<PAGE> 1
Registration No. 333-23327
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
Post-Effective Amendment No. 11
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, 2000 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.
<PAGE> 2
PART A
Information Required in a Prospectus
<PAGE> 3
TRAVELERS ACCESS ANNUITY PROSPECTUS:
THE TRAVELERS FUND ABD FOR VARIABLE ANNUITIES
THE TRAVELERS FUND ABD II FOR VARIABLE ANNUITIES
This prospectus describes TRAVELERS ACCESS ANNUITY, a flexible premium variable
annuity contract (the "Contract") issued by The Travelers Insurance Company or
The Travelers Life and Annuity Company, depending on the state in which you
purchased your Contract. The Contract is available in connection with certain
retirement plans that qualify for special federal income tax treatment
("qualified Contracts") as well as those that do not qualify for such treatment
("nonqualified Contracts"). We may issue it 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, we refer to Contracts and certificates as "Contracts."
You can choose to have your premium ("purchase payments") accumulate on a fixed
basis and/ or a variable basis. Your contract value will vary daily to reflect
the investment experience of the subaccounts ("funding options") you select and
any interest credited to the Fixed Account. The variable funding options are:
<TABLE>
<S> <C>
Capital Appreciation Fund TRAVELERS SERIES FUND INC.
Money Market Portfolio Alliance Growth Portfolio
ALLIANCE VARIABLE PRODUCT SERIES FUND, INC. MFS Total Return Portfolio
Premier Growth Portfolio Class B Putnam Diversified Income Portfolio
DELAWARE GROUP PREMIUM FUND THE TRAVELERS SERIES TRUST
REIT Series Convertible Bond Portfolio
DREYFUS VARIABLE INVESTMENT FUND Disciplined Mid Cap Stock Portfolio
Appreciation Portfolio(1) Disciplined Small Cap Stock Portfolio
Small Cap Portfolio Equity Income Portfolio
GREENWICH STREET SERIES FUND Federated High Yield Portfolio
Equity Index Portfolio Class II Shares Federated Stock Portfolio
JANUS ASPEN SERIES Large Cap Portfolio
Balanced Portfolio -- Service Shares Lazard International Stock Portfolio
Global Life Sciences Portfolio -- Service Shares MFS Emerging Growth Portfolio
Global Technology Portfolio -- Service Shares MFS Mid Cap Growth Portfolio
Worldwide Growth Portfolio -- Service Shares MFS Research Portfolio
SALOMON BROTHERS VARIABLE SERIES FUND INC. Strategic Stock Portfolio
Capital Fund Travelers Quality Bond Portfolio
Investors Fund VARIABLE INSURANCE PRODUCTS FUND II
Small Cap Growth Fund (FIDELITY)
Contrafund(R) Portfolio -- Service Class
2
WARBURG PINCUS TRUST
Emerging Markets Portfolio
</TABLE>
- ---------------
(1) Formerly Capital Appreciation Portfolio
The Fixed Account is described in Appendix C. 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. READ AND RETAIN THEM FOR FUTURE REFERENCE.
This prospectus provides the information that you should know before investing
in the Contract. You can receive additional information about the Travelers Fund
ABD for Variable Annuities or the Travelers Fund ABD II for Variable Annuities
("Separate Account") by requesting a copy of the Statement of Additional
Information ("SAI") dated May 1, 2000. 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 Insurance Company,
Annuity Investor Services, One Tower Square, Hartford, Connecticut 06183, call
1-800-842-9368 or access the SEC's website (http://www.sec.gov). See Appendix D
for the SAI's table of contents.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
VARIABLE ANNUITY CONTRACTS ARE NOT DEPOSITS OF ANY BANK, AND ARE NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY.
PROSPECTUS DATED MAY 1, 2000
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<S> <C>
Index of Special Terms................ 2
Summary............................... 3
Fee Table............................. 6
Condensed Financial Information....... 9
The Annuity Contract.................. 9
Contract Owner Inquiries............ 9
Purchase Payments................... 9
Accumulation Units.................. 9
The Funding Options................. 10
Charges and Deductions................ 13
General............................. 13
Administrative Charges.............. 13
Mortality and Expense Risk Charge... 14
Funding Option Expenses............. 14
Premium Tax......................... 14
Changes in Taxes Based Upon Premium
or Value......................... 14
Transfers............................. 14
Dollar Cost Averaging............... 15
Access to Your Money.................. 15
Systematic Withdrawals.............. 16
Loans............................... 16
Ownership Provisions.................. 16
Types of Ownership.................. 16
Contract Owner................... 16
Beneficiary...................... 17
Annuitant........................ 17
Death Benefit......................... 17
Death Proceeds Before the Maturity
Date............................. 17
Payment of Proceeds................. 17
Death Proceeds After the Maturity
Date............................. 19
The Annuity Period.................... 19
Maturity Date....................... 19
Allocation of Annuity............... 19
Variable Annuity.................... 20
Fixed Annuity....................... 20
Payment Options....................... 20
Election of Options................. 20
Annuity Options..................... 21
Income Options...................... 21
Miscellaneous Contract Provisions..... 22
Right to Return..................... 22
Termination......................... 22
Required Reports.................... 22
Suspension of Payments.............. 23
Transfers of Contract Values to
Other Annuities.................. 23
The Separate Accounts................. 23
Performance Information............. 23
Federal Tax Considerations............ 24
General Taxation of Annuities....... 24
Types of Contracts: Qualified or
Nonqualified..................... 24
Nonqualified Annuity Contracts...... 25
Qualified Annuity Contracts......... 25
Penalty Tax for Premature
Distributions.................... 25
Diversification Requirements for
Variable Annuities............... 25
Ownership of the Investments........ 26
Mandatory Distributions for
Qualified Plans.................. 26
Taxation of Death Benefit
Proceeds......................... 26
Other Information..................... 26
The Insurance Companies............. 26
Financial Statements................ 27
IMSA................................ 27
Distribution of Variable Annuity
Contracts........................ 27
Conformity with State and Federal
Laws............................. 27
Voting Rights....................... 28
Legal Proceedings and Opinions...... 28
Appendix A: Condensed Financial
Information for The Travelers
Insurance Company: Separate Account
ABD................................. A-1
Appendix B: Condensed Financial
Information for The Travelers Life &
Annuity Company: Separate Account
ABD II.............................. B-1
Appendix C: The Fixed Account......... C-1
Appendix D: Contents of the Statement
of Additional Information........... D-1
</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 Period................... 9
Accumulation Unit..................... 9
Annuitant............................. 17
Annuity Payments...................... 19
Annuity Unit.......................... 10
Contingent Annuitant.................. 17
Contract Date......................... 9
Contract Owner (You, Your)............ 16
Contract Value........................ 9
Contract Year......................... 9
Death Report Date..................... 17
Fixed Account......................... C-1
Funding Option(s)..................... 10
Maturity Date......................... 19
Purchase Payment...................... 9
Underlying Fund....................... 10
Written Request....................... 9
</TABLE>
2
<PAGE> 5
SUMMARY:
TRAVELERS ACCESS ANNUITY
THIS SUMMARY DETAILS SOME OF THE MORE IMPORTANT POINTS THAT YOU SHOULD KNOW AND
CONSIDER BEFORE PURCHASING THE CONTRACT. PLEASE READ THE ENTIRE PROSPECTUS
CAREFULLY.
WHAT COMPANY WILL ISSUE MY CONTRACT? Your issuing company is either The
Travelers Insurance Company or The Travelers Life and Annuity Company, ("the
Company," "We" or "Us") depending on where you purchased your Contract. Each
company sponsors its own separate account, both of which are described later in
this prospectus. The Travelers Insurance Company sponsors the Travelers Fund ABD
for Variable Annuities ("Fund ABD"); The Travelers Life and Annuity Company
sponsors the Travelers Fund ABD II for Variable Annuities ("Fund ABD II"). When
we refer to the Separate Account, we are referring to either Fund ABD or Fund
ABD II, depending upon your issuing company. Your issuing company is The
Travelers Life and Annuity Company unless you purchased your contract in the
locations listed below, which contracts are issued by The Travelers Insurance
Company.
<TABLE>
<S> <C>
Kansas Oregon(1)
Maine Puerto Rico
New Hampshire() Tennessee
New Jersey Washington(1)
New York Wyoming
North Carolina
</TABLE>
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(1) The Travelers Insurance Company issues only single premium contracts with
variable and fixed accounts for these states. The Travelers Life and Annuity
Company issues only flexible premium contracts with variable accounts in
these states. Please refer to your Contract or ask your agent for more
information.
You may also refer to the cover page of your Contract for the name of your
issuing company. You may only purchase a Contract where the Contract has been
approved. Not all locations have approved all Contracts.
CAN YOU GIVE ME A GENERAL DESCRIPTION OF THE VARIABLE ANNUITY CONTRACT? The
Contract offered by the Company is a variable annuity intended for retirement
savings or other long-term investment purposes. The Contract provides a death
benefit as well as guaranteed payout options. You direct your payment(s) to one
or more of the variable funding options and/or to the Fixed Account. We
guarantee money directed to the Fixed Account as to principal and interest. The
variable funding options are designed to produce a higher rate of return than
the Fixed Account; however, this is not guaranteed. You can also lose money in
the variable funding options.
The Contract, like all deferred variable annuity contracts, has two phases: the
accumulation phase and the payout phase. During the accumulation phase
generally, under a qualified contract, your pre-tax contribution accumulates on
a tax-deferred basis and is 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 contribution
accumulates on a tax-deferred basis and is taxed as income when you make a
withdrawal. The payout phase occurs when you begin receiving payments from your
Contract. The amount of money you accumulate in your Contract determines the
amount of income (annuity payments) you receive during the payout phase.
During the payout phase, you may choose to receive annuity payments from the
Fixed Account or the variable funding options. If you want to receive payments
from your annuity, you can choose one of a number of annuity options or income
options.
3
<PAGE> 6
Once you choose one of the annuity options or income options and begin to
receive payments, it cannot be changed. During the payout phase, you have the
same investment choices you had during the accumulation phase. If amounts are
directed to the variable funding options, the dollar amount of your payments may
increase or decrease.
WHO SHOULD PURCHASE THIS CONTRACT? The Contract is currently available for use
in connection with (1) individual nonqualified purchases; (2) rollovers from
Individual Retirement Annuities (IRAs); and (3) rollovers from other 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.
Purchase of this Contract through a tax qualified retirement plan ("Plan") does
not provide any additional tax deferral benefits beyond those provided by the
Plan. Accordingly, if you are purchasing this Contract through a Plan, you
should consider purchasing this Contract for its Death Benefit, Annuity Option
Benefits, and other non-tax-related benefits.
You may purchase the Contract with an initial payment of at least $20,000. You
may make additional payments of at least $500 at any time during the
accumulation phase.
IS THERE A RIGHT TO RETURN PERIOD? 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 on the purchase payment 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.
WHAT TYPES OF INVESTMENT OPTIONS ARE AVAILABLE? You can direct your money into
the Fixed Account or any or all of the funding options shown on the cover page.
The funding options are described in the prospectuses for the funds. Depending
on market conditions, you may make or lose money in any of these options.
The value of the Contract will vary depending upon the investment performance of
the funding options you choose. Past performance is not a guarantee of future
results. Standard and Nonstandard performance is shown in the Statement of
Additional Information that you may request free of charge.
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. We may, in the future, charge a fee
for any transfer request, or limit the number of transfers allowed. At a
minimum, we would always allow one transfer every six months. We reserve the
right to restrict transfers that we determine will disadvantage other contract
owners. 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.
WHAT EXPENSES WILL BE ASSESSED UNDER THE CONTRACT? 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 on the deduction date, 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 the sub-account
administrative charge is 0.15% annually. Each funding option also charges for
management and other expenses. Please refer to the Fee Table for more
information about the charges.
HOW WILL MY CONTRIBUTIONS AND WITHDRAWALS BE TAXED? Generally, 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
4
<PAGE> 7
receiving annuity or income payments. Under a nonqualified Contract, payments to
the contract are made with after-tax dollars, and 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.
HOW MAY I ACCESS MY MONEY? You can take withdrawals any time during the
accumulation phase. There are no withdrawal charges, however, income taxes,
and/or a penalty tax may apply to taxable amounts withdrawn.
WHAT IS THE DEATH BENEFIT UNDER THE CONTRACT? The death benefit applies upon
the first death of the owner, joint owner, or annuitant. Assuming you are the
Annuitant, the death benefit is as follows: If you die before the Contract is in
the payout phase, the person you have chosen as your beneficiary will receive a
death benefit. The death benefit value is calculated at the close of the
business day on which the Company's Home Office receives due proof of death and
written payment instructions. Certain states may have varying age requirements.
Please refer to the Death Benefit section in the prospectus for more details.
ARE THERE ANY ADDITIONAL FEATURES? This Contract has other features you may be
interested in. These include:
- DOLLAR COST AVERAGING. This is a program that allows you to invest a
fixed amount of money in 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.
5
<PAGE> 8
FEE TABLE
- --------------------------------------------------------------------------------
CONTRACT OWNER TRANSACTIONS EXPENSES
<TABLE>
<S> <C>
ANNUAL CONTRACT ADMINISTRATIVE CHARGE $30
(Waived if contract value is $40,000 or more)
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%
</TABLE>
FUNDING OPTION EXPENSES:
(as a percentage of average daily net assets of the Funding Option as of
December 31, 1999, unless otherwise noted)
<TABLE>
<CAPTION>
TOTAL
ANNUAL OPERATING
MANAGEMENT FEE OTHER EXPENSES EXPENSES
(AFTER EXPENSE (AFTER EXPENSE (AFTER EXPENSE
FUNDING OPTIONS: REIMBURSEMENT) 12B-1 FEE REIMBURSEMENT) REIMBURSEMENT)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Appreciation Fund................. 0.75% 0.08% 0.83%
Money Market Portfolio.................... 0.32% 0.08% 0.40%(1)
ALLIANCE VARIABLE PRODUCT SERIES FUND,
INC.
Premier Growth Portfolio -- Class B... 1.00% 0.25% 0.04% 1.29%
DELAWARE GROUP PREMIUM FUND
REIT Series........................... 0.64% 0.21% 0.85%(2)
DREYFUS VARIABLE INVESTMENT FUND
Appreciation Portfolio(3)............. 0.75% 0.03% 0.78%
Small Cap Portfolio................... 0.75% 0.03% 0.78%
GREENWICH STREET SERIES FUND
Equity Index Portfolio -- Class II
Shares.............................. 0.21% 0.25% 0.05% 0.51%(4)
JANUS ASPEN SERIES
Balanced Portfolio -- Service
Shares.............................. 0.65% 0.25% 0.02% 0.92%(5)
Global Life Sciences
Portfolio -- Service Shares......... 0.65% 0.25% 0.19% 1.09%(5)
Global Technology Portfolio -- Service
Shares.............................. 0.65% 0.25% 0.13% 1.03%(5)
Worldwide Growth Portfolio -- Service
Shares.............................. 0.65% 0.25% 0.05% 0.95%(5)
SALOMON BROTHERS VARIABLE SERIES FUND INC.
Capital Fund.......................... 0.00% 1.00% 1.00%(6)
Investors Fund........................ 0.53% 0.45% 0.98%(6)
Small Cap Growth Fund................. 0.30% 1.50% 1.50%(6)
TRAVELERS SERIES FUND INC.
Alliance Growth Portfolio............. 0.80% 0.02% 0.82%(7)
MFS Total Return Portfolio............ 0.80% 0.04% 0.84%(7)
Putnam Diversified Income Portfolio... 0.75% 0.08% 0.83%(7)
THE TRAVELERS SERIES TRUST
Convertible Bond Portfolio............ 0.60% 0.20% 0.80%(8)
Disciplined Mid Cap Stock Portfolio... 0.70% 0.25% 0.95%(9)
Disciplined Small Cap Stock
Portfolio........................... 0.80% 0.20% 1.00%(8)
Equity Income Portfolio............... 0.75% 0.13% 0.88%
Federated High Yield Portfolio........ 0.65% 0.19% 0.84%
Federated Stock Portfolio............. 0.63% 0.19% 0.82%
Large Cap Portfolio................... 0.75% 0.12% 0.87%
Lazard International Stock
Portfolio........................... 0.83% 0.23% 1.06%
MFS Emerging Growth Portfolio......... 0.75% 0.12% 0.87%
</TABLE>
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<TABLE>
<CAPTION>
TOTAL
ANNUAL OPERATING
MANAGEMENT FEE OTHER EXPENSES EXPENSES
(AFTER EXPENSE (AFTER EXPENSE (AFTER EXPENSE
FUNDING OPTIONS: REIMBURSEMENT) 12B-1 FEE REIMBURSEMENT) REIMBURSEMENT)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MFS Mid Cap Growth Portfolio.......... 0.80% 0.20% 1.00%(8)
MFS Research Portfolio................ 0.80% 0.19% 0.99%
Strategic Stock Portfolio............. 0.60% 0.30% 0.90%(8)
Travelers Quality Bond Portfolio...... 0.32% 0.22% 0.54%
VARIABLE INSURANCE PRODUCTS FUND II
Contrafund(R) Portfolio -- Service
Class 2............................. 0.58% 0.25% 0.07% 0.90%(10)
WARBURG PINCUS TRUST
Emerging Markets Portfolio............ 0.00% 1.40% 1.40%(11)
</TABLE>
NOTES:
The purpose of this 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. "Other Expenses" include operating costs of the fund. These expenses
are reflected in each funding option's net asset value and are not deducted from
the account value under the Contract.
(1) Other Expenses have been restated to reflect the current expense
reimbursement arrangement with Travelers Insurance Company. Travelers has
agreed to reimburse the Fund for the amount by which its aggregate expenses
(including the management fee, but excluding brokerage commissions, interest
charges and taxes) exceeds 0.40%. Without such arrangement, Total Expenses
would have been 0.50% for the MONEY MARKET PORTFOLIO.
(2) The investment adviser for the REIT SERIES is Delaware Management Company
("DMC"). Effective May 1, 2000 through October 31, 2000, DMC has voluntarily
agreed to waive its management fee and reimburse the Series for expenses to
the extent that total expenses will not exceed 0.85%. Without such an
arrangement, Total Annual Operating Expenses for the fund would have been
0.96%.
(3) Formerly known as Dreyfus Capital Appreciation Portfolio.
(4) The Portfolio Management Fee for EQUITY INDEX PORTFOLIO -- CLASS II shares
includes 0.06% for fund administration and a distribution plan or "Rule
12b-1 plan". Fees for Class II reflect the period from 3/22/99 (inception
date) to 12/31/99. On March 22, 1999, the fund adopted its current fee
structure.
(5) Expenses are based on the estimated expenses that the new Service Shares
Class of each Portfolio expects to incur in its initial fiscal year. All
expenses are shown without the effect of offset arrangements.
(6) The Adviser has waived all or a portion of its Management Fees for the year
ended December 31, 1999. If such fees were not waived or expenses
reimbursed, the Management Fee, Other Expenses, and Total Annual Operating
Expenses would have been as follows: 0.70%, 0.45% and 1.15% respectively for
the INVESTORS FUND; 0.85%, 1.14%, and 1.99% respectively for the CAPITAL
FUND; and 0.75%, 15.61%, and 16.36% respectively for the SMALL CAP GROWTH
FUND. Expenses for the Small Cap Growth Fund are annualized.
(7) Expenses are as of October 31, 1999 (the Fund's fiscal year end). There were
no fees waived or expenses reimbursed for these funds in 1999.
(8) Travelers Insurance has agreed to reimburse the CONVERTIBLE BOND PORTFOLIO,
the STRATEGIC STOCK PORTFOLIO, the DISCIPLINED SMALL CAP STOCK PORTFOLIO,
and the MFS MID CAP GROWTH PORTFOLIO for expenses for the period ended
December 31, 1999 which exceeded 0.80%, 0.90%, 1.00% and 1.00%,
respectively. Without such voluntary arrangements, the actual annualized
Total Annual Operating Expenses would have been 1.23%, 0.99%, 1.49%, and
1.07%, respectively.
(9) Other Expenses reflect the current expense reimbursement arrangement with
Travelers Insurance Company. Travelers has agreed to reimburse the Portfolio
for the amount by which its aggregate expenses (including management fees,
but excluding brokerage commissions, interest charges and taxes) exceeds
0.95%. Without such arrangements, the Total Annual Operating Expenses would
have been 0.99% for the DISCIPLINED MID CAP STOCK PORTFOLIO.
(10) A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, through arrangements with certain funds
custodian, credits realized as a result of uninvested cash balances were
used to reduce a portion of each applicable fund's expenses. Without these
reductions, the Total Annual Operating Expenses presented in the table
would have been 0.95% for CONTRAFUND PORTFOLIO -- SERVICE CLASS 2. Service
Class 2 expenses are based on estimated expenses for the first year.
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<PAGE> 10
(11) Fee waivers, expense reimbursements, or expense credits reduced expenses
for the WARBURG PINCUS EMERGING MARKETS PORTFOLIO during 1999, but this may
be discontinued at any time. Without such arrangements, the Portfolio's
Management Fees, Other Expenses and Total Annual Operating Expenses would
equal 1.25%, 1.88% and 3.13%, respectively. The Portfolio's other expenses
are based on annualized estimates of expenses for the fiscal year ending
December 31, 1999, net of any fee waivers or expense reimbursements.
EXAMPLE*:
Assuming a 5% annual return on assets, a $1,000 investment would be subject to
the following expenses:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
IF CONTRACT IS SURRENDERED, ANNUITIZED
OR IF NO WITHDRAWALS HAVE BEEN MADE
AT THE END OF PERIOD SHOWN:
-----------------------------------------
FUNDING OPTION 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
Capital Appreciation Fund................................... 23 70 120 257
Money Market Portfolio...................................... 18 57 98 213
ALLIANCE VARIABLE PRODUCT SERIES FUND, INC.
Premier Growth Portfolio -- Class B..................... 27 84 143 303
DELAWARE GROUP PREMIUM FUND
REIT Series............................................. 23 71 121 259
DREYFUS VARIABLE INVESTMENT FUND
Appreciation Portfolio.................................. 22 68 117 252
Small Cap Portfolio..................................... 22 68 117 252
GREENWICH STREET SERIES FUND
Equity Index Portfolio -- Class II Shares............... 19 60 104 224
JANUS ASPEN SERIES
Balanced Portfolio -- Service Shares.................... 24 73 124 266
Global Life Sciences Portfolio -- Service Shares........ 25 78 133 283
Global Technology Portfolio -- Service Shares........... 25 76 130 278
Worldwide Growth Portfolio -- Service Shares............ 24 74 126 270
SALOMON BROTHERS VARIABLE SERIES FUND INC.
Capital Fund............................................ 24 75 128 275
Investors Fund.......................................... 24 75 127 273
Small Cap Growth Fund................................... 29 90 153 323
TRAVELERS SERIES FUND INC
Alliance Growth Portfolio............................... 23 70 119 256
MFS Total Return Portfolio.............................. 23 70 120 258
Putnam Diversified Income Portfolio..................... 23 70 120 257
THE TRAVELERS SERIES TRUST
Convertible Bond Portfolio.............................. 22 69 118 254
Disciplined Mid Cap Stock Portfolio..................... 24 74 126 270
Disciplined Small Cap Stock Portfolio................... 24 75 128 275
Equity Income Portfolio................................. 23 72 122 262
Federated High Yield Portfolio.......................... 23 70 120 258
Federated Stock Portfolio............................... 23 70 119 256
Large Cap Portfolio..................................... 23 71 122 261
Lazard International Stock Portfolio.................... 25 77 132 281
MFS Emerging Growth Portfolio........................... 23 71 122 261
MFS Mid Cap Growth Portfolio............................ 24 75 128 275
MFS Research Portfolio.................................. 24 75 128 274
Strategic Stock Portfolio............................... 23 72 123 264
Travelers Quality Bond Portfolio........................ 20 61 105 227
VARIABLE INSURANCE PRODUCTS FUND II
Contrafund(R) Portfolio -- Service Class 2.............. 23 72 123 264
WARBURG PINCUS TRUST
Emerging Markets Portfolio.............................. 28 87 148 314
</TABLE>
* THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THE EXAMPLE
REFLECTS THE $30 ANNUAL CONTRACT ADMINISTRATIVE CHARGE AS AN ANNUAL CHARGE OF
0.009% OF ASSETS.
8
<PAGE> 11
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
See Appendices A and B.
THE ANNUITY CONTRACT
- --------------------------------------------------------------------------------
Travelers Access Annuity is a contract between the contract owner ("you"), and
the Company. You make purchase payments to us and we credit them to your
Contract. 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. The date the
Contract and its benefits become effective is referred to as the contract date.
Each 12-month period following the contract date is called a contract year.
Certain changes and elections must be made in writing to the Company. Where the
term "written request" is used, it means that written information must be sent
to the Company's Home Office in a form and content satisfactory to us.
CONTRACT OWNER INQUIRIES
Any questions you have about your Contract should be directed to the Company's
Home Office at 1-800-842-9368.
PURCHASE PAYMENTS
The initial purchase payment must be at least $20,000. You may make additional
payments of at least $500 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. The initial purchase payment is due and payable
before the Contract becomes effective.
We will apply the initial purchase payment within two business days after we
receive it in good order at our Home Office. Subsequent purchase payments will
be credited to a Contract on the same business day, if received in good order by
our Home Office by 4:00 p.m. Eastern time. A business day is any day that the
New York Stock Exchange is open. Our business day ends at 4:00 p.m. Eastern time
unless we need to close earlier due to an emergency.
ACCUMULATION UNITS
The period between the contract effective date and the maturity date is the
accumulation period. During the accumulation period, an accumulation unit is
used to calculate the value of a Contract. An accumulation unit works like a
share of a mutual fund. Each funding option has a corresponding accumulation
unit value. The accumulation units are valued each business day and their values
may increase or decrease from day to day. The number of accumulation units we
will credit to your Contract once we receive a purchase payment is determined by
dividing the amount directed to each funding option by the value of its
accumulation unit. We calculate the value of an accumulation unit for each
funding option each day the New York Stock Exchange is open. The values are
calculated as of 4:00 p.m. Eastern time. After the value is calculated, we
credit your
9
<PAGE> 12
Contract. 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. These funding options are subsections of the Separate
Account, which invest in the underlying mutual funds ("underlying funds"). 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. You are not investing directly in the underlying fund. Since each
option has varying degrees of risk, please read the prospectuses carefully
before investing. Contact your registered representative or call 1-800-842-9368
to request additional copies of the prospectuses.
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 and obtaining any state and SEC approval, if necessary. From time to time we
may make new funding options available.
The current variable funding options are listed below, along with their
investment advisers and any subadviser:
<TABLE>
<CAPTION>
INVESTMENT
FUNDING OPTION OBJECTIVE INVESTMENT ADVISER/SUBADVISER
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Capital Appreciation Fund Seeks growth of capital through the use of common Travelers Asset Management
stocks. Income is not an objective. The Fund International Company LLC
invests principally in common stocks of small to ("TAMIC")
large companies which are expected to experience Subadviser: Janus
wide fluctuations in price in both rising and Capital Corp.
declining markets. ("Janus Capital")
Money Market Portfolio Seeks high current income from short-term money TAMIC
market instruments while preserving capital and
maintaining a high degree of liquidity.
ALLIANCE VARIABLE PRODUCT
SERIES FUND, INC.
Premier Growth Portfolio Seeks long-term growth of capital by investing Alliance Capital Management
Class B primarily in equity securities of a limited
number of large, carefully selected, high quality
U.S. companies that are judged likely to achieve
superior earning momentum.
DELAWARE GROUP PREMIUM FUND
REIT Series Seeks maximum long-term total return, by Delaware Management Company,
investing in securities of companies primarily Inc.
engaged in the real estate industry. Capital Subadviser: Lincoln Investment
appreciation is a secondary objective. Management, Inc.
DREYFUS VARIABLE INVESTMENT
FUND
Appreciation Portfolio Seeks primarily to provide long-term capital The Dreyfus Corporation
growth consistent with the preservation of Subadviser: Fayez Sarofim & Co.
capital; current income is a secondary investment
objective. The portfolio invests primarily in the
common stocks of domestic and foreign issuers.
Small Cap Portfolio Seeks to maximize capital appreciation. The Dreyfus Corporation
GREENWICH STREET SERIES FUND
Equity Index Portfolio Seeks to replicate, before deduction of expenses, Travelers Investment Management
Class II Shares the total return performance of the S&P 500 Company ("TIMCO")
Index.
</TABLE>
10
<PAGE> 13
<TABLE>
<CAPTION>
INVESTMENT
FUNDING OPTION OBJECTIVE INVESTMENT ADVISER/SUBADVISER
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
JANUS ASPEN SERIES
Balanced Portfolio--Service Seeks long-term capital growth, consistent with Janus Capital
Shares preservation of capital and balanced by current
income.
Global Life Sciences Seeks long-term capital growth by investing Janus Capital
Portfolio--Service Shares primarily in equity securities of U.S. and
foreign companies, normally investing at least
65% of its total assets in companies with a life
science orientation.
Global Technology Seeks long-term capital growth by investing Janus Capital
Portfolio--Service Shares primarily in equity securities of U.S. and
foreign companies, normally investing at least
65% of its total assets in companies likely to
benefit significantly from advances in
technology.
Worldwide Growth Seeks growth of capital in a manner consistent Janus Capital
Portfolio -- Service Shares with preservation of capital by investing
primarily in common stocks of companies of any
size throughout the world.
SALOMON BROTHERS VARIABLE
SERIES FUND, INC.
Capital Fund Seeks capital appreciation, primarily through Salomon Brothers Asset
investments in common stocks which are believed Management ("SBAM")
to have above-average price appreciation
potential and which may involve above average
risk.
Small Cap Growth Fund Seeks long-term growth of capital by investing SBAM
primarily in equity securities of companies with
market capitalizations similar to that of
companies included in the Russell 2000 Index.
Investors Fund Seeks long-term growth of capital, and, SBAM
secondarily, current income, through investments
in common stocks of well-known companies.
TRAVELERS SERIES FUND, INC.
Alliance Growth Portfolio Seeks long-term growth of capital. Current income Travelers Investment Adviser
is only an incidental consideration. The ("TIA")
Portfolio invests predominantly in equity Subadviser: Alliance Capital
securities of companies with a favorable outlook Management L.P.
for earnings and whose rate of growth is expected
to exceed that of the U.S. economy over time.
MFS Total Return Portfolio (a balanced portfolio). Seeks to obtain above- TIA
average income (compared to a portfolio entirely Subadviser: Massachusetts
invested in equity securities) consistent with Financial Services Company
the prudent deployment of capital. Generally, at ("MFS")
least 40% of the Portfolio's assets will be
invested in equity securities.
Putnam Diversified Income Seeks high current income consistent with TIA
Portfolio preservation of capital. The Portfolio will Subadviser: Putnam Investment
allocate its investments among the U.S. Management, Inc.
Government Sector, the High Yield Sector, and the
International Sector of the fixed income
securities markets.
THE TRAVELERS SERIES TRUST
Convertible Bond Portfolio Seeks current income and capital appreciation by TAMIC
investing in convertible bond securities and in
combinations of nonconvertible fixed-income
securities and warrants or call options that
together resemble convertible securities.
Disciplined Mid Cap Stock Seeks growth of capital by investing primarily in TAMIC
Portfolio a broadly diversified portfolio of common stocks. Subadviser: TIMCO
Disciplined Small Cap Stock Seeks long term capital appreciation by investing TAMIC
Portfolio primarily (at least 65% of its total assets) in Subadviser: TIMCO
the common stocks of U.S. companies with
relatively small market capitalizations at the
time of investment.
</TABLE>
11
<PAGE> 14
<TABLE>
<CAPTION>
INVESTMENT
FUNDING OPTION OBJECTIVE INVESTMENT ADVISER/SUBADVISER
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Equity Income Portfolio Seeks reasonable income by investing at least 65% TAMIC
in income-producing equity securities. The Subadviser: Fidelity Management
balance may be invested in all types of domestic & Research Company ("FMR")
and foreign securities, including bonds. The
Portfolio seeks to achieve a yield that exceeds
that of the securities comprising the S&P 500.
The Subadviser also considers the potential for
capital appreciation.
Federated High Yield Seeks high current income by investing primarily TAMIC
Portfolio in a professionally managed, diversified Subadviser: Federated
portfolio of fixed income securities. Investment Counseling, Inc.
Federated Stock Portfolio Seeks growth of income and capital by investing TAMIC
principally in a professionally managed and Subadviser: Federated
diversified portfolio of common stock of Investment Counseling, Inc.
high-quality companies (i.e., leaders in their
industries and characterized by sound management
and the ability to finance expected growth).
Large Cap Portfolio Seeks long-term growth of capital by investing TAMIC
primarily in equity securities of companies with Subadviser: FMR
large market capitalizations.
Lazard International Stock Seeks capital appreciation by investing primarily TAMIC
Portfolio in the equity securities of non-United States Subadviser: Lazard Asset
companies (i.e., incorporated or organized Management
outside the United States).
MFS Emerging Growth Seeks to provide long-term growth of capital. TAMIC
Portfolio Dividend and interest income from portfolio Subadviser: MFS
securities, if any, is incidental to the MFS
Portfolio's investment objective.
MFS Mid Cap Growth Seeks to obtain long term growth of capital by TAMIC
Portfolio investing, under normal market conditions, at Subadviser: MFS
least 65% of its total assets in equity
securities of companies with medium market
capitalization which the investment adviser
believes have above-average growth potential.
MFS Research Portfolio Seeks to provide long-term growth of capital and TAMIC
future income. Subadviser: MFS
Strategic Stock Portfolio Seeks to provide an above-average total return TAMIC
through a combination of potential capital Subadviser: TIMCO
appreciation and dividend income by investing
primarily in high dividend yield stocks
periodically selected from the companies included
in (i) the Dow Jones Industrial Average and (ii)
a subset of the Standard & Poor's Industrial
Index.
Travelers Quality Bond Seeks current income, moderate capital volatility TAMIC
Portfolio and total return.
VARIABLE INSURANCE PRODUCTS
FUND II
Contrafund(R) Portfolio -- Seeks long-term capital appreciation by investing FMR
Service Class 2 primarily in common stocks of companies whose
value the adviser believes is not fully
recognized by the public.
WARBURG PINCUS TRUST
Emerging Markets Portfolio Seeks long-term growth of capital by investing Credit Sussie Asset
primarily in equity securities of non-U.S. Management LLC
issuers consisting of companies in emerging
securities markets.
</TABLE>
12
<PAGE> 15
CHARGES AND DEDUCTIONS
- --------------------------------------------------------------------------------
GENERAL
We deduct the charges described below. The charges are for the service and
benefits we provide, costs and expenses we incur, and risks we assume under the
Contracts. Services and benefits we provide include:
- the ability for you to make withdrawals and surrenders under the
Contracts;
- the death benefit paid on the death of the contract owner, annuitant, or
first of the joint contract owners,
- the available funding options and related programs (including dollar-cost
averaging, portfolio rebalancing, and systematic withdrawal programs);
- administration of the annuity options available under the Contracts; and
- the distribution of various reports to contract owners.
Costs and expenses we incur include:
- losses associated with various overhead and other expenses associated
with providing the services and benefits provided by the Contracts,
- sales and marketing expenses including commission payments to your sales
agent, and
- other costs of doing business.
Risks we assume include:
- that annuitants may live longer than estimated when the annuity factors
under the Contracts were established;
- that the amount of the death benefit will be greater than the contract
value, and
- that the costs of providing the services and benefits under the Contracts
will exceed the charges deducted.
We may also deduct a charge for taxes.
Unless otherwise specified, charges are deducted proportionately from all
funding options in which you are invested.
We may reduce or eliminate the administrative charges and/or the mortality and
expense risk charge under the Contract when certain sales or administration of
the Contract result in savings or reduced expenses and/or risks. For certain
trusts, we may change the order in which purchase payments and earnings are
withdrawn in order to determine the withdrawal charge. We will not reduce or
eliminate the withdrawal charge or the administrative charge where such
reduction or elimination would be unfairly discriminatory to any person.
ADMINISTRATIVE CHARGES
We will deduct an annual contract administrative charge on the fourth Friday of
each August from Contracts with a value of less than $40,000 on that date. This
charge compensates us for expenses incurred in establishing and maintaining the
Contract. The $30 charge is deducted from the contract value by canceling
accumulation units applicable to each variable funding option on a pro rata
basis. For the first Contract year this charge will be prorated (i.e.
calculated) from the date of purchase. A prorated charge will also be made if
the Contract is completely withdrawn or terminated. We will not deduct a
contract administrative charge:
(1) from the distribution of death proceeds,
(2) after an annuity payout has begun, or
(3) if the contract value on the date of assessment equals or is greater
than $40,000.
13
<PAGE> 16
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 ("M&E")
charge from amounts held in the variable funding options. The deduction is
reflected in our calculation of accumulation and annuity unit values. The
charges stated are the maximum for this product. We reserve the right to lower
this charge at any time. This charge equals, on an annual basis, 1.25% of the
amounts held in each variable funding option. This charge compensates the
Company for risks assumed, benefits provided and expenses incurred including the
payment of commissions to your sales agent.
FUNDING OPTION EXPENSES
The charges and expenses of the funding options are summarized in the fee table
and are described in the accompanying prospectuses.
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. We
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 we have 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.
TRANSFERS
- --------------------------------------------------------------------------------
Up to 30 days before the maturity date, you may transfer all or part of the
contract value between funding options. Transfers are made at the value(s) next
determined after we receive your request at the Home Office. There are no
charges or restrictions on the amount or frequency of transfers currently;
however, we reserve the right to charge a fee for any transfer request, and to
limit the number of transfers to one in any six-month period. We also reserve
the right to restrict transfers by any market timing firm or any other third
party authorized to initiate transfers on behalf of multiple contract owners. We
may, among other things, not accept: 1) the transfer instructions of any agent
acting under a power of attorney on behalf of more than one owner, or 2) the
transfer or exchange instructions of individual owners who have executed
pre-authorized transfer forms which are submitted by market timing firms or
other third parties on behalf of more than one owner. We further reserve the
right to limit transfers that we determine will disadvantage other contract
owners.
Since different 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.
14
<PAGE> 17
DOLLAR COST AVERAGING
Dollar cost averaging or the pre-authorized transfer program (the "DCA Program")
allows you to transfer a set dollar amount to other funding options on a monthly
or quarterly basis during the accumulation phase of the Contract. Using this
method, more accumulation units are purchased in a funding option if the value
per unit is low and fewer accumulation units are purchased if the value per unit
is high. Therefore, a lower-than-average cost per unit may be achieved over the
long run.
You may elect the DCA Program 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 DCA Program. The minimum amount that may be transferred through this
program is $400.
You may establish pre-authorized transfers of contract values from the Fixed
Account, subject to certain restrictions. Under the DCA Program, automated
transfers from the Fixed Account may not deplete your Fixed Account Value in
less than twelve months from your enrollment in the DCA Program.
In addition to the DCA Program, the Company may credit increased interest rates
to contract owners under an administrative Special DCA Program established at
the discretion of the Company, depending on availability and state law. Under
this program, the contract owner may pre-authorize level transfers to any of the
funding options under either a 6 Month Program or 12 Month Program. The 6 Month
Program and the 12 Month Program will generally have different credited interest
rates. Under the 6 Month Program, the interest rate can accrue up to 6 months on
funds in the Special DCA Program and all purchase payments and accrued interest
must be transferred on a level basis to the selected funding option in 6 months.
Under the 12 Month Program, the interest rate can accrue up to 12 months on
funds in the Special DCA Program and all purchase payments and accrued interest
in this Program must be transferred on a level basis to the selected funding
options in 12 months.
The pre-authorized transfers will begin after the initial Program purchase
payment and complete enrollment instructions are received by the Company. If
complete Program enrollment instructions are not received by the Company within
15 days of receipt of the initial Program purchase payment, the entire balance
in the Program will be credited with the non-Program interest rate then in
effect for the Fixed Account.
You may start or stop participation in the DCA Program at any time, but you must
give the Company at least 30 days' notice to change any automated transfer
instructions that are currently in place. If you stop the Special DCA Program
and elect to remain in the Fixed Account, your contract value will be credited
for the remainder of 6 or 12 months with the interest rate for non-Program
funds.
A contract owner may only have one DCA Program or Special DCA Program in place
at one time. Any subsequent purchase payments received by the Company within the
Program period selected will be allocated to the current funding options over
the remainder of that Program transfer period, unless otherwise directed by the
contract owner.
All provisions and terms of the Contract apply to the DCA and Special DCA
Programs, 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
contract value, that is, the contract value less any premium tax not previously
deducted. Unless you submit a written request specifying the fixed or variable
funding option(s) from which amounts are to be
15
<PAGE> 18
withdrawn, the withdrawal will be made on a pro rata basis. The contract value
will be determined as of the close of business after we receive your surrender
request at the Home Office. The contract value may be more or less than the
purchase payments made.
We may defer payment of any contract value for a period of up to seven days
after the written request is received, but it is our intent to pay as soon as
possible. We cannot process requests for withdrawals that are not in good order.
We will contact you if there is a deficiency causing a delay and will advise
what is needed to act upon the withdrawal request.
SYSTEMATIC WITHDRAWALS
After the first contract year and 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 premium taxes and withdrawal charge
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 investment
options in which you have an interest, unless you instruct us otherwise. You may
begin or discontinue systematic withdrawals at any time by notifying us in
writing, but 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.
OWNERSHIP PROVISIONS
- --------------------------------------------------------------------------------
TYPES OF OWNERSHIP
CONTRACT OWNER
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 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 (e.g. 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.
16
<PAGE> 19
BENEFICIARY
You name the beneficiary in a written request. The beneficiary has the right to
receive any death benefit proceeds under the contract upon the death of the
annuitant or a contract owner. If more than one beneficiary survives the
annuitant or contract owner, 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. In the case of a non-spousal
beneficiary or a spousal beneficiary who has not chosen to assume the contract,
the death benefit proceeds will be held in a fixed account until the beneficiary
elects a Settlement Option or takes a distribution.
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.
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.
A contingent annuitant may not be changed, deleted or added after the Contract
becomes effective.
DEATH BENEFIT
- --------------------------------------------------------------------------------
Before the maturity date, when there is no contingent annuitant, a death benefit
is payable when either the annuitant or a contract owner dies. The death benefit
is calculated at the close of the business day on which the Company's Home
Office receives due proof of death and written payment instructions ("death
report date").
DEATH PROCEEDS BEFORE THE MATURITY DATE
DEATH OF ANY OWNER OR THE ANNUITANT BEFORE AGE 75. The Company will pay to the
beneficiary a death benefit in 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; or
(3) the contract value on the latest fifth contract year anniversary
before the Company receives due proof of death.
DEATH OF ANY OWNER OR THE ANNUITANT ON OR AFTER AGE 75. The Company will pay to
the beneficiary a death benefit in 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; or
(3) the contract value on the latest fifth contract year anniversary
occurring on or before the annuitant's 75th birthday.
