<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 13
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 15
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT
FOR VARIABLE ANNUITIES
(Exact name of Registrant)
THE TRAVELERS INSURANCE COMPANY
(Name of Insurance Company)
ONE TOWER SQUARE, HARTFORD, CONNECTICUT 06183
(Address of Insurance Company's Principal Executive Offices)
Insurance Company's Telephone Number, including Area Code:
(203) 277-0111
ERNEST J. WRIGHT
Secretary to the Board of Managers
The Travelers Timed Short-Term Bond
Account for Variable Annuities
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, 1995 pursuant to paragraph (b) of Rule 485
____ 60 days after filing pursuant to paragraph (a)(i) of Rule 485
____ on ___________ pursuant to paragraph (a)(i)
____ 75 days after filing pursuant to paragraph (a)(ii) of Rule 485
____ on ___________ pursuant to paragraph (a)(ii) 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 CONTRACTS 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, 1994 WAS
FILED ON FEBRUARY 27, 1995.
<PAGE>
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT
FOR VARIABLE ANNUITIES
Cross-Reference Sheet
Form N-3
<TABLE>
<CAPTION>
Item
No. Caption in Prospectus
- ---- ----------------------
<S> <C> <C>
1. Cover Page The Travelers Timed Short-Term Bond
Account for Variable Annuities
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
and Insurance Company Accounts
6. Management Management
7. Deductions and Expenses Charges and Deductions
8. General Description of The Variable Annuity Contract
Variable Annuity Contracts
9. Annuity Period The Annuity Period
10. Death Benefit Death Benefit
11. Purchases and Contract Value The Variable Annuity Contract
12. Redemptions Surrenders and Redemptions
13. Taxes Federal Tax Considerations
14. Legal Proceedings Legal Proceedings and Opinions
15. Table of Contents of Statement Appendix A
of Additional Information
<CAPTION>
Caption in Statement of Additional Information
----------------------------------------------
<S> <C> <C>
16. Cover Page The Travelers Timed Short-Term Bond
Account for Variable Annuities
17. Table of Contents Table of Contents
18. General Information and History Description of The Travelers and
The Separate Accounts
19. Investment Objectives and Investment Policies and Investment
Policies Objectives
20. Management Board of Managers
21. Investment Advisory and Investment Management and Advisory
Other Services Services
22. Brokerage Allocation Portfolio Transactions
23. Purchase and Pricing of Valuation of Assets
Securities Being Offered
24. Underwriters Distribution and Management Services
25. Calculation of Performance Data Performance Data
26. Annuity Payments Inapplicable
27. Financial Statements Financial Statements
</TABLE>
<PAGE>
PART A
<PAGE>
UNIVERSAL ANNUITY
PROSPECTUS
The Individual Variable Annuity Contracts described in this
Prospectus (issued by The Travelers Insurance Company)provide
for Purchase Payments to be made, either as a single payment or
on a flexible basis, before a selected Maturity Date (usually at
retirement). Purchase Payments may currently 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; 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
bond; 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).
Purchase Payments allocated to Fund U will be invested at net asset
value directly in shares of the underlying funds available under
Fund U (the "Underlying Funds") in accordance with the selection
made by the Contract Owner. (See "The Underlying Funds" on page 17
for a complete list of the funds currently available under Fund U.)
Some of the Underlying Funds may not be available in every state
due to various insurance regulations.
Accounts TGIS, TSB, TAS and TB are investment alternatives
available for those participants who have entered into third party
market timing services agreements. The market timing fee is
deducted as an asset charge from Accounts TGIS, TSB, TAS and TB.
PARTICIPANTS WHO INVEST IN THESE SEPARATE ACCOUNTS WITHOUT A MARKET
TIMING AGREEMENT DO SO AT THEIR OWN RISK, AND MAY BEAR A
DISPROPORTIONATE AMOUNT OF THE EXPENSES ASSOCIATED WITH PORTFOLIO
TURNOVER AND MAY BEAR AN UNNECESSARY INVESTMENT RISK. (See "Market
Timing Services," page 33.)
Travelers Equities Sales, Inc. is the principal underwriter for
these contracts, and may add or substitute investment alternatives,
as described in this Prospectus. The Cash Value of the Contract
will vary continuously to reflect the investment performance of the
Investment Alternatives selected by the Contract Owner. The
Contract Owner bears the investment risk.
This Prospectus sets forth concisely the information about the
Separate Accounts that you should know before investing. Please
read it and retain it for future reference. Additional information
about the Separate Accounts is contained in a Statement of
Additional Information dated May 1, 1995 which has been filed with
the Securities and Exchange Commission and is incorporated by
reference into this Prospectus. A copy may be obtained, without
charge, by writing to The Travelers Insurance Company, Annuity
Services 5 SHS, One Tower Square, Hartford, Connecticut 06183-5030,
or by calling 1-800-842-0125. The Table of Contents of the
Statement of Additional Information appears in Appendix A of this
Prospectus.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT
PROSPECTUSES OF THE MUTUAL FUNDS UNDERLYING FUND U. BOTH THIS
PROSPECTUS AND EACH OF THE UNDERLYING FUND PROSPECTUSES SHOULD BE
READ AND RETAINED FOR FUTURE REFERENCE.
AN INVESTMENT IN ACCOUNT MM IS NEITHER INSURED NOR GUARANTEED BY
THE U.S. GOVERNMENT.
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, 1995
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This page intentionally left blank.
<PAGE>
TABLE OF CONTENTS
GLOSSARY OF SPECIAL TERMS iv
PROSPECTUS SUMMARY 1
FEE TABLE -- Accounts GIS, QB, MM, TGIS, TSB, TAS and TB 4
FEE TABLE -- Fund U and its Underlying Funds 5
CONDENSED FINANCIAL INFORMATION 7
THE INSURANCE COMPANY 16
THE SEPARATE ACCOUNTS 16
THE TRAVELERS FUND U FOR VARIABLE ANNUITIES 17
The Underlying Funds 17
Underlying Fund Investment Advisers 20
Asset Allocation Advice 21
General 21
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES (ACCOUNT GIS) 21
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES (ACCOUNT QB) 22
THE TRAVELERS MONEY MARKET ACCOUNT
FOR VARIABLE ANNUITIES (ACCOUNT MM) 24
THE TRAVELERS TIMED GROWTH AND INCOME STOCK
ACCOUNT FOR VARIABLE ANNUITIES (ACCOUNT TGIS) 26
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT
FOR VARIABLE ANNUITIES (ACCOUNT TSB) 27
THE TRAVELERS TIMED AGGRESSIVE STOCK ACCOUNT
FOR VARIABLE ANNUITIES (ACCOUNT TAS) 29
THE TRAVELERS TIMED BOND ACCOUNT
FOR VARIABLE ANNUITIES (ACCOUNT TB) 31
MARKET TIMING SERVICES 33
Market Timing Risks 34
THE VARIABLE ANNUITY CONTRACT 34
General Benefit Description 35
Purchase Payments 35
Application of Purchase Payments 35
Right to Return 35
Number of Accumulation Units 35
Net Investment Factor 35
Federal and State Income Tax Withholding 36
CHARGES AND DEDUCTIONS 36
Contingent Deferred Sales Charge 36
Premium Tax 37
Changes in Taxes Based Upon Premium or Value 37
Administrative Charge 37
Reduction or Elimination of Contract Charges 37
Insurance Charge 37
<PAGE>
Investment Advisory Fees 38
Market Timing Services Fees 38
PERFORMANCE INFORMATION 38
MANAGEMENT AND INVESTMENT ADVISORY SERVICES 39
TRANSFERS 40
Dollar-Cost Averaging (Automated Transfers) 40
SURRENDERS AND REDEMPTIONS 40
Systematic Withdrawals 41
DEATH BENEFIT 41
THE ANNUITY PERIOD 42
Maturity Date 42
Allocation of Annuity Payments 42
Annuity Unit Value 42
Determination of First Annuity Payment 42
Determination of Second and Subsequent Annuity Payments 43
PAYOUT OPTIONS 43
Election of Options 43
Annuity Options 43
Income Options 44
MISCELLANEOUS CONTRACT PROVISIONS 45
Termination 45
Required Reports 45
Suspension of Payments 45
FEDERAL TAX CONSIDERATIONS 45
General 45
Tax Law Diversification Requirements for
Variable Annuities 45
Ownership of the Investments 46
Section 403(b) Plans and Arrangements 46
Qualified Pension and Profit-Sharing Plans 46
Individual Retirement Annuities 47
Section 457 Plans 47
Nonqualified Annuities 47
Federal Income Tax Withholding 48
Tax Advice 49
VOTING RIGHTS 49
DISTRIBUTION OF VARIABLE ANNUITY CONTRACTS 50
STATE REGULATION 51
LEGAL PROCEEDINGS AND OPINIONS 51
APPENDIX A 51
<PAGE>
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 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.
COMPANY: The Travelers Insurance Company.
COMPANY'S HOME OFFICE: the principal executive offices of The
Travelers Insurance Company, located at One Tower Square, Hartford,
Connecticut.
CONTRACT DATE: the date on which the contract, benefits and the
provisions of the contract become effective.
CONTRACT YEARS: annual periods computed from the Contract Date.
INCOME PAYMENTS: optional forms of periodic payments made by the
Company which are not based on the life of the Annuitant.
INVESTMENT ALTERNATIVE: a Separate Account or available mutual 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 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.
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.
PURCHASE PAYMENT (PREMIUM 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: an open-end management investment company which
serves as an investment option under The Travelers Fund U for
Variable Annuities.
VALUATION DATE: generally, 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 and the Company is open for business. 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.
THERE ARE ELIGIBILITY REQUIREMENTS FOR PURCHASERS DESCRIBED
ELSEWHERE IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE
A SOLICITATION OF AN OFFER TO ACQUIRE ANY INTEREST OR PARTICIPATION
IN THE VARIABLE ANNUITY DESCRIBED IN THIS PROSPECTUS TO ANY PERSON
WHO IS INELIGIBLE FOR PURCHASE.
<PAGE>
PROSPECTUS SUMMARY
- -----------------------------------------------------------
INTRODUCTION
The Contract described in this Prospectus is issued by The
Travelers Insurance Company (the "Company" or "The Travelers"),
an indirect wholly owned subsidiary of Travelers Group Inc.
The Company has established the Separate Accounts listed below
for the purpose of funding the Variable Annuity Contract described
in this Prospectus. All of the Separate Accounts except
Fund U are registered with the Securities and Exchange
Commission as diversified, open-end management investment
companies under the Investment Company Act of 1940 (the
"1940 Act"). Fund U is registered with the Securities and
Exchange Commission as a unit investment trust under the
1940 Act.
RIGHT TO RETURN
A contract may be returned for a full refund of the Contract
Value (including charges) within ten days of purchase,
unless state law requires a longer period. The Contract
Value returned may be greater or less than the Purchase
Payment. However, if applicable state law so requires, or
if the Contract is purchased as an Individual Retirement
Annuity (IRA), the Purchase Payment will be refunded in
full. (See "The Variable Annuity Contract--Right to
Return," page 35.)
PURCHASE PAYMENTS
The minimum Purchase Payment under tax-benefited contracts
is $20, except in the case of IRAs where the initial minimum
Purchase Payment is $1,000. For non tax-benefited
contracts, the minimum Purchase Payment is $1,000 initially,
and $100 thereafter. (See "The Variable Annuity Contract--
Purchase Payments," page 35.)
THE SEPARATE ACCOUNTS
The Separate Accounts currently available under the Contract
are as follows:
The Travelers Growth and Income Stock Account for
Variable Annuities (Account GIS)
The Travelers Quality Bond Account for Variable Annuities
(Account QB)
The Travelers Money Market Account for Variable Annuities
(Account MM)
The Travelers Timed Growth and Income Stock Account for
Variable Annuities (Account TGIS) *
The Travelers Timed Short-Term Bond Account for Variable
Annuities (Account TSB) *
The Travelers Timed Aggressive Stock Account for Variable
Annuities (Account TAS) *
The Travelers Timed Bond Account for Variable Annuities
(Account TB) *
The Travelers Fund U for Variable Annuities (Fund U)
* ACCOUNTS TGIS, TSB, TAS AND TB ARE AVAILABLE ONLY IN
CONNECTION WITH THE MARKET TIMING PROGRAM, AS DESCRIBED
BELOW.
FUND U AND THE UNDERLYING FUNDS
Purchase Payments designated to be allocated to Fund U will
be invested at net asset value in shares of the following
Underlying Funds in accordance with the selection made by
the Contract Owner:
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
Dreyfus Stock Index Fund
Fidelity's High Income Portfolio
Fidelity's Equity-Income Portfolio
Fidelity's Growth Portfolio
Fidelity's Asset Manager Portfolio
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
G.T. Global Strategic Income Portfolio
Smith Barney High Income Portfolio
MFS Total Return Portfolio
<PAGE>
INVESTMENT OBJECTIVES AND RISKS
A complete description of the investment objectives for each
of the Separate Accounts listed above is contained in this
Prospectus (beginning on page 21). Brief descriptions of
the investment objectives for the Underlying Funds are
contained on pages 17-19 of this Prospectus; and complete
descriptions may be found in the prospectuses for the
Underlying Funds. As is true with all investment companies,
each investment alternative possesses certain investment
risks and there can be no assurance that the objectives of
any of the investment alternatives will be achieved.
MARKET TIMING
Accounts TGIS, TSB, TAS and TB (the "Market Timed Accounts")
are investment alternatives available to Contract Owners who
have entered into third party market timing services
agreements ("market timing agreements") with select
registered investment advisers which provide market timing
services in exchange for a fee ("registered investment
advisers"). The market timing agreements permit the
registered investment advisers to act on behalf of the
Contract Owner by transferring all or a portion of the
Contract Owner's units from one Market Timed Account to
another. Copeland Financial Services, Inc. ("Copeland"), a
registered investment adviser and an affiliate of the
Company, provides market timing services to Contract Owners
in the Market Timed Accounts for a fee of 1.25% of the
current value of the assets subject to timing, plus a one-
time $30 market timing application fee deducted at the time
a Contract Owner completes an application for market timing
services. Pursuant to the market timing agreements, the
Company deducts a daily percentage of the 1.25% annual
market timing fee from the assets of the Market Timed
Accounts on each Valuation Date. The Company then pays the
market timing fee to Copeland.
Assets timed by investment advisers not affiliated with the
Company may be in the Market Timed Accounts if the
unaffiliated advisers agree to an arrangement substantially
identical to the payment method described above for the
affiliated advisers, and if the unaffiliated advisers are
acceptable to the Company.
Contract Owners who invest in 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.
Additionally, investment in the Market Timed Accounts
without a market timing agreement may cause an unnecessary
investment risk.
For further information regarding market timing, please see
"Market Timing Services," page 33.
ASSET ALLOCATION
Some Contract Owners may elect to enter into an asset
allocation investment advisory agreement with Copeland
Financial Services, Inc. Copeland provides asset allocation
advice under its CHART Program (R), 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. The service may not
be available in all marketing programs through which the
Universal Annuity contract is sold. (See "Asset Allocation
Advice," page 21.)
INVESTMENT ADVISORY SERVICES
The Travelers Investment Management Company furnishes
investment management and advisory services to Accounts GIS,
TGIS, TSB and TAS. Travelers Asset Management International
Corporation furnishes investment management and advisory
services to Accounts QB, MM and TB. (See "Management and
Investment Advisory Services," page 39, as well as
"Underlying Fund Investment Advisers," page 20, and the
prospectuses for each of the underlying funds.)
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 "Contingent Deferred Sales Charge,"
page 36.)
The Company will deduct $15 semiannually from the Contract
to cover administrative expenses associated with the
Contract. (See "Administrative Charge," page 37.)
<PAGE>
The Company deducts an insurance charge from each Separate
Account to compensate for mortality and expense risks
assumed by the Company. The insurance charge is equivalent
on an annual basis to 1.25% of the daily net assets of the
Account. (See "Charges and Deductions--Insurance Charge,"
page 37.)
A deduction is made from each Separate Account (except Fund
U) for investment management and advisory services.
Investment advisory fees are deducted daily and paid weekly
to the investment advisers providing these services. (See
"Charges and Deductions--Investment Advisory Fees," page
38.) For investment options under Fund U, the investment
management and advisory services fee is deducted from the
assets of the underlying funds. (Please see the
prospectuses of the underlying mutual funds for a
description of their respective investment management and
advisory fees.)
Premium taxes may apply to annuities in a few states. These
taxes currently range from 0.5% to 5.0%, depending upon
jurisdiction. The Company will deduct any applicable
premium tax from the Contract Value, either upon death,
surrender, or 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. (See
"Charges and Deductions--Premium Tax," page 37.)
ANNUITY PAYMENTS
At Maturity Date, the contract provides lifetime Annuity
Payments, as well as other types of payout plans. (See
"Payout Options," page 43.) 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 the state of New Jersey.
DEATH BENEFIT
A death benefit is payable to the Beneficiary of the
Contract if the Annuitant dies before Annuity or Income
Payments begin. (See "Death Benefit," page 41.)
TRANSFERS AND WITHDRAWALS
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 40.)
SURRENDERS
Prior to Maturity Date, all or part of the contract value
may be surrendered, subject to certain charges and
limitations. (See "Surrenders and Redemptions," page 40,
and "Federal Tax Considerations--Section 403(b) Plans and
Arrangements," page 46.)
TERMINATION
The Travelers reserves the right to terminate inactive
contracts under certain circumstances. (See "Miscellaneous
Contract Provisions--Termination," page 45.)
VOTING RIGHTS
Purchasers have certain voting rights under the contracts.
(See "Voting Rights," page 49.)
<PAGE>
FEE TABLE
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ACCOUNTS GIS, QB, MM, TGIS, TSB, TAS AND TB
The purpose of this Fee Table is to assist Contract Owners in
understanding the various costs and expenses that will be borne,
directly or indirectly, under the Contract. For additional
information regarding the charges and deductions assessed under the
Contract, including possible waivers or reductions of these
expenses, see "Charges and Deductions," page 36. Expenses shown do
not include premium taxes which may be applicable.
CONTRACT CHARGES AND EXPENSES
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 Fees
(as a percentage of average net assets) 1.25%
<TABLE>
TOTAL
MANAGEMENT MARKET ANNUAL
FEE TIMING FEE (1) EXPENSES (2)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Travelers Growth and Income Stock Account (Account GIS) 0.45% -- 1.70%
Travelers Quality Bond Account (Account QB) 0.32% -- 1.57%
Travelers Money Market Account (Account MM) 0.32% -- 1.57%
Travelers Timed Growth and Income Stock Account (Account TGIS) 0.32% 1.25% 2.82%
Travelers Timed Short-Term Bond Account (Account TSB) 0.32% 1.25% 2.82%
Travelers Timed Aggressive Stock Account (Account TAS) 0.30% 1.25% 2.80%
Travelers Timed Bond Account (Account TB) 0.50% 1.25% 3.00%
EXAMPLE (3)
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES.
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
- --------------------------------------------------------
A $1,000 investment would be subject to the If the Contract is NOT surrendered at the
following expenses, assuming a 5% annual end of the period shown, a $1,000 invest-
return on assets, if the Contract is surren- ment would be subject to the following
dered at the end of the period shown (4): expenses, assuming a 5% annual return:
<CAPTION>
- ------------------------------------------------------------------------------------------------
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>
Account GIS $ 69 $ 109 $ 152 $ 220 $ 19 $ 59 $ 102 $ 220
Account QB 68 105 145 206 18 55 95 206
Account MM 68 105 145 206 18 55 95 206
Account TGIS 80 143 208 332 30 93 158 332
Account TSB 80 143 208 332 30 93 158 332
Account TAS 80 142 207 330 30 92 157 330
Account TB 82 148 216 348 32 98 166 348
</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 Includes mortality and expense risk fees.
3 The Example reflects the $15 Semiannual Contract Fee as an annual
charge of 0.179% of assets.
4 The Contingent Deferred Sales Charge may be waived upon
annuitization (see "Charges and Deductions -- Contingent Deferred
Sales Charge," page 36.)
<PAGE>
FEE TABLE
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THE TRAVELERS FUND U FOR VARIABLE ANNUITIES
AND ITS UNDERLYING FUNDS
The purpose of this Fee Table is to assist Contract Owners in
understanding the various costs and expenses that will be borne,
directly or indirectly, under the Contract. The information listed
reflects expenses of the Separate Account as well as of the
Underlying Funds. For additional information regarding the charges
and deductions assessed under the Contract, including possible
waivers or reductions of these expenses, see "Charges and
Deductions," page 36. Expenses shown do not include premium taxes,
which may be applicable.
CONTRACT CHARGES AND EXPENSES
Contingent Deferred Sales Charge
(as a percentage of purchase payments): 5.00%
Semiannual Contract Administrative Charge $15
ANNUAL SUB-ACCOUNT OR SEPARATE ACCOUNT EXPENSES
Mortality and Expense Risk Fees
(as a percentage of average net
assets of the Separate Account) 1.25%
UNDERLYING FUND EXPENSES
(as a percentage of average net assets of the Underlying Fund)
<TABLE>
<CAPTION>
OTHER TOTAL
MANAGEMENT EXPENSES UNDERLYING
FEE (AFTER REIMBURSEMENT) FUND EXPENSES
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital Appreciation Fund 0.75% 0.14% (1) 0.89%
High Yield Bond Trust 0.50% 0.75% (1) 1.25%
Managed Assets Trust 0.50% 0.11% (1) 0.61%
U.S. Government Securities Portfolio 0.32% 0.39% (1) 0.71%
Social Awareness Stock Portfolio 0.65% 0.60% (1) 1.25%
Utilities Portfolio* 0.65% 0.60% (1) 1.25%
Templeton Bond Fund 0.50% 0.40% (2) 0.90%
Templeton Stock Fund 0.48% 0.25% (2) 0.73%
Templeton Asset Allocation Fund 0.49% 0.26% (2) 0.75%
Fidelity's High Income Portfolio 0.61% 0.10% (3) 0.71%
Fidelity's Equity-Income Portfolio 0.52% 0.06% (3) 0.58%
Fidelity's Growth Portfolio 0.62% 0.07% (3) 0.69%
Fidelity's Asset Manager Portfolio 0.72% 0.08% (3) 0.80%
Dreyfus Stock Index Fund 0.07% 0.33% (4) 0.40%
American Odyssey International Equity Fund 0.70% 0.55% (5) 1.25%
American Odyssey Emerging Opportunities Fund 0.65% 0.18% (5) 0.83%
American Odyssey Core Equity Fund 0.60% 0.18% (5) 0.78%
American Odyssey Long-Term Bond Fund 0.50% 0.25% (5) 0.75%
American Odyssey Intermediate-Term Bond Fund 0.50% 0.25% (5) 0.75%
American Odyssey Short-Term Bond Fund 0.50% 0.25% (5) 0.75%
Smith Barney Income and Growth Portfolio 0.65% 0.10% (6) 0.75%
Alliance Growth Portfolio 0.80% 0.10% (6) 0.90%
Smith Barney International Equity Portfolio 0.90% 0.35% (6) 1.25%
Putnam Diversified Income Portfolio 0.75% 0.20% (6) 0.95%
G.T. Global Strategic Income Portfolio 0.80% 0.30% (6) 1.10%
Smith Barney High Income Portfolio 0.60% 0.10% (6) 0.70%
MFS Total Return Portfolio 0.80% 0.15% (6) 0.95%
</TABLE>
1 Other Expenses are as of the fiscal year ended December 31, 1994,
taking 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 0.83%, 2.69% and 2.84% for High Yield
Bond Trust, Social Awareness Stock Portfolio and Utilities
Portfolio respectively.
2 Other Expenses are based on the actual operating expenses
incurred by the Fund during the year ended December 31, 1994.
3 Management Fees and Other Expenses are as of the fiscal year
ended December 31, 1994. No reimbursement arrangement affected
the High Income Portfolio. A portion of the brokerage commissions
the Fund paid was used to reduce its expenses. Without this
reduction, total Other Expenses would have been: Equity-Income
Portfolio, 0.60%; Growth Portfolio, 0.70%; and Asset Manager
Portfolio, 0.81%.
4 The administrator and investment adviser have agreed to reimburse
the Fund for expenses in excess of 0.40%. For the fiscal year
ended December 31, 1994, the Management Fee and Other Expenses
before reimbursement were 0.15% and 0.42%, respectively.
5 Other Expenses are as of the fiscal year ended December 31, 1994
taking into account the current expense limitations agreed to by
the Manager. The Manager has agreed to continue, at least until
May 1, 1996, to waive fees or reimburse expenses to the extent a
Fund's total expense ratio exceeds the following expense
limitation: International Equity Fund, 1.25%; Emerging
Opportunities Fund and Core Equity Fund, 1.00%; and Long-Term
Bond Fund, Intermediate-Term Bond Fund, Short-Term Bond Fund,
0.75%. Thereafter, each 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. The Long-Term Bond Fund
and the Intermediate-Bond Fund are currently reimbursing the
Manager while the Short-Term Bond Fund and the Intermediate
Equity Fund are still receiving reimbursements from the
Manager. Without these expense limitations and/or Manager
reimbursements, Other Expenses of the Funds would have been as
follows: International Equity Fund, 0.66%; Emerging
Opportunities Fund, 0.27%; Core Equity Fund, 0.25%, Long-Term
Bond Fund, 0.23%; Intermediate-Term Bond Fund, 0.25%; and Short-Term
Bond Fund, 0.52%.
<PAGE>
6 Other expenses are as of October 31, 1994, 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 Funds for their expenses. If such fees were not
waived and expenses were not reimbursed, Total Underlying
Expenses would have been as follows: Smith Barney Income and
Growth, 2.08%; Alliance Growth Portfolio,
1.76%; Smith Barney International Equity Portfolio, 2.00%; Putnam
Diversified Income Portfolio, 2.92%; G.T. Global Income
Portfolio, 4.53%; Smith Barney High Income Portfolio, 2.60%; and
MFS Return Portfolio, 2.51%.
* Annualized (Fund commenced operations February 4, 1994).
- -----------------------------------------------------------------------
EXAMPLE *
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
- ------------------------------------------------------------------------
<TABLE>
A $1,000 investment would be If the Contract is NOT surrendered
subject to the following at the end of the period shown, a
expenses, assuming a 5% $1,000 investment would be subject
annual return on assets, if to the following expenses, assuming
the Contract is surrendered at a 5% annual return:
the end of the period shown **:
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
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>
Capital Appreciation Fund $74 $122 $174 $265 $24 $72 $124 $265
High Yield Bond Trust 77 133 192 301 27 83 142 301
Managed Assets Trust 71 114 160 237 21 64 110 237
U.S. Government Securities Portfolio 72 117 165 247 22 67 115 247
Social Awareness Stock Portfolio 77 133 192 301 27 83 142 301
Utilities Portfolio 77 133 -- -- 27 83 -- --
Templeton Bond Fund 74 123 174 267 24 73 124 267
Templeton Stock Fund 72 118 166 249 22 68 116 249
Templeton Asset Allocation Fund 72 118 167 251 22 68 117 251
Fidelity's High Income Portfolio 72 117 165 247 22 67 115 247
Fidelity's Equity-Income Portfolio 70 113 158 234 20 63 108 234
Fidelity's Growth Portfolio 72 116 164 245 22 66 114 245
Fidelity's Asset Manager Portfolio 73 120 169 256 23 70 119 256
Dreyfus Stock Index Fund 69 108 149 215 19 58 99 215
American Odyssey Funds (1):
International Equity Fund 77 133 192 301 27 83 142 301
Emerging Opportunities Fund 73 121 171 259 23 71 121 259
Core Equity Fund 72 119 168 254 22 69 117 254
Long-Term Bond Fund 72 118 167 251 22 68 117 251
Intermediate-Term Bond Fund 72 118 167 251 22 68 117 251
Short-Term Bond Fund 72 118 167 251 22 68 117 251
American Odyssey Funds (2):
International Equity Fund 90 170 252 415 40 120 202 415
Emerging Opportunities Fund 85 158 232 378 35 108 182 378
Core Equity Fund 85 156 230 374 35 106 180 374
Long-Term Bond Fund 85 155 228 371 35 105 178 371
Intermediate-Term Bond Fund 85 155 228 371 35 105 178 371
Short-Term Bond Fund 85 155 228 371 35 105 178 371
Smith Barney Income and Growth Portfolio 72 118 -- -- 22 68 -- --
Alliance Growth Portfolio 74 123 -- -- 24 73 -- --
Smith Barney International Equity Portfolio 77 133 -- -- 27 83 -- --
Putnam Diversified Income Portfolio 74 124 -- -- 24 74 -- --
G.T. Global Strategic Income Portfolio 76 129 -- -- 26 79 -- --
Smith Barney High Income Portfolio 72 117 -- -- 22 67 -- --
MFS Total Return Portfolio 74 124 -- -- 24 74 -- --
</TABLE>
* The Example reflects the $15 "Semiannual" Contract Fee as an
annual charge of 0.179% of assets.
** The Contingent Deferred Sales Charge may be waived upon
annuitization (see "Charges and Deductions --Contingent Deferred
Sales Charge," page 36.)
1 Reflects expenses that would be incurred for those Contract
Owners who DO NOT participate in the CHART Asset Allocation
program.
2 Reflects expenses that would be incurred for those Contract
Owners who DO participate in the CHART Asset Allocation program.
<PAGE>
CONDENSED FINANCIAL INFORMATION
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES
Per Unit Data for an Accumulation Unit outstanding throughout each year
The following information on per unit data has been audited by Coopers &
Lybrand L.L.P., Independent Accountants. Their report on the per unit data for
each of the five years in the period ended December 31, 1994 is contained in
the 1994 Annual Report to Contract Owners. The Annual Report is incorporated
by reference into the Statement of Additional Information. The following
information should be read in conjunction with the financial statements
contained in the 1994 Annual Report.
Contracts issued on or after May 16,1983.
<TABLE>
<CAPTION>
SELECTED PER UNIT DATA 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income ..............$ .189 $ .184 $ .188 $ .198 $ .192 $ .191 $ .168 $ .132 $ .126 $ .130
Operating expenses ................... .115 .106 .098 .091 .079 .095 .071 .066 .060 .048
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net investment income ................ .074 .078 .090 .107 .113 .096 .097 .066 .066 .082
Unit Value at beginning of year ...... 7.007 6.507 6.447 5.048 5.295 4.191 3.601 3.737 3.275 2.732
Net realized and change in
unrealized gains (losses) ........... (.164) .422 (.030) 1.292 (.360) 1.008 .493 (.202) .396 .461
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Unit Value at end of year ............$ 6.917 $ 7.007 $ 6.507 $ 6.447 $ 5.048 $ 5.295 $ 4.191 $ 3.601 $ 3.737 $ 3.275
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase (decrease) in
unit value ........................... (.09) .50 .06 1.40 (.25) 1.10 .59 (.14) .46 .54
Ratio of operating expenses to
average net assets ................... 1.65% 1.57% 1.58% 1.58% 1.57% 1.58% 1.58% 1.58% 1.57% 1.57%
Ratio of net investment income to
average net assets ................... 1.05% 1.15% 1.43% 1.86% 2.25% 2.33% 2.60% 1.49% 1.84% 2.85%
Number of units outstanding at
end of year (thousands)...............26,692 28,497 29,661 26,235 19,634 15,707 12,173 11,367 54,065 32,994
Portfolio turnover rate ................ 103% 81% 189% 319% 54% 27% 38% 51% 95% 93%
Contracts issued prior to May 16,1983.
<CAPTION>
SELECTED PER UNIT DATA 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income ..............$ .192 $ .189 $ .192 $ .201 $ .199 $ .191 $ .168 $ .132 $ .126 $ .130
Operating expenses ................... .100 .092 .085 .077 .069 .066 .053 .059 .047 .037
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net investment income ................ .092 .097 .107 .124 .130 .125 .115 .073 .079 .093
Unit Value at beginning of year ...... 7.194 6.664 6.587 5.145 5.383 4.250 3.642 3.771 3.296 2.742
Net realized and change in
unrealized gains (losses) ........... (.166) .433 (.030) 1.318 (.368) 1.008 .493 (.202) .396 .461
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Unit Value at end of year ............$ 7.120 $ 7.194 $ 6.664 $ 6.587 $ 5.145 $ 5.383 $ 4.250 $ 3.642 $ 3.771 $ 3.296
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase (decrease) in
unit value ........................... (.07) .53 .08 1.44 (.24) 1.13 .61 (.13) .48 .55
Ratio of operating expenses to
average net assets ................... 1.41% 1.33% 1.33% 1.33% 1.33% 1.33% 1.33% 1.33% 1.32% 1.32%
Ratio of net investment income to
average net assets ................... 1.30% 1.40% 1.67% 2.11% 2.50% 2.56% 2.85% 1.72% 2.09% 3.16%
Number of units outstanding at
end of year (thousands) ..............19,557 21,841 22,516 24,868 28,053 31,326 35,633 41,859 48,008 55,699
Portfolio turnover rate ............... 103% 81% 189% 319% 54% 27% 38% 51% 95% 93%
</TABLE>
The consolidated financial statements of The Travelers Insurance Company and
Subsidiaries are contained in the Statement of Additional Information.
<PAGE>
CONDENSED FINANCIAL INFORMATION
THE TRAVELERS QUALITY BOND 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, 1994 is contained
in the l994 Annual Report to Contract Owners. The Annual Report is incorporated
by reference into the Statement of Additional Information. The following
information should be read in conjunction with the financial statements
contained in the 1994 Annual Report.
Contracts issued subsequent to May 16, 1983.
<TABLE>
<CAPTION>
SELECTED PER UNIT DATA 1994 1993 1992 1991 + 1990 1989 1988 1987 1986 1985
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income ...............$ .310 $ .299 $ .311 $ .299 $ .277 $ .270 $ .259 $ .245 $ .240 $ .237
Operating expenses .................... .069 .067 .061 .056 .048 .047 .046 .042 .040 .035
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net investment income ................. .241 .232 .250 .243 .229 .223 .213 .203 .200 .202
Unit Value at beginning of year ....... 4.381 4.052 3.799 3.357 3.129 2.852 2.697 2.629 2.369 2.056
Net realized and change in
unrealized gains (losses) ............ (.348) .097 .003 .199 (.001) .054 (.058) (.135) .060 .111
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Unit Value at end of year .............$ 4.274 $ 4.381 $ 4.052 $ 3.799 $ 3.357 $ 3.129 $ 2.852 $ 2.697 $ 2.629 $ 2.369
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase (decrease) in unit value .. (.11) .33 .25 .44 .23 .28 .16 .07 .26 .31
Ratio of operating expenses to
average net assets .................... 1.57% 1.57% 1.58% 1.57% 1.57% 1.57% 1.58% 1.57% 1.57% 1.58%
Ratio of net investment income to
average net assets .................... 5.62% 5.41% 6.38% 6.84% 7.06% 7.44% 7.67% 7.72% 7.94% 9.15%
Number of units outstanding at
end of year (thousands)............... 27,033 28,472 20,250 17,211 14,245 13,135 9,457 7,560 8,321 3,719
Portfolio turnover rate ............... 27% 24% 23% 21% 41% 33% 17% 17% 28% 29%
Contracts issued prior to May 16, 1983.
<CAPTION>
SELECTED PER UNIT DATA 1994 1993 1992 1991 +1990 1989 1988 1987 1986 1985
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income ............... $ .318 $ .306 $ .317 $ .304 $ .281 $ .270 $ .259 $ .245 $ .240 $ .237
Operating expenses .................... .059 .058 .050 .048 .040 .035 .037 .034 .032 .029
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net investment income ................. .259 .248 .267 .256 .241 .235 .222 .211 .208 .208
Unit Value at beginning of year ....... 4.498 4.150 3.880 3.421 3.181 2.892 2.728 2.652 2.384 2.065
Net realized and change in
unrealized gains (losses) ............ (.357) .100 .003 .203 (.001) .054 (.058) (.135) .060 .111
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Unit Value at end of year .............$ 4.400 $ 4.498 $ 4.150 $ 3.880 $ 3.421 $ 3.181 $ 2.892 $ 2.728 $ 2.652 $ 2.384
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase (decrease) in unit value. (.10) .35 .27 .46 .24 .29 .16 .08 .27 .32
Ratio of operating expenses to
average net assets .................. 1.33% 1.33% 1.33% 1.33% 1.33% 1.33% 1.33% 1.32% 1.32% 1.33%
Ratio of net investment income to
average net assets .................. 5.87% 5.66% 6.61% 7.09% 7.31% 7.60% 7.82% 7.87% 8.19% 9.43%
Number of units outstanding at
end of year (thousands) ............. 10,694 12,489 13,416 14,629 16,341 18,248 21,124 24,703 27,776 31,189
Portfolio turnover rate .............. 27% 24% 23% 21% 41% 33% 17% 17% 28% 29%
<FN>
+ On May 1, 1990, TAMIC replaced TIMCO as the investment adviser for Account QB.
</TABLE>
The consolidated financial statements of The Travelers Insurance Company
and Subsidiaries are contained in the Statement of Additional Information.
<PAGE>
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, 1994 is contained
in the 1994 Annual Report to Contract Owners. The Annual Report is incorporated
by reference into the Statement of Additional information. The following
information should be read in conjunction with the financial statements
contained in the 1994 Annual Report.
Contracts issued on or after May 16, 1983.
<TABLE>
<CAPTION>
SELECTED PER UNIT DATA 1994 1993 1992 1991 + 1990 1989 1988 1987 1986 1985
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income ............ $ .087 $ .065 $ .077 $ .118 $ .149 $ .156 $ .118 $ .101 $ .091 $ .108
Operating expenses ................. .032 .031 .031 .030 .029 .027 .023 .023 .020 .020
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net investment income .............. .055 .034 .046 .088 .120 .129 .095 .078 .071 .088
Unit Value at beginning of year .... 2.029 1.995 1.949 1.861 1.741 1.612 1.517 1.439 1.368 1.280
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Unit Value at end of year .......... $ 2.084 $ 2.029 $ 1.995 $ 1.949 $ 1.861 $ 1.741 $ 1.612 $ 1.517 $ 1.439 $ 1.368
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase in unit value ........... .06 .03 .05 .09 .12 .13 .10 .08 .07 .09
Ratio of operating expenses to
average net assets ................... 1.57% 1.57% 1.57% 1.57% 1.57% 1.57% 1.56% 1.57% 1.57% 1.57%
Ratio of net investment income to
average net assets ................... 2.72% 1.68% 2.33% 4.66% 6.68% 7.65% 6.02% 5.27% 4.87% 6.55%
Number of units outstanding at
end of year (thousands)...............39,675 34,227 42,115 55,013 67,343 57,916 41,449 49,918 31,831 24,645
Contracts issued prior to May 16, 1983.
<CAPTION>
SELECTED PER UNIT DATA 1994 1993 1992 1991 + 1990 1989 1988 1987 1986 1985
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income ..............$ .091 $ .067 $ .079 $ .120 $ .151 $ .156 $ .118 $ .101 $ .091 $ .108
Operating expenses ................... .028 .027 .027 .026 .024 .021 .018 .018 .015 .017
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net investment income ................ .063 .040 .052 .094 .127 .135 .100 .083 .076 .091
Unit Value at beginning of year ...... 2.083 2.043 1.991 1.897 1.770 1.635 1.535 1.452 1.376 1.285
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Unit Value at end of year ............$ 2.146 $ 2.083 $ 2.043 $ 1.991 $ 1.897 $ 1.770 $ 1.635 $ 1.535 $ 1.452 $ 1.376
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase in unit value ........... .06 .04 .05 .09 .13 .14 .10 .08 .08 .09
Ratio of operating expenses to
average net assets .................. 1.33% 1.33% 1.33% 1.33% 1.33% 1.33% 1.31% 1.32% 1.32% 1.32%
Ratio of net investment income to
average net assets .................. 2.98% 1.93% 2.58% 4.90% 6.93% 7.81% 6.19% 5.49% 5.09% 6.83%
Number of units outstanding at
end of year (thousands) ............. 206 218 227 262 326 367 497 592 593 639
<FN>
+ On May 1, 1990, TAMIC replaced TIMCO as the investment adviser for Account MM.
The consolidated financial statements of The Travelers Insurance Company and
Subsidiaries are contained in the Statement of Additional Information.
</TABLE>
CONDENSED FINANCIAL INFORMATION -- ACCOUNT MM
<PAGE>
CONDENSED FINANCIAL INFORMATION
THE TRAVELERS FUND U FOR VARIABLE ANNUITIES
Accumulation Unit Values
(Unaudited)
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
----------------- ------------------ ----------------- ----------------- ---------------
Q NQ Q NQ Q NQ Q NQ Q NQ
------- ------- ------- ------- ------- ------ ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Appreciation Fund*
Unit Value at beginning of year. $ 1.892 $ 1.962 $ 1.665 $ 1.727 $ 1.433 $ 1.487 $ 1.075 $ 1.114 $ 1.157 $ 1.200
Unit Value at end of year ....... 1.779 1.845 1.892 1.962 1.665 1.727 1.433 1.487 1.075 1.114
Number of units outstanding at
end of year (thousands)......... 40,160 3,605 30,003 2,825 16,453 1,020 12,703 887 11,356 553
High Yield Bond Trust
Unit Value at beginning of year .$ 2.222 $ 2.245 $ 1.974 $ 1.994 $ 1.767 $ 1.785 $ 1.418 $ 1.433 $ 1.573 $ 1.590
Unit Value at end of year ....... 2.167 2.189 2.222 2.245 1.976 1.994 1.767 1.785 1.418 1.433
Number of units outstanding at
end of year (thousands) ........ 4,708 585 5,066 603 4,730 428 4,018 344 4,045 341
Managed Assets Trust
Unit Value at beginning of year .$ 2.281 $ 2.455 $ 2.111 $ 2.273 $ 2.034 $ 2.189 $ 1.691 $ 1.821 $ 1.671 $ 1.799
Unit Value at end of year ....... 2.201 2.369 2.281 2.455 2.111 2.273 2.034 2.189 1.691 1.821
Number of units outstanding at
end of year (thousands)......... 58,355 4,813 63,538 4,490 65,926 4,120 58,106 3,359 51,489 2,744
1989 1988 1987 1986 1985
----------------- ------------------ ----------------- ----------------- ---------------
Q NQ Q NQ Q NQ Q NQ Q NQ
------- ------- ------- ------- ------- ------ ------ ------- ------ -------
Capital Appreciation Fund*
Unit Value at beginning of year .$ 1.015 $ 1.052 $ 0.934 $ 0.968 $ 1.027 $ 1.066 $ 0.946 $ 0.976 $ 0.736 $ 0.755
Unit Value at end of year ....... 1.157 1.200 1.015 1.052 0.934 0.968 1.027 1.066 0.946 0.976
Number of units outstanding at
end of year (thousands) ........ 12,038 495 13,040 423 12,957 486 12,658 263 13,504 93
High Yield Bond Trust
Unit Value at beginning of year .$ 1.571 $ 1.588 $ 1.388 $ 1.403 $ 1.412 $ 1 .427 $ 1.324 $ 1.339 $ 1.134 $ 1.146
Unit Value at end of year ....... 1.573 1.590 1.571 1.588 1.388 1.403 1.412 1.427 1.324 1.339
Number of units outstanding at
end of year (thousands) ........ 6,074 573 5,783 676 4,645 523 4,866 591 2,331 86
Managed Assets Trust
Unit Value at beginning of year .$ 1.331 $ 1.433 $ 1.234 $ 1.328 $ 1.223 $ 1.317 $ 1.040 $ 1.119 $ 0.831 $ 0.892
Unit Value at end of year ....... 1.671 1.799 1.331 1.433 1.234 1.328 1.223 1.317 1.040 1.119
Number of units outstanding at
end of year (thousands) ........ 47,104 2,836 46,809 3,316 46,733 3,875 33,600 1,876 28,956 939
Q = Qualified
NQ = Non-Qualified
The financial statements of Fund U are contained in the 1994 Annual Report to
Contract Owners.
The consolidated financial statements of The Travelers Insurance Company and
Subsidiaries are contained in the Statement of Additional Information.
* Prior to May 1, 1994, the Capital Appreciation Fund was known as the
Aggressive Stock Trust.
</TABLE>
CONDENSED FINANCIAL INFORMATION -- FUND U
<PAGE>
CONDENSED FINANCIAL INFORMATION
THE TRAVELERS FUND U FOR VARIABLE ANNUITIES
ACCUMULATION UNIT VALUES
(Unaudited)
<TABLE>
<CAPTION>
1994 1993 1992*
---- ---- -----
<S> <C> <C> <C>
U.S. GOVERNMENT SECURITIES PORTFOLIO
Unit Value at beginning of period.............................................................. $ 1.153 $ 1.066 $ 1.000
Unit Value at end of period.................................................................... 1.074 1.153 1.066
Number of units outstanding at end of period (thousands) ...................................... 22,709 22,142 8,566
SOCIAL AWARENESS STOCK PORTFOLIO
Unit Value at beginning of period.............................................................. $ 1.153 $ 1.086 $ 1.000
Unit Value at end of period.................................................................... 1.109 1.153 1.086
Number of units outstanding at end of period (thousands) ...................................... 3,499 2,920 1,332
UTILITIES PORTFOLIO
Unit Value at beginning of period ............................................................. $ 1.000 -- --
Unit Value at end of period ................................................................... 1.005 -- --
Number of units outstanding at end of period (thousands) ...................................... 5,740 -- --
TEMPLETON BOND FUND
Unit Value at beginning of year ............................................................... $ 1.172 $ 1.065 $ 1.000
Unit Value at end of year ..................................................................... 1.101 1.172 1.065
Number of units outstanding at end of year (thousands) ........................................ 10,186 8,014 3,477
TEMPLETON STOCK FUND
Unit Value at beginning of year ............................................................... $ 1.385 $ 1.047 $ 1.000
Unit Value at end of year ..................................................................... 1.338 1.385 1.047
Number of units outstanding at end of year (thousands) ........................................ 101,462 43,847 10,433
TEMPLETON ASSET ALLOCATION FUND
Unit Value at beginning of year ............................................................... $ 1.333 $ 1.070 $ 1.000
Unit Value at end of year ..................................................................... 1.277 1.333 1.070
Number of units outstanding at end of year (thousands) ........................................ 103,407 51,893 13,888
FIDELITY'S HIGH INCOME PORTFOLIO
Unit Value at beginning of year ............................................................... $ 1.138 $ 1.138 $ 1.000
Unit Value at end of year ..................................................................... 1.316 1.354 1.138
Number of units outstanding at end of year (thousands) ........................................ 25,813 17,381 4,875
FIDELITY'S GROWTH PORTFOLIO
Unit Value at beginning of year ............................................................... $ 1.024 $ 1.024 $ 1.000
Unit Value at end of year ..................................................................... 1.192 1.207 1.024
Number of units outstanding at end of year (thousands) ........................................ 176,304 101,260 30,240
FIDELITY'S EQUITY-INCOME PORTFOLIO
Unit Value at beginning of period ............................................................. $ 1.052 $ 1.000 --
Unit Value at end of period ................................................................... 1.112 1.052 --
Number of units outstanding at end of period (thousands) ...................................... 78,856 13,414 --
FIDELITY'S ASSET MANAGER PORTFOLIO
Unit Value at beginning of year ............................................................... $ 1.301 $ 1.088 $ 1.000
Unit Value at end of year ..................................................................... 1.207 1.301 1.088
Number of units outstanding at end of year (thousands) ........................................ 282,474 162,413 30,207
DREYFUS STOCK INDEX FUND, INC.
Unit Value at beginning of year ............................................................... $ 1.148 $ 1.064 $ 1.000
Unit Value at end of year ..................................................................... 1.144 1.148 1.064
Number of units outstanding at end of year (thousands) ........................................ 31,600 26,789 12,089
AMERICAN ODYSSEY INTERNATIONAL EQUITY FUND
Unit Value at beginning of period ............................................................. $ 1.180 $ 1.000 --
Unit Value at end of period ................................................................... 1.084 1.180 --
Number of units outstanding at end of period (thousands) ...................................... 47,096 16,944 --
AMERICAN ODYSSEY EMERGING OPPORTUNITIES FUND
Unit Value at beginning of period ............................................................. $ 1.079 $ 1.000 --
Unit Value at end of period ................................................................... 1.168 1.079 --
Number of units outstanding at end of period (thousands) ...................................... 73,838 27,011 --
AMERICAN ODYSSEY CORE EQUITY FUND
Unit Value at beginning of period ............................................................. $ 1.012 $ 1.000 --
Unit Value at end of period ................................................................... .990 1.012 --
Number of units outstanding at end of period (thousands) ...................................... 100,082 37,136 --
AMERICAN ODYSSEY LONG-TERM BOND FUND
Unit Value at beginning of period ............................................................. $ 1.085 $ 1.000 --
Unit Value at end of period ................................................................... 1.010 1.085 --
Number of units outstanding at end of period (thousands) ...................................... 70,928 25,467 --
AMERICAN ODYSSEY INTERMEDIATE-TERM BOND FUND
Unit Value at beginning of period ............................................................. $ 1.035 $ 1.000 --
Unit Value at end of period ................................................................... .993 1.035 --
Number of units outstanding at end of period (thousands) ...................................... 50,403 19,564 --
AMERICAN ODYSSEY SHORT-TERM BOND FUND
Unit Value at beginning of period ............................................................. $ 1.020 $ 1.000 --
Unit Value at end of period ................................................................... 1.006 1.020 --
Number of units outstanding at end of period (thousands) ...................................... 17,611 8,201 --
<FN>
* Period covers January 24, 1992 (date portfolio became available under
Fund U) to December 31, 1992, except Social Awareness Stock Portfolio,
which became available under Fund U on May 1, 1992.
</TABLE>
The financial statements of Fund U are contained in the 1994 Annual Report to
Contract Owners.
The consolidated financial statements of The Travelers Insurance Company and
Subsidiaries are contained in the Statement of Additional Information.
<PAGE>
<PAGE>
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, 1994 is contained in
the 1994 Annual Report to Contract Owners. The Annual Report is incorporated
by reference into the Statement of Additional Information. The following
information should be read in conjunction with the financial statements
contained in the 1994 Annual Report.
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER UNIT DATA
Total investment income ................................ $ .064 $ .043 $ .046 $ .045 $ .099 $ .161 $ .044
Operating expenses ..................................... **(.041) **.042 **.045 **.045 **.034 .023 .017
------- ------- ------- ------- ------- ------- -------
Net investment income .................................. .023 .001 .001 -- .065 .138 .027
Unit Value at beginning of year ........................ $ 1.776 $ 1.689 $ 1.643 $ 1.391 $ 1.447 $ 1.108 $ 1.000
Net realized and change in unrealized gains (losses).... (.104) 0.086 0.045 0.252 (.121) .201 .081
------- ------- ------- ------- ------- ------- -------
Unit Value at end of year .............................. $ 1.695 $ 1.776 $ 1.689 $ 1.643 $ 1.391 $ 1.447 $ 1.108
------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- -------
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase (decrease) in unit value .................. (.08) .09 .05 .25 (.06) .34 .11
Ratio of operating expenses to average net assets * .... ** 2.82% ** 2.82% ** 2.82% ** 2.82% ** 2.41% 1.57% 1.57%
Ratio of net investment income to average net assets * . 1.58% 0.08% 0.78% 1.33% 1.86% 2.81% 2.55%
Number of units outstanding at end of year (thousands) . 29,692 -- 217,428 -- 5,708 -- 3,829
Portfolio turnover rate ............................... 19% 70% 119% 489% 653% 149% 268%
<FN>
* 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.
</TABLE>
The consolidated financial statements of The Travelers Insurance Company and
Subsidiaries are contained in the Statement of Additional Information.
