<PAGE> 1
Registration No. 33-65339
811-07463
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 3
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 3
THE TRAVELERS FUND ABD II 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
Secretary
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, 1997 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.
Pursuant to Rule 24f-2 of the Investment Company Act of 1940, the Registrant
hereby declares that an indefinite amount of Variable Annuity Contract units was
registered under the Securities Act of 1933. A Rule 24f-2 Notice for the fiscal
year ended December 31, 1996 was filed with the Commissionon February 28, 1997.
<PAGE> 2
THE TRAVELERS FUND ABD II FOR VARIABLE ANNUITIES
Cross-Reference Sheet
Form N-4
ITEM
NO. CAPTION IN PROSPECTUS
1. Cover Page Prospectus
2. Definitions Glossary of Special Terms
3. Synopsis Prospectus Summary
4. Condensed Financial Information Not Applicable
5. General Description of Registrant, The Insurance Company; The Separate
Depositor, and Portfolio Companies Account and the Funding Options;
Voting Rights
6. Deductions (and Expenses) Fee Table; Charges and Deductions;
Distribution of Variable Annuity
Contracts
7. General Description of Variable The Contract; Ownership Provisions;
Annuity Contracts Transfers
8. Annuity Period The Annuity Period; Payment Options
9. Death Benefit Death Benefit
10. Purchases and Contract Value The Contract
11. Redemptions Surrenders and Redemptions;
Miscellaneous Contract Provisions;
The Contract
12. Taxes Federal Tax Considerations
13. Legal Proceedings Legal Proceedings and Opinions
14. Table of Contents of Statement Appendix D
of Additional Information
CAPTION IN STATEMENT OF ADDITIONAL
INFORMATION
-------------------------------------
15. Cover Page Statement of Additional Information
16. Table of Contents Table of Contents
17. General Information and History The Insurance Company
18. Services Principal Underwriter; Distribution
and Management Agreement
19. Purchase of Securities Being Valuation of Assets
Offered
20. Underwriters Principal Underwriter
21. Calculation of Performance Data Performance Information
22. Annuity Payments Not Applicable
23. Financial Statements Financial Statements
<PAGE> 3
PART A
Information Required in a Prospectus
<PAGE> 4
TRAVELERS PORTFOLIO ARCHITECT VARIABLE ANNUITY
CONTRACT (FUND ABD II) PROFILE
MAY 1, 1997
THIS PROFILE IS A SUMMARY OF SOME OF THE MORE IMPORTANT POINTS THAT YOU SHOULD
KNOW AND CONSIDER BEFORE PURCHASING THE CONTRACT. THE CONTRACT IS MORE FULLY
DESCRIBED IN THE FULL PROSPECTUS WHICH IS ATTACHED TO THIS PROFILE. PLEASE READ
THE PROSPECTUS CAREFULLY. THE TERMS "WE," "US," "OUR" AND THE "COMPANY" REFER TO
TRAVELERS LIFE AND ANNUITY COMPANY. "YOU" AND "YOUR" REFER TO THIS CONTRACT
OWNER.
1. THE VARIABLE ANNUITY CONTRACT. The Contract offered by Travelers Life and
Annuity Company is a variable annuity that is intended for retirement savings or
other long-term investment purposes. The Contract provides a death benefit as
well as guaranteed income options. Under a qualified Contract, you can make one
or more payments, as you choose, on a tax-deferred basis. Under a nonqualified
Contract, you can make one or more payments with after-tax dollars. You direct
your payment(s) to one or more of the variable funding options listed in Section
4 and/or to the Fixed Account. We guarantee money directed to the Fixed Account
as to principal and interest. The initial interest rate is guaranteed for a
one-year period. After that, interest is declared each calendar quarter by the
Company. The variable funding options are designed to produce a higher rate of
return than the Fixed Account, however, this is not guaranteed. You may also
lose money in the variable funding options.
You can transfer between the 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. The Company may, in the future, charge
a fee for any transfer request, or limit the number of transfers allowed. The
Company, at the minimum, would always allow one transfer every six months. You
may transfer between the Fixed Account and the funding options twice a year
(during the 30 days after the six-month contract date anniversary), provided the
amount is not greater than 15% of the Fixed Account Value on that date.
The Contract, like all deferred variable annuity contracts, has two phases: the
accumulation phase and the income phase. During the accumulation phase, under a
tax-qualified contract, your tax-deferred 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 taxdeferred basis and are taxed as income when you make a
withdrawal. The income phase occurs when you begin receiving regular payments
from your Contract. The amount of money you accumulate in your Contract
determines the amount of income (annuity payments) you receive during the income
phase.
2. ANNUITY PAYMENTS (THE INCOME PHASE). You may choose to receive income
payments from the Fixed Account or the variable funding options. If you want to
receive regular payments from your annuity, you can choose one of the following
annuity options: Option 1 -- payments for your life (life annuity) -- assuming
that you are the annuitant; Option 2 -- payments for your life with an added
guarantee that payments will continue to your beneficiary for a certain number
of months (120, 180 or 240, as you select), if you should die during that
period; Option 3 -- Joint and Last Survivor Annuity, in which payments are made
for your life and the life of another person (usually your spouse). This option
can also be elected with payments continuing at a reduced rate after the death
of one payee. There are also two Income Options: Fixed Amount -- the cash
surrender value of your Contract will be paid to you in equal payments; or Fixed
Period -- the cash surrender value will be used to make payments for a fixed
time period. If you should die before the end of the Fixed Period, the remaining
amount would go to your beneficiary.
Once you make an election of an annuity option or an income option and once
payments begin, it cannot be changed. During the income phase, you have the same
investment choices you had during the accumulation phase. If amounts are
directed to the funding options, the dollar amount of your payments may increase
or decrease.
<PAGE> 5
3. PURCHASE. You may purchase the Contract with an initial payment of at least
$5,000. You may make additional payments of at least $500 at any time during the
accumulation phase. (In some states, additional payments are not allowed.)
4. FUNDING OPTIONS. You can direct your money into the Fixed Account or any or
all of the following variable funding options. They are described in the
prospectuses for the funds. Depending on market conditions, you may make or lose
money in any of these variable options:
<TABLE>
<S> <C>
Capital Appreciation Fund Lazard International Equity Portfolio
Cash Income Trust MFS Emerging Growth Portfolio
Alliance Growth Portfolio Federated Stock Portfolio
MFS Total Return Portfolio Federated High Yield Portfolio
Putnam Diversified Income Portfolio Large Cap Portfolio
Travelers Quality Bond Portfolio Equity Income Portfolio
Mid Cap Disciplined Equity Fund
</TABLE>
5. EXPENSES. The Contract has insurance features and investment features, and
there are costs related to each. For contracts with a value of less than
$40,000, the Company deducts an annual administrative charge of $30. The annual
insurance charge is 1.25% of the amounts you direct to the Funding Options; and
a related sub-account administrative charge of .15% annually is charged.
Each funding option has investment charges for management fees and other
expenses. The charges range from 0.60% to 1.25% annually, of the average daily
net asset balance of the funding option, depending on the funding option.
If you withdraw money, the Company may deduct a withdrawal charge (0% to 6%) of
the amount withdrawn from the contract. If you withdraw all amounts under the
contract, or if you begin receiving annuity payments, the Company may be
required by your state to deduct a premium tax of 0%-5%.
The following table is designed to help you understand the Contract charges. The
column "Total Annual Insurance Charges" shows the total of the $30 annual
contract charge (which is represented as .021% below), the mortality and expense
risk charge of 1.25% and the sub-account charge of .15%. The column "Total
Funding Option Expenses" shows the investment charges for each portfolio. The
columns under the heading "Examples" show you how much you would pay under the
Contract for a one-year period and for a 10-year period. The examples assume
that you invested $1,000 in a Contract that earns 5% annually and that you
withdraw your money at the end of year 1 and at the end of year 10. For year 1,
the Total Annual Insurance Charges are assessed as well as the withdrawal
charges. For year 10, the example shows the aggregate of all the annual charges
assessed during that time, but no withdrawal charge is shown. The Total Annual
Insurance Charges includes the mortality and expense risk charge and the
administrative charges. For these examples, the premium tax is assumed to be 0%.
<TABLE>
<CAPTION>
EXAMPLES:
TOTAL ANNUAL TOTAL ANNUAL EXPENSES
TOTAL ANNUAL FUNDING OPTION TOTAL ANNUAL AT END OF:
PORTFOLIO NAME INSURANCE CHARGES EXPENSES CHARGES 1 YEAR 10 YEARS
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C>
Capital Appreciation Fund....... 1.42% 0.83% 2.39% $ 83 $259
Cash Income Trust............... 1.42% 0.78% 2.34% 82 254
Alliance Growth................. 1.42% 0.87% 2.43% 83 263
MFS Total Return................ 1.42% 0.91% 2.47% 84 267
Putnam Diversified Income....... 1.42% 0.96% 2.52% 84 272
Travelers Quality Bond.......... 1.42% 0.75% 2.31% 82 250
Lazard International Equity..... 1.42% 1.25% 2.81% 87 300
MFS Emerging Growth............. 1.42% 0.95% 2.51% 84 271
Federated Stock................. 1.42% 0.95% 2.51% 84 271
Federated High Yield............ 1.42% 0.95% 2.51% 84 271
Large Cap....................... 1.42% 0.95% 2.51% 84 271
Equity Income................... 1.42% 0.95% 2.51% 84 271
Mid Cap Disciplined Equity...... 1.42% 0.95% 2.51% 84 271
</TABLE>
2
<PAGE> 6
6. TAXES. The payments you make to a qualified Contract during the accumulation
phase are made with before-tax dollars. You will be taxed on your purchase
payments and on any earnings when you make a withdrawal or begin receiving
annuity or income payments. Under a non-qualified Contract, payments to the
contract are made with after-tax dollars, and any earnings will accumulate
tax-deferred. You will be taxed on these earnings when they are withdrawn from
the Contract.
For owners of qualified Contracts, 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. 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.
7. ACCESS TO YOUR MONEY. You can take out money any time during the
accumulation phase. A withdrawal charge may apply. The amount of the charge
depends on a number of factors, including the length of time since the purchase
payment was made (6% if withdrawn within one year, gradually decreasing to 0%
for payments held by the Company for 8 years or more). After the first contract
year, you may withdraw up to 10% of the contract value (as of the end of the
prior year end) without a withdrawal charge. Of course, you may also have to pay
income taxes and a tax penalty on any money you take out.
8. PERFORMANCE. The value of the Contract will vary depending upon the
investment performance of the funding options you choose. The following chart
shows total returns for each funding option for the time periods shown. The rate
of return reflects the insurance charges, administrative charge, investment
charges and all other expenses of the funding option. The rate of return does
not reflect any withdrawal charge or applicable taxes, which, if applied, would
reduce such performance. Past performance is not a guarantee of future results.
LAST TEN CALENDAR YEARS (OR FULL YEARS SINCE INCEPTION):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
PORTFOLIO NAME 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Appreciation Fund... 26.39% 35.46% -6.12% 13.45% 15.97% 32.04% -6.89% 13.85% 8.50% -9.21%
Cash Income Trust........... 2.69% 2.77% 3.31% 0.77% 1.80% 5.16% 6.53% 6.16% 5.60%
Travelers Series Fund,
Inc.......................
Alliance Growth......... 27.56% 32.97%
MFS Total Return........ 12.88% 23.93%
Putnam Diversified
Income................ 6.70% 15.74%
</TABLE>
Those funding options not illustrated above do not yet have one full year of
performance history.
9. DEATH BENEFIT. Assuming you are the annuitant, if you die before you move to
the income phase, the person you have chosen as your beneficiary will receive a
death benefit. The death benefit paid depends on your age at the time of your
death. The death benefit value is determined at the close of the business day on
which the Company's Home Office receives due proof of death. If you die before
you reach age 90, the death benefit equals the greatest of : (1) the contract
value; (2) the total purchase payments made under the Contract less all partial
withdrawals; or (3) the maximum "final benefit value" occurring on or before
your 80(th) birthday (after adjustments for all purchase payments and
withdrawals). (See the Contract prospectus for an explanation of "final benefit
value".)
Assuming you are the annuitant, if you die on or after age 90 and before the
maturity date, the death benefit payable will be the contract value, less any
applicable premium tax or outstanding loans.
In certain states, the death benefit described above is not yet available. In
these states, if the annuitant dies before the contract is in the income phase,
the person you have selected as the beneficiary will receive an amount equal to
the greater of the following in instances where the annuitant dies before age
75:
1) the Contract Value;
2) the total purchase payments made under the Contract; or
3
<PAGE> 7
3) the Contract Value on the latest fifth Contract year before the
Company receives due proof of death.
If the annuitant dies after age 75 but before age 85 (90 in Florida and New
York) and before the contract maturity date, the beneficiary will receive
1) the Contract value;
2) Total purchase payments made under the Contract; or
3) The Contract value on the latest fifth year anniversary occurring on
or before the Annuitant's 75th birthday;
If the annuitant dies on or after age 85 and before the maturity date, the death
benefit will equal Contract value.
NOTE: In all cases described above, amounts will be reduced by loans
outstanding, premium taxes owed and partial withdrawals not previously deducted.
This death benefit may not be available in all states. Certain states may have
varying age requirements. Please refer to the Contract prospectus for more
details.
10. OTHER INFORMATION
RIGHT TO RETURN. If you cancel the Contract within twenty days after you
receive it, you will receive a full refund of the Contract Value (including
charges). 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 during the right to return period; therefore, the Contract Value returned
may be greater or less than your purchase payment. If the Contract is purchased
as an Individual Retirement Annuity, and is returned within the first seven days
after delivery, your full purchase payment will be refunded; during the
remainder of the right to return period, the Contract Value (including charges)
will be refunded. The Contract Value will be determined at the close of business
on the day we receive a written request for a refund.
WHO SHOULD PURCHASE THIS CONTRACT? The Contract is currently available for use
in connection with (1) individual nonqualified purchases; (2) Individual
Retirement Annuities (IRAs) and (3) qualified retirement plans. Qualified
contracts include contracts qualifying under Section 401(a), 403(b), or 408(b)
of the Internal Revenue Code of 1986, as amended.
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 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.
AUTOMATIC REBALANCING. You may elect to have the Company periodically
reallocate the values in your contract to match your original (or your latest)
funding option allocation request.
11. INQUIRIES. If you need more information, please contact us at (800)
842-8573 or:
Travelers Life and Annuity Company
Annuity Services
One Tower Square
Hartford, CT 06183
4
<PAGE> 8
THE TRAVELERS FUND ABD II FOR VARIABLE ANNUITIES
This prospectus describes PORTFOLIO ARCHITECT, a flexible premium variable
annuity contract (the "Contract") issued by The Travelers Life and Annuity
Company (the "Company" "We" or "Our"). The Contract is available in connection
with certain retirement plans that qualify for special federal income tax
treatment ("qualified Contracts") as well as those that do not qualify for such
treatment ("nonqualified Contracts"). Portfolio Architect may be issued as an
individual Contract or as a group Contract. In states where only group Contracts
are available, you will be issued a certificate summarizing the provisions of
the group Contract. For convenience, this prospectus refers to both Contracts
and certificates as "Contracts."
You can choose to have your purchase payments accumulate on a fixed basis (i.e.
a Fixed Account funded through the Company's general account) and/or a variable
basis (i.e., one or more of the sub-accounts ("funding options")) of the
Travelers Fund ABD II for Variable Annuities ("Fund ABD II"). Your contract
value will vary daily to reflect the investment experience of the funding
options you select and any interest credited to the Fixed Account. The variable
funding options currently available are: Capital Appreciation Fund; Cash Income
Trust; Alliance Growth Portfolio, MFS Total Return Portfolio, and Putnam
Diversified Income Portfolio, of the Travelers Series Fund, Inc.; and Travelers
Quality Bond Portfolio, Lazard International Stock Portfolio, MFS Emerging
Growth Portfolio, Federated Stock Portfolio, Federated High Yield Portfolio,
Large Cap Portfolio, Equity Income Portfolio and Mid Cap Disciplined Equity Fund
of the Travelers Series Trust. The Fixed Account funding option is described in
Appendix B. Unless specified otherwise, this prospectus refers to the variable
funding options. The contracts and/or some of the funding options may not be
available in all states. THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE
CURRENT PROSPECTUSES FOR THE VARIABLE FUNDING OPTIONS. THESE PROSPECTUSES SHOULD
BE READ AND RETAINED FOR FUTURE REFERENCE.
This prospectus provides the information that you should know before investing
in the Contract. You can receive additional information about Fund ABD II by
requesting a copy of the Statement of Additional Information ("SAI") dated May
1, 1997. The SAI has been filed with the Securities and Exchange Commission
("SEC") and is incorporated by reference into this prospectus. To request a
copy, write to The Travelers Life and Annuity Company, Annuity Services, One
Tower Square, Hartford, Connecticut 06183, or call (800) 842-8573. The Table of
Contents of the SAI appears in Appendix C of this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
VARIABLE ANNUITY CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR
GUARANTEED BY ANY BANK, NOR ARE THEY FEDERALLY INSURED OR OTHERWISE PROTECTED BY
THE FDIC, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY; THEY ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL INVESTMENT.
PROSPECTUS DATED MAY 1, 1997
<PAGE> 9
TABLE OF CONTENTS
<TABLE>
<S> <C>
INDEX OF SPECIAL TERMS................. 2
FEE TABLE.............................. 3
THE ANNUITY CONTRACT................... 4
Purchase Payments...................... 5
Accumulation Units..................... 5
The Funding Options.................... 5
Substitutions and Additions............ 6
CHARGES AND DEDUCTIONS................. 6
Withdrawal Charge...................... 6
Free Withdrawal Allowance.............. 7
Administrative Charges................. 7
Mortality and Expense Risk Charge...... 7
Reduction or Elimination of Contract
Charges.............................. 7
Funding Option Expenses................ 7
Premium Tax............................ 8
Changes in Taxes Based Upon Premium or
Value................................ 8
OWNERSHIP PROVISIONS................... 8
Types of Ownership..................... 8
Beneficiary............................ 8
Annuitant.............................. 9
TRANSFERS.............................. 9
Dollar Cost Averaging.................. 9
ACCESS TO YOUR MONEY................... 9
Systematic Withdrawals................. 10
Loans.................................. 10
DEATH BENEFIT.......................... 10
Death Proceeds Before the Maturity Date
(Provided State Approval has been
Received)............................ 11
Death Proceeds Before the Maturity Date
(If State Approval has not been
Received)............................ 11
THE ANNUITY PERIOD..................... 12
Maturity Date.......................... 12
Allocation of Annuity.................. 12
Variable Annuity....................... 13
Fixed Annuity.......................... 13
PAYMENT OPTIONS........................ 13
Election of Options.................... 13
Annuity Options........................ 14
Income Options......................... 14
MISCELLANEOUS CONTRACT PROVISIONS...... 15
Right to Return........................ 15
Termination............................ 15
Required Reports....................... 15
Suspension of Payments................. 15
Transfers of Contract Values to Other
Annuities............................ 16
THE SEPARATE ACCOUNT................... 16
Mixed and Shared Funding............... 16
Performance Information................ 16
FEDERAL TAX CONSIDERATIONS............. 17
General Taxation of Annuities.......... 17
Types of Contracts Qualified or
Nonqualified......................... 17
Nonqualified Annuity Contracts......... 17
Qualified Annuity Contracts............ 18
Penalty Tax for Premature
Distributions........................ 18
Diversification Requirements for
Variable Annuities................... 18
Ownership of the Investments........... 19
Mandatory Distributions for Qualified
Plans................................ 19
OTHER INFORMATION...................... 19
Insurance Company...................... 19
Distribution Of Variable Annuity
Contracts............................ 19
Conformity with State and Federal
Laws................................. 20
Voting Rights.......................... 20
Legal Proceedings And Opinions......... 20
APPENDIX A: Condensed Financial
Information.......................... 21
APPENDIX B: The Fixed Account.......... 22
APPENDIX C: Table of Contents of the
Statement of Additional
Information.......................... 23
</TABLE>
INDEX OF SPECIAL TERMS
The following terms are italicized throughout the prospectus. Refer to the page
listed for an explanation of each term.
<TABLE>
<S> <C>
Accumulation Unit...................... 5
Annuitant.............................. 8
Annuity Payments....................... 12
Annuity Unit........................... 12
Cash Surrender Value................... 9
Contract Date.......................... 4
Contract Owner (You, Your)............. 4
Contract Value......................... 4
Contract Year.......................... 4
Fixed Account.......................... 22
Funding Option(s)...................... 5
Income Payments........................ 13
Maturity Date.......................... 4
Purchase Payment....................... 4
Written Request........................ 4
</TABLE>
2
<PAGE> 10
FUND ABD II FEE TABLE
- --------------------------------------------------------------------------------
CONTRACT OWNER TRANSACTION EXPENSES
<TABLE>
<S> <C>
WITHDRAWAL CHARGE (as a percentage of purchase payments withdrawn):
Length of Time From Purchase Payment
</TABLE>
<TABLE>
<CAPTION>
(NUMBER OF YEARS) CHARGE
<S> <C>
1 6%
2 6%
3 5%
4 5%
5 4%
6 3%
7 2%
8 and over 0%
ANNUAL CONTRACT ADMINISTRATIVE CHARGE
Waived if contract value is $40,000 or more $30
ANNUAL SEPARATE ACCOUNT CHARGES:
(as a percentage of the average daily net assets of the Separate Account)
Mortality and Expense Risk Charge............................................. 1.25%
Administrative Expense Charge................................................. 0.15%
------
Total Separate Account Charges............................................ 1.40%
FUNDING OPTION EXPENSES:
(as a percentage of average daily net assets of the Funding Option)
</TABLE>
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL ANNUAL
FEE EXPENSES FUNDING
(AFTER EXPENSES (AFTER EXPENSES OPTION
PORTFOLIO NAME ARE REIMBURSED) ARE REIMBURSED) EXPENSES
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital Appreciation Fund..................... 0.75% 0.08%(1) 0.83%
Cash Income Trust............................. 0.32% 0.46%(1)(2) 0.78%
Alliance Growth............................... 0.80% 0.07%(1) 0.87%
MFS Total Return.............................. 0.80% 0.11%(1) 0.91%
Putnam Diversified Income..................... 0.75% 0.21%(1) 0.96%
Travelers Quality Bond........................ 0.32% 0.43%(1)(3) 0.75%
Lazard International Stock.................... 0.83% 0.42%(1)(3) 1.25%
MFS Emerging Growth........................... 0.75% 0.20%(1)(3) 0.95%
Federated Stock............................... 0.63% 0.32%(1)(3) 0.95%
Federated High Yield.......................... 0.65% 0.30%(1)(3) 0.95%
Large Cap (Sub-Adv. Fidelity)................. 0.75% 0.20%(4) 0.95%
Equity Income (Sub-Adv. Fidelity)............. 0.75% 0.20%(4) 0.95%
Mid Cap Disciplined Equity Fund............... 0.70% 0.25%(1)(5) 0.95%
</TABLE>
NOTES:
The purpose of the Fee Table is to assist contract owners in understanding the
various costs and expenses that a contract owner will bear, directly or
indirectly. See "Charges and Deductions" in this prospectus for additional
information. Expenses shown do not include premium taxes, which may be
applicable.
(1) Includes a Sub-Administrator Charge of .06%.
(2) Other Expenses take into account the current expense reimbursement
arrangement with the Company. The Company has agreed to reimburse the Fund
for the amount by which its aggregate expenses (including the management
fee, but excluding brokerage commissions, interest charges and taxes)
exceeds 0.60%. Without such arrangement, Other Expenses would have been
1.71% for Cash Income Trust.
(3) The Travelers has waived all of its fees for the period ended December 31,
1996. In addition, the Travelers has agreed to reimburse the Portfolios'
expenses for the same period. Without such arrangements, Other Expenses for
the Travelers Series Trust Travelers Quality Bond Portfolio, Lazard
International Stock Portfolio, MFS Emerging Growth Portfolio, Federated High
Yield Portfolio, and Federated Stock Portfolios would have been 1.76%,
2.87%, 2.09%, 2.19%, and 3.03%, respectively.
(4) Other Expenses take into account the current expense reimbursement
arrangement with the Company. The Company has agreed to reimburse the Fund
for the amount by which its aggregate expenses (including the management
fee, but excluding brokerage commissions, interest charges and taxes)
exceeds 0.95%. Without such arrangements, Other Expenses for the Travelers
Series Trust Large Cap Portfolio and Equity Income Portfolios would have
been 1.55%.
(5) Other Expenses for the Mid Cap Disciplined Equity Fund are based on
estimated expenses for 1996 since the portfolio has no investment history.
They also take into account the current expense reimbursement arrangement
with the Company in which The Company has agreed to reimburse the Fund for
the amount by which its aggregate expenses (including the management fee,
but excluding brokerage commissions, interest charges and taxes) exceeds
0.95%.
3
<PAGE> 11
EXAMPLE*
Assuming a 5% annual return, a $1,000 investment would be subject to the
following expenses, if
(a) surrendered or withdrawn at the end of the period shown, or
(b) if annuitized, or if no withdrawals are made at the end of the period
shown.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
PORTFOLIO NAME 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Appreciation Fund......................................................... $83(a) $120(a) $161(a) $259(a)
23(b) 70(b) 121(b) 259(b)
Cash Income Trust................................................................. 82(a) 119(a) 158(a) 254(a)
23(b) 72(b) 123(b) 263(b)
Alliance Growth................................................................... 83(a) 122(a) 163(a) 263(a)
23(b) 72(b) 123(b) 263(b)
MFS Total Return.................................................................. 84(a) 123(a) 165(a) 267(a)
24(b) 73(b) 125(b) 267(b)
Putnam Diversified Income......................................................... 84(a) 124(a) 167(a) 272(a)
24(b) 74(b) 127(b) 272(b)
Travelers Quality Bond............................................................ 82(a) 118(a) n/a n/a
22(b) 68(b) n/a n/a
Lazard International Stock........................................................ 87(a) 133(a) n/a n/a
27(b) 83(b) n/a n/a
MFS Emerging Growth............................................................... 84(a) 124(a) n/a n/a
24(b) 74(b) n/a n/a
Federated Stock................................................................... 84(a) 124(a) n/a n/a
24(b) 74(b) n/a n/a
Federated High Yield.............................................................. 84(a) 124(a) n/a n/a
24(b) 74(b) n/a n/a
Large Cap......................................................................... 84(a) 124(a) n/a n/a
24(b) 74(b) n/a n/a
Equity Income..................................................................... 84(a) 124(a) n/a n/a
24(b) 74(b) n/a n/a
Mid Cap Disciplined Equity Fund................................................... 84(a) 124(a) n/a n/a
24(b) 74(b) n/a n/a
</TABLE>
* THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS
EXAMPLE REFLECTS THE $30 ANNUAL CONTRACT ADMINISTRATIVE CHARGE AS AN ANNUAL
CHARGE OF .021% OF ASSETS. FOR NEW FUNDING OPTIONS, EXPENSES ARE GIVEN ONLY
FOR YEARS ONE AND THREE.
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
This information is located in Appendix A, page 21.
THE ANNUITY CONTRACT
- --------------------------------------------------------------------------------
Travelers Portfolio Architect Annuity is a contract between you, the contract
owner, and Travelers Life and Annuity Company (called "us" or the "Company").
Under this contract, you make purchase payments to us and we credit them to your
account. The Company promises to pay you an income, in the form of annuity or
income 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, plus or minus any investment experience or interest. The
contract value also reflects all surrenders 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, except as noted
under the Death Benefit provisions described in this prospectus. The date the
contract and its benefits became effective is referred to as the contract date.
Each anniversary of this 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 written information must be sent
to the Company's Home Office in a form and content satisfactory to us.
4
<PAGE> 12
PURCHASE PAYMENTS
The initial purchase payment must be at least $5,000. Additional payments of at
least $500 may be made under the Contract at any time. Under certain
circumstances, we may waive the minimum purchase payment requirement. Purchase
payments over $1,000,000 may be made with our prior consent. In some states, we
do not accept additional purchase payments.
