<PAGE> 1
Registration No. 2-79529
811-3575
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 29
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 29
THE TRAVELERS FUND U FOR VARIABLE ANNUITIES
-------------------------------------------
(Exact name of Registrant)
THE TRAVELERS INSURANCE 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
Assistant Secretary
The Travelers Insurance 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, 1996 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.
AN INDEFINITE AMOUNT OF VARIABLE ANNUITY CONTRACT UNITS WAS REGISTERED PURSUANT
TO RULE 24f-2 OF THE INVESTMENT COMPANY ACT OF 1940. A RULE 24f-2 NOTICE FOR
THE FISCAL YEAR ENDED DECEMBER 31, 1995 WAS FILED ON FEBRUARY 29, 1995.
<PAGE> 2
THE TRAVELERS FUND U FOR VARIABLE ANNUITIES
Cross-Reference Sheet
Form N-4
<TABLE>
<CAPTION>
ITEM
NO. CAPTION IN PROSPECTUS
- --- -----------------------------------------
<S> <C>
1. Cover Page Universal Annuity Prospectus (cover page)
2. Definitions Glossary of Special Terms
3. Synopsis Prospectus Summary
4. Condensed Financial Information Condensed Financial Information
5. General Description of Registrant, The Insurance Company; The Separate Accounts;
Depositor and Portfolio Companies The Variable Annuity Contract; Fund U;
Underlying Funds; Miscellaneous; Voting Right
6. Deductions and Expenses Charges and Deductions; Distribution of Variable
Annuity Contracts
7. General Description of Variable The Variable Annuity Contract
Annuity Contracts
8. Annuity Period The Annuity Period
9. Death Benefit Death Benefit
10. Purchases and Contract Value The Variable Annuity Contract
11. Redemptions Surrenders and Redemptions
12. Taxes Federal Tax Considerations
13. Legal Proceedings Legal Proceedings and Opinions
14. Table of Contents of Statement Contents of the Statement of Additional Information
of Additional Information
<CAPTION>
CAPTION IN STATEMENT OF ADDITIONAL
INFORMATION
-----------------------------------------
<S> <C>
15. Cover Page Cover Page
16. Table of Contents Table of Contents
17. General Information and History Description of The Travelers and
the Separate Accounts
18. Services Distribution and Management Services
19. Purchase of Securities Being Offered Valuation of Separate Account Assets
20. Underwriters Distribution and Management Services;
Principal Underwriter
21. Calculation of Performance Data Performance Data
22. Annuity Payments Not Applicable
23. Financial Statements Financial Statements
</TABLE>
<PAGE> 3
PART A
INFORMATION REQUIRED IN A PROSPECTUS
<PAGE> 4
UNIVERSAL ANNUITY
PROSPECTUS
- --------------------------------------------------------------------------------
This prospectus describes the Individual and Group Variable Annuity Contracts
(the "Contracts") to which Purchase Payments may be made as either a single
payment or on a flexible basis. The Contracts are issued by The Travelers
Insurance Company. Purchase Payments may be allocated to one or more of the
following Investment Alternatives: The Travelers Growth and Income Stock Account
for Variable Annuities (Account GIS) -- common stock; The Travelers Quality Bond
Account for Variable Annuities (Account QB) -- intermediate-term bonds; The
Travelers Money Market Account for Variable Annuities (Account MM) -- money
market instruments (an investment in Account MM is neither insured nor
guaranteed by the U.S. Government); The Travelers Timed Growth and Income Stock
Account for Variable Annuities (Account TGIS) -- timed/common stock; The
Travelers Timed Short-Term Bond Account for Variable Annuities (Account
TSB) -- timed/short-term bonds; The Travelers Timed Aggressive Stock Account for
Variable Annuities (Account TAS) -- timed/aggressive common stock; The Travelers
Timed Bond Account for Variable Annuities (Account TB) -- timed/U.S. Government
securities; or The Travelers Fund U for Variable Annuities (Fund U) and its
underlying funds as follows:
- --------------------------------------------------------------------------------
Capital Appreciation Fund
High Yield Bond Trust
Managed Assets Trust
U.S. Government Securities Portfolio
Social Awareness Stock Portfolio
Utilities Portfolio
Templeton Bond Fund
Templeton Stock Fund
Templeton Asset Allocation Fund
Fidelity's High Income Portfolio
Fidelity's Equity-Income Portfolio
Fidelity's Growth Portfolio
Fidelity's Asset Manager Portfolio
Dreyfus Stock Index Fund
American Odyssey International Equity
Fund
American Odyssey Emerging Opportunities
Fund
American Odyssey Core Equity Fund
American Odyssey Long-Term Bond Fund
American Odyssey Intermediate-Term Bond
Fund
American Odyssey Short-Term Bond Fund
Smith Barney Income and Growth Portfolio
Alliance Growth Portfolio
Smith Barney International Equity
Portfolio
Putnam Diversified Income Portfolio
Smith Barney High Income Portfolio
MFS Total Return Portfolio
This prospectus sets forth the information that you should know before
investing. Please read it and retain it for future reference. Additional
information is contained in a Statement of Additional Information ("SAI") dated
May 1, 1996, which has been filed with the Securities and Exchange Commission
("SEC") and is incorporated by reference into this prospectus. A copy may be
obtained, without charge, by writing to The Travelers Insurance Company, Annuity
Services, One Tower Square, Hartford, Connecticut 06183-5030, or by calling
1-860-422-3985. The Table of Contents of the SAI appears in Appendix A of this
prospectus.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUSES OF
FUND U'S UNDERLYING FUNDS. BOTH THIS PROSPECTUS AND EACH OF THE UNDERLYING FUND
PROSPECTUSES SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
VARIABLE ANNUITY CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR
GUARANTEED BY ANY BANK, NOR ARE THEY FEDERALLY INSURED OR OTHERWISE PROTECTED BY
THE FDIC, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY; THEY ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL INVESTMENT.
THE DATE OF THIS PROSPECTUS IS MAY 1, 1996
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<S> <C>
GLOSSARY OF SPECIAL TERMS............................................................. 4
PROSPECTUS SUMMARY.................................................................... 6
FEE TABLE............................................................................. 8
CONDENSED FINANCIAL INFORMATION....................................................... 11
THE VARIABLE ANNUITY CONTRACT......................................................... 21
PURCHASE PAYMENTS................................................................... 21
Application of Purchase Payments................................................. 21
Number of Accumulation Units..................................................... 21
THE VARIABLE INVESTMENT ALTERNATIVES................................................ 22
Fund U: Underlying Funds......................................................... 22
Managed Separate Accounts........................................................ 24
TRANSFERS........................................................................... 25
Dollar-Cost Averaging (Automated Transfers)...................................... 25
Asset Allocation Advice.......................................................... 25
Telephone Transfers.............................................................. 26
MARKET TIMING SERVICES.............................................................. 26
Market Timing Risks.............................................................. 27
SURRENDERS AND REDEMPTIONS.......................................................... 27
Systematic Withdrawals........................................................... 28
DEATH BENEFIT....................................................................... 28
CHARGES AND DEDUCTIONS.............................................................. 28
Contingent Deferred Sales Charge................................................. 28
Premium Tax...................................................................... 30
Administrative Charge............................................................ 30
Mortality and Expense Risk Charge................................................ 30
Reduction or Elimination of Contract Charges..................................... 30
Investment Advisory Fees......................................................... 31
Market Timing Services Fees...................................................... 31
THE ANNUITY PERIOD.................................................................... 31
Maturity Date.................................................................... 31
Allocation of Annuity Payments................................................... 32
Annuity Unit Value............................................................... 32
Determination of First Annuity Payment........................................... 32
Determination of Second and Subsequent Annuity Payments.......................... 33
PAYOUT OPTIONS...................................................................... 33
Election of Options.............................................................. 33
Annuity Options.................................................................. 33
Income Options................................................................... 34
MISCELLANEOUS......................................................................... 35
Termination of Contract or Account............................................... 35
Distribution from One Account to Another Account................................. 36
Required Reports................................................................. 36
</TABLE>
2
<PAGE> 6
<TABLE>
<S> <C>
Right to Return.................................................................. 36
Change of Contract............................................................... 37
Assignment....................................................................... 37
Suspension of Payments........................................................... 37
Voting Rights.................................................................... 37
Fund U......................................................................... 38
Accounts GIS, QB, MM, TGIS, TSB, TAS and TB.................................... 38
Distribution of Variable Annuity Contracts....................................... 38
State Regulation................................................................. 39
Legal Proceedings and Opinions................................................... 39
THE INSURANCE COMPANY AND SEPARATE ACCOUNTS........................................... 39
THE INSURANCE COMPANY............................................................... 39
THE SEPARATE ACCOUNTS............................................................... 39
Substitution of Investments...................................................... 40
Investment Advisers.............................................................. 40
Managed Separate Accounts: Management and Investment Advisory Services........... 41
Performance Information.......................................................... 42
FEDERAL TAX CONSIDERATIONS............................................................ 43
General............................................................................. 43
Investor Control.................................................................... 43
Section 403(b) Plans and Arrangements............................................... 43
Qualified Pension and Profit-Sharing Plans.......................................... 44
Individual Retirement Annuities..................................................... 44
Section 457 Plans................................................................... 45
The Employee Retirement Income Security Act of 1974................................. 45
Federal Income Tax Withholding...................................................... 45
Tax Advice.......................................................................... 46
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE
ANNUITIES (ACCOUNT GIS)............................................................. 47
THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES
(ACCOUNT QB)........................................................................ 48
THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES
(ACCOUNT MM)........................................................................ 50
THE TRAVELERS TIMED GROWTH AND INCOME STOCK ACCOUNT FOR
VARIABLE ANNUITIES (ACCOUNT TGIS)................................................... 53
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT FOR VARIABLE
ANNUITIES (ACCOUNT TSB)............................................................. 54
THE TRAVELERS TIMED AGGRESSIVE STOCK ACCOUNT FOR VARIABLE
ANNUITIES (ACCOUNT TAS)............................................................. 57
THE TRAVELERS TIMED BOND ACCOUNT FOR VARIABLE ANNUITIES
(ACCOUNT TB)........................................................................ 59
APPENDIX A............................................................................ 62
</TABLE>
3
<PAGE> 7
GLOSSARY OF SPECIAL TERMS
- --------------------------------------------------------------------------------
As used in this Prospectus, the following terms have the indicated meanings:
ACCUMULATION UNIT -- an accounting unit of measure used to calculate the value
of a contract before Annuity Payments begin.
ANNUITANT -- the person on whose life the Variable Annuity contract is issued.
ANNUITY COMMENCEMENT DATE -- the date on which Annuity Payments are to begin
under the terms of the Contract and/or the Plan. Also referred to as "Maturity
Date" under an Individual Contract.
ANNUITY PAYMENTS -- a series of periodic payments for life; for life with either
a minimum number of payments or a determinable sum assured; or for the joint
lifetime of the Annuitant and another person and thereafter during the lifetime
of the survivor.
ANNUITY UNIT -- an accounting unit of measure used to calculate the dollar
amount of Annuity Payments.
BOARD OF MANAGERS -- the persons directing the investment and administration of
a Managed Separate Account.
CASH SURRENDER VALUE -- the amount payable to the Owner or other payee upon
termination of the contract during the lifetime of the Annuitant.
CASH VALUE -- the current value of Accumulation Units credited to the contract
less any administrative charges.
CERTIFICATE -- the document issued to a Participant evidencing his or her
participation under the Group Contract.
CERTIFICATE DATE -- the effective date of participation under the group annuity
contract as designated in the Certificate.
CERTIFICATE YEARS -- annual periods computed from the Certificate Date.
COMPANY -- The Travelers Insurance Company.
COMPANY'S HOME OFFICE -- the principal executive offices of the Company, located
at One Tower Square, Hartford, Connecticut, 06183.
CONTRACT -- the Variable Annuity contract described in this prospectus. A group
contract ("Group Contract") or an individual contract ("Individual Contract")
may be issued.
CONTRACT DATE -- the date on which the master Group Contract or Individual
Contract and its benefits and provisions become effective.
CONTRACT YEARS -- annual periods computed from the Contract Date.
CONTRACT OWNER (OWNER) -- for a Group Contract, the entity to which the master
group contract is issued, usually a trustee, Plan administrator or employer. For
an Individual Contract, the person to whom the Contract is issued.
CONTRACT OWNER'S ACCOUNT (OWNER'S ACCOUNT) -- the record of Accumulation Units
credited to the Contract Owner.
INCOME PAYMENTS -- optional forms of periodic payments made by the Company which
are not based on the life of the Annuitant.
INDIVIDUAL ACCOUNT -- the record of Accumulation Units credited to a Participant
or beneficiary.
4
<PAGE> 8
INVESTMENT ALTERNATIVE -- a Managed Separate Account or available Underlying
Fund to which assets under a Variable Annuity contract may be allocated.
MAJORITY VOTE -- a "majority vote of the outstanding voting securities" is
defined in the Investment Company Act of 1940, as amended ("1940 Act") as the
lesser of (i) 67% or more of the votes present at a meeting, if Contract Owners
holding more than 50% of the total voting power of all Contract Owners in the
Separate Account are present or represented by proxy, or (ii) more than 50% of
the total voting power of all Contract Owners in the Separate Account.
MANAGED SEPARATE ACCOUNTS -- Accounts GIS, QB, MM, TGIS, TSB, TAS and TB, the
diversified open-end management investment companies registered with the SEC
under the 1940 Act to which payments under this Contract may be allocated.
MARKET TIMING SERVICES -- third party investment advisory services provided for
an extra fee to Participants in Account TGIS, Account TSB, Account TAS and
Account TB.
MATURITY DATE -- the date on which the first Annuity Payment is to begin.
PARTICIPANT -- an eligible person who participates in the Plan.
PARTICIPANT'S INTEREST -- the Cash Value which is credited for the benefit of a
Participant under the Plan.
PLAN -- the Plan under which the Contract is issued.
PURCHASE PAYMENT -- a gross amount paid to the Company under the Contract during
the accumulation period.
SEPARATE ACCOUNT -- assets set aside by the Company, the investment experience
of which is kept separate from that of other assets of the Company; for example,
The Travelers Fund U for Variable Annuities or The Travelers Growth and Income
Stock Account for Variable Annuities.
UNDERLYING FUND(S) -- the investment option(s) available under The Travelers
Fund U for Variable Annuities to which payments under the Contract may be
allocated. (The portion of the Contract or Account allocated to the Underlying
Fund is referred to in the Contract as "Sub-Accounts.")
VALUATION DATE -- a day on which an account is valued. A valuation date is any
day on which the New York Stock Exchange is open for trading. The value of
Accumulation Units and Annuity Units will be determined as of the close of
trading on the New York Stock Exchange.
VALUATION PERIOD -- the period between the close of business on successive
Valuation Dates.
VARIABLE ANNUITY -- an annuity contract which provides for accumulation and for
Annuity Payments which vary in amount in accordance with the investment
experience of a Separate Account.
5
<PAGE> 9
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------
INTRODUCTION
The Contract described in this prospectus is both an insurance product and a
security. As an insurance product, it is subject to the insurance laws and
regulations of each state in which it is available for distribution. As a
security it is subject to federal securities laws. The Contract is a variable
annuity designed to help Contract Owners and Participants accumulate money for
retirement. It allows Purchase Payments to be allocated to any or all of the
Investment Alternatives. The Contracts described in this prospectus are issued
by The Travelers Insurance Company (the "Company" or "The Travelers"). The
minimum Purchase Payment under tax-qualified contracts is $20, except in the
case of individual retirement annuities ("IRAs") where the initial minimum
Purchase Payment is $1,000. For nonqualified contracts, the minimum Purchase
Payment is $1,000 initially, and $100 thereafter. (See "The Variable Annuity
Contract -- Purchase Payments," page 21.) Purchase Payments are allocated to the
Managed Separate Accounts and to the Underlying Funds of Fund U in accordance
with the selection made by the Contract Owner. A description of the investment
objectives for each Investment Alternative begins on page 22.
For Group Contracts issued in the state of New York, and for Individual
Contracts regardless of the state where issued, there is a Right to Return. (See
"The Variable Annuity Contract -- Right to Return," page 36.)
TRANSFERS AND SURRENDERS
Transfers may be made among available Investment Alternatives without fee,
penalty or charge at any time before Annuity or Income Payments begin. (See
"Transfers," page 25.)
Prior to the Maturity Date, all or part of the Contract value may be
surrendered, subject to certain charges and limitations. Income taxes will be
payable on the taxable portion of the amount surrendered, and a penalty tax may
be incurred if you are under age 59 1/2. (See "Surrenders and Redemptions," page
27, and "Federal Tax Considerations -- Section 403(b) Plans and Arrangements,"
page 42.)
MARKET TIMING AND ASSET ALLOCATION
Accounts TGIS, TSB, TAS and TB (the "Market Timed Accounts") are available to
Contract Owners who have entered into third party market timing services
agreements ("market timing agreements") with registered investment advisers who
provide such services for a fee ("registered investment advisers"). (See "Market
Timing Services," page 27.)
Some Contract Owners may elect to enter into an asset allocation investment
advisory agreement which is fully described in a separate Disclosure Statement.
(See "The Travelers Fund U for Variable Annuities -- Asset Allocation Advice,"
page 25.)
CHARGES AND EXPENSES
No sales charge is deducted from Purchase Payments when they are received.
However, a Contingent Deferred Sales Charge of 5% will be deducted if a Purchase
Payment is surrendered within five years of the date it was received. Under
certain circumstances, the Contingent Deferred Sales Charge may be waived. (See
"Charges and Deductions -- Contingent Deferred Sales Charge," page 28.)
Premium taxes may apply to annuities in a few states. The applicable amount will
be deducted in compliance with each state's laws. (See "Charges and
Deductions -- Premium Tax," page 30.)
The Company will deduct $15 semiannually from the Contract to cover
administrative expenses associated with the Contract. (See "Charges and
Deductions -- Administrative Charge," page 30.)
6
<PAGE> 10
The Company deducts a charge from each Separate Account to compensate for
mortality and expense risks assumed by the Company. The charge is equivalent on
an annual basis to 1.25% of the daily net assets of each Separate Account. (See
"Charges and Deductions -- Mortality and Expense Risk Charge," page 30.)
A deduction is made from each Managed Separate Account for investment management
and advisory services. (See "Charges and Deductions -- Investment Advisory
Fees," page 31.) For investment options under Fund U, the investment management
and advisory services fee is deducted from the assets of the underlying funds.
(See the prospectuses for the Underlying Funds for a description of their
respective investment management and advisory fees.)
ANNUITY PAYMENTS
At the Maturity Date, the Contract provides lifetime Annuity Payments, as well
as other types of payout plans. (See "Payout Options," page 33.) If a variable
payout is selected, the payments will continue to vary with the investment
performance of the selected Investment Alternatives. Variable payout is not
available for Contracts issued in New Jersey and Florida.
DEATH BENEFIT
For Individual Contracts, and Group Contracts for which individual certificates
have been issued to Participants, a death benefit is payable to the Beneficiary
of the Contract if the Participant dies before Annuity or Income Payments begin.
(See "Death Benefit," page 28.)
7
<PAGE> 11
FEE TABLE
- --------------------------------------------------------------------------------
ACCOUNTS GIS, QB, MM, TGIS, TSB, TAS AND TB
FUND U AND ITS UNDERLYING FUNDS
The purpose of this Fee Table is to help individuals understand the various
costs and expenses that a Contract Owner or a Participant will bear, directly or
indirectly, under the Contract. The information, except as noted, reflects
expenses of the Managed Separate Accounts as well as Fund U and its Underlying
Funds for the fiscal year ending December 31, 1995. For additional information,
including possible waivers or reductions of these expenses, see "Charges and
Deductions," page 28. Expenses shown do not include premium taxes, which may be
applicable.
CONTRACT CHARGES AND EXPENSES
<TABLE>
<S> <C>
CONTINGENT DEFERRED SALES CHARGE (as a percentage of purchase payments)........ 5.00%
SEMIANNUAL CONTRACT ADMINISTRATIVE CHARGE...................................... $15
ANNUAL SEPARATE ACCOUNT EXPENSES
MORTALITY AND EXPENSE RISK CHARGE (as a percentage of average net assets of
Managed Separate Accounts and Fund U)....................................... 1.25%
INVESTMENT ALTERNATIVE EXPENSES:
(as a percentage of average net assets of amounts allocated to the Investment
Alternative)
</TABLE>
<TABLE>
<CAPTION>
MARKET
MANAGEMENT TIMING ANNUAL
MANAGED SEPARATE ACCOUNTS FEE FEE(1) EXPENSES(2)
<S> <C> <C> <C>
--------------------------------------------------------------------------------------------------
Travelers Growth and Income Stock (Account GIS)...... 0.45% -- 0.45%
Travelers Quality Bond Account (Account QB).......... 0.32% -- 0.32%
Travelers Money Market Account (Account MM).......... 0.32% -- 0.32%
Travelers Timed Growth and Income Stock Account
(Account TGIS)..................................... 0.32% 1.25% 1.57%
Travelers Timed Short-Term Bond Account (Account
TSB)............................................... 0.32% 1.25% 1.57%
Travelers Timed Aggressive Stock Account (Account
TAS)............................................... 0.35%(3) 1.25% 1.58%
Travelers Timed Bond Account (Account TB)............ 0.50% 1.25% 1.75%
</TABLE>
<TABLE>
<CAPTION>
OTHER TOTAL
EXPENSES UNDERLYING
MANAGEMENT (AFTER FUND
UNDERLYING FUNDS FEE REIMBURSEMENT) EXPENSES
<S> <C> <C> <C>
--------------------------------------------------------------------------------------------------
Capital Appreciation Fund............................ 0.75% 0.10% 0.85%
High Yield Bond Trust................................ 0.50% 0.75%(4) 1.25%
Managed Assets Trust................................. 0.50% 0.08% 0.58%
U.S. Government Securities Portfolio................. 0.32% 0.24% 0.56%
Social Awareness Stock Portfolio..................... 0.65% 0.60%(4) 1.25%
Utilities Portfolio.................................. 0.65% 0.60%(4) 1.25%
Templeton Bond Fund.................................. 0.50% 0.28% 0.78%
Templeton Stock Fund................................. 0.47% 0.19% 0.66%
Templeton Asset Allocation Fund...................... 0.48% 0.18% 0.66%
Fidelity's High Income Portfolio..................... 0.60% 0.11%(5) 0.71%
Fidelity's Equity-Income Portfolio................... 0.51% 0.10%(5) 0.61%
Fidelity's Growth Portfolio.......................... 0.61% 0.09%(5) 0.70%
Fidelity's Asset Manager Portfolio................... 0.71% 0.08%(5) 0.79%
Dreyfus Stock Index Fund............................. 0.16% 0.23%(6) 0.39%
American Odyssey International Equity Fund........... 0.68% 0.30%(7) 0.98%
American Odyssey Emerging Opportunities Fund......... 0.63% 0.14%(7) 0.70%
American Odyssey Core Equity Fund.................... 0.59% 0.11%(7) 0.70%
American Odyssey Long-Term Bond Fund................. 0.50% 0.16%(7) 0.66%
American Odyssey Intermediate-Term Bond Fund......... 0.50% 0.18%(7) 0.68%
American Odyssey Short-Term Bond Fund................ 0.50% 0.25%(7) 0.75%
Smith Barney Income and Growth Portfolio............. 0.65% 0.08%(8) 0.73%
Alliance Growth Portfolio............................ 0.80% 0.10%(8) 0.90%
</TABLE>
8
<PAGE> 12
<TABLE>
<CAPTION>
OTHER TOTAL
EXPENSES UNDERLYING
MANAGEMENT (AFTER FUND
UNDERLYING FUNDS FEE REIMBURSEMENT) EXPENSES
<S> <C> <C> <C>
--------------------------------------------------------------------------------------------------
Smith Barney International Equity Portfolio.......... 0.90% 0.54%(9) 1.44%
Putnam Diversified Income Portfolio.................. 0.75% 0.22%(8) 0.97%
Smith Barney High Income Portfolio................... 0.60% 0.10%(8) 0.70%
MFS Total Return Portfolio........................... 0.80% 0.15%(8) 0.95%
G.T. Global Strategic Income Portfolio............... 0.80% 0.67%(9) 1.47%
</TABLE>
(1) Contract Owners may discontinue market timing services at any time and
thereby avoid any subsequent fees for those services by transferring to a
non-timed account.
(2) This figure does not include the mortality and expense risk fee.
(3) For the fiscal year ending December 31, 1995, the Management Fee for the
Timed Aggressive Stock Account was 0.33% based on a graded scale that
decreased as assets increased. Effective May 1, 1996, the Management Fee
became a flat rate of 0.35%. The chart reflects the current Management Fee.
(4) Other Expenses take into account the current expense reimbursement
arrangement with the Company. The Company has agreed to reimburse each Fund
for the amount by which its aggregate expenses (including the management
fee, but excluding brokerage commissions, interest charges and taxes)
exceeds 1.25%. Without such arrangement, Other Expenses would have been
0.78%, 1.10% and 0.62% for High Yield Bond Trust, Social Awareness Stock
Portfolio, and Utilities Portfolio, respectively.
(5) No reimbursement arrangement affected the Equity-Income Portfolio and the
Growth Portfolio. A portion of the brokerage commissions the Fund paid was
used to reduce its expenses. Without this reduction, Total Underlying Fund
Expenses would have been: High Income Portfolio, 0.71% (there were brokerage
commissions paid, but it did not affect the ratio) and Asset Manager
Portfolio, 0.81%.
(6) The administrator and investment adviser have agreed to reimburse the Fund
for expenses in excess of 0.40%. The Investment Management Fee and Other
Expenses before reimbursement were 0.17% and 0.25%, respectively.
(7) Total Underlying Fund Expenses do not take into account the expense
limitations agreed to by the Manager. The Manager anticipates that as of May
1996, it will no longer waive the fees or reimburse the expenses for the
International Equity Fund, the Emerging Opportunities Fund, the Core Equity
Fund, the Long-Term Bond Fund, and the Intermediate-Term Bond Fund. Total
Underlying Fund Expenses, which reflect the repayment to the Manager of
prior fees waived and expenses reimbursed, were 1.08%, 0.77%, 0.70%, 0.70%,
and 0.75% respectively.
The Manager has agreed to continue, at least until May 1, 1997, to waive
fees or reimburse expenses to the extent the Short-Term Bond Fund's total
expense ratio exceeds 0.75%. Thereafter, the Fund is required to reimburse
the Manager for any fees waived or expenses it reimbursed provided that
this reimbursement by the Fund does not cause the total expense ratio to
exceed the expense limitations above. Without these expense limitations
and/or Manager reimbursements, Other Expenses of the Short-Term Bond Fund
would have been 0.26%.
(8) Total Underlying Fund Expenses are as of October 31, 1995, (the Fund's
fiscal year end) taking into account the current expense limitations agreed
to by the Manager. The Manager waived all of its fees for the period and
reimbursed the Portfolios for their expenses. If such fees were not waived
and expenses were not reimbursed, Total Underlying Fund Expenses would have
been as follows: Smith Barney Income and Growth, 0.94%; Alliance Growth
Portfolio, 0.97%; Putnam Diversified Income Portfolio, 1.31%; Smith Barney
High Income Portfolio, 1.07%; and MFS Total Return Portfolio, 1.06%.
(9) During the fiscal year ended October 31, 1995, the Smith Barney
International Equity Portfolio and G.T. Global Strategic Income Portfolio
earned credits from the Custodian which reduced the service fees incurred.
When these credits are taken into consideration, Total Underlying Fund
Expenses for these Portfolios are 1.21% and 1.11% respectively. In addition,
the Manager waived all or part of its fees for this period for the G.T.
Global Strategic Income Portfolio. Actual Total Underlying Expenses for the
Portfolio would have been 1.93% without this reimbursement.
EXAMPLE*
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
Assuming a 5% annual return on assets, a $1,000 investment would be subject to
the following expenses:
<TABLE>
<CAPTION>
If the Contract is not
If the Contract is surrendered surrendered at the end of
at the end of the period the period shown or if
shown: it is annuitized:
- ------------------------------------------------------------------------------------------------------------------
ONE THREE FIVE TEN ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Managed Separate Accounts:
Account GIS................................ $69 $109 $152 $221 $19 $59 $102 $221
Account QB................................. 68 105 145 207 18 55 95 207
Account MM................................. 68 105 145 207 18 55 95 207
Account TGIS............................... 80 143 208 333 30 93 158 333
Account TSB................................ 80 143 208 333 30 93 158 333
Account TAS................................ 81 144 209 335 31 94 159 335
Account TB................................. 82 148 217 349 32 98 167 349
</TABLE>
9
<PAGE> 13
<TABLE>
<CAPTION>
If the Contract is not
If the Contract is surrendered surrendered at the end of
at the end of the period the period shown or if
shown: it is annuitized:
- ------------------------------------------------------------------------------------------------------------------
THREE FIVE TEN ONE THREE FIVE TEN
ONE YEARS YEARS YEARS YEAR YEARS YEARS YEARS
YEAR
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Underlying Funding Options:
Capital Appreciation Fund.................. $73 $121 $172 $262 $23 $71 $122 $262
High Yield Bond Trust...................... 77 133 192 302 27 83 142 302
Managed Assets Trust....................... 70 113 159 234 20 63 109 234
U.S. Government Securities Portfolio....... 70 113 158 233 20 63 108 233
Social Awareness Stock Portfolio........... 77 133 192 302 27 83 142 302
Utilities Portfolio........................ 77 133 192 302 27 83 142 302
Templeton Bond Fund........................ 72 119 169 255 22 69 119 255
Templeton Stock Fund....................... 71 116 163 243 21 66 113 243
Templeton Asset Allocation Fund............ 71 116 163 243 21 66 113 243
Fidelity's High Income Portfolio........... 72 117 165 248 22 67 115 248
Fidelity's Equity-Income Portfolio......... 71 114 160 237 21 64 110 237
Fidelity's Growth Portfolio................ 72 117 165 247 22 67 115 247
Fidelity's Asset Manager Portfolio......... 73 120 169 256 23 70 119 256
Dreyfus Stock Index Fund................... 69 107 149 214 19 57 99 214
American Odyssey Funds(1):
International Equity Fund................ 74 125 179 275 24 75 129 275
Emerging Opportunities Fund.............. 72 119 168 254 22 69 118 254
Core Equity Fund......................... 72 117 165 247 22 67 115 247
Long-Term Bond Fund...................... 71 116 163 243 21 66 113 243
Intermediate-Term Bond Fund.............. 71 116 164 245 21 66 114 245
Short-Term Bond Fund..................... 72 118 167 252 22 68 117 252
American Odyssey Funds(2):
International Equity Fund................ 87 162 239 392 37 112 189 392
Emerging Opportunities Fund.............. 85 156 230 373 35 106 180 373
Core Equity Fund......................... 84 154 226 367 34 104 176 367
Long-Term Bond Fund...................... 84 153 224 364 34 103 174 364
Intermediate-Term Bond Fund.............. 84 153 225 365 34 103 175 365
Short-Term Bond Fund..................... 85 155 229 372 35 105 179 372
Smith Barney Income and Growth Portfolio... 72 118 166 250 22 68 116 250
Alliance Growth Portfolio.................. 74 123 175 267 24 73 125 267
Smith Barney International Equity
Portfolio................................ 79 139 202 320 29 89 152 320
Putnam Diversified Income Portfolio........ 74 125 178 274 24 75 128 274
Smith Barney High Income Portfolio......... 72 117 165 247 22 67 115 247
MFS Total Return Portfolio................. 74 124 177 272 24 74 127 272
G.T. Global Strategic Income Portfolio..... 79 140 203 323 29 90 153 323
</TABLE>
* The Example reflects the $15 Semiannual Contract Fee as an annual charge of
0.185% of assets.
(1) Reflects expenses that would be incurred for those Contract Owners who DO
NOT participate in the CHART Asset Allocation program.
(2) Reflects expenses that would be incurred for those Contract Owners who DO
participate in the CHART Asset Allocation program.
10
<PAGE> 14
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES
PER UNIT DATA FOR AN ACCUMULATION AND ANNUITY UNIT OUTSTANDING THROUGHOUT EACH
YEAR
The following information on per unit data has been audited by Coopers & Lybrand
L.L.P., independent accountants. Their report on the per unit data for each of
the five years in the period ended December 31, 1995 is contained in the SAI.
The consolidated financial statements of The Travelers Insurance Company and
Subsidiaries are also contained in the SAI. Refer to the cover of this
Prospectus for information on obtaining a free copy of the SAI.
<TABLE>
<CAPTION>
CONTRACTS ISSUED ON OR AFTER TO MAY 16, 1983 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SELECTED PER UNIT DATA
Total investment income......................................................... $ .205 $ .189 $ .184 $ .188
Operating expenses.............................................................. .140 .115 .106 .098
------- ------- ------- -------
Net investment income........................................................... .065 .074 .078 .090
Unit Value at beginning of year................................................. 6.917 7.007 6.507 6.447
Net realized and change in unrealized gains (losses)............................ 2.387 (.164) .422 (.030)
------- ------- ------- -------
Unit Value at end of year....................................................... $ 9.369 $ 6.917 $ 7.007 $ 6.507
======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase (decrease) in unit value........................................... 2.45 (.09) .50 .06
Ratio of operating expenses to average net assets............................... 1.70% 1.65% 1.57% 1.58%
Ratio of net investment income to average net assets............................ .79% 1.05% 1.15% 1.43%
Number of units outstanding at end of year (thousands).......................... 26,688 26,692 28,497 29,661
Portfolio turnover rate......................................................... 96% 103% 81% 189%
Average Commission Rate Paid*................................................... .0480 -- -- --
<CAPTION>
CONTRACTS ISSUED PRIOR TO MAY 16, 1983 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SELECTED PER UNIT DATA
Total investment income......................................................... $ .208 $ .192 $ .189 $ .192
Operating expenses.............................................................. .123 .100 .092 .085
------- ------- ------- -------
Net investment income........................................................... .085 .092 .097 .107
Unit Value at beginning of year................................................. 7.120 7.194 6.664 6.587
Net realized and change in unrealized gains (losses)............................ 2.463 (.166) .433 (.030)
------- ------- ------- -------
Unit Value at end of year....................................................... $ 9.668 $ 7.120 $ 7.194 $ 6.664
======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase (decrease) in unit value........................................... 2.55 (.07) .53 .08
Ratio of operating expenses to average net assets............................... 1.45% 1.41% 1.33% 1.33%
Ratio of net investment income to average net assets............................ 1.02% 1.30% 1.40% 1.67%
Number of units outstanding at end of year (thousands).......................... 17,896 19,557 21,841 22,516
Portfolio turnover rate......................................................... 96% 103% 81% 189%
Average Commission Rate Paid*................................................... .0480 -- -- --
<CAPTION>
CONTRACTS ISSUED ON OR AFTER TO MAY 16, 1983 1991 1990 1989 1988
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SELECTED PER UNIT DATA
Total investment income......................................................... $ .198 $ .192 $ .191 $ .168
Operating expenses.............................................................. .091 .079 .095 .071
------- ------- ------- -------
Net investment income........................................................... .107 .113 .096 .097
Unit Value at beginning of year................................................. 5.048 5.295 4.191 3.601
Net realized and change in unrealized gains (losses)............................ 1.292 (.360) 1.008 .493
------- ------- ------- -------
Unit Value at end of year....................................................... $ 6.447 $ 5.048 $ 5.295 $ 4.191
======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase (decrease) in unit value........................................... 1.40 (.25) 1.10 .59
Ratio of operating expenses to average net assets............................... 1.58% 1.57% 1.58% 1.58%
Ratio of net investment income to average net assets............................ 1.86% 2.25% 2.33% 2.60%
Number of units outstanding at end of year (thousands).......................... 26,235 19,634 15,707 12,173
Portfolio turnover rate......................................................... 319% 54% 27% 38%
Average Commission Rate Paid*................................................... -- -- -- --
<CAPTION>
CONTRACTS ISSUED PRIOR TO MAY 16, 1983 1991 1990 1989 1988
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SELECTED PER UNIT DATA
Total investment income......................................................... $ .201 $ .199 $ .191 $ .168
Operating expenses.............................................................. .077 .069 .066 .053
------- ------- ------- -------
Net investment income........................................................... .124 .130 .125 .115
Unit Value at beginning of year................................................. 5.145 5.383 4.250 3.642
Net realized and change in unrealized gains (losses)............................ 1.318 (.368) 1.008 .493
------- ------- ------- -------
Unit Value at end of year....................................................... $ 6.587 $ 5.145 $ 5.383 $ 4.250
======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase (decrease) in unit value........................................... 1.44 (.24) 1.13 .61
Ratio of operating expenses to average net assets............................... 1.33% 1.33% 1.33% 1.33%
Ratio of net investment income to average net assets............................ 2.11% 2.50% 2.56% 2.85%
Number of units outstanding at end of year (thousands).......................... 24,868 28,053 31,326 35,633
Portfolio turnover rate......................................................... 319% 54% 27% 38%
Average Commission Rate Paid*................................................... -- -- -- --
<CAPTION>
CONTRACTS ISSUED ON OR AFTER TO MAY 16, 1983 1987 1986
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SELECTED PER UNIT DATA
Total investment income......................................................... $ .132 $ .126
Operating expenses.............................................................. .066 .060
------- -------
Net investment income........................................................... .066 .066
Unit Value at beginning of year................................................. 3.737 3.275
Net realized and change in unrealized gains (losses)............................ (.202) .396
------- -------
Unit Value at end of year....................................................... $ 3.601 $ 3.737
======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase (decrease) in unit value........................................... (.14) .46
Ratio of operating expenses to average net assets............................... 1.58% 1.57%
Ratio of net investment income to average net assets............................ 1.49% 1.84%
Number of units outstanding at end of year (thousands).......................... 11,367 54,065
Portfolio turnover rate......................................................... 51% 95%
Average Commission Rate Paid*................................................... -- --
<CAPTION>
CONTRACTS ISSUED PRIOR TO MAY 16, 1983 1987 1986
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SELECTED PER UNIT DATA
Total investment income......................................................... $ .132 $ .126
Operating expenses.............................................................. .059 .047
------- -------
Net investment income........................................................... .073 .079
Unit Value at beginning of year................................................. 3.771 3.296
Net realized and change in unrealized gains (losses)............................ (.202) .396
------- -------
Unit Value at end of year....................................................... $ 3.642 $ 3.771
======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase (decrease) in unit value........................................... (.13) .48
Ratio of operating expenses to average net assets............................... 1.33% 1.32%
Ratio of net investment income to average net assets............................ 1.72% 2.09%
Number of units outstanding at end of year (thousands).......................... 41,859 48,008
Portfolio turnover rate......................................................... 51% 95%
Average Commission Rate Paid*................................................... -- --
</TABLE>
* The Average Commission Rate Paid is required for funds that have over 10% in
equities for which commissions are paid. This information is required for
funds with fiscal year ends on or after September 30, 1996; earlier compliance
is allowed.
11
<PAGE> 15
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES
PER UNIT DATA FOR AN ACCUMULATION AND ANNUITY UNIT OUTSTANDING THROUGHOUT EACH
YEAR
The following information on per unit data has been audited by Coopers & Lybrand
L.L.P., independent accountants. Their report on the per unit data for each of
the five years in the period ended December 31, 1995 is contained in the SAI.
The consolidated financial statements of The Travelers Insurance Company and
Subsidiaries are also contained in the SAI. Refer to the cover of this
Prospectus for information on obtaining a free copy of the SAI.
<TABLE>
<CAPTION>
CONTRACTS ISSUED ON OR AFTER MAY 16, 1983 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SELECTED PER UNIT DATA
Total investment income......................................................... $ .319 $ .310 $ .299 $ .311
Operating expenses.............................................................. .073 .069 .067 .061
------- ------- ------- -------
Net investment income........................................................... .246 .241 .232 .250
Unit Value at beginning of year................................................. 4.274 4.381 4.052 3.799
Net realized and change in unrealized gains (losses)............................ .374 (.348) .097 .003
------- ------- ------- -------
Unit Value at end of year....................................................... $ 4.894 $ 4.274 $ 4.381 $ 4.052
======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase (decrease) in unit value........................................... .62 (.11) .33 .25
Ratio of operating expenses to average net assets............................... 1.57% 1.57% 1.57% 1.58%
Ratio of net investment income to average net assets............................ 5.29% 5.62% 5.41% 6.38%
Number of units outstanding at end of year (thousands).......................... 27,066 27,033 28,472 20,250
Portfolio turnover rate......................................................... 138% 27% 24% 23%
<CAPTION>
CONTRACTS ISSUED PRIOR TO MAY 16, 1983 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SELECTED PER UNIT DATA
Total investment income......................................................... $ .328 $ .318 $ .306 $ .317
Operating expenses.............................................................. .063 .059 .058 .050
------- ------- ------- -------
Net investment income........................................................... .265 .259 .248 .267
Unit Value at beginning of year................................................. 4.400 4.498 4.150 3.880
Net realized and change in unrealized gains (losses)............................ .385 (.357) .100 .003
------- ------- ------- -------
Unit Value at end of year....................................................... $ 5.050 $ 4.400 $ 4.498 $ 4.150
======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase (decrease) in unit value........................................... .65 (.10) .35 .27
Ratio of operating expenses to average net assets............................... 1.33% 1.33% 1.33% 1.33%
Ratio of net investment income to average net assets............................ 5.54% 5.87% 5.66% 6.61%
Number of units outstanding at end of year (thousands).......................... 9,325 10,694 12,489 13,416
Portfolio turnover rate......................................................... 138% 27% 24% 23%
<CAPTION>
CONTRACTS ISSUED ON OR AFTER MAY 16, 1983 1991 1990* 1989 1988
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SELECTED PER UNIT DATA
Total investment income......................................................... $ .299 $ .277 $ .270 $ .259
Operating expenses.............................................................. .056 .048 .047 .046
------- ------- ------- -------
Net investment income........................................................... .243 .229 .223 .213
Unit Value at beginning of year................................................. 3.357 3.129 2.852 2.697
Net realized and change in unrealized gains (losses)............................ .199 (.001) .054 (.058)
------- ------- ------- -------
Unit Value at end of year....................................................... $ 3.799 $ 3.357 $ 3.129 $ 2.852
======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase (decrease) in unit value........................................... .44 .23 .28 .16
Ratio of operating expenses to average net assets............................... 1.57% 1.57% 1.57% 1.58%
Ratio of net investment income to average net assets............................ 6.84% 7.06% 7.44% 7.67%
Number of units outstanding at end of year (thousands).......................... 17,211 14,245 13,135 9,457
Portfolio turnover rate......................................................... 21% 41% 33% 17%
<CAPTION>
CONTRACTS ISSUED PRIOR TO MAY 16, 1983 1991 1990* 1989 1988
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SELECTED PER UNIT DATA
Total investment income......................................................... $ .304 $ .281 $ .270 $ .259
Operating expenses.............................................................. .048 .040 .035 .037
------- ------- ------- -------
Net investment income........................................................... .256 .241 .235 .222
Unit Value at beginning of year................................................. 3.421 3.181 2.892 2.728
Net realized and change in unrealized gains (losses)............................ .203 (.001) .054 (.058)
------- ------- ------- -------
Unit Value at end of year....................................................... $ 3.880 $ 3.421 $ 3.181 $ 2.892
======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase (decrease) in unit value........................................... .46 .24 29 .16
Ratio of operating expenses to average net assets............................... 1.33% 1.33% 1.33% 1.33%
Ratio of net investment income to average net assets............................ 7.09% 7.31% 7.60% 7.82%
Number of units outstanding at end of year (thousands).......................... 14,629 16,341 18,248 21,124
Portfolio turnover rate......................................................... 21% 41% 33% 17%
<CAPTION>
CONTRACTS ISSUED ON OR AFTER MAY 16, 1983 1987 1986
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SELECTED PER UNIT DATA
Total investment income......................................................... $ .245 $ .240
Operating expenses.............................................................. .042 .040
------- -------
Net investment income........................................................... .203 .200
Unit Value at beginning of year................................................. 2.629 2.369
Net realized and change in unrealized gains (losses)............................ (.135) .060
------- -------
Unit Value at end of year....................................................... $ 2.697 $ 2.629
======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase (decrease) in unit value........................................... .07 .26
Ratio of operating expenses to average net assets............................... 1.57% 1.57%
Ratio of net investment income to average net assets............................ 7.72% 7.94%
Number of units outstanding at end of year (thousands).......................... 7,560 8,321
Portfolio turnover rate......................................................... 17% 28%
<CAPTION>
CONTRACTS ISSUED PRIOR TO MAY 16, 1983 1987 1986
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SELECTED PER UNIT DATA
Total investment income......................................................... $ .245 $ .240
Operating expenses.............................................................. .034 .032
------- -------
Net investment income........................................................... .211 .208
Unit Value at beginning of year................................................. 2.652 2.384
Net realized and change in unrealized gains (losses)............................ (.135) .060
------- -------
Unit Value at end of year....................................................... $ 2.728 $ 2.652
======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase (decrease) in unit value........................................... .08 .27
Ratio of operating expenses to average net assets............................... 1.32% 1.32%
Ratio of net investment income to average net assets............................ 7.87% 8.19%
Number of units outstanding at end of year (thousands).......................... 24,703 27,776
Portfolio turnover rate......................................................... 17% 28%
</TABLE>
* On May 1, 1990, TAMIC replaced TIMCO as the investment adviser for Account QB.
12
<PAGE> 16
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES
PER UNIT DATA FOR AN ACCUMULATION UNIT OUTSTANDING THROUGHOUT EACH YEAR
The following information on per unit data has been audited by Coopers & Lybrand
L.L.P., independent accountants. Their report on the per unit data for each of
the five years in the period ended December 31, 1995 is contained in the SAI.
The consolidated financial statements of The Travelers Insurance Company and
Subsidiaries are also contained in the SAI. Refer to the cover of this
Prospectus for information on obtaining a free copy of the SAI.
<TABLE>
<CAPTION>
CONTRACTS ISSUED ON OR AFTER MAY 16, 1983 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SELECTED PER UNIT DATA
Total investment income......................................................... $ .127 $ .087 $ .065 $ .077
Operating expenses.............................................................. .034 .032 .031 .031
------- ------- ------- -------
Net investment income........................................................... .093 .055 .034 .046
Unit Value at beginning of year................................................. 2.084 2.029 1.995 1.949
------- ------- ------- -------
Unit Value at end of year....................................................... $ 2.177 $ 2.084 $ 2.029 $ 1.995
======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase in unit value...................................................... .09 .06 .03 .05
Ratio of operating expenses to average net assets............................... 1.57% 1.57% 1.57% 1.57%
Ratio of net investment income to average net assets............................ 4.36% 2.72% 1.68% 2.33%
Number of units outstanding at end of year (thousands).......................... 35,721 39,675 34,227 42,115
<CAPTION>
CONTRACTS ISSUED PRIOR TO MAY 16, 1983 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SELECTED PER UNIT DATA
Total investment income......................................................... $ .130 $ .091 $ .067 $ .079
Operating expenses.............................................................. .030 .028 .027 .027
------- ------- ------- -------
Net investment income........................................................... .100 .063 .040 .052
Unit Value at beginning of year................................................. 2.146 2.083 2.043 1.991
------- ------- ------- -------
Unit Value at end of year....................................................... $ 2.246 $ 2.146 $ 2.083 $ 2.043
======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase in unit value...................................................... .10 .06 .04 .05
Ratio of operating expenses to average net assets............................... 1.33% 1.33% 1.33% 1.33%
Ratio of net investment income to average net assets............................ 4.61% 2.98% 1.93% 2.58%
Number of units outstanding at end of year (thousands).......................... 206 206 218 227
<CAPTION>
CONTRACTS ISSUED ON OR AFTER MAY 16, 1983 1991 1990* 1989 1988
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SELECTED PER UNIT DATA
Total investment income......................................................... $ .118 $ .149 $ .156 $ .118
Operating expenses.............................................................. .030 .029 .027 .023
------- ------- ------- -------
Net investment income........................................................... .088 .120 .129 .095
Unit Value at beginning of year................................................. 1.861 1.741 1.612 1.517
------- ------- ------- -------
Unit Value at end of year....................................................... $ 1.949 $ 1.861 $ 1.741 $ 1.612
======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase in unit value...................................................... .09 .12 .13 .10
Ratio of operating expenses to average net assets............................... 1.57% 1.57% 1.57% 1.56%
Ratio of net investment income to average net assets............................ 4.66% 6.68% 7.65% 6.02%
Number of units outstanding at end of year (thousands).......................... 55,013 67,343 57,916 41,449
<CAPTION>
CONTRACTS ISSUED PRIOR TO MAY 16, 1983 1991 1990* 1989 1988
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SELECTED PER UNIT DATA
Total investment income......................................................... $ .120 $ .151 $ .156 $ .118
Operating expenses.............................................................. .026 .024 .021 .018
------- ------- ------- -------
Net investment income........................................................... .094 .127 .135 .100
Unit Value at beginning of year................................................. 1.897 1.770 1.635 1.535
------- ------- ------- -------
Unit Value at end of year....................................................... $ 1.191 $ 1.897 $ 1.770 $ 1.635
======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase in unit value...................................................... .09 .13 .14 .10
Ratio of operating expenses to average net assets............................... 1.33% 1.33% 1.33% 1.31%
Ratio of net investment income to average net assets............................ 4.90% 6.93% 7.81% 6.19%
Number of units outstanding at end of year (thousands).......................... 262 326 367 497
<CAPTION>
CONTRACTS ISSUED ON OR AFTER MAY 16, 1983 1987 1986
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SELECTED PER UNIT DATA
Total investment income......................................................... $ .101 $ .091
Operating expenses.............................................................. .023 .020
------- -------
Net investment income........................................................... .078 .071
Unit Value at beginning of year................................................. 1.439 1.368
------- -------
Unit Value at end of year....................................................... $ 1.517 $ 1.439
======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase in unit value...................................................... .08 .07
Ratio of operating expenses to average net assets............................... 1.57% 1.57%
Ratio of net investment income to average net assets............................ 5.27% 4.87%
Number of units outstanding at end of year (thousands).......................... 49,918 31,831
<CAPTION>
CONTRACTS ISSUED PRIOR TO MAY 16, 1983 1987 1986
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SELECTED PER UNIT DATA
Total investment income......................................................... $ .101 $ .091
Operating expenses.............................................................. .018 .015
------- -------
Net investment income........................................................... .083 .076
Unit Value at beginning of year................................................. 1.452 1.376
------- -------
Unit Value at end of year....................................................... $ 1.535 $ 1.452
======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase in unit value...................................................... .08 .08
Ratio of operating expenses to average net assets............................... 1.32% 1.32%
Ratio of net investment income to average net assets............................ 5.49% 5.09%
Number of units outstanding at end of year (thousands).......................... 592 593
</TABLE>
* On May 1, 1990, TAMIC replaced TIMCO as the investment adviser for Account MM.
13
<PAGE> 17
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
THE TRAVELERS FUND U FOR VARIABLE ANNUITIES
ACCUMULATION UNIT VALUES (UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
------------------- -------------------
Q NQ Q NQ
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CAPITAL APPRECIATION FUND*
Unit Value at beginning of year................................................. $ 1.779 $ 1.845 $ 1.892 $ 1.962
Unit Value at end of year....................................................... 2.396 2.485 1.779 1.845
Number of units outstanding at end of year (thousands).......................... 45,979 4,415 40,160 3,605
HIGH YIELD BOND TRUST
Unit Value at beginning of year................................................. $ 2.167 $ 2.189 $ 2.222 $ 2.245
Unit Value at end of year....................................................... 2.472 2.498 2.167 2.189
Number of units outstanding at end of year (thousands).......................... 4,592 498 4,708 585
MANAGED ASSETS TRUST
Unit Value at beginning of year................................................. $ 2.201 $ 2.369 $ 2.281 $ 2.455
Unit Value at end of year....................................................... 2.763 2.975 2.201 2.369
Number of units outstanding at end of year (thousands).......................... 57,020 4,114 58,355 4,813
<CAPTION>
1990 1989
------------------- -------------------
Q NQ Q NQ
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CAPITAL APPRECIATION FUND*
Unit Value at beginning of year................................................. $ 1.157 $ 1.200 $ 1.015 $ 1.052
Unit Value at end of year....................................................... 1.075 1.114 1.157 1.200
Number of units outstanding at end of year (thousands).......................... 11,356 553 12,038 495
HIGH YIELD BOND TRUST
Unit Value at beginning of year................................................. $ 1.573 $ 1.590 $ 1.571 $ 1.588
Unit Value at end of year....................................................... 1.418 1.433 1.573 1.590
Number of units outstanding at end of year (thousands).......................... 4,045 341 6,074 573
MANAGED ASSETS TRUST
Unit Value at beginning of year................................................. $ 1.671 $ 1.799 $ 1.331 $ 1.433
Unit Value at end of year....................................................... 1.691 1.821 1.671 1.799
Number of units outstanding at end of year (thousands).......................... 51,489 2.744 47,104 2,836
<CAPTION>
1993 1992
------------------- -------------------
Q NQ Q NQ
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CAPITAL APPRECIATION FUND*
Unit Value at beginning of year................................................. $ 1.665 $ 1.727 $ 1.433 $ 1.487
Unit Value at end of year....................................................... 1.892 1.962 1.665 1.727
Number of units outstanding at end of year (thousands).......................... 30,003 2,825 16,453 1,020
HIGH YIELD BOND TRUST
Unit Value at beginning of year................................................. $ 1.974 $ 1.994 $ 1.767 $ 1.785
Unit Value at end of year....................................................... 2.222 2.245 1.976 1.994
Number of units outstanding at end of year (thousands).......................... 5,066 603 4,730 428
MANAGED ASSETS TRUST
Unit Value at beginning of year................................................. $ 2.111 $ 2.273 $ 2.034 $ 2.189
Unit Value at end of year....................................................... 2.281 2.455 2.111 2.273
Number of units outstanding at end of year (thousands).......................... 63,538 4,490 65,926 4,120
<CAPTION>
1988 1987
------------------- -------------------
Q NQ Q NQ
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CAPITAL APPRECIATION FUND*
Unit Value at beginning of year................................................. $ 0.934 $ 0.968 $ 1.027 $ 1.066
Unit Value at end of year....................................................... 1.015 1.052 0.934 0.968
Number of units outstanding at end of year (thousands).......................... 13,040 423 12,957 486
HIGH YIELD BOND TRUST
Unit Value at beginning of year................................................. $ 1.388 $ 1.403 $ 1.412 $ 1.427
Unit Value at end of year....................................................... 1.571 1.588 1.388 1.403
Number of units outstanding at end of year (thousands).......................... 5,783 676 4,645 523
MANAGED ASSETS TRUST
Unit Value at beginning of year................................................. $ 1.234 $ 1.328 $ 1.223 $ 1.317
Unit Value at end of year....................................................... 1.331 1.433 1.234 1.328
Number of units outstanding at end of year (thousands).......................... 46,809 3,316 46,733 3,875
<CAPTION>
1991
-------------------
Q NQ
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CAPITAL APPRECIATION FUND*
Unit Value at beginning of year................................................. $ 1.075 $ 1.114
Unit Value at end of year....................................................... 1.433 1.487
Number of units outstanding at end of year (thousands).......................... 12,703 887
HIGH YIELD BOND TRUST
Unit Value at beginning of year................................................. $ 1.418 $ 1.433
Unit Value at end of year....................................................... 1.767 1.785
Number of units outstanding at end of year (thousands).......................... 4,018 344
MANAGED ASSETS TRUST
Unit Value at beginning of year................................................. $ 1.691 $ 1.821
Unit Value at end of year....................................................... 2.034 2.189
Number of units outstanding at end of year (thousands).......................... 58,106 3,359
<CAPTION>
1986
-------------------
Q NQ
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CAPITAL APPRECIATION FUND*
Unit Value at beginning of year................................................. $ 0.946 $ 0.976
Unit Value at end of year....................................................... 1.027 1.066
Number of units outstanding at end of year (thousands).......................... 12,658 263
HIGH YIELD BOND TRUST
Unit Value at beginning of year................................................. $ 1.324 $ 1.339
Unit Value at end of year....................................................... 1.412 1.427
Number of units outstanding at end of year (thousands).......................... 4,866 591
MANAGED ASSETS TRUST
Unit Value at beginning of year................................................. $ 1.040 $ 1.119
Unit Value at end of year....................................................... 1.223 1.317
Number of units outstanding at end of year (thousands).......................... 33,600 1,876
</TABLE>
Q = Qualified
NQ = NonQualified
The financial statements of Fund U and the consolidated financial statements of
The Travelers Insurance Company and Subsidiaries are contained in the SAI.
* Prior to May 1, 1994, the Capital Appreciation Fund was known as the
Aggressive Stock Trust.
14
<PAGE> 18
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
THE TRAVELERS FUND U FOR VARIABLE ANNUITIES
ACCUMULATION UNIT VALUES (UNAUDITED)
<TABLE>
<CAPTION>
1995 1994 1993 1992
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES PORTFOLIO (1/92)*
Unit Value at beginning of period...................................... $ 1.074 $ 1.153 $ 1.066 $ 1.000
Unit Value at end of period............................................ 1.321 1.074 1.153 1.066
Number of units outstanding at end of period (thousands)............... 21,339 22,709 22,142 8,566
SOCIAL AWARENESS STOCK PORTFOLIO (5/92)*
Unit Value at beginning of period...................................... $ 1.109 $ 1.153 $ 1.086 $ 1.000
Unit Value at end of period............................................ 1.461 1.109 1.153 1.086
Number of units outstanding at end of year (thousands)................. 4,841 3,499 2,920 1,332
UTILITIES PORTFOLIO (2/94)*
Unit Value at beginning of period...................................... $ 1.005 $ 1.000 -- --
Unit Value at end of period............................................ 1.284 1.005 -- --
Number of units outstanding at end of period (thousands)............... 11,918 5,740 -- --
TEMPLETON BOND FUND (8/88)*
Unit Value at beginning of year........................................ $ 1.101 $ 1.172 $ 1.065 $ 1.000
Unit Value at end of year.............................................. 1.250 1.101 1.172 1.065
Number of units outstanding at end of year (thousands)................. 10,527 10,186 8,014 3,477
TEMPLETON STOCK FUND (8/88)*
Unit Value at beginning of year........................................ $ 1.338 $ 1.385 $ 1.047 $ 1.000
Unit Value at end of year.............................................. 1.655 1.338 1.385 1.047
Number of units outstanding at end of year (thousands)................. 122,937 101,462 43,847 10,433
TEMPLETON ASSET ALLOCATION FUND (8/88)*
Unit Value at beginning of year........................................ $ 1.277 $ 1.333 $ 1.070 $ 1.000
Unit Value at end of year.............................................. 1.546 1.277 1.333 1.070
Number of units outstanding at end of year (thousands)................. 107,460 103,407 51,893 13,888
FIDELITY'S HIGH INCOME PORTFOLIO (9/85)*
Unit Value at beginning of year........................................ $ 1.316 $ 1.354 $ 1.138 $ 1.000
Unit Value at end of year.............................................. 1.568 1.316 1.354 1.138
Number of units outstanding at end of year (thousands)................. 32,601 25,813 17,381 4,875
FIDELITY'S GROWTH PORTFOLIO (10/86)*
Unit Value at beginning of year........................................ $ 1.192 $ 1.207 $ 1.024 $ 1.000
Unit Value at end of year.............................................. 1.594 1.192 1.207 1.024
Number of units outstanding at end of year (thousands)................. 229,178 176,304 101,260 30,240
FIDELITY'S EQUITY-INCOME PORTFOLIO (10/86)*
Unit Value at beginning of period...................................... $ 1.112 $ 1.052 $ 1.000 --
Unit Value at end of period............................................ 1.484 1.112 1.052 --
Number of units outstanding at end of period (thousands)............... 153,462 78,856 13,414 --
FIDELITY'S ASSET MANAGER PORTFOLIO (9/89)*
Unit Value at beginning of year........................................ $ 1.207 $ 1.301 $ 1.088 $ 1.000
Unit Value at end of year.............................................. 1.394 1.207 1.301 1.088
Number of units outstanding at end of year (thousands)................. 270,795 282,474 162,413 30,207
DREYFUS STOCK INDEX FUND (9/89)*
Unit Value at beginning of year........................................ $ 1.144 $ 1.148 $ 1.064 $ 1.000
Unit Value at end of year.............................................. 1.546 1.144 1.148 1.064
Number of units outstanding at end of year (thousands)................. 43,247 31,600 26,789 12,089
AMERICAN ODYSSEY INTERNATIONAL EQUITY FUND (5/93)*
Unit Value at beginning of period...................................... $ 1.084 $ 1.180 $ 1.000 --
Unit Value at end of period............................................ 1.274 1.084 1.180 --
Number of units outstanding at end of period (thousands)............... 70,364 47,096 16,944 --
AMERICAN ODYSSEY EMERGING OPPORTUNITIES FUND (5/93)*
Unit Value at beginning of period...................................... $ 1.168 $ 1.079 $ 1.000 --
Unit Value at end of period............................................ 1.526 1.168 1.079 --
Number of units outstanding at end of period (thousands)............... 103,815 73,838 27,011 --
</TABLE>
15
<PAGE> 19
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
THE TRAVELERS FUND U FOR VARIABLE ANNUITIES
ACCUMULATION UNIT VALUES (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
1995 1994 1993 1992
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
AMERICAN ODYSSEY CORE EQUITY FUND (5/93)*
Unit Value at beginning of period...................................... $ .990 $ 1.012 $ 1.000 --
Unit Value at end of period............................................ 1.354 .990 1.012 --
Number of units outstanding at end of period (thousands)............... 137,330 100,082 37,136 --
AMERICAN ODYSSEY LONG-TERM BOND FUND (5/93)*
Unit Value at beginning of period...................................... $ .990 $ 1.085 $ 1.000 --
Unit Value at end of period............................................ 1.221 .990 1.085 --
Number of units outstanding at end of period (thousands)............... 101,376 70,928 25,467 --
AMERICAN ODYSSEY INTERMEDIATE-TERM BOND FUND (5/93)*
Unit Value at beginning of period...................................... $ .993 $ 1.035 $ 1.000 --
Unit Value at end of period............................................ 1.128 .993 1.035 --
Number of units outstanding at end of period (thousands)............... 68,878 50,403 19,564 --
AMERICAN ODYSSEY SHORT-TERM BOND FUND (5/93)*
Unit Value at beginning of period...................................... $ 1.006 $ 1.020 $ 1.000 --
Unit Value at end of period............................................ 1.102 1.006 1.020 --
Number of units outstanding at end of period (thousands)............... 24,416 17,611 8,201 --
SMITH BARNEY INCOME AND GROWTH PORTFOLIO (6/94)*
Unit Value at beginning of period...................................... $ 1.000 -- -- --
Unit Value at end of period............................................ 1.246 -- -- --
Number of units outstanding at end of period (thousands)............... 1,747 -- -- --
ALLIANCE GROWTH PORTFOLIO (6/94)*
Unit Value at beginning of period...................................... $ 1.000 -- -- --
Unit Value at end of period............................................ 1.284 -- -- --
Number of units outstanding at end of period (thousands)............... 2,498 -- -- --
SMITH BARNEY INTERNATIONAL EQUITY PORTFOLIO (6/94)*
Unit Value at beginning of period...................................... $ 1.000 -- -- --
Unit Value at end of period............................................ 1.137 -- -- --
Number of units outstanding at end of period (thousands)............... 593 -- -- --
PUTNAM DIVERSIFIED INCOME PORTFOLIO (6/94)*
Unit Value at beginning of period...................................... $ 1.000 -- -- --
Unit Value at end of period............................................ 1.128 -- -- --
Number of units outstanding at end of period (thousands)............... 774 -- -- --
SMITH BARNEY HIGH INCOME PORTFOLIO (6/94)*
Unit Value at beginning of period...................................... $ 1.000 -- -- --
Unit Value at end of period............................................ 1.124 -- -- --
Number of units outstanding at end of period (thousands)............... 138 -- -- --
MFS TOTAL RETURN PORTFOLIO (6/94)*
Unit Value at beginning of period...................................... $ 1.000 -- -- --
Unit Value at end of period............................................ 1.205 -- -- --
Number of units outstanding at end of period (thousands)............... 2,734 -- -- --
G.T. GLOBAL STRATEGIC INCOME PORTFOLIO (6/94)*
Unit Value at beginning of period...................................... $ 1.000 -- -- --
Unit Value at end of period............................................ 1.195 -- -- --
Number of units outstanding at end of period (thousands)............... 162 -- -- --
</TABLE>
* Inception date.
The financial statements of Fund U and the consolidated financial statements of
The Travelers Insurance Company and Subsidiaries are contained in the SAI.
16
<PAGE> 20
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
THE TRAVELERS TIMED GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES
PER UNIT DATA FOR AN ACCUMULATION UNIT OUTSTANDING THROUGHOUT EACH PERIOD
The following information on per unit data has been audited by Coopers & Lybrand
L.L.P., independent accountants. Their report on the per unit data for each of
the five years in the period ended December 31, 1995 is contained in the SAI.
The consolidated financial statements of The Travelers Insurance Company and
Subsidiaries are also contained in the SAI. Refer to the cover of this
Prospectus for information on obtaining a free copy of the SAI.
<TABLE>
<CAPTION>
1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SELECTED PER UNIT DATA
Total investment income...................................................$ .083 $ .064 $ .043 $ .046
Operating expenses........................................................ .057** .041** .042** .045**
------- ------- ------- -------
Net investment income..................................................... .026 .023 .001 .001
Unit Value at beginning of year...........................................$ 1.695 $ 1.776 $ 1.689 $ 1.643
Net realized and change in unrealized gains (losses)...................... .542 (.104) 0.086 0.045
------- ------- ------- -------
Unit Value at end of year.................................................$ 2.263 $ 1.695 $ 1.776 $ 1.689
======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase (decrease) in unit value..................................... .57 (.08) .09 .05
Ratio of operating expenses to average net assets*........................ 2.82%** 2.82%** 2.82%** 2.82%**
Ratio of net investment income to average net assets*..................... 1.37% 1.58% 0.08% 0.78%
Number of units outstanding at end of year (thousands).................... 105 29,692 -- 217,428
Portfolio turnover rate................................................... 79% 19% 70% 119%
<CAPTION>
1991 1990 1989 1988
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SELECTED PER UNIT DATA
Total investment income.................................................... $ .045 $ .099 $ .161 $ .044
Operating expenses......................................................... .045** .034** .023 .017
------- ------- ------- -------
Net investment income...................................................... -- .065 .138 .027
Unit Value at beginning of year............................................ $ 1.391 $ 1.447 $ 1.108 $ 1.000
Net realized and change in unrealized gains (losses)....................... 0.252 (.121) .201 .081
------- ------- ------- -------
Unit Value at end of year.................................................. $ 1.643 $ 1.391 $ 1.447 $ 1.108
======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase (decrease) in unit value...................................... .25 (.06) .34 .11
Ratio of operating expenses to average net assets*......................... 2.82%** 2.41%** 1.57% 1.57%
Ratio of net investment income to average net assets*...................... 1.33% 1.86% 2.81% 2.55%
Number of units outstanding at end of year (thousands)..................... -- 5,708 -- 3,829
Portfolio turnover rate.................................................... 489% 653% 149% 268%
</TABLE>
* Annualized
** Effective May 1, 1990, market timing fees are included in operating expenses.
Prior to May 1, 1990, market timing fee payments were made by separate check
from a contract owner, and were not recorded in the financial statements of
Account TGIS, or by contractual surrender to the extent allowed under federal
tax law.
17
<PAGE> 21
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT FOR VARIABLE ANNUITIES*
PER UNIT DATA FOR AN ACCUMULATION UNIT OUTSTANDING THROUGHOUT EACH PERIOD
The following information on per unit data has been audited by Coopers & Lybrand
L.L.P., independent accountants. Their report on the per unit data for each of
the five years in the period ended December 31, 1995 is contained in the SAI.
The consolidated financial statements of The Travelers Insurance Company and
Subsidiaries are also contained in the SAI. Refer to the cover of this
Prospectus for information on obtaining a free copy of the SAI.
<TABLE>
<CAPTION>
1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SELECTED PER UNIT DATA
Total investment income....................................... $ .074 $ .055 $ .041 $ .054
Operating expenses............................................ .035** .036** .037** .041**
------- ------- ------- -------
Net investment income......................................... .039 .019 .004 .013
Unit value at beginning of year............................... 1.292 1.275 1.271 1.258
Net realized and change in unrealized gains (losses)***....... .002 (.002) -- --
------- ------- ------- -------
Unit value at end of year..................................... $ 1.333 $ 1.292 $ 1.275 $ 1.271
======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase in unit value.................................... .04 .02 -- .01
Ratio of operating expenses to average net assets****......... 2.82%** 2.82%** 2.82%** 2.82%**
Ratio of net investment income to average net assets****...... 3.17% 1.45% .39% 1.12%
Number of units outstanding at end of year (thousands)........ -- 216,713 353,374 173,359
<CAPTION>
1991 1990 1989 1988 1987
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED PER UNIT DATA
Total investment income....................................... $ .076 $ .099 $ .102 $ .078 $ .003
Operating expenses............................................ .036** .030** .017 .016 .001
------- ------- ------- ------- -------
Net investment income......................................... .040 .069 .085 .062 .002
Unit value at beginning of year............................... 1.218 1.149 1.064 1.002 1.000
Net realized and change in unrealized gains (losses)***....... -- -- -- -- --
------- ------- ------- ------- -------
Unit value at end of year..................................... $ 1.258 $ 1.218 $ 1.149 $ 1.064 $ 1.002
======= ======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase in unit value.................................... .04 .07 .09 .06 --
Ratio of operating expenses to average net assets****......... 2.82%** 2.41%** 1.57% 1.57% 1.57%
Ratio of net investment income to average net assets****...... 3.07% 5.89% 7.63% 6.51% 2.69%
Number of units outstanding at end of year (thousands)........ 439,527 369,769 360,074 356,969 288,757
</TABLE>
* Prior to May 1, 1994, the Account was known as The Travelers Timed Money
Market Account for Variable Annuities.
** Effective May 1, 1990, market timing fees are included in operating
expenses. Prior to May 1, 1990, market timing fee payments were made by
separate check from a contract owner, and were not recorded in the
financial statements of Account TSB, or by contractual surrender to the
extent allowed under federal tax law.
*** Effective May 2, 1994, Account TSB was authorized to invest in securities
with a maturity of greater than one year. As a result, net realized and
change in unrealized gains (losses) are no longer included in total
investment income.
**** Annualized.
18
<PAGE> 22
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
THE TRAVELERS TIMED AGGRESSIVE STOCK ACCOUNT FOR VARIABLE ANNUITIES
PER UNIT DATA FOR AN ACCUMULATION UNIT OUTSTANDING THROUGHOUT EACH PERIOD
The following information on per unit data has been audited by Coopers & Lybrand
L.L.P., independent accountants. Their report on the per unit data for each of
the five years in the period ended December 31, 1995 is contained in the SAI.
The consolidated financial statements of The Travelers Insurance Company and
Subsidiaries are also contained in the SAI. Refer to the cover of this
Prospectus for information on obtaining a free copy of the SAI.
<TABLE>
<CAPTION>
1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SELECTED PER UNIT DATA
Total investment income....................................... $ .042 $ .036 $ .037 $ .041
Operating expenses............................................ .057** .049** .048** .043**
------- ------- ------- -------
Net investment income (loss).................................. (.015) (.013) (.011) (.002)
Unit Value at beginning of year............................... 1.706 1.838 1.624 1.495
Net realized and unrealized gains (losses).................... .652 (.119) .225 .131
------- ------- ------- -------
Unit Value at end of year..................................... $ 2.253 $ 1.706 $ 1.838 $ 1.624
======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase (decrease) in unit value......................... .55 (.13) .21 (.13)
Ratio of operating expenses to average net assets*............ 2.83%** 2.80%** 2.82%** 2.93%**
Ratio of net investment income to average net assets*......... (.74)% (.72)% (.80)% (.12)%
Number of units outstanding at end of year (thousands)........ 45,575 25,109 43,059 20,225
Portfolio turnover rate....................................... 113% 142% 71% 269%
<CAPTION>
1991 1990+ 1989 1988 1987
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED PER UNIT DATA
Total investment income....................................... $ .044 $ .045 $ .052 $ .008 $ .001
Operating expenses............................................ .039** .073** .051 .015 .000
------- ------- ------- ------- -------
Net investment income (loss).................................. .005 (.028) .001 (.007) .001
Unit Value at beginning of year............................... 1.136 1.189 1.059 1.001 1.000
Net realized and unrealized gains (losses).................... .354 (.025) .129 .065 .000
------- ------- ------- ------- -------
Unit Value at end of year..................................... $ 1.495 $ 1.136 $ 1.189 $ 1.059 $ 1.001
======= ======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase (decrease) in unit value......................... .36 (.05) .13 .06 .00
Ratio of operating expenses to average net assets*............ 2.99%** 2.64%** 1.95% 1.95% 1.95%
Ratio of net investment income to average net assets*......... .37% (3.73)% .91% (.88)% 4.90%
Number of units outstanding at end of year (thousands)........ 19,565 5,585 0 0 841
Portfolio turnover rate....................................... 261% 0% 77% 127% 0
</TABLE>
* Annualized
** Effective May 1, 1990, market timing fees are included in operating expenses.
Prior to May 1, 1990, market timing fee payments were made by separate check
from a contract owner and were not recorded in the financial statements of
Account TAS, or by contractual surrender to the extent allowed under federal
tax law.
+ On May 1, 1990, TIMCO replaced Keystone Custodian Funds, Inc. as the
investment adviser for Account TAS.
19
<PAGE> 23
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
THE TRAVELERS TIMED BOND ACCOUNT FOR VARIABLE ANNUITIES
PER UNIT DATA FOR AN ACCUMULATION UNIT OUTSTANDING THROUGHOUT EACH PERIOD
The following information on per unit data has been audited by Coopers & Lybrand
L.L.P., independent accountants. Their report on the per unit data for each of
the five years in the period ended December 31, 1995 is contained in the SAI.
The consolidated financial statements of The Travelers Insurance Company and
Subsidiaries are also contained in the SAI. Refer to the cover of this
Prospectus for information on obtaining a free copy of the SAI.
<TABLE>
<CAPTION>
1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SELECTED PER UNIT DATA
Total investment income....................................... $ .071 $ .007 $ .054 $ .051
Operating expenses............................................ .031** .006** .036** .032**
------- ------- ------- -------
Net investment income......................................... .040 .001 .018 .019
Unit Value at beginning of year............................... 1.215 1.234 1.132 1.087
Net realized and change in unrealized gains (losses).......... .128 (.020) .084 .026
------- ------- ------- -------
Unit Value at end of year..................................... $ 1.383 $ 1.215 $ 1.234 $ 1.132
======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase (decrease) in unit value......................... .17 (.02) .10 .05
Ratio of operating expenses to average net assets*............ 3.00%** 3.00%** 3.00%** 2.99%**
Ratio of net investment income to average net assets*......... 3.98% 1.02% 1.48% 1.71%
Number of units outstanding at end of year (thousands)........ 11,466 -- 20,207 21,868
Portfolio turnover rate....................................... 117% -- 190% 505%
<CAPTION>
1991 1990+ 1989 1988 1987
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED PER UNIT DATA
Total investment income....................................... $ .052 $ .072 $ .147 $ .141 $ .001
Operating expenses............................................ .031** .018** .023 .022 .001
------- ------- ------- ------- -------
Net investment income......................................... .021 .054 .124 .119 .000
Unit Value at beginning of year............................... .994 1.036 1.114 1.000 1.000
Net realized and change in unrealized gains (losses).......... .072 (.096) (.202) (.005) --
------- ------- ------- ------- -------
Unit Value at end of year..................................... $ 1.087 $ .994 $ 1.036 $ 1.114 $ 1.000
======= ======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase (decrease) in unit value......................... .09 (.04) (.08) .11 .00
Ratio of operating expenses to average net assets*............ 3.00%** 2.58%** 2.02% 2.04% 1.78%
Ratio of net investment income to average net assets*......... 3.07% 3.88% 11.15% 11.12% (.95)
Number of units outstanding at end of year (thousands)........ 19,521 14,115 660 830 625
Portfolio turnover rate....................................... 627% 370% 10% 26% 0%
</TABLE>
* Annualized
** Effective May 1, 1990, market timing fees are included in operating expenses.
Prior to May 1, 1990, market timing fee payments were made by separate check
from a contract owner, and were not recorded in the financial statements of
Account TB, or by contractual surrender to the extent allowed under federal
tax law.
+ On May 1, 1990, TAMIC replaced Keystone Custodian Funds, Inc. as the
investment adviser for Account TB.
20
<PAGE> 24
THE VARIABLE ANNUITY CONTRACT
- --------------------------------------------------------------------------------
The Contract is a variable annuity designed to help Contract Owners and
Participants accumulate money for retirement. The following brief description of
the key features of the Contract is subject to the specific terms of the
Contract itself. Reference should also be made to the Glossary of Special Terms.
PURCHASE PAYMENTS
Purchase Payments under tax-qualified retirement plans (except IRAs), that is,
tax-sheltered annuities (i.e., 403(b)), corporate pension and profit-sharing,
governmental and deferred compensation plans for governmental and tax-exempt
organization employees, may be made under the Contract in amounts of $20 or more
per Participant, subject to the terms of the Plan. The initial minimum Purchase
Payment for IRAs is $1,000; for nonqualified Contracts, the initial minimum
Purchase Payment is $1,000 and $100 thereafter. The initial Purchase Payment is
due and payable before the Contract becomes effective.
Purchase Payments accumulate under the Contract until the Annuity Commencement
Date. The Company will automatically begin paying Annuity Payments to the Owner
or Participant, as provided in the Plan, on the Participant's Annuity
Commencement Date, if the Participant is then living. (See "Annuity
Options -- Automatic Option," page 33.) The Owner or the Participant, as
provided in the Plan, may choose instead a number of alternative arrangements
for benefit payments. Under a Group Contract, if the Participant dies before a
payout begins, the Company will pay to the Owner or beneficiary, as provided in
the Plan, the Participant's Interest. The Participant's Interest will be
considered the Cash Value of that Participant's Individual Account unless the
Company is otherwise instructed by the Owner. Under an Individual Contract, if
the Owner dies before a payout begins, the amount due will be paid to the
beneficiary.
APPLICATION OF PURCHASE PAYMENTS
Each Purchase Payment will be applied to the Contract to provide Accumulation
Units of the Investment Alternatives, as selected by the Contract Owner. Such
Accumulation Units will be credited to an Owner's Account or Individual Account,
as directed or as provided in the Plan. If the Contract application is in good
order, the Company will apply the initial Purchase Payment within two business
days of receipt of the Purchase Payment at the Company's Home Office. If the
application is not in good order, the Company will attempt to secure the missing
information within five business days. If the application is not complete at the
end of this period, the Company will inform the applicant of the reason for the
delay. The Purchase Payment will be returned immediately unless the applicant
specifically consents to the Company keeping the Purchase Payment until the
application is complete. Once it is complete, the Purchase Payment will be
applied within two business days.
NUMBER OF ACCUMULATION UNITS
The number of Accumulation Units to be credited will be determined by dividing
the Purchase Payment applied to the designated Investment Alternative by the
current Accumulation Unit Value of that Investment Alternative.
The Accumulation Unit Value for each Investment Alternative was established at
$1.00 at inception. The value of an Accumulation Unit on any Valuation Date is
determined by multiplying the value on the immediately preceding Valuation Date
by the net investment factor for the Valuation Period just ended. The net
investment factor is described in the SAI. The value of an Accumulation Unit on
any date other than a Valuation Date will be equal to its value as of the next
succeeding Valuation Date. The value of an Accumulation Unit may increase or
decrease.
21
<PAGE> 25
THE VARIABLE INVESTMENT ALTERNATIVES
FUND U
Fund U currently invests in the following Underlying Funds. Each Underlying Fund
has risks associated with it. Please read the accompanying prospectus for each
carefully. Underlying Funds may be added or withdrawn as permitted by applicable
law. Additionally, some of the Underlying Funds may not be available in every
state due to various insurance regulations.
UNDERLYING FUNDS:
CAPITAL APPRECIATION FUND. The objective of the Capital Appreciation Fund is
growth of capital through the use of common stocks. Income is not an objective.
The Fund invests principally in common stocks of small to large companies which
are expected to experience wide fluctuations in price in both rising and
declining markets.
HIGH YIELD BOND TRUST. The objective of the High Yield Bond Trust is generous
income. The assets of the High Yield Bond Trust will be invested in bonds which,
as a class, sell at discounts from par value and are typically high risk
securities.
MANAGED ASSETS TRUST. The objective of the Managed Assets Trust is high total
investment return through a fully managed investment policy. Assets of the
Managed Assets Trust will be invested in a portfolio of equity, debt and
convertible securities.
DREYFUS STOCK INDEX FUND. The objective of the Dreyfus Stock Index Fund is to
provide investment results that correspond to the price and yield performance of
publicly traded common stocks in the aggregate, as represented by the Standard &
Poor's 500 Composite Stock Price Index.
THE TRAVELERS SERIES TRUST PORTFOLIOS
U.S. GOVERNMENT SECURITIES PORTFOLIO. The objective of the U.S. Government
Securities Portfolio is the selection of investments from the point of view of
an investor concerned primarily with highest credit quality, current income and
total return. The assets of the U.S. Government Securities Portfolio will be
invested in direct obligations of the United States, its agencies and
instrumentalities.
SOCIAL AWARENESS STOCK PORTFOLIO. The objective of the Social Awareness Stock
Portfolio is long-term capital appreciation and retention of net investment
income. The Portfolio seeks to fulfill this objective by selecting investments,
primarily common stocks, which meet the social criteria established for the
Portfolio. Social criteria currently excludes companies that derive a
significant portion of their revenues from the production of tobacco, tobacco
products, alcohol, or military defense systems, or in the provision of military
defense related services or gambling services.
UTILITIES PORTFOLIO. The objective of the Utilities Portfolio is to provide
current income by investing in equity and debt securities of companies in the
utility industries.
TEMPLETON VARIABLE PRODUCTS SERIES
TEMPLETON BOND FUND. The objective of the Templeton Bond Fund is high current
income through a flexible policy of investing primarily in debt securities of
companies, governments and government agencies of various nations throughout the
world.
TEMPLETON STOCK FUND. The objective of the Templeton Stock Fund is capital
growth through a policy of investing primarily in common stocks issued by
companies, large and small, in various nations throughout the world.
TEMPLETON ASSET ALLOCATION FUND. The objective of the Templeton Asset
Allocation Fund is a high level of total return with reduced risk over the long
term through a flexible policy of
22
<PAGE> 26
investing in stocks of companies in any nation and debt obligations of companies
and governments of any nation. Changes in the asset mix will be adjusted in an
attempt to capitalize on total return potential produced by changing economic
conditions throughout the world.
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND
FIDELITY'S HIGH INCOME PORTFOLIO. The objective of the High Income Portfolio is
to seek to obtain a high level of current income by investing primarily in high
yielding, lower-rated, fixed-income securities, while also considering growth of
capital.
FIDELITY'S EQUITY-INCOME PORTFOLIO. The objective of the Equity-Income
Portfolio is to seek reasonable income by investing primarily in
income-producing equity securities; in choosing these securities, the portfolio
manager will also consider the potential for capital appreciation.
FIDELITY'S GROWTH PORTFOLIO. The objective of the Growth Portfolio is to seek
capital appreciation. The Portfolio normally purchases common stocks of
well-known, established companies, and small emerging growth companies, although
its investments are not restricted to any one type of security. Capital
appreciation may also be found in other types of securities, including bonds and
preferred stocks.
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND II
FIDELITY'S ASSET MANAGER PORTFOLIO. The objective of the Asset Manager
Portfolio is to seek high total return with reduced risk over the long-term by
allocating its assets among stocks, bonds and short-term fixed-income
instruments.
AMERICAN ODYSSEY FUNDS, INC.
AMERICAN ODYSSEY INTERNATIONAL EQUITY FUND.* The objective of the International
Equity Fund is to seek maximum long-term total return by investing primarily in
common stocks of established non-U.S. companies.
AMERICAN ODYSSEY EMERGING OPPORTUNITIES FUND.* The objective of the Emerging
Opportunities Fund is to seek maximum long-term total return by investing
primarily in common stocks of small, rapidly growing companies.
AMERICAN ODYSSEY CORE EQUITY FUND.* The objective of the Core Equity Fund is to
seek maximum long-term total return by investing primarily in common stocks of
well-established companies.
AMERICAN ODYSSEY LONG-TERM BOND FUND.* The objective of the Long-Term Bond Fund
is to seek maximum long-term total return by investing primarily in long-term
corporate debt securities, U.S. government securities, mortgage-related
securities, and asset-backed securities, as well as money market instruments.
AMERICAN ODYSSEY INTERMEDIATE-TERM BOND FUND.* The objective of the
Intermediate-Term Bond Fund is to seek maximum long-term total return by
investing primarily in intermediate-term corporate debt securities, U.S.
government securities, mortgage-related securities and asset-backed securities,
as well as money market instruments.
AMERICAN ODYSSEY SHORT-TERM BOND FUND.* The objective of the Short-Term Bond
Fund is to seek maximum long-term total return by investing primarily in
investment-grade, short-term debt securities.
* Funds available for use with an asset allocation program, for which there is a
fee. See "Asset Allocation Advice" on page 25 for more information.
23
<PAGE> 27
SMITH BARNEY/TRAVELERS SERIES FUND, INC.
SMITH BARNEY INCOME AND GROWTH PORTFOLIO. The objective of the Income and
Growth Portfolio is current income and long-term growth of income and capital by
investing primarily, but not exclusively, in common stocks.
ALLIANCE GROWTH PORTFOLIO. The objective of the Growth Portfolio is long-term
growth of capital by investing predominantly in equity securities of companies
with a favorable outlook for earnings and whose rate of growth is expected to
exceed that of the U.S. economy over time. Current income is only an incidental
consideration.
SMITH BARNEY INTERNATIONAL EQUITY PORTFOLIO. The objective of the International
Equity Portfolio is total return on assets from growth of capital and income by
investing at least 65% of its assets in a diversified portfolio of equity
securities of established non-U.S. issuers.
PUTNAM DIVERSIFIED INCOME PORTFOLIO. The objective of the Diversified Income
Portfolio is to seek high current income consistent with preservation of
capital. The Portfolio will allocate its investments among the U.S. Government
Sector, the High Yield Sector, and the International Sector of the fixed income
securities markets.
SMITH BARNEY HIGH INCOME PORTFOLIO. The investment objective of the High Income
Portfolio is high current income. Capital appreciation is a secondary objective.
The Portfolio will invest at least 65% of its assets in high-yielding corporate
debt obligations and preferred stock.
MFS TOTAL RETURN PORTFOLIO. The Total Return Portfolio's objective is to obtain
above-average income (compared to a portfolio entirely invested in equity
securities) consistent with the prudent employment of capital. Generally, at
least 40% of the Portfolio's assets will be invested in equity securities.
G.T. GLOBAL STRATEGIC INCOME PORTFOLIO. (NOTE: AVAILABLE ONLY TO EXISTING
CUSTOMERS AS OF APRIL 30, 1996. THE COMPANY EXPECTS TO ELIMINATE THIS OPTION BY
EARLY 1997.) This fund's objective is to seek high current income and
secondarily to seek capital appreciation. The Portfolio allocates its
investments among debt securities of issuers of the U.S. Government Sector, the
High Yield Sector and the International Sector of the fixed income securities
markets.
MANAGED SEPARATE ACCOUNTS:
For each Managed Separate Account, neither the investment objective nor the
fundamental investment restrictions, as described in the SAI, can be changed
without a vote of the majority of the outstanding voting securities of the
Accounts, as defined by the 1940 Act. See page 47 for more information regarding
the investment objectives and policies and risk factors of these options.
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES (ACCOUNT
GIS): The basic investment objective is long-term accumulation of principal
through capital appreciation and retention of net investment income.
THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES (ACCOUNT QB): The
basic objective is current income, moderate capital volatility and total return.
THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES (ACCOUNT MM): The
basic investment objective is preservation of capital, a high degree of
liquidity and the highest possible current income available from certain
short-term money market securities.
THE TRAVELERS TIMED GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES
(ACCOUNT TGIS)#: The basic investment objective is long-term accumulation of
principal through capital appreciation and retention of net investment income.
24
<PAGE> 28
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT FOR VARIABLE ANNUITIES
(ACCOUNT TSB)#: The investment objective is to generate high current income
with limited price volatility while maintaining a high degree of liquidity.
THE TRAVELERS TIMED AGGRESSIVE STOCK ACCOUNT FOR VARIABLE ANNUITIES
(ACCOUNT TAS)#: The investment objective is growth of capital by investing
primarily in a broadly diversified portfolio of common stocks.
THE TRAVELERS TIMED BOND ACCOUNT FOR VARIABLE ANNUITIES (ACCOUNT TB)#:
The investment objective is current income and total return by investing debt
securities of the highest credit quality.
# These investment options are available through a market timing program, for
which there is a fee. Certain risks may apply to those who allocate funds to
these options outside of the market timing program. See "Market Timing
Services" on page 31 for more information.
TRANSFERS
Before Annuity or Income Payments begin, the Owner or Participant, if permitted,
may transfer all or part of the Contract Value among available Investment
Alternatives without fee, penalty or charge. There are currently no restrictions
on frequency of transfers, but the Company reserves the right to limit transfers
to one in any six-month period. Such restrictions do not apply to transfers by
third party market timing services among timed Investment Alternatives.
Since the available Investment Alternatives have different investment advisory
fees, a transfer from one Investment Alternative to another could result in
higher or lower investment advisory fees. (See "Investment Advisory Fees," page
31.)
DOLLAR COST AVERAGING (AUTOMATED TRANSFERS)
By written request, the Owner or Participant, if permitted, may elect automated
transfers of Contract Values on a monthly or quarterly basis from specific
Investment Alternatives to other Investment Alternatives. Certain minimums may
apply to enroll in the program. He or she may stop or change participation in
the Dollar Cost Averaging program at any time, provided the Company receives at
least 30 days' written notice.
Automated transfers are subject to all Contract provisions, including those
relating to the transfer of money between Investment Alternatives. Certain
minimums may apply to amounts transferred.
Dollar cost averaging requires regular investment regardless of fluctuating
prices and does not guarantee profits nor prevent losses in a declining market.
Before electing this option, individuals should consider their financial ability
to continue purchases through periods of low price levels.
ASSET ALLOCATION ADVICE
Some Contract Owners or Participants, if permitted, may elect to enter into a
separate advisory agreement with Copeland Financial Services, Inc. ("Copeland"),
an affiliate of the Company. Copeland provides asset allocation advice under its
CHART(SM) Program, which is fully described in a separate Disclosure Statement.
Under the CHART Program, Purchase Payments and Cash Values are allocated among
the six American Odyssey Funds. Copeland's charge for this advisory service is
equal to a maximum of 1.50% of the assets subject to the CHART Program. This fee
is currently reduced by 0.25%, the amount of the fee paid to the investment
manager of American Odyssey Funds, and it is further reduced for assets over
$25,000. Another reduction is made for Participants in Plans subject to ERISA
with respect to amounts allocated to the American Odyssey Intermediate-Term Bond
Fund because that Fund has as its subadviser an affiliate of Copeland. A $30
initial fee is also charged. The CHART Program fee will be paid by quarterly
withdrawals from the Cash Values allocated to the American Odyssey Funds. The
Company will not treat these withdrawals as taxable distributions. The CHART
Program may not be available in all marketing programs through which the
Universal Annuity Contract is sold.
25
<PAGE> 29
TELEPHONE TRANSFERS
A Contract Owner may place a transfer request via telephone. The telephone
transfer privilege is available automatically; no special election is necessary
for a Contract Owner to have this privilege. All transfers must be in accordance
with the terms of the Contract. Transfer instructions are currently accepted on
each Valuation Date between 9:00 a.m. and 4:00 p.m., Eastern time, at
1-800-842-8573. Once instructions have been accepted, they may not be rescinded;
however, new telephone instructions may be given the following day. If the
transfer instructions are not in good order, the Company will not execute the
transfer and will promptly notify the caller.
The Company will make a reasonable effort to record each telephone transfer
conversation, but in the event that no recording is effective or available, the
Contract Owner will remain liable for each telephone transfer effected.
Additionally, the Company is not liable for acting upon instructions believed to
be genuine and in accordance with the procedures described above. As a result of
this policy, the Contract Owner may bear the risk of loss in the event that the
Company follows instructions that prove to be fraudulent.
MARKET TIMING SERVICES
Accounts TGIS, TSB, TAS and TB ("Market Timed Accounts") are Investment
Alternatives available to individuals who have entered into market timing
services agreements ("market timing agreements") with registered investment
advisers who provide market timing services ("registered investment advisers").
Such agreements permit the registered investment advisers to act on behalf of
the Contract Owner or Participant by transferring all or a portion of the
Contract Owner's units from one Market Timed Account to another. The registered
investment advisers can transfer funds only from one Market Timed Account to
another Market Timed Account.
A Contract Owner or Participant, if permitted, may transfer account values from
any of the Market Timed Accounts to any of the other Investment Alternatives
available under the Contract. However, if an individual in a Market Timed
Account transfers all current account values and directs all future allocations
to a non-timed investment alternative, the market timing agreements with the
registered investment advisers automatically terminate. If this occurs, the
registered investment advisers no longer have the right to transfer funds on
behalf of that individual. Partial withdrawals from the Market Timed Accounts do
not affect the market timing agreements.
Copeland, a registered investment adviser and an affiliate of the Company,
provides market timing services for a fee equivalent to 1.25% of the current
value of the assets subject to timing. Copeland also charges a $30 market timing
application fee. If a person who has terminated his or her market timing
agreement wishes to reenter a market timing agreement, the market timing fees
will be reassessed, and a new $30 application fee will be charged by Copeland.
The market timing fee is deducted from the assets of the Market Timed Accounts
pursuant to a payment method for which the Company, Accounts TGIS, TSB, TAS and
TB, Tower Square Securities, Inc., the principal underwriter of the Contracts,
and Copeland obtained an exemptive order from the SEC on February 7, 1990
("asset charge payment method"). Pursuant to the asset charge payment method,
the market timing agreements are between the Contract Owner or Participant, as
applicable and Copeland; however, the Company is a signatory to the agreements
and is solely responsible for payment of the fee to Copeland. On each Valuation
Date, the Company deducts the amount necessary to pay the fee from each of the
Market Timed Accounts and, in turn, pays that amount to Copeland. This is the
sole payment method available to those who enter into market timing agreements.
Individuals in the Market Timed Accounts may use the services of unaffiliated
market timing investment advisers if such advisers are acceptable to the
Company, and if such advisers agree to an arrangement substantially identical to
the asset charge payment method.
Distribution and Management Agreements between each of the Market Timed Accounts
and the Company authorize the Company to deduct the market timing fees in
accordance with the asset
26
<PAGE> 30
charge payment method. Contract Owners are asked to approve annually the terms
of the Distribution and Management Agreement in order to continue the asset
charge payment method. Because the market timing services are provided pursuant
to individual agreements between Contract Owners or Participants and the
registered investment advisers, the Boards of Managers of the Market Timed
Accounts do not exercise any supervisory or oversight role with respect to these
services or the fees charged therefor.
Under the asset charge payment method, the daily deductions for market timing
fees are not treated by the Company as taxable distributions. (See "Federal Tax
Considerations," page 43.)
MARKET TIMING RISKS
Those who allocate amounts to the Market Timed Accounts without a market timing
agreement do so at their own risk and may bear a disproportionate amount of the
expenses associated with Separate Account portfolio turnover. In addition, since
the market timing fee is deducted by the Company as an asset charge from the
Market Timed Accounts, those who allocate amounts to these Accounts without a
market timing agreement will nevertheless have the fees deducted on a daily
basis. Although the Company intends to identify such non-timed Contract Owners
or Participants and to restore to the non-timed Contract Owner's account, no
less frequently than monthly, an amount equal to the deductions for the market
timing fees, this restored amount will not reflect any investment experience
that would have been attributable to such deductions.
Those who elect to participate in a market timing agreement may be subject to
the following additional risks: (1) higher transaction costs; (2) higher
portfolio turnover rate; (3) investment return goals not being achieved by the
registered investment advisers which provide market timing services; and (4)
higher account expenses for depleting and, then, starting up the account.
Actions by the registered investment advisers which provide market timing
services may also increase risks generally found in any investment, i.e., the
failure to achieve an investment objective, and possible lower yield. In
addition, if there is more than one market timing strategy utilizing a Market
Timed Account, those who invest in the Market Timed Account when others are
transferred into or out of that Account by the registered investment advisers
may bear part of the direct costs incurred by those individuals who were
transferred. For example, if 90% of a Market Timed Account is under one market
timing strategy, and those funds are transferred either into or out of that
Account, those constituting the other 10% of the Market Timed Account may bear a
disproportionate amount of the expense for the transfer.
SURRENDERS AND REDEMPTIONS
Under a Group Contract, before a Participant's Annuity Commencement Date, the
Company will pay all or any portion of that Participant's Interest to the Owner
or Participant, as provided in the Plan. Under an Individual Contract, the
Contract Owner may redeem all or any portion of the Cash Surrender Value at any
time prior to the Annuity Commencement Date. The Owner or Participant must
submit a written surrender request. Surrenders will be made pro rata from all
the investment options unless he or she specifies the Investment Alternative(s)
from which surrender is to be made. The Cash Surrender Value will be determined
as of the Valuation Date next following receipt of the Owner's surrender request
at the Company's Home Office. A Group Contract Owners' Account may be
surrendered for cash as provided in the Plan without the consent of any
Participant.
The Company may defer payment of any Cash Surrender Value for a period of not
more than seven days after the request is received in good order. The Cash
Surrender Value of an Owner's Account or Individual Account on any date will be
equal to the Cash Value of the applicable Contract or Account less any
applicable Contingent Deferred Sales Charge, outstanding cash loans, and any
premium tax not previously deducted. The Cash Surrender Value may be more or
less than the Purchase Payments made depending on the value of the Contract or
Account at the time of surrender.
27
<PAGE> 31
For those participating in the Texas Optional Retirement Program, a withdrawal
is available only upon termination of employment, retirement or death as
provided in the Texas Optional Retirement Program.
For Participants in Section 403(b) tax deferred annuity plans, a withdrawal may
not be made from certain salary reduction amounts taken prior to reaching age
59 1/2, or due to separation from service, death, disability or hardship. (See
"Section 403(b) Plans and Arrangements," page 43.)
SYSTEMATIC WITHDRAWALS
Each Contract Year, Contract Owners or Participants, as applicable, may elect to
take monthly, quarterly, semiannual or annual systematic withdrawals of a
specified dollar amount. Any applicable premium taxes will be deducted. To elect
this option, an election form provided by the Company must be completed.
Systematic withdrawals may be stopped at any time, provided the Company receives
at least 30 days' written notice.
DEATH BENEFIT
The following Death Benefit applies to all Contracts, except for unallocated
Group Contracts for which there is no death benefit:
If the Participant or, for an Individual Contract, the Annuitant dies on or
after age 75 and before Annuity or Income Payments begin, the Company will pay
to the beneficiary the Participant's Interest or Cash Value, for individual
Contracts, as of the date it receives at its Home Office proof of death, less
any premium tax incurred. If the Participant or Annuitant dies before age 75 and
before Annuity or Income Payments begin, after receipt of due proof of death,
the Company will pay the greatest of (1), (2) or (3) below:
1. the Participant's Interest or, for an Individual Contract, the Cash
Value, less any premium tax incurred or outstanding cash loans;
2. the total Purchase Payments allocated for that Participant or Contract
Owner, less any prior surrenders or cash loans; or
3. the Participant's Interest or, for an Individual Contract, the Cash
Value, on the fifth Certificate or Contract Year immediately preceding
the date of receipt of due proof of death by the Company, less any
applicable premium tax, outstanding cash loans or surrenders made since
such fifth year anniversary.
In some jurisdictions, until state approval is received, the applicable age at
which the death benefit formula will reduce will be age 65 rather than age 75.
CHARGES AND DEDUCTIONS
CONTINGENT DEFERRED SALES CHARGE
No sales charges are deducted at the time a Purchase Payment is applied under
the Contract. A Contingent Deferred Sales Charge of 5% will be assessed if an
amount is surrendered (withdrawn) within five years of its payment date. (For
this calculation, the five years will be measured from the first day of the
calendar month of the payment date.)
In the case of a partial surrender, payments made first will be considered to be
surrendered first ("first in, first out"). In no event may the Contingent
Deferred Sales Charge exceed 5% of premiums paid in the five years immediately
preceding the surrender date, nor may the charge exceed 5% of the amount
withdrawn. Unless the Company receives instructions to the contrary, the
Contingent Deferred Sales Charge will be deducted from the amount requested.
28
<PAGE> 32
The Contingent Deferred Sales Charge will be waived if:
- - an annuity payout is begun;
- - an income option of at least three years' duration (without right of
withdrawal) is begun after the first Contract Year;
- - the Participant under a Group Contract or Annuitant under an Individual
Contract dies;
- - the Participant under a Group Contract or Annuitant under an Individual
Contract becomes disabled (as defined by the Internal Revenue Service)
subsequent to purchase of the Contract;
- - the Participant under a Group Contract, or Annuitant under an Individual
Contract, under a tax-deferred annuity plan (403(b) plan) retires after age
55, provided the Contract has been in effect five years or more and provided
the payment is made to the Contract Owner or Participant, as provided in the
Plan;
- - the Participant under a Group Contract, or Annuitant under an Individual
Contract, under an IRA plan reaches age 70 1/2, provided the Certificate has
been in effect five years or more;
- - the Participant under a Group Contract, or Annuitant under an Individual
Contract, under a qualified pension or profit-sharing plan (including a 401(k)
plan) retires at or after age 59 1/2, provided the Certificate or Contract, as
applicable has been in effect five years or more; or if refunds are made to
satisfy the anti-discrimination test. (For those under Certificates issued
before May 1, 1992, the Contingent Deferred Sales Charge will also be waived
if the Participant or Annuitant retires at normal retirement age (as defined
by the Plan), provided the Certificate or Contract, as applicable has been in
effect one year or more);
- - the Participant under a Section 457 deferred compensation plan retires and the
Certificate has been in effect five years or more, or if a financial hardship
or disability withdrawal has been allowed by the Plan administrator under
applicable Internal Revenue Service ("IRS") rules;
- - for Group Contracts, the Participant under a Section 457 deferred compensation
plan established by the Deferred Compensation Board of the state of New York
or a "public employer" in that state (as defined in Section 5 of the New York
State Finance Laws) terminates employment. The Contingent Deferred Sales
Charge will also be waived for such a Plan at the termination date specified
in the Contract; or
- - for Group Contracts, the Participant under a pension or profit-sharing plan,
including a 401(k) plan, Section 457 deferred compensation plan, or a tax
deferred annuity plan (403(b) plan) that is subject to the Employee Retirement
Income Security Act of 1974 ("ERISA") retires at normal retirement age (as
defined by the Plan) or terminates employment, provided that the Contract
Owner purchases this Contract in conjunction with a group unallocated flexible
annuity contract issued by the Company.
There is a 10% free withdrawal allowance available for partial withdrawals taken
during any Certificate Year or Contract Year, as applicable after the first.
Such withdrawals will be free of charge until the free withdrawal amount is
exceeded. Participants under IRA plans with Certificates or Contracts, as
applicable, issued prior to May 1, 1994, are entitled to a 20% free withdrawal
allowance after the first Certificate or Contract Year. Free withdrawals from
IRA plans are only available after the Participant has attained age 59 1/2. The
free withdrawal amount that is available will be calculated as of the Contract
Anniversary Date immediately preceding the surrender date. The free withdrawal
allowance does not apply to full surrenders. For 403(b) plan Participants,
partial and full withdrawals (surrenders) may be subject to restrictions. (See
"Section 403(b) Plans and Arrangements," page 43.)
The Company expects the Contingent Deferred Sales Charge under the Contracts
will be insufficient to cover distribution expenses. The difference will be
covered by the general assets of the Company which are attributable, in part, to
the mortality and expense risk charges assessed under the Contract.
29
<PAGE> 33
PREMIUM TAX
Certain state and local governments impose premium taxes. These taxes currently
range from 0.5% to 5.0% depending upon jurisdiction. The Company, in its sole
discretion and in compliance with any applicable state law, will determine the
method used to recover premium tax expenses incurred. The Company will deduct
any applicable premium taxes from the Contract Value either upon death,
surrender, annuitization, or at the time Purchase Payments are made to the
Contract, but no earlier than when the Company has a tax liability under state
law.
ADMINISTRATIVE CHARGE
On all Contracts there will be a semiannual administrative charge of $15 for
each Participant or Owner for which an account is maintained. The administrative
charge will be deducted from the account in June and December of each year. This
charge will be prorated from the date of purchase to the next date of assessment
of charge. A prorated charge will also be assessed upon voluntary or involuntary
surrender of the Contract. This charge will not be assessed after an annuity
payout has begun. The administrative charge will be deducted from the Contract
Value by canceling Accumulation Units in each investment alternative on a pro
rata basis. The administrative charge will offset the actual expenses of the
Company in administering the Contract. The charge is set at a level which does
not exceed the average expected cost of the administrative services to be
provided while the Contract is in force.
MORTALITY AND EXPENSE RISK CHARGE
There is an insurance charge against the assets of each Separate Account to
cover the mortality and expense risks associated with guarantees which the
Company provides under these Variable Annuity Contracts. This charge, on an
annual basis, is 1.25% of the Separate Account value and is deducted on each
Valuation Date at the rate of 0.003425% for each day in the Valuation Period.
The Company estimates that approximately 50% of the charge is for the assumption
of mortality risk, while the remainder is for the assumption of expense risk.
The mortality risk charge compensates the Company for guaranteeing to provide
Annuity Payments according to the terms of the Contract regardless of how long
the Annuitant lives and for the guaranteeing to provide the death benefit if the
Annuitant dies prior to the Maturity Date. The expense risk charge compensates
the Company for the risk that the charges under the Contract, which cannot be
increased during the duration of the Contract, will be insufficient to cover
actual costs.
If the amount deducted for these mortality and expense risks is not sufficient
to cover the mortality costs and expense shortfalls, the loss is borne by the
Company. If the deduction is more than sufficient, the excess will be a profit
to the Company. The Company expects to make a profit from this charge.
REDUCTION OR ELIMINATION OF CONTRACT CHARGES
The amount of the Contingent Deferred Sales Charge, mortality and expense risk
charge, and the administrative charge assessed under the Contract may be reduced
or eliminated when sales of the Contract are made to individuals or a group of
individuals in such a manner that results in savings or reduction of sales
expenses. The entitlement to such a reduction in the Contingent Deferred Sales
Charges, mortality and expense risk charge or the administrative charge will be
based on the following: (1) the size and type of group to which sales are to be
made (the sales expenses for a larger group are generally less than for a
smaller group because of the ability to implement large numbers of contracts
with fewer sales contacts); (2) the total amount of Purchase Payments to be
received (per Contract sales expenses are likely to be less on larger Purchase
Payments than on smaller ones); and (3) any prior or existing relationship with
the Company (per contract sales expenses are likely to be less when there is a
prior or existing relationship because of the likelihood of implementing the
Contract with fewer sales contacts).
30
<PAGE> 34
There may be other circumstances, of which the Company is not presently aware,
which could result in fewer sales expenses. In no event will reduction or
elimination of the Contingent Deferred Sales Charge, mortality and expense risk
charge or the administrative charge be permitted where such reduction or
elimination will be unfairly discriminatory to any person.
INVESTMENT ADVISORY FEES
The Travelers Investment Management Company ("TIMCO") furnishes investment
management and advisory services to Accounts GIS, TGIS, TSB and TAS according to
the terms of written agreements between TIMCO and each Managed Separate Account.
The fees are as follows:
<TABLE>
<CAPTION>
ACCOUNT ANNUAL MANAGEMENT FEE
------------------------------------- ------------------------------------
<S> <C>
Account TAS.......................... 0.35% of average daily net assets
Account GIS.......................... 0.45% of average daily net assets
Account TGIS......................... 0.3233% of average daily net assets
Account TSB.......................... 0.3233% of average daily net assets
</TABLE>
Travelers Asset Management International Corporation ("TAMIC") furnishes
investment management and advisory services to Accounts QB, MM and TB according
to the terms of written agreements between TAMIC and each Account. The fees are
as follows:
<TABLE>
<CAPTION>
ACCOUNT ANNUAL MANAGEMENT FEE
------------------------------------- ------------------------------------
<S> <C>
Account TB........................... 0.50% of the first $50,000,000, plus
0.40% of the next $100,000,000, plus
0.30% of the next $100,000,000, plus
0.25% of amounts over $250,000,000
(of Account TB's aggregate net
asset value)
Accounts QB.......................... 0.3233% of average daily net assets
Account MM........................... 0.3233% of average daily net assets
</TABLE>
For information on the Investment Advisory Fees of Fund U's underlying funds
refer to the Fee Table and to the prospectuses for those funds.
MARKET TIMING SERVICES FEES
In connection with the market timing services provided to Participants in
Accounts TGIS, TSB, TAS and TB, Copeland receives a fee equivalent on an annual
basis to 1.25% of the current value of the assets subject to timing. The Company
deducts this fee daily from the assets of the Market Timed Accounts. Copeland
also charges a $30 market timing application fee. Participants may discontinue
market timing services at any time and thereby avoid any subsequent fees for
those services by transferring to a non-timed account. (See "Market Timing
Services," page 27.)
THE ANNUITY PERIOD
MATURITY DATE
Under a Group Contract, Annuity Payments for a particular Participant will
ordinarily begin on that Participant's Annuity Commencement Date as stated in
that Participant's Certificate. For Individual Contracts, it is the date stated
in the Contract. However, a later Annuity Commencement Date may be elected. The
Annuity Commencement Date must be before the individual's 70th birthday, unless
the Company consents to a later date. Federal income tax law requires that
certain minimum distribution payments be taken from pension, profit-sharing,
Section 403(b), Section 457 and IRA plans after the individual reaches the age
of 70 1/2. A number of payout options are available (see "Payout Options," page
33). No Contingent Deferred Sales Charge will be assessed if an Annuity Option
is elected, or an Income Option of at least three years' duration (without right
of withdrawal) is elected after the first Certificate or Contract Year. Federal
income tax law
31
<PAGE> 35
also requires that certain minimum distribution payments be taken upon the death
of the Contract Owner of a nonqualified annuity contract and upon the death of
the Annuitant of a pension, profit-sharing, Section 403(b), Section 457, or IRA
plan.
ALLOCATION OF ANNUITY PAYMENTS
When Annuity Payments begin, the accumulated value in each Investment
Alternative will be applied to provide an Annuity with the amount of Annuity
Payments varying with the investment experience of that same Investment
Alternative. If the Owner or Participant, as provided in the Plan, wishes to
have Annuity Payments which vary with the investment experience of a different
Investment Alternative, transfers among accounts must be made at least 30 days
before the date Annuity Payments begin. If the Owner or Participant wishes to
have a fixed dollar annuity whose payments do not vary, the Company will
exchange that Participant's Interest for a different contract or provide such
other settlement agreements as are appropriate to effect the payment of such an
Annuity.
Variable payout is not available for Contracts issued in the states of New
Jersey and Florida. Once Annuity Payments begin, these Contract Owners or
Participants, as provided in the Plan will automatically receive a fixed dollar
annuity whose payments do not vary with the investment experience of an
Investment Alternative.
ANNUITY UNIT VALUE
The dollar value of an Annuity Unit for each Investment Alternative was
established at $1.00 at inception. The value of an Annuity Unit as of any
Valuation Date is determined 14 days in advance in order to allow adequate time
for the required calculations and the mailing of annuity checks in advance of
their due dates. (If the date 14 days in advance is not a Valuation Date, the
calculation is made on the next following Valuation Date, which would generally
be 13 or 12 days in advance.)
Specifically, the Annuity Unit Value for an Investment Alternative as of a
Valuation Date is equal to (a) the value of the Annuity Unit on the immediately
preceding Valuation Date multiplied by (b) the net investment factor for the
Valuation Period ending on or next following 14 days prior to the current
Valuation Date, 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 3.5% for a Valuation Period of one day is
1.0000942 and, for a period of two days, is 1.0000942 x 1.0000942.)
The value of an Annuity Unit as of any date other than a Valuation Date is equal
to its value on the next succeeding Valuation Date.
The number of Annuity Units credited to the Contract is determined by dividing
the first monthly Annuity Payment attributable to each Investment Alternative by
the Investment Alternative's Annuity Unit Value as of the due date of the first
Annuity Payment. The number of Annuity Units remains fixed during the annuity
period.
DETERMINATION OF FIRST ANNUITY PAYMENT
The Contract contains tables used to determine the first monthly Annuity
Payment. The amount applied to effect an Annuity will be the Cash Value of the
Contract as of 14 days before the date Annuity Payments commence less any
applicable premium taxes not previously deducted.