CONDENSED FINANCIAL INFORMATION--ACCOUNT TGS
<PAGE>
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, 1994 is contained in
the 1994 Annual Report to Contract Owners. The Annual Report is incorporated
by reference into the Statement of Additional Information. The following
information should be read in conjunction with the financial statements
contained in the 1994 Annual Report.
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER UNIT DATA
Total investment income .............................. $ .055 $ .041 $ .054 $ .076 $ .099 $ .102 $ .078 $ .003
Operating expenses ................................... ** .036 ** .037 ** .041 ** .036 ** .030 .017 .016 .001
------- ------- ------- ------- ------- ------- ------- -------
Net investment income ................................ .019 .004 .013 .040 .069 .085 .062 .002
Unit value at beginning of year ...................... 1.275 1.271 1.258 1.218 1.149 1.064 1.002 1.000
Net realized and change in unrealized gains
(losses) **** ....................................... (.002) -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Unit value at end of year ............................ $ 1.292 $ 1.275 $ 1.271 $ 1.258 $ 1.218 $ 1.149 $ 1.064 $ 1.002
------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- -------
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase in unit value ........................... .02 -- .01 .04 .07 .09 .06 --
Ratio of operating expenses to average net assets *** ** 2.82% ** 2.82% ** 2.82% ** 2.82% ** 2.41% 1.57% 1.57% 1.57%
Ratio of net investment income to
average net assets *** ............................. 1.45% .39% 1.12% 3.07% 5.89% 7.63% 6.51% 2.69%
Number of units outstanding at end of year (thousands) 216,713 353,374 173,359 439,527 369,769 360,074 356,969 288,757
<FN>
* 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.
*** Annualized
**** 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.
</TABLE>
The consolidated financial statements of The Travelers Insurance Company and
Subsidiaries are contained in the Statement of Additional Information.
<PAGE>
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, 1994 is contained in
the 1994 Annual Report to Contract Owners. The Annual Report is incorporated by
reference into the Statement of Additional Information. The following
information should be read in conjunction with the financial statements
contained in the 1994 Annual Report.
<TABLE>
<CAPTION>
1994 1993 1992 1991 + 1990 1989 1988 1987
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER UNIT DATA
Total investment income .............................. $ .036 $ .037 $ .041 $ .044 $ .045 $ .052 $ .008 $ .001
Operating expenses ................................... ** .049 ** .048 ** .043 ** .039 ** .073 .051 .015 .000
------- ------- ------- ------- ------- ------- ------- -------
Net investment income (loss) ......................... (.013) (.011) (.002) .005 (.028) .001 (.007) .001
Unit Value at beginning of year ...................... 1.838 1.624 1.495 1.136 1.189 1.059 1.001 1.000
Net realized and unrealized gains (losses) ........... (.119) .225 .131 .354 (.025) .129 .065 .000
------- ------- ------- ------- ------- ------- ------- -------
Unit Value at end of year ............................ $ 1.706 $ 1.838 $ 1.624 $ 1.495 $ 1.136 $ 1.189 $ 1.059 $ 1.001
------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- -------
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase (decrease) in unit value ................ (.13) .21 (.13) .36 (.05) .13 .06 .00
Ratio of operating expenses to average net assets *... ** 2.80% ** 2.82% ** 2.93% ** 2.99% ** 2.64% 1.95% 1.95% 1.95%
Ratio of net investment income to average net assets * (.72)% (.80)% (.12)% .37% (3.73)% .91% (.88)% 4.90%
Number of units outstanding at end of year (thousands) 25,109 43,059 20,225 19,565 5,585 0 0 841
Portfolio turnover rate .............................. 142% 71% 269% 261% 0% 77% 127% 0
<FN>
* 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.
</TABLE>
The consolidated financial statements of The Travelers Insurance Company and
Subsidiaries are contained in the Statement of Additional Information.
CONDENSED FINANCIAL INFORMATION--ACCOUNT TAS
<PAGE>
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, 1994 is contained in
the 1994 Annual Report to Contract Owners. The Annual Report is incorporated by
reference into the Statement of Additional Information. The following
information should be read in conjunction with the financial statements
contained in the 1994 Annual Report.
<TABLE>
<CAPTION>
1994 1993 1992 1991 +1990 1989 1988 1987
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER UNIT DATA
Total investment income ........................ $ .007 $ .054 $ .051 $ .052 $ .072 $ .147 $ .141 $ .001
Operating expenses ............................. ** .006 ** .036 ** .032 ** .031 ** .018 .023 .022 .001
------- ------- ------- ------- ------- ------- ------- -------
Net investment income .......................... .001 .018 .019 .021 .054 .124 .119 .000
Unit Value at beginning of year................. 1.234 1.132 1.087 .994 1.036 1.114 1.000 1.000
Net realized and change in unrealized gains
(losses) ..................................... (.020) .084 .026 .072 (.096) (.202) (.005) --
------- ------- ------- ------- ------- ------- ------- -------
Unit Value at end of year ...................... $ 1.215 $ 1.234 $ 1.132 $ 1.087 $ .994 $ 1.036 $ 1.114 $ 1.000
------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- -------
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase (decrease) in unit value .......... (.02) .10 .05 .09 (.04) (.08) .11 .00
Ratio of operating expenses to average net
assets * ..................................... ** 3.00% ** 3.00% ** 2.99% ** 3.00% ** 2.58% 2.02% 2.04% 1.78%
Ratio of net investment income to average
net assets * ................................. 1.02% 1.48% 1.71% 3.07% 3.88% 11.15% 11.12% (.95)
Number of units outstanding at end of year
(thousands) .................................. -- 20,207 21,868 19,521 14,115 660 830 625
Portfolio turnover rate ........................ -- 190% 505% 627% 370% 10% 26% 0%
<FN>
* 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.
</TABLE>
The consolidated financial statements of The Travelers Insurance Company
and Subsidiaries are contained in the Statement of Additional Information.
CONDENSED FINANCIAL INFORMATION --ACCOUNT TB
<PAGE>
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 The Travelers Inc. 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
contract described in this Prospectus meets the definition of a
separate account under the federal securities laws, and will comply
with the provisions of the Investment Company Act of 1940 (the
"1940 Act"), as amended. Additionally, the operations of each of
the Separate Accounts are subject to the provisions of
Section 38a-433 of the Connecticut General Statutes which authorizes the
Connecticut Insurance Commissioner to adopt regulations under it.
Section 38a-433 contains no restrictions on investments of the
Separate Accounts, and the Commissioner has adopted no regulations
under the Section that affect the Separate Accounts.
There are two different types of Separate Accounts which serve as
the funding vehicles for the Variable Annuity contracts described
in this Prospectus. The first type, Fund U, is a unit investment
trust registered with the Securities and Exchange Commission ("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 (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 these 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 Account.
Each of the Separate Accounts available in connection with the
Contract has different investment objectives and fundamental
investment policies, as set forth below. Neither the investment
objectives nor the fundamental investment policies of a Separate
Account can be changed without a vote of a majority of the
outstanding voting securities of the Account, as defined in the
Investment Company Act of 1940, as amended.
Each of the Separate Accounts was established as follows: 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.
GENERAL
Under Connecticut law, the assets of the Separate Accounts will be
held for the exclusive benefit of the owners of, and the persons
entitled to payment under, the Variable Annuity contracts offered
by this Prospectus and under all other contracts which provide for
accumulated values or dollar amount payments to reflect investment
results of the Separate Accounts. 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 are no longer
possible, 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 Securities and Exchange Commission,
to the extent required by the 1940 Act, or other applicable law.
The Company may also add other available investment alternatives
under the Contract.
<PAGE>
THE TRAVELERS FUND U FOR VARIABLE ANNUITIES
- -----------------------------------------------------------------
Fund U currently invests in the following Underlying Funds.
Purchase Payments applied to Fund U will be invested in the
Underlying Funds at net asset value in accordance with the
selection made by the Owner. Owners may change their selection
without fee, penalty or charge, except those which may be assessed
directly by the Underlying Funds. 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.
THE 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. Please read
carefully the complete risk disclosure in the Trust's prospectus
before investing.
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.
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 investment 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 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 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.
<PAGE>
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. Please read
carefully the complete risk disclosure in the Portfolio's
prospectus before investing.
FIDELITY'S EQUITY-INCOME PORTFOLIO. The objective of 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 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.
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.
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.
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.
<PAGE>
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. Please read carefully the complete risk
disclosure in the Portfolio's prospectus before investing.
G.T. GLOBAL STRATEGIC INCOME PORTFOLIO. The Strategic Income
Portfolio's investment objective is primarily to seek high current
income and secondarily to seek capital appreciation. The Portfolio
allocates its assets among debt securities of issuers in the United
States, developed foreign countries, and emerging markets. Please
read carefully the complete risk disclosure in the Portfolio's
prospectus before investing.
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. Please read carefully the
complete risk disclosure in the Portfolio's prospectus before
investing.
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. Please
read carefully the complete risk disclosure in the Portfolio's
prospectus before investing.
* Funds available for use with an asset allocation program, as
described below.
<PAGE>
UNDERLYING FUND INVESTMENT ADVISERS
The Underlying Funds receive investment management and advisory
services from the following investment professionals:
<TABLE>
<CAPTION>
FUND INVESTMENT ADVISER SUB-ADVISER
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Capital Appreciation Fund The Travelers Investment Management
Company (TIMCO) Janus Capital Corporation
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, Inc. Bank of Ireland Asset (U.S.) Management
Limited
American Odyssey Emerging
Opportunities Fund American Odyssey Funds Management, Inc. Wilke/Thompson Capital Management, Inc.
American Odyssey Core Equity Fund American Odyssey Funds Management, Inc. Equinox Capital Management, Inc.
American Odyssey Long-Term
Bond Fund American Odyssey Funds Management, Inc. Western Asset Management Company and
WLO Global Management
American Odyssey Intermediate-
Term Bond Fund American Odyssey Funds Management, Inc. TAMIC
American Odyssey Short-Term
Bond Fund American Odyssey Funds Management, Inc. Smith Graham & Co. Asset Managers, L.P.
Smith Barney Income and Growth Portfolio Smith Barney Mutual Funds Management Inc.
Alliance Growth Portfolio Smith Barney Mutual Funds Management Inc. Alliance Capital Management L.P.
Smith Barney International Equity Portfolio Smith Barney Mutual Funds Management Inc.
Putnam Diversified Income Portfolio Smith Barney Mutual Funds Management Inc. Putnam Investment Management, Inc.
G.T. Global Strategic Income Portfolio Smith Barney Mutual Funds Management Inc. G.T. Capital Management, Inc.
Smith Barney High Income Portfolio Smith Barney Mutual Funds Management Inc.
MFS Total Return Portfolio Smith Barney Mutual Funds Management Inc. Massachusetts Financial Services Company
</TABLE>
<PAGE>
ASSET ALLOCATION ADVICE
Some Contract Owners have elected 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 Program (R), 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 sub-adviser 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.
GENERAL
All investment income and other distributions of Fund U are
reinvested in fund shares at net asset value. The funds are
required to redeem fund shares at net asset value and to make
payment within seven days. Fund shares for the Underlying Funds
listed above are currently sold to Fund U in connection with
variable annuity contracts issued by the Company; additionally,
some of the Underlying Fund shares may also be sold to other
separate accounts in connection with variable annuity and variable
life insurance contracts issued by the Company, its affiliates or
other insurance companies. Shares of the Underlying Funds are not
sold to the general public. More detailed information may be found
in the current prospectuses for the Underlying Funds listed above;
these prospectuses are included with and must accompany this
Prospectus. Please read them carefully before investing.
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES (ACCOUNT GIS)
- -----------------------------------------------------------------
INVESTMENT OBJECTIVE
The basic investment objective of Account GIS is the selection of
investments from the point of view of an investor concerned
primarily with long-term accumulation of principal through capital
appreciation and retention of net investment income. This
principal objective does not preclude the realization of short-term
gains when conditions would suggest the long-term goal is
accomplished by such short-term transactions. 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, 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 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 five percent (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, 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 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
<PAGE>
and interpretations, subject to the requirements of the SEC).
Account GIS expects that risk management transactions involving
futures contracts will not impact more than thirty percent (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 twenty-five
percent (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 ten percent
(10%) of the investment portfolio.
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 the selection of
investments from the point of view of an investor concerned
primarily with current income, moderate capital volatility and
total return.
<PAGE>
It is contemplated that the assets of Account QB will be 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 participations based on revenues,
sales or profits. It is 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. The investments of Account QB
will not be concentrated in any one industry; that is, no more than
twenty-five percent (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 to the extent that this action is considered
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
salability are anticipated with regard to the investments of
Account QB.
Account QB may from time to time 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.
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.
The commitment to purchase when-issued securities may 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. 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 Investment Company Act of 1940 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 (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 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 five percent (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.
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 QB will enter into futures contracts for
hedging purposes only (i.e., for the purposes or with the intent
specified in CFTC
<PAGE>
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 as
determined in good faith by the Board of Managers. 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. While there are many kinds of short-term securities
used by the various money market funds, 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. 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
<PAGE>
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, payable in United States
dollars, of foreign branches of United States banks which meet the
foregoing requirements. Obligations of 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 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 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 dealer 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.
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
<PAGE>
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 to Contract Owners 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 Investment
Company Act of 1940, 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
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 the selection of
investments from the point of view of an investor concerned
primarily with long-term accumulation of principal through capital
appreciation and retention of net investment income. This
principal objective does not preclude the realization of short-term
gains when conditions would suggest the long-term goal is
accomplished by such short-term transactions. 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.
<PAGE>
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 five percent (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 employed for speculative purposes. When a futures contract is
purchased, Account TGIS 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 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. The yield, if any, 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. In addition, there are risks inherent in Account TGIS
as an investment alternative used by Market Timing Services. (See
"Market Timing Risks," page 34.)
FUNDAMENTAL INVESTMENT POLICIES
The fundamental investment policies of Account TGIS are the same as
Account GIS. (See "Account GIS--Fundamental Investment Policies,"
page 22.)
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
<PAGE>
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 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
<PAGE>
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. 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.
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 to Contract Owners 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 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.
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.
THE TRAVELERS TIMED AGGRESSIVE STOCK ACCOUNT
FOR VARIABLE ANNUITIES (ACCOUNT TAS)
- -----------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of Account TAS is to provide shareholders
with growth of capital by investing primarily in a broadly
diversified portfolio of common stocks.
<PAGE>
In selecting investments for the portfolio, TIMCO employs
quantitative analysis to identify 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 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 five percent (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,
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. At no time will Account TAS's
transactions in such futures be employed 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.
<PAGE>
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 34.)
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.
THE TRAVELERS TIMED BOND ACCOUNT
FOR VARIABLE ANNUITIES (ACCOUNT TB)
- -----------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of Account TB is the selection of
investments from the point of view of an investor concerned
primarily with highest credit quality, current income and total
return. To achieve this objective, Account TB invests primarily in
direct obligations of the United States, in obligations of its
instrumentalities supported by its full faith and credit, 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.
<PAGE>
Account TB may from time to time 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.
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.
The commitment to purchase when-issued securities 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. 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 Investment Company Act of 1940 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 (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 five percent (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
<PAGE>
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, 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 34.)
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.
MARKET TIMING SERVICES
- -----------------------------------------------------------------
Accounts TGIS, TSB, TAS and TB are investment alternatives ("Market
Timed Accounts") available to Contract Owners who have entered into
market timing services agreements ("market timing agreements") with
select registered investment advisers which provide market timing
services ("registered investment advisers"). These market timing
agreements permit the registered investment advisers to act on
behalf of the Contract Owner 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 may transfer account values from any of the Market
Timed Accounts to any of the other investment alternatives
available under the Contract; however, if a Contract Owner in a
Market Timed Account transfers all of his current and future
account values from the Market Timed Account 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 the Contract Owner.
Partial withdrawals or surrenders from the Market Timed Accounts by
Contract Owners who have entered into market timing agreements do
not affect the agreement. Such partial withdrawals or surrenders
leave the market timing agreements intact.
Copeland Financial Services, Inc. ("Copeland"), a registered
investment adviser and an affiliate of the Company, provides market
timing services to Contract Owners in the Market Timed Accounts for
a fee of 1.25% of the current value of the assets subject to
timing. Copeland also charges a $30 market timing application fee.
If a Contract Owner who has terminated his 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.
<PAGE>
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, TESI and Copeland obtained an
exemptive order from the Securities and Exchange Commission on
February 7, 1990 ("asset charge payment method"). Pursuant to the
asset charge payment method, the market timing agreements are
between Contract Owners 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 Contract Owners who enter into
market timing agreements. Contract Owners 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 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 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 45.)
MARKET TIMING RISKS
Contract Owners who invest in 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, Contract Owners who invest in 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 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.
Contract Owners 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,
Contract Owners 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 Contract Owners 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,
Contract Owners constituting the other 10% of the Market Timed
Account may bear a disproportionate amount of the expense for the
transfer.
THE VARIABLE ANNUITY CONTRACT
- -----------------------------------------------------------------
The individual Variable Annuity contract described in this
Prospectus is both an insurance product and a security. As an
insurance product, the Contract is subject to the insurance laws
and regulations of each state. The underlying product is an
annuity where premiums are paid to the Company and credited to the
Contract to accumulate until 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.
<PAGE>
GENERAL BENEFIT DESCRIPTION
Under the Automatic Option, the Company will begin paying Annuity
Payments to the Owner on the Maturity Date if the Annuitant is then
living. (See "Automatic Option," page 43.) The Owner may choose
instead a number of alternative arrangements for benefit payments.
If the Annuitant dies before a payout begins, the Company will pay
a death benefit under the Contract.
PURCHASE PAYMENTS
Purchase Payments under tax-benefited retirement plans (except
IRAs), that is, 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, subject to the terms of the plan. The
initial minimum Purchase Payment for IRAs is $1,000; for non tax-
benefited 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. Each Purchase Payment is payable at the
Company's Home Office.
APPLICATION OF PURCHASE PAYMENTS
Each Purchase Payment will be applied by the Company to provide
Accumulation Units to the credit of the Contract. 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 in the mail at the Company's Home Office. If the
application is not in good order, the Company will attempt to get
it in good order 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 and that 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.
RIGHT TO RETURN
The Contract may be returned for a full refund of the Contract's
Cash Value (including charges) within ten days after 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 Contract
was purchased as 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.
NUMBER OF ACCUMULATION UNITS
The number of Accumulation Units to be credited to the Contract
once a Purchase Payment has been received by the Company 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 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.
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:
<PAGE>
(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.
FEDERAL AND STATE INCOME TAX WITHHOLDING
The federal tax law requires income tax withholding on
distributions from pension plans and annuity contracts. The Owner,
participant or beneficiary generally has a right to elect not to
have withholding apply. Some states also require withholding from
pension and annuity payments unless the Owner, participant or
beneficiary elects not to have withholding apply. (For further
information on federal withholding, see "Federal Income Tax
Withholding," page 48.)
CHARGES AND DEDUCTIONS
- -----------------------------------------------------------------
CONTINGENT DEFERRED SALES CHARGE
There are no sales charges collected 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.
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 Annuitant dies;
- -- the Annuitant becomes disabled (as defined by the Internal
Revenue Service) subsequent to purchase of the Contract;
- -- the Annuitant 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;
- -- the Annuitant under an IRA plan reaches age 70 1/2, provided the
Contract has been in effect five years or more;
- -- the Annuitant under a qualified pension or profit-sharing plan
(including a 401(k) plan) retires at or after age 59 1/2,
provided the Contract has been in effect five years or more; or
if refunds are made to satisfy the anti-discrimination test;
(For Annuitants under Contracts issued before May 1, 1992, the
Contingent Deferred Sales Charge will also be waived if the
Annuitant retires at normal retirement age (as defined by the
plan), provided the Contract has been in effect one year or
more); or
- -- the Annuitant under a Section 457 deferred compensation plan
retires and the Contract 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 IRS rules.
<PAGE>
There is a 10% free withdrawal allowance available for partial
withdrawals taken during any Contract Year after the first. Such
withdrawals will be free of charge until the free withdrawal amount
is exceeded. Participants under IRA plans with Contracts issued
prior to May 1, 1994 are entitled to a 20% free withdrawal
allowance after the first 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 46.)
The Company expects the Contingent Deferred Sales Charge 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.
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.
CHANGES IN TAXES BASED UPON PREMIUM OR VALUE
If there is any change in a law assessing taxes against the Company
based upon the premiums of the contract, gains in the contract or
value of the contract, the Company reserves the right to charge you
proportionately for that tax. This would include a tax based upon
our realized net capital gains in the Sub-Accounts, on which we are
not currently taxed.
ADMINISTRATIVE CHARGE
On all contracts there will be a semiannual administrative charge
of $15 to cover administrative expenses. The administrative charge
will be deducted from the account on the second to last Friday of
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 cancelling Accumulation Units
in each investment alternative on a pro rata basis. This charge
cannot be increased. 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.
REDUCTION OR ELIMINATION OF CONTRACT CHARGES
The amount of the Contingent Deferred Sales 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 or the administrative
charge will be based on the following: (1) the size and type of
group to which sales are to be made; (2) the total amount of
Purchase Payments to be received; (3) any prior or existing
relationship with the Company. 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 or the administrative charge
be permitted where such reduction or elimination will be unfairly
discriminatory to any person.
INSURANCE 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 the Contract. 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.
<PAGE>
The Company estimates that approximately 50% of the insurance
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 risks assumed in making mortality
guarantees of several types. First, the annuity rates guaranteed
in the Contract assure an Annuitant that his or her Annuity
Payments will not be adversely affected by the actual mortality
experience of other Travelers Annuitants. Also, no Contingent
Deferred Sales Charge will be assessed if the Contract Value is
paid as a death benefit on the death of the Annuitant.
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 the insurance charge.
INVESTMENT ADVISORY FEES
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 Account. TIMCO receives advisory
fees in amounts equivalent to 0.45%, on an annual basis, of the
average daily net assets of Account GIS, and to 0.3233%, on an
annual basis, of the average daily net assets of TGIS and TSB. The
annual advisory fees paid to TIMCO for advisory services provided
to Account TAS are as follows:
<TABLE>
<CAPTION>
Aggregate Net Asset
Annual Management Fee Value of the Account
--------------------- -----------------------
<C> <S> <C>
0.50% of the first $ 20,000,000, plus
0.25% of the next $ 80,000,000, plus
0.20% of the next $200,000,000, plus
0.15% of amounts over $300,000,000.
</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. TAMIC receives advisory fees in amounts
equivalent to 0.3233%, on an annual basis, of the average daily net
assets of Accounts QB and MM. The annual advisory fees paid to
TAMIC for advisory services provided to Account TB are as follows:
<TABLE>
Aggregate Net Asset
Annual Management Fee Value of the Account
--------------------- ----------------------
<C> <S> <C>
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.
</TABLE>
MARKET TIMING SERVICES FEES
In connection with the market timing services provided to Contract
Owners in Accounts TGIS, TSB, TAS and TB, Copeland Financial
Services, Inc. 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. 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. (See "Market Timing
Services," page 33.)
PERFORMANCE INFORMATION
- -----------------------------------------------------------------
From time to time, the Company may advertise several types of
historical performance for the Separate Accounts and the Sub-
Accounts 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
<PAGE>
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 Securities and Exchange Commission.
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 Securities and Exchange
Commission, 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 for a period covering the time during which an
Underlying Fund held in the Sub-Account has been in existence if
the Underlying Fund has not been in existence for one of the
prescribed periods. 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. "Non-
standardized total return" will be calculated in a similar manner
and for the same time periods as the standardized average annual
total returns, except non-standardized total returns will 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 if reflected in these
calculations.
For Sub-Accounts that invest in Underlying Funds that were in
existence prior to the date the Underlying Fund 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 held as
Sub-Accounts 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 (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.
Performance data for Accounts TGIS, TSB, TAS and TB may not always
be useful in evaluating the performance of these Accounts because
Accounts TGIS, TSB, TAS and TB may experience wide fluctuations in
assets over a given time period due their exclusive availability to
Participants who have entered into third party market timing
services agreements. In addition, performance data for Accounts
TGIS, TSB, TAS and TB alone will not generally be useful for the
purpose of evaluating the performance of a market timing strategy
which utilizes these Accounts.
The yield and total return quotations are based upon historical
earnings and are not necessarily representative of future
performance. A Contract Owner's 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.
MANAGEMENT AND INVESTMENT ADVISORY SERVICES
- -----------------------------------------------------------------
The investments and administration of the Separate Accounts are
under the direction of the Board of Managers. Subject to the
authority of the Board of Managers, The Travelers Investment
Management Company (TIMCO) furnishes investment management and
advisory services to Accounts GIS, TGIS, TSB and TAS, and Travelers
Asset Management International Corporation (TAMIC) furnishes such
services to Accounts QB, MM and TB.
TIMCO 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 The Travelers Inc. TIMCO also acts as investment
adviser or sub-adviser for other investment companies used to fund
variable products, including the Capital Appreciation Fund and
Managed Assets Trust; as well as for individual and pooled pension
and profit-sharing accounts, and for affiliated companies of The
Travelers Insurance Company.
<PAGE>
TAMIC 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 The Travelers Inc. TAMIC also acts as
investment adviser or sub-adviser for other investment companies used
to fund variable products, including High Yield Bond Trust, Managed
Assets Trust, Cash Income Trust and the U.S. Government Securities
Portfolio of The Travelers Series Trust; as well as for individual
and pooled pension and profit-sharing accounts, for offshore
insurance companies affiliated with The Travelers Insurance
Company, and for non-affiliated insurance companies, both domestic
and offshore.
TRANSFERS
- -----------------------------------------------------------------
Before Annuity or Income Payments begin, the Owner may transfer all
or part of the Contract Value from one available investment
alternative to another without fee, penalty or charge. There are
currently no restrictions on frequency of transfers, but the
Company reserves the right to limit transfers to no more than one
in any six month period. However, any such restrictions are
inapplicable to transfers by third party market timing services
among timed Investment Alternatives.
Some of the investment alternatives available under the Contract
have higher investment advisory fees than others; therefore, a
transfer from one investment alternative to another could result in
a Contract Owner's investment becoming subject to higher or lower
investment advisory fees. (See "Investment Advisory Fees,"
page 38.) In addition, the market timing fee is deducted as an
asset charge from Accounts TGIS, TSB, TAS and TB. Contract Owners
who invest in those Separate Accounts without a market timing
services agreement will bear an unnecessary investment risk. (See
"Market Timing Services," page 33.) A transfer between Investment
Alternatives has no other effect on the amount or timing of any of
the other charges under the Contract. For purposes of computing
the applicability of the Contingent Deferred Sales Charge, the date
of the Purchase Payments made pursuant to the Contract will not be
affected by transfers among Investment Alternatives.
If a Contract Owner in a market timed Investment Alternative
transfers all of his current and future account values from the
market timed Investment Alternative to a non-timed Investment
Alternative, he has terminated his market timing services
agreement. If this occurs, the market timing service no longer has
the right to transfer funds on behalf of the Contract Owner.
Partial withdrawals or surrenders from an Investment Alternative
for Contract Owners who have entered into market timing services
agreements do not affect the agreements.
DOLLAR-COST AVERAGING (AUTOMATED TRANSFERS)
Dollar-cost averaging permits the Contract Owner to transfer the
same dollar amount to other Sub-Accounts on a regular basis so that
more Accumulation Units are purchased in a Sub-Account if the value
per unit is low and less Accumulation Units are purchased if the
value per unit is high. Therefore, a lower-than-average value per
unit may be achieved over the long run.
By written request, you may elect automated transfers of Contract
Values on a monthly or quarterly basis from specific Sub-Accounts
to other Sub-Accounts. You may stop or change your 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 Sub-
Accounts. Certain minimums apply to amounts transferred and/or to
enroll in the program.
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, you
should consider your financial ability to continue purchases
through periods of low price levels.
SURRENDERS AND REDEMPTIONS
- -----------------------------------------------------------------
A Contract Owner may redeem all or any portion of the Cash
Surrender Value of the Contract at any time prior to the Maturity
Date. The Contract Owner must submit a written request (in the
proper form, including the appropriate countersignature of a
Travelers agent) specifying the investment alternative(s) from
which the surrender is to be made.
<PAGE>
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.
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
the mail, but it is its intent to pay as soon as possible.
Requests for surrender that are not in good order will not be
processed until the deficiencies are corrected. The Company will
contact the Contract Owner to advise of the reason for the delay
and what is needed to act on the surrender request. Cash Value
equal to the amount the Contract Owner wishes to redeem will be
transferred to Account MM from the Investment Alternative(s) from
which surrender is to be made. It will remain in Account MM until
the Company receives the information required to act on the
surrender request.
The Cash Surrender Value on any date will be equal to the Cash
Value of the Contract 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 at
the time of surrender.
For participants in the Texas Optional Retirement Program,
surrenders are 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,
surrenders 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 46.)
SYSTEMATIC WITHDRAWALS
You may elect to take monthly, quarterly, semiannual or annual
systematic withdrawals of a specified dollar amount during the
prior twelve months. Any applicable premium taxes will be
deducted. To elect this option, you must complete an election form
provided by the Company. You may stop the systematic withdrawals
at any time, provided the Company receives at least 30 days'
written notice.
DEATH BENEFIT
- -----------------------------------------------------------------
A death benefit is payable to the beneficiary of the Contract upon
the death of the Annuitant prior to the Maturity Date.
If the Annuitant dies on or after age 75 and before Annuity or
Income Payments begin, the Company will pay to the beneficiary the
Cash Value of the Contract as of the date it receives proof of
death at its Home Office, less any applicable premium tax or
outstanding cash loans. If the Annuitant dies before age 75, and
before Annuity or Income Payments begin, after receipt of due proof
of the Annuitant's death, the Company will pay to the beneficiary
the greatest of (1), (2) or (3) below, except for Contracts issued
in the states of Minnesota and Washington, where the Company will
pay the greater of (1) or (2) below:
1. The Cash Value of the Contract, less any applicable premium
tax or outstanding cash loans;
2. The total Purchase Payments made under the Contract, less any
prior surrenders or cash loans; or
3. The Cash Value of the Contract on the fifth Contract Date
Anniversary 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 the 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.
<PAGE>
THE ANNUITY PERIOD
- -----------------------------------------------------------------
MATURITY DATE
Annuity Payments will ordinarily begin on the Maturity Date stated
in the Contract; however, a later Maturity Date may be elected.
The Maturity Date must be before the Annuitant's 70th birthday,
unless the Company consents to a later date. Federal income tax
law requires the Annuitant to commence certain minimum distribution
payments from pension, profit-sharing, Section 403(b), Section 457
and IRA plans after the participant reaches the age of 70 1/2. A
number of payout options are available. (See "Payout Options,"
page 43.) 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 Contract Year. Federal income tax law also requires that
certain minimum distribution payments be taken upon the death of
the Owner of a non tax-benefited 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
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 wishes to have a fixed dollar annuity
whose payments do not vary, the Company will exchange the Contract
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 state
of New Jersey. Once Annuity Payments begin, these Contract Owners
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 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.
<PAGE>
The amount of the first monthly payment depends on the Annuity
Option elected (see "Automatic Option," page 43) and the adjusted
age of the Annuitant. 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 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 Maturity 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 option must be made in writing in a form
satisfactory to the Company. Any election made during the lifetime
of the Annuitant must be made by the Contract Owner. The terms of
options elected by some Contract Owners and beneficiaries may be
restricted to meet the contract qualification requirements of
Section 401(a)(9) of the Internal Revenue Code. If, at the death
of the Annuitant, there is no election in effect for that
Annuitant, election of an option must be made by the beneficiary
entitled to any death benefit payable in one sum under the
Contract. The minimum amount that can be placed under an Annuity
or Income Option will be $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
Subject to the conditions described in "Election of Options" above,
all or any part of the Cash Surrender Value of the Contract may be
paid under one or more of the following Annuity Options. Annuity
options may be elected on a monthly, quarterly, semiannual or
annual basis.
AUTOMATIC OPTION--Unless otherwise specified in the application or
the plan and if no election has been made, if the Annuitant is then
living and has a spouse, the Company will pay to the Owner the
first of a series of Annuity Payments based on the life of the
Annuitant and the Annuitant's spouse in accordance with Option 5.
If the Annuitant is living and no election has been made and the
Annuitant has no spouse on the Maturity Date, the Company will pay
to the Owner the first of a series of Annuity Payments based on the
life of the Annuitant, 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. This option offers the maximum payment, since there is no
assurance of a minimum number of payments or provision for a death
benefit for beneficiaries. (It would be possible under this option
to receive only one Annuity Payment if the Annuitant died before
the due date of the second Annuity Payment, only two if the
Annuitant died before the third Annuity Payment, etc.)
<PAGE>
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 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. (It would be possible under
this option to receive only one Annuity Payment if both Annuitants
died before the due date of the second Annuity Payment, only two if
they died before the third Annuity Payment, etc.)
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
Instead of the Annuity Options described above, and subject to the
conditions described under "Election of Options," one of the
following Income Options may be elected to the extent they are
consistent with federal tax law qualification requirements. Income
Options may be elected on a monthly, quarterly, semiannual or
annual basis.
OPTION 1--PAYMENTS OF A FIXED AMOUNT: The Company will make equal
payments of the amount elected until the Cash 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 during
the lifetime of the primary payee, or 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 45.)
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 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
<PAGE>
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 investment income under
Income Option 3, payments are unrelated to the actual life span of
any person. Thus, the Annuitant may outlive the payment period.
While Income Options do not directly involve mortality risks for
the Company, a Contract Owner 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 makes any Income Option election, he or she should consult
a tax adviser as to any adverse tax consequences the election might
have.
MISCELLANEOUS CONTRACT PROVISIONS
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TERMINATION
No Purchase Payments after the first are required to keep the
Contract in effect. However, the Company reserves the right to
terminate the Contract on any Valuation Date if the Cash Value as
of that date is less than $500 and no Purchase Payments have been
made for at least three years. Termination will not occur until 31
days after the Company has mailed notice of termination to the
Owner at his last known address and to any assignee of record. If
the Contract is terminated, the Company will pay to the Owner the
Cash Surrender Value of the Contract, if any (except in those
jurisdictions which mandate the Cash Value, if any), less any
applicable administrative charge or premium tax.
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.
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 Securities and Exchange Commission 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.
FEDERAL TAX CONSIDERATIONS
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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.
TAX LAW DIVERSIFICATION REQUIREMENTS FOR VARIABLE ANNUITIES
The Code requires that any nonqualified variable annuity contracts
based on a segregated asset account shall not be treated as an
annuity for any period if investments made in the account are not
adequately diversified. Final tax regulations define how segregated
asset accounts must be diversified. The Company monitors the
diversification of investments constantly and believes that its
accounts are adequately diversified. The consequence of any failure
is
<PAGE>
essentially the loss to the contract owner of tax deferred
treatment. The Company intends to administer all contracts subject
to this provision of law in a manner that will maintain adequate
diversification.
OWNERSHIP OF THE INVESTMENTS
Assets in the segregated asset accounts must be owned by the
Company, and not by the Contract Owner, for federal income tax
purposes. Otherwise, the deferral of taxes is lost and income and
gains from the accounts would be includible annually in the
Contract Owner's gross income.
The Internal Revenue Service has stated in published rulings that
a variable contract owner will be considered the owner of the
assets of a segregated asset account if the owner possesses an
incident of ownership in those assets, such as the ability to
exercise investment control over the assets. The Treasury
Department announced, in connection with the issuance of temporary
regulations concerning investment diversification, that those
regulations "do not provide guidance concerning the circumstances
in which investor control of the investments of a segregated asset
account may cause the investor, rather than the insurance company,
to be treated as the owner of the assets of the account." This
announcement, dated September 15, 1986, also stated that the
guidance would be issued by way of regulations or rulings on the
"extent to which policyholders may direct their investments to
particular subaccounts [of a segregated asset account] without
being treated as owners of the underlying assets." As of the date
of this prospectus, no such guidance has been issued.
The Company does not know if such guidance will be issued, or if it
is, what standards it may set. Furthermore, the Company does not
know if such guidance may be issued with retroactive effect. New
regulations are generally issued with a prospective-only effect as
to future sales or as to future voluntary transactions in existing
contracts. The Company therefore reserves the right to modify the
contract as necessary to attempt to prevent contract owners from
being considered the owner of the assets of the accounts.
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 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.
<PAGE>
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 income when distributed. Distributions must commence by April
1st of the calendar year after the close of 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.
NONQUALIFIED ANNUITIES
Individuals may purchase tax-deferred annuities without tax law
funding limits. The Purchase Payments receive no tax benefit,
deduction or deferral, but increases in the value of the Contract
are generally deferred from tax until distribution. If a non-
qualified annuity is owned by other than an individual, however,
(e.g., by a corporation), the increases in value attributable to
Purchase Payments made after February 28, 1986 are includable in
income annually. Furthermore, for Contracts issued after April 22,
1987, all deferred increases in value will be includable in the
income of an Owner when that Owner transfers the Contract without
adequate consideration.
<PAGE>
The federal tax law requires nonqualified annuity contracts issued
on or after January 19, 1985 to meet minimum mandatory distribution
requirements upon the death of the Contract Owner. Failure to meet
these requirements will cause the succeeding Contract Owner or
beneficiary to lose the tax benefits associated with annuity
contracts, i.e., primarily the tax deferral prior to distribution.
The distribution required depends upon whether an Annuity Option is
elected or whether the succeeding Owner is the surviving spouse.
Contracts will be administered by the Company in accordance with
these rules.
If two or more nonqualified annuity contracts are purchased from
the same insurer within the same calendar year, distributions from
any of them will be taxed based upon the amount of income in all of
the same calendar year series of annuities. This will generally
have the effect of causing taxes to be paid sooner on the deferred
gain in the contracts.
Those receiving partial distributions made before annuitization of
a contract will generally be taxed on an income-first basis to the
extent of income in the contract. Certain pre-August 14, 1982
deposits into a nonqualified annuity contract that have been
placed in the contract by means of a tax-deferred exchange under
Section 1035 of the Code may be withdrawn first without income tax
liability. This information on deposits must be provided to the
Company by the other insurance company at the time of the exchange.
There is income in the contract generally to the extent the Cash
Value exceeds the investment in the contract. The investment in
the contract is equal to the amount of premiums paid less any
amount received previously which was excludable from gross income.
Any direct or indirect borrowing against the value of the contract
or pledging of the contract as security for a loan will be treated
as a cash withdrawal under the tax law.
With certain exceptions, the law will impose an additional tax if
a Contract Owner makes a withdrawal of any amount under the
contract which is allocable to an investment made after August 13,
1982. The amount of the additional tax will be 10% of the amount
includable in income by the Contract Owner because of the
withdrawal. The additional tax will not be imposed if the amount
is received on or after the Contract Owner reaches the age of
59 1/2, or if the amount is one of a series of substantially equal
periodic payments made for life or life expectancy of the taxpayer.
The additional tax will not be imposed if the withdrawal or partial
surrender follows the death or disability of the Contract Owner.
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.
1. ELIGIBLE ROLLOVER DISTRIBUTION FROM SECTION 403(B) PLANS OR
ARRANGEMENTS OR FROM QUALIFIED PENSION AND PROFIT-SHARING PLANS
There is an unwaivable 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.
<PAGE>
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,
1994, a recipient receiving periodic payments (e.g., monthly or
annual payments under an Annuity Option) which total $13,700 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 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-benefited plan loses
its exempt status, employees could lose some of the tax benefits
described. For further information, a qualified tax adviser should
be consulted.
VOTING RIGHTS
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GENERAL
The person having voting interest under the Contract is the
Contract Owner. A participant covered by a Contract issued in
connection with a Section 403(b) or a Section 408 plan is the
Owner. The number of votes which an Owner 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 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, an Owner's voting
rights will decline as the reserve for the Contract declines.
Accounts GIS, QB, MM and Fund U are also used to fund certain other
Variable Annuity Contracts; votes attributable to such other
annuities are computed in an analogous manner.
During the accumulation period, participants covered by a Contract
issued in connection with an H.R.10 plan will have the right to
instruct the Owner with respect to all votes attributable to the
Contract, and participants covered by a contract issued in
connection with a corporate pension plan will have the right to
instruct the Owner with respect to votes attributable to payments
made by the Annuitant, and with respect to any additional votes
which are authorized by the terms of the plan, if any. All other
votes entitled to be cast during the accumulation period may be
cast by the Owner in its sole discretion. During the annuity
period, every participant will have the right to instruct the Owner
with respect to all votes attributable to the amount of assets
established in the account to meet the annuity obligations related
to such participant. Each participant having the right to instruct
an Owner with respect to any votes will receive a statement of the
number of votes, including fractional votes, attributable to his or
her contract, and stating his or her right to instruct the Owner
how such votes are to be cast.
Each Owner will cast the votes with respect to which instructions
from participants have been received in accordance with such
instructions; and votes for which participants were 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.
<PAGE>
Upon the death of the participant, all voting rights will vest in
the beneficiary of the Contract, except in the case of non tax-
benefited annuity contracts where the surviving spouse may succeed
to the ownership.
FUND U
In accordance with its view of present applicable law, the Company
will vote shares of mutual funds held in Fund U at regular and
special meetings of the shareholders of the mutual 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 Investment
Company Act of 1940 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 mutual fund(s) in which he has an
interest, proxy material and a form with which to give such
instructions with respect to the proportion of the mutual 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 Investment Company Act of 1940 require the Owners' approval;
and (vi) any other business which may properly come before the
meeting.
The number of votes which each Owner 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 were 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
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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 Travelers Equities Sales, Inc. ("TESI"). TESI, whose
principal business address is One Tower Square, Hartford,
Connecticut, serves as the principal underwriter for the variable
annuity contracts described herein. TESI is a registered broker-
dealer with the Securities and Exchange Commission under the
Securities Exchange Act of 1934 and is a member of the National
Association of Securities Dealers, Inc. ("NASD"). TESI 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 TESI are parties. No amounts have been
or will be retained by TESI for acting as principal underwriter for
the Contracts.
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.
<PAGE>
From time to time the Company may pay or permit other promotional
incentives, in cash, credit or other compensation.
STATE REGULATION
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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
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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.
APPENDIX A
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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 Alternatives
The Travelers Fund U for Variable Annuities
Investments of Fund U
Available Mutual Funds
Investment Objectives and Policies
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
<PAGE>
Buying Put and Call Options
Futures Contracts
Money Market Instruments
Investment Management and Advisory Services
Advisory Fees
TIMCO
TAMIC
Valuation of Assets
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, 1995
(FORM NO. L-11164S), AND THE ANNUAL REPORTS DATED DECEMBER 31, 1994
WHICH ARE INCORPORATED BY REFERENCE THEREIN (FORM NOS. VG-137, VG-
181, VG-182 AND VG-FNDU), ARE AVAILABLE WITHOUT CHARGE. TO
REQUEST A COPY, PLEASE CLIP THIS COUPON ON THE DOTTED LINE ABOVE,
ENTER YOUR NAME AND ADDRESS IN THE SPACES PROVIDED BELOW, AND MAIL
TO: THE TRAVELERS INSURANCE COMPANY, ANNUITY SERVICES - 5 SHS ONE
TOWER SQUARE, HARTFORD, CONNECTICUT 06183-5030.
Name:____________________________________________________________
Address:_________________________________________________________
_________________________________________________________________
<PAGE>
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<PAGE>
THE TRAVELERS UNIVERSAL ANNUITY
INDIVIDUAL VARIABLE ANNUITY CONTRACTS
ISSUED BY
THE TRAVELERS INSURANCE COMPANY
L-11164 TIC Ed. 5-95
Printed in U.S.A.
<PAGE>
UNIVERSAL ANNUITY
PROSPECTUS
The Group Variable Annuity Contracts described in this
Prospectus (issued by The Travelers Insurance Company)provide
for Purchase Payments to be made, either as a single payment
or on a flexible basis, by or on behalf of a Participant.
Purchase Payments may currently 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; 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).
Purchase Payments allocated to Fund U will be invested at
net asset value directly in shares of underlying funds
available under Fund U (the "Underlying Funds") in
accordance with the selection made by the Contract Owner.
(See "The Underlying Funds" on page 1 for a complete list of
funds currently available under Fund U.) Some of the
underlying mutual funds may not be available in every state
due to various insurance regulations.
Accounts TGIS, TSB, TAS and TB are investment alternatives
available for those participants who have entered into third
party market timing services agreements. The market timing
fee is deducted as an asset charge from Accounts TGIS, TSB,
TAS and TB. PARTICIPANTS WHO INVEST IN THESE SEPARATE
ACCOUNTS WITHOUT A MARKET TIMING AGREEMENT DO SO AT THEIR
OWN RISK, AND MAY BEAR A DISPROPORTIONATE AMOUNT OF THE
EXPENSES ASSOCIATED WITH PORTFOLIO TURNOVER AND MAY BEAR AN
UNNECESSARY INVESTMENT RISK. (See "Market Timing Services,"
page 33.)
Travelers Equities Sales, Inc. ("TESI") is the principal
underwriter for the Contract, and may add or substitute
investment alternatives, as described in this Prospectus.
The value of the Contract will vary continuously to reflect
the investment performance of the investment alternatives
selected by the Contract Owner. The Contract Owner bears
the investment risk.
This Prospectus sets forth concisely the information about
the Separate Accounts that you should know before investing.
Please read it and retain it for future reference.
Additional information about the Separate Accounts is
contained in a Statement of Additional Information dated May
1, 1995, which has been filed with the Securities and
Exchange Commission and is incorporated by reference into
this Prospectus. A copy may be obtained, without charge, by
writing to The Travelers Insurance Company, Annuity Services
5 SHS, One Tower Square, Hartford, Connecticut 06183-5030,
or by calling 1-800-842-0125. The Table of Contents of the
Statement of Additional Information appears in Appendix A of
this Prospectus.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE
CURRENT PROSPECTUSES OF THE MUTUAL FUNDS UNDERLYING FUND U.
BOTH THIS PROSPECTUS AND EACH OF THE UNDERLYING FUND
PROSPECTUSES SHOULD BE READ AND RETAINED FOR FUTURE
REFERENCE.
AN INVESTMENT IN ACCOUNT MM IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT.
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, 1995
<PAGE>
TABLE OF CONTENTS
GLOSSARY OF SPECIAL TERMS iv
PROSPECTUS SUMMARY 1
FEE TABLE -- Accounts GIS, QB, MM, TGIS, TSB, TAS and TB 4
FEE TABLE -- Fund U and its Underlying Funds 5
CONDENSED FINANCIAL INFORMATION 7
THE INSURANCE COMPANY 16
THE SEPARATE ACCOUNTS 16
THE TRAVELERS FUND U FOR VARIABLE ANNUITIES 17
The Underlying Funds 17
Underlying Fund Investment Advisers 20
Asset Allocation Advice 21
General 21
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES (ACCOUNT GIS) 21
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES (ACCOUNT QB) 22
THE TRAVELERS MONEY MARKET ACCOUNT
FOR VARIABLE ANNUITIES (ACCOUNT MM) 24
THE TRAVELERS TIMED GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES (ACCOUNT TGIS) 26
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT
FOR VARIABLE ANNUITIES (ACCOUNT TSB) 27
THE TRAVELERS TIMED AGGRESSIVE STOCK ACCOUNT
FOR VARIABLE ANNUITIES (ACCOUNT TAS) 29
THE TRAVELERS TIMED BOND ACCOUNT
FOR VARIABLE ANNUITIES (ACCOUNT TB) 31
MARKET TIMING SERVICES 33
Market Timing Risks 34
THE VARIABLE ANNUITY CONTRACT 34
General Benefit Description 34
Purchase Payments 35
Application of Purchase Payments 35
Right to Return 35
Number of Accumulation Units 35
Net Investment Factor 35
Federal and State Income Tax Withholding 36
CHARGES AND DEDUCTIONS 36
Contingent Deferred Sales Charge 36
Premium Tax 37
Administrative Charge 37
Reduction or Elimination of Contract Charges 37
Insurance Charge 37
Investment Advisory Fees 38
Market Timing Services Fees 38
PERFORMANCE INFORMATION 38
MANAGEMENT AND INVESTMENT ADVISORY SERVICES 39
TRANSFERS 40
Dollar-Cost Averaging (Automated Transfers) 40
SURRENDERS AND REDEMPTIONS 40
Systematic Withdrawals 41
DEATH BENEFIT 41
THE ANNUITY PERIOD 41
Maturity Date 41
Allocation of Annuity Payments 42
Annuity Unit Value 42
Determination of First Annuity Payment 42
Determination of Second and Subsequent Annuity Payments 42
PAYOUT OPTIONS 43
Election of Options 43
Annuity Options 43
Income Options 44
MISCELLANEOUS CONTRACT PROVISIONS 44
Termination 44
Benefit in the Event of Termination of a Participant,
the Plan or the Contract 45
Distribution from One Account to Another Account 45
Required Reports 45
Change of Contract 45
Assignment 46
Suspension of Payments 46
FEDERAL TAX CONSIDERATIONS 46
General 46
Investor Control 46
Section 403(b) Plans and Arrangements 47
Qualified Pension and Profit-Sharing Plans 47
Individual Retirement Annuities 47
Section 457 Plans 48
The Employee Retirement Income Security Act of 1974 48
Federal Income Tax Withholding 49
Tax Advice 49
VOTING RIGHTS 50
DISTRIBUTION OF VARIABLE ANNUITY CONTRACTS 51
STATE REGULATION 51
LEGAL PROCEEDINGS AND OPINIONS 51
APPENDIX A 52
<PAGE>
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 a Participant's Annuity
Payments are to begin under the terms of the plan.
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 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.
CONTRACT DATE: the date on which the master group contract and its
benefits and provisions become effective.
CONTRACT YEARS: annual periods computed from the Contract Date.
INCOME PAYMENTS: optional forms of periodic payments made by the
Company which are not based on the life of the Annuitant.
INDIVIDUAL ACCOUNT: Accumulation Units credited to a Participant or
beneficiary.
INVESTMENT ALTERNATIVE: a Separate Account or available mutual 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 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.
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.
OWNER: the entity to which the master group contract is issued,
usually a trustee, plan administrator or employer.
OWNER'S ACCOUNT: Accumulation Units credited to the Owner.
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 a
Variable Annuity 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: an open-end management investment company which
serves as an investment option under The Travelers Fund U for
Variable Annuities (also referred to as "Sub-Accounts").
VALUATION DATE: generally, 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 and the Company is open for business. 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.
There are eligibility requirements for purchasers described
elsewhere in this Prospectus. This Prospectus does not constitute
a solicitation of an offer to acquire any interest or participation
in the Variable Annuity described in this Prospectus to any person
who is ineligible for purchase.
<PAGE>
PROSPECTUS SUMMARY
- ------------------------------------------------------------------
INTRODUCTION
The Contract described in this Prospectus is issued by The
Travelers Insurance Company (the "Company" or "The Travelers"),
an indirect wholly owned subsidiary of Travelers Group Inc.
The Company has established the Separate Accounts listed below for
the purpose of funding the Variable Annuity Contract described
in this Prospectus. All of the Separate Accounts except
Fund U are registered with the Securities and Exchange
Commission as diversified, open-end management investment
companies under the Investment Company Act of 1940 (the
"1940 Act"). Fund U is registered with the Securities and
Exchange Commission as a unit investment trust under the
1940 Act.
RIGHT TO RETURN
For contracts issued in the state of New York, a Participant
has the right to return his or her certificate within twenty
days of purchase. (See "The Variable Annuity Contract --
Right to Return," page 35.)
