<PAGE> 1
Registration Statement No. 333-27687
811-08223
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. 6
THE TRAVELERS FUND BD IV FOR VARIABLE ANNUITIES
-----------------------------------------------
(Exact name of Registrant)
THE TRAVELERS LIFE AND ANNUITY COMPANY
--------------------------------------
(Name of Depositor)
ONE TOWER SQUARE, HARTFORD, CONNECTICUT 06183
---------------------------------------------
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number, including area code: (860) 277-0111
--------------
ERNEST J. WRIGHT
The Travelers Life and Annuity Company
One Tower Square
Hartford, Connecticut 06183
---------------------------
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering:
It is proposed that this filing will become effective (check appropriate box):
_____ immediately upon filing pursuant to paragraph (b) of Rule 485.
__X__ on May 1, 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 INDEX ANNUITY PROSPECTUS:
THE TRAVELERS FUND BD III FOR VARIABLE ANNUITIES
THE TRAVELERS FUND BD IV FOR VARIABLE ANNUITIES
This prospectus describes TRAVELERS INDEX ANNUITY, a single 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"). Travelers Index Annuity is issued as an individual
Contract.
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:
Money Market Portfolio
DEUTSCHE ASSET MANAGEMENT VIT FUNDS
EAFE(R) Equity Index Fund
Small Cap Index Fund
GREENWICH STREET SERIES FUND
Equity Index Portfolio -- Class I Shares
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.
In addition, you can choose to protect your investment by purchasing a guarantee
from the Company called the Principal Protection Feature. If purchased, we will
guarantee that on the Principal Protection Expiration Date (the last day of the
eighth Contract Year), your Contract will be worth at least 115%, 100% or 90%
(depending on your selection), of your Purchase Payment, adjusted for withdrawal
reductions, even if the value of your Contract on that date is less than the
chosen percentage of your original payment. To qualify for the Principal
Protection Feature, you must allocate your original payment to the Protected
Funding Option -- Equity Index Portfolio -- and keep your payment in that
funding option until the end of the eighth contract year. There is a separate
charge for this feature.
This prospectus provides the information that you should know before investing
in the Contract. You can receive additional information about The Travelers Fund
BD III for Variable Annuities or The Travelers Fund BD IV 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> 4
TABLE OF CONTENTS
<TABLE>
<S> <C>
Index of Special Terms................ 2
Summary............................... 3
Fee Table............................. 7
Condensed Financial Information....... 10
The Annuity Contract.................. 10
Contract Owner Inquiries......... 10
Purchase Payments................ 10
Accumulation Units............... 10
The Funding Options.............. 10
Optional Principal Protection
Feature........................ 11
Principal Protection Expiration
Date........................... 12
Charges and Deductions................ 12
General.......................... 12
Withdrawal Charge................ 13
Free Withdrawal Allowance........ 13
Optional Principal Protection
Fee............................ 13
Principal Protection Cancellation
Charge......................... 14
Administrative Charges........... 14
Mortality and Expense Risk
Charge......................... 14
Funding Option Expenses.......... 15
Premium Tax...................... 15
Changes in Taxes Based Upon
Premium or Value............... 15
Transfers............................. 15
Dollar Cost Averaging............ 15
Access to Your Money.................. 16
Systematic Withdrawals........... 16
Ownership Provisions.................. 17
Types of Ownership............... 17
Beneficiary...................... 17
Annuitant........................ 17
Death Benefit......................... 17
Death Proceeds Before the
Maturity Date.................. 17
Payment of Proceeds.............. 19
Death Proceeds After the Maturity
Date........................... 20
The Annuity Period.................... 21
Maturity Date.................... 21
Allocation of Annuity............ 21
Variable Annuity................. 21
Fixed Annuity.................... 22
Payment Options....................... 22
Election of Options.............. 22
Annuity Options.................. 22
Miscellaneous Contract Provisions..... 23
Right to Return.................. 23
Termination...................... 23
Required Reports................. 24
Suspension of Payments........... 24
Transfers of Contract Values to
Other Annuities................ 24
The Separate Accounts................. 24
Performance Information.......... 24
Federal Tax Considerations............ 25
General Taxation of Annuities.... 25
Types of Contracts: Qualified or
Nonqualified................... 25
Nonqualified Annuity Contracts... 26
Qualified Annuity Contracts...... 26
Penalty Tax for Premature
Distributions.................. 26
Diversification Requirements for
Variable Annuities............. 27
Ownership of the Investments..... 27
Mandatory Distributions for
Qualified Plans................ 27
Taxation of Death Benefit
Proceeds....................... 27
Other Information..................... 28
The Insurance Companies.......... 28
Financial Statements............. 28
IMSA............................. 28
Distribution of Variable Annuity
Contracts...................... 28
Conformity with State and Federal
Laws........................... 28
Voting Rights.................... 29
Legal Proceedings and Opinions... 29
APPENDIX A: Condensed Financial
Information for The Travelers
Insurance Company: Fund BD III...... A-1
APPENDIX B: Condensed Financial
Information for The Travelers Life
and Annuity Company: Fund BD IV..... 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 Unit..................... 10
Accumulation Period................... 10
Annuitant............................. 17
Annuity Payments...................... 10
Annuity Unit.......................... 10
Cash Surrender Value.................. 16
Contingent Annuitant.................. 17
Contract Date......................... 10
Contract Owner (You, Your)............ 17
Contract Value........................ 10
Contract Year......................... 10
Death Report Date..................... 17
Fixed Account......................... C-1
Funding Option(s)..................... 10
Maturity Date......................... 10
Purchase Payment...................... 10
Underlying Fund....................... 10
Written Request....................... 10
</TABLE>
2
<PAGE> 5
SUMMARY:
TRAVELERS INDEX 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 BD
III for Variable Annuities ("Fund BD III"); The Travelers Life and Annuity
Company sponsors the Travelers Fund BD IV for Variable Annuities ("Fund BD IV").
When we refer to the Separate Account, we are referring to either Fund BD III or
Fund BD IV, 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>
Bahamas New York
British Virgin Islands North Carolina
Guam Puerto Rico
Kansas Tennessee
Maine U.S. Virgin Islands
New Hampshire Wyoming
</TABLE>
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 for sale. This Contract may not currently be available for sale in all
locations.
CAN YOU GIVE ME A GENERAL DESCRIPTION OF THE VARIABLE ANNUITY CONTRACT? The
Contract offered by the Company is a single payment 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 Option or the variable funding options. If you want to receive scheduled
payments from your annuity, you can choose from a number of options.
Once you choose one of the annuity options and begin to receive payments, it
cannot be changed. During the payout phase, you have the same investment choices
you had during the
3
<PAGE> 6
accumulation phase. If amounts are directed to the variable funding options, the
dollar amount of your payments may increase or decrease.
PRINCIPAL PROTECTION GUARANTEE. (For investors who intend to hold the Contract
for at least eight years.) You can choose to protect your investment by
purchasing a separate guarantee from the Company. With the Principal Protection
Guarantee, you receive, at the end of eight years, 115%, 100%, or 90% of your
original purchase payment (depending on the guarantee you purchased) less any
partial withdrawals and related withdrawal charges, or the contract
value -- whichever is greater. Not all levels of protection may be available for
purchase.
After the end of the eighth contract year, you may (a) remain in the contract
and transfer to any of the funding options, (b) purchase another Index Annuity
contract with the Principal Protection Guarantee, (c) transfer to another
annuity contract or (d) withdraw your contract value. Unless you inform us in
writing of a different investment choice, at the end of the eighth contract
year, we will transfer your contract value to the Money Market Portfolio,
offered within this Contract.
If you have selected the Principal Protection Feature, any partial amounts you
withdraw (including the withdrawal charge and Principal Protection Cancellation
Charge) will reduce the amount of principal guaranteed proportionately. The
Principal Protection Feature which you originally selected covers the remaining
contract value. If you make a full withdrawal before the end of the eighth
contract year, the Principal Protection Guarantee is no longer in effect.
Depending on market conditions, the cash surrender value may be more or less
than the guaranteed principal amount you selected. We will not refund any
expenses or fees associated with the Principal Protection Feature under any
circumstances.
WHO SHOULD PURCHASE THIS CONTRACT? The Contract is currently available for use
in connection with (1) individual nonqualified purchases; (2) Individual
Retirement Annuities (IRAs); and (3) Section 403(b) Rollovers (TSA rollover).
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 a single payment of at least $10,000. At this
time, the Company does not permit additional payments.
IS THERE A RIGHT TO RETURN PERIOD? If you cancel the Contract within ten days
after you receive it, you will receive a full refund of 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.
4
<PAGE> 7
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 $50,000, the Company deducts an annual
administrative charge (the "Contract fee") of $30. For the standard death
benefit, the annual insurance charge is 1.25% of the amounts you direct to the
funding options. For the enhanced death benefit, the annual insurance charge is
1.45% of the amounts you direct to the variable funding options. Regardless of
the death benefit chosen, the sub-account administrative charge is 0.15%
annually of the amounts directed to the variable funding options. Each funding
option also charges for management and other expenses.
An optional Contract feature, the Principal Protection Guarantee, provides that
you will receive a stated percent of your single payment, less partial
withdrawals and related withdrawal charges, on the Principal Protection
Guarantee Expiration Date. There is an annual insurance charge of up to 2.00% if
you select this feature. If you withdraw your money before the maturity date and
if you have selected the Principal Protection Guarantee, there is no refund of
the Principal Protection Fee, and the Company may deduct an additional Principal
Protection Cancellation Charge (0%-4%).
A withdrawal charge will apply to withdrawals from the Contract, and is
calculated as a percentage of the purchase payments. The maximum percentage is
6%, decreasing to 0% in years nine and later.
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 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. Withdrawal charges, income taxes, the Principal Protection
Cancellation Charge, 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.
5
<PAGE> 8
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. This program is not available if you have selected the Principal
Protection Feature.
- 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.
6
<PAGE> 9
FEE TABLE -- WITHOUT PRINCIPAL PROTECTION FEATURE
- --------------------------------------------------------------------------------
CONTRACT OWNER TRANSACTION EXPENSES
<TABLE>
<S> <C>
WITHDRAWAL CHARGE (as a percentage of the purchase
payment withdrawn)
</TABLE>
<TABLE>
<CAPTION>
YEARS SINCE PURCHASE WITHDRAWAL
PAYMENT MADE CHARGE
<S> <C>
1 or less 6%
2 6%
3 5%
4 5%
5 4%
6 4%
7 3%
8 2%
9 and over 0%
</TABLE>
<TABLE>
<S> <C>
ANNUAL CONTRACT ADMINISTRATIVE CHARGE
(Waived if contract value is $50,000 or more) $30
ANNUAL SEPARATE ACCOUNT CHARGES:
(as a percentage of the average daily net assets of the
Separate Account)
</TABLE>
<TABLE>
<CAPTION>
STANDARD ENHANCED
DEATH DEATH
BENEFIT BENEFIT
- ---------------------------------------------------------------------------------
<S> <C> <C>
Mortality and Expense Risk Charge........................... 1.25% 1.45%
Administrative Charge....................................... 0.15% 0.15%
------- -------
Total Separate Account Charges............................ 1.40% 1.60%
</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 OTHER OPERATING
FEE EXPENSES EXPENSES
(AFTER EXPENSE (AFTER EXPENSE (AFTER EXPENSE
FUNDING OPTIONS REIMBURSEMENT) REIMBURSEMENT) REIMBURSEMENT)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market Portfolio........................ 0.32% 0.08% 0.40%(1)
DEUTSCHE ASSET MANAGEMENT VIT FUNDS
Small Cap Index Fund........................ 0.13% 0.32% 0.45%(2)
EAFE(R) Equity Index Fund................... 0.26% 0.39% 0.65%(2)
GREENWICH STREET SERIES FUND
Equity Index Portfolio -- Class I Shares.... 0.21% 0.07% 0.28%(3)
</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) These fees reflect a voluntary expense reimbursement arrangement whereby the
Adviser has agreed to reimburse the funds. Without such arrangement, the
Management Fee and Other Expenses for the Deutsche VIT EAFE EQUITY INDEX
FUND and SMALL CAP INDEX FUND would have been 0.45% and 0.69%, and 0.35% and
0.83%, respectively. Effective April 2000, the Trust's name was changed from
BT Insurance Funds Trust to Deutsche Asset Management VIT Funds.
(3) The Portfolio Management Fee for EQUITY INDEX PORTFOLIO includes 0.06% for
fund administration.
7
<PAGE> 10
EXAMPLE* -- WITHOUT PRINCIPAL PROTECTION:
STANDARD DEATH BENEFIT
Assuming a 5% annual return on assets, a $1,000 investment would be subject to
the following expenses:
<TABLE>
<CAPTION>
IF CONTRACT IS SURRENDERED AT THE IF CONTRACT IS NOT SURRENDERED OR
END OF PERIOD SHOWN: ANNUITIZED AT END OF PERIOD SHOWN:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
FUNDING OPTION 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market Portfolio....... $80 $111 $145 $228 $20 $61 $105 $228
DEUTSCHE ASSET MANAGEMENT VIT
FUNDS
Small Cap Index Fund....... 80 113 148 233 20 63 108 233
EAFE(R) Equity Index
Fund.................... 82 119 158 254 22 69 118 254
GREENWICH STREET SERIES FUND
Equity Index Portfolio --
Class I Shares.......... 79 108 139 215 19 58 99 215
</TABLE>
ENHANCED DEATH BENEFIT
Assuming a 5% annual return on assets, a $1,000 investment would be subject to
the following expenses:
<TABLE>
<CAPTION>
IF CONTRACT IS SURRENDERED AT THE IF CONTRACT IS NOT SURRENDERED OR
END OF PERIOD SHOWN: ANNUITIZED AT END OF PERIOD SHOWN:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
FUNDING OPTION 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market Portfolio....... $82 $117 $156 $249 $22 $67 $116 $249
DEUTSCHE ASSET MANAGEMENT VIT
FUNDS
Small Cap Index Fund....... 82 119 158 254 22 69 118 254
EAFE(R) Equity Index
Fund.................... 84 125 168 274 24 75 128 274
GREENWICH STREET SERIES FUND
Equity Index Portfolio --
Class I Shares.......... 81 114 150 236 21 64 110 236
</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
0.004% OF ASSETS.
8
<PAGE> 11
FEE TABLE -- WITH PRINCIPAL PROTECTION FEATURE
- --------------------------------------------------------------------------------
CONTRACT OWNER TRANSACTION EXPENSES
<TABLE>
<S> <C> <C> <C>
PRINCIPAL PROTECTION CANCELLATION CHARGE
WITHDRAWAL CHARGE (as a percentage of
(as a percentage of the purchase payment purchase payment withdrawn
withdrawn): from Protected Funding Option):
YEARS SINCE PURCHASE YEAR SINCE PURCHASE
PAYMENT MADE CHARGE PAYMENT MADE CHARGE
1 or less 6% 1 or less 4%
2 6% 2 4%
3 5% 3 4%
4 5% 4 3%
5 4% 5 3%
6 4% 6 3%
7 3% 7 2%
8 2% 8 1%
9 and over 0% 9 and over N/A
ANNUAL CONTRACT FEE ADMINISTRATIVE CHARGE
(Waived if contract value is $50,000 or more) $30
</TABLE>
<TABLE>
<S> <C>
ANNUAL SEPARATE ACCOUNT CHARGES:
(as a percentage of the average daily net assets of the
Separate Account)
</TABLE>
<TABLE>
<CAPTION>
STANDARD ENHANCED
DEATH BENEFIT DEATH BENEFIT
---------------------------
<S> <C> <C>
Mortality and Expense Risk Charge........................... 1.25% 1.45%
Principal Protection Fee (maximum)(1)....................... 2.00% 2.00%
Administrative Expense Charge............................... 0.15% 0.15%
---- ----
Total Separate Account Charges............................ 3.40% 3.60%
</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 OPTION REIMBURSEMENT) REIMBURSEMENT) REIMBURSEMENT)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GREENWICH STREET SERIES FUND
Equity Index Portfolio(2) -- Class I
Shares 0.21% 0.07% 0.28%
</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) The Principal Protection Fee is an annual insurance charge that varies with
the level of guarantee chosen under the Principal Protection Feature. The
maximum Principal Protection Fee is 2.0% annually.
(2) This fee reflects a voluntary expense reimbursement arrangement whereby the
Adviser has agreed to reimburse the fund. Without such arrangement, Total
Expenses would have been 0.69%. In addition, the Portfolio's Management Fee
includes 0.06% for fund administration.
EXAMPLE* -- WITH PRINCIPAL PROTECTION
<TABLE>
<CAPTION>
IF CONTRACT IS SURRENDERED AT THE IF CONTRACT IS NOT SURRENDERED OR
END OF PERIOD SHOWN: ANNUITIZED AT END OF PERIOD SHOWN:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
FUNDING OPTION 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GREENWICH STREET SERIES
FUND
Equity Index Portfolio --
Class I Shares........ (a) 139 207 267 407 39 117 197 407
(b) 141 213 277 423 41 123 207 423
</TABLE>
- ---------------
(a) Standard Death Benefit
(b) Enhanced Death Benefit
* 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
0.004% OF ASSETS.
9
<PAGE> 12
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
See Appendices A and B.
THE ANNUITY CONTRACT
- --------------------------------------------------------------------------------
Travelers Index Annuity is a contract between the contract owner ("you"), and
the Company. You make a purchase payment to us and we credit it to your account.
