485BPOS 1 e45759e485bpos.txt TRAVELERS SEPARATE ACCOUNT SIX FOR VARIABLE ANNT. 1 Registration Statement No. 333-58809 811-08869 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Post-Effective No. 5 And REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Post-Effective No. 5 THE TRAVELERS SEPARATE ACCOUNT SIX FOR VARIABLE ANNUITIES --------------------------------------------------------- (Exact name of Registrant) THE TRAVELERS LIFE AND ANNUITY COMPANY -------------------------------------- (Name of Depositor) ONE TOWER SQUARE, HARTFORD, CONNECTICUT 06183 --------------------------------------------- (Address of Depositor's Principal Executive Offices) Depositor's Telephone Number, including area code: (860) 277-0111 -------------- ERNEST J. WRIGHT The Travelers Life and Annuity Company One Tower Square Hartford, Connecticut 06183 --------------------------- (Name and Address of Agent for Service) Approximate Date of Proposed Public Offering: It is proposed that this filing will become effective (check appropriate box): immediately upon filing pursuant to paragraph (b) of Rule 485. ----- X on May 1, 2001 pursuant to paragraph (b) of Rule 485. ----- 60 days after filing pursuant to paragraph (a)(1) of Rule 485. ----- on ___________ pursuant to paragraph (a)(1) of Rule 485. ----- If appropriate, check the following box: this post-effective amendment designates a new effective date for a ----- previously filed post-effective amendment. 2 PART A Information Required in a Prospectus 3 TRAVELERS RETIREMENT ACCOUNT ANNUITY PROSPECTUS: THE TRAVELERS SEPARATE ACCOUNT FIVE FOR VARIABLE ANNUITIES THE TRAVELERS SEPARATE ACCOUNT SIX FOR VARIABLE ANNUITIES This prospectus describes TRAVELERS RETIREMENT ACCOUNT, a flexible premium deferred variable annuity contract (the "Contract") issued by The Travelers Insurance Company or The Travelers Life and Annuity Company, depending on the state in which you purchased your Contract. The Contract is available in connection with certain retirement plans that qualify for special federal income tax treatment ("qualified Contracts"). We may issue it as an individual Contract or as a group Contract. When we issue a group Contract, you will receive a certificate summarizing the Contract's provisions. For convenience, we refer to Contracts and certificates as "Contracts." You can choose to have your premium ("purchase payments") and any applicable purchase payment credits accumulate on a variable and/or fixed basis in one of our funding options. Your contract value before the maturity date and the amount of monthly income afterwards will vary daily to reflect the investment experience of the variable funding options you select. You bear the investment risk of investing in the variable funding options. The variable funding options are: Capital Appreciation Fund Managed Assets Trust High Yield Bond Trust Money Market Portfolio AIM VARIABLE INSURANCE FUNDS, INC. AIM V.I. Value Fund CITISTREET FUNDS, INC.(1) Diversified Bond Fund(2) International Stock Fund(3) Large Company Stock Fund(4) Small Company Stock Fund(5) CREDIT SUISSE WARBURG PINCUS TRUST Emerging Markets Portfolio DELAWARE GROUP PREMIUM FUND, INC. REIT Series Small Cap Value Series DREYFUS VARIABLE INVESTMENT FUND Appreciation Portfolio -- Initial Shares Small Cap Portfolio -- Initial Shares GREENWICH STREET SERIES FUND Appreciation Portfolio Equity Index Portfolio Class II Fundamental Value Portfolio JANUS ASPEN SERIES Aggressive Growth Portfolio -- Service Shares Balanced Portfolio -- Service Shares Worldwide Growth Portfolio -- Service Shares PIMCO VARIABLE INSURANCE TRUST Total Return Bond Portfolio PUTNAM VARIABLE TRUST Putman VT International Growth Fund -- Class IB Shares Putman VT Small Cap Value Fund -- Class IB Shares Putman VT Voyager II Fund -- Class IB Shares SALOMON BROTHERS VARIABLE SERIES FUNDS, INC. Capital Fund Investors Fund Small Cap Growth Fund Total Return Fund SMITH BARNEY INVESTMENT SERIES Smith Barney Large Cap Core Portfolio Smith Barney Premier Selection All Cap Growth Portfolio STRONG VARIABLE INSURANCE FUNDS, INC. Strong Multi Cap Value Fund II(6) TRAVELERS SERIES FUND, INC. AIM Capital Appreciation Portfolio Alliance Growth Portfolio MFS Total Return Portfolio Putnam Diversified Income Portfolio Smith Barney Aggressive Growth Portfolio Smith Barney High Income Portfolio Smith Barney International All Cap Growth Portfolio(7) Smith Barney Large Capitalization Growth Portfolio THE TRAVELERS SERIES TRUST Disciplined Mid Cap Stock Portfolio Equity Income Portfolio Federated Stock Portfolio Large Cap Portfolio Lazard International Stock Portfolio MFS Emerging Growth Portfolio MFS Mid Cap Growth Portfolio MFS Research Portfolio Social Awareness Stock Portfolio Travelers Quality Bond Portfolio U.S. Government Securities Portfolio Utilities Portfolio VAN KAMPEN LIFE INVESTMENT TRUST Emerging Growth Portfolio -- Class II Shares Enterprise Portfolio -- Class II Shares VARIABLE ANNUITY PORTFOLIOS Smith Barney Small Cap Growth Opportunities Portfolio VARIABLE INSURANCE PRODUCTS FUND II (FIDELITY) Asset Manager Portfolio -- Service Class 2 Contrafund(R) Portfolio -- Service Class 2 VARIABLE INSURANCE PRODUCTS FUND III (FIDELITY) Dynamic Capital Appreciation Portfolio -- Service Class 2 Mid Cap Portfolio -- Service Class 2 --------------- (1) formerly American Odyssey Funds, Inc. (2) formerly Long-Term Bond Fund (3) formerly International Equity Fund (4) formerly Core Equity Fund (5) formerly Emerging Opportunities Fund (6) formerly Strong Schafer Value Fund II (7) formerly Smith Barney International Equity Fund We also offer variable annuity contracts that do not have purchase payment credits, and therefore may have lower fees. Over time, the value of the purchase payment credits could be more than offset by higher charges. You should carefully consider whether or not this Contract is the most appropriate investment for you. The Contract, certain contract features and/or some of the funding options may not be available in all states. The Fixed Account is described in a separate prospectus. THE CURRENT PROSPECTUSES FOR THE UNDERLYING FUNDS THAT SUPPORT THE VARIABLE FUNDING OPTIONS MUST ACCOMPANY THIS PROSPECTUS. READ AND RETAIN THEM FOR FUTURE REFERENCE. This prospectus provides the information that you should know before investing in the Contract. You can receive additional information about your Contract by requesting a copy of the Statement of Additional Information ("SAI") dated May 1, 2001. We filed the SAI with the Securities and Exchange Commission ("SEC"), and it is incorporated by reference into this prospectus. To request a copy, write to The Travelers Insurance Company, Annuity Investor Services, One Tower Square, Hartford, Connecticut 06183, call 1-800-842-9406 or access the SEC's website (http://www.sec.gov). See Appendix E for the SAI's table of contents. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THIS PROSPECTUS IS ACCOMPANIED BY EITHER A COPY OF THE TRAVELERS INSURANCE COMPANY'S OR THE TRAVELERS LIFE AND ANNUITY COMPANY'S LATEST ANNUAL REPORT FILED ON FORM 10-K FOR THE PERIOD ENDED DECEMBER 31, 2000, DEPENDING ON WHICH CONTRACT YOU PURCHASED. VARIABLE ANNUITY CONTRACTS ARE NOT DEPOSITS OF ANY BANK, AND ARE NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. PROSPECTUS DATED MAY 1, 2001 4 TABLE OF CONTENTS Index of Special Terms.................... 2 Summary................................... 3 Fee Table................................. 6 Condensed Financial Information........... 14 The Annuity Contract...................... 14 Contract Owner Inquiries................ 14 Purchase Payments....................... 14 Purchase Payment Credits................ 14 Conservation Credits.................... 15 Accumulation Units...................... 15 The Variable Funding Options............ 15 The Fixed Account......................... 21 Charges and Deductions.................... 21 General................................. 21 Withdrawal Charge....................... 22 Free Withdrawal Allowance............... 23 Transfer Charge......................... 23 Mortality and Expense Risk Charge....... 23 Variable Funding Option Expenses........ 23 Floor Benefit/Liquidity Benefit Charges............................... 23 CHART Asset Allocation Program Charges.. 23 Premium Tax............................. 23 Changes in Taxes Based upon Premium or Value................................. 24 Transfers................................. 24 Dollar Cost Averaging................... 24 Access to Your Money...................... 25 Systematic Withdrawals.................. 25 Managed Distribution Program............ 25 Ownership Provisions...................... 26 Types of Ownership...................... 26 Contract Owner........................ 26 Beneficiary........................... 26 Death Benefit............................. 26 Death Proceeds Before the Maturity Date.................................. 26 Payment of Proceeds..................... 27 Death Proceeds After the Maturity Date.................................. 28 The Annuity Period........................ 28 Maturity Date........................... 28 Liquidity Benefit....................... 29 Allocation of Annuity................... 29 Variable Annuity........................ 29 Fixed Annuity........................... 30 Payment Options........................... 30 Election of Options..................... 30 Annuity Options......................... 31 Miscellaneous Contract Provisions......... 32 Right to Return......................... 32 Termination............................. 32 Required Reports........................ 32 Suspension of Payments.................. 32 The Separate Accounts..................... 32 Performance Information................. 33 Federal Tax Considerations................ 34 General Taxation of Annuities........... 34 Qualified Annuity Contracts............. 34 Penalty Tax for Premature Distributions......................... 35 Diversification Requirements for Variable Annuities.................... 35 Ownership of the Investments............ 35 Mandatory Distributions for Qualified Plans................................. 35 Taxation of Death Benefit Proceeds...... 35 Available Information..................... 35 Incorporation of Certain Documents By Reference............................... 36 Other Information......................... 36 The Insurance Companies................. 36 Financial Statements.................... 37 Distribution of Variable Annuity Contracts............................. 37 Conformity with State and Federal Laws.................................. 37 Voting Rights........................... 37 Legal Proceedings and Opinions.......... 37 APPENDIX A: Condensed Financial Information for The Travelers Insurance Company: Separate Account Five.......... A-1 APPENDIX B: Condensed Financial Information for The Travelers Life and Annuity Company: Separate Account Six... B-1 APPENDIX C: Waiver of Withdrawal Charge for Nursing Home Confinement............ C-1 APPENDIX D: Market Value Adjustment....... D-1 APPENDIX E: Contents of the Statement of Additional Information.................. E-1 Financial Statements......................
INDEX OF SPECIAL TERMS The following terms are italicized throughout the prospectus. Refer to the page listed for an explanation of each term. Accumulation unit......................... 15 Accumulation period....................... 15 Annuitization credit...................... 29 Annuity payments.......................... 29 Annuity unit.............................. 15 Cash surrender value...................... 25 Conservation credit....................... 15 Contract date............................. 14 Contract owner (You, Your)................ 26 Contract value............................ 14 Contract year............................. 14 Death report date......................... 26 Fixed Account............................. C-1 Funding Option(s)......................... 15 Maturity date............................. 29 Purchase payment.......................... 14 Purchase payment credit................... 14 Underlying fund........................... 15 Written request........................... 14
2 5 SUMMARY: TRAVELERS RETIREMENT ACCOUNT THIS SUMMARY DETAILS SOME OF THE MORE IMPORTANT POINTS THAT YOU SHOULD KNOW AND CONSIDER BEFORE PURCHASING THE CONTRACT. PLEASE READ THE ENTIRE PROSPECTUS CAREFULLY. WHAT COMPANY WILL ISSUE MY CONTRACT? Your issuing company is either The Travelers Insurance Company or The Travelers Life and Annuity Company, ("the Company," "We" or "Us") depending on where you reside. Each company sponsors its own segregated asset account ("Separate Account"). The Travelers Insurance Company sponsors the Travelers Separate Account Five for Variable Annuities ("Separate Account Five"); The Travelers Life and Annuity Company sponsors the Travelers Separate Account Six for Variable Annuities ("Separate Account Six"). When we refer to the Separate Account, we are referring to either Separate Account Five or Separate Account Six, depending upon your issuing Company. Your issuing Company is The Travelers Life and Annuity Company unless you reside in one of the following locations. The Travelers Insurance Company issues Contracts in the locations listed below: Bahamas British Virgin Islands Guam New Hampshire New Jersey New York U.S. Virgin Islands CAN YOU GIVE ME A GENERAL DESCRIPTION OF THE CONTRACT? We designed the Contract for retirement savings or other long-term investment purposes. The Contract provides a death benefit as well as guaranteed payout options. You direct your payment(s) to one or more of the variable funding options and/or to the Fixed Account that is part of our general account (the "Fixed Account"). We guarantee money directed to the Fixed Account as to principal and interest. The variable funding options are designed to produce a higher rate of return than the Fixed Account; however, this is not guaranteed. You can also lose money in the variable funding options. The Contract, like all deferred variable annuity contracts, has two phases: the accumulation phase and the payout phase. During the accumulation phase generally, under a qualified contract, your pre-tax contributions accumulate on a tax-deferred basis and are taxed as income when you make a withdrawal, presumably when you are in a lower tax bracket. During the accumulation phase, under a nonqualified contract, earnings on your after-tax contributions accumulate on a tax-deferred basis and are taxed as income when you make a withdrawal. The payout phase occurs when you begin receiving payments from your Contract. The amount of money you accumulate in your Contract determines the amount of income (annuity payments) you receive during the payout phase. During the payout phase, you may choose one of a number of annuity options. You may receive income payments from the variable funding options and/or the Fixed Account. If you elect variable income payments, the dollar amount or your payments may increase or decrease. Once you choose one of the annuity options and begin to receive payments, it cannot be changed. WHO SHOULD PURCHASE THIS CONTRACT? The Contract is currently available for use in connection with tax qualified retirement plans ("Plans"), which include contracts qualifying under Section 401(a), 403(b), 408 or 457 of the Internal Revenue Code of 1986, as amended. Purchase of this Contract through a Plan does not provide any additional tax deferral benefits beyond those provided by the Plan. Accordingly, you should consider purchasing this Contract for its Death Benefit, Annuity Option Benefits, and other non-tax-related benefits. You may purchase the Contract with an initial payment of at least $20,000. You may make additional payments of at least $5,000 at any time during the accumulation phase. 3 6 WHO IS THE CONTRACT ISSUED TO? If you purchase an individual contract, you are the contract owner. If a group contract is purchased, we issue certificates to the individual participants. Where we refer to "you," we are referring to the individual contract owner or the group participant, as applicable. We refer to both contracts and certificates as "Contracts." If a group unallocated contract is purchased, we issue only the Contract. We issue group contracts in connection with retirement plans. Depending on your Plan, certain features and/or variable funding options described in this prospectus may not be available to you. Your Plan provisions supercede the prospectus. If you have any questions about your specific Plan, contact your Plan administrator. IS THERE A RIGHT TO RETURN PERIOD? If you cancel the Contract within ten days after you receive it, you will receive a full refund of your contract value plus any Contract charges and premium taxes you paid (but not fees and charges assessed by the underlying funds). Where state law requires a longer right to return period, or the return of purchase payments, the Company will comply. You bear the investment risk on the purchase payment allocated to a variable funding option during the right to return period; therefore, the contract value we return may be greater or less than your purchase payment. If you purchased your Contract as an Individual Retirement Annuity, and you return it within the first seven days after delivery, we will refund your full purchase payment. During the remainder of the right to return period, we will refund your contract value (including charges we assessed). We will determine your contract value at the close of business on the day we receive a written request for a refund. During the right to return period, you will not bear any contract fees associated with the purchase payment credits. If you exercise your right to return, you will be in the same position as if you had exercised the right to return in a variable annuity contract with no purchase payment credit. You would, however, receive any gains, and we would bear any losses attributable to the purchase payment credits. CAN YOU GIVE A GENERAL DESCRIPTION OF THE VARIABLE FUNDING OPTIONS AND HOW THEY OPERATE? Through its subaccounts, the Separate Account uses your purchase payments to purchase units, at your direction, of one or more of the variable funding options. In turn, each variable funding option invests in an underlying mutual fund ("underlying fund") that holds securities consistent with its own investment policy. Depending on market conditions, you may make or lose money in any of these variable funding options. You can transfer between the variable funding options as frequently as you wish without any current tax implications. Currently there is no charge for transfers, nor a limit to the number of transfers allowed. We may, in the future, charge a fee for any transfer request, or limit the number of transfers allowed. At a minimum, we would always allow one transfer every six months. We reserve the right to restrict transfers that we determine will disadvantage other contract owners. WHAT EXPENSES WILL BE ASSESSED UNDER THE CONTRACT? The Contract has insurance features and investment features, and there are costs related to each. We deduct a mortality and expense risk ("M&E") charge daily from the amounts you allocate to the Separate Account. We deduct the M&E at an annual rate of 0.80% for the Standard Death Benefit, and 1.25% for the Optional Death Benefit. Each underlying fund also charges for management costs and other expenses. We will apply a withdrawal charge to withdrawals from the Contract, and will calculate it as a percentage of the purchase payments and associated purchase payment credits. The maximum percentage is 5%, gradually decreasing to 0% in years six and later. If you select the Variable Annuitization Floor Benefit, there is a Floor Benefit charge assessed. This charge will vary based upon market conditions, and will be set at the time you choose this option. Once established, this charge will remain the same throughout the term of the annuitization. 4 7 HOW WILL MY PURCHASE PAYMENTS AND WITHDRAWALS BE TAXED? Generally, the payments you make to a qualified Contract during the accumulation phase are made with before-tax dollars. Generally, you will be taxed on your purchase payments, purchase payment credits and on any earnings when you make a withdrawal or begin receiving annuity payments. If you are younger than 59 1/2 when you take money out, you may be charged a 10% federal penalty tax on the amount withdrawn. If you reach a certain age, you may be required by federal tax laws to begin receiving payments from your annuity or risk paying a penalty tax. In those cases, we can calculate and pay you the minimum required distribution amounts. During the annuity period, if you have elected the Variable Annuity Floor Benefit Option and take a surrender, there will be tax implications. Consult your tax advisor. HOW MAY I ACCESS MY MONEY? You can take withdrawals any time during the accumulation phase, subject to certain Plan restrictions under federal tax law. Withdrawal charges, income taxes, and/or a penalty tax may apply to taxable amounts withdrawn. WHAT IS THE DEATH BENEFIT UNDER THE CONTRACT? You may choose to purchase the Standard or Optional Death Benefit. If you die before the Contract is in the payout phase, the person you have chosen as your beneficiary will receive a death benefit. We calculate the death benefit value at the close of the business day on which our Home Office receives (1) due proof of death and (2) written payment instructions. The Optional Death Benefit may not be available in all states. Please refer to the Death Benefit section in the prospectus for more details. WHERE MAY I FIND OUT MORE ABOUT ACCUMULATION UNIT VALUES? The Condensed Financial Information in Appendix A or Appendix B to this prospectus provides more information about accumulation unit values. ARE THERE ANY ADDITIONAL FEATURES? This Contract has other features you may be interested in. These include: - DOLLAR COST AVERAGING. This is a program that allows you to invest a fixed amount of money in variable funding options each month, theoretically giving you a lower average cost per unit over time than a single one-time purchase. 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. - SYSTEMATIC WITHDRAWAL OPTION. Before the maturity date, you can arrange to have money sent to you at set intervals throughout the year. Of course, any applicable income and penalty taxes will apply on amounts withdrawn. - MANAGED DISTRIBUTION PROGRAM. This program allows us to automatically calculate and distribute to you, in November of the applicable tax year, an amount that will satisfy the Internal Revenue Service's minimum distribution requirements imposed on certain contracts once the owner reaches age 70 1/2 or retires. These minimum distributions occur during the accumulation phase. - ASSET ALLOCATION ADVICE. If allowed you may elect to enter into a separate advisory agreement with CitiStreet Financial Services LLC ("CitiStreet") for the purpose of receiving asset allocation advice under CitiStreet's CHART Program. The CHART Program allocates all purchase payments among the CitiStreet Funds. The CHART Program and applicable fees are fully described in a separate disclosure statement. 5 8 FEE TABLE -------------------------------------------------------------------------------- The purpose of this Fee Table is to assist contract owners in understanding the various costs and expenses that you will bear, directly or indirectly, if you purchase this Contract. See "Charges and Deductions" in this prospectus for additional information. Expenses shown do not include premium taxes, which may be applicable. "Other Expenses" include operating costs of each underlying fund. Each fund reflects these expenses in its net asset value; the expenses are not deducted from your contract value. TRANSACTION EXPENSES WITHDRAWAL CHARGE (as a percentage of the purchase payments and any applicable purchase payment credits withdrawn)
YEARS SINCE PURCHASE WITHDRAWAL PAYMENT MADE CHARGE 0-1 5% 2 4% 3 3% 4 2% 5 1% 6 and later 0%
During the annuity period, if you have elected the Liquidity Benefit, a surrender charge of 5% of the amount withdrawn will be assessed. See "Liquidity Benefit." ANNUAL SEPARATE ACCOUNT CHARGES: (as a percentage of the average daily net assets of the Separate Account)
STANDARD OPTIONAL DEATH BENEFIT DEATH BENEFIT Mortality and Expense Risk Charge.................. 0.80% 1.25% Administrative Expense Charge...................... None None ----- ----- Total Separate Account Charges........... 0.80% 1.25%
VARIABLE FUNDING OPTION EXPENSES: (as a percentage of average daily net assets of the funding option as of December 31, 2000, unless otherwise noted) Each of the CitiStreet Funds is listed twice, once with and once without the optional CHART asset allocation fee of 0.80% reflected.
TOTAL ANNUAL OPERATING MANAGEMENT FEE OTHER EXPENSES EXPENSES (AFTER EXPENSE 12B-1 (AFTER EXPENSE (AFTER EXPENSE FUNDING OPTIONS: REIMBURSEMENT) FEES REIMBURSEMENT) REIMBURSEMENT) --------------------------------------------------------------------------------------------------------- Capital Appreciation Fund...................... 0.81% 0.02% 0.83% High Yield Bond Trust.......................... 0.56% 0.27% 0.83% Managed Assets Trust........................... 0.56% 0.03% 0.59% Money Market Portfolio......................... 0.38% 0.02% 0.40% AIM VARIABLE INSURANCE FUNDS, INC. AIM V.I. Value Fund........................ 0.61% 0.23% 0.84% CITISTREET FUNDS, INC. CitiStreet Diversified Bond Fund........... 0.49% 0.13% 0.62% CitiStreet International Stock Fund........ 0.58% 0.17% 0.75% CitiStreet Large Company Stock Fund........ 0.55% 0.13% 0.68% CitiStreet Small Company Stock Fund........ 0.66% 0.18% 0.84%
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TOTAL ANNUAL OPERATING MANAGEMENT FEE OTHER EXPENSES EXPENSES (AFTER EXPENSE 12B-1 (AFTER EXPENSE (AFTER EXPENSE FUNDING OPTIONS: REIMBURSEMENT) FEES REIMBURSEMENT) REIMBURSEMENT) --------------------------------------------------------------------------------------------------------- CITISTREET FUNDS, INC.* CitiStreet Diversified Bond Fund*.......... 0.49% 0.93% 1.42% CitiStreet International Stock Fund*....... 0.58% 0.97% 1.55% CitiStreet Large Company Stock Fund*....... 0.55% 0.93% 1.48% CitiStreet Small Company Stock Fund*....... 0.66% 0.98% 1.64% CREDIT SUISSE WARBURG PINCUS TRUST Emerging Markets Portfolio................. 1.09% 0.31% 1.40%(1) DELAWARE GROUP PREMIUM FUND REIT Series................................ 0.57% 0.28% 0.85%(2) Small Cap Value Series..................... 0.71% 0.14% 0.85%(2) DREYFUS VARIABLE INVESTMENT FUND Appreciation Portfolio -- Initial Shares... 0.75% 0.03% 0.78%(3) Small Cap Portfolio -- Initial Shares...... 0.75% 0.03% 0.78%(3) GREENWICH STREET SERIES FUND Appreciation Portfolio..................... 0.75% 0.03% 0.78%(4) Equity Index Portfolio -- Class II Shares**................................. 0.21% 0.25% 0.04% 0.50%(5) Fundamental Value Portfolio................ 0.75% 0.04% 0.79%(4) JANUS ASPEN SERIES Aggressive Growth Portfolio -- Service Shares**................................. 0.65% 0.25% 0.02% 0.92% Balanced Portfolio -- Service Shares**..... 0.65% 0.25% 0.02% 0.92% Worldwide Growth Portfolio -- Service Shares**................................. 0.65% 0.25% 0.05% 0.95% OCC ACCUMULATION TRUST Equity Portfolio+.......................... 0.80% 0.15% 0.95% PIMCO VARIABLE INSURANCE TRUST Total Return Bond Portfolio................ 0.25% 0.40% 0.65%(6) PUTNAM VARIABLE TRUST Putnam VT International Growth Fund -- Class IB Shares**........................ 0.76% 0.25% 0.18% 1.19% Putnam VT Small Cap Value Fund -- Class IB Shares**................................. 0.80% 0.25% 0.30% 1.35% Putnam VT Voyager II Fund -- Class IB Shares**................................. 0.70% 0.25% 0.30% 1.25%(7) SALOMON BROTHERS VARIABLE SERIES FUND INC. Capital Fund............................... 0.58% 0.42% 1.00%(8) Investors Fund............................. 0.70% 0.21% 0.91% Small Cap Growth Fund...................... 0.00% 1.50% 1.50%(8) Total Return Fund.......................... 0.46% 0.54% 1.00%(8) SMITH BARNEY INVESTMENT SERIES Smith Barney Large Cap Core Portfolio...... 0.75% 0.20% 0.95%(9) Smith Barney Premier Selection All Cap Growth Portfolio......................... 0.75% 0.20% 0.95%(9) STRONG VARIABLE INSURANCE FUNDS, INC. Strong Multi Cap Value Fund II............. 1.00% 0.20% 1.20%(10) THE MONTGOMERY FUNDS III Montgomery Variable Series: Growth Fund+... 0.82% 0.43% 1.25%(11)
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TOTAL ANNUAL OPERATING MANAGEMENT FEE OTHER EXPENSES EXPENSES (AFTER EXPENSE 12B-1 (AFTER EXPENSE (AFTER EXPENSE FUNDING OPTIONS: REIMBURSEMENT) FEES REIMBURSEMENT) REIMBURSEMENT) --------------------------------------------------------------------------------------------------------- THE TRAVELERS SERIES TRUST Disciplined Mid Cap Stock Portfolio........ 0.76% 0.12% 0.88% Disciplined Small Cap Stock Portfolio+..... 0.86% 0.14% 1.00%(12) Equity Income Portfolio.................... 0.75% 0.07% 0.82%(13) Federated Stock Portfolio.................. 0.69% 0.14% 0.82%# Large Cap Portfolio........................ 0.75% 0.07% 0.82%(13) Lazard International Stock Portfolio....... 0.89% 0.14% 1.02%# MFS Emerging Growth Portfolio.............. 0.81% 0.05% 0.86% MFS Mid Cap Growth Portfolio............... 0.86% 0.04% 0.90% MFS Research Portfolio..................... 0.86% 0.06% 0.92% Strategic Stock Portfolio+................. 0.66% 0.24% 0.90%(12) Social Awareness Stock Portfolio........... 0.71% 0.04% 0.75% Travelers Quality Bond Portfolio........... 0.38% 0.11% 0.49% U.S. Government Securities Portfolio....... 0.39% 0.09% 0.48% Utilities Portfolio........................ 0.71% 0.18% 0.89% TRAVELERS SERIES FUND INC. AIM Capital Appreciation Portfolio......... 0.80% 0.03% 0.83%(14) Alliance Growth Portfolio.................. 0.80% 0.01% 0.81%(14) MFS Total Return Portfolio................. 0.80% 0.04% 0.84%(14) Putnam Diversified Income Portfolio........ 0.75% 0.12% 0.87%(14) Smith Barney Aggressive Growth Portfolio... 0.80% 0.19% 0.99%(14) Smith Barney High Income Portfolio......... 0.60% 0.06% 0.66%(14) Smith Barney International All Cap Growth Portfolio................................ 0.90% 0.08% 0.98%(14) Smith Barney Large Capitalization Growth Portfolio................................ 0.75% 0.02% 0.77%(14) VAN KAMPEN LIFE INVESTMENT TRUST Emerging Growth Portfolio Class II Shares**................................. 0.70% 0.25% 0.05% 1.00% Enterprise Portfolio Class II Shares**..... 0.50% 0.25% 0.10% 0.85% VARIABLE ANNUITY PORTFOLIOS Smith Barney Small Cap Growth Opportunities Portfolio................................ 0.75% 0.15% 0.90%(15) VARIABLE INSURANCE PRODUCTS FUND II Asset Manager Portfolio -- Service Class 2**...................................... 0.53% 0.25% 0.10% 0.88% Contrafund(R) Portfolio -- Service Class 2**...................................... 0.57% 0.25% 0.10% 0.92%(16) VARIABLE INSURANCE PRODUCTS FUND III Dynamic Capital Appreciation Portfolio -- Service Class 2**........................ 0.57% 0.25% 0.61% 1.43%(17) Mid Cap Portfolio -- Service Class 2**..... 0.57% 0.25% 0.17% 0.99%(16)
FOOTNOTES: + No longer available to new contract owners. * Includes CHART Asset Allocation Fee of 0.80%. ** The 12b-1 fees deducted from these classes cover certain distribution, shareholder support and administrative services provided by intermediaries (the insurance company, broker dealer, or other service providers). # Numbers have been rounded. (1) Fee waivers, expense reimbursements, or expense credits reduced expenses for the EMERGING MARKETS PORTFOLIO during 2000, but this may be discontinued at any time. Without such arrangements, the Portfolio's Management Fee, Other Expenses and Total Annual Operating Expenses would equal 1.25%, 0.42% and 1.67%, respectively. The Portfolio's other expenses are based on annualized estimates of expenses for the fiscal year ending December 31, 2000, net of any fee waivers or expense reimbursements. (2) The investment adviser for the REIT SERIES and the SMALL CAP VALUE SERIES is Delaware Management Company ("DMC"). Effective through April 30, 2001, DMC has voluntarily agreed to waive its management fee and reimburse the Series for expenses to the extent that total expenses will not exceed 0.85%. Without such an arrangement, Total Annual Operating Expenses for the funds would have been 1.03% and 0.89%, respectively. (3) Total Annual Operating Expenses for the VIF SMALL CAP PORTFOLIO -- INITIAL SHARES and the VIF APPRECIATION PORTFOLIO -- INITIAL SHARES do not include interest expense, loan commitment fees, and dividends on securities sold short. These figures are for the year ended December 31, 2000. Actual expenses in future years may be higher or lower that the fees given. (4) The Management Fee for the Portfolios includes 0.20% for fund administration. (5) The Management Fee includes 0.06% for fund administration. 8 11 (6) Other Expenses" reflects a 0.25% administrative fee and 0.01% representing organizational expenses and pro rata Trustees' fees for the TOTAL RETURN BOND PORTFOLIO. PIMCO has contractually agreed to reduce Total Annual Operating Expenses to, the extent they would exceed, due to the payment of organizational expenses and Trustees' fees, 0.65% of average daily net assets for the TOTAL RETURN BOND PORTFOLIO. Without such reductions, Total Annual Operating Expenses for the fiscal year ended December 31, 2000 would have been 0.66%. Under the Expense Limitation Agreement, PIMCO may recoup these waivers and reimbursements in future periods, not exceeding three years, provided total expenses, including such recoupment, do not exceed the annual expense limit. (7) The Total Annual Operating Expenses for the VT VOYAGER FUND II -- CLASS IB SHARES are based on estimated expenses. This fund commenced operations on September 1, 2000. (8) The Adviser has waived all or a portion of its Management Fees for the year ended December 31, 2000. If such fees were not waived or expenses reimbursed, the Management Fee, Other Expenses, and Total Annual Operating Expenses would have been 0.85%, 0.42%, and 1.27%, respectively for the CAPITAL FUND; 0.75%, 1.77%, and 2.52%, respectively for the SMALL CAP GROWTH FUND; and 0.80%, 0.54%, and 1.34%, respectively for the TOTAL RETURN FUND. (9) The Adviser has agreed to waive all or a portion of its fees and reimburse certain expenses for the year ended October 31, 2000 (the Fund's fiscal year end). If such fees were not waived and expenses not reimbursed, Total Annual Operating Expenses for the SMITH BARNEY PREMIER SELECTION ALL CAP GROWTH PORTFOLIO and the SMITH BARNEY LARGE CAP CORE PORTFOLIO would have been 2.14% and 1.55%, respectively. As a result of a voluntary expense limitation, the expense ratios of these funds will not exceed 0.95%. (10) The Adviser for STRONG MULTI CAP VALUE FUND II has voluntarily agreed to cap the Total Annual Operating Expenses at 1.20%. The adviser has no current intention to, but may in the future, discontinue or modify any waiver of fees or absorption of expenses at its discretion without further notification. Absent the waiver of fees, the Total Annual Operating Expenses would be 1.41%. (11) The investment manager of the MONTGOMERY VARIABLE SERIES: GROWTH FUND has agreed to reduce some or all of its management fees if necessary to keep Total Annual Operating Expenses, expressed on an annualized basis, at or below one and one quarter percent (1.25%) of its average net assets. Absent this waiver of fees, the Portfolio's Total Annual Operating Expenses would equal 2.41%. (12) Travelers Insurance Company has agreed to reimburse the STRATEGIC STOCK PORTFOLIO and the DISCIPLINED SMALL CAP STOCK PORTFOLIO for expenses for the period ended December 31, 2000 which exceeded 0.90% and 1.00% respectively. Without such voluntary arrangements, the actual annualized Total Annual Operating Expenses would have been 0.97% and 1.14%, respectively. (13) TAMIC or the fund has entered into varying arrangements with third parties who either paid or reduced a portion of the fund's expenses. Without such expense reductions, Total Annual Operating Expenses for the EQUITY INCOME PORTFOLIO and the LARGE CAP PORTFOLIO would have been 0.87% and 0.84%, respectively. (14) Expenses are as of October 31, 2000 (the Fund's fiscal year end). There were no fees waived or expenses reimbursed for these funds in 2000. (15) The Advisor has agreed to reimburse SMITH BARNEY SMALL CAP GROWTH OPPORTUNITIES PORTFOLIO for the period ended December 31, 2000. If such expenses were not voluntarily reimbursed, the actual annualized Total Annual Operating Expenses would have been 4.45%. (16) Actual annual class operating expenses were lower because a portion of the brokerage commissions that the fund paid was used to reduce the fund's expenses, and/or because through arrangements with the fund's custodian, credits realized as a result of uninvested cash balances were used to reduce a portion of the fund's custodian expenses. Without such reduction, Total Annual Operating Expenses for the CONTRAFUND(R) PORTFOLIO -- SERVICE CLASS 2, and MID CAP PORTFOLIO -- SERVICE CLASS 2 would have been 0.90% and 0.94%, respectively. (17) The Total Annual Operating Expenses for the DYNAMIC CAPITAL APPRECIATION PORTFOLIO -- SERVICE CLASS 2 are based on estimated expenses. 9 12 EXAMPLES These examples show what your costs would be under certain hypothetical situations. The examples do not represent past or future expenses. Your actual expenses may be more or less than those shown. We base examples on the annual expenses of the underlying funds for the year ended December 31, 2000, and assume that any fee waivers and expense reimbursements will continue. We cannot guarantee that these fee waivers and expense reimbursements will continue. The examples assume the application of a purchase payment credit of 2% when the optional death benefit has been selected. EXAMPLE: STANDARD DEATH BENEFIT You would pay the following expenses on a $1,000 investment, assuming a 5% annual return on assets, and the charges reflected in the expense table above using the expenses for the Standard Death Benefit:
--------------------------------------------------------------------------------------------------------------------------------- IF CONTRACT IS SURRENDERED AT THE IF CONTRACT IS NOT SURRENDERED OR END OF PERIOD SHOWN: ANNUITIZED AT END OF PERIOD SHOWN: ------------------------------------- ------------------------------------- FUNDING OPTION 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS --------------------------------------------------------------------------------------------------------------------------------- Capital Appreciation Fund......................... 67 81 99 193 17 51 89 193 High Yield Bond Trust............................. 67 81 99 193 17 51 89 193 Managed Assets Trust.............................. 64 74 86 167 14 44 76 167 Money Market Portfolio............................ 62 68 76 145 12 38 66 145 AIM VARIABLE INSURANCE FUNDS, INC. AIM V.I. Value Fund............................ 67 82 99 194 17 52 89 194 CITISTREET FUNDS, INC. CitiStreet Diversified Bond Fund............... 64 75 88 170 14 45 78 170 CitiStreet International Stock Fund............ 66 79 94 185 16 49 84 185 CitiStreet Large Company Stock Fund............ 65 77 91 177 15 47 81 177 CitiStreet Small Company Stock Fund............ 67 82 99 194 17 52 89 194 CITISTREET FUNDS, INC.* CitiStreet Diversified Bond Fund*.............. 73 99 129 255 23 69 119 255 CitiStreet International Stock Fund*........... 74 103 136 269 24 73 126 269 CitiStreet Large Company Stock Fund*........... 73 101 132 262 23 71 122 262 CitiStreet Small Company Stock Fund*........... 75 106 140 278 25 76 130 278 CREDIT SUISSE WARBURG PINCUS TRUST Emerging Markets Portfolio..................... 72 99 128 253 22 69 118 253 DELAWARE GROUP PREMIUM FUND REIT Series.................................... 67 82 100 195 17 52 90 195 Small Cap Value Series......................... 67 82 100 195 17 52 90 195 DREYFUS VARIABLE INVESTMENT FUND Appreciation Portfolio -- Initial Shares....... 66 80 96 188 16 50 86 188 Small Cap Portfolio -- Initial Shares.......... 66 80 96 188 16 50 86 188 GREENWICH STREET SERIES FUND Appreciation Portfolio......................... 66 80 96 188 16 50 86 188 Equity Index Portfolio -- Class II Shares...... 63 71 81 157 13 41 71 157 Fundamental Value Portfolio.................... 66 80 97 189 16 50 87 189 JANUS ASPEN SERIES Aggressive Growth Portfolio -- Service Shares....................................... 67 84 103 203 17 54 93 203 Balanced Portfolio -- Service Shares........... 67 84 103 203 17 54 93 203 Worldwide Growth Portfolio -- Service Shares... 68 85 105 206 18 55 95 206 OCC ACCUMULATION TRUST Equity Portfolio+.............................. 68 85 105 206 18 55 95 206 PIMCO VARIABLE INSURANCE TRUST Total Return Bond Portfolio.................... 65 76 89 174 15 46 79 174 PUTNAM VARIABLE TRUST Putnam VT International Growth Fund -- Class IB Shares....................................... 70 92 117 232 20 62 107 232 Putnam VT Small Cap Value Fund -- Class IB Shares....................................... 72 97 125 248 22 67 115 248 Putnam VT Voyager II Fund -- Class IB Shares... 71 94 120 238 21 64 110 238 SALOMON BROTHERS VARIABLE SERIES FUND INC. Capital Fund................................... 68 87 107 212 18 57 97 212 Investors Fund................................. 67 84 103 202 17 54 93 202 Small Cap Growth Fund.......................... 73 102 133 264 23 72 123 264 Total Return Fund.............................. 68 87 107 212 18 57 97 212 SMITH BARNEY INVESTMENT SERIES Smith Barney Large Cap Core Portfolio.......... 68 85 105 206 18 55 95 206 Smith Barney Premier Selection All Cap Growth Portfolio.................................... 68 85 105 206 18 55 95 206 STRONG VARIABLE INSURANCE FUNDS, INC. Strong Multi Cap Value Fund II................. 70 93 118 233 20 63 108 233 THE MONTGOMERY FUNDS III Montgomery Variable Series: Growth Fund+....... 71 94 120 238 21 64 110 238
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--------------------------------------------------------------------------------------------------------------------------------- IF CONTRACT IS SURRENDERED AT THE IF CONTRACT IS NOT SURRENDERED OR END OF PERIOD SHOWN: ANNUITIZED AT END OF PERIOD SHOWN: ------------------------------------- ------------------------------------- FUNDING OPTION 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS --------------------------------------------------------------------------------------------------------------------------------- THE TRAVELERS SERIES TRUST Disciplined Mid Cap Stock Portfolio............ 67 83 101 199 17 53 91 199 Disciplined Small Cap Stock Portfolio+......... 68 87 107 212 18 57 97 212 Equity Income Portfolio........................ 66 81 98 192 16 51 88 192 Federated Stock Portfolio...................... 66 81 98 192 16 51 88 192 Large Cap Portfolio............................ 66 81 98 192 16 51 88 192 Lazard International Stock Portfolio........... 68 87 109 214 18 57 99 214 MFS Emerging Growth Portfolio.................. 67 82 100 197 17 52 90 197 MFS Mid Cap Growth Portfolio................... 67 84 102 201 17 54 92 201 MFS Research Portfolio......................... 67 84 103 203 17 54 93 203 Strategic Stock Portfolio+..................... 67 84 102 201 17 54 92 201 Social Awareness Stock Portfolio............... 66 79 94 185 16 49 84 185 Travelers Quality Bond Portfolio............... 63 71 81 156 13 41 71 156 U.S. Government Securities Portfolio........... 63 71 80 155 13 41 70 155 Utilities Portfolio............................ 67 83 102 200 17 53 92 200 TRAVELERS SERIES FUND INC. AIM Capital Appreciation Portfolio............. 67 81 99 193 17 51 89 193 Alliance Growth Portfolio...................... 66 81 98 191 16 51 88 191 MFS Total Return Portfolio..................... 67 82 99 194 17 52 89 194 Putnam Diversified Income Portfolio............ 67 83 101 198 17 53 91 198 Smith Barney Aggressive Growth Portfolio....... 68 86 107 211 18 56 97 211 Smith Barney High Income Portfolio............. 65 76 90 175 15 46 80 175 International All Cap Growth Portfolio......... 68 86 106 209 18 56 96 209 Smith Barney Large Capitalization Growth Portfolio.................................... 66 80 96 187 16 50 86 187 VAN KAMPEN LIFE INVESTMENT TRUST Emerging Growth Portfolio Class II Shares...... 68 87 107 212 18 57 97 212 Enterprise Portfolio Class II Shares........... 67 82 100 195 17 52 90 195 VARIABLE ANNUITY PORTFOLIOS Smith Barney Small Cap Growth Opportunities Portfolio.................................... 67 84 102 201 17 54 92 201 VARIABLE INSURANCE PRODUCTS FUND II Asset Manager Portfolio -- Service Class 2..... 67 83 101 199 17 53 91 199 Contrafund(R) Portfolio -- Service Class 2..... 67 86 107 211 18 56 97 211 VARIABLE INSURANCE PRODUCTS FUND III Dynamic Capital Appreciation Portfolio -- Service Class 2.............................. 73 100 129 256 23 70 119 256 Mid Cap Portfolio -- Service Class 2........... 68 86 107 211 18 56 97 211
* Reflects expenses that would be incurred for those contract owners who participate in the CHART Asset Allocation program. + No longer available to new contract owners. 11 14 EXAMPLE: OPTIONAL DEATH BENEFIT You would pay the following expenses on a $1,000 investment, assuming a 5% annual return on assets, purchase payment credits of 2%, and the charges reflected in the expense table above using the expenses for the Optional Death Benefit:
--------------------------------------------------------------------------------------------------------------------------------- IF CONTRACT IS SURRENDERED AT THE IF CONTRACT IS NOT SURRENDERED OR END OF PERIOD SHOWN: ANNUITIZED AT END OF PERIOD SHOWN: ------------------------------------- ------------------------------------- FUNDING OPTION 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS --------------------------------------------------------------------------------------------------------------------------------- Capital Appreciation Fund......................... 71 95 122 241 21 65 112 241 High Yield Bond Trust............................. 71 95 122 241 21 65 112 241 Managed Assets Trust.............................. 69 88 110 216 19 58 100 216 Money Market Portfolio............................ 67 82 100 195 17 52 90 195 AIM VARIABLE INSURANCE FUNDS, INC. AIM V.I. Value Fund............................ 71 95 122 242 21 65 112 242 CITISTREET FUNDS, INC. CitiStreet Diversified Bond Fund............... 69 89 111 219 19 59 101 219 CitiStreet International Stock Fund............ 70 93 118 233 20 63 108 233 CitiStreet Large Company Stock Fund............ 70 91 114 225 20 61 104 225 CitiStreet Small Company Stock Fund............ 71 95 122 242 21 65 112 242 CITISTREET FUNDS, INC.* CitiStreet Diversified Bond Fund*.............. 77 113 151 300 27 83 141 300 CitiStreet International Stock Fund*........... 78 117 158 313 28 87 148 313 CitiStreet Large Company Stock Fund*........... 78 115 154 306 28 85 144 306 CitiStreet Small Company Stock Fund*........... 79 119 162 321 29 89 152 321 CREDIT SUISSE WARBURG PINCUS TRUST Emerging Markets Portfolio..................... 77 112 151 298 27 82 141 298 DELAWARE GROUP PREMIUM FUND REIT Series.................................... 71 96 123 243 21 66 113 243 Small Cap Value Series......................... 71 96 123 243 21 66 113 243 DREYFUS VARIABLE INVESTMENT FUND Appreciation Portfolio -- Initial Shares....... 71 94 119 236 21 64 109 236 Small Cap Portfolio -- Initial Shares.......... 71 94 119 236 21 64 109 236 GREENWICH STREET SERIES FUND Appreciation Portfolio......................... 71 94 119 236 21 64 109 236 Equity Index Portfolio -- Class II Shares...... 68 85 105 206 18 55 95 206 Fundamental Value Portfolio.................... 71 94 120 237 21 64 110 237 JANUS ASPEN SERIES Aggressive Growth Portfolio -- Service Shares....................................... 72 98 126 250 22 68 116 250 Balanced Portfolio -- Service Shares........... 72 98 126 250 22 68 116 250 Worldwide Growth Portfolio -- Service Shares... 72 99 128 253 22 69 118 253 OCC ACCUMULATION TRUST Equity Portfolio+.............................. 72 99 128 253 22 69 118 253 PIMCO VARIABLE INSURANCE TRUST Total Return Bond Portfolio.................... 69 90 113 222 19 60 103 222 PUTNAM VARIABLE TRUST Putnam VT International Growth Fund -- Class IB Shares....................................... 75 106 140 278 25 76 130 278 Putnam VT Small Cap Value Fund -- Class IB Shares....................................... 76 111 148 293 26 81 138 293 Putnam VT Voyager II Fund -- Class IB Shares... 75 108 143 284 25 78 133 284 SALOMON BROTHERS VARIABLE SERIES FUND INC. Capital Fund................................... 73 100 130 258 23 70 120 258 Investors Fund................................. 72 98 126 249 22 68 116 249 Small Cap Growth Fund.......................... 78 115 155 308 28 85 145 308 Total Return Fund.............................. 73 100 130 258 23 70 120 258 SMITH BARNEY INVESTMENT SERIES Smith Barney Large Cap Core Portfolio.......... 72 99 128 253 22 69 118 253 Smith Barney Premier Selection All Cap Growth Portfolio.................................... 72 99 128 253 22 69 118 253 STRONG VARIABLE INSURANCE FUNDS, INC. Strong Multi Cap Value Fund II................. 75 106 141 279 25 76 131 279 THE MONTGOMERY FUNDS III Montgomery Variable Series: Growth Fund+....... 75 108 143 284 25 78 133 284 THE TRAVELERS SERIES TRUST Disciplined Mid Cap Stock Portfolio............ 72 97 124 246 22 67 114 246 Disciplined Small Cap Stock Portfolio+......... 73 100 130 258 23 70 120 258 Equity Income Portfolio........................ 71 95 121 240 21 65 111 240 Federated Stock Portfolio...................... 71 95 121 240 21 65 111 240 Large Cap Portfolio............................ 71 95 121 240 21 65 111 240 Lazard International Stock Portfolio........... 73 101 132 261 23 71 122 261 MFS Emerging Growth Portfolio.................. 71 96 123 244 21 66 113 244 MFS Mid Cap Growth Portfolio................... 72 97 125 248 22 67 115 248 MFS Research Portfolio......................... 72 98 126 250 22 68 116 250 Strategic Stock Portfolio+..................... 72 97 125 248 22 67 115 248 Social Awareness Stock Portfolio............... 70 93 118 233 20 63 108 233 Travelers Quality Bond Portfolio............... 68 85 104 205 18 55 94 205 U.S. Government Securities Portfolio........... 68 84 104 204 18 54 94 204 Utilities Portfolio............................ 72 97 125 247 22 67 115 247
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--------------------------------------------------------------------------------------------------------------------------------- IF CONTRACT IS SURRENDERED AT THE IF CONTRACT IS NOT SURRENDERED OR END OF PERIOD SHOWN: ANNUITIZED AT END OF PERIOD SHOWN: ------------------------------------- ------------------------------------- FUNDING OPTION 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS --------------------------------------------------------------------------------------------------------------------------------- TRAVELERS SERIES FUND INC. AIM Capital Appreciation Portfolio............. 71 95 122 241 21 65 112 241 Alliance Growth Portfolio...................... 71 95 121 239 21 65 111 239 MFS Total Return Portfolio..................... 71 95 122 242 21 65 112 242 Putnam Diversified Income Portfolio............ 72 96 124 245 22 66 114 245 Smith Barney Aggressive Growth Portfolio....... 73 100 130 257 23 70 120 257 Smith Barney High Income Portfolio............. 69 90 113 223 19 60 103 223 International All Cap Growth Portfolio......... 73 100 129 256 23 70 119 256 Smith Barney Large Capitalization Growth Portfolio.................................... 71 93 119 235 21 63 109 235 VAN KAMPEN LIFE INVESTMENT TRUST Emerging Growth Portfolio Class II Shares...... 73 100 130 258 23 70 120 258 Enterprise Portfolio Class II Shares........... 71 96 123 243 21 66 113 243 VARIABLE ANNUITY PORTFOLIOS Smith Barney Small Cap Growth Opportunities Portfolio.................................... 72 97 125 248 22 67 115 248 VARIABLE INSURANCE PRODUCTS FUND II Asset Manager Portfolio -- Service Class 2..... 72 97 124 246 22 67 114 246 Contrafund(R) Portfolio -- Service Class 2..... 72 98 126 250 22 68 116 250 VARIABLE INSURANCE PRODUCTS FUND III Dynamic Capital Appreciation Portfolio -- Service Class 2.............................. 77 113 152 301 27 83 142 301 Mid Cap Portfolio -- Service Class 2........... 73 100 130 257 23 70 120 257
* Reflects expenses that would be incurred for those contract owners who participate in the CHART Asset Allocation program. + No longer available to new contract owners. 13 16 CONDENSED FINANCIAL INFORMATION -------------------------------------------------------------------------------- See Appendices A and B. THE ANNUITY CONTRACT -------------------------------------------------------------------------------- Travelers Retirement Account is a contract between the contract owner ("you") and the Company. We describe your rights and benefits in this prospectus and in the Contract. There may be differences in your Contract because of the requirements of the state where we issued your Contract. We will include any such differences in your Contract. You make purchase payments to us and we credit them to your Contract. We promise to pay you an income, in the form of annuity payments, beginning on a future date that you choose, the maturity date. The purchase payments accumulate tax deferred in the funding options of your choice. We offer multiple variable funding options, and one Fixed Account option. The contract owner assumes the risk of gain or loss according to the performance of the variable funding options. The contract value is the amount of purchase payments and any applicable purchase payment credits, plus or minus any investment experience on the amounts you allocate to the Separate Account ("Separate Account contract value") or interest on the amounts you allocate to the Fixed Account ("Fixed Account contract value"). The contract value also reflects all withdrawals made and charges deducted. There is generally no guarantee that at the maturity date the contract value will equal or exceed the total purchase payments made under the Contract. The date the contract and its benefits become effective is referred to as the contract date. Each 12-month period following the contract date is called a contract year. Certain changes and elections must be made in writing to the Company. Where the term "written request" is used, it means that you must send written information to our Home Office in a form and content satisfactory to us. CONTRACT OWNER INQUIRIES Any questions you have about your Contract should be directed to our Home Office at 1-800-842-9406. PURCHASE PAYMENTS Your initial purchase payment is due and payable before the Contract becomes effective. The initial purchase payment must be at least $20,000. You may make additional payments of at least $5,000 at any time. Under certain circumstances, we may waive the minimum purchase payment requirement. Purchase payments over $1,000,000 may be made only with our prior consent. We will apply the initial purchase payment less any applicable premium tax (net purchase payment) within two business days after we receive it in good order at our Home Office. We will credit subsequent purchase payments to a Contract on the same business day we receive it, if it is received in good order by our Home Office by 4:00 p.m. Eastern time. A business day is any day that the New York Stock Exchange is open for regular trading (except when trading is restricted due to an emergency as defined by the Securities and Exchange Commission). Purchase payments allocated to the Fixed Account are not eligible for purchase payment credits. PURCHASE PAYMENT CREDITS If, for an additional charge, you select the Optional Death Benefit, we will add a credit to your Contract with each purchase payment. Each credit is added to the contract value when the corresponding purchase payment is applied, and will equal 2% of each purchase payment. These credits are applied pro rata to the same funding options to which your purchase payment was applied. Purchase payments allocated to the Fixed Account are not eligible for purchase payment credits. 14 17 You should know that over time and under certain circumstances (such as a period of poor market performance) the costs associated with the purchase payment credits may exceed the sum of the purchase payment credits and related earnings. You should consider this possibility before purchasing the Contract. CONSERVATION CREDIT If you are purchasing this Contract with funds from another Contract issued by us or our affiliates, you may receive a conservation credit to your purchase payments. If applied, we will determine the amount of such credit. ACCUMULATION UNITS The period between the contract date and the maturity date is the accumulation period. During the accumulation period, an accumulation unit is used to calculate the value of a Contract. An accumulation unit works like a share of a mutual fund. Each funding option has a corresponding accumulation unit value. The accumulation units are valued each business day and their values may increase or decrease from day to day. The number of accumulation units we will credit to your Contract once we receive a purchase payment is determined by dividing the amount directed to each funding option by the value of its accumulation unit. We calculate the value of an accumulation unit for each funding option each day the New York Stock Exchange is open. The values are calculated as of 4:00 p.m. Eastern time. After the value is calculated, we credit your Contract. During the annuity period (i.e., after the maturity date), you are credited with annuity units. THE VARIABLE FUNDING OPTIONS You choose the variable funding options to which you allocate your purchase payments. These variable funding options are subaccounts of the Separate Account. The subaccounts invest in the underlying funds. You are not investing directly in the underlying fund. Each underlying fund is a portfolio of an open-end management investment company that is registered with the SEC under the Investment Company Act of 1940. You will find detailed information about the funds and their inherent risks in the current fund prospectuses for the underlying funds that must accompany this prospectus. Since each option has varying degrees of risk, please read the prospectuses carefully before investing. There is no assurance that any of the underlying funds will meet its investment objectives. Contact your registered representative or call 1-800-842-9406 to request additional copies of the prospectuses. The Company has entered into agreements with either the investment adviser or distributor of certain of the underlying funds in which the adviser or distributor pays us a fee for providing administrative services, which fee may vary. The fee is ordinarily based upon an annual percentage of the average aggregate net amount invested in the underlying funds on behalf of the Separate Account. In addition, an affiliated broker-dealer will receive 12b-1 fees deducted from certain underlying fund assets for providing distribution, shareholder support and administrative services to some of the underlying funds. If any of the underlying funds become unavailable for allocating purchase payments, or if we believe that further investment in an underlying fund is inappropriate for the purposes of the Contract, we may substitute another funding option. However, we will not make any substitutions without notifying you and obtaining any state and SEC approval, if necessary. From time to time we may make new funding options available. 15 18 The current variable funding options are listed below, along with their investment advisers and any subadviser.
