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Registration Statement No. _________
811-03927
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 20
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)
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60 days after filing pursuant to paragraph (a)(1)
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on pursuant to paragraph (a)(1) of Rule 485.
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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 Survivorship 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 Survivorship Life Insurance Policies is being registered
under the Securities Act of 1933.
F. Approximate date of proposed public offering:
As soon as practicable following the effectiveness of the
Registration Statement
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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; The Policy;
Transfers of Cash Value; The Separate Account and Valuation;
Voting Rights; Disregard of Voting Rights; Dividends; Lapse
and Reinstatement
11 Prospectus Summary; The Investment Options
12 Prospectus Summary; The Investment Options
13 Charges and Deductions; Distribution
14 The Policy
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
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; The Policy; 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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THE TRAVELERS VARIABLE SURVIVORSHIP LIFE
INDIVIDUAL VARIABLE UNIVERSAL LIFE INSURANCE POLICIES
PROSPECTUS
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, 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 second death
of the two named Insureds. The Policy Owners ("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. 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 (subject to the Grace Period provision), or for a longer period
as may be provided under the Lapse Protection Guarantee Rider.
We offer two death benefits under the Policy -- the "Level Option" and the
"Variable Option." Under either option, the death benefit will never be less
than the Amount Insured (less any outstanding Policy loans or Monthly Deduction
Amounts due and unpaid). You choose one at the time you apply for the Policy,
however you may change the death benefit option, subject to certain conditions.
This Policy may be or become a modified endowment Policy under federal tax law.
If so, any partial withdrawal, Policy surrender or loan may result in adverse
tax consequences or penalties.
REPLACING EXISTING INSURANCE WITH THIS POLICY MAY NOT BE TO YOUR ADVANTAGE.
EACH OF THE INVESTMENT OPTION PROSPECTUSES ARE INCLUDED WITH THE PACKAGE
CONTAINING THIS PROSPECTUS. ALL PROSPECTUSES SHOULD BE READ AND RETAINED FOR
FUTURE REFERENCE.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION 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 , 1999.
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TABLE OF CONTENTS
Glossary of Special Terms.............. 3
Prospectus Summary..................... 5
General Description.................... 8
The Application...................... 8
How the Policy Works................... 8
Applying Premium Payments............ 8
The Investment Options................. 9
Policy Benefits and Rights............. 12
Transfers of Cash Value.............. 12
Telephone Transfers............... 12
Automated Transfers.................. 12
Dollar Cost Averaging............. 12
Portfolio Rebalancing............. 12
Lapse and Reinstatement.............. 13
Lapse Protection Guarantee Rider..... 13
Exchange............................. 13
Right to Cancel...................... 13
Access to Cash Values.................. 14
Policy Loans......................... 14
Consequences...................... 14
Policy Surrenders.................... 14
Full Surrenders................... 14
Partial Withdrawals............... 14
Death Benefit.......................... 15
Option 1............................. 15
Option 2............................. 16
Payment of Proceeds.................. 16
Payment Options...................... 16
Maturity Benefits...................... 17
Maturity Extension Rider............. 17
Coverage Extension Rider............. 17
Charges and Deductions................. 18
Charges Against Premium.............. 18
Front-End Sales Charge............ 18
State Premium Tax Charge.......... 18
Monthly Deduction Amount............. 18
Cost of Insurance................. 18
Policy Administrative Expense
Charge.......................... 18
Monthly Policy Charge............. 18
Charges for Supplemental Benefit
Provisions...................... 18
Charges Against the Separate
Account........................... 19
Mortality and Expense Risk
Charge.......................... 19
Administrative Expense Charge..... 19
Underlying Fund Expenses............. 19
Surrender Charges.................... 19
Transaction Charge................... 19
Reduction or Elimination of
Charges........................... 19
The Separate Account and Valuation
The Travelers Fund UL for Variable
Life Insurance (Fund UL).......... 20
How the Cash Value Varies......... 20
Accumulation Unit Value........... 21
Net Investment Factor............. 21
Changes to the Policy.................. 21
General.............................. 21
Changes in Stated Amount............. 21
Changes in Death Benefit Option...... 21
Additional Policy Provisions........... 22
Assignment........................... 22
Limit on Right to Contest and Suicide
Exclusion......................... 22
Misstatement as to Sex and Age....... 22
Voting Rights........................ 22
Disregard of Voting Instructions..... 22
Other Matters.......................... 23
Statements to Policy Owners.......... 23
Suspension of Valuation.............. 23
Dividends............................ 23
Mixed and Shared Funding............. 23
Distribution......................... 24
Legal Proceedings and Opinion........ 24
Independent Accountants.............. 24
Federal Tax Considerations............. 25
(Keep all subheadings in same order),
note new page numbers
The Company............................ 28
IMSA................................. 29
Year 2000 Compliance................. 29
Management........................... 30
Directors of The Travelers
Insurance Company............... 30
Senior Officers of The Travelers
Insurance Company............... 31
Example of Policy Charges.............. 31
Performance Information................ 32
Illustrations.......................... 35
Appendix A
Appendix B
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GLOSSARY OF SPECIAL TERMS
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ACCUMULATION UNIT -- a standard of measurement used to calculate the values
allocated to the Investment Options.
AMOUNT INSURED
ANNUAL MINIMUM PREMIUM -- the Policy Owner must pay a first premium greater than
or equal to one-quarter of this amount for the Policy to be issued. (Please
refer to Appendix A.)
BENEFICIARY(IES) -- the person(s) named to receive the benefits of this Policy
at the Insured's death.
CASH SURRENDER VALUE -- the Cash Value less any outstanding Policy loan and
surrender charges.
CASH VALUE -- the current value of Accumulation Units credited to each of the
Investment Options available under the Policy, plus the value of the Loan
Account.
COMPANY'S HOME OFFICE -- the principal executive offices of The Travelers
Insurance Company located at One Tower Square, Hartford, Connecticut 06183.
DEATH BENEFIT
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 the Policy is issued by the Company for delivery
to the Policy Owner.
LAPSE PROTECTION GUARANTEE RIDER -- a rider which provides that the Policy will
not lapse 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 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 Death Benefit minus the Cash Value.
NET PREMIUM -- the amount of each premium payment, minus the deduction of any
front-end sales charges and premium tax charges.
PLANNED PREMIUM -- the amount of premium which the Policy Owner chooses to pay
to the Company on a scheduled basis, and for which the Company will bill the
Policy Owner, either annually, semiannually or through automatic monthly
checking account deductions.
POLICY DATE -- the date on which the Policy, benefits and provisions of the
Policy become effective.
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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.
SEPARATE ACCOUNT -- assets set aside by The Travelers Insurance Company, the
investment experience of which is kept separate from that of other assets of The
Travelers Insurance Company; for example, The Travelers Fund UL for Variable
Life Insurance.
STATED AMOUNT -- the amount originally selected by the Policy Owner used to
determine the Death Benefit, or as may be increased or decreased as described in
this Prospectus.
UNDERLYING FUND -- the underlying mutual fund(s) that correspond to each
Investment Option. Each Investment Option invests directly in a Fund.
VALUATION DATE -- a day on which the Separate Account is valued. A Valuation
Date is any day on which the New York Stock Exchange is open for trading and the
Company is open for business. The value of Accumulation Units will be determined
as of the close of trading on the New York Stock Exchange.
VALUATION PERIOD -- the period between the close of business on successive
Valuation Dates.
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PROSPECTUS SUMMARY
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WHAT IS VARIABLE SURVIVORSHIP LIFE INSURANCE?
This Flexible Premium Variable Survivorship Life Insurance Policy is designed to
provide insurance protection on the life of two Insureds and to build Cash
Value. Like other life insurance, it provides an income-tax free death benefit
that is payable to the Beneficiary upon the 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. 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.
SUMMARY OF FEATURES
INVESTMENT OPTIONS: You have the ability to choose from a wide variety of
well-known Investment Options. The investment options invest directly in the
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:
Capital Appreciation Fund GREENWICH STREET SERIES FUND:
Dreyfus Stock Index Fund Equity Index Portfolio
Managed Assets Trust Total Return Portfolio
Money Market Portfolio
TRAVELERS SERIES FUND, INC.:
BT INSURANCE FUNDS TRUST: AIM Capital Appreciation Portfolio
EAFE Equity Index Fund Alliance Growth Portfolio
Small Cap Index Fund MFS Total Return Portfolio
Putnam Diversified Income Portfolio
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND: Smith Barney High Income Portfolio
VIP Equity Income Portfolio Smith Barney Large Cap Value Portfolio
VIP Growth Portfolio
VIP High Income Portfolio TRAVELERS SERIES TRUST:
U.S. Government Securities Portfolio
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND Utilities Portfolio
II: Zero Coupon Bond Portfolio 2000
VIP II Asset Manager Portfolio Zero Coupon Bond Portfolio 2005
Additional Investment Options may be added from time to time. For more
information, see "The Investment Options." Refer to each Fund's prospectus for a
complete description of the investment objectives, restrictions and other
material information.
PREMIUMS: When applying for your Policy, you state how much you intend to pay,
and whether you will pay annually, semiannually or monthly via checking account
deductions. You may also make unscheduled premium payments in any amount. No
premium payments will be accepted if receipt of such premiums would disqualify
the Policy as life insurance under applicable federal tax laws.
You indicate on your application what percentage of each Net Premium you would
like allocated to the Investment Options. You may change your allocations by
writing to the Company or by calling 1-800-334-4298.
During the underwriting period, any premium paid will be held in a non-interest
bearing account. After the Policy Date and until the applicants' right to cancel
has expired, your Net Premium will be invested in the Money Market Portfolio.
After that, the Cash Value will be distributed to each Investment Option in the
percentages indicated on your application.
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RIGHT TO EXAMINE POLICY: You may return your Policy for any reason and receive
a full refund of your premium by mailing us the Policy and a written request for
cancellation within a specified period.