PURCHASE PAYMENTS
The minimum Purchase Payment under tax-benefited contracts
is $20, except in the case of IRAs where the initial minimum
Purchase Payment is $1,000. For non tax-benefited
contracts, the minimum Purchase Payment is $1,000 initially,
and $100 thereafter. (See "The Variable Annuity Contract --
Purchase Payments," page 35.)
THE SEPARATE ACCOUNTS
The Separate Accounts currently available under the Contract
are as follows:
The Travelers Growth and Income Stock Account for Variable
Annuities (Account GIS)
The Travelers Quality Bond Account for Variable Annuities
(Account QB)
The Travelers Money Market Account for Variable Annuities
(Account MM)
The Travelers Timed Growth and Income Stock Account for
Variable Annuities (Account TGIS) *
The Travelers Timed Short-Term Bond Account for Variable
Annuities (Account TSB) *
The Travelers Timed Aggressive Stock Account for Variable
Annuities (Account TAS) *
The Travelers Timed Bond Account for Variable Annuities
(Account TB) *
The Travelers Fund U for Variable Annuities (Fund U)
* ACCOUNTS TGIS, TSB, TAS AND TB ARE AVAILABLE ONLY IN
CONNECTION WITH THE MARKET TIMING PROGRAM, AS DESCRIBED
BELOW.
FUND U AND THE UNDERLYING FUNDS
Purchase Payments designated to be allocated to Fund U will
be invested at net asset value in shares of the following
Underlying Funds in accordance with the selection made by
the Contract Owner:
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
Dreyfus Stock Index Fund
Fidelity's High Income Portfolio
Fidelty's Equity-Income Portfolio
Fidelity's Growth Portfolio
Fidelity's Asset Manager Portfolio
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
G.T. Global Strategic Income Portfolio
Smith Barney High Income Portfolio
MFS Total Return Portfolio
<PAGE>
INVESTMENT OBJECTIVES AND RISKS
A complete description of the investment objectives for each
of the Separate Accounts listed above is contained in this
Prospectus (beginning on page 16). Brief descriptions of
the investment objectives for the Underlying Funds are
contained on page 17 of this Prospectus; and complete
descriptions may be found in the prospectuses for the
Underlying Funds. As is true with all investment companies,
each investment alternative possesses certain investment
risks and there can be no assurance that the objectives of
any of the investment alternatives will be achieved.
MARKET TIMING
Accounts TGIS, TSB, TAS and TB (the "Market Timed Accounts")
are investment alternatives available to Contract Owners who
have entered into third party market timing services
agreements ("market timing agreements") with select
registered investment advisers which provide market timing
services in exchange for a fee ("registered investment
advisers"). The market timing agreements permit the
registered investment advisers to act on behalf of the
Contract Owner by transferring all or a portion of the
Contract Owner's units from one Market Timed Account to
another. Copeland Financial Services, Inc. ("Copeland"), a
registered investment adviser and an affiliate of the
Company, provides market timing services to Contract Owners
in the Market Timed Accounts for a fee of 1.25% of the
current value of the assets subject to timing, plus a one-
time $30 market timing application fee deducted at the time
a Contract Owner completes an application for market timing
services. Pursuant to the market timing agreements, the
Company deducts a daily percentage of the 1.25% annual
market timing fee from the assets of the Market Timed
Accounts on each Valuation Date. The Company then pays the
market timing fee to Copeland.
Assets timed by investment advisers not affiliated with the
Company may be in the Market Timed Accounts if the
unaffiliated advisers agree to an arrangement substantially
identical to the payment method described above for the
affiliated advisers, and if the unaffiliated advisers are
acceptable to the Company.
Contract Owners who invest in 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.
Additionally, investment in the Market Timed Accounts
without a market timing agreement may cause an unnecessary
investment risk.
For further information regarding market timing, please see
"Market Timing Services," page 33.
ASSET ALLOCATION
Some Contract Owners may elect to enter into an asset
allocation investment advisory agreement with Copeland.
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. The service may not be available
in all marketing programs through which the Universal
Annuity contract is sold. (See "The Travelers Fund U
for Variable Annuities -- Asset Allocation Advice," page 21.)
INVESTMENT ADVISORY SERVICES
The Travelers Investment Management Company ("TIMCO") furnishes
investment management and advisory services to Accounts GIS,
TGIS, TSB and TAS. Travelers Asset Management International
Corporation ("TAMIC") furnishes investment management and advisory
services to Accounts QB, MM and TB. (See "Management and
Investment Advisory Services," page 39, as well as "The
Travelers Fund U for Variable Annuities -- Underlying Fund
Investment Advisers," page 20, and the prospectuses for each
of the underlying funds.)
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 36.)
The Company will deduct $15 semiannually from the Contract
to cover administrative expenses associated with the
Contract. (See "Charges and Deductions -- Administrative
Charge," page 37.)
The Company deducts an insurance charge from each Separate
Account to compensate for mortality and expense risks
assumed by the Company. The insurance charge is equivalent
on an annual basis to 1.25% of the daily net assets of the
Account. (See "Charges and Deductions -- Insurance
Charge," page 37.)
<PAGE>
A deduction is made from each Separate Account (except Fund
U) for investment management and advisory services.
Investment advisory fees are deducted daily and paid weekly
to the investment advisers providing these services. (See
"Charges and Deductions-- Investment Advisory Fees,"
page 38.) For investment options under Fund U, the
investment management and advisory services fee is deducted
from the assets of the underlying funds. (Please see the
prospectuses of the underlying mutual funds for a
description of their respective investment management and
advisory fees.)
Premium taxes may apply to annuities in a few states. These
taxes currently range from 0.5% to 5.0%, depending upon
jurisdiction. The Company will deduct any applicable
premium tax from the Contract Value, either upon death,
surrender, or 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. (See
"Charges and Deductions -- Premium Tax," page 37.)
ANNUITY PAYMENTS
At Maturity Date, the contract provides lifetime Annuity
Payments, as well as other types of payout plans. (See
"Payout Options," page 43.) 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 the state of New Jersey.
DEATH BENEFIT
If individual certificates have been issued under the
Contract to Participants, and if a Participant's Interest in
the Contract has been individually allocated, 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 41.)
TRANSFERS AND WITHDRAWALS
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 40.)
SURRENDERS
Prior to Maturity Date, all or part of the contract value
may be surrendered, subject to certain charges and
limitations. (See "Surrenders and Redemptions," page 40, and
"Federal Tax Considerations -- Section 403(b) Plans and
Arrangements," page 47.)
TERMINATION
The Travelers reserves the right to terminate inactive
contracts under certain circumstances. (See "Miscellaneous
Contract Provisions -- Termination," page 44.)
VOTING RIGHTS
Purchasers have certain voting rights under the contracts.
(See "Voting Rights," page 50.)
<PAGE>
FEE TABLE
- -----------------------------------------------------------
ACCOUNTS GIS, QB, MM, TGIS, TSB, TAS AND TB
The purpose of this Fee Table is to assist Contract Owners in
understanding the various costs and expenses that will be borne,
directly or indirectly, under the Contract. For additional
information regarding the charges and deductions assessed under the
Contract, including possible waivers or reductions of these
expenses, see "Charges and Deductions," page 36. Expenses shown do
not include premium taxes which may be applicable.
CONTRACT CHARGES AND EXPENSES
Contingent Deferred Sales Charge (as a percentage of purchase
payments): 5.00%
Semiannual Contract Administrative Charge $ 15
ANNUAL EXPENSES
Mortality and Expense Risk Fees
(as a percentage of average net assets) 1.25%
<TABLE>
<CAPTION>
TOTAL
MANAGEMENT MARKET ANNUAL
FEE TIMING FEE * EXPENSES
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Travelers Growth and Income Stock Account (Account GIS) 0.45% -- 1.70%
Travelers Quality Bond Account (Account QB) 0.32% -- 1.57%
Travelers Money Market Account (Account MM) 0.32% -- 1.57%
Travelers Timed Growth and Income Stock Account (Account TGIS) 0.32% 1.25% 2.82%
Travelers Timed Short-Term Bond Account (Account TSB) 0.32% 1.25% 2.82%
Travelers Timed Aggressive Stock Account (Account TAS) 0.30% 1.25% 2.80%
Travelers Timed Bond Account (Account TB) 0.50% 1.25% 3.00%
</TABLE>
<TABLE>
EXAMPLE **
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS
THAN THOSE SHOWN.
A $1,000 investment would be subject to the If the Contract is NOT surrendered at the
following expenses, assuming a 5% annual end of the period shown, a $1,000 invest-
return on assets, if the Contract is surren- ment would be subject to the following
dered at the end of the period shown ***: expenses, assuming a 5% annual return:
<CAPTION>
- --------------------------------------------------------------------------------------------
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>
Account GIS $ 70 $112 $157 $232 $20 $ 62 $107 $232
Account QB 69 109 151 218 19 59 101 218
Account MM 69 109 151 218 19 59 101 218
Account TGIS 81 146 213 342 31 96 163 342
Account TSB 81 146 213 342 31 96 163 342
Account TAS 81 145 212 340 31 95 162 340
Account TB 83 151 222 359 33 101 172 359
</TABLE>
* 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.
** The Example reflects the $15 Semiannual Contract Fee as an
annual charge of 0.291% of assets.
*** The Contingent Deferred Sales Charge may be waived upon
annuitization (see "Charges and Deductions - Contingent Deferred
Sales Charge," page 36.)
<PAGE>
FEE TABLE
THE TRAVELERS FUND U FOR VARIABLE ANNUITIES
AND ITS UNDERLYING FUNDS
- ------------------------------------------------------------------
The purpose of this Fee Table is to assist Contract Owners in
understanding the various costs and expenses that will be borne,
directly or indirectly, under the Contract. The information listed
reflects expenses of the Separate Account as well as of the
Underlying Funds. For additional information regarding the charges
and deductions assessed under the Contract, including possible
waivers or reductions of these expenses, see "Charges and
Deductions," page 36. Expenses shown do not include premium
taxes, which may be applicable.
CONTRACT CHARGES AND EXPENSES
Contingent Deferred Sales Charge
(as a percentage of purchase payments): 5.00%
Semiannual Contract Administrative Charge $15
ANNUAL EXPENSES
Mortality and Expense Risk Fees (as a percentage of average net
assets of the Separate Account) 1.25%
UNDERLYING FUND EXPENSES
(as a percentage of average net assets of the Underlying Fund)
<TABLE>
<CAPTION>
OTHER TOTAL
MANAGEMENT EXPENSES UNDERLYING
FEE (AFTER REIMBURSEMENT) FUND EXPENSES
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital Appreciation Fund 0.75% 0.14% (1) 0.89%
High Yield Bond Trust 0.50% 0.75% (1) 1.25%
Managed Assets Trust 0.50% 0.11% (1) 0.61%
U.S. Government Securities Portfolio 0.32% 0.39% (1) 0.71%
Social Awareness Stock Portfolio 0.65% 0.60% (1) 1.25%
Utilities Portfolio 0.65% 0.60% (1) 1.25%
Templeton Bond Fund 0.50% 0.40% (2) 0.90%
Templeton Stock Fund 0.48% 0.25% (2) 0.73%
Templeton Asset Allocation Fund 0.49% 0.26% (2) 0.75%
Fidelity's High Income Portfolio 0.61% 0.10% (3) 0.71%
Fidelity's Equity-Income Portfolio 0.52% 0.06% (3) 0.58%
Fidelity's Growth Portfolio 0.62% 0.07% (3) 0.69%
Fidelity's Asset Manager Portfolio 0.72% 0.08% (3) 0.80%
Dreyfus Stock Index Fund 0.07% 0.33% (4) 0.40%
American Odyssey International Equity Fund 0.70% 0.55% (5) 1.25%
American Odyssey Emerging Opportunities Fund 0.65% 0.18% (5) 0.83%
American Odyssey Core Equity Fund 0.60% 0.18% (5) 0.78%
American Odyssey Long-Term Bond Fund 0.50% 0.25% (5) 0.75%
American Odyssey Intermediate-Term Bond Fund 0.50% 0.25% (5) 0.75%
American Odyssey Short-Term Bond Fund 0.50% 0.25% (5) 0.75%
Smith Barney Income and Growth Portfolio 0.65% 0.10% (6) 0.75%
Alliance Growth Portfolio 0.80% 0.10% (6) 0.90%
Smith Barney International Equity Portfolio 0.90% 0.35% (6) 1.25%
Putnam Diversified Income Portfolio 0.75% 0.20% (6) 0.95%
G.T. Global Strategic Income Portfolio 0.80% 0.30% (6) 1.10%
Smith Barney High Income Portfolio 0.60% 0.10% (6) 0.70%
MFS Total Return Portfolio 0.80% 0.15% (6) 0.95%
</TABLE>
(1) Other Expenses are as of the fiscal year ended December 31, 1994,
taking 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 0.83%, 2.61% and 2.84% for HYBT, Social
Awareness Stock Portfolio, and Utilities Portfolio, respectively.
(2) Other Expenses are based on the actual operating expenses
incurred by the Fund during the year ended December 31, 1994.
(3) Management Fees and Other Expenses are as of the fiscal year
ended December 31, 1994. No reimbursement arrangement affected the
High Income Portfolio. A portion of the brokerage commissions the
Fund paid was used to reduce its expenses. Without this reduction,
total Other Expenses would have been: Equity-Income Portfolio,
0.60%; Growth Portfolio, 0.70%; and Asset Manager Portfolio, 0.81%.
(4) The administrator and investment adviser have agreed to reimburse
the Fund for expenses in excess of 0.40%. For the fiscal year ended
December 31, 1994, the Investment Management Fee and Other Expenses
before reimbursement were 0.15% and 0.42%, respectively.
(5) Other Expenses are as of the fiscal year ended December 31, 1994
taking into account the current expense limitations agreed to by
the Manager. The Manager has agreed to continue, at least until
May 1, 1996, to waive fees or reimburse expenses to the extent a
Fund's total expense ratio exceeds the following expense
limitation: International Equity Fund, 1.25%; Emerging
Opportunities Fund and Core Equity Fund, 1.00%; and Long-Term Bond
Fund, Intermediate-Term Bond Fund, Short-Term Bond Fund, 0.75%.
Thereafter, each 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. The Long-Term Bond Fund and
the Intermediate-Bond Fund are currently reimbursing the Manager
while the Short-Term Bond Fund and the International Equity Fund
are still receiving reimbursements from the Manager. Without these
expense limitations and/or Manager reimbursements, Other Expenses
of the Funds would have been as follows: International Equity Fund,
0.66%; Emerging Opportunities Fund, 0.27%; Core Equity Fund, 0.25%;
Long-Term Bond Fund, 0.23%; Intermediate-Bond Fund, 0.25%; and
Short-Term Bond, 0.52%.
<PAGE>
6 Other expenses are as of October 31, 1994, 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 Funds for their expenses. If such fees were not
waived and expenses were not reimbursed, Total Underlying Expenses
would have been as follows: Smith Barney Income and Growth, 2.08%;
Alliance Growth Portfolio, 1.76%; Smith Barney International Equity
Portfolio, 2.00%; Putnam Diversified Income Portfolio, 2.92%; G.T.
Global Income Portfolio, 4.53%; Smith Barney High Income Portfolio,
2.60%; and MFS Return Portfolio, 2.51%.
EXAMPLE *
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
<TABLE>
A $1,000 investment would be subject to the If the Contract is NOT surrendered at the
following expenses, assuming a 5% annual end of the period shown, a $1,000 invest-
return on assets, if the Contract is surren- ment would be subject to the following
dered at the end of the period shown**: expenses, assuming a 5% annual return:
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
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>
Capital Appreciation Fund $75 $126 $180 $277 $25 $76 $130 $277
High Yield Bond Trust 78 137 197 312 28 87 147 312
Managed Assets Trust 72 117 165 247 22 67 115 248
U.S. Government Securities Portfolio 73 120 171 259 23 70 121 259
Social Awareness Stock Portfolio 78 137 197 312 28 87 147 312
Utilities Portfolio 78 137 197 312 28 87 147 312
Templeton Bond Fund 75 126 180 278 25 76 130 278
Templeton Stock Fund 73 121 172 261 23 71 122 261
Templeton Asset Allocation Fund 73 122 173 263 23 72 123 263
Fidelity's High Income Portfolio 73 120 171 259 23 70 121 259
Fidelity's Equity-Income Portfolio 72 116 164 245 22 66 114 245
Fidelity's Growth Portfolio 73 120 170 257 23 70 120 257
Fidelity's Asset Manager Portfolio 74 123 175 268 24 73 125 268
Dreyfus Stock Index Fund 70 111 155 227 20 61 105 227
American Odyssey Funds (1):
International Equity Fund 78 137 197 312 28 87 147 312
Emerging Opportunities Fund 74 124 177 271 24 74 127 271
Core Equity Fund 74 122 174 266 24 72 124 266
Long-Term Bond Fund 73 122 173 263 23 72 123 263
Intermediate-Term Bond Fund 73 122 173 263 23 72 123 263
Short-Term Bond Fund 73 122 173 263 23 72 123 263
American Odyssey Funds (2):
International Equity Fund 91 173 257 424 41 123 207 424
Emerging Opportunities Fund 86 161 237 388 36 111 187 388
Core Equity Fund 86 159 235 384 36 109 185 384
Long-Term Bond Fund 86 159 234 381 36 109 184 381
Intermediate-Term Bond Fund 86 159 234 381 36 109 184 381
Short-Term Bond Fund 86 159 234 381 36 109 184 381
Smith Barney Income and Growth Portfolio 73 122 -- -- 23 72 -- --
Alliance Growth Portfolio 75 126 -- -- 25 76 -- --
Smith Barney International Equity Portfolio 78 137 -- -- 28 87 -- --
Putnam Diversified Income Portfolio 75 128 -- -- 25 78 -- --
G.T. Global Strategic Income Portfolio 77 132 -- -- 27 82 -- --
Smith Barney High Income Portfolio 73 120 -- -- 23 70 -- --
MFS Total Return Portfolio 75 128 -- -- 25 78 -- --
</TABLE>
* The Example reflects the $15 Semiannual Contract Fee as an annual
charge of 0.291% of assets.
** The Contingent Deferred Sales Charge may be waived upon
annuitization (see "Charges and Deductions - Contingent Deferred
Sales Charge," page 36.)
(1) Reflects expenses that would be incurred for those Contract
Owners who DO NOT participate in the CHART Asset Allocation
program.
(2) Reflects expenses that would be incurred for those Contract
Owners who DO participate in the CHART Asset Allocation program.
<PAGE>
CONDENSED FINANCIAL INFORMATION
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES
Per Unit Data for an Accumulation Unit outstanding throughout each year
The following information on per unit data has been audited by Coopers &
Lybrand L.L.P., Independent Accountants. Their report on the per unit data for
each of the five years in the period ended December 31, 1994 is contained in
the 1994 Annual Report to Contract Owners. The Annual Report is incorporated
by reference into the Statement of Additional Information. The following
information should be read in conjunction with the financial statements
contained in the 1994 Annual Report.
Contracts issued on or after May 16, 1983.
<TABLE>
<CAPTION>
SELECTED PER UNIT DATA 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income ..............$ .189 $ .184 $ .188 $ .198 $ .192 $ .191 $ .168 $ .132 $ .126 $ .130
Operating expenses ................... .115 .106 .098 .091 .079 .095 .071 .066 .060 .048
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net investment income ................ .074 .078 .090 .107 .113 .096 .097 .066 .066 .082
Unit Value at beginning of year ...... 7.007 6.507 6.447 5.048 5.295 4.191 3.601 3.737 3.275 2.732
Net realized and change in
unrealized gains (losses) ........... (.164) .422 (.030) 1.292 (.360) 1.008 .493 (.202) .396 .461
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Unit Value at end of year ............$ 6.917 $ 7.007 $ 6.507 $ 6.447 $ 5.048 $ 5.295 $ 4.191 $ 3.601 $ 3.737 $ 3.275
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase (decrease) in
unit value ........................... (.09) .50 .06 1.40 (.25) 1.10 .59 (.14) .46 .54
Ratio of operating expenses to
average net assets ................... 1.65% 1.57% 1.58% 1.58% 1.57% 1.58% 1.58% 1.58% 1.57% 1.57%
Ratio of net investment income to
average net assets ................... 1.05% 1.15% 1.43% 1.86% 2.25% 2.33% 2.60% 1.49% 1.84% 2.85%
Number of units outstanding at
end of year (thousands)...............26,692 28,497 29,661 26,235 19,634 15,707 12,173 11,367 54,065 32,994
Portfolio turnover rate ................ 103% 81% 189% 319% 54% 27% 38% 51% 95% 93%
Contracts issued prior to May 16, 1983.
<CAPTION>
SELECTED PER UNIT DATA 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income ..............$ .192 $ .189 $ .192 $ .201 $ .199 $ .191 $ .168 $ .132 $ .126 $ .130
Operating expenses ................... .100 .092 .085 .077 .069 .066 .053 .059 .047 .037
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net investment income ................ .092 .097 .107 .124 .130 .125 .115 .073 .079 .093
Unit Value at beginning of year ...... 7.194 6.664 6.587 5.145 5.383 4.250 3.642 3.771 3.296 2.742
Net realized and change in
unrealized gains (losses) ........... (.166) .433 (.030) 1.318 (.368) 1.008 .493 (.202) .396 .461
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Unit Value at end of year ............$ 7.120 $ 7.194 $ 6.664 $ 6.587 $ 5.145 $ 5.383 $ 4.250 $ 3.642 $ 3.771 $ 3.296
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase (decrease) in
unit value ........................... (.07) .53 .08 1.44 (.24) 1.13 .61 (.13) .48 .55
Ratio of operating expenses to
average net assets ................... 1.41% 1.33% 1.33% 1.33% 1.33% 1.33% 1.33% 1.33% 1.32% 1.32%
Ratio of net investment income to
average net assets ................... 1.30% 1.40% 1.67% 2.11% 2.50% 2.56% 2.85% 1.72% 2.09% 3.16%
Number of units outstanding at
end of year (thousands) ..............19,557 21,841 22,516 24,868 28,053 31,326 35,633 41,859 48,008 55,699
Portfolio turnover rate ............... 103% 81% 189% 319% 54% 27% 38% 51% 95% 93%
</TABLE>
The consolidated financial statements of The Travelers Insurance Company and
Subsidiaries are contained in the Statement of Additional Information.
<PAGE>
CONDENSED FINANCIAL INFORMATION
THE TRAVELERS QUALITY BOND 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, 1994 is contained
in the l994 Annual Report to Contract Owners. The Annual Report is incorporated
by reference into the Statement of Additional Information. The following
information should be read in conjunction with the financial statements
contained in the 1994 Annual Report.
Contracts issued subsequent to May 16, 1983.
<TABLE>
<CAPTION>
SELECTED PER UNIT DATA 1994 1993 1992 1991 + 1990 1989 1988 1987 1986 1985
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income ...............$ .310 $ .299 $ .311 $ .299 $ .277 $ .270 $ .259 $ .245 $ .240 $ .237
Operating expenses .................... .069 .067 .061 .056 .048 .047 .046 .042 .040 .035
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net investment income ................. .241 .232 .250 .243 .229 .223 .213 .203 .200 .202
Unit Value at beginning of year ....... 4.381 4.052 3.799 3.357 3.129 2.852 2.697 2.629 2.369 2.056
Net realized and change in
unrealized gains (losses) ............ (.348) .097 .003 .199 (.001) .054 (.058) (.135) .060 .111
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Unit Value at end of year .............$ 4.274 $ 4.381 $ 4.052 $ 3.799 $ 3.357 $ 3.129 $ 2.852 $ 2.697 $ 2.629 $ 2.369
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase (decrease) in unit value .. (.11) .33 .25 .44 .23 .28 .16 .07 .26 .31
Ratio of operating expenses to
average net assets .................... 1.57% 1.57% 1.58% 1.57% 1.57% 1.57% 1.58% 1.57% 1.57% 1.58%
Ratio of net investment income to
average net assets .................... 5.62% 5.41% 6.38% 6.84% 7.06% 7.44% 7.67% 7.72% 7.94% 9.15%
Number of units outstanding at
end of year (thousands)............... 27,033 28,472 20,250 17,211 14,245 13,135 9,457 7,560 8,321 3,719
Portfolio turnover rate ............... 27% 24% 23% 21% 41% 33% 17% 17% 28% 29%
Contracts issued prior to May 16, 1983.
<CAPTION>
SELECTED PER UNIT DATA 1994 1993 1992 1991 + 1990 1989 1988 1987 1986 1985
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income ...............$ .318 $ .306 $ .317 $ .304 $ .281 $ .270 $ .259 $ .245 $ .240 $ .237
Operating expenses .................... .059 .058 .050 .048 .040 .035 .037 .034 .032 .029
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net investment income ................. .259 .248 .267 .256 .241 .235 .222 .211 .208 .208
Unit Value at beginning of year ....... 4.498 4.150 3.880 3.421 3.181 2.892 2.728 2.652 2.384 2.065
Net realized and change in
unrealized gains (losses) ............ (.357) .100 .003 .203 (.001) .054 (.058) (.135) .060 .111
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Unit Value at end of year .............$ 4.400 $ 4.498 $ 4.150 $ 3.880 $ 3.421 $ 3.181 $ 2.892 $ 2.728 $ 2.652 $ 2.384
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase (decrease) in unit value (.10) .35 .27 .46 .24 .29 .16 .08 .27 .32
Ratio of operating expenses to
average net assets .................. 1.33% 1.33% 1.33% 1.33% 1.33% 1.33% 1.33% 1.32% 1.32% 1.33%
Ratio of net investment income to
average net assets .................. 5.87% 5.66% 6.61% 7.09% 7.31% 7.60% 7.82% 7.87% 8.19% 9.43%
Number of units outstanding at
end of year (thousands) ............. 10,694 12,489 13,416 14,629 16,341 18,248 21,124 24,703 27,776 31,189
Portfolio turnover rate .............. 27% 24% 23% 21% 41% 33% 17% 17% 28% 29%
+ On May 1, 1990, TAMIC replaced TIMCO as the investment adviser for Account QB.
</TABLE>
The consolidated financial statements of The Travelers Insurance Company
and Subsidiaries are contained in the Statement of Additional Information.
<PAGE>
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, 1994 is contained
in the 1994 Annual Report to Contract Owners. The Annual Report is incorporated
by reference into the Statement of Additional Information. The following
information should be read in conjunction with the financial statements
contained in the 1994 Annual Report.
Contracts issued on or after May 16, 1983.
<TABLE>
<CAPTION>
SELECTED PER UNIT DATA 1994 1993 1992 1991 1990* 1989 1988 1987 1986 1985
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income ............ $ .087 $ .065 $ .077 $ .118 $ .149 $ .156 $ .118 $ .101 $ .091 $ .108
Operating expenses ................. .032 .031 .031 .030 .029 .027 .023 .023 .020 .020
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net investment income .............. .055 .034 .046 .088 .120 .129 .095 .078 .071 .088
Unit Value at beginning of year .... 2.029 1.995 1.949 1.861 1.741 1.612 1.517 1.439 1.368 1.280
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Unit Value at end of year .......... $ 2.084 $ 2.029 $ 1.995 $ 1.949 $ 1.861 $ 1.741 $ 1.612 $ 1.517 $ 1.439 $ 1.368
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase in unit value ........... .06 .03 .05 .09 .12 .13 .10 .08 .07 .09
Ratio of operating expenses to
average net assets ................... 1.57% 1.57% 1.57% 1.57% 1.57% 1.57% 1.56% 1.57% 1.57% 1.57%
Ratio of net investment income to
average net assets ................... 2.72% 1.68% 2.33% 4.66% 6.68% 7.65% 6.02% 5.27% 4.87% 6.55%
Number of units outstanding at
end of year (thousands)...............39,675 34,227 42,115 55,013 67,343 57,916 41,449 49,918 31,831 24,645
Contracts issued prior to May 16, 1983.
<CAPTION>
SELECTED PER UNIT DATA 1994 1993 1992 1991 1990* 1989 1988 1987 1986 1985
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income .............. .091 $ .067 $ .079 $ .120 $ .151 $ .156 $ .118 $ .101 $ .091 $ .108
Operating expenses ................... .028 .027 .027 .026 .024 .021 .018 .018 .015 .017
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net investment income ................ .063 .040 .052 .094 .127 .135 .100 .083 .076 .091
Unit Value at beginning of year ...... 2.083 2.043 1.991 1.897 1.770 1.635 1.535 1.452 1.376 1.285
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Unit Value at end of year ............$ 2.146 $ 2.083 $ 2.043 $ 1.991 $ 1.897 $ 1.770 $ 1.635 $ 1.535 $ 1.452 $ 1.376
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase in unit value ........... .06 .04 .05 .09 .13 .14 .10 .08 .08 .09
Ratio of operating expenses to
average net assets .................. 1.33% 1.33% 1.33% 1.33% 1.33% 1.33% 1.31% 1.32% 1.32% 1.32%
Ratio of net investment income to
average net assets .................. 2.98% 1.93% 2.58% 4.90% 6.93% 7.81% 6.19% 5.49% 5.09% 6.83%
Number of units outstanding at
end of year (thousands) ............. 206 218 227 262 326 367 497 592 593 639
* On May 1, 1990, TAMIC replaced TIMCO as the investment adviser for Account MM.
The consolidated financial statements of The Travelers Insurance Company and
Subsidiaries are contained in the Statement of Additional Information.
</TABLE>
CONDENSED FINANCIAL INFORMATION -- ACCOUNT MM
<PAGE>
CONDENSED FINANCIAL INFORMATION
THE TRAVELERS FUND U FOR VARIABLE ANNUITIES
Accumulation Unit Values
(Unaudited)
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
----------------- ------------------ ----------------- ----------------- ---------------
Q NQ Q NQ Q NQ Q NQ Q NQ
------- ------- ------- ------- ------- ------ ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CAPITAL APPRECIATION FUND*
Unit Value at beginning of year. $ 1.892 $ 1.962 $ 1.665 $ 1.727 $ 1.433 $ 1.487 $ 1.075 $ 1.114 $ 1.157 $ 1.200
Unit Value at end of year ....... 1.779 1.845 1.892 1.962 1.665 1.727 1.433 1.487 1.075 1.114
Number of units outstanding at
end of year (thousands)......... 40,160 3,605 30,003 2,825 16,453 1,020 12,703 887 11,356 553
HIGH YIELD BOND TRUST
Unit Value at beginning of year .$ 2.222 $ 2.245 $ 1.974 $ 1.994 $ 1.767 $ 1.785 $ 1.418 $ 1.433 $ 1.573 $ 1.590
Unit Value at end of year ....... 2.167 2.189 2.222 2.245 1.976 1.994 1.767 1.785 1.418 1.433
Number of units outstanding at
end of year (thousands) ........ 4,708 585 5,066 603 4,730 428 4,018 344 4,045 341
MANAGED ASSETS TRUST
Unit Value at beginning of year .$ 2.281 $ 2.455 $ 2.111 $ 2.273 $ 2.034 $ 2.189 $ 1.691 $ 1.821 $ 1.671 $ 1.799
Unit Value at end of year ....... 2.201 2.369 2.281 2.455 2.111 2.273 2.034 2.189 1.691 1.821
Number of units outstanding at
end of year (thousands)......... 58,355 4,813 63,538 4,490 65,926 4,120 58,106 3,359 51,489 2,744
1989 1988 1987 1986 1985
----------------- ------------------ ----------------- ----------------- ---------------
Q NQ Q NQ Q NQ Q NQ Q NQ
------- ------- ------- ------- ------- ------ ------ ------- ------ -------
CAPITAL APPRECIATION FUND*
Unit Value at beginning of year .$ 1.015 $ 1.052 $ 0.934 $ 0.968 $ 1.027 $ 1.066 $ 0.946 $ 0.976 $ 0.736 $ 0.755
Unit Value at end of year ....... 1.157 1.200 1.015 1.052 0.934 0.968 1.027 1.066 0.946 0.976
Number of units outstanding at
end of year (thousands) ........ 12,038 495 13,040 423 12,957 486 12,658 263 13,504 93
HIGH YIELD BOND TRUST
Unit Value at beginning of year .$ 1.571 $ 1.588 $ 1.388 $ 1.403 $ 1.412 $ 1.427 $ 1.324 $ 1.339 $ 1.134 $ 1.146
Unit Value at end of year ....... 1.573 1.590 1.571 1.588 1.388 1.403 1.412 1.427 1.324 1.339
Number of units outstanding at
end of year (thousands) ........ 6,074 573 5,783 676 4,645 523 4,866 591 2,331 86
MANAGED ASSETS TRUST
Unit Value at beginning of year .$ 1.331 $ 1.433 $ 1.234 $ 1.328 $ 1.223 $ 1.317 $ 1.040 $ 1.119 $ 0.831 $ 0.892
Unit Value at end of year ....... 1.671 1.799 1.331 1.433 1.234 1.328 1.223 1.317 1.040 1.119
Number of units outstanding at
end of year (thousands) ........ 47,104 2,836 46,809 3,316 46,733 3,875 33,600 1,876 28,956 939
Q = Qualified
NQ = Non-Qualified
The financial statements of Fund U are contained in the 1994 Annual Report to
Contract Owners.
The consolidated financial statements of The Travelers Insurance Company and
Subsidiaries are contained in the Statement of Additional Information.
* Prior to May 1, 1994, the Capital Appreciation Fund was known as the
Aggressive Stock Trust.
</TABLE>
CONDENSED FINANCIAL INFORMATION -- FUND U
<PAGE>
CONDENSED FINANCIAL INFORMATION
THE TRAVELERS FUND U FOR VARIABLE ANNUITIES
ACCUMULATION UNIT VALUES
(Unaudited)
<TABLE>
<CAPTION>
1994 1993 1992*
---- ---- -----
<S> <C> <C> <C>
U.S. GOVERNMENT SECURITIES PORTFOLIO
Unit Value at beginning of period.............................................................. $ 1.153 $ 1.066 $ 1.000
Unit Value at end of period.................................................................... 1.074 1.153 1.066
Number of units outstanding at end of period (thousands) ...................................... 22,709 22,142 8,566
SOCIAL AWARENESS STOCK PORTFOLIO
Unit Value at beginning of period.............................................................. $ 1.153 $ 1.086 $ 1.000
Unit Value at end of period.................................................................... 1.109 1.153 1.086
Number of units outstanding at end of year (thousands) ........................................ 3,499 2,920 1,332
UTILITIES PORTFOLIO
Unit Value at beginning of period.............................................................. $ 1.000 -- --
Unit Value at end of period.................................................................... 1.005 -- --
Number of units outstanding at end of period (thousands) ...................................... 5,740 -- --
TEMPLETON BOND FUND
Unit Value at beginning of year ............................................................... $ 1.172 $ 1.065 $ 1.000
Unit Value at end of year ..................................................................... 1.101 1.172 1.065
Number of units outstanding at end of year (thousands) ........................................ 10,186 8,014 3,477
TEMPLETON STOCK FUND
Unit Value at beginning of year ............................................................... $ 1.385 $ 1.047 $ 1.000
Unit Value at end of year ..................................................................... 1.338 1.385 1.047
Number of units outstanding at end of year (thousands) ........................................ 101,462 43,847 10,433
TEMPLETON ASSET ALLOCATION FUND
Unit Value at beginning of year ............................................................... $ 1.333 $ 1.070 $ 1.000
Unit Value at end of year ..................................................................... 1.277 1.333 1.070
Number of units outstanding at end of year (thousands) ........................................ 103,407 51,893 13,888
FIDELITY'S HIGH INCOME PORTFOLIO
Unit Value at beginning of year ............................................................... $ 1.138 $ 1.138 $ 1.000
Unit Value at end of year ..................................................................... 1.316 1.354 1.138
Number of units outstanding at end of year (thousands) ........................................ 25,813 17,381 4,875
FIDELITY'S GROWTH PORTFOLIO
Unit Value at beginning of year ............................................................... $ 1.024 $ 1.024 $ 1.000
Unit Value at end of year ..................................................................... 1.192 1.207 1.024
Number of units outstanding at end of year (thousands) ........................................ 176,304 101,260 30,240
FIDELITY'S EQUITY-INCOME PORTFOLIO
Unit Value at beginning of period ............................................................. $ 1.052 $ 1.000 --
Unit Value at end of period ................................................................... 1.112 1.052 --
Number of units outstanding at end of period (thousands) ...................................... 78,856 13,414 --
FIDELITY'S ASSET MANAGER PORTFOLIO
Unit Value at beginning of year ............................................................... $ 1.301 $ 1.088 $ 1.000
Unit Value at end of year ..................................................................... 1.207 1.301 1.088
Number of units outstanding at end of year (thousands) ........................................ 282,474 162,413 30,207
DREYFUS STOCK INDEX FUND, INC.
Unit Value at beginning of year ............................................................... $ 1.148 $ 1.064 $ 1.000
Unit Value at end of year ..................................................................... 1.144 1.148 1.064
Number of units outstanding at end of year (thousands) ........................................ 31,600 26,789 12,089
AMERICAN ODYSSEY INTERNATIONAL EQUITY FUND
Unit Value at beginning of period ............................................................. $ 1.180 $ 1.000 --
Unit Value at end of period ................................................................... 1.084 1.180 --
Number of units outstanding at end of period (thousands) ...................................... 47,096 16,944 --
AMERICAN ODYSSEY EMERGING OPPORTUNITIES FUND
Unit Value at beginning of period ............................................................. $ 1.079 $ 1.000 --
Unit Value at end of period ................................................................... 1.168 1.079 --
Number of units outstanding at end of period (thousands) ...................................... 73,838 27,011 --
AMERICAN ODYSSEY CORE EQUITY FUND
Unit Value at beginning of period ............................................................. $ 1.012 $ 1.000 --
Unit Value at end of period ................................................................... .990 1.012 --
Number of units outstanding at end of period (thousands) ...................................... 100,082 37,136 --
AMERICAN ODYSSEY LONG-TERM BOND FUND
Unit Value at beginning of period ............................................................. $ 1.085 $ 1.000 --
Unit Value at end of period ................................................................... 1.010 1.085 --
Number of units outstanding at end of period (thousands) ...................................... 70,928 25,467 --
AMERICAN ODYSSEY INTERMEDIATE-TERM BOND FUND
Unit Value at beginning of period ............................................................. $ 1.035 $ 1.000 --
Unit Value at end of period ................................................................... .993 1.035 --
Number of units outstanding at end of period (thousands) ...................................... 50,403 19,564 --
AMERICAN ODYSSEY SHORT-TERM BOND FUND
Unit Value at beginning of period ............................................................. $ 1.020 $ 1.000 --
Unit Value at end of period ................................................................... 1.006 1.020 --
Number of units outstanding at end of period (thousands) ...................................... 17,611 8,201 --
* Period covers January 24, 1992 (date portfolio became available under
Fund U) to December 31, 1992, except Social Awareness Stock Portfolio,
which became available under Fund U on May 1, 1992.
</TABLE>
The financial statements of Fund U are contained in the 1994 Annual Report to
Contract Owners.
The consolidated financial statements of The Travelers Insurance Company and
Subsidiaries are contained in the Statement of Additional Information.
<PAGE>
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, 1994 is contained in
the 1994 Annual Report to Contract Owners. The Annual Report is incorporated
by reference into the Statement of Additional Information. The following
information should be read in conjunction with the financial statements
contained in the 1994 Annual Report.
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER UNIT DATA
Total investment income ................................ $ .064 $ .043 $ .046 $ .045 $ .099 $ .161 $ .044
Operating expenses ..................................... **(.041) **.042 **.045 **.045 **.034 .023 .017
------- ------- ------- ------- ------- ------- -------
Net investment income .................................. .023 .001 .001 -- .065 .138 .027
Unit Value at beginning of year ........................ $ 1.776 $ 1.689 $ 1.643 $ 1.391 $ 1.447 $ 1.108 $ 1.000
Net realized and change in unrealized gains (losses).... (.104) 0.086 0.045 0.252 (.121) .201 .081
------- ------- ------- ------- ------- ------- -------
Unit Value at end of year .............................. $ 1.695 $ 1.776 $ 1.689 $ 1.643 $ 1.391 $ 1.447 $ 1.108
------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- -------
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase (decrease) in unit value .................. (.08) .09 .05 .25 (.06) .34 .11
Ratio of operating expenses to average net assets * .... ** 2.82% ** 2.82% ** 2.82% ** 2.82% ** 2.41% 1.57% 1.57%
Ratio of net investment income to average net assets * . 1.58% 0.08% 0.78% 1.33% 1.86% 2.81% 2.55%
Number of units outstanding at end of year (thousands) . 29,692 -- 217,428 -- 5,708 -- 3,829
Portfolio turnover rate ............................... 19% 70% 119% 489% 653% 149% 268%
* 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.
</TABLE>
The consolidated financial statements of The Travelers Insurance Company and
Subsidiaries are contained in the Statement of Additional Information.
<PAGE>
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, 1994 is contained in
the 1994 Annual Report to Contract Owners. The Annual Report is incorporated
by reference into the Statement of Additional Information. The following
information should be read in conjunction with the financial statements
contained in the 1994 Annual Report.
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER UNIT DATA
Total investment income .............................. $ .055 $ .041 $ .054 $ .076 $ .099 $ .102 $ .078 $ .003
Operating expenses ................................... ** .036 ** .037 ** .041 ** .036 ** .030 .017 .016 .001
------- ------- ------- ------- ------- ------- ------- -------
Net investment income ................................ .019 .004 .013 .040 .069 .085 .062 .002
Unit value at beginning of year ...................... 1.275 1.271 1.258 1.218 1.149 1.064 1.002 1.000
Net realized and change in unrealized gains
(losses) **** ....................................... (.002) -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Unit value at end of year ............................ $ 1.292 $ 1.275 $ 1.271 $ 1.258 $ 1.218 $ 1.149 $ 1.064 $ 1.002
------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- -------
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase in unit value ........................... .02 -- .01 .04 .07 .09 .06 --
Ratio of operating expenses to average net assets *** ** 2.82% ** 2.82% ** 2.82% ** 2.82% ** 2.41% 1.57% 1.57% 1.57%
Ratio of net investment income to
average net assets *** ............................. 1.45% .39% 1.12% 3.07% 5.89% 7.63% 6.51% 2.69%
Number of units outstanding at end of year (thousands) 216,713 353,374 173,359 439,527 369,769 360,074 356,969 288,757
* 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.
*** Annualized
**** 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.
</TABLE>
The consolidated financial statements of The Travelers Insurance Company and
Subsidiaries are contained in the Statement of Additional Information.
<PAGE>
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, 1994 is contained in
the 1994 Annual Report to Contract Owners. The Annual Report is incorporated by
reference into the Statement of Additional Information. The following
information should be read in conjunction with the financial statements
contained in the 1994 Annual Report.
<TABLE>
<CAPTION>
1994 1993 1992 1991 + 1990 1989 1988 1987
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER UNIT DATA
Total investment income .............................. $ .036 $ .037 $ .041 $ .044 $ .045 $ .052 $ .008 $ .001
Operating expenses ................................... ** .049 ** .048 ** .043 ** .039 ** .073 .051 .015 .000
------- ------- ------- ------- ------- ------- ------- -------
Net investment income (loss) ......................... (.013) (.011) (.002) .005 (.028) .001 (.007) .001
Unit Value at beginning of year ...................... 1.838 1.624 1.495 1.136 1.189 1.059 1.001 1.000
Net realized and unrealized gains (losses) ........... (.119) .225 .131 .354 (.025) .129 .065 .000
------- ------- ------- ------- ------- ------- ------- -------
Unit Value at end of year ............................ $ 1.706 $ 1.838 $ 1.624 $ 1.495 $ 1.136 $ 1.189 $ 1.059 $ 1.001
------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- -------
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase (decrease) in unit value ................ (.13) .21 (.13) .36 (.05) .13 .06 .00
Ratio of operating expenses to average net assets *... ** 2.80% ** 2.82% ** 2.93% ** 2.99% ** 2.64% 1.95% 1.95% 1.95%
Ratio of net investment income to average net assets * (.72)% (.80)% (.12)% .37% (3.73)% .91% (.88)% 4.90%
Number of units outstanding at end of year (thousands) 25,109 43,059 20,225 19,565 5,585 0 0 841
Portfolio turnover rate .............................. 142% 71% 269% 261% 0% 77% 127% 0
* 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.
</TABLE>
The consolidated financial statements of The Travelers Insurance Company and
Subsidiaries are contained in the Statement of Additional Information.
<PAGE>
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, 1994 is contained in
the 1994 Annual Report to Contract Owners. The Annual Report is incorporated by
reference into the Statement of Additional Information. The following
information should be read in conjunction with the financial statements
contained in the 1994 Annual Report.
<TABLE>
<CAPTION>
1994 1993 1992 1991 +1990 1989 1988 1987
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER UNIT DATA
Total investment income ........................ $ .007 $ .054 $ .051 $ .052 $ .072 $ .147 $ .141 $ .001
Operating expenses ............................. ** .006 ** .036 ** .032 ** .031 ** .018 .023 .022 .001
------- ------- ------- ------- ------- ------- ------- -------
Net investment income .......................... .001 .018 .019 .021 .054 .124 .119 .000
Unit Value at beginning of year................. 1.234 1.132 1.087 .994 1.036 1.114 1.000 1.000
Net realized and change in unrealized gains
(losses) ..................................... (.020) .084 .026 .072 (.096) (.202) (.005) --
------- ------- ------- ------- ------- ------- ------- -------
Unit Value at end of year ...................... $ 1.215 $ 1.234 $ 1.132 $ 1.087 $ .994 $ 1.036 $ 1.114 $ 1.000
------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- -------
SIGNIFICANT RATIOS AND ADDITIONAL DATA
Net increase (decrease) in unit value .......... (.02) .10 .05 .09 (.04) (.08) .11 .00
Ratio of operating expenses to average net
assets * ..................................... ** 3.00% ** 3.00% ** 2.99% ** 3.00% ** 2.58% 2.02% 2.04% 1.78%
Ratio of net investment income to average
net assets * ................................. 1.02% 1.48% 1.71% 3.07% 3.88% 11.15% 11.12% (.95)
Number of units outstanding at end of year
(thousands) .................................. -- 20,207 21,868 19,521 14,115 660 830 625
Portfolio turnover rate ........................ -- 190% 505% 627% 370% 10% 26% 0%
* 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.
</TABLE>
The consolidated financial statements of The Travelers Insurance Company
and Subsidiaries are contained in the Statement of Additional Information.
<PAGE>
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. 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
contract described in this Prospectus meets the definition of a
separate account under the federal securities laws, and will comply
with the provisions of the Investment Company Act of 1940 (the
"1940 Act"), as amended. Additionally, the operations of each of
the Separate Accounts are subject to the provisions of Section 38a-
433 of the Connecticut General Statutes which authorizes the
Connecticut Insurance Commissioner to adopt regulations under it.
Section 38a-433 contains no restrictions on investments of the
Separate Accounts, and the Commissioner has adopted no regulations
under the Section that affect the Separate Accounts.
There are two different types of Separate Accounts which serve as
the funding vehicles for the Variable Annuity contracts described
in this Prospectus. The first type, Fund U, is a unit investment
trust registered with the Securities and Exchange Commission ("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 (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 these 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 set forth below. Neither the
investment objectives nor the fundamental investment policies of a
Separate Account can be changed without a vote of a majority of the
outstanding voting securities of the Separate Account, as defined
in the 1940 Act.
Each of the Separate Accounts was established as follows: 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.
GENERAL
Under Connecticut law, the assets of the Separate Accounts will be
held for the exclusive benefit of the owners of, and the persons
entitled to payment under, the Variable Annuity contracts offered
by this Prospectus and under all other contracts which provide for
accumulated values or dollar amount payments to reflect investment
results of the Separate Accounts. 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 are no longer
possible, 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 Securities and Exchange Commission,
to the extent required by the 1940 Act, or other applicable law.
The Company may also add other available investment alternatives
under the Contract.
<PAGE>
THE TRAVELERS FUND U FOR VARIABLE ANNUITIES
- ------------------------------------------------------------------
Fund U currently invests in the following Underlying Funds.
Purchase Payments applied to Fund U will be invested in the
Underlying Funds at net asset value in accordance with the
selection made by the Owner. Owners may change their selection
without fee, penalty or charge, except those which may be assessed
directly by the Underlying Funds. 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.
THE 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. Please read
carefully the complete risk disclosure in the Trust's prospectus
before investing.
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.
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 investment 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 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 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.
<PAGE>
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. Please read
carefully the complete risk disclosure in the Portfolio's
prospectus before investing.
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 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.
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.
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.
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.
<PAGE>
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. Please read carefully the complete risk
disclosure in the Portfolio's prospectus before investing.
G.T. GLOBAL STRATEGIC INCOME PORTFOLIO. The Strategic Income
Portfolio's investment objective is primarily to seek high current
income and secondarily to seek capital appreciation. The Portfolio
allocates its assets among debt securities of issuers in the United
States, developed foreign countries, and emerging markets. Please
read carefully the complete risk disclosure in the Portfolio's
prospectus before investing.
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. Please read carefully the
complete risk disclosure in the Portfolio's prospectus before
investing.
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. Please
read carefully the complete risk disclosure in the Portfolio's
prospectus before investing.
* Funds available for use with an asset allocation program, as
described below.
<PAGE>
UNDERLYING FUND INVESTMENT ADVISERS
The Underlying Funds receive investment management and advisory
services from the following investment professionals:
<TABLE>
<CAPTION>
FUND INVESTMENT ADVISER SUB-ADVISER
<S> <C>
Capital Appreciation Fund The Travelers Investment Management
Company (TIMCO) Janus Capital Corporation
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, Inc. Bank of Ireland Asset Management (U.S.)
Limited
American Odyssey Emerging
Opportunities Fund American Odyssey Funds Management, Inc. Wilke/Thompson Capital Management, Inc.
American Odyssey Core Equity Fund American Odyssey Funds Management, Inc. Equinox Capital Management, Inc.
American Odyssey Long-Term
Bond Fund American Odyssey Funds Management, Inc. Western Asset Management Company and
WLO Global Management
American Odyssey Intermediate-
Term Bond Fund American Odyssey Funds Management, Inc. TAMIC
American Odyssey Short-Term
Bond Fund American Odyssey Funds Management, Inc. Smith Graham & Co. Asset Managers, L.P.
Smith Barney Income and Growth Portfolio Smith Barney Mutual Funds Management Inc.
Alliance Growth Portfolio Smith Barney Mutual Funds Management Inc. Alliance Capital Management L.P.
Smith Barney International Equity Portfolio Smith Barney Mutual Funds Management Inc.
Putnam Diversified Income Portfolio Smith Barney Mutual Funds Management Inc. Putnam Investment Management, Inc.
G.T. Global Strategic Income Portfolio Smith Barney Mutual Funds Management Inc. G.T. Capital Management, Inc.
Smith Barney High Income Portfolio Smith Barney Mutual Funds Management Inc.
MFS Total Return Portfolio Smith Barney Mutual Funds Management Inc. Massachusetts Financial Services Company
</TABLE>
<PAGE>
ASSET ALLOCATION ADVICE
Some Contract Owners have elected 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 sub-adviser 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.
GENERAL
All investment income and other distributions of Fund U are
reinvested in fund shares at net asset value. The funds are
required to redeem fund shares at net asset value and to make
payment within seven days. Fund shares for the Underlying Funds
listed above are currently sold to Fund U in connection with
variable annuity contracts issued by the Company; additionally,
some of the Underlying Fund shares may also be sold to other
separate accounts in connection with variable annuity and variable
life insurance contracts issued by the Company, its affiliates or
other insurance companies. Shares of the Underlying Funds are not
sold to the general public. More detailed information may be found
in the current prospectuses for the Underlying Funds listed above;
these prospectuses are included with and must accompany this
Prospectus. Please read them carefully before investing.