The amount of the first monthly payment depends on the Annuity Option elected
(see "Annuity Options -- Automatic Option," page 33) and the adjusted age of the
Participant. A formula for determining the adjusted age is contained in the
Contract. The tables are determined from the Progressive Annuity Table assuming
births in the year 1900 and an assumed annual net investment rate of 3.5%. The
total first monthly Annuity Payment is determined by multiplying the benefit per
$1,000 of value shown in the tables of the Contract by the number of thousands
of dollars of value
32
<PAGE> 36
of the Contract applied to that Annuity Option. The Company reserves the right
to require proof of age before Annuity Payments begin.
DETERMINATION OF SECOND AND SUBSEQUENT ANNUITY PAYMENTS
The dollar amount of the second and subsequent Annuity Payments is not
predetermined and may change from month to month based on the investment
experience of the applicable Investment Alternatives. The actual amounts of
these payments are determined by multiplying the number of Annuity Units
credited to the Contract in each Investment Alternative by the corresponding
Annuity Unit Value as of the date on which payment is due. The interest rate
assumed in the annuity tables would produce a level Annuity Unit Value and,
therefore, level Annuity Payments if the net investment rate remained constant
at the assumed rate. In fact, payments will vary up or down as the net
investment rate varies up or down from the assumed rate, and there can be no
assurance that a net investment rate will be as high as the assumed rate.
PAYOUT OPTIONS
ELECTION OF OPTIONS
On the Annuity Commencement Date, or other agreed-upon date, the Company will
pay an amount payable under the Contract in one lump sum, or in accordance with
the payment option selected by the Contract Owner. Election of an Annuity Option
or an Income Option must be made in writing in a form satisfactory to the
Company. Any election made during the lifetime of the Group Contract
Participant, or the Annuitant under an Individual Contract, must be made by the
Participant, as provided in the Plan or the Contract Owner, as applicable. The
terms of options elected may be restricted to meet the contract qualification
requirements of Section 401(a)(9) of the Internal Revenue Code. If, at the death
of a Participant, or Annuitant under an Individual Contract, there is no
election in effect for that Participant or Annuitant, the beneficiary may elect
an Annuity Option or Income Option in lieu of the Death Benefit. The minimum
amount that can be placed under an Annuity Option or Income Option, as described
below, is $2,000 unless the Company consents to a lesser amount. If any monthly
periodic payment due any payee is less than $20, the Company reserves the right
to make payments at less frequent intervals. Annuity Options and Income Options
may be elected on a monthly, quarterly, semiannual or annual basis.
ANNUITY OPTIONS
AUTOMATIC OPTION -- Unless the Company is directed otherwise by the Owner, if
the Participant is living and has a spouse and no election has been made, the
Company will, on that Participant's Annuity Commencement Date, pay to the
Participant the first of a series of Annuity Payments based on the life of the
Participant as the primary payee and the Participant's spouse in accordance with
Option 5 below.
Unless the Plan provides otherwise, if the Participant is living and no election
has been made and the Participant has no spouse, the Company will, on the
Annuity Commencement Date, pay to the Participant the first of a series of
Annuity Payments based on the life of the Participant, in accordance with Option
2 with 120 monthly payments assured.
OPTION 1 -- LIFE ANNUITY -- NO REFUND: The Company will make Annuity Payments
during the lifetime of the person on whose life the payments are based,
terminating with the last payment preceding death. While this option offers the
maximum periodic payment, THERE IS NO ASSURANCE OF A MINIMUM NUMBER OF PAYMENTS,
NOR IS THERE A 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 person on
whose life payments are based, 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, payments will be continued during the remainder of the period to the
beneficiary designated. The beneficiary may instead receive a single sum
settlement
33
<PAGE> 37
equal to the discounted value of the future payments with the interest rate
equivalent to the assumption originally used when the Annuity began.
OPTION 3 -- UNIT REFUND LIFE ANNUITY: The Company will make Annuity Payments
during the lifetime of the person on whose life payments are based, terminating
with the last payment due before the death of that person, provided that, at
death, the beneficiary will receive in one sum the current dollar value of the
number of Annuity Units equal to (a) minus (b) (if that difference is positive)
where: (a) is the total amount applied under the option divided by the Annuity
Unit Value on the due date of the first Annuity Payment, and (b) is the product
of the number of the Annuity Units represented by each payment and the number of
payments made.
OPTION 4 -- JOINT AND LAST SURVIVOR LIFE ANNUITY -- NO REFUND: The Company will
make Annuity Payments during the joint lifetime of the two persons on whose
lives payments are based, and during the lifetime of the survivor. No further
payments will be made following the death of the survivor. THERE IS NO ASSURANCE
OF A MINIMUM NUMBER OF PAYMENTS, NOR IS THERE A PROVISION FOR A DEATH BENEFIT
UPON THE SURVIVOR'S DEATH.
OPTION 5 -- JOINT AND LAST SURVIVOR LIFE ANNUITY -- ANNUITY REDUCES ON DEATH OF
PRIMARY PAYEE: The Company will make Annuity Payments during the lifetime of the
two persons on whose lives payments are based. One of the two persons will be
designated as the primary payee. The other will be designated as the secondary
payee. On the death of the secondary payee, if survived by the primary 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, if survived by the secondary
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 following the
death of the survivor.
OPTION 6 -- OTHER ANNUITY OPTIONS: The Company will make any other arrangements
for Annuity Payments as may be mutually agreed upon.
INCOME OPTIONS
OPTION 1 -- PAYMENTS OF A FIXED AMOUNT: The Company will make equal payments of
the amount elected until the Cash Value applied under this option has been
exhausted. The final payment will include any amount insufficient to make
another full payment.
OPTION 2 -- PAYMENTS FOR A FIXED PERIOD: The Company will make payments for the
number of years selected. The amount of each payment will be equal to the
remaining Cash Value applied under this option divided by the number of
remaining payments.
OPTION 3 -- INVESTMENT INCOME: The Company will make payments for the period
agreed on. The amount payable will be equal to the excess, if any, of the Cash
Value under this option over the amount applied under this option. No payment
will be made if the Cash Value is less than the amount applied, and it is
possible that no payments would be made for a period of time. Payments under
this option are not considered to be Annuity Payments and are taxable in full as
ordinary income. (See "Federal Tax Considerations," page 43.) This option will
generally be inappropriate under federal tax law for periods that exceed the
Participant's attainment of age 70 1/2.
The Cash Value used to determine the amount of any Income Payment will be
calculated as of 14 days before the date an Income Payment is due and will be
determined on the same basis as the Cash Value of the Contract, including the
deduction for mortality and expense risks.
Income Options differ from Annuity Options in that the amount of the payments
made under Income Options are unrelated to the length of life of any person.
Although the Company continues to deduct the charge for mortality and expense
risks, it assumes no mortality risks for amounts applied under any Income
Option. Moreover, except with respect to lifetime payments of
34
<PAGE> 38
investment income under Income Option 3, payments are unrelated to the actual
life span of any person. Thus, the Participant may outlive the payment period.
While Income Options do not directly involve mortality risks for the Company, an
individual may elect to apply the remaining Cash Value to provide an Annuity at
the guaranteed rates even though Income Payments have been received under an
Income Option. Before an Owner or Participant makes any Income Option election,
he or she should consult a tax adviser as to any adverse tax consequences the
election might have.
MISCELLANEOUS
- --------------------------------------------------------------------------------
TERMINATION OF CONTRACT OR ACCOUNT
TERMINATION BY OWNER -- If an Owner or a Participant terminates an Account, in
whole or in part, while the contract remains in effect; and the value of the
terminated Account is to be either paid in cash to you or to a Participant; or
transferred to any other funding vehicle, the Company will pay or transfer the
Cash Surrender Value of the terminated Account.
If this Contract is terminated, whether or not the Plan is terminated; and the
Owner or the Participant, as provided in the Plan, elect that values are not to
be paid out in cash or transferred, the Company reserves the right to agree to
apply a Participant's Interest either as instructed by the Owner or the
Participant, or under one of the options described under "Options in the Event
of Termination of a Participant."
TERMINATION BY PARTICIPANT -- If a Participant terminates an Individual Account,
in whole or in part, while the contract remains in effect; and the value of the
terminated Individual Account is to be either paid in cash to the Participant,
or transferred to any other funding vehicle, the Company will pay or transfer
the Cash Surrender Value of the terminated Account.
TERMINATION BY THE COMPANY AND TERMINATION AMOUNT -- If the Cash Value in a
Participant's Individual Account is less than the Termination Amount stated in
the Contract, and no premium has been applied to the Account for at least three
years, the Company reserves the right to terminate that Account, and to move the
Cash Value of that Participant's Individual Account to the Owner's Account.
If the Plan does not allow for this movement to the Owner's Account, the Cash
Value, less any applicable premium tax not previously deducted, will be paid to
that Participant or to the Owner, as provided in the Plan.
We reserve the right to terminate this Contract on any Valuation Date if:
1. there is no Cash Value in any Participant's Individual Account, and
2. the Cash Value of the Owner's Account, if any, is less than the
Termination Amount shown in the Contract, and
3. premium has not been paid for at least three years.
If this Contract is terminated, the Cash Value of the Owner's Account, if any,
less any applicable premium tax not previously deducted will be paid to you.
Termination will not occur until 31 days after the Company has mailed notice of
termination to the Group Contract Owner or the Participant, as provided in the
Plan, at the last known address; and to any assignee of record.
OPTIONS IN THE EVENT OF TERMINATION OF A PARTICIPANT -- In the event that,
before the Annuity Commencement Date of a Participant, that Participant
terminates participation in the Plan, the
35
<PAGE> 39
Owner or that Participant, as provided in the Plan, with respect to that
Participant's Interest may elect:
1. If that Participant is at least 50 years of age, to have that
Participant's Interest applied to provide an Annuity Option or an Income
Option.
2. If the Contract is continued, to have that Participant's Interest
applied to continue as a paid-up deferred annuity for that Participant,
(i.e., the Cash Value remains in the Contract and the annuity becomes
payable under the same terms and conditions as the Annuity that would
have otherwise been payable at the Annuity Commencement Date).
3. To have the Owner or that Participant, as provided in the Plan, receive
that Participant's Interest in cash.
4. If that Participant becomes a Participant under another group contract
of this same type which is in effect with us, to transfer that
Participant's Interest to that group contract.
5. To make any other arrangements as may be mutually agreed on.
If this Contract is continued, any Cash Value to which a terminating Participant
is not entitled under the Plan, will be moved to the Owner's Account.
AUTOMATIC BENEFIT -- In the event of termination, unless otherwise provided in
the Plan, a Participant's Interest will continue as a paid-up deferred annuity
in accordance with option 2. above, if this Contract is continued. Or, if this
Contract is terminated, will be paid in cash to the Owner or to that
Participant, as provided in the Plan.
ANNUITY PAYMENTS -- Termination of this Contract or the Plan will not affect
payments being made under any Annuity Option which began before the date of
termination.
DISTRIBUTION FROM ONE ACCOUNT TO ANOTHER ACCOUNT
Under a Group Contract, the Owner may, as provided for in the Plan, distribute
the Cash Value from the Owner's Account to one or more Individual Accounts. No
distribution will be allowed between Individual Accounts.
The Owner may, as required by and provided for in the Plan, move the Cash Value
from any or all Individual Accounts to the Owner's Account without a charge.
REQUIRED REPORTS
As often as required by law, but at least once in each Contract Year before the
due date of the first Annuity Payment, the Company will furnish a report which
will show the number of Accumulation Units credited to the Contract in each
Investment Alternative and the corresponding Accumulation Unit Value as of the
date of the report. The Company will keep all records required under federal or
state laws.
RIGHT TO RETURN
For Group Contracts issued in the state of New York, during the 20 days
following the Participant's receipt of a Certificate, the Participant may return
the Certificate to the Company, by mail or in person, if for any reason the
Participant has changed his or her mind. Upon return of the Certificate, the
Company will refund to the Owner the sum of all Purchase Payments made under the
Contract, and will make the Separate Accounts whole if the accumulation value
has declined.
For all Individual Contracts, the Contract may be returned for a full refund of
the Contract's Cash Value (including charges) within ten days after the delivery
of the Contract to the Contract Owner, unless state law requires a longer
period. The Contract Owner bears the investment risk during the free-look
period; therefore, the Cash Value returned may be greater or less than the
Purchase Payment made under the Contract. However, if applicable state law so
requires, or if the
36
<PAGE> 40
Contract was purchased in an Individual Retirement Annuity, the Purchase Payment
will be returned in full. All Cash Values will be determined as of the Valuation
Date next following the Company's receipt of the Contract Owner's written
request for refund.
The right to return is not available to participants of the Texas Optional
Retirement Program.
CHANGE OF CONTRACT
For Group Contracts, the Company may, at any time, make any changes, including
retroactive changes, in the Contract to the extent that the change is required
to meet the requirements of any federal law or regulation to which the Company
is subject.
Except as provided in the paragraph immediately above, no change may be made in
the Contract before the fifth anniversary of the Contract Date, and in no event
will changes be made with respect to payments being made by the Company under
any Annuity Option which has commenced prior to the date of change. On and after
the fifth anniversary of the Contract Date, the Company reserves the right to
change the Termination Amount (see "Termination of Contract or Account," page
35), the calculation of the net investment rate and the Unit Values, and the
Annuity Tables. Any change in the Annuity Tables will be applicable only to
premiums received under the Contract after the change. The ability to make such
change lessens the value of mortality and expense guarantees. Other changes
(including changes to the administrative charge) may be applicable to all
Owners' Accounts and Individual Accounts under the Contract, to only the Owners'
Accounts and Individual Accounts established after the change, or to only
premiums received under the Contract after the date of change as the Company
declares at the time of change. The Company will give notice to the Owner at
least 90 days before the date the change is to take effect.
ASSIGNMENT
The Participant may not assign his or her rights under a Group Contract. The
Owner may assign his or her rights under an Individual or a Group Contract if
allowed by the Plan.
SUSPENSION OF PAYMENTS
If a national stock exchange is closed (except for holidays or weekends), or
trading is restricted due to an existing emergency as defined by the SEC so that
disposal of the Separate Account's investments or determination of its net asset
value is not reasonably practicable, or the Commission has ordered that the
right of redemption (surrender) be suspended for the protection of Contract
Owners, the Company may postpone all procedures (including making Annuity
Payments) which require valuation of Separate Accounts until the stock exchange
is reopened and trading is no longer restricted.
VOTING RIGHTS
The Contract Owner or Participant, as applicable, has certain voting rights in
the Investment Alternatives. The number of votes which an Owner or Participant,
as provided in the Plan, may cast in the accumulation period is equal to the
number of Accumulation Units credited to the account under the Contract. During
the annuity period, the group Participant or the Individual Contract Owner may
cast the number of votes equal to (i) the reserve related to the Contract
divided by (ii) the value of an Accumulation Unit. During the annuity period,
the voting rights of a Participant or, under an Individual Contract, an
Annuitant, will decline as the reserve for the Contract declines.
Upon the death of the person authorized to vote under the Contract, all voting
rights will vest in the beneficiary of the Contract, except in the case of
nonqualified Individual Contracts, where the surviving spouse may succeed to the
ownership.
37
<PAGE> 41
FUND U. In accordance with its view of present applicable law, the Company will
vote shares of the Underlying Funds at regular and special meetings of the
shareholders of the funds in accordance with instructions received from persons
having a voting interest in Fund U. The Company will vote shares for which it
has not received instructions in the same proportion as it votes shares for
which it has received instructions. However, if the 1940 Act or any regulation
thereunder should be amended, or if the present interpretation thereof should
change, and as a result the Company determines that it is permitted to vote
shares of the mutual funds in its own right, it may elect to do so.
The number of shares which a person has a right to vote will be determined as of
the date concurrent with the date established by the respective mutual fund for
determining shareholders eligible to vote at the meeting of the fund, and voting
instructions will be solicited by written communication before the meeting in
accordance with the procedures established by the mutual fund.
Each person having a voting interest in Fund U will receive periodic reports
relating to the fund(s) in which he or she has an interest, proxy material and a
form with which to give such instructions with respect to the proportion of the
fund shares held in Fund U corresponding to his or her interest in Fund U.
ACCOUNTS GIS, QB, MM, TGIS, TSB, TAS AND TB. Contract Owners participating in
Accounts GIS, QB, MM, TGIS, TSB, TAS or TB will be entitled to vote at their
meetings on (i) any change in the fundamental investment policies of or other
policies related to the accounts requiring the Owners' approval; (ii) amendment
of the investment advisory agreements; (iii) election of the members of the
Board of Managers of the accounts; (iv) ratification of the selection of an
independent public accountant for the accounts; (v) any other matters which, in
the future, under the 1940 Act require the Owners' approval; and (vi) any other
business which may properly come before the meeting.
The number of votes which each Contract Owner or a Participant may cast,
including fractional votes, shall be determined as of the date to be chosen by
the Board of Managers within 75 days of the date of the meeting, and at least 20
days' written notice of the meeting will be given.
Votes for which Participants under a Group Contract are entitled to instruct the
Owner, but for which the Owner has received no instructions, will be cast by the
Owner for or against each proposal to be voted on only in the same proportion as
votes for which instructions have been received.
DISTRIBUTION OF VARIABLE ANNUITY CONTRACTS
The Company intends to sell the Contract in all jurisdictions where the Company
is licensed to do business, except the Bahamas. The Contract may be purchased
from agents who are licensed by state insurance authorities to sell variable
annuity contracts issued by the Company, and who are also registered
representatives of broker-dealers which have Selling Agreements with Tower
Square Securities, Inc. ("Tower Square"). Tower Square, whose principal business
address is One Tower Square, Hartford, Connecticut, serves as the principal
underwriter for the variable annuity contracts described herein. It is
anticipated, however, that an affiliated broker-dealer may become the principal
underwriter for the Contracts during 1996. The offering is continuous. Tower
Square is a registered broker-dealer with the SEC under the Securities Exchange
Act of 1934 and is a member of the National Association of Securities Dealers,
Inc. ("NASD"). Tower Square is an affiliate of the Company and an indirect
wholly owned subsidiary of Travelers Group Inc., and serves as principal
underwriter pursuant to a Distribution and Management Agreement to which the
Separate Accounts, the Company and Tower Square are parties. No amounts have
been or will be retained by Tower Square for acting as principal underwriter for
the Contracts.
38
<PAGE> 42
Agents will be compensated for sales of the Contracts on a commission and
service fee basis. The compensation paid to sales agents will not exceed 7.0% of
the payments made under the Contract. In addition, certain production,
persistency and managerial bonuses may be paid.
From time to time the Company may pay or permit other promotional incentives, in
cash, credit or other compensation.
STATE REGULATION
The Company is subject to the laws of the state of Connecticut governing
insurance companies and to regulation by the Insurance Commissioner of the state
of Connecticut. An annual statement in a prescribed form must be filed with that
Commissioner on or before March 1 in each year covering the operations of the
Company for the preceding year and its financial condition on December 31 of
such year. Its 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 by the National Association of Insurance Commissioners
("NAIC") at least once in every four years.
In addition, the Company is subject to the insurance laws and regulations of the
other states in which it is licensed to operate. Generally, the insurance
departments of the states apply the laws of the jurisdiction of domicile in
determining the field of permissible investments.
LEGAL PROCEEDINGS AND OPINIONS
There are no pending material legal proceedings affecting the Separate Accounts.
Legal matters in connection with federal laws and regulations affecting the
issue and sale of the variable annuity Contract described in this Prospectus and
the organization of the Company, its authority to issue variable annuity
contracts under Connecticut law and the validity of the forms of the variable
annuity contracts under Connecticut law have been passed on by the General
Counsel of the Life and Annuities Division of the Company.
THE INSURANCE COMPANY AND SEPARATE ACCOUNTS
- --------------------------------------------------------------------------------
THE INSURANCE COMPANY
The Travelers Insurance Company (the "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 a 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 Travelers Group Inc., a financial services holding
company. The Company's Home Office is located at One Tower Square, Hartford,
Connecticut 06183.
THE SEPARATE ACCOUNTS
Two different types of Separate Accounts serve as the funding vehicles for the
Contracts described in this prospectus. The first type, Fund U, is a unit
investment trust registered with the SEC under the 1940 Act, which means that
Fund U's assets are invested exclusively in the shares of the Underlying Funds.
The second type of Separate Account available under the Contract (the "Managed
Separate Accounts" -- Accounts GIS, QB, MM, TGIS, TSB, TAS and TB) are
diversified, open-end management investment companies registered with the SEC
under the 1940 Act. The assets of the Managed Separate Accounts are invested
directly in securities such as stocks, bonds or money market instruments which
are compatible with the stated investment policies of each Separate Account.
Each of the Separate Accounts available in connection with the Contract has
different investment objectives and fundamental investment policies, as
described beginning on page 47.
39
<PAGE> 43
The Separate Accounts were established on the following dates: Fund U -- May 16,
1983; Account GIS -- September 22, 1967; Account QB -- July 29, 1974; Account
MM -- December 29, 1981; Accounts TGIS and TSB -- October 30, 1986; and Accounts
TAS and TB -- January 2, 1987.
Under Connecticut law, the assets of the Separate Accounts will be held for the
exclusive benefit of its owners. Income, gains and losses, whether or not
realized, for assets allocated to the Separate Accounts, are in accordance with
the applicable annuity contracts, credited to or charged against the Separate
Accounts without regard to other income, gains or losses of the Company. The
assets in the Separate Accounts are not chargeable with liabilities arising out
of any other business which the Company may conduct. The obligations arising
under the Variable Annuity contracts are obligations of the Company.
SUBSTITUTION OF INVESTMENTS
If any of the Separate Accounts or Underlying Funds become unavailable, or in
the judgment of the Company become inappropriate for the purposes of the
Contract, the Company may substitute another investment alternative without
consent of Contract Owners. Substitution may be made with respect to both
existing investments and the investment of future Purchase Payments. However, no
such substitution will be made without notice to Contract Owners and without
prior approval of the SEC, to the extent required by the 1940 Act, or other
applicable law.
INVESTMENT ADVISERS
The Investment Alternatives receive investment management and advisory services
from the following investment professionals:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT ALTERNATIVE INVESTMENT ADVISER SUBADVISER
- ------------------------------------------------------------------------------------------------------------------
Capital Appreciation Fund............... The Travelers Investment Management Janus Capital Corporation
Company (TIMCO)
High Yield Bond Trust................... Travelers Asset Management
International Corporation (TAMIC)
Managed Assets Trust.................... TAMIC TIMCO
U.S. Government Securities Portfolio.... TAMIC
Social Awareness Stock Portfolio........ Smith Barney Mutual Funds Management
Inc.
Utilities Portfolio..................... Smith Barney Mutual Funds Management
Inc.
Templeton Stock Fund.................... Templeton Investment Counsel, Inc.
Templeton Asset Allocation Fund......... Templeton Investment Counsel, Inc.
Templeton Bond Fund..................... Templeton Global Bond Managers
Fidelity's High Income Portfolio........ Fidelity Management & Research
Company
Fidelity's Equity-Income Portfolio...... Fidelity Management & Research
Company
Fidelity's Growth Portfolio............. Fidelity Management & Research
Company
Fidelity's Asset Manager Portfolio...... Fidelity Management & Research
Company
Dreyfus Stock Index Fund................ Wells Fargo Nikko Investment
Advisors
American Odyssey International Equity
Fund.................................. American Odyssey Funds Management, Bank of Ireland Asset Management
Inc. (U.S.) Limited
</TABLE>
40
<PAGE> 44
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT ALTERNATIVE INVESTMENT ADVISER SUBADVISER
- ------------------------------------------------------------------------------------------------------------------
American Odyssey Emerging Opportunities
Fund.................................. American Odyssey Funds Management, Wilke/Thompson Capital Management,
Inc. Inc.
American Odyssey Core Equity Fund....... American Odyssey Funds Management, Equinox Capital Management, Inc.
Inc.
American Odyssey Long-Term Bond Fund.... American Odyssey Funds Management, Western Asset Management Company and
Inc. WLO Global Management
American Odyssey Intermediate-Term Bond
Fund.................................. American Odyssey Funds Management, TAMIC
Inc.
American Odyssey Short-Term Bond Fund... American Odyssey Funds Management, Smith Graham & Co. Asset Managers,
Inc. L.P.
Smith Barney Income and Growth
Portfolio............................. Smith Barney Mutual Funds Management
Inc.
Alliance Growth Portfolio............... Smith Barney Mutual Funds Management Alliance Capital Management L.P.
Inc.
Smith Barney International Equity
Portfolio............................. Smith Barney Mutual Funds Management
Inc.
Putnam Diversified Income Portfolio..... Smith Barney Mutual Funds Management Putnam Investment Management, Inc.
Inc.
Smith Barney High Income Portfolio...... Smith Barney Mutual Funds Management
Inc.
MFS Total Return Portfolio.............. Smith Barney Mutual Funds Management Massachusetts Financial Services
Inc. Company
G.T. Global Strategic Income
Portfolio............................. Smith Barney Mutual Funds Management G.T. Capital Management, Inc.
Inc.
Growth and Income Account............... TIMCO
Quality Bond Account.................... TAMIC
Money Market Account.................... TAMIC
Timed Growth and Income Stock Account... TIMCO
Timed Short-Term Bond Account........... TIMCO
Timed Aggressive Stock Account.......... TIMCO
Timed Bond Account...................... TAMIC
</TABLE>
MANAGED SEPARATE ACCOUNTS: MANAGEMENT AND INVESTMENT ADVISORY SERVICES
The investments and administration of each Managed Separate Account are under
the direction of a Board of Managers. Subject to the authority of each Board of
Managers, TIMCO and TAMIC furnish investment management and advisory services as
indicated in the Investment Adviser Chart. Additionally, the Board of Managers
for each Managed Separate Account annually selects an independent public
accountant, reviews the terms of the management and investment advisory
agreements, recommends any changes in the fundamental investment policies (and
submits any such changes to Contract Owners at the annual meeting), and takes
any other actions necessary in connection with the operation and management of
the Managed Separate Accounts.
The Travelers Investment Management Company ("TIMCO") is a registered investment
adviser that has provided investment advisory services since its incorporation
in 1967. Its principal offices are located at One Tower Square, Hartford,
Connecticut, and it is a wholly owned subsidiary of Smith Barney Holdings Inc.,
which is a wholly owned subsidiary of Travelers Group Inc., a financial services
holding company. TIMCO also acts as investment adviser or subadviser for other
investment companies used to fund variable products, as well as for individual
and pooled pension and profit-sharing accounts, and for affiliated companies of
The Travelers Insurance Company.
41
<PAGE> 45
Travelers Asset Management International Corporation ("TAMIC") is a registered
investment adviser that has provided investment advisory services since its
incorporation in 1978. Its principal offices are located at One Tower Square,
Hartford, Connecticut, and it is an indirect wholly owned subsidiary of
Travelers Group Inc., a financial services holding company. TAMIC also acts as
investment adviser or subadviser for other investment companies used to fund
variable products, as well as for individual and pooled pension and
profit-sharing accounts, and for domestic insurance companies affiliated with
The Travelers Insurance Company and nonaffiliated insurance companies.
PERFORMANCE INFORMATION
From time to time, the Company may advertise several types of historical
performance for the Managed Separate Accounts and the Underlying Funds of Fund
U. The yield and effective yield may be advertised for Account MM, a money
market fund. Yield is a measure of the net dividend and interest income earned
over a specific seven-day period, expressed as a percentage of the offering
price of Account MM's Accumulation Units. Yield is an annualized figure, which
means that it is assumed that Account MM generates the same level of net income
over a 52-week period. Effective yield is calculated similarly but includes the
effect of assumed compounding calculated under rules prescribed by the SEC. The
effective yield will be slightly higher than yield due to this compounding
effect. Neither yield quotation reflects a deduction for the Contingent Deferred
Sales Charge, which if included, would reduce yield and effective yield.
The Company may also advertise the standardized average annual total returns of
Accounts GIS, QB, MM, TGIS, TSB, TAS, TB and Fund U, calculated in a manner
prescribed by the SEC, as well as the non-standardized total return, as
described below. Standardized average annual total return will show the
percentage rate of return of a hypothetical initial investment of $1,000 for the
most recent one-, five- and ten-year periods, or since an Underlying Fund's
inception date. This standardized calculation reflects the deduction of all
applicable charges made to the Contract, except for premium taxes which may be
imposed by certain states. The non-standardized total returns differ from the
standardized average annual total returns, in that they do not reflect the
deduction of any applicable Contingent Deferred Sales Charge or the $15
semiannual contract administrative charge, which would decrease the level of
performance shown.
For Underlying Funds that were in existence prior to the date they became
available under the Contract, the standardized average annual total return and
non-standardized total return quotations will show the investment performance
that such Underlying Funds would have achieved (reduced by the applicable
charges) had they been available under the Contract for the period quoted.
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 as discussed in the
Statement of Additional Information. 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 separate
accounts and mutual funds.
The yield and total return quotations are based upon historical earnings and are
not necessarily representative of future performance. The Contract Value at
redemption may be more or less than original cost. The Statement of Additional
Information contains more detailed information about these performance
calculations, including actual examples of each type of performance advertised.
42
<PAGE> 46
FEDERAL TAX CONSIDERATIONS
- --------------------------------------------------------------------------------
GENERAL
The Company is taxed as a life insurance company under Subchapter L of the
Internal Revenue Code (the "Code"). The Separate Accounts that form the
Investment Alternatives described herein are treated as part of the total
operations of the Company and are not taxed separately. Investment income and
gains of a Separate Account that are credited to a variable annuity contract
incur no current federal income tax. Generally, amounts credited to a contract
are not taxable until received by the Contract Owner, participant or
beneficiary, either in the form of Annuity Payments or other distributions. Tax
consequences and limits are described further below for each annuity program.
INVESTOR CONTROL
In certain circumstances, owners of variable annuity contracts may be considered
the owners, for federal income tax purposes, of the assets of the separate
accounts used to support their contract. In those circumstances, income and
gains from the separate account assets would be includable in the variable
contract owner's gross income.
The IRS has stated in published rulings that a variable contract owner will be
considered the owner of separate account assets if the contract owner possesses
incidents of ownership in those assets, such as the ability to exercise
investment control over the assets. The U.S. Treasury Department has also
announced, in connection with the issuance of regulations concerning
diversification, that those regulations "do not provide guidance concerning the
circumstances in which investor control of the investments of a segregated asset
account may cause the investor (i.e., the Contract Owner), rather than the
insurance company, to be treated as the owner of the assets in the account."
This announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which policyholders may direct their
investments to particular Sub-Accounts without being treated as owners of the
underlying assets." As of the date of this prospectus, no such guidance has been
issued.
The ownership rights under the Contract are similar to, but different in certain
respects from, those described by the IRS in rulings in which it determined that
the owners were not owners of separate account assets. For example, a Contract
Owner or Participant of this Contract has additional flexibility in allocating
payments and cash values. These differences could result in the Contract Owner
being treated as the owner of the assets of Fund U. In addition, the Company
does not know what standard will be set forth in the regulations or rulings
which the Treasury is expected to issue, nor does the Company know if such
guidance will be issued. The Company therefore reserves the right to modify the
Contract as necessary to attempt to prevent the Contract Owner from being
considered the owner of a pro rata share of the assets of Fund U.
The remaining tax discussion assumes that the Contract qualifies as an annuity
contract for federal income tax purposes.
SECTION 403(B) PLANS AND ARRANGEMENTS
Purchase Payments for tax-deferred annuity contracts may be made by an employer
for employees under annuity plans adopted by public educational organizations
and certain organizations which are tax exempt under Section 501(c)(3) of the
Code. Within statutory limits, these payments are not currently includable in
the gross income of the participants. Increases in the value of the Contract
attributable to these Purchase Payments are similarly not subject to current
taxation. The income in the Contract is taxable as ordinary income whenever
distributed.
An additional tax of 10% will apply to any taxable distribution received by the
participant before the age of 59 1/2, except when due to death, disability, or
as part of a series of payments for life or
43
<PAGE> 47
life expectancy, or made after the age of 55 with separation from service. There
are other statutory exceptions.
Amounts attributable to salary reductions and income thereon may not be
withdrawn prior to attaining the age of 59 1/2, separation from service, death,
total and permanent disability, or in the case of hardship as defined by federal
tax law and regulations. Hardship withdrawals are available only to the extent
of the salary reduction contributions and not from the income attributable to
such contributions. These restrictions do not apply to assets held generally as
of December 31, 1988.
Distribution must begin by April 1st of the calendar year following the calendar
year in which the participant attains the age of 70 1/2. Certain other mandatory
distribution rules apply at the death of the participant.
Eligible rollover distributions, including most partial or full redemptions or
"term-for-years" distributions of less than 10 years, are eligible for direct
rollover to another 403(b) contract or to an Individual Retirement Arrangement
(IRA) without federal income tax withholding.
QUALIFIED PENSION AND PROFIT-SHARING PLANS
Under a qualified pension or profit-sharing trust described in Section 401(a) of
the Code and exempt from tax under Section 501(a) of the Code, 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.
Distribution must begin by April 1st of the calendar year following the calendar
year in which the participant attains the age of 70 1/2. Certain other mandatory
distribution rules apply at the death of the participant.
Distributions in the form of Annuity or Income Payments 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. Payments under Income
Option 3 are taxable in full. Certain lump-sum distributions described in
Section 402 of the Code may be eligible for special ten-year forward averaging
treatment for individuals born before January 1, 1936. All individuals may be
eligible for favorable five-year forward averaging of lump-sum distributions.
Certain eligible rollover distributions including most partial and full
surrenders or term-for-years distributions of less than 10 years are eligible
for direct rollover to an eligible retirement plan or to an IRA without federal
income tax withholding.
An additional tax of 10% will apply to any taxable distribution received by the
participant before the age of 59 1/2, except by reason of death, disability or
as part of a series of payments for life or life expectancy, or at early
retirement at or after the age of 55. There are other statutory exceptions.
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 is not employed, 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 $2,250.
Partial or full distributions made prior to the age of 59 1/2, except in the
case of death, disability or distribution for life or life expectancy, will
incur a penalty tax of 10% plus ordinary income tax treatment of the taxable
amount received. Distributions after the age of 59 1/2 are treated as ordinary
income. Amounts contributed after 1986 on a non-deductible basis are not
includable in
44
<PAGE> 48
income when distributed. Distributions must begin by April 1st of the calendar
year following the calendar year in which the individual attains the age of
70 1/2. The individual must maintain personal and tax return records of any
non-deductible contributions and distributions.
Section 408(k) of 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.
SECTION 457 PLANS
Section 457 of the Code allows employees and independent contractors of state
and local governments and tax-exempt organizations to defer a portion of their
salaries or compensation to retirement years without paying current income tax
on either the deferrals or the earnings on the deferrals.
The Owner of contracts issued under Section 457 plans is the employer or a
contractor of the participant and amounts may not be made available to
participants (or beneficiaries) until separation from service, retirement or
death or an unforeseeable emergency as determined by Treasury Regulations. The
proceeds of annuity contracts purchased by Section 457 plans are subject to the
claims of general creditors of the employer or contractor.
Distributions must begin generally by April 1st of the calendar year following
the calendar year in which the participant attains the age of 70 1/2. Certain
other mandatory distribution rules apply upon the death of the Participant.
All distributions from plans that meet the requirements of Section 457 of the
Code are taxable as ordinary income in the year paid or made available to the
Participant or beneficiary.
THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974
Under the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended,
certain special provisions may apply to certain tax-qualified Contracts if the
Owner requests that the Contract be issued to conform to ERISA or if the Company
has notice that the Contract was issued pursuant to a plan that is subject to
ERISA.
ERISA requires that certain Annuity Options, withdrawals or other payments and
any application for a loan secured by the Contract may not be made until the
Participant has filed a Qualified Election with the Plan administrator. Under
certain Plans, ERISA also requires that a designation of a beneficiary other
than the Participant's spouse be invalid unless the Participant has filed a
Qualified Election.
A Qualified Election must include either the written consent of the
Participant's spouse, notarized or witnessed by an authorized Plan
representative, or the Participant's certification that there is no spouse or
that the spouse cannot be located.
The Company intends to administer all contracts to which ERISA applies in a
manner consistent with the direction of the Plan administrator regarding the
provisions of the Plan, in accordance with applicable law. Because these
requirements differ according to the Plan, a person contemplating the purchase
of an annuity contract should consider the provisions of the Plan.
FEDERAL INCOME TAX WITHHOLDING
The portion of a distribution which is taxable income to the recipient will be
subject to federal income tax withholding, generally pursuant to Section 3405 of
the Code. The application of this provision is summarized below.
45
<PAGE> 49
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 complete term-for-years settlement distribution is elected for a
period of ten years or more, payable at least annually, or
(c) a minimum required distribution as defined under the tax law is
taken after the attainment of the age of 70 1/2 or as otherwise
required by law.
A distribution including a rollover that is not a direct rollover will require
the 20% withholding, and a 10% additional tax penalty may apply to any amount
not added back in the rollover. The 20% withholding may be recovered when the
participant or beneficiary files a personal income tax return for the year if a
rollover was completed within 60 days of receipt of the funds, except to the
extent that the participant or spousal beneficiary is otherwise underwithheld or
short on estimated taxes for that year.
2. OTHER NON-PERIODIC DISTRIBUTIONS (FULL OR PARTIAL REDEMPTIONS)
To the extent not described as requiring 20% withholding in 1 above, the
portion of a non-periodic distribution which constitutes taxable income
will be subject to federal income tax withholding, to the extent such
aggregate distributions exceed $200 for the year, unless the recipient
elects not to have taxes withheld. If an election out is not provided,
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, 1996, a recipient receiving periodic payments (e.g.,
monthly or annual payments under an Annuity Option) which total $14,350
or less per year, will generally be exempt from the withholding
requirements.
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.
Recipients who do not provide a social security number or other taxpayer
identification number will not be permitted to elect out of withholding.
Additionally, United States citizens residing outside of the country, or U.S.
legal residents temporarily residing outside the country, are not permitted to
elect out of withholding.
TAX ADVICE
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 an
Owner, participant or beneficiary who may make elections under a Contract. It
should be understood that the foregoing description of the federal
46
<PAGE> 50
income tax consequences under these Contracts is not exhaustive and that special
rules are provided with respect to situations not discussed here. It should be
understood that if a tax-qualified plan loses its exempt status, employees could
lose some of the tax benefits described. For further information regarding
federal income taxes and any applicable state income taxes, a qualified tax
adviser should be consulted.
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES (ACCOUNT GIS)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The basic investment objective of Account GIS is to seek long-term accumulation
of principal through capital appreciation and retention of net investment
income. In seeking its objective, short-term gains may also be realized. The
assets of Account GIS generally will be fully invested in a portfolio of equity
securities, mainly common stocks, spread over industries and companies. However,
investments may be made in bonds, notes or other evidence of indebtedness,
issued publicly or placed privately, of a type customarily purchased for
investment by institutional investors, including United States government
securities. These investments in other than equity securities generally would
not have a prospect of long-term appreciation, and are temporary for defensive
purposes and are chosen on the basis of combined considerations of risk, income
and appreciation. Such investments may or may not be convertible into stock or
be accompanied by stock purchase options or warrants for the purchase of stock.
Account GIS will use exchange-traded stock index futures contracts as a hedge to
protect against changes in stock prices. A stock index futures contract is a
contractual obligation to buy or sell a specified index of stocks at a future
date for a fixed price. Stock index futures may also be used to hedge cash
inflows to gain market exposure until the cash is invested in specific common
stocks. Account GIS will not purchase or sell futures contracts for which the
aggregate initial margin exceeds 5% of the fair market value of its assets,
after taking into account unrealized profits and losses on any such contracts
which it has entered into. When a futures contract is purchased, Account GIS
will set aside, an amount of cash and cash equivalents equal to the total market
value of the futures contract, less the amount of the initial margin.
All stock index futures will be traded on exchanges that are licensed and
regulated by the Commodity Futures Trading Commission ("CFTC"). To ensure that
its futures transactions meet CFTC standards, Account GIS will enter into
futures contracts for hedging purposes only (i.e., for the purposes or with the
intent specified in CFTC regulations and interpretations, subject to the
requirements of the SEC). Account GIS expects that risk management transactions
involving futures contracts will not impact more than 30% of its assets at any
one time. For a more detailed discussion of financial futures contracts and
associated risks, please see the Statement of Additional Information.
Account GIS may write covered call options on portfolio securities for which
call options are available and which are listed on a national securities
exchange. It may also purchase index or individual equity call options as an
alternative to holding stocks or stock index futures, or purchase index or
individual equity put options as a defensive measure. For a detailed discussion
of options contracts and associated risks, please see the Statement of
Additional Information.
Changes in investments may be made from time to time to take into account
changes in the outlook for particular industries or companies. The investments
of Account GIS will not, however, be concentrated in any one industry; that is,
no more than 25% of the value of Account GIS's assets will be invested in any
one industry. While Account GIS may occasionally invest in foreign securities,
it is not anticipated that such foreign securities will, at any time, account
for more than 10% of the investment portfolio.
47
<PAGE> 51
The assets of Account GIS will be kept fully invested, except that (a)
sufficient cash may be kept on hand reasonably to provide for variable annuity
contract obligations, and (b) reasonable amounts of cash, United States
government or other liquid securities, such as short-term bills and notes, may
be held for limited periods, pending investment in accordance with Account GIS's
investment policies.
RISK FACTORS
It must be recognized that there are risks inherent in the ownership of any
security. The investment experience on equity investments over time will tend to
reflect levels of stock market prices and dividend payouts. Both are affected by
diverse factors, including not only business conditions and investor confidence
in the economy, but current conditions in a particular industry or company. The
yield on a common stock is not contractually determined. Equity securities are
subject to financial risks relating to the earning stability and overall
financial soundness of an issue. They are also subject to market risks relating
to the effect of general changes in the securities market on the price of a
security.
FUNDAMENTAL INVESTMENT POLICIES
The fundamental investment policies of Account GIS permit it to:
1. invest up to 5% of its assets in the securities of any one issuer
(exclusive of securities issued or guaranteed by the United States
government, its agencies or instrumentalities);
2. borrow from banks in amounts of up to 5% of its assets, but only for
emergency purposes;
3. purchase interests in real estate represented by securities for which
there is an established market;
4. make loans through the acquisition of a portion of a privately placed
issue of bonds, debentures or other evidences of indebtedness of a type
customarily purchased by institutional investors;
5. acquire up to 10% of the voting securities of any one issuer (it is the
present practice of Account GIS not to exceed 5% of the voting
securities of any one issuer);
6. make purchases on margin in the form of short-term credits which are
necessary for the clearance of transactions; and place up to 5% of its
net asset value in total margin deposits for positions in futures
contracts; and
7. invest up to 5% of its assets in restricted securities (securities which
may not be publicly offered without registration under the Securities
Act of 1933).
THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES
(ACCOUNT QB)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The basic investment objective of Account QB is to seek current income, moderate
capital volatility and total return.
The assets of Account QB will be primarily invested in money market obligations,
including, but not limited to, Treasury bills, repurchase agreements, commercial
paper, bank certificates of deposit and bankers' acceptances, and in publicly
traded debt securities, including bonds, notes, debentures, equipment trust
certificates and short-term instruments. These securities may carry certain
equity features such as conversion or exchange rights or warrants for the
acquisition of stocks of the same or different issuer, or participation based on
revenues, sales or profits. It is
48
<PAGE> 52
currently anticipated that the market value-weighted average maturity of the
portfolio will not exceed five years. (In the case of mortgage-backed
securities, the estimated average life of cash flows will be used instead of
average maturity.) Investment in longer term obligations may be made if the
Board of Managers concludes that the investment yields justify a longer term
commitment. No more than 25% of the value of Account QB's assets will be
invested in any one industry.
The portfolio will be actively managed and investments may be sold prior to
maturity if deemed advantageous in light of factors such as market conditions or
brokerage costs. While the investments of Account QB are generally not listed
securities, there are firms which make markets in the type of debt instruments
that Account QB holds. No problems of liquidity are anticipated with regard to
the investments of Account QB.
From time to time, Account QB may commit to purchase new-issue government or
agency securities on a "when-issued" or "to be announced" ("TBA") basis
("when-issued securities"). The prices of such securities will be fixed at the
time the commitment to purchase is made, and may be expressed in either dollar
price or yield maintenance terms. Such commitment to purchase be viewed as a
senior security, and will be marked to market and reflected in Account QB's
Accumulation Unit Value daily from the commitment date. Delivery and payment may
be at a future date beyond customary settlement time. It is the customary
practice of Account QB to make when-issued or TBA purchases for settlement no
more than 90 days beyond the commitment date.
While it is TAMIC's intention to take physical delivery of these securities,
offsetting transactions may be made prior to settlement, if it is advantageous
to do so. Account QB does not make payment or begin to accrue interest on these
securities until settlement date. In order to invest its assets pending
settlement, Account QB will normally invest in short-term money market
instruments and other securities maturing no later than the scheduled settlement
date.
Account QB does not intend to purchase when-issued securities for speculative or
"leverage" purposes. Consistent with Section 18 of the 1940 Act and the General
Policy Statement of the SEC thereunder, when Account QB commits to purchase a
when-issued security, it will identify and place in a segregated account
high-grade money market instruments and other liquid securities equal in value
to the purchase cost of the when-issued securities.
TAMIC believes that purchasing securities in this manner will be advantageous to
Account QB. However, this practice does entail certain risks, namely the default
of the counterparty on its obligation to deliver the security as scheduled. In
this event, Account QB would endure a loss (or gain) equal to the price
appreciation (or depreciation) in value from the commitment date. TAMIC employs
a rigorous credit quality procedure in determining the counterparties with which
it will deal in when-issued securities and, in some circumstances, will require
the counterparty to post cash or some other form of security as margin to
protect the value of its delivery obligation pending settlement.
Account QB may also purchase and sell interest rate futures contracts to hedge
against changes in interest rates that might otherwise have an adverse effect
upon the value of Account QB's securities. Hedging by use of interest rate
futures seeks to establish, with more certainty than would otherwise be
possible, the effective rate of return on portfolio securities. When hedging is
successful, any depreciation in the value of portfolio securities will
substantially be offset by appreciation in the value of the futures position.
Conversely, any appreciation in the value of the portfolio securities will
substantially be offset by depreciation in the value of the futures position.
Account QB will not purchase or sell futures contracts for which the aggregate
initial margin exceeds 5% of the fair market value of its assets, after taking
into account unrealized profits and losses on any such contracts which it has
entered into. At no time will Account QB's transactions in futures contracts be
employed for speculative purposes. When a futures contract is purchased, Account
QB will set aside, in an identifiable manner, an amount of cash and cash
equivalents equal to the total market value of the futures contract, less the
amount of the initial margin.
49
<PAGE> 53
All interest rate futures contracts will be traded on exchanges that are
licensed and regulated by the Commodity Futures Trading Commission ("CFTC"). To
ensure that its futures transactions meet FTC standards, Account QB will enter
into futures contracts for edging purposes only (i.e., for the purposes or with
the intent specified in CFTC regulations and interpretations, subject to the
requirements of the SEC). For a more detailed discussion of financial futures
contracts and associated risks, please see the Statement of Additional
Information.
RISK FACTORS
The Board of Managers will weigh considerations of risks, yield and ratings in
implementing Account QB's fundamental investment policies. There are no specific
criteria with regard to quality or ratings of the investments of Account QB, but
it is anticipated that they will be of investment grade or its equivalent. There
may or may not be more risk in investing in debt instruments where there are no
specific criteria with regard to quality or ratings of the investments.
The yield on debt instruments over a period of time should reflect prevailing
interest rates, which depend on a number of factors, including government action
in the capital markets, government fiscal and monetary policy, needs of
businesses for capital goods for expansion, and investor expectations as to
future inflation. The yield on a particular debt instrument is also affected by
the risk that the issuer will be unable to pay principal and interest.
FUNDAMENTAL INVESTMENT POLICIES
The fundamental investment policies of Account QB permit it to:
1. invest up to 15% of the value of its assets in the securities of any one
issuer (exclusive of obligations of the United States government and its
instrumentalities, for which there is no limit);
2. borrow from banks in amounts of up to 5% of its assets, but only for
emergency purposes;
3. purchase interests in real estate represented by securities for which
there is an established market;
4. make loans through the acquisition of a portion of a privately placed
issue of bonds, debentures or other evidences of indebtedness of a type
customarily purchased by institutional investors;
5. acquire up to 10% of the voting securities of any one issuer (it is the
present practice of Account QB not to exceed 5% of the voting securities
of any one issuer);
6. make purchases on margin in the form of short-term credits which are
necessary for the clearance of transactions; and place up to 5% of its
net asset value in total margin deposits for positions in futures
contracts; and
7. invest up to 5% of its assets in restricted securities (securities which
may not be publicly offered without registration under the Securities
Act of 1933).
THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES
(ACCOUNT MM)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The basic investment objective of Account MM is preservation of capital, a high
degree of liquidity and the highest possible current income available from
certain short-term money market securities. Account MM restricts its investment
portfolio to only the securities listed below. As is true with all investment
companies, there can be no assurance that Account MM's objectives will be
achieved.
50
<PAGE> 54
An investment in Account MM is neither insured nor guaranteed by the U.S.
Government. Account MM's assets will be invested in the following types of
securities.
1. Marketable obligations issued or guaranteed by the United States government,
its agencies, authorities or instrumentalities. These include issues of the
United States Treasury, such as bills, certificates of indebtedness, notes and
bonds, and issues of agencies, authorities and instrumentalities established
under the authority of an act of Congress. The latter issues include, but are
not limited to, obligations of the Tennessee Valley Authority, the Bank for
Cooperatives, the Federal Intermediate Credit Banks, Federal Land Banks and the
Federal National Mortgage Association. Obligations issued or guaranteed by the
United States government, its agencies, authorities or instrumentalities may be
supported by the full faith and credit of the United States Treasury; by the
right of the issuer to borrow from the United States Treasury; by discretionary
authority of the United States government to purchase an agency's, authority's
or instrumentalities' obligations and in some instances, solely by the credit of
the United States government agency, authority or instrumentality. No assurance
can be given that the United States government will provide financial support to
such United States government sponsored agencies, authorities or
instrumentalities in the future, since it is not obligated to do so by law.
Account MM will invest in such securities only when satisfied that the credit
risk with respect to the issuer (or guarantor) is minimal. Interest or discount
rates on agency securities are closely related to rates on Treasury bills.
2. Certificates of Deposit and Banker's Acceptances of banks having total assets
of more than $1 billion which are members of the Federal Deposit Insurance
Corporation. Certificates of Deposit are receipts issued by a bank in exchange
for the deposit of funds. The issuer agrees to pay the amount deposited plus
interest to the bearer of the receipt on the date specified on the certificate.
The certificate usually can be traded in the secondary market before maturity.
The Federal Deposit Insurance Corporation does not insure Certificates of
Deposit to the extent they are in excess of $100,000 per customer. Banker's
Acceptances usually arise from short-term credit arrangements drawn on a bank by
an exporter or importer to obtain a stated amount of funds to pay for specific
merchandise. The draft is then "accepted" by a bank which, in effect,
unconditionally guarantees to pay the face value of the instrument on its
maturity date. The acceptance may then be held by the accepting bank as an
earning asset or it may be sold in the secondary market at the going rate of
discount for a specific maturity. Although maturity for acceptances can be as
long as 270 days, most acceptances have maturities of six months or less.
Account MM may invest in securities of foreign branches of United States banks,
payable in United States dollars, which meet the foregoing requirements.
Obligations of foreign branches of United States banks are subject to additional
risks beyond those of domestic branches of United States banks. These additional
risks include foreign economic and political developments, foreign governmental
restrictions which may adversely affect payment of principal and interest on
obligations, foreign withholding and other taxes on interest income, and
difficulties in obtaining and enforcing a judgment against a foreign branch of a
domestic bank. In addition, different risks may result from the fact that
foreign branches of United States banks are not necessarily subject to the types
of requirements that apply to domestic branches of United States banks with
respect to mandatory reserves, loan limitations, examinations, accounting,
auditing, recordkeeping and the public availability of information.
3. Commercial Paper rated A-1 by Standard and Poor's Corporation or Prime-1 by
Moody's Investor Services, Inc. For a more detailed discussion of the
characteristics of commercial paper ratings, please see the Statement of
Additional Information.
4. Repurchase agreements with national banks or reporting broker dealers
involving marketable obligations of or guaranteed by the United States
government, its agencies, authorities or instrumentalities. A repurchase
agreement is an agreement in which the seller of a security agrees to repurchase
the security sold at a mutually agreed upon time and price. It may also be
viewed as the loan of money by Account MM to the seller. The resale price is in
excess of the purchase
51
<PAGE> 55
price, reflecting an agreed upon interest rate. The rate is effective for the
period of time Account MM is invested in the agreement and is not related to the
coupon rate on the underlying security. The period of these repurchase
agreements will usually be short, from overnight to one week, and at no time
will Account MM invest in repurchase agreements for more than one year. The
securities which are subject to repurchase agreements may, however, have
maturity dates in excess of one year from the effective date of the repurchase
agreement. Account MM will always receive, as collateral, securities whose
market value, including accrued interest, will be at least equal to 102% of the
dollar amount invested by Account MM in each agreement and will make payment for
such securities only upon physical delivery or evidence of book entry transfer
to the account of the Custodian. If the seller defaults, Account MM might incur
a loss if the value of the collateral securing the repurchase agreement
declines, and Account MM might incur disposition costs in connection with
liquidating the collateral. In addition, if bankruptcy proceedings are commenced
with respect to the seller of the security, realization upon the collateral by
Account MM may be delayed or limited. Account MM's Board of Managers will
evaluate the creditworthiness of any banks or broker dealers with which Account
MM engages in repurchase agreements by setting guidelines and standards of
review for Account MM's investment adviser and monitoring the adviser's actions
with regard to repurchase agreements for Account MM.
RISK FACTORS
The market value of Account MM's investments tends to decrease during periods of
rising interest rates and to increase during intervals of falling interest
rates, with corresponding fluctuations in Account MM's net income. In order to
minimize the fluctuations in market values to which interest-paying obligations
are subject, Account MM concentrates its investments in relatively short-term
securities, and in no event does the maturity date of an obligation exceed one
year from the date of Account MM's purchase.
Return is aided both by Account MM's ability to make investments in large
denominations and by its efficiencies of scale. Also, Account MM may seek to
improve portfolio income by selling certain portfolio securities before maturity
date in order to take advantage of yield disparities that occur in money
markets. Account MM may purchase and sell marketable obligations of or
guaranteed by the United States government, its agencies, authorities or
instrumentalities on a when-issued or delayed delivery basis, with such
purchases possibly occurring as much as a month before actual delivery and
payment.
FUNDAMENTAL INVESTMENT POLICIES
The fundamental investment policies of Account MM permit it to:
1. invest up to 25% of its assets in the securities of issuers in any
single industry (exclusive of securities issued by domestic banks and
savings and loan associations, or securities issued or guaranteed by the
United States government, its agencies, authorities or
instrumentalities); neither all finance companies, as a group, nor all
utility companies, as a group, are considered a single industry for the
purpose of this restriction;
2. invest up to 10% of its assets in the securities of any one issuer,
including repurchase agreements with any one bank or dealer (exclusive
of securities issued or guaranteed by the United States government, its
agencies or instrumentalities); however, in accordance with Rule 2a-7 of
the 1940 Act, to which Account MM is subject, Account MM will not invest
more than 5% of its assets in the securities of any one issuer (other
than securities issued or guaranteed by the United States government or
its instrumentalities);
3. acquire up to 10% of the outstanding securities of any one issuer
(exclusive of securities issued or guaranteed by the United States
government, its agencies or instrumentalities);
4. borrow money from banks on a temporary basis in an aggregate amount not
to exceed one third of Account MM's assets (including the amount
borrowed); and
52
<PAGE> 56
5. pledge, hypothecate or transfer, as security for indebtedness, any
securities owned or held by Account MM as may be necessary in connection
with any borrowing mentioned above and in an aggregate amount of up to
5% of Account MM's assets.
THE TRAVELERS TIMED GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES (ACCOUNT TGIS)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The basic investment objective of Account TGIS is to seek long-term accumulation
of principal through capital appreciation and retention of net investment
income. In selecting its objective, short-term gains may also be realized. The
assets of Account TGIS generally will be fully invested in a portfolio of equity
securities, mainly common stocks, spread over industries and companies. However,
when it is determined that investments of other types may be advantageous on the
basis of combined considerations of risk, income and appreciation, investments
may be made in bonds, notes or other evidence of indebtedness, issued publicly
or placed privately, of a type customarily purchased for investment by
institutional investors, including United States government securities. These
investments in other than equity securities generally would not have a prospect
of long-term appreciation, and are temporary for defensive purposes. Such
investments may or may not be convertible into stock or be accompanied by stock
purchase options or warrants for the purchase of stock.
Account TGIS will use exchange-traded financial futures contracts consisting of
stock index futures contracts and futures contracts on debt securities
("interest rate futures") to facilitate market timed moves, and as a hedge to
protect against changes in stock prices or interest rates. A stock index futures
contract is a contractual obligation to buy or sell a specified index of stocks
at a future date for a fixed price. An interest rate futures contract is a
contract to buy or sell specified debt securities at a future time for a fixed
price. These contracts would obligate Account TGIS, at maturity of the
contracts, to purchase or sell certain securities at specified prices or to make
cash settlements. In general, moves in a market-timed investment strategy may
require the purchase or sale of large amounts of securities in a short period of
time. This purchase or sale could result in substantial transaction costs and
perhaps higher borrowing in Account TGIS to provide funds needed for transfer to
the other timed accounts prior to the five-day settlement period for stock
sales. Alternatively, common stock exposure can be increased or decreased in a
more timely, cost-effective fashion by buying or selling stock index futures. By
transacting in such futures when a market timing move is called, the investment
adviser can create the ability to buy or sell actual common stocks with less
haste and at lower transaction costs. As the actual stocks are bought or sold,
the futures positions would simply be eliminated.
Account TGIS may also purchase and sell interest rate futures to hedge against
changes in interest rates that might otherwise have an adverse effect upon the
value of Account TGIS's securities. Hedging by use of interest rate futures
seeks to establish, with more certainty than would otherwise be possible, the
effective rate of return on portfolio securities. When hedging is successful,
any depreciation in the value of portfolio securities will substantially be
offset by appreciation in the value of the futures position. Conversely, any
appreciation in the value of portfolio securities will substantially be offset
by depreciation in the value of the futures position.
Account TGIS will not purchase or sell futures contracts for which the aggregate
initial margin exceeds 5% of the fair market value of its assets, after taking
into account unrealized profits and losses on any such contracts it has entered
into. At no time will Account TGIS's transactions in such financial futures be
used for speculative purposes. When a futures contract is purchased, Account
TGIS will set aside, an amount of cash and cash equivalents equal to the total
market value of the futures contract, less the amount of the initial margin.
53
<PAGE> 57
All financial futures contracts will be traded on exchanges that are licensed
and regulated by the Commodity Futures Trading Commission ("CFTC"). To ensure
that its futures transactions meet CFTC standards, Account TGIS will enter into
futures contracts for hedging purposes only (i.e., for the purposes or with the
intent specified in CFTC regulations and interpretations, subject to the
requirements of the SEC). For a more detailed discussion of financial futures
contracts and associated risks, please see the Statement of Additional
Information.
Account TGIS may write covered call options on portfolio securities for which
call options are available and which are listed on a national securities
exchange. It may also purchase index or individual equity call options as an
alternative to holding stocks or stock index futures, or purchase index or
individual equity put options as a defensive measure. For a detailed discussion
of options contracts and associated risks, please see the Statement of
Additional Information.
RISK FACTORS
It must be recognized that there are risks inherent in the ownership of any
security. The investment experience on equity investments over time will tend to
reflect levels of stock market prices and dividend payouts. Both are affected by
diverse factors including not only business conditions and investor confidence
in the economy, but current conditions in a particular industry or company.
Equity securities are subject to financial risks relating to the earning
stability and overall financial soundness of an issue. They are also subject to
market risks relating to the effect of general changes in the securities market
on the price of a security. In addition, there are risks inherent in Account
TGIS as an investment alternative used by Market Timing Services. (See "Market
Timing Risks," page 27.)
FUNDAMENTAL INVESTMENT POLICIES
The fundamental investment policies of Account TGIS are the same as Account GIS.
(See "Account GIS -- Fundamental Investment Policies," page 47.)
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT
FOR VARIABLE ANNUITIES (ACCOUNT TSB)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of Account TSB is to generate high current income with
limited price volatility while maintaining a high degree of liquidity. As is
true with all investment companies, there can be no assurance that Account TSB's
objectives will be achieved. Account TSB's assets will be invested in the
following types of securities. The final maturity of any asset will not exceed
three years and the average maturity of the total portfolio is expected to be
nine months.
1. Marketable obligations issued or guaranteed by the United States government,
its agencies, authorities or instrumentalities. These include issues of the
United States Treasury, such as bills, certificates of indebtedness, notes and
bonds, and issues of agencies, authorities and instrumentalities established
under the authority of an act of Congress. The latter issues include, but are
not limited to, obligations of the Tennessee Valley Authority, the Bank for
Cooperatives, the Federal Intermediate Credit Banks, Federal Land Banks and the
Federal National Mortgage Association. Obligations issued or guaranteed by the
United States government, its agencies, authorities or instrumentalities may be
supported by the full faith and credit of the United States Treasury; by the
right of the issuer to borrow from the United States Treasury; by discretionary
authority of the United States government to purchase an agency's, authority's
or instrumentalities' obligations and in some instances, solely by the credit of
the United States government agency, authority or instrumentality. No assurance
can be given that the United States government will provide financial support to
such United States government sponsored agencies, authorities or
54
<PAGE> 58
instrumentalities in the future, since it is not obligated to do so by law.
Account TSB will invest in such securities only when satisfied that the credit
risk with respect to the issuer (or guarantor) is minimal. Interest or discount
rates on agency securities are closely related to rates on Treasury bills.
2. Certificates of Deposit and Banker's Acceptances of banks having total assets
of more than $1 billion which are members of the Federal Deposit Insurance
Corporation. Certificates of Deposit are receipts issued by a bank in exchange
for the deposit of funds. The issuer agrees to pay the amount deposited plus
interest to the bearer of the receipt on the date specified on the certificate.
The certificate usually can be traded in the secondary market before maturity.
The Federal Deposit Insurance Corporation does not insure Certificates of
Deposit to the extent they are in excess of $100,000 per customer. Banker's
Acceptances usually arise from short-term credit arrangements drawn on a bank by
an exporter or importer to obtain a stated amount of funds to pay for specific
merchandise. The draft is then "accepted" by a bank which, in effect,
unconditionally guarantees to pay the face value of the instrument on its
maturity date. The acceptance may then be held by the accepting bank as an
earning asset or it may be sold in the secondary market at the going rate of
discount for a specific maturity. Although maturity for acceptances can be as
long as 270 days, most acceptances have maturities of six months or less.
Account TSB may invest in securities payable in United States dollars of foreign
branches of United States banks which meet the foregoing requirements and in
Euro Certificates of Deposit, which are certificates of deposit issued by banks
outside of the United States, with interest and principal paid in U.S. dollars.
Obligations of foreign banks and foreign branches of United States banks are
subject to additional risks than those of domestic branches of United States
banks. These additional risks include foreign economic and political
developments, foreign governmental restrictions which may adversely affect
payment of principal and interest on obligations, foreign withholding and other
taxes on interest income, and difficulties in obtaining and enforcing a judgment
against a foreign bank or a foreign branch of a domestic bank. In addition,
different risks may result from the fact that foreign banks or foreign branches
of United States banks are not necessarily subject to the types of requirements
that apply to domestic branches of United States banks with respect to mandatory
reserves, loan limitations, examinations, accounting, auditing, recordkeeping
and the public availability of information.
3. Commercial Paper rated A-1 by Standard and Poor's Corporation or Prime-1 by
Moody's Investor Services, Inc. For a more detailed discussion of the
characteristics of commercial paper ratings, please see the Statement of
Additional Information.
4. Repurchase agreements with national banks and reporting broker dealers
involving marketable obligations of or guaranteed by the United States
government, its agencies, authorities or instrumentalities. A repurchase
agreement is an agreement in which the seller of a security agrees to repurchase
the security sold at a mutually agreed upon time and price. It may also be
viewed as the loan of money by Account TSB to the seller. The resale price is in
excess of the purchase price, reflecting an agreed upon interest rate. The rate
is effective for the period of time Account TSB is invested in the agreement and
is not related to the coupon rate on the underlying security. The period of
these repurchase agreements will usually be short, from overnight to one week,
and at no time will Account TSB invest in repurchase agreements for more than
one year. The securities which are subject to repurchase agreements may,
however, have maturity dates in excess of one year from the effective date of
the repurchase agreement. Account TSB will always receive, as collateral,
securities whose market value, including accrued interest, will be at least
equal to 102% of the dollar amount invested by Account TSB in each agreement and
will make payment for such securities only upon physical delivery or evidence of
book entry transfer to the account of the Custodian. If the seller defaults,
Account TSB might incur a loss if the value of the collateral securing the
repurchase agreement declines, and Account TSB might incur disposition costs in
connection with liquidating the collateral.
55
<PAGE> 59
In addition, if bankruptcy proceedings are commenced with respect to the seller
of the security, realization upon the collateral by Account TSB may be delayed
or limited. Account TSB's Board of Managers will evaluate the creditworthiness
of any banks or broker dealers with which Account TSB engages in repurchase
agreements by setting guidelines and standards of review for Account TSB's
investment adviser and monitoring the adviser's actions with regard to
repurchase agreements for Account TSB.
5. Short-term notes, bonds, debentures and other debt instruments issued or
guaranteed by an entity with a bond rating of at least AA by S&P or Aa by
Moody's, and with final maturities of such short-term instruments normally
limited to eighteen months at the time of purchase.
RISK FACTORS
The market value of Account TSB's investments tends to decrease during periods
of rising interest rates and to increase during intervals of falling interest
rates, with corresponding fluctuations in Account TSB's net income. In order to
minimize the fluctuations in market values to which interest-paying obligations
are subject, Account TSB concentrates its investments in relatively short-term
securities, and in no event does the maturity date of an obligation exceed three
years from the date of Account TSB's purchase. There can be no assurance that,
upon redemption, Account TSB's net asset value will be equal to or greater than
the net asset value at the time of purchase.
Return is aided both by Account TSB's ability to make investments in large
denominations and by its efficiencies of scale. Also, Account TSB may seek to
improve portfolio income by selling certain portfolio securities before the
maturity date in order to take advantage of yield disparities that occur in
money markets. Account TSB may purchase and sell marketable obligations of or
guaranteed by the United States government, its agencies, authorities or
instrumentalities on a when-issued or delayed delivery basis, with such
purchases possibly occurring as much as a month before actual delivery and
payment. In addition, there are risks inherent in Account TSB as an investment
alternative used by market timing services. (See "Market Timing Risks," page
27.)
FUNDAMENTAL INVESTMENT POLICIES
The fundamental investment policies of Account TSB permit it to:
1. invest up to 25% of its assets in the securities of issuers in any
single industry (exclusive of securities issued by domestic banks and
savings and loan associations, or securities issued or guaranteed by the
United States government, its agencies, authorities or
instrumentalities); neither all finance companies, as a group, nor all
utility companies, as a group, are considered a single industry for the
purpose of this restriction;
2. invest up to 10% of its assets in the securities of any one issuer,
including repurchase agreements with any one bank or dealer (exclusive
of securities issued or guaranteed by the United States government, its
agencies or instrumentalities);
3. acquire up to 10% of the outstanding securities of any one issuer
(exclusive of securities issued or guaranteed by the United States
government, its agencies or instrumentalities);
4. borrow money from banks on a temporary basis in an aggregate amount not
to exceed one third of Account TSB's assets (including the amount
borrowed); and
5. pledge, hypothecate or transfer, as security for indebtedness, any
securities owned or held by Account TSB as may be necessary in
connection with any borrowing mentioned above and in an aggregate amount
of up to 5% of Account TSB's assets.
56
<PAGE> 60
THE TRAVELERS TIMED AGGRESSIVE STOCK ACCOUNT
FOR VARIABLE ANNUITIES (ACCOUNT TAS)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of Account TAS is to seek growth of capital by
investing primarily in a broadly diversified portfolio of common stocks.
In selecting investments for the portfolio, TIMCO identifies stocks which appear
to be undervalued. A proprietary computer model reviews over one-thousand stocks
using fundamental and technical criteria such as price relative to book value,
earnings growth and momentum, and the change in price relative to a broad
composite stock index.
Computer-aided analysis may also be utilized to match certain characteristics of
the portfolio, such as industry sector representation, to the characteristics of
a market index, or to impose a tilt toward certain attributes. Although Account
TAS currently focuses on mid-sized domestic companies with market
capitalizations that fall between $500 million and $10 billion, Account TAS may
invest in smaller or larger companies without limitation. The prices of
mid-sized company stocks and smaller company stocks may fluctuate more than
those of larger company stocks.
It is the policy of Account TAS to invest its assets as fully as practicable in
common stocks, securities convertible into common stocks and securities having
common stock characteristics, including rights and warrants selected primarily
for prospective capital growth. Account TAS may invest in domestic, foreign and
restricted securities.
When market conditions warrant, Account TAS may adopt a defensive position to
preserve shareholders' capital by investing in money market instruments. Such
instruments, which must mature within one year of their purchase, consist of
U.S. government securities; instruments of banks which are members of the
Federal Deposit Insurance Corporation and have assets of at least $1 billion,
such as certificates of deposit, demand and time deposits and bankers'
acceptances; prime commercial paper, including master demand notes; and
repurchase agreements secured by U.S. government securities.
Account TAS will use exchange-traded financial futures contracts consisting of
stock index futures contracts and futures contracts on debt securities
("interest rate futures") to facilitate market timed moves, and as a hedge to
protect against changes in stock prices or interest rates. A stock index futures
contract is a contractual obligation to buy or sell a specified index of stocks
at a future date for a fixed price. An interest rate futures contract is a
contract to buy or sell specified debt securities at a future time for a fixed
price.
In general, moves in a market-timed investment strategy may require the purchase
or sale of large amounts of securities in a short period of time. This purchase
or sale could result in substantial transaction costs and perhaps higher
borrowing in Account TAS to provide funds needed for transfer to other timed
accounts prior to the five-day settlement period for stock sales. Alternatively,
common stock exposure can be increased or decreased in a more timely, cost-
effective fashion by buying or selling stock index futures. By transacting in
such futures when a market timing move is called, TIMCO can create the ability
to buy or sell actual common stocks with less haste and at lower transaction
costs. As the actual stocks are bought or sold, the futures positions would
simply be eliminated.
Account TAS may also purchase and sell interest rate futures to hedge against
changes in interest rates that might otherwise have an adverse effect upon the
value of Account TAS's securities. Hedging by use of interest rate futures seeks
to establish, with more certainty than would otherwise be possible, the
effective rate of return on portfolio securities. When hedging is successful,
any depreciation in the value of portfolio securities will substantially be
offset by
57
<PAGE> 61
appreciation in the value of the futures position. Conversely, any appreciation
in the value of portfolio securities will substantially be offset by
depreciation in the value of the futures position.
Account TAS will not purchase or sell futures contracts for which the aggregate
initial margin exceeds 5% of the fair market value of its assets, after taking
into account unrealized profits and losses on any such contracts which it has
entered into. When a futures contract is purchased, Account TAS will set aside
an amount of cash and cash equivalents equal to the total market value of the
futures contract, less the amount of the initial margin. At no time will Account
TAS's transactions in such futures be used for speculative purposes.
All financial futures contracts will be traded on exchanges that are licensed
and regulated by the Commodity Futures Trading Commission ("CFTC"). To ensure
that its futures transactions meet CFTC standards, Account TAS will enter into
futures contracts for hedging purposes only (i.e., for the purposes or with the
intent specified in CFTC regulations and interpretations, subject to the
requirements of the SEC). For a more detailed discussion of financial futures
contracts and associated risks, please see the Statement of Additional
Information.
Account TAS may write covered call options on portfolio securities for which
call options are available and which are listed on a national securities
exchange. It may also purchase index or individual equity call options as an
alternative to holding stocks or stock index futures, or purchase index or
individual equity put options as a defensive measure. For a detailed discussion
of options contracts and associated risks, please see the Statement of
Additional Information.
RISK FACTORS
There can, of course, be no assurance that Account TAS will achieve its
investment objective since there is uncertainty in every investment. Equity
securities are subject to financial risks relating to the earning stability and
overall financial soundness of an issue. They are also subject to market risks
relating to the effect of general changes in the securities market on the price
of a security. In addition, there may be more risk associated with Account TAS
to the extent that it invests in small or mid-sized companies. More risk is
associated with investment in small or mid-sized companies than with larger
companies because such companies may be dependent on only one or two products
and may be more vulnerable to competition from larger companies with greater
resources and to economic conditions affecting their market sector. Small or
mid-sized companies may be new, without long business or management histories,
and perceived by the market as unproven. Their securities may be held primarily
by insiders or institutional investors, which may affect marketability. The
prices of these stocks often fluctuate more than the overall stock market. In
addition, there are risks inherent in Account TAS as an investment alternative
used by Market Timing Services. (See "Market Timing Risks," page 27.)
FUNDAMENTAL INVESTMENT POLICIES
The fundamental investment policies of Account TAS permit it to:
1. invest up to 5% of its assets in the securities of any one issuer;
2. borrow money from banks in amounts of up to 10% of its assets, but only
as a temporary measure for emergency or extraordinary purposes;
3. pledge up to 10% of its assets to secure borrowings;
4. invest up to 25% of its assets in the securities of issuers in the same
industry; and
5. invest up to 10% of its assets in repurchase agreements maturing in more
than seven days and securities for which market quotations are not
readily available.
58
<PAGE> 62
THE TRAVELERS TIMED BOND ACCOUNT FOR VARIABLE ANNUITIES
(ACCOUNT TB)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of Account TB is to seek current income and total
return. To achieve this objective, Account TB invests primarily in direct
obligations of highest credit quality: obligations of the United States, and its
instrumentalities, and in obligations issued or guaranteed by Federal Agencies
which are independent corporations sponsored by the United States and which are
subject to its general supervision, but which do not carry the full faith and
credit obligations of the United States.
Direct obligations of the United States include Treasury bills which are issued
on a discount basis with a maturity of one year or less, Treasury Notes which
have maturities at issuance between one and ten years, and Treasury Bonds which
have maturities at issuance greater than ten years. Instrumentalities of the
United States whose debt obligations are backed by its full faith and credit,
include: Government National Mortgage Association, Federal Housing
Administration, Farmers Homes Administration, Export-Import Bank of the United
States, Small Business Administration, General Services Administration, Maritime
Administration, District of Columbia Armory Board, Farm Credit System Financial
Assistance Corporation, Federal Financing Bank and Washington Metropolitan Area
Transit Authority Bonds. Federal Agencies include: Farm Credit System, Federal
Home Loan Banks, Federal Home Loan Mortgage Corporation, Federal National
Mortgage Association and Student Loan Marketing Association.
Account TB intends to be fully invested at all times; however, when market
conditions warrant, Account TB may invest temporarily in money market
instruments. Such instruments, which must mature within one year of their
purchase, consist of U.S. government securities; instruments of banks which are
members of the Federal Deposit Insurance Corporation and have assets of at least
$1 billion, such as certificates of deposit, demand and time deposits and
bankers' acceptances; prime commercial paper, including master demand notes; and
repurchase agreements secured by U.S. government securities.
Account TB may from time to time commit to purchase new-issue government or
agency securities on a "when-issued" or "to be announced" ("TBA") basis
("when-issued securities"). The prices of such securities will be fixed at the
time the commitment to purchase is made, and may be expressed in either dollar
price or yield maintenance terms. Such commitment may be viewed as a senior
security, and will be marked to market and reflected in Account TB's
Accumulation Unit Value daily from the commitment date. Delivery and payment may
be at a future date beyond customary settlement time. It is the customary
practice of Account TB to make when-issued or TBA purchases for settlement no
more than 90 days beyond the commitment date.
While it is TAMIC's intention to take physical delivery of these securities,
offsetting transactions may be made prior to settlement, if it is advantageous
to do so. Account TB does not make payment or begin to accrue interest on these
securities until settlement date. In order to invest its assets pending
settlement, Account TB will normally invest in short-term money market
instruments and other securities maturing no later than the scheduled settlement
date.
Account TB does not intend to purchase when-issued securities for speculative or
"leverage" purposes. Consistent with Section 18 of the 1940 Act and the General
Policy Statement of the SEC thereunder, when Account TB commits to purchase a
when-issued security, it will identify and place in a segregated account
high-grade money market instruments and other liquid securities equal in value
to the purchase cost of the when-issued securities.
TAMIC believes that purchasing securities in this manner will be advantageous to
Account TB. However, this practice does entail certain risks, namely the default
of the counterparty on its obligation to deliver the security as scheduled. In
this event, Account TB would endure a loss
59
<PAGE> 63
(gain) equal to the price appreciation (depreciation) in value from the
commitment date. TAMIC employs a rigorous credit quality procedure in
determining the counterparties with which it will deal in when-issued securities
and, in some circumstances, will require the counterparty to post cash or some
other form of security as margin to protect the value of its delivery obligation
pending settlement.
Account TB may seek to preserve capital by writing covered call options on
securities which it owns. Such an option on an underlying security would
obligate Account TB to sell, and give the purchaser of the option the right to
buy, that security at a stated exercise price at any time until the stated
expiration date of the option.
Account TB will use exchange-traded financial futures contracts consisting of
futures contracts on debt securities ("interest rate futures") to facilitate
market timed moves, and as a hedge to protect against changes in interest rates.
An interest rate futures contract is a contract to buy or sell specified debt
securities at a future time for a fixed price. These contracts would obligate
Account TB, at maturity of the contracts, to purchase or sell certain securities
at specified prices or to make cash settlements.
In general, moves in a market timed investment strategy may require the purchase
or sale of large amounts of securities in a short period of time. This purchase
or sale could result in substantial transaction costs and perhaps higher
borrowing in Account TB to provide funds needed for transfer to Account TSB.
Alternatively, debt security exposure can be increased or decreased in a more
timely, cost-effective fashion by buying or selling interest rate futures. By
transacting in such futures when a market timing move is called, TAMIC can
create the ability to buy or sell actual debt securities with less haste and at
lower transaction costs. As the actual debt securities are bought or sold, the
futures positions would simply be eliminated.
Account TB may also purchase and sell interest rate futures to hedge against
changes in interest rates that might otherwise have an adverse effect upon the
value of Account TB's securities. Hedging by use of interest rate futures seeks
to establish, with more certainty than would otherwise be possible, the
effective rate of return on portfolio securities. When hedging is successful,
any depreciation in the value of portfolio securities will substantially be
offset by appreciation in the value of the futures position. Conversely, any
appreciation in the value of the portfolio securities will substantially be
offset by depreciation in the value of the futures position.
Account TB will not purchase or sell futures contracts for which the aggregate
initial margin exceeds 5% of the fair market value of its assets, after taking
into account unrealized profits and losses on any such contracts which it has
entered into. At no time will Account TB's transactions in futures contracts be
employed for speculative purposes. When a futures contract is purchased, Account
TB will set aside, in an identifiable manner, an amount of cash and cash
equivalents equal to the total market value of the futures contract, less the
amount of the initial margin.
All interest rate futures contracts will be traded on exchanges that are
licensed and regulated by the Commodity Futures Trading Commission ("CFTC"). To
ensure that its futures transactions meet CFTC standards, Account TB will enter
into futures contracts for hedging purposes only (i.e., for the purposes or with
the intent specified in CFTC regulations and interpretations, subject to the
requirements of the SEC). For a more detailed discussion of financial futures
contracts and associated risks, please see the Statement of Additional
Information.
RISK FACTORS
There can, of course, be no assurance that Account TB will achieve its
investment objective since there is uncertainty in every investment. U.S.
Government securities are considered among the safest of fixed-income
investments. As a result, however, their yields are generally lower than the
yields available from corporate debt securities. The value of the portfolio
securities of Account TB will fluctuate based on market conditions and interest
rates. Interest rates depend on a number of factors, including government action
in the capital markets, government fiscal and monetary policy,
60
<PAGE> 64
needs of businesses for capital goods for expansion, and investor expectations
as to future inflation. An increase in interest rates will generally reduce the
value of debt securities, and conversely a decline in interest rates will
generally increase the value of debt securities. In addition, there are risks
inherent in Account TB as an investment alternative used by Market Timing
Services. (See "Market Timing Risks" page 27.)
FUNDAMENTAL INVESTMENT POLICIES
The fundamental investment policies of Account TB permit it to:
1. invest up to 5% of its assets in the securities of any one issuer
(exclusive of securities of the United States government, its agencies
or instrumentalities, for which there is no limit);
2. borrow money from banks in amounts of up to 10% of its assets, but only
as a temporary measure for emergency or extraordinary purposes;
3. pledge up to 10% of its assets to secure borrowings;
4. invest up to 25% of its assets in the securities of issuers in the same
industry (exclusive of securities of the U.S. government, its agencies
or instrumentalities, for which there is no limit); and
5. invest up to 10% of its assets in repurchase agreements maturing in more
than seven days and securities for which market quotations are not
readily available including restricted securities.
61
<PAGE> 65
APPENDIX A
- --------------------------------------------------------------------------------
CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
The Statement of Additional Information contains more specific information and
financial statements relating to the Separate Accounts and The Travelers
Insurance Company. A list of the contents of the Statement of Additional
Information is set forth below:
Description of The Travelers and The Separate Accounts
The Insurance Company
The Separate Accounts
Investment Restrictions
The Travelers Growth and Income Stock Account For Variable Annuities
The Travelers Timed Growth and Income Stock Account for Variable
Annuities
The Travelers Timed Aggressive Stock Account for Variable Annuities
The Travelers Quality Bond Account for Variable Annuities
The Travelers Timed Bond Account for Variable Annuities
The Travelers Money Market Account for Variable Annuities
The Travelers Timed Short-Term Bond Account for Variable Annuities
Description of Certain Types of Investments and Investment Techniques
Available to the Separate Accounts
Writing Covered Call Options
Buying Put and Call Options
Futures Contracts
Money Market Instruments
Investment Management and Advisory Services
Advisory Fees
TIMCO
TAMIC
Valuation of Separate Account Assets
Net Investment Factor
Performance Data
Yield Quotations of Account MM
Average Annual Total Return Quotations of Accounts GIS, QB, MM, TGIS,
TSB, TAS, TB and Fund U
The Board of Managers
Distribution and Management Services
Securities Custodian
Independent Accountants
Financial Statements
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
COPIES OF THE STATEMENT OF ADDITIONAL INFORMATION DATED MAY 1, 1996 (FORM NO.
L-11165S) ARE AVAILABLE WITHOUT CHARGE. TO REQUEST A COPY, PLEASE CLIP THIS
COUPON ON THE DOTTED LINE, ENTER YOUR NAME AND ADDRESS IN THE SPACES PROVIDED
BELOW, AND MAIL TO: THE TRAVELERS INSURANCE COMPANY, ANNUITY SERVICES, ONE TOWER
SQUARE, HARTFORD, CONNECTICUT 06183-5030.
Name:
Address:
62
<PAGE> 66
THE TRAVELERS UNIVERSAL ANNUITY
INDIVIDUAL AND GROUP
VARIABLE ANNUITY CONTRACTS
ISSUED BY
THE TRAVELERS INSURANCE COMPANY
L-11165 Printed in U.S.A.
TIC Ed. 5-96
<PAGE> 67
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 68
UNIVERSAL ANNUITY
STATEMENT OF ADDITIONAL INFORMATION
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES
THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES
THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES
THE TRAVELERS TIMED GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT FOR VARIABLE ANNUITIES
THE TRAVELERS TIMED AGGRESSIVE STOCK ACCOUNT FOR VARIABLE ANNUITIES
THE TRAVELERS TIMED BOND ACCOUNT FOR VARIABLE ANNUITIES
THE TRAVELERS FUND U FOR VARIABLE ANNUITIES
VARIABLE ANNUITY CONTRACTS
ISSUED BY
THE TRAVELERS INSURANCE COMPANY
MAY 1, 1996
This Statement of Additional Information is not a prospectus but
relates to, and should be read in conjunction with, the Prospectus dated May 1,
1996. A copy of the Prospectus may be obtained by writing to The Travelers
Insurance Company (the "Company"), Annuity Services, One Tower Square,
Hartford, Connecticut 06183-5030, or by calling 1-860 -422-3985.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
DESCRIPTION OF THE TRAVELERS INSURANCE COMPANY AND
THE SEPARATE ACCOUNTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 3
The Insurance Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
The Separate Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
The Travelers Growth and Income Stock Account for Variable Annuities. . . . . . . . . . . . . . 3
The Travelers Timed Growth and Income Stock Account for Variable Annuities . . . . . . . . . . . 3
The Travelers Timed Aggressive Stock Account for Variable Annuities. . . . . . . . . . . . . . . 5
The Travelers Quality Bond Account for Variable Annuities. . . . . . . . . . . . . . . . . . . . 6
The Travelers Timed Bond Account for Variable Annuities. . . . . . . . . . . . . . . . . . . . . 7
The Travelers Money Market Account for Variable Annuities. . . . . . . . . . . . . . . . . . . . 9
The Travelers Timed Short-Term Bond Account for Variable Annuities . . . . . . . . . . . . . . . 10
DESCRIPTION OF CERTAIN TYPES OF INVESTMENTS AND INVESTMENT TECHNIQUES
AVAILABLE TO THE SEPARATE ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
WRITING COVERED CALL OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
BUYING PUT AND CALL OPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
FUTURES CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
MONEY MARKET INSTRUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
INVESTMENT MANAGEMENT AND ADVISORY SERVICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Advisory Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
TIMCO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
TAMIC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
VALUATION OF SEPARATE ACCOUNT ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
NET INVESTMENT FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
PERFORMANCE DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
1
<PAGE> 69
<TABLE>
<S> <C>
Yield Quotations of Account MM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Average Annual Total Return Quotations of Accounts GIS, QB, MM, TGIS, TSB, TAS, TB
and Fund U. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
THE BOARD OF MANAGERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
DISTRIBUTION AND MANAGEMENT SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECURITIES CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
</TABLE>
2
<PAGE> 70
DESCRIPTION OF THE TRAVELERS INSURANCE COMPANY
AND THE SEPARATE ACCOUNTS
THE INSURANCE COMPANY
The Travelers Insurance Company (the "Company") is a stock insurance
company chartered in 1864 in Connecticut and continuously engaged in the
insurance business since that time. The Company is a wholly owned subsidiary
of The Travelers Insurance Group, Inc., a holding company which is an indirect
wholly owned subsidiary of Travelers Group Inc., a financial services holding
company. The Company's Home Office is located at One Tower Square, Hartford,
Connecticut 06183.
THE SEPARATE ACCOUNTS
Each of the Separate Accounts available under the variable annuity
contracts described in this Statement of Additional Information meets the
definition of a separate account under federal securities laws, and will comply
with the provisions of the Investment Company Act of 1940, as amended (the
"1940 Act"). Additionally, the operations of each of the Separate Accounts are
subject to the provisions of Section 38a-433 of the Connecticut General
Statutes which authorize the Connecticut Insurance Commissioner to adopt
regulations under it. The Section contains no restrictions on investments of
the Separate Accounts, and the Commissioner has adopted no regulations under
the Section that affect the Separate Accounts.
INVESTMENT RESTRICTIONS
The Separate Accounts described below each have different investment
objectives and policies, as discussed in the Prospectus under "The Managed
Separate Accounts" on page 24. Each Managed Separate Account has certain
fundamental investment restrictions which are set forth below. Neither the
investment objective nor the fundamental investment restrictions can be changed
without a vote of a majority of the outstanding voting securities of the
Accounts, as defined in the 1940 Act. Additionally, in accomplishing their
respective investment objectives, each Account uses certain types of
investments and investment techniques which are discussed under "Investments
and Investment Techniques" on page 11.
The percentage restrictions (for either fundamental investment
policies or investment restrictions) are interpreted such that if they are
adhered to at the time of investment, a later increase in a percentage beyond
the specified limit resulting from a change in the values of portfolio
securities or in the amount of net assets shall not be considered a violation.
It must be recognized that there are risks inherent in the ownership of any
investment and that there can be no assurance that the investment objectives of
the Separate Accounts will be achieved.
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES
THE TRAVELERS TIMED GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES
INVESTMENT RESTRICTIONS
The investment restrictions for Accounts GIS and TGIS, as set forth
below, are identical, except where indicated. The investment restrictions set
forth in items 1 through 9 are fundamental and may not be changed without a
vote of a majority of the outstanding voting securities of Account GIS or
Account TGIS, as defined in the 1940 Act. Items 10 through 13 may be changed
by a vote of the Board of Managers of Account GIS or Account TGIS.
1. Not more than 5% of the assets of the Account will be invested in
the securities of any one issuer, except obligations of the United
States Government and its instrumentalities.
2. Borrowings will not be made, except that the right is reserved to
borrow from banks for emergency purposes, provided that such
borrowings will not exceed 5% of the value of the assets of
Account GIS, or
3
<PAGE> 71
10% of the value of the assets of Account TGIS, and that
immediately after the borrowing, and at all times thereafter, and
while any such borrowing is unrepaid, there will be asset coverage
of at least 300% for all borrowings of the Account.
3. Securities of other issuers will not be underwritten, except that
the Account could be deemed an underwriter when engaged in the
sale of restricted securities. (See item 13.)
4. Interests in real estate will not be purchased, except as may be
represented by securities for which there is an established
market.
5. No purchase of commodities or commodity contracts will be made,
except transactions involving financial futures in order to limit
transaction and borrowing costs and for hedging purposes, as
discussed above.
6. Loans will be made only through the acquisition of a portion of
privately placed issue of bonds, debentures or other evidences of
indebtedness of a type customarily purchased by institutional
investors. (See item 13.)
7. Investments will not be made in the securities of a company for
the purpose of exercising management or control.
8. Not more than 10% of the voting securities of any one issuer will
be acquired. (It is the present practice of the Account not to
exceed 5% of the voting securities of any one issuer.)
9. Senior securities will not be issued.
10. Short sales of securities will not be made.
11. Purchases will not be made on margin, except for short-term
credits which are necessary for the clearance of transactions, and
for the placement of not more than 5% of its net asset value in
total margin deposits for positions in futures contracts.
12. The Account will not invest in the securities of other investment
companies, except as part of a plan of merger, consolidation or
acquisition of assets.
13. Not more than 5% of the value of the assets of the Account may be
invested in restricted securities (securities which may not be
publicly offered without registration under the Securities Act of
1933).
Changes in the investments of Accounts GIS and TGIS may be made from
time to time to take into account changes in the outlook for particular
industries or companies. The Accounts' investments will not, however, be
concentrated in any one industry; that is, no more than 25% of the value of
their assets will be invested in any one industry. While Accounts GIS and TGIS
may occasionally invest in foreign securities, it is not anticipated that such
investments will, at any time, account for more than 10% of their investment
portfolios.
The assets of Accounts GIS and TGIS will be kept fully invested,
except that (a) sufficient cash may be kept on hand to provide for variable
annuity contract obligations, and (b) reasonable amounts of cash, United States
Government or other liquid securities, such as short-term bills and notes, may
be held for limited periods, pending investment in accordance with their
respective investment policies.
PORTFOLIO TURNOVER
Although Accounts GIS and TGIS intend to purchase securities for
long-term appreciation of capital and income, and do not intend to place
emphasis on obtaining short-term trading profits, such short-term trading may
occur. A higher turnover rate should not be interpreted as indicating a
variation from the stated investment policy of seeking long-term accumulation
of capital, and will normally increase the brokerage costs of Accounts GIS and
TGIS.
4
<PAGE> 72
However, negotiated fees and the use of futures contracts will help to reduce
brokerage costs. While there is no restriction on portfolio turnover, Account
GIS expects to have a moderate to high level of portfolio turnover in the range
of 150% to 300%, and Account TGIS expects that its portfolio turnover will be
higher than normal since the Account is being timed by third party investment
advisory services. The portfolio turnover rate for Account GIS for the years
ended December 31, 1993, 1994 and 1995 was 81%, 103% and 96%, respectively.
The portfolio turnover rate for Account TGIS for the years ended December 31,
1993, 1994 and 1995 was 70%, 19% and 79%, respectively.
THE TRAVELERS TIMED AGGRESSIVE STOCK ACCOUNT FOR VARIABLE ANNUITIES
INVESTMENT RESTRICTIONS
The investment restrictions set forth below are fundamental and may
not be changed without a vote of a majority of the outstanding voting
securities of Account TAS, as defined in the 1940 Act. Account TAS may not:
1. invest more than 5% of its total assets, computed at market value,
in the securities of any one issuer;
2. invest in more than 10% of any class of securities of any one
issuer;
3. invest more than 5% of the value of its total assets in companies
which have been in operation for less than three years;
4. borrow money, except to facilitate redemptions or for emergency or
extraordinary purposes and then only from banks and in amounts of
up to 10% of its gross assets computed at cost; while outstanding,
a borrowing may not exceed one-third of the value of its net
assets, including the amount borrowed; Account TAS has no
intention of attempting to increase its net income by means of
borrowing and all borrowings will be repaid before additional
investments are made; assets pledged to secure borrowings shall be
no more than the lesser of the amount borrowed or 10% of the gross
assets of Account TAS computed at cost;
5. underwrite securities, except that Account TAS may purchase
securities from issuers thereof or others and dispose of such
securities in a manner consistent with its other investment
policies; in the disposition of restricted securities the Account
may be deemed to be an underwriter, as defined in the Securities
Act of 1933 (the "1933 Act");
6. purchase real estate or interests in real estate, except through
the purchase of securities of a type commonly purchased by
financial institutions which do not include direct interest in
real estate or mortgages, or commodities or commodity contracts,
except transactions involving financial futures in order to limit
transaction and borrowing costs and for hedging purposes as
described above;
7. invest for the primary purpose of control or management;
8. make margin purchases or short sales of securities, except for
short-term credits which are necessary for the clearance of
transactions, and to place not more than 5% of its net asset value
in total margin deposits for positions in futures contracts;
9. make loans, except that Account TAS may purchase money market
securities, enter into repurchase agreements, buy publicly and
privately distributed debt securities and lend limited amounts of
its portfolio securities to broker- dealers; all such investments
must be consistent with the Account's investment objective and
policies;
10. invest more than 25% of its total assets in the securities of
issuers in any single industry;
5
<PAGE> 73
11. purchase the securities of any other investment company, except in
the open market and at customary brokerage rates and in no event
more than 3% of the voting securities of any investment company;
12. invest in interests in oil, gas or other mineral exploration or
development programs; or
13. invest more than 5% of its net assets in warrants, valued at the
lower of cost or market; warrants acquired by the Account in units
or attached to securities will be deemed to be without value with
regard to this restriction. Account TAS is subject to
restrictions in the sale of portfolio securities to, and in its
purchase or retention of securities of, companies in which the
management personnel of The Travelers Investment Management
Company ("TIMCO") have a substantial interest.
Account TAS may make investments in an amount of up to 10% of the
value of its net assets in restricted securities which may not be publicly sold
without registration under the 1933 Act. In most instances such securities are
traded at a discount from the market value of unrestricted securities of the
same issuer until the restriction is eliminated. If and when Account TAS sells
such portfolio securities, it may be deemed an underwriter, as such term is
defined in the 1933 Act, with respect thereto, and registration of such
securities under the 1933 Act may be required. Account TAS will not bear the
expense of such registration. Account TAS intends to reach agreements with all
such issuers whereby they will pay all expenses of registration. In
determining securities subject to the 10% limitation, Account TAS will include,
in addition to restricted securities, repurchase agreements maturing in more
than seven days and other securities not having readily available market
quotations.
PORTFOLIO TURNOVER
Although Account TAS intends to invest in securities selected
primarily for prospective capital growth and does not intend to place emphasis
on obtaining short-term trading profits, such short-term trading may occur. A
high turnover rate should not be interpreted as indicating a variation from the
stated investment policy, and will normally increase Account TAS's brokerage
costs. While there is no restriction on portfolio turnover, Account TAS's
portfolio turnover rate may be high since the Account is being timed by third
party investment advisory services. The portfolio turnover rate for the years
ended December 31, 1993, 1994 and 1995 was 71%, 142% and 113%, respectively.
THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES
INVESTMENT RESTRICTIONS
The investment restrictions set forth in items 1 through 9 below are
fundamental and may not be changed without a vote of a majority of the
outstanding voting securities of Account QB, as defined in the 1940 Act. Items
10 through 14 may be changed by a vote of the Board of Managers of Account QB.
1. Not more than 15% of the value of the assets of Account QB will be
invested in the securities of any one issuer, except obligations
of the United States Government and its instrumentalities, for
which there is no limit.
2. Borrowings will not be made, except that the right is reserved to
borrow from banks for emergency purposes, provided that these
borrowings will not exceed 5% of the value of the assets of
Account QB and that immediately after the borrowing, and at all
times thereafter, and while any borrowing is unrepaid, there will
be asset coverage of at least 300% for all borrowings of Account
QB.
3. Securities of other issuers will not be underwritten, except that
Account QB could be deemed to be an underwriter when engaged in
the sale of restricted securities. (See item 13.)
4. Interests in real estate will not be purchased, except as may be
represented by securities for which there is an established
market.
6
<PAGE> 74
5. No purchase of commodities or commodity contracts will be made,
except transactions involving financial futures used as a hedge
against unanticipated changes in prevailing levels of interest
rates.
6. Loans will be made only through the acquisition of a portion of
privately placed issue of bonds, debentures and other evidences of
indebtedness of a type customarily purchased by institutional
investors. (See item 13.)
7. Investments will not be made in the securities of a company for
the purpose of exercising management or control.
8. Not more than 10% of the voting securities of any one issuer will
be acquired.
9. Senior securities will not be issued.
10. Short sales of securities will not be made.
11. Purchases will not be made on margin, except for any short-term
credits that are necessary for the clearance of transactions and
to place up to 5% of the value of its net assets in total margin
deposits for positions in futures contracts.
12. Account QB will not invest in the securities of other investment
companies, except as part of a plan of merger, consolidation or
acquisition of assets.
13. Not more than 5% of the value of the assets of Account QB may be
invested in restricted securities (securities which may not be
publicly offered without registration under the Securities Act of
1933 (the "1933 Act").
14. The average period of maturity (or in the case of mortgage-backed
securities, the estimated average life of cash flows) of all fixed
interest debt instruments held by Account QB will not exceed five
years.
The investments of Account QB will not be concentrated in any one
industry; that is, no more than 25% of the value of its assets will be invested
in any one industry. There is no investment policy as to Account QB's
investment in foreign securities.
PORTFOLIO TURNOVER
Brokerage costs associated with short-term debt instruments are
significantly lower than those incurred on equity investments, and thus, a high
portfolio turnover rate would not adversely affect the brokerage costs of
Account QB to the same extent as high turnover in a separate account which
invests primarily in common stock. The portfolio turnover rate for Account QB
for the years ended December 31, 1993, 1994 and 1995 was 24%, 27% and 138%,
respectively.
THE TRAVELERS TIMED BOND ACCOUNT FOR VARIABLE ANNUITIES
INVESTMENT RESTRICTIONS
The investment restrictions set forth below are fundamental and may
not be changed without a vote of a majority of the outstanding voting
securities of Account TB, as defined in the 1940 Act. Account TB may not:
1. invest more than 5% of its total assets, computed at market value,
in the securities of any one issuer (exclusive of securities of
the United States Government, its agencies or instrumentalities,
for which there is no limit);
7
<PAGE> 75
2. invest in more than 10% of any class of securities of any one
issuer;
3. invest more than 5% of the value of its total assets in companies
which have been in operation for less than three years;
4. borrow money, except to facilitate redemptions or for emergency or
extraordinary purposes and then only from banks and in amounts of
up to 10% of its gross assets computed at cost; while outstanding
according to the 1940 Act, a borrowing may not exceed one-third of
the value of the net assets, including the amount borrowed;
Account TB has no intention of attempting to increase its net
income by borrowing and all borrowings will be repaid before
additional investments are made; assets pledged to secure
borrowings shall be no more than the lesser of the amount borrowed
or 10% of the gross assets computed at cost;
5. underwrite securities, except that Account TB may purchase
securities from issuers thereof or others and dispose of such
securities in a manner consistent with its other investment
policies; in the disposition of restricted securities Account TB
may be deemed to be an underwriter, as defined in the 1933 Act;
6. purchase real estate or interests in real estate, except through
the purchase of securities of a type commonly purchased by
financial institutions which do not include direct interest in
real estate or mortgages, or commodities or commodity contracts,
except transactions involving financial futures in order to limit
transactions and borrowing costs and for hedging purposes as
discussed above;
7. invest for the primary purpose of control or management;
8. make margin purchases or short sales of securities, except for
short-term credits which are necessary for the clearance of
transactions, and to place not more than 5% of its net asset value
in total margin deposits for positions in futures contracts;
9. make loans, except that Account TB may purchase money market
securities, enter into repurchase agreements, buy publicly and
privately distributed debt securities and lend limited amounts of
its portfolio securities to brokers-dealers; all such investments
must be consistent with the investment objective and policies;
10. invest more than 25% of its total assets in the securities of
issuers in any single industry (exclusive of securities of the
United States government, its agencies or instrumentalities, for
which there is no limit); or
11. purchase the securities of any other investment company, except in
the open market and at customary brokerage rates and in no event
more than 3% of the voting securities of any investment company.
When consistent with its investment objectives, Account TB may
purchase securities of brokers, dealers, underwriters or
investment advisers. Account TB is subject to restrictions in the
sale of portfolio securities to, and in its purchase or retention
of securities of, companies in which the management personnel of
Travelers Asset Management International Corporation ("TAMIC")
have a substantial interest.
PORTFOLIO TURNOVER
Brokerage costs associated with debt instruments are significantly
lower than those incurred on equity investments, and thus, a high portfolio
turnover rate would not adversely affect the brokerage costs of Account TB to
the same extent as high turnover in a separate account which invests primarily
in common stock. While there is no restriction on portfolio turnover, Account
TB's turnover rate may be high since the Account is being timed by third party
investment advisory services. The portfolio turnover rate for Account TB for
the years ended December 31, 1993, 1994 and 1995 was 190%, 0% and 117%,
respectively.
8
<PAGE> 76
THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES
INVESTMENT RESTRICTIONS
In keeping with the objective of obtaining the highest possible
current income consistent with a high degree of liquidity and preservation of
capital, Account MM operates under the following restrictions, which
restrictions are fundamental and may not be changed without a vote of a
majority of the outstanding voting securities of Account MM, as defined in the
1940 Act. Account MM may not:
1. purchase any security which has a maturity date more than one year
from the date of the Account's purchase;
2. invest more than 25% of its assets in the securities of issuers in
any single industry (exclusive of securities issued by domestic
banks and savings and loan associations, or securities issued or
guaranteed by the United States Government, its agencies,
authorities or instrumentalities). Neither all finance companies,
as a group, nor all utility companies, as a group, are considered
a single industry for the purpose of restriction;
3. invest more than 10% of its assets in the securities of any one
issuer, including repurchase agreements with any one bank or
dealer (exclusive of securities issued or guaranteed by the United
States Government, its agencies or instrumentalities);
4. acquire more than 10% of the outstanding securities of any one
issuer (exclusive of securities issued or guaranteed by the United
States Government, its agencies or instrumentalities); however, in
accordance with Rule 2a-7 of the 1940 Act, to which the Account is
subject, the Account will not invest more than 5% of its assets in
the securities of any one issuer (other than securities issued or
guaranteed by the United States Government or its
instrumentalities);
5. borrow money, except from banks on a temporary basis in an
aggregate amount not to exceed one-third of the Account's assets
(including the amount borrowed); the borrowings may be used
exclusively to facilitate the orderly maturation and sale of
portfolio securities during any periods of abnormally heavy
redemption requests, if they should occur; such borrowings may not
be used to purchase investments and the Account will not purchase
any investment while any such borrowing exists; immediately after
the borrowing, and at all times thereafter while any borrowing is
unrepaid, there will be asset coverage of at least 300% for all
borrowings of the Account;
6. pledge, hypothecate or in any manner transfer, as security for
indebtedness, any securities owned or held by the Account, except
as may be necessary in connection with any borrowing mentioned
above and in an aggregate amount not to exceed 5% of the Account's
assets;
7. make loans, provided that the Account may purchase money market
securities and enter into repurchase agreements;
8. (a) make investments for the purpose of exercising control; (b)
purchase securities of other investment companies, except in
connection with a merger, consolidation, acquisition or
reorganization; (c) invest in real estate (other than money market
securities secured by real estate or interests therein, or money
market securities issued by companies which invest in real estate
or interests therein), commodities or commodity contracts,
interests in oil, gas or other mineral exploration or other
development programs; (d) purchase any securities on margin; (e)
make short sales of securities or maintain a short position or
write, purchase or sell puts, calls, straddles, spreads or
combinations thereof; (f) invest in securities of issuers (other
than agencies, authorities or instrumentalities of the United
States Government) having a record, together with predecessors, of
less than three years of continuous operation if more than 5% of
the Account's assets would be invested in such securities; (g)
purchase or retain securities of any issuer if the officers and
directors of the investment adviser who individually own more than
0.5% of the outstanding securities of such issuer together own
more than 5% of the securities of such issuer; or (h) act as an
underwriter of securities;
9
<PAGE> 77
9. invest in securities which under the 1933 Act or other securities
laws cannot be readily disposed of with registration or which are
otherwise not readily marketable at the time of purchase,
including repurchase agreements that mature in more than seven
days, if as a result more than 10% of the value of the Account's
assets is invested in these securities. At present, the Account
has no investments in these securities and has no present
expectation of purchasing any, although it may in the future; and
10. issue senior securities.
PORTFOLIO TURNOVER
A portfolio turnover rate is not applicable to Account MM which
invests only in money market instruments.
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT FOR VARIABLE ANNUITIES
INVESTMENT RESTRICTIONS
In keeping with the objective of obtaining the highest possible
current income consistent with a high degree of liquidity and preservation of
capital, Account TSB operates under the following restrictions, which
restrictions are fundamental and may not be changed without a vote of a
majority of the outstanding voting securities of Account TSB, as defined in the
1940 Act. Account TSB may not:
1. purchase any security which has a maturity date more than three
years from the date such security was purchased;
2. invest more than 25% of its assets in the securities of issuers in
any single industry (exclusive of securities issued by domestic
banks and savings and loan associations, or securities issued or
guaranteed by the United States Government, its agencies,
authorities or instrumentalities); neither all finance companies,
as a group, nor all utility companies, as a group, are considered
a single industry for the purpose of restriction;
3. invest more than 10% of its assets in the securities of any one
issuer, including repurchase agreements with any one bank or
dealer (exclusive of securities issued or guaranteed by the United
States Government, its agencies or instrumentalities);
4. acquire more than 10% of the outstanding securities of any one
issuer (exclusive of securities issued or guaranteed by the United
States Government, its agencies or instrumentalities);
5. borrow money, except from banks on a temporary basis in an
aggregate amount not to exceed one-third of the Account's assets
(including the amount borrowed); the borrowings may be used
exclusively to facilitate the orderly maturation and sale of
portfolio securities during any periods of abnormally heavy
redemption requests, if they should occur; such borrowings may not
be used to purchase investments and the Account will not purchase
any investment while any such borrowing exists; immediately after
the borrowing, and at all times thereafter while any borrowing is
unrepaid, there will be asset coverage of at least 300% for all
borrowings of the Account;
6. pledge, hypothecate or in any manner transfer, as security for
indebtedness, any securities owned or held by the Account, except
as may be necessary in connection with any borrowing mentioned
above and in an aggregate amount not to exceed 5% of the Account's
assets;
7. make loans, provided that the Account may purchase money market
securities and enter into repurchase agreements;
10
<PAGE> 78
8. (a) make investments for the purpose of exercising control; (b)
purchase securities of other investment companies, except in
connection with a merger, consolidation, acquisition or
reorganization; (c) invest in real estate (other than money market
securities secured by real estate or interests therein, or money
market securities issued by companies which invest in real estate
or interests therein), commodities or commodity contracts,
interests in oil, gas or other mineral exploration or other
development programs; (d) purchase any securities on margin; (e)
make short sales of securities or maintain a short position or
write, purchase or sell puts, calls, straddles, spreads or
combinations thereof; (f) invest in securities of issuers (other
than agencies, authorities or instrumentalities of the United
States Government) having a record, together with predecessors, of
less than three years of continuous operation if more than 5% of
the Account's assets would be invested in such securities; (g)
purchase or retain securities of any issuer if the officers and
directors of the investment adviser who individually own more than
0.5% of the outstanding securities of such issuer together own
more than 5% of the securities of such issuer; or (h) act as an
underwriter of securities;
9. invest in securities which under the 1933 Act or other securities
laws cannot be readily disposed of with registration or which are
otherwise not readily marketable at the time of purchase,
including repurchase agreements that mature in more than seven
days, if as a result more than 10% of the value of the Account's
assets is invested in these securities. At present, the Account
has no investments in these securities and has no present
expectation of purchasing any, although it may in the future; and
10. issue senior securities.
PORTFOLIO TURNOVER
Brokerage costs associated with short-term debt instruments are
significantly lower than those incurred on equity investments, and thus, a high
portfolio turnover rate would not adversely affect the brokerage costs of
Account TSB to the same extent as high turnover in a separate account which
invests primarily in common stock. While there is no restriction on portfolio
turnover, Account TSB's turnover rate may be high since the Account is being
timed by third party investment advisory services.
A portfolio turnover rate is not applicable to Account TSB which invests only
in short-term instruments.
DESCRIPTION OF CERTAIN TYPES OF INVESTMENTS AND INVESTMENT
TECHNIQUES AVAILABLE TO THE SEPARATE ACCOUNTS
WRITING COVERED CALL OPTIONS
Accounts GIS, TGIS, TAS and TB may write covered call options on
portfolio securities for which call options are available and which are listed
on a national securities exchange. These call options generally will be
short-term contracts with a duration of nine months or less.
The Accounts will write only "covered" call options, that is, they
will own the underlying securities which are acceptable for escrow when they
write the call option and until the obligation to sell the underlying security
is extinguished by exercise or expiration of the call option, or until a call
option covering the same underlying security and having the same exercise price
and expiration date is purchased. The Accounts will receive a premium for
writing a call option, but give up, until the expiration date, the opportunity
to profit from an increase in the underlying security's price above the
exercise price. The Accounts will retain the risk of loss from a decrease in
the price of the underlying security. Writing covered call options is a
conservative investment technique which is believed to involve relatively
little risk, but which is capable of enhancing an Account's total returns.
The premium received for writing a covered call option will be
recorded as a liability in each Account's Statement of Assets and Liabilities.
This liability will be adjusted daily to the option's current market value,
which
11
<PAGE> 79
will be the latest sale price at the close of the New York Stock Exchange, or,
in the absence of such sale, at the latest bid quotation. The liability will
be extinguished upon expiration of the option, the purchase of an identical
option in a closing transaction, or delivery of the underlying security upon
exercise of the option.
The Options Clearing Corporation is the issuer of, and the obligor on,
the covered call options written by the Accounts. In order to secure an
obligation to deliver to the Options Clearing Corporation the underlying
security of a covered call option, the Accounts will be required to make escrow
arrangements.
In instances where the Accounts believe it is appropriate to close a
covered call option, they can close out the previously written call option by
purchasing a call option on the same underlying security with the same exercise
price and expiration date. The Accounts may also, under certain circumstances,
be able to transfer a previously written call option.
A previously written call option can be closed out by purchasing an
identical call option only on a national securities exchange which provides a
secondary market in the call option. There is no assurance that a liquid
secondary market will exist for a particular call option at such time. If the
Accounts cannot effect a closing transaction, they will not be able to sell the
underlying security while the previously written option remains outstanding,
even though it might otherwise be advantageous to do so.
If a substantial number of the call options are exercised, the
Accounts' rates of portfolio turnover may exceed historical levels. This would
result in higher brokerage commissions in connection with the writing of
covered call options and the purchase of call options to close out previously
written options. Such brokerage commissions are normally higher than those
applicable to purchases and sales of portfolio securities.
BUYING PUT AND CALL OPTIONS
Accounts GIS, TGIS and TAS may purchase put options on securities
held, or on futures contracts whose price volatility is expected to closely
match that of securities held, as a defensive measure to preserve contract
owners' capital when market conditions warrant. The Accounts may purchase call
options on specific securities, or on futures contracts whose price volatility
is expected to closely match that of securities, eligible for purchase by the
Accounts, in anticipation of or as a substitute for the purchase of the
securities themselves. These options may be listed on a national exchange or
executed "over-the-counter" with a broker-dealer as the counterparty. While
the investment advisers anticipate that the majority of option purchases and
sales will be executed on a national exchange, put or call options on specific
securities or for non-standard terms are likely to be executed directly with a
broker-dealer when it is advantageous to do so. Option contracts will be
short-term in nature, generally less than nine months.