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 and a premium tax charge
are applied to each premium based on the size of your Policy. The charges
are banded by Stated Amount as follows:
TOTAL
STATED SALES PREMIUM PREMIUM
AMOUNT CHARGE TAX EXPENSE
------ ------ ------- -------
less than $500,000 2.5% 2.5% 5.0%
$500,000 to $999,999 2.0% 2.5% 4.5%
$1,000,000 to $4,999,999 0% 2.5% 2.5%
$5,000,000 and over 0% 0% 0%
This charge pays some distribution expenses and state and local premium
taxes.
- MONTHLY DEDUCTION -- deductions taken from the value of your Policy each
month to cover cost of insurance charges, the monthly policy 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
and for 15 years after an increase in coverage. The surrender charge
consists of a per thousand of stated amount charge.
ASSET-BASED CHARGES:
- MORTALITY AND EXPENSE RISK CHARGE -- applies to the assets of the
Investment Options on a daily basis which equals an annual rate of .80%
for the first fifteen years and .35% thereafter.
- ADMINISTRATIVE EXPENSE CHARGE -- applies to the assets of the Investment
Options on a daily basis which equals an annual rate of .10% for the
first fifteen years and 0% thereafter.
- 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.
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.
- 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.
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 experience of the Investment Options. Monthly charges
and any partial surrenders taken will also decrease the Cash Value. There is no
minimum guaranteed Cash Value.
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- ACCESS TO POLICY VALUES: You may borrow up to 100% of your Policy's Cash
Surrender Value. After year 15, the Company offers zero net cost loan.
(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 among the Investment Options. You may do this by writing to the Company or
calling 1-800-334-4298.
You can use automated transfers to take advantage of dollar cost
averaging -- investing a fixed amount at regular intervals. For example, you
might have a set amount transferred from a relatively conservative Investment
Option to a more aggressive one, or to several others.
LAPSE PROTECTION GUARANTEE RIDER: This Rider allows for your Policy to remain
in effect for the first ten Policy Years, regardless of the performance of the
Investment Options that you select. You must pay at least the cumulative 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 61 days to pay a premium to
cover the Monthly Deduction Amount. If the premium is not paid, your Policy will
lapse.
EXCHANGE RIGHTS: During the first two Policy Years, you can exchange this
Policy for one that provides benefits that do not vary with the investment
return of the Investment Options.
TAX CONSEQUENCES: Currently, the federal tax law excludes all Death Benefit
payments from the gross income of the Beneficiary. At any point in time, the
Policy may become a modified endowment contract ("MEC"). A MEC has an
income-first taxation of all loans, pledges, collateral assignments or partial
surrenders. A 10% penalty tax may be imposed on such income distributed before
the older Policy Owner attains age 59 1/2. The Company has established
safeguards for monitoring whether a Policy may become a MEC.
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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 when
the last of the two insureds dies 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 face amount of insurance
- Additional benefits through the use of optional riders
This Policy is both an insurance product and a security. The Policy is first and
foremost a life insurance Policy with death benefits, Cash Values and other
features traditionally associated with life insurance. The Policy is a security
because the Cash Value and, under certain circumstances, the Amount Insured, and
Death Benefit may increase or decrease depending on the investment experience of
the Investment Options chosen.
THE APPLICATION. In order to become a policy owner, you must submit an
application 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 when the last of the two insureds dies, we will pay
your beneficiary the death benefit option plus any additional rider death
benefit (less any outstanding loan account balance). 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). During the
underwriting period, any premium paid will be held in a non-interest bearing
account.
APPLYING PREMIUM PAYMENTS
We apply the first premium on the later of the Policy Date or the date we
receive it at our Home Office. During the Right to Cancel Period, we allocate
net premiums to the Money Market
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Portfolio. At the end of the Right to Cancel Period, we direct the net premiums
to the investment option(s) selected on the application, unless you give us
other directions.
The investment options are segments of the separate account. They correspond to
underlying funds with the same names. The available investment options are
listed below.
We credit your policy with accumulation units of the investment option(s) you
have selected. We calculate the number of accumulation units by dividing your
net premium payment by each investment option's accumulation unit value computed
after we receive your payment.
THE INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
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 Investment Options
prospectuses which are included with and must accompany this prospectus. Please
read carefully the complete risk disclosure in each Portfolio's prospectus
before investing.
INVESTMENT OPTION INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
----------------- -------------------- -----------------------------
Capital Appreciation Fund Seeks growth of capital through the Travelers Asset Management
use of common stocks. Income is not an International Corporation
objective. The Fund invests ("TAMIC")
principally in common stocks of small Subadviser: Janus Capital
to large companies which are expected Corp.
to experience wide fluctuations in
price in both rising and declining
markets.
Dreyfus Stock Index Fund Seeks to provide investment results Mellon Equity
that correspond to the price and yield
performance of publicly traded common
stocks in the aggregate, as
represented by the Standard & Poor's
500 Composite Stock Price Index.
Managed Assets Trust Seeks high total investment return TAMIC
through a fully managed investment Subadviser: Travelers
policy in a portfolio of equity, debt Investment Management Company
and convertible securities. ("TIMCO")
Money Market Portfolio Seeks high current income from short- TAMIC
term money market instruments while
preserving capital and maintaining a
high degree of liquidity.
BT INSURANCE FUNDS TRUST
EAFE Index Fund Seeks to replicate, before deduction Bankers Trust Global
of expenses, the total return Investment Management
performance of the EAFE index.
Small Cap Index Fund Seeks to replicate, before deduction Bankers Trust Global
of expenses, the total return Investment Management
performance of the Russell 2000 index.
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INVESTMENT OPTION INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
----------------- -------------------- -----------------------------
FIDELITY'S VARIABLE INSURANCE
PRODUCTS FUND
VIP Equity-Income Seeks reasonable income by investing Fidelity Management &
Portfolio primarily in income-producing equity Research Company
securities; in choosing these
securities, the portfolio manager will
also consider the potential for
capital appreciation.
VIP Growth Portfolio Seeks capital appreciation by Fidelity Management &
purchasing common stocks of well- Research Company
known, established companies, and
small emerging growth companies,
although its investments are not
restricted to any one type of
security. Capital appreciation may
also be found in other types of
securities, including bonds and
preferred stocks.
VIP High Income Portfolio Seeks to obtain a high level of Fidelity Management &
current income by investing primarily Research Company
in high yielding, lower-rated,
fixed-income securities, while also
considering growth of capital.
FIDELITY'S VARIABLE INSURANCE
PRODUCTS FUND II
VIP II Asset Manager Seeks high total return with reduced Fidelity Management &
Portfolio risk over the long-term by allocating Research Company
its assets among stocks, bonds and
short-term fixed-income instruments.
GREENWICH STREET
SERIES FUND
Total Return Portfolio An equity portfolio that seeks to Mutual Management Corp.
provide total return, consisting of ("MMC")
long-term capital appreciation and
income. The Portfolio will invest
primarily in a diversified portfolio
of dividend-paying common stocks.
Equity Index Portfolio* Seeks to replicate, before deduction Travelers Investment
of expenses, the total return Management Company
performance of the S&P 500 index.
TRAVELERS SERIES FUND, INC.
AIM Capital Appreciation Seeks capital appreciation by Travelers Investment Adviser
Portfolio investing principally in common stock, ("TIA")
with emphasis on medium-sized and Subadviser: AIM Capital
smaller emerging growth companies. Management Inc.
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INVESTMENT OPTION INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
----------------- -------------------- -----------------------------
Alliance Growth Portfolio Seeks long-term growth of capital by TIA
investing predominantly in equity Subadviser: Alliance Capital
securities of companies with a Management L.P.
favorable outlook for earnings and
whose rate of growth is expected to
exceed that of the U.S. economy over
time. Current income is only an
incidental consideration.
MFS Total Return Seeks to obtain above-average income TIA
Portfolio (compared to a portfolio entirely Subadviser: MFS
invested in equity securities)
consistent with the prudent employment
of capital. Generally, at least 40% of
the Portfolio's assets will be
invested in equity securities.
Putnam Diversified Income Seeks high current income consistent TIA
Portfolio of the with preservation of capital by Subadviser: Putnam Investment
Travelers Series Fund allocating its investments among the Management, Inc.
Inc. following three sectors of the fixed-
income securities markets, a U.S.
Government Sector, a High Yield
Sector, and an International Sector.
Smith Barney High Income Seeks high current income. Capital MMC
Portfolio appreciation is a secondary objective.
The Portfolio will invest at least 65%
of its assets in high-yielding
corporate debt obligations and
preferred stock.
Smith Barney Large Cap Seeks current income and long-term MMC
Value Portfolio growth of income and capital by
investing primarily, but not
exclusively, in common stocks.
TRAVELERS SERIES TRUST
U.S. Government Seeks to select investments from the TAMIC
Securities Portfolio point of view of an investor concerned
primarily with highest credit quality,
current income and total return. The
assets of the U.S. Government
Securities Portfolio will be invested
in direct obligations of the United
States, its agencies and
instrumentalities.
Utilities Portfolio Seeks to provide current income by MMC
investing in equity and debt
securities of companies in the utility
industries.
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INVESTMENT OPTION INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
----------------- -------------------- -----------------------------
Zero Coupon Bond Fund Seeks to provide as high an investment TAMIC
Portfolio (Series 2000 return as consistent with the
and Series 2005) preservation of capital investing in
primarily zero coupon securities that
pay cash income but are acquired by
the Portfolio at substantial discounts
from their values at maturity. The
Zero Coupon Bond Fund Portfolios may
not be appropriate for Policy Owners
who do not plan to have their premiums
invested in shares of the Portfolios
for the long term or until maturity.
POLICY BENEFITS AND RIGHTS
- --------------------------------------------------------------------------------
TRANSFERS OF CASH VALUE
As long as the Policy remains in effect, you may make transfers of Cash Value
between Investment Options. We reserve the right to restrict the number of free
transfers to four times in any Policy Year and to charge $10 for each additional
transfer; however, we do not currently charge for transfers.
We calculate the number of Accumulation Units involved using the Accumulation
Unit Values on the Valuation Date on which we receive the transfer request.
