<PAGE> 1
Registration Statement No. 33-73466
811-8242
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 3
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 3
THE TRAVELERS FUND BD FOR VARIABLE ANNUITIES
--------------------------------------------
(Exact name of Registrant)
THE TRAVELERS INSURANCE COMPANY
-------------------------------
(Name of Depositor)
ONE TOWER SQUARE, HARTFORD, CONNECTICUT 06183
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(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number, including area code: (860) 277-0111
--------------
ERNEST J. WRIGHT
Assistant Secretary
The Travelers Insurance Company
One Tower Square
Hartford, Connecticut 06183
----------------------------
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering:
------------------
It is proposed that this filing will become effective (check appropriate box):
immediately upon filing pursuant to paragraph (b) of Rule 485.
- -----
X on May 1, 1996 pursuant to paragraph (b) of Rule 485.
- -----
60 days after filing pursuant to paragraph (a)(1) of Rule 485.
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on ___________ pursuant to paragraph (a)(1) of Rule 485.
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If appropriate, check the following box:
this post-effective amendment designates a new effective date
- ----- for a previously filed post-effective amendment.
PURSUANT TO RULE 24f-2 OF THE INVESTMENT COMPANY ACT OF 1940, THE REGISTRANT
HEREBY DECLARES THAT AN INDEFINITE AMOUNT OF VARIABLE ANNUITY CONTRACT UNITS
WAS REGISTERED UNDER THE SECURITIES ACT OF 1933. A RULE 24f-2 NOTICE FOR THE
FISCAL YEAR ENDED DECEMBER 31, 1995 WAS FILED ON FEBRUARY 29, 1996.
<PAGE> 2
THE TRAVELERS FUND BD FOR VARIABLE ANNUITIES
Cross-Reference Sheet
Form N-4
<TABLE>
<CAPTION>
Item
No. Caption in Prospectus
- --- ---------------------
<S> <C>
1. Cover Page Prospectus
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
Depositor, and Portfolio Companies Account and the Underlying Funds
6. Deductions Charges and Deductions; Distribution of
Variable Annuity Contracts
7. General Description of Variable The Contract
Annuity Contracts
8. Annuity Period The Annuity Period
9. Death Benefit Death Benefit
10. Purchases and Contract Value The Contract; Distribution of Variable Annuity
Contract
11. Redemptions Surrenders and Redemptions
12. Taxes Federal Tax Considerations
13. Legal Proceedings Legal Proceedings and Opinions
14. Table of Contents of Statement Appendix C - Contents of the Statement
of Additional Information of Additional Information
Caption in Statement of Additional
Information
------------------------------------------
15. Cover Page Cover Page
16. Table of Contents Table of Contents
17. General Information and History The Insurance Company
18. Services Principal Underwriter; Distribution and
Management Agreement
19. Purchase of Securities Being Offered Valuation of Assets
20. Underwriters Principal Underwriter
21. Calculation of Performance Data Performance Information
22. Annuity Payments Not Applicable
23. Financial Statements Financial Statements
</TABLE>
<PAGE> 3
PART A
Information Required in a Prospectus
<PAGE> 4
PROSPECTUS
This Prospectus describes an individual flexible premium variable annuity
contract (the "Contract") offered by The Travelers Insurance Company (the
"Company"). The Contract is currently available for use in connection with (1)
individual nonqualified purchases; (2) Individual Retirement Annuities (IRAs)
pursuant to Section 408 of the Internal Revenue Code of 1986, as amended (the
"Code"); and (3) qualified retirement plans. Qualified contracts include
contracts qualifying under Section 401(a), 403(b) or 408(b) of the Code.
Purchase Payments made under the Contract will accumulate on a fixed and/or a
variable basis, as selected by the Contract Owner. If on a variable basis, the
value of the Contract prior to the Maturity Date will vary continuously to
reflect the investment experience of underlying funds ("Underlying Funds")
available under The Travelers Fund BD for Variable Annuities ("Fund BD"). The
Underlying Funds currently available are: Smith Barney Income and Growth
Portfolio, Alliance Growth Portfolio, American Capital Enterprise Portfolio,
Smith Barney International Equity Portfolio, Smith Barney Pacific Basin
Portfolio, TBC Managed Income Portfolio, Putnam Diversified Income Portfolio,
G.T. Global Strategic Income Portfolio, Smith Barney High Income Portfolio, MFS
Total Return Portfolio, and AIM Capital Appreciation Portfolio, and Smith Barney
Money Market Portfolio of the Smith Barney Travelers Series Fund, Inc., and
Smith Barney Total Return Portfolio of the Smith Barney Series Fund.
This Prospectus provides the information about Fund BD that you should know
before investing. Please read it and retain it for future reference. Additional
information about Fund BD is contained in a Statement of Additional Information
("SAI") dated May 1, 1996 which has been filed with the Securities and Exchange
Commission ("SEC") and is incorporated by reference into this Prospectus. A copy
may be obtained, without charge, by writing to The Travelers Insurance Company,
Annuity Investor Services, One Tower Square, Hartford, Connecticut 06183-9061,
or by calling 1-800-842-8573. The Table of Contents of the SAI appears in
Appendix A of this Prospectus.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUS FOR THE
UNDERLYING FUNDS. BOTH THE CONTRACT PROSPECTUS AND THE UNDERLYING FUND
PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THIS PROSPECTUS IS DATED MAY 1, 1996
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<S> <C>
GLOSSARY OF SPECIAL TERMS.............................................................. 4
PROSPECTUS SUMMARY..................................................................... 5
FEE TABLE.............................................................................. 7
CONDENSED FINANCIAL INFORMATION........................................................ 9
THE INSURANCE COMPANY.................................................................. 10
THE SEPARATE ACCOUNT AND THE UNDERLYING FUNDS.......................................... 10
THE TRAVELERS FUND BD FOR VARIABLE ANNUITIES (FUND BD)................................. 10
THE UNDERLYING FUNDS................................................................... 10
UNDERLYING FUND INVESTMENT MANAGERS.................................................... 12
SUBSTITUTION AND ADDITIONS............................................................. 12
PERFORMANCE INFORMATION................................................................ 12
THE CONTRACT........................................................................... 13
Purchase Payments.................................................................... 13
Right to Return...................................................................... 13
Accumulation Units................................................................... 14
CHARGES AND DEDUCTIONS................................................................. 14
Contingent Deferred Sales Charge..................................................... 14
Administrative Charges............................................................... 15
Mortality and Expense Risk Charge.................................................... 15
Reduction or Elimination of Contract Charges......................................... 16
Underlying Fund Charges.............................................................. 16
Premium Tax.......................................................................... 16
Changes In Taxes Based Upon Premium or Value......................................... 16
OWNERSHIP PROVISIONS................................................................... 16
Types of Ownership................................................................... 16
Beneficiary.......................................................................... 17
Annuitant............................................................................ 17
TRANSFERS.............................................................................. 17