PAYMENT OF PROCEEDS
The process of paying death benefit proceeds before the maturity date under
various situations for nonqualified contracts and qualified contracts is
summarized in the charts below. The charts do not encompass every situation and
are merely intended as a general guide. More detailed information is provided in
your Contract. Generally, the person(s) receiving the benefit may request that
the proceeds be paid in a lump sum, or be applied to one of the settlement
options available under the Contract.
17
<PAGE> 20
NONQUALIFIED CONTRACTS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
BEFORE THE MATURITY DATE, THE COMPANY WILL PAY MANDATORY PAYOUT
UPON THE DEATH OF THE THE PROCEEDS TO: UNLESS. . . RULES APPLY*
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OWNER (WHO IS NOT THE The beneficiary(ies), or Unless, the beneficiary is the Yes
ANNUITANT) (WITH NO JOINT if none, to the contract contract owner's spouse and the
OWNER) owner's estate. spouse elects to continue the
contract as the new owner
rather than receive the
distribution.
- -----------------------------------------------------------------------------------------------------------------
OWNER (WHO IS THE ANNUITANT) The beneficiary(ies), or Unless, the beneficiary is the Yes
(WITH NO JOINT OWNER) if none, to the contract contract owner's spouse and the
owner's estate. spouse elects to continue the
contract as the new owner
rather than receive the
distribution.
- -----------------------------------------------------------------------------------------------------------------
JOINT OWNER (WHO IS NOT THE The surviving joint Unless the surviving joint Yes
ANNUITANT) owner. owner is the spouse and elects
to assume and continue the
contract.
- -----------------------------------------------------------------------------------------------------------------
JOINT OWNER (WHO IS THE The beneficiary(ies), or Unless the beneficiary is the
ANNUITANT) if none, to the contract contract owner's spouse and the
owner's estate. spouse elects to assume and
continue the contract.
Or, unless there is a Yes
contingent annuitant the
contingent annuitant becomes
the annuitant and the proceeds
will be paid to the surviving
joint owner. If the surviving
joint owner is the spouse, the
spouse may elect to assume and
continue the contract.
- -----------------------------------------------------------------------------------------------------------------
ANNUITANT (WHO IS NOT THE The beneficiary(ies). Unless, there is a contingent No
CONTRACT OWNER) annuitant. Then, the contingent
annuitant becomes the annuitant
and the Contract continues in
effect (generally using the
original maturity date). The
proceeds will then be paid upon
the death of the contingent
annuitant or owner.
- -----------------------------------------------------------------------------------------------------------------
ANNUITANT (WHO IS THE See death of "owner who N/A
CONTRACT OWNER) is the annuitant" above.
- -----------------------------------------------------------------------------------------------------------------
ANNUITANT (WHERE OWNER IS A The beneficiary(ies) Yes (Death of
NONNATURAL PERSON/TRUST) (e.g. the trust). annuitant is
treated as death of
the owner in these
circumstances.)
- -----------------------------------------------------------------------------------------------------------------
CONTINGENT ANNUITANT No death proceeds are N/A
(ASSUMING ANNUITANT IS STILL payable; contract
ALIVE) continues.
- -----------------------------------------------------------------------------------------------------------------
BENEFICIARY No death proceeds are N/A
payable; contract
continues.
- -----------------------------------------------------------------------------------------------------------------
CONTINGENT BENEFICIARY No death proceeds are N/A
payable; contract
continues.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
* Certain payout rules of the Internal Revenue Code (IRC) are triggered upon the
death of any Owner. Non-spousal Beneficiaries (as well as spousal
beneficiaries who choose not to assume the contract) must begin taking
distributions based on the Beneficiary's life expectancy within one year of
death or take a complete distribution of contract proceeds within 5 years of
death.
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QUALIFIED CONTRACTS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
MANDATORY PAYOUT
BEFORE THE MATURITY DATE, THE COMPANY WILL PAY RULES APPLY
UPON THE DEATH OF THE THE PROCEEDS TO: UNLESS. . . (SEE *ABOVE)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OWNER/ANNUITANT The beneficiary(ies), or Yes
if none, to the contract
owner's estate.
- -----------------------------------------------------------------------------------------------------------------
BENEFICIARY No death proceeds are N/A
payable; contract
continues.
- -----------------------------------------------------------------------------------------------------------------
CONTINGENT BENEFICIARY No death proceeds are N/A
payable; contract
continues.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
DEATH PROCEEDS AFTER THE MATURITY DATE
If any owner or the annuitant dies on or after the maturity date, the Company
will pay the beneficiary a death benefit consisting of any benefit remaining
under the annuity or income option then in effect.
THE ANNUITY PERIOD
- --------------------------------------------------------------------------------
MATURITY DATE
Under the Contract, you can receive regular income payments (annuity payments).
You can choose the month and the year in which those payments begin (maturity
date). You can also choose among income payouts (annuity or income options) or
elect a lump sum distribution. While the annuitant is alive, you can change your
selection any time up to the maturity date. Annuity 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, or unless you elect another date. Annuity payments are a series of
periodic payments (a) for life; (b) for life with either a minimum number of
payments or a specific amount assured; or (c) for the joint lifetime of the
annuitant and another person, and thereafter during the lifetime of the
survivor. We may require proof that the annuitant is alive before annuity
payments are made. Not all options may be available in all states.
You may choose to annuitize at any time after you purchase the Contract. Unless
you elect otherwise, the maturity date will be the annuitant's 70th birthday for
qualified contracts and the annuitant's 75th birthday for nonqualified contracts
or ten years after the effective date of the Contract, if later. (For Contracts
issued in Florida and New York, the maturity date elected may not be later than
the annuitant's 90th birthday.)
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
for nonqualified contracts 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 certain qualified contracts upon either the later of the contract
owner's attainment of age 70 1/2 or year of retirement; or the death of the
contract owner. You should seek independent tax advice regarding the election of
minimum required distributions.
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. If, at the time annuity payments begin,
no election has been made to the
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<PAGE> 22
contrary, the contract value will be applied to provide an annuity funded by the
same investment options as you have selected during the accumulation period . At
least 30 days before the maturity date, you may transfer the contract value
among the funding options in order to change the basis on which annuity payments
will be determined. (See "Transfers.")
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 accumulation 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. If a variable annuity is elected,
the amount applied to it 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
and the annuitant's adjusted age. 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 Contract tables by
the number of thousands of dollars of contract value applied to that annuity
option and factors in an assumed daily net investment factor. The Assumed Daily
Net Investment factor corresponds to an annual interest rate of 3%, used to
determine the guaranteed payout rates shown. If investment rates are higher at
the time annuitization is selected, payout rates will be higher than those
shown. 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 payment options.
DETERMINATION OF SECOND AND SUBSEQUENT ANNUITY PAYMENTS. The dollar amount of
all subsequent annuity payments changes from month to month based on the
investment experience of the applicable funding options. The total amount of
each annuity payment will 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 amount
applied to begin the annuity will be the contract value, determined as of the
date annuity payments begin. Payout rates will not be lower than those shown in
the Contract. 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. 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 or income payments
20
<PAGE> 23
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 reserves the right to make payments at less
frequent intervals, or to pay the contract value in a lump-sum.
On the maturity date, we will pay the amount due under the Contract in
accordance with the payment option that you select. You may choose to receive a
single lump-sum payment. You must elect an option in writing, in a form
satisfactory to the Company. Any election made during the lifetime of the
annuitant must be made by the contract owner.
ANNUITY OPTIONS
Subject to the conditions described in "Election of Options" above, all or any
part of the contract value (less any applicable premium taxes) 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. We may offer
additional options.
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 Contract's
cash surrender value (or, if required by state law, contract value) may be paid
under one or more of the following income options,
21
<PAGE> 24
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 each
funding option or the Fixed Account in proportion to the cash surrender value
attributable to each funding option and/or Fixed Account. The final payment will
include any amount insufficient to make another full payment.
Option 2 -- Payments for a Fixed Period. The Company will make payments for the
period selected. The amount of each payment will be equal to the remaining cash
surrender value applied under this option divided by the number of remaining
payments.
Option 3 -- Other Income Options. The Company will make any other arrangements
for Income Options as may be mutually agreed upon.
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 on the purchase payment 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 the Contract and a written request for a refund. Where state
law requires a longer period, or the return of purchase payments or other
variations of this provision, 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 contract value (minus any credits applied within 12 months of
termination)less any applicable premium tax, and 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 report date for each funding option to
which the contract owner has allocated amounts during the applicable period. The
Company will keep all records required under federal and state laws.
22
<PAGE> 25
SUSPENSION OF PAYMENTS
The Company reserves the right to suspend or postpone the date of any payment or
determination of values on any business day (1) when the New York Stock Exchange
("the Exchange") is closed; (2) when trading on the Exchange is restricted; (3)
when an emergency exists as determined by the SEC so that the sale of securities
held in the Separate Account may not reasonably occur or so that the Company may
not reasonably determine the value the Separate Account's net assets; or (4)
during any other period when the SEC, by order, so permits for the protection of
security holders.
TRANSFERS OF CONTRACT VALUES TO OTHER ANNUITIES
Where state law permits, we may allow 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 ACCOUNTS
- --------------------------------------------------------------------------------
The Travelers Insurance Company and the Travelers Life and Annuity Company each
sponsor separate accounts: The Travelers Fund ABD for Variable Annuities ("Fund
ABD") and the Travelers Fund ABD II for Variable Annuities ("Fund ABD II"),
respectively. Both Fund ABD and Fund ABD II were established on October 17, 1995
and are registered with the SEC as unit investment trusts (separate account)
under the Investment Company Act of 1940, as amended (the "1940 Act"). The
Separate Account assets attributable to the Contracts will be invested
exclusively in the shares of the variable funding options.
The assets of Fund ABD and Fund ABD II are held for the exclusive and separate
benefit of the owners of each separate account, according to the laws of
Connecticut. Income, gains and losses, whether or not realized, from assets
allocated to the Separate Account are, in accordance with the Contracts,
credited to or charged against the Separate Account without regard to other
income, gains and losses of the Company. The assets held by the Separate Account
are not chargeable with liabilities arising out of any other business which 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 the Separate Account. 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.
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, and the "nonstandardized total return," as described below. Specific
examples of the performance information appear 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 contract
administrative charge is converted to a percentage of assets based on the actual
fee collected, divided by the average net assets for Contracts sold.
23
<PAGE> 26
NONSTANDARDIZED METHOD. Nonstandardized "total returns" will be calculated in a
similar manner based on the performance of the funding options over a period of
time, usually for the calendar year-to-date, and for the past one-, three-,
five- and ten-year periods. Nonstandardized total returns will not reflect the
deduction of the annual contract administrative charge, which, if reflected,
would decrease the level of performance shown.
For funding options that were in existence before they became available under
the Separate Account, the nonstandardized average annual total return quotations
will reflect the investment performance that such funding options would have
achieved (reduced by the applicable charges) had they been held under the
Contract for the period quoted. The total return quotations are based upon
historical earnings and are not necessarily representative of future
performance.
GENERAL. Within the guidelines prescribed by the SEC and the National
Association of Securities Dealers, Inc. ("NASD"), performance information may be
quoted numerically or may be presented in a table, graph or other illustration.
Advertisements may include data comparing performance to well-known indices of
market performance (including, but not limited to, the Dow Jones Industrial
Average, the Standard & Poor's (S&P) 500 Index, the S&P 400 Index, the Lehman
Brothers Long T-Bond Index, the Russell 1000, 2000 and 3000 Indices, the Value
Line Index, and the Morgan Stanley Capital International's EAFE Index).
Advertisements may also include published editorial comments and performance
rankings compiled by independent organizations (including, but not limited to,
Lipper Analytical Services, Inc. and Morningstar, Inc.) and publications that
monitor the performance of the Separate Account and the variable funding
options.
FEDERAL TAX CONSIDERATIONS
- --------------------------------------------------------------------------------
The following general discussion of the federal income tax consequences under
this Contract is not intended to cover all situations, and is not meant to
provide tax advice. Because of the complexity of the law and the fact that the
tax results will vary depending on many factors, you should consult your tax
adviser regarding your personal situation. For your information, a more detailed
tax discussion is contained in the SAI.
GENERAL TAXATION OF ANNUITIES
Congress has recognized the value of saving for retirement by providing certain
tax benefits, in the form of tax deferral, for money put into an annuity. The
Internal Revenue Code (Code) governs how this money is ultimately taxed,
depending upon the type of contract, qualified or non-qualified, and the manner
in which the money is distributed, as briefly described below.
TAX-FREE EXCHANGES: The Internal Revenue Code provides that, generally, no gain
or loss is recognized when an annuity contract is received in exchange for a
life, endowment, or annuity contract. Since different annuity contracts have
different expenses, fees and benefits, a tax-free exchange could result in your
investment becoming subject to higher or lower fees and/or expenses.
TYPES OF CONTRACTS: QUALIFIED OR NONQUALIFIED
If you purchase an annuity contract with proceeds of an eligible rollover
distribution from 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, 403(b)
annuities, pension and profit-sharing plans (including 401(k) plans), Keogh
Plans, and certain other qualified deferred compensation plans. An exception to
this is a qualified plan called a Roth IRA. Under Roth IRAs, after-tax
contributions accumulate until maturity, when amounts (including earnings) may
be withdrawn tax-free. If you purchase the Contract on an individual basis with
after-tax dollars and not under one of the programs described above, your
Contract is referred to as nonqualified.
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<PAGE> 27
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
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
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 includible in income
annually. Furthermore, for Contracts issued after April 22, 1987, if you
transfer the Contract without adequate consideration all deferred increases in
value will be includible in your income at the time of the transfer.
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 includible in your income. (See "Penalty
Tax for Premature Distributions" below.) There is income in the Contract to the
extent the contract 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 excludible 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 distributions, including lump-sum withdrawals
and annuity payments, are taxed at the ordinary income tax rate unless the
distribution is transferred to an eligible rollover account or contract. The
Contract is available as a vehicle for IRA rollovers and for other qualified
Contracts. There are special rules which govern the taxation of qualified
Contracts, including withdrawal restrictions, requirements for mandatory
distributions, and contribution limits. We have provided a more complete
discussion in the SAI.
PENALTY TAX FOR PREMATURE DISTRIBUTIONS
Taxable distributions taken before the contract owner has reached the age of
59 1/2 will be subject to a 10% additional tax penalty unless the distribution
is taken in a series of periodic distributions, for life or life expectancy, or
unless the distribution follows the death or disability of the contract owner.
Other exceptions may be available in certain qualified plans.
DIVERSIFICATION REQUIREMENTS FOR VARIABLE ANNUITIES
The Code requires that any nonqualified variable annuity Contracts based on a
separate account shall not be treated as an annuity for any period if
investments made in the account are not adequately diversified. Final tax
regulations define how separate accounts must be diversified. The Company
monitors the diversification of investments constantly and believes that its
accounts are
25
<PAGE> 28
adequately diversified. The consequence of any failure to diversify is
essentially the loss to the contract owner of tax deferred treatment. The
Company intends to administer all contracts subject to this provision of law in
a manner that will maintain adequate diversification.
OWNERSHIP OF THE INVESTMENTS
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 includable 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 or the year of retirement.
Distributions must begin or be continued according to required patterns
following the death of the contract owner or annuitant of both qualified and
nonqualified annuities.
TAXATION OF DEATH BENEFIT PROCEEDS
Amounts may be distributed from a Contract because of the death of an owner or
annuitant. Generally, such amounts are includible in the income of the recipient
as follows: (i) if distributed in a lump sum, they are taxed in the same manner
as a full surrender of the Contract; or (ii) if distributed under a payment
option, they are taxed in the same way as annuity payments.
OTHER INFORMATION
- --------------------------------------------------------------------------------
THE INSURANCE COMPANIES
Please refer to the first page of the Summary of this prospectus to determine
which company issued your Contract.
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<PAGE> 29
The Travelers Insurance Company is a stock insurance company chartered in 1864
in Connecticut and continuously engaged in the insurance business since that
time. It is licensed to conduct life insurance business in all states of the
United States, the District of Columbia, Puerto Rico, Guam, the U.S. and British
Virgin Islands and the Bahamas. The Company is an indirect wholly owned
subsidiary of Citigroup Inc. The Company's Home Office is located at One Tower
Square, Hartford, Connecticut 06183.
The Travelers Life and Annuity Company is a stock insurance company chartered in
1973 in Connecticut and continuously engaged in the insurance business since
that time. It is licensed to conduct life insurance business in a majority of
the states of the United States, the District of Columbia and Puerto Rico, and
intends to seek licensure in the remaining states, except New York. The Company
is an indirect wholly owned subsidiary of Citigroup Inc. The Company's Home
Office is located at One Tower Square, Hartford, Connecticut 06183.
FINANCIAL STATEMENTS
The financial statements for each insurance company and for each separate
account are located in their respective Statements of Additional Information.
IMSA
The Companies are members of the Insurance Marketplace Standards Association
("IMSA"), and as such may use the IMSA logo and IMSA membership in
advertisements. Companies that belong to IMSA subscribe to a set of ethical
standards covering the various aspects of sales and service for individually
sold life insurance and annuities. IMSA members have adopted policies and
procedures that demonstrate a commitment to honesty, fairness and integrity in
all customer contacts involving the sale and service of individual life
insurance and annuity products.
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. Any sales
representative or employee who sells the Contracts will be qualified to sell
variable annuities under applicable federal and state laws. Each broker-dealer
is registered with the SEC under the Securities Exchange Act of 1934, and all
are members of the NASD. The principal underwriter of the Contracts is CFBDS,
Inc., 21 Milk St., Boston, MA. CFBDS, Inc. is not affiliated with the Company or
the Separate Account. However, it is currently anticipated that Travelers
Distribution LLC, an affiliated broker-dealer, may become the principal
underwriter for the Contracts during the year 2000.
Up-front compensation paid to sales representatives will not exceed 7% of the
purchase payments made under the Contracts. If asset based compensation is paid,
it will not exceed 2% of the average account value annually. From time to time,
the Company may pay or permit other promotional incentives, in cash, credit or
other compensation.
CONFORMITY WITH STATE AND FEDERAL LAWS
The Contract is governed by the laws of the state in which it is delivered.
Where a state has not approved a Contract feature or funding option, it will not
be available in that state. Any paid-up annuity, contract 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.
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<PAGE> 30
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
Legal matters in connection with the federal laws and regulations affecting the
issue and sale of the contract described in this prospectus, as well as the
organization of the Companies, their authority to issue variable annuity
contracts under Connecticut law and the validity of the forms of the variable
annuity contracts under Connecticut law, have been passed on by the General
Counsel of the Companies.
THE TRAVELERS INSURANCE COMPANY
There are no pending legal proceedings affecting the Separate Account. There is
one material pending legal proceeding, other than ordinary routine litigation
incidental to business, to which the Company is a party.
In March 1997, a purported class action entitled Patterman v. The Travelers,
Inc., et al. was commenced in the Superior Court of Richmond County, Georgia,
alleging, among other things, violations of the Georgia RICO statute and other
state laws by an affiliate of the Company, Primerica Financial Services, Inc.
and certain of its affiliates. Plaintiffs seek unspecified compensatory and
punitive damages and other relief. In October 1997, defendants answered the
complaint, denied liability and asserted numerous affirmative defenses. In
February 1998, on defendants' motion, the Superior Court of Richmond County
transferred the lawsuit to the Superior Court of Gwinnett County, Georgia.
Plaintiffs appealed the transfer order, and in December 1998 the Court of
Appeals of the State of Georgia reversed the lower court's decision. Defendants
petitioned the Georgia Supreme Court to hear an appeal from the decision of the
Court of Appeals, and the petition was granted in May 1998. In September 1999,
oral argument on defendants' petition was heard and, on February 28, 2000, the
Georgia Supreme Court affirmed the Georgia County Appeals and remanded the
matter to the Superior Court of Richmond County. In March 2000, defendants moved
the Georgia Supreme Court to reconsider its February 28, 2000 decision, and that
motion remains pending. Proceedings in the trial court have been stayed pending
appeal. Defendants intend to vigorously contest the litigation.
THE TRAVELERS LIFE AND ANNUITY COMPANY
There are no pending material legal proceedings affecting the Separate Account,
the principal underwriter or the Company.
28
<PAGE> 31
APPENDIX A: CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
THE TRAVELERS FUND ABD FOR VARIABLE ANNUITIES
ACCUMULATION UNIT VALUES*
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD FROM
------------ ------------ ------------ DECEMBER 16, 1996
DECEMBER 31, DECEMBER 31, DECEMBER 31, TO
FUNDING OPTION 1999 1998 1997 DECEMBER 31, 1996
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C>
<S> <C> <C> <C> <C>
CAPITAL APPRECIATION FUND (4/97)
Unit Value at beginning of period........ $ 2.046 $ 1.283 $ 1.032 $ 1.000
Unit Value at end of period.............. 3.098 2.046 1.283 1.032
Number of units outstanding at end of
period................................. 25,971,911 10,561,314 870,525 --
MONEY MARKET PORTFOLIO (7/97)
Unit Value at beginning of period........ $ 1.070 $ 1.033 $ 1.000 N/A
Unit Value at end of period.............. 1.107 1.070 1.033 N/A
Number of units outstanding at end of
period................................. 16,750,270 9,244,927 345,682 N/A
DELAWARE GROUP PREMIUM FUND, INC.
REIT SERIES (6/98)
Unit Value at beginning of period........ $ 0.901 $ 1.000 N/A N/A
Unit Value at end of period.............. 0.866 0.901 N/A N/A
Number of units outstanding at end of
period................................. 357,910 96,983 N/A N/A
DREYFUS VARIABLE INVESTMENT FUND
CAPITAL APPRECIATION PORTFOLIO (5/98)
Unit Value at beginning of period........ $ 1.112 $ 1.000 N/A N/A
Unit Value at end of period.............. 1.223 1.112 N/A N/A
Number of units outstanding at end of
period................................. 7,840,789 2,937,245 N/A N/A
SMALL CAP PORTFOLIO (5/98)
Unit Value at beginning of period........ $ 0.871 $ 1.000 N/A N/A
Unit Value at end of period.............. 1.058 0.871 N/A N/A
Number of units outstanding at end of
period................................. 3,387,052 1,435,805 N/A N/A
GREENWICH STREET SERIES FUND
EQUITY INDEX PORTFOLIO CLASS II
Unit Value at beginning of period........ $ 1.000 N/A N/A N/A
Unit Value at end of period.............. 1.098 N/A N/A N/A
Number of units outstanding at end of
period................................. 753,819 N/A N/A N/A
SALOMON BROTHERS VARIABLE SERIES FUNDS, INC.
INVESTORS FUND (6/98)
Unit Value at beginning of period........ $ 1.029 $ 1.000 N/A N/A
Unit Value at end of period.............. 1.132 1.029 N/A N/A
Number of units outstanding at end of
period................................. 3,905,967 1,764,644 N/A N/A
TRAVELERS SERIES FUND, INC.
ALLIANCE GROWTH PORTFOLIO (6/97)
Unit Value at beginning of period........ $ 1.679 $ 1.319 $ 1.037 $ 1.000
Unit Value at end of period.............. 2.189 1.679 1.319 1.037
Number of units outstanding at end of
period................................. 25,024,627 13,211,206 1,062,634 --
MFS TOTAL RETURN PORTFOLIO (5/97)
Unit Value at beginning of period........ $ 1.303 $ 1.183 $ 1.000 N/A
Unit Value at end of period.............. 1.319 1.303 1.183 N/A
Number of units outstanding at end of
period................................. 27,173,225 16,380,184 962,287 N/A
PUTNAM DIVERSIFIED INCOME PORTFOLIO
(5/97)
Unit Value at beginning of period........ $ 1.062 $ 1.070 $ 1.007 $ 1.000
Unit Value at end of period.............. 1.059 1.062 1.070 1.007
Number of units outstanding at end of
period................................. 3,396,677 1,955,397 51,659 --
THE TRAVELERS SERIES TRUST
CONVERTIBLE BOND PORTFOLIO (5/98)
Unit Value at beginning of period........ $ 1.000 $ 1.000 N/A N/A
Unit Value at end of period.............. 1.170 1.000 N/A N/A
Number of units outstanding at end of
period................................. 1,137,997 458,699 N/A N/A
</TABLE>
A-1
<PAGE> 32
APPENDIX A: CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
THE TRAVELERS FUND ABD FOR VARIABLE ANNUITIES
ACCUMULATION UNIT VALUES* (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD FROM
------------ ------------ ------------ DECEMBER 16, 1996
DECEMBER 31, DECEMBER 31, DECEMBER 31, TO
FUNDING OPTION 1999 1998 1997 DECEMBER 31, 1996
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C>
<S> <C> <C> <C> <C>
THE TRAVELERS SERIES TRUST (CONT'D.)
DISCIPLINED MID CAP STOCK PORTFOLIO
(6/97)
Unit Value at beginning of period........ $ 1.377 $ 1.195 $ 1.000 N/A
Unit Value at end of period.............. 1.541 1.377 1.195 N/A
Number of units outstanding at end of
period................................. 2,663,507 1,425,770 120,880 N/A
DISCIPLINED SMALL CAP STOCK
PORTFOLIO (1/98)
Unit Value at beginning of period........ $ 0.894 $ 1.000 N/A N/A
Unit Value at end of period.............. 1.061 0.894 N/A N/A
Number of units outstanding at end of
period................................. 1,899,628 518,858 N/A N/A
EQUITY INCOME PORTFOLIO (5/97)
Unit Value at beginning of period........ $ 1.484 $ 1.339 $ 1.026 $ 1.000
Unit Value at end of period.............. 1.535 1.484 1.339 1.026
Number of units outstanding at end of
period................................. 19,892,863 12,301,819 639,656 --
FEDERATED HIGH YIELD PORTFOLIO (5/97)
Unit Value at beginning of period........ $ 1.177 $ 1.140 $ 1.000 N/A
Unit Value at end of period.............. 1.196 1.177 1.140 N/A
Number of units outstanding at end of
period................................. 10,237,038 7,715,310 620,667 N/A
FEDERATED STOCK PORTFOLIO (5/97)
Unit Value at beginning of period........ $ 1.494 $ 1.285 $ 1.000 N/A
Unit Value at end of period.............. 1.552 1.494 1.285 N/A
Number of units outstanding at end of
period................................. 7,710,739 4,599,587 352,550 N/A
LARGE CAP PORTFOLIO (6/97)
Unit Value at beginning of period........ $ 1.665 $ 1.245 $ 1.023 $ 1.000
Unit Value at end of period.............. 2.123 1.665 1.245 1.023
Number of units outstanding at end of
period................................. 15,562,311 6,662,550 491,869 --
LAZARD INTERNATIONAL STOCK PORTFOLIO
(5/97)
Unit Value at beginning of period........ $ 1.216 $ 1.095 $ 1.027 $ 1.000
Unit Value at end of period.............. 1.460 1.216 1.095 1.027
Number of units outstanding at end of
period................................. 10,264,070 6,533,760 849,629 --
MFS EMERGING GROWTH PORTFOLIO (4/97)
Unit Value at beginning of period........ $ 1.587 $ 1.198 $ 1.004 $ 1.000
Unit Value at end of period.............. 2.766 1.587 1.198 1.004
Number of units outstanding at end of
period................................. 11,222,748 5,891,811 528,553 --
MFS MID CAP GROWTH PORTFOLIO (4/98)
Unit Value at beginning of period........ $ 0.985 $ 1.000 N/A N/A
Unit Value at end of period.............. 1.595 0.985 N/A N/A
Number of units outstanding at end of
period................................. 3,220,420 696,846 N/A N/A
MFS RESEARCH PORTFOLIO (5/98)
Unit Value at beginning of period........ $ 1.054 $ 1.000 N/A N/A
Unit Value at end of period.............. 1.285 1.054 N/A N/A
Number of units outstanding at end of
period................................. 1,352,776 149,981 N/A N/A
STRATEGIC STOCK PORTFOLIO(7/98)
Unit Value at beginning of period........ $ 0.948 $ 1.000 N/A N/A
Unit Value at end of period.............. 0.981 0.948 N/A N/A
Number of units outstanding at end of
period................................. 221,310 13,783 N/A N/A
TRAVELERS QUALITY BOND PORTFOLIO (7/97)
Unit Value at beginning of period........ $ 1.131 $ 1.057 $ 1.001 $ 1.000
Unit Value at end of period.............. 1.128 1.131 1.057 1.001
Number of units outstanding at end of
period................................. 13,396,194 9,328,606 378,758 --
</TABLE>
A-2
<PAGE> 33
APPENDIX A: CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
THE TRAVELERS FUND ABD FOR VARIABLE ANNUITIES
ACCUMULATION UNIT VALUES* (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD FROM
------------ ------------ ------------ DECEMBER 16, 1996
DECEMBER 31, DECEMBER 31, DECEMBER 31, TO
FUNDING OPTION 1999 1998 1997 DECEMBER 31, 1996
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C>
<S> <C> <C> <C> <C>
WARBURG PINCUS TRUST
EMERGING MARKETS PORTFOLIO (6/98)
Unit Value at beginning of period........ $ 0.734 $ 1.000 N/A N/A
Unit Value at end of period.............. 1.313 0.734 N/A N/A
Number of units outstanding at end of
period................................. 892,012 223,688 N/A N/A
</TABLE>
* The Company began tracking the Accumulation Unit values in 1996, however the
Separate Account held no assets until 1997. The date next to each funding
option's name reflects the date money first came into the funding option
through the Separate Account. Funding Options not listed had no amounts yet
allocated to them. The financial statements for Fund ABD and the financial
statements of The Travelers Insurance Company are contained in the SAI.
A-3
<PAGE> 34
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<PAGE> 35
APPENDIX B: CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
THE TRAVELERS FUND ABD II FOR VARIABLE ANNUITIES
ACCUMULATION UNIT VALUES
<TABLE>
<CAPTION>
YEAR ENDED YEARS ENDED PERIOD FROM
------------ ------------------------------------- DECEMBER 16, 1996
DECEMBER 31, DECEMBER 31, DECEMBER 31, TO
FUNDING OPTION 1999 1998 1997 DECEMBER 31, 1996
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C>
<S> <C> <C> <C> <C>
CAPITAL APPRECIATION FUND (12/96)*
Unit Value at beginning of year.... $ 2.046 $ 1.283 $ 1.032 $ 1.000
Unit Value at end of year.......... 3.098 2.046 1.283 1.032
Number of units outstanding at end
of year.......................... 46,942,401 23,010,432 6,344,051 29,824
MONEY MARKET PORTFOLIO(2/97)*
Unit Value at beginning of year.... $ 1.070 $ 1.033 $ 1.000 N/A
Unit Value at end of year.......... 1.107 1.070 1.033 N/A
Number of units outstanding at end
of year.......................... 37,736,754 16,762,447 5,369,177 N/A
DELAWARE GROUP PREMIUM FUND, INC.
REIT SERIES(5/98)*
Unit Value at beginning of year.... $ 0.901 $ 1.000 N/A N/A
Unit Value at end of year.......... 0.866 0.901 N/A N/A
Number of units outstanding at end
of year.......................... 1,280,359 632,612 N/A N/A
DREYFUS VARIABLE INVESTMENT FUND
CAPITAL APPRECIATION PORTFOLIO
(4/98)
Unit Value at beginning of year.... $ 1.112 $ 1.000 N/A N/A
Unit Value at end of year.......... 1.223 1.112 N/A N/A
Number of units outstanding at end
of year.......................... 10,488,399 2,833,960 N/A N/A
SMALL CAP PORTFOLIO (4/98)*
Unit Value at beginning of year.... $ 0.871 $ 1.000 N/A N/A
Unit Value at end of year.......... 1.058 0.871 N/A N/A
Number of units outstanding at end
of year.......................... 7,815,322 3,051,249 N/A N/A
GREENWICH STREET SERIES FUND
EQUITY INDEX PORTFOLIO
Unit Value at beginning of year.... $ 1.000 N/A N/A N/A
Unit Value at end of year.......... 1.098 N/A N/A N/A
Number of units outstanding at end
of year.......................... 3,460,443 N/A N/A N/A
SALOMON BROTHERS VARIABLE SERIES FUNDS,
INC.
INVESTORS FUND (4/98)*
Unit Value at beginning of year.... $ 1.029 $ 1.000 N/A N/A
Unit Value at end of year.......... 1.132 1.029 N/A N/A
Number of units outstanding at end
of year.......................... 8,670,638 3,232,444 N/A N/A
TRAVELERS SERIES FUND INC.
ALLIANCE GROWTH PORTFOLIO (12/96)*
Unit Value at beginning of year.... $ 1.679 $ 1.319 $ 1.037 $ 1.000
Unit Value at end of year.......... 2.189 1.679 1.319 1.037
Number of units outstanding at end
of year.......................... 47,167,905 31,011,054 8,259,362 2,250
MFS TOTAL RETURN PORTFOLIO (1/97)*
Unit Value at beginning of year.... $ 1.303 $ 1.183 $ 1.000 N/A
Unit Value at end of year.......... 1.319 1.303 1.183 N/A
Number of units outstanding at end
of year.......................... 54,290,552 42,017,841 9,959,634 N/A
PUTNAM DIVERSIFIED INCOME PORTFOLIO
(12/96)*
Unit Value at beginning of year.... $ 1.062 $ 1.070 $ 1.007 $ 1.000
Unit Value at end of year.......... 1.059 1.062 1.070 1.007
Number of units outstanding at end
of year.......................... 4,489,463 3,797,291 1,132,608 3,300
THE TRAVELERS SERIES TRUST
CONVERTIBLE BOND PORTFOLIO (5/98)*
Unit Value at beginning of year.... $ 1.000 $ 1.000 N/A N/A
Unit Value at end of year.......... 1.170 1.000 N/A N/A
Number of units outstanding at end
of year.......................... 2,431,429 414,907 N/A N/A
</TABLE>
B-1
<PAGE> 36
APPENDIX B: CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
THE TRAVELERS FUND ABD II FOR VARIABLE ANNUITIES
ACCUMULATION UNIT VALUES (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED YEARS ENDED PERIOD FROM
------------ ------------------------------------- DECEMBER 16, 1996
DECEMBER 31, DECEMBER 31, DECEMBER 31, TO
FUNDING OPTION 1999 1998 1997 DECEMBER 31, 1996
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C>
<S> <C> <C> <C> <C>
THE TRAVELERS SERIES TRUST (CONT'D)
DISCIPLINED MID CAP STOCK PORTFOLIO
(6/97)*
Unit Value at beginning of year.... $ 1.377 $ 1.195 $ 1.000 N/A
Unit Value at end of year.......... 1.541 1.377 1.195 N/A
Number of units outstanding at end
of year.......................... 6,716,626 5,142,990 1,668,733 N/A
DISCIPLINED SMALL CAP STOCK
PORTFOLIO (5/98)
Unit Value at beginning of year.... $ 0.894 $ 1.000 N/A N/A
Unit Value at end of year.......... 1.061 0.894 N/A N/A
Number of units outstanding at end
of year.......................... 1,202,404 450,528 N/A N/A
EQUITY INCOME PORTFOLIO (12/96)*
Unit Value at beginning of year.... $ 1.484 $ 1.339 $ 1.026 $ 1.339
Unit Value at end of year.......... 1.535 1.484 1.339 1.026
Number of units outstanding at end
of year.......................... 35,687,217 25,733,333 6,719,150 30,196
FEDERATED HIGH YIELD PORTFOLIO
(1/97)*
Unit Value at beginning of year.... $ 1.177 $ 1.140 $ 1.000 N/A
Unit Value at end of year.......... 1.196 1.177 1.140 N/A
Number of units outstanding at end
of year.......................... 22,260,856 18,811,555 4,566,993 N/A
FEDERATED STOCK PORTFOLIO (1/97)*
Unit Value at beginning of year.... $ 1.494 $ 1.285 $ 1.000 N/A
Unit Value at end of year.......... 1.552 1.494 1.285 N/A
Number of units outstanding at end
of year.......................... 14,406,177 11,892,034 3,816,999 N/A
LARGE CAP PORTFOLIO (12/96)*
Unit Value at beginning of year.... $ 1.665 $ 1.245 $ 1.023 $ 1.000
Unit Value at end of year.......... 2.123 1.665 1.245 1.023
Number of units outstanding at end
of year.......................... 28,051,763 15,040,703 4,815,858 7,800
LAZARD INTERNATIONAL STOCK
PORTFOLIO (12/96)*
Unit Value at beginning of year.... $ 1.216 $ 1.095 $ 1.027 $ 1.000
Unit Value at end of year.......... 1.460 1.216 1.095 1.027
Number of units outstanding at end
of year.......................... 25,226,349 17,270,810 5,694,288 5,702
MFS EMERGING GROWTH PORTFOLIO
(12/96)*
Unit Value at beginning of year.... $ 1.587 $ 1.198 $ 1.004 $ 1.000
Unit Value at end of year.......... 2.766 1.587 1.198 1.004
Number of units outstanding at end
of year.......................... 22,881,721 15,538,984 4,218,974 31,886
MFS MID CAP GROWTH PORTFOLIO
(4/98)*
Unit Value at beginning of year.... $ 0.985 $ 1,000 N/A N/A
Unit Value at end of year.......... 1.595 0.985 N/A N/A
Number of units outstanding at end
of year.......................... 4,760,902 965,761 N/A N/A
MFS RESEARCH PORTFOLIO (5/98)*
Unit Value at beginning of year.... $ 1.054 $ 1.000 N/A N/A
Unit Value at end of year.......... 1.285 1.054 N/A N/A
Number of units outstanding at end
of year.......................... 669,474 211,400 N/A N/A
STRATEGIC STOCK PORTFOLIO (5/98)*
Unit Value at beginning of year.... $ 0.948 $ 1.000 N/A N/A
Unit Value at end of year.......... 0.981 0.948 N/A N/A
Number of units outstanding at end
of year.......................... 434,122 147,123 N/A N/A
</TABLE>
B-2
<PAGE> 37
APPENDIX B: CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
THE TRAVELERS FUND ABD II FOR VARIABLE ANNUITIES
ACCUMULATION UNIT VALUES (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED YEARS ENDED PERIOD FROM
------------ ------------------------------------- DECEMBER 16, 1996
DECEMBER 31, DECEMBER 31, DECEMBER 31, TO
FUNDING OPTION 1999 1998 1997 DECEMBER 31, 1996
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C>
<S> <C> <C> <C> <C>
TRAVELERS QUALITY BOND PORTFOLIO
(12/96)*
Unit Value at beginning of year.... $ 1.131 $ 1.057 $ 1.001 $ 1.000
Unit Value at end of year.......... 1.128 1.131 1.057 1.001
Number of units outstanding at end
of year.......................... 26,069,226 15,435,236 3,137,736 95,203
WARBURG PINCUS TRUST
EMERGING MARKETS PORTFOLIO (5/98)*
Unit Value at beginning of year.... $ 0.734 $ 1.000 N/A N/A
Unit Value at end of year.......... 1.313 0.734 N/A N/A
Number of units outstanding at end
of year.......................... 2,521,807 780,839 N/A N/A
</TABLE>
* Reflects date money was first applied to this funding option through the
Separate Account. Condensed financial information is shown as of this date.
Funding Options not listed had no amounts yet allocated to them. "Number of
units outstanding at end of year" may include units for contract owners in the
payout phase. The financial statements for Fund ABD II and the financial
statements of The Travelers Life and Annuity Company are contained in the SAI.
B-3
<PAGE> 38
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<PAGE> 39
APPENDIX C
- --------------------------------------------------------------------------------
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 the separate accounts 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 the Separate Account 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.
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, nor 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 at 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 under 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.
C-1
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<PAGE> 41
APPENDIX D
- --------------------------------------------------------------------------------
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
The Statement of Additional Information contains more specific information and
financial statements relating to The Travelers Insurance Company or The
Travelers Life and Annuity Company. A list of the contents of the Statement of
Additional Information is set forth below:
The Insurance Company
Principal Underwriter
Distribution and Principal Underwriting Agreement
Valuation of Assets
Performance Information
Mixed and Shared Funding
Federal Tax Considerations
Independent Accountants
Financial Statements
- --------------------------------------------------------------------------------
Copies of the Statement of Additional Information dated May 1, 2000 are
available without charge. To request a copy, please clip this coupon on the
dotted line above, enter your name and address in the spaces provided below, and
mail to: The Travelers Insurance Company, Annuity Investor Services, One Tower
Square, Hartford, Connecticut 06183. The Travelers Insurance Company Statement
of Additional Information is printed on Form L-21194S, and The Travelers Life
and Annuity Statement of Additional Information is printed on Form L-21195S.
Name:
- ----------------------------------------
Address:
- ----------------------------------------
- ----------------------------------------
D-1
<PAGE> 42
L-21270 May 1, 2000
<PAGE> 43
TRAVELERS ACCESS SELECT ANNUITY PROSPECTUS:
THE TRAVELERS FUND ABD FOR VARIABLE ANNUITIES
THE TRAVELERS FUND ABD II FOR VARIABLE ANNUITIES
This prospectus describes TRAVELERS ACCESS SELECT ANNUITY, a flexible premium
variable annuity contract (the "Contract") issued by The Travelers Insurance
Company or The Travelers Life and Annuity Company, depending on the state in
which you purchased your Contract. The Contract is available in connection with
certain retirement plans that qualify for special federal income tax treatment
("qualified Contracts") as well as those that do not qualify for such treatment
("nonqualified Contracts"). We may issue it 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, we refer to Contracts and certificates as "Contracts."
You can choose to have your premium ("purchase payments") accumulate on a fixed
basis and/ or a variable basis. Your contract value will vary daily to reflect
the investment experience of the subaccounts ("funding options") you select and
any interest credited to the Fixed Account. The variable funding options are:
Capital Appreciation Fund
Money Market Portfolio
ALLIANCE VARIABLE PRODUCT SERIES FUND, INC.
Premier Growth Portfolio -- Class B
DELAWARE GROUP PREMIUM FUND
REIT Series
DREYFUS VARIABLE INVESTMENT FUND
Appreciation Portfolio(1)
Small Cap Portfolio
GREENWICH STREET SERIES FUND
Appreciation Portfolio
Diversified Strategic Income Portfolio
Equity Index Portfolio -- Class II Shares
Total Return Portfolio
JANUS ASPEN SERIES
Balanced Portfolio -- Service Shares
Global Life Sciences Portfolio -- Service Shares
Global Technology Portfolio -- Service Shares
Worldwide Growth Portfolio -- Service Shares
SALOMON BROTHERS VARIABLE SERIES FUND INC.
Investors Fund
TRAVELERS SERIES FUND INC.
Alliance Growth Portfolio
MFS Total Return Portfolio
THE TRAVELERS SERIES TRUST
Convertible Bond Portfolio
Disciplined Mid Cap Stock Portfolio
Disciplined Small Cap Stock Portfolio
Equity Income Portfolio (Fidelity)
Federated High Yield Portfolio
Federated Stock Portfolio
Large Cap Portfolio (Fidelity)
Lazard International Stock Portfolio
MFS Emerging Growth Portfolio
MFS Mid Cap Growth Portfolio
Travelers Quality Bond Portfolio
VARIABLE INSURANCE PRODUCTS FUND II (FIDELITY)
Contrafund(R) Portfolio -- Service Class 2
WARBURG PINCUS TRUST
Emerging Markets Portfolio
- ---------------
(1) Formerly Capital Appreciation Portfolio
The Fixed Account is described in Appendix C. 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. READ AND RETAIN THEM FOR FUTURE REFERENCE.