The Company promises to pay you an income, in the form of annuity payments,
beginning on a future date that you choose, the maturity date. The purchase
payment accumulates 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 payment,
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 payment made under the Contract, except as noted under the
Principal Protection Feature provisions. 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 PAYMENT
The single purchase payment must be at least $10,000. Under certain
circumstances, we may waive the minimum purchase payment requirement. For a
single purchase payment over $1,000,000, you must receive the Company's Home
Office approval before we will accept the purchase payment.
We will apply the single purchase payment within two business days after we
receive it in good order at our Home Office. 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.
THE FUNDING OPTIONS
You choose which of the following variable funding options to have your purchase
payment 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
10
<PAGE> 13
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 under the Contract, 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>
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT
FUNDING OPTION INVESTMENT OBJECTIVE ADVISER/SUBADVISER
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Money Market Portfolio Seeks high current income from short-term Travelers Asset Management
money market instruments while preserving International Company LLC
capital and maintaining a high degree of
liquidity.
DEUTSCHE ASSET MANAGEMENT VIT
FUNDS
EAFE Equity Index Fund Seeks to replicate, before deduction of Bankers Trust Global
expenses, the total return performance of Investment Management
the EAFE Index.
Small Cap Index Fund Seeks to replicate, before deduction of Bankers Trust Global
expenses, the total return performance of Investment Management
the Russell 2000 Index.
GREENWICH STREET SERIES FUND
Equity Index Portfolio* -- Seeks to replicate, before deduction of Travelers Investment
Class I Shares expenses, the total return performance of Management Co.
the S&P 500 index.
</TABLE>
* IF ELECTED WITH THE PRINCIPAL PROTECTION FEATURE, THIS IS REFERRED TO AS THE
"PROTECTED FUNDING OPTION."
OPTIONAL PRINCIPAL PROTECTION FEATURE
(FOR INVESTORS WHO INTEND TO HOLD THE CONTRACT FOR AT LEAST EIGHT YEARS.)
You can choose to protect your investment by purchasing a guarantee called the
Principal Protection Feature. If you purchase this feature, the Company will
guarantee that on the Principal Protection Expiration Date, your Contract will
be worth at least either 115%, 100%, or 90% (depending on the guarantee you
purchased) of your original purchase payment adjusted only for withdrawal
reductions (including the Principal Protection Cancellation Charge), even if the
value of your Contract on that date is less than your original payment. The
purchase payment is not adjusted for administrative charges and mortality and
expense risk charges. To qualify for the Principal Protection Feature, you must
select this feature when you purchase the Contract, and allocate your entire
purchase payment to the Protected Funding Option, the Equity Index Portfolio,
until the Principal Protection Expiration Date (a minimum of eight years). Not
all levels of protection may be purchased at all times. A Principal Protection
Fee and a Cancellation Charge are associated with this feature. (See "Charges
and Deductions.") You should not purchase this feature if you intend to
surrender the Contract within eight years.
At this time, the only Protected Funding Option is Equity Index Portfolio. At
some time in the future, we may add additional Protected Funding Options.
If you buy the Principal Protection Feature, you may not transfer out of the
Protected Funding Option before the end of the eighth contract year. You may
withdraw or annuitize all or part of your contract value before the Principal
Protection Expiration Date, subject to a Principal Protection Cancellation
Charge and withdrawal charges. The amounts you withdraw (including the
11
<PAGE> 14
withdrawal charge and Principal Protection Cancellation Charge) will reduce the
amount of the principal guarantee proportionately.
PRINCIPAL PROTECTION EXPIRATION DATE
If you purchase the Principal Protection Feature, the Company will fulfill its
obligations under the feature on the Principal Expiration Date (which is the
last day of the eighth contract year). On that date, we will contribute to your
contract value any amount needed to bring your contract value up to 115%, 100%
or 90%, depending on your selection, of your original payment adjusted for
withdrawal reductions. In addition, on the Principal Protection Expiration Date,
we will transfer your contract value to the Money Market Portfolio, a money
market fund, unless you select, in writing, a different funding option. On and
after the Principal Protection Expiration Date, you may remain in the Contract
and transfer to any funding options, purchase a new Travelers Index Annuity
Contract with the Principal Protection Feature, annuitize your Contract,
exchange this Contract for another annuity contract, or withdraw your contract
value. Your registered representative will help you with your decision.
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 withdrawal charge, the administrative charges
and/or the mortality and expense risk charge under the Contract when certain
sales or administration of the Contract result in savings or reduced expenses
and/or risks. For certain trusts, we may change the order in which purchase
payments and earnings are withdrawn in order to determine the withdrawal charge.
We will not reduce or eliminate the withdrawal charge or the administrative
charge where such reduction or elimination would be unfairly discriminatory to
any person.
12
<PAGE> 15
WITHDRAWAL CHARGE
We do not deduct a sales charge from the purchase payment when it is applied
under the Contract. However, a withdrawal charge will be deducted if any or all
of the purchase payment is withdrawn during the first eight years following the
purchase payment. We will assess the charge as a percentage of the purchase
payment withdrawn as follows:
<TABLE>
<CAPTION>
YEARS SINCE PURCHASE WITHDRAWAL
PAYMENT MADE CHARGE
<S> <C>
1 or less 6%
2 6%
3 5%
4 5%
5 4%
6 4%
7 3%
8 2%
9 and over 0%
</TABLE>
For purposes of the withdrawal charge calculation, withdrawals are deemed to be
taken first from:
(a) any free withdrawal allowance (as described below);
(b) the remainder of the purchase payment; and then
(c) from any Contract earnings (in excess of the free withdrawal
allowance).
Unless you instruct us otherwise, we will deduct the withdrawal charge from the
amount requested.
We will not deduct a withdrawal charge or Principal Protection Cancellation
Charge from payments we make:
- due to the death of the contract owner or the annuitant (with no
contingent annuitant surviving);
- due to a minimum distribution under our minimum distribution rules then
in effect.
FREE WITHDRAWAL ALLOWANCE
Beginning in the second contract year, you may withdraw up to 10% of the
contract value annually. We calculate the available withdrawal amount as of the
end of the previous contract year. The free withdrawal provision applies to all
partial withdrawals. We reserve the right to not permit the provision on a full
surrender. In Washington state, the free withdrawal provision applies to all
withdrawals. If you have selected the Principal Protection Feature, the
Principal Protection Cancellation Charge will not be assessed on the 10% free
withdrawal allowance. However, any free withdrawal allowance taken will reduce
the principal guarantee proportionately.
OPTIONAL PRINCIPAL PROTECTION FEE
The Company offers you the option of purchasing a guarantee on your investment.
You can obtain protection for 115%, 100% or 90% of your principal if you buy the
Principal Protection Feature at the time you purchase your Contract. Your
registered representative will tell you what levels of protection are currently
available for selection. Under this feature, we will guarantee that, on the
Principal Protection Expiration Date (which is the last day of the eighth
contract year), your Contract will be worth at least either 115%, 100% or 90%
(depending on your choice of guarantees) of your purchase payment, less a
reduction for withdrawals, withdrawal charges, and the Principal Protection
Cancellation Charge, even if the value of your Contract on that date is less
than the chosen percentage of your original purchase payment. Of course, if your
contract value is more than the chosen percentage of your original purchase
payment, you will receive the greater value.
There is an annual charge, the Principal Protection Fee, for this feature. The
Principal Protection Fee compensates us for the risks that we will bear in
providing this guarantee of principal. The Principal Protection Fee is deducted
daily from your contract value at a maximum annual rate of
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<PAGE> 16
2.00%. The charge varies based on the level of guarantee chosen and the current
market conditions that determine our actual costs associated with the Principal
Protection Feature. The charge will be set periodically and will lock in at the
time of contract purchase. The Principal Protection Fee is set forth in your
Contract and is nonrefundable. Generally, the Principal Protection Fee will
conform with the chart below. Please note that these ranges are estimates. The
actual charge will vary due to market conditions, and will be determined by the
Company.
<TABLE>
<CAPTION>
LEVEL OF GUARANTEE CHARGE RANGE
% OF PURCHASE PAYMENT % OF CONTRACT VALUE
<S> <C>
115% 1.90% - 2.00%
100% 1.80% - 2.00%
90% 1.35% - 2.00%
</TABLE>
The Principal Protection Feature must be selected at the time you purchase your
Contract and will extend for the eight years from the contract date until the
Principal Protection Expiration Date. This guarantee is valid only if your
Contract is held to the Principal Protection Expiration Date, and you do not
annuitize or surrender before that date.
PRINCIPAL PROTECTION CANCELLATION CHARGE
We will assess a Principal Protection Cancellation Charge if you select the
Principal Protection Feature and make a full or partial withdrawal from the
Contract, before the Principal Protection Expiration Date. This charge
compensates us for costs incurred should you withdraw from the Principal
Protection Feature before the Principal Protection Expiration Date.
The Principal Protection Cancellation Charge equals up to 4% of the original
purchase payment withdrawn. The percent charged depends on the length of time
you have had your contract. The Principal Protection Cancellation Charge is set
forth in your Contract.
If you have selected the Principal Protection Feature, any partial amounts you
withdraw (including the withdrawal charge and Principal Protection Cancellation
Charge) will reduce the amount of principal guaranteed proportionately. The
Principal Protection Feature which you originally selected covers the remaining
contract value. If you make a full withdrawal before the end of the eighth
contract year, the Principal Protection Guarantee is no longer in effect.
Depending on market conditions, the cash surrender value may be more or less
than the guaranteed principal amount you selected. We will not refund any
expenses or fees associated with the Principal Protection Feature under any
circumstances.
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 $50,000 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 $50,000.
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
14
<PAGE> 17
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.
For contract owners who have elected the standard death benefit, this charge
equals, on an annual basis, 1.25% of the amounts held in each variable funding
option. For those contract owners who have elected an enhanced death benefit,
the mortality and expense risk charge equals, on an annual basis, 1.45% 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 the purchase payment is 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 if you have not elected the Principal
Protection Feature. If you have elected the Principal Protection Feature,
transfers are permitted only after the Principal Protection Expiration Date.
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. Please refer to
Appendix C for information about transfers between the Fixed Account and the
funding options.
DOLLAR COST AVERAGING
This feature is not available during the Guarantee Period if you selected the
Principal Protection Guarantee.
15
<PAGE> 18
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 $10,000 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.
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.
All provisions and terms of the Contract apply to automated transfers, including
provisions relating to the transfer of money between investment options. We
reserve the right to suspend or modify transfer privileges at any time and to
assess a processing fee for this service.
ACCESS TO YOUR MONEY
- --------------------------------------------------------------------------------
Any time before the maturity date, you may redeem all or any portion of the cash
surrender value, that is, the contract value less any withdrawal charge, any
applicable Principal Protection Cancellation Charge, and 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 cash surrender value will be
determined as of the close of business after we receive your surrender request
at the Home Office. The cash surrender value may be more or less than the
purchase payment made. Withdrawals during the annuity period are not allowed.
If you select the Principal Protection Feature and withdraw any amounts prior to
the Principal Protection Expiration Date, the amounts withdrawn (including the
withdrawal charge and Principal Protection Cancellation Charge) will no longer
be protected by the principal guarantee and will reduce the amount of the
principal guarantee proportionately.
We may defer payment of any cash surrender value for a period of up to seven
days after the written request is received, but it is our intent to pay as soon
as possible. We cannot process requests for withdrawals that are not in good
order. We will contact you if there is a deficiency causing a delay and will
advise what is needed to act upon the withdrawal request.
SYSTEMATIC WITHDRAWALS
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.
16
<PAGE> 19
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 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
STANDARD DEATH BENEFIT
DEATH OF ANY OWNER OR THE ANNUITANT BEFORE AGE 85. 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 purchase payment made under the Contract less all partial
withdrawals; or
(3) the Reset Death Benefit Value. The Reset Death Benefit Value is
redetermined once every eight years, at which time it is set equal
to the then current Contract Value. The Reset Death Benefit Value
will also be redetermined any time a partial surrender is taken by
reducing the Reset Death Benefit Value by a Partial Surrender
Reduction (as described below).
17
<PAGE> 20
DEATH OF ANY OWNER OR THE ANNUITANT ON OR AFTER AGE 85. 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 purchase payment made under the Contract less all partial
withdrawals; or
(3) the Reset Death Benefit Value (as described above) available at the
Annuitant's 85th birthday, less any Partial Surrender Reductions (as
described below) which occur after the Annuitant's 85th birthday.
PARTIAL SURRENDER REDUCTION. If you make a partial surrender, the Reset Death
Benefit Value is reduced by a partial surrender reduction which equals (1) the
Reset Death Benefit Value immediately prior to the partial surrender multiplied
by (2) the amount of the partial surrender divided by the contract value
immediately prior to the partial surrender.
For example, assume your current contract value is $55,000. If your original
Reset Death Benefit Value is $50,000, and you decide to make a partial
withdrawal of $10,000, the Reset Death Benefit Value would be reduced as
follows:
50,000 x (10,000/55,000) = 9,090
Your new Reset Death Benefit Value would be 50,000-9,090, or $40,910.
The following example shows what would happen in a declining market. Assume your
current contract value is $30,000. If your original Reset Death Benefit Value is
$50,000, and you decide to make a partial withdrawal of $10,000, the Reset Death
Benefit Value would be reduced as follows:
50,000 x (10,000/30,000) = 16,666
Your new Reset Death Benefit Value would be 50,000-16,666, or $33,334.
ENHANCED DEATH BENEFIT
DEATH OF ANY OWNER OR THE ANNUITANT BEFORE AGE 80. The Company will pay to the
beneficiary a death benefit in an amount equal to the greatest of (1), or (2)
below, each reduced by any applicable premium tax or outstanding loans:
(1) the contract value;
(2) the Roll-Up Death Benefit Value (as described below) available at
the death report date.
DEATH OF ANY OWNER OR THE ANNUITANT ON OR AFTER AGE 80. The Company will pay to
the beneficiary a death benefit in an amount equal to the greatest of (1) or (2)
below, each reduced by any applicable premium tax or outstanding loans:
(1) the contract value;
(2) the Roll-Up Death Benefit Value (as described below) available at
the annuitant's 80th birthday, less any Partial Surrender
Reductions (as described below) which occur after the annuitant's
80th birthday.
ROLL-UP DEATH BENEFIT VALUE: On the contract date, the Roll-Up Death Benefit
Value is equal to the purchase payment. On each anniversary of the contract
date, the Roll-Up Death Benefit Value will be recalculated as follows:
(1) the Roll-Up Death Benefit Value on the previous contract date
anniversary; minus
(2) any Partial Surrender Reductions (as described below) since the
previous contract date anniversary.
The result, increased by 7%, is the new Roll-Up Death Benefit Value.
18
<PAGE> 21
On dates other than a contract date anniversary, the Roll-Up Death Benefit Value
equals:
(1) the Roll-Up Death Benefit Value on the previous contract date
anniversary; minus
(2) any Partial Surrender Reductions (as described below) since the
previous contract date anniversary.
The maximum Roll-Up Death Benefit payable equals 7% per year, to a maximum of
200% of the difference between the purchase payment and all Partial Surrender
Reductions (as described below).
The Partial Surrender Reduction equals:
(1) the amount of the Roll-Up Death Benefit Value just before the
reduction for the partial surrender, multiplied by
(2) the amount of the partial surrender divided by the contract value
just before the partial surrender.
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.
NONQUALIFIED CONTRACTS
<TABLE>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
BEFORE THE MATURITY DATE, UPON THE COMPANY WILL PAY THE UNLESS... MANDATORY PAYOUT
THE DEATH OF THE PROCEEDS TO: RULES APPLY*
- --------------------------------------------------------------------------------------------------------------
Owner (who is not the The beneficiary (ies), Unless, the beneficiary is Yes
annuitant) (with no joint or if none, to the the contract owner's spouse
owner) contract owner's estate. and the 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 Yes
(with no joint owner) or if none, to the the contract owner's spouse
contract owner's estate. and the 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 Yes
annuitant) or if none, to the contract owner's spouse and
contract owner's estate. the spouse elects to assume
and continue the contract.
Or, unless there is a
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.
- --------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE> 22
<TABLE>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
BEFORE THE MATURITY DATE, UPON THE COMPANY WILL PAY THE UNLESS... MANDATORY PAYOUT
THE DEATH OF THE PROCEEDS TO: RULES APPLY*
- --------------------------------------------------------------------------------------------------------------
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.
QUALIFIED CONTRACTS
<TABLE>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
BEFORE THE MATURITY DATE, UPON THE COMPANY WILL PAY THE UNLESS... MANDATORY PAYOUT
THE DEATH OF THE PROCEEDS TO: RULES APPLY (SEE *
ABOVE)
- --------------------------------------------------------------------------------------------------------------
Owner/Annuitant The beneficiary (ies), Yes
or 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.
20
<PAGE> 23
THE ANNUITY PERIOD
- --------------------------------------------------------------------------------
MATURITY DATE
Under the Contract, you can receive regular income payments (annuity payments).
You can choose the month and the year in which those payments begin (maturity
date). You can also choose among income plans (annuity options) or elect a lump
sum distribution. While the annuitant is alive, you can change your selection
any time up to the maturity date. Annuity payments will begin on the maturity
date stated in the Contract unless 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 85th birthday 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.)
If you select the Principal Protection Feature, you may not select a maturity
date that is prior to the Principal Protection Expiration Date. (that is, prior
to the last day of the eighth contract year).