FUNDING OPTION INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER ------------------------------------------------------------------------------------------------------------------- Capital Appreciation Fund Seeks growth of capital through the use of Travelers Asset Management common stocks. Income is not an objective. International Company LLC The Fund invests principally in common stocks ("TAMIC") of small to large companies which are Subadviser: Janus Capital Corp. expected to experience wide fluctuations in price both in rising and declining markets. High Yield Bond Trust* Seeks generous income. The assets of the High TAMIC Yield Bond Trust will be invested in bonds which, as a class, sell at discounts from par value and are typically high risk securities. Managed Assets Trust** Seeks high total investment return through a TAMIC fully managed investment policy in a Subadviser: Travelers portfolio of equity, debt and convertible Investment Management Company securities. ("TIMCO") Money Market Portfolio* Seeks high current income from short-term TAMIC money market instruments while preserving capital and maintaining a high degree of liquidity. AIM VARIABLE INSURANCE FUNDS, INC. AIM V.I. Value Fund Seeks to achieve long-term growth of capital AIM Advisers, Inc. ("AIM") by investing primarily in equity securities of undervalued companies. Income is a secondary objective. CITISTREET FUNDS, INC. Diversified Bond Fund* Seeks maximum long-term total return (capital CitiStreet Funds Management, appreciation and income) by investing Inc. ("CitiStreet") primarily in fixed income securities. Subadviser: Western Asset Management Company; Salomon Brothers Asset Management ("SBAM"); and SSgA Funds Management, Inc. ("SSgA") International Stock Fund Seeks maximum long-term total return (capital CitiStreet appreciation and income) by investing Subadviser: Bank of Ireland primarily in common stocks of established Asset Management (U.S.) non-U.S. companies. Limited; Smith Barney Fund Management Inc. ("SBFM") and SSgA Large Company Stock Fund Seeks maximum long-term total return (capital CitiStreet appreciation and income) by investing Subadvisers: Wellington primarily in common stocks of Management Company, LLP; Putnam well-established companies. Investment Management Inc.; and SSgA Small Company Stock Fund Seeks maximum long-term total return (capital CitiStreet appreciation and income) by investing Subadviser: Cowen Asset primarily in common stocks of small Management; SBAM and SSgA companies. DELAWARE GROUP PREMIUM FUND REIT Series** Seeks maximum long-term total return by Delaware Management Company, investing in securities of companies Inc. primarily engaged in the real estate Subadviser: Lincoln Investment industry. Capital appreciation is a secondary Management, Inc. objective. Small Cap Value Series Seeks capital appreciation by investing in Delaware Management Company, small to mid-cap common stocks whose market Inc. value appears low relative to their Subadviser: Lincoln Investment underlying value or future earnings and Management, Inc. growth potential. Emphasis will also be placed on securities of companies that may be temporarily out of favor or whose value is not yet recognized by the market.
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FUNDING OPTION INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER ------------------------------------------------------------------------------------------------------------------- DREYFUS VARIABLE INVESTMENT FUND Appreciation Portfolio -- Seeks primarily to provide long-term capital The Dreyfus Corporation Initial Shares growth consistent with the preservation of Subadviser: Fayez Sarofim & Co. capital; current income is a secondary investment objective. The portfolio invests primarily in the common stocks of domestic and foreign insurers. Small Cap Portfolio -- Initial Seeks to maximize capital appreciation. The Dreyfus Corporation Shares GREENWICH STREET SERIES FUND Appreciation Portfolio Seeks long term appreciation of capital by SBFM investing primarily in equity securities. Equity Index Portfolio Class II Seeks to replicate, before deduction of TIMCO Shares expenses, the total return performance of the S&P 500 Index. Fundamental Value Portfolio** Seeks long-term capital growth with current SBFM income as a secondary objective. JANUS ASPEN SERIES Aggressive Growth Portfolio -- Seeks long-term capital growth by investing Janus Capital Service Shares primarily in common stocks selected for their growth potential, normally investing at least 50% in the equity assets of medium-sized companies. Balanced Portfolio -- Service Seeks long-term capital growth, consistent Janus Capital Shares with preservation of capital and balanced by current income. Worldwide Growth Portfolio -- Seeks growth of capital in a manner Janus Capital Service Shares consistent with preservation of capital by investing primarily in common stocks of companies of any size throughout the world. PIMCO VARIABLE INSURANCE TRUST Total Return Bond Portfolio Seeks maximum total return, consistent with Pacific Investment Management preservation of capital and prudent Company investment management, by investing primarily in investment-grade debt securities. PUTNAM VARIABLE TRUST Putnam VT International Growth Seeks capital appreciation by investing Putnam Management ("Putnam") Fund -- Class IB Shares mostly in common stocks of companies outside the United States. Putnam VT Small Cap Value Seeks capital appreciation by investing Putnam Fund -- Class IB Shares mainly in common stocks of U.S. companies with a focus on value stocks. Putnam VT Voyager II Fund -- Seeks capital appreciation by investing Putnam Class IB Shares mainly in common stocks of U.S. companies with a focus on growth stocks. SALOMON BROTHERS VARIABLE SERIES FUND, INC. Capital Fund Seeks capital appreciation, primarily through SBAM investments in common stocks which are believed to have above-average price appreciation potential and which may involve above average risk. Investors Fund Seeks long-term growth of capital, and, SBAM secondarily, current income, through investments in common stocks of well-known companies. Small Cap Growth Fund Seeks long-term growth of capital by SBAM investing primarily in equity securities of companies with market capitalizations similar to that of companies included in the Russell 2000 Index. Total Return Fund** Seeks above-average income (compared to a SBAM portfolio invested entirely in equity securities). Secondarily, seeks opportunities for growth of capital and income. SMITH BARNEY INVESTMENT SERIES Smith Barney Large Cap Core Seeks long term growth of capital by Travelers Investment Advisers Portfolio investing in a select group of mutual funds. ("TIA")
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FUNDING OPTION INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER ------------------------------------------------------------------------------------------------------------------- Smith Barney Premier Selection Seeks long-term growth of capital using a SBFM All Cap Growth Portfolio multi- manager approach investing in small, medium and large size companies. STRONG VARIABLE INSURANCE FUNDS, INC. Strong Multi Cap Value Fund II Seeks long-term capital appreciation. Current Strong Capital Management Inc. income is a secondary objective when Subadviser: Schafer Capital selecting investments The goal is to identify Management, Inc. stocks that provide above-average earnings growth prospects at a price-to-earnings ratio lower than that of the S&P 500. TRAVELERS SERIES FUND INC. AIM Capital Appreciation Seeks capital appreciation by investing TIA Portfolio principally in common stock, with emphasis on Subadviser: AIM Capital medium-sized and smaller emerging growth Management, Inc. companies. Alliance Growth Portfolio Seeks long-term growth of capital. Current TIA income is only an incidental consideration. Subadviser: Alliance Capital The Portfolio invests predominantly in equity Management L.P. securities of companies with a favorable outlook for earnings and whose rate of growth is expected to exceed that of the U.S. economy over time. MFS Total Return Portfolio** (a balanced portfolio) Seeks to obtain above- TIA average income (compared to a portfolio Subadviser: Massachusetts entirely invested in equity securities) Financial Services ("MFS") consistent with the prudent employment of capital. Generally, at least 40% of the Portfolio's assets are invested in equity securities. Putnam Diversified Income Seeks high current income consistent with TIA Portfolio* preservation of capital. The Portfolio will Subadviser: Putnam Investment allocate its investments among the U.S. Management, Inc. Government Sector, the High Yield Sector, and the International Sector of the fixed income securities markets. Smith Barney Aggressive Growth Seeks capital appreciation by investing SBFM Portfolio primarily in common stocks of companies that are experiencing, or have the potential to experience, growth of earnings, or that exceed the average earnings growth rate of companies whose securities are included in the S&P 500. Smith Barney High Income Seeks high current income. Capital SBFM Portfolio* appreciation is a secondary objective. The Portfolio will invest at least 65% of its assets in high-yielding corporate debt obligations and preferred stock. Smith Barney International All Seeks total return on assets from growth of SBFM Cap Growth Portfolio capital and income by investing at least 65% of its assets in a diversified portfolio of equity securities of established non-U.S. issuers. Smith Barney Large Capitalization Seeks long-term growth of capital by SBFM Growth Portfolio investing in equity securities of companies with large market capitalizations. THE TRAVELERS SERIES TRUST Disciplined Mid Cap Stock Seeks growth of capital by investing TAMIC Portfolio primarily in a broadly diversified portfolio Subadviser: TIMCO of U.S. common stocks. Disciplined Small Cap Stock Seeks long term capital appreciation by TAMIC Portfolio+ investing primarily (at least 65% of its Subadviser: TIMCO total assets) in the common stocks of U.S. companies with relatively small market capitalizations at the time of investments. Equity Income Portfolio Seeks reasonable income by investing at least TAMIC 65% in income-producing equity securities. Subadviser: Fidelity Management The balance may be invested in all types of & Research Co ("FMR") domestic and foreign securities, including bonds. The Portfolio seeks to achieve a yield that exceeds that of the securities comprising the S&P 500. The Subadviser also considers the potential for capital appreciation.
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FUNDING OPTION INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER ------------------------------------------------------------------------------------------------------------------- THE TRAVELERS SERIES TRUST (CONT.) Federated Stock Portfolio Seeks growth of income and capital by TAMIC investing principally in a professionally Subadviser: Federated managed and diversified portfolio of common Investment Counseling, Inc. stock of high-quality companies (i.e., leaders in their industries and characterized by sound management and the ability to finance expected growth). Large Cap Portfolio Seeks long-term growth of capital by TAMIC investing primarily in equity securities of Subadviser: FMR companies with large market capitalizations. Lazard International Stock Seeks capital appreciation by investing TAMIC Portfolio primarily in the equity securities of Subadviser: Lazard Asset non-United States companies (i.e., Management incorporated or organized outside the United States). MFS Emerging Growth Portfolio Seeks to provide long-term growth of capital. TAMIC Dividend and interest income from portfolio Subadviser: MFS securities, if any, is incidental to the MFS Portfolio's investment objective. MFS Mid Cap Growth Portfolio Seeks to obtain long-term growth of capital TAMIC by investing, under normal market conditions, Subadviser: MFS at least 65% of its total assets in equity securities of companies with medium market capitalization which the investment adviser believes have above-average growth potential. MFS Research Portfolio Seeks to provide long-term growth of capital TAMIC and future income. Subadviser: MFS Social Awareness Stock Portfolio Seeks long-term capital appreciation and SBFM retention of net investment income by selecting investments, primarily common stocks, which meet the social criteria established for the Portfolio. Social criteria currently excludes companies that derive a significant portion of their revenues from the production of tobacco, tobacco products, alcohol, or military defense systems, or in the provision of military defense related services or gambling services. Strategic Stock Portfolio+ Seeks to provide an above-average total TAMIC return through a combination of potential Subadviser: TIMCO capital appreciation and dividend income by investing primarily in high dividend-yielding stocks periodically selected from the companies included in (i) the Dow Jones Industrial Average and (ii) a subset of the S&P Industrial Index. Travelers Quality Bond Portfolio* Seeks current income, moderate capital TAMIC volatility and total return. U.S. Government Securities Seeks to select investments from the point of TAMIC Portfolio* view of an investor concerned primarily with the highest credit quality, current income and total return. The assets of the Portfolio will be invested in direct obligations of the United States, its agencies and instrumentalities. Utilities Portfolio** Seeks to provide current income by investing SBFM in equity and debt securities of companies in the utilities industries. VAN KAMPEN LIFE INVESTMENT TRUST Emerging Growth Portfolio -- Seeks capital appreciation by investing Van Kampen Asset Management, Class II Shares primarily in common stocks of companies Inc. considered to be emerging growth companies. ("VKAM") Enterprise Portfolio -- Class II Seeks capital appreciation through VKAM Shares investments believed by the Adviser to have above-average potential for capital appreciation.
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FUNDING OPTION INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER ------------------------------------------------------------------------------------------------------------------- VARIABLE ANNUITY PORTFOLIOS Smith Barney Small Cap Growth Seeks high total return with reduced risk Citi Fund Management, Inc. Opportunities Portfolio over the long-term by allocating its assets among stocks, bonds and short-term fixed-income instruments. VARIABLE INSURANCE PRODUCTS FUND II Asset Manager Seeks high total return with reduced risk FMR Portfolio -- Service Class 2** over the long-term by allocating its assets among stocks, bonds and short-term fixed-income instruments. Contrafund(R) Seeks long-term capital appreciation by FMR Portfolio -- Service Class 2 investing primarily in common stocks of companies whose value the adviser believes is not fully recognized by the public. VARIABLE INSURANCE PRODUCTS III Dynamic Capital Appreciation Seeks capital appreciation by investing FMR Portfolio -- Service Class 2 primarily in common stocks of both domestic and foreign issuers. Mid Cap Portfolio -- Service Seeks long-term growth of capital and income FMR Class 2 by investing primarily in income-producing equity securities, including common stocks and convertible securities. CREDIT SUISSE WARBURG PINCUS TRUST Emerging Markets Portfolio Seeks long-term growth of capital by Credit Suisse Asset Management, investing primarily in equity securities of LLC non-U.S. issuers consisting of companies in emerging securities markets.
Before the end of 2001, we anticipate substituting shares of a new portfolio for the following portfolios currently available in your Contract. You should know, however, that we cannot proceed with the proposed substitutions until we receive certain regulatory approvals, and that details of the substitutions, including the new portfolio to be offered, may change. We will notify you of the final details, including the approximate date, before the substitution occurs, and notify you after the substitution has happened. Also, we will send you the current prospectus for the new funding option before the substitution occurs.
FUNDING OPTION INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER ------------------------------------------------------------------------------------------------------------------- MONTGOMERY FUNDS III Montgomery Variable Series: Seeks capital appreciation by investing Montgomery Asset Management Growth Fund+ primarily in equity securities, usually common stock, of domestic companies of all sizes, and emphasizes companies having market capitalizations of $1 billion or more. OCC ACCUMULATION TRUST Equity Portfolio+ Seeks long-term capital appreciation through OP Cap Advisors investment in securities (primarily equity securities) of companies that are believed by the adviser to be undervalued in the marketplace in relation to factors such as the companies' assets or earnings.
* The funding options marked with an asterisk (*) are considered competing funds, and may be subject to transfer restrictions. Those marked with two asterisks (**) are not currently considered competing funds, but may be so in the future because of an allowable change in the funding option's investment strategy. Please refer to the contract for transfer restrictions. + Not available to new contract owners as of May 1, 2001. 20 23 FIXED ACCOUNT -------------------------------------------------------------------------------- We offer a Fixed Account as a funding option. Please see separate prospectus for more information. CHARGES AND DEDUCTIONS -------------------------------------------------------------------------------- GENERAL We deduct the charges described below. The charges are for the service and benefits we provide, costs and expenses we incur, and risks we assume under the Contracts. Services and benefits we provide include: - the ability for you to make withdrawals and surrenders under the Contracts; - the death benefit paid on the death of the contract owner, annuitant, or first of the joint owners, - the available funding options and related programs (including dollar-cost averaging, portfolio rebalancing, and systematic withdrawal programs); - administration of the annuity options available under the Contracts; and - the distribution of various reports to contract owners. Costs and expenses we incur include: - losses associated with various overhead and other expenses associated with providing the services and benefits provided by the Contracts, - sales and marketing expenses including commission payments to your sales agent, and - other costs of doing business. Risks we assume include: - that annuitants may live longer than estimated when the annuity factors under the Contracts were established; - that the amount of the death benefit will be greater than the contract value or the maximum of all Step-Up values under the Optional Death Benefit, and - that the costs of providing the services and benefits under the Contracts will exceed the charges deducted. We may also deduct a charge for taxes. Unless otherwise specified, charges are deducted proportionately from all funding options in which you are invested. We may reduce or eliminate the withdrawal charge, the administrative charges and/or the mortality and expense risk charge under the Contract when certain sales or administration of the Contract result in savings or reduced expenses and/or risks. For certain trusts, we may change the order in which purchase payments and earnings are withdrawn in order to determine the withdrawal charge. We will not reduce or eliminate the withdrawal charge or the administrative charge where such reduction or elimination would be unfairly discriminatory to any person. The amount of a charge may not necessarily correspond to the costs associated with providing the services or benefits indicated by the designated charge. (For example, the withdrawal charge we collect may not fully cover all of the sales and distribution expenses we actually incur.) We may also profit on one or more of the charges. We may use any such profits for any corporate purpose, including the payment of sales expenses. 21 24 WITHDRAWAL CHARGE We do not deduct a sales charge from purchase payments when they are made to the Contract. However, a withdrawal charge will apply if purchase payments and any applicable purchase payment credits are withdrawn before they have been in the Contract for ten years. We will assess the charge as a percentage of the purchase payment and any applicable purchase payment credits withdrawn as follows:
YEARS SINCE PURCHASE WITHDRAWAL PAYMENT MADE CHARGE 0-1 5% 2 4% 3 3% 4 2% 5 1% 6 or more 0%
For purposes of the withdrawal charge calculation, withdrawals are deemed to be taken first from: (a) any purchase payment and any applicable purchase payment credits to which no withdrawal charge applies, then (b) any remaining free withdrawal allowance (as described below) (after being reduced by (a)), then (c) any purchase payment and any applicable purchase payment credits to which a withdrawal charge applies (on a first-in, first-out basis), then (d) any Contract earnings. Unless you instruct us otherwise, we will deduct the withdrawal charge from the amount requested. IF YOU DID NOT PURCHASE YOUR CONTRACT UNDER A 457 OR 403(B) QUALIFIED PLAN, we will not deduct a withdrawal charge: - from payments we make due to the death of the annuitant; - if a life annuity payout has begun, other than the Liquidity Benefit Option (See "Liquidity Benefit"); - if an income option of at least ten years' duration is elected; - from amounts withdrawn which are deposited to other contracts issued by us or our affiliate, subject to our approval; - if withdrawals are taken under our Managed Distribution Program, if elected by you (see "Access to Your Contract Values"); or - if you are confined to an Eligible Nursing Home, as described in Appendix C. IF YOU PURCHASED YOUR CONTRACT UNDER A 457 OR 403(B) QUALIFIED PLAN, we will not deduct a withdrawal charge: - from payments we make due to the death of the annuitant; - if a life annuity payout has begun; - if payments for a period of at least five years have begun; - from amounts withdrawn which are deposited to other contracts issued by us or our affiliate, subject to our approval; - if withdrawals are taken as a minium distribution, as defined under The Code; - if withdrawals are taken due to a hardship, as defined under The Code; 22 25 - if withdrawals are taken due to a disability, as defined under The Code, of the annuitant; - (403(b) PLANS ONLY) if you are confined to an Eligible Nursing Home, as described in Appendix C. FREE WITHDRAWAL ALLOWANCE Subject to the provisions of the Internal Revenue code, you may withdraw up to 20% of the contract value annually. We calculate the available withdrawal amount as of the end of the previous contract year. The free withdrawal provision applies to all withdrawals except these transferring directly to another financial institution. We reserve the right to modify the free withdrawal provision. TRANSFER CHARGE We reserve the right to assess a transfer charge of up to $10.00 on transfers exceeding 12 per year. We will notify you in writing at your last known address at least 31 days before we impose any such transfer charge. MORTALITY AND EXPENSE RISK CHARGE Each business day, we deduct a mortality and expense risk ("M&E") charge from amounts we hold in the variable funding options. We reflect the deduction in our calculation of accumulation and annuity unit values. The charges stated are the maximum for this product. We reserve the right to lower this charge at any time. If you choose the Standard Death Benefit, the M&E charge is 0.80% annually. If you choose the Optional Death Benefit, the M&E charge is 1.25% annually. This charge compensates us for risks assumed, benefits provided and expenses incurred, including the payment of commissions to your sales agent. VARIABLE FUNDING OPTION EXPENSES We summarized the charges and expenses of the underlying funds in the fee table. Please review the prospectus for each underlying fund for a more complete description of that fund and its expenses. FLOOR BENEFIT/LIQUIDITY BENEFIT CHARGES If you select the Variable Annuitization Floor Benefit, we deduct a charge upon election of this benefit. This charge compensates us for guaranteeing a minimum variable annuity payment regardless of the performance of the variable funding options you selected. This charge will vary based upon market conditions, but will never increase your annual separate account charge by more than 3%. The charge will be set at the time of election, and will remain level throughout the term of annuitization. If the Liquidity Benefit is selected, there is a surrender charge of 5% of the amounts withdrawn. Please refer to "The Annuity Period" for a description of these benefits. CHART ASSET ALLOCATION PROGRAM CHARGES Under the CHART Program, purchase payments and cash values are allocated among the specified asset allocation funds. The charge for this advisory service is equal to a maximum of 0.80% of the assets subject to the CHART Program. The CHART Program fee will be paid by quarterly withdrawals from the cash values allocated to the asset allocation funds. We will not treat these withdrawals as taxable distributions. Please refer to "Miscellaneous Contract Provisions" for further information. PREMIUM TAX Certain state and local governments charge premium taxes ranging from 0% to 5%, depending upon jurisdiction. We are responsible for paying these taxes and will determine the method used to recover premium tax expenses incurred. We will deduct any applicable premium taxes from your contract value either upon death, surrender, annuitization, or at the time you make purchase payments to the Contract, but no earlier than when we have a tax liability under state law. 23 26 CHANGES IN TAXES BASED UPON PREMIUM OR VALUE If there is any change in a law assessing taxes against the Company based upon premiums, contract gains or value of the Contract, we reserve the right to charge you proportionately for this tax. TRANSFERS -------------------------------------------------------------------------------- Up to 30 days before the maturity date, you may transfer all or part of the contract value between variable funding options. We will make transfers at the value(s) next determined after we receive your request at our Home Office. There are no charges or restrictions on the amount or frequency of transfers currently; however, we reserve the right to charge a fee for any transfer request, and to limit the number of transfers to one in any six-month period. We also reserve the right to restrict transfers by any market timing firm or any other third party authorized to initiate transfers on behalf of multiple contract owners. We may, among other things, not accept: 1) the transfer instructions of any agent acting under a power of attorney on behalf of more than one owner, or 2) the transfer or exchange instructions of individual owners who have executed pre-authorized transfer forms which are submitted by market timing firms or other third parties on behalf of more than one owner. We further reserve the right to limit transfers that we determine will disadvantage other contract owners. Since different underlying funds have different expenses, a transfer of contract values from one variable funding option to another could result in your investment becoming subject to higher or lower expenses. Also, you should consider the inherent risks involved in making transfers. Frequent transfers based on short-term expectations may increase the risk that you will make a transfer at an inopportune time. After the maturity date, you may make transfers between funding options only with our consent. Please refer to your Contract for restrictions on transfers to and from the Fixed Account. DOLLAR COST AVERAGING Dollar cost averaging or the pre-authorized transfer program (the "DCA Program") allows you to transfer a set dollar amount to other funding options on a monthly or quarterly basis during the accumulation phase of the Contract. Using this method, you will purchase more accumulation units in a funding option if the value per unit is low and will purchase fewer accumulation units if the value per unit is high. Therefore, you may achieve a lower-than-average cost per unit in the long run if you have the financial ability to continue the program over a long enough period of time. Dollar cost averaging does not assure a profit or protect against a loss. You may elect the DCA Program through written request or other method acceptable to us. You must have a minimum total contract value of $5,000 to enroll in the DCA Program. The minimum amount that may be transferred through this program is $400. You may establish pre-authorized transfers of contract values from the Fixed Account, subject to certain restrictions. Under the DCA Program, automated transfers from the Fixed Account may not deplete your Fixed Account Value in less than twelve months from your enrollment in the DCA Program. In addition to the DCA Program, we may credit increased interest rates to contract owners under an administrative Special DCA Program established at our discretion, depending on availability and state law. Under this program, the contract owner may pre-authorize level transfers to any of the funding options under either a 6 Month Program or 12 Month Program. The 6 Month Program and the 12 Month Program will generally have different credited interest rates. Under the 6 Month Program, the interest rate can accrue up to 6 months on amounts in the Special DCA Program and we must transfer all purchase payments and accrued interest on a level basis to the selected funding options in 6 months. Under the 12 Month Program, the interest rate can accrue up to 12 24 27 months on funds in the Special DCA Program and we must transfer all purchase payments and accrued interest in this Program on a level basis to the selected funding options in 12 months. The pre-authorized transfers will begin after the initial Program purchase payment and complete enrollment instructions are received by Travelers. If complete Program enrollment instructions are not received by the Company within 15 days of receipt of the initial Program purchase payment, the entire balance in the Program will be credited with the non-Program interest rate then in effect for the Fixed Account. You may start or stop participation in the DCA 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. If you stop the Special DCA Program and elect to remain in the Fixed Account, we will credit your contract value for the remainder of 6 or 12 months with the interest rate for non-Program funds. You may only have one DCA Program or Special DCA Program in place at one time. We will allocate any subsequent purchase payments we receive within the Program period selected to the current funding options over the remainder of that Program transfer period, unless you otherwise direct. All provisions and terms of the Contract apply to the DCA and Special DCA Programs, including provisions relating to the transfer of money between funding options. We reserve the right to suspend or modify transfer privileges at any time and to assess a processing fee for this service. ACCESS TO YOUR MONEY -------------------------------------------------------------------------------- Any time before the maturity date, you may redeem all or any portion of the cash surrender value, that is, the contract value less any withdrawal charge and any premium tax not previously deducted. Unless you submit a written request specifying the fixed or variable funding option(s) from which we are to withdraw amounts, we will make the withdrawal on a pro rata basis. We will determine the cash surrender value as of the close of business after we receive your surrender request at our Home Office. The cash surrender value may be more or less than the purchase payments you made. You may not make withdrawals during the annuity period. We may defer payment of any cash surrender value for a period of up to seven days after the written request is received, but it is our intent to pay as soon as possible. We cannot process requests for withdrawals that are not in good order. We will contact you if there is a deficiency causing a delay and will advise what is needed to act upon the withdrawal request. SYSTEMATIC WITHDRAWALS Before the maturity date, you may choose to withdraw a specified dollar amount (at least $100) on a monthly, quarterly, semiannual or annual basis. We will deduct any applicable premium taxes and withdrawal charge. To elect systematic withdrawals, you must have a contract value of at least $15,000 and you must make the election on the form we provide . We will surrender accumulation units pro rata from all investment options in which you have an interest, unless you instruct us otherwise. You may begin or discontinue systematic withdrawals at any time by notifying us in writing, but you must give at least 30 days' notice to change any systematic withdrawal instructions that are currently in place. We reserve the right to discontinue offering systematic withdrawals or to assess a processing fee for this service upon 30 days' written notice to contract owners (where allowed by state law). Each systematic withdrawal is subject to federal income taxes on the taxable portion. In addition, a 10% federal penalty tax may be assessed on systematic withdrawals if the contract owner is under age 59 1/2. You should consult with your tax adviser regarding the tax consequences of systematic withdrawals. MANAGED DISTRIBUTION PROGRAM. Under the systematic withdrawal option, you may choose to participate in the Managed Distribution Program. At no cost to you, you may instruct us to 25 28 calculate and make minimum distributions that may be required by the IRS upon reaching age 70 1/2. (See "Federal Tax Considerations.") These payments will not be subject to the withdrawal charge and will be in lieu of the free withdrawal allowance. No Dollar Cost Averaging will be permitted if you are participating in the Managed Distribution Program. OWNERSHIP PROVISIONS -------------------------------------------------------------------------------- TYPES OF OWNERSHIP Contract Owner (you). The Contract belongs to the contract owner named in the Contract (on the Specifications page). The annuitant is the individual upon whose life the maturity date and the amount of monthly annuity payments depend. Because this is a qualified contract, the owner and the annuitant must always be the same person, and there can be only one contract owner. You have sole power to exercise any rights and to receive all benefits given in the Contract provided you have not named an irrevocable beneficiary. Beneficiary. You name the beneficiary in a written request. The beneficiary has the right to receive any death benefit proceeds remaining under the Contract upon the death of the annuitant or the contract owner. If more than one beneficiary survives the annuitant or contract owner, they will share equally in benefits unless you recorded different shares with the Company by written request before the death of the annuitant or contract owner. In the case of a non-spousal beneficiary or a spousal beneficiary who has not chosen to assume the Contract, we will not transfer or otherwise remove the death benefit proceeds from either the variable funding options or the Fixed Account, as most recently elected by the contract owner, until the death report date. Unless you have named an irrevocable beneficiary you have the right to change any beneficiary by written request during the lifetime of the annuitant and while the Contract continues. DEATH BENEFIT -------------------------------------------------------------------------------- Before the maturity date, a death benefit is payable when you die. At purchase, you elect either the Standard Death Benefit or the Optional Death Benefit. We calculate the death benefit at the close of the business day on which our Home Office receives (1) due proof of death and (2) written payment instructions ("death report date"). For both the Standard and Optional Death Benefit, we must be notified of your death no later than six months from the date of death in order to pay the death proceeds as described under "Death Proceeds Before the Maturity Date." If we are notified more than six months after the death, we will pay death proceeds equal to the contract value on the death report date, less any applicable premium tax. DEATH PROCEEDS BEFORE THE MATURITY DATE STANDARD DEATH BENEFIT
---------------------------------------------------------------------------------------------- ANNUITANT'S AGE ON THE CONTRACT DATE DEATH BENEFIT PAYABLE ---------------------------------------------------------------------------------------------- Before Age 80 Greater of: 1. Contract value, or 2. Total purchase payments less any withdrawals (and related charges). ---------------------------------------------------------------------------------------------- On or after Age 80 Contract value. ----------------------------------------------------------------------------------------------
26 29 OPTIONAL DEATH BENEFIT AND CREDIT The Optional Death Benefit and Credit varies depending on the annuitant's age on the contract date:
---------------------------------------------------------------------------------------------- ANNUITANT'S AGE ON THE CONTRACT DATE DEATH BENEFIT PAYABLE ---------------------------------------------------------------------------------------------- Under Age 70 Greater of: 1. Contract value, or 2. Total purchase payments less any withdrawals (and related charges); or 3. Maximum Step-Up death benefit value (described below) associated with contract date anniversaries beginning with the 5(th), and ending with the last before the annuitant's 76(th) birthday. ---------------------------------------------------------------------------------------------- Age 70-75 Greater of: 1. Contract value, or 2. Total purchase payments less any withdrawals (and related charges); or 3. Step-Up death benefit value (described below) associated with the 5(th) contract date anniversary ---------------------------------------------------------------------------------------------- Age 76-80 Greater of (1) or (2) above. ---------------------------------------------------------------------------------------------- Age over 80 Contract value. ----------------------------------------------------------------------------------------------
STEP-UP DEATH BENEFIT VALUE We will establish a separate Step-Up death benefit value on the fifth contract date anniversary and on each subsequent contract date anniversary on or before the death report date and will initially equal the contract value on that anniversary. After a Step-Up death benefit value has been established, we will recalculate it each time a purchase payment is made or a withdrawal is taken until the death report date. We will recalculate Step-Up death benefit values by increasing them by the amount of each applicable purchase payment and by reducing them by a partial surrender reduction (as described below) for each applicable withdrawal. Recalculations of Step-Up death benefit values related to any purchase payments or any withdrawals will be made in the order that such purchase payments or partial surrender reductions occur. PARTIAL SURRENDER REDUCTION. If you make a withdrawal, we will reduce the Step-Up value by a partial surrender reduction which equals: (1) the step-up value, multiplied by (2) the amount of the withdrawal, divided by (3) the contract value before the withdrawal. For example, assume your current contract value is $55,000. If your original step-up value is $50,000, and you decide to make a withdrawal of $10,000, we would reduce the step-up value as follows: 50,000 x (10,000/55,000) = 9,090 Your new step-up value would be 50,000-9,090, or $40,910. The following example shows what would happen in a declining market. Assume your current contract value is $30,000. If your original step-up value is $50,000, and you decide to make a withdrawal of $10,000, we would reduce the step-up value as follows: 50,000 X (10,000/30,000) = 16,666 Your new step-up value would be 50,000-16,666, or $33,334. PAYMENT OF PROCEEDS We describe the process of paying death benefit proceeds before the maturity date in the charts below. The charts do not encompass every situation and are merely intended as a general guide. More detailed information is provided in your Contract. Generally, the person(s) receiving the 27 30 benefit may request that the proceeds be paid in a lump sum, or be applied to one of the settlement options available under the Contract. -------------------------------------------------------------------------------------------------------- BEFORE THE MATURITY DATE, THE COMPANY WILL PAY THE PROCEEDS TO: MANDATORY PAYOUT RULES UPON THE DEATH OF THE APPLY (SEE * BELOW) -------------------------------------------------------------------------------------------------------- OWNER/ANNUITANT The beneficiary(ies), or if none, to Yes the contract owner's estate. -------------------------------------------------------------------------------------------------------- BENEFICIARY No death proceeds are payable; contract N/A continues. -------------------------------------------------------------------------------------------------------- CONTINGENT BENEFICIARY No death proceeds are payable; contract N/A continues. --------------------------------------------------------------------------------------------------------
* Certain payout rules of the Internal Revenue Code (IRC) are triggered upon the death of any Owner. Non-spousal Beneficiaries (as well as spousal beneficiaries who choose not to assume the contract) must begin taking distributions based on the Beneficiary's life expectancy within one year of death or take a complete distribution of contract proceeds within 5 years of death. If Mandatory Distributions have begun, the 5 year payout option is not available. DEATH PROCEEDS AFTER THE MATURITY DATE If the contract owner dies on or after the maturity date, the Company will pay the beneficiary a death benefit consisting of any benefit remaining under the annuity or income option then in effect. THE ANNUITY PERIOD -------------------------------------------------------------------------------- MATURITY DATE Under the Contract, you can receive regular income payments (annuity payments). You can choose the month and the year in which those payments begin (maturity date). You can also choose among income payouts (annuity options) or elect a lump sum distribution. While the annuitant is alive, you can change your selection any time up to the maturity date. Annuity payments will begin on the maturity date stated in the Contract unless (1) you fully surrendered the Contract; (2) we paid the proceeds to the beneficiary before that date; or (3) you elected another date. Annuity payments are a series of periodic payments (a) for life; (b) for life with either a minimum number of payments or a specific amount assured; or (c) for the joint lifetime of the annuitant and another person, and thereafter during the lifetime of the survivor. We may require proof that the annuitant is alive before we make annuity payments. Not all options may be available in all states. You may choose to annuitize at any time after you purchase your Contract. Unless you elect otherwise, the maturity date will be your 90th birthday or ten years after the effective date of the contract, if later. (For Contracts issued in Florida and New York, the maturity date you elect may not be later than your 90th birthday.) At least 30 days before the original maturity date, you may elect to extend the maturity date to any time prior to the annuitant's 90th birthday or to a later date with our consent. You may use certain annuity options taken at the maturity date to meet the minimum required distribution requirements of federal tax law, or you may use a program of withdrawals instead. These mandatory distribution requirements take effect generally upon the death of the contract owner, or with certain qualified contracts upon either the later of the contract owner's attainment of age 70 1/2 or year of retirement; or the death of the contract owner. You should seek independent tax advice regarding the election of minimum required distributions. 28 31 LIQUIDITY BENEFIT (BENEFIT NOT AVAILABLE UNDER 457 PLANS) If you select any annuity option which guarantees you payments for a minimum period of time ("period certain"), you may take a lump sum payment (equal to a portion or all of the value of the remaining payments) any time after the first contract year. There is a surrender charge of 5% of the amount withdrawn under this option. For variable annuity payments, we use the Assumed Net Investment Factor, ("ANIF") as the interest rate to determine the lump sum amount. If you request only a percentage of the amount available, we will reduce the amount of each payment during the rest of the period certain by that percentage. After the period expires, your payments will increase to the level they would have been had no liquidation has taken place. For fixed annuity payments, we calculate the present value of the remaining period certain payments using a current interest rate. The current interest rate used depends on the amount of time left in the annuity option you elected. The current rate will be the same rate we would give someone electing an annuity option for that same amount of time. If you request a percentage of the amount available during the period certain, we will reduce the amount of each payment during the rest of the period certain by that percentage. After the period certain expires, your payments will increase to the level they would have been had no liquidation taken place. The market value adjustment formula for calculating the present value described above for fixed annuity payments is as follows: Present Value =LOGO[Payment(s) X (1/1 + iC)(t/365)] Where iC = the interest rate described above n = the number of payments remaining in the contract owner's period certain at the time of request for this benefit t = the number of days remaining until that payment is made, adjusting for leap years.