This prospectus provides the information that you should know before investing
in the Contract. You can receive additional information about the Travelers Fund
ABD for Variable Annuities or the Travelers Fund ABD II for Variable Annuities
("Separate Account") by requesting a copy of the Statement of Additional
Information ("SAI") dated May 1, 2000. 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 Insurance Company,
Annuity Investor Services, One Tower Square, Hartford, Connecticut 06183, call
1-800-842-8573 or access the SEC's website (http://www.sec.gov). See Appendix D
for the SAI's table of contents.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
VARIABLE ANNUITY CONTRACTS ARE NOT DEPOSITS OF ANY BANK, AND ARE NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY.
PROSPECTUS DATED MAY 1, 2000
<PAGE> 44
TABLE OF CONTENTS
<TABLE>
<S> <C>
Index of Special Terms................ 2
Summary............................... 3
Fee Table............................. 6
Condensed Financial Information....... 9
The Annuity Contract.................. 9
Contract Owner Inquiries............ 9
Purchase Payments................... 9
Accumulation Units.................. 9
The Funding Options................. 10
Charges and Deductions................ 12
General............................. 12
Administrative Charges.............. 13
Mortality and Expense Risk Charge... 13
Funding Option Expenses............. 13
Premium Tax......................... 14
Changes in Taxes Based Upon Premium
or Value......................... 14
Transfers............................. 14
Dollar Cost Averaging............... 14
Access to Your Money.................. 15
Systematic Withdrawals.............. 15
Loans............................... 16
Ownership Provisions.................. 16
Types of Ownership.................. 16
Beneficiary......................... 16
Annuitant........................... 16
Death Benefit......................... 17
Death Proceeds Before the Maturity
Date............................. 17
Payment of Proceeds................. 17
Death Proceeds After the Maturity
Date............................. 19
The Annuity Period.................... 19
Maturity Date....................... 19
Allocation of Annuity............... 19
Variable Annuity.................... 20
Fixed Annuity....................... 20
Payment Options....................... 20
Election of Options................. 20
Annuity Options..................... 21
Income Options...................... 21
Miscellaneous Contract Provisions..... 22
Right to Return..................... 22
Termination......................... 22
Required Reports.................... 22
Suspension of Payments.............. 22
Transfers of Contract Values to
Other Annuities.................. 22
The Separate Accounts................. 23
Performance Information............. 23
Federal Tax Considerations............ 24
General Taxation of Annuities....... 24
Types of Contracts: Qualified or
Nonqualified..................... 24
Nonqualified Annuity Contracts...... 24
Qualified Annuity Contracts......... 25
Penalty Tax for Premature
Distributions.................... 25
Diversification Requirements for
Variable Annuities............... 25
Ownership of the Investments........ 25
Mandatory Distributions for
Qualified Plans.................. 26
Taxation of Death Benefit
Proceeds......................... 26
Other Information..................... 26
The Insurance Companies............. 26
Financial Statements................ 26
IMSA................................ 26
Distribution of Variable Annuity
Contracts........................ 27
Conformity with State and Federal
Laws............................. 27
Voting Rights....................... 27
Legal Proceedings and Opinions...... 27
Appendix A: Condensed Financial
Information for The Travelers
Insurance Company: Separate Account
ABD................................. A-1
Appendix B: Condensed Financial
Information for The Travelers Life &
Annuity Company: Separate Account
ABD II.............................. B-1
Appendix C: The Fixed Account......... C-1
Appendix D: Contents of the Statement
of Additional Information........... D-1
</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 Period................... 9
Accumulation Unit..................... 9
Annuitant............................. 16
Annuity Payments...................... 19
Annuity Unit.......................... 9
Contingent Annuitant.................. 16
Contract Date......................... 9
Contract Owner (You, Your)............ 9
Contract Value........................ 9
Contract Year......................... 9
Death Report Date..................... 17
Fixed Account......................... C-1
Funding Option(s)..................... 10
Maturity Date......................... 9
Purchase Payment...................... 9
Underlying Fund....................... 10
Written Request....................... 9
</TABLE>
2
<PAGE> 45
SUMMARY:
TRAVELERS ACCESS SELECT ANNUITY
THIS SUMMARY DETAILS SOME OF THE MORE IMPORTANT POINTS THAT YOU SHOULD KNOW AND
CONSIDER BEFORE PURCHASING THE CONTRACT. PLEASE READ THE ENTIRE PROSPECTUS
CAREFULLY.
WHAT COMPANY WILL ISSUE MY CONTRACT? Your issuing company is either The
Travelers Insurance Company or The Travelers Life and Annuity Company, ("the
Company," "We" or "Us") depending on where you purchased your Contract. Each
company sponsors its own separate account, both of which are described later in
this prospectus. The Travelers Insurance Company sponsors the Travelers Fund ABD
for Variable Annuities ("Fund ABD"); The Travelers Life and Annuity Company
sponsors the Travelers Fund ABD II for Variable Annuities ("Fund ABD II"). When
we refer to the Separate Account, we are referring to either Fund ABD or Fund
ABD II, depending upon your issuing company.
Your issuing company is The Travelers Life and Annuity Company unless you
purchased your contract in the locations listed below, which contracts are
issued by The Travelers Insurance Company.
<TABLE>
<S> <C>
Kansas North Carolina
Maine Oregon(1)
New Hampshire Puerto Rico
New Jersey Tennessee
New York Washington(1)
Wyoming
</TABLE>
- ---------------
(1) The Travelers Insurance Company issues only single premium contracts with
variable and fixed accounts for these states. The Travelers Life and Annuity
Company issues only flexible premium contracts with variable accounts in
these states. Please refer to your Contract or ask your agent for more
information.
You may also refer to the cover page of your Contract for the name of your
issuing company. You may only purchase a Contract where the Contract has been
approved. Not all locations have approved all Contracts.
CAN YOU GIVE ME A GENERAL DESCRIPTION OF THE VARIABLE ANNUITY CONTRACT? The
Contract offered by the Company is a variable annuity intended for retirement
savings or other long-term investment purposes. The Contract provides a death
benefit as well as guaranteed payout options. You direct your payment(s) to one
or more of the variable funding options and/or to the Fixed Account. We
guarantee money directed to the Fixed Account as to principal and interest. The
variable funding options are designed to produce a higher rate of return than
the Fixed Account; however, this is not guaranteed. You can also lose money in
the variable funding options.
The Contract, like all deferred variable annuity contracts, has two phases: the
accumulation phase and the payout phase. During the accumulation phase
generally, under a qualified contract, your pre-tax contribution accumulates on
a tax-deferred basis and is 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 contribution
accumulates on a tax-deferred basis and is taxed as income when you make a
withdrawal. The payout phase occurs when you begin receiving payments from your
Contract. The amount of money you accumulate in your Contract determines the
amount of income (annuity payments) you receive during the payout phase.
During the payout phase, you may choose to receive annuity payments from the
Fixed Account or the variable funding options. If you want to receive payments
from your annuity, you can choose one of a number of annuity options or income
options.
Once you choose one of the annuity options or income options and begin to
receive payments, it cannot be changed. During the payout phase, you have the
same investment choices you had
3
<PAGE> 46
during the accumulation phase. If amounts are directed to the variable funding
options, the dollar amount of your payments may increase or decrease.
WHO SHOULD PURCHASE THIS CONTRACT? The Contract is currently available for use
in connection with (1) individual nonqualified purchases; (2) rollovers from
Individual Retirement Annuities (IRAs); and (3) rollovers from other 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.
Purchase of this Contract through a tax qualified retirement plan ("Plan") does
not provide any additional tax deferral benefits beyond those provided by the
Plan. Accordingly, if you are purchasing this Contract through a Plan, you
should consider purchasing this Contract for its Death Benefit, Annuity Option
Benefits, and other non-tax-related benefits.
You may purchase the Contract with an initial payment of at least $20,000. You
may make additional payments of at least $500 at any time during the
accumulation phase.
IS THERE A RIGHT TO RETURN PERIOD? 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 on the purchase payment 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.
WHAT TYPES OF INVESTMENT OPTIONS ARE AVAILABLE? You can direct your money into
the Fixed Account or any or all of the funding options shown on the cover page.
The funding options are described in the prospectuses for the funds. Depending
on market conditions, you may make or lose money in any of these options.
The value of the Contract will vary depending upon the investment performance of
the funding options you choose. Past performance is not a guarantee of future
results. Standard and Nonstandard performance is shown in the Statement of
Additional Information that you may request free of charge.
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. We may, in the future, charge a fee
for any transfer request, or limit the number of transfers allowed. At a
minimum, we would always allow one transfer every six months. We reserve the
right to restrict transfers that we determine will disadvantage other contract
owners. 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.
WHAT EXPENSES WILL BE ASSESSED UNDER THE CONTRACT? 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 on the deduction date, 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 the sub-account
administrative charge is 0.15% annually. Each funding option also charges for
management and other expenses. Please refer to the Fee Table for more
information about the charges.
HOW WILL MY CONTRIBUTIONS AND WITHDRAWALS BE TAXED? Generally, 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 nonqualified Contract, payments to the contract
4
<PAGE> 47
are made with after-tax dollars, and 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.
HOW MAY I ACCESS MY MONEY? You can take withdrawals any time during the
accumulation phase. There are no withdrawal charges, however, income taxes
and/or a penalty tax may apply to taxable amounts withdrawn.
WHAT IS THE DEATH BENEFIT UNDER THE CONTRACT? The death benefit applies upon
the first death of the owner, joint owner, or annuitant. Assuming you are the
Annuitant, the death benefit is as follows: If you die before the Contract is in
the payout phase, the person you have chosen as your beneficiary will receive a
death benefit. The death benefit value is calculated at the close of the
business day on which the Company's Home Office receives due proof of death and
written payment instructions. Certain states may have varying age requirements.
Please refer to the Death Benefit section in the prospectus for more details.
ARE THERE ANY ADDITIONAL FEATURES? This Contract has other features you may be
interested in. These include:
- DOLLAR COST AVERAGING. This is a program that allows you to invest a
fixed amount of money in 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.
5
<PAGE> 48
FEE TABLE
- --------------------------------------------------------------------------------
CONTRACT OWNER TRANSACTIONS EXPENSES
<TABLE>
<S> <C>
Annual Contract Administrative Charge (Waived if
contract value is $40,000 or more) $30
</TABLE>
<TABLE>
<S> <C>
ANNUAL SEPARATE ACCOUNT CHARGES
(as a percentage of the average daily net assets of the
Separate Account)
Mortality & Expense Risk Charge..................... 1.25%
Administrative Expense Charge....................... 0.15%
-----
Total Separate Account Charges................... 1.40%
</TABLE>
FUNDING OPTION EXPENSES:
(as a percentage of average daily net assets of the Funding Option as of
December 31, 1999, unless otherwise noted)
<TABLE>
<CAPTION>
TOTAL ANNUAL
MANAGEMENT FEE OTHER EXPENSES OPERATING EXPENSES
(AFTER EXPENSE (AFTER EXPENSE (AFTER EXPENSE
FUNDING OPTIONS: REIMBURSEMENT) 12B-1 FEES REIMBURSEMENT) REIMBURSEMENT)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Appreciation Fund.............. 0.75% 0.08% 0.83%
Money Market Portfolio................. 0.32% 0.08% 0.40%(1)
ALLIANCE VARIABLE PRODUCT SERIES FUND,
INC.
Premier Growth Portfolio --
Class B......................... 1.00% 0.25% 0.04% 1.29%
DELAWARE GROUP PREMIUM FUND
REIT Series....................... 0.64% 0.21% 0.85%(2)
DREYFUS VARIABLE INVESTMENT FUND
Appreciation Portfolio............ 0.75% 0.03% 0.78%(3)
Small Cap Portfolio............... 0.75% 0.03% 0.78%
GREENWICH STREET SERIES FUND
Appreciation Portfolio............ 0.75% 0.04% 0.79%(4)
Diversified Strategic Income
Portfolio....................... 0.65% 0.13% 0.78%(4)
Equity Index Portfolio -- Class II
Shares.......................... 0.21% 0.25% 0.05% 0.51%(5)
Total Return Portfolio............ 0.75% 0.04% 0.79%(4)
JANUS ASPEN SERIES
Balanced Portfolio --
Service Shares.................. 0.65% 0.25% 0.02% 0.92%(6)
Global Life Sciences Portfolio --
Service Shares.................. 0.65% 0.25% 0.19% 1.09%(6)
Global Technology Portfolio --
Service Shares.................. 0.65% 0.25% 0.13% 1.03%(6)
Worldwide Growth Portfolio --
Service Shares.................. 0.65% 0.25% 0.05% 0.95%(6)
SALOMON BROTHERS VARIABLE SERIES FUND
INC.
Investors Fund.................... 0.53% 0.45% 0.98%(7)
TRAVELERS SERIES FUND INC.
Alliance Growth Portfolio......... 0.80% 0.02% 0.82%(8)
MFS Total Return Portfolio........ 0.80% 0.04% 0.84%(8)
THE TRAVELERS SERIES TRUST
Convertible Bond Portfolio........ 0.60% 0.20% 0.80%(9)
Disciplined Mid Cap Stock
Portfolio....................... 0.70% 0.25% 0.95%(10)
Disciplined Small Cap Stock
Portfolio....................... 0.80% 0.20% 1.00%(9)
Equity Income Portfolio........... 0.75% 0.13% 0.88%
Federated High Yield Portfolio.... 0.65% 0.19% 0.84%
Federated Stock Portfolio......... 0.63% 0.19% 0.82%
Large Cap Portfolio............... 0.75% 0.12% 0.87%
Lazard International Stock
Portfolio....................... 0.83% 0.23% 1.06%
</TABLE>
6
<PAGE> 49
<TABLE>
<CAPTION>
TOTAL ANNUAL
MANAGEMENT FEE OTHER EXPENSES OPERATING EXPENSES
(AFTER EXPENSE (AFTER EXPENSE (AFTER EXPENSE
FUNDING OPTIONS: REIMBURSEMENT) 12B-1 FEES REIMBURSEMENT) REIMBURSEMENT)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MFS Emerging Growth Portfolio..... 0.75% 0.12% 0.87%
MFS Mid Cap Growth Portfolio...... 0.80% 0.20% 1.00%(9)
Travelers Quality Bond
Portfolio....................... 0.32% 0.22% 0.54%
VARIABLE INSURANCE PRODUCTS FUND II
Contrafund(R) Portfolio -- Service
Class 2......................... 0.58% 0.25% 0.07% 0.90%(11)
WARBURG PINCUS TRUST
Emerging Markets Portfolio........ 0.00% 1.40% 1.40%(12)
</TABLE>
NOTES:
The purpose of this 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. "Other Expenses" include operating costs of the fund. These expenses
are reflected in each funding option's net asset value and are not deducted from
the account value under the Contract.
(1) Other Expenses have been restated to reflect the current expense
reimbursement arrangement with Travelers Insurance Company. Travelers has
agreed to reimburse the Portfolio for the amount by which its aggregate
expenses (including the management fee, but excluding brokerage commissions,
interest charges and taxes) exceeds 0.40%. Without such arrangement, Total
Expenses would have been 0.50% for the MONEY MARKET PORTFOLIO.
(2) The investment adviser for the REIT SERIES is Delaware Management Company
("DMC"). Effective May 1, 2000 through October 31, 2000, DMC has voluntarily
agreed to waive its management fee and reimburse the Series for expenses to
the extent that total expenses will not exceed 0.85%. Without such an
arrangement, Total Annual Operating Expenses for the fund would have been
0.96%.
(3) Formerly known as Dreyfus Capital Appreciation Portfolio.
(4) The Portfolio Management Fee for the APPRECIATION PORTFOLIO, the TOTAL
RETURN, and the DIVERSIFIED STRATEGIC INCOME PORTFOLIO includes 0.20% for
fund administration.
(5) The Portfolio Management Fee for EQUITY INDEX PORTFOLIO-CLASS II includes
0.06% for fund administration and a distribution plan or "Rule 12b-1 plan".
Fees for Class II reflect the period from 3/22/99 (inception date) to
12/31/99. On March 22, 1999, the fund adopted its current fee structure.
(6) Expenses are based on the estimated expenses that the new Service Shares
Class of each Portfolio expects to incur in its initial fiscal year. All
expenses are shown without the effect of offset arrangements.
(7) The Adviser has waived all or a portion of its Management Fees for the year
ended December 31, 1999. If such fees were not waived or expenses
reimbursed, the Management Fee, Other Expenses and Total Annual Operating
Expenses would have been 0.70%, 0.45% and 1.15% respectively.
(8) Expenses are as of October 31, 1999 (the Fund's fiscal year end). There were
no fees waived or expenses reimbursed for these funds in 1999.
(9) Travelers Insurance Company has agreed to reimburse the CONVERTIBLE BOND
PORTFOLIO, the DISCIPLINED SMALL CAP STOCK PORTFOLIO, and the MFS MID CAP
GROWTH PORTFOLIO for expenses for the period ended December 31, 1999 which
exceeded 0.80%, 1.00% and 1.00% respectively. Without such voluntary
arrangements, the actual annualized Total Annual Operating Expenses would
have been 1.23%, 1.49%, and 1.07% respectively.
(10) Other Expenses reflect the current expense reimbursement arrangement with
Travelers Insurance Company. Travelers has agreed to reimburse the
Portfolio for the amount by which its aggregate expenses (including
management fees, but excluding brokerage commissions, interest charges and
taxes) exceeds 0.95%. Without such arrangements, the Total Annual Operating
Expenses for the Portfolio would have been 0.99% for the DISCIPLINED MID
CAP STOCK PORTFOLIO.
(11) A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, through arrangements with certain fund's
custodian, credits realized as a result of uninvested cash balances were
used to reduce a portion of each applicable fund's expenses. Without these
reductions, the Total Annual Operating Expenses presented in the table
would have been 0.95% for CONTRAFUND PORTFOLIO -- SERVICE CLASS 2. Service
Class 2 expenses are based on estimated expenses for the first year.
(12) Fee waivers, expense reimbursements, or expense credits reduced expenses
for the WARBURG PINCUS EMERGING MARKETS PORTFOLIO during 1999, but this may
be discontinued at any time. Without such arrangements, the Portfolio's
Management Fees, Other Expenses and Total Annual Operating Expenses would
equal 1.25%, 1.88% and 3.13%, respectively. The Portfolio's other expenses
are based on annualized estimates of expenses for the fiscal year ending
December 31, 1999, net of any fee waivers or expense reimbursements.
7
<PAGE> 50
EXAMPLE*:
Assuming a 5% annual return on assets, a $1,000 investment would be subject to
the following expenses:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
IF CONTRACT IS SURRENDERED, ANNUITIZED,
OR IF NO WITHDRAWALS HAVE BEEN MADE
AT THE END OF PERIOD SHOWN:
-----------------------------------------
FUNDING OPTIONS: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Appreciation Fund................................... 23 70 120 257
Money Market Portfolio...................................... 18 57 98 213
ALLIANCE VARIABLE PRODUCT SERIES FUND, INC.
Premier Growth Portfolio -- Class B..................... 27 84 143 303
DELAWARE GROUP PREMIUM FUND
REIT Series............................................. 23 71 121 259
DREYFUS VARIABLE INVESTMENT FUND
Appreciation Portfolio.................................. 22 68 117 252
Small Cap Portfolio..................................... 22 68 117 252
GREENWICH STREET SERIES FUND
Appreciation Portfolio.................................. 22 69 118 253
Diversified Strategic Income Portfolio.................. 22 68 117 252
Equity Index Portfolio -- Class II Shares............... 19 60 104 224
Total Return Portfolio.................................. 22 69 118 253
JANUS ASPEN SERIES
Balanced Portfolio -- Service Shares.................... 24 73 124 266
Global Life Sciences Portfolio -- Service Shares........ 25 78 133 283
Global Technology Portfolio -- Service Shares........... 25 76 130 278
Worldwide Growth Portfolio -- Service Shares............ 24 74 126 270
SALOMON BROTHERS VARIABLE SERIES FUND INC.
Investors Fund.......................................... 24 75 127 273
TRAVELERS SERIES FUND INC
Alliance Growth Portfolio............................... 23 70 119 256
MFS Total Return Portfolio.............................. 23 70 120 258
THE TRAVELERS SERIES TRUST
Convertible Bond Portfolio.............................. 22 69 118 254
Disciplined Mid Cap Stock Portfolio..................... 24 74 126 270
Disciplined Small Cap Stock Portfolio................... 24 75 128 275
Equity Income Portfolio................................. 23 72 122 262
Federated High Yield Portfolio.......................... 23 70 120 258
Federated Stock Portfolio............................... 23 70 119 256
Large Cap Portfolio..................................... 23 71 122 261
Lazard International Stock Portfolio.................... 25 77 132 281
MFS Emerging Growth Portfolio........................... 23 71 122 261
MFS Mid Cap Growth Portfolio............................ 24 75 128 275
Travelers Quality Bond Portfolio........................ 20 61 105 227
VARIABLE INSURANCE PRODUCTS FUND II
Contrafund(R) Portfolio -- Service Class 2.............. 23 72 123 264
WARBURG PINCUS TRUST
Emerging Markets Portfolio.............................. 28 87 148 314
</TABLE>
* THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THE EXAMPLE
REFLECTS THE $30 ANNUAL CONTRACT ADMINISTRATIVE CHARGE AS AN ANNUAL CHARGE OF
0.009% OF ASSETS.
8
<PAGE> 51
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
See Appendices A and B.
THE ANNUITY CONTRACT
- --------------------------------------------------------------------------------
Travelers Access Select Annuity is a contract between the contract owner
("you"), and the Company. You make purchase payments to us and we credit them to
your Contract. 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. The date the
Contract and its benefits become effective is referred to as the contract date.
Each 12-month period following the contract date is called a contract year.
Certain changes and elections must be made in writing to the Company. Where the
term "written request" is used, it means that written information must be sent
to the Company's Home Office in a form and content satisfactory to us.
CONTRACT OWNER INQUIRIES
Any questions you have about your Contract should be directed to the Company's
Home Office at 1-800-842-8573.
PURCHASE PAYMENTS
The initial purchase payment must be at least $20,000. You may make additional
payments of at least $500 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. The initial purchase payment is due and payable
before the Contract becomes effective.
We will apply the initial purchase payment within two business days after we
receive it in good order at our Home Office. Subsequent purchase payments will
be credited to a Contract on the same business day, if received in good order by
our Home Office by 4:00 p.m. Eastern time. A business day is any day that the
New York Stock Exchange is open. Our business day ends at 4:00 p.m. Eastern time
unless we need to close earlier due to an emergency.
ACCUMULATION UNITS
The period between the contract effective date and the maturity date is the
accumulation period. During the accumulation period, an accumulation unit is
used to calculate the value of a Contract. An accumulation unit works like a
share of a mutual fund. Each funding option has a corresponding accumulation
unit value. The accumulation units are valued each business day and their values
may increase or decrease from day to day. The number of accumulation units we
will credit to your Contract once we receive a purchase payment is determined by
dividing the amount directed to each funding option by the value of its
accumulation unit. We calculate the value of an accumulation unit for each
funding option each day the New York Stock Exchange is open. The values are
calculated as of 4:00 p.m. Eastern time. After the value is calculated, we
credit your Contract. During the annuity period (i.e., after the maturity date),
you are credited with annuity units.
9
<PAGE> 52
THE FUNDING OPTIONS
You choose which of the following variable funding options to have your purchase
payments allocated to. These funding options are subsections of the Separate
Account, which invest in the underlying mutual funds ("underlying funds"). 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. You are not investing directly in the underlying fund. Since each
option has varying degrees of risk, please read the prospectuses carefully
before investing. Contact your registered representative or call 1-800-842-8573
to request additional copies of the prospectuses.
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 and obtaining any state and SEC approval, if necessary. From time to time we
may make new funding options available.
The current variable funding options are listed below, along with their
investment advisers and any subadviser:
<TABLE>
<CAPTION>
FUNDING OPTION INVESTMENT OBJECTIVE INVESTMENT ADVISER/ SUBADVISER
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Capital Appreciation Fund Seeks growth of capital through the use of Travelers Asset Management
common stocks. Income is not an objective. The International Company LLC
Fund invests principally in common stocks of ("TAMIC")
small to large companies which are expected to Subadviser: Janus Capital Corp.
experience wide fluctuations in price both in ("Janus Capital")
rising and declining markets.
Money Market Portfolio Seeks high current income from short-term money TAMIC
market instruments while preserving capital and
maintaining a high degree of liquidity.
ALLIANCE VARIABLE PRODUCT
SERIES FUND, INC.
Premier Growth Portfolio -- Seeks long-term growth of capital by investing Alliance Capital Management
Class B primarily in equity securities of a limited
number of large, carefully selected, high
quality U.S. companies that are judged likely to
achieve superior earning momentum.
DELAWARE GROUP PREMIUM FUND,
INC.
REIT Series Seeks maximum long-term total return by Delaware Management Company,
investing in securities of companies primarily Inc.
engaged in the real estate industry. Capital Subadviser: Lincoln Investment
appreciation is a secondary objective. Management, Inc.
DREYFUS VARIABLE INVESTMENT
FUND
Appreciation Portfolio Seeks primarily to provide long-term capital The Dreyfus Corporation
growth consistent with the preservation of Subadviser: Fayez Sarofim & Co.
capital; current income is a secondary
investment objective. The portfolio invests
primarily in the common stocks of domestic and
foreign insurers.
Small Cap Portfolio Seeks to maximize capital appreciation. The Dreyfus Corporation
GREENWICH STREET SERIES FUND
Appreciation Portfolio Seeks long term appreciation of capital by SSB Citi Fund Management LLC.
investing primarily in equity securities. ("SSB Citi")
Diversified Strategic Seeks high current income by investing primarily SSB Citi
Income Portfolio in the following fixed income securities: U.S. Subadviser: Smith Barney Global
Gov't and mortgage-related securities, foreign Capital Management, Inc.
gov't bonds and corporate bonds rated below
investment grade.
Equity Index Portfolio -- Seeks to replicate, before deduction of Travelers Investment Management
Class II Shares expenses, the total return performance of the Co. ("TIMCO")
S&P 500 Index.
Total Return Portfolio An equity portfolio that seeks to provide total SSB Citi
return, consisting of long-term capital
appreciation and income. The Portfolio will
invest primarily in a diversified portfolio of
dividend-paying common stocks.
</TABLE>
10
<PAGE> 53
<TABLE>
<CAPTION>
FUNDING OPTION INVESTMENT OBJECTIVE INVESTMENT ADVISER/ SUBADVISER
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
JANUS ASPEN SERIES
Balanced Seeks long-term capital growth, consistent with Janus Capital
Portfolio -- Service Shares preservation of capital and balanced by current
income.
Global Life Sciences Seeks long-term capital growth by investing Janus Capital
Portfolio -- Service Shares primarily in equity securities of U.S. and
foreign companies, normally investing at least
65% of its total assets in companies with a life
science orientation.
Global Technology Seeks long-term capital growth by investing Janus Capital
Portfolio -- Service Shares primarily in equity securities of U.S. and
foreign companies, normally investing at least
65% of its total assets in companies likely to
benefit significantly from advances in
technology.
Worldwide Growth Seeks growth of capital in a manner consistent Janus Capital
Portfolio -- Service Shares with preservation of capital by investing
primarily in common stocks of companies of any
size throughout the world.
SALOMON BROTHERS VARIABLE
SERIES FUND INC.
Investors Fund Seeks long-term growth of capital, and, Salomon Brothers Asset
secondarily, current income, through investments Management ("SBAM")
in common stocks of well-known companies.
TRAVELERS SERIES FUND INC.
Alliance Growth Portfolio Seeks long-term growth of capital. Current Travelers Investment Adviser
income is only an incidental consideration. The ("TIA")
Portfolio invests predominantly in equity Subadviser: Alliance
securities of companies with a favorable outlook Capital Management L.P.
for earnings and whose rate of growth is
expected to exceed that of the U.S. economy over
time.
MFS Total Return Portfolio (a balanced portfolio) Seeks to obtain above- TIA
average income (compared to a portfolio entirely Subadviser: Massachusetts
invested in equity securities) consistent with Financial Services Company
the prudent employment of capital. Generally, at ("MFS")
least 40% of the Portfolio's assets are invested
in equity securities.
THE TRAVELERS SERIES TRUST
Convertible Bond Portfolio Seeks current income and capital appreciation by TAMIC
investing in convertible bond securities and in
combinations of nonconvertible fixed-income
securities and warrants or call options that
together resemble convertible securities.
Disciplined Mid Cap Stock Seeks growth of capital by investing primarily TAMIC
Portfolio in a broadly diversified portfolio of U.S. Subadviser: TIMCO
common stocks.
Disciplined Small Cap Stock Seeks long term capital appreciation by TAMIC
Portfolio investing primarily (at least 65% of its total Subadviser: TIMCO
assets) in the common stocks of U.S. Companies
with relatively small market capitalizations at
the time of investment.
Equity Income Portfolio Seeks reasonable income by investing at least TAMIC
65% in income-producing equity securities. The Subadviser: Fidelity Management
balance may be invested in all types of domestic & Research Co ("FMR")
and foreign securities, including bonds. The
Portfolio seeks to achieve a yield that exceeds
that of the securities comprising the S&P 500.
The Subadviser also considers the potential for
capital appreciation.
</TABLE>
11
<PAGE> 54
<TABLE>
<CAPTION>
FUNDING OPTION INVESTMENT OBJECTIVE INVESTMENT ADVISER/ SUBADVISER
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Federated High Yield Seeks high current income by investing primarily TAMIC
Portfolio in a professionally managed, diversified Subadviser: Federated
portfolio of fixed income securities. Investment Counseling, Inc.
Federated Stock Portfolio Seeks growth of income and capital by investing TAMIC
principally in a professionally managed and Subadviser: Federated
diversified portfolio of common stock of high- Investment Counseling, Inc.
quality companies (i.e., leaders in their
industries and characterized by sound management
and the ability to finance expected growth).
Large Cap Portfolio Seeks long-term growth of capital by investing TAMIC
primarily in equity securities of companies with Subadviser: FMR
large market capitalizations.
Lazard International Stock Seeks capital appreciation by investing TAMIC
Portfolio primarily in the equity securities of non-United Subadviser: Lazard Asset
States companies (i.e., incorporated or Management
organized outside the United States).
MFS Emerging Growth Seeks to provide long-term growth of capital. TAMIC
Portfolio Dividend and interest income from portfolio Subadviser: MFS
securities, if any, is incidental to the MFS
Portfolio's investment objective.
MFS Mid Cap Growth Seeks to obtain long-term growth of capital by TAMIC
Portfolio investing, under normal market conditions, at Subadviser: MFS
least 65% of its total assets in equity
securities of companies with medium market
capitalization which the investment adviser
believes have above-average growth potential.
Travelers Quality Bond Seeks current income, moderate capital TAMIC
volatility and total return.
VARIABLE INSURANCE PRODUCTS
FUND II
Contrafund(R) Portfolio-- Seeks long-term capital appreciation by FMR
Service Class 2 investing primarily in common stocks of
companies whose value the adviser believes is
not fully recognized by the public.
WARBURG PINCUS TRUST
Emerging Markets Portfolio Seeks long-term growth of capital by investing Credit Suisse Asset Management
primarily in equity securities of non-U.S. LLC
issuers consisting of companies in emerging
securities markets.
</TABLE>
CHARGES AND DEDUCTIONS
- --------------------------------------------------------------------------------
GENERAL
We deduct the charges described below. The charges are for the service and
benefits we provide, costs and expenses we incur, and risks we assume under the
Contracts. Services and benefits we provide include:
- the ability for you to make withdrawals and surrenders under the
Contracts;
- the death benefit paid on the death of the contract owner, annuitant, or
first of the joint contract owners,
- the available funding options and related programs (including dollar-cost
averaging, portfolio rebalancing, and systematic withdrawal programs);
- administration of the annuity options available under the Contracts; and
- the distribution of various reports to contract owners.
Costs and expenses we incur include:
- losses associated with various overhead and other expenses associated
with providing the services and benefits provided by the Contracts,
12
<PAGE> 55
- sales and marketing expenses including commission payments to your sales
agent, and
- other costs of doing business.
Risks we assume include:
- that annuitants may live longer than estimated when the annuity factors
under the Contracts were established;
- that the amount of the death benefit will be greater than the contract
value, and
- that the costs of providing the services and benefits under the Contracts
will exceed the charges deducted.
We may also deduct a charge for taxes.
Unless otherwise specified, charges are deducted proportionately from all
funding options in which you are invested.
We may reduce or eliminate the administrative charges and/or the mortality and
expense risk charge under the Contract when certain sales or administration of
the Contract result in savings or reduced expenses and/or risks. For certain
trusts, we may change the order in which purchase payments and earnings are
withdrawn in order to determine the withdrawal charge. We will not reduce or
eliminate the administrative charge where such reduction or elimination would be
unfairly discriminatory to any person.
ADMINISTRATIVE CHARGES
We will deduct an annual contract administrative charge on the fourth Friday of
each August from Contracts with a value of less than $40,000 on that date. This
charge compensates us for expenses incurred in establishing and maintaining the
Contract. The $30 charge is deducted from the contract value by canceling
accumulation units applicable to each variable funding option on a pro rata
basis. For the first Contract year this charge will be prorated (i.e.
calculated) from the date of purchase. A prorated charge will also be made if
the Contract is completely withdrawn or terminated. We will not deduct a
contract administrative charge:
(1) from the distribution of death proceeds,
(2) after an annuity payout has begun, or
(3) if the contract value on the date of assessment equals or is 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 ("M&E")
charge from amounts held in the variable funding options. The deduction is
reflected in our calculation of accumulation and annuity unit values. The
charges stated are the maximum for this product. We reserve the right to lower
this charge at any time. This charge equals, on an annual basis, 1.25% of the
amounts held in each variable funding option. This charge compensates the
Company for risks assumed, benefits provided and expenses incurred, including
the payment of commissions to your sales agent.
FUNDING OPTION EXPENSES
The charges and expenses of the funding options are summarized in the fee table
and are described in the accompanying prospectuses.
13
<PAGE> 56
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. We
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 we have 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.
TRANSFERS
- --------------------------------------------------------------------------------
Up to 30 days before the maturity date, you may transfer all or part of the
contract value between funding options. Transfers are made at the value(s) next
determined after we receive your request at the Home Office. There are no
charges or restrictions on the amount or frequency of transfers currently;
however, we reserve the right to charge a fee for any transfer request, and to
limit the number of transfers to one in any six-month period. We also reserve
the right to restrict transfers by any market timing firm or any other third
party authorized to initiate transfers on behalf of multiple contract owners. We
may, among other things, not accept: 1) the transfer instructions of any agent
acting under a power of attorney on behalf of more than one owner, or 2) the
transfer or exchange instructions of individual owners who have executed
pre-authorized transfer forms which are submitted by market timing firms or
other third parties on behalf of more than one owner. We further reserve the
right to limit transfers that we determine will disadvantage other contract
owners.
Since different 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 the pre-authorized transfer program (the "DCA Program")
allows you to transfer a set dollar amount to other funding options on a monthly
or quarterly basis during the accumulation phase of the Contract. Using this
method, more accumulation units are purchased in a funding option if the value
per unit is low and fewer accumulation units are purchased if the value per unit
is high. Therefore, a lower-than-average cost per unit may be achieved over the
long run.
You may elect the DCA Program 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 DCA Program. The minimum amount that may be transferred through this
program is $400.
You may establish pre-authorized transfers of contract values from the Fixed
Account, subject to certain restrictions. Under the DCA Program, automated
transfers from the Fixed Account may not deplete your Fixed Account Value in
less than twelve months from your enrollment in the DCA Program.
In addition to the DCA Program, the Company may credit increased interest rates
to contract owners under an administrative Special DCA Program established at
the discretion of the
14
<PAGE> 57
Company, depending on availability and state law. Under this program, the
contract owner may pre-authorize level transfers to any of the funding options
under either a 6 Month Program or 12 Month Program. The 6 Month Program and the
12 Month Program will generally have different credited interest rates. Under
the 6 Month Program, the interest rate can accrue up to 6 months on funds in the
Special DCA Program and all purchase payments and accrued interest must be
transferred on a level basis to the selected funding option in 6 months. Under
the 12 Month Program, the interest rate can accrue up to 12 months on funds in
the Special DCA Program and all purchase payments and accrued interest in this
Program must be transferred on a level basis to the selected funding options in
12 months.
The pre-authorized transfers will begin after the initial Program purchase
payment and complete enrollment instructions are received by the Company. If
complete Program enrollment instructions are not received by the Company within
15 days of receipt of the initial Program purchase payment, the entire balance
in the Program will be credited with the non-Program interest rate then in
effect for the Fixed Account.
You may start or stop participation in the DCA Program at any time, but you must
give the Company at least 30 days' notice to change any automated transfer
instructions that are currently in place. If you stop the Special DCA Program
and elect to remain in the Fixed Account, your contract value will be credited
for the remainder of 6 or 12 months with the interest rate for non-Program
funds.
A contract owner may only have one DCA Program or Special DCA Program in place
at one time. Any subsequent purchase payments received by the Company within the
Program period selected will be allocated to the current funding options over
the remainder of that Program transfer period, unless otherwise directed by the
contract owner.
All provisions and terms of the Contract apply to the DCA and Special DCA
Programs, 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
contract value, less any premium tax not previously deducted. Unless you submit
a written request specifying the fixed or variable funding option(s) from which
amounts are to be withdrawn, the withdrawal will be made on a pro rata basis.
The contract value will be determined as of the close of business after we
receive your surrender request at the Home Office. The contract value may be
more or less than the purchase payments made.
We may defer payment of any contract value for a period of up to seven days
after the written request is received, but it is our intent to pay as soon as
possible. We cannot process requests for withdrawals that are not in good order.
We will contact you if there is a deficiency causing a delay and will advise
what is needed to act upon the withdrawal request.
SYSTEMATIC WITHDRAWALS
Before the maturity date, you may choose to withdraw a specified dollar amount
(at least $100) on a monthly, quarterly, semiannual or annual basis. Any
applicable premium taxes and withdrawal charge 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 investment options in which you
have an interest, unless you instruct us otherwise. You may begin or discontinue
systematic withdrawals at any time
15
<PAGE> 58
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.
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 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 (e.g. 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.
BENEFICIARY
You name the beneficiary in a written request. The beneficiary has the right to
receive any death benefit proceeds under the contract upon the death of the
annuitant or a contract owner. If more than one beneficiary survives the
annuitant or contract owner, 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. In the case of a non-spousal
beneficiary or a spousal beneficiary who has not chosen to assume the contract,
the death proceeds will be held in a fixed account until the beneficiary elects
a Settlement Option or takes a distribution.
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.
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.
A contingent annuitant may not be changed, deleted or added after the Contract
becomes effective.
16
<PAGE> 59
DEATH BENEFIT
- --------------------------------------------------------------------------------
Before the maturity date, when there is no contingent annuitant, a death benefit
is payable when either the annuitant or a contract owner dies. The death benefit
is calculated at the close of the business day on which the Company's Home
Office receives due proof of death and written payment instructions ("death
report date").
DEATH PROCEEDS BEFORE THE MATURITY DATE
DEATH OF ANY OWNER OR THE ANNUITANT BEFORE AGE 75. The Company will pay to the
beneficiary a death benefit in 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; or
(3) the contract value on the latest fifth contract year anniversary before
the Company receives due proof of death.
DEATH OF ANY OWNER OR THE ANNUITANT ON OR AFTER AGE 75. The Company will pay to
the beneficiary a death benefit in 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; or
(3) the contract value on the latest fifth contract year anniversary
occurring on or before the annuitant's 75th birthday.
PAYMENT OF PROCEEDS
The process of paying death benefit proceeds before the maturity date under
various situations for nonqualified contracts and qualified contracts is
summarized in the charts below. The charts do not encompass every situation and
are merely intended as a general guide. More detailed information is provided in
your Contract. Generally, the person(s) receiving the benefit may request that
the proceeds be paid in a lump sum, or be applied to one of the settlement
options available under the Contract.
17
<PAGE> 60
NONQUALIFIED CONTRACTS
<TABLE>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
BEFORE THE MATURITY DATE, THE COMPANY WILL PAY UNLESS... MANDATORY PAYOUT
UPON THE DEATH OF THE THE PROCEEDS TO: RULES APPLY*
- -----------------------------------------------------------------------------------------------------------------
Owner (who is not the The beneficiary (ies), Unless, the beneficiary is the Yes
annuitant) (with no joint or if none, to the contract owner's spouse and the
owner) contract owner's estate. spouse elects to continue the
contract as the new owner
rather than receive the
distribution.
- -----------------------------------------------------------------------------------------------------------------
Owner (who is the annuitant) The beneficiary (ies), Unless, the beneficiary is the Yes
(with no joint owner) or if none, to the contract owner's spouse and the
contract owner's estate. spouse elects to continue the
contract as the new owner
rather than receive the
distribution.
- -----------------------------------------------------------------------------------------------------------------
Joint Owner (who is not the The surviving joint Unless the surviving joint Yes
annuitant) owner. owner is the spouse and elects
to assume and continue the
contract.
- -----------------------------------------------------------------------------------------------------------------
Joint Owner (who is the The beneficiary (ies), Unless the beneficiary is the
annuitant) or if none, to the contract owner's spouse and the
contract owner's estate. spouse elects to assume and
continue the contract.
Or, unless there is a Yes
contingent annuitant the
contingent annuitant becomes
the annuitant and the proceeds
will be paid to the surviving
joint owner. If the surviving
joint owner is the spouse, the
spouse may elect to assume and
continue the contract.
- -----------------------------------------------------------------------------------------------------------------
Annuitant (who is not the The beneficiary (ies). Unless, there is a contingent No
contract owner) annuitant. Then, the contingent
annuitant becomes the annuitant
and the contract continues in
effect (generally using the
original maturity date). The
proceeds will then be paid upon
the death of the contingent
annuitant or owner.
- -----------------------------------------------------------------------------------------------------------------
Annuitant (who is the contract See death of "owner who N/A
owner) is the annuitant" above.
- -----------------------------------------------------------------------------------------------------------------
Annuitant (where owner is a The beneficiary (ies) Yes (Death of
nonnatural person/trust) (e.g. the trust). annuitant is
treated as death of
the owner in these
circumstances.)
- -----------------------------------------------------------------------------------------------------------------
Contingent Annuitant(assuming No death proceeds are N/A
annuitant is still alive) payable; contract
continues.
- -----------------------------------------------------------------------------------------------------------------
Beneficiary No death proceeds are N/A
payable; contract
continues.
- -----------------------------------------------------------------------------------------------------------------
Contingent Beneficiary No death proceeds are N/A
payable; contract
continues.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
* Certain payout rules of the Internal Revenue Code (IRC) are triggered upon the
death of any Owner. Non-spousal Beneficiaries (as well as spousal
beneficiaries who choose not to assume the contract) must begin taking
distributions based on the Beneficiary's life expectancy within one year of
death or take a complete distribution of contract proceeds within 5 years of
death.