We will apply the initial purchase payment within two business days after we
receive it at our Home Office. Subsequent purchase payments will be credited to
a Contract within one business day. Our business day ends when the New York
Stock Exchange closes, usually 4:00 p.m. Eastern time.
ACCUMULATION UNITS
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 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 the accumulation unit. We calculate the value of an accumulation
unit for each funding option each day after the New York Stock Exchange closes.
After the value is calculated, your account is credited. During the annuity
period (i.e., after the maturity date), you are credited with annuity units.
THE FUNDING OPTIONS
You choose which of the following variable funding options to have your purchase
payments allocated to. You will find detailed information about the options and
their inherent risks in the current prospectuses for the funding options which
must accompany this prospectus. Since each option has varying degrees of risk,
please read the prospectuses carefully before investing. Additional copies of
the prospectuses may be obtained by contacting your registered representative or
by calling 1-800-842-8573.
The current funding options are listed below, along with their investment
advisers and any subadviser:
<TABLE>
<CAPTION>
FUNDING OPTION INVESTMENT OBJECTIVE INVESTMENT ADVISER SUB-ADVISER
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital Appreciation growth of capital Travelers Asset Management Janus Capital Corporation
Fund International Corporation
("TAMIC")
Cash Income Trust high current income while TAMIC
emphasizing preservation
of capital and
maintaining a high degree
of liquidity
Alliance Growth long-term growth of capital Travelers Investment Advisers Alliance Capital Management
Portfolio ("TIA") L.P.
MFS Total Return above-average income TIA Massachusetts Financial
Portfolio (compared to a portfolio Services Company ("MFS")
entirely invested in
equity securities)
consistent with the
prudent employment of
capital
Putnam Diversified high current income TIA Putnam Investment
Income Portfolio consistent with Management, Inc
preservation of capital
Travelers Quality Bond current income, moderate TAMIC
Portfolio capital volatility and
total return
</TABLE>
5
<PAGE> 13
<TABLE>
<CAPTION>
FUNDING OPTION INVESTMENT OBJECTIVE INVESTMENT ADVISER SUB-ADVISER
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lazard International capital appreciation TAMIC Lazard Asset Management
Stock Portfolio through investing
primarily in the equity
securities of non- United
States companies
MFS Emerging Growth long-term growth of capital TAMIC MFS
Portfolio
Federated Stock growth of income and TAMIC Federated Investment
Portfolio capital Counseling, Inc.
Federated High Yield high current income TAMIC Federated Investment
Portfolio Counseling, Inc.
Large Cap Portfolio long-term growth of capital TAMIC Fidelity Management &
Research Company
Equity Income Portfolio reasonable income TAMIC Fidelity Management &
Research Company
Mid Cap Disciplined growth of capital TAMIC Travelers Investment
Equity Fund Management Company
</TABLE>
SUBSTITUTIONS AND ADDITIONS
If any of the funding options become unavailable for allocating purchase
payments, or if we believe that further investment in a funding option is
inappropriate for the purposes of the Contract, we may substitute another
funding option. However, we will not make any substitutions without notifying
you, obtaining state approval if applicable, and without prior approval of the
SEC, to the extent required by the 1940 Act or other applicable law. From time
to time we may make new funding options available.
CHARGES AND DEDUCTIONS
- --------------------------------------------------------------------------------
WITHDRAWAL CHARGE
No sales charges are deducted from purchase payments when they are applied under
the Contract. However, a withdrawal charge will be deducted if any or all of the
contract value is withdrawn during the first seven years following a purchase
payment. The length of time from when we receive the purchase payment to the
time of withdrawal determines the amount of the charge.
The withdrawal charge is equal to a percentage of purchase payments withdrawn
from the Contract and is calculated as follows:
<TABLE>
<CAPTION>
LENGTH OF TIME FROM
PURCHASE PAYMENT WITHDRAWAL
(NUMBER OF YEARS) CHARGE
<S> <C>
1 6%
2 6%
3 5%
4 5%
5 4%
6 3%
7 2%
8 and over 0%
</TABLE>
For purposes of the withdrawal charge calculation, withdrawals will be deemed to
be taken first from any free withdrawal amount (as described below); next from
remaining purchase payments (on a first-in, first-out basis); and then from
contract earnings (in excess of the free withdrawal amount). Unless you instruct
us otherwise, we will deduct the withdrawal charge from the amount requested.
We will not deduct a withdrawal charge (1) from payments we make due to the
death of the contract owner or the death of the annuitant with no contingent
annuitant surviving; (2) if an annuity payout has begun; or (3) if an income
option of at least five years' duration is begun after the first contract year.
6
<PAGE> 14
FREE WITHDRAWAL ALLOWANCE
There is a 10% free withdrawal allowance available each year after the first
contract year. The available amount will be calculated as of the end of the
previous contract year. The free withdrawal allowance applies to any partial
withdrawals and to full withdrawals, except those transferred directly to
annuity contracts issued by other financial institutions. In Washington state,
this provision applies to all withdrawals.
ADMINISTRATIVE CHARGES
A Contract administrative charge of $30 is deducted annually from Contracts with
a value of less than $40,000. This charge compensates us for expenses incurred
in establishing and maintaining the Contract. The charge is deducted from the
contract value on the fourth Friday of each August by canceling accumulation
units applicable to each funding option on a pro rata basis. This charge will be
prorated from the date of purchase to the next date of assessment of charge. A
prorated charge will also be made if the Contract is completely withdrawn or
terminated. We will not deduct a contract administrative charge: (1) if the
distribution results from the death of the contract owner or the annuitant with
no contingent annuitant surviving, (2) after an annuity payout has begun, or (3)
if the contract value on the date of assessment is equal to or greater than
$40,000.
An administrative expense charge (sometimes called "sub-account administrative
charge") is deducted on each business day from amounts allocated to the variable
funding options in order to compensate the Company for certain related
administrative and operating expenses. The charge equals, on an annual basis,
0.15% of the daily net asset value allocated to each of the variable funding
options.
MORTALITY AND EXPENSE RISK CHARGE
Each business day, the Company deducts a mortality and expense risk charge. The
deduction is reflected in our calculation of accumulation and annuity unit
values. This charge equals, on an annual basis, 1.25% of the amounts held in
each funding option. We reserve the right to lower this charge at any time. The
mortality risk portion compensates us for guaranteeing to provide annuity
payments according to the terms of the Contract regardless of how long the
annuitant lives and for guaranteeing to provide the death benefit if an
annuitant dies prior to the maturity date. The expense risk portion compensates
us for the risk that the charges under the Contract, which cannot be increased
during the duration of the Contract, will be insufficient to cover actual costs.
REDUCTION OR ELIMINATION OF CONTRACT CHARGES
The withdrawal charge, the administrative charges, and the mortality and expense
risk charge under the Contract may be reduced or eliminated when certain sales
or administration of the Contract result in savings or reduction of
administrative or sales expenses, and/or mortality and expense risks. Any such
reduction will be based on the following: (1) the size and type of group to
which sales are to be made; (2) the total amount of purchase payments to be
received; and (3) any prior or existing relationship with the Company. There may
be other circumstances, of which we are not presently aware, which could result
in fewer sales expenses, administrative charges, or mortality and expense risk
charges. For certain trusts, the Company may change the order in which purchase
payments and earnings are withdrawn to determine the withdrawal charge. Any
reduction or elimination of the charges will be permitted only where it will not
be discriminatory to any person.
FUNDING OPTION EXPENSES
The deductions from and expenses paid out of the assets of the various funding
options are summarized in the fee table and are described in the accompanying
prospectuses.
7
<PAGE> 15
PREMIUM TAX
Certain state and local governments charge premium taxes ranging from 0% to 5%,
depending upon jurisdiction. The Company is responsible for paying these taxes
and will determine the method used to recover premium tax expenses incurred.
Where required, the Company will deduct any applicable premium taxes from the
contract value either upon death, surrender, annuitization, or at the time
purchase payments are made to the Contract, but no earlier than when the Company
has a tax liability under state law.
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.
OWNERSHIP PROVISIONS
- --------------------------------------------------------------------------------
TYPES OF OWNERSHIP
Contract Owner (you). The Contract belongs to the contract owner named in the
Contract (on the Specifications page), or to any other person to whom the
contract is subsequently assigned. An assignment of ownership or a collateral
assignment may be made only for nonqualified contracts. You have sole power
during the annuitant's lifetime to exercise any rights and to receive all
benefits given in the contract provided the you have not named an irrevocable
beneficiary and provided the Contract is not assigned.
You receive all payments while the annuitant is alive unless you direct them to
an alternate recipient. An alternate recipient does not become the contract
owner.
Joint Owner. For nonqualified contracts only, joint owners (i.e., spouses) may
be named in a written request before the contract is in effect. Joint owners may
independently exercise transfers allowed under the Contract. All other rights of
ownership must be exercised by both owners. Joint owners own equal shares of any
benefits accruing or payments made to them. All rights of a joint owner end at
death if the other joint owner survives. The entire interest of the deceased
joint owner in the Contract will pass to the surviving joint owner.
BENEFICIARY
The beneficiary is named by you in a written request. The beneficiary has the
right to receive any remaining contractual benefits upon the death of the
annuitant or the contract owner. If more than one beneficiary survives the
annuitant, they will share equally in benefits unless different shares are
recorded with the Company by written request before the death of the annuitant
or contract owner.
With nonqualified contracts, as discussed under "Death Benefit," the beneficiary
named in the contract may differ from the designated beneficiary (for example,
the joint owner or a contingent annuitant). In such cases, the designated
beneficiary receives the contract benefits (rather than the beneficiary) upon
your death.
Unless an irrevocable beneficiary has been named, you have the right to change
any beneficiary by written request during the lifetime of the annuitant and
while the Contract continues.
8
<PAGE> 16
ANNUITANT
The annuitant is designated in the Contract (on the Specifications page), and is
the individual on whose life the maturity date and the amount of the monthly
annuity payments depend. The annuitant may not be changed after the contract is
in effect.
For nonqualified contracts only, the contract owner may also name one individual
as a contingent annuitant by written request before the Contract becomes
effective. A contingent annuitant may not be changed, deleted or added after the
Contract becomes effective.
For contracts issued in New York, a contingent annuitant may not be named.
TRANSFERS
- --------------------------------------------------------------------------------
Before the maturity date, you may transfer all or part of the contract value
between funding options. 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. Since different funding options have different expenses, a
transfer of contract values from one funding option to another could result in
your investment becoming subject to higher or lower expenses. After the maturity
date, you may make transfers between funding options only with our consent.
DOLLAR COST AVERAGING
Dollar cost averaging (or "automated transfers") allows you to transfer a set
dollar amount to other funding options on a monthly or quarterly basis so that
more accumulation units are purchased in a funding option if the value per unit
is low and less accumulation units are purchased if the value per unit is high.
Therefore, a lower-than-average value per unit may be achieved over the long
run.
You may elect automated transfers through written request or other method
acceptable to the Company. You must have a minimum total contract value of
$5,000 to enroll in the Dollar Cost Averaging program. The minimum amount that
may be transferred through this program is $400.
You may establish automated transfers of contract values from the Fixed Account,
subject to certain restrictions. Automated transfers from the Fixed Account may
not deplete your Fixed Account Value in less than twelve months from your
enrollment in the Dollar Cost Averaging program.
You may start or stop participation in the Dollar Cost Averaging program at any
time, but you must give the Company at least 30 days' notice to change any
automated transfer instructions that are currently in place. All provisions and
terms of the Contract apply to automated transfers, including provisions
relating to the transfer of money between investment 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. You must submit a written request
specifying the fixed or variable funding option(s) from which amounts are to be
withdrawn. The cash surrender value will be determined as of the close of
business after we receive your surrender request at the Home Office. The cash
surrender value may be more or less than the purchase payments made depending on
the contract value at the time of surrender.
9
<PAGE> 17
The Company 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 surrender 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. Any
applicable withdrawal charges (in excess of the free withdrawal allowance) and
any applicable premium taxes will be deducted. To elect systematic withdrawals,
you must have a contract value of at least $15,000 and you must make the
election on the form provided by the Company. We will surrender accumulation
units pro rata from all funding 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 at least 30 days' notice must be
given 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.
LOANS
Loans may be available under your Contract. If available, all loan provisions
are described in your Contract or loan agreement.
DEATH BENEFIT
- --------------------------------------------------------------------------------
Before the maturity date, a death benefit is payable to the beneficiary when
either the annuitant, the contract owner or the first of joint owners dies and
there is no contingent annuitant. The death benefit is calculated at the close
of the business day on which the Company's Home Office received due proof of
death. If the Company is notified of the annuitant's, contract owner's, or first
of the joint owner's death more than six months after the death, the death
benefit will be the contract value. A beneficiary may request that a death
benefit payable under the Contract be applied to one of the settlement options
available under the Contract. (See also "Nonqualified Annuity Contracts," in
this prospectus.)
For nonqualified contracts, if the contract owner (including the first of joint
owners) dies before the maturity date, a distribution may be required under the
minimum distribution requirements of the federal tax law. If so required, we
will recalculate the value of the death benefit under the provisions of "Death
Proceeds Before the Maturity Date," below. The value of the death benefit, as
recalculated, will be credited to the party taking distributions upon the death
of the contract owner with the annuitant or contingent annuitant surviving. This
will generally be the surviving joint owner or otherwise the beneficiary in
accordance with all the circumstances and the terms of the Contract. This party
may differ from the beneficiary who was named by the contract owner in a written
request and who would receive any remaining contractual benefits upon the death
of the annuitant. This party may be paid in a single lump sum, or by other
options, but should take distributions as required by minimum distribution
requirements of the federal tax law. If your spouse is the surviving joint
owner, he or she may elect to continue the Contract as owner rather than taking
a distribution under the Contract. (See "Nonqualified Annuity Contracts" in this
prospectus.) In this case, all references to age in the "Death Proceeds Before
the Maturity Date" section will be based on the contract owner's age rather than
the annuitant's age.
10
<PAGE> 18
DEATH PROCEEDS BEFORE THE MATURITY DATE (NEW DEATH BENEFIT):
IF THE ANNUITANT DIES BEFORE AGE 80 AND BEFORE THE MATURITY DATE the Company
will pay the beneficiary an amount equal to the greatest of (1), (2) or (3)
below, each reduced by any applicable premium tax or outstanding loans:
1) the contract value;
2) the total purchase payments made under the Contract less all partial
withdrawals; or
3) the highest of all "final death benefit values" as described below.
A separate death benefit value will be established on the contract date and on
each anniversary of the contract date which occurs on or before the death report
date. The death benefit value established on the contract date will initially
equal the purchase payment. The death benefit value established on each contract
date anniversary will initially equal the contract value on that anniversary.
Thereafter, each death benefit value will be adjusted to reflect any purchase
payments made, or any partial withdrawals taken, from the date on which a
particular death benefit value was established until the death report date. Once
any adjustment has been made, a "death benefit value" then becomes equal to the
previous death benefit value plus or minus that adjustment.
Adjustments to the death benefit values for any purchase payments or partial
withdrawals will be made in the order that such purchase payments or partial
withdrawals occur. For each purchase payment, death benefit values will be
increased by the amount of the purchase payment. For each partial withdrawal,
death benefit values will be reduced by a "partial withdrawal reduction" which
equals the product of (i) the death benefit value immediately before the
reduction of the partial withdrawal, and (ii) the amount of the partial
withdrawal divided by the contract value immediately before the partial
withdrawal. The "final death benefit value" associated with the contract date
and with each contract date anniversary equals the initial death benefit value
plus or minus all adjustments until the death report date.
IF THE ANNUITANT DIES ON OR AFTER AGE 80, BUT BEFORE AGE 90 AND BEFORE THE
MATURITY DATE, the death benefit payable will be the greatest of (1), (2) or (3)
below, less any applicable premium tax or outstanding loans:
1) the contract value;
2) the total purchase payments made under the Contract less all partial
withdrawals; or
3) the maximum of all "final death benefit value" associated with the
contract date or any contract date anniversary occurring on or before
the annuitant's 80th birthday.
IF THE ANNUITANT DIES ON OR AFTER AGE 90 AND BEFORE THE MATURITY DATE, the death
benefit payable will be the contract value, less any applicable premium tax or
outstanding loans.
DEATH PROCEEDS BEFORE THE MATURITY DATE (IF THE NEW DEATH BENEFIT IS NOT
AVAILABLE IN YOUR STATE):
IF THE ANNUITANT DIES BEFORE AGE 75 AND BEFORE THE MATURITY DATE, the Company
will pay the beneficiary an amount equal to the greatest of (1), (2) or (3)
below, each reduced by any applicable premium tax , withdrawals not previously
deducted and any outstanding loans:
1) the contract value;
2) the total purchase payments made under the Contract; or
3) the contract value on the latest fifth contract year anniversary
before the Company receives due proof of death.
IF THE ANNUITANT DIES ON OR AFTER AGE 75, BUT BEFORE AGE 85 (90 IN FLORIDA) AND
BEFORE THE MATURITY DATE, the Company will pay the beneficiary a death benefit
in an amount equal to the greatest of (1), (2) or (3) below, (each reduced by
any applicable premium, prior surrenders not previously deducted or any
outstanding loans):
1) the contract value;
2) the total purchase payments made under the Contract; or
11
<PAGE> 19
3) the contract value on the latest fifth contract year anniversary
occurring on or before the annuitant's 75th birthday.
IF THE ANNUITANT DIES ON OR AFTER AGE 85 AND BEFORE THE MATURITY DATE, the
Company will pay the beneficiary a death benefit in an amount equal to the
contract value, less any applicable premium tax. This provision does not apply
in Florida.
Note; If an annuitant who is not also a contract owner or a Joint Owner dies
prior to the maturity date while this Contract is in effect and while the
contingent annuitant is living:
1) the contract value will not be payable upon the annuitant's death;
2) the contingent annuitant becomes the annuitant; and
3) all other rights and benefits provided by this Contract will continue
in effect.
When a contingent annuitant becomes the annuitant, the maturity date remains the
same as previously in effect, unless otherwise provided.
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 plans (annuity or income options). We
ask you to choose the maturity date and the annuity option when you purchase the
contract. While the annuitant is alive, you can change your selection any time
up to the maturity date. Annuity or income payments will begin on the maturity
date stated in the Contract unless the Contract has been fully surrendered or
the proceeds have been paid to the beneficiary before that 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 annuity payments are made.
Unless you elect otherwise, the maturity date will be the annuitant's 70th
birthday for qualified contracts and the annuitant's 75th birthday, or ten years
after the effective date of the contract, if later, for nonqualified contracts.
(For Contracts issued in Florida, the maturity date elected may not be later
than the annuitant's 90th birthday.)
For nonqualified Contracts, at least 30 days before the original maturity date,
a contract owner may elect to extend the maturity date to any time prior to the
annuitant's 85th birthday or, for qualified Contracts, to a later date with the
Company's consent. Certain annuity options taken at the maturity date may be
used to meet the minimum required distribution requirements of federal tax law,
or a program of partial surrenders may be used instead. These mandatory
distribution requirements take effect generally upon the death of the contract
owner, or with qualified contracts upon either the contract owner's attainment
of age 70 1/2 or the death of the contract owner. Independent tax advice should
be sought regarding the election of minimum required distributions.
ALLOCATION OF ANNUITY
When an annuity option is elected, it may be elected as a variable annuity, a
fixed annuity, or a combination of both. (Variable payouts under this Contract
are not permitted in Florida or New Jersey.) If, at the time annuity payments
begin, no election has been made to the contrary, the cash surrender value will
be applied to provide an annuity funded by the same investment options (contract
value, in Oregon). 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 annuity payments will be determined. (See "Transfers.")
12
<PAGE> 20
VARIABLE ANNUITY
You may choose an annuity payout that fluctuates depending on the investment
experience of the variable funding options. The number of annuity units credited
to the Contract is determined by dividing the first monthly annuity payment
attributable to each funding option by the corresponding annuity unit value as
of 14 days before the date annuity payments begin. An annuity unit is used to
measure the dollar value of an annuity payment. The number of annuity units (but
not their value) remains fixed during the annuity period.
DETERMINATION OF FIRST ANNUITY PAYMENT. The Contract contains tables used to
determine the first monthly annuity payment. The amount applied to effect a
variable annuity will be the value of the funding options as of 14 days before
the date annuity payments begin less any applicable premium taxes not previously
deducted.
The amount of the first monthly payment depends on the annuity option elected. A
formula for determining the adjusted age is contained in the Contract. The total
first monthly annuity payment is determined by multiplying the benefit per
$1,000 of value shown in the tables of the Contract by the number of thousands
of dollars of value of the Contract applied to that annuity option. The Company
reserves the right to require satisfactory proof of age of any person on whose
life annuity payments are based before making the first payment under any of the
settlement options.
DETERMINATION OF SECOND AND SUBSEQUENT ANNUITY PAYMENTS. The dollar amount of
the second and subsequent annuity payments is not predetermined and may change
from month to month based on the investment experience of the applicable funding
option. The total amount of each annuity payment will be equal to the sum of the
basic payments in each funding option. The actual amounts of these payments are
determined by multiplying the number of annuity units 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 cash
surrender value will be determined as of the date annuity payments begin. If it
would produce a larger payment, the first fixed annuity payment will be
determined using the Life Annuity Tables in effect on the maturity date.
PAYMENT OPTIONS
- --------------------------------------------------------------------------------
ELECTION OF OPTIONS
While the annuitant is alive, you can change your annuity or income option
selection any time up to the maturity date. Income options differ from annuity
options in that the amount of the payments made under income options are not
based upon the life of any person. Therefore, the annuitant may outlive the
payment period. Once annuity or income 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 Joint 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 or income option will be
$2,000 unless we agree to a lesser amount. If any monthly periodic payment due
is less than $100, the Company
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<PAGE> 21
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 one lump
sum (except in Florida, where this is not permitted), or in accordance with the
payment option that you select. 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.
ANNUITY OPTIONS
Subject to the conditions described in "Election of Options" above, all or any
part of the cash surrender value (contract value, in Oregon) may be paid under
one or more of the following annuity options. Payments under the annuity options
may be elected on a monthly, quarterly, semiannual or annual basis.
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. One will be designated the primary payee, the
other will be designated the 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.
Option 5 -- Other Annuity Options. The Company will make any other arrangements
for annuity payments as may be mutually agreed upon.
INCOME OPTIONS
Instead of one of the annuity options described above, and subject to the
conditions described under "Election of Options," all or part of the cash
surrender value (or, where required by state law, contract value) may be paid
under one or more of the following income options, provided that they are
consistent with federal tax law qualification requirements. Payments under the
income options may be elected on a monthly, quarterly, semiannual or annual
basis:
Option 1 -- Payments of a Fixed Amount. The Company will make equal payments of
the amount elected until the cash surrender value applied under this option has
been exhausted. The first payment and all later payments will be paid from
amounts attributable to each investment option in proportion to the cash
surrender value attributable to each. The final payment will include any amount
insufficient to make another full payment.
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<PAGE> 22
Option 2 -- Payments for a Fixed Period. The Company will make payments for the
fixed period selected based on the cash surrender value as of the date payments
begin. If, at the death of the annuitant, the total number of fixed payments has
not been made, the payments will be made to the beneficiary.
Option 3 -- Other Income Options. The Company will make any other arrangements
for income payments as may be mutually agreed upon.
The amount applied to effect an income option will be the cash surrender value
as of the date income payments begin, less any applicable premium taxes not
previously deducted and any applicable withdrawal charge. (Certain states may
have different requirements that we will honor.) The contract value used to
determine the amount of any income payment will be determined on the same basis
as the contract value during the accumulation period, including the deduction
for mortality and expense risks and the contract administrative expense charge.
MISCELLANEOUS CONTRACT PROVISIONS
- --------------------------------------------------------------------------------
RIGHT TO RETURN
You may return the Contract for a full refund of the contract value (including
charges) within twenty days after you receive it (the "right to return period").
You bear the investment risk during the right to return period; therefore, the
contract value returned may be greater or less than your purchase payment. If
the Contract is purchased as an Individual Retirement Annuity, and is returned
within the first seven days after delivery, your purchase payment will be
refunded in full; during the remainder of the right to return period, the
contract value (including charges) will be refunded. The contract value will be
determined following the close of the business day on which we receive a written
request for a refund. Where state law requires a longer free look period, or the
return of purchase payments or other variations of this provision, the Company
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 the contract value as of that date is less than $1,000 and
no purchase payments have been made for at least two years, unless otherwise
specified by state law. Termination will not occur until 31 days after the
Company has mailed notice of termination to the contract owner's last known
address and to any assignee of record. If the Contract is terminated, we will
pay you the cash surrender value (contract value less any applicable premium
tax, in the states that so require), less any applicable administrative charge.
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 date of the report 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 or 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
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<PAGE> 23
reasonably occur or so that the Company may not reasonably determine the value
of 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.
TRANSFERS OF CONTRACT VALUES TO OTHER ANNUITIES
We may permit contract owners to transfer their contract values into other
annuities offered by us or our affiliated insurance companies under rules then
in effect.
THE SEPARATE ACCOUNT
- --------------------------------------------------------------------------------
The Travelers Fund ABD II For Variable Annuities ("Fund ABD II") was established
on October 17, 1995 and is registered with the SEC as a unit investment trust
(separate account) under the Investment Company Act of 1940, as amended (the
"1940 Act"). The assets of Fund ABD II will be invested exclusively in the
shares of the variable funding options.
The assets of Fund ABD II are held for the exclusive benefit of the owners of
this separate account, according to the laws of Connecticut. Income, gains and
losses, whether or not realized, from assets allocated to Fund ABD II are, in
accordance with the Contracts, credited to or charged against Fund ABD II
without regard to other income, gains and losses of the Company. The assets held
by Fund ABD II are not chargeable with liabilities arising out of any other
business which the Company may conduct. Obligations under the Contract are
obligations of the Company.
All investment income and other distributions of the funding options are payable
to Fund ABD II. All such income and/or distributions are reinvested 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.
MIXED AND SHARED FUNDING
It is conceivable that in the future it may be disadvantageous for both variable
annuity and variable life insurance separate accounts, or for variable separate
accounts of different insurance companies, to invest simultaneously in the same
portfolios (called "mixed" and "shared" funding). Currently neither the
insurance companies nor the portfolios foresee any such disadvantages to the
companies or to variable contract owners. Each portfolio's board of trustees,
directors or managers intends to monitor events in order to identify any
material conflicts between such policy owners and to determine what action, if
any, should be taken in response thereto.
PERFORMANCE INFORMATION
From time to time, we may advertise several types of historical performance for
the Contract's funding options. We may advertise the "standardized average
annual total returns" of the funding option, calculated in a manner prescribed
by the SEC, as well as the "non-standardized total return," as described below.
Examples of the performance figures are illustrated in the SAI.
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. These quotations
reflect the deduction of all recurring charges during each period (on a pro rata
basis in the case of fractional periods). The deduction for the annual
administrative charge ($30) is converted to a percentage of assets based on the
actual fee collected (or anticipated to be collected, if a new product), divided
by the average net assets for Contracts sold (or anticipated to be sold). Each
quotation assumes a total redemption at the end of each period with the
applicable withdrawal charge deducted at that time.
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<PAGE> 24
NON-STANDARDIZED METHOD. Non-standardized "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. Non-standardized total returns will not reflect the
deduction of any withdrawal charge or the $30 annual contract administrative
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.
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 and 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 Fund ABD II and the variable funding options.
For funding options that were in existence prior to the date they became
available under Fund ABD II, the standardized and non-standardized average
annual total return quotations will show 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. The contract value at redemption may be more or less than
original cost.
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.
TYPES OF CONTRACTS: QUALIFIED OR NONQUALIFIED
If you purchase an annuity contract under any pension plan, specially sponsored
program, or individual retirement annuity (IRA) with pre-tax dollars, your
contract is referred to as a qualified contract. Some examples of qualified
contracts are: IRAs, pension and profit-sharing plans (including 401(k) plans),
and Keogh Plans. If you purchase the contract with after-tax dollars and not
under one of the programs described above, your contract is referred to as
nonqualified.