Dollar-Cost Averaging (Automated Transfers).......................................... 17
Telephone Transfers.................................................................. 18
SURRENDERS AND REDEMPTIONS............................................................. 18
Systematic Withdrawals............................................................... 19
DEATH BENEFIT.......................................................................... 19
Death Proceeds Prior to the Maturity Date............................................ 20
Death Proceeds After the Maturity Date............................................... 20
THE ANNUITY PERIOD..................................................................... 20
Maturity Date........................................................................ 20
Allocation of Annuity................................................................ 21
</TABLE>
2
<PAGE> 6
<TABLE>
<S> <C>
Variable Annuity..................................................................... 21
Fixed Annuity........................................................................ 22
PAYMENT OPTIONS........................................................................ 22
Election of Options.................................................................. 22
Annuity Options...................................................................... 22
Income Options....................................................................... 23
MISCELLANEOUS CONTRACT PROVISIONS...................................................... 23
Termination.......................................................................... 23
Misstatement......................................................................... 24
Required Reports..................................................................... 24
Suspension of Payments............................................................... 24
Transfers of Contract Values to Other Annuities...................................... 24
FEDERAL TAX CONSIDERATIONS............................................................. 24
General Taxation of Annuities........................................................ 24
Tax Law Diversification Requirements for Variable Annuities.......................... 24
Ownership of the Investments......................................................... 25
Penalty Tax for Premature Distributions.............................................. 25
Mandatory Distributions for Qualified Plans.......................................... 25
Nonqualified Annuity Contracts....................................................... 25
Individual Retirement Annuities...................................................... 26
Qualified Pension and Profit-Sharing Plans........................................... 26
Federal Income Tax Withholding....................................................... 27
VOTING RIGHTS.......................................................................... 28
DISTRIBUTION OF VARIABLE ANNUITY CONTRACTS............................................. 28
Conformity with State and Federal Laws............................................... 28
LEGAL PROCEEDINGS AND OPINIONS......................................................... 28
THE FIXED ACCOUNT...................................................................... 29
Transfers............................................................................ 29
APPENDIX A............................................................................. 30
APPENDIX B............................................................................. 32
APPENDIX C............................................................................. 33
</TABLE>
3
<PAGE> 7
GLOSSARY OF SPECIAL TERMS
- --------------------------------------------------------------------------------
The following terms are used throughout the Prospectus and have the indicated
meanings:
ACCUMULATION UNIT -- An accounting unit of measure used to calculate the value
of a Contract before Annuity Payments begin.
ACCUMULATION UNIT VALUE -- The dollar amount of an Accumulation Unit.
ANNUITANT -- The person on whose life this contract is issued and the amount of
the monthly Annuity Payments depend.
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 amount of
Annuity Payments.
CASH SURRENDER VALUE -- The amount payable to the Contract Owner or other payee
upon full or partial surrender of the Contract during the lifetime of the
Annuitant. The amount will be the contract value, less any applicable surrender
charge and any premium tax not previously deducted.
COMPANY (WE, OUR) -- The Travelers Insurance Company.
COMPANY'S HOME OFFICE -- The principal offices of The Travelers Insurance
Company located at One Tower Square, Hartford, Connecticut 06183-9061.
CONTRACT DATE -- The date on which the Contact, benefits and the contract
provisions become effective.
CONTRACT OWNER (YOU, YOUR) -- The person or entity to whom the Contract is
issued.
CONTRACT VALUE -- The current value of Accumulation Units credited to the
Contract less any administrative charges.
CONTRACT YEARS -- Twelve-month periods beginning on the Contract Date.
FIXED ACCOUNT -- An additional account into which Purchase Payments may be
allocated and which is included in the Contract Value. Purchase Payments
allocated to the Fixed Account will earn interest at a rate guaranteed by the
Company; this rate will change from time to time.
INCOME PAYMENTS -- Optional forms of payments made by the Company which are
based on an agreed-upon number of payments or payment amount.
MATURITY DATE -- The date on which the first Annuity or Income Payment is to
begin under a Contract.
PURCHASE PAYMENT -- A gross amount paid to the Company 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 (Fund BD).
SUB-ACCOUNT -- The portion of the assets of the Separate Account which is
allocated to a particular Underlying Fund.
UNDERLYING FUND(S) -- The investment option(s) available under the Separate
Account.
VALUATION DATE -- A day on which Separate Account assets are valued. A Valuation
Date is any day on which the New York Stock Exchange is open for trading. The
value of Accumulation Units and Annuity Units will be determined as of the close
of trading on the New York Stock Exchange.
VALUATION PERIOD -- The period between the close of business on successive
Valuation Dates.
VARIABLE ANNUITY -- An annuity contract which provides for accumulation and for
Annuity Payments which vary in amount in accordance with the investment
experience of a Separate Account.
4
<PAGE> 8
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------
INTRODUCTION
The Contract described in this Prospectus is both an insurance policy and a
security. As an insurance policy, it is subject to the insurance laws and
regulations of each state in which it is available for distribution. As a
security, it is subject to the federal securities laws. The Contract is an
individual flexible premium variable annuity. It allows you to allocate Purchase
Payments to any or all of the Underlying Funds currently available under Fund
BD, as well as to the Fixed Account. (See "Underlying Funds" on page 10.) An
initial lump-sum Purchase Payment of at least $5,000 must be made to the
Contract; additional Purchase Payments of at least $500 may be made. In some
states, subsequent Purchase Payments are not allowed. (See "Purchase Payments,"
page 13.) Purchase payments over $1,000,000 may be made with the Company's prior
consent.
RIGHT TO RETURN
You may return the Contract and receive a full refund of the Contract Value
(including charges) within twenty days after the Contract is delivered to you,
unless state law requires a longer period. (See "Right to Return," page 13.)
CHARGES AND EXPENSES
No sales charges are deducted from Purchase Payments when they are received.
However, a Contingent Deferred Sales Charge ("CDSC" or "surrender charge") may
apply if you make a full or partial surrender of the Contract Value during the
first seven years following each Purchase Payment. The maximum surrender charge
that could be assessed is 6% of the amount withdrawn. (See "Contingent Deferred
Sales Charge," page 14.)
