 19,
1994. (Incorporated herein by reference to Exhibit 6(a) to the
Registration Statement filed on Form N-4, File No. 333-40193, filed
November 13, 1997.)
6(b). By-Laws of The Travelers Insurance Company, as amended on October 20,
1994. (Incorporated herein by reference to Exhibit 6(b) to the
Registration Statement filed on Form N-4, File No. 333-40193, filed
November 13, 1997.)
7. None
8. Participation Agreements. (Incorporated herein by reference to Exhibit
8 to Pre-Effective Amendment No. 1 to the Registration Statement on
Form S-6, File No. 333-96521, filed May 12, 2000.)
9. None
130
10. Form of Application for Variable Life Insurance Contracts.
(Incorporated herein by reference to Exhibit 10 to the Registration
Statement filed on Form S-6, File No. 333-69771 filed April 18, 2001.)
11. Opinion of counsel as to the legality of the securities being
registered. .
12. Power of Attorney authorizing Ernest J. Wright or Kathleen A. McGah as
signatory for George C. Kokulis and Katherine M. Sullivan.
(Incorporated herein by reference to Exhibit 15(b) to the
Post-Effective Amendment No. 21 to the Registration Statement on Form
S-6, File No. 2-88637, filed April 25, 2000.)
Power of Attorney authorizing Ernest J. Wright or Kathleen A. McGah as
signatories for Glenn D. Lammey, Marla Berman Lewitus and William R.
Hogan. (Incorporated herein by reference to Exhibit 15, to the
Post-Effective Amendment No. 22 to the Registration Statement on Form
S-6, File No. 2-88637, filed April 18, 2001.)
131
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933, the registrant, The
Travelers Fund UL for Variable Life Insurance, has duly caused this registration
statement to be signed on its behalf by the undersigned thereunto duly
authorized, in the city of Hartford and state of Connecticut, on the 18th day of
June, 2001.
THE TRAVELERS FUND UL FOR VARIABLE LIFE INSURANCE
(Registrant)
THE TRAVELERS INSURANCE COMPANY
(Depositor)
By:*GLENN D. LAMMEY
--------------------------------------------
Glenn D. Lammey, Chief Financial Officer,
Chief Accounting Officer and Controller
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities indicated
on the 18th day of June, 2001.
*GEORGE C. KOKULIS Director, Chairman of the Board, President
- -------------------------- and Chief Executive Officer
(George C. Kokulis) (Principal Executive Officer
*GLENN D. LAMMEY Director, Chief Financial Officer
- -------------------------- Officer, Chief Accounting Officer and Controller
(Glenn D. Lammey) (Principal Financial Officer)
*MARLA BERMAN LEWITUS Director
- --------------------------
(Marla Berman Lewitus)
*WILLIAM R. HOGAN Director
- ------------------
(William R. Hogan)
*By: /s/Ernest J. Wright, Attorney-in-Fact
-------------------------------------
132
EXHIBIT INDEX
- -------------
Written Consents Method of Filing
- ---------------- ----------------
A. Consent of Counsel, to filing of her opinion as an exhibit to by See Exhibit 11
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 Electronically
contained in the prospectus.
C. Consent of Independent Certified Public Accountants. Electronically
EXHIBITS
3(b) Selling Agreement Electronically
5. Form of Variable Life Insurance Contract. Electronically
11. Opinion of counsel as to the legality of the securities Electronically
being registered.