18
<PAGE> 61
QUALIFIED CONTRACTS
<TABLE>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
BEFORE THE MATURITY DATE, THE COMPANY WILL PAY UNLESS... MANDATORY PAYOUT
UPON THE DEATH OF THE THE PROCEEDS TO: RULES APPLY
(SEE* ABOVE)
- -----------------------------------------------------------------------------------------------------------------
Owner/Annuitant The beneficiary(ies), or Yes
if none, to the contract
owner's estate.
- -----------------------------------------------------------------------------------------------------------------
Beneficiary No death proceeds are N/A
payable; contract
continues.
- -----------------------------------------------------------------------------------------------------------------
Contingent Beneficiary No death proceeds are N/A
payable; contract
continues.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
DEATH PROCEEDS AFTER THE MATURITY DATE
If any owner or the annuitant dies on or after the maturity date, the Company
will pay the beneficiary a death benefit consisting of any benefit remaining
under the annuity or income option then in effect.
THE ANNUITY PERIOD
- --------------------------------------------------------------------------------
MATURITY DATE
Under the Contract, you can receive regular income payments (annuity payments).
You can choose the month and the year in which those payments begin (maturity
date). You can also choose among income payouts (annuity or income options) or
elect a lump sum distribution. While the annuitant is alive, you can change your
selection any time up to the maturity date. Annuity 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, or unless you elect another date. Annuity payments are a series of
periodic payments (a) for life; (b) for life with either a minimum number of
payments or a specific amount assured; or (c) for the joint lifetime of the
annuitant and another person, and thereafter during the lifetime of the
survivor. We may require proof that the annuitant is alive before annuity
payments are made. Not all options may be available in all states.
You may choose to annuitize at any time after you purchase the Contract. Unless
you elect otherwise, the maturity date will be the annuitant's 70th birthday for
qualified contracts and the annuitant's 75th birthday for nonqualified contracts
or ten years after the effective date of the Contract, if later. (For Contracts
issued in Florida and New York, the maturity date elected may not be later than
the annuitant's 90th birthday.)
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
for nonqualified contracts 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 certain qualified contracts upon either the later of the contract
owner's attainment of age 70 1/2 or year of retirement; or the death of the
contract owner. You should seek independent tax advice regarding the election of
minimum required distributions.
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. If, at the time annuity payments begin,
no election has been made to the contrary, the contract value will be applied to
provide an annuity funded by the same investment
19
<PAGE> 62
options as you have selected during the accumulation period . At least 30 days
before the maturity date, you may transfer the contract value among the funding
options in order to change the basis on which annuity payments will be
determined. (See "Transfers.")
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 accumulation 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. If a variable annuity is elected,
the amount applied to it 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
and the annuitant's adjusted age. 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 Contract tables by
the number of thousands of dollars of contract value applied to that annuity
option and factors in an assumed daily net investment factor. The Assumed Daily
Net Investment factor corresponds to an annual interest rate of 3%, used to
determine the guaranteed payout rates shown. If investment rates are higher at
the time annuitization is selected, payout rates will be higher than those
shown. 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 payment options.
DETERMINATION OF SECOND AND SUBSEQUENT ANNUITY PAYMENTS. The dollar amount of
all subsequent annuity payments changes from month to month based on the
investment experience of the applicable funding options. The total amount of
each annuity payment will 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 amount
applied to begin the annuity will be the contract value, determined as of the
date annuity payments begin. Payout rates will not be lower than those shown in
the Contract. 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. 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 or income 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
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<PAGE> 63
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 reserves the right to make payments at less
frequent intervals, or to pay the contract value in a lump-sum.
On the maturity date, we will pay the amount due under the Contract in
accordance with the payment option that you select. You may choose to receive a
single lump-sum payment. You must elect an option in writing, in a form
satisfactory to the Company. Any election made during the lifetime of the
annuitant must be made by the contract owner.
ANNUITY OPTIONS
Subject to the conditions described in "Election of Options" above, all or any
part of the contract value (less any applicable premium taxes) 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. We may offer
additional options.
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 Contract's
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 contract value applied under this option has been
exhausted. The first payment and all later payments will be paid from each
funding option or the Fixed Account in proportion to the contract value
attributable to each funding option and/or Fixed Account. The final payment will
include any amount insufficient to make another full payment.
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Option 2 -- Payments for a Fixed Period. The Company will make payments for the
period selected. The amount of each payment will be equal to the remaining
contract value applied under this option divided by the number of remaining
payments.
Option 3 -- Other Income Options. The Company will make any other arrangements
for Income Options as may be mutually agreed upon.
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 on the purchase payment 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 the Contract and a written request for a refund. Where state
law requires a longer period, or the return of purchase payments or other
variations of this provision, 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 contract value (minus any credits applied within 12 months of
termination)less any applicable premium tax, and 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 report date for each funding option to
which the contract owner has allocated amounts during the applicable period. The
Company will keep all records required under federal and state laws.
SUSPENSION OF PAYMENTS
The Company reserves the right to suspend or postpone the date of any payment or
determination of values on any business day (1) when the New York Stock Exchange
("the Exchange") is closed; (2) when trading on the Exchange is restricted; (3)
when an emergency exists as determined by the SEC so that the sale of securities
held in the Separate Account may not reasonably occur or so that the Company may
not reasonably determine the value the Separate Account's net assets; or (4)
during any other period when the SEC, by order, so permits for the protection of
security holders.
TRANSFERS OF CONTRACT VALUES TO OTHER ANNUITIES
Where state law permits, we may allow contract owners to transfer their contract
values into other annuities offered by us or our affiliated insurance companies
under rules then in effect.
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<PAGE> 65
THE SEPARATE ACCOUNTS
- --------------------------------------------------------------------------------
The Travelers Insurance Company and the Travelers Life and Annuity Company each
sponsor separate accounts: The Travelers Fund ABD for Variable Annuities ("Fund
ABD") and the Travelers Fund ABD II for Variable Annuities ("Fund ABD II"),
respectively. Both Fund ABD and Fund ABD II were established on October 17, 1995
and are registered with the SEC as unit investment trusts (separate account)
under the Investment Company Act of 1940, as amended (the "1940 Act"). The
Separate Account assets attributable to the Contracts will be invested
exclusively in the shares of the variable funding options.
The assets of Fund ABD and Fund ABD II are held for the exclusive and separate
benefit of the owners of each separate account, according to the laws of
Connecticut. Income, gains and losses, whether or not realized, from assets
allocated to the Separate Account are, in accordance with the Contracts,
credited to or charged against the Separate Account without regard to other
income, gains and losses of the Company. The assets held by the Separate Account
are not chargeable with liabilities arising out of any other business which 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 the Separate Account. 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.
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, and the "nonstandardized total return," as described below. Specific
examples of the performance information appear 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 contract
administrative charge is converted to a percentage of assets based on the actual
fee collected, divided by the average net assets for Contracts sold.
NONSTANDARDIZED METHOD. Nonstandardized "total returns" will be calculated in a
similar manner based on the performance of the funding options over a period of
time, usually for the calendar year-to-date, and for the past one-, three-,
five- and ten-year periods. Nonstandardized total returns will not reflect the
deduction of the annual contract administrative charge, which, if reflected,
would decrease the level of performance shown.
For funding options that were in existence before they became available under
the Separate Account, the nonstandardized average annual total return quotations
will reflect the investment performance that such funding options would have
achieved (reduced by the applicable charges) had they been held under the
Contract for the period quoted. The total return quotations are based upon
historical earnings and are not necessarily representative of future
performance.
GENERAL. Within the guidelines prescribed by the SEC and the National
Association of Securities Dealers, Inc. ("NASD"), performance information may be
quoted numerically or may be presented in a table, graph or other illustration.
Advertisements may include data comparing performance to well-known indices of
market performance (including, but not limited to, the Dow Jones Industrial
Average, the Standard & Poor's (S&P) 500 Index, the S&P 400 Index, the Lehman
Brothers Long T-Bond Index, the Russell 1000, 2000 and 3000 Indices, the Value
Line Index, and the Morgan Stanley Capital International's EAFE Index).
Advertisements may also include published
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<PAGE> 66
editorial comments and performance rankings compiled by independent
organizations (including, but not limited to, Lipper Analytical Services, Inc.
and Morningstar, Inc.) and publications that monitor the performance of the
Separate Account and the variable funding options.
FEDERAL TAX CONSIDERATIONS
- --------------------------------------------------------------------------------
The following general discussion of the federal income tax consequences under
this Contract is not intended to cover all situations, and is not meant to
provide tax advice. Because of the complexity of the law and the fact that the
tax results will vary depending on many factors, you should consult your tax
adviser regarding your personal situation. For your information, a more detailed
tax discussion is contained in the SAI.
GENERAL TAXATION OF ANNUITIES
Congress has recognized the value of saving for retirement by providing certain
tax benefits, in the form of tax deferral, for money put into an annuity. The
Internal Revenue Code (Code) governs how this money is ultimately taxed,
depending upon the type of contract, qualified or non-qualified, and the manner
in which the money is distributed, as briefly described below.
TAX-FREE EXCHANGES: The Internal Revenue Code provides that, generally, no gain
or loss is recognized when the annuity contract is received in exchange for a
life, endowment, or annuity contract. Since different annuity contracts have
different expenses, fees and benefits, a tax free exchange could result in your
investment becoming subject to higher or lower fees and/or expenses.
TYPES OF CONTRACTS: QUALIFIED OR NONQUALIFIED
If you purchase an annuity contract with proceeds of an eligible rollover
distribution from 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, 403(b)
annuities, pension and profit-sharing plans (including 401(k) plans), Keogh
Plans, and certain other qualified deferred compensation plans. An exception to
this is a qualified plan called a Roth IRA. Under Roth IRAs, after-tax
contributions accumulate until maturity, when amounts (including earnings) may
be withdrawn tax-free. If you purchase the Contract on an individual basis 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
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
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 includible in income
annually. Furthermore, for Contracts issued after April 22, 1987, if you
transfer the Contract without adequate consideration all deferred increases in
value will be includible in your income at the time of the transfer.
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 includible in your income. (See "Penalty
Tax for Premature Distributions" below.) There is
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<PAGE> 67
income in the Contract to the extent the contract 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 excludible 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 distributions, including lump-sum withdrawals
and annuity payments, are taxed at the ordinary income tax rate unless the
distribution is transferred to an eligible rollover account or contract. The
Contract is available as a vehicle for IRA rollovers and for other qualified
Contracts. There are special rules which govern the taxation of qualified
Contracts, including withdrawal restrictions, requirements for mandatory
distributions, and contribution limits. We have provided a more complete
discussion in the SAI.
PENALTY TAX FOR PREMATURE DISTRIBUTIONS
Taxable distributions taken before the contract owner has reached the age of
59 1/2 will be subject to a 10% additional tax penalty unless the distribution
is taken in a series of periodic distributions, for life or life expectancy, or
unless the distribution follows the death or disability of the contract owner.
Other exceptions may be available in certain qualified plans.
DIVERSIFICATION REQUIREMENTS FOR VARIABLE ANNUITIES
The Code requires that any nonqualified variable annuity Contracts based on a
separate account shall not be treated as an annuity for any period if
investments made in the account are not adequately diversified. Final tax
regulations define how separate accounts must be diversified. The Company
monitors the diversification of investments constantly and believes that its
accounts are adequately diversified. The consequence of any failure to diversify
is essentially the loss to the contract owner of tax deferred treatment. The
Company intends to administer all contracts subject to this provision of law in
a manner that will maintain adequate diversification.
OWNERSHIP OF THE INVESTMENTS
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 includable 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
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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 or the year of retirement.
Distributions must begin or be continued according to required patterns
following the death of the contract owner or annuitant of both qualified and
nonqualified annuities.
TAXATION OF DEATH BENEFIT PROCEEDS
Amounts may be distributed from a Contract because of the death of an owner or
annuitant. Generally, such amounts are includible in the income of the recipient
as follows: (i) if distributed in a lump sum, they are taxed in the same manner
as a full surrender of the Contract; or (ii) if distributed under a payment
option, they are taxed in the same way as annuity payments.
OTHER INFORMATION
- --------------------------------------------------------------------------------
THE INSURANCE COMPANIES
Please refer to the first page of the Summary of this prospectus to determine
which company issued your Contract.
The Travelers Insurance Company is a stock insurance company chartered in 1864
in Connecticut and continuously engaged in the insurance business since that
time. It is licensed to conduct life insurance business in all states of the
United States, the District of Columbia, Puerto Rico, Guam, the U.S. and British
Virgin Islands and the Bahamas. The Company is an indirect wholly owned
subsidiary of Citigroup Inc. The Company's Home Office is located at One Tower
Square, Hartford, Connecticut 06183.
The Travelers Life and Annuity Company is a stock insurance company chartered in
1973 in Connecticut and continuously engaged in the insurance business since
that time. It is licensed to conduct life insurance business in a majority of
the states of the United States, the District of Columbia and Puerto Rico, and
intends to seek licensure in the remaining states, except New York. The Company
is an indirect wholly owned subsidiary of Citigroup Inc. The Company's Home
Office is located at One Tower Square, Hartford, Connecticut 06183.
FINANCIAL STATEMENTS
The financial statements for each insurance company and for each separate
account are located in their respective Statements of Additional Information.
IMSA
The Companies are members of the Insurance Marketplace Standards Association
("IMSA"), and as such may use the IMSA logo and IMSA membership in
advertisements. Companies that belong to IMSA subscribe to a set of ethical
standards covering the various aspects of sales and service for individually
sold life insurance and annuities. IMSA members have adopted policies and
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procedures that demonstrate a commitment to honesty, fairness and integrity in
all customer contacts involving the sale and service of individual life
insurance and annuity products.
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. Any sales
representative or employee who sells the Contracts will be qualified to sell
variable annuities under applicable federal and state laws. Each broker-dealer
is registered with the SEC under the Securities Exchange Act of 1934, and all
are members of the NASD. The principal underwriter of the Contracts is CFBDS,
Inc., 21 Milk St., Boston, MA. CFBDS, Inc. is not affiliated with the Company or
the Separate Account. However, it is currently anticipated that Travelers
Distribution LLC, an affiliated broker-dealer, may become the principal
underwriter for the Contracts during the year 2000.
Up-front compensation paid to sales representatives will not exceed 7% of the
purchase payments made under the Contracts. If asset based compensation is paid,
it will not exceed 2% of the average account value annually. From time to time,
the Company may pay or permit other promotional incentives, in cash, credit or
other compensation.
CONFORMITY WITH STATE AND FEDERAL LAWS
The Contract is governed by the laws of the state in which it is delivered.
Where a state has not approved a Contract feature or funding option, it will not
be available in that state. Any paid-up annuity, contract 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
Legal matters in connection with the federal laws and regulations affecting the
issue and sale of the contract described in this prospectus, as well as the
organization of the Companies, their authority to issue variable annuity
Contracts under Connecticut law and the validity of the forms of the variable
annuity Contracts under Connecticut law, have been passed on by the General
Counsel of the Companies.
THE TRAVELERS INSURANCE COMPANY
There are no pending legal proceedings affecting the Separate Account. There is
one material pending legal proceeding, other than ordinary routine litigation
incidental to business, to which the Company is a party. In March, 1997, a
purported class action entitled Patterman v. The Travelers, Inc. et al., was
commenced in the Superior Court of Richmond County, Georgia, alleging, among
other things, violation of the Georgia RICO statute and other state laws by an
affiliate of the Company, Primerica Financial Services, Inc. and certain of its
affiliates. Plaintiffs seek unspecified compensatory and punitive damages and
other relief. In October 1997, defendants answered the complaint, denied
liability and asserted numerous affirmative defenses. In February 1998, the
Superior Court of Richmond County transferred the lawsuit to the Superior Court
of Gwinnett County, Georgia. The plaintiffs appealed the transfer order, and in
December 1998 the Court of
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Appeals of the State of Georgia reversed the lower court's decision. Later in
December 1998, defendants petitioned the Georgia Supreme Court to hear the
appeal from the decision of the Court of Appeals, which was granted in May 1999.
In September 1999, the Georgia Supreme Court heard oral argument on defendant's
petition for an order reversing the Georgia Court of Appeals and transferring
the lawsuit from the Superior Court of Richmond County to the Superior Court of
Gwinnett County. The Georgia Supreme Court reversed its decision, and has not
yet issued its opinion. Pending appeal, proceedings in the trial court have been
stayed. Defendants intend to vigorously contest the litigation.
THE TRAVELERS LIFE AND ANNUITY COMPANY
There are no pending material legal proceedings affecting the Separate Account,
the principal underwriter or the Company.
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TRAVELERS ACCESS SELECT
APPENDIX A
- --------------------------------------------------------------------------------
THE TRAVELERS FUND ABD FOR VARIABLE ANNUITIES
ACCUMULATION UNIT VALUES*
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED PERIOD FROM
--------------------------- ------------ DECEMBER 16, 1996
DECEMBER 31, DECEMBER 31, DECEMBER 31, TO
FUNDING OPTION 1999 1998 1997 DECEMBER 31, 1996
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C>
<S> <C> <C> <C> <C>
CAPITAL APPRECIATION FUND (4/97)
Unit Value at beginning of period........ $ 2.046 $ 1.283 $ 1.032 $ 1.000
Unit Value at end of period.............. 3.098 2.046 1.283 1.032
Number of units outstanding at end of
period................................. 25,971,911 10,561,314 870,525 --
MONEY MARKET PORTFOLIO (7/97)
Unit Value at beginning of period........ $ 1.070 $ 1.033 $ 1.000 N/A
Unit Value at end of period.............. 1.107 1.070 1.033 N/A
Number of units outstanding at end of
period................................. 16,750,270 9,244,927 345,682 N/A
DELAWARE GROUP PREMIUM FUND
REIT SERIES (6/98)
Unit Value at beginning of period........ $ 0.901 $ 1.000 N/A N/A
Unit Value at end of period.............. 0.866 0.901 N/A N/A
Number of units outstanding at end of
period................................. 357,910 96,983 N/A N/A
DREYFUS VARIABLE INVESTMENT FUND:
APPRECIATION PORTFOLIO (5/98)
Unit Value at beginning of period........ $ 1.112 $ 1.000 N/A N/A
Unit Value at end of period.............. 1.223 1.112 N/A N/A
Number of units outstanding at end of
period................................. 7,840,789 2,937,245 N/A N/A
SMALL CAP PORTFOLIO (5/98)
Unit Value at beginning of period........ $ 0.871 $ 1.000 N/A N/A
Unit Value at end of period.............. 1.058 0.871 N/A N/A
Number of units outstanding at end of
period................................. 3,387,052 1,435,805 N/A N/A
GREENWICH STREET SERIES FUND:
APPRECIATION PORTFOLIO (6/97)
Unit Value at beginning of period........ $ 1.283 $ 1.092 $ 1.000 N/A
Unit Value at end of period.............. 1.431 1.283 1.092 N/A
Number of units outstanding at end of
period................................. 6,935,912 3,710,315 506,282 N/A
DIVERSIFIED STRATEGIC INCOME PORTFOLIO
(6/97)
Unit Value at beginning of period........ $ 1.100 $ 1.048 $ 1.000 N/A
Unit Value at end of period.............. 1.103 1.100 1.048 N/A
Number of units outstanding at end of
period................................. 10,783,437 7,076,327 733,829 N/A
EQUITY INDEX PORTFOLIO -- CLASS II SHARES
(6/99)
Unit Value at beginning of period........ $ 1.000 N/A N/A N/A
Unit Value at end of period.............. 1.098 N/A N/A N/A
Number of units outstanding at end of
period................................. 753,819 N/A N/A N/A
TOTAL RETURN PORTFOLIO (5/98)
Unit Value at beginning of period........ $ 0.953 $ 1.000 N/A N/A
Unit Value at end of period.............. 1.146 0.953 N/A N/A
Number of units outstanding at end of
period................................. 1,958,751 708,254 N/A N/A
SALOMON BROTHERS VARIABLE SERIES FUNDS, INC.:
SALOMON BROTHERS VARIABLE INVESTORS
FUND (6/98)
Unit Value at beginning of period........ $ 1.029 $ 1.000 N/A N/A
Unit Value at end of period.............. 1.132 1.029 N/A N/A
Number of units outstanding at end of
period................................. 3,905,967 1,764,644 N/A N/A
TRAVELERS SERIES FUND, INC.:
ALLIANCE GROWTH PORTFOLIO (6/97)
Unit Value at beginning of period........ $ 1.679 $ 1.319 $ 1.037 $ 1.000
Unit Value at end of period.............. 2.189 1.679 1.319 1.037
Number of units outstanding at end of
period................................. 25,024,627 13,211,206 1,062,634 --
</TABLE>
A-1
<PAGE> 72
TRAVELERS ACCESS SELECT
APPENDIX A
- --------------------------------------------------------------------------------
THE TRAVELERS FUND ABD FOR VARIABLE ANNUITIES
ACCUMULATION UNIT VALUES* (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED PERIOD FROM
--------------------------- ------------ DECEMBER 16, 1996
DECEMBER 31, DECEMBER 31, DECEMBER 31, TO
FUNDING OPTION 1999 1998 1997 DECEMBER 31, 1996
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C>
<S> <C> <C> <C> <C>
MFS TOTAL RETURN PORTFOLIO (5/97)
Unit Value at beginning of period........ $ 1.303 $ 1.183 $ 1.000 N/A
Unit Value at end of period.............. 1.319 1.303 1.183 N/A
Number of units outstanding at end of
period................................. 27,173,225 16,380,184 962,287 N/A
THE TRAVELERS SERIES TRUST:
CONVERTIBLE BOND PORTFOLIO (5/98)
Unit Value at beginning of period........ $ 1.000 $ 1.000 N/A N/A
Unit Value at end of period.............. 1.170 1.000 N/A N/A
Number of units outstanding at end of
period................................. 1,137,997 458,699 N/A N/A
DISCIPLINED MID CAP STOCK PORTFOLIO
(6/97)
Unit Value at beginning of period........ $ 1.377 $ 1.195 $ 1.000 N/A
Unit Value at end of period.............. 1.541 1.377 1.195 N/A
Number of units outstanding at end of
period................................. 2,663,507 1,425,770 120,880 N/A
DISCIPLINED SMALL CAP STOCK
PORTFOLIO (1/98)
Unit Value at beginning of period........ $ 0.894 $ 1.000 N/A N/A
Unit Value at end of period.............. 1.061 0.894 N/A N/A
Number of units outstanding at end of
period................................. 1,899,628 518,858 N/A N/A
EQUITY INCOME PORTFOLIO (5/97)
Unit Value at beginning of period........ $ 1.484 $ 1.339 $ 1.026 $ 1.000
Unit Value at end of period.............. 1.535 1.484 1.339 1.026
Number of units outstanding at end of
period................................. 19,892,863 12,301,819 639,656
FEDERATED HIGH YIELD PORTFOLIO (5/97)
Unit Value at beginning of period........ $ 1.177 $ 1.140 $ 1.000 N/A
Unit Value at end of period.............. 1.196 1.177 1.140 N/A
Number of units outstanding at end of
period................................. 10,237,038 7,715,310 620,667 N/A
FEDERATED STOCK PORTFOLIO (5/97)
Unit Value at beginning of period........ $ 1.494 $ 1.285 $ 1.000 N/A
Unit Value at end of period.............. 1.552 1.494 1.285 N/A
Number of units outstanding at end of
period................................. 7,710,739 4,599,587 352,550 N/A
LARGE CAP PORTFOLIO (6/97)
Unit Value at beginning of period........ $ 1.665 $ 1.245 $ 1.023 $ 1.000
Unit Value at end of period.............. 2.123 1.665 1.245 1.023
Number of units outstanding at end of
period................................. 15,562,311 6,662,550 491,869
LAZARD INTERNATIONAL STOCK PORTFOLIO
(5/97)
Unit Value at beginning of period........ $ 1.216 $ 1.095 $ 1.027 $ 1.000
Unit Value at end of period.............. 1.460 1.216 1.095 1.027
Number of units outstanding at end of
period................................. 10,264,070 6,533,760 849,629 --
MFS EMERGING GROWTH PORTFOLIO (4/97)
Unit Value at beginning of period........ $ 1.587 $ 1.198 $ 1.004 $ 1.000
Unit Value at end of period.............. 2.766 1.587 1.198 1.004
Number of units outstanding at end of
period................................. 11,222,748 5,891,811 528,553 --
MFS MID CAP GROWTH PORTFOLIO (4/98)
Unit Value at beginning of period........ $ 0.985 $ 1.000 N/A N/A
Unit Value at end of period.............. 1.595 0.985 N/A N/A
Number of units outstanding at end of
period................................. 3,220,420 696,846 N/A N/A
TRAVELERS QUALITY BOND PORTFOLIO (7/97)
Unit Value at beginning of period........ $ 1.131 $ 1.057 $ 1.001 $ 1.000
Unit Value at end of period.............. 1.128 1.131 1.057 1.001
Number of units outstanding at end of
period................................. 13,396,194 9,328,606 378,758 --
</TABLE>
A-2
<PAGE> 73
TRAVELERS ACCESS SELECT
APPENDIX A
- --------------------------------------------------------------------------------
THE TRAVELERS FUND ABD FOR VARIABLE ANNUITIES
ACCUMULATION UNIT VALUES* (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED PERIOD FROM
--------------------------- ------------ DECEMBER 16, 1996
DECEMBER 31, DECEMBER 31, DECEMBER 31, TO
FUNDING OPTION 1999 1998 1997 DECEMBER 31, 1996
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C>
<S> <C> <C> <C> <C>
THE TRAVELERS SERIES TRUST (CONT.)
WARBURG PINCUS TRUST:
EMERGING MARKETS PORTFOLIO (6/98)
Unit Value at beginning of period........ $ 0.734 $ 1.000 N/A N/A
Unit Value at end of period.............. 1.313 0.734 N/A N/A
Number of units outstanding at end of
period................................. 892,012 223,688 N/A N/A
</TABLE>
* The Company began tracking the Accumulation Unit values in 1996, however the
Separate Account held no assets until 1997. The date next to each funding
option's name reflects the date that money came into the funding option
through the Separate Account. Funding Options not listed had no amounts yet
allocated to them. The financial statements for Fund ABD and the financial
statements of The Travelers Insurance Company are contained in the SAI.
A-3
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<PAGE> 75
APPENDIX B
- --------------------------------------------------------------------------------
CONDENSED FINANCIAL INFORMATION
THE TRAVELERS FUND ABD II FOR VARIABLE ANNUITIES
ACCUMULATION UNIT VALUES
<TABLE>
<CAPTION>
YEARS ENDED PERIOD FROM
DECEMBER 31, DECEMBER 16, 1996
-------------------------------------- TO
FUNDING OPTION 1999 1998 1997 DECEMBER 31, 1996
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C>
<S> <C> <C> <C> <C>
CAPITAL APPRECIATION FUND (12/96)
Unit Value at beginning of period $2.046...... $ 1.283 $ 1.032 $ 1.000
Unit Value at end of period 3.098...... 2.046 1.283 1.032
Number of units outstanding at end of period 46,942,401.. 23,010,432 6,344,051 29,824
MONEY MARKET PORTFOLIO (2/97)
Unit Value at beginning of period $1.070...... $ 1.033 $ 1.000 N/A
Unit Value at end of period 1.107...... 1.070 1.033 N/A
Number of units outstanding at end of period 37,736,754.. 16,762,447 5,369,177 N/A
DELAWARE GROUP PREMIUM FUND:
REIT SERIES (5/98)
Unit Value at beginning of period $0.901...... $ 1.000 N/A N/A
Unit Value at end of period 0.866...... 0.901 N/A N/A
Number of units outstanding at end of period 1,280,359.. 632,612 N/A N/A
DREYFUS VARIABLE INVESTMENT FUND:
APPRECIATION PORTFOLIO (4/98)
Unit Value at beginning of period $1.112...... $ 1.000 N/A N/A
Unit Value at end of period 1.223...... 1.112 N/A N/A
Number of units outstanding at end of period 10,488,399.. 2,833,960 N/A N/A
SMALL CAP PORTFOLIO (4/98)
Unit Value at beginning of period $0.871...... $ 1.000 N/A N/A
Unit Value at end of period 1.058...... 0.871 N/A N/A
Number of units outstanding at end of period 7,815,322.. 3,051,249 N/A N/A
GREENWICH STREET SERIES FUND:
APPRECIATION PORTFOLIO (6/97)
Unit Value at beginning of period $1.283...... $ 1.092 $ 1.000 N/A
Unit Value at end of period 1.431...... 1.283 1.092 N/A
Number of units outstanding at end of period 24,225,208.. 16,532,767 5,241,524 N/A
DIVERSIFIED STRATEGIC INCOME PORTFOLIO (6/97)
Unit Value at beginning of period $1.100...... $ 1.048 $ 1.000 N/A
Unit Value at end of period 1.103...... 1.100 1.048 N/A
Number of units outstanding at end of period 28,198,595.. 24,838,532 5,444,154 N/A
EQUITY INDEX PORTFOLIO -- CLASS II SHARES (5/99)
Unit Value at beginning of period $1.000...... N/A N/A N/A
Unit Value at end of period 1.098...... N/A N/A N/A
Number of units outstanding at end of period 3,460,443.. N/A N/A N/A
TOTAL RETURN PORTFOLIO (5/98)
Unit Value at beginning of period $0.953...... $ 1.000 N/A N/A
Unit Value at end of period 1.146...... 0.953 N/A N/A
Number of units outstanding at end of period 4,963,010.. 1,281,704 N/A N/A
SALOMON BROTHERS VARIABLE SERIES FUNDS, INC.:
SALOMON BROTHERS VARIABLE INVESTORS FUND (4/98)
Unit Value at beginning of period $1.029...... $ 1.000 N/A N/A
Unit Value at end of period 1.132...... 1.029 N/A N/A
Number of units outstanding at end of period 8,670,638.. 3,232,444 N/A N/A
TRAVELERS SERIES FUND, INC.:
ALLIANCE GROWTH PORTFOLIO (12/96)
Unit Value at beginning of period $1.679...... $ 1.319 $ 1.037 $ 1.000
Unit Value at end of period 2.189...... 1.679 1.319 1.037
Number of units outstanding at end of period 47,167,905.. 31,011,054 8,259,362 2,250
MFS TOTAL RETURN PORTFOLIO (1/97)
Unit Value at beginning of period $1.303...... $ 1.183 $ 1.000 N/A
Unit Value at end of period 1.319...... 1.303 1.183 N/A
Number of units outstanding at end of period 54,290,552.. 42,017,841 9,959,634 N/A
THE TRAVELERS SERIES TRUST:
CONVERTIBLE BOND PORTFOLIO (5/98)
Unit Value at beginning of period $1.000...... $ 1.000 N/A N/A
Unit Value at end of period 1.170...... 1.000 N/A N/A
Number of units outstanding at end of period 2,431,429.. 414,907 N/A N/A
DISCIPLINED MID CAP STOCK PORTFOLIO (6/97)
Unit Value at beginning of period $1.377...... $ 1.195 $ 1.000 N/A
Unit Value at end of period 1.541...... 1.377 1.195 N/A
Number of units outstanding at end of period 6,716,626.. 5,142,990 1,668,733 N/A
DISCIPLINED SMALL CAP STOCK PORTFOLIO (5/98)
Unit Value at beginning of period $0.894...... $ 1.000 N/A N/A
Unit Value at end of period 1.061...... 0.894 N/A N/A
Number of units outstanding at end of period 1,202,404.. 450,528 N/A N/A
</TABLE>
B-1
<PAGE> 76
APPENDIX B
- --------------------------------------------------------------------------------
CONDENSED FINANCIAL INFORMATION
THE TRAVELERS FUND ABD II FOR VARIABLE ANNUITIES
ACCUMULATION UNIT VALUES (CONTINUED)
<TABLE>
<CAPTION>
YEARS ENDED PERIOD FROM
DECEMBER 31, DECEMBER 16, 1996
-------------------------------------- TO
FUNDING OPTION 1999 1998 1997 DECEMBER 31, 1996
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C>
<S> <C> <C> <C> <C>
THE TRAVELERS SERIES TRUST (CONT'D)
EQUITY INCOME PORTFOLIO (12/96)
Unit Value at beginning of period $1.484...... $ 1.339 $ 1.026 $ 1.000
Unit Value at end of period 1.535...... 1.484 1.339 1.026
Number of units outstanding at end of period 35,687,217.. 25,733,333 6,719,150 30,196
FEDERATED HIGH YIELD PORTFOLIO (1/97)
Unit Value at beginning of period $1.177...... $ 1.140 $ 1.000 N/A
Unit Value at end of period 1.196...... 1.177 1.140 N/A
Number of units outstanding at end of period 22,260,856.. 18,811,555 4,566,993 N/A
FEDERATED STOCK PORTFOLIO (1/97)
Unit Value at beginning of period $1.494...... $ 1.285 $ 1.000 N/A
Unit Value at end of period 1.552...... 1.494 1.285 N/A
Number of units outstanding at end of period 14,406,177.. 11,892,034 3,816,999 N/A
LARGE CAP PORTFOLIO (12/96)
Unit Value at beginning of period $1.665...... $ 1.245 $ 1.023 $ 1.000
Unit Value at end of period 2.123...... 1.665 1.245 1.023
Number of units outstanding at end of period 28,051,763.. 15,040,703 4,815,858 7,800
LAZARD INTERNATIONAL STOCK PORTFOLIO (12/96)
Unit Value at beginning of period $1.216...... $ 1.095 $ 1.027 $ 1.000
Unit Value at end of period 1.460...... 1.216 1.095 1.027
Number of units outstanding at end of period 25,226,349.. 17,270,810 5,694,288 5,702
MFS EMERGING GROWTH PORTFOLIO (12/96)
Unit Value at beginning of period $1.587...... $ 1.198 $ 1.004 $ 1.000
Unit Value at end of period 2.766...... 1.587 1.198 1.004
Number of units outstanding at end of period 22,881,721.. 15,538,984 4,218,974 31,886
TRAVELERS QUALITY BOND PORTFOLIO (12/96)
Unit Value at beginning of period $1.131...... $ 1.057 $ 1.001 $ 1.000
Unit Value at end of period 1.128...... 1.131 1.057 1.001
Number of units outstanding at end of period 26,069,226.. 15,435,236 3,137,736 95,203
MFS MID CAP GROWTH PORTFOLIO (4/98)
Unit Value at beginning of period $0.985...... $ 1.000 N/A N/A
Unit Value at end of period 1.595...... 0.985 N/A N/A
Number of units outstanding at end of period 4,760,902.. 965,761 N/A N/A
WARBURG PINCUS TRUST:
EMERGING MARKETS PORTFOLIO (5/98)
Unit Value at beginning of period $0.734...... $ 1.000 N/A N/A
Unit Value at end of period 1.313...... 0.734 N/A N/A
Number of units outstanding at end of period 2,521,807.. 780,839 N/A N/A
</TABLE>
Funding Options not listed had no amounts yet allocated to them. The date next
to each funding options name represents the date money first came into the
funding option through the Separate Account. "Number of units outstanding at end
of period" may include units for contract owners in the payout phase. The
financial statements for Fund ABD II and the financial statements of The
Travelers Life and Annuity Company are contained in the SAI.
B-2
<PAGE> 77
APPENDIX C
- --------------------------------------------------------------------------------
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 the separate accounts 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 the Separate Account 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.
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, nor 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 at 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 under 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.
C-1
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<PAGE> 79
APPENDIX D
- --------------------------------------------------------------------------------
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
The Statement of Additional Information contains more specific information and
financial statements relating to The Travelers Insurance Company or The
Travelers Life and Annuity Company. A list of the contents of the Statement of
Additional Information is set forth below:
The Insurance Company
Principal Underwriter
Distribution and Principal Underwriting Agreement
Valuation of Assets
Performance Information
Mixed and Shared Funding
Federal Tax Considerations
Independent Accountants
Financial Statements
- --------------------------------------------------------------------------------
Copies of the Statement of Additional Information dated May 1, 2000 are
available without charge. To request a copy, please clip this coupon on the
dotted line above, enter your name and address in the spaces provided below, and
mail to: The Travelers Insurance Company, Annuity Investor Services, One Tower
Square, Hartford, Connecticut 06183. The Travelers Insurance Company Statement
of Additional Information is printed on Form L-21194S, and The Travelers Life
and Annuity Statement of Additional Information is printed on Form L21195S.
Name:
Address:
D-1
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<PAGE> 81
PART B
Information Required in a Statement of Additional Information
<PAGE> 82
STATEMENT OF ADDITIONAL INFORMATION
dated
May 1, 2000
for
THE TRAVELERS FUND ABD II FOR VARIABLE ANNUITIES
(ACCESS AND ACCESS SELECT)
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, 2000. A copy of the Prospectus may be obtained
by writing to The Travelers Life and Annuity Company, Annuity Investor Services,
One Tower Square, Hartford, Connecticut 06183-9061, or by calling (800) 842-8573
or by accessing the Securities and Exchange Commission's website at
http://www.sec.gov.
TABLE OF CONTENTS
<TABLE>
<S> <C>
THE INSURANCE COMPANY ............................................ 1
PRINCIPAL UNDERWRITER ............................................ 1
DISTRIBUTION AND PRINCIPAL UNDERWRITING AGREEMENT ................ 2
VALUATION OF ASSETS .............................................. 2
PERFORMANCE INFORMATION. ......................................... 3
MIXED AND SHARED FUNDING ......................................... 9
FEDERAL TAX CONSIDERATIONS ....................................... 9
INDEPENDENT ACCOUNTANTS .......................................... 12
FINANCIAL STATEMENTS ............................................. F-1
</TABLE>
<PAGE> 83
THE INSURANCE COMPANY
The Travelers Life and Annuity Company (the "Company") is a stock
insurance company chartered in 1973 in Connecticut and continuously engaged in
the insurance business since that time. The Company is licensed to conduct a
life insurance business in all states, (except New Hampshire and New York) and
the District of Columbia and Puerto Rico. The Company's Home Office is located
at One Tower Square Hartford, Connecticut 06183 and its telephone number is
(860) 277-0111.
The Company is a wholly owned subsidiary of The Travelers Insurance
Company, an indirect, wholly owned subsidiary of Citigroup Inc. ("Citigroup"), a
diversified holding company whose businesses provide a broad range of financial
services to consumer and corporate customers around the world. Citigroup's
activities are conducted through the Global Consumer, Global Corporate and
Investment Bank, Global Investment Management and Private Banking, and
Investment Activities segments.
STATE REGULATION. The Company is subject to the laws of the state of Connecticut
governing insurance companies and to regulation by the Insurance Commissioner of
the state of Connecticut (the "Commissioner"). An annual statement covering the
operations of the Company for the preceding year, as well as its financial
conditions as of December 31 of such year, must be filed with the Commissioner
in a prescribed format on or before March 1 of each year. The Company's books
and assets are subject to review or examination by the Commissioner or his
agents at all times, and a full examination of its operations is conducted at
least once every four years.
The Company is also subject to the insurance laws and regulations of all
other states in which it is licensed to operate. However, the insurance
departments of each of these states generally apply the laws of the home state
(jurisdiction of domicile) in determining the field of permissible investments.
THE SEPARATE ACCOUNT. 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 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
CFBDS, Inc. serves as principal underwriter for Fund ABD II and the
Contracts. The offering is continuous. CFBDS's principal executive offices are
located at 21 Milk Street, Boston, Massachusetts. CFBDS is not affiliated with
the Company or Fund ABD II. However, it is currently anticipated that Travelers
Distribution LLC, an affiliated broker dealer, may become the principal
underwriter for the Contracts during the year 2000.
1
<PAGE> 84
DISTRIBUTION AND PRINCIPAL UNDERWRITING AGREEMENT
Under the terms of the Distribution and Principal Underwriting Agreement
among Fund ABD II, CFBDS and the Company, CFBDS acts as agent for the
distribution of the Contracts and as principal underwriter for the Contracts.
The Company reimburses CFBDS for certain sales and overhead expenses connected
with sales functions.
VALUATION OF ASSETS
FUNDING OPTIONS: The value of the assets of each Funding Option is determined at
4:00 p.m. eastern time on each business day, unless we need to close earlier due
to an emergency. A business day is any day the New York Stock Exchange is open.
Each security traded on a national securities exchange is valued at the last
reported sale price on the business day. If there has been no sale on that day,
then the value of the security is taken to be the mean between the reported bid
and asked prices on the business day or on the basis of quotations received from
a reputable broker or any other recognized source.
Any security not traded on a securities exchange but traded in the
over-the-counter-market and for which market quotations are readily available is
valued at the mean between the quoted bid and asked prices on the business day
or on the basis of quotations received from a reputable broker or any other
recognized source.
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> 85
The gross investment rate may be either positive or negative. A Funding
Option's investment income includes any distribution whose ex-dividend date
occurs during the valuation period.
ACCUMULATION UNIT VALUE. The value of the accumulation unit for each Funding
Option was initially established at $1.00. The value of an accumulation unit on
any business day is determined by multiplying the value on the preceding
business day by the net investment factor for the valuation period just ended.
The net investment factor is calculated for each Funding Option and takes into
account the investment performance, expenses and the deduction of certain
expenses.
ANNUITY UNIT VALUE. The initial Annuity Unit Value applicable to each Funding
Option was established at $1.00. An annuity unit value as of any business day is
equal to (a) the value of the annuity unit on the preceding business day,
multiplied by (b) the corresponding net investment factor for the valuation
period just ended, divided by (c) the assumed net investment factor for the
valuation period. (For example, the assumed net investment factor based on an
annual assumed net investment rate of 3.0% for a Valuation Period of one day is
1.000081 and, for a period of two days, is 1.000081 x 1.000081.)
PERFORMANCE INFORMATION
From time to time, the Company may advertise several types of historical
performance for the Funding Options of Fund ABD II. The Company may advertise
the "standardized average annual total returns" of the Funding Options,
calculated in a manner prescribed by the Securities and Exchange Commission, as
well as the "nonstandardized total returns," as described below:
STANDARDIZED METHOD. Quotations of average annual total returns are
computed according to a formula in which a hypothetical initial investment of
$1,000 is applied to the Funding Option, and then related to ending redeemable
values over one-, five-, and ten-year periods, or for a period covering the time
during which the Funding Option has been in existence, if less. If a Funding
Option has been in existence for less than one year, the "since inception" total
return performance quotations are year-to-date and are not average annual total
returns. These quotations reflect the deduction of all recurring charges during
each period (on a pro rata basis in the case of fractional periods). The
deduction for the annual contract administrative charge is converted to a
percentage of assets based on the actual fee collected, divided by the average
net assets for contracts sold under the Prospectus to which this SAI relates.
NONSTANDARDIZED METHOD. Nonstandardized "total returns" will be
calculated in a similar manner based on the performance of the Funding Options
over a period of time, usually for the calendar year-to-date, and for the past
one-, three-, five- and ten-year periods. Nonstandardized total returns will not
reflect the deduction of the annual contract administrative charge, which, if
reflected, would decrease the level of performance shown.