NONQUALIFIED ANNUITY CONTRACTS
As the owner of a nonqualified annuity, you do not receive any tax benefit
(deduction or deferral of income) on purchase payments, but you will not be not
be taxed on increases in the value of your contract until a distribution
occurs -- either as a withdrawal (distribution made prior to the maturity date),
or as annuity payments. When a withdrawal is made, you are taxed on the amount
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<PAGE> 25
of the withdrawal that is considered earnings. Similarly, when you receive an
annuity payment, part of each payment is considered a return of your purchase
payments and will not be taxed. The remaining portion of the annuity payment
(i.e., any earnings) will be considered ordinary income for tax purposes.
If a nonqualified annuity is owned by other than an individual, however, (e.g.,
by a corporation), increases in the value of the contract attributable to
purchase payments made after February 28, 1986 are includable in income
annually. Furthermore, for contracts issued after April 22, 1987, all deferred
increases in value will be includable in your income if you should transfer the
contract for an amount substantially less than the value of the contract.
If you make a partial withdrawal, this money will generally be taxed as first
coming from earnings, (income in the contract), and then from your purchase
payments. These withdrawn earnings are includable in your income. (See "Penalty
Tax for Premature Distributions" below). There is income in the contract to the
extent the cash value exceeds your investment in the contract. The investment in
the contract equals the total purchase payments you paid less any amount
received previously which was excludable from gross income. Any direct or
indirect borrowing against the value of the contract or pledging of the contract
as security for a loan will be treated as a cash distribution under the tax law.
Federal tax law requires that nonqualified annuity contracts meet minimum
mandatory distribution requirements upon the death of the contract owner,
including the first of joint owners. If these requirements are not met, the
surviving joint owner, or the beneficiary, will have to pay taxes prior to
distribution. The distribution required depends, among other things, upon
whether an annuity option is elected or whether the new contract owner is the
surviving spouse. We will administer Contracts in accordance with these rules
and we will notify you when you should begin receiving payments.
QUALIFIED ANNUITY CONTRACTS
Under a qualified annuity, since amounts paid into the contract have not yet
been taxed, the full amount of all withdrawals and annuity payments are taxed at
the ordinary income tax rate. 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 requirements for mandatory
distributions and contribution limits. We have provided a more complete
discussion in the SAI.
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 money
distributed was (1) paid on or after the owner dies; (2) paid if the taxpayer
becomes totally disabled, (as that term is defined in the Code); (3) paid in a
series of substantially equal payments made annually (or more frequently) under
a lifetime annuity; (4) paid as an immediate annuity; or (5) paid from purchase
payments made prior to August 14, 1982.
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 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.
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<PAGE> 26
OWNERSHIP OF THE INVESTMENTS
Assets in the separate accounts, also referred to as segregated asset accounts
must be owned by the Company and not by the Contract Owner for federal income
tax purposes. Otherwise, the deferral of taxes is lost and income and gains from
the accounts would be includible annually in the Contract Owner's gross income.
The Internal Revenue Service has stated in published rulings that a variable
contract owner will be considered the owner of the assets of a segregated asset
account if the owner possesses an incident of ownership in those assets, such as
the ability to exercise investment control over the assets. The Treasury
Department announced, in connection with the issuance of temporary regulations
concerning investment diversification, that those regulations "do not provide
guidance concerning the circumstances in which investor control of the
investments of a segregated asset account may cause the investor, rather than
the insurance company, to be treated as the owner of the assets of the account."
This announcement, dated September 15, 1986, also stated that the guidance would
be issued by way of regulations or rulings on the "extent to which policyholders
may direct their investments to particular subaccounts [of a segregated asset
account] without being treated as owners of the underlying assets." As of the
date of this prospectus, no such guidance has been issued.
The Company does not know if such guidance will be issued, or if it is, what
standards it may set. Furthermore, the Company does not know if such guidance
may be issued with retroactive effect. New regulations are generally issued with
a prospective-only effect as to future sales or as to future voluntary
transactions in existing contracts. The Company therefore reserves the right to
modify the contract as necessary to attempt to prevent Contract Owners from
being considered the owner of the assets of the separate account.
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. 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.
OTHER INFORMATION
- --------------------------------------------------------------------------------
THE INSURANCE COMPANY
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 and intends to seek licensure in the remaining
states, except New York. The Company is an indirect wholly owned subsidiary of
Travelers Group Inc. The Company's Home Office is located at One Tower Square,
Hartford, Connecticut 06183.
DISTRIBUTION OF VARIABLE ANNUITY CONTRACTS
The Company intends to sell the Contracts in all jurisdictions where it is
licensed to do business and where the Contract is approved. The Contracts will
be sold by life insurance sales agents who represent the Company, and who are
licensed registered representatives of the Company or certain other registered
broker-dealers. The compensation paid to sales representatives will not exceed
6.5% of the payments made under the Contracts.
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<PAGE> 27
From time to time, the Company may pay or permit other promotional incentives,
in cash, credit or other compensation.
Any sales representative or employee will have been qualified to sell variable
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 for the Contracts is Tower Square
Securities, Inc., an affiliate of the Company; however, it is currently
anticipated that an affiliated broker-dealer may become the principal
underwriter for the Contracts during 1997.
CONFORMITY WITH STATE AND FEDERAL LAWS
The Contract is governed by the laws of the state in which it is delivered. 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 the Contract is delivered. 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 funding options. However, we
believe that when a funding option 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
There are no pending material legal proceedings affecting Fund ABD II. Legal
matters in connection with the federal laws and regulations affecting the issue
and sale of the Contract described in this prospectus, as well as the
organization of the Company, its authority to issue variable annuity contracts
under Connecticut law and the validity of the forms of the variable annuity
contracts under Connecticut law, have been reviewed by the General Counsel of
the Company.
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APPENDIX A: CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
THE TRAVELERS FUND ABD II FOR VARIABLE ANNUITIES
ACCUMULATION UNIT VALUES
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 16, 1996
(DATE OPERATIONS
COMMENCED) TO
FUNDING OPTION DECEMBER 31, 1996
<S> <C>
- -------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C>
CAPITAL APPRECIATION FUND
Unit Value at beginning of period.............................................. $ 1.000
Unit Value at end of period.................................................... 1.032
Number of units outstanding at end of period................................... 29,824
CASH INCOME TRUST
Unit Value at beginning of period.............................................. N/A
Unit Value at end of period.................................................... N/A
Number of units outstanding at end of period................................... N/A
ALLIANCE GROWTH PORTFOLIO
Unit Value at beginning of period.............................................. $ 1.000
Unit Value at end of period.................................................... 1.037
Number of units outstanding at end of period................................... 2,250
MFS TOTAL RETURN PORTFOLIO
Unit Value at beginning of period.............................................. N/A
Unit Value at end of period.................................................... N/A
Number of units outstanding at end of period................................... N/A
PUTNAM DIVERSIFIED INCOME PORTFOLIO
Unit Value at beginning of period.............................................. $ 1.000
Unit Value at end of period.................................................... 1.007
Number of units outstanding at end of period................................... 3,300
TRAVELERS QUALITY BOND PORTFOLIO
Unit Value at beginning of period.............................................. $ 1.000
Unit Value at end of period.................................................... 1.001
Number of units outstanding at end of period................................... 95,203
LAZARD INTERNATIONAL STOCK PORTFOLIO
Unit Value at beginning of period.............................................. $ 1.000
Unit Value at end of period.................................................... 1.027
Number of units outstanding at end of period................................... 5,702
MFS EMERGING GROWTH PORTFOLIO
Unit Value at beginning of period.............................................. $ 1.000
Unit Value at end of period.................................................... 1.004
Number of units outstanding at end of period................................... 31,886
FEDERATED STOCK PORTFOLIO
Unit Value at beginning of period.............................................. N/A
Unit Value at end of period.................................................... N/A
Number of units outstanding at end of period................................... N/A
FEDERATED HIGH YIELD PORTFOLIO
Unit Value at beginning of period.............................................. N/A
Unit Value at end of period.................................................... N/A
Number of units outstanding at end of period................................... N/A
LARGE CAP PORTFOLIO
Unit Value at beginning of period.............................................. $ 1.000
Unit Value at end of period.................................................... 1.023
Number of units outstanding at end of period................................... 7,800
EQUITY INCOME PORTFOLIO
Unit Value at beginning of period.............................................. $ 1.000
Unit Value at end of period.................................................... 1.026
Number of units outstanding at end of period................................... 30,196
</TABLE>
The Mid Cap Disciplined Equity Fund and the Smith Barney Concert Select
Allocation Series, Inc. portfolios were not available under the contracts as of
December 31, 1996. Funding Options reflecting "N/A" were available on December
31, 1996 but had no amounts yet allocated to them. The financial statements for
Fund ABD II are contained in the Annual Report to contract owners. The
consolidated financial statements of The Travelers Life and Annuity Company are
contained in the SAI.
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<PAGE> 29
APPENDIX B
- --------------------------------------------------------------------------------
THE FIXED ACCOUNT
The Fixed Account is secured by part of the general assets of the Company. The
general assets of the Company include all assets of the Company other than those
held in Fund ABD II or any other separate account sponsored by the Company or
its affiliates.
The staff of the SEC does not generally review the disclosure in the prospectus
relating to the Fixed Account. Disclosure regarding the Fixed Account and the
general account may, however, be subject to certain provisions of the federal
securities laws relating to the accuracy and completeness of statements made in
the prospectus.
Under the Fixed Account, the Company assumes the risk of investment gain or
loss, guarantees a specified interest rate, and guarantees a specified periodic
annuity payment. The investment gain or loss of Fund ABD II or any of the
funding options does not affect the Fixed Account portion of the contract
owner's contract value, or the dollar amount of fixed annuity payments made
under any payout option.
We guarantee that, at any time, the Fixed Account contract value will not be
less than the amount of the purchase payments allocated to the Fixed Account,
plus interest credited as described below, less any applicable premium taxes or
prior surrenders. If the contract owner effects a surrender, the amount
available from the Fixed Account will be reduced by any applicable withdrawal
charge as described under "Charges and Deductions" in this prospectus.
Purchase payments allocated to the Fixed Account and any transfers made to the
Fixed Account become part of the Company's general account which supports
insurance and annuity obligations. Neither the general account nor any interest
therein is registered under, or subject to the provisions of, the Securities Act
of 1933 or Investment Company Act of 1940. We will invest the assets of the
Fixed Account at our discretion. Investment income from such Fixed Account
assets will be allocated to us and to the Contracts participating in the Fixed
Account.
Investment income from the Fixed Account allocated to us includes compensation
for mortality and expense risks borne by us in connection with Fixed Account
Contracts. The amount of such investment income allocated to the Contracts will
vary from year to year in our sole discretion of such rate or rates as we
prospectively declare from time to time.
The initial rate for any allocations into the Fixed Account is guaranteed for
one year from the date of such allocation. Subsequent renewal rates will be
guaranteed for the calendar quarter. We also guarantee that for the life of the
Contract we will credit interest at not less than 3% per year. Any interest
credited to amounts allocated to the Fixed Account in excess of 3% per year will
be determined in our sole discretion. You assume the risk that interest credited
to the Fixed Account may not exceed the minimum guarantee of 3% for any given
year.
TRANSFERS
You may make transfers from the Fixed Account to any other available funding
option(s) twice a year during the 30 days following the semiannual anniversary
of the contract effective date. The transfers are limited to an amount of up to
15% of the Fixed Account Value on the semiannual contract effective date
anniversary. (This restriction does not apply to transfers from the Dollar Cost
Averaging Program.) Amounts previously transferred from the Fixed Account to
other funding options may not be transferred back to the Fixed Account for a
period of at least six months from the date of transfer. We reserve the right to
waive either of these restrictions.
Automated transfers from the Fixed Account to any of the funding options may
begin at any time. Automated transfers from the Fixed Account may not deplete
your Fixed Account value in a period of less than twelve months from your
enrollment in the Dollar Cost Averaging Program.
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<PAGE> 30
APPENDIX C
- --------------------------------------------------------------------------------
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
The Statement of Additional Information contains more specific information and
financial statements relating to 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 Management Agreement
Valuation of Assets
Telephone Transfer
Federal Tax Considerations
Independent Accountants
Financial Statements
- --------------------------------------------------------------------------------
Copies of the Statement of Additional Information dated May 1, 1997 (Form No.
L-12548S) 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 Life and Annuity Company, Annuity
Marketing, One Tower Square, Hartford, Connecticut 06183-9061.
Name:
Address:
23
<PAGE> 31
PART B
Information Required in a Statement of Additional Information
<PAGE> 32
STATEMENT OF ADDITIONAL INFORMATION
dated
May 1, 1997
for
THE TRAVELERS FUND ABD II 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 Individual Variable Annuity
Contract Prospectus dated May 1, 1997. A copy of the Prospectus may be obtained
by writing to The Travelers Life and Annuity Company, Annuity Services, One
Tower Square, Hartford, Connecticut 06183-9061, or by calling (800) 842-8735.
TABLE OF CONTENTS
<TABLE>
<S> <C>
THE INSURANCE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PRINCIPAL UNDERWRITER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
DISTRIBUTION AND MANAGEMENT AGREEMENT . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . 1
VALUATION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
TELEPHONE TRANSFERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
FEDERAL TAX CONSIDERATIONS . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
</TABLE>
<PAGE> 33
THE INSURANCE COMPANY
The Travelers Life and Annuity Company (the "Company"), is a stock
insurance company chartered in 1973 in Connecticut. It is a wholly owned
subsidiary of The Travelers Insurance Company, which is indirectly owned,
through a wholly owned subsidiary, by Travelers Group Inc., a financial services
holding company engaged, through its subsidiaries, principally in four business
segments: (i) Investment Services; (ii) Consumer Finance Services; (iii) Life
Insurance Services; and (iv) Property and Casualty Insurance Services.
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. 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. Fund ABD II 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 Fund ABD II are subject to the
provisions of Section 38a-433 of the Connecticut General Statutes which
authorizes the Connecticut Insurance 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
Tower Square Securities, Inc. ("Tower Square"), an affiliate of the
Company, serves as principal underwriter for Fund ABD II and the Contracts. The
offering is continuous. Tower Square is an indirect wholly owned subsidiary of
Travelers Group Inc. and its principal executive offices are located at One
Tower Square, Hartford, Connecticut. It is anticipated that an affiliated
broker-dealer will become the principal underwriter during 1997.
DISTRIBUTION AND MANAGEMENT AGREEMENT
Under the terms of the Distribution and Management Agreement among Fund
ABD II, the Company and Tower Square, the Company provides all administrative
services and mortality and expense risk guarantees related to variable annuity
contracts sold by the Company in connection with Fund ABD II. Tower Square
performs the sales functions related to the Contracts. The Company reimburses
Tower Square for commissions paid, other sales expenses and certain overhead
expenses connected with sales functions. The Company also pays all costs
(including costs associated with the preparation of sales literature); all costs
of qualifying Fund ABD II and the variable annuity contract with regulatory
authorities; the costs of proxy solicitation; and all custodian, accountant's
and legal fees.
1
<PAGE> 34
The Company also provides without cost to Fund ABD II all necessary office
space, facilities, and personnel to manage its affairs.
VALUATION OF ASSETS
FUNDING OPTIONS: The value of the assets of each funding option is determined on
each business day as of the close of the New York Stock Exchange. 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.
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 Valuation Date
or on the basis of quotations received from a reputable broker or any other
recognized source.
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.
2
<PAGE> 35
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 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. An annuity unit value as of any business day is equal to (a)
the value of the annuity unit on the immediately 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 Fund ABD II. The Company may
advertise the "standardized average annual total returns" of the Funding Option,
calculated in a manner prescribed by the Securities and Exchange Commission, as
well as the "non-standardized total return," 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). The
deduction for the annual administrative charge ($30) is converted to a
percentage of assets based on the actual fee collected (or anticipated to be
collected, if a new product), divided by the average net assets for contracts
sold (or anticipated to be sold) under the Prospectus to which this Statement of
Additional Information relates. Each quotation assumes a total redemption at the
end of each period with the assessment of any applicable Withdrawal Charge at
that time.
NON-STANDARDIZED METHOD. Non-standardized "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. Non-standardized total returns will
not reflect the deduction of any applicable Contingent Deferred Sales Charge or
the $30 annual contract administrative 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.
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
3
<PAGE> 36
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 and 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 Fund ABD II and the Funding Options.
For Funding Options that were in existence prior to the date they
became available under Fund ABD II, the standardized and non-standardized
average annual total return quotations will show 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. An Owner's Contract Value at redemption
may be more or less than original cost.
Average annual total returns for each of the Funding Options (excluding
Cash Income Trust) computed according to the standardized and non-standardized
methods for the period ending December 31, 1996 (beginning at inception date)
are set forth in the following table.
TOTAL RETURN CALCULATIONS
FUNDING OPTIONS OF FUND ABD II
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
STANDARDIZED NON-STANDARDIZED
Inception
Date
- ---------------------------------------------------------------------------------------------------------------------------
1-YR 5-YR 10-YR 1-YR 3-YR 5-YR 10-YR
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Alliance Growth 21.55% 23.97%* -- 27.58% 25.40%* -- -- 6/94
Capital Appreciation 20.39% 15.54% 11.21% 26.41% 16.85% 15.98% 11.22% 5/83
Fund
Equity Income 5.15%* -- -- 11.16%* -- -- -- 8/96
Federated Stock 6.06%* -- -- 12.07%* -- -- -- 8/96
Large Cap 6.76%* -- -- 12.76%* -- -- -- 8/96
Lazard International Stock
1.17%* -- -- 7.17%* -- -- -- 8/96
MFS Emerging Growth -0.51%* -- -- 5.50%* -- -- -- 8/96
Federated High Yield 1.09%* -- -- 7.09%* -- -- -- 8/96
Putnam Diversified
Income 0.70% 7.24%* -- 6.72% 9.01%* -- -- 6/94
Travelers Quality Bond -2.94%* -- -- 3.06%* -- -- -- 8/96
MFS Total Return 6.88% 11.49%* -- 12.90% 13.16%* -- -- 6/94
Travelers Cash Income -3.31% 1.52% 3.84%* 2.72% 2.94% 2.28% 3.86%* 12/87
</TABLE>
* Since inception.
4
<PAGE> 37
TELEPHONE TRANSFERS
A contract owner may place a transfer request by telephone. The telephone
transfer privilege is available automatically; no special election is necessary
for a contract owner to have this privilege. All transfers must be in accordance
with the terms of the Contract. In certain cases, the Company may allow you to
authorize your agent to make telephone transfers. Transfer instructions are
currently accepted on each Valuation Date between 9:00 a.m. and 4:00 p.m.,
Eastern time, at 1-800-842-8573. Once instructions have been accepted, they may
not be rescinded; however, new telephone instructions may be given the following
day. If the transfer instructions are not in good order, the Company will not
execute the transfer and will promptly notify the caller.
The Company will make a reasonable effort to record each telephone transfer
conversation, but in the event that no recording is effective or available, the
contract owner will remain liable for each telephone transfer effected.
Additionally, the Company is not liable for acting upon instructions believed to
be genuine and in accordance with the procedures described above. As a result of
this policy, the contract owner may bear the risk of loss in the event that the
Company follows instructions that prove to be fraudulent.
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 calendar year in which a participant
under a qualified plan, a Section 403(b) annuity, or an IRA attains age 70 1/2.
Distributions must also begin or be continued according to required patterns
following the death of the contract owner or the annuitant.
NONQUALIFIED ANNUITY CONTRACTS
Individuals may purchase tax-deferred annuities without tax law funding
limits. The purchase payments receive no tax benefit, deduction or deferral, but
increases in the value of the contract are generally deferred from tax until
distribution. If a nonqualified annuity is owned by other than an individual,
however, (e.g., by a corporation), the increases in value attributable to
purchase payments made after February 28, 1986 are includable in income
annually. Furthermore, for contracts issued after April 22, 1987, all deferred
increases in value will be includable in the income of a contract owner when the
contract owner transfers the contract without adequate consideration.
If two or more annuity contracts are purchased from the same insurer within
the same calendar year, distributions from any of them will be taxed based upon
the amount of income in all of the same calendar year series of annuities. This
will generally have the effect of causing taxes to be paid sooner on the
deferred gain in the contracts.
5
<PAGE> 38
Those receiving partial distributions made before the maturity date will
generally be taxed on an income-first basis to the extent of income in the
contract. If you are exchanging another annuity contract for this annuity,
certain pre-August 14, 1982 deposits into an annuity contract that have been
placed in the contract by means of a tax-deferred exchange under Section 1035 of
the Code may be withdrawn first without income tax liability. This information
on deposits must be provided to the Company by the other insurance company at
the time of the exchange. There is income in the contract generally to the
extent the cash value exceeds the investment in the contract. The investment in
the contract is equal to the amount of premiums paid less any amount received
previously which was excludable from gross income. Any direct or indirect
borrowing against the value of the contract or pledging of the contract as
security for a loan will be treated as a cash distribution under the tax law.
The federal tax law requires that nonqualified annuity contracts meet
minimum mandatory distribution requirements upon the death of the contract
owner, including the first of joint owners. Failure to meet these requirements
will cause the surviving joint owner, or the beneficiary to lose the tax
benefits associated with annuity contracts, i.e., primarily the tax deferral
prior to distribution. The distribution required depends, among other things,
upon whether an annuity option is elected or whether the new contract owner is
the surviving spouse. Contracts will be administered by the Company in
accordance with these rules and the Company will make a notification when
payments should be commenced.
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 $30,000 for each participant.
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 employes. 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.
6
<PAGE> 39
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.
Distributions are 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. Certain lump-sum distributions may be eligible for special
forward averaging tax treatment for certain classes of individuals.
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.
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 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
7
<PAGE> 40
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, 1997,
a recipient receiving periodic payments (e.g., monthly or annual payments under
an annuity option) which total $14,850 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
Coopers & Lybrand L.L.P., independent accountants, 100 Pearl Street,
Hartford, Connecticut, are the independent auditors for Fund ABD II. The
services provided to Fund ABD II included primarily the audit of the Fund's
financial statements. The financial statements for the year ended December 31,
1996 of Fund ABD II are incorporated herein by reference to the Fund ABD II
Annual Report. Such financial statements have been audited by Coopers & Lybrand
L.L.P., as indicated in their reports thereon in reliance upon the authority of
said firm as experts in accounting and auditing.
The financial statements of The Travelers Life and Annuity Company as
of December 31, 1996 and 1995, and for each of the years in the three-year
period ended December 31, 1996, have been included herein in reliance upon the
report of KPMG Peat Marwick LLP, independent certified public accountants, and
upon the authority of said firm as experts in accounting and auditing.
8
<PAGE> 41
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, 1996 and 1995, and the related statements of
income and retained earnings and cash flows for each of the years in the
three-year period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Travelers Life and Annuity
Company as of December 31, 1996 and 1995, and the results of its operations and
its cash flows for each of the years in the three-year period ended December 31,
1996, in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
January 17, 1997
9
<PAGE> 42
THE TRAVELERS LIFE AND ANNUITY COMPANY
STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
(for the year ended December 31, in thousands) 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Premiums $ 9,357 $ 2,652 $ 3,498
Net investment income 89,040 63,209 66,093
Realized investment gains (losses) (9,613) 18,713 (2,074)
Other 16,223 17,466 18,702
- ----------------------------------------------------------------------------------------------------------
Total revenues 105,007 102,040 86,219
- ----------------------------------------------------------------------------------------------------------
BENEFITS AND EXPENSES
Current and future insurance benefits 56,448 52,390 55,596
Amortization of deferred acquisition costs
and value of insurance in force 3,286 1,563 -
Other operating expenses 5,691 4,651 2,758
- ----------------------------------------------------------------------------------------------------------
Total benefits and expenses 65,425 58,604 58,354
- ----------------------------------------------------------------------------------------------------------
Income before federal income taxes 39,582 43,436 27,865
- ----------------------------------------------------------------------------------------------------------
Federal income taxes:
Current 29,456 2,555 4,742
Deferred expense (benefit) (15,665) 11,964 4,798
- ----------------------------------------------------------------------------------------------------------
Total federal income taxes 13,791 14,519 9,540
- ----------------------------------------------------------------------------------------------------------
Net income 25,791 28,917 18,325
Retained earnings beginning of year 157,907 128,990 110,665
Dividends to parent 16,000 - -
- ----------------------------------------------------------------------------------------------------------
Retained earnings end of year $167,698 $157,907 $128,990
- ----------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
10
<PAGE> 43
THE TRAVELERS LIFE AND ANNUITY COMPANY
BALANCE SHEETS
<TABLE>
<CAPTION>
(at December 31, in thousands) 1996 1995
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Fixed maturities, available for sale at fair value
(cost, $672,173; $678,293) $ 694,535 $ 724,639
Equity securities, at fair value (cost, $6,654; $9,453) 9,554 13,099
Mortgage loans 90,542 125,813
Real estate held for sale, net of accumulated depreciation of $0; $524 10,111 8,995
Policy loans 1,750 -
Short-term securities 70,755 51,381
Other investments 69,754 65,805
- -----------------------------------------------------------------------------------------------------------------
Total investments 947,001 989,732
- -----------------------------------------------------------------------------------------------------------------
Separate accounts 1,187,812 886,688
Deferred acquisition costs and value of insurance in force 40,027 22,560
Deferred federal income taxes 57,616 41,158
Other assets 21,827 24,501
- -----------------------------------------------------------------------------------------------------------------
Total assets $2,254,283 $1,964,639
- -----------------------------------------------------------------------------------------------------------------
LIABILITIES
Future policy benefits $ 654,534 $ 671,027
Contractholder funds 86,097 11,947
Separate accounts 1,124,605 856,867
Other liabilities 17,179 61,247
- -----------------------------------------------------------------------------------------------------------------
Total liabilities 1,882,415 1,601,088
- -----------------------------------------------------------------------------------------------------------------
SHAREHOLDER'S EQUITY
Common stock, par value $100; 100,000
shares authorized, 30,000 issued and outstanding 3,000 3,000
Additional paid-in capital 167,314 167,314
Retained earnings 167,698 157,907
Unrealized investment gains, net of taxes 33,856 35,330
- -----------------------------------------------------------------------------------------------------------------
Total shareholder's equity 371,868 363,551
- -----------------------------------------------------------------------------------------------------------------
Total liabilities and shareholder's equity $2,254,283 $1,964,639
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
11
<PAGE> 44
THE TRAVELERS LIFE AND ANNUITY COMPANY
STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
(for the year ended December 31, in thousands) 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Premiums collected $ 6,472 $ 1,950 $ 3,498
Net investment income received 71,083 66,219 57,240
Benefits and claims paid (70,331) (71,710) (72,298)
Interest credited to contractholders (813) - -
Operating expenses paid (5,482) (3,013) (4,400)
Income taxes refunded (paid) (23,931) (35,305) 1,030
Other (6,857) (6,772) 22,507
- -------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities (29,859) (48,631) 7,577
- -------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of investments
Fixed maturities 20,301 11,752 29,043
Mortgage loans 37,789 24,137 60,260
Proceeds from sales of investments
Fixed maturities 978,970 459,971 41,671
Equity securities 12,818 11,823 9,373
Mortgage loans 22,437 7,013 23,327
Real estate held for sale - - 34,181
Purchases of investments
Fixed maturities (994,443) (515,098) (204,412)
Equity securities (5,412) (156) (375)
Mortgage loans (21,450) (4,890) (5,607)
Policy loans (1,750) - -
Short-term securities, (purchases) sales, net (19,688) (5,051) (1,146)
Other investments, (purchases) sales, net (6,160) 9,274 682
Securities transactions in course of settlement (51,703) 45,727 5,722
- -------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (28,291) 44,502 (7,281)
- -------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Contractholder fund deposits 96,490 5,707 -
Contractholder fund withdrawals (22,340) (1,874) -
Dividends to parent company (16,000) - -
- -------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 58,150 3,833 -
- -------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash $ - $ (296) $ 296
- -------------------------------------------------------------------------------------------------------------
Cash at December 31 $ - $ - $ 296
- -------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
12
<PAGE> 45
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS
The Travelers Life and Annuity Company (the Company) is a wholly owned
subsidiary of The Travelers Insurance Company (TIC), which is a wholly
owned subsidiary of The Travelers Insurance Group Inc. (TIGI), which is
an indirect wholly owned subsidiary of Travelers Group Inc. (Travelers
Group), a financial services holding company engaged, through its
subsidiaries, principally in four business segments: (i) Investment
Services; (ii) Consumer Finance Services; (iii) Property & Casualty
Insurance Services; and (iv) Life Insurance Services (through TIC and its
subsidiaries). The periodic reports of Travelers Group provide additional
business and financial information concerning that company and its
consolidated subsidiaries.