See Appendix E for examples of this market value adjustment. ALLOCATION OF ANNUITY You may elect to receive your annuity payments in the form of a variable annuity, a fixed annuity, or a combination of both. If, at the time annuity payments begin, you have not made an election, we will apply your contract value to provide an annuity funded by the same investment options as you have selected during the accumulation period. At least 30 days before the maturity date, you may transfer the contract value among the funding options in order to change the basis on which we will determine annuity payments. (See "Transfers.") ANNUITIZATION CREDIT. This credit is applied to the contract value used to purchase one of the annuity options described below. The credit equals 0.5% of your contract value if you annuitize during contract years 2-5, 1% during contract years 6-10, and 2% after contract year 10. There is no credit applied to contracts held less than 1 year. VARIABLE ANNUITY You may choose an annuity payout that fluctuates depending on the investment experience of the variable funding options. We determine the number of annuity units credited to the Contract by dividing the first monthly annuity payment attributable to each variable funding option by the corresponding accumulation unit value as of 14 days before the date annuity payments begin. We use an annuity unit to measure the dollar value of an annuity payment. The number of annuity units (but not their value) remains fixed during the annuity period. 29 32 DETERMINATION OF FIRST ANNUITY PAYMENT. Your Contract contains the tables we use to determine your first monthly annuity payment. If you elect a variable annuity, the amount we apply to it will be the cash surrender value as of 14 days before the date annuity payments. The amount of your first monthly payment depends on the annuity option you elected and the annuitant's adjusted age. Your Contract contains the formula for determining the adjusted age. We determine the total first monthly annuity payment by multiplying the benefit per $1,000 of value shown in the Contract tables (or, if they would produce a larger payment, the tables then in effect on the maturity date) by the number of thousands of dollars of contract value you apply to that annuity option, and factors in an assumed daily net investment factor. We call this your net investment rate. Your net investment rate corresponds to an annual interest rate of 3%. This means that if the annualized investment performance, after expenses, of your variable funding options is less than 3%, then the dollar amount of your variable annuity payment will decrease. However, if the annualized investment performance, after expenses, of your variable funding options is greater than 3%, then the dollar amount of your variable annuity payments will increase. DETERMINATION OF SECOND AND SUBSEQUENT ANNUITY PAYMENTS. The dollar amount of all subsequent annuity payments changes from month to month based on the investment experience of the applicable funding options. The total amount of each annuity payment will equal the sum of the basic payments in each funding option. We determine the actual amounts of these payments by multiplying the number of annuity units we credited to each funding option by the corresponding annuity unit value as of the date 14 days before the date the payment is due. FIXED ANNUITY You may choose a fixed annuity that provides payments which do not vary during the annuity period. We will calculate the dollar amount of the first fixed annuity payment as described under "Variable Annuity," except that the amount we apply to begin the annuity will be your contract value as of the date annuity payments begin. The payout rates we use will always at least equal but not exceed those we show in your Contract. If you have elected the Increasing Benefit Option, the payments will be calculated as above. However, the initial payment will be less than that reflected in the table and the subsequent payments will be increased by the percentage you elected. PAYMENT OPTIONS -------------------------------------------------------------------------------- ELECTION OF OPTIONS While the annuitant is alive, you can change your annuity option selection any time up to the maturity date. Once annuity payments have begun, no further elections are allowed. During the annuitant's lifetime, if you do not elect otherwise before the maturity date, we will pay you (or another designated payee) the first of a series of monthly annuity payments based on the life of the annuitant, in accordance with Annuity Option 2 (Life Annuity with 120 monthly payments assured). For certain qualified contracts, Annuity Option 4 (Joint and Last Survivor Life Annuity -- Annuity Reduced on Death of Primary Payee) will be the automatic option as described in the Contract. The minimum amount that can be placed under an annuity option will be $2,000 unless we agree to a lesser amount. If any monthly periodic payment due is less than $100, the Company reserves the right to make payments at less frequent intervals, or to pay the contract value in a lump-sum. On the maturity date, we will pay the amount due under the Contract in accordance with the payment option that you select. You may choose to receive a single lump-sum payment. You must elect an option in writing, in a form satisfactory to the Company. Any election made during the lifetime of the annuitant must be made by the contract owner. 30 33 VARIABLE ANNUITIZATION FLOOR BENEFIT. (BENEFIT NOT AVAILABLE UNDER 457 PLANS) This benefit may not be available, or may only be available under certain annuity options, if we determine market conditions so dictate. If available, we will guarantee that, regardless of the performance of the funding options selected by you, your annuity payments will never be less than a certain percentage of your first annuity payment. This percentage will vary depending on market conditions, but will never be less than 50%. You may not elect this benefit if you are over age 80. Additionally, you must select from certain funds available under this guarantee. Currently, these funds are the Equity Index Portfolio Class II, the Travelers Quality Bond Portfolio, and the U.S. Government Securities Portfolio. We may, at our discretion, increase or decrease the number of funds available under this benefit. This benefit is not currently available under Annuity Option 5. The benefit is not available with the 5% ANIF under any Option. If you select this benefit, you may not elect to liquidate any portion of your Contract. There is a charge for this guarantee, which will begin upon election of this benefit. This charge will vary based upon market conditions, and will be established at the time the benefit is elected. Once established, the charge will remain level throughout the remainder of the annuitization, and will never increase your annual separate account charge by more than 3% per year. We reserve the right to restrict the amount of contract value to be annuitized under this benefit. ANNUITY OPTIONS Subject to the conditions described in "Election of Options" above, we may pay all or any part of the cash surrender value under one or more of the following annuity options. Payments under the annuity options are generally made on a monthly basis. We may offer additional options. Options 1 through 4 are available for both fixed and/or variable annuities. Option 5 is only available for fixed annuities. INCREASING BENEFIT OPTION. For Fixed Annuities, the annuity payment you receive may be either level (except after death of Primary Payee in Option 4) or increasing. If increasing payments are selected, the initial payment will be less than the corresponding level payment for the same annuity option, but your payments will increase on each contract date anniversary by a percentage chosen by you. You may choose a whole number percentage from one to four. Option 1 -- Life Annuity -- No Refund. The Company will make annuity payments during the lifetime of the annuitant ending with the last payment before death. This option offers the maximum periodic payment, since there is no assurance of a minimum number of payments or provision for a death benefit for beneficiaries. Option 2 -- Life Annuity with 120, 180 or 240 Monthly Payments Assured. The Company will make monthly annuity payments during the lifetime of the annuitant, with the agreement that if, at the death of that person, payments have been made for less than 120, 180 or 240 months as elected, we will continue making payments to the beneficiary during the remainder of the period. Option 3 -- Joint and Last Survivor Life Annuity -- No Refund. The Company will make regular annuity payments during the lifetime of the annuitant and a second person. When either person dies, we will continue making payments to the survivor. No further payments will be made following the death of the survivor. Option 4 -- Joint and Last Survivor Life Annuity -- Annuity Reduced on Death of Primary Payee. The Company will make annuity payments during the lifetimes of the annuitant and a second person. You will designate one as primary payee, and the other will be designated as secondary payee. On the death of the secondary payee, the Company will continue to make monthly annuity payments to the primary payee in the same amount that would have been payable during the joint lifetime of the two persons. On the death of the primary payee, the Company will continue to make annuity payments to the secondary payee in an amount equal to 50% of the payments which would have been made during the lifetime of the primary payee. No further payments will be made once both payees have died. 31 34 Option 5 -- Payments for a Fixed Period. We will make periodic payments for the period selected. Option 6 -- Income Option. We will make a certain number of payments which are not based on the annuitant's lifetime. MISCELLANEOUS CONTRACT PROVISIONS -------------------------------------------------------------------------------- RIGHT TO RETURN You may return the Contract for a full refund of the contract value plus any contract charges and premium taxes you paid (but not any fees and charges the underlying fund assessed) within ten days after you receive it (the "right to return period"). You bear the investment risk of investing in the variable funding options during the right to return period; therefore, the contract value we return may be greater or less than your purchase payment. If you purchase the Contract as an Individual Retirement Annuity, and return it within the first seven days after delivery, we will refund your purchase payment in full; during the remainder of the right to return period, we will refund the contract value (including charges). We will determine the contract value following the close of the business day on which we receive your Contract and a written request for a refund. Where state law requires a longer period, or the return of purchase payments or other variations of this provision, we will comply. Refer to your Contract for any state-specific information. TERMINATION You do not need to make any purchase payments after the first to keep the Contract in effect. However, we reserve the right to terminate the Contract on any business day if your contract value as of that date is less than $2,000 and you have not made purchase payments for at least two years, unless otherwise specified by state law. Termination will not occur until 31 days after we have mailed notice of termination to your last known address and to any assignee of record. If we terminate the Contract, we will pay you the cash surrender value less any applicable taxes. REQUIRED REPORTS As often as required by law, but at least once in each contract year before the due date of the first annuity payment, we will furnish a report showing the number of accumulation units credited to the Contract and the corresponding accumulation unit value(s) as of the report date for each funding option to which the contract owner has allocated amounts during the applicable period. The Company will keep all records required under federal and state laws. SUSPENSION OF PAYMENTS The Company reserves the right to suspend or postpone the date of any payment or determination of values on any business day (1) when the New York Stock Exchange ("the Exchange") is closed; (2) when trading on the Exchange is restricted; (3) when an emergency exists as determined by the SEC so that the sale of securities held in the Separate Account may not reasonably occur or so that the Company may not reasonably determine the value the Separate Account's net assets; or (4) during any other period when the SEC, by order, so permits for the protection of security holders. Payments from the Fixed Account may be delayed up to 6 months. THE SEPARATE ACCOUNTS -------------------------------------------------------------------------------- The Travelers Insurance Company and the Travelers Life and Annuity Company each sponsor separate accounts: Separate Account Five and Separate Account Six, respectively. Both Separate Account Five and Separate Account Six were established on June 8, 1998 and are registered with 32 35 the SEC as unit investment trusts (separate account) under the Investment Company Act of 1940, as amended. We will invest Separate Account assets attributable to the Contracts exclusively in the shares of the variable funding options. We hold the assets of Separate Account Five and Separate Account Six for the exclusive and separate benefit of the owners of each separate account, according to the laws of Connecticut. Income, gains and losses, whether or not realized, from assets allocated to the Separate Account are, in accordance with the Contracts, credited to or charged against the Separate Account without regard to other income, gains and losses of the Company. The assets held by the Separate Account are not chargeable with liabilities arising out of any other business which we may conduct. Obligations under the Contract are obligations of the Company. All investment income and other distributions of the funding options are payable to the Separate Account. We reinvest all such income and/or distributions in shares of the respective funding option at net asset value. Shares of the funding options are currently sold only to life insurance company separate accounts to fund variable annuity and variable life insurance contracts. Shares of the variable funding options are currently sold only to life insurance company separate accounts to fund variable annuity and variable life insurance contracts. Certain variable annuity separate accounts and variable life insurance separate accounts may invest in the funding options simultaneously (called "mixed" and "shared" funding). It is conceivable that in the future it may be disadvantageous to do so. Although the Company and the variable funding options do not currently foresee any such disadvantages either to variable annuity contract owners or variable life policy owners, each variable funding option's Board of Directors intends to monitor events in order to identify any material conflicts between them and to determine what action, if any, should be taken. If a Board of Directors was to conclude that separate funds should be established for variable life and variable annuity separate accounts, the variable annuity contract owners would not bear any of the related expenses, but variable annuity contract owners and variable life insurance policy owners would no longer have the economies of scale resulting from a larger combined fund. PERFORMANCE INFORMATION From time to time, we may advertise several types of historical performance for the Contract's variable funding options. We may advertise the "standardized average annual total returns" of the variable funding option, calculated in a manner prescribed by the SEC, and the "nonstandardized total return," as described below. Specific examples of the performance information appear in the SAI. STANDARDIZED METHOD. We compute quotations of average annual total returns according to a formula in which a hypothetical initial investment of $1,000 is applied to the variable funding option, and then related to ending redeemable values over one-, five-, and ten-year periods, or for a period covering the time during which the funding option has been in existence, if less. Purchase payment credits are not included in these calculations. These quotations reflect the deduction of all recurring charges during each period (on a pro rata basis in the case of fractional periods). We convert the deduction for the annual contract administrative charge to a percentage of assets based on the actual fee collected, divided by the average net assets for Contracts sold. Each quotation assumes a total redemption at the end of each period with the applicable withdrawal charge deducted at that time. NONSTANDARDIZED METHOD. We calculate nonstandardized "total returns" in a similar manner based on the performance of the funding options over a period of time, usually for the calendar year-to-date, and for the past one-, three-, five- and ten-year periods. Nonstandardized total returns will not reflect the deduction of the annual contract administrative charge, which, if reflected, would decrease the level of performance shown. Purchase payment credits are not included in these calculations. These returns also do not reflect the withdrawal charge because we designed the Contract for long-term investment. 33 36 For underlying funds that were in existence before they became available as a funding option, the nonstandardized average annual total return quotations reflects the investment performance that such funding options would have achieved (reduced by the applicable charges) had the underlying fund been held under the Contract for the period quoted. The total return quotations are based upon historical earnings and are not necessarily representative of future performance. GENERAL. Within the guidelines prescribed by the SEC and the National Association of Securities Dealers, Inc. ("NASD"), performance information may be quoted numerically or may be presented in a table, graph or other illustration. Advertisements may include data comparing performance to well-known indices of market performance (including, but not limited to, the Dow Jones Industrial Average, the Standard & Poor's (S&P) 500 Index, the S&P 400 Index, the Lehman Brothers Long T-Bond Index, the Russell 1000, 2000 and 3000 Indices, the Value Line Index, and the Morgan Stanley Capital International's EAFE Index). Advertisements may also include published editorial comments and performance rankings compiled by independent organizations (including, but not limited to, Lipper Analytical Services, Inc. and Morningstar, Inc.) and publications that monitor the performance of the Separate Account and the variable funding options. FEDERAL TAX CONSIDERATIONS -------------------------------------------------------------------------------- The following general discussion of the federal income tax consequences under this Contract is not intended to cover all situations, and is not meant to provide tax advice. Because of the complexity of the law and the fact that the tax results will vary depending on many factors, you should consult your tax adviser regarding your personal situation. For your information, a more detailed tax discussion is contained in the SAI. GENERAL TAXATION OF ANNUITIES Congress has recognized the value of saving for retirement by providing certain tax benefits, in the form of tax deferral, for money put into an annuity. The Internal Revenue Code (Code) governs how this money is ultimately taxed, depending upon the type of contract, qualified or non-qualified, and the manner in which the money is distributed, as briefly described below. TAX-FREE EXCHANGES: The Internal Revenue Code provides that, generally, no gain or loss is recognized when an annuity contract is received in exchange for a life, endowment, or annuity contract. Since different annuity contracts have different expenses, fees and benefits, a tax-free exchange could result in your investment becoming subject to higher or lower fees and/or expenses. QUALIFIED ANNUITY CONTRACTS Under a qualified annuity, since amounts paid into the contract have generally not yet been taxed, the full amount of all distributions, including lump-sum withdrawals and annuity payments, are generally taxed at the ordinary income tax rate unless the distribution is transferred to an eligible rollover account or contract. The Contract is available as a vehicle for IRA rollovers and for other qualified contracts. There are special rules which govern the taxation of qualified contracts, including withdrawal restrictions, requirements for mandatory distributions, and contribution limits. We have provided a more complete discussion in the SAI. The Contract includes one or more optional enhanced death benefits that in some cases may exceed the greater of the purchase payments or the contract value. The IRS has not reviewed the Contract for qualification as an IRA, and has not addressed in a ruling of general applicability, whether a death benefit such as the optional death benefit(s) in the Contract comports with IRA qualification requirements. Although Travelers regards the optional enhanced death benefit as a permissible benefit under an IRA, the IRS may take a contrary position regarding tax qualification resulting in deemed distributions and penalty taxes. You should consult your tax advisor prior to selecting any optional enhanced death benefit for an IRA. 34 37 PENALTY TAX FOR PREMATURE DISTRIBUTIONS Taxable distributions taken before the contract owner has reached the age of 59 1/2 will be subject to a 10% additional tax penalty unless the distribution is taken in a series of periodic distributions, for life or life expectancy, or unless the distribution follows the death or disability of the contract owner. Other exceptions may be available in certain qualified plans. DIVERSIFICATION REQUIREMENTS FOR VARIABLE ANNUITIES The Code requires that any nonqualified variable annuity contracts based on a separate account shall not be treated as an annuity for any period if investments made in the account are not adequately diversified. Final tax regulations define how separate accounts must be diversified. The Company monitors the diversification of investments constantly and believes that its accounts are adequately diversified. The consequence of any failure to diversify is essentially the loss to the contract owner of tax deferred treatment. The Company intends to administer all contracts subject to this provision of law in a manner that will maintain adequate diversification. OWNERSHIP OF THE INVESTMENTS In certain circumstances, owners of variable annuity contracts have been considered to be the owners of the assets of the underlying separate account for Federal income tax purposes due to their ability to exercise investment control over those assets. When this is the case, the contract owners have been currently taxed on income and gains attributable to the variable account assets. There is little guidance in this area, and some features of the Contract, such as the flexibility of the contract owner to allocate premium payments and transfer amounts among the funding options, have not been addressed in public rulings. While we believe that the Contract does not give the contract owner investment control over separate account assets, we reserve the right to modify the Contract as necessary to prevent a contract owner from being treated as the owner of the separate account assets supporting the Contract. MANDATORY DISTRIBUTIONS FOR QUALIFIED PLANS Federal tax law requires that minimum annual distributions begin by April 1st of the calendar year following the calendar year in which an IRA owner attains age 70 1/2. Participants in qualified plans and 403(b) annuities may defer minimum distributions until the later of April 1st of the calendar year following the calendar year in which they attain age 70 1/2 or the year of retirement. Distributions must begin or be continued according to required patterns following the death of the contract owner or annuitant of both qualified and nonqualified annuities. TAXATION OF DEATH BENEFIT PROCEEDS Amounts may be distributed from a Contract because of the death of an owner or annuitant. Generally, such amounts are includible in the income of the recipient as follows: (i) if distributed in a lump sum, they are taxed in the same manner as a full surrender of the contract; of (ii) if distributed under a payment option, they are taxed in the same way as annuity payments. AVAILABLE INFORMATION -------------------------------------------------------------------------------- The Companies are both subject to the information requirements of the Securities and Exchange Act of 1934 ("the 1934 Act"), as amended, and file reports, proxy statements and other information with the Securities and Exchange Commission ("Commission"). You may read and copy this information and other information at the following locations: - public reference facilities of the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. - the Commission's Regional Offices located at Seven World Trade Center, New York, New York 10048, 35 38 - the Commission's Regional Offices located at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Under the Securities Act of 1933, the Companies have each filed with the Commission registration statements (the "Registration Statement") relating to the Contracts offered by this Prospectus. This Prospectus has been filed as a part of the Registration Statement and does not contain all of the information set forth in the Registration Statement and the exhibits. Reference is hereby made to such Registration Statement and exhibits for further information about the Companies and the Contracts. The Registration Statement and the exhibits may be inspected and copied as described above. Although the Companies each furnish the Annual Reports on Form 10-K for the year ended December 31, 2000 to owners of contracts or certificates, we do not plan to furnish subsequent annual reports containing financial information to the owners of contracts or certificates described in this Prospectus. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE -------------------------------------------------------------------------------- Each Company's latest Annual Report on Form 10-K has been filed with the Commission. They are both incorporated by reference into this Prospectus and a copy of your issuing Company's 10-K must accompany this Prospectus. The Forms 10-K for the fiscal year ended December 31, 2000 contain additional information about each Company including audited financial statements for the latest fiscal year. The Travelers Insurance Company filed its Form 10-K on March 14, 2001 via Edgar, File No. 33-33691. The Travelers Life and Annuity Company filed its Form 10-K on March 14, 2001 via Edgar; File No. 33-58677. If requested, we will furnish, without charge, a copy of any and all of the documents incorporated by reference, other than exhibits to those documents (unless such exhibits are specifically incorporated by reference in those documents). You may direct your requests to: The Travelers Insurance Company, One Tower Square, Hartford, Connecticut 06183-5030, Attention: Annuity Services. The telephone number is (860) 422-3985. You may also obtain copies of any documents, incorporated by reference into this prospectus by accessing the SEC's website (http://www.sec.gov). OTHER INFORMATION -------------------------------------------------------------------------------- THE INSURANCE COMPANIES Please refer to your Contract or the first page of the Summary of this prospectus to determine which Company issued your Contract. The Travelers Insurance Company is a stock insurance company chartered in 1864 in Connecticut and continuously engaged in the insurance business since that time. It 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 is an indirect wholly owned subsidiary of Citigroup Inc. The Company's Home Office is located at One Tower Square, Hartford, Connecticut 06183. The Travelers Life and Annuity Company is a stock insurance company chartered in 1973 in Connecticut and continuously engaged in the insurance business since that time. It is licensed to conduct life insurance business in a majority of the states of the United States, the District of Columbia and Puerto Rico, and intends to seek licensure in the remaining states, except New York. The Company is an indirect wholly owned subsidiary of Citigroup Inc. The Company's Home Office is located at One Tower Square, Hartford, Connecticut 06183. 36 39 FINANCIAL STATEMENTS The financial statements for the Company and its separate account are located in the Statement of Additional Information. DISTRIBUTION OF VARIABLE ANNUITY CONTRACTS We intend to sell the Contracts in all jurisdictions where we are licensed to do business and where the Contract is approved. Any registered representative of affiliated or independent broker-dealers who sell the Contracts will be qualified to sell variable annuities under applicable federal and state laws. Each broker-dealer is registered with the SEC under the Securities Exchange Act of 1934, and all are members of the NASD. The principal underwriter of the Contracts is our affiliate, Travelers Distribution LLC, One Tower Square, Hartford, CT. Up-front compensation paid to sales representatives will not exceed 7% of the purchase payments made under the Contracts. If asset based compensation is paid, it will not exceed 2% of the average account value annually. From time to time, we may pay or permit other promotional incentives, in cash, credit or other compensation. CONFORMITY WITH STATE AND FEDERAL LAWS The laws of the state in which we deliver a Contract govern that Contract. Where a state has not approved a contract feature or funding option, it will not be available in that state. Any paid-up annuity, cash surrender value or death benefits that are available under the Contract are not less than the minimum benefits required by the statutes of the state in which we delivered the Contract. We reserve the right to make any changes, including retroactive changes, in the Contract to the extent that the change is required to meet the requirements of any law or regulation issued by any governmental agency to which the Company, the Contract or the contract owner is subject. VOTING RIGHTS The Company is the legal owner of the shares of the underlying funds. However, we believe that when an underlying fund solicits proxies in conjunction with a vote of shareholders we are required to obtain from you and from other owners 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. Should we determine that we are no longer required to comply with the above, we will vote on the shares in our own right. LEGAL PROCEEDINGS AND OPINIONS 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 Companies, their 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 passed on by the General Counsel of the Companies. THE TRAVELERS INSURANCE COMPANY There are no pending legal proceedings affecting the Separate Account. There is one pending material legal proceeding, other than ordinary routine litigation incidental to business, to which the Company is a party. In March 1997, a purported class action entitled Patterman v. The Travelers, Inc., et al. was commenced in the Superior Court of Richmond County, Georgia, alleging, among other things, violations of the Georgia RICO statute and other state laws by an affiliate of the Company, Primerica Financial Services, Inc. and certain of its affiliates. Plaintiffs seek unspecified compensatory and punitive damages and other relief. From February 1998 through April 2000, various motions for transfer of the lawsuit were heard and appealed. In April 2000, the matter was remanded to the Superior Court of Richmond County by the Georgia Supreme Court. Also, in April 37 40 2000 defendants moved for summary judgement on all counts of the complaint. Discovery commenced in May 2000. Defendants intend to vigorously contest the litigation. THE TRAVELERS LIFE AND ANNUITY COMPANY There are no pending material legal proceedings affecting the Separate Account, the principal underwriter or the Company. 38 THIS PAGE INTENTIONALLY LEFT BLANK. 41 APPENDIX A CONDENSED FINANCIAL INFORMATION (1999) -------------------------------------------------------------------------------- THE TRAVELERS SEPARATE ACCOUNT FIVE FOR VARIABLE ANNUITIES AIR = ASSUMED INVESTMENT RATE FC = FLOOR BENEFIT CHARGE STANDARD = STANDARD DEATH BENEFIT OPTIONAL = OPTIONAL DEATH BENEFIT
PERIOD FROM JUNE 9, 1999* TO DECEMBER 31, 1999 STANDARD STANDARD OPTIONAL OPTIONAL STANDARD STANDARD OPTIONAL OPTIONAL 3%AIR, 3%AIR, 3%AIR, 3%AIR, 3%AIR 5%AIR 3%AIR 5%AIR .62FC 1.1%FC .83FC 1.40%FC --------------------------------------------------------------------------------------------------------------------------------- HIGH YIELD BOND TRUST (9/99) Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year......... 0.980 0.980 0.977 0.977 -- -- -- -- Number of units outstanding at end of year......................... -- -- 93,082 -- -- -- -- -- MANAGED ASSETS TRUST (6/99) Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year......... 1.102 1.102 1.098 1.098 -- -- -- -- Number of units outstanding at end of year......................... 13,609 -- 899,389 -- -- -- -- -- MONEY MARKET PORTFOLIO (9/99) Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year......... 1.032 1.032 1.028 1.028 -- -- -- -- Number of units outstanding at end of year......................... 36,453 -- 134,132 -- -- -- -- -- AMERICAN ODYSSEY FUNDS, INC.* CORE EQUITY FUND (9/99)* Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year......... 0.995 0.995 0.992 0.992 -- -- -- -- Number of units outstanding at end of year......................... 21,459 -- 68,472 -- -- -- -- -- EMERGING OPPORTUNITIES FUND (9/99)* Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year......... 1.465 1.465 1.460 1.460 -- -- -- -- Number of units outstanding at end of year......................... 6,201 -- 29,981 -- -- -- -- -- GLOBAL HIGH-YIELD BOND FUND (12/99)++ Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year......... 1.070 1.070 1.066 1.066 -- -- -- -- Number of units outstanding at end of year......................... -- -- 18,317 -- -- -- -- -- INTERMEDIATE-TERM BOND FUND (8/99)++ Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year......... 1.005 1.005 1.002 1.002 -- -- -- -- Number of units outstanding at end of year......................... 73,160 -- 44,935 -- -- -- -- -- INTERNATIONAL EQUITY FUND (7/99)* Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year......... 1.272 1.272 1.267 1.267 -- -- -- -- Number of units outstanding at end of year......................... 6,933 -- 91,971 -- -- -- -- -- LONG-TERM BOND FUND (9/99)* Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year......... 0.979 0.979 0.976 0.976 -- -- -- -- Number of units outstanding at end of year......................... 37,502 -- 49,414 -- -- -- -- -- DELAWARE GROUP PREMIUM FUND REIT SERIES Unit Value at beginning of year... -- -- -- -- -- -- -- -- Unit Value at end of year......... -- -- -- -- -- -- -- -- Number of units outstanding at end of year......................... -- -- -- -- -- -- -- -- SMALL CAP VALUE SERIES (10/99) Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year......... 0.991 0.991 0.988 0.988 -- -- -- -- Number of units outstanding at end of year......................... -- -- 3,413 -- -- -- -- --
A-1 42 APPENDIX A CONDENSED FINANCIAL INFORMATION (1999) -------------------------------------------------------------------------------- THE TRAVELERS SEPARATE ACCOUNT FIVE FOR VARIABLE ANNUITIES (CONTINUED)
PERIOD FROM JUNE 9, 1999* TO DECEMBER 31, 1999 STANDARD STANDARD OPTIONAL OPTIONAL STANDARD STANDARD OPTIONAL OPTIONAL 3%AIR, 3%AIR, 3%AIR, 3%AIR, 3%AIR 5%AIR 3%AIR 5%AIR .62FC 1.1%FC .83FC 1.40%FC --------------------------------------------------------------------------------------------------------------------------------- DREYFUS VARIABLE INVESTMENT FUND CAPITAL APPRECIATION PORTFOLIO** (7/99) Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year......... 1.081 1.081 1.077 1.077 -- -- -- -- Number of units outstanding at end of year......................... 24,552 -- 320,468 -- -- -- -- -- SMALL CAP PORTFOLIO (10/99) Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year......... 1.240 1.240 1.236 1.236 -- -- -- -- Number of units outstanding at end of year......................... -- -- 37,863 -- -- -- -- -- GREENWICH STREET SERIES FUND EQUITY INDEX PORTFOLIO II (7/99) Unit Value at beginning of year... 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 Unit Value at end of year......... 1.133 1.133 1.129 1.129 1.127 1.123 1.122 1.117 Number of units outstanding at end of year......................... 13,350 -- 317,090 -- -- -- -- -- THE MONTGOMERY FUNDS III MONTGOMERY VARIABLE SERIES; GROWTH FUND (10/99)+ Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year......... 1.208 1.208 1.204 1.204 -- -- -- -- Number of units outstanding at end of year......................... -- -- 22,857 -- -- -- -- -- OCC ACCUMULATION TRUST EQUITY PORTFOLIO+ Unit Value at beginning of year... -- -- -- -- -- -- -- -- Unit Value at end of year......... -- -- -- -- -- -- -- -- Number of units outstanding at end of year......................... -- -- -- -- -- -- -- -- SALOMON BROTHERS VARIABLE SERIES FUNDS, INC. CAPITAL FUND (7/98) Unit Value at beginning of year... -- -- -- -- -- -- -- -- Unit Value at end of year......... -- -- -- -- -- -- -- -- Number of units outstanding at end of year......................... -- -- -- -- -- -- -- -- INVESTORS FUND (10/99) Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year......... 1.088 1.088 1.084 1.084 -- -- -- -- Number of units outstanding at end of year......................... 13,535 -- 6,020 -- -- -- -- -- TOTAL RETURN FUND Unit Value at beginning of year... -- -- -- -- -- -- -- -- Unit Value at end of year......... -- -- -- -- -- -- -- -- Number of units outstanding at end of year......................... -- -- -- -- -- -- -- -- STRONG VARIABLE INSURANCE FUNDS, INC. STRONG SCHAFER VALUE FUND II (7/98)* Unit Value at beginning of year... -- -- -- -- -- -- -- -- Unit Value at end of year......... -- -- -- -- -- -- -- -- Number of units outstanding at end of year......................... -- -- -- -- -- -- -- -- TRAVELERS SERIES FUND INC. ALLIANCE GROWTH PORTFOLIO (7/99) Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year......... 1.303 1.303 1.298 1.298 -- -- -- -- Number of units outstanding at end of year......................... 17,222 -- 226,122 -- -- -- -- -- MFS TOTAL RETURN PORTFOLIO (7/99) Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year......... 0.994 0.994 0.991 0.991 -- -- -- -- Number of units outstanding at end of year......................... -- -- 114,042 -- -- -- -- --
A-2 43 APPENDIX A CONDENSED FINANCIAL INFORMATION (1999) -------------------------------------------------------------------------------- THE TRAVELERS SEPARATE ACCOUNT FIVE FOR VARIABLE ANNUITIES (CONTINUED)
PERIOD FROM JUNE 9, 1999* TO DECEMBER 31, 1999 STANDARD STANDARD OPTIONAL OPTIONAL STANDARD STANDARD OPTIONAL OPTIONAL 3%AIR, 3%AIR, 3%AIR, 3%AIR, 3%AIR 5%AIR 3%AIR 5%AIR .62FC 1.1%FC .83FC 1.40%FC --------------------------------------------------------------------------------------------------------------------------------- <->TRAVELERS SERIES FUND INC. (CONT.) PUTNAM DIVERSIFIED INCOME PORTFOLIO () Unit Value at beginning of year... -- -- -- -- -- -- -- -- Unit Value at end of year......... -- -- -- -- -- -- -- -- Number of units outstanding at end of year......................... -- -- -- -- -- -- -- -- SMITH BARNEY HIGH INCOME PORTFOLIO (8/99) Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year......... 1.007 1.007 1.004 1.004 -- -- -- -- Number of units outstanding at end of year......................... 20,231 -- -- -- -- -- -- -- SMITH BARNEY INTERNATIONAL EQUITY PORTFOLIO (12/99) Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year......... 1.569 1.569 1.563 1.563 -- -- -- -- Number of units outstanding at end of year......................... -- -- 53,669 -- -- -- -- -- SMITH BARNEY LARGE CAPITALIZATION GROWTH PORTFOLIO (10/99) Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year......... 1.132 1.132 1.128 1.128 -- -- -- -- Number of units outstanding at end of year......................... -- -- 77,927 -- -- -- -- -- THE TRAVELERS SERIES TRUST DISCIPLINED MID CAP STOCK PORTFOLIO (8/99) Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year......... 1.132 1.132 1.129 1.129 -- -- -- -- Number of units outstanding at end of year......................... 4,950 -- 13,503 -- -- -- -- -- DISCIPLINED SMALL CAP STOCK PORTFOLIO ()+ Unit Value at beginning of year... -- -- -- -- -- -- -- -- Unit Value at end of year......... -- -- -- -- -- -- -- -- Number of units outstanding at end of year......................... -- -- -- -- -- -- -- -- EQUITY INCOME PORTFOLIO (7/99) Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year......... 1.021 1.021 1.017 1.017 -- -- -- -- Number of units outstanding at end of year......................... 12,381 -- 255,091 -- -- -- -- -- FEDERATED STOCK PORTFOLIO () Unit Value at beginning of year... -- -- -- -- -- -- -- -- Unit Value at end of year......... -- -- -- -- -- -- -- -- Number of units outstanding at end of year......................... -- -- -- -- -- -- -- -- LARGE CAP PORTFOLIO (7/99) Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year......... 1.224 1.224 1.219 1.219 -- -- -- -- Number of units outstanding at end of year......................... 12,719 -- 89,328 -- -- -- -- -- LAZARD INTERNATIONAL STOCK PORTFOLIO (8/99) Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year......... 1.194 1.194 1.190 1.190 -- -- -- -- Number of units outstanding at end of year......................... 4,591 -- -- -- -- -- -- -- MFS MID CAP GROWTH PORTFOLIO (10/99) Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year......... 1.603 1.603 1.598 1.598 -- -- -- -- Number of units outstanding at end of year......................... -- -- 91,838 -- -- -- -- -- MFS RESEARCH PORTFOLIO () Unit Value at beginning of year... -- -- -- -- -- -- -- -- Unit Value at end of year......... -- -- -- -- -- -- -- -- Number of units outstanding at end of year......................... -- -- -- -- -- -- -- --
A-3 44 APPENDIX A CONDENSED FINANCIAL INFORMATION (1999) -------------------------------------------------------------------------------- THE TRAVELERS SEPARATE ACCOUNT FIVE FOR VARIABLE ANNUITIES (CONTINUED)
PERIOD FROM JUNE 9, 1999* TO DECEMBER 31, 1999 STANDARD STANDARD OPTIONAL OPTIONAL STANDARD STANDARD OPTIONAL OPTIONAL 3%AIR, 3%AIR, 3%AIR, 3%AIR, 3%AIR 5%AIR 3%AIR 5%AIR .62FC 1.1%FC .83FC 1.40%FC --------------------------------------------------------------------------------------------------------------------------------- <->THE TRAVELERS SERIES TRUST (CONT.) SOCIAL AWARENESS PORTFOLIO (7/99) Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year......... 1.115 1.115 1.111 1.111 -- -- -- -- Number of units outstanding at end of year......................... 14,167 -- 57,036 -- -- -- -- -- STRATEGIC STOCK PORTFOLIO+ Unit Value at beginning of year... -- -- -- -- -- -- -- -- Unit Value at end of year......... -- -- -- -- -- -- -- -- Number of units outstanding at end of year......................... -- -- -- -- -- -- -- -- TRAVELERS QUALITY BOND PORTFOLIO (8/99) Unit Value at beginning of year... 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 Unit Value at end of year......... 1.002 1.002 0.998 0.998 1.000 0.999 0.996 0.994 Number of units outstanding at end of year......................... 19,941 -- 8,527 -- -- -- -- -- U.S. GOVERNMENT SECURITIES PORTFOLIO (8/99) Unit Value at beginning of year... 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 Unit Value at end of year......... 0.968 0.968 0.965 0.965 0.966 0.965 0.962 0.961 Number of units outstanding at end of year......................... 20,423 -- 75,867 -- -- -- -- -- UTILITIES PORTFOLIO (8/99) Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year......... 0.959 0.959 0.956 0.956 -- -- -- -- Number of units outstanding at end of year......................... -- -- 2,049 -- -- -- -- -- WARBURG PINCUS TRUST* EMERGING MARKETS PORTFOLIO (10/99) Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year......... 1.506 1.506 1.502 1.502 -- -- -- -- Number of units outstanding at end of year......................... -- -- 42,199 -- -- -- -- --
A-4 45 APPENDIX A CONDENSED FINANCIAL INFORMATION (2000) -------------------------------------------------------------------------------- THE TRAVELERS SEPARATE ACCOUNT FIVE FOR VARIABLE ANNUITIES
YEAR ENDED DECEMBER 31, 2000 STANDARD STANDARD OPTIONAL STANDARD STANDARD OPTIONAL OPTIONAL 3%, 3%, OPTIONAL 3%, 3% 5% 3% 5% .62FC 1.1%FC 3%, .83FC 1.40%FC --------------------------------------------------------------------------------------------------------------------------------- CAPITAL APPRECIATION FUND (5/00) Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year......... 0.745 0.745 0.743 0.743 -- -- -- -- Number of units outstanding at end of year......................... -- -- 978,236 -- -- -- -- -- HIGH YIELD BOND TRUST (9/99) Unit Value at beginning of year... 0.980 0.980 0.977 0.977 -- -- -- -- Unit Value at end of year......... 0.982 0.982 0.974 0.974 -- -- -- -- Number of units outstanding at end of year......................... -- -- 311,004 -- -- -- -- -- MANAGED ASSETS TRUST (6/99) Unit Value at beginning of year... 1.102 1.102 1.098 1.098 -- -- -- -- Unit Value at end of year......... 1.076 1.076 1.067 1.067 -- -- -- -- Number of units outstanding at end of year......................... 20,767 -- 1,799,521 -- -- -- -- -- MONEY MARKET PORTFOLIO (9/99) Unit Value at beginning of year... 1.032 1.032 1.028 1.028 -- -- -- -- Unit Value at end of year......... 1.087 1.087 1.078 1.078 -- -- -- -- Number of units outstanding at end of year......................... 76,073 -- 911,055 -- -- -- -- -- AMERICAN ODYSSEY FUNDS, INC.* CORE EQUITY FUND (9/99)* Unit Value at beginning of year... 0.995 0.995 0.992 0.992 -- -- -- -- Unit Value at end of year......... 0.840 0.840 0.833 0.833 -- -- -- -- Number of units outstanding at end of year......................... 10,384 -- 626,483 -- -- -- -- -- EMERGING OPPORTUNITIES FUND (9/99)* Unit Value at beginning of year... 1.465 1.465 1.460 1.460 -- -- -- -- Unit Value at end of year......... 1.600 1.600 1.587 1.587 -- -- -- -- Number of units outstanding at end of year......................... 1,472 -- 235,839 -- -- -- -- -- GLOBAL HIGH-YIELD BOND FUND (12/99)++ Unit Value at beginning of year... 1.070 1.070 1.066 1.066 -- -- -- -- Unit Value at end of year......... 1.021 1.021 1.012 1.012 -- -- -- -- Number of units outstanding at end of year......................... -- -- 95,298 -- -- -- -- -- INTERMEDIATE-TERM BOND FUND (8/99)++ Unit Value at beginning of year... 1.005 1.005 1.002 1.002 -- -- -- -- Unit Value at end of year......... 1.063 1.063 1.054 1.054 -- -- -- -- Number of units outstanding at end of year......................... 16,410 -- 369,677 -- -- -- -- -- INTERNATIONAL EQUITY FUND (7/99)* Unit Value at beginning of year... 1.272 1.272 1.267 1.267 -- -- -- -- Unit Value at end of year......... 1.160 1.160 1.151 1.151 -- -- -- -- Number of units outstanding at end of year......................... 1,916 -- 347,387 -- -- -- -- -- LONG-TERM BOND FUND (9/99)* Unit Value at beginning of year... 0.979 0.979 0.976 0.976 -- -- -- -- Unit Value at end of year......... 1.092 1.092 1.083 1.083 -- -- -- -- Number of units outstanding at end of year......................... 12,041 -- 409,109 -- -- -- -- -- DELAWARE GROUP PREMIUM FUND, INC. REIT SERIES (9/00) Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year......... 1.221 1.221 1.213 1.213 -- -- -- -- Number of units outstanding at end of year......................... -- -- 50,532 -- -- -- -- -- SMALL CAP VALUE SERIES (10/99) Unit Value at beginning of year... 0.991 0.991 0.988 0.988 -- -- -- -- Unit Value at end of year......... 1.162 1.162 1.153 1.153 -- -- -- -- Number of units outstanding at end of year......................... -- -- 39,689 -- -- -- -- --
A-5 46 APPENDIX A CONDENSED FINANCIAL INFORMATION (2000) -------------------------------------------------------------------------------- THE TRAVELERS SEPARATE ACCOUNT FIVE FOR VARIABLE ANNUITIES (CONTINUED)
YEAR ENDED DECEMBER 31, 2000 STANDARD STANDARD OPTIONAL STANDARD STANDARD OPTIONAL OPTIONAL 3%, 3%, OPTIONAL 3%, 3% 5% 3% 5% .62FC 1.1%FC 3%, .83FC 1.40%FC --------------------------------------------------------------------------------------------------------------------------------- DREYFUS VARIABLE INVESTMENT FUND CAPITAL APPRECIATION PORTFOLIO (7/99) Unit Value at beginning of year... 1.081 1.081 1.077 1.077 -- -- -- -- Unit Value at end of year......... 1.065 1.065 1.057 1.057 -- -- -- -- Number of units outstanding at end of year......................... 24,552 -- 509,909 -- -- -- -- -- SMALL CAP PORTFOLIO (10/99) Unit Value at beginning of year... 1.240 1.240 1.236 1.236 -- -- -- -- Unit Value at end of year......... 1.394 1.394 1.383 1.383 -- -- -- -- Number of units outstanding at end of year......................... 3,246 -- 349,550 -- -- -- -- -- GREENWICH STREET SERIES FUND EQUITY INDEX PORTFOLIO II (7/99) Unit Value at beginning of year... 1.133 1.133 1.129 1.129 1.127 1.123 1.122 1.117 Unit Value at end of year......... 1.019 1.019 1.011 1.011 1.008 0.999 0.996 0.986 Number of units outstanding at end of year......................... 14,389 -- 613,182 -- -- -- -- -- JANUS ASPEN SERIES WORLDWIDE GROWTH PORTFOLIO (5/00) Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year......... 0.801 0.801 0.799 0.799 -- -- -- -- Number of units outstanding at end of year......................... -- -- 409,725 -- -- -- -- -- THE MONTGOMERY FUNDS III MONTGOMERY VARIABLE SERIES; GROWTH FUND (10/99)+ Unit Value at beginning of year... 1.208 1.208 1.204 1.204 -- -- -- -- Unit Value at end of year......... 1.090 1.090 1.082 1.082 -- -- -- -- Number of units outstanding at end of year......................... -- -- 78,405 -- -- -- -- -- OCC ACCUMULATION TRUST EQUITY PORTFOLIO (1/00)+ Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year......... 1.014 1.014 1.007 1.007 -- -- -- -- Number of units outstanding at end of year......................... -- -- 8,202 -- -- -- -- -- SALOMON BROTHERS VARIABLE SERIES FUNDS, INC. CAPITAL FUND (4/00) Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year......... 1.072 1.072 1.064 1.064 -- -- -- -- Number of units outstanding at end of year......................... -- -- 62,150 -- -- -- -- -- INVESTORS FUND (10/99) Unit Value at beginning of year... 1.088 1.088 1.084 1.084 -- -- -- -- Unit Value at end of year......... 1.244 1.244 1.234 1.234 -- -- -- -- Number of units outstanding at end of year......................... -- -- 55,437 -- -- -- -- -- TOTAL RETURN FUND (9/00) Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year......... 1.072 1.072 1.064 1.064 -- -- -- -- Number of units outstanding at end of year......................... -- -- 9,945 -- -- -- -- -- STRONG VARIABLE INSURANCE FUNDS, INC. STRONG SCHAFER VALUE FUND II (3/00)* Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year......... 0.938 0.938 0.932 0.932 -- -- -- -- Number of units outstanding at end of year......................... -- -- 24,959 -- -- -- -- -- TRAVELERS SERIES FUND, INC. ALLIANCE GROWTH PORTFOLIO (7/99) Unit Value at beginning of year... 1.303 1.303 1.298 1.298 -- -- -- -- Unit Value at end of year......... 1.057 1.057 1.048 1.048 -- -- -- -- Number of units outstanding at end of year......................... 56,806 -- 987,185 -- -- -- -- --
A-6 47 APPENDIX A CONDENSED FINANCIAL INFORMATION (2000) -------------------------------------------------------------------------------- THE TRAVELERS SEPARATE ACCOUNT FIVE FOR VARIABLE ANNUITIES (CONTINUED)