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 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 cash surrender value will be
applied to provide an annuity funded by the same investment options as you have
selected during the accumulation period (contract value, in Oregon). At least 30
days before the maturity date, you may transfer the contract value among the
funding options in order to change the basis on which annuity payments will be
determined. (See "Transfers.") If the Principal Protection Feature is selected
and you annuitize before the Principal Protection Expiration Date, a Principal
Protection Cancellation Charge may apply.
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.
21
<PAGE> 24
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 cash surrender 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 option selection any
time up to the maturity date. Once annuity payments have begun, no further
elections are allowed.
During the annuitant's lifetime, if you do not elect otherwise before the
maturity date, we will pay you (or another designated payee) the first of a
series of monthly annuity payments based on the life of the annuitant, in
accordance with Annuity Option 2 (Life Annuity with 120 monthly payments
assured). For certain qualified contracts, Annuity Option 4 (Joint and Last
Survivor 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 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 cash surrender 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.
22
<PAGE> 25
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 -- Payments for a Fixed Period. The Company will make equal payments
until the cash surrender value applied under this option has been exhausted. The
first payment and all later payments will be paid from amounts attributable to
each investment option in proportion to the cash surrender value attributable to
each. The final payment will include any amount insufficient to make another
full payment.
MISCELLANEOUS CONTRACT PROVISIONS
- --------------------------------------------------------------------------------
RIGHT TO RETURN
You may return the Contract for a full refund of the contract value (including
charges) within ten 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
We reserve the right to terminate the Contract on any business day if the
contract value as of that date is less than $2,000 unless otherwise specified by
state law. Termination will not occur until 31 days after the Company has mailed
notice of termination to the contract owner's last known address and to any
assignee of record. If the Contract is terminated, we will pay you the cash
surrender value less any applicable premium tax, and any applicable
administrative charge.
23
<PAGE> 26
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.
THE SEPARATE ACCOUNTS
- --------------------------------------------------------------------------------
The Travelers Insurance Company and the Travelers Life and Annuity Company each
sponsor separate accounts: The Travelers Fund BD III for Variable Annuities
("Fund BD III") and the Travelers Fund BD IV for Variable Annuities ("Fund BD
IV"), respectively. Both Fund BD III and Fund BD IV were established on March
27, 1997 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 BD III and Fund BD IV 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
24
<PAGE> 27
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. Each quotation assumes a total
redemption at the end of each period with the applicable withdrawal charge
deducted at that time.
NONSTANDARDIZED METHOD. Nonstandardized "total returns" will be calculated in a
similar manner based on the performance of the funding options over a period of
time, usually for the calendar year-to-date, and for the past one-, three-,
five- and ten-year periods. Nonstandardized total returns will not reflect the
deduction of the annual contract administrative charge, which, if reflected,
would decrease the level of performance shown. The withdrawal charge is not
reflected because the Contract is designed for long-term investment.
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
25
<PAGE> 28
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 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.
26
<PAGE> 29
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 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.
27
<PAGE> 30
OTHER INFORMATION
- --------------------------------------------------------------------------------
THE INSURANCE COMPANY
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
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, cash surrender value or death
benefits that are available under the Contract are not less than the minimum
benefits required by the statutes of the state in which the Contract is
delivered. We reserve the right to make any changes, including retroactive
changes, in the Contract to the
28
<PAGE> 31
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, 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.
29
<PAGE> 32
THIS PAGE INTENTIONALLY LEFT BLANK.
<PAGE> 33
APPENDIX A: CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
THE TRAVELERS FUND BD III FOR VARIABLE ANNUITIES
ACCUMULATION VALUES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999
-------------------------------------------------
UNIT VALUE UNIT VALUE ACCUMULATION
BEGINNING OF YEAR END OF YEAR UNITS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET PORTFOLIO (2/98)
Standard Death Benefit................................... 1.044 1.080 87,063
Enhanced Death Benefit................................... 1.041 1.076.... --
DEUTSCHE ASSET MANAGEMENT VIT FUNDS*
EAFE EQUITY INDEX FUND (1/98)
Standard Death Benefit................................ 1.166 1.468.... 86,483
Enhanced Death Benefit................................ 1.163 1.461.... --
SMALL CAP INDEX FUND (1/98)
Standard Death Benefit................................ 0.911 1.080.... 379,973
Enhanced Death Benefit................................ 0.909 1.075.... --
GREENWICH STREET SERIES FUND
EQUITY INDEX PORTFOLIO (12/97)
Standard Death Benefit
0.00% Principal Protection Fee...................... 1.327 1.581.... 1,776,976
0.80% Principal Protection Fee...................... 1.314 1.552.... --
0.85% Principal Protection Fee...................... 1.100 1.299.... --
0.95% Principal Protection Fee...................... 1.314 1.550.... 16,731
1.00% Principal Protection Fee...................... 1.194 1.408.... 577,193
1.10% Principal Protection Fee...................... 1.308 1.541.... 219,822
1.35% Principal Protection Fee...................... 1.309 1.538.... 2,144,703
1.45% Principal Protection Fee...................... 1.095 1.285.... 3,384,455
1.50% Principal Protection Fee...................... 1.302 1.527.... 36,888,854
1.80% Principal Protection Fee...................... 1.000 1.107.... 79,071,649
1.90% Principal Protection Fee...................... 1.302 1.520.... --
2.00% Principal Protection Fee...................... 1.208 1.410.... 20,820
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
--------------------------------------------------
UNIT VALUE UNIT VALUE ACCUMULATION
BEGINNING OF YEAR END OF YEAR UNITS
- --------------------------------------------------------- --------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET PORTFOLIO (2/98)
Standard Death Benefit................................... $1.007 $1.044 8,882
Enhanced Death Benefit................................... 1.007 1.041 --
DEUTSCHE ASSET MANAGEMENT VIT FUNDS*
EAFE EQUITY INDEX FUND (1/98)
Standard Death Benefit................................ 0.972 1.166 --
Enhanced Death Benefit................................ 0.972 1.163 --
SMALL CAP INDEX FUND (1/98)
Standard Death Benefit................................ 0.945 0.911 --
Enhanced Death Benefit................................ 0.944 0.909 --
GREENWICH STREET SERIES FUND
EQUITY INDEX PORTFOLIO (12/97)
Standard Death Benefit
0.00% Principal Protection Fee...................... 1.047 1.327 195,925
0.80% Principal Protection Fee...................... 1.044 1.314 --
0.85% Principal Protection Fee...................... 1.000 1.100 --
0.95% Principal Protection Fee...................... 1.000 1.314 16,752
1.00% Principal Protection Fee...................... 1.000 1.194 22,680
1.10% Principal Protection Fee...................... 1.043 1.308 220,067
1.35% Principal Protection Fee...................... 1.000 1.309 1,556,018
1.45% Principal Protection Fee...................... 1.000 1.095 3,460,179
1.50% Principal Protection Fee...................... 1.042 1.302 2,611,390
1.80% Principal Protection Fee......................
1.90% Principal Protection Fee...................... 1.000 1.302 --
2.00% Principal Protection Fee...................... 1.000 1.208 22,226
<CAPTION>
PERIOD FROM SEPTEMBER 12, 1997 (EFFECTIVE DATE)
TO DECEMBER 31, 1997
--------------------------------------------------
UNIT VALUE UNIT VALUE ACCUMULATION
BEGINNING OF YEAR END OF YEAR UNITS
- --------------------------------------------------------- --------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET PORTFOLIO (2/98)
Standard Death Benefit................................... 1.000 1.007 --
Enhanced Death Benefit................................... 1.000 1.007 --
DEUTSCHE ASSET MANAGEMENT VIT FUNDS*
EAFE EQUITY INDEX FUND (1/98)
Standard Death Benefit................................ 1.000 0.972 --
Enhanced Death Benefit................................ 1.000 0.972 --
SMALL CAP INDEX FUND (1/98)
Standard Death Benefit................................ 1.000 0.945 --
Enhanced Death Benefit................................ 1.000 0.944
GREENWICH STREET SERIES FUND
EQUITY INDEX PORTFOLIO (12/97)
Standard Death Benefit
0.00% Principal Protection Fee...................... 1.000 1.047 --
0.80% Principal Protection Fee...................... 1.000 1.044 --
0.85% Principal Protection Fee......................
0.95% Principal Protection Fee......................
1.00% Principal Protection Fee......................
1.10% Principal Protection Fee...................... 1.000 1.043 143,274
1.35% Principal Protection Fee......................
1.45% Principal Protection Fee......................
1.50% Principal Protection Fee...................... 1.000 1.042 --
1.80% Principal Protection Fee......................
1.90% Principal Protection Fee......................
2.00% Principal Protection Fee......................
</TABLE>
A-1
<PAGE> 34
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999
-------------------------------------------------
UNIT VALUE UNIT VALUE ACCUMULATION
BEGINNING OF YEAR END OF YEAR UNITS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Enhanced Death Benefit
0.00% Principal Protection Fee...................... 1.324 1.573.... 460,640
0.80% Principal Protection Fee...................... 1.310 1.545.... --
0.85% Principal Protection Fee...................... 1.099 1.295.... --
0.95% Principal Protection Fee...................... 1.311 1.544.... --
1.00% Principal Protection Fee...................... 1.193 1.404.... 254,591
1.10% Principal Protection Fee...................... 1.305 1.534.... 9,692
1.35% Principal Protection Fee...................... 1.306 1.532.... 10,990
1.45% Principal Protection Fee...................... 1.094 1.281.... 61,752
1.50% Principal Protection Fee...................... 1.298 1.520.... 3,627,419
1.80% Principal Protection Fee...................... 1.000 1.106.... 1,197,428
1.90% Principal Protection Fee...................... 1.299 1.515.... --
2.00% Principal Protection Fee...................... 1.206 1.405.... 147,045
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
--------------------------------------------------
UNIT VALUE UNIT VALUE ACCUMULATION
BEGINNING OF YEAR END OF YEAR UNITS
- --------------------------------------------------------- --------------------------------------------------
<S> <C> <C> <C>
Enhanced Death Benefit
0.00% Principal Protection Fee...................... 1.046 1.324 16,764
0.80% Principal Protection Fee...................... 1.000 1.310 --
0.85% Principal Protection Fee...................... 1.000 1.099 --
0.95% Principal Protection Fee...................... 1.000 1.311 --
1.00% Principal Protection Fee...................... 1.000 1.193 24,092
1.10% Principal Protection Fee...................... 1.043 1.305 9,713
1.35% Principal Protection Fee...................... 1.000 1.306 11,011
1.45% Principal Protection Fee...................... 1.000 1.094 61,777
1.50% Principal Protection Fee...................... 1.041 1.298 2,000,628
1.80% Principal Protection Fee......................
1.90% Principal Protection Fee...................... 1.000 1.299 --
2.00% Principal Protection Fee...................... 1.000 1.206 147,068
<CAPTION>
PERIOD FROM SEPTEMBER 12, 1997 (EFFECTIVE DATE)
TO DECEMBER 31, 1997
--------------------------------------------------
UNIT VALUE UNIT VALUE ACCUMULATION
BEGINNING OF YEAR END OF YEAR UNITS
- --------------------------------------------------------- --------------------------------------------------
<S> <C> <C> <C>
Enhanced Death Benefit
0.00% Principal Protection Fee...................... -- -- --
0.80% Principal Protection Fee...................... -- -- --
0.85% Principal Protection Fee...................... -- -- --
0.95% Principal Protection Fee...................... -- -- --
1.00% Principal Protection Fee...................... -- -- --
1.10% Principal Protection Fee...................... 1.000 1.043 33,723
1.35% Principal Protection Fee......................
1.45% Principal Protection Fee......................
1.50% Principal Protection Fee...................... 1.000 1.041 9,612
1.80% Principal Protection Fee...................... -- -- --
1.90% Principal Protection Fee...................... -- -- --
2.00% Principal Protection Fee...................... -- -- --
</TABLE>
- ---------------
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 of
Separate Account BD III and the consolidated financial statements of The
Travelers Insurance Company and Subsidiaries are contained in the SAI.
* Formerly the BT Insurance Funds Trust.
A-2
<PAGE> 35
APPENDIX B: CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
THE TRAVELERS FUND BD IV FOR VARIABLE ANNUITIES
ACCUMULATION VALUES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999
-------------------------------------------------
UNIT VALUE UNIT VALUE ACCUMULATION
BEGINNING OF YEAR END OF YEAR UNITS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET PORTFOLIO (10/97)
Standard Death Benefit................................ 1.044 1.080.... 1,382,006
Enhanced Death Benefit................................ 1.041 1.076.... 1,142,472
DEUTSCHE ASSET MANAGEMENT VIT FUNDS*
EAFE EQUITY INDEX FUND (10/97)
Standard Death Benefit................................ 1.166 1.468.... 1,264,534
Enhanced Death Benefit................................ 1.163 1.461.... 371,413
SMALL CAP INDEX FUND (10/97)
Standard Death Benefit................................ 0.911 1.080.... 3,362,605
Enhanced Death Benefit................................ 0.909 1.075.... 4,438,492
GREENWICH STREET SERIES FUND
EQUITY INDEX PORTFOLIO (9/97)
Standard Death Benefit
0.00% Principal Protection Fee...................... 1.327 1.581.... 15,906,377
0.80% Principal Protection Fee...................... 1.314 1.552.... 208,129
0.85% Principal Protection Fee...................... 1.100 1.299.... 412,494
0.95% Principal Protection Fee...................... 1.314 1.550.... 935,721
1.00% Principal Protection Fee...................... 1.194 1.408.... 3,838,256
1.10% Principal Protection Fee...................... 1.308 1.541.... 6,291,395
1.35% Principal Protection Fee...................... 1.309 1.538.... 20,668,805
1.45% Principal Protection Fee...................... 1.095 1.285.... 15,944,192
1.50% Principal Protection Fee...................... 1.302 1.527.... 123,986,805
1.80% Principal Protection Fee...................... 1.000 1.107.... 46,666,708
1.90% Principal Protection Fee...................... 1.302 1.521.... 159,489
2.00% Principal Protection Fee...................... 1.208 1.410.... 1,181,707
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
--------------------------------------------------
UNIT VALUE UNIT VALUE ACCUMULATION
BEGINNING OF YEAR END OF YEAR UNITS
- --------------------------------------------------------- --------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET PORTFOLIO (10/97)
Standard Death Benefit................................ $1.007 $1.044 728,039
Enhanced Death Benefit................................ 1.007 1.041 86,459
DEUTSCHE ASSET MANAGEMENT VIT FUNDS*
EAFE EQUITY INDEX FUND (10/97)
Standard Death Benefit................................ 0.972 1.166 786,358
Enhanced Death Benefit................................ 0.972 1.163 135,896
SMALL CAP INDEX FUND (10/97)
Standard Death Benefit................................ 0.945 0.911 2,147,107
Enhanced Death Benefit................................ 0.944 0.909 3,882,023
GREENWICH STREET SERIES FUND
EQUITY INDEX PORTFOLIO (9/97)
Standard Death Benefit
0.00% Principal Protection Fee...................... 1.047 1.327 6,591,030
0.80% Principal Protection Fee...................... 1.044 1.314 208,150
0.85% Principal Protection Fee...................... 1.000 1.100 422,929
0.95% Principal Protection Fee...................... 1.000 1.314 950,940
1.00% Principal Protection Fee...................... 1.000 1.194 533,038
1.10% Principal Protection Fee...................... 1.043 1.308 6,730,772
1.35% Principal Protection Fee...................... 1.000 1.309 21,883,580
1.45% Principal Protection Fee...................... 1.000 1.095 16,643,685
1.50% Principal Protection Fee...................... 1.042 1.302 27,872,471
1.80% Principal Protection Fee......................
1.90% Principal Protection Fee...................... 1.000 1.302 159,531
2.00% Principal Protection Fee...................... 1.000 1.208 1,238,057
<CAPTION>
PERIOD FROM SEPTEMBER 12, 1997 (EFFECTIVE DATE)
TO DECEMBER 31, 1997
--------------------------------------------------
UNIT VALUE UNIT VALUE ACCUMULATION
BEGINNING OF YEAR END OF YEAR UNITS
- --------------------------------------------------------- --------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET PORTFOLIO (10/97)
Standard Death Benefit................................ $1.000 $1.007 46,237
Enhanced Death Benefit................................ 1.000 1.007 --
DEUTSCHE ASSET MANAGEMENT VIT FUNDS*
EAFE EQUITY INDEX FUND (10/97)
Standard Death Benefit................................ 1.000 0.972 144,516
Enhanced Death Benefit................................ 1.000 0.972 10,530
SMALL CAP INDEX FUND (10/97)
Standard Death Benefit................................ 1.000 0.945 441,762
Enhanced Death Benefit................................ 1.000 0.944 644,012
GREENWICH STREET SERIES FUND
EQUITY INDEX PORTFOLIO (9/97)
Standard Death Benefit
0.00% Principal Protection Fee...................... 1.000 1.047 934,805
0.80% Principal Protection Fee...................... 1.000 1.044 208,174
0.85% Principal Protection Fee......................
0.95% Principal Protection Fee......................
1.00% Principal Protection Fee......................
1.10% Principal Protection Fee...................... 1.000 1.043 5,313,886
1.35% Principal Protection Fee......................
1.45% Principal Protection Fee......................
1.50% Principal Protection Fee...................... 1.000 1.042 358,499
1.80% Principal Protection Fee......................
1.90% Principal Protection Fee......................
2.00% Principal Protection Fee......................