The Company offers fixed and variable deferred annuities and individual
life insurance to individuals and small businesses. It also provides
single premium group annuity close-out contracts and individual
structured settlement annuities.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies used in the preparation of the
accompanying financial statements follow.
Basis of presentation
The financial statements and accompanying footnotes of the Company are
prepared in conformity with generally accepted accounting principles. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and benefits
and expenses during the reporting period. Actual results could differ
from those estimates.
Certain prior year amounts have been reclassified to conform with the
1996 presentation.
Investments
Fixed maturities include bonds, notes and redeemable preferred stocks.
Fixed maturities are valued based upon quoted market prices, or if quoted
market prices are not available, discounted expected cash flows using
market rates commensurate with the credit quality and maturity of the
investment. 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 nonredeemable 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.
13
<PAGE> 46
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Mortgage loans are carried at amortized cost. A mortgage loan is
considered impaired when it is probable that the Company will be unable
to collect principal and interest amounts due. For mortgage loans that
are determined to be impaired, a reserve is established for the
difference between the amortized cost and fair market value of the
underlying collateral. In estimating fair value, the Company uses
interest rates reflecting the higher returns required in the current real
estate financing market. Impaired loans were insignificant at December
31, 1996 and 1995.
Real estate held for sale is carried at the lower of cost or fair value
less estimated costs to sell. Fair value of foreclosed properties is
established at the time of foreclosure by internal analysis or external
appraisers, using discounted cash flow analyses and other acceptable
techniques. Thereafter, an allowance for losses on real estate held for
sale is established if the carrying value of the property exceeds its
current fair value less estimated costs to sell. There was no such
allowance at December 31, 1996 and 1995.
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.
Accrual of 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.
Investment Gains and Losses
Realized investment gains and losses are included as a component of
pre-tax revenues based upon specific identification of the investments
sold on the trade date. Also included are gains and losses arising from
the remeasurement of the local currency value of foreign investments to
U.S. dollars, the functional currency of the Company.
Policy Loans
Policy loans are carried at the amount of the unpaid balances that are
not in excess of the net cash surrender values of the related insurance
policies. The carrying value of policy loans, which have no defined
maturities, is considered to be fair value.
Separate Accounts
Separate account liabilities primarily represent structured settlement
annuity obligations, which provide guaranteed levels of return or
benefits to contractholders. The separate account assets supporting these
obligations, which are legally segregated and are not subject to claims
that arise out of any other business of the Company, are primarily
carried at fair value. Earnings on structured settlement contracts,
generally net investment income less policyholder benefits and operating
expenses, are included in other revenues.
14
<PAGE> 47
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
In addition, the Company has other separate accounts, 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
revenues. Deposits, net investment income and realized investment gains
and losses for these accounts are excluded from revenues, and related
liability increases are excluded from benefits and expenses.
Deferred Acquisition Costs and Value of Insurance In Force
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
10- to 25-year amortization period is used for life insurance, and a 10-
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.
The value of insurance in force represents the actuarially determined
present value of anticipated profits to be realized from annuities
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
business acquired. The value of the business in force is amortized using
current interest crediting rates to accrete interest and amortized
employing a level yield method. The value of insurance in force is
reviewed periodically for recoverability to determine if any adjustment
is required. Adjustments, if any are charged to income.
Future Policy Benefits
Benefit reserves represent liabilities for future insurance policy
benefits. Benefit reserves for life insurance and annuity policies have
been computed based upon mortality, morbidity, persistency and interest
assumptions applicable to these coverages, which range from 4.5% to 7.5%,
including a provision for adverse deviation. These assumptions consider
Company experience and industry standards. The assumptions vary by plan,
age at issue, year of issue and duration.
15
<PAGE> 48
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Contractholder Funds
Contractholder funds represent receipts from the issuance of universal
life and certain individual annuity 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 3.9% to 7.0%.
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 as well as state
laws, regulations, and general administrative rules. Permitted statutory
accounting practices encompass all accounting practices not so
prescribed. The impact of any permitted accounting practices on the
statutory surplus of the Company is not material.
Premiums
Premiums are recognized as revenues when due. Reserves are established
for the portion of premiums that will be earned in future periods.
Other Revenues
Other revenues include surrender, mortality and administrative charges
and fees as earned on investment and other insurance contracts. Other
revenues also include structured settlement policyholder revenues, which
relate to contracts issued through a separate account of the Company, net
of the related policyholder benefits and expenses.
Federal Income Taxes
The provision for federal income taxes is comprised of two components,
current income taxes and deferred income taxes. Deferred federal income
taxes arise from changes during the year in cumulative temporary
differences between the tax basis and book basis of assets and
liabilities. The deferred federal income tax asset is recognized to the
extent that future realization of the tax benefit is more likely than
not, with a valuation allowance for the portion that is not likely to be
recognized.
16
<PAGE> 49
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Future Application of Accounting Standards
In June 1996, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 125 (FAS 125),
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." FAS 125 provides accounting and
reporting standards for transfers and servicing of financial assets and
extinguishments of liabilities. These standards are based on consistent
application of a financial-components approach that focuses on control.
Under that approach, after a transfer of financial assets, an entity
recognizes the financial and servicing assets it controls and the
liabilities it has incurred, derecognizes financial assets when control
has been surrendered and derecognizes liabilities when extinguished. FAS
125 provides consistent standards for distinguishing transfers of
financial assets that are sales from transfers that are secured
borrowings. The requirements of FAS No. 125 are effective for transfers
and servicing of financial assets and extinguishments of liabilities
occurring after December 31, 1996, and are to be applied prospectively.
However, in December 1996 the FASB issued FAS No. 127, "Deferral of the
Effective Date of Certain Provisions of FASB Statement No. 125," which
delays until January 1, 1998 the effective date for certain provisions.
The adoption of the provisions of this statement effective January 1,
1997 will not have a material impact on results of operations, financial
condition or liquidity and the Company is currently evaluating the impact
of the provisions whose effective date has been delayed until January 1,
1998.
3. CHANGES IN ACCOUNTING PRINCIPLES
Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This
statement establishes accounting standards for the impairment of
long-lived assets and certain identifiable intangibles to be disposed.
This statement requires a write down to fair value when long-lived assets
to be held and used are impaired. The statement also requires long-lived
assets to be disposed (e.g., real estate held for sale) be carried at the
lower of cost or fair value less cost to sell, and does not allow such
assets to be depreciated. The adoption of this standard did not have a
material impact on the Company's financial condition, results of
operations or liquidity.
Accounting for Stock-Based Compensation
The Company participates in a stock option plan sponsored by Travelers
Group that provides for the granting of stock options in Travelers Group
common stock to officers and key employees. The Company applies
Accounting Principles Board Opinion No. 25 (APB 25) and related
interpretations in accounting for stock options. Since stock options are
issued at fair market value on the date of award, no compensation cost
has been recognized for these awards. In October 1995, the Financial
Accounting Standards Board issued Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" (FAS 123).
This statement provides an alternative to APB 25 whereby fair values may
be ascribed to options using a valuation model and amortized to
compensation cost over the vesting period of the options. Had the Company
applied FAS 123 in accounting for stock options, net income would have
been reduced by an insignificant amount in 1996 and 1995.
17
<PAGE> 50
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
3. CHANGES IN ACCOUNTING PRINCIPLES, Continued
Accounting by Creditors for Impairment of a Loan
Effective January 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment of
a Loan," and Statement of Financial Accounting Standards No. 118,
"Accounting by Creditors for Impairment of a Loan - Income Recognition
and Disclosures," which describe how impaired loans should be measured
when determining the amount of a loan loss accrual. These statements
amended existing guidance on the measurement of restructured loans in a
troubled debt restructuring involving a modification of terms. Their
adoption did not have a material impact on the Company's financial
condition, results of operations or liquidity.
4. REINSURANCE
The Company participates in reinsurance in order to limit losses,
minimize exposure to large risks, provide capacity for future growth and
to effect business-sharing arrangements. The Company remains primarily
liable as the direct insurer on all risks reinsured.
Life insurance in force ceded to TIC at December 31, 1996 and 1995 was
$90.7 million and $97.7 million, respectively. At December 31, 1996 and
1995, $2.2 billion and $601.2 million, respectively, was ceded to
non-affiliates.
5. SHAREHOLDER'S EQUITY
Unrealized Investment Gains (Losses)
An analysis of the change in unrealized gains and losses on investments
is shown in Note 12.
Shareholder's Equity and Dividend Availability
The Company's statutory net income was $17.9 million, $23.0 million and
$5.7 million for the years ended December 31, 1996, 1995 and 1994,
respectively.
Statutory capital and surplus was $254.1 million and $257.8 million at
December 31, 1996 and 1995, respectively.
The Company is currently subject to various regulatory restrictions that
limit the maximum amount of dividends available to be paid to its parent
without prior approval of insurance regulatory authorities. Statutory
surplus of $14.8 million is available in 1997 for dividend payments by
the Company without prior approval of the Connecticut Insurance
Department.
18
<PAGE> 51
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
6. DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company does not hold or issue derivative instruments for trading
purposes. The carrying value of derivative instruments was not
significant at December 31, 1996 and 1995.
Fair Value of Certain Financial Instruments
The Company uses various financial instruments in the normal course of
its business. Fair values of financial instruments which are considered
insurance contracts are not required to be disclosed and are not included
in the amounts discussed.
At December 31, 1996, investments in fixed maturities had a carrying
value and a fair value of $694.5 million, compared with a carrying value
and a fair value of $724.6 million at December 31, 1995. See Note 12.
At December 31, 1996 and 1995, mortgage loans had a carrying value of
$90.5 million and $125.8 million, respectively, which approximates fair
value. In estimating fair value, the Company used interest rates
reflecting the higher returns required in the current real estate
financing market.
The carrying values of $2.1 million and $1.9 million of financial
instruments classified as other assets approximated their fair values at
December 31, 1996 and 1995, respectively. The carrying values of $13.3
million and $55.3 million of financial instruments classified as other
liabilities also approximated their fair values at December 31, 1996 and
1995, respectively. Fair value is determined using various methods
including discounted cash flows, as appropriate for the various financial
instruments.
The assets of separate accounts providing a guaranteed return had a
carrying value and a fair value of $896.9 million and $901.0 million,
respectively, at December 31, 1996, compared to a carrying value and a
fair value of $869.1 million and $923.0 million, respectively, at
December 31, 1995. The liabilities of separate accounts providing a
guaranteed return had a carrying value and a fair value of $808.7 million
and $695.3 million, respectively, at December 31, 1996, compared to a
carrying value and a fair value of $839.1 million and $766.3 million,
respectively, at December 31, 1995.
The carrying values of short-term securities and policy loans
approximated their fair values.
19
<PAGE> 52
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
7. COMMITMENTS AND CONTINGENCIES
Financial Instruments with Off-Balance Sheet Risk
The Company has, in the normal course of business, provided fixed rate
loan commitments and commitments to partnerships.
The off-balance sheet risks of fixed rate loan commitments, commitments
to partnerships and forward contracts were not significant at December
31, 1996 and 1995.
Litigation
The Company is a defendant in various litigation matters in the normal
course of business. Although there can be no assurances, as of December
31, 1996, the Company believes, based on information currently available,
that the ultimate resolution of these legal proceedings would not be
likely to have a material adverse effect on its results of operations,
financial condition or liquidity.
8. BENEFIT PLANS
Pension Plans
The Company participates in a qualified, noncontributory defined benefit
pension plan sponsored by Travelers Group covering the majority of
Travelers Group's U.S. employees. Benefits for the qualified plan are
based on an account balance formula. Under this formula, each employee's
accrued benefit can be expressed as an account that is credited with
amounts based upon the employee's pay, length of service and a specified
interest rate, all subject to a minimum benefit level. This plan is
funded in accordance with the Employee Retirement Income Security Act of
1974 and the Internal Revenue Code.
The Company also participates in a nonqualified, noncontributory defined
benefit pension plan sponsored by an affiliate covering the majority of
the Company's U.S. employees. Contributions are based on benefits paid.
The Company's share of net pension expense was not significant for 1996,
1995 or 1994.
Other Benefit Plans
In addition to pension benefits, the Company provides certain health care
and life insurance benefits for retired employees through a plan
sponsored by TIGI. Retirees may elect certain prepaid health care benefit
plans. Life insurance benefits are generally set at a fixed amount.
Beginning January 1, 1996, these plans were amended to restrict benefit
eligibility to retirees and certain retiree-eligible employees. The cost
recognized by the Company for these benefits represents its allocated
share of the total costs of the plan, net of retiree contributions. The
Company's share of the total cost of the plan for 1996, 1995 and 1994 was
not significant.
20
<PAGE> 53
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
8. BENEFIT PLANS, Continued
Savings, Investment and Stock Ownership Plan
Under the savings, investment and stock ownership plan available to
substantially all employees of TIGI, the Company matches a portion of
employee contributions. Effective April 1, 1993, the match decreased from
100% to 50% of an employee's first 5% contribution and a variable match
based on the profitability of TIGI and its subsidiaries was added through
December 31, 1995. Effective January 1, 1996, the match remained at 50%
of an employee's first 5% contribution with a maximum of $1,000.
Effective January 1, 1997, employee contributions will be matched with
Travelers Group stock options. The Company's expense was not significant
for 1996, 1995 or 1994.
9. 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 TIC. Settlements for these functions between TIC
and its affiliates are made regularly. 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 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.
TIGI and its subsidiaries maintain 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, 1996 and 1995,
the pool totaled approximately $2.9 billion and $2.2 billion,
respectively. The Company's share of the pool amounted to $68.2 million
and $49.5 million at December 31, 1996 and 1995, respectively, and is
included in short-term securities in the balance sheet.
The Company's TTM Modified Guaranteed Annuity Contracts are subject to a
limited guarantee agreement by TIC in a principal amount of up to $250
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 sells structured settlement annuities to an affiliate,
Travelers Property Casualty Corp., (TAP), formerly Travelers/Aetna
Property Casualty Corp. Such deposits were $36.9 million, $36.6 million
and $37.6 million for 1996, 1995 and 1994, respectively.
The Company began marketing variable annuity products through its
affiliate, Smith Barney, Inc., in 1995. Deposits related to these
products were $300.0 million and $20.5 million in 1996 and 1995,
respectively.
Most leasing functions for TIGI and its subsidiaries are handled by TAP.
Rent expense related to these leases are shared by the companies on a
cost allocation method based generally on estimated usage by department.
The company's rent expense was insignificant in 1996, 1995 and 1994.
21
<PAGE> 54
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
10. FEDERAL INCOME TAXES
<TABLE>
<CAPTION>
(in thousands) 1996 1995 1994
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Effective tax rate
Income before federal income taxes $ 39,582 $43,436 $27,865
Statutory tax rate 35% 35% 35%
-------------------------------------------------------------------------------------------
Expected federal income taxes $ 13,854 $15,203 $ 9,753
Tax effect of:
Nontaxable investment income (15) (13) (90)
Adjustments to benefit and other reserves - - (117)
Other, net (48) (671) (6)
--------------------------------------------------------------------------------------------
Federal income taxes $ 13,791 $14,519 $ 9,540
--------------------------------------------------------------------------------------------
Effective tax rate 35% 33% 34%
-------------------------------------------------------------------------------------------
Composition of federal income taxes
Current:
United States $ 29,435 $ 2,555 $ 4,742
Foreign 21 - -
--------------------------------------------------------------------------------------------
Total 29,456 2,555 4,742
--------------------------------------------------------------------------------------------
Deferred:
United States (15,665) 11,964 4,798
--------------------------------------------------------------------------------------------
Federal income taxes $ 13,791 $14,519 $ 9,540
--------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE> 55
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
10. FEDERAL INCOME TAXES, Continued
The net deferred tax assets at December 31, 1996 and 1995 were comprised
of the tax effects of temporary differences related to the following
assets and liabilities:
<TABLE>
<CAPTION>
(in thousands) 1996 1995
------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Benefit, reinsurance and other reserves $79,484 $ 67,104
Other 3,043 2,570
------------------------------------------------------------------------------------------
Total 82,527 69,674
------------------------------------------------------------------------------------------
Deferred tax liabilities:
Investments, Net 12,113 19,625
Deferred acquisition costs and
value of insurance in force 10,066 6,285
Other 662 536
------------------------------------------------------------------------------------------
Total 22,841 26,446
------------------------------------------------------------------------------------------
Net deferred tax asset before valuation allowance 59,686 43,228
Valuation allowance for deferred tax assets (2,070) (2,070)
------------------------------------------------------------------------------------------
Net deferred tax asset after valuation allowance $57,616 $41,158
------------------------------------------------------------------------------------------
</TABLE>
Starting in 1994 and continuing for at least five years, TIC and its life
insurance subsidiaries, including the Company, will 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 will be
paid currently to TIC. Any credits for losses 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.
A net deferred tax asset valuation allowance of $2.1 million has been
established to reduce the deferred tax asset on investment losses to the
amount that, based upon available evidence, is more likely than not to be
realized. Reversal of the valuation allowance is contingent upon the
recognition of future capital gains in the Company's consolidated life
insurance company federal income tax return through 1998, and the
consolidated federal income tax return of Travelers Group commencing in
1999, or a change in circumstances which causes the recognition of the
benefits to become more likely than not. There was no change in the
valuation allowance during 1996. The initial recognition of any benefit
provided by the reversal of the valuation allowance will be recognized by
reducing goodwill.
23
<PAGE> 56
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
10. FEDERAL INCOME TAXES, Continued
In management's judgment, the $57.6 million "net deferred tax asset after
valuation allowance" as of December 31, 1996, is fully recoverable
against expected future years' taxable ordinary income and capital gains.
At December 31, 1996, the Company has 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,
which, under provisions of the Tax Reform Act of 1984, will not increase
after 1983, is estimated to be $2.0 million. This amount has not been
subjected to current income taxes but, under certain conditions that
management considers to be remote, may become subject to income taxes in
future years. At current rates, the maximum amount of such tax (for which
no provision has been made in the financial statements) would be
approximately $700 thousand.
11. NET INVESTMENT INCOME
<TABLE>
<CAPTION>
(For the year ended December 31, in thousands) 1996 1995 1994
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross investment income
Fixed maturities $54,029 $49,486 $44,354
Equity securities 411 497 827
Mortgage loans 15,491 11,644 17,178
Real estate held for sale 3,480 2,476 6,299
Other 19,770 2,552 4,480
---------------------------------------------------------------------------------------
93,181 66,655 73,138
---------------------------------------------------------------------------------------
Investment expenses 4,141 3,446 7,045
---------------------------------------------------------------------------------------
Net investment income $89,040 $63,209 $66,093
---------------------------------------------------------------------------------------
</TABLE>
24
<PAGE> 57
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
12. INVESTMENTS AND INVESTMENT GAINS (LOSSES)
Realized investment gains (losses) for the periods were as follows:
<TABLE>
<CAPTION>
(For the year ended December 31, in thousands) 1996 1995 1994
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Realized
Fixed maturities $(11,491) $(4,240) $ (908)
Equity securities 4,613 6,138 1,675
Mortgage loans 1,979 725 36
Real estate held for sale (73) (35) -
Other (4,641) 16,125 (2,877)
-----------------------------------------------------------------------------------------
Realized investment gains (losses) $ (9,613) $18,713 $(2,074)
-----------------------------------------------------------------------------------------
</TABLE>
Changes in net unrealized investment gains (losses) that are included as
a separate component of shareholder's equity were as follows:
<TABLE>
<CAPTION>
(For the year ended December 31, in thousands) 1996 1995 1994
------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Unrealized
Fixed maturities $(23,953) $111,551 $(65,205)
Equity securities (746) 1,834 (27)
Other 22,431 4,390 (28)
------------------------------------------------------------------------------------------
(2,268) 117,775 (65,260)
Related taxes (794) 41,221 (22,841)
------------------------------------------------------------------------------------------
Change in unrealized investment gains (losses) (1,474) 76,554 (42,419)
Balance beginning of year 35,330 (41,224) 1,195
------------------------------------------------------------------------------------------
Balance end of year $ 33,856 $ 35,330 $(41,224)
------------------------------------------------------------------------------------------
</TABLE>
Fixed Maturities
Proceeds from sales of fixed maturities classified as available for sale
were $979.0 million and $460.0 million in 1996 and 1995, respectively.
Gross gains of $8.4 million and $7.9 million and gross losses of $19.9
million and $10.3 million in 1996 and 1995, respectively, were realized
on those sales.
25
<PAGE> 58
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
12. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued
The amortized cost and fair values of investments in fixed maturities
were as follows:
<TABLE>
<CAPTION>
December 31, 1996
----------------------------------------------------------------------------------------------------
Gross Gross
Amortized unrealized unrealized Fair
(in thousands) cost gains losses value
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available for sale:
Mortgage-backed securities -
CMOs and pass through
securities $ 88,138 $ 1,637 $ 629 $ 89,146
U.S. Treasury securities
and obligations of U.S.
Government and
government agencies
and authorities 115,059 10,371 61 125,369
Obligations of states and
political subdivisions 3,500 255 -- 3,755
Debt securities issued
by foreign governments 56,097 1,473 1,269 56,301
All other corporate bonds 409,294 13,862 3,277 419,879
Redeemable preferred stock 85 -- -- 85
----------------------------------------------------------------------------------------------------
Total $672,173 $27,598 $5,236 $694,535
----------------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE> 59
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
12. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued
<TABLE>
<CAPTION>
December 31, 1995
------------------------------------------------------------------------------------------
Gross Gross
Amortized unrealized unrealized Fair
(in thousands) cost gains losses value
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available for sale:
Mortgage-backed securities -
CMOs and pass through
securities $ 89,044 $ 2,545 $ 378 $ 91,211
U.S. Treasury securities
and obligations of U.S.
Government and
government agencies
and authorities 160,988 24,267 1 185,254
Obligations of states and
political subdivisions 3,500 499 - 3,999
All other corporate bonds 424,676 21,576 2,162 444,090
Redeemable preferred stock 85 - - 85
------------------------------------------------------------------------------------------
Total $678,293 $48,887 $2,541 $724,639
------------------------------------------------------------------------------------------
</TABLE>
The amortized cost and fair value of fixed maturities available for sale
at December 31, 1996, by contractual maturity, are shown below. Actual
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>
Maturity Amortized Fair
(in thousands) cost value
-------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 11,184 $ 11,204
Due after 1 year through 5 years 50,397 50,366
Due after 5 years through 10 years 169,634 173,049
Due after 10 years 352,820 370,770
-------------------------------------------------------------------------
584,035 605,389
Mortgage-backed securities 88,138 89,146
-------------------------------------------------------------------------
Total $672,173 $694,535
-------------------------------------------------------------------------
</TABLE>
The Company makes significant investments in collateralized mortgage
obligations (CMOs). CMOs typically have high credit quality, offer good
liquidity, and provide a significant advantage in yield and total return
compared to U.S. Treasury securities. The Company's investment strategy
is to purchase CMO tranches which are protected against prepayment risk,
including planned amortization class (PAC) tranches. Prepayment protected
tranches are preferred because they provide stable cash flows in a
variety of interest rate scenarios. The Company does invest in other
types of CMO tranches if a careful assessment indicates a favorable
risk/return tradeoff. The Company does not purchase residual interests in
CMOs.
27
<PAGE> 60
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
12. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued
At December 31, 1996 and 1995, the Company held CMOs with a market value
of $67.7 million and $68.6 million, respectively. The Company's CMO
holdings are 100% and approximately 94% collateralized by GNMA, FNMA or
FHLMC securities at December 31, 1996 and 1995, respectively.
Equity Securities
The cost and market values of investments in equity securities were as
follows:
<TABLE>
<CAPTION>
December 31, 1996
----------------------------------------------------------------------------------------------------
Gross Gross
unrealized unrealized Fair
(in thousands) Cost gains losses value
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stocks $1,630 $2,845 $83 $4,392
Nonredeemable preferred stocks 5,024 138 - 5,162
----------------------------------------------------------------------------------------------------
Total $6,654 $2,983 $83 $9,554
----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
December 31, 1995
----------------------------------------------------------------------------------------------------
Gross Gross
unrealized unrealized Fair
(in thousands) Cost gains losses value
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stocks $3,310 $3,374 $ 68 $ 6,616
Nonredeemable preferred stocks 6,143 340 - 6,483
----------------------------------------------------------------------------------------------------
Total $9,453 $3,714 $ 68 $13,099
----------------------------------------------------------------------------------------------------
</TABLE>
Proceeds from sales of equity securities were $12.8 million and $11.8
million in 1996 and 1995, respectively. Gross gains of $4.7 million and
$4.9 million and gross losses of $155 thousand and $474 thousand in 1996
and 1995, respectively, were realized on those sales.
Real estate held for sale and mortgage loans
Underperforming assets include delinquent mortgage loans, loans in the
process of foreclosure, foreclosed loans and loans modified at interest
rates below market.
28
<PAGE> 61
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
12. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued
At December 31, 1996 and 1995, the Company's real estate held for sale
and mortgage loan portfolios consisted of the following:
<TABLE>
<CAPTION>
(in thousands) 1996 1995
---------------------------------------------------------------------------
<S> <C> <C>
Current mortgage loans $ 90,394 $108,142
Underperforming mortgage loans 148 17,671
---------------------------------------------------------------------------
Total 90,542 125,813
---------------------------------------------------------------------------
Real estate held for sale 10,111 8,995
---------------------------------------------------------------------------
Total $100,653 $134,808
---------------------------------------------------------------------------
</TABLE>
Aggregate annual maturities on mortgage loans at December 31, 1996 are as
follows:
<TABLE>
<CAPTION>
(in thousands)
---------------------------------------------------
<S> <C>
Past maturity $ 1,677
1997 5,662
1998 316
1999 5,088
2000 5,734
2001 5,678
Thereafter 66,387
---------------------------------------------------
Total $90,542
---------------------------------------------------
</TABLE>
Concentrations
At December 31, 1996 the Company had investments of $75.1 million in the
State of Israel and $40.6 million in Merrill Lynch Trust Series 45. In
1995, the Company had no concentration of credit risk in a single
investee exceeding 10% of shareholder's equity.
The Company participates in a short-term investment pool maintained by an
affiliate. See Note 9.
Included in fixed maturities are below investment grade assets totaling
$40.7 million and $59.0 million at December 31, 1996 and 1995,
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 that are classified as below investment
grade loans.
29
<PAGE> 62
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
12. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued
The Company also had concentrations of investments, primarily fixed
maturities, in the following industries:
<TABLE>
<CAPTION>
(in thousands) 1996 1995
------------------------------------------------------------------------------------------
<S> <C> <C>
Foreign governments $108,850 $ -
Finance 90,222 25,853
Transportation 86,819 44,118
------------------------------------------------------------------------------------------
</TABLE>
Below investment grade assets included in the totals of the previous
table were as follows:
<TABLE>
<CAPTION>
(in thousands) 1996 1995
----------------------------------------------------------------------------------------
<S> <C> <C>
Foreign governments $6,567 $ -
Finance 2,386 451
Transportation 776 18,648
----------------------------------------------------------------------------------------
</TABLE>
Concentrations of mortgage loans by property type at December 31, 1996
and 1995 were as follows:
<TABLE>
<CAPTION>
(in thousands) 1996 1995
-----------------------------------------------------------------------------------------
<S> <C> <C>
Agricultural $33,501 $29,820
Office 22,533 32,024
Retail 20,024 27,870
-----------------------------------------------------------------------------------------
</TABLE>
The Company monitors creditworthiness of counterparties to all financial
instruments by using controls that include credit approvals, limits and
other monitoring procedures. Collateral for fixed maturities often
includes pledges of assets, including stock and other assets, guarantees
and letters of credit. The Company's underwriting standards with respect
to new mortgage loans generally require loan to value ratios of 75% or
less at the time of mortgage origination.