TELEPHONE TRANSFERS. The Policy Owner may make the request in writing by
mailing such request to the Company at its Home Office, or by telephone (if an
authorization form is on file) by calling 1-800-334-4298. The Company will take
reasonable steps to ensure that telephone transfer requests are genuine. These
steps may include seeking proper authorization and identification prior to
processing telephone requests. Additionally, the Company will confirm telephone
transfers. Any failure to take such measures may result in the Company's
liability for any losses due to fraudulent telephone transfer requests.
AUTOMATED TRANSFERS
DOLLAR-COST AVERAGING. You may establish automated transfers of Policy Values
on a monthly or quarterly basis from any Investment Option(s) to any other
Investment Option(s) through written request or other method acceptable to the
Company. You must have a minimum 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.
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PORTFOLIO REBALANCING. You may elect to have the Company periodically
reallocate values in your policy to match your original (or your latest) funding
option allocation request.
LAPSE AND REINSTATEMENT
Except as 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. If this happens, we will notify you in writing that if
the amount shown in the notice is not paid within 61 days (the "Late Period"),
the Policy may lapse. The amount shown will be enough to pay the deduction
amount due. The Policy will continue through the Late Period, but if no payment
is received by us, it will terminate at the end of the Late Period. If the last
of the two Insureds dies during the Late Period, the Death Benefit payable will
be reduced by the Monthly Deduction Amount due plus the amount of any
outstanding loan. (See "Death Benefit," below.)
If the Policy lapses, you may reinstate the Policy by paying the reinstatement
premium (and any applicable charges) 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. In addition, we reserve the right to require satisfactory
evidence of insurability of both Insureds.
LAPSE PROTECTION GUARANTEE RIDER
You may elect to have a Lapse Protection Guarantee Rider added to the Policy. It
is available only with Death Benefit Option 1 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 Loan Account Value 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 in the following Policy Month even if the Cash Surrender Value is
not enough to cover the Monthly Deduction Amount due, provided the following
Policy Month is within the first ten Policy Years.
The Monthly Coverage Protection Premium will change to reflect any changes you
make to the Stated Amount or supplemental benefit riders under the Policy. If
you make a change, we will send you an updated Monthly Coverage 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.
EXCHANGE RIGHTS
Once the Policy is in effect, you may exchange during the first 24 months for a
general account 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 as those of the former Policy. Any
outstanding Policy loan must be repaid before we will make an exchange. In
addition, there may be an adjustment for the difference in Cash Value between
the two Policies.
RIGHT TO CANCEL
An Applicant may cancel the Policy by returning it via mail or personal delivery
to the Company or to the agent who sold the Policy. The Policy must be returned
by the latest of
(1) 10 days after delivery of the Policy to the Policy Owner,
(2) 45 days of completion of the Policy application, or
(3) 10 days after the Notice of Right to Cancel has been mailed or
delivered to the Applicant whichever is latest
(or later if required by state law).
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We will refund the greater of all premium payments paid, or the sum of (1) the
difference between the premium paid, including any fees or charges, and the
amounts allocated to the Investment Option(s), (2) the value of the amounts
allocated to the Investment Option(s) on the date on which the Company receives
the returned Policy, and (3) any fees and other charges imposed on amounts
allocated to the Investment Option(s). We will make the refund within seven days
after we receive your returned policy.
ACCESS TO CASH VALUES
- --------------------------------------------------------------------------------
POLICY LOANS
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 7.4%; thereafter 3.85% will be charged.
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). Amounts held in the Loan Account will not 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). If a loan is not repaid, it permanently decreases the Cash
Surrender Value, which could cause the Policy to lapse. Additionally, the Death
Benefit payable could also be decreased because of an 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 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.
For full surrenders, we will pay you within seven days after we receive the
request, or on the date you specify, whichever is later. The Policy will
terminate on the deduction date following our receipt of the surrender request
(or following the date you specified, if later).
PARTIAL WITHDRAWALS. You may request a partial withdrawal from the Policy. The
amount paid to you will be the net amount requested, minus any applicable
Surrender Charges. We will deduct the amount surrendered pro rata from all
Investment Options, unless you give us other written instructions.
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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
- --------------------------------------------------------------------------------
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 to 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
- --------------- ----------
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
Options 1. The examples assume an Insured of age 40, a Minimum Amount Insured of
250% of Cash Value (assuming the preceding table is controlling as to Minimum
Amount Insured), and no outstanding Policy loan.
OPTION 1 -- LEVEL DEATH BENEFIT
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
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life insurance Policy, the Death Benefit cannot be less than the Minimum Amount
Insured (or, in this example, 250% of the Cash Value).
EXAMPLE ONE. If the Cash Value of the Policy equals $10,000, the Minimum Amount
Insured would be $25,000 ($10,000 x 250%). Since the Death Benefit in the Policy
is the greater of the Stated Amount ($50,000) or the Minimum Amount Insured
($25,000), the Death Benefit would be $50,000.
EXAMPLE TWO. If the Cash Value of the Policy equals $40,000, the Minimum Amount
Insured would be $100,000 ($40,000 x 250%). The resulting Death Benefit would be
$100,000 since the Death Benefit is the greater of the Stated Amount ($50,000)
or the Minimum Amount Insured ($100,000).
OPTION 2 -- VARIABLE DEATH BENEFIT
In the following examples of an Option 2 Variable Death Benefit, the Death
Benefit varies with the investment experience of the applicable Investment
Options and will generally be equal to the Stated Amount plus the Cash Value of
the Policy (determined on the date of the Insured's death). The Death Benefit
cannot, however, be less than the Minimum Amount Insured (or, in this example,
250% of the Cash Value).
EXAMPLE ONE. If the Cash Value of the Policy equals $10,000, the Minimum Amount
Insured would be $25,000 ($10,000 x 250%). The Death Benefit ($60,000) would be
equal to the Stated Amount ($50,000) plus the Cash Value ($10,000), unless the
Minimum Amount Insured ($25,000) was greater.
EXAMPLE TWO. If the Cash Value of the Policy equals $60,000, then the Minimum
Amount Insured would be $150,000 ($60,000 x 250%). The resulting Death Benefit
would be $150,000 because the Minimum Amount Insured ($150,000) is greater than
the Stated Amount plus the Cash Value ($50,000 + $60,000 = $110,000).
PAYMENT OF PROCEEDS
Death Benefits are payable within seven days after we receive satisfactory proof
of the Second Insured's death. The amount of Death Benefit paid may be adjusted
to reflect any Policy loan, any material misstatements in the Policy application
as to age or sex of the Insured, and any amounts payable to an assignee under a
collateral assignment of the Policy. (See "Assignment".) 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 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 61-day period after the Company gives notice
to the Policy Owner that the Cash Surrender Value of the Policy is insufficient
to meet the Monthly Deduction Amount due against the Cash Value of the Policy,
then the Death Benefit actually paid to the Policy Owner's Beneficiary will be
reduced by the amount of the Deduction Amount that is due and unpaid. (See "Cash
Value and Cash Surrender Value," for effects of partial surrenders on Death
Benefits.)
PAYMENT OPTIONS
We will pay policy proceeds in a lump sum, unless you or the Beneficiary selects
one of the Company's payment options. We may defer payment of proceeds which
exceed the Death Benefit for up to six months from the date of the request for
the payment. A combination of options may be used. The minimum amount that may
be placed under a payment option is $5,000 unless we consent to a lesser amount.
Proceeds applied under an option will no longer be affected by the investment
experience of the Investment Options.
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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 $50, 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
- --------------------------------------------------------------------------------
MATURITY EXTENSION RIDER
The maturity date is the anniversary of the Policy Date on which the younger
Insured is age 100. If the Insured is living on the Maturity Date, the Company
will pay you the Policy's Cash Value, less any outstanding Policy loan or unpaid
Deduction Amount. You must surrender the Policy to us before we make a payment,
at which point the Policy will terminate and we will have no further obligations
under the Policy.
When 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 last Insured's
death or the date on which you request that the Policy terminate. When the
Maturity Extension Benefit ends, a Death Benefit consisting of the Cash Value
less any Loan Account Value will be paid. The Death Benefit is based on the
experience of the Investment Options selected and is not guaranteed. After the
Maturity Date, periodic Deduction Amounts will no longer be charged against the
Cash Value and additional premiums will not be accepted.
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 hold the cash value until the death of both
Insureds or request for payment of the full cash surrender value, as defined by
this rider, prior to last death of both insureds. The death benefit will equal
the stated amount, less any outstanding loans. It is effective only from the
policy anniversary
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when the insured is age 99 to maturity date. Any monthly deduction amounts due
must be paid upon maturity for this rider to take effect. There is no charge for
this rider.
CHARGES AND DEDUCTIONS
- --------------------------------------------------------------------------------
CHARGES AGAINST PREMIUM
FRONT-END SALES CHARGE. When we receive a Premium Payment, and before
allocation of the payment among the Investment Options, we deduct a front-end
sales charge. For Stated Amount, the charge is 2.5%. For Stated Amounts from
$500,000 to $999,999, the charge is 2.0%, and for Stated Amounts of $1,000,000
or greater, there is no front-end sales charge. Additional charges may be
assessed upon any full or partial surrender. (See "Surrender Charges.")
Sales charges are intended to cover the Company's actual sales expenses,
including agent sales commissions, advertising and the printing of the
prospectuses. The Company expects to recover the sales expenses of a Policy. To
the extent sales expenses are not covered by the sales charges, the Company will
recover such expenses from its surplus. This surplus may include profit from the
mortality and expense risk charge.
STATE PREMIUM TAX CHARGE. A charge of 2.5% of each premium payment will be
deducted for state premium taxes (except for Policies issued in the Commonwealth
of Puerto Rico where no premium tax is deducted). These taxes vary from state to
state and currently range from 0.75% to 3.5%; 2.5% is an average. Because there
is a range of premium taxes, a Policy Owner may pay a premium tax charge that is
higher or lower than the premium tax actually assessed in his or her
jurisdiction. For Policies with a Stated Amount of $5,000,000 or more, there is
no premium tax deduction.
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 Exchange Charge, Monthly Policy
Charge and Charges for any Supplemental Benefit Provisions. These are described
below:
COST OF INSURANCE CHARGE. The amount of the Cost of Insurance deduction depends
on of the amount of insurance coverage on the date of the deduction and the
current cost per dollar for insurance coverage. The cost per dollar of insurance
coverage varies annually and is based on age, sex and risk class of the
Insureds.