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES (ACCOUNT GIS)
- ------------------------------------------------------------------
INVESTMENT OBJECTIVE
The basic investment objective of Account GIS is the selection of
investments from the point of view of an investor concerned
primarily with long-term accumulation of principal through capital
appreciation and retention of net investment income. This
principal objective does not preclude the realization of short-term
gains when conditions would suggest the long-term goal is
accomplished by such short-term transactions. 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, 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 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 five percent (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, 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 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
<PAGE>
involving futures contracts will not impact more than thirty
percent (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 twenty-five
percent (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 ten percent
(10%) of the investment portfolio.
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 the selection of
investments from the point of view of an investor concerned
primarily with current income, moderate capital volatility and
total return.
It is contemplated that the assets of Account QB will be 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
<PAGE>
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
participations based on revenues, sales or profits. It is
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. The investments of Account QB will not be concentrated
in any one industry; that is, no more than twenty-five percent
(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 to the extent that this action is considered
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
salability are anticipated with regard to the investments of
Account QB.
Account QB may from time to time 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.
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.
The commitment to purchase when-issued securities may 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. 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 Investment Company Act of 1940 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 (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 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 five percent (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.
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 QB 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.
<PAGE>
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 as
determined in good faith by the Board of Managers. 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. While there are many kinds of short-term securities
used by the various money market funds, 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. 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
<PAGE>
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 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.
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.
<PAGE>
Return to Contract Owners 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 Investment
Company Act of 1940, 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
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 the selection of
investments from the point of view of an investor concerned
primarily with long-term accumulation of principal through capital
appreciation and retention of net investment income. This
principal objective does not preclude the realization of short-term
gains when conditions would suggest the long-term goal is
accomplished by such short-term transactions. 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.
<PAGE>
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 five percent (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 employed for speculative purposes. When a futures contract is
purchased, Account TGIS 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 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. The yield, if any, 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. In addition, there are risks inherent in Account TGIS
as an investment alternative used by Market Timing Services. (See
"Market Timing Risks," page 34.)
FUNDAMENTAL INVESTMENT POLICIES
The fundamental investment policies of Account TGIS are the same as
Account GIS. (See "Account GIS -- Fundamental Investment Policies,"
page 22.)
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.
<PAGE>
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 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
<PAGE>
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 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.
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 to Contract Owners 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 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.
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.
THE TRAVELERS TIMED AGGRESSIVE STOCK ACCOUNT
FOR VARIABLE ANNUITIES (ACCOUNT TAS)
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INVESTMENT OBJECTIVE
The investment objective of Account TAS is to provide shareholders
with growth of capital by investing primarily in a broadly
diversified portfolio of common stocks.
In selecting investments for the portfolio, TIMCO employs
quantitative analysis to identify 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.
<PAGE>
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 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 five percent (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,
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. At no time will Account TAS's
transactions in such futures be employed 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
<PAGE>
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 34.)
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.
THE TRAVELERS TIMED BOND ACCOUNT
FOR VARIABLE ANNUITIES (ACCOUNT TB)
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INVESTMENT OBJECTIVE
The investment objective of Account TB is the selection of
investments from the point of view of an investor concerned
primarily with highest credit quality, current income and total
return. To achieve this objective, Account TB invests primarily in
direct obligations of the United States, in obligations of its
instrumentalities supported by its full faith and credit, 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 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.
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.
<PAGE>
The commitment to purchase when-issued securities 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. 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 Investment Company Act of 1940 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 (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 five percent (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.
<PAGE>
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, 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 34.)
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.
MARKET TIMING SERVICES
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Accounts TGIS, TSB, TAS and TB are investment alternatives ("Market
Timed Accounts") available to Contract Owners who have entered into
market timing services agreements ("market timing agreements") with
select registered investment advisers which provide market timing
services ("registered investment advisers"). These market timing
agreements permit the registered investment advisers to act on
behalf of the Contract Owner 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 may transfer account values from any of the Market
Timed Accounts to any of the other investment alternatives
available under the Contract; however, if a Contract Owner in a
Market Timed Account transfers all of his current and future
account values from the Market Timed Account 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 the Contract Owner.
Partial withdrawals or surrenders from the Market Timed Accounts by
Contract Owners who have entered into market timing agreements do
not affect the agreement. Such partial withdrawals or surrenders
leave the market timing agreements intact.
Copeland Financial Services, Inc. ("Copeland"), a registered
investment adviser and an affiliate of the Company, provides market
timing services to Contract Owners in the Market Timed Accounts for
a fee of 1.25% of the current value of the assets subject to
timing. Copeland also charges a $30 market timing application fee.
If a Contract Owner who has terminated his 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, TESI and Copeland obtained an
exemptive order from the Securities and Exchange Commission on
February 7, 1990 ("asset charge payment method"). Pursuant to the
asset charge payment method, the market timing agreements are
between Contract Owners and Copeland; however, the
<PAGE>
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 Contract
Owners who enter into market timing agreements. Contract Owners 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 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 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 46.)
MARKET TIMING RISKS
Participants who invest in 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, Contract Owners who invest in 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 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.
Participants 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,
Contract Owners 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 Contract Owners 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,
Participants constituting the other 10% of the Market Timed Account
may bear a disproportionate amount of the expense for the transfer.
THE VARIABLE ANNUITY CONTRACT
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The group Variable Annuity contract described in this Prospectus is
both an insurance product and a security. As an insurance product,
the Contract is subject to the insurance laws and regulations of
each state. The underlying product is an annuity where premiums
are paid to the Company and credited to the Contract to accumulate
until 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.
GENERAL BENEFIT DESCRIPTION
Under the Automatic Option, 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 "Automatic Option," page 43.)
The Owner or the Participant, as provided in the plan, may choose
instead a number of alternative arrangements for benefit payments.
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.
<PAGE>
PURCHASE PAYMENTS
Purchase Payments under tax-benefited retirement plans (except
IRAs), that is, 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 non tax-benefited 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. Each Purchase Payment is payable at the
Company's Home Office.
APPLICATION OF PURCHASE PAYMENTS
Each Purchase Payment will be applied by the Company to provide
Accumulation Units to the credit of 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 in the mail at the Company's Home Office. If the
application is not in good order, the Company will attempt to get
it in good order 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 and that 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. All Purchase Payments
will initially be applied to the Owner's Account. Distributions to
Individual Accounts will be allowed in accordance with the terms of
"Distribution from One Account to Another Account," page 45.
RIGHT TO RETURN
For contracts issued in the state of New York, during the twenty
days following delivery of a Group Variable Annuity certificate to
the Participant, 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 contract, the
Company will refund to the Participant the sum of all Purchase
Payments made under the contract, and will make the Separate
Accounts whole if the accumulation value has declined.
NUMBER OF ACCUMULATION UNITS
The number of Accumulation Units to be credited to an Owner's
Account or an Individual Account once a Purchase Payment has been
received by the Participant 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 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.
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);
<PAGE>
(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.
FEDERAL AND STATE INCOME TAX WITHHOLDING
The federal tax law requires income tax withholding on
distributions from pension plans and annuity contracts. The Owner,
Participant or beneficiary generally has a right to elect not to
have withholding apply. Some states also require withholding from
pension and annuity payments unless the Owner, Participant or
beneficiary elects not to have withholding apply. (For further
information on federal withholding, see "Federal Income Tax
Withholding," page 49.)
CHARGES AND DEDUCTIONS
- ------------------------------------------------------------------
CONTINGENT DEFERRED SALES CHARGE
There are no sales charges collected 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.
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 dies;
- -- the Participant becomes disabled (as defined by the Internal
Revenue Service) subsequent to purchase of the Contract;
- -- the Participant 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;
- -- the Participant under an IRA plan reaches age 70 1/2,
provided the Certificate has been in effect five years or more;
- -- the Participant under a qualified pension or profit-sharing plan
(including a 401(k) plan) retires at or after age 59 1/2,
provided the Certificate has been in effect five years or more;
or if refunds are made to satisfy the anti-discrimination test;
(For Participants under Certificates issued before May 1, 1992,
the Contingent Deferred Sales Charge will also be waived if the
Participant retires at normal retirement age (as defined by the
plan), provided the Certificate 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 IRS
rules;
- -- 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
- -- 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.
<PAGE>
There is a 10% free withdrawal allowance available for partial
withdrawals taken during any Certificate Year after the first.
Such withdrawals will be free of charge until the free withdrawal
amount is exceeded. Participants under IRA plans with Certificates
issued prior to May 1, 1994, are entitled to a 20% free withdrawal
allowance after the first Certificate 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 47.)
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.
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 on the second to last Friday of 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 cancelling 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.
REDUCTION OR ELIMINATION OF CONTRACT CHARGES
The amount of the Contingent Deferred Sales 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 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).
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 or the administrative charge be permitted where such
reduction or elimination will be unfairly discriminatory to any
person.
INSURANCE 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.
<PAGE>
The Company estimates that approximately 50% of the insurance
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 risks assumed in making mortality
guarantees of several types. For example, the annuity rates
guaranteed in the Contract assure an Annuitant that his or her
Annuity Payments will not be adversely affected by the actual
mortality experience of other Travelers Annuitants. Also, no
Contingent Deferred Sales Charge will be assessed if the Contract
Value is paid as a death benefit on the death of the Annuitant.
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 the insurance charge.
INVESTMENT ADVISORY FEES
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 Account. TIMCO receives advisory
fees in amounts equivalent to 0.45%, on an annual basis, of the
average daily net assets of Account GIS, and to 0.3233%, on an
annual basis, of the average daily net assets of TGIS and TSB. The
annual advisory fees paid to TIMCO for advisory services provided
to Account TAS are as follows:
<TABLE>
<CAPTION>
Aggregate Net Asset
Annual Management Fee Value of the Account
---------------------- --------------------
<C> <S> <C>
0.50% of the first $ 20,000,000, plus
0.25% of the next $ 80,000,000, plus
0.20% of the next $200,000,000, plus
0.15% of amounts over $300,000,000.
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. TAMIC receives advisory fees in amounts equivalent to 0.3233%,
on an annual basis, of the average daily net assets of Accounts QB and MM.
The annual advisory fees paid to TAMIC for advisory services provided to
Account TB are as follows:
Aggregate Net Asset
Annual Management Fee Value of the Account
--------------------- --------------------
<C> <S> <C>
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.
</TABLE>
MARKET TIMING SERVICES FEES
In connection with the market timing services provided to
Participants in Accounts TGIS, TSB, TAS and TB, Copeland Financial
Services, Inc. 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 33.)
PERFORMANCE INFORMATION
- ------------------------------------------------------------------
From time to time, the Company may advertise several types of
historical performance for the Separate Accounts and the Sub-
Accounts 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
<PAGE>
calculated similarly but includes the effect of
assumed compounding calculated under rules prescribed by the
Securities and Exchange Commission. 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 Securities and Exchange
Commission, 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 for a period covering the time during which an
Underlying Fund held in the Sub-Account has been in existence if
the Underlying Fund has not been in existence for one of the
prescribed periods. 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. "Non-
standardized total return" will be calculated in a similar manner
and for the same time periods as the standardized average annual
total returns, except non-standardized total returns will 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 if reflected in these
calculations.
For Sub-Accounts that invest in Underlying Funds that were in
existence prior to the date the Underlying Fund 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 held as
Sub-Accounts 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 (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.
Performance data for Accounts TGIS, TSB, TAS and TB may not always
be useful in evaluating the performance of these Accounts because
Accounts TGIS, TSB, TAS and TB may experience wide fluctuations in
assets over a given time period due to their exclusive availability to
Participants who have entered into third party market timing
services agreements. In addition, performance data for Accounts
TGIS, TSB, TAS and TB alone will not generally be useful for the
purpose of evaluating the performance of a market timing strategy
which utilizes these Accounts.
The yield and total return quotations are based upon historical
earnings and are not necessarily representative of future
performance. A Contract Owner's 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.
MANAGEMENT AND INVESTMENT ADVISORY SERVICES
- ------------------------------------------------------------------
The investments and administration of the Separate Accounts are
under the direction of the Board of Managers. Subject to the
authority of the Board of Managers, TIMCO furnishes investment
management and advisory services to Accounts GIS, TGIS, TSB and
TAS, TAMIC and furnishes such services to Accounts QB, MM and TB.
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. TIMCO also acts as investment adviser or sub-adviser for other
investment companies used to fund variable products, including the
Capital Appreciation Fund and Managed Assets Trust; as well as for
individual and pooled pension and profit-sharing accounts, and for
affiliated companies of The Travelers Insurance Company.
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. TAMIC also acts as investment adviser or
sub-adviser for other investment companies
<PAGE>
used to fund variable products, including High Yield Bond Trust,
Managed Assets Trust, Cash Income Trust and the U.S. Government
Securities Portfolio of The Travelers Series Trust; as well as for
individual and pooled pension and profit-sharing accounts, and for
domestic and offshore insurance companies affiliated with The
Travelers Insurance Company.
TRANSFERS
- ------------------------------------------------------------------
Before Annuity or Income Payments begin, the Owner may transfer all
or part of the Contract Value from one available investment
alternative to another without fee, penalty or charge. There are
currently no restrictions on frequency of transfers, but the
Company reserves the right to limit transfers to no more than one
in any six month period. However, any such restrictions are
inapplicable to transfers by third party market timing services
among timed Investment Alternatives.
Some of the investment alternatives available under the Contract
have higher investment advisory fees than others; therefore, a
transfer from one investment alternative to another could result in
a Participant's investment becoming subject to higher or lower
investment advisory fees. (See "Investment Advisory Fees,"
page 38.) In addition, the market timing fee is deducted as an
asset charge from Accounts TGIS, TSB, TAS and TB. Participants who
invest in those Separate Accounts without a market timing services
agreement will bear an unnecessary investment risk. (See "Market
Timing Services," page 33.) A transfer between Investment
Alternatives has no other effect on the amount or timing of any of
the other charges under the Contract. For purposes of computing
the applicability of the Contingent Deferred Sales Charge, the date
of the Purchase Payments made pursuant to the Contract will not be
affected by transfers among Investment Alternatives.
If a Participant in a market timed Investment Alternative transfers
all of his current and future account values from the market timed
Investment Alternative to a non-timed Investment Alternative, he
has terminated his market timing services agreement. If this
occurs, the market timing service no longer has the right to
transfer funds on behalf of the Participant. Partial withdrawals
or surrenders from an Investment Alternative for Participants who
have entered into market timing services agreements do not affect
the agreements.
DOLLAR-COST AVERAGING (AUTOMATED TRANSFERS)
By written request, the Participant may elect automated transfers
of Contract Values on a monthly or quarterly basis from specific
Sub-Accounts to other Sub-Accounts. The Participant may stop or
change your 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 Sub-
Accounts. Certain minimums apply to amounts transferred and/or to
enroll in the program.
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,
Participants should consider their financial ability to continue
purchases through periods of low price levels.
SURRENDERS AND REDEMPTIONS
- ------------------------------------------------------------------
Before the due date of a Participant's first Annuity Payment, the
Company will pay all or any portion of that Participant's Interest
to the Owner or Participant, as provided in the plan. The Owner or
Participant must submit a written request specifying 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 (One Tower Square, Hartford, Connecticut 06183). The
Owner's 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
the mail, but it is its intent to pay as soon as possible.
Requests for surrender that are not in good order will not be
processed until the deficiencies are corrected. The Company will
contact the Contract Owner to advise of the reason for the delay
and what is needed to act on the surrender request. Cash Value
equal to the amount the Contract Owner wishes to redeem will be
transferred to Account MM from the Investment Alternative(s) from
which
<PAGE>
surrender is to be made. It will remain in Account MM until the
Company receives the information required to act on the surrender
request.
The Cash Surrender Value of an Owner's Account or Individual
Account on any date will be equal to the Cash Value of the Contract
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 at the time of surrender.
For Participants 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
withdrawl 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 47.)
SYSTEMATIC WITHDRAWALS
You may elect to take monthly, quarterly, semiannual or annual
systematic withdrawals of a specified dollar amount during the
prior twelve months. Any applicable premium taxes will be
deducted. To elect this option, you must complete an election form
provided by the Company. You may stop the systematic withdrawals
at any time, provided the Company receives at least 30 days'
written notice.
DEATH BENEFIT
- ------------------------------------------------------------------
If individual certificates have been issued under the Contract to
Participants, and if a Participant's Interest in the Contract has
been individually allocated by the Owner, a death benefit will be
payable as follows.
If the Participant dies on or after age 75 and before Annuity or
Income Payments begin, the Company will pay to the beneficiary the
Participant's Interest as of the date it receives proof of death at
its Home Office, less any premium tax incurred. If the Participant
dies before age 75 and before Annuity or Income Payments begin,
after receipt of due proof of the Participant's death, the Company
will pay the greatest of (1), (2) or (3) below, except for
contracts issued in the state of Washington, where the Company will
pay the greater of (1) or (2) below.
1. the Participant's Interest, less any premium tax incurred or
outstanding cash loans;
2. the total Purchase Payments allocated to that Participant,
less any prior surrenders or cash loans; or
3. the Participant's Interest on the fifth Certificate Date
anniversary 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 the 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.
THE ANNUITY PERIOD
- ------------------------------------------------------------------
MATURITY DATE
Annuity Payments for a particular Participant will ordinarily begin
on that Participant's Annuity Commencement Date as stated in that
Participant's Certificate. However, a later Annuity Commencement
Date may be elected. The Annuity Commencement Date must be before
the Participant'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 Participant
reaches the age of 70 1/2. A number of payout options are
available (see "Payout Options," page 43). 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 Year.
<PAGE>
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 state
of New Jersey. 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 "Automatic Option," page 43) 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 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.
<PAGE>
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 option must be made in writing in
a form satisfactory to the Company. Any election made during the
lifetime of the Participant must be made by the Owner or the
Participant, as provided in the plan. The terms of options elected
by some Participants or beneficiaries 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, there is
no election in effect for that Participant, election of an option
must be made by the beneficiary entitled to any death benefit
payable in one sum under the Contract. The minimum amount that can
be placed under an Annuity or Income Option will be $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
Subject to the conditions described in "Election of Options" above,
and subject to the plan, all or any part of a Participant's
Interest otherwise payable in one sum to the Owner or that
Participant on that Participant's Annuity Commencement Date or
prior Cash Surrender of an Individual Account, or amounts payable
in one sum to the beneficiary on death of that Participant, may be
paid under one or more of the following Annuity Options. Annuity
Options may be elected on a monthly, quarterly, semiannual or
annual basis.
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. This option offers the maximum periodic payment, since
there is no assurance of a minimum number of payments or provision
for a death benefit for beneficiaries. (It would be possible under
this option to receive only one Annuity Payment if the Participant
died before the due date of the second Annuity Payment, only two if
the Participant died before the third Annuity Payment, etc.)
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 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. (It would be possible under
this option to receive only one Annuity Payment if both
Participants died before the due date of the second Annuity
Payment, only two if they died before the third Annuity Payment,
etc.)
<PAGE>
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
Instead of the Annuity Options described above, and subject to the
conditions described under "Election of Options" and the plan, all
or any part of a Participant's Interest otherwise payable in one
sum to the Owner or that Participant on the Participant's Annuity
Commencement Date or prior Cash Surrender of an Individual Account,
or amounts payable in one sum to the beneficiary on the death of
Participant, may be paid under one or more of the Income Options
described below. Income Options may be elected on a monthly,
quarterly, semiannual or annual basis.
OPTION 1--PAYMENTS OF A FIXED AMOUNT: The Company will make equal
payments of the amount elected until the Cash 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 46.) 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 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 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, a Contract Owner 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 CONTRACT PROVISIONS
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TERMINATION
No Purchase Payments after the first are required to keep the
contract in effect. However, if the Cash Value in a Participant's
Individual Account is less than $500 and no premium has been
applied to the Participant's Individual Account for at least three
years, the Company reserves the right to terminate the
Participant's Individual Account and move the Cash Value of that
Participant's Individual Account to the Owner's Account. If the
plan does not allow for
<PAGE>
transfer to the Owner's Account, the Company will pay the Cash
Value, adjusted for any applicable premium tax, to the Owner, or to
that Participant at the direction of the Owner.
Additionally, the Company reserves the right to terminate the
contract on any Valuation Date if there is no Cash Value in any
Participant's Individual Account and the Cash Value of the Owner's
Account, if any, is less than $500 and no premium has been paid for
at least three years. If the contract is terminated, the Company
will pay to the Owner the Cash Value of the Owner's Account, if any
(without deduction of any Contingent Deferred Sales Charge, but
after deduction of any applicable administrative charge or premium
tax).
Termination will not occur until 31 days after the Company has
mailed notice of termination to the Owner or the Participant, as
provided in the plan, at the last known address and to any assignee
of record.
BENEFIT IN THE EVENT OF TERMINATION OF A PARTICIPANT, THE PLAN OR
THE CONTRACT
In the event that, prior to the Annuity Commencement Date, the
Participant terminates participation in the plan, the plan is
terminated, or the contract is terminated, the Owner or that
Participant, as provided in the plan with respect to that
Participant's Interest, may elect:
(a) if that Participant is at least 50 years of age, to have that
Participant's Interest applied to provide an Annuity or Income
Payment;
(b) if the contract is continued, to have that Participant's
Interest applied to continue as a paid-up deferred annuity for
that Participant;
(c) to have the Owner or that Participant, as provided in the
plan, receive that Participant's Interest in cash; or
(d) if that Participant becomes a Participant under another group
contract of the same type which is in force with the Company,
to transfer that Participant's Interest to that group
contract.
If the 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. If the contract is terminated, the Owner will
receive the Cash Value of the Owner's Account.
AUTOMATIC BENEFIT -- In the event of termination, unless otherwise
provided in the plan, a Participant's Interest will (1) if the
contract is continued, be applied to continue as a paid-up deferred
annuity in accordance with option (b), or (2) if the contract is
terminated, be paid in cash to the Owner or that Participant as
provided in the plan, in accordance with option (c).
ANNUITY PAYMENTS -- Termination of this contract or the plan will
not affect payments being made under any Annuity Option which has
commenced prior to the date of termination.
DISTRIBUTION FROM ONE ACCOUNT TO ANOTHER ACCOUNT
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.
CHANGE OF CONTRACT
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.
<PAGE>
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," page 44), 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 Owner or Participant may not assign his rights under the
contract.
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 Securities and Exchange Commission 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.
FEDERAL TAX CONSIDERATIONS
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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 Treasury 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
<PAGE>
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 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.
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.
<PAGE>
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 income when distributed. Distributions must commence by April
1st of the calendar year after the close of 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 the
contract if the Owner of a Section 403(b) plan contract or certain
other tax-benefited contracts 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.
<PAGE>
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.
1. ELIGIBLE ROLLOVER DISTRIBUTION FROM SECTION 403(B) PLANS OR
ARRANGEMENTS OR FROM QUALIFIED PENSION AND PROFIT-SHARING
PLANS
There is an unwaivable 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,
1994, a recipient receiving periodic payments (e.g., monthly or
annual payments under an Annuity Option) which total $13,700 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 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-benefited plan loses
its exempt status, employees could lose some of the tax benefits
described. For further information, a qualified tax adviser should
be consulted.
<PAGE>
VOTING RIGHTS
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GENERAL
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 Participant 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, a Participant's voting rights will decline as the
reserve for the Contract declines. Accounts GIS, QB, MM and Fund
U are also used to fund certain other Variable Annuity Contracts;
votes attributable to such other annuities are computed in an
analogous manner.
During the accumulation period, Participants covered by a Contract
issued in connection with an H.R.10 plan will have the right to
instruct the Owner with respect to all votes attributable to the
Contract, and Participants covered by a contract issued in
connection with a governmental, tax exempt or corporate pension
plan will have the right to instruct the Owner with respect to
votes attributable to payments made by the Participant, and with
respect to any additional votes which are authorized by the terms
of the plan, if any. All other votes entitled to be cast during
the accumulation period may be cast by the Owner in its sole
discretion. During the annuity period, every Participant will have
the right to instruct the Owner with respect to all votes
attributable to the amount of assets established in the account to
meet the annuity obligations related to such Participant. Each
Participant having the right to instruct an Owner with respect to
any votes will receive a statement of the number of votes,
including fractional votes, attributable to his or her contract,
and stating his or her right to instruct the Owner how such votes
are to be cast.
Each Owner will cast the votes with respect to which instructions
from Participants have been received in accordance with such
instructions; and votes for which Participants were 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.
Upon the death of the Participant, all voting rights will vest in
the beneficiary of the Contract.
FUND U
In accordance with its view of present applicable law, the Company
will vote shares of mutual funds held in Fund U at regular and
special meetings of the shareholders of the mutual 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 Investment
Company Act of 1940 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 mutual fund(s) in which he has an
interest, proxy material and a form with which to give such
instructions with respect to the proportion of the mutual 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 Investment Company Act of 1940 require the Owners' approval;
and (vi) any other business which may properly come before the
meeting.
The number of votes which each 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.
<PAGE>
Votes for which Participants were 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
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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 Travelers Equities
Sales, Inc. ("TESI"). TESI, whose principal business address is
One Tower Square, Hartford, Connecticut, serves as the principal
underwriter for the variable annuity contracts described herein.
TESI is a registered broker-dealer with the Securities and Exchange
Commission under the Securities Exchange Act of 1934 and is a member
of the National Association of Securities Dealers, Inc. ("NASD").
TESI 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 TESI are parties. No amounts have been
or will be retained by TESI for acting as principal underwriter for
the Contracts.
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.
<PAGE>
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 Alternatives
The Travelers Fund U for Variable Annuities
Investments of Fund U
Available Mutual Funds
Investment Objectives and Policies
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 Assets
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
Principal Underwriter
Securities Custodian
Independent Accountants
Financial Statements -- The Travelers Insurance Company
- ----------------------------------------------------------------
COPIES OF THE STATEMENT OF ADDITIONAL INFORMATION DATED MAY 1, 1995
(FORM NO. L-11165S), AND THE ANNUAL REPORTS DATED DECEMBER 31, 1994
WHICH ARE INCORPORATED BY REFERENCE THEREIN (INCLUDED IN FORM NO.
VG-137), ARE AVAILABLE WITHOUT CHARGE. TO REQUEST A COPY, PLEASE
CLIP THIS COUPON ON THE DOTTED LINE ABOVE, ENTER YOUR NAME AND
ADDRESS IN THE SPACES PROVIDED BELOW, AND MAIL TO: THE TRAVELERS
INSURANCE COMPANY, ANNUITY SERVICES - 5 SHS ONE TOWER SQUARE,
HARTFORD, CONNECTICUT 06183-5030.
Name:____________________________________________________________
Address:_________________________________________________________
_________________________________________________________________
<PAGE>
PART B
<PAGE>
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
INDIVIDUAL VARIABLE ANNUITY CONTRACTS
ISSUED BY
THE TRAVELERS INSURANCE COMPANY
May 1, 1995
This Statement of Additional Information is not a prospectus but
relates to, and should be read in conjunction with, the Prospectus
dated May 1, 1995. A copy of the Prospectus may be obtained by
writing to The Travelers Insurance Company (the "Company"), Annuity
Services--5 SHS, One Tower Square, Hartford, Connecticut 06183-
5030, or by calling 1-800-842-0125.
TABLE OF CONTENTS
PAGE
DESCRIPTION OF THE TRAVELERS AND THE SEPARATE ACCOUNTS 1
The Insurance Company 1
The Separate Accounts 1
INVESTMENT ALTERNATIVES 1
THE TRAVELERS FUND U FOR VARIABLE ANNUITIES 4
Investments of Fund U 4
Available Mutual Funds 4
INVESTMENT OBJECTIVES AND POLICIES 4
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES 4
THE TRAVELERS TIMED GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES 4
THE TRAVELERS TIMED AGGRESSIVE STOCK ACCOUNT FOR VARIABLE ANNUITIES 6
THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES 7
THE TRAVELERS TIMED BOND ACCOUNT FOR VARIABLE ANNUITIES 9
THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES 10
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT FOR VARIABLE ANNUITIES 11
DESCRIPTION OF CERTAIN TYPES OF INVESTMENTS AND INVESTMENT
TECHNIQUES AVAILABLE TO THE SEPARATE ACCOUNTS 12
WRITING COVERED CALL OPTIONS 12
BUYING PUT AND CALL OPTIONS 13
FUTURES CONTRACTS 14
MONEY MARKET INSTRUMENTS 16
INVESTMENT MANAGEMENT AND ADVISORY SERVICES 18
Advisory Fees 18
TIMCO 19
<PAGE>
TAMIC 20
VALUATION OF ASSETS 22
PERFORMANCE DATA 22
Yield Quotations of Account MM 22
Average Annual Total Return Quotations of Accounts
GIS, QB, MM, TGIS, TSB, TAS, TB and Fund U 22
THE BOARD OF MANAGERS 26
DISTRIBUTION AND MANAGEMENT SERVICES 27
PRINCIPAL UNDERWRITER 27
SECURITIES CUSTODIAN 28
INDEPENDENT ACCOUNTANTS 28
FINANCIAL STATEMENTS 28
FINANCIAL STATEMENTS - THE TRAVELERS INSURANCE COMPANY F-1
<PAGE>
DESCRIPTION OF THE TRAVELERS 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. It is licensed
to conduct life insurance business in all states of the United
States, the District of Columbia, Puerto Rico, Guam, the U.S. and
British Virgin Islands and the Bahamas. The Company is an indirect
wholly owned subsidiary of Travelers Group Inc. 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 authorizes 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.
There are two different types of Separate Accounts which serve as
the funding vehicles for these variable annuity contracts. The
first type, Fund U, was established on September 2, 1982 and is
registered with the Securities and Exchange Commission as a unit
investment trust under the 1940 Act. Fund U's assets are invested
in the shares of mutual funds. Accounts GIS, QB, MM, TGIS, TSB,
TAS and TB, the second type of Separate Account available under the
variable annuity contracts, are registered with the Securities and
Exchange Commission as diversified, open-end management investment
companies under the 1940 Act. Account GIS was established on
September 22, 1967; Account QB was established on July 29, 1974;
Account MM was established on December 29, 1981; Accounts TGIS and
TSB were established on October 30, 1986; and Accounts TAS and TB
were established on January 2, 1987. The assets of these accounts
are invested directly in securities (such as stocks, bonds or money
market instruments) which are compatible with the stated investment
policies of each of the Separate Accounts.
INVESTMENT ALTERNATIVES
Purchase Payments may be allocated to one or more of the available
Investment Alternatives. The Company may add or remove available
Investment Alternatives as permitted by law. The investment
objectives of each available Investment Alternative are as follows:
ACCOUNT GIS:
The primary objective of Account GIS is long-term accumulation of
principal through capital appreciation and retention of net
investment income. The assets of Account GIS will normally be
invested in a portfolio of common stocks spread over industries and
companies.
ACCOUNT TGIS:
The primary objective of Account TGIS is the same as Account GIS,
except that Contract Owners in Account TGIS have entered into third
party investment advisory contracts with providers of market timing
services.
ACCOUNT QB:
The primary objective of Account QB is the selection of investments
from the point of view of an investor concerned primarily with
current income, moderate capital volatility and total return.
Assets of Account QB will be invested in short-term to
intermediate-term bonds or other debt securities with a market
value-weighted average maturity of five years or less.
ACCOUNT MM:
The primary investment objective of Account MM is preservation of
capital, a high degree of liquidity and the highest possible
current income. Assets of Account MM will be invested primarily in
short-term money market securities.
ACCOUNT TSB:
The primary objective of Account TSB is to generate high current
income with limited price volatility while maintaining a high
degree of liquidity. Additionally, Contract Owners in Account TSB
have entered into third party investment advisory contracts with
providers of market timing services.
<PAGE>
ACCOUNT TAS:
The objective of Account TAS is growth of capital through the use
of common stocks. Assets of Account TAS will be fully invested in
a diversified portfolio consisting primarily of common stocks,
securities convertible into common stocks, and securities having
common stock characteristics. Additionally, Contract Owners in
Account TAS have entered into third party investment advisory
contracts with providers of market timing services.
ACCOUNT TB:
The objective of Account TB is the selection of investments from
the point of view of an investor concerned primarily with credit
quality, current income and total return. Assets of Account TB
will be invested primarily in direct obligations of the United
States, its agencies and instrumentalities. Contract Owners in
Account TB have entered into third party investment advisory
contracts with providers of market timing services.
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 U.S.
stocks, bonds and money market securities.
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 that 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. Contract Owners are advised to
read carefully the complete risk disclosure contained in the
Trust's prospectus before investing.
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 instrumentalities and agencies.
SOCIAL AWARENESS STOCK PORTFOLIO:
The objective of the Social Awareness Stock Portfolio is long-term
capital appreciation and retention of net investment income through
the selection of 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 the provision of military
defense or gambling services.
UTILITIES PORTFOLIO:
The objective of the Utilities Portfolio is to provide current
income. Long-term capital appreciation is a secondary objective.
The Portfolio seeks to achieve its objective by investing in equity
and debt securities of companies in the utility industries.
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 investing in stocks of companies in any
nation, 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 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. Contract Owners are advised to read
the complete risk disclosure contained in the Portfolio's
prospectus before investing.
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.
<PAGE>
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 smaller, 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 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.
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.
AMERICAN ODYSSEY INTERNATIONAL EQUITY FUND:
The objective of the American Odyssey 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 American Odyssey 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 American Odyssey 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 American Odyssey 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 American Odyssey 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 American Odyssey Short-Term Bond Fund is to
seek maximum long-term total return by investing primarily in
investment-grade, short-term debt securities.
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. (Please read carefully the
complete risk disclosure in the Portfolio's prospectus before
investing.)
G.T. GLOBAL STRATEGIC INCOME PORTFOLIO:
The Strategic Income Portfolio's investment objective is primarily
to seek high current income and secondarily to seek capital
appreciation. The Portfolio allocates its assets among debt
securities of issuers in the United States, developed foreign
countries, and emerging markets. (Please read carefully the
complete risk disclosure in the Portfolio's prospectus before
investing.)
<PAGE>
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. (Please
read carefully the complete risk disclosure in the Portfolio's
prospectus before investing.)
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. (Please read carefully the complete risk
disclosure in the Portfolio's prospectus before investing.)
THE TRAVELERS FUND U FOR VARIABLE ANNUITIES
INVESTMENTS OF FUND U
Purchase Payments applied to Fund U will be invested in one or more
of the available mutual funds at net asset value in accordance with
the selection made by the Contract Owner. Contract Owners may
change their selection without fee, penalty or charge. Available
mutual funds may be added or withdrawn as permitted by applicable
law.
AVAILABLE MUTUAL FUNDS
A summary of the investment objectives of the mutual funds
underlying Fund U (i.e., all those listed above, except the 7
Separate Accounts) is provided in "Investment Alternatives,"
beginning on page 1. All investment income and other distributions
of Fund U are reinvested in fund shares at net asset value. The
funds are required to redeem fund shares at net asset value and to
make payment within seven days. Fund shares for the mutual funds
listed above are currently sold to Fund U in connection with the
Company's variable annuity products; additionally, some of the
mutual fund shares may also be sold to other separate accounts of
the Company or its affiliates, or to other insurance companies in
connection with such companies' variable annuity and variable life
insurance products. Fund shares are not sold to the general
public. More detailed information may be found in the current
prospectuses and Statements of Additional Information for the
available mutual funds.
INVESTMENT OBJECTIVES AND POLICIES
The Separate Accounts described below each have different
investment objectives and policies, and each 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 12.
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 OBJECTIVES
The basic investment objective of Accounts GIS and TGIS is the
selection of investments from the point of view of an investor
concerned primarily with long-term accumulation of principal
through capital appreciation and retention of net investment
income. This principal objective does not preclude the realization
of short-term gains when conditions would suggest the long-term
goal is accomplished by such short-term transactions. The assets
of Account GIS will primarily be 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
also 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 generally
would not have a prospect of long-term appreciation.
<PAGE>
Investments in other than equity securities 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 GIS may use exchange-traded financial futures contracts as
a hedge to protect against changes in stock prices. Account GIS
intends to use stock index futures contracts primarily to limit
transaction and borrowing costs, and expects that risk management
transactions involving futures contracts will not impact more than
thirty percent (30%) of Account GIS's assets at any one time.
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 (as described in the Prospectus), and as a hedge to
protect against changes in stock prices or interest rates.
Accounts GIS and TGIS may also write covered call options on
securities which they own, and may also purchase index or
individual equity call options.
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 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 twenty-five percent (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 ten
percent (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
<PAGE>
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.
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, 1992, 1993 and 1994
was 189%, 81% and 103%, respectively. The portfolio turnover rate
for Account TGIS for the years ended December 31, 1992, 1993 and
1994 was 119%, 70% and 19%, respectively.
THE TRAVELERS TIMED AGGRESSIVE STOCK ACCOUNT FOR VARIABLE ANNUITIES
INVESTMENT OBJECTIVE
The investment objective of Account TAS is to provide shareholders
with growth of capital by investing primarily in a broadly
diversified portfolio of common stocks.
In selecting investments for the portfolio, the investment adviser
employs quantitative analysis to identify 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 the change in price of 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.
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 (as described in the Prospectus), and as a hedge to
protect against changes in stock prices or interest rates.
Account TAS may also invest, for defensive purposes, 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.
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");
<PAGE>
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;
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, 1992, 1993 and 1994
was 269%, 71% and 142%, respectively.
THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES
INVESTMENT OBJECTIVE
The basic investment objective of Account QB is the selection of
investments from the point of view of an investor concerned
primarily with current income, moderate capital volatility and
total return.
It is contemplated that the assets of Account QB will be 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 participations based on revenues,
sales or profits. It is 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 flow will be used instead of average
maturity.) Investments in longer term obligations may be made if
the Board of Managers concludes that the investment yields justify
a longer term commitment.
<PAGE>
Account QB may purchase and sell futures contracts on debt
securities ("interest rate futures") to hedge against changes in
interest rates that might otherwise have an adverse effect upon the
value of Account QB's securities.
The portfolio will be actively managed and Account QB may sell
investments prior to maturity to the extent that this action is
considered 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 which Account QB holds. No
problems of salability are anticipated with regard to the
investments of Account QB.
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 as
determined in good faith by the Board of Managers. 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.
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.
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 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 twenty-five percent (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, 1992, 1993 and 1994 was 23%, 24% and 27%, respectively.
<PAGE>
THE TRAVELERS TIMED BOND ACCOUNT FOR VARIABLE ANNUITIES
INVESTMENT OBJECTIVE
The investment objective of Account TB is the selection of
investments from the point of view of an investor concerned
primarily with highest credit quality, current income and total
return. To achieve this objective, Account TB invests primarily in
direct obligations of the United States, in obligations of its
instrumentalities supported by its full faith and credit, 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.
Account TB will use exchange-traded financial futures contracts on
debt securities ("interest rate futures") to facilitate market
timed moves (as described in the Prospectus), and as a hedge to
protect against changes in interest rates.
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);
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
<PAGE>
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, 1992, 1993 and 1994 was 505%, 190% and 0%, respectively.
THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES
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. While there are many kinds of short-term securities
used by the various money market funds, Account MM will restrict
its investment portfolio to only the securities listed below.
The Account's assets will primarily be invested in (1) marketable
obligations issued or guaranteed by the United States Government,
its agencies, authorities or instrumentalities; (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; (3) Commercial Paper rated A-1 by Standard
and Poor's Corporation or Prime-1 by Moody's Investor Services,
Inc.; and (4) repurchase agreements with government securities
dealers recognized by the Federal Reserve Board or with member
banks of the Federal Reserve System involving marketable
obligations of or guaranteed by the United States Government, its
agencies, authorities or instrumentalities. Account MM may also
invest in securities of foreign branches of United States banks,
payable in United States dollars.
The market value of Account MM's investments tend to decrease
during periods of rising interest rates and to increase during
intervals of falling interest rates, with corresponding
fluctuations in their 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 purchase.
Return to Contract Owners is aided both by Account MM's ability to
make investments in large denominations and by their efficiencies
of scale. Also, Account MM seeks 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.
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;
<PAGE>
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. 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 OBJECTIVE
The basic investment objective of Account TSB is to generate high
current income with limited price volatility while maintaining a
high degree of liquidity. Account TSB's assets will be primarily
invested in (1) marketable obligations issued or guaranteed by the
United States Government, its agencies, authorities or
instrumentalities; (2) Certificates of Deposit, Bankers'
Acceptances and other debt securities issued by banks having total
assets of more than $1 billion which are members of the Federal
Deposit Insurance Corporation; (3) Commercial Paper rated A-1 by
Standard and Poor's Corporation or Prime-1 by Moody's Investor
Services, Inc.; (4) short-term notes, bonds, debentures or 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 (5) repurchase
agreements with government securities dealers recognized by the
Federal Reserve Board or with member banks of the Federal Reserve
System involving marketable obligations of or guaranteed by the
United States Government, its agencies, authorities or
instrumentalities. Account TSB may also invest in securities of
foreign branches of United States banks, payable in United States
dollars, and in Euro Certificates of Deposit.
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 their 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 purchase.
Account TSB seeks 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
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.
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:
<PAGE>
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;
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. The portfolio turnover rate
for the year ended December 31, 1994 was 0%.
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.
<PAGE>
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 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.
<PAGE>
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.
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
<PAGE>
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 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.
<PAGE>
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.
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
<PAGE>
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.
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
<PAGE>
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.
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 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 Agreements between Account TGIS and
TIMCO, Account TSB and TIMCO, and Account TAS and TIMCO, were each
approved by a vote of the variable annuity contract owners at their
meeting held on April 23, 1993.
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" below);
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
For furnishing investment management and advisory services to
Account GIS, TIMCO is paid an amount equivalent on an annual basis
to 0.45%. For furnishing investment management and advisory
services to Accounts TGIS and TSB, TIMCO is paid an amount
equivalent on an annual basis to 0.3233% of the average daily net
assets of each Account. For furnishing investment management and
advisory services to Account TAS, TIMCO is paid an amount
equivalent on an annual basis to the following:
<PAGE>
<TABLE>
<CAPTION>
AGGREGATE NET ASSET
ANNUAL MANAGEMENT FEE VALUE OF THE ACCOUNT
---------------------- --------------------
<C> <S> <C>
0.50% of the first $ 20,000,000, plus
0.25% of the next $ 80,000,000, plus
0.20% of the next $ 200,000,000, plus
0.15% of amounts over $ 300,000,000.
The advisory fees paid to TIMCO by each of the Accounts during the last three
fiscal years were:
<CAPTION>
ACCOUNT GIS ACCOUNT TSB ACCOUNT TGIS ACCOUNT TAS
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
1992 $ 1,062,527 $ 1,077,022 $ 783,035 $ 107,868
1993 $ 1,136,509 $ 1,021,879 $ 681,566 $ 213,623
1994 $ 1,368,700 $ 821,532 $ 322,065 $ 279,503
For furnishing investment management and advisory services to Accounts QB and
MM, TAMIC is paid an amount equivalent on an annual basis to 0.3233% of the
average daily net assets of each Account. For furnishing investment management
and advisory services to Account TB, TAMIC is paid an amount equivalent on an
annual basis to the following:
<CAPTION>
AGGREGATE NET ASSET
ANNUAL MANAGEMENT FEE VALUE OF THE ACCOUNT
--------------------- --------------------
<C> <S> <C>
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.
The advisory fees paid to TAMIC by each of the Accounts during the last three fiscal years were:
<CAPTION>
ACCOUNT QB ACCOUNT MM ACCOUNT TB
---------- ---------- ----------
<S> <C> <C> <C>
1992 $ 418,671 $ 313,563 $ 115,397
1993 $ 508,762 $ 245,238 $ 126,188
1994 $ 572,484 $ 262,326 $ 18,297
</TABLE>
TIMCO
TIMCO, an indirect wholly owned subsidiary of Travelers Group Inc.,
is located at One Tower Square, Hartford, Connecticut 06183. In
addition to providing investment management and advisory services
to Accounts GIS, TGIS, TSB and TAS, TIMCO also acts as investment
adviser to the following investment company: Capital Appreciation
Fund. These investment companies are among the investment
alternatives which serve as the funding media for certain variable
annuity and variable life insurance contracts offered by The
Travelers Insurance Company and its affiliates and which had
aggregate net assets of $82,372,873 at December 31, 1994. TIMCO
also acts as investment adviser for individual and pooled pension
and profit-sharing accounts and for affiliated companies of The
Travelers Insurance Company, and as sub-adviser for Managed Assets
Trust.
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
<PAGE>
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.
The total brokerage commissions paid by Account GIS for the fiscal
years ended December 31, 1992, 1993 and 1994 were $1,682,034,
$801,002 and $991,682, respectively. For the fiscal year ended
December 31, 1994, portfolio transactions in the amount of
$620,478,015 were directed to certain brokers because of research
services, of which $889,970 was paid in commissions with respect to
these transactions.
The total brokerage commissions paid by Account TGIS for the fiscal
years ended December 31, 1992, 1993 and 1994 were $314,055,
$328,616 and $40,276, respectively. For the fiscal year ended
December 31, 1994, portfolio transactions in the amount of
$20,416,591 were directed to certain brokers because of research
services, of which $10,390 was paid in commissions with respect to
these transactions.
The total brokerage commissions paid by Account TAS for the fiscal
years ended December 31, 1992, 1993 and 1994 were $109,626,
$181,952 and $458,081, respectively. For the fiscal year ended
December 31, 1994, portfolio transactions in the amount of
$193,183,450 were directed to certain brokers because of research
services, of which $351,777 was paid in commissions with respect to
these transactions.
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. No brokerage
business was placed with any brokers affiliated with TIMCO or its
predecessors during the last three fiscal years.
TAMIC
TAMIC, an indirect wholly owned subsidiary of Travelers Group Inc.,
is located at One Tower Square, Hartford, Connecticut 06183. In
addition to providing investment management and advisory services
to Accounts QB, MM and TB, TAMIC also acts as investment adviser
for the following investment companies: High Yield Bond Trust,
Managed Assets Trust, Cash Income Trust and the U.S. Government
Securities Portfolio of The Travelers Series Trust. These
investment companies are among the investment alternatives which
serve as the funding media for certain variable annuity and
variable life insurance contracts offered by The Travelers
Insurance Company and which had aggregate net assets of
$178,328,172 at December 31, 1994. TAMIC also acts as investment
adviser for individual and pooled pension and profit-sharing
accounts, and for offshore and domestic insurance companies
affiliated with The Travelers Insurance Company.
Investment advice and management for TAMIC's clients 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
<PAGE>
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 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, 1992, 1993 and 1994 were $80,374, $87,444
and $82,390, respectively. For the fiscal year ended December 31,
1994, no portfolio transactions were directed to certain brokers
because of research services.
The total brokerage commissions paid by Account TB for the fiscal
years ended December 31, 1992, 1993 and 1994 were $275,151,
$128,480 and $46,680, respectively. For the fiscal year ended
December 31, 1994, no portfolio transactions were directed to
certain brokers because of research services.
No brokerage business was placed with any brokers affiliated with
TAMIC or its predecessors during the last three fiscal years.
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.
<PAGE>
VALUATION OF 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.
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 31, 1994 was 4.76%.
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 31, 1994 was
4.87%.
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 semi-annual 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 sub-accounts of Fund U that
invest in underlying funds that were in existence prior to the date
the underlying fund became available under Fund U, average annual
total return calculations may include periods prior to the
inception of the Fund U subaccount. Such returns will be
calculated by adjusting the actual returns of the underlying funds
to reflect the charges that would have been assessed under the Fund
U sub-account 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
<PAGE>
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.
NON-STANDARDIZED 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-year, three-year, five-year 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 semi-annual 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 sub-accounts of Fund U that
invest in underlying funds that were in existence prior to the date
the underlying funds 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 the inception of the Fund U sub-account. Such returns
will be calculated by adjusting the actual returns of the
underlying funds to reflect the charges that would have been
assessed under the Fund U sub-account had the underlying fund been
available under Fund U during that period.
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 non-standardized 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, 1994 are set forth in the following
table.
<PAGE>
<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 (6.38)% 4.45% 9.46% (1.27)% 2.37% 5.48% 9.74% 5/83
Account QB (7.47)% 5.44% 7.32% (2.42)% 4.01% 6.44% 7.59% 5/83
Account MM (2.43)% 2.59% 4.74% 2.75% 2.26% 3.67% 5.00% 5/83
Account TGIS (9.54)% 2.11% 7.60% (4.61)% 1.02% 3.21%* -- 1/88
Account TSB(1) (3.85)% 1.26% 3.47% 1.33% 0.91% 2.38%* -- 11/87
Account TAS (11.97)% 6.53% 7.50% (7.16)% 4.50% 7.50%* -- 11/87
Account TB (6.59)% 2.15% 2.52% (1.49)% 3.77% 3.24%* -- 11/87
Fund U **--
Managed Assets Trust (8.47)% 4.65% 9.96% (3.47)% 2.67% 5.67% 10.24% 5/83
High Yield Bond Trust (7.54)% 5.62% 6.42% (2.49)% 7.04% 6.61% 6.69% 5/83
Capital Appreciation Fund(2) (10.83)% 8.06% 8.95% (5.96)% 7.47% 8.99% 9.23% 5/83
U.S. Government
Securities Portfolio (11.64)% 0.63%* -- (6.82)% 2.48%* -- -- 1/92
Social Awareness Stock Portfolio (8.80)% 1.97%* -- (3.83)% 3.95%* -- -- 5/92
Utilities Portfolio (4.61)%* -- -- 0.55%* -- -- -- 2/94
Templeton Bond Fund (10.92)% 4.26% 5.20%* (6.06)% 2.50% 5.29% 5.41%* 8/88
Templeton Stock Fund (8.41)% 7.43% 8.83%* (3.42)% 10.56% 8.38% 9.05%* 8/88
Templeton Asset Allocation Fund (9.13)% 6.89% 8.22%* (4.17)% 8.39% 7.85% 8.44%* 8/88
Fidelity's High Income Portfolio (7.79)% 11.82% 9.29%* (2.77)% 12.11% 12.66% 9.55%* 9/85
Fidelity's Equity-Income
Portfolio 0.55% 8.21% 9.32%* 5.74% 12.55% 9.14% 9.57%* 10/86
Fidelity's Growth Portfolio (6.37)% 8.59% 10.92%* (1.26)% 7.93% 9.51% 11.17%* 10/86
Fidelity's Asset Manager
Portfolio (12.05)% 8.41% 8.63%* (7.26)% 6.99% 9.33% 8.84%* 9/89
Dreyfus Stock
Index Fund (5.52)% 5.83% 6.65%* (0.37)% 4.40% 6.82% 6.85%* 9/89
American Odyssey
Core Equity Fund (7.30)% (3.85)%* -- (3.24)% (0.62)%* -- -- 5/93
American Odyssey
Emerging Opportunities Fund 3.12% 6.75%* -- 8.31% 9.80%* -- -- 5/93
American Odyssey
International Equity Fund (12.89)% 1.85%* -- (8.13)% 4.98%* -- -- 5/93
American Odyssey
Long-Term Bond Fund (11.74)% (2.63)%* -- (6.93)% 0.58%* -- -- 5/93
American Odyssey
Intermediate-Term Bond Fund (9.01)% (3.66)%* -- (4.05)% (0.43)%* -- -- 5/93
American Odyssey
Short-Term Bond Fund (6.48)% (2.85)%* -- (1.38)% 0.36%* -- -- 5/93
Smith Barney Income
and Growth Portfolio (6.89)%* -- -- (1.89)%* -- -- -- 6/94
<PAGE>
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>
Alliance Growth Portfolio (0.42)%* -- -- 4.68%* -- -- -- 6/94
Smith Barney
International Equity Portfolio (9.41)%* -- -- (4.55)%* -- -- -- 6/94
Putnam Diversified
Income Portfolio (4.29)%* -- -- 0.81%* -- -- -- 6/94
G.T. Global Strategic
Income Portfolio (10.35)%* -- -- (5.54)%* -- -- -- 6/94
Smith Barney
High Income Portfolio (6.31)%* -- -- (1.28)%* -- -- -- 6/94
MFS Total Return
Portfolio (7.14)%* -- -- (2.16)%* -- -- -- 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.