Other charges include the contract administrative expense charge ($30 annually)
and a Sub-Account administrative expense charge (0.15% on an annual basis of the
average daily net assets allocated to each of the Underlying Funds). (See
"Administrative Charges," page 15.) A mortality and expense risk charge,
equivalent on an annual basis to 1.25% of the daily net assets of amounts
allocated to each Underlying Funds will also be charged. (See "Mortality and
Expense Risk Charge," page 15.) If applicable, state premium taxes will also be
deducted and paid when due. (See "Premium Tax," page 16.)
TRANSFERS
Prior to the Maturity Date, you may reallocate the Contract Value among the
Fixed Account and any of the Underlying Funds available under Fund BD. Transfers
between the variable Sub-Accounts are unlimited. Transfers between the Fixed
Account and any of the Underlying Funds are subject to certain restrictions.
(See "Transfers," page 17, and "The Fixed Account," page 29.) Dollar-Cost
Averaging, or automated transfers, are also available. The minimum automated
transfer amount is $400. (See "Dollar Cost Averaging (Automated Transfers)," on
page 17.)
SURRENDERS
Prior to the Maturity Date, you may surrender all or part of the Contract Value
subject to certain charges and limitations. You will be liable for income tax on
the taxable portion of any full or partial surrender, and you may incur a 10%
tax penalty if such surrender is made prior to the age of 59 1/2. (See
"Surrenders and Redemptions," page 18 and "Penalty Tax for Premature
Distributions" page 25.)
Systematic withdrawals of at least $100 on a monthly, quarterly, semiannual or
annual basis may be elected if your Contract Value is at least $15,000. All
applicable surrender charges and premium taxes will be deducted. (See
"Systematic Withdrawals," on page 19.)
5
<PAGE> 9
DEATH BENEFIT
A death benefit is payable to the Beneficiary upon the death of the Annuitant
prior to the Maturity Date with no Contingent Annuitant surviving. The death
benefit will vary based on the Annuitant's age at the time of death. (See "Death
Benefit," page 19.)
THE ANNUITY PERIOD
On the Maturity Date, or other agreed-upon payment date, the Company will
provide Annuity or Income Payments as described in the section entitled "The
Annuity Period." (See page 20.)
THE FIXED ACCOUNT
Although this Prospectus specifically applies only to the variable features of
the Contract, the Contract also allows you to allocate Purchase Payments to a
Fixed Account where they will earn interest at a rate guaranteed by the Company,
which interest rate will not be less than 3% per year. (See "The Fixed Account,"
page 29.)
6
<PAGE> 10
FEE TABLE
- --------------------------------------------------------------------------------
FUND BD AND ITS UNDERLYING FUNDS
The purpose of the Fee Table is to assist Contract Owners in understanding the
various costs and expenses that he or she will bear, directly or indirectly,
under the Contract. The information listed reflects expenses of the Sub-Accounts
as well as of the Underlying Fund Expenses. Additional information regarding the
charges and deductions assessed under the Contract can be found on page 14.
Expenses shown do not include premium taxes, which may be applicable.
CONTRACT OWNER TRANSACTION EXPENSES
Contingent Deferred Sales Charge (as a percentage of purchase payments):
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
LENGTH OF TIME FROM PURCHASE PAYMENT CONTINGENT DEFERRED
(NUMBER OF YEARS) SURRENDER CHARGE
-----------------------------------------------------------------------------------
<S> <C>
1 6%
2 6%
3 6%
4 3%
5 2%
6 1%
7 and thereafter 0%
Annual Contract Administrative Charge
(Waived if Contract Value is $40,000 or more) $30
</TABLE>
ANNUAL SUB-ACCOUNT CHARGES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
STANDARD ENHANCED
DEATH BENEFIT DEATH BENEFIT
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Mortality and Expense Risk Fee
(as a percentage of daily net asset value) 1.02% 1.30%
Sub-Account Administrative Charge
(as a percentage of daily net asset value) 0.15% 0.15%
TOTAL SUB-ACCOUNT CHARGES 1.17% 1.45%
</TABLE>
UNDERLYING FUND EXPENSES
(as a percentage of average net assets of the Underlying Fund)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
MANAGEMENT OTHER TOTAL UNDERLYING
FEE EXPENSES FUND EXPENSES
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Smith Barney Income and Growth Portfolio 0.65% 0.08%1 0.73%
Alliance Growth Portfolio 0.80% 0.10%1 0.90%
American Capital Enterprise Portfolio 0.70% 0.18%1 0.88%
Smith Barney International Equity Portfolio 0.90% 0.54%1* 1.44%
Smith Barney Pacific Basin Portfolio 0.90% 0.93%1 1.83%
TBC Managed Income Portfolio 0.65% 0.27%1 0.92%
Putnam Diversified Income Portfolio 0.75% 0.22%1 0.97%
G.T. Global Strategic Income Portfolio 0.80% 0.67%1* 1.47%
Smith Barney High Income Portfolio 0.60% 0.10%1 0.70%
MFS Total Return Portfolio 0.80% 0.15%1 0.95%
Smith Barney Money Market Portfolio 0.60% 0.05%1 0.65%
AIM Capital Appreciation Portfolio 0.80% 0.20%1 1.00%
Smith Barney Total Return Portfolio 0.75% 0.25%2 1.00%
</TABLE>
1 Other expenses are as of October 31, 1995, taking into account the current
expense limitations agreed to by the Managers. The Managers waived all of
their 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 for the Smith Barney/Travelers Series Fund Portfolios would have
been: Smith Barney Income and Growth Portfolio, 0.94%; Alliance Growth
Portfolio, 0.97%; American Capital Enterprise Portfolio, 1.26%; Smith Barney
International Equity Portfolio, 1.21%; Smith Barney Pacific Basin Portfolio,
2.23%; TBC Managed Income Portfolio, 1.29%; Putnam Diversified Income
Portfolio, 1.31%; G.T. Global Strategic Income Portfolio, 1.93%; Smith Barney
High Income Portfolio, 1.07%; MFS Total Return Portfolio, 1.06%; Smith Barney
Money Market Portfolio, 0.94%.
2 Other expenses are as of December 31, 1995, taking into account the current
expense limitations agreed to by the Managers. The Managers waived all of
their fees for the period and reimbursed the Funds for their expenses. The
Smith Barney Series Fund Total Return Portfolio had no fees waived and no
expenses reimbursed.
* Smith Barney International Equity Portfolio and G.T. Global Strategic Income
Portfolio earned credits from the Custodian which reduced the service fees
incurred. When these credits are taken into consideration, Total Underlying
Fund Expenses are 1.21% and 1.11% respectively.