Non-Income Producing Investments
Investments included in the balance sheets that were non-income producing
for the preceding 12 months were insignificant.
Restructured Investments
The Company had mortgage loan and debt securities which were restructured
at below market terms totaling approximately $1.0 million and $17.7
million at December 31, 1996 and 1995, respectively. The new terms
typically defer a portion of contract interest payments to varying future
periods. The accrual of interest is suspended on all restructured assets,
and interest income is reported only as payment is received. Gross
interest income on restructured assets that would have been recorded in
accordance with the original terms of such assets was insignificant in
1996 and amounted to $4.9 million in 1995. Interest on these assets,
included in net investment income, was insignificant in 1996 and amounted
to $2.0 million in 1995.
30
<PAGE> 63
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
13. LIFE AND ANNUITY DEPOSIT FUNDS AND RESERVES
At December 31, 1996, the Company had $740.6 million of life and annuity
deposit funds and reserves. Of that total, $659.0 million were not
subject to discretionary withdrawal based on contract terms. The
remaining $81.6 million 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 $50.4 million of
liabilities that are surrenderable with market value adjustments. An
additional $31.2 million of the life insurance and individual annuity
liabilities are subject to discretionary withdrawals with an average
surrender charge of 6.7%. 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.
14. RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES
The following table reconciles net income to net cash provided by (used
in) operating activities:
<TABLE>
<CAPTION>
(For the year ended December 31, in thousands) 1996 1995 1994
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income from continuing operations $ 25,791 $ 28,917 $ 18,325
Adjustments to reconcile net income to
cash provided by operating activities
Realized (gains) losses 9,613 (18,713) 2,074
Deferred federal income taxes (15,665) 11,964 4,798
Amortization of deferred policy acquisition
costs and value of insurance in force 3,286 1,563 -
Additions to deferred policy acquisition costs (20,753) (3,109) (21,014)
Investment income accrued 1,308 (819) 1,085
Premium balances receivable (3,561) (2,277) -
Insurance reserves and accrued expenses (16,459) (20,081) (16,062)
Other (13,419) (46,076) 18,371
------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities $(29,859) $(48,631) $ 7,577
------------------------------------------------------------------------------------------------------------
</TABLE>
15. NONCASH INVESTING AND FINANCING ACTIVITIES
Significant noncash investing and financing activities include: a) the
transfer of $2.6 million of real estate held for sale and mortgage loans
from one of the Company's separate accounts to the general account in
1995, b) acquisition of real estate through foreclosures of mortgage
loans amounting to $1.1 million, $0 and $10.3 million in 1996, 1995 and
1994, respectively.
31
<PAGE> 64
STATEMENT OF ADDITIONAL INFORMATION
FUND ABD II
Individual Variable Annuity Contract
issued by
The Travelers Life and Annuity Company
One Tower Square
Hartford, Connecticut 06183
L-12548S (5/97)
32
<PAGE> 65
PORTFOLIO ARCHITECT
ANNUAL REPORT
DECEMBER 31, 1996
THE TRAVELERS FUND ABD II
FOR VARIABLE ANNUITIES
[TRAVELERSLIFE LOGO]
The Travelers Insurance Company
The Traverlers Life and Annuity Company
One Tower Square
Hartford, CT 06183
<PAGE> 66
THE TRAVELERS FUND ABD II
FOR VARIABLE ANNUITIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<S> <C> <C>
ASSETS:
Investments in eligible funds at market value:
Capital Appreciation Fund, 780 shares (cost $30,910)............................... $ 28,636
Travelers Series Fund Inc.:
Alliance Growth Portfolio, 139 shares (cost $2,336)............................. 2,334
Putnam Diversified Income Portfolio, 287 shares (cost $3,477)................... 3,325
The Travelers Series Trust:
Travelers Quality Bond Portfolio, 9,203 shares (cost $95,608)................... 92,947
Lazard International Stock Portfolio, 544 shares (cost $5,700).................. 5,860
MFS Emerging Growth Portfolio, 3,022 shares (cost $32,647)...................... 31,883
Large Cap Portfolio, 707 shares (cost $7,828)................................... 7,983
Equity Income Portfolio, 2,795 shares (cost $31,132)............................ 30,994
----------
Total Investments (cost $209,638).............................................. $ 203,962
Dividends receivable................................................................ 4,649
------------
Total Assets................................................................... 208,611
------------
LIABILITIES:
Accrued liabilities................................................................. 58
------------
Total Liabilities.............................................................. 58
------------
NET ASSETS: $ 208,553
============
</TABLE>
See Notes to Financial Statements
-1-
<PAGE> 67
THE TRAVELERS FUND ABD II
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS
FOR THE PERIOD DECEMBER 16, 1996
(DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends............................................................................ $ 5,162
EXPENSES:
Insurance charges.................................................................... $ 54
Administrative fees.................................................................. 5
-----------
Total expenses...................................................................... 59
------------
Net investment income.............................................................. 5,103
------------
UNREALIZED LOSS ON INVESTMENTS:
December 31, 1996.................................................................. (5,676)
-------------
Net decrease in net assets resulting from operations................................. $ (573)
=============
</TABLE>
See Notes to Financial Statements
-2-
<PAGE> 68
THE TRAVELERS FUND ABD II
FOR VARIABLE ANNUITIES
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD DECEMBER 16, 1996
(DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
1996
----
<S> <C>
OPERATIONS:
Net investment income......................................................... $ 5,103
Unrealized loss on investments................................................ (5,676)
------------
Net decrease in net assets resulting from operations......................... (573)
------------
UNIT TRANSACTIONS:
Participant purchase payments.................................................
(applicable to 206,161 units)................................................ 209,126
------------
Net increase in net assets resulting from unit transactions................ 209,126
------------
Net increase in net assets................................................ 208,553
NET ASSETS:
Beginning of period........................................................... -
------------
End of period................................................................. $ 208,553
============
</TABLE>
See Notes to Financial Statements
-3-
<PAGE> 69
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Fund ABD II for Variable Annuities ("Fund ABD II") 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 Travelers
Group Inc., and is available for funding certain variable annuity contracts
issued by Travelers Life. Fund ABD II is registered under the Investment
Company Act of 1940, as amended, as a unit investment trust.
Participant purchase payments applied to Fund ABD II are invested in one or
more eligible funds in accordance with the selection made by the contract
owner. As of December 31, 1996, the eligible funds available under Fund ABD
II are: Capital Appreciation Fund; Cash Income Trust; Alliance Growth
Portfolio, Putnam Diversified Income Portfolio, and MFS Total Return
Portfolio of Travelers Series Fund Inc.; Travelers Quality Bond Portfolio,
Lazard International Stock Portfolio, MFS Emerging Growth Portfolio,
Federated Stock Portfolio, Federated High Yield Portfolio, Large Cap
Portfolio and Equity Income Portfolio of The Travelers Series Trust. All of
the funds are Massachusetts business trusts, except Travelers Series Fund
Inc. which is incorporated under Maryland law. All eligible funds are
managed by affiliates of The Travelers.
The following is a summary of significant accounting policies consistently
followed by Fund ABD II in the preparation of its financial statements.
SECURITY VALUATION. Investments are valued daily at the net asset values
per share of the underlying funds.
FEDERAL INCOME TAXES. The operations of Fund ABD II form a part of the
total operations of Travelers Life and are not taxed separately. Travelers
Life is taxed as a life insurance company under the Internal Revenue Code of
1986, as amended (the "Code"). Under existing federal income tax law, no
taxes are payable on the investment income of Fund ABD II. Fund ABD II is
not taxed as a "regulated investment company" under Subchapter M of the
Code.
OTHER. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Security transactions are accounted for on the trade date. Dividend income
is recorded on the ex-dividend date.
2. INVESTMENTS
Purchases of investments aggregated $209,638, for the period ended December
31, 1996. There were no sales for the period ended December 31, 1996.
Realized gains and losses from investment transactions are reported on an
identified cost basis. The cost of investments in eligible funds was
$209,638 at December 31, 1996. Gross unrealized appreciation for all
investments at December 31, 1996 was $315. Gross unrealized depreciation
for all investments at December 31, 1996 was $5,991.
-4-
<PAGE> 70
NOTES TO FINANCIAL STATEMENTS - CONTINUED
3. CONTRACT CHARGES
Insurance charges are paid for the mortality and expense risks assumed by
Travelers Life. These charges are equivalent to 1.25% of the average net
assets of Fund ABD II on an annual basis.
Administrative fees are paid for administrative expenses incurred by
Travelers Life. This charge is equivalent to 0.15% of the average net assets
of Fund ABD II on an annual basis.
For contracts in the accumulation phase with a contract value less than
$40,000, an annual charge of $30 (prorated for partial periods) is deducted
from participant account balances and paid to Travelers Life to cover
contract administrative charges.
No sales charge is deducted from participant purchase payments when they are
received. However, Travelers Life generally assesses a contingent deferred
sales charge of up to 6% if a participant's purchase payment is surrendered
within seven years of its payment date. No contingent deferred sales
charges were assessed for the period ended December 31, 1996.
4. NET CONTRACT OWNERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------------------------------------
ACCUMULATION UNIT NET
UNITS VALUE ASSETS
----- ----- ------
<S> <C> <C> <C>
Capital Appreciation Fund............................................. 29,824 $ 1.032 $ 30,772
Travelers Series Fund Inc.
Alliance Growth Portfolio............................................ 2,250 1.037 2,333
Putnam Diversified Income Portfolio.................................. 3,300 1.007 3,323
The Travelers Series Trust
Travelers Quality Bond Portfolio..................................... 95,203 1.001 95,290
Lazard International Stock Portfolio................................. 5,702 1.027 5,857
MFS Emerging Growth Portfolio........................................ 31,886 1.004 32,019
Large Cap Portfolio.................................................. 7,800 1.023 7,979
Equity Income Portfolio.............................................. 30,196 1.026 30,980
---------------
Net Contract Owners' Equity.................................................................................... $ 208,553
===============
</TABLE>
-5-
<PAGE> 71
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. SCHEDULE OF FUND ABD II OPERATIONS AND CHANGES IN NET ASSETS
FOR THE PERIOD DECEMBER 16, 1996
(DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
PUTNAM LAZARD
CAPITAL ALLIANCE DIVERSIFIED TRAVELERS INTERNATIONAL
APPRECIATION GROWTH INCOME QUALITY BOND STOCK
FUND PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends............................... $ 2,151 $ 86 $ 177 $ 2,347 $ -
---------- ------------- ---------- ------------ ------------
EXPENSES:
Insurance charges....................... 13 1 2 4 3
Administrative fees..................... 2 - - - -
---------- ------------- ---------- ------------ ------------
Net investment income (loss)...... 2,136 85 175 2,343 (3)
---------- ------------- ---------- ------------ ------------
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
End of period....................... (2,274) (2) (152) (2,661) 160
---------- ------------- ---------- ------------ ------------
Net increase (decrease) in net assets
resulting from operations......... (138) 83 23 (318) 157
---------- ------------- ---------- ------------ ------------
UNIT TRANSACTIONS:
Participant purchase payments........... 30,910 2,250 3,300 95,608 5,700
---------- ------------- ---------- ------------ ------------
Net increase in net assets resulting
from unit transactions............ 30,910 2,250 3,300 95,608 5,700
---------- ------------- ---------- ------------ ------------
Net increase in net assets........ 30,772 2,333 3,323 95,290 5,857
NET ASSETS:
Beginning of period................. - - - - -
---------- ------------- ---------- ------------ ------------
End of period....................... $ 30,772 $ 2,333 $ 3,323 $ 95,290 $ 5,857
========== ============= ========== ============ ============
</TABLE>
-6-
<PAGE> 72
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
MFS EMERGING
GROWTH LARGE CAP EQUITY INCOME
PORTFOLIO PORTFOLIO PORTFOLIO COMBINED
------------- ----------- ------------ ----------
<S> <C> <C> <C>
$ 151 $ 28 $ 222 $ 5,162
--------- ---------- ----------- ----------
14 4 13 54
1 - 2 5
--------- ---------- ----------- ----------
136 24 207 5,103
--------- ---------- ----------- ----------
(764) 155 (138) (5,676)
--------- ---------- ----------- ----------
(628) 179 69 (573)
--------- ---------- ----------- ----------
32,647 7,800 30,911 209,126
--------- ---------- ----------- ----------
32,647 7,800 30,911 209,126
--------- ---------- ----------- ----------
32,019 7,979 30,980 208,553
- - - -
--------- ---------- ----------- ----------
$ 32,019 $ 7,979 $ 30,980 $ 208,553
========= ========== =========== ==========
</TABLE>
-7-
<PAGE> 73
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF ACCUMULATION UNITS FOR FUND ABD II
FOR THE PERIOD DECEMBER 16, 1996
(DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1996.
<TABLE>
<CAPTION>
PUTNAM
CAPITAL ALLIANCE DIVERSIFIED TRAVELERS
APPRECIATION GROWTH INCOME QUALITY BOND
FUND PORTFOLIO PORTFOLIO FUND
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Accumulation units beginning of period.................... - - - -
Accumulation units purchased and
transferred from other Travelers accounts.............. 29,824 2,250 3,300 95,203
Accumulation units redeemed and
transferred to other Travelers accounts................ - - - -
------------- ------------ ------------ ------------
Accumulation units end of period.......................... 29,824 2,250 3,300 95,203
============= ============= ============= =============
<CAPTION>
LAZARD MFS EMERGING
INTERNATIONAL GROWTH LARGE CAP EQUITY INCOME
STOCK PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ------------ ---------- -------------
<S> <C> <C> <C> <C>
Accumulation units beginning of period.................... - - - -
Accumulation units purchased and
transferred from other Travelers accounts.............. 5,702 31,886 7,800 30,196
Accumulation units redeemed and
transferred to other Travelers accounts................ - - - -
------------- ------------ ------------ ------------
Accumulation units end of period.......................... 5,702 31,886 7,800 30,196
============= ============= ============= =============
</TABLE>
-8-
<PAGE> 74
REPORT OF INDEPENDENT ACCOUNTANTS
To the Owners of Variable Annuity Contracts of
The Travelers Fund ABD II for Variable Annuities:
We have audited the accompanying statement of assets and liabilities of The
Travelers Fund ABD II for Variable Annuities as of December 31, 1996, and the
related statement of operations and changes in net assets for the period
December 16, 1996 (date operations commenced) to December 31, 1996. These
financial statements are the responsibility of management. Our responsibility
is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of shares owned as of December 31, 1996, by
correspondence with 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 audit 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 Travelers Fund ABD II for
Variable Annuities as of December 31, 1996, the results of its operations and
the changes in its net assets for the period December 16, 1996 (date operations
commenced) to December 31, 1996, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 7, 1997
-9-
<PAGE> 75
Independent Accountants
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
This report is prepared for the general information of contract owners and is
not an offer of shares of The Travelers Fund ABD II for Variable Annuities or
Fund ABD II's underlying funds. It should not be used in connection with any
offer except in conjunction with the Prospectuses for the Variable Annuity
products offered by The Travelers Life and Annuity Company and the Prospectuses
of the underlying funds, which collectively contain all pertinent information,
including the applicable sales commissions.
FNDABDII (Annual) (12-96) Printed in U.S.A.
<PAGE> 76
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) The financial statements of the Registrant and the Report of Independent
Accountants thereto are contained in the Registrant's Annual Report and
are incorporated into the Statement of Additional Information by
reference. The financial statements of the Registrant include:
Statement of Assets and Liabilities as of December 31, 1996
Statement of Operations for the year ended December 31, 1996
Statement of Changes in Net Assets for the period December 16,
1996 (date operations commenced) to December 31, 1996
Statement of Investments as of December 31, 1996
Notes to Financial Statements
The audited financial statements of The Travelers Life and Annuity Company
and the Reports of Independent Accountants, are contained in the Statement
of Additional Information. The financial statements of The Travelers Life
and Annuity Company include:
Statements of Income and Retained Earnings for the years ended
December 31, 1996, 1995 and 1994
Balance Sheets as of December 31, 1996 and 1995
Statements of Cash Flows for the years ended December 31, 1996,
1995 and 1994
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 December 22, 1995.)
2. Exempt.
3(a). Distribution and Management Agreement among the Registrant, The
Travelers Life and Annuity Company and Tower Square Securities,
Inc. (Incorporated herein by reference to Exhibit 3(a) to the
Registration Statement on Form N-4, filed December 22, 1995.)
3(b). Form of Selling Agreement.
4. Form of Variable Annuity Contract(s). (Incorporated herein by
reference to Exhibit 4 to the Registration Statement on Form N-4,
filed June 17, 1996.)
5. None.
6(a). Charter of The Travelers Life and Annuity Company, as amended on
April 10, 1990. (Incorporated herein by reference to Exhibit 3(a)
to the Registration Statement on Form N-4, File No. 33-58131,
filed via Edgar on March 17, 1995.)
6(b). By-Laws of The Travelers Life and Annuity Company, as amended on
October 20, 1994. (Incorporated herein by reference to Exhibit
3(b) to the Registration Statement on Form N-4, File No. 33-58131,
filed via Edgar on March 17, 1995.)
<PAGE> 77
7. None.
8. None.
9. Opinion of Counsel as to the legality of securities being
registered.
10(a). Consent of Coopers & Lybrand L.L.P., Independent Accountants.
10(b). Consent of KPMG Peat Marwick LLP, Independent Certified Public
Accountants.
13. Schedule for computation of each performance quotation.
15(a). Powers of Attorney authorizing Jay S. Fishman or Ernest J. Wright
as signatory for Michael A. Carpenter, Robert I. Lipp, Charles O.
Prince III, Marc P. Weill, Irwin R. Ettinger, Donald T. DeCarlo
and Christine B. Mead. (Incorporated herein by reference to
Exhibit 15 to the Registration Statement on Form N-4, filed
December 22, 1995.)
15(b). Powers of Attorney authorizing Ernest J. Wright or Kathleen A.
McGah as signatory for Michael A. Carpenter, Ian R. Stuart and
Katherine M. Sullivan. (Incorporated herein by reference to
Exhibit 15(b) to the Registration Statement on Form N-4, filed
June 17, 1996.)
15(c). Powers of Attorney authorizing Ernest J. Wright or Kathleen A.
McGah as signatory for Jay S. Benet and George C. Kokulis.
(Incorporated herein by reference to Exhibit 15(c) to
Post-Effective Amendment No. 1 to the Registration Statement on
Form N-4, filed August 15, 1997.)
15(d). Power of Attorney authorizing Ernest J. Wright or Kathleen A.
McGah as signatory for Ian R. Stuart. (Incorporated herein by
reference to Exhibit 15(d) to Post-Effective Amendment No. 2 to
the Registration Statement on Form N-4 filed February 28, 1997.)
27. Financial Data Schedules.
<PAGE> 78
Item 25. Directors and Officers of the Depositor
Name and Principal Positions and Offices
Business Address with Depositor
Michael A. Carpenter* Director, Chairman of the Board
President and Chief Executive Officer
Jay S. Benet* Director and Senior Vice President
George C. Kokulis* Director and Senior Vice President
Robert I. Lipp* Director
Ian R. Stuart* Director, Senior Vice President,
Chief Financial Officer, Chief
Accounting Officer and Controller
Katherine M. Sullivan* Director and Senior Vice President
and General Counsel
Marc P. Weill** Director and Senior Vice President
Stuart Baritz** Senior Vice President
Elizabeth C. Georgakopoulos* Senior Vice President
Barry Jacobson* Senior Vice President
Russell H. Johnson* Senior Vice President
Warren H. May* Senior Vice President
Christine M. Modie* Senior Vice President
David A. Tyson* Senior Vice President
F. Denney Voss* Senior Vice President
Paula Burton* Vice President
Charles N. Vest* Vice President and Actuary
Donald R. Munson, Jr.* Second Vice President
Ernest J. Wright* Vice President and Secretary
Kathleen A. McGah* Assistant Secretary and Counsel
Principal Business Address:
* The Travelers Life and Annuity Company **Travelers Group Inc.
One Tower Square 388 Greenwich Street
Hartford, CT 06183 New York, N.Y. 10013
<PAGE> 79
Item 26. Persons Controlled by or Under Coimmon Control with the Depositor or
Registrant
OWNERSHIP OF THE TRAVELERS LIFE AND ANNUITY COMPANY
<TABLE>
<CAPTION>
Company State of Organization Ownership Principal Business
- ------- ---------------------- --------- ------------------
<S> <C> <C> <C>
Travelers Group Inc. Delaware Publicly Held ----------------
Associated Madison Companies Inc. Delaware 100.00 ----------------
PFS Services Inc. Georgia 100.00 ----------------
The Travelers Insurance Group, Inc. Connecticut 100.00 ----------------
The Travelers Insurance Company Connecticut 100.00 Insurance
The Travelers Life and Annuity Company Connecticut 100.00 Insurance
</TABLE>
- --------------------------------------------------------------------------------
PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
THE TRAVELERS LIFE AND ANNUITY COMPANY
<TABLE>
<CAPTION>
% of Voting
Securities
Owned Directly
State of or Indirectly by
Organization The Travelers Inc. Principal Business
------------ ----------------- ------------------
<S> <C> <C> <C>
AC Health Ventures, Inc. Delaware 100.00 Inactive
AMCO Biotech, Inc. Delaware 100.00 Inactive
Associated Madison Companies, Inc. Delaware 100.00 Holding company.
American National Life Insurance (T & C), Ltd. Turks and
Caicos Islands 100.00 Insurance
ERISA Corporation New York 100.00 Inactive
Mid-America Insurance Services, Inc. Georgia 100.00 Third party
administrator
National Marketing Corporation Pennsylvania 100.00 Inactive
PFS Services, Inc. Georgia 100.00 General partner and
holding company
The Travelers Insurance Group Inc. Connecticut 100.00 Holding company
</TABLE>
3/18/97
<PAGE> 80
<TABLE>
<CAPTION>
% of Voting
Securities
Owned Directly
State of or Indirectly by
Organization The Travelers Inc. Principal Business
------------ ----------------- ------------------
<S> <C> <C> <C>
Constitution Plaza, Inc. Connecticut 100.00 Real estate brokerage
KP Properties Corporation Massachusetts 100.00 Real estate
KPI 85, Inc. Massachusetts 100.00 Real estate
KRA Advisers Corporation Massachusetts 100.00 Real estate
KRP Corporation Massachusetts 100.00 Real estate
La Metropole S.A. Belgium 98.83 P-C insurance/
reinsurance
The Prospect Company Delaware 100.00 Investments
89th & York Avenue Corporation New York 100.00 Real estate
979 Third Avenue Corporation Delaware 100.00 Real estate
Meadow Lane, Inc. Georgia 100.00 Real estate
development
Panther Valley, Inc. New Jersey 100.00 Real estate management
Prospect Management Services Company Delaware 100.00 Real estate management
The Travelers Asset Funding Corporation Connecticut 100.00 Investment adviser
Travelers Capital Funding Corporation Connecticut 100.00 Furniture/equipment
The Travelers Insurance Company Connecticut 100.00 Insurance
The Plaza Corporation Connecticut 100.00 Holding company
The Copeland Companies New Jersey 100.00 Holding company
American Odyssey Funds Management,
Inc. New Jersey 100.00 Investment advisor
American Odyssey Funds, Inc. Maryland 100.00 Investment management
Copeland Administrative Services, Inc. New Jersey 100.00 Administrative
services
Copeland Associates, Inc. Delaware 100.00 Fixed/variable
annuities
Copeland Associates Agency of
Ohio, Inc. Ohio 99.00 Fixed/variable
annuities
Copeland Associates of Alabama,
Inc. Alabama 100.00 Fixed/variable
annuities
Copeland Associates of Montana,
Inc. Montana 100.00 Fixed/variable
annuities
Copeland Benefits Management
Company New Jersey 51.00 Investment marketing
Copeland Equities, Inc. New Jersey 100.00 Fixed/variable
annuities
H.C. Copeland Associates, Inc. of
Massachusetts Massachusetts 100.00 Fixed annuities
Copeland Financial Services, Inc. New Jersey 100.00 Investment advisory
services.