POLICY ADMINISTRATIVE EXPENSE CHARGE. For the first three Policy Years, an
administrative charge is deducted monthly from the Policy's Cash Value. This
charge also applies to increases in the Stated Amount (excluding Cost of Living
Adjustments and increases in Stated Amounts due to Death Benefit Option
changes). This charge is used to cover expenses associated with issuing the
Policy.
The amount charged varies by Policy and will be stated in the Policy. The charge
currently varies by issue age and Stated Amount (see Appendix C(1) for chart of
charges).
MONTHLY POLICY CHARGE. This $10 charge is used to cover expenses associated
with maintaining the policy.
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CHARGES FOR SUPPLEMENTAL BENEFIT PROVISIONS. The Company will include a
supplemental benefits charge in the Monthly Deduction Amount if you has elected
any supplemental benefit provision. The amount of this charge will vary
depending upon the actual supplemental benefits selected.
CHARGES AGAINST THE SEPARATE ACCOUNT
MORTALITY AND EXPENSE RISK CHARGE. We deduct a daily charge for mortality and
expense risks. This charge is at an annual rate of 0.80% for the first fifteen
(15) Policy Years, and 0.35% thereafter. The mortality risk assumed is that the
cost of insurance charge specified in the Policy may not be enough to meet
actual claims. The expense risk assumed is that expenses incurred in issuing and
administering the Policies will exceed the administrative charges set forth in
the Policy.
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 to each of the
underlying Mutual Funds are described in the individual fund prospectuses. These
are not direct charges under the Policy; they are indirect because they affect
each Investment Option's accumulation unit value.
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. These surrender charges apply during the first 15
Policy Years (or the first 15 years following an increase in Stated Amount other
than an increase for a Cost of Living Adjustment or a change in Death Benefit
option). The charge 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 increases with the issue ages of the Insureds.
The charge decreases by 1/15% each year over the fifteen-year period. For
example, for a 45-year old male nonsmoker and a 45-year-old female nonsmoker
with a Stated Amount of $150,000, the charge in the first year is $16.31 for
each $1,000 of Stated Amount, or $2,419.50. The charge decreases 1/15%, or
approximately $1.08, each year, so in the fifth year, it is $11.83 for each
$1,000 of Stated Amount, or $1,774.50; in the fifteenth year, it is $1.08 for
each $1,000, or $162.
This charge is designed to compensate the Company for administrative expenses
not covered by other administrative charges. This charge may be reduced or
eliminated when sales are made under certain arrangements. (See "Reduction or
Elimination of Sales Charges and Administrative Charges" below.) The Per
Thousand of Stated Amount surrender charges are set forth in Appendix B.
TRANSFER CHARGE
There is currently no charge for transfers between Investment Options. We
reserve the right to limit free transfers of Cash Value to four times in any
Policy Year, and to charge $10 for any additional transfers.
REDUCTION OR ELIMINATION OF CHARGES
We may offer the Policy in arrangements where an employer or trustee will own a
group of policies on the lives of certain employees, or in other situations
where groups of policies will be purchased at one time. We may reduce or
eliminate the mortality and expense risk charge, sales or surrender charges and
administrative charges in such arrangements to reflect the reduced sales
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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 of the withdrawal charge, mortality and expense
risk charge or the administrative charge if the reduction or elimination will be
unfairly discriminatory to any person.
THE SEPARATE ACCOUNT AND VALUATION
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THE TRAVELERS FUND UL FOR VARIABLE LIFE INSURANCE (FUND UL)
The Travelers Fund UL for Variable Life Insurance was established on November
10, 1983 under the insurance laws of the state of Connecticut. It is registered
with the Securities and Exchange Commission ("SEC") as a unit investment trust
under the Investment Company Act of 1940. A Registration Statement has been
filed with the Securities and Exchange Commission under the Securities Act of
1933, as amended. This Prospectus does not contain all information set forth in
the Registration Statement, its amendments and exhibits. You may access the
SEC's website (http://www.sec.gov) to view the entire Registration Statement.
This registration does not mean that the SEC supervises the management or the
investment practices or policies of the Separate Account.
The assets of Fund UL are invested exclusively in shares of the Investment
Options. The operations of Fund UL are also subject to the provisions of Section
38a-433 of the Connecticut General Statutes which authorizes the Connecticut
Insurance Commissioner to adopt regulations under it. Under Connecticut law, the
assets of Fund UL will be held for the exclusive benefit of Policy Owners and
the persons entitled to payments under the Policy. The assets held in Fund UL
are not chargeable with liabilities arising out of any other business which the
Company may conduct. Any obligations arising under the Policy are general
corporate obligations of the Company.
All investment income of and other distributions to each Investment Option are
reinvested in shares of corresponding underlying fund at net asset value. The
income and realized gains or losses on the assets of each Investment Option are
separate and are credited to or charged against the Investment Option without
regard to income, gains or losses from any other Investment Option or from any
other business of the Company. The Company purchases shares of the Fund in
connection in the Investment Options in connection with premium payments
allocated to the Policy Owners' directions, and redeems Fund shares to meet
Policy obligations. We will also make adjustments in reserves, if required. The
Investment Options are required to redeem Fund shares at net asset value and to
make payment within seven days.
HOW THE CASH VALUE VARIES. We calculate the Policy's Cash Value each day the
New York Stock Exchange is open for trading (a "valuation date"). A Policy's
Cash Value reflects a number of factors, including Premium Payments, partial
withdrawals, loans, Policy charges, and the investment experience of the
Investment Option(s) chosen. The Policy's Cash Value on a valuation date equals
the sum of all accumulation units for each Investment Option chosen, plus the
Loan Account Value.
The Separate Account purchases shares of the underlying funds at net asset value
(i.e., without a sales charge). The Separate Account receives all dividends and
capital gains distributions from each underlying fund, and reinvests in
additional shares of that fund. The Accumulation Unit Value reflects the
reinvestment of any dividends or capital gains distributions declared by the
underlying fund. The Separate Account will redeem underlying fund shares at
their net asset value, to the extent necessary to make payments under the
Policy.
In order to determine Cash Value, Cash Surrender Value, policy loans and the
number of Accumulation Units to be credited, we use the values calculated as of
the close of business on each valuation date we receive the written request, or
payment in good order, at our Home Office.
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ACCUMULATION UNIT VALUE. Accumulation Units measure the value of the Investment
Options. The value for each Investment Option's Accumulation Unit is calculated
on each valuation date. The value equals the Accumulation Unit value for the
preceding valuation period multiplied by the underlying fund's Net Investment
Factor during the next Valuation Period. (For example, to calculate Monday's
valuation date price, we would multiply Friday's Accumulation Unit Value by
Monday's net investment factor.)
The Accumulation Unit Value may increase or decrease. The number of Accumulation
Units credited to your Policy will not change as a result of the Investment
Option's investment experience.
NET INVESTMENT FACTOR. For each Investment Option, the value of its
Accumulation Unit depends of the net rate of return for the corresponding
underlying fund. We determine the net rate of return at the end of each
Valuation Period (that is, the period of time beginning at the close of the New
York Stock Exchange, and ending at its close of business on the next Valuation
Date). The net rate of return reflects the investment performance of the
investment option, includes any dividends or capital gains distributed, and is
net of the Separate Account charges.
CHANGES TO THE POLICY
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GENERAL
Once the policy is issued, you may make certain changes. Some of these changes
will not require additional underwriting approval; some changes will. Certain
requests must be made in writing, as indicated below:
WRITTEN CHANGES REQUIRING UNDERWRITING APPROVAL:
- increases in the stated amount of insurance;
- changing the death benefit from Option 1 to Option 2
WRITTEN CHANGES NOT REQUIRING UNDERWRITING APPROVAL:
- decreases in the stated amount of insurance
- changing the death benefit from Option 2 to Option 1
- changes to the way your premiums are allocated (Note: you can also make
these changes by telephone)
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
After the first two policy years, a Policy Owner may request in writing an
increase or decrease in the Policy's Stated Amount, provided that the Stated
Amount after any decrease may not be less than the minimum amount of $100,000.
For purposes of determining the cost of insurance charge, a decrease in the
Stated Amount will reduce the Stated Amount in the following order:
1) against the most recent increase in the Stated Amount;
2) to other increases in the reverse order in which they occurred;
3) to the initial Stated Amount.
A decrease in Stated Amount in a substantially funded Policy may cause a cash
distribution that is includable in the gross income of the Policy Owner.
For increases in the Stated Amount, we may require a new application and
evidence of insurability as well as an additional premium payment. The effective
date of any increase will be shown on the new Policy Summary which we will send.
The effective date of any increase in the Stated Amount
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will generally be the Deduction Date next following either the date of a new
application or, if different, the date requested by the Applicant. There is an
additional Policy Administrative Charge and a Per Thousand of Stated Amount
Surrender Charge associated with a requested increase in Stated Amount. There is
no additional charge for a decrease in Stated Amount.
CHANGES IN DEATH BENEFIT OPTION
After the first two policy years, provided both Insureds are alive, you may
change the Death Benefit option by sending a written request to the Company.
There is no direct consequence of changing a Death Benefit option, except as
described under "Tax Treatment of Policy Benefits." However, the change could
affect future values of Net Amount At Risk, and with some Option 2 to Option 1
changes involving substantially funded Policies, there may be a cash
distribution which is included in your gross income. The cost of insurance
charge which is based on the Net Amount At Risk may be different in the future.
A change from Option 1 to Option 2 will not be permitted if the change results
in a Stated Amount of less than $100,000. A charge from Option 1 to Option 2
also subject to underlying. Contact your registered representative for more
information.
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 or 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 Insured commits suicide during
the two-year period following issue, subject to state law, the Death Benefit
will be limited to the premiums paid less (i) the amount of any partial
surrender, (ii) the amount of any outstanding Policy loan, and (iii) the amount
of any unpaid Deduction Amount due. During the two-year period following an
increase, the Death Benefit in the case of suicide will be limited to an amount
equal to the Deduction Amount paid for such increase.