7
<PAGE> 11
EXAMPLE*
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
STANDARD DEATH BENEFIT ELECTION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
A $1,000 investment would be If the Contract is not
subject to the following surrendered at the end of
expenses, assuming a 5% the period shown or if it
annual return on assets, if is annuitized, a $1,000
the Contract is surrendered investment would be subject
or if certain income to the following expenses,
options are elected at the assuming a 5% annual return
end of the period shown**: on assets:
- ------------------------------------------------------------------------------------------------------------------------
ONE YEAR THREE YEARS ONE YEAR THREE YEARS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Smith Barney Income and Growth Portfolio $ 80 $ 123 $ 20 $63
Alliance Growth Portfolio 82 127 22 67
American Capital Enterprise Portfolio 81 126 21 66
Smith Barney International Equity Portfolio 85 138 25 78
Smith Barney Pacific Basin Portfolio 86 139 26 79
TBC Managed Income Portfolio 81 126 21 66
Putnam Diversified Income Portfolio 82 129 22 69
G.T. Global Strategic Income Portfolio 84 133 24 73
Smith Barney High Income Portfolio 80 121 20 61
MFS Total Return Portfolio 82 129 22 69
Smith Barney Money Market Portfolio 80 121 20 61
AIM Capital Appreciation Portfolio 82 127 22 67
Smith Barney Total Return Portfolio 83 130 23 70
</TABLE>
ENHANCED DEATH BENEFIT ELECTION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
A $1,000 investment would be If the Contract is not
subject to the following surrendered at the end of
expenses, assuming a 5% the period shown or if it
annual return on assets, if is annuitized, a $1,000
the Contract is surrendered investment would be subject
or if certain income to the following expenses,
options are elected at the assuming a 5% annual return
end of the period shown**: on assets:
- ------------------------------------------------------------------------------------------------------------------------
ONE YEAR THREE YEARS ONE YEAR THREE YEARS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Smith Barney Income and Growth Portfolio $ 83 $ 131 $ 23 $71
Alliance Growth Portfolio 85 136 25 76
American Capital Enterprise Portfolio 84 135 24 75
Smith Barney International Equity Portfolio 88 146 28 86
Smith Barney Pacific Basin Portfolio 89 148 29 88
TBC Managed Income Portfolio 84 135 24 75
Putnam Diversified Income Portfolio 85 137 25 77
G.T. Global Strategic Income Portfolio 87 142 27 82
Smith Barney High Income Portfolio 83 130 23 70
MFS Total Return Portfolio 85 137 25 77
Smith Barney Money Market Portfolio 83 130 23 70
AIM Capital Appreciation Portfolio 85 136 25 76
Smith Barney Total Return Portfolio 86 139 26 79
</TABLE>
* The Example reflects the $30 Annual Contract Administrative Charge as an
annual charge of 0.075% of assets based on an anticipated average account
value of $40,000.
** The Contingent Deferred Sales Charge is waived if annuity payout has begun or
if an income option of at least five years' duration is begun after the first
Contract Year. (See "Charges and Deductions -- Contingent Deferred Sales
Charge," page 14.)
8
<PAGE> 12
CONDENSED FINANCIAL INFORMATION
THE TRAVELERS FUND BD FOR VARIABLE ANNUITIES
ACCUMULATION UNIT VALUES
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDING PERIOD ENDING
DECEMBER 31, 1995 DECEMBER 31, 1994
STANDARD ENHANCED STANDARD ENHANCED
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SMITH BARNEY/TRAVELERS SERIES FUND INC.
ALLIANCE GROWTH PORTFOLIO
Unit Value at beginning of period (1) $ 1.047 $ 1.046 $ 1.000 $1.000
Unit Value at end of period 1.396 1.390 1.047 1.046
Number of units outstanding at end of period (thousands) 1,573,668 452,737 16,522 7,338
AMERICAN CAPITAL ENTERPRISE PORTFOLIO
Unit Value at beginning of period (2) $ 1.039 $ 1.037 $ 1.000 $1.000
Unit Value at end of period 1.362 1.356 1.039 1.037
Number of units outstanding at end of period (thousands) 764,534 329,130 2,941 1,618
TBC MANAGED INCOME PORTFOLIO
Unit Value at beginning of period (3) $ 0.997 $ 0.995 $ 1.000 $1.000
Unit Value at end of period 1.142 1.137 0.997 0.995
Number of units outstanding at end of period (thousands) 225,876 89,569 2,849 980
G.T. GLOBAL STRATEGIC INCOME PORTFOLIO
Unit Value at beginning of period (2) $ 0.945 $ 0.944 $ 1.000 $1.000
Unit Value at end of period 1.121 1.116 0.945 0.944
Number of units outstanding at end of period (thousands) 32,765 79,526 2,400 1,063
SMITH BARNEY HIGH INCOME PORTFOLIO
Unit Value at beginning of period (4) $ 0.988 $ 0.986 $ 1.000 $1.000
Unit Value at end of period 1.162 1.157 0.988 0.986
Number of units outstanding at end of period (thousands) 242,593 331,521 3,105 1,147
SMITH BARNEY INTERNATIONAL EQUITY PORTFOLIO
Unit Value at beginning of period (1) $ 0.955 $ 0.954 $ 1.000 $1.000
Unit Value at end of period 1.050 1.046 0.955 0.954
Number of units outstanding at end of period (thousands) 556,129 200,940 14,141 5,898
SMITH BARNEY INCOME AND GROWTH PORTFOLIO
Unit Value at beginning of period (1) $ 0.981 $ 0.980 $ 1.000 $1.000
Unit Value at end of period 1.291 1.285 0.981 0.980
Number of units outstanding at end of period (thousands) 596,201 146,469 6,654 3,015
SMITH BARNEY MONEY MARKET PORTFOLIO
Unit Value at beginning of period (1) $ 1.016 $ 1.014 $ 1.000 $1.000
Unit Value at end of period 1.058 1.054 1.016 1.014
Number of units outstanding at end of period (thousands) 2,373,923 819,856 7,171 3,736
PUTNAM DIVERSIFIED INCOME PORTFOLIO
Unit Value at beginning of period (1) $ 1.009 $ 1.007 $ 1.000 $1.000
Unit Value at end of period 1.170 1.165 1.009 1.007
Number of units outstanding at end of period (thousands) 823,783 126,460 5,803 3,669
SMITH BARNEY PACIFIC BASIN PORTFOLIO
Unit Value at beginning of period (2) $ 0.899 $ 0.898 $ 1.000 $1.000
Unit Value at end of period 0.910 0.906 0.899 0.898
Number of units outstanding at end of period (thousands) 37,278 19,544 1,842 978
MFS TOTAL RETURN PORTFOLIO
Unit Value at beginning of period (1) $ 0.979 $ 0.977 $ 1.000 $1.000
Unit Value at end of period 1.216 1.211 0.979 0.977
Number of units outstanding at end of period (thousands) 912,547 101,550 9,099 3,480
AIM CAPITAL APPRECIATION PORTFOLIO
Unit Value at beginning of period (5) $ 1.000 $ 1.000 $ -- $ --
Unit Value at end of period 0.958 0.957 -- --
Number of units outstanding at end of period (thousands) 2,536,732 908,266 -- --
SMITH BARNEY SERIES FUND:
SMITH BARNEY TOTAL RETURN PORTFOLIO
Unit Value at beginning of period (6) $ 1.010 $ 1.010 $ 1.000 $1.000
Unit Value at end of period 1.251 1.247 1.010 1.010
Number of units outstanding at end of period (thousands) 651,440 148,894 1,109 277
</TABLE>
(1) Initial period covers June 20, 1994 (date of availability under Fund BD) to
December 31, 1994.