Copeland Healthcare Services, Inc. New Jersey 100.00 Life insurance
marketing
H.C. Copeland and Associates, Inc.
of Texas Texas 100.00 Fixed/variable
annuities
</TABLE>
2
<PAGE> 81
<TABLE>
<CAPTION>
% of Voting
Securities
Owned Directly
State of or Indirectly by
Organization The Travelers Inc. Principal Business
------------ ----------------- ------------------
<S> <C> <C> <C>
Three Parkway Inc. - I Pennsylvania 100.00 Investment real estate
Three Parkway Inc. - II Pennsylvania 100.00 Investment real estate
Three Parkway Inc. - III Pennsylvania 100.00 Investment real estate
Tower Square Securities, Inc. Connecticut 100.00 Broker dealer
Travelers Asset Management International
Corporation New York 100.00 Investment adviser
Travelers Distribution Company Delaware 100.00
Travelers Investment Adviser, Inc. Delaware 100.00 Investment Advisor
Travelers/Net Plus Agency of Ohio, Inc. Ohio 100.00 Insurance agency
Travelers/Net Plus Insurance Agency, Inc. Massachusetts 100.00 Insurance agency
Travelers/Net Plus, Inc. Connecticut 100.00
The Travelers Life and Annuity Company Connecticut 100.00 Life insurance
Travelers Insurance Holdings Inc. Georgia 100.00 Holding company
AC RE, Ltd. Bermuda 100.00 Reinsurance
American Financial Life Insurance Company Texas 100.00 Insurance
Primerica Life Insurance Company Massachusetts 100.00 Life insurance
National Benefit Life Insurance
Company New York 100.00 Insurance
Primerica Financial Services
(Canada) Ltd. Canada 100.00 Holding company
PFSL Investments Canada Ltd. Canada 100.00 Mutual fund dealer
Primerica Financial Services Ltd. Canada 82.82 General agent
Primerica Life Insurance Company
of Canada Canada 100.00 Life insurance
The Travelers Insurance Corporation Proprietary
Limited Australia 100.00 Inactive
Travelers Canada Corporation Canada 100.00 Inactive
Travelers Mortgage Securities Corporation Delaware 100.00 Collateralized
obligations
Travelers of Ireland Limited Ireland 99.90 Data processing
Travelers Property Casualty Corp. Delaware 82.00 Holding company
The Aetna Casualty and Surety Company Connecticut 100.00 Insurance company
AE Development Group, Inc. Connecticut 100.00
Aetna Casualty & Surety Company of Canada Canada 100.00
Aetna Casualty and Surety Company of
America Connecticut 100.00 Insurance company
Aetna Casualty and Surety Company of
Illinois Illinois 100.00 Insurance company
</TABLE>
3
<PAGE> 82
<TABLE>
<CAPTION>
% of Voting
Securities
Owned Directly
State of or Indirectly by
Organization The Travelers Inc. Principal Business
------------ ----------------- ------------------
<S> <C> <C> <C>
Aetna Casualty Company of Connecticut Connecticut 100.00 Insurance company
Aetna Commercial Insurance Company Connecticut 100.00 Insurance company
Aetna Excess and Surplus Lines Company Connecticut 100.00 Insurance Company
Aetna Lloyds of Texas Insurance Company Texas 100.00 Insurance company
Aetna National Accounts U.K. Limited United Kingdom 100.00 Insurance company
Axia Services, Inc. New York 100.00
Farmington Casualty Company Connecticut 100.00 Insurance company
Farmington Management, Inc. Connecticut 100.00
Urban Diversified Properties, Inc. Connecticut 100.00
The Standard Fire Insurance Company Connecticut 100.00
AE Properties, Inc. California 100.00
Aetna Insurance Company Connecticut 100.00 Insurance company
Aetna Insurance Company of Illinois Illinois 100.00 Insurance company
Aetna Personal Security Insurance Company Connecticut 100.00 Insurance company
Community Rehabilitation Investment
Corporation Connecticut 100.00
The Automobile Insurance Company of
Hartford, Connecticut Connecticut 100.00 Insurance company
The Travelers Indemnity Company Connecticut 100.00 P-C insurance
Commercial Insurance Resources, Inc. Delaware 100.00 Holding company
Gulf Insurance Company Missouri 100.00 P-C insurance
Atlantic Insurance Company Texas 100.00 P-C insurance
Gulf Risk Services, Inc. Delaware 100.00 Claims/risk management
Gulf Underwriters Insurance
Company Missouri 100.00 P-C ins/surplus lines
Select Insurance Company Texas 100.00 P-C insurance
Countersignature Agency, Inc. Florida 100.00 Countersign ins
policies
First Floridian Auto and Home Insurance
Company Florida 100.00 Insurance company
First Trenton Indemnity Company New Jersey 100.00 P-C insurance
Laramia Insurance Agency, Inc. North Carolina 100.00 Flood insurance
Secure Affinity Agency, Inc. Delaware 100.00 P-C insurance agency
The Charter Oak Fire Insurance Company Connecticut 100.00 P-C insurance
The Parker Realty and Insurance
Agency, Inc. Vermont 58.00 Real estate
</TABLE>
4
<PAGE> 83
<TABLE>
<CAPTION>
% of Voting
Securities
Owned Directly
State of or Indirectly by
Organization The Travelers Inc. Principal Business
------------ ----------------- ------------------
<S> <C> <C>
The Phoenix Insurance Company Connecticut 100.00 P-C insurance
Constitution State Service Company Montana 100.00 Service company
The Travelers Indemnity Company of
America Georgia 100.00 P-C insurance
The Travelers Indemnity Company of
Connecticut Connecticut 100.00 Insurance
The Travelers Indemnity Company of
Illinois Illinois 100.00 P-C insurance
The Premier Insurance Company of
Massachusetts Massachusetts 100.00 Insurance
The Travelers Home and Marine Insurance
Company Indiana 100.00 P-C insurance
The Travelers Indemnity Company of
Missouri Missouri 100.00 P-C insurance
The Travelers Lloyds Insurance Company Texas 100.00 Non-life insurance
The Travelers Marine Corporation California 100.00 General insurance
brokerage
TI Home Mortgage Brokerage, Inc. Delaware 100.00 Mortgage brokerage
services
TravCo Insurance Company Indiana 100.00 P-C insurance
Travelers Bond Investments, Inc. Connecticut 100.00 Bond investments
Travelers General Agency of Hawaii, Inc. Hawaii 100.00 Insurance agency
Travelers Medical Management
Services Inc. Delaware 100.00 Managed care
Travelers Specialty Property Casualty
Company, Inc. Connecticut 100.00 Insurance management
Primerica Convention Services, Inc. Georgia 100.00
Primerica Finance Corporation Delaware 100.00 Holding company
PFS Distributors, Inc. Georgia 100.00 General partner
PFS Investments Inc. Georgia 100.00 Broker dealer
PFS T.A., Inc. Delaware 100.00 Joint venture partner
Primerica Financial Services Home Mortgages, Inc. Georgia 100.00 Mortgage loan broker
Primerica Financial Services, Inc. Nevada 100.00 General agency
Primerica Financial Services Agency of New York, Inc. New York 100.00 General agency
licensing
Primerica Financial Services Insurance Marketing of
Connecticut, Inc. Connecticut 100.00 General agency
licensing
Primerica Financial Services Insurance Marketing of
Idaho, Inc. Idaho 100.00 General agency
licensing
Primerica Financial Services Insurance Marketing of
Nevada, Inc. Nevada 100.00 General agency
licensing
Primerica Financial Services Insurance Marketing of
Pennsylvania, Inc. Pennsylvania 100.00 General agency
licensing
Primerica Financial Services Insurance Marketing of
the Virgin Islands, Inc. United States
Virgin Islands 100.00 General agency
licensing
Primerica Financial Services Insurance Marketing of
Wyoming, Inc. Wyoming 100.00 General agency
licensing
</TABLE>
5
<PAGE> 84
<TABLE>
<CAPTION>
% of Voting
Securities
Owned Directly
State of or Indirectly by
Organization The Travelers Inc. Principal Business
------------ ----------------- ------------------
<S> <C> <C> <C>
Primerica Financial Services Insurance Marketing, Inc. Delaware 100.00 General agency
licensing
Primerica Financial Services of Alabama, Inc. Alabama 100.00 General agency
licensing
Primerica Financial Services of Arizona, Inc. Arizona 100.00 General agency
licensing
Primerica Financial Services of Kentucky Inc. Kentucky 100.00 General agency
licensing
Primerica Financial Services of New Mexico, Inc. New Mexico 100.00 General agency
licensing
Primerica Insurance Agency of Massachusetts, Inc. Massachusetts 100.00 General agency
licensing
Primerica Insurance Marketing Services of
Puerto Rico, Inc. Puerto Rico 100.00 Insurance agency
Primerica Insurance Services of Louisiana, Inc. Louisiana 100.00 General agency
licensing
Primerica Insurance Services of Maryland, Inc. Maryland 100.00 General agency
licensing
Primerica Services, Inc. Georgia 100.00 Print operations
RCM Acquisition Inc. Delaware 100.00 Investments
SCN Acquisitions Company Delaware 100.00 Investments
SL&H Reinsurance, Ltd. Nevis 100.00 Reinsurance
Southwest Service Agreements, Inc. North Carolina 100.00 Warranty/service
agreements
Southwest Warranty Corporation Florida 100.00 Extended automobile
warranty
Berg Associates New Jersey 100.00 Inactive
CCC Holdings, Inc. Delaware 100.00 Holding company
Commercial Credit Company Delaware 100.00 Holding company.
American Health and Life Insurance Company Maryland 100.00 LH&A Insurance
Brookstone Insurance Company Vermont 100.00 Insurance managers
CC Finance Company, Inc. New York 100.00 Consumer lending
CC Financial Services, Inc. Hawaii 100.00 Consumer lending
CCC Fairways, Inc. Delaware 100.00 Investment company
Chesapeake Appraisal and Settlement Services Inc. Maryland 100.00 Appraisal/title
Chesapeake Appraisal and Settlement Services
Agency of Ohio Inc. Ohio 100.00 Appraisal/Title
City Loan Financial Services, Inc. Ohio 100.00 Direct loan
Commercial Credit Banking Corporation Oregon 100.00 Consumer finance
Commercial Credit Consumer Services, Inc. Minnesota 100.00 Consumer finance
Commercial Credit Corporation [AL] Alabama 100.00 Consumer finance
Commercial Credit Corporation [CA] California 100.00 Consumer finance
</TABLE>
6
<PAGE> 85
<TABLE>
<CAPTION>
% of Voting
Securities
Owned Directly
State of or Indirectly by
Organization The Travelers Inc. Principal Business
------------ ----------------- ------------------
<S> <C> <C> <C>
Commercial Credit Corporation [HI] Hawaii 100.00 Financial services
Commercial Credit Corporation [IA] Iowa 100.00 Consumer finance
Commercial Credit of Alabama, Inc. Delaware 100.00 Consumer lending
Commercial Credit of Mississippi, Inc. Delaware 100.00 Consumer finance
Commercial Credit Corporation [KY] Kentucky 100.00 Consumer finance
Certified Insurance Agency, Inc. Kentucky 100.00 Insurance agency
Commercial Credit Investment, Inc. Kentucky 100.00 Investment company
National Life Insurance Agency of Kentucky, Inc. Kentucky 100.00 Insurance agency
Union Casualty Insurance Agency, Inc. Kentucky 100.00 Insurance agency
Commercial Credit Corporation [MD] Maryland 100.00 Consumer finance
Action Data Services, Inc. Missouri 100.00 Data processing
Commercial Credit Plan, Incorporated [OK] Oklahoma 100.00 Consumer finance
Commercial Credit Corporation [NY] New York 100.00 Consumer finance
Commercial Credit Corporation [SC] South Carolina 100.00 Consumer finance
Commercial Credit Corporation [WV] West Virginia 100.00 Consumer finance
Commercial Credit Corporation NC North Carolina 100.00 Consumer finance
Commercial Credit Europe, Inc. Delaware 100.00 Inactive
Commercial Credit Far East Inc. Delaware 100.00 Inactive
Commercial Credit Insurance Services, Inc. Maryland 100.00 Insurance broker
Commercial Credit Insurance Agency (P&C) of
Mississippi, Inc. Mississippi 100.00 Insurance agency
Commercial Credit Insurance Agency of Alabama, Inc. Alabama 100.00 Insurance agency
Commercial Credit Insurance Agency of Hawaii, Inc. Hawaii 100.00 Insurance agency
Commercial Credit Insurance Agency of Kentucky, Inc. Kentucky 100.00 Insurance agency
Commercial Credit Insurance Agency of Massachusetts,
Inc. Massachusetts 100.00 Insurance agency
Commercial Credit Insurance Agency of Nevada, Inc. Nevada 100.00 Credit LH&A, P-C
insurance
Commercial Credit Insurance Agency of New
Mexico, Inc. New Mexico 100.00 Insurance agency/
Broker
Commercial Credit Insurance Agency of Ohio, Inc. Ohio 100.00 Insurance agency/
broker
Commercial Credit International, Inc. Delaware 100.00 Holding company
Commercial Credit International Banking Corporation Oregon 100.00 International lending
Commercial Credit Corporation CCC Limited Canada 100.00 Second mortgage loans
</TABLE>
7
<PAGE> 86
<TABLE>
<CAPTION>
% of Voting
Securities
Owned Directly
State of or Indirectly by
Organization The Travelers Inc. Principal Business
------------ ----------------- ------------------
<S> <C> <C> <C>
Commercial Credit Services do Brazil Ltda. Brazil 99.00 Inactive
Commercial Credit Services Belgium S.A. Belgium 100.00 Inactive
Commercial Credit Limited Delaware 100.00 Inactive
Commercial Credit Loan, Inc. [NY] New York 100.00 Consumer finance
Commercial Credit Loans, Inc. [DE] Delaware 100.00 Consumer finance
Commercial Credit Loans, Inc. [OH] Ohio 100.00 Consumer finance
Commercial Credit Loans, Inc. [VA] Virginia 100.00 Consumer finance
Commercial Credit Management Corporation Maryland 100.00 Intercompany services
Commercial Credit Plan Incorporated [TN] Tennessee 100.00 Consumer finance
Commercial Credit Plan Incorporated [UT] Utah 100.00 Consumer finance
Commercial Credit Plan Incorporated of Georgetown Delaware 100.00 Consumer finance
Commercial Credit Plan Industrial Loan Company Virginia 100.00 Consumer finance
Commercial Credit Plan, Incorporated [CO] Colorado 100.00 Consumer finance
Commercial Credit Plan, Incorporated [DE] Delaware 100.00 Consumer finance
Commercial Credit Plan, Incorporated [GA] Georgia 100.00 Consumer finance
Commercial Credit Plan, Incorporated [MO] Missouri 100.00 Consumer finance
Commercial Credit Securities, Inc. Delaware 100.00 Broker dealer
DeAlessandro & Associates, Inc. Delaware 100.00 Inactive
Park Tower Holdings, Inc. Delaware 100.00 Holding company
CC Retail Services, Inc. Delaware 100.00 Leasing, financing
Troy Textiles, Inc. Delaware 100.00 Inactive
Commercial Credit Development Corporation Delaware 100.00 Direct loan
Myers Park Properties, Inc. Delaware 100.00 Inactive
Travelers Home Mortgage Services of Alabama, Inc. Delaware 100.00 Inactive
Penn Re, Inc. North Carolina 100.00 Management company
Plympton Concrete Products, Inc. Delaware 100.00 Inactive
Resource Deployment, Inc. Texas 100.00 Management company
The Travelers Bank Delaware 100.00 Banking services
The Travelers Bank USA Delaware 100.00 Credit card bank
Travelers Home Equity, Inc. North Carolina 100.00 Financial services
</TABLE>
8
<PAGE> 87
<TABLE>
<CAPTION>
% of Voting
Securities
Owned Directly
State of or Indirectly by
Organization The Travelers Inc. Principal Business
------------ ----------------- ------------------
<S> <C> <C> <C>
CC Consumer Services of Alabama, Inc. Alabama 100.00 Financial services
CC Home Lenders Financial, Inc. Georgia 100.00 Financial services
CC Home Lenders, Inc. Ohio 100.00 Financial services
Commercial Credit Corporation [TX] Texas 100.00 Consumer finance
Commercial Credit Financial of Kentucky, Inc. Kentucky 100.00 Consumer finance
Commercial Credit Financial of West Virginia, Inc. West Virginia 100.00 Consumer finance
Commercial Credit Plan Consumer Discount Company Pennsylvania 100.00 Financial services
Commercial Credit Services of Kentucky, Inc. Kentucky 100.00 Financial services.
Travelers Home Mortgage Services, Inc. North Carolina 100.00 Financial services
Triton Insurance Company Missouri 100.00 P-C insurance
Verochris Corporation Delaware 100.00 Joint venture company
AMC Aircraft Corp. Delaware 100.00 Aviation
World Service Life Insurance Company Colorado 100.00 Life insurance
Greenwich Street Capital Partners, Inc. Delaware 100.00 Investments
Greenwich Street Investments, Inc. Delaware 100.00 Investments
Greenwich Street Capital Partners Offshore Holdings, Inc. Delaware 100.00 Investments
Mirasure Insurance Company, Ltd. Bermuda 100.00 Inactive
Pacific Basin Investments Ltd. Delaware 100.00 Inactive
Primerica Corporation <WY> Wyoming 100.00 Inactive
Primerica, Inc. Delaware 100.00 Name saver
Smith Barney Corporate Trust Company Delaware 100.00 Trust company
Smith Barney Holdings Inc. Delaware 100.00 Holding company
Nextco Inc. Delaware 100.00 Purchasing
R-H Capital, Inc. Delaware 100.00 Investments
R-H Sports Enterprises Inc Georgia 100.00 Sports representation
SB Cayman Holdings I Inc. Delaware 100.00 Holding company
Greenwich (Cayman) I Limited Cayman Islands 100.00 Corporate services
Greenwich (Cayman) II Limited Cayman Islands 100.00 Corporate services
Greenwich (Cayman) III Limited Cayman Islands 100.00 Corporate services
SB Cayman Holdings II Inc. Delaware 100.00 Holding company
</TABLE>
9
<PAGE> 88
<TABLE>
<CAPTION>
% of Voting
Securities
Owned Directly
State of or Indirectly by
Organization The Travelers Inc. Principal Business
------------ ----------------- ------------------
<S> <C> <C> <C>
SB Cayman Holdings III Inc. Delaware 100.00 Holding company
SB Cayman Holdings IV Inc. Delaware 100.00 Holding company
Smith Barney (Delaware) Inc. Delaware 100.00 Holding company
1345 Media Corp. Delaware 100.00 Holding company
Corporate Realty Advisors, Inc. Delaware 100.00 Realty trust adviser
IPO Holdings Inc. Delaware 100.00 Holding company
Institutional Property Owners, Inc. V Delaware 100.00 Investments
Institutional Property Owners, Inc. VI Delaware 100.00 General partner
MLA 50 Corporation Delaware 100.00 Limited partner
MLA GP Corporation Delaware 100.00 General partner
Smith Barney Acquisition Corporation Delaware 100.00 Offshore fund adviser
Smith Barney Global Capital Management, Inc. Delaware 100.00 Investment management
Smith Barney Realty, Inc. Delaware 100.00 Investments
Smith Barney Risk Investors, Inc. Delaware 100.00 Investments
Smith Barney Venture Corp. Delaware 100.00 Investments
Smith Barney (Ireland) Limited Ireland 100.00 Fund management
Smith Barney Asia Inc. Delaware 100.00 Investment banking
Smith Barney Asset Management Group (Asia) Pte. Ltd. Singapore 100.00 Asset management
Smith Barney Canada Inc. Canada 100.00 Investment dealer
Smith Barney Capital Services Inc. Delaware 100.00 Derivative product
transactions
Smith Barney Cayman Islands, Ltd. Cayman Islands 100.00 Securities trading
Smith Barney Commercial Corp. Delaware 100.00 Commercial credit
Smith Barney Commercial Corporation Asia Limited Hong Kong 99.00 Commodities trading
Smith Barney Europe Holdings, Ltd. United Kingdom 100.00 Holding corp.
Smith Barney Europe, Ltd. United Kingdom 100.00 Securities brokerage
Smith Barney Futures Management Inc. Delaware 100.00 Commodities pool
operator
Smith Barney Offshore Fund Ltd. Delaware 100.00 Commodity pool
Smith Barney Overview Fund PLC Dublin 100.00 Commodity fund
Smith Barney Inc. Delaware 100.00 Broker dealer
SBHU Life Agency, Inc. Delaware 100.00 Insurance brokerage
</TABLE>
10
<PAGE> 89
<TABLE>
<CAPTION>
% of Voting
Securities
Owned Directly
State of or Indirectly by
Organization The Travelers Inc. Principal Business
------------ ----------------- ------------------
<S> <C> <C> <C>
Robinson-Humphrey Insurance Services Inc. Georgia 100.00 Insurance brokerage
Robinson-Humphrey Insurance Services of
Alabama, Inc. Alabama 100.00 Insurance brokerage
SBHU Life Agency of Arizona, Inc. Arizona 100.00 Insurance brokerage
SBHU Life Agency of Indiana, Inc. Indiana 100.00 Insurance brokerage
SBHU Life Agency of Utah, Inc. Utah 100.00 Insurance brokerage
SBHU Life Insurance Agency of Massachusetts, Inc. Massachusetts 100.00 Insurance brokerage
SBS Insurance Agency of Hawaii, Inc. Hawaii 100.00 Insurance brokerage
SBS Insurance Agency of Idaho, Inc. Idaho 100.00 Insurance brokerage
SBS Insurance Agency of Maine, Inc. Maine 100.00 Insurance brokerage
SBS Insurance Agency of Montana, Inc. Montana 100.00 Insurance brokerage
SBS Insurance Agency of Nevada, Inc. Nevada 100.00 Insurance brokerage
SBS Insurance Agency of Ohio, Inc. Ohio 100.00 Insurance brokerage
SBS Insurance Agency of South Dakota, Inc. South Dakota 100.00 Insurance brokerage
SBS Insurance Agency of Wyoming, Inc. Wyoming 100.00 Insurance brokerage
SBS Insurance Brokerage Agency of Arkansas, Inc. Arkansas 100.00 Insurance brokerage
SBS Insurance Brokers of Kentucky, Inc. Kentucky 100.00 Insurance brokerage
SBS Insurance Brokers of New Hampshire, Inc. New Hampshire 100.00 Insurance brokerage
SBS Insurance Brokers of North Dakota, Inc. North Dakota 100.00 Insurance brokerage
SBS Life Insurance Agency of Puerto Rico, Inc. Puerto Rico 100.00 Insurance brokerage
SLB Insurance Agency of Maryland, Inc. Maryland 100.00 Insurance brokerage
Smith Barney Life Agency Inc. Louisiana 100.00 Insurance brokerage
Smith Barney (Hong Kong) Limited Hong Kong 100.00 Broker dealer
Smith Barney (Netherlands) Inc. Delaware 100.00 Broker dealer
Smith Barney International Incorporated Oregon 100.00 Broker dealer
Smith Barney (Singapore) Pte Ltd Singapore 100.00 Commodities
Smith Barney Pacific Holdings, Inc. British
Virgin Islands 100.00 Holding company
Smith Barney (Asia) Limited Hong Kong 100.00 Broker dealer
Smith Barney (Pacific) Limited Hong Kong 100.00 Commodities dealer
Smith Barney Securities Pte Ltd Singapore 100.00 Securities brokerage
Smith Barney Puerto Rico Inc. Puerto Rico 100.00 Broker dealer
</TABLE>
11
<PAGE> 90
<TABLE>
<CAPTION>
% of Voting
Securities
Owned Directly
State of or Indirectly by
Organization The Travelers Inc. Principal Business
------------ ----------------- ------------------
<S> <C> <C> <C>
The Robinson-Humphrey Company, Inc. Delaware 100.00 Broker dealer
Smith Barney Mortgage Brokers Inc. Delaware 100.00 Mortgage brokerage
Smith Barney Mortgage Capital Corp. Delaware 100.00 Mortgage-backed
securities
Smith Barney Mortgage Capital Group, Inc. Delaware 100.00 Mortgage trading
Smith Barney Mutual Funds Management Inc. Delaware 100.00 Investment management
Smith Barney Asset Management Co., Ltd. Japan 100.00 Investment advisor
Smith Barney Strategy Advisers Inc. Delaware 100.00 Investment management
E.C. Tactical Management S.A. Luxembourg 100.00 Investment management
Smith Barney Offshore, Inc. Delaware 100.00 Decathlon Fund advisor
Decathlon Offshore Limited Cayman Islands 100.00 Commodity fund
Smith Barney S.A. France 100.00 Commodities trading
Smith Barney Asset Management France S.A. France 100.00 Com. based asset
management
Smith Barney Securities Investment Consulting Co. Ltd. Taiwan 99.00 Investrment analysis
Smith Barney Shearson (Chile) Corredora de Seguro Limitada Chile 100.00 Insurance brokerage
Structured Mortgage Securities Corporation Delaware 100.00 Mortgage-backed
securities
The Travelers Investment Management Company Connecticut 100.00 Investment advisor
Smith Barney Private Trust Company New York 100.00 Trust company.
Smith Barney Private Trust Company of Florida Florida 100.00 Trust company
Tinmet Corporation Delaware 100.00 Inactive
Travelers Group Diversified Distribution Services, Inc. Delaware 100.00 Alternative marketing
Travelers Group Exchange, Inc. Delaware 100.00 Insurance agency
Travelers Services Inc. Delaware 100.00 Holding company
Tribeca Management Inc. Delaware 100.00
TRV Employees Investments, Inc. Delaware 100.00 Investments
TRV/RCM Corp. Delaware 100.00 Inactive
TRV/RCM LP Corp. Delaware 100.00 Inactive
</TABLE>
12
<PAGE> 91
Item 27. Number of Contract Owners
As of March 1, 1997, 38 contract owners held qualified and non-qualified
contracts offered by the Registrant.
Item 28. Indemnification
Section 33-320a 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 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; or (3) the court, upon application by the individual, determines in
view of all of the circumstances that such person is fairly and reasonably
entitled to be indemnified, and then for such amount as the court shall
determine. With respect to proceedings brought by or in the right of the
corporation, the statute provides that the corporation shall indemnify its
officers, directors and certain other defined individuals, against reasonable
expenses actually incurred by them in connection with such proceedings, subject
to certain limitations.
C.G.S. Section 33-320a provides an exclusive remedy; a Connecticut corporation
cannot indemnify a director or officer to an extent either greater or less than
that authorized by the statute, e.g., pursuant to its certificate of
incorporation, by-laws, or any separate contractual arrangement. However, the
statute does specifically authorize a corporation to procure indemnification
insurance to provide greater indemnification rights. The premiums for such
insurance may be shared with the insured individuals on an agreed basis.
Travelers Group Inc. also provides liability insurance for its directors and
officers and the directors and officers of its subsidiaries, including the
Depositor. 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 liability (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.
<PAGE> 92
Item 29. Principal Underwriter
(a) Tower Square Securities, Inc.
One Tower Square
Hartford, CT 06183
Tower Square Securities, Inc. also serves as the principal underwriter
for:
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
The Travelers Timed Aggressive Stock Account for Variable Annuities
The Travelers Timed Bond Account for Variable Annuities
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 Travelers Fund ABD for Variable Annuities
The Travelers Separate Account QP for Variable Annuities
The Travelers Separate Account QP II for Variable Annuities
The Travelers Fund UL for Variable Life Insurance
The Travelers Fund UL II for Variable Life Insurance
The Travelers Variable Life Insurance Separate Account One
The Travelers Variable Life Insurance Separate Account Three
The Travelers Variable Life Insurance Separate Account Two
The Travelers Variable Life Insurance Separate Account Four
(b) Name and Principal Positions and Offices
Business Address * With Underwriter
------------------ ---------------------
Russell H. Johnson Chairman of the Board, Chief Executive
Officer, President and Chief Operating
Officer
William F. Scully, III Member, Board of Directors,
Senior Vice President, Treasurer
and Chief Financial Officer
Cynthia P. Macdonald Vice President, Chief Compliance Officer
and Assistant Secretary
Joanne K. Russo Member, Board of Directors
Senior Vice President
Kathleen A. McGah General Counsel and Secretary
Jay S. Benet Member, Board of Directors
George C. Kokulis Member, Board of Directors
Warren H. May Member, Board of Directors
Donald R. Munson, Jr. Senior Vice President
Stuart L. Baritz Vice President
Michael P. Kiley Vice President
Tracey Kiff-Judson Second Vice President
Robin A. Jones Second Vice President
Whitney F. Burr Second Vice President
Marlene M. Ibsen Second Vice President
John J. Williams, Jr. Director and Assistant Compliance Officer
Susan M. Cursio Director and Operations Manager
Dennis D. D'Angelo Director
<PAGE> 93
(b) (cont'd)
Name and Principal Positions and Offices
Business Address * With Underwriter
------------------ ---------------------
Thomas P. Tooley Director
Nancy S. Waldrop Assistant Treasurer
* Principal business address: One Tower Square, Hartford, Connecticut
06183
(c) Not Applicable.
Item 30. Location of Accounts and Records
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.
<PAGE> 94
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 29th day of
April, 1997.
THE TRAVELERS FUND ABD II FOR VARIABLE ANNUITIES
(Registrant)
THE TRAVELERS LIFE AND ANNUITY COMPANY
(Depositor)
By: *IAN R. STUART
-----------------------------------------------
Ian R. Stuart
Senior Vice President, Chief Financial Officer
Chief Accounting Officer and Controller
As required by the Securities Act of 1933, this amendment to this registration
statement has been signed by the following persons in the capacities indicated
on this 29th day of April, 1997.
*MICHAEL A. CARPENTER Director and Chairman of the Board, President
- --------------------------- and Chief Executive Officer
(Michael A. Carpenter)
*JAY S. BENET Director
- ---------------------------
(Jay S. Benet)
*GEORGE C. KOKULIS Director
- ---------------------------
(George C. Kokulis)
*ROBERT I. LIPP Director
- ---------------------------
(Robert I. Lipp)
*IAN R. STUART Director, Senior Vice President, Chief Financial
- --------------------------- Officer, Chief Accounting Officer and Controller
(Ian R. Stuart)
*KATHERINE M. SULLIVAN Director, Senior Vice President and General
- ---------------------------
(Katherine M. Sullivan)
*MARC P. WEILL Director
- ---------------------------
(Marc P. Weill)
*By: Ernest J. Wright, Attorney-in-Fact
<PAGE> 95
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
- ------- ----------- -----------------
<S> <C> <C>
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 December 22, 1995.)
3(a). Form of Distribution and Management Agreement among the Registrant,
The Travelers Life and Annuity Company and Tower Square Securities,
Inc. (Incorporated herein by reference to Exhibit 3(a) to the
Registration Statement on Form N-4, filed December 22, 1995.)
3(b). Form of Selling Agreement. Electronically
4. Form of Variable Annuity Contract(s). (Incorporated
herein by reference to Exhibit 4 to the Registration
Statement on Form N-4, filed June 17, 1996.)
6(a). Charter of The Travelers Life and Annuity Company, as
amended on April 10, 1990. (Incorporated herein
by reference to Exhibit 3(a) to the Registration
Statement on Form N-4, File No. 33-58131, filed via
Edgar on March 17, 1995.)
6(b). By-Laws of The Travelers Life and Annuity Company, as
amended on October 20, 1994. (Incorporated herein
by reference to Exhibit 3(b) to the Registration
Statement on Form N-4, File No. 33-58131, filed via
Edgar on March 17, 1995.)