</TABLE>
B-1
<PAGE> 36
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999
-------------------------------------------------
UNIT VALUE UNIT VALUE ACCUMULATION
BEGINNING OF YEAR END OF YEAR UNITS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Enhanced Death Benefit
0.00% Principal Protection Fee...................... 1.324 1.573.... 10,466,930
0.80% Principal Protection Fee...................... 1.310 1.545.... --
0.85% Principal Protection Fee...................... 1.099 1.295.... 49,914
0.95% Principal Protection Fee...................... 1.311 1.544.... 171,111
1.00% Principal Protection Fee...................... 1.193 1.404.... 730,273
1.10% Principal Protection Fee...................... 1.305 1.534.... 2,850,045
1.35% Principal Protection Fee...................... 1.306 1.532.... 4,436,116
1.45% Principal Protection Fee...................... 1.094 1.281.... 6,221,780
1.50% Principal Protection Fee...................... 1.298 1.520.... 49,484,678
1.80% Principal Protection Fee...................... 1.000 1.106.... 17,179,177
1.90% Principal Protection Fee...................... 1.299 1.515.... 142,657
2.00% Principal Protection Fee...................... 1.206 1.405.... 298,659
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
--------------------------------------------------
UNIT VALUE UNIT VALUE ACCUMULATION
BEGINNING OF YEAR END OF YEAR UNITS
- --------------------------------------------------------- --------------------------------------------------
<S> <C> <C> <C>
Enhanced Death Benefit
0.00% Principal Protection Fee...................... 1.046 1.324 5,435,838
0.80% Principal Protection Fee...................... 1.000 1.310 --
0.85% Principal Protection Fee...................... 1.000 1.099 49,914
0.95% Principal Protection Fee...................... 1.000 1.311 172,533
1.00% Principal Protection Fee...................... 1.000 1.193 102,873
1.10% Principal Protection Fee...................... 1.043 1.305 3,412,468
1.35% Principal Protection Fee...................... 1.000 1.306 4,436,276
1.45% Principal Protection Fee...................... 1.000 1.094 6,481,921
1.50% Principal Protection Fee...................... 1.041 1.298 8,321,419
1.80% Principal Protection Fee......................
1.90% Principal Protection Fee...................... 1.000 1.299 142,785
2.00% Principal Protection Fee...................... 1.000 1.206 341,977
<CAPTION>
PERIOD FROM SEPTEMBER 12, 1997 (EFFECTIVE DATE)
TO DECEMBER 31, 1997
--------------------------------------------------
UNIT VALUE UNIT VALUE ACCUMULATION
BEGINNING OF YEAR END OF YEAR UNITS
- --------------------------------------------------------- --------------------------------------------------
<S> <C> <C> <C>
Enhanced Death Benefit
0.00% Principal Protection Fee...................... 1.000 1.046 737,335
0.80% Principal Protection Fee......................
0.85% Principal Protection Fee......................
0.95% Principal Protection Fee......................
1.00% Principal Protection Fee......................
1.10% Principal Protection Fee...................... 1.000 1.043 3,330,660
1.35% Principal Protection Fee......................
1.45% Principal Protection Fee......................
1.50% Principal Protection Fee...................... 1.000 1.041 99,043
1.80% Principal Protection Fee......................
1.90% Principal Protection Fee......................
2.00% Principal Protection Fee......................
</TABLE>
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 of
Separate Account BD IV and of The Travelers Life and Annuity Company are
contained in the SAI.
* Formerly BT Insurance Funds Trust.
B-2
<PAGE> 37
APPENDIX C
- --------------------------------------------------------------------------------
THE FIXED ACCOUNT OPTION
(AVAILABLE ONLY IF YOU HAVE NOT SELECTED THE PRINCIPAL PROTECTION FEATURE
OR AFTER THE PRINCIPAL PROTECTION EXPIRATION DATE)
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
<PAGE> 38
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<PAGE> 39
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-12547S, and The Travelers Life
and Annuity Statement of Additional Information is printed on Form L-12548S
Name:
Address:
D-1
<PAGE> 40
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<PAGE> 41
L-12547 May 1, 2000
<PAGE> 42
PART B
Information Required in a Statement of Additional Information
<PAGE> 43
Travelers Index Annuity
STATEMENT OF ADDITIONAL INFORMATION
dated
May 1, 2000
for
THE TRAVELERS FUND BD IV FOR VARIABLE ANNUITIES
ISSUED BY
THE TRAVELERS LIFE AND ANNUITY COMPANY
This Statement of Additional Information ("SAI") is not a prospectus but relates
to, and should be read in conjunction with, the Individual Variable Annuity
Contract Prospectus dated May 1, 2000. A copy of the Prospectus may be obtained
by writing to The Travelers Life and Annuity Company, Annuity Services, One
Tower Square, Hartford, Connecticut 06183, or by calling 1-800-842-8573 or by
accessing the Securities and Exchange Commission's website at
http://www.sec.gov.
TABLE OF CONTENTS
THE INSURANCE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . 1
PRINCIPAL UNDERWRITER . . . . . . . . . . . . . . . . . . . . . . . . . 1
DISTRIBUTION AND PRINCIPAL UNDERWRITING AGREEMENT . . . . . . . . . . . 2
VALUATION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . 2
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 3
MIXED AND SHARED FUNDING. . . . . . . . . . . . . . . . . . . . . . . . 7
FEDERAL TAX CONSIDERATIONS. . . . . . . . . . . . . . . . . . . . . . . 7
INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . 10
FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . F-1
<PAGE> 44
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 BD IV 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 BD IV 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 BD IV 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 BD IV. 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> 45
DISTRIBUTION AND PRINCIPAL UNDERWRITING AGREEMENT
Under the terms of the Distribution and Principal Underwriting
Agreement among Fund BD IV, 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> 46
The gross investment rate may be either positive or negative. A
Sub-Account's assets are based on the net asset value of the Funding Option, and
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 business day
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 Funding Options of Fund BD IV. 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 allocated to a Funding Option, and then related to ending redeemable
values over one-, five- and ten-year periods, or inception, if a Funding Option
has not been in existence for one of the prescribed periods. 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 per contract sold under the Prospectus to which this SAI relates.
Each quotation assumes a total redemption at the end of each period with the
assessment of all applicable withdrawal charges.
NONSTANDARDIZED METHOD. Nonstandardized "total returns" will be
calculated in a similar manner based on the performance of the funding options
over a period of time, usually for the calendar year-to-date, and for the past
one-, three-, five- and ten-year periods. Nonstandardized total returns will not
reflect the deduction of any applicable withdrawal charge or the annual contract
administrative charge, which, if reflected, would decrease the level of
performance shown. The withdrawal charge is not reflected because the Contract
is designed for long-term investment.
For Funding Options that were in existence prior to the date before
they became available under Fund BD IV, the nonstandardized average annual total
return quotations may be accompanied by returns showing the investment
performance that such Funding Options would have achieved (reduced
3
<PAGE> 47
by the applicable charges) had they been held available 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 BD IV and the Funding Options.
Average annual total returns for each of the Funding Options computed
according to the standardized and nonstandardized methods for the period ending
December 31, 1999 are set forth in the following tables.
4
<PAGE> 48
TRAVELERS INDEX ANNUITY
STANDARDIZED PERFORMANCE UPDATE AS OF 12/31/99
<TABLE>
<CAPTION>
Standard Death Benefit Enhanced Death Benefit
WITHOUT PRINCIPAL PROTECTION Inception Date* 1 Year Inception 1 Year Inception
<S> <C> <C> <C> <C> <C>
STOCK ACCOUNTS:
Bankers Trust EAFE Index Fund 10/23/1997 19.81% 16.91% 19.56% 16.66%
Bankers Trust Small Cap Index Fund 10/7/1997 12.48% 0.84% 12.24% 0.63%
Equity Index Portfolio 9/12/1997 13.07% 20.00% 12.83% 19.75%
MONEY MARKET ACCOUNTS:
Travelers Money Market Portfolio 10/17/1997 -2.50% 0.88% -2.71% 0.67%
</TABLE>
<TABLE>
<CAPTION>
Standard Death Benefit Enhanced Death Benefit
WITH PRINCIPAL PROTECTION Inception Date* 1 Year Inception 1 Year Inception
<S> <C> <C> <C> <C> <C>
Equity Index Portfolio 9/12/1997 10.71% 17.52% 10.48% 17.28%
</TABLE>
* The date that the Funding Option became available under the Separate Account.
5
<PAGE> 49
TRAVELERS INDEX ANNUITY
NON STANDARDIZED PERFORMANCE UPDATE AS OF 12/31/99
<TABLE>
<CAPTION>
STANDARD DEATH BENEFIT
Average Annual Returns
WITHOUT PRINCIPAL PROTECTION Inception YTD 1 Year 3 Year 5 Year Inception
Date*
<S> <C> <C> <C> <C> <C> <C>
STOCK ACCOUNTS:
Bankers Trust EAFE Index Fund 10/23/1997 25.83% 25.83% - - 19.15%
Bankers Trust Small Cap Index Fund 10/7/1997 18.50% 18.50% - - 3.50%
Equity Index Portfolio 11/30/1991 19.09% 19.09% 25.72% 26.87% 19.56%
MONEY MARKET ACCOUNTS:
Travelers Money Market Portfolio 12/31/1987 3.52% 3.52% 3.56% 3.23% 3.62%
</TABLE>
<TABLE>
<CAPTION>
ENHANCED DEATH BENEFIT
Average Annual Returns
WITHOUT PRINCIPAL PROTECTION YTD 1 Year 3 Year 5 Year Inception
<S> <C> <C> <C> <C> <C>
STOCK ACCOUNTS:
Bankers Trust EAFE Index Fund 25.58% 25.58% - - 18.91%
Bankers Trust Small Cap Index Fund 18.26% 18.26% - - 3.29%
Equity Index Portfolio 18.85% 18.85% 25.48% 26.62% 19.32%
MONEY MARKET ACCOUNTS:
Travelers Money Market Portfolio 3.31% 3.31% 3.35% 3.03% 3.41%
</TABLE>
<TABLE>
<CAPTION>
STANDARD DEATH BENEFIT
Average Annual Returns
WITH PRINCIPAL PROTECTION Inception YTD 1 Year 3 Year 5 Year Inception
Date
<S> <C> <C> <C> <C> <C> <C>
Equity Index Portfolio 11/30/1991 16.73% 16.73% 23.25% 24.39% 17.21%
</TABLE>
<TABLE>
<CAPTION>
ENHANCED DEATH BENEFIT
Average Annual Returns
WITH PRINCIPAL PROTECTION YTD 1 Year 3 Year 5 Year Inception
<S> <C> <C> <C> <C> <C>
Equity Index Portfolio 16.50% 16.50% 23.01% 24.15% 16.98%
</TABLE>
* The date that the underlying fund began operating. As presented above,
"Inception" is the date that the underlying fund commenced operations. For
Funds that were in existence before they became available under the separate
account, the performance figures represent actual returns of the fund
adjusted to reflect the charges that would have been assessed under the
separate account during the period(s) shown. Funds in existence for less
than one year reflect cumulative performance; all others are annualized.
6
<PAGE> 50
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 701/2. Distributions must also begin or be continued according to required
patterns following the death of the contract owner or the annuitant.
NONQUALIFIED ANNUITY CONTRACTS
Individuals may purchase tax-deferred annuities without tax law funding
limits. The purchase payments receive no tax benefit, deduction or deferral, but
increases in the value of the contract are generally deferred from tax until
distribution. If a nonqualified annuity is owned by other than an individual,
however, (e.g., by a corporation), the increases in value attributable to
purchase payments made after February 28, 1986 are includable in income
annually. Furthermore, for contracts issued after April 22, 1987, all deferred
increases in value will be includable in the income of a contract owner when the
contract owner transfers the contract without adequate consideration.
If two or more annuity contracts are purchased from the same insurer
within the same calendar year, distributions from any of them will be taxed
based upon the amount of income in all of the same calendar year series of
annuities. This will generally have the effect of causing taxes to be paid
sooner on the deferred gain in the contracts.
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
7
<PAGE> 51
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
8
<PAGE> 52
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 701/2 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.
9
<PAGE> 53
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 BD IV as of December 31, 1999 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.
10
<PAGE> 54
ANNUAL REPORT
DECEMBER 31, 1999
THE TRAVELERS FUND BD IV
FOR VARIABLE ANNUITIES
[TRAVELERS LIFE & ANNUITY LOGO]
The Travelers Insurance Company
The Travelers Life and Annuity Company
One Tower Square
Hartford, CT 06183
<PAGE> 55
THE TRAVELERS FUND BD IV
FOR VARIABLE ANNUITIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<S> <C> <C>
ASSETS:
Investments in eligible funds at market value:
Alliance Variable Product Series Fund, 204,232 shares (cost $7,749,919) ........... $ 8,250,975
American Variable Insurance Series Class II, 314,038 shares (cost $12,695,796) .... 12,356,824
BT Insurance Funds Trust, 898,727 shares (cost $9,533,293) ........................ 10,784,099
Greenwich Street Series Fund, 13,261,784 shares (cost $399,570,800) ............... 473,602,613
Money Market Portfolio, 2,716,227 shares (cost $2,716,227) ........................ 2,716,227
Salomon Brothers Variable Series Funds Inc., 84,867 shares (cost $1,001,712) ...... 1,054,936
Templeton Variable Products Series Fund, 198,510 shares (cost $3,321,210) ......... 3,555,705
The Travelers Series Trust, 336,814 shares (cost $6,462,902) ...................... 7,146,124
Travelers Series Fund Inc., 7,064,437 shares (cost $25,568,107) ................... 26,679,312
Van Kampen Life Investment Trust, 186,472 shares (cost $7,337,745) ................ 8,620,591
Variable Insurance Products Fund II, 165,082 shares (cost $4,487,823) ............. 4,803,882
------------
Total Investments (cost $480,445,534) ........................................... $559,571,288
Receivables:
Dividends ......................................................................... 17,283
Purchase payments and transfers from other Travelers accounts ..................... 3,409,343
Other assets ........................................................................ 659
------------
Total Assets .................................................................... 562,998,573
------------
LIABILITIES:
Payables:
Contract surrenders and transfers to other Travelers accounts ..................... 83,963
Insurance charges ................................................................. 176,515
Administrative fees ............................................................... 20,101
Equity protection fees ............................................................ 156,561
------------
Total Liabilities ..................................................................... 437,140
------------
NET ASSETS: ........................................................................... $562,561,433
============
</TABLE>
See Notes to Financial Statements
-1-
<PAGE> 56
THE TRAVELERS FUND BD IV
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends ................................................................. $ 4,358,909
EXPENSES:
Insurance charges ......................................................... $ 4,071,900
Administrative fees ....................................................... 466,991
Equity protection fees .................................................... 3,899,344
------------
Total expenses .......................................................... 8,438,235
------------
Net investment loss ................................................... (4,079,326)
------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold .......................................... 5,143,500
Cost of investments sold ................................................ 5,113,736
------------
Net realized gain (loss) .............................................. 29,764
Change in unrealized gain (loss) on investments:
Unrealized gain at December 31, 1998 .................................... 16,160,307
Unrealized gain at December 31, 1999 .................................... 79,125,754
------------
Net change in unrealized gain (loss) for the year ..................... 62,965,447
------------
Net realized gain (loss) and change in unrealized gain (loss) ....... 62,995,211
------------
Net increase in net assets resulting from operations ...................... $ 58,915,885
============
</TABLE>
See Notes to Financial Statements
-2-
<PAGE> 57
THE TRAVELERS FUND BD IV
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 loss ................................................... $ (4,079,326) $ (979,418)
Net realized gain (loss) from investment transactions ................. 29,764 298,053
Net change in unrealized gain (loss) on investments ................... 62,965,447 16,171,529
------------- -------------
Net increase in net assets resulting from operations ................ 58,915,885 15,490,164
------------- -------------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 296,337,235 and 110,695,098 units, respectively) ..... 364,039,921 124,285,134
Participant transfers from other Travelers accounts
(applicable to 8,051,001 and 3,224,235 units, respectively) ......... 9,418,433 3,308,122
Administrative charges
(applicable to 24,174 and 6,544 units, respectively) ................ (33,161) (6,961)
Contract surrenders
(applicable to 6,678,999 and 2,905,308 units, respectively) ......... (9,063,729) (3,367,984)
Participant transfers to other Travelers accounts
(applicable to 6,203,686 and 2,723,425 units, respectively) ......... (6,682,386) (2,885,898)
Other payments to participants
(applicable to 2,030,911 and 655,386 units, respectively) ........... (2,815,354) (723,317)
------------- -------------
Net increase in net assets resulting from unit transactions ......... 354,863,724 120,609,096
------------- -------------
Net increase in net assets ........................................ 413,779,609 136,099,260
NET ASSETS:
Beginning of year ..................................................... 148,781,824 12,682,564
------------- -------------
End of year ........................................................... $ 562,561,433 $ 148,781,824
============= =============
</TABLE>
See Notes to Financial Statements
-3-
<PAGE> 58
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Fund BD IV for Variable Annuities ("Fund BD IV") 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 BD IV is registered under the Investment Company Act of 1940, as
amended, as a unit investment trust. Fund BD IV includes the Travelers Index
Annuity and Travelers Vintage XTRA Annuity products.