MISSTATEMENT AS TO SEX AND AGE
If there has been a misstatement with regard to sex or age, benefits payable
will be adjusted to what the Policy would have provided with the correct
information. A misstatement with regard to sex or age in a substantially funded
Policy may cause a cash distribution that is includable in whole or in part in
the gross income of the Policy Owner.
VOTING RIGHTS
The Company is the legal owner of the underlying fund shares. However, we
believe that when an underlying fund solicits proxies, we are required to obtain
from policy owners who have chosen those investment options instructions on how
to vote those shares. When we receive those instructions, we will vote all of
the shares we own in proportion to those instructions. This will also include
any shares we own on our own behalf. If we determine that we no longer need to
comply with this voting method, we will vote on the shares in our own right.
DISREGARD OF VOTING INSTRUCTIONS
When permitted by state insurance regulatory authorities, we may disregard
voting instructions if the instructions would cause a change in the investment
objective or policies of the Separate
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Account or an Investment Option, or if it would cause the approval or
disapproval of an investment advisory Policy of an Investment Option. In
addition, we may disregard voting instructions in favor of changes in the
investment policies or the investment adviser of any Investment Options which
are initiated by a Policy Owner if we reasonably disapprove of such changes. A
change would be disapproved only if the proposed change is contrary to state law
or prohibited by state regulatory authorities, or if we determine that the
change would have an adverse effect on our general account (i.e., if the
proposed investment policy for an Investment Option may result in overly
speculative or unsound investments.) If we do disregard voting instructions, a
summary of that action and the reasons for such action would be included in the
next annual report to Policy Owners.
OTHER MATTERS
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STATEMENTS TO POLICY OWNERS
We will maintain all records relating to the Separate Account and the Investment
Options. At least once each Policy Year, we will send you a statement containing
the following information:
- the Stated Amount and the Cash Value of the Policy (indicating the number
of Accumulation Units credited to the Policy in each Investment Option
and the corresponding Accumulation Unit Value);
- the date and amount of each premium payment;
- the date and amount of each Monthly Deduction;
- the amount of any outstanding Policy loan as of the date of the
statement, and the amount of any loan interest charged on the Loan
Account;
- the date and amount of any partial cash surrenders and the amount of any
partial surrender charges;
- the annualized cost of any supplemental benefits purchased under the
Policy; and
- a reconciliation since the last report of any change in Cash Value and
Cash Surrender Value.
We will also send any other reports required by any applicable state or federal
laws or regulations.
SUSPENSION OF VALUATION
We reserve the right to suspend or postpone the date of any payment of any
benefit or values for any Valuation Period (1) when the New York Stock Exchange
("Exchange") is closed; (2) when trading on the Exchange is restricted; (3) when
the SEC determines so that disposal of the securities held in the Underlying
Funds is not reasonably practicable or the value of the Investment Option's net
assets cannot be determined; or (4) during any other period when the SEC, by
order, so permits for the protection of security holders.
DIVIDENDS
No dividends will be paid under the Policy.
MIXED AND SHARED FUNDING
It is conceivable that in the future it may not be advantageous for variable
life insurance and variable annuity Separate Accounts to invest in the
Investment Options simultaneously. This is called mixed funding. Certain funds
may be available to variable products of other companies not affiliated with
Travelers. This is called "shared funding." Although we -- and the funds -- do
not anticipate any disadvantages either to variable life insurance or to
variable annuity Policy Owners, the Investment Options' Boards of Directors
intend to monitor events to identify any material conflicts that may arise and
to determine what action, if any, should be taken. If any of the Investment
Options' Boards of Directors conclude that separate mutual funds should be
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established for variable life insurance and variable annuity Separate Accounts,
the Company will bear the attendant expenses, but variable life insurance and
variable annuity Policy Owners would no longer have the economies of scale
resulting from a larger combined fund. Please consult the prospectuses of the
Investment Options for additional information.
DISTRIBUTION
The Company intends to sell the Policies in all jurisdictions where it is
licensed to do business and where the Policy is approved. The Policies will be
sold by life insurance sales representatives who are registered representatives
of the Company or certain other registered broker-dealers. The maximum
commission payable by the Company for distribution would be no greater than 50%
of the actual premium paid in the first twelve months. Any sales representative
or employee will have been qualified to sell variable life insurance Policies
under applicable federal and state laws. Each broker/dealer is registered with
the Securities and Exchange Commission under the Securities Exchange Act of 1934
and all are members of the National Association of Securities Dealers, Inc.
CFBDS, Inc. serves as principal underwriter of the Policies.
LEGAL PROCEEDINGS AND OPINION
There are no pending material legal proceedings affecting the Separate Account.
Legal matters in connection with the federal laws and regulations affecting the
issue and sale of the Contract described in this prospectus, as well as the
organization of the Company, its authority to issue variable annuity contracts
under Connecticut law and the validity of the forms of the variable annuity
contracts under Connecticut law, have been reviewed by the General Counsel of
the Company.
INDEPENDENT ACCOUNTANTS
Financial statements as of and for the year ended December 31, 1997 of Fund UL,
included in the registration statement have been incorporated herein in reliance
on the report of Coopers & Lybrand LLP, independent accountants given the
authority of that firm as experts in accounting and auditing.
The consolidated financial statements of The Travelers Insurance Company and
Subsidiaries as of December 31, 1997 and 1996 and for each of the years in the
three-year period ended December 31, 1997, have been included herein and in the
registration statement in reliance upon the report of KPMG Peat Marwick 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 Investment Options, it
intends to monitor the investments of the Investment Options to ensure
compliance with the diversification requirements prescribed by the Treasury
Department.
INVESTOR CONTROL
In certain circumstances, owners of variable life insurance contracts may be
considered the owners, for federal income tax purposes, of the assets of the
separate accounts used to support
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their contract. In those circumstances, income and gains from the separate
account assets would be includable in the variable contract owner's gross income
each year. The IRS has stated in published rulings that a variable contract
owner will be considered the owner of separate account assets if the contract
owner possesses incidents of ownership in those assets, such as the ability to
exercise investment control over the assets. The Treasury has also announced, in
connection with the issuance of regulations concerning diversification, that
those regulations "do not provide guidance concerning the circumstances in which
investor control of the investments of a segregated asset account may cause the
investor (i.e., the Policy Owner), rather than the insurance company, to be
treated as the owner of the assets in the account." This announcement also
stated that guidance would be issued by way of regulations or rulings on the
"extent to which policyholders may direct their investments to particular
Investment Options without being treated as owners of the underlying assets." As
of the date of this prospectus, no such guidance has been issued.
The ownership rights under the Policy are similar to, but different in certain
respects from, those described by the IRS in rulings in which it determined that
the policy owners received the desired tax benefits because they were not owners
of separate account assets. For example, a Policy Owner of this Policy has
additional flexibility in allocating payments and cash values. These differences
could result in the Policy Owner being treated as the owner of the assets of the
Separate Account. In addition, the Company does not know what standard will be
set forth in the regulations or rulings which the Treasury is expected to issue,
nor does the Company know if such guidance will be issued. The Company therefore
reserves the right to modify the Policy as necessary to attempt to prevent the
Policy Owner from being considered the owner of a pro rata share of the assets
of the Separate Account.
The remaining tax discussion assumes that the Policy qualifies as a life
insurance contract for federal income tax purposes.
TAX TREATMENT OF POLICY BENEFITS
IN GENERAL
The Company believes that the proceeds and cash value increases of a Policy
should be treated in a manner consistent with a fixed-benefit life insurance
policy for federal income tax purposes. Thus, the Death Benefit under the Policy
should be excludable from the gross income of the Beneficiary.
In addition, the Policy Owner will generally not be deemed to be in constructive
receipt of the Cash Value, including increments thereof, until there is a
distribution. The tax consequences of distribution from, and loans taken from or
secured by, a Policy depend on whether the Policy is classified as a "Modified
Endowment Contract." However, whether a Policy is or is not a Modified Endowment
Contract, upon a complete surrender or lapse of a Policy or when benefits are
paid at a Policy's maturity date, if the amount received plus the amount of
indebtedness exceeds the total investment in the Policy, the excess will
generally be treated as ordinary income subject to tax.
Depending on the circumstances, the exchange of a Policy, a change in the
Policy's Death Benefit Option, a Policy loan, a partial withdrawal, a surrender,
a change in ownership, or an assignment of the Policy may have federal income
tax consequences. In addition, federal, state and local transfer, and other tax
consequences of ownership or receipt of Policy proceeds depend on the
circumstances of each Owner or beneficiary. Therefore, it is important to check
with a tax adviser prior to the purchase of a policy.
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
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date will not by itself cause the new contract to be a modified endowment
contract if the older contract had not become one prior to the exchange.
However, the new contract must be re-tested under the 7-pay test rules.
A contract fails to satisfy the 7-pay test if the cumulative amount of premiums
paid under the contract at any time during the first seven contract years
exceeds the sum of the net level premiums that would have been paid on or before
such time had the contract provided for paid-up future benefits after the
payment of seven level annual premiums. If a material change in the contract
occurs either during the first seven contract years, or later, a new seven-year
testing period is begun. A decrease to Stated Amount made in the first seven
years will cause a retest of the cumulative amount of premiums. Decreases made
after the first seven contract years are not considered a material change,
provided no other material changes have occurred prior. Tax regulations or other
guidance will be needed to fully define those transactions which are material
changes. The Company has established safeguards for monitoring whether a
contract may become a modified endowment contract.
Loans and partial withdrawals from, as well as collateral assignments of,
Policies that are modified endowment contracts will be treated as distributions
to the Policy Owner for tax purposes. All pre-death distributions (including
loans, partial withdrawals and collateral assignments) from these Policies will
be included in gross income on an income-first basis to the extent of any income
in the Policy (the cash value less the Policy Owner's investment in the Policy)
immediately before the distribution.
The law also imposes a 10% penalty tax on pre-death distributions (including
loans, collateral assignments, partial withdrawals and complete surrenders) from
modified endowment contracts to the extent they are included in income, unless a
specific exception to the penalty applies. The penalty does not apply to amounts
which are distributed on or after the date on which the taxpayer attains age
59 1/2, because the taxpayer is disabled, or as substantially equal periodic
payments over the taxpayer's life (or life expectancy) or over the joint lives
(or joint life expectancies) of the taxpayer and his or her beneficiary.