<PAGE>
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 (1993-present),
Chairman and Member Smith Barney Strategy Advisors, Inc.; President (1994-present), Smith Barney Mutual Funds Management
388 Greenwich Street Inc.; Chairman and/or Director and President of thirty investment companies associated with Smith
New York, New York Barney; Chairman, Board of Trustees, Drew University; Trustee, The East New York Savings Bank;
Age 61 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, Attorneys; Member, Advisory Board
Member (1973-1994), thirty-one mutual funds sponsored by Keystone Group, Inc.; Member, Board of Managers,
2700 Hospital Trust Tower seven Variable Annuity Separate Accounts of The Travelers Insurance Company +; Trustee, five Mutual
Providence, Rhode Island Funds sponsored by The Travelers Insurance Company ++.
Age 71
Robert E. McGill, III Director (1983-present), Executive Vice President (1989-1994) and Senior Vice President, Finance and
Member Administration (1983-1989), The Dexter Corporation (manufacturer of specialty chemicals and
One Elm Street materials); Vice Chairman (1990-1992), Director (1983-present), Life Technologies, Inc. (life
Windsor Locks, Connecticut science/biotechnology products); Director (1993-present), Analytical Technology, Inc. (manufacturer
Age 63 of measurement instruments); Director (1994-present), The Connecticut Surety Corporation (insurance);
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 Professor of Finance (1980-present) and Associate Dean (1993- present), School of Business
Member Administration, and Director, Center for Research and Development in Financial Services
368 Fairfield Road, U41F (1980-present), University of Connecticut; Director (1992-present), GZA Geoenvironmental Tech,
Storrs, Connecticut Inc. (engineering services); Member, Board of Managers, seven Variable Annuity Separate
Age 52 Accounts of The Travelers Insurance Company +; Trustee, five Mutual Funds sponsored by The
Travelers Insurance Company ++.
Frances M. Hawk Portfolio Manager (1992-present), HLM Management Company, Inc. (investment management); Assistant
Member Treasurer,Pensions and Benefits Management (1989-1992), United Technologies Corporation (broad-based
222 Berkeley Street designer and manufacturer of high technology products); Member, Board of Managers, seven Variable
Boston, Massachusetts Annuity Separate Accounts of The Travelers Insurance Company +; Trustee, five Mutual Funds sponsored
Age 47 by the Travelers Insurance Company ++.
Ernest J. Wright Assistant Secretary (1994-present), Counsel (1987-present), The Travelers Insurance Company; Secretary,
Secretary to the Board Board of Managers, seven Variable Annuity Separate Accounts of The Travelers Insurance Company +;
One Tower Square Secretary, Board of Trustees, five Mutual Funds sponsored by The Travelers Insurance Company ++.
Hartford, Connecticut
Age 54
</TABLE>
<PAGE>
+ 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 in an "interested person" within the meaning of the
Investment Company Act of 1940 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 Dexter Corporation, of which Mr. McGill is a director, entered
into contracts with The Travelers Insurance Company to provide
short-term disability and life insurance benefits to employees of
The Dexter Corporation, and to administer the health and dental
benefits program for employees of The Dexter Corporation.
The Company is responsible for payment of the fees and expenses of
the Board of Managers, for the expenses of audit of the Separate
Accounts, and for certain other expenses for services related to
the operation 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 annual retainer of $10,000 for service on the Boards of
the nine 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 $1,800 for each meeting of such Boards attended.
DISTRIBUTION AND MANAGEMENT SERVICES
Under the terms of a Distribution and Management Agreement between
each Separate Account, the Company and Travelers Equities Sales,
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 1994 1993 1992
---------------- ---- ---- ----
<S> <C> <C> <C>
GIS $ 4,025,788 $ 4,239,811 $ 3,953,639
QB $ 2,156,643 $ 1,903,669 $ 1,564,308
MM $ 1,107,288 $ 1,050,585 $ 1,337,875
U $ 17,248,780 $ 7,219,329 $ 2,785,034
TGIS $ 1,409,471 $ 2,872,771 $ 3,269,670
TSB $ 3,525,570 $ 4,308,973 $ 4,547,489
TAS $ 1,238,375 $ 874,790 $ 471,250
TB $ 47,835 $ 332,985 $ 314,018
</TABLE>
PRINCIPAL UNDERWRITER
Travelers Equities Sales, Inc. ("TESI") an affiliate of the Company
serves as principal underwriter for the Separate Accounts. The
offering is continuous. TESI is an indirect wholly owned subsidiary
of Travelers Group Inc., and its principal executive offices are
located at One Tower Square, Hartford, Connecticut.
<PAGE>
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., Independent 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 or incorporated by reference in the Prospectus, Statement
of Additional Information and their respective Registration
Statements have been audited by Coopers & Lybrand L.L.P., as
indicated in their reports thereon, and are incorporated herein by
reference in reliance upon the authority of said firm as experts in
accounting and auditing.
FINANCIAL STATEMENTS
The financial statements for Accounts GIS, QB, MM, TGIS, TSB, TAS,
TB and Fund U contained in the December 31, 1994 Annual Reports to
Contract Owners are incorporated herein by reference. A copy may
be obtained by writing to The Travelers Insurance Company, Annuity
Services--5 SHS, One Tower Square, Hartford, Connecticut 06183, or
by calling 1-800-842-0125.
The financial statements of the Company, as contained herein,
should be considered only as bearing upon the Company's ability to
meet its obligations under the Contract, and they should not be
considered as bearing on the investment performance of the Separate
Accounts.
<PAGE>
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<PAGE>
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<PAGE>
THETRAVELERS (logo with umbrella)
THE TRAVELERS
VARIABLE ANNUITIES
INDIVIDUAL VARIABLE ANNUITY CONTRACTS
ISSUED BY
THE TRAVELERS INSURANCE COMPANY
INDIVIDUAL PURCHASES,
PENSION AND PROFIT-SHARING,
SECTION 403(B) AND SECTION 408, AND
DEFERRED COMPENSATION PROGRAMS
L-11164S TIC Ed. 5-95
Printed in U.S.A.
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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
GROUP VARIABLE ANNUITY CONTRACTS
ISSUED BY
THE TRAVELERS INSURANCE COMPANY
May 1, 1995
This Statement of Additional Information is not a prospectus
but relates to, and should be read in conjunction with, the
Prospectus dated May 1, 1995. A copy of the Prospectus may
be obtained by writing to The Travelers Insurance Company
(the "Company"), Annuity Services--5 SHS, One Tower Square,
Hartford, Connecticut 06183-5030, or by calling 1-800-842-0125.
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TABLE OF CONTENTS
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DESCRIPTION OF THE TRAVELERS AND THE SEPARATE ACCOUNTS 1
The Insurance Company 1
The Separate Accounts 1
INVESTMENT ALTERNATIVES 1
THE TRAVELERS FUND U FOR VARIABLE ANNUITIES 4
Investments of Fund U 4
Available Mutual Funds 4
INVESTMENT OBJECTIVES AND POLICIES 4
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES 4
THE TRAVELERS TIMED GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES 4
THE TRAVELERS TIMED AGGRESSIVE STOCK ACCOUNT FOR VARIABLE ANNUITIES 6
THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES 7
THE TRAVELERS TIMED BOND ACCOUNT FOR VARIABLE ANNUITIES 9
THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES 10
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT FOR VARIABLE ANNUITIES 11
DESCRIPTION OF CERTAIN TYPES OF INVESTMENTS AND INVESTMENT TECHNIQUES
AVAILABLE TO THE SEPARATE ACCOUNTS 12
WRITING COVERED CALL OPTIONS 12
BUYING PUT AND CALL OPTIONS 13
FUTURES CONTRACTS 14
MONEY MARKET INSTRUMENTS 16
INVESTMENT MANAGEMENT AND ADVISORY SERVICES 18
Advisory Fees 18
TIMCO 19
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TAMIC 20
VALUATION OF ASSETS 22
PERFORMANCE DATA 22
Yield Quotations of Account MM 22
Average Annual Total Return Quotations of Accounts GIS, QB, MM,
TGIS, TSB, TAS, TB and Fund U 22
THE BOARD OF MANAGERS 26
DISTRIBUTION AND MANAGEMENT SERVICES 27
PRINCIPAL UNDERWRITER 27
SECURITIES CUSTODIAN 28
INDEPENDENT ACCOUNTANTS 28
FINANCIAL STATEMENTS 28
FINANCIAL STATEMENTS - THE TRAVELERS INSURANCE COMPANY F-1
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DESCRIPTION OF THE TRAVELERS 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. It is licensed to conduct life insurance business in
all states of the United States, the District of Columbia,
Puerto Rico, Guam, the U.S. and British Virgin Islands and
the Bahamas. The Company is an indirect wholly owned
subsidiary of Travelers Group Inc. 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 authorizes 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.
There are two different types of Separate Accounts which
serve as the funding vehicles for these variable annuity
contracts. The first type, Fund U, was established on
September 2, 1982 and is registered with the Securities and
Exchange Commission as a unit investment trust under the
1940 Act. Fund U's assets are invested in the shares of
mutual funds. Accounts GIS, QB, MM, TGIS, TSB, TAS and TB,
the second type of Separate Account available under the
variable annuity contracts, are registered with the
Securities and Exchange Commission as diversified, open-end
management investment companies under the 1940 Act. Account
GIS was established on September 22, 1967; Account QB was
established on July 29, 1974; Account MM was established on
December 29, 1981; Accounts TGIS and TSB were established on
October 30, 1986; and Accounts TAS and TB were established
on January 2, 1987. The assets of these accounts are
invested directly in securities (such as stocks, bonds or
money market instruments) which are compatible with the
stated investment policies of each of the Separate Accounts.
INVESTMENT ALTERNATIVES
Purchase Payments may be allocated to one or more of the
available Investment Alternatives. The Company may add or
remove available Investment Alternatives as permitted by
law. The investment objectives of each available Investment
Alternative are as follows:
ACCOUNT GIS:
The primary objective of Account GIS is long-term
accumulation of principal through capital appreciation and
retention of net investment income. The assets of Account
GIS will normally be invested in a portfolio of common
stocks spread over industries and companies.
ACCOUNT TGIS:
The primary objective of Account TGIS is the same as Account
GIS, except that Contract Owners in Account TGIS have
entered into third party investment advisory contracts with
providers of market timing services.
ACCOUNT QB:
The primary objective of Account QB is the selection of
investments from the point of view of an investor concerned
primarily with current income, moderate capital volatility
and total return. Assets of Account QB will be invested in
short-term to intermediate-term bonds or other debt
securities with a market value-weighted average maturity of
five years or less.
ACCOUNT MM:
The primary investment objective of Account MM is
preservation of capital, a high degree of liquidity and the
highest possible current income. Assets of Account MM will
be invested primarily in short-term money market securities.
ACCOUNT TSB:
The primary objective of Account TSB is to generate high
current income with limited price volatility while
maintaining a high degree of liquidity. Additionally,
Contract Owners in Account TSB have entered into third party
investment advisory contracts with providers of market
timing services.
ACCOUNT TAS:
The objective of Account TAS is growth of capital through
the use of common stocks. Assets of Account TAS will be
fully invested in a diversified portfolio consisting
primarily of common stocks, securities convertible into
common stocks, and securities having common stock
characteristics. Additionally, Contract Owners in Account
TAS have entered into third party investment advisory
contracts with providers of market timing services.
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ACCOUNT TB:
The objective of Account TB is the selection of investments
from the point of view of an investor concerned primarily
with credit quality, current income and total return.
Assets of Account TB will be invested primarily in direct
obligations of the United States, its agencies and
instrumentalities. Contract Owners in Account TB have
entered into third party investment advisory contracts with
providers of market timing services.
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 U.S. stocks, bonds and money market securities.
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 that 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. Contract
Owners are advised to read carefully the complete risk
disclosure contained in the Trust's prospectus before
investing.
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 instrumentalities and
agencies.
SOCIAL AWARENESS STOCK PORTFOLIO:
The objective of the Social Awareness Stock Portfolio is
long-term capital appreciation and retention of net
investment income through the selection of 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 the
provision of military defense or gambling services.
UTILITIES PORTFOLIO:
The objective of the Utilities Portfolio is to provide
current income. Long-term capital appreciation is a
secondary objective. The Portfolio seeks to achieve its
objective by investing in equity and debt securities of
companies in the utility industries.
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 investing in stocks of
companies in any nation, 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 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. Contract Owners
are advised to read the complete risk disclosure contained
in the Portfolio's prospectus before investing.
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.
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 smaller,
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.
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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.
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.
AMERICAN ODYSSEY INTERNATIONAL EQUITY FUND:
The objective of the American Odyssey 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 American Odyssey 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 American Odyssey 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 American Odyssey 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 American Odyssey 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 American Odyssey Short-Term Bond Fund
is to seek maximum long-term total return by investing
primarily in investment-grade, short-term debt securities.
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.
(Please read carefully the complete risk disclosure in the
Portfolio's prospectus before investing.)
G.T. GLOBAL STRATEGIC INCOME PORTFOLIO:
The Strategic Income Portfolio's investment objective is
primarily to seek high current income and secondarily to
seek capital appreciation. The Portfolio allocates its
assets among debt securities of issuers in the United
States, developed foreign countries, and emerging markets.
(Please read carefully the complete risk disclosure in the
Portfolio's prospectus before investing.)
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. (Please read carefully the complete risk
disclosure in the Portfolio's prospectus before investing.)
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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. (Please read
carefully the complete risk disclosure in the Portfolio's
prospectus before investing.)
THE TRAVELERS FUND U FOR VARIABLE ANNUITIES
INVESTMENTS OF FUND U
Purchase Payments applied to Fund U will be invested in one
or more of the available mutual funds at net asset value in
accordance with the selection made by the Contract Owner.
Contract Owners may change their selection without fee,
penalty or charge. Available mutual funds may be added or
withdrawn as permitted by applicable law.
AVAILABLE MUTUAL FUNDS
A summary of the investment objectives of the mutual funds
underlying Fund U (i.e., all those listed above, except the
7 Separate Accounts) is provided in "Investment
Alternatives," beginning on page 1. All investment income
and other distributions of Fund U are reinvested in fund
shares at net asset value. The funds are required to redeem
fund shares at net asset value and to make payment within
seven days. Fund shares for the mutual funds listed above
are currently sold to Fund U in connection with the
Company's variable annuity products; additionally, some of
the mutual fund shares may also be sold to other separate
accounts of the Company or its affiliates, or to other
insurance companies in connection with such companies'
variable annuity and variable life insurance products. Fund
shares are not sold to the general public. More detailed
information may be found in the current prospectuses and
Statements of Additional Information for the available
mutual funds.
INVESTMENT OBJECTIVES AND POLICIES
The Separate Accounts described below each have different
investment objectives and policies, and each 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 12.
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 OBJECTIVES
The basic investment objective of Accounts GIS and TGIS is
the selection of investments from the point of view of an
investor concerned primarily with long-term accumulation of
principal through capital appreciation and retention of net
investment income. This principal objective does not
preclude the realization of short-term gains when conditions
would suggest the long-term goal is accomplished by such
short-term transactions. The assets of Account GIS will
primarily be 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 also 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 generally would not have a prospect of
long-term appreciation. Investments in other than equity
securities 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 GIS may use exchange-traded financial futures
contracts as a hedge to protect against changes in stock
prices. Account GIS intends to use stock index futures
contracts primarily to limit transaction and borrowing
costs, and expects
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that risk management transactions involving futures contracts will
not impact more than thirty percent (30%) of Account GIS's assets
at any one time.
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 (as described in
the Prospectus), and as a hedge to protect against changes
in stock prices or interest rates.
Accounts GIS and TGIS may also write covered call options on
securities which they own, and may also purchase index or
individual equity call options.
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 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 twenty-five percent
(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
ten percent (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.
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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. 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, 1992, 1993 and 1994 was 189%, 81% and 103%,
respectively. The portfolio turnover rate for Account TGIS
for the years ended December 31, 1992, 1993 and 1994 was
119%, 70% and 19%, respectively.
THE TRAVELERS TIMED AGGRESSIVE STOCK ACCOUNT FOR VARIABLE
ANNUITIES
INVESTMENT OBJECTIVE
The investment objective of Account TAS is to provide
shareholders with growth of capital by investing primarily
in a broadly diversified portfolio of common stocks.
In selecting investments for the portfolio, the investment
adviser employs quantitative analysis to identify 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 the change in price of 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.
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 (as described in
the Prospectus), and as a hedge to protect against changes
in stock prices or interest rates.
Account TAS may also invest, for defensive purposes, 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.
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
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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;
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, 1992, 1993
and 1994 was 269%, 71% and 142%, respectively.
THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES
INVESTMENT OBJECTIVE
The basic investment objective of Account QB is the
selection of investments from the point of view of an
investor concerned primarily with current income, moderate
capital volatility and total return.
It is contemplated that the assets of Account QB will be
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 participations based on
revenues, sales or profits. It is 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 flow will be used instead of average maturity.)
Investments in longer term obligations may be made if the
Board of Managers concludes that the investment yields
justify a longer term commitment.
Account QB may purchase and sell futures contracts on debt
securities ("interest rate futures") to hedge against
changes in interest rates that might otherwise have an
adverse effect upon the value of Account QB's securities.
<PAGE>
The portfolio will be actively managed and Account QB may
sell investments prior to maturity to the extent that this
action is considered 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 which Account QB holds. No problems of
salability are anticipated with regard to the investments of
Account QB.
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 as determined in good faith by the
Board of Managers. 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.
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.
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
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 twenty-five percent
(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, 1992,
1993 and 1994 was 23%, 24% and 27%, respectively.
<PAGE>
THE TRAVELERS TIMED BOND ACCOUNT FOR VARIABLE ANNUITIES
INVESTMENT OBJECTIVE
The investment objective of Account TB is the selection of
investments from the point of view of an investor concerned
primarily with highest credit quality, current income and
total return. To achieve this objective, Account TB invests
primarily in direct obligations of the United States, in
obligations of its instrumentalities supported by its full
faith and credit, 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.
Account TB will use exchange-traded financial futures
contracts on debt securities ("interest rate futures") to
facilitate market timed moves (as described in the
Prospectus), and as a hedge to protect against changes in
interest rates.
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);
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
<PAGE>
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, 1992, 1993 and 1994 was 505%,
190% and 0%, respectively.
THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES
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. While there are many kinds of
short-term securities used by the various money market
funds, Account MM will restrict its investment portfolio to
only the securities listed below.
The Account's assets will primarily be invested in (1)
marketable obligations issued or guaranteed by the United
States Government, its agencies, authorities or
instrumentalities; (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; (3) Commercial Paper rated A-1 by Standard and
Poor's Corporation or Prime-1 by Moody's Investor Services,
Inc.; and (4) repurchase agreements with government
securities dealers recognized by the Federal Reserve Board
or with member banks of the Federal Reserve System involving
marketable obligations of or guaranteed by the United States
Government, its agencies, authorities or instrumentalities.
Account MM may also invest in securities of foreign branches
of United States banks, payable in United States dollars.
The market value of Account MM's investments tend to
decrease during periods of rising interest rates and to
increase during intervals of falling interest rates, with
corresponding fluctuations in their 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 purchase.
Return to Contract Owners is aided both by Account MM's
ability to make investments in large denominations and by
their efficiencies of scale. Also, Account MM seeks 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.
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;
<PAGE>
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.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 OBJECTIVE
The basic investment objective of Account TSB is to generate
high current income with limited price volatility while
maintaining a high degree of liquidity. Account TSB's
assets will be primarily invested in (1) marketable
obligations issued or guaranteed by the United States
Government, its agencies, authorities or instrumentalities;
(2) Certificates of Deposit, Bankers' Acceptances and other
debt securities issued by banks having total assets of more
than $1 billion which are members of the Federal Deposit
Insurance Corporation; (3) Commercial Paper rated A-1 by
Standard and Poor's Corporation or Prime-1 by Moody's
Investor Services, Inc.; (4) short-term notes, bonds,
debentures or 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 (5) repurchase agreements with government
securities dealers recognized by the Federal Reserve Board
or with member banks of the Federal Reserve System involving
marketable obligations of or guaranteed by the United States
Government, its agencies, authorities or instrumentalities.
Account TSB may also invest in securities of foreign
branches of United States banks, payable in United States
dollars, and in Euro Certificates of Deposit.
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 their 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 purchase.
Account TSB seeks 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 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.
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:
<PAGE>
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;
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. The portfolio turnover
rate for the year ended December 31, 1994 was 0%.
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.
<PAGE>
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 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.
<PAGE>
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.
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
<PAGE>
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 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.
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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.
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
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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.
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
<PAGE>
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.
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
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 Agreements
between Account TGIS and TIMCO, Account TSB and TIMCO, and
Account TAS and TIMCO, were each approved by a vote of the
variable annuity contract owners at their meeting held on
April 23, 1993.
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" below);
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
For furnishing investment management and advisory services
to Account GIS, TIMCO is paid an amount equivalent on an
annual basis to 0.45%. For furnishing investment management
and advisory services to Accounts TGIS and TSB, TIMCO is
paid an amount equivalent on an annual basis to 0.3233% of
the average daily net assets of each Account. For
furnishing investment management and advisory services to
Account TAS, TIMCO is paid an amount equivalent on an annual
basis to the following:
<PAGE>
AGGREGATE NET ASSET
ANNUAL MANAGEMENT FEE VALUE OF THE ACCOUNT
0.50% of the first $ 20,000,000, plus
0.25% of the next $ 80,000,000, plus
0.20% of the next $ 200,000,000, plus
0.15% of amounts over $ 300,000,000.
The advisory fees paid to TIMCO by each of the Accounts
during the last three fiscal years were:
ACCOUNT GIS ACCOUNT TSB ACCOUNT TGIS ACCOUNT TAS
1992 $1,062,527 $1,077,022 $783,035 $107,868
1993 $1,136,509 $1,021,879 $681,566 $213,623
1994 $1,368,700 $ 821,532 $322,065 $279,503
For furnishing investment management and advisory services
to Accounts QB and MM, TAMIC is paid an amount equivalent on
an annual basis to 0.3233% of the average daily net assets
of each Account. For furnishing investment management and
advisory services to Account TB, TAMIC is paid an amount
equivalent on an annual basis to the following:
AGGREGATE NET ASSET
ANNUAL MANAGEMENT FEE VALUE OF THE ACCOUNT
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.
The advisory fees paid to TAMIC by each of the Accounts
during the last three fiscal years were:
ACCOUNT QB ACCOUNT MM ACCOUNT TB
1992 $418,671 $313,563 $115,397
1993 $508,762 $245,238 $126,188
1994 $572,484 $262,326 $ 18,297
TIMCO
TIMCO, an indirect wholly owned subsidiary of Travelers
Group Inc., is located at One Tower Square, Hartford,
Connecticut 06183. In addition to providing investment
management and advisory services to Accounts GIS, TGIS, TSB
and TAS, TIMCO also acts as investment adviser to the
following investment company: Capital Appreciation Fund.
These investment companies are among the investment alternatives
which serve as the funding media for certain variable annuity
and variable life insurance contracts offered by The Travelers
Insurance Company and its affiliates and which had aggregate net
assets of $82,372,873 at December 31, 1994. TIMCO also acts
as investment adviser for individual and pooled pension and
profit-sharing accounts and for affiliated companies of The
Travelers Insurance Company, and as sub-adviser for Managed
Assets Trust.
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
<PAGE>
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.
The total brokerage commissions paid by Account GIS for the
fiscal years ended December 31, 1992, 1993 and 1994 were
$1,682,034, $801,002 and $991,682, respectively. For the
fiscal year ended December 31, 1994, portfolio transactions
in the amount of $620,478,015 were directed to certain
brokers because of research services, of which $889,970 was
paid in commissions with respect to these transactions.
The total brokerage commissions paid by Account TGIS for the
fiscal years ended December 31, 1992, 1993 and 1994 were
$314,055, $328,616 and $40,276, respectively. For the
fiscal year ended December 31, 1994, portfolio transactions
in the amount of $20,416,591 were directed to certain
brokers because of research services, of which $10,390 was
paid in commissions with respect to these transactions.
The total brokerage commissions paid by Account TAS for the
fiscal years ended December 31, 1992, 1993 and 1994 were
$109,626, $181,952 and $458,081, respectively. For the
fiscal year ended December 31, 1994, portfolio transactions
in the amount of $193,183,450 were directed to certain
brokers because of research services, of which $351,777 was
paid in commissions with respect to these transactions.
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.
No brokerage business was placed with any brokers affiliated
with TIMCO or its predecessors during the last three fiscal
years.
TAMIC
TAMIC, an indirect wholly owned subsidiary of Travelers
Group Inc., is located at One Tower Square, Hartford,
Connecticut 06183. In addition to providing investment
management and advisory services to Accounts QB, MM and TB,
TAMIC also acts as investment adviser for the following
investment companies: High Yield Bond Trust, Managed Assets
Trust, Cash Income Trust and the U.S. Government Securities
Portfolio of The Travelers Series Trust. These investment
companies are among the investment alternatives which serve
as the funding media for certain variable annuity and
variable life insurance contracts offered by The Travelers
Insurance Company and which had aggregate net assets of
$178,328,172 at December 31, 1994. TAMIC also acts as
investment adviser for individual and pooled pension and
profit-sharing accounts, and for offshore and domestic
insurance companies affiliated with The Travelers Insurance
Company.
Investment advice and management for TAMIC's clients 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
<PAGE>
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 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, 1992, 1993 and 1994 were
$80,374, $87,444 and $82,390, respectively. For the fiscal
year ended December 31, 1994, no portfolio transactions were
directed to certain brokers because of research services.
The total brokerage commissions paid by Account TB for the
fiscal years ended December 31, 1992, 1993 and 1994 were
$275,151, $128,480 and $46,680, respectively. For the
fiscal year ended December 31, 1994, no portfolio
transactions were directed to certain brokers because of
research services.
No brokerage business was placed with any brokers affiliated
with TAMIC or its predecessors during the last three fiscal
years.
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.
<PAGE>
VALUATION OF 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.
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 31, 1994
was 4.65%.
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 31, 1994 was 4.76%.
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 semi-annual 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 sub-accounts of Fund U that invest in underlying funds
that were in existence prior to the date the underlying fund
became available under Fund U, average annual total return
calculations may include periods prior to the inception of
the Fund U subaccount. Such returns will be calculated by
adjusting the actual returns of the underlying funds to
reflect the charges that would have been assessed under the
Fund U sub-account 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
<PAGE>
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.
NON-STANDARDIZED 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-year, three-
year, five-year 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 semi-annual 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 sub-accounts of Fund U that invest in underlying funds
that were in existence prior to the date the underlying
funds 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 the inception of the Fund U sub-account.
Such returns will be calculated by adjusting the actual
returns of the underlying funds to reflect the charges that
would have been assessed under the Fund U sub-account had
the underlying fund been available under Fund U during that
period.
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 non-standardized 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, 1994 are set
forth in the following table.
<PAGE>
</TABLE>
<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 (6.48)% 4.32% 9.40% (1.27)% 2.37% 5.48% 9.74% 5/83
Account QB (7.57)% 5.31% 7.26% (2.42)% 4.01% 6.44% 7.50% 5/83
Account MM (2.55)% 2.46% 4.67% 2.75% 2.26% 3.67% 5.00% 5/83
Account TGIS (9.64)% 1.98% 7.50%* (4.61)% 1.02% 3.21%* -- 1/88
Account TSB(1) (3.96)% 1.13% 3.38%* 1.33% 0.91% 2.38%* -- 11/87
Account TAS (12.07)% 6.39% 7.40%* (7.16)% 4.50% 7.50%* -- 11/87
Account TB (6.69)% 2.02% 2.42%* (1.49)% 3.77% 3.24%* -- 11/87
Fund U **--
Managed Assets Trust (8.57)% 4.52% 9.89% (3.47)% 2.67% 5.67% 10.24% 5/83
High Yield Bond Trust (7.64)% 5.49% 6.36% (2.49)% 7.04% 6.61% 6.69% 5/83
Capital Appreciation Fund(2) (10.93)% 7.93% 8.88% (5.96)% 7.47% 8.99% 9.23% 5/83
U.S. Government Securities Portfolio (11.74)% 0.48%* -- (6.82)% 2.48%* -- -- 1/92
Social Awareness Stock Portfolio (8.90)% 1.83% -- (3.83)% 3.95%* -- -- 5/92
Utilities Portfolio (4.71)%* -- -- 0.55%* -- -- -- 2/94
Templeton Bond Fund (11.02)% 4.13% 5.09%* (6.06)% 2.50% 5.29% 5.41%* 8/88
Templeton Stock Fund (8.52)% 7.30% 8.72%* (3.42)% 10.56% 8.38% 9.05%* 8/88
Templeton Asset Allocation Fund (9.32)% 6.76% 8.12%* (4.17)% 8.39% 7.85% 8.44%* 8/88
Fidelity's High Income Portfolio (7.90)% 11.69% 9.21%* (2.77)% 12.11% 12.66% 9.55%* 9/85
Fidelity's Equity-Income Portfolio 0.44% 8.08% 9.23%* 5.74% 12.55% 9.14% 9.57%* 10/86
Fidelity's Growth Portfolio (6.47)% 8.46% 10.83%* (1.26)% 7.93% 9.51% 11.17%* 10/86
Fidelity's Asset Manager Portfolio (12.15)% 8.28% 8.51% (7.26)% 6.99% 9.33% 8.84% 9/89
Dreyfus Stock Index Fund (5.63)% 5.70% 6.52% (0.37)% 4.40% 6.82% 6.85% 9/89
American Odyssey Core Equity Fund (7.40)% (3.98)% -- (2.24)% 0.62%* -- -- 5/93
American Odyssey
Emerging Opportunities Fund 3.00% 6.61%* -- 8.31% 9.80%* -- -- 5/93
American Odyssey
International Equity Fund (12.99)% 1.72%* -- (8.13)% 4.98%* -- -- 5/93
American Odyssey
Long-Term Bond Fund (11.84)% (2.76)%* -- (6.93)% 0.58%* -- -- 5/93
American Odyssey
Intermediate-Term Bond Fund (9.12)% (3.79)%* -- (4.05)% 0.43%* -- -- 5/93
American Odyssey
Short-Term Bond Fund (6.58)% (2.98)%* -- (1.38)% 0.36%* -- -- 5/93
Smith Barney Income
and Growth Portfolio (6.94)%* -- -- (1.89)%* -- -- -- 6/94
<PAGE>
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>
Alliance Growth Portfolio (0.48)% -- -- 4.68%* -- -- -- 6/94
Smith Barney
International Equity Portfolio (6.36)%* -- -- (4.55)%* -- -- -- 6/94
Putnam Diversified
Income Portfolio (4.34)%* -- -- 0.81%* -- -- -- 6/94
G.T. Global Strategic
Income Portfolio (10.41)%* -- -- (5.54)%* -- -- -- 6/94
Smith Barney
High Income Portfolio (6.36)%* -- -- (1.28)%* -- -- -- 6/94
MFS Total Return
Portfolio (7.20)%* -- -- (2.16)%* -- -- -- 6/94
* 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.
</TABLE>
<PAGE>
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.
Name Present Position and Principal Occupation During
Last Five Years
* Heath B. McLendon Managing Director (1993-present), Smith Barney
Chairman and Member Inc. ("Smith Barney"); Chairman (1993-present),
388 Greenwich Street Smith Barney Strategy Advisors, Inc.; President
New York, New York (1994-present), Smith Barney Mutual Funds
Age 61 Management Inc.; Chairman and/or Director and
President of thirty investment companies
associated with 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),
Member Edwards & Angell, Attorneys; Member, Advisory
2700 Hospital Trust Tower Board (1973-1994), thirty-one mutual funds
Providence, Rhode Island sponsored by Keystone Group, Inc.; Member,
Age 71 Board of Managers, seven Variable Annuity Separate
Accounts of The Travelers Insurance Company+;
Trustee, five Mutual Funds sponsored by The
Travelers Insurance Company++.
Robert E. McGill, III Director (1983-present), Executive Vice
Member President (1989-1994) and Senior Vice President,
One Elm Street Finance and Administration (1983-1989),
Windsor Locks, Connecticut The Dexter Corporation (manufacturer of
Age 63 specialty chemicals and materials); Vice Chairman
(1990-1992), Director (1983-present), Life
Technologies, Inc. (life science/biotechnology
products); Director (1993-present), Analytical
Technology, Inc. (manufacturer of
measurement instruments); Director
(1994-present), The Connecticut Surety
Corporation (insurance); 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 Professor of Finance (1980-present) and
Member Associate Dean (1993-present), School of Business
368 Fairfield Road, U41F Administration, and Director, Center for Research
Storrs, Connecticut and Development in Financial Services
Age 52 (1980-present), 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++.
Frances M. Hawk Portfolio Manager (1992-present), HLM Management
Member Company, Inc. (investment management); Assistant
222 Berkeley Street Treasurer, Pensions and Benefits Management
Boston, Massachusetts (1989-1992), United Technologies Corporation
Age 47 (broad-based designer and manufacturer of high
technology products); Member, Board 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
Secretary to the Board (1987-present), The Travelers Insurance Company;
One Tower Square Secretary, Board of Managers, seven Variable
Hartford, Connecticut Annuity Separate Accounts of The Travelers
Age 54 Insurance Company+; Secretary, Board of Trustees,
five Mutual Funds sponsored by The Travelers
Insurance Company++.
<PAGE>
+ 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 in an "interested person" within the meaning
of the Investment Company Act of 1940 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 Dexter Corporation, of which Mr. McGill is a director,
entered into contracts with The Travelers Insurance Company
to provide short-term disability and life insurance benefits
to employees of The Dexter Corporation, and to administer
the health and dental benefits program for employees of The
Dexter Corporation.
The Company is responsible for payment of the fees and
expenses of the Board of Managers, for the expenses of audit
of the Separate Accounts, and for certain other expenses for
services related to the operation 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 annual retainer of
$10,000 for service on the Boards of the nine 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 $1,800 for each meeting of such Boards attended.
DISTRIBUTION AND MANAGEMENT SERVICES
Under the terms of a Distribution and Management Agreement
between each Separate Account, the Company and Travelers
Equities Sales, 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:
SEPARATE ACCOUNT 1994 1993 1992
GIS $ 4,025,788 $4,239,811 $3,953,639
QB $ 2,156,643 $1,903,669 $1,564,308
MM $ 1,107,288 $1,050,585 $1,337,875
U $17,248,780 $7,219,329 $2,785,034
TGIS $ 1,409,471 $2,872,771 $3,269,670
TSB $ 3,525,570 $4,308,973 $4,547,489
TAS $ 1,238,375 $ 874,790 $ 471,250
TB $ 47,835 $ 332,985 $ 314,018
PRINCIPAL UNDERWRITER
Travelers Equities Sales, Inc. ("TESI"), an affiliate of the
Company, serves as principal underwriter for the Separate
Accounts. The offering is continuous. TESI is an indirect
wholly owned subsidiary of Travelers Group Inc., and its
principal executive offices are located at One Tower Square,
Hartford, Connecticut.
<PAGE>
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., Independent 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 or incorporated
by reference in the Prospectus, Statement of Additional
Information and their respective Registration Statements
have been audited by Coopers & Lybrand L.L.P., as indicated
in their reports thereon, and are incorporated herein by
reference in reliance upon the authority of said firm as
experts in accounting and auditing.
FINANCIAL STATEMENTS
The financial statements for Accounts GIS, QB, MM, TGIS,
TSB, TAS, TB and Fund U contained in the December 31, 1994
Annual Reports to Contract Owners are incorporated herein by
reference. A copy may be obtained by writing to The
Travelers Insurance Company, Annuity Services--5 SHS, One
Tower Square, Hartford, Connecticut 06183, or by calling
1-800-842-0125.
The financial statements of the Company, as contained
herein, should be considered only as bearing upon the
Company's ability to meet its obligations under the
Contract, and they should not be considered as bearing on
the investment performance of the Separate Accounts.
<PAGE>
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<PAGE>
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<PAGE>
THETRAVELERS (logo umbrella)
THE TRAVELERS
VARIABLE ANNUITIES
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. 5-95
Printed in U.S.A.
<PAGE> 1
Independent Auditors' Report
The Board of Directors and Shareholder of
The Travelers Insurance Company and Subsidiaries:
We have audited the accompanying consolidated balance sheets of The Travelers
Insurance Company and Subsidiaries as of December 31, 1994 and 1993, and the
related consolidated statements of operations and retained earnings and cash
flows for the year ended December 31, 1994. 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, 1994 and 1993, and the
results of their operations and their cash flows for the year ended December
31, 1994, in conformity with generally accepted accounting principles.
As discussed in Note 2 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 17, 1995
16
<PAGE> 2
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
Hartford, Connecticut
January 24, 1994
17
<PAGE> 3
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 for The Travelers Insurance Company and Subsidiaries for the
year ended December 31, 1992. 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 audits.
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, 1992 in conformity with generally accepted
accounting principles.
As discussed in Notes 2, 5, 10 and 13 to the consolidated financial statements,
the Company changed its method of accounting for postretirement benefits other
than pensions, accounting for income taxes and accounting for foreclosed assets
in 1992.
/S/ COOPERS & LYBRAND
Hartford, Connecticut
February 9, 1993, except for Notes 2 and 5,
as to which the date is January 24, 1994
18
<PAGE> 4
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------|------------------------------
(for the year ended December 31, in millions) 1994 | 1993 1992
- --------------------------------------------------------------------------|------------------------------
|
<S> <C> | <C> <C>
REVENUES |
Premiums $ 3,861 | $ 2,725 $ 2,686
Net investment income 1,849 | 1,884 2,101
Realized investment gains (losses) 14 | (21) (747)
Other 1,023 | 859 785
- --------------------------------------------------------------------------|------------------------------
6,747 | 5,447 4,825
- --------------------------------------------------------------------------|------------------------------
BENEFITS AND EXPENSES |
Current and future insurance benefits 3,421 | 3,121 3,000
Interest credited to contractholders 967 | 1,206 1,456
Claim settlement expenses 193 | 231 264
Amortization of deferred acquisition costs and value of |
insurance in force 284 | 55 61
General and administrative expenses 1,025 | 751 987
- --------------------------------------------------------------------------|------------------------------
5,890 | 5,364 5,768
- --------------------------------------------------------------------------|------------------------------
|
Income (loss) before federal income taxes |
and cumulative effects |
of changes in accounting principles 857 | 83 (943)
- --------------------------------------------------------------------------|------------------------------
|
Federal income taxes: |
Current 36 | 20 2
Deferred 276 | (78) (340)
- --------------------------------------------------------------------------|------------------------------
312 | (58) (338)
- --------------------------------------------------------------------------|------------------------------
|
Income (loss) before cumulative effects of changes |
in accounting principles 545 | 141 (605)
Cumulative effect of change in accounting |
for postretirement benefits other than |
pensions, net of tax - | - (126)
Cumulative effect of change in accounting |
for income taxes - | - 350
- --------------------------------------------------------------------------|------------------------------
|
Net income (loss) 545 | 141 (381)
Retained earnings beginning of year 1,017 | 888 1,281
Dividends to parent company - | (14) (14)
Preference stock tax benefit allocated by parent - | 2 2
- --------------------------------------------------------------------------|------------------------------
Retained earnings end of year $ 1,562 | $ 1,017 $ 888
- --------------------------------------------------------------------------|------------------------------
</TABLE>
See notes to consolidated financial statements.
19
<PAGE> 5
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
(at December 31, in millions) 1994 1993
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Fixed maturities, available for sale at market in 1994 (cost, $18,579);
at lower of aggregate cost or market in 1993 (market, $18,284) $17,260 $18,045
Bonds, held for investment (market, $18) - 18
Equity securities, at market (cost, $173; $199) 169 220
Mortgage loans 4,938 6,845
Real estate held for sale, net of accumulated depreciation of $9; $0 383 954
Policy loans 1,581 1,366
Short-term securities 2,279 1,376
Other investments 885 687
- ---------------------------------------------------------------------------------------------------------
Total investments 27,495 29,511
- ---------------------------------------------------------------------------------------------------------
Cash 102 50
Investment income accrued 362 379
Premium balances receivable 215 224
Reinsurance recoverable 2,915 2,883
Deferred acquisition costs and value of insurance in force 1,939 1,794
Deferred federal income taxes 950 855
Separate and variable accounts 5,160 4,666
Other assets 1,397 979
- ---------------------------------------------------------------------------------------------------------
Total assets $40,535 $41,341
- ---------------------------------------------------------------------------------------------------------
LIABILITIES
Contractholder funds $16,354 $17,850
Future policy benefits 11,480 11,263
Policy and contract claims 1,222 1,274
Separate and variable accounts 5,128 4,644
Short-term debt 74 -
Other liabilities 1,923 2,007
- ---------------------------------------------------------------------------------------------------------
Total liabilities 36,181 37,038
- ---------------------------------------------------------------------------------------------------------
SHAREHOLDER'S EQUITY
Common stock, par value $2.50; 40 million
shares authorized, issued and outstanding 100 100
Additional paid-in capital 3,452 3,179
Unrealized investment gains (losses), net of taxes (760) 7
Retained earnings 1,562 1,017
- ---------------------------------------------------------------------------------------------------------
Total shareholder's equity 4,354 4,303
- ---------------------------------------------------------------------------------------------------------
Total liabilities and shareholder's equity $40,535 $41,341
- ---------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
20
<PAGE> 6
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) 1994 | 1993 1992
- ----------------------------------------------------------------------------|--------------------------------
<S> <C> | <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES |
Premiums collected $ 3,722 | $ 2,530 $ 2,594
Net investment income received 1,895 | 1,794 2,134
Other revenues received 734 | 568 568
Benefits and claims paid (3,572) | (2,902) (3,123)
Interest credited to contractholders (922) | (1,154) (1,404)
Operating expenses paid (972) | (859) (869)
Income taxes (paid) refunded (27) | 25 (2)
Trading account investments, (purchases) sales, net - | (1,576) (364)
Other (141) | 202 522
- ----------------------------------------------------------------------------|--------------------------------
Net cash provided by (used in) operating activities 717 | (1,372) 56
- ----------------------------------------------------------------------------|--------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES |
Investment repayments |
Fixed maturities 2,783 | 2,624 2,084
Mortgage loans 1,337 | 1,210 1,063
Proceeds from investments sold |
Fixed maturities 1,370 | 102 175
Equity securities 359 | 75 173
Mortgage loans 557 | 310 254
Real estate 728 | 949 235
Investments in |
Fixed maturities (4,767) | (3,269) (2,471)
Equity securities (340) | (51) (119)
Mortgage loans (94) | (246) (63)
Policy loans, net (215) | (2) (184)
Short-term securities, (purchases) sales, net (903) | 860 (615)
Other investments, (purchases) sales, net (50) | 53 191
Securities sold under repurchase agreement (209) | - -
Cash from disposition of operations 53 | - 5
- ----------------------------------------------------------------------------|--------------------------------
Net cash provided by investing activities 609 | 2,615 728
- ----------------------------------------------------------------------------|--------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES |
Issuance (redemption) of short-term debt, net 74 | - -
Contractholder fund deposits 2,197 | 3,159 3,047
Contractholder fund withdrawals (3,529) | (4,418) (5,003)
Dividends to parent company - | (14) (14)
Return of capital to parent company (23) | - -
Contributions from parent company - | - 500
Other 7 | 6 2
- ----------------------------------------------------------------------------|--------------------------------
Net cash used in financing activities (1,274) | (1,267) (1,468)
- ----------------------------------------------------------------------------|--------------------------------
Net increase (decrease) in cash $ 52 | $ (24) $ (684)
- ----------------------------------------------------------------------------|--------------------------------
|
Cash at December 31 $ 102 | $ 50 $ 74
- -------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
21
<PAGE> 7
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Travelers Insurance Company and its subsidiaries (the Company) is a
wholly owned subsidiary of The Travelers Insurance Group Inc. (TIG).
TIG is an indirect wholly owned subsidiary of The Travelers Inc.
Significant accounting policies used in the preparation of the
accompanying financial statements follow.
Basis of presentation
In December 1992, Primerica Corporation (Primerica) acquired
approximately 27% of the common stock of the Company's then parent, The
Travelers Corporation (the Acquisition). The Acquisition was accounted
for as a purchase. In connection with the Acquisition, Primerica
transferred 100% of the preferred provider organization and third party
administrator networks of Transport Life Insurance Company (a wholly
owned subsidiary of Primerica) to The Travelers Corporation, which
contributed them to the Company. The Company realized an increase to
shareholder's equity of $23 million related to this contribution.
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
The Travelers Inc. This was effected through the exchange of .80423
shares of The Travelers Inc. common stock for each share of The
Travelers Corporation common stock (the Merger). All subsidiaries of
The Travelers Corporation were contributed to TIG. In conjunction with
the Merger, The Travelers Inc. contributed Travelers Insurance Holdings
Inc. (formerly Primerica Insurance Holdings, Inc.) and its subsidiaries
(TIHI) to TIG, which in turn contributed TIHI to the Company.
TIHI is an intermediate holding company whose primary subsidiaries are
Primerica Life Insurance Company (Primerica Life) and its subsidiary
National Benefit Life Insurance Company (NBL), and Transport Life
Insurance Company (Transport). Through its subsidiaries, TIHI primarily
offers individual insurance and specialty accident and health insurance.
The Company realized an increase to shareholder's equity of $2.1 billion
at December 31, 1993 related to the contribution of TIHI. At December
31, 1993 and subsequent, TIHI is included in the Life and Annuities
segment.
The consolidated financial statements and the accompanying notes reflect
the historical operations of the Company for the years ended December 31,
1993 and 1992. The results of operations of TIHI and its subsidiaries
are not included in the 1993 and 1992 financial statements. The
Company's consolidated balance sheet and related data at December 31,
1994 and 1993 include TIHI on a fully consolidated basis. The
Acquisition and the Merger are being accounted for as a "step
acquisition." The consolidated balance sheet and related data at
December 31, 1993 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 are
reflected in the consolidated balance sheet at December 31, 1993 based
upon management's then best estimate of their fair values. Evaluation and
appraisal of assets and liabilities, including investments, the value of
insurance in force, reinsurance recoverable, other insurance assets and
liabilities and related deferred income taxes were completed during 1994.
22
<PAGE> 8
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
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 the "pushdown" basis of 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 the "pushdown" basis of accounting, was
approximately $340 million and is being amortized over 40 years on a
straight-line basis.
The consolidated statement of operations and retained earnings, the
consolidated statement of cash flows and the related accompanying notes
for the year ended December 31, 1994, which are presented on a purchase
accounting basis, are separated from the corresponding 1993 and 1992
information, which is presented on a historical accounting basis, to
indicate the difference in valuation bases.
Principles of Consolidation
The financial statements have been prepared in conformity with generally
accepted accounting principles and include the Company and its
significant insurance and noninsurance subsidiaries. Certain prior
year amounts have been reclassified to conform with the 1994
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. Securities 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. As of December 31, 1993, in conjunction with the Merger, the
majority of fixed maturities were classified as "available for sale" and
recorded at the lower of aggregate cost or market value. Fixed
maturities classified as "held for investment" were carried at amortized
cost.
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. 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,
both internal and external, using discounted cash flow analyses and
other acceptable techniques.
23
<PAGE> 9
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Accrual of income is suspended on fixed maturities or mortgage loans
that are in default, or on which it is likely that future interest
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 foreign operations (primarily
Canadian) 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
translation of the local currency value of foreign investments to U.S.
dollars, the functional currency of the Company.
Policy Loans
Policy loans are carried at the amount of the unpaid balances that are
not in excess of the net cash surrender values of the related insurance
policies. The carrying value of policy loans, which have no defined
maturities, is considered to be fair value.
Deferred Acquisition Costs
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 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-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.
24
<PAGE> 10
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Value of Insurance In Force
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, except at December 31, 1993 the assets and liabilities
of these accounts were recorded at the value assigned at the acquisition
dates. 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.
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 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 $246 million.
25
<PAGE> 11
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
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 3.4% to 8.0%.
Contractholder funds also include other funds that policyholders leave
on deposit with the Company.
Benefit Reserves
Benefit reserves represent liabilities for future insurance policy
benefits. Benefit reserves for traditional 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 12.0%, 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 Leases
At December 31, 1993, operating leases 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 average lease period.
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. At December 31, 1993, the
deferred profits on limited-payment policies were recorded at the values
assigned at the acquisition dates.
26
<PAGE> 12
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
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 in the Company's deferred federal income tax
asset during the year. 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.
Accounting Standards not yet Adopted
Statement of Financial Accounting Standards No. 118, "Accounting by
Creditors for Impairment of a Loan - Income Recognition and Disclosures"
(FAS 118), and Statement of Financial Accounting Standards No. 114,
"Accounting by Creditors for Impairment of a Loan" (FAS 114), describe
how impaired loans should be measured when determining the amount of a
loan loss accrual. These statements also amend existing guidance on the
measurement of restructured loans in a troubled debt restructuring
involving a modification of terms. The adoption of these statements,
effective January 1, 1995, will not have a material effect on results of
operations or financial position.
2. CHANGES IN ACCOUNTING PRINCIPLES
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 The Travelers Inc.
See note 15 for additional disclosures.
27
<PAGE> 13
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
2. CHANGES IN ACCOUNTING PRINCIPLES, Continued
Offsetting of Amounts Related to Certain Contracts
Effective January 1, 1994, the Company adopted Financial Accounting
Standards Board Interpretation No. 39, "Offsetting of Amounts Related to
Certain Contracts" (Interpretation 39). The general principle of
Interpretation 39 states that amounts due from and due to another party
may not be offset in the consolidated balance sheet unless a right of
setoff exists and the parties intend to exercise the right of setoff.
Implementation of Interpretation 39 did not have a material impact on the
Company's financial position; however, assets and liabilities were both
increased by $68 million as of December 31, 1994.
Accounting and Reporting for Reinsurance Contracts
In the first quarter of 1993, the Company implemented Statement of
Financial Accounting Standards No. 113, "Accounting and Reporting for
Reinsurance of Short-Duration and Long-Duration Contracts" (FAS 113).
FAS 113 requires the reporting of reinsurance receivables and prepaid
reinsurance premiums as assets and precludes the immediate recognition
of gains for all reinsurance contracts unless the liability to the
policyholder has been extinguished. Implementation of FAS 113 did not
have an impact on the Company's earnings, however, assets and
liabilities increased by like amounts. See note 5 for additional
reinsurance disclosures.
Postretirement Benefits Other Than Pensions
In 1992, the Company adopted Statement of Financial Accounting Standards
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions" (FAS 106). As required, the Company changed its method of
accounting for retiree benefit plans effective January 1, 1992, to
accrue for the Company's share of the costs of postretirement benefits
over the service period rendered by employees. Previously these
benefits were charged to expense when paid. The Company elected
to recognize immediately the liability for postretirement benefits as
the cumulative effect of a change in accounting principle. This
resulted in a noncash after-tax charge to net income of $126 million.
See note 10 for additional information relating to FAS 106.