YEAR ENDED DECEMBER 31, 2000 STANDARD STANDARD OPTIONAL STANDARD STANDARD OPTIONAL OPTIONAL 3%, 3%, OPTIONAL 3%, 3% 5% 3% 5% .62FC 1.1%FC 3%, .83FC 1.40%FC --------------------------------------------------------------------------------------------------------------------------------- <->TRAVELERS SERIES FUND, INC. (CONT.) MFS TOTAL RETURN PORTFOLIO (7/99) Unit Value at beginning of year... 0.994 0.994 0.991 0.991 -- -- -- -- Unit Value at end of year......... 1.150 1.150 1.142 1.142 -- -- -- -- Number of units outstanding at end of year......................... -- -- 487,322 -- -- -- -- -- PUTNAM DIVERSIFIED INCOME PORTFOLIO Unit Value at beginning of year... -- -- -- -- -- -- -- -- Unit Value at end of year......... -- -- -- -- -- -- -- -- Number of units outstanding at end of year......................... -- -- -- -- -- -- -- -- SMITH BARNEY HIGH INCOME PORTFOLIO (8/99) Unit Value at beginning of year... 1.007 1.007 1.004 1.004 -- -- -- -- Unit Value at end of year......... 0.918 0.918 0.912 0.912 -- -- -- -- Number of units outstanding at end of year......................... 20,231 -- 52,398 -- -- -- -- -- SMITH BARNEY INTERNATIONAL EQUITY PORTFOLIO (12/99)* Unit Value at beginning of year... 1.569 1.569 1.563 1.563 -- -- -- -- Unit Value at end of year......... 1.186 1.186 1.177 1.177 -- -- -- -- Number of units outstanding at end of year......................... 3,291 -- 247,679 -- -- -- -- -- SMITH BARNEY LARGE CAPITALIZATION GROWTH PORTFOLIO (10/99) Unit Value at beginning of year... 1.132 1.132 1.128 1.128 -- -- -- -- Unit Value at end of year......... 1.045 1.045 1.037 1.037 -- -- -- -- Number of units outstanding at end of year......................... -- -- 178,384 -- -- -- -- -- THE TRAVELERS SERIES TRUST DISCIPLINED MID CAP STOCK PORTFOLIO (8/99) Unit Value at beginning of year... 1.132 1.132 1.129 1.129 -- -- -- -- Unit Value at end of year......... 1.310 1.310 1.301 1.301 -- -- -- -- Number of units outstanding at end of year......................... 4,950 -- 88,564 -- -- -- -- -- DISCIPLINED SMALL CAP STOCK PORTFOLIO+ Unit Value at beginning of year... -- -- -- -- -- -- -- -- Unit Value at end of year......... -- -- -- -- -- -- -- -- Number of units outstanding at end of year......................... -- -- -- -- -- -- -- -- EQUITY INCOME PORTFOLIO (7/99) Unit Value at beginning of year... 1.021 1.021 1.017 1.017 -- -- -- -- Unit Value at end of year......... 1.105 1.105 1.096 1.096 -- -- -- -- Number of units outstanding at end of year......................... 12,381 -- 437,309 -- -- -- -- -- FEDERATED STOCK PORTFOLIO Unit Value at beginning of year... -- -- -- -- -- -- -- -- Unit Value at end of year......... -- -- -- -- -- -- -- -- Number of units outstanding at end of year......................... -- -- -- -- -- -- -- -- LARGE CAP PORTFOLIO (7/99) Unit Value at beginning of year... 1.224 1.224 1.219 1.219 -- -- -- -- Unit Value at end of year......... 1.038 1.038 1.030 1.030 -- -- -- -- Number of units outstanding at end of year......................... 52,127 -- 804,274 -- -- -- -- -- LAZARD INTERNATIONAL STOCK PORTFOLIO (8/99) Unit Value at beginning of year... 1.194 1.194 1.190 1.190 -- -- -- -- Unit Value at end of year......... 1.049 1.049 1.041 1.041 -- -- -- -- Number of units outstanding at end of year......................... 4,591 -- 17,988 -- -- -- -- -- MFS MID CAP GROWTH PORTFOLIO (10/99) Unit Value at beginning of year... 1.603 1.603 1.598 1.598 -- -- -- -- Unit Value at end of year......... 1.739 1.739 1.726 1.726 -- -- -- -- Number of units outstanding at end of year......................... 30,494 -- 504,511 -- -- -- -- --
A-7 48 APPENDIX A CONDENSED FINANCIAL INFORMATION (2000) -------------------------------------------------------------------------------- THE TRAVELERS SEPARATE ACCOUNT FIVE FOR VARIABLE ANNUITIES (CONTINUED)
YEAR ENDED DECEMBER 31, 2000 STANDARD STANDARD OPTIONAL STANDARD STANDARD OPTIONAL OPTIONAL 3%, 3%, OPTIONAL 3%, 3% 5% 3% 5% .62FC 1.1%FC 3%, .83FC 1.40%FC --------------------------------------------------------------------------------------------------------------------------------- <->THE TRAVELERS SERIES TRUST (CONT.) MFS RESEARCH PORTFOLIO (6/00) Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year......... 1.136 1.136 1.127 1.127 -- -- -- -- Number of units outstanding at end of year......................... -- -- 7,875 -- -- -- -- -- SOCIAL AWARENESS PORTFOLIO (7/99) Unit Value at beginning of year... 1.115 1.115 1.111 1.111 -- -- -- -- Unit Value at end of year......... 1.100 1.100 1.092 1.092 -- -- -- -- Number of units outstanding at end of year......................... 14,167 -- 141,652 -- -- -- -- -- STRATEGIC STOCK PORTFOLIO (4/00)+ Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year......... 1.030 1.030 1.023 1.023 -- -- -- -- Number of units outstanding at end of year......................... -- -- 19,858 -- -- -- -- -- TRAVELERS QUALITY BOND PORTFOLIO (8/99) Unit Value at beginning of year... 1.002 1.002 0.998 0.998 1.000 0.999 0.996 0.994 Unit Value at end of year......... 1.063 1.063 1.055 1.055 1.058 1.055 1.049 1.045 Number of units outstanding at end of year......................... 19,941 -- 54,601 -- -- -- -- -- U.S. GOVERNMENT SECURITIES PORTFOLIO (8/99) Unit Value at beginning of year... 0.968 0.968 0.965 0.965 0.966 0.965 0.962 0.961 Unit Value at end of year......... 1.099 1.099 1.091 1.091 1.094 1.091 1.084 1.080 Number of units outstanding at end of year......................... 20,423 -- 141,994 -- -- -- -- -- UTILITIES PORTFOLIO (8/99) Unit Value at beginning of year... 0.959 0.959 0.956 0.956 -- -- -- -- Unit Value at end of year......... 1.183 1.183 1.174 1.174 -- -- -- -- Number of units outstanding at end of year......................... -- -- 135,986 -- -- -- -- -- VARIABLE INSURANCE PRODUCTS FUND II ASSETS MANAGER PORTFOLIO -- SERVICE CLASS 2 (5/00) Unit Value at beginning of year... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year......... 0.949 0.949 0.947 0.947 -- -- -- -- Number of units outstanding at end of year......................... -- -- 173,343 -- -- -- -- -- WARBURG PINCUS TRUST EMERGING MARKETS PORTFOLIO (10/99) Unit Value at beginning of year... 1.506 1.506 1.502 1.502 -- -- -- -- Unit Value at end of year......... 1.022 1.022 1.015 1.015 -- -- -- -- Number of units outstanding at end of year......................... -- -- 122,227 -- -- -- -- --
The date next to each funding option's name reflects the date money first came into the funding option through the Separate Account. The financial statements for Separate Account Five and the consolidated financial statements for The Travelers Insurance Company and subsidiaries are contained in the SAI. Those funding options not listed above were not available as of December 31, 2000. * Fund's name has changed. Refer to prospectus for new name. + No longer available to new contract owners. ++ Fund is closed. A-8 49 THIS PAGE INTENTIONALLY LEFT BLANK. 50 APPENDIX B CONDENSED FINANCIAL INFORMATION -------------------------------------------------------------------------------- TRAVELERS SEPARATE ACCOUNT SIX FOR VARIABLE ANNUITIES (1999) AIR = ASSUMED INVESTMENT RATE FC = FLOOR BENEFIT CHARGE STANDARD = STANDARD DEATH BENEFIT OPTIONAL = OPTIONAL DEATH BENEFIT
PERIOD FROM MARCH 22* TO DECEMBER 31, 1999 STANDARD STANDARD OPTIONAL OPTIONAL STANDARD STANDARD OPTIONAL OPTIONAL 3%AIR, 3%AIR, 3%AIR, 3%AIR, 3%AIR 5%AIR 3%AIR 5%AIR .62FC 1.1%FC .83%FC 1.40%FC --------------------------------------------------------------------------------------------------------------------------------- HIGH YIELD BOND TRUST (5/99) Unit Value at beginning of year........................... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year........ 0.980 0.980 0.977 0.977 -- -- -- -- Number of units outstanding at end of year.................... 92,789 -- 879,832 -- -- -- -- -- MANAGED ASSETS TRUST (3/99) Unit Value at beginning of year........................... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year........ 1.102 1.102 1.098 1.098 -- -- -- -- Number of units outstanding at end of year.................... 232,345 -- 5,360,035 -- -- -- -- -- MONEY MARKET PORTFOLIO (4/99) Unit Value at beginning of year........................... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year........ 1.032 1.032 1.028 1.028 -- -- -- -- Number of units outstanding at end of year.................... 239,890 -- 5,359,933 -- -- -- -- -- AMERICAN ODYSSEY FUNDS, INC.* CORE EQUITY FUND (3/99)* Unit Value at beginning of year........................... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year........ 0.995 0.995 0.992 0.992 -- -- -- -- Number of units outstanding at end of year.................... 228,230 -- 5,697,520 -- -- -- -- -- EMERGING OPPORTUNITIES FUND (3/99)* Unit Value at beginning of year........................... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year........ 1.465 1.465 1.460 1.460 -- -- -- -- Number of units outstanding at end of year.................... 113,574 -- 2,542,636 -- -- -- -- -- GLOBAL HIGH-YIELD BOND FUND (3/99)++ Unit Value at beginning of year........................... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year........ 1.070 1.070 1.066 1.066 -- -- -- -- Number of units outstanding at end of year.................... 48,457 -- 1,363,227 -- -- -- -- -- INTERMEDIATE-TERM BOND FUND (3/99)++ Unit Value at beginning of year........................... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year........ 1.005 1.005 1.002 1.002 -- -- -- -- Number of units outstanding at end of year.................... 187,387 -- 2,889,162 -- -- -- -- -- INTERNATIONAL EQUITY FUND (3/99)* Unit Value at beginning of year........................... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year........ 1.272 1.272 1.267 1.267 -- -- -- -- Number of units outstanding at end of year.................... 90,221 -- 3,413,512 -- -- -- -- -- LONG-TERM BOND FUND (3/99)* Unit Value at beginning of year........................... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year........ 0.979 0.979 0.976 0.976 -- -- -- -- Number of units outstanding at end of year.................... 139,623 -- 3,629,750 -- -- -- -- -- DELAWARE GROUP PREMIUM FUND REIT SERIES (7/99) Unit Value at beginning of year........................... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year........ 0.937 0.937 0.935 0.935 -- -- -- -- Number of units outstanding at end of year.................... -- -- 22,639 -- -- -- -- -- SMALL CAP VALUE SERIES (4/99) Unit Value at beginning of year........................... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year........ 0.991 0.991 0.988 0.988 -- -- -- -- Number of units outstanding at end of year.................... -- -- 184,589 -- -- -- -- --
B-1 51 APPENDIX B CONDENSED FINANCIAL INFORMATION -------------------------------------------------------------------------------- TRAVELERS SEPARATE ACCOUNT SIX FOR VARIABLE ANNUITIES (1999) (CONTINUED)
PERIOD FROM MARCH 22* TO DECEMBER 31, 1999 STANDARD STANDARD OPTIONAL OPTIONAL STANDARD STANDARD OPTIONAL OPTIONAL 3%AIR, 3%AIR, 3%AIR, 3%AIR, 3%AIR 5%AIR 3%AIR 5%AIR .62FC 1.1%FC .83%FC 1.40%FC --------------------------------------------------------------------------------------------------------------------------------- DREYFUS VARIABLE INVESTMENT FUND CAPITAL APPRECIATION PORTFOLIO (3/99) Unit Value at beginning of year........................... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year........ 1.081 1.081 1.077 1.077 -- -- -- -- Number of units outstanding at end of year.................... 244,529 -- 2,447,252 -- -- -- -- -- SMALL CAP PORTFOLIO (4/99) Unit Value at beginning of year........................... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year........ 1.240 1.240 1.236 1.236 -- -- -- -- Number of units outstanding at end of year.................... 45,091 -- 1,060,068 -- -- -- -- -- GREENWICH STREET SERIES FUND EQUITY INDEX PORTFOLIO II (3/99) Unit Value at beginning of year........................... 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 Unit Value at end of year........ 1.133 1.133 1.129 1.129 1.127 1.123 1.122 1.117 Number of units outstanding at end of year.................... 207,054 -- 5,953,238 -- -- -- -- -- THE MONTGOMERY FUNDS III MONTGOMERY VARIABLE SERIES; GROWTH FUND (3/99)+ Unit Value at beginning of year........................... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year........ 1.208 1.208 1.204 1.204 -- -- -- -- Number of units outstanding at end of year.................... 16,056 -- 573,739 -- -- -- -- -- OCC ACCUMULATION TRUST EQUITY PORTFOLIO (3/99)+ Unit Value at beginning of year........................... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year........ 0.930 0.930 0.927 0.927 -- -- -- -- Number of units outstanding at end of year.................... -- -- 150,291 -- -- -- -- -- SALOMON BROTHERS VARIABLE SERIES FUNDS, INC. CAPITAL FUND (3/99) Unit Value at beginning of year........................... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year........ 1.222 1.222 1.218 1.218 -- -- -- -- Number of units outstanding at end of year.................... 13,279 -- 1,398,956 -- -- -- -- -- INVESTORS FUND (3/99) Unit Value at beginning of year........................... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year........ 1.088 1.088 1.084 1.084 -- -- -- -- Number of units outstanding at end of year.................... 5,119 -- 665,635 -- -- -- -- -- TOTAL RETURN FUND (3/99) Unit Value at beginning of year........................... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year........ 1.002 1.002 0.998 0.998 -- -- -- -- Number of units outstanding at end of year.................... -- -- 163,763 -- -- -- -- -- STRONG VARIABLE INSURANCE FUNDS, INC. STRONG SCHAFER VALUE FUND II (7/99)* Unit Value at beginning of year........................... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year........ 0.877 0.877 0.875 0.875 -- -- -- -- Number of units outstanding at end of year.................... 6,351 -- 114,839 -- -- -- -- -- TRAVELERS SERIES FUND INC. ALLIANCE GROWTH PORTFOLIO (3/99) Unit Value at beginning of year........................... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year........ 1.303 1.303 1.298 1.298 -- -- -- -- Number of units outstanding at end of year.................... 274,568 -- 4,867,877 -- -- -- -- -- MFS TOTAL RETURN PORTFOLIO (4/99) Unit Value at beginning of year........................... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year........ 0.994 0.994 0.991 0.991 -- -- -- -- Number of units outstanding at end of year.................... 56,338 -- 822,665 -- -- -- -- --
B-2 52 APPENDIX B CONDENSED FINANCIAL INFORMATION -------------------------------------------------------------------------------- TRAVELERS SEPARATE ACCOUNT SIX FOR VARIABLE ANNUITIES (1999) (CONTINUED)
PERIOD FROM MARCH 22* TO DECEMBER 31, 1999 STANDARD STANDARD OPTIONAL OPTIONAL STANDARD STANDARD OPTIONAL OPTIONAL 3%AIR, 3%AIR, 3%AIR, 3%AIR, 3%AIR 5%AIR 3%AIR 5%AIR .62FC 1.1%FC .83%FC 1.40%FC --------------------------------------------------------------------------------------------------------------------------------- TRAVELERS SERIES FUND INC. (CONT.) PUTNAM DIVERSIFIED INCOME PORTFOLIO (6/99) Unit Value at beginning of year........................... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year........ 1.010 1.010 1.007 1.007 -- -- -- -- Number of units outstanding at end of year.................... -- -- 188,752 -- -- -- -- -- SMITH BARNEY HIGH INCOME PORTFOLIO (5/99) Unit Value at beginning of year........................... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year........ 1.007 1.007 1.004 1.004 -- -- -- -- Number of units outstanding at end of year.................... -- -- 174,517 -- -- -- -- -- SMITH BARNEY INTERNATIONAL EQUITY PORTFOLIO (3/99) Unit Value at beginning of year........................... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year........ 1.569 1.569 1.563 1.563 -- -- -- -- Number of units outstanding at end of year.................... 33,821 -- 942,437 -- -- -- -- -- SMITH BARNEY LARGE CAPITALIZATION GROWTH PORTFOLIO (3/99) Unit Value at beginning of year........................... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year........ 1.132 1.132 1.132 1.128 -- -- -- -- Number of units outstanding at end of year.................... 100,647 -- 2,808,440 -- -- -- -- -- THE TRAVELERS SERIES TRUST DISCIPLINED MID CAP STOCK PORTFOLIO (6/99) Unit Value at beginning of year........................... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year........ 1.132 1.132 1.129 1.129 -- -- -- -- Number of units outstanding at end of year.................... -- -- 131,236 -- -- -- -- -- DISCIPLINED SMALL CAP STOCK PORTFOLIO+ (5/99) Unit Value at beginning of year........................... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year........ 1.150 1.150 1.147 1.147 -- -- -- -- Number of units outstanding at end of year.................... -- -- 41,709 -- -- -- -- -- EQUITY INCOME PORTFOLIO (3/99) Unit Value at beginning of year........................... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year........ 1.021 1.021 1.017 1.017 -- -- -- -- Number of units outstanding at end of year.................... 216,322 -- 2,462,986 -- -- -- -- -- FEDERATED STOCK PORTFOLIO (4/99) Unit Value at beginning of year........................... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year........ 0.965 0.965 0.962 0.962 -- -- -- -- Number of units outstanding at end of year.................... -- -- 342,000 -- -- -- -- -- LARGE CAP PORTFOLIO (3/99) Unit Value at beginning of year........................... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year........ 1.224 1.224 1.219 1.219 -- -- -- -- Number of units outstanding at end of year.................... 247,021 -- 2,827,437 -- -- -- -- -- LAZARD INTERNATIONAL STOCK PORTFOLIO (4/99) Unit Value at beginning of year........................... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year........ 1.194 1.194 1.190 1.190 -- -- -- -- Number of units outstanding at end of year.................... 13,922 -- 118,109 -- -- -- -- -- MFS MID CAP GROWTH PORTFOLIO (5/99) Unit Value at beginning of year........................... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year........ 1.603 1.603 1.598 1.598 -- -- -- -- Number of units outstanding at end of year.................... 22,378 -- 519,757 -- -- -- -- --
B-3 53 APPENDIX B CONDENSED FINANCIAL INFORMATION -------------------------------------------------------------------------------- TRAVELERS SEPARATE ACCOUNT SIX FOR VARIABLE ANNUITIES (1999) (CONTINUED)
PERIOD FROM MARCH 22* TO DECEMBER 31, 1999 STANDARD STANDARD OPTIONAL OPTIONAL STANDARD STANDARD OPTIONAL OPTIONAL 3%AIR, 3%AIR, 3%AIR, 3%AIR, 3%AIR 5%AIR 3%AIR 5%AIR .62FC 1.1%FC .83%FC 1.40%FC --------------------------------------------------------------------------------------------------------------------------------- THE TRAVELERS SERIES TRUST (CONT.) MFS RESEARCH PORTFOLIO (3/99) Unit Value at beginning of year........................... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year........ 1.213 1.213 1.209 1.209 -- -- -- -- Number of units outstanding at end of year.................... -- -- 169,528 -- -- -- -- -- SOCIAL AWARENESS PORTFOLIO (3/99) Unit Value at beginning of year........................... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year........ 1.115 1.115 1.111 1.111 -- -- -- -- Number of units outstanding at end of year.................... 204,232 -- 1,692,027 -- -- -- -- -- STRATEGIC STOCK PORTFOLIO (9/99)+ Unit Value at beginning of year........................... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year........ 0.942 0.942 0.940 0.940 -- -- -- -- Number of units outstanding at end of year.................... -- -- 75,116 -- -- -- -- -- TRAVELERS QUALITY BOND PORTFOLIO (3/99) Unit Value at beginning of year........................... 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 Unit Value at end of year........ 1.002 1.002 0.998 0.998 1.000 0.999 0.996 0.994 Number of units outstanding at end of year.................... 30,445 -- 1,489,904 -- -- -- -- -- U.S. GOVERNMENT SECURITIES PORTFOLIO (3/99) Unit Value at beginning of year........................... 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 Unit Value at end of year........ 0.968 0.968 0.965 0.965 0.966 0.965 0.962 0.961 Number of units outstanding at end of year.................... 81,239 -- 1,134,380 -- -- -- -- -- UTILITIES PORTFOLIO (5/99) Unit Value at beginning of year........................... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year........ 0.959 0.959 0.956 0.956 -- -- -- -- Number of units outstanding at end of year.................... 52,624 -- 426,556 -- -- -- -- -- WARBURG PINCUS TRUST* EMERGING MARKETS PORTFOLIO (5/99) Unit Value at beginning of year........................... 1.000 1.000 1.000 1.000 -- -- -- -- Unit Value at end of year........ 1.506 1.506 1.502 1.502 -- -- -- -- Number of units outstanding at end of year.................... 54,662 -- 563,587 -- -- -- -- --
B-4 54 APPENDIX B CONDENSED FINANCIAL INFORMATION -------------------------------------------------------------------------------- THE TRAVELERS SEPARATE ACCOUNT SIX FOR VARIABLE ANNUITIES (2000)
YEAR ENDED DECEMBER 31, 2000 ---------------------------------------------------------------------------------------------- STANDARD STANDARD OPTIONAL OPTIONAL STANDARD STANDARD OPTIONAL OPTIONAL 3% 5% 3% 5% 3%,.62FC 3%,1.1%FC 3%,.83FC 3%,1.40%FC --------- --------- --------- --------- ---------- --------- -------- ---------- --------------------------------------------------------------------------------------------------------------------------------- CAPITAL APPRECIATION FUND (5/00) Unit Value at beginning of year......................... 1.000 1.000 1.000 1.000 Unit Value at end of year...... 0.745 0.745 0.743 0.743 Number of units outstanding at end of year.................. 1,006,482 -- 18,629,244 -- HIGH YIELD BOND TRUST (5/99) Unit Value at beginning of year......................... 0.980 0.980 0.977 0.977 Unit Value at end of year...... 0.982 0.982 0.974 0.974 Number of units outstanding at end of year.................. 101,749 -- 2,504,886 23,249 MANAGED ASSETS TRUST (3/99) Unit Value at beginning of year......................... 1.102 1.102 1.098 1.098 Unit Value at end of year...... 1.076 1.076 1.067 1.067 Number of units outstanding at end of year.................. 913,007 -- 17,098,984 -- MONEY MARKET PORTFOLIO (4/99) Unit Value at beginning of year......................... 1.032 1.032 1.028 1.028 Unit Value at end of year...... 1.087 1.087 1.078 1.078 Number of units outstanding at end of year.................. 700,403 -- 12,443,637 -- AMERICAN ODYSSEY FUNDS, INC.* CORE EQUITY FUND (3/99)* Unit Value at beginning of year......................... 0.995 0.995 0.992 0.992 Unit Value at end of year...... 0.840 0.840 0.833 0.833 Number of units outstanding at end of year.................. 959,029 -- 22,805,101 18,600 EMERGING OPPORTUNITIES FUND (3/99)* Unit Value at beginning of year......................... 1.465 1.465 1.460 1.460 Unit Value at end of year...... 1.600 1.600 1.587 1.587 Number of units outstanding at end of year.................. 462,418 -- 9,235,726 7,256 GLOBAL HIGH-YIELD BOND FUND (3/99)++ Unit Value at beginning of year......................... 1.070 1.070 1.066 1.066 Unit Value at end of year...... 1.021 1.021 1.012 1.012 Number of units outstanding at end of year.................. 160,574 1,616 4,237,855 -- INTERMEDIATE-TERM BOND FUND (3/99)++ Unit Value at beginning of year......................... 1.005 1.005 1.002 1.002 Unit Value at end of year...... 1.063 1.063 1.054 1.054 Number of units outstanding at end of year.................. 399,235 -- 9,735,911 22,453 INTERNATIONAL EQUITY FUND (3/99)* Unit Value at beginning of year......................... 1.272 1.272 1.267 1.267 Unit Value at end of year...... 1.160 1.160 1.151 1.151 Number of units outstanding at end of year.................. 474,746 -- 12,244,917 9,004 LONG-TERM BOND FUND (3/99)* Unit Value at beginning of year......................... 0.979 0.979 0.976 0.976 Unit Value at end of year...... 1.092 1.092 1.083 1.083 Number of units outstanding at end of year.................. 601,543 -- 13,300,852 22,686 DELAWARE GROUP PREMIUM FUND, INC. REIT SERIES (7/99) Unit Value at beginning of year......................... 0.937 0.937 0.935 0.935 Unit Value at end of year...... 1.221 1.221 1.213 1.213 Number of units outstanding at end of year.................. 102,023 -- 284,819 -- SMALL CAP VALUE SERIES (4/99) Unit Value at beginning of year......................... 0.991 0.991 0.988 0.988 Unit Value at end of year...... 1.162 1.162 1.153 1.153 Number of units outstanding at end of year.................. 5,110 -- 319,706 --
B-5 55 APPENDIX B CONDENSED FINANCIAL INFORMATION -------------------------------------------------------------------------------- TRAVELERS SEPARATE ACCOUNT SIX FOR VARIABLE ANNUITIES (2000) (CONTINUED)
YEAR ENDED DECEMBER 31, 2000 ---------------------------------------------------------------------------------------------- STANDARD STANDARD OPTIONAL OPTIONAL STANDARD STANDARD OPTIONAL OPTIONAL 3% 5% 3% 5% 3%,.62FC 3%,1.1%FC 3%,.83FC 3%,1.40%FC --------- --------- --------- --------- ---------- --------- -------- ---------- --------------------------------------------------------------------------------------------------------------------------------- DREYFUS VARIABLE INVESTMENT FUND APPRECIATION PORTFOLIO (3/99) Unit Value at beginning of year......................... 1.081 1.081 1.077 1.077 Unit Value at end of year...... 1.065 1.065 1.057 1.057 Number of units outstanding at end of year.................. 311,873 -- 4,996,243 -- SMALL CAP PORTFOLIO (4/99) Unit Value at beginning of year......................... 1.240 1.240 1.236 1.236 Unit Value at end of year...... 1.394 1.394 1.383 1.383 Number of units outstanding at end of year.................. 305,761 -- 5,489,701 -- GREENWICH STREET SERIES FUND EQUITY INDEX PORTFOLIO II (3/99) Unit Value at beginning of year......................... 1.133 1.133 1.129 1.129 1.127 1.123 1.122 1.117 Unit Value at end of year...... 1.019 1.019 1.011 1.011 1.008 0.999 0.996 0.986 Number of units outstanding at end of year.................. 842,129 -- 15,906,549 65,654 22,462 -- -- -- JANUS ASPEN SERIES WORLDWIDE GROWTH PORTFOLIO -- SERVICE SHARES (5/00) Unit Value at beginning of year......................... 1.000 1.000 1.000 1.000 Unit Value at end of year...... 0.801 0.801 0.799 0.799 Number of units outstanding at end of year.................. 424,750 -- 8,681,668 -- THE MONTGOMERY FUNDS III MONTGOMERY VARIABLE SERIES; GROWTH FUND (3/99)+ Unit Value at beginning of year......................... 1.208 1.208 1.204 1.204 Unit Value at end of year...... 1.090 1.090 1.082 1.082 Number of units outstanding at end of year.................. 40,161 -- 755,544 -- OCC ACCUMULATION TRUST EQUITY PORTFOLIO (6/99)+ Unit Value at beginning of year......................... 0.930 0.930 0.927 0.927 Unit Value at end of year...... 1.014 1.014 1.007 1.007 Number of units outstanding at end of year.................. -- -- 210,914 -- SALOMON BROTHERS VARIABLE SERIES FUNDS, INC. CAPITAL FUND (3/99) Unit Value at beginning of year......................... 1.222 1.222 1.218 1.218 Unit Value at end of year...... 1.433 1.433 1.422 1.422 Number of units outstanding at end of year.................. 70,934 -- 3,944,667 37,311 INVESTORS FUND (3/99) Unit Value at beginning of year......................... 1.088 1.088 1.084 1.084 Unit Value at end of year...... 1.244 1.244 1.234 1.234 Number of units outstanding at end of year.................. 20,655 -- 1,626,667 -- TOTAL RETURN FUND (3/99) Unit Value at beginning of year......................... 1.002 1.002 0.998 0.998 Unit Value at end of year...... 1.072 1.072 1.064 1.064 Number of units outstanding at end of year.................. 5,470 -- 216,675 -- STRONG VARIABLE INSURANCE FUNDS, INC. STRONG SCHAFER VALUE FUND II (7/99)* Unit Value at beginning of year......................... 0.877 0.877 0.875 0.875 Unit Value at end of year...... 0.938 0.938 0.932 0.932 Number of units outstanding at end of year.................. 6,351 -- 255,460 --
B-6 56 APPENDIX B CONDENSED FINANCIAL INFORMATION -------------------------------------------------------------------------------- TRAVELERS SEPARATE ACCOUNT SIX FOR VARIABLE ANNUITIES (2000) (CONTINUED)
YEAR ENDED DECEMBER 31, 2000 ---------------------------------------------------------------------------------------------- STANDARD STANDARD OPTIONAL OPTIONAL STANDARD STANDARD OPTIONAL OPTIONAL 3% 5% 3% 5% 3%,.62FC 3%,1.1%FC 3%,.83FC 3%,1.40%FC --------- --------- --------- --------- ---------- --------- -------- ---------- --------------------------------------------------------------------------------------------------------------------------------- TRAVELERS SERIES FUND, INC. ALLIANCE GROWTH PORTFOLIO (3/99) Unit Value at beginning of year......................... 1.303 1.303 1.298 1.298 Unit Value at end of year...... 1.057 1.057 1.048 1.048 Number of units outstanding at end of year.................. 787,876 -- 14,295,924 36,239 MFS TOTAL RETURN PORTFOLIO (4/99) Unit Value at beginning of year......................... 0.994 0.994 0.991 0.991 Unit Value at end of year...... 1.150 1.150 1.142 1.142 Number of units outstanding at end of year.................. 177,102 -- 3,061,099 -- PUTNAM DIVERSIFIED INCOME PORTFOLIO (6/99) Unit Value at beginning of year......................... 1.010 1.010 1.007 1.007 Unit Value at end of year...... 0.998 0.998 0.991 0.991 Number of units outstanding at end of year.................. -- -- 316,519 -- SMITH BARNEY HIGH INCOME PORTFOLIO (5/99) Unit Value at beginning of year......................... 1.007 1.007 1.004 1.004 Unit Value at end of year...... 0.918 0.918 0.912 0.912 Number of units outstanding at end of year.................. 12,407 -- 283,760 -- SMITH BARNEY INTERNATIONAL EQUITY PORTFOLIO (3/99) Unit Value at beginning of year......................... 1.569 1.569 1.563 1.563 Unit Value at end of year...... 1.186 1.186 1.177 1.177 Number of units outstanding at end of year.................. 76,324 -- 3,218,634 -- SMITH BARNEY LARGE CAPITALIZATION GROWTH PORTFOLIO (3/99) Unit Value at beginning of year......................... 1.132 1.132 1.128 1.128 Unit Value at end of year...... 1.045 1.045 1.037 1.037 Number of units outstanding at end of year.................. 265,016 -- 6,508,869 14,436 THE TRAVELERS SERIES TRUST DISCIPLINED MID CAP STOCK PORTFOLIO (6/99) Unit Value at beginning of year......................... 1.132 1.132 1.129 1.129 Unit Value at end of year...... 1.310 1.310 1.301 1.301 Number of units outstanding at end of year.................. 87,378 -- 1,801,861 -- DISCIPLINED SMALL CAP STOCK PORTFOLIO (5/99)+ Unit Value at beginning of year......................... 1.150 1.150 1.147 1.147 Unit Value at end of year...... 1.165 1.165 1.156 1.156 Number of units outstanding at end of year.................. 23,123 -- 328,710 -- EQUITY INCOME PORTFOLIO (3/99) Unit Value at beginning of year......................... 1.021 1.021 1.017 1.017 Unit Value at end of year...... 1.105 1.105 1.096 1.096 Number of units outstanding at end of year.................. 212,588 -- 4,760,672 -- FEDERATED STOCK PORTFOLIO (4/99) Unit Value at beginning of year......................... 0.965 0.965 0.962 0.962 Unit Value at end of year...... 0.993 0.993 0.986 0.986 Number of units outstanding at end of year.................. 4,126 -- 500,956 -- LARGE CAP PORTFOLIO (3/99) Unit Value at beginning of year......................... 1.224 1.224 1.219 1.219 Unit Value at end of year...... 1.038 1.038 1.030 1.030 Number of units outstanding at end of year.................. 334,348 -- 8,737,631 --
B-7 57 APPENDIX B CONDENSED FINANCIAL INFORMATION -------------------------------------------------------------------------------- TRAVELERS SEPARATE ACCOUNT SIX FOR VARIABLE ANNUITIES (2000) (CONTINUED)
YEAR ENDED DECEMBER 31, 2000 ---------------------------------------------------------------------------------------------- STANDARD STANDARD OPTIONAL OPTIONAL STANDARD STANDARD OPTIONAL OPTIONAL 3% 5% 3% 5% 3%,.62FC 3%,1.1%FC 3%,.83FC 3%,1.40%FC --------- --------- --------- --------- ---------- --------- -------- ---------- --------------------------------------------------------------------------------------------------------------------------------- THE TRAVELERS SERIES TRUST (CONT.) LAZARD INTERNATIONAL STOCK PORTFOLIO (4/99) Unit Value at beginning of year......................... 1.194 1.194 1.190 1.190 Unit Value at end of year...... 1.049 1.049 1.041 1.041 Number of units outstanding at end of year.................. 43,159 -- 325,277 -- MFS MID CAP GROWTH PORTFOLIO (5/99) Unit Value at beginning of year......................... 1.603 1.603 1.598 1.598 Unit Value at end of year...... 1.739 1.739 1.726 1.726 Number of units outstanding at end of year.................. 201,277 -- 4,877,373 14,037 MFS RESEARCH PORTFOLIO (3/99) Unit Value at beginning of year......................... 1.213 1.213 1.209 1.209 Unit Value at end of year...... 1.136 1.136 1.127 1.127 Number of units outstanding at end of year.................. 80,150 -- 1,184,412 -- SOCIAL AWARENESS PORTFOLIO (3/99) Unit Value at beginning of year......................... 1.115 1.115 1.111 1.111 Unit Value at end of year...... 1.100 1.100 1.092 1.092 Number of units outstanding at end of year.................. 338,770 -- 3,740,424 -- STRATEGIC STOCK PORTFOLIO (9/99)+ Unit Value at beginning of year......................... 0.942 0.942 0.940 0.940 Unit Value at end of year...... 1.030 1.030 1.023 1.023 Number of units outstanding at end of year.................. -- -- 195,578 -- TRAVELERS QUALITY BOND PORTFOLIO (3/99) Unit Value at beginning of year......................... 1.002 1.002 0.998 0.998 1.000 0.999 0.996 0.994 Unit Value at end of year...... 1.063 1.063 1.055 1.055 1.058 1.055 1.049 1.045 Number of units outstanding at end of year.................. 89,190 -- 2,776,420 22,724 -- -- -- -- U.S. GOVERNMENT SECURITIES PORTFOLIO (3/99) Unit Value at beginning of year......................... 0.968 0.968 0.965 0.965 0.966 0.965 0.962 0.961 Unit Value at end of year...... 1.099 1.099 1.091 1.091 1.094 1.091 1.084 1.080 Number of units outstanding at end of year.................. 147,364 -- 2,991,693 -- -- -- -- -- UTILITIES PORTFOLIO (5/99) Unit Value at beginning of year......................... 0.959 0.959 0.956 0.956 Unit Value at end of year...... 1.183 1.183 1.174 1.174 Number of units outstanding at end of year.................. 136,065 -- 2,495,494 -- VARIABLE INSURANCE PRODUCTS FUND II (FIDELITY) ASSET MANAGER PORTFOLIO -- SERVICE SHARES (6/00) Unit Value at beginning of year......................... 1.000 1.000 1.000 1.000 Unit Value at end of year...... 0.949 0.949 0.947 0.947 Number of units outstanding at end of year.................. 133,640 -- 1,309,194 -- WARBURG PINCUS TRUST* EMERGING MARKETS PORTFOLIO (5/99) Unit Value at beginning of year......................... 1.506 1.506 1.502 1.502 Unit Value at end of year...... 1.022 1.022 1.015 1.015 Number of units outstanding at end of year.................. 71,391 -- 1,387,952 --
The date next to each funding option's name reflects the date money first came into the funding option through the Separate Account. The financial statements for Separate Account Five and the financial statements for The Travelers Life and Annuity Company are contained in the SAI. Funding options not listed above had no amounts allocated to them or were not available as of December 31, 2000. * Fund's name has changed. Refer to prospectus for new fund name. + No longer available to new contract owners. ++ Fund is closed. B-8 58 THIS PAGE INTENTIONALLY LEFT BLANK. 59 APPENDIX C -------------------------------------------------------------------------------- WAIVER OF WITHDRAWAL CHARGE FOR NURSING HOME CONFINEMENT (Not Available under Section 457 Plans. Not available if Owner is age 71 or older on the Contract Date. Please refer to your Contract for state variations of this waiver.) If, after the first contract year and before the maturity date, the annuitant begins confinement in an eligible nursing home, you may surrender or make withdrawal, subject to the maximum withdrawal amount described below, without incurring a withdrawal charge. In order for the Company to waive the withdrawal charge, the withdrawal must be made during continued confinement in an eligible nursing home after the qualifying period has been satisfied, or within sixty (60) days after such confinement ends. The qualifying period is confinement in an eligible nursing home for ninety (90) consecutive days. We will require proof of confinement in a form satisfactory to us, which may include certification by a licensed physician that such confinement is medically necessary. We define an eligible nursing home is defined as an institution or special nursing unit of a hospital which: (a) is Medicare approved as a provider of skilled nursing care services; and (b) is not, other than in name only, an acute care hospital, a home for the aged, a retirement home, a rest home, a community living center, or a place mainly for the treatment of alcoholism, mental illness or drug abuse. OR Meets all of the following standards: (a) is licensed as a nursing care facility by the state in which it is licensed; (b) is either a freestanding facility or a distinct part of another facility such as a ward, wing, unit or swing-bed of a hospital or other facility; (c) provides nursing care to individuals who are not able to care for themselves and who require nursing care; (d) provides, as a primary function, nursing care and room and board; and charges for these services; (e) provides care under the supervision of a licensed physician, registered nurse (RN) or licensed practical nurse (LPN); (f) may provide care by a licensed physical, respiratory, occupational or speech therapist; and (g) is not, other than in name only, an acute care hospital, a home for the aged, a retirement home, a rest home, a community living center, or a place mainly for the treatment of alcoholism, mental illness or drug abuse. FILING A CLAIM: You must provide the Company with written notice of a claim during continued confinement after the 90-day qualifying period, or within sixty days after such confinement ends. The maximum withdrawal amount for which we will waive the withdrawal charge is the contract value on the next valuation date following written proof of claim, less any purchase payments made within a one-year period before confinement in an eligible nursing home begins, less any purchase payments made on or after the annuitant's 71st birthday. We will pay any withdrawal requested under the scope of this waiver as soon as we receive proper written proof of your claim, and we will pay the withdrawal in a lump sum. You should consult with your personal tax adviser regarding the tax impact of any withdrawals taken from your Contract. C-1 60 THIS PAGE INTENTIONALLY LEFT BLANK. 61 APPENDIX D -------------------------------------------------------------------------------- MARKET VALUE ADJUSTMENT If you (the Annuitant) have selected any period certain option, you may elect to surrender a payment equal to a portion or all of the present value of the remaining period certain payments any time after the first contract year. There is a surrender charge of 5% of the amount withdrawn under this option. For fixed annuity payments, we calculate the present value of the remaining period certain payments using a current interest rate. The current interest rate is the then current annual rate of return offered by Us on new Fixed Annuity period certain only annuitizations for the amount of time remaining in the certain period. If the period of time remaining is less than the minimum length of time for which we offer a new Fixed Annuity Period Certain Only Annuitization, then the interest rate will be the rate of return for that minimum length of time. The formula for calculating the Present Value is as follows: Present Value =LOGO[Payment(s) X (1/1 + iC)(t/365)] Where iC = the interest rate described above n = the number of payments remaining in the contract owner's certain period at the time of request for this benefit t = number of days remaining until that payment is made, adjusting for leap years. If you request a percentage of the total amount available, the remaining period certain payments will be reduced by that percentage for the remainder of the certain period. After the certain period expires, any remaining payments will increase to the level they would have been had no liquidation taken place. Illustration: Amount Annuitized: $12,589.80 Annuity Option: Life w/10 Year Certain $1,000 Annually--first payment Annuity Payments: immediately
For the purposes of this illustration, assume after two years (immediately preceding the third payment), you choose to receive full liquidity, and the current rate of return which we are then crediting for 8 year fixed Period Certain Only Annuitizations is 4.00%. The total amount available for liquidity is calculated as follows: 1000 + (1000/1.04) + (1000/1.04)( 7/8)2 + (1000/1.04)( 7/8)3 + (1000/1.04) ( 7/8)4 + (1000/1.04)( 7/8)5 + (1000/1.04)( 7/8)6 + (1000/1.04)( 7/8)7 = $7002.06 The surrender penalty is calculated as 5% of $7,002.06, or $350.10. The net result to you after subtraction of the surrender penalty of $350.10 would be $6,651.96. You would receive no more payments for 8 years. After 8 years, if you are still living, you will receive $1000 annually until your death. D-1 62 THIS PAGE INTENTIONALLY LEFT BLANK. 63 APPENDIX E -------------------------------------------------------------------------------- CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION The Statement of Additional Information contains more specific information and financial statements relating to The Travelers Insurance Company or The Travelers Life and Annuity Company. A list of the contents of the Statement of Additional Information is set forth below: The Insurance Company Principal Underwriter Distribution and Principal Underwriting Agreement Valuation of Assets Performance Information Federal Tax Considerations Independent Accountants Financial Statements -------------------------------------------------------------------------------- Copies of the Statement of Additional Information dated May 1, 2001 are available without charge. To request a copy, please clip this coupon on the dotted line above, enter your name and address in the spaces provided below, and mail to: The Travelers Insurance Company, Annuity Investor Services, One Tower Square, Hartford, Connecticut 06183. The Travelers Insurance Company Statement of Additional Information is printed on Form L-21256S, and The Travelers Life and Annuity Statement of Additional Information is printed on Form L-21257S. Name: ------------------------------------------------ Address: ------------------------------------------------ --------------------------------------------------------- E-1 64 THIS PAGE INTENTIONALLY LEFT BLANK. 65 THIS PAGE INTENTIONALLY LEFT BLANK. 66 L-21256 May 1, 2001 67 PART B Information Required in a Statement of Additional Information 68 TRAVELERS RETIREMENT ACCOUNT VARIABLE ANNUITY STATEMENT OF ADDITIONAL INFORMATION dated May 1, 2001 for THE TRAVELERS SEPARATE ACCOUNT SIX FOR VARIABLE ANNUITIES ISSUED BY THE TRAVELERS LIFE AND ANNUITY COMPANY This Statement of Additional Information ("SAI") is not a prospectus but relates to, and should be read in conjunction with, the Variable Annuity Contract Prospectus dated May 1, 2001. A copy of the Prospectus may be obtained by writing to The Travelers Life and Annuity Company, Annuity Services, One Tower Square, Hartford, Connecticut 06183-8036, or by calling (800) 842-9406 or by accessing the Securities and Exchange Commission's website at http://www.sec.gov. TABLE OF CONTENTS THE INSURANCE COMPANY .......................................... 2 PRINCIPAL UNDERWRITER .......................................... 2 DISTRIBUTION AND PRINCIPAL UNDERWRITING AGREEMENT .............. 2 VALUATION OF ASSETS ............................................ 2 PERFORMANCE INFORMATION ........................................ 3 FEDERAL TAX CONSIDERATIONS ..................................... 8 INDEPENDENT ACCOUNTANTS ........................................ 10 FINANCIAL STATEMENTS............................................ F-1 -1- 69 THE INSURANCE COMPANY The Travelers Life and Annuity Company (the "Company") is a stock insurance company chartered in 1973 in Connecticut and continuously engaged in the insurance business since that time. The Company is licensed to conduct a life insurance business in all states, (except New Hampshire and New York) and the District of Columbia and Puerto Rico. The Company's Home Office is located at One Tower Square Hartford, Connecticut 06183 and its telephone number is (860) 277-0111. The Company is a wholly owned subsidiary of The Travelers Insurance Company, an indirect, wholly owned subsidiary of Citigroup Inc. ("Citigroup"), a diversified holding company whose businesses provide a broad range of financial services to consumer and corporate customers around the world. Citigroup's activities are conducted through the Global Consumer, Global Corporate and Investment Bank, Global Investment Management and Private Banking, and Investment Activities segments. STATE REGULATION. The Company is subject to the laws of the state of Connecticut governing insurance companies and to regulation by the Insurance Commissioner of the state of Connecticut (the "Commissioner"). An annual statement covering the operations of the Company for the preceding year, as well as its financial conditions as of December 31 of such year, must be filed with the Commissioner in a prescribed format on or before March 1 of each year. The Company's books and assets are subject to review or examination by the Commissioner or his agents at all times, and a full examination of its operations is conducted at least once every four years. The Company is also subject to the insurance laws and regulations of all other states in which it is licensed to operate. However, the insurance departments of each of these states generally apply the laws of the home state (jurisdiction of domicile) in determining the field of permissible investments. THE SEPARATE ACCOUNT. Separate Account Six meets the definition of a separate account under the federal securities laws, and will comply with the provisions of the 1940 Act. Additionally, the operations of Separate Account Six are subject to the provisions of Section 38a-433 of the Connecticut General Statutes which authorizes the Commissioner to adopt regulations under it. Section 38a-433 contains no restrictions on the investments of the Separate Account, and the Commissioner has adopted no regulations under the Section that affect the Separate Account. PRINCIPAL UNDERWRITER Travelers Distribution LLC ("TDLLC") serves as principal underwriter for Separate Account Six and the Contracts. The offering is continuous. TDLLC's principal executive offices are located at One Tower Square, Hartford, Connecticut. TDLLC is affiliated with the Company and Separate Account Six. DISTRIBUTION AND PRINCIPAL UNDERWRITING AGREEMENT Under the terms of the Distribution and Principal Underwriting Agreement among Separate Account Six, TDLLC and the Company, TDLLC acts as agent for the distribution of the Contracts and as principal underwriter for the Contracts. The Company reimburses TDLLC for certain sales and overhead expenses connected with sales VALUATION OF ASSETS FUNDING OPTIONS: The value of the assets of each Funding Option is determined at 4:00 p.m. Eastern time on each business day, unless we need to close earlier due to an emergency. A business day is any day the New York Stock Exchange is open. Each security traded on a national securities exchange is valued at the last reported sale price on the business day. If there has been no sale on that day, then the value of the security is taken to be the mean between the reported bid and asked prices on the business day or on the basis of quotations received from a reputable broker or any other recognized source. Any security not traded on a securities exchange but traded in the over-the-counter-market and for which market quotations are readily available is valued at the mean between the quoted bid and asked prices on the business day or on the basis of quotations received from a reputable broker or any other recognized source. -2- 70 Securities traded on the over-the-counter-market and listed securities with no reported sales are valued at the mean between the last reported bid and asked prices or on the basis of quotations received from a reputable broker or other recognized source. Short-term investments for which a quoted market price is available are valued at market. Short-term investments maturing in more than sixty days for which there is no reliable quoted market price are valued by "marking to market" (computing a market value based upon quotations from dealers or issuers for securities of a similar type, quality and maturity.) "Marking to market" takes into account unrealized appreciation or depreciation due to changes in interest rates or other factors which would influence the current fair values of such securities. Short-term investments maturing in sixty days or less for which there is no reliable quoted market price are valued at amortized cost which approximates market. THE CONTRACT VALUE: The value of an accumulation unit on any business day is determined by multiplying the value on the preceding business day by the net investment factor for the valuation period just ended. The net investment factor is used to measure the investment performance of a Funding Option from one valuation period to the next. The net investment factor for a Funding Option for any valuation period is equal to the sum of 1.000000 plus the net investment rate (the gross investment rate less any applicable Funding Option deductions during the valuation period relating to the mortality and expense risk charge and the administrative expense charge). The gross investment rate of a Funding Option is equal to (a) minus (b), divided by (c) where: (a) = investment income plus capital gains and losses (whether realized or unrealized); (b) = any deduction for applicable taxes (presently zero); and (c) = the value of the assets of the funding option at the beginning of the valuation period. The gross investment rate may be either positive or negative. A Funding Option's investment income includes any distribution whose ex-dividend date occurs during the valuation period. ACCUMULATION UNIT VALUE. The value of the accumulation unit for each Funding Option was initially established at $1.00. The value of an accumulation unit on any business day is determined by multiplying the value on the preceding business day by the net investment factor for the valuation period just ended. The net investment factor is calculated for each Funding Option and takes into account the investment performance, expenses and the deduction of certain expenses. ANNUITY UNIT VALUE. The initial Annuity Unit Value applicable to each Funding Option was established at $1.00. An annuity unit value as of any business day is equal to (a) the value of the annuity unit on the preceding business day, multiplied by (b) the corresponding net investment factor for the valuation period just ended, divided by (c) the assumed net investment factor for the valuation period. (For example, the assumed net investment factor based on an annual assumed net investment rate of 3.0% for a Valuation Period of one day is 1.000081 and, for a period of two days, is 1.000081 x 1.000081.) PERFORMANCE INFORMATION From time to time, the Company may advertise several types of historical performance for the Funding Options of Separate Account Six. The Company may advertise the "standardized average annual total returns" of the Funding Options, calculated in a manner prescribed by the Securities and Exchange Commission, as well as the "nonstandardized total returns," as described below: STANDARDIZED METHOD. Quotations of average annual total returns are computed according to a formula in which a hypothetical initial investment of $1,000 is applied to the Funding Option, and then related to ending redeemable values over one-, five-, and ten-year periods, or for a period covering the time during which the Funding Option has been in existence, if less. If a Funding Option has been in existence for less than one year, the "since inception" total return performance quotations are year-to-date and are not average annual total returns. These quotations reflect the deduction of all recurring charges during each period (on a pro rata basis in the case of fractional periods). Each quotation assumes a total redemption at the end of each period with the assessment of any applicable withdrawal charge deducted at that time. NONSTANDARDIZED METHOD. Nonstandardized "total returns" will be calculated in a similar manner based on the performance of the Funding Options over a period of time, usually for the calendar year-to-date, and for the past one-, three-, five- and ten-year periods. Nonstandardized total returns will not reflect the deduction of any applicable -3- 71 withdrawal charge, which, if reflected, would decrease the level of performance shown. The withdrawal charge is not reflected because the Contract is designed for long-term investment. For Funding Options that were in existence prior to the date they became available under Separate Account Six, the nonstandardized average annual total return quotations will reflect the investment performance that such Funding Options would have achieved (reduced by the applicable charges) had they been held under the Contract for the period quoted. The total return quotations are based upon historical earnings and are not necessarily representative of future performance. Average annual total returns for each Funding Option computed according to the standardized and nonstandardized methods for the period ending December 31, 2000 are set forth in the following tables. -4- 72 TRAVELERS RETIREMENT ACCOUNT STANDARDIZED PERFORMANCE AS OF 12/31/00