(2) Initial period covers June 21, 1994 (date of availability under Fund BD) to
December 31, 1994.
(3) Initial period covers June 28, 1994 (date of availability under Fund BD) to
December 31, 1994.
(4) Initial period covers June 22, 1994 (date of availability under Fund BD) to
December 31, 1994.
(5) Initial period covers October 2, 1995 (date of availability under Fund BD)
to December 31, 1994.
(6) Initial period covers November 21, 1994 (date of availability under Fund BD)
to December 31, 1994.
The financial statements of Fund BD are contained in the Statement of Additional
Information, and in the Annual Report to Contract Owners. The consolidated
financial statements of The Travelers Insurance Company and Subsidiaries are
contained in the Statement of Additional Information.
9
<PAGE> 13
THE INSURANCE COMPANY
- --------------------------------------------------------------------------------
The Travelers Insurance Company (the "Company") is a stock insurance company
chartered in 1864 in the State of Connecticut and continuously engaged in the
insurance business since that time. The Company is licensed to conduct a life
insurance business in all states of the United States, the District of Columbia,
Puerto Rico, Guam, the U.S. and British Virgin Islands, and the Bahamas. The
Company is an indirect wholly owned subsidiary of Travelers Group Inc., a
financial services holding company. The Company's Home Office is located at One
Tower Square, Hartford, Connecticut 06183.
THE SEPARATE ACCOUNT AND THE UNDERLYING FUNDS
- --------------------------------------------------------------------------------
THE TRAVELERS FUND BD FOR VARIABLE ANNUITIES (FUND BD)
Fund BD was established on October 22, 1993 and is registered with the SEC as a
unit investment trust under the Investment Company Act of 1940, as amended (the
"1940 Act"). The assets of Fund BD will be invested exclusively in the shares of
the Underlying Funds.
The assets of Fund BD are held for the exclusive benefit of the owners of this
separate account, according to the laws of Connecticut. Income, gains and
losses, whether or not realized, from assets allocated to Fund BD are, in
accordance with the Contracts, credited to or charged against Fund BD without
regard to other income, gains and losses of the Company. The assets held by Fund
BD are not chargeable with liabilities arising out of any other business which
the Company may conduct. Obligations under the Contract are obligations of the
Company.
All investment income and other distributions of the Underlying Funds are
payable to Fund BD. All such income and/or distributions are reinvested in
shares of the respective Underlying Fund at net asset value. Shares of the
Underlying Funds listed above are currently sold only to life insurance company
separate accounts to fund variable annuity and variable life insurance
contracts. Fund shares are not sold to the general public.
THE UNDERLYING FUNDS
Purchase Payments are allocated to the Underlying Funds in accordance with the
selection made by the Contract Owner.
More detailed information about the options and their inherent risks may be
found in the current prospectuses for the Underlying Funds. These prospectuses
are included with and must accompany this Prospectus. Since there are varying
degrees of risk inherent in each option, please read them carefully before
investing. Additional copies of the prospectuses may be obtained by contacting
your registered representative or by calling 1-800-842-8573.
Fund BD currently invests in the following Underlying Funds:
SMITH BARNEY/TRAVELERS SERIES FUND INC.:
SMITH BARNEY INCOME AND GROWTH PORTFOLIO. The objective of the Income and
Growth Portfolio is current income and long-term growth of income and capital by
investing primarily, but not exclusively, in common stocks.
ALLIANCE GROWTH PORTFOLIO. The objective of the Growth Portfolio is long-term
growth of capital by investing predominantly in equity securities of companies
with a favorable outlook for earnings and whose rate of growth is expected to
exceed that of the U.S. economy over time. Current income is only an incidental
consideration.
AMERICAN CAPITAL ENTERPRISE PORTFOLIO. The Enterprise Portfolio's objective is
capital appreciation through investment in securities believed to have
above-average potential for capital appreciation. Any income received on such
securities is incidental to the objective of capital appreciation.
10
<PAGE> 14
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.
SMITH BARNEY PACIFIC BASIN PORTFOLIO. The Pacific Basin Portfolio's objective
is long-term capital appreciation through investment primarily in equity
securities of companies in Asian Pacific Countries.
TBC MANAGED INCOME PORTFOLIO. The objective of the Managed Income Portfolio is
to seek high current income consistent with prudent risk of capital through
investments in corporate debt obligations, preferred stocks, and obligations
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities.
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.
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.
SMITH BARNEY HIGH INCOME PORTFOLIO. The investment objective of the High Income
Portfolio is high current income. Capital appreciation is a secondary objective.
The Portfolio will invest at least 65% of its assets in high-yielding corporate
debt obligations and preferred stock.
MFS TOTAL RETURN PORTFOLIO. The Total Return Portfolio's objective is to obtain
above-average income (compared to a portfolio entirely invested in equity
securities) consistent with the prudent employment of capital. Generally, at
least 40% of the Portfolio's assets will be invested in equity securities.
SMITH BARNEY MONEY MARKET PORTFOLIO. The investment objective of the Money
Market Portfolio is maximum current income and preservation of capital by
investing in high quality, short-term money market instruments.
AIM CAPITAL APPRECIATION PORTFOLIO. The investment objective of the AIM Capital
Appreciation Portfolio is to seek capital appreciation by investing principally
in common stock, with emphasis on medium-sized and smaller emerging growth
companies.
SMITH BARNEY SERIES FUND INC:
SMITH BARNEY TOTAL RETURN PORTFOLIO. The investment objective of the Smith
Barney Total Return Portfolio is to provide total return, consisting of
long-term capital appreciation and income. The Portfolio will seek to achieve
its goal by investing primarily in a diversified portfolio of dividend-paying
common stock.