For Funding Options that were in existence prior to the date they became
available under Fund ABD II, the nonstandardized average annual total return
quotations will reflect the investment performance that such Funding Options
would have achieved (reduced by the applicable charges) had
3
<PAGE> 86
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.
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 Funding Options.
Average annual total returns for each of the Funding Options computed
according to the standardized and nonstandardized methods for the periods ending
December 31, 1999, are set forth in the following tables.
4
<PAGE> 87
TRAVELERS ACCESS
STANDARDIZED PERFORMANCE UPDATE AS OF 12/31/99
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
STOCK ACCOUNTS: 1 Year 5 Year 10 Year (or inception) Inception Date #
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alliance Growth Portfolio 30.41% - 29.41% 12/17/96
- -----------------------------------------------------------------------------------------------------------------------------------
Capital Appreciation Fund (Janus) 51.39% - 45.04% 12/16/96
- -----------------------------------------------------------------------------------------------------------------------------------
Delaware Investments REIT Series -3.98% - -8.43% 5/12/98
- -----------------------------------------------------------------------------------------------------------------------------------
Dreyfus Capital Appreciation Portfolio 9.90% - 12.15% 4/1/98
- -----------------------------------------------------------------------------------------------------------------------------------
Dreyfus Small Cap Portfolio 21.43% - 3.28% 4/8/98
- -----------------------------------------------------------------------------------------------------------------------------------
Equity Income Portfolio (Fidelity) 3.45% - 15.13% 12/16/96
- -----------------------------------------------------------------------------------------------------------------------------------
Equity Index Portfolio Class II * - - 23.42% 6/1/99
- -----------------------------------------------------------------------------------------------------------------------------------
Federated Stock Portfolio 3.87% - 15.92% 1/10/97
- -----------------------------------------------------------------------------------------------------------------------------------
Large Cap Portfolio (Fidelity) 27.52% - 28.11% 12/17/96
- -----------------------------------------------------------------------------------------------------------------------------------
Lazard International Stock Portfolio 20.01% - 13.24% 12/16/96
- -----------------------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Portfolio 74.32% - 39.74% 12/16/96
- -----------------------------------------------------------------------------------------------------------------------------------
MFS Mid Cap Growth Portfolio 61.90% - 32.25% 4/30/98
- -----------------------------------------------------------------------------------------------------------------------------------
MFS Research Portfolio 21.95% - 16.12% 5/12/98
- -----------------------------------------------------------------------------------------------------------------------------------
Salomon Brothers Investors Fund 10.09% - 7.44% 4/8/98
- -----------------------------------------------------------------------------------------------------------------------------------
Strategic Stock Portfolio 3.50% - 2.39% 7/31/98
- -----------------------------------------------------------------------------------------------------------------------------------
Travelers Disciplined Mid Cap Stock Portfolio 11.89% - 18.31% 6/5/97
- -----------------------------------------------------------------------------------------------------------------------------------
Travelers Disciplined Small Cap Stock Portfolio 18.73% - 3.66% 5/8/98
- -----------------------------------------------------------------------------------------------------------------------------------
Warburg Pincus Emerging Markets Portfolio 78.89% - 18.16% 5/15/98
- -----------------------------------------------------------------------------------------------------------------------------------
BOND ACCOUNTS:
- -----------------------------------------------------------------------------------------------------------------------------------
Federated High Yield Portfolio 1.65% - 6.17% 1/3/97
- -----------------------------------------------------------------------------------------------------------------------------------
Putnam Diversified Income Portfolio -0.31% - 1.89% 12/16/96
- -----------------------------------------------------------------------------------------------------------------------------------
Travelers Convertible Bond Portfolio 17.04% - 10.08% 5/12/98
- -----------------------------------------------------------------------------------------------------------------------------------
Travelers Quality Bond Portfolio -0.33% - 4.03% 12/17/96
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCED ACCOUNTS:
- -----------------------------------------------------------------------------------------------------------------------------------
MFS Total Return Portfolio 1.20% - 9.75% 1/10/97
- -----------------------------------------------------------------------------------------------------------------------------------
MONEY MARKET ACCOUNTS:
- -----------------------------------------------------------------------------------------------------------------------------------
Travelers Money Market Portfolio 3.51% - 3.57% 2/4/97
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Certain funds offer multiple classes of shares. The performance above may
reflect the fees and performance of another class of the same fund for periods
before the current class existed. If the current class's 12b-1 fee and other
expenses were higher, the performance shown would be lower. # The inception date
used to calculate standardized performance is based on the date that the
investment option became active in the product.
5
<PAGE> 88
TRAVELERS ACCESS
NON STANDARDIZED PERFORMANCE UPDATE AS OF 12/31/99
<TABLE>
<CAPTION>
Cumulative Returns
------------------------------------------------------------------
YTD 1 YR 3YR 5YR 10YR
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STOCK ACCOUNTS:
- -----------------------------------------------------------------------------------------------------------------------
Alliance Growth Portfolio 30.42% 30.42% 111.14% 258.21% -
- -----------------------------------------------------------------------------------------------------------------------
Capital Appreciation Fund (Janus) 51.40% 51.40% 200.28% 410.44% 675.75%
- -----------------------------------------------------------------------------------------------------------------------
Delaware Investments REIT Series -3.97% -3.97% - - -
- -----------------------------------------------------------------------------------------------------------------------
Dreyfus Capital Appreciation Portfolio 9.91% 9.91% 78.38% 190.94% -
- -----------------------------------------------------------------------------------------------------------------------
Dreyfus Small Cap Portfolio 21.44% 21.44% 33.25% 95.52% -
- -----------------------------------------------------------------------------------------------------------------------
Equity Income Portfolio (Fidelity) 3.46% 3.46% 49.64% - -
- -----------------------------------------------------------------------------------------------------------------------
Equity Index Portfolio Class II * 18.91% 18.91% 98.43% 228.46% -
- -----------------------------------------------------------------------------------------------------------------------
Federated Stock Portfolio 3.88% 3.88% 59.01% - -
- -----------------------------------------------------------------------------------------------------------------------
Large Cap Portfolio (Fidelity) 27.53% 27.53% 107.54% - -
- -----------------------------------------------------------------------------------------------------------------------
Lazard International Stock Portfolio 20.02% 20.02% 42.12% - -
- -----------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Portfolio 74.33% 74.33% 175.49% - -
- -----------------------------------------------------------------------------------------------------------------------
MFS Mid Cap Growth Portfolio 61.91% 61.91% - - -
- -----------------------------------------------------------------------------------------------------------------------
MFS Research Portfolio 21.96% 21.96% - - -
- -----------------------------------------------------------------------------------------------------------------------
Salomon Brothers Investors Fund 10.10% 10.10% - - -
- -----------------------------------------------------------------------------------------------------------------------
Strategic Stock Portfolio 3.51% 3.51% - - -
- -----------------------------------------------------------------------------------------------------------------------
Travelers Disciplined Mid Cap Stock Portfolio 11.90% 11.90% - - -
- -----------------------------------------------------------------------------------------------------------------------
Travelers Disciplined Small Cap Stock Portfolio 18.74% 18.74% - - -
- -----------------------------------------------------------------------------------------------------------------------
Warburg Pincus Emerging Markets Portfolio 78.90% 78.90% - - -
- -----------------------------------------------------------------------------------------------------------------------
BOND ACCOUNTS:
- -----------------------------------------------------------------------------------------------------------------------
Federated High Yield Portfolio 1.66% 1.66% 19.51% - -
- -----------------------------------------------------------------------------------------------------------------------
Putnam Diversified Income Portfolio -0.30% -0.30% 5.16% 29.92% -
- -----------------------------------------------------------------------------------------------------------------------
Travelers Convertible Bond Portfolio 17.05% 17.05% - - -
- -----------------------------------------------------------------------------------------------------------------------
Travelers Quality Bond Portfolio -0.32% -0.32% 12.66% - -
- -----------------------------------------------------------------------------------------------------------------------
BALANCED ACCOUNTS:
- -----------------------------------------------------------------------------------------------------------------------
MFS Total Return Portfolio 1.21% 1.21% 33.22% 86.43% -
- -----------------------------------------------------------------------------------------------------------------------
MONEY MARKET ACCOUNTS:
- -----------------------------------------------------------------------------------------------------------------------
Travelers Money Market Portfolio 3.52% 3.52% 11.10% 17.30% 36.70%
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
Average Annual Returns Calendar Year Returns
----------------------------------------------------------------------------------
3YR 5YR 10YR Inception Inception 1998 1997 1996
Date To Date #
- ----------------------------------------------- ---------------------------------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STOCK ACCOUNTS:
- ----------------------------------------------- ---------------------------------------------------- ----------------------------
Alliance Growth Portfolio 28.29% 29.05% - 26.96% 6/20/94 27.23% 27.24% 27.58%
- ----------------------------------------------- ---------------------------------------------------- ----------------------------
Capital Appreciation Fund (Janus) 44.27% 38.52% 22.72% 14.03% 5/16/83 59.47% 24.38% 26.41%
- ----------------------------------------------- ---------------------------------------------------- ----------------------------
Delaware Investments REIT Series - - - -8.30% 5/6/98 - - -
- ----------------------------------------------- ---------------------------------------------------- ----------------------------
Dreyfus Capital Appreciation Portfolio 21.28% 23.80% - 18.40% 4/5/93 28.50% 26.30% 23.84%
- ----------------------------------------------- ---------------------------------------------------- ----------------------------
Dreyfus Small Cap Portfolio 10.04% 14.34% - 33.81% 8/31/90 -4.70% 15.14% 14.98%
- ----------------------------------------------- ---------------------------------------------------- ----------------------------
Equity Income Portfolio (Fidelity) 14.38% - - 16.47% 8/30/96 10.85% 30.48% -
- ----------------------------------------------- ---------------------------------------------------- ----------------------------
Equity Index Portfolio Class II * 25.66% 26.84% - 19.54% 11/30/91 26.81% 31.59% 21.78%
- ----------------------------------------------- ---------------------------------------------------- ----------------------------
Federated Stock Portfolio 16.72% - - 18.90% 8/30/96 16.25% 31.67% -
- ----------------------------------------------- ---------------------------------------------------- ----------------------------
Large Cap Portfolio (Fidelity) 27.56% - - 29.02% 8/30/96 33.69% 21.74% -
- ----------------------------------------------- ---------------------------------------------------- ----------------------------
Lazard International Stock Portfolio 12.43% - - 13.11% 8/1/96 11.06% 6.63% -
- ----------------------------------------------- ---------------------------------------------------- ----------------------------
MFS Emerging Growth Portfolio 40.19% - - 37.68% 8/30/96 32.42% 19.34% -
- ----------------------------------------------- ---------------------------------------------------- ----------------------------
MFS Mid Cap Growth Portfolio - - - 30.80% 3/23/98 - - -
- ----------------------------------------------- ---------------------------------------------------- ----------------------------
MFS Research Portfolio - - - 14.73% 3/23/98 - - -
- ----------------------------------------------- ---------------------------------------------------- ----------------------------
Salomon Brothers Investors Fund - - - 10.38% 2/17/98 - - -
- ----------------------------------------------- ---------------------------------------------------- ----------------------------
Strategic Stock Portfolio - - - -2.01% 5/6/98 - - -
- ----------------------------------------------- ---------------------------------------------------- ----------------------------
Travelers Disciplined Mid Cap Stock Portfolio - - - 21.69% 4/1/97 15.30% - -
- ----------------------------------------------- ---------------------------------------------------- ----------------------------
Travelers Disciplined Small Cap Stock Portfolio - - - 2.73% 5/1/98 - - -
- ----------------------------------------------- ---------------------------------------------------- ----------------------------
Warburg Pincus Emerging Markets Portfolio - - - 21.65% 12/31/97 -17.28% - -
- ----------------------------------------------- ---------------------------------------------------- ----------------------------
BOND ACCOUNTS:
- ----------------------------------------------- ---------------------------------------------------- ----------------------------
Federated High Yield Portfolio 6.12% - - 7.68% 8/30/96 3.25% 13.85% -
- ----------------------------------------------- ---------------------------------------------------- ----------------------------
Putnam Diversified Income Portfolio 1.69% 5.37% - 4.98% 6/20/94 -0.74% 6.26% 6.72%
- ----------------------------------------------- ---------------------------------------------------- ----------------------------
Travelers Convertible Bond Portfolio - - - 9.91% 5/1/98 - - -
- ----------------------------------------------- ---------------------------------------------------- ----------------------------
Travelers Quality Bond Portfolio 4.05% - - 4.58% 8/30/96 6.98% 5.65% -
- ----------------------------------------------- ---------------------------------------------------- ----------------------------
BALANCED ACCOUNTS:
- ----------------------------------------------- ---------------------------------------------------- ----------------------------
MFS Total Return Portfolio 10.03% 13.26% - 11.46% 6/20/94 10.10% 19.56% 12.90%
- ----------------------------------------------- ---------------------------------------------------- ----------------------------
MONEY MARKET ACCOUNTS:
- ----------------------------------------------- ---------------------------------------------------- ----------------------------
Travelers Money Market Portfolio 3.57% 3.24% 3.17% 3.62% 12/31/87 3.59% 3.60% 2.72%
- ----------------------------------------------- ---------------------------------------------------- ----------------------------
</TABLE>
* Certain funds offer multiple classes of shares. The performance above may
reflect the fees and performance of another class of the same fund for periods
before the current class existed. If the current class's 12b-1 fee and other
expenses were higher, the performance shown would be lower. # The inception date
is the date that the underlying fund commenced operations
6
<PAGE> 89
TRAVELERS ACCESS SELECT
STANDARDIZED PERFORMANCE UPDATE AS OF 12/31/99
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
STOCK ACCOUNTS: 1 Year 5 Year 10 Year (or inception) Inception Date #
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alliance Growth Portfolio 30.41% - 29.41% 12/17/96
- ----------------------------------------------------------------------------------------------------------------------------------
Capital Appreciation Fund (Janus) 51.39% - 45.04% 12/16/96
- ----------------------------------------------------------------------------------------------------------------------------------
Delaware Investments REIT Series -3.98% - -8.43% 5/12/98
- ----------------------------------------------------------------------------------------------------------------------------------
Dreyfus Capital Appreciation Portfolio 9.90% - 12.15% 4/1/98
- ----------------------------------------------------------------------------------------------------------------------------------
Dreyfus Small Cap Portfolio 21.43% - 3.28% 4/8/98
- ----------------------------------------------------------------------------------------------------------------------------------
Equity Income Portfolio (Fidelity) 3.45% - 15.13% 12/16/96
- ----------------------------------------------------------------------------------------------------------------------------------
Equity Index Portfolio Class II * - - 23.42% 6/1/99
- ----------------------------------------------------------------------------------------------------------------------------------
Federated Stock Portfolio 3.87% - 15.92% 1/10/97
- ----------------------------------------------------------------------------------------------------------------------------------
Large Cap Portfolio (Fidelity) 27.52% - 28.11% 12/17/96
- ----------------------------------------------------------------------------------------------------------------------------------
Lazard International Stock Portfolio 20.01% - 13.24% 12/16/96
- ----------------------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Portfolio 74.32% - 39.74% 12/16/96
- ----------------------------------------------------------------------------------------------------------------------------------
MFS Mid Cap Growth Portfolio 61.90% - 32.25% 4/30/98
- ----------------------------------------------------------------------------------------------------------------------------------
Salomon Brothers Investors Fund 10.09% - 7.44% 4/8/98
- ----------------------------------------------------------------------------------------------------------------------------------
Smith Barney Appreciation Portfolio 11.54% - 15.04% 6/11/97
- ----------------------------------------------------------------------------------------------------------------------------------
Smith Barney Total Return Portfolio 20.31% - 8.71% 5/14/98
- ----------------------------------------------------------------------------------------------------------------------------------
Travelers Disciplined Mid Cap Stock Portfolio 11.89% - 18.31% 6/5/97
- ----------------------------------------------------------------------------------------------------------------------------------
Travelers Disciplined Small Cap Stock Portfolio 18.73% - 3.66% 5/8/98
- ----------------------------------------------------------------------------------------------------------------------------------
Warburg Pincus Emerging Markets Portfolio 78.89% - 18.16% 5/15/98
- ----------------------------------------------------------------------------------------------------------------------------------
BOND ACCOUNTS:
- ----------------------------------------------------------------------------------------------------------------------------------
Federated High Yield Portfolio 1.65% - 6.17% 1/3/97
- ----------------------------------------------------------------------------------------------------------------------------------
Smith Barney Diversified Strategic Income Portfolio 0.30% - 3.92% 6/12/97
- ----------------------------------------------------------------------------------------------------------------------------------
Travelers Convertible Bond Portfolio 17.04% - 10.08% 5/12/98
- ----------------------------------------------------------------------------------------------------------------------------------
Travelers Quality Bond Portfolio -0.33% - 4.03% 12/17/96
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCED ACCOUNTS:
- ----------------------------------------------------------------------------------------------------------------------------------
MFS Total Return Portfolio 1.20% - 9.75% 1/10/97
- ----------------------------------------------------------------------------------------------------------------------------------
MONEY MARKET ACCOUNTS:
- ----------------------------------------------------------------------------------------------------------------------------------
Travelers Money Market Portfolio 3.51% - 3.57% 2/4/97
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Certain funds offer multiple classes of shares. The performance above may
reflect the fees and performance of another class of the same fund for periods
before the current class existed. If the current class's 12b-1 fee and other
expenses were higher, the performance shown would be lower. # The inception date
used to calculate standardized performance is based on the date that the
investment option became active in the product.
7
<PAGE> 90
TRAVELERS ACCESS SELECT
NON STANDARDIZED PERFORMANCE UPDATE AS OF 12/31/99
<TABLE>
<CAPTION>
Cumulative Returns
--------------------------------------------------
YTD 1 YR 3YR 5YR 10YR
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STOCK ACCOUNTS:
- ------------------------------------------------------------------------------------------------------
Alliance Growth Portfolio 30.42% 30.42% 111.1% 258.2%
- ------------------------------------------------------------------------------------------------------
Capital Appreciation Fund (Janus) 51.40% 51.40% 200.3% 410.4% 675.8%
- ------------------------------------------------------------------------------------------------------
Delaware Investments REIT Series -3.97% -3.97%
- ------------------------------------------------------------------------------------------------------
Dreyfus Capital Appreciation Portfolio 9.91% 9.91% 78.4% 190.9%
- ------------------------------------------------------------------------------------------------------
Dreyfus Small Cap Portfolio 21.44% 21.44% 33.2% 95.5%
- ------------------------------------------------------------------------------------------------------
Equity Income Portfolio (Fidelity) 3.46% 3.46% 49.6%
- ------------------------------------------------------------------------------------------------------
Equity Index Portfolio Class II * 18.91% 18.91% 98.4% 228.5%
- ------------------------------------------------------------------------------------------------------
Federated Stock Portfolio 3.88% 3.88% 59.0%
- ------------------------------------------------------------------------------------------------------
Large Cap Portfolio (Fidelity) 27.53% 27.53% 107.5%
- ------------------------------------------------------------------------------------------------------
Lazard International Stock Portfolio 20.02% 20.02% 42.1%
- ------------------------------------------------------------------------------------------------------
MFS Emerging Growth Portfolio 74.33% 74.33% 175.5%
- ------------------------------------------------------------------------------------------------------
MFS Mid Cap Growth Portfolio 61.91% 61.91%
- ------------------------------------------------------------------------------------------------------
Salomon Brothers Investors Fund 10.10% 10.10%
- ------------------------------------------------------------------------------------------------------
Smith Barney Appreciation Portfolio 11.55% 11.55% 63.4% 145.4%
- ------------------------------------------------------------------------------------------------------
Smith Barney Total Return Portfolio 20.32% 20.32% 43.6% 118.8%
- ------------------------------------------------------------------------------------------------------
Travelers Disciplined Mid Cap Stock Portfolio 11.90% 11.90%
- ------------------------------------------------------------------------------------------------------
Travelers Disciplined Small Cap Stock Portfolio 18.74% 18.74%
- ------------------------------------------------------------------------------------------------------
Warburg Pincus Emerging Markets Portfolio 78.90% 78.90%
- ------------------------------------------------------------------------------------------------------
BOND ACCOUNTS:
- ------------------------------------------------------------------------------------------------------
Federated High Yield Portfolio 1.66% 1.66% 19.5%
- ------------------------------------------------------------------------------------------------------
Smith Barney Diversified Strategic Income Portfolio 0.31% 0.31% 12.2% 40.9%
- ------------------------------------------------------------------------------------------------------
Travelers Convertible Bond Portfolio 17.05% 17.05%
- ------------------------------------------------------------------------------------------------------
Travelers Quality Bond Portfolio -0.32% -0.32% 12.7%
- ------------------------------------------------------------------------------------------------------
BALANCED ACCOUNTS:
- ------------------------------------------------------------------------------------------------------
MFS Total Return Portfolio 1.21% 1.21% 33.2% 86.4%
- ------------------------------------------------------------------------------------------------------
MONEY MARKET ACCOUNTS:
- ------------------------------------------------------------------------------------------------------
Travelers Money Market Portfolio 3.52% 3.52% 11.1% 17.3% 36.7%
- ------------------------------------------------------------------------------------------------------
<CAPTION>
Average Annual Returns Calendar Year Returns
-----------------------------------------------------------------------------
3YR 5YR 10YR Inception to Inception 1998 1997 1996
Date Date #
- ---------------------------------------------------- ------------------------------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STOCK ACCOUNTS:
- ---------------------------------------------------- ------------------------------------------------- --------------------------
Alliance Growth Portfolio 28.29% 29.05% 26.96% 6/20/94 27.23% 27.24% 27.58%
- ---------------------------------------------------- ------------------------------------------------- --------------------------
Capital Appreciation Fund (Janus) 44.27% 38.52% 22.72% 14.03% 5/16/83 59.47% 24.38% 26.41%
- ---------------------------------------------------- ------------------------------------------------- --------------------------
Delaware Investments REIT Series -8.30% 5/6/98
- ---------------------------------------------------- ------------------------------------------------- --------------------------
Dreyfus Capital Appreciation Portfolio 21.28% 23.80% 18.40% 4/5/93 28.50% 26.30% 23.84%
- ---------------------------------------------------- ------------------------------------------------- --------------------------
Dreyfus Small Cap Portfolio 10.04% 14.34% 33.81% 8/31/90 -4.70% 15.14% 14.98%
- ---------------------------------------------------- ------------------------------------------------- --------------------------
Equity Income Portfolio (Fidelity) 14.38% 16.47% 8/30/96 10.85% 30.48%
- ---------------------------------------------------- ------------------------------------------------- --------------------------
Equity Index Portfolio Class II * 25.66% 26.84% 19.54% 11/30/91 26.81% 31.59% 21.78%
- ---------------------------------------------------- ------------------------------------------------- --------------------------
Federated Stock Portfolio 16.72% 18.90% 8/30/96 16.25% 31.67%
- ---------------------------------------------------- ------------------------------------------------- --------------------------
Large Cap Portfolio (Fidelity) 27.56% 29.02% 8/30/96 33.69% 21.74%
- ---------------------------------------------------- ------------------------------------------------- --------------------------
Lazard International Stock Portfolio 12.43% 13.11% 8/1/96 11.06% 6.63%
- ---------------------------------------------------- ------------------------------------------------- --------------------------
MFS Emerging Growth Portfolio 40.19% 37.68% 8/30/96 32.42% 19.34%
- ---------------------------------------------------- ------------------------------------------------- --------------------------
MFS Mid Cap Growth Portfolio 30.80% 3/23/98
- ---------------------------------------------------- ------------------------------------------------- --------------------------
Salomon Brothers Investors Fund 10.38% 2/17/98
- ---------------------------------------------------- ------------------------------------------------- --------------------------
Smith Barney Appreciation Portfolio 17.77% 19.66% 13.19% 10/16/91 17.47% 24.66% 18.24%
- ---------------------------------------------------- ------------------------------------------------- --------------------------
Smith Barney Total Return Portfolio 12.83% 16.94% 15.35% 12/3/93 3.60% 15.22% 23.68%
- ---------------------------------------------------- ------------------------------------------------- --------------------------
Travelers Disciplined Mid Cap Stock Portfolio 21.69% 4/1/97 15.30%
- ---------------------------------------------------- ------------------------------------------------- --------------------------
Travelers Disciplined Small Cap Stock Portfolio 2.73% 5/1/98
- ---------------------------------------------------- ------------------------------------------------- --------------------------
Warburg Pincus Emerging Markets Portfolio 21.65% 12/31/97 -17.28%
- ---------------------------------------------------- ------------------------------------------------- --------------------------
BOND ACCOUNTS:
- ---------------------------------------------------- ------------------------------------------------- --------------------------
Federated High Yield Portfolio 6.12% 7.68% 8/30/96 3.25% 13.85%
- ---------------------------------------------------- ------------------------------------------------- --------------------------
Smith Barney Diversified Strategic Income Portfolio 3.92% 7.10% 5.19% 10/16/91 4.93% 6.63% 9.72%
- ---------------------------------------------------- ------------------------------------------------- --------------------------
Travelers Convertible Bond Portfolio 9.91% 5/1/98
- ---------------------------------------------------- ------------------------------------------------- --------------------------
Travelers Quality Bond Portfolio 4.05% 4.58% 8/30/96 6.98% 5.65%
- ---------------------------------------------------- ------------------------------------------------- --------------------------
BALANCED ACCOUNTS:
- ---------------------------------------------------- ------------------------------------------------- --------------------------
MFS Total Return Portfolio 10.03% 13.26% 11.46% 6/20/94 10.10% 19.56% 12.90%
- ---------------------------------------------------- ------------------------------------------------- --------------------------
MONEY MARKET ACCOUNTS:
- ---------------------------------------------------- ------------------------------------------------- --------------------------
Travelers Money Market Portfolio 3.57% 3.24% 3.17% 3.62% 12/31/87 3.59% 3.60% 2.72%
- ---------------------------------------------------- ------------------------------------------------- --------------------------
</TABLE>
* Certain funds offer multiple classes of shares. The performance above may
reflect the fees and performance of another class of the same fund for periods
before the current class existed. If the current class's 12b-1 fee and other
expenses were higher, the performance shown would be lower. # The inception date
is the date that the underlying fund commenced operations
8
<PAGE> 91
MIXED AND SHARED FUNDING
Certain variable annuity separate accounts and variable life insurance
separate accounts may invest in the Funding Options simultaneously (called
"mixed" and "shared" funding). It is conceivable that in the future it may be
disadvantageous to do so. Although the Company and the Funding Options do not
currently foresee any such disadvantages either to variable annuity contract
owners or variable life policy owners, each Funding Option's Board of Directors
intends to monitor events in order to identify any material conflicts between
them and to determine what action, if any, should be taken. If a Board of
Directors was to conclude that separate funds should be established for variable
life and variable annuity separate accounts, the variable annuity contract
owners would not bear any of the related expenses, but variable annuity contract
owners and variable life insurance policy owners would no longer have the
economies of scale resulting from a larger combined fund.
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 generally 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 bad
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.
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
9
<PAGE> 92
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 employees. Early withdrawals are subject to the
10% early withdrawal penalty generally applicable to IRAs, except that an early
withdrawal by an employee under a SIMPLE plan IRA, within the first two years of
participation, shall be subject to a 25% early withdrawal tax.
ROTH IRAs
Effective January 1, 1998, Section 408A of the Code permits certain
individuals to contribute to a Roth IRA. Eligibility to make contributions is
based upon income, and the applicable limits vary based on marital status and/or
whether the contribution is a rollover contribution from another IRA or an
annual contribution. Contributions to a Roth IRA, which are subject to certain
limitations ($2,000 per year for annual contributions), are not deductible and
must be made in cash or as a rollover or transfer from another Roth IRA or other
IRA. A conversion of a "traditional" IRA to a Roth IRA may
10
<PAGE> 93
be subject to tax and other special rules apply. You should consult a tax
adviser before combining any converted amounts with other Roth IRA
contributions, including any other conversion amounts from other tax years.
Qualified distributions from a Roth IRA are tax-free. A qualified
distribution requires that the Roth IRA has been held for at least 5 years, and
the distribution is made after age 59 1/2, on death or disability of the owner,
or for a limited amount ($10,000) for a qualified first time home purchase for
the owner or certain relatives. Income tax and a 10% penalty tax may apply to
distributions made (1) before age 59 1/2 (subject to certain exceptions) or (2)
during five taxable years starting with the year in which the first contribution
is made to the Roth IRA.
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.
11
<PAGE> 94
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 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, 1999, 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
The financial statements of The Travelers Life and Annuity Company as of
December 31, 1999 and 1998, and for each of the years in the three-year period
ended December 31, 1999, included herein, and the financial statements of Fund
ABD II as of and for the year ended December 31, 1999, also included herein,
have been included in reliance upon the reports of KPMG LLP, independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing.
12
<PAGE> 95
ANNUAL REPORT
DECEMBER 31, 1999
THE TRAVELERS FUND ABD II
FOR VARIABLE ANNUITIES
[TRAVELERS LIFE&ANNUITY LOGO]
The Travelers Insurance Company
The Travelers Life and Annuity Company
One Tower Square
Hartford, CT 06183
<PAGE> 96
THE TRAVELERS FUND ABD II
FOR VARIABLE ANNUITIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<CAPTION>
ASSETS:
<S> <C> <C>
Investments in eligible funds at market value:
Capital Appreciation Fund, 1,335,146 shares (cost $93,724,341) .......................... $ 145,263,879
Delaware Group Premium Fund, Inc., 127,893 shares (cost $1,139,759) ..................... 1,108,831
Dreyfus Variable Investment Fund, 440,024 shares (cost $18,504,750) ..................... 20,726,641
Greenwich Street Series Fund, 4,848,224 shares (cost $71,637,977) ....................... 75,236,795
Money Market Portfolio, 42,351,549 shares (cost $42,351,549) ............................ 42,351,549
Morgan Stanley Dean Witter Universal Funds, Inc., 1,459,584 shares (cost $18,554,620) ... 19,139,779
Salomon Brothers Variable Series Funds Inc., 1,808,970 shares (cost $19,622,350) ........ 20,460,089
The Travelers Series Trust, 18,873,981 shares (cost $265,114,296) ....................... 315,043,199
Travelers Series Fund Inc., 7,957,724 shares (cost $155,793,869) ........................ 179,397,221
Van Kampen Life Investment Trust, 9,329,955 shares (cost $34,120,870) ................... 39,989,037
Warburg Pincus Trust, 232,002 shares (cost $2,451,572) .................................. 3,289,795
----------------
Total Investments (cost $723,015,953) ................................................. $ 862,006,815
Receivables:
Dividends ............................................................................... 115,888
Purchase payments and transfers from other Travelers accounts ........................... 2,391,387
Other assets .............................................................................. 48,371
---------------
Total Assets .......................................................................... 864,562,461
---------------
LIABILITIES:
Payables:
Contract surrenders and transfers to other Travelers accounts ........................... 851,782
Insurance charges ....................................................................... 260,029
Administrative fees .................................................................... 31,202
Accrued liabilities ....................................................................... 5,922
---------------
Total Liabilities ..................................................................... 1,148,935
---------------
NET ASSETS: $ 863,413,526
===============
</TABLE>
See Notes to Financial Statements
-1-
<PAGE> 97
THE TRAVELERS FUND ABD II
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C> <C>
Dividends ........................................................................ $ 25,681,160
EXPENSES:
Insurance charges ................................................................ $ 7,740,785
Administrative fees .............................................................. 928,894
----------------
Total expenses.................................................................. 8,669,679
-----------------
Net investment income ........................................................ 17,011,481
-----------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ................................................. 379,798,102
Cost of investments sold ....................................................... 370,321,690
----------------
Net realized gain (loss) ..................................................... 9,476,412
Change in unrealized gain (loss) on investments:
Unrealized gain at December 31, 1998 ............................................. 36,155,774
Unrealized gain at December 31, 1999 ............................................. 138,990,862
----------------
Net change in unrealized gain (loss) for the year .............................. 102,835,088
-----------------
Net realized gain (loss) and change in unrealized gain (loss)................... 112,311,500
-----------------
Net increase in net assets resulting from operations ............................... 129,322,981
=================
</TABLE>
See Notes to Financial Statements
-2-
<PAGE> 98
THE TRAVELERS FUND ABD II
FOR VARIABLE ANNUITIES
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
OPERATIONS:
Net investment income ........................................................ $ 17,011,481 $ 8,320,588
Net realized gain (loss) from investment transactions ........................ 9,476,412 2,811,746
Net change in unrealized gain (loss) on investments .......................... 102,835,088 35,777,662
--------------- ---------------
Net increase in net assets resulting from operations ....................... 129,322,981 46,909,996
--------------- ---------------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 166,599,210 and 209,176,825 units, respectively) ........... 230,945,585 250,118,712
Participant transfers from other Travelers accounts
(applicable to 412,772,611 and 151,067,338 units, respectively) ........... 525,844,236 180,688,277
Administrative charges
(applicable to 56,314 and 31,383 units, respectively) ..................... (82,126) (38,546)
Contract surrenders
(applicable to 29,909,228 and 16,070,201 units, respectively) ............. (40,380,404) (19,665,803)
Participant transfers to other Travelers accounts
(applicable to 338,145,478 and 94,682,840 units, respectively) ............ (415,729,534) (107,711,107)
Other payments to participants
(applicable to 4,551,953 and 1,424,197 units, respectively) ............... (5,832,750) (1,691,394)
--------------- ---------------
Net increase in net assets resulting from unit transactions ................ 294,765,007 301,700,139
--------------- ---------------
Net increase in net assets ............................................... 424,087,988 348,610,135
NET ASSETS:
Beginning of year ............................................................ 439,325,538 90,715,403
--------------- ---------------
End of year .................................................................. $ 863,413,526 $ 439,325,538
=============== ===============
</TABLE>
See Notes to Financial Statements
-3-
<PAGE> 99
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 Citigroup
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. Fund ABD II
includes the products Portfolio Architect, Portfolio Architect Select,
Travelers Access, Travelers Access Select, and Travelers Premier Advisers.
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, 1999, the eligible funds available under Fund ABD
II were: Capital Appreciation Fund; Money Market Portfolio, 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, Equity Income Portfolio, Disciplined Mid Cap Stock Portfolio,
MFS Mid Cap Growth Portfolio, MFS Research Portfolio, Strategic Stock
Portfolio, Disciplined Small Cap Stock Portfolio and Convertible Bond
Portfolio of The Travelers Series Trust; Diversified Strategic Income
Portfolio, Total Return Portfolio, Appreciation Portfolio and Equity Index
Portfolio Class II of Greenwich Street Series Fund; REIT Series of Delaware
Group Premium Fund, Inc.; Capital Appreciation Portfolio and Small Cap
Portfolio of Dreyfus Variable Investment Fund; Emerging Markets Portfolio
of Warburg Pincus Trust; Mid Cap Value Portfolio, Value Portfolio, Emerging
Markets Equity Portfolio and Global Equity Portfolio of Morgan Stanley Dean
Witter Universal Funds, Inc. (formerly Morgan Stanley Universal Funds,
Inc.); Morgan Stanley Real Estate Securities Portfolio, Enterprise
Portfolio, Government Portfolio, Growth and Income Portfolio, Emerging
Growth Portfolio, Domestic Income Portfolio, Money Market Portfolio and
Comstock Portfolio of Van Kampen Life Investment Trust; Salomon Brothers
Variable Investors Fund, Salomon Brothers Variable Capital Fund, Salomon
Brothers Variable High Yield Bond Fund and Salomon Brothers Variable
Strategic Bond Fund of Salomon Brothers Variable Series Funds Inc. All of
the funds are Massachusetts business trusts, except Travelers Series Fund
Inc., Delaware Group Premium Fund, Inc., Salomon Brothers Variable Series
Funds, Inc., and Morgan Stanley Dean Witter Universal Funds, Inc., which
are incorporated under Maryland law and Van Kampen Life Investment Trust
which is a Delaware business trust. Capital Appreciation Fund, Money Market
Portfolio, Travelers Series Fund Inc., Travelers Series Trust, Greenwich
Street Series Fund, and Salomon Brothers Variable Series Funds, Inc. are
managed by affiliates of The Travelers. Not all funds may be available in
all states or to all contract owners.
The following is a summary of significant accounting policies consistently
followed by 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.
SECURITY TRANSACTIONS. Security transactions are accounted for on the trade
date. Dividend income is recorded on the ex-dividend date.
FEDERAL INCOME TAXES. The operations of Fund 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.
-4-
<PAGE> 100
NOTES TO FINANCIAL STATEMENTS - CONTINUED
2. INVESTMENTS
The aggregate costs of purchases and proceeds from sales of investments
were $693,772,145 and $379,798,102, respectively, for the year ended
December 31, 1999. Realized gains and losses from investment transactions
are reported on an average cost basis. The cost of investments in eligible
funds was $723,018,953 at December 31, 1999. Gross unrealized appreciation
for all investments at December 31, 1999 was $142,828,409. Gross unrealized
depreciation for all investments at December 31, 1999 was $3,837,547.
3. CONTRACT CHARGES
Insurance charges are paid for the mortality and expense risks assumed by
Travelers Life. Each business day, Travelers Life deducts a mortality and
expense risk charge which is reflected in the calculation of accumulation
and annuity unit values. This charge equals, on an annual basis, 1.25% of
the amount held in each funding option
Administrative fees are paid for administrative expenses. This fee is also
deducted each business day and reflected in the calculation of accumulation
and annuity unit values. This charge equals, on an annual basis, 0.15% of
the amounts held in each funding option.
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. Contract surrender
payments include $385,026 and $63,298 of contingent deferred sales charges
for the years ended December 31, 1999 and 1998, respectively.
4. CHANGE IN ACCOUNTING
On January 1, 1999, in conjunction with the implementation of a new system,
Fund ABD II changed its basis of reporting realized gains and losses for
investment transactions from an identified cost basis to an average cost
basis. The accounting changed had no effect on net assets.
-5-
<PAGE> 101
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. NET CONTRACT OWNERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31, 1999
------------------------------------------------------------------
ACCUMULATION ANNUITY UNIT NET
UNITS UNITS VALUE ASSETS
----- ----- ----- ------
<S> <C> <C> <C> <C>
Capital Apperciation Fund ..................................... 46,936,090 6,311 $3.098 $145,437,918
Delaware Group Premium Fund, Inc.
REIT Series ................................................. 1,280,359 - 0.866 1,108,461
Dreyfus Variable Investment Fund
Capital Appreciation Portfolio .............................. 10,488,399 - 1.223 12,822,259
Small Cap Portfolio ......................................... 7,815,322 - 1.058 8,264,911
Greenwich Street Series Fund
Appreciation Portfolio ...................................... 24,225,208 - 1.431 34,662,000
Diversified Strategic Income Portfolio ...................... 28,190,252 8,343 1.103 31,108,967
Total Return Portfolio ...................................... 4,963,010 - 1.146 5,688,900
Equity Index Portfolio Class II ............................. 3,460,443 - 1.098 3,798,098
Money Market Portfolio ........................................ 37,736,754 - 1.107 41,793,122
Morgan Stanley Dean Witter Universal Funds, Inc.
Emerging Markets Equity Portfolio ........................... 1,187,791 - 1.476 1,762,472
Global Equity Portfolio ..................................... 4,937,653 - 1.017 5,021,661
Mid Cap Value Portfolio ..................................... 5,752,898 - 1.235 7,102,174
Value Portfolio ............................................. 6,166,448 - 0.852 5,254,465
Salomon Brothers Variable Series Funds Inc.
Salomon Brothers Variable Capital Fund ...................... 2,802,945 - 1.305 3,657,612
Salomon Brothers Variable High Yield Bond Fund .............. 3,085,254 - 1.032 3,182,949
Salomon Brothers Variable Investors Fund .................... 8,670,638 - 1.132 9,819,218
Salomon Brothers Variable Strategic Bond Fund ............... 3,695,681 - 1.026 3,793,423
The Travelers Series Trust
Equity Income Portfolio ..................................... 35,680,567 6,650 1.535 54,787,094
Federated High Yield Portfolio .............................. 22,260,856 - 1.196 26,633,290
Federated Stock Portfolio ................................... 14,390,300 15,877 1.552 22,351,557
Large Cap Portfolio ......................................... 28,043,782 7,981 2.123 59,551,774
Lazard International Stock Portfolio ........................ 25,226,349 - 1.460 36,821,800
MFS Emerging Growth Portfolio ............................... 22,881,721 - 2.766 63,299,808
MFS Mid Cap Growth Portfolio ................................ 4,760,902 - 1.595 7,595,898
MFS Research Portfolio ...................................... 669,474 - 1.285 860,431
Strategic Stock Portfolio ................................... 434,122 - 0.981 426,055
Convertible Bond Portfolio .................................. 2,431,429 - 1.170 2,845,793
Disciplined Mid Cap Stock Portfolio ......................... 6,716,626 - 1.541 10,352,640
Disciplined Small Cap Stock Portfolio ....................... 1,202,404 - 1.061 1,275,884
Travelers Quality Bond Portfolio ............................ 26,069,226 - 1.128 29,397,260
</TABLE>
-6-
<PAGE> 102
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. NET CONTRACT OWNERS' EQUITY (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1999
------------------------------------------------------------------
ACCUMULATION ANNUITY UNIT NET
UNITS UNITS VALUE ASSETS
----- ----- ----- ------
<S> <C> <C> <C> <C>
Travelers Series Fund Inc.