1 Year 5 Year 10 Year (or inception) ------- ------ ------------------------ STOCK ACCOUNTS: Alliance Growth Portfolio -23.28% - -0.09% 03/25/99 American Odyssey Core Equity Fund -20.22% - -12.33% 03/23/99 American Odyssey Emerging Opportunities Fund 3.73% - 27.37% 03/23/99 American Odyssey International Equity Fund -13.71% - 5.56% 03/22/99 Capital Appreciation Fund (Janus) - - -28.16% 05/01/00 Delaware Investments REIT Series 24.72% - 10.96% 07/20/99 Delaware Small Cap Value Series 11.73% - 5.95% 04/20/99 Dreyfus VIF Appreciation Portfolio -6.79% - 0.38% 03/23/99 Dreyfus VIF Small Cap Portfolio 6.91% - 17.96% 04/06/99 Equity Income Portfolio (Fidelity) 2.78% - 2.59% 03/25/99 Equity Index Portfolio Class II* -14.92% - -2.21% 03/22/99 Federated Stock Portfolio -2.51% - -3.78% 04/21/99 Janus Aspen Worldwide Growth Portfolio-Service Shares* - - -24.11% 05/01/00 Large Cap Portfolio (Fidelity) -19.76% - -1.13% 03/23/99 Lazard International Stock Portfolio -16.91% - -0.54% 04/21/99 MFS Mid Cap Growth Portfolio 3.01% - 36.86% 05/10/99 MFS Research Portfolio -11.41% - 4.29% 03/25/99 Montgomery Variable Series: Growth Fund -14.68% - 1.77% 03/25/99 OCC Accumulation Trust Equity Portfolio 3.56% - -2.75% 06/17/99 Salomon Brothers Variable Capital Fund 11.78% - 19.43% 03/22/99 Salomon Brothers Variable Investors Fund 8.82% - 10.11% 03/31/99 Smith Barney International Equity Portfolio -28.50% - 6.93% 03/22/99 Smith Barney Large Cap Growth Portfolio -12.70% - -0.74% 03/29/99 Social Awareness Stock Portfolio (Smith Barney) -6.63% - 2.32% 03/23/99 Strategic Stock Portfolio 3.86% - -2.02% 09/08/99 Strong Schafer Value Fund II 1.49% - -7.86% 07/06/99 Travelers Disciplined Mid Cap Stock Portfolio 10.17% - 15.14% 06/15/99 Travelers Disciplined Small Cap Stock Portfolio -4.16% - 6.33% 05/10/99 Utilities Portfolio (Smith Barney) 17.73% - 7.27% 05/04/99 Warburg Pincus Emerging Markets Portfolio -35.78% - -2.18% 05/24/99 BOND ACCOUNTS: American Odyssey Global High-Yield Bond Fund -9.78% - -2.13% 03/23/99 American Odyssey Intermediate-Term Bond Fund 0.27% - 0.24% 03/23/99 American Odyssey Long-Term Bond Fund 5.96% - 1.83% 03/22/99 Putnam Diversified Income Portfolio -6.54% - -3.78% 06/08/99 Smith Barney High Income Portfolio -13.73% - -8.49% 05/19/99 Travelers High Yield Bond Trust -5.27% - -4.56% 05/07/99 Travelers Quality Bond Portfolio 0.65% - 0.27% 03/23/99 Travelers U.S. Government Securities Portfolio 8.02% - 2.26% 03/23/99 BALANCED ACCOUNTS: Fidelity VIP II Asset Manager Portfolio-Service Class 2* - - -10.08% 05/01/00 MFS Total Return Portfolio 10.20% - 5.26% 04/16/99 Salomon Brothers Variable Total Return Fund 1.57% - 0.77% 03/23/99 Travelers Managed Assets Trust -7.69% - 0.96% 03/22/99 MONEY MARKET ACCOUNTS: Travelers Money Market Portfolio -0.12% - 1.62% 04/06/99
The inception date used to calculate standardized performance is based on the date that the investment option became active in the product. -5- 73 TRAVELERS RETIREMENT ACCOUNT NONSTANDARDIZED PERFORMANCE AS OF 12/31/00
AVERAGE ANNUAL RETURNS ----------------------------------------------------------- YTD 1 YR 3YR 5YR Inception ------- ------- ------ ------ ------ -------- STOCK ACCOUNTS: Alliance Growth Portfolio -19.24% -19.24% 10.36% 16.94% 18.61% 6/20/94 American Odyssey Core Equity Fund + -16.02% -16.02% -1.91% 8.37% 9.63% 5/1/93 American Odyssey Emerging Opportunities Fund + 8.73% 8.73% 9.81% 6.01% 9.76% 5/1/93 American Odyssey International Equity Fund + -9.17% -9.17% 10.48% 10.97% 10.46% 5/1/93 Capital Appreciation Fund (Janus) -22.85% -22.85% 23.12% 24.09% 11.71% 5/16/83 Delaware Investments REIT Series 29.72% 29.72% - - 4.56% 5/6/98 Delaware Small Cap Value Series 16.73% 16.73% 1.02% 10.36% 10.31% 12/23/93 Dreyfus VIF Appreciation Portfolio -1.88% -1.88% 11.56% 16.83% 15.69% 4/5/93 Dreyfus VIF Small Cap Portfolio 11.91% 11.91% 9.06% 11.48% 31.67% 8/31/90 Equity Income Portfolio (Fidelity) 7.78% 7.78% 7.40% - 14.39% 8/30/96 Equity Index Portfolio - Class II* -10.44% -10.44% 10.64% 16.82% 15.95% 11/30/91 Federated Stock Portfolio 2.49% 2.49% 7.43% - 14.98% 8/30/96 Janus Aspen Worldwide Growth Portfolio - Service Shrs* -17.03% -17.03% 19.69% 21.38% 20.68% 9/13/93 Large Cap Portfolio (Fidelity) -15.53% -15.53% 13.00% - 16.81% 8/30/96 Lazard International Stock Portfolio -12.53% -12.53% 5.35% - 6.91% 8/1/96 MFS Mid Cap Growth Portfolio 8.01% 8.01% - - 22.17% 3/23/98 MFS Research Portfolio -6.75% -6.75% - - 6.62% 3/23/98 Montgomery Variable Series: Growth Fund -10.19% -10.19% 2.88% - 11.98% 2/9/96 OCC Accumulation Trust Equity Portfolio 8.56% 8.56% 6.67% 13.08% 13.92% 8/1/88 Salomon Brothers Variable Capital Fund 16.78% 16.78% - - 18.93% 2/17/98 Salomon Brothers Variable Investors Fund 13.82% 13.82% - - 11.66% 2/17/98 Smith Barney International Equity Portfolio -24.74% -24.74% 9.44% 9.10% 7.68% 6/20/94 Smith Barney Large Cap Growth Portfolio -8.10% -8.10% - - 15.54% 5/6/98 Social Awareness Stock Portfolio (Smith Barney) -1.72% -1.72% 13.65% 16.93% 14.33% 5/1/92 Strategic Stock Portfolio 8.86% 8.86% - - 2.04% 5/6/98 Strong Schafer Value Fund II 6.49% 6.49% 0.97% - 0.50% 10/10/97 Travelers Disciplined Mid Cap Stock Portfolio 15.17% 15.17% 14.21% - 20.03% 4/1/97 Travelers Disciplined Small Cap Stock Portfolio 0.84% 0.84% - - 2.13% 5/1/98 Utilities Portfolio (Smith Barney) 22.73% 22.73% 12.21% 13.15% 13.40% 2/4/94 Warburg Pincus Emerging Markets Portfolio -32.40% -32.40% 0.11% - 0.11% 12/31/97 BOND ACCOUNTS: American Odyssey Global High-Yield Bond Fund + -5.03% -5.03% - - -1.06% 5/1/98 American Odyssey Intermediate-Term Bond Fund + 5.27% 5.27% 4.17% 4.25% 4.38% 5/1/93 American Odyssey Long-Term Bond Fund + 10.96% 10.96% 4.69% 4.90% 5.89% 5/1/93 Putnam Diversified Income Portfolio -1.62% -1.62% -0.78% 2.11% 4.06% 6/20/94 Smith Barney High Income Portfolio -9.19% -9.19% -3.00% 2.78% 4.48% 6/22/94 Travelers High Yield Bond Trust -0.28% -0.28% 2.66% 7.37% 7.02% 6/10/83 Travelers Quality Bond Portfolio 5.65% 5.65% 4.17% - 4.96% 8/30/96 Travelers U.S. Government Securities Portfolio 13.02% 13.02% 5.20% 5.34% 6.21% 1/24/92 BALANCED ACCOUNTS: Fidelity VIP II Asset Manager Portfolio-Service Class 2* -5.36% -5.36% 5.56% 9.63% 9.76% 9/6/89 MFS Total Return Portfolio 15.20% 15.20% 8.79% 11.74% 12.16% 6/20/94 Salomon Brothers Variable Total Return Fund 6.57% 6.57% - - 3.72% 2/17/98 Travelers Managed Assets Trust -2.83% -2.83% 9.54% 12.07% 9.45% 6/7/83 MONEY MARKET ACCOUNTS: Travelers Money Market Portfolio 4.88% 4.88% 4.09% 3.78% 3.86% 12/31/87
The inception date is the date that the underlying fund commenced operations. + American Odyssey Funds above do not reflect the CHART fee of 0.80%. These funds offer multiple classes of shares. The performance above may reflect the fees and performance of another class of the same fund for periods before the current class existed. If the current class's 12b-1 fee and other expenses were higher, the performance shown would be lower. They may not be available in every jurisdiction -6- 74 TRAVELERS RETIREMENT ACCOUNT CHART PROGRAM PERFORMANCE UPDATE AS OF 12/31/000 CHART FEE = 0.80%
AVERAGE ANNUAL RETURNS CALENDAR YEAR RETURNS ------------------------------------ ------------------------- YTD 1 YR 3YR 5YR Inception 1999 1998 1997 ------- ------- ------ ------ ------------------ ------ ------- ------ STOCK ACCOUNTS American Odyssey Core Equity Fund -16.51% -16.51% -2.63% 7.55% 8.78% 5/1/93 -2.31% 13.19% 29.22% American Odyssey Emerging Opportunities Fund 8.09% 8.09% 9.03% 5.22% 8.92% 5/1/93 33.99% -10.50% 4.87% American Odyssey International Equity Fund -9.71% -9.71% 9.68% 10.14% 9.61% 5/1/93 29.87% 12.54% 2.91% BOND ACCOUNTS American Odyssey Global High-Yield Bond -5.60% -5.60% - - -1.80% 5/1/98 8.44% - - Fund American Odyssey Intermediate-Term Bond Fund 4.64% 4.64% 3.41% 3.47% 3.57% 5/1/93 -0.56% 6.28% 5.33% American Odyssey Long-Term Bond Fund 10.31% 10.31% 3.93% 4.11% 5.07% 5/1/93 -4.72% 6.83% 9.77%
The inception date is the date that the underlying fund commenced operations. TRAVELERS RETIREMENT ACCOUNT STANDARDIZED PERFORMANCE AS OF 12/31/00
1 YR 5 YR 10 YR or Inception ------- ---- ---------------------- STOCK ACCOUNTS: American Odyssey Core Equity Fund -20.69% - -21.96% 3/23/1999 American Odyssey Emerging Opportunities Fund 3.09% - 51.61% 3/23/1999 American Odyssey International Equity Fund -14.22% - 8.54% 3/22/1999 BOND ACCOUNTS American Odyssey Global High-Yield Bond Fund -10.32% - -5.15% 3/23/1999 American Odyssey Intermediate-Term Bond Fund -0.36% - -1.03% 3/23/1999 American Odyssey Long-Term Bond Fund 5.31% - 1.79% 3/22/1999
-7- 75 FEDERAL TAX CONSIDERATIONS The following description of the federal income tax consequences under this Contract is not exhaustive and is not intended to cover all situations. Because of the complexity of the law and the fact that the tax results will vary according to the factual status of the individual involved, tax advice may be needed by a person contemplating purchase of an annuity contract and by a contract owner or beneficiary who may make elections under a contract. For further information, please consult a qualified tax adviser. MANDATORY DISTRIBUTIONS FOR QUALIFIED PLANS Federal tax law requires that minimum annual distributions begin by April 1st of the calendar year following the later of calendar year in which a participant under a qualified plan, or a Section 403(b) annuity, attains age 70-1/2 or retires. Minimum annual distributions under an IRA must begin by April 1st of the calendar year in which the contract owner attains 70-1/2. Distributions must also begin or be continued according to required patterns following the death of the contract owner or the annuitant. INDIVIDUAL RETIREMENT ANNUITIES To the extent of earned income for the year and not exceeding $2,000 per individual, an individual may make deductible contributions to an individual retirement annuity (IRA). There are certain limits on the deductible amount based on the adjusted gross income of the individual and spouse and based on their participation in a retirement plan. If an individual is married and the spouse does not have earned income, the individual may establish IRAs for the individual and spouse. Purchase payments may then be made annually into IRAs for both spouses in the maximum amount of 100% of earned income up to a combined limit of $4,000. The Code provides for the purchase of a Simplified Employee Pension (SEP) plan. A SEP is funded through an IRA with an annual employer contribution limit of 15% of compensation up to $35,000 for each participant. The Internal Revenue Services has not reviewed the contract for qualifications as an IRA, and has not addressed in a ruling of general applicability whether a death benefit provision such as the optional enhanced death benefit in the contract comports with IRA qualification requirements. SIMPLE PLAN IRA FORM Effective January 1, 1997, employers may establish a savings incentive match plan for employees ("SIMPLE plan") under which employees can make elective salary reduction contributions to an IRA based on a percentage of compensation of up to $6,000. (Alternatively, the employer can establish a SIMPLE cash or deferred arrangement under IRS Section 401(k)). Under a SIMPLE plan IRA, the employer must either make a matching contribution of 100% on the first 3% or 7% contribution for all eligible employees. Early withdrawals are subject to the 10% early withdrawal penalty generally applicable to IRAs, except that an early withdrawal by an employee under a SIMPLE plan IRA, within the first two years of participation, shall be subject to a 25% early withdrawal tax. ROTH IRAS Effective January 1, 1998, Section 408A of the Code permits certain individuals to contribute to a Roth IRA. Eligibility to make contributions is based upon income, and the applicable limits vary based on marital status and/or whether the contribution is a rollover contribution from another IRA or an annual contribution. Contributions to a Roth IRA, which are subject to certain limitations ($2,000 per year for annual contributions), are not deductible and must be made in cash or as a rollover or transfer from another Roth IRA or other IRA. A conversion of a "traditional" IRA to a Roth IRA may be subject to tax and other special rules apply. You should consult a tax adviser before combining any converted amounts with other Roth IRA contributions, including any other conversion amounts from other tax years. Qualified distributions from a Roth IRA are tax-free. A qualified distribution requires that the Roth IRA has been held for at least 5 years, and the distribution is made after age 59-1/2, on death or disability of the owner, or for a limited amount ($10,000) for a qualified first time home purchase for the owner or certain relatives. Income tax and a 10% penalty tax may apply to distributions made (1) before age 59-1/2 (subject to certain exceptions) or (2) during five taxable years starting with the year in which the first contribution is made to any Roth IRA of the individual. QUALIFIED PENSION AND PROFIT-SHARING PLANS Under a qualified pension or profit-sharing plan, purchase payments made by an employer are not currently taxable to the participant and increases in the value of a contract are not subject to taxation until received by a participant or beneficiary. -8- 76 Distributions are generally taxable to the participant or beneficiary as ordinary income in the year of receipt. Any distribution that is considered the participant's "investment in the contract" is treated as a return of capital and is not taxable. Under a qualified plan, the investment in the contract may be zero. The contract includes an optional death benefit that in some cases may exceed the greater of the purchase payments or the contract value. The death benefit could be characterized as an incidental benefit, the amount of which is limited in any pension or profit-sharing plan. Because the death benefit may exceed this limitation, employers using the contract in connection with such plans should consult their tax adviser. SECTION 403(b) PLANS Under Code section 403(b), payments made by public school systems and certain tax exempt organizations to purchase annuity contracts for their employees are excludable from the gross income of the employee, subject to certain limitations. However, these payments may be subject to FICA (Social Security) taxes. A qualified contract issued as a tax-sheltered annuity under section 403(b) will be amended as necessary to conform to the requirements of the Code. The contract includes an optional death benefit that in some cases may exceed the greater of the purchase payments or the contract value. The death benefit could be characterized as an incidental benefit, the amount of which is limited in any tax-sheltered annuity under section 403(b). Because the death benefit may exceed this limitation, employers using the Contract in connection with such plans should consult their tax adviser. Code section 403(b)(11) restricts this distribution under Code section 403(b) annuity contracts of: (1) elective contributions made in years beginning after December 31, 1998; (2) earnings on those contributions; and (3) earnings in such years on amounts held as of the last year beginning before January 1, 1989. Distribution of those amounts may only occur upon death of the employee, attainment of age 59-1/2, separation from service, disability, or financial hardship. In addition, income attributable to elective contributions may not be distributed in the case of hardship. FEDERAL INCOME TAX WITHHOLDING The portion of a distribution which is taxable income to the recipient will be subject to federal income tax withholding as follows: 1. ELIGIBLE ROLLOVER DISTRIBUTION FROM SECTION 403(b) PLANS OR ARRANGEMENTS OR FROM QUALIFIED PENSION AND PROFIT-SHARING PLANS There is a mandatory 20% tax withholding for plan distributions that are eligible for rollover to an IRA or to another retirement plan but that are not directly rolled over. A distribution made directly to a participant or beneficiary may avoid this result if: (a) a periodic settlement distribution is elected based upon a life or life expectancy calculation, or (b) a term-for-years settlement distribution is elected for a period of ten years or more, payable at least annually, or (c) a minimum required distribution as defined under the tax law is taken after the attainment of the age of 70-1/2 or as otherwise required by law, or (d) the distribution is a hardship distribution. A distribution including a rollover that is not a direct rollover will be subject to the 20% withholding, and a 10% additional tax penalty may apply to any amount not added back in the rollover. The 20% withholding may be recovered when the participant or beneficiary files a personal income tax return for the year if a rollover was completed within 60 days of receipt of the funds, except to the extent that the participant or spousal beneficiary is otherwise underwithheld or short on estimated taxes for that year. 2. OTHER NON-PERIODIC DISTRIBUTIONS (FULL OR PARTIAL REDEMPTIONS) To the extent not described as requiring 20% withholding in 1 above, the portion of a non-periodic distribution which constitutes taxable income will be subject to federal income tax withholding, if the aggregate distributions exceed $200 for the year, unless the recipient elects not to have taxes withheld. If no such election is made, 10% of the taxable -9- 77 distribution will be withheld as federal income tax. Election forms will be provided at the time distributions are requested. This form of withholding applies to all annuity programs. 3. PERIODIC DISTRIBUTIONS (DISTRIBUTIONS PAYABLE OVER A PERIOD GREATER THAN ONE YEAR) The portion of a periodic distribution which constitutes taxable income will be subject to federal income tax withholding under the wage withholding tables as if the recipient were married claiming three exemptions. A recipient may elect not to have income taxes withheld or have income taxes withheld at a different rate by providing a completed election form. Election forms will be provided at the time distributions are requested. This form of withholding applies to all annuity programs. As of January 1, 2001, a recipient receiving periodic payments (e.g., monthly or annual payments under an annuity option) which total $15,150 or less per year, will generally be exempt from periodic withholding. Recipients who elect not to have withholding made are liable for payment of federal income tax on the taxable portion of the distribution. All recipients may also be subject to penalties under the estimated tax payment rules if withholding and estimated tax payments are not sufficient to cover tax liabilities. Recipients who do not provide a social security number or other taxpayer identification number will not be permitted to elect out of withholding. Additionally, U.S citizens residing outside of the country, or U.S. legal residents temporarily residing outside the country, are not permitted to elect out of withholding. INDEPENDENT ACCOUNTANTS The financial statements of The Travelers Life and Annuity Company as of December 31, 2000 and 1999, and for each of the years in the three-year period ended December 31, 2000, included herein, and the financial statements of The Travelers Separate Account Six for Variable Annuities as of December 31, 2000, and for the year ended December 31, 2000 and the period from March 22, 1999 (date operations commenced) to December 31, 1999 also included herein, have been included in reliance upon the reports of KPMG LLP, independent certified public accountants, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing. -10- 78 ANNUAL REPORT DECEMBER 31, 2000 THE TRAVELERS SEPARATE ACCOUNT SIX FOR VARIABLE ANNUITIES [TRAVELERS INSURANCE LOGO] The Travelers Insurance Company The Travelers Life and Annuity Company One Tower Square Hartford, CT 06183 79 THE TRAVELERS SEPARATE ACCOUNT SIX FOR VARIABLE ANNUITIES STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2000 ASSETS: Investments at market value: Capital Appreciation Fund, 177,581 shares (cost $17,697,887) .................... $ 14,563,420 High Yield Bond Trust, 292,379 shares (cost $2,672,948) ......................... 2,564,167 Managed Assets Trust, 1,067,206 shares (cost $21,033,965) ....................... 19,145,683 Money Market Portfolio, 14,138,907 shares (cost $14,138,907) .................... 14,138,907 American Odyssey Funds, Inc., 5,982,740 shares (cost $82,731,925) ............... 80,062,009 Delaware Group Premium Fund, 63,897 shares (cost $758,034) ...................... 844,931 Dreyfus Variable Investment Fund, 342,963 shares (cost $16,660,862) ............. 13,620,892 Greenwich Street Series Fund, 526,306 shares (cost $18,013,364) ................. 17,031,272 Janus Aspen Series, 196,946 shares (cost $8,638,288) ............................ 7,241,703 OCC Accumulation Trust, 5,885 shares (cost $204,185) ............................ 212,402 Salomon Brothers Variable Series Fund Inc., 553,535 shares (cost $7,741,880) .... 8,035,178 Strong Variable Insurance Funds, Inc., 24,928 shares (cost $233,780) ............ 244,048 The Montgomery Funds III, 55,416 shares (cost $955,997) ......................... 861,167 The Travelers Series Trust, 2,654,557 shares (cost $44,301,794) ................. 42,753,283 Travelers Series Fund Inc., 1,598,344 shares (cost $35,040,833) ................. 31,031,107 Variable Insurance Products Fund II, 85,991 shares (cost $1,418,252) ............ 1,366,392 Warburg Pincus Trust, 152,722 shares (cost $2,018,031) .......................... 1,424,900 -------------------- Total Investments (cost $274,260,932) ......................................... $ 255,141,461 Receivables: Dividends ....................................................................... 83,952 Purchase payments and transfers from other Travelers accounts ................... 575,397 Other assets ..................................................................... 9,648 ----------------- Total Assets .................................................................. 255,810,458 ----------------- LIABILITIES: Payables: Contract surrenders and transfers to other Travelers accounts ................... 11,590 Insurance charges ............................................................... 84,397 Floor benefit fees .............................................................. 4 Accrued liabilities .............................................................. 206 ----------------- Total Liabilities ............................................................. 96,197 ----------------- NET ASSETS: $ 255,714,261 =================
See Notes to Financial Statements -1- 80 THE TRAVELERS SEPARATE ACCOUNT SIX FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2000 INVESTMENT INCOME: Dividends ..................................................................... $ 12,184,380 EXPENSES: Insurance charges ............................................................. $ 2,002,282 Floor benefit fees ............................................................ 28 ------------------- Total expenses .............................................................. 2,002,310 ------------------- Net investment income ...................................................... 10,182,070 ------------------- REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain (loss) from investment transactions: Proceeds from investments sold ............................................... 21,449,238 Cost of investments sold ..................................................... 21,546,753 ------------------- Net realized gain (loss) ................................................... (97,515) Change in unrealized gain (loss) on investments: Unrealized gain at December 31, 1999 ......................................... 4,579,270 Unrealized loss at December 31, 2000 ......................................... (19,119,471) ------------------- Net change in unrealized gain (loss) for the year ........................... (23,698,741) ------------------- Net realized gain (loss) and change in unrealized gain (loss) .............. (23,796,256) ------------------- Net decrease in net assets resulting from operations ........................... $ (13,614,186) ===================
See Notes to Financial Statements -2- 81 THE TRAVELERS SEPARATE ACCOUNT SIX FOR VARIABLE ANNUITIES STATEMENT OF CHANGES IN NET ASSETS FOR THE YEAR ENDED DECEMBER 31 2000 AND THE PERIOD MARCH 22, 1999 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1999
2000 1999 ---- ---- OPERATIONS: Net investment income ....................................................... $ 10,182,070 $ 599,053 Net realized gain (loss) from investment transactions ....................... (97,515) 60,339 Net change in unrealized gain (loss) on investments ......................... (23,698,741) 4,579,270 ------------------- ------------------- Net increase (decrease) in net assets resulting from operations ............ (13,614,186) 5,238,662 ------------------- ------------------- UNIT TRANSACTIONS: Participant purchase payments (applicable to 179,841,053 and 69,384,778 units, respectively) ............. 198,929,531 72,682,259 Participant transfers from other Travelers accounts (applicable to 19,994,279 and 2,800,035 units, respectively) ............... 22,485,846 2,956,633 Administrative asset allocation charges (applicable to 218,563 and 49,763 units, respectively) ..................... (237,150) (53,718) Contract surrenders (applicable to 3,735,605 and 243,642 units, respectively) .................. (4,084,344) (261,786) Participant transfers to other Travelers accounts (applicable to 23,622,096 and 2,926,663 units, respectively) ............... (25,587,102) (3,050,444) Other payments (to) from participants (applicable to 250,684 and 3,105 units, respectively) ...................... 306,777 3,283 ------------------- ------------------- Net increase in net assets resulting from unit transactions ................ 191,813,558 72,276,227 ------------------- ------------------- Net increase in net assets ................................................ 178,199,372 77,514,889 NET ASSETS: Beginning of period ......................................................... 77,514,889 - ------------------- ------------------- End of period ............................................................... $ 255,714,261 $ 77,514,889 =================== ===================
See Notes to Financial Statements -3- 82 NOTES TO FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES The Travelers Separate Account Six for Variable Annuities ("Separate Account Six") is a separate account of The Travelers Life and Annuity Company ("Travelers Life"), which is a wholly owned subsidiary of The Travelers Insurance Company ("The Travelers"), an indirect wholly owned subsidiary of Citigroup Inc., and is available for funding certain variable annuity contracts issued by The Travelers. Separate Account Six is registered under the Investment Company Act of 1940, as amended, as a unit investment trust. Separate Account Six is comprised of the Travelers Retirement Account product. Participant purchase payments applied to Separate Account Six are invested in one or more sub-accounts in accordance with the selection made by the contract owner. As of December 31, 2000, the investments comprising Separate Account Six were: Capital Appreciation Fund; High Yield Bond Trust; Managed Assets Trust; Money Market Portfolio; Core Equity Fund (formerly American Odyssey Core Equity Fund), Emerging Opportunities Fund (formerly American Odyssey Emerging Opportunities Fund), Global High-Yield Bond Fund (formerly American Odyssey Global High-Yield Bond Fund), Intermediate-Term Bond Fund (formerly American Odyssey Intermediate-Term Bond Fund) International Equity Fund (formerly American Odyssey International Equity Fund) and Long-Term Bond Fund (formerly American Odyssey Long-Term Bond Fund) of American Odyssey Funds, Inc.; REIT Series and Small Cap Value Series of Delaware Group Premium Fund; Appreciation Portfolio (formerly Capital Appreciation Portfolio) and Small Cap Portfolio of Dreyfus Variable Investment Fund; Equity Index Portfolio - Class II Shares of the Greenwich Street Series Fund; Worldwide Growth Portfolio - Service Shares of Janus Aspen Series; Equity Portfolio of OCC Accumulation Trust; Total Return Fund (formerly Salomon Brothers Variable Total Return Fund), Capital Fund (formerly Salomon Brothers Variable Capital Fund) and Investors Fund (formerly Salomon Brothers Variable Investors Fund) of Salomon Brothers Variable Series Fund Inc.; Strong Schafer Value Fund II of Strong Variable Insurance Funds, Inc; Montgomery Variable Series: Growth Fund of Montgomery Funds III; Equity Income Portfolio, Large Cap Portfolio, Lazard International Stock Portfolio, MFS Mid Cap Growth Portfolio, MFS Research Portfolio, Social Awareness Stock Portfolio, Strategic Stock Portfolio, Disciplined Mid Cap Stock Portfolio, Disciplined Small Cap Stock Portfolio, Travelers Quality Bond Portfolio, U.S. Government Securities Portfolio, Utilities Portfolio and Federated Stock Portfolio of The Travelers Series Trust; Alliance Growth Portfolio, MFS Total Return Portfolio, Smith Barney High Income Portfolio, Smith Barney International Equity Portfolio, Putnam Diversified Income Portfolio and Smith Barney Large Capitalization Growth Portfolio of Travelers Series Fund Inc.; Asset Manager Portfolio - Service Class 2 of Variable Insurance Products Fund II; and Emerging Markets Portfolio of Warburg Pincus Trust. All funds are Massachusetts business trusts, except for the Travelers Series Fund Inc., American Odyssey Funds, Inc., and Salomon Brothers Variable Series Fund Inc., which are incorporated under Maryland law. Strong Variable Insurance Funds, Inc. is a Wisconsin corporation and Montgomery Funds III is a Delaware business trust. Capital Appreciation Fund, High Yield Bond Trust, Managed Assets Trust, Money Market Portfolio, The Travelers Series Trust and Travelers Series Fund Inc. are managed by affiliates of The Travelers. Not all funds may be available in all states or to all contract owners. The following is a summary of significant accounting policies consistently followed by Separate Account Six in the preparation of its financial statements. SECURITY VALUATION. Investments are valued daily at the net asset values per share of the underlying funds. SECURITY TRANSACTIONS. Security transactions are accounted for on the trade date. Dividend income is recorded on the ex-dividend date. FEDERAL INCOME TAXES. The operations of Separate Account Six form a part of the total operations of The Travelers and are not taxed separately. The Travelers is taxed as a life insurance company under the Internal Revenue Code of 1986, as amended (the "Code"). Under existing federal income tax law, no taxes are payable on the investment income of Separate Account Six. Separate Account Six is not taxed as a "regulated investment company" under Subchapter M of the Code. OTHER. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. -4- 83 NOTES TO FINANCIAL STATEMENTS - CONTINUED 2. INVESTMENTS The aggregate costs of purchases and proceeds from sales of investments were $223,517,988 and $21,449,238 respectively, for the year ended December 31, 2000. Realized gains and losses from investment transactions are reported on an average cost basis. The cost of investments in eligible funds was $274,260,932 at December 31, 2000. Gross unrealized appreciation for all investments at December 31, 2000 was $2,881,307. Gross unrealized depreciation for all investments at December 31, 2000 was $22,000,778. 3. CONTRACT CHARGES Insurance charges are paid for the mortality and expense risks assumed by Travelers Life. Each business day, Travelers Life deducts a mortality and expense charge which is reflected in the calculation of accumulation and annuity unit values. This charge equals, on an annual basis, 0.80%, for the Standard Death Benefit contracts (identified in Note 5 with a preface of "Standard") and 1.25% for the Optional Death Benefit and Credit contracts (identified in Note 5 with a preface of "Optional"). No sales charge is deducted from participant purchase payments when they are received. However, Travelers Life may assess a contingent deferred sales charge (up to 5% if a participant's purchase payment is surrendered within five years of its payment date). Contract surrender payments include $94,586 and $2,863 of contingent deferred sales charges for the year ended December 31, 2000 and the period March 22, 1999 (date operations commenced) to December 31, 1999. See the product prospectus for a more detailed explanation of withdrawal charges. Participants in American Odyssey Funds, Inc. (the "Funds"), may elect to enter into a separate asset allocation advisory agreement with CitiStreet Financial Services LLC ("CitiStreet") (formerly Copeland Financial Services, Inc.) an affiliate of Travelers Life. Under this arrangement, Copeland provides asset allocation advice and charges participants an annual fee. The annual fee, which decreases as a participant's assets in the Funds increase, is equivalent to an amount of up to 0.80% of the participant's assets in the Funds. These fees totaled $290,351 for the year ended December 31, 2000 and there were no annual fee charges for the period March 22, 1999 (date operations commenced) to December 31, 1999. If the Variable Annuitization Floor Benefit is selected, a charge is deducted. This charge compensates Travelers Life for guaranteeing a minimum variable annuity payment regardless of the performance of the funding option. This charge will vary based upon market conditions, but will not exceed 3% annually. This charge will be set at the time of election and will remain level throughout the term of annuitization. If the Liquidity Benefit is selected, there is a surrender charge of 5% of the amount withdrawn. This floor benefit feature is available in Equity Index Portfolio - Class II Shares, Travelers Quality Bond Portfolio and U.S. Government Securities Portfolio only. Accordingly, in Note 5, these funding options list the values associated with each of these charges in effect as of December 31, 1999. 4. OTHER If the Optional Death Benefit and Credit is selected, Travelers Life will add a credit to the contract with each purchase payment. Each credit is added to the contract value when the applicable purchase payment is applied and will equal 2% of each purchase payment. These credits are applied pro rata to the same funding option(s) to which the purchase payment was applied. An additional annuitization credit is applied to a contract value once an annuity option is purchased. This credit equals 0.5% of the contract value if annuitized during contract years 2-5, 1% during contract years 6-10 and 2% after contract year 10. There is no credit applied to contracts held less than one year. -5- 84 NOTES TO FINANCIAL STATEMENTS - CONTINUED 5. NET CONTRACT OWNERS' EQUITY *
DECEMBER 31, 2000 -------------------------------------------------------------------------- ACCUMULATION ANNUITY UNIT NET UNITS UNITS VALUE ASSETS ----- ----- ----- ------ Capital Appreciation Fund Standard, 3% AIR ............................ 1,006,482 - $ 0.745 $ 750,188 Standard, 5% AIR ............................ - - 0.745 - Optional, 3% AIR ............................ 18,629,244 - 0.743 13,844,247 Optional, 5% AIR ............................ - - 0.743 - High Yield Bond Trust Standard, 3% AIR ............................ 98,184 3,565 0.982 99,882 Standard, 5% AIR ............................ - - 0.982 - Optional, 3% AIR ............................ 2,504,886 - 0.974 2,440,772 Optional, 5% AIR ............................ - 23,249 0.974 22,645 Managed Assets Trust Standard, 3% AIR ............................ 913,007 - 1.076 982,027 Standard, 5% AIR ............................ - - 1.076 - Optional, 3% AIR ............................ 17,098,984 - 1.067 18,245,402 Optional, 5% AIR ............................ - - 1.067 - Money Market Portfolio Standard, 3% AIR ............................ 700,403 - 1.087 761,146 Standard, 5% AIR ............................ - - 1.087 - Optional, 3% AIR ............................ 12,443,637 - 1.078 13,418,035 Optional, 5% AIR ............................ - - 1.078 - American Odyssey Funds, Inc. Core Equity Fund Standard, 3% AIR ............................ 959,029 - 0.840 805,240 Standard, 5% AIR ............................ - - 0.840 - Optional, 3% AIR ............................ 22,805,101 - 0.833 18,996,240 Optional, 5% AIR ............................ - 18,600 0.833 15,494 Emerging Opportunities Fund Standard, 3% AIR ............................ 462,418 - 1.600 739,875 Standard, 5% AIR ............................ - - 1.600 - Optional, 3% AIR ............................ 9,235,726 - 1.587 14,660,151 Optional, 5% AIR ............................ - 7,256 1.587 11,515 Global High-Yield Bond Fund Standard, 3% AIR ............................ 160,574 - 1.021 163,855 Standard, 5% AIR ............................ - 1,616 1.021 1,650 Optional, 3% AIR ............................ 4,237,855 - 1.012 4,290,121 Optional, 5% AIR ............................ - - 1.012 - Intermediate-Term Bond Fund Standard, 3% AIR ............................ 399,235 - 1.063 424,262 Standard, 5% AIR ............................ - - 1.063 - Optional, 3% AIR ............................ 9,735,911 - 1.054 10,264,256 Optional, 5% AIR ............................ - 22,453 1.054 23,665
-6- 85 NOTES TO FINANCIAL STATEMENTS - CONTINUED 5. NET CONTRACT OWNERS' EQUITY (CONTINUED) *
DECEMBER 31, 2000 ------------------------------------------------------------------------- ACCUMULATION ANNUITY UNIT NET UNITS UNITS VALUE ASSETS ----- ----- ----- ------ American Odyssey Funds, Inc. (continued) International Equity Fund Standard, 3% AIR ............................ 474,746 - $ 1.160 $ 550,868 Standard, 5% AIR ............................ - - 1.160 - Optional, 3% AIR ............................ 12,244,917 - 1.151 14,095,368 Optional, 5% AIR ............................ - 9,004 1.151 10,364 Long-Term Bond Fund Standard, 3% AIR ............................ 601,543 - 1.092 656,585 Standard, 5% AIR ............................ - - 1.092 - Optional, 3% AIR ............................ 13,300,852 - 1.083 14,402,449 Optional, 5% AIR ............................ - 22,686 1.083 24,569 Delaware Group Premium Fund REIT Series Standard, 3% AIR ............................ 102,023 - 1.221 124,548 Standard, 5% AIR ............................ - - 1.221 - Optional, 3% AIR ............................ 284,819 - 1.213 345,452 Optional, 5% AIR ............................ - - 1.213 - Small Cap Value Series Standard, 3% AIR ............................ 5,110 - 1.162 5,939 Standard, 5% AIR ............................ - - 1.162 - Optional, 3% AIR ............................ 319,706 - 1.153 368,724 Optional, 5% AIR ............................ - - 1.153 - Dreyfus Variable Investment Fund Appreciation Portfolio Standard, 3% AIR ............................ 308,303 3,570 1.065 332,181 Standard, 5% AIR ............................ - - 1.065 - Optional, 3% AIR ............................ 4,996,243 - 1.057 5,279,369 Optional, 5% AIR ............................ - - 1.057 - Small Cap Portfolio Standard, 3% AIR ............................ 305,761 - 1.394 426,089 Standard, 5% AIR ............................ - - 1.394 - Optional, 3% AIR ............................ 5,489,701 - 1.383 7,590,716 Optional, 5% AIR ............................ - - 1.383 - Greenwich Street Series Fund Equity Index Portfolio - Class II Shares Standard, 3% AIR ............................ 782,669 59,460 1.019 857,560 Standard, 5% AIR ............................ - - 1.019 - Optional, 3% AIR ............................ 15,906,549 - 1.011 16,079,087 Optional, 5% AIR ............................ - 65,654 1.011 66,376 Standard, 3%, .62% Floor Charge ............. - 22,462 1.008 22,638 Standard, 3%, 1.10% Floor Charge ............ - - 0.999 - Optional, 3%, .83% Floor Charge ............. - - 0.996 - Optional 3%, 1.40% Floor Charge ............. - - 0.986 -
-7- 86 NOTES TO FINANCIAL STATEMENTS - CONTINUED 5. NET CONTRACT OWNERS' EQUITY (CONTINUED) *
DECEMBER 31, 2000 ------------------------------------------------------------------------- ACCUMULATION ANNUITY UNIT NET UNITS UNITS VALUE ASSETS ----- ----- ----- ------ Janus Aspen Series Worldwide Growth Portfolio - Service Shares Standard, 3% AIR ............................ 424,750 - $ 0.801 $ 340,307 Standard, 5% AIR ............................ - - 0.801 - Optional, 3% AIR ............................ 8,681,668 - 0.799 6,935,015 Optional, 5% AIR ............................ - - 0.799 - OCC Accumulation Trust Equity Portfolio Standard, 3% AIR ............................ - - 1.014 - Standard, 5% AIR ............................ - - 1.014 - Optional, 3% AIR ............................ 210,914 - 1.007 212,330 Optional, 5% AIR ............................ - - 1.007 - Salomon Brothers Variable Series Fund Inc. Total Return Fund Standard, 3% AIR ............................ 5,470 - 1.072 5,865 Standard, 5% AIR ............................ - - 1.072 - Optional, 3% AIR ............................ 216,675 - 1.064 230,467 Optional, 5% AIR ............................ - - 1.064 - Capital Fund Standard, 3% AIR ............................ 70,934 - 1.433 101,654 Standard, 5% AIR ............................ - - 1.433 - Optional, 3% AIR ............................ 3,944,667 - 1.422 5,608,173 Optional, 5% AIR ............................ - 37,311 1.422 53,056 Investors Fund Standard, 3% AIR ............................ 20,655 - 1.244 25,692 Standard, 5% AIR ............................ - - 1.244 - Optional, 3% AIR ............................ 1,626,667 - 1.234 2,007,557 Optional, 5% AIR ............................ - - 1.234 - Strong Variable Insurance Funds, Inc. Strong Schafer Value Fund II Standard, 3% AIR ............................ 6,351 - 0.938 5,957 Standard, 5% AIR ............................ - - 0.938 - Optional, 3% AIR ............................ 255,460 - 0.932 238,012 Optional, 5% AIR ............................ - - 0.932 - The Montgomery Funds III Montgomery Variable Series: Growth Fund Standard, 3% AIR ............................ 40,161 - 1.090 43,779 Standard, 5% AIR ............................ - - 1.090 - Optional, 3% AIR ............................ 755,544 - 1.082 817,102 Optional, 5% AIR ............................ - - 1.082 -
-8- 87 NOTES TO FINANCIAL STATEMENTS - CONTINUED 5. NET CONTRACT OWNERS' EQUITY (CONTINUED) *
DECEMBER 31, 2000 ------------------------------------------------------------------------- ACCUMULATION ANNUITY UNIT NET UNITS UNITS VALUE ASSETS ----- ----- ----- ------ The Travelers Series Trust Equity Income Portfolio Standard, 3% AIR ............................ 210,685 1,903 $ 1.105 $ 234,924 Standard, 5% AIR ............................ - - 1.105 - Optional, 3% AIR ............................ 4,760,672 - 1.096 5,219,315 Optional, 5% AIR ............................ - - 1.096 - Federated Stock Portfolio Standard, 3% AIR ............................ 4,126 - 0.993 4,099 Standard, 5% AIR ............................ - - 0.993 - Optional, 3% AIR ............................ 500,956 - 0.986 493,862 Optional, 5% AIR ............................ - - 0.986 - Large Cap Portfolio Standard, 3% AIR ............................ 334,348 - 1.038 347,105 Standard, 5% AIR ............................ - - 1.038 - Optional, 3% AIR ............................ 8,737,631 - 1.030 8,999,081 Optional, 5% AIR ............................ - - 1.030 - Lazard International Stock Portfolio Standard, 3% AIR ............................ 41,599 1,560 1.049 45,258 Standard, 5% AIR ............................ - - 1.049 - Optional, 3% AIR ............................ 325,277 - 1.041 338,514 Optional, 5% AIR ............................ - - 1.041 - MFS Mid Cap Growth Portfolio Standard, 3% AIR ............................ 201,277 - 1.739 350,044 Standard, 5% AIR ............................ - - 1.739 - Optional, 3% AIR ............................ 4,877,373 - 1.726 8,419,935 Optional, 5% AIR ............................ - 14,037 1.726 24,228 MFS Research Portfolio Standard, 3% AIR ............................ 80,150 - 1.136 91,069 Standard, 5% AIR ............................ - - 1.136 - Optional, 3% AIR ............................ 1,184,412 - 1.127 1,335,142 Optional, 5% AIR ............................ - - 1.127 - Social Awareness Stock Portfolio Standard, 3% AIR ............................ 338,770 - 1.100 372,772 Standard, 5% AIR ............................ - - 1.100 - Optional, 3% AIR ............................ 3,740,424 - 1.092 4,083,188 Optional, 5% AIR ............................ - - 1.092 - Strategic Stock Portfolio Standard, 3% AIR ............................ - - 1.030 - Standard, 5% AIR ............................ - - 1.030 - Optional, 3% AIR ............................ 195,578 - 1.023 200,160 Optional, 5% AIR ............................ - - 1.023 - Disciplined Mid Cap Stock Portfolio Standard, 3% AIR ............................ 87,378 - 1.310 114,435 Standard, 5% AIR ............................ - - 1.310 - Optional, 3% AIR ............................ 1,801,861 - 1.301 2,343,507 Optional, 5% AIR ............................ - - 1.301 -
-9- 88 NOTES TO FINANCIAL STATEMENTS - CONTINUED 5. NET CONTRACT OWNERS' EQUITY (CONTINUED) *
DECEMBER 31, 2000 ------------------------------------------------------------------------- ACCUMULATION ANNUITY UNIT NET UNITS UNITS VALUE ASSETS ----- ----- ----- ------ The Travelers Series Trust (continued) Disciplined Small Cap Stock Portfolio Standard, 3% AIR ............................ 23,123 - $ 1.165 $ 26,932 Standard, 5% AIR ............................ - - 1.165 - Optional, 3% AIR ............................ 318,969 - 1.156 368,794 Optional, 5% AIR ............................ - 9,741 1.156 11,261 Travelers Quality Bond Portfolio Standard, 3% AIR ............................ 89,190 - 1.063 94,818 Standard, 5% AIR ............................ - - 1.063 - Optional, 3% AIR ............................ 2,776,420 - 1.055 2,928,223 Optional, 5% AIR ............................ - 22,724 1.055 23,974 Standard, 3%, .25% Floor Charge ............. - - 1.058 - Standard, 3%, .43% Floor Charge ............. - - 1.055 - Optional, 3%, .33% Floor Charge ............. - - 1.049 - Optional, 3%, .53% Floor Charge ............. - - 1.045 - U.S. Government Securities Portfolio Standard, 3% AIR ............................ 145,585 1,779 1.099 161,973 Standard, 5% AIR ............................ - - 1.099 - Optional, 3% AIR ............................ 2,991,693 - 1.091 3,262,256 Optional, 5% AIR ............................ - - 1.091 - Standard, 3%, .25% Floor Charge ............. - - 1.094 - Standard, 3%, .43% Floor Charge ............. - - 1.091 - Optional, 3%, .33% Floor Charge ............. - - 1.084 - Optional, 3%, .53% Floor Charge ............. - - 1.080 - Utilities Portfolio Standard, 3% AIR ............................ 136,065 - 1.183 160,899 Standard, 5% AIR ............................ - - 1.183 - Optional, 3% AIR ............................ 2,495,494 - 1.174 2,929,117 Optional, 5% AIR ............................ - - 1.174 - Travelers Series Fund Inc. Alliance Growth Portfolio Standard, 3% AIR ............................ 785,108 2,768 1.057 832,513 Standard, 5% AIR ............................ - - 1.057 - Optional, 3% AIR ............................ 14,295,924 - 1.048 14,986,334 Optional, 5% AIR ............................ - 36,239 1.048 37,978 MFS Total Return Portfolio Standard, 3% AIR ............................ 177,102 - 1.150 203,738 Standard, 5% AIR ............................ - - 1.150 - Optional, 3% AIR ............................ 3,061,099 - 1.142 3,494,580 Optional, 5% AIR ............................ - - 1.142 -
-10- 89 NOTES TO FINANCIAL STATEMENTS - CONTINUED 5. NET CONTRACT OWNERS' EQUITY (CONTINUED) *
DECEMBER 31, 2000 ------------------------------------------------------------------------- ACCUMULATION ANNUITY UNIT NET UNITS UNITS VALUE ASSETS ----- ----- ----- ------ Travelers Series Fund Inc. (continued) Putnam Diversified Income Portfolio Standard, 3% AIR ............................... - - $ 0.998 $ - Standard, 5% AIR ............................... - - 0.998 - Optional, 3% AIR ............................... 316,519 - 0.991 313,654 Optional, 5% AIR ............................... - - 0.991 - Smith Barney High Income Portfolio Standard, 3% AIR ............................... 12,407 - 0.918 11,392 Standard, 5% AIR ............................... - - 0.918 - Optional, 3% AIR ............................... 283,760 - 0.912 258,651 Optional, 5% AIR ............................... - - 0.912 - Smith Barney International Equity Portfolio Standard, 3% AIR ............................... 76,324 - 1.186 90,520 Standard, 5% AIR ............................... - - 1.186 - Optional, 3% AIR ............................... 3,218,634 - 1.177 3,787,080 Optional, 5% AIR ............................... - - 1.177 - Smith Barney Large Capitalization Growth Portfolio Standard, 3% AIR ............................... 265,016 - 1.045 276,958 Standard, 5% AIR ............................... - - 1.045 - Optional, 3% AIR ............................... 6,508,869 - 1.037 6,748,701 Optional, 5% AIR ............................... - 14,436 1.037 14,970 Variable Insurance Products Fund II Asset Manager Portfolio - Service Class 2 Standard, 3% AIR ............................... 133,640 - 0.949 126,860 Standard, 5% AIR ............................... - - 0.949 - Optional, 3% AIR ............................... 1,309,194 - 0.947 1,239,100 Optional, 5% AIR ............................... - - 0.947 - Warburg Pincus Trust Emerging Markets Portfolio Standard, 3% AIR ............................... 71,391 - 1.022 72,989 Standard, 5% AIR ............................... - - 1.022 - Optional, 3% AIR ............................... 1,387,952 - 1.015 1,408,842 Optional, 5% AIR ............................... - - 1.015 - ------------------ Net Contract Owners' Equity ............................................................................... $ 255,714,261 ==================