Furthermore, if the loan interest is capitalized by adding the amount due to the
balance of the loan, the amount of the capitalized interest will be treated as
an additional distribution subject to income tax as well as the 10% penalty tax,
if applicable, to the extent of income in the Policy.
The Death Benefit of a modified endowment contract remains excludable from the
gross income of the Beneficiary to the extent described above in "Tax
Consequences of Life Insurance Contracts." 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 Consequences of Life
Insurance Contracts."
EXCHANGES
Any Policy issued in exchange for a modified endowment contract will be subject
to the tax treatment accorded to modified endowment contracts. However, the
Company believes that any Policy received in exchange for a life insurance
contract that is not a modified endowment contract will generally not be treated
as a modified endowment contract if the face amount of the Policy is greater
than or equal to the death benefit of the policy being exchanged. The payment of
any premiums at the time of or after the exchange may, however, cause the Policy
to become a modified endowment contract. A prospective purchaser should consult
a qualified tax advisor before authorizing the exchange of his or her current
life insurance contract for a Policy.
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AGGREGATION OF MODIFIED ENDOWMENT CONTRACTS
In the case of a pre-death distribution (including a loan, partial withdrawal,
collateral assignment or complete surrender) from a Policy that is treated as a
modified endowment contract, a special aggregation requirement may apply for
purposes of determining the amount of the income on the Policy. Specifically, if
the Company or any of its affiliates issues to the same Policy Owner more than
one modified endowment contract within a calendar year, then for purposes of
measuring the income on the Policy with respect to a distribution from any of
those Policies, the income on the Policy for all those Policies will be
aggregated and attributed to that distribution.
POLICIES WHICH ARE NOT MODIFIED ENDOWMENT CONTRACTS
Unlike loans from modified endowment contracts, a loan from a Policy that is not
a modified endowment contract will be considered indebtedness of the Owner and
no part of a loan will constitute income to the Owner. However, the treatment of
loans taken after the 13th Policy Year, is unclear; such loans might be
considered a withdrawal instead of indebtedness for federal tax purposes.
Pre-death distributions from a Policy that is not a modified endowment contract
will generally not be included in gross income to the extent that the amount
received does not exceed the Policy Owner's investment in the Policy. (An
exception to this general rule may occur in the case of a decrease or change
that reduces the benefits provided under a Policy in the first 15 years after
the Policy is issued and that results in a cash distribution to the Policy
Owner. Such a cash distribution may be taxed in whole or in part as ordinary
income to the extent of any gain in the Policy.) Further, the 10% penalty tax on
pre-death distributions does not apply to Policies that are not modified
endowment contracts.
Certain changes to Policies that are not modified endowment contracts may cause
such Policies to be treated as modified endowment contracts. A Policy Owner
should therefore consult a tax advisor before effecting any change to a Policy
that is not a modified endowment contract.
TREATMENT OF LOAN INTEREST
If there is any borrowing against the Policy, the interest paid on loans may not
be tax deductible.
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 or the earnings
or the realized capital gains attributable to Fund UL. However, the Company may
assess a charge against the Investment Options for federal income taxes
attributable to those accounts in the event that the Company incurs income or
capital gains or other tax liability attributable to Fund UL under future tax
law.
THE COMPANY
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The Travelers Insurance Company (the "Company") is a stock insurance company
chartered in 1864 in Connecticut and has been engaged in the insurance business
since that time. The Company writes individual life insurance and individual and
group annuity contracts on a non-participating basis, and acts as depositor for
the Separate Account assets. The Company is licensed to conduct life insurance
business in all states of the United States, the District of Columbia, Puerto
Rico, Guam, the U.S. and British Virgin Islands, and the Bahamas. The Company's
obligations as depositor for Fund UL may not be transferred without notice to
and consent of Policy Owners.
The Company is an indirect wholly owned subsidiary of Citigroup Inc., a
financial services holding company. The Company's principal executive offices
are located at One Tower Square, Hartford, Connecticut 06183, telephone number
(860) 277-0111.
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The Company is subject to Connecticut law governing insurance companies and is
regulated and supervised by the Connecticut Commissioner of Insurance. An annual
statement in a prescribed form must be filed with the Commissioner on or before
March 1 in each year covering the operations of the Company for the preceding
year and its financial condition on December 31 of such year. The Company's
books and assets are subject to review or examination by the Commissioner, and a
full examination of its operations is conducted at least once every four years.
In addition, the Company is subject to the insurance laws and regulations of any
jurisdiction in which it sells its insurance Policies, as well as to various
federal and state securities laws and regulations.
IMSA
The Company is a member of the Insurance Marketplace Standards Association
("IMSA"), and as such may use the IMSA logo and IMSA membership in its
advertisements. Companies that belong to IMSA subscribe to a set of ethical
standards covering the various aspects of sales and service for individually
sold life insurance and annuities. IMSA members have adopted policies and
procedures that demonstrate a commitment to honesty, fairness and integrity in
all customer contacts involving the sale and service of individual life
insurance and annuity products.
YEAR 2000 COMPLIANCE
The Company is highly dependent on computer systems and systems applications for
conducting its ongoing business functions. In 1996, the Company began the
process of identifying, assessing and implementing changes to computer programs
to address the year 2000 issue and developed a comprehensive plan to address the
issue. The issue involves the ability of computer systems that have time
sensitive programs to recognize properly the year 2000. The inability to do so
could result in major failures or miscalculations that would disrupt the
Company's ability to meet its customer and other obligations on a timely basis.
The Company is in the process of implementing necessary changes, in accordance
with its Year 2000 plan, to bring all its critical business systems into year
2000 compliance by early 1999. As part of, and following, achievement of year
2000 compliance, systems have been, and will continue to be, subjected to a
certification process which validates the renovated code before it is certified
for use in production. In addition, the Company is developing contingency plans
to be used in the event of an unexpected failure, which may result from the
complex interrelationships among our clients, business partners, and other
parties upon whom it relies. These plans are expected to be in place by December
31, 1998.
The total pre-tax cost associated with the required modifications and
conversions is expected to be insignificant and is being expensed as incurred in
the period 1996 through 1999, and is not expected to have a material effect on
its financial position, results of operations or liquidity. The Company also has
third party customers, financial institutions, vendors and others with which it
conducts business and has communicated with them on their plans to address and
resolve year 2000 issues on a timely basis. While it is likely that these
efforts by third party vendors will be successful, it is possible that a series
of failures by third parties could have a material adverse effect on the
Company's results of operations in future years.
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MANAGEMENT
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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 Travelers Group Inc. include, prior to December
31, 1993, Primerica Corporation or its predecessors.
DIRECTOR
NAME AND POSITION SINCE PRINCIPAL BUSINESS
----------------- -------- ------------------
Jay S. Benet................... 1996 Senior Vice President since February 1994 and Vice
Director President (1990-1994) of The Travelers Insurance
Company; Partner (1986-1990) of Coopers & Lybrand.
Ian R. Stuart.................. 1996 Senior Vice President since November, 1996 Chief
Director Financial Officer; Chief Accounting Officer and
Controller since March 1996, Vice President (1991-1996)
of The Travelers Insurance Company.
Katherine M. Sullivan.......... 1996 Senior Vice President and General Counsel since May
Director 1996 of The Travelers Insurance Company; Senior Vice
President and General Counsel (1994-1996) Connecticut
Mutual; Special Counsel & Chief of Staff (1988-1994)
Aetna Life & Casualty.
George C. Kokulis.............. 1996 Senior Vice President since September 1995, Vice
Director President (1993-1995) of The Travelers Insurance
Company.
Michael A. Carpenter........... 1995 Co-chairman, Salomon Smith Barney since October 1998;
Director Chairman since June 1996 and President and Chief
Executive Officer June 1995-1998 of The Travelers
Insurance Company; Vice Chairman since February 1998;
Executive Vice President (1995-1998) of Travelers Group
Inc.; Chairman, President and Chief Executive Officer
(1989-1994), Kidder Peabody Group Inc.
Robert I. Lipp................. 1992 Chairman, President and Chief Executive Officer since
Director April 1996 of Travelers Property Casualty Corp.; Chief
Executive Officer and Director since December 1993 of
The Travelers Insurance Group Inc.; Vice Chairman and
Director of Travelers Group Inc. since 1991; Chairman
and Chief Executive Officer of Commercial Credit
Company (1991-1993); Executive Vice President
(1986-1991), Primerica Corporation.
Marc P. Weill*................. 1994 Senior Vice President-Investments since 1993 and Chief
Director Investment Officer since 1995 of The Travelers
Insurance Group Inc.; Senior Vice President and Chief
Investment Officer of Travelers Group Inc. since 1992;
Vice President (1990-1992), Primerica Corporation; Vice
President (1989-1990), Smith Barney Inc.
J. Eric Daniels................ 1998 President and Chief Executive Officer since December
Director 1998 of The Travelers Insurance Company; Chief
Operating Officer of Global Consumer Bank of Citibank.
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* Principal business address: Travelers Group Inc., 388 Greenwich Street, New
York, New York
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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
---- -------------------------------
Stuart Baritz................ Senior Vice President
Barry Jacobson............... Senior Vice President
Russell H. Johnson........... Senior Vice President
Warren H. May................ Senior Vice President
Jay S. Fishman............... Senior Vice President
David A. Tyson............... Senior Vice President
F. Denney Voss............... Senior Vice President
Elizabeth C. Senior Vice President
Georgakopoulos.............
Christine M. Modie........... Senior Vice President
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 Deduction Amounts generally will be higher for an
Insured who is older than the assumed Insured, and lower for an Insured who is
younger (assuming the Insureds have the same risk classification). Cost of
insurance rates go up each year as the Insured becomes a year older.