The Accounts will pay a premium in exchange for the right to purchase
(call) or sell (put) a specific number of shares of an equity security or
futures contract at a specified price (the strike price) on or before the
expiration date of the options contract. In either case, each Account's risk
is limited to the option premium paid.
The Accounts may sell the put and call options prior to their
expiration and realize a gain or loss thereby. A call option will expire
worthless if the price of the related security is below the contract strike
price at the time of expiration; a put option will expire worthless if the
price of the related security is above the contract strike price at the time of
expiration.
Put and call options will be employed for bona fide hedging purposes
only. Liquid securities sufficient to fulfill the call option delivery
obligation will be identified and segregated in an account; deliverable
securities sufficient to fulfill the put option obligation will be similarly
identified and segregated. In the case of put options on futures contracts,
portfolio securities whose price volatility is expected to match that of the
underlying futures contract will be identified and segregated.
12
<PAGE> 80
FUTURES CONTRACTS
STOCK INDEX FUTURES
Accounts GIS, TGIS and TAS will invest in stock index futures. A
stock index futures contract provides for one party to take and the other to
make delivery of an amount of cash over the hedging period equal to a specified
amount times the difference between a stock index value at the close of the
last trading day of the contract or the selling price and the price at which
the futures contract is originally struck. The stock index assigns relative
values to the common stocks included in the index and reflects overall price
trends in the designated market for equity securities. Therefore, price
changes in a stock index futures contract reflect changes in the specified
index of equity securities on which the futures contract is based. Stock index
futures may also be used, to a limited extent, to hedge specific common stocks
with respect to market (systematic) risk (involving the market's assessment of
overall economic prospects) as distinguished from stock-specific risk
(involving the market's evaluation of the merits of the issuer of a particular
security). By establishing an appropriate "short" position in stock index
futures, the Accounts may seek to protect the value of their equity securities
against an overall decline in the market for equity securities. Alternatively,
in anticipation of a generally rising market, the Accounts can seek to avoid
losing the benefit of apparently low current prices by establishing a "long"
position in stock index futures and later liquidating that position as
particular equity securities are in fact acquired. None of the Accounts will
be a hedging fund; however, to the extent that any hedging strategies actually
employed are successful, the Accounts will be affected to a lesser degree by
adverse overall market price movements unrelated to the merits of specific
portfolio equity securities than would otherwise be the case. Gains and losses
on futures contracts employed as hedges for specific securities will normally
be offset by losses or gains, respectively, on the hedged security.
INTEREST RATE FUTURES
Accounts TGIS, TAS, QB and TB may purchase and sell futures contracts
on debt securities ("interest rate futures") to hedge against anticipated
changes in interest rates that might otherwise have an adverse effect upon the
value of an Account's debt securities. An interest rate futures contract is a
binding contractual commitment which, if held to maturity, will result in an
obligation to make or accept delivery, during a particular future month, of
debt securities having a standardized face value and rate of return.
By purchasing interest rate futures (assuming a "long" position) the
Accounts will be legally obligated to accept the future delivery of the
underlying security and pay the agreed price. This would be done, for example,
when the Account intends to purchase particular debt securities when it has the
necessary cash, but expects the rate of return available in the securities
markets at that time to be less favorable than rates currently available in the
futures markets. If the anticipated rise in the price of the debt securities
should occur (with its concurrent reduction in yield), the increased cost of
purchasing the securities will be offset, at least to some extent, by the rise
in the value of the futures position taken in anticipation of the securities
purchase.
By selling interest rate futures held by it, or interest rate futures
having characteristics similar to those held by it (assuming a "short"
position), the Account will be legally obligated to make the future delivery of
the security against payment of the agreed price. Such a position seeks to
hedge against an anticipated rise in interest rates that would adversely affect
the value of the Account's portfolio debt securities.
Open futures positions on debt securities will be valued at the most
recent settlement price, unless such price does not appear to the Board of
Managers to reflect the fair value of the contract, in which case the positions
will be valued at fair value determined in good faith by or under the direction
of the Board of Managers.
Hedging by use of interest rate futures seeks to establish, with more
certainty than would otherwise be possible, the effective rate of return on
portfolio securities. When hedging is successful, any depreciation in the
value of portfolio securities will substantially be offset by appreciation in
the value of the futures position.
13
<PAGE> 81
FUTURES MARKETS AND REGULATIONS
When a futures contract is purchased, the Accounts will set aside, in
an identifiable manner, an amount of cash and cash equivalents equal to the
total market value of the futures contract, less the amount of the initial
margin. The Accounts will incur brokerage fees in connection with their
futures transactions, and will be required to deposit and maintain funds with
brokers as margin to guarantee performance of future obligations.
Positions taken in the futures markets are not normally held to
maturity, but instead are liquidated through offsetting transactions which may
result in a profit or a loss. Closing out an open futures contract sale or
purchase is effected by entering into an offsetting futures contract purchase
or sale, respectively, for the same aggregate amount of the stock index or
interest rate futures contract and the same delivery date. If the offsetting
purchase price is less than the original sale price, the Accounts realize a
gain; if it is more, the Accounts realize a loss. Conversely, if the offsetting
sale price is more than the original purchase price, the Accounts realize a
gain; if less, a loss. While futures positions taken by the Accounts will
usually be liquidated in this manner, the Accounts may instead make or take
delivery of the underlying securities whenever it appears economically
advantageous for them to do so. In determining gain or loss, transaction costs
must also be taken into account. There can be no assurance that the Accounts
will be able to enter into an offsetting transaction with respect to a
particular contract at a particular time.
A clearing corporation associated with the exchange on which futures
are traded guarantees that the sale and purchase obligations will be performed
with regard to all positions that remain open at the termination of the
contract.
All stock index and interest rate futures will be traded on exchanges
that are licensed and regulated by the Commodity Futures Trading Commission
("CFTC"). Stock index futures are currently traded on the New York Futures
Exchange and the Chicago Mercantile Exchange. Interest rate futures are
actively traded on the Chicago Board of Trade and the International Monetary
Market at the Chicago Mercantile Exchange.
The investment advisers do not believe any of the Accounts to be a
"commodity pool" as defined under the Commodity Exchange Act. The Accounts
will only enter into futures contracts for bona fide hedging or other
appropriate risk management purposes as permitted by CFTC regulations and
interpretations, and subject to the requirements of the Securities and Exchange
Commission. The Accounts will not purchase or sell futures contracts for which
the aggregate initial margin exceeds five percent (5%) of the fair market value
of their individual assets, after taking into account unrealized profits and
unrealized losses on any such contracts which they have entered into. The
Accounts will further seek to assure that fluctuations in the price of any
futures contracts that they use for hedging purposes will be substantially
related to fluctuations in the price of the securities which they hold or which
they expect to purchase, although there can be no assurance that the expected
result will be achieved.
As evidence of their hedging intent, the Accounts expect that on
seventy-five percent (75%) or more of the occasions on which they purchase a
long futures contract, they will effect the purchase of securities in the cash
market or take delivery at the close of a futures position. In particular
cases, however, when it is economically advantageous, a long futures position
may be terminated without the corresponding purchase of securities.
SPECIAL RISKS
While certain futures contracts may be purchased and sold to reduce
certain risks, these transactions may entail other risks. Thus, while the
Accounts may benefit from the use of such futures, unanticipated changes in
stock price movements or interest rates may result in a poorer overall
performance for the Account than if it had not entered into such futures
contracts. Moreover, in the event of an imperfect correlation between the
futures position and the portfolio position which is intended to be protected,
the desired protection may not be obtained and the Accounts may be exposed to
risk of loss. The investment advisers will attempt to reduce this risk by
engaging in futures transactions, to the extent possible, where, in their
judgment, there is a significant correlation between changes in the prices of
the futures contracts and the prices of any portfolio securities sought to be
hedged.
In addition to the possibility that there may be a less than perfect
correlation between movements in the futures contracts and securities in the
portfolio being hedged, the prices of futures contracts may not correlate
perfectly with movements in the underlying security due to certain market
distortions. First, rather than meeting variation
14
<PAGE> 82
margin deposit requirements should a futures contract value move adversely,
investors may close futures contracts through offsetting transactions which
could distort the normal relationship between the index and futures markets.
Second, since margin requirements in the futures market are less onerous than
in the securities market, the futures market may attract more speculators than
the securities market. Increased participation by speculators may cause
temporary price distortions. Due to the possibility of such price distortion,
and also because of the imperfect correlation discussed above, even a correct
forecast of general market trends by the investment advisers may not result in
a successful hedging transaction in the futures market over a short time
period. However, as is noted above, the use of financial futures by the
Accounts is intended primarily to limit transaction and borrowing costs. At no
time will the Accounts use financial futures for speculative purposes.
Successful use of futures contracts for hedging purposes is also
subject to the investment advisers' ability to predict correctly movements in
the direction of the market. However, the investment advisers believe that
over time the value of the Accounts' portfolios will tend to move in the same
direction as the market indices which are intended to correlate to the price
movements of the portfolio securities sought to be hedged.
MONEY MARKET INSTRUMENTS
Money market securities are instruments with remaining maturities of
one year or less, such as bank certificates of deposit, bankers' acceptances,
commercial paper (including master demand notes), and obligations issued or
guaranteed by the United States Government, its agencies or instrumentalities,
some of which may be subject to repurchase agreements.
CERTIFICATES OF DEPOSIT
Certificates of deposit are receipts issued by a bank in exchange for
the deposit of funds. The issuer agrees to pay the amount deposited plus
interest to the bearer of the receipt on the date specified on the certificate.
The certificate usually can be traded in the secondary market prior to
maturity.
Certificates of deposit will be limited to U.S. dollar-denominated
certificates of United States banks which have at least $1 billion in deposits
as of the date of their most recently published financial statements (including
foreign branches of U.S. banks, U.S. branches of foreign banks which are
members of the Federal Reserve System or the Federal Deposit Insurance
Corporation).
The Accounts will not acquire time deposits or obligations issued by
the International Bank for Reconstruction and Development, the Asian
Development Bank or the Inter-American Development Bank. Additionally, the
Accounts do not currently intend to purchase such foreign securities (except to
the extent that certificates of deposit of foreign branches of U.S. banks may
be deemed foreign securities) or purchase certificates of deposit, bankers'
acceptances or other similar obligations issued by foreign banks.
Additionally, Account TSB invests in Euro Certificates of Deposit issued by
banks outside of the United States, with interest and principal paid in U.S.
dollars.
BANKERS' ACCEPTANCES
Bankers' acceptances typically arise from short-term credit
arrangements designed to enable businesses to obtain funds to finance
commercial transactions. Generally, an acceptance is a time draft drawn on a
bank by an exporter or an importer to obtain a stated amount of funds to pay
for specific merchandise. The draft is then "accepted" by the bank which, in
effect, unconditionally guarantees to pay the face value of the instrument on
its maturity date. The acceptance may then be held by the accepting bank as an
earning asset or it may be sold in the secondary market at the going rate of
discount for a specific maturity. Although maturities for acceptances can be
as long as 270 days, most acceptances have maturities of six months or less.
Bankers' acceptances acquired by Accounts MM or TSB must have been accepted by
U.S. commercial banks, including foreign branches of U.S. commercial banks,
having total deposits at the time of purchase in excess of $1 billion, and must
be payable in U.S. dollars.
15
<PAGE> 83
COMMERCIAL PAPER RATINGS
Investments in commercial paper are limited to those rated A-1 by
Standard & Poor's Corporation and Prime-1 by Moody's Investors Service, Inc.
Commercial paper rated A-1 by S&P has the following characteristics: (1)
liquidity ratios are adequate to meet cash requirements; (2) the issuer's
long-term senior debt is rated "A" or better, although in some cases "BBB"
credits may be allowed; (3) the issuer has access to at least two additional
channels of borrowing; (4) basic earnings and cash flow have an upward trend
with allowances made for unusual circumstances; and (5) the issuer's industry
is typically well established and the issuer has a strong position within the
industry.
The rating Prime-1 is the highest commercial paper rating assigned by
Moody's. Among the factors considered by Moody's in assigning ratings are the
following: (1) evaluating the management of the issuer; (2) economic evaluation
of the issuer's industry or industries and an appraisal of speculative-type
risks which may be inherent in certain areas; (3) evaluation of the issuer's
products in relation to competition and customer acceptance; (4) liquidity; (5)
amount and quality of long-term debt; (6) trend of earnings over a period of
ten years; (7) financial strength of a parent company and the relationship
which exists with the issuer; and (8) recognition by the management of
obligations which may be present or may arise as a result of public
preparations to meet such obligations. The relative strength or weakness of
the above factors determines how the issuer's commercial paper is rated within
various categories.
MASTER DEMAND NOTES
Master demand notes are unsecured obligations that permit the
investment of fluctuating amounts at varying rates of interest pursuant to
direct arrangements between the lender (issuer) and the borrower. Master
demand notes may permit daily fluctuations in the interest rate and daily
changes in the amounts borrowed. An Account has the right to increase the
amount under the note at any time up to the full amount provided by the note
agreement, or to decrease the amount, and the borrower may repay up to the full
amount of the note without penalty. Notes purchased by a separate account must
permit it to demand payment of principal and accrued interest at any time (on
not more than seven days notice) or to resell the note at any time to a third
party. Master demand notes may have maturities of more than one year, provided
they specify that (i) the account be entitled to payment of principal and
accrued interest upon not more than seven days notice, and (ii) the rate of
interest on such notes be adjusted automatically at periodic intervals which
normally will not exceed 31 days, but which may extend up to one year. Because
these types of notes are direct lending arrangements between the lender and the
borrower, such instruments are not normally traded, and there is no secondary
market for these notes, although they are redeemable and thus repayable by the
borrower at face value plus accrued interest at any time. Accordingly, the
right to redeem is dependent upon the ability of the borrower to pay principal
and interest on demand. In connection with master demand note arrangements,
the investment adviser considers earning power, cash flow, and other liquidity
ratios of the borrower to pay principal and interest on demand. These notes,
as such, are not typically rated by credit rating agencies. Unless they are so
rated, a separate account may invest in them only if at the time of an
investment the issuer meets the criteria set forth above for commercial paper.
The notes will be deemed to have a maturity equal to the longer of the period
remaining to the next interest rate adjustment or the demand notice period.
UNITED STATES GOVERNMENT SECURITIES
Securities issued or guaranteed by the United States Government
include a variety of Treasury securities that differ only in their interest
rates, maturities and dates of issuance. Treasury Bills have maturities of one
year or less, Treasury Notes have maturities of one to ten years, and Treasury
Bonds generally have maturities of greater than ten years at the date of
issuance.
Securities issued or guaranteed by the United States Government or its
agencies or instrumentalities include direct obligations of the United States
Treasury and securities issued or guaranteed by the Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, Government National Mortgage
Association, General Services Administration, Central Bank for Cooperatives,
Federal Home Loan Banks, Federal Loan Mortgage Corporation, Federal
Intermediate Credit Banks, Federal Land Banks, Maritime Administration, The
Tennessee Valley Authority, District of Columbia Armory Board and Federal
National Mortgage Association.
16
<PAGE> 84
Some obligations of United States Government agencies and
instrumentalities, such as Treasury Bills and Government National Mortgage
Association pass-through certificates, are supported by the full faith and
credit of the United States; others, such as securities of Federal Home Loan
Banks, are supported by the right of the issuer to borrow from the Treasury;
still others, such as bonds issued by the Federal National Mortgage
Association, a private corporation, are supported only by the credit of the
instrumentality. Because the United States Government is not obligated by law
to provide support to an instrumentality it sponsors, the Accounts will invest
in the securities issued by such an instrumentality only when the investment
advisers determine that the credit risk with respect to the instrumentality
does not make the securities unsuitable investments. United States Government
securities will not include international agencies or instrumentalities in
which the United States Government, its agencies or instrumentalities
participate, such as the World Bank, the Asian Development Bank or the
Inter-American Development Bank, or issues insured by the Federal Deposit
Insurance Corporation.
REPURCHASE AGREEMENTS
Interim cash balances may be invested from time to time in repurchase
agreements with approved counterparties. Approved counterparties are limited
to national banks or reporting broker-dealers meeting the Advisor's credit
quality standards as presenting minimal risk of default. All repurchase
transactions must be collateralized by U.S. Government securities with market
value no less than 102% of the amount of the transaction, including accrued
interest. Repurchase transactions generally mature the next business day but,
in the event of a transaction of longer maturity, collateral will be marked to
market daily and, when required, additional cash or qualifying collateral will
be required from the counterparty.
In executing a repurchase agreement, a portfolio purchases eligible
securities subject to the seller's simultaneous agreement to repurchase them on
a mutually agreed upon date and at a mutually agreed upon price. The purchase
and resale prices are negotiated with the counterparty on the basis of current
short-term interest rates, which may be more or less than the rate on the
securities collateralizing the transaction. Physical delivery or, in the case
of "book-entry" securities, segregation in the counterparty's account at the
Federal Reserve for the benefit of the Portfolio is required to establish a
perfected claim to the collateral for the term of the agreement in the event
the counterparty fails to fulfill its obligation.
As the securities collateralizing a repurchase transaction are
generally of longer maturity than the term of the transaction, in the event of
default by the counterparty on its obligation, the Portfolio would bear the
risks of delay, adverse market fluctuation and transaction costs in disposing
of the collateral.
FOREIGN BANK OBLIGATIONS
Accounts MM and TSB may invest in obligations of foreign branches of
U.S. banks or U.S. branches of foreign banks. The obligations of foreign
branches of United States banks may be general obligations of the parent bank
in addition to the issuing branch, or may be limited by the terms of a specific
obligation and by government regulation. Payment of interest and principal
upon these obligations may also be affected by governmental action in the
country of domicile of the branch (generally referred to as "sovereign risk").
In addition, evidences of ownership of such securities may be held outside the
United States and Accounts MM and TSB may be subject to the risks associated
with the holding of such property overseas. Various provisions of federal law
governing domestic branches do not apply to foreign branches of domestic banks.
Obligations of United States branches of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by federal and state
regulation as well as by governmental action in the country in which the
foreign bank has its head office. In addition, there may be less publicly
available information about a United States branch of a foreign bank than about
a domestic bank.
17
<PAGE> 85
INVESTMENT MANAGEMENT AND ADVISORY SERVICES
The investments and administration of the separate accounts are under
the direction of the Board of Managers. The Travelers Investment Management
Company (TIMCO) furnishes investment management and advisory services to
Accounts GIS, TGIS, TSB and TAS according to the terms of written Investment
Advisory Agreements. The Investment Advisory Agreements between Account TGIS
and TIMCO and Account TSB and TIMCO, were each approved by a vote of the
variable annuity contract owners at their meeting held on April 23, 1993. The
Investment Advisory Agreement between Account GIS and TIMCO was approved by a
vote of the variable annuity contract owners at their meeting held on April 23,
1993, and amended effective May 1, 1994 by virtue of contract owner approval at
a meeting held on April 22, 1994. The Investment Advisory Agreement between
Account TAS and TIMCO was approved by a vote of the variable annuity contract
owners at their meeting held on April 23, 1993, and amended effective May 1,
1996 by virtue of contract owner approval at a meeting held on April 19, 1996.
Travelers Asset Management International Corporation (TAMIC) furnishes
investment management and advisory services to Accounts QB, MM and TB according
to the terms of written Investment Advisory Agreements. The Investment
Advisory Agreements between Account QB and TAMIC, Account MM and TAMIC, and
Account TB and TAMIC, were each approved by a vote of variable annuity contract
owners at their meeting held on April 23, 1993.
The agreements between Accounts GIS, TGIS, TSB and TAS and TIMCO, and
the agreements between Accounts QB, MM and TB and TAMIC, will all continue in
effect as described below in (3), as required by the 1940 Act. Each of the
agreements:
1. provides that for investment management and advisory services, the
Company will pay to TIMCO and TAMIC, on an annual basis, an
advisory fee based on the current value of the assets of the
accounts for which TIMCO and TAMIC act as investment advisers (see
"Advisory Fees" on page 41 of the prospectus);
2. may not be terminated by TIMCO or TAMIC without the prior approval
of a new investment advisory agreement by those casting a majority
of the votes entitled to be cast and will be subject to
termination without the payment of any penalty, upon sixty days
written notice, by the Board of Managers or by a vote of those
casting a majority of the votes entitled to be cast;
3. will continue in effect for a period more than two years from the
date of its execution, only so long as its continuance is
specifically approved at least annually by a vote of a majority of
the Board of Managers, or by a vote of a majority of the
outstanding voting securities of the Accounts. In addition, and
in either event, the terms of the agreements must be approved
annually by a vote of a majority of the Board of Managers who are
not parties to, or interested persons of any party to, the
agreements, cast in person at a meeting called for the purpose of
voting on the approval and at which the Board of Managers has been
furnished the information that is reasonably necessary to evaluate
the terms of the agreements; and
4. will automatically terminate upon assignment.
ADVISORY FEES
The advisory fee for each Separate Account is described in the
prospectus.
The advisory fees paid to TIMCO by each of the Accounts during the
last three fiscal years were:
<TABLE>
<CAPTION>
ACCOUNT GIS ACCOUNT TSB ACCOUNT TGIS ACCOUNT TAS
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
1993 $ 1,136,509 $ 1,021,879 $ 681,566 $ 213,623
1994 $ 1,368,700 $ 821,532 $ 322,065 $ 279,503
1995 $ 1,700,124 $ 444,029 $ 479,029 $ 215,616
</TABLE>
18
<PAGE> 86
The advisory fees paid to TAMIC by each of the Accounts during the
last three fiscal years were:
<TABLE>
<CAPTION>
ACCOUNT QB ACCOUNT MM ACCOUNT TB
<S> <C> <C> <C>
1993 $ 508,762 $ 245,238 $ 126,188
1994 $ 572,484 $ 262,326 $ 18,297
1995 $ 547,715 $ 254,985 $ 62,947
</TABLE>
TIMCO
Investment decisions for Accounts GIS, TGIS, TSB and TAS will be made
independently from each other and from any other accounts that may be or become
managed by TIMCO. If, however, accounts managed by TIMCO are simultaneously
engaged in the purchase of the same security, then available securities may be
allocated to each account and may be averaged as to price in whatever manner
TIMCO deems to be fair. In some cases, this system might adversely affect the
price or volume of securities being bought or sold by an account, while in
other cases it may produce better executions or lower brokerage rates.
BROKERAGE
Subject to approval of the Board of Managers, and in accordance with
the Investment Advisory Agreements, TIMCO will place purchase and sale orders
for portfolio securities of the Accounts through brokerage firms which it may
select from time to time with the objective of seeking the best execution by
responsible brokerage firms at reasonably competitive rates. To the extent
consistent with this policy, certain brokerage transactions may be placed with
firms which provide brokerage and research services to TIMCO, and such
transactions may be paid for at higher rates than other firms would charge.
The term "brokerage and research services" includes advice as to the value of
securities; the advisability of investing in, purchasing or selling securities;
the availability of securities for purchasers or sellers of securities;
furnishing analyses and reports concerning issues, industries, securities,
economic factors and trends, portfolio strategy and performance of accounts;
and effecting securities transactions and performing functions incidental
thereto (such as clearance and settlement). These brokerage and research
services may be utilized in providing investment advice to Accounts GIS, TGIS,
TSB and TAS, and may also be utilized in providing investment advice and
management to all accounts over which TIMCO exercises investment discretion,
but not all of such services will necessarily be utilized in providing
investment advice to all accounts. This practice may be expected to result in
greater cost to the Accounts than might otherwise be the case if brokers whose
charges were based on execution alone were used for such transactions. TIMCO
believes that brokers' research services are very important in providing
investment advice to the Accounts, but is unable to give the services a dollar
value. While research services are not expected to reduce the expenses of
TIMCO, TIMCO will, through the use of these services, avoid the additional
expenses which would be incurred if it should attempt to develop comparable
information through its own staff.
Transactions in the over-the-counter market are placed with the
principal market makers unless better price and execution may be obtained
otherwise. Brokerage fees will be incurred in connection with futures
transactions, and Accounts GIS, TGIS and TAS will be required to deposit and
maintain funds with brokers as margin to guarantee performance of future
obligations.
The overall reasonableness of brokerage commissions paid is evaluated
by personnel of TIMCO responsible for trading and managing the portfolios of
Accounts GIS, TGIS, TSB and TAS by comparing brokerage firms utilized by TIMCO
to other firms with respect to the following factors: the prices paid or
received in securities transactions, speed of execution and settlement, size
and difficulty of the brokerage transactions, the financial soundness of the
firms, and the quality, timeliness and quantity of research information and
reports.
19
<PAGE> 87
The total brokerage commissions paid by Account GIS for the fiscal
years ended December 31, 1993, 1994 and 1995 were $801,002, $991,682 and
$866,658, respectively. For the fiscal year ended December 31, 1995, portfolio
transactions in the amount of $680,081,658 were directed to certain brokers
because of research services, of which $845,372 was paid in commissions with
respect to these transactions. Commissions in the amount of $28,914 and
$41,845 were paid to Smith Barney Inc. and The Robinson Humphrey Company, Inc.,
respectively, both affiliates of TIMCO, which equals, for each, 3.33% and 4.82%
of Account GIS's aggregate brokerage commissions paid to such brokers during
1995. The percentage of the Account GIS's aggregate dollar amount of
transactions involving the payment of commissions effected through Smith Barney
and Robinson Humphrey was 3.01% and 4.71% respectively.
The total brokerage commissions paid by Account TGIS for the fiscal
years ended December 31, 1993, 1994 and 1995 were $328,616, $40,276 and
$260,684, respectively. For the fiscal year ended December 31, 1995, portfolio
transactions in the amount of $144,079,786 were directed to certain brokers
because of research services, of which $169,084 was paid in commissions with
respect to these transactions. Commissions in the amount of $5,731 and $7.500
were paid to Smith Barney Inc. and The Robinson Humphrey Company, Inc.,
respectively, both affiliates of TIMCO, which equals, for each, 2.20% and 2.88%
of Account TGIS's aggregate brokerage commissions paid to such brokers during
1995. The percentage of the Account TGIS's aggregate dollar amount of
transactions involving the payment of commissions effected through Smith Barney
and Robinson Humphrey was 1.77% and 3.00% respectively.
The total brokerage commissions paid by Account TAS for the fiscal
years ended December 31, 1993, 1994 and 1995 were $181,952, $458,081 and
$247,733, respectively. For the fiscal year ended December 31, 1995, portfolio
transactions in the amount of $123,104,187 were directed to certain brokers
because of research services, of which $197,014 was paid in commissions with
respect to these transactions. Commissions in the amount of $5,623 and $3,135
were paid to Smith Barney Inc. and The Robinson Humphrey Company, Inc.,
respectively, both affiliates of TIMCO, which equals, for each, 2.27% and 1.27%
of Account TAS's aggregate brokerage commissions paid to such brokers during
1995. The percentage of the Account TAS's aggregate dollar amount of
transactions involving the payment of commissions effected through Smith Barney
and Robinson Humphrey was 1.84% and 1.32%, respectively.
No formulas were used in placing portfolio transactions with brokers
which provided research services, and no specific amount of transactions was
allocated for research services.
TAMIC
Investment advice and management for TAMIC's clients (Accounts QB, MM
and TB) are furnished in accordance with their respective investment objectives
and policies and investment decisions for the Accounts will be made
independently from those of any other accounts managed by TAMIC. However,
securities owned by Accounts QB, MM or TB may also be owned by other clients
and it may occasionally develop that the same investment advice and decision
for more than one client is made at the same time. Furthermore, it may develop
that a particular security is bought or sold for only some clients even though
it might be held or bought or sold for other clients, or that a particular
security is bought for some clients when other clients are selling the
security. When two or more accounts are engaged in the purchase or sale of the
same security, the transactions are allocated as to amount in accordance with a
formula which is equitable to each account. It is recognized that in some
cases this system could have a detrimental effect on the price or volume of the
security as far as Accounts QB, MM or TB are concerned. In other cases,
however, it is believed that the ability of the accounts to participate in
volume transactions will produce better executions for the accounts.
BROKERAGE
Subject to approval of the Board of Managers, it is the policy of
TAMIC, in executing transactions in portfolio securities, to seek best
execution of orders at the most favorable prices. The determination of what
may constitute best execution and price in the execution of a securities
transaction by a broker involves a number of
20
<PAGE> 88
considerations, including, without limitation, the overall direct net economic
result to Accounts QB and TB, involving both price paid or received and any
commissions and other cost paid, the efficiency with which the transaction is
effected, the ability to effect the transaction at all where a large block is
involved, the availability of the broker to stand ready to execute possible
difficult transactions in the future, and the financial strength and stability
of the broker. Such considerations are judgmental and are weighed by management
in determining the overall reasonableness of brokerage commissions paid.
Subject to the foregoing, a factor in the selection of brokers is the receipt
of research services, analyses and reports concerning issuers, industries,
securities, economic factors and trends, and other statistical and factual
information. Any such research and other statistical and factual information
provided by brokers is considered to be in addition to and not in lieu of
services required to be performed by TAMIC under its Investment Advisory
Agreements. The cost, value and specific application of such information are
indeterminable and hence are not practicably allocable among Accounts QB and TB
and other clients of TAMIC who may indirectly benefit from the availability of
such information. Similarly, Accounts QB and TB may indirectly benefit from
information made available as a result of transactions for such clients.
Purchases and sales of bonds and money market instruments will usually
be principal transactions and will normally be purchased directly from the
issuer or from the underwriter or market maker for the securities. There
usually will be no brokerage commissions paid for such purchases. Purchases
from the underwriters will include the underwriting commission or concession,
and purchases from dealers serving as market makers will include the spread
between the bid and asked prices. Where transactions are made in the
over-the-counter market, Accounts QB and TB will deal with primary market
makers unless more favorable prices are otherwise obtainable. Brokerage fees
will be incurred in connection with futures transactions, and Accounts QB and
TB will be required to deposit and maintain funds with brokers as margin to
guarantee performance of future obligations.
TAMIC may follow a policy of considering the sale of units of Account
QB and TB a factor in the selection of broker-dealers to execute portfolio
transactions, subject to the requirements of best execution described above.
The policy of TAMIC with respect to brokerage is and will be reviewed
by the Board of Managers periodically. Because of the possibility of further
regulatory developments affecting the securities exchanges and brokerage
practices generally, the foregoing practices may be changed, modified or
eliminated.
The total brokerage commissions paid by Account QB for the fiscal
years ended December 31, 1993, 1994 and 1995 were $87,444, $82,390, $549,540,
respectively. For the fiscal year ended December 31, 1995, no portfolio
transactions were directed to certain brokers because of research services.
Commissions in the amount of $12,375 and $1,875 were paid to Shearson/American
Express and Smith Barney Inc., respectively, both affiliates of TIMCO, which
equals, for each, 2.25% and 0.34% of Account QB's aggregate brokerage
commissions paid to such brokers during 1995. The percentage of the Account
QB's aggregate dollar amount of transactions involving the payment of
commissions effected through Smith Barney and Robinson Humphrey was 2.25% and
0.34% respectively.
The total brokerage commissions paid by Account TB for the fiscal
years ended December 31, 1993, 1994 and 1995 were $128,480, $46,680 and
$65,596, respectively. For the fiscal year ended December 31, 1995, no
portfolio transactions were directed to certain brokers because of research
services.
PORTFOLIO TRANSACTIONS
Subject to the general supervision of the Board of Managers, TAMIC is
responsible for the investment decisions and the placement of orders for
portfolio transactions of Account MM. Portfolio transactions occur primarily
with issuers, underwriters or major dealers in money market instruments acting
as principals. Such transactions are normally on a net basis and do not
involve payment of brokerage commissions. The cost of securities purchased
from an underwriter usually includes a commission paid by the issuer to the
underwriter, and transactions with dealers normally reflect the spread between
the bid and asked prices. TAMIC seeks to obtain the best net price and most
favorable execution of orders for the purchase and sale of portfolio
securities.
21
<PAGE> 89
VALUATION OF SEPARATE ACCOUNT ASSETS
The value of the assets of each Separate Account is determined on each
Valuation Date as of the close of the New York Stock Exchange. If the New York
Stock Exchange is not open for trading on any such day, then such computation
shall be made as of the normal close of the New York Stock Exchange. Each
security traded on a national securities exchange is valued at the last
reported sale price on the Valuation Date. 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 Valuation Date or on the basis of
quotations received from a reputable broker or any other recognized source.
Any security not traded on a securities exchange but traded in the
over-the-counter market and for which market quotations are readily available
is valued at the mean between the quoted bid and asked prices on the Valuation
Date or on the basis of quotations received from a reputable broker or any
other recognized source.
Securities traded on the over-the-counter market and listed securities
with no reported sales are valued at the mean between the last reported bid and
asked prices or on the basis of quotations received from a reputable broker or
other recognized source.
Short-term investments for which a quoted market price is available
are valued at market. Short-term investments maturing in more than sixty days
for which there is no reliable quoted market price are valued by "marking to
market" (computing a market value based upon quotations from dealers or issuers
for securities of a similar type, quality and maturity). "Marking to market"
takes into account unrealized appreciation or depreciation due to changes in
interest rates or other factors which would influence the current fair values
of such securities. Short-term investments maturing in sixty days or less for
which there is no reliable quoted market price are valued at amortized cost
which approximates market.
NET INVESTMENT FACTOR
The net investment factor is used to measure the investment
performance of an investment alternative from one Valuation Period to the next.
The net investment factor is determined by dividing (a) by (b) and adding (c)
to the result where:
(a) is the net result of the Valuation Period's investment income
(including, in the case of assets invested in an underlying mutual
fund, distributions whose ex-dividend date occurs during the
Valuation Period), PLUS capital gains and losses (whether realized
or unrealized), LESS any deduction for applicable taxes (presently
zero);
(b) is the value of the assets at the beginning of the Valuation
Period (or, in the case of assets invested in an underlying mutual
fund, value is based on the net asset value of the mutual fund);
(c) is the net result of 1.000, LESS the Valuation Period deduction
for the insurance charge, LESS the applicable deduction for the
investment advisory fee, and in the case of Accounts TGIS, TSB,
TAS and TB, LESS the applicable deduction for market timing fees
(the deduction for the investment advisory fee is not applicable
in the case of assets invested in an Underlying Fund, since the
fee is reflected in the net asset value of the fund).
The net investment factor may be more or less than one.
22
<PAGE> 90
PERFORMANCE DATA
YIELD QUOTATIONS OF ACCOUNT MM
Yield quotations of Account MM are calculated using the base period
return for a seven-day period. The base period return is calculated using a
hypothetical pre-existing account having a balance of one accumulation unit at
the beginning of the period; base period return per accumulation unit is equal
to accrued interest on portfolio securities plus or minus amortized purchase
discount or premium less all accrued expenses for investment advisory fees and
mortality and expense guarantees, and less a pro rata portion of the contract
administrative charge (calculated in the manner described under "Average Annual
Total Return" below), divided by the accumulation unit value at the beginning
of the period. Realized capital gains or losses and unrealized appreciation or
depreciation of the portfolio are not included in the base period return, but
are included in accumulation unit values.
Current yield is equal to the base period return multiplied by 365,
and the result divided by 7. The current yield for Account MM for the
seven-day period ended December 29, 1995 was 4.07%.
Effective yield, which includes the effects of compounding, is equal
to the sum of 1 plus the base period return, raised to a power equal to 365
divided by 7, minus 1. The effective yield for Account MM for the seven-day
period ended December 29, 1995 was 4.15%.
These quotations do not reflect a deduction for any applicable
surrender charge. If the surrender charge was included, yield and effective
yield would be reduced.
AVERAGE ANNUAL TOTAL RETURN QUOTATIONS OF ACCOUNTS GIS, QB, MM, TGIS, TSB, TAS,
TB AND FUND U
STANDARDIZED METHOD. Quotations of average annual total return are
computed according to a formula in which a hypothetical initial investment of
$1,000 is applied to an Investment Alternative, and then related to ending
redeemable values over one-, five-and ten-year periods (or fractional portions
thereof). The 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 semiannual administrative charge ($15) 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 Statement of
Additional Information relates. Each quotation assumes a total redemption at
the end of each period with the assessment of any applicable surrender charge
at that time. For Underlying Funds that were in existence prior to the date
they became available under Fund U, average annual total return calculations
may include periods prior to their availability under Fund U. Such returns
will be calculated by adjusting the actual returns of the underlying funds to
reflect the charges that would have been assessed under Fund U had the
underlying fund been available under Fund U during that period. For Accounts
TGIS, TSB, TAS and TB, market timing fees are included in expenses in the
calculation of performance for periods on or after May 1, 1990, the date on
which the market timing fee became a charge against the daily assets of the
timed accounts. The performance for periods prior to May 1, 1990 does not
reflect the deduction of the market timing fee.
NONSTANDARDIZED METHOD. Accounts GIS, QB, MM, TGIS, TSB, TAS, TB and
Fund U may also show the percentage change in the value of an Accumulation Unit
based on the performance of the Account over a period of time, usually for the
calendar year-to-date, and for the past one- , three- , five- and seven-year
periods, determined by dividing the increase (decrease) in value for that unit
by the Accumulation Unit Value at the beginning of the period. This percentage
figure will reflect the deduction of any asset based charges under the
contracts, but will not reflect the deduction of the semiannual administrative
charge or surrender charge. The deduction of the semi-annual administrative
charge or surrender charge would reduce any percentage increase or make greater
any percentage decrease. For Underlying Funds that were in existence prior to
the date they became available under Fund U, the percentage change in the value
of an accumulation unit based on the performance of Fund U over a period of
time may include periods prior to their availability under Fund U. Such
returns will be calculated by adjusting the actual returns of the underlying
funds to reflect the charges that would have been assessed under Fund U had the
underlying fund been available under Fund U during that period.
23
<PAGE> 91
TOTAL RETURN QUOTATIONS FOR TIMED ACCOUNTS. Because Accounts TGIS,
TSB, TAS and TB are primarily available to Contract Owners who have entered
into third party market timing services agreements, the Accounts may experience
wide fluctuations in assets over a given time period. Consequently,
performance data computed according to both the standardized and
nonstandardized methods for Accounts TGIS, TSB, TAS and TB may not always be
useful in evaluating the performance of these Accounts. In addition,
performance data for Accounts TGIS, TSB, TAS and TB alone will not generally be
useful to the purchase of evaluating the performance of a market timing
strategy that uses these Accounts.
GENERAL. 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
separate accounts and mutual funds.
Average annual total returns of each Separate Account computed
according to the standardized and non-standardized methods for the periods
ended December 31, 1995 are set forth in the following table.
24
<PAGE> 92
<TABLE>
<CAPTION>
STANDARDIZED NON-STANDARDIZED INCEPTION
DATE
1 Year 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Account GIS 30.21% 12.22% 10.76% 35.44% 12.92% 13.16% 11.08% 5/83
Account QB 9.29% 6.77% 7.20% 14.49% 6.50% 7.83% 7.52% 5/83
Account MM (0.75)% 1.98% 4.45% 4.44% 2.96% 3.18% 4.76% 5/83
Account TGIS 28.33% 9.20% 10.43%* 33.56% 10.18% 10.21%* -- 1/88
Account TSB(1) (2.02)% 0.57% 3.33%* 3.17% 1.62% 1.83%* -- 11/87
Account TAS 26.85% 13.77% 10.19%* 32.08% 11.54% 14.68%* -- 11/87
Account TB 8.60% 5.73% 3.76%* 13.08% 6.90% 6.82%* -- 11/87
Fund U **--
Managed Assets Trust 20.32% 9.42% 9.94% 25.54% 9.38% 10.42% 10.26%
High Yield Bond Trust 8.88% 11.05% 6.12% 14.09% 7.79% 12.01% 6.44% 5/83
Capital Appreciation Fund(2) 29.44% 16.33% 9.42% 34.67% 12.90% 17.20% 9.74% 5/83
U.S. Government Securities Portfolio 17.72% 5.97%* -- 22.94% 7.40%* -- -- 1/92
Social Awareness Stock Portfolio 26.52% 9.53% -- 31.75% 1.039%* -- -- 5/92
Utilities Portfolio 22.47% 11.44%* -- 27.69% 14.07%* -- -- 2/94
Templeton Bond Fund 8.30% 5.85% 6.18%* 13.50% 5.48% 6.94% 6.48%* 8/88
Templeton Stock Fund 18.48% 15.16% 10.63%* 23.69% 16.49% 16.05% 10.94%* 8/88
Templeton Asset Allocation Fund 15.82% 13.29% 9.77%* 21.03% 13.05% 14.21% 10.08%* 8/88
Fidelity's High Income Portfolio 13.90% 16.64% 9.79%* 19.11% 11.29% 17.50% 10.11%* 9/85
Fidelity's Equity-Income Portfolio 28.18% 18.99% 11.60%* 33.41% 18.11% 19.81% 11.93%* 10/86
Fidelity's Growth Portfolio 28.46% 18.46% 13.09%* 33.69% 15.88% 19.29% 13.42%* 10/86
Fidelity's Asset Manager Portfolio 0.31% 10.38% 9.56%* 15.51% 8.59% 11.36% 9.87%* 9/89
Dreyfus Stock Index Fund 29.86% 13.62% 10.62%* 35.09% 13.27% 14.53% 10.94%* 9/89
American Odyssey Core Equity Fund 31.61% 10.20% -- 36.85% 12.06%* -- -- 5/93
American Odyssey
Emerging Opportunities Fund 25.38% 15.44%* -- 30.61% 17.20%* -- -- 5/93
American Odyssey
International Equity Fund 12.32% 7.61%* -- 17.53% 9.53%* -- -- 5/93
American Odyssey
Long-Term Bond Fund 15.72% 5.82%* -- 20.94% 7.79%* -- -- 5/93
American Odyssey
Intermediate-Term Bond Fund 8.39% 2.57%* -- 13.59% 4.62%* -- -- 5/93
American Odyssey
Short-Term Bond Fund 4.29% 1.63%* -- 9.49% 3.70%* -- -- 5/93
Smith Barney Income
and Growth Portfolio 26.18% 14.84%* -- 31.41% 28.92%* -- -- 6/94
Alliance Growth Portfolio 27.92% 21.10%* -- 33.15% 39.37%* -- -- 6/94
Smith Barney
International Equity Portfolio 4.66% (0.32)% * -- 9.86% 4.87%* -- -- 6/94
Putnam Diversified
Income Portfolio 10.72% 7.38%* -- 15.93% 16.83%* -- -- 6/94
Smith Barney
High Income Portfolio 11.27% 6.22%* -- 16.48% 14.99%* -- -- 6/94
MFS Total Return
Portfolio 18.93% 10.25%* -- 24.15% 21.46%* -- -- 6/94
</TABLE>
* Since inception date.
** For those Fund U sub-accounts that invest in underlying funds that were in
existence prior to the date on which the underlying fund became available under
the Contract, performance figures represent actual returns of the underlying
funds, adjusted to reflect the charges that would have been assessed had those
underlying funds been offered under Fund U during the entire period shown.
(1) Formerly The Travelers Timed Money Market Account for Variable Annuities
(Account TMM).
(2) Formerly Aggressive Stock Trust.
25
<PAGE> 93
THE BOARD OF MANAGERS
The investments and administration of each of the Separate Accounts
are under the direction of the Board of Managers, listed below. Members of the
Board of Managers of Accounts GIS, QB, MM, TGIS, TSB, TAS and TB are elected
annually by those Contract Owners participating in the Separate Accounts. A
majority of the members of the Board of Managers are persons who are not
affiliated with The Travelers Insurance Company, TIMCO, TAMIC or their
affiliates.
<TABLE>
<CAPTION>
Name Present Position and Principal Occupation During Last Five Years
- ---- ----------------------------------------------------------------
<S> <C>
*Heath B. McLendon Managing Director (1993-present), Smith Barney Inc. ("Smith Barney");
Chairman and Member Chairman (1993-present), Smith Barney Strategy Advisors, Inc.;
388 Greenwich Street President (1994-present), Smith Barney Mutual Funds Management Inc.;
New York, New York Chairman and Director of forty-one investment companies associated with
Age 62 Smith Barney; Chairman, Board of Trustees, Drew University; Trustee,
The East New York Savings Bank; Advisory Director, First Empire State
Corporation; Chairman, Board of Managers, seven Variable Annuity
Separate Accounts of The Travelers Insurance Company+; Chairman, Board
of Trustees, five Mutual Funds sponsored by The Travelers Insurance
Company++; prior to July 1993, Senior Executive Vice President of
Shearson Lehman Brothers Inc.
Knight Edwards Of Counsel (1988-present), Partner (1956-1988), Edwards & Angell,
Member Attorneys; Member, Advisory Board (1973-1994), thirty-one mutual funds
2700 Hospital Trust Tower sponsored by Keystone Group, Inc.; Member, Board of Managers, seven
Providence, Rhode Island Variable Annuity Separate Accounts of The Travelers Insurance Company+;
Age 72 Trustee, five Mutual Funds sponsored by The Travelers Insurance
Company++.
Robert E. McGill, III Retired manufacturing executive. Director (1983-1995), Executive Vice
Member President (1989-1994) and Senior Vice President, Finance and
295 Hancock Street Administration (1983-1989), The Dexter Corporation (manufacturer of
Williamstown, Massachusetts specialty chemicals and materials); Vice Chairman (1990-1992), Director
Age 64 (1983-1995), Life Technologies, Inc. (life science/biotechnology
products); Director, (1994-present), The Connecticut Surety Corporation
(insurance); Director (1995-present), Calbiochem Novachem International
(life science/biotechnology products); Director (1995-present), Chemfab
Corporation (specialty materials manufacturer); Member, Board of
Managers, seven Variable Annuity Separate Accounts of The Travelers
Insurance Company+; Trustee, five Mutual Funds sponsored by The
Travelers Insurance Company++.
Lewis Mandell Dean, College of Business Administration (1995-present), Marquette
Member University; Professor of Finance (1980-1995) and Associate Dean
606 N. 13th Street (1993-1995), School of Business Administration, and Director, Center
Milwaukee, WI 53233 for Research and Development in Financial Services (1980-1995),
Age 53 University of Connecticut; Director (1992-present), GZA
Geoenvironmental Tech, Inc. (engineering services); Member, Board of
Managers, seven Variable Annuity Separate Accounts of The Travelers
Insurance Company+; Trustee, five Mutual Funds sponsored by The
Travelers Insurance Company++.
</TABLE>
26
<PAGE> 94
<TABLE>
<S> <C>
Frances M. Hawk Portfolio Manager (1992-present), HLM Management Company, Inc.
Member (investment management); Assistant Treasurer, Pensions and Benefits.
222 Berkeley Street Management (1989-1992), United Technologies Corporation (broad- based
Boston, Massachusetts designer and manufacturer of high technology products); Member, Board
Age 48 of Managers, seven Variable Annuity Separate Accounts of The Travelers
Insurance Company+; Trustee, five Mutual Funds sponsored by The
Travelers Insurance Company++.
Ernest J. Wright Assistant Secretary (1994-present), Counsel (1987-present), The
Secretary to the Board Travelers Insurance Company; Secretary, Board of Managers, seven
One Tower Square Variable Annuity Separate Accounts of The Travelers Insurance Company+;
Hartford, Connecticut Secretary, Board of Trustees, five Mutual Funds sponsored by The
Age 55 Travelers Insurance Company++.
Kathleen A. McGah Assistant Secretary and Counsel (1995-present), The Travelers Insurance
Assistant Secretary to the Board Company; Assistant Secretary, Board of Managers, seven Variable Annuity
One Tower Square Separate Accounts of The Travelers Insurance Company+; Assistant
Hartford, Connecticut Secretary, Board of Trustees, five Mutual Funds sponsored by The
Age 45 Travelers Insurance Company++. Prior to January 1995, Counsel, ITT
Hartford Life Insurance Company.
</TABLE>
+ These seven Variable Annuity Separate Accounts are: 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 and The Travelers Timed Bond Account for
Variable Annuities.
++ These five Mutual Funds are: Capital Appreciation Fund, Cash Income
Trust, High Yield Bond Trust, Managed Assets Trust and The Travelers
Series Trust.
* Mr. McLendon is an "interested person" within the meaning of
the 1940 Act by virtue of his position as Managing Director of Smith Barney
Inc., an indirect wholly owned subsidiary of Travelers Group Inc. and also owns
shares and options to purchase shares of Travelers Group Inc., the indirect
parent of The Travelers Insurance Company.
The Company is responsible for payment of the fees and expenses of the
Board of Managers, and the expenses of audit of the Separate Accounts, as well
as other expenses for services related to the operations of the accounts, for
which it deducts certain amounts from purchase payments and from the accounts.
Members of the Board of Managers who are also officers or employees of
Travelers Group Inc. or its subsidiaries are not entitled to any fee. Members
of the Board of Managers who are not affiliated as employees of Travelers Group
Inc. or its subsidiaries receive an aggregate retainer of $17,000 for service
on the Boards of the seven Variable Annuity Separate Accounts established by
The Travelers Insurance Company and the five Mutual Funds sponsored by The
Travelers Insurance Company. They also receive an aggregate fee of $2,000 for
each meeting of such Boards attended.
27
<PAGE> 95
DISTRIBUTION AND MANAGEMENT SERVICES
Under the terms of a Distribution and Management Agreement between
each Separate Account, the Company and Tower Square Securities, Inc., the
Company provides all sales and administrative services and mortality and
expense risk guarantees related to variable annuity contracts issued by the
Company in connection with the Separate Accounts and assumes the risk of
minimum death benefits, as applicable. The Company also pays all sales costs
(including costs associated with the preparation of sales literature); all
costs of qualifying the Separate Accounts and the variable annuity contracts
with regulatory authorities; the costs of proxy solicitation; all custodian,
accountants' and legal fees; and all compensation paid to the unaffiliated
members of the Board of Managers. In addition, under the terms of the
Distribution and Management Agreements between the Company and Accounts TGIS,
TSB, TAS and TB, the Company deducts amounts necessary to pay fees to
third-party registered investment advisers which provide market timing
investment advisory services to Contract Owners in those accounts and, in turn,
pays such fees to the registered investment advisers. The Company also
provides without cost to the Separate Accounts all necessary office space,
facilities, and personnel to manage its affairs.
The Company received the following amounts from the Separate Accounts
in each of the last three fiscal years for services provided under the
Distribution and Management Agreements:
<TABLE>
<CAPTION>
SEPARATE ACCOUNT 1995 1994 1993
---------------- ---- ---- ----
<S> <C> <C> <C>
GIS $ 4,557,639 $ 4,025,788 $ 4,239,811
QB $ 2,119,384 $ 2,156,643 $ 1,903,669
MM $ 1,122,833 $ 1,107,288 $ 1,050,585
U $27,747,007 $17,248,780 $ 7,219,329
TGIS $ 1,986,950 $ 1,409,471 $ 2,872,771
TSB $ 1,860,151 $ 3,525,570 $ 4,308,973
TAS $ 906,250 $ 1,238,375 $ 874,790
TB $ 179,197 $ 47,835 $ 332,985
</TABLE>
SECURITIES CUSTODIAN
Chase Manhattan Bank, N.A., Chase MetroTech Center, Brooklyn, New
York, is the custodian of the portfolio securities and similar investments of
Accounts GIS, QB, MM, TGIS, TSB, TAS and TB.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., certified public accountants, 100 Pearl
Street, Hartford, Connecticut, are the independent auditors for Accounts GIS,
QB, MM, TGIS, TSB, TAS, TB and Fund U. The services provided to these Separate
Accounts include primarily the examination of the Accounts' financial
statements. The financial statements of Account GIS, QB, MM, TGIS, TSB, TAS,
TB and Fund U included in the Statement of Additional Information have been
audited by Coopers & Lybrand L.L.P., as indicated in their reports thereon in
reliance upon the authority of said firm as experts in accounting and auditing.
The consolidated balance sheet of The Travelers Insurance Company and
Subsidiaries (the "Company") as of December 31, 1995 and 1994 and the
consolidated statements of operations and retained earnings and cash flows for
the years then ended, have been included herein in reliance upon the report
of KPMG Peat Marwick LLP, independent certified public accountants, and upon
the authority of said firm as experts in accounting and auditing. The report of
KPMG Peat Marwick LLP covering the December 31, 1995 consolidated financial
statements of the Company refers to a change in the accounting for investments
in accordance with provisions of Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities," in
1994.
The statements of operations and retained earnings and cash flows of
the Company for the year ended December 31, 1993, included in the Company's
Form 10-K for the year ended December 31, 1995, have been included herein in
reliance upon the report dated January 24, 1994 of Coopers & Lybrand L.L.P.,
certified public accountants, and upon the authority of said firm as experts in
accounting and auditing.
28
<PAGE> 96
THE TRAVELERS FUND U
FOR VARIABLE ANNUITIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
ASSETS:
Investment in eligible funds at market value:
Travelers Variable Products Funds, 19,951,136 shares (cost $290,142,297).......... $353,947,210
Templeton Variable Products Series Fund, 19,723,347 shares (cost $319,593,055).... 382,396,682
Fidelity's Variable Insurance Products Fund, 28,496,176 shares (cost $518,298,280) 642,742,661
Fidelity's Variable Insurance Products Fund II, 23,910,561 shares (cost
$342,023,109)................................................................... 377,547,763
Dreyfus Stock Index Fund, 3,828,671 shares (cost $56,911,523)..................... 65,853,145
American Odyssey Funds, Inc., 50,655,566 shares (cost $550,417,615) : 629,016,626
Smith Barney/Travelers Series Fund Inc., 831,830 shares (cost $9,982,906)......... 10,265,822
------------
Total Investments (cost $2,087,368,785)......................................... $2,461,769,909
Receivables:
Dividends......................................................................... 32,749,653
Purchase payments and transfers from other Travelers accounts..................... 6,140,188
Other assets....................................................................... 11,292
--------------
Total Assets..................................................................... 2,500,671,042
--------------
LIABILITIES:
Payable for contract surrenders and transfers to other Travelers accounts.......... 971,619
Accrued liabilities................................................................ 485,047
--------------
Total Liabilities................................................................ 1,456,666
--------------
NET ASSETS.......................................................................... $2,499,214,376
==============
</TABLE>
See Notes to Financial Statements
-1-
<PAGE> 97
THE TRAVELERS FUND U
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends................................................ $ 69,822,353
EXPENSES:
Insurance charges........................................ 25,747,007
------------
Net investment income.................................. 44,075,346
------------
REALIZED GAIN AND CHANGE IN UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Realized gain from investment transactions:
Proceeds from investments sold.......................... $119,495,585
Cost of investments sold................................ 98,687,144
------------
Net realized gain...................................... 20,808,441
Change in unrealized gain (loss) on investments:
Unrealized loss at December 31, 1994.................... (8,676,019)
Unrealized gain at December 31, 1995.................... 374,401,124
------------
Net change in unrealized gain (loss) for the year...... 383,077,143
------------
Net realized gain and change in unrealized gain (loss) 403,885,584
------------
Net increase in net assets resulting from operations..... $447,960,930
============
</TABLE>
See Notes to Financial Statements
-2-
<PAGE> 98
THE TRAVELERS FUND U
FOR VARIABLE ANNUITIES
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
OPERATIONS:
Net investment income........................................... $ 44,075,346 $ 35,977,438
Net realized gain from investment transactions.................. 20,808,441 5,781,870
Net change in unrealized gain (loss) on investments............. 383,077,143 (90,470,991)
-------------- --------------
Net increase (decrease) in net assets resulting from operations 447,960,930 (48,711,683)
-------------- --------------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 337,352,334 and 347,994,427 units, respectively) 452,028,311 427,701,738
Participant transfers from other Travelers accounts
(applicable to 304,664,477 and 502,271,333 units, respectively) 412,659,453 601,760,125
Administrative and asset allocation charges
(applicable to 7,055,084 and 5,180,119 units, respectively).... (9,143,467) (5,793,309)
Contract surrenders
(applicable to 61,767,394 and 33,835,413 units, respectively).. (88,487,237) (45,824,121)
Participant transfers to other Travelers accounts
(applicable to 244,445,899 and 186,102,321 units, respectively) (339,344,437) (243,643,400)
Other payments to participants
(applicable to 2,572,549 and 1,836,572 units, respectively).... (3,565,280) (2,362,947)
-------------- --------------
Net increase in net assets resulting from unit transactions.... 424,147,343 731,838,086
-------------- --------------
Net increase in net assets.................................... 872,108,273 683,126,403
NET ASSETS:
Beginning of year............................................... 1,627,106,103 943,979,700
-------------- --------------
End of year..................................................... $2,499,214,376 $1,627,106,103
============== ==============
</TABLE>
See Notes to Financial Statements
-3-
<PAGE> 99
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Fund U for Variable Annuities ("Fund U") is a separate account of
The Travelers Insurance Company ("The Travelers"), an indirect wholly owned
subsidiary of Travelers Group Inc., and is available for funding certain
variable annuity contracts issued by The Travelers. Fund U is registered under
the Investment Company Act of 1940, as amended, as a unit investment trust.
The Travelers interest in the net assets of Fund U was $1,460,895 at December
31, 1995.
Participant purchase payments applied to Fund U are invested in one or more
eligible funds in accordance with the selection made by the contract owner. As
of December 31, 1995, the eligible funds available under Fund U are: Managed
Assets Trust; High Yield Bond Trust; Capital Appreciation Fund; U.S. Government
Securities Portfolio, Social Awareness Stock Portfolio and Utilities Portfolio
of The Travelers Series Trust; American Odyssey Core Equity Fund, American
Odyssey Emerging Opportunities Fund, American Odyssey International Equity
Fund, American Odyssey Long-Term Bond Fund, American Odyssey Intermediate-Term
Bond Fund and American Odyssey Short-Term Bond Fund of American Odyssey Funds,
Inc.; Alliance Growth Portfolio, G.T. Global Strategic Income Portfolio, Smith
Barney High Income Portfolio, Smith Barney International Equity Portfolio,
Smith Barney Income and Growth Portfolio, Putnam Diversified Income Portfolio
and MFS Total Return Portfolio of Smith Barney/Travelers Series Fund Inc. (all
of which are managed by affiliates of The Travelers); Templeton Bond Fund,
Templeton Stock Fund and Templeton Asset Allocation Fund of Templeton Variable
Products Series Fund; High Income Portfolio, Growth Portfolio and Equity-Income
Portfolio of Fidelity's Variable Insurance Products Fund; Asset Manager
Portfolio of Fidelity's Variable Insurance Products Fund II; and Dreyfus Stock
Index Fund. All of the funds are Massachusetts business trusts, except for
American Odyssey Funds, Inc., Dreyfus Stock Index Fund and Smith
Barney/Travelers Series Fund Inc. which are incorporated under Maryland law.
The following is a summary of significant accounting policies consistently
followed by Fund U in the preparation of its financial statements.
SECURITY VALUATION. Investments are valued daily at the net asset values per
share of the underlying funds.
FEDERAL INCOME TAXES. The operations of Fund U form a part of the total
operations of The Travelers and are not taxed separately. The Travelers is
taxed as a life insurance company under the Internal Revenue Code of
1986, as amended (the "Code"). Under existing federal income tax law, no taxes
are payable on the investment income of Fund U. Fund U is not taxed as a
"regulated investment company" under Subchapter M of the Code.
OTHER. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Security transactions are accounted for on the trade date. Dividend income is
recorded on the ex-dividend date.
2. INVESTMENTS
Purchases and sales of investments aggregated $560,019,875 and $119,495,585,
respectively, for the year ended December 31, 1995. Realized gains and losses
from investment transactions are reported on an identified-cost basis. The
cost of investments in eligible funds was $2,087,368,785 at December 31, 1995.
Gross unrealized appreciation for all investments at December 31, 1995 was
$374,402,134. Gross unrealized depreciation for all investments at December
31, 1995 was $1,010.
-4-
<PAGE> 100
NOTES TO FINANCIAL STATEMENTS - CONTINUED
3. CONTRACT CHARGES
Insurance charges are paid to The Travelers for the mortality and expense risks
assumed by The Travelers. These charges are equivalent to 1.25% of the average
net assets of Fund U on an annual basis. Additionally, for certain contracts
in the accumulation phase, a semi-annual charge of $15 (prorated for partial
periods) is deducted from participant account balances and paid to The
Travelers to cover administrative charges.
Participants in American Odyssey Funds, Inc. (the "Funds"), may elect to enter
into a separate asset allocation advisory agreement with Copeland Financial
Services, Inc. ("Copeland"), an affiliate of The Travelers. Under this
arrangement, Copeland provides asset allocation advice and charges participants
an annual fee, plus a one-time set-up fee of $30. The annual fee, which
decreases as a participant's assets in the Funds increase, is equivalent to an
amount of up to 1.50% of the participant's assets in the Funds. Copeland has
currently agreed to waive 0.25% of this fee. These fees totaled $5,306,354 and
$3,045,220, for the years ended December 31, 1995 and 1994, respectively.
No sales charge is deducted from participant purchase payments when they are
received. However, The Travelers assesses a 5% contingent deferred sales
charge if a participant's purchase payment is surrendered within five years of
its payment date. Contract surrender payments are stated prior to the
deduction of $1,392,135 and $666,955 of contingent deferred sales charges for
the years ended December 31, 1995 and 1994, respectively.
4. NET ASSETS HELD BY AFFILIATE
Approximately $5,373,000 and $4,925,000 of the net assets of Fund U were held
on behalf of an affiliate of The Travelers as of December 31, 1995 and 1994,
respectively. Transactions with this affiliate during the years ended December
31, 1995 and 1994, comprised participant purchase payments of approximately
$1,355,000 and $1,949,000 and contract surrenders of approximately $1,883,000
and $363,000, respectively.
-5-
<PAGE> 101
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. SUMMARY OF INVESTMENT OPTIONS
<TABLE>
<CAPTION>
NO. OF MARKET
SHARES VALUE
---------- -------------
<S> <C> <C>
TRAVELERS VARIABLE PRODUCTS FUNDS (14.4%)
Managed Assets Trust (Cost $139,908,102) 10,968,893 $ 170,017,842
High Yield Bond Trust (Cost $12,046,922) 1,401,632 12,614,692
Capital Appreciation Fund (Cost $94,239,227) 3,646,148 120,979,175
U.S. Government Securities Portfolio (Cost $25,265,522) 2,253,604 28,012,301
Social Awareness Stock Portfolio (Cost $5,806,088) 492,622 7,054,352
Utilities Portfolio (Cost $12,876,436) 1,188,237 15,268,848
---------- --------------
Total (Cost $290,142,297) 19,951,136 353,947,210
---------- --------------
TEMPLETON VARIABLE PRODUCTS SERIES FUND (15.5%)
Templeton Bond Fund (Cost $12,699,065) 1,108,307 13,166,690
Templeton Stock Fund (Cost $167,117,050) 9,748,957 203,168,254
Templeton Asset Allocation Fund (Cost $139,776,940) 8,866,083 166,061,738
---------- --------------
Total (Cost $319,593,055) 19,723,347 382,396,682
---------- --------------
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND (26.1%)
High Income Portfolio (Cost $47,162,532) 4,213,796 50,776,244
Growth Portfolio (Cost $280,543,594) 12,491,938 364,764,601
Equity-Income Portfolio (Cost $190,592,154) 11,790,442 227,201,816
---------- --------------
Total (Cost $518,298,280) 28,496,176 642,742,661
---------- --------------
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND II (15.3%)
Asset Manager Portfolio (Cost $342,023,109)
Total (Cost $342,023,109) 23,910,561 377,547,763
---------- --------------
DREYFUS STOCK INDEX FUND (2.7%)
Total (Cost $56,911,523) 3,828,671 65,853,145
---------- --------------
AMERICAN ODYSSEY FUNDS, INC. (25.6%)
American Odyssey Core Equity Fund (Cost $143,739,163) 13,310,057 177,289,964
American Odyssey Emerging Opportunities Fund (Cost $120,373,380) 10,089,352 151,542,072
American Odyssey International Equity Fund (Cost $79,331,616) 6,979,145 88,495,559
American Odyssey Long-Term Bond Fund (Cost $109,970,003) 10,761,200 113,315,437
American Odyssey Intermediate-Term Bond Fund (Cost $71,629,767) 7,012,463 72,789,370
American Odyssey Short-Term Bond Fund (Cost $25,373,686) 2,503,349 25,584,224
---------- --------------
Total (Cost $550,417,615) 50,655,566 629,016,626
---------- --------------
SMITH BARNEY/TRAVELERS SERIES FUND INC. (0.4%)
Alliance Growth Portfolio (Cost $3,069,804) 228,918 3,081,239
G.T. Global Strategic Income Portfolio (Cost $180,457) 16,913 183,843
Smith Barney High Income Portfolio (Cost $146,935) 13,356 148,119
Smith Barney International Equity Portfolio (Cost $656,861) 62,688 669,505
Smith Barney Income and Growth Portfolio (Cost $2,025,925) 166,257 2,138,064
Putnam Diversified Income Portfolio (Cost $833,163) 73,707 832,153
MFS Total Return Portfolio (Cost $3,069,761) 269,991 3,212,899
---------- --------------
Total (Cost $9,982,906) 831,830 10,265,822
---------- --------------
TOTAL INVESTMENT OPTIONS (100%)
(COST $2,087,368,785) $2,461,769,909
==============
</TABLE>
-6-
<PAGE> 102
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. NET CONTRACT OWNERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31, 1995
----------------------------------------------
ACCUMULATION ANNUITY UNIT NET
UNITS UNITS VALUE ASSETS
----- ----- ----- ------
<S> <C> <C> <C> <C>
Managed Assets Trust
Qualified.................................... 57,020,314 64,995 $2.763 $ 157,743,322
Non-Qualified................................ 4,113,975 27,182 2.975 12,317,046
High Yield Bond Trust
Qualified.................................... 4,592,111 - 2.472 11,351,620
Non-Qualified................................ 497,535 11,223 2.498 1,270,707
Capital Appreciation Fund
Qualified.................................... 45,978,768 22,479 2.396 110,223,695
Non-Qualified................................ 4,414,558 38,277 2.485 11,064,962
The Travelers Series Trust
U.S. Government Securities Portfolio......... 21,338,806 - 1.321 28,184,457
Social Awareness Stock Portfolio............. 4,840,885 - 1.461 7,071,541
Utilities Portfolio.......................... 11,917,700 - 1.284 15,301,065
Templeton Variable Products Series Fund
Templeton Bond Fund.......................... 10,527,233 9,202 1.250 13,166,550
Templeton Stock Fund......................... 122,936,652 24,148 1.655 203,491,467
Templeton Asset Allocation Fund.............. 107,459,620 9,318 1.546 166,144,914
Fidelity's Variable Insurance Products Fund
High Income Portfolio........................ 32,600,537 34,153 1.568 51,166,462
Growth Portfolio............................. 229,177,825 121,107 1.594 365,418,744
Equity-Income Portfolio...................... 153,461,509 81,176 1.484 227,776,532
Fidelity's Variable Insurance Products Fund II
Asset Manager Portfolio...................... 270,795,019 211,798 1.394 377,683,715
Dreyfus Stock Index Fund...................... 43,246,729 - 1.546 66,841,057
American Odyssey Funds, Inc.
American Odyssey Core Equity Fund............ 137,330,147 - 1.354 185,983,144
American Odyssey Emerging Opportunities Fund. 103,815,434 8,748 1.526 158,436,688
American Odyssey International Equity Fund... 70,364,454 - 1.274 89,664,702
American Odyssey Long-Term Bond Fund......... 101,376,422 - 1.221 123,771,354
American Odyssey Intermediate-Term Bond Fund. 68,877,506 - 1.128 77,674,318
American Odyssey Short-Term Bond Fund........ 24,416,215 - 1.102 26,893,408
Smith Barney/Travelers Series Fund Inc.
Alliance Growth Portfolio.................... 2,498,303 - 1.284 3,206,664
G.T. Global Strategic Income Portfolio....... 161,842 - 1.195 193,433
Smith Barney High Income Portfolio........... 137,755 - 1.124 154,765
Smith Barney International Equity Portfolio.. 592,682 - 1.137 673,921
Smith Barney Income and Growth Portfolio..... 1,747,342 - 1.246 2,176,413
Putnam Diversified Income Portfolio.......... 774,330 - 1.128 873,469
MFS Total Return Portfolio................... 2,733,609 - 1.205 3,294,241
--------------
Net Contract Owners' Equity................................................... $2,499,214,376
==============
</TABLE>
-7-
<PAGE> 103
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF FUND U OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
CAPITAL
MANAGED ASSETS TRUST HIGH YIELD BOND TRUST APPRECIATION FUND
-------------------------- ------------------------ -------------------------
1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends....................................... $ 7,184,513 $ 11,797,895 $ 941,371 $ 908,267 $ 538,024 $ 358,325
------------ ------------ ----------- ----------- ------------ -----------
EXPENSES:
Insurance charges............................... 1,930,851 1,838,017 153,284 152,609 1,245,525 874,820
------------ ------------ ----------- ----------- ------------ -----------
Net investment income (loss).................. 5,253,662 9,959,878 788,087 755,658 (707,501) (516,495)
------------ ------------ ----------- ----------- ------------ -----------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment
transactions:
Proceeds from investments sold................. 11,838,891 17,256,950 2,341,036 2,915,483 13,097,985 9,689,951
Cost of investments sold....................... 9,792,813 15,400,891 2,295,750 2,839,358 9,274,345 7,636,698
------------ ------------ ----------- ----------- ------------ -----------
Net realized gain (loss)...................... 2,046,078 1,856,059 45,286 76,125 3,823,640 2,053,253
------------ ------------ ----------- ----------- ------------ -----------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year....... 2,677,803 19,765,458 (190,385) 976,104 1,236,789 6,901,611
Unrealized gain (loss) end of year............. 30,109,740 2,677,803 567,770 (190,385) 26,739,948 1,236,789
------------ ------------ ----------- ----------- ------------ -----------
Net change in unrealized gain (loss) for
the year.................................... 27,431,937 (17,087,655) 758,155 (1,166,489) 25,503,159 (5,664,822)
------------ ------------ ----------- ----------- ------------ -----------
Net increase (decrease) in net assets
resulting from operations..................... 34,731,677 (5,271,718) 1,591,528 (334,706) 28,619,298 (4,128,064)
------------ ------------ ----------- ----------- ------------ -----------
UNIT TRANSACTIONS:
Participant purchase payments................... 12,725,731 16,108,507 1,152,461 1,293,542 17,519,986 18,411,998
Participant transfers from other Travelers
accounts...................................... 4,507,153 6,051,512 1,788,890 1,967,398 29,112,536 30,791,524
Administrative and asset allocation charges..... (219,268) (237,574) (18,625) (20,252) (160,042) (137,533)
Contract surrenders............................. (10,393,810) (9,072,855) (1,033,566) (1,210,352) (3,638,067) (2,976,142)
Participant transfers to other Travelers
accounts...................................... (10,950,505) (23,379,919) (2,329,135) (2,784,688) (28,049,805) (26,099,388)
Other payments to participants.................. (200,724) (262,973) (11,747) (40,146) (222,415) (67,334)
------------ ------------ ----------- ----------- ------------ -----------
Net increase (decrease) in net assets
resulting from unit transactions............ (4,531,423) (10,793,302) (451,722) (794,498) 14,562,193 19,923,125
------------ ------------ ----------- ----------- ------------ -----------
Net increase (decrease) in net assets........ 30,200,254 (16,065,020) 1,139,806 (1,129,204) 43,181,491 15,795,061
NET ASSETS:
Beginning of year............................. 139,860,114 155,925,134 11,482,521 12,611,725 78,107,166 62,312,105
------------ ------------ ----------- ----------- ------------ -----------
End of year................................... $170,060,368 $139,860,114 $12,622,327 $11,482,521 $121,288,657 $78,107,166
============ ============ =========== =========== ============ ===========
</TABLE>
-8-
<PAGE> 104
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
U.S. GOVERNMENT SOCIAL AWARENESS
SECURITIES PORTFOLIO STOCK PORTFOLIO UTILITIES PORTFOLIO TEMPLETON BOND FUND
- ------------------------- ----------------------- ------------------------ -------------------------
1995 1994 1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1,398,521 $ 947,128 $ 119,821 $ 87,669 $ 150,434 $ - $ 554,133 $ 625,209
- ----------- ------------ ---------- ---------- ----------- ---------- ----------- -----------
325,837 318,691 74,063 45,194 130,215 42,161 153,608 133,981
- ----------- ------------ ---------- ---------- ----------- ---------- ----------- -----------
1,072,684 628,437 45,758 42,475 20,219 (42,161) 400,525 491,228
- ----------- ------------ ---------- ---------- ----------- ---------- ----------- -----------
7,588,890 6,627,937 1,013,467 768,125 2,361,428 1,913,029 1,764,933 2,096,128
7,393,404 6,550,850 808,197 677,069 2,102,248 1,895,166 1,785,361 2,193,743
- ----------- ------------ ---------- ---------- ----------- ---------- ----------- -----------
195,486 77,087 205,270 91,056 259,180 17,863 (20,428) (97,615)
- ----------- ------------ ---------- ---------- ----------- ---------- ----------- -----------
(1,427,050) 1,147,389 (63,248) 208,441 52,210 - (698,498) 359,548
2,746,779 (1,427,050) 1,248,264 (63,248) 2,392,412 52,210 467,625 (698,498)
- ----------- ------------ ---------- ---------- ----------- ---------- ----------- -----------
4,173,829 (2,574,439) 1,311,512 (271,689) 2,340,202 52,210 1,166,123 (1,058,046)
- ----------- ------------ ---------- ---------- ----------- ---------- ----------- -----------
5,441,999 (1,868,915) 1,562,540 (138,158) 2,619,601 27,912 1,546,220 (664,433)
- ----------- ------------ ---------- ---------- ----------- ---------- ----------- -----------
1,592,087 6,745,869 1,519,956 929,015 2,973,322 2,324,950 1,739,161 3,392,436
5,497,597 6,392,347 1,501,420 863,341 9,184,581 6,101,993 1,789,574 3,673,260
(31,716) (33,644) (12,158) (9,227) (14,379) (5,145) (14,121) (13,693)
(1,864,732) (2,155,692) (79,490) (66,269) (183,673) (56,197) (450,326) (294,123)
(6,668,246) (10,024,208) (1,298,335) (1,066,309) (5,017,497) (2,612,177) (2,647,625) (4,267,516)
(180,911) (189,210) (2,013) - (32,215) (10,011) (11,299) (4,036)
- ----------- ------------ ---------- ---------- ----------- ---------- ----------- -----------
(1,655,921) 735,462 1,629,380 650,551 6,910,139 5,743,413 405,364 2,486,328
- ----------- ------------ ---------- ---------- ----------- --------- ----------- -----------
3,786,078 (1,133,453) 3,191,920 512,393 9,529,740 5,771,325 1,951,584 1,821,895
24,398,379 25,531,832 3,879,621 3,367,228 5,771,325 - 11,214,966 9,393,071
- ----------- ------------ ---------- ---------- ----------- ---------- ----------- -----------
$28,184,457 $ 24,398,379 $7,071,541 $3,879,621 $15,301,065 $5,771,325 $13,166,550 $11,214,966
=========== ============ ========== ========== =========== ========== =========== ===========
</TABLE>
-9-
<PAGE> 105
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF FUND U OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994 (CONTINUED)
<TABLE>
<CAPTION>
TEMPLETON ASSET FIDELITY'S HIGH
TEMPLETON STOCK FUND ALLOCATION FUND INCOME PORTFOLIO
-------------------------- -------------------------- --------------------------
1995 1994 1995 1994 1995 1994
---- ---- ---- ----- ---- ----
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends...................................... $ 2,523,957 $ 944,994 $ 3,447,327 $ 2,082,812 $ 2,457,673 $ 2,410,696
------------ ------------ ------------ ------------ ------------ ------------
EXPENSES:
Insurance charges.............................. 2,112,407 1,306,677 1,847,180 1,398,064 532,559 359,644
------------ ------------ ------------ ------------ ------------ ------------
Net investment income (loss)................. 411,550 (361,683) 1,600,147 684,748 1,925,114 2,051,052
------------ ------------ ------------ ------------ ------------ ------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment
transactions:
Proceeds from investments sold................ 4,184,428 4,887,673 8,767,048 1,531,028 4,968,874 7,810,635
Cost of investments sold...................... 2,939,726 3,777,878 7,005,322 1,234,719 4,751,441 7,586,042
------------ ------------ ------------ ------------ ------------ ------------
Net realized gain (loss)..................... 1,244,702 1,109,795 1,761,726 296,309 217,433 224,593
------------ ------------ ------------ ------------ ------------ ------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year...... 2,277,411 8,478,654 1,519,117 7,840,073 (1,388,217) 1,749,503
Unrealized gain (loss) end of year............ 36,051,204 2,277,411 26,284,798 1,519,117 3,613,712 (1,388,217)
------------ ------------ ------------ ------------ ------------ ------------
Net change in unrealized gain (loss)
for the year.............................. 33,773,793 (6,201,243) 24,765,681 (6,320,956) 5,001,929 (3,137,720)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations.................... 35,430,045 (5,453,131) 28,127,554 (5,339,899) 7,144,476 (862,075)
------------ ------------ ------------ ------------ ------------ ------------
UNIT TRANSACTIONS:
Participant purchase payments.................. 38,462,831 39,232,523 23,642,833 42,047,835 10,516,308 9,491,538
Participant transfers from other
Travelers accounts........................... 28,718,119 70,703,053 9,637,424 45,091,664 14,386,232 17,854,012
Administrative and asset allocation charges.... (293,673) (199,800) (193,759) (166,499) (60,830) (48,036)
Contract surrenders............................ (5,514,830) (2,290,591) (7,577,118) (2,870,674) (1,665,013) (864,220)
Participant transfers to other Travelers
accounts..................................... (28,862,332) (26,870,976) (19,254,099) (15,669,794) (12,931,444) (14,826,130)
Other payments to participants................. (203,056) (111,447) (330,255) (174,731) (201,683) (297,022)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from unit transactions........... 32,307,059 80,462,762 5,925,026 68,257,801 10,043,570 11,310,142
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets....... 67,737,104 75,009,631 34,052,580 62,917,902 17,188,046 10,448,067
NET ASSETS:
Beginning of year............................ 135,754,363 60,744,732 132,092,334 69,174,432 33,978,416 23,530,349
------------ ------------ ------------ ------------ ------------ ------------
End of year.................................. $203,491,467 $135,754,363 $166,144,914 $132,092,334 $ 51,166,462 $ 33,978,416
============ ============ ============ ============ ============ ============
</TABLE>
-10-
<PAGE> 106
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
FIDELITY'S FIDELITY'S EQUITY- FIDELITY'S ASSET DREYFUS STOCK
GROWTH PORTFOLIO INCOME PORTFOLIO MANAGER PORTFOLIO INDEX FUND
- -------------------------- ------------------------- -------------------------- ------------------------
1995 1994 1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1,191,787 $ 7,980,052 $ 8,589,857 $ 2,272,534 $ 7,188,187 $ 11,642,403 $ 1,629,405 $ 967,727
- ------------ ------------ ------------ ----------- ------------ ------------ ----------- -----------
3,684,287 2,076,224 1,935,998 584,739 4,490,031 3,776,729 627,250 414,165
- ------------ ------------ ------------ ----------- ------------ ------------ ----------- -----------
(2,492,500) 5,903,828 6,653,859 1,687,795 2,698,156 7,865,674 1,002,155 553,562
- ------------ ------------ ------------ ----------- ------------ ------------ ----------- -----------
8,250,207 536,929 3,334,273 63,435 31,499,795 1,082,303 2,234,634 3,142,570
5,394,373 479,211 2,893,003 66,022 27,445,980 950,713 2,199,090 3,550,672
- ------------ ------------ ------------ ----------- ------------ ------------ ----------- -----------
2,855,834 57,718 441,270 (2,587) 4,053,815 131,590 35,544 (408,102)
- ------------ ------------ ------------ ----------- ------------ ------------ ----------- -----------
7,539,489 13,687,213 313,667 104,352 (9,997,449) 20,934,353 (4,598,353) (4,368,729)
84,221,007 7,539,489 36,609,662 313,667 35,524,654 (9,997,449) 8,941,622 (4,598,353)
- ------------ ------------ ------------ ----------- ------------ ------------ ----------- -----------
76,681,518 (6,147,724) 36,295,995 209,315 45,522,103 (30,931,802) 13,539,975 (229,624)
- ------------ ------------ ------------ ----------- ------------ ------------ ----------- -----------
77,044,852 (186,178) 43,391,124 1,894,523 52,274,074 (22,934,538) 14,577,674 (84,164)
- ------------ ------------ ------------ ----------- ------------ ------------ ----------- -----------
68,178,034 59,359,898 51,490,745 23,978,386 59,550,456 101,058,500 11,429,071 9,301,654
70,935,405 60,520,647 77,738,161 58,461,159 15,094,558 99,669,238 14,735,957 5,962,556
(562,812) (398,535) (299,927) (94,158) (621,271) (601,917) (93,721) (72,647)
(14,480,130) (5,309,379) (4,785,609) (1,231,613) (16,635,725) (9,663,263) (1,652,874) (1,100,500)
(45,533,842) (25,808,607) (27,115,781) (9,413,073) (71,870,374) (37,372,036) (8,263,626) (8,460,165)
(324,795) (267,912) (327,225) (17,389) (920,794) (635,352) (47,582) (157,002)
- ------------ ------------ ------------ ----------- ------------ ------------ ----------- -----------
78,211,860 88,096,112 96,700,364 71,683,312 (15,403,150) 152,455,170 16,107,225 5,473,896
- ------------ ------------ ------------ ----------- ------------ ------------ ----------- -----------
155,256,712 87,909,934 140,091,488 73,577,835 36,870,924 129,520,632 30,684,899 5,389,732
210,162,032 122,252,098 87,685,044 14,107,209 340,812,791 211,292,159 36,156,158 30,766,426
- ------------ ------------ ------------ ----------- ------------ ------------ ----------- -----------
$365,418,744 $210,162,032 $227,776,532 $87,685,044 $377,683,715 $340,812,791 $66,841,057 $36,156,158
============ ============ ============ =========== ============ ============ =========== ===========
</TABLE>
-11-
<PAGE> 107
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF FUND U OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994 (CONTINUED)
<TABLE>
<CAPTION>
AMERICAN ODYSSEY
AMERICAN ODYSSEY EMERGING OPPORTUNITIES AMERICAN ODYSSEY
CORE EQUITY FUND FUND INTERNATIONAL EQUITY FUND
------------------------- ------------------------- ----------------------------
1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.................................. $ 8,238,273 $ 1,600,417 $ 6,411,590 $ 1,137,975 $ 864,640 $ 1,758,846
------------ ----------- ------------ ----------- ----------- -----------
EXPENSES:
Insurance charges.......................... 1,766,994 872,511 1,561,867 700,451 855,328 457,980
------------ ----------- ------------ ----------- ----------- -----------
Net investment income (loss)............. 6,471,279 727,906 4,849,723 437,524 9,312 1,300,866
------------ ----------- ------------ ----------- ----------- -----------
REALIZED GAIN (LOSS) AND CHANGE IN
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment
transactions:
Proceeds from investments sold............ 2,554,698 51,333 7,612,195 1,279,750 798,713 675,821
Cost of investments sold.................. 1,929,933 50,337 4,943,095 1,073,345 697,051 582,141
------------ ----------- ------------ ----------- ----------- -----------
Net realized gain (loss)................. 624,765 996 2,669,100 206,405 101,662 93,680
------------ ----------- ------------ ----------- ----------- -----------
Change in unrealized gain (loss)
on investments:
Unrealized gain (loss) beginning of year.. (2,790,941) 156,938 7,749,282 2,448,079 (1,757,196) 2,674,845
Unrealized gain (loss) end of year........ 33,550,801 (2,790,941) 31,168,692 7,749,282 9,163,943 (1,757,196)
------------ ----------- ------------ ----------- ----------- -----------
Net change in unrealized gain (loss)
for the year........................... 36,341,742 (2,947,879) 23,419,410 5,301,203 10,921,139 (4,432,041)
------------ ----------- ------------ ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations................ 43,437,786 (2,218,977) 30,938,233 5,945,132 11,032,113 (3,037,495)
------------ ----------- ------------ ----------- ----------- -----------
UNIT TRANSACTIONS:
Participant purchase payments.............. 38,103,304 25,149,323 36,860,517 20,528,669 21,452,760 14,428,964
Participant transfers from other
Travelers accounts....................... 25,706,834 48,123,620 34,699,760 41,201,751 18,271,289 28,811,508
Administrative and asset allocation charges (1,853,178) (1,028,088) (1,498,327) (807,375) (856,676) (506,764)
Contract surrenders........................ (5,219,198) (1,734,704) (4,131,758) (1,348,510) (2,246,977) (884,711)
Participant transfers to other
Travelers accounts....................... (13,084,927) (6,791,621) (24,587,291) (8,362,877) (9,015,509) (7,736,620)
Other payments to participants............. (153,977) (48,880) (119,071) (21,881) (37,631) (9,112)
------------ ----------- ------------ ----------- ----------- -----------
Net increase (decrease) in net
assets resulting from unit
transactions........................... 43,498,858 63,669,650 41,223,830 51,189,777 27,567,256 34,103,265
------------ ----------- ------------ ----------- ----------- -----------
Net increase (decrease) in net assets... 86,936,644 61,450,673 72,162,063 57,134,909 38,599,369 31,065,770
NET ASSETS:
Beginning of year........................ 99,046,500 37,595,827 86,274,625 29,139,716 51,065,333 19,999,563
------------ ----------- ------------ ----------- ----------- -----------
End of year.............................. $185,983,144 $99,046,500 $158,436,688 $86,274,625 $89,664,702 $51,065,333
============ =========== ============ =========== =========== ===========
</TABLE>
-12-
<PAGE> 108
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
AMERICAN ODYSSEY
AMERICAN ODYSSEY INTERMEDIATE-TERM AMERICAN ODYSSEY
LONG-TERM BOND FUND BOND FUND SHORT-TERM BOND FUND ALLIANCE GROWTH PORTFOLIO
- ------------------------- ------------------------ ------------------------ -------------------------
1995 1994 1995 1994 1995 1994 1995 1994
- ------------ ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 10,146,574 $ 2,487,367 $ 4,715,639 $ 1,887,104 $ 1,279,091 $ 661,843 $ 87,142 $ -
- ------------ ----------- ----------- ----------- ----------- ----------- ------------- -----------
1,208,202 615,088 786,831 446,612 279,815 167,468 14,572 -
- ------------ ----------- ----------- ----------- ----------- ----------- ------------
8,938,372 1,872,279 3,928,808 1,440,492 999,276 494,375 72,570 -
- ------------ ----------- ----------- ----------- ----------- ----------- ------------ -----------
472,042 54,554 398,026 111,706 1,331,127 465,840 735,184 -
444,741 57,696 385,152 111,618 1,307,471 465,141 624,113 -
- ------------ ----------- ----------- ----------- ----------- ----------- ------------
27,301 (3,142) 12,874 88 23,656 699 111,071 -
- ------------ ----------- ----------- ----------- ----------- ----------- ------------ -----------
(5,640,279) (1,103,433) (2,767,442) (94,877) (722,729) (70,550) - -
3,345,434 (5,640,279) 1,159,603 (2,767,442) 210,538 (722,729) 11,435 -
- ------------ ----------- ----------- ----------- ----------- ----------- ------------
8,985,713 (4,536,846) 3,927,045 (2,672,565) 933,267 (652,179) 11,435 -
- ------------ ----------- ----------- ----------- ----------- ----------- ------------ -----------
17,951,386 (2,667,709) 7,868,727 (1,231,985) 1,956,199 (157,105) 195,076 -
- ------------ ----------- ----------- ----------- ----------- ----------- ------------ -----------
27,882,120 18,654,620 16,057,224 11,886,853 4,746,886 3,376,658 1,616,779 -
18,946,902 35,228,874 13,190,448 24,768,105 7,974,101 9,522,563 2,517,025 -
(1,299,849) (747,449) (789,474) (499,007) (241,333) (165,966) (3,040) -
(3,350,110) (1,137,829) (2,469,286) (1,030,466) (1,059,269) (526,031) (27,840) -
(7,859,175) (5,329,266) (6,139,322) (4,080,359) (4,153,623) (2,687,671) (1,091,336) -
(107,392) (18,691) (83,945) (17,982) (46,550) (11,836) - -
- ------------ ----------- ----------- ----------- ----------- ----------- ------------ -----------
34,212,496 46,650,259 19,765,645 31,027,144 7,220,212 9,507,717 3,011,588 -
- ------------ ----------- ----------- ----------- ----------- ----------- ------------ -----------
52,163,882 43,982,550 27,634,372 29,795,159 9,176,411 9,350,612 3,206,664 -
71,607,472 27,624,922 50,039,946 20,244,787 17,716,997 8,366,385 - -
- ------------ ----------- ----------- ----------- ----------- ----------- ------------ -----------
$123,771,354 $71,607,472 $77,674,318 $50,039,946 $26,893,408 $17,716,997 $ 3,206,664 $ -
============ =========== =========== =========== =========== =========== ============ ===========
</TABLE>
-13-
<PAGE> 109
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF FUND U OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994 (CONTINUED)
<TABLE>
<CAPTION>
SMITH BARNEY
G.T. GLOBAL STRATEGIC SMITH BARNEY INTERNATIONAL EQUITY
INCOME PORTFOLIO HIGH INCOME PORTFOLIO PORTFOLIO
---------------------- ---------------------- -----------------------
1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.......................................... $ 6,685 $ - $ 6,627 $ - $ 758 $ -
-------- --------- --------- --------- ---------- ---------
EXPENSES:
Insurance charges.................................. 1,042 - 798 - 3,528 -
-------- --------- --------- --------- ---------- ---------
Net investment income (loss)..................... 5,643 - 5,829 - (2,770) -
-------- --------- --------- --------- ---------- ---------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold.................... 94,529 - 228,159 - 737,524 -
Cost of investments sold.......................... 88,691 - 227,132 - 716,941 -
-------- --------- --------- --------- ---------- ---------
Net realized gain (loss)......................... 5,838 - 1,027 - 20,583 -
-------- --------- -------- - --------- ---------- ---------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year.......... - - - - - -
Unrealized gain (loss) end of year................ 3,386 - 1,184 - 12,644 -
-------- --------- --------- --------- ---------- ---------
Net change in unrealized gain (loss) for the year 3,386 - 1,184 - 12,644 -
-------- --------- --------- --------- ---------- ---------
Net increase (decrease) in net assets
resulting from operations........................ 14,867 - 8,040 - 30,457 -
-------- --------- --------- --------- ---------- ---------
UNIT TRANSACTIONS:
Participant purchase payments...................... 53,544 - 123,596 - 248,413 -
Participant transfers from other Travelers accounts 229,702 - 263,996 - 1,207,815 -
Administrative and asset allocation charges........ (234) - (156) - (921) -
Contract surrenders................................ (5,779) - (729) - (1,611) -
Participant transfers to other Travelers accounts.. (98,667) - (239,982) - (810,232) -
Other payments to participants..................... - - - - - -
-------- --------- --------- --------- ---------- ---------
Net increase (decrease) in net assets resulting
from unit transactions.......................... 178,566 - 146,725 - 643,464 -
-------- --------- --------- --------- ---------- ---------
Net increase (decrease) in net assets........... 193,433 - 154,765 - 673,921 -
NET ASSETS:
Beginning of year................................ - - - - - -
-------- --------- --------- --------- ---------- ---------
End of year...................................... $193,433 $ - $ 154,765 $ - $ 673,921 $ -
======== ========= ========= ========= ========== =========
</TABLE>
-14-
<PAGE> 110
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
SMITH BARNEY PUTNAM DIVERSIFIED
INCOME AND GROWTH PORTFOLIO INCOME PORTFOLIO MFS TOTAL RETURN PORTFOLIO COMBINED
- --------------------------- -------------------- -------------------------- ------------------------------
1995 1994 1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
$ 36,534 $ - $ 38,421 $ - $ 75,369 $ - $ 69,822,353 $ 52,559,263
- ---------- --------------- --------- --------- ---------- -------------- -------------- --------------
8,818 - 3,893 - 12,224 - 25,747,007 16,581,825
- ---------- --------------- --------- --------- ---------- -------------- -------------- --------------
27,716 - 34,528 - 63,145 - 44,075,346 35,977,438
- ---------- --------------- --------- --------- ---------- -------------- -------------- --------------
808,019 - 437,525 - 41,955 - 119,495,585 62,961,180
774,305 - 429,667 - 37,799 - 98,687,144 57,179,310
- ---------- --------------- --------- --------- ---------- -------------- -------------- --------------
33,714 - 7,858 - 4,156 - 20,808,441 5,781,870
- ---------- --------------- --------- --------- ---------- -------------- -------------- --------------
- - - - - - (8,676,019) 81,794,972
112,139 - (1,010) - 143,138 - 374,401,124 (8,676,019)
- ---------- --------------- --------- --------- ---------- -------------- -------------- --------------
112,139 - (1,010) - 143,138 - 383,077,143 (90,470,991)
- ---------- --------------- --------- --------- ---------- -------------- -------------- --------------
173,569 - 41,376 - 210,439 - 447,960,930 (48,711,683)
- ---------- --------------- --------- --------- ---------- -------------- -------------- --------------
685,912 - 526,594 - 1,177,680 - 452,028,311 427,701,738
2,243,499 - 774,514 - 2,005,961 - 412,659,453 601,760,125
(1,255) - (762) - (1,960) - (9,143,467) (5,793,309)
(15,712) - (1,244) - (2,761) - (88,487,237) (45,824,121)
(909,600) - (467,009) - (95,118) - (339,344,437) (243,643,400)
- - - - - - (3,565,280) (2,362,947)
- ---------- --------------- --------- --------- ---------- -------------- -------------- --------------
2,002,844 - 832,093 - 3,083,802 - 424,147,343 731,838,086
- ---------- --------------- --------- --------- ---------- -------------- -------------- --------------
2,176,413 - 873,469 - 3,294,241 - 872,108,273 683,126,403
- - - - - - 1,627,106,103 943,979,700
- ---------- --------------- --------- --------- ---------- -------------- -------------- --------------
$2,176,413 $ - $ 873,469 $ - $3,294,241 $ - $2,499,214,376 $1,627,106,103
========== =============== ========= ========= ========== ============== ============== ==============
</TABLE>
-15-
<PAGE> 111
NOTES TO FINANCIAL STATEMENTS - CONTINUED
8. SCHEDULE OF ACCUMULATION AND ANNUITY UNITS FOR FUND U
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
MANAGED ASSETS TRUST HIGH YIELD BOND TRUST CAPITAL APPRECIATION FUND
-------------------------- -------------------------- ----------------------------
1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation and annuity units
beginning of year........................ 63,168,528 68,027,761 5,293,204 5,668,742 43,765,022 32,827,520
Accumulation units purchased and
transferred from other Travelers accounts 6,804,157 9,829,134 1,254,645 1,483,985 21,692,792 26,936,524
Accumulation units redeemed and
transferred to other Travelers accounts.. (8,739,735) (14,680,729) (1,446,258) (1,858,672) (14,999,326) (15,994,317)
Annuity units............................. (6,484) (7,638) (722) (851) (4,406) (4,705)
------------ ------------ ------------ ------------ ------------- -------------
Accumulation and annuity units
end of year.............................. 61,226,466 63,168,528 5,100,869 5,293,204 50,454,082 43,765,022
============ ============ ============ ============ ============= =============
<CAPTION>
U.S. GOVERNMENT SOCIAL AWARENESS
SECURITIES PORTFOLIO STOCK PORTFOLIO UTILITIES PORTFOLIO
-------------------------- -------------------------- ----------------------------
1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation and annuity units
beginning of year........................ 22,709,043 22,142,424 3,498,916 2,920,464 5,739,775 -
Accumulation units purchased and
transferred from other Travelers accounts 5,969,324 11,851,220 2,357,639 1,580,346 10,825,283 8,412,648
Accumulation units redeemed and
transferred to other Travelers accounts.. (7,339,561) (11,284,601) (1,015,670) (1,001,894) (4,647,358) (2,672,873)
Annuity units............................. - - - - - -
------------ ------------ ------------ ------------ ------------- -------------
Accumulation and annuity units
end of year.............................. 21,338,806 22,709,043 4,840,885 3,498,916 11,917,700 5,739,775
============ ============ ============ ============ ============= =============
<CAPTION>
TEMPLETON ASSET
TEMPLETON BOND FUND TEMPLETON STOCK FUND ALLOCATION FUND
-------------------------- -------------------------- ----------------------------
1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation and annuity units
beginning of year........................ 10,185,995 8,013,975 101,461,716 43,847,436 103,406,989 51,892,645
Accumulation units purchased and
transferred from other Travelers accounts 2,985,095 6,253,420 44,948,066 79,071,044 23,794,549 65,958,367
Accumulation units redeemed and
transferred to other Travelers accounts.. (2,633,968) (4,080,815) (23,447,028) (21,455,245) (19,731,907) (14,443,661)
Annuity units............................. (687) (585) (1,954) (1,519) (693) (362)
------------ ------------ ------------ ------------ ------------- -------------
Accumulation and annuity units
end of year.............................. 10,536,435 10,185,995 122,960,800 101,461,716 107,468,938 103,406,989
============ ============ ============ ============ ============= =============
<CAPTION>
FIDELITY'S HIGH FIDELITY'S GROWTH FIDELITY'S EQUITY
INCOME PORTFOLIO PORTFOLIO INCOME PORTFOLIO
-------------------------- -------------------------- ----------------------------
1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation and annuity units
beginning of year........................ 25,813,287 17,380,805 176,304,261 101,260,373 78,856,048 13,414,425
Accumulation units purchased and
transferred from other Travelers accounts 16,940,763 20,326,066 94,357,102 102,249,321 99,568,686 75,280,518
Accumulation units redeemed and
transferred to other Travelers accounts.. (10,116,608) (11,891,324) (41,359,028) (27,204,765) (24,872,561) (9,833,706)
Annuity units............................. (2,752) (2,260) (3,403) (668) (9,488) (5,189)
------------ ------------ ------------ ------------ ------------- -------------
Accumulation and annuity units
end of year.............................. 32,634,690 25,813,287 229,298,932 176,304,261 153,542,685 78,856,048
============ ============ ============ ============ ============= =============
</TABLE>
-16-
<PAGE> 112
NOTES TO FINANCIAL STATEMENTS - CONTINUED
8. SCHEDULE OF ACCUMULATION AND ANNUITY UNITS FOR FUND U
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994 (CONTINUED)
<TABLE>
<CAPTION>
FIDELITY'S ASSET DREYFUS STOCK AMERICAN ODYSSEY
MANAGER PORTFOLIO INDEX FUND CORE EQUITY FUND
-------------------------- ---------------------------- ----------------------------
1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation and annuity units
beginning of year........................ 282,474,420 162,412,958 31,599,969 26,788,975 100,081,556 37,136,233
Accumulation units purchased and
transferred from other Travelers accounts 58,634,743 158,768,309 19,084,473 13,394,123 54,332,583 72,443,145
Accumulation units redeemed and
transferred to other Travelers accounts.. (70,087,353) (38,691,316) (7,437,713) (8,583,129) (17,083,992) (9,497,822)
Annuity units............................. (14,993) (15,531) - - - -
------------ ------------ ------------- ------------- ------------- -------------
Accumulation and annuity units
end of year.............................. 271,006,817 282,474,420 43,246,729 31,599,969 137,330,147 100,081,556
============ ============ ============= ============= ============= =============
<CAPTION>
AMERICAN ODYSSEY
EMERGING OPPORTUNITIES AMERICAN ODYSSEY AMERICAN ODYSSEY
FUND INTERNATIONAL EQUITY FUND LONG-TERM BOND FUND
-------------------------- ---------------------------- ----------------------------
1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation and annuity units
beginning of year........................ 73,837,797 27,011,473 47,095,715 16,943,798 70,927,733 25,466,509
Accumulation units purchased and
transferred from other Travelers accounts 51,700,251 56,410,964 33,740,404 38,245,426 41,680,825 52,554,483
Accumulation units redeemed and
transferred to other Travelers accounts.. (21,710,744) (9,584,640) (10,471,665) (8,093,509) (11,232,136) (7,093,259)
Annuity units............................. (3,122) - - - - -
------------ ------------ ------------- ------------- ------------- -------------
Accumulation and annuity units
end of year.............................. 103,824,182 73,837,797 70,364,454 47,095,715 101,376,422 70,927,733
============ ============ ============= ============= ============= =============
<CAPTION>
AMERICAN ODYSSEY
INTERMEDIATE-TERM AMERICAN ODYSSEY
BOND FUND SHORT-TERM BOND FUND ALLIANCE GROWTH PORTFOLIO
-------------------------- ---------------------------- ----------------------------
1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation and annuity units
beginning of year........................ 50,402,986 19,564,524 17,610,778 8,201,363 - -
Accumulation units purchased and
transferred from other Travelers accounts 27,369,748 36,451,352 11,996,257 12,765,365 3,402,780 -
Accumulation units redeemed and
transferred to other Travelers accounts.. (8,895,228) (5,612,890) (5,190,820) (3,355,950) (904,477) -
Annuity units............................. - - - - - -
------------ ------------ ------------- ------------- ------------- -------------
Accumulation and annuity units
end of year.............................. 68,877,506 50,402,986 24,416,215 17,610,778 2,498,303 -
============ ============ ============= ============= ============= =============
<CAPTION>
G.T. GLOBAL STRATEGIC SMITH BARNEY SMITH BARNEY INTERNATIONAL
INCOME PORTFOLIO HIGH INCOME PORTFOLIO EQUITY PORTFOLIO
-------------------------- ---------------------------- ----------------------------
1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation and annuity units
beginning of year........................ - - - - - -
Accumulation units purchased and
transferred from other Travelers accounts 254,272 - 367,626 - 1,334,884 -
Accumulation units redeemed and
transferred to other Travelers accounts.. (92,430) - (229,871) - (742,202) -
Annuity units............................. - - - - - -
------------ ------------ ------------- ------------- ------------- -------------
Accumulation and annuity units
end of year.............................. 161,842 - 137,755 - 592,682 -
============ ============ ============= ============= ============= =============
</TABLE>
-17-
<PAGE> 113
NOTES TO FINANCIAL STATEMENTS - CONTINUED
8. SCHEDULE OF ACCUMULATION AND ANNUITY UNITS FOR FUND U
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994 (CONTINUED)
<TABLE>
<CAPTION>
SMITH BARNEY INCOME PUTNAM DIVERSIFIED
AND GROWTH PORTFOLIO INCOME PORTFOLIO MFS TOTAL RETURN PORTFOLIO
---------------------- -------------------- ----------------------------
1995 1994 1995 1994 1995 1994
---------- ---------- --------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Accumulation and annuity units
beginning of year........................ - - - - - -
Accumulation units purchased and
transferred from other Travelers accounts 2,586,551 - 1,210,571 - 2,822,742 -
Accumulation units redeemed and
transferred to other Travelers accounts.. (839,209) - (436,241) - (89,133) -
Annuity units............................. - - - - - -
---------- ---------- --------- --------- ------------- -------------
Accumulation and annuity units
end of year.............................. 1,747,342 - 774,330 - 2,733,609 -
========== ========== ========= ========= ============= =============
</TABLE>
-18-
<PAGE> 114
REPORT OF INDEPENDENT ACCOUNTANTS
To the Owners of Variable Annuity Contracts of
The Travelers Fund U for Variable Annuities:
We have audited the accompanying statement of assets and liabilities of The
Travelers Fund U for Variable Annuities as of December 31, 1995, and the
related statement of operations for the year then ended, and the statement of
changes in net assets for each of the two years in the period then ended.
These financial statements are the responsibility of management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of shares owned as of December 31, 1995, 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 U for
Variable Annuities as of December 31, 1995, 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.
COOPERS & LYBRAND L.L.P
Hartford, Connecticut
February 20, 1996
-19-
<PAGE> 115
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investment securities, at market value (identified cost $335,934,204) $420,557,596
Cash................................................................. 425,287
Receivables:
Dividends........................................................... 804,793
Interest............................................................ 4,493
Investment securities sold.......................................... 4,606,975
Purchase payments and transfers from other Travelers accounts....... 208,254
Variation on futures margin......................................... 2,100
Other assets......................................................... 20,396
------------
Total Assets....................................................... 426,629,894
------------
LIABILITIES:
Payables:
Investment securities purchased..................................... 3,049,304
Contract surrenders and transfers to other Travelers accounts....... 372,754
Investment management and advisory fees............................. 26,012
Accrued liabilities.................................................. 71,571
------------
Total Liabilities.................................................. 3,519,641
------------
NET ASSETS............................................................ $423,110,253
============
</TABLE>
See Notes to Financial Statements
-5-
<PAGE> 116
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends........................................... $ 8,691,154
Interest ........................................... 639,038
-----------
Total income....................................... $ 9,330,192
EXPENSES:
Investment management and advisory fees............. 1,700,124
Insurance charges................................... 4,324,809
-----------
Total expenses..................................... 6,024,933
------------
Net investment income............................. 3,305,259
------------
REALIZED GAIN AND CHANGE IN UNREALIZED GAIN ON
INVESTMENT SECURITIES:
Realized gain from investment security transactions:
Proceeds from investment securities sold........... 387,628,072
Cost of investment securities sold................. 349,676,213
-----------
Net realized gain................................. 37,951,859
Change in unrealized gain on investment securities:
Unrealized gain at December 31, 1994............... 12,899,180
Unrealized gain at December 31, 1995............... 84,623,392
-----------
Net change in unrealized gain for the year........ 71,724,212
------------
Net realized gain and change in unrealized gain.. 109,676,071
------------
Net increase in net assets resulting from operations $112,981,330
============
</TABLE>
See Notes to Financial Statements
-6-
<PAGE> 117
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income........................................... $ 3,305,259 $ 3,903,113
Net realized gain from investment security transactions......... 37,951,859 9,768,357
Net change in unrealized gain on investment securities.......... 71,724,212 (17,759,208)
------------ ------------
Net increase (decrease) in net assets resulting from operations 112,981,330 (4,087,738)
------------ ------------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 2,505,561 and 3,287,872 units, respectively).... 20,576,327 22,820,587
Participant transfers from other Travelers accounts
(applicable to 2,758,216 and 2,395,050 units, respectively).... 23,120,885 16,585,884
Administrative charges
(applicable to 39,010 and 52,573 units, respectively).......... (345,103) (356,909)
Contract surrenders
(applicable to 3,134,685 and 3,654,777 units, respectively).... (26,235,475) (25,688,114)
Participant transfers to other Travelers accounts
(applicable to 3,616,329 and 5,819,195 units, respectively).... (29,697,410) (40,465,786)
Other payments to participants
(applicable to 138,390 and 245,574 units, respectively)........ (1,142,807) (1,752,347)
------------ ------------
Net decrease in net assets resulting from unit transactions.... (13,723,583) (28,856,685)
------------ ------------
Net increase (decrease) in net assets......................... 99,257,747 (32,944,423)
NET ASSETS:
Beginning of year............................................... 323,852,506 356,796,929
------------ ------------
End of year..................................................... $423,110,253 $323,852,506
============ ============
</TABLE>
See Notes to Financial Statements
-7-
<PAGE> 118
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Growth and Income Stock Account for Variable Annuities
("Account GIS") is a separate account of The Travelers Insurance Company
("The Travelers"), an indirect wholly owned subsidiary of Travelers Group
Inc., and is available for funding certain variable annuity contracts issued
by The Travelers. Account GIS is registered under the Investment Company
Act of 1940, as amended, as a diversified, open-end management investment
company.
The following is a summary of significant accounting policies consistently
followed by Account GIS in the preparation of its financial statements.
SECURITY VALUATION. Investments in securities traded on a national
securities exchange are valued at the last-reported sale price as of the
close of business of the New York Stock Exchange on the last business day of
the year; 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.
When market quotations are not considered to be readily available for
long-term corporate bonds and notes, such investments are generally stated
at fair value on the basis of valuations furnished by a pricing service.
These valuations are determined for normal institutional-size trading units
of such securities using methods based on market transactions for comparable
securities and various relationships between securities which are generally
recognized by institutional traders. Securities, including restricted
securities, for which pricing services are not readily available are valued
by management at prices which it deems in good faith to be fair.
Short-term investments for which a quoted market price is available are
valued at market. Short-term investments for which there is no reliable
quoted market price are valued by computing a market value based upon
quotations from dealers or issuers for securities of a similar type, quality
and maturity.
FUTURES CONTRACTS. Account GIS may use stock index futures contracts as a
substitute for the purchase or sale of individual securities. When Account
GIS enters into a futures contract, it agrees to buy or sell a specified
index of stocks at a future time for a fixed price, unless the contract is
closed prior to expiration. Account GIS is obligated to deposit with a
broker an "initial margin" equivalent to a percentage of the face, or
notional value of the contract.
It is Account GIS's practice to hold cash and cash equivalents in an amount
at least equal to the notional value of outstanding purchased futures
contracts, less the initial margin. Cash and cash equivalents include cash
on hand, securities segregated under federal and brokerage regulations, and
short-term highly liquid investments with maturities generally three months
or less when purchased. Generally, futures contracts are closed prior to
expiration.
Futures contracts purchased by Account GIS are priced and settled daily;
accordingly, changes in daily prices are recorded as realized gains or
losses and no asset is recorded in the Statement of Investments. However,
when Account GIS holds open futures contracts, it assumes a market risk
generally equivalent to the underlying market risk of change in the value of
the specified indexes associated with the futures contract.
OPTIONS. Account GIS may purchase index or individual equity put or call
options, thereby obtaining the right to sell or buy a fixed number of shares
of the underlying asset at the stated price on or before the stated
expiration date. Account GIS may sell the options before expiration.
Options held by Account GIS are listed on either national securities
exchanges or on over-the-counter markets, and are short-term contracts with
a duration of less than nine months. The market value of the options will
be the latest sale price as of the close of business of the New York Stock
Exchange, or in the absence of such sale, the latest bid quotation.
-8-
<PAGE> 119
NOTES TO FINANCIAL STATEMENTS - CONTINUED
REPURCHASE AGREEMENTS. When Account GIS enters into a repurchase agreement
(a purchase of securities whereby the seller agrees to repurchase the
securities at a mutually agreed upon date and price), the repurchase price
of the securities will generally equal the amount paid by Account GIS plus a
negotiated interest amount. The seller under the repurchase agreement will
be required to provide to Account GIS securities (collateral) whose market
value, including accrued interest, will be at least equal to 102% of the
repurchase price. Account GIS monitors the value of collateral on a daily
basis. Repurchase agreements will be limited to transactions with national
banks and reporting broker dealers believed to present minimal credit
risks. Account GIS's custodian will take actual or constructive receipt
of all securities underlying repurchase agreements until such agreements
expire.
FEDERAL INCOME TAXES. The operations of Account GIS form a part of the
total operations of The Travelers and are not taxed separately. The
Travelers is taxed as a life insurance company under the Internal Revenue
Code of 1986, as amended (the "Code"). Under existing federal income tax
law, no taxes are payable on the investment income and capital gains of
Account GIS. Account GIS is not taxed as a "regulated investment company"
under Subchapter M of the Code.
OTHER. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Security transactions are accounted for on the trade date. Dividend income
is recorded on the ex-dividend date. Interest income is recorded on the
accrual basis.
2. INVESTMENTS
Purchases and sales of securities other than short-term investments
aggregated $362,287,474 and $348,166,551 respectively, for the year ended
December 31, 1995. Realized gains and losses from security transactions are
reported on an identified cost basis.
At December 31, 1995, Account GIS held 6 open S&P 500 Stock Index futures
contracts with a maturity date of March 15, 1996. The underlying face
value, or notional value, of these contracts at December 31, 1995, amounted
to $1,855,350. In connection with these contracts, short-term investments
with a par value of $200,000 had been pledged as margin deposits.
Net realized gains (losses) resulting from futures contracts were $2,884,399
and ($190,085) for the years ended December 31, 1995 and 1994, respectively.
These gains (losses) are included in the net realized gain from investment
security transactions on both the Statement of Operations and the Statement
of Changes in Net Assets. The cash settlement for December 31, 1995 is
shown on the Statement of Assets and Liabilities as a receivable for
variation on futures margin.
3. CONTRACT CHARGES
Investment management and advisory fees are calculated daily at an annual
rate of 0.45% of Account GIS's average net assets. These fees are paid to
The Travelers Investment Management Company, an indirect wholly owned
subsidiary of Travelers Group Inc.
Insurance charges are paid to The Travelers for the mortality and expense
risks assumed by The Travelers. On contracts issued prior to May 16, 1983,
these charges are equivalent to 1.0017% of the average net assets of Account
GIS on an annual basis. On contracts issued on or after May 16, 1983, the
charges for mortality and expense risks are equivalent to 1.25% of the
average net assets of Account GIS on an annual basis. Additionally, for
certain contracts in the accumulation phase, a semi-annual charge of $15
(prorated for partial periods) is deducted from participant account balances
and paid to The Travelers to cover administrative charges.
On contracts issued prior to May 16, 1983, The Travelers retained from
Account GIS sales charges of $40,106 and $54,101 for the years ended
December 31, 1995 and 1994, respectively. The Travelers generally assesses
a 5% contingent deferred sales charge if a participant's purchase payment is
surrendered within five years of its payment date. Contract surrender
payments are stated prior to the deduction of $189,214 and $146,421 of
contingent deferred sales charges for the years ended December 31, 1995 and
1994, respectively.