Alliance Growth Portfolio ................................... 47,159,785 8,120 $2.189 $103,259,050
MFS Total Return Portfolio .................................. 54,283,283 7,269 1.319 71,594,687
Putnam Diversified Income Portfolio ......................... 4,489,463 - 1.059 4,753,613
Van Kampen Life Investment Trust
Comstock Portfolio .......................................... 592,847 - 0.916 543,095
Domestic Income Portfolio ................................... 2,370,354 - 0.983 2,330,804
Emerging Growth Portfolio ................................... 4,454,847 - 2.426 10,808,083
Enterprise Portfolio ........................................ 6,294,366 - 1.344 8,460,646
Government Portfolio ........................................ 1,781,637 - 1.003 1,786,132
Growth and Income Portfolio ................................. 6,242,006 - 1.147 7,160,428
Money Market Portfolio ...................................... 7,282,651 - 1.055 7,684,513
Morgan Stanley Real Estate Securities Portfolio ............. 1,437,131 - 0.866 1,244,273
Warburg Pincus Trust
Emerging Markets Portfolio .................................. 2,521,807 - 1.313 3,310,308
--------------
Net Contract Owners' Equity .................................................................................... $863,413,526
==============
</TABLE>
-7-
<PAGE> 103
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. STATEMENT OF INVESTMENTS
<TABLE>
<CAPTION>
INVESTMENT OPTIONS NO. OF MARKET
SHARES VALUE
----------------- -----------------
<S> <C> <C>
CAPITAL APPRECIATION FUND (16.9%)
Total (Cost $93,724,341) 1,335,146 $145,263,879
----------------- -----------------
DELAWARE GROUP PREMIUM FUND, INC. (0.1%)
REIT Series
Total (Cost $1,139,759) 127,893 1,108,831
----------------- -----------------
DREYFUS VARIABLE INVESTMENT FUND (2.4%)
Capital Appreciation Portfolio (cost $11,740,341) 319,779 12,749,573
Small Cap Portfolio (cost $6,764,409) 120,245 7,977,068
----------------- -----------------
Total (Cost $18,504,750) 440,024 20,726,641
----------------- -----------------
GREENWICH STREET SERIES FUND (8.7%)
Appreciation Portfolio (Cost $30,508,756) 1,481,948 34,662,769
Diversified Strategic Income Portfolio (Cost $32,480,074) 2,977,715 31,087,343
Total Return Portfolio (Cost $5,163,433) 282,558 5,690,723
Equity Index Portfolio Class II (Cost $3,485,714) 106,003 3,795,960
----------------- -----------------
Total (Cost $71,637,977) 4,848,224 75,236,795
----------------- -----------------
MONEY MARKET PORTFOLIO (4.9%)
Total (Cost $42,351,549) 42,351,549 42,351,549
----------------- -----------------
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC. (2.2%)
Emerging Markets Equity Portfolio (Cost $1,211,349) 126,749 1,763,082
Global Equity Portfolio (Cost $5,091,986) 390,315 5,027,257
Mid Cap Value Portfolio (Cost $6,673,170) 454,305 7,096,251
Value Portfolio (Cost $5,578,115) 488,215 5,253,189
----------------- -----------------
Total (Cost $18,554,620) 1,459,584 19,139,779
----------------- -----------------
SALOMON BROTHERS VARIABLE SERIES FUNDS INC. (2.4%)
Salomon Brothers Variable Capital Fund (Cost $3,174,259) 267,653 3,658,815
Salomon Brothers Variable High Yield Bond Fund (Cost $3,384,029) 345,340 3,184,039
Salomon Brothers Variable Investors Fund (Cost $9,081,008) 803,148 9,822,502
Salomon Brothers Variable Strategic Bond Fund (Cost $3,983,054) 392,829 3,794,733
----------------- -----------------
Total (Cost $19,622,350) 1,808,970 20,460,089
----------------- -----------------
</TABLE>
-8-
<PAGE> 104
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
NO. OF MARKET
SHARES VALUE
----------------- -----------------
<S> <C> <C>
THE TRAVELERS SERIES TRUST (36.6%)
Equity Income Portfolio (Cost $54,216,831) 3,639,667 $54,776,991
Federated High Yield Portfolio (Cost $26,913,145) 2,322,398 26,568,228
Federated Stock Portfolio (Cost $20,785,849) 1,368,358 22,358,973
Large Cap Portfolio (Cost $47,720,542) 2,817,387 59,475,042
Lazard International Stock Portfolio (Cost $33,883,524) 2,312,004 36,159,735
MFS Emerging Growth Portfolio (Cost $33,891,943) 2,121,157 63,252,898
MFS Mid Cap Growth Portfolio (Cost $5,200,212) 461,155 7,576,775
MFS Research Portfolio (Cost $707,641) 65,905 860,720
Strategic Stock Portfolio (Cost $431,556) 42,920 426,195
Convertible Bond Portfolio (Cost $2,503,155) 240,277 2,808,835
Disciplined Mid Cap Stock Portfolio (Cost $8,648,472) 649,783 10,143,121
Disciplined Small Cap Stock Portfolio (Cost $1,064,131) 121,730 1,300,073
Travelers Quality Bond Portfolio (Cost $29,147,295) 2,711,240 29,335,613
----------------- -----------------
Total (Cost $265,114,296) 18,873,981 315,043,199
----------------- -----------------
TRAVELERS SERIES FUND INC. (20.8%)
Alliance Growth Portfolio (Cost $78,519,694) 3,136,847 103,139,536
MFS Total Return Portfolio (Cost $72,312,352) 4,405,572 71,502,438
Putnam Diversified Income Portfolio (Cost $4,961,823) 415,305 4,755,247
----------------- -----------------
Total (Cost $155,793,869) 7,957,724 179,397,221
----------------- -----------------
VAN KAMPEN LIFE INVESTMENT TRUST (4.6%)
Comstock Portfolio (Cost $545,960) 58,353 543,268
Domestic Income Portfolio (Cost $2,435,990) 289,882 2,330,654
Emerging Growth Portfolio (Cost $6,375,946) 233,801 10,808,621
Enterprise Portfolio (Cost $7,108,178) 323,931 8,457,842
Government Portfolio (Cost $1,860,130) 202,579 1,786,747
Growth and Income Portfolio (Cost $6,808,495) 467,285 7,163,477
Money Market Portfolio (Cost $7,653,481) 7,653,481 7,653,481
Morgan Stanley Real Estate Securities Portfolio (Cost $1,332,690) 100,643 1,244,947
----------------- -----------------
Total (Cost $34,120,870) 9,329,955 39,989,037
----------------- -----------------
WARBURG PINCUS TRUST (0.4%)
Emerging Markets Portfolio
Total (Cost $2,451,572) 232,002 3,289,795
----------------- -----------------
TOTAL INVESTMENT OPTIONS (100%)
(COST $723,015,953) $862,006,815
=================
</TABLE>
-9-
<PAGE> 105
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF FUND ABD II OPERATIONS AND CHANGES IN NET ASSETS FOR THE YEARS
ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
DREYFUS CAPITAL
CAPITAL APPRECIATION FUND REIT SERIES APPRECIATION PORTFOLIO
-------------------------- --------------------- -----------------------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends .......................................... $ 1,998,737 $ 649,386 $ 13,182 $ - $ 115,440 $ 16,303
------------ ------------ ---------- --------- ----------- ----------
EXPENSES:
Insurance charges .................................. 1,058,075 289,870 10,798 1,497 101,089 12,844
Administrative fees ................................ 126,969 34,785 1,296 180 12,131 1,541
------------ ------------ ---------- --------- ----------- ----------
Net investment income (loss) ....................... 813,693 324,731 1,088 (1,677) 2,220 1,918
------------ ------------ ---------- --------- ----------- ----------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ................... 5,102,834 1,324,183 96,715 65,575 605,737 190,813
Cost of investments sold ......................... 3,576,507 976,056 98,618 72,581 563,552 184,507
------------ ------------ ---------- --------- ----------- ----------
Net realized gain (loss) ....................... 1,526,327 348,127 (1,903) (7,006) 42,185 6,306
------------ ------------ ---------- --------- ----------- ----------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year ......... 12,515,005 108,583 9,925 - 257,453 -
Unrealized gain (loss) end of year ............... 51,539,538 12,515,005 (30,928) 9,925 1,009,232 257,453
------------ ------------ ---------- --------- ----------- ----------
Net change in unrealized gain (loss) for the
year ........................................ 39,024,533 12,406,422 (40,853) 9,925 751,779 257,453
------------ ------------ ---------- --------- ----------- ----------
Net increase (decrease) in net assets
resulting from operations ........................ 41,364,553 13,079,280 (41,668) 1,242 796,184 265,677
------------ ------------ ---------- --------- ----------- ----------
UNIT TRANSACTIONS:
Participant purchase payments ...................... 38,741,403 20,450,412 289,560 405,397 4,907,553 2,334,030
Participant transfers from other Travelers accounts 34,803,329 9,775,884 407,021 219,590 4,969,385 785,282
Administrative charges ............................. (11,349) (4,258) (69) (16) (963) (79)
Contract surrenders ................................ (3,496,348) (2,318,539) (39,940) (12,830) (458,748) (124,200)
Participant transfers to other Travelers accounts .. (12,742,237) (1,958,651) (73,120) (43,093) (543,327) (108,535)
Other payments to participants ..................... (310,419) (76,461) (3,613) - - -
------------ ------------ ---------- --------- ----------- ----------
Net increase (decrease) in net assets
resulting from unit transactions ............... 56,984,379 25,868,387 579,839 569,048 8,873,900 2,886,498
------------ ------------ ---------- --------- ----------- ----------
Net increase (decrease) in net assets .......... 98,348,932 38,947,667 538,171 570,290 9,670,084 3,152,175
NET ASSETS:
Beginning of year ................................ 47,088,986 8,141,319 570,290 - 3,152,175 -
------------ ------------ ---------- --------- ----------- ----------
End of year ...................................... $145,437,918 $ 47,088,986 $1,108,461 $ 570,290 $12,822,259 $3,152,175
============ ============ ========== ========= =========== ==========
</TABLE>
-10-
<PAGE> 106
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
DIVERSIFIED STRATEGIC
SMALL CAP PORTFOLIO APPRECIATION PORTFOLIO INCOME PORTFOLIO TOTAL RETURN PORTFOLIO
---------------------------- ------------------------------ ------------------------------ ----------------------------
1999 1998 1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
$2,489 $14,580 $621,204 $800,393 $1,837,504 $1,136,091 $189,436 $8,487
-------------- ----------- ------------- -------------- -------------- ------------- ------------ ------------
58,528 6,583 345,092 180,136 384,549 232,330 42,636 3,755
7,023 790 41,411 21,617 46,146 27,880 5,117 451
-------------- ----------- ------------- -------------- -------------- ------------- ------------ ------------
(63,062) 7,207 234,701 598,640 1,406,809 875,881 141,683 4,281
-------------- ----------- ------------- -------------- -------------- ------------- ------------ ------------
3,155,467 92,364 1,979,628 534,323 4,744,433 1,317,064 241,854 147,571
2,863,386 109,282 1,799,001 532,263 4,974,042 1,401,783 233,150 164,794
-------------- ----------- ------------- -------------- -------------- ------------- ------------ ------------
292,081 (16,918) 180,627 2,060 (229,609) (84,719) 8,704 (17,223)
-------------- ----------- ------------- -------------- -------------- ------------- ------------ ------------
222,014 - 1,582,444 (164,938) (289,764) (366,241) 49,916 -
1,212,659 222,014 4,154,013 1,582,444 (1,392,731) (289,764) 527,290 49,916
-------------- ----------- ------------- -------------- -------------- ------------- ------------ ------------
990,645 222,014 2,571,569 1,747,382 (1,102,967) 76,477 477,374 49,916
-------------- ----------- ------------- -------------- -------------- ------------- ------------ ------------
1,219,664 212,303 2,986,897 2,348,082 74,233 867,639 627,761 36,974
-------------- ----------- ------------- -------------- -------------- ------------- ------------ ------------
2,587,082 1,630,807 9,425,103 11,377,650 5,337,475 16,265,550 2,170,295 991,416
5,391,249 1,020,723 4,302,785 2,948,835 5,561,379 7,618,084 1,960,248 364,875
(648) (59) (3,159) (1,723) (3,343) (2,324) (553) (21)
(271,613) (27,090) (1,349,630) (288,935) (2,280,187) (723,704) (125,494) (39,807)
(3,313,712) (179,662) (1,712,077) (821,369) (4,273,398) (2,044,290) (154,725) (132,387)
(4,133) - (193,425) (80,041) (625,373) (369,338) (9,682) -
-------------- ----------- ------------- -------------- -------------- ------------- ------------ ------------
4,388,225 2,444,719 10,469,597 13,134,417 3,716,553 20,743,978 3,840,089 1,184,076
-------------- ----------- ------------- -------------- -------------- ------------- ------------ ------------
5,607,889 2,657,022 13,456,494 15,482,499 3,790,786 21,611,617 4,467,850 1,221,050
2,657,022 - 21,205,506 5,723,007 27,318,181 5,706,564 1,221,050 -
-------------- ----------- ------------- -------------- -------------- ------------- ------------ ------------
$8,264,911 $2,657,022 $34,662,000 $21,205,506 $31,108,967 $27,318,181 $5,688,900 $1,221,050
============== =========== ============= ============== ============== ============= ============ ============
</TABLE>
-11-
<PAGE> 107
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF FUND ABD II OPERATIONS AND CHANGES IN NET ASSETS FOR
THE YEARS ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
<TABLE>
<CAPTION>
EQUITY INDEX PORTFOLIO CLASS II
----------------------------------------
1999 1998
---- ----
INVESTMENT INCOME:
<S> <C> <C>
Dividends .................................................... $ 262 $ -
------------------- -------------------
EXPENSES:
Insurance charges ............................................ 12,454 -
Administrative fees .......................................... 1,494 -
------------------- -------------------
Net investment income (loss) ............................. (13,686) -
------------------- -------------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ............................. 36,679 -
Cost of investments sold ................................... 36,124 -
------------------- -------------------
Net realized gain (loss) ..................................... 555 -
------------------- -------------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year ................... - -
Unrealized gain (loss) end of year ......................... 310,246 -
------------------- -------------------
Net change in unrealized gain (loss) for the year ........ 310,246 -
------------------- -------------------
Net increase (decrease) in net assets
resulting from operations .................................. 297,115 -
------------------- -------------------
UNIT TRANSACTIONS:
Participant purchase payments ................................ 2,460,836 -
Participant transfers from other Travelers accounts .......... 1,081,185 -
Administrative charges ....................................... (57) -
Contract surrenders .......................................... (16,309) -
Participant transfers to other Travelers accounts ............ (24,672) -
Other payments to participants ............................... - -
------------------- -------------------
Net increase (decrease) in net assets
resulting from unit transactions ......................... 3,500,983 -
------------------- -------------------
Net increase (decrease) in net assets .................... 3,798,098 -
NET ASSETS:
Beginning of year .......................................... - -
------------------- -------------------
End of year ................................................ $ 3,798,098 $ -
=================== ===================
</TABLE>
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
-----------------------------------------
1999 1998
---- ----
INVESTMENT INCOME:
<S> <C> <C>
Dividends .................................................... $ 1,193,780 $ 637,335
--------------------- -------------------
EXPENSES:
Insurance charges ............................................ 302,196 162,639
Administrative fees .......................................... 36,263 19,516
--------------------- -------------------
Net investment income (loss) ............................. 855,321 455,180
--------------------- -------------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ............................. 158,971,876 37,860,275
Cost of investments sold ................................... 158,971,876 37,860,275
--------------------- -------------------
Net realized gain (loss) ................................. - -
--------------------- -------------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year ................... - -
Unrealized gain (loss) end of year ......................... - -
--------------------- -------------------
Net change in unrealized gain (loss) for the year ........ - -
--------------------- -------------------
Net increase (decrease) in net assets
resulting from operations .................................. 855,321 455,180
--------------------- -------------------
UNIT TRANSACTIONS:
Participant purchase payments ................................ 31,203,495 23,473,107
Participant transfers from other Travelers accounts .......... 178,255,560 42,985,983
Administrative charges ....................................... (2,347) (845)
Contract surrenders .......................................... (7,259,004) (6,226,587)
Participant transfers to other Travelers accounts ............ (177,832,134) (48,188,615)
Other payments to participants ............................... (1,361,353) (109,825)
--------------------- -------------------
Net increase (decrease) in net assets
resulting from unit transactions ......................... 23,004,217 11,933,218
--------------------- -------------------
Net increase (decrease) in net assets ........................ 23,859,538 12,388,398
NET ASSETS:
Beginning of year .......................................... 17,933,584 5,545,186
--------------------- -------------------
End of year ................................................ $ 41,793,122 $ 17,933,584
===================== ===================
</TABLE>
<TABLE>
<CAPTION>
EMERGING MARKETS EQUITY PORTFOLIO
----------------------------------------
1999 1998
---- ----
INVESTMENT INCOME:
<S> <C> <C>
Dividends .................................................... $ 169 $ 1,270
-------------------- -------------------
EXPENSES:
Insurance charges ............................................ 9,604 1,205
Administrative fees .......................................... 1,153 144
-------------------- -------------------
Net investment income (loss) ............................. (10,588) (79)
-------------------- -------------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ............................. 531,418 220,711
Cost of investments sold ................................... 442,587 230,811
-------------------- -------------------
Net realized gain (loss) ................................. 88,831 (10,100)
-------------------- -------------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year ..................... (25,858) -
Unrealized gain (loss) end of year ........................... 551,733 (25,858)
-------------------- -------------------
Net change in unrealized gain (loss) for the year .......... 577,591 (25,858)
-------------------- -------------------
Net increase (decrease) in net assets
resulting from operations .................................. 655,834 (36,037)
-------------------- -------------------
UNIT TRANSACTIONS:
Participant purchase payments ................................ 514,659 261,230
Participant transfers from other Travelers accounts .......... 882,312 31,201
Administrative charges ....................................... (94) (3)
Contract surrenders .......................................... (15,307) (2,274)
Participant transfers to other Travelers accounts ............ (525,494) (3,555)
Other payments to participants ............................... - -
-------------------- -------------------
Net increase (decrease) in net assets
resulting from unit transactions ......................... 856,076 286,599
-------------------- -------------------
Net increase (decrease) in net assets ...................... 1,511,910 250,562
NET ASSETS:
Beginning of year .......................................... 250,562 -
-------------------- -------------------
End of year ................................................ $ 1,762,472 $ 250,562
==================== ===================
</TABLE>
-12-
<PAGE> 108
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
SALOMON BROTHERS VARIABLE
GLOBAL EQUITY PORTFOLIO MID CAP VALUE PORTFOLIO VALUE PORTFOLIO CAPITAL FUND
- ----------------------------- -------------------------- ------------------------------ -------------------------------
1999 1998 1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
$277,588 $28,358 $792,266 $76,083 $63,036 $89,299 $113,984 $27,023
- ------------- ------------- ----------- ------------ ------------- -------------- -------------- --------------
46,722 13,316 59,128 13,840 51,675 11,152 29,104 5,574
5,607 1,598 7,095 1,661 6,201 1,338 3,492 669
- ------------- ------------- ----------- ------------ ------------- -------------- -------------- --------------
225,259 13,444 726,043 60,582 5,160 76,809 81,388 20,780
- ------------- ------------- ----------- ------------ ------------- -------------- -------------- --------------
548,414 43,986 932,133 46,196 520,196 38,500 387,499 125,696
532,422 47,575 839,088 51,374 535,596 42,409 339,370 122,201
- ------------- ------------- ----------- ------------ ------------- -------------- -------------- --------------
15,992 (3,589) 93,045 (5,178) (15,400) (3,909) 48,129 3,495
- ------------- ------------- ----------- ------------ ------------- -------------- -------------- --------------
49,441 - 253,714 - (148,821) - 116,303 -
(64,729) 49,441 423,081 253,714 (324,926) (148,821) 484,556 116,303
- ------------- ------------- ----------- ------------ ------------- -------------- -------------- --------------
(114,170) 49,441 169,367 253,714 (176,105) (148,821) 368,253 116,303
- ------------- ------------- ----------- ------------ ------------- -------------- -------------- --------------
127,081 59,296 988,455 309,118 (186,345) (75,921) 497,770 140,578
- ------------- ------------- ----------- ------------ ------------- -------------- -------------- --------------
1,184,111 2,260,730 1,765,802 2,802,523 1,835,767 2,132,920 1,347,958 1,184,177
1,605,543 491,570 2,147,621 296,961 1,697,558 466,354 907,891 120,941
(597) (93) (993) (94) (682) (75) (201) (18)
(90,402) (9,065) (120,603) (16,313) (110,787) (11,301) (53,164) (673)
(499,258) (32,247) (930,436) (43,084) (450,067) (36,665) (311,911) (122,135)
(70,169) (4,839) (91,890) (4,893) (6,291) - (53,601) -
- ------------- ------------- ----------- ------------ ------------- -------------- -------------- --------------
2,129,228 2,706,056 2,769,501 3,035,100 2,965,498 2,551,233 1,836,972 1,182,292
- ------------- ------------- ----------- ------------ ------------- -------------- -------------- --------------
2,256,309 2,765,352 3,757,956 3,344,218 2,779,153 2,475,312 2,334,742 1,322,870
2,765,352 - 3,344,218 - 2,475,312 - 1,322,870 -
- ------------- ------------- ----------- ------------ ------------- -------------- -------------- --------------
$5,021,661 $2,765,352 $7,102,174 $3,344,218 $5,254,465 $2,475,312 $3,657,612 $1,322,870
============= ============= =========== ============ ============= ============== ============== ==============
</TABLE>
-13-
<PAGE> 109
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF FUND ABD II OPERATIONS AND CHANGES IN NET ASSETS FOR THE YEARS
ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
<TABLE>
<CAPTION>
SALOMON BROTHERS VARIABLE SALOMON BROTHERS VARIABLE SALOMON BROTHERS VARIABLE
HIGH YIELD BOND FUND INVESTORS FUND STRATEGIC BOND FUND
----------------------- ----------------------- -------------------------
1999 1998 1999 1998 1999 1998
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ............................................. $279,009 $127,360 $49,232 $13,538 $189,329 $87,619
----------- ----------- ----------- ----------- ----------- -----------
EXPENSES:
Insurance charges ..................................... 34,947 13,786 79,298 13,226 48,265 8,409
Administrative fees ................................... 4,194 1,654 9,516 1,587 5,792 1,009
----------- ----------- ----------- ----------- ----------- -----------
Net investment income (loss) ...................... 239,868 111,920 (39,582) (1,275) 135,272 78,201
----------- ----------- ----------- ----------- ----------- -----------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ...................... 1,856,986 189,392 762,130 139,070 2,556,917 870,843
Cost of investments sold ............................ 1,880,009 194,567 694,827 144,581 2,598,948 852,003
----------- ----------- ----------- ----------- ----------- -----------
Net realized gain (loss) .......................... (23,023) (5,175) 67,303 (5,511) (42,031) 18,840
----------- ----------- ----------- ----------- ----------- -----------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year ............ (104,631) - 219,284 - (44,038) -
Unrealized gain (loss) end of year .................. (199,990) (104,631) 741,494 219,284 (188,321) (44,038)
----------- ----------- ----------- ----------- ----------- -----------
Net change in unrealized gain (loss) for the year . (95,359) (104,631) 522,210 219,284 (144,283) (44,038)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations......................... 121,486 2,114 549,931 212,498 (51,042) 53,003
----------- ----------- ----------- ----------- ----------- -----------
UNIT TRANSACTIONS:
Participant purchase payments ......................... 1,374,259 2,993,252 3,223,871 2,721,329 3,438,314 1,792,778
Participant transfers from other Travelers accounts ... 945,590 263,803 3,399,188 529,577 1,111,136 150,355
Administrative charges ................................ (302) (37) (727) (58) (276) (25)
Contract surrenders ................................... (33,345) (66,900) (297,073) (98,329) (27,597) (11,455)
Participant transfers to other Travelers accounts ..... (2,137,847) (251,869) (356,521) (40,235) (2,622,938) (26,943)
Other payments to participants ........................ (27,255) - (24,233) - (11,887) -
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from unit transactions .................. 121,100 2,938,249 5,944,505 3,112,284 1,886,752 1,904,710
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets ............. 242,586 2,940,363 6,494,436 3,324,782 1,835,710 1,957,713
NET ASSETS:
Beginning of year ................................... 2,940,363 - 3,324,782 - 1,957,713 -
----------- ----------- ----------- ----------- ----------- -----------
End of year ......................................... $3,182,949 $2,940,363 $9,819,218 $3,324,782 $3,793,423 $1,957,713
=========== =========== =========== =========== =========== ===========
</TABLE>
-14-
<PAGE> 110
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
EQUITY INCOME PORTFOLIO FEDERATED HIGH YIELD PORTFOLIO FEDERATED STOCK PORTFOLIO LARGE CAP PORTFOLIO
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
1999 1998 1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
$ 3,636,717 $ 427,384 $ 32,266 $ 1,419,051 $ 203,880 $ 667,783 $ 3,207,129 $ 1,093,908
- ------------- ------------- ------------- ------------- ------------- ------------- -------------- -------------
607,493 305,270 321,703 181,206 261,076 153,879 502,533 186,055
72,899 36,632 38,605 21,745 31,329 18,466 60,304 22,327
- ------------- ------------- ------------- ------------- ------------- ------------- -------------- -------------
2,956,325 85,482 (328,042) 1,216,100 (88,525) 495,438 2,644,292 885,526
- ------------- ------------- ------------- ------------- ------------- ------------- -------------- -------------
6,000,314 1,732,606 6,098,881 2,067,295 1,947,514 2,130,798 2,329,180 613,934
5,709,138 1,480,505 6,177,085 2,033,922 1,799,557 1,903,540 1,963,646 456,601
- ------------- ------------- ------------- ------------- ------------- ------------- -------------- -------------
291,176 252,101 (78,204) 33,373 147,957 227,258 365,534 157,333
- ------------- ------------- ------------- ------------- ------------- ------------- -------------- -------------
2,406,309 115,204 (1,068,510) (127,556) 1,045,564 (73,636) 3,846,100 92,281
560,160 2,406,309 (344,917) (1,068,510) 1,573,124 1,045,564 11,754,500 3,846,100
- ------------- ------------- ------------- ------------- ------------- ------------- -------------- -------------
(1,846,149) 2,291,105 723,593 (940,954) 527,560 1,119,200 7,908,400 3,753,819
- ------------- ------------- ------------- ------------- ------------- ------------- -------------- -------------
1,401,352 2,628,688 317,347 308,519 586,992 1,841,896 10,918,226 4,796,678
- ------------- ------------- ------------- ------------- ------------- ------------- -------------- -------------
12,745,521 20,033,589 5,101,257 12,986,976 3,507,011 9,240,699 15,287,756 9,904,301
11,758,808 11,589,592 7,864,506 7,547,219 3,400,343 4,993,546 13,602,899 5,994,492
(7,892) (4,858) (2,932) (1,890) (3,143) (1,938) (5,347) (2,404)
(4,160,755) (2,350,956) (1,782,882) (527,063) (809,001) (1,694,704) (2,210,882) (408,836)
(4,843,891) (2,577,468) (6,662,803) (3,171,867) (1,885,658) (1,526,533) (2,858,964) (1,130,981)
(290,910) (128,463) (339,453) (208,873) (206,471) 4,487 (220,052) (111,978)
- ------------- ------------- ------------- ------------- ------------- ------------- -------------- -------------
15,200,881 26,561,436 4,177,693 16,624,502 4,003,081 11,015,557 23,595,410 14,244,594
- ------------- ------------- ------------- ------------- ------------- ------------- -------------- -------------
16,602,233 29,190,124 4,495,040 16,933,021 4,590,073 12,857,453 34,513,636 19,041,272
38,184,861 8,994,737 22,138,250 5,205,229 17,761,484 4,904,031 25,038,138 5,996,866
- ------------- ------------- ------------- ------------- ------------- ------------- -------------- -------------
$ 54,787,094 $ 38,184,861 $ 26,633,290 $ 22,138,250 $ 22,351,557 $ 17,761,484 $ 59,551,774 $ 25,038,138
============= ============= ============= ============= ============= ============= ============= =============
</TABLE>
-15-
<PAGE> 111
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF FUND ABD II OPERATIONS AND CHANGES IN NET ASSETS FOR THE YEARS
ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
<TABLE>
<CAPTION>
LAZARD INTERNATIONAL MFS EMERGING MFS MID CAP
STOCK PORTFOLIO GROWTH PORTFOLIO GROWTH PORTFOLIO
--------------------------- ------------------------ ---------------------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ............................................ $ 60,286 $ 245,262 $ - $ - $ 9,593 $ -
------------- ------------- ----------- ----------- ---------- --------
EXPENSES:
Insurance charges .................................... 355,888 172,139 431,321 175,935 35,954 2,866
Administrative fees .................................. 42,706 20,657 51,758 21,112 4,315 344
------------- ------------- ----------- ----------- ---------- --------
Net investment income (loss) .................. (338,308) 52,466 (483,079) (197,047) (30,676) (3,210)
------------- ------------- ----------- ----------- ---------- --------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold .................... 146,195,193 24,585,544 2,476,293 732,646 218,333 140,288
Cost of investments sold .......................... 141,387,167 23,623,407 1,918,861 586,059 197,326 147,156
------------- ------------- ----------- ----------- ---------- --------
Net realized gain (loss) ........................ 4,808,026 962,137 557,432 146,587 21,007 (6,868)
------------- ------------- ----------- ----------- ---------- --------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .......... 97,478 (92,628) 4,395,707 (409) 91,293 -
Unrealized gain (loss) end of year ................ 2,276,211 97,478 29,360,955 4,395,707 2,376,563 91,293
------------- ------------- ----------- ----------- ---------- --------
Net change in unrealized gain (loss) for the year 2,178,733 190,106 24,965,248 4,396,116 2,285,270 91,293
------------- ------------- ----------- ----------- ---------- --------
Net increase (decrease) in net assets
resulting from operations ....................... 6,648,451 1,204,709 25,039,601 4,345,656 2,275,601 81,215
------------- ------------- ----------- ----------- ---------- --------
UNIT TRANSACTIONS:
Participant purchase payments ........................ 7,758,720 9,057,392 8,500,779 10,684,830 1,885,492 621,610
Participant transfers from other Travelers accounts .. 153,774,633 31,837,817 10,217,467 6,271,344 2,968,438 297,833
Administrative charges ............................... (4,049) (2,656) (4,965) (2,464) (353) (8)
Contract surrenders .................................. (2,150,962) (291,099) (1,624,987) (332,900) (271,522) (21,102)
Participant transfers to other Travelers accounts .... (150,099,777) (26,977,783) (3,392,206) (1,355,078) (213,457) (27,849)
Other payments to participants ....................... (110,023) (59,497) (94,046) (9,145) - -
------------- ------------- ----------- ----------- ---------- --------
Net increase (decrease) in net assets
resulting from unit transactions ............. 9,168,542 13,564,174 13,602,042 15,256,587 4,368,598 870,484
------------- ------------- ----------- ----------- ---------- --------
Net increase (decrease) in net assets ......... 15,816,993 14,768,883 38,641,643 19,602,243 6,644,199 951,699
NET ASSETS:
Beginning of year ................................ 21,004,807 6,235,924 24,658,165 5,055,922 951,699 -
------------- ------------- ----------- ----------- ---------- --------
End of year ...................................... $ 36,821,800 $ 21,004,807 $63,299,808 $24,658,165 $7,595,898 $951,699
============= ============= =========== =========== ========== ========
</TABLE>
-16-
<PAGE> 112
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
DISCIPLINED MID CAP
MFS RESEARCH PORTFOLIO STRATEGIC STOCK PORTFOLIO CONVERTIBLE BOND PORTFOLIO STOCK PORTFOLIO
- --------------------------- --------------------------- ---------------------------- --------------------------
1999 1998 1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
$ - $ 348 $ 1 $ 1,827 $ 1,712 $ 9,789 $ 349,741 $ 77,730
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
5,905 1,110 2,773 648 17,906 1,205 103,038 55,554
709 133 333 78 2,149 145 12,364 6,667
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
(6,614) (895) (3,105) 1,101 (18,343) 8,439 234,339 15,509
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
63,545 2,451 191,997 26,106 164,089 48,432 1,365,521 482,095
57,501 2,462 180,875 26,996 155,855 48,570 1,270,294 478,820
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
6,044 (11) 11,122 (890) 8,234 (138) 95,227 3,275
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
16,644 - 4,393 - 5,726 - 704,146 (40,622)
153,079 16,644 (5,361) 4,393 305,680 5,726 1,494,649 704,146
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
136,435 16,644 (9,754) 4,393 299,954 5,726 790,503 744,768
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
135,865 15,738 (1,737) 4,604 289,845 14,027 1,120,069 763,552
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
177,513 174,947 219,695 103,291 1,057,778 231,595 1,807,037 3,244,520
381,506 33,235 148,341 60,067 1,252,696 182,154 1,595,194 1,877,665
(99) (15) (39) (3) (236) (7) (1,048) (486)
(3,724) (96) (32,008) (12,807) (104,469) (45) (346,302) (156,396)
(53,403) (1,036) (47,687) (15,662) (64,686) (12,859) (830,980) (605,788)
- - - - - - (75,765) (32,317)
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
501,793 207,035 288,302 134,886 2,141,083 400,838 2,148,136 4,327,198
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
637,658 222,773 286,565 139,490 2,430,928 414,865 3,268,205 5,090,750
222,773 - 139,490 - 414,865 - 7,084,435 1,993,685
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 860,431 $ 222,773 $ 426,055 $ 139,490 $ 2,845,793 $ 414,865 $ 10,352,640 $ 7,084,435
============ ============ ============ ============ ============ ============ ============ ============
</TABLE>
-17-
<PAGE> 113
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF FUND ABD II OPERATIONS AND CHANGES IN NET ASSETS FOR THE YEARS
ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
<TABLE>
<CAPTION>
DISCIPLINED SMALL CAP TRAVELERS QUALITY
STOCK PORTFOLIO BOND PORTFOLIO ALLIANCE GROWTH PORTFOLIO
---------------------- ------------------------- ----------------------------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ......................................... $ - $ 1,177 $ 136,928 $ 720,081 $ 3,894,825 $ 1,829,359
---------- --------- ----------- ----------- ------------ -------------
EXPENSES:
Insurance charges ................................. 9,022 1,599 324,109 134,427 893,010 375,582
Administrative fees ............................... 1,082 192 38,893 16,131 107,161 45,070
---------- --------- ----------- ----------- ------------ -------------
Net investment income (loss) .................. (10,104) (614) (226,074) 569,523 2,894,654 1,408,707
---------- --------- ----------- ----------- ------------ -------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold .................. 38,908 97,356 4,773,895 1,426,652 7,119,456 5,912,385
Cost of investments sold ........................ 35,284 130,787 4,755,373 1,348,228 6,060,265 5,298,727
---------- --------- ----------- ----------- ------------ -------------
Net realized gain (loss) ...................... 3,624 (33,431) 18,522 78,424 1,059,191 613,658
---------- --------- ----------- ----------- ------------ -------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year ........ 54,093 - 41,766 (55,076) 6,850,756 524,679
Unrealized gain (loss) end of year .............. 235,942 54,093 188,318 41,766 24,619,842 6,850,756
---------- --------- ----------- ----------- ------------ -------------
Net change in unrealized gain (loss) for the year
year ........................................ 181,849 54,093 146,552 96,842 17,769,086 6,326,077
---------- --------- ----------- ----------- ------------ -------------
Net increase (decrease) in net assets
resulting from operations ....................... 175,369 20,048 (61,000) 744,789 21,722,931 8,348,442
---------- --------- ----------- ----------- ------------ -------------
UNIT TRANSACTIONS:
Participant purchase payments ..................... 356,075 218,628 10,780,396 10,555,963 20,501,481 24,721,814
Participant transfers from other Travelers accounts 396,049 163,991 9,966,674 5,567,605 22,940,418 18,127,293
Administrative charges ............................ (139) (8) (2,589) (962) (9,779) (4,656)
Contract surrenders ............................... (50,621) (42) (2,620,791) (381,335) (3,272,036) (1,421,861)
Participant transfers to other Travelers accounts . (3,466) - (5,786,932) (2,325,360) (10,260,985) (8,525,339)
Other payments to participants .................... - - (339,379) (17,824) (415,779) (89,156)
---------- --------- ----------- ----------- ------------ -------------
Net increase (decrease) in net assets
resulting from unit transactions ............ 697,898 382,569 11,997,379 13,398,087 29,483,320 32,808,095
---------- --------- ----------- ----------- ------------ -------------
Net increase (decrease) in net assets ....... 873,267 402,617 11,936,379 14,142,876 51,206,251 41,156,537
NET ASSETS:
Beginning of year ............................... 402,617 - 17,460,881 3,318,005 52,052,799 10,896,262
---------- --------- ----------- ----------- ------------ -------------
End of year ..................................... $1,275,884 $ 402,617 $29,397,260 $17,460,881 $103,259,050 $ 52,052,799
========== ========= =========== =========== ============ =============
</TABLE>
-18-
<PAGE> 114
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
PUTNAM DIVERSIFIED INCOME
MFS TOTAL RETURN PORTFOLIO PORTFOLIO COMSTOCK PORTFOLIO DOMESTIC INCOME PORTFOLIO
- ------------------------------ ----------------------------- ---------------------------- ------------------------------
1999 1998 1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
$ 4,888,194 $ 1,558,787 $ 256,160 $ 95,821 $ 6,131 $ - $ 111,393 $ -
- -------------- -------------- --------------- -------------- -------------- ------------- -------------- --------------
832,358 438,988 56,428 29,933 1,248 - 22,294 3,763
99,883 52,679 6,771 3,592 150 - 2,675 452
- -------------- -------------- --------------- -------------- -------------- ------------- -------------- --------------
3,955,953 1,067,120 192,961 62,296 4,733 - 86,424 (4,215)
- -------------- -------------- --------------- -------------- -------------- ------------- -------------- --------------
7,373,728 1,399,138 1,301,551 317,244 1,009 - 303,093 162,991
7,417,784 1,234,969 1,367,811 301,769 1,031 - 314,853 162,244
- -------------- -------------- --------------- -------------- -------------- ------------- -------------- --------------
(44,056) 164,169 (66,260) 15,475 (22) - (11,760) 747
- -------------- -------------- --------------- -------------- -------------- ------------- -------------- --------------
2,455,109 416,951 (65,928) 41,520 - - 24,917 -
(809,914) 2,455,109 (206,576) (65,928) (2,692) - (105,336) 24,917
- -------------- -------------- --------------- -------------- -------------- ------------- -------------- --------------
(3,265,023) 2,038,158 (140,648) (107,448) (2,692) - (130,253) 24,917
- -------------- -------------- --------------- -------------- -------------- ------------- -------------- --------------
646,874 3,269,447 (13,947) (29,677) 2,019 - (55,589) 21,449
- -------------- -------------- --------------- -------------- -------------- ------------- -------------- --------------
14,478,136 29,032,693 607,174 1,847,458 113,277 - 1,414,178 1,017,236
15,141,599 15,234,912 1,514,841 1,493,786 434,143 - 442,239 68,934
(9,381) (5,778) (1,179) (544) (5) - (120) (5)
(3,780,910) (1,545,201) (119,485) (166,521) (6,339) - (132,857) (51,190)
(8,870,264) (2,670,876) (1,230,451) (323,542) - - (270,288) (116,930)
(760,914) (352,586) (36,030) - - - (6,253) -
- -------------- -------------- --------------- -------------- -------------- ------------- -------------- --------------
16,198,266 39,693,164 734,870 2,850,637 541,076 - 1,446,899 918,045
- -------------- -------------- --------------- -------------- -------------- ------------- -------------- --------------
16,845,140 42,962,611 720,923 2,820,960 543,095 - 1,391,310 939,494
54,749,547 11,786,936 4,032,690 1,211,730 - - 939,494 -
- -------------- -------------- --------------- -------------- -------------- ------------- -------------- --------------
$ 71,594,687 $ 54,749,547 $ 4,753,613 $ 4,032,690 $ 543,095 $ - $ 2,330,804 $ 939,494
============== ============== ============== ============== ============== ============== ============== ==============
</TABLE>
-19-
<PAGE> 115
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF FUND ABD II OPERATIONS AND CHANGES IN NET ASSETS FOR THE YEARS
ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
<TABLE>
<CAPTION>
EMERGING GROWTH
PORTFOLIO ENTERPRISE PORTFOLIO GOVERNMENT PORTFOLIO
------------------------ ------------------------- ----------------------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ......................................... $ - $ - $ 233,446 $ - $ 71,677 $ -
----------- ---------- ----------- ---------- ---------- --------
EXPENSES:
Insurance charges ................................. 53,330 5,346 54,054 6,895 19,365 3,133
Administrative fees ............................... 6,400 641 6,486 828 2,324 376
----------- ---------- ----------- ---------- ---------- --------
Net investment income (loss) .................. (59,730) (5,987) 172,906 (7,723) 49,988 (3,509)
----------- ---------- ----------- ---------- ---------- --------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold .................. 948,778 43,146 1,127,701 87,352 762,071 50,195
Cost of investments sold ........................ 731,984 43,824 1,100,113 96,592 797,072 49,536
----------- ---------- ----------- ---------- ---------- --------
Net realized gain (loss) ...................... 216,794 (678) 27,588 (9,240) (35,001) 659
----------- ---------- ----------- ---------- ---------- --------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year ........ 208,735 - 220,881 - 16,709 -
Unrealized gain (loss) end of year .............. 4,432,675 208,735 1,349,664 220,881 (73,383) 16,709
----------- ---------- ----------- ---------- ---------- --------
Net change in unrealized gain (loss) for the
year ........................................ 4,223,940 208,735 1,128,783 220,881 (90,092) 16,709
----------- ---------- ----------- ---------- ---------- --------
Net increase (decrease) in net assets
resulting from operations ..................... 4,381,004 202,070 1,329,277 203,918 (75,105) 13,859
----------- ---------- ----------- ---------- ---------- --------
UNIT TRANSACTIONS:
Participant purchase payments ..................... 2,922,244 1,060,781 2,871,544 1,590,891 1,108,484 723,786
Participant transfers from other Travelers accounts 3,555,105 141,971 3,801,872 264,873 707,602 107,728
Administrative charges ............................ (449) (19) (652) (27) (172) (11)
Contract surrenders ............................... (47,294) (3,012) (71,074) (2,731) (25,323) (51,392)
Participant transfers to other Travelers accounts . (1,336,514) (20,150) (1,410,540) (99,751) (705,226) -
Other payments to participants .................... (47,654) - (16,954) - (18,098) -
----------- ---------- ----------- ---------- ---------- --------
Net increase (decrease) in net assets
resulting from unit transactions ............ 5,045,438 1,179,571 5,174,196 1,753,255 1,067,267 780,111
----------- ---------- ----------- ---------- ---------- --------
Net increase (decrease) in net assets ....... 9,426,442 1,381,641 6,503,473 1,957,173 992,162 793,970
NET ASSETS:
Beginning of year ............................... 1,381,641 - 1,957,173 - 793,970 -
----------- ---------- ----------- ---------- ---------- --------
End of year ..................................... $10,808,083 $1,381,641 $ 8,460,646 $1,957,173 $1,786,132 $793,970
=========== ========== =========== ========== ========== ========
</TABLE>
-20-
<PAGE> 116
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
VAN KAMPEN MONEY MARKET MORGAN STANLEY REAL ESTATE
GROWTH AND INCOME PORTFOLIO PORTFOLIO SECURITIES PORTFOLIO EMERGING MARKETS PORTFOLIO
- --------------------------- -------------------------- -------------------------- --------------------------
1999 1998 1999 1998 1999 1998 1999 1998
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 400,408 $ - $ 265,167 $ 85,351 $ 54,360 $ - $ 124,499 $ 4,860
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
54,824 9,395 72,714 21,758 12,085 3,070 16,194 2,092
6,579 1,128 8,726 2,611 1,450 368 1,943 251
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
339,005 (10,523) 183,727 60,982 40,825 (3,438) 106,362 2,517
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
150,984 105,400 5,389,393 2,354,130 255,637 18,941 170,122 12,933
138,558 110,239 5,389,393 2,354,130 273,124 21,662 142,637 17,067
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
12,426 (4,839) - - (17,487) (2,721) 27,485 (4,134)
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
162,033 - - - (16,650) - (3,884) -
354,982 162,033 - - (87,743) (16,650) 838,223 (3,884)
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
192,949 162,033 - - (71,093) (16,650) 842,107 (3,884)
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
544,380 146,671 183,727 60,982 (47,755) (22,809) 975,954 (5,501)
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
2,154,773 2,011,625 2,360,119 6,927,272 441,009 604,109 980,593 445,398
2,410,895 282,122 6,709,512 278,431 445,869 64,966 983,607 136,683
(645) (44) (260) (17) (143) (12) (150) (6)
(138,139) (18,162) (446,007) (242,714) (63,442) (7,413) (63,041) (223)
(138,588) (80,274) (5,957,934) (2,100,494) (161,383) (8,723) (139,577) (3,429)
(14,186) - (47,459) (40,645) - - - -
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
4,274,110 2,195,267 2,617,971 4,821,833 661,910 652,927 1,761,432 578,423
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
4,818,490 2,341,938 2,801,698 4,882,815 614,155 630,118 2,737,386 572,922
2,341,938 - 4,882,815 - 630,118 - 572,922 -
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
$ 7,160,428 $ 2,341,938 $ 7,684,513 $ 4,882,815 $ 1,244,273 $ 630,118 $ 3,310,308 $ 572,922
=========== =========== =========== =========== =========== =========== =========== ===========
</TABLE>
-21-
<PAGE> 117
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF FUND ABD II OPERATIONS AND CHANGES IN NET ASSETS FOR THE YEARS
ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
<TABLE>
<CAPTION>
COMBINED
------------------------------
1999 1998
------------- -------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends ........................................... $ 25,681,160 $ 11,951,643
------------- -------------
EXPENSES:
Insurance charges ................................... 7,740,785 3,242,010
Administrative fees ................................. 928,894 389,045
------------- -------------
Net investment income (loss) ................... 17,011,481 8,320,588
------------- -------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold .................... 379,798,102 87,756,620
Cost of investments sold .......................... 370,321,690 84,944,874
------------- -------------
Net realized gain (loss) ........................ 9,476,412 2,811,746
------------- -------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .......... 36,155,774 378,112
Unrealized gain (loss) end of year ................ 138,990,862 36,155,774
------------- -------------
Net change in unrealized gain (loss) for the year 102,835,088 35,777,662
------------- -------------
Net increase (decrease) in net assets
resulting from operations ......................... 129,322,981 46,909,996
------------- -------------
UNIT TRANSACTIONS:
Participant purchase payments ....................... 230,945,585 250,118,712
Participant transfers from other Travelers accounts . 525,844,236 180,688,277
Administrative charges .............................. (82,126) (38,546)
Contract surrenders ................................. (40,380,404) (19,665,803)
Participant transfers to other Travelers accounts ... (415,729,534) (107,711,107)
Other payments to participants ...................... (5,832,750) (1,691,394)
------------- -------------
Net increase (decrease) in net assets
resulting from unit transactions .................. 294,765,007 301,700,139
------------- -------------
Net increase (decrease) in net assets ........... 424,087,988 348,610,135
NET ASSETS:
Beginning of year ................................. 439,325,538 90,715,403
------------- -------------
End of year ....................................... $ 863,413,526 $ 439,325,538
============= =============
</TABLE>
-22-
<PAGE> 118
NOTES TO FINANCIAL STATEMENTS - CONTINUED
8. SCHEDULE OF ACCUMULATION AND ANNUITY UNITS FOR FUND ABD II FOR THE YEARS
ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
DREYFUS CAPITAL
CAPITAL APPRECIATION FUND REIT SERIES APPRECIATION PORTFOLIO
---------------------------- ---------------------------- ----------------------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Accumulation and annuity units
beginning of year ........................ 23,010,432 6,344,051 632,612 - 2,833,960 -
Accumulation units purchased and
transferred from other Travelers accounts. 30,473,593 19,419,628 780,021 692,530 8,503,898 3,057,697
Accumulation units redeemed and
transferred to other Travelers accounts .. (6,541,493) (2,753,247) (132,274) (59,918) (849,459) (223,737)
Annuity units .............................. (131) - - - - -
------------ ---------- ---------- ------------ ------------ -----------
Accumulation and annuity units
end of year .............................. 46,942,401 23,010,432 1,280,359 632,612 10,488,399 2,833,960
============ ========== ========== ============ ============ ===========
DIVERSIFIED STRATEGIC
SMALL CAP PORTFOLIO APPRECIATION PORTFOLIO INCOME PORTFOLIO
-------------------------- -------------------------- --------------------------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
Accumulation and annuity units
beginning of year ........................ 3,051,249 - 16,532,767 5,241,524 24,838,532 5,444,154
Accumulation units purchased and
transferred from other Travelers accounts. 8,524,388 3,305,330 10,111,351 12,327,036 9,890,335 22,318,744
Accumulation units redeemed and
transferred to other Travelers accounts .. (3,760,315) (254,081) (2,418,910) (1,035,793) (6,517,399) (2,945,583)
Annuity units .............................. - - - - (12,873) 21,217
------------ ---------- ---------- ------------ ------------ -----------
Accumulation and annuity units
end of year .............................. 7,815,322 3,051,249 24,225,208 16,532,767 28,198,595 24,838,532
============ ========== ========== ============ ============ ===========
EQUITY INDEX PORTFOLIO
TOTAL RETURN PORTFOLIO CLASS II MONEY MARKET PORTFOLIO
-------------------------- -------------------------- --------------------------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
Accumulation and annuity units
beginning of year ........................ 1,281,704 - - - 16,762,447 5,369,177
Accumulation units purchased and
transferred from other Travelers accounts. 3,955,062 1,471,725 3,501,544 - 191,194,632 63,309,706
Accumulation units redeemed and
transferred to other Travelers accounts .. (273,756) (190,021) (41,101) - (170,220,325) (51,916,436)
Annuity units .............................. - - - - - -
------------ ---------- ---------- ------------ ------------ -----------
Accumulation and annuity units
end of year .............................. 4,963,010 1,281,704 3,460,443 - 37,736,754 16,762,447
============ ========== ========== ============ ============ ===========
</TABLE>
-23-
<PAGE> 119
NOTES TO FINANCIAL STATEMENTS - CONTINUED
8. SCHEDULE OF ACCUMULATION AND ANNUITY UNITS FOR FUND ABD II FOR THE YEARS
ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
<TABLE>
<CAPTION>
EMERGING MARKETS EQUITY
PORTFOLIO GLOBAL EQUITY PORTFOLIO MID CAP VALUE PORTFOLIO
-------------------------- -------------------------- ----------------------------
1999 1998 1999 1998 1999 1998
----------- ----------- ----------- ----------- ----------- -----------
<S> <S> <C> <C> <C> <C> <C>
Accumulation and annuity units
beginning of year ........................ 325,885 - 2,791,215 - 3,208,568 -
Accumulation units purchased and
transferred from other Travelers accounts. 1,341,365 334,287 2,805,267 2,844,512 3,557,812 3,284,830
Accumulation units redeemed and
transferred to other Travelers accounts .. (479,459) (8,402) (658,829) (53,297) (1,013,482) (76,262)
Annuity units .............................. - - - - - -
----------- ----------- ----------- ----------- ----------- -----------
Accumulation and annuity units
end of year ..............................