Accounting for Income Taxes
In the third quarter of 1992, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (FAS 109)
with retroactive application to January 1, 1992. FAS 109 establishes new
principles for calculating and reporting the effects of federal income
taxes in financial statements. FAS 109 replaces the income statement
orientation inherent in the prior income tax accounting standard with a
balance sheet approach. Under the new approach, deferred tax assets and
liabilities are generally determined based on the difference between the
financial statement and tax bases of assets and liabilities using
enacted tax rates in effect for the year in which the differences are
expected to reverse. FAS 109 allows recognition of deferred tax assets
if 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.
28
<PAGE> 14
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
2. CHANGES IN ACCOUNTING PRINCIPLES, Continued
The implementation of FAS 109 resulted in a one time increase to
earnings of $350 million in the first quarter of 1992. This increase in
earnings was principally due to tax rate differences and the recognition
of a portion of previously unrecognized deferred tax assets. See note
13 for further discussion of FAS 109.
Accounting for Foreclosed Assets
In February 1993, The Travelers Corporation announced its intent to
accelerate the sale of foreclosed real estate and, effective December
31, 1992, changed its method of accounting for foreclosed assets in
compliance with the American Institute of Certified Public Accountants'
Statement of Position 92-3, "Accounting for Foreclosed Assets" (SOP
92-3). This guidance requires that in-substance foreclosures and
foreclosed assets held for sale be carried at the lower of cost or
fair value less estimated costs to sell. Previously, all foreclosed
assets were carried at cost less accumulated depreciation. This
accounting change resulted in a pretax charge of $412 million to
realized investment losses in 1992.
3. ACQUISITIONS AND DISPOSITIONS
In December 1994, the Company and its affiliates sold its 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
its group life and related businesses to MetLife, and completed the
formation of The MetraHealth Companies, Inc. (MetraHealth), a joint
venture of the medical businesses of the Company and its affiliates and
MetLife.
The Company and its affiliates sold its group life business as well as
related non-medical group insurance businesses to MetLife for $350
million. The assets transferred included customer lists, books and
records, and furniture and equipment. In connection with the sale, the
Company and its affiliates agreed to cede 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 and its affiliates 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 joint venture by contributing their
group medical businesses to MetraHealth, in exchange for shares of
common stock of MetraHealth. The assets transferred included cash,
fixed assets, customer lists, books and records, certain trademarks and
other assets used exclusively or primarily in the medical businesses.
The Company also contributed all of the capital stock of its wholly
owned subsidiary, The Travelers Employee Benefits Company, to
MetraHealth. The total contribution by the Company amounted to $336
million at carrying value on the date of contribution. 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, TIG owned 7.4% and the other 50% was owned by
MetLife and its affiliates.
29
<PAGE> 15
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
3. ACQUISITIONS AND DISPOSITIONS, Continued
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 comes due for renewal
and after obtaining regulatory approvals, the risks will be transferred
to MetraHealth. In the interim the related operating results for this
medical insurance business will be reported by the Company.
All of the businesses sold to MetLife or contributed to MetraHealth were
included in the Company's Managed Care and Employee Benefits Operations
(MCEBO). Revenues and net income from MCEBO for the year ended 1994
amounted to $3.5 billion and $157 million, respectively. Beginning in
1995 the Company's results will reflect the runoff medical insurance
business, plus its equity interest in the earnings of MetraHealth.
On December 31, 1993, in conjunction with the Merger, The Travelers Inc.
contributed TIHI to TIG, which TIG then contributed to the Company at a
carrying value of $2.1 billion. Through its subsidiaries TIHI primarily
offers individual life insurance and specialty accident and health
insurance.
In December 1992, in conjunction with the Acquisition, The Travelers
Corporation acquired Transport Life Insurance Company's preferred
provider and third party administrator organizations from Primerica
Corporation (see note 1), and on December 30, 1992 contributed these
businesses to the Company.
4. COMMERCIAL PAPER AND LINES OF CREDIT
The Company issues commercial paper directly to investors and had $74
million outstanding at December 31, 1994. The Company maintains unused
credit availability under bank lines of credit at least equal to the
amount of the outstanding commercial paper.
In 1994, The Travelers Inc., Commercial Credit Company (an indirect
wholly owned subsidiary of The Travelers Inc.) and the Company entered
into an agreement with a syndicate of banks to provide $1.5 billion of
revolving credit, to be allocated to any of the above-indicated
companies. The revolving credit facility consists of a 364-day
revolving credit in the amount of $300 million and a 5-year revolving
credit in the amount of $1.2 billion. The participation of the Company
in this facility is limited to $300 million, and at December 31, 1994,
the Company's allocation was $200 million, all of which was unused.
30
<PAGE> 16
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
5. 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 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>
- -----------------------------------------------------------------|------------------------------
1994 | 1993 1992
- -----------------------------------------------------------------|------------------------------
<S> <C> | <C> <C>
Written Premiums: |
Direct $ 4,529 | $ 3,308 $ 3,163
|
Assumed from: |
Affiliated companies 59 | 31 15
Non-affiliated companies 33 | 60 115
|
Ceded to: |
Affiliated companies (358) | (496) (522)
Non-affiliated companies (341) | (98) (62)
- -----------------------------------------------------------------|------------------------------
|
Total Net Written Premiums $ 3,922 | $ 2,805 $ 2,709
=================================================================|==============================
|
Earned Premiums: |
Direct $ 4,475 | $ 3,256 $ 3,124
|
Assumed from: |
Affiliated companies 65 | 32 15
Non-affiliated companies 30 | 32 110
|
Ceded to: |
Affiliated companies (384) | (512) (491)
Non-affiliated companies (333) | (87) (64)
- -----------------------------------------------------------------|------------------------------
|
Total Net Earned Premiums $ 3,853 | $ 2,721 $ 2,694
=================================================================|==============================
</TABLE>
31
<PAGE> 17
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
5. REINSURANCE, Continued
Reinsurance recoverables at December 31 include amounts recoverable on
unpaid and paid losses and were as follows (in millions):
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
1994 1993
------------------------------------------------------------------------------
<S> <C> <C>
Reinsurance Recoverables:
Life and accident and health business:
Affiliated companies $ 3 $ 3
Non-affiliated companies 661 689
Property-casualty business:
Affiliated companies 2,251 2,191
------------------------------------------------------------------------------
Total Reinsurance Recoverables $ 2,915 $ 2,883
==============================================================================
</TABLE>
6. SHAREHOLDER'S EQUITY
Additional Paid-In Capital
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 1 and 3). 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.
The increase in additional paid-in capital during December 31, 1992
arose from a contribution of $500 million in 1992 from The Travelers
Corporation and the contribution of Transport Life Insurance Company's
preferred provider and third party administrator organizations in 1992
(see note 3).
Unrealized Investment Gains (Losses)
An analysis of the change in unrealized gains and losses on investments
is shown in note 15.
32
<PAGE> 18
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
6. SHAREHOLDER'S EQUITY, Continued
Shareholder's Equity and Dividend Availability
The statutory net income, including TIHI, was $100 million for the year
ended December 31, 1994. The statutory net loss, excluding TIHI, was
$648 million and $346 million for the years ended December 31, 1993 and
1992, respectively.
Statutory capital and surplus was $2.1 billion and $1.8 billion at
December 31, 1994 and 1993, respectively.
The Company is currently subject to various regulatory restrictions that
limit the maximum amount of dividends available to TIG without prior
approval of insurance regulatory authorities. Under statutory
accounting practices, there is no statutory surplus available in 1995
for dividends to TIG without prior approval of the Connecticut Insurance
Department.
Dividend payments to the Company from its insurance subsidiaries are
subject to similar restrictions and statutory surplus of the
subsidiaries is not available in 1995 for dividends to the Company
without prior approval of insurance regulatory authorities.
7. ADDITIONAL OPERATING INFORMATION
The Company has segmented its business by major product lines. TIHI was
contributed to the Company on December 31, 1993, and its assets at that
date and subsequent and its operations for the year ended December 31,
1994 are included in the following table in the Life and Annuities
segment. Transport Life Insurance Company's preferred provider and
third party administrator organizations were contributed to the Company
in December 1992 and are included in the Managed Care and Employee
Benefits segment.
33
<PAGE> 19
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
7. ADDITIONAL OPERATING INFORMATION, continued
Results included in the table below reflect 1993 fourth quarter
after-tax charges of $103 million for an addition to reserves for
foreclosed properties held for sale and 1992 fourth quarter after-tax
charges of $272 million for implementation of SOP 92-3 and $193 million
for an addition to mortgage loan valuation reserves.
<TABLE>
<CAPTION>
Managed Care Corporate
Travelers Life and Employee and Other
(in millions) and Annuities Benefits Operations Consolidated
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994
- ----
Revenues
Premiums $ 1,492 $ 2,369 $ - $ 3,861
Net investment income 1,603 246 - 1,849
Realized investment gains 13 - 1 14
Other 173 850 - 1,023
- ------------------------------------------------------------------------------------------------------------------------
Total $ 3,281 $ 3,465 $ 1 $ 6,747
- ------------------------------------------------------------------------------------------------------------------------
Income (loss) before federal income taxes $ 604 $ 257 $ (4) $ 857
Net income (loss) 392 157 (4) 545
Assets 33,078 5,131 2,326 40,535
- ------------------------------------------------------------------------------------------------------------------------
1993
- ----
Revenues
Premiums $ 330 $ 2,395 $ - $ 2,725
Net investment income 1,616 265 3 1,884
Realized investment gains (losses) (45) 24 - (21)
Other 120 737 2 859
- ------------------------------------------------------------------------------------------------------------------------
Total $ 2,021 $ 3,421 $ 5 $ 5,447
- ------------------------------------------------------------------------------------------------------------------------
Income (loss) before federal income taxes $ (87) $ 173 $ (3) $ 83
Net income (loss) 19 123 (1) 141
Assets (purchase accounting value) 34,155 4,744 2,442 41,341
- ------------------------------------------------------------------------------------------------------------------------
1992
- ----
Revenues
Premiums $ 278 $ 2,408 $ - $ 2,686
Net investment income 1,799 290 12 2,101
Realized investment gains (losses) (725) (22) - (747)
Other 140 645 - 785
- ------------------------------------------------------------------------------------------------------------------------
Total $ 1,492 $ 3,321 $ 12 $ 4,825
- ------------------------------------------------------------------------------------------------------------------------
Income (loss) before federal
income taxes and cumulative effects of
changes in accounting principles $ (844) $ (100) $ 1 $ (943)
Cumulative effect of change in
accounting for postretirement
benefits other than pensions, net of tax (25) (101) - (126)
Cumulative effect of change in
accounting for income taxes 223 124 3 350
Net income (loss) (343) (42) 4 (381)
Assets 31,378 4,498 2,191 38,067
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
34
<PAGE> 20
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
8. DISCLOSURE ABOUT DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF
FINANCIAL INSTRUMENTS
The Company uses derivative financial instruments, including financial
futures, interest rate swaps and forward contracts, as a means of
prudently hedging exposure to price, foreign currency and/or interest
rate risk on anticipated investment purchases 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 credit 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. Many
transactions include the use of collateral to minimize credit risk and
lower the effective cost to the borrower.
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. At December 31,
1994 and 1993, the Company had entered into interest rate swaps with
contract values of $145 million and $153 million, respectively. At both
December 31, 1994 and 1993, the fair value of interest rate swaps was $1
million (loss position) which is determined using a discounted cash flow
method.
The off-balance-sheet risks of financial futures contracts, forward
contracts, fixed and variable rate loan commitments and unfunded
commitments to partnerships were not considered significant at December
31, 1994 and 1993.
35
<PAGE> 21
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
8. DISCLOSURE ABOUT DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF
FINANCIAL INSTRUMENTS, Continued
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, 1994 and 1993, investments in fixed maturities have a
fair value of $17.3 billion and $18.3 billion, respectively. See note
15.
At December 31, 1994, mortgage loans have a carrying value of $4.9
billion, which approximates fair value, compared with a carrying value
and a fair value of $6.8 billion at December 31, 1993. In estimating
fair value, the Company used interest rates reflecting the higher
returns required in the current real estate financing market.
The carrying value of $417 million and $320 million of financial
instruments classified as other assets approximates fair values at
December 31, 1994 and 1993, respectively. The carrying value of $1.2
billion and $878 million of financial instruments classified as other
liabilities also approximates their fair values at December 31, 1994 and
1993, respectively. Fair value is determined using various methods
including discounted cash flows and carrying value, as appropriate for
the various financial instruments.
At December 31, 1994, contractholder funds with defined maturities have
a carrying value of $4.2 billion and a fair value of $4.0 billion,
compared with a carrying value and a fair value of $5.0 billion at
December 31, 1993. 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 have a carrying value of
$9.1 billion and a fair value of $8.8 billion at December 31, 1994,
compared with a carrying value of $13.0 billion and a fair value of
$12.7 billion at December 31, 1993. These contracts generally are
valued at surrender value.
The assets of separate accounts providing a guaranteed return have a
carrying value and a fair value of $1.5 billion and $1.4 billion,
respectively, at December 31, 1994, compared with a carrying value and a
fair value of $1.5 billion and $1.6 billion, respectively, at December
31, 1993. The liabilities of separate accounts providing a guaranteed
return have a carrying value and a fair value of $1.5 billion and $1.3
billion, respectively, at December 31, 1994, compared with a carrying
value and a fair value of $1.5 billion and $1.7 billion, respectively,
at December 31, 1993.
36
<PAGE> 22
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
8. DISCLOSURE ABOUT DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF
FINANCIAL INSTRUMENTS, Continued
The carrying values of cash, short-term securities and investment income
accrued approximate their fair values.
The carrying value of policy loans, which have no defined maturities, is
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
In April 1989, a lawsuit was filed against the Company by the federal
government alleging the Company improperly handled health benefit claims
for individuals who are actively employed and eligible for Medicare
coverage. In November 1992, the court ruled on cross motions for
summary judgment. The court found that the Company had no liability
when acting in the capacity of an administrator of claims. However, the
court also recognized that, while the government's right of recovery
with respect to insured claims is governed by the substantive terms of
our customers' health benefit plan, the right of recovery is independent
of procedural limitations in the Company's contracts.
The Company is a defendant or codefendant in various litigation matters.
Although there can be no assurances, as of December 31, 1994, 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.
10. BENEFIT PLANS
Pension Plans
The Company participates in qualified and nonqualified, noncontributory
defined benefit pension plans 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, The Travelers Inc.
37
<PAGE> 23
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
10. BENEFIT PLANS, Continued
The Company's share of net pension expense was $6 million, $8 million
and $22 million for 1994, 1993 and 1992, respectively.
Through plans sponsored by TIG, 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
$2 million in 1994, 1993 and 1992. Certain non-U.S. employees of TIHI
are covered by noncontributory defined benefit plans. These plans are
funded based upon local laws.
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 TIG. 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.
In the third quarter of 1992, TIG adopted FAS 106 and elected to
recognize the accumulated postretirement benefit obligation (i.e., the
transition obligation) as a change in accounting principle retroactive
to January 1, 1992. The Company's pretax share of the total cost of the
plan for 1994, 1993 and 1992 was $14 million, $29 million and $26
million, respectively.
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. The
costs related to these changes have been assumed by TIG.
Savings, Investment and Stock Ownership Plan
Under the savings, investment and stock ownership plan available to
substantially all employees of TIG (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 TIG's profitability was added. The Company's
matching obligations were $7 million, $10 million and $16 million in
1994, 1993 and 1992, respectively.
38
<PAGE> 24
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
11. RELATED PARTY TRANSACTIONS
The principal banking functions for certain subsidiaries and affiliates
of TIG, and salaries and expenses for TIG and its insurance subsidiaries
(excluding TIHI), are handled by the Company. Settlements for these
functions between the Company and its affiliates are made regularly.
The Company provides various insurance coverages, principally life and
health, to employees of certain subsidiaries of TIG. The premiums for
these coverages were charged in accordance with normal cost allocation
procedures. In addition, investment advisory and management services,
data processing services and claims processing services are provided by
affiliated companies.
TIG and its subsidiaries maintain short-term investment pools in which
the Company participates. The positions of each company participating
in the pools are calculated and adjusted daily. At December 31, 1994
and 1993, the pools totaled approximately $1.5 billion and $1.3 billion,
respectively. The Company's share of the pools amounted to $1.1 billion
and $439 million at December 31, 1994 and 1993, respectively, and is
included in short-term securities in the consolidated balance sheet.
The Company markets a variable annuity product through its affiliate,
Smith Barney. Sales of this product were $158 million in 1994.
The Company leases new furniture and equipment from a noninsurance
subsidiary of TIG. The rental expense charged to the Company for this
furniture and equipment was $9 million, $10 million and $9 million in
1994, 1993 and 1992, respectively.
At December 31, 1994 and 1993, TIC has an investment of $23 million and
$27 million, respectively, in bonds of its affiliate, Commercial Credit
Company. This is included in fixed maturities in the consolidated
balance sheet.
TIHI has an investment of $231 million and $110 million in common stock
of The Travelers Inc. at December 31, 1994 and 1993, respectively.
This is carried at fair value at December 31, 1994 and at cost at
December 31, 1993. At December 31, 1994, TIHI has an investment of $35
million in redeemable preferred stock of The Travelers Inc. which is
carried at fair value. TIHI has notes receivable from The Travelers
Inc. of $30 million at December 31, 1994 and 1993, which are carried at
cost. These assets are included in other investments in the
consolidated balance sheet.
39
<PAGE> 25
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 $99 million, $113
million and $122 million in 1994, 1993 and 1992, respectively. Future
net minimum rental and lease payments are estimated as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
Minimum operating Minimum capital
------------------------------------------------------------------------------------------
(in millions) rental payments lease payments
------------------------------------------------------------------------------------------
<S> <C> <C>
Year ending December 31,
1995 $ 112 $ 7
1996 85 7
1997 69 4
1998 54 4
1999 47 4
Thereafter 36 64
------------------------------------------------------------------------------------------
$ 403 $ 90
------------------------------------------------------------------------------------------
</TABLE>
The Company is reimbursed by affiliates of TIG for utilization of space
and equipment.
The following is a summary of assets under capital leases:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
(in millions) 1994 1993
-------------------------------------------------------------------------
<S> <C> <C>
Buildings $ 25 $ 25
Equipment 14 14
-------------------------------------------------------------------------
39 39
Less accumulated depreciation 17 14
-------------------------------------------------------------------------
Net $ 22 $ 25
-------------------------------------------------------------------------
</TABLE>
The net carrying value of the assets is recorded at amortized cost and
at the value assigned at the acquisition dates at December 31, 1994 and
1993, respectively.
40
<PAGE> 26
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
13. FEDERAL INCOME TAXES
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
(in millions) 1994 | 1993 1992
------------------------------------------------------------|------------------------------
<S> <C> | <C> <C>
Effective tax rate |
|
Income (loss) before federal |
income taxes $ 857 | $ 83 $ (943)
------------------------------------------------------------|------------------------------
Statutory tax rate 35% | 35% 34%
------------------------------------------------------------|------------------------------
|
Expected federal income taxes $ 300 | $ 29 $ (321)
Tax effect of: |
Nontaxable investment income (4) | (1) (1)
Adjustments to benefit and other reserves - | (46) (18)
Adjustment to deferred tax asset for |
enacted change in tax rates from |
34% to 35% - | (25) -
Goodwill 12 | - -
Other 4 | (15) 2
------------------------------------------------------------|------------------------------
Federal income taxes $ 312 | $ (58) $ (338)
------------------------------------------------------------|------------------------------
|
Effective tax rate 36% | (70%) 36%
------------------------------------------------------------|------------------------------
|
Composition of federal income taxes |
Current: |
United States $ 22 | $ 17 $ (3)
Foreign 14 | 3 5
------------------------------------------------------------|------------------------------
Total 36 | 20 2
------------------------------------------------------------|------------------------------
|
Deferred: |
United States 271 | (78) (340)
Foreign 5 | - -
------------------------------------------------------------|------------------------------
Total 276 | (78) (340)
------------------------------------------------------------|------------------------------
Federal income taxes $ 312 | $ (58) $ (338)
-------------------------------------------------------------------------------------------
</TABLE>
41
<PAGE> 27
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
13. FEDERAL INCOME TAXES, Continued
The net deferred tax assets at December 31, 1994 and 1993 were comprised
of the tax effects of the temporary differences related to the following
assets and liabilities:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
(in millions) 1994 1993
----------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Benefit, reinsurance and other reserves $ 453 $ 575
Contractholder funds 158 184
Investments 690 492
Other employee benefits 87 65
Other 257 146
----------------------------------------------------------------------------------------------
Total 1,645 1,462
----------------------------------------------------------------------------------------------
Deferred tax liabilities:
Deferred acquisition costs and value of insurance in force 529 504
Prepaid pension expense 5 3
Other 61 -
----------------------------------------------------------------------------------------------
Total 595 507
----------------------------------------------------------------------------------------------
Net deferred tax asset before valuation allowance 1,050 955
Valuation allowance for deferred tax assets (100) (100)
----------------------------------------------------------------------------------------------
Net deferred tax asset after valuation allowance $ 950 $ 855
----------------------------------------------------------------------------------------------
</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. The Company has no receivable for unreimbursed credits from its
previous allocation agreement with The Travelers Corporation.
42
<PAGE> 28
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 net 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 The Travelers Inc. commencing
in 1999 or a change in circumstances which causes the recognition of the
benefits to become more likely than not. There was no net change in the
valuation allowance during 1994. The initial recognition of any benefit
produced by the reversal of the valuation allowance will be recognized
by reducing goodwill.
The Company has a net deferred tax asset, after the valuation allowance
of $100 million, which relates to temporary differences that are
expected to reverse as net ordinary deductions except for a deferred tax
asset of $319 million which relates to the unrealized loss on fixed
maturity investments. Management does not intend to realize the
unrealized loss on the fixed maturity investments except to the extent
of offsetting capital gains. The Company will have to generate
approximately $1.8 billion of taxable income, before reversal of these
temporary differences, primarily over the next 10 to 15 years, to
realize the remainder of the deferred tax asset, exclusive of the
unrealized loss on fixed maturity investments. Management expects to
realize the remainder of the deferred tax asset based upon its
expectation of future positive taxable income, after the reversal of
these deductible temporary differences, in the consolidated life
insurance company federal income tax return through 1998, and the
consolidated federal income tax return of The Travelers Inc. commencing
in 1999. The taxable income of The Travelers Inc. consolidated return,
after reversal of the deductible temporary differences, is expected to
be at least $1 billion annually. At December 31, 1994, 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) is
approximately $326 million.
See note 2 for a discussion of the implementation of new principles for
accounting for income taxes.
43
<PAGE> 29
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
14. NET INVESTMENT INCOME
<TABLE>
<CAPTION>
------------------------------------------------------------------|------------------------------
(For the year ended December 31, in millions) 1994 | 1993 1992
------------------------------------------------------------------|------------------------------
<S> <C> | <C> <C>
Gross investment income |
Fixed maturities $ 1,253 | $ 1,221 $ 1,242
Mortgage loans 534 | 692 868
Real estate 177 | 383 384
Policy loans 112 | 106 109
Other 7 | (23) -
------------------------------------------------------------------|------------------------------
2,083 | 2,379 2,603
------------------------------------------------------------------|------------------------------
|
Investment expenses 234 | 495 502
------------------------------------------------------------------|------------------------------
Net investment income $ 1,849 | $ 1,884 $ 2,101
------------------------------------------------------------------|------------------------------
</TABLE>
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) 1994 | 1993 1992
-------------------------------------------------------------------|-----------------------------
<S> <C> | <C> <C>
Realized |
|
Fixed maturities $ (3) | $ 182 $ (11)
Equity securities 19 | 14 9
Mortgage loans - | (32) (386)
Real estate - | (222) (400)
Other (2) | 37 41
-------------------------------------------------------------------|-----------------------------
Realized investment gains (losses) $ 14 | $ (21) $ (747)
-------------------------------------------------------------------|-----------------------------
</TABLE>
44
<PAGE> 30
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
15. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued
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) 1994 | 1993 1992
-------------------------------------------------------------------|-----------------------------
<S> <C> | <C> <C>
Unrealized |
|
Fixed maturities $ (1,319) | $ (235) $ 146
Equity securities (25) | (17) 6
Other 165 | 28 4
-------------------------------------------------------------------|-----------------------------
(1,179) | (224) 156
Related taxes (412) | (83) 53
-------------------------------------------------------------------|-----------------------------
|
Net unrealized investment gains (losses) (767) | (141) 103
Contribution of TIHI - 5 | -
Balance beginning of year 7 143 | 40
--------------------------------------------------------------------------------------|----------
Balance end of year $ (760) $ 7 | $ 143
-------------------------------------------------------------------------------------------------
</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 $1.4 billion in 1994, resulting in gross realized gains of $15
million and gross realized losses of $27 million. There were no sales
of fixed maturities classified as available for sale in 1993 or 1992 as,
in conjunction with the Merger, fixed maturities were first classified
as "available for sale" effective December 31, 1993.
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 $97 million and $195 million in 1993 and
1992, respectively. Gross gains of $7 million and $10 million in 1993
and 1992, respectively, and gross losses of $1 million and $6 million in
1993 and 1992, respectively, were realized on those sales.
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. At December 31, 1992, these fixed
maturities had market values of $4.8 billion. Sales of trading
portfolio fixed maturities were $4.0 billion and $642 million in 1993
and 1992, respectively. Gross gains of $165 million and $24 million in
1993 and 1992, respectively, and gross losses of $2 million and $4
million in 1993 and 1992, respectively, were realized on those sales.
45
<PAGE> 31
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
15. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued
The amortized cost and market value of investments in fixed maturities
were as follows:
<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>
46
<PAGE> 32
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
15. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
December 31, 1993
------------------------------------------------------------------------------------------------
Gross Gross
Carrying unrealized unrealized Market
(in millions) value gains losses value
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available for sale:
Mortgage-backed securities -
CMOs and pass through
securities $ 4,219 $ 18 $ 18 $ 4,219
U.S. Treasury securities
and obligations of U.S.
Government and
government agencies
and authorities 2,807 67 6 2,868
Obligations of states,
municipalities and
political subdivisions 259 9 - 268
Debt securities issued by
foreign governments 333 6 - 339
All other corporate bonds 10,474* 125 29 10,570
Redeemable preferred stock 20 - - 20
Held for investment 18 - - 18
------------------------------------------------------------------------------------------------
Total $ 18,130 $ 225 $ 53 $ 18,302
------------------------------------------------------------------------------------------------
</TABLE>
* Before valuation reserves of $67 million.
The amortized cost and market value of fixed maturities at December 31,
1994, 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 $ 1,217 $ 1,197
Due after 1 year through 5 years 4,691 4,434
Due after 5 years through 10 years 5,731 5,310
Due after 10 years 3,161 2,841
------------------------------------------------------------------------------------------------
14,800 13,782
Mortgage-backed securities 3,779 3,478
------------------------------------------------------------------------------------------------
Total $ 18,579 $ 17,260
------------------------------------------------------------------------------------------------
</TABLE>
47
<PAGE> 33
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, 1994 and 1993, the Company held CMOs with a market value
of $2.2 billion and $2.5 billion, respectively. Approximately 88% of
the Company's CMO holdings are fully collateralized by GNMA, FNMA or
FHLMC securities at December 31, 1994 and 1993. The majority of these
are GNMA-backed securities. In addition, the Company held $1.3 billion
and $1.9 billion of GNMA, FNMA or FHLMC mortgage-backed securities at
December 31, 1994 and 1993, respectively. Virtually all of these
securities are rated AAA. The Company also held $927 million and $899
million of securities that are backed primarily by credit card or car
loan receivables at December 31, 1994 and 1993, respectively.
Equity Securities
The cost and market values of investments in equity securities were as
follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
December 31, 1994
------------------------------------------------------------------------------------------------
Gross Gross
unrealized unrealized Market
(in thousands) 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
------------------------------------------------------------------------------------------------
December 31, 1993
------------------------------------------------------------------------------------------------
Common stocks $ 129 $ 22 $ 3 $ 148
Nonredeemable preferred stocks 70 3 1 72
------------------------------------------------------------------------------------------------
Total $ 199 $ 25 $ 4 $ 220
------------------------------------------------------------------------------------------------
</TABLE>
Proceeds from sales of equity securities were $359 million in 1994,
resulting in gross realized gains of $24 million and gross realized
losses of $6 million.
48
<PAGE> 34
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
15. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued
Mortgage loans and real estate
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, 1994 and 1993, the Company's mortgage loan and real
estate held for sale portfolios consisted of the following (in
millions):
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
1994 1993
------------------------------------------------------------------------------
<S> <C> <C>
Current mortgage loans $ 4,467 $ 5,680
Underperforming mortgage loans 471 1,165
------------------------------------------------------------------------------
Total mortgage loans 4,938 6,845
------------------------------------------------------------------------------
Real estate held for sale 383 954
------------------------------------------------------------------------------
Total mortgage loans and real estate $ 5,321 $ 7,799
------------------------------------------------------------------------------
</TABLE>
Aggregate annual maturities on mortgage loans at December 31, 1994 are as
follows:
<TABLE>
<CAPTION>
-----------------------------------------------------
(in millions)
-----------------------------------------------------
<S> <C>
Past maturity $ 196
1995 708
1996 517
1997 550
1998 614
1999 611
Thereafter 1,742
-----------------------------------------------------
Total $ 4,938
-----------------------------------------------------
</TABLE>
Concentrations
At December 31, 1994 and 1993, the Company had no concentration of
credit risk in a single investee exceeding 10% of consolidated
shareholder's equity.
The Company participates in two short-term investment pools maintained by
TIG and its subsidiaries. These pools are discussed in note 11.
49
<PAGE> 35
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
15. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued
Included in fixed maturities are below investment grade assets totaling
$922 million and $814 million at December 31, 1994 and 1993,
respectively. The Company defines its below investment grade assets as
those securities rated "Ba1" or below by external rating agencies, or
the equivalent by the internal analysts when a public rating does not
exist. Such assets include publicly traded below investment grade
bonds, highly leveraged transactions and certain other privately issued
bonds that are classified as below investment grade loans.
The Company also has significant concentrations of investments in the
following industries:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
(in millions) 1994 1993
------------------------------------------------------------------------------------------------
<S> <C> <C>
Finance $ 1,241 $ 1,442
Electric utilities 1,222 1,348
Banking 953 743
Oil and gas 859 651
------------------------------------------------------------------------------------------------
</TABLE>
Below investment grade assets included in the totals above, are as
follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
(in millions) 1994 1993
------------------------------------------------------------------------------------------------
<S> <C> <C>
Finance $ 75 $ 45
Electric utilities 32 47
Banking 21 21
Oil and gas 33 38
------------------------------------------------------------------------------------------------
</TABLE>
At December 31, 1994 and 1993, significant concentrations of mortgage
loans were for properties located in highly populated areas in the
states listed below. The amounts are shown below:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
(in millions) 1994 1993
------------------------------------------------------------------------------------------------
<S> <C> <C>
California $ 929 $ 1,174
New York 558 780
Florida 432 588
Texas 380 584
Illinois 347 485
------------------------------------------------------------------------------------------------
</TABLE>
Other mortgage loan investments are fairly evenly dispersed throughout
the United States, with no holdings in any state exceeding $273 million
and $324 million at December 31, 1994 and 1993, respectively.
50
<PAGE> 36
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
15. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued
Concentrations of mortgage loans by property type at December 31, 1994
and 1993 are shown below:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
(in millions) 1994 1993
-----------------------------------------------------------------------------------------------
<S> <C> <C>
Office $ 2,065 $ 2,769
Apartment 1,029 1,635
Retail 606 891
Agricultural 540 643
Hotel 402 547
-----------------------------------------------------------------------------------------------
</TABLE>
Real estate investments are dispersed throughout the United States, with
no holdings in any state exceeding $111 million or $191 million at
December 31, 1994 or 1993, respectively.
Real estate assets at December 31, 1994 and 1993 included office
properties with carrying values of $205 million and $568 million,
respectively.
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
At December 31, 1994, 1993 and 1992, total investment valuation
reserves, which are deducted from the applicable investment carrying
values in the consolidated balance sheet, were as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
(in millions) 1994 | 1993 1992
------------------------------------------------------------------|------------------------------
<S> <C> | <C> <C>
Beginning of year $ 67 | $ 1,417 $ 864
Increase - | 195 821
Impairments, net of gains/recoveries - | (602) (268)
FAS 115/Purchase accounting adjustment (67) | (943) -
-------------------------------------------------------------------------------------------------
End of year $ - $ 67 | $ 1,417
-------------------------------------------------------------------------------------------------
</TABLE>
At December 31, 1993, investment valuation reserves were comprised of
$67 million for securities. Increases in the investment valuation
reserves are reflected as realized investment losses.
51
<PAGE> 37
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) 1994 1993
-----------------------------------------------------------------------------------------------
<S> <C> <C>
Mortgage loans $ 127 $ 249
Real estate 73 147
Fixed maturities 6 24
-----------------------------------------------------------------------------------------------
Total $ 206 $ 420
-----------------------------------------------------------------------------------------------
</TABLE>
Restructured
The Company has mortgage loans and debt securities which were
restructured at below market terms totaling approximately $259 million
and $796 million at December 31, 1994 and 1993, respectively. At
December 31, 1993, the Company's restructured assets are recorded at
purchase accounting value. 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 $52 million in 1994 and $121
million in 1993. Interest on these assets, included in net investment
income, aggregated $17 million and $52 million in 1994 and 1993,
respectively.
16. LIFE AND ANNUITY DEPOSIT FUNDS AND RESERVES
At December 31, 1994, the Company has $23.2 billion of life and annuity
deposit funds and reserves. Of that total, $11.6 billion are not
subject to discretionary withdrawal based on contract terms and related
market conditions. The remaining $11.6 billion are for life and annuity
products that are subject to discretionary withdrawal by the
contractholder. Included in the amount that is subject to discretionary
withdrawal are $1.9 billion of liabilities that are surrenderable with
market value adjustments. An additional $5.7 billion of the life
insurance and individual annuity liabilities are subject to
discretionary withdrawals with an average surrender charge of 5.5%.
Another $1.4 billion 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 $2.6 billion of
liabilities are surrenderable without charge. Approximately 30% 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.
52
<PAGE> 38
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
17. RESTRUCTURING COSTS
During 1992, the Company announced a series of organizational
restructuring initiatives associated with its plan to streamline its
business and corporate operations. These initiatives have been
substantially completed. These initiatives resulted in a pretax charge
in 1992 of $151 million, consisting of $96 million for severance,
benefits, accrued vacation and outplacement costs, $5 million for
relocation costs due to consolidation efforts, $19 million for lease
costs, $15 million for writeoff of goodwill related to identified
divestitures and $16 million of miscellaneous other costs.
18. RECONCILIATION OF NET INCOME (LOSS) TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
In the first quarter of 1992, the Company changed its presentation of
cash flows from operating activities from the indirect method to the
direct method. The following table reconciles net income (loss) to net
cash provided by operating activities:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
(For the year ended December 31, in millions) 1994 | 1993 1992
----------------------------------------------------------------|-------------------------------
<S> <C> | <C> <C>
Net income (loss) $ 545 | $ 141 $ (381)
Reconciling adjustments |
Realized gains (losses) (14) | 21 747
Deferred federal income taxes 276 | (78) (340)
Amortization of deferred policy acquisition |
costs and value of insurance in force 284 | 55 61
Additions to deferred policy acquisition costs (429) | 5 (2)
Trading account investments, |
(purchases) sales, net - | (1,576) (364)
Investment income accrued 17 | 1 29
Premium balances receivable 9 | 41 3
Insurance reserves and accrued expenses 165 | 542 (81)
Restructuring reserves - | (79) 121
Cumulative effects of changes in |
accounting principles - | - (224)
Other, including investment valuation reserves |
in 1993 and 1992 (136) | (445) 487
----------------------------------------------------------------|-------------------------------
|
Net cash provided by (used in) |
operating activities $ 717 | $ (1,372) $ 56
------------------------------------------------------------------------------------------------
</TABLE>
53
<PAGE> 39
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
19. NONCASH INVESTING AND FINANCING ACTIVITIES
Significant noncash investing and financing activities include: a) the
1994 exchange of $23 million of TIHI's investment in The Travelers Inc.
common stock for $35 million of The Travelers Inc. nonredeemable
preferred stock; b) the acquisition of real estate through foreclosures
of mortgage loans amounting to $229 million, $563 million and $753
million in 1994, 1993 and 1992, respectively; c) the acceptance of
purchase money mortgages for sales of real estate aggregating $96
million, $190 million and $72 million in 1994, 1993 and 1992,
respectively; d) the 1993 contribution of TIHI by The Travelers Inc. (see
note 3); e) the 1993 contribution of $400 million of bond investments by
The Travelers Corporation (see note 6); f) increases in investment
valuation reserves in 1993 and 1992 for securities, mortgage loans and/or
investment real estate (see note 15); g) the 1993 transfer of $352
million of mortgage loans and bonds from the Company's general account to
two separate accounts; and h) the contribution in 1992 of Transport Life
Insurance Company's preferred provider and third party administrator
organizations by The Travelers Corporation (see note 3).
54
<PAGE>
COPY OF ANNUAL REPORT DATED DECEMBER 31, 1994
TO WHICH THE REGISTRANT'S FINANCIAL STATEMENTS
ARE INCORPORATED IN THE PROSPECTUS/STATEMENT OF
ADDITIONAL INFORMATION BY REFERENCE TO THIS FILING
Annual Report
For
The Travelers Timed Short-Term Bond Account for Variable
Annuities
<PAGE>
UNIVERSAL ANNUITY
ANNUAL REPORT
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT FOR VARIABLE ANNUITIES
DECEMBER 31, 1994
THETRAVELERS (logo with umbrella)
THE TRAVELERS INSURANCE COMPANY
ONE TOWER SQUARE
HARTFORD, CONNECTICUT 06183
<PAGE>
THETRAVELERS (logo with Umbrella)
THE TRAVELERS VARIABLE PRODUCT SEPARATE ACCOUNTS
INVESTMENT ADVISORY COMMENTARY AS OF DECEMBER 31, 1994
ECONOMIC REVIEW AND OUTLOOK
Economic growth kicked into high gear in 1994, and the economy used
up any excess capacity in product and labor markets. The fitful
recovery of the previous three years was replaced by a broad-based
expansion. Unemployment fell to 5.4% at year-end, from 7.0% at the
end of 1993. This robust economic activity was accompanied by few
signs of higher inflation. The Consumer Price Index rose just 2.7%
during 1994, the same as during the prior year. However, certain
commodity prices showed large gains, and there was evidence by
year-end of a modest acceleration in wage gains.
The Federal Reserve ("Fed") started a tightening policy in
February, while there still appeared to be slack in the economy.
Fed actions served to push 3-month T-bill rates up from 3.1% at the
start of the year to 5.7% at year-end. The yield curve rose and
flattened significantly during the year. Yields on one-year
Treasury bills rose by over 350 basis points, while yields on the
30-year bond were up over 150 basis points. At year-end, there
was little evidence that Fed tightening had started to slow growth.
In the fourth quarter, the economy grew at an annual rate of 4.5%,
well above the 2.0-2.5% pace that many economists think is
compatible with price stability.
There is normally a lag of 6-12 months between Federal Reserve
actions and the resulting impact on the economy. Coming into 1994,
Fed policy was very accommodative of economic growth, with real
money market interest rates (adjusted for inflation) close to zero.
Monetary policy became truly restrictive only with the last 2 or 3
rates hikes. With unemployment at levels that many economists view
as inflationary, we expect the Fed to push money market interest
rates somewhat higher in 1995. We think that the Federal Reserve
will succeed in slowing economic growth, and that inflation will
stay below 4% during 1995 and into 1996. However, convincing
evidence of the slowdown may take a while longer to emerge.
FIXED-INCOME MARKET COMMENTARY
Like a neutron bomb, which kills people but leaves buildings
intact, rising interest rates in 1994 decimated complicated
strategies much more than it hurt broad market averages. During
the fourth quarter, Orange County and emerging markets investors
were added to the casualty list, joining the hedge funds and
various corporate users of derivatives that were hurt earlier in
the year. While derivatives and mortgage backed securities have
taken much of the blame for these incidents, the rise in short-term
interest rates hurt any strategy that was based on leverage or
benefited from the prior three years of low short-term rates.
For the year, cash was the best performing asset, while stocks
treaded water and bonds had their worst year in recent history.
The Lehman Long Treasuries Index showed a negative return of 7.6%
for the full year 1994. The long end of the yield curve stabilized
late in the year, allowing long Treasuries to outperform cash
during the fourth quarter. For the year as a whole, mortgage
backed securities and corporates outperformed similar duration
Treasuries. Late in the year, corporate spreads widened modestly
with growing concerns over the 1995 economic outlook; as a result,
long corporates underperformed similar duration Treasuries in the
fourth quarter.
<PAGE>
We have been concerned by tight spreads on corporate issues
throughout 1994. We expect issuance of new corporates to be light
in the first half of 1995; this will help to support prices of
corporate issues. Corporates are still likely to underperform
Treasuries if a significant economic slowdown develops. We think
inflation will stay below 4% in 1995. We also expect stable to
modestly lower yields on Treasuries with maturities of 5 years or
longer. If we are correct, bond investors will enjoy real returns,
after inflation, of 4-7% in 1995. If the Federal Reserve is
successful in containing economic growth and inflation, lower
interest rates (stronger bond prices) are likely in 1996.
EQUITY MARKET COMMENTARY
Despite increased pressure by the Federal Reserve Board and a
string of potentially dangerous financial crises, the U.S. stock
market managed to achieve a broad-based gain in the second half of
1994. Surprisingly strong corporate earnings offset the negative
effect of higher interest rates on equity valuations. During the
final six months of 1994, the S&P 500 Stock Index provided a total
return of 4.9%, including dividends. The stocks of small and
medium sized companies provided comparable returns over that
period, but with considerably higher volatility.
Technology stocks led the market during the second half. The
office and business equipment group was up over 25%, owing to
continued booming sales of personal computers and a sharp rebound
in networking stocks. Semi conductor stocks advanced in concert,
reflecting strong demand for memory chips and microprocessors.
Investors also returned to many defensive and recently out-of-favor
"growth" groups in the second half. In the consumer staples
sector, for example, beverage stocks rose 24% on earnings
surprising and improving international growth prospects. In the
health care sector, drug and medical product stocks rebounded over
20%.
On the negative side, rising interest rates and fears of an
impending economic slowdown hurt many interest sensitive and early
cycle groups. Airline, trucking and railroad stocks were down over
10%. Auto stocks were off 8%. Regional banks declined 12%. In the
energy sector, independent producers and drilling companies were
down 12%, due to weaker oil and gas prices and the poor outlook for
new production.
We remain constructive, but cautious, in our outlook for stocks in
1995. With the S&P 500 Stock Index trading at only 14.5 times
operating earnings, the equity market starts the year with
reasonable valuation support. A more stable interest rate
environment could even help to reverse the broad-based market price
to earnings ratio contraction that has occurred over the past year.
Where we think the stock market is most likely to run into problems
is on the earnings front. Corporate earnings are expected to grow
8-10% in 1995, but most of that growth is expected to occur in the
first half of the year. By the third quarter, we expect a
noticeable deceleration in earnings growth. With equity indices
near their all-time highs, the stock market is probably more
vulnerable than the bond market to negative surprises, given the
relative performance of the two asset classes over the past year.
TIMCO (Logo of sphere)
A COMPANY OF THETRAVELERS (logo with Umbrella)
The Travelers Investment Management Company ("TIMCO") provides
equity management and advisory services for the following Travelers
Variable Product Separate Accounts contained in this report: Timed
Growth and Income Stock Account, Timed Short-Term Bond Account and
Timed Aggressive Stock Account.
TAMIC (Logo of globe with four lines through it)
TRAVELERS ASSET MANAGEMENT
INTERNATIONAL CORPORATION
Travelers Asset Management International Corporation ("TAMIC")
provides fixed income management and advisory services for the
following Travelers Variable Product Separate Account contained in
this report: Timed Bond Account.
<PAGE>
<PAGE>
THE TRAVELERS
TIMED SHORT-TERM
BOND ACCOUNT
FOR VARIABLE ANNUITIES
The Timed Short-Term Bond Account experienced wide sweeping changes
during 1994. In May, the Account's prospectus was rewritten.
Resulting from this change was the shedding of its money market
structure to become a short-term bond account. The new guidelines
now allow the fund to hold securities with longer maturities. The
targeted average life which was 30 to 60 days, became six months to
one year.
The Account was affected by nine market timing moves during the
year which created a net outflow of fund assets of approximately
$70 million.
The strategy in managing the Account was aimed at capturing
constantly increasing rates. This was achieved through maintaining
the average life of the portfolio at a level much lower than had
been targeted under the Account's new structure. This strategy
proved beneficial to its participants, since the Federal Reserve's
tightening moves during the year drastically increased short term
rates.
Since there is a greater probability of further Federal Reserve
tightening, the current strategy in managing the portfolio will
remain stable. When the robust economy becomes more stable and
then begins to weaken, longer maturities will begin to be targeted.
At all times, liquidity and protection of principal will remain the
overall objective in choosing high quality debt instruments.
TIMCO (logo with globe)
A COMPANY OF THETRAVELERS (logo with umbrella)
<PAGE>
<TABLE>
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT
FOR VARIABLE ANNUITIES
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1994
<S> <C>
ASSETS:
Investment securities, at market value (identified cost $278,134,006) $277,878,388
Cash 244,087
Receivables:
Interest 2,313,980
Purchase payments and transfers from other Travelers accounts 161,307
-----------
Total Assets 280,597,762
-----------
LIABILITIES:
Payables:
Contract surrenders and transfers to other Travelers accounts 422,554
Investment management and advisory fees 9,620
Market timing fees 19,201
Insurance charges 37,023
Accrued liabilities 21
-----------
Total Liabilities 488,419
-----------
NET ASSETS
(Applicable to 216,713,157 units outstanding at $1.292 per unit) $ 280,109,343
-----------
-----------
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT
FOR VARIABLE ANNUITIES
<CAPTION>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
<S> <C> <C>
INVESTMENT INCOME:
Interest $10,631,738
EXPENSES:
Market timing fees $ 3,161,512
Investment management and advisory fees 821,532
Insurance charges 3,161,512
----------
Total expenses 7,144,556
-----------
Net investment income 3,487,182
-----------
REALIZED AND CHANGE IN UNREALIZED LOSS ON
INVESTMENT SECURITIES:
Realized loss from investment security transactions:
Proceeds from investment securities sold 4,269,084,056
Cost of investment securities sold 4,269,100,116
------------
Net realized loss (16,060)
Change in unrealized loss on investment securities:
Unrealized loss at December 31, 1993 --
Unrealized loss at December 31, 1994 (255,618)
-----------
Net change in unrealized loss for the year (255,618)
------------
Net realized and change in unrealized loss (271,678)
------------
Net increase in net assets resulting from operations $ 3,215,504
------------
------------
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT
FOR VARIABLE ANNUITIES
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
1994 1993
------ ------
<S> <C> <C>
OPERATIONS:
Net investment income $ 3,487,182 $ 1,222,407
Net realized loss from investment security transactions (16,060) --
Net change in unrealized loss on investment securities (255,618) --
----------- ------------
Net increase in net assets resulting from operations 3,215,504 1,222,407
----------- ------------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 20,847,101 and 36,436,120 units, respectively) 26,686,784 46,385,730
Participant transfers from other Travelers accounts
(applicable to 2,135,671 and 6,511,400 units, respectively) 2,734,518 8,275,785
Market timing transfers from other Travelers timed accounts
(applicable to 298,165,356 and 510,378,268 units, respectively) 381,665,377 649,547,162
Administrative charges
(applicable to 383,685 and 508,085 units, respectively) (493,803) (647,570)
Contract surrenders
(applicable to 20,164,576 and 21,307,511 units, respectively) (25,802,591) (27,127,885)
Participant transfers to other Travelers accounts
(applicable to 84,918,862 and 69,993,550 units, respectively) (108,667,839) (89,136,094)
Market timing transfers to other Travelers timed accounts
(applicable to 352,098,599 and 281,051,657 units, respectively) (449,633,557) (357,500,287)
Other payments to participants
(applicable to 242,807 and 450,700 units, respectively) (311,994) (573,643)
----------- -----------
Net increase (decrease) in net assets resulting from unit transactions (173,823,105) 229,223,198
----------- -----------
Net increase (decrease) in net assets (170,607,601) 230,445,605
NET ASSETS:
Beginning of year 450,716,944 220,271,339
----------- -----------
End of year $280,109,343 $450,716,944
----------- -----------
----------- -----------
See Notes to Financial Statements
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Timed Short-Term Bond Account for Variable Annuities
("Account TSB"), formerly The Travelers Timed Money Market Account
for Variable Annuities, is a separate account of The Travelers
Insurance Company ("Travelers Insurance"), an indirect wholly owned
subsidiary of The Travelers Inc., and is available for funding
certain variable annuity contracts issued by Travelers Insurance.
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 Travelers Insurance,
which provide for the transfer of participants' funds to certain
other timed accounts of Travelers Insurance, at the discretion of
the market timers.
In 1994, The Travelers Timed Money Market Account for Variable
Annuities ("Account TMM") Board of Managers modified the
fundamental investment objective, restrictions and account name.
The changes enable Account TMM, renamed The Travelers Timed
Short-Term Bond Account for Variable Annuities to invest in
fixed-income securities with a maturity of three years or
less. Prior to the change, Account TMM was only able to hold
fixed-income securities with a maturity of one year or less.
As a result of the modifications, Account TSB is no longer subject
to the provisions of Rule 2a-7 of the 1940 Act.
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 Travelers Insurance and are not taxed
separately. Travelers Insurance 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. Security transactions are accounted for on the trade date.
Interest income is recorded on the accrual basis.
<PAGE>
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 The Travelers Inc.
A market timing fee equivalent on an annual basis to 1.25% of the
net assets of Account TSB is deducted daily for market timing
services. Prior to July 22, 1994, Travelers Insurance paid the fee
to Travelers Equities Sales, Inc., and Copeland Financial Services,
Inc., affiliates of Travelers Insurance and registered investment
advisers which provided market timing services to subscribing
participants in Account TSB. Effective July 22, 1994, Travelers
Equities Sales, Inc., discontinued its market timing service.
After this date, all market timing fees were paid to Copeland
Financial Services, Inc.
Insurance charges are paid to Travelers Insurance for the mortality
and expense risks assumed by Travelers Insurance. 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
and the level of participation in other Travelers Insurance
separate accounts) is deducted from participant account balances
and paid to Travelers Insurance to cover administrative charges.
No sales charge is deducted from participant purchase payments when
they are received. However, Travelers Insurance 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
$392,576 and $376,463 of contingent deferred sales charges for the
years ended December 31, 1994 and 1993, respectively.
3. SUPPLEMENTARY INFORMATION
(Per unit data for a unit outstanding
throughout each year.)
<TABLE> YEAR ENDED DECEMBER 31,
__________________________________________
<CAPTION>
1994 1993 1992
__________ __________ __________
<S> <C> <C> <C>
SELECTED PER UNIT DATA:
Total investment income..................................... $ .055 $ .041 $ .054
Operating expenses.......................................... .036* .037* .041*
_________ __________ _________
Net investment income....................................... .019 .004 .013
Unit value at beginning of year............................. 1.275 1.271 1.258
Net realized and change in unrealized gains (losses)**...... (.002) -- --
_________ _________ ________
Unit value at end of year............................... $ 1.292 $ 1.275 $ 1.271
========= ========= ========
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase in unit value................................... .02 -- .01
Ratio of operating expenses to average net assets***........ 2.82%* 2.82%* 2.82%*
Ratio of net investment income to average net assets***..... 1.45% .39% 1.12%
Number of units outstanding at end of year (thousands). 216,713 353,374 173,359
1991 1990
__________ __________
SELECTED PER UNIT DATA:
Total investment income..................................... $ .076 $ .099
Operating expenses.......................................... .036* .030*
_________ __________
Net investment income....................................... .040 .069
Unit value at beginning of year............................. 1.218 1.149
Net realized and change in unrealized gains (losses)**...... -- --
_________ _________
Unit value at the end of year............................... $ 1.258 $ 1.218
========= =========
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase in unit value.................................. .04 .07
Ratio of operating expenses to average net assets***........ 2.82%* 2.41%*
Ratio of net investment income to average net assets***..... 3.07% 5.89%
Number of units outstanding at end of year (thousands). 439,527 369,769
</TABLE>
* 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 from the contract 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.