Participant purchase payments applied to Fund BD IV 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 BD
IV were: Money Market Portfolio; Equity Index Portfolio, Appreciation
Portfolio, Diversified Strategic Income Portfolio, Equity Index Portfolio
Class II and Total Return Portfolio of Greenwich Street Series Fund; Salomon
Brothers Variable Capital Fund, Salomon Brothers Variable Investors Fund and
Salomon Brothers Variable Small Cap Growth Fund of Salomon Brothers Variable
Series Funds Inc.; Disciplined Small Cap Stock Portfolio, Equity Income
Portfolio, Large Cap Portfolio, MFS Emerging Growth Portfolio, MFS Research
Portfolio and Strategic Stock Portfolio of The Travelers Series Trust;
Alliance Growth Portfolio, MFS Total Return Portfolio, Smith Barney
Aggressive Growth Portfolio, Smith Barney High Income Portfolio, Smith
Barney International Equity Portfolio, Smith Barney Large Capitalization
Growth Portfolio, Smith Barney Large Cap Value Portfolio, Smith Barney Mid
Cap Portfolio, Smith Barney Money Market Portfolio, Travelers Managed Income
Portfolio and Van Kampen Enterprise Portfolio of Travelers Series Fund Inc.
(all of which are managed by affiliates of The Travelers); Small Cap Index
Fund and EAFE(R) Equity Index Fund of BT Insurance Funds Trust; Premier
Growth Portfolio Class B of Alliance Variable Product Series Fund; Global
Growth Fund, Growth Fund, Growth Income Fund of American Variable Insurance
Series Class 2; Franklin Small Cap Investment Fund Class 2 and Templeton
International Fund Class 2 of the Templeton Variable Products Series Fund;
Emerging Growth Portfolio of Van Kampen Life Investment Trust; and
Contrafund(R) Portfolio-Service Class of Variable Insurance Products Fund
II. All of the funds are Massachusetts business trusts except for Salomon
Brothers Variable Series Funds Inc., Travelers Series Fund Inc., both of
which are incorporated under Maryland law; and Van Kampen Life Investment
trust which is a Delaware business trust. 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 BD IV 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 BD IV 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 BD IV. Fund BD IV 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.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
-4-
<PAGE> 59
2. INVESTMENTS
The aggregate costs of purchases and proceeds from sales of investments were
$353,297,908 and $5,143,500 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
$480,445,534 at December 31, 1999. Gross unrealized appreciation for all
investments at December 31, 1999 was $511,968. Gross unrealized depreciation
for all investments at December 31, 1999 was $79,637,722.
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% and
1.45% of the amounts held in each funding option for the Standard Death
Benefit and Enhanced Death Benefit, respectively.
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 amount held in each funding option.
For the Travelers Index Annuity contracts in the accumulation phase with a
contract value less than $50,000, 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. For the Travelers
Vintage XTRA Annuity contracts in the accumulation phase with a contract
value less than $100,000, an annual charge of $40 (prorated for partial
periods) is deducted from participant account balances and paid to Travelers
Life to cover contract administrative charges.
Participants in the Equity Index Portfolio may elect, at the time of
purchase, to obtain a Principal Protection Feature. Under this feature,
Travelers Life will guarantee that the value of the contract after eight
years will be at least equal to 115%, 100% or 90% of the purchase payment.
The annual fee, which depends on the level of protection that is chosen as
well as market conditions, is equivalent to an amount of up to 2.00% of the
participant's contract value. Additionally, participants who withdraw from
this feature before the end of the eighth contact year will be subject to a
withdrawal fee of up to 4% of the original purchase payment withdrawn.
No sales charge is deducted from participant purchase payments when they are
received. However, for the Travelers Index Annuity products, Travelers Life
generally assesses a contingent deferred sales charge of up to 6% if a
participant's purchase payment is surrendered within eight years of its
payment date. For the Travelers Vintage XTRA Annuity products, Travelers
Life generally assesses a contingent deferred sales charge of up to 8% if a
participant's purchase payment is surrendered within nine years of its
payment date. Contract surrender payments include $371,535 and $28,216 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 BD IV changed its basis of reporting realized gains and losses for
investment transactions from an identified cost basis to an average cost
basis. The accounting change had no effect on net assets.
-5-
<PAGE> 60
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. NET CONTRACT OWNERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31, 1999
----------------------------------------
ACCUMULATION UNIT NET
UNITS VALUE ASSETS
------------ ------ ------------
<S> <C> <C> <C>
Alliance Variable Product Series Fund
Premier Growth Portfolio Class B
Standard Death Benefit ......................... 2,118,594 $1.127 $ 2,388,237
Enhanced Death Benefit ......................... 5,273,207 1.127 5,942,470
American Variable Insurance Series Class 2
Global Growth Fund
Standard Death Benefit ......................... 496,228 1.301 645,665
Enhanced Death Benefit ......................... 1,335,904 1.301 1,737,659
Growth Fund
Standard Death Benefit ......................... 790,492 1.184 935,685
Enhanced Death Benefit ......................... 4,513,981 1.183 5,341,413
Growth-Income Fund
Standard Death Benefit ......................... 1,022,054 1.031 1,054,023
Enhanced Death Benefit ......................... 2,847,709 1.031 2,935,865
BT Insurance Funds Trust
EAFE Equity Index Fund
Standard Death Benefit ......................... 1,264,534 1.468 1,855,706
Enhanced Death Benefit ......................... 371,413 1.461 542,665
Small Cap Index Fund
Standard Death Benefit ......................... 3,362,605 1.080 3,630,909
Enhanced Death Benefit ......................... 4,438,492 1.075 4,771,236
Greenwich Street Series Fund
Equity Index Portfolio
Standard Death Benefit
0.00% Principle Protection Fee ................. 15,906,377 1.581 25,143,283
0.80% Principle Protection Fee ................. 208,129 1.552 322,995
0.85% Principle Protection Fee ................. 412,494 1.299 536,029
0.95% Principle Protection Fee ................. 935,721 1.550 1,450,226
1.00% Principle Protection Fee ................. 3,838,256 1.408 5,403,383
1.10% Principle Protection Fee ................. 6,291,395 1.541 9,696,542
1.35% Principle Protection Fee ................. 20,668,805 1.538 31,781,421
1.45% Principle Protection Fee ................. 15,944,192 1.285 20,496,108
1.50% Principle Protection Fee ................. 123,986,805 1.527 189,344,417
1.80% Principle Protection Fee ................. 46,666,708 1.107 51,666,180
1.90% Principle Protection Fee ................. 159,489 1.521 242,591
2.00% Principle Protection Fee ................. 1,181,707 1.410 1,666,242
</TABLE>
-6-
<PAGE> 61
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. NET CONTRACT OWNERS' EQUITY (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1999
----------------------------------------
ACCUMULATION UNIT NET
UNITS VALUE ASSETS
------------ ------ ------------
<S> <C> <C> <C>
Greenwich Street Series Fund (continued)
Enhanced Death Benefit
0.00% Principle Protection Fee ................. 10,466,930 $1.573 $ 16,469,271
0.80% Principle Protection Fee ................. - 1.545 -
0.85% Principle Protection Fee ................. 49,914 1.295 64,638
0.95% Principle Protection Fee ................. 171,111 1.544 264,152
1.00% Principle Protection Fee ................. 730,273 1.404 1,025,307
1.10% Principle Protection Fee ................. 2,850,045 1.534 4,372,390
1.35% Principle Protection Fee ................. 4,436,116 1.532 6,794,335
1.45% Principle Protection Fee ................. 6,221,780 1.281 7,972,959
1.50% Principle Protection Fee ................. 49,484,678 1.520 75,222,481
1.80% Principle Protection Fee ................. 17,179,177 1.106 19,008,406
1.90% Principle Protection Fee ................. 142,657 1.515 216,135
2.00% Principle Protection Fee ................. 298,659 1.405 419,513
Appreciation Portfolio
Standard Death Benefit ......................... 407,917 1.044 425,780
Enhanced Death Benefit ......................... 1,032,853 1.043 1,077,748
Diversified Strategic Income Portfolio
Standard Death Benefit ......................... 156,084 0.999 155,922
Enhanced Death Benefit ......................... 315,232 0.999 314,815
Total Return Portfolio
Standard Death Benefit ......................... 29,295 1.048 30,708
Enhanced Death Benefit ......................... 193,248 1.048 202,532
Equity Index Portfolio Class II
Standard Death Benefit ......................... 638,959 1.063 679,488
Enhanced Death Benefit ......................... 1,331,138 1.063 1,415,185
Money Market Portfolio
Standard Death Benefit ......................... 1,382,006 1.080 1,492,999
Enhanced Death Benefit ......................... 1,142,472 1.076 1,228,783
Salomon Brothers Variable Series Funds Inc.
Salomon Brothers Variable Small Cap Growth Fund
Standard Death Benefit ......................... 56,346 1.213 68,369
Enhanced Death Benefit ......................... 334,378 1.213 405,601
Salomon Brothers Variable Capital Fund
Standard Death Benefit ......................... 42,351 1.032 43,717
Enhanced Death Benefit ......................... 144,350 1.032 148,973
Salomon Brothers Variable Investors Fund
Standard Death Benefit ......................... 69,063 1.014 70,019
Enhanced Death Benefit ......................... 323,132 1.014 327,546
</TABLE>
-7-
<PAGE> 62
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. NET CONTRACT OWNERS' EQUITY (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1999
----------------------------------------
ACCUMULATION UNIT NET
UNITS VALUE ASSETS
------------ ------ ------------
<S> <C> <C> <C>
Templeton Variable Products Series Fund
Franklin Small Cap Investments Fund Class 2
Standard Death Benefit ......................... 719,638 $1.173 $ 843,843
Enhanced Death Benefit ......................... 1,075,985 1.172 1,261,377
Templeton International Fund Class 2
Standard Death Benefit ......................... 445,419 1.109 494,014
Enhanced Death Benefit ......................... 940,873 1.109 1,043,201
The Travelers Series Trust
Equity Income Portfolio
Standard Death Benefit ......................... 174,100 1.052 183,209
Enhanced Death Benefit ......................... 581,591 1.052 611,825
Large Cap Portfolio
Standard Death Benefit ......................... 500,514 1.126 563,399
Enhanced Death Benefit ......................... 715,311 1.125 804,932
MFS Emerging Growth Portfolio
Standard Death Benefit ......................... 936,269 1.433 1,341,343
Enhanced Death Benefit ......................... 1,856,574 1.432 2,658,984
MFS Research Portfolio
Standard Death Benefit ......................... 307,732 1.135 349,331
Enhanced Death Benefit ......................... 648,369 1.135 735,788
Strategic Stock Portfolio
Standard Death Benefit ......................... 35,199 0.993 34,941
Enhanced Death Benefit ......................... 1,165 0.992 1,156
Disciplined Small Cap Stock Portfolio
Standard Death Benefit ......................... 36,483 1.082 39,465
Enhanced Death Benefit ......................... 64,294 1.082 69,536
Travelers Series Fund Inc.
Alliance Growth Portfolio
Standard Death Benefit ......................... 1,333,895 1.149 1,532,888
Enhanced Death Benefit ......................... 2,482,793 1.149 2,852,292
MFS Total Return Portfolio
Standard Death Benefit ......................... 229,693 1.003 230,318
Enhanced Death Benefit ......................... 421,734 1.002 422,747
Smith Barney International Equity Portfolio
Standard Death Benefit ......................... 945,011 1.230 1,161,913
Enhanced Death Benefit ......................... 456,157 1.229 560,716
Smith Barney Money Market Portfolio
Standard Death Benefit ......................... 2,574,330 1.006 2,588,880
Enhanced Death Benefit ......................... 4,261,461 1.005 4,284,303
Smith Barney Aggressive Growth Portfolio
Standard Death Benefit ......................... 1,210,115 1.210 1,463,867
Enhanced Death Benefit ......................... 1,899,455 1.209 2,297,030
</TABLE>
-8-
<PAGE> 63
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. NET CONTRACT OWNERS' EQUITY (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1999
----------------------------------------
ACCUMULATION UNIT NET
UNITS VALUE ASSETS
------------ ------ ------------
<S> <C> <C> <C>
Travelers Series Fund Inc. (continued)
Smith Barney High Income Portfolio
Standard Death Benefit ......................... 222,226 $1.015 $ 225,518
Enhanced Death Benefit ......................... 431,806 1.015 438,078
Smith Barney Large Capitalization Growth Portfolio
Standard Death Benefit ......................... 2,526,512 1.090 2,753,683
Enhanced Death Benefit ......................... 2,543,458 1.090 2,771,273
Smith Barney Large Cap Value Portfolio
Standard Death Benefit ......................... 1,119,883 0.998 1,117,977
Enhanced Death Benefit ......................... 676,689 0.998 675,323
Smith Barney Mid Cap Portfolio
Standard Death Benefit ......................... 501,324 1.166 584,346
Enhanced Death Benefit ......................... 583,087 1.165 679,438
Travelers Managed Income Portfolio
Standard Death Benefit ......................... 194,554 0.997 193,954
Enhanced Death Benefit ......................... 346,462 0.997 345,281
Van Kampen Enterprise Portfolio
Standard Death Benefit ......................... 614,555 1.152 707,959
Enhanced Death Benefit ......................... 436,721 1.152 502,941
Van Kampen Life Investment Trust
Emerging Growth Portfolio
Standard Death Benefit ......................... 1,613,716 1.393 2,247,637
Enhanced Death Benefit ......................... 4,621,812 1.392 6,435,370
Variable Insurance Products Fund II
Contrafund(R) Portfolio - Service Class
Standard Death Benefit ......................... 1,210,535 1.138 1,377,866
Enhanced Death Benefit ......................... 3,185,580 1.138 3,624,769
------------
Net Contract Owners' Equity ..................................................... $562,561,433
============
</TABLE>
-9-
<PAGE> 64
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. STATEMENT OF INVESTMENTS
<TABLE>
<CAPTION>
INVESTMENT OPTIONS NO. OF MARKET
SHARES VALUE
------------ ------------
<S> <C> <C>
ALLIANCE VARIABLE PRODUCT SERIES FUND (1.5%)
Premier Growth Portfolio Class B
Total (Cost $7,749,919) 204,232 $ 8,250,975
------------ ------------
AMERICAN VARIABLE INSURANCE SERIES CLASS 2 (2.2%)
Global Growth Fund (Cost $2,211,690) 110,340 2,362,373
Growth Fund (Cost $6,278,117) 86,884 6,131,415
Growth-Income Fund (Cost $4,205,989) 116,814 3,863,036
------------ ------------
Total (Cost $12,695,796) 314,038 12,356,824
------------ ------------
BT INSURANCE FUNDS TRUST (1.9%)
EAFE Equity Index Fund (Cost $2,027,176) 175,816 2,391,094
Small Cap Index Fund (Cost $7,506,117) 722,911 8,393,005
------------ ------------
Total (Cost $9,533,293) 898,727 10,784,099
------------ ------------
GREENWICH STREET SERIES FUND (84.6%)
Equity Index Portfolio (Cost $395,574,168) 13,092,162 469,484,908
Appreciation Portfolio (Cost $1,418,517) 62,235 1,455,679
Diversified Strategic Income Portfolio (Cost $413,043) 39,495 412,328
Total Return Portfolio (Cost $221,610) 11,585 233,328
Equity Index Portfolio Class II (Cost $1,943,462) 56,307 2,016,370
------------ ------------
Total (Cost $399,570,800) 13,261,784 473,602,613
------------ ------------
MONEY MARKET PORTFOLIO (0.5%)
Total (Cost $2,716,227) 2,716,227 2,716,227
------------ ------------
SALOMON BROTHERS VARIABLE SERIES FUNDS INC. (0.2%)
Salomon Brothers Variable Small Cap Growth Fund (Cost $422,049) 38,654 470,034
Salomon Brothers Variable Capital Fund (Cost $186,953) 13,693 187,186
Salomon Brothers Variable Investors Fund (Cost $392,710) 32,520 397,716
------------ ------------
Total (Cost $1,001,712) 84,867 1,054,936
------------ ------------
TEMPLETON VARIABLE PRODUCTS SERIES FUND (0.6%)
Franklin Small Cap Investments Fund Class 2 (Cost $1,905,867) 131,035 2,062,482
Templeton International Fund Class 2 (Cost $1,415,343) 67,475 1,493,223
------------ ------------
Total (Cost $3,321,210) 198,510 3,555,705
------------ ------------
</TABLE>
-10-
<PAGE> 65
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
NO. OF MARKET
SHARES VALUE
------------ ------------
<S> <C> <C>
THE TRAVELERS SERIES TRUST (1.3%)
Equity Income Portfolio (Cost $790,483) 51,384 $ 773,330
Large Cap Portfolio (Cost $1,325,103) 63,630 1,343,222
MFS Emerging Growth Portfolio (Cost $3,245,825) 129,387 3,858,344
MFS Research Portfolio (Cost $963,591) 78,567 1,026,080
Strategic Stock Portfolio (Cost $35,885) 3,636 36,108
Disciplined Small Cap Stock Portfolio (Cost $102,015) 10,210 109,040
------------ ------------
Total (Cost $6,462,902) 336,814 7,146,124
------------ ------------
TRAVELERS SERIES FUND INC. (4.8%)
Alliance Growth Portfolio (Cost $4,002,562) 129,189 4,247,749
MFS Total Return Portfolio (Cost $637,122) 39,438 640,086
Smith Barney International Equity Portfolio (Cost $1,506,132) 74,208 1,704,557
Smith Barney Money Market Portfolio (Cost $5,855,403) 5,855,404 5,855,403
Smith Barney Aggressive Growth Portfolio (Cost $3,320,643) 302,666 3,659,237
Smith Barney High Income Portfolio (Cost $650,222) 54,080 653,289
Smith Barney Large Capitalization Growth Portfolio (Cost $5,180,090) 333,576 5,333,876
Smith Barney Large Cap Value Portfolio (Cost $1,681,893) 86,003 1,677,922
Smith Barney Mid Cap Portfolio (Cost $1,148,330) 105,482 1,232,029
Travelers Managed Income Portfolio (Cost $529,371) 45,951 528,897
Van Kampen Enterprise Portfolio (Cost $1,056,339) 38,440 1,146,267
------------ ------------
Total (Cost $25,568,107) 7,064,437 26,679,312
------------ ------------
VAN KAMPEN LIFE INVESTMENT TRUST (1.5%)
Emerging Growth Portfolio
Total (Cost $7,337,745) 186,472 8,620,591
------------ ------------
VARIABLE INSURANCE PRODUCTS FUND II (0.9%)
Contrafund(R) Portfolio - Service Class
Total (Cost $4,487,823) 165,082 4,803,882
------------ ------------
TOTAL INVESTMENT OPTIONS (100%)
(COST $480,445,534) $559,571,288
============
</TABLE>
-11-
<PAGE> 66
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF FUND BD IV OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
PREMIER GROWTH
PORTFOLIO CLASS B GLOBAL GROWTH FUND GROWTH FUND
---------------------- ---------------------- -----------------------
1999 1998 1999 1998 1999 1998
------------- ----- ------------- ----- ------------- -----
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ............................................... $ - $ - $ 60,988 $ - $ 597,386 $ -
------------- ----- ------------- ----- ------------- -----
EXPENSES:
Insurance charges ....................................... 8,091 - 1,588 - 4,540 -
Administrative fees ..................................... 868 - 168 - 480 -
Equity protection fees .................................. - - - - - -