-9-
<PAGE> 120
NOTES TO FINANCIAL STATEMENTS - CONTINUED
4. NET ASSETS HELD BY AFFILIATE
Approximately $10,733,000 and $8,001,000 of the net assets of Account GIS
were held on behalf of an affiliate of The Travelers as of December 31, 1995
and 1994, respectively. Transactions with this affiliate during the years
ended December 31, 1995 and 1994, were comprised of participant purchase
payments of approximately $427,000 and $356,000 and contract surrenders of
approximately $560,000 and $653,000, respectively.
5. NET CONTRACT OWNERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31, 1995
---------------------------------------------------------------
UNIT NET
UNITS VALUE ASSETS
----- ----- ------
<S> <C> <C> <C>
Contracts issued prior to May 16, 1983.............. 17,463,591 $ 9.668 $ 168,855,951
Annuity Contracts issued prior to May 16, 1983...... 432,651 9.668 4,183,314
Contracts issued on or after May 16, 1983........... 26,625,318 9.369 249,479,832
Annuity Contracts issued on or after May 16, 1983... 63,090 9.369 591,156
--------------
Net Contract Owners' Equity............................................................ $ 423,110,253
==============
</TABLE>
-10-
<PAGE> 121
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SUPPLEMENTARY INFORMATION
(Selected data for a unit outstanding throughout each year.)
Contracts issued prior to May 16, 1983
<TABLE>
<CAPTION> FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------------------------
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
SELECTED PER UNIT DATA:
Total investment income............................... $ .208 $ .192 $ .189 $ .192 $ .201
Operating expenses.................................... .123 .100 .092 .085 .077
------ ------ ------ ------ ------
Net investment income................................. .085 .092 .097 .107 .124
Unit value at beginning of year....................... 7.120 7.194 6.664 6.587 5.145
Net realized and change in unrealized gains (losses).. 2.463 (.166) .433 (.030) 1.318
------ ------ ------ ------ ------
Unit value at end of year............................. $9.668 $7.120 $7.194 $6.664 $6.587
====== ====== ====== ====== ======
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value................. 2.55 (.07) .53 .08 1.44
Ratio of operating expenses to average net assets..... 1.45% 1.41% 1.33% 1.33% 1.33%
Ratio of net investment income to average net assets.. 1.02% 1.30% 1.40% 1.67% 2.11%
Number of units outstanding at end of year (thousands) 17,896 19,557 21,841 22,516 24,868
Portfolio turnover rate............................... 96% 103% 81% 189% 319%
</TABLE>
Contracts issued on or after May 16, 1983
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------------------------
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
SELECTED PER UNIT DATA:
Total investment income............................... $ .205 $ .189 $ .184 $ .188 $ .198
Operating expenses.................................... .140 .115 .106 .098 .091
------ ------ ------ ------ ------
Net investment income................................. .065 .074 .078 .090 .107
Unit value at beginning of year....................... 6.917 7.007 6.507 6.447 5.048
Net realized and change in unrealized gains (losses).. 2.387 (.164) .422 (.030) 1.292
------ ------ ------ ------ ------
Unit value at end of year............................. $9.369 $6.917 $7.007 $6.507 $6.447
====== ====== ====== ====== ======
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value................. 2.45 (.09) .50 .06 1.40
Ratio of operating expenses to average net assets..... 1.70% 1.65% 1.57% 1.58% 1.58%
Ratio of net investment income to average net assets.. .79% 1.05% 1.15% 1.43% 1.86%
Number of units outstanding at end of year (thousands) 26,688 26,692 28,497 29,661 26,235
Portfolio turnover rate............................... 96% 103% 81% 189% 319%
</TABLE>
-11-
<PAGE> 122
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
NO. OF MARKET
SHARES VALUE
------- -----------
<S> <C> <C>
COMMON STOCKS (99.2%)
AMUSEMENTS (1.3%)
Harrah's Entertainment, Inc. 60,000 $ 1,455,000
Walt Disney Co. 69,900 4,124,100
-----------
5,579,100
-----------
BANKING (6.5%)
Banc One Corp. 69,537 2,625,022
Bank of Boston Corp. 10,500 485,625
Bank of New York, Inc. 17,000 828,750
BankAmerica Corp. 59,800 3,872,050
Barnett Banks, Inc. 29,500 1,740,500
Chase Manhattan Corp. 16,700 1,012,437
Chemical Banking Corp. 23,300 1,368,875
Citicorp 66,800 4,492,300
First Interstate Bancorp 7,300 996,450
First Union Corp. 16,300 906,688
Golden West Financial Corp. 23,200 1,281,800
Mellon Bank Corp. 11,900 639,625
NationsBank Corp. 52,500 3,655,312
Norwest Corp. 58,000 1,914,000
SunTrust Banks, Inc. 10,400 712,400
Wells Fargo & Co. 4,200 907,200
-----------
27,439,034
-----------
CHEMICALS, PHARMACEUTICALS AND
ALLIED PRODUCTS (14.4%)
Abbott Laboratories 91,900 3,836,825
Air Products & Chemicals, Inc. 38,700 2,041,425
American Home Products Corp. 27,100 2,628,700
Amgen (A) 48,800 2,894,450
Bristol-Myers Squibb Co. 30,300 2,602,013
Cabot Corp. 11,800 635,725
Clorox Co. 22,100 1,582,912
Colgate-Palmolive Co. 13,100 920,275
Dow Chemical Co. 24,500 1,724,188
E.I. Dupont de Nemours & Co. 49,700 3,472,787
Eastman Chemical Company 25,300 1,584,413
Eli Lilly & Co. 48,200 2,711,250
International Flavors & Fragrances 34,100 1,636,800
Johnson & Johnson 59,700 5,111,812
Merck & Co., Inc. 111,200 7,311,400
Monsanto Co. 10,800 1,323,000
Morton International, Inc. 47,400 1,700,475
Pfizer, Inc. 81,700 5,147,100
Pharmacia & Upjohn, Inc. (A) 46,400 1,798,000
Procter & Gamble Co. 79,400 6,590,200
Schering-Plough Corp. 57,800 3,164,550
-----------
60,418,300
-----------
</TABLE>
<TABLE>
<CAPTION>
NO. OF MARKET
SHARES VALUE
------- -----------
<S> <C> <C>
COMMUNICATION (10.0%)
Ameritech Corp. 56,600 $ 3,339,400
AT&T Corp. 172,700 11,182,325
Bell Atlantic Corp. 41,000 2,741,875
Bellsouth Corp. 100,000 4,350,000
Capital Cities ABC, Inc. 14,600 1,801,275
GTE Corp. 76,500 3,366,000
ITT Industries, Inc. (A) 24,500 588,000
MCI Communications Corp. 55,700 1,458,644
NYNEX Corp. 58,300 3,148,200
Sprint Corp. 31,200 1,244,100
SBC Communications., Inc. 75,400 4,335,500
Tele-Communications, Inc. (A) 29,400 586,163
U S West Communications Group 16,800 600,600
U S West Media Group(A) 17,100 324,900
Viacom International, Inc. (A) 62,600 2,965,675
-----------
42,032,657
-----------
CONSTRUCTION (0.3%)
Pulte Corp. 34,600 1,163,425
-----------
CONTRACTORS (0.5%)
Fluor Corp. 30,200 1,993,200
-----------
ELECTRICAL AND
ELECTRONIC MACHINERY (6.2%)
Alliance Semiconductor (A) 11,400 131,100
Amphenol Corp. (A) 85,500 2,073,375
Andrew Corp. (A) 41,500 1,602,938
Cypress Semiconductor (A) 110,700 1,411,425
General Electric Co. 151,800 10,929,600
Intel Corp. 64,600 3,670,087
LSI Logic Corp. (A) 12,000 393,000
Micron Technology 35,100 1,390,838
Motorola, Inc. 40,700 2,319,900
Tellabs, Inc. (A) 10,500 389,812
Texas Instruments, Inc. 16,000 828,000
Time Warner, Inc. 27,300 1,033,988
-----------
26,174,063
-----------
FINANCE (3.6%)
American Express Co. 44,800 1,853,600
Dean Witter Discover & Co. 39,800 1,870,600
Federal Home Loan Corp. 17,200 1,436,200
Federal National Mortgage Assoc. 25,000 3,103,125
Green Tree Financial Corp. 67,300 1,775,037
Household International 28,500 1,685,063
Lehman Brothers Holding, Inc. 44,600 947,750
Merrill Lynch & Co., Inc. 38,800 1,978,800
Morgan Stanley Group, Inc. 7,300 588,562
-----------
15,238,737
-----------
</TABLE>
-12-
<PAGE> 123
STATEMENT OF INVESTMENTS - CONTINUED
<TABLE>
<CAPTION>
NO. OF MARKET
SHARES VALUE
------- ----------
<S> <C> <C>
FOOD (9.0%)
Anheuser-Busch Cos. 12,400 $ 829,250
Campbell Soup Co. 19,400 1,164,000
Coca-Cola Co. 112,400 8,345,700
CONAGRA, Inc. 53,500 2,206,875
CPC International, Inc. 24,800 1,701,900
General Mills, Inc. 14,800 854,700
H.J. Heinz Co. 69,150 2,290,594
IBP, Inc. 13,600 686,800
Kellogg Co. 21,200 1,637,700
PepsiCo, Inc. 94,500 5,280,188
Philip Morris, Inc. 90,300 8,172,150
Ralston-Purina Group 28,700 1,790,162
Seagram Co. Ltd. 28,900 1,000,663
Unilever NV 12,400 1,745,300
-----------
37,705,982
-----------
INSURANCE (3.7%)
Aetna Life & Casualty Co. 9,700 671,725
Allstate Corp. 29,875 1,228,609
American International Group 54,450 5,036,625
Chubb Corp. 16,700 1,615,725
General Reinsurance Corp. 14,200 2,201,000
HealthCare COMPARE (A) 32,300 1,411,106
ITT Corp. (A) 24,500 1,298,500
ITT Hartford Group, Inc. (A) 24,500 1,185,187
United Healthcare Corp. 16,100 1,054,550
-----------
15,703,027
-----------
LUMBER AND WOOD PRODUCTS (0.1%)
Georgia-Pacific Corp. 8,600 590,175
-----------
MACHINERY (5.5%)
Apple Computer, Inc. 10,200 324,487
Applied Materials (A) 44,900 1,765,131
Baker Hughes, Inc. 66,000 1,608,750
Black & Decker Corp. 33,000 1,163,250
Cabletron Systems, Inc. (A) 7,100 575,100
Caterpillar, Inc. 18,400 1,081,000
Cisco Systems, Inc. (A) 27,100 2,024,031
Compaq Computer Corp. (A) 12,800 614,400
Duriron, Inc. 13,600 314,500
Harnischfeger Industries 44,900 1,492,925
Hewlett Packard Co. 45,400 3,802,250
International Business Machines Corp. 41,900 3,844,325
Silicon Graphics, Inc. (A) 61,900 1,702,250
Sun Microsystems (A) 19,200 877,200
3Com Corp. (A) 44,300 2,068,256
-----------
23,257,855
-----------
METAL PRODUCTS (2.0%)
Ball Corp. 35,200 968,000
Danaher Corp. 40,600 1,289,050
Gillette Co. 25,500 1,329,188
Inland Steel Industries, Inc. 31,300 786,413
Parker-Hannifin Corp. 41,900 1,435,075
Phelps Dodge Corp. 19,800 1,232,550
Reynolds Metals Co. 20,100 1,138,162
-----------
8,178,438
-----------
MINING (0.5%)
Freeport-McMoRan Copper & Gold 25,500 717,188
Homestake Mining Co. 88,100 1,376,562
-----------
2,093,750
-----------
</TABLE>
<TABLE>
<CAPTION>
NO. OF MARKET
SHARES VALUE
------- ----------
<S> <C> <C>
MISCELLANEOUS MANUFACTURING (3.6%)
Baxter International, Inc. 10,600 $ 443,875
Eastman Kodak Co. 29,500 1,976,500
Emerson Electric Co. 37,000 3,024,750
Heart Technology, Inc. (A) 42,600 1,392,488
Honeywell, Inc. 38,300 1,862,337
Mattel, Inc. 58,900 1,811,175
Medtronic, Inc. 60,000 3,352,500
Xerox Corp. 9,200 1,260,400
-----------
15,124,025
-----------
OIL & GAS (0.6%)
Anadarko Petroleum 14,200 768,575
Schlumberger Ltd. 22,500 1,558,125
-----------
2,326,700
-----------
PAPER AND ALLIED PRODUCTS (1.0%)
Bowater, Inc. 23,700 841,350
Champion International Corp. 30,400 1,276,800
International Paper Co. 22,500 852,188
Kimberly Clark Corp. 10,530 871,357
-----------
3,841,695
-----------
PETROLEUM REFINING AND
RELATED INDUSTRIES (7.9%)
Amoco Corp. 60,500 4,348,437
Atlantic Richfield, Inc. 14,800 1,639,100
Chevron Corp. 57,800 3,034,500
Exxon Corp. 110,000 8,813,750
Mobil Corp. 48,100 5,387,200
Phillips Petroleum Co. 22,700 774,638
Royal Dutch Petroleum Co. 58,800 8,298,150
Texaco, Inc. 10,000 785,000
-----------
33,080,775
-----------
PRINTING, PUBLISHING AND
ALLIED INDUSTRIES (0.8%)
Gannett Co. 32,100 1,970,138
New York Times Co. 50,800 1,504,950
-----------
3,475,088
-----------
RETAIL (5.7%)
Federated Department Stores, Inc. (A) 64,000 1,760,000
General Nutrition Cos., Inc. (A) 2,900 64,525
Home Depot, Inc. 75,166 3,598,572
J.C. Penney Co. 46,000 2,190,750
May Department Stores 51,600 2,180,100
McDonalds Corp. 57,000 2,572,125
OfficeMax, Inc. (A) 56,000 1,253,000
Price/Costco, Inc. (A) 92,100 1,416,037
Safeway, Inc. (A) 30,000 1,545,000
Tandy Corp. 29,300 1,215,950
The GAP, Inc. 13,500 567,000
Wal-Mart Stores, Inc. 158,500 3,546,438
Walgreen Co. 65,100 1,944,862
-----------
23,854,359
-----------
RUBBER AND PLASTIC PRODUCTS (0.6%)
Nike, Inc. 38,000 2,645,750
-----------
SERVICES (2.7%)
Autodesk, Inc. 28,000 959,000
Columbia/HCA Healthcare Corp. 40,300 2,045,225
Computer Associates International 18,650 1,060,719
Microsoft (A) 48,400 4,250,125
Oracle Systems Corp. (A) 75,450 3,197,193
-----------
11,512,262
-----------
</TABLE>
-13-
<PAGE> 124
STATEMENT OF INVESTMENTS-CONTINUED
<TABLE>
<CAPTION>
NO. OF MARKET
SHARES VALUE
---------- ------------
<S> <C> <C>
STONE, CLAY, GLASS AND
CONCRETE PRODUCTS (0.6%)
Minnesota Mining & Manufacturing Co. 38,200 $ 2,530,750
------------
TRANSPORTATION (1.7%)
AMR, Inc. (A) 21,400 1,588,950
Conrail, Inc. 23,100 1,617,000
CSX Corp. 43,800 1,998,375
Norfolk Southern Corp. 25,100 1,992,313
------------
7,196,638
------------
TRANSPORTATION MANUFACTURING (4.8%)
Boeing Co. 48,100 3,769,837
Chrysler Corp. 43,100 2,386,663
Eaton Corp. 25,100 1,345,987
Ford Motor Co. 103,300 2,995,700
General Motors Corp. 62,800 3,320,550
Lockheed Martin Corp. 18,039 1,425,081
McDonnell Douglas Corp. 23,600 2,171,200
United Technologies Corp. 17,800 1,688,775
Varity Corp. (A) 32,000 1,188,000
------------
20,291,793
------------
UTILITIES (4.7%)
Baltimore Gas & Electric Co. 69,600 1,983,600
Browning-Ferris Industries. 52,300 1,542,850
Duquesne Light Co. 51,300 1,577,475
Florida Power & Light Co. 53,100 2,462,513
Houston Industries 80,200 1,944,850
Pacific Enterprises 20,700 584,775
Panhandle Eastern Corp. 52,800 1,471,800
Public Service Enterprises Group 66,200 2,027,375
Southern Co. 113,700 2,799,862
Texas Utilities Co. 53,900 2,216,638
WMX Technologies, Inc. 44,500 1,329,437
------------
19,941,175
------------
WHOLESALE TRADE (0.9%)
Crane Co. 39,700 1,463,938
Enron Corp. 56,500 2,154,063
------------
3,618,001
------------
TOTAL COMMON STOCKS
(COST $332,383,742) 417,006,754
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
---------- -----------
<S> <C> <C>
SHORT-TERM INVESTMENTS (0.8%)
U.S. GOVERNMENT SECURITIES (0.0%)
United States of America Treasury,
5.49% due September 19, 1996 (C) $50,000 $47,462
United States of America Treasury,
5.51% due September 19, 1996 (C) 150,000 142,380
------------
189,842
------------
REPURCHASE AGREEMENTS (0.8%)
Merrill Lynch Government
Securities, Inc., 5.50% Repurchase
Agreement dated December 29,
1995, due January 2, 1996,
collateralized by: United States of
America Treasury, $3,375,000,
5.63% due October 31, 1997 3,361,000 3,361,000
------------
TOTAL SHORT-TERM
INVESTMENTS (COST $3,550,462) 3,550,842
------------
NOTIONAL
VALUE
----------
FUTURES CONTRACTS (0.0%)
S&P 500 Stock Index,
Exp. March, 1996 (D) $1,855,350 -
------------
TOTAL INVESTMENTS (100%)
(COST $335,934,204) (B) $420,557,596
------------
------------
</TABLE>
NOTES
(A) Non-income Producing Security.
(B) At December 31, 1995, net unrealized appreciation for all securities was
$84,623,392. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over cost of
$90,547,890 and aggregate gross unrealized depreciation for all securities
in which there was an excess of cost over market value of $5,924,498.
(C) Par value of $200,000 pledged to cover margin deposits on futures
contracts.
(D) As more fully discussed in Note 1 to the financial statements, it is
Account GIS's practice to hold cash and cash equivalents (including
short-term investments) at least equal to the underlying face value, or
notional value, of outstanding purchased futures contracts, less the
initial margin. Account GIS uses futures contracts as a substitute for
holding individual securities.
See Notes to Financial Statements
-14-
<PAGE> 125
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Managers and Owners of Variable Annuity Contracts of
The Travelers Growth and Income Stock Account for Variable Annuities:
We have audited the accompanying statement of assets and liabilities of The
Travelers Growth and Income Stock Account for Variable Annuities including the
statement of investments as of December 31, 1995, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended, and the per unit data for each
of the five years in the period then ended. These financial statements and per
unit data are the responsibility of management. Our responsibility is to
express an opinion on these financial statements and per unit data 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 and per unit
data 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 securities owned as of
December 31, 1995, by correspondence with the custodian and brokers. 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 and per unit data referred to above
present fairly, in all material respects, the financial position of The
Travelers Growth and Income Stock Account for Variable Annuities as of December
31, 1995, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and the per
unit data for each of the five years in the period then ended, in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 16, 1996
-15-
<PAGE> 126
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investment securities, at market value (identified cost $171,465,906) $177,553,579
Cash................................................................. 37,260
Receivables:
Interest............................................................ 2,005,670
Purchase payments and transfers from other Travelers accounts....... 95,800
Other assets......................................................... 732
------------
Total Assets....................................................... 179,693,041
------------
LIABILITIES:
Payables:
Contract surrenders and transfers to other Travelers accounts....... 53,512
Investment management and advisory fees............................. 7,967
Accrued liabilities.................................................. 30,012
------------
Total Liabilities.................................................. 91,491
------------
NET ASSETS............................................................ $179,601,550
============
</TABLE>
See Notes to Financial Statements
-18-
<PAGE> 127
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest.................................................. $11,561,622
EXPENSES:
Investment management and advisory fees................... $ 547,715
Insurance charges......................................... 1,990,477
-----------
Total expenses........................................... 2,538,192
-----------
Net investment income................................... 9,023,430
-----------
REALIZED GAIN AND CHANGE IN UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES:
Realized gain from investment security transactions:
Proceeds from investment securities sold................. 239,670,130
Cost of investment securities sold....................... 238,650,952
-----------
Net realized gain....................................... 1,019,178
Change in unrealized gain (loss) on investment securities:
Unrealized loss at December 31, 1994..................... (6,629,315)
Unrealized gain at December 31, 1995.................... 6,087,673
-----------
Net change in unrealized gain (loss) for the year....... 12,716,988
-----------
Net realized gain and change in unrealized gain (loss). 13,736,166
-----------
Net increase in net assets resulting from operations...... $22,759,596
===========
</TABLE>
See Notes to Financial Statements
-19-
<PAGE> 128
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
OPERATIONS:
Net investment income........................................... $ 9,023,430 $ 10,078,150
Net realized gain (loss) from investment security transactions.. 1,019,178 (1,194,328)
Net change in unrealized gain (loss) on investment securities... 12,716,988 (13,194,301)
------------ ------------
Net increase (decrease) in net assets resulting from operations 22,759,596 (4,310,479)
------------ ------------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 3,283,550 and 6,301,055 units, respectively).... 15,219,291 27,333,447
Participant transfers from other Travelers accounts
(applicable to 4,374,714 and 5,749,483 units, respectively).... 20,342,504 24,892,067
Administrative charges
(applicable to 30,577 and 36,754 units, respectively).......... (146,591) (157,847)
Contract surrenders
(applicable to 3,514,833 and 4,071,409 units, respectively).... (16,280,761) (17,682,850)
Participant transfers to other Travelers accounts
(applicable to 5,302,454 and 11,082,480 units, respectively)... (24,324,600) (47,893,070)
Other payments to participants
(applicable to 146,460 and 93,315 units, respectively)......... (686,680) (408,660)
------------ ------------
Net decrease in net assets resulting from unit transactions.... (5,876,837) (13,916,913)
------------ ------------
Net increase (decrease) in net assets......................... 16,882,759 (18,227,392)
NET ASSETS:
Beginning of year............................................... 162,718,791 180,946,183
------------ ------------
End of year..................................................... $179,601,550 $162,718,791
============ ============
</TABLE>
See Notes to Financial Statements
-20-
<PAGE> 129
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Quality Bond Account for Variable Annuities ("Account QB") is
a separate account of The Travelers Insurance Company ("The Travelers"), an
indirect wholly owned subsidiary of Travelers Group Inc., and is available
for funding certain variable annuity contracts issued by The Travelers.
Account QB is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company.
The following is a summary of significant accounting policies consistently
followed by Account QB in the preparation of its financial statements.
SECURITY VALUATION. Investments in securities traded on a national
securities exchange are valued at the last-reported sale price as of the
close of business of the New York Stock Exchange on the last business day of
the year; 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.
When market quotations are not considered to be readily available for
long-term corporate bonds and notes, such investments are generally stated
at fair value on the basis of valuations furnished by a pricing service.
These valuations are determined for normal institutional-size trading units
of such securities using methods based on market transactions for comparable
securities and various relationships between securities which are generally
recognized by institutional traders. Securities, including restricted
securities, for which pricing services are not readily available, are valued
by management at prices which it deems in good faith to be fair.
Short-term investments for which a quoted market price is available are
valued at market. Short-term investments for which there is no reliable
quoted market price are valued by computing a market value based upon
quotations from dealers or issuers for securities of a similar type, quality
and maturity.
FUTURES CONTRACTS. Account QB may use interest rate futures contracts as a
substitute for the purchase or sale of individual securities. When Account
QB enters into a futures contract, it agrees to buy or sell specified debt
securities at a future time for a fixed price, unless the contract is closed
prior to expiration. Account QB is obligated to deposit with a broker an
"initial margin" equivalent to a percentage of the face, or notional value
of the contract.
It is Account QB's practice to hold cash and cash equivalents in an amount
at least equal to the notional value of outstanding purchased futures
contracts, less the initial margin. Cash and cash equivalents include cash
on hand, securities segregated under federal and brokerage regulations, and
short-term highly liquid investments with maturities generally three months
or less when purchased. Generally, futures contracts are closed prior to
expiration.
Futures contracts purchased by Account QB are priced and settled daily;
accordingly, changes in daily prices are recorded as realized gains or
losses and no asset is recorded in the Statement of Investments. However,
when Account QB holds open futures contracts, it assumes a market risk
generally equivalent to the underlying market risk of change in the value of
the debt securities associated with the futures contract.
REPURCHASE AGREEMENTS. When Account QB enters into a repurchase agreement
(a purchase of securities whereby the seller agrees to repurchase the
securities at a mutually agreed upon date and price), the repurchase price
of the securities will generally equal the amount paid by Account QB plus a
negotiated interest amount. The seller under the repurchase agreement will
be required to provide to Account QB securities (collateral) whose market
value, including accrued interest, will be at least equal to 102% of the
repurchase price. Account QB monitors the value of collateral on a daily
basis. Repurchase agreements will be limited to transactions with national
banks and reporting broker dealers believed to present minimal credit
risks. Account QB's custodian will take actual or constructive receipt of
all securities underlying repurchase agreements until such agreements
expire.
-21-
<PAGE> 130
NOTES TO FINANCIAL STATEMENTS - CONTINUED
FEDERAL INCOME TAXES. The operations of Account QB form a part of the total
operations of The Travelers and are not taxed separately. The Travelers is
taxed as a life insurance company under the Internal Revenue Code of 1986,
as amended (the "Code"). Under existing federal income tax law, no taxes
are payable on the investment income and capital gains of Account QB.
Account QB is not taxed as a "regulated investment company" under Subchapter
M of the Code.
OTHER. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Security transactions are accounted for on the trade date. Interest income
is recorded on the accrual basis.
2. INVESTMENTS
Purchases and sales of securities other than short-term investments
aggregated $226,088,270 and $214,619,503, respectively, for the year ended
December 31, 1995. Realized gains and losses from security transactions are
reported on an identified cost basis.
Net realized losses resulting from futures contracts were $132,050 for the
year ended December 31, 1994. These losses are included in the net realized
loss from investment security transactions on the Statement of Changes in
Net Assets.
3. CONTRACT CHARGES
Investment management and advisory fees are calculated daily at an annual
rate of 0.3233% of Account QB's average net assets. These fees are paid to
Travelers Asset Management International Corporation, an indirect wholly
owned subsidiary of Travelers Group Inc.
Insurance charges are paid to The Travelers for the mortality and
expense risks assumed by The Travelers. On contracts issued prior to May
16, 1983, these charges are equivalent to 1.0017% of the average net assets
of Account QB on an annual basis. On contracts issued on or after May 16,
1983, the charges for mortality and expense risks are equivalent to 1.25% of
the average net assets of Account QB on an annual basis. Additionally, for
certain contracts in the accumulation phase, a semi-annual charge of $15
(prorated for partial periods and level of participation in other separate
accounts of The Travelers) is deducted from participant account balances and
paid to The Travelers to cover administrative charges.
On contracts issued prior to May 16, 1983, The Travelers retained from
Account QB sales charges of $20,292 and $30,136 for the years ended December
31, 1995 and 1994, respectively. The Travelers generally assesses a 5%
contingent deferred sales charge if a participant's purchase payment is
surrendered within five years of its payment date. Contract surrender
payments are stated prior to the deduction of $108,615 and $67,230 of
contingent deferred sales charges for the years ended December 31, 1995 and
1994, respectively.
-22-
<PAGE> 131
NOTES TO FINANCIAL STATEMENTS - CONTINUED
4. NET ASSETS HELD BY AFFILIATE
Approximately $755,000 and $722,000 of the net assets of Account QB were
held on behalf of an affiliate of The Travelers as of December 31, 1995
and 1994, respectively. Transactions with this affiliate during the years
ended December 31, 1995 and 1994, were comprised of participant purchase
payments of approximately $17,000 and $50,000, and contract surrenders of
approximately $86,000 and $115,000, respectively.
5. NET CONTRACT OWNERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31, 1995
---------------------------------
UNIT NET
UNITS VALUE ASSETS
---------- ------- ------------
<S> <C> <C> <C>
Contracts issued prior to May 16, 1983.............. 9,267,182 $5.050 $ 46,812,722
Annuity Contracts issued prior to May 16, 1983...... 58,236 5.050 294,175
Contracts issued on or after May 16, 1983........... 27,057,043 4.894 132,451,179
Annuity Contracts issued on or after May 16, 1983... 8,881 4.894 43,474
------------
Net Contract Owners' Equity.............................................. $179,601,550
============
</TABLE>
-23-
<PAGE> 132
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SUPPLEMENTARY INFORMATION
(Selected data for a unit outstanding throughout each year.)
Contracts issued prior to May 16, 1983
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
SELECTED PER UNIT DATA:
Total investment income............................... $ .328 $ .318 $ .306 $ .317 $ .304
Operating expenses.................................... .063 .059 .058 .050 .048
------- ------- ------- ------- -------
Net investment income................................. .265 .259 .248 .267 .256
Unit value at beginning of year....................... 4.400 4.498 4.150 3.880 3.421
Net realized and change in unrealized gains (losses).. .385 (.357) .100 .003 .203
------- ------- ------- ------- -------
Unit value at end of year............................. $ 5.050 $ 4.400 $ 4.498 $ 4.150 $ 3.880
======= ======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value................. .65 (.10) .35 .27 .46
Ratio of operating expenses to average net assets..... 1.33% 1.33% 1.33% 1.33% 1.33%
Ratio of net investment income to average net assets.. 5.54% 5.87% 5.66% 6.61% 7.09%
Number of units outstanding at end of year (thousands) 9,325 10,694 12,489 13,416 14,629
Portfolio turnover rate............................... 138% 27% 24% 23% 21%
</TABLE>
Contracts issued on or after May 16, 1983
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
SELECTED PER UNIT DATA:
Total investment income............................... $ .319 $ .310 $ .299 $ .311 $ .299
Operating expenses.................................... .073 .069 .067 .061 .056
------- ------- ------- ------- -------
Net investment income................................. .246 .241 .232 .250 .243
Unit value at beginning of year....................... 4.274 4.381 4.052 3.799 3.357
Net realized and change in unrealized gains (losses).. .374 (.348) .097 .003 .199
------- ------- ------- ------- -------
Unit value at end of year............................. $ 4.894 $ 4.274 $ 4.381 $ 4.052 $ 3.799
======= ======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value................. .62 (.11) .33 .25 .44
Ratio of operating expenses to average net assets..... 1.57% 1.57% 1.57% 1.58% 1.57%
Ratio of net investment income to average net assets.. 5.29% 5.62% 5.41% 6.38% 6.84%
Number of units outstanding at end of year (thousands) 27,066 27,033 28,472 20,250 17,211
Portfolio turnover rate............................... 138% 27% 24% 23% 21%
</TABLE>
-24-
<PAGE> 133
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
----------- -----------
<S> <C> <C>
BONDS (85.9%)
AMUSEMENTS (8.3%)
ITT Corp.,
6.25% Notes, 2000 $ 7,100,000 $ 7,146,683
Six Flags Entertainment,
0.00% Notes, 1999 7,000,000 5,302,500
Time Warner Entertainment, Inc.,
9.625% Notes, 2002 2,000,000 2,317,932
-----------
14,767,115
-----------
AUTO RECEIVABLES (1.1%)
Premier Auto Trust 1995-3,
6.25% Pass Through, 2001 2,000,000 2,035,998
-----------
BANKING (9.4%)
Banponce Financial Corp.,
6.69% Notes, 2000 6,500,000 6,658,535
Fleet Financial Group,
9.90% Notes, 2001 7,000,000 8,239,217
J.P. Morgan & Co.,
0.00% Notes, 1998 2,000,000 1,761,712
-----------
16,659,464
-----------
COMMUNICATION (4.8%)
Tele-Communications, Inc.,
7.31% Notes, 2001 6,500,000 6,763,913
Tele-Communications, Inc.,
9.65% Debentures, 2003 1,500,000 1,696,141
-----------
8,460,054
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS (13.7%)
American Southwest Financial
Corp., 9.00% Pass Through, 2018 683,033 706,693
CFAT,1995-A Certificates,
6.45% Pass Through, 1998 3,000,000 3,027,180
FNMA Remic Trust 1993-13,
6.50% Pass Through, 2000 2,403,238 2,391,291
FNMA Remic Trust 1994-39,
6.35% Pass Through, 2023 2,000,000 2,001,418
FNMA Remic Trust 1994-42,
5.75% Pass Through, 2018 2,500,000 2,472,173
GNMA Backed Trust II,
8.50% Pass Through, 2018 692,607 716,757
Grand Met Investment Corp.,
0.00% Notes, 2004 10,000,000 6,175,560
GS Trust 3D,
8.00% Pass Through, 2014 308,187 313,848
Kidder Peabody Mortgage
Assets Trust 23,
9.88% Pass Through, 2019 816,216 837,543
Oxford Acceptance Corp.,
9.70% Pass Through, 2017 227,192 234,589
PB CMO Trust II,
9.20% Pass Through, 2018 537,394 551,699
Prudential Home Mortgage 1992-17,
8.00% Pass Through, 2007 2,000,000 2,053,278
Residential Funding Mortgage
Securities 1993-MZ3,
6.97% Pass Through, 2023 (A) 2,367,301 2,312,379
Ryland Acceptance Corp.,
9.00% Pass Through, 2015 561,206 578,372
-----------
24,372,780
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
----------- -----------
<S> <C> <C>
CREDIT CARD RECEIVABLES (6.0%)
Chase Manhattan Credit Card
Master Trust,
8.75% Pass Through, 1996 $ 2,100,000 $ 2,129,335
First Chicago Master Trust II,
6.25% Pass Through, 1999 1,650,000 1,670,177
Household Private Label
CC MT 1994-2 B Certificate,
8.00% Pass Through, 2003 3,500,000 3,736,387
MBNA Master
Credit Card Trust, 1992-1,
7.25% Pass Through, 1997 1,000,000 1,024,909
Signet Credit Card
Master Trust,1993-4 B,
5.80% Pass Through, 1999 2,000,000 2,004,218
-----------
10,565,026
-----------
FINANCE (10.7%)
AT&T Capital Corp.,
6.10% Notes, 1998 7,200,000 7,283,124
Equitable Life,
6.95% Notes, 2005 5,000,000 5,062,500
General Motors Acceptance Corp.,
6.625% Notes, 2002 3,500,000 3,604,261
General Motors Acceptance Corp.,
7.75% Notes, 1999 2,000,000 2,112,354
Xerox Credit Corp.,
10.125% Notes, 1999 1,000,000 1,010,575
-----------
19,072,814
-----------
FOOD (2.0%)
Bacardi Martini,
5.75% Notes, 1998 3,620,000 3,615,475
-----------
MISCELLANEOUS MANUFACTURING (2.2%)
Becton Dickinson & Co.,
8.80% Notes, 2001 3,500,000 3,947,528
-----------
PAPER AND
ALLIED PRODUCTS (3.2%)
Champion International Corp.,
9.875% Debentures, 2000 5,000,000 5,757,395
-----------
PETROLEUM REFINING AND
RELATED INDUSTRIES (4.4%)
Hydro Quebec,
8.625% Notes, 2002 3,100,000 3,464,250
Hydro Quebec,
7.375% Debentures, 2003 4,000,000 4,272,436
-----------
7,736,686
-----------
SERVICES (1.8%)
Electronic Data System,
7.125% Notes, 2005 3,000,000 3,200,190
-----------
TRANSPORTATION (2.3%)
American Airlines, Inc. 1993-A4,
6.50% Notes, 1997 1,896,000 1,909,949
Delta Airlines, Inc.,
9.25% Sinking Fund, 2007 (A) 1,910,243 2,125,755
-----------
4,035,704
-----------
</TABLE>
-25-
<PAGE> 134
STATEMENT OF INVESTMENTS - CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
---------- -------------
<S> <C> <C>
TRANSPORTATION
MANUFACTURING (1.6%)
Ford Motor Co.,
6.27% Notes, 2000 $ 2,863,011 $ 2,863,944
------------
UTILITIES (14.4%)
Boston Edison Co.,
5.95% Debentures, 1998 1,000,000 995,370
DQU II Funding,
7.23% Bonds, 1999 8,272,000 8,543,644
Florida Gas Transmission,
7.75% Notes, 1997 2,500,000 2,586,025
Long Island Lighting Co.,
8.75% Bonds, 1996 1,500,000 1,511,963
NIPSCO Capital Market, Inc.,
0.00% Bonds, 1997 4,500,000 4,045,338
Transco Energy Co.,
9.125% Notes, 1998 4,000,000 4,295,216
United Illuminating Company.,
7.375% Debentures, 1998 3,500,000 3,581,788
------------
25,559,344
------------
TOTAL BONDS
(COST $147,038,183) 152,649,517
------------
U.S. GOVERNMENT
AGENCY SECURITIES (11.2%)
Federal Home Loan
Mortgage Corp., G24 ZC,
5.15% Pass Through, 2012 4,452,013 4,347,387
Federal National
Mortgage Association,
7.55% Notes, 2004 2,500,000 2,611,428
FNMA 30yr Conventional
Long Term,
7.50% Pass Through, 2025 10,670,307 10,943,734
GNMA 30yr Single Family Issue,
7.50% Pass Through, 2023 1,960,001 2,017,576
------------
TOTAL U.S. GOVERNMENT
AGENCY SECURITIES
(COST $19,521,129) 19,920,125
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
---------- -------------
<S> <C> <C>
U.S. GOVERNMENT
SECURITIES (2.6%)
United States of America Treasury,
5.50% Notes, 1999 $ 4,500,000 $ 4,530,937
------------
TOTAL U.S. GOVERNMENT
SECURITIES (COST $4,453,594) 4,530,937
------------
SHORT-TERM INVESTMENTS (0.3%)
REPURCHASE AGREEMENTS (0.3%)
Merrill Lynch Government
Securities, Inc., 5.50% Repurchase
Agreement dated December 29,
1995 due January 2, 1996,
collateralized by: United States of
America Treasury, $455,000,
5.63% due October 31, 1997 453,000 453,000
------------
TOTAL SHORT-TERM
INVESTMENTS
(COST $ 453,000) 453,000
------------
TOTAL INVESTMENTS (100%)
(COST $171,465,906) (B) $177,553,579
============
</TABLE>
NOTES
(A) Management Priced Security.
(B) At December 31, 1995, net unrealized appreciation for all securities was
$6,087,673. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over cost of
$6,300,641 and aggregate gross unrealized depreciation for all securities
in which there was an excess of cost over market value of $212,968.
See Notes to Financial Statements
-26-
<PAGE> 135
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Managers and Owners of Variable Annuity Contracts of
The Travelers Quality Bond Account for Variable Annuities:
We have audited the accompanying statement of assets and liabilities of The
Travelers Quality Bond Account for Variable Annuities including the statement
of investments as of December 31, 1995, and the related statement of operations
for the year then ended, the statement of changes in net assets for each of the
two years in the period then ended, and the per unit data for each of the five
years in the period then ended. These financial statements and per unit data
are the responsibility of management. Our responsibility is to express an
opinion on these financial statements and per unit data 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 and per unit
data 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 securities owned as of
December 31, 1995, by correspondence with the custodian. 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 and per unit data referred to above
present fairly, in all material respects, the financial position of The
Travelers Quality Bond Account for Variable Annuities as of December 31, 1995,
the results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the per unit
data for each of the five years in the period then ended, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 16, 1996
-27-
<PAGE> 136
THE TRAVELERS MONEY MARKET ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investment securities, at market value (identified cost $78,016,334) $78,010,508
Receivables:
Interest........................................................... 506,982
Purchase payments and transfers from other Travelers accounts...... 287,249
Other assets........................................................ 222
-----------
Total Assets...................................................... 78,804,961
-----------
LIABILITIES:
Cash overdraft...................................................... 289,043
Payables:
Contract surrenders and transfers to other Travelers accounts...... 247,635
Investment management and advisory fees............................ 3,483
Accrued liabilities................................................. 13,389
-----------
Total Liabilities................................................. 553,550
-----------
NET ASSETS........................................................... $78,251,411
===========
</TABLE>
See Notes to Financial Statements
-30-
<PAGE> 137
THE TRAVELERS MONEY MARKET ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest............................................ $4,662,482
EXPENSES:
Investment management and advisory fees............. $254,985
Insurance charges................................... 980,050
--------
Total expenses..................................... 1,235,035
----------
Net investment income............................. 3,427,447
----------
Net increase in net assets resulting from operations $3,427,447
==========
</TABLE>
See Notes to Financial Statements
-31-
<PAGE> 138
THE TRAVELERS MONEY MARKET ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................. $ 3,427,447 $ 2,248,581
----------- -----------
Net increase in net assets resulting from operations.................. 3,427,447 2,248,581
----------- -----------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 6,970,794 and 14,485,166 units, respectively).......... 14,864,399 29,698,901
Participant transfers from other Travelers accounts
(applicable to 39,907,908 and 45,192,925 units, respectively)......... 85,226,642 92,615,492
Administrative charges
(applicable to 44,021 and 49,034 units, respectively)................. (94,696) (101,345)
Contract surrenders
(applicable to 5,220,626 and 5,130,779 units, respectively)........... (11,137,360) (10,532,362)
Participant transfers to other Travelers accounts
(applicable to 45,205,495 and 48,771,566 units, respectively)......... (96,405,902) (100,065,788)
Other payments to participants
(applicable to 363,303 and 290,664 units, respectively)............... (782,623) (598,655)
----------- -----------
Net increase (decrease) in net assets resulting from unit transactions (8,329,540) 11,016,243
----------- -----------
Net increase (decrease) in net assets................................ (4,902,093) 13,264,824
NET ASSETS:
Beginning of year...................................................... 83,153,504 69,888,680
----------- -----------
End of year............................................................ $78,251,411 $83,153,504
=========== ===========
</TABLE>
See Notes to Financial Statements
-32-
<PAGE> 139
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Money Market Account for Variable Annuities ("Account MM") is
a separate account of The Travelers Insurance Company ("The Travelers"), an
indirect wholly owned subsidiary of Travelers Group Inc., and is available
for funding certain variable annuity contracts issued by The Travelers.
Account MM is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company.
The following is a summary of significant accounting policies consistently
followed by Account MM in the preparation of its financial statements.
SECURITY VALUATION. Short-term investments for which a quoted market price
is available are valued at market. Short-term investments for which there
is no reliable quoted market price are valued by computing a market value
based upon quotations from dealers or issuers for securities of a similar
type, quality and maturity.
REPURCHASE AGREEMENTS. When Account MM enters into a repurchase agreement
(a purchase of securities whereby the seller agrees to repurchase the
securities at a mutually agreed-upon date and price), the repurchase price
of the securities will generally equal the amount paid by Account MM plus a
negotiated interest amount. The seller under the repurchase agreement will
be required to provide to Account MM securities (collateral) whose market
value, including accrued interest, will be at least equal to 102% of the
repurchase price. Account MM monitors the value of collateral on a daily
basis. Repurchase agreements will be limited to transactions with national
banks and reporting broker dealers believed to present minimal credit risks.
Account MM's custodian will take actual or constructive receipt of all
securities underlying repurchase agreements until such agreements expire.
FEDERAL INCOME TAXES. The operations of Account MM form a part of the
total operations of The Travelers and are not taxed separately. The
Travelers is taxed as a life insurance company under the Internal Revenue
Code of 1986, as amended (the "Code"). Under existing federal income tax
law, no taxes are payable on the investment income and capital gains of
Account MM. Account MM is not taxed as a "regulated investment company"
under Subchapter M of the Code.
OTHER. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Security transactions are accounted for on the trade date. Interest income
is recorded on the accrual basis.
2. CONTRACT CHARGES
Investment management and advisory fees are calculated daily at an annual
rate of 0.3233% of Account MM's net assets. These fees are paid to
Travelers Asset Management International Corporation, an indirect wholly
owned subsidiary of Travelers Group Inc.
Insurance charges are paid to The Travelers for the mortality and expense
risks assumed by The Travelers. On contracts issued prior to May 16, 1983,
these charges are equivalent to 1.0017% of the average net assets of Account
MM on an annual basis. On contracts issued on or after May 16, 1983, the
charges for mortality and expense risks are equivalent to 1.25% of the
average net assets of Account MM on an annual basis. Additionally, for
certain contracts in the accumulation phase, a semi-annual charge of $15
(prorated for partial periods) is deducted from participant account balances
and paid to The Travelers to cover administrative charges.
The Travelers assesses a 5% contingent deferred sales charge if a
participant's purchase payment is surrendered within five years of its
payment date. Contract surrender payments are stated prior to the deduction
of $142,783 and $98,960 of contingent deferred sales charges for the years
ended December, 31 1995 and 1994, respectively.
-33-
<PAGE> 140
NOTES TO FINANCIAL STATEMENTS - CONTINUED
3. NET ASSETS HELD BY AFFILIATE
Approximately $1,816,000 and $485,000 of the net assets of Account MM were
held on behalf of an affiliate of The Travelers as of December 31, 1995 and
1994, respectively. Transactions with this affiliate during the years ended
December 31, 1995 and 1994, were comprised of contract surrenders of
approximately $72,000 and $800,000, respectively. Participant purchase
payments were approximately $965,000 for the year ended December 31, 1995.
4. NET CONTRACT OWNERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-----------------------------------------
NET
UNITS UNIT VALUE ASSETS
----- ---------- ------
<S> <C> <C> <C>
Contracts issued prior to May 16, 1983........... 205,781 $2.246 $ 462,401
Contracts issued on or after May 16, 1983........ 35,666,813 2.177 77,671,585
Annuity Contracts issued on or after May 16, 1983 53,922 2.177 117,425
-------------
Net Contract Owners' Equity.............................................. $ 78,251,411
=============
</TABLE>
-34-
<PAGE> 141
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. SUPPLEMENTARY INFORMATION
(Selected data for a unit outstanding throughout each year.)
Contracts issued prior to May 16, 1983
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------------------------
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
SELECTED PER UNIT DATA:
Total investment income............................... $.130 $.091 $.067 $.079 $.120
Operating expenses.................................... .030 .028 .027 .027 .026
------ ------ ------ ------ ------
Net investment income................................. .100 .063 .040 .052 .094
Unit value at beginning of year....................... 2.146 2.083 2.043 1.991 1.897
------ ------ ------ ------ ------
Unit value at end of year............................. $2.246 $2.146 $2.083 $2.043 $1.991
====== ====== ====== ====== ======
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase in unit value............................ .10 .06 .04 .05 .09
Ratio of operating expenses to average net assets..... 1.33 % 1.33 % 1.33 % 1.33 % 1.33 %
Ratio of net investment income to average net assets.. 4.61 % 2.98 % 1.93 % 2.58 % 4.90 %
Number of units outstanding at end of year (thousands) 206 206 218 227 262
</TABLE>
Contracts issued on or after May 16, 1983
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------------------------
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
SELECTED PER UNIT DATA:
Total investment income............................... $.127 $.087 $.065 $.077 $.118
Operating expenses.................................... .034 .032 .031 .031 .030
------ ------ ------ ------ ------
Net investment income................................. .093 .055 .034 .046 .088
Unit value at beginning of year....................... 2.084 2.029 1.995 1.949 1.861
------ ------ ------ ------ ------
Unit value at end of year............................. $2.177 $2.084 $2.029 $1.995 $1.949
====== ====== ====== ====== ======
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase in unit value............................ .09 .06 .03 .05 .09
Ratio of operating expenses to average net assets..... 1.57 % 1.57 % 1.57 % 1.57 % 1.57 %
Ratio of net investment income to average net assets.. 4.36 % 2.72 % 1.68 % 2.33 % 4.66 %
Number of units outstanding at end of year (thousands) 35,721 39,675 34,227 42,115 55,013
</TABLE>
-35-
<PAGE> 142
THE TRAVELERS MONEY MARKET ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
---------- -----------
<S> <C> <C>
SHORT-TERM
INVESTMENTS (100%)
COMMERCIAL PAPER (97.6%)
ABN AMRO Holdings NV,
5.55% due April 30, 1996 $ 3,000,000 $ 2,999,542
Associates Corp. of North America,
5.87% due February 15, 1996 3,000,000 2,995,647
Bank of Montreal,
5.70% due March 22, 1996 3,000,000 2,948,256
Ciesco LP,
5.61% due February 27, 1996 3,500,000 3,461,480
CIT Group Holdings, Inc.,
5.68% due June 15, 1996 2,000,000 2,029,353
Corp. Receives Corp.,
5.78% due January 17, 1996 3,500,000 3,453,693
Daimler Benz North America Corp.,
5.76% due February 2, 1996 3,500,000 3,464,527
Dresdner U.S. Financial, Inc.,
5.80% due January 22, 1996 3,500,000 3,449,583
General Electric Capital Corp.,
5.54% due May 3, 1996 3,500,000 3,421,583
Hanson PLC,
6.52% due January 15, 1996 3,500,000 3,499,671
J.P. Morgan & Co. Inc.,
5.80% due January 8, 1996 3,500,000 3,481,868
Kingdom of Sweden,
5.71% due March 8, 1996 3,500,000 3,445,737
Morgan Stanley Group, Inc.,
5.81% due January 24, 1996 3,500,000 3,449,482
National Rural Utilities
Cooperative Financial Corp.,
5.72% due February 9,1996 3,500,000 3,462,297
PACCAR Financial Corp.,
5.90% due September 20, 1996 3,500,000 3,497,987
Pearson, Inc.,
5.79% due January 17, 1996 3,600,000 3,579,616
Pitney Bowes Credit Corp.,
5.70% due February 7, 1996 3,500,000 3,463,495
Potomac Electric Power Co.,
5.78% due January 11, 1996 875,000 870,747
Progress Capital Holdings, Inc.,
5.84% due January 18, 1996 3,500,000 3,476,715
PHH Corp.,
5.78% due January 19, 1996 3,900,000 3,871,084
Siemens Corp.,
5.74% due January 22, 1996 1,500,000 1,489,138
Southern California Edison Co.,
5.44% due May 31, 1996 3,500,000 3,417,922
Teco Financial, Inc.,
5.81% due February 9, 1996 3,500,000 3,442,670
Wachovia Bank of North Carolina NA,
5.83% due May 13, 1996 3,500,000 3,503,415
-----------
76,175,508
-----------
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
---------- -----------
<S> <C> <C>
REPURCHASE AGREEMENTS (2.4%)
Merrill Lynch Government
Securities, Inc., 5.50% Repurchase
Agreement dated December 29,
1995 due January 2, 1996,
collateralized by: United States of
America Treasury, $1,845,000,
5.63% due October 31, 1997 $ 1,835,000 $ 1,835,000
-----------
TOTAL INVESTMENTS (100%) $78,010,508
(COST $78,016,334) ===========
</TABLE>
See Notes to Financial Statements
-36-
<PAGE> 143
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Managers and Owners of Variable Annuity Contracts of
The Travelers Money Market Account for Variable Annuities:
We have audited the accompanying statement of assets and liabilities of The
Travelers Money Market Account for Variable Annuities including the statement
of investments as of December 31, 1995, and the related statement of operations
for the year then ended, the statement of changes in net assets for each of the
two years in the period then ended, and the per unit data for each of the five
years in the period then ended. These financial statements and per unit data
are the responsibility of management. Our responsibility is to express an
opinion on these financial statements and per unit data 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 and per unit
data 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 securities owned as of
December 31, 1995, by correspondence with the custodian. 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 and per unit data referred to above
present fairly, in all material respects, the financial position of The
Travelers Money Market Account for Variable Annuities as of December 31, 1995,
the results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the per unit
data for each of the five years in the period then ended, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 16, 1996
-37-
<PAGE> 144
THE TRAVELERS TIMED GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investment securities, at market value (identified cost $218,088,826) . . . . . . . . $ 234,727,772
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,809,383
Receivables:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 259,024
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 521,319
Investment securities sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,534,864
Purchase payments and transfers from other Travelers accounts . . . . . . . . . . 145,221
Variation on futures margin . . . . . . . . . . . . . . . . . . . . . . . . . . . 111,300
---------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 239,108,883
---------------
LIABILITIES:
Payables:
Investment securities purchased . . . . . . . . . . . . . . . . . . . . . . . . . 1,016,632
Contract surrenders and transfers to other Travelers accounts . . . . . . . . . . 248,699
Investment management and advisory fees . . . . . . . . . . . . . . . . . . . . . 10,577
Market timing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,379
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,723
---------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,341,010
---------------
NET ASSETS
(Applicable to 105,043,638 units outstanding at $2.263 per unit) . . . . . . . . . . $ 237,767,873
===============
</TABLE>
See Notes to Financial Statements
-4-
<PAGE> 145
THE TRAVELERS TIMED GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,672,366
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,387,085
--------------
Total income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,059,451
EXPENSES:
Market timing fees . . . . . . . . . . . . . . . . . . . . . . . . 1,843,842
Investment management and advisory fees . . . . . . . . . . . . . . 479,029
Insurance charges . . . . . . . . . . . . . . . . . . . . . . . . . 1,843,842
--------------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . 4,166,713
---------------
Net investment income . . . . . . . . . . . . . . . . . . . 1,892,738
---------------
REALIZED GAIN AND CHANGE IN UNREALIZED GAIN ON
INVESTMENT SECURITIES:
Realized gain from investment security transactions:
Proceeds from investment securities sold . . . . . . . . . . . . 176,122,054
Cost of investment securities sold . . . . . . . . . . . . . . . 157,239,157
--------------
Net realized gain . . . . . . . . . . . . . . . . . . . . . 18,882,897
Change in unrealized gain on investment securities:
Unrealized gain at December 31, 1994 . . . . . . . . . . . . . . 183,229
Unrealized gain at December 31, 1995 . . . . . . . . . . . . . . 16,638,946
--------------
Net change in unrealized gain for the year . . . . . . . . . 16,455,717
---------------
Net realized gain and change in unrealized gain . . . . . 35,338,614
---------------
Net increase in net assets resulting from operations . . . . . . . $ 37,231,352
===============
</TABLE>
See Notes to Financial Statements
-5-
<PAGE> 146
THE TRAVELERS TIMED GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . $ 1,892,738 $ 1,302,116
Net realized gain (loss) from investment security transactions . . . 18,882,897 (13,198,289)
Net change in unrealized gain on investment securities . . . . . . . 16,455,717 183,229
--------------- ---------------
Net increase (decrease) in net assets resulting from operations . 37,231,352 (11,712,944)
--------------- ---------------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 4,557,812 and 5,436,273 units, respectively) . . . 9,246,578 9,166,985
Participant transfers from other Travelers accounts
(applicable to 263,610 and 168,881 units, respectively) . . . . . 530,000 307,302
Market timing transfers from other Travelers timed accounts
(applicable to 91,018,707 and 244,492,247 units, respectively) . . 182,133,693 426,883,052
Administrative charges
(applicable to 150,735 and 117,707 units, respectively) . . . . . (325,636) (193,352)
Contract surrenders
(applicable to 6,210,191 and 6,733,833 units, respectively) . . . (12,733,388) (11,342,908)
Participant transfers to other Travelers accounts
(applicable to 13,985,712 and 27,205,807 units, respectively) . . (28,338,250) (45,844,869)
Market timing transfers to other Travelers timed accounts
(applicable to 186,256,925 units) . . . . . . . . . . . . . . . . - (316,794,041)
Other payments to participants
(applicable to 141,806 and 91,176 units, respectively) . . . . . . (290,911) (154,790)
--------------- ---------------
Net increase in net assets resulting from unit transactions . . . 150,222,086 62,027,379
--------------- ---------------
Net increase in net assets . . . . . . . . . . . . . . . . . . 187,453,438 50,314,435
NET ASSETS:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . 50,314,435 -
--------------- ---------------
End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 237,767,873 $ 50,314,435
=============== ===============
</TABLE>
See Notes to Financial Statements
-6-
<PAGE> 147
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Timed Growth and Income Stock Account for Variable
Annuities ("Account TGIS") is a separate account of The Travelers
Insurance Company ("The Travelers"), an indirect wholly owned
subsidiary of Travelers Group Inc., and is available for funding
certain variable annuity contracts issued by The Travelers. Account
TGIS is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company.
Participants in Account TGIS have entered into market timing service
agreements with an affiliate of The Travelers, which provide for the
transfer of participants' funds to certain other timed accounts of The
Travelers, at the discretion of the market timer.
The following is a summary of significant accounting policies
consistently followed by Account TGIS in the preparation of its
financial statements.
SECURITY VALUATION. Investments in securities traded on a national
securities exchange are valued at the last-reported sale price as of
the close of business of the New York Stock Exchange on the last
business day of the year; 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.
When market quotations are not considered to be readily available for
long-term corporate bonds and notes, such investments are generally
stated at fair value on the basis of valuations furnished by a pricing
service. These valuations are determined for normal
institutional-size trading units of such securities using methods
based on market transactions for comparable securities and various
relationships between securities which are generally recognized by
institutional traders. Securities, including restricted securities,
for which pricing services are not readily available are valued by
management at prices which it deems in good faith to be fair.
Short-term investments for which a quoted market price is available
are valued at market. Short-term investments for which there is no
reliable quoted market price are valued by computing a market value
based upon quotations from dealers or issuers for securities of a
similar type, quality and maturity.
FUTURES CONTRACTS. Account TGIS uses stock index futures contracts,
and may also use interest rate futures contracts, as a substitute for
the purchase or sale of individual securities. When Account TGIS
enters into a futures contract, it agrees to buy or sell a specified
index of stocks or debt securities at a future time for a fixed price,
unless the contract is closed prior to expiration. Account TGIS is
obligated to deposit with a broker an "initial margin" equivalent to a
percentage of the face, or notional value of the contract.
It is Account TGIS's practice to hold cash and cash equivalents in an
amount at least equal to the notional value of outstanding purchased
futures contracts, less the initial margin. Cash and cash equivalents
include cash on hand, securities segregated under federal and
brokerage regulations, and short-term highly liquid investments with
maturities generally three months or less when purchased. Generally,
futures contracts are closed prior to expiration.
Futures contracts purchased by Account TGIS are priced and settled
daily; accordingly, changes in daily prices are recorded as realized
gains or losses and no asset is recorded in the Statement of
Investments. However, when Account TGIS holds open futures contracts,
it assumes a market risk generally equivalent to the underlying market
risk of change in the value of the specified indexes associated with
the futures contract.
OPTIONS. Account TGIS may purchase index or individual equity put or
call options, thereby obtaining the right to sell or buy a fixed
number of shares of the underlying asset at the stated price on or
before the stated expiration date. Account TGIS may sell the options
before expiration. Options held by Account TGIS are listed on either
national securities exchanges or on over-the-counter markets, and are
short-term contracts with a duration of less than nine months. The
market value of the options will be the latest sale price at the close
of the New York Stock Exchange, or in the absence of such sale, the
latest bid quotation.
-7-
<PAGE> 148
NOTES TO FINANCIAL STATEMENTS - CONTINUED
REPURCHASE AGREEMENTS. When Account TGIS enters into a repurchase
agreement (a purchase of securities whereby the seller agrees to
repurchase the securities at a mutually agreed upon date and price),
the repurchase price of the securities will generally equal the amount
paid by Account TGIS plus a negotiated interest amount. The seller
under the repurchase agreement will be required to provide to Account
TGIS securities (collateral) whose market value, including accrued
interest, will be at least equal to 102% of the repurchase price.
Account TGIS monitors the value of collateral on a daily basis.
Repurchase agreements will be limited to transactions with national
banks and reporting broker dealers believed to present minimal credit
risks. Account TGIS's custodian will take actual or constructive
receipt of all securities underlying repurchase agreements until such
agreements expire.
FEDERAL INCOME TAXES. The operations of Account TGIS form a part of
the total operations of The Travelers and are not taxed separately.
The Travelers is taxed as a life insurance company under the Internal
Revenue Code of 1986, as amended (the "Code"). Under the existing
federal income tax law no taxes are payable on the investment income
and capital gains of account TGIS. TGIS is not taxed as "regulated
investment company" under Subchapter M of the Code.
OTHER. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Security transactions are accounted for on the trade date. Dividend
income is recorded on the ex-dividend date. Interest income is
recorded on the accrual basis.
2. INVESTMENTS
Purchases and sales of securities other than short-term investments
aggregated $149,948,054 and $60,388,180, respectively, for the year
ended December 31, 1995. Realized gains and losses from security
transactions are reported on an identified cost basis.
At December 31, 1995, Account TGIS held 318 open S&P 500 Stock Index
futures contracts with a maturity date of March 15, 1996. The
underlying face value, or notional value, of these contracts at
December 31, 1995 amounted to $98,333,550. In connection with these
contracts, short-term investments with a par value of $4,500,000 had
been pledged as margin deposits.
Net realized gains (losses) resulting from futures contracts were
$16,007,920 and ($13,010,751) for the years ended December 31, 1995
and 1994, respectively. These gains (losses) are included in the net
realized gain (loss) from investment security transactions on both the
Statement of Operations and the Statement of Changes in Net Assets.
The cash settlement for December 31, 1995, is shown on the Statement
of Assets and Liabilities as a receivable for variation on futures
margin.
-8-
<PAGE> 149
NOTES TO FINANCIAL STATEMENTS - CONTINUED
3. CONTRACT CHARGES
Investment management and advisory fees are calculated daily at an
annual rate of 0.3233% of Account TGIS's average net assets. These
fees are paid to The Travelers Investment Management Company, an
indirect wholly owned subsidiary of Travelers Group Inc.
A market timing fee equivalent on an annual basis to 1.25% of the net
assets of Account TGIS is deducted for market timing services. The
Travelers deducts the fee daily and, in turn, pays the fee to Copeland
Financial Services, Inc., a registered investment adviser and an
affiliate of The Travelers which provides market timing services to
subscribing participants in Account TGIS.
Insurance charges are paid to The Travelers for the mortality and
expense risks assumed by The Travelers. These charges are equivalent
to 1.25% of the average net assets of Account TGIS on an annual basis.
Additionally, for contracts in the accumulation phase, a semi-annual
charge of $15 (prorated for partial periods) is deducted from
participant account balances and paid to The Travelers to cover
administrative charges.
No sales charge is deducted from participant purchase payments when
they are received. However, The Travelers generally assesses a 5%
contingent deferred sales charge if a participant's purchase payment
is surrendered within five years of its payment date. Contract
surrender payments are stated prior to the deduction of $143,108 and
$170,063 in satisfaction of contingent deferred sales charges for the
years ended December 31, 1995 and 1994, respectively.
4. SUPPLEMENTARY INFORMATION
(Selected data for a unit outstanding throughout each year.)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
SELECTED PER UNIT DATA:
Total investment income . . . . . . . . . . . . . . . . . $.083 $ .064 $ .043 $ .046 $ .045
Operating expenses . . . . . . . . . . . . . . . . . . . .057 .041 .042 .045 .045
------ ------- ------- ------- -------
Net investment income . . . . . . . . . . . . . . . . . . .026 .023 .001 .001 -
Unit value at beginning of year . . . . . . . . . . . . . 1.695 1.776 1.689 1.643 1.391
Net realized and change in unrealized gains (losses) . . .542 (.104) .086 .045 .252
------ ------- ------- ------- -------
Unit value at end of year . . . . . . . . . . . . . . . . $2.263 $ 1.695 $ 1.776 $ 1.689 $ 1.643
====== ======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value . . . . . . . . . . .57 (.08) .09 .05 .25
Ratio of operating expenses to average net assets* . . . 2.83% 2.82% 2.82% 2.82% 2.83%
Ratio of net investment income to average net assets* . . 1.37% 1.58% .08% .78% 1.33%
Number of units outstanding at end of year (thousands). . 105,044 29,692 - 217,428 -
Portfolio turnover rate . . . . . . . . . . . . . . . . . 79% 19% 70% 119% 489%
</TABLE>
* Annualized.
-9-
<PAGE> 150
THE TRAVELERS TIMED GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
NO. OF MARKET
SHARES VALUE
------ -----------
<S> <C> <C>
COMMON STOCKS (59.2%)
AMUSEMENTS (0.8%)
Harrah's Entertainment, Inc. 20,000 $ 485,000
Walt Disney Co. 23,200 1,368,800
-----------
1,853,800
-----------
BANKING (3.8%)
Banc One Corp. 23,200 875,800
Bank of Boston Corp. 3,500 161,875
Bank of New York, Inc. 5,600 273,000
BankAmerica Corp. 20,200 1,307,950
Barnett Banks, Inc. 9,800 578,200
Chase Manhattan Corp. 5,600 339,500
Chemical Banking Corp. 7,800 458,250
Citicorp 22,300 1,499,675
First Interstate Bancorp 2,400 327,600
First Union Corp. 5,300 294,812
Golden West Financial Corp. 7,800 430,950
Mellon Bank Corp. 3,900 209,625
NationsBank Corp. 17,100 1,190,588
Norwest Corp. 19,400 640,200
SunTrust Banks, Inc. 3,500 239,750
Wells Fargo & Co. 1,400 302,400
-----------
9,130,175
-----------
CHEMICALS, PHARMACEUTICALS AND
ALLIED PRODUCTS (8.6%)
Abbott Laboratories 30,600 1,277,550
Air Products & Chemicals, 13,000 685,750
Inc.
American Home Products Corp. 9,100 882,700
Amgen (A) 16,300 966,794
Bristol-Myers Squibb Co. 10,100 867,337
Cabot Corp. 3,900 210,113
Clorox Co. 7,300 522,862
Colgate-Palmolive Co. 4,400 309,100
Dow Chemical Co. 8,200 577,075
E.I. Dupont de Nemours & Co. 16,700 1,166,913
Eastman Chemical Company 8,400 526,050
Eli Lilly & Co. 16,200 911,250
International Flavors & 11,300 542,400
Fragrances
Johnson & Johnson 19,900 1,703,937
Merck & Co., Inc. 37,200 2,445,900
Monsanto Co. 3,600 441,000
Morton International, Inc. 15,900 570,413
Pharmacia & Upjohn, Inc. (A) 15,500 600,625
Pfizer, Inc. 27,200 1,713,600
Procter & Gamble Co. 26,400 2,191,200
Schering-Plough Corp. 19,200 1,051,200
-----------
20,163,769
-----------
</TABLE>
<TABLE>
<CAPTION>
NO. OF MARKET
SHARES VALUE
------ -----------
<S> <C> <C>
COMMUNICATION (6.0%)
Ameritech Corp. 18,800 $ 1,109,200
AT&T Corp. 57,700 3,736,075
Bell Atlantic Corp. 13,600 909,500
Bellsouth Corp. 33,200 1,444,200
Capital Cities ABC, Inc. 4,900 604,537
GTE Corp. 25,600 1,126,400
ITT Industries, Inc. (A) 8,200 196,800
MCI Communications Corp. 18,700 489,706
NYNEX Corp. 19,400 1,047,600
Sprint Corp. 10,400 414,700
SBC Communications., Inc. 25,300 1,454,750
Tele-Communications, Inc. (A) 9,500 189,406
U.S. West, Inc. 5,500 196,625
US West Media (A) 5,500 104,500
Viacom International, Inc. (A) 20,800 985,400
-----------
14,009,399
-----------
CONSTRUCTION (0.2%)
Pulte Corp. 11,500 386,688
-----------
CONTRACTORS (0.3%)
Fluor Corp. 10,000 660,000
ELECTRICAL AND
ELECTRONIC MACHINERY (3.7%)
Alliance Semiconductor (A) 3,800 43,700
Amphenol Corp. (A) 28,700 695,975
Andrew Corp. (A) 13,800 533,025
Cypress Semiconductor (A) 36,900 470,475
General Electric Co. 50,500 3,636,000
Intel Corp. 21,500 1,221,469
LSI Logic Corp. (A) 3,900 127,725
Micron Technology 11,700 463,612
Motorola, Inc. 13,500 769,500
Tellabs, Inc. (A) 3,500 129,938
Texas Instruments, Inc. 5,300 274,275
Time Warner, Inc. 9,200 348,450
-----------
8,714,144
-----------
FINANCE (2.2%)
American Express Co. 14,900 616,487
Dean Witter Discover & Co. 13,300 625,100
Federal Home Loan Corp. 5,700 475,950
Federal National Mortgage 8,400 1,042,650
Assoc.
Green Tree Financial Corp. 22,400 590,800
Household International 9,500 561,688
Lehman Brothers Holding, Inc. 14,900 316,625
Merrill Lynch & Co., Inc. 12,900 657,900
Morgan Stanley Group, Inc. 2,400 193,500
-----------
5,080,700
-----------
</TABLE>
-10-
<PAGE> 151
STATEMENT OF INVESTMENTS - CONTINUED
<TABLE>
<CAPTION>
NO. OF MARKET
SHARES VALUE
------ ------
<S> <C> <C>
FOOD (5.3%)
Anheuser-Busch Cos. 4,100 $ 274,187
Campbell Soup Co. 6,600 396,000
Coca-Cola Co. 37,400 2,776,950
CONAGRA, Inc. 17,900 738,375
CPC International, Inc. 8,300 569,588
General Mills, Inc. 4,900 282,975
H.J. Heinz Co. 23,100 765,187
IBP, Inc. 3,600 181,800
Kellogg Co. 7,000 540,750
PepsiCo, Inc. 31,500 1,760,063
Philip Morris, Inc. 30,200 2,733,100
Ralston Purina Group 9,600 598,800
Seagram Co. Ltd. 9,800 339,325
Unilever NV 4,200 591,150
-------------
12,548,250
-------------
INSURANCE (2.2%)
Aetna Life & Casualty Co. 3,200 221,600
Allstate Corp. 10,738 441,600
American International Group 18,150 1,678,875
Chubb Corp. 5,600 541,800
General Reinsurance Corp. 4,700 728,500
HealthCare COMPARE (A) 10,700 467,456
ITT Corp. (A) 8,200 434,600
ITT Hartford Group, Inc. (A) 8,200 396,675
United Healthcare Corp. 5,400 353,700
-------------
5,264,806
-------------
LUMBER AND WOOD PRODUCTS
(0.1%)
Georgia-Pacific Corp. 2,800 192,150
-------------
MACHINERY (3.3%)
Apple Computers, Inc. 3,500 111,344
Applied Materials (A) 15,000 589,688
Baker Hughes, Inc. 21,800 531,375
Black & Decker Corp. 11,000 387,750
Cabletron System, Inc. (A) 2,400 194,400
Caterpillar, Inc. 6,100 358,375
Cisco Systems, Inc. (A) 9,000 672,187
Compaq Computer Corp. (A) 4,300 206,400
Duriron, Inc. 4,500 104,062
Harnischfeger Industries 14,800 492,100
Hewlett Packard Co. 15,200 1,273,000
International Business 14,000 1,284,500
Machines Corp.
Silicon Graphics, Inc. (A) 20,600 566,500
Sun Microsystems (A) 6,400 292,400
3Com Corp. (A) 12,700 592,931
-------------
7,657,012
-------------
METAL PRODUCTS (1.2%)
Ball Corp. 11,900 327,250
Danaher Corp. 13,500 428,625
Gillette Co. 8,500 443,063
Inland Steel Industries, Inc. 10,400 261,300
Parker-Hannifin Corp. 13,900 476,075
Phelps Dodge Corp. 6,600 410,850
Reynolds Metals Co. 6,600 373,725
-------------
2,720,888
-------------
MINING (0.3%)
Freeport-McMoran Copper & 8,500 239,062
Gold
Homestake Mining Co. 29,300 457,813
-------------
696,875
-------------
</TABLE>
<TABLE>
<CAPTION>
NO. OF MARKET
SHARES VALUE
------ ------
<S> <C> <C>
MISCELLANEOUS MANUFACTURING
(2.2%)
Baxter International, Inc. 3,500 $ 146,562
Eastman Kodak Co. 9,900 663,300
Emerson Electric Co. 12,200 997,350
Heart Technology, Inc. (A) 14,400 470,700
Honeywell, Inc. 12,800 622,400
Mattel, Inc. 20,900 642,675
Medtronic, Inc. 20,000 1,117,500
Xerox Corp. 3,100 424,700
-------------
5,085,187
-------------
OIL & GAS (0.3%)
Anadarko Petroleum 4,700 254,388
Schlumberger Ltd. 7,500 519,375
-------------
773,763
-------------
PAPER AND ALLIED PRODUCTS
(0.5%)
Bowater, Inc. 8,000 284,000
Champion International Corp. 10,100 424,200
International Paper Co. 7,500 284,062
Kimberly Clark Corp. 3,510 290,453
-------------
1,282,715
-------------
PETROLEUM REFINING AND
RELATED INDUSTRIES (4.7%)
Amoco Corp. 20,200 1,451,875
Atlantic Richfield, Inc. 4,900 542,675
Chevron Corp. 19,200 1,008,000
Exxon Corp. 36,700 2,940,587
Mobil Corp. 16,000 1,792,000
Phillips Petroleum Co. 7,700 262,762
Royal Dutch Petroleum Co. 19,600 2,766,050
Texaco, Inc. 3,300 259,050
-------------
11,022,999
-------------
PRINTING, PUBLISHING AND
ALLIED INDUSTRIES (0.5%)
Gannett Co. 10,600 650,575
New York Times Co. 16,800 497,700
-------------
1,148,275
-------------
RETAIL (3.4%)
Federated Department Stores, 21,300 585,750
Inc. (A)
General Nutrition Cos., Inc. (A) 900 20,025
Home Depot, Inc. 25,300 1,211,237
J.C. Penney Co. 15,300 728,663
May Department Stores 17,200 726,700
McDonalds Corp. 19,100 861,887
OfficeMax, Inc. (A) 18,700 418,413
Price/Costco, Inc. (A) 30,700 472,012
Safeway, Inc. (A) 10,100 520,150
Tandy Corp. 9,800 406,700
The GAP, Inc. 4,500 189,000
Wal-Mart Stores, Inc. 52,700 1,179,163
Walgreen Co. 21,700 648,287
-------------
7,967,987
-------------
RUBBER AND PLASTIC PRODUCTS
(0.4%)
Nike, Inc. 12,800 891,200
-------------
</TABLE>
-11-
<PAGE> 152
STATEMENT OF INVESTMENTS - CONTINUED
<TABLE>
<CAPTION>
NO. OF MARKET
SHARES VALUE
------ ------
<S> <C> <C>
SERVICES (1.7%)
Autodesk, Inc. 9,300 $ 318,525
Columbia/HCA Healthcare Corp. 13,400 680,050
Computer Associates International 6,100 346,938
Equifax, Inc. 3,600 76,950
Microsoft (A) 16,100 1,413,783
Oracle Systems Corp. (A) 25,000 1,059,375
--------------
3,895,621
--------------
STONE, CLAY, GLASS, AND
CONCRETE PRODUCTS (0.4%)
Minnesota Mining &
Manufacturing Co. 12,700 841,375
--------------
TRANSPORTATION (1.0%)
AMR, Inc. (A) 7,100 527,175
Conrail, Inc. 7,800 546,000
CSX Corp. 14,600 666,125
Norfolk Southern Corp. 8,400 666,750
--------------
2,406,050
--------------
TRANSPORTATION MANUFACTURING (2.8%)
Boeing Co. 16,000 1,254,000
Chrysler Corp. 14,500 802,937
Eaton Corp. 8,400 450,450
Ford Motor Co. 35,900 1,041,100
General Motors Corp. 21,000 1,110,375
Lockheed Martin Corp. 6,100 481,900
McDonnell Douglas Corp. 7,800 717,600
United Technologies Corp. 6,000 569,250
Varity Corp. (A) 6,300 233,888
--------------
6,661,500
--------------
UTILITIES (2.8%)
Baltimore Gas & Electric Co. 23,000 655,500
Browning and Ferris Ind. 17,400 513,300
Duquesne Light Co. 17,400 535,050
Florida Power & Light Co. 17,700 820,837
Houston Industries 26,800 649,900
Pacific Enterprises 6,800 192,100
Panhandle Eastern Corp. 17,700 493,388
Public Service Enterprises Group 22,300 682,937
Southern Co. 38,000 935,750
Texas Utilities Co. 18,000 740,250
WMX Technologies, Inc. 14,800 442,150
--------------
6,661,162
--------------
WHOLESALE TRADE (0.5%)
Crane Co. 13,200 486,750
Enron Corp. 18,800 716,750
--------------
1,203,500
--------------
TOTAL COMMON STOCKS
(COST $122,285,106) 138,919,990
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
--------- ------
<S> <C> <C>
SHORT-TERM INVESTMENTS (40.8%)
COMMERCIAL PAPER (38.2%)
ABN AMRO Holdings NV,
5.55% due April 30, 1996 $ 5,000,000 $ 4,999,237
Associates Corp. of North America,
5.87% due February 15, 1996 4,500,000 4,493,471
Bausch & Lomb, Inc.,
5.78% due January 16, 1996 2,000,000 1,982,031
Ciesco LP,
5.75% due January 31, 1996 5,500,000 5,455,633
Dresdner U.S. Financial, Inc.,
5.80% due January 22, 1996 4,500,000 4,435,178
Eiger Capital Corp.,
5.81% due January 23, 1996 5,500,000 5,462,539
General Electric Capital Corp.,
5.54% due May 3, 1996 4,500,000 4,399,178
H.J. Heinz Co.,
5.85% due January 12, 1996 4,500,000 4,467,784
Hanson PLC,
5.74% due February 16, 1996 4,500,000 4,441,383
PACCAR Financial Corp.,
5.90% due September 20, 1996 4,500,000 4,497,412
Pacific Gas & Electric Co.,
5.79% due January 10, 1996 5,500,000 5,474,150
Pacificorp,
5.80% due January 30, 1996 4,100,000 4,059,595
Potomac Electric Power Co.,
5.78% due January 11, 1996 5,500,000 5,473,264
Progress Capital Holdings, Inc.,
5.86% due January 18, 1996 5,500,000 5,466,893
PHH Corp.,
5.78% due January 19, 1996 4,100,000 4,069,601
Southern California Edison Co.,
5.75% due January 12, 1996 5,500,000 5,472,439
Toronto Dominion Bank,
5.82% due January 19, 1996 5,000,000 4,969,971
Toyota Motor Credit Corp.,
5.78% due January 19, 1996 5,500,000 5,466,236
Wachovia Bank of North Carolina NA,
5.83% due May 13, 1996 4,500,000 4,504,391
--------------
89,590,386
--------------
U.S. GOVERNMENT SECURITIES (1.8%)
United States of America Treasury,
5.51% due September 19, 1996 (C) 4,500,000 4,271,396
--------------
REPURCHASE AGREEMENTS (0.8%)
Merrill Lynch Government
Securities, Inc., 5.50% Repurchase
Agreement dated December 29,
1995, due January 2, 1996,
collateralized by: United States of
America Treasury, $1,955,000,
5.63% due October 31, 1997 1,946,000 1,946,000
--------------
TOTAL SHORT-TERM
INVESTMENTS (COST $95,803,720) 95,807,782
--------------
</TABLE>
-12-
<PAGE> 153
STATEMENT OF INVESTMENTS - CONTINUED
<TABLE>
<CAPTION>
NOTIONAL MARKET
VALUE VALUE
-------- ------
<S> <C> <C>
FUTURES CONTRACTS (0.0%)
S&P 500 Stock Index,
Exp. March, 1996 (D) $ 98,333,550 -
-------------
TOTAL INVESTMENTS (100%)
(COST $218,088,826) (B) $ 234,727,772
=============
</TABLE>
NOTES
(A) Non-income Producing Security.
(B) At December 31, 1995, net unrealized appreciation for all securities
was $16,638,946. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of market
value over cost of $18,769,006 and aggregate gross unrealized
depreciation for all securities in which there was an excess of cost
over market value of $2,130,060.
(C) Par value of $4,500,000 pledged to cover margin deposits on futures
contracts.
(D) As more fully discussed in Note 1 to the financial statements, it is
Account TGIS's practice to hold cash and cash equivalents (including
short-term investments) at least equal to the underlying face value,
or notional value, of outstanding purchased futures contracts, less
the initial margin. Account TGIS uses futures contracts as a
substitute for holding individual securities.
See Notes to Financial Statements
-13-
<PAGE> 154
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Managers and Owners of Variable Annuity Contracts of
The Travelers Timed Growth and Income Stock Account for Variable Annuities:
We have audited the accompanying statement of assets and liabilities of The
Travelers Timed Growth and Income Stock Account for Variable Annuties including
the statement of investments as of December 31, 1995, and the related statement
of operations for the year then ended, the statement of changes in net assets
for each of the two years in the period then ended, and the per unit data for
each of the five years in the period then ended. These financial statements
and per unit data are the responsibility of management. Our responsibility is
to express an opinion on these financial statements and per unit data 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 and per unit
data 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 securities owned as of
December 31, 1995, by correspondence with the custodian and brokers. 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 and per unit data referred to above
present fairly, in all material respects, the financial position of The
Travelers Timed Growth and Income Stock Account for Variable Annuities as of
December 31, 1995, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended,
and the per unit data for each of the five years in the period then ended, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 16, 1996
-14-
<PAGE> 155
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS:
Cash........................................................................ $206,378
Receivable for purchase payments and transfers from other
Travelers accounts........................................................ 1,415
--------
Total Assets.............................................................. 207,793
--------
LIABILITIES:
Payables:
Contract surrenders and transfers to other Travelers accounts.............. 15,920
Due to The Travelers....................................................... 191,573
Accrued liabilities......................................................... 300
--------
Total Liabilities......................................................... 207,793
--------
NET ASSETS................................................................... $ -
========
</TABLE>
See Notes to Financial Statements
-16-
<PAGE> 156
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest............................................ $8,201,199
EXPENSES:
Market timing fees.................................. $ 1,716,258
Investment management and advisory fees............. 444,144
Insurance charges................................... 1,716,258
------------
Total expenses..................................... 3,876,660
----------
Net investment income............................. 4,324,539
----------
REALIZED GAIN AND CHANGE IN UNREALIZED LOSS ON
INVESTMENT SECURITIES:
Realized gain from investment security transactions:
Proceeds from investment securities sold........... 303,595,598
Cost of investment securities sold................. 303,529,546
------------
Net realized gain................................. 66,052
Change in unrealized loss on investment securities:
Unrealized loss at December 31, 1994............... (255,618)
Unrealized loss at December 31, 1995............... -
------------
Net change in unrealized loss for the year........ 255,618
----------
Net realized gain and change in unrealized loss.. 321,670
----------
Net increase in net assets resulting from operations $4,646,209
==========
</TABLE>
See Notes to Financial Statements
-17-
<PAGE> 157
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
OPERATIONS:
Net investment income........................................... $ 4,324,539 $ 3,487,182
Net realized gain (loss) from investment security transactions.. 66,052 (16,060)
Net change in unrealized loss on investment securities.......... 255,618 (255,618)
------------- -------------
Net increase in net assets resulting from operations........... 4,646,209 3,215,504
------------- -------------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 10,737,861 and 20,847,101 units, respectively).. 14,027,260 26,686,784
Participant transfers from other Travelers accounts
(applicable to 837,920 and 2,135,671 units, respectively)...... 1,093,151 2,734,518
Market timing transfers from other Travelers timed accounts
(applicable to 12,166,043 and 298,165,356 units, respectively). 16,038,495 381,665,377
Administrative charges
(applicable to 101,958 and 383,685 units, respectively)........ (133,957) (493,803)
Contract surrenders
(applicable to 8,137,104 and 20,164,576 units, respectively)... (10,638,375) (25,802,591)
Participant transfers to other Travelers accounts
(applicable to 25,776,691 and 84,918,862 units, respectively).. (33,660,474) (108,667,839)
Market timing transfers to other Travelers timed accounts
(applicable to 206,198,047 and 352,098,599 units, respectively) (271,166,611) (449,633,557)
Other payments to participants
(applicable to 241,181 and 242,807 units, respectively)........ (315,041) (311,994)
------------- -------------
Net decrease in net assets resulting from unit transactions.... (284,755,552) (173,823,105)
------------- -------------
Net decrease in net assets.................................... (280,109,343) (170,607,601)
NET ASSETS:
Beginning of year............................................... 280,109,343 450,716,944
------------- -------------
End of year..................................................... $ - $ 280,109,343
============= =============
</TABLE>
See Notes to Financial Statements
-18-
<PAGE> 158
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Timed Short-Term Bond Account for Variable Annuities ("Account
TSB"), is a separate account of The Travelers Insurance Company ("The
Travelers"), an indirect wholly owned subsidiary of Travelers Group Inc.,
and is available for funding certain variable annuity contracts issued by
The Travelers. Account TSB is registered under the Investment Company Act
of 1940, as amended, as a diversified, open-end management investment
company. Participants in Account TSB have entered into market timing service
agreements with an affiliate of The Travelers, which provide for the
transfer of participants' funds to certain other timed accounts of The
Travelers, at the discretion of the market timers.
The following is a summary of significant accounting policies consistently
followed by Account TSB in the preparation of its financial statements.
SECURITY VALUATION. Investments in securities traded on a national
securities exchange are valued at the last-reported sale price as of the
close of business of the New York Stock Exchange on the last business day of
the year; 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.
When market quotations are not considered to be readily available for
long-term corporate bonds and notes, such investments are generally stated
at fair value on the basis of valuations furnished by a pricing service.
These valuations are determined for normal institutional-size trading units
of such securities, using methods based on market transactions for
comparable securities and various relationships between securities which are
generally recognized by institutional traders. Securities, including
restricted securities, for which pricing services are not readily available,
are valued by management at prices which it deems in good faith to be fair.
Short-term investments for which a quoted market price is available are
valued at market. Short-term investments for which there is no reliable
quoted market price are valued by computing a market value based upon
quotations from dealers or issuers for securities of a similar type, quality
and maturity.
REPURCHASE AGREEMENTS. When Account TSB enters into a repurchase agreement
(a purchase of securities whereby the seller agrees to repurchase the
securities at a mutually agreed upon date and price), the repurchase price
of the securities will generally equal the amount paid by Account TSB plus a
negotiated interest amount. The seller under the repurchase agreement will
be required to provide to Account TSB securities (collateral) whose market
value, including accrued interest, will be at least equal to 102% of the
repurchase price. Account TSB monitors the value of collateral on a daily
basis. Repurchase agreements will be limited to transactions with national
banks and reporting broker dealers believed to present minimal credit
risks. Account TSB's custodian will take actual or constructive receipt
of all securities underlying repurchase agreements until such agreements
expire.
FEDERAL INCOME TAXES. The operations of Account TSB form a part of the
total operations of The Travelers and are not taxed separately. The
Travelers is taxed as a life insurance company under the Internal Revenue
Code of 1986, as amended (the "Code"). Under existing federal income tax
law, no taxes are payable on the investment income and capital gains of
Account TSB. Account TSB is not taxed as a "regulated investment company"
under Subchapter M of the Code.
OTHER. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Security transactions are accounted for on the trade date. Interest income
is recorded on the accrual basis.
-19-
<PAGE> 159
NOTES TO FINANCIAL STATEMENTS - CONTINUED
2. CONTRACT CHARGES
Investment management and advisory fees are calculated daily at an annual
rate of 0.3233% of Account TSB's average net assets. These fees are paid to
The Travelers Investment Management Company, an indirect wholly owned
subsidiary of Travelers Group Inc.
A market timing fee equivalent on an annual basis to 1.25% of the net assets
of Account TSB is deducted for market timing services. The Travelers
deducts the fee daily and, in turn, pays the fee to Copeland Financial
Services, Inc., a registered investment adviser and an affiliate of The
Travelers which provides market timing services to subscribing participants
in Account TSB.
Insurance charges are paid to The Travelers for the mortality and expense
risks assumed by The Travelers. These charges are equivalent to 1.25% of
the average net assets of Account TSB on an annual basis. Additionally, for
contracts in the accumulation phase, a semi-annual charge of $15 (prorated
for partial periods) is deducted from participant account balances and paid
to The Travelers to cover administrative charges.
No sales charge is deducted from participant purchase payments when they are
received. However, The Travelers generally assesses a 5% contingent
deferred sales charge if a participant's purchase payment is surrendered
within five years of its payment date. Contract surrender payments are
stated prior to the deduction of $143,893 and $392,576 of contingent
deferred sales charges for years ended December 31, 1995 and 1994,
respectively.
3. SUPPLEMENTARY INFORMATION
(Selected data for a unit outstanding throughout each year.)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------------------
1995 1994 1993 1992 1991
----- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
SELECTED PER UNIT DATA:
Total investment income............................... $ .074 $ .055 $ .041 $ .054 $ .076
Operating expenses.................................... .035 .036 .037 .041 .036
------ ------ ------ ------ ------
Net investment income................................. .039 .019 .004 .013 .040
Unit value at beginning of year....................... 1.292 1.275 1.271 1.258 1.218
Net realized and change in unrealized gains (losses)*. .002 (.002) - - -
------ ------ ------ ------ ------
Unit value at end of year............................. $1.333 $1.292 $1.275 $1.271 $1.258
====== ====== ====== ====== ======
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase in unit value............................ .04 .02 - .01 .04
Ratio of operating expenses to average net assets**... 2.82% 2.82 % 2.82% 2.82% 2.82%
Ratio of net investment income to average net assets** 3.17% 1.45 % .39% 1.12% 3.07%
Number of units outstanding at end of year (thousands) - 216,713 353,374 173,359 439,527
</TABLE>
* Effective May 2, 1994, Account TSB was authorized to invest in securities
with a maturity of greater than one year. As a result, net realized and
change in unrealized gains (losses) are no longer included in total
investment income.
** Annualized.
-20-
<PAGE> 160
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Managers and Owners of Variable Annuity Contracts of
The Travelers Timed Short-Term Bond Account for Variable Annuities:
We have audited the accompanying statement of assets and liabilities of The
Travelers Timed Short-Term Bond Account for Variable Annuities as of December
31, 1995, and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period then
ended, and the per unit data for each of the five years in the period then
ended. These financial statements and per unit data are the responsibility of
management. Our responsibility is to express an opinion on these financial
statements and per unit data 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 and per unit
data 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 and per unit data referred to above
present fairly, in all material respects, the financial position of The
Travelers Timed Short-Term Bond Account for Variable Annuities as of December
31, 1995, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and the per
unit data for each of the five years in the period then ended, in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 16, 1996
-21-
<PAGE> 161
THE TRAVELERS TIMED AGGRESSIVE STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investment securities, at market value (identified cost $92,504,548) $102,210,432
Receivables:
Dividends.......................................................... 104,617
Interest........................................................... 79,332
Investment securities sold......................................... 1,100,922
Purchase payments and transfers from other Travelers accounts...... 70,569
Variation on futures margin........................................ 102,500
------------
Total Assets...................................................... 103,668,372
------------
LIABILITIES:
Cash overdraft...................................................... 112,791
Payables:
Investment securities purchased.................................... 765,503
Contract surrenders and transfers to other Travelers accounts...... 36,941
Investment management and advisory fees............................ 4,166
Market timing fees................................................. 10,474
Accrued liabilities................................................. 19,048
------------
Total Liabilities................................................. 948,923
------------
NET ASSETS
(Applicable to 45,575,269 units outstanding at $2.253 per unit)..... $102,719,449
============
</TABLE>
See Notes to Financial Statements
-23-
<PAGE> 162
THE TRAVELERS TIMED AGGRESSIVE STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends........................................... $ 985,664
Interest............................................ 386,837
------------
Total income....................................... $ 1,372,501
EXPENSES:
Market timing fees.................................. 825,418
Investment management and advisory fees............. 215,616
Insurance charges................................... 825,418
------------
Total expenses..................................... 1,866,452
-----------
Net investment loss............................... (493,951)
-----------
REALIZED GAIN AND CHANGE IN UNREALIZED GAIN ON
INVESTMENT SECURITIES:
Realized gain from investment security transactions:
Proceeds from investment securities sold........... 107,552,351
Cost of investment securities sold................. 99,151,992
------------
Net realized gain................................. 8,400,359
Change in unrealized gain on investment securities:
Unrealized gain at December 31, 1994............... 954,837
Unrealized gain at December 31, 1995............... 9,705,884
------------
Net change in unrealized gain for the year........ 8,751,047
-----------
Net realized gain and change in unrealized gain.. 17,151,406
-----------
Net increase in net assets resulting from operations $16,657,455
===========
</TABLE>
See Notes to Financial Statements
-24-
<PAGE> 163
THE TRAVELERS TIMED AGGRESSIVE STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment loss.................................................... $ (493,951) $ (669,893)
Net realized gain from investment security transactions................ 8,400,359 3,067,643
Net change in unrealized gain on investment securities................. 8,751,047 (9,552,884)
------------ ------------
Net increase (decrease) in net assets resulting from operations....... 16,657,455 (7,155,134)
------------ ------------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 4,530,704 and 11,273,841 units, respectively).......... 9,157,753 19,879,301
Participant transfers from other Travelers accounts
(applicable to 352,561 and 4,166,181 units, respectively)............. 701,109 7,429,218
Market timing transfers from other Travelers timed accounts
(applicable to 27,252,603 and 12,495,931 units, respectively)......... 57,070,717 22,750,505
Administrative charges
(applicable to 80,867 and 105,768 units, respectively)................ (173,519) (176,362)
Contract surrenders
(applicable to 1,614,811 and 2,506,410 units, respectively)........... (3,295,917) (4,425,394)
Participant transfers to other Travelers accounts
(applicable to 9,931,060 and 19,093,231 units, respectively).......... (20,145,243) (33,573,248)
Market timing transfers to other Travelers timed accounts
(applicable to 24,144,775 units)...................................... - (40,963,059)
Other payments to participants
(applicable to 43,168 and 35,178 units, respectively)................. (82,155) (62,046)
------------ ------------
Net increase (decrease) in net assets resulting from unit transactions 43,232,745 (29,141,085)
------------ ------------
Net increase (decrease) in net assets................................ 59,890,200 (36,296,219)
NET ASSETS:
Beginning of year...................................................... 42,829,249 79,125,468
------------ ------------
End of year............................................................ $102,719,449 $42,829,249
============ ============
</TABLE>
See Notes to Financial Statements
-25-
<PAGE> 164
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Timed Aggressive Stock Account for Variable Annuities ("Account
TAS") is a separate account of The Travelers Insurance Company ("The
Travelers"), an indirect wholly owned subsidiary of Travelers Group Inc., and
is available for funding certain variable annuity contracts issued by The
Travelers. Account TAS is registered under the Investment Company Act of
1940, as amended, as a diversified, open-end management investment company.
Participants in Account TAS have entered into market timing service
agreements with an affiliate of The Travelers, which provide for the transfer
of participants' funds to certain other timed accounts of The
Travelers, at the discretion of the market timers.
The following is a summary of significant accounting policies consistently
followed by Account TAS in the preparation of its financial statements.
SECURITY VALUATION. Investments in securities traded on a national
securities exchange are valued at the last-reported sale price as of the
close of business of the New York Stock Exchange on the last business day of
the year; 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.
When market quotations are not considered to be readily available for
long-term corporate bonds and notes, such investments are generally stated at
fair value on the basis of valuations furnished by a pricing service. These
valuations are determined for normal institutional-size trading units of such
securities using methods based on market transactions for comparable
securities and various relationships between securities which are generally
recognized by institutional traders. Securities, including restricted
securities, for which pricing services are not readily available are valued
by management at prices which it deems in good faith to be fair.
Short-term investments for which a quoted market price is available are
valued at market. Short-term investments for which there is no reliable
quoted market price are valued by computing a market value based upon
quotations from dealers or issuers for securities of a similar type, quality
and maturity.
FUTURES CONTRACTS. Account TAS uses stock index futures contracts, and may
also use interest rate futures contracts, as a substitute for the purchase or
sale of individual securities. When Account TAS enters into a futures
contract, it agrees to buy or sell a specified index of stocks, or debt
securities, at a future time for a fixed price, unless the contract is closed
prior to expiration. Account TAS is obligated to deposit with a broker an
"initial margin" equivalent to a percentage of the face, or notional value of
the contract.
It is Account TAS's practice to hold cash and cash equivalents in an amount
at least equal to the notional value of outstanding purchased futures
contracts, less the initial margin. Cash and cash equivalents include cash
on hand, securities segregated under federal and brokerage regulations, and
short-term highly liquid investments with maturities generally three months
or less when purchased. Generally, futures contracts are closed prior to
expiration.
Futures contracts purchased by Account TAS are priced and settled daily;
accordingly, changes in daily prices are recorded as realized gains or losses
and no asset is recorded in the Statement of Investments. However, when
Account TAS holds open futures contracts, it assumes a market risk generally
equivalent to the underlying market risk of change in the value of the
specified indexes or debt securities associated with the futures contract.
OPTIONS. Account TAS may purchase index or individual equity put or call
options, thereby obtaining the right to sell or buy a fixed number of shares
of the underlying asset at the stated price on or before the stated
expiration date. Account TAS may sell the options before expiration.
Options held by Account TAS are listed on either national securities
exchanges or on over-the-counter markets, and are short-term contracts with a
duration of less than nine months. The market value of the options will be
the latest sale price at the close of the New York Stock Exchange, or, in the
absence of such sale, the latest bid quotation.
-26-
<PAGE> 165
NOTES TO FINANCIAL STATEMENTS - CONTINUED
REPURCHASE AGREEMENTS. When Account TAS enters into a repurchase agreement
(a purchase of securities whereby the seller agrees to repurchase the
securities at a mutually agreed upon date and price), the repurchase price of
the securities will generally equal the amount paid by Account TAS plus a
negotiated interest amount. The seller under the repurchase agreement will
be required to provide to Account TAS securities (collateral) whose market
value, including accrued interest, will be at least equal to 102% of the
repurchase price. Account TAS monitors the value of collateral on a daily
basis. Repurchase agreements will be limited to transactions with national
banks and reporting broker dealers believed to present minimal credit risks.
Account TAS's custodian will take actual or constructive receipt of all
securities underlying repurchase agreements until such agreements expire.
FEDERAL INCOME TAXES. The operations of Account TAS form a part of the total
operations of The Travelers and are not taxed separately. The Travelers is
taxed as a life insurance company under the Internal Revenue Code of 1986, as
amended (the "Code"). Under existing federal income tax law, no taxes are
payable on the investment income and capital gains of Account TAS. Account
TAS is not taxed as a "regulated investment company" under Subchapter M of
the Code.
OTHER. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Security transactions are accounted for on the trade date. Dividend
income is recorded on the ex-dividend date. Interest income is recorded on
the accrual basis.
2. INVESTMENTS
Purchases and sales of securities other than short-term investments
aggregated $93,163,480 and $67,179,935, respectively, for the year ended
December 31, 1995. Realized gains and losses from investment transactions
are reported on an identified-cost basis.
At December 31, 1995, Account TAS held 205 open S&P 400 MidCap Index futures
contracts with a maturity date of March 15, 1996. The underlying face value,
or notional value, of these contracts at December 31, 1995, amounted to
$22,350,125. In connection with these contracts, short-term investments with
a par value of $550,000 had been pledged as margin deposits.
Net realized gains resulting from futures contracts were $1,364,329 and
$63,616 for the years ended December 31, 1995 and 1994, respectively. These
gains are included in the net realized gain from investment security
transactions on both the Statement of Operations and the Statement of Changes
in Net Assets. The cash settlement for December 31, 1995, is shown on the
Statement of Assets and Liabilities as a receivable for variation on futures
margin.
-27-
<PAGE> 166
NOTES TO FINANCIAL STATEMENTS - CONTINUED
3. CONTRACT CHARGES
Investment management and advisory fees are calculated daily at annual rates
which start at 0.50% and decrease, as net assets increase, to 0.15% of
Account TAS's average net assets. These fees are paid to The Travelers
Investment Management Company, an indirect wholly owned subsidiary of
Travelers Group Inc.
A market timing fee equivalent on an annual basis to 1.25% of the net assets
of Account TAS is deducted for market timing services. The Travelers deducts
the fee daily and, in turn, pays the fee to Copeland Financial Services,
Inc., a registered investment adviser and an affiliate of The Travelers which
provides market timing services to subscribing participants in Account TAS.
Insurance charges are paid to The Travelers for the mortality and expense
risks assumed by The Travelers. These charges are equivalent to 1.25% of the
average net assets of Account TAS on an annual basis. Additionally, for
contracts in the accumulation phase, a semi-annual charge of $15 (prorated
for partial periods) is deducted from participant account balances and paid
to The Travelers to cover administrative charges.
No sales charge is deducted from participant purchase payments when they are
received. However, The Travelers generally assesses a 5% contingent deferred
sales charge if a participant's purchase payment is surrendered within five
years of its payment date. Contract surrender payments are stated prior to
the deduction of $80,832 and $101,444 of contingent deferred sales charges
for the years ended December 31, 1995 and 1994, respectively.
4. SUPPLEMENTARY INFORMATION
(Selected data for a unit outstanding throughout each year.)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------------------------------
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
SELECTED PER UNIT DATA:
Total investment income............................... $ .042 $.036 $.037 $.041 $.044
Operating expenses.................................... .057 .049 .048 .043 .039
------ ------ ------ ------ ------
Net investment income (loss).......................... (.015) (.013) (.011) (.002) .005
Unit value at beginning of year....................... 1.706 1.838 1.624 1.495 1.136
Net realized and change in unrealized gains (losses).. .562 (.119) .225 .131 .354
------ ------ ------ ------ ------
Unit value at end of year............................. $ 2.253 $1.706 $1.838 $1.624 $1.495
====== ====== ====== ====== ======
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value................. .55 (.13) .21 .13 .36
Ratio of operating expenses to average net assets*.... 2.83 % 2.80 % 2.82 % 2.93 % 2.99%
Ratio of net investment (loss) income to average net
assets*............................................. (.74)% (.72)% (.80)% (.12)% .37%
Number of units outstanding at end of year (thousands) 45,575 25,109 43,059 20,225 19,565
Portfolio turnover rate............................... 113 % 142 % 71 % 269 % 261%
</TABLE>
* Annualized.
-28-
<PAGE> 167
THE TRAVELERS TIMED AGGRESSIVE STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
NO. OF MARKET
SHARES VALUE
------ ---------
<S> <C> <C>
COMMON STOCKS (78.2%)
AGRICULTURE (0.5%)
Dole Food Co., Inc. 14,600 $ 511,000
----------
AMUSEMENTS (1.0%)
Castle & Cooke Inc. (A) 4,866 81,505
Circus Circus Enterprises, Inc. (A) 12,500 348,437
Mirage Resorts, Inc. (A) 20,200 696,900
----------
1,126,842
----------
BANKING (6.2%)
Crestar Financial Corp. 4,500 266,062
Fifth Third Bancorp 8,200 597,575
First of America Bank Corp. 15,800 701,125
First Security Corp. 15,000 573,750
First Tennessee National Corp. 9,200 555,450
Marshall & Isley Corp. 12,000 311,250
Mercantile Bancorp. 12,500 575,000
Mercantile Bankshares 14,000 387,625
Northern Trust Corp. 7,800 434,363
Signet Banking Corp. 8,600 204,250
SouthTrust Corp. 13,800 355,350
Star Banc Corp. 4,000 238,000
State Street Boston Corp. 4,000 180,000
UJB Financial Corp. 7,200 257,400
UN Planters Corp. 9,100 290,063
Wilmington Trust Corp. 13,600 421,600
----------
6,348,863
----------
CHEMICALS, PHARMACEUTICALS AND
ALLIED PRODUCTS (5.2%)
Biogen, Inc. (A) 4,400 269,500
Cabot Corp. 7,300 393,287
Chiron Corp. (A) 5,467 604,787
Eastman Chemical Company 3,400 212,925
Forest Labs, Inc. (A) 11,500 520,375
Genzyme Corp. (A) 3,400 211,650
International Flavors & Fragrances 6,700 321,600
IMC Fertilizer Group, Inc. 8,400 343,350
IVAX Corp. 7,100 202,350
Loctite Corp. 4,800 228,000
Morton International, Inc. 8,200 294,175
Mylan Labs, Inc. 20,900 491,150
Praxair, Inc. 10,600 356,425
Smith International, Inc. (A) 12,500 293,750
Wellman, Inc. 13,300 302,575
Witco Chemical Corp. 7,500 219,375
----------
5,265,274
----------
COMMUNICATION (3.7%)
Century Telephone Enterprises 15,600 495,300
Clear Channel Communications (A) 6,600 291,225
Comsat Corp. 6,100 113,612
Frontier Corp. 15,500 465,000
Infinity Broadcasting (A) 10,200 379,950
Lincoln Telecommunications 12,000 255,000
NEXTEL Communications (A) 18,500 274,031
Southern New England Telephone 7,800 310,050
Telephone & Data Systems, Inc. 5,800 229,100
WorldCom, Inc. (A) 28,700 1,015,263
----------
3,828,531
----------
</TABLE>
<TABLE>
<CAPTION>
NO. OF MARKET
SHARES VALUE
------ ---------
<S> <C> <C>
CONTRACTORS (0.7%)
Fluor Corp. 5,400 $ 356,400
Granite Construction, Inc. 9,800 309,925
JWP, Inc. (A)(E) 32,200 644
----------
666,969
----------
ELECTRICAL AND
ELECTRONIC MACHINERY (4.8%)
ADC Telecommunications, Inc. (A) 6,900 250,988
Alliance Semiconductor (A) 2,300 26,450
American Power Conversion (A) 26,200 247,263
Amphenol Corp. (A) 16,400 397,700
Analog Devices, Inc. (A) 20,050 709,269
Andrew Corp. (A) 9,400 363,075
Atmel Corp. (A) 20,600 458,350
Cypress Semiconductor (A) 34,700 442,425
Linear Technology Corp. 3,700 145,687
LSI Logic Corp. (A) 2,300 75,325
Molex, Inc. 20,600 659,200
Sensormatic Electronics Corp. 7,900 137,262
Tellabs, Inc. (A) 1,500 55,687
U.S. Robotics, Inc. 6,100 536,038
Vishay Intertechnology, Inc. (A) 8,100 255,150
Xilinx, Inc. (A) 4,700 142,762
----------
4,902,631
----------
FINANCE (3.5%)
Bear Stearns Cos., Inc. 7,400 147,075
Charles Schwab Corp. 26,100 525,262
Finova Group, Inc. 4,200 202,650
Franklin Resources, Inc. 5,400 272,025
Green Tree Financial Corp. 32,800 865,100
HFS, Inc.(A) 10,900 891,075
Household International 4,000 236,500
Lehman Brothers Holding, Inc. 9,100 193,375
Paine Webber Group 11,900 238,000
----------
3,571,062
----------
FOOD (2.1%)
Coca-Cola Enterprises, Inc. 28,000 749,000
Flowers Industries 19,600 237,650
IBP, Inc. 8,000 404,000
Robert Mondavi Corp. (A) 4,400 123,200
Ralston-Purina Group 3,800 237,025
Tyson Foods, Inc. 12,500 328,906
----------
2,079,781
----------
FURNITURE AND FIXTURES (0.3%)
Leggett & Platt, Inc. 11,600 281,300
----------
HOTELS & LODGING (0.2%)
La Quinta Motor Inns, Inc. 7,300 199,837
----------
</TABLE>
-29-
<PAGE> 168
STATEMENT OF INVESTMENTS - CONTINUED
<TABLE>
<CAPTION>
NO. OF MARKET
SHARES VALUE
------ ---------
<S> <C> <C>
INSURANCE (5.5%)
American Bankers Insurance Group, Inc. 10,000 $ 391,875
American Reinsurance Corp. 8,300 339,262
American Financial Group, Inc. 14,700 450,187
Aon Corp. 7,200 359,100
AFLAC, Inc. 20,100 871,838
Foundation Health Corp. (A) 6,900 296,700
HealthCare COMPARE (A) 12,500 546,094
PacifiCare Health Systems (A) 7,700 671,825
Progressive Corp., Ohio 5,400 263,925
SunAmerica, Inc. 7,700 365,750
Transatlantic Holdings, Inc. 6,000 440,250
Value Health, Inc. (A) 12,600 346,500
Zurich Reinsurance Centre Holdings 6,900 209,588
----------
5,552,894
----------
MACHINERY (5.1%)
Baker Hughes, Inc. 10,200 248,625
Bay Networks, Inc. (A) 29,659 1,217,863
Cabletron System, Inc. (A) 4,200 340,200
Cirrus Logic, Inc. (A) 8,200 162,462
Dell Computer Corp. (A) 5,900 205,394
Duriron, Inc. 3,300 76,312
EMC Corp. (A) 37,900 582,713
Gateway 2000, Inc. (A) 14,400 351,900
Harnischfeger Industries 5,800 192,850
Lam Research Corp. (A) 3,200 146,000
Seagate Technology (A) 10,400 494,000
Silicon Graphics, Inc. (A) 12,300 338,250
Stewart & Stevenson Services, Inc. 11,400 289,275
Symbol Technologies (A) 11,000 434,500
3Com Corp. (A) 2,900 135,394
----------
5,215,738
----------
METAL PRODUCTS (1.6%)
Amax Gold, Inc. (A) 6,500 199,063
Ball Corp. 6,100 167,750
Bethlehem Steel Corp. (A) 15,200 212,800
Danaher Corp. 15,500 492,125
Parker-Hannifin Corp. 7,100 243,175
Reynolds Metals Co. 6,000 339,750
----------
1,654,663
----------
MINING (0.2%)
Homestake Mining Co. 14,000 218,750
----------
MISCELLANEOUS MANUFACTURING (4.1%)
Biomet, Inc. (A) 17,300 308,156
Callaway Golf Co. 21,800 493,225
Cordis Corp. (A) 2,500 251,250
Heart Technology., Inc. (A) 8,500 277,844
International Game Technology 16,400 178,350
Litton Industries (A) 6,800 302,600
Mattel, Inc. 7,500 230,625
Measurex Corp. 7,600 214,700
Medtronic, Inc. 9,600 536,400
Stryker Corp. 6,600 346,087
Tencor Instruments (A) 7,900 192,563
Teradyne, Inc. (A) 10,600 265,000
Thermo Electronics Corp. (A) 10,150 527,800
----------
4,124,600
----------
</TABLE>
<TABLE>
<CAPTION>
NO. OF MARKET
SHARES VALUE
------ ---------
<S> <C> <C>
OIL & GAS (1.7%)
Anadarko Petroleum 11,900 $ 644,088
Apache Corp. 14,300 421,850
ENSCO International(A) 15,700 361,100
Louisiana Land & Exploration 7,700 330,137
----------
1,757,175
----------
PAPER AND ALLIED PRODUCTS (1.1%)
Bowater, Inc. 9,100 323,050
Champion International Corp. 4,500 189,000
James River Corp. 6,500 156,812
Mead Corp. 4,900 256,025
Potlatch Corp. 5,800 232,000
----------
1,156,887
----------
PETROLEUM REFINING AND
RELATED INDUSTRIES (0.6%)
Lyondell Petrochemical 5,200 118,950
Murphy Oil Corp. 6,100 253,150
Sun Co., Inc. 8,483 232,222
----------
604,322
----------
PRINTING, PUBLISHING AND
ALLIED INDUSTRIES (1.4%)
Lee Enterprises, Inc. 22,800 524,400
Tribune Co. 3,600 220,050
Washington Post Co. 2,500 705,000
----------
1,449,450
----------
RETAIL (5.3%)
Apple South, Inc. 12,600 269,325
AutoZone, Inc. (A) 9,400 271,425
Boston Chicken, Inc. (A) 9,500 304,594
Claires Stores, Inc. 14,900 262,613
Dayton Hudson Corp. 2,900 217,500
Dollar General Corp. 8,400 174,300
Federated Department Stores, Inc. (A) 8,200 225,500
General Nutrition Cos., Inc. (A) 500 11,125
Hannaford Brothers Co. 9,900 243,787
Kohl's Corp. (A) 10,800 567,000
Morrison Restaurants, Inc. 3,900 54,600
Office Depot, Inc. (A) 19,200 379,200
OfficeMax, Inc. (A) 11,200 250,600
Outback Steakhouse, Inc. (A) 5,700 204,844
Revco D.S., Inc. (A) 9,000 254,250
Rite Aid Corp. 8,700 297,975
Safeway, Inc. (A) 5,200 267,800
Staples, Inc. (A) 16,650 407,925
Stop & Shop Companies (A) 9,000 208,125
Tandy Corp. 4,600 190,900
Waban, Inc. (A) 16,900 316,875
----------
5,380,263
----------
RUBBER AND PLASTIC PRODUCTS (0.6%)
Nike, Inc. 6,100 424,712
Premark International, Inc. 4,500 227,813
----------
652,525
----------
SERVICES (6.5%)
Adobe Systems, Inc. 12,200 757,925
Autodesk, Inc. 4,600 157,550
Cadence Design System, Inc. (A) 16,050 674,100
Compuware Corp. (A) 6,100 114,375
Coram Healthcare Corp. (A) 15,300 66,938
CUC International, Inc. (A) 5,300 180,862
</TABLE>
-30-
<PAGE> 169
STATEMENT OF INVESTMENTS - CONTINUED
<TABLE>
<CAPTION>
NO. OF MARKET
SHARES VALUE
--------- -------------
<S> <C> <C>
SERVICES (CONTINUED)
Equifax, Inc. 11,900 $ 254,363
Flightsafety International, Inc 8,300 417,075
Health Management Association., Inc. (A) 11,200 292,600
HBO & Co. 2,900 221,850
HEALTHSOUTH Corp (A) 13,800 401,925
Informix Corp. (A) 17,200 517,075
Manpower, Inc. 10,600 298,125
Olsten Corp. 6,000 237,000
Omnicom Group, Inc. 16,200 603,450
Or Nda Healthcorp (A) 11,000 255,750
Parametric Technology Co. (A) 9,300 617,287
Paychex, Inc. 11,900 591,281
-------------
6,659,531
-------------
STONE, CLAY, GLASS AND
CONCRETE PRODUCTS (0.3%)
Owens-Corning Fiberglass (A) 7,600 341,050
-------------
TEXTILE MILL PRODUCTS (0.4%)
Shaw Industries, Inc. 15,100 222,725
Unifi, Inc. 8,400 185,850
-------------
408,575
-------------
TRANSPORTATION (1.5%)
AMR, Inc. (A) 2,800 207,900
CSX Corp. 5,200 237,250
Kansas City Southern Industries, Inc. 10,500 480,375
Northwest Airlines Corp. (A) 6,100 310,719
Tidewater, Inc. 9,800 308,700
-------------
1,544,944
-------------
TRANSPORTATION MANUFACTURING (1.9%)
Echlin, Inc. 6,600 240,900
Harley-Davidson, Inc. 9,500 273,125
McDonnell Douglas Corp. 3,800 349,600
Sundstrand Corp. 7,400 520,775
Trinity Industries 10,800 340,200
Varity Corp. (A) 5,500 204,188
-------------
1,928,788
-------------
UTILITIES (10.8%)
Allegheny Power System, Inc. 16,100 460,863
Baltimore Gas & Electric Co. 11,200 319,200
Boston Edison Co. 11,700 345,150
Brooklyn Union Gas Co. 16,000 468,000
Consolidated Natural Gas Co. 6,100 276,787
CMS Energy Corp. 20,600 615,425
Delmarva Power & Light 20,800 473,200
El Paso Natural Gas Co. 13,200 374,550
Florida Progress Corp. 12,500 442,188
Illinova Corp. 22,300 669,000
Kansas City Power & Light Co. 21,700 566,912
Louisville Gas & Electric Co. 11,000 464,750
MCN Corp. 21,800 506,850
NIPSCO Industries, Inc. 16,100 615,825
Panhandle Eastern Corp. 8,300 231,363
Pinnacle West Capital Corp. 23,500 675,625
Portland General Electric Co. 18,200 530,075
Public Service Co. of Colorado 18,400 650,900
SCANA Corp. 25,600 732,800
Texas Utilities Co. 6,400 263,200
TECO Energy, Inc. 26,200 671,375
Wisconsin Energy 23,600 722,750
-------------
11,076,788
-------------
</TABLE>
<TABLE>
<CAPTION>
NO. OF MARKET
SHARES VALUE
--------- -------------
<S> <C> <C>
WHOLESALE TRADE (1.4%)
Arrow Electronics (A) 11,200 $ 483,000
Avnet, Inc. 4,600 205,850
Cardinal Health, Inc. 9,800 536,550
Crane Co. 5,700 210,188
-------------
1,435,588
-------------
TOTAL COMMON STOCKS
(COST $70,236,848) 79,944,621
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
---------
<S> <C> <C>
SHORT-TERM INVESTMENTS (21.8%)
COMMERCIAL PAPER (19.0%)
ABN AMRO Holding NV,
5.55% due April 30, 1996 $ 2,000,000 1,999,696
AT&T Co.,
5.74% due January 19, 1996 2,500,000 2,484,694
Ciesco LP,
5.75% due January 31, 1996 2,500,000 2,479,833
Pacific Gas & Electric Co.,
5.79% due January 10, 1996 2,500,000 2,488,250
Potomac Electric Power Co.,
5.78% due January 11, 1996 2,500,000 2,487,847
Progress Capital Holdings, Inc.,
5.86% due January 18, 1996 2,500,000 2,484,951
Southern California Edison Co.,
5.75% due January 12, 1996 2,500,000 2,487,472
Toyota Motor Credit Corp.,
5.78% due January 19, 1996 2,500,000 2,484,653
-------------
19,397,396
-------------
U.S. GOVERNMENT SECURITIES (0.7%)
United States of America Treasury,
5.33% due September 19, 1996 (C) 750,000 720,955
United States of America Treasury,
5.51% due September 19, 1996 (C) 50,000 47,460
-------------
768,415
-------------
REPURCHASE AGREEMENTS (2.1%)
Merrill Lynch Government
Securities, Inc., 5.50% Repurchase
Agreement dated December 29,
1995, due January 2, 1996,
collateralized by: United States of
America Treasury, $2,110,000,
5.63% due October 31, 1997 2,100,000 2,100,000
-------------
TOTAL SHORT-TERM
INVESTMENTS (COST $22,267,700) 22,265,811
-------------
</TABLE>
<TABLE>
<CAPTION>
NOTIONAL
VALUE
--------
<S> <C> <C>
FUTURES CONTRACTS (0.0%)
S&P 400 MidCap Index,
Exp. March, 1996 (D) $ 22,350,125 -
-------------
TOTAL INVESTMENTS (100%)
(COST $92,504,548) (B) $ 102,210,432
=============
</TABLE>
-31-
<PAGE> 170
STATEMENT OF INVESTMENTS - CONTINUED
NOTES
(A) Non-income Producing Security.