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
4. SUBSEQUENT EVENT
On February 3, 1995, $49,295,213 of the net assets of The Travelers
Timed Short-Term Bond Account for Variable Annuities were
transferred to The Travelers Timed Growth and Income Stock Account
for Variable Annuities as a result of a transfer order made by a
market timer on behalf of subscribing participants.
On February 15, 1995, $16,144,323 of the net assets of The
Travelers Timed Short-Term Bond Account for Variable Annuities were
transferred to The Travelers Timed Bond Account for Variable
Annuities as a result of a transfer order made by a market timer on
behalf of subscribing participants.
<PAGE>
<TABLE>
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS
DECEMBER 31, 1994
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
____________ __________
<S> <C> <C>
SHORT-TERM INVESTMENTS (100%)
CERTIFICATES OF DEPOSIT (7.2%)
Abn Amro Bank NW,
6.16% due February 9, 1995 $ 5,000,000 $ 4,945,875
Commerzbank Ag,
5.55% due January 6, 1995 15,000,000 14,998,956
---------
19,944,831
---------
COMMERCIAL PAPER (78.8%)
Bankers Trust New York Corp.,
5.21% due February 21, 1995 10,000,000 9,731,333
Campbell Soup Co.,
5.95% due January 5, 1995 10,000,000 9,988,500
Commerzbank U.S. Finance, Inc.,
6.00% due January 3, 1995 6,924,000 6,919,436
Corporate Receivables Corp.,
6.02% due January 10, 1995 5,000,000 4,982,639
Daimler Benz North America Corp.,
6.13% due February 9, 1995 4,000,000 3,958,940
General Electric Capital Corp.,
5.44% due August 15, 1995 5,000,000 4,957,037
General Electric Capital Corp.,
5.87% due January 23, 1995 6,000,000 5,968,815
General Mills, Inc.,
5.90% due January 3, 1995 20,000,000 19,983,594
H.J. Heinz Co.,
6.07% due January 26, 1995 7,000,000 6,939,991
IMI Funding Corp.,
6.00% due May 1, 1995 15,000,000 14,531,492
IMI Funding Corp.,
6.05% due January 9, 1995 4,000,000 3,976,709
J.P. Morgan & Co., Inc.,
6.03% due January 18, 1995 5,000,000 4,975,375
Lilly Eli & Co.,
6.03% due January 5, 1995 5,000,000 4,975,069
Morgan Stanley Group, Inc.,
6.34% due March 9, 1995 10,000,000 9,846,583
National Rural Utilities Cooperative
Fin. Corp.,
6.05% due January 19, 1995 10,000,000 9,950,731
PACCAR Financial Corp.,
5.90% due January 3, 1995 10,326,000 10,319,222
COMMERCIAL PAPER (CONTINUED)
PRINCIPAL MARKET
AMOUNT VALUE
--------- --------
Potomac Electric Power Co.,
5.94% due January 11, 1995 $ 10,000,000 $ 9,978,678
Potomac Electric Power Co.,
6.05% due January 13, 1995 2,000,000 1,991,719
Progress Capital Holdings, Inc.,
5.92% due January 11, 1995 10,000,000 9,965,583
Province of Quebec,
5.20% due March 6, 1995 10,000,000 9,727,903
Rabobank Nederland NV,
5.90% due January 3, 1995 2,000,000 1,998,687
Siemens Corp.,
6.16% due February 2, 1995 10,000,000 9,903,556
Southern California Edison Co.,
6.05% due January 18, 1995 20,000,000 19,901,367
Southwestern Bell Capital Corp.,
5.20% due February 10, 1995 10,000,000 9,750,772
Weyerhaeuser Co.
5.95% due January 23, 1995 10,000,000 9,913,458
Xerox Corp.,
5.97% due January 20, 1995 4,000,000 3,985,017
---------
219,122,206
---------
U.S. GOVERNMENT AGENCY SECURITIES (1.8%)
Federal Home Loan Banks,
6.16% due March 2, 1995 5,000,000 4,926,824
---------
U.S. GOVERNMENT SECURITIES (12.2%)
United States of America Treasury,
4.10% due February 9, 1995 25,000,000 24,048,055
United States of America Treasury,
6.00% due June 30, 1996 5,000,000 4,913,348
United States of America Treasury,
6.25% due August 31, 1996 5,000,000 4,923,124
---------
33,884,527
---------
TOTAL INVESTMENTS (100%)
(COST $278,134,006) $277,878,388
-----------
-----------
See Notes to Financial Statements
</TABLE>
<PAGE>
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
including the statement of investments, as of December 31, 1994,
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, 1994, 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 Short-Term Bond Account for
Variable Annuities as of December 31, 1994, 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 15, 1995
<PAGE>
This page intentionally left blank.
<PAGE>
<PAGE>
Investment Advisers
-------------------
(THE TRAVELERS TIMED GROWTH AND INCOME STOCK,
TIMED SHORT-TERM BOND
AND TIMED AGGRESSIVE STOCK ACCOUNTS)
THE TRAVELERS INVESTMENT MANAGEMENT COMPANY
Hartford, Connecticut
(THE TRAVELERS TIMED BOND ACCOUNT)
TRAVELERS ASSET MANAGEMENT INTERNATIONAL CORPORATION
Hartford, Connecticut
Independent Accountants
-----------------------
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
Custodian
---------
SHAWMUT BANK CONNECTICUT, N.A.
Hartford, Connecticut
This report is prepared for the general information
of contract owners and is not an offer of shares of The Travelers
Timed Growth and Income Stock, Timed Short-Term Bond, Timed
Aggressive Stock and Timed Bond Accounts. It should not be used in
connection with any offer except in conjunction with the
Prospectuses for the Variable Annuity products offered by The
Travelers Insurance Company which contain all pertinent
information, including the applicable selling commissions.
VG-182 (Annual) (12-94) Printed in U.S.A.
<PAGE>
PART C
OTHER INFORMATION
Item 28. 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
Aggressive Stock Account for Variable Annuities, The
Travelers Timed Bond Account for Variable Annuities and The
Travelers Fund U for Variable Annuities, and the Reports of
Independent Accountants thereto, are contained in the
December 31, 1994 Annual Reports to Contract Owners and are
incorporated by reference in Part B of this Registration
Statement. For each of the Accounts, these financial
statements include as applicable:
Statement of Assets and Liabilities as of December 31,
1994 (except The Travelers Timed Bond
Account for Variable Annuities which was timed out as
of December 31, 1994)
Statement of Operations for the year ended December 31, 1994
Statement of Changes in Net Assets for the years ended
December 31, 1994 and 1993
Statement of Investments as of December 31, 1994 (except
The Travelers Timed Bond Account for Variable Annuities
which was timed out as of December 31, 1994)
Notes to Financial Statements
The consolidated financial statements of The Travelers
Insurance Company and Subsidiaries and the Reports of
Independent Accountants are 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, 1994, 1993 and 1992
Consolidated Balance Sheet as of December 31, 1994 and 1993
Consolidated Statement of Cash Flows for the years
ended December 31, 1994, 1993 and 1992
Notes to Consolidated Financial Statements
(b) Exhibits
<TABLE>
<S> <C>
*1. Resolution of The Travelers Insurance Company's Board
of Directors authorizing the establishment of the
Registrant. (Incorporated herein by reference to Exhibit
1 to the Registration Statement on Form N-3 filed on
March 31, 1987.)
*2. Rules and Regulations of the Registrant. (Incorporated
herein by reference to Exhibit 2 to the Registration
Statement on Form N-3 filed on March 31, 1987.)
3. Custody Agreement between the Registrant and Chase
Manhattan Bank, N. A., Brooklyn, New York.
*4. Investment Advisory Agreement between the Registrant
and The Travelers Investment Management Company.
(Incorporated herein by reference to Exhibit 4 to
Post-Effective Amendment No. 8 to the Registration Statement
on Form N-3 filed on February 17, 1993.)
5. Distribution and Management Agreement among the Registrant,
The Travelers Insurance Company and Travelers Equities
Sales, Inc.
<PAGE>
*6. Form of Variable Annuity Contracts. (Incorporated herein
by reference to Exhibit 6 to the Registration Statement on
Form N-3 filed on March 31, 1987.)
*7. Form of Applications. (Incorporated herein by reference
to Exhibit 7 to the Registration Statement on Form N-3
filed on March 31, 1987.)
*8(a). Charter of The Travelers Insurance Company, as amended on
October 19, 1994. (Incorporated herein by reference to
Exhibit 3(a)(i) to the Registration Statement on Form S-2, File
33-58677, filed via Edgar on April 18, 1995.)
*8(b). By-Laws of The Travelers Insurance Company, as amended on
October 19, 1994. Incorporated herein by reference to
Exhibit 3(b)(i) to the Registration Statement on Form S-2,
File 33-58677, filed via Edgar on April 18, 1995.)
*12. Opinion of Counsel as to the legality of the securities being
registered. (Incorporated herein by reference to the
Registrant's most recent 24f-2 Notice filed on February
27, 1995.)
13(a). Consent of Coopers & Lybrand L.L.P., Independent Accountants,
to the incorporation by reference in this Form N-3 of their
report on the audited financial statements of the
Registrant, to the inclusion of their reports on the
financial statements of The Travelers Insurance Company
contained in Part B of this Registration Statement, and
to the reference in the Statements of Additional
Information to such firm as "Experts" in accounting and
auditing.
13(b). Consent of KPMG Peat Marwick LLP, Independent Auditors, to
the inclusion in this Form N-3 of their report on the
financial statements of The Travelers Insurance Company
contained in Part B of this Registration Statement.
16. Schedule for Computation of Total Return Calculations -
Standardized and Non-Standardized.
17. Representation concerning reliance upon No-Action Letter
IP-6-88.
18(a). Powers of Attorney authorizing Ernest J. Wright as signatory
for Heath B. McLendon, Knight Edwards, Robert E. McGill III,
Lewis Mandell and Frances M. Hawk.
18(b). Power of Attorney authorizing Ernest J. Wright as signatory
for Jay S. Fishman.
18(c). 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, Michael A. Carpenter,
Donald T. DeCarlo and James L. Morgan.
27. Financial Data Schedule.
<FN>
* Previously filed and incorporated herein by reference.
</TABLE>
<PAGE>
Item 29. Directors and Officers of The Travelers Insurance
Company
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address with Insurance Company with Registrant
- ------------------ ----------------------- ----------------------
<S> <C> <C>
Robert I. Lipp* Director, Chairman of the Board ----
and President
Jay S. Fishman* Director and Chief Financial Officer ----
Charles O. Prince, III** Director ----
Marc P. Weill** Director and Senior Vice President ----
Irwin R. Ettinger** Director ----
Michael A. Carpenter* Director ----
Donald T. DeCarlo* Director, General Counsel ----
and Secretary
Robert E. Evans* Senior Vice President ----
Jay S. Benet* Senior Vice President ----
James L. Morgan* Senior Vice President and ----
Chief Accounting Officer
William H. White* Vice President and Treasurer ----
Ian R. Stuart* Vice President and Financial Officer ----
Kathleen M. D'Auria* Vice President ----
George C. Kokulis* Vice President ----
Gene S. Lunman* Vice President and Actuary ----
Kathleen A. Preston* Vice President ----
Charles N. Vest* Vice President and Actuary ----
Robert Hamilton* Second Vice President ----
Kyle Rotherie* Second Vice President ----
Elizabeth Charron* Second Vice President ----
Ernest J. Wright* Assistant Secretary and Secretary to the
General Counsel, Financial Services Board of Managers
<FN>
*Principal Business Address: **
The Travelers Insurance Company Travelers Group Inc.
One Tower Square 388 Greenwich Street
Hartford, CT 06183 New York, N.Y. 10013
</TABLE>
<PAGE>
Item 30. Persons Controlled by or Under Common Control with the
Depositor or Registrant
<PAGE>
OWNERSHIP OF THE TRAVELERS INSURANCE COMPANY
<TABLE>
<CAPTION>
Company State of Organization Ownership Principal Business
- ------- --------------------- --------- ------------------
<S> <C> <C> <C>
Travelers Group Inc. Delaware Publicly Held --------------
Associated Madison Companies Inc. Delaware 100.00 --------------
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
Travelers
State of Group
Organization Inc. Principal Business
------------ --------- -------------------
<S> <C> <C> <C>
AC Health Ventures, Inc. Delaware 100.00 Inactive
AMCO Biotech, Inc. Delaware 100.00 Inactive
Associated Madison Companies, Inc. Delaware 100.00 Holding company.
American National Life Insurance Turks and Caicos 100.00 Insurance
(T & C), Ltd. 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
PFS Custodial Services, Inc. Georgia 100.00 General partner
PFS Distributors, Inc. Georgia 100.00 General partner
PFS Investments Inc. Georgia 100.00 Broker dealer
PFS Services, Inc. Georgia 100.00 General partner
Primerica Finance Corporation Delaware 100.00 Holding company
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
% of Voting
Securities
Owned
Directly
or
Indirectly
by
Travelers
State of Group
Organization Inc. Principal Business
------------ --------- -------------------
<S> <C> <C> <C>
American Capital Custodial Delaware 100.00 Limited partner
Services, Inc.
American Capital T.A., Inc. Delaware 100.00 Joint venture partner
Primerica Financial Services Home Georgia 100.00 Mortgage loan broker
Mortgages, Inc.
Primerica Financial Services, Inc. Nevada 100.00 General agency
Primerica Financial Services New York 100.00 General agency licensing
Agency of New York, Inc.
Primerica Financial Services Connecticut 100.00 General agency licensing
Insurance Marketing of
Connecticut, Inc.
Primerica Financial Services Idaho 100.00 General agency licensing
Insurance Marketing of
Idaho, Inc.
Primerica Financial Services Nevada 100.00 General agency licensing
Insurance Marketing of
Nevada, Inc.
Primerica Financial Services Pennsylvania 100.00 General agency licensing
Insurance Marketing of
Pennsylvania, Inc.
Primerica Financial Services United States 100.00 General agency licensing
Insurance Marketing of Virgin Islands
the Virgin Islands, Inc.
Primerica Financial Services Wyoming 100.00 General agency licensing
Insurance Marketing of
Wyoming, Inc.
Primerica Financial Services Delaware 100.00 General agency licensing
Insurance Marketing, Inc.
Primerica Financial Services of Alabama 100.00 General agency licensing
Alabama, Inc.
Primerica Financial Services of New Mexico 100.00 General agency licensing
New Mexico, Inc.
Primerica Insurance Agency of Massachusetts 100.00 General agency licensing
Massachusetts, Inc.
Primerica Insurance Marketing Puerto Rico 100.00 Insurance agency
Services of
Puerto Rico, Inc.
Primerica Insurance Services of Louisiana 100.00 General agency licensing
Louisiana, Inc.
Primerica Insurance Services of Maryland 100.00 General agency licensing
Maryland, Inc.
Primerica Services, Inc. Georgia 100.00 Inactive
RCM Acquisition Inc. Delaware 100.00 Investments
SCN Acquisitions Company Delaware 100.00 Investments
SL&H Reinsurance, Ltd. Turks and Caicos 100.00 Reinsurance
Islands
Southwest Service Agreements, North Carolina 100.00 Warranty/service agreements
Inc.
Southwest Warranty Corporation Florida 100.00 Extended automobile warranty
The Travelers Insurance Group Inc. Connecticut 100.00 Holding company
Harbour Associates I, Inc. Delaware 100.00 Real estate holding
Deer Run II, Inc. Delaware 100.00 Real estate holding
Net & Twine II Corporation Delaware 100.00 Real estate holding
KP Properties Corporation Massachusetts 100.00 Real estate
KPI 85, Inc. Massachusetts 100.00 Real estate
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
% of Voting
Securities
Owned
Directly
or
Indirectly
by
Travelers
State of Group
Organization Inc. Principal Business
------------ --------- -------------------
<S> <C> <C> <C>
KRA Advisers Corporation Massachusetts 100.00 Real estate
KRP Corporation Massachusetts 100.00 Real estate
La Metropole S.A. Belgium 98.83 P-C insurance/reinsurance
The 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 Administrative New Jersey 100.00 Administrative services
Services, Inc.
Copeland Associates, Delaware 100.00 Fixed/variable annuities
Inc.
Copeland Ohio 99.00 Fixed/variable annuities
Associates
Agency of
Ohio, Inc.
Copeland Alabama 100.00 Fixed/variable annuities
Associates of
Alabama, Inc.
Copeland Montana 100.00 Fixed/variable annuities
Associates of
Montana, Inc.
Copeland Benefits New Jersey 51.00 Investment marketing
Management
Company
Copeland Equities, New Jersey 100.00 Fixed/variable annuities
Inc.
H.C. Copeland Massachusetts 100.00 Fixed annuities
Associates,
Inc. of
Massachusetts
Copeland Financial New Jersey 100.00 Investment advisory services.
Services, Inc.
Copeland Healthcare New Jersey 100.00 Life insurance marketing
Services, Inc.
H.C. Copeland and Texas 100.00 Fixed/variable annuities
Associates, Inc. of
Texas
The Parker Realty and Vermont 57.98 Real estate
Insurance Agency, Inc.
Travelers General Agency of Hawaii 100.00 Insurance agency
Hawaii, Inc.
The Prospect Company Delaware 100.00 Investments
89th & York Avenue New York 100.00 Real estate
Corporation
979 Third Avenue Delaware 100.00 Real estate
Corporation
Meadow Lane, Inc. Georgia 100.00 Real estate development
Panther Valley, Inc. New Jersey 100.00 Real estate management
Prospect Management Delaware 100.00 Real estate management
Services Company
The Travelers Asset Funding Connecticut 100.00 Investment adviser
Corporation
Travelers Capital Connecticut 100.00 Furniture/equipment
Funding Corporation
The Travelers Corporation of Bermuda 99.99 Pensions
Bermuda Limited
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
% of Voting
Securities
Owned
Directly
or
Indirectly
by
Travelers
State of Group
Organization Inc. Principal Business
------------ --------- -------------------
<S> <C> <C> <C>
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 Insurance Texas 100.00 P-C 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
Penn Casualty Missouri 100.00 P-C insurance
Insurance
Company
Select Insurance Texas 100.00 P-C insurance
Company
Countersignature Agency, Florida 100.00 Countersign ins policies
Inc.
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.
The Charter Oak Fire Connecticut 100.00 P-C insurance
Insurance Company
The Exchange Agency, Inc. Delaware 100.00 Insurance agency
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 Lloyds Texas 100.00 Non-life insurance
Insurance Company
TI Home Mortgage Brokerage, Delaware 100.00 Mortgage brokerage services
Inc.
TravCo Insurance Company Indiana 100.00 P-C insurance
Travelers Medical Delaware 100.00 Managed care
Management Services Inc.
The Travelers Insurance Company Connecticut 100.00 Insurance
Delaware Windtree Realty Delaware 100.00 Real estate holdings
Corporation
Market Funding Corporation Delaware 100.00 Real estate management
I
Market Funding Corporation Delaware 100.00 Real estate management
II
Red Oak Plaza Holding Delaware 100.00 Inactive
Company, Inc.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
% of Voting
Securities
Owned
Directly
or
Indirectly
by
Travelers
State of Group
Organization Inc. Principal Business
------------ --------- -------------------
<S> <C> <C> <C>
The Travelers Life and Connecticut 100.00 Life insurance
Annuity Company
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 Georgia 100.00 Holding company
Holdings Inc.
AC RE, Ltd. Bermuda 100.00 Reinsurance
American Financial Texas 100.00 Insurance
Life Insurance
Company
Transport Life Texas 100.00 Insurance
Insurance
Company
Continental Texas 100.00 Insurance
Life
Insurance
Company
Primerica Life Massachusetts 100.00 Life insurance
Insurance Company
National Benefit New York 100.00 Insurance
Life Insurance
Company
Primerica Canada 100.00 Holding company
Financial
Services
(Canada) Ltd.
PFSL Canada 100.00 Mutual fund dealer
Investments
Canada Ltd.
Primerica Canada 82.82 General agent
Financial
Services
Ltd.
Primerica Canada 100.00 Life insurance
Life
Insurance
Company of
Canada
The Travelers Insurance Australia 100.00 Inactive
Corporation Proprietary
Limited
The Travelers Marine Corporation California 100.00 General insurance brokerage
The Travelers Realty Investment Connecticut 100.00 Real estate investment advisor
Company
AdVision, Inc. Connecticut 100.00 Advertising agency
Constitution Plaza, Inc. Connecticut 100.00 Real estate brokerage
Travelers Asset Management New York 100.00 Investment adviser
International Corporation
Travelers Canada Corporation Canada 100.00 Inactive
Travelers Equities Sales, Inc. Connecticut 100.00 Broker dealer
Travelers Mortgage Securities Delaware 100.00 Collateralized obligations
Corporation
Travelers of Ireland Limited Ireland 99.90 Data processing
Travelers Specialty Property Connecticut 100.00 Insurance management
Casualty Company, Inc.
CCC Holdings, Inc. Delaware 100.00 Holding company
Commercial Credit Company Delaware 100.00 Holding company.
American Health and Life Maryland 100.00 LH&A Insurance
Insurance Company
Brookstone Insurance Company Vermont 100.00 Insurance managers
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
% of Voting
Securities
Owned
Directly
or
Indirectly
by
Travelers
State of Group
Organization Inc. Principal Business
------------ --------- -------------------
<S> <C> <C> <C>
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, Ohio 100.00 Consumer finance
Inc.
Commercial Credit Banking Oregon 100.00 Consumer finance
Corporation
Commercial Credit Consumer Minnesota 100.00 Consumer finance
Services, Inc.
Commercial Credit Corporation Alabama 100.00 Consumer finance
(AL)
Commercial Credit Corporation California 100.00 Consumer finance
(CA)
Commercial Credit Corporation Iowa 100.00 Consumer finance
(IA)
Commercial Credit Corporation Kentucky 100.00 Consumer finance
(KY)
Certified Insurance Agency, Kentucky 100.00 Insurance agency
Inc.
Commercial Credit Kentucky 100.00 Investment company
Investment, Inc.
National Life Insurance Kentucky 100.00 Insurance agency
Agency of Kentucky, Inc.
Union Casualty Insurance Kentucky 100.00 Insurance agency
Agency, Inc.
Commercial Credit Corporation Maryland 100.00 Consumer finance
(MD)
Action Data Services, Inc. Missouri 100.00 Data processing
Commercial Credit Plan, Oklahoma 100.00 Consumer finance
Incorporated (OK)
Commercial Credit Corporation New Jersey 100.00 Consumer finance
(NJ)
Commercial Credit Corporation New York 100.00 Consumer finance
(NY)
Commercial Credit Corporation South Carolina 100.00 Consumer finance
(SC)
Commercial Credit Corporation West Virginia 100.00 Consumer finance
(WV)
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 Maryland 100.00 Insurance broker
Services, Inc.
Commercial Credit Insurance Mississippi 100.00 Insurance agency
Agency (P&C) of
Mississippi, Inc.
Commercial Credit Insurance Alabama 100.00 Insurance agency
Agency of Alabama, Inc.
Commercial Credit Insurance Kentucky 100.00 Insurance agency
Agency of Kentucky, Inc.
Commercial Credit Insurance Massachusetts 100.00 Insurance agency
Agency of Massachusetts,
Inc.
Commercial Credit Insurance Nevada 100.00 Credit LH&A, P-C insurance
Agency of Nevada, Inc.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
% of Voting
Securities
Owned
Directly
or
Indirectly
by
Travelers
State of Group
Organization Inc. Principal Business
------------ --------- -------------------
<S> <C> <C> <C>
Commercial Credit Insurance Ohio 100.00 Insurance agency/broker
Agency of Ohio, Inc.
Commercial Credit Insurance New Mexico 100.00 Insurance agency/broker
Agency of New Mexico,
Inc.
Commercial Credit International, Delaware 100.00 Holding company
Inc.
Commercial Credit Oregon 100.00 International lending
International Banking
Corporation
Commercial Credit Canada 100.00 Second mortgage loans
Corporation CCC
Limited
Commercial Credit Brazil 99.00 Inactive
Services do
Brazil Ltda.
Commercial Credit Services Belgium 100.00 Inactive
Belgium S.A.
Commercial Credit Services Israel 100.00 Equipment leasing
Israel Limited
Industrial Leasing Israel 99.71 Equipment leasing
Services Limited
Comlease Ltd. Israel 99.99 Equipment leasing
Commercial Credit Limited Delaware 100.00 Inactive
Commercial Credit Loan, Inc. New York 100.00 Consumer finance
(NY)
Commercial Credit Loans, Inc. Delaware 100.00 Consumer finance
(DE)
Commercial Credit Loans, Inc. Ohio 100.00 Consumer finance
(OH)
Commercial Credit Loans, Inc. Virginia 100.00 Consumer finance
(VA)
Commercial Credit Management Maryland 100.00 Intercompany services
Corporation
Commercial Credit Plan Tennessee 100.00 Consumer finance
Incorporated (TN)
Commercial Credit Plan Utah 100.00 Consumer finance
Incorporated (UT)
Commercial Credit Plan Delaware 100.00 Consumer finance
Incorporated of Georgetown
Commercial Credit Plan Virginia 100.00 Consumer finance
Industrial Loan Company
Commercial Credit Plan, Colorado 100.00 Consumer finance
Incorporated (CO)
Commercial Credit Plan, Delaware 100.00 Consumer finance
Incorporated (DE)
Commercial Credit Plan, Georgia 100.00 Consumer finance
Incorporated (GA)
Commercial Credit Plan, Missouri 100.00 Consumer finance
Incorporated (MO)
Commercial Credit Securities, Delaware 100.00 Broker dealer
Inc.
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
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
% of Voting
Securities
Owned
Directly
or
Indirectly
by
Travelers
State of Group
Organization Inc. Principal Business
------------ --------- -------------------
<S> <C> <C> <C>
Commercial Credit Delaware 100.00 Direct loan
Development Corporation
Myers Park Properties, Delaware 100.00 Inactive
Inc.
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. 100.00 Financial services
CC Consumer Services of Alabama 100.00 Financial services
Alabama, Inc.
CC Home Lenders Financial, Georgia 100.00 Financial services
Inc.
CC Home Lenders, Inc. Ohio 100.00 Financial services
Commercial Credit Texas 100.00 Consumer finance
Corporation (TX)
Commercial Credit Financial Kentucky 100.00 Consumer finance
of Kentucky, Inc.
Commercial Credit Financial West Virginia 100.00 Consumer finance
of West Virginia, Inc.
Commercial Credit Plan Pennsylvania 100.00 Financial services
Consumer Discount Company
Commercial Credit Services Kentucky 100.00 Financial services.
of Kentucky, Inc.
Travelers Home Equity North Carolina 100.00 Financial services
Services, Inc.
Verochris Corporation Delaware 100.00 Joint venture company
AMC Aircraft Corp. Delaware 100.00 Aviation
Voyager Guaranty Insurance Missouri 100.00 P-C insurance
Company
World Service Life Insurance Colorado 100.00 Life insurance
Company
D.I.R.E.C.T. Resources, Inc. Delaware 100.00 Fraud/subrogation recovery
Greenwich Street Capital Partners, Inc. Delaware 100.00 Investments
Greenwich Street Investments, Inc. Delaware 100.00 Investments
Greenwich Street Capital Partners Delaware 100.00 Investments
Offshore 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
M.K.L. Realty Corporation New Jersey 66.67 Holding company
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
% of Voting
Securities
Owned
Directly
or
Indirectly
by
Travelers
State of Group
Organization Inc. Principal Business
------------ --------- -------------------
<S> <C> <C> <C>
MFC Holdings, Inc. Delaware 100.00 Inactive
MRC Holdings, Inc. Delaware 100.00 Real estate
The Berg Agency, Inc. (NJ) 100.00 Inactive
Mirasure Insurance Company, Ltd. Bermuda 100.00 Inactive
PA/RCM Corporation Delaware 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 100.00 Trust company
Smith Barney Holdings Inc. Delaware 100.00 Holding company
Mutual Management Corp. New York 100.00 Investment adviser
Smith Barney Asset Management Japan 100.00 Investment manager
Co., Ltd.
R-H Sports Enterprises Inc Georgia 100.00 Investment banking
SB Cayman Holdings I Inc. Delaware 100.00 Holding company
SB Cayman Holdings II Inc. Delaware 100.00 Holding company
SBS Software Inc. Delaware 100.00 Financial software
Smith Barney (Delaware) Inc. Delaware 100.00 Investment banking
1345 Media Corp. Delaware 100.00 Holding company
Americas Avenue Corporation Delaware 100.00 Holding company
Corporate Realty Advisors, Inc. Delaware 100.00 Investment adviser
CRA Acquisition Corp. Delaware 100.00 Real estate
IPO Holdings Inc. Delaware 100.00 Holding company
Institutional Property Delaware 100.00 Sale leaseback transactions
Owners, Inc. IV
Institutional Property Delaware 100.00 Sale leaseback transactions
Owners, Inc. V
Institutional Property Delaware 100.00 Sale leaseback transactions
Owners, Inc. VI
Institutional Property Delaware 100.00 Sale leaseback transactions
Owners, Inc. VII
MLA 50 Corporation Delaware 100.00 Real estate
MLA GP Corporation Delaware 100.00 Real estate
Municipal Markets Advisors Delaware 100.00 Real estate
Incorporated
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
% of Voting
Securities
Owned
Directly
or
Indirectly
by
Travelers
State of Group
Organization Inc. Principal Business
------------ --------- -------------------
<S> <C> <C> <C>
SBF Corp. Delaware 100.00 General partner
Smith Barney Acquisition Delaware 100.00 Investment advisor
Corporation
Smith Barney Commercial Corp. Delaware 100.00 Consumer credit
Smith Barney Funding Holding Delaware 100.00 Broker dealer
Corp.
Smith Barney Global Capital Delaware 100.00 Investment advisor
Management, Inc.
Smith Barney Investment, Inc. Delaware 100.00 Investment advisor
Smith Barney Offshore, Inc. Delaware 100.00 Investment advisor
Decathlon Offshore Limited Cayman Islands 100.00 Commodity fund
Smith Barney Pension Advisors Delaware 100.00 Investment advisor
Corp.
Smith Barney Realty Advisors, Delaware 100.00 Inactive
Inc.
Smith Barney Realty, Inc. Delaware 100.00 Real estate broker
Smith Barney Risk Investors, Inc. Delaware 100.00 General partner
Smith Barney Venture Corp. Delaware 100.00 Venture capital
First Century Company Delaware 100.00 Holding company
First Century Management Delaware 100.00 Investment adviser
Company
Smith Barney Asia Inc. Delaware 100.00 Corporate finance
Smith Barney Asset Management Group Singapore 100.00 Asset management
(Asia) Pte. Ltd.
Smith Barney Canada Inc. Canada 100.00 Investment advisor
Smith Barney Capital Services Inc. Delaware 100.00 Derivative product transactions
Smith Barney Cayman Islands, Ltd. Cayman Islands 100.00 Market debt securities
Smith Barney Commercial Corporation Hong Kong 99.00 Investment adviser
Asia Limited
Smith Barney Europe Holdings, Ltd. United Kingdom 100.00 Holding company
Smith Barney Europe, Ltd. United Kingdom 100.00 Broker dealer
Smith Barney Shearson Futures, United Kingdom 100.00 Broker dealer
Ltd.
Smith Barney Futures Management Inc. Delaware 100.00 Investment banking
Harbourer Fund, Ltd. Bahama Islands 100.00 Investment fund
Smith Barney Offshore Fund Ltd. 100.00 Investment fund
Smith Barney Shearson Overview Dublin 100.00 Investment company
Fund PLC
Smith Barney Inc. Delaware 100.00 Broker dealer
SBHU Life Agency, Inc. Delaware 100.00 Insurance broker
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
% of Voting
Securities
Owned
Directly
or
Indirectly
by
Travelers
State of Group
Organization Inc. Principal Business
------------ --------- -------------------
<S> <C> <C> <C>
Robinson-Humphrey Insurance Georgia 100.00 Insurance
Services Inc.
Robinson-Humphrey Alabama 100.00 Insurance
Insurance Services
of Alabama, Inc.
SBHU Life & Health Agency, Delaware 100.00 Insurance broker
Inc.
SBHU Life Agency of Arizona, Arizona 100.00 Insurance broker
Inc.
SBHU Life Agency of Indiana, Indiana 100.00 Insurance broker
Inc.
SBHU Life Agency of Utah, Utah 100.00 Insurance broker
Inc.
SBHU Life Insurance Agency Massachusetts 100.00 Insurance broker
of Massachusetts, Inc.
SBS Insurance Agency of Hawaii 100.00 Insurance broker
Hawaii, Inc.
SBS Insurance Agency of Idaho 100.00 Insurance broker
Idaho, Inc.
SBS Insurance Agency of Maine 100.00 Insurance broker
Maine, Inc.
SBS Insurance Agency of Montana 100.00 Insurance broker
Montana, Inc.
SBS Insurance Agency of Nevada 100.00 Insurance broker
Nevada, Inc.
SBS Insurance Agency of North Carolina 100.00 Insurance broker
North Carolina, Inc.
SBS Insurance Agency of Ohio 100.00 Insurance broker
Ohio, Inc.
SBS Insurance Agency of South Dakota 100.00 Insurance broker
South Dakota, Inc.
SBS Insurance Agency of Wyoming 100.00 Insurance broker
Wyoming, Inc.
SBS Insurance Brokerage Arkansas 100.00 Insurance broker
Agency of Arkansas, Inc.
SBS Insurance Brokers of Arizona 100.00 Insurance broker
Arizona, Inc.
SBS Insurance Brokers of Kentucky 100.00 Insurance broker
Kentucky, Inc.
SBS Insurance Brokers of Louisiana 100.00 Insurance broker
Louisiana, Inc.
SBS Insurance Brokers of New Hampshire 100.00 Insurance broker
New Hampshire, Inc.
SBS Insurance Brokers of North Dakota 100.00 Insurance broker
North Dakota, Inc.
SBS Life Insurance Agency of Puerto Rico 100.00 Insurance broker
Puerto Rico, Inc.
SLB Insurance Agency of Maryland 100.00 Insurance broker
Maryland, Inc.
Smith Barney Life Agency Louisiana 100.00 Insurance broker
Inc.
Smith Barney (France) S.A. France 100.00 Commodities trading
Smith Barney (Hong Kong) Limited Hong Kong 100.00 Commodities trading
Smith Barney (Netherlands) Inc. Delaware 100.00 Commodities trading
Smith Barney International Oregon 100.00 Commodities trading
Incorporated
Smith Barney Pacific British Virgin 100.00 Holding company
Holdings, Inc. Islands
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
% of Voting
Securities
Owned
Directly
or
Indirectly
by
Travelers
State of Group
Organization Inc. Principal Business
------------ --------- -------------------
<S> <C> <C> <C>
Smith Barney Shearson Hong Kong 100.00 Commodities trading
(Asia) Limited
Smith Barney Shearson Singapore 100.00 Futures broker
(Singapore) Pte Ltd
Smith Barney Shearson, HG Singapore 100.00 Securities broker
Asia (Singapore) Pte Ltd
HG Asia (Singapore) Singapore 100.00 Securities broker
Pte. Ltd.
The Robinson-Humphrey Company, Delaware 100.00 Broker dealer
Inc.
Smith Barney Mortgage Brokers Inc. Delaware 100.00 Home equity loans
Smith Barney Mortgage Capital Corp. Delaware 100.00 Sponsor CMOs
Smith Barney Mortgage Capital Group, Delaware 100.00 Trade whole loans
Inc.
Smith Barney Mutual Funds Management Delaware 100.00 Investment adviser
Inc.
Smith Barney Strategy Advisers Delaware 100.00 Investment advisor
Inc.
E.C. Tactical Management Luxembourg 100.00 Investment advisor
S.A.
Smith Barney Private Trust Company Cayman Islands 100.00 Trust company
(Cayman) Limited
Greenwich (Cayman) Services I Cayman Islands 100.00 Investment advisor
Limited
Greenwich (Cayman) Services II Cayman Islands 100.00 Investment advisor
Limited
Greenwich (Cayman) Services III Cayman Islands 100.00 Investment advisor
Limited
Smith Barney S.A. France 99.00 Commodities trading
Smith Barney Shearson (Chile) Chile 100.00 Commodities trading
Corredora de Seguro Limitada
Smith Barney Shearson (Ireland) Ireland 100.00 Commodities trading
Limited
Structured Mortgage Securities Delaware 100.00 Issue CMOs
Corporation
The Travelers Investment Management Connecticut 100.00 Investment advisor
Company
Smith Barney Private Trust Company New York 100.00 Trust company.
Smith Barney Private Trust Company of Florida 100.00 Trust company
Florida
Tinmet Corporation Delaware 100.00 Inactive
Travelers Services Inc. Delaware 100.00 Holding company
TRV Employees Investments, Inc. Delaware 100.00 Investments
</TABLE>
12
<PAGE>
Item 31. Number of Contract Owners
As of March 31, 1995, 25,270 qualified and non-qualified contract
owners held contracts offered by the Registrant.
Item 32. Indemnification
Pursuant to the provisions of Article VI of the Rules and
Regulations of the Registrant, indemnification is provided to
members of the Board of Managers, officers and employees of the
Registrant in accordance with the standards established by
Section 33-320a of the Connecticut General Statutes ("C.G.S.")
relating to indemnification under the Connecticut Stock
Corporation Act.
Section 33-320a of the Connecticut General Statutes 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 Registrant. This insurance provides
for coverage against loss from claims made against directors and
officers in their capacity as such, including, subject to certain
exceptions, liabilities under the Federal securities laws.
Rule 484 Undertaking
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such 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>
Item 33. Business and Other Connections of Investment Adviser
Officers and Directors of The Travelers Investment Management
Company (TIMCO), the Registrant's Investment Adviser, are set
forth in the following table:
<TABLE>
<CAPTION>
Name Position with TIMCO Other Business
- ---- --------------------- --------------
<S> <C> <C>
Jeffrey B. Lane Director and Chairman Vice Chairman
Smith Barney Inc.**
Kent A. Kelley Director and Chief
Executive Officer* -----
Sandip A. Bhagat Director and President*
Heath B. McLendon Director Managing Director
Smith Barney Inc.**
Jacob E. Hurwitz Vice President* -----
Emil Molinaro Vice President Vice President
Travelers Group Inc.**
Daniel Willey Vice President* -----
Gloria G. Williams Assistant Vice President* -----
James W. Churm Corporate Secretary Senior Vice President
Smith Barney Inc.**
Michael Day Treasurer Managing Director
Smith Barney Inc.**
<FN>
Address: * One Tower Square, Hartford, Connecticut 06183
** Smith Barney Inc., 388 Greenwich Street,
New York, New York, 10013
</TABLE>
<PAGE>
Item 34. Principal Underwriter
(a) Travelers Equities Sales, Inc.
One Tower Square
Hartford, Connecticut 06183
Travelers Equities Sales, 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 Aggressive Stock Account for Variable Annuities
The Travelers Timed Bond Account for Variable Annuities
The Travelers Fund U for Variable Annuities
The Travelers Fund UL for Variable Life Insurance
The Travelers Fund BD for Variable Annuities
The Travelers Fund VA for Variable Annuities
<TABLE>
<CAPTION>
(b) Name and Principal Positions and Offices Positions and Offices
Business Address* With Underwriter With Registrant
------------------ --------------------- ---------------------
<S> <C> <C>
George C. Kokulis Chairman of the Board -----
and President
Robert E. Evans Director -----
Gregory C. MacDonald Director -----
Kathleen A. Preston Director and Executive -----
Vice President
Robert C. Hamilton Director and Senior -----
Vice President
Donald R. Munson, Jr. Director and Vice President, -----
Annuity Marketing
Thomas P. Tooley Vice President, Life Marketing -----
George A. Ryan Vice President -----
Jeffrey A. Barker Regional Vice President -----
Walter Melnik, Jr. Regional Vice President -----
Raymond W. Sheridan Regional Vice President -----
William F. Scully, III Treasurer -----
William H. White Assistant Treasurer -----
Charles B. Chamberlain Assistant Treasurer -----
George M. Quaggin Assistant Treasurer -----
Kathleen A. McGah General Counsel and Secretary Assistant Secretary
Alison K. George Director of Compliance -----
and Assistant Corporate Secretary
<FN>
* Principal business address: One Tower Square, Hartford,
Connecticut 06183
</TABLE>
<PAGE>
(c) Prior to February 1, 1995, The Travelers Insurance Company
served as the principal underwriter. The compensation listed
below is for the year ending December 31, 1994.
<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>
The Travelers $0 $0 $0 $3,525,570
Insurance Co.
<FN>
* Other compensation consists of $3,161,512 in mortality and
expense risk fees and $364,058 in sales and administrative
charges.
</TABLE>
Item 35. Location of Accounts and Records
(1) The Travelers Insurance Company
One Tower Square
Hartford, Connecticut 06183
(2) Chase Manhattan Bank, N. A.
Chase MetroTech Center
Brooklyn, New York 11245
Item 36. Management Services
Inapplicable.
Item 37. 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 16 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;
(c) To deliver any Statement of Additional Information and any
financial statements required to be made available under
this Form N-3 promptly upon written or oral request.
(d) To include in any registration statement filed in connection
with a contract used as a funding vehicle for retirement
plans meeting the requirements of Section 403(b) of the
Internal Revenue Code a representation that the Registrant
is relying upon No-Action Letter IP-6-88 issued to the
American Council of Life Insurance. (See Exhibit 17.)
<PAGE>
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 caused this amendment to this Registration Statement to be
signed on its behalf, in the City of Hartford, State of
Connecticut, on April 26, 1995.
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT
FOR VARIABLE ANNUITIES
(Registrant)
By: *HEATH B. McLENDON
---------------------------------
Heath B. McLendon
Chairman of the Board of Managers
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, this Registration Statement
has been signed below by the following persons in the capacities
indicated on April 26, 1995.
*HEATH B. McLENDON Chairman, Board of Managers
- ---------------------------------
(Heath B. McLendon)
*KNIGHT EDWARDS Member, Board of Managers
- ---------------------------------
(Knight Edwards)
*ROBERT E. McGILL, III Member, Board of Managers
- ---------------------------------
(Robert E. McGill, III)
*LEWIS MANDELL Member, Board of Managers
- ---------------------------------
(Lewis Mandell)
*FRANCES M. HAWK Member, Board of Managers
- ---------------------------------
(Frances M. Hawk)
*By: /s/Ernest J. Wright
---------------------------------
Ernest J. Wright, Attorney-in-Fact
Secretary, Board of Managers
<PAGE>
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 caused this amendment to this Registration Statement to be
signed on its behalf, in the City of Hartford, State of
Connecticut, on April 26, 1995.
THE TRAVELERS INSURANCE COMPANY
(Insurance Company)
By: *JAY S. FISHMAN
----------------------------
Jay S. Fishman
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following
persons in the capacities indicated on April 26, 1995.
*ROBERT I. LIPP Director, Chairman of the Board
- --------------------------------- and President (principal
(Robert I. Lipp) executive officer)
*JAY S. FISHMAN Director and Chief Financial
- --------------------------------- Officer
(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)
*MICHAEL A. CARPENTER Director
- ---------------------------------
(Michael A. Carpenter)
*DONALD T. DeCARLO Director
- ---------------------------------
(Donald T. DeCarlo)
/s/JAMES L. MORGAN Senior Vice President - Finance
- --------------------------------- and Chief Accounting Officer
(James L. Morgan)
*By: /s/Ernest J. Wright
----------------------------
Ernest J. Wright
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
- ------- ----------- ----------------
<S> <C> <C>
1. Resolution of The Travelers Insurance Company's Board
of Directors authorizing the establishment of the Registrant.
(Incorporated herein by reference to Exhibit 1 to the Registration
Statement on Form N-3 filed on March 31, 1987.)
2. Rules and Regulations of the Registrant. (Incorporated herein
by reference to Exhibit 2 to the Registration Statement on Form N-3
filed on March 31, 1987.)
3. Custody Agreement between the Registrant and Chase Electronically
Manhattan Bank, N. A., Brooklyn, New York.
4. Investment Advisory Agreement between the Registrant
and The Travelers Investment Management Company.
(Incorporated herein by reference to Exhibit 4 to Post-Effective
Amendment No. 8 to the Registration Statement on Form N-3
filed on February 17, 1993.)
5. Distribution and Management Agreement among the Electronically
Registrant, The Travelers Insurance Company and
Travelers Equities Sales,Inc.
6. Form of Variable Annuity Contracts. (Incorporated herein
by reference to Exhibit 6 to the Registration Statement on
Form N-3 filed on March 31, 1987.)
7. Form of Applications. (Incorporated herein by reference to
Exhibit 7 to the Registration Statement on Form N-3 filed on
March 31, 1987.)
8(a). Charter of The Travelers Insurance Company, as amended
on October 19, 1994. (Incorporated herein by reference to
Exhibit 3(a)(i) to the Registration Statement on Form S-2,
File No. 33-58677, filed via Edgar on April 18, 1995.)
8(b). By-Laws of The Travelers Insurance Company, as amended
on October 19, 1994. (Incorporated herein by reference to
Exhibit 3(b)(i) to the Registration Statement on Form S-2,
File No. 33-58677, filed via Edgar on April 18, 1995.)
12. Opinion of Counsel as to the legality of the securities being
registered. (Incorporated herein by reference to the
Registrant's most recent 24f-2 Notice filed on February 27, 1995.)
<PAGE>
13(a). Consent of Coopers & Lybrand L.L.P, Independent Electronically
Accountants, to the incorporation by reference in this
Form N-3 of their report on the audited financial
statements of the Registrant, to the inclusion of their
reports on the financial statements of The Travelers
Insurance Company contained in Part B of this Registration
Statement, and to the reference in the Statements of
Additional Information to such firm as "Experts" in
accounting and auditing.
13(b). Consent of KPMG Peat Marwick LLP, Independent Electronically
Auditors, to the inclusion in this Form N-3 of their report
on the financial statements of The Travelers Insurance
Company contained in Part B of this Registration Statement.
16. Schedule for Computation of Total Return Calculations - Electronically
Standardized and Non-Standardized.
17. Representation concerning reliance upon No-Action Electronically
Letter IP-6-88.
18(a). Powers of Attorney authorizing Ernest J. Wright as signatory for Electronically
Heath B. McLendon, Knight Edwards, Robert E. McGill III, Lewis
Mandell and Frances M. Hawk.
18(b). Power of Attorney authorizing Ernest J. Wright as signatory for Electronically
Jay S. Fishman.
18(c). Powers of Attorney authorizing Jay S. Fishman or Ernest J. Wright Electronically
as signatory for Robert I. Lipp, Charles O. Prince, III, Marc P.
Weill, Irwin R. Ettinger, Michael A. Carpenter, Donald T.DeCarlo
and James L. Morgan.
27. Financial Data Schedule Electronically
</TABLE>
<PAGE>
EXHIBIT 3
CUSTODY AGREEMENT
Agreement made as of the 1st day of February, 1995
between each of the registered management investment companies
of The Travelers Insurance Company listed below, and such
others as may be added from time to time on Schedule A
attached hereto (each individually hereinafter called the
"Customer"), and The Chase Manhattan Bank, N.A., (hereinafter
called the "Bank"), whereby the Customer appoints the Bank,
and the Bank hereby agrees to act, as Custodian of the cash
and securities ("Assets") of the Customer, subject to the
terms of this Agreement.
1. CUSTOMER ACCOUNTS.
The Bank agrees to establish and maintain the following
accounts ("Accounts"):
(a) A custody account in the name of the Customer
("Custody Account") for any and all stocks, shares,
bonds, debentures, notes, mortgages or other
obligations for the payment of money, bullion, coin
and any certificates, receipts, warrants or other
instruments representing rights to receive, purchase
or subscribe for the same or evidencing or
representing any other rights or interests therein
and other similar property whether certificated or
uncertificated as may be received by the Bank for
the account of the Customer ("Securities"); and
(b) A deposit account in the name of the Customer
("Deposit Account") for any and all cash in any
currency received by the Bank for the account of the
Customer, which cash shall not be subject to
withdrawal by draft or check. The Customer warrants
its authority to: 1) deposit the cash and Securities
(Assets) received in the Accounts and 2) give
instructions (as defined in Section 9) concerning
the Accounts. Upon written agreement between the
Bank and the Customer, additional Accounts may be
established and separately accounted for as
additional Accounts under the terms of this
Agreement.
2. MAINTENANCE OF SECURITIES AND CASH AT BANK.
Unless instructions (as defined in Section 9)
specifically require another location acceptable to the
Bank:
(a) Securities will be held in the country or other
jurisdiction in which the principal trading market
for such Securities is located, where such
Securities are to be presented for payment or where
such Securities are acquired; and
(b) Cash will be credited to an account in a country or
other jurisdiction in which such cash may be legally
deposited or it is the legal currency for the
payment of public or private debts.
Cash may be held pursuant to Instructions (as defined in
Section 9) in either interest or non-interest bearing accounts
as may be available for the particular currency. To the
extent Instructions are issued and the Bank can comply with
such Instructions, the Bank is authorized to maintain cash
balances on deposit for the Customer with itself or one of its
affiliates at such reasonable rates of interest as may from
time to time be paid on such accounts, or in non-interest
bearing accounts as the Customer may direct, if acceptable to
the Bank.
1
<PAGE>
3. DEPOSIT ACCOUNT TRANSACTIONS.
(a) The Bank will make payments from the Deposit Account
upon receipt of Instructions which include all
information required by the Bank.
(b) In the event that any payment to be made under this
Section 3 exceeds the funds available in the Deposit
Account, the Bank, in its discretion, may advance
the Customer such excess amount which shall be
deemed a loan payable on demand, bearing interest at
the rate customarily charged by the Bank on similar
loans.
(c) If the Bank credits the Deposit Account on a payable
date, or at any time prior to actual collection and
reconciliation to the Deposit Account, with
interest, dividends, redemptions or any other amount
due, the Customer will promptly return any such
amount upon oral or written notification: (i) that
such amount has not been received in the ordinary
course of business or (ii) that such amount was
incorrectly credited. If the Customer does not
promptly return any amount upon such notification,
the Bank shall be entitled, upon oral or written
notification to the Customer, to reverse such credit
by debiting the Deposit Account for the amount
previously credited. The Bank shall have no duty or
obligation to institute legal proceedings, file a
claim or a proof of claim in any insolvency
proceeding or take any other action with respect to
the collection of such amount, but may act for the
Customer upon Instructions after consultation with
the Customer.
4. CUSTODY ACCOUNT TRANSACTIONS.
(a) Securities will be transferred, exchanged or
delivered by the Bank upon receipt by the Bank of
Instructions which include all information required
by the Bank. Settlement and payment for Securities
received for, and delivery of Securities out of, the
Custody Account may be made in accordance with the
customary or established securities trading or
securities processing practices and procedures in
the jurisdiction or market in which the transaction
occurs, including, without limitation, delivery of
Securities to a purchaser, dealer or their agents
against a receipt with the expectation of receiving
later payment and free delivery. Delivery of
Securities out of the Custody Account may also be
made in any manner specifically required by
Instructions acceptable to the Bank.