------------- ----- ------------- ----- ------------- -----
Net investment income (loss) ........................ (8,959) - 59,232 - 592,366 -
------------- ----- ------------- ----- ------------- -----
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ........................ 64 - 23,834 - - -
Cost of investments sold .............................. 63 - 23,215 - - -
------------- ----- ------------- ----- ------------- -----
Net realized gain (loss) ............................ 1 - 619 - - -
------------- ----- ------------- ----- ------------- -----
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .............. - - - - - -
Unrealized gain (loss) end of year .................... 501,056 - 150,683 - (146,702) -
------------- ----- ------------- ----- ------------- -----
Net change in unrealized gain (loss) for the year ... 501,056 - 150,683 - (146,702) -
------------- ----- ------------- ----- ------------- -----
Net increase (decrease) in net assets
resulting from operations ........................... 492,098 - 210,534 - 445,664 -
------------- ----- ------------- ----- ------------- -----
UNIT TRANSACTIONS:
Participant purchase payments ........................... 7,724,074 - 2,047,060 - 5,730,183 -
Participant transfers from other Travelers accounts ..... 179,178 - 173,397 - 171,097 -
Administrative charges .................................. - - - - - -
Contract surrenders ..................................... (2,488) - (95) - (6,591) -
Participant transfers to other Travelers accounts ....... (62,155) - (47,572) - (63,255) -
Other payments to participants .......................... - - - - - -
------------- ----- ------------- ----- ------------- -----
Net increase (decrease) in net assets
resulting from unit transactions .................... 7,838,609 - 2,172,790 - 5,831,434 -
------------- ----- ------------- ----- ------------- -----
Net increase (decrease) in net assets ............... 8,330,707 - 2,383,324 - 6,277,098 -
NET ASSETS:
Beginning of year ..................................... - - - - - -
------------- ----- ------------- ----- ------------- -----
End of year ........................................... $ 8,330,707 $ - $ 2,383,324 $ - $ 6,277,098 $ -
============= ===== ============= ===== ============= =====
</TABLE>
-12-
<PAGE> 67
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
GROWTH-INCOME FUND EAFE EQUITY INDEX FUND SMALL CAP INDEX FUND EQUITY INDEX PORTFOLIO
----------------------- ------------------------------- ------------------------------- -------------------------------
1999 1998 1999 1998 1999 1998 1999 1998
------------- ----- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 447,088 $ - $ 107,675 $ 13,140 $ 318,071 $ 96,423 $ 2,623,725 $ 632,895
------------- ----- ------------- ------------- ------------- ------------- ------------- -------------
2,896 - 20,675 6,818 90,786 50,486 3,870,127 831,225
312 - 2,399 809 9,946 5,412 444,792 95,678
- - - - - - 3,899,344 744,521
------------- ----- ------------- ------------- ------------- ------------- ------------- -------------
443,880 - 84,601 5,513 217,339 40,525 (5,590,538) (1,038,529)
------------- ----- ------------- ------------- ------------- ------------- ------------- -------------
150 - 394,109 339,861 1,435,055 529,765 19,837 3,024,406
151 - 343,805 314,784 1,458,054 603,589 17,261 2,677,606
------------- ----- ------------- ------------- ------------- ------------- ------------- -------------
(1) - 50,304 25,077 (22,999) (73,824) 2,576 346,800
------------- ----- ------------- ------------- ------------- ------------- ------------- -------------
- - 51,033 426 (164,007) 1,367 16,273,281 (13,015)
(342,953) - 363,918 51,033 886,888 (164,007) 73,910,740 16,273,281
------------- ----- ------------- ------------- ------------- ------------- ------------- -------------
(342,953) - 312,885 50,607 1,050,895 (165,374) 57,637,459 16,286,296
------------- ----- ------------- ------------- ------------- ------------- ------------- -------------
100,926 - 447,790 81,197 1,245,235 (198,673) 52,049,497 15,594,567
------------- ----- ------------- ------------- ------------- ------------- ------------- -------------
3,956,455 - 827,912 848,877 2,159,725 4,415,025 284,944,847 118,283,454
87,111 - 381,819 97,126 358,121 707,953 3,415,358 1,359,066
- - (252) (83) (326) (116) (32,490) (6,694)
(3,694) - (23,101) (5,687) (79,990) (26,556) (8,693,674) (3,334,964)
(150,910) - (310,974) (97,017) (609,498) (437,993) (817,146) (1,260,126)
- - - - (156,152) - (2,659,202) (723,317)
------------- ----- ------------- ------------- ------------- ------------- ------------- -------------
3,888,962 - 875,404 843,216 1,671,880 4,658,313 276,157,693 114,317,419
------------- ----- ------------- ------------- ------------- ------------- ------------- -------------
3,989,888 - 1,323,194 924,413 2,917,115 4,459,640 328,207,190 129,911,986
- - 1,075,177 150,764 5,485,030 1,025,390 141,371,814 11,459,828
------------- ----- ------------- ------------- ------------- ------------- ------------- -------------
$ 3,989,888 $ - $ 2,398,371 $ 1,075,177 $ 8,402,145 $ 5,485,030 $ 469,579,004 $ 141,371,814
============= ===== ============= ============= ============= ============= ============= =============
</TABLE>
-13-
<PAGE> 68
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF FUND BD IV OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
<TABLE>
<CAPTION>
APPRECIATION DIVERSIFIED STRATEGIC TOTAL
PORTFOLIO INCOME PORTFOLIO RETURN PORTFOLIO
--------------------- --------------------- ---------------------
1999 1998 1999 1998 1999 1998
----------- ----- ----------- ----- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ............................................. $ - $ - $ - $ - $ - $ -
----------- ----- ----------- ----- ----------- -----
EXPENSES:
Insurance charges ..................................... 1,514 - 330 - 154 -
Administrative fees ................................... 162 - 36 - 16 -
Equity protection fees ................................ - - - - - -
----------- ----- ----------- ----- ----------- -----
Net investment income (loss) ...................... (1,676) - (366) - (170) -
----------- ----- ----------- ----- ----------- -----
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ...................... 5,005 - 28,378 - 82 -
Cost of investments sold ............................ 4,981 - 28,439 - 80 -
----------- ----- ----------- ----- ----------- -----
Net realized gain (loss) .......................... 24 - (61) - 2 -
----------- ----- ----------- ----- ----------- -----
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year ............ - - - - - -
Unrealized gain (loss) end of year .................. 37,162 - (715) - 11,718 -
----------- ----- ----------- ----- ----------- -----
Net change in unrealized gain (loss) for the year.. 37,162 - (715) - 11,718 -
----------- ----- ----------- ----- ----------- -----
Net increase (decrease) in net assets
resulting from operations ......................... 35,510 - (1,142) - 11,550 -
----------- ----- ----------- ----- ----------- -----
UNIT TRANSACTIONS:
Participant purchase payments ......................... 1,421,252 - 488,492 - 216,090 -
Participant transfers from other Travelers accounts ... 56,150 - 13,595 - 5,600 -
Administrative charges ................................ - - - - - -
Contract surrenders ................................... (429) - (274) - - -
Participant transfers to other Travelers accounts ..... (8,955) - (29,934) - - -
Other payments to participants ........................ - - - - - -
----------- ----- ----------- ----- ----------- -----
Net increase (decrease) in net assets
resulting from unit transactions .................. 1,468,018 - 471,879 - 221,690 -
----------- ----- ----------- ----- ----------- -----
Net increase (decrease) in net assets ............. 1,503,528 - 470,737 - 233,240 -
NET ASSETS:
Beginning of year ................................... - - - - - -
----------- ----- ----------- ----- ----------- -----
End of year ......................................... $ 1,503,528 $ - $ 470,737 $ - $ 233,240 $ -
=========== ===== =========== ===== =========== =====
</TABLE>
-14-
<PAGE> 69
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
SALOMON BROTHERS SALOMON BROTHERS
EQUITY INDEX VARIABLE SMALL CAP VARIABLE
PORTFOLIO CLASS II MONEY MARKET PORTFOLIO GROWTH FUND CAPITAL FUND
--------------------- --------------------------- --------------------- --------------------
1999 1998 1999 1998 1999 1998 1999 1998
----------- ----- ----------- ----------- ----------- ----- ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
$ - $ - $ 82,266 $ 18,618 $ - $ - $ 5,864 $ -
----------- ----- ----------- ----------- ----------- ----- ----------- -----
1,896 - 21,995 4,973 504 - 279 -
202 - 2,451 572 53 - 30 -
- - - - - - - -
----------- ----- ----------- ----------- ----------- ----- ----------- -----
(2,098) - 57,820 13,073 (557) - 5,555 -
----------- ----- ----------- ----------- ----------- ----- ----------- -----
10,771 - 2,784,251 1,141,401 169 - 199 -
10,942 - 2,784,251 1,141,401 163 - 199 -
----------- ----- ----------- ----------- ----------- ----- ----------- -----
(171) - - - 6 - - -
----------- ----- ----------- ----------- ----------- ----- ----------- -----
- - - - - - - -
72,908 - - - 47,985 - 233 -
----------- ----- ----------- ----------- ----------- ----- ----------- -----
72,908 - - - 47,985 - 233 -
----------- ----- ----------- ----------- ----------- ----- ----------- -----
70,639 - 57,820 13,073 47,434 - 5,788 -
----------- ----- ----------- ----------- ----------- ----- ----------- -----
1,841,696 - 3,393,659 737,778 396,945 - 50,823 -
206,558 - 1,221,668 1,143,977 29,591 - 136,079 -
- - (93) (68) - - - -
(969) - (243,442) (777) - - - -
(23,251) - (2,557,633) (1,090,762) - - - -
- - - - - - - -
----------- ----- ----------- ----------- ----------- ----- ----------- -----
2,024,034 - 1,814,159 790,148 426,536 - 186,902 -
----------- ----- ----------- ----------- ----------- ----- ----------- -----
2,094,673 - 1,871,979 803,221 473,970 - 192,690 -
- - 849,803 46,582 - - - -
----------- ----- ----------- ----------- ----------- ----- ----------- -----
$ 2,094,673 $ - $ 2,721,782 $ 849,803 $ 473,970 $ - $ 192,690 $ -
=========== ===== =========== =========== =========== ===== =========== =====
</TABLE>
-15-
<PAGE> 70
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF FUND BD IV OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
<TABLE>
<CAPTION>
SALOMON BROTHERS FRANKLIN SMALL CAP TEMPLETON
VARIABLE INVESTMENTS INTERNATIONAL
INVESTORS FUND FUND CLASS 2 FUND CLASS 2
-------------------- --------------------- ---------------------
1999 1998 1999 1998 1999 1998
----------- ----- ----------- ----- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ............................................... $ 2,019 $ - $ - $ - $ - $ -
----------- ----- ----------- ----- ----------- -----
EXPENSES:
Insurance charges ....................................... 396 - 1,443 - 1,240 -
Administrative fees ..................................... 42 - 159 - 134 -
Equity protection fees .................................. - - - - - -
----------- ----- ----------- ----- ----------- -----
Net investment income (loss) ........................ 1,581 - (1,602) - (1,374) -
----------- ----- ----------- ----- ----------- -----
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ........................ 97 - - - 35,716 -
Cost of investments sold .............................. 96 - - - 35,532 -
----------- ----- ----------- ----- ----------- -----
Net realized gain (loss) ............................ 1 - - - 184 -
----------- ----- ----------- ----- ----------- -----
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .............. - - - - - -
Unrealized gain (loss) end of year .................... 5,006 - 156,615 - 77,880 -
----------- ----- ----------- ----- ----------- -----
Net change in unrealized gain (loss) for the year ... 5,006 - 156,615 - 77,880 -
----------- ----- ----------- ----- ----------- -----
Net increase (decrease) in net assets
resulting from operations ........................... 6,588 - 155,013 - 76,690 -
----------- ----- ----------- ----- ----------- -----
UNIT TRANSACTIONS:
Participant purchase payments ........................... 360,111 - 1,966,266 - 1,454,328 -
Participant transfers from other Travelers accounts ..... 30,866 - 48,312 - 47,408 -
Administrative charges .................................. - - - - - -
Contract surrenders ..................................... - - (691) - (241) -
Participant transfers to other Travelers accounts ....... - - (63,680) - (40,970) -
Other payments to participants .......................... - - - - - -
----------- ----- ----------- ----- ----------- -----
Net increase (decrease) in net assets
resulting from unit transactions .................... 390,977 - 1,950,207 - 1,460,525 -
----------- ----- ----------- ----- ----------- -----
Net increase (decrease) in net assets ............... 397,565 - 2,105,220 - 1,537,215 -
NET ASSETS:
Beginning of year ..................................... - - - - - -
----------- ----- ----------- ----- ----------- -----
End of year ........................................... $ 397,565 $ - $ 2,105,220 $ - $ 1,537,215 $ -
=========== ===== =========== ===== =========== =====
</TABLE>
-16-
<PAGE> 71
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
EQUITY INCOME MFS EMERGING GROWTH MFS RESEARCH
PORTFOLIO LARGE CAP PORTFOLIO PORTFOLIO PORTFOLIO
- --------------------- --------------------- --------------------- ---------------------
1999 1998 1999 1998 1999 1998 1999 1998
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
$ 38,697 $ - $ 44,324 $ - $ - $ - $ - $ -
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
762 - 1,090 - 3,017 - 969 -
82 - 123 - 328 - 104 -
- - - - - - - -
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
37,853 - 43,111 - (3,345) - (1,073) -
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
10,127 - 128 - 64 - 8,230 -
10,751 - 126 - 59 - 7,789 -
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
(624) - 2 - 5 - 441 -
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
- - - - - - - -
(17,153) - 18,119 - 612,519 - 62,489 -
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
(17,153) - 18,119 - 612,519 - 62,489 -
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
20,076 - 61,232 - 609,179 - 61,857 -
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
787,996 - 1,295,270 - 3,230,038 - 1,023,532 -
18,195 - 35,370 - 203,275 - 12,502 -
- - - - - - - -
(236) - (177) - (296) - (206) -
(30,997) - (23,364) - (41,869) - (12,566) -
- - - - - - - -
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
774,958 - 1,307,099 - 3,391,148 - 1,023,262 -
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
795,034 - 1,368,331 - 4,000,327 - 1,085,119 -
- - - - - - - -
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
$ 795,034 $ - $ 1,368,331 $ - $ 4,000,327 $ - $ 1,085,119 $ -
=========== ===== =========== ===== =========== ===== =========== =====
</TABLE>
-17-
<PAGE> 72
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF FUND BD IV OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
<TABLE>
<CAPTION>
STRATEGIC STOCK DISCIPLINED SMALL CAP ALLIANCE GROWTH
PORTFOLIO STOCK PORTFOLIO PORTFOLIO
--------------------- --------------------- ---------------------
1999 1998 1999 1998 1999 1998
----------- ----- ----------- ----- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ............................................... $ - $ - $ - $ - $ - $ -
----------- ----- ----------- ----- ----------- -----
EXPENSES:
Insurance charges ....................................... 16 - 63 - 3,817 -
Administrative fees ..................................... 2 - 7 - 422 -
Equity protection fees .................................. - - - - - -
----------- ----- ----------- ----- ----------- -----
Net investment income (loss) ........................ (18) - (70) - (4,239) -
----------- ----- ----------- ----- ----------- -----
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ........................ - - - - 3,290 -
Cost of investments sold .............................. - - - - 3,141 -
----------- ----- ----------- ----- ----------- -----
Net realized gain (loss) ............................ - - - - 149 -
----------- ----- ----------- ----- ----------- -----
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .............. - - - - - -
Unrealized gain (loss) end of year .................... 223 - 7,025 - 245,187 -
----------- ----- ----------- ----- ----------- -----
Net change in unrealized gain (loss) for the year ... 223 - 7,025 - 245,187 -
----------- ----- ----------- ----- ----------- -----
Net increase (decrease) in net assets
resulting from operations ........................... 205 - 6,955 - 241,097 -
----------- ----- ----------- ----- ----------- -----
UNIT TRANSACTIONS:
Participant purchase payments ........................... 35,892 - 82,046 - 4,152,573 -
Participant transfers from other Travelers accounts ..... - - 20,000 - 123,955 -
Administrative charges .................................. - - - - - -
Contract surrenders ..................................... - - - - (253) -
Participant transfers to other Travelers accounts ....... - - - - (132,192) -
Other payments to participants .......................... - - - - - -
----------- ----- ----------- ----- ----------- -----
Net increase (decrease) in net assets
resulting from unit transactions .................... 35,892 - 102,046 - 4,144,083 -
----------- ----- ----------- ----- ----------- -----
Net increase (decrease) in net assets ............... 36,097 - 109,001 - 4,385,180 -
NET ASSETS:
Beginning of year ..................................... - - - - - -
----------- ----- ----------- ----- ----------- -----
End of year ........................................... $ 36,097 $ - $ 109,001 $ - $ 4,385,180 $ -
=========== ===== =========== ===== =========== =====
</TABLE>
-18-
<PAGE> 73
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
SMITH BARNEY SMITH BARNEY
MFS TOTAL RETURN INTERNATIONAL SMITH BARNEY MONEY AGGRESSIVE GROWTH
PORTFOLIO EQUITY PORTFOLIO MARKET PORTFOLIO PORTFOLIO
- --------------------- --------------------- --------------------- ---------------------
1999 1998 1999 1998 1999 1998 1999 1998
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
$ - $ - $ - $ - $ 16,315 $ - $ 2,482 $ -
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
680 - 1,402 - 4,248 - 3,044 -
73 - 162 - 453 - 332 -
- - - - - - - -
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
(753) - (1,564) - 11,614 - (894) -
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
79,272 - - - 266,171 - - -
80,054 - - - 266,171 - - -
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
(782) - - - - - - -
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
- - - - - - - -
2,964 - 198,425 - - - 338,594 -
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
2,964 - 198,425 - - - 338,594 -
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
1,429 - 196,861 - 11,614 - 337,700 -
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
706,276 - 1,478,188 - 7,097,349 - 3,444,173 -
30,359 - 60,247 - 1,073,248 - 76,862 -
- - - - - - - -
(247) - (96) - - - (312) -
(84,752) - (12,571) - (1,309,028) - (97,526) -
- - - - - - - -
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
651,636 - 1,525,768 - 6,861,569 - 3,423,197 -