* An assumed interest rate of either 3% or 5% is applied in the calculation of annuity unit values depending on the type of annuitization selected. The values associated with each are identified in the table above as "3% AIR" and "5% AIR". -11- 90 NOTES TO FINANCIAL STATEMENTS - CONTINUED 6. STATEMENT OF INVESTMENTS
INVESTMENTS NO. OF MARKET SHARES VALUE -------------------- -------------------- CAPITAL APPRECIATION FUND (5.7%) Total (Cost $17,697,887) 177,581 $ 14,563,420 -------------------- -------------------- HIGH YIELD BOND TRUST (1.0%) Total (Cost $2,672,948) 292,379 2,564,167 -------------------- -------------------- MANAGED ASSETS TRUST (7.5%) Total (Cost $21,033,965) 1,067,206 19,145,683 -------------------- -------------------- MONEY MARKET PORTFOLIO (5.5%) Total (Cost $14,138,907) 14,138,907 14,138,907 -------------------- -------------------- AMERICAN ODYSSEY FUNDS, INC. (31.4%) Core Equity Fund (Cost $22,822,532) 1,414,151 19,769,831 Emerging Opportunities Fund (Cost $14,729,267) 894,197 15,407,009 Global High-Yield Bond Fund (Cost $4,866,843) 496,583 4,454,353 Intermediate-Term Bond Fund (Cost $10,578,680) 1,026,004 10,701,222 International Equity Fund (Cost $15,297,511) 747,933 14,652,012 Long-Term Bond Fund (Cost $14,437,092) 1,403,872 15,077,582 -------------------- -------------------- Total (Cost $82,731,925) 5,982,740 80,062,009 -------------------- -------------------- DELAWARE GROUP PREMIUM FUND (0.3%) REIT Series (Cost $428,839) 42,663 470,143 Small Cap Value Series (Cost $329,195) 21,234 374,788 -------------------- -------------------- Total (Cost $758,034) 63,897 844,931 -------------------- -------------------- DREYFUS VARIABLE INVESTMENT FUND (5.3%) Appreciation Portfolio (Cost $5,652,257) 144,256 5,613,015 Small Cap Portfolio (Cost $11,008,605) 198,707 8,007,877 -------------------- -------------------- Total (Cost $16,660,862) 342,963 13,620,892 -------------------- -------------------- GREENWICH STREET SERIES FUND (6.7%) Equity Index Portfolio - Class II Shares Total (Cost $18,013,364) 526,306 17,031,272 -------------------- -------------------- JANUS ASPEN SERIES (2.8%) Worldwide Growth Portfolio - Service Shares Total (Cost $8,638,288) 196,946 7,241,703 -------------------- -------------------- OCC ACCUMULATION TRUST (0.1%) Equity Portfolio Total (Cost $204,185) 5,885 212,402 -------------------- -------------------- SALOMON BROTHERS VARIABLE SERIES FUND INC. (3.2%) Total Return Fund (Cost $235,936) 22,095 236,413 Capital Fund (Cost $5,570,966) 381,776 5,764,837 Investors Fund (Cost $1,934,978) 149,664 2,033,928 -------------------- -------------------- Total (Cost $7,741,880) 553,535 8,035,178 -------------------- --------------------
-12- 91 NOTES TO FINANCIAL STATEMENTS - CONTINUED 6. STATEMENT OF INVESTMENTS (CONTINUED)
NO. OF MARKET SHARES VALUE -------------------- -------------------- STRONG VARIABLE INSURANCE FUNDS, INC. (0.1%) Strong Schafer Value Fund II Total (Cost $233,780) 24,928 $ 244,048 -------------------- -------------------- THE MONTGOMERY FUNDS III (0.3%) Montgomery Variable Series: Growth Fund Total (Cost $955,997) 55,416 861,167 -------------------- -------------------- THE TRAVELERS SERIES TRUST (16.8%) Equity Income Portfolio (Cost $5,193,320) 335,550 5,456,040 Federated Stock Portfolio (Cost $504,831) 31,152 498,128 Large Cap Portfolio (Cost $11,017,537) 556,174 9,349,292 Lazard International Stock Portfolio (Cost $414,337) 29,194 383,903 MFS Mid Cap Growth Portfolio (Cost $9,320,179) 523,320 8,770,842 MFS Research Portfolio (Cost $1,474,704) 111,518 1,354,947 Social Awareness Stock Portfolio (Cost $4,330,810) 152,479 4,385,283 Strategic Stock Portfolio (Cost $189,122) 20,164 200,227 Disciplined Mid Cap Stock Portfolio (Cost $2,404,545) 142,280 2,455,746 Disciplined Small Cap Stock Portfolio (Cost $416,934) 39,626 406,171 Travelers Quality Bond Portfolio (Cost $2,944,326) 273,835 3,012,182 U.S. Government Securities Portfolio (Cost $3,271,197) 280,308 3,425,361 Utilities Portfolio (Cost $2,819,952) 158,957 3,055,161 -------------------- -------------------- Total (Cost $44,301,794) 2,654,557 42,753,283 -------------------- -------------------- TRAVELERS SERIES FUND INC. (12.2%) Alliance Growth Portfolio (Cost $19,215,899) 638,330 15,862,493 MFS Total Return Portfolio (Cost $3,458,521) 206,286 3,663,646 Putnam Diversified Income Portfolio (Cost $335,123) 30,054 313,762 Smith Barney High Income Portfolio (Cost $305,885) 26,720 270,135 Smith Barney International Equity Portfolio (Cost $4,385,128) 223,054 3,878,908 Smith Barney Large Capitalization Growth Portfolio (Cost $7,340,277) 473,900 7,042,163 -------------------- -------------------- Total (Cost $35,040,833) 1,598,344 31,031,107 -------------------- -------------------- VARIABLE INSURANCE PRODUCTS FUND II (0.5%) Asset Manager Portfolio - Service Class 2 Total (Cost $1,418,252) 85,991 1,366,392 -------------------- -------------------- WARBURG PINCUS TRUST (0.6%) Emerging Markets Portfolio Total (Cost $2,018,031) 152,722 1,424,900 -------------------- -------------------- TOTAL INVESTMENTS (100%) (COST $274,260,932) $ 255,141,461 ====================
-13- 92 NOTES TO FINANCIAL STATEMENTS - CONTINUED 7. SCHEDULE OF SEPARATE ACCOUNT SIX OPERATIONS AND CHANGES IN NET ASSETS FOR THE YEAR ENDED DECEMBER 31, 2000 AND THE PERIOD MARCH 22, 1999 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1999
CAPITAL APPRECIATION FUND HIGH YIELD BOND TRUST ------------------------------ ------------------------------ 2000 1999 2000 1999 ---- ---- ---- ---- INVESTMENT INCOME: Dividends ......................................... $ 75,422 $ - $ 118,655 $ 11,903 -------------- -------------- -------------- --------------- EXPENSES: Insurance charges ................................. 62,402 - 19,411 3,826 Floor benefit fees ................................ - - - - -------------- -------------- -------------- --------------- Net investment income (loss) .................. 13,020 - 99,244 8,077 -------------- -------------- -------------- --------------- REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain (loss) from investment transactions: Proceeds from investments sold .................. 138,871 - 327,034 55,284 Cost of investments sold ........................ 144,418 - 334,411 56,753 -------------- -------------- -------------- --------------- Net realized gain (loss) ..................... (5,547) - (7,377) (1,469) -------------- -------------- -------------- --------------- Change in unrealized gain (loss) on investments: Unrealized gain (loss) beginning of period - - (4,621) - Unrealized gain (loss) end of period ............ (3,134,467) - (108,781) (4,621) -------------- -------------- -------------- --------------- Net change in unrealized gain (loss) for the period ................................ (3,134,467) - (104,160) (4,621) -------------- -------------- -------------- --------------- Net increase (decrease) in net assets resulting from operations ................. (3,126,994) - (12,293) 1,987 -------------- -------------- -------------- --------------- UNIT TRANSACTIONS: Participant purchase payments ..................... 16,739,069 - 1,706,966 973,281 Participant transfers from other Travelers accounts 1,516,842 - 200,394 42,593 Administrative asset allocation charges ........... - - - - Contract surrenders ............................... (42,113) - (40,588) (2,974) Participant transfers to other Travelers accounts . (492,369) - (240,763) (64,167) Other payments (to) from participants ............. - - (1,137) - -------------- -------------- -------------- --------------- Net increase (decrease) in net assets resulting from unit transactions ................ 17,721,429 - 1,624,872 948,733 -------------- -------------- -------------- --------------- Net increase (decrease) in net assets ........... 14,594,435 - 1,612,579 950,720 NET ASSETS: Beginning of period .............................. - - 950,720 - -------------- -------------- -------------- --------------- End of period .................................... $ 14,594,435 $ - $ 2,563,299 $ 950,720 ============== ============== ============== =============== MANAGED ASSETS TRUST ------------------------------- 2000 1999 ---- ---- INVESTMENT INCOME: Dividends ......................................... $ 1,748,106 $ 48,516 --------------- --------------- EXPENSES: Insurance charges ................................. 159,881 19,283 Floor benefit fees ................................ - - --------------- --------------- Net investment income (loss) .................. 1,588,225 29,233 --------------- --------------- REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain (loss) from investment transactions: Proceeds from investments sold .................. 320,244 187,612 Cost of investments sold ........................ 323,656 186,469 --------------- --------------- Net realized gain (loss) ..................... (3,412) 1,143 --------------- --------------- Change in unrealized gain (loss) on investments: Unrealized gain (loss) beginning of period ...... 322,572 - Unrealized gain (loss) end of period ............ (1,888,282) 322,572 --------------- --------------- Net change in unrealized gain (loss) for the period ................................ (2,210,854) 322,572 --------------- --------------- Net increase (decrease) in net assets resulting from operations ................. (626,041) 352,948 --------------- --------------- UNIT TRANSACTIONS: Participant purchase payments ..................... 12,814,924 5,726,071 Participant transfers from other Travelers accounts 1,555,379 194,127 Administrative asset allocation charges ........... - - Contract surrenders ............................... (357,507) (27,424) Participant transfers to other Travelers accounts . (492,889) (103,085) Other payments (to) from participants ............. 190,926 - --------------- --------------- Net increase (decrease) in net assets resulting from unit transactions ................ 13,710,833 5,789,689 --------------- --------------- Net increase (decrease) in net assets ........... 13,084,792 6,142,637 NET ASSETS: Beginning of period .............................. 6,142,637 - --------------- --------------- End of period .................................... $ 19,227,429 $ 6,142,637 =============== ===============
-14- 93 NOTES TO FINANCIAL STATEMENTS - CONTINUED
MONEY MARKET PORTFOLIO CORE EQUITY FUND EMERGING OPPORTUNITIES FUND GLOBAL HIGH-YIELD BOND FUND -------------------------------- ------------------------------ ------------------------------ ------------------------------- 2000 1999 2000 1999 2000 1999 2000 1999 ---- ---- ---- ---- ---- ---- ---- ---- $ 560,110 $ 84,491 $ 842,301 $ 70,815 $ 443,229 $ 16,633 $ 283,015 $ 6,008 ---------------- --------------- --------------- -------------- -------------- --------------- --------------- --------------- 113,085 19,329 159,070 17,921 116,527 9,644 38,342 3,572 - - - - - - - - ---------------- --------------- --------------- -------------- -------------- --------------- --------------- --------------- 447,025 65,162 683,231 52,894 326,702 6,989 244,673 2,436 ---------------- --------------- --------------- -------------- -------------- --------------- --------------- --------------- 8,964,358 700,917 340,381 80,469 270,429 15,884 221,490 4,199 8,964,358 700,917 371,025 84,661 240,524 15,770 227,209 4,185 ---------------- --------------- --------------- -------------- -------------- --------------- --------------- --------------- - - (30,644) (4,192) 29,905 114 (5,719) 14 ---------------- --------------- --------------- -------------- -------------- --------------- --------------- --------------- - - (129,071) - 636,426 - 39,737 - - - (3,052,701) (129,071) 677,742 636,426 (412,490) 39,737 ---------------- --------------- --------------- -------------- -------------- --------------- --------------- --------------- - - (2,923,630) (129,071) 41,316 636,426 (452,227) 39,737 ---------------- --------------- --------------- -------------- -------------- --------------- --------------- --------------- 447,025 65,162 (2,271,043) (80,369) 397,923 643,529 (213,273) 42,187 ---------------- --------------- --------------- -------------- -------------- --------------- --------------- --------------- 16,490,403 5,984,365 16,756,956 5,886,555 11,441,006 3,162,495 3,520,590 1,442,653 4,911,492 696,473 426,878 167,251 419,867 96,426 90,527 33,650 - - (63,081) (15,478) (42,485) (8,408) (15,392) (2,493) (375,198) (20,302) (349,538) (12,784) (251,894) (6,916) (133,335) (4,185) (13,070,718) (967,330) (564,902) (67,458) (427,114) (8,896) (290,047) (6,882) 17,809 - 3,003 984 (4,485) 493 (8,538) 164 ---------------- --------------- --------------- -------------- -------------- --------------- --------------- --------------- 7,973,788 5,693,206 16,209,316 5,959,070 11,134,895 3,235,194 3,163,805 1,462,907 ---------------- --------------- --------------- -------------- -------------- --------------- --------------- --------------- 8,420,813 5,758,368 13,938,273 5,878,701 11,532,818 3,878,723 2,950,532 1,505,094 5,758,368 - 5,878,701 - 3,878,723 - 1,505,094 - ---------------- --------------- --------------- -------------- -------------- --------------- --------------- --------------- $ 14,179,181 $ 5,758,368 $ 19,816,974 $ 5,878,701 $ 15,411,541 $ 3,878,723 $ 4,455,626 $ 1,505,094 ================ =============== =============== ============== ============== =============== =============== ===============
-15- 94 NOTES TO FINANCIAL STATEMENTS - CONTINUED 7. SCHEDULE OF SEPARATE ACCOUNT SIX OPERATIONS AND CHANGES IN NET ASSETS FOR THE YEAR ENDED DECEMBER 31, 2000 AND THE PERIOD MARCH 22, 1999 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1999 (CONTINUED)
INTERMEDIATE-TERM BOND FUND INTERNATIONAL EQUITY FUND ------------------------------ ------------------------------ 2000 1999 2000 1999 ---- ---- ---- ---- INVESTMENT INCOME: Dividends .......................................... $ 383,925 $ 16,869 $ 448,159 $ - -------------- -------------- -------------- --------------- EXPENSES: Insurance charges .................................. 83,562 9,175 116,751 11,955 Floor benefit fees ................................. - - - - -------------- -------------- -------------- --------------- Net investment income (loss) .................... 300,363 7,694 331,408 (11,955) -------------- -------------- -------------- --------------- REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain (loss) from investment transactions: Proceeds from investments sold ................... 221,834 55,209 339,559 46,936 Cost of investments sold ......................... 223,758 55,252 332,013 46,406 -------------- -------------- -------------- --------------- Net realized gain (loss) ........................ (1,924) (43) 7,546 530 -------------- -------------- -------------- --------------- Change in unrealized gain (loss) on investments: Unrealized gain (loss) beginning of period ....... 574 - 614,870 - Unrealized gain (loss) end of period ............. 122,542 574 (645,499) 614,870 -------------- -------------- -------------- --------------- Net change in unrealized gain (loss) for the period ........................................ 121,968 574 (1,260,369) 614,870 -------------- -------------- -------------- --------------- Net increase (decrease) in net assets resulting from operations ....................... 420,407 8,225 (921,415) 603,445 -------------- -------------- -------------- --------------- UNIT TRANSACTIONS: Participant purchase payments ...................... 7,326,754 3,006,363 11,530,078 3,763,133 Participant transfers from other Travelers accounts 355,699 97,524 446,023 115,970 Administrative asset allocation charges ............ (32,416) (6,700) (41,709) (9,954) Contract surrenders ................................ (281,305) (13,986) (254,374) (13,007) Participant transfers to other Travelers accounts .. (168,060) (10,045) (541,900) (19,137) Other payments (to) from participants .............. 9,066 657 (1,046) 493 -------------- -------------- -------------- --------------- Net increase (decrease) in net assets resulting from unit transactions ................ 7,209,738 3,073,813 11,137,072 3,837,498 -------------- -------------- -------------- --------------- Net increase (decrease) in net assets .......... 7,630,145 3,082,038 10,215,657 4,440,943 NET ASSETS: Beginning of period ............................. 3,082,038 - 4,440,943 - -------------- -------------- -------------- --------------- End of period ................................... $ 10,712,183 $ 3,082,038 $ 14,656,600 $ 4,440,943 ============== ============== ============== =============== LONG-TERM BOND FUND ------------------------------- 2000 1999 ---- ---- INVESTMENT INCOME: Dividends .......................................... $ 525,552 $ 34,964 --------------- --------------- EXPENSES: Insurance charges 109,419 12,306 Floor benefit fees ................................. - - --------------- --------------- Net investment income (loss) .................... 416,133 22,658 --------------- --------------- REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain (loss) from investment transactions: Proceeds from investments sold ................... 238,137 97,271 Cost of investments sold ......................... 238,191 97,740 --------------- --------------- Net realized gain (loss) ........................ (54) (469) --------------- --------------- Change in unrealized gain (loss) on investments: Unrealized gain (loss) beginning of period ....... (34,486) - Unrealized gain (loss) end of period ............. 640,490 (34,486) --------------- --------------- Net change in unrealized gain (loss) for the period ........................................ 674,976 (34,486) --------------- --------------- Net increase (decrease) in net assets resulting from operations ....................... 1,091,055 (12,297) --------------- --------------- UNIT TRANSACTIONS: Participant purchase payments ...................... 10,493,586 3,671,244 Participant transfers from other Travelers accounts 438,588 92,076 Administrative asset allocation charges ............ (42,067) (10,685) Contract surrenders ................................ (270,694) (11,674) Participant transfers to other Travelers accounts .. (305,947) (50,152) Other payments (to) from participants .............. 78 492 --------------- --------------- Net increase (decrease) in net assets resulting from unit transactions ................ 10,313,544 3,691,301 --------------- --------------- Net increase (decrease) in net assets .......... 11,404,599 3,679,004 NET ASSETS: Beginning of period ............................. 3,679,004 - --------------- --------------- End of period ................................... $ 15,083,603 $ 3,679,004 =============== ===============
-16- 95 NOTES TO FINANCIAL STATEMENTS - CONTINUED
REIT SERIES SMALL CAP VALUE SERIES APPRECIATION PORTFOLIO SMALL CAP PORTFOLIO -------------------------------- ------------------------------ ------------------------------ ------------------------------- 2000 1999 2000 1999 2000 1999 2000 1999 ---- ---- ---- ---- ---- ---- ---- ---- $ 1,326 $ - $ 6,546 $ - $ 99,886 $ 26,105 $ 3,436,893 $ - ---------------- --------------- --------------- -------------- -------------- --------------- --------------- --------------- 1,616 119 3,308 962 55,884 13,280 50,835 4,612 - - - - - - - - ---------------- --------------- --------------- -------------- -------------- --------------- --------------- --------------- (290) (119) 3,238 (962) 44,002 12,825 3,386,058 (4,612) ---------------- --------------- --------------- -------------- -------------- --------------- --------------- --------------- 20,603 19,792 57,790 6,944 588,338 251,255 102,223 113,538 20,916 21,050 59,931 7,394 568,336 245,969 93,024 104,690 ---------------- --------------- --------------- -------------- -------------- --------------- --------------- --------------- (313) (1,258) (2,141) (450) 20,002 5,286 9,199 8,848 ---------------- --------------- --------------- -------------- -------------- --------------- --------------- --------------- (22) - (4,787) - 102,903 - 169,062 - 41,304 (22) 45,593 (4,787) (39,242) 102,903 (3,000,728) 169,062 ---------------- --------------- --------------- -------------- -------------- --------------- --------------- --------------- 41,326 (22) 50,380 (4,787) (142,145) 102,903 (3,169,790) 169,062 ---------------- --------------- --------------- -------------- -------------- --------------- --------------- --------------- 40,723 (1,399) 51,477 (6,199) (78,141) 121,014 225,467 173,298 ---------------- --------------- --------------- -------------- -------------- --------------- --------------- --------------- 339,694 29,826 174,610 195,117 2,985,718 2,967,159 6,049,118 1,262,814 93,278 12,435 6,542 - 487,843 110,688 670,760 34,898 - - - - - - - - (5,374) - (7,155) (777) (72,886) (7,984) (78,019) (2,822) (19,490) (19,693) (22,595) (5,747) (609,882) (290,900) (204,009) (102,442) - - (10,610) - (1,079) - (12,258) - ---------------- --------------- --------------- -------------- -------------- --------------- --------------- --------------- 408,108 22,568 140,792 188,593 2,789,714 2,778,963 6,425,592 1,192,448 ---------------- --------------- --------------- -------------- -------------- --------------- --------------- --------------- 448,831 21,169 192,269 182,394 2,711,573 2,899,977 6,651,059 1,365,746 21,169 - 182,394 - 2,899,977 - 1,365,746 - ---------------- --------------- --------------- -------------- -------------- --------------- --------------- --------------- $ 470,000 $ 21,169 $ 374,663 $ 182,394 $ 5,611,550 $ 2,899,977 $ 8,016,805 $ 1,365,746 ================ =============== =============== ============== ============== =============== =============== ===============
-17- 96 NOTES TO FINANCIAL STATEMENTS - CONTINUED 7. SCHEDULE OF SEPARATE ACCOUNT SIX OPERATIONS AND CHANGES IN NET ASSETS FOR THE YEAR ENDED DECEMBER 31, 2000 AND THE PERIOD MARCH 22, 1999 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1999 (CONTINUED)
EQUITY INDEX PORTFOLIO - WORLDWIDE GROWTH CLASS II SHARES PORTFOLIO - SERVICE SHARES ------------------------------ ------------------------------ 2000 1999 2000 1999 ---- ---- ---- ---- INVESTMENT INCOME: Dividends ........................................... $ 44,770 $ 7,202 $ 195,689 $ - -------------- -------------- -------------- --------------- EXPENSES: Insurance charges ................................... 156,706 21,777 32,301 - Floor benefit fees .................................. 28 - - - -------------- -------------- -------------- --------------- Net investment income (loss) .................... (111,964) (14,575) 163,388 - -------------- -------------- -------------- --------------- REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain (loss) from investment transactions: Proceeds from investments sold .................... 627,331 386,680 298,958 - Cost of investments sold .......................... 607,235 375,394 331,834 - -------------- -------------- -------------- --------------- Net realized gain (loss) ........................ 20,096 11,286 (32,876) - -------------- -------------- -------------- --------------- Change in unrealized gain (loss) on investments: Unrealized gain (loss) beginning of period ........ 517,135 - - - Unrealized gain (loss) end of period .............. (982,092) 517,135 (1,396,585) - -------------- -------------- -------------- --------------- Net change in unrealized gain (loss) for the period .......................................... (1,499,227) 517,135 (1,396,585) - -------------- -------------- -------------- --------------- Net increase (decrease) in net assets resulting from operations ....................... (1,591,095) 513,846 (1,266,073) - -------------- -------------- -------------- --------------- UNIT TRANSACTIONS: Participant purchase payments ....................... 11,527,274 6,376,640 8,264,467 - Participant transfers from other Travelers accounts . 1,089,116 204,036 660,869 - Administrative asset allocation charges ............. - - - - Contract surrenders ................................. (356,305) (24,952) (49,331) - Participant transfers to other Travelers accounts ... (648,631) (115,186) (334,610) - Other payments (to) from participants ............... 50,918 - - - -------------- -------------- -------------- --------------- Net increase (decrease) in net assets resulting from unit transactions ................ 11,662,372 6,440,538 8,541,395 - -------------- -------------- -------------- --------------- Net increase (decrease) in net assets ........... 10,071,277 6,954,384 7,275,322 - NET ASSETS: Beginning of period ............................... 6,954,384 - - - -------------- -------------- -------------- --------------- End of period ..................................... $ 17,025,661 $ 6,954,384 $ 7,275,322 $ - ============== ============== ============== =============== EQUITY PORTFOLIO ------------------------------- 2000 1999 ---- ---- INVESTMENT INCOME: Dividends ........................................... $ 15,801 $ - --------------- --------------- EXPENSES: Insurance charges ................................... 2,146 324 Floor benefit fees .................................. - - --------------- --------------- Net investment income (loss) ........................ 13,655 (324) --------------- --------------- REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain (loss) from investment transactions: Proceeds from investments sold ...................... 14,323 248 Cost of investments sold ............................ 14,333 244 --------------- --------------- Net realized gain (loss) ............................ (10) 4 --------------- --------------- Change in unrealized gain (loss) on investments: Unrealized gain (loss) beginning of period .......... 1,813 - Unrealized gain (loss) end of period ................ 8,217 1,813 --------------- --------------- Net change in unrealized gain (loss) for the period . 6,404 1,813 --------------- --------------- Net increase (decrease) in net assets resulting from operations ........................... 20,049 1,493 --------------- --------------- UNIT TRANSACTIONS: Participant purchase payments ....................... 33,163 136,293 Participant transfers from other Travelers accounts . 29,732 1,600 Administrative asset allocation charges ............. - - Contract surrenders ................................. - - Participant transfers to other Travelers accounts ... (10,000) - Other payments (to) from participants ............... - - --------------- --------------- Net increase (decrease) in net assets resulting from unit transactions .................. 52,895 137,893 --------------- --------------- Net increase (decrease) in net assets ............. 72,944 139,386 NET ASSETS: Beginning of period ............................... 139,386 - --------------- --------------- End of period ..................................... $ 212,330 $ 139,386 =============== ===============
-18- 97 NOTES TO FINANCIAL STATEMENTS - CONTINUED
TOTAL RETURN FUND CAPITAL FUND INVESTORS FUND STRONG SCHAFER VALUE FUND II -------------------------------- ------------------------------ ------------------------------ ------------------------------- 2000 1999 2000 1999 2000 1999 2000 1999 ---- ---- ---- ---- ---- ---- ---- ---- $ 7,455 $ 3,922 $ 333,346 $ 54,934 $ 72,226 $ 3,694 $ 1,064 $ 4,152 ---------------- --------------- --------------- -------------- -------------- --------------- --------------- --------------- 2,546 1,071 40,508 7,963 14,972 3,878 2,029 346 - - - - - - - - ---------------- --------------- --------------- -------------- -------------- --------------- --------------- --------------- 4,909 2,851 292,838 46,971 57,254 (184) (965) 3,806 ---------------- --------------- --------------- -------------- -------------- --------------- --------------- --------------- 55,846 968 231,192 141,974 140,570 159,695 1,878 612 55,766 986 206,900 139,714 129,788 163,453 1,846 657 ---------------- --------------- --------------- -------------- -------------- --------------- --------------- --------------- 80 (18) 24,292 2,260 10,782 (3,758) 32 (45) ---------------- --------------- --------------- -------------- -------------- --------------- --------------- --------------- (8,593) - 106,795 - 8,609 - (2,212) - 477 (8,593) 193,871 106,795 98,950 8,609 10,268 (2,212) ---------------- --------------- --------------- -------------- -------------- --------------- --------------- --------------- 9,070 (8,593) 87,076 106,795 90,341 8,609 12,480 (2,212) ---------------- --------------- --------------- -------------- -------------- --------------- --------------- --------------- 14,059 (5,760) 404,206 156,026 158,377 4,667 11,547 1,549 ---------------- --------------- --------------- -------------- -------------- --------------- --------------- --------------- 92,356 169,217 3,429,748 1,615,314 1,096,845 840,488 110,334 104,802 20,000 - 422,479 9,960 152,562 25,539 16,041 - - - - - - - - - (15,566) - (76,618) (3,222) (45,419) (790) - (304) (37,974) - (122,937) (58,593) (56,513) (142,507) - - - - (13,480) - - - - - ---------------- --------------- --------------- -------------- -------------- --------------- --------------- --------------- 58,816 169,217 3,639,192 1,563,459 1,147,475 722,730 126,375 104,498 ---------------- --------------- --------------- -------------- -------------- --------------- --------------- --------------- 72,875 163,457 4,043,398 1,719,485 1,305,852 727,397 137,922 106,047 163,457 - 1,719,485 - 727,397 - 106,047 - ---------------- --------------- --------------- -------------- -------------- --------------- --------------- --------------- $ 236,332 $ 163,457 $ 5,762,883 $ 1,719,485 $ 2,033,249 $ 727,397 $ 243,969 $ 106,047 ================ =============== =============== ============== ============== =============== =============== ===============
-19- 98 NOTES TO FINANCIAL STATEMENTS - CONTINUED 7. SCHEDULE OF SEPARATE ACCOUNT SIX OPERATIONS AND CHANGES IN NET ASSETS FOR THE YEAR ENDED DECEMBER 31, 2000 AND THE PERIOD MARCH 22, 1999 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1999 (CONTINUED)
MONTGOMERY VARIABLE SERIES: GROWTH FUND EQUITY INCOME PORTFOLIO ----------------------------------- ------------------------------------ 2000 1999 2000 1999 ---- ---- ---- ---- INVESTMENT INCOME: Dividends ............................................. $ 60,920 $ 7,138 $ 52,873 $ 172,587 ----------------- ----------------- ----------------- ----------------- EXPENSES: Insurance charges ..................................... 10,397 1,663 45,483 10,520 Floor benefit fees .................................... - - - - ----------------- ----------------- ----------------- ----------------- Net investment income (loss) ...................... 50,523 5,475 7,390 162,067 ----------------- ----------------- ----------------- ----------------- REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain (loss) from investment transactions: Proceeds from investments sold ...................... 39,814 1,604 441,867 264,619 Cost of investments sold ............................ 37,230 1,588 466,881 273,079 ----------------- ----------------- ----------------- ----------------- Net realized gain (loss) .......................... 2,584 16 (25,014) (8,460) ----------------- ----------------- ----------------- ----------------- Change in unrealized gain (loss) on investments: Unrealized gain (loss) beginning of period .......... 52,712 - (128,018) - Unrealized gain (loss) end of period ................ (94,830) 52,712 262,720 (128,018) ----------------- ----------------- ----------------- ----------------- Net change in unrealized gain (loss) for the period (147,542) 52,712 390,738 (128,018) ----------------- ----------------- ----------------- ----------------- Net increase (decrease) in net assets resulting from operations ......................... (94,435) 58,203 373,114 25,589 ----------------- ----------------- ----------------- ----------------- UNIT TRANSACTIONS: Participant purchase payments ......................... 242,739 650,064 2,508,107 2,810,908 Participant transfers from other Travelers accounts ... 31,613 2,860 238,427 29,242 Administrative asset allocation charges ............... - - - - Contract surrenders ................................... (2,856) (790) (107,514) (19,684) Participant transfers to other Travelers accounts ..... (16,490) - (273,118) (119,758) Other payments (to) from participants ................. (10,027) - (11,074) - ----------------- ----------------- ----------------- ----------------- Net increase (decrease) in net assets resulting from unit transactions .................. 244,979 652,134 2,354,828 2,700,708 ----------------- ----------------- ----------------- ----------------- Net increase (decrease) in net assets ............. 150,544 710,337 2,727,942 2,726,297 NET ASSETS: Beginning of period ................................. 710,337 - 2,726,297 - ----------------- ----------------- ----------------- ----------------- End of period ....................................... $ 860,881 $ 710,337 $ 5,454,239 $ 2,726,297 ================= ================= ================= ================= FEDERATED STOCK PORTFOLIO ------------------------------------ 2000 1999 ---- ---- INVESTMENT INCOME: Dividends ............................................. $ 23,636 $ 558 ----------------- ----------------- EXPENSES: Insurance charges ..................................... 5,158 1,513 Floor benefit fees .................................... - - ----------------- ----------------- Net investment income (loss) ...................... 18,478 (955) ----------------- ----------------- REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain (loss) from investment transactions: Proceeds from investments sold ...................... 46,805 2,960 Cost of investments sold ............................ 49,547 3,095 ----------------- ----------------- Net realized gain (loss) .......................... (2,742) (135) ----------------- ----------------- Change in unrealized gain (loss) on investments: Unrealized gain (loss) beginning of period .......... (7,074) - Unrealized gain (loss) end of period ................ (6,703) (7,074) ----------------- ----------------- Net change in unrealized gain (loss) for the period 371 (7,074) ----------------- ----------------- Net increase (decrease) in net assets resulting from operations ......................... 16,107 (8,164) ----------------- ----------------- UNIT TRANSACTIONS: Participant purchase payments ......................... 161,319 338,773 Participant transfers from other Travelers accounts ... 23,623 - Administrative asset allocation charges ............... - - Contract surrenders ................................... (7,334) (1,608) Participant transfers to other Travelers accounts ..... (24,755) - Other payments (to) from participants ................. - - ----------------- ----------------- Net increase (decrease) in net assets resulting from unit transactions .................. 152,853 337,165 ----------------- ----------------- Net increase (decrease) in net assets ............. 168,960 329,001 NET ASSETS: Beginning of period ................................. 329,001 - ----------------- ----------------- End of period ....................................... $ 497,961 $ 329,001 ================= =================
-20- 99 NOTES TO FINANCIAL STATEMENTS - CONTINUED
LAZARD INTERNATIONAL STOCK LARGE CAP PORTFOLIO PORTFOLIO MFS MID CAP GROWTH PORTFOLIO ------------------------------------- ----------------------------------- ----------------------------------- 2000 1999 2000 1999 2000 1999 ---- ---- ---- ---- ---- ---- $ 566,770 $ 172,975 $ 13,954 $ 58 $ 262,060 $ 179 ------------------- ----------------- ----------------- ----------------- ----------------- ----------------- 88,137 16,114 3,647 430 56,450 1,535 - - - - - - ------------------- ----------------- ----------------- ----------------- ----------------- ----------------- 478,633 156,861 10,307 (372) 205,610 (1,356) ------------------- ----------------- ----------------- ----------------- ----------------- ----------------- 477,176 27,001 172,533 15,873 185,096 140,356 469,379 25,148 174,975 14,937 167,751 138,726 ------------------- ----------------- ----------------- ----------------- ----------------- ----------------- 7,797 1,853 (2,442) 936 17,345 1,630 ------------------- ----------------- ----------------- ----------------- ----------------- ----------------- 358,317 - 12,937 - 135,803 - (1,668,245) 358,317 (30,434) 12,937 (549,337) 135,803 ------------------- ----------------- ----------------- ----------------- ----------------- ----------------- (2,026,562) 358,317 (43,371) 12,937 (685,140) 135,803 ------------------- ----------------- ----------------- ----------------- ----------------- ----------------- (1,540,132) 517,031 (35,506) 13,501 (462,185) 136,077 ------------------- ----------------- ----------------- ----------------- ----------------- ----------------- 7,451,765 3,154,427 345,629 147,097 7,678,423 859,381 483,041 104,132 26,574 12,061 812,348 10,461 - - - - - - (162,734) (19,491) (18,824) - (37,187) (12,906) (635,900) (5,953) (90,763) (15,502) (97,051) (126,343) - - (495) - 33,189 - ------------------- ----------------- ----------------- ----------------- ----------------- ----------------- 7,136,172 3,233,115 262,121 143,656 8,389,722 730,593 ------------------- ----------------- ----------------- ----------------- ----------------- ----------------- 5,596,040 3,750,146 226,615 157,157 7,927,537 866,670 3,750,146 - 157,157 - 866,670 - ------------------- ----------------- ----------------- ----------------- ----------------- ----------------- $ 9,346,186 $ 3,750,146 $ 383,772 $ 157,157 $ 8,794,207 $ 866,670 =================== ================= ================= ================= ================= ================= MFS RESEARCH PORTFOLIO ------------------------------------ 2000 1999 ---- ---- $ 7,477 $ - ------------------ ----------------- 7,675 791 - - ------------------ ----------------- (198) (791) ------------------ ----------------- 100,188 793 91,829 786 ------------------ ----------------- 8,359 7 ------------------ ----------------- 25,541 - (119,757) 25,541 ------------------ ----------------- (145,298) 25,541 ------------------ ----------------- (137,137) 24,757 ------------------ ----------------- 1,295,630 176,746 148,059 4,391 - - (11,302) (952) (73,981) - - - ------------------ ----------------- 1,358,406 180,185 ------------------ ----------------- 1,221,269 204,942 204,942 - ------------------ ----------------- $ 1,426,211 $ 204,942 ================== =================
-21- 100 NOTES TO FINANCIAL STATEMENTS - CONTINUED 7. SCHEDULE OF SEPARATE ACCOUNT SIX OPERATIONS AND CHANGES IN NET ASSETS FOR THE YEAR ENDED DECEMBER 31, 2000 AND THE PERIOD MARCH 22, 1999 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1999 (CONTINUED)
SOCIAL AWARENESS STOCK PORTFOLIO STRATEGIC STOCK PORTFOLIO ----------------------------------- ------------------------------------ 2000 1999 2000 1999 ---- ---- ---- ---- INVESTMENT INCOME: Dividends ............................................. $ 58,905 $ 10,571 $ 15,316 $ - ----------------- ----------------- ----------------- ----------------- EXPENSES: Insurance charges ..................................... 41,985 8,608 1,916 178 Floor benefit fees .................................... - - - - ----------------- ----------------- ----------------- ----------------- Net investment income (loss) ...................... 16,920 1,963 13,400 (178) ----------------- ----------------- ----------------- ----------------- REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain (loss) from investment transactions: Proceeds from investments sold ...................... 690,421 84,670 15,891 116 Cost of investments sold ............................ 678,398 82,466 16,456 116 ----------------- ----------------- ----------------- ----------------- Net realized gain (loss) .......................... 12,023 2,204 (565) - ----------------- ----------------- ----------------- ----------------- Change in unrealized gain (loss) on investments: Unrealized gain (loss) beginning of period .......... 127,259 - (211) - Unrealized gain (loss) end of period ................ 54,473 127,259 11,105 (211) ----------------- ----------------- ----------------- ----------------- Net change in unrealized gain (loss) for the period (72,786) 127,259 11,316 (211) ----------------- ----------------- ----------------- ----------------- Net increase (decrease) in net assets resulting from operations ......................... (43,843) 131,426 24,151 (389) ----------------- ----------------- ----------------- ----------------- UNIT TRANSACTIONS: Participant purchase payments ......................... 2,616,814 2,060,733 102,888 70,414 Participant transfers from other Travelers accounts ... 330,377 3,131 17,200 600 Administrative asset allocation charges ............... - - - - Contract surrenders A25:A40 ........................... (54,232) (9,472) (3,733) - Participant transfers to other Travelers accounts ..... (511,078) (78,673) (10,971) - Other payments (to) from participants ................. 10,777 - - - ----------------- ----------------- ----------------- ----------------- Net increase (decrease) in net assets resulting from unit transactions .................. 2,392,658 1,975,719 105,384 71,014 ----------------- ----------------- ----------------- ----------------- Net increase (decrease) in net assets ............. 2,348,815 2,107,145 129,535 70,625 NET ASSETS: Beginning of period ................................. 2,107,145 - 70,625 - ----------------- ----------------- ----------------- ----------------- End of period ....................................... $ 4,455,960 $ 2,107,145 $ 200,160 $ 70,625 ================= ================= ================= ================= DISCIPLINED MID CAP STOCK PORTFOLIO ------------------------------------ 2000 1999 ---- ---- Investment Income: Dividends ............................................. $ 33,131 $ 257 ----------------- ----------------- EXPENSES: Insurance charges ..................................... 10,677 467 Floor benefit fees .................................... - - ----------------- ----------------- Net investment income (loss) ...................... 22,454 (210) ----------------- ----------------- REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain (loss) from investment transactions: Proceeds from investments sold ...................... 53,244 16,454 Cost of investments sold ............................ 50,540 16,908 ----------------- ----------------- Net realized gain (loss) .......................... 2,704 (454) ----------------- ----------------- Change in unrealized gain (loss) on investments: Unrealized gain (loss) beginning of period .......... 16,733 - Unrealized gain (loss) end of period ................ 51,201 16,733 ----------------- ----------------- Net change in unrealized gain (loss) for the period 34,468 16,733 ----------------- ----------------- Net increase (decrease) in net assets resulting from operations ......................... 59,626 16,069 ----------------- ----------------- UNIT TRANSACTIONS: Participant purchase payments ......................... 1,985,993 135,790 Participant transfers from other Travelers accounts ... 352,934 12,435 Administrative asset allocation charges ............... - - Contract surrenders A25:A40 ........................... (62,417) - Participant transfers to other Travelers accounts ..... (26,403) (16,085) Other payments (to) from participants ................. - - ----------------- ----------------- Net increase (decrease) in net assets resulting from unit transactions .................. 2,250,107 132,140 ----------------- ----------------- Net increase (decrease) in net assets ............. 2,309,733 148,209 NET ASSETS: Beginning of period ................................. 148,209 - ----------------- ----------------- End of period ....................................... $ 2,457,942 $ 148,209 ================= =================
-22- 101 NOTES TO FINANCIAL STATEMENTS - CONTINUED
DISCIPLINED SMALL CAP STOCK PORTFOLIO TRAVELERS QUALITY BOND PORTFOLIO U.S. GOVERNMENT SECURITIES PORTFOLIO ------------------------------------- ----------------------------------- ----------------------------------- 2000 1999 2000 1999 2000 1999 ---- ---- ---- ---- ---- ---- $ 14,024 $ - $ 98,876 $ 1,600 $ 76,552 $ 50 ------------------- ----------------- ----------------- ----------------- ----------------- ----------------- 2,995 203 26,471 7,278 19,776 6,382 - - - - - - ------------------- ----------------- ----------------- ----------------- ----------------- ----------------- 11,029 (203) 72,405 (5,678) 56,776 (6,332) ------------------- ----------------- ----------------- ----------------- ----------------- ----------------- 56,485 169 968,901 182,280 568,897 30,859 54,689 169 966,993 180,385 564,981 31,175 ------------------- ----------------- ----------------- ----------------- ----------------- ----------------- 1,796 - 1,908 1,895 3,916 (316) ------------------- ----------------- ----------------- ----------------- ----------------- ----------------- 4,980 - 9,782 - (11,677) - (10,763) 4,980 67,856 9,782 154,164 (11,677) ------------------- ----------------- ----------------- ----------------- ----------------- ----------------- (15,743) 4,980 58,074 9,782 165,841 (11,677) ------------------- ----------------- ----------------- ----------------- ----------------- ----------------- (2,918) 4,777 132,387 5,999 226,533 (18,325) ------------------- ----------------- ----------------- ----------------- ----------------- ----------------- 326,457 43,050 1,996,032 1,490,108 2,093,734 1,196,160 76,773 - 297,940 70,771 393,644 6,160 - - - - - - (2,434) - (91,181) (564) (44,736) (351) (39,609) - (776,058) (48,348) (387,958) (10,480) 891 - (30,071) - (30,152) - ------------------- ----------------- ----------------- ----------------- ----------------- ----------------- 362,078 43,050 1,396,662 1,511,967 2,024,532 1,191,489 ------------------- ----------------- ----------------- ----------------- ----------------- ----------------- 359,160 47,827 1,529,049 1,517,966 2,251,065 1,173,164 47,827 - 1,517,966 - 1,173,164 - ------------------- ----------------- ----------------- ----------------- ----------------- ----------------- $ 406,987 $ 47,827 $ 3,047,015 $ 1,517,966 $ 3,424,229 $ 1,173,164 =================== ================= ================= ================= ================= ================= UTILITIES PORTFOLIO ----------------------------------- 2000 1999 ---- ---- $ 24,596 $ 9,974 ----------------- ----------------- 14,945 1,962 - - ----------------- ----------------- 9,651 8,012 ----------------- ----------------- 60,256 3,217 59,242 3,436 ----------------- ----------------- 1,014 (219) ----------------- ----------------- (27,612) - 235,209 (27,612) ----------------- ----------------- 262,821 (27,612) ----------------- ----------------- 273,486 (19,819) ----------------- ----------------- 2,123,241 480,671 298,117 1,800 - - (17,941) - (45,340) (4,199) - - ----------------- ----------------- 2,358,077 478,272 ----------------- ----------------- 2,631,563 458,453 458,453 - ----------------- ----------------- $ 3,090,016 $ 458,453 ================= =================
-23- 102 NOTES TO FINANCIAL STATEMENTS - CONTINUED 7. SCHEDULE OF SEPARATE ACCOUNT SIX OPERATIONS AND CHANGES IN NET ASSETS FOR THE YEAR ENDED DECEMBER 31, 2000 AND THE PERIOD MARCH 22, 1999 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1999 (CONTINUED)
ALLIANCE GROWTH PORTFOLIO MFS TOTAL RETURN PORTFOLIO ----------------------------------- ------------------------------------ 2000 1999 2000 1999 ---- ---- ---- ---- INVESTMENT INCOME: Dividends .............................................. $ 1,031,388 $ 34,153 $ 71,418 $ 8,144 ----------------- ----------------- ----------------- ----------------- EXPENSES: Insurance charges ...................................... 162,579 17,583 17,629 2,916 Floor benefit fees ..................................... - - - - ----------------- ----------------- ----------------- ----------------- Net investment income (loss) ....................... 868,809 16,570 53,789 5,228 ----------------- ----------------- ----------------- ----------------- REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain (loss) from investment transactions: Proceeds from investments sold ....................... 627,892 4,840 227,011 53,615 Cost of investments sold ............................. 619,947 4,838 224,857 55,493 ----------------- ----------------- ----------------- ----------------- Net realized gain (loss) ........................... 7,945 2 2,154 (1,878) ----------------- ----------------- ----------------- ----------------- Change in unrealized gain (loss) on investments: Unrealized gain (loss) beginning of period ........... 821,877 - (5,961) - Unrealized gain (loss) end of period ................. (3,353,406) 821,877 205,125 (5,961) ----------------- ----------------- ----------------- ----------------- Net change in unrealized gain (loss) for the period ............................................. (4,175,283) 821,877 211,086 (5,961) ----------------- ----------------- ----------------- ----------------- Net increase (decrease) in net assets resulting from operations .......................... (3,298,529) 838,449 267,029 (2,611) ----------------- ----------------- ----------------- ----------------- UNIT TRANSACTIONS: Participant purchase payments .......................... 11,773,513 5,537,134 2,516,034 866,576 Participant transfers from other Travelers accounts .... 1,315,323 367,035 178,856 19,030 Administrative asset allocation charges ................ - - - - Contract surrenders .................................... (115,621) (11,285) (69,344) (3,149) Participant transfers to other Travelers accounts ...... (567,381) (54,747) (65,588) (8,515) Other payments (to) from participants .................. 72,934 - - - ----------------- ----------------- ----------------- ----------------- Net increase (decrease) in net assets resulting from unit transactions ................... 12,478,768 5,838,137 2,559,958 873,942 ----------------- ----------------- ----------------- ----------------- Net increase (decrease) in net assets .............. 9,180,239 6,676,586 2,826,987 871,331 NET ASSETS: Beginning of period .................................. 6,676,586 - 871,331 - ----------------- ----------------- ----------------- ----------------- End of period ........................................ $ 15,856,825 $ 6,676,586 $ 3,698,318 $ 871,331 ================= ================= ================= ================= PUTNAM DIVERSIFIED INCOME PORTFOLIO ------------------------------------ 2000 1999 ---- ---- INVESTMENT INCOME: Dividends .............................................. $ 23,878 $ 847 ----------------- ----------------- EXPENSES: Insurance charges ...................................... 3,443 914 Floor benefit fees ..................................... - - ----------------- ----------------- Net investment income (loss) ....................... 20,435 (67) ----------------- ----------------- REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain (loss) from investment transactions: Proceeds from investments sold ....................... 6,004 25,710 Cost of investments sold ............................. 6,258 25,717 ----------------- ----------------- Net realized gain (loss) ........................... (254) (7) ----------------- ----------------- Change in unrealized gain (loss) on investments: Unrealized gain (loss) beginning of period ........... 3,583 - Unrealized gain (loss) end of period ................. (21,361) 3,583 ----------------- ----------------- Net change in unrealized gain (loss) for the period ............................................. (24,944) 3,583 ----------------- ----------------- Net increase (decrease) in net assets resulting from operations .......................... (4,763) 3,509 ----------------- ----------------- UNIT TRANSACTIONS: Participant purchase payments .......................... 37,410 191,536 Participant transfers from other Travelers accounts .... 93,878 20,033 Administrative asset allocation charges ................ - - Contract surrenders .................................... (3,008) - Participant transfers to other Travelers accounts ...... - (24,941) Other payments (to) from participants .................. - - ----------------- ----------------- Net increase (decrease) in net assets resulting from unit transactions ................... 128,280 186,628 ----------------- ----------------- Net increase (decrease) in net assets .............. 123,517 190,137 NET ASSETS: Beginning of period .................................. 190,137 - ----------------- ----------------- End of period ........................................ $ 313,654 $ 190,137 ================= =================