9. Opinion of Counsel as to the legality of securities being Electronically
registered by Registrant.
10(a). Consent of Coopers & Lybrand, L.L.P., Independent Electronically
Accountants.
10(b). Consent of KPMG Peat Marwick LLP, Independent Electronically
Certified Public Accountants.
</TABLE>
<PAGE> 96
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
- ------- ----------- -----------------
<S> <C> <C>
13. Schedule of computation of each performance quotation- Electronically
Standardized and Nonstandardized.
15. Powers of Attorney authorizing Jay S. Fishman or
Ernest J. Wright as signatory for Michael A Carpenter,
Robert I. Lipp, Charles O. Prince III, Marc P. Weill,
Irwin R. Ettinger, Donald T. DeCarlo and Christine B.
Mead. (Incorporated herein by reference to Exhibit 15
to the Registration Statement on Form N-4, filed
December 22, 1995.)
15(b). Powers of Attorney authorizing Ernest J. Wright and
and Kathleen A. McGah as signatory for Michael A.
Carpenter, Ian R. Stuart and Katherine M. Sullivan.
(Incorporated herein by reference to Exhibit 15(b) to the
Registration Statement on Form N-4, filed June 17, 1996.)
15(c). Powers of Attorney authorizing Ernest J. Wright and
Kathleen A. McGah as signatory for Jay S. Benet and
George C. Kokulis. (Incorporated herein by reference to
Exhibit 15(c) to Post-Effective Amendment No. 1 to the
Registration Statement on Form N-4, filed August 15, 1996.)
15(d). Power of Attorney authorizing Ernest J. Wright and
Kathleen A. McGah as signatory for Ian R. Stuart.
(Incorporated herein by reference to Exhibit 15(d) to the
Registration Statement on Form N-4 filed February 28, 1997.)
27. Financial Data Schedule Electronically
</TABLE>
<PAGE> 1
Exhibit 3(b)
SELLING AGREEMENT
THIS AGREEMENT is made among Travelers Insurance Company ("TIC"), Travelers Life
and Annuity Companies ("TLAC"), (collectively the "Insurance Companies") and
Tower Square Securities (Underwriter) and , ("Broker/Dealer") together
with such affiliated insurance agencies (collectively the "Selling Entities")
as are specified on the Selling Agreement Schedule Page.
In consideration of the mutual promises contained in this agreement, the parties
agree as follows:
1. Purpose and Background. The Underwriter, the Insurance Companies,
Broker/Dealer and Selling Entities enter into this agreement for the purpose of
authorizing Broker/Dealer, through its insurance licensed agents as described in
Section 5 below, to solicit applications for such life insurance (including
variable life), annuity contracts (including fixed, variable, and modified
guaranteed annuity products) and, long term care insurance contracts
(collectively the "Insurance Policies") as are listed on the Selling Agreement
Schedule Pages (the "Schedule Pages"). These Schedules Page may be amended from
time to time to add other Insurance Policies.
2. Licensing and Appointment. The Insurance Companies have each respectively
appointed Underwriter to serve as the distributor and principal underwriter of
the variable life or variable annuity Insurance Policies. The Underwriter is
registered with the SEC, the National Association of Securities Dealers, Inc.
("NASD") and all appropriate state securities regulatory authorities as a
Broker/Dealer.
The Underwriter and Broker/Dealer desire that Broker/Dealer through its
registered representatives ("Registered Representatives") be authorized to sell
the Insurance Policies.
3. Securities Licensing/ NASD Compliance. Broker/Dealer shall, at all times when
performing its functions under this agreement, be registered as a securities
broker with the SEC and NASD and licensed or registered as a securities
broker-dealer in the states and other local jurisdictions that require such
licensing or registration in connection with sales of the variable products.
Broker/Dealer agrees to abide by all rules and regulations of the NASD and to
comply with all applicable state and insurance and securities laws and
regulations. For the purpose of compliance with any applicable federal or state
securities laws or regulations promulgated under them, Broker/Dealer
acknowledges and agrees that in performing Broker/Dealer services covered by
this Agreement, it is acting in the capacity of an independent broker and dealer
as defined by the By-Laws of the NASD and not as an agent or employee of either
Underwriter or any registered investment company.
1
<PAGE> 2
4. Insurance Licensing. Broker/Dealer (and if appropriate Insurance Selling
Entities) agree that at all times when performing its functions under this
agreement, the entity soliciting sales of the Insurance Policies will be validly
licensed as an insurance agency in the states and other jurisdictions that
require such licensing or registration in connection sales or solicitation of
the Insurance Policies. If applicable, Broker/Dealer represents that it or its
insurance agency affiliate is properly authorized under applicable state law to
receive insurance commissions generated from sales of the Insurance Policies.
Broker/Dealer and Selling Entities each represent that they are engaged in the
issuance of the Insurance Policies in accordance with federal securities laws
and the applicable insurance laws of those states in which the Insurance
Policies have been qualified for sale.
Broker/Dealer represents and warrants that it is authorized and licensed as an
agent under applicable state insurance laws to solicit, negotiate and effect the
contracts of insurance contemplated hereunder. In the event Broker/Dealer is not
licensed as such, an insurance agency affiliated with Broker/Dealer shall be
licensed as an agent under applicable state insurance laws to solicit, negotiate
and effect the contracts of insurance contemplated hereunder.
5. Appointment of Broker/Dealer. The Insurance Companies (and with respect to
any variable life insurance or annuity product, Underwriter) hereby authorize
the Broker/Dealer to sell those Insurance Policies listed on the Schedule Page,
as such page may be amended from time to time, the variable Insurance Policies
through its validly appointed and licensed registered representatives (the
"Registered Representatives"). Broker/Dealer is also appointed to perform
certain administrative services necessary to facilitate the solicitation and
sales of the Insurance Policies.
Broker/Dealer or, if applicable, Selling Entities, are appointed as a general
agencies of Insurance Companies and is authorized to sell the Insurance Policies
listed on the Schedule Pages.
Broker/Dealer and Selling Entities must comply with the following requirements:
(a) All securities services provided in connection with the sale of insurance
securities will be through registered representatives of Broker/Dealer;
(b) Unregistered employees will not engage in any securities activities, nor
receive any compensation based on transactions in insurance securities or the
provision of securities advice;
(c) Broker/Dealer will maintain books and records relating to transactions in
insurance securities at its home office;
2
<PAGE> 3
(d) Customers purchasing variable Insurance Policies will make their checks
payable to Insurance Companies unless a Netting Agreement has been entered into;
For the purpose of compliance with any applicable state insurance laws or
regulations promulgated under them, Broker/Dealer acknowledges and agrees that
solely in performing the insurance-selling functions reflected by this
Agreement, it or its Registered Representative is acting as the agent of the
Insurance Companies, and in that capacity is authorized only to solicit
applications from the public for the Insurance Policies.
6. Responsibility for Registered Representatives Activities. Broker/Dealer will
select and supervise persons whom it will train to solicit applications for the
Insurance Policies in conformance with applicable state and federal laws and
regulations. Persons engaged in the sale of variable Insurance Policies will be
registered representatives of Broker/Dealer in accordance with the rules of the
NASD. All individuals soliciting sales of Insurance Policies will be properly
licensed and appointed to the Travelers Insurance Companies in accordance with
the state insurance laws of those jurisdictions in which the Insurance Policies
may lawfully be distributed.
The Insurance Companies shall have authority to determine whether to appoint or
terminate a particular registered representative of the Broker Dealer as an
agent of the Insurance Companies. Broker/Dealer agrees to cooperate in supplying
information or making recommendations necessary to complete such insurance agent
appointments. Additionally, Broker/Dealer shall supply the information required
in the "Recommendation Letter" set forth in Exhibit 1 for each of its agents for
which it seeks appointment.
Upon request by Underwriter, Broker/Dealer and/or Insurance Agency shall furnish
such appropriate records as may be necessary to establish supervision of its
Registered Representatives in connection with sales of the Insurance Policies.
Upon Underwriter's review of such supervisory materials, Broker/Dealer shall
make such changes to its registered representatives' rules of conduct as
Underwriter may reasonably request but only to the extent that such requests
relate to sales of the Insurance Policies.
Broker/Dealer shall notify Underwriter if any Registered Representative ceases
to be a registered representative of Broker/Dealer or ceases to maintain the
proper licensing required for the sale of the Insurance Policies or fails to
meet material rules and standards imposed by either Broker/Dealer or the Selling
Entities.
7. Suitability of Sales of Contract. Broker/Dealer will review all contract
proposals and applications for suitability and for completeness and correctness
as to form concerning sales of variable Insurance Policies. Broker/Dealer shall
also be responsible for ensuring compliance with NASD suitability rules and
standards applicable to purchases of the Insurance Policies.
3
<PAGE> 4
Broker/Dealer will promptly, but in no case later than the end of the business
day that Broker/Dealer receives applications and payment, forward to the
applicable Insurance Company, at addresses provided, all such applications found
suitable and in good form, together with any payments received with such
applications without deduction or reduction unless a Netting Agreement has been
entered into. Broker/Dealer will immediately return to the applicant all
applications together with any payments received therewith deemed by
Broker/Dealer to be unsuitable or not complete and correct as to form. The
Insurance Companies reserve the right to reject any Insurance Product
application and return any payment made in connection with an application which
is rejected. Insurance Policies issued on applications accepted by the Insurance
Companies will be forwarded to Broker/Dealer or at the direction of
Broker/Dealer to the registered representative for delivery to the Contract
Owner. Broker/Dealer shall obtain and retain a written receipt for each Contract
which Broker/Dealer delivers.
The parties acknowledge that sales and solicitations may, where consistent with
state insurance laws and regulations, be conducted either without an
application, or on a basis where an application is submitted subsequent to a
sale. If such sales procedures are permitted, Broker/Dealer agrees that it will
continue to be responsible for compliance with applicable laws concerning, among
other things, suitability and policy delivery requirements. Broker/Dealer agrees
to hold Underwriter harmless for any failure to follow such rules or
regulations.
8. Solicitation/Representatives Concerning the Contracts. Broker/Dealer will
perform the selling functions required by this Agreement in accordance with the
terms and conditions of any applicable prospectus(es). Broker/Dealer will make
only representations included in the prospectus or in any authorized
supplemental material. No sales solicitations, including the delivery of
supplemental sales literature or other such materials, shall occur, be delivered
to, or used with a prospective purchaser unless accompanied or preceded by
appropriate and then-current prospectus(es).
Any material prepared or used by Broker/Dealer or its Registered Representative,
which describes in whole or in part or refers by name or form to any of the
Insurance Companies' Insurance Policies or underlying funds or uses the name of
the Insurance Companies, Underwriter, or Travelers Group Inc., or the logos or
service marks of any of them, or the name, logos or service marks of any
"Affiliated Company" of any of them, as that term is defined in Section 2(a)(2)
of the Investment Company Act of 1940, must be approved by Underwriter in
writing prior to any such use.
Broker/Dealer and Selling Entities acknowledge that information pertaining to
Underwriter and Insurance Companies is proprietary in nature. Selling Entities
agree that they will not disclose any information concerning Insurance Companies
or Underwriter's products, services or programs or any person for consideration
or otherwise unless Broker/Dealer and/or Selling Entities consents to such use
in writing. Broker/Dealer and Selling Entities agree that, following the
termination of this Agreement for any reason, they will not enter into any plan,
program scheme or course of action which would
4
<PAGE> 5
systematically attempt to induce any Contract owner (s) away from Travelers,
except that Broker Dealer may always recommend a move to another company's
product if such move would be more suitable than Traveler's product for a
particular client or clients or in the event of a detrimental change in the
financial stability of Travelers which Broker Dealer believe would jeopardize
their clients.
9. Compensation. Compensation payable to Broker/Dealer on sales of the Contracts
solicited by Broker/Dealer will be paid to Broker/Dealer, or as necessary to
meet any and all legal requirements, to a licensed insurance affiliate, in
accordance with the compensation schedule(s) set forth on the Schedule Pages as
such Schedule Pages may be amended from time to time and are in effect at the
time the Contract payments are received by the applicable Insurance Company (in
the case of annuities) or at the time the applications are received (in the case
of life insurance). The Insurance Companies and Underwriter reserve the
privilege of revising the compensation schedules set forth in the Schedule Pages
at any time with thirty (30) days prior written notice to Broker/Dealer. The
parties understand that with regard to rate specials only, for the modified
guaranteed annuity contracts, commission schedules may be adjusted without
provision of prior notice.
10. Assignment of Agreement. This Agreement may not be assigned except by mutual
consent and will continue, subject to the termination by any party on written
notice to the other party, except that in the event Broker/Dealer ceases to be a
registered Broker/Dealer or a member of the NASD, this Agreement will
immediately terminate. Underwriter reserves the right to designate, at its sole
discretion, an alternative Principal Underwriter for the distribution of the
Contracts covered by this Agreement with thirty (30) days prior written notice
to Broker/Dealer except in the event that TIC replaces Underwriter as discussed
below.
The parties understand that if TIC replaces Underwriter any such substituted
party will automatically assume all of Underwriter's rights and duties under
this agreement. TIC may assume such functions itself or assign these to
affiliated, properly licensed broker-dealers. TIC will notify Broker/Dealer if
any such substitution occurs.
11. Indemnification. No party to this Agreement will be liable for any
obligation, act or omission of the other. Each party to this Agreement will hold
harmless and indemnify the (1) Registered Investment Companies which are used to
fund the Contracts, (2) Insurance Companies, (3) Underwriter, (4) Broker/Dealer,
and (5) Selling Entities, as appropriate, for any loss or expense suffered as a
result of the violation or noncompliance by any party to this agreement of any
of the terms of this agreement or of any applicable law or regulation. No party
nor any of its employees or agents will be liable to the other party for any
direct, special or consequential damages arising out of or in connection with
the performance of any services pursuant to the Agreement. Each party to this
agreement agrees to indemnify and hold harmless any other affected party for any
losses, claims, damages or liabilities (or actions in respect thereof) which
arise out of or are based on any untrue statement or alleged untrue statement of
a material fact required to be stated or
5
<PAGE> 6
necessary to make the statements made not misleading in the connection with the
solicitation, sale, or administration of the of the Insurance Policies.
12. Notices. All notices to the Insurance Companies or Underwriter relating to
this Agreement should be sent to the attention of :
The Travelers Insurance Companies
One Tower Square
Hartford, CT 06183-6091
All notices to Broker/Dealer will be duly given if mailed or
faxed to the address provided to Insurance Companies by Broker/Dealer from time
to time.
13. Independent Contractors. Underwriter and Insurance Companies are independent
contractors with respect to Broker/Dealer, Insurance Agency, and to Registered
Representatives.
14. Governing Law. This Agreement shall be construed in accordance with and
governed by the laws of the state of Connecticut.
15. Amendment of Agreement. Underwriter reserves the right to amend this
Agreement at any time, and the submission of an application by Broker/Dealer
after notice of any such amendment has been sent to the other parties shall
constitute the other parties' agreement to any such amendment. The compensation
schedules attached to the Schedule Pages may, however, be revised at any time
without the provision of prior notice with regard to rate specials only for the
modified guaranteed annuities.
16. Termination. This Agreement may be terminated, without cause, by any party
upon thirty (30) days' prior written notice, and may be terminated, for failure
to perform satisfactorily or other cause, by any party immediately; and shall be
terminated if Broker/Dealer shall cease to be a registered Broker/Dealer under
the Securities Exchange Act of 1934, as amended, and a member of the NASD.
Notwithstanding, the following sections shall survive any such termination:
Sections 6, 8, 10, 11 and 14.
17. Waiver Upon Termination. Failure of any party to terminate this Agreement
for any of the causes set forth in this agreement will not constitute a waiver
of the right to terminate this Agreement at a later time for any of these
causes.
18. Books and Records. Broker/Dealer shall maintain all books and records
required by applicable laws and regulations in connection with the offer and
sale of the Insurance Policies. The books, accounts and records of Broker/Dealer
relating to the sale of the Insurance Policies shall be maintained so as to
clearly and accurately disclose the nature and details of all transactions.
6
<PAGE> 7
19. Cooperation with Regulatory Investigations. Broker/Dealer and Underwriter
agree to cooperate fully in any insurance, securities or other regulatory
investigation, inquiry, inspection, or proceeding or in any judicial proceeding
arising in connection with the Insurance Policies. Broker/Dealer and Underwriter
shall cooperate with each other to resolve any customer complaint, and each
agrees to promptly notify the other upon receipt of notice of any investigation,
claim, or proceeding involving the Contracts or any situation which would
materially affect the respective party's ability to perform its obligations
hereunder.
20. Fidelity Bond. Broker/Dealer represents that all of its directors, officers,
employees and Registered Representatives are and shall be continuously covered
by a blanket fidelity bond, covering for larceny and embezzlement, issued by a
reputable bonding company. This bond shall be maintained at Broker/Dealer's
expense and shall be, at least, of the form, type and amount required under the
NASD Rules of Fair Practice.
21. Counterparts. This Agreement may be executed in one or more counterpart,
each of which shall be deemed in all respects an original.
7
<PAGE> 8
In reliance on the representations set forth and in consideration of the
undertakings described herein, the parties represented below do hereby contract
and agree. This agreement is effective _______________, 1997
Travelers Insurance Company Travelers Life and Annuity
Company
By:________________________ By:________________________
Title:_____________________ Title:_____________________
Date:______________________ Date:______________________
Tower Square Securities, Inc. ___________________________
Broker Dealer
By:________________________ By:________________________
Title:_____________________ Title:_____________________
Date:______________________
___________________________ ___________________________
Insurance Agency Insurance Agency
By:________________________ By:________________________
Title:_____________________ Title:_____________________
Date:______________________ Date:______________________
ver. 2
8
<PAGE> 1
EXHIBIT 9
April 29, 1997
The Travelers Life and Annuity Company
One Tower Square
Hartford, Connecticut 06183
Gentlemen:
With reference to Post-Effective Amendment No. 3 to the Registration
Statement on Form N-4 filed by The Travelers Life and Annuity Company and The
Travelers Fund ABD II for Variable Annuities with the Securities and Exchange
Commission covering Flexible Premium Variable Annuity contracts, I have examined
such documents and such law as I have considered necessary and appropriate, and
on the basis of such examination, it is my opinion that:
1. The Travelers Life and Annuity Company is duly organized and
existing under the laws of the State of Connecticut and has been
duly authorized to do business and to issue variable annuity
contracts by the Insurance Commissioner of the State of
Connecticut.
2. The Travelers Fund ABD II for Variable Annuities is a duly
authorized and validly existing separate account established
pursuant to Section 38a-433 of the Connecticut General Statutes.
3. The variable annuity contracts covered by the above Registration
Statement, and all pre-and post-effective amendments relating
thereto, have been approved and authorized by the Insurance
Commissioner of the State of Connecticut and when issued will be
valid, legal and binding obligations of The Travelers Life and
Annuity Company and The Travelers Fund ABD II for Variable
Annuities.
I hereby consent to the filing of this opinion as an exhibit to the
above-referenced Post-Effective Amendment and to the reference to this opinion
under the caption "Legal Proceedings and Opinion" in the Prospectus constituting
a part of such Post-Effective Amendment.
Katherine M. Sullivan
General Counsel
The Travelers Life and Annuity Company
<PAGE> 1
EXHIBIT (10A)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Post-Effective Amendment
No. 3 to the Registration Statement of The Travelers Fund ABD II for Variable
Annuities (the "Fund") on Form N-4 (File No. 33-65339) of our report dated
February 7, 1997, on our audit of the financial statements of the Fund, which
report is included in the Fund's Annual Report for the period ended December 16,
1996 (date operations commenced) to December 31, 1996 which is incorporated by
reference in this Post-Effective Amendment to the Registration Statement. We
also consent to the reference to our Firm as experts in accounting and auditing
under the caption "Independent Accountants" in the Statement of Additional
Information.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
April 24, 1997
<PAGE> 1
Exhibit 10(b)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
The Travelers Life and Annuity Company:
We consent to the use of our report included herein and to the reference to our
firm as experts under the heading "Independent Accountants".
KPMG Peat Marwick LLP
Hartford, Connecticut
April 24, 1997
<PAGE> 1
EXHIBIT 13
THE TRAVELERS FUND ABD II FOR VARIABLE ANNUITIES
SCHEDULE FOR COMPUTATION OF TOTAL RETURN CALCULATIONS
The standardized and nonstandardized average annual total returns are computed
according to the formula described below. A hypothetical initial investment of
$1,000 is applied to the Funding Option, and then related to ending redeemable
values as of the most recent fiscal year end, for the calendar year-to-date
(nonstandardized only), and over a 1-year, 3-year (nonstandardized only),
5-year, and 10-year period, or since inception if a Funding Option has not been
in existence for one of the prescribed periods.
T = (ERV/P)(1/n) -1 where:
T = average annual total return
P = a hypothetical initial payment of $1,000
n = the applicable year (1, 3, 5, 10) or portion thereof
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of each of the periods
Both the standardized and nonstandardized performance returns reflect the
deduction for the management fees and other expenses for a Funding Option, the
mortality and expense risk charge and the administrative expense charge.
For Funding Options that were in existence prior to the date they became
available under Fund ABD II, the standardized and nonstandarized average total
return quotations will show the investment performance that such Funding Options
would have achieved (reduced by applicable charges/fees had they been held under
the Contract for the period quoted. The total return quotations are based on
historical earnings and are not necessarily representative of future
performance. An Owner's Contract Value at redemption may be more or less than
original cost.
Standardized Method
The standardized returns take into consideration all fees and/or charges
applicable to the Funding Option or contract.
Under the standardized method, the $30 annual contract administrative charge is
reflected in the calculation and is assumed to be deducted at the end of August
of each year. It is expressed as a percentage of assets based on the actual fees
collected (or, anticipated, if a new product) divided by the average net assets
(or, anticipated average net assets, if a new product) for contracts sold under
the prospectus for each year for which performance is shown.
Each standardized average annual total return quotation assumes a total
redemption at the end of each period with the assessment of any applicable
withdrawal charge (6%, 6%, 5%, 5%, 4%, 3% 2%) at that time.
Nonstandardized Method
Nonstandardized returns do not reflect the deduction of any applicable
withdrawal charge or the $30 annual administrative 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 a Schedule of the Computation of the Total Return Quotations, both
Standardized and Nonstandardized, see attached.