11
<PAGE> 15
UNDERLYING FUND INVESTMENT MANAGERS
The Underlying Funds receive investment management and advisory services from
the following investment professionals:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
FUND INVESTMENT MANAGER SUB-ADVISER
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Smith Barney Income and Smith Barney Mutual Funds
Growth Portfolio Management Inc.("SBMFM")
- ----------------------------------------------------------------------------------------------
Alliance Growth Portfolio SBMFM Alliance Capital
Management L.P.
- ----------------------------------------------------------------------------------------------
American Capital Enterprise SBMFM American Capital Asset
Portfolio Management, Inc
- ----------------------------------------------------------------------------------------------
Smith Barney Int'l Equity SBMFM
Portfolio
- ----------------------------------------------------------------------------------------------
Smith Barney Pacific Basin SBMFM
Portfolio
- ----------------------------------------------------------------------------------------------
TBC Managed Income Portfolio SBMFM The Boston Company Asset
Management, Inc.
- ----------------------------------------------------------------------------------------------
Putnam Diversified Income SBMFM Putnam Investment Management,
Portfolio Inc.
- ----------------------------------------------------------------------------------------------
G.T. Global Strategic Income SBMFM G.T. Capital Management Inc.
Portfolio
- ----------------------------------------------------------------------------------------------
Smith Barney High Income SBMFM
Portfolio
- ----------------------------------------------------------------------------------------------
MFS Total Return Portfolio SBMFM Massachusetts Financial
Services Company
- ----------------------------------------------------------------------------------------------
Smith Barney Money Market SBMFM
Portfolio
- ----------------------------------------------------------------------------------------------
AIM Capital Appreciation SBMFM AIM Capital Management, Inc
Portfolio
- ----------------------------------------------------------------------------------------------
Smith Barney Total Return SBMFM
Portfolio
- ----------------------------------------------------------------------------------------------
</TABLE>
SUBSTITUTIONS AND ADDITIONS
If any of the Underlying Funds should become unavailable for allocating purchase
payments, or if, in the judgment of the Company further investment in an
Underlying Fund becomes inappropriate for the purposes of the Contract, we may
substitute another registered, open-end management investment company.
Substitution may be made with respect to both existing investments and the
investment of any future Purchase Payments. However, no such substitution will
be made without notice to Contract Owners, state approval if applicable, and
without prior approval of the, to the extent required by the 1940 Act, or other
applicable law. Additional Underlying Funds may also be added under the
Contract.
See Appendix A for Contracts issued in the state of New York.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Company may advertise different types of historical
performance for the Underlying Funds available through Fund BD. The Company may
advertise the "standardized average annual total returns" of each, calculated in
a manner prescribed by the SEC, as well as the "non-standardized total return,"
as described below.
12
<PAGE> 16
"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 fractional periods thereof). 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, except
non-standardized total returns will not reflect the deduction of any applicable
Contingent Deferred Sales Charge or the $30 annual contract administrative
charge, which would decrease the level of performance shown if reflected in
these calculations.
Performance information may be quoted numerically or may be presented in a
table, graph or other illustration. Advertisements may include data comparing
performance to well-known indices of market performance (including, but not
limited to, the Dow Jones Industrial Average, the Standard & Poor's (S&P) 500
Index and the S&P 400 Index, the Lehman Brothers Long T-Bond Index, the Russell
1000, 2000 and 3000 Indices, the Value Line Index, and the Morgan Stanley
Capital International's EAFE Index). Advertisements may also include published
editorial comments and performance rankings compiled by independent
organizations (including, but not limited to, Lipper Analytical Services, Inc.
and Morningstar, Inc.) and publications that monitor the performance of Fund BD
and the Underlying Funds.
The 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 SAI contains
more detailed information about these performance calculations, including actual
examples of each type of performance advertised.
THE CONTRACT
- --------------------------------------------------------------------------------
Purchase Payments are paid to the Company and credited to the Contract Owner's
account to accumulate until the Maturity Date. The Contract Owner assumes the
risk of gain or loss according to the performance of the selected
Sub-Account(s). There is generally no guarantee that the Contract Value at the
Maturity Date will equal or exceed the total Purchase Payments made under the
Contract, except as specified or elected under the Death Benefit provisions
described on page 19.
PURCHASE PAYMENTS
The minimum initial Purchase Payment must be at least $5,000. Additional
payments of at least $500 may be made under the Contract at any time. Purchase
Payments over $1,000,000 may be made with the Company's prior consent. In some
states, subsequent Purchase Payments are not allowed to this Contract. The
initial Purchase Payment is due and payable before the Contract becomes
effective.
The Company will apply the initial Purchase Payment within two business days
following its receipt at the Company's Home Office. Subsequent Purchase Payments
will be credited to the Contract on the basis of Accumulation Unit values next
determined after receipt of the Purchase Payment.
RIGHT TO RETURN
You may return the Contract for a full refund of the Contract Value (including
charges) within twenty days after you receive it (the "free-look period"). Where
state law requires a longer period, or the return of Purchase Payments, the
Company will comply. The Contract Owner bears the investment risk during the
free-look period; therefore, the Contract Value returned may be greater or less
than your Purchase Payment. If the Contract is purchased as an Individual
Retirement Annuity and is returned within the first seven days after delivery,
your Purchase Payment will be refunded in full During the remainder of the
free-look period, the Contract Value (including charges) will be refunded. All
Contract Values will be determined as of the next valuation date following the
Company's receipt of the Owner's written request for refund.
See Appendix A for Contracts issued in the state of New York.
13
<PAGE> 17
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
amount allocated to each Underlying Fund by the current applicable Accumulation
Unit Value. The value of an Accumulation Unit may increase or decrease.
The initial Accumulation Unit Value applicable to each segment of the Separate
Account was established at $1.00. The value of an Accumulation Unit on any
Valuation Date is determined by multiplying the value on the immediately
preceding Valuation Date by the net investment factor for the Valuation Period
just ended. The net investment factor, calculated for each Underlying Fund,
takes into account the investment performance, expenses and the deduction of
certain expenses. The net investment factor is described more fully in the SAI.
CHARGES AND DEDUCTIONS
- --------------------------------------------------------------------------------
CONTINGENT DEFERRED SALES CHARGE ("CDSC")
No sales charges are deducted from Purchase Payments when they are received and
applied under the Contract. However, a CDSC will be assessed if a full or
partial surrender of the Contract Value is made during the first six years
following a Purchase Payment. The length of time from receipt of the Purchase
Payment to the time of surrender determines the amount of the charge. This
charge will not exceed the aggregate amount of the Purchase Payments made under
the Contract.