(B) At December 31, 1995, net
unrealized appreciation for all
securities was $9,705,884. This
consisted of aggregate gross
unrealized appreciation for all
securities in which there was an
excess of market value over cost
of $13,225,738 and aggregate
gross unrealized depreciation for
all securities in which there was
an excess of cost over market
value of $3,519,854.
(C) Par value of $550,000 pledged to
cover margin deposits on futures
contracts.
(D) As more fully discussed in Note
1 to the financial statements, it
is Account TAS's practice to hold
cash and cash equivalents
(including short-term
investments) at least equal to
the underlying face value, or
notional value, of outstanding
purchased futures contracts, less
the initial margin. Account TAS
uses futures contracts as a
substitute for holding individual
securities.
(E) Management Priced Security.
See Notes to Financial Statements
-32-
<PAGE> 171
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Managers and Owners of Variable Annuity Contracts of
The Travelers Timed Aggressive Stock Account for Variable Annuities:
We have audited the accompanying statement of assets and liabilities of The
Travelers Timed Aggressive Stock Account for Variable Annuities including the
statement of investments as of December 31, 1995, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended, and the per unit data for each
of the five years in the period then ended. These financial statements and per
unit data are the responsibility of management. Our responsibility is to
express an opinion on these financial statements and per unit data 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 and per unit
data 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 securities owned as of
December 31, 1995, by correspondence with the custodian and brokers. 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 and per unit data referred to above
present fairly, in all material respects, the financial position of The
Travelers Timed Aggressive Stock Account for Variable Annuities as of December
31, 1995, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and the per
unit data for each of the five years in the period then ended, in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 16, 1996
-33-
<PAGE> 172
THE TRAVELERS TIMED BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investment securities, at market value (identified cost $14,974,638) $15,673,604
Receivables:
Interest........................................................... 227,862
Purchase payments and transfers from other Travelers accounts...... 8,416
Other assets........................................................ 10
-----------
Total Assets...................................................... 15,909,892
-----------
LIABILITIES:
Cash overdraft...................................................... 27,413
Payables:
Contract surrenders and transfers to other Travelers accounts...... 13,481
Investment management and advisory fees............................ 1,082
Market timing fees................................................. 1,625
Insurance charges.................................................. 2,705
-----------
Total Liabilities................................................. 46,306
-----------
NET ASSETS
(Applicable to 11,466,306 units outstanding at $1.383 per unit)..... $15,863,586
===========
</TABLE>
See Notes to Financial Statements
-35-
<PAGE> 173
THE TRAVELERS TIMED BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest............................................ $ 878,805
EXPENSES:
Market timing fees.................................. $ 157,286
Investment management and advisory fees............. 62,947
Insurance charges................................... 157,286
-----------
Total expenses..................................... 377,519
----------
Net investment income............................. 501,286
----------
REALIZED GAIN AND CHANGE IN UNREALIZED GAIN ON
INVESTMENT SECURITIES:
Realized gain from investment security transactions:
Proceeds from investment securities sold........... 37,514,034
Cost of investment securities sold................. 36,612,294
-----------
Net realized gain................................. 901,740
Change in unrealized gain on investment securities:
Unrealized gain at December 31, 1994............... -
Unrealized gain at December 31, 1995............... 698,966
-----------
Net change in unrealized gain for the year........ 698,966
----------
Net realized gain and change in unrealized gain.. 1,600,706
----------
Net increase in net assets resulting from operations $2,101,992
==========
</TABLE>
See Notes to Financial Statements
-36-
<PAGE> 174
THE TRAVELERS TIMED BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
OPERATIONS:
Net investment income.................................................. $ 501,286 $ 36,951
Net realized gain from investment security transactions................ 901,740 1,513,641
Net change in unrealized gain on investment securities................. 698,966 (1,920,043)
------------ ------------
Net increase (decrease) in net assets resulting from operations....... 2,101,992 (369,451)
------------ ------------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 796,980 and 343,897 units, respectively)............... 1,033,094 426,588
Participant transfers from other Travelers accounts
(applicable to 55,290 and 485,822 units, respectively)................ 68,142 602,519
Market timing transfers from other Travelers timed accounts
(applicable to 25,376,865 units)...................................... 31,962,202 -
Administrative charges
(applicable to 16,869 and 13 units, respectively)..................... (22,828) (19)
Contract surrenders
(applicable to 614,080 and 141,875 units, respectively)............... (802,989) (175,642)
Participant transfers to other Travelers accounts
(applicable to 1,869,809 and 1,223,515 units, respectively)........... (2,437,532) (1,510,001)
Market timing transfers to other Travelers timed accounts
(applicable to 12,262,071 and 19,671,603 units, respectively)......... (16,038,495) (23,908,276)
------------ ------------
Net increase (decrease) in net assets resulting from unit transactions 13,761,594 (24,564,831)
------------ ------------
Net increase (decrease) in net assets................................. 15,863,586 (24,934,282)
NET ASSETS:
Beginning of year...................................................... - 24,934,282
------------ ------------
End of year............................................................ $ 15,863,586 $ -
============ ============
</TABLE>
See Notes to Financial Statements
-37-
<PAGE> 175
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Timed Bond Account for Variable Annuities ("Account TB") is a
separate account of The Travelers Insurance Company ("The Travelers"), an
indirect wholly owned subsidiary of Travelers Group Inc., and is available
for funding certain variable annuity contracts issued by The Travelers.
Account TB is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company.
Participants in Account TB have entered into market timing service
agreements with an affiliate of The Travelers, which provide for the
transfer of participants' funds to certain other timed accounts of The
Travelers, at the discretion of the market timer.
The following is a summary of significant accounting policies consistently
followed by Account TB in the preparation of its financial statements.
SECURITY VALUATION. Investments in securities traded on a national
securities exchange are valued at the last-reported sale price as of the
close of business of the New York Stock Exchange on the last business day of
the year; 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.
When market quotations are not considered to be readily available for
long-term corporate bonds and notes, such investments are generally stated
at fair value on the basis of valuations furnished by a pricing service.
These valuations are determined for normal institutional-size trading units
of such securities using methods based on market transactions for comparable
securities and various relationships between securities which are generally
recognized by institutional traders. Securities, including restricted
securities, for which pricing services are not readily available are valued
by management at prices which it deems in good faith to be fair.
Short-term investments for which a quoted market price is available are
valued at market. Short-term investments for which there is no reliable
quoted market price are valued by computing a market value based upon
quotations from dealers or issuers for securities of a similar type, quality
and maturity.
FUTURES CONTRACTS. Account TB uses interest rate futures contracts as a
substitute for the purchase or sale of individual securities. When Account
TB enters into a futures contract, it agrees to buy or sell specified debt
securities, at a future time for a fixed price, unless the contract is
closed prior to expiration. Account TB is obligated to deposit with a
broker an "initial margin" equivalent to a percentage of the face, or
notional value of the contract.
It is Account TB's practice to hold cash and cash equivalents in an amount
at least equal to the notional value of outstanding purchased futures
contracts. Cash and cash equivalents include cash on hand, securities
segregated under federal and brokerage regulations, and short-term highly
liquid investments with maturities generally three months or less when
purchased. Generally, futures contracts are closed prior to expiration.
Futures contracts purchased by Account TB are priced and settled daily;
accordingly, changes in daily prices are recorded as realized gains or
losses and no asset is recorded in the Statement of Investments. However,
when Account TB holds open futures contracts, it assumes a market risk
generally equivalent to the underlying market risk of change in the value of
the specified indexes associated with the futures contract.
-38-
<PAGE> 176
NOTES TO FINANCIAL STATEMENTS - CONTINUED
WHEN-ISSUED SECURITIES. Account TB may from time to time purchase new-issue
government or agency securities on a "when-issued" basis. The prices are
fixed at the time the commitment is made to purchase these securities.
Delivery and payment may be at a future date beyond customary settlement
time. It is the practice of Account TB to make when-issued purchases for
settlement no more than 90 days beyond the commitment date.
The commitment to purchase a when-issued security is treated as a senior
security and will be valued and reflected in Account TB's net asset value
daily from the commitment date. While it is Account TB's intention to take
physical delivery of these securities, offsetting transactions may be made
prior to settlement.
Account TB does not make payment or begin to accrue interest on these
securities until settlement date. When Account TB commits to purchase a
security on a when-issued basis, it identifies and segregates high-grade
money market instruments and other liquid securities equal in value to the
purchase cost of the when-issued securities.
REPURCHASE AGREEMENTS. When Account TB enters into a repurchase agreement
(a purchase of securities whereby the seller agrees to repurchase the
securities at a mutually agreed upon date and price), the repurchase price
of the securities will generally equal the amount paid by Account TB plus a
negotiated interest amount. The seller under the repurchase agreement will
be required to provide to Account TB securities (collateral) whose market
value, including accrued interest, will be at least equal to 102% of the
repurchase price. Account TB monitors the value of collateral on a daily
basis. Repurchase agreements will be limited to transactions with national
banks and reporting broker dealers believed to present minimal credit
risks. Account TB's custodian will take actual or constructive receipt of
all securities underlying repurchase agreements until such agreements
expire.
FEDERAL INCOME TAXES. The operations of Account TB form a part of the total
operations of The Travelers and are not taxed separately. The Travelers is
taxed as a life insurance company under the Internal Revenue Code of 1986,
as amended (the "Code"). Under existing federal income tax law, no taxes
are payable on the investment income and capital gains of Account TB.
Account TB is not taxed as a "regulated investment company" under
Subchapter M of the Code.
OTHER. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Security transactions are accounted for on the trade date. Interest income
is recorded on the accrual basis.
2. INVESTMENTS
Purchases and sales of securities other than short-term investments
aggregated $31,369,575 and $17,999,074, respectively, for the year ended
December 31, 1995. Realized gains and losses from investment transactions
are reported on an identified-cost basis.
-39-
<PAGE> 177
NOTES TO FINANCIAL STATEMENTS - CONTINUED
3. CONTRACT CHARGES
Investment management and advisory fees are calculated daily at annual rates
which start at 0.50% and decrease, as net assets increase, to 0.25% of
Account TB's average net assets. These fees are paid to Travelers Asset
Management International Corporation, an indirect wholly owned subsidiary of
Travelers Group Inc.
A market timing fee equivalent on an annual basis to 1.25% of the net assets
of Account TB is deducted for market timing services. The Travelers deducts
the fee daily and, in turn, pays the fee to Copeland Financial Services,
Inc., a registered investment adviser and an affiliate of The Travelers
which provides market timing services to subscribing participants in Account
TB.
Insurance charges are paid to The Travelers for the mortality and expense
risks assumed by The Travelers. These charges are equivalent to 1.25% of
the average net assets of Account TB on an annual basis. Additionally, for
contracts in the accumulation phase, a semi-annual charge of $15 (prorated
for partial periods) is deducted from participant account balances and paid
to The Travelers to cover administrative charges.
No sales charge is deducted from participant purchase payments when they
are received. However, The Travelers generally assesses a 5% contingent
deferred sales charge if a participant's purchase payment is surrendered
within five years of its payment date. Contract surrender payments are
stated prior to the deduction of $21,911 and $1,843 of contingent deferred
sales charges for the years ended December 31, 1995 and 1994, respectively.
4. SUPPLEMENTARY INFORMATION
(Selected data for a unit outstanding throughout each year.)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
SELECTED PER UNIT DATA:
Total investment income............................... $ .071 $ .007 $ .054 $ .051 $ .052
Operating expenses.................................... .031 .006 .036 .032 .031
------ ------ ------ ------ ------
Net investment income................................. .040 .001 .018 .019 .021
Unit value at beginning of year....................... 1.215 1.234 1.132 1.087 .994
Net realized and change in unrealized gains (losses).. .128 (.020) .084 .026 .072
------ ------ ------ ------ ------
Unit value at end of year............................. $1.383 $1.215 $1.234 $1.132 $1.087
====== ====== ====== ====== ======
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value................. .17 (.02) .10 .05 .09
Ratio of operating expenses to average net assets*.... 3.00% 3.00% 3.00% 2.99% 3.00%
Ratio of net investment income to average net assets*. 3.98% 1.02% 1.48% 1.71% 3.07%
Number of units outstanding at end of year (thousands) 11,466 - 20,207 21,868 19,521
Portfolio turnover rate............................... 117% - 190% 505% 627%
</TABLE>
* Annualized.
-40-
<PAGE> 178
THE TRAVELERS TIMED BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
---------- -----------
<S> <C> <C>
U.S. GOVERNMENT AGENCY
SECURITIES (51.2%)
Federal Home Loan Banks,
7.315% Notes, 2005 $2,000,000 $2,200,620
FHLMC Gold 30yr PC,
7.50% Pass Through, 2001 115,669 118,661
FHLMC Gold 30yr PC,
7.50% Pass Through, 2002 1,016,994 1,042,723
FHLMC Gold 7yr Balloon,
7.50% Pass Through, 2002 781,461 801,231
FNMA 15yr Conventional Interm. Term,
7.50% Pass Through, 2010 314,724 323,969
FNMA 15yr Conventional Interm. Term,
7.50% Pass Through, 2010 394,373 405,957
FNMA 15yr Conventional Interm. Term,
7.50% Pass Through, 2010 400,834 412,608
FNMA 15yr Conventional Interm. Term,
7.50% Pass Through, 2010 240,602 247,669
FNMA 15yr Conventional Interm. Term,
7.50% Pass Through, 2010 494,133 508,648
GNMA 30yr Single Family Issue,
7.00% Pass Through, 2023 531,140 537,945
GNMA 30yr Single Family Issue,
7.00% Pass Through, 2023 113,469 114,922
GNMA 30yr Single Family Issue,
7.00% Pass Through, 2024 323,567 327,713
GNMA 30yr Single Family Issue,
7.00% Pass Through, 2024 526,952 533,704
GNMA 30yr Single Family Issue,
7.00% Pass Through, 2025 333,669 337,944
GNMA 30yr Single Family Issue,
7.00% Pass Through, 2025 107,166 108,540
----------
TOTAL U.S. GOVERNMENT
AGENCY SECURITIES
(COST $7,864,825) 8,022,854
----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
---------- -----------
<S> <C> <C>
U.S. GOVERNMENT
SECURITIES (44.3%)
United States of America Treasury,
7.25% Bonds, 2022 $6,000,000 $ 6,948,750
-----------
TOTAL U.S. GOVERNMENT
SECURITIES (COST $6,407,813) 6,948,750
-----------
SHORT-TERM INVESTMENTS (4.5%)
REPURCHASE AGREEMENTS (4.5%)
Merrill Lynch Government
Securities, Inc., 5.50% Repurchase
Agreement dated December 29,
1995 due January 2, 1996,
collateralized by: United States of
America Treasury, $705,000,
5.63% due October 31, 1997 702,000 702,000
-----------
TOTAL SHORT-TERM
INVESTMENTS (COST $702,000) 702,000
-----------
TOTAL INVESTMENTS (100%)
(COST $14,974,638) (A) $15,673,604
===========
</TABLE>
NOTES
(A) At December 31, 1995, gross and net unrealized appreciation for all
securities was $ 698,966.
See Notes to Financial Statements
-41-
<PAGE> 179
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Managers and Owners of Variable Annuity Contracts of
The Travelers Timed Bond Account for Variable Annuities:
We have audited the accompanying statement of assets and liabilities of The
Travelers Timed Bond Account for Variable Annuities including the statement of
investments as of December 31, 1995, and the related statement of operations
for the year then ended, the statement of changes in net assets for each of the
two years in the period then ended, and the per unit data for each of the five
years in the period then ended. These financial statements and per unit data
are the responsibility of management. Our responsibility is to express an
opinion on these financial statements and per unit data 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 and per unit
data 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 securities owned as of
December 31, 1995, by correspondence with the custodian. 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 and per unit data referred to above
present fairly, in all material respects, the financial position of The
Travelers Timed Bond Account for Variable Annuities as of December 31, 1995,
the results of its operations for the year ended, the changes in its net assets
for each of the two years in the period then ended, and the per unit data for
each of the five years in the period then ended, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 16, 1996
-42-
<PAGE> 180
Independent Auditors' Report
The Board of Directors and Shareholder of
The Travelers Insurance Company and Subsidiaries:
We have audited the accompanying consolidated balance sheet of The Travelers
Insurance Company and Subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of operations and retained earnings and cash
flows for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of The Travelers
Insurance Company and Subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles.
As discussed in note 3 to the consolidated financial statements, the Company
adopted the provisions of Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," in 1994.
/s/KPMG Peat Marwick LLP
------------------------
Hartford, Connecticut
January 16, 1996
14
<PAGE> 181
Report of Independent Accountants
To the Board of Directors and Shareholder of
The Travelers Insurance Company and Subsidiaries:
We have audited the consolidated statements of operations and retained earnings
and cash flows of The Travelers Insurance Company and Subsidiaries for the year
ended December 31, 1993. These consolidated financial statements are the
responsibility of Company management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall consolidated
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated results of operations and
cash flows of The Travelers Insurance Company and Subsidiaries for the year
ended December 31, 1993 in conformity with generally accepted accounting
principles.
/s/ COOPERS & LYBRAND L.L.P.
- ----------------------------
Hartford, Connecticut
January 24, 1994
15
<PAGE> 182
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
(for the year ended December 31, in millions) 1995 1994 | 1993
- ---------------------------------------------------------------------------------------------|-------
<S> <C> <C> | <C>
REVENUES |
Premiums $1,496 $1,492 | $ 330
Net investment income 1,824 1,702 | 1,730
Realized investment gains (losses) 106 13 | (39)
Other 221 199 | 153
- ---------------------------------------------------------------------------------------------|-------
3,647 3,406 | 2,174
- ---------------------------------------------------------------------------------------------|-------
|
BENEFITS AND EXPENSES |
Current and future insurance benefits 1,185 1,216 | 792
Interest credited to contractholders 967 961 | 1,200
Amortization of deferred acquisition costs and |
value of insurance in force 290 281 | 56
Other operating expenses 368 351 | 211
- ---------------------------------------------------------------------------------------------|-------
2,810 2,809 | 2,259
- ---------------------------------------------------------------------------------------------|-------
|
Income (loss) from continuing operations before |
federal income taxes 837 597 | (85)
- ---------------------------------------------------------------------------------------------|-------
|
Federal income taxes: |
Current 233 (96) | (58)
Deferred 57 307 | (48)
- ---------------------------------------------------------------------------------------------|-------
290 211 | (106)
- ---------------------------------------------------------------------------------------------|-------
|
Income from continuing operations 547 386 | 21
|
Discontinued operations, net of income taxes |
Income from operations (net of taxes of $18, $83 and $48) 72 150 | 120
Gain on disposition (net of taxes of $68, $18 and $0) 131 9 | -
- ---------------------------------------------------------------------------------------------|-------
Income from discontinued operations 203 159 | 120
- ---------------------------------------------------------------------------------------------|-------
|
Net income 750 545 | 141
Retained earnings beginning of year 1,562 1,017 | 888
Dividend to parent - - | (14)
Preference stock tax benefit allocated by parent - - | 2
- ---------------------------------------------------------------------------------------------|-------
Retained earnings end of year $2,312 $1,562 | $1,017
- -----------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
16
<PAGE> 183
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
(at December 31, in millions) 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Fixed maturities, available for sale at market (cost, $18,187; $18,579) $18,842 $17,260
Equity securities, at market (cost, $182; $173) 224 169
Mortgage loans 3,626 4,938
Real estate held for sale, net of accumulated depreciation of $9; $9 293 383
Policy loans 1,888 1,581
Short-term securities 1,554 2,279
Other investments 874 885
- -------------------------------------------------------------------------------------------------------------
Total investments 27,301 27,495
- -------------------------------------------------------------------------------------------------------------
Cash 73 102
Investment income accrued 338 362
Premium balances receivable 107 215
Reinsurance recoverables 4,107 2,915
Deferred acquisition costs and value of insurance in force 1,962 1,939
Deferred federal income taxes - 950
Separate and variable accounts 6,949 5,160
Other assets 1,464 1,397
- -------------------------------------------------------------------------------------------------------------
Total assets $42,301 $40,535
- -------------------------------------------------------------------------------------------------------------
LIABILITIES
Contractholder funds $14,525 $16,354
Future policy benefits 11,783 11,480
Policy and contract claims 571 1,222
Separate and variable accounts 6,916 5,128
Short-term debt 73 74
Deferred federal income taxes 32 -
Other liabilities 2,173 1,923
- -------------------------------------------------------------------------------------------------------------
Total liabilities 36,073 36,181
- -------------------------------------------------------------------------------------------------------------
SHAREHOLDER'S EQUITY
Common stock, par value $2.50; 40 million
shares authorized, issued and outstanding 100 100
Additional paid-in capital 3,134 3,452
Retained earnings 2,312 1,562
Unrealized investment gains (losses), net of taxes 682 (760)
- -------------------------------------------------------------------------------------------------------------
Total shareholder's equity 6,228 4,354
- -------------------------------------------------------------------------------------------------------------
Total liabilities and shareholder's equity $42,301 $40,535
- -------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
17
<PAGE> 184
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
(for the year ended December 31, in millions) 1995 1994 | 1993
- -------------------------------------------------------------------------------------------------|----------
<S> <C> <C> | <C>
CASH FLOWS FROM OPERATING ACTIVITIES |
Premiums collected $ 1,346 $ 1,394 | $ 551
Net investment income received 1,855 1,719 | 1,638
Other revenues received 90 (2) | 2
Benefits and claims paid (846) (1,115) | (960)
Interest credited to contractholders (960) (868) | (1,097)
Operating expenses paid (615) (536) | (231)
Income taxes (paid) refunded (63) (27) | 25
Trading account investments, (purchases) sales, net - - | (1,585)
Other (137) (81) | 308
- -------------------------------------------------------------------------------------------------|----------
Net cash provided by (used in) operating activities 670 484 | (1,349)
Net cash provided by (used in) discontinued operations (596) 233 | (23)
- -------------------------------------------------------------------------------------------------|-----------
Net cash provided by (used in) operations 74 717 | (1,372)
- -------------------------------------------------------------------------------------------------|-----------
CASH FLOWS FROM INVESTING ACTIVITIES |
Investment repayments |
Fixed maturities 1,974 2,528 | 2,369
Mortgage loans 680 1,266 | 1,103
Proceeds from investments sold |
Fixed maturities 6,773 1,316 | 99
Equity securities 379 357 | 75
Mortgage loans 704 546 | 290
Real estate held for sale 253 728 | 949
Investments in |
Fixed maturities (10,748) (4,594) | (2,968)
Equity securities (305) (340) | (51)
Mortgage loans (144) (102) | (246)
Policy loans, net (325) (193) | (2)
Short-term securities, (purchases) sales, net 291 (367) | 850
Other investments, (purchases) sales, net (267) (299) | 41
Securities transactions in course of settlement 258 24 | (7)
Net cash provided by (used in) investing activities of |
discontinued operations 1,425 (261) | 113
- -------------------------------------------------------------------------------------------------|----------
Net cash provided by investing activities 948 609 | 2,615
- -------------------------------------------------------------------------------------------------|----------
CASH FLOWS FROM FINANCING ACTIVITIES |
Issuance (redemption) of short-term debt, net (1) 73 | -
Contractholder fund deposits 2,705 1,951 | 2,884
Contractholder fund withdrawals (3,755) (3,357) | (4,264)
Dividends to parent company - - | (14)
Return of capital to parent company - (23) | -
Net cash provided by financing activities |
of discontinued operations - 84 | 121
Other - (2) | 6
- -------------------------------------------------------------------------------------------------|----------
Net cash used in financing activities (1,051) (1,274) | (1,267)
- -------------------------------------------------------------------------------------------------|----------
Net increase (decrease) in cash $ (29) $ 52 | $ (24)
- ------------------------------------------------------------------------------------------------------------
Cash at December 31 $ 73 $ 102 $ 50
- -----------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
18
<PAGE> 185
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS
The Travelers Insurance Company is a wholly owned subsidiary of The
Travelers Insurance Group Inc. (TIGI), which is an indirect, wholly owned
subsidiary of Travelers Group Inc. (Travelers).
The Travelers Insurance Company and its subsidiaries (the Company)
principally operates through one major business segment: Life and
Annuity, which offers individual life, long-term care, annuities and
investment products to individuals and small businesses, and investment
products to employer-sponsored retirement and savings plans. The
Company's Corporate and Other Operations segment manages the investment
portfolio of the Company.
Individual products are primarily marketed through independent agents and
through two of the Company's affiliates, The Copeland Companies and the
financial consultants of Smith Barney, Inc. (Smith Barney). Group pension
products and annuities are marketed by the Company's salaried staff
directly to plan sponsors and are also placed through independent
consultants and investment advisers.
The Company sold group life and health insurance through its Managed Care
and Employee Benefits Operations (MCEBO) through 1994. See note 4.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies used in the preparation of the
accompanying financial statements follow.
Basis of presentation
The consolidated financial statements include the accounts of the
Company and its insurance and noninsurance subsidiaries. Significant
intercompany transactions have been eliminated.
In December 1992, Primerica Corporation (Primerica) acquired
approximately 27% of the common stock of the Company's then parent, The
Travelers Corporation (the 27% Acquisition). The 27% Acquisition was
accounted for as a purchase. Effective December 31, 1993, Primerica
acquired the approximately 73% of The Travelers Corporation common stock
which it did not already own, and The Travelers Corporation was merged
into Primerica, which was renamed Travelers Group Inc. This was effected
through the exchange of .80423 shares of Travelers common stock for each
share of The Travelers Corporation common stock (the Merger). All
subsidiaries of The Travelers Corporation were contributed to TIGI. In
conjunction with the Merger, Travelers contributed Travelers Insurance
Holdings Inc. (formerly Primerica Insurance Holdings, Inc.) and its
subsidiaries (TIHI) to TIGI, which in turn contributed TIHI to the
Company.
TIHI is an intermediate holding company whose primary subsidiaries are
Primerica Life Insurance Company and its subsidiary National Benefit
Life Insurance Company, which primarily offers individual life
insurance. Through September 1995 it also sold specialty accident and
health insurance through its subsidiary Transport Life Insurance Company
(see note 4).
19
<PAGE> 186
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
The consolidated financial statements and the accompanying notes reflect
the historical operations of the Company for the year ended December 31,
1993. The results of operations of TIHI and its subsidiaries are not
included in the 1993 financial statements.
The 27% Acquisition and the Merger were accounted for as a "step
acquisition", and the purchase accounting adjustments were "pushed down"
as of December 31, 1993 to the subsidiaries of TIGI, including the
Company, and reflect adjustments of assets and liabilities of the Company
(except TIHI) to their fair values determined at each acquisition date
(i.e., 27% of values at December 31, 1992 as carried forward and 73% of
the values at December 31, 1993). These assets and liabilities were
recorded at December 31, 1993 based upon management's then best estimate
of their fair values at the respective dates. Evaluation and appraisal of
assets and liabilities, including investments, the value of insurance in
force, other insurance assets and liabilities and related deferred
federal income taxes was completed during 1994. The excess of the 27%
share of assigned value of identifiable net assets over cost at December
31, 1992, which was allocated to the Company through "pushdown"
accounting, was approximately $56 million and is being amortized over ten
years on a straight-line basis. The excess of the purchase price of the
common stock over the fair value of the 73% of net assets acquired at
December 31, 1993, which was allocated to the Company through "pushdown"
accounting, was approximately $340 million and is being amortized over 40
years on a straight-line basis.
The consolidated statements of operations and retained earnings and of
cash flows and the related accompanying notes for the years ended
December 31, 1995 and 1994, which are presented on a purchase accounting
basis, are separated from the corresponding 1993 information, which is
presented on a historical accounting basis, to indicate the difference in
valuation bases.
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.
As more fully described in note 4, all of the operations comprising MCEBO
are presented as a discontinued operation and, accordingly, prior year
amounts have been restated.
Certain prior year amounts have been reclassified to conform with the
1995 presentation.
Investments
Fixed maturities include bonds, notes and redeemable preferred stocks.
Fixed maturities are valued based upon quoted market prices, or if quoted
market prices are not available, discounted expected cash flows using
market rates commensurate with the credit quality and maturity of the
investment. Fixed maturities are classified as "available for sale" and
are reported at fair value, with unrealized investment gains and losses,
net of income taxes, charged or credited directly to shareholder's
equity.
20
<PAGE> 187
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Equity securities, which include common and nonredeemable preferred
stocks, are available for sale and 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. 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. Impaired loans were insignificant at December 31, 1995.
Real estate held for sale is carried at the lower of cost or fair value
less estimated costs to sell. Fair value was established at time of
foreclosure by appraisers, either internal or external, using discounted
cash flow analyses and other acceptable techniques. Thereafter, an
allowance for losses on real estate held for sale is established if the
carrying value of the property exceeds its current fair value less
estimated costs to sell. There was no such allowance at December 31,
1995.
Accrual of income 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.
Gains or losses arising from futures contracts used to hedge investments
are treated as basis adjustments and are recognized in income over the
life of the hedged investments.
Gains and losses arising from forward contracts used to hedge foreign
investments in the Company's U.S. portfolios are a component of realized
investment gains and losses. Gains and losses arising from forward
contracts used to hedge investments in Canadian operations are reflected
directly in shareholder's equity, net of income taxes.
Interest rate swaps are used to manage interest rate risk in the
investment portfolio and are marked to market with unrealized gains and
losses recorded as a component of shareholder's equity, net of income
taxes. Rate differentials on interest rate swap agreements are accrued
between settlement dates and are recognized as an adjustment to interest
income from the related investment.
Investment Gains and Losses
Realized investment gains and losses are included as a component of
pretax revenues based upon specific identification of the investments
sold on the trade date and, prior to the Merger, included adjustments to
investment valuation reserves. These adjustments reflected changes
considered to be other than temporary in the net realizable value of
investments. 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. The foreign exchange
effects of Canadian operations are included in unrealized gains and
losses.
21
<PAGE> 188
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
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.
Deferred Acquisition Costs and Value of Insurance in Force
Costs of acquiring individual life insurance, annuities and health
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 and guaranteed
renewable health contracts, including long-term care, are amortized over
the period of anticipated premiums; universal life in relation to
estimated gross profits; and annuity contracts employing a level yield
method. For life insurance, a 10- to 25-year amortization period is
used; for guaranteed renewable health, a 10- to 20-year period, and a
10- to 15-year period is employed for annuities. Deferred acquisition
costs are reviewed periodically for recoverability to determine if any
adjustment is required.
The value of insurance in force represents the actuarially determined
present value of anticipated profits to be realized from life insurance,
annuities and health contracts at the date of the Merger 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
interest rates ranging from 14% to 18% for the business acquired. The
value of the business in force is amortized over the contract period
using current interest crediting rates to accrete interest and using
amortization methods based on the specified products. Traditional life
insurance and guaranteed renewable health policies are amortized over
the period of anticipated premiums; universal life is amortized in
relation to estimated gross profits; and 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.
Separate and Variable Accounts
Separate and variable accounts primarily represent funds for which
investment income and investment gains and losses accrue directly to,
and investment risk is borne by, the contractholders. Each account has
specific investment objectives. The assets of each account are legally
segregated and are not subject to claims that arise out of any other
business of the Company. The assets of these accounts are carried at
market value. Certain other separate accounts provide guaranteed levels
of return or benefits and the assets of these accounts are carried at
amortized cost. Amounts assessed to the contractholders for management
services are included in revenues. Deposits, net investment income and
realized investment gains and losses for these accounts are excluded
from revenues, and related liability increases are excluded from
benefits and expenses.
22
<PAGE> 189
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Goodwill
The excess of the 27% share of assigned value of identifiable assets
over cost at December 31, 1992 allocated to the Company as a result of
the 27% Acquisition amounted to approximately $56 million and is being
amortized over 10 years on a straight-line basis. Goodwill resulting
from the excess of the purchase price over the fair value of the 73% of
net assets acquired related to the Merger amounted to approximately $340
million at December 31, 1993 and is being amortized over 40 years on a
straight-line basis. TIHI has goodwill of $239 million.
Contractholder Funds
Contractholder funds represent receipts from the issuance of universal
life, pension investment and certain individual annuity contracts. Such
receipts are considered deposits on investment contracts that do not
have substantial mortality or morbidity risk. Account balances are also
increased by interest credited and reduced by withdrawals, mortality
charges and administrative expenses charged to the contractholders.
Calculations of contractholder account balances for investment contracts
reflect lapse, withdrawal and interest rate assumptions based on
contract provisions, the Company's experience and industry standards.
Interest rates credited to contractholder funds range from 3.8% to 8.6%.
Contractholder funds also include other funds that policyholders leave
on deposit with the Company.
Future Policy Benefits
Benefit reserves represent liabilities for future insurance policy
benefits. Benefit reserves for life insurance, annuities, and accident
and health policies have been computed based upon mortality, morbidity,
persistency and interest assumptions applicable to these coverages,
which range from 2.5% to 10.0%, including adverse deviation. These
assumptions consider Company experience and industry standards and may
be revised if it is determined that the future experience will differ
substantially from that previously assumed. The assumptions vary by
plan, age at issue, year of issue and duration. Appropriate recognition
has been given to experience rating and reinsurance.
Operating Lease Obligations
At December 31, 1993, operating lease obligations were recorded at the
value assigned at the acquisition dates and included in the consolidated
balance sheet as a component of other liabilities. This liability is
being amortized over the respective lease periods.
23
<PAGE> 190
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Permitted Statutory Accounting Practices
The Company, domiciled principally in Connecticut and Massachusetts,
prepares statutory financial statements in accordance with the accounting
practices prescribed or permitted by the insurance departments of those
states. Prescribed statutory accounting practices include a variety of
publications of the National Association of Insurance Commissioners as
well as state laws, regulations, and general administrative rules.
Permitted statutory accounting practices encompass all accounting
practices not so prescribed. The impact of any permitted accounting
practices on statutory surplus of the Company is not material.
Premiums
Premiums are recognized as revenues when due. Reserves are established
for the portion of premiums that will be earned in future periods and for
deferred profits on limited-payment policies that are being recognized in
income over the policy term.
Other Revenues
Other revenues include surrender, mortality and administrative charges
and fees as earned on investment, universal life and other insurance
contracts. Other revenues also include gains and losses on dispositions
of assets and operations other than realized investment gains and losses,
revenues of noninsurance subsidiaries, and the pretax operating results
of real estate joint ventures.
Interest Credited to Contractholders
Interest credited to contractholders represents amounts earned by
universal life, pension investment and certain individual annuity
contracts in accordance with contract provisions.
Federal Income Taxes
The provision for federal income taxes is comprised of two components,
current income taxes and deferred income taxes. Deferred federal income
taxes arise from changes during the year in cumulative temporary
differences between the tax basis and book basis of assets and
liabilities. The deferred federal income tax asset is recognized to the
extent that future realization of the tax benefit is more likely than
not, with a valuation allowance for the portion that is not likely to be
recognized.
24
<PAGE> 191
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Accounting Standards not yet Adopted
Statement of Financial Accounting Standards No. 121, "Accounting for
Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to
be held and used and for long-lived assets and certain identifiable
intangibles to be disposed of. This statement requires the write down to
fair value when long-lived assets to be held and used are impaired. It
also requires long-lived assets to be disposed of (e.g., real estate held
for sale) to be carried at the lower of cost or fair value less cost to
sell and does not allow such assets to be depreciated. The adoption of
this statement, effective January 1, 1996, did not have a material effect
on the Company's results of operations, financial condition or liquidity.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (FAS 123). This statement addresses alternative
accounting treatments for stock-based compensation, such as stock options
and restricted stock. FAS 123 permits either expensing the value of
stock-based compensation over the period earned or disclosing in the
financial statement footnotes the pro forma impact to net income as if
the value of stock-based compensation awards had been expensed. The value
of awards would be measured at the grant date based upon estimated fair
value, using option pricing models. The requirements of this statement
will be effective for 1996 financial statements, although earlier
adoption is permissible if an entity elects to expense the cost of
stock-based compensation. The Company, along with affiliated companies,
participates in stock option and incentive plans sponsored by Travelers.
The Company is currently evaluating the disclosures requirements and
expense recognition alternatives addressed by this statement.
3. CHANGES IN ACCOUNTING PRINCIPLES
Accounting by Creditors for Impairment of a Loan
Effective January 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment of
a Loan," and Statement of Financial Accounting Standards No. 118,
"Accounting by Creditors for Impairment of a Loan - Income Recognition
and Disclosures," which describe how impaired loans should be measured
when determining the amount of a loan loss accrual. These statements
amended existing guidance on the measurement of restructured loans in a
troubled debt restructuring involving a modification of terms. Their
adoption did not have a material impact on the Company's financial
condition, results of operations or liquidity.
25
<PAGE> 192
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
3. CHANGES IN ACCOUNTING PRINCIPLES, Continued
Accounting for Certain Debt and Equity Securities
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt
and Equity Securities" (FAS 115), which addresses accounting and
reporting for investments in equity securities that have a readily
determinable fair value and for all debt securities. Investment
securities have been classified as "available for sale" and are reported
at fair value, with unrealized gains and losses, net of income taxes,
charged or credited directly to shareholder's equity. Previously,
securities classified as available for sale were carried at the lower of
aggregate cost or market value. Initial adoption of this standard
resulted in an increase of approximately $232 million (net of taxes) to
net unrealized gains which is included in shareholder's equity.
This increase included an unrealized gain of $133 million (net of income
taxes) on TIHI's investment in the common stock of Travelers. See note
15.
4. ACQUISITIONS AND DISPOSITIONS
In December 1994, the Company and its affiliates sold their group dental
insurance business to Metropolitan Life Insurance Company (MetLife) and
realized a gain on the sale of $9 million (aftertax). On January 3, 1995,
the Company and its affiliates completed the sale of their group life and
related non-medical group insurance businesses to MetLife for $350
million and realized a gain on the sale of $20 million (aftertax). In
connection with the sale, the Company ceded 100% of its risks in the
group life and related businesses to MetLife on an indemnity reinsurance
basis, effective January 1, 1995. In connection with the reinsurance
transaction, the Company transferred assets with a fair market value of
approximately $1.5 billion to MetLife, equal to the statutory reserves
and other liabilities transferred.
On January 3, 1995, the Company and MetLife and certain of their
affiliates formed The MetraHealth Companies, Inc. (MetraHealth) joint
venture by contributing their group medical businesses to MetraHealth, in
exchange for shares of common stock of MetraHealth. No gain was
recognized upon the formation of the joint venture. Upon formation of the
joint venture, the Company owned 42.6% of the outstanding capital stock
of MetraHealth, TIGI owned 7.4% and the other 50% was owned by MetLife
and its affiliates. In March 1995, MetraHealth acquired HealthSpring,
Inc. for common stock of MetraHealth, resulting in a reduction in the
ownership interests of the Company to 41.10%, TIGI to 7.15%, and MetLife
to 48.25%.
In connection with the formation of the joint venture, the transfer of
the fee-based medical business (Administrative Services Only) and other
noninsurance business to MetraHealth was completed on January 3, 1995. As
the medical insurance business of the Company came due for renewal, the
risks were transferred to MetraHealth and the related operating results
for this medical insurance business were reported by the Company in 1995
as part of discontinued operations.
26
<PAGE> 193
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
4. ACQUISITIONS AND DISPOSITIONS, continued
On October 2, 1995, the Company and its affiliates completed the sale of
their ownership in MetraHealth to United HealthCare Corporation. Gross
proceeds to the Company were $708 million in cash, and could increase by
up to $144 million if a contingency payment based on 1995 results is
made. The gain to the Company, not including the contingency payment,
was $111 million (aftertax) and was recognized in the fourth quarter of
1995.
All of the businesses sold to MetLife or contributed to MetraHealth were
included in the Company's MCEBO segment in 1994. In 1995 the Company's
results reflect the medical insurance business not yet transferred, plus
its equity interest in the earnings of MetraHealth through the date of
the sale. These operations have been accounted for as a discontinued
operation. Revenues from discontinued operations for the years ended
December 31, 1995, 1994 and 1993 amounted to $1.2 billion, $3.3 billion
and $3.3 billion, respectively. The assets and liabilities of the
discontinued operations have not been segregated in the consolidated
balance sheet as of December 31, 1995 and 1994. The assets and
liabilities of the discontinued operations consist primarily of
investments and insurance-related assets and liabilities. At December
31, 1995, these assets and liabilities each amounted to $1.8 billion. At
December 31, 1994, these assets and liabilities amounted to $3.4 billion
and $3.2 billion, respectively.
In September 1995, Travelers made a pro rata distribution to its
stockholders of shares of Class A Common Stock of Transport Holdings
Inc., which at the time was a wholly owned subsidiary of Travelers and
was the indirect owner of the business of Transport Life Insurance
Company (Transport). Immediately prior to this distribution, the Company
dividended Transport, an indirect, wholly owned subsidiary of the
Company, to its parent, resulting in a reduction in additional paid-in
capital of $334 million. The results of Transport through September 1995
are included in income from continuing operations.
On December 31, 1993, in conjunction with the Merger, Travelers
contributed TIHI to TIGI, which TIGI then contributed to the Company at
a carrying value of $2.1 billion. Through its subsidiaries, TIHI
primarily offers individual life insurance and, until the dividend of
Transport, specialty accident and health insurance.
5. COMMERCIAL PAPER AND LINES OF CREDIT
The Company issues commercial paper directly to investors and had $73
million outstanding at December 31, 1995. The Company maintains unused
credit availability under bank lines of credit at least equal to the
amount of the outstanding commercial paper.
Travelers, Commercial Credit Company (CCC) (an indirect wholly owned
subsidiary of Travelers) and the Company have an agreement with a
syndicate of banks to provide $1.0 billion of revolving credit, to be
allocated to any of Travelers, CCC or the Company. The Company's
participation in this agreement is limited to $250 million. The
revolving credit facility consists of a five-year revolving credit
facility which expires in 1999. At December 31, 1995, $125 million was
allocated to the Company. Under this facility the Company is required to
maintain certain minimum equity and risk-based capital levels. At
December 31, 1995, the Company was in compliance with these provisions.
27
<PAGE> 194
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
6. 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
coinsurance, modified coinsurance and yearly renewable term. The Company
remains primarily liable as the direct insurer on all risks reinsured.
It is the policy of the Company to obtain reinsurance for amounts above
certain retention limits on individual life policies which vary with age
and underwriting classification. Generally, the maximum retention on an
ordinary life risk is $1.5 million. The Company writes workers'
compensation business through its Accident Department. This business is
ceded 100% to an affiliate, The Travelers Indemnity Company.
A summary of reinsurance financial data reflected within the
consolidated statement of operations and retained earnings is presented
below (in millions):
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
1995 1994 | 1993
-------------------------------------------------------------------------------|---------
<S> <C> <C> | <C>
Written Premiums: |
Direct $2,166 $2,153 | $ 854
|
Assumed from: |
Non-affiliated companies - - | 13
|
Ceded to: |
Affiliated companies (374) (358) | (480)
Non-affiliated companies (302) (306) | (57)
-------------------------------------------------------------------------------|---------
Total net written premiums $1,490 $1,489 | $ 330
===============================================================================|=========
|
Earned Premiums: |
Direct $2,067 $2,301 | $ 850
|
Assumed from: |
Non-affiliated companies - - | 13
|
|
Ceded to: |
Affiliated companies (283) (384) | (480)
Non-affiliated companies (298) (305) | (58)
-------------------------------------------------------------------------------|---------
Total net earned premiums $1,486 $1,612 | $ 325
=========================================================================================
</TABLE>
28
<PAGE> 195
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
6. REINSURANCE, Continued
Reinsurance recoverables at December 31 include amounts recoverable on
unpaid and paid losses and were as follows (in millions):
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
1995 1994
----------------------------------------------------------------------------
<S> <C> <C>
Reinsurance Recoverables:
Life and accident and health business:
Non-affiliated companies $1,744 $ 661
Affiliated companies - 3
Property-casualty business:
Affiliated companies 2,363 2,251
----------------------------------------------------------------------------
Total Reinsurance Recoverables $4,107 $2,915
============================================================================
</TABLE>
Total reinsurance recoverable at December 31, 1995 includes $929 million
recoverable from MetLife in connection with the sale of the Company's
group life and related businesses. See note 4.
7. SHAREHOLDER'S EQUITY
Additional Paid-In Capital
The decrease of $318 million in additional paid-in capital during 1995 is
due primarily to the dividend of Transport to the Company's parent (see
note 4).
The increase of $273 million in additional paid-in capital during 1994 is
due primarily to the finalization of the evaluations and appraisals used
to assign fair values to assets and liabilities under purchase
accounting.
The increase of $1.7 billion in additional paid-in capital during 1993
arose from a contribution of $400 million from The Travelers Corporation
and the contribution of TIHI (see notes 2 and 4). This was partially
offset by the impact of the initial evaluations and appraisals used to
assign fair values to assets and liabilities under purchase accounting.
Unrealized Investment Gains (Losses)
An analysis of the change in unrealized gains and losses on investments
is shown in note 15.
Shareholder's Equity and Dividend Availability
Statutory net income, including TIHI, was $235 million and $100 million
for the years ended December 31, 1995 and 1994, respectively. Statutory
net loss, excluding TIHI, was $648 million for the year ended December
31, 1993.
Statutory capital and surplus was $3.2 billion and $2.1 billion at
December 31, 1995 and 1994, respectively.
29
<PAGE> 196
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
7. SHAREHOLDER'S EQUITY, Continued
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 $506 million is available in 1996 for dividend payments by the
Company without prior approval of the Connecticut Insurance Department.
Dividend payments to the Company from its insurance subsidiaries are
subject to similar restrictions and are limited to $16 million in 1996.
8. DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS
Derivative Financial Instruments with Off-Balance Sheet Risk
The Company uses derivative financial instruments, including financial
futures, interest rate swaps and forward contracts, as a means of hedging
exposure to foreign currency and/or interest rate risk on anticipated
transactions or existing assets and liabilities. Also, in the normal
course of business, the Company has fixed and variable rate loan
commitments and unfunded commitments to partnerships. 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 consolidated 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 or cash flow associated with these instruments can be less
than these amounts. For forward contracts and interest rate swaps, credit
risk is limited to the amounts calculated to be due the Company on such
contracts. For unfunded commitments to partnerships, credit exposure is
the amount of the unfunded commitments. For fixed and variable rate loan
commitments, credit exposure is represented by the contractual amount of
these instruments.
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. Some
transactions include the use of collateral to minimize credit risk and
lower the effective cost to the borrower.
The Company uses exchange traded financial futures contracts to manage
its exposure to changes in interest rates which arises from the sale of
certain insurance and investment products. To hedge against adverse
changes in interest rates, the Company enters short positions in
financial futures contracts which offset asset price changes resulting
from changes in market interest rates until an investment is purchased.
30
<PAGE> 197
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
8. DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS,
Continued
Futures contracts have little credit risk since organized exchanges are
the counterparties. 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, 1995, the Company's futures contracts have no
fair value because these contracts are marked to market and settled in
cash.
The Company may occasionally enter into interest rate swaps in connection
with other financial instruments to provide greater risk diversification
and better match an asset with a corresponding liability. 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. In all cases, counterparties under these agreements are
major financial institutions with the risk of non-performance considered
remote.
The off-balance-sheet risks of interest rate swaps, financial futures
contracts, forward contracts, fixed and variable rate loan commitments
and unfunded commitments to partnerships were not significant at December
31, 1995 and 1994.
Derivative Financial Instruments without Off-Balance Sheet Risk
The Company purchased a 5-year interest rate cap, with a notional amount
of $200 million, from Travelers Group Inc. in 1995 to hedge against
losses that could result from increasing interest rates. This instrument,
which does not have off-balance sheet risk, gives the Company the right
to receive payments if interest rates exceed specific levels at specified
dates. The premium of $2 million paid for this instrument is being
amortized over its life. The interest rate cap asset is reported at fair
value which is $1 million at December 31, 1995.
Fair Value of Certain Financial Instruments
The Company uses various financial instruments in the normal course of
its business. Fair values of financial instruments which are considered
insurance contracts are not required to be disclosed and are not included
in the amounts discussed.
At December 31, 1995, investments in fixed maturities had a carrying
value and a fair value of $18.8 billion, compared with a carrying value
and a fair value of $17.3 billion at December 31, 1994. See note 15.
At December 31, 1995, mortgage loans had a carrying value of $3.6
billion, which approximated fair value, compared with a carrying value of
$4.9 billion, which approximated fair value at December 31, 1994. In
estimating fair value, the Company used interest rates reflecting the
higher returns required in the real estate financing market.
31
<PAGE> 198
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
8. DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS,
Continued
The carrying values of $647 million and $417 million of financial
instruments classified as other assets approximated their fair values at
December 31, 1995 and 1994, respectively. The carrying values of $1.3
billion and $1.2 billion of financial instruments classified as other
liabilities also approximated their fair values at December 31, 1995 and
1994, respectively. Fair value is determined using various methods
including discounted cash flows, as appropriate for the various financial
instruments.
At December 31, 1995, contractholder funds with defined maturities had a
carrying value of $2.4 billion and a fair value of $2.5 billion, compared
with a carrying value of $4.2 billion and a fair value of $4.0 billion at
December 31, 1994. 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
$9.3 billion and a fair value of $9.0 billion at December 31, 1995,
compared with a carrying value of $9.1 billion and a fair value of $8.8
billion at December 31, 1994. These contracts generally are valued at
surrender value.
The assets of separate accounts providing a guaranteed return had a
carrying value and a fair value of $1.5 billion and $1.6 billion,
respectively, at December 31, 1995, compared with a carrying value and a
fair value of $1.5 billion and $1.4 billion, respectively, at December
31, 1994. The liabilities of separate accounts providing a guaranteed
return had a carrying value and a fair value of $1.5 billion and $1.4
billion, respectively, at December 31, 1995, compared with a carrying
value and a fair value of $1.5 billion and $1.3 billion, respectively, at
December 31, 1994.
The carrying values of cash, short-term securities and investment income
accrued approximated their fair values.
The carrying value of policy loans, which have no defined maturities, was
considered to be fair value.
9. COMMITMENTS AND CONTINGENCIES
Financial Instruments with Off-Balance-Sheet Risk
See note 8 for a discussion of financial instruments with
off-balance-sheet risk.
Litigation
The Company is a defendant or codefendant in various litigation matters.
Although there can be no assurances, as of December 31, 1995, the Company
believes, based on information currently available, that the ultimate
resolution of these legal proceedings would not be likely to have a
material adverse effect on its results of operations, financial condition
or liquidity.
32
<PAGE> 199
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
10. BENEFIT PLANS
Pension Plans
The Company participates in qualified and nonqualified, noncontributory
defined benefit pension plans sponsored by an affiliate covering the
majority of the Company's U.S. employees. Benefits for the qualified plan
are based on an account balance formula. Under this formula, each
employee's accrued benefit can be expressed as an account that is
credited with amounts based upon the employee's pay, length of service
and a specified interest rate, all subject to a minimum benefit level.
This plan is funded in accordance with the Employee Retirement Income
Security Act of 1974 and the Internal Revenue Code. For the nonqualified
plan, contributions are based on benefits paid.
Certain subsidiaries of TIHI participate in a noncontributory defined
benefit plan sponsored by their ultimate parent, Travelers.
The Company's share of net pension expense was not significant for 1995,
1994 and 1993.
Through plans sponsored by TIGI, the Company also provides defined
contribution pension plans for certain agents. Company contributions are
primarily a function of production. The expense for these plans was not
significant in 1995, 1994 and 1993.
Other Benefit Plans
In addition to pension benefits, the Company provides certain health care
and life insurance benefits for retired employees through a plan
sponsored by TIGI. This plan does not include employees of TIHI. Covered
employees may become eligible for these benefits if they reach retirement
age while working for the Company. These retirees may elect certain
prepaid health care benefit plans. Life insurance benefits generally are
set at a fixed amount. The cost recognized by the Company for these
benefits represents its allocated share of the total costs of the plan,
net of employee contributions. The Company's share of the total cost of
the plan for 1995, 1994 and 1993 was not significant.
The Merger resulted in a change in control of The Travelers Corporation
as defined in the applicable plans, and provisions of some employee
benefit plans secured existing compensation and benefit entitlements
earned prior to the change in control, and provided a salary and benefit
continuation floor for employees whose employment was affected. These
merger-related costs were assumed by TIGI.
Savings, Investment and Stock Ownership Plan
Under the savings, investment and stock ownership plan available to
substantially all employees of TIGI (except TIHI), the Company matches a
portion of employee contributions. Effective April 1, 1993, the match
decreased from 100% to 50% of an employee's first 5% contribution and a
variable match based on the profitability of TIGI and its subsidiaries
was added. The Company's matching obligation was not significant in 1995,
1994 and 1993.
33
<PAGE> 200
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
11. RELATED PARTY TRANSACTIONS
The principal banking functions, including payment of salaries and
expenses, for certain subsidiaries and affiliates of TIGI (excluding
TIHI) are handled by the Company. Settlements for these payments between
the Company and its affiliates are made regularly. The Company provides
various employee benefits coverages to employees of 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 shared with affiliated companies. Charges
for these services are shared by the companies on cost allocation methods
based generally on estimated usage by department.
TIGI and its subsidiaries maintain a short-term investment pool in which
the Company participates. The position of each company participating in
the pool is calculated and adjusted daily. At December 31, 1995 and 1994,
the pool totaled approximately $2.2 billion and $1.5 billion,
respectively. The Company's share of the pool amounted to $1.4 billion
and $1.1 billion at December 31, 1995 and 1994, respectively, and is
included in short-term securities in the consolidated balance sheet.
The Company sells structured settlement annuities to its affiliates, The
Travelers Indemnity Company and its subsidiaries. Such deposits were $38
million, $39 million and $50 million for 1995, 1994 and 1993,
respectively.
The Company markets individual annuity products through The Copeland
Companies, a subsidiary of TIGI. Deposits related to these products were
$684 million, $635 million and $581 million in 1995, 1994 and 1993,
respectively.
The Company markets variable annuity products and life and accident and
health insurance through its affiliate, Smith Barney. Premiums and
deposits related to these products were $580 million and $161 million in
1995 and 1994, respectively.
The Company leases new furniture and equipment from a noninsurance
subsidiary of TIGI. The rental expense charged to the Company for this
furniture and equipment was not significant in 1995, 1994 and 1993.
At December 31, 1995 and 1994, TIC had an investment of $24 million and
$23 million, respectively, in bonds of its affiliate, Commercial Credit
Company. This is included in fixed maturities in the consolidated balance
sheet.
TIHI had an investment of $445 million and $231 million in common stock
of Travelers at December 31, 1995 and 1994, respectively. This is carried
at fair value. At December 31, 1994, Transport had an investment of $35
million in nonredeemable preferred stock of Travelers which was carried
at fair value. TIHI had notes receivable from Travelers of $30 million at
December 31, 1994, which were carried at cost. The notes were paid during
1995. These assets are included in other investments in the consolidated
balance sheet.
34
<PAGE> 201
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
12. LEASES
The Company has entered into various operating and capital lease
agreements for office space and data processing and certain other
equipment. Rental expense under operating leases was $22 million, $23
million and $26 million, in 1995, 1994 and 1993, respectively. Future net
minimum rental and lease payments are estimated as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
Minimum operating Sublease
(in millions) rental payments rental income
--------------------------------------------------------------------------------------
<S> <C> <C>
Year ending December 31,
1996 $103 $26
1997 88 19
1998 77 10
1999 71 6
2000 64 6
Thereafter 310 28
--------------------------------------------------------------------------------------
$713 $95
--------------------------------------------------------------------------------------
</TABLE>
The Company is reimbursed by affiliates of TIGI for utilization of space
and equipment.
35
<PAGE> 202
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
13. FEDERAL INCOME TAXES
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
(in millions) 1995 1994 | 1993
----------------------------------------------------------------------------|---------
<S> <C> <C> | <C>
Effective tax rate |
|
Income before federal income taxes $837 $ 597 | $ (85)
Statutory tax rate 35% 35% | 35%
----------------------------------------------------------------------------|---------
|
Expected federal income taxes $293 $ 209 | $ (30)
Tax effect of: |
Nontaxable investment income (4) (4) | (1)
Adjustments to benefit and other reserves - - | (50)
Adjustment to deferred tax asset for |
enacted change in tax rates from |
34% to 35% - - | (18)
Other, net 1 6 | (7)
----------------------------------------------------------------------------|---------
Federal income taxes (benefit) $290 $ 211 | $(106)
----------------------------------------------------------------------------|---------
|
Effective tax rate 35% 35% | 125%
----------------------------------------------------------------------------|---------
|
Composition of federal income taxes |
Current: |
United States $220 $(108) | $ (61)
Foreign 13 12 | 3
----------------------------------------------------------------------------|---------
Total 233 (96) | (58)
----------------------------------------------------------------------------|---------
|
Deferred: |
United States 52 302 | (48)
Foreign 5 5 | -
----------------------------------------------------------------------------|-----------
Total 57 307 | (48)
----------------------------------------------------------------------------|-----------
Federal income taxes $290 $ 211 | $ (106)
----------------------------------------------------------------------------------------
</TABLE>
Tax benefits allocated directly to shareholder's equity for the years
ended December 31, 1995 and 1994 were $7 million and $2 million,
respectively.
36
<PAGE> 203
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
13. FEDERAL INCOME TAXES, Continued
The net deferred tax liability at December 31, 1995 and the net deferred
tax asset at December 31, 1994 were comprised of the tax effects of
temporary differences related to the following assets and liabilities:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
(in millions) 1995 1994
--------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Benefit, reinsurance and other reserves $ 447 $ 453
Contractholder funds 54 158
Investments - 690
Other employee benefits 83 87
Other 264 257
--------------------------------------------------------------------------------------------
Total 848 1,645
--------------------------------------------------------------------------------------------
Deferred tax liabilities:
Deferred acquisition costs and value of insurance in force 538 529
Investments 152 -
Prepaid pension expense 9 5
Other 81 61
--------------------------------------------------------------------------------------------
Total 780 595
--------------------------------------------------------------------------------------------
Net deferred tax asset before valuation allowance 68 1,050
Valuation allowance for deferred tax assets (100) (100)
--------------------------------------------------------------------------------------------
Net deferred tax (liability) asset after valuation allowance $ (32) $ 950
--------------------------------------------------------------------------------------------
</TABLE>
Starting in 1994 and continuing for at least five years, the Company and
its life insurance subsidiaries will file a consolidated federal income
tax return. Federal income taxes are allocated to each member of the
consolidated return on a separate return basis adjusted for credits and
other amounts required by the consolidation process. Any resulting
liability will be paid currently to the Company. Any credits for losses
will be paid by the Company to the extent that such credits are for tax
benefits that have been utilized in the consolidated federal income tax
return.
37
<PAGE> 204
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
13. FEDERAL INCOME TAXES, Continued
A net deferred tax asset valuation allowance of $100 million has been
established to reduce the deferred tax asset on investment losses to the
amount that, based upon available evidence, is more likely than not to be
realized. Reversal of the valuation allowance is contingent upon the
recognition of future capital gains in the Company's consolidated life
insurance company federal income tax return through 1998, and the
consolidated federal income tax return of Travelers commencing in 1999,
or a change in circumstances which causes the recognition of the benefits
to become more likely than not. There was no change in the valuation
allowance during 1995. The initial recognition of any benefit produced by
the reversal of the valuation allowance will be recognized by reducing
goodwill.
At December 31, 1995, the Company has no ordinary or capital loss
carryforwards.
The "policyholders surplus account", which arose under prior tax law, is
generally that portion of the gain from operations that has not been
subjected to tax, plus certain deductions. The balance of this account,
which, under provisions of the Tax Reform Act of 1984, will not increase
after 1983, is estimated to be $932 million. This amount has not been
subjected to current income taxes but, under certain conditions that
management considers to be remote, may become subject to income taxes in
future years. At current rates, the maximum amount of such tax (for which
no provision has been made in the financial statements) would be
approximately $326 million.
14. NET INVESTMENT INCOME
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
(For the year ended December 31, in millions) 1995 1994 | 1993
--------------------------------------------------------------------------------|-----------
<S> <C> <C> | <C>
Gross investment income |
Fixed maturities $1,191 $1,082 | $1,069
Mortgage loans 419 511 | 655
Policy loans 163 110 | 104
Real estate held for sale 111 174 | 371
Other 97 52 | 8
--------------------------------------------------------------------------------|-----------
1,981 1,929 | 2,207
--------------------------------------------------------------------------------|-----------
|
Investment expenses 157 227 | 477
--------------------------------------------------------------------------------|-----------
Net investment income $1,824 $1,702 | $1,730
--------------------------------------------------------------------------------------------
</TABLE>
38
<PAGE> 205
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
15. INVESTMENTS AND INVESTMENT GAINS (LOSSES)
Realized investment gains (losses) for the periods were as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
(For the year ended December 31, in millions) 1995 1994 | 1993
-------------------------------------------------------------------------------|----------
<S> <C> <C> | <C>
Realized |
Fixed maturities $(43) $(3) | $ 159
Equity securities 36 18 | 12
Mortgage loans 47 - | (35)
Real estate held for sale 18 - | (212)
Other 48 (2) | 37
-------------------------------------------------------------------------------|----------
Realized investment gains (losses) $106 $13 | $ (39)
------------------------------------------------------------------------------------------
</TABLE>
Changes in net unrealized investment gains (losses) that are included as
a separate component of shareholder's equity were as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
(For the year ended December 31, in millions) 1995 1994 | 1993
---------------------------------------------------------------------------------|----------
<S> <C> <C> | <C>
Unrealized |
Fixed maturities $1,974 $(1,319) | $(235)
Equity securities 46 (25) | (17)
Other 200 165 | 28
---------------------------------------------------------------------------------|----------
2,220 (1,179) | (224)
Related taxes 778 (412) | (83)
---------------------------------------------------------------------------------|----------
Change in unrealized investment gains (losses) 1,442 (767) | (141)
Contribution of TIHI - - | 5
Balance beginning of year (760) 7 | 143
--------------------------------------------------------------------------------------------
Balance end of year $ 682 $ (760) $ 7
--------------------------------------------------------------------------------------------
</TABLE>
The initial adoption of FAS 115 resulted in an increase of approximately
$232 million (net of taxes) to net unrealized gains in 1994.
Fixed Maturities
Proceeds from sales of fixed maturities classified as available for sale
were $6.8 billion and $1.3 billion in 1995 and 1994, respectively. Gross
gains of $80 million and $14 million and gross losses of $124 million and
$26 million in 1995 and 1994, respectively, were realized on those sales.
Prior to December 31, 1993, fixed maturities that were intended to be
held to maturity were recorded at amortized cost and classified as held
for investment. Sales from the amortized cost portfolios have been made
periodically. Such sales were $99 million in 1993, resulting in gross
realized gains of $6 million and gross realized losses of $1 million.
39
<PAGE> 206
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
15. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued
Prior to December 31, 1993, the carrying values of the trading portfolio
fixed maturities were adjusted to market value as it was likely they
would be sold prior to maturity. Sales of trading portfolio fixed
maturities were $4.0 billion in 1993. Gross gains of $139 million and
gross losses of $2 million were realized on those sales.
The amortized cost and market value of investments in fixed maturities
were as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
December 31, 1995
-------------------------------------------------------------------------------------------------
Gross Gross
Amortized unrealized unrealized Market
(in millions) cost gains losses value
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available for sale:
Mortgage-backed securities -
CMOs and pass through
securities $ 4,174 $103 $15 $ 4,262
U.S. Treasury securities
and obligations of U.S.
Government and
government agencies
and authorities 1,327 116 - 1,443
Obligations of states,
municipalities and
political subdivisions 91 2 - 93
Debt securities issued by
foreign governments 311 17 - 328
All other corporate bonds 12,283 442 10 12,715
Redeemable preferred stock 1 - - 1
-------------------------------------------------------------------------------------------------
Total $18,187 $680 $25 $18,842
-------------------------------------------------------------------------------------------------
</TABLE>
40
<PAGE> 207
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
15. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
December 31, 1994
-------------------------------------------------------------------------------------------------
Gross Gross
Amortized unrealized unrealized Market
(in millions) cost gains losses value
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available for sale:
Mortgage-backed securities -
CMOs and pass through
securities $ 3,779 $ 3 $ 304 $ 3,478
U.S. Treasury securities
and obligations of U.S.
Government and
government agencies
and authorities 3,080 3 306 2,777
Obligations of states,
municipalities and
political subdivisions 87 - 7 80
Debt securities issued by
foreign governments 398 - 26 372
All other corporate bonds 11,225 14 696 10,543
Redeemable preferred stock 10 - - 10
-------------------------------------------------------------------------------------------------
Total $18,579 $20 $1,339 $17,260
-------------------------------------------------------------------------------------------------
</TABLE>
The amortized cost and market value of fixed maturities at December 31,
1995, by contractual maturity, are shown below. Actual maturities will
differ from contractual maturities because borrowers may have the right
to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
Maturity Amortized Market
(in millions) cost value
-----------------------------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 788 $ 792
Due after 1 year through 5 years 5,053 5,156
Due after 5 years through 10 years 5,176 5,416
Due after 10 years 2,996 3,216
-----------------------------------------------------------------------------------------------
14,013 14,580
Mortgage-backed securities 4,174 4,262
-----------------------------------------------------------------------------------------------
Total $18,187 $18,842
-----------------------------------------------------------------------------------------------
</TABLE>
41
<PAGE> 208
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
15. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued
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,
primarily planned amortization class (PAC) tranches. Prepayment protected
tranches are preferred because they provide stable cash flows in a
variety of 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, 1995 and 1994, the Company held CMOs with a market value
of $2.3 billion and $2.2 billion, respectively. Approximately 89% of the
Company's CMO holdings are fully collateralized by GNMA, FNMA or FHLMC
securities at December 31, 1995 and 1994. In addition, the Company held
$917 million and $1.3 billion of GNMA, FNMA or FHLMC mortgage-backed
securities at December 31, 1995 and 1994, respectively. Virtually all of
these securities are rated AAA. The Company also held $1.3 billion and
$927 million of securities that are backed primarily by credit card or
car loan receivables at December 31, 1995 and 1994, respectively.
Equity Securities
The cost and market values of investments in equity securities were as
follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
December 31, 1995
-------------------------------------------------------------------------------------------------
Gross Gross
unrealized unrealized Market
(in millions) Cost gains losses value
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stocks $138 $48 $5 $181
Nonredeemable preferred stocks 44 2 3 43
-------------------------------------------------------------------------------------------------
Total $182 $50 $8 $224
-------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
December 31, 1994
---------------------------------------------------------------------------------------------------
Gross Gross
unrealized unrealized Market
(in millions) Cost gains losses value
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stocks $ 133 $ 19 $ 21 $ 131
Nonredeemable preferred stocks 40 - 2 38
---------------------------------------------------------------------------------------------------
Total $ 173 $ 19 $ 23 $ 169
---------------------------------------------------------------------------------------------------
</TABLE>
42
<PAGE> 209
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
15. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued
Proceeds from sales of equity securities were $379 million and $357
million in 1995 and 1994, respectively. Gross gains of $27 million and
$24 million and gross losses of $2 million and $6 million in 1995 and
1994, respectively, were realized on those sales.
Mortgage loans and real estate held for sale
Underperforming assets include delinquent mortgage loans, loans in the
process of foreclosure, foreclosed loans and loans modified at interest
rates below market. The Company continues its strategy, adopted in
conjunction with the Merger, to dispose of these real estate assets and
some of the mortgage loans and to reinvest the proceeds to obtain current
market yields.
At December 31, 1995 and 1994, the Company's mortgage loan and real
estate held for sale portfolios consisted of the following (in millions):
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
1995 1994
---------------------------------------------------------------------------------
<S> <C> <C>
Current mortgage loans $ 3,385 $ 4,467
Underperforming mortgage loans 241 471
---------------------------------------------------------------------------------
Total 3,626 4,938
---------------------------------------------------------------------------------
Real estate held for sale 293 383
---------------------------------------------------------------------------------
Total $ 3,919 $ 5,321
---------------------------------------------------------------------------------
</TABLE>
Aggregate annual maturities on mortgage loans at December 31, 1995 are
as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------
(in millions)
-------------------------------------------------------
<S> <C>
Past maturity $ 189
1996 462
1997 398
1998 589
1999 339
2000 382
Thereafter 1,267
-------------------------------------------------------
Total $ 3,626
-------------------------------------------------------
</TABLE>
43
<PAGE> 210
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
15. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued
Concentrations
At December 31, 1995 and 1994, the Company had no concentration of credit
risk in a single investee exceeding 10% of consolidated shareholder's
equity.
The Company participates in a short-term investment pool maintained by
TIGI and its subsidiaries. See note 11.
Included in fixed maturities are below investment grade assets totaling
$1.0 billion and $922 million at December 31, 1995 and 1994,
respectively. The Company defines its below investment grade assets as
those securities rated "Ba1" or below by external rating agencies, or the
equivalent by internal analysts when a public rating does not exist. Such
assets include publicly traded below investment grade bonds and certain
other privately issued bonds that are classified as below investment
grade loans.
The Company also had significant concentrations of investments, primarily
fixed maturities, in the following industries:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
(in millions) 1995 1994
---------------------------------------------------------------------------------------------------
<S> <C> <C>
Finance $ 1,491 $ 1,241
Banking 1,226 953
Electric utilities 1,023 1,222
Oil and gas 861 859
---------------------------------------------------------------------------------------------------
</TABLE>
Below investment grade assets included in the totals above, were as
follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
(in millions) 1995 1994
---------------------------------------------------------------------------------------------------
<S> <C> <C>
Finance $ 56 $ 75
Banking 8 21
Electric utilities 26 32
Oil and gas 66 33
---------------------------------------------------------------------------------------------------
</TABLE>
At December 31, 1995 and 1994, significant concentrations of mortgage
loans were for properties located in highly populated areas in the states
listed below:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
(in millions) 1995 1994
---------------------------------------------------------------------------------------------------
<S> <C> <C>
California $ 736 $ 929
New York 400 558
---------------------------------------------------------------------------------------------------
</TABLE>
44
<PAGE> 211
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
15. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued
Other mortgage loan investments are fairly evenly dispersed throughout
the United States, with no holdings in any state exceeding $332 million
and $432 million at December 31, 1995 and 1994, respectively.
Concentrations of mortgage loans by property type at December 31, 1995
and 1994 were as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
(in millions) 1995 1994
---------------------------------------------------------------------------------------------------
<S> <C> <C>
Office $ 1,513 $ 2,065
Apartment 580 1,029
Agricultural 556 540
Retail 426 606
---------------------------------------------------------------------------------------------------
</TABLE>
The Company monitors creditworthiness of counterparties to all financial
instruments by using controls that include credit approvals, limits and
other monitoring procedures. Collateral for fixed maturities often
includes pledges of assets, including stock and other assets, guarantees
and letters of credit. The Company's underwriting standards with respect
to new mortgage loans generally require loan to value ratios of 75% or
less at the time of mortgage origination.
Investment Valuation Reserves
There were no investment valuation reserves at December 31, 1995 and
1994. Investment valuation reserve activity during 1994 and 1993 was as
follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
(in millions) 1994 | 1993
--------------------------------------------------------------------------------------|------------
<S> <C> | <C>
Beginning of year $ 67 | $ 1,417
Increase - | 195
Impairments, net of gains/recoveries - | (602)
FAS 115/Purchase accounting adjustment (67) | (943)
---------------------------------------------------------------------------------------------------
End of year $ - $ 67
---------------------------------------------------------------------------------------------------
</TABLE>
At December 31, 1993, investment valuation reserves were comprised of $67
million for securities. Increases in the investment valuation reserves
were reflected as realized investment losses.
45
<PAGE> 212
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
15. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued
Nonincome Producing
Investments included in the consolidated balance sheets that were
nonincome producing for the preceding 12 months were as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
(in millions) 1995 1994
---------------------------------------------------------------------------------------------------
<S> <C> <C>
Mortgage loans $ 65 $ 127
Real estate 18 73
Fixed maturities 4 6
---------------------------------------------------------------------------------------------------
Total $ 87 $ 206
---------------------------------------------------------------------------------------------------
</TABLE>
Restructured Investments
The Company had mortgage loans and debt securities which were
restructured at below market terms totaling approximately $67 million and
$259 million at December 31, 1995 and 1994, respectively. The new terms
typically defer a portion of contract interest payments to varying future
periods. The accrual of interest is suspended on all restructured assets,
and interest income is reported only as payment is received. Gross
interest income on restructured assets that would have been recorded in
accordance with the original terms of such loans amounted to $16 million
in 1995 and $52 million in 1994. Interest on these assets, included in
net investment income, aggregated $8 million and $17 million in 1995 and
1994, respectively.
16. LIFE AND ANNUITY DEPOSIT FUNDS AND RESERVES
At December 31, 1995, the Company had $22.4 billion of life and annuity
deposit funds and reserves. Of that total, $11.4 billion were not subject
to discretionary withdrawal based on contract terms and related market
conditions. The remaining $11.0 billion were for life and annuity
products that were subject to discretionary withdrawal by the
contractholders. Included in the amount that were subject to
discretionary withdrawal were $1.5 billion of liabilities that are
surrenderable with market value adjustments. An additional $5.8 billion
of the life insurance and individual annuity liabilities are subject to
discretionary withdrawals with an average surrender charge of 5.2%.
Another $870 million of liabilities are surrenderable at book value over
5 to 10 years. In the payout phase, these funds are credited at
significantly reduced interest rates. The remaining $2.8 billion of
liabilities are surrenderable without charge. Approximately 25% of these
liabilities relate to individual life products. These 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.
46
<PAGE> 213
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
17. RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES
The following table reconciles net income to net cash provided by (used
in) operating activities:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
(For the year ended December 31, in millions) 1995 1994 | 1993
---------------------------------------------------------------------------------------|-----------
<S> <C> <C> | <C>
Net income from continuing operations $ 547 $ 386 | $ 21
Reconciling adjustments |
Realized (gains) losses (106) (13) | 39
Deferred federal income taxes 57 307 | (48)
Amortization of deferred policy acquisition |
costs and value of insurance in force 290 281 | 56
Additions to deferred policy acquisition costs (454) (435) | 51
Trading account investments, |
(purchases) sales, net - - | (1,585)
Investment income accrued (9) (47) | 3
Premium balances receivable (8) 5 | (5)
Insurance reserves and accrued expenses 291 212 | 166
Restructuring reserves - - | (79)
Other, including investment valuation reserves |
in 1993 62 (212) | 32
---------------------------------------------------------------------------------------|-----------
Net cash provided by (used in) |
operating activities 670 484 | (1,349)
Net cash provided by (used in) |
discontinued operations (596) 233 | (23)
---------------------------------------------------------------------------------------|-----------
Net cash provided by (used in) |
operations $ 74 $ 717 | $ (1,372)
---------------------------------------------------------------------------------------------------
</TABLE>
47
<PAGE> 214
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
18. NONCASH INVESTING AND FINANCING ACTIVITIES
Significant noncash investing and financing activities include: a) the
1995 transfer of assets with a fair market value of approximately $1.5
billion and statutory reserves and other liabilities of approximately
$1.5 billion to MetLife (see note 4); b) the 1995 dividend of Transport
Life Insurance Company to the Company's parent (see note 4); c) the
acquisition of real estate through foreclosures of mortgage loans
amounting to $97 million, $229 million and $563 million in 1995, 1994 and
1993, respectively; d) the acceptance of purchase money mortgages for
sales of real estate aggregating $27 million, $96 million and $190
million in 1995, 1994 and 1993, respectively; e) the 1994 exchange of $23
million of TIHI's investment in Travelers common stock for $35 million of
Travelers nonredeemable preferred stock; f) the 1993 contribution of TIHI
by Travelers (see note 4); g) the 1993 contribution of $400 million of
bond investments by The Travelers Corporation (see note 7); h) increases
in investment valuation reserves in 1993 for real estate held for sale
(see note 15); and i) the 1993 transfer of $352 million of mortgage loans
and bonds from the Company's general account to two separate accounts.
48
<PAGE> 215
THIS PAGE INTENTIONALLY LEFT BLANK.
30
<PAGE> 216
THE TRAVELERS (logo umbrella)
THE TRAVELERS
VARIABLE ANNUITIES
INDIVIDUAL AND GROUP VARIABLE ANNUITY CONTRACTS
Issued By
THE TRAVELERS INSURANCE COMPANY
PENSION AND PROFIT-SHARING,
SECTION 403(b) AND SECTION 408, AND
DEFERRED COMPENSATION PROGRAMS
L-11165S TIC Ed. 5-96
Printed in U.S.A.
31
<PAGE> 217
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) The financial statements of the Registrant, as well as of 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, and The
Travelers Timed Bond Account for Variable Annuities, and the Reports
of Independent Accountants thereto, are contained in Part B (Statement
of Additional Information) of this Registration Statement. For each
of the Accounts, these financial statements include the following as
applicable:
Statement of Assets and Liabilities as of December 31, 1995
Statement of Operations for the year ended December 31, 1995
Statement of Changes in Net Assets for the years ended
December 31, 1995 and 1994
Statement of Investments as of December 31, 1995
Notes to Financial Statements
The consolidated financial statements of The Travelers Insurance
Company and Subsidiaries as of December 31, 1995, and the Reports of
Independent Auditors, are also contained in the Statement of
Additional Information. The consolidated financial statements of The
Travelers Insurance Company and Subsidiaries include:
Consolidated Statement of Operations and Retained Earnings for
the years ended December 31, 1995, 1994 and 1993
Consolidated Balance Sheet as of December 31, 1995 and 1994
Consolidated Statement of Cash Flows for the years ended
December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
(b) Exhibits
1. Resolution of The Travelers Insurance Company's Board of
Directors authorizing the establishment of the Registrant.
2. Not Applicable.
3(a). Distribution and Management Agreement among the Registrant,
The Travelers Insurance Company and Tower Square Securities,
Inc. (formerly known as Travelers Equities Sales, Inc.)
(Incorporated herein by reference to Exhibit 3 to the
Post-Effective Amendment No. 28 to the Registration Statement
on Form N-4 filed on April 24, 1995.)
3(b). Selling Agreement.
4. Example of Variable Annuity Contract.
5. Example of Application.
6(a). Charter of The Travelers Insurance Company, as amended on
October 19, 1994. (Incorporated herein by reference to Exhibit
3(a)(i) to Registration Statement on Form S-2, File No.
33-58677, filed via EDGAR on April 18, 1995.)
<PAGE> 218
6(b). By-Laws of The Travelers Insurance Company, as amended on
October 20, 1994. (Incorporated herein by reference to
Exhibit 3(a)(ii) to Registration Statement on Form S-2, File
No. 33-58677, filed via EDGAR on April 18, 1995.)
7. None.
8(a). Participation Agreement among Variable Insurance Products
Fund, Fidelity Distributors Corporation and The Travelers
Insurance Company.
8(b). Participation Agreement among Variable Insurance Products Fund
II, Fidelity Distributors Corporation and The Travelers
Insurance Company.
8(c). Participation Agreement among Templeton Variable Products
Series Fund, Templeton Funds Distributor, Inc. and The
Travelers Insurance Company.
8(d). Participation Agreement between The Travelers Insurance
Company and Dreyfus Stock Index Fund.
8(e). Participation Agreement among American Odyssey Funds, Inc.,
Copeland Equities, Inc. and The Travelers Insurance Company.
9. Opinion of Counsel as to the legality of securities being
registered by Registrant.
10(a). Consent of Coopers & Lybrand L.L.P., Independent Accountants,
to the inclusion of their reports as listed in Part C of this
Registration Statement, and to the reference in the Statement
of Additional Information to such firm as "experts" in
accounting and auditing.
10(b). Consent of KPMG Peat Marwick LLP, Independent Auditors, to the
inclusion in this Form N-4 of their report on the consolidated
financial statements of The Travelers Insurance Company
contained in Part B of this Registration Statement, and to the
reference to their firm as "experts" under the heading
"Independent Accountants."
13. Schedule for Computation of Total Return Calculations -
Standardized and Non-Standardized.
15(a). Power of Attorney authorizing Ernest J. Wright or Kathleen A.
McGah as signatory for Michael A. Carpenter, Jay S. Fishman
and Ian R. Stuart.
15(b). Powers of Attorney authorizing Jay S. Fishman or Ernest J.
Wright as signatory for Robert I. Lipp, Charles O. Prince,
III, Marc P. Weill, Irwin R. Ettinger, and Donald T. DeCarlo.
(Incorporated herein by reference to Exhibit 15(b) to
Post-Effective Amendment No. 28 to the Registration Statement
on Form N-4 filed April 24, 1996.)
<PAGE> 219
Item 25. Directors and Officers of the Depositor
<TABLE>
<CAPTION>
Name and Principal Positions and Offices
Business Address with Depositor
- -------------------------- -------------------------
<S> <C>
Robert I. Lipp* Director and Chairman
Michael A. Carpenter* Director, President and
Chief Executive Officer
Jay S. Fishman* Director
Charles O. Prince, III** Director
Marc P. Weill** Director and Senior Vice President
Irwin R. Ettinger** Director
Donald T. DeCarlo* Director, General Counsel and Secretary
Stuart Baritz** Senior Vice President
Jay S. Benet* Senior Vice President
George C. Kokulis* Senior Vice President
Warren H. May* Senior Vice President
Kathleen M. D'Auria* Vice President
Elizabeth Charron* Vice President
Robert Hamilton* Vice President
Ian R. Stuart* Vice President, Chief Financial Officer,
Chief Accounting Officer and Controller
Charles N. Vest* Vice President and Actuary
William H. White* Vice President and Treasurer
Bethann C. Maas* Second Vice President
Ernest J. Wright* Assistant Secretary
Kathleen A. McGah Assistant Secretary
Principal Business Address: * The Travelers Insurance Company
One Tower Square
Hartford, Connecticut 06183
** Travelers Group Inc.
388 Greenwich Street
New York , New York 10013
</TABLE>
<PAGE> 220
Item 26. Persons Controlled By or Under Common Control with the Depositor.
OWNERSHIP OF THE TRAVELERS INSURANCE COMPANY
<TABLE>
<CAPTION>
State of Principal
Company Organization Ownership Business
- ------- ------------ --------- ---------
<S> <C> <C> <C>
Travelers Group Inc. Delaware Publicly Held ---------
Associated Madison Companies Inc. Delaware 100.00 ---------
The Travelers Insurance Group, Inc. Connecticut 100.00 ---------
The Travelers Insurance Company Connecticut 100.00 Insurance
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE
TRAVELERS INSURANCE COMPANY
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly or
Indirectly by
State of Travelers Principal
Company Organization Group Inc. Business
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AC Health Ventures, Inc. Delaware 100.00 Inactive
AMCO Biotech, Inc. Delaware 100.00 Inactive
Associated Madison Companies, Inc. Delaware 100.00 Holding company.
American National Life Insurance (T & C), Ltd. Turks and Caicos 100.00 Insurance
Islands
ERISA Corporation New York 100.00 Inactive
Mid-America Insurance Services, Inc. Georgia 100.00 Third party
administrator
National Marketing Corporation Pennsylvania 100.00 Inactive
</TABLE>
1
<PAGE> 221
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly or
Indirectly by
State of Travelers Principal
Company Organization Group Inc. Business
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PFS Services, Inc. Georgia 100.00 General partner
The Travelers Insurance Group Inc. Connecticut 100.00 Holding company
Constitution Plaza, Inc. Connecticut 100.00 Real estate brokerage
KP Properties Corporation Massachusetts 100.00 Real estate
KPI 85, Inc. Massachusetts 100.00 Real estate
KRA Advisers Corporation Massachusetts 100.00 Real estate
KRP Corporation Massachusetts 100.00 Real estate
La Metropole S.A. Belgium 98.83 P-C insurance/
reinsurance
Principal Financial Associates, Delaware 100.00 Inactive
Inc.
Winthrop Financial Group, Inc. Delaware 100.00 Leasing company.
The Prospect Company Delaware 100.00 Investments
89th & York Avenue Corporation New York 100.00 Real estate
979 Third Avenue Corporation Delaware 100.00 Real estate
Meadow Lane, Inc. Georgia 100.00 Real estate
development
Panther Valley, Inc. New Jersey 100.00 Real estate management
Prospect Management Services Delaware 100.00 Real estate management
Company
The Travelers Asset Funding Connecticut 100.00 Investment adviser
Corporation
Travelers Capital Funding Connecticut 100.00 Furniture/equipment
Corporation
The Travelers Corporation of Bermuda Bermuda 99.99 Pensions
Limited
</TABLE>
2
<PAGE> 222
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly or
Indirectly by
State of Travelers Principal
Company Organization Group Inc. Business
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
The Travelers Insurance Company Connecticut 100.00 Insurance
The Plaza Corporation Connecticut 100.00 Holding company
Joseph A. Wynne Agency California 100.00 Inactive
The Copeland Companies New Jersey 100.00 Holding company
American Odyssey Funds New Jersey 100.00 Investment advisor
Management, Inc.
American Odyssey Maryland 100.00 Investment management
Funds, Inc.
Copeland New Jersey 100.00 Administrative
Administrative services
Services, Inc.
Copeland Associates, Delaware 100.00 Fixed/variable
Inc. annuities
Copeland Ohio 99.00 Fixed/variable
Associates Agency annuities
of Ohio, Inc.
Copeland Alabama 100.00 Fixed/variable
Associates of annuities
Alabama, Inc.
Copeland Montana 100.00 Fixed/variable
Associates of annuities
Montana, Inc.
Copeland Benefits New Jersey 51.00 Investment marketing
Management
Company
Copeland New Jersey 100.00 Fixed/variable
Equities, Inc. annuities
H.C. Copeland Massachusetts 100.00 Fixed annuities
Associates, Inc.
of Massachusetts
Copeland Financial New Jersey 100.00 Investment advisory
Services, Inc. services.
Copeland Healthcare New Jersey 100.00 Life insurance
Services, Inc. marketing
H.C. Copeland and Texas 100.00 Fixed/variable
Associates, Inc. of annuities
Texas
Tower Square Securities, Connecticut 100.00 Broker dealer
Inc.
The Travelers Life and Annuity Connecticut 100.00 Life insurance
Company
</TABLE>
3
<PAGE> 223
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly or
Indirectly by
State of Travelers Principal
Company Organization Group Inc. Business
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
The Travelers Marine Corporation California 100.00 General insurance
brokerage
Three Parkway Inc. - I Pennsylvania 100.00 Investment real estate
Three Parkway Inc. - II Pennsylvania 100.00 Investment real estate
Three Parkway Inc. - III Pennsylvania 100.00 Investment real estate
Travelers Insurance Holdings Georgia 100.00 Holding company
Inc.
AC RE, Ltd. Bermuda 100.00 Reinsurance
American Financial Life Texas 100.00 Insurance
Insurance Company
Primerica Life Insurance Massachusetts 100.00 Life insurance
Company
National Benefit Life New York 100.00 Insurance
Insurance Company
Primerica Financial Canada 100.00 Holding company
Services (Canada) Ltd.
PFSL Investments Canada 100.00 Mutual fund dealer
Canada Ltd.
Primerica Canada 82.82 General agent
Financial Services
Ltd.
Primerica Life Canada 100.00 Life insurance
Insurance Company
of Canada
Travelers/Net Plus, Inc. Connecticut 100.00
The Travelers Insurance Corporation Australia 100.00 Inactive
Proprietary Limited
Travelers Asset Management New York 100.00 Investment adviser
International Corporation
Travelers Canada Corporation Canada 100.00 Inactive
Travelers Mortgage Securities Delaware 100.00 Collateralized
Corporation obligations
Travelers of Ireland Limited Ireland 99.90 Data processing
</TABLE>
4
<PAGE> 224
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly or
Indirectly by
State of Travelers Principal
Company Organization Group Inc. Business
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Travelers/Aetna Property Casualty Delaware 100.00 Holding company
Corp.
The Aetna Casualty and Surety Connecticut 100.00 Insurance company
Company
ABP Community Urban Connecticut 100.00
Redevelopment Corporation
AE Development Group, Inc. Connecticut 100.00
Aetna Casualty & Surety Connecticut 100.00 Insurance company
Company of America
Aetna Casualty & Surety Canada 100.00
Company of Canada
Aetna Casualty & Surety Illinois 100.00 Insurance company
Company of Illinois
Aetna Casualty Company of Connecticut 100.00 Insurance company
Connecticut
Aetna Commercial Insurance Connecticut 100.00 Insurance company
Company
Aetna Excess and Surplus Connecticut 100.00 Insurance company
Lines Company
Aetna Financial Futures, Connecticut 100.00
Inc.
Aetna Lloyds of Texas Texas 100.00 Insurance company
Insurance Company
Aetna National Accounts United Kingdom 100.00 Insurance company
U.K. Limited
Aetna Opportunity Connecticut 100.00
Corporation
Aetna Property Services, Delaware 100.00
Inc.
AFF, Inc. Connecticut 100.00
Axia Services, Inc. New York 100.00
Farmington Management, Inc. Connecticut 100.00
The Farmington Casualty Connecticut 100.00 Insurance company
Company
</TABLE>
5
<PAGE> 225
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly or
Indirectly by
State of Travelers Principal
Company Organization Group Inc. Business
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Urban Diversified Connecticut 100.00
Properties, Inc.
The Standard Fire Insurance Connecticut 100.00 Insurance company
Company
AE Properties, Inc. California 100.00
Aetna Insurance Company Connecticut 100.00 Insurance company
Aetna Insurance Company of Illinois 100.00 Insurance company
Illinois
Aetna Personal Security Connecticut 100.00 Insurance company
Insurance Company
Community Rehabilitation Connecticut 100.00
Investment Corporation
The Automobile Insurance Connecticut 100.00 Insurance company
Company of Hartford,
Connecticut
The Travelers Indemnity Company Connecticut 100.00 P-C insurance
Commercial Insurance Delaware 100.00 Holding company
Resources, Inc.
Gulf Insurance Company Missouri 100.00 P-C insurance
Atlantic Texas 100.00 P-C insurance
Insurance Company
Gulf Risk Delaware 100.00 Claims/risk management
Services, Inc.
Gulf Underwriters North Carolina 100.00 P-C ins/surplus lines
Insurance Company
Select Insurance Texas 100.00 P-C insurance
Company
Countersignature Agency, Florida 100.00 Countersign ins
Inc. policies
First Trenton Indemnity New Jersey 100.00 P-C insurance
Company
Laramia Insurance Agency, North Carolina 100.00 Flood insurance
Inc.
Lynch, Ryan & Associates, Massachusetts 100.00 Cost containment
Inc.
</TABLE>
6
<PAGE> 226
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly or
Indirectly by
State of Travelers Principal
Company Organization Group Inc. Business
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
The Charter Oak Fire Connecticut 100.00 P-C insurance
Insurance Company
The Parker Realty and Vermont 58.00 Real estate
Insurance Agency, Inc.
The Phoenix Insurance Connecticut 100.00 P-C insurance
Company
Constitution State Montana 100.00 Service company
Service Company
The Travelers Georgia 100.00 P-C insurance
Indemnity Company
of America
The Travelers Connecticut 100.00 Insurance
Indemnity Company
of Connecticut
The Travelers Illinois 100.00 P-C insurance
Indemnity Company
of Illinois
The Premier Insurance Massachusetts 100.00 Insurance
Company of Massachusetts
The Travelers Home and Indiana 100.00 P-C insurance
Marine Insurance Company
The Travelers Indemnity Missouri 100.00 P-C insurance
Company of Missouri
The Travelers Lloyds Texas 100.00 Non-life insurance
Insurance Company
TI Home Mortgage Brokerage, Delaware 100.00 Mortgage brokerage
Inc. services
TravCo Insurance Company Indiana 100.00 P-C insurance
Travelers Bond Investments, Connecticut 100.00 Bond investments
Inc.
Travelers General Agency of Hawaii 100.00 Insurance agency
Hawaii, Inc.
Travelers Medical Delaware 100.00 Managed care
Management Services Inc.
Travelers Specialty Connecticut 100.00 Insurance management
Property Casualty Company,
Inc.
VIPortfolio Agency, Inc. Delaware 100.00 Insurance agency
Primerica Finance Corporation Delaware 100.00 Holding company
</TABLE>
7
<PAGE> 227
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly or
Indirectly by
State of Travelers Principal
Company Organization Group Inc. Business
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PFS Distributors, Inc. Georgia 100.00 General partner
PFS Investments Inc. Georgia 100.00 Broker dealer
PFS T.A., Inc. Delaware 100.00 Joint venture partner
Primerica Financial Services Home Mortgages, Georgia 100.00 Mortgage loan broker
Inc.
Primerica Financial Services, Inc. Nevada 100.00 General agency
Primerica Financial Services Agency of New New York 100.00 General agency
York, Inc. licensing
Primerica Financial Services Insurance Connecticut 100.00 General agency
Marketing of Connecticut, Inc. licensing
Primerica Financial Services Insurance Idaho 100.00 General agency
Marketing of Idaho, Inc. licensing
Primerica Financial Services Insurance Nevada 100.00 General agency
Marketing of Nevada, Inc. licensing
Primerica Financial Services Insurance Pennsylvania 100.00 General agency
Marketing of Pennsylvania, Inc. licensing
Primerica Financial Services Insurance United States Virgin 100.00 General agency
Marketing of the Virgin Islands, Inc. Islands licensing
Primerica Financial Services Insurance Wyoming 100.00 General agency
Marketing of Wyoming, Inc. licensing
Primerica Financial Services Insurance Delaware 100.00 General agency
Marketing, Inc. licensing
Primerica Financial Services of Alabama, Alabama 100.00 General agency
Inc. licensing
Primerica Financial Services of New New Mexico 100.00 General agency
Mexico, Inc. licensing
Primerica Insurance Agency of Massachusetts 100.00 General agency
Massachusetts, Inc. licensing
Primerica Insurance Marketing Services of Puerto Rico 100.00 Insurance agency
Puerto Rico, Inc.
Primerica Insurance Services of Louisiana, Louisiana 100.00 General agency
Inc. licensing
Primerica Insurance Services of Maryland, Maryland 100.00 General agency
Inc. licensing
</TABLE>
8
<PAGE> 228
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly or
Indirectly by
State of Travelers Principal
Company Organization Group Inc. Business
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Primerica Services, Inc. Georgia 100.00 Print operations
RCM Acquisition Inc. Delaware 100.00 Investments
SCN Acquisitions Company Delaware 100.00 Investments
SL&H Reinsurance, Ltd. Nevis 100.00 Reinsurance
Southwest Service Agreements, Inc. North Carolina 100.00 Warranty/service
agreements
Southwest Warranty Corporation Florida 100.00 Extended automobile
warranty
CCC Holdings, Inc. Delaware 100.00 Holding company
Commercial Credit Company Delaware 100.00 Holding company.
American Health and Life Insurance Company Maryland 100.00 LH&A Insurance
Brookstone Insurance Company Vermont 100.00 Insurance managers
CC Finance Company, Inc. New York 100.00 Consumer lending
CC Financial Services, Inc. Hawaii 100.00 Financial services
CCC Fairways, Inc. Delaware 100.00 Investment company
City Loan Financial Services, Inc. Ohio 100.00 Consumer finance
Commercial Credit Banking Corporation Oregon 100.00 Consumer finance
Commercial Credit Consumer Services, Inc. Minnesota 100.00 Consumer finance
Commercial Credit Corporation <AL> Alabama 100.00 Consumer finance
Commercial Credit Corporation <CA> California 100.00 Consumer finance
Commercial Credit Corporation <IA> Iowa 100.00 Consumer finance
</TABLE>
9
<PAGE> 229
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly or
Indirectly by
State of Travelers Principal
Company Organization Group Inc. Business
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial Credit of Alabama, Inc. Delaware 100.00 Consumer lending
Commercial Credit Corporation <KY> Kentucky 100.00 Consumer finance
Certified Insurance Agency, Inc. Kentucky 100.00 Insurance agency
Commercial Credit Investment, Inc. Kentucky 100.00 Investment company
National Life Insurance Agency of Kentucky 100.00 Insurance agency
Kentucky, Inc.
Union Casualty Insurance Agency, Inc. Kentucky 100.00 Insurance agency
Commercial Credit Corporation <MD> Maryland 100.00 Consumer finance
Action Data Services, Inc. Missouri 100.00 Data processing
Commercial Credit Plan, Incorporated Oklahoma 100.00 Consumer finance
<OK>
Commercial Credit Corporation <NY> New York 100.00 Consumer finance
Commercial Credit Corporation <SC> South Carolina 100.00 Consumer finance
Commercial Credit Corporation <WV> West Virginia 100.00 Consumer finance
Commercial Credit Corporation NC North Carolina 100.00 Consumer finance
Commercial Credit Europe, Inc. Delaware 100.00 Inactive
Commercial Credit Far East Inc. Delaware 100.00 Inactive
Commercial Credit Insurance Services, Inc. Maryland 100.00 Insurance broker
Commercial Credit Insurance Agency Mississippi 100.00 Insurance agency
(P&C) of Mississippi, Inc.
Commercial Credit Insurance Agency of Alabama 100.00 Insurance agency
Alabama, Inc.
Commercial Credit Insurance Agency of Kentucky 100.00 Insurance agency
Kentucky, Inc.
</TABLE>
10
<PAGE> 230
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly or
Indirectly by
State of Travelers Principal
Company Organization Group Inc. Business
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial Credit Insurance Agency of Massachusetts 100.00 Insurance agency
Massachusetts, Inc.
Commercial Credit Insurance Agency of Nevada 100.00 Credit LH&A, P-C
Nevada, Inc. insurance
Commercial Credit Insurance Agency of New Mexico 100.00 Insurance
New Mexico, Inc. agency/Broker
Commercial Credit Insurance Agency of Ohio 100.00 Insurance
Ohio, Inc. agency/broker
Commercial Credit International, Inc. Delaware 100.00 Holding company
Commercial Credit International Oregon 100.00 International lending
Banking Corporation
Commercial Credit Corporation Canada 100.00 Second mortgage loans
CCC Limited
Commercial Credit Services do Brazil 99.00 Inactive
Brazil Ltda.
Commercial Credit Services Belgium Belgium 100.00 Inactive
S.A.
Commercial Credit Limited Delaware 100.00 Inactive
Commercial Credit Loan, Inc. <NY> New York 100.00 Consumer finance
Commercial Credit Loans, Inc. <DE> Delaware 100.00 Consumer finance
Commercial Credit Loans, Inc. <OH> Ohio 100.00 Consumer finance
Commercial Credit Loans, Inc. <VA> Virginia 100.00 Consumer finance
Commercial Credit Management Corporation Maryland 100.00 Intercompany services
Commercial Credit Plan Incorporated <TN> Tennessee 100.00 Consumer finance
Commercial Credit Plan Incorporated <UT> Utah 100.00 Consumer finance
Commercial Credit Plan Incorporated of Delaware 100.00 Consumer finance
Georgetown
Commercial Credit Plan Industrial Loan Virginia 100.00 Consumer finance
Company
</TABLE>
11
<PAGE> 231
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly or
Indirectly by
State of Travelers Principal
Company Organization Group Inc. Business
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial Credit Plan, Incorporated <CO> Colorado 100.00 Consumer finance
Commercial Credit Plan, Incorporated <DE> Delaware 100.00 Consumer finance
Commercial Credit Plan, Incorporated <GA> Georgia 100.00 Consumer finance
Commercial Credit Plan, Incorporated <MO> Missouri 100.00 Consumer finance
Commercial Credit Securities, Inc. Delaware 100.00 Broker dealer
DeAlessandro & Associates, Inc. Delaware 100.00 Insurance consulting
Park Tower Holdings, Inc. Delaware 100.00 Holding company
CC Retail Services, Inc. Delaware 100.00 Leasing, financing
Troy Textiles, Inc. Delaware 100.00 Factoring. Company is
inactive.
COMCRES, Inc. Delaware 100.00 Inactive
Commercial Credit Development Delaware 100.00 Direct loan
Corporation
Myers Park Properties, Inc. Delaware 100.00 Inactive
Penn Re, Inc. North Carolina 100.00 Management company
Plympton Concrete Products, Inc. Delaware 100.00 Inactive
Resource Deployment, Inc. Texas 100.00 Management company
The Travelers Bank Delaware 100.00 Banking services
The Travelers Bank USA Delaware 100.00 Credit card bank
Travelers Home Equity, Inc. North Carolina 100.00 Financial services
CC Consumer Services of Alabama, Inc. Alabama 100.00 Financial services
</TABLE>
12
<PAGE> 232
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly or
Indirectly by
State of Travelers Principal
Company Organization Group Inc. Business
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CC Home Lenders Financial, Inc. Georgia 100.00 Financial services
CC Home Lenders, Inc. Ohio 100.00 Financial services
Commercial Credit Corporation <TX> Texas 100.00 Consumer finance
Commercial Credit Financial of Kentucky 100.00 Consumer finance
Kentucky, Inc.
Commercial Credit Financial of West West Virginia 100.00 Consumer finance
Virginia, Inc.
Commercial Credit Plan Consumer Pennsylvania 100.00 Financial services
Discount Company
Commercial Credit Services of Kentucky 100.00 Financial services.
Kentucky, Inc.
Travelers Home Equity Services, Inc. North Carolina 100.00 Financial services
Triton Insurance Company Missouri 100.00 P-C insurance
Verochris Corporation Delaware 100.00 Joint venture company
AMC Aircraft Corp. Delaware 100.00 Aviation
World Service Life Insurance Company Colorado 100.00 Life insurance
Greenwich Street Capital Partners, Inc. Delaware 100.00 Investments
Greenwich Street Investments, Inc. Delaware 100.00 Investments
Greenwich Street Capital Partners Offshore Delaware 100.00 Investments
Holdings, Inc.
Margco Holdings, Inc. Delaware 100.00 Holding company
Berg Associates New Jersey 100.00 Inactive
Berg Enterprises Realty, Inc. <NY> New York 100.00 Inactive
Dublin Escrow, Inc. California 100.00 Inactive
</TABLE>
13
<PAGE> 233
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly or
Indirectly by
State of Travelers Principal
Company Organization Group Inc. Business
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
M.K.L. Realty Corporation New Jersey 66.67 Holding company
MRC Holdings, Inc. Delaware 100.00 Real estate
The Berg Agency, Inc. <NJ> New Jersey 100.00 Inactive
Mirasure Insurance Company, Ltd. Bermuda 100.00 Inactive
Pacific Basin Investments Ltd. Delaware 100.00 Inactive
Primerica Corporation <WY> Wyoming 100.00 Inactive
Primerica, Inc. Delaware 100.00 Name saver
RCM Capital Trust Company California 100.00 Trust company
Smith Barney Corporate Trust Company Delaware 100.00 Trust company
Smith Barney Holdings Inc. Delaware 100.00 Holding company
Mutual Management Corp. New York 100.00 Inactive
R-H Capital, Inc. Delaware 100.00 Investments
R-H Sports Enterprises Inc Georgia 100.00 Sports representation
SB Cayman Holdings I Inc. Delaware 100.00 Holding company
Greenwich (Cayman) I Limited Cayman Islands 100.00 Corporate services
Greenwich (Cayman) II Limited Cayman Islands 100.00 Corporate services
Greenwich (Cayman) III Limited Cayman Islands 100.00 Corporate services
SB Cayman Holdings II Inc. Delaware 100.00 Holding company
SB Cayman Holdings III Inc. Delaware 100.00 Holding company
</TABLE>
14
<PAGE> 234
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly or
Indirectly by
State of Travelers Principal
Company Organization Group Inc. Business
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SB Cayman Holdings IV Inc. Delaware 100.00 Holding company
Smith Barney (Delaware) Inc. Delaware 100.00 Holding company
1345 Media Corp. Delaware 100.00 Holding company
Americas Avenue Corporation Delaware 100.00 Inactive
Corporate Realty Advisors, Inc. Delaware 100.00 Realty trust adviser
IPO Holdings Inc. Delaware 100.00 Holding company
Institutional Property Owners, Inc. V Delaware 100.00 Investments
Institutional Property Owners, Inc. Delaware 100.00 General partner
VI
MLA 50 Corporation Delaware 100.00 Limited partner
MLA GP Corporation Delaware 100.00 General partner
Municipal Markets Advisors Incorporated Delaware 100.00 Public finance
SBF Corp. Delaware 100.00 Merchant banking
investments
Smith Barney Acquisition Corporation Delaware 100.00 Offshore fund adviser
Smith Barney Global Capital Management, Delaware 100.00 Investment management
Inc.
Smith Barney Investment, Inc. Delaware 100.00 Inactive
Smith Barney Realty, Inc. Delaware 100.00 Investments
Smith Barney Risk Investors, Inc. Delaware 100.00 Investments
Smith Barney Venture Corp. Delaware 100.00 Investments
Smith Barney (Ireland) Limited Ireland 100.00 Fund management
</TABLE>
15
<PAGE> 235
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly or
Indirectly by
State of Travelers Principal
Company Organization Group Inc. Business
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Smith Barney Asia Inc. Delaware 100.00 Investment banking
Smith Barney Asset Management Group (Asia) Pte. Singapore 100.00 Asset management
Ltd.
Smith Barney Canada Inc. Canada 100.00 Investment dealer
Smith Barney Capital Services Inc. Delaware 100.00 Derivative product
transactions
Smith Barney Cayman Islands, Ltd. Cayman Islands 100.00 Securities trading
Smith Barney Commercial Corp. Delaware 100.00 Commercial credit
Smith Barney Commercial Corporation Asia Hong Kong 99.00 Commodities trading
Limited
Smith Barney Europe Holdings, Ltd. United Kingdom 100.00 Holding corp.
Smith Barney Europe, Ltd. United Kingdom 100.00 Securities brokerage
Smith Barney Shearson Futures, Ltd. United Kingdom 100.00 Inactive
Smith Barney Futures Management Inc. Delaware 100.00 Commodities pool
operator
Smith Barney Offshore Fund Ltd. Delaware 100.00 Commodity pool
Smith Barney Overview Fund PLC Dublin 100.00 Commodity fund
Smith Barney Inc. Delaware 100.00 Broker dealer
Institutional Property Owners, Inc. VII Delaware 100.00 Never activated
SBHU Life Agency, Inc. Delaware 100.00 Insurance brokerage
Robinson-Humphrey Insurance Services Georgia 100.00 Insurance brokerage
Inc.
Robinson-Humphrey Insurance Alabama 100.00 Insurance brokerage
Services of Alabama, Inc.
SBHU Life & Health Agency, Inc. Delaware 100.00 Insurance brokerage
</TABLE>
16
<PAGE> 236
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly or
Indirectly by
State of Travelers Principal
Company Organization Group Inc. Business
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SBHU Life Agency of Arizona, Inc. Arizona 100.00 Insurance brokerage
SBHU Life Agency of Indiana, Inc. Indiana 100.00 Insurance brokerage
SBHU Life Agency of Utah, Inc. Utah 100.00 Insurance brokerage
SBHU Life Insurance Agency of Massachusetts 100.00 Insurance brokerage
Massachusetts, Inc.
SBS Insurance Agency of Hawaii, Inc. Hawaii 100.00 Insurance brokerage
SBS Insurance Agency of Idaho, Inc. Idaho 100.00 Insurance brokerage
SBS Insurance Agency of Maine, Inc. Maine 100.00 Insurance brokerage
SBS Insurance Agency of Montana, Inc. Montana 100.00 Insurance brokerage
SBS Insurance Agency of Nevada, Inc. Nevada 100.00 Insurance brokerage
SBS Insurance Agency of North North Carolina 100.00 Insurance brokerage
Carolina, Inc.
SBS Insurance Agency of Ohio, Inc. Ohio 100.00 Insurance brokerage
SBS Insurance Agency of South Dakota, South Dakota 100.00 Insurance brokerage
Inc.
SBS Insurance Agency of Wyoming, Inc. Wyoming 100.00 Insurance brokerage
SBS Insurance Brokerage Agency of Arkansas 100.00 Insurance brokerage
Arkansas, Inc.