<PAGE> 2
Portfolio Architect
Standardized Performance
CAPITAL APPRECIATION FUND
<TABLE>
<CAPTION>
Unit Values Dollars Units Dollars Units Dollars Units Annual Fee
----------- ------- ------- ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
--------
12/31/86 0.355923 1000 2809.596 0.016%
--------
08/31/87 0.487589 -0.12622 -0.259 0.016%
08/31/88 0.341875 -0.18642 -0.545 0.016%
08/31/89 0.424192 -0.17214 -0.406 0.016%
08/31/90 0.357292 -0.17558 -0.491 0.016%
08/31/91 0.461437 -0.18391 -0.399 0.016%
--------
12/31/91 0.491180 1000 2035.914 0.016%
--------
08/31/92 0.493850 -0.10725 -0.217 -0.21456 -0.434 0.016%
08/31/93 0.641665 -0.18493 -0.288 -0.25500 -0.397 0.016%
08/31/94 0.620510 -0.20552 -0.331 -0.28340 -0.457 0.016%
08/31/95 0.780701 -0.22813 -0.292 -0.31457 -0.403 0.016%
--------
12/31/95 0.816209 1000 1225.176 0.016%
--------
08/31/96 0.928253 -0.15002 -0.162 -0.36512 -0.393 -0.50347 -0.542 0.021%
--------
12/31/96 1.031780 -0.08427 -0.082 -0.13994 -0.136 -0.19297 -0.187 0.021%
--------
</TABLE>
<TABLE>
<CAPTION>
One-Year Five-Year Ten-Year
<S> <C> <C> <C>
Ending units 1224.932 2034.257 2805.076
Contract Value $1,263.86 $2,098.91 $2,894.22
Cash Surrender Value $1,203.86 $2,058.91 $2,894.22
--------
Total Return 20.39% 105.89% 189.42%
-------- -------- --------
Average Annual Total Return 15.54% 11.21%
-------- --------
</TABLE>
<TABLE>
<CAPTION>
ALLIANCE GROWTH PORTFOLIO
Unit Values Dollars Units Dollars Units Annual Fee
<S> <C> <C> <C> <C> <C> <C>
- --------
06/20/94 0.584317 1000 1711.400 0.016%
- --------
08/31/94 0.605634 -0.03214 -0.053 0.016%
08/31/95 0.785461 -0.19045 -0.242 0.016%
- --------
12/31/95 0.812738 1000 1230.409 0.016%
- --------
08/31/96 0.879764 -0.14617 -0.166 -0.29918 -0.340 0.021%
- --------
12/31/96 1.036860 -0.08275 -0.080 -0.11508 -0.111 0.021%
- --------
</TABLE>
<TABLE>
<CAPTION>
One-Year Since inception
<S> <C> <C>
Ending units 1230.163 1710.654
Contract Value $1,275.51 $1,773.71
Cash Surrender Value $1,215.51 $1,723.71
-------- --------
Total Return 21.55% 72.37%
-------- --------
Average Annual Total Return 23.97%
--------
</TABLE>
MFS TOTAL RETURN PORTFOLIO
<TABLE>
<CAPTION>
Unit Values Dollars Units Dollars Units Annual Fee
<S> <C> <C> <C> <C> <C> <C>
- --------
06/20/94 1.000000 1000 1000.000 0.016%
08/31/94 1.018312 -0.03185 -0.031 0.016%
08/31/95 1.121520 -0.17118 -0.153 0.016%
- --------
12/31/95 1.211283 1000 825.571 0.016%
- --------
08/31/96 1.252736 -0.14279 -0.114 -0.24925 -0.199 0.021%
- --------
12/31/96 1.367557 -0.07591 -0.056 -0.09193 -0.067 0.021%
- --------
</TABLE>
<TABLE>
<CAPTION>
One-Year Since inception
<S> <C> <C>
Ending units 825.401 999.550
Contract Value $1,128.78 $1,366.94
Cash Surrender Value $1,068.78 $1,316.94
--------
Total Return 6.88% 31.69%
-------- --------
Average Annual Total Return 11.48%
--------
</TABLE>
PUTNAM DIVERSIFIED INCOME PORTFOLIO
<TABLE>
<CAPTION>
Unit Values Dollars Units Dollars Units Annual Fee
<S> <C> <C> <C> <C> <C> <C>
- --------
06/20/94 0.809110 1000 1235.926 0.016%
- --------
08/31/94 0.818177 -0.03174 -0.039 0.016%
08/31/95 0.897324 -0.16961 -0.189 0.016%
- --------
12/31/95 0.943425 1000 1059.968 0.016%
- --------
08/31/96 0.955299 -0.14127 -0.148 -0.24037 -0.252 0.021%
- --------
12/31/96 1.006841 -0.07298 -0.072 -0.08508 -0.084 0.021%
- --------
</TABLE>
<TABLE>
<CAPTION>
One-Year Since inception
<S> <C> <C>
Ending units 1059.748 1235.362
Contract Value $1,067.00 $1,243.81
Cash Surrender Value $1,007.00 $1,193.81
--------
Total Return 0.70% 19.38%
-------- --------
Average Annual Total Return 7.24%
--------
</TABLE>
<PAGE> 3
EQUITY INCOME PORTFOLIO (FIDELITY SUB-ADVISER)
<TABLE>
<CAPTION>
Unit Values Dollars Units Annual Fee
<S> <C> <C> <C> <C>
- --------
08/30/96 0.922928 1000 1083.508 0.021%
- --------
08/31/96 0.922928 -0.00058 -0.001 0.021%
- --------
12/31/96 1.025939 -0.07411 -0.072 0.021%
- --------
</TABLE>
<TABLE>
<CAPTION>
Since inception
<S> <C>
Ending units 1083.435
Contract Value $1,111.54
Cash Surrender Value $1,051.54
Total Return 5.15%
</TABLE>
FEDERATED STOCK PORTFOLIO
<TABLE>
<CAPTION>
Unit Values Dollars Units Annual Fee
<S> <C> <C> <C> <C>
- --------
08/30/96 1.000000 1000 1000.000 0.021%
- --------
08/31/96 1.000000 -0.00058 -0.001 0.021%
- --------
12/31/96 1.120708 -0.07443 -0.066 0.021%
- --------
</TABLE>
<TABLE>
<CAPTION>
Since inception
<S> <C>
Ending units 999.933
Contract Value $1,120.63
Cash Surrender Value $1,060.63
Total Return 6.06%
</TABLE>
LARGE CAP PORTFOLIO (FIDELITY SUB-ADVISER)
<TABLE>
<CAPTION>
Unit Values Dollars Units Annual Fee
<S> <C> <C> <C> <C>
- --------
08/30/96 0.907122 1000 1102.388 0.021%
- --------
08/31/96 0.907122 -0.00058 -0.001 0.021%
- --------
12/31/96 1.022896 -0.07467 -0.073 0.021%
- --------
</TABLE>
<TABLE>
<CAPTION>
Since inception
<S> <C>
Ending units 1102.314
Contract Value $1,127.55
Cash Surrender Value $1,067.55
Total Return 6.76%
</TABLE>
LAZARD INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
Unit Values Dollars Units Annual Fee
<S> <C> <C> <C> <C>
- --------
08/01/96 0.958308 1000 1043.506 0.021%
- --------
08/31/96 0.945756 -0.01715 -0.018 0.021%
- --------
12/31/96 1.027066 -0.07225 -0.070 0.021%
- --------
</TABLE>
<TABLE>
<CAPTION>
Since inception
<S> <C>
Ending units 1043.418
Contract Value $1,071.66
Cash Surrender Value $1,011.66
Total Return 1.17%
</TABLE>
<PAGE> 4
MFS EMERGING GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Unit Values Dollars Units Annual Fee
<S> <C> <C> <C> <C>
- --------
08/30/96 0.951800 1000 1050.641 0.021%
- --------
08/31/96 0.951800 -0.00058 -0.001 0.021%
- --------
12/31/96 1.004157 -0.07212 -0.072 0.021%
- --------
</TABLE>
<TABLE>
<CAPTION>
Since inception
<S> <C>
Ending units 1050.568
Contract Value $1,054.94
Cash Surrender Value $994.94
Total Return -0.51%
</TABLE>
FEDERATED HIGH YIELD PORTFOLIO
<TABLE>
<CAPTION>
Unit Values Dollars Units Annual Fee
<S> <C> <C> <C> <C>
- --------
08/30/96 1.000000 1000 1000.000 0.021%
- --------
08/31/96 1.000000 -0.00058 -0.001 0.021%
- --------
12/31/96 1.070940 -0.07268 -0.068 0.021%
- --------
</TABLE>
<TABLE>
<CAPTION>
Since inception
<S> <C>
Ending units 999.931
Contract Value $1,070.87
Cash Surrender Value $1,010.87
Total Return 1.09%
</TABLE>
TRAVELERS QUALITY BOND PORTFOLIO
<TABLE>
<CAPTION>
Unit Values Dollars Unit Annual Fee
<S> <C> <C> <C> <C>
- --------
08/30/96 0.971168 1000 1029.688 0.021%
- --------
08/31/96 0.971168 -0.00058 -0.001 0.021%
- --------
12/31/96 1.000909 -0.07127 -0.071 0.021%
- --------
</TABLE>
<TABLE>
<CAPTION>
Since inception
<S> <C>
Ending units 1029.616
Contract Value $1,030.55
Cash Surrender Value $970.55
Total Return -2.94%
</TABLE>
TRAVELERS CASH INCOME TRUST
<TABLE>
<CAPTION>
Unit Values Dollars Units Dollars Units Dollars Units Annual Fee
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------
12/31/87 1.000000 1000 1000.000 0.016%
- --------
08/31/88 1.034369 -0.10880 -0.105 0.016%
08/31/89 1.101482 -0.17085 -0.155 0.016%
08/31/90 1.166930 -0.18143 -0.155 0.016%
08/31/91 1.231601 -0.19180 -0.156 0.016%
- --------
12/31/91 1.256672 1000 795.753 0.016%
- --------
08/31/92 1.274683 -0.10773 -0.085 -0.20039 -0.157 0.016%
08/31/93 1.287798 -0.16311 -0.127 -0.20485 -0.159 0.016%
08/31/94 1.296908 -0.16450 -0.127 -0.20659 -0.159 0.016%
08/31/95 1.356929 -0.16887 -0.124 -0.21208 -0.156 0.016%
- --------
12/31/95 1.369504 1000 730.191 0.016%
- --------
08/31/96 1.391588 -0.14152 -0.102 -0.22952 -0.165 -0.28825 -0.207 0.021%
- --------
12/31/96 1.406691 -0.07170 -0.051 -0.07809 -0.056 -0.09807 -0.070 0.021%
- --------
</TABLE>
<TABLE>
<CAPTION>
One-Year Five-Year Since Inception
<S> <C> <C> <C>
Ending units 730.038 795.069 998.521
Contract Value $1,026.94 $1,118.42 $1,404.61
Cash Surrender Value $966.94 $1,078.42 $1,404.61
--------
Total Return -3.31% 7.84% 40.46%
-------- -------- --------
Average Annual Total Return 1.52% 3.84%
-------- --------
</TABLE>
<PAGE> 5
PORTFOLIO ARCHITECT
Non-Standardized Performance
Capital Appreciation Fund
<TABLE>
<CAPTION>
Unit Value Dollars Units Dollars Units Dollars Units Dollars Units Dollars Units Annual Fee
--------- ------- ----- ------- ----- ------- ----- ------- ----- ------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
05/26/83 0.348580 1000 2868.782
- --------
12/31/86 0.355923 1000 2809.596 0.000%
- --------
08/31/87 0.487589 0.00000 0.000 0.000 0.000 0.000%
08/31/88 0.341875 0.00000 0.000 0.000 0.000 0.000%
08/31/89 0.424192 0.00000 0.000 0.000 0.000 0.000%
08/31/90 0.357292 0.00000 0.000 0.000 0.000 0.000%
08/31/91 0.461437 0.00000 0.000 0.000 0.000 0.000%
- --------
12/31/91 0.491180 1000 2035.914 0.000%
- --------
08/31/92 0.493850 0.00000 0.000 0.00000 0.000 0.000 0.000 0.000%
08/31/93 0.641665 0.00000 0.000 0.00000 0.000 0.000 0.000 0.000%
- --------
12/31/93 0.646424 1000 1546.972
- --------
08/31/94 0.620510 0.00000 0.00000 0.00000 0.000 0.00000 0.000 0.000 0.000 0.000%
08/31/95 0.780701 0.00000 0.00000 0.00000 0.000 0.00000 0.000 0.000 0.000 0.000%
- --------
12/31/95 0.816209 1000 1225.176 0.000%
- --------
08/31/96 0.928253 0.00000 0.000 0.00000 0.00000 0.00000 0.000 0.00000 0.000 0.000 0.000 0.000%
- --------
12/31/96 1.031780 0.00000 0.000 0.00000 0.00000 0.00000 0.000 0.00000 0.000 0.000 0.000 0.000%
- --------
</TABLE>
<TABLE>
<CAPTION>
One-Year Three-Year Five-Year Ten-Year Since Inception
<S> <C> <C> <C> <C> <C>
Ending Units 1225.176 1546.972 2035.914 2809.596 2868.782
Contract Value $1,264.11 $1,596.13 $2,100.62 $2,898.88 $2,959.95
---------
Total Return 26.41% 59.61% 110.06% 189.89% 196.00%
--------- --------- --------- --------- ---------
Average Annual Total Return 16.85% 15.98% 11.22% 8.30%
--------- --------- --------- ---------
</TABLE>
ALLIANCE GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Unit Value Dollars Units Dollars Units Dollars Units Annual Fee
---------- ------- ----- ------- ----- ------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------
06/20/94 0.584317 1000 1711.400 0.000%
- --------
08/31/94 0.605634 0.00000 0.000 0.000%
08/31/95 0.785461 0.00000 0.000 0.000%
- --------
12/31/95 0.812738 1000 1230.409 0.000%
- --------
08/31/96 0.879764 0.00000 0.000 0.00000 0.000 0.000%
- --------
12/31/96 1.036860 0.00000 0.000 0.00000 0.000 0.000%
- --------
</TABLE>
<TABLE>
<CAPTION>
One-Year Since Inception
<S> <C> <C>
Ending Units 1230.409 1711.400
Contract Value $1,275.76 $1,774.48
---------
Total Return 27.58% 77.45%
--------- ---------
Average Annual Total Return 25.40%
---------
</TABLE>
MFS TOTAL RETURN PORTFOLIO
<TABLE>
<CAPTION>
Unit Value Dollars Units Dollars Units Annual Fee
---------- ------- ----- ------- ----- ----------
<S> <C> <C> <C> <C> <C> <C>
- --------
06/20/94 1.000000 1000 1000.000 0.000%
- --------
08/31/94 1.018312 0.00000 0.000 0.000%
08/31/95 1.121520 0.00000 0.000 0.000%
- --------
12/31/95 1.211665 1000 825.311
- --------
08/31/96 1.252736 0.00000 0.000 0.00000 0.000 0.000%
- --------
12/31/96 1.367988 0.00000 0.000 0.00000 0.000 0.000%
- --------
</TABLE>
<TABLE>
<CAPTION>
One-Year Since Inception
<S> <C> <C>
Ending Units 825.311 1000.000
Contract Value $1,129.02 $1,367.99
--------
Total Return 12.90% 12.90%
-------- --------
Average Annual Total Return 13.16%
--------
</TABLE>
PUTNAM DIVERSIFIED INCOME PORTFOLIO
<TABLE>
<CAPTION>
Unit Value Dollars Units Dollars Units Annual Fee
---------- ------- ----- ------- ----- ----------
<S> <C> <C> <C> <C> <C> <C>
- --------
06/20/94 0.809110 1000 1235.926 0.000%
- --------
08/31/94 0.818177 0.00000 0.000 0.000%
08/31/95 0.897324 0.00000 0.000 0.000%
- --------
12/31/95 0.943425 1000 1059.968 0.000%
- --------
08/31/96 0.955299 0.00000 0.000 0.00000 0.000 0.000%
- --------
12/31/96 1.006841 0.00000 0.000 0.00000 0.000 0.000%
- --------
</TABLE>
<TABLE>
<CAPTION>
One-Year Since Inception
<S> <C> <C>
Ending Units 1059.968 1235.926
Contract Value $1,067.22 $1,244.38
---------
Total Return 6.72% 24.44%
--------- ---------
Average Annual Total Return 9.01%
---------
</TABLE>
EQUITY INCOME PORTFOLIO (FIDELITY SUB-ADVISER)
<TABLE>
<CAPTION>
Unit Value Dollars Units Annual Fee
---------- ------- ----- ----------
<C> <C> <C> <C> <C>
- --------
08/30/96 0.922928 1000 1083.508 0.000%
- --------
08/31/96 0.922928 0.00000 0.000 0.000%
- --------
12/31/96 1.025939 0.00000 0.000 0.000%
- --------
</TABLE>
<TABLE>
<CAPTION>
Since Inception
<S> <C>
Ending Units 1083.508
Contract Value $1,111.61
Total Return 11.16%
</TABLE>
FEDERATED STOCK PORTFOLIO
<TABLE>
<CAPTION>
Unit Value Dollars Units Annual Fee
---------- ------- ----- ----------
<S> <C> <C> <C> <C>
- --------
08/30/96 1.000000 1000 1000.000 0.000%
- --------
08/31/96 1.000000 0.00000 0.000 0.000%
- --------
12/31/96 1.120708 0.00000 0.000 0.000%
- --------
</TABLE>
<TABLE>
<CAPTION>
Since Inception
<S> <C>
Ending Units 1000.000
Contract Value $1,120.71
Total Return 12.07%
</TABLE>
LARGE CAP PORTFOLIO (FIDELITY SUB-ADVISER)
<TABLE>
<CAPTION>
Unit Value Dollars Units Annual Fee
---------- ------- ----- ----------
<C> <C> <C> <C> <C>
- --------
08/30/96 0.907122 1000 1102.388 0.000%
- --------
08/31/96 0.907122 0.00000 0.000 0.000%
- --------
12/31/96 1.022896 0.00000 0.000 0.000%
- --------
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
Since inception
<S> <C>
Ending units 1102.388
Contract Value $1,127.63
Total Return 12.76%
</TABLE>
LAZARD INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
Unit Value Dollars Units Annual Fee
---------- ------- ----- ----------
<S> <C> <C> <C> <C>
08/01/96 0.958308 1000 1043.506 0.000%
08/31/96 0.945756 0.00000 0.000 0.000%
12/31/96 1.027066 0.00000 0.000 0.000%
</TABLE>
<TABLE>
<CAPTION>
Since Inception
<S> <C>
Ending Units 1043.506
Contract Value $1,071.75
Total Return 7.17%
</TABLE>
MFS EMERGING GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Unit Value Dollars Units Annual Fee
---------- ------- ----- ----------
<S> <C> <C> <C> <C>
- --------
08/30/96 0.951800 1000 1050.641 0.000%
- --------
08/31/96 0.951800 0.00000 0.000 0.000%
- --------
12/31/96 1.004157 0.00000 0.000 0.000%
- --------
</TABLE>
<TABLE>
<CAPTION>
Since Inception
<S> <C>
Ending Units 1050.641
Contract Value $1,055.01
Total Return 5.50%
</TABLE>
FEDERATED HIGH YIELD PORTFOLIO
<TABLE>
<CAPTION>
Unit Value Dollars Units Annual Fee
---------- -------- ----- ----------
<S> <C> <C> <C> <C>
08/30/96 1.000000 1000 1000.000 0.000%
08/31/96 1.000000 0.00000 0.000 0.000%
12/31/96 1.070940 0.00000 0.000 0.000%
</TABLE>
<TABLE>
<CAPTION>
Since Inception
<S> <C>
Ending Units 1000.000
Contract Value $1,070.94
Total Return 7.09%
</TABLE>
TRAVELERS QUALITY BOND PORTFOLIO
<TABLE>
<CAPTION>
Unit Value Dollars Units Annual Fee
---------- ------- ----- ----------
<S> <C> <C> <C> <C>
- --------
08/30/96 0.971168 1000 1029.688 0.000%
- --------
08/31/96 0.971168 0.00000 0.000 0.000%
- --------
12/31/96 1.000909 0.00000 0.000 0.000%
- --------
</TABLE>
<TABLE>
<CAPTION>
Since Inception
<S> <C>
Ending Units 1029.688
Contract Value $1,030.62
Total Return 3.06%
</TABLE>
TRAVELERS CASH INCOME TRUST
<TABLE>
<CAPTION>
Unit Value Dollars Units Dollars Units Dollars Units Dollars Units Annual Fee
----------- ------- ----- ------- ----- ------- ----- ------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- --------
12/31/87 1.000000 1000 1000.000 0.000%
- --------
08/31/88 1.034369 0.00000 0.000 0.000%
08/31/89 1.101482 0.00000 0.000 0.000%
08/31/90 1.166930 0.00000 0.000 0.000%
08/31/91 1.231601 0.00000 0.000 0.000%
- --------
12/31/91 1.256672 1000 795.753 0.000%
- --------
08/31/92 1.274683 0.00000 0.000 0.00000 0.000 0.000%
08/31/93 1.287798 0.00000 0.000 0.00000 0.000 0.000%
- --------
12/31/93 1.289480 1000 775.506
- --------
08/31/94 1.296908 0.00000 0.00000 0.00000 0.000 0.00000 0.000 0.000%
08/31/95 1.356929 0.00000 0.00000 0.00000 0.000 0.00000 0.000 0.000%
- --------
12/31/95 1.369504 1000 730.191 0.000%
- --------
08/31/96 1.391588 0.00000 0.000 0.00000 0.00000 0.00000 0.000 0.00000 0.000 0.000%
- --------
12/31/96 1.406691 0.00000 0.000 0.00000 0.00000 0.00000 0.000 0.00000 0.000 0.000%
- --------
</TABLE>
<TABLE>
<CAPTION>
One-Year Three-Year Five-Year Since Inception
<S> <C> <C> <C> <C>
Ending Units 730.191 775.506 795.753 1000.000
Contract Value $1,027.15 $1,090.90 $1,119.38 $1,406.69
---------
Total Return 2.72% 9.09% 11.94% 40.67%
--------- --------- --------- ---------
Average Annual Total Return 2.94% 2.28% 3.86%
--------- --------- ---------
</TABLE>
<PAGE> 7
Portfolio Architect
Standardized Performance
CAPITAL APPRECIATION FUND
<TABLE>
<CAPTION>
Unit Values Dollars Units Dollars Units Dollars Units Annual Fee
----------- ------- ------- ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
--------
12/31/86 0.355923 1000 2809.596 0.016%
--------
08/31/87 0.487589 -0.12622 -0.259 0.016%
08/31/88 0.341875 -0.18642 -0.545 0.016%
08/31/89 0.424192 -0.17214 -0.406 0.016%
08/31/90 0.357292 -0.17558 -0.491 0.016%
08/31/91 0.461437 -0.18391 -0.399 0.016%
--------
12/31/91 0.491180 1000 2035.914 0.016%
--------
08/31/92 0.493850 -0.10725 -0.217 -0.21456 -0.434 0.016%
08/31/93 0.641665 -0.18493 -0.288 -0.25500 -0.397 0.016%
08/31/94 0.620510 -0.20552 -0.331 -0.28340 -0.457 0.016%
08/31/95 0.780701 -0.22813 -0.292 -0.31457 -0.403 0.016%
--------
12/31/95 0.816209 1000 1225.176 0.016%
--------
08/31/96 0.928253 -0.15002 -0.162 -0.36512 -0.393 -0.50347 -0.542 0.021%
--------
12/31/96 1.031780 -0.08427 -0.082 -0.13994 -0.136 -0.19297 -0.187 0.021%
--------
</TABLE>
<TABLE>
<CAPTION>
One-Year Five-Year Ten-Year
<S> <C> <C> <C>
Ending units 1224.932 2034.257 2805.076
Contract Value $1,263.86 $2,098.91 $2,894.22
Cash Surrender Value $1,203.86 $2,058.91 $2,894.22
--------
Total Return 20.39% 105.89% 189.42%
-------- -------- --------
Average Annual Total Return 15.54% 11.21%
-------- --------
</TABLE>
<TABLE>
<CAPTION>
ALLIANCE GROWTH PORTFOLIO
Unit Values Dollars Units Dollars Units Annual Fee
<S> <C> <C> <C> <C> <C> <C>
- --------
06/20/94 0.584317 1000 1711.400 0.016%
- --------
08/31/94 0.605634 -0.03214 -0.053 0.016%
08/31/95 0.785461 -0.19045 -0.242 0.016%
- --------
12/31/95 0.812738 1000 1230.409 0.016%
- --------
08/31/96 0.879764 -0.14617 -0.166 -0.29918 -0.340 0.021%
- --------
12/31/96 1.036860 -0.08275 -0.080 -0.11508 -0.111 0.021%
- --------
</TABLE>
<TABLE>
<CAPTION>
One-Year Since inception
<S> <C> <C>
Ending units 1230.163 1710.654
Contract Value $1,275.51 $1,773.71
Cash Surrender Value $1,215.51 $1,723.71
-------- --------
Total Return 21.55% 72.37%
-------- --------
Average Annual Total Return 23.97%
--------
</TABLE>
MFS TOTAL RETURN PORTFOLIO
<TABLE>
<CAPTION>
Unit Values Dollars Units Dollars Units Annual Fee
<S> <C> <C> <C> <C> <C> <C>
- --------
06/20/94 1.000000 1000 1000.000 0.016%
08/31/94 1.018312 -0.03185 -0.031 0.016%
08/31/95 1.121520 -0.17118 -0.153 0.016%
- --------
12/31/95 1.211283 1000 825.571 0.016%
- --------
08/31/96 1.252736 -0.14279 -0.114 -0.24925 -0.199 0.021%
- --------
12/31/96 1.367557 -0.07591 -0.056 -0.09193 -0.067 0.021%
- --------
</TABLE>
<TABLE>
<CAPTION>
One-Year Since inception
<S> <C> <C>
Ending units 825.401 999.550
Contract Value $1,128.78 $1,366.94
Cash Surrender Value $1,068.78 $1,316.94
--------
Total Return 6.88% 31.69%
-------- --------
Average Annual Total Return 11.48%
--------
</TABLE>
PUTNAM DIVERSIFIED INCOME PORTFOLIO
<TABLE>
<CAPTION>
Unit Values Dollars Units Dollars Units Annual Fee
<S> <C> <C> <C> <C> <C> <C>
- --------
06/20/94 0.809110 1000 1235.926 0.016%
- --------
08/31/94 0.818177 -0.03174 -0.039 0.016%
08/31/95 0.897324 -0.16961 -0.189 0.016%
- --------
12/31/95 0.943425 1000 1059.968 0.016%
- --------
08/31/96 0.955299 -0.14127 -0.148 -0.24037 -0.252 0.021%
- --------
12/31/96 1.006841 -0.07298 -0.072 -0.08508 -0.084 0.021%
- --------
</TABLE>
<TABLE>
<CAPTION>
One-Year Since inception
<S> <C> <C>
Ending units 1059.748 1235.362
Contract Value $1,067.00 $1,243.81
Cash Surrender Value $1,007.00 $1,193.81
--------
Total Return 0.70% 19.38%
-------- --------
Average Annual Total Return 7.24%
--------
</TABLE>
<PAGE> 8
EQUITY INCOME PORTFOLIO (FIDELITY SUB-ADVISER)
<TABLE>
<CAPTION>
Unit Values Dollars Units Annual Fee
<S> <C> <C> <C> <C>
- --------
08/30/96 0.922928 1000 1083.508 0.021%
- --------
08/31/96 0.922928 -0.00058 -0.001 0.021%
- --------
12/31/96 1.025939 -0.07411 -0.072 0.021%
- --------
</TABLE>
<TABLE>
<CAPTION>
Since inception
<S> <C>
Ending units 1083.435
Contract Value $1,111.54
Cash Surrender Value $1,051.54
Total Return 5.15%
</TABLE>
FEDERATED STOCK PORTFOLIO
<TABLE>
<CAPTION>
Unit Values Dollars Units Annual Fee
<S> <C> <C> <C> <C>
- --------
08/30/96 1.000000 1000 1000.000 0.021%
- --------
08/31/96 1.000000 -0.00058 -0.001 0.021%
- --------
12/31/96 1.120708 -0.07443 -0.066 0.021%
- --------
</TABLE>
<TABLE>
<CAPTION>
Since inception
<S> <C>
Ending units 999.933
Contract Value $1,120.63
Cash Surrender Value $1,060.63
Total Return 6.06%
</TABLE>
LARGE CAP PORTFOLIO (FIDELITY SUB-ADVISER)
<TABLE>
<CAPTION>
Unit Values Dollars Units Annual Fee
<S> <C> <C> <C> <C>
- --------
08/30/96 0.907122 1000 1102.388 0.021%
- --------
08/31/96 0.907122 -0.00058 -0.001 0.021%
- --------
12/31/96 1.022896 -0.07467 -0.073 0.021%
- --------
</TABLE>
<TABLE>
<CAPTION>
Since inception
<S> <C>
Ending units 1102.314
Contract Value $1,127.55
Cash Surrender Value $1,067.55
Total Return 6.76%
</TABLE>
LAZARD INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
Unit Values Dollars Units Annual Fee
<S> <C> <C> <C> <C>
- --------
08/01/96 0.958308 1000 1043.506 0.021%
- --------
08/31/96 0.945756 -0.01715 -0.018 0.021%
- --------
12/31/96 1.027066 -0.07225 -0.070 0.021%
- --------
</TABLE>
<TABLE>
<CAPTION>
Since inception
<S> <C>
Ending units 1043.418
Contract Value $1,071.66
Cash Surrender Value $1,011.66
Total Return 1.17%
</TABLE>
<PAGE> 9
MFS EMERGING GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Unit Values Dollars Units Annual Fee
<S> <C> <C> <C> <C>
- --------
08/30/96 0.951800 1000 1050.641 0.021%
- --------
08/31/96 0.951800 -0.00058 -0.001 0.021%
- --------
12/31/96 1.004157 -0.07212 -0.072 0.021%
- --------
</TABLE>
<TABLE>
<CAPTION>
Since inception
<S> <C>
Ending units 1050.568
Contract Value $1,054.94
Cash Surrender Value $994.94
Total Return -0.51%
</TABLE>
FEDERATED HIGH YIELD PORTFOLIO
<TABLE>
<CAPTION>
Unit Values Dollars Units Annual Fee
<S> <C> <C> <C> <C>
- --------
08/30/96 1.000000 1000 1000.000 0.021%
- --------
08/31/96 1.000000 -0.00058 -0.001 0.021%
- --------
12/31/96 1.070940 -0.07268 -0.068 0.021%
- --------
</TABLE>
<TABLE>
<CAPTION>
Since inception
<S> <C>
Ending units 999.931
Contract Value $1,070.87
Cash Surrender Value $1,010.87
Total Return 1.09%
</TABLE>
TRAVELERS QUALITY BOND PORTFOLIO
<TABLE>
<CAPTION>
Unit Values Dollars Unit Annual Fee
<S> <C> <C> <C> <C>
- --------
08/30/96 0.971168 1000 1029.688 0.021%
- --------
08/31/96 0.971168 -0.00058 -0.001 0.021%
- --------
12/31/96 1.000909 -0.07127 -0.071 0.021%
- --------
</TABLE>
<TABLE>
<CAPTION>
Since inception
<S> <C>
Ending units 1029.616
Contract Value $1,030.55
Cash Surrender Value $970.55
Total Return -2.94%
</TABLE>
TRAVELERS CASH INCOME TRUST
<TABLE>
<CAPTION>
Unit Values Dollars Units Dollars Units Dollars Units Annual Fee
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------
12/31/87 1.000000 1000 1000.000 0.016%
- --------
08/31/88 1.034369 -0.10880 -0.105 0.016%
08/31/89 1.101482 -0.17085 -0.155 0.016%
08/31/90 1.166930 -0.18143 -0.155 0.016%
08/31/91 1.231601 -0.19180 -0.156 0.016%
- --------
12/31/91 1.256672 1000 795.753 0.016%
- --------
08/31/92 1.274683 -0.10773 -0.085 -0.20039 -0.157 0.016%
08/31/93 1.287798 -0.16311 -0.127 -0.20485 -0.159 0.016%
08/31/94 1.296908 -0.16450 -0.127 -0.20659 -0.159 0.016%
08/31/95 1.356929 -0.16887 -0.124 -0.21208 -0.156 0.016%
- --------
12/31/95 1.369504 1000 730.191 0.016%
- --------
08/31/96 1.391588 -0.14152 -0.102 -0.22952 -0.165 -0.28825 -0.207 0.021%
- --------
12/31/96 1.406691 -0.07170 -0.051 -0.07809 -0.056 -0.09807 -0.070 0.021%
- --------
</TABLE>
<TABLE>
<CAPTION>
One-Year Five-Year Since Inception
<S> <C> <C> <C>
Ending units 730.038 795.069 998.521
Contract Value $1,026.94 $1,118.42 $1,404.61
Cash Surrender Value $966.94 $1,078.42 $1,404.61
--------
Total Return -3.31% 7.84% 40.46%
-------- -------- --------
Average Annual Total Return 1.52% 3.84%
-------- --------
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 1-MO
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> DEC-16-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 209,638
<INVESTMENTS-AT-VALUE> 203,962
<RECEIVABLES> 4,649
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 208,611
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 58
<TOTAL-LIABILITIES> 58
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 206,161
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (5,676)
<NET-ASSETS> 208,553
<DIVIDEND-INCOME> 5,162
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 59
<NET-INVESTMENT-INCOME> 5,103
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> (5,676)
<NET-CHANGE-FROM-OPS> (573)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 206,161
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 208,553
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 59
<AVERAGE-NET-ASSETS> 98,550
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