-24- 103 NOTES TO FINANCIAL STATEMENTS - CONTINUED
SMITH BARNEY HIGH INCOME SMITH BARNEY INTERNATIONAL PORTFOLIO EQUITY PORTFOLIO --------------------------------------------- ------------------------------------------ 2000 1999 2000 1999 ---- ---- ---- ---- $ 16,401 $ 8,537 $ 24,296 $ 568 --------------------- ---------------------- -------------------- --------------------- 2,520 1,018 43,443 3,613 - - - - --------------------- ---------------------- -------------------- --------------------- 13,881 7,519 (19,147) (3,045) --------------------- ---------------------- -------------------- --------------------- 85,896 23,710 2,393,140 84,634 90,091 25,414 2,533,198 72,737 --------------------- ---------------------- -------------------- --------------------- (4,195) (1,704) (140,058) 11,897 --------------------- ---------------------- -------------------- --------------------- (3,463) - 357,019 - (35,750) (3,463) (506,220) 357,019 --------------------- ---------------------- -------------------- --------------------- (32,287) (3,463) (863,239) 357,019 --------------------- ---------------------- -------------------- --------------------- (22,601) 2,352 (1,022,444) 365,871 --------------------- ---------------------- -------------------- --------------------- 152,935 171,059 3,523,109 1,163,100 28,315 24,572 2,606,913 - - - - - (10,544) - (76,666) (2,461) (53,238) (22,807) (2,730,274) - - - 50,452 - --------------------- ---------------------- -------------------- --------------------- 117,468 172,824 3,373,534 1,160,639 --------------------- ---------------------- -------------------- --------------------- 94,867 175,176 2,351,090 1,526,510 175,176 - 1,526,510 - --------------------- ---------------------- -------------------- --------------------- $ 270,043 $ 175,176 $ 3,877,600 $ 1,526,510 ===================== ====================== ==================== ===================== SMITH BARNEY LARGE CAPITALIZATION GROWTH PORTFOLIO ASSET MANAGER PORTFOLIO - SERVICE CLASS 2 -------------------------------------------- ------------------------------------------ 2000 1999 2000 1999 ---- ---- ---- ---- $ 7,009 $ 7,024 $ - $ - ------------------- ----------------------- -------------------- --------------------- 69,941 12,215 4,795 - - - - - ------------------- ----------------------- -------------------- --------------------- (62,932) (5,191) (4,795) - ------------------- ----------------------- -------------------- --------------------- 227,483 474,283 47,144 - 213,115 439,066 47,689 - ------------------- ----------------------- -------------------- --------------------- 14,368 35,217 (545) - ------------------- ----------------------- -------------------- --------------------- 363,356 - - - (298,114) 363,356 (51,860) - ------------------- ----------------------- -------------------- --------------------- (661,470) 363,356 (51,860) - ------------------- ----------------------- -------------------- --------------------- (710,034) 393,382 (57,200) - ------------------- ----------------------- -------------------- --------------------- 4,324,310 3,058,535 1,390,909 - 478,104 319,713 47,948 - - - - - (104,790) (12,050) (7,524) - (231,044) (476,683) (8,173) - 1,186 - - - ------------------- ----------------------- -------------------- --------------------- 4,467,766 2,889,515 1,423,160 - ------------------- ----------------------- -------------------- --------------------- 3,757,732 3,282,897 1,365,960 - 3,282,897 - - - ------------------- ----------------------- -------------------- --------------------- $ 7,040,629 $ 3,282,897 $ 1,365,960 $ - =================== ======================= ==================== =====================
-25- 104 NOTES TO FINANCIAL STATEMENTS - CONTINUED 7. SCHEDULE OF SEPARATE ACCOUNT SIX OPERATIONS AND CHANGES IN NET ASSETS FOR THE YEAR ENDED DECEMBER 31, 2000 AND THE PERIOD MARCH 22, 1999 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1999 (CONTINUED)
EMERGING MARKETS PORTFOLIO ----------------------------------------- 2000 1999 ---- ---- INVESTMENT INCOME: Dividends ....................................................... $ 57,424 $ 32,455 -------------------- -------------------- EXPENSES: Insurance charges ............................................... 20,919 1,584 Floor benefit fees .............................................. - - -------------------- -------------------- Net investment income (loss) ................................ 36,505 30,871 -------------------- -------------------- REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain (loss) from investment transactions: Proceeds from investments sold ................................ 435,705 785 Cost of investments sold ...................................... 473,235 713 -------------------- -------------------- Net realized gain (loss) .................................... (37,530) 72 -------------------- -------------------- Change in unrealized gain (loss) on investments: Unrealized gain (loss) beginning of period .................... 136,683 - Unrealized gain (loss) end of period .......................... (593,131) 136,683 -------------------- -------------------- Net change in unrealized gain (loss) for the period ......... (729,814) 136,683 -------------------- -------------------- Net increase (decrease) in net assets resulting from operations ................................... (730,839) 167,626 -------------------- -------------------- UNIT TRANSACTIONS: Participant purchase payments ................................... 1,358,881 766,167 Participant transfers from other Travelers accounts ............. 194,928 12,960 Administrative asset allocation charges ......................... - - Contract surrenders ............................................. (9,203) (12,920) Participant transfers to other Travelers accounts ............... (260,579) (5,190) Other payments (to) from participants ........................... - - -------------------- -------------------- Net increase (decrease) in net assets resulting from unit transactions ............................ 1,284,027 761,017 -------------------- -------------------- Net increase (decrease) in net assets ....................... 553,188 928,643 NET ASSETS: Beginning of period ........................................... 928,643 - -------------------- -------------------- End of period A25 ............................................. $ 1,481,831 $ 928,643 ==================== ==================== COMBINED ------------------------------------------- 2000 1999 ---- ---- INVESTMENT INCOME: Dividends ....................................................... $ 12,184,380 $ 857,883 ---------------------- -------------------- EXPENSES: Insurance charges ............................................... 2,002,282 258,830 Floor benefit fees .............................................. 28 - ---------------------- -------------------- Net investment income (loss) ................................ 10,182,070 599,053 ---------------------- -------------------- REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain (loss) from investment transactions: Proceeds from investments sold ................................ 21,449,238 3,764,035 Cost of investments sold ...................................... 21,546,753 3,703,696 ---------------------- -------------------- Net realized gain (loss) .................................... (97,515) 60,339 ---------------------- -------------------- Change in unrealized gain (loss) on investments: Unrealized gain (loss) beginning of period .................... 4,579,270 - Unrealized gain (loss) end of period .......................... (19,119,471) 4,579,270 ---------------------- -------------------- Net change in unrealized gain (loss) for the period ......... (23,698,741) 4,579,270 ---------------------- -------------------- Net increase (decrease) in net assets resulting from operations ................................... (13,614,186) 5,238,662 ---------------------- -------------------- UNIT TRANSACTIONS: Participant purchase payments ................................... 198,929,531 72,682,259 Participant transfers from other Travelers accounts ............. 22,485,846 2,956,633 Administrative asset allocation charges ......................... (237,150) (53,718) Contract surrenders ............................................. (4,084,344) (261,786) Participant transfers to other Travelers accounts ............... (25,587,102) (3,050,444) Other payments (to) from participants ........................... 306,777 3,283 ---------------------- -------------------- Net increase (decrease) in net assets resulting from unit transactions ............................ 191,813,558 72,276,227 ---------------------- -------------------- Net increase (decrease) in net assets ....................... 178,199,372 77,514,889 NET ASSETS: Beginning of period ........................................... 77,514,889 - ---------------------- -------------------- End of period ................................................ $ 255,714,261 $ 77,514,889 ====================== ====================
-26- 105 NOTES TO FINANCIAL STATEMENTS - CONTINUED 8. SCHEDULE OF ACCUMULATION UNITS FOR SEPARATE ACCOUNT SIX FOR THE YEAR ENDED DECEMBER 31, 2000 AND THE PERIOD MARCH 22, 1999 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1999 (CONTINUED)
CAPITAL APPRECIATION FUND HIGH YIELD BOND TRUST ----------------------------------------- ----------------------------------------- 2000 1999 2000 1999 ---- ---- ---- ---- Accumulation and annuity units beginning of period ......................... - - 972,621 - Accumulation units purchased and transferred from other Travelers accounts ... 20,242,775 - 1,944,495 1,041,776 Accumulation units redeemed and transferred to other Travelers accounts ..... (607,049) - (286,071) (69,155) Annuity units ................................ - - (1,161) - ------------------- -------------------- -------------------- ------------------- Accumulation and annuity units end of period ............................... 19,635,726 - 2,629,884 972,621 =================== ==================== ==================== =================== MANAGED ASSETS TRUST ----------------------------------------- 2000 1999 ---- ---- Accumulation and annuity units beginning of period ......................... 5,592,380 - Accumulation units purchased and transferred from other Travelers accounts ... 13,019,547 5,716,522 Accumulation units redeemed and transferred to other Travelers accounts ..... (599,936) (124,142) Annuity units ................................ - - ------------------- -------------------- Accumulation and annuity units end of period ............................... 18,011,991 5,592,380 =================== ====================
MONEY MARKET PORTFOLIO CORE EQUITY FUND ----------------------------------------- ----------------------------------------- 2000 1999 2000 1999 ---- ---- ---- ---- Accumulation and annuity units beginning of period ......................... 5,599,823 - 5,925,750 - Accumulation units purchased and transferred from other Travelers accounts ... 20,300,692 6,568,399 18,947,512 6,022,090 Accumulation units redeemed and transferred to other Travelers accounts ..... (12,756,475) (968,576) (1,092,005) (96,340) Annuity units - - 1,473 - ------------------- -------------------- -------------------- ------------------- Accumulation and annuity units end of period ............................... 13,144,040 5,599,823 23,782,730 5,925,750 =================== ==================== ==================== =================== EMERGING OPPORTUNITIES FUND ----------------------------------------- 2000 1999 ---- ---- Accumulation and annuity units beginning of period ......................... 2,656,210 - Accumulation units purchased and transferred from other Travelers accounts ... 7,516,464 2,673,798 Accumulation units redeemed and transferred to other Travelers accounts ..... (467,849) (17,588) Annuity units ................................ 575 - ------------------- -------------------- Accumulation and annuity units end of period ............................... 9,705,400 2,656,210 =================== ====================
GLOBAL HIGH-YIELD BOND FUND INTERMEDIATE-TERM BOND FUND ----------------------------------------- ----------------------------------------- 2000 1999 2000 1999 ---- ---- ---- ---- Accumulation and annuity units beginning of period ......................... 1,411,684 - 3,076,549 - Accumulation units purchased and transferred from other Travelers accounts ... 3,415,527 1,424,467 7,544,822 3,106,634 Accumulation units redeemed and transferred to other Travelers accounts ..... (426,716) (12,783) (465,553) (30,085) Annuity units ................................ (450) - 1,781 - ------------------- -------------------- -------------------- ------------------- Accumulation and annuity units end of period ............................... 4,400,045 1,411,684 10,157,599 3,076,549 =================== ==================== ==================== =================== INTERNATIONAL EQUITY FUND ----------------------------------------- 2000 1999 ---- ---- Accumulation and annuity units beginning of period ......................... 3,503,733 - Accumulation units purchased and transferred from other Travelers accounts ... 9,932,041 3,539,125 Accumulation units redeemed and transferred to other Travelers accounts ..... (707,820) (35,392) Annuity units ................................ 713 - ------------------- -------------------- Accumulation and annuity units end of period ............................... 12,728,667 3,503,733 =================== ====================
LONG-TERM BOND FUND REIT SERIES ----------------------------------------- ----------------------------------------- 2000 1999 2000 1999 ---- ---- ---- ---- Accumulation and annuity units beginning of period ......................... 3,769,373 - 22,639 - Accumulation units purchased and transferred from other Travelers accounts ... 10,763,667 3,843,031 389,840 44,121 Accumulation units redeemed and transferred to other Travelers accounts ..... (609,758) (73,658) (25,637) (21,482) Annuity units ................................ 1,799 - - - ------------------- -------------------- -------------------- ------------------- Accumulation and annuity units end of period ............................... 13,925,081 3,769,373 386,842 22,639 =================== ==================== ==================== =================== SMALL CAP VALUE SERIES ----------------------------------------- 2000 1999 ---- ---- Accumulation and annuity units beginning of period ......................... 184,589 - Accumulation units purchased and transferred from other Travelers accounts ... 181,642 191,309 Accumulation units redeemed and transferred to other Travelers accounts ..... (41,415) (6,720) Annuity units ................................ - - ------------------- -------------------- Accumulation and annuity units end of period ............................... 324,816 184,589 =================== ====================
-27- 106 NOTES TO FINANCIAL STATEMENTS - CONTINUED 8. SCHEDULE OF ACCUMULATION UNITS FOR SEPARATE ACCOUNT SIX FOR THE YEAR ENDED DECEMBER 31, 2000 AND THE PERIOD MARCH 22, 1999 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1999 (CONTINUED)
APPRECIATION PORTFOLIO SMALL CAP PORTFOLIO ----------------------------------------- ----------------------------------------- 2000 1999 2000 1999 ---- ---- ---- ---- Accumulation and annuity units beginning of period ......................... 2,691,781 - 1,105,159 - Accumulation units purchased and transferred from other Travelers accounts ... 3,247,101 2,977,259 4,911,894 1,196,018 Accumulation units redeemed and transferred to other Travelers accounts ..... (629,773) (285,478) (221,591) (90,859) Annuity units ................................ (993) - - - ------------------- -------------------- -------------------- ------------------- Accumulation and annuity units end of period ............................... 5,308,116 2,691,781 5,795,462 1,105,159 =================== ==================== ==================== =================== EQUITY INDEX PORTFOLIO - CLASS II SHARES ----------------------------------------- 2000 1999 ---- ---- Accumulation and annuity units beginning of period ......................... 6,160,292 - Accumulation units purchased and transferred from other Travelers accounts ... 11,554,147 6,294,446 Accumulation units redeemed and transferred to other Travelers accounts ..... (854,228) (134,154) Annuity units ................................ (23,417) - ------------------- -------------------- Accumulation and annuity units end of period ............................... 16,836,794 6,160,292 =================== ====================
WORLDWIDE GROWTH PORTFOLIO - SERVICE SHARES EQUITY PORTFOLIO ----------------------------------------- ----------------------------------------- 2000 1999 2000 1999 ---- ---- ---- ---- Accumulation and annuity units beginning of period ......................... - - 150,291 - Accumulation units purchased and transferred from other Travelers accounts ... 9,555,951 - 70,889 150,291 Accumulation units redeemed and transferred to other Travelers accounts ..... (449,533) - (10,266) - Annuity units ................................ - - - - ------------------- -------------------- -------------------- ------------------- Accumulation and annuity units end of period ............................... 9,106,418 - 210,914 150,291 =================== ==================== ==================== =================== TOTAL RETURN FUND ----------------------------------------- 2000 1999 ---- ---- Accumulation and annuity units beginning of period ......................... 163,763 - Accumulation units purchased and transferred from other Travelers accounts ... 109,737 163,763 Accumulation units redeemed and transferred to other Travelers accounts ..... (51,355) - Annuity units ................................ - - ------------------- -------------------- Accumulation and annuity units end of period ............................... 222,145 163,763 =================== ====================
CAPITAL FUND INVESTORS FUND ----------------------------------------- ----------------------------------------- 2000 1999 2000 1999 ---- ---- ---- ---- Accumulation and annuity units beginning of period ......................... 1,412,235 - 670,754 - Accumulation units purchased and transferred from other Travelers accounts ... 2,801,849 1,468,098 1,062,815 808,386 Accumulation units redeemed and transferred to other Travelers accounts ..... (160,809) (55,863) (86,247) (137,632) Annuity units ................................ (363) - - - ------------------- -------------------- -------------------- ------------------- Accumulation and annuity units end of period ............................... 4,052,912 1,412,235 1,647,322 670,754 =================== ==================== ==================== =================== ............................................. STRONG SCHAFER VALUE FUND II ----------------------------------------- 2000 1999 ---- ---- Accumulation and annuity units beginning of period ......................... 121,190 - Accumulation units purchased and transferred from other Travelers accounts ... 140,621 121,530 Accumulation units redeemed and transferred to other Travelers accounts ..... - (340) Annuity units ................................ - - ------------------- -------------------- Accumulation and annuity units end of period ............................... 261,811 121,190 =================== ====================
MONTGOMERY VARIABLE SERIES: GROWTH FUND EQUITY INCOME PORTFOLIO ----------------------------------------- ----------------------------------------- 2000 1999 2000 1999 ---- ---- ---- ---- Accumulation and annuity units beginning of period ......................... 589,795 - 2,679,308 - Accumulation units purchased and transferred from other Travelers accounts ... 230,170 590,508 2,678,799 2,821,527 Accumulation units redeemed and transferred to other Travelers accounts ..... (24,260) (713) (384,316) (142,219) Annuity units - - (531) - ------------------- -------------------- -------------------- ------------------- Accumulation and annuity units end of period ............................... 795,705 589,795 4,973,260 2,679,308 =================== ==================== ==================== =================== FEDERATED STOCK PORTFOLIO ----------------------------------------- 2000 1999 ---- ---- Accumulation and annuity units beginning of period ......................... 342,000 - Accumulation units purchased and transferred from other Travelers accounts ... 197,008 343,693 Accumulation units redeemed and transferred to other Travelers accounts ..... (33,926) (1,693) Annuity units ................................ - - ------------------- -------------------- Accumulation and annuity units end of period ............................... 505,082 342,000 =================== ====================
-28- 107 NOTES TO FINANCIAL STATEMENTS - CONTINUED 8. SCHEDULE OF ACCUMULATION UNITS FOR SEPARATE ACCOUNT SIX FOR THE YEAR ENDED DECEMBER 31, 2000 AND THE PERIOD MARCH 22, 1999 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1999 (CONTINUED)
LARGE CAP PORTFOLIO LAZARD INTERNATIONAL STOCK PORTFOLIO ----------------------------------------- ----------------------------------------- 2000 1999 2000 1999 ---- ---- ---- ---- Accumulation and annuity units beginning of period ......................... 3,074,458 - 132,031 - Accumulation units purchased and transferred from other Travelers accounts ... 6,679,772 3,095,719 335,948 146,121 Accumulation units redeemed and transferred to other Travelers accounts ..... (682,251) (21,261) (99,109) (14,090) Annuity units ................................ - - (434) - ------------------- -------------------- -------------------- ------------------- Accumulation and annuity units end of period ............................... 9,071,979 3,074,458 368,436 132,031 =================== ==================== ==================== =================== MFS MID CAP GROWTH PORTFOLIO ----------------------------------------- 2000 1999 ---- ---- Accumulation and annuity units beginning of period ......................... 542,135 - Accumulation units purchased and transferred from other Travelers accounts ... 4,609,628 667,352 Accumulation units redeemed and transferred to other Travelers accounts ..... (58,977) (125,217) Annuity units ................................ (99) - ------------------- -------------------- Accumulation and annuity units end of period ............................... 5,092,687 542,135 =================== ====================
MFS RESEARCH PORTFOLIO SOCIAL AWARENESS STOCK PORTFOLIO ----------------------------------------- ----------------------------------------- 2000 1999 2000 1999 ---- ---- ---- ---- Accumulation and annuity units beginning of period ......................... 169,528 - 1,896,259 - Accumulation units purchased and transferred from other Travelers accounts ... 1,165,215 170,429 2,694,535 1,977,907 Accumulation units redeemed and transferred to other Travelers accounts ..... (70,181) (901) (511,600) (81,648) Annuity units ................................ - - - - ------------------- -------------------- -------------------- ------------------- Accumulation and annuity units end of period ............................... 1,264,562 169,528 4,079,194 1,896,259 =================== ==================== ==================== =================== STRATEGIC STOCK PORTFOLIO ----------------------------------------- 2000 1999 ---- ---- Accumulation and annuity units beginning of period ......................... 75,116 - Accumulation units purchased and transferred from other Travelers accounts ... 136,306 75,116 Accumulation units redeemed and transferred to other Travelers accounts ..... (15,844) - Annuity units ................................ - - ------------------- -------------------- Accumulation and annuity units end of period ............................... 195,578 75,116 =================== ====================
DISCIPLINED MID CAP STOCK PORTFOLIO DISCIPLINED SMALL CAP STOCK PORTFOLIO ----------------------------------------- ----------------------------------------- 2000 1999 2000 1999 ---- ---- ---- ---- Accumulation and annuity units beginning of period ........................ 131,236 - 41,709 - Accumulation units purchased and transferred from other Travelers accounts .. 1,828,263 147,731 343,890 41,709 Accumulation units redeemed and transferred to other Travelers accounts .... (70,260) (16,495) (34,538) - Annuity units ................................ - - 772 - ------------------- -------------------- -------------------- ------------------- Accumulation and annuity units end of period .............................. 1,889,239 131,236 351,833 41,709 =================== ==================== ==================== =================== TRAVELERS QUALITY BOND PORTFOLIO ----------------------------------------- 2000 1999 ---- ---- Accumulation and annuity units beginning of period ........................ 1,520,349 - Accumulation units purchased and transferred from other Travelers accounts .. 2,252,919 1,569,309 Accumulation units redeemed and transferred to other Travelers accounts .... (884,715) (48,960) Annuity units ................................ (219) - ------------------- -------------------- Accumulation and annuity units end of period .............................. 2,888,334 1,520,349 =================== ====================
U.S. GOVERNMENT SECURITIES PORTFOLIO UTILITIES PORTFOLIO ----------------------------------------- ----------------------------------------- 2000 1999 2000 1999 ---- ---- ---- ---- Accumulation and annuity units beginning of period ........................ 1,215,619 - 479,180 - Accumulation units purchased and transferred from other Travelers accounts .. 2,385,731 1,226,733 2,213,807 483,516 Accumulation units redeemed and transferred to other Travelers accounts .... (461,798) (11,114) (61,428) (4,336) Annuity units ................................ (495) - - - ------------------- -------------------- -------------------- ------------------- Accumulation and annuity units end of period .............................. 3,139,057 1,215,619 2,631,559 479,180 =================== ==================== ==================== =================== ALLIANCE GROWTH PORTFOLIO ----------------------------------------- 2000 1999 ---- ---- Accumulation and annuity units beginning of period ........................ 5,142,445 - Accumulation units purchased and transferred from other Travelers accounts .. 10,474,166 5,197,145 Accumulation units redeemed and transferred to other Travelers accounts .... (495,505) (54,700) Annuity units ................................ (1,067) - ------------------- -------------------- Accumulation and annuity units end of period .............................. 15,120,039 5,142,445 =================== ====================
-29- 108 NOTES TO FINANCIAL STATEMENTS - CONTINUED 8. SCHEDULE OF ACCUMULATION UNITS FOR SEPARATE ACCOUNT SIX FOR THE YEAR ENDED DECEMBER 31, 2000 AND THE PERIOD MARCH 22, 1999 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1999 (CONTINUED)
MFS TOTAL RETURN PORTFOLIO -------------------------------------------- 2000 1999 ---- ---- Accumulation and annuity units beginning of period ........................ 879,003 - Accumulation units purchased and transferred from other Travelers accounts .. 2,489,668 890,786 Accumulation units redeemed and transferred to other Travelers accounts .... (130,470) (11,783) Annuity units ................................ - - -------------------- ---------------------- Accumulation and annuity units end of period ................................ 3,238,201 879,003 ==================== ====================== PUTNAM DIVERSIFIED INCOME PORTFOLIO SMITH BARNEY HIGH INCOME PORTFOLIO -------------------------------------------- ------------------------------------------ 2000 1999 2000 1999 ---- ---- ---- ---- Accumulation and annuity units beginning of period .................... 188,752 - 174,517 - Accumulation units purchased and transferred from other Travelers accounts 130,731 213,946 186,845 197,839 Accumulation units redeemed and transferred to other Travelers accounts (2,964) (25,194) (65,195) (23,322) Annuity units ............................ - - - - --------------------- --------------------- --------------------- ------------------- Accumulation and annuity units end of period .......................... 316,519 188,752 296,167 174,517 ===================== ===================== ===================== ===================
SMITH BARNEY INTERNATIONAL EQUITY PORTFOLIO -------------------------------------------- 2000 1999 ---- ---- Accumulation and annuity units beginning of period ....................... 976,258 - Accumulation units purchased and transferred from other Travelers accounts . 4,450,421 978,517 Accumulation units redeemed and transferred to other Travelers accounts ... (2,131,721) (2,259) Annuity units .............................. - - -------------------- ---------------------- Accumulation and annuity units end of period ............................. 3,294,958 976,258 ==================== ====================== SMITH BARNEY LARGE ASSET MANAGER PORTFOLIO - SERVICE CAPITALIZATION GROWTH PORTFOLIO CLASS 2 -------------------------------------------- ------------------------------------------ 2000 1999 2000 1999 ---- ---- ---- ---- Accumulation and annuity units beginning of period ..................... 2,909,087 - - - Accumulation units purchased and transferred from other Travelers accounts 4,177,618 3,365,629 1,459,176 - Accumulation units redeemed and transferred to other Travelers accounts . (299,529) (456,542) (16,342) - Annuity units ............................ 1,145 - - - --------------------- --------------------- --------------------- ------------------- Accumulation and annuity units end of period ........................... 6,788,321 2,909,087 1,442,834 - ===================== ===================== ===================== ===================
EMERGING MARKETS PORTFOLIO COMBINED -------------------------------------------- ------------------------------------------- 2000 1999 2000 1999 ---- ---- ---- ---- Accumulation and annuity units beginning of period ................... 618,249 - 68,967,850 - Accumulation units purchased and transferred from other Travelers accounts 1,060,688 632,518 199,835,332 72,184,813 Accumulation units redeemed and transferred to other Travelers accounts (219,594) (14,269) (27,304,609) (3,216,963) Annuity units ........................... - - (20,971) - -------------------- ---------------------- --------------------- -------------------- Accumulation and annuity units end of period ......................... 1,459,343 618,249 241,477,602 68,967,850 ==================== ====================== ===================== ====================
-30- 109 INDEPENDENT AUDITORS' REPORT The Board of Directors of The Travelers Life and Annuity Company and Owners of Variable Annuity Contracts of The Travelers Separate Account Six for Variable Annuities: We have audited the accompanying statement of assets and liabilities of The Travelers Separate Account Six for Variable Annuities (comprised of the sub-accounts listed in note 1) (collectively, "the Account") as of December 31, 2000, and the related statement of operations for the year then ended and the statement of changes in net assets for the year ended December 31, 2000 and the period March 22, 1999 (date operations commenced) to December 31, 1999. These financial statements are the responsibility of the Account's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of shares owned as of December 31, 2000, by correspondence with the underlying funds. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Account as of December 31, 2000, the results of its operations for the year then ended and the changes in its net assets for the year ended December 31, 2000 and the period March 22, 1999 (date operations commenced) to December 31, 1999, in conformity with accounting principles generally accepted in the United States of America. /s/ KPMG LLP Hartford, Connecticut February 15, 2001 -31- 110 Independent Auditors KPMG LLP Hartford, Connecticut This report is prepared for the general information of contract owners and is not an offer of units of The Travelers Separate Account Six for Variable Annuities or shares of Separate Account Six's underlying funds. It should not be used in connection with any offer except in conjunction with the Prospectus for The Travelers Separate Account Six for Variable Annuities product(s) offered by The Travelers Life and Annuity Company and the Prospectuses for the underlying funds, which collectively contain all pertinent information, including the applicable sales commissions. VG-SEP6 (Annual) (12-00) Printed in U.S.A. 111 INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholder The Travelers Life and Annuity Company: We have audited the accompanying balance sheets of The Travelers Life and Annuity Company as of December 31, 2000 and 1999, and the related statements of income, changes in retained earnings and accumulated other changes in equity from non-owner sources and cash flows for each of the years in the three-year period ended December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Travelers Life and Annuity Company as of December 31, 2000 and 1999, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America. /s/ KPMG LLP Hartford, Connecticut January 16, 2001 F-1 112 THE TRAVELERS LIFE AND ANNUITY COMPANY STATEMENTS OF INCOME ($ in thousands)
FOR THE YEAR ENDED DECEMBER 31, 2000 1999 1998 --------- --------- --------- REVENUES Premiums $ 33,941 $ 25,270 $ 23,677 Net investment income 214,174 177,179 171,003 Realized investment gains (losses) (7,396) (4,973) 18,493 Fee income 127,378 63,722 27,392 Other revenues 9,625 4,072 1,494 --------- --------- --------- Total Revenues 377,722 265,270 242,059 --------- --------- --------- BENEFITS AND EXPENSES Current and future insurance benefits 78,403 78,072 81,371 Interest credited to contractholders 77,579 56,216 51,535 Amortization of deferred acquisition costs 68,254 38,902 15,956 Operating expenses 14,095 11,326 5,012 --------- --------- --------- Total Benefits and Expenses 238,331 184,516 153,874 --------- --------- --------- Income before federal income taxes 139,391 80,754 88,185 --------- --------- --------- Federal income taxes Current 11,738 21,738 18,917 Deferred 36,748 6,410 11,783 --------- --------- --------- Total Federal Income Taxes 48,486 28,148 30,700 --------- --------- --------- Net income $ 90,905 $ 52,606 $ 57,485 ========= ========= =========
See Notes to Financial Statements. F-2 113 THE TRAVELERS LIFE AND ANNUITY COMPANY BALANCE SHEETS ($ in thousands)
DECEMBER 31, 2000 1999 ----------- ----------- ASSETS Fixed maturities, available for sale at fair value (including $49,465 at December 31, 2000 subject to securities lending agreements) $ 2,297,141 $ 1,713,948 Equity securities, at fair value 22,551 33,169 Mortgage loans 132,768 155,719 Short-term securities 247,377 81,119 Other invested assets 222,325 190,622 ----------- ----------- Total Investments 2,922,162 2,174,577 ----------- ----------- Separate accounts 6,802,985 4,795,165 Deferred acquisition costs 579,567 350,088 Deferred federal income taxes 11,296 74,478 Premium balances receivable 26,184 22,420 Other assets 153,423 84,605 ----------- ----------- Total Assets $10,495,617 $ 7,501,333 ----------- ----------- LIABILITIES Future policy benefits and claims $ 989,576 $ 1,007,776 Contractholder funds 1,631,611 1,117,819 Separate accounts 6,802,985 4,795,165 Other liabilities 211,441 114,408 ----------- ----------- Total Liabilities 9,635,613 7,035,168 ----------- ----------- SHAREHOLDER'S EQUITY Common stock, par value $100; 100,000 shares authorized, 30,000 issued and outstanding 3,000 3,000 Additional paid-in capital 417,316 167,316 Retained earnings 426,066 335,161 Accumulated other changes in equity from non-owner sources 13,622 (39,312) ----------- ----------- Total Shareholder's Equity 860,004 466,165 ----------- ----------- Total Liabilities and Shareholder's Equity $10,495,617 $ 7,501,333 =========== ===========
See Notes to Financial Statements. F-3 114 THE TRAVELERS LIFE AND ANNUITY COMPANY STATEMENTS OF CHANGES IN RETAINED EARNINGS AND ACCUMULATED OTHER CHANGES IN EQUITY FROM NON-OWNER SOURCES ($ in thousands)
STATEMENTS OF CHANGES IN RETAINED EARNINGS 2000 1999 1998 --------- --------- --------- Balance, beginning of year $ 335,161 $ 282,555 $ 225,070 Net income 90,905 52,606 57,485 --------- --------- --------- Balance, end of year $ 426,066 $ 335,161 $ 282,555 ========= ========= ========= STATEMENTS OF ACCUMULATED OTHER CHANGES IN EQUITY FROM NON-OWNER SOURCES Balance, beginning of year $ (39,312) $ 87,889 $ 70,277 Unrealized gains (losses), net of tax 52,934 (127,201) 17,612 --------- --------- --------- Balance, end of year $ 13,622 $ (39,312) $ 87,889 ========= ========= ========= SUMMARY OF CHANGES IN EQUITY FROM NON-OWNER SOURCES Net Income $ 90,905 $ 52,606 $ 57,485 Other changes in equity from non-owner sources 52,934 (127,201) 17,612 --------- --------- --------- Total changes in equity from non-owner sources $ 143,839 $ (74,595) $ 75,097 ========= ========= =========
See Notes to Financial Statements. F-4 115 THE TRAVELERS LIFE AND ANNUITY COMPANY STATEMENTS OF CASH FLOWS INCREASE (DECREASE) IN CASH ($ in thousands)
FOR THE YEARS ENDED DECEMBER 31, 2000 1999 1998 ----------- ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Premiums collected $ 33,609 $ 24,804 $ 22,300 Net investment income received 186,362 150,107 146,158 Benefits and claims paid (96,890) (94,503) (90,872) Interest credited to contractholders (77,579) (50,219) (51,535) Operating expenses paid (325,180) (235,166) (122,327) Income taxes paid (38,548) (29,369) (25,214) Other, including fee income 176,822 46,028 46,099 ----------- ----------- ----------- Net Cash Used in Operating Activities (141,404) (188,318) (75,391) ----------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from maturities of investments Fixed maturities 220,841 213,402 113,456 Mortgage loans 28,477 28,002 25,462 Proceeds from sales of investments Fixed maturities 843,856 774,096 1,095,976 Equity securities 30,772 5,146 6,020 Mortgage loans 15,260 -- -- Real estate held for sale 2,115 -- -- Purchases of investments Fixed maturities (1,564,237) (1,025,110) (1,320,704) Equity securities (20,361) (12,524) (13,653) Mortgage loans (17,016) (8,520) (39,158) Policy loans, net (2,675) (5,316) (2,010) Short-term securities (purchases) sales, net (166,259) 45,057 43,054 Other investments (purchases) sales, net 327 (44,621) 1,110 Securities transactions in course of settlement, net 21,372 (7,033) 36,459 ----------- ----------- ----------- Net Cash Used in Investing Activities (607,528) (37,421) (53,988) ----------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Contractholder fund deposits 629,138 308,953 211,476 Contractholder fund withdrawals (115,289) (83,817) (83,036) Contribution from parent company 250,000 -- -- ----------- ----------- ----------- Net Cash Provided by Financing Activities 763,849 225,136 128,440 ----------- ----------- ----------- Net increase (decrease) in cash 14,917 (603) (939) Cash at beginning of period 21 624 315 ----------- ----------- ----------- Cash at December 31, $ 14,938 $ 21 $ 624 =========== =========== ===========
See Notes to Financial Statements. F-5 116 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Significant accounting policies used in the preparation of the accompanying financial statements follow. BASIS OF PRESENTATION The Travelers Life and Annuity Company (the Company) is a wholly owned subsidiary of The Travelers Insurance Company (TIC), an indirect wholly owned subsidiary of Citigroup Inc. (Citigroup). The financial statements and accompanying footnotes of the Company are prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and benefits and expenses during the reporting period. Actual results could differ from those estimates. The Company offers a variety of variable annuity products where the investment risk is borne by the contractholder, not the Company, and the benefits are not guaranteed. The premiums and deposits related to these products are reported in separate accounts. The Company considers it necessary to differentiate, for financial statement purposes, the results of the risks it has assumed from those it has not. Certain prior year amounts have been reclassified to conform to the 2000 presentation. ACCOUNTING CHANGES ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS OF LIABILITIES In September 2000, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, a replacement of FASB Statement No. 125" (FAS 140). Provisions of FAS 140 primarily relating to transfers of financial assets and securitizations that differ from provisions of FAS 125 are effective for transfers taking place after March 31, 2001. Special purpose entities (SPEs) used in securitizations that are currently qualifying SPEs under FAS 125 will continue to be treated as qualifying SPEs so long as they issue no new beneficial interests and accept no new asset transfers after March 31, 2001, other than transfers committed to prior to that date. Under FAS 140 qualifying SPEs are not consolidated by the transferor. It is not expected that there will be a significant effect on the Company's results of operations, financial condition or liquidity relating to a change in consolidation status for existing qualifying SPEs under FAS 140. FAS 140 also amends the accounting for collateral and requires new disclosures for collateral, securitizations, and retained interests in securitizations. These provisions are effective for financial statements for fiscal years ending after December 15, 2000. The accounting for collateral, as amended, requires (a) certain assets pledged as collateral to be separately reported in the consolidated balance sheet from assets not so encumbered and (b) disclosure of assets pledged as collateral that have not been reclassified and separately reported. The change in accounting for collateral did not have a significant effect on results of the Company's operations, financial condition or liquidity. See Note 2. F-6 117 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL USE During the third quarter of 1998, the Company adopted the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants' (AcSEC) Statement of Position 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use" (SOP 98-1). SOP 98-1 provides guidance on accounting for the costs of computer software developed or obtained for internal use and for determining when specific costs should be capitalized or expensed. The adoption of SOP 98-1 had no impact on the Company's financial condition, statement of operations or liquidity. ACCOUNTING POLICIES INVESTMENTS Fixed maturities include bonds, notes and redeemable preferred stocks. Fair values of investments in fixed maturities are based on quoted market prices or dealer quotes or, if these are not available, discounted expected cash flows using market rates commensurate with the credit quality and maturity of the investment. Also included in fixed maturities are loan-backed and structured securities, which are amortized using the retrospective method. The effective yield used to determine amortization is calculated based upon actual historical and projected future cash flows, which are obtained from a widely accepted securities data provider. Fixed maturities are classified as "available for sale" and are reported at fair value, with unrealized investment gains and losses, net of income taxes, charged or credited directly to shareholder's equity. Equity securities, which include common and non-redeemable preferred stocks, are classified as "available for sale" and are carried at fair value based primarily on quoted market prices. Changes in fair values of equity securities are charged or credited directly to shareholder's equity, net of income taxes. Mortgage loans are carried at amortized cost. A mortgage loan is considered impaired when it is probable that the Company will be unable to collect principal and interest amounts due. For mortgage loans that are determined to be impaired, a reserve is established for the difference between the amortized cost and fair market value of the underlying collateral. In estimating fair value, the Company uses interest rates reflecting the current real estate financing market. Impaired loans were insignificant at December 31, 2000 and 1999. Short-term securities, consisting primarily of money market instruments and other debt issues purchased with a maturity of less than one year, are carried at amortized cost, which approximates market. Other invested assets include partnership investments and real estate joint ventures accounted for on the equity method of accounting. All changes in equity of these investments are recorded in net investment income. Also included in other invested assets are policy loans which are carried at the amount of the unpaid balances that are not in excess of the net cash surrender values of the related insurance policies. The carrying value of policy loans, which have no defined maturities, is considered to be fair value. F-7 118 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) Accrual of investment income, included in other assets, is suspended on fixed maturities or mortgage loans that are in default, or on which it is likely that future payments will not be made as scheduled. Interest income on investments in default is recognized only as payment is received. DERIVATIVE FINANCIAL INSTRUMENTS The Company uses derivative financial instruments, including financial futures, options, forward contracts and interest rate swaps, as a means of hedging exposure to foreign currency, equity price changes and/or interest rate risk on anticipated transactions or existing assets and liabilities. Hedge accounting is generally used to account for derivatives. To qualify for hedge accounting the changes in value of the derivative must be expected to substantially offset the changes in value of the hedged item. Hedges are monitored to ensure that there is a high correlation between the derivative instruments and the hedged investment. Derivatives that do not qualify for hedge accounting are marked to market with the changes in market value reflected in realized investment gains (losses). Gains and losses arising from financial futures contracts are used to adjust the basis of hedged investments and are recognized in net investment income over the life of the investment. Payments to be received or made under interest rate swaps are accrued and recognized in net investment income. Swaps hedging investments are carried at fair value with unrealized gains and losses, net of taxes, charged or credited directly to shareholder's equity. Gains and losses arising from equity index options are marked to market with changes in market value reflected in realized investment gains (losses). Forward contracts, equity swaps and interest rate options were not significant at December 31, 2000 and 1999. Information concerning derivative financial instruments is included in Note 8. INVESTMENT GAINS AND LOSSES Realized investment gains and losses are included as a component of pre-tax revenues based upon specific identification of the investments sold on the trade date. Also included are gains and losses arising from the remeasurement of the local currency value of foreign investments to U.S. dollars, the functional currency of the Company. SEPARATE ACCOUNTS The Company has separate account assets and liabilities representing funds for which investment income and investment gains and losses accrue directly to, and investment risk is borne by, the contractholders. Each of these accounts have specific investment objectives. The assets and liabilities of these accounts are carried at fair value, and amounts assessed to the contractholders for management services are included in fee income. Deposits, net investment income and realized investment gains and losses for these accounts are excluded from revenues, and related liability increases are excluded from benefits and expenses. F-8 119 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) DEFERRED ACQUISITION COSTS Costs of acquiring individual life insurance and annuity business, principally commissions and certain expenses related to policy issuance, underwriting and marketing, all of which vary with and are primarily related to the production of new business, are deferred. Acquisition costs relating to traditional life insurance are amortized in relation to anticipated premiums; universal life in relation to estimated gross profits; and annuity contracts employing a level yield method. A 15 to 20-year amortization period is used for life insurance, and a seven to 20-year period is employed for annuities. Deferred acquisition costs are reviewed periodically for recoverability to determine if any adjustment is required. Adjustments, if any, are charged to income. VALUE OF INSURANCE IN FORCE The value of insurance in force is an asset recorded at the time of acquisition of an insurance company. It represents the actuarially determined present value of anticipated profits to be realized from annuity contracts at the date of acquisition using the same assumptions that were used for computing related liabilities, where appropriate. The value of insurance in force was the actuarially determined present value of the projected future profits discounted at an interest rate of 16% for the annuity business acquired. The annuity contracts are amortized employing a level yield method. The value of insurance in force, which is included in other assets, is reviewed periodically for recoverability to determine if any adjustment is required. Adjustments, if any, are charged to income. FUTURE POLICY BENEFITS Benefit reserves represent liabilities for future insurance policy benefits. Benefit reserves for life insurance and annuity policies have been computed based upon mortality, morbidity, persistency and interest assumptions applicable to these coverages, which range from 3.0% to 7.8%, including a provision for adverse deviation. These assumptions consider Company experience and industry standards. The assumptions vary by plan, age at issue, year of issue and duration. CONTRACTHOLDER FUNDS Contractholder funds represent receipts from the issuance of universal life, certain individual annuity contracts, and structured settlement contracts. Contractholder fund balances are increased by such receipts and credited interest and reduced by withdrawals, mortality charges and administrative expenses charged to the contractholders. Interest rates credited to contractholder funds range from 3.5% to 10.0%. OTHER LIABILITIES Included in Other Liabilities is the Company's estimate of its liability for guaranty fund and other insurance-related assessments. State guaranty fund assessments are based upon the Company's share of premium written or received in one or more years prior to an insolvency occurring in the industry. Once an insolvency has occurred, the Company recognizes a liability for such assessments if it is probable that an assessment will be imposed and the amount of the assessment can be reasonably estimated. At December 31, 2000 and 1999, the Company's liability for guaranty fund assessments was not significant. F-9 120 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) PERMITTED STATUTORY ACCOUNTING PRACTICES The Company, domiciled in the State of Connecticut, prepares statutory financial statements in accordance with the accounting practices prescribed or permitted by the State of Connecticut Insurance Department. Prescribed statutory accounting practices include certain publications of the National Association of Insurance Commissioners (NAIC) as well as state laws, regulations, and general administrative rules. Permitted statutory accounting practices encompass all accounting practices not so prescribed. The impact of presently permitted accounting practices on the statutory surplus of the Company is not material. The NAIC recently completed a process intended to codify statutory accounting practices for certain insurance enterprises. As a result of this process, the NAIC issued a revised statutory Accounting Practices and Procedures Manual - version effective January 1, 2001 (the revised Manual) that will be effective for years beginning January 1, 2001. The State of Connecticut will require that, effective January 1, 2001, insurance companies domiciled in Connecticut prepare their statutory basis financial statements in accordance with the revised Manual subject to any deviations prescribed or permitted by the Connecticut insurance commissioner. Other states have addressed compliance with the revised Manual in a similar manner. The Company has estimated that the impact of this change on its statutory capital and surplus will not be significant. PREMIUMS Premiums are recognized as revenues when due. Reserves are established for the portion of premiums that will be earned in future periods. FEE INCOME Fee income includes mortality, administrative and equity protection charges, and management fees earned on the Universal Life and Deferred Annuity separate account businesses. OTHER REVENUES Other revenues include surrender, penalties and other charges. FEDERAL INCOME TAXES The provision for federal income taxes comprises two components, current income taxes and deferred income taxes. Deferred federal income taxes arise from changes during the year in cumulative temporary differences between the tax basis and book basis of assets and liabilities. F-10 121 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) FUTURE APPLICATION OF ACCOUNTING STANDARDS In June 1998, the FASB issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (FAS 133). In June 1999, the FASB issued Statement of Financial Standards No. 137, "Deferral of the Effective Date of FASB Statement No. 133" (FAS 137), which allows entities that have not yet adopted FAS 133 to defer its effective date to all fiscal quarters of all fiscal years beginning after June 15, 2000. In June 2000, the FASB issued Statement of Financial Accounting Standards No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities, an amendment of FASB Statement No. 133," which amends the accounting and reporting standards of FAS 133. FAS 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives), and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the consolidated balance sheet and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designated as (a) a hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment, (b) a hedge of the exposure to variable cash flows of a recognized asset or liability or of a forecasted transaction, or (c) a hedge of the foreign currency exposure of a net investment in a foreign operation, an unrecognized firm commitment, an available-for-sale security, or a foreign-currency-denominated forecasted transaction. The accounting for changes in the fair value of a derivative (that is, gains and losses) depends on the intended use of the derivative and the resulting designation. Upon initial application of FAS 133, hedging relationships must be designated anew and documented pursuant to the provisions of this statement. The Company adopted the deferral provisions of FAS 137, effective January 1, 2000. The Company will adopt FAS 133, as amended, as of January 1, 2001. The Company has determined that the cumulative effect of FAS 133, as amended, will not be significant. The Company does, however, anticipate a significant and continuing increase in the complexity of the accounting and the recordkeeping requirements for hedging activities and for insurance-related contracts and may make changes to its risk management strategies. The Company does not expect that FAS 133, as amended, will have a significant impact on its results of operations, financial condition or liquidity in future periods. F-11 122 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) 2. INVESTMENTS FIXED MATURITIES The amortized cost and fair values of investments in fixed maturities were as follows:
GROSS GROSS DECEMBER 31, 2000 AMORTIZED UNREALIZED UNREALIZED FAIR ($ in thousands) COST GAINS LOSSES VALUE ----------------- --------- ---------- ---------- ----- AVAILABLE FOR SALE: Mortgage-backed securities - CMOs and pass-through securities $ 219,851 $ 7,369 $ 1,767 $ 225,453 U.S. Treasury securities and obligations of U.S. Government and government agencies and authorities 112,021 12,200 286 123,935 Obligations of states and political subdivisions 30,583 2,698 329 32,952 Debt securities issued by foreign governments 50,624 1,149 939 50,834 All other corporate bonds 1,403,462 33,805 26,904 1,410,363 All other debt securities 442,390 10,734 7,837 445,287 Redeemable preferred stock 9,007 853 1,543 8,317 ---------- ---------- ---------- ---------- Total Available For Sale $2,267,938 $ 68,808 $ 39,605 $2,297,141 ---------- ---------- ---------- ----------
GROSS GROSS DECEMBER 31, 1999 AMORTIZED UNREALIZED UNREALIZED FAIR ($ in thousands) COST GAINS LOSSES VALUE ----------------- --------- ---------- ---------- ----- AVAILABLE FOR SALE: Mortgage-backed securities - CMOs and pass-through securities $ 211,864 $ 2,103 $ 7,818 $ 206,149 U.S. Treasury securities and obligations of U.S. Government and government agencies and authorities 116,082 2,613 3,704 114,991 Obligations of states and political subdivisions 29,801 7 3,312 26,496 Debt securities issued by foreign governments 44,159 2,813 198 46,774 All other corporate bonds 1,059,552 6,592 42,458 1,023,686 All other debt securities 297,911 5,065 10,353 292,623 Redeemable preferred stock 3,654 41 466 3,229 ---------- ---------- ---------- ---------- Total Available For Sale $1,763,023 $ 19,234 $ 68,309 $1,713,948 ---------- ---------- ---------- ----------
Proceeds from sales of fixed maturities classified as available for sale were $844 million, $774 million and $1.1 billion in 2000, 1999 and 1998, respectively. Gross gains of $22.4 million, $24.6 F-12 123 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) million and $32.6 million and gross losses of $34.1 million, $22.0 million and $17.0 million in 2000, 1999 and 1998, respectively were realized on those sales. Fair values of investments in fixed maturities are based on quoted market prices or dealer quotes or, if these are not available, discounted expected cash flows using market rates commensurate with the credit quality and maturity of the investment. The fair value of investments for which a quoted market price or dealer quote is not available amounted to $530.2 million and $486.2 million at December 31, 2000 and 1999, respectively. The amortized cost and fair value of fixed maturities available for sale at December 31, 2000, by contractual maturity, are shown below. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
AMORTIZED FAIR ($ in thousands) COST VALUE ---------- ---------- MATURITY: Due in one year or less $ 51,478 $ 51,005 Due after 1 year through 5 years 638,112 646,327 Due after 5 years through 10 years 675,953 679,957 Due after 10 years 682,544 694,399 ---------- ---------- 2,048,087 2,071,688 ---------- ---------- Mortgage-backed securities 219,851 225,453 ---------- ---------- Total Maturity $2,267,938 $2,297,141 ---------- ----------
The Company makes significant investments in collateralized mortgage obligations (CMOs). CMOs typically have high credit quality, offer good liquidity, and provide a significant advantage in yield and total return compared to U.S. Treasury securities. The Company's investment strategy is to purchase CMO tranches, which are protected against prepayment risk, including planned amortization class (PAC) tranches. Prepayment protected tranches are preferred because they provide stable cash flows in a variety of interest rate scenarios. The Company does invest in other types of CMO tranches if an assessment indicates a favorable risk/return tradeoff. The Company does not purchase residual interests in CMOs. At December 31, 2000 and 1999, the Company held CMOs with a fair value of $189.4 million and $167.7 million, respectively. The Company's CMO holdings were 55.4% and 65.9% collateralized by GNMA, FNMA or FHLMC securities at December 31, 2000 and 1999, respectively. The Company engages in securities lending whereby certain securities from its portfolio are loaned to other institutions for short periods of time. The Company generally receives cash collateral from the borrower, equal to at least the market value of the loaned securities plus accrued interest, and F-13 124 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) reinvests in a short-term investment pool. See Note 10. The loaned securities remain a recorded asset of the Company, however, the Company records a liability for the amount of the collateral held, representing its obligation to return the collateral related to these loaned securities, and reports that liability as part of other liabilities in the consolidated balance sheet. At December 31, 2000 and 1999, the Company held collateral of $50.7 million and $38.2 million, respectively. EQUITY SECURITIES The cost and fair values of investments in equity securities were as follows:
GROSS GROSS EQUITY SECURITIES: UNREALIZED UNREALIZED FAIR ($ in thousands) COST GAINS LOSSES VALUE ------- ------- ------- ------- DECEMBER 31, 2000 Common stocks $ 2,861 $ 29 $ 845 $ 2,045 Non-redeemable preferred stocks 21,150 480 1,124 20,506 ------- ------- ------- ------- Total Equity Securities $24,011 $ 509 $ 1,969 $22,551 ------- ------- ------- ------- DECEMBER 31, 1999 Common stocks $ 4,966 $ 730 $ 256 $ 5,440 Non-redeemable preferred stocks 29,407 533 2,211 27,729 ------- ------- ------- ------- Total Equity Securities $34,373 $ 1,263 $ 2,467 $33,169 ------- ------- ------- -------
Proceeds from sales of equity securities were $30.8 million, $5.1 million and $6.0 million in 2000, 1999 and 1998, respectively. Gross gains of $3.3 million, $1.5 million and $2.6 million and gross losses of $.3 million, $.3 million and $.8 million were realized on those sales during 2000, 1999 and 1998, respectively. MORTGAGE LOANS Underperforming assets include delinquent mortgage loans over 90 days past due, loans in the process of foreclosure and loans modified at interest rates below market. At December 31, 2000 and 1999, the Company's mortgage loan portfolios consisted of the following:
($ in thousands) 2000 1999 -------- -------- Current Mortgage Loans $132,768 $151,814 Underperforming Mortgage Loans -- 3,905 -------- -------- Total $132,768 $155,719 -------- --------
F-14 125 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) Aggregate annual maturities on mortgage loans at December 31, 2000 are as follows:
($ in thousands) 2001 $ 17,550 2002 8,990 2003 5,089 2004 8,475 2005 6,277 Thereafter 86,387 -------- Total $132,768 ========
CONCENTRATIONS Significant individual investment concentrations included $52.8 million and $63.2 million in the Tishman Speyer Joint Venture at December 31, 2000 and 1999, respectively. The Company participates in a short-term investment pool maintained by an affiliate. See Note 10. Included in fixed maturities are below investment grade assets totaling $143.8 million and $141.4 million at December 31, 2000 and 1999, respectively. The Company defines its below investment grade assets as those securities rated "Ba1" or below by external rating agencies, or the equivalent by internal analysts when a public rating does not exist. Such assets include publicly traded below investment grade bonds and certain other privately issued bonds and notes that are classified as below investment grade. The Company's industry concentrations of investments, primarily fixed maturities, at fair value were as follows:
($ in thousands) 2000 1999 -------- -------- Banking $222,984 $152,848 Finance 204,994 103,385 -------- --------
The Company held investments in foreign banks in the amount of $139 million and $125 million at December 31, 2000 and 1999, respectively, which are included in the table above. Below investment grade assets included in the preceding table were not significant. Mortgage loan investments are relatively evenly disbursed throughout the United States, with no significant holdings in any one state or property type. The Company monitors creditworthiness of counterparties to all financial instruments by using controls that include credit approvals, limits and other monitoring procedures. Collateral for fixed maturities often includes pledges of assets, including stock and other assets, guarantees and letters of credit. The Company's underwriting standards with respect to new mortgage loans generally require loan to value ratios of 75% or less at the time of mortgage origination. F-15 126 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) NON-INCOME PRODUCING INVESTMENTS Investments included in the December 31, 2000 and 1999 balance sheets that were non-income producing were insignificant. RESTRUCTURED INVESTMENTS Mortgage loan and debt securities which were restructured at below market terms at December 31, 2000 and 1999 were insignificant. The new terms of restructured investments typically defer a portion of contract interest payments to varying future periods. The accrual of interest is suspended on all restructured assets, and interest income is reported only as payment is received. Gross interest income on restructured assets that would have been recorded in accordance with the original terms of such assets was insignificant. Interest on these assets, included in net investment income, was insignificant. NET INVESTMENT INCOME
FOR THE YEAR ENDED DECEMBER 31, ($ in thousands) 2000 1999 1998 -------- -------- -------- GROSS INVESTMENT INCOME Fixed maturities $163,091 $136,039 $130,825 Joint ventures and partnerships 34,574 22,175 22,107 Mortgage loans 14,776 16,126 15,969 Other 4,398 4,417 3,322 -------- -------- -------- Total Gross Investment Income 216,839 178,757 172,223 -------- -------- -------- Investment expenses 2,665 1,578 1,220 -------- -------- -------- Net investment income $214,174 $177,179 $171,003 -------- -------- --------
REALIZED AND UNREALIZED INVESTMENT GAINS (LOSSES) Net realized investment gains (losses) for the periods were as follows:
FOR THE YEAR ENDED DECEMBER 31, ($ in thousands) 2000 1999 1998 -------- -------- -------- REALIZED Fixed maturities $(11,742) $ 2,657 $ 15,620 Joint ventures and partnerships (1,909) (10,450) 529 Mortgage Loans 3,825 602 623 Other 2,430 2,218 1,721 -------- -------- -------- Total Realized Investment Gains (Losses) $ (7,396) $ (4,973) $ 18,493 -------- -------- --------
F-16 127 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) Changes in net unrealized investment gains (losses) that are included as accumulated other changes in equity from non-owner sources in shareholder's equity were as follows:
FOR THE YEAR ENDED DECEMBER 31, ($ in thousands) 2000 1999 1998 --------- --------- --------- UNREALIZED Fixed maturities $ 78,278 $(180,409) $ 24,336 Other 3,159 (15,285) 2,760 --------- --------- --------- Total unrealized investment gains (losses) 81,437 (195,694) 27,096 Related taxes 28,503 (68,493) 9,484 --------- --------- --------- Change in unrealized investment gains (losses) 52,934 (127,201) 17,612 Balance beginning of year (39,312) 87,889 70,277 --------- --------- --------- Balance End of Year $ 13,622 $ (39,312) $ 87,889 --------- --------- ---------
3. REINSURANCE The Company participates in reinsurance in order to limit losses, minimize exposure to large risks, provide additional capacity for future growth and to effect business-sharing arrangements. Reinsurance is accomplished through various plans of reinsurance, primarily yearly renewable term coinsurance and modified coinsurance. The Company remains primarily liable as the direct insurer on all risks reinsured. Total in-force business ceded under reinsurance contracts is $17.4 billion and $12.8 billion at December 31, 2000 and 1999, including $28.9 million and $62.8 million, respectively to TIC. Total life insurance premiums ceded were $8.9 million, $6.5 million and $4.2 million in 2000, 1999 and 1998, respectively. Ceded premiums paid to TIC were immaterial for these same periods. 4. DEPOSIT FUNDS AND RESERVES At December 31, 2000 and 1999, the Company had $2.6 billion and $2.1 billion of life and annuity deposit funds and reserves, respectively. Of that total, $1.4 billion and $1.4 billion, respectively, were not subject to discretionary withdrawal based on contract terms. The remaining amounts were life and annuity products that were subject to discretionary withdrawal by the contractholders. Included in the amount that is subject to discretionary withdrawal were $.9 billion and $.5 billion of liabilities that are surrenderable with market value adjustments. The remaining $.3 billion and $.2 billion of life insurance and individual annuity liabilities are subject to discretionary withdrawals with an average surrender charge of 5.4% and 4.9%, respectively. The life insurance risks would have to be underwritten again if transferred to another carrier, which is considered a significant deterrent for long-term policyholders. Insurance liabilities that are surrendered or withdrawn from the Company are reduced by outstanding policy loans and related accrued interest prior to payout. F-17 128 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) 5. FEDERAL INCOME TAXES The net deferred tax assets at December 31, 2000 and 1999 were comprised of the tax effects of temporary differences related to the following assets and liabilities:
($ in thousands) 2000 1999 --------- --------- Deferred Tax Assets: Benefit, reinsurance and other reserves $ 192,772 $ 161,629 Investments, net 0 14,270 Other 2,510 2,394 --------- --------- Total 195,282 178,293 --------- --------- Deferred Tax Liabilities: Investments, net (16,956) -- Deferred acquisition costs and value of insurance in force (165,671) (100,537) Other (1,359) (1,208) --------- --------- Total (183,986) (101,745) --------- --------- Net Deferred Tax Asset Before Valuation Allowance 11,296 76,548 Valuation Allowance for Deferred Tax Assets 0 (2,070) --------- --------- Net Deferred Tax Asset After Valuation Allowance $ 11,296 $ 74,478 --------- ---------
TIC and its life insurance subsidiaries, including the Company, file a consolidated federal income tax return. Federal income taxes are allocated to each member on a separate return basis adjusted for credits and other amounts required by the consolidation process. Any resulting liability has been, and will be, paid currently to TIC. Any credits for losses have been, and will be, paid by TIC to the extent that such credits are for tax benefits that have been utilized in the consolidated federal income tax return. The elimination of the valuation allowance for deferred tax assets in 2000 resulted from an analysis of the availability of capital gains to offset capital losses. In management's opinion, there will be adequate capital gains to make realization of existing capital losses more likely than not. The reduction in the valuation allowance was recognized by reducing goodwill. In management's judgment, the $11.3 million net deferred tax asset as of December 31, 2000, is fully recoverable against expected future years' taxable ordinary income and capital gains. At December 31, 2000, the Company had no ordinary or capital loss carryforwards. The policyholders surplus account, which arose under prior tax law, is generally that portion of the gain from operations that has not been subjected to tax, plus certain deductions. The balance of this account is approximately $2.1 million. Income taxes are not provided for on this amount because under current U.S. tax rules such taxes will become payable only to the extent such amounts are distributed as a dividend or exceed limits prescribed by federal law. Distributions are not contemplated from this account. At current rates the maximum amount of such tax would be approximately $700 thousand. F-18 129 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) 6. SHAREHOLDER'S EQUITY SHAREHOLDER'S EQUITY AND DIVIDEND AVAILABILITY The Company's statutory net loss was $(66.2) million, $(23.4) million and $(3.2) million for the years ended December 31, 2000, 1999 and 1998, respectively. Statutory capital and surplus was $476 million and $294 million at December 31, 2000 and 1999, respectively. Effective January 1, 2001, the Company will prepare its statutory basis financial statements in accordance with the revised Manual subject to any deviations prescribed or permitted by its domicilary insurance commissioners (see Note 1, Summary of Significant Accounting Policies, Permitted Statutory Accounting Practices). The Company has estimated that the impact of this change on statutory capital and surplus will not be significant. The Company is currently subject to various regulatory restrictions that limit the maximum amount of dividends available to be paid to its parent without prior approval of insurance regulatory authorities. The Company does not have surplus available to pay dividends to TIC in 2001 without prior approval of the Connecticut Insurance Department. In 2000, TIC contributed $250 million as additional paid-in capital to the Company. F-19 130 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) ACCUMULATED OTHER CHANGES IN EQUITY FROM NON-OWNER SOURCES, NET OF TAX Changes in each component of Accumulated Other Changes in Equity from Non-Owner Sources were as follows:
NET ACCUMULATED UNREALIZED FOREIGN OTHER CHANGES GAIN (LOSS) ON CURRENCY IN EQUITY FROM INVESTMENT TRANSLATION NON-OWNER ($ in thousands) SECURITIES ADJUSTMENT SOURCES -------------- ----------- -------------- BALANCE, JANUARY 1, 1998 $ 70,277 $ -- $ 70,277 Unrealized gains on investment securities, Net of tax of $15,957 29,632 -- 29,632 Less: reclassification adjustment for gains Included in net income, net of tax of $(6,473) (12,020) -- (12,020) --------- --------- --------- CURRENT PERIOD CHANGE 17,612 -- 17,612 --------- --------- --------- BALANCE, DECEMBER 31, 1998 87,889 -- 87,889 Unrealized loss on investment securities, Net of tax of $(70,234) (130,433) -- (130,433) Less: reclassification adjustment for losses Included in net income, net of tax of $1,741 3,232 -- 3,232 --------- --------- --------- CURRENT PERIOD CHANGE (127,201) -- (127,201) --------- --------- --------- BALANCE, DECEMBER 31, 1999 (39,312) -- (39,312) Unrealized gains on investment securities, Net of tax of $25,914 48,127 -- 48,127 Less: reclassification adjustment for losses Included in net income, net of tax of $2,589 4,807 -- 4,807 --------- --------- --------- CURRENT PERIOD CHANGE 52,934 -- 52,934 --------- --------- --------- BALANCE, DECEMBER 31, 2000 $ 13,622 $ -- $ 13,622 ========= ========= =========
7. BENEFIT PLANS PENSION AND OTHER POSTRETIREMENT BENEFITS The Company participates in a qualified, noncontributory defined benefit pension plan sponsored by Citigroup. In addition, the Company provides certain other postretirement benefits to retired employees through a plan sponsored by The Travelers Insurance Group Inc. (TIGI), TIC's direct parent. The Company's share of net expense for the qualified pension and other postretirement benefit plans was not significant for 2000, 1999 and 1998. 401(K) SAVINGS PLAN Substantially all of the Company's employees are eligible to participate in a 401(k) savings plan sponsored by Citigroup. The Company's expenses in connection with the 401(k) savings plan were not significant in 2000, 1999 and 1998. F-20 131 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) 8. DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS DERIVATIVE FINANCIAL INSTRUMENTS The Company uses derivative financial instruments, including financial futures, interest rate swaps, equity swaps, options and forward contracts as a means of hedging exposure to interest rate, equity price, and foreign currency risk on anticipated transactions or existing assets and liabilities. The Company does not hold or issue derivative instruments for trading purposes. These derivative financial instruments have off-balance sheet risk. Financial instruments with off-balance sheet risk involve, to varying degrees, elements of credit and market risk in excess of the amount recognized in the balance sheet. The contract or notional amounts of these instruments reflect the extent of involvement the Company has in a particular class of financial instrument. However, the maximum loss of cash flow associated with these instruments can be less than these amounts. For interest rate swaps, options, and forward contracts, credit risk is limited to the amounts that it would cost the Company to replace the contracts. Financial futures contracts and purchased listed option contracts have very little credit risk since organized exchanges are the counterparties. The Company as a writer of option contracts has no credit risk since the counterparty has no performance obligation after it has paid a cash premium. The Company monitors creditworthiness of counterparties to these financial instruments by using criteria of acceptable risk that are consistent with on-balance sheet financial instruments. The controls include credit approvals, limits and other monitoring procedures. The Company uses exchange-traded financial futures contracts to manage its exposure to changes in interest rates that arise from the sale of certain insurance and investment products, or the need to reinvest proceeds from the sale or maturity of investments. To hedge against adverse changes in interest rates, the Company enters long or short positions in financial futures contracts which offset asset price changes resulting from changes in market interest rates until an investment is purchased or a product is sold. Margin payments are required to enter a futures contract and contract gains or losses are settled daily in cash. The contract amount of futures contracts represents the extent of the Company's involvement, but not future cash requirements, as open positions are typically closed out prior to the delivery date of the contract. At December 31, 2000 and 1999, the Company held financial futures contracts with notional amounts of $89.9 million and $48.7 million, respectively. The deferred gains and/or losses on these contracts were not significant at December 31, 2000 and 1999. At December 31, 2000 and 1999, the Company's futures contracts had no fair value because these contracts are marked to market and settled in cash daily. The Company enters into interest rate swaps in connection with other financial instruments to provide greater risk diversification and better match assets and liabilities. Under interest rate swaps, the Company agrees with other parties to exchange, at specified intervals, the difference between fixed- F-21 132 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) rate and floating-rate interest amounts calculated by reference to an agreed notional principal amount. Generally, no cash is exchanged at the outset of the contract and no principal payments are made by either party. A single net payment is usually made by one counterparty at each due date. Swap agreements are not exchange-traded so they are subject to the risk of default by the counterparty. As of December 31, 2000 and 1999, the Company held interest rate swap contracts with notional amounts of $279.0 million and $231.1 million, respectively. The fair value of these financial instruments was $2.0 million (loss position) at December 31, 2000, and was $9.5 million (loss position) at December 31, 1999. The fair values were determined using the discounted cash flow method. At December 31, 2000 and 1999, the Company held swap contracts with affiliate counterparties, included above, with a notional amount of $37.0 million and $43.7 million and a fair value of $1.8 million (loss position) and $4.7 million (loss position), respectively. The Company uses equity option contracts to manage its exposure to changes in equity market prices that arise from the sale of certain insurance products. To hedge against adverse changes in the equity market prices, the Company enters long positions in equity option contracts with major financial institutions. These contracts allow the Company, for a fee, the right to receive a payment if the Standard and Poor's 500 Index falls below agreed upon strike prices. At December 31, 2000 and 1999, the Company held equity option contracts with notional amounts of $291.5 million and $275.4 million, respectively. The fair value of these financial instruments was $6.9 million (gain position) and $32.6 million (gain position) at December 31, 2000 and 1999, respectively. The fair value of these contracts represents the estimated replacement cost as quoted by independent third party brokers. The off-balance sheet risks of interest rate options, equity swaps and forward contracts were not significant at December 31, 2000 and 1999. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK In the normal course of business, the Company issues fixed and variable rate loan commitments and has unfunded commitments to partnerships and joint ventures. The off-balance sheet risk of these financial instruments was not significant at December 31, 2000 and 1999. FAIR VALUE OF CERTAIN FINANCIAL INSTRUMENTS The Company uses various financial instruments in the normal course of its business. Fair values of financial instruments that are considered insurance contracts are not required to be disclosed and are not included in the amounts discussed. At December 31, 2000, investments in fixed maturities had a carrying value and a fair value of $2.3 billion compared with a carrying value and a fair value of $1.8 billion and $1.7 billion, respectively, at December 31, 1999. See Notes 1 and 2. At December 31, 2000, mortgage loans had a carrying value of $132.7 million and a fair value of $134.1 million and in 1999 had a carrying value of $155.7 million and a fair value of $156.0 million. F-22 133 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) In estimating fair value, the Company used interest rates reflecting the current real estate financing market. The carrying values of short-term securities were $247.4 million and $81.1 million in 2000 and 1999, respectively, which approximated their fair values. Policy loans which are included in other invested assets had carrying values of $12.9 million and $10.2 million in 2000 and 1999, respectively, which also approximated their fair values. The carrying values of $101.4 million and $57.6 million of financial instruments classified as other assets approximated their fair values at December 31, 2000 and 1999, respectively. The carrying values of $173.5 million and $100.2 million of financial instruments classified as other liabilities also approximated their fair values at December 31, 2000 and 1999, respectively. Fair value is determined using various methods, including discounted cash flows, as appropriate for the various financial instruments. At December 31, 2000, contractholder funds with defined maturities had a carrying value of $1,204 million and a fair value of $1,170 million, compared with a carrying value of $879 million and a fair value of $781 million at December 31, 1999. The fair value of these contracts is determined by discounting expected cash flows at an interest rate commensurate with the Company's credit risk and the expected timing of cash flows. Contractholder funds without defined maturities had a carrying value of $583 million and a fair value of $477 million at December 31, 2000, compared with a carrying value of $482 million and a fair value of $409 million at December 31, 1999. These contracts generally are valued at surrender value. 9. COMMITMENTS AND CONTINGENCIES FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK See Note 8. LITIGATION In the ordinary course of business, the Company is a defendant or co-defendant in various litigation matters incidental to and typical of the businesses in which it is engaged. In the opinion of the Company's management, the ultimate resolution of these legal proceedings would not be likely to have a material adverse effect on its results of operations, financial condition or liquidity. 10. RELATED PARTY TRANSACTIONS The principal banking functions, including payment of salaries and expenses, for certain subsidiaries and affiliates of TIGI, including the Company, are handled by two companies. TIC handles banking functions for the life and annuity operations of Travelers Life & Annuity and some of its non-insurance affiliates. The Travelers Indemnity Company handles banking functions for the property-casualty operations, including most of its property-casualty insurance and non-insurance affiliates. Settlements between companies are made at least monthly. TIC provides various employee benefit coverages to certain subsidiaries of TIGI. The premiums for these coverages were charged in accordance with cost allocation procedures based upon salaries or census. In addition, investment F-23 134 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) advisory and management services, data processing services and claims processing services are provided by affiliated companies. Charges for these services are shared by the companies on cost allocation methods based generally on estimated usage by department. TIC maintains a short-term investment pool in which the Company participates. The position of each company participating in the pool is calculated and adjusted daily. At December 31, 2000 and 1999, the pool totaled approximately $4.4 billion and $2.6 billion, respectively. The Company's share of the pool amounted to $172.5 million and $31.4 million at December 31, 2000 and 1999, respectively, and is included in short-term securities in the balance sheet. In the normal course of business, management of both the Company and TIC conducts reviews of the investment portfolios of each company to properly match assets with liabilities. As a result of these reviews, the Company sold $100 million of investments to TIC at arm's length, with a related loss of $1.3 million. The Company's TTM Modified Guaranteed Annuity Contracts are subject to a limited guarantee agreement by TIC in a principal amount of up to $450 million. TIC's obligation is to pay in full to any owner or beneficiary of the TTM Modified Guaranteed Annuity Contracts principal and interest as and when due under the annuity contract to the extent that the Company fails to make such payment. In addition, TIC guarantees that the Company will maintain a minimum statutory capital and surplus level. The Company sold structured settlement annuities to the insurance affiliates of Travelers Property Casualty Corp. (TPC). During 1998 it was decided to use TIC as the primary issuer of structured settlement annuities and the Company as the assignment company. Policy reserves and contractholder fund liabilities associated with these structured settlements were $726 million and $766 million at December 31, 2000 and 1999, respectively. The Company began distributing variable annuity products through its affiliate, Salomon Smith Barney (SSB) in 1995. Premiums and deposits related to these products were $1.6 billion, $1.1 billion and $932.1 million in 2000, 1999 and 1998, respectively. In 1996, the Company began marketing various life products through SSB as well. Premiums related to such products were $59.3 million, $40.8 million and $44.5 million in 2000, 1999 and 1998, respectively. During 1998, the Company began distributing deferred annuity products through its affiliates Primerica Financial Services (Primerica), CitiStreet Retirement Services (formerly The Copeland Companies), a division of CitiStreet, a joint venture between Citigroup and State Street Bank, and Citibank, N.A. (Citibank). Deposits received from Primerica were $844 million, $763 million and $216 million in 2000, 1999 and 1998 respectively. Deposits from Citibank and CitiStreet Retirement Services were $131 million and $220 million, respectively for 2000, and were insignificant in 1999 and 1998. The Company participates in a stock option plan sponsored by Citigroup that provides for the granting of stock options in Citigroup common stock to officers and key employees. To further encourage employee stock ownership, Citigroup introduced the WealthBuilder stock option program during 1997. Under this program, all employees meeting certain requirements are granted Citigroup stock options. F-24 135 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) Most leasing functions for TIGI and its subsidiaries are handled by TPC. Rent expense related to these leases is shared by the companies on a cost allocation method based generally on estimated usage by department. The Company's rent expense was insignificant in 2000, 1999 and 1998. At December 31, 2000 and 1999, the Company had investments in Tribeca Investments LLC, an affiliate of the Company, in the amounts of $29.4 million and $22.3 million, respectively. The Company also had investments in an affiliated joint venture, Tishman Speyer, in the amount of $52.8 million and $63.2 million at December 31, 2000 and 1999, respectively. The Company has other affiliated investments. The individual investment with any one affiliate was insignificant at December 31, 2000 and 1999. 11. RECONCILIATION OF NET INCOME TO NET CASH USED IN OPERATING ACTIVITIES The following table reconciles net income to net cash used in operating activities:
FOR THE YEAR ENDED DECEMBER 31, 2000 1999 1998 ($ in thousands) ---- ---- ---- Net Income From Continuing Operations $ 90,905 $ 52,606 $ 57,485 Adjustments to reconcile net income to cash used in operating activities: Realized (gains) losses 7,396 4,973 (18,493) Deferred federal income taxes 36,748 6,410 11,783 Amortization of deferred policy acquisition costs 68,254 38,902 15,956 Additions to deferred policy acquisition costs (297,733) (211,182) (120,278) Investment income accrued (27,812) (27,072) (3,821) Premium balances (332) (466) (6,786) Insurance reserves (18,487) (16,431) (8,431) Other (343) (36,058) (2,806) --------- --------- --------- Net cash used in operations $(141,404) $(188,318) $ (75,391) --------- --------- ---------
12. NON-CASH INVESTING AND FINANCING ACTIVITIES There were no significant non-cash investing and financing activities for 2000, 1999 and 1998. F-25 136 TRAVELERS RETIREMENT PRODUCT VARIABLE ANNUITY STATEMENT OF ADDITIONAL INFORMATION SEPARATE ACCOUNT SIX Individual and Group Variable Annuity Contract issued by The Travelers Life and Annuity Company One Tower Square Hartford, Connecticut 06183 L-21257S May 2001 137 PART C Other Information Item 24. Financial Statements and Exhibits (a) The financial statements of the Registrant and the Report of Independent Auditors thereto are contained in the Registrant's Annual Report and are included in the Statement of Additional Information. The financial statements of the Registrant include: Statement of Assets and Liabilities as of December 31, 2000 Statement of Operations for the year ended December 31, 2000 Statement of Changes in Net Assets for the year ended December 31, 2000 and for the period March 22, 1999 to December 31, 1999 Statement of Investments as of December 31, 2000 Notes to Financial Statements The financial statements of The Travelers Life and Annuity Company and the report of Independent Auditors, are contained in the Statement of Additional Information. The financial statements of The Travelers Life and Annuity Company include: Statements of Income for the years ended December 31, 2000, 1999 and 1998 Balance Sheets as of December 31, 2000 and 1999 Statements of Changes in Retained Earnings and Accumulated Other Changes in Equity from Non-Owner Sources for the years ended December 31, 2000, 1999 and 1998 Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998 Notes to Financial Statements (b) Exhibits 1. Resolution of The Travelers Life and Annuity Company Board of Directors authorizing the establishment of the Registrant. (Incorporated herein by reference to Exhibit 1 to the Registration Statement on Form N-4, filed July 9, 1998.) 2. Not Applicable. 3(a). Distribution and Principal Underwriting Agreement among the Registrant, The Travelers Life and Annuity Company and Travelers Distribution LLC (Incorporated herein by reference to Exhibit 3(a) to the Registration Statement on Form N-4, File No. 333-58809 filed February 26, 2001.) 3(b). Selling Agreement. (Incorporated herein by reference to Exhibit 3(b) to Post-Effective Amendment No. 4 the Registration Statement on Form N-4, File No. 333-27688 filed April 6, 2001.) 4. Variable Annuity Contract. (Incorporated herein by reference to Exhibit 4 to Pre-Effective Amendment No. 1 to the Registration Statement on Form N-4, File No. 333-58809, filed November 3, 1998.) 5. Application. (Incorporated herein by reference to Exhibit 5 to Pre-Effective Amendment No. 1 to the Registration Statement on Form N-4, File No. 333-58809, filed November 3, 1998.) 6(a). Charter of The Travelers Life and Annuity Company, as amended on April 10, 1990. (Incorporated herein by reference to Exhibit 6(a) to the Registration Statement on Form N-4, File No. 333-40191, filed November 13, 1997.) 138 6(b). By-Laws of The Travelers Life and Annuity Company, as amended on October 20, 1994. (Incorporated herein by reference to Exhibit 6(b) to the Registration Statement on Form N-4, File No. 333-40191, filed November 13, 1997.) 8. Participation Agreements. (Incorporated herein by reference to Exhibit 8 to Pre-Effective Amendment No. 1 to the Registration Statement on Form S-6, File No. 333-96521 filed May 24, 2000.) 9. Opinion of Counsel as to the legality of securities being registered. (Incorporated herein by reference to Exhibit 9 to the Registration Statement on Form N-4, filed July 9, 1998.) 10. Consent of KPMG LLP, Independent Certified Public Accountants. 13. Computation of Total Return Calculations - Standardized and Non-Standardized. (Incorporated herein by reference to Exhibit 13 to Pre-Effective Amendment No. 1 to the Registration Statement on Form N-4, File No. 333-58809, filed November 3, 1998.) 15(a). Powers of Attorney authorizing Ernest J. Wright or Kathleen A. McGah as signatory for George C. Kokulis, Katherine M. Sullivan and Glenn D. Lammey. (Incorporated herein by reference to Exhibit 15 to Post-Effective Amendment No. 2 the Registration Statement on Form N-4, filed April 20, 2000.) 15(b). Powers of Attorney authorizing Ernest J. Wright or Kathleen A. McGah as signatory for Glenn D. Lammey and Marla Berman Lewitus. (Incorporated herein by reference to Exhibit 15(b) to Post-Effective Amendment No. 3 the Registration Statement on Form N-4, filed February 27, 2001.) 15(c). Power of Attorney authorizing Ernest J. Wright or Kathleen A. McGah as signatory for William R. Hogan. (Incorporated herein by reference to Exhibit 15(c) to Post-Effective Amendment No. 4 the Registration Statement on Form N-4, filed March 28, 2001.) Item 25. Directors and Officers of the Depositor
Name and Principal Positions and Offices Business Address with Insurance Company ---------------- ---------------------- George C. Kokulis* Director, President and Chief Executive Officer Glenn D. Lammey* Director, Executive Vice President, Chief Financial Officer, Chief Accounting Officer and Controller Mary Jean Thornton* Executive Vice President and Chief Information Officer Stuart Baritz*** Senior Vice President William H. Heyman** Senior Vice President William R. Hogan* Director, Senior Vice President Marla Berman Lewitus* Director, Senior Vice President and General Counsel Brendan Lynch* Senior Vice President Warren H. May* Senior Vice President Kathleen Preston* Senior Vice President Robert J. Price** Senior Vice President David A. Tyson* Senior Vice President F. Denney Voss** Senior Vice President
139 David A. Golino* Vice President Donald R. Munson, Jr.* Vice President Tim W. Still* Vice President Anthony Cocolla* Second Vice President Linn K. Richardson* Second Vice President and Actuary Paul Weissman* Second Vice President and Actuary Ernest J. Wright* Vice President and Secretary Kathleen A. McGah* Assistant Secretary and Deputy General Counsel
Principal Business Address: * The Travelers Life and Annuity Company ** Citigroup Inc. One Tower Square 399 Park Avenue Hartford, CT 06183 New York, N.Y. 10048 *** Travelers Portfolio Group 1345 Avenue of the Americas New York, NY 10105 Item 26. Persons Controlled by or Under Common Control with the Depositor or Registrant Incorporated herein by reference to Exhibit 16 to Post-Effective Amendment No.4 to the Registration Statement on Form N-4, File No. 333-27689, filed April 6, 2001. Item 27. Number of Contract Owners As of February 28, 2001, 3,552 contract owners held qualified and non-qualified contracts offered by the Registrant. Item 28. Indemnification 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. 140 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. Rule 484 Undertaking 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. Item 29. Principal Underwriter (a) Travelers Distribution LLC One Tower Square Hartford, CT 06183 Travelers Distribution LLC also serves as principal underwriter and distributor for the following funds: The Travelers Fund U for Variable Annuities, The Travelers Fund VA for Variable Annuities, The Travelers Fund BD for Variable Annuities, The Travelers Fund BD II for Variable Annuities, The The Travelers Fund BD III for Variable Annuities, Travelers Fund BD IV for Variable Annuities, The Travelers Fund ABD for Variable Annuities, The Travelers Fund ABD II for Variable Annuities, The Travelers Separate Account PF for Variable Annuities, The Travelers Separate Account PF II for Variable Annuities, The Travelers Separate Account QP for Variable Annuities, The Travelers Separate Account TM for Variable Annuities, The Travelers Separate Account TM II for Variable Annuities, The Travelers Separate Account Five for Variable Annuities, The Travelers Separate Account Seven for Variable Annuities, The Travelers Separate Account Eight for Variable Annuities, The Travelers Separate Account Nine for Variable Annuities, The Travelers Separate Account Ten for Variable Annuities, The Travelers Fund UL for Variable Life Insurance, The Travelers Fund UL II for Variable Life Insurance, The Travelers Fund UL III for Variable Life Insurance, The Travelers Variable Life Insurance Separate Account One, The Travelers Variable Life Insurance Separate Account Two, The Travelers Variable Life Insurance Separate Account Three, The Travelers Variable Life Insurance Separate Account Four, The Travelers Separate Account MGA, The Travelers Separate Account MGA II, The Travelers Growth and Income Stock Account for Variable Annuities, The Travelers Quality Bond Account for Variable Annuities, The Travelers Money Market Account for Variable Annuities, The Travelers Timed Growth and Income Stock Account for Variable Annuities, The Travelers Timed Short-Term Bond Account for Variable Annuities and The Travelers Timed Aggressive Stock Account for Variable Annuities, Citicorp Life Variable Annuity Separate Account and First Citicorp Life Variable Annuity Separate Account. (b) The information required by this Item 29 with respect to each director and officer of Travelers Distribution LLC is incorporated by reference to Schedule A of Form BD filed by Travelers Distribution LLC pursuant to the Securities and Exchange Act of 1934 (File No. 8-50244). (c) Not Applicable 141 Item 30. Location of Accounts and Records (1) The Travelers Life and Annuity Company One Tower Square Hartford, Connecticut 06183 Item 31. Management Services Not Applicable. Item 32. Undertakings The undersigned Registrant hereby undertakes: (a) To file a post-effective amendment to this registration statement as frequently as is necessary to ensure that the audited financial statements in the registration statement are never more than sixteen months old for so long as payments under the variable annuity contracts may be accepted; (b) To include either (1) as part of any application to purchase a contract offered by the prospectus, a space that an applicant can check to request a Statement of Additional Information, or (2) a post card or similar written communication affixed to or included in the prospectus that the applicant can remove to send for a Statement of Additional Information; and (c) To deliver any Statement of Additional Information and any financial statements required to be made available under this Form N-4 promptly upon written or oral request. The Company hereby represents: (a). That the aggregate charges under the Contracts 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. 142 SIGNATURES As required by the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets the requirements of Securities Act Rule 485(b) for effectiveness of this amendment to this registration statement and has caused this amendment to this registration statement to be signed on its behalf, in the City of Hartford, and State of Connecticut, on this 25th day of April, 2001. THE TRAVELERS SEPARATE ACCOUNT SIX FOR VARIABLE ANNUITIES (Registrant) THE TRAVELERS LIFE AND ANNUITY COMPANY (Depositor) By:*GLENN D. LAMMEY ------------------------------ Glenn D. Lammey, Chief Financial Officer, Chief Accounting Officer and Controller As required by the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on the 25th day of April 2001. *GEORGE C. KOKULIS Director, President and Chief Executive ---------------------------- Officer (Principal Executive Officer) (George C. Kokulis) *GLENN D. LAMMEY Director, Chief Financial Officer, Chief ---------------------------- Accounting Officer and Controller (Principal (Glenn D. Lammey) Financial Officer) *MARLA BERMAN LEWITUS Director ---------------------------- (Marla Berman Lewitus) *WILLIAM R. HOGAN Director ---------------------------- (William R. Hogan) *By: /s/Ernest J. Wright, Attorney-in-Fact 143 EXHIBIT INDEX
Exhibit No. Description Method of Filing ------- ----------- ---------------- 10 Consent of KPMG LLP, Independent Certified Public Accountants Electronically