Male, Age 35
Preferred Non-Smoker
Annual Premium: $ 850.00
Hypothetical Gross Annual Investment
Rate of Return: 8%
Face Amount: $100,000
Level Death Benefit Option
Current Charges
TOTAL MONTHLY DEDUCTION
SURRENDER CHARGES FOR THE POLICY YEAR
----------------- SALES CHARGE -----------------------
COMPONENT OF
ADMINISTRATIVE SURRENDER CHARGE COST OF
POLICY CUMULATIVE SALES CHARGE CHARGE AS % OF INSURANCE ADMINISTRATIVE
YEAR PREMIUMS COMPONENT COMPONENT CUM. PREM. CHARGES CHARGES
- ------ ---------- ------------ -------------- ---------------- --------- --------------
1 $ 850.00 $91.20 $364.80 10.73% $145.00 $96.00
2 $1,700.00 $90.40 $361.60 5.32% $157.00 $96.00
3 $2,550.00 $90.00 $360.00 3.53% $168.00 $96.00
5 $4,250.00 $92.80 $371.20 2.18% $190.00 $ 0
10 $8,500.00 $59.40 $237.60 0.70% $250.00 $ 0
(3) Hypothetical results shown above are illustrative only and are based on the
Hypothetical Gross Annual Investment Rate of Return shown above. This
Hypothetical Gross Annual Investment Rate of Return should not be deemed to
be a representation of past or future investment results. Actual investment
results may be more or less than those shown. No representations can be made
that the hypothetical rates assumed can be achieved for any one year or
sustained over any period of time.
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37
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 Investment Options will be calculated by adjusting the
actual returns of the Investment Options to reflect the charges that would have
been assessed under the Investment Options had the Investment Option been
available under Fund UL during the period shown.
The following performance information represents the percentage change in the
value of an Accumulation Unit of the Investment Options for the periods
indicated, and reflects all expenses of the Investment Options. The chart
reflects the guaranteed maximum .80% mortality and expense risk charge and .10%
administrative expense risk charge. The rates of return do not reflect the
front-end sales charge or the 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.
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.
32
38
The table below shows the net annual rates of return for accumulation units of
investment options available through the Variable Survivorship Life Policy.
AVERAGE ANNUAL RETURNS THROUGH 12/31/97
UNDERLYING INVESTMENT OPTIONS ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
----------------------------- -------- ----------- ---------- ---------
STOCK FUNDS
AIM Capital Appreciation Portfolio 11.15% N/A N/A N/A
Alliance Growth Portfolio 27.82% N/A N/A N/A
Capital Appreciation Fund (Janus Sub-Adviser) 24.93% 28.90% 18.16% 15.36%
Dreyfus Stock Index Fund 31.67% 29.35% 18.57% N/A
Fidelity VIP Equity-Income Portfolio 26.87% 24.31% 19.01% N/A
Fidelity VIP Growth Portfolio 22.30% 23.04% 16.89% N/A
Smith Barney Large Cap Value Portfolio 25.42% N/A N/A N/A
Total Return Portfolio 15.75% N/A N/A N/A
Utilities Portfolio 24.09% N/A N/A N/A
Banker's Trust EAFE Index Fund
Banker's Trust Small Cap Index Fund
Equity Index Portfolio
BOND FUNDS
Fidelity VIP High Income Portfolio 16.56% 16.30% 12.87% 11.76%
Smith Barney High Income Portfolio 12.79% N/A N/A N/A
U.S. Gov't Securities Portfolio 11.59% 11.41% 7.01% N/A
Zero Coupon Bond Portfolio 2000 6.24% N/A N/A N/A
Zero Coupon Bond Portfolio 2005 10.63% N/A N/A N/A
BALANCED FUNDS
Fidelity VIP II Asset Manager Portfolio 19.50% 16.27% 11.90% N/A
MFS Total Return Portfolio 20.04% N/A N/A N/A
Managed Assets Trust 20.16% 19.46% 12.34% 12.02%
MONEY MARKET FUNDS
Money Market Portfolio(1) 4.11% 3.67% 2.89% N/A
The information presented in the above chart represents the percentage change in
the value of an accumulation unit of the underlying investment options for the
periods indicated, and reflects all expenses of the underlying funds, 0.80%
mortality and expense risk charge and 0.10% administrative expense charge
against amounts allocated to the underlying funds. The rates of return do not
reflect the 2.5% front-end sales charge or the 2.5% state premium tax charge
(both of which are deducted from premium payments) nor do they reflect surrender
charges or monthly deduction amounts. These charges would reduce the average
annual return reflected.
(1) An investment in Money Market Portfolio is neither insured nor guaranteed by
the United States Government. There is no assurance that a stable $1.00
value will be maintained.
33
39
HYPOTHETICAL EXAMPLE(2)
Male nonsmoker age 40 with a level death benefit
of $300,000 and annual premium payments of $5,000
ONE YEAR FIVE YEARS
------------------------------------ ------------------------------------
TOTAL ACCUMULATED SURRENDER TOTAL ACCUMULATED SURRENDER
UNDERLYING INVESTMENT OPTION INVESTMENT VALUE VALUE INVESTMENT VALUE VALUE
---------------------------- ---------- ----------- --------- ---------- ----------- ---------
STOCK FUNDS
AIM Capital Appreciation Portfolio $5,000 $4,621 $2,706 N/A N/A N/A
Alliance Growth Portfolio 5,000 5,360 3,445 N/A N/A N/A
Capital Appreciation Fund (Janus
Sub-Adviser) 5,000 5,231 3,317 $25,000 $39,038 $37,806
Dreyfus Stock Index Fund 5,000 5,531 3,616 25,000 40,656 39,424
Fidelity VIP Equity-Income
Portfolio 5,000 5,318 3,403 25,000 37,549 36,317
Fidelity VIP Growth Portfolio 5,000 5,115 3,200 25,000 35,471 34,240
Smith Barney Large Cap Value
Portfolio 5,000 5,253 3,338 N/A N/A N/A
Total Return Portfolio 5,000 4,825 2,910 N/A N/A N/A
Utilities Portfolio 5,000 5,194 3,279 25,000 N/A N/A
Banker's Trust EAFE Index Fund
Banker's Trust Small Cap Index
Fund
Equity Index Portfolio
BOND FUNDS
Fidelity VIP High Income Portfolio 5,000 4,860 2,946 25,000 30,478 29,247
Smith Barney High Income Portfolio 5,000 4,693 2,778 N/A N/A N/A
Travelers U.S. Gov't Securities
Portfolio 5,000 4,640 2,725 25,000 25,768 24,536
Zero Coupon Bond Portfolio 2000 5,000 4,403 2,489 N/A N/A N/A
Zero Coupon Bond Portfolio 2005 5,000 4,598 2,683 N/A N/A N/A
BALANCED FUNDS
Fidelity VIP II Asset Manager
Portfolio 5,000 4,991 3,076 25,000 30,344 29,112
MFS Total Return Portfolio 5,000 5,014 3,100 N/A N/A N/A
Managed Assets Trust 5,000 5,020 3,105 25,000 31,892 30,661
MONEY MARKET FUNDS
Money Market Portfolio 5,000 4,309 2,394 25,000 22,446 21,214
The charges used in the above example consist of a front-end sales charge of
2.5%, a state premium tax charge of 2.5%, the 0.90% mortality and expense risk
charge, all expenses of the underlying funds, and monthly deduction charges
including cost of insurance.
The benefits illustrated above may differ for other policies as a result of
differences in investment allocation, premium timing and amount, death benefit
type, as well as the age and underwriting of the classification of the insured
(which could result in higher costs 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.
2 These hypothetical examples show the effect of the performance quoted on cash
values. Performance, loans and withdrawals will affect the cash value and
death benefit of your policy. Since the values of the portfolios will
fluctuate, the cash value at any time may be more or less than the total
principal investment made, including at the time of surrender of the policy,
when surrender charges may apply.
34
40
ILLUSTRATIONS
------------------------------------------------------------------------------
The following pages are intended to illustrate how the Account Value, Cash
Surrender Value and Death Benefit can change over time for Policies issued to a
45 year old male and a 45 year old female. The difference between the Account
Value and the Cash Surrender Value in these illustrations represents the
Surrender Charge that would be incurred upon a full surrender of the Policy.
For both male and female age 45, there are two pages of values. One page
illustrates the assumption that the maximum Guaranteed Cost of Insurance Rates,
the monthly administrative charge, mortality and expense risk charge, and
administrative expense charge allowable under the Policy are charged in all
years. The other page illustrates the assumption that the current scale of Cost
of Insurance Rates and other charges are charged in all years. The Cost of
Insurance Rates charged vary by age, sex and underwriting classification, and
the monthly administrative charge varies by age, amount of insurance and
smoker/non-smoker classification for current charges. The illustrations reflect
a deduction of 5% from each annual premium for premium tax (2.5%) and front end
sales charge (2.5%).
The values shown in these illustrations vary according to assumptions used for
charges, and gross rates of investment returns. For the first fifteen Policy
Years, the current and guaranteed charges consist of 0.80% for mortality and
expense risks, 0.10% for administrative expenses, and .63% for Investment Option
expenses and thereafter 0.25% for mortality and expense risks, 0.00% for
administrative expenses, and .63% for Investment Option expenses.
The charge for Investment Option expenses reflected in the illustrations assumes
that Cash Value is allocated equally among all Investment Options and that no
Policy Loans are outstanding, and is an average of the investment advisory fees
and other expenses charged by each of the Investment Options during 1997.
After deduction of these amounts, the illustrated gross annual investment rates
of return of 0%, 6%, and 12% correspond to approximate net annual rates of
- -1.53%, 4.47%, and 10.47%, respectively on a current and guaranteed basis during
the first fifteen Policy Years, and to approximate net annual rates of -.88%,
5.12%, and 11.12%, respectively on a current and guaranteed basis thereafter.
The actual charges under a Policy for expenses of the Investment Options will
depend on the actual allocation of Cash Value and may be higher or lower than
those illustrated.
For illustrations shown for policies issued prior to May 1, 1998, see "Policies
Paid Prior to May 1, 1998" for the applicable charges and fees.