SBS Insurance Brokers of Kentucky, Kentucky 100.00 Insurance brokerage
Inc.
SBS Insurance Brokers of Louisiana, Louisiana 100.00 Insurance brokerage
Inc.
SBS Insurance Brokers of New New Hampshire 100.00 Insurance brokerage
Hampshire, Inc.
SBS Insurance Brokers of North North Dakota 100.00 Insurance brokerage
Dakota, Inc.
SBS Life Insurance Agency of Puerto Puerto Rico 100.00 Insurance brokerage
Rico, Inc.
</TABLE>
17
<PAGE> 237
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly or
Indirectly by
State of Travelers Principal
Company Organization Group Inc. Business
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SLB Insurance Agency of Maryland, Maryland 100.00 Insurance brokerage
Inc.
Smith Barney Life Agency Inc. Louisiana 100.00 Insurance brokerage
Smith Barney (France) S.A. France 100.00 Commodities trading
Smith Barney (Hong Kong) Limited Hong Kong 100.00 Broker dealer
Smith Barney (Netherlands) Inc. Delaware 100.00 Broker dealer
Smith Barney International Incorporated Oregon 100.00 Broker dealer
Smith Barney (Singapore) Pte Ltd Singapore 100.00 Commodities
Smith Barney Pacific Holdings, Inc. British Virgin 100.00 Holding company
Islands
Smith Barney (Asia) Limited Hong Kong 100.00 Broker dealer
Smith Barney (Pacific) Limited Hong Kong 100.00 Commodities dealer
Smith Barney Securities Pte Ltd Singapore 100.00 Securities brokerage
Smith Barney Research Pte. Ltd. Singapore 100.00 Inactive
The Robinson-Humphrey Company, Inc. Delaware 100.00 Broker dealer
Smith Barney Mortgage Brokers Inc. Delaware 100.00 Mortgage brokerage
Smith Barney Mortgage Capital Corp. Delaware 100.00 Mortgage-backed
securities
Smith Barney Mortgage Capital Group, Inc. Delaware 100.00 Mortgage trading
Smith Barney Mutual Funds Management Inc. Delaware 100.00 Investment management
Smith Barney Strategy Advisers Inc. Delaware 100.00 Investment management
E.C. Tactical Management S.A. Luxembourg 100.00 Investment management
</TABLE>
18
<PAGE> 238
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly or
Indirectly by
State of Travelers Principal
Company Organization Group Inc. Business
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Smith Barney Offshore, Inc. Delaware 100.00 Decathlon Fund advisor
Decathlon Offshore Limited Cayman Islands 100.00 Commodity fund
Smith Barney S.A. France 100.00 Commodities trading
Smith Barney Asset Management France SA France 100.00 Com. based asset
management
Smith Barney Shearson (Chile) Corredora de Chile 100.00 Insurance brokerage
Seguro Limitada
Structured Mortgage Securities Corporation Delaware 100.00 Mortgage-backed
securities
The Travelers Investment Management Company Connecticut 100.00 Investment advisor
Smith Barney Private Trust Company New York 100.00 Trust company.
Smith Barney Private Trust Company of Florida Florida 100.00 Trust company
Tinmet Corporation Delaware 100.00 Inactive
Travelers Services Inc. Delaware 100.00 Holding company
Tribeca Management Inc. Delaware 100.00
TRV Employees Investments, Inc. Delaware 100.00 Investments
TRV/RCM Corp. Delaware 100.00 Inactive
TRV/RCM LP Corp. Delaware 100.00 Inactive
</TABLE>
19
<PAGE> 239
Item 27. Number of Contract Owners
As of March 31, 1995, 176,873 contract owners held qualified and non-qualified
contracts offered by the Registrant.
Item 28. Indemnification
Section 33-320a of the Connecticut General Statutes ("C.G.S.") regarding
indemnification of directors and officers of Connecticut corporations provides
in general that Connecticut corporations shall indemnify their officers,
directors and certain other defined individuals against judgments, fines,
penalties, amounts paid in settlement and reasonable expenses actually incurred
in connection with proceedings against the corporation. The corporation's
obligation to provide such indemnification generally does not apply unless (1)
the individual is successful on the merits in the defense of any such
proceeding; or (2) a determination is made (by persons specified in the
statute) that the individual acted in good faith and in the best interests of
the corporation; or (3) the court, upon application by the individual,
determines in view of all of the circumstances that such person is fairly and
reasonably entitled to be indemnified, and then for such amount as the court
shall determine. With respect to proceedings brought by or in the right of the
corporation, the statute provides that the corporation shall indemnify its
officers, directors and certain other defined individuals, against reasonable
expenses actually incurred by them in connection with such proceedings, subject
to certain limitations.
C.G.S. Section 33-320a provides an exclusive remedy; a Connecticut corporation
cannot indemnify a director or officer to an extent either greater or less than
that authorized by the statute, e.g., pursuant to its certificate of
incorporation, by-laws, or any separate contractual arrangement. However, the
statute does specifically authorize a corporation to procure indemnification
insurance to provide greater indemnification rights. The premiums for such
insurance may be shared with the insured individuals on an agreed basis.
Travelers Group Inc. also provides liability insurance for its directors and
officers and the directors and officers of its subsidiaries, including the
Depositor. This insurance provides for coverage against loss from claims made
against directors and officers in their capacity as such, including, subject to
certain exceptions, liabilities under the Federal securities laws.
Rule 484 Undertaking
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liability (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
<PAGE> 240
Item 29. Principal Underwriter
(a) Tower Square Securities, Inc.
One Tower Square
Hartford, Connecticut 06183
Tower Square Securities, Inc. also serves as principal underwriter for the
following :
The Travelers Growth and Income Stock Account for Variable Annuities
The Travelers Quality Bond Account for Variable Annuities
The Travelers Money Market Account for Variable Annuities
The Travelers Timed Growth and Income Stock Account for Variable
Annuities
The Travelers Timed Short-Term Bond Account for Variable Annuities
The Travelers Timed Aggressive Stock Account for Variable Annuities
The Travelers Timed Bond Account for Variable Annuities
The Travelers Fund VA for Variable Annuities
The Travelers Fund BD for Variable Annuities
The Travelers Fund BD II for Variable Annuities
The Travelers Fund ABD for Variable Annuities
The Travelers Fund ABD II for Variable Annuities
The Travelers Fund UL for Variable Life Insurance
The Travelers Fund UL II for Variable Annuities
The Travelers Variable Life Insurance Separate Account One
The Travelers Variable Life Insurance Separate Account Three
The Travelers Separate Account QP for Variable Annuities
The Travelers Separate Account QP II for Variable Annuities
Tower Square Securities, Inc. also serves as sponsor to the following
mutual funds:
Cash Income Trust
Capital Appreciation Fund
Managed Assets Trust
High Yield Bond Trust
The Travelers Series Trust
<TABLE>
<CAPTION>
(b) Name and Principal Positions and Offices Positions and Offices
Business Address * With Underwriter With Registrant
------------------ ---------------- ---------------------
<S> <C> <C>
Russell H. Johnson Chairman and Chief Executive -----
Officer
Donald R. Munson, Jr. Director, President and Chief -----
Operating Officer
William F. Scully, III Member, Board of Directors, -----
Senior Vice President, Treasurer
and Chief Financial Officer
Cynthia P. Macdonald Vice President, Chief Compliance -----
Officer, Assistant Secretary
Jay S. Benet Member, Board of Directors -----
George C. Kokulis Member, Board of Directors -----
Warren H. May Member, Board of Directors -----
Kathleen A. McGah General Counsel and Secretary Assistant Secretary
Robert C. Hamilton Vice President -----
Tracey Kiff-Judson Second Vice President -----
Robin A. Jones Second Vice President -----
Whitney F. Burr Second Vice President -----
Marlene M. Ibsen Second Vice President -----
John J. Williams, Jr. Director and Assistant Compliance -----
Officer
</TABLE>
<PAGE> 241
(cont'd)
<TABLE>
<CAPTION>
(b) Name and Principal Positions and Offices Positions and Offices
Business Address * With Underwriter With Registrant
------------------ ----------------------------------------------------------------
<S> <C> <C>
Susan M. Curcio Director and Operations Manager -----
Gregory C. Macdonald Director -----
Thomas P. Tooley Director -----
Nancy S. Waldrop Assistant Treasurer -----
</TABLE>
* Principal business address: One Tower Square, Hartford,
Connecticut 06183
(c) Tower Square Securities, Inc. serves as the principal underwriter.
The compensation listed below is for the year ending December 31, 1995.
<TABLE>
<CAPTION>
Name of Net Underwriting Compensation on
Principal Discounts and Redemption or Brokerage Other
Underwriter Commissions Annuitization Commissions Compensation*
- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Tower Square $ 0 $ 0 $ 0 $ 0
Securities, Inc.
</TABLE>
Item 30. Location of Accounts and Records
(1) The Travelers Insurance 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.
<PAGE> 242
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 amendment to this Registration
Statement to be signed on its behalf, in the City of Hartford, State of
Connecticut, on April 18, 1996.
THE TRAVELERS FUND U FOR VARIABLE ANNUITIES
(Registrant)
By: *Ian R. Stuart
--------------------------------------
Ian R. Stuart
Vice President, Chief Financial Officer
Chief Accounting Officer and Controller
The Travelers Insurance Company
THE TRAVELERS INSURANCE COMPANY
(Depositor)
By: *Ian R. Stuart
--------------------------------------
Ian R. Stuart
Vice President, Chief Financial Officer
Chief Accounting Officer and Controller
The Travelers Insurance Company
Pursuant to the requirements of the Securities Act of 1933, this post-effective
amendment to this Registration Statement has been signed below by the following
persons in the capacities indicated on April 18, 1996.
<TABLE>
<S> <C>
*ROBERT I. LIPP Director and Chairman
- -------------------------------------------
(Robert I. Lipp)
*MICHAEL A. CARPENTER Director, President and
- ------------------------------------------- Chief Executive Officer
(Michael A. Carpenter)
*JAY S. FISHMAN Director
- -------------------------------------------
(Jay S. Fishman)
*CHARLES O. PRINCE, III Director
- -------------------------------------------
(Charles O. Prince, III)
*MARC P. WEILL Director
- -------------------------------------------
(Marc P. Weill)
*IRWIN R. ETTINGER Director
- -------------------------------------------
(Irwin R. Ettinger)
*DONALD T. DeCARLO Director
- -------------------------------------------
(Donald T. DeCarlo)
*IAN R. STUART Vice President, Chief Financial Officer,
- ------------------------------------------ Chief Accounting Officer and Controller
(Ian R. Stuart)
*By: /s/Ernest J. Wright
--------------------------------------
Ernest J. Wright, Attorney-in-Fact
</TABLE>
<PAGE> 243
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
- ------- ----------- ----------------
<S> <C> <C>
1. Resolution of The Travelers Insurance Company's Board Electronically
of Directors authorizing the establishment of the Registrant.
2. Not Applicable.
3(a). Form of Distribution and Management Agreement among
the Registrant, The Travelers Insurance Company and
Tower Square Securities, Inc. )(formerly known as
Travelers Equities Sales, Inc.).
3(b). Selling Agreement. Electronically
4. Example of Variable Annuity Contract. Electronically
5. Example of Application. Electronically
6(a). Charter of The Travelers Insurance Company, as amended
on October 19, 1994. (Incorporated herein by reference
to Exhibit 3(a)(i) to Registration Statement on Form S-2,
File No. 33-58677, filed via EDGAR on April 18, 1995.)
6(b). By-Laws of The Travelers Insurance Company, as amended
on October 20, 1994. (Incorporated herein by reference
to Exhibit 3(b)(i) to Registration Statement on Form S-2,
File No. 33-58677, filed via EDGAR on April 18, 1995.)
8(a). Participation Agreement among Variable Insurance Products Electronically
Fund, Fidelity Distributors Corporation and The Travelers
Insurance Company.
8(b). Participation Agreement among Variable Insurance Products Electronically
Fund II, Fidelity Distributors Corporation and The Travelers
Insurance Company
8(c). Participation Agreement among Templeton Variable Products Electronically
Series Fund, Templeton Funds Distributor, Inc. and The
Travelers Insurance Company.
8(d). Participation Agreement between The Travelers Insurance Electronically
Company and Dreyfus Stock Index Fund
8(e). Participation Agreement among American Odyssey Electronically
Funds, Inc., Copeland Equities, Inc. and The Travelers
Insurance Company.
9. Opinion of Counsel as to the legality of securities being Electronically
registered by Registrant.
10(a). Consent of Coopers & Lybrand L.L.P., Independent Electronically
Accountants, to the inclusion of their reports as listed
in Part C of this Registration Statement, and to the
reference in the Statements of Additional Information
to such firm as "Experts" in accounting and auditing.
</TABLE>
<PAGE> 244
EXHIBIT INDEX (CONT'D)
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
- ------- ----------- ----------------
<S> <C> <C>
10(b). Consent of KPMG Peat Marwick LLP, Independent Electronically
Auditors, to the inclusion in this Form N-4 of their
report on the consolidated financial statements of The
Travelers Insurance Company contained in Part B of
this Registration Statement, and to the reference to their firm
as "experts" under the heading "Independent Accountants."
13. Schedule for Computation of Total Return Calculations - Electronically
Standardized and Non-Standardized.
15(a). Power of Attorney authorizing Ernest J. Wright or Electronically
Kathleen A. McGah as signatory for Michael A.
Carpenter, Jay S. Fishman and Ian R. Stuart.
15(b). Powers of Attorney authorizing Jay S. Fishman or
Ernest J. Wright as signatory for Robert I. Lipp,
Charles O. Prince, III, Marc P. Weill, Irwin R. Ettinger,
and Donald T. DeCarlo. (Incorporated herein by
reference to Exhibit 15(b) to Post-Effective Amendment
No. 28 to the Registration Statement on Form N-4
filed April 24, 1995.)
</TABLE>
<PAGE> 1
EXHIBIT 1
CERTIFICATE
I, John R. Kenney, Corporate Secretary of THE TRAVELERS INSURANCE
COMPANY, DO HEREBY CERTIFY that at a meeting of the Board of Directors of The
Travelers Insurance Company held on the 7th day of May, 1982, at which a quorum
was present and voting, the following resolutions were adopted:
VOTED: That pursuant to authority granted by Section 38-154a of the
Connecticut General Statutes, the Chairman of the Board, the
President, or the Chairman of the Finance Committee, or any one of
them acting alone, is authorized to establish a separate account or
accounts to invest in shares of investment companies advised by
affiliates of the Company pursuant to plans and contracts issued and
sold by the Company in connection therewith.
VOTED: That the proper officers are authorized to take such action as may be
necessary to register the separate account or accounts to be
established to hold shares of investment companies advised by
affiliates of the Company as a unit investment trust investment
company under the Investment Company Act of 1940; to file any
necessary or appropriate exemption requests, and any amendments
thereto, for such separate account or accounts under the Investment
Company Act of 1940; to file a registration statement, and any
amendments, exhibits and other documents thereto, in order to register
plans and contracts of the Company and interests in such separate
account or accounts in connection therewith under the Securities Act
of 1933; and to take any and all action as may in their judgment be
necessary or appropriate in connection therewith.
VOTED: That each officer and director who may be required, on his own behalf
and in the name and on behalf of the Company, to execute a
registration statement, and any amendments thereto, under the
Securities Act of 1933 and the Investment Company Act of 1940 relating
to the separate account or accounts to be established to invest in
shares of investment companies advised by affiliates of the Company is
authorized to execute a power of attorney appointing representatives
to act as his attorney and agent to execute said registration
statement, and any amendments thereto, in his name, place and stead;
and that John R. Kenney is designated and appointed the agent for
service of process on the Company under the Securities Act of 1933 and
the Investment Company Act of 1940 in connection with such
registration statement, and any amendments thereto, with all the
powers incident to such appointment.
VOTED: That the proper officers are authorized in connection with the
separate account or accounts to be established to hold shares of
investment companies advised by affiliates of the Company, to enter
into such Underwriting or Sponsorship Agreements for such separate
account or accounts and such Custodial-Safekeeping and Agency
Agreements between the Company and any bank designated as agent and/or
custodian, as may be required; to take any necessary action to provide
initial capital for such separate account or accounts; and to take
such other action as may in their judgment be necessary or appropriate
to enable the Company to transact the business of issuing and selling
plans and contracts in connection with such separate account or
accounts.
<PAGE> 2
I DO HEREBY CERTIFY that pursuant to such authority, Edward H. Budd,
Chairman and Chief Executive Officer of The Travelers Insurance Company,
established The Travelers Fund U for Variable Annuities on September 2, 1982.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of The
Travelers Insurance Company at Hartford, Connecticut this 16th day of
September, 1982.
/s/John R. Kenney, Corporate Secretary
<PAGE> 1
EXHIBIT 3B
SELLING AGREEMENT
FOR VARIABLE CONTRACTS
THIS AGREEMENT, effective ____________________, is made by TOWER SQUARE
SECURITIES, INC., (hereafter referred to as Tower Square) as the Distributor,
and __________________________________________
__________________________________________________, (hereafter referred to as
Broker/Dealer).
Tower Square and the Broker/Dealer enter into this agreement for the purpose of
authorizing the Broker/Dealer, through its licensed individual agents as
described in paragraph 3, to solicit applications for such variable life
insurance, variable annuity and modified guaranteed annuity contracts (the
"Contract(s)") as may be issued by The Travelers Insurance Company, the
Travelers Life and Annuity Company and any affiliated companies (hereafter
referred to as the Insurance Companies), and identified by policy form in the
Compensation Schedules relating to this agreement as such schedules may be
amended from time to time. The parties represent and agree as follows:
1. The Insurance Companies are engaged in the issuance of the
Contracts in accordance with federal securities laws and the
applicable insurance laws of those states in which the
Contracts have been qualified for sale. The Contracts may be
considered securities under the Securities Act of 1933;
therefore, distribution of the Contracts is made through Tower
Square as a registered Broker/Dealer under the Securities
Exchange Act of 1934 and as a member of the National
Association of Securities Dealers, Inc. ("NASD"). The terms
of the offering of the Contracts are more particularly
described in the Prospectus(es) for the Contracts.
2. The Broker/Dealer certifies that it is a registered
Broker/Dealer under the Securities Exchange Act of 1934 and a
member of the NASD. The Broker/Dealer agrees to abide by all
rules and regulations of the NASD and to comply with all
applicable state and federal laws and the rules and
regulations of the authorized regulatory agencies affecting
the sale of the Contracts.
3. The Broker/Dealer will select persons whom it will employ and
supervise and who will be trained and qualified to solicit
applications for the Contracts in conformance with applicable
state and federal laws and regulations. Persons so trained
and qualified will be registered representatives of the
Broker/Dealer in accordance with the rules of the NASD and
they will be properly licensed in accordance with the state
insurance laws of those jurisdictions in which the Contracts
may lawfully be distributed and in which they solicit
applications for such Contracts. The Insurance Companies
shall have ultimate authority to determine whether they shall
appoint or terminate a particular registered representative as
an agent of the Insurance Companies with the various state
insurance departments.
4. The Broker/Dealer will review all contract proposals and
applications for suitability and for completeness and
correctness as to form. The Broker/Dealer will promptly, but
in no case later than the end of the next business day
following receipt by the Broker/Dealer, forward to the
applicable Insurance Company, at addresses provided, all
applications found suitable and in good form, together with
any payments received with such applications without deduction
or reduction. The Broker/Dealer will immediately return to
the applicant all applications together with any payments
received therewith deemed by the Broker/Dealer to be
unsuitable or not complete and correct as to form. The
Insurance Companies reserve the right to reject any Contract
application and return any payment made in connection with an
application which is rejected. Contracts issued on
applications accepted by the Insurance Companies will be
forwarded to the Broker/Dealer or at the direction of the
Broker/Dealer to the registered representative for delivery to
the Contract Owner. The Broker/Dealer shall obtain and retain
a receipt for each Contract which the Broker/Dealer delivers.
<PAGE> 2
2
5. The Broker/Dealer will perform the selling functions required
by this Agreement only in accordance with the terms and
conditions of the then current prospectus(es) applicable to
the Contract and will make no representations not included in
the prospectus or in any authorized supplemental material. No
sales solicitation, including the delivery of supplemental
sales literature or other such materials, shall occur, be
delivered to, or used with a prospective purchaser unless
accompanied or preceded by appropriate and then-current
prospectus(es). Any material prepared or used by the
Broker/Dealer or its registered representative, which
describes in whole or in part or refers by name or form to any
of the Insurance Companies' Contracts or underlying funds or
uses the name of the Insurance Companies, Tower Square, or The
Travelers Group, Inc., or the logos or service marks of any of
them, or the name, logos or service marks of any "Affiliated
Company" of any of them, as that term is defined in Section
2(a)(2) of the Investment Company Act of 1940, must be
approved by Tower Square in writing prior to any such use.
6. Compensation payable to the Broker/Dealer on sales of the
Contracts solicited by the Broker/Dealer will be paid to the
Broker/Dealer, or as necessary to meet any and all legal
requirements, to a licensed insurance affiliate, in accordance
with the Compensation Schedule(s) relating to this agreement
as they may be amended from time to time and are in effect at
the time the Contract payments are received by the applicable
Insurance Company (in the case of annuities) or at the time
the applications are received (in the case of life insurance).
In the event compensation is paid to the licensed insurance
agency affiliate as described in the preceding sentence, such
payment will be reflected in the Broker/Dealer's "Focus"
reports, and in its fee assessment reports filed with the
NASD. The Insurance Companies and Tower Square reserve the
privilege of revising the Compensation Schedules at any time.
7. If the Insurance Companies return all or a portion of a
premium paid with respect to a Contract, Broker/Dealer shall
be obligated to refund to Tower Square applicable commissions
on the amount of such premium only where:
(a) the Contract solicited is returned not taken under
the policy "free look" provisions;
(b) premiums are refunded due to overpayments, errors in
billing or in the timing of automatic premium
collection deductions, or errors resulting in policy
reissue;
(c) the check delivered in payment of any contract
premium does not clear and the premium collection
deductions, or errors resulting in policy reissue;
(d) the Contract is terminated or there is a refund of
premium and an act, error or omission of the
Broker/Dealer or its registered representative
materially contributed to the termination of the
Contract or the need to return premium;
(e) the application is rejected by the Insurance Company;
(f) the Insurance Company is directed by a judicial or
regulatory authority to return premium without
assessment of a surrender charge;
(g) the applicant's initial premium on a 1035 exchange is
returned because the expected rollover amount from
another Contract is not transferred due to the
exchange not meeting the legal requirements to
qualify for a tax-free exchange;
(h) the Insurance Company returns unearned premium on a
life insurance contract as required by the provisions
of the contract;
(i) the Insurance Company determines that it has a legal
liability to return premiums on a life insurance
contract within the first year after the Contract is
issued; or
<PAGE> 3
3
(j) the Insurance Company and Broker/Dealer mutually
agree to return all or a portion of a premium paid
with respect to a Contract.
8. If any Contract is repurchased at any time or if within
forty-five (45) days after confirmation by the Insurance
Companies of any premium payments credited to a Contract, that
Contract is tendered for full or partial surrender, or the
life at risk thereunder dies, then, at the option of the
Insurance Companies or Tower Square no commission will be
payable with respect to said premium payments and any
commission previously paid for said premium payments must be
refunded to the applicable Insurance Company or Tower Square
as directed by Tower Square. Tower Square agrees to notify
the Broker/Dealer within ten (10) business days after the
request for repurchase or redemption, or notification or death
of the life at risk is received by the applicable Insurance
Company.
9. This Agreement may not be assigned except by mutual consent
and will continue, subject to the termination by any party on
written notice to the other party, except that in the event
the Broker/Dealer ceases to be a registered Broker/Dealer or a
member of the NASD, this Agreement will immediately terminate.
Tower Square reserves the right to designate, at its sole
discretion, an alternative Principal Underwriter for the
distribution of the Contracts covered by this Agreement. The
designation will constitute substitution of parties to this
Agreement with assumption of the rights and obligations
created by this Agreement as applicable.
10. Failure of any party to terminate this Agreement for any of
the causes set forth in this agreement will not constitute a
waiver of the right to terminate this Agreement at a later
time for any of these causes.
11. For the purpose of compliance with any applicable federal or
state securities laws or regulations promulgated under them,
the Broker/Dealer acknowledges and agrees that in performing
the Broker/Dealer services covered by this Agreement, it is
acting in the capacity of an independent broker and dealer as
defined by the By-Laws of the NASD and not as an agent or
employee of either Tower Square or any registered investment
company.
The Broker/Dealer represents and warrants that it is
authorized and licensed as an agent under applicable state
insurance laws to solicit, negotiate and effect the contracts
of insurance contemplated hereunder. In the event the
Broker/Dealer is not licensed as such, an insurance agency
affiliated with the Broker/Dealer shall be licensed as an
agent under applicable state insurance laws to solicit,
negotiate and effect the contracts of insurance contemplated
hereunder.
For the purpose of compliance with any applicable state
insurance laws or regulations promulgated under them, the
Broker/Dealer acknowledges and agrees that solely in
performing the insurance-selling functions reflected by this
agreement, it or its registered representative is acting as
the agent of the Insurance Companies, and in that capacity is
authorized only to solicit applications from the public for
the Contracts. Such Contracts will not become effective until
such applications are accepted after underwriting review by
the Insurance Companies at their Home Office.
In furtherance of its responsibilities as a Broker/Dealer, the
Broker/Dealer acknowledges that it is responsible for
compliance on any business it produces concerning the
Contracts. No Broker/Dealer will be entitled to compensation
with respect to any application for or payment credited to,
any Contract(s) that is rejected by the Insurance Companies in
the event the Insurance Companies or Tower Square determine
the solicitation or obtaining of purchasers, applications or
payments by the Broker/Dealer or any of its Associated persons
was done in
<PAGE> 4
4
violation of the securities or insurance laws of the United
States or any state or other jurisdiction.
No party to this Agreement will be liable for any obligation,
act or omission of the other. Each party to this Agreement
will hold harmless and indemnify the (1) Registered Investment
Companies which are used to fund the Contracts, (2) Insurance
Companies, (3) Tower Square, and (4) the Broker/Dealer, as
appropriate, for any loss or expense suffered as a result of
the violation or noncompliance by that party or the Associated
persons of that party of any applicable law or regulation or
any provision of the Agreement; provided, however, that no
party or any of its employees or agents will be liable to the
other party for any direct, special or consequential damages
arising out of or in connection with the performance of any
services pursuant to the Agreement.
12. All notices to the Insurance Companies or Tower Square
relating to this Agreement should be sent to the attention of
The Travelers Insurance Companies, FS Law Department, One
Tower Square, Hartford, CT 06183. All notices to the
Broker/Dealer will be duly given if mailed or faxed to the
address shown below.
13. The terms "Associated Person", "member" and "rules of the
Corporation" as used herein shall be defined consistently with
the definition of similar terms as contained in Article I of
the NASD By-Laws. This Agreement will be construed in
accordance with the laws of the State of Connecticut.
In reliance on the representations set forth and in consideration of the
undertakings described herein, the parties represented below do hereby contract
and agree.
<TABLE>
<CAPTION>
TOWER SQUARE SECURITIES, INC. The Broker/Dealer
<S> <C> <C>
By:
------------------------------ ----------------------------------
Title:
------------------------------ ----------------------------------
Street Address
Date:
------------------------------ ----------------------------------
By:
----------------------------------
Title:
----------------------------------
Taxpayer I.D.:
----------------------------------
Date:
----------------------------------
Fax:
----------------------------------
</TABLE>
<PAGE> 1
Exhibit 4
THE TRAVELERS INSURANCE COMPANY ONE TOWER SQUARE o HARTFORD, CONNECTICUT o
06183
CONTRACT OWNER SPECIMEN GRP GTSAl MSTR CA
CONTRACT NUMBER 000000-3434333 (7G) CONTRACT DATE 02/14/1996
We are pleased to provide you the benefits of this Annuity Contract.
EMERGENCY PROCEDURE
If a national stock exchange is closed (except for holidays or
weekends) or trading is restricted due to an existing emergency as
defined by the Securities and Exchange Commission so that we cannot
value the Separate Account(s), we may postpone all procedures which
require valuation of the Separate Account(s) until valuation is
possible. Any provision of this contract which specifies a Valuation
Date will be superseded by this Emergency Procedure.
This contract is issued in consideration of the application and the payment of
premium. It is subject to the terms and conditions stated on the attached
pages, all of which are a part of it. It is made effective as stated in the
application.
This contract is delivered in the state where the application for it was
completed by the Applicant and is subject to the laws of that state.
Executed at Hartford. Connecticut
President
This is a legal contract between you and us. READ YOUR CONTRACT CAREFULLY.
GROUP VARIABLE ANNUITY CONTRACT
ANNUITY AND INCOME OPTIONS
ELECTIVE OPTIONS WITHOUT DIVIDENDS
ANNUITY PAYMENTS AND OTHER VALUES PROVIDED BY THIS CONTRACT ARE BASED ON
INVESTMENT EXPERIENCE OF SEPARATE ACCOUNTS AND ARE VARIABLE AND ARE NOT
GUARANTEED AS TO FIXED DOLLAR AMOUNT.
LVA-FPG(u) TIC Ed. 1-83
<PAGE> 2
DEFINITIONS
(a) "We, us, our" means The Travelers Insurance Company;
(b) "You, your" means the Contract Owner;
(c) "Separate Accounts" means those separate accounts shown in the CONTRACT
SUMMARY which we established for this class of contracts and certain other
contracts;
(d) "Underlying Fund" means an open-end diversified investment management
company indicated in the CONTRACT SUMMARY, which is an underlying
investment for a Separate Account;
(e) "Sub-Account" means that portion of the assets of a Separate Account
which is allocated to a particular Underlying Fund. If there is no
Underlying Fund for a Separate Account, the entire Separate Account is a
Sub-Account;
(f) "Valuation Period" means the period between successive valuations;
(g) "Valuation Date" means a date on which a Separate Account is valued:
(h) "Age" means age last birthday;
(i) "Contract years" means twelve month periods beginning with the Contract
Date;
(j) "Basic contract" means this contract excluding any additional benefit for
which a separate premium is charged;
(k) "Our Office" means the Home Office of The Travelers Insurance Company or
any other office which we may designate for the purpose of administering
this contract;
(l) "Participant" means an eligible person who participates in the Plan;
(m) "Participant's Interest" means the Value to which the Participant is
entitled under the Plan. The Participant's Interest will be the value of
that Participant's Individual Accounts unless you instruct us otherwise;
(n) "Plan" means the Plan described in this contract;
(o) "Individual Account" means Accumulation Units credited to a Participant
or beneficiary;
(p) "Owner's Account" means Accumulation Units credited to you;
(q) "Account" means either the Owner's Account or a Participant's Individual
Account. A Participant may have more than one Individual Account;
(r) "Annuity Commencement Date" means the date on which a Participant's
Annuity payments are to begin; and
(s) "Due Proof of Death" means (i) a copy of a certified death certificate;
(ii) a copy of a certified decree of a court of competent jurisdiction as
to the finding of death; (iii) a written statement by a medical doctor who
attended the deceased; or (iv) any other proof satisfactory to us.
2
<PAGE> 3
CONTRACT SUMMARY
CONTRACT OWNER SPECIMEN GRP GTSAl MSTR CA
CONTRACT NUMBER 000000-3434333 (7G) 02/14/1996 CONTRACT DATE
BENEFIT DESCRIPTION
GROUP VARIABLE ANNUITY CONTRACT WITH ANNUITY AND INCOME OPTIONS.
GROSS PREMIUM IS PAYABLE BEGINNING ON 02/14/1996
THE NET PREMIUM UNDER THE BASIC CONTRACT IS EQUAL TO THE GROSS PREMIUM LESS
ANY APPLICABLE PREMIUM TAX.
AMOUNTS DEDUCTED ON SURRENDER (FIRST IN, FIRST OUT BASIS):
<TABLE>
<CAPTION>
YEARS SINCE GROSS PERCENT OF GROSS PREMIUM
PREMIUM WAS PAID PAYMENTS (NOT PREVIOUSLY SURRENDERED)
----------------- ----------------------------------------
<S> <C>
1-5 5%
6 AND THEREAFTER 0%
</TABLE>
SEMI-ANNUAL ACCOUNT CHARGE - $15.00, ON EACH ACCOUNT. NO ACCOUNT CHARGE WILL BE
DEDUCTED FROM FLEXIBLE ACCOUNT.
SUB-ACCOUNT TRANSFER CHARGE: $0.00
ACCOUNT DISTRIBUTION CHARGE: $0.00
<TABLE>
<CAPTION>
SUBACCOUNT
DEDUCTION PER DAY
-----------------
<S> <C>
SEPARATE ACCOUNTS-
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR .0000466
VARIABLE ANNUITIES UNDERLYING FUNDS - NONE
THE TRAVELERS TIMED GROWTH AND INCOME STOCK ACCOUNT FOR .0000774
VARIABLE ANNUITIES UNDERLYING FUNDS - NONE
THE TRAVELERS TIMED AGGRESSIVE STOCK ACCOUNT FOR VARIABLE .0000822
ANNUITIES UNDERLYING FUNDS - NONE
THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES .0000431
UNDERLYING FUNDS - NONE
THE TRAVELERS TIMED BOND ACCOUNT FOR VARIABLE ANNUITIES .0000822
UNDERLYING FUNDS - NONE
THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES .0000431
UNDERLYING FUNDS - NONE
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT FOR VARIABLE .0000774
ANNUITIES UNDERLYING FUNDS - NONE
THE TRAVELERS FUND U FOR VARIABLE ANNUITIES
UNDERLYING FUNDS
MANAGED ASSETS TRUST .00003425
HIGH YIELD BOND TRUST .00003425
CAPITAL APPRECIATION FUND .00003425
</TABLE>
(BENEFITS CONTINUED)
FPGUl*LW058*LW282*GBU*GATU*L13411*LVAE9A*L13089*L13804*LH389B*L13193*
L 7GGl--CAM01
S-3 TIC Ed. 5-94
3
<PAGE> 4
CONTRACT SUMMARY
CONTRACT OWNER SPECIMEN GRP GTSAl MSTR CA
CONTRACT NUMBER 000000-3434333 (7G) 02/14/1996 CONTRACT DATE
BENEFIT DESCRIPTION
<TABLE>
<CAPTION>
SUBACCOUNT
DEDUCTION PER DAY
-----------------
<S> <C>
AMERICAN ODYSSEY FUNDS, INC-
AMERICAN ODYSSEY CORE EQUITY FUND .00003425
AMERICAN ODYSSEY EMERGING OPPORTUNITIES FUND .00003425
AMERICAN ODYSSEY INTERNATIONAL EQUITY FUND .00003425
AMERICAN ODYSSEY LONG-TERM BOND FUND .00003425
AMERICAN ODYSSEY INTERMEDIATE-TERM BOND FUND .00003425
AMERICAN ODYSSEY SHORT-TERM BOND FUND .00003425
THE TRAVELERS SERIES TRUST-
U.S. GOVERNMENT SECURITIES PORTFOLIO .00003425
UTILITIES PORTFOLIO .00003425
SOCIAL AWARENESS STOCK PORTFOLIO .00003425
TEMPLETON VARIABLE PRODUCTS SERIES FUND-
TEMPLETON BOND FUND .00003425
TEMPLETON STOCK FUND .00003425
TEMPLETON ASSET ALLOCATION FUND .00003425
VARIABLE INSURANCE PRODUCTS FUND-
FIDELITY'S HIGH INCOME PORTFOLIO .00003425
FIDELITY'S GROWTH PORTFOLIO .00003425
FIDELITY'S EQUITY INCOME PORTFOLIO .00003425
VARIABLE INSURANCE PRODUCTS FUND II -
FIDELITY'S ASSET MANAGER PORTFOLIO .00003425
DREYFUS STOCK INDEX FUND INC. .00003425
SMITH BARNEY/TRAVELERS SERIES FUND, INC.-
SMITH BARNEY INCOME & GROWTH PORTFOLIO .00003425
ALLIANCE GROWTH PORTFOLIO .00003425
SMITH BARNEY INTERNATIONAL EQUITY PORTFOLIO .00003425
PUTNAM DIVERSIFIED INCOME PORTFOLIO .00003425
GT GLOBAL STRATEGIC INCOME PORTFOLIO .00003425
SMITH BARNEY HIGH INCOME PORTFOLIO .00003425
MFS TOTAL RETURN PORTFOLIO .00003425
</TABLE>
ASSUMED DAILY NET INVESTMENT FACTOR IS 1.0000942 FOR ALL SEPARATE ACCOUNTS
PROVISION FOR FLEXIBLE ANNUITY ACCOUNT AND CASH LOANS
MAXIMUM LOAN AMOUNT: 80% OF THE CASH VALUE FOR ACCOUNTS WITH
BALANCES UP TO $12,500 OR 1/2 OF THE CASH
VALUE FOR ACCOUNTS WITH BALANCES OVER
$12,500 UP TO A MAXIMUM OF $50,000 REDUCED
BY THE HIGHEST OUTSTANDING LOAN BALANCE
DURING THE LAST 12 MONTHS.
MINIMUM LOAN AMOUNT: $1,000
MAXIMUM LOAN INTEREST RATE: 7.00% PER ANNUM IN ADVANCE
BENEFITS CONTINUED
FPGUl*LW058*LW282*GBU*GATU*L13411*LVAE9A*L13089*L13804*LH389B*L13193*L
7gg1 --CAM01
S3 TIC Ed. 2-95
4
<PAGE> 5
CONTRACT SUMMARY
CONTRACT OWNER SPECIMEN GRP GTSAl CA
CONTRACT NUMBER 00000-3434333 (7G) 02/14/1996 CONTRACT DATE
BENEFIT DESCRIPTION
WE RESERVE THE RIGHT TO TERMINATE THIS ACCOUNT OR ANY INACTIVE ACCOUNTS UNDER
THIS CONTRACT IF THE CASH VALUE OF THE CONTRACT OR THE ACCOUNT IS LESS THAN THE
TERMINATION AMOUNT OF $500 AND NO PREMIUM PAYMENTS HAVE BEEN MADE FOR AT LEAST
THREE YEARS.
NO GROSS PREMIUM MAY BE DECREASED TO AN AMOUNT WHICH IS LESS THAN THE MINIMUM
PREMIUM THEN REQUIRED UNDER VARIABLE ANNUITY CONTRACTS ISSUED FOR THE CLASS TO
WHICH THIS CONTRACT THEN BELONGS. NO PREMIUM PAYMENTS WILL BE ACCEPTED UNLESS
SUCH PAYMENTS ARE MADE UNDER AN EMPLOYEES' TRUST OR ANNUITY PLAN QUALIFIED
UNDER THE INTERNAL REVENUE CODE OF THE UNITED STATES.
FPGUl*LW058*LW282*GBU*GATU*L13411*LVAE9A*L13089*L13804*LH389B*L13193*L
7GGl--CAM01
S3 TIC Ed. 2-95
5
<PAGE> 6
BENEFITS
If a Participant is living on that Participant's Annuity Commencement date:
1. we will apply the Participant's Interest to provide an Annuity; and
2. we will pay to you or that Participant, as provided in the Plan,
the first of a series of Annuity payments.
You or the Participant, as provided in the Plan, may elect:
1. another form of Annuity or Income; or
2. an earlier date for Commencement or an Annuity or an Income, or both;
as provided in this contract. We will determine the dollar amounts of Annuity
or Income payments as described in the Annuity Provisions or Income Provisions.
If a Participant dies:
1. while this contract continues; and
2. before the payment of that Participant's Annuity or Income:
we will, on receipt of due proof of that Participant's death, pay to you or
that Participant's beneficiary, as provided in the Plan, that Participant's
Interest less any applicable premium tax not previously deducted. We will
determine the value of the Participant's Interest as of the valuation next
following receipt of due proof of that Participant's death at our Office.
If:
1. a Participant's Interest is to be applied to effect an Annuity or
Income Option; and
2. that Interest is other than the Cash Value of that Participant's
Individual Accounts;
we must receive your instructions at least 30 days before that Participant's
first Annuity or Income Payment is to be made.
VALUATION PROVISIONS
We will apply the first net premium to provide Accumulation Units:
1. as directed or as provided in the Plan;
2. as of the valuation next following receipt of the premium for the basic
contract at our Office; or
3. on the date indicated in the application for:
a. this contract; or
b. the Individual Account:
if later.
We will apply any net premium after the first as of the valuation next
following its receipt at our Office. The net premium will be allocated to the
Sub-Accounts in the proportion specified:
LVA-GB(U) TIC Ed. 1-83
6
<PAGE> 7
1. in the application for this contract; or
2. as you or the Participant, as provided in the Plan, tell us from time
to time.
NET PREMIUM--The net premium is as stated in the CONTRACT SUMMARY.
NUMBER OF ACCUMULATION UNITS--We will determine the number of Accumulation
Units to be credited to the basic contract in each Sub-Account on payment of
premium by dividing (a) by (b) where:
(a) is the net premium applied to that Sub-Account; and
(b) is by the then Accumulation Unit Value of that Sub-Account.
ACCUMULATION UNIT VALUE--The initial value of an Accumulation Unit for each
Sub-Account was set at $1.00. We determine the value of an Accumulation Unit in
each Sub-Account:
1. on each Valuation Date;
2. by multiplying:
a. the value on the immediately preceding Valuation Date; by
b. the net investment factor for that Sub-Account for the Valuation
Period just ended.
The value of an Accumulation Unit on any date other than a Valuation Date will
be equal to its value as of the next Valuation Date
NET INVESTMENT RATE AND NET INVESTMENT FACTOR--Each Sub-Account's net
investment rate for a Valuation Period is equal to:
1. the gross investment rate for that Sub-Account; less
2. the applicable Sub-Account deduction for the interval in the Valuation
Period.
All Sub-Account deductions are shown in the CONTRACT SUMMARY.
The gross investment rate of a Sub-Account for a Valuation Period is equal to
(a) divided by (b) where (a) is:
1. investment income; plus
2. capital gains and losses, whether realized or unrealized; less
3. a deduction for any applicable taxes, including income taxes arising
from:
a. income; and
b. realized and unrealized capital gains; and
(b) is the amount of the assets at the beginning of the Valuation Period
The gross investment rate for a Sub-Account may be either positive or negative.
If a Sub-Account is invested in shares of an Underlying Fund, assets are based
on the net asset value of the Underlying Fund. Investment income includes any
distribution whose ex-dividend date occurs during the Valuation Period.
The net investment factor for a Sub-Account for any Valuation Period is the sum
of
1. 1.0000000; plus
2. the net investment rate.
7
<PAGE> 8
TRANSFER BETWEEN SUB-ACCOUNTS--We will transfer all or any part of an
Individual's Account:
l. from one Sub-Account;
2. to any other Sub-Account stated in the CONTRACT SUMMARY;
3. at any time up to 30 days before the due date of a Participant's first
Annuity payment;
4. on written request:
a. by you; or
b. the Participant;
as provided in the Plan.
We will:
1. at any time;
2. during the continuance of this contract;
3. on your written request;
transfer all or any part of the Cash Value in the Owner's Account from one
Sub-Account to any other Sub-Account shown on the CONTRACT SUMMARY.
We reserve the right to limit the number of transfers in an Account between
Sub-Accounts. We will not limit transfers to less than one in any six month
period. In the event of a transfer, the number of Accumulation Units credited
to the Sub-Account from which the transfer is made will be reduced. The
reduction will be determined by dividing:
1. the amount transferred; by
2. the Accumulation Unit Value for that Sub-Account as of the next
valuation after we receive your written request for transfer at our
Office.
The number of Accumulation Units credited to the Sub-Account to which the
transfer is being made will be increased. The increase will equal:
1. the amount transferred; less
2. any Transfer Charge stated on the CONTRACT SUMMARY; and all divided by
3. the Accumulation Unit Value for that Sub-Account determined as of
the next valuation after we receive the request at our Office.
After Annuity payments begin, you may make transfers only as described in the
ANNUITY PROVISIONS.
DISTRIBUTION FROM ONE ACCOUNT TO ANOTHER ACCOUNT--You may, as provided in the
Plan, distribute Cash Value from the Owner's Account to one or more Individual
Accounts. We will reduce the total Cash Value distributed to an Individual
Account, as necessary, to reflect any Account Distribution Charge shown on the
CONTRACT SUMMARY. We will allocate the charge between the Sub-Accounts in the
proportion that the Cash Value distributed to each Sub-Account bears to the
total Cash Value distributed to that Account. No distribution is allowed
between Individual Accounts. You may, as required and as provided in the Plan,
move Cash Value from any or all Individual Accounts to the Owner's Account
without a charge.
CASH VALUE AND BENEFITS IN THE EVENT OF TERMINATION
CASH VALUE--The Cash Value of an Account on any date equals the sum of the
accumulated values in the Sub-Accounts. The accumulated value in a Sub-Account
equals (a) less (b) times (c) where:
8
<PAGE> 9
(a) is the number of Accumulation Units credited to the Account in that
Sub-Account:
(b) is any reductions as specified in the "Administrative Charge"
provision; and
(c) is the then Accumulation Unit Value for that Sub-Account.
ACCOUNT CHARGE--We will deduct from the Cash Value an Administrative Charge in
the amount and for the period shown on the CONTRACT SUMMARY.
We will allocate the charge between the Sub-Accounts in the proportion that the
Cash Value of an Account in each Sub-Account bears to the total Cash Value of
an Account.
The charge will be made by reducing the number of Accumulation Units.
We will make a pro rata charge for any part of a period before determination of
the Cash Value if:
1. the Participant dies; or
2. Annuity payments begin.
CASH SURRENDER--We will, unless the Plan provides otherwise:
1. before the due date of a Participant's first Annuity payment; and
2. without the consent of any beneficiary unless irrecoverably named;
pay you all or any part of that Participant's Interest, less any applicable
premium tax not previously deducted, if you or that Participant, as provided in
the Plan, request it in writing. You may surrender the Owner's Account for
cash, as provided in the Plan, without the consent of any Participant. We may
delay payment of the Cash Surrender Value for a period of not more than seven
days after we receive the request.
CASH SURRENDER VALUE--The Cash Surrender Value of an Account is equal to (d)
less (e) less (f) where:
(d) is the Cash Value;
(e) is any amounts deducted on surrender which are shown on the CONTRACT
SUMMARY; and
(f) is any applicable premium tax not previously deducted.
TERMINATION OF CONTRACT OR ACCOUNT
TERMINATION BY OWNER--If:
1. you terminate an Account, in whole or in part, while the contract
remains in effect; and
2. the value of the terminated Account is to be:
a. paid in cash to you or to a Participant; or
b. transferred to any other funding vehicle;
we will pay or transfer the Cash Surrender Value of the terminated Account.
If:
1. you terminate this contract, whether or not the Plan is terminated; and
2. you or the Participant, as provided in the Plan, elect that
values are not to be paid out in cash or transferred;
we may, at our discretion, agree to apply a Participant's Interest:
1. as instructed by you or the Participant;
9
<PAGE> 10
2. under one of the options described under "Options in the Event of
Termination of a Participant."
TERMINATION BY PARTICIPANT--If:
1 a Participant terminates an Individual Account, in whole or in
part, while the contract remains in effect; and
2. the value of the terminated Individual Account is to be:
a. paid in cash to the Participant; or
b. transferred to any other funding vehicle;
we will pay or transfer the Cash Surrender Value of the terminated Account.
TERMINATION BY US AND TERMINATION AMOUNT--If:
1. the Cash Value in a Participant's Individual Account is less than
the Termination Amount stated on the CONTRACT SUMMARY; and
2. no premium has been applied to the Account for at least three years;
we reserve the right:
1. to terminate that Account; and
2. to move the Cash Value of that Participant's Individual Account to the
Owner's Account.
If the Plan does not allow for this movement to the Owner's Account, we will
pay the Cash Value, less any applicable premium tax not previously deducted, to
that Participant or to you, as provided in the Plan.
We reserve the right to terminate this contract on any Valuation Date if:
1. there is no Cash Value in any Participant's Individual Account: and
2. the Cash Value of the Owner's Account, if any, is less than the
Termination Amount shown on the CONTRACT SUMMARY; and
3. premium has not been paid for at least three years.
If this contract is terminated, we will pay to you the Cash Value of the
Owner's Account, if any, less any applicable premium tax not previously
deducted.
Termination will not occur until 31 days after we have mailed notice of
termination:
1. to you or the Participant, as provided in the Plan, at the last known
address; and
2. to any assignee of record.
OPTIONS IN THE EVENT OF TERMINATION OF A PARTICIPANT--IN the event that, before
the Annuity Commencement Date of a Participant, that Participant terminates
participation in the Plan, you or that Participant, as provided in the Plan,
with respect to that Participant's Interest may elect:
1. If that Participant is at least 50 years of age, to have that
Participant's Interest applied to provide an Annuity or Income as
provided under "Annuity Provisions" or "Income Provisions."
2. If the contract is continued, to have that Participant's Interest
applied to continue as a paid-up deferred annuity for that
Participant, as provided in the "Paid-Up Deferred Annuity" provision.
3. To have you or that Participant, as provided in the Plan, receive
in cash, as provided in the "Cash Surrender" provision, that
Participant's Interest.
10
<PAGE> 11
4. If that Participant becomes a Participant under another group
contract of this same type which is in effect with us, to transfer
that Participant's Interest to that group contract.
5. To make any other arrangements as may be mutually agreed on.
If this contract is continued, any Cash Value to which a terminating
Participant is not entitled under the Plan, will be moved to the Owner's
Account.
AUTOMATIC BENEFIT --In the event of termination, unless otherwise provided in
the Plan, a Participant's Interest will be:
1. If this contract is continued, to continue as a paid-up deferred
annuity in accordance with option 2. above; or
2. If this contract is terminated, will be paid in cash to you or that
Participant, as provided in the Plan.
PAID-UP DEFERRED ANNUITY--We will determine the amount of any Paid-Up Deferred
Annuity Payment as described in the "Valuation Provisions" and "Annuity
Provisions." The paid-up deferred annuity will be payable under the same terms
and conditions as the Annuity that would have otherwise been payable at the
Annuity Commencement Date.
ANNUITY PAYMENTS--Termination of this contract or the Plan will not affect
payments we are making under any Annuity Option which began before the date of
termination.
ANNUITY PROVISIONS
SUB-ACCOUNT ALLOCATION--The accumulated value in each Sub-Account will be
applied:
1. when annuity payments start;
2. to provide an annuity which varies with the investment experience of
that same Sub-Account.
You may elect to transfer Cash Value from one Sub-Account to another:
1. as described in the provision "Transfer Between Sub-Accounts;"
2. in order to reallocate the basis on which Annuity payments will be
determined.
TRANSFERS BETWEEN SUB-ACCOUNTS--After Annuity payments start, you may, with our
consent, change the allocation of your values in each Sub-Account. We will base
each transfer on the actuarial reserve which we determine.
AMOUNT OF FIRST PAYMENT--The ANNUITY TABLES are used to determine the first
monthly Annuity payment. They show the dollar amount of the first monthly
Annuity payment which can be purchased with each $1,000 applied. The amount
applied to effect an Annuity will be:
1. the Cash Value of an Individual Account as of 14 days before the date
Annuity payments start;
2. less any applicable premium taxes not previously deducted.
ANNUITY UNIT VALUE--The initial value of an Annuity Unit for each Separate
Account was set at $1.00. On any Valuation Date the Annuity Unit Value for a
Sub-Account equals:
1. the value of the Sub-Account Annuity Unit on the immediately preceding
Valuation Date; times
2. the net investment factor of that Sub-Account for the Valuation
Period ending on or next following 14 days before the current
Valuation Date;
11
<PAGE> 12
3. divided by the Assumed Net Investment Factor. The Assumed Daily
Net Investment Factor is shown on the CONTRACT SUMMARY.
The value of an Annuity Unit as of any date other than a Valuation Date will be
equal to its value as of the next succeeding Valuation Date.
NUMBER OF ANNUITY UNITS--We determine the number of Annuity Units credited to
the basic contract in each Sub-Account by dividing (a) by (b) where:
1. (a) is the basic first monthly Annuity payment attributable to that
Sub-Account; and
2. (b) is the Sub-Account's Annuity Unit Value as of the due date of the
first Annuity payment.
The number of Annuity Units is fixed during the annuity period unless a
transfer is made after Annuity Payments begin.
AMOUNT OF SECOND AND SUBSEQUENT PAYMENTS--The dollar amount of the second and
subsequent payments may change from month to month. The total amount of each
Annuity payment will be equal to:
1. the sum of the payments in each Sub-Account; less
2. any applicable Administrative Charge shown on the CONTRACT SUMMARY.
The actual amount of the payments in each Sub-Account is found by multiplying
(c) by (d) where:
(c) is the number of Annuity Units credited to the Account in that
Sub-Account; and
(d) is the Annuity Unit Value of the Sub-Account as of the date on which
the payment is due.
ANNUITY OPTIONS--We will, subject to the conditions stated in "Election of
Options," and the Plan, pay:
1. all or any part of a Participant's Interest otherwise payable to you or
that Participant:
a. in one sum on that Participant's Annuity Commencement Date; or
b. on prior Cash Surrender of an Individual Account; or
amounts payable:
1. in one sum;
2. to the beneficiary;
3. on death of that Participant;
maybe paid under one or more of the Annuity Options below.
AUTOMATIC OPTION--Unless the Plan provides otherwise, if:
1. the Participant is living and has a spouse; and
2. no election has been made;
we will pay:
1. on that Participant's Annuity Commencement Date;
2. a series of Annuity Payments:
a. based on the life of the Participant as the primary payee and the
Participant's spouse;
b. in accordance with Option 5.
12
<PAGE> 13
Unless the Plan provides otherwise, if:
1. the Participant is living; and
2. has no spouse; and
3. no election has been made;
we will:
1. on that Participant's Annuity Commencement Date;
2. pay to the Participant the first of a series of Annuity payments;
a. based on the life of the Participant;
b. in accordance with Option 2;
c. with 120 monthly payments assured.
OPTION 1.--LIFE ANNUITY--NO REFUND--We will make monthly Annuity Payments:
1. during the lifetime of the person on whose life the payments are based;
2. ending with the last monthly payment preceding death.
OPTION 2.--LIFE ANNUITY WITH 120, 180 OR 240 MONTHLY PAYMENT ASSURED--We will
make monthly Annuity payments:
1. during the lifetime of the person on whose life the payments are based;
and
2. under the conditions stated below.
If at the death of that person, payments have been made for less than 120, 180
or 240 months, as elected, we will continue to make payments:
1. to the designated beneficiary;
2. during the remainder of the period.
OPTION 3. CASH REFUND LIFE ANNUITY--We will make monthly Annuity payments:
1. during the lifetime of the person on whose life the payments are based;
2. ending with the last payment due before the death of that person under
the conditions stated below.
At death of the person on whose life the payments are based, the beneficiary
will receive in one sum the then dollar value of the number of Annuity Units
equal to (a) minus (b) (if that difference is positive) where:
(a) is the total amount applied under this option divided by the
Annuity Unit Value on the due date of the first Annuity payment; and
(b) is:
1) the number of Annuity Units represented by each payment; times
2) the number of payments made.
OPTION 4. JOINT AND LAST SURVIVOR LIFE ANNUITY--We will make monthly annuity
payments:
1. during the joint lifetime of two persons on whose lives payments are
based; and
2. during the lifetime of the survivor.
No more payments will be made after the death of the survivor.
13
<PAGE> 14
OPTION 5. JOINT AND LAST SURVIVOR LIFE ANNUITY--ANNUITY REDUCED ON DEATH OF
PRIMARY PAYEE--We will make monthly Annuity payments during the joint lifetime
of two persons on whose lives payments are based. One of the two persons will
be designated as the primary payee. The other will be designated the secondary
payee. On the death of the secondary payee, if survived by the primary payee,
we will continue to make monthly Annuity payments:
1. to the primary payee;
2. in the same amount that would have been payable during the joint
lifetime of the two persons.
On the death of the primary payee, if survived by the secondary payee, we will
continue to make monthly Annuity payments:
1. to the secondary payee;
2. 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 following the death of the survivor.
OPTION 6. OTHER ANNUITY OPTIONS--We will make any other arrangements for
Annuity payments as may be mutually agreed on.
The first payments under Annuity Options 1, 2, 3, 4 and 5 will be determined
from the ANNUITY TABLES. We reserve the right to require satisfactory proof of
the age of any person on whose life Annuity payments are based before making
the first payment under any of these options.
INCOME PROVISIONS
We will, subject to the conditions stated in "Election of Options" and the
Plan, pay:
1. all or any part of a Participant's Interest otherwise payable to you or
that Participant:
a. in one sum on that Participant's Annuity Commencement Date; or
b. on prior Cash Surrender of an Individual Account; or
2. amounts payable:
a. in one sum;
b. to the beneficiary;
c. on the death of that Participant;
under one or more of the Income Options below. Cash Surrender Value used to
determine the amount of any Income payment will be:
1. based on the Accumulation Unit Value as of 14 days before the date an
Income payment is due; and
2. determined the same way as in the Accumulation period.
OPTION 1. PAYMENTS OF A FIXED AMOUNT--We will make equal payments each month:
1. of the amount elected;
2. until the value applied under this option is gone.
The first monthly payment will be paid from each Sub-Account in proportion to
its Cash Surrender Values applied.
14
<PAGE> 15
The second payment and all later payments from each Sub-Account will be the
same as the first payment under this option. The final payment will include any
amount that is not enough to make another full payment.
OPTION 2. PAYMENTS FOR A FIXED PERIOD--We will make monthly payments for the
period selected. The amount of each payment will be equal to:
1. the then remaining Cash Surrender Value applied under this option;
2. divided by the number of remaining payments.
OPTION 3. INVESTMENT INCOME--We will make monthly payments:
1. during the lifetime of the primary payee; or
2. for the period agreed on.
The amount to be paid will be equal to (a) minus (b), if positive, where:
(a) is the excess, if any, of the then Cash Surrender Value under this
option; and
(b) is the amount applied under this option.
ELECTION OF OPTIONS
We will pay any amount payable under this contract under the terms of any
Option if:
1. the amount is payable in one sum; and
2. the amount placed under an option is at least $2,000 unless we consent
to a lesser amount; and
3. the election is made:
a. in writing; and
b. by you or the Participant, if that Participant is living; or
c. by the beneficiary, if the participant has died.
If any periodic payment due any payee is less than $20.00, we reserve the right
to make payments at less frequent intervals.
Any election you or the Participant, as provided in the Plan, makes as to
payments after that Participant dies is not binding on the payee unless
restricted in the election.
While the Participant is living, you or that Participant as provided in the
Plan, may change an election if the election has not been made irrevocable, if
the change is made:
(a) during the lifetime of that Participant; and
(b) before that Participant's Annuity Commencement Date or prior
surrender.
On revocation of an election of:
1. any Annuity Option; or
2. any Income Option;
to be paid on the death of a Participant, any death benefit will be paid:
15
<PAGE> 16
1. in one sum: and
2. to the beneficiary designated.
PAYMENT DATE--The first payment under an option, except Income Option 3, is due
on the Participant's Annuity Commencement Date or any other date elected. Under
Income Option 3 the first payment is due one month after that date.
PAYEE--We will make each payment to the person designated, with the designation
applying at the due date of each payment.
Each payment under any other elected option will be made to you or a
Participant, as provided in the Plan.
If the last surviving payee dies while receiving payments, we will pay in one
sum:
1. any unpaid Cash Value in an Individual Account; or
2. the present value of any remaining payments assured;
to the executors or administrators of that payee, unless otherwise provided.
When payments under any Annuity option are made to other than the person on
whose life the Annuity is based, we will require assurance that that person is
living on the due date of each Annuity payment.
RIGHTS OF PAYEE--Unless otherwise provided in the Plan, and except as
restricted, the payee under any option will not:
1. have the right to assign any payments under that option; and
2. have the right to receive the present value of any remaining payments;
or
3. have the right to withdraw any unpaid Cash Surrender Value in an
Individual Account.
A payee has no right to receive the present value of future payments under an
Annuity option during the lifetime of the person on whose life the payments are
based.
Any payee who has a right to withdraw or receive the present value of future
payments can:
1. exercise that right to the exclusion on the rights of any succeeding
payee; and
2. have the right to elect to have all or part of that amount paid under
an Annuity or Income option.
PRESENT VALUE--The calculation of the present value of future payments under an
Annuity option will be at an interest rate equivalent to the rate or rates at
which the first monthly payment was computed.
EXEMPTION--All amounts held and payments made under an option will be exempt
from the claims of all creditors, to the extent allowed by law.
GENERAL PROVISIONS
THE CONTRACT- The entire contract between us and the Applicant consists of the
contract, all attached pages, and the written application. All statements made
in the application are considered to be to the best knowledge and belief of the
Applicant and not as promises of truth. Unless it is contained in the written
application, we will not use any statement to void this contract or to deny a
claim.
No person other than one of our officers can, for us, alter or waive any terms
or provisions of this contract.
16
<PAGE> 17
CERTIFICATES--We will issue to you for delivery to each participant an
individual Certificate stating in substance the benefits to which each
Participant is entitled under this contract.
The word "certificate" as used here will include:
1. certificate riders; and
2. certificate supplements;
if any. The certificates will not, unless otherwise stated on the CONTRACT
SUMMARY, constitute a part of this contract.
PREMIUM PAYMENT--Each premium is payable to us at our office or to one of our
authorized representatives. We will accept each premium payment after the first
subject to the conditions and provisions stated on the CONTRACT SUMMARY and the
requirements of the Plan.
No gross premium allocated to an Account may be decreased to an amount which is
less than the minimum premium then required under Group Variable Annuity
contracts issued for the class to which this contract belongs.
SEX AND AGE--IF the Participant's sex or date of birth was misstated in the
Participant's Account Authorization, all benefits of this contract are what the
premium paid would have purchased at the correct sex and age.
Proof of a Participant's age may be filed at any time at our office.
INCONTESTABILITY--We will not contest the basic contract from its Date of
Issue.
OWNERSHIP-ASSIGNMENT--THE owner is shown in the application. Unless otherwise
provided in the Plan, no rights or benefits under this contract are assignable.
BENEFICIARY--Unless the Plan provides otherwise, a Participant's beneficiary
will be as designated in that Participant's Account Authorization. Without the
consent of any beneficiary unless irrevocably named you or the Participant, as
provided in the Plan, may change the designation of beneficiary:
1. during the Participant's lifetime; and
2. while this contract continues.
Any change of designation will be effective from the date you or the
Participant, as provided in the Plan, sign the request for change, whether or
not the Participant is living when we receive the request. We will not be
responsible for any payment we made before we received the request at our
Office. The interest of any beneficiary will be subject to the rights of any
assignee. The interest of any beneficiary who does not survive a participant
will pass to you, the Participant or the Participant's executors,
administrators or assignees, as provided in the Plan.
CHANGE OF CONTRACT--We may, at any time, make any changes, including
retroactive changes, in this contract to the extent that the change is required
to meet the requirements of any law or regulation issued by any governmental
agency to which we or you are subject.
Except as provided in the paragraph above, no changes may be made in the
provisions of this contract before the 5th anniversary of the Contract Date
and, in no event will changes be made with respect to payments being made by us
under any Annuity Option which began before the date of change. On and after
the 5th anniversary of the Contract Date, unless otherwise stated on the
CONTRACT SUMMARY, we reserve the right to change:
17
<PAGE> 18
1. the deductions from premium payments;
2. the administrative charge;
3. the Account Distribution Charge;
4. the Termination Amount;
5. the calculation of:
a. the net investment rate;
b. the Unit Values; and
6. the Annuity Tables.
Any change in the Annuity Tables will be applicable only to premiums we
receive:
1. under this contract;
2. after the change.
Other changes may be applicable:
1. to all Accounts under this contract; or
2. only to Accounts established after the change; or
3. only to premiums received under this contract after the date of the
change;
as we declare at the time of change.
We will give notice to you at least 90 days before the date of change is to
take effect.
REQUIRED REPORTS--We will furnish a report to you:
1. as often as required by law; but
2. at least once in each contract year.
The report will show:
1. the value of the contract as of the date of the report; and
2. any other information required.
VOTING RIGHTS--For each Separate Account:
1. you or the Participant, as provided in the Plan during the lifetime of
the Participant; or
2. the beneficiary after the death of the Participant; will be
entitled to certain voting rights with respect to each Separate
Account in which this contract is credited with Accumulation Units or
Annuity Units. These will be determined in accordance with the
provisions of the Rules and Regulations of each Separate Account.
If:
1. a Separate Account is invested in Underlying Funds; and
2. current law allows,
you will instead be entitled to instruct us how to vote at meetings of the
shareholders of the Underlying Funds. We will determine the number of votes as
to which you will be entitled to instruct us. If there is a change in the law
which permits us to vote the shares:
18
<PAGE> 19
1. of the Underlying Funds;
2. without direction from you;
we reserve the right to do so.
MORTALITY AND EXPENSES--Our actual mortality and expense experience will not
affect:
1. the amount of any Annuity or Income payments; or
2. any other values under the basic contract.
NO DIVIDENDS--This contract will not be entitled to share in our surplus
earnings.
RELATION OF THIS CONTRACT TO THE SEPARATE ACCOUNTS--We will have exclusive and
absolute ownership and control of the assets of our Separate Accounts. Our
determination of the value of an Accumulation Unit and an Annuity Unit by the
method described in this contract will be conclusive.
19
<PAGE> 20
ANNUITY TABLES
DOLLAR AMOUNT OF THE FIRST MONTHLY ANNUITY PAYMENT WHICH IS PURCHASED
WITH EACH $1,000 APPLIED
Options 1,2, and 3-Single Life Annuities
<TABLE>
<S> <C> <C> <C> <C> <C>
120 180 240
MONTHLY MONTHLY MONTHLY
ADJUSTED NO PAYMENTS PAYMENTS PAYMENTS CASH
AGE REFUND ASSURED ASSURED ASSURED REFUND
50 $4.74 $4.69 $4.62 $4.52 $4.53
51 4.84 4.78 4.70 4.58 4.60
52 4.94 4.87 4.78 4.65 4.67
53 5.04 4.97 4.87 4.71 4.75
54 5.16 5.07 4.95 4.78 4.84
55 5.28 5.18 5.04 4.85 4.93
56 5.40 5.29 5.13 4.91 5.02
57 5.54 5.41 5.23 4.98 5.12
58 5.69 5.53 5.33 5.05 5.22
59 5.84 5.66 5.43 5.11 5.32
60 6.01 5.79 5.53 5.18 5.44
61 6.18 5.94 5.63 5.24 5.56
62 6.37 6.08 5.74 5.30 5.68
63 6.57 6.24 5.84 5.36 5.82
64 6.79 6.40 5.95 5.41 5.96
65 7.02 6.57 6.05 5.46 6.10
66 7.27 6.74 6.15 5.51 6.26
67 7.54 6.91 6.26 5.55 6.43
68 7.83 7.10 6.35 5.59 6.60
69 8.14 7.28 6.45 5.62 6.78
70 8.48 7.47 6.54 5.65 6.98
71 8.84 7.66 6.62 5.68 7.19
72 9.23 7.85 6.70 5.70 7.41
73 9.65 8.04 6.77 5.71 7.65
74 10.11 8.23 6.83 5.72 7.89
75 10.61 8.41 6.88 5.73 8.16
</TABLE>
OPTION 4 - JOINT AND LAST SURVIVOR LIFE ANNUITY
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
ADJUSTED AGE OF ADJUSTED AGE OF SECOND LIFE
FIRST LIFE 51 56 58 61 63 66 71
50 $4.21 $4.35 $4.40 $4.47 $4.51 $4.57 $4.64
55 4.37 4.58 4.66 4.78 4.85 4.94 5.07
57 4.43 4.67 4.77 4.90 4.99 5.10 5.26
60 4.51 4.80 4.92 5.09 5.20 5.36 5.59
62 4.55 4.88 5.01 5.22 5.35 5.54 5.82
65 4.62 4.99 5.15 5.39 5.56 5.81 6.19
70 4.70 5.14 5.34 5.65 5.88 6.23 6.83
</TABLE>
U-83
LVA-GAT(u) TIC Ed.1-83
20
<PAGE> 21
OPTION 5 - JOINT AND LAST SURVIVOR LIFE ANNUITY
ANNUITY REDUCES ON DEATH OF PRIMARY PAYEE
<TABLE>
<S> <C> <C> <C> <C>
ADJUSTED AGE OF
PRIMARY PAYEE ADJUSTED AGE OF SECOND PAYEE
46 51 56 61
50 $4.37 $4.46 $4.54 $4.61
55 4.65 4.78 4.91 5.02
60 4.97 5.15 5.34 5.51
65 5.34 5.57 5.83 6.10
70 5.75 6.05 6.40 6.78
</TABLE>
Dollar amounts of the first monthly payments for ages not shown in these Tables
will be calculated on the same basis as those shown and may be obtained from
us. Amounts shown in these Tables are based on the Progressive Annuity Table,
with a two year set-back, (assuming births in the year 1900) with interest at
the rate of 3 1/2% per annum. The adjusted age of the person on whose life the
Annuity is based is determined from the actual age last birthday on the due
date of the first Annuity payment in the following manner.
<TABLE>
<S> <C> <C> <C> <C>
Calendar Year in which
First Payment is Due . . 1981-1990 1991-2000 2001-2010 2011 & later
Adjusted Age is Actual Age . . . minus 3 minus 4 minus 5 minus 6
</TABLE>
21
<PAGE> 22
FLEXIBLE ANNUITY RIDER
This rider is made a part of the basic contract to which it is attached. The
Date of Issue of the rider is the same as that of the basic contract unless a
different date is shown in the Contract Summary. Except as provided in this
rider, a Flexible Annuity Account is treated the same as a Sub-Account.
When you direct us to do so, we will
1. apply all or any part of a Participant's net premium; or
2. transfer all or any part of a Participant's Interest under the
contract;
to a Flexible Annuity Account.
PREMIUM PAYMENT--PREMIUMS are payable to us at our office. We will accept
premiums subject to the conditions stated in the Contract Summary. No premium
payment after the first is required to keep this rider in effect, as long as
the basic contract is in effect.
We will apply the first net premium paid for this rider:
1. to provide Accumulation Units;
2. to the credit of this rider;
3. as of the day the premium is received at our office; or
4. on the date shown in the application for this rider, if later.
We will apply any net premium after the first net premium as of the day we
receive it at our office.
For the purpose of this rider, the "VALUATION PROVISIONS" of the basic contract
are amended by deleting the following provisions:
1. "Number of Accumulation Units;"
2. "Accumulation Unit Value;" and
3. "Net Investment Rate and Net Investment Factor;"
and the following provisions are added.
NUMBER OF ACCUMULATION UNITS--We will determine the number of Accumulation
Units to be credited to this rider on payment of premiums by dividing the net
premium by the then dollar value of one Accumulation Unit.
ACCUMULATION UNIT VALUE--We will determine the value of an Accumulation Unit on
any day by multiplying:
1. the value on the immediately preceding day; by
2. the net interest factor for the day on which the value is being
determined.
NET INTEREST FACTOR--The net interest factor for a day is:
1. the assured Net Interest Rate which is equivalent to an annual interest
rate of 3 1/2%, plus
2. any additional net interest return, plus
3. 1.0000.
L-13411 TIC Ed. 6-91
22
<PAGE> 23
CASH VALUE--The Cash Value of a Flexible Annuity Account on any date equals:
1. the number of Accumulation Units credited to this rider: minus
2. any reductions as stated in the "Account Charge" provision of the basic
contract; and multiplied by
3. the then Accumulation Unit Value.
For the assured values of a Flexible Annuity Account, see the TABLE OF VALUES
of this rider.
CASH SURRENDER--We will:
1. before the due date of a Participant's first Annuity payment; and
2. without the consent of any beneficiary unless irrevocably named,
pay you all or any part of that Participant's interest in the value of this
rider if you request it in writing. We may delay payment of the Cash Surrender
Value of a Flexible Annuity Account for a period of not more than six months
after we receive the request.
CASH SURRENDER VALUE--The Cash Surrender Value of a Flexible Annuity Account is
equal to:
1. the Cash Value of a Flexible Annuity Account; minus
2. any amounts deducted on surrender which are shown on the contract
summary, minus
3. any applicable premium tax not previously deducted.
BENEFITS--In addition to the benefits of the basic contract, you may apply all
or any part of a Participant's Interest to provide a Flexible Annuity Account
(fixed dollar) Annuity. The fixed dollar annuity provisions available:
1. are of the same type; and
2. payable under the same terms and conditions as indicated in the
"ANNUITY PROVISIONS" of the contract except for Option 3, Unit Refund
Life Annuity, which is not available. However you may elect a Cash
Refund Life Annuity.
CASH REFUND LIFE ANNUITY--We will make monthly annuity payments to you:
1. during the lifetime of the Participant on whose life the payments are
based;
2. ending with the last payment due before the death of that Participant;
provided that at death the beneficiary will receive in one sum the excess, if
any, of:
1. the total amount applied under the option; minus
2. the sum of the annuity payments previously made.
We will determine the first payment under this option from the ANNUITY TABLES
in the contract. It will be the same as that shown for a Unit Refund Life
Annuity.
The rights and benefits stated in the provision of the basic contract entitled
"ELECTIONS OF OPTIONS" will apply to the Cash Refund Life Annuity.
The dollar amount of the first fixed dollar annuity payment will be as
indicated in the provision of the basic contract entitled "Amount of First
Payment." The amount applied to effect an annuity will be the Cash Value as of
the date the first payment is paid. All subsequent payments will be in the same
amount and that amount will
23
<PAGE> 24
be assured throughout the payment period. If it would produce a larger payment,
we agree that the fixed dollar annuity payment will be determined on the same
mortality and interest basis used in determining rates for fixed dollar
payments under annuity contracts being issued for the same class of Annuitants
on the date the first fixed dollar annuity payment is paid under this contract.
LOANS--You may request a loan for a Participant at any time as long as the
request is made in writing on a form that is acceptable to us.
The loan:
1. must be made before the due date of the first annuity payment for the
Participant; and
2. will be made without the consent of any beneficiary or other
party unless irrevocably named, or unless required by Federal law: and
3. cannot exceed the maximum loan value.
We may defer granting a loan for the period permitted by law but not for more
than six months. We will not grant an additional loan for any Participant until
the first loan has been repaid in full.
MINIMUM LOAN VALUE--The minimum loan value is shown on the Contract Summary.
MAXIMUM LOAN VALUE--The maximum loan value is shown on the Contract Summary.
You must transfer Cash Value from the basic contract equal to the loan amount
to the Flexible Annuity Account prior to our granting the loan. The amount
transferred to the Flexible Annuity Account will be taken pro rata from each of
the other contract Sub-Accounts which have Cash Value, unless you instruct us
otherwise. An express condition of us lending the loan amount to you is that
you will grant us a security interest in the Cash Value of the Flexible Annuity
Account equal to the loan amount.
LOAN INTEREST--Interest on the loan is payable in advance on a quarterly basis.
The interest rate will be a fixed rate as stated in the Contract Summary.
EFFECT OF A LOAN ON CASH VALUE OF THE FLEXIBLE ANNUITY ACCOUNT--To the extent
that the loan remains outstanding, the Cash Value that is equal to the loan
amount will be credited with an interest rate of 3-1/2% a year.
The Cash Value may be decreased as stated in the Loan and Interest Repayments
section of this rider.
EFFECT OF A LOAN ON CASH SURRENDER VALUE OF THE FLEXIBLE ANNUITY ACCOUNT--While
a loan remains outstanding, the Cash Surrender Value of the Flexible Annuity
Account equals;
1. the Cash Value; less
2. any amounts deducted on surrender which are shown on the Contract
Summary; less
3. any applicable premium tax not previously deducted; and less
4. the amount of any outstanding loan and accrued interest.
EFFECT OF LOAN ON TRANSFERS FROM THE FLEXIBLE ANNUITY ACCOUNT TO OTHER
SUB-ACCOUNTS--While a loan remains outstanding, the maximum Cash Value that you
may transfer from the Flexible Annuity Account to any other Sub-Account(s) is
the Cash Surrender Value.
LOAN AND INTEREST REPAYMENTS--We will send you periodic bills, except when the
loan is in default, for the loan and interest amount due. Payments must be made
on a quarterly basis. Unless the loan was used to purchase a principal
residence, the loan must be repaid within 5 years of the date the loan is made.
We must be
24
<PAGE> 25
notified in writing when the loan is being used to purchase a principal
residence. We will notify you regarding the repayment schedule for the loan.
If the entire billed amount is not paid within 31 days of the due date, one of
the following events will occur:
1. If there is Cash Value of the Flexible Annuity Account that is
not restricted and it is sufficient to pay the Participant's entire
billed amount, we will surrender that billed amount from that
unrestricted Cash Value. Cash Value that is not restricted consists of
any amount that is:
a. not restricted according to the Internal Revenue Code; and
b. attributable to the Participant's contributions.
When the billed amount is surrendered from the Cash Value of the Flexible
Annuity Account, the Cash Value will also be reduced by:
a. any amounts deducted on surrender, if applicable, which are shown
on the Contract Summary; plus
b. any applicable premium tax not previously deducted.
2. When the entire billed amount cannot be paid as described in item
1 above, we will send you a notice reminding you that the amount for a
Participant has not been paid. If you do not pay that billed amount
within 60 days of the date of our notice, the outstanding loan plus
any accrued interest will be considered a loan in default. We will not
send you any more bills.
Interest will continue to be charged and credited to the loan in default while
the loan is outstanding. Repayment of the loan amount and/or accrued interest
will be allowed at any time.
When an event that is recognized under federal tax law or regulation as one
which allows the Cash Value of the Flexible Annuity Account to be distributed,
the Cash Value will be reduced by:
1. the amount of the outstanding loan plus any accrued interest; plus
2. the amounts deducted on surrender, if applicable, which are shown on
the Contract Summary; plus
3. any applicable premium tax not previously deducted.
The loan amount is then considered no longer outstanding. Interest will no
longer be charged or credited to the loan amount.
BENEFITS IN THE EVENT PREMIUM IS NOT PAID--
AUTOMATIC BENEFIT--This rider will automatically continue as a Paid-Up Deferred
Annuity starting at a Participant's Annuity Commencement Date if:
1. this rider has a Cash Value; and
2. no further premium payments are made for this rider.
PAID-UP DEFERRED ANNUITY--We will determine the amount of any Paid-Up Deferred
Annuity payment as described in the "Cash Value" provision above. The annuity
will be payable:
1. on the Participant's Annuity Commencement Date;
2. if the Annuitant is then living;
3. unless you elect otherwise;
25
<PAGE> 26
4. under the same terms and conditions as the Annuity that would have
otherwise been payable at the Participant's Annuity Commencement Date.
The Cash Value and the Cash Surrender Value of this Paid-up Deferred Annuity
provision on and before an Annuity Commencement Date will be calculated as
described in the "VALUATION PROVISIONS" of the basic contract.
CASH--You may surrender this rider for cash as described in the "Cash
Surrender" provision.
MINIMUM VALUES--Any Paid-Up Deferred Annuity Value or Cash Surrender Value
provided by this rider are not less than the minimum required by the law of the
state in which this contract is delivered.
ANNUAL REPORTS--We will furnish you a report for this rider as often as
required by law but at least once in each contract year before the due date of
the first Annuity payment.
The report will show the Cash Value of the Flexible Annuity Account as of the
date of the report.
THE TRAVELERS INSURANCE COMPANY
President
26
<PAGE> 27
TABLE OF VALUES
Cash Values per $1,000 of Net Premium Payment Applied to Provide Accumulation
Units
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
No. of Full No. of Full No. of Full No. of Full No. of Full
Years From Years From Years From Years From Years From
Date Prem. Cash Date Prem. Cash Date Prem. Cash Date Prem. Cash Date Prem. Cash
is Applied Value is Applied Value is Applied Value is Applied Value is Applied Value
1 1035 15 1675 29 2711 43 4389 57 7105
2 1071 16 1733 30 2806 44 4543 58 7354
3 1108 17 1794 31 2905 45 4702 59 7611
4 1147 18 1857 32 3006 46 4866 60 7878
5 1187 19 1922 33 3111 47 5037 61 8153
6 1229 20 1989 34 3220 48 5213 62 8439
7 1272 21 2059 35 3333 49 5396 63 8734
8 1316 22 2131 36 3450 50 5584 64 9040
9 1362 23 2206 37 3571 51 5780 65 9356
10 1410 24 2283 38 3696 52 5982 66 9684
11 1459 25 2363 39 3825 53 6192 67 10023
12 1511 26 2445 40 3959 54 6408 68 10373
13 1563 27 2531 41 4097 55 6633 69 10737
14 1618 28 2620 42 4241 56 6865 70 11112
</TABLE>
L-13411
27
<PAGE> 28
OWNERSHIP--NON-TRANSFERABLE
You may not:
1. sell;
2. assign; or
3. discount;
this contract. You may not pledge this contract:
1. as collateral for a loan; or
2. as security for the performance;
a. of an obligation; or
b. for any other purpose;
to any person or organization other than us.
These restrictions will not apply to:
1. the Trustee of any Trust described in Section 401(a); or
2. the Administrator of any Annuity Plan described in Section 403(a);
of the Internal Revenue Code. This restriction supersedes an provisions of the
contract which may be inconsistent with it
LIMITATION ON SETTLEMENT OPTION ELECTION
To conform this contract with:
1. the applicable sections of the Internal Revenue Code of 1954; and
2. the rulings and regulations under the Code;
the provision of this contract relating to "ELECTION OF OPTIONS," if
applicable, is amended by the addition of the following provision:
A settlement option may not be elected under which the present value of the
payments to be made to the Participant is less than fifty percent (50%) of the
present value of the total payments to be made to the Participant and his or
her beneficiary. To conform this contract with:
1. the applicable sections of the Internal Revenue Code of 1954; and
2. the rulings and limitations under the Code;
the provision of this contract relating to "INCOME PROVISIONS," if applicable,
is amended by the deletion of "Option 3. Amounts Held at Interest" when this
contract has been transferred or assigned to the Annuitant/Participant.
THE TRAVELERS INSURANCE COMPANY
President
LVA-E9-A TIC Ed. 3-83
28
<PAGE> 29
ENDORSEMENT
This endorsement is made a part of this contract in order to comply with
Section 403(b) of the Internal Revenue Code. The following conditions,
restrictions and limitations apply.
ELECTIVE DEFERRAL CONTRIBUTION LIMITS
In order to meet the qualification requirements of Internal Revenue Code
Section 403(b), elective deferral contributions may not exceed the limitations
in effect under Internal Revenue Code Section 402(g).
This rule is effective for plan years beginning after December 31, 1987 and
applies to all elective deferral plans, contracts or arrangements.
WITHDRAWAL RESTRICTIONS
To qualify as a contract which can defer compensation under an Internal Revenue
Code 403(b) plan or arrangement, the withdrawal restrictions under Internal
Revenue Section 403(b)(11) must be met.
Withdrawals attributable to contributions made pursuant to a salary reduction
agreement may be paid only upon or after attainment of age 59-1/2, separation
from service, death, total or permanent disability (as defined in Internal
Revenue Code Section 72(m)(7)) or in the case of hardship (as defined in the
Treasury Regulations). The hardship exception applies only to the salary
reduction contribution and not to any income attributable to such contribution.
These withdrawal restrictions apply to years beginning after December 31, 1988
but only with respect to assets other than those assets held as of the close of
the last year beginning before January 1, 1989.
NONDISCRIMINATION RULES
In order to meet the qualification requirements of Internal Revenue Code
Section 403(b), except in the case of a contract purchased by a church, all
plans must meet the nondiscrimination rules set forth in Internal Revenue Code
Section 403(b) (12). These rules apply to years beginning after December
31, 1988.
MANDATORY DISTRIBUTION RULES
In order to meet the qualification requirements of Internal Revenue Code
Section 403(b), all plans must meet the mandatory distribution rules in
Internal Revenue Code Section 401(a)(9). These rules apply to years beginning
after December 31, 1986.
ADMINISTRATIVE COMPLIANCE
We intend to administer this contract so that it will maintain its tax deferred
qualification under Internal Revenue Code Section 403(b). If temporary or final
regulations require a change in the contract language in order to maintain
qualification, we will administer this contract in accordance with the
regulations.
THE TRAVELERS INSURANCE COMPANY
President
L-13089
29
<PAGE> 30
ENDORSEMENT
This endorsement is made a part of the contract to which it is attached at its
Date of Issue.
The "Relation of This Contract to the Separate Accounts" under the "General
Provisions" is amended by deleting the provisions and replacing it with the
following:
We will have exclusive and absolute ownership and control of the assets of our
Separate Accounts. That portion of the assets of a Separate Account equal to
the reserves and other contract liabilities with respect to such Separate
Account shall not be chargeable with liabilities arising out of any other
business we may conduct. Our determination of the value of an Accumulation Unit
and an Annuity Unit by the method described in this contract will be
conclusive.
THE TRAVELERS INSURANCE COMPANY
President
L-13804 TIC Ed. 5-92
30
<PAGE> 31
ENDORSEMENT
This endorsement is made a part of this Contract at its Date of Issue.
This endorsement deletes any and all reference to "sex" in the contract to
which it is attached.
THE TRAVELERS INSURANCE COMPANY
President
L-13193
31
<PAGE> 32
ENDORSEMENT
This endorsement is made a part of this contract form at its Date of Issue.
The "Benefits" provision is amended by deleting the existing provision and
replacing it with the following:
If the Participant is living on that Participant's Annuity Commencement date:
1. we will apply the Participant's Interest to provide an Annuity; and
2. we will pay to you or that Participant, as provided in the Plan, the
first of a series of Annuity payments.
You or the Participant, as provided in the Plan, may elect:
1. another form of Annuity or Income; or
2. an earlier date for the commencement of an Annuity or an Income, or
both:
as provided in this contract. We will determine the dollar amounts of Annuity
or Income Payments as described in the Annuity Provisions or the Income
Provisions.
If:
1. a Participant's Interest is to be applied to effect an Annuity or
Income Option; and
2. that Interest is other than the Cash Value of that Participant's
Individual Accounts;
we must receive your instructions at least 30 days before that Participant's
first Annuity or Income Payment is to be made.
If the Participant dies before age 75 while this contract continues and before
the payment of that Participant's Annuity or Income, we will, after receipt of
due proof of that Participant's death, pay to you or that Participant's
beneficiary as provided in the Plan, the greater of 1), 2), or 3) below, less
any applicable premium tax, or outstanding loans as of the date of receipt of
due proof of death:
1. the Cash Value of the Participant's Account;
2. the gross premium paid under that Participant's Account less any
surrenders not previously deducted; or
3. the Cash Value of that Participant's Account on the fifth Year
anniversary of the Effective Date of the certificate immediately
preceding the date of receipt by us of due proof of that Participant's
death less any surrenders not previously deducted.
If the Participant dies on or after age 75 while this contract continues; and
before the payment of that Participant's Annuity or Income, we will, after
receipt of due proof of that Participant's death, pay to you or that
Participant's beneficiary, as provided in the Plan:
1. the Cash Value of the Participant's Account, less any applicable
premium tax, or outstanding loans not previously deducted.
The Cash Value of the Participant's Account will be determined as of the next
valuation following receipt by us at our office of due proof of that
Participant's death.
THE TRAVELERS INSURANCE COMPANY
President
L-12862 TIC Ed. 5-94
32
<PAGE> 33
Group Variable Annuity Contract
Annuity and Income Options
Elective Options Without Dividends
ENDORSEMENTS
LVA-FP(u)
33
<PAGE> 1
EXHIBIT 5
[TRAVELERS LOGO] APPLICATION FOR INDIVIDUAL DEFERRED ANNUITY
One Tower Square - Annuity Services - Hartford, CT 06183-5030
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Name of Annuitant (Please Print) Sex Date of Birth (MM/DD/YY) U.S. Citizen
- --------------------------------------------------------------------------------------------------------------------------------
/ /Male / /Female / /Yes / /No
- --------------------------------------------------------------------------------------------------------------------------------
Address of Annuitant Social Security Number Maturity Date (MM/DD/YY)
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
Name of Owner (Non-Qualified Only) Sex Date of Birth (MM/DD/YY) U.S. Citizen
- --------------------------------------------------------------------------------------------------------------------------------
/ /Male / /Female / /Yes / /No
- --------------------------------------------------------------------------------------------------------------------------------
Address of Owner (Non-Qualified Only) Social Security Number Succeeding Owner (If Owner and
Annuitant are different)
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Beneficiary (Name and Relationship) ALLOCATION SCHEDULE
- --------------------------------------------------------------------------------------------------------------------------------
Investment Individual Rollover Other
Selection Contribution Contribution
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Periodic Contribution % % %
- --------------------------------------------------------------------------------------------------------------------------------
/ /Annual / /Quarterly / /Monthly % % %
-----------------------------------------------------------------
/ /Semi-Annual / /Semi-Monthly / /Bi-Weekly % % %
- --------------------------------------------------------------------------------------------------------------------------------
Marketing Program % % %
- --------------------------------------------------------------------------------------------------------------------------------
/ /IRA / /IRA/SEP / /TSA / /Non-Qualified % % %
- --------------------------------------------------------------------------------------------------------------------------------
Replacement Information: Will the contract(s) applied for % % %
replace any existing annuity contract or life insurance -----------------------------------------------------------------
policy on the annuitant's life? / /Yes / /No Total 100% 100% 100%
If Yes, give name of company and contract number: -----------------------------------------------------------------
Money Type $ $ $
Sub-Amount
-----------------------------------------------------------------
Initial Premium Amount $
- -------------------------------------------------------------- Rollover Premium Amount $
Additional Information TOTAL AMOUNT $
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
ACKNOWLEDGMENT I understand that the contract will take effect when the first
premium payment is received, and the application is approved in the Home Office
of The Travelers Insurance Company. All payments and values provided by the
contract applied for, when based on investment experience of a separate
account, are variable in nature and are not guaranteed as to a fixed dollar. No
agent is authorized to make changes to the contract or application. I
understand that The Travelers Insurance Company may amend this contract to
comply with changes in the Internal Revenue Code and related regulations.
/ /I acknowledge receipt of a current prospectus(es). (For variable annuities
only)
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Signature of Owner Home Telephone # Work Telephone #
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
Signature of Applicant (If other than Owner, Non-Qualified only)
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
Application Signed at (City and State) Witnessed by (Licensed Representative) Date
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 2
TELEPHONE TRANSFER AUTHORIZATION
I, the undersigned Contract Owner of the variable annuity contract issued in
response to the application contained on Page 1 hereof, authorize The Travelers
Insurance Company to accept and act upon telephone instructions from me, my
spouse (if indicated below) or any person purporting to be me or my spouse and
who provides the identifying contract information. I, the undersigned Contract
Owner, for myself and all persons claiming through me or under any variable
annuity I own, understand, promise and warrant that The Travelers Insurance
Company and all persons acting on its behalf shall be indemnified, defended and
held harmless by me against any and all claim loss, liability, or demand of
whatsoever nature to which said insurance company its said employees,
subcontractors or owners (collectively its "agents") may be subject or put by
reason of real or claimed damage or injury arising or resulting in whole or in
part from negligence, wrongful act or wrongful omission of said Travelers
Insurance Company, or any of its "agents" so long as it or they shall have acted
in good faith in attempting to perform according to the terms of this Telephone
Transfer Authorization.
<TABLE>
<S> <C>
------------------------------------
/ / I authorize telephone transfer capabilities for my spouse Name of
Spouse
------------------------------------
</TABLE>
/ / I acknowledge receipt and agree to the terms of the Telephone Transfer Rules
and Regulations listed on the Customer Information Sheet.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Signature of Contract Owner Date
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C>
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
REMITTANCE INFORMATION
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Name of Employer Address Case #
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
REPRESENTATIVE'S REPORT
I acknowledge that all data representations and signatures recorded on Pages 1
and 2 were recorded by me or in my presence in response to my inquiry and
request and all such representations and signatures are accurate and valid to
the best of my knowledge and belief.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Signed Print Name Here Date
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
To be signed personally be the representative(s) by whom the application was
solicited Will the contract(s) applied for replace any existing annuity
contract or life insurance policy on the Annuitant's life?
/ / Yes / / No
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Owner Information Use the space below for plate or
- -------------------------------------------------------------------------------- Producer's name, contract and codeOccupation
Annual Income
- --------------------------------------------------------------------------------
Net Worth
- --------------------------------------------------------------------------------
Applicable Tax Bracket
- --------------------------------------------------------------------------------
Investment Objective
- --------------------------------------------------------------------------------
Registered Representative's Signature
- --------------------------------------------------------------------------------
If your customer is affiliated with or working for a member of a stock
exchange or the NASD they are required to disclose this information. Please
note the broker/dealer name below
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
If the customer refuses to provide the above information, please have him/her
sign below
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE TRAVELERS INSURANCE COMPANY AND ITS AFFILIATES
<PAGE> 3
[TRAVELERS LOGO] APPLICATION FOR INDIVIDUAL DEFERRED ANNUITY
One Tower Square -- Annuity Services -- Hartford, CT 06183-5030
<TABLE>
<CAPTION>
UNIVERSAL ANNUITY - A VARIABLE ANNUITY
<S> <C>
ALLIANCE CAPITAL MANAGEMENT, INC.
Alliance Growth Portfolio HA
THE DREYFUS CORPORATION
Dreyfus Stock Index Fund DI
FIDELITY INVESTMENTS
Fidelity's Asset Manager Portfolio FA
Fidelity's Equity-Income Portfolio FE
Fidelity's Growth Portfolio FS
Fidelity's High Income Portfolio FB
MASSACHUSETTS FINANCIAL SERVICES COMPANY
MFS Total Return HT
PUTNAM INVESTMENT MANAGEMENT, INC.
Putnam Diversified Income Portfolio HP
SMITH BARNEY
Smith Barney High Income Portfolio HH
Smith Barney Income & Growth Portfolio HJ
Smith Barney International Equity Portfolio HI
TEMPLETON WORLDWIDE
Templeton's Global Asset Allocation Fund IN
Templeton's Global Bond Fund IB
Templeton's Global Stock Fund IS
THE TRAVELERS MANAGED FUNDS
Travelers Growth and Income Stock Account GS
Travelers High Yield Bond Trust HYBT
Travelers Managed Assets Trust MAT
Travelers Money Market Account MM
Travelers Quality Bond Account QB
Travelers Social Awareness Stock Portfolio SA
Travelers U.S. Government Securities Portfolio GV
Capital Appreciation Fund (Sub-Adviser:Janus) AST
Utilities Portfolio (Adviser:Smith Barney) UP
AMERICAN ODYSSEY FUNDS
American Odyssey Core Equity Fund OC
American Odyssey Emerging Opportunities Fund OE
American Odyssey Intermediate-Term Bond Fund OM
American Odyssey International Equity Fund OI
American Odyssey Long-Term Bond Fund OB
American Odyssey Short-Term Bond Fund OS
MARKET TIMING STRATEGIES
Growth Stock Strategy GST
U.S. Government Securities Strategy USG
Aggressive Stock Strategy AGS
FIXED INTEREST OPTIONS
Fixed Interest Option (Qualified Only) FX
Fixed Interest Option (Nonqualified Only) NX
TFLEX - A FIXED ANNUITY T-FLEX
</TABLE>
<PAGE> 4
[TRAVELERS LOGO] APPLICATION FOR INDIVIDUAL DEFERRED ANNUITY
One Tower Square -- Annuity Services -- Hartford, CT 06183-5030
By signing the telephone transfer authorization on Page 2 of the application,
the contract owner or authorized spouse has the ability to execute the
following transactions:
Transfer all or any part of accumulated variable annuity contract
values to a funding vehicle (hereafter referred to as an "investment
alternative") of the variable annuity contract.
Allocate all or any part of future contributions to the investment
alternative(s) of the variable annuity contract or to a fixed annuity
product.
Contract Owners who authorize The Travelers to accept telephone instructions
for transfers of Contract Values agree to such transfers subject to the
following provisions:
1. Telephone transfer instructions will be accepted between 9:00 am
and 4:00 pm Eastern Time.
2. Instructions may be given by calling 1-800-872-6737 for
out-of-state calls; or 1-800-233-3591 for Connecticut calls.
3. All callers must identify themselves by providing specific
information about their contract including: name, address, contract
number, social security number and date of birth.
4. Once instructions are accepted by the Telephone Transfer Unit, they
may not be rescinded. New telephone instructions may be given the
following business day.
5. All transfers must be in accordance with the terms of the Variable
Annuity Contract. If the transfer instructions are not in good order,
The Travelers will not execute the transfer and will notify the caller
before the end of the next business day.
6. This authorization shall continue in force until The Travelers
receives written revocation from the Contract Owner, the ownership of
the contract is transferred, the Annuitant dies, or The Travelers
discontinues the privilege.
7. Understand and agree that The Travelers will make reasonable effort
to record each telephone transfer conversation but in the event that
no recording is effective or available, the Contract Owner remains
liable for each telephone transfer effected pursuant to the terms of
this agreement and authorization.
<PAGE> 1
EXHIBIT 8A
PARTICIPATION AGREEMENT
Among
VARIABLE INSURANCE PRODUCTS FUND.
FIDELITY DISTRIBUTORS CORPORATION
and
THE TRAVELERS INSURANCE COMPANY
THIS AGREEMENT, made and entered into this 25th day of October, 1991
by and among THE TRAVELERS INSURANCE COMPANY, (hereinafter the "Company"), a
Connecticut corporation, on its own behalf and on behalf of each segregated
asset account of the Company set forth on Schedule A hereto as may be amended
from time to time (each such account hereinafter referred to as the "Account"),
and the VARIABLE INSURANCE PRODUCTS FUND, an unincorporated business trust
organized under the laws of the Commonwealth of Massachusetts (hereinafter the
"Fund") and FIDELITY DISTRIBUTORS CORPORATION (hereinafter the "Underwriter"),
a Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products") to be
offered by insurance companies which have entered into participation agreements
with the Fund and the Underwriter (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each designated a "Portfolio" and representing the interest
in a particular managed portfolio of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated October 15, 1985 (File No. 812-6102), granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of sections 9(a),
13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended,
(hereinafter the "1940 Act") and Rules 6e-2(b) (15) and 6e-3(T) (b) (15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by variable annuity and variable life insurance separate accounts of
both affiliated and unaffiliated life insurance companies (hereinafter the
"Shared Funding Exemptive Order"); and
<PAGE> 2
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, Fidelity Management & Research Company (the "Adviser") is
duly registered as an investment adviser under the federal Investment Advisers
Act of 1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain variable
life or variable annuity contracts under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to one or more variable life or annuity
contracts; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission under the Securities Exchange Act of 1934,
as amended, (hereinafter the "1934 Act"), and is a member in good standing of
the National Association of Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid variable life and variable
annuity contracts and the Underwriter is authorized to sell such shares to unit
investment trusts such as each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Underwriter agrees to sell to the Company those shares of
the Fund which each Account orders, executing such orders on a daily basis at
the net asset value next computed after receipt by the Fund or its designee of
the order for the shares of the Fund. For purposes of this Section 1.1, the
Company shall be the designee of the Fund for receipt of such orders from each
Account and receipt by such designee shall constitute receipt by the Fund;
provided that the Fund receives notice of such order by 9:30 a.m. Boston time
on the next following Business Day. "Business Day" shall mean any day on which
the New York Stock Exchange is open for trading and on which the Fund
calculates its net asset value pursuant to the rules of the Securities and
Exchange Commission.
2
<PAGE> 3
1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value
pursuant to rules of the Securities and Exchange Commission and the Fund shall
use reasonable efforts to calculate such net asset value on each day which the
New York Stock Exchange is open for trading. Notwithstanding the foregoing,
the Board of Trustees of the Fund (hereinafter the "Board") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Board
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund will
be sold only to Participating Insurance Companies and their separate accounts.
No shares of any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Section 2.5 of Article II
of this Agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on the Company's request,
any full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day.
1.6. The Company agrees to purchase and redeem the shares of each
Portfolio offered by the then current prospectus of the Fund and in accordance
with the provisions of such prospectus. The Company agrees that all net
amounts available under the variable life and variable annuity contracts with
the form number(s) which are listed on Schedule B attached hereto and
incorporated herein by this reference, as such Schedule B may be amended from
time to time hereafter by mutual written agreement of all the parties hereto,
(the "Contracts") shall be invested in the Fund, in such other Funds advised by
the Adviser as may be mutually agreed to in writing by the parties hereto, or
in the Company's general account, provided that such amounts may also be
invested in an investment company other than the Fund if (a) such other
investment company, or series thereof, has investment objectives or policies
that are substantially different from the investment objectives and policies of
all the Portfolios of the Fund; or (b) the Company gives the Fund and the
Underwriter 45 days written notice of its intention to make such other
investment company available as a funding vehicle for the Contracts; or (c)
such other investment company was available as a funding vehicle for the
Contracts prior to the date of this Agreement and the Company so informs the
Fund and Underwriter prior to their signing this Agreement; or (d) the Fund or
Underwriter consents to the use of such other investment company.
3
<PAGE> 4
1.7. The Company shall pay for Fund shares on the next Business Day
after an order to purchase Fund shares is made in accordance with the
provisions of Section 1.1 hereof. Payment shall be in federal funds
transmitted by wire. For purpose of Section 2.10 and 2.11, upon receipt by the
Fund of the federal funds so wired, such funds shall cease to be the
responsibility of the Company and shall become the responsibility of the Fund.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio.
The Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available by 7 p.m. Boston
time.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act; that the Contracts will be issued and
sold in compliance in all material respects with all applicable Federal and
State laws and that the sale of the Contracts shall comply in all material
respects with state insurance suitability requirements. The Company further
represents and warrants that it is an insurance company duly organized and in
good standing under applicable law and that it has legally and validly
established each Account prior to any issuance or sale thereof as a segregated
asset account under Section 38-433 of the Connecticut Insurance Code and has
registered or, prior to any issuance or sale of the Contracts, will register
each Account as a unit investment trust in accordance with the provisions of
the 1940 Act to serve as a segregated investment account for the Contracts.
2.2. The Fund represents and warrants that Fund shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of Delaware and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend the Registration
Statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Fund
shall register and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Fund or
the Underwriter
4
<PAGE> 5
2.3. The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended, (the "Code") and that it will make every effort to maintain
such qualification (under Subchapter M or any successor or similar provision)
and that it will notify the Company immediately upon having a reasonable basis
for believing that it has ceased to so qualify or that it might not so qualify
in the future.
2.4. The Company represents that the Contracts are currently treated
as endowment, annuity or life insurance contracts, under applicable provisions
of the Code and that it will make every effort to maintain such treatment and
that it will notify the Fund and the Underwriter immediately upon having a
reasonable basis for believing that the Contracts have ceased to be so treated
or that they might not be so treated in the future.
2.5. The Fund currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although it may make such payments in the future. The Fund has
adopted a "no fee" or "defensive" Rule 12b-1 Plan under which it makes no
payments for distribution expenses. To the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1, the Fund undertakes to have a
board of trustees, a majority of whom are not interested persons of the Fund,
formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Delaware and the Fund and the Underwriter represent that their
respective operations are and shall at all times remain in material compliance
with the laws of the State of Delaware to the extent required to perform this
Agreement.
2.7. The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC.
The Underwriter further represents that it will sell and distribute the Fund
shares in accordance with the laws of the State of Delaware and all applicable
state and federal securities laws, including without limitation the 1933 Act,
the 1934 Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of the State of Delaware and that it does and will
comply in all material respects with the 1940 Act.
2.9. The Underwriter represents and warrants that the Adviser is and
shall remain duly registered in all material respects under all applicable
federal and state securities laws and that the Adviser shall perform its
obligations for the Fund in compliance in all material respects with the laws
of the State of Delaware and any applicable state and federal securities laws.
5
<PAGE> 6
2.10. The Fund and Underwriter represent and warrant that all of
their directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities
dealing with the money and/or securities of the Fund are and shall continue to
be at all times covered by a blanket fidelity bond or similar coverage for the
benefit of the Fund, in an amount not less than the minimal coverage as
required currently by entities subject to the requirements of Rule 17g-1 of the
1940 Act or related provisions as may be promulgated from time to time. The
aforesaid Bond shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company.
ARTICLE III. Prospectuses and Proxy Statements: Voting
3.1. The Underwriter shall provide the Company (at the Company's
expense) with as many copies of the Fund's current prospectus as the Company
may reasonably request. If requested by the Company in lieu thereof, the Fund
shall provide such documentation (including a final copy of the new prospectus
as set in type at the Fund's expense) and other assistance as is reasonably
necessary in order for the Company once each year (or more frequently if the
prospectus for the Fund is amended) to have the prospectus for the Contracts
and the Fund's prospectus printed together in one document (such printing to be
at the company's expense).
3.2. The Fund's prospectus shall state that the Statement of
Additional Information for the Fund is available from the Underwriter (or in
the Fund's discretion, the Prospectus shall state that such Statement is
available from the Fund), and the Underwriter (or the Fund), at its expense,
shall print and provide such Statement free of charge to the Company and to any
owner of a Contract or prospective owner who requests such Statement.
3.3. The Fund, at its expense, shall provide the Company with copies
of its proxy material, reports to stockholders and other communications to
stockholders in such quantity as the Company shall reasonably require for
distributing to Contract owners.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract Owners;
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of such portfolio
for which instructions have been received: so long as and to the
extent that the Securities and Exchange Commission continues to
interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to
vote Fund shares held
6
<PAGE> 7
in any segregated asset account in its own right, to the extent
permitted by law. Participating Insurance Companies shall be
responsible for a assuring that each of their separate accounts
participating in the Fund calculates voting privileges in a
manner consistent with the standards set forth on Schedule C
attached hereto and incorporated herein by this reference, which
standards will also be provided to the other Participating
Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either
provide for annual meetings or comply with Section 16(c) of the 1940 Act
(although the Fund is not one of the trusts described in Section 16(c) of that
Act) as well as with Sections 16(a) and, if and when applicable, 16(b).
Further, the Fund will act in accordance with the Securities and Exchange
Commission's interpretation of the requirements of Section 16(a) with respect
to periodic elections of trustees and with whatever rules the Commission may
promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or its investment adviser or the Underwriter is
named, at least fifteen Business Days prior to its use. No such material shall
be used if the Fund or its designee object to such use within fifteen Business
Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or
its designee or by the Underwriter, except with the permission of the Fund or
the Underwriter or the designee of either.
4.3. The Fund, Underwriter, or its designee shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or its
separate account(s), is named at least fifteen Business Days prior to its use.
No such material shall be used if the Company or its designee object to such
use within fifteen Business Days after receipt of such material.
4.4. The Fund and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public
domain or approved by the Company for distribution to Contract owners, or in
sales literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
7
<PAGE> 8
4.5. The Fund will provide to the Company at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Fund or its shares,
contemporaneously with the filing of such document with the Securities and
Exchange Commission or other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that relate to the
Contracts or each Account, contemporaneously with the filing of such document
with the Securities and Exchange Commission.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e. any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational
or training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, Statements of Additional Information, shareholder reports, and
proxy materials.
ARTICLE V. Fees and Expenses
5.1. The Fund and Underwriter shall pay no fee or other compensation
to the Company under this agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing and such payments will be made out of existing fees otherwise payable
to the Underwriter, past profits of the Underwriter or other resources
available to the Underwriter. No such payments shall be made directly by the
Fund. Currently, no such payments are contemplated.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of
8
<PAGE> 9
all statements and notices required by any federal or state law, all taxes on
the issuance or transfer of the Fund's shares.
5.3. The Company shall bear the expenses of printing and distributing
the Fund's prospectus to owners of Contracts issued by the Company and of
distributing the Fund's proxy materials and reports to such Contract owners.
ARTICLE VI . Diversification
6.1. The Fund will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated as variable
contracts under the Code and the regulations issued thereunder. Without
limiting the scope of the foregoing, the Fund will at all times comply with
Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations.
ARTICLE VII. Potential Conflicts
7.1. The Board will monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the contract owners
of all separate accounts investing in the Fund. An irreconcilable material
conflict may arise for a variety of reasons, including: (a) an action by any
state insurance regulatory authority; (b) a change in applicable federal or
state insurance, tax, or securities laws or regulations, or a public ruling,
private letter ruling, no-action or interpretative letter, or any similar
action by insurance, tax, or securities regulatory authorities; (c) an
administrative or judicial decision in any relevant proceeding; (d) the manner
in which the investments of any Portfolio are being managed; (e) a difference
in voting instructions given by variable annuity contract and variable life
insurance contract owners; or (f) a decision by an insurer to disregard the
voting instructions of contract owners. The Board shall promptly inform the
Company if it determines that an irreconcilable material conflict exists and
the implications thereof.
7.2. The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities under the Shared Funding Exemptive Order, by providing
the Board with all information reasonably necessary for the Board to consider
any issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another
9
<PAGE> 10
Portfolio of the Fund, or submitting the question whether such segregation
should be implemented to a vote of all affected Contract owners and, as
appropriate, segregating the assets of any appropriate group (i.e., annuity
contract owners, life insurance contract owners, or variable contract owners of
one or more Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected contract owners the option of making
such a change; and (2), establishing a new registered management investment
company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard contract owner voting instructions and
that decision represents a minority position or would preclude a majority vote,
the Company may be required, at the Fund's election, to withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account; provided, however that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Any such withdrawal and termination must take place within six (6) months after
the Fund gives written notice that this provision is being implemented, and
until the end of that six month period the Underwriter and Fund shall continue
to accept and implement orders by the Company for the purchase (and redemption)
of shares of the Fund.
7.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to the Company
conflicts with the majority of other state regulators, then the Company will
withdraw the affected Account's investment in the Fund and terminate this
Agreement with respect to such Account within six months after the Board
informs the Company in writing that it has determined that such decision has
created an irreconcilable material conflict; provided, however, that such
withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested members of the Board. Until the end of the foregoing six month
period, the Underwriter and Fund shall continue to accept and implement orders
by the Company for the purchase (and redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but
in no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
10
<PAGE> 11
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief from any
provision of the Act or the rules promulgated thereunder with respect to mixed
or shared funding (as defined in the Shared Funding Exemptive Order) on terms
and conditions materially different from those contained in the Shared Funding
Exemptive Order, then (a) the Fund and/or the Participating Insurance
Companies, as appropriate, shall take such steps as may be necessary to comply
with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent such rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3,
7.4, and 7.5 of this Agreement shall continue in effect only to the extent that
terms and conditions substantially identical to such Sections are contained in
such Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
8.1 Indemnification By The Company
8.1(a). The Company agrees to indemnify and hold harmless the Fund
and each trustee of the Board and officers and each person, if any, who
controls the Fund within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.1)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Company) or litigation
(including legal and other expenses), to which the Indemnified Parties may
become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisition of the
Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
Registration Statement or prospectus for the Contracts or
contained in the Contracts or sales literature for the Contracts
(or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance upon
and in conformity with information furnished to the Company by
or on behalf of the Fund for use in the Registration Statement
or prospectus for the Contracts or in the Contracts or sales
literature (or any amendment or supplement) or otherwise for use
in connection with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the Registration Statement, prospectus or sales
literature of the Fund not supplied by the Company or persons
under its control) or wrongful conduct of the Company or persons
under its control, with respect to the sale or distribution of
the Contracts or Fund Shares; or
11
<PAGE> 12
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration
Statement, prospectus, or sales literature of the Fund or any
amendment thereof or supplement thereto or the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading if such a statement or omission was made in reliance
upon information furnished to the Fund by or on behalf of the
Company: or
(iv) arise as a result of any failure by the Company to provide
the services and furnish the materials under the terms of this
Agreement: or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company, as limited by and in
accordance with the provisions of Sections 8.1(b) and 8.1(c)
hereof.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation incurred or assessed against an Indemnified Party as such may arise
from such Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's duties or by reason
of such Indemnified Party's reckless disregard of obligations or duties under
this Agreement or to the Fund, whichever is applicable.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Company of
any such claim shall not relieve the Company from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Company shall be entitled to
participate, at its own expense, in the defense of such action. The Company
also shall be entitled to assume the defense thereof, with counsel satisfactory
to the party named in the action. After notice from the Company to such party
of the Company's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the Company will not be liable to such party under this Agreement for any legal
or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.1(d). The Indemnified Parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Fund Shares or the Contracts or the operation
of the Fund.
8.2. Indemnification by the Underwriter
12
<PAGE> 13
8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses) to which the Indemnified Parties may
become subject under any statute, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the Fund's
shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
Registration Statement or prospectus or sales literature of the
Fund (or any amendment or supplement to any of the foregoing),
or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance upon
and in conformity with information furnished to the Underwriter
or Fund by or on behalf of the Company for use in the
Registration Statement or prospectus for the Fund or in sales
literature (or any amendment or supplement) or otherwise for use
in connection with the sale of the Contracts or Fund shares: or
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the Registration Statement, prospectus or sales
literature for the Contracts not supplied by the Underwriter or
persons under its control) or wrongful conduct of the Fund,
Adviser or Underwriter or persons under their control, with
respect to the sale or distribution of the Contracts or Fund
shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration
Statement, prospectus, or sales literature covering the
Contracts, or any amendment thereof or supplement thereto, or
the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statement or statements therein not misleading, if such
statement or omission was made in reliance upon information
furnished to the Company by or on behalf of the Fund; or
(iv) arise as a result of any failure by the Fund to provide
the services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in good
faith or otherwise, to comply with the diversification
requirements specified in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this
Agreement or arise out of or result from
13
<PAGE> 14
any other material breach of this Agreement by the Underwriter;
as limited by and in accordance with the provisions of Sections
8.2(b) and 8.2(e) hereof.