1,187,791 325,885 4,937,653 2,791,215 5,752,898 3,208,568
=========== =========== =========== =========== =========== ===========
SALOMON BROTHERS VARIABLE SALOMON BROTHERS VARIABLE HIGH
VALUE PORTFOLIO CAPITAL FUND YIELD BOND FUND
-------------------------- -------------------------- ------------------------------
1999 1998 1999 1998 1999 1998
----------- ----------- ----------- ----------- ----------- -----------
Accumulation and annuity units
beginning of year ........................ 2,812,523 - 1,220,503 - 2,965,625 -
Accumulation units purchased and
transferred from other Travelers accounts. 4,000,210 2,873,153 1,934,463 1,343,468 2,303,316 3,295,172
Accumulation units redeemed and
transferred to other Travelers accounts .. (646,285) (60,630) (352,021) (122,965) (2,188,687) (329,547)
Annuity units .............................. - - - - - -
----------- ----------- ----------- ----------- ----------- -----------
Accumulation and annuity units
end of year .............................. 6,166,448 2,812,523 2,802,945 1,220,503 3,085,254 2,965,625
=========== =========== =========== =========== =========== ===========
SALOMON BROTHERS VARIABLE SALOMON BROTHERS VARIABLE
INVESTORS FUND STRATEGIC BOND FUND EQUITY INCOME PORTFOLIO
-------------------------- -------------------------- ---------------------------
1999 1998 1999 1998 1999 1998
----------- ----------- ----------- ----------- ----------- -----------
Accumulation and annuity units
beginning of year ........................ 3,232,444 - 1,887,776 - 25,733,333 6,719,150
Accumulation units purchased and
transferred from other Travelers accounts. 6,040,352 3,379,513 4,412,015 1,925,631 16,160,752 22,606,518
Accumulation units redeemed and
transferred to other Travelers accounts .. (602,158) (147,069) (2,604,110) (37,855) (6,196,607) (3,609,244)
Annuity units .............................. - - - - (10,261) 16,909
----------- ----------- ----------- ----------- ----------- -----------
Accumulation and annuity units
end of year .............................. 8,670,638 3,232,444 3,695,681 1,887,776 35,687,217 25,733,333
=========== =========== =========== =========== =========== ===========
</TABLE>
-24-
<PAGE> 120
NOTES TO FINANCIAL STATEMENTS - CONTINUED
8. SCHEDULE OF ACCUMULATION AND ANNUITY UNITS FOR FUND ABD II FOR THE YEARS
ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
<TABLE>
<CAPTION>
FEDERATED HIGH YIELD
PORTFOLIO FEDERATED STOCK PORTFOLIO LARGE CAP PORTFOLIO
---------------------------- -------------------------- --------------------------
1999 1998 1999 1998 1999 1998
------------ ------------ ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Accumulation and annuity units
beginning of year ........................ 18,811,555 4,566,993 11,892,034 3,816,999 15,040,703 4,815,858
Accumulation units purchased and
transferred from other Travelers accounts. 10,746,052 17,610,463 4,386,006 10,369,275 15,913,042 11,382,125
Accumulation units redeemed and
transferred to other Travelers accounts .. (7,296,751) (3,365,901) (1,861,344) (2,311,092) (2,901,817) (1,157,280)
Annuity units .............................. - - (10,519) 16,852 (165) -
------------ ------------ ------------ ---------- ------------ ----------
Accumulation and annuity units
end of year .............................. 22,260,856 18,811,555 14,406,177 11,892,034 28,051,763 15,040,703
============ ============ ============ ========== ============ ==========
LAZARD INTERNATIONAL STOCK MFS EMERGING GROWTH MFS MID CAP GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
---------------------------- -------------------------- --------------------------
1999 1998 1999 1998 1999 1998
------------ ------------ ------------ ---------- ------------ ----------
Accumulation and annuity units
beginning of year ........................ 17,270,810 5,694,288 15,538,984 4,218,974 965,761 -
Accumulation units purchased and
transferred from other Travelers accounts. 121,373,724 34,619,471 10,157,863 12,610,230 4,204,178 1,029,103
Accumulation units redeemed and
transferred to other Travelers accounts .. (113,418,185) (23,042,949) (2,815,126) (1,290,220) (409,037) (63,342)
Annuity units .............................. - - - - - -
------------ ------------ ------------ ---------- ------------ ----------
Accumulation and annuity units
end of year .............................. 25,226,349 17,270,810 22,881,721 15,538,984 4,760,902 965,761
============ ============ ============ ========== ============ ==========
MFS RESEARCH PORTFOLIO STRATEGIC STOCK PORTFOLIO CONVERTIBLE BOND PORTFOLIO
---------------------------- -------------------------- --------------------------
1999 1998 1999 1998 1999 1998
------------ ------------ ------------ ---------- ------------ ----------
Accumulation and annuity units
beginning of year ........................ 211,400 - 147,123 - 414,907 -
Accumulation units purchased and
transferred from other Travelers accounts 508,408 212,507 368,698 177,120 2,172,953 428,175
Accumulation units redeemed and
transferred to other Travelers accounts .. (50,334) (1,107) (81,699) (29,997) (156,431) (13,268)
Annuity units .............................. - - - - - -
------------ ------------ ------------ ---------- ------------ ----------
Accumulation and annuity units
end of year .............................. 669,474 211,400 434,122 147,123 2,431,429 414,907
============ ============ ============ ========== ============ ==========
</TABLE>
-25-
<PAGE> 121
NOTES TO FINANCIAL STATEMENTS - CONTINUED
8. SCHEDULE OF ACCUMULATION AND ANNUITY UNITS FOR FUND ABD II FOR THE YEARS
ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
<TABLE>
<CAPTION>
DISCIPLINED MID CAP STOCK DISCIPLINED SMALL CAP STOCK TRAVELERS QUALITY BOND
PORTFOLIO PORTFOLIO PORTFOLIO
-------------------------- -------------------------- --------------------------
1999 1998 1999 1998 1999 1998
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Accumulation and annuity units
beginning of year ................ 5,142,990 1,668,733 450,528 - 15,435,236 3,137,736
Accumulation units purchased and
transferred from other Travelers
accounts ......................... 2,491,446 4,138,168 809,275 450,591 18,386,874 14,755,637
Accumulation units redeemed and
transferred to other Travelers
accounts ......................... (917,810) (663,911) (57,399) (63) (7,752,884) (2,458,137)
Annuity units ...................... - - - - - -
----------- ----------- ----------- ----------- ----------- -----------
Accumulation and annuity units
end of year ...................... 6,716,626 5,142,990 1,202,404 450,528 26,069,226 15,435,236
=========== =========== =========== =========== =========== ===========
PUTNAM DIVERSIFIED INCOME
ALLIANCE GROWTH PORTFOLIO MFS TOTAL RETURN PORTFOLIO PORTFOLIO
-------------------------- -------------------------- --------------------------
1999 1998 1999 1998 1999 1998
----------- ----------- ----------- ----------- ----------- -----------
Accumulation and annuity units
beginning of year ................ 31,011,054 8,259,362 42,017,841 9,959,634 3,797,291 1,132,608
Accumulation units purchased and
transferred from other Travelers
accounts ......................... 23,788,319 29,810,420 22,460,175 35,743,753 2,013,693 3,122,465
Accumulation units redeemed and
transferred to other Travelers
accounts ......................... (7,631,299) (7,058,728) (10,176,248) (3,704,031) (1,321,521) (457,782)
Annuity units ...................... (169) - (11,216) 18,485 - -
----------- ----------- ----------- ----------- ----------- -----------
Accumulation and annuity units
end of year ...................... 47,167,905 31,011,054 54,290,552 42,017,841 4,489,463 3,797,291
=========== =========== =========== =========== =========== ===========
COMSTOCK PORTFOLIO DOMESTIC INCOME PORTFOLIO MERGING GROWTH PORTFOLIO
-------------------------- -------------------------- --------------------------
1999 1998 1999 1998 1999 1998
----------- ----------- ----------- ----------- ----------- -----------
Accumulation and annuity units
beginning of year ................ - - 922,300 - 1,147,906 -
Accumulation units purchased and
transferred from other Travelers
accounts ......................... 599,834 - 1,861,816 1,090,541 4,149,836 1,172,534
Accumulation units redeemed and
transferred to other Travelers
accounts ......................... (6,987) - (413,762) (168,241) (842,895) (24,628)
Annuity units ...................... - - - - - -
----------- ----------- ----------- ----------- ----------- -----------
Accumulation and annuity units
end of year ...................... 592,847 - 2,370,354 922,300 4,454,847 1,147,906
=========== =========== =========== =========== =========== ===========
</TABLE>
-26-
<PAGE> 122
NOTES TO FINANCIAL STATEMENTS - CONTINUED
8. SCHEDULE OF ACCUMULATION AND ANNUITY UNITS FOR FUND ABD II FOR THE YEARS
ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
<TABLE>
<CAPTION>
ENTERPRISE PORTFOLIO GOVERNMENT PORTFOLIO GROWTH AND INCOME PORTFOLIO
---------------------------- ---------------------------- -----------------------------
1999 1998 1999 1998 1999 1998
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Accumulation and annuity units
beginning of year .............. 1,807,065 - 754,724 - 2,274,752 -
Accumulation units purchased and
transferred from other Travelers
accounts ....................... 5,813,632 1,919,553 1,767,857 805,366 4,238,292 2,380,623
Accumulation units redeemed and
transferred to other Travelers
accounts ....................... (1,326,331) (112,488) (740,944) (50,642) (271,038) (105,871)
Annuity units .................... - - - - - -
------------ ------------ ------------ ------------ ------------ ------------
Accumulation and annuity units
end of year .................... 6,294,366 1,807,065 1,781,637 754,724 6,242,006 2,274,752
============ ============ ============ ============ ============ ============
VAN KAMPEN MONEY MARKET MORGAN STANLEY REAL ESTATE
PORTFOLIO SECURITIES PORTFOLIO EMERGING MARKETS PORTFOLIO
---------------------------- ---------------------------- -----------------------------
1999 1998 1999 1998 1999 1998
------------ ------------ ------------ ------------ ------------ ------------
Accumulation and annuity units
beginning of year .............. 4,773,944 - 693,461 - 780,839 -
Accumulation units purchased and
transferred from other Travelers
accounts ....................... 8,718,667 7,128,613 1,000,014 712,380 1,950,791 785,570
Accumulation units redeemed and
transferred to other Travelers
accounts ....................... (6,209,960) (2,354,669) (256,344) (18,919) (209,823) (4,731)
Annuity units .................. - - - - - -
------------ ------------ ------------ ------------ ------------ ------------
Accumulation and annuity units
end of year ................... 7,282,651 4,773,944 1,437,131 693,461 2,521,807 780,839
============ ============ ============ ============ ============ ============
COMBINED
-----------------------------
1999 1998
------------ ------------
Accumulation and annuity units
beginning of year .............. 324,424,783 76,389,241
Accumulation units purchased and
transferred from other Travelers
accounts ....................... 579,371,821 360,244,163
Accumulation units redeemed and
transferred to other Travelers
accounts ....................... (372,617,639) (112,282,084)
Annuity units .................... (45,334) 73,463
------------ ------------
Accumulation and annuity units
end of year .................... 531,133,631 324,424,783
============ ============
</TABLE>
-27-
<PAGE> 123
INDEPENDENT AUDITORS' REPORT
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, 1999, and the
related statement of operations for the year then ended and the statement of
changes in net assets for each of the two years in the period then ended. These
financial statements are the responsibility of management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of shares owned as of December 31, 1999, by correspondence with the
underlying funds. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Travelers Fund ABD II for
Variable Annuities as of December 31, 1999, the results of its operations for
the year then ended and the changes in its net assets for each of the two years
in the period then ended, in conformity with generally accepted accounting
principles.
/s/ KPMG LLP
Hartford, Connecticut
February 18,2000
-28-
<PAGE> 124
Independent Auditors
KPMG LLP
Hartford, Connecticut
This report is prepared for the general information of contract owners and is
not an offer of shares of The Travelers 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 Prospectus for The Travelers Fund ABD II
for Variable Annuities product(s) 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) (12-99) Printed in U.S.A.
<PAGE> 125
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholder
The Travelers Life and Annuity Company:
We have audited the accompanying balance sheets of The Travelers Life and
Annuity Company as of December 31, 1999 and 1998, and the related statements of
income, changes in retained earnings and accumulated other changes in equity
from non-owner sources and cash flows for each of the years in the three-year
period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Travelers Life and Annuity
Company as of December 31, 1999 and 1998, and the results of its operations and
its cash flows for each of the years in the three-year period ended December 31,
1999, in conformity with generally accepted accounting principles.
/s/ KPMG LLP
- ---------------------
Hartford, Connecticut
January 18, 2000
F-1
<PAGE> 126
THE TRAVELERS LIFE AND ANNUITY COMPANY
STATEMENTS OF INCOME
($ in thousands)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
REVENUES
Premiums $25,270 $23,677 $35,190
Net investment income 177,179 171,003 168,653
Realized investment gains (losses) (4,973) 18,493 44,871
Fee income 54,749 17,718 5,004
Other revenues 13,045 11,168 3,159
- ----------------------------------------------------------------------------------------------------------------------------
Total Revenues 265,270 242,059 256,877
- ----------------------------------------------------------------------------------------------------------------------------
BENEFITS AND EXPENSES
Current and future insurance benefits 78,072 81,371 95,639
Interest credited to contractholders 56,216 51,535 35,165
Amortization of deferred acquisition costs 38,902 15,956 4,944
Operating expenses 11,326 5,012 11,554
- ----------------------------------------------------------------------------------------------------------------------------
Total Benefits and Expenses 184,516 153,874 147,302
- ----------------------------------------------------------------------------------------------------------------------------
Income before federal income taxes 80,754 88,185 109,575
- ----------------------------------------------------------------------------------------------------------------------------
Federal income taxes:
Current 21,738 18,917 33,859
Deferred expense 6,410 11,783 4,344
- ----------------------------------------------------------------------------------------------------------------------------
Total Federal Income Taxes 28,148 30,700 38,203
============================================================================================================================
Net income $52,606 $57,485 $71,372
============================================================================================================================
</TABLE>
See Notes to Financial Statements.
F-2
<PAGE> 127
THE TRAVELERS LIFE AND ANNUITY COMPANY
BALANCE SHEETS
($ in thousands)
<TABLE>
<CAPTION>
DECEMBER 31, 1999 1998
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Fixed maturities, available for sale at fair value (cost, $1,764,329; $1,707,347) $1,713,948 $1,838,681
Equity securities, at fair value (cost, $34,373; $25,826) 33,169 26,685
Mortgage loans 155,719 174,565
Short-term securities 81,119 126,176
Other invested assets 190,622 136,122
- --------------------------------------------------------------------------------------------------------------------------
Total Investments 2,174,577 2,302,229
- --------------------------------------------------------------------------------------------------------------------------
Separate accounts 4,795,165 2,178,474
Deferred acquisition costs 350,088 177,808
Deferred federal income taxes 74,478 12,395
Premium balances receivable 22,420 16,074
Other assets 84,605 57,524
- --------------------------------------------------------------------------------------------------------------------------
Total Assets $7,501,333 $4,744,504
- --------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Future policy benefits $950,959 $963,171
Contractholder funds 1,174,636 947,411
Separate accounts 4,795,165 2,178,474
Other liabilities 114,408 114,690
- --------------------------------------------------------------------------------------------------------------------------
Total Liabilities 7,035,168 4,203,746
- --------------------------------------------------------------------------------------------------------------------------
SHAREHOLDER'S EQUITY
Common stock, par value $100; 100,000 shares authorized,
30,000 issued and outstanding 3,000 3,000
Additional paid-in capital 167,316 167,314
Retained earnings 335,161 282,555
Accumulated other changes in equity from non-owner sources (39,312) 87,889
- --------------------------------------------------------------------------------------------------------------------------
Total Shareholder's Equity 466,165 540,758
- --------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholder's Equity $7,501,333 $4,744,504
==========================================================================================================================
</TABLE>
See Notes to Financial Statements.
F-3
<PAGE> 128
THE TRAVELERS LIFE AND ANNUITY COMPANY
STATEMENTS OF CHANGES IN RETAINED EARNINGS AND ACCUMULATED
OTHER CHANGES IN EQUITY FROM NON-OWNER SOURCES
($ in thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN RETAINED EARNINGS 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of year $282,555 $225,070 $167,698
Net income 52,606 57,485 71,372
Dividends to parent - - 14,000
===========================================================================================================
Balance, end of year $335,161 $282,555 $225,070
===========================================================================================================
- -----------------------------------------------------------------------------------------------------------
STATEMENTS OF ACCUMULATED OTHER CHANGES
IN EQUITY FROM NON-OWNER SOURCES
- -----------------------------------------------------------------------------------------------------------
Balance, beginning of year $87,889 $70,277 $33,856
Unrealized gains (losses), net of tax (127,201) 17,612 36,421
===========================================================================================================
Balance, end of year $(39,312) $87,889 $70,277
===========================================================================================================
- -----------------------------------------------------------------------------------------------------------
SUMMARY OF CHANGES IN EQUITY
FROM NON-OWNER SOURCES
- -----------------------------------------------------------------------------------------------------------
Net Income $52,606 $57,485 $71,372
Other changes in equity from
non-owner sources (127,201) 17,612 36,421
- -----------------------------------------------------------------------------------------------------------
Total changes in equity from
non-owner sources $(74,595) $75,097 $107,793
===========================================================================================================
</TABLE>
See Notes to Financial Statements.
F-4
<PAGE> 129
THE TRAVELERS LIFE AND ANNUITY COMPANY
STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH
($ in thousands)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Premiums collected $24,804 $22,300 $34,553
Net investment income received 150,107 146,158 170,460
Benefits and claims paid (94,503) (90,872) (90,820)
Interest credited to contractholders (50,219) (51,535) (35,165)
Operating expenses paid (235,166) (122,327) (64,698)
Income taxes paid (29,369) (25,214) (22,440)
Other, including fee income 46,028 (46,099) (16,128)
- ----------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by (Used in) Operating Activities (188,318) (75,391) 8,018
- ----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of investments
Fixed maturities 213,402 113,456 81,899
Mortgage loans 28,002 25,462 8,972
Proceeds from sales of investments
Fixed maturities 774,096 1,095,976 856,846
Equity securities 5,146 6,020 12,404
Mortgage loans - - 5,483
Real estate held for sale - - 4,493
Purchases of investments
Fixed maturities (1,025,110) (1,320,704) (1,020,803)
Equity securities (12,524) (13,653) (6,382)
Mortgage loans (8,520) (39,158) (41,967)
Policy loans, net (5,316) (2,010) (1,144)
Short-term securities (purchases) sales, net 45,057 43,054 (88,067)
Other investments (purchases) sales, net (44,621) 1,110 (51,502)
Securities transactions in course of settlement, net (7,033) 36,459 10,526
- ----------------------------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (37,421) (53,988) (229,242)
- ----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Contractholder fund deposits 308,953 211,476 325,932
Contractholder fund withdrawals (83,817) (83,036) (89,145)
Dividends to parent company - - (14,000)
- ----------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 225,136 128,440 222,787
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash (603) (939) 1,563
============================================================================================================================
Cash at December 31, $21 $624 $1,563
============================================================================================================================
</TABLE>
See Notes to Financial Statements.
F-5
<PAGE> 130
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies used in the preparation of the accompanying
financial statements follow.
Basis of Presentation
The Travelers Life and Annuity Company (the Company) is a wholly owned
subsidiary of The Travelers Insurance Company (TIC), an indirect wholly
owned subsidiary of Citigroup Inc. (Citigroup). The financial statements
and accompanying footnotes of the Company are prepared in conformity with
generally accepted accounting principles. The preparation of financial
statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and benefits and expenses during the reporting
period. Actual results could differ from those estimates.
The Company offers a variety of variable annuity products where the
investment risk is borne by the contractholder, not the Company, and the
benefits are not guaranteed. The premiums and deposits related to these
products are reported in separate accounts. The Company considers it
necessary to differentiate, for financial statement purposes, the results
of the risks it has assumed from those it has not.
Certain prior year amounts have been reclassified to conform to the 1999
presentation.
ACCOUNTING CHANGES
Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities
Effective January 1, 1997, the Company adopted Statement of Financial
Accounting Standards No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities" (FAS 125). This
statement establishes accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities. These
standards are based on an approach that focuses on control. Under this
approach, after a transfer of financial assets, an entity recognizes the
financial and servicing assets it controls and the liabilities it has
incurred, derecognizes financial assets when control has been surrendered
and derecognizes liabilities when extinguished. FAS 125 provides standards
for distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings. Effective January 1, 1998, the
Company adopted the collateral provisions of FAS 125 which were not
effective until 1998 in accordance with Statement of Financial Accounting
Standards No. 127, "Deferral of the Effective Date of Certain Provisions of
SFAS 125". The adoption of the collateral provisions of FAS 125 created
additional assets and liabilities on the Company's statement of financial
position related to the recognition of securities provided and received as
collateral. There was no impact on the results of operations from the
adoption of the collateral provisions of FAS 125.
F-6
<PAGE> 131
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR
INTERNAL USE
During the third quarter of 1998, the Company adopted (effective January 1,
1998) the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants' Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use" (SOP 98-1). SOP 98-1 provides guidance on accounting for the
costs of computer software developed or obtained for internal use and for
determining when specific costs should be capitalized or expensed. The
adoption of SOP 98-1 had no impact on the Company's financial condition,
statement of operations or liquidity.
ACCOUNTING BY INSURANCE AND OTHER ENTERPRISES FOR INSURANCE - RELATED
ASSESSMENTS
In January 1999, the Company adopted (effective January 1, 1999) Statement
of Position 97-3, "Accounting by Insurance and Other Enterprises for
Insurance-Related Assessments" (SOP 97-3). SOP 97-3 provides guidance for
determining when an entity should recognize a liability for guaranty-fund
and other insurance-related assessments, how to measure that liability, and
when an asset may be recognized for the recovery of such assessments
through premium tax offsets or policy surcharges. The adoption of this SOP
had no impact on the Company's financial condition, results of operations
or liquidity.
ACCOUNTING POLICIES
Investments
Fixed maturities include bonds, notes and redeemable preferred stocks. Fair
values of investments in fixed maturities are based on quoted market prices
or dealer quotes or, if these are not available, discounted expected cash
flows using market rates commensurate with the credit quality and maturity
of the investment. Also included in fixed maturities are loan-backed and
structured securities, which are amortized using the retrospective method.
The effective yield used to determine amortization is calculated based upon
actual historical and projected future cash flows, which are obtained from
a widely accepted securities data provider. Fixed maturities are classified
as "available for sale" and are reported at fair value, with unrealized
investment gains and losses, net of income taxes, charged or credited
directly to shareholder's equity.
Equity securities, which include common and non-redeemable preferred
stocks, are classified as "available for sale" and are carried at fair
value based primarily on quoted market prices. Changes in fair values of
equity securities are charged or credited directly to shareholder's equity,
net of income taxes.
Mortgage loans are carried at amortized cost. A mortgage loan is considered
impaired when it is probable that the Company will be unable to collect
principal and interest amounts due. For mortgage loans that are determined
to be impaired, a reserve is established for the difference between the
amortized cost and fair market value of the underlying collateral. In
estimating fair value, the Company uses interest rates reflecting the
current real estate financing market. Impaired loans were insignificant at
December 31, 1999 and 1998.
Short-term securities, consisting primarily of money market instruments and
other debt issues purchased with a maturity of less than one year, are
carried at amortized cost which approximates market.
F-7
<PAGE> 132
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Other invested assets include partnership investments and real estate joint
ventures accounted for on the equity method of accounting. All changes in
equity of these investments are recorded in net investment income.
Accrual of investment income, included in other assets, is suspended on
fixed maturities or mortgage loans that are in default, or on which it is
likely that future payments will not be made as scheduled. Interest income
on investments in default is recognized only as payment is received.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses derivative financial instruments, including financial
futures, options, forward contracts and interest rate swaps, as a means of
hedging exposure to foreign currency, equity price changes and/or interest
rate risk on anticipated transactions or existing assets and liabilities.
Hedge accounting is used to account for derivatives. To qualify for hedge
accounting the changes in value of the derivative must be expected to
substantially offset the changes in value of the hedged item. Hedges are
monitored to ensure that there is a high correlation between the derivative
instruments and the hedged investment.
Gains and losses arising from financial futures contracts are used to
adjust the basis of hedged investments and are recognized in net investment
income over the life of the investment.
Forward contracts, and interest rate options were not significant at
December 31, 1999 and 1998. Information concerning derivative financial
instruments is included in Note 4.
INVESTMENT GAINS AND LOSSES
Realized investment gains and losses are included as a component of pre-tax
revenues based upon specific identification of the investments sold on the
trade date. Also included are gains and losses arising from the
remeasurement of the local currency value of foreign investments to U.S.
dollars, the functional currency of the Company.
POLICY LOANS
Policy loans are carried at the amount of the unpaid balances that are not
in excess of the net cash surrender values of the related insurance
policies. The carrying value of policy loans, which have no defined
maturities, is considered to be fair value.
SEPARATE ACCOUNTS
The Company has separate account assets and liabilities representing funds
for which investment income and investment gains and losses accrue directly
to, and investment risk is borne by, the contractholders. Each of these
accounts have specific investment objectives. The assets and liabilities of
these accounts are carried at fair value, and amounts assessed to the
contractholders for management services are included in fee income.
Deposits, net investment income and realized investment gains and losses
for these accounts are excluded from revenues, and related liability
increases are excluded from benefits and expenses.
F-8
<PAGE> 133
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
DEFERRED ACQUISITION COSTS
Costs of acquiring individual life insurance and annuity business,
principally commissions and certain expenses related to policy issuance,
underwriting and marketing, all of which vary with and are primarily
related to the production of new business, are deferred. Acquisition costs
relating to traditional life insurance are amortized in relation to
anticipated premiums; universal life in relation to estimated gross
profits; and annuity contracts employing a level yield method. A 15 to
20-year amortization period is used for life insurance, and a seven to
20-year period is employed for annuities. Deferred acquisition costs are
reviewed periodically for recoverability to determine if any adjustment is
required. Adjustments, if any, are charged to income.
VALUE OF INSURANCE IN FORCE
The value of insurance in force is an asset recorded at the time of
acquisition of an insurance company. It represents the actuarially
determined present value of anticipated profits to be realized from annuity
contracts at the date of acquisition using the same assumptions that were
used for computing related liabilities, where appropriate. The value of
insurance in force was the actuarially determined present value of the
projected future profits discounted at an interest rate of 16% for the
annuity business acquired. The annuity contracts are amortized employing a
level yield method. The value of insurance in force is reviewed
periodically for recoverability to determine if any adjustment is required.
Adjustments, if any, are charged to income.
FUTURE POLICY BENEFITS
Benefit reserves represent liabilities for future insurance policy
benefits. Benefit reserves for life insurance and annuity policies have
been computed based upon mortality, morbidity, persistency and interest
assumptions applicable to these coverages, which range from 3.0% to 7.5%,
including a provision for adverse deviation. These assumptions consider
Company experience and industry standards. The assumptions vary by plan,
age at issue, year of issue and duration.
CONTRACTHOLDER FUNDS
Contractholder funds represent receipts from the issuance of universal
life, certain individual annuity contracts, and structured settlement
contracts. Contractholder fund balances are increased by such receipts and
credited interest and reduced by withdrawals, mortality charges and
administrative expenses charged to the contractholders. Interest rates
credited to contractholder funds range from 3.3% to 10.0%.
OTHER LIABILITIES
Included in Other Liabilities is the Company's estimate of its liability
for guaranty fund and other insurance-related assessments. State guaranty
fund assessments are based upon the Company's share of premium written or
received in one or more years prior to an insolvency occurring in the
industry. Once an insolvency has occurred, the Company recognizes a
liability for such assessments if it is probable that an assessment will be
imposed and the amount of the assessment can be reasonably estimated. At
December 31, 1999, the Company's liability for guaranty fund assessments
was not significant.
F-9
<PAGE> 134
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
PERMITTED STATUTORY ACCOUNTING PRACTICES
The Company, domiciled in the State of Connecticut, prepares statutory
financial statements in accordance with the accounting practices prescribed
or permitted by the State of Connecticut Insurance Department. Prescribed
statutory accounting practices include certain publications of the National
Association of Insurance Commissioners (NAIC) as well as state laws,
regulations, and general administrative rules. Permitted statutory
accounting practices encompass all accounting practices not so prescribed.
The impact of any permitted accounting practices on the statutory surplus
of the Company is not material.
The NAIC recently completed a process intended to codify statutory
accounting practices for certain insurance enterprises. As a result of this
process, the NAIC issued a revised statutory Accounting Practices and
Procedures Manual - version effective January 1, 2001 (the revised Manual)
that will be effective for years beginning January 1, 2001. It is expected
that the State of Connecticut will require that, effective January 1, 2001,
insurance companies domiciled in Connecticut prepare their statutory basis
financial statements in accordance with the revised Manual subject to any
deviations prescribed or permitted by the Connecticut insurance
commissioner. The Company has not yet determined the impact that this
change will have on its statutory capital and surplus.
PREMIUMS
Premiums are recognized as revenues when due. Reserves are established for
the portion of premiums that will be earned in future periods.
FEE INCOME
Fee income includes mortality and equity protection charges and fees earned
on Universal Life and Deferred Annuity businesses.
OTHER REVENUES
Other revenues include surrender, mortality and administrative charges, and
fees earned on investment and other insurance contracts.
FEDERAL INCOME TAXES
The provision for federal income taxes comprises two components, current
income taxes and deferred income taxes. Deferred federal income taxes arise
from changes during the year in cumulative temporary differences between
the tax basis and book basis of assets and liabilities. The deferred
federal income tax asset is recognized to the extent that future
realization of the tax benefit is more likely than not, with a valuation
allowance for the portion that is not likely to be recognized.
FUTURE APPLICATION OF ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (FAS 133). This statement
establishes accounting and reporting standards for derivative instruments,
F-10
<PAGE> 135
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
including certain derivative instruments embedded in other contracts,
(collectively referred to as derivatives) and for hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the balance sheet and measure those instruments at fair
value. If certain conditions are met, a derivative may be specifically
designated as (a) a hedge of the exposure to changes in the fair value of a
recognized asset or liability or an unrecognized firm commitment, (b) a
hedge of the exposure to variable cash flows of a forecasted transaction,
or (c) a hedge of the foreign currency exposure of a net investment in a
foreign operation, an unrecognized firm commitment, an available-for-sale
security, or a foreign-currency-denominated forecasted transaction. The
accounting for changes in the fair value of a derivative (that is, gains
and losses) depends on the intended use of the derivative and the resulting
designation. Upon initial application of FAS 133, hedging relationships
must be designated anew and documented pursuant to the provisions of this
statement. FAS 133 was to be effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. However, in June 1999 the FASB issued
Statement of Financial Standards No. 137, "Deferral of the Effective Date
of FASB Statement No. 133" (FAS 137) which allows entities that have not
adopted FAS 133 to defer its effective date to all fiscal quarters of all
fiscal years beginning after June 15, 2000. The Company expects to adopt
the deferral provisions of FAS 137 and has not yet determined the impact
that FAS 133 will have on its financial statements.
2. REINSURANCE
The Company participates in reinsurance in order to limit losses, minimize
exposure to large risks, provide additional capacity for future growth and
to effect business-sharing arrangements. Reinsurance is accomplished
through various plans of reinsurance, primarily yearly renewable term
coinsurance and modified coinsurance. The Company remains primarily liable
as the direct insurer on all risks reinsured.
Total in-force business ceded under reinsurance contracts is $12.8 billion
and $8.8 billion at December 31, 1999 and 1998, including $63 million and
$70 million, respectively to TIC. Total life insurance premiums ceded were
$6.5 million, $4.2 million and $2.4 million in 1999, 1998 and 1997,
respectively. Ceded premiums paid to TIC were immaterial for these same
periods.
3. SHAREHOLDER'S EQUITY
Shareholder's Equity and Dividend Availability
The Company's statutory net income (loss) was $(23.4) million, $(3.2)
million and $80.3 million for the years ended December 31, 1999, 1998 and
1997, respectively.
Statutory capital and surplus was $294 million and $328 million at December
31, 1999 and 1998, respectively.
The Company is currently subject to various regulatory restrictions that
limit the maximum amount of dividends available to be paid to its parent
without prior approval of insurance regulatory authorities. Statutory
surplus of $29.4 million is available in 2000 for dividend payments by the
Company without prior approval of the Connecticut Insurance Department.
F-11
<PAGE> 136
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Accumulated Other Changes in Equity from Non-Owner Sources, Net of Tax
Changes in each component of Accumulated Other Changes in Equity From Non-Owner
Sources were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
NET ACCUMULATED
UNREALIZED FOREIGN OTHER CHANGES
GAINS ON CURRENCY IN EQUITY FROM
INVESTMENT TRANSLATION NON-OWNER
($ in thousands) SECURITIES ADJUSTMENT SOURCES
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE, JANUARY 1, 1997 $33,856 $ -- $33,856
Unrealized gains on investment securities,
net of tax of $35,316 65,587 -- 65,587
Less: reclassification adjustment for gains
included in net income, net of tax of $(15,705) (29,166) -- (29,166)
- --------------------------------------------------------------------------------------------------------------------
CURRENT PERIOD CHANGE 36,421 -- 36,421
- --------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1997 70,277 -- 70,277
Unrealized gain on investment securities,
net of tax of $15,957 29,632 -- 29,632
Less: reclassification adjustment for gains
included in net income, net of tax of $(6,473) (12,020) -- (12,020)
- --------------------------------------------------------------------------------------------------------------------
CURRENT PERIOD CHANGE 17,612 -- 17,612
- --------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1998 87,889 -- 87,889
Unrealized gains on investment securities,
net of tax of $(70,234) (130,433) -- (130,433)
Less: reclassification adjustment for losses
included in net income, net of tax of $1,741 3,232 -- 3,232
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
CURRENT PERIOD CHANGE (127,201) -- (127,201)
====================================================================================================================
BALANCE, DECEMBER 31, 1999 $ (39,312) $ -- $ (39,312)
====================================================================================================================
</TABLE>
4. DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS
Derivative Financial Instruments
The Company uses derivative financial instruments, including financial
futures, interest rate swaps, options and forward contracts as a means of
hedging exposure to interest rate, equity price, and foreign currency risk
on anticipated transactions or existing assets and liabilities. The Company
does not hold or issue derivative instruments for trading purposes. These
derivative financial instruments have off-balance sheet risk. Financial
instruments with off-balance sheet risk involve, to varying degrees,
elements of credit and market risk in excess of the amount recognized in
the balance sheet. The contract or notional amounts of these instruments
reflect the extent of involvement the Company has in a particular class of
financial instrument. However, the maximum loss of cash flow
F-12
<PAGE> 137
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
associated with these instruments can be less than these amounts. For
interest rate swaps, options, and forward contracts, credit risk is limited
to the amounts that it would cost the Company to replace the contracts.
Financial futures contracts and purchased listed option contracts have very
little credit risk since organized exchanges are the counterparties. The
Company as a writer of option contracts has no credit risk since the
counterparty has no performance obligation after it has paid a cash
premium.
The Company monitors creditworthiness of counterparties to these financial
instruments by using criteria of acceptable risk that are consistent with
on-balance sheet financial instruments. The controls include credit
approvals, limits and other monitoring procedures.
The Company uses exchange traded financial futures contracts to manage its
exposure to changes in interest rates that arise from the sale of certain
insurance and investment products, or the need to reinvest proceeds from
the sale or maturity of investments. To hedge against adverse changes in
interest rates, the Company enters long or short positions in financial
futures contracts which offset asset price changes resulting from changes
in market interest rates until an investment is purchased or a product is
sold.
Margin payments are required to enter a futures contract and contract gains
or losses are settled daily in cash. The contract amount of futures
contracts represents the extent of the Company's involvement, but not
future cash requirements, as open positions are typically closed out prior
to the delivery date of the contract.
At December 31, 1999 and 1998, the Company held financial futures
contracts with notional amounts of $48.7 million and $41.5 million,
respectively. The deferred gains and/or losses on these contracts were not
significant at December 31, 1999 and 1998. At December 31, 1999 and
1998, the Company's futures contracts had no fair value because these
contracts are marked to market and settled in cash daily.