The charge for Investment Option expenses for all illustrations is an average of
the investment advisory fees and other expenses charged by all of the Investment
Options. The Investment Option expenses for some of the Investment Options
reflect an expense reimbursement agreement currently in effect. For the year
ended December 31, 1997, these reimbursement agreements affected the total
operating expenses of the Investment Options as follows:
1. For Money Market Portfolio, other expenses have been restated to reflect
the current expense reimbursement arrangement with The Travelers
Insurance Company. Travelers has agreed to reimburse the Fund for the
amount by which its aggregate expenses (including the management fee,
but excluding brokerage commissions, interest charges and taxes) exceeds
0.40%. Without such arrangement, Total Expenses would have been 1.39%
for the Money Market Portfolio.
2. The other expenses reflected in AIM Capital Appreciation Portfolio,
Alliance Growth Portfolio and MFS Total Return are as of October 31,
1997 (the Fund's fiscal year end). Managed Assets Trust, U.S. Government
Securities Portfolio and Utilities Portfolio reflect other expenses as
of December 31, 1997. There were no fees waived or expenses reimbursed
for these funds in 1997.
35
41
3. A portion of the brokerage commissions that certain funds pay was used
to reduce Fidelity funds' expenses. In addition, certain funds have
entered into arrangements with their custodian whereby credits realized,
as a result of uninvested cash balances were used to reduce custodian
expenses. Without these reductions, the Total Underlying Fund Expenses
would have been .64% for Asset Manager Portfolio, .57% for Equity Income
Portfolio, .67% for Growth, and .71% for High Income.
4. Total Return Portfolio's Management Fees include 0.20% for fund
administration.
5. Other expenses are as of December 31, 1997 and take into account the
current expense reimbursement arrangement with Travelers. Travelers has
agreed to reimburse the Portfolio for the amount by which the aggregate
expenses (including management, but excluding brokerage commissions,
interest charges and taxes) exceeds .15%. Without such arrangement, the
Total Expenses for the Portfolio would have been as follows: 2.21% for
Zero Coupon Bond Fund Series 1998; 1.80% for Zero Coupon Bond Fund
Series 2000; 1.52% for Zero Coupon Bond Fund Series 2005.
Although these reimbursement arrangements are expected to continue in subsequent
years, the effect of discontinuance could be higher expenses charged to Policy
Owners.
As stated above, the examples illustrate values that would result based upon
hypothetical uniform gross investment rates of return of 0%, 6% and 12%. The
values would be different from those shown if the gross rates averaged 0%, 6%,
and 12% over a period of years, but fluctuated above and below those averages.
The illustrations also assume that premiums are paid as indicated, no Policy
loans are made, no increases or decreases to the Stated Amount are requested, no
partial surrenders are made, and no charges for transfers between funds are
incurred.
The illustrations do not reflect any charges for federal income taxes against
Fund UL, since the Company is not currently deducting such charges from Fund UL.
However, such charges may be made in the future, and in that event, the gross
annual investment rates of return would have to exceed 0%, 6% and 12% by an
amount sufficient to cover the tax charges in order to produce the Death
Benefits, Account Values and Cash Surrender Values illustrated.
Upon request, the Company will provide a comparable illustration based upon the
proposed Insured's age, sex, underwriting classification, the specified
insurance benefits, and the premium requested. The illustration will show
average fund expenses or, if requested, actual fund expenses. The hypothetical
gross annual investment return assumed in such an illustration will not exceed
12%.
36
42
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 to 33-778, 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.
C.G.S. Section 33-778 provides an exclusive remedy; a Connecticut corporation
cannot indemnify a director or officer to an extent either greater or less than
that authorized by the statute, e.g., pursuant to its certificate of
incorporation, by-laws, or any separate contractual arrangement. However, the
statute does specifically authorize a corporation to procure indemnification
insurance to provide greater indemnification rights. The premiums for such
insurance may be shared with the insured individuals on an agreed basis.
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.
43
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.
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 Katherine M. Sullivan, General Counsel, to filing of her
opinion as an exhibit to this Registration Statement and to the
reference to her opinion under the caption "Legal Proceedings and
Opinion" in the Prospectus. (See Exhibit 11 below.)
B. Consent and Actuarial Opinion pertaining to the illustrations contained
in the prospectus. To be filed by amendment.
C. Consent of KPMG Peat Marwick LLP, Independent Certified Public
Accountants. To be filed by amendment.
D. Powers of Attorney. (See Exhibit 12 below.)
EXHIBITS
1. Resolution of the Board of Directors of The Travelers Insurance Company
authorizing the establishment of the Registrant. (Incorporated herein
by reference to Exhibit No. 1 to Post-Effective Amendment No. 17 to the
Registration Statement on Form S-6 filed April 29, 1996.)
2. Not Applicable.
3(a). Distribution and Principal Underwriting Agreement among the Registrant,
The Travelers Insurance Company and CFBDS, Inc. (Incorporated herein by
reference to Exhibit 3(a) to the Registration Statement on Form N-4,
File No. 333-60227, filed November 9, 1998.)
3(b). Selling Agreement. (Incorporated herein by reference to Exhibit 3(b) to
the Registration Statement on Form N-4, File No. 333-60227, filed
November 9, 1998.)
3(c). Agents Agreements, including schedule of sales commissions. To be filed
by amendment.
4. None
5. Form of Variable Universal Life Insurance Contracts.
44
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 among Variable Insurance Products Fund,
Fidelity Distributors Corporation and The Travelers Insurance Company;
Variable Insurance Products Fund II, Fidelity Distributors Corporation
and The Travelers Insurance Company; Templeton Variable Products Series
Fund, Templeton Funds Distributor, Inc. and The Travelers Insurance
Company; and between The Travelers Insurance Company and Dreyfus Stock
Index Fund. (Incorporated herein by reference to Exhibits 8(a), 8(b),
8(c) and 8(d), respectively to Post-Effective Amendment No. 29 to the
Registration Statement on Form N-4, File No. 2-79529 filed on April 19,
1996.)
9. None
10. Form of Application for Variable Universal Life Insurance Contracts. To
be filed by amendment.
11. Opinion of counsel as to the legality of the securities being
registered.
12(a). Power of Attorney authorizing Ernest J. Wright or Kathleen A. McGah as
signatory for Michael A. Carpenter, Jay S. Benet, George C. Kokulis,
Robert I. Lipp, Ian R. Stuart, Katherine M. Sullivan and Marc P. Weill.
(Incorporated herein by reference to Exhibits 15(a) and 15(b) to the
Registration Statement on Form S-6 filed April 28, 1995 and April 25,
1997.)
12(b). Power of Attorney authorizing Ernest J. Wright or Kathleen A. McGah as
signatory for J. Eric Daniels.
45
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 28th day
of December 1998.
THE TRAVELERS FUND UL FOR VARIABLE LIFE INSURANCE
(Registrant)
THE TRAVELERS INSURANCE COMPANY
(Depositor)
By: *IAN R. STUART
----------------------------------
Ian R. Stuart
Senior Vice President, 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 28th day of December 1998.
*MICHAEL A. CARPENTER Director, Chairman of the Board
- ---------------------------
(Michael A. Carpenter)
*J. ERIC DANIELS Director, President and Chief Executive Officer
- ---------------------------
(J. Eric Daniels)
*JAY S. BENET Director
- ---------------------------
(Jay S. Benet)
*GEORGE C. KOKULIS Director
- ---------------------------
(George C. Kokulis)
*ROBERT I. LIPP Director
- ---------------------------
(Robert I. Lipp)
*IAN R. STUART Director, Senior Vice President, Chief Financial
- --------------------------- Officer, Chief Accounting Officer and Controller
(Ian R. Stuart)
*KATHERINE M. SULLIVAN Director, Senior Vice President
- --------------------------- and General Counsel
(Katherine M. Sullivan)
*MARC P. WEILL Director
- ---------------------------
(Marc P. Weill)
*By: /s/ Ernest J. Wright, Attorney-in-Fact
46
EXHIBIT INDEX
Written Consents Method of Filing
- ---------------- ----------------
A. Consent of Katherine M. Sullivan, General Electronically
Counsel, to filing of her opinion as an See Exhibit 11
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 To be filed by
the illustrations contained in the prospectus. amendment
C. Consent of KPMG Peat Marwick LLP, Independent To be filed by
Certified Public Accountants. Amendment
D. Powers of Attorney. See Exhibit 12
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.)
3(a). Distribution and Principal Underwriting
Agreement among the Registrant, The Travelers
Insurance Company and CFBDS, Inc.
(Incorporated herein by reference to Exhibit
3(a) to the Registration Statement on Form
N-4, File No. 333-60227, filed November 9,
1998.)
3(b). Selling Agreement. (Incorporated herein by
reference to Exhibit 3(b) to the Registration
Statement on Form N-4, File No. 333-60227,
filed November 9, 1998.)
3(c). Agents Agreements, including schedule of To be filed by
sales commissions. amendment
5. Form of Variable Universal Life Insurance Electronically
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.)
47
EXHIBIT Method of Filing
- ------- ----------------
8. Participation Agreements among Variable
Insurance Products Fund, Fidelity
Distributors Corporation and The Travelers
Insurance Company; Variable Insurance
Products Fund II, Fidelity Distributors
Corporation and The Travelers Insurance
Company; Templeton Variable Products Series
Fund, Templeton Funds Distributor, Inc. and
The Travelers Insurance Company; and between
The Travelers Insurance Company and Dreyfus
Stock Index Fund. (Incorporated herein by
reference to Exhibits 8(a), 8(b), 8(c), 8(d)
to Post-Effective Amendment No. 29 to the
Registration Statement on Form N-4, File No.
2-79529 filed on April 19, 1996.)
10. Form of Application for Variable Universal To be filed by
Life Insurance Contracts. amendment
11. Opinion of counsel as to the legality of the Electronically
securities being registered.
12(a) Powers of Attorney authorizing Ernest J.
Wright or Kathleen A. McGah as signatory for
Michael A. Carpenter Jay S. Benet, George C.
Kokulis, Robert I. Lipp, Ian R. Stuart,
Katherine M. Sullivan and Marc P. Weill.
(Incorporated by reference to Exhibits 15(a)
and 15(b) to Post-Effective Registration
Statements on Form S-6, filed on April 28,
1995 and April 25, 1997.)
12(b) Power of Attorney authorizing Ernest J. Electronically
Wright or Kathleen A. McGah as signatory for
J. Eric Daniels.