(b) The Bank, in its discretion, may credit or debit the
Accounts on a contractual settlement date with cash
or Securities with respect to any sale, exchange or
purchase of Securities. Otherwise, such
transactions will be credited or debited to the
Accounts on the date cash or Securities are actually
received by the Bank and reconciled to the Account.
(i) The Bank may reverse credits or debits made to
the Accounts in its discretion if the related
transaction fails to settle within a reasonable
period, determined by the Bank in its
discretion, after the contractual settlement
date for the related transaction.
(ii) If any Securities delivered pursuant to this
Section 4 are returned by the recipient
thereof, the Bank may reverse the credits and
debits of the particular transaction at any
time.
2
<PAGE>
5. ACTIONS OF THE BANK.
The Bank shall follow Instructions received regarding
assets held in the Accounts. However, until it receives
Instructions to the contrary, the Bank will:
(a) Present for payment any Securities which are called,
redeemed or retired or otherwise become payable and
all coupons and other income items which call for
payment upon presentation, to the extent that the
Bank is actually aware of such opportunities.
(b) Execute in the name of the Customer such ownership
and other certificates as may be required to obtain
payments in respect of Securities.
(c) Exchange interim receipts or temporary Securities
for definitive Securities.
(d) Appoint brokers and agents for any transaction
involving the Securities, including, without
limitation, affiliates of the Bank.
(e) Issue statements to the Customer, at times mutually
agreed upon, identifying the Assets in the Accounts.
The Bank will send the Customer an advice or notification
of any transfers of Assets to or from the Accounts. Such
statements, advices or notifications shall indicate the
identity of the entity having custody of the Assets. Unless
the Customer sends the Bank a written exception or objection
to any Bank statement within sixty (60) days of receipt, the
Customer shall be deemed to have approved such statement. In
such event, or where the Customer has otherwise approved any
such statement, the Bank shall, to the extent permitted by
law, be released, relieved and discharged with respect to all
matters set forth in such statement or reasonably implied
therefrom as though it had been settled by the decree of a
court of competent jurisdiction in an action where the
Customer and all persons having or claiming an interest in the
Customer or the Customer's Accounts were parties.
All collections of funds or other property paid or
distributed in respect of Securities in the Custody Account
shall be made at the risk of the Customer. The Bank shall
have no liability for any loss occasioned by delay in the
actual receipt of notice by the Bank of any payment,
redemption or other transaction regarding Securities in the
Custody Account in respect of which the Bank has agreed to
take any action under this Agreement.
6. CORPORATE ACTIONS; PROXIES.
Whenever the Bank receives information concerning the
Securities which requires discretionary action by the
beneficial owner of the Securities (other than a proxy), such
as subscription rights, bonus issues, stock repurchase plans
and rights offerings, or legal notices or other material
intended to be transmitted to securities holders ("Corporate
Actions"), the Bank will give the Customer notice of such
Corporate Actions to the extent that the Bank's central
corporate actions department has actual knowledge of a
Corporate Action in time to notify its customers.
When a rights entitlement or a fractional interest
resulting from a rights issue, stock dividend, stock split or
similar Corporate Action is received which bears an expiration
date, the Bank will endeavor to obtain Instructions from the
Customer or its Authorized Person, but if Instructions are not
received in time for the Bank to take timely action, or actual
notice of such Corporate Action was received too late to seek
Instructions, the Bank is authorized to sell such rights
entitlement or fractional interest and to credit the Deposit
Account with the proceeds or take any other action it deems in
good faith, to be appropriate in which case it shall be held
harmless for any such action.
The Bank will deliver proxies to the Customer or its
designated agent pursuant to special arrangements which may
have been agreed to in writing. Such proxies shall be
executed in the appropriate nominee name relating to
Securities in the Custody Account registered in the name of
3
<PAGE>
such nominee but without indicating the manner in which such
proxies are to be voted; and where bearer Securities are
involved, proxies will be delivered in accordance with
Instructions.
7. NOMINEES.
Securities which are ordinarily held in registered form
may be registered in a nominee name of the Bank or securities
depository, as the case may be. The Bank may without notice
to the Customer cause any such Securities to cease to be
registered in the name of any such nominee and to be
registered in the name of the Customer. In the event that any
Securities registered in a nominee name are called for partial
redemption by the issuer, the Bank may allot the called
portion to the respective beneficial holders of such class of
security in any manner the Bank deems to be fair and
equitable. The Customer agrees to hold the Bank and their
respective nominees harmless from any liability arising
directly or indirectly from their status as a mere record
holder of Securities in the Custody Account.
All securities accepted by the Bank on behalf of the
Customer under the terms of this Agreement shall be in "street
name" or other good delivery from.
8. AUTHORIZED PERSONS.
As used in this Agreement, the term "Authorized Person"
means employees or agents including investment managers as
have been designated by written notice from the Customer or
its designated agent to act on behalf of the Customer under
this Agreement. Such persons shall continue to be Authorized
Persons until such time as the Bank receives Instructions from
the Customer or its designated agent that any such employee or
agent is no longer an Authorized Person.
9. INSTRUCTIONS.
The term "Instructions" means instructions of any
Authorized Person received by the Bank, via telephone, tested
telex, TWX, facsimile transmission, bank wire or other
teleprocess or electronic instruction or trade information
system acceptable to the Bank which the Bank believes in good
faith to have been given by Authorized Persons or which are
transmitted with proper testing pursuant to terms and
conditions which the Bank may specify. Unless otherwise
expressly provided, all Instructions shall continue in full
force and effect until canceled or superseded.
Any instructions delivered to the Bank by telephone shall
promptly thereafter be confirmed in writing by an Authorized
Person (which confirmation may bear the facsimile signature of
such Person), but the Customer will hold the Bank harmless for
the failure of an Authorized Person to send such confirmation
in writing, the failure of such confirmation to conform to the
telephone instructions received or the Bank's failure to
produce such confirmation at any subsequent time. The Bank
may electronically record any Instructions given by telephone,
and any other telephone discussions with respect to the
Custody Account or transactions pursuant to the Agreement.
The Customer shall be responsible from safeguarding any
testkeys, identification codes or other security devices which
the Bank shall make available to the Customer or its
Authorized Persons.
The Bank agrees to safeguard and maintain the
confidentiality of all passwords or numbers and to limit
access to this information for the purpose of acting pursuant
to this agreement.
4
<PAGE>
10. STANDARD OF CARE; LIABILITIES.
(a) The Bank shall be responsible for the performance of
only such duties as are set forth in this Agreement
or expressly contained in Instructions which are
consistent with the provisions of this Agreement as
follows:
(i) The Bank will use reasonable care with respect
to its obligations under this Agreement and the
safekeeping of Assets. In the event of any
loss to the Customer by reason of the failure
of the Bank to utilize reasonable care, the
Bank shall be liable to the Customer only to
the extent of the Customer's direct damages, to
be determined based on the market value of the
property which is the subject of the loss at
the date of discovery of such loss and without
reference to any special conditions or
circumstances.
(ii) The Bank will not be responsible for any act,
omission, default or for the solvency of any
broker or agent which it appoints unless such
appointment was made negligently or in bad
faith.
(iii) The bank shall be indemnified by, and
without liability to the Customer for any
action taken or omitted by the Bank whether
pursuant to Instructions or otherwise within
the scope of this Agreement if such act or
omission was in good faith, without negligence.
In performing its obligations under this
Agreement, the Bank may rely on the genuineness
of any document which it believes in good faith
to have been validly executed.
(iv) The Customer agrees to pay for and hold the
Bank harmless from any liability or loss
resulting from the imposition or assessment of
any taxes or other governmental charges, and
any related expenses with respect to income
from or Assets in the Accounts.
(v) The Bank will use its best efforts to maintain,
during the term of this Agreement, insurance
coverage comparable to the types, amounts and
limits set forth below:
Standard Limit Per
Form No. 24 Loss Aggregate
----------- --------- ---------
* Insuring Agreements $75,000,000 $75,000,000
ABC-Basic Coverages
* Insuring Agreement 75,000,000 75,000,000
D-Forgery or Alteration
* Insuring Agreement 75,000,000 75,000,000
E-Securities (1)
* Extortion Coverage (2)
A. Threat to Persons 20,000,000 20,000,000
B. Threat to Property 20,000,000 20,000,000
* Computer Systems 75,000,000 75,000,000
Coverage (3)
* Deductible Amount 2,500,000
Notes:
(1) An additional $125,000,000 insurance
coverage for securities located at
custodian's head office or at The Chase
Manhattan Bank, N.A., Chase MetroTech
Center, Brooklyn, New York 11245,
Attention: Global Custody Division.
(2) No deductible (separate policy).
5
<PAGE>
(3) This coverage is for electronic funds
transfer systems. There is additional
coverage for all EDP equipment and Media
under Commercial Property Insurance. The
limits of this coverage are $583,000,000.
(vi) Without limiting the foregoing, the Bank shall
not be liable for any loss which results from:
1) the general risk of investing, or 2)
investing or holding Assets in a particular
country including, but not limited to, losses
resulting from nationalization, expropriation
or other governmental actions; regulation of
the banking or securities industry; currency
restrictions, devaluations or fluctuations; and
market conditions which prevent the orderly
execution of securities transactions or affect
the value of Assets.
(vii) Neither party shall be liable to the other
for any loss due to forces beyond their control
including, but not limited to strikes or work
stoppages, acts of war or terrorism,
insurrection, revolution, nuclear fusion,
fission or radiation, or acts of God.
(b) Consistent with and without limiting the first
paragraph of this Section 10, it is specifically
acknowledged that the Bank shall have no duty or
responsibility to:
(i) question Instructions or make any suggestions
to the Customer or an Authorized Person
regarding such Instructions;
(ii) supervise or make recommendations with respect
to investments or the retention of Securities;
(iii) advise the Customer or an Authorized
Person regarding any default in the payment of
principal or income of any security other than
as provided in Section 3(c) of this Agreement;
(iv) evaluate or report to the Customer or an
Authorized Person regarding the financial
condition of any broker, agent or other party
to which Securities are delivered or payments
are made pursuant to this Agreement:
(v) review or reconcile trade confirmations
received from brokers. The Customer or its
Authorized Persons (as defined in Section 8)
issuing Instructions shall bear any
responsibility to review such confirmations
against Instructions issued to and statements
issued by the Bank.
(c) The Customer authorizes the Bank to act under this
Agreement notwithstanding that the Bank or any of
its divisions or affiliates may have a material
interest in a transaction, or circumstances are such
that the Bank may have a potential conflict of duty
or interest including the fact that the Bank or any
of its affiliates may provide brokerage services to
other customers, act as financial advisor to the
issuer of Securities, act as a lender to the issuer
of Securities, act in the same transaction as agent
for more than one customer, have a material interest
in the issue of Securities, or earn profits from any
of the activities listed herein.
11. FEES AND EXPENSES.
The Customer agrees to pay to the Bank for its services
under this Agreement such amount as may be agreed upon in
writing, together with the Bank's reasonable out-of-pocket
expenses.
6
12. MISCELLANEOUS.
<PAGE>
(a) Certification of Residency, etc. The Customer
certifies that it is a resident of the United States
with its principal place of business in the State of
Connecticut and agrees to notify the Bank of any
changes in residency. The Bank may rely upon this
certification or the certification of such other
facts as may be required to administer the Bank's
obligations under this Agreement. The Customer will
indemnify the Bank against all losses, liability,
claims or demands arising directly or indirectly
from any such certifications.
(b) Access to Records. The Bank shall allow the
Customer's independent public accountant reasonable
access to the records of the Bank relating to the
Assets as is required in connection with their
examination of books and records pertaining to the
Customer's affairs.
(c) Periodic Statements, Books and Records. The Bank
shall notify the Customer of each transaction
involving securities in the Account and will render
a statement of transactions with respect to the
Account on a regular basis. Periodic statements
shall be rendered as the Customer may reasonably
require, but not less frequently than monthly. The
Bank shall at all times maintain proper books and
records that shall separately identify the
securities. Books and records of the Bank (and of
any agent or depository) relating to the Account
shall at all times during regular business hours of
the Bank (or of any agent or depository) be
available for inspection by duly authorized
officers, employees or agents of Customer, or by
legally authorized regulatory officers who are then
in the process of reviewing the Customer's financial
affairs upon adequate proof to the Bank of such
official status. The Bank agrees to maintain such
records as may be sufficient to determine and verify
information concerning the custodied securities
which must be included in the Annual and Semi-Annual
Reports of the Customer, or any other report
required by applicable law.
(d) Books and Records Are Property of Customer. The
Bank hereby acknowledges that all books and records
relating to the services provided to Customer
hereunder are the property of the Customer and
subject to its control; provided, however, that
during the term of the Agreement, the Customer shall
not exercise such control so as to interfere with
the performance of the Bank's duties hereunder.
(e) Governing Law; Successors and Assigns. This
Agreement shall be governed by the laws of the State
of New York.
(f) Entire Agreement; Applicable Riders. Customer
represents that the Assets deposited in the Accounts
are (Check one):
__ Employee Benefit Plan or other assets subject
to the Employee Retirement Income Security Act
of 1974, as amended ("ERISA");
X Investment company assets subject to certain
Securities and Exchange Commission ("SEC")
rules and regulations;
__ Neither of the above.
This Agreement consists exclusively of this document
together with Schedule A and Exhibit 1.
There are no other provisions of this Agreement and
this Agreement supersedes any other agreements,
whether written or oral, between the parties. Any
amendment to this Agreement must be in writing,
executed by both parties.
(g) Severability. In the event that one or more
provisions of this Agreement are held invalid,
illegal or enforceable in any respect on the basis
of any particular circumstances or in any
jurisdiction, the validity, legality and
enforceability of such
7
<PAGE>
provision or provisions under
other circumstances or in other jurisdictions and of
the remaining provisions will not in any way be
affected or impaired.
(h) Waiver. Except as otherwise provided in this
Agreement, no failure or delay on the part of either
party in exercising any power or right under this
Agreement operates as a waiver, nor does any single
or partial exercise of any power or right preclude
any other or further exercise, or the exercise of
any other power or right. No waiver by a party of
any provision of this Agreement, or waiver of any
breach or default, is effective unless in writing
and signed by the party against whom the waiver is
to be enforced.
(i) Notices. All notices under this Agreement shall be
effective when actually received. Any notices or
other communications which may be required under
this Agreement are to be sent to the parties at the
following addresses or such other addresses as may
subsequently be given to the other party in writing:
Bank: The Chase Manhattan Bank, N.A.
Chase MetroTech Center
Brooklyn, New York 11245
Attention: Global Custody Division
Customer: The Travelers Insurance Company
One Tower Square
Hartford, Connecticut 06183-2030
Attention: Securities Department, Cashier Division
13. CONFIDENTIALITY OF RECORDS.
The Bank agrees to treat all records and other
information relating to the Customer or the Custody Account as
confidential, except that it may disclose such information
after prior notification to and prior approval of the
Customer, which will not be unreasonably withheld. Nothing in
this paragraph shall prevent the Bank from divulging
information to civil, criminal, bank, or securities regulatory
authorities or where the Bank may be exposed to civil or
criminal proceedings or penalties for failure to comply.
14. RELIANCE UPON DATA.
The Bank may rely on the accuracy of all data received by
it through electronic means and initiated by any person
authorized by the Customer. Every person who uses the correct
passwords to obtain information by electronic means or to make
permissible transactions shall be presumed to have the
Customer's authority unless the Customer can prove that:
(a) a person using a correct password was not authorized
to have access to this information;
(b) the person using the password obtained it through or
as a result of the Bank's disclosure (whether direct
or indirect); and
(c) the disclosure by the Bank was not authorized by the
Customer prior to its unauthorized use.
15. OPTION GUARANTEE LETTERS OR ESCROW RECEIPTS.
The Customer covenants and agrees that in the event that
the Bank shall at any time at the Customer's request enter
into an "Option Guarantee Letter" or execute an "SD Option
Clearing Corporation Escrow Receipt" at the request of the
Customer covering securities deposited with the Bank pursuant
to the Agreement, the Customer will hold the Bank harmless
from any and all loss, cost, or damage which the Bank may
suffer by reason of being requested to deliver securities or
8
<PAGE>
other property under such Option Guarantee Letters or Escrow
Receipts which securities and/or other property were not in
fact delivered to the Bank or to the Bank's agent for
transmittal to the Bank.
16. SUBROGATION OF RIGHTS.
At the election of the Customer, the Customer shall be
entitled to be subrogated to the rights of the Bank, with
respect to any claim against any other person or institution
which the Bank may have, as a consequence of any loss or
damage to custodied securities. In such event, the Customer
shall consult with the Bank concerning selection of counsel
and management of any litigation to cover for such loss.
17. RESOLUTION OF DISPUTES.
In the event of any loss of or damage to custodied
securities or dispute between the Bank and the Customer
concerning the Account, the Bank and the Customer agree to
attempt to resolve the dispute through negotiation or a method
of alternative dispute resolution. No litigation shall be
commenced without a certification by an authorized officer,
employee, or agent of either party that the dispute cannot be
resolved by negotiation or alternative dispute resolution
provided in writing at least 10 days before commencing legal
action.
18. TRUSTEES AND SHAREHOLDERS OF MUTUAL FUNDS NOT PERSONALLY
LIABLE.
To the extent this Agreement is made on behalf of the
mutual funds (the "Funds"), it shall be made by an officer of
the Fund, not individually, but solely as an officer or
Trustee of the Fund under its Declaration of Trust, and the
obligations under this Agreement are not binding upon, nor
shall any resort be had to the private property of, any of the
Trustees, shareholders, officers, employees or agents of the
Funds personally, but shall bind only the Funds' property.
19. INFORMATION TO CALIFORNIA COMMISSIONER OF INSURANCE.
The Bank agrees that it shall furnish to the California
Commissioner of Insurance, at the Customer's expense, any
information or reports concerning the funds as the
Commissioner, in the performance of his or her duties, may
request.
9
<PAGE>
20. DEPOSIT OF SECURITIES IN SECURITIES SYSTEM.
If the Customer wishes to deposit securities with the
Bank to be held in the Bank's account with one or more
depositories or clearinghouses or in the book-entry system
authorized by the U.S. Department of the Treasury or other
federal agency (collectively referred to as "Securities
Systems") pursuant to an arrangement which is approved by the
Customer, then the Bank will do the following:
(a) The Bank's official records shall separately
identify the securities owned by the customer which
are held in the account and indicate the location of
the securities.
(b) All registered securities held by the Bank pursuant
to the agreement shall be registered in the name of
the Customer or its nominee, the Bank or its
nominee, or a Securities System or its nominee.
(c) The Bank will send to the Customer a confirmation of
the transfer of securities held for the Customer and
furnish regular reports of holdings of securities in
the account.
(d) Upon written instructions from an authorized officer
of the Customer, any representative of the
Connecticut Insurance Department shall be entitled
to examine, on the Bank's premises, the Bank's
records relating to the securities held in the
account.
(e) The Bank shall maintain records sufficient to
determine and verify information relating to
securities held in the account that may be reported
in the Annual and Semi-Annual Reports of the
Customer, as filed with regulatory authorities.
(f) The Bank shall be responsible for any loss of the
securities held in the account caused by the
negligence of the Bank or its agents.
(g) In the event of loss of any of the securities held
in the account, the Bank shall promptly replace the
securities or the value thereof and the value of any
loss of rights or privileges resulting from said
loss or securities.
(h) The Bank will hold the securities in the account
subject to the instructions of the Customer and will
permit withdrawal thereof upon the demand of the
Customer.
(i) The Bank shall send to the Customer all (i) reports
which it receives from the Securities System on its
systems of internal accounting control and (ii)
reports prepared by outside auditors with respect to
the Bank's systems of internal accounting control
pertaining to custodian recordkeeping, promptly upon
the Bank's receipt of such reports.
(j) Securities in the account may be held only in
Connecticut or in reciprocal states under the
Insurers Supervision, Rehabilitation and Liquidation
Model Act or a similar act (the Model Act).
(k) If a reciprocal state under the Model Act repeals or
modifies the Model Act so as to impair the
Connecticut Insurance Commissioner's authority over
the assets of an insolvent insurer, any securities
held in the account and located in that state will
be relocated to another reciprocal state or
Connecticut prior to the effective date of said
repeal or modification, unless the Connecticut
Insurance Commissioner deems the repeal or
modification acceptable.
(l) The Bank may only deposit the securities in a
nonproprietary account with the Securities System
that includes only assets held for the Bank's
customers.
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<PAGE>
(m) Should a Securities System cease to act on behalf of
the Bank, then the securities in the account shall
be promptly transferred to the Bank or another
Securities System approved by the Customer.
21. EFFECTIVE PERIOD, TERMINATION, ASSIGNMENT AND AMENDMENT.
This Agreement shall become effective as of the effective
date named herein, shall continue in full force and effect
until terminated as hereinafter provided, may be amended at
any time by mutual agreement of the parties hereto, and may be
terminated by either party by an instrument in writing
delivered or mailed, postage prepaid to the other party, such
termination to take effect not sooner than thirty (30) days
after the date of such delivery or mailing; provided, however,
that the Bank shall not act under paragraph 20 hereof in the
absence of receipt of an initial certificate of the Secretary
that the board of the Customer has approved the initial use of
a particular Securities System and the receipt of an annual
certificate of the Secretary that the Board has reviewed the
use by the Customer of such Securities System, as required in
each case by Rule 17f-4 under the Investment Company Act of
1940, as amended, and provided further, however, that the
Customer shall not amend or terminate this Agreement in
contravention of any applicable federal or state regulations,
or any provision of its Rules and Regulations or by-laws and
further provided, that the Customer may at any time by action
of its Board (a) substitute another bank or trust company for
the Bank by giving notice as described above to the Bank, or
(b) immediately terminate this Agreement in the event of the
appointment of a conservator or receiver for the Bank by the
Comptroller of the Currency or upon the happening of a like
event at the direction of an appropriate regulatory agency or
court of competent jurisdiction.
Upon termination of the Agreement, the Customer shall pay
the Bank such compensation as may be due as of the date of
such termination and shall likewise reimburse the Bank for its
costs, expenses and disbursements.
This Agreement may not be assigned by the Bank without
the consent of the Customer, authorized or approved by a
resolution of its Board (The Board of Managers of the Variable
Annuity Accounts or the Board of Trustees of the Mutual
Funds).
Additional Investment Company Separate Accounts or mutual
funds may be added to this Agreement upon the execution by the
Bank and any additional party of an amended "Schedule A" to be
attached to this Agreement, which shall list such additional
Separate Accounts or mutual funds.
22. INDEMNIFICATION AND HOLD HARMLESS.
The Customer agrees to indemnify and hold harmless the
Bank and its nominees from all taxes, charges, expenses,
assessments, claims and liabilities (including counsel fees)
incurred or assessed against it or its nominees in Connecticut
with the performance of this Agreement in good faith, except
such as may arise from the Bank's or its nominee's own
negligent action, negligent failure to act or willful
misconduct.
11
<PAGE>
IN WITNESS WHEREOF, the Customer and the Bank have each
executed this Custody Agreement as of the 1st day of February,
1995, by their duly authorized representatives.
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
By: /s/Heath B. McLendon
Chairman
Board of Managers
CAPITAL APPRECIATION FUND
CASH INCOME TRUST
HIGH YIELD BOND TRUST
MANAGED ASSETS TRUST
THE TRAVELERS SERIES TRUST
U.S. GOVERNMENT SECURITIES PORTFOLIO
SOCIAL AWARENESS STOCK PORTFOLIO
UTILITIES PORTFOLIO
By: /s/Heath B. McLendon
Chairman
Board of Trustees
THE CHASE MANHATTAN BANK, N.A.
By: /s/George S. Synder
Title: Vice President
12
<PAGE>
EXHIBIT I
MUTUAL FUND RIDER TO GLOBAL CUSTODY AGREEMENT
BETWEEN THE TRAVELERS INSURANCE COMPANY AND
THE CHASE MANHATTAN BANK, N.A.
EFFECTIVE FEBRUARY 1, 1995
Customer represents that the Assets being placed in the
Bank's custody are subject to the Investment Company Act of
1940 (the "1940 Act"), as the same may be amended from time to
time.
Except to the extent that the Bank has specifically
agreed to comply with a condition of a rule, regulation,
interpretation promulgated by or under the authority of the
Securities and Exchange Commission ("SEC") or the Exemptive
Order applicable to accounts of this nature issued to the Bank
(Investment Company Act of 1940, Release No. 12053, November
20, 1981), as amended, or unless the Bank has otherwise
specifically agreed, the Customer shall be solely responsible
to assure that the maintenance of Assets under this Agreement
complies with such rules, regulations, interpretations or
exemptive order promulgated by or under the authority of the
SEC.
The following modifications are made to the Agreement:
Section 9. Instructions.
Add the following language to the end of Section 9:
Deposit Account Payments and Custody Account Transactions
made pursuant to Section 3 and 4 of this Agreement may be
made only for the purposes listed below. Instructions
must specify the purpose for which any transaction is to
be made and Customer shall be solely responsible to
assure that Instructions are in accord with any
limitations or restrictions applicable to the Customer by
law or as may be set forth in its prospectus.
(a) In connection with the purchase or sale of
Securities at prices as confirmed by Instructions;
(b) When Securities are called, redeemed or retired, or
otherwise become payable;
(c) In exchange for or upon conversion into other
securities alone or other securities and cash
pursuant to any plan or merger, consolidation,
reorganization, recapitalization or readjustment;
(d) Upon conversion of Securities pursuant to their
terms into other securities;
(e) Upon exercise of subscription, purchase or other
similar rights represented by Securities;
(f) For the payment of interest, taxes, management or
supervisory fees, distributions or operating
expenses;
(g) In connection with any borrowings by the Customer
requiring a pledge of Securities, but only against
receipt of amounts borrowed;
(h) In connection with any loans, but only against
receipt of adequate collateral as specified in
Instructions which shall reflect any restrictions
applicable to the Customer;
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<PAGE>
(i) For the purpose of redeeming shares of the capital
stock of the Customer and the delivery to, or the
crediting to the account of the Bank or the
Customer's transfer agent, such shares to be
purchased or redeemed;
(j) For the purpose of redeeming in kind shares of the
Customer against delivery to the Bank or the
Customer's transfer agent of such shares to be so
redeemed;
(k) For delivery in accordance with the provisions of
any agreement among the Customer, the Bank and a
broker-dealer registered under the Securities
Exchange Act of 1934 and a member of The National
Association of Securities Dealers, Inc., relating to
compliance with the rules of The Options Clearing
Corporation and of any registered national
securities exchange, or of any similar organization
or organizations, regarding escrow or other
arrangements in connection with transactions by the
Customer;
(l) For release of Securities to designated brokers
under covered call options, provided, however, that
such Securities shall be released only upon payment
to the Bank of monies for the premium due and a
receipt for the Securities which are to be held in
escrow. Upon exercise of the option, or at
expiration, the Bank will received from brokers the
Securities previously deposited. The Bank will act
strictly in accordance with Instructions in the
delivery of Securities to be held in escrow and will
have no responsibility or liability for any such
Securities which are not returned promptly when due
other than to make proper request for such return;
(m) For spot or forward foreign exchange transactions to
facilitate security trading, receipt of income from
Securities or related transactions;
(n) For other proper purposes as may be specified in
Instructions issued by an officer of the Customer
which shall include a statement of the purpose for
which the delivery or payment is to be made, the
amount of the payment or specific Securities to be
delivered, the name of the person or persons to whom
delivery or payment is to be made, and a
certification that the purpose is a proper purpose
under the instruments governing the Customer; and
(o) Upon the termination of this Agreement as set forth
in Section 21.
Section 10. Standard of Care; Liabilities.
Add the following subsection (c) to Section 10:
(c) The Bank hereby warrants to the Customer that in its
opinion, after due inquiry, the established
procedures to be followed by each of its branches,
each branch of a qualified U.S. bank, holding the
Customer's Securities, pursuant to this Agreement
afford protection for such Securities at least equal
to that afforded by the Bank's established
procedures with respect to similar securities held
by the Bank and its securities depositories in New
York.
Section 12. Access to Records.
Add the following language to the end of Section 12(b):
Upon reasonable request from the Customer, the Bank shall
furnish the Customer such reports (or portions thereof)
of the Bank's system of internal account controls
applicable to the Bank's duties under this Agreement.
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<PAGE>
SCHEDULE A
Short
Name Long Name
- ----- ---------
VTM The Travelers Timed Short-Term Bond Account for
Variable Annuities
VTA The Travelers Timed Growth and Income Stock Account
for Variable Annuities
VA1 The Travelers Quality Bond Account for Variable
Annuities
VAA The Travelers Growth and Income Stock Account for
Variable Annuities
VM The Travelers Money Market Account for Variable
Annuities
MAT Managed Assets Trust
AST Capital Appreciation Fund
HYBT High Yield Bond Trust
CIT Cash Income Trust
USGF US Government Securities Portfolio
SOAP Social Awareness Stock Portfolio
VTAS The Travelers Timed Aggressive Stock Account for
Variable Annuities
VTB The Travelers Timed Bond Account for Variable
Annuities
GRUF Utilities Portfolio
<PAGE>
EXHIBIT 5
DISTRIBUTION AND MANAGEMENT AGREEMENT
DISTRIBUTION AND MANAGEMENT AGREEMENT (the "Agreement") made
this 1st day of February, 1995, by and among The Travelers
Insurance Company, a Connecticut stock insurance company
(hereinafter the "Company"), Travelers Equities Sales, Inc., a
Connecticut general business corporation (hereinafter "TESI"),
and The Travelers Timed Short-Term Bond Account for Variable
Annuities (hereinafter "Account TSB"), a separate account of the
Company established by its Chairman of the Board and Chief
Executive Officer on October 30, 1986, pursuant to a resolution
of the Company's Board of Directors on August 4, 1967, pursuant
to Section 38-154a of the Connecticut General Statutes. This
Agreement supersedes the Distribution and Management Agreement
dated December 30, 1992 between the Company and Account TSB.
1. The Company hereby agrees to provide all administrative
services relative to variable annuity contracts and revisions
thereof (hereinafter "Contracts") sold by the Company, the net
proceeds of which or reserves for which are maintained in Account
TSB.
2. TESI hereby agrees to perform all sales functions
relative to the Contracts. The Company agrees to reimburse TESI
for commissions paid, other sales expenses and properly allocable
overhead expenses incurred in performance thereof.
3. For providing the administrative services referred to in
paragraph 1 above, and for reimbursing TESI for the sales
functions referred to in paragraph 2 above, the Company will
receive the deductions for sales and administrative expenses
which are stated in the Contracts.
4. The Company will furnish at its own expense and without
cost to Account TSB the administrative expenses of Account TSB,
including but not limited to:
(a) office space in the offices of the Company or in such
other place as may be agreed upon from time to time,
and all necessary office facilities and equipment;
(b) necessary personnel for managing the affairs of
Account TSB, including clerical, bookkeeping,
accounting and other office personnel;
(c) all information and services, including legal services,
required in connection with registering and qualifying
Account TSB or the Contracts with federal and state
regulatory authorities, preparation of registration
statements and prospectuses, including amendments and
revisions thereto, all annual, semi-annual and periodic
reports, notices and proxy solicitation materials
furnished to variable annuity Contract Owners or
regulatory authorities, including the costs of printing
and mailing such items;
(d) the costs of preparing, printing, and mailing all sales
literature;
(e) all registration, filing and other fees in connection
with compliance requirements of federal and state
regulatory authorities;
(f) the charges and expenses of any custodian or depository
appointed by Account TSB for the safekeeping of its cash,
securities and other property;
(g) the charges and expenses of independent accountants
retained by Account TSB;
(h) expenses of Contract Owners' and Board of Managers'
meetings;
<PAGE>
(i) all expenses of and compensation paid to Members of
the Board of Managers of Account TSB;
and
(j) reimbursement for amounts paid by Account TSB for
indemnification of the Board of Managers of Account TSB,
the officers, and agents of Account TSB pursuant to
Article VI of Account TSB's Rules and Regulations,
provided that in the case of any person who is a
director, officer or agent of the Company, the
Company's obligation will be limited to such amount as
the Board of Directors of the Company determines to be
reasonable.
Provided, however, that the Company shall not be obligated
to pay capital gains taxes, and any other taxes based on
income of, assets in or the existence of Account TSB.
5. Provided Contract Owners annually approve this Agreement
at a meeting of Contract Owners held for that purpose, Account
TSB will reimburse the Company for charges and expenses paid by
the Company to registered investment advisers which provide
market timing investment advisory services relating to the
Contracts pursuant to written agreements between the Contract
Owners and such market timing investment advisers, which
agreements are acceptable to the Company. The failure of
Contract Owners to approve this Distribution and Management
Agreement shall have no effect on the validity of the provisions
of this Agreement other than this paragraph 5.
6. The services of the Company and TESI to Account TSB
hereunder are not to be deemed exclusive and the Company and TESI
shall be free to render similar services to others so long as its
services hereunder are not impaired or interfered with thereby.
7. The Company agrees to guarantee that the annuity payments
will not be affected by mortality experience (under Contracts the
reserves for which are invested in Account TSB) and assumes the
risks (a) that the actuarial estimate of mortality rates among
annuitants may prove erroneous and that reserves set up on the
basis of such estimates will not be sufficient to meet the
Company's variable annuity payment obligations, and (b) that the
charges for services and expenses of the Company set forth in the
Contracts, including the payment of any guaranteed minimum death
benefit prior to the Maturity Date specified in the Contract, may
not prove sufficient to cover its actual expenses. For providing
these mortality and expense risk guarantees, the Company will
receive from Account TSB an amount per valuation period of
Account TSB, as provided from time to time.
8. This Agreement shall continue in effect for a period of
more than two years from the date of its execution, only so long
as such continuance after said date is specifically approved at
least annually by vote of a majority of the Board of Managers,
who are parties to such Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of
voting on such approval, or by a vote of a majority of the
outstanding voting securities of Account TSB; provided, however,
that this Agreement shall terminate automatically in the event of
its assignment by any of the parties hereto.
9. Notwithstanding termination of this Agreement, the
Company shall continue to provide administrative services, and
mortality and expense risk guarantees provided for herein with
respect to Contracts in effect on the date of termination, and
the Company shall continue to receive the compensation provided
under this Agreement.
10. This Agreement is subject to the provisions of the
Investment Company Act of 1940, as amended, and the rules of the
Securities and Exchange Commission.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their respective officials thereunto
duly authorized and, in the case of the Company and TESI, seals
to be affixed as of the day and year first above written.
THE TRAVELERS INSURANCE COMPANY
(Seal)
By: /s/Robert E. Evans
Title: Senior Vice President
ATTEST:
/s/Ernest J. Wright
Assistant Secretary
THE TRAVELERS TIMED SHORT-TERM BOND
ACCOUNT FOR VARIABLE ANNUITIES
By: /s/ Heath B. McLendon
Title: Chairman, Board of Managers
WITNESS:
/s/Ernest J. Wright
Secretary to the Board of Managers
TRAVELERS EQUITIES SALES, INC.
By: /s/George C. Kokulis
Title: President
ATTEST: (SEAL)
/s/Ernest J. Wright
Corporate Secretary
<PAGE>
EXHIBIT 13(A)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Post-Effective Amendment
No. 13 of this Registration Statement on Form N-3 of our reports dated
February 15, 1995, on our audits of the financial statements of The Travelers
Timed Short-Term Bond Account for Variable Annuities, 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 Aggressive Stock Account for Variable
Annuities, The Travelers Timed Bond Account for Variable Annuities and The
Travelers Fund U for Variable Annuities, and to the inclusion of our reports
on the financial statements of The Travelers Insurance Company and
Subsidiaries (the "Company") dated January 24, 1994 and February 9, 1993
(except for Notes 2 and 5, as to which the date is January 24, 1994) which
includes an explanatory paragraph regarding the change in the methods of
accounting for post-retirement benefits other than pensions, income taxes
and foreclosed assets in 1992, on our audits of the consolidated financial
statements of the Company. We also consent to the reference to our Firm as
experts under the caption "Independent Accountants".
/s/Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
April 24, 1995
<PAGE>
EXHIBIT 13(B)
The Board of Directors
The Travelers Insurance Company:
We consent to the inclusion in this Post-Effective Amendment No. 13 to the
registration statement (No. 33-13051) on Form N-3, filed for The Travelers
Times Short-Term Bond Account for Variable Annuities, of our reports, dated
January 17, 1995. Our reports refer 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."
/s/KPMG PEAT MARWICK LLP
-------------------------
KPMG PEAT MARWICK LLP
Hartford Connecticut
April 12, 1995
<PAGE>
EXHIBIT 16
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT
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, 1994 through December 31, 1994.
The "5-year rate" represents performance for the period January
1, 1990 through December 31, 1994.
The "10-year rate" represents performance for the period November
16, 1987 (the date operations commenced) through December 31,
1994.
T = (ERV/P)1/n 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 6.123 for the "10-year
rate"/Since Inception
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. Additionally, market timing fees are
included as 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.
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 and
5-year periods. The 1-year rate is for the period January 1,
1994 through December 31, 1994; the 3-year rate is for the period
January 1, 1992 through December 31, 1994; and the 5-year rate is
for the period January 1, 1990 through December 31, 1994.
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 and 5 years (or since
inception), 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>
INDIVIDUAL STANDARDIZED PERFORMANCE
TIMED SHORT-TERM 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 1.002660 1 000.00 997.347 .003090
03/31/88 1.015637 .002850
06/30/88 1.030641 -1.44 -1.402 .002850
09/30/88 1.045943 .002850
12/30/88 1.064239 -1.49 -1.397 .002850
03/31/89 1.085286 .002450
06/30/89 1.107869 -1.32 -1.194 .002450
09/29/89 1.128272 .002450
12/29/89 1.148818 1 000.00 870.46O -1.37 -1.195 .002450
03/30/90 1.168513 .002120
06/29/90 1.184637 -1.08 -.909 -1.23 -1.036 .002120
09/28/90 1.201661 .002120
12/31/90 1.217997 -1.11 -.909 -1.26 -1.036 .002120
03/28/91 1.229361 .001840
06/28/91 1.240486 -.98 -.792 -1.12 -.903 .001840
09/30/91 1.249921 .001840
12/31/91 1.257686 -1.00 -.793 -1.14 -.904 .001840
03/31/92 1.262170 .001810
06/30/92 1.266925 -.99 -.782 -1.13 -.891 .001810
09/30/92 1.269132 .001810
12/31/92 1.270617 -.99 -.783 -1.13 -.892 .001810
03/31/93 1.272056 .001960
06/30/93 1.273149 -1.08 -.847 -1.23 -.966 .001960
09/30/93 1.274244 .001960
12/31/93 1.275474 1 000.00 784.022 -1.08 -.847 -1.23 -.965 .001960
03/31/94 1.276228 .001790
06/30/94 1.279488 -.90 -.701 -.99 -.772 -1.13 -.880 .001790
09/30/94 1.284869 .001790
12/30/94 1.292443 -.90 -.698 -.99 -.769 -1.13 -.876 .001790
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR SINCE INCEPTION
-------- --------- ---------------
<S> <C> <C> <C>
ENDING UNITS 782.624 862.258 982.810
ACCOUNT VALUE 1,011.50 1,114.42 1,270.23
SURRENDER VALUE 961.50 1,064.42
TOTAL RETURN -3.85% 6.44% 27.02%
ANNUALIZED RETURN 1.26% 3.47%
</TABLE>
<PAGE>
GROUP STANDARDIZED PERFORMANCE
TIMED SHORT-TERM 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 1.002660 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 1,000.00 870.460 -1.50 -1.307 .002680
03/30/90 1.168513 .002830
06/29/90 1.184637 -1.44 -1.213 -1.64 -1.382 .002830
09/28/90 1.20l66l .002830
12/31/90 1.217997 -1.48 -1.213 -1.68 -1.382 .002830
03/28/91 1.229361 .002970
06/28/91 1.240486 -1.58 -1.277 -1.81 -1.455 .002970
09/30/91 1.249921 .002970
12/31/91 1.257686 -1.61 -1.278 -1.83 -1.456 .002970
03/31/92 1.262170 .003500
06/30/92 1.266925 -1.91 -1.509 -2.18 -1.719 .003500
09/30/92 1.269132 .003500
12/31/92 1.270617 -1.92 -1.510 -2.19 -1.720 .003500
03/31/93 1.272056 .003410
06/30/93 1.273149 -1.87 -1.469 -2.13 -1.674 .003410
09/30/93 1.274244 .003410
12/31/93 1.275474 1,000.00 784.022 -1.87 -1.467 -2.13 -1.671 .003410
03/31/94 1.276228 .002910
06/30/94 1.279488 -1.46 -1.139 -1.60 -1.249 -1.82 -1.422 .002910
09/30/94 1.284869 .002910
12/30/94 1.292443 -1.46 -1.133 -1.61 -1.243 -1.83 -1.416 .002910
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR SINCE INCEPTION
-------- --------- ---------------
<S> <C> <C> <C>
ENDING UNITS 781.750 857.032 976.344
ACCOUNT VALUE 1,010.37 1,107.67 1,261.87
SURRENDER VALUE 960.37 1,057.67
TOTAL RETURN -3.96% 5.77% 26.19%
ANNUALIZED RETURN 1.13% 3.38%
</TABLE>
<PAGE>
EXHIBIT 17
In connection with the solicitation and sale of variable
annuity contracts to participants of plans qualified under
Section 403(b) of the Internal Revenue Code, the Registrant
hereby represents, in reliance upon No-Action Letter IP-6-88,
that it has:
(1) included appropriate disclosure regarding the
redemption restrictions imposed by Section 403(b)(11) in
each registration statement, including the prospectus,
used in connection with the offer of the contract;
(2) included appropriate disclosure regarding the
redemption restrictions imposed by Section 403(b)(11) in
any sales literature used in connection with the offer
of the contract;
(3) instructed sales representatives who solicit
participants to purchase the contract specifically to
bring the redemption restrictions imposed by Section
403(b)(11) to the attention of the potential
participants; and
(4) obtained from each plan participant who purchases a
Section 403(b) annuity contact, prior to or at the time
of such purchase, a signed statement acknowledging the
participant's understanding of (i) the restrictions on
redemption imposed by Section 403(b)(11), and (ii) the
investment alternatives available under the employer's
Section 403(b) arrangement, to which the participant may
elect to transfer his or her contract value.
By: /s/Robert C. Hamilton
Name: Robert C. Hamilton
Title: Second Vice President
Date: Aprl 25, 1995
<PAGE>
EXHIBIT 18(a)
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT
FOR VARIABLE ANNUITIES
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, Heath B. McLendon of Summit, New Jersey, Chair
man of the Board of Managers of The Travelers Timed Short-Term
Bond Account for Variable Annuities of The Travelers Insurance
Company, do hereby make, constitute and appoint ERNEST J. WRIGHT,
Secretary of said Fund, and KATHLEEN A. McGAH, Assistant
Secretary of said Fund, 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 of said Fund on Form N-3 or other
applicable form under the Securities Act of 1933 for the
registration of Variable Annuity Contracts funded in The Travelers
Timed Short-Term Bond Account for Variable Annuities and to sign
any and all amendments thereto that may be filed.
IN WITNESS WHEREOF I have hereunto set my hand this
28th day of February, 1995.
/s/Heath B. McLendon
Chairman of the Board of Managers
The Travelers Timed Short-Term
Bond Account for Variable Annuities
<PAGE>
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT
FOR VARIABLE ANNUITIES
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, Knight Edwards of Providence, Rhode Island, a
member of the Board of Managers of The Travelers Timed Short-Term
Bond Account for Variable Annuities of The Travelers Insurance
Company, do hereby make, constitute and appoint ERNEST J. WRIGHT,
Secretary of said Fund, and SARA CHAMBERLAIN, Assistant Secretary
of said Fund, 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 of said Fund on Form N-3 or other
applicable form under the Securities Act of 1933 for the
registration of Variable Annuity Contracts funded in The Travelers
Timed Short-Term Bond Account for Variable Annuities and to sign
any and all amendments thereto that may be filed.
IN WITNESS WHEREOF I have hereunto set my hand this
21st day of October, 1994.
/s/Knight Edwards
Member of the Board of Managers
The Travelers Timed Short-Term
Bond Account for Variable Annuities
<PAGE>
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT
FOR VARIABLE ANNUITIES
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, Robert E. McGill, III of Williamstown,
Massachusetts, a member of the Board of Managers of The
Travelers Timed Short-Term Bond Account for Variable Annuities
of The Travelers Insurance Company, do hereby make,
constitute and appoint ERNEST J. WRIGHT, Secretary of said
Fund, and SARA CHAMBERLAIN, Assistant Secretary of said Fund, 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 of said
Fund on Form N-3 or other applicable form under the Securities
Act of 1933 for the registration of Variable Annuity Contracts
funded in The Travelers Timed Short-Term Bond Account for
Variable Annuities and to sign any and all amendments thereto
that may be filed.
IN WITNESS WHEREOF I have hereunto set my hand this
21st day of October, 1994.
/s/Robert E. McGill, III
Member of the Board of Managers
The Travelers Timed Short-Term
Bond Account for Variable Annuities
<PAGE>
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT
FOR VARIABLE ANNUITIES
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, Lewis Mandell of Storrs, Connecticut, a member
of the Board of Managers of The Travelers Timed Short-Term Bond
Account for Variable Annuities of The Travelers Insurance Company,
do hereby make, constitute and appoint ERNEST J. WRIGHT,
Secretary of said Fund, and SARA CHAMBERLAIN, Assistant Secretary
of said Fund, 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 of said Fund on Form N-3 or other
applicable form under the Securities Act of 1933 for the
registration of Variable Annuity Contracts funded in The Travelers
Timed Short-Term Bond Account for Variable Annuities and to sign
any and all amendments thereto that may be filed.
IN WITNESS WHEREOF I have hereunto set my hand this
21st day of October, 1994.
/s/Lewis Mandell
Member of the Board of Managers
The Travelers Timed Short-Term
Bond Account for Variable Annuities
<PAGE>
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT
FOR VARIABLE ANNUITIES
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, Frances M. Hawk of Sherborn, Massachusetts, a
member of the Board of Managers of The Travelers Timed Short-Term
Bond Account for Variable Annuities of The Travelers Insurance
Company, do hereby make, constitute and appoint ERNEST J. WRIGHT,
Secretary of said Fund, and SARA CHAMBERLAIN, Assistant Secretary
of said Fund, 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 of said Fund on Form N-3 or other
applicable form under the Securities Act of 1933 for the
registration of Variable Annuity Contracts funded in The Travelers
Timed Short-Term Bond Account for Variable Annuities and to sign
any and all amendments thereto that may be filed.
IN WITNESS WHEREOF I have hereunto set my hand this
21st day of October, 1994.
/s/Frances M. Hawk
Member of the Board of Managers
The Travelers Timed Short-Term
Bond Account for Variable Annuities
<PAGE>
Exhibit 18(b)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, JAY S. FISHMAN of Haworth, New Jersey, director and
Chief Financial Officer 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-3, Form N-4, S-2 and Form S-6 or
other appropriate form under the Securities Act of 1933 which
registrants are dedicated specifically to the funding of variable
annuity contracts, modified guaranteed annuity contracts and
variable life insurance 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 24th day
of April, 1995.
/s/ Jay S. Fishman
____________________________________
Director and Chief Financial Officer
The Travelers Insurance Company
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT
FOR VARIABLE ANNUITIES
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, Robert I. Lipp of Scarsdale, New York, director of The Travelers
Insurance Company (hereafter the "Company"), do hereby make, constitute and
appoint JAY S. FISHMAN, Director and Chief Financial 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
Company on Form N-3 or other appropriate form under the Securities Act of 1933
for The Travelers Timed Short-Term Bond Account 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 26th day of April,
1995.
/s/Robert I. Lipp
Director
The Travelers Insurance Company
<PAGE>
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT
FOR VARIABLE ANNUITIES
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, Charles O. Prince, III of Weston, Connecticut, director of The
Travelers Insurance Company (hereafter the "Company"), do hereby make,
constitute and appoint JAY S. FISHMAN, Director and Chief Financial 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 Company on Form N-3 or other appropriate form under the Securities Act of
1933 for The Travelers Timed ShortTerm Bond Account 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 26th day of April,
1995.
/s/Charles O. Prince, III
Director
The Travelers Insurance Company
<PAGE>
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT
FOR VARIABLE ANNUITIES
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, Marc P. Weill of New York, New York, director of The
Travelers Insurance Company (hereinafter the "Company"), do
hereby make, constitute and appoint JAY S. FISHMAN, Director and
Chief Financial 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 Company on Form N-3 or other appropriate form under the
Securities Act of 1933 for The Travelers Timed Short-Term Bond
Account 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 28th
day of November, 1994.
/s/Marc P. Weill
Director
The Travelers Insurance Company
<PAGE>
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT
FOR VARIABLE ANNUITIES
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, Irwin R. Ettinger of Stamford, Connecticut, director
of The Travelers Insurance Company (hereinafter the "Company"),
do hereby make, constitute and appoint JAY S. FISHMAN, Director
and Chief Financial 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 Company on Form N-3 or other appropriate form
under the Securities Act of 1933 for The Travelers Timed Short
Term Bond Account 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 26th
day of April, 1994.
/s/Irwin R. Ettinger
Director
The Travelers Insurance Company
<PAGE>
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT
FOR VARIABLE ANNUITIES
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, MICHAEL A. CARPENTER of Greenwich, Connecticut, a
director of The Travelers Insurance Company (hereinafter the
"Company"), do hereby make, constitute and appoint JAY S.
FISHMAN, Director and Chief Financial 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 Company on Form N-3 or
other appropriate form under the Securities Act of 1933 for
The Travelers Timed Short-Term Bond Account 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 3rd day
of February, 1995.
/s/Michael A. Carpenter
Director
The Travelers Insurance Company
<PAGE>
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT
FOR VARIABLE ANNUITIES
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, Donald T. DeCarlo of Douglaston, New York, director
of The Travelers Insurance Company (hereinafter the "Company"),
do hereby make, constitute and appoint JAY S. FISHMAN, Director
and Chief Financial 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 Company on Form N-3 or other appropriate form
under the Securities Act of 1933 for The Travelers Timed Short
Term Bond Account 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 10th
day of April, 1995.
/s/Donald T. DeCarlo
Director
The Travelers Insurance Company
<PAGE>
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT
FOR VARIABLE ANNUITIES
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, James L. Morgan of Simsbury, Connecticut, Senior
Vice President and Chief Accounting Officer of The Travelers
Insurance Company (hereinafter the "Company"), do hereby make,
constitute and appoint JAY S. FISHMAN, Director and Chief
Financial Officer of said Company, and JULIE E. ROCKMORE,
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-3 or other appropriate form under the Securities
Act of 1933 for The Travelers Timed Short-Term Bond Account 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 26th
day of September, 1994.
/s/James L. Morgan
Senior Vice President and
Chief Accounting Officer
The Travelers Insurance Company
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 278,134,006
<INVESTMENTS-AT-VALUE> 277,878,388
<RECEIVABLES> 2,475,287
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 244,087
<TOTAL-ASSETS> 280,597,762
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 488,419
<TOTAL-LIABILITIES> 488,419
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 216,713,157
<SHARES-COMMON-PRIOR> 353,373,558
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 280,109,343
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 10,631,738
<OTHER-INCOME> 0
<EXPENSES-NET> 7,144,556
<NET-INVESTMENT-INCOME> 3,487,182
<REALIZED-GAINS-CURRENT> (16,060)
<APPREC-INCREASE-CURRENT> (255,618)
<NET-CHANGE-FROM-OPS> 3,215,504
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (170,607,601)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 821,532
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7,144,556
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