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
653,065 - 1,722,629 - 6,873,183 - 3,760,897 -
- - - - - - - -
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
$ 653,065 $ - $ 1,722,629 $ - $ 6,873,183 $ - $ 3,760,897 $ -
=========== ===== =========== ===== =========== ===== =========== =====
</TABLE>
-19-
<PAGE> 74
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF FUND BD IV OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
<TABLE>
<CAPTION>
SMITH BARNEY LARGE
SMITH BARNEY HIGH CAPITALIZATION SMITH BARNEY LARGE
INCOME PORTFOLIO GROWTH PORTFOLIO CAP VALUE PORTFOLIO
--------------------- --------------------- ---------------------
1999 1998 1999 1998 1999 1998
----------- ----- ----------- ----- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ............................................... $ - $ - $ 10,947 $ - $ - $ -
----------- ----- ----------- ----- ----------- -----
EXPENSES:
Insurance charges ....................................... 596 - 5,389 - 1,646 -
Administrative fees ..................................... 64 - 595 - 189 -
Equity protection fees .................................. - - - - - -
----------- ----- ----------- ----- ----------- -----
Net investment income (loss) ........................ (660) - 4,963 - (1,835) -
----------- ----- ----------- ----- ----------- -----
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ........................ 10,840 - - - - -
Cost of investments sold .............................. 10,765 - - - - -
----------- ----- ----------- ----- ----------- -----
Net realized gain (loss) ............................ 75 - - - - -
----------- ----- ----------- ----- ----------- -----
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .............. - - - - - -
Unrealized gain (loss) end of year .................... 3,067 - 153,786 - (3,971) -
----------- ----- ----------- ----- ----------- -----
Net change in unrealized gain (loss) for the year ... 3,067 - 153,786 - (3,971) -
----------- ----- ----------- ----- ----------- -----
Net increase (decrease) in net assets
resulting from operations ........................... 2,482 - 158,749 - (5,806) -
----------- ----- ----------- ----- ----------- -----
UNIT TRANSACTIONS:
Participant purchase payments ........................... 671,463 - 5,201,506 - 1,670,903 -
Participant transfers from other Travelers accounts ..... 6,029 - 203,025 - 163,579 -
Administrative charges .................................. - - - - - -
Contract surrenders ..................................... (204) - (1,700) - (75) -
Participant transfers to other Travelers accounts ....... (16,174) - (36,624) - (35,301) -
Other payments to participants .......................... - - - - - -
----------- ----- ----------- ----- ----------- -----
Net increase (decrease) in net assets
resulting from unit transactions .................... 661,114 - 5,366,207 - 1,799,106 -
----------- ----- ----------- ----- ----------- -----
Net increase (decrease) in net assets ............... 663,596 - 5,524,956 - 1,793,300 -
NET ASSETS:
Beginning of year ..................................... - - - - - -
----------- ----- ----------- ----- ----------- -----
End of year ........................................... $ 663,596 $ - $ 5,524,956 $ - $ 1,793,300 $ -
=========== ===== =========== ===== =========== =====
</TABLE>
-20-
<PAGE> 75
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
SMITH BARNEY MID TRAVELERS MANAGED VAN KAMPEN ENTERPRISE EMERGING GROWTH
CAP PORTFOLIO INCOME PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------- --------------------- --------------------- ---------------------
1999 1998 1999 1998 1999 1998 1999 1998
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1,062 $ - $ - $ - $ - $ - $ - $ -
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
948 - 604 - 1,305 - 8,709 -
102 - 65 - 151 - 934 -
- - - - - - - -
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
12 - (669) - (1,456) - (9,643) -
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
128 - 26,918 - 615 - - -
124 - 26,928 - 596 - - -
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
4 - (10) - 19 - - -
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
- - - - - - - -
83,699 - (474) - 89,928 - 1,282,846 -
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
83,699 - (474) - 89,928 - 1,282,846 -
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
83,715 - (1,153) - 88,491 - 1,273,203 -
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
1,124,321 - 516,828 - 1,088,816 - 6,940,989 -
55,748 - 69,263 - 33,847 - 483,583 -
- - - - - - - -
- - (269) - (254) - (3,163) -
- - (45,434) - - - (11,605) -
- - - - - - - -
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
1,180,069 - 540,388 - 1,122,409 - 7,409,804 -
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
1,263,784 - 539,235 - 1,210,900 - 8,683,007 -
- - - - - - - -
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
$ 1,263,784 $ - $ 539,235 $ - $ 1,210,900 $ - $ 8,683,007 $ -
=========== ===== =========== ===== =========== ===== =========== =====
</TABLE>
-21-
<PAGE> 76
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF FUND BD IV OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
<TABLE>
<CAPTION>
CONTRAFUND(R)
PORTFOLIO -
SERVICE CLASS COMBINED
----------------------- -------------------------------
1999 1998 1999 1998
------------- ----- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ............................................... $ - $ - $ 4,358,909 $ 761,076
------------- ----- ------------- -------------
EXPENSES:
Insurance charges ....................................... 5,141 - 4,071,900 893,502
Administrative fees ..................................... 553 - 466,991 102,471
Equity protection fees .................................. - - 3,899,344 744,521
------------- ----- ------------- -------------
Net investment income (loss) ........................ (5,694) - (4,079,326) (979,418)
------------- ----- ------------- -------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ........................ - - 5,143,500 5,035,433
Cost of investments sold .............................. - - 5,113,736 4,737,380
------------- ----- ------------- -------------
Net realized gain (loss) ............................ - - 29,764 298,053
------------- ----- ------------- -------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .............. - - 16,160,307 (11,222)
Unrealized gain (loss) end of year .................... 316,059 - 79,125,754 16,160,307
------------- ----- ------------- -------------
Net change in unrealized gain (loss) for the year ... 316,059 - 62,965,447 16,171,529
------------- ----- ------------- -------------
Net increase (decrease) in net assets
resulting from operations ........................... 310,365 - 58,915,885 15,490,164
------------- ----- ------------- -------------
UNIT TRANSACTIONS:
Participant purchase payments ........................... 4,511,844 - 364,039,921 124,285,134
Participant transfers from other Travelers accounts ..... 187,438 - 9,418,433 3,308,122
Administrative charges .................................. - - (33,161) (6,961)
Contract surrenders ..................................... (562) - (9,063,729) (3,367,984)
Participant transfers to other Travelers accounts ....... (6,450) - (6,682,386) (2,885,898)
Other payments to participants .......................... - - (2,815,354) (723,317)
------------- ----- ------------- -------------
Net increase (decrease) in net assets
resulting from unit transactions .................... 4,692,270 - 354,863,724 120,609,096
------------- ----- ------------- -------------
Net increase (decrease) in net assets ............... 5,002,635 - 413,779,609 136,099,260
NET ASSETS:
Beginning of year ..................................... - - 148,781,824 12,682,564
------------- ----- ------------- -------------
End of year ........................................... $ 5,002,635 $ - $ 562,561,433 $ 148,781,824
============= ===== ============= =============
</TABLE>
-22-
<PAGE> 77
NOTES TO FINANCIAL STATEMENTS - CONTINUED
8. SCHEDULE OF ACCUMULATION UNITS FOR FUND BD IV
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
PREMIER GROWTH
PORTFOLIO CLASS B GLOBAL GROWTH FUND GROWTH FUND
--------------------------- -------------------------- ---------------------------
1999 1998 1999 1998 1999 1998
------------ ----------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Accumulation units beginning of year ....... - - - - - -
Accumulation units purchased and
transferred from other Travelers accounts. 7,452,180 - 1,874,487 - 5,370,441 -
Accumulation units redeemed and
transferred to other Travelers accounts .. (60,379) - (42,355) - (65,968) -
------------ ----------- ------------ ----------- ------------ ------------
Accumulation units end of year ............. 7,391,801 - 1,832,132 - 5,304,473 -
============ =========== ============ =========== ============ ============
</TABLE>
<TABLE>
<CAPTION>
GROWTH-INCOME FUND EAFE EQUITY INDEX FUND SMALL CAP INDEX FUND
--------------------------- -------------------------- ---------------------------
1999 1998 1999 1998 1999 1998
------------ ----------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Accumulation units beginning of year ....... - - 922,254 155,046 6,029,130 1,085,774
Accumulation units purchased and
transferred from other Travelers accounts. 4,023,525 - 965,706 869,019 2,685,180 5,514,171
Accumulation units redeemed and
transferred to other Travelers accounts .. (153,762) - (252,013) (101,811) (913,213) (570,815)
------------ ----------- ------------ ----------- ------------ ------------
Accumulation units end of year ............. 3,869,763 - 1,635,947 922,254 7,801,097 6,029,130
============ =========== ============ =========== ============ ============
</TABLE>
<TABLE>
<CAPTION>
DIVERSIFIED STRATEGIC
EQUITY INDEX PORTFOLIO APPRECIATION PORTFOLIO INCOME PORTFOLIO
--------------------------- -------------------------- ---------------------------
1999 1998 1999 1998 1999 1998
------------ ----------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Accumulation units beginning of year ....... 112,132,187 10,982,342 - - - -
Accumulation units purchased and
transferred from other Travelers accounts. 224,883,810 105,708,437 1,450,006 - 501,545 -
Accumulation units redeemed and
transferred to other Travelers accounts .. (8,784,579) (4,558,592) (9,236) - (30,229) -
------------ ----------- ------------ ----------- ------------ ------------
Accumulation units end of year ............. 328,231,418 112,132,187 1,440,770 - 471,316 -
============ =========== ============ =========== ============ ============
</TABLE>
<TABLE>
<CAPTION>
EQUITY INDEX PORTFOLIO
TOTAL RETURN PORTFOLIO CLASS II MONEY MARKET PORTFOLIO
--------------------------- -------------------------- ---------------------------
1999 1998 1999 1998 1999 1998
------------ ----------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Accumulation units beginning of year ....... - - - - 814,498 46,237
Accumulation units purchased and
transferred from other Travelers accounts. 222,543 - 1,994,160 - 4,352,276 1,827,706
Accumulation units redeemed and
transferred to other Travelers accounts .. - - (24,063) - (2,642,296) (1,059,445)
------------ ----------- ------------ ----------- ------------ ------------
Accumulation units end of year ............. 222,543 - 1,970,097 - 2,524,478 814,498
============ =========== ============ =========== ============ ============
</TABLE>
-23-
<PAGE> 78
NOTES TO FINANCIAL STATEMENTS - CONTINUED
8. SCHEDULE OF ACCUMULATION UNITS FOR FUND BD IV
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
<TABLE>
<CAPTION>
SALOMON BROTHERS SALOMON BROTHERS SALOMON BROTHERS
VARIABLE SMALL CAP VARIABLE VARIABLE
GROWTH FUND CAPITAL FUND INVESTORS FUND
------------------- ------------------- -------------------
1999 1998 1999 1998 1999 1998
---------- ---- ---------- ---- ---------- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation units beginning of year ........... - - - - - -
Accumulation units purchased and
transferred from other Travelers accounts .... 390,724 - 186,701 - 392,195 -
Accumulation units redeemed and
transferred to other Travelers accounts ...... - - - - - -
---------- ---- ---------- ---- ---------- ----
Accumulation units end of year ................. 390,724 - 186,701 - 392,195 -
========== ==== ========== ==== ========== ====
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN SMALL CAP TEMPLETON
INVESTMENTS FUND INTERNATIONAL EQUITY INCOME
CLASS 2 FUND CLASS 2 PORTFOLIO
------------------- ------------------- -------------------
1999 1998 1999 1998 1999 1998
---------- ---- ---------- ---- ---------- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation units beginning of year ........... - - - - - -
Accumulation units purchased and
transferred from other Travelers accounts .... 1,855,290 - 1,426,151 - 785,770 -
Accumulation units redeemed and
transferred to other Travelers accounts ...... (59,667) - (39,859) - (30,079) -
---------- ---- ---------- ---- ---------- ----
Accumulation units end of year ................. 1,795,623 - 1,386,292 - 755,691 -
========== ==== ========== ==== ========== ====
</TABLE>
<TABLE>
<CAPTION>
MFS EMERGING GROWTH MFS RESEARCH
LARGE CAP PORTFOLIO PORTFOLIO PORTFOLIO
------------------- ------------------- -------------------
1999 1998 1999 1998 1999 1998
---------- ---- ---------- ---- ---------- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation units beginning of year ........... - - - - - -
Accumulation units purchased and
transferred from other Travelers accounts .... 1,238,576 - 2,824,586 - 967,441 -
Accumulation units redeemed and
transferred to other Travelers accounts ...... (22,751) - (31,743) - (11,340) -
---------- ---- ---------- ---- ---------- ----
Accumulation units end of year ................. 1,215,825 - 2,792,843 - 956,101 -
========== ==== ========== ==== ========== ====
</TABLE>
<TABLE>
<CAPTION>
STRATEGIC STOCK DISCIPLINED SMALL ALLIANCE GROWTH
PORTFOLIO CAP STOCK PORTFOLIO PORTFOLIO
------------------- ------------------- -------------------
1999 1998 1999 1998 1999 1998
---------- ---- ---------- ---- ---------- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation units beginning of year ........... - - - - - -
Accumulation units purchased and
transferred from other Travelers accounts .... 36,364 - 100,777 - 3,939,179 -
Accumulation units redeemed and
transferred to other Travelers accounts ...... - - - - (122,491) -
---------- ---- ---------- ---- ---------- ----
Accumulation units end of year ................. 36,364 - 100,777 - 3,816,688 -
========== ==== ========== ==== ========== ====
</TABLE>
-24-
<PAGE> 79
NOTES TO FINANCIAL STATEMENTS - CONTINUED
8. SCHEDULE OF ACCUMULATION UNITS FOR FUND BD IV
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
<TABLE>
<CAPTION>
SMITH BARNEY
MFS TOTAL INTERNATIONAL SMITH BARNEY MONEY
RETURN PORTFOLIO EQUITY PORTFOLIO MARKET PORTFOLIO
------------------- ------------------- -------------------
1999 1998 1999 1998 1999 1998
---------- ---- ---------- ---- ---------- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation units beginning of year ........... - - - - - -
Accumulation units purchased and
transferred from other Travelers accounts .... 736,140 - 1,411,532 - 8,138,831 -
Accumulation units redeemed and
transferred to other Travelers accounts ...... (84,713) - (10,364) - (1,303,040) -
---------- ---- ---------- ---- ---------- ----
Accumulation units end of year ................. 651,427 - 1,401,168 - 6,835,791 -
========== ==== ========== ==== ========== ====
</TABLE>
<TABLE>
<CAPTION>
SMITH BARNEY SMITH BARNEY LARGE
AGGRESSIVE SMITH BARNEY HIGH CAPITALIZATION
GROWTH PORTFOLIO INCOME PORTFOLIO GROWTH PORTFOLIO
------------------- ------------------- -------------------
1999 1998 1999 1998 1999 1998
---------- ---- ---------- ---- ---------- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation units beginning of year ........... - - - - - -
Accumulation units purchased and
transferred from other Travelers accounts .... 3,200,015 - 670,205 - 5,106,011 -
Accumulation units redeemed and
transferred to other Travelers accounts ...... (90,445) - (16,173) - (36,041) -
---------- ---- ---------- ---- ---------- ----
Accumulation units end of year ................. 3,109,570 - 654,032 - 5,069,970 -
========== ==== ========== ==== ========== ====
</TABLE>
<TABLE>
<CAPTION>
SMITH BARNEY LARGE SMITH BARNEY MID TRAVELERS MANAGED
CAP VALUE PORTFOLIO CAP PORTFOLIO INCOME PORTFOLIO
------------------- ------------------- -------------------
1999 1998 1999 1998 1999 1998
---------- ---- ---------- ---- ---------- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation units beginning of year ........... - - - - - -
Accumulation units purchased and
transferred from other Travelers accounts .... 1,832,098 - 1,084,411 - 586,774 -
Accumulation units redeemed and
transferred to other Travelers accounts ...... (35,526) - - - (45,758) -
---------- ---- ---------- ---- ---------- ----
Accumulation units end of year ................. 1,796,572 - 1,084,411 - 541,016 -
========== ==== ========== ==== ========== ====
</TABLE>
<TABLE>
<CAPTION>
VAN KAMPEN CONTRAFUND(R)
ENTERPRISE EMERGING GROWTH PORTFOLIO -
PORTFOLIO PORTFOLIO SERVICE CLASS
------------------- ------------------- -------------------
1999 1998 1999 1998 1999 1998
---------- ---- ---------- ---- ---------- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation units beginning of year ........... - - - - - -
Accumulation units purchased and
transferred from other Travelers accounts .... 1,051,500 - 6,248,377 - 4,402,729 -
Accumulation units redeemed and
transferred to other Travelers accounts ...... (224) - (12,849) - (6,614) -
---------- ---- ---------- ---- ---------- ----
Accumulation units end of year ................. 1,051,276 - 6,235,528 - 4,396,115 -
========== ==== ========== ==== ========== ====
</TABLE>
-25-
<PAGE> 80
NOTES TO FINANCIAL STATEMENTS - CONTINUED
8. SCHEDULE OF ACCUMULATION UNITS FOR FUND BD IV
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
<TABLE>
<CAPTION>
COMBINED
------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Accumulation units beginning of year ........... 119,898,069 12,269,399
Accumulation units purchased and
transferred from other Travelers accounts .... 304,388,236 113,919,333
Accumulation units redeemed and
transferred to other Travelers accounts ...... (14,937,770) (6,290,663)
------------ ------------
Accumulation units end of year ................. 409,348,535 119,898,069
============ ============
</TABLE>
-26-
<PAGE> 81
INDEPENDENT AUDITORS' REPORT
To the Owners of Variable Annuity Contracts of
The Travelers Fund BD IV for Variable Annuities:
We have audited the accompanying statement of assets and liabilities of The
Travelers Fund BD IV for Variable Annuities as of December 31, 1999, and the
related statement of operations for the year then ended and the statements 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 BD IV 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
-27-
<PAGE> 82
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 BD IV for Variable Annuities or
Fund BD IV's underlying funds. It should not be used in connection with any
offer except in conjunction with the Prospectus for The Travelers Fund BD IV 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.