The purpose of the surrender charge is to help defray expenses incurred in the
sale of the Contract, including commissions and other expenses associated with
the printing and distribution of prospectuses and sales material. However, the
Company expects that the Contingent Deferred Sales Charges assessed under the
Contract will be insufficient to cover these expenses; the difference will be
covered by the general assets of the Company which are attributable, in part, to
mortality and expense risk charges under the Contract which are described below.
The surrender charge is equal to a percentage of the amount withdrawn from the
Contract (not to exceed the aggregate amount of the Purchase Payments made under
the Contract), and is calculated as follows:
<TABLE>
<CAPTION>
LENGTH OF TIME FROM
PURCHASE PAYMENT CONTINGENT DEFERRED
(NUMBER OF YEARS) SALES CHARGE
- ----------------------------------------------------
<S> <C>
1 6%
2 6%
3 6%
4 3%
5 2%
6 1%
7 and thereafter 0%
</TABLE>
For purposes of determining the amount of any CDSC, surrenders will be deemed to
be taken first from any applicable free withdrawal amount (as described below);
next from remaining Purchase Payments (on a first-in, first-out basis); and then
from contract earnings (in excess of any free withdrawal amount). Unless the
Company receives instructions to the contrary, the CDSC will be deducted from
the amount requested.
No CDSC will be assessed (1) in the event of distributions resulting from the
death of the Contract Owner or the death of the Annuitant with no Contingent
Annuitant surviving; (2) if an annuity payout has begun; or (3) if an income
option of at least five years' duration is begun after the first Contract Year.
14
<PAGE> 18
FREE WITHDRAWAL ALLOWANCE. There is a 15% free withdrawal allowance available
each year after the first Contract Year. The available withdrawal amount will be
calculated as of the first Valuation Date of any given Contract Year. The free
withdrawal allowance applies to partial surrenders of any amount and to full
surrenders, except those full surrenders transferred directly to annuity
contracts issued by other financial institutions. See Appendix A for Contracts
issued in the state of New York.
ADMINISTRATIVE CHARGES
CONTRACT ADMINISTRATIVE CHARGE. An administrative charge of $30 will be
deducted annually from the Contract to compensate the Company for expenses
incurred in establishing and administering the Contract. The contract
administrative charge will be deducted from the Contract Value on the fourth
Friday of August of each year by cancelling Accumulation Units in each
Sub-Account on a pro rata basis. This charge will be prorated from the date of
purchase to the next date of assessment of charge. A prorated charge will also
be assessed upon voluntary or involuntary surrender of the Contract. The
Contract Administrative Charge will not be assessed upon distributions resulting
from the death of the Contract Owner or the Annuitant with no Contingent
Annuitant surviving, or after an annuity payout has begun, or if the Contract
Value is equal to or greater than $40,000 on the charge assessment date.
SUB-ACCOUNT ADMINISTRATIVE CHARGE. An administrative charge is deducted on each
Valuation Date from the amounts allocated to the variable Underlying Funds in
order to compensate the Company for certain administrative and operating
expenses. The charge is equivalent, on an annual basis, to 0.15% of the daily
net asset value allocated to each of the Underlying Funds.
Neither administrative charge can be increased. The charges are 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, and the Company does not expect
to make a profit from these charges.
MORTALITY AND EXPENSE RISK CHARGE
A mortality and expense risk charge is deducted on each Valuation Date from
amounts held in the Separate Account. This charge is intended to cover the
mortality and expense risks associated with guarantees which the Company
provides under the Contract. The mortality risk portion of the insurance charge
compensates the Company for guaranteeing to provide Annuity Payments to an
Annuitant according to the terms of the Contract regardless of how long the
Annuitant lives and no matter what the actual mortality experience of other
Annuitants under the Contract might be, and for guaranteeing to provide the
standard or the enhanced death benefit if an Annuitant dies prior to the
Maturity Date. The expense risk charge compensates the Company for the risk that
the charges under the Contract, which cannot be increased during the duration of
the Contract, will be insufficient to cover actual costs.
For those Contract Owners who have elected a standard death benefit provision,
the insurance charge is equivalent, on an annual basis, to 1.02% of the daily
net asset value of amounts held in the Separate Account.
For those Contract Owners who have elected an enhanced death benefit provision,
the insurance charge is equivalent, on an annual basis, to 1.30% of the daily
net asset value of amounts held in the Separate Account. The Company reserves
the right to lower the mortality and expense risk charge at any time.
If the amount deducted for 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 mortality and
expense risk charge.
15
<PAGE> 19
REDUCTION OR ELIMINATION OF CONTRACT CHARGES
The CDSC, the administrative charges, and the mortality and expense risk charge
under the Contract may be reduced or eliminated when certain sales of the
Contract result 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;
and (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.
UNDERLYING FUND CHARGES
Fund BD purchases shares of the Underlying Funds at net asset value. The net
asset value of each Underlying Fund reflects investment management fees and
other expenses already deducted from the assets of the Underlying Funds. For a
complete description of these investment advisory fees and other expenses, refer
to the prospectus for the Underlying Funds.
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. Where required, the
Company will deduct any applicable premium taxes from the Contract Value either
upon death, surrender, annuitization, or at the time Purchase Payments are made
to the Contract, but no earlier than when the Company has a tax liability under
state law.
CHANGES IN TAXES BASED UPON PREMIUM OR VALUE
If there is any change in a law assessing taxes against the Company based upon
the premiums of the contract, gains in the contract or value of the contract, we
reserve the right to charge you proportionately for this tax.
OWNERSHIP PROVISIONS
- --------------------------------------------------------------------------------
TYPES OF OWNERSHIP
OWNER. The Contract belongs to the Owner designated on the Contract
Specifications page, or to any other person subsequently named pursuant to a
valid assignment. An assignment of ownership or a collateral assignment may be
made only for nonqualified contracts. The Owner has sole power during the
Annuitant's lifetime to exercise any rights and to receive all benefits given in
the contract provided the Owner has not named an irrevocable beneficiary and
provided the Contract is not assigned.
The Owner is the recipient of all payments while the Annuitant is alive unless
the Owner directs them to an alternate recipient. An alternate recipient under a
payment direction does not become the Owner.
JOINT OWNER. For nonqualified contracts only, Joint Owners may be named in a
written request prior to the Contract Date. Joint Owners may independently
exercise transfers between the Sub-Accounts or between the Fixed Account and the
Sub-Accounts. All other rights of ownership must be exercised by joint action.
Joint owners own equal shares of any benefits accruing or payments made to them.
All rights of a Joint Owner end at death if another Joint Owner survives. The
entire interest of the deceased Joint Owner in the Contract will pass to the
surviving Joint Owner.