8.2(b). The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith,
or gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to each Company or the Account, whichever is
applicable.
8.2(c). The Underwriter shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Underwriter in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Underwriter
of any such claim shall not relieve the Underwriter from any liability which it
may have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by
it, and the Underwriter will not be liable to such party under this Agreement
for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable
costs of investigation.
8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
8.3. Indemnification By the Fund
8.3(a). The Fund agrees to indemnify and hold harmless the Company,
and each of its directors and officers and each person, if any, who controls
the Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Fund) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any
statute, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements result
from the gross negligence, bad faith or willful misconduct of the Board or any
member thereof, are related to the operations of the Fund and:
14
<PAGE> 15
(I) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure to comply with the
diversification requirements specified in Article VI of this
Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation incurred or assessed against an Indemnified Party as such may arise
from such Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's duties or by reason
of such Indemnified Party's reckless disregard of obligations and duties under
this Agreement or to the Company, the Fund, the Underwriter or each Account,
whichever is applicable.
8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Fund will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the
defense thereof other than reasonable costs of investigation.
8.3(d). The Company and the Underwriter agree promptly to notify the
Fund of the commencement of any litigation or proceedings against it or any of
its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of either
Account, or the sale or acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 acts, and the rules and regulations and rulings thereunder,
including such exemptions from those
15
<PAGE> 16
statutes, rules and regulations as the Securities and Exchange Commission may
grant (including, but not limited to, the Shared Funding Exemptive Order) and
the terms hereof shall be interpreted and construed in accordance therewith.
ARTICLE X. Termination
10.1. This Agreement shall terminate:
(a) at the option of any party upon one year advance written
notice to the other parties; or
(b) at the option of the Company to the extent that shares of
Portfolios are not reasonably available to meet the requirements
of the Contracts as determined by the Company, provided however,
that such termination shall apply only to the Portfolio(s) not
reasonably available. Prompt notice of the election to terminate
for such cause shall be furnished by the Company; or
(c) at the option of the Fund in the event that formal
administrative proceedings are instituted against the Company by
the NASD, the Securities and Exchange Commission, the Insurance
Commissioner or any other regulatory body regarding the
Company's duties under this Agreement or related to the sale of
the Contracts, with respect to the operation of any Account, or
the purchase of the Fund shares, provided, however, that the
Fund determines in its sole judgment exercised in good faith,
that any such administrative proceedings will have a material
adverse effect upon the ability of the Company to perform its
obligations under this Agreement; or
(d) at the option of the Company in the event that formal
administrative proceedings are instituted against the Fund or
Underwriter by the NASD, the Securities and Exchange Commission,
or any state securities or insurance department or any other
regulatory body, provided, however, that the Company determines
in its sole judgment exercised in good faith, that any such
administrative proceedings will have a material adverse effect
upon the ability of the Fund or Underwriter to perform its
obligations under this Agreement; or
(e) with respect to any Account, upon requisite vote of the
Contract owners having an interest in such Account (or any
subaccount) to substitute the shares of another investment
company for the corresponding Portfolio shares of the Fund in
accordance with the terms of the Contracts for which those
Portfolio shares had been selected to serve as the underlying
investment media. The Company will give 30 days' prior written
notice to the Fund of the date of any proposed vote to replace
the Fund's shares; or
(f) at the option of the Company, in the event any of the
Fund's shares are not registered, issued or sold in accordance
with applicable state and/or federal law
16
<PAGE> 17
or such law precludes the use of such shares as the underlying
investment media of the Contracts issued or to be issued by
the Company; or
(g) at the option of the Company, if the Fund ceases to qualify
as a Regulated Investment Company under Subchapter M of the Code
or under any successor or similar provision, or if the Company
reasonably believes that the Fund may fail to so qualify; or
(h) at the option of the Company, if the Fund fails to meet the
diversification requirements specified in Article VI hereof; or
(i) at the option of either the Fund or the Underwriter, if (1)
the Fund or the Underwriter, respectively, shall determine, in
their sole judgment reasonably exercised in good faith, that the
Company has suffered a material adverse change in its business
or financial condition or is the subject of material adverse
publicity and such material adverse change or material adverse
publicity will have a material adverse impact upon the business
and operations of either the Fund or the Underwriter, (2) the
Fund or the Underwriter shall notify the Company in writing of
such determination and its intent to terminate this Agreement,
and (3) after considering the actions taken by the Company and
any other changes in circumstances since the giving of such
notice, such determination of the Fund or the Underwriter shall
continue to apply on the sixtieth (60th) day following the
giving of such notice, which sixtieth day shall be the effective
date of termination; or
(j) at the option of the Company, if (1) the Company shall
determine, in its sole judgment reasonably exercised in good
faith, that either the Fund or the Underwriter has suffered a
material adverse change in its business or financial condition
or is the subject of material adverse publicity and such
material adverse change or material adverse publicity will have
a material adverse impact upon the business and operations of
the Company, (2) the Company shall notify the Fund and the
Underwriter in writing of such determination and its intent to
terminate the Agreement, and (3) after considering the actions
taken by the Fund and/or the Underwriter and any other changes
in circumstances since the giving of such notice, such
determination shall continue to apply on the sixtieth (60th) day
following the giving of such notice, which sixtieth day shall be
the effective date of termination; or
(k) at the option of either the Fund or the Underwriter, if the
Company gives the Fund and the Underwriter the written notice
specified in Section 1.6(b) hereof and at the time such notice
was given there was no notice of termination outstanding under
any other provision of this Agreement; provided, however any
termination under this Section 10.1(k) shall be effective forty
five (45) days after the notice specified in Section 1.6(b) was
given.
17
<PAGE> 18
10.2. It is understood and agreed that the right of any party hereto
to terminate this Agreement pursuant to Section 10.1(a) may be exercised for
any reason or for no reason.
10.3. Notice Requirement. No termination of this Agreement shall be
effective unless and until the party terminating this Agreement gives prior
written notice to all other parties to this Agreement of its intent to
terminate which notice shall set forth the basis for such termination.
Furthermore,
(a) In the event that any termination is based upon the
provisions of Article VII, or the provision of Section 10.1(a),
10.1(i), 10.1(j) or 10.1(k) of this Agreement, such prior
written notice shall be given in advance of the effective date
of termination as required by such provisions; and
(b) in the event that any termination is based upon the
provisions of Section 10.1(c) or 10.1(d) of this Agreement, such
prior written notice shall be given at least ninety (90) days
before the effective date of termination.
10.4. Effect of Termination. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall, at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as Existing
Contracts"). Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the making of additional
purchase payments under the Existing Contracts. The parties agree that this
Section 10.4 shall not apply to any terminations under Article VII and the
effect of such Article VII terminations shall be governed by Article VII of
this Agreement.
10.5. The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in either Account) except (i) as necessary to implement Contract Owner
initiated transactions, or (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption"). Upon request,
the Company will promptly furnish to the Fund and the Underwriter the opinion
of counsel for the Company (which counsel shall be reasonably satisfactory to
the Fund and the Underwriter) to the effect that any redemption pursuant to
clause (ii) above is a Legally Required Redemption. Furthermore, except in
cases where permitted under the terms of the Contracts, the Company shall not
prevent Contract Owners from allocating payments to a Portfolio that was
otherwise available under the Contracts without first giving the Fund or the
Underwriter 90 days notice of its intention to do so.
18
<PAGE> 19
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Fund:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
If to the Company:
The Travelers Insurance Company
One Tower Square
Hartford, Connecticut 06183
Attention: Ronald R. Gendreau, Annuity Division
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
ARTICLE XII. Miscellaneous
12.1 All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto and, except as
permitted by this Agreement, shall not disclose, disseminate or utilize such
names and addresses and other confidential information until such time as it
may come into the public domain without the express written consent of the
affected party.
12.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
19
<PAGE> 20
12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the NASD and state insurance regulators)
and shall permit such authorities reasonable access to its books and records in
connection with any investigation or inquiry relating to this Agreement or the
transactions contemplated hereby. Notwithstanding the generality of the
foregoing, each party hereto further agrees to furnish the California Insurance
Commissioner with any information or reports in connection with services
provided under this Agreement which such Commissioner may request in order to
ascertain whether the variable life insurance operations of the Company are
being conducted in a manner consistent with the California Variable Life
Insurance Regulations and any other applicable law or regulations.
12.7 The Fund and Underwriter agree that to the extent any advisory
or other fees received by the Fund, the Underwriter or the Adviser are
determined to be unlawful in legal or administrative proceedings under the 1973
NAIC model variable life insurance regulation in the states of California,
Colorado, Maryland or Michigan, the Underwriter shall indemnify and reimburse
the Company for any out of pocket expenses and actual damages the Company has
incurred as a result of any such proceeding; provided however that the
provisions of Section 8.2(b) of this and 8.2(c) shall apply to such
indemnification and reimbursement obligation. Such indemnification and
reimbursement obligation shall be in addition to any other indemnification and
reimbursement obligations of the Fund and/or the Underwriter under this
Agreement.
12.8. The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights, remedies
and obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
Company:
THE TRAVELERS INSURANCE COMPANY
By its authorized officer,
Fund:
VARIABLE INSURANCE PRODUCTS FUND
By its authorized officer,
Underwriter:
FIDELITY DISTRIBUTORS CORPORATION
By its authorized officer,
20
<PAGE> 21
21
<PAGE> 22
Schedule A
Accounts
<TABLE>
<CAPTION>
Name of Account Date of Resolution of Company's Board
which Established the Account
<S> <C>
The Travelers Fund U for Variable
Annuities May 7, 1982
</TABLE>
22
<PAGE> 23
Schedule B
Contracts
1. Contract Form LVA-10FPU-A (and such other variations as required by state
law)
2. Contract Form LVA-FPG(u) (and such other variations as required by state
law)
23
<PAGE> 24
SCHEDULE C
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for
the handling of proxies relating to the Fund by the Underwriter, the Fund and
the Company. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the term "Company" shall also include the
department or third party assigned by the Insurance Company to perform the
steps delineated below.
1. The number of proxy proposals is given to the Company by the
Underwriter as early as possible before the date set by the Fund for
the shareholder meeting to facilitate the establishment of tabulation
procedures. At this time the Underwriter will inform the Company of
the Record, Mailing and Meeting dates. This will be done verbally
approximately two months before meeting.
2. Promptly after the Record Date, the Company will perform a "tape run",
or other activity, which will generate the names, addresses and number
of units which are attributed to each contractowner/ policyholder (the
"Customer") as of the Record Date. Allowance should be made for
account adjustments made after this date that could affect the status
of the Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to
call in the number of Customers to Fidelity, as soon as
possible, but no later than two weeks after the Record Date.
3. The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of a proxy
statement. Underwriter will provide at least one copy of the last
Annual Report to the Company.
4. The text and format for the Voting Instruction Cards ("Cards" or
"Card") is provided to the Company by the Fund. The Company, at its
expense, shall produce and personalize the Voting Instruction Cards.
The Legal Department of the Underwriter or its affiliate ("Fidelity
Legal") must approve the Card before it is printed. Allow
approximately 2-4 business days for printing information on the Cards.
Information commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund)
24
<PAGE> 25
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
5. During this time, Fidelity Legal will develop, produce, and the Fund
will pay for the Notice of Proxy and the Proxy Statement (one
document). Printed and folded notices and statements will be sent to
Company for insertion into envelopes (envelopes and return envelopes
are provided and paid for by the Insurance Company). Contents of
envelope sent to Customers by Company will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as quickly
as possible and that their vote is important. One copy will be
supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed and
approved in advance by Fidelity Legal.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company
reviews and approves the contents of the mailing package to ensure
correctness and completeness. Copy of this approval sent to Fidelity
Legal.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but not
including) the meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes
place in another department or another vendor depending on process
used. An often used procedure is to sort Cards on arrival by proposal
into vote categories of all yes, no, or mixed replies, and to begin
data entry.
Note: Postmarks are not generally needed. A need for postmark
information would be due to an insurance company's internal
procedure and has not been required by Fidelity in the Past.
9. Signatures on Card checked against legal name on account registration
which was printed on the Card.
Note: For Example, If the account registration is under "Bertram C.
Jones, Trustee," then that is the exact legal name to be printed
on the Card and is the signature needed on the Card.
25
<PAGE> 26
10. If Cards are mutilated, or for any reason are illegible or are not
signed properly, they are sent back to Customer with an explanatory
letter, a new Card and return envelope. The mutilated or illegible
Card is disregarded and considered to be not received for purposes of
vote tabulation. Any Cards that have "kicked out" (e.g. mutilated,
illegible) of the procedure are "hand verified," i.e., examined as to
why they did not complete the system. Any questions on those Cards
are usually remedied individually.
11. There are various control procedures used to ensure proper tabulation
of votes and accuracy of that tabulation. The most prevalent is to
sort the Cards as they first arrive into categories depending upon
their vote; an estimate of how the vote is progressing may then be
calculated. If the initial estimates and the actual vote do not
coincide, then an internal audit of that vote should occur. This may
entail a recount.
12. The actual tabulation of votes is done in units which is then
converted to shares. (It is very important that the Fund receives the
tabulations stated in terms of a percentage and the number of shares)
Fidelity Legal must review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to
Fidelity Legal on the morning of the meeting not later than 10:00 a.m.
Boston time. Fidelity Legal may request an earlier deadline if
required to calculate the vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final
vote. Fidelity Legal will provided a standard from for each
Certification.
15. The Company will be required to box and archive the Cards received
from the Customers. In the event that any vote is challenged or if
otherwise necessary for legal, regulatory, or accounting purposes,
Fidelity Legal will be permitted reasonable access to such Cards.
16. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
26
<PAGE> 27
AMENDMENT NO. 1
Amendment to the Participation Agreement among Variable Insurance Products Fund
(the Fund), Fidelity Distributors Corporation (the Underwriter) and The
Travelers Insurance Company (the Company) dated October 25, 1991 (the
Agreement).
WHEREAS each of the parties desire to expand the Accounts of the Company which
invest in shares of the Fund. The Fund, Underwriter and the Company hereby
agree to amend Schedules A and B of the Agreement by inserting the following in
its entirety:
For Schedule A:
The Travelers Fund UL (established by resolution of Company's Board on November
4, 1983)
For Schedule B:
Contract Form L-ULVB (and such other variations as required by state law)
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to be
executed in its name and on its behalf by its duly authorized representative as
of 11/29, 1993.
Company:
THE TRAVELERS INSURANCE COMPANY
By its authorized officer,
Fund:
VARIABLE INSURANCE PRODUCTS FUND
By its authorized officer,
Underwriter:
FIDELITY DISTRIBUTORS CORPORATION
By its authorized officer,
27
<PAGE> 28
Schedule A
Accounts
<TABLE>
<CAPTION>
Name of Account Date of Resolution of Company's Board
- ----------------- which Established the Account
-----------------------------
<S> <C>
The Travelers Fund U for Variable Annuities May 7, 1982
The Travelers Fund UL November 4, 1983
</TABLE>
28
<PAGE> 29
Schedule B
Contracts
1. Contract Form LVA-10FPU-A (and such other variations as required by
state law)
2. Contract Form LVA-FPG(u) (and such other variations as required by
state law)
3. Contract Form L-ULVB
29
<PAGE> 1
EXHIBIT 8B
PARTICIPATION AGREEMENT
Among
VARIABLE INSURANCE PRODUCTS FUND II.
FIDELITY DISTRIBUTORS CORPORATION
and
THE TRAVELERS INSURANCE COMPANY
THIS AGREEMENT, made and entered into this 25th day of October, 1991
by and among THE TRAVELERS INSURANCE COMPANY, (hereinafter the "Company"), a
Connecticut corporation, on its own behalf and on behalf of each segregated
asset account of the Company set forth on Schedule A hereto as may be amended
from time to time (each such account hereinafter referred to as the "Account"),
and the VARIABLE INSURANCE PRODUCTS FUND II, an unincorporated business trust
organized under the laws of the Commonwealth of Massachusetts (hereinafter the
"Fund") and FIDELITY DISTRIBUTORS CORPORATION (hereinafter the "Underwriter"),
a Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products") to be
offered by insurance companies which have entered into participation agreements
with the Fund and the Underwriter (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each designated a "Portfolio" and representing the interest
in a particular managed portfolio of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated September 17, 1986 (File No. 812-6422), granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of sections 9(a),
13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended,
(hereinafter the "1940 Act") and Rules 6e-2(b) (15) and 6e-3(T) (b) (15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by variable annuity and variable life insurance separate accounts of
both affiliated and unaffiliated life insurance companies (hereinafter the
"Shared Funding Exemptive Order"); and
<PAGE> 2
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, Fidelity Management & Research Company (the "Adviser") is
duly registered as an investment adviser under the federal Investment Advisers
Act of 1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain variable
life or variable annuity contracts under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to one or more variable life or annuity
contracts; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission under the Securities Exchange Act of 1934,
as amended, (hereinafter the "1934 Act"), and is a member in good standing of
the National Association of Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid variable life and variable
annuity contracts and the Underwriter is authorized to sell such shares to unit
investment trusts such as each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Underwriter agrees to sell to the Company those shares of
the Fund which each Account orders, executing such orders on a daily basis at
the net asset value next computed after receipt by the Fund or its designee of
the order for the shares of the Fund. For purposes of this Section 1.1, the
Company shall be the designee of the Fund for receipt of such orders from each
Account and receipt by such designee shall constitute receipt by the Fund;
provided that the Fund receives notice of such order by 9:30 a.m. Boston time
on the next following Business Day. "Business Day" shall mean any day on which
the New York Stock Exchange is open for trading and on which the Fund
calculates its net asset value pursuant to the rules of the Securities and
Exchange Commission.
2
<PAGE> 3
1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value
pursuant to rules of the Securities and Exchange Commission and the Fund shall
use reasonable efforts to calculate such net asset value on each day which the
New York Stock Exchange is open for trading. Notwithstanding the foregoing,
the Board of Trustees of the Fund (hereinafter the "Board") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Board
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund will
be sold only to Participating Insurance Companies and their separate accounts.
No shares of any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Section 2.5 of Article II
of this Agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on the Company's request,
any full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day.
1.6. The Company agrees to purchase and redeem the shares of each
Portfolio offered by the then current prospectus of the Fund and in accordance
with the provisions of such prospectus. The Company agrees that all net
amounts available under the variable life and variable annuity contracts with
the form number(s) which are listed on Schedule B attached hereto and
incorporated herein by this reference, as such Schedule B may be amended from
time to time hereafter by mutual written agreement of all the parties hereto,
(the "Contracts") shall be invested in the Fund, in such other Funds advised by
the Adviser as may be mutually agreed to in writing by the parties hereto, or
in the Company's general account, provided that such amounts may also be
invested in an investment company other than the Fund if (a) such other
investment company, or series thereof, has investment objectives or policies
that are substantially different from the investment objectives and policies of
all the Portfolios of the Fund; or (b) the Company gives the Fund and the
Underwriter 45 days written notice of its intention to make such other
investment company available as a funding vehicle for the Contracts; or (c)
such other investment company was available as a funding vehicle for the
Contracts prior to the date of this Agreement and the Company so informs the
Fund and Underwriter prior to their signing this Agreement; or (d) the Fund or
Underwriter consents to the use of such other investment company.
3
<PAGE> 4
1.7. The Company shall pay for Fund shares on the next Business Day
after an order to purchase Fund shares is made in accordance with the
provisions of Section 1.1 hereof. Payment shall be in federal funds
transmitted by wire. For purpose of Section 2.10 and 2.11, upon receipt by the
Fund of the federal funds so wired, such funds shall cease to be the
responsibility of the Company and shall become the responsibility of the Fund.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio.
The Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available by 7 p.m. Boston
time.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act; that the Contracts will be issued and
sold in compliance in all material respects with all applicable Federal and
State laws and that the sale of the Contracts shall comply in all material
respects with state insurance suitability requirements. The Company further
represents and warrants that it is an insurance company duly organized and in
good standing under applicable law and that it has legally and validly
established each Account prior to any issuance or sale thereof as a segregated
asset account under Section 38-433 of the Connecticut Insurance Code and has
registered or, prior to any issuance or sale of the Contracts, will register
each Account as a unit investment trust in accordance with the provisions of
the 1940 Act to serve as a segregated investment account for the Contracts.
2.2. The Fund represents and warrants that Fund shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of Delaware and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend the Registration
Statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Fund
shall register and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Fund or
the Underwriter
4
<PAGE> 5
2.3. The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended, (the "Code") and that it will make every effort to maintain
such qualification (under Subchapter M or any successor or similar provision)
and that it will notify the Company immediately upon having a reasonable basis
for believing that it has ceased to so qualify or that it might not so qualify
in the future.
2.4. The Company represents that the Contracts are currently treated
as endowment, annuity or life insurance contracts, under applicable provisions
of the Code and that it will make every effort to maintain such treatment and
that it will notify the Fund and the Underwriter immediately upon having a
reasonable basis for believing that the Contracts have ceased to be so treated
or that they might not be so treated in the future.
2.5. The Fund currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although it may make such payments in the future. The Fund has
adopted a "no fee" or "defensive" Rule 12b-1 Plan under which it makes no
payments for distribution expenses. To the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1, the Fund undertakes to have a
board of trustees, a majority of whom are not interested persons of the Fund,
formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Delaware and the Fund and the Underwriter represent that their
respective operations are and shall at all times remain in material compliance
with the laws of the State of Delaware to the extent required to perform this
Agreement.
2.7. The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC.
The Underwriter further represents that it will sell and distribute the Fund
shares in accordance with the laws of the State of Delaware and all applicable
state and federal securities laws, including without limitation the 1933 Act,
the 1934 Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of the State of Delaware and that it does and will
comply in all material respects with the 1940 Act.
2.9. The Underwriter represents and warrants that the Adviser is and
shall remain duly registered in all material respects under all applicable
federal and state securities laws and that the Adviser shall perform its
obligations for the Fund in compliance in all material respects with the laws
of the State of Delaware and any applicable state and federal securities laws.
5
<PAGE> 6
2.10. The Fund and Underwriter represent and warrant that all of
their directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities
dealing with the money and/or securities of the Fund are and shall continue to
be at all times covered by a blanket fidelity bond or similar coverage for the
benefit of the Fund, in an amount not less than the minimal coverage as
required currently by entities subject to the requirements of Rule 17g-1 of the
1940 Act or related provisions as may be promulgated from time to time. The
aforesaid Bond shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company.
ARTICLE III. Prospectuses and Proxy Statements: Voting
3.1. The Underwriter shall provide the Company (at the Company's
expense) with as many copies of the Fund's current prospectus as the Company
may reasonably request. If requested by the Company in lieu thereof, the Fund
shall provide such documentation (including a final copy of the new prospectus
as set in type at the Fund's expense) and other assistance as is reasonably
necessary in order for the Company once each year (or more frequently if the
prospectus for the Fund is amended) to have the prospectus for the Contracts
and the Fund's prospectus printed together in one document (such printing to be
at the company's expense).
3.2. The Fund's prospectus shall state that the Statement of
Additional Information for the Fund is available from the Underwriter (or in
the Fund's discretion, the Prospectus shall state that such Statement is
available from the Fund), and the Underwriter (or the Fund), at its expense,
shall print and provide such Statement free of charge to the Company and to any
owner of a Contract or prospective owner who requests such Statement.
3.3. The Fund, at its expense, shall provide the Company with copies
of its proxy material, reports to stockholders and other communications to
stockholders in such quantity as the Company shall reasonably require for
distributing to Contract owners.
3.4. If and to the extent required by law the Company shall:
(I) solicit voting instructions from Contract Owners;
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of such portfolio
for which instructions have been received: so long as and to the
extent that the Securities and Exchange Commission continues to
interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to
vote Fund shares held
6
<PAGE> 7
in any segregated asset account in its own right, to the extent
permitted by law. Participating Insurance Companies shall be
responsible for a assuring that each of their separate accounts
participating in the Fund calculates voting privileges in a
manner consistent with the standards set forth on Schedule C
attached hereto and incorporated herein by this reference, which
standards will also be provided to the other Participating
Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either
provide for annual meetings or comply with Section 16(c) of the 1940 Act
(although the Fund is not one of the trusts described in Section 16(c) of that
Act) as well as with Sections 16(a) and, if and when applicable, 16(b).
Further, the Fund will act in accordance with the Securities and Exchange
Commission's interpretation of the requirements of Section 16(a) with respect
to periodic elections of trustees and with whatever rules the Commission may
promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or its investment adviser or the Underwriter is
named, at least fifteen Business Days prior to its use. No such material shall
be used if the Fund or its designee object to such use within fifteen Business
Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or
its designee or by the Underwriter, except with the permission of the Fund or
the Underwriter or the designee of either.
4.3. The Fund, Underwriter, or its designee shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or its
separate account(s), is named at least fifteen Business Days prior to its use.
No such material shall be used if the Company or its designee object to such
use within fifteen Business Days after receipt of such material.
4.4. The Fund and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public
domain or approved by the Company for distribution to Contract owners, or in
sales literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
7
<PAGE> 8
4.5. The Fund will provide to the Company at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Fund or its shares,
contemporaneously with the filing of such document with the Securities and
Exchange Commission or other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that relate to the
Contracts or each Account, contemporaneously with the filing of such document
with the Securities and Exchange Commission.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e. any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational
or training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, Statements of Additional Information, shareholder reports, and
proxy materials.
ARTICLE V. Fees and Expenses
5.1. The Fund and Underwriter shall pay no fee or other compensation
to the Company under this agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing and such payments will be made out of existing fees otherwise payable
to the Underwriter, past profits of the Underwriter or other resources
available to the Underwriter. No such payments shall be made directly by the
Fund. Currently, no such payments are contemplated.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of
8
<PAGE> 9
all statements and notices required by any federal or state law, all taxes on
the issuance or transfer of the Fund's shares.
5.3. The Company shall bear the expenses of printing and distributing
the Fund's prospectus to owners of Contracts issued by the Company and of
distributing the Fund's proxy materials and reports to such Contract owners.
ARTICLE VI . Diversification
6.1. The Fund will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated as variable
contracts under the Code and the regulations issued thereunder. Without
limiting the scope of the foregoing, the Fund will at all times comply with
Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations.
ARTICLE VII. Potential Conflicts
7.1. The Board will monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the contract owners
of all separate accounts investing in the Fund. An irreconcilable material
conflict may arise for a variety of reasons, including: (a) an action by any
state insurance regulatory authority; (b) a change in applicable federal or
state insurance, tax, or securities laws or regulations, or a public ruling,
private letter ruling, no-action or interpretative letter, or any similar
action by insurance, tax, or securities regulatory authorities; (c) an
administrative or judicial decision in any relevant proceeding; (d) the manner
in which the investments of any Portfolio are being managed; (e) a difference
in voting instructions given by variable annuity contract and variable life
insurance contract owners; or (f) a decision by an insurer to disregard the
voting instructions of contract owners. The Board shall promptly inform the
Company if it determines that an irreconcilable material conflict exists and
the implications thereof.
7.2. The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities under the Shared Funding Exemptive Order, by providing
the Board with all information reasonably necessary for the Board to consider
any issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another
9
<PAGE> 10
Portfolio of the Fund, or submitting the question whether such segregation
should be implemented to a vote of all affected Contract owners and, as
appropriate, segregating the assets of any appropriate group (i.e., annuity
contract owners, life insurance contract owners, or variable contract owners of
one or more Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected contract owners the option of making
such a change; and (2), establishing a new registered management investment
company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard contract owner voting instructions and
that decision represents a minority position or would preclude a majority vote,
the Company may be required, at the Fund's election, to withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account; provided, however that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Any such withdrawal and termination must take place within six (6) months after
the Fund gives written notice that this provision is being implemented, and
until the end of that six month period the Underwriter and Fund shall continue
to accept and implement orders by the Company for the purchase (and redemption)
of shares of the Fund.
7.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to the Company
conflicts with the majority of other state regulators, then the Company will
withdraw the affected Account's investment in the Fund and terminate this
Agreement with respect to such Account within six months after the Board
informs the Company in writing that it has determined that such decision has
created an irreconcilable material conflict; provided, however, that such
withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested members of the Board. Until the end of the foregoing six month
period, the Underwriter and Fund shall continue to accept and implement orders
by the Company for the purchase (and redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but
in no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
10
<PAGE> 11
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief from any
provision of the Act or the rules promulgated thereunder with respect to mixed
or shared funding (as defined in the Shared Funding Exemptive Order) on terms
and conditions materially different from those contained in the Shared Funding
Exemptive Order, then (a) the Fund and/or the Participating Insurance
Companies, as appropriate, shall take such steps as may be necessary to comply
with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent such rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3,
7.4, and 7.5 of this Agreement shall continue in effect only to the extent that
terms and conditions substantially identical to such Sections are contained in
such Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
8.1 Indemnification By The Company
8.1(a). The Company agrees to indemnify and hold harmless the Fund
and each trustee of the Board and officers and each person, if any, who
controls the Fund within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.1)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Company) or litigation
(including legal and other expenses), to which the Indemnified Parties may
become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisition of the
Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
Registration Statement or prospectus for the Contracts or
contained in the Contracts or sales literature for the Contracts
(or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance upon
and in conformity with information furnished to the Company by
or on behalf of the Fund for use in the Registration Statement
or prospectus for the Contracts or in the Contracts or sales
literature (or any amendment or supplement) or otherwise for use
in connection with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the Registration Statement, prospectus or sales
literature of the Fund not supplied by the Company or persons
under its control) or wrongful conduct of the Company or persons
under its control, with respect to the sale or distribution of
the Contracts or Fund Shares; or
11
<PAGE> 12
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration
Statement, prospectus, or sales literature of the Fund or any
amendment thereof or supplement thereto or the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading if such a statement or omission was made in reliance
upon information furnished to the Fund by or on behalf of the
Company: or
(iv) arise as a result of any failure by the Company to provide
the services and furnish the materials under the terms of this
Agreement: or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company, as limited by and in
accordance with the provisions of Sections 8.1(b) and 8.1(c)
hereof.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation incurred or assessed against an Indemnified Party as such may arise
from such Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's duties or by reason
of such Indemnified Party's reckless disregard of obligations or duties under
this Agreement or to the Fund, whichever is applicable.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Company of
any such claim shall not relieve the Company from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Company shall be entitled to
participate, at its own expense, in the defense of such action. The Company
also shall be entitled to assume the defense thereof, with counsel satisfactory
to the party named in the action. After notice from the Company to such party
of the Company's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the Company will not be liable to such party under this Agreement for any legal
or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.1(d). The Indemnified Parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Fund Shares or the Contracts or the operation
of the Fund.
8.2. Indemnification by the Underwriter
12
<PAGE> 13
8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses) to which the Indemnified Parties may
become subject under any statute, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the Fund's
shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
Registration Statement or prospectus or sales literature of the
Fund (or any amendment or supplement to any of the foregoing),
or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance upon
and in conformity with information furnished to the Underwriter
or Fund by or on behalf of the Company for use in the
Registration Statement or prospectus for the Fund or in sales
literature (or any amendment or supplement) or otherwise for use
in connection with the sale of the Contracts or Fund shares: or
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the Registration Statement, prospectus or sales
literature for the Contracts not supplied by the Underwriter or
persons under its control) or wrongful conduct of the Fund,
Adviser or Underwriter or persons under their control, with
respect to the sale or distribution of the Contracts or Fund
shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration
Statement, prospectus, or sales literature covering the
Contracts, or any amendment thereof or supplement thereto, or
the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statement or statements therein not misleading, if such
statement or omission was made in reliance upon information
furnished to the Company by or on behalf of the Fund; or
(iv) arise as a result of any failure by the Fund to provide
the services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in good
faith or otherwise, to comply with the diversification
requirements specified in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this
Agreement or arise out of or result from
13
<PAGE> 14
any other material breach of this Agreement by the Underwriter;
as limited by and in accordance with the provisions of
Sections 8.2(b) and 8.2(e) hereof.
8.2(b). The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith,
or gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to each Company or the Account, whichever is
applicable.
8.2(c). The Underwriter shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Underwriter in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Underwriter
of any such claim shall not relieve the Underwriter from any liability which it
may have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by
it, and the Underwriter will not be liable to such party under this Agreement
for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable
costs of investigation.
8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
8.3. Indemnification By the Fund
8.3(a). The Fund agrees to indemnify and hold harmless the Company,
and each of its directors and officers and each person, if any, who controls
the Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Fund) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any
statute, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements result
from the gross negligence, bad faith or willful misconduct of the Board or any
member thereof, are related to the operations of the Fund and:
14
<PAGE> 15
(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure to comply with the
diversification requirements specified in Article VI of this
Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation incurred or assessed against an Indemnified Party as such may arise
from such Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's duties or by reason
of such Indemnified Party's reckless disregard of obligations and duties under
this Agreement or to the Company, the Fund, the Underwriter or each Account,
whichever is applicable.
8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Fund will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the
defense thereof other than reasonable costs of investigation.
8.3(d). The Company and the Underwriter agree promptly to notify the
Fund of the commencement of any litigation or proceedings against it or any of
its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of either
Account, or the sale or acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 acts, and the rules and regulations and rulings thereunder,
including such exemptions from those
15
<PAGE> 16
statutes, rules and regulations as the Securities and Exchange Commission may
grant (including, but not limited to, the Shared Funding Exemptive Order) and
the terms hereof shall be interpreted and construed in accordance therewith.
ARTICLE X. Termination
10.1. This Agreement shall terminate:
(a) at the option of any party upon one year advance written
notice to the other parties; or
(b) at the option of the Company to the extent that shares of
Portfolios are not reasonably available to meet the requirements
of the Contracts as determined by the Company, provided however,
that such termination shall apply only to the Portfolio(s) not
reasonably available. Prompt notice of the election to
terminate for such cause shall be furnished by the Company; or
(c) at the option of the Fund in the event that formal
administrative proceedings are instituted against the Company by
the NASD, the Securities and Exchange Commission, the Insurance
Commissioner or any other regulatory body regarding the
Company's duties under this Agreement or related to the sale of
the Contracts, with respect to the operation of any Account, or
the purchase of the Fund shares, provided, however, that the
Fund determines in its sole judgment exercised in good faith,
that any such administrative proceedings will have a material
adverse effect upon the ability of the Company to perform its
obligations under this Agreement; or
(d) at the option of the Company in the event that formal
administrative proceedings are instituted against the Fund or
Underwriter by the NASD, the Securities and Exchange Commission,
or any state securities or insurance department or any other
regulatory body, provided, however, that the Company determines
in its sole judgment exercised in good faith, that any such
administrative proceedings will have a material adverse effect
upon the ability of the Fund or Underwriter to perform its
obligations under this Agreement; or
(e) with respect to any Account, upon requisite vote of the
Contract owners having an interest in such Account (or any
subaccount) to substitute the shares of another investment
company for the corresponding Portfolio shares of the Fund in
accordance with the terms of the Contracts for which those
Portfolio shares had been selected to serve as the underlying
investment media. The Company will give 30 days' prior written
notice to the Fund of the date of any proposed vote to replace
the Fund's shares; or
(f) at the option of the Company, in the event any of the
Fund's shares are not registered, issued or sold in accordance
with applicable state and/or federal law
16
<PAGE> 17
or such law precludes the use of such shares as the underlying
investment media of the Contracts issued or to be issued by the
Company; or
(g) at the option of the Company, if the Fund ceases to qualify
as a Regulated Investment Company under Subchapter M of the Code
or under any successor or similar provision, or if the Company
reasonably believes that the Fund may fail to so qualify; or
(h) at the option of the Company, if the Fund fails to meet the
diversification requirements specified in Article VI hereof; or
(i) at the option of either the Fund or the Underwriter, if (1)
the Fund or the Underwriter, respectively, shall determine, in
their sole judgment reasonably exercised in good faith, that the
Company has suffered a material adverse change in its business
or financial condition or is the subject of material adverse
publicity and such material adverse change or material adverse
publicity will have a material adverse impact upon the business
and operations of either the Fund or the Underwriter, (2) the
Fund or the Underwriter shall notify the Company in writing of
such determination and its intent to terminate this Agreement,
and (3) after considering the actions taken by the Company and
any other changes in circumstances since the giving of such
notice, such determination of the Fund or the Underwriter shall
continue to apply on the sixtieth (60th) day following the
giving of such notice, which sixtieth day shall be the effective
date of termination; or
(j) at the option of the Company, if (1) the Company shall
determine, in its sole judgment reasonably exercised in good
faith, that either the Fund or the Underwriter has suffered a
material adverse change in its business or financial condition
or is the subject of material adverse publicity and such
material adverse change or material adverse publicity will have
a material adverse impact upon the business and operations of
the Company, (2) the Company shall notify the Fund and the
Underwriter in writing of such determination and its intent to
terminate the Agreement, and (3) after considering the actions
taken by the Fund and/or the Underwriter and any other changes
in circumstances since the giving of such notice, such
determination shall continue to apply on the sixtieth (60th) day
following the giving of such notice, which sixtieth day shall be
the effective date of termination; or
(k) at the option of either the Fund or the Underwriter, if the
Company gives the Fund and the Underwriter the written notice
specified in Section 1.6(b) hereof and at the time such notice
was given there was no notice of termination outstanding under
any other provision of this Agreement; provided, however any
termination under this Section 10.1(k) shall be effective forty
five (45) days after the notice specified in Section 1.6(b) was
given.
17
<PAGE> 18
10.2. It is understood and agreed that the right of any party hereto
to terminate this Agreement pursuant to Section 10.1(a) may be exercised for
any reason or for no reason.
10.3. Notice Requirement. No termination of this Agreement shall be
effective unless and until the party terminating this Agreement gives prior
written notice to all other parties to this Agreement of its intent to
terminate which notice shall set forth the basis for such termination.
Furthermore,
(a) In the event that any termination is based upon the
provisions of Article VII, or the provision of Section 10.1(a),
10.1(i), 10.1(j) or 10.1(k) of this Agreement, such prior
written notice shall be given in advance of the effective date
of termination as required by such provisions; and
(b) in the event that any termination is based upon the
provisions of Section 10.1(c) or 10.1(d) of this Agreement, such
prior written notice shall be given at least ninety (90) days
before the effective date of termination.
10.4. Effect of Termination. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall, at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as Existing
Contracts"). Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the making of additional
purchase payments under the Existing Contracts. The parties agree that this
Section 10.4 shall not apply to any terminations under Article VII and the
effect of such Article VII terminations shall be governed by Article VII of
this Agreement.
10.5. The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in either Account) except (i) as necessary to implement Contract Owner
initiated transactions, or (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption"). Upon request,
the Company will promptly furnish to the Fund and the Underwriter the opinion
of counsel for the Company (which counsel shall be reasonably satisfactory to
the Fund and the Underwriter) to the effect that any redemption pursuant to
clause (ii) above is a Legally Required Redemption. Furthermore, except in
cases where permitted under the terms of the Contracts, the Company shall not
prevent Contract Owners from allocating payments to a Portfolio that was
otherwise available under the Contracts without first giving the Fund or the
Underwriter 90 days notice of its intention to do so.
18
<PAGE> 19
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Fund:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
If to the Company:
The Travelers Insurance Company
One Tower Square
Hartford, Connecticut 06183
Attention: Ronald R. Gendreau, Annuity Division
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
ARTICLE XII. Miscellaneous
12.1 All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto and, except as
permitted by this Agreement, shall not disclose, disseminate or utilize such
names and addresses and other confidential information until such time as it
may come into the public domain without the express written consent of the
affected party.
12.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
19
<PAGE> 20
12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the NASD and state insurance regulators)
and shall permit such authorities reasonable access to its books and records in
connection with any investigation or inquiry relating to this Agreement or the
transactions contemplated hereby. Notwithstanding the generality of the
foregoing, each party hereto further agrees to furnish the California Insurance
Commissioner with any information or reports in connection with services
provided under this Agreement which such Commissioner may request in order to
ascertain whether the variable life insurance operations of the Company are
being conducted in a manner consistent with the California Variable Life
Insurance Regulations and any other applicable law or regulations.
12.7 The Fund and Underwriter agree that to the extent any advisory
or other fees received by the Fund, the Underwriter or the Adviser are
determined to be unlawful in legal or administrative proceedings under the 1973
NAIC model variable life insurance regulation in the states of California,
Colorado, Maryland or Michigan, the Underwriter shall indemnify and reimburse
the Company for any out of pocket expenses and actual damages the Company has
incurred as a result of any such proceeding; provided however that the
provisions of Section 8.2(b) of this and 8.2(c) shall apply to such
indemnification and reimbursement obligation. Such indemnification and
reimbursement obligation shall be in addition to any other indemnification and
reimbursement obligations of the Fund and/or the Underwriter under this
Agreement.
12.8. The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights, remedies
and obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
Company:
THE TRAVELERS INSURANCE COMPANY
By its authorized officer,
Fund:
VARIABLE INSURANCE PRODUCTS FUND II
By its authorized officer,
Underwriter:
FIDELITY DISTRIBUTORS CORPORATION
By its authorized officer,
20
<PAGE> 21
Schedule A
Accounts
<TABLE>
<CAPTION>
Name of Account Date of Resolution of Company's Board
which Established the Account
<S> <C>
The Travelers Fund U for Variable
Annuities May 7, 1982
</TABLE>
21
<PAGE> 22
Schedule B
Contracts
1. Contract Form LVA-10FPU-A (and such other variations as required by state
law)
2. Contract Form LVA-FPG(u) (and such other variations as required by state
law)
22
<PAGE> 23
SCHEDULE C
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for
the handling of proxies relating to the Fund by the Underwriter, the Fund and
the Company. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the term "Company" shall also include the
department or third party assigned by the Insurance Company to perform the
steps delineated below.
1. The number of proxy proposals is given to the Company by the
Underwriter as early as possible before the date set by the Fund for
the shareholder meeting to facilitate the establishment of tabulation
procedures. At this time the Underwriter will inform the Company of
the Record, Mailing and Meeting dates. This will be done verbally
approximately two months before meeting.
2. Promptly after the Record Date, the Company will perform a "tape run",
or other activity, which will generate the names, addresses and number
of units which are attributed to each contractowner/ policyholder (the
"Customer") as of the Record Date. Allowance should be made for
account adjustments made after this date that could affect the status
of the Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to
call in the number of Customers to Fidelity, as soon as
possible, but no later than two weeks after the Record Date.
3. The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of a proxy
statement. Underwriter will provide at least one copy of the last
Annual Report to the Company.
4. The text and format for the Voting Instruction Cards ("Cards" or
"Card") is provided to the Company by the Fund. The Company, at its
expense, shall produce and personalize the Voting Instruction Cards.
The Legal Department of the Underwriter or its affiliate ("Fidelity
Legal") must approve the Card before it is printed. Allow
approximately 2-4 business days for printing information on the Cards.
Information commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund)
23
<PAGE> 24
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
5. During this time, Fidelity Legal will develop, produce, and the Fund
will pay for the Notice of Proxy and the Proxy Statement (one
document). Printed and folded notices and statements will be sent to
Company for insertion into envelopes (envelopes and return envelopes
are provided and paid for by the Insurance Company). Contents of
envelope sent to Customers by Company will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as quickly
as possible and that their vote is important. One copy will be
supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed and
approved in advance by Fidelity Legal.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company
reviews and approves the contents of the mailing package to ensure
correctness and completeness. Copy of this approval sent to Fidelity
Legal.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but not
including) the meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes
place in another department or another vendor depending on process
used. An often used procedure is to sort Cards on arrival by proposal
into vote categories of all yes, no, or mixed replies, and to begin
data entry.
Note: Postmarks are not generally needed. A need for postmark
information would be due to an insurance company's internal
procedure and has not been required by Fidelity in the Past.
9. Signatures on Card checked against legal name on account registration
which was printed on the Card.
Note: For Example, If the account registration is under "Bertram C.
Jones, Trustee," then that is the exact legal name to be printed
on the Card and is the signature needed on the Card.
24
<PAGE> 25
10. If Cards are mutilated, or for any reason are illegible or are not
signed properly, they are sent back to Customer with an explanatory
letter, a new Card and return envelope. The mutilated or illegible
Card is disregarded and considered to be not received for purposes of
vote tabulation. Any Cards that have "kicked out" (e.g. mutilated,
illegible) of the procedure are "hand verified," i.e., examined as to
why they did not complete the system. Any questions on those Cards
are usually remedied individually.
11. There are various control procedures used to ensure proper tabulation
of votes and accuracy of that tabulation. The most prevalent is to
sort the Cards as they first arrive into categories depending upon
their vote; an estimate of how the vote is progressing may then be
calculated. If the initial estimates and the actual vote do not
coincide, then an internal audit of that vote should occur. This may
entail a recount.
12. The actual tabulation of votes is done in units which is then
converted to shares. (It is very important that the Fund receives the
tabulations stated in terms of a percentage and the number of shares)
Fidelity Legal must review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to
Fidelity Legal on the morning of the meeting not later than 10:00 a.m.
Boston time. Fidelity Legal may request an earlier deadline if
required to calculate the vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final
vote. Fidelity Legal will provided a standard from for each
Certification.
15. The Company will be required to box and archive the Cards received
from the Customers. In the event that any vote is challenged or if
otherwise necessary for legal, regulatory, or accounting purposes,
Fidelity Legal will be permitted reasonable access to such Cards.
16. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
25
<PAGE> 26
AMENDMENT NO. 1
Amendment to the Participation Agreement among Variable Insurance Products Fund
II (the Fund), Fidelity Distributors Corporation (the Underwriter) and The
Travelers Insurance Company (the Company) dated October 25, 1991 (the
Agreement).
WHEREAS each of the parties desire to expand the Accounts of the Company which
invest in shares of the Fund. The Fund, Underwriter and the Company hereby
agree to amend Schedules A and B of the Agreement by inserting the following in
its entirety:
For Schedule A:
The Travelers Fund UL (established by resolution of Company's Board on
November 4, 1983)
For Schedule B:
Contract Form L-ULVB (and such other variations as required by state law)
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to be
executed in its name and on its behalf by its duly authorized representative as
of 11/29, 1993.
Company:
THE TRAVELERS INSURANCE COMPANY
By its authorized officer,
Fund:
VARIABLE INSURANCE PRODUCTS FUND II
By its authorized officer,
Underwriter:
FIDELITY DISTRIBUTORS CORPORATION
By its authorized officer,
26
<PAGE> 27
Schedule A
Accounts
<TABLE>
<CAPTION>
Name of Account Date of Resolution of Company's Board
- ----------------- which Established the Account
-----------------------------
<S> <C>
The Travelers Fund U for Variable Annuities May 7, 1982
The Travelers Fund UL November 4, 1983
</TABLE>
27
<PAGE> 28
Schedule B
Contracts
1. Contract Form LVA-10FPU-A (and such other variations as required by
state law)
2. Contract Form LVA-FPG(u) (and such other variations as required by
state law)
3. Contract Form L-ULVB
28
<PAGE> 1
EXHIBIT 8C
AMENDED PARTICIPATION AGREEMENT
among
TEMPLETON VARIABLE PRODUCTS SERIES FUND,
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
and
THE TRAVELERS INSURANCE COMPANY
THIS AGREEMENT, made and entered into this 29th day of November, 1993,
by and among THE TRAVELERS INSURANCE COMPANY (hereinafter the "Company"), a
Connecticut corporation), on its own behalf and on behalf of each segregated
asset account of the Company set forth on Schedule A hereto as may be amended
from time to time (each such account hereinafter referred to as the "Account"),
and the TEMPLETON VARIABLE PRODUCTS SERIES FUND, an unincorporated business
trust organized under the laws of the Commonwealth of Massachusetts
(hereinafter the "Fund") and FRANKLIN/TEMPLETON DISTRIBUTORS, INC. (hereinafter
the "Underwriter"), a California corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable annuity and variable life insurance
contracts to be offered by insurance companies which have entered into
participation agreements with the Fund and the Underwriter (hereinafter
"Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, as set forth on Schedule C hereto, each designated a
"Portfolio" and representing the interest in a particular managed portfolio of
securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated November 16, 1993 (File No. 812-8546), granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of Sections 9(a),
13(a), 15(a) and 15(b) of the Investment Company Act of 1940 (the "1940 Act")
and Rules 6e-2(b)(15) and 6e3-T(b)(15) thereunder, to the extent necessary to
permit shares of the Fund to be sold to and held by separate accounts funding
variable annuity and variable life insurance contracts issued by both
affiliated and unaffiliated life insurance companies (hereinafter the "Shared
Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (the "1933 Act"): and
<PAGE> 2
WHEREAS, Templeton Investment Counsel, Inc. (the "Adviser") is duly
registered as an investment adviser under the federal Investment Advisers Act
of 1940 and any applicable state securities laws: and
WHEREAS, the Company has registered or will register certain variable
annuity and variable life insurance contracts under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to one or more variable annuity and variable
life insurance contracts; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act: and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission under the Securities Exchange Act of 1934,
as amended (the "1934 Act"), and is a member in good standing of the National
Association of Securities Dealers, Inc. (hereinafter the "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid variable annuity and variable
life insurance contracts and the Underwriter is authorized to sell such shares
to unit investment trusts such as each Account at net asset value.
NOW THEREFORE, in consideration of their mutual promises, the Company,
the Fund and the Underwriter agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1 The Underwriter agrees to sell to the Company those shares of the
Fund which each Account orders, executing such orders on a daily basis at the
net asset value next computed after receipt by the Fund or its designee of the
order for the shares of the Fund. For purposes of this Section 1.1, the Company
shall be the designee of the Fund for receipt of such orders from each Account
and receipt by such designee shall constitute receipt by the Fund; provided
that the Fund receives notice of such order by 9:30 a.m., St. Petersburg time
on the next following Business Day. "Business Day" shall mean any day on which
the New York Stock Exchange is open for trading and on which the Fund
calculates its net asset value pursuant to the rules of the Securities and
Exchange Commission.
1.2 The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value
pursuant to rules of the Securities and Exchange Commission and the Fund shall
use reasonable efforts to calculate such net asset value on each day which the
New York Stock Exchange is open for trading. Notwithstanding the foregoing,
the Board of
2
<PAGE> 3
Trustees of the Fund (hereinafter the "Board") may refuse to sell shares of any
Portfolio to any person, or suspend or terminate the offering of shares of any
Portfolio if such action is required by law or by regulatory authorities having
jurisdiction or is, in the sole discretion of the Board acting in good faith
and in light of the fiduciary duties under federal and any applicable state
laws, necessary in the best interests of the shareholders of such Portfolio.
1.3 The Fund and the Underwriter agree that shares of the Fund will
be sold only to Participating Insurance Companies and their separate accounts.
No shares of any Portfolio will be sold to the general public.
1.4 The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Section 2.5 of Article II
of this Agreement is in effect to govern such sales.
1.5 The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day.
1.6 The Company agrees to purchase and redeem the shares of each
Portfolio offered by the then current prospectus of the Fund and in accordance
with the provisions of such prospectus. The Company agrees that all net amounts
available under the variable annuity and variable life insurance contracts with
the form number(s) which are listed on Schedule B attached hereto and
incorporated herein by this reference, as such Schedule B may hereafter be
amended from time to time by mutual written agreement of all the parties hereto
(the "Contracts"), shall be invested in the Fund, in such other Funds advised
by the Adviser as may be mutually agreed to in writing by the parties hereto,
or in the Company's general account, provided that such amounts may also be
invested in an investment company other than the Fund if (a) such other
investment company, or series thereof, has investment objectives or policies
that are substantially different from the investment objectives and policies of
all the Portfolios of the Fund; or (b) the Company gives the Fund and the
Underwriter 45 days written notice of its intention to make such other
investment company available as a funding vehicle for the Contracts; or (c)
such other investment company was available as a funding vehicle for the
Contracts prior to the date of this Agreement and the Company so informs the
Fund and the Underwriter prior to their signing this Agreement; or (d) the Fund
or Underwriter consents to the use of such other investment company.
1.7 The Company shall pay for Fund shares on the next Business Day
after an order to purchase Fund shares is made in accordance with the
provisions of Section 1.1 hereof. Payment shall be in federal funds
transmitted by wire. For purposes of Section 2.10 and 2.11, upon receipt by
the Fund of the federal funds so wired, such funds shall cease to be the
responsibility of the Company and shall become the responsibility of the Fund.
3
<PAGE> 4
1.8 Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate sub-account of each Account.
1.9 The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the portfolio shares in additional shares of that Portfolio.
The Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.10 The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practicable after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available by 7:00 p.m., St.
Petersburg time.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1 The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act; that the Contracts will be issued and
sold in compliance in all material respects with all applicable Federal and
State laws and that the sale of the Contracts shall comply in all material
respects with state insurance suitability requirements. The Company further
represents and warrants that it is an insurance company duly organized and in
good standing under applicable law and that is has legally and validly
established each Account prior to any issuance or sale thereof as a segregated
asset account under Section 38a-433 of the Connecticut General Statutes and has
registered or, prior to any issuance or sale of the Contracts, will register
each Account as a unit investment trust in accordance with the provisions of
the 1940 Act to serve as a segregated investment account for the Contracts.
2.2 The Fund represents and warrants that Fund shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the Commonwealth of
Massachusetts and all applicable state and federal securities laws and that the
Fund is and shall remain registered under the 1940 Act. The Fund shall amend
the Registration Statement for its shares under the 1933 Act and the 1940 Act
from time to time as required in order to effect the continuous offering of its
shares. The Fund shall register and qualify the shares for sale in accordance
with the laws of the various states only if and to the extent deemed advisable
by the Fund or the Underwriter.
2.3 The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code") and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or
4
<PAGE> 5
similar provision) and that it will notify the Company immediately upon having
a reasonable basis for believing that it has ceased to so qualify or that it
might not so qualify in the future.
2.4 The Company represents that the Contracts are currently treated
as endowment, annuity or life insurance contracts, under applicable provisions
of the Code and that it will make every effort to maintain such treatment and
that it will notify the Fund and the Underwriter immediately upon having a
reasonable basis for believing that the Contracts have ceased to be so treated
or that they might not be so treated in the future.
2.5 The Fund currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although it may make such payments in the future. To the extent
that it decides to finance distribution expenses pursuant to Rule 12b-1, the
Fund undertakes to have a board of trustees, a majority of whom are not
interested persons of the Fund, formulate and approve any plan under Rule 12b-1
to finance distribution expenses.
2.6 The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
Commonwealth of Massachusetts and the Fund and the Underwriter represent that
their respective operations are and shall at all times remain in material
compliance with the laws of the Commonwealth of Massachusetts.
2.7 The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker dealer with the
Securities and Exchange Commission. The Underwriter further represents that it
will sell and distribute the Fund shares in accordance with the laws of the
State of California, and all applicable state and federal securities laws,
including without limitation, the 1933 Act, the 1934 Act and the 1940 Act.
2.8 The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
2.9 The Underwriter represents and warrants that the Adviser is and
shall remain duly registered in all material respects under all applicable
state and federal securities laws and that the Adviser shall perform its
obligations for the Fund in compliance in all material respects with the laws
of the State of Florida and any applicable state and federal securities laws.
2.10 The Fund and the Underwriter represent and warrant that all of
their directors, officers, employees, investment advisers and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-1 of the 1940 Act or related
provisions as may be
5
<PAGE> 6
promulgated from time to time. The aforesaid Bond shall include coverage for
larceny and embezzlement and shall be issued by a reputable bonding company.
2.11 The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities
dealing with the money and/or securities of the Fund are and shall continue to
be at all times covered by a blanket fidelity bond or similar coverage for the
benefit of the Fund, in an amount not less than the minimal coverage as
required currently by entities subject to the requirements of Rule 17g-1 of the
1940 Act or related provisions as may be promulgated from time to time. The
aforesaid Bond shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1 The Underwriter shall provide the Company (at the Company's
expense) with as many copies of the Fund's current prospectus as the Company
may reasonably request. If requested by the Company in lieu thereof, the Fund
shall provide such documentation (including a final copy of the new prospectus
as set in type at the Fund's expense) and other assistance as is reasonably
necessary in order for the Company once each year (or more frequently if the
prospectus for the Fund is amended) to have the prospectus for the Contracts
and the Fund's prospectus printed together in one document (such printing to be
at the Company's expense).
3.2 The Fund's prospectus shall state that the Statement of
Additional Information for the Fund is available from the Underwriter (or in
the Fund's discretion, the Prospectus shall state that such Statement is
available from the Fund), and the Underwriter (or the Fund), at its expense,
shall print and provide such Statement free of charge to the Company and to any
owner of a Contract or prospective owner who requests such Statement.
3.3 The Fund, at its expense, shall provide the Company with copies
of its proxy material, reports to stockholders and other communications to
stockholders in such quantity as the Company shall reasonably require for
distributing to Contract Owners.
3.4 If and to the extent required by law, the Company shall: (i)
solicit voting instructions from Contract Owners; (ii) vote the Fund shares in
accordance with the instructions received from Contract Owners; and (iii) vote
Fund shares for which no instructions have been received in the same proportion
as Fund shares of such Portfolio for which instructions have been received; so
long as and to the extent that the Securities and Exchange Commission continues
to interpret the 1940 Act to require pass-through voting privileges for
variable contract owners. The Company reserves the right to vote Fund shares
held in any segregated asset account in its own right, to the extent permitted
by law. Participating Insurance Companies shall be responsible for assuring
that each of their separate accounts participating in the Fund calculates
voting privileges in a manner consistent with the standards set forth on
Schedule C attached hereto, and incorporated herein by reference, which
standards will also be provided to the other Participating Insurance Companies.
6
<PAGE> 7
3.5 The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular, the Fund will either
provide for annual meetings or comply with Section 16(c) of the 1940 Act
(although the Fund is not one of the trusts described in Section 16(c) of that
Act) as well as with Sections 16(a) and, if and when applicable, 16(b).
Further, the Fund will act in accordance with the Securities and Exchange
Commission's interpretation of the requirements of Section 16(a) with respect
to periodic elections of trustees and with whatever rules the Commission may
promulgate with respect thereto.
ARTICLE IV. SALES MATERIALS AND INFORMATION
4.1 The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
materials in which the Fund or its investment adviser or the Underwriter is
named. at least fifteen Business Days prior to its use. No such material shall
be used if the Fund or its designee object to such use within fifteen Business
Days after receipt of such material.
4.2 The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy materials approved by
the Fund or its designee or by the Underwriter, except with the permission of
the Fund or the Underwriter or the designee of either.
4.3 The Fund, Underwriter or its designee shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or its
separate account(s), is named at least fifteen Business Days prior to its use.
No such material shall be used if the Company or its designee object to such
use within fifteen Business Days after receipt of such material.
4.4 The Fund and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public
domain or approved by the Company for distribution to Contract Owners, or in
sales literature or other promotional materials approved by the Company or its
designee, except with the permission of the Company.
4.5 The Fund will provide to the Company at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Fund or its shares,
7
<PAGE> 8
contemporaneously with the filing of such document with the Securities and
Exchange Commission.
4.6 The Company will provide to the Fund at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for
no-action letters, and all amendments to any of the above, that relate to the
Contracts or each Account, contemporaneously with the filing of such documents
with the Securities and Exchange Commission.
4.7 For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, Statements of Additional Information, shareholder reports, and
proxy materials.
ARTICLE V. FEES AND EXPENSES
5.1 The Fund and the Underwriter shall pay no fee or other
compensation to the Company under this Agreement, except that if the Fund or
any Portfolio adopts and implements a plan pursuant to Rule 12b-1 to finance
distribution expenses, then the Underwriter may make payments to the Company or
to the underwriter for the Contracts if and in amounts agreed to by the
Underwriter in writing and such payments will be made out of existing fees
otherwise payable to the Underwriter, past profits of the Underwriter or other
resources available to the Underwriter. No such payments shall be made
directly by the Fund. Currently, no such payments are contemplated.
5.2 All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law, and, if and to the extent deemed advisable by the Fund, in
accordance with the applicable state laws prior to their sale. The Fund shall
bear the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any state or federal law,
all taxes on the issuance and transfer of the Fund's shares
8
<PAGE> 9
5.3 The Company shall bear the expenses of printing and distributing
the Fund's prospectus to owners of the Contracts issued by the Company and of
distributing the Fund's proxy materials and reports to such Contract Owners.
ARTICLE VI. DIVERSIFICATION
6.1 The Fund will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated as variable
contracts under the Code and the regulations issued thereunder. Without
limiting the scope of the foregoing, the Fund will at all times comply with
Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment or life insurance
contracts and any amendments or other modifications to such Section or
Regulations.
ARTICLE VII. POTENTIAL CONFLICTS
7.1 The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity and variable life insurance contract
owners; or (f) a decision by an insurer to disregard the voting instructions of
contract owners. The Board shall promptly inform the Company if it determines
that an irreconcilable material conflict exists and the implications thereof.
7.2 The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities by providing the Board with all information reasonably
necessary for the Board to consider any issues raised. This includes, but is
not limited to, an obligation by the Company to inform the Board whenever
contract owner voting instructions are disregarded.
7.3 If it is determined by a majority of the Board, or a majority of
its disinterested trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a
vote of all affected contract owners and, as appropriate, segregating the
assets
9
<PAGE> 10
of any appropriate group (i.e., annuity contract owners, life insurance
contract owners, or variable contract owners of one or more Participating
Insurance Companies) that votes in favor of such segregation, or offering to
the affected contract owners the option of making such a change; and (2)
establishing a new registered management investment company or managed separate
account.
7.4 If a material irreconcilable conflict arises because of a
decision by the Company to disregard contract owner voting instructions and
that decision represents a minority position or would preclude a majority vote,
the Company may be required, at the Fund's election, to withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Any such withdrawal and termination must take place within six (6) months after
the Fund gives written notice that this provision is being implemented, and
until the end of that six month period the Underwriter and the Fund shall
continue to accept and implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
7.5 If a material irreconcilable conflict arises because of a
particular state insurance regulator's decision applicable to the Company
conflicts with the majority of other state regulators, then the Company will
withdraw the affected Account's investment in the Fund and terminate this
Agreement with respect to such Account within six months after the Board
informs the Company in writing that it has determined that such decision has
created an irreconcilable material conflict; provided, however, that such
withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested members of the Board. Until the end of the foregoing six month
period, the Underwriter and the Fund shall continue to accept and implement
orders by the Company for the purchase (and redemption) of shares of the Fund.
7.6 For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but
in no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination; provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board
7.7 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act of the rules promulgated
10
<PAGE> 11
thereunder with respect to mixed or shared funding (as defined in the Shared
Funding Exemptive Order) on terms and conditions materially different from
those contained in the Shared Funding Exemptive Order, then (a) the Fund and/or
the Participating Insurance Companies, as appropriate, shall take such steps as
may be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and Rule
6e-3, as adopted, to the extent such rules are applicable; and (b) Sections
3.4, 3.5, 7.1, 7.2, 7.3, 7.4 and 7.5 of this Agreement shall continue in effect
only to the extent that terms and conditions substantially identical to such
Sections are contained in such Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1 Indemnification By The Company
(a) The Company agrees to indemnify and hold harmless the Fund and
each trustee of the Board and officers and each person, if any, who controls
the Fund within the meaning of Section 15 of the 1933 Act and to indemnify and
hold harmless the Underwriter and each director and officer and each person, if
any, who controls the Underwriter within the meaning of Section 15 of the 1933
Act (collectively, the "Indemnified Parties" for purposes of this Section 8.1)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Company) or litigation
(including legal and other expenses), to which the Indemnified Parties may
become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisition of the
Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the Registration
Statement or prospectus for the Contracts or contained in the
Contracts or sales literature for the Contracts (or any amendment or
supplement to any of the foregoing), or arise out of or are based upon
the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Company by or
on behalf of the Fund or the Underwriter for use in the Registration
Statement or prospectus for the Contracts or in the Contracts or sales
literature (or any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature of the Fund not
supplied by the Company, or persons under its control) or wrongful
conduct of the Company or persons under its control, with respect to
the sale or distribution of the Contracts or Fund Shares: or
11
<PAGE> 12
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement, prospectus,
or sales literature of the Fund or any amendment thereof or supplement
thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading if such a statement or omission was
made in reliance upon information furnished to the Fund by or on
behalf of the Company; or
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement;
or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Company, as limited by and in accordance with the
provisions of Sections 8.1(b) and 8.1(c) hereof.
(b) The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation incurred or assessed against an Indemnified Party's willful
misfeasance, bad faith, or gross negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified Party's reckless
disregard of obligations or duties under this Agreement or to the Fund or the
Underwriter, whichever is applicable.
(c) The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Company of
any such claim shall not relieve the Company from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Company shall be entitled to
participate, at its own expense, in the defense of such action. The Company
also shall be entitled to assume the defense thereof, with counsel satisfactory
to the party named in the action. After notice from the Company to such party
of the Company's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the Company will not be liable to such party under this Agreement for any legal
or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
(d) The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund shares or the Contracts or the operation of
the Fund.
8.2. Indemnification By The Underwriter
12
<PAGE> 13
(a) The Underwriter agrees to indemnify and hold harmless the Company
and each of its directors and officers and each person, if any, who controls
the Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Underwriter) or litigation (including legal and
other expenses) to which the Indemnified Parties may become subject under any
statute, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements are
related to the sale or acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Registration
Statement, prospectus or sales literature of the Fund (or any
amendment or supplement to any of the foregoing), or arise out of are
based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made
in reliance upon and in conformity with information furnished to the
Underwriter or Fund by or on behalf of the Company for use in the
Registration Statement or prospectus for the Fund or in sales
literature (or any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature for the
Contracts not supplied by the Underwriter or persons under its
control) or wrongful conduct of the Fund, Adviser or Underwriter or
persons under their control, with respect to the sale or distribution
of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement, prospectus,
or sales literature covering the Contracts, or any amendment thereof
or supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statement or statements therein not misleading, if such
statement or omission was made in reliance upon information furnished
to the Company by or on behalf of the Fund; or
(iv) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this Agreement
(including a failure, whether unintentional or in good faith or
otherwise, to comply with the diversification requirements specified
in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this
Agreement or arise out of or result from any other material breach of
this Agreement by the Underwriter; as limited by and in accordance
with the provisions of Sections 8.2(b) and 8.2(c) hereof.
13
<PAGE> 14
(b) The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation to which an Indemnified Party would otherwise be subject by reason
of such Indemnified Party's willful misfeasance, bad faith, or gross negligence
in the performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations and duties under this
Agreement or to each Company or the Account, whichever is applicable.
(c) The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Underwriter
of any such claim shall not relieve the Underwriter from any liability which it
may have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by
it, and the Underwriter will not be liable to such party under this Agreement
for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable
costs of investigation.
(d) The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
8.3. Indemnification By The Fund
(a) The Fund agrees to indemnify and hold harmless the Company, and
each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Fund) or litigation (including legal and other
expenses to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements result
from the gross negligence, bad faith or willful misconduct of the Board or any
member thereof, are related to the operations of the Fund, and:
(I) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this Agreement
(including a failure to comply with the diversification requirements
specified in Article VI of this Agreement); or
14
<PAGE> 15
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this Agreement or
arise out of or result from any other material breach of this
Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
(b) The Fund shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation incurred
or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company, the Fund, the Underwriter or each Account, whichever is
applicable.
(c) The Fund shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified the Fund in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or
after such Indemnified Party shall have received notice of such service on any
designee), but failure to notify the Fund of any such claim shall not relieve
the Fund from any liability which it may have to the Indemnified Party against
whom such action is brought otherwise than on account of this indemnification
provision. In case any such action is brought against the Indemnified Parties,
the Fund will be entitled to participate, at its own expense, in the defense
thereof. The Fund also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice from the
Fund to such party of the Fund's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Fund will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable
costs of investigation.
(d) The Company and the Underwriter agree promptly to notify the Fund
of the commencement of any litigation or proceedings against it or any of its
respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of either
Account, or the sale or acquisition of shares of the Fund.
ARTICLE IX. APPLICABLE LAW
9.1 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Florida
9.2 This Agreement shall be subject to the provisions of the 1933,
1934, and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant (including, but not limited to,
the Shared Funding Exemptive Order) and the terms hereof shall be interpreted
and construed in accordance therewith.
15
<PAGE> 16
ARTICLE X. TERMINATION
10.1 This Agreement shall terminate:
(a) at the option of any party upon one year advance written notice
to the other parties; provided, however, such notice shall not be given earlier
than one year following the date of this Agreement; or
(b) at the option of the Company to the extent that shares of
Portfolios are not reasonably available to meet the requirements of the
Contracts as determined by the Company; provided, however, that such
termination shall apply only to the Portfolio(s) not reasonably available.
Prompt notice of the election to terminate for such cause shall be furnished by
the Company; or
(c) at the option of the Fund in the event that formal administrative
proceedings are instituted against the Company by the NASD, the Securities and
Exchange Commission, the Insurance Commissioner or any other regulatory body
regarding the Company's duties under this Agreement or related to the sale of
the Contracts, with respect to the operation of any Account, or the purchase of
the Fund shares; provided, however, that the Fund determines in its sole
judgment exercised in good faith, that any such administrative proceedings will
have a material adverse effect upon the ability of the Company to perform its
obligations under this Agreement; or
(d) at the option of the Company in the event that formal
administrative proceedings are instituted against the Fund or Underwriter by
the NASD, the Securities and Exchange Commission, or any state securities or
insurance department or any other regulatory body; provided, however, that the
Company determines in its sole judgment exercised in good faith, that any such
administrative proceedings will have a material adverse effect upon the ability
of the Fund or Underwriter to perform its obligations under this Agreement; or
(e) with respect to any Account, upon requisite vote of the contract
owners having an interest in such Account (or any subaccount) to substitute the
shares of another investment company for the corresponding Portfolio shares of
the Fund in accordance with the terms of the Contracts for which those
Portfolio shares had been selected to serve as the underlying investment media.
The Company will give 30 days' prior written notice to the Fund of the date of
any proposed vote to replace the Fund's shares; or
(f) at the option of the Company, in the event of any of the Fund's
shares are not registered, issued or sold in accordance with applicable state
and/or federal law or such law precludes the use of such shares as the
underlying investment media of the Contracts issued or to be issued by the
Company; or
16
<PAGE> 17
(g) at the option of the Company, if the Fund ceases to qualify as a
Regulated Investment Company under Subchapter M of the Code or under any
successor or similar provision, or if the Company reasonably believes that the
Fund may fail to so qualify; or
(h) at the option of the Company, if the Fund fails to meet the
diversification requirements specified in Article VI hereof; or
(i) at the option of either the Fund or the Underwriter, if (1) the
Fund or the Underwriter, respectively, shall determine, in their sole judgment
reasonably exercised in good faith, that the Company has suffered a material
adverse change in its business or financial condition or is the subject of
material adverse publicity and such material adverse change or material adverse
publicity will have a material adverse impact upon the business and operations
of either the Fund or the Underwriter, (2) the Fund or the Underwriter shall
notify the Company in writing of such determination and its intent to terminate
this Agreement, and (3) after considering the actions taken by the Company and
any other changes in circumstances since the giving of such notice, such
determination of the Fund or the Underwriter shall continue to apply on the
sixtieth (60) day following the giving of such notice, which sixtieth day shall
be the effective date of termination; or
(j) at the option of the Company, if (l) the Company shall determine,
in its sole judgment reasonably exercised in good faith, that either the Fund
or the Underwriter has suffered a material adverse change in its business or
financial condition or is the subject of material adverse publicity and such
material adverse change or material adverse publicity will have a material
adverse impact upon the business and operations of the Company, (2) the Company
shall notify the Fund and the Underwriter in writing of such determination and
its intent to terminate the Agreement, and (3) after considering the actions
taken by the Fund and/or the Underwriter and any other changes in circumstances
since the giving of such notice, such determination shall continue to apply on
the sixtieth (60th) day following the giving of such notice, which sixtieth day
shall be the effective date of termination; or
(k) at the option of either the-Fund or the Underwriter, if the
Company gives the Fund and the Underwriter the written notice specified in
Section 1.6(b) hereof and at the time such notice was given there was no notice
of termination outstanding under any other provision of this Agreement;
provided, however, any termination under this Section 10.1(k) shall be
effective forty-five (45) days after the notice specified in Section 1.6(b) was
given.
10.2 It is understood and agreed that the right of any party hereto
to terminate this Agreement pursuant to Section 10.1(a) may be exercised for
any reason or for no reason.
10.3 Notice Requirement. No termination of this Agreement shall be
effective unless and until the party terminating this Agreement gives prior
written notice to all other parties to this Agreement of its intent to
terminate, which notice shall set forth the basis for such termination.
Furthermore,
17
<PAGE> 18
(a) in the event that any termination is based upon the provision of
Article VII, or the provision of Sections 10.1(a), 10.1(i), 10.1(j) or 10.1(k)
of this Agreement, such prior written notice shall be given in advance of the
effective date of termination as required by such provisions; and
(b) in the event that any termination is based upon the provisions of
Sections 10.1(c) or 10.1(d) of this Agreement, such prior written notice shall
be given at least ninety (90) days before the effective date of termination.
10.4 Effect of Termination. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall, at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the making of additional
purchase payments under the Existing Contracts. The parties agree that this
Section 10.4 shall not apply to any terminations under Article VII and the
effect of such Article VII terminations shall be governed by Article VII of
this Agreement.
10.5 The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in either Account) except (i) as necessary to implement Contract Owner
initiated transactions, or (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption"). Upon request,
the Company will promptly furnish to the Fund and the Underwriter the opinion
of counsel for the Company (which counsel shall be reasonably satisfactory to
the Fund and the Underwriter) to the effect that any redemption pursuant to
clause (ii) above is a Legally Required Redemption. Furthermore, except in
cases where permitted under the terms of the Contracts, the Company shall not
prevent contract owners from allocating payments to a Portfolio that was
otherwise available under the Contracts without first giving the Fund or the
Underwriter 90 days notice of its intention to so do.
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or such other address as such party may from time to time specify in writing to
the other party.
If to the Fund:
700 Central Avenue
St. Petersburg, Florida 33701
Attention: Secretary
18
<PAGE> 19
If to the Company:
One Tower Square
Hartford, Connecticut 06183
Attention: Ron Gendreau
Vice President, 5 NB
If to the Underwriter:
700 Central Avenue
St. Petersburg, Florida 33701
Attention: Thomas M. Mistele
Vice President
ARTICLE XII. MISCELLANEOUS
12.1 All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto and, except as
permitted by this Agreement, shall not disclose, disseminate or utilize such
names and addresses and other confidential information until such time as it
may come into the public domain without the express written consent of the
affected party.
12.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument
12.5 If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the NASD and state insurance regulators)
and shall permit such authorities reasonable access to its books and records in
connection with any investigation or inquiry relating to this Agreement or the
transactions contemplated hereby. Notwithstanding the generality of the
foregoing, each party further agrees to furnish the California Insurance
Commissioner with any information or reports in connection with services
provided under this Agreement which such Commissioner may request in order to
ascertain whether the variable life insurance operations of the Company
19
<PAGE> 20
are being conducted in a manner consistent with the California Variable Life
Insurance Regulations and any other applicable law or regulations.
12.7 The Fund and Underwriter agree that to the extent any advisory
or other fees received by the Fund, the Underwriter or the Adviser are
determined to be unlawful in legal or administrative proceedings under the 1973
NAIC model variable life insurance regulation in the states of California,
Colorado, Maryland or Michigan, the Underwriter shall indemnify and reimburse
the Company for any out of pocket expenses and actual damages the Company has
incurred as a result of any such proceedings; provided, however, that the
provisions of Section 8.2(b) of this and 8.2(c) shall apply to such
indemnification and reimbursement obligation. Such indemnification and
reimbursement obligation shall be in addition to any other indemnification and
reimbursement obligations of the Fund and/or the Underwriter under this
Agreement.
12.8 The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
Company:
THE TRAVELERS INSURANCE COMPANY
By its authorized officer,
Fund:
TEMPLETON VARIABLE PRODUCTS SERIES FUND
By its authorized officer,
Underwriter:
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
By its authorized officer,.
20
<PAGE> 21
Schedule A
Accounts
<TABLE>
<CAPTION>
Date of Resolution of Company's Board
Name of Account which Established the Account
- --------------- -------------------------------------------
<S> <C>
The Travelers Fund U for May 7, 1982
Variable Annuities
The Travelers Fund UL for November 4, 1983
Variable Life Insurance
</TABLE>
21
<PAGE> 22
Schedule B
Contracts
1 Contract Forms LVA-10FPU-A
LVA-FPG(u)
2. Contract Forms L-ULVB (and such other variations as required by state
law).
22
<PAGE> 23
Schedule C
Portfolios
Templeton Variable Products Series Fund
1. Templeton Bond Fund
2. Templeton Stock Fund
3. Templeton Asset Allocation Fund
23
<PAGE> 1
EXHIBIT 8D
FUND PARTICIPATION AGREEMENT
This Agreement is entered into as of the 31st day of October, 1991, between THE
TRAVELERS INSURANCE COMPANY ("Travelers"), a life insurance company organized
under the laws of the State of Connecticut, and DREYFUS LIFE AND ANNUITY INDEX
FUND, INC. ("Fund"), a corporation organized under the laws of the State of
Maryland.
ARTICLE I
DEFINITIONS
1.1 "Act" shall mean the Investment Company Act of 1940, as amended.
1.2 "Board" shall mean the Board of Directors of the Fund having the
responsibility for management and control of the Fund.
1.3 "Business Day": A day on which Travelers and the New York Stock
Exchange are customarily open for business.
1.4 "Commission" shall mean the Securities and Exchange Commission.
1.5 "Contract" shall mean a variable annuity contract or a variable life
insurance contract that uses the Fund as an underlying investment
medium. Individuals who participate under a group Contract are
"Participants".
1.6 "Contractholder" shall mean any entity that is a party to a Contract
with a Participating Company.
1.7 "Disinterested Board Members" shall mean those members of the Board
that are not deemed to be "interested persons" of the Fund, as defined
by the Act.
1.8 "Dreyfus" shall mean The Dreyfus Corporation and its affiliates.
1.9 "Participating Companies" shall mean any insurance company (including
Travelers", which offers variable annuity and/or variable life
insurance contracts to the public and which has entered into an
agreement with the Fund similar hereto for the purpose of making Fund
shares available to serve as the underlying investment medium for the
aforesaid Contracts.
1.10 "Prospectus" shall mean the Fund's current prospectus and statement of
additional information, as most recently filed with the Commission.
<PAGE> 2
1.11 "Separate Account" shall mean The Travelers Fund U for variable
annuities, a separate account established by Travelers in accordance
with the laws of the State of Connecticut.
1.12 "Software Program"' shall mean the software program used by the Fund
for providing Fund and account balance information including net asset
value per share. Such Program may include the Lion System. In
situations where the Lion System or any other Software Program used by
the Fund is not available, such information may be provided by
telephone. The Lion System shall be provided to Travelers at no
charge.
1.13 "Travelers' General Account(s)" shall mean the general account(s) of
Travelers and its affiliates which invest in the Fund
ARTICLE II
REPRESENTATIONS
2.1 Travelers represents and warrants that (a) it is an insurance company
duly organized and in good standing under applicable law; (b) it has
legally and validly established the Separate Account pursuant to the
Connecticut Insurance Code for the purpose of offering to the public
certain group and individual variable annuity contracts; and (c) it
has registered the Separate Account as a unit investment trust under
the Act to serve as the segregated investment account for the
Contracts.
2.2 Travelers represents and warrants that (a) the Contracts will be
described in a registration statement filed under the Securities Act
of 1933, as amended ("1933 Act"); (b) the Contracts will be issued and
sold in compliance in all material respects with all applicable
federal and state laws; and (c) the sale of the Contracts shall comply
in all respects with state insurance law requirements.
2.3 Travelers represents and warrants that the income, gains and losses,
whether or not realized, from assets allocated to the Separate Account
are, in accordance with the applicable Contracts, to be credited to or
charged against such Separate Account without regard to other income,
gains or losses from assets allocated to any other accounts of
Travelers. Travelers represents and warrants that the assets of the
Separate Account are and will be kept separate from Traveler's General
Accounts and any other separate accounts Travelers may have, and will
not be charged with liabilities from any business that Travelers may
conduct or the liabilities of any companies affiliated with Travelers.
2.4 Fund represents that the Fund is registered with the Commission under
the Act as an open-end, non-diversified management investment company
and possesses, and shall maintain, all legal and regulatory licenses,
approvals, consents and/or exemptions required for Fund to operate and
offer its shares as an underlying investment medium for Participating
Companies.
2
<PAGE> 3
2.5 Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"), and that it will make every effort to
maintain such qualification (under Subchapter M or any successor or
similar provision) and that it will notify Travelers immediately upon
having a reasonable basis for believing that it has ceased to so
qualify or that it might not so qualify in the future.
2.6 Travelers represents that the Contracts are currently treated as life
insurance policies or annuity contracts, under applicable provisions
of the Code, and that it will make every effort to maintain such
treatment and that it will notify the Fund immediately upon having a
reasonable basis for believing that the Contracts have ceased to be so
treated or that they might not be so treated in the future.
2.7 Fund agrees that the Fund's assets shall be managed and invested in a
manner that complies with the requirements of Section 817(h) of the
Code.
2.8 Fund agrees to establish one account in the name of Travelers and its
affiliates and to make its shares available to such account. The
shares shall be offered to the Separate Account and to Travelers'
General Account at the net asset value of such shares.
2.9 Travelers and Fund agree that (1) Travelers shall be permitted
(subject to the other terms of this Agreement) to utilize and employ
other management investment companies as underlying investment media
for the Separate Account, and (2) Fund shall be permitted (subject to
the other terms of this Agreement) to make Fund shares available to
other Participating Companies and contractholders.
2.10 Fund represents and warrants that any of its directors, officers,
employees, investment advisers, and other individuals/entities who
deal with the money and/or securities of the Fund are and shall
continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less
than that required by Rule 17g-1 under the Act. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company.
2.11 Travelers represents and warrants that all of its employees and agents
who deal with the money and/or securities of the Fund are and shall
continue to be at all times covered by a blanket fidelity bond or
similar coverage in an amount not less than the coverage required to
be maintained by the Fund. The aforesaid Bond shall include coverage
for larceny and embezzlement and shall be issued by a reputable
bonding company.
2.12 Travelers agrees that Dreyfus shall be deemed a third party
beneficiary under this Agreement and may enforce any and all rights
conferred by virtue of this Agreement.
2.13 If the Travelers issues variable life insurance policies through a
Separate Account or the Fund enters into a participation agreement
with a Participating Company (including Travelers) offering variable
life insurance policies through a separate account investing in
3
<PAGE> 4
the Fund, Travelers and the Fund will promptly amend this Agreement to
add any provisions, conditions or undertakings required by an
exemptive order under the Act on which the Fund is then relying.
ARTICLE III
FUND SHARES
3.1 The Contracts funded through the Separate Account will provide for the
investment of certain amounts in the shares of the Fund.
3.2 Fund agrees to make its shares available for purchase at the
applicable net asset value per share by Travelers and the Separate
Account on those days on which the Fund calculates its net asset value
pursuant to rules of the Commission and the Fund shall use all
reasonable efforts to calculate such net asset value on each Business
Day. Notwithstanding the foregoing, the Fund may refuse to sell its
shares to any person, or suspend or terminate the offering of the
Fund's shares if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the
Board, acting in good faith and in light of its fiduciary duties under
federal and any applicable state laws, necessary and in the best
interests of the Fund's shareholders.
3.3 Fund agrees that shares of the Fund will be sold only to Participating
Companies and their separate accounts and to the general accounts of
those Participating Companies and their affiliates. No Fund shares
will be sold to the general public.
3.4 Fund shall use its best efforts to provide closing net asset value,
dividend and capital gain information on a per-share and Fund basis to
Travelers by 6:00 p.m. Eastern Time on each Business Day. Any material
errors in the calculation of net asset value, dividend and capital
gain information shall be reported immediately upon discovery to
Travelers. Non-material errors will be corrected in the next Business
Day's net asset value per share.
3.5 At the end of each Business Day, Travelers will use the information
described in Sections 3.2 and 3.4 to calculate the Separate Account
unit values for the day. Using this unit value, Travelers will process
the day's Separate Account transactions received by it by the close of
trading on the floor of the New York Stock Exchange (currently 4:00
p.m. Eastern time) to determine the net dollar amount of Fund shares
which will be purchased or redeemed at that day's closing net asset
value per share. The net purchase or redemption orders will be
transmitted to the Fund by Travelers by 11:00 a.m. Eastern Time on the
Business Day next following Travelers' receipt of that information.
Subject to Section 3.6, all purchase and redemption orders for
Travelers' General Accounts shall be effected at the net asset value
per share next calculated after receipt of the order by the Fund or
its Transfer Agent.
4
<PAGE> 5
3.6 Fund appoints Travelers as its agent for the limited purpose of
accepting orders for the purchase and redemption of Fund shares for
the Separate Account. Fund will execute orders at the net asset value
per share determined as of the close of trading on the day of receipt
of such orders by Travelers acting as agent ("effective trade date"),
provided that the Fund receives notice of such orders by 11:00 a.m.
Eastern Time on the next following Business Day.
3.7 Travelers will make its best efforts to notify Fund in advance of any
unusually large purchase or redemption orders.
3.8 If Travelers' order requests the purchase of Fund shares, Travelers
will pay for such purchases by wiring Federal Funds to Fund or its
designated custodial account on the day the order is transmitted. If
payment in Federal Funds for any purchase is received by the Fund
after 12:00 noon on the business day on which the applicable purchase
request was received by the Fund pursuant to Section 3.5, Travelers
shall promptly upon the Fund's request, reimburse the Fund for any
charges, costs, fees, interest or other expenses incurred by the Fund
in connection with any advances to, or borrowings or overdrafts by,
the Fund as a result of portfolio transactions effected by the Fund
based upon such purchase request. If Travelers' order requests the
redemption of Fund shares valued at or greater than $1 million
dollars, the Fund will wire such amount to Travelers within seven days
of the order.
3.9 Fund has the obligation to ensure that Fund shares are registered with
applicable federal agencies at all times.
3.10 Fund will confirm each purchase or redemption order made by Travelers.
Transfer of Fund shares will be by book entry only. No stock
certificates will be issued to Travelers. Travelers will record shares
ordered from Fund in an appropriate title for the corresponding
account.
3.11 Fund shall credit Travelers with the appropriate number of shares.
3.12 On each ex-dividend date of the Fund or, if not a Business Day, on the
first Business Day thereafter, Fund shall communicate to Travelers the
amount of dividend and capital gain, if any, per share. All dividends
and capital gains shall be automatically reinvested in additional
shares of the Fund at the net asset value per share of the Fund on the
ex-dividend date. Fund shall, on the day after the ex-dividend date
or, if not a Business Day, on the first Business Day thereafter,
notify Travelers of the number of shares so issued.
5
<PAGE> 6
ARTICLE IV
STATEMENTS AND REPORTS
4.1 Fund shall provide monthly statements of account as of the end of each
month for all of Travelers' accounts by the fifteenth (15th) Business
Day of the following month.
4.2 Fund shall distribute to Travelers copies of the Fund's Prospectuses,
proxy materials, notices, periodic reports and other printed materials
(which the Fund customarily provides to its shareholders) in
quantities as Travelers may, reasonably request for distribution to
each Contractholder and Participant.
4.3 Fund will provide to Travelers at least one complete copy of all
registration statements, Prospectuses, reports, proxy statements,
sales literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments to any
of the above, that relate to the Fund or its shares, contemporaneously
with the filing of such document with the Commission or other
regulatory authorities.
4.4 Travelers will provide to the Fund at least one copy of all
registration statements, Prospectuses, reports, proxy statements,
sales literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments to any
of the above, that relate to the Contracts or the Separate Account,
contemporaneously with the filing of such document with the
Commission.
ARTICLE V
EXPENSES
5.1 The charge to the Fund for all expenses and costs of the Fund,
including but not limited to management fees, administrative expenses
and legal and regulatory costs, will be made in the determination of
the Fund's daily net asset value per share so as to accumulate to an
annual charge at the rate set forth in the Fund's Prospectus. Excluded
from the expense limitation described herein shall be brokerage
commissions and transaction fees and extraordinary expenses.
5.2 Except as provided in this Article V and, in particular in the next
sentence, Travelers shall not be required to pay directly any expenses
of the Fund or expenses relating to the distribution of its shares.
Travelers shall pay the following expenses or costs:
a. Such amount of the production expenses of any Fund materials or
marketing materials for prospective Travelers Contractholders
and Participants as Dreyfus and Travelers shall agree from time
to time.
6
<PAGE> 7
b. Distribution expenses of any Fund materials or marketing
materials for prospective Travelers Contractholders and
Participants.
c. Distribution expenses of Fund materials or marketing materials
for Travelers Contractholders and Participants.
Except as provided herein, all other Fund expenses shall not be borne
by Travelers.
ARTICLE VI
EXEMPTIVE RELIEF
6.1 Travelers has reviewed a copy of the order dated August 23, 1989 of
the Securities and Exchange Commission under Section 6(c) of the Act
and, in particular, has reviewed the conditions to the relief set
forth in the related Notice. As set forth therein, Travelers agrees to
report any potential or existing conflicts promptly to the Board, and
in particular whenever contract voting instructions are disregarded,
and recognizes that it will be responsible for assisting the Board in
carrying out its responsibilities under such application. Travelers
agrees to carry out such responsibilities with a view to the interests
of existing Contractholders.
6.2 If a majority of the Board, or a majority of Disinterested Board
Members, determines that a material irreconcilable conflict exists
with regard to Contractholder investments in the Fund, the Board shall
give prompt notice to all Participating Companies. If the Board
determines that Travelers is responsible for causing or creating said
conflict, Travelers shall at its sole cost and expense, and to the
extent reasonably practicable (as determined by a majority of the
Disinterested Board Members), take such action as is necessary to
remedy or eliminate the irreconcilable material conflict. Such
necessary action may include, but shall not be limited to:
a. Withdrawing the assets allocable to the Separate Account from
the Fund and reinvesting such assets in a different investment
medium, or submitting the question of whether such segregation
should be implemented to a vote or all affected Contractholders;
and/or
b. Establishing a new registered management investment company.
6.3 If a material irreconcilable conflict arises as a result of a decision
by Travelers to disregard Contractholder voting instructions and said
decision represents a minority position or would preclude a majority
vote by all Contractholders having an interest in the Fund, Travelers
may be required, at the Board's election, to withdraw the Separate
Account's investment in the Fund.
7
<PAGE> 8
6.4 For the purpose of this Article, a majority of the Disinterested Board
Members shall determine whether or not any proposed action adequately
remedies any irreconcilable material conflict, but in no event will
the Fund be required to bear the expense of establishing a new funding
medium for any Contract. Travelers shall not be required by this
Article to establish a new funding medium for any Contract if an offer
to do so has been declined by vote of a majority of the
Contractholders materially adversely affected by the irreconcilable
material conflict.
6.5 No action by Travelers taken or omitted, and no action by the Separate
Account or the Fund taken or omitted as a result of any act or failure
to act by Travelers pursuant to this Article VI shall relieve
Travelers of its obligations under, or otherwise affect the operation
of, Article V.
ARTICLE VII
VOTING OF FUND SHARES
7.1 Fund shall provide Travelers with copies at no cost to Travelers, of
the Fund's proxy material, reports to stockholders and other
communications to stockholders in such quantity as Travelers shall
reasonably require for distributing to Contractholders or
Participants.
Travelers shall:
(a) solicit voting instructions from Contractholders or
Participants on a timely basis and in accordance with
applicable law;
(b) vote the Fund shares in accordance with instructions received
from Contractholders or Participants; and
(c) vote Fund shares for which no instructions have been received in
the same proportion as Fund shares for which instructions have
been received.
Travelers agrees at all times to votes its General Account shares in
the same proportion as Fund shares for which instructions have been
received from Contractholders or Participants.
ARTICLE VIII
MARKETING AND REPRESENTATIONS
8.1 The Fund or its underwriter shall periodically furnish Travelers with
the following documents, in quantities as Travelers may reasonably
request:
8
<PAGE> 9
a. Current Prospectus and any supplements thereto;
b. other marketing materials.
Expenses for the production of such documents may be borne by
Travelers in accordance with Section 5.2 of this Agreement.
8.2 Travelers shall designate certain persons or entities which shall have
the requisite licenses to solicit applications for the sale of
Contracts. No representation is made as to the number or amount of
Contracts that are to be sold by Travelers. Travelers shall make
reasonable efforts to market the Contracts and shall comply with all
applicable federal and state laws in connection therewith.
8.3 Travelers shall furnish, or shall cause to be furnished, to the Fund,
each piece of sales literature or other promotional material in which
the Fund, its investment adviser or the administrator is named, at
least fifteen Business Days prior to its use. No such material shall
be used unless the Fund approves such material. Such approval (if
given) must be in writing and shall be presumed not given if not
received within ten Business Days after receipt of such material. The
Fund shall use all reasonable efforts to respond within ten days of
receipt.
8.4 Travelers shall not give any information or make any representations
or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information
or representations contained in the registration statement or
Prospectus, as may be amended or supplemented from time to time, or in
reports or proxy statements for the Fund, or in sales literature or
other promotional material approved by the Fund.
8.5 Fund shall furnish, or shall cause to be furnished, to Travelers, each
piece of the Fund's sales literature or other promotional material in
which Travelers or the Separate Account is named, at least fifteen
Business Days prior to its use. No such material shall be used unless
Travelers approves such material. Such approval (if given) must be in
writing and shall be presumed not given if not received within ten
Business Days after receipt of such material. Travelers shall use all
reasonable efforts to respond within ten days of receipt.
8.6 Fund shall not, in connection with the sale of Fund shares, give any
information or make any representations on behalf of Travelers or
concerning Travelers, the Separate Account, or the Contracts other
than the information or representations contained in a registration
statement or prospectus for the Contracts, as may be amended or
supplemented from time to time, or in published reports for the
Separate Account which are in the public domain or approved by
Travelers for distribution to Contractholders or Participants, or in
sales literature or other promotional material approved by Travelers.
9
<PAGE> 10
ARTICLE IX
INDEMNIFICATION
9.1 Travelers agrees to indemnify and hold harmless the Fund, Dreyfus, the
Fund's investment adviser, and their affiliates, and each of their
directors, officers, employees, agents and each person, if any, who
controls any of the foregoing entities or persons within the meaning
of the 1933 Act (collectively, the "Indemnified Parties" for purposes
of Section 9.1), against any losses, claims, damages or liabilities
for which the Indemnified Parties may become subject, under the 1933
Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect to thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any
material fact contained in information furnished by Travelers for use
in the registration statement or Prospectus or sales literature or
advertisements of the Fund or with respect to the Separate Account or
Contracts, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or arise out of or as a result of conduct, statements or
representations (other than statements or representations contained in
the Prospectus and sales literature or advertisements of the Fund) of
Travelers or its agents, with respect to the sale and distribution of
Contracts for which Fund shares are an underlying investment; and
Travelers will reimburse any Indemnified Party in connection with
investigating or defending any such loss, claim, damage, liability or
action; provided, however, that Travelers will not be liable in any
such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any untrue statement or omission or
alleged omission made in such registration statement, prospectus,
sales literature, or advertisement in conformity with written
information furnished to Travelers by the Fund specifically for use
therein. This indemnity agreement will be in addition to any liability
which Travelers may otherwise have.
9.2 The Fund agrees to indemnify and hold harmless Travelers and each of
its directors, officers, employees, agents and each person, if any,
who controls Travelers within the meaning of the 1933 Act against any
losses, claims, damages or liabilities to which Travelers or any such
director, officer, employee, agent or controlling person may become
subject, under the 1933 Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) (1)
arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement
or Prospectus or sales literature or advertisements of the Fund; (2)
arise out of or are based upon the omission to state in the
registration statement or Prospectus or sales literature or
advertisements of the Fund any material fact required to be stated
therein or necessary to make the statements therein not misleading; or
(3) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration
statement or Prospectus or sales literature or advertisements with
respect to the Separate Account or the Contracts and such statements
were based on information provided to Travelers by the Fund; and the
Fund will reimburse any legal or other expenses reasonably incurred by
Travelers or any such director, officer, employee, agent
10
<PAGE> 11
or controlling person in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however,
that the Fund will not be liable in any such case to the extent that
any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or omission or alleged omission made in such
Registration Statement, Prospectus, sales literature or advertisements
in conformity with written information furnished to the Fund by
Travelers specifically for use therein. This indemnity agreement will
be in addition to any liability which the Fund may otherwise have.
9.3 The Fund shall indemnify and hold Travelers harmless against any and
all liability, loss, damages, costs or expenses which Travelers may
incur, suffer or be required to pay due to the Fund's (1) incorrect
calculation of the daily net asset value, dividend rate or capital
gain distribution rate; (2) incorrect reporting of the daily net asset
value, dividend rate or capital gain distribution rate; and (3)
untimely reporting of the net asset value, dividend rate or capital
gain distribution rate; provided that the Fund shall have no
obligation to indemnify and hold harmless Travelers if the incorrect
calculation or incorrect or untimely reporting was the result of
incorrect information furnished by Travelers or information furnished
untimely by Travelers.
9.4 Travelers shall indemnify and hold the Fund harmless against any and
all liability, loss, damages, costs or expenses which the Fund may
incur, suffer or be required to pay due to Travelers' incorrect
calculation and/or untimely reporting of net purchase or redemption
orders.
9.5 Promptly after receipt by an indemnified party under this Article of
notices of the commencement of action, such indemnified party will, if
a claim in respect thereof is to be made against the indemnifying
party under this Article, notify the indemnifying party of the
commencement thereof; but the omission to notify the indemnifying
party will not relieve it from any liability which it may have to any
indemnified party otherwise than under this Article. In case any such
action is brought against any indemnified party, and it notified the
indemnifying party of the commencement thereof, the indemnifying party
will be entitled to participate therein and, to the extent that it may
wish, assume the defense thereof, with counsel satisfactory to such
indemnified party, and to the extent that the indemnifying party has
given notice to such effect to the indemnified party and is performing
its obligations under this Article, the indemnifying party shall not
be liable for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof, other
than reasonable costs of investigation.
9.6 Travelers shall indemnify and hold the Fund, Dreyfus and the Fund's
investment adviser harmless against any tax liability incurred by the
Fund under Section 851 of the Code arising from purchases or
redemptions by Travelers' General Accounts or the account of its
affiliates.
11
<PAGE> 12
ARTICLE X
COMMENCEMENT AND TERMINATION
10.1 This Agreement shall be effective as of the date hereof and shall
continue in force until terminated in accordance with the provisions
herein.
10.2 This Agreement shall terminate without penalty:
a. At the option of Travelers or the Fund at any time from the date
hereof upon 180 days' notice, unless a shorter time is agreed to
by the parties;
b. At the option of Travelers, if any of the Fund's shares are not
reasonably available to meet the requirements of the Contracts
as determined by Travelers. Prompt notice of election to
terminate shall be furnished by Travelers, said termination to
be effective ten days after receipt of notice unless the Fund
makes available a sufficient number of shares to meet the
requirements of the Contracts within said ten-day period;
c. At the option of Travelers, upon the institution of formal
proceedings against the Fund by the Commission, National
Association of Securities Dealers or any other regulatory body,
the expected or anticipated ruling, judgment or outcome of which
would, in Travelers' reasonable judgment, materially impair the
Fund's ability to meet and perform the Fund's obligations and
duties hereunder. Prompt notice of election to terminate shall
be furnished by Travelers with said termination to be effective
upon receipt of notice
d. At the option of the Fund, upon the institution of formal
proceedings against Travelers by the Commission, National
Association of Securities Dealers or any other regulatory body,
the expected or anticipated ruling, judgment or outcome of which
would, in the Fund's reasonable judgment, materially impair
Travelers' ability to meet and perform Travelers obligations and
duties hereunder. Prompt notice of election to terminate shall
be furnished by the Fund with said termination to be effective
upon receipt of notice;
e. At the option of the Fund, if the Fund shall determine, in its
sole judgment reasonably exercised in good faith, that Travelers
has suffered a material adverse change in its business or
financial condition or is the subject of material adverse
publicity and such material adverse change or material adverse
publicity will have a material adverse impact upon the business
and operation of the Fund, the Fund shall notify Travelers in
writing of such determination and its intent to terminate this
Agreement, and after considering the actions taken by Travelers
and any other changes in circumstances since the giving of such
notice, such determination of the Fund shall continue to apply
on the sixtieth (60th) day following the giving of such notice,
which sixtieth day shall be the effective date of termination:
12
<PAGE> 13
f. Upon termination of the Management Agreement between the Fund
and Wells Fargo Nikko Investment Advisors or its successors
unless Travelers specifically approves the selection of a new
Fund manager. The Fund shall promptly furnish notice of such
termination to Travelers;
g. In the event the Fund's shares are not registered, issued or
sold in accordance with applicable federal law, or such law
precludes the use of such shares as the underlying investment
medium of Contracts issued or to be issued by Travelers.
Termination shall be effective immediately upon such occurrence
without notice;
h. At the option of the Fund, if the Contracts are not registered,
issued or sold in accordance with applicable federal law; or
I. Upon assignment of this-Agreement, unless made with the written
consent of the non-assigning party.
Any such termination pursuant to Section 10.2a, 10.2d, 10.2e, 10.2f or
10.2h herein shall not affect the operation of Article V of this
Agreement. Any termination of this Agreement shall not affect the
operation of Article IX of this Agreement.
ARTICLE XI
AMENDMENTS
11.1 Any other changes in the terms of this Agreement shall be made by
agreement in writing between Travelers and Fund.
ARTICLE XII
NOTICE
12.1 Each notice required by this Agreement shall be given by certified
mail, return receipt requested, to the appropriate parties at the
following addresses:
Travelers: The Travelers Insurance Company
One Tower Square
Hartford, Connecticut 06183
Attn: Ron Gendreau, Vice President 5 NB
Fund: Dreyfus Life and Annuity Index Fund, Inc.
200 Park Avenue
New York, New York 10166
Attn: Steven F. Newman, Secretary
13
<PAGE> 14
with copies to: Stroock & Stroock & Lavan
7 Hanover Square
New York, New York 10004-2594
Attn: Lewis G. Cole, Esq.
Stuart H. Coleman, Esq.
Notice shall be deemed to be given on the date of receipt by the
addresses as evidenced by the return receipt.
ARTICLE XIII
MISCELLANEOUS
13.1 All persons dealing with the Fund must look solely to the property of
the Fund for the enforcement of any claims against the Fund as neither
the Directors, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
ARTICLE XIV
LAW
14.1 This Agreement shall be construed in accordance with the internal laws
of the State of New York without giving effect to principles of
conflict of laws.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be duly
executed and attested as of the date first above written.
THE TRAVELERS INSURANCE COMPANY
By:
ITS:
Attest:
DREYFUS LIFE AND ANNUITY INDEX FUND, INC.
By:
Its:
Attest
14
<PAGE> 1
EXHIBIT 8e
FUND PARTICIPATION AGREEMENT
AGREEMENT, made and entered into this 23rd day of February, 1993 by
and among THE TRAVELERS INSURANCE COMPANY (the "Company"), a Connecticut
corporation, on its own behalf and on behalf of each segregated asset account
set forth on Schedule A hereto as amended from time to time (each such account
hereinafter referred to as the "Account"), ODYSSEY FUNDS, INC. (the "Series
Fund"), a Maryland corporation, and COPELAND EQUITIES, INC. (the
"Underwriter"), a New Jersey corporation.
WHEREAS, the Series Fund is a diversified, open-end management
investment company registered with the Securities and Exchange Commission (the
"SEC") under the Investment Company Act of 1940, as amended (the "1940 Act"),
and has or will register its shares under the Securities Act of 1933, as
amended (the "1933 Act"); and
WHEREAS, the Series Fund is currently divided into six separate
series (each a "Fund"), each of which is established pursuant to a resolution
of the Board of Directors of the Series Fund (the "Board"), and the Series Fund
may in the future add additional Funds; and
WHEREAS, the Underwriter is registered as a broker-dealer under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and is a member
in good standing of the National Association of Securities Dealers, Inc. (the
"NASD"); and
WHEREAS, the Series Fund is available to act as the investment
vehicle for separate accounts established for variable life insurance policies
and variable annuity contracts (collectively, the "Variable Insurance
Products") to be offered by insurance companies which have entered into
participation agreements with the Series Fund and the Underwriter (the
"Participating Insurance Companies"); and
WHEREAS, the Account is a unit investment trust registered under
the 1940 Act and invests in investment company shares as an investment option
under certain variable annuity or variable life insurance contracts issued by
the Company and registered under the 1933 Act (the "Contracts"); and
WHEREAS, the parties desire to provide Series Fund shares as an
investment option under the Contracts.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I. SALE OF SERIES FUND SHARES
1.1. The Underwriter agrees to sell to the Company those shares
of the Series Fund which the Account orders, executing such orders on a daily
basis at the net asset value next computed after receipt by the Series Fund or
its designee of the order. For purposes of this Section 1.1, the Company shall
be the designee of the Series Fund for receipt of such orders from the Account
and receipt by such designee shall constitute receipt by the Series Fund;
provided that the Series
<PAGE> 2
Fund receives notice of such order by 9:30 a.m. Eastern time on the next
following Business Day. "Business Day" shall mean any day on which the New
York Stock Exchange is open for trading and on which the Series Fund calculates
its net asset value pursuant to SEC rules.
1.2. The Series Fund agrees to make its shares available
indefinitely for purchase by the Company and the Account at the applicable net
asset value per share on those days on which the Series Fund calculates its net
asset value pursuant to SEC rules. The Series Fund shall use reasonable
efforts to calculate such net asset value on each day which the New York Stock
Exchange is open for trading. Notwithstanding the foregoing, the Board may
refuse to sell shares of any Fund to any person, or suspend or terminate the
offering of shares of any Fund if such action is required by law or by
regulatory authorities having jurisdiction or is, in the sole discretion of the
Board acting in good faith and in light of their fiduciary duties under federal
and any applicable state laws, necessary in the best interests of the
shareholders of such Fund.
1.3. The Series Fund and the Underwriter agree that shares of the
Series Fund will be sold only to Participating Insurance Companies, their
affiliates, and their separate accounts. No shares of any Fund will be sold
to the general public.
1.4. The Company and the Account shall pay for Series Fund shares
on the next Business Day after an order to purchase Series Fund shares is made.
Payment shall be in federal funds transmitted by wire.
1.5. The Series Fund agrees to redeem for cash, on the Company's
request, any full or fractional shares of the Series Fund held by the Company
or the Account, executing such requests on a daily basis at the net asset value
next computed after receipt by the Series Fund or its designee of the request
for redemption. For purposes of this Section 1.4, the Company shall be the
designee of the Series Fund for receipt of requests for redemption from the
Account and receipt by such designee shall constitute receipt by the Series
Fund; provided that the Series Fund receives notice of such request for
redemption by 9:30 a.m. Eastern time on the next following Business Day.
1.6. Issuance and transfer of the Series Fund's shares will be by
book entry only. Stock certificates will not be issued to the Company or the
Account. Shares ordered from the Series Fund will be recorded in an
appropriate title for the Account or the appropriate subaccount of the Account.
1.7. The Series Fund shall furnish same day notice (by wire or
telephone, followed by written confirmation) to the Company of any income,
dividends or capital gain distributions payable on the Series Fund's shares.
The Company hereby elects to receive all such income, dividends and capital
gain distributions of a Fund in the form of additional shares of that Fund. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Series Fund shall
notify the Company of the number of shares so issued as payment of such
dividends and distributions.
1.8. The Series Fund shall make the net asset value per share for
each Fund available to the Company on a daily basis as soon as reasonably
practical after those figures are calculated.
<PAGE> 3
The Series Fund shall use its best efforts to make such net asset value per
share information available by 7 p.m. Eastern time.
1.9. The Company agrees to purchase and redeem the shares of each
Fund offered by the then current prospectus of the Series Fund and in
accordance with the provisions of such prospectus. The Company agrees that all
net amounts available under the Contracts shall be invested in the Series Fund,
or in the Company's general account; provided, however, that such amounts may
also be invested in an investment company other than the Series Fund if (a)
such other investment company, or series thereof, has investment objectives or
policies that are substantially different from the investment objectives and
policies of all the Funds; or (b) the Company gives the Series Fund and the
Underwriter 45 days written notice of its intention to make such other
investment company available as a funding vehicle for the Contracts; or (c)
such other investment company was available as a funding vehicle for the
Contracts prior to the date of this Agreement; or (d) the Series Fund or the
Underwriter consents to the use of such other investment company.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that it is an insurance
company duly organized and in good standing under applicable law and that it
has legally and validly established the Account as a segregated asset account
under Section 38a-433 of the Connecticut Insurance Code and has registered the
Account as a unit investment trust under the 1940 Act.
2.2. The Company represents and warrants that the Contracts are
or will be registered under the 1933 Act, that the Contracts will be issued and
sold in compliance in all material respects with all applicable federal and
state laws, and that the sale of the Contracts shall comply in all material
respects with state insurance suitability requirements.
2.3. The Series Fund represents and warrants that it is lawfully
organized and validly existing Maryland Corporation, that it is registered as a
diversified, open-end management investment company under the 1940 Act, and
that it does and will comply in all materials respects with the 1940 Act.
2.4. The Series Fund represents and warrants that Series Fund
shares sold pursuant to this Agreement shall be registered under the 1933 Act,
duly authorized for issuance and sold in compliance with the laws of the State
of Maryland and all applicable federal and state securities laws. The Series
Fund shall amend the Registration Statement for its shares under the 1933 Act
and the 1940 Act from time to time as required in order to effect the
continuous offering of its shares.
2.5. The Series Fund represents and warrants that it is currently
qualified as a Regulated Investment Company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code") and that it will make every
effort to maintain such qualification (under Subchapter M or any successor or
similar provision) and that it will notify the Company immediately upon having
a reasonable basis for believing that it has ceased to so qualify or that it
might not so qualify in the future.
<PAGE> 4
2.6. The Series Fund represents and warrants that each Fund will
comply with Section 817(h) of the Code, all regulations issued thereunder and
all amendments or modifications to such Section or regulations, and that it
will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to comply or that it might not comply in the
future.
2.7. The Company represents and warrants that the Contracts are
currently treated as endowment, annuity or life insurance contracts, under
applicable provisions of the Code and that it will make every effort to
maintain such treatment and that it will notify the Series Fund and the
Underwriter immediately upon having a reasonable basis for believing that the
Contracts have ceased to be so treated or that they might not be so treated in
the future.
2.8. The Underwriter represents and warrants that it is a member
in good standing of the NASD and is registered with the SEC as a broker-dealer.
The Underwriter further represents that it will sell and distribute the Fund
shares in accordance with the laws of the State of New Jersey and all
applicable state and federal securities laws.
2.9. The Series Fund and the Underwriter represent and warrant
that all of their directors, officers, employees, investment advisers, and
other individuals/entities dealing with the money and/or securities of the
Series Fund are and shall continue to be at all times covered by a blanket
fidelity bond or similar coverage for the benefit of the Series Fund (the
"Bond") in an amount not less than the minimal coverage as required currently
by Rule 17g-1 of the 1940 Act or related provisions as may be promulgated from
time to time. The Bond shall include coverage for larceny and embezzlement and
shall be issued by a reputable bonding company.
2.10. The Company represents and warrants that all of its
directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Series
Fund are and shall continue to be at all times covered by a blanket fidelity
bond or similar coverage for the benefit of the Series Fund (the "Bond") in an
amount not less than the minimal coverage as required currently by entities
subject to the requirements of Rule 17g-1 of the 1940 Act or related provisions
as may be promulgated from time to time. The Bond shall include coverage for
larceny and embezzlement and shall be issued by a reputable bonding company.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS: VOTING
3.1. The Underwriter shall provide the Company (at the Company's
expense) with as many copies of the Series Fund's current prospectus as the
Company may reasonably request. If requested by the Company in lieu thereof,
the Series Fund shall provide such documentation (including a final copy of the
new prospectus as set in type at the Series Fund's expense) and other
assistance as is reasonably necessary in order for the Company once each year
(or more frequently if the prospectus for the Series Fund is amended) to have
the prospectus for the Contracts and the Series Fund's prospectus printed
together in one document (such printing to be at the Company's expense).
<PAGE> 5
3.2. The Underwriter or the Series Fund (at their expense) shall
print and provide a copy of the Series Fund current Statement of Additional
Information ("SAI") to the Company and to any owner of a Contract or
prospective owner who requests it. The Company may order additional copies of
the SAI at its expense.
3.3. The Series Fund, at its expense, shall provide the Company
with copies of its proxy materials, reports to stockholders, and other
communications to stockholders in such quantity as the Company shall reasonably
require for distributing to Contract owners.