FNDBDIV (Annual) (12-99) Printed in U.S.A.
<PAGE> 83
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> 84
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 $71,372
============================================================================================================================
</TABLE>
See Notes to Financial Statements.
F-2
<PAGE> 85
THE TRAVELERS LIFE AND ANNUITY COMPANY
BALANCE SHEETS
($ 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 $4,744,504
==========================================================================================================================
</TABLE>
See Notes to Financial Statements.
F-3
<PAGE> 86
THE TRAVELERS LIFE AND ANNUITY COMPANY
STATEMENTS OF CHANGES IN RETAINED EARNINGS AND ACCUMULATED
OTHER CHANGES IN EQUITY FROM NON-OWNER SOURCES
($ 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 $107,793
===========================================================================================================
</TABLE>
See Notes to Financial Statements.
F-4
<PAGE> 87
THE TRAVELERS LIFE AND ANNUITY COMPANY
STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH
($ 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> 88
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> 89
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> 90
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> 91
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> 92
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> 93
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 $29.4 million is available in 2000 for dividend payments by the
Company without prior approval of the Connecticut Insurance Department.
F-11
<PAGE> 94
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Accumulated Other Changes in Equity from Non-Owner Sources, Net of Tax
Changes in each component of Accumulated Other Changes in Equity From Non-Owner
Sources were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
NET ACCUMULATED
UNREALIZED FOREIGN OTHER CHANGES
GAINS ON CURRENCY IN EQUITY FROM
INVESTMENT TRANSLATION NON-OWNER
($ 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> 95
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> 96
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> 97
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> 98
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> 99
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> 100
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 $168,653
--------------------------------------------------------------------------------------------------------------
</TABLE>
F-18
<PAGE> 101
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
10. INVESTMENTS AND INVESTMENT GAINS (LOSSES)
Realized investment gains (losses) for the periods were as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
($ 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 $70,277
--------------------------------------------------------------------------------------------------------------
</TABLE>
F-19
<PAGE> 102
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Fixed Maturities
The amortized cost and fair values of investments in fixed maturities were
as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
GROSS GROSS
DECEMBER 31, 1999 AMORTIZED COST UNREALIZED UNREALIZED FAIR
($ 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> 103
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 $181.6 million, respectively. The Company's CMO holdings
were 65.9% and 62.9% collateralized by GNMA, FNMA or FHLMC securities at
December 31, 1999 and 1998, respectively.
F-21
<PAGE> 104
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Equity Securities
The cost and market values of investments in equity securities were as
follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
EQUITY SECURITIES: GROSS UNREALIZED GROSS UNREALIZED
($ 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 $155,719
================================================================
</TABLE>
F-22
<PAGE> 105
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Concentrations
Significant individual investment concentrations included:
<TABLE>
<CAPTION>
---------------------------------------------------------------------
($ 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> 106
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> 107
Travelers Index Annuity
STATEMENT OF ADDITIONAL INFORMATION
THE TRAVELERS FUND BD IV FOR VARIABLE ANNUITIES
Individual Variable Annuity Contract
issued by
The Travelers Life and Annuity Company
One Tower Square
Hartford, Connecticut 06183
L-12683S May 2000
<PAGE> 108
PART C
Other Information
Item 24. Financial Statements and Exhibits
(a) The financial statements of the Registrant and the Report of
Independent Accountants thereto are contained in the Registrant's
Annual Report and are 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 May 23, 1997.)
2. Not Applicable.
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. Variable Annuity Contract. (Incorporated herein by reference to Exhibit
4 to the Registration Statement on Form N-4, filed May 23, 1997.)
5. Application. (Incorporated herein by reference to Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-4, filed August
12, 1997.)
6(a). Charter of The Travelers Life and Annuity Company, as amended on April
10, 1990. (Incorporated herein by reference to Exhibit 6(a) to
Registration Statement on Form N-4, File No. 33-58131, filed via Edgar
on March 17, 1995.)
<PAGE> 109
6(b). By-Laws of The Travelers Life and Annuity Company, as amended on
October 20, 1994. (Incorporated herein by reference to Exhibit 6(b) to
the Registration Statement on Form N-4, File No. 33-58131, filed via
Edgar on March 17, 1995.)
9. Opinion of Counsel as to the legality of securities being registered.
(Incorporated herein by reference to Exhibit 9 to the Registration
Statement on Form N-4 filed May 23, 1997.)
10. Consent of KPMG LLP, Independent Certified Public Accountants.
13. Computation of Total Return Calculations - Standardized and
Non-Standardized. (Incorporated herein by reference to Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-4, filed August
12, 1997.)
15(a). Powers of Attorney authorizing Ernest J. Wright or Kathleen A. McGah as
signatory for Michael A. Carpenter, Jay S. Benet, George C. Kokulis,
Robert I. Lipp, Ian R. Stuart, Katherine M. Sullivan and Marc P. Weill.
(Incorporated herein by reference to Exhibit 15(a) to the Registration
Statement on Form N-4, filed May 23, 1997.)
15(a). Powers of Attorney authorizing Ernest J. Wright or Kathleen A. McGah as
signatory for George C. Kokulis, Katherine M. Sullivan and Glenn D.
Lammey.
Item 25. Directors and Officers of the Depositor
<TABLE>
<CAPTION>
Name and Principal Positions and Offices
Business Address with Insurance Company
- --------------------- ----------------------
<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
</TABLE>
<PAGE> 110
<TABLE>
<S> <C>
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, 6,311 contract owners held qualified and non-qualified
contracts offered by the Registrant.
Item 28. Indemnification
Sections 33-770 to 33-778, inclusive of the Connecticut General Statutes
("C.G.S.") regarding indemnification of directors and officers of Connecticut
corporations provides in general that Connecticut corporations shall indemnify
their officers, directors and certain other defined individuals against
judgments, fines, penalties, amounts paid in settlement and reasonable expenses
actually incurred in connection with proceedings against the corporation. The
corporation's obligation to provide such indemnification generally does not
apply unless (1) the individual is wholly successful on the merits in the
defense of any such proceeding; or (2) a determination is made (by persons
specified in the statute) that the individual acted in good faith and in the
best interests of the corporation and in all other cases, his conduct was at
least not opposed to the best interests of the corporation, and in a criminal
case he had no reasonable cause to believe his conduct was unlawful; or (3) the
court, upon application by the individual, determines in view of all of the
circumstances that such person is fairly and reasonably entitled to be
indemnified, and then for such amount as the court shall determine. With
respect to proceedings brought by or in the right of the corporation, the
statute provides that the corporation shall indemnify its officers, directors
and certain other defined individuals, against reasonable expenses actually
incurred by them in connection with such proceedings, subject to certain
limitations.
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,
<PAGE> 111
unenforceable. In the event that a claim for indemnification against such
liability (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
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
CitiFundsSM International Growth & Income Portfolio, CitiFundsSM International
Growth Portfolio, CitiFundsSM U.S. Treasury Reserves, CitiFundsSM Cash
Reserves, CitiFundsSM Premium U.S. Treasury Reserves, CitiFundsSM Premium
Liquid Reserves, CitiFundsSM Institutional U.S. Treasury Reserves, CitiFundsSM
Institutional Liquid Reserves, CitiFundsSM Institutional Cash Reserves,
CitiFundsSM Tax Free Reserves, CitiFundsSM Institutional Tax Free Reserves,
CitiFundsSM California Tax Free Reserves, CitiFundsSM Connecticut Tax Free
Reserves, CitiFundsSM New York Tax Free Reserves, CitiFundsSM New York Tax Free
Income Portfolio, CitiFundsSM National Tax Free Income Portfolio, CitiFundsSM
California Tax Free Income Portfolio, CitiFundsSM Intermediate Income
Portfolio, CitiFundsSM Balanced Portfolio, CitiFundsSM Small Cap Value
Portfolio, CitiFundsSM Growth & Income Portfolio, CitiFundsSM Large Cap Growth
Portfolio, CitiFundsSM Small Cap Growth Portfolio, CitiSelect VIP Folio 200,
CitiSelect VIP Folio 300, CitiSelect VIP Folio 400, CitiSelect VIP Folio 500,
CitiFundsSM Small Cap Growth VIP Portfolio, CitiSelect Folio 200, CitiSelect
Folio 300, CitiSelect Folio 400, and CitiSelect 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,
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. 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 Fund ABD II for Variable Annuities, The Travelers Separate
Account PF for Variable Annuities, The Travelers Separate Account PF II for
Variable Annuities, The Travelers Separate Account QP for Variable Annuities,
The Travelers Separate Account TM for Variable Annuities, The Travelers
Separate Account TM II for Variable Annuities, The Travelers Separate Account
Five for Variable Annuities, The Travelers Separate Account Six for Variable
Annuities, The Travelers Separate Account Seven for Variable Annuities, The
Travelers Separate Account Eight 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
<PAGE> 112
Timed Bond Account for Variable Annuities, 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,
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., 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, Smith Barney Large Cap
Blend Fund, Smith Barney Fundamental Value Fund Inc., Large Cap Value Fund,
Short-Term High Grade Bond Fund, U.S. Government Securities Fund, 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, Cash Portfolio,
Government Portfolio, Municipal Portfolio, Concert Peachtree Growth 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, 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, 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, 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 Series,
MFS Money Market Series, MFS Bond Series, MFS Total Return Series, MFS Research
Series, MFS Emerging Growth Series, 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
<PAGE> 113
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
(1) The Travelers Life and Annuity Company
One Tower Square
Hartford, Connecticut 06183
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
The undersigned Registrant hereby undertakes:
(a) To file a post-effective amendment to this registration statement as
frequently as is necessary to ensure that the audited financial
statements in the registration statement are never more than sixteen
months old for so long as payments under the variable annuity contracts
may be accepted;
(b) To include either (1) as part of any application to purchase a contract
offered by the prospectus, a space that an applicant can check to
request a Statement of Additional Information, or (2) a post card or
similar written communication affixed to or included in the prospectus
that the applicant can remove to send for a Statement of Additional
Information; and
(c) To deliver any Statement of Additional Information and any financial
statements required to be made available under this Form N-4 promptly
upon written or oral request.
The Company hereby represents:
(a). That the aggregate charges under the Contracts of the Registrant
described herein are reasonable in relation to the services rendered,
the expenses expected to be incurred, and the risks assumed by the
Company.
<PAGE> 114
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 post-effective amendment to this
registration statement and has duly caused this post-effective amendment to this
registration statement to be signed on its behalf in the City of Hartford, State
of Connecticut, on the 12th day of April 2000.
THE TRAVELERS FUND BD IV 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 12th 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> 115
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filling
- ------- ----------- -----------------
<S> <C> <C>
10. Consent of KPMG LLP, Independent Certified Public Accountants Eletronically
15(b) Powers of Attorney authorizing Ernest J. Wright or Kathleen A. Electronically
McGah as signatory for George C. Kokulis, Katherine M. Sullivan
and Glenn D. Lammey.
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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 11, 2000
<PAGE> 1
Exhibit 15(b)
THE TRAVELERS FUND BD IV FOR VARIABLE ANNUITIES
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, GEORGE C. KOKULIS of Simsbury, Connecticut, Director, President
and Chief Executive Officer of The Travelers Life and Annuity Company
(hereafter the "Company"), do hereby make, constitute and appoint ERNEST J.
WRIGHT, Secretary of said Company, and KATHLEEN A. McGAH, Assistant Secretary
of said Company, or either one of them acting alone, my true and lawful
attorney-in-fact, for me, and in my name, place and stead, to sign registration
statements on behalf of said Company on Form N-4 or other appropriate form
under the Securities Act of 1933 and the Investment Company Act of 1940 for The
Travelers Fund BD IV for Variable Annuities, a separate account of the Company
dedicated specifically to the funding of variable annuity contracts to be
offered by said Company, and further, to sign any and all amendments thereto,
including post-effective amendments, that may be filed by the Company on behalf
of said registrant.
IN WITNESS WHEREOF, I have hereunto set my hand this 10th day of April
2000.
/s/George C. Kokulis
Director, President and Chief Executive Officer
The Travelers Life and Annuity Company
<PAGE> 2
THE TRAVELERS FUND BD IV FOR VARIABLE ANNUITIES
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, KATHERINE M. SULLIVAN of Longmeadow, Massachusetts, a Director
of The Travelers Life and Annuity Company (hereafter the "Company"), do hereby
make, constitute and appoint ERNEST J. WRIGHT, Secretary of said Company, and
KATHLEEN A. McGAH, Assistant Secretary of said Company, or either one of them
acting alone, my true and lawful attorney-in-fact, for me, and in my name,
place and stead, to sign registration statements on behalf of said Company on
Form N-4 or other appropriate form under the Securities Act of 1933 and the
Investment Company Act of 1940 for The Travelers Fund BD IV for Variable
Annuities, a separate account of the Company dedicated specifically to the
funding of variable annuity contracts to be offered by said Company, and
further, to sign any and all amendments thereto, including post-effective
amendments, that may be filed by the Company on behalf of said registrant.
IN WITNESS WHEREOF, I have hereunto set my hand this 31st day of March
2000.
/s/Katherine M. Sullivan
Director
The Travelers Life and Annuity Company
<PAGE> 3
THE TRAVELERS FUND BD IV FOR VARIABLE ANNUITIES
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, GLENN D. LAMMEY of Simsbury, Connecticut, Chief Financial
Officer, Chief Accounting Officer and Controller of The Travelers Life and
Annuity Company (hereafter the "Company"), do hereby make, constitute and
appoint ERNEST J. WRIGHT, Secretary of said Company, and KATHLEEN A. McGAH,
Assistant Secretary of said Company, or either one of them acting alone, my
true and lawful attorney-in-fact, for me, and in my name, place and stead, to
sign registration statements on behalf of said Company on Form N-4 or other
appropriate form under the Securities Act of 1933 and the Investment Company
Act of 1940 for The Travelers Fund BD IV for Variable Annuities, a separate
account of the Company dedicated specifically to the funding of variable
annuity contracts to be offered by said Company, and further, to sign any and
all amendments thereto, including post-effective amendments, that may be filed
by the Company on behalf of said registrant.
IN WITNESS WHEREOF, I have hereunto set my hand this 31st day of March
2000.
/s/Glenn D. Lammey
Chief Financial Officer,
Chief Accounting Officer and Controller
The Travelers Life and Annuity Company