The Company enters into interest rate swaps in connection with other
financial instruments to provide greater risk diversification and better
match assets and liabilities. Under interest rate swaps, the Company agrees
with other parties to exchange, at specified intervals, the difference
between fixed-rate and floating-rate interest amounts calculated by
reference to an agreed notional principal amount. Generally, no cash is
exchanged at the outset of the contract and no principal payments are made
by either party. A single net payment is usually made by one counterparty
at each due date. Swap agreements are not exchange traded so they are
subject to the risk of default by the counterparty.
As of December 31, 1999 and 1998, the Company held interest rate swap
contracts with notional amounts of $231.1 million and $165.3 million,
respectively. The fair value of these financial instruments was $9.5
million (loss position) at December 31, 1999, and was $3.4 million (gain
position) and $.7 million (loss position) at December 31, 1998. The fair
values were determined using the discounted cash flow method. At December
31, 1999, the Company held swap contracts with affiliate counterparties
with a notional amount of $43.7 million and a fair value of $4.7 million
(loss position).
F-13
<PAGE> 138
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
The Company uses equity option contracts to manage its exposure to changes
in equity market prices that arise from the sale of certain insurance
products. To hedge against adverse changes in the equity market prices, the
Company enters long positions in equity option contracts with major
financial institutions. These contracts allow the Company, for a fee, the
right to receive a payment if the Standard and Poor's 500 Index falls below
agreed upon strike prices.
At December 31, 1999 and 1998, the Company held equity option contracts
with notional amounts of $275.4 million and zero, respectively. The fair
value of these financial instruments was $32.6 million (gain position) at
December 31, 1999. The fair values were determined using the discounted
cash flow method.
The off-balance sheet risks of interest rate options and forward contracts
were not significant at December 31, 1999 and 1998.
Financial Instruments with Off-Balance Sheet Risk
In the normal course of business, the Company issues fixed and variable
rate loan commitments and has unfunded commitments to partnerships and
joint ventures. The off-balance sheet risk of these financial instruments
was not significant at December 31, 1999 and 1998.
Fair Value of Certain Financial Instruments
The Company uses various financial instruments in the normal course of its
business. Fair values of financial instruments that are considered
insurance contracts are not required to be disclosed and are not included
in the amounts discussed.
At December 31, 1999, investments in fixed maturities had a carrying value
and a fair value of $1.8 billion and $1.7 billion, respectively, compared
with a carrying value and a fair value of $1.7 billion and $1.8 billion,
respectively, at December 31, 1998. See Notes 1 and 10.
At December 31, 1999, mortgage loans had a carrying value of $155.7 million
and a fair value of $156.0 million and in 1998 had a carrying value of
$174.6 million and a fair value of $185.7 million. In estimating fair
value, the Company used interest rates reflecting the current real estate
financing market.
The carrying values of short-term securities and policy loans totaling
$91.3 million and $131.1 million in 1999 and 1998, respectively,
approximated their fair values and are included in other invested assets.
The carrying values of $57.6 million and $36.5 million of financial
instruments classified as other assets approximated their fair values at
December 31, 1999 and 1998, respectively. The carrying values of $100.2
million and $98.4 million of financial instruments classified as other
liabilities also approximated their fair values at December 31, 1999 and
1998, respectively. Fair value is determined using various methods,
including discounted cash flows, as appropriate for the various financial
instruments.
F-14
<PAGE> 139
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
At December 31, 1999, contractholder funds with defined maturities had a
carrying value of $878.9 million and a fair value of $780.5 million,
compared with a carrying value of $725.6 million and a fair value of $698.1
million at December 31, 1998. The fair value of these contracts is
determined by discounting expected cash flows at an interest rate
commensurate with the Company's credit risk and the expected timing of cash
flows. Contractholder funds without defined maturities had a carrying value
of $481.8 million and a fair value of $409.2 million at December 31, 1999,
compared with a carrying value of $483.0 million and a fair value of $442.5
million at December 31, 1998. These contracts generally are valued at
surrender value.
5. COMMITMENTS AND CONTINGENCIES
Financial Instruments with Off-Balance Sheet Risk
See Note 4.
Litigation
In the ordinary course of business, the Company is a defendant or
co-defendant in various litigation matters incidental to and typical of the
businesses in which it is engaged. In the opinion of the Company's
management, the ultimate resolution of these legal proceedings would not be
likely to have a material adverse effect on its results of operations,
financial condition or liquidity.
6. BENEFIT PLANS
Pension and Other Postretirement Benefits
The Company participates in a qualified, noncontributory defined benefit
pension plan sponsored by Citigroup. In addition, the Company provides
certain other postretirement benefits to retired employees through a plan
sponsored by The Travelers Insurance Group Inc. (TIGI), TIC's direct
parent. The Company's share of net expense for the qualified pension and
other postretirement benefit plans was not significant for 1999, 1998 and
1997.
401(k) Savings Plan
Substantially all of the Company's employees are eligible to participate in
a 401(k) savings plan sponsored by Citigroup. Effective January 1, 1997,
the Company discontinued matching contributions for the majority of its
employees. The Company's expenses in connection with the 401(k) savings
plan were not significant in 1999, 1998 and 1997.
7. RELATED PARTY TRANSACTIONS
The principal banking functions, including payment of salaries and
expenses, for certain subsidiaries and affiliates of TIGI, including the
Company, are handled by two companies. TIC handles banking functions for
the life and annuity operations of Travelers Life & Annuity and some of its
non-insurance affiliates. The Travelers Indemnity Company handles banking
functions for the property-casualty operations, including most of its
property-casualty insurance and non-insurance affiliates. Settlements
between companies are made at least monthly. TIC provides various employee
benefit
F-15
<PAGE> 140
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
coverages to certain subsidiaries of TIGI. The premiums for these coverages
were charged in accordance with cost allocation procedures based upon
salaries or census. In addition, investment advisory and management
services, data processing services and claims processing services are
provided by affiliated companies. Charges for these services are shared by
the companies on cost allocation methods based generally on estimated usage
by department.
TIC maintains a short-term investment pool in which the Company
participates. The position of each company participating in the pool is
calculated and adjusted daily. At December 31, 1999 and 1998, the pool
totaled approximately $2.6 billion and $2.3 billion, respectively. The
Company's share of the pool amounted to $31.4 million and $93.1 million at
December 31, 1999 and 1998, respectively, and is included in short-term
securities in the balance sheet.
The Company's TTM Modified Guaranteed Annuity Contracts are subject to a
limited guarantee agreement by TIC in a principal amount of up to $450
million. TIC's obligation is to pay in full to any owner or beneficiary of
the TTM Modified Guaranteed Annuity Contracts principal and interest as and
when due under the annuity contract to the extent that the Company fails to
make such payment. In addition, TIC guarantees that the Company will
maintain a minimum statutory capital and surplus level.
The Company sold structured settlement annuities to the insurance
affiliates of Travelers Property Casualty Corp. (TAP). Premiums and
deposits were $8.9 million and $70.6 million for 1998 and 1997,
respectively. The reduction in premiums and deposits from 1997 to 1998 was
a result of a decision during 1998 to use TIC as the primary issuer of
structured settlement annuities and the Company as the assignment company.
Policy reserves and contractholder fund liabilities associated with these
structured settlements were $766.4 million and $808.7 million at December
31, 1999 and 1998, respectively.
The Company began distributing variable annuity products through its
affiliate, the Financial Consultants of Salomon Smith Barney (SSB) in 1995.
Premiums and deposits related to these products were $1.1 billion, $932.1
million and $615.6 million in 1999, 1998 and 1997, respectively. In 1996,
the Company began marketing various life products through SSB as well. New
premiums related to such products were $40.8 million, $44.5 million and
$24.4 million in 1999, 1998 and 1997, respectively.
During 1998, the Company began distributing deferred annuity products
through its affiliates Primerica Financial Services (Primerica), Citibank,
N.A. (Citibank) and The Copeland Companies (Copeland). Deposits received
from Primerica were $763 million and $216 million. Deposits from Citibank
and Copeland were immaterial for 1999 and 1998.
The Company participates in a stock option plan sponsored by Citigroup that
provides for the granting of stock options in Citigroup common stock to
officers and key employees. To further encourage employee stock ownership,
during 1997 Citigroup introduced the WealthBuilder stock option program.
Under this program, all employees meeting certain requirements are granted
Citigroup stock options.
Most leasing functions for TIGI and its subsidiaries are handled by TAP.
Rent expense related to these leases is shared by the companies on a cost
allocation method based generally on estimated usage by department. The
Company's rent expense was insignificant in 1999, 1998 and 1997.
F-16
<PAGE> 141
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
At December 31, 1999 and 1998, the Company had investments in Tribeca
Investments, L.L.C., an affiliate of the Company, in the amounts of $22.3
million and $18.3 million, respectively, included in other invested assets.
The Company has loaned $16.6 million of Corporate Bonds to SSB as of
December 31, 1999.
8. FEDERAL INCOME TAXES
The net deferred tax assets at December 31, 1999 and 1998 were comprised of
the tax effects of temporary differences related to the following assets
and liabilities:
<TABLE>
<CAPTION>
($ in thousands) 1999 1998
---- ----
----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred Tax Assets:
Benefit, reinsurance and other reserves $161,629 $121,150
Investments, net 14,270 --
Other 2,394 2,810
----------------------------------------------------------------------------------------------------------------
Total 178,293 123,960
----------------------------------------------------------------------------------------------------------------
Deferred Tax Liabilities:
Investments, net -- (56,103)
Deferred acquisition costs and value of insurance in force (100,537) (51,993)
Other (1,208) (1,399)
----------------------------------------------------------------------------------------------------------------
Total (101,745) (109,495)
----------------------------------------------------------------------------------------------------------------
Net Deferred Tax (Liability) Asset Before Valuation Allowance 76,548 14,465
Valuation Allowance for Deferred Tax Assets (2,070) (2,070)
----------------------------------------------------------------------------------------------------------------
Net Deferred Tax Asset After Valuation Allowance $74,478 $12,395
----------------------------------------------------------------------------------------------------------------
</TABLE>
F-17
<PAGE> 142
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
TIC and its life insurance subsidiaries, including the Company, file a
consolidated federal income tax return. Federal income taxes are allocated
to each member on a separate return basis adjusted for credits and other
amounts required by the consolidation process. Any resulting liability has
been, and will be, paid currently to TIC. Any credits for losses have been,
and will be, paid by TIC to the extent that such credits are for tax
benefits that have been utilized in the consolidated federal income tax
return.
The $2.1 million valuation allowance is sufficient to cover any capital
losses on investments that may exceed the capital gains able to be
generated in the life insurance group's consolidated federal income tax
return based upon management's best estimate of the character of the
reversing temporary differences. Reversal of the valuation allowance is
contingent upon the recognition of future capital gains or a change in
circumstances that causes the recognition of the benefits to become more
likely than not. There was no change in the valuation allowance during
1999. The initial recognition of any benefit provided by the reversal of
the valuation allowance will be recognized by reducing goodwill.
In management's judgment, the $74.5 million "net deferred tax asset after
valuation allowance" as of December 31, 1999, is fully recoverable against
expected future years' taxable ordinary income and capital gains. At
December 31, 1999, the Company had no ordinary or capital loss
carryforwards.
The policyholders surplus account, which arose under prior tax law, is
generally that portion of the gain from operations that has not been
subjected to tax, plus certain deductions. The balance of this account is
approximately $2 million. Income taxes are not provided for on this amount
because under current U.S. tax rules such taxes will become payable only to
the extent such amounts are distributed as a dividend or exceed limits
prescribed by federal law. Distributions are not contemplated from this
account. At current rates the maximum amount of such tax would be
approximately $700 thousand.
9. NET INVESTMENT INCOME
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
($ in thousands) 1999 1998 1997
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GROSS INVESTMENT INCOME
Fixed maturities $136,039 $130,825 $120,900
Joint venture and partnership income 22,175 22,107 32,336
Mortgage loans 16,126 15,969 14,905
Other 4,417 3,322 2,284
--------------------------------------------------------------------------------------------------------------
178,757 172,223 170,425
--------------------------------------------------------------------------------------------------------------
Investment expenses 1,578 1,220 1,772
--------------------------------------------------------------------------------------------------------------
Net investment income $177,179 $171,003 $168,653
--------------------------------------------------------------------------------------------------------------
</TABLE>
F-18
<PAGE> 143
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
10. INVESTMENTS AND INVESTMENT GAINS (LOSSES)
Realized investment gains (losses) for the periods were as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
($ in thousands) 1999 1998 1997
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REALIZED INVESTMENT GAINS (LOSSES)
Fixed maturities $2,657 $15,620 $29,236
Equity Securities 1,193 1,819 8,385
Other 1,025 525 2,180
Joint venture and partnerships (9,848) 529 5,070
--------------------------------------------------------------------------------------------------------------
Total Realized Investment Gains (Losses) $(4,973) $18,493 $44,871
--------------------------------------------------------------------------------------------------------------
</TABLE>
Changes in net unrealized investment gains (losses) that are included as
accumulated other changes in equity from non-owner sources in shareholder's
equity were as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
($ in thousands) 1999 1998 1997
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
UNREALIZED INVESTMENT GAINS (LOSSES)
Fixed maturities $(181,715) $24,336 $34,451
Other (13,979) 2,760 21,581
--------------------------------------------------------------------------------------------------------------
Total unrealized investment gains (losses) (195,694) 27,096 56,032
Related taxes (68,493) 9,484 19,611
--------------------------------------------------------------------------------------------------------------
Change in unrealized investment gains (losses) (127,201) 17,612 36,421
Balance beginning of year 87,889 70,277 33,856
--------------------------------------------------------------------------------------------------------------
Balance End of Year $(39,312) $87,889 $70,277
--------------------------------------------------------------------------------------------------------------
</TABLE>
F-19
<PAGE> 144
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Fixed Maturities
The amortized cost and fair values of investments in fixed maturities were
as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
GROSS GROSS
DECEMBER 31, 1999 AMORTIZED COST UNREALIZED UNREALIZED FAIR
($ in thousands) GAINS LOSSES VALUE
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE:
Mortgage-backed securities - CMOs and
pass-through securities $211,864 $2,103 $(7,818) $206,149
U.S. Treasury securities and obligations
of U.S. Government and government agencies
and authorities 116,082 2,613 (3,704) 114,991
Obligations of states and political
subdivisions 29,801 7 (3,312) 26,496
Debt securities issued by foreign
governments 44,159 2,813 (198) 46,774
All other corporate bonds 1,358,769 10,351 (52,811) 1,316,309
Redeemable preferred stock 3,654 41 (466) 3,229
-----------------------------------------------------------------------------------------------------------------
Total Available For Sale $1,764,329 $17,928 $(68,309) $1,713,948
-----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
GROSS GROSS
DECEMBER 31, 1998 AMORTIZED COST UNREALIZED UNREALIZED FAIR
($ in thousands) GAINS LOSSES VALUE
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE:
Mortgage-backed securities - CMOs and
pass-through securities $220,105 $ 11,571 $(193) $231,483
U.S. Treasury securities and obligations
of U.S. Government and government agencies
and authorities 289,376 53,782 (274) 342,884
Obligations of states and political
subdivisions 28,749 994 (17) 29,726
Debt securities issued by foreign
governments 40,786 2,966 (375) 43,377
All other corporate bonds 1,124,298 75,870 (13,000) 1,187,168
Redeemable preferred stock 4,033 119 (109) 4,043
-----------------------------------------------------------------------------------------------------------------
Total Available For Sale $1,707,347 $145,302 $(13,968) $1,838,681
-----------------------------------------------------------------------------------------------------------------
</TABLE>
Proceeds from sales of fixed maturities classified as available for sale
were $774 million, $1.1 billion and $857 million in 1999, 1998 and 1997,
respectively. Gross gains of $24.6 million, $32.6 million and $38.1 million
and gross losses of $22.0 million, $17.0 million and $8.9 million in 1999,
1998 and 1997, respectively were realized on those sales.
F-20
<PAGE> 145
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Fair values of investments in fixed maturities are based on quoted market
prices or dealer quotes or, if these are not available, discounted expected
cash flows using market rates commensurate with the credit quality and
maturity of the investment. The fair value of investments for which a
quoted market price or dealer quote are not available amounted to $486.2
million and $427.0 million at December 31, 1999 and 1998, respectively.
The amortized cost and fair value of fixed maturities available for sale at
December 31, 1999, by contractual maturity, are shown below. Actual
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
AMORTIZED FAIR
($ in thousands) COST VALUE
-------------------------------------------------------------------------------------------
<S> <C> <C>
MATURITY:
Due in one year or less $40,556 $40,092
Due after 1 year through 5 years 327,632 322,082
Due after 5 years through 10 years 451,635 441,307
Due after 10 years 732,642 704,318
-------------------------------------------------------------------------------------------
1,552,465 1,507,799
-------------------------------------------------------------------------------------------
Mortgage-backed securities 211,864 206,149
-------------------------------------------------------------------------------------------
Total Maturity $1,764,329 $1,713,948
-------------------------------------------------------------------------------------------
</TABLE>
The Company makes significant investments in collateralized mortgage
obligations (CMOs). CMOs typically have high credit quality, offer good
liquidity, and provide a significant advantage in yield and total return
compared to U.S. Treasury securities. The Company's investment strategy is
to purchase CMO tranches which are protected against prepayment risk,
including planned amortization class (PAC) tranches. Prepayment protected
tranches are preferred because they provide stable cash flows in a variety
of interest rate scenarios. The Company does invest in other types of CMO
tranches if a careful assessment indicates a favorable risk/return
tradeoff. The Company does not purchase residual interests in CMOs.
At December 31, 1999 and 1998, the Company held CMOs with a market value of
$167.7 million and $181.6 million, respectively. The Company's CMO holdings
were 65.9% and 62.9% collateralized by GNMA, FNMA or FHLMC securities at
December 31, 1999 and 1998, respectively.
F-21
<PAGE> 146
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Equity Securities
The cost and market values of investments in equity securities were as
follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
EQUITY SECURITIES: GROSS UNREALIZED GROSS UNREALIZED
($ in thousands) COST GAINS LOSSES FAIR VALUE
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1999
Common stocks $4,966 $ 730 $ (256) $5,440
Non-redeemable preferred stocks 29,407 533 (2,211) 27,729
------------------------------------------------------------------------------------------------------------------
Total Equity Securities $34,373 $1,263 $(2,467) $33,169
------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1998
Common stocks $5,185 $ 889 $(292) $5,782
Non-redeemable preferred stocks 20,641 707 (445) 20,903
------------------------------------------------------------------------------------------------------------------
Total Equity Securities $25,826 $1,596 $(737) $26,685
------------------------------------------------------------------------------------------------------------------
</TABLE>
Proceeds from sales of equity securities were $5.1 million, $6.0 million
and $12.4 million in 1999, 1998 and 1997, respectively. Gross gains of $1.5
million, $2.6 million and $8.6 million were realized on those sales during
1999, 1998 and 1997, respectively.
Gross losses were insignificant during the same periods.
Mortgage Loans
Underperforming assets include delinquent mortgage loans, loans in the
process of foreclosure and loans modified at interest rates below market.
At December 31, 1999 and 1998, the Company's mortgage loan portfolios
consisted of the following:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
($ in thousands) 1999 1998
-----------------------------------------------------------------------------------
<S> <C> <C>
Current Mortgage Loans $151,814 $170,635
Underperforming Mortgage Loans 3,905 3,930
-----------------------------------------------------------------------------------
Total $155,719 $174,565
-----------------------------------------------------------------------------------
</TABLE>
Aggregate annual maturities on mortgage loans at December 31, 1999 are as
follows:
<TABLE>
----------------------------------------------------------------
<S> <C>
($ in thousands)
2000 $20,791
2001 1,563
2002 6,292
2003 4,896
2004 4,167
Thereafter 118,010
================================================================
Total $155,719
================================================================
</TABLE>
F-22
<PAGE> 147
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Concentrations
Significant individual investment concentrations included:
<TABLE>
<CAPTION>
---------------------------------------------------------------------
($ in thousands) 1999 1998
---------------------------------------------------------------------
<S> <C> <C>
Tishman Speyer Joint Venture $63,199 $62,400
Bell South Corp. 23,689 53,322
---------------------------------------------------------------------
</TABLE>
The Company participates in a short-term investment pool maintained by an
affiliate. See Note 7.
Included in fixed maturities are below investment grade assets totaling
$141.4 million and $102.4 million at December 31, 1999 and 1998,
respectively. The Company defines its below investment grade assets as
those securities rated "Ba1" or below by external rating agencies, or the
equivalent by internal analysts when a public rating does not exist. Such
assets include publicly traded below investment grade bonds and certain
other privately issued bonds and notes that are classified as below
investment grade bonds.
The Company's industry concentrations of investments, primarily fixed
maturities, were as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------
($ in thousands) 1999 1998
---------------------------------------------------------------------
<S> <C> <C>
Banking $152,848 $160,713
Transportation 139,519 155,116
Electric utilities 103,897 109,027
Finance 103,385 69,916
Oil & Gas 102,739 45,172
---------------------------------------------------------------------
</TABLE>
The Company held investments in Foreign Banks in the amount of $125 million
and $115 million at December 31, 1999 and 1998, respectively, which are
included in the table above.
Below investment grade assets included in the preceding table were not
significant.
The Company monitors creditworthiness of counterparties to all financial
instruments by using controls that include credit approvals, limits and
other monitoring procedures. Collateral for fixed maturities often includes
pledges of assets, including stock and other assets, guarantees and letters
of credit. The Company's underwriting standards with respect to new
mortgage loans generally require loan to value ratios of 75% or less at the
time of mortgage origination.
Non-Income Producing Investments
Investments included in the December 31, 1999 and 1998 balance sheets that
were non-income producing were insignificant.
F-23
<PAGE> 148
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Restructured Investments
Mortgage loan and debt securities which were restructured at below market
terms at December 31, 1999 and 1998 were insignificant. The new terms of
restructured investments typically defer a portion of contract interest
payments to varying future periods. The accrual of interest is suspended on
all restructured assets, and interest income is reported only as payment is
received. Gross interest income on restructured assets that would have been
recorded in accordance with the original terms of such assets was
insignificant. Interest on these assets, included in net investment income,
was insignificant.
11. DEPOSIT FUNDS AND RESERVES
At December 31, 1999, the Company had $2.1 billion of life and annuity
deposit funds and reserves. Of that total, $1.4 billion were not subject to
discretionary withdrawal based on contract terms. The remaining $.7 billion
were life and annuity products that were subject to discretionary
withdrawal by the contractholders. Included in the amount that is subject
to discretionary withdrawal were $.5 billion of liabilities that are
surrenderable with market value adjustments. The remaining $.2 billion of
life insurance and individual annuity liabilities are subject to
discretionary withdrawals with an average surrender charge of 4.9%. The
life insurance risks would have to be underwritten again if transferred to
another carrier, which is considered a significant deterrent for long-term
policyholders. Insurance liabilities that are surrendered or withdrawn from
the Company are reduced by outstanding policy loans and related accrued
interest prior to payout.
12. RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES
The following table reconciles net income to net cash provided by (used in)
operating activities:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1999 1998 1997
---- ---- ----
($ in thousands)
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Income From Continuing Operations $ 52,606 $ 57,485 $ 71,372
Adjustments to reconcile net income to cash provided by
operating activities:
Realized gains (4,973) (18,493) (44,871)
Deferred federal income taxes 6,410 11,783 4,344
Amortization of deferred policy acquisition costs 38,902 15,956 4,944
Additions to deferred policy acquisition costs (211,182) (120,278) (56,975)
Investment income accrued (27,072) (3,821) 908
Premium balances (466) (6,786) (3,450)
Insurance reserves (16,431) (8,431) 3,981
Other (26,112) (2,806) 27,765
------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operations $(188,318) $(75,391) $8,018
------------------------------------------------------------------------------------------------------------------
</TABLE>
13. NON-CASH INVESTING AND FINANCING ACTIVITIES
There were no significant non-cash investing and financing activities
for 1999, 1998 and 1997.
F-24
<PAGE> 149
STATEMENT OF ADDITIONAL INFORMATION
FUND ABD II FOR VARIABLE ANNUITIES
(ACCESS AND ACCESS SELECT)
Individual Variable Annuity Contract
issued by
The Travelers Life and Annuity Company
One Tower Square
Hartford, Connecticut 06183
L-21195S May 2000
<PAGE> 150
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) The financial statements of the Registrant and the Report of Independent
Auditors thereto are contained in the Registrant's Annual Report and are
included in the Statement of Additional Information. The financial
statements of the Registrant include:
Statement of Assets and Liabilities as of December 31, 1999
Statement of Operations for the year ended December 31, 1999
Statement of Changes in Net Assets for the years ended December
31, 1999 and 1998
Statement of Investments as of December 31, 1999
Notes to Financial Statements
The financial statements of The Travelers Life and Annuity Company and
the report of Independent Auditors, are contained in the Statement of
Additional Information. The financial statements of The Travelers Life
and Annuity Company include:
Statements of Income for the years ended December 31, 1999, 1998 and
1997
Balance Sheets as of December 31, 1999 and 1998
Statements of Changes in Retained Earnings and Accumulated Other
Changes in Equity from Non-Owner Sources for the years ended December
31, 1999, 1998 and 1997
Statements of Cash Flows for the years ended December 31, 1999, 1998
and 1997
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 Principal Underwriting Agreement among the Registrant,
The Travelers Life and Annuity Company and CFBDS, Inc. (Incorporated
herein by reference to Exhibit 3(a) to Pre-Effective Amendment No. 1 to
the Registration Statement on Form N-4, File No. 333-60215 filed November
9, 1998)
3(b). Selling Agreement. (Incorporated herein by reference to Exhibit 3(b) to
the Registration Statement on Form N-4, filed May 23, 1997.)
(Incorporated herein by reference to Exhibit 3(b) to Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-4, File No.
333-60215 filed November 9, 1998)
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.)
<PAGE> 151
6(b). By-Laws of The Travelers Life and Annuity Company, as amended on October
20, 1994. (Incorporated herein by reference to Exhibit 3(b) to the
Registration Statement on Form N-4, File No. 33-58131, filed via Edgar on
March 17, 1995.)
7. None.
8. None.
9. Opinion of Counsel as to the legality of securities being registered.
(Incorporated herein by reference to Exhibit 9 to Post-Effective
Amendment No. 3 to the Registration Statement on Form N-4, File No.
33-65339, filed April 29, 1997.)
10. Consent of KPMG LLP, Independent Certified Public Accountants.
13. Schedule for computation of each performance quotation - Standardized.
(Incorporated herein by reference to Exhibit 13 to Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-4, File No.
333-232237 filed July 3, 1997.)
13. Schedule for computation of each performance
quotation - Non-Standardized. (Incorporated herein by reference to
Exhibit 13 to Post-Effective Amendment No. 3 to the Registration
Statement on Form N-4, File No. 33-65339, filed April 29, 1997.)
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 George C. Kokulis, Katherine M. Sullivan and Glenn D.
Lammey. (Incorporated herein by reference to Exhibit 15(b) to
Post-Effective Amendment No. 6 to the Registration Statement on Form N-4,
File No. 33-65339, filed April 17, 2000.)
<PAGE> 152
Item 25. Directors and Officers of the Depositor
<TABLE>
<S> <C>
George C. Kokulis* Director, President and Chief Executive Officer
Katherine M. Sullivan* Director and Senior Vice President
Marc P. Weill** Director and Senior Vice President
Mary Jean Thornton* Executive Vice President and
Chief Information Officer
Stuart Baritz*** Senior Vice President
Barry Jacobson* Senior Vice President
Russell H. Johnson* Senior Vice President
Marla Berman Lewitus* Senior Vice President and General Counsel
Brendan Lynch* Senior Vice President
Warren H. May* Senior Vice President
Kathleen Preston* Senior Vice President
David A. Tyson* Senior Vice President
F. Denney Voss* Senior Vice President
Glenn D. Lammey* Chief Financial Officer, Chief
Accounting Officer and Controller
David A. Golino* Vice President
Donald R. Munson, Jr.* Vice President
Anthony Cocolla Second Vice President
Scott R. Hansen Second Vice President
Linn K. Richardson* Second Vice President and Actuary
Paul Weissman Second Vice President and Actuary
Ernest J. Wright* Vice President and Secretary
Kathleen A. McGah* Assistant Secretary and
Deputy General Counsel
Principal Business Address:
* The Travelers Life and Annuity Company ** Citigroup Inc.
One Tower Square 388 Greenwich Street
Hartford, CT 06183 New York, N.Y. 10013
*** Travelers Portfolio Group
1345 Avenue of the Americas
New York, NY 10105
</TABLE>
Item 26. Persons Controlled by or Under Common Control with the Depositor or
Registrant
Incorporated herein by reference to Exhibit 16 to Post-Effective
Amendment No. 2 to the Registration Statement on Form N-4, File No. 333-40191,
filed April 12, 2000.
Item 27. Number of Contract Owners
As of February 29, 2000, 3,492 contract owners held qualified and non-qualified
contracts offered by the Registrant.
<PAGE> 153
Item 28. Indemnification
Sections 33-770 to 33-778, inclusive of the Connecticut General Statutes
("C.G.S.") regarding indemnification of directors and officers of Connecticut
corporations provides in general that Connecticut corporations shall indemnify
their officers, directors and certain other defined individuals against
judgments, fines, penalties, amounts paid in settlement and reasonable expenses
actually incurred in connection with proceedings against the corporation. The
corporation's obligation to provide such indemnification generally does not
apply unless (1) the individual is wholly successful on the merits in the
defense of any such proceeding; or (2) a determination is made (by persons
specified in the statute) that the individual acted in good faith and in the
best interests of the corporation and in all other cases, his conduct was at
least not opposed to the best interests of the corporation, and in a criminal
case he had no reasonable cause to believe his conduct was unlawful; or (3) the
court, upon application by the individual, determines in view of all of the
circumstances that such person is fairly and reasonably entitled to be
indemnified, and then for such amount as the court shall determine. With respect
to proceedings brought by or in the right of the corporation, the statute
provides that the corporation shall indemnify its officers, directors and
certain other defined individuals, against reasonable expenses actually incurred
by them in connection with such proceedings, subject to certain limitations.
Citigroup Inc. also provides liability insurance for its directors and officers
and the directors and officers of its subsidiaries, including the Registrant.
This insurance provides for coverage against loss from claims made against
directors and officers in their capacity as such, including, subject to certain
exceptions, liabilities under the federal securities laws.
Rule 484 Undertaking
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
<PAGE> 154
Item 29. Principal Underwriter
(a) CFBDS, Inc.
21 Milk Street
Boston, MA 02109
CFBDS, Inc. also serves as principal underwriter for the following :
(a) CFBDS, the Registrant's Distributor, is also the distributor for
CitiFunds(SM) International Growth & Income Portfolio, CitiFunds(SM)
International Growth Portfolio, CitiFunds(SM) U.S. Treasury Reserves,
CitiFunds(SM) Cash Reserves, CitiFunds(SM) Premium U.S. Treasury Reserves,
CitiFunds(SM) Premium Liquid Reserves, CitiFunds(SM) Institutional U.S. Treasury
Reserves, CitiFunds(SM) Institutional Liquid Reserves, CitiFunds(SM)
Institutional Cash Reserves, CitiFunds(SM) Tax Free Reserves, CitiFunds(SM)
Institutional Tax Free Reserves, CitiFunds(SM) California Tax Free Reserves,
CitiFunds(SM) Connecticut Tax Free Reserves, CitiFunds(SM) New York Tax Free
Reserves, CitiFunds(SM) New York Tax Free Income Portfolio, CitiFunds(SM)
National Tax Free Income Portfolio, CitiFunds(SM) California Tax Free Income
Portfolio, CitiFunds(SM) Intermediate Income Portfolio, CitiFunds(SM) Balanced
Portfolio, CitiFunds(SM) Small Cap Value Portfolio, CitiFunds(SM) Growth &
Income Portfolio, CitiFunds(SM) Large Cap Growth Portfolio, CitiFunds(SM) Small
Cap Growth Portfolio, CitiFunds(SM) Short-Term U.S. Government Income Portfolio,
CitiFunds(SM) Emerging Asian Markets Equity Portfolio CitiSelect(R) VIP Folio
200, CitiSelect(R) VIP Folio 300, CitiSelect(R) VIP Folio 400, CitiSelect(R) VIP
Folio 500, CitiFunds(SM) Small Cap Growth VIP Portfolio, CitiSelect(R) Folio
100, CitiSelect(R) Folio 200, CitiSelect(R) Folio 300, CitiSelect(R) Folio 400,
and CitiSelect(R) Folio 500.
CFBDS is also the placement agent for Large Cap Value Portfolio, Small Cap Value
Portfolio, International Portfolio, Foreign Bond Portfolio, Intermediate Income
Portfolio, Short-Term Portfolio, Growth & Income Portfolio, U.S. Fixed Income
Portfolio, High Yield Portfolio, Large Cap Growth Portfolio, Small Cap Growth
Portfolio, International Equity Portfolio, Balanced Portfolio, Government Income
Portfolio, Tax Free Reserves Portfolio, Cash Reserves Portfolio and U.S.
Treasury Reserves Portfolio, Emerging Asian Markets Equity Portfolio.
CFBDS also serves as the distributor for the following funds: The Travelers Fund
U for Variable Annuities, The Travelers Fund VA for Variable Annuities, The
Travelers Fund BD for Variable Annuities, The Travelers Fund BD II for Variable
Annuities, The Travelers Fund BD III for Variable Annuities, The Travelers Fund
BD IV for Variable Annuities, The Travelers Fund ABD for Variable Annuities, The
Travelers Separate Account PF for Variable Annuities, The Travelers Separate
Account PF II for Variable Annuities, The Travelers Separate Account QP for
Variable Annuities, The Travelers Separate Account TM for Variable Annuities,
The Travelers Separate Account TM II for Variable Annuities, The Travelers
Separate Account Five for Variable Annuities, The Travelers Separate Account Six
for Variable Annuities, The Travelers Separate Account Seven for Variable
Annuities, The Travelers Separate Account Eight for Variable Annuities, The
Travelers Separate Account Nine for Variable Annuities, The Travelers Separate
Account Ten for Variable Annuities, The Travelers Fund UL for Variable Life
Insurance, The Travelers Fund UL II for Variable Life Insurance, The Travelers
Fund UL III for Variable Life Insurance, The Travelers Variable Life Insurance
Separate Account One, The Travelers Variable Life Insurance Separate Account
Two, The Travelers Variable Life Insurance Separate Account Three, The Travelers
Variable Life Insurance Separate Account Four, The Travelers Separate Account
MGA, The Travelers Separate Account MGA II, The Travelers Growth and Income
Stock Account for Variable Annuities, The Travelers Quality Bond Account for
Variable Annuities, The Travelers Money Market Account for Variable Annuities,
The Travelers Timed Growth and Income Stock Account for Variable Annuities, The
Travelers Timed Short-Term Bond Account for Variable Annuities, The Travelers
Timed Aggressive Stock Account for Variable Annuities, The Travelers Timed Bond
Account for Variable Annuities
<PAGE> 155
CFBDS is also the distributor for the following funds: Emerging Growth Fund,
Government Fund, Growth and Income Fund, International Equity Fund, Municipal
Fund, Balanced Investments, Emerging Markets Equity Investments, Government
Money Investments, High Yield Investments, Intermediate Fixed Income
Investments, International Equity Investments, International Fixed Income
Investments, Large Capitalization Growth Investments, Large Capitalization Value
Equity Investments, Long-Term Bond Investments, Mortgage Backed Investments,
Municipal Bond Investments, Small Capitalization Growth Investments, Small
Capitalization Value Equity Investments, Appreciation Portfolio, Diversified
Strategic Income Portfolio, Emerging Growth Portfolio, Equity Income Portfolio,
Equity Index Portfolio, Growth & Income Portfolio, Intermediate High Grade
Portfolio, International Equity Portfolio, Money Market Portfolio, Total Return
Portfolio.
CFBDS is also the distributor for the following Smith Barney Mutual Fund
registrants: Smith Barney Adjustable Rate Government Income Fund, Smith Barney
Aggressive Growth Fund Inc., Smith Barney Appreciation Fund, Smith Barney
Arizona Municipals Fund Inc., Smith Barney California Municipals Fund Inc.,
Smith Barney Large Cap Blend Fund, Smith Barney Fundamental Value Fund Inc.,
Smith Barney Balanced Fund, Smith Barney Convertible Fund, Smith Barney
Diversified Strategic Income Fund, Smith Barney Exchange Reserve Fund, Smith
Barney High Income Fund, Smith Barney Municipal High Income Fund, Smith Barney
Premium Total Return Fund, Smith Barney Total Return Bond Fund, Smith Barney
Contrarian Fund, Smith Barney Government Securities Fund, Smith Barney
Hansberger Global Small Cap Value Fund, Smith Barney Hansberger Global Value
Fund, Smith Barney Investment Grade Bond Fund, Smith Barney Special Equities
Fund, Smith Barney Intermediate Maturity California Municipals Fund, Smith
Barney Intermediate Maturity New York Municipals Fund, Smith Barney Large
Capitalization Growth Fund, Smith Barney S&P 500 Index Fund, Smith Barney Mid
Cap Blend Fund, Smith Barney Managed Governments Fund Inc., Smith Barney Managed
Municipals Fund Inc., Smith Barney Massachusetts Municipals Fund, Cash
Portfolio, Government Portfolio, Retirement Portfolio, California Money Market
Portfolio, Florida Portfolio, Georgia Portfolio, Limited Term Portfolio, New
York Money Market Portfolio, New York Portfolio, Pennsylvania Portfolio, Smith
Barney Municipal Money Market Fund, Inc., Smith Barney Natural Resources Fund
Inc., Smith Barney New Jersey Municipals Fund Inc., Smith Barney Oregon
Municipals Fund, Zeros Plus Emerging Growth Series 2000, Smith Barney Security
and Growth Fund, Smith Barney Small Cap Blend Fund, Inc., Smith Barney
Telecommunications Income Fund, Smith Barney High Income Portfolio, Smith Barney
Large Cap Value Portfolio, Smith Barney International Equity Portfolio, Smith
Barney Large Capitalization Growth Portfolio, Smith Barney Money Market
Portfolio, Smith Barney Pacific Basin Portfolio, Balanced Portfolio,
Conservative Portfolio, Growth Portfolio, High Growth Portfolio, Income
Portfolio, Global Portfolio, Select Balanced Portfolio, Select Conservative
Portfolio, Select Growth Portfolio, Select High Growth Portfolio, Select Income
Portfolio, Concert Social Awareness Fund, Large Cap Value Fund, Short-Term High
Grade Bond Fund, U.S. Government Securities Fund, Cash Portfolio, Government
Portfolio, Municipal Portfolio, Concert Peachtree Growth Fund, Income and Growth
Portfolio, Reserve Account Portfolio, U.S. Government/High Quality Securities
Portfolio, Emerging Markets Portfolio, European Portfolio, Global Government
Bond Portfolio, International Balanced Portfolio, International Equity
Portfolio, Pacific Portfolio, AIM Capital Appreciation Portfolio, Alliance
Growth Portfolio, GT Global Strategic Income Portfolio, MFS Total Return
Portfolio, Putnam Diversified Income Portfolio, TBC Managed Income Portfolio,
Van Kampen American Capital Enterprise Portfolio, Centurion Tax-Managed U.S.
Equity Fund, Centurion Tax-Managed International Equity Fund, Centurion U.S.
Protection Fund, Centurion International Protection Fund, Global High-Yield Bond
Fund, International Equity Fund, Emerging Opportunities Fund, Core Equity Fund,
Long-Term Bond Fund, Global Dimensions Fund L.P., Citicorp Private Equity L.P.,
AIM V.I. Capital Appreciation Fund, AIM V.I. Government Series Fund, AIM V.I.
Growth Fund, AIM V.I. International Equity Fund, AIM V.I. Value Fund, Fidelity
VIP Growth Portfolio, Fidelity VIP High Income Portfolio, Fidelity VIP Equity
Income Portfolio, Fidelity VIP Overseas Portfolio, Fidelity VIP II Contrafund
Portfolio, Fidelity VIP II Index 500 Portfolio, MFS World Government
<PAGE> 156
Series, MFS Money Market Series, MFS Bond Series, MFS Total Return Series, MFS
Research Series, MFS Emerging Growth Series.
CFBDS is also the distributor for the following Salomon Brothers funds: Salomon
Brothers Institutional Money Market Fund, Salomon Brothers Cash Management Fund,
Salomon Brothers New York Municipal Money Market Fund, Salomon Brothers National
Intermediate Municipal Fund, Salomon Brothers U.S. Government Income Fund,
Salomon Brothers High Yield Bond Fund, Salomon Brothers Strategic Bond Fund,
Salomon Brothers Total Return Fund, Salomon Brothers Asia Growth Fund, Salomon
Brothers Capital Fund Inc, Salomon Brothers Investors Fund Inc, Salomon Brothers
Opportunity Fund Inc, Salomon Brothers Institutional High Yield Bond Fund,
Salomon Brothers Institutional Emerging Markets Debt Fund, Salomon Brothers
Variable Investors Fund, Salomon Brothers Variable Capital Fund, Salomon
Brothers Variable Total Return Fund, Salomon Brothers Variable High Yield Bond
Fund, Salomon Brothers Variable Strategic Bond Fund, Salomon Brothers Variable
U.S. Government Income Fund, and Salomon Brothers Variable Asia Growth Fund.
(b) The information required by this Item 29 with respect to each director
and officer of CFBDS, Inc. is incorporated by reference to Schedule A of Form BD
filed by CFBDS pursuant to the Securities and Exchange Act of 1934 (File No.
8-32417).
(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:
<PAGE> 157
(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> 158
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 17th day of
April, 2000.
THE TRAVELERS FUND ABD II FOR VARIABLE ANNUITIES
(Registrant)
THE TRAVELERS LIFE AND ANNUITY COMPANY
(Depositor)
By:*GLENN D. LAMMEY
-------------------------------------------
Glenn D. Lammey, Chief Financial Officer,
Chief Accounting Officer and Controller
As required by the Securities Act of 1933, this registration statement has been
signed by the following persons in the capacities indicated on the 17th day of
April 2000.
<TABLE>
<S> <C>
*GEORGE C. KOKULIS Director, President and Chief Executive Officer
- --------------------------------- (Principal Executive Officer)
(George C. Kokulis)
*KATHERINE M. SULLIVAN Director
- ---------------------------------
(Katherine M. Sullivan)
*MARC P. WEILL Director
- ---------------------------------
(Marc P. Weill)
*By: /s/Ernest J. Wright, Attorney-in-Fact
</TABLE>
<PAGE> 159
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
- ------- ----------- ----------------
<S> <C> <C>
10. Consent of KPMG LLP, Independent Electronically
Certified Public Accountants.
</TABLE>
<PAGE> 1
Exhibit 10
Consent of Independent Certified Public Accountants
Board of Directors
The Travelers Life and Annuity Company
We consent to the use of our reports included herein and to the reference to our
firm as experts under the heading "Independent Accountants."
/s/KPMG LLP
Hartford, Connecticut
April 14, 2000