3.4. If and to the extent required by law, the Company shall: (i)
solicit voting instructions from Contract owners; (ii) vote the Series Fund
shares in accordance with instructions received from Contract owners; and (iii)
vote Series Fund shares for which no instructions have been received in the
same proportion as Series Fund shares of such Fund for which instructions have
been received; all so long as and to the extent that the SEC continues to
interpret the 1940 Act to require pass-through voting privileges for variable
contract owners. The Company reserves the right to vote Series Fund shares
held in any segregated asset account in its own right, to the extent permitted
by law.
3.5. The Series Fund shall comply with 1940 Act's requirements
concerning shareholder meetings.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished,
to the Series Fund or its designee, each piece of sales literature or other
promotional material in which the Series Fund or its investment adviser or the
Underwriter is named, at least fifteen Business Days prior to its use. No such
material shall be used if the Series Fund or its designee object to such use
within fifteen Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Series Fund or concerning the
Series Fund in connection with the sale of the Contracts other than the
information or representations contained in the registration statement,
prospectus, or SAI for the Series Fund shares, as such registration statement,
prospectus, and SAI may be amended or supplemented from time to time, or in
reports or proxy statements for the Series Fund, or in sales literature or
other promotional material approved by the Series Fund or its designee or by
the Underwriter, except with the permission of the Series Fund or the
Underwriter or the designee of either.
4.3. The Series Fund, the Underwriter, or their designee shall
furnish, or shall cause to be furnished, to the Company or its designee, each
piece of sales literature or other promotional material in which the Company
and/or its separate account(s), is named, at least fifteen Business Days prior
to its use. No such material shall be used if the Company or its designee
object to such use within fifteen Business Days after receipt of such material.
4.4. The Series Fund and the Underwriter shall not give any
information or make any representations on behalf of the Company or concerning
the Company, the Account, or the
<PAGE> 6
Contracts other than the information or representations contained in the
registration statement, prospectus, and SAI for the Contracts, as such
registration statement, prospectus, or SAI may be amended or supplemented from
time to time, or in published reports for the Account which are in the public
domain or approved by the Company for distribution to Contract owners, or in
sales literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Series Fund will provide to the Company at least one
complete copy of all registration statements, prospectuses, SAIs, reports,
proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Series Fund or its shares, as soon as
reasonably practicable after the filing of such document with the SEC or other
regulatory authorities.
4.6. The Company will provide to the Series Fund at least one
complete copy of all registration statements, prospectuses, SAIs, reports,
solicitations for voting instructions, sales literature and other promotional
materials, applications for exemptions, requests for no action letters, and all
amendments to any of the above, that relate to the contracts or the Account, as
soon as reasonably practicable after the filing of such document with the SEC.
ARTICLE V. FEES AND EXPENSES
5.1. The Fund and the Underwriter shall pay no fee or other
compensation to the Company under this Agreement.
5.2. All expenses incident to performance by the Series Fund
under this Agreement shall be paid by the Series Fund. The Series Fund shall
bear the expenses for the cost of registration and qualification of the Series
Fund's shares, preparation and filing of the Series Fund's prospectus and
registration statement, proxy materials and reports, setting the prospectus in
type, printing and providing the Company with a sufficient quantity of the
Series Fund's prospectus for the Company to distribute to all existing owners
of Contracts, setting in type and printing the proxy materials and reports to
shareholders (including the costs of printing a prospectus that constitutes an
annual report), the preparation of all statements and notices required by any
federal or state law, all taxes on the issuance or transfer of the Series
Fund's shares.
5.3. The Company shall bear the expenses of printing and
distributing the Series Fund's prospectus to prospective owners of Contracts
and of distributing the Series Fund's proxy materials and reports to existing
Contract owners.
ARTICLE VI. POTENTIAL CONFLICTS
6.1. The Board will monitor the Series Fund for the existence of
any material irreconcilable conflict between the interests of the contract
owners of all separate accounts investing in the Series Fund. A material
irreconcilable conflict may arise for a variety of reasons, including: (a) an
action by any state insurance regulatory authority; (b) a change in applicable
federal or state insurance, tax, or securities laws or regulations, or a public
ruling, private letter
<PAGE> 7
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Fund are being managed; (e) a difference in voting instructions given by
variable annuity contract and variable life insurance contract owners; or (f) a
decision by an insurer to disregard the voting instructions of contract owners.
The Board shall promptly inform the Company if it determines that a material
irreconcilable conflict exists and the implications thereof.
6.2. The Company will report to the Board any potential or
existing conflicts of which it is aware. The Company will assist the Board in
carrying out its responsibilities under any exemptive order issued by the SEC
permitting shared funding by providing the Board with all information
reasonably necessary for the Board to consider any issues raised. This
includes, but is not limited to, an obligation by the Company to inform the
Board whenever contract owner voting instructions are disregarded.
6.3. If it is determined by a majority of the Board, or a
majority of its disinterested directors, that a material irreconcilable
conflict exists, the Company and other Participating Insurance Companies shall,
at their expense and to the extent reasonably practicable (as determined by a
majority of the disinterested directors), take whatever steps are necessary to
remedy or eliminate the material irreconcilable conflict, up to and including:
(1) withdrawing the assets allocable to some or all of the separate accounts
from the Series Fund or any Fund thereof and reinvesting such assets in a
different investment medium, including (but not limited to) another Fund of the
Series Fund, or submitting the question whether such segregation should be
implemented to a vote of all affected contract owners and, as appropriate,
segregating the assets of any appropriate group (i.e., annuity contract owners,
life insurance contract owners, or variable contract owners of one or more
Participating Insurance Companies) that votes in favor of such segregation, or
offering to the affected contract owners the option of making such a change;
and (2) establishing a new registered management investment company or managed
separate account.
6.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard contract owner voting instructions and
that decision represents a minority position or would preclude a majority vote,
the Company may be required, at the Series Fund's election, to withdraw the
affected account's investment in the Series Fund and terminate this Agreement
with respect to such account; provided, however that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested
members of the Board. Any such withdrawal and termination must take place
within six months after the Series Fund gives written notice that this
provision is being implemented, and until the end of that six-month period the
Underwriter and the Series Fund shall continue to accept and implement orders
by the Company for the purchase (and redemption) of shares of the Series Fund.
6.5. If a material irreconcilable conflict arises because a
decision of a particular state insurance regulator applicable to the Company
conflicts with the position of the majority of other state regulators, then the
Company will withdraw the affected account's investment in the Series Fund and
terminate this Agreement with respect to such account within six months after
the
<PAGE> 8
Board informs the Company in writing that it has determined that such decision
has created a material irreconcilable conflict; provided, however, that such
withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested members of the Board. Until the end of the foregoing six-month
period, the Underwriter and the Series Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Series Fund.
6.6. For purposes of Sections 6.3 through 6.6 of this Agreement,
a majority of the disinterested members of the Board shall determine whether
any proposed action adequately remedies any material irreconcilable conflict,
but in no event will the Series Fund be required to establish a new funding
medium for the Contracts. The Company shall not be required by Section 6.3 to
establish a new funding medium for the Contracts if an offer to do so has been
declined by vote of a majority of Contract owners materially adversely affected
by the material irreconcilable conflict. In the event that the Board
determines that any proposed action does not adequately remedy any material
irreconcilable conflict, then the Company will withdraw the account's
investment in the Series Fund and terminate this Agreement within six months
after the Board informs the Company in writing of the foregoing determination;
provided, however, that such withdrawal and termination shall be limited to the
extent required by any such material irreconcilable conflict as determined by a
majority of the disinterested members of the Board.
6.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief from any
provision of the 1940 Act or the rules promulgated thereunder with respect to
mixed or shared funding on terms and conditions materially different from those
contained in any exemptive order issued by the SEC permitting mixed or shared
funding, then (a) the Series Fund and/or the Participating Insurance Companies,
as appropriate, shall take such steps as may be necessary to comply with Rules
6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such
rules are applicable; and (b) Sections 3.4, 6.1, 6.2, 6.3, 6.4, and 6.5 of this
Agreement shall continue in effect only to the extent that terms and conditions
substantially identical to such Sections are contained in such Rule(s) as so
amended or adopted.
ARTICLE VII. INDEMNIFICATION
7.1. Indemnification By The Company
7.1.(a) The Company agrees to indemnify and hold harmless
the Series Fund and each director of the Board and officers and each person, if
any, who controls the Series Fund within the meaning of Section 15 of the 1933
Act (collectively, the "Indemnified Parties" for purposes of this Section 7.1)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Company) or litigation
(including legal and other expenses), to which the Indemnified Parties may
become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisition of the
Series Fund's shares or the Contracts and:
<PAGE> 9
(i) arise out of or are based upon any untrue
statements or alleged untrue statements of any
material fact contained in the Registration Statement
or prospectus for the Contracts or contained in the
Contracts or sales literature for the Contracts (or
any amendment or supplement to any of the foregoing),
or arise out of or are based upon the omission or the
alleged omission to state therein a material fact
required to be stated therein or necessary to make
the statements therein not misleading, provided that
this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or
such alleged statement or omission was made in
reliance upon and in conformity with information
furnished to the Company by or on behalf of the
Series Fund for use in the Registration Statement or
prospectus for the Contracts or in the Contracts or
sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the
Contracts or Series Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or
representations contained in the Registration
Statement, prospectus or sales literature of the
Series Fund not supplied by the Company or persons
under its control) or wrongful conduct of the Company
or persons under its control, with respect to the
sale or distribution of the Contracts or Series Fund
shares: or
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact contained in a
Registration Statement, prospectus, or sales
literature of the Series Fund or any amendment
thereof or supplement thereto or the omission or
alleged omission to state therein a material fact
required to be stated therein or necessary to make
the statements therein not misleading if such a
statement or omission was made in reliance upon
information furnished to the Series Fund by or on
behalf of the Company; or
(iv) arise as a result of any failure by the Company
to provide the services and furnish the materials
under the terms of this Agreement; or
(v) arise out of or result from any material breach
of any representation and/or warranty made by the
Company in this Agreement or arise out of or result
from any other material breach of this Agreement by
the Company, as limited by and in accordance with the
provisions of Sections 7.1(b) and 7.1(c) hereof.
7.1.(b) The Company shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities, or litigation incurred or assessed against an Indemnified Party as
such may arise from such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations or duties
under this Agreement or to the Series Fund, whichever is applicable.
<PAGE> 10
7.1.(c) The Company shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Company in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Company of
any such claim shall not relieve the Company from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Company shall be entitled to
participate, at its own expense, in the defense of such action. The Company
also shall be entitled to assume the defense thereof, with counsel satisfactory
to the party named in the action. After notice from the Company to such party
of the Company's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the Company will not be liable to such party under this Agreement for any legal
or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
7.1.(d) The Indemnified Parties will promptly notify the
Company of the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Series Fund shares or the Contracts
or the operation of the Series Fund.
7.2. Indemnification by the Underwriter
7.2.(a) The Underwriter agrees to indemnify and hold
harmless the Company and each of its directors and officers and each person, if
any, who controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 7.2)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses) to which the Indemnified Parties may
become subject under any statute, at common law or otherwise, insofar as such
losses, claims, damages, liabilities, or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the Series
Fund's shares or the contracts and:
(i) arise out of or are based upon any untrue
statements or alleged untrue statements of any
material fact contained in the Registration Statement
or prospectus or sales literature of the Series Fund
(or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statements therein not
misleading, provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or
omission was made in reliance upon and in conformity
with information furnished to the Underwriter or the
Series Fund by or on behalf of the Company for use in
the Registration Statement or prospectus for the
Series Fund or in sales literature (or any amendment
or supplement) or otherwise for use in connection
with the sale of the Contracts or Series Fund shares;
or
<PAGE> 11
(ii) arise out of or as a result of statements or
representations (other than statements or
representations contained in the Registration
Statement, prospectus, or sales literature for the
Contracts not supplied by the Underwriter or persons
under its control) or wrongful conduct of the Series
Fund or Underwriter or persons under their control,
with respect to the sale or distribution of the
Contracts or Series Fund shares; or
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact contained in a
Registration Statement, prospectus, or sales
literature covering the Contracts, or any amendment
thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact
required to be stated therein or necessary to make
the statements therein not misleading, if such a
statement or omission was made in reliance upon
information furnished to the Company by or on behalf
of the Series Fund; or
(iv) arise as a result of any failure by the Series
Fund to provide the services and furnish the
materials under the terms of this Agreement
(including a failure, whether unintentional or in
good faith or otherwise, to comply with the
diversification requirements specified in Section 2.6
of this Agreement); or
(v) arise out of or result from any material breach
of any representation and/or warranty made by the
Underwriter in this Agreement or arise out of or
result from any other material breach of this
Agreement by the Underwriter, as limited by and in
accordance with the provisions of Sections 7.2(b) and
7.2(c) hereof.
7.2.(b) The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities, or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith,
or gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Company or the Account, whichever is applicable.
7.2.(c) The Underwriter shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Underwriter in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Underwriter
of any such claim shall not relieve the Underwriter from any liability which it
may have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense of such action. The
Underwriter also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from the
Underwriter to such party of the Underwriter's election to assume the defense
thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel
<PAGE> 12
retained by it, and the Underwriter will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable
costs of investigation.
7.2.(d) The Company agrees promptly to notify the
Underwriter of the commencement of any litigation or proceedings against it or
any of its officers or directors in connection with the issuance or sale of the
Contracts or the operation of the Account.
7.3. Indemnification By the Series Fund
7.3.(a) The Series Fund agrees to indemnify and hold
harmless the Company, and each of its directors and officers and each person,
if any, who controls the Company within the meaning of Section 15 of the 1933
Act (collectively, the "Indemnified Parties" for purposes of this Section 7.3)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Series Fund) or litigation
(including legal and other expenses) to which the Indemnified Parties may
become subject under any statute, at common law or otherwise, insofar as such
losses, claims, damages, liabilities, or expenses (or actions in respect
thereof) or settlements result from the gross negligence, bad faith, or willful
misconduct of the Board or any member thereof, are related to the operations of
the Series Fund and:
(i) arise as a result of any failure by the Series
Fund to provide the services and furnish the
materials under the terms of this Agreement
(including a failure to comply with the
diversification requirements specified in Section 2.6
of this Agreement); or
(ii) arise out of or result from any material breach
of any representation and/or warranty made by the
Series Fund in this Agreement or arise out of or
result from any other material breach of this
Agreement by the Series Fund;
as limited by and in accordance with the provisions of Sections 7.3(b) and
7.3(c) hereof.
7.3.(b) The Series Fund shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities, or litigation incurred or assessed against an Indemnified Party as
such may arise from such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Company, the Series Fund, the Underwriter, or
the Account, whichever is applicable.
7.3.(c) The Series Fund shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Series Fund in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Series Fund
of any such claim shall not relieve the Series Fund from any liability which it
may have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such
<PAGE> 13
action is brought against the Indemnified Parties, the Series Fund will be
entitled to participate, at its own expense, in the defense of such action.
The Series Fund also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice from the
Series Fund to such party of the Series Fund's election to assume the defense
thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Series Fund will not be liable to
such party under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the defense thereof
other than reasonable costs of investigation.
7.3.(d) The Company agrees promptly to notify the Series
Fund of the commencement of any litigation or proceedings against it or any of
its officers or directors in connection with this Agreement, the issuance or
sale of the Contracts, with respect to the operation of the Account, or the
sale or acquisition of shares of the Series Fund.
ARTICLE VIII. APPLICABLE LAW
8.1. This Agreement shall be governed and construed in accordance
with the laws of the State of New Jersey.
8.2. This Agreement shall be subject to the provisions of the
1933, 1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules, and regulations as the
SEC may grant, and the terms of this Agreement shall be interpreted and
construed in accordance therewith.
ARTICLE IX. Termination
9.1. This Agreement shall terminate:
(a) at the option of any party upon one year advance
written notice to the other parties; or
(b) at the option of the Company to the extent that shares
of the Funds are not reasonably available to meet the
requirements of the Contracts as determined by the Company;
provided, however, that such termination shall apply only to
the Fund(s) not reasonably available. Prompt notice of the
election to terminate for such cause shall be furnished by
the Company; or
(c) at the option of the Series Fund in the event that
formal administrative proceedings are instituted against the
Company by the NASD, the SEC, the Insurance Commissioner, or
any other regulatory body regarding the Company's duties
under this Agreement or related to the sale of the
Contracts, with respect to the operation of the Account, or
the purchase of the Series Fund shares; provided, however,
that the Series Fund determines in its sole judgment
exercised in good faith that any such administrative
proceedings will have a material adverse effect upon the
ability of the Company to perform its obligations under this
Agreement; or
<PAGE> 14
(d) at the option of the Company in the event that formal
administrative proceedings are instituted against the Series
Fund or the Underwriter by the NASD, the SEC, or any state
securities or insurance department, or any other regulatory
body; provided, however, that the Company determines in its
sole judgment exercised in good faith that any such
administrative proceedings will have a material adverse
effect upon the ability of the Series Fund or the
Underwriter to perform their obligations under this
Agreement; or
(e) with respect to the Account, upon requisite vote of the
Contract owners having an interest in such Account (or any
subaccount) to substitute the shares of another investment
company for Series Fund shares. The Company will give 30
days' prior written notice to the Series Fund of the date of
any proposed vote to replace the Series Fund's shares: or
(f) at the option of the Company, in the event any of the
Series Fund's shares are not registered, issued, or sold in
accordance with applicable state and/or federal law or such
law precludes the use of such shares as the underlying
investment media of the Contracts; or
(g) at the option of the Company, if the Series Fund ceases
to qualify as a Regulated Investment Company under
Subchapter M of the Code or under any successor or similar
provision, or if the Company reasonably believes that the
Series Fund may fail to so qualify; or
(h) at the option of the Company, if the Series Fund fails
to meet the diversification requirements of the Code; or
(i) at the option of either the Series Fund or the
Underwriter, if (1) the Series Fund or the Underwriter,
respectively, shall determine, in their sole judgment
reasonably exercised in good faith, that the Company has
suffered a material adverse change in its business or
financial condition or is the subject of material adverse
publicity and such material adverse change or material
adverse publicity will have a material adverse impact upon
the business and operations of either the Series Fund or the
Underwriter, (2) the Series Fund or the Underwriter shall
notify the Company in writing of such determination and its
intent to terminate this Agreement, and (3) after
considering the actions taken by the Company and any other
changes in circumstances since the giving of such notice,
such determination of the Series Fund or the Underwriter
shall continue to apply on the sixtieth (60th) day following
the giving of such notice, which sixtieth day shall be the
effective date of termination; or
(j) at the option of the Company, if (1) the Company shall
determine, in its sole judgment reasonably exercised in good
faith, that either the Series Fund or the Underwriter has
suffered a material adverse change in its business or
financial condition or is the subject of material adverse
publicity and such material adverse change or material
adverse publicity will have a material adverse impact upon
the business and operations of the Company, (2) the Company
shall notify the Series
<PAGE> 15
Fund and the Underwriter in writing of such determination
and its intent to terminate the Agreement, and (3) after
considering the actions taken by the Series Fund and/or the
Underwriter and any other changes in circumstances since the
giving of such notice, such determination shall continue to
apply on the sixtieth (60th) day following the giving of
such notice, which sixtieth day shall be the effective date
of termination; or
(k) at the option of either the Series Fund or the
Underwriter, if the Company gives the Series Fund and the
Underwriter the written notice specified in Section l.9(b)
hereof and at the time such notice was given there was no
notice of termination outstanding under any other provision
of this Agreement; provided, however, any termination under
this Section 10.1(k) shall be effective forty-five (45) days
after the notice specified in Section 1.9(b) was given.
9.2. It is understood and agreed that the right of any party
hereto to terminate this Agreement pursuant to Section 9.1(a) may be exercised
for any reason or for no reason.
9.3. Notice Requirement. No termination of this Agreement shall
be effective unless and until the party terminating this Agreement gives prior
written notice to all other parties to this Agreement of its intent to
terminate which notice shall set forth the basis for such termination.
Furthermore,
(a) in the event that any termination is based upon the
provisions of Article VI, or the provision of Section
9.1(a), 9.1(i), 9.1(j) or 9.1(k) of this Agreement, such
prior written notice shall be given in advance of the
effective date of termination as required by such
provisions; and
(b) in the event that any termination is based upon the
provisions of Section 9.1(c) or 9.1(d) of this Agreement,
such prior written notice shall be given at least ninety
(90) days before the effective date of termination.
9.4. Effect of Termination. Notwithstanding any termination of
this Agreement, the Series Fund and the Underwriter shall, at the option of the
Company, continue to make available additional shares of the Series Fund
pursuant to the terms and conditions of this Agreement, for all Contracts in
effect on the effective date of termination of this Agreement (the "Existing
Contracts"). Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to reallocate investments in the Series Fund,
redeem investments in the Series Fund, and/or invest in the Series Fund upon
the making of additional purchase payments under the Existing Contracts. The
parties agree that this Section 9.4 shall not apply to any terminations under
Article VI and the effect of such Article VI terminations shall be governed by
Article VI of this Agreement.
9.5. The Company shall not redeem Series Fund shares attributable
to the Contracts (as opposed to Series Fund shares purchased directly by the
Company to provide seed money and Series Fund shares attributable to the
Company's assets held in the Account) except (i) as necessary to implement
Contract owner initiated transactions, or (ii) as required by state and/or
<PAGE> 16
federal laws or regulations or judicial or other legal precedent of general
application (a "Legally Required Redemption"). Upon request, the Company will
promptly furnish to the Series Fund and the Underwriter the opinion of counsel
for the Company (which counsel shall be reasonably satisfactory to the Series
Fund and the Underwriter) to the effect that any redemption pursuant to clause
(ii) above is a Legally Required Redemption. Furthermore, except in cases
where permitted under the terms of the Contracts, the Company shall not prevent
Contract owners from allocating payments to a Fund that was otherwise available
under the Contracts without first giving the Series Fund or the Underwriter 90
days notice of its intention to do so.
ARTICLE X. NOTICES
10.1. Any notice shall be sufficiently given when sent by
registered or certified mail (return receipt requested) to the other party at
the address of such party set forth below or at such other address as such
party may from time to time specify in writing to the other party.
If to the Series Fund:
Odyssey Funds, Inc.
Two Tower Center
East Brunswick, NJ 08816
Attention: Secretary
If to the Company:
The Travelers Insurance Company
One Tower Square
Hartford, CT 06183
Attention: Ronald R. Gendreau, Annuity Division
If to the Underwriter:
Copeland Equities, Inc.
Two Tower Center
East Brunswick, NJ 08816
Attention: Secretary
ARTICLE XI. MISCELLANEOUS
11.1. All persons dealing with the Series Fund must look
solely to the property of the Series Fund for the enforcement of any claims
against the Series Fund as neither the Board, officers, agents, or shareholders
assume any personal liability for obligations entered into on behalf of the
Series Fund.
<PAGE> 17
11.2. Subject to the requirements of legal process and
regulatory authority, each party hereto shall treat as confidential the names
and addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto and, except as
permitted by this Agreement, shall not disclose, disseminate, or utilize such
names and addresses and other confidential information until such time as it
may come into the public domain without the express written consent of the
affected party.
11.3. The captions in this Agreement are included for
convenience of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
11.4. This Agreement may be executed simultaneously in two or
more counterparts, each of which taken together shall constitute one
instrument.
11.5. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule, or otherwise, the remainder of the
Agreement shall not be affected thereby.
11.6. Each party hereto shall cooperate with each other party
and all appropriate governmental authorities (including without limitation the
SEC, the NASD, and state insurance regulators) and shall permit such
authorities reasonable access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
11.7. The rights, remedies, and obligations contained in this
Agreement are cumulative and are in addition to any and all rights, remedies,
and obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be executed by their officers designated below as of the day and year first
above written.
ODYSSEY FUNDS, INC.
/s/ By its President
THE TRAVELERS INSURANCE COMPANY
/s/ By its Vice President
COPELAND EQUITIES, INC.
/s/ By its Senior Vice President
<PAGE> 18
SCHEDULE A
The Travelers Fund U for Variable Annuities, established May 7,
1982.
<PAGE> 1
EXHIBIT 9
April 18, 1996
The Travelers Insurance Company
The Travelers Fund U for Variable Annuities
One Tower Square
Hartford, Connecticut 06183
Gentlemen:
With reference to the Post-Effective Amendment No. 29 to the
Registration Statement on Form N-4 filed by The Travelers Insurance Company and
The Travelers Fund U for Variable Annuities with the Securities and Exchange
Commission covering individual and group variable annuity contracts, I have
examined such documents and such law as I have considered necessary and
appropriate, and on the basis of such examination, it is my opinion that:
1. The Travelers Insurance Company is duly organized and existing
under the laws of the State of Connecticut and has been duly
authorized to do business and to issue variable annuity contracts
by the Insurance Commissioner of the State of Connecticut.
2. The Travelers Fund U for Variable Annuities is a duly authorized
and validly existing separate account established pursuant to
Section 38a-433 of the Connecticut General Statutes.
3. The variable annuity contracts covered by the above Registration
Statement, and all Post-Effective Amendments related thereto,
have been approved and authorized by the Insurance Commissioner
of the State of Connecticut and when issued will be valid, legal
and binding obligations of The Travelers Insurance Company and of
The Travelers Fund U for Variable Annuities.
4. Assets of The Travelers Fund U for Variable Annuities are not
chargeable with liabilities arising out of any other business The
Travelers Insurance Company may conduct.
I hereby consent to the filing of this opinion as an exhibit to the
above-referenced Post-Effective Amendment and to the reference to this opinion
under the caption "Legal Proceedings and Opinion" in the Prospectus
constituting a part of such Post-Effective Amendment.
Very truly yours,
Ernest J. Wright
General Counsel
Life and Annuities Division
The Travelers Insurance Company
<PAGE> 1
Exhibit 10(a)
Consent of Independent Accountants
We consent to the the inclusion in this Post-Effective Amendment No. 29 of the
Registration Statement on Form N-4 of our report dated February 20, 1996, on
uor audits of the financial statements of The Travelers Fund U for Variable
Annuitites, and of our reports dated February 16, 1996, on our audits of the
financial statements of The Travelers Quality Bond Account for Variable
Annuities, 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 and The Travelers Timed Bond Account for
Variable Annuities for the year ended December 31, 1995, and of our report
dated January 24, 1994, on our audit of the consolidated statements of
operations, retained earnings and cash flows of The Travelers Insurance Company
and Subsidiaries for the year ended December 31, 1993. We also consent to the
reference to our Firm as experts in accounting and auditing under the caption
"Independent Accountants" in the Statement of Additional Information.
Coopers & Lybrand L.L.P.
Hartford, Connecticut
April 18, 1996
<PAGE> 1
Exhibit 10(b)
Consent of Independent Certified Public Accountants
The Board of Directors
The Travelers Insurance Company:
We consent to the use of our report included herein and to the reference to our
Firm as experts under the heading "Independent Accountants" in the Prospectus.
Our report refers to a change in accounting for investments in accordance with
the provisions of Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," in 1994.
/s/ KPMG Peat Marwick
April 18, 1996
<PAGE> 1
EXHIBIT 13
THE TRAVELERS FUND U FOR VARIABLE ANNUITIES
SCHEDULE FOR COMPUTATION OF TOTAL RETURN CALCULATIONS
Total Return Calculation (Standardized)
The "1-year rate" represents fund performance for the period January 1, 1995
through December 31, 1995.
The "5-year rate" is for the period January 1, 1991 through December 31, 1995.
The "10-year rate" is from January 1, 1986 through December 31, 1995
1/n
T = (ERV/P) where:
T = average annual total return
P = a hypothetical initial payment of $1,000
n = 1 for the "1-year rate", 5 for the "5-year rate", and 10 for the
"10-year rate"
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of each of the periods
For calculating the redeemable value, the $15 semiannual administrative charge
was expressed as a percentage of assets based on the actual fee collected
divided by the average net assets per contracts sold under that prospectus for
each year for which performance was shown, and was assumed to be deducted on
June 30 and December 31 of each year.
The unit values used in the calculation reflect the deduction for the
investment advisory fees for the fund and the mortality and expense risk
charge. Since the 5% contingent deferred sales charge applies only for five
years, the ERV for the end of the 10 year period does not reflect this charge.
Total Return Calculation (Non-Standardized)
The non-standardized rate represents fund performance for the calendar
year-to-date, and for the most recent 1-year 3-year, 5-year and 10-year
periods. The 1-year rate is for the period January 1, 1995 through December 31,
1995; the 3-year rate is for the period January 1, 1993 through December 31,
1995; and the 10-year rate is for the period January 1, 1986 through December
31, 1995.
The non-standardized total returns reflect a percentage change in the value of
an Accumulation Unit based on the performance of an account over periods of 1
year, 3 years, 5 years and 10 years, determined by dividing the increase
(decrease) in value for that unit by the Accumulation Unit Value at the
beginning of the period. This percentage figure reflects the deduction of asset
based charges, but does not reflect the deduction of semiannual administrative
charges or contingent deferred sales charges. The deduction of the semiannual
administrative charge or the contingent deferred sales charge would reduce any
percentage increase or make greater any percentage decrease.
For a Schedule of the Computation of the Total Return Quotations, both
Standardized and Non-Standardized, see attached.
<PAGE> 2
TIC
UA STANDARDIZED PERFORMANCE
GROWTH & INCOME FUND
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 SEMFEE
- ---- ----- ------- ----- ------- ----- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/85 3.274721 1,000.00 305.370 .003520
03/31/86 3.724563 .002800
06/30/86 3.862283 -1.53 -.395 .002800
09/30/86 3.603691 .002800
12/31/86 3.738026 -1.62 -.434 .002800
03/31/87 4.422457 .003960
06/30/87 4.480700 -2.48 -.553 .003960
09/30/87 4.661013 .003960
12/31/87 3.600787 -2.43 -.675 .003960
03/31/88 3.864699 .003150
06/30/88 4.108341 -1.84 -.448 .003150
09/30/88 4.136286 .003150
12/30/88 4.191498 -1.98 -.472 .003150
03/31/89 4.483892 .002680
06/30/89 4.818705 -1.83 -.379 .002680
09/29/89 5.224172 .002680
12/29/89 5.297970 -2.05 -.386 .002680
03/30/90 5.085348 .002830
06/29/90 5.425945 -2.29 -.422 .002830
09/28/90 4.670304 .002830
12/31/90 5.048239 1,000.00 198.089 -2.23 -.442 .002830
03/28/91 5.681417 .002970
06/28/91 5.544001 -1.56 -.281 -2.37 -.427 .002970
09/30/91 5.982666 .002970
12/31/91 6.447267 -1.76 -.273 -2.67 -.415 .002970
03/31/92 6.054138 .003500
06/30/92 6.096339 -2.17 -.356 -3.29 -.540 .003500
09/30/92 6.226924 .003500
12/31/92 6.506697 -2.17 -.334 -3.30 -.507 .003500
03/31/93 6.771922 .003410
06/30/93 6.766547 -2.23 -.329 -3.38 -.500 .003410
09/30/93 6.923488 .003410
12/31/93 7.006536 -2.31 -.329 -3.50 -.500 .003410
03/31/94 6.692617 .002910
06/30/94 6.691273 -1.96 -.292 -2.97 -.444 .002910
09/30/94 6.986911 .002910
12/30/94 6.917241 1,000.00 144.566 -1.94 -.280 -2.94 -.426 .002910
03/31/95 7.581334 .001850
06/30/95 8.318112 -1.02 -.122 -1.38 -.166 -2.09 -.252 .001850
09/29/95 8.962376 .001850
12/29/95 9.368819 -1.18 -.126 -1.60 -.171 -2.43 -.259 .001850
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR TEN YEAR
<S> <C> <C> <C>
ENDING UNITS 144.318 195.277 296.494
ACCOUNT VALUE 1,352.09 1,829.52 2,777.80
SURRENDER VALUE 1,302.09 1,779.52
TOTAL RETURN 30.21 % 77.95 % 177.78 %
ANNUALIZED RETURN 12.22 % 10.76 %
</TABLE>
<PAGE> 3
UA STANDARDIZED PERFORMANCE
QUALITY BOND FUND
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 SEMFEE
- ---- ----- ------- ----- ------- ----- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/85 2.371032 1,000.00 421.757 .003520
03/31/86 2.484173 .002800
06/30/86 2.510261 -1.44 -.574 .002800
09/30/86 2.562290 .002800
12/31/86 2.629004 -1.52 -.576 .002800
03/31/87 2.671202 .003960
06/30/87 2.629709 -2.19 -.833 .003960
09/30/87 2.591627 .003960
12/31/87 2.697586 -2.21 -.821 .003960
03/31/88 2.795872 .003150
06/30/88 2.806798 -1.82 -.647 .003150
09/30/88 2.831701 .003150
12/30/88 2.852210 -1.86 -.654 .003150
03/31/89 2.856949 .002680
06/30/89 3.019819 -1.64 -.544 .002680
09/29/89 3.045791 .002680
12/29/89 3.128870 -1.72 -.549 .002680
03/30/90 3.126373 .002830
06/29/90 3.211662 -1.87 -.582 .002830
09/28/90 3.250241 .002830
12/31/90 3.356924 1,000.00 297.892 -1.93 -.576 .002830
03/28/91 3.442096 .002970
06/28/91 3.510775 -1.52 -.433 -2.12 -.603 .002970
09/30/91 3.657534 .002970
12/31/91 3.798712 -1.61 -.425 -2.25 -.593 .002970
03/31/92 3.784626 .003500
06/30/92 3.906250 -2.00 -.513 -2.79 -.715 .003500
09/30/92 4.068601 .003500
12/31/92 4.051961 -2.06 -.510 -2.88 -.711 .003500
03/31/93 4.209075 .003410
06/30/93 4.301122 -2.11 -.490 -2.94 -.683 .003410
09/30/93 4.387422 .003410
12/31/93 4.380675 -2.19 -.499 -3.05 -.696 .003410
03/31/94 4.286274 .002910
06/30/94 4.267932 -1.86 -.435 -2.59 -.606 .002910
09/30/94 4.288726 .002910
12/30/94 4.274446 1,000.00 233.948 -1.83 -.428 -2.55 -.597 .002910
03/31/95 4.463970 .001850
06/30/95 4.670550 -.97 -.207 -1.22 -.261 -1.70 -.363 .001850
09/29/95 4.729498 .001850
12/29/95 4.893919 -1.03 -.211 -1.30 -.266 -1.81 -.370 .001850
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR TEN YEAR
<S> <C> <C> <C>
ENDING UNITS 233.530 293.633 409.463
ACCOUNT VALUE 1,142.88 1,437.02 2,003.88
SURRENDER VALUE 1,092.88 1,387.02
TOTAL RETURN 9.29 % 38.70 % 100.39 %
ANNUALIZED RETURN 6.77 % 7.20 %
</TABLE>
<PAGE> 4
UA STANDARDIZED PERFORMANCE
DREYFUS STOCK INDEX FUND
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 SEMFEE
- ---- ----- ------- ----- ------- ----- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
09/30/89 .807971 1,000.00 1,237.668 .002680
12/31/89 .822856 -.68 -.828 .002680
03/31/90 .795004 .002830
06/30/90 .840749 -1.46 -1.732 .002830
09/30/90 .723607 .002830
12/31/90 .784249 1,000.00 1,275.105 -1.42 -1.811 .002830
03/31/91 .894569 .002970
06/30/91 .888822 -1.58 -1.782 -1.53 -1.724 .002970
09/30/91 .931911 .002970
12/31/91 1.005682 -1.79 -1.781 -1.73 -1.723 .002970
03/31/92 .976358 .003500
06/30/92 .990287 -2.22 -2.242 -2.15 -2.169 .003500
09/30/92 1.017069 .003500
12/31/92 1.063662 -2.28 -2.145 -2.21 -2.074 .003500
03/31/93 1.103994 .003410
06/30/93 1.104058 -2.34 -2.121 -2.26 -2.051 .003410
09/30/93 1.127227 .003410
12/31/93 1.148463 -2.43 -2.115 -2.35 -2.046 .003410
03/31/94 1.100683 .002910
06/30/94 1.100821 -2.07 -1.877 -2.00 -1.816 .002910
09/30/94 1.148798 .002910
12/30/94 1.144205 1,000.00 873.969 -2.06 -1.800 -1.99 -1.741 .002910
03/31/95 1.250834 .001850
06/30/95 1.362735 -1.01 -.744 -1.46 -1.071 -1.41 -1.036 .001850
09/29/95 1.465091 .001850
12/29/95 1.545680 -1.17 -.760 -1.69 -1.095 -1.64 -1.059 .001850
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR SINCE INCEPTION
<S> <C> <C> <C>
ENDING UNITS 872.466 1,257.075 1,215.859
ACCOUNT VALUE 1,348.55 1,943.04 1,879.33
SURRENDER VALUE 1,298.55 1,893.04
TOTAL RETURN 29.86 % 89.30 % 87.93 %
ANNUALIZED RETURN 13.62 % 10.62 %
</TABLE>
<PAGE> 5
UA STANDARDIZED PERFORMANCE
FIDELITY ASSET MANAGER PORTFOLIO
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 SEMFEE
- ---- ----- ------- ----- ------- ----- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
09/06/89 .769163 1,000.00 1,300.115 .002680
09/30/89 .767789 .002680
12/31/89 .772372 -.85 -1.105 .002680
03/31/90 .766878 .002830
06/30/90 .799139 -1.44 -1.807 .002830
09/30/90 .752903 .002830
12/31/90 .813985 1,000.00 1,228.524 -1.48 -1.819 .002830
03/31/91 .897954 .002970
06/30/91 .912510 -1.57 -1.726 -1.66 -1.820 .002970
09/30/91 .956830 .002970
12/31/91 .985224 -1.73 -1.755 -1.82 -1.850 .002970
03/31/92 1.011568 .003500
06/30/92 1.032958 -2.16 -2.094 -2.28 -2.208 .003500
09/30/92 1.050109 .003500
12/31/92 1.088353 -2.27 -2.086 -2.39 -2.199 .003500
03/31/93 1.144645 .003410
06/30/93 1.176733 -2.36 -2.003 -2.49 -2.112 .003410
09/30/93 1.222979 .003410
12/31/93 1.300962 -2.57 -1.979 -2.71 -2.087 .003410
03/31/94 1.234767 .002910
06/30/94 1.218600 -2.23 -1.830 -2.35 -1.930 .002910
09/30/94 1.249846 .002910
12/30/94 1.206570 1,000.00 828.796 -2.14 -1.777 -2.26 -1.873 .002910
03/31/95 1.230368 .001850
06/30/95 1.272729 -.95 -.747 -1.39 -1.093 -1.47 -1.153 .001850
09/29/95 1.346710 .001850
12/29/95 1.393727 -1.02 -.733 -1.49 -1.073 -1.58 -1.131 .001850
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR SINCE INCEPTION
<S> <C> <C> <C>
ENDING UNITS 827.316 1,211.108 1,277.020
ACCOUNT VALUE 1,153.05 1,687.95 1,779.82
SURRENDER VALUE 1,103.05 1,637.95
TOTAL RETURN 10.31 % 63.80 % 77.98 %
ANNUALIZED RETURN 10.38 % 9.56 %
</TABLE>
<PAGE> 6
UA STANDARDIZED PERFORMANCE
FIDELITY HIGH INCOME PORTFOLIO
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 SEMFEE
- ---- ----- ------- ----- ------- ----- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/85 .598305 1,000.00 1,671.388 .003520
03/31/86 .639679 .002800
06/30/86 .666687 -1.48 -2.220 .002800
09/30/86 .670893 .002800
12/31/86 .695343 -1.59 -2.289 .002800
03/31/87 .737566 .003960
06/30/87 .720910 -2.34 -3.242 .003960
09/30/87 .700111 .003960
12/31/87 .695054 -2.33 -3.355 .003960
03/31/88 .731804 .003150
06/30/88 .749507 -1.89 -2.520 .003150
09/30/88 .757344 .003150
12/31/88 .766334 -1.98 -2.582 .003150
03/31/89 .776053 .002680
06/30/89 .801525 -1.74 -2.169 .002680
09/30/89 .761552 .002680
12/31/89 .725251 -1.69 -2.332 .002680
03/31/90 .688779 .002830
06/30/90 .713891 -1.68 -2.354 .002830
09/30/90 .693724 .002830
12/31/90 .700220 1,000.00 1,428.123 -1.65 -2.355 .002830
03/31/91 .779113 .002970
06/30/91 .833787 -1.63 -1.951 -1.87 -2.248 .002970
09/30/91 .893910 .002970
12/31/91 .934139 -1.87 -2.004 -2.16 -2.310 .002970
03/31/92 1.051533 .003500
06/30/92 1.080335 -2.51 -2.324 -2.89 -2.678 .003500
09/30/92 1.132682 .003500
12/31/92 1.137517 -2.76 -2.426 -3.18 -2.796 .003500
03/31/93 1.212775 .003410
06/30/93 1.266920 -2.91 -2.297 -3.35 -2.647 .003410
09/30/93 1.293522 .003410
12/31/93 1.353807 -3.17 -2.339 -3.65 -2.695 .003410
03/31/94 1.346061 .002910
06/30/94 1.325859 -2.76 -2.080 -3.18 -2.398 .002910
09/30/94 1.336418 .002910
12/30/94 1.316357 1,000.00 759.672 -2.72 -2.063 -3.13 -2.378 .002910
03/31/95 1.388275 .001850
06/30/95 1.465121 -.98 -.667 -1.81 -1.239 -2.09 -1.428 .001850
09/29/95 1.532383 .001850
12/29/95 1.567961 -1.06 -.679 -1.98 -1.261 -2.28 -1.453 .001850
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR SINCE INCEPTION
<S> <C> <C> <C>
ENDING UNITS 758.326 1,408.140 1,622.940
ACCOUNT VALUE 1,189.03 2,207.91 2,544.71
SURRENDER VALUE 1,139.03 2,157.91
TOTAL RETURN 13.90 % 115.79 % 154.47 %
ANNUALIZED RETURN 16.64 % 9.79 %
</TABLE>
<PAGE> 7
UA STANDARDIZED PERFORMANCE
FIDELITY EQUITY-INCOME PORTFOLIO
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 SEMFEE
- ---- ----- ------- ----- ------- ----- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10/09/86 .524217 1,000.00 1,907.607 .002800
12/31/86 .523774 -.64 -1.215 .002800
03/31/87 .610766 .003960
06/30/87 .609820 -2.14 -3.508 .003960
09/30/87 .634819 .003960
12/31/87 .511397 -2.11 -4.130 .003960
03/31/88 .563154 .003150
06/30/88 .611254 -1.68 -2.746 .003150
09/30/88 .615505 .003150
12/31/88 .619753 -1.84 -2.966 .003150
03/31/89 .666753 .002680
06/30/89 .711341 -1.69 -2.373 .002680
09/30/89 .753957 .002680
12/31/89 .718237 -1.81 -2.521 .002680
03/31/90 .672708 .002830
06/30/90 .683324 -1.87 -2.740 .002830
09/30/90 .564035 .002830
12/31/90 .600841 1,000.00 1,664.334 -1.71 -2.851 .002830
03/31/91 .688643 .002970
06/30/91 .697811 -1.60 -2.300 -1.82 -2.601 .002970
09/30/91 .745366 .002970
12/31/91 .779960 -1.82 -2.338 -2.06 -2.645 .002970
03/31/92 .803652 .003500
06/30/92 .825563 -2.33 -2.824 -2.64 -3.195 .003500
09/30/92 .838214 .003500
12/31/92 .900353 -2.50 -2.779 -2.83 -3.143 .003500
03/31/93 .973310 .003410
06/30/93 .995302 -2.67 -2.686 -3.02 -3.038 .003410
09/30/93 1.040209 .003410
12/31/93 1.051644 -2.88 -2.740 -3.26 -3.100 .003410
03/31/94 1.021781 .002910
06/30/94 1.057170 -2.53 -2.393 -2.86 -2.706 .002910
09/30/94 1.126333 .002910
12/30/94 1.112000 1,000.00 899.281 -2.60 -2.336 -2.94 -2.643 .002910
03/31/95 1.209130 .001850
06/30/95 1.294552 -1.00 -.773 -1.83 -1.413 -2.07 -1.599 .001850
09/29/95 1.402090 .001850
12/29/95 1.483574 -1.15 -.778 -2.11 -1.423 -2.39 -1.609 .001850
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR SINCE INCEPTION
<S> <C> <C> <C>
ENDING UNITS 897.729 1,641.102 1,856.277
ACCOUNT VALUE 1,331.85 2,434.70 2,753.92
SURRENDER VALUE 1,281.85 2,384.70
TOTAL RETURN 28.18 % 138.47 % 175.39 %
ANNUALIZED RETURN 18.99 % 11.60 %
</TABLE>
<PAGE> 8
UA STANDARDIZED PERFORMANCE
FIDELITY GROWTH PORTFOLIO
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 SEMFEE
- ---- ----- ------- ----- ------- ----- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10/09/86 .498625 1,000.00 2,005.515 .002800
12/31/86 .498701 -.64 -1.277 .002800
03/31/87 .586887 .003960
06/30/87 .606346 -2.19 -3.616 .003960
09/30/87 .639965 .003960
12/31/87 .510542 -2.21 -4.333 .003960
03/31/88 .557143 .003150
06/30/88 .585433 -1.72 -2.943 .003150
09/30/88 .582594 .003150
12/31/88 .582770 -1.83 -3.147 .003150
03/31/89 .628140 .002680
06/30/89 .673853 -1.68 -2.487 .002680
09/30/89 .750815 .002680
12/31/89 .756981 -1.91 -2.517 .002680
03/31/90 .726438 .002830
06/30/90 .781271 -2.16 -2.765 .002830
09/30/90 .616809 .002830
12/31/90 .659807 1,000.00 1,515.595 -2.02 -3.063 .002830
03/31/91 .776772 .002970
06/30/91 .752157 -1.59 -2.112 -2.08 -2.759 .002970
09/30/91 .864335 .002970
12/31/91 .948195 -1.91 -2.015 -2.50 -2.632 .002970
03/31/92 .960645 .003500
06/30/92 .877747 -2.41 -2.751 -3.15 -3.593 .003500
09/30/92 .899612 .003500
12/31/92 1.024228 -2.51 -2.451 -3.28 -3.202 .003500
03/31/93 1.060381 .003410
06/30/93 1.135505 -2.77 -2.442 -3.62 -3.190 .003410
09/30/93 1.207495 .003410
12/31/93 1.207307 -3.00 -2.488 -3.92 -3.249 .003410
03/31/94 1.165626 .002910
06/30/94 1.083999 -2.50 -2.309 -3.27 -3.015 .002910
09/30/94 1.167146 .002910
12/30/94 1.192078 1,000.00 838.871 -2.48 -2.082 -3.24 -2.719 .002910
03/31/95 1.258248 .001850
06/30/95 1.466358 -1.03 -.703 -1.84 -1.255 -2.40 -1.639 .001850
09/29/95 1.668285 .001850
12/29/95 1.593743 -1.19 -.744 -2.12 -1.328 -2.76 -1.735 .001850
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR SINCE INCEPTION
<S> <C> <C> <C>
ENDING UNITS 837.424 1,494.360 1,951.634
ACCOUNT VALUE 1,334.64 2,381.63 3,110.40
SURRENDER VALUE 1,284.64 2,331.63
TOTAL RETURN 28.46 % 133.16 % 211.04 %
ANNUALIZED RETURN 18.46 % 13.09 %
</TABLE>
<PAGE> 9
UA STANDARDIZED PERFORMANCE
U.S. GOVERNMENT SECURITIES PORTFOLIO
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 SEMFEE
- ---- ----- ------- ----- ------- ----- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
01/24/92 1.000000 1,000.00 1,000.000 .003500
03/31/92 1.004840 .003500
06/30/92 1.028527 -1.54 -1.494 .003500
09/30/92 1.064789 .003500
12/31/92 1.066269 -1.83 -1.716 .003500
03/31/93 1.113928 .003410
06/30/93 1.137403 -1.87 -1.646 .003410
09/30/93 1.168646 .003410
12/31/93 1.153070 -1.94 -1.685 .003410
03/31/94 1.095843 .002910
06/30/94 1.077102 -1.61 -1.496 .002910
09/30/94 1.062501 .002910
12/30/94 1.074430 1,000.00 930.726 -1.55 -1.445 .002910
03/31/95 1.131555 .001850
06/30/95 1.230754 -.99 -.806 -1.06 -.858 .001850
09/29/95 1.242915 .001850
12/29/95 1.320899 -1.10 -.831 -1.17 -.884 .001850
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION
<S> <C> <C>
ENDING UNITS 929.089 988.774
ACCOUNT VALUE 1,227.23 1,306.07
SURRENDER VALUE 1,177.23 1,256.07
TOTAL RETURN 17.72 % 25.61 %
ANNUALIZED RETURN 5.97 %
</TABLE>
<PAGE> 10
UA STANDARDIZED PERFORMANCE
TEMPLETON BOND FUND
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 SEMFEE
- ---- ----- ------- ----- ------- ----- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
08/31/88 .788642 1,000.00 1,268.002 .003150
09/30/88 .792559 .003150
12/31/88 .800303 -1.06 -1.325 .003150
03/31/89 .811695 .002680
06/30/89 .824316 -1.38 -1.673 .002680
09/30/89 .835262 .002680
12/31/89 .850853 -1.42 -1.669 .002680
03/31/90 .842456 .002830
06/30/90 .863644 -1.53 -1.774 .002830
09/30/90 .865048 .002830
12/31/90 .893435 1,000.00 1,119.276 -1.57 -1.755 .002830
03/31/91 .914025 .002970
06/30/91 .918887 -1.51 -1.639 -1.70 -1.845 .002970
09/30/91 .972519 .002970
12/31/91 1.022356 -1.61 -1.576 -1.81 -1.774 .002970
03/31/92 .987423 .003500
06/30/92 1.034866 -2.01 -1.941 -2.26 -2.185 .003500
09/30/92 1.067424 .003500
12/31/92 1.064775 -2.05 -1.922 -2.30 -2.164 .003500
03/31/93 1.112129 .003410
06/30/93 1.131937 -2.08 -1.840 -2.34 -2.071 .003410
09/30/93 1.159356 .003410
12/31/93 1.172093 -2.18 -1.861 -2.45 -2.094 .003410
03/31/94 1.119632 .002910
06/30/94 1.094718 -1.83 -1.670 -2.06 -1.880 .002910
09/30/94 1.099411 .002910
12/30/94 1.101064 1,000.00 908.212 -1.77 -1.606 -1.99 -1.807 .002910
03/31/95 1.143544 .001850
06/30/95 1.196103 -.96 -.807 -1.17 -.982 -1.32 -1.105 .001850
09/29/95 1.207163 .001850
12/29/95 1.249706 -1.03 -.821 -1.25 -1.000 -1.41 -1.125 .001850
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR SINCE INCEPTION
<S> <C> <C> <C>
ENDING UNITS 906.584 1,103.240 1,241.757
ACCOUNT VALUE 1,132.96 1,378.73 1,551.83
SURRENDER VALUE 1,082.96 1,328.73
TOTAL RETURN 8.30 % 32.87 % 55.18 %
ANNUALIZED RETURN 5.85 % 6.18 %
</TABLE>
<PAGE> 11
UA STANDARDIZED PERFORMANCE
TEMPLETON ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 SEMFEE
- ---- ----- ------- ----- ------- ----- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
08/31/88 .764604 1,000.00 1,307.867 .003150
09/30/88 .769166 .003150
12/31/88 .782762 -1.07 -1.361 .003150
03/31/89 .800836 .002680
06/30/89 .811232 -1.40 -1.720 .002680
09/30/89 .856326 .002680
12/31/89 .875511 -1.47 -1.684 .002680
03/31/90 .864730 .002830
06/30/90 .890442 -1.63 -1.828 .002830
09/30/90 .767523 .002830
12/31/90 .795571 1,000.00 1,256.959 -1.55 -1.951 .002830
03/31/91 .873771 .002970
06/30/91 .867105 -1.55 -1.790 -1.60 -1.850 .002970
09/30/91 .943179 .002970
12/31/91 1.003260 -1.74 -1.737 -1.80 -1.796 .002970
03/31/92 1.006362 .003500
06/30/92 1.068318 -2.27 -2.127 -2.35 -2.198 .003500
09/30/92 1.060888 .003500
12/31/92 1.070227 -2.34 -2.188 -2.42 -2.262 .003500
03/31/93 1.129396 .003410
06/30/93 1.176935 -2.39 -2.033 -2.47 -2.102 .003410
09/30/93 1.249192 .003410
12/31/93 1.333027 -2.67 -2.002 -2.76 -2.069 .003410
03/31/94 1.286213 .002910
06/30/94 1.263356 -2.35 -1.862 -2.43 -1.924 .002910
09/30/94 1.319009 .002910
12/30/94 1.277445 1,000.00 782.813 -2.30 -1.799 -2.38 -1.860 .002910
03/31/95 1.308087 .001850
06/30/95 1.421156 -.98 -.687 -1.55 -1.090 -1.60 -1.127 .001850
09/29/95 1.505370 .001850
12/29/95 1.546087 -1.07 -.694 -1.70 -1.101 -1.76 -1.138 .001850
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR SINCE INCEPTION
<S> <C> <C> <C>
ENDING UNITS 781.431 1,239.231 1,280.996
ACCOUNT VALUE 1,208.16 1,915.96 1,980.53
SURRENDER VALUE 1,158.16 1,865.96
TOTAL RETURN 15.82 % 86.60 % 98.05 %
ANNUALIZED RETURN 13.29 % 9.77 %
</TABLE>
<PAGE> 12
UA STANDARDIZED PERFORMANCE
TEMPLETON STOCK FUND
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 SEMFEE
- ---- ----- ------- ----- ------- ----- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
08/31/88 .772928 1,000.00 1,293.782 .003150
09/30/88 .776767 .003150
12/31/88 .790514 -1.06 -1.347 .003150
03/31/89 .825684 .002680
06/30/89 .826945 -1.40 -1.694 .002680
09/30/89 .898485 .002680
12/31/89 .894924 -1.49 -1.664 .002680
03/31/90 .880159 .002830
06/30/90 .909033 -1.65 -1.810 .002830
09/30/90 .764002 .002830
12/31/90 .786446 1,000.00 1,271.543 -1.54 -1.963 .002830
03/31/91 .877701 .002970
06/30/91 .857706 -1.55 -1.810 -1.57 -1.829 .002970
09/30/91 .927562 .002970
12/31/91 .990028 -1.74 -1.760 -1.76 -1.779 .002970
03/31/92 1.000848 .003500
06/30/92 1.042397 -2.25 -2.163 -2.28 -2.187 .003500
09/30/92 1.020298 .003500
12/31/92 1.046888 -2.31 -2.210 -2.34 -2.234 .003500
03/31/93 1.116933 .003410
06/30/93 1.173076 -2.39 -2.039 -2.42 -2.061 .003410
09/30/93 1.274035 .003410
12/31/93 1.385364 -2.75 -1.986 -2.78 -2.008 .003410
03/31/94 1.340311 .002910
06/30/94 1.335335 -2.49 -1.867 -2.52 -1.887 .002910
09/30/94 1.404836 .002910
12/30/94 1.338030 1,000.00 747.367 -2.45 -1.828 -2.47 -1.848 .002910
03/31/95 1.381158 .001850
06/30/95 1.517535 -.99 -.650 -1.66 -1.093 -1.68 -1.105 .001850
09/29/95 1.615610 .001850
12/29/95 1.655043 -1.10 -.662 -1.84 -1.112 -1.86 -1.125 .001850
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR SINCE INCEPTION
<S> <C> <C> <C>
ENDING UNITS 746.055 1,253.675 1,267.242
ACCOUNT VALUE 1,234.75 2,074.89 2,097.34
SURRENDER VALUE 1,184.75 2,024.89
TOTAL RETURN 18.48 % 102.49 % 109.73 %
ANNUALIZED RETURN 15.16 % 10.63 %
</TABLE>
<PAGE> 13
UA STANDARDIZED PERFORMANCE
MONEY MARKET FUND
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 SEMFEE
- ---- ----- ------- ----- ------- ----- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/85 1.367725 1,000.00 731.141 .003520
03/31/86 1.389098 .002800
06/30/86 1.407571 -1.42 -1.009 .002800
09/30/86 1.424724 .002800
12/31/86 1.439792 -1.46 -1.011 .002800
03/31/87 1.455636 .003960
06/30/87 1.472883 -2.10 -1.427 .003960
09/30/87 1.492303 .003960
12/31/87 1.517269 -2.15 -1.420 .003960
03/31/88 1.538117 .003150
06/30/88 1.558905 -1.76 -1.129 .003150
09/30/88 1.584312 .003150
12/30/88 1.612326 -1.81 -1.123 .003150
03/31/89 1.644247 .002680
06/30/89 1.678508 -1.60 -.951 .002680
09/29/89 1.709823 .002680
12/29/89 1.740867 -1.66 -.952 .002680
03/30/90 1.770299 .002830
06/29/90 1.800561 -1.81 -1.005 .002830
09/28/90 1.830577 .002830
12/31/90 1.861309 1,000.00 537.256 -1.87 -1.004 .002830
03/28/91 1.886708 .002970
06/28/91 1.908303 -1.50 -.788 -2.02 -1.056 .002970
09/30/91 1.929804 .002970
12/31/91 1.949230 -1.54 -.788 -2.06 -1.057 .002970
03/31/92 1.961531 .003500
06/30/92 1.975395 -1.84 -.931 -2.47 -1.248 .003500
09/30/92 1.987800 .003500
12/31/92 1.994712 -1.86 -.931 -2.49 -1.248 .003500
03/31/93 2.003764 .003410
06/30/93 2.011698 -1.82 -.906 -2.44 -1.215 .003410
09/30/93 2.020269 .003410
12/31/93 2.028641 -1.84 -.905 -2.46 -1.213 .003410
03/31/94 2.036841 .002910
06/30/94 2.049311 -1.58 -.770 -2.12 -1.032 .002910
09/30/94 2.064755 .002910
12/30/94 2.084454 1,000.00 479.742 -1.60 -.766 -2.14 -1.027 .002910
03/31/95 2.107454 .001850
06/30/95 2.131087 -.94 -.439 -1.03 -.485 -1.39 -.650 .001850
09/29/95 2.154037 .001850
12/29/95 2.176950 -.95 -.439 -1.06 -.485 -1.42 -.650 .001850
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR TEN YEAR
<S> <C> <C> <C>
ENDING UNITS 478.864 529.499 709.714
ACCOUNT VALUE 1,042.46 1,152.69 1,545.01
SURRENDER VALUE 992.46 1,102.69
TOTAL RETURN -.75 % 10.27 % 54.50 %
ANNUALIZED RETURN 1.98 % 4.45 %
</TABLE>
<PAGE> 14
UA STANDARDIZED PERFORMANCE
AMERICAN ODYSSEY LONG TERM BOND FUND
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 SEMFEE
- ---- ----- ------- ----- ------- ----- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
05/01/93 1.000000 1,000.00 1,000.000 .003410
06/30/93 1.022681 -.57 -.554 .003410
09/30/93 1.077476 .003410
12/31/93 1.084753 -1.80 -1.655 .003410
03/31/94 1.040919 .002910
06/30/94 1.009481 -1.52 -1.506 .002910
09/30/94 1.007277 .002910
12/30/94 1.009615 1,000.00 990.477 -1.46 -1.449 .002910
03/31/95 1.066677 .001850
06/30/95 1.141545 -.99 -.863 -.99 -.867 .001850
09/29/95 1.162560 .001850
12/29/95 1.220991 -1.08 -.886 -1.09 -.890 .001850
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION
<S> <C> <C>
ENDING UNITS 988.728 993.078
ACCOUNT VALUE 1,207.23 1,212.54
SURRENDER VALUE 1,157.23 1,162.54
TOTAL RETURN 15.72 % 16.25 %
ANNUALIZED RETURN 5.82 %
</TABLE>
<PAGE> 15
UA STANDARDIZED PERFORMANCE
AMERICAN ODYSSEY CORE EQUITY FUND
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 SEMFEE
- ---- ----- ------- ----- ------- ----- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
05/01/93 1.000000 1,000.00 1,000.000 .003410
06/30/93 .994108 -.56 -.562 .003410
09/30/93 1.014439 .003410
12/31/93 1.012373 -1.71 -1.689 .003410
03/31/94 .985818 .002910
06/30/94 .985673 -1.45 -1.471 .002910
09/30/94 1.013639 .002910
12/30/94 .989690 1,000.00 1,010.417 -1.43 -1.447 .002910
03/31/95 1.070957 .001850
06/30/95 1.176170 -1.01 -.861 -1.00 -.847 .001850
09/29/95 1.277819 .001850
12/29/95 1.354370 -1.18 -.872 -1.16 -.859 .001850
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION
<S> <C> <C>
ENDING UNITS 1,008.684 993.125
ACCOUNT VALUE 1,366.13 1,345.06
SURRENDER VALUE 1,316.13 1,295.06
TOTAL RETURN 31.61 % 29.51 %
ANNUALIZED RETURN 10.20 %
</TABLE>
<PAGE> 16
UA STANDARDIZED PERFORMANCE
AMERICAN ODYSSEY EMERGING OPPTS FUND
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 SEMFEE
- ---- ----- ------- ----- ------- ----- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
05/01/93 1.000000 1,000.00 1,000.000 .003410
06/30/93 .969499 -.55 -.569 .003410
09/30/93 1.008005 .003410
12/31/93 1.078790 -1.75 -1.618 .003410
03/31/94 1.080366 .002910
06/30/94 1.013294 -1.52 -1.499 .002910
09/30/94 1.128325 .002910
12/30/94 1.168475 1,000.00 855.816 -1.58 -1.353 .002910
03/31/95 1.214213 .001850
06/30/95 1.411561 -1.02 -.723 -1.19 -.841 .001850
09/29/95 1.569549 .001850
12/29/95 1.526112 -1.16 -.761 -1.35 -.885 .001850
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION
<S> <C> <C>
ENDING UNITS 854.332 993.235
ACCOUNT VALUE 1,303.81 1,515.79
SURRENDER VALUE 1,253.81 1,465.79
TOTAL RETURN 25.38 % 46.58 %
ANNUALIZED RETURN 15.44 %
</TABLE>
<PAGE> 17
UA STANDARDIZED PERFORMANCE
AMERICAN ODYSSEY INTNL EQUITY FUND
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 SEMFEE
- ---- ----- ------- ----- ------- ----- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
05/01/93 1.000000 1,000.00 1,000.000 .003410
06/30/93 .973707 -.55 -.568 .003410
09/30/93 1.009188 .003410
12/31/93 1.180346 -1.84 -1.555 .003410
03/31/94 1.102016 .002910
06/30/94 1.087810 -1.65 -1.514 .002910
09/30/94 1.131246 .002910
12/30/94 1.084329 1,000.00 922.229 -1.57 -1.452 .002910
03/31/95 1.093010 .001850
06/30/95 1.175760 -.96 -.820 -1.04 -.885 .001850
09/29/95 1.262995 .001850
12/29/95 1.274376 -1.04 -.819 -1.13 -.884 .001850
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION
<S> <C> <C>
ENDING UNITS 920.590 993.143
ACCOUNT VALUE 1,173.18 1,265.64
SURRENDER VALUE 1,123.18 1,215.64
TOTAL RETURN 12.32 % 21.56 %
ANNUALIZED RETURN 7.61 %
</TABLE>
<PAGE> 18
UA STANDARDIZED PERFORMANCE
AMERICAN ODYSSEY INTMEDTE TERM BOND FUND
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 SEMFEE
- ---- ----- ------- ----- ------- ----- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
05/01/93 1.000000 1,000.00 1,000.000 .003410
06/30/93 1.012954 -.56 -.557 .003410
09/30/93 1.036579 .003410
12/31/93 1.034768 -1.74 -1.686 .003410
03/31/94 1.009556 .002910
06/30/94 .995410 -1.47 -1.480 .002910
09/30/94 .997262 .002910
12/30/94 .992838 1,000.00 1,007.214 -1.44 -1.451 .002910
03/31/95 1.028928 .001850
06/30/95 1.078101 -.96 -.895 -.95 -.884 .001850
09/29/95 1.090109 .001850
12/29/95 1.127795 -1.03 -.910 -1.01 -.899 .001850
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION
<S> <C> <C>
ENDING UNITS 1,005.408 993.042
ACCOUNT VALUE 1,133.89 1,119.95
SURRENDER VALUE 1,083.89 1,069.95
TOTAL RETURN 8.39 % 6.99 %
ANNUALIZED RETURN 2.57 %
</TABLE>
<PAGE> 19
UA STANDARDIZED PERFORMANCE
AMERICAN ODYSSEY SHORT TERM BOND FUND
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 SEMFEE
- ---- ----- ------- ----- ------- ----- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
05/01/93 1.000000 1,000.00 1,000.000 .003410
06/30/93 1.006005 -.56 -.559 .003410
09/30/93 1.015785 .003410
12/31/93 1.020116 -1.73 -1.692 .003410
03/31/94 1.011941 .002910
06/30/94 1.005771 -1.47 -1.462 .002910
09/30/94 1.009626 .002910
12/30/94 1.006059 1,000.00 993.977 -1.46 -1.449 .002910
03/31/95 1.036122 .001850
06/30/95 1.070093 -.95 -.892 -.96 -.893 .001850
09/29/95 1.078089 .001850
12/29/95 1.101532 -1.00 -.905 -1.00 -.906 .001850
</TABLE>
ONE YEAR SINCE INCEPTION
<TABLE>
<CAPTION>
<S> <C> <C>
ENDING UNITS 992.180 993.038
ACCOUNT VALUE 1,092.92 1,093.86
SURRENDER VALUE 1,042.92 1,043.86
TOTAL RETURN 4.29 % 4.39 %
ANNUALIZED RETURN 1.63 %
</TABLE>
<PAGE> 20
UA STANDARDIZED PERFORMANCE
SOCIAL AWARENESS STOCK PORTFOLIO
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 SEMFEE
- ---- ----- ------- ----- ------- ----- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
05/01/92 1.000000 1,000.00 1,000.000 .003500
06/30/92 .989966 -.57 -.578 .003500
09/30/92 1.007741 .003500
12/31/92 1.085896 -1.82 -1.672 .003500
03/31/93 1.131872 .003410
06/30/93 1.123379 -1.88 -1.673 .003410
09/30/93 1.163586 .003410
12/31/93 1.152985 -1.93 -1.677 .003410
03/31/94 1.099062 .002910
06/30/94 1.087557 -1.62 -1.490 .002910
09/30/94 1.134471 .002910
12/30/94 1.108859 1,000.00 901.828 -1.59 -1.431 .002910
03/31/95 1.209024 .001850
06/30/95 1.320270 -1.01 -.767 -1.11 -.844 .001850
09/29/95 1.393969 .001850
12/29/95 1.460895 -1.16 -.793 -1.27 -.872 .001850
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION
<S> <C> <C>
ENDING UNITS 900.267 989.764
ACCOUNT VALUE 1,315.20 1,445.94
SURRENDER VALUE 1,265.20 1,395.94
TOTAL RETURN 26.52 % 39.59 %
ANNUALIZED RETURN 9.53 %
</TABLE>
<PAGE> 21
UA STANDARDIZED PERFORMANCE
TIMED GROWTH & INCOME FUND
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 SEMFEE
- ---- ----- ------- ----- ------- ----- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/87 1.000000 1,000.00 1,000.000 .003960
03/31/88 1.043214 .003150
06/30/88 1.112459 -1.66 -1.495 .003150
09/30/88 1.093686 .003150
12/30/88 1.108008 -1.75 -1.576 .003150
03/31/89 1.183046 .002680
06/30/89 1.226724 -1.56 -1.271 .002680
09/29/89 1.349866 .002680
12/29/89 1.447154 -1.78 -1.233 .002680
03/30/90 1.483656 .002830
06/29/90 1.534041 -2.10 -1.367 .002830
09/28/90 1.295140 .002830
12/31/90 1.392111 1,000.00 718.334 -2.06 -1.477 .002830
03/28/91 1.579806 .002970
06/28/91 1.557471 -1.57 -1.010 -2.17 -1.394 .002970
09/30/91 1.653150 .002970
12/31/91 1.643784 -1.71 -1.037 -2.35 -1.432 .002970
03/31/92 1.605950 .003500
06/30/92 1.595289 -2.03 -1.273 -2.80 -1.757 .003500
09/30/92 1.612722 .003500
12/31/92 1.691970 -2.06 -1.216 -2.84 -1.678 .003500
03/31/93 1.754806 .003410
06/30/93 1.746089 -2.09 -1.198 -2.89 -1.654 .003410
09/30/93 1.781780 .003410
12/31/93 1.776397 -2.14 -1.205 -2.95 -1.663 .003410
03/31/94 1.644978 .002910
06/30/94 1.635093 -1.77 -1.080 -2.44 -1.491 .002910
09/30/94 1.700710 .002910
12/30/94 1.694534 1,000.00 590.133 -1.72 -1.015 -2.38 -1.402 .002910
03/31/95 1.853016 .001850
06/30/95 2.014890 -1.01 -.502 -1.22 -.604 -1.68 -.834 .001850
09/29/95 2.164648 .001850
12/29/95 2.263175 -1.17 -.515 -1.40 -.620 -1.94 -.855 .001850
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR SINCE INCEPTION
<S> <C> <C> <C>
ENDING UNITS 589.115 708.077 977.422
ACCOUNT VALUE 1,333.27 1,602.50 2,212.08
SURRENDER VALUE 1,283.27 1,552.50
TOTAL RETURN 28.33 % 55.25 % 121.21 %
ANNUALIZED RETURN 9.20 % 10.43 %
</TABLE>
<PAGE> 22
UA STANDARDIZED PERFORMANCE
TIMED BOND FUND
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 SEMFEE
- ---- ----- ------- ----- ------- ----- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/87 1.006212 1,000.00 993.826 .003960
06/30/88 1.070065 -1.62 -1.519 .003150
12/31/88 1.113817 -1.71 -1.532 .003150
06/30/89 1.153771 -1.51 -1.305 .002680
12/31/89 1.036044 -1.45 -1.401 .002680
06/29/90 .971269 -1.40 -1.445 .002830
09/28/90 .952427 .002830
12/31/90 .994294 1,000.00 1,005.739 -1.37 -1.380 .002830
03/28/91 .993443 .002970
06/28/91 .978064 -1.47 -1.506 -1.44 -1.475 .002970
09/30/91 1.034551 .002970
12/31/91 1.087659 -1.54 -1.416 -1.51 -1.387 .002970
03/31/92 1.054489 .003500
06/30/92 1.091777 -1.91 -1.752 -1.87 -1.716 .003500
09/30/92 1.134815 .003500
12/31/92 1.132269 -1.95 -1.721 -1.91 -1.685 .003500
03/31/93 1.181273 .003410
06/30/93 1.208980 -1.99 -1.650 -1.95 -1.616 .003410
09/30/93 1.251567 .003410
12/31/93 1.233781 -2.08 -1.684 -2.04 -1.650 .003410
03/31/94 1.215370 .002910
06/30/94 1.215370 -1.77 -1.460 -1.74 -1.430 .002910
09/30/94 1.215370 .002910
12/30/94 1.215370 1,000.00 822.795 -1.76 -1.447 -1.72 -1.418 .002910
03/31/95 1.237189 .001850
06/30/95 1.330021 -.97 -.728 -1.17 -.879 -1.15 -.861 .001850
09/29/95 1.314640 .001850
12/29/95 1.383112 -1.03 -.746 -1.25 -.900 -1.22 -.882 .001850
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR SINCE INCEPTION
<S> <C> <C> <C>
ENDING UNITS 821.321 991.324 971.124
ACCOUNT VALUE 1,135.98 1,371.11 1,343.17
SURRENDER VALUE 1,085.98 1,321.11
TOTAL RETURN 8.60 % 32.11 % 34.32 %
ANNUALIZED RETURN 5.73 % 3.76 %
</TABLE>
<PAGE> 23
UA STANDARDIZED PERFORMANCE
TIMED MONEY MARKET FUND
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 SEMFEE
- ---- ----- ------- ----- ------- ----- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/87 1.002660 1,000.00 997.347 .003960
03/31/88 1.015637 .003150
06/30/88 1.030641 -1.60 -1.549 .003150
09/30/88 1.045943 .003150
12/30/88 1.064239 -1.64 -1.544 .003150
03/31/89 1.085286 .002680
06/30/89 1.107869 -1.45 -1.306 .002680
09/29/89 1.128272 .002680
12/29/89 1.148818 -1.50 -1.307 .002680
03/30/90 1.168513 .002830
06/29/90 1.184637 -1.64 -1.382 .002830
09/28/90 1.201661 .002830
12/31/90 1.217997 1,000.00 821.020 -1.68 -1.382 .002830
03/28/91 1.229361 .002970
06/28/91 1.240486 -1.50 -1.208 -1.81 -1.455 .002970
09/30/91 1.249921 .002970
12/31/91 1.257686 -1.52 -1.209 -1.83 -1.456 .002970
03/31/92 1.262170 .003500
06/30/92 1.266925 -1.81 -1.427 -2.18 -1.719 .003500
09/30/92 1.269132 .003500
12/31/92 1.270617 -1.81 -1.428 -2.19 -1.720 .003500
03/31/93 1.272056 .003410
06/30/93 1.273149 -1.77 -1.389 -2.13 -1.674 .003410
09/30/93 1.274244 .003410
12/31/93 1.275474 -1.77 -1.387 -2.13 -1.671 .003410
03/31/94 1.276228 .002910
06/30/94 1.279488 -1.51 -1.181 -1.82 -1.422 .002910
09/30/94 1.284869 .002910
12/30/94 1.292443 1,000.00 773.729 -1.52 -1.175 -1.83 -1.416 .002910
03/31/95 1.303504 .001850
06/30/95 1.314445 -.93 -.710 -.98 -.744 -1.18 -.896 .001850
09/29/95 1.325187 .001850
12/29/95 1.333386 -.95 -.710 -.99 -.744 -1.19 -.896 .001850
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR SINCE INCEPTION
<S> <C> <C> <C>
ENDING UNITS 772.309 809.127 974.553
ACCOUNT VALUE 1,029.79 1,078.88 1,299.45
SURRENDER VALUE 979.79 1,028.88
TOTAL RETURN -2.02 % 2.89 % 29.95 %
ANNUALIZED RETURN .57 % 3.33 %
</TABLE>
<PAGE> 24
UA STANDARDIZED PERFORMANCE
TIMED AGGRESSIVE STOCK FUND
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 SEMFEE
- ---- ----- ------- ----- ------- ----- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/87 1.012787 1,000.00 987.374 .003960
06/30/88 1.180798 -1.71 -1.444 .003150
12/31/88 1.058779 -1.74 -1.642 .003150
06/30/89 1.159500 -1.46 -1.262 .002680
12/31/89 1.188557 -1.55 -1.301 .002680
06/29/90 .670595 -1.29 -1.926 .002830
09/28/90 1.094412 .002830
12/31/90 1.135862 1,000.00 880.389 -1.25 -1.102 .002830
03/28/91 1.324568 .002970
06/28/91 1.299304 -1.59 -1.225 -1.77 -1.362 .002970
09/30/91 1.371983 .002970
12/31/91 1.494908 -1.82 -1.220 -2.03 -1.356 .002970
03/31/92 1.413545 .003500
06/30/92 1.413025 -2.23 -1.581 -2.48 -1.757 .003500
09/30/92 1.454581 .003500
12/31/92 1.623738 -2.33 -1.434 -2.59 -1.594 .003500
03/31/93 1.681441 .003410
06/30/93 1.722953 -2.50 -1.449 -2.77 -1.611 .003410
09/30/93 1.840208 .003410
12/31/93 1.837611 -2.65 -1.443 -2.95 -1.604 .003410
03/31/94 1.750344 .002910
06/30/94 1.666038 -2.22 -1.334 -2.47 -1.483 .002910
09/30/94 1.770541 .002910
12/30/94 1.705971 1,000.00 586.176 -2.14 -1.252 -2.37 -1.392 .002910
03/31/95 1.856408 .001850
06/30/95 2.019009 -1.01 -.500 -1.50 -.742 -1.67 -.825 .001850
09/29/95 2.211584 .001850
12/29/95 2.253189 -1.16 -.514 -1.72 -.762 -1.91 -.847 .001850
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR SINCE INCEPTION
<S> <C> <C> <C>
ENDING UNITS 585.163 867.947 964.866
ACCOUNT VALUE 1,318.48 1,955.65 2,174.02
SURRENDER VALUE 1,268.48 1,905.65
TOTAL RETURN 26.85 % 90.56 % 117.40 %
ANNUALIZED RETURN 13.77 % 10.19 %
</TABLE>
<PAGE> 25
UA STANDARDIZED PERFORMANCE
MANAGED ASSETS TRUST
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 SEMFEE
- ---- ----- ------- ----- ------- ----- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/85 1.040246 1,000.00 961.311 .003520
03/31/86 1.193011 .002800
06/30/86 1.257659 -1.55 -1.230 .002800
09/30/86 1.174191 .002800
12/31/86 1.223010 -1.67 -1.363 .002800
03/31/87 1.445994 .003960
06/30/87 1.481165 -2.57 -1.733 .003960
09/30/87 1.546842 .003960
12/31/87 1.233686 -2.57 -2.085 .003960
03/31/88 1.273436 .003150
06/30/88 1.317886 -1.92 -1.456 .003150
09/30/88 1.296419 .003150
12/30/88 1.330834 -1.99 -1.494 .003150
03/31/89 1.397951 .002680
06/30/89 1.511052 -1.81 -1.200 .002680
09/29/89 1.631150 .002680
12/29/89 1.670980 -2.03 -1.213 .002680
03/30/90 1.632375 .002830
06/29/90 1.716575 -2.28 -1.326 .002830
09/28/90 1.591752 .002830
12/31/90 1.683418 1,000.00 594.030 -2.28 -1.355 .002830
03/28/91 1.808914 .002970
06/28/91 1.805897 -1.54 -.852 -2.45 -1.358 .002970
09/30/91 1.909094 .002970
12/31/91 2.033846 -1.69 -.832 -2.70 -1.325 .002970
03/31/92 1.968786 .003500
06/30/92 2.009641 -2.10 -1.043 -3.34 -1.662 .003500
09/30/92 2.057708 .003500
12/31/92 2.111478 -2.13 -1.010 -3.40 -1.610 .003500
03/31/93 2.195169 .003410
06/30/93 2.214177 -2.18 -.983 -3.47 -1.567 .003410
09/30/93 2.268465 .003410
12/31/93 2.280590 -2.26 -.990 -3.60 -1.578 .003410
03/31/94 2.185810 .002910
06/30/94 2.168655 -1.90 -.878 -3.04 -1.400 .002910
09/30/94 2.221974 .002910
12/30/94 2.201344 1,000.00 454.268 -1.87 -.848 -2.98 -1.352 .002910
03/31/95 2.343044 .001850
06/30/95 2.525949 -.99 -.393 -1.28 -.508 -2.04 -.809 .001850
09/29/95 2.654052 .001850
12/29/95 2.763480 -1.11 -.402 -1.43 -.519 -2.29 -.827 .001850
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR TEN YEAR
<S> <C> <C> <C>
ENDING UNITS 453.473 585.567 933.368
ACCOUNT VALUE 1,253.16 1,618.20 2,579.34
SURRENDER VALUE 1,203.16 1,568.20
TOTAL RETURN 20.32 % 56.82 % 157.93 %
ANNUALIZED RETURN 9.42 % 9.94 %
</TABLE>
<PAGE> 26
UA STANDARDIZED PERFORMANCE
HIGH YIELD BOND TRUST
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 SEMFEE
- ---- ----- ------- ----- ------- ----- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/85 1.324407 1,000.00 755.055 .003520
03/31/86 1.400043 .002800
06/30/86 1.418786 -1.45 -1.022 .002800
09/30/86 1.386517 .002800
12/31/86 1.412432 -1.49 -1.058 .002800
03/31/87 1.478947 .003960
06/30/87 1.459673 -2.14 -1.467 .003960
09/30/87 1.429921 .003960
12/31/87 1.388266 -2.12 -1.526 .003960
03/31/88 1.474435 .003150
06/30/88 1.498753 -1.71 -1.138 .003150
09/30/88 1.534578 .003150
12/30/88 1.571309 -1.81 -1.152 .003150
03/31/89 1.605096 .002680
06/30/89 1.679425 -1.63 -.970 .002680
09/29/89 1.648107 .002680
12/29/89 1.573397 -1.63 -1.034 .002680
03/30/90 1.493038 .002830
06/29/90 1.524863 -1.63 -1.072 .002830
09/28/90 1.420906 .002830
12/31/90 1.402285 1,000.00 713.122 -1.54 -1.100 .002830
03/28/91 1.526564 .002970
06/28/91 1.593250 -1.59 -.996 -1.65 -1.038 .002970
09/30/91 1.677140 .002970
12/31/91 1.766769 -1.78 -1.006 -1.85 -1.048 .002970
03/31/92 1.853915 .003500
06/30/92 1.886057 -2.27 -1.205 -2.37 -1.256 .003500
09/30/92 1.940150 .003500
12/31/92 1.973957 -2.40 -1.215 -2.50 -1.266 .003500
03/31/93 2.073533 .003410
06/30/93 2.142071 -2.49 -1.161 -2.59 -1.210 .003410
09/30/93 2.183544 .003410
12/31/93 2.222328 -2.63 -1.185 -2.74 -1.235 .003410
03/31/94 2.164136 .002910
06/30/94 2.144559 -2.24 -1.046 -2.34 -1.091 .002910
09/30/94 2.181349 .002910
12/30/94 2.166884 1,000.00 461.492 -2.21 -1.021 -2.31 -1.064 .002910
03/31/95 2.276282 .001850
06/30/95 2.390870 -.97 -.407 -1.48 -.621 -1.55 -.647 .001850
09/29/95 2.421989 .001850
12/29/95 2.472157 -1.04 -.419 -1.58 -.640 -1.65 -.667 .001850
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR TEN YEAR
<S> <C> <C> <C>
ENDING UNITS 460.666 703.027 732.991
ACCOUNT VALUE 1,138.84 1,737.99 1,812.07
SURRENDER VALUE 1,088.84 1,687.99
TOTAL RETURN 8.88 % 68.80 % 81.21 %
ANNUALIZED RETURN 11.05 % 6.12 %
</TABLE>
<PAGE> 27
UA STANDARDIZED PERFORMANCE
UTILITIES PORTFOLIO
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 SEMFEE
- ---- ----- ------- ----- ------- ----- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
02/04/94 1.000000 1,000.00 1,000.000 .002910
03/31/94 .998125 .002910
06/30/94 .984067 -1.15 -1.173 .002910
09/30/94 .998823 .002910
12/30/94 1.005532 1,000.00 994.498 -1.45 -1.438 .002910
03/31/95 1.052948 .001850
06/30/95 1.116051 -.98 -.874 -.98 -.877 .001850
09/29/95 1.188817 .001850
12/29/95 1.283982 -1.10 -.859 -1.11 -.861 .001850
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION
<S> <C> <C>
ENDING UNITS 992.765 995.650
ACCOUNT VALUE 1,274.69 1,278.40
SURRENDER VALUE 1,224.69 1,228.40
TOTAL RETURN 22.47 % 22.84 %
ANNUALIZED RETURN 11.44 %
</TABLE>
<PAGE> 28
UA STANDARDIZED PERFORMANCE
CAPITAL APPRECIATION FUND
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 SEMFEE
- ---- ----- ------- ----- ------- ----- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/85 .945573 1,000.00 1,057.560 .003520
03/31/86 1.100847 .002800
06/30/86 1.181165 -1.57 -1.333 .002800
09/30/86 .976295 .002800
12/31/86 1.026600 -1.63 -1.590 .002800
03/31/87 1.337873 .003960
06/30/87 1.315794 -2.45 -1.859 .003960
09/30/87 1.359885 .003960
12/31/87 .933666 -2.34 -2.511 .003960
03/31/88 1.009223 .003150
06/30/88 1.086541 -1.67 -1.538 .003150
09/30/88 1.018419 .003150
12/30/88 1.014693 -1.74 -1.710 .003150
03/31/89 1.074554 .002680
06/30/89 1.114221 -1.49 -1.340 .002680
09/29/89 1.236725 .002680
12/29/89 1.157147 -1.59 -1.375 .002680
03/30/90 1.144672 .002830
06/29/90 1.235622 -1.77 -1.431 .002830
09/28/90 .981598 .002830
12/31/90 1.083795 1,000.00 922.684 -1.71 -1.579 .002830
03/28/91 1.298703 .002970
06/28/91 1.282081 -1.62 -1.264 -1.83 -1.427 .002970
09/30/91 1.340840 .002970
12/31/91 1.433412 -1.86 -1.296 -2.10 -1.463 .002970
03/31/92 1.477458 .003500
06/30/92 1.410818 -2.29 -1.623 -2.58 -1.832 .003500
09/30/92 1.480864 .003500
12/31/92 1.665086 -2.47 -1.485 -2.79 -1.675 .003500
03/31/93 1.762397 .003410
06/30/93 1.822381 -2.73 -1.496 -3.08 -1.688 .003410
09/30/93 1.925978 .003410
12/31/93 1.892135 -2.90 -1.532 -3.27 -1.729 .003410
03/31/94 1.813722 .002910
06/30/94 1.702090 -2.39 -1.404 -2.70 -1.585 .002910
09/30/94 1.780524 .002910
12/30/94 1.779321 1,000.00 562.012 -2.31 -1.299 -2.61 -1.466 .002910
03/31/95 1.865442 .001850
06/30/95 2.122753 -1.01 -.478 -1.64 -.775 -1.86 -.874 .001850
09/29/95 2.380648 .001850
12/29/95 2.396267 -1.17 -.490 -1.90 -.794 -2.15 -.896 .001850
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR TEN YEAR
<S> <C> <C> <C>
ENDING UNITS 561.045 909.715 1,026.658
ACCOUNT VALUE 1,344.41 2,179.92 2,460.15
SURRENDER VALUE 1,294.41 2,129.92
TOTAL RETURN 29.44 % 112.99 % 146.01 %
ANNUALIZED RETURN 16.33 % 9.42 %
</TABLE>
<PAGE> 29
SPOTLIGHT ON TRAVELERS UNIVERSAL ANNUITY -- PERFORMANCE UPDATE AS OF 12/31/95
<TABLE>
<CAPTION>
CUMULATIVE RETURNS AVERAGE ANNUAL RETURNS
---------------------------------------------- ---------------------------------------
YTD 1 YR 3 YR 5 YR 10 YR 3 YR 5 YR 10 YR INCEPTION*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STOCK ACCOUNTS:
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Growth Portfolio# 33.15% 33.15% - - - - - - 39.37% (6/94)
- ------------------------------------------------------------------------------------------------------------------------------------
American Odyssey Core Equity Fund 36.85% 36.85% - - - - - - 12.06% (5/93)
- ------------------------------------------------------------------------------------------------------------------------------------
American Odyssey Emerging Opportunities
Fund 30.61% 30.61% - - - - - - 17.20% (5/93)
- ------------------------------------------------------------------------------------------------------------------------------------
American Odyssey International Equity
Fund 17.53% 17.53% - - - - - - 9.53% (5/93)
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Appreciation Fund (Janus
sub-adviser)-- 34.67% 34.67% 43.90% 121.10% 153.40% 12.90% 17.20% 9.74% 7.16% (5/83)
- ------------------------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund* 35.09% 35.09% 45.30% 97.10% - 13.27% 14.53% - 10.94% (9/89)
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity's Equity-Income Portfolio* 33.41% 33.41% 64.80% 146.90% - 18.11% 19.81% - 11.93% (10/86)
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity's Growth Portfolio* 33.69% 33.69% 55.60% 141.50% - 15.88% 19.29% - 13.42% (10/86)
- ------------------------------------------------------------------------------------------------------------------------------------
Smith Barney Income and Growth# 31.41% 31.41% - - - - - - 28.92% (6/94)
- ------------------------------------------------------------------------------------------------------------------------------------
Smith Barney International Equity
Portfolio# 9.86% 9.86% - - - - - - 4.87% (6/94)
- ------------------------------------------------------------------------------------------------------------------------------------
Social Awareness Stock Portfolio
(Smith Barney) 31.75% 31.75% 34.50% - - 10.39% - - 10.90% (5/92)
- ------------------------------------------------------------------------------------------------------------------------------------
Templeton's Global Stock Fund* 23.69% 23.69% 58.10% 110.40% - 16.49% 16.05% - 10.94% (8/88)
- ------------------------------------------------------------------------------------------------------------------------------------
Travelers Growth & Income Stock
Account 35.44% 35.44% 44.00% 85.60% 186.10% 12.92% 13.16% 11.08% 10.17% (5/83)
- ------------------------------------------------------------------------------------------------------------------------------------
Utilities Portfolio (Smith Barney) 27.69% 27.69% - - - - - - 14.07% (2/94)
- ------------------------------------------------------------------------------------------------------------------------------------
BOND ACCOUNTS:
- ------------------------------------------------------------------------------------------------------------------------------------
American Odyssey Intermediate-Bond Fund 13.59% 13.59% - - - - - - 4.62% (5/93)
- ------------------------------------------------------------------------------------------------------------------------------------
American Odyssey Long-Term Bond Fund 20.94% 20.94% - - - - - - 7.79% (5/93)
- ------------------------------------------------------------------------------------------------------------------------------------
American Odyssey Short-Term Bond Fund 9.49% 9.49% - - - - - - 3.70% (5/93)
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity's High Income Portfolio* 19.11% 19.11% 37.80% 123.90% 162.10% 11.29% 17.50% 10.11% 10.45% (9/85)
- ------------------------------------------------------------------------------------------------------------------------------------
Putnam Diversified Income Portfolio# 15.93% 15.93% - - - - - - 16.86% (6/94)
- ------------------------------------------------------------------------------------------------------------------------------------
Smith Barney High Income Portfolio# 16.48% 16.48% - - - - - - 14.99% (6/94)
- ------------------------------------------------------------------------------------------------------------------------------------
Templeton's Global Bond Fund 13.50% 13.50% 17.40% 39.90% - 5.48% 6.94% - 6.48% (8/88)
- ------------------------------------------------------------------------------------------------------------------------------------
Travelers High Yield Bond Trust 14.09% 14.09% 25.20% 76.30% 86.70% 7.79% 12.01% 6.44% 7.43% (5/83)
- ------------------------------------------------------------------------------------------------------------------------------------
Travelers Quality Bond Account 14.49% 14.49% 20.80% 45.80% 106.40% 6.50% 7.83% 7.52% 8.32% (5/83)
- ------------------------------------------------------------------------------------------------------------------------------------
Travelers U.S. Government Securities
Portfolio 22.94% 22.94% 23.90% - - 7.40% - - 7.34% (1/92)
- ------------------------------------------------------------------------------------------------------------------------------------
ASSET ALLOCATION ACCOUNTS:
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity's Asset Manager Portfolio* 15.51% 15.51% 28.10% 71.20% - 8.59% 11.36% - 9.87% (9/89)
- ------------------------------------------------------------------------------------------------------------------------------------
MFS Total Return Portfolio# 24.15% 24.15% - - - - - - 21.46% (6/94)
- ------------------------------------------------------------------------------------------------------------------------------------
Templeton's Global Asset Allocation
Fund* 21.03% 21.03% 44.50% 94.30% - 13.05% 14.21% - 10.08% (8/88)
- ------------------------------------------------------------------------------------------------------------------------------------
Travelers Managed Assets Trust 25.54% 25.54% 30.90% 64.20% 165.70% 9.38% 10.42% 10.26% 8.38% (5/83)
- ------------------------------------------------------------------------------------------------------------------------------------
MONEY MARKET ACCOUNT:
- ------------------------------------------------------------------------------------------------------------------------------------
Travelers Money Market Account 4.44% 4.44% 9.10% 17.00% 59.20% 2.96% 3.18% 4.76% 5.41% (5/83)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CALENDAR YEAR RETURNS
-----------------------------------
1995 1994 1993 1992
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
STOCK ACCOUNTS:
- -----------------------------------------------------------------------------
Alliance Growth Portfolio# 33.15% - - -
- -----------------------------------------------------------------------------
American Odyssey Core Equity Fund 36.85% -2.24% - -
- -----------------------------------------------------------------------------
American Odyssey Emerging Opportunities
Fund 30.61% 8.31% - -
- -----------------------------------------------------------------------------
American Odyssey International Equity
Fund 17.53% -8.31% - -
- -----------------------------------------------------------------------------
Capital Appreciation Fund (Janus
sub-adviser)-- 34.67% -5.96% 13.64% 16.16%
- -----------------------------------------------------------------------------
Dreyfus Stock Index Fund* 35.09% -0.37% 7.97% 5.77%
- -----------------------------------------------------------------------------
Fidelity's Equity-Income Portfolio* 33.41% 5.74% 16.80% 15.44%
- -----------------------------------------------------------------------------
Fidelity's Growth Portfolio* 33.69% -1.26% 17.87% 8.02%
- -----------------------------------------------------------------------------
Smith Barney Income and Growth# 31.41% - - -
- -----------------------------------------------------------------------------
Smith Barney International Equity
Portfolio# 9.86% - - -
- -----------------------------------------------------------------------------
Social Awareness Stock Portfolio
(Smith Barney) 31.75% -3.83% 6.18% -
- -----------------------------------------------------------------------------
Templeton's Global Stock Fund* 23.69% -3.42% 32.33% 5.74%
- -----------------------------------------------------------------------------
Travelers Growth & Income Stock
Account 35.44% -1.27% 7.68% 0.92%
- -----------------------------------------------------------------------------
Utilities Portfolio (Smith Barney) 27.69% - - -
- -----------------------------------------------------------------------------
BOND ACCOUNTS:
- -----------------------------------------------------------------------------
American Odyssey Intermediate-Bond Fund 13.59% -4.05% - -
- -----------------------------------------------------------------------------
American Odyssey Long-Term Bond Fund 20.94% -6.93% - -
- -----------------------------------------------------------------------------
American Odyssey Short-Term Bond Fund 9.49% -1.38% - -
- -----------------------------------------------------------------------------
Fidelity's High Income Portfolio* 19.11% -2.77% 19.01% 21.77%
- -----------------------------------------------------------------------------
Putnam Diversified Income Portfolio# 15.93% - - -
- -----------------------------------------------------------------------------
Smith Barney High Income Portfolio# 16.48% - - -
- -----------------------------------------------------------------------------
Templeton's Global Bond Fund 13.50% -6.06% 10.08% 4.15%
- -----------------------------------------------------------------------------
Travelers High Yield Bond Trust 14.09% -2.49% 12.58% 11.73%
- -----------------------------------------------------------------------------
Travelers Quality Bond Account 14.49% -2.42% 8.11% 6.67%
- -----------------------------------------------------------------------------
Travelers U.S. Government Securities
Portfolio 22.94% -6.82% 8.14% -
- -----------------------------------------------------------------------------
ASSET ALLOCATION ACCOUNTS:
- -----------------------------------------------------------------------------
Fidelity's Asset Manager Portfolio* 15.51% -7.26% 19.53% 10.47%
- -----------------------------------------------------------------------------
MFS Total Return Portfolio# 24.15% - - -
- -----------------------------------------------------------------------------
Templeton's Global Asset Allocation
Fund* 21.03% -4.17% 24.56% 6.67%
- -----------------------------------------------------------------------------
Travelers Managed Assets Trust 25.54% -3.47% 8.01% 3.82%
- -----------------------------------------------------------------------------
MONEY MARKET ACCOUNT:
- -----------------------------------------------------------------------------
Travelers Money Market Account 4.44% 2.75% 1.70% 2.33%
- -----------------------------------------------------------------------------
</TABLE>
Universal Annuity is a variable annuity. These returns are out of: 1) the 1.25%
annual mortality and expense risk charge and 2) portfolio management fees. The
deduction of the semi-annual administrative charge and the deferred sales
charge (5% maximum) is not reflected. The deduction of those charges would
reduce any percentage increase or make greater any percentage decrease.
Performance data quoted represents past performance. Investment return and
principal value of an investment will fluctuate so that an Investor's units,
when redeemed, may be worth more or less than their original cost. An
investment in the Travelers Money Market Account is neither insured nor
guaranteed by the U.S. Government. When presented to the public, this
performance information must be preceded or accompanied by the current
prospectus.
- - Janus Capital Corporation assumed investment responsibility of the Capital
Appreciation Fund (formerly Aggressive Stock Trust) on May 1, 1993.
* These Fund U sub-accounts were not added as an Investment Option under Fund U
until January 24, 1992 (Fidelity's Equity Income Portfolio was added July 19,
1993); however, underlying funds were in existence prior to that date.
Performance figures for periods prior to 1/24/92 represent actual returns of
the underlying funds adjusted to reflect the charges that would have been
assessed had those underlying funds been offered under Fund U during that
period.
# These Fund U sub-accounts were not added as an Investment Option under Fund U
until February 13, 1995; however, underlying funds were in existence prior to
that date. Performance figures for periods prior to 2/13/95 represent actual
returns of the underlying funds adjusted to reflect charges that would have
been assessed had those underlying funds been offered under Fund U during
that period.
+ Returns for periods less than one year are cumulative.
The Travelers Insurance Company and its Affiliates,
One Tower Square, Hartford, CT 06183
<PAGE> 30
SEC STANDARDIZED PERFORMANCE
The following performance data is required by the SEC rules governing uniform
performance reporting. This performance data reflects deductions of all fees
and charges including: 1) the 1.25% annual mortality and expense risk charge,
2) portfolio management fees, 3) the semi-annual administration charge and 4)
the deferred sales charge. Although the deferred sales charge is included in
this performance data, it is applied only if a surrender is made while assets
are under the penalty period. Performance data quoted represents past
performance. Investment return and principal value of an investment will
fluctuate so that an investor's units, when redeemed, may be worth more or less
than their original cost. An investment in the Travelers Money Market Account
is neither insured nor guaranteed by the U.S. Government. When presented to
the public, this performance must be presented or accompanied by the current
prospectus. This performance data is based on a hypothetical investment of
$1,000.
STANDARDIZED AVERAGE ANNUAL RETURNS AS OF 12/31/95 (UPDATED QUARTERLY)
<TABLE>
<CAPTION>
----------------------------------------------------------------
STOCK ACCOUNTS: 1 YEAR 5 YEAR 10 YEAR (OR INCEPTION)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alliance Growth Portfolio# 27.79% - 21.01% (6/94)
- --------------------------------------------------------------------------------------------------------------------------
American Odyssey Core Equity Fund 31.48% - 10.15% (5/93)
- --------------------------------------------------------------------------------------------------------------------------
American Odyssey Emerging Opportunities Fund 25.25% - 15.40% (5/93)
- --------------------------------------------------------------------------------------------------------------------------
American Odyssey International Equity Fund 12.20% - 7.57% (5/93)
- --------------------------------------------------------------------------------------------------------------------------
Capital Appreciation Fund (Janus sub-adviser) 29.31% 16.31% 9.41%
- --------------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund* 29.72% 13.60% 10.61% (9/89)
- --------------------------------------------------------------------------------------------------------------------------
Fidelity's Equity-Income Portfolio* 28.05% 18.97% 11.59% (10/86)
- --------------------------------------------------------------------------------------------------------------------------
Fidelity's Growth Portfolio* 28.33% 18.44% 13.07% (10/86)
- --------------------------------------------------------------------------------------------------------------------------
Smith Barney Income and Growth# 26.05% - 14.76% (6/94)
- --------------------------------------------------------------------------------------------------------------------------
Smith Barney International Equity Portfolio# 4.55% - -0.39% (6/94)
- --------------------------------------------------------------------------------------------------------------------------
Social Awareness Stock Portfolio (Smith Barney) 26.39% - 9.50% (5/92)
- --------------------------------------------------------------------------------------------------------------------------
Templeton's Global Stock Fund* 18.35% 15.14% 10.62% (8/88)
- --------------------------------------------------------------------------------------------------------------------------
Travelers Growth & Income Stock Account 30.08% 12.20% 10.75%
- --------------------------------------------------------------------------------------------------------------------------
Utilities Portfolio (Smith Barney) 22.34% - 11.38% (2/94)
- --------------------------------------------------------------------------------------------------------------------------
BOND ACCOUNTS:
- --------------------------------------------------------------------------------------------------------------------------
American Odyssey Intermediate-Bond Fund 8.27% - 2.53% (5/93)
- --------------------------------------------------------------------------------------------------------------------------
American Odyssey Long-Term Bond Fund 15.60% - 5.78% (5/93)
- --------------------------------------------------------------------------------------------------------------------------
American Odyssey Short-Term Bond Fund 4.18% - 1.58% (5/93)
- --------------------------------------------------------------------------------------------------------------------------
Fidelity's High Income Portfolio* 13.78% 16.61% 9.78%
- --------------------------------------------------------------------------------------------------------------------------
Putnam Diversified Income Portfolio# 10.60% - 7.30% (6/94)
- --------------------------------------------------------------------------------------------------------------------------
Smith Barney High Income Portfolio# 11.15% - 6.14% (6/94)
- --------------------------------------------------------------------------------------------------------------------------
Templeton's Global Bond Fund 8.18% 5.83% 6.16% (8/88)
- --------------------------------------------------------------------------------------------------------------------------
Travelers High Yield Bond Trust 8.77% 11.02% 6.11%
- --------------------------------------------------------------------------------------------------------------------------
Travelers Quality Bond Account 9.17% 6.74% 7.19%
- --------------------------------------------------------------------------------------------------------------------------
Travelers U.S. Government Securities Portfolio 17.60% - 5.94% (1/92)
- --------------------------------------------------------------------------------------------------------------------------
ASSET ALLOCATION ACCOUNTS:
- --------------------------------------------------------------------------------------------------------------------------
Fidelity's Asset Manager Portfolio* 10.19% 10.36% 9.54% (9/89)
- --------------------------------------------------------------------------------------------------------------------------
MFS Total Return Portfolio# 18.80% - 10.18% (6/94)
- --------------------------------------------------------------------------------------------------------------------------
Templeton's Global Asset Allocation Fund* 15.69% 13.27% 9.75% (8/88)
- --------------------------------------------------------------------------------------------------------------------------
Travelers Managed Assets Trust 20.19% 9.40% 9.93%
- --------------------------------------------------------------------------------------------------------------------------
MONEY MARKET ACCOUNT:
- --------------------------------------------------------------------------------------------------------------------------
Travelers Money Market Account -0.86% 1.95% 4.44%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on reverse side
TX, OR, FL ind. contract no.: LVA-10FPU-A; PR ind. contract no.: L-13973; TX,
FL, OR, PR grp. contract no.: LVA-10FPG(u). Submitted to Insurance Commissioner
of Puerto Rico on 2/1/93.
L-12032 REV 12/95 I/R 700.04
<PAGE> 31
Non-Standardized Performance: Fund U
Description of Returns calculations
The following notation will be used for a fund's prices, or unit values:
UVINCEP: Unit Value at fund inception
UV85: Unit Value at year-end, 1985. (Year-minus-10)
UV90: Unit Value at year-end, 1990. (Year-minus-5)
UV92: Unit Value at year-end, 1992. (Year-minus-3)
UV94: Unit Value at year-end, 1994. (Prior year)
UV95: Unit Value at year-end, 1995. (Current year)
1-Year return
(((UV95 / UV94) - 1) * 100)
3-Year average return
((((UV95 / UV92) ** (1/3)) - 1) * 100)
5-Year average return
((((UV95 / UV90) ** (1/5)) - 1) * 100)
10-Year average return
((((UV95 / UV85) ** (1/10)) - 1) * 100)
Inception-to-date return
If fund inception was within 1995:
(((UV95 / UVINCEP) - 1) * 100)
If fund inception was prior to 1995:
((((UV95 / UVINCEP) ** (365 / NUMDAYS)) - 1) * 100)
where NUMDAYS is the number of days from inception to 12/31/95.
FUND UNIT VALUES:
1.) UTILITIES PORTFOLIO (SMITH BARNEY)
UNIT VALUE RETURN
---------- ------
INCEPTION (02/04/94 ): 1.000000 14.07
12/85:
12/90:
12/92:
12/94: 1.005532 27.69
CURRENT 12/95: 1.283982
2.) FIDELITY EQUITY INCOME-PORTFOLIO
UNIT VALUE RETURN
---------- ------
INCEPTION (10/09/86 ): .524217 11.93
12/85:
12/90: .600841 19.81
12/92: .900353 18.11
12/94: 1.112000 33.41
CURRENT 12/95: 1.483574
3.) TRAVELERS GROWTH & INCOME ACCOUNT
UNIT VALUE RETURN
<PAGE> 32
---------- ------
INCEPTION (05/16/83 ): 2.756517 10.17
12/85: 3.274721 11.08
12/90: 5.048239 13.16
12/92: 6.506697 12.92
12/94: 6.917241 35.44
CURRENT 12/95: 9.368819
4.) DREYFUS STOCK INDEX FUND
UNIT VALUE RETURN
---------- ------
INCEPTION (09/30/89 ): .807971 10.94
12/85:
12/90: .784249 14.53
12/92: 1.063662 13.27
12/94: 1.144205 35.09
CURRENT 12/95: 1.545680
5.) TRAVLERS SOC AWRES STOCK PORTFOLIO#
UNIT VALUE RETURN
---------- ------
INCEPTION (05/01/92 ): 1.000000 10.90
12/85:
12/90:
12/92: 1.085896 10.39
12/94: 1.108859 31.75
CURRENT 12/95: 1.460895
6.) AM ODYSSEY CORE EQUITY FUND
UNIT VALUE RETURN
---------- ------
INCEPTION (05/01/93 ): 1.000000 12.06
12/85:
12/90:
12/92:
12/94: .989690 36.85
CURRENT 12/95: 1.354370
7.) TEMPLETON GLOBAL STOCK FUND
UNIT VALUE RETURN
---------- ------
INCEPTION (08/31/88 ): .772928 10.94
12/85:
12/90: .786446 16.05
12/92: 1.046888 16.49
12/94: 1.338030 23.69
CURRENT 12/95: 1.655043
8.) AM ODYSSEY INTNL EQUITY FUND
UNIT VALUE RETURN
---------- ------
INCEPTION (05/01/93 ): 1.000000 9.53
12/85:
12/90:
<PAGE> 33
12/92:
12/94: 1.084329 17.53
CURRENT 12/95: 1.274376
9.) FIDELITY GROWTH PORTFOLIO
UNIT VALUE RETURN
---------- ------
INCEPTION (10/09/86 ): .498625 13.42
12/85:
12/90: .659807 19.29
12/92: 1.024228 15.88
12/94: 1.192078 33.69
CURRENT 12/95: 1.593743
10.) CAPITAL APPRECIATION FUND (JANUS)
UNIT VALUE RETURN
---------- ------
INCEPTION (05/16/83 ): 1.000000 7.16
12/85: .945573 9.74
12/90: 1.083795 17.20
12/92: 1.665086 12.90
12/94: 1.779321 34.67
CURRENT 12/95: 2.396267
11.) AM ODYSSEY EMERGING OPPTS FUND
UNIT VALUE RETURN
---------- ------
INCEPTION (05/01/93 ): 1.000000 17.20
12/85:
12/90:
12/92:
12/94: 1.168475 30.61
CURRENT 12/95: 1.526112
12.) AM ODYSSEY SHORT TERM BOND FUND
UNIT VALUE RETURN
---------- ------
INCEPTION (05/01/93 ): 1.000000 3.70
12/85:
12/90:
12/92:
12/94: 1.006059 9.49
CURRENT 12/95: 1.101532
13.) TRAVELERS QUALITY BOND ACCOUNT
UNIT VALUE RETURN
---------- ------
INCEPTION (05/16/83 ): 1.783024 8.32
12/85: 2.371032 7.52
12/90: 3.356924 7.83
12/92: 4.051961 6.50
12/94: 4.274446 14.49
CURRENT 12/95: 4.893919
<PAGE> 34
14.) AM ODYSSEY INTMEDTE TERM BOND FUND
UNIT VALUE RETURN
---------- ------
INCEPTION (05/01/93 ): 1.000000 4.62
12/85:
12/90:
12/92:
12/94: .992838 13.59
CURRENT 12/95: 1.127795
15.) TRAVELERS U.S. GOVERN SECURITIES
UNIT VALUE RETURN
---------- ------
INCEPTION (01/24/92 ): 1.000000 7.34
12/85:
12/90:
12/92: 1.066269 7.40
12/94: 1.074430 22.94
CURRENT 12/95: 1.320899
16.) TEMPLETON GLOBAL BOND FUND
UNIT VALUE RETURN
---------- ------
INCEPTION (08/31/88 ): .788642 6.48
12/85:
12/90: .893435 6.94
12/92: 1.064775 5.48
12/94: 1.101064 13.50
CURRENT 12/95: 1.249706
17.) AM ODYSSEY LONG TERM BOND FUND
UNIT VALUE RETURN
---------- ------
INCEPTION (05/01/93 ): 1.000000 7.79
12/85:
12/90:
12/92:
12/94: 1.009615 20.94
CURRENT 12/95: 1.220991
18.) TRAVELERS HIGH YIELD BOND TRUST
UNIT VALUE RETURN
---------- ------
INCEPTION (05/16/83 ): 1.000000 7.43
12/85: 1.324407 6.44
12/90: 1.402285 12.01
12/92: 1.973957 7.79
12/94: 2.166884 14.09
CURRENT 12/95: 2.472157
19.) FIDELITY HIGH INCOME PORTFOLIO
UNIT VALUE RETURN
---------- ------
INCEPTION (09/19/85 ): .564419 10.45
<PAGE> 35
12/85: .598305 10.11
12/90: .700220 17.50
12/92: 1.137517 11.29
12/94: 1.316357 19.11
CURRENT 12/95: 1.567961
20.) TRAVELERS MANAGED ASSET TRUST
UNIT VALUE RETURN
---------- ------
INCEPTION (05/16/83 ): 1.000000 8.38
12/85: 1.040246 10.26
12/90: 1.683418 10.42
12/92: 2.111478 9.38
12/94: 2.201344 25.54
CURRENT 12/95: 2.763480
21.) FIDELITY ASSET MANAGER PORTFOLIO
UNIT VALUE RETURN
---------- ------
INCEPTION (09/06/89 ): .769163 9.87
12/85:
12/90: .813985 11.36
12/92: 1.088353 8.59
12/94: 1.206570 15.51
CURRENT 12/95: 1.393727
22.) TEMPLETON GLOBAL ALLOCATION FUND
UNIT VALUE RETURN
---------- ------
INCEPTION (08/31/88 ): .764604 10.08
12/85:
12/90: .795571 14.21
12/92: 1.070227 13.05
12/94: 1.277445 21.03
CURRENT 12/95: 1.546087
23.) TRAVELERS MONEY MARKET ACCOUNT
UNIT VALUE RETURN
---------- ------
INCEPTION (05/16/83 ): 1.118813 5.41
12/85: 1.367725 4.76
12/90: 1.861309 3.18
12/92: 1.994712 2.96
12/94: 2.084454 4.44
CURRENT 12/95: 2.176950
(* MDEVNEY, 4/16/96, 9:06am *)
<PAGE> 1
EXHIBIT 15
THE TRAVELERS FUND U FOR VARIABLE ANNUITIES
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, MICHAEL A. CARPENTER of Greenwich, Connecticut, Director,
President and Chief Executive Officer of The Travelers Insurance Company
(hereinafter the "Company"), do hereby make, constitute and appoint JAY S.
FISHMAN, Director and Chief Finan-cial Officer of said Company, and ERNEST J.
WRIGHT, 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 Com-pany on Form N-4
or other appropriate form under the Securities Act of 1933 for The Travelers
Fund U for Variable Annuities, a separate account of the Company dedicated
specifically to the funding of variable annuity contracts to be offered by the
Com-pany, 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 12th day of June,
1995.
/s/Michael A. Carpenter
Director, President and
Chief Executive Officer
The Travelers Insurance Company
<PAGE> 2
THE TRAVELERS FUND U FOR VARIABLE ANNUITIES
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, JAY S. FISHMAN of Haworth, New Jersey, Director of The
Travelers Insurance Company (hereinafter the "Company"), do hereby make,
constitute and appoint ERNEST J. WRIGHT, Assistant 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 for The
Travelers Fund U for Variable Annuities, a separate account of the Company
dedicated specifically to the funding of variable annuity contracts to be
offered by the 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 1st day
of April, 1996.
/s/Jay S. Fishman
---------------------------------
Director
The Travelers Insurance Company
<PAGE> 3
THE TRAVELERS FUND U FOR VARIABLE ANNUITIES
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, IAN R. STUART of East Hampton, Connecticut, Vice
President, Chief Financial Officer, Chief Accounting Officer and Controller of
The Travelers Insurance Company (hereinafter the "Company"), do hereby make,
constitute and appoint ERNEST J. WRIGHT, Assistant 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 for The
Travelers Fund U for Variable Annuities, a separate account of the Company
dedicated specifically to the funding of variable annuity contracts to be
offered by the 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 1st day
of April, 1996.
/s/Ian R. Stuart
----------------------------------------
Vice President, Chief Financial Officer,
Chief Accounting Officer and Controller
The Travelers Insurance Company