16
<PAGE> 20
SUCCEEDING OWNER. For nonqualified contracts only, if Joint Owners are not
named, the Contract Owner may name a Succeeding Owner in a written request. The
Succeeding Owner becomes the Owner if living when the Owner dies. The Succeeding
Owner has no interest in the Contract before then. The Owner may change or
delete a Succeeding Owner by written request.
BENEFICIARY
The Beneficiary is the party named by the Owner in a written request. The
Beneficiary has the right to receive any remaining contractual benefits upon the
death of the Annuitant or the Owner. If there is more than one Beneficiary
surviving the Annuitant, the Beneficiaries will share equally in benefits unless
different shares are recorded with the Company by written request prior to the
death of the Annuitant or Owner.
With nonqualified contracts, the Beneficiary may differ from the designated
beneficiary as defined by the distribution provisions of the Contract. The
designated beneficiary may take the contract benefits in lieu of the Beneficiary
upon the death of the Contract Owner.
Unless an irrevocable Beneficiary has been named, the Owner has the right to
change any Beneficiary by written request during the lifetime of the Annuitant
and while the Contract continues.
ANNUITANT
The Annuitant is designated on the Contract Specifications page, and is the
individual on whose life the Maturity Date and the amount of the monthly annuity
payments depend. The Annuitant may not be changed after the Contract Date.
For nonqualified contracts only, the Contract Owner may also name one individual
as a Contingent Annuitant by written request prior to the Contract Date. A
Contingent Annuitant may not be changed, deleted or added to the Contract after
the Contract Date.
See Appendix A for Contracts issued in the state of New York.
If an Annuitant who is not also an owner or a joint owner dies prior to the
Maturity Date while this Contract is in effect and while the Contingent
Annuitant is living:
1) the Contract Value will not be payable upon the Annuitant's death;
2) the Contingent Annuitant becomes the Annuitant; and
3) all other rights and benefits provided by this Contract will continue in
effect.
When a Contingent Annuitant becomes the Annuitant, the Maturity Date remains the
same as previously in effect, unless otherwise provided.
TRANSFERS
- --------------------------------------------------------------------------------
Prior to the Maturity Date, the Contract Owner may transfer all or part of the
Contract Value between SubAccounts. There are no charges or restrictions on the
amount or frequency of transfers currently; however, the Company reserves the
right to charge a fee for any transfer request, and to limit the number of
transfers to one in any six month period. Since different Underlying Funds have
different expenses, a transfer of Contract Values from one Sub-Account to
another could result in a Contract Owner's investment becoming subject to higher
or lower expenses.
DOLLAR-COST AVERAGING (AUTOMATED TRANSFERS)
Dollar-cost averaging permits the Contract Owner to transfer a fixed dollar
amount to other Sub-Accounts on a monthly or quarterly 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.
17
<PAGE> 21
You may elect automated transfers through written request or other method
acceptable to the Company. (See Appendix A for Contracts issued in the state of
New York.) You must have a minimum total Contract Value of $5,000 to enroll in
the Dollar-Cost Averaging program. The minimum total automated transfer amount
is $400.
Certain restrictions apply for automated transfers from the Fixed Account that
do not apply to automated transfers from any of the Sub-Accounts. You may
establish automated transfers of Contract Values from the Fixed Account at any
time. Automated transfers from the Fixed Account may not deplete your Fixed
Account Value in a period of less than twelve months from your enrollment in the
Dollar-Cost Averaging program.
You may start or stop participation in the Dollar-Cost Averaging program at any
time, but you must give the Company at least 30 days' notice to change any
automated transfer instructions that are currently in place. Automated transfers
are subject to all of the other provisions and terms of the Contract, including
provisions relating to the transfer of money between Sub-Accounts. The Company
reserves the right to suspend or modify transfer privileges at any time and to
assess a processing fee for this service.
Before transferring any part of the Contract Value, Contract Owners should
consider the risks involved in switching between investments available under
this Contract. Dollar-cost averaging requires regular investments regardless of
fluctuating price levels, and does not guarantee profits or prevent losses in a
declining market. A potential investor should consider his or her financial
ability to continue purchases through periods of low price levels.
TELEPHONE TRANSFERS
A Contract Owner may place a transfer request via telephone. The telephone
transfer privilege is available automatically; no special election is necessary
for a Contract Owner to have this privilege available. All transfers must be in
accordance with the terms of the Contract. Transfer instructions are currently
accepted on each Valuation Date between 9:00 a.m. and 4:00 p.m., Eastern time,
at 1-800-842-8573. Once instructions have been accepted, they may not be
rescinded; however, new telephone instructions may be given the following day.
If the transfer instructions are not in good order, the Company will not execute
the transfer and will promptly notify the caller.
The Company will make a reasonable effort to record each telephone transfer
conversation, but in the event that no recording is effective or available, the
Contract Owner will remain liable for each telephone transfer effected.
Additionally, the Company is not liable for acting upon instructions believed to
be genuine and in accordance with the procedures described above. As a result of
this policy, the Contract Owner may bear the risk of loss in the event that the
Company follows instructions that prove to be fraudulent.
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) specifying the investment option
from which the surrender is to be made. The Cash Surrender Value will be
determined as of the next valuation following receipt of the Owner's surrender
request at the Company's Home Office. The Cash Surrender Value may be more or
less than the Purchase Payments made depending on the Contract Value at the time
of surrender.
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 the
Company's 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 upon the surrender request.
18
<PAGE> 22
SYSTEMATIC WITHDRAWALS
Prior to the Maturity Date of the Contract, a Contract Owner may elect in
writing on a form provided by the Company to take systematic withdrawals from
the Contract by surrendering a specified dollar amount (at least $100) on a
monthly, quarterly, semiannual or annual basis. The election must be made on the
form provided by the Company. Any applicable surrender charges above the free
withdrawal allowance and any applicable premium taxes will be deducted. The
minimum Contract Value required to begin systematic withdrawals is $15,000. The
Company will process the withdrawals as directed by surrendering on a pro-rata
basis Accumulation Units from all investment options in which the Contract Owner
has an interest, unless otherwise directed. The Contract Owner may begin or
discontinue systematic withdrawals at any time by notifying the Company in
writing, but at least 30 days' notice must be given to change any systematic
withdrawal instructions that are currently in place.
The Company reserves the right to discontinue offering systematic withdrawals or
to assess a processing fee for this service upon 30 days' written notice to
Contract Owners. See Appendix A for Contracts issued in the state of New York.
Each systematic withdrawal is subject to federal income taxes on the taxable
portion. In addition, a 10% federal penalty tax may be assessed on systematic
withdrawals if the Contract Owner is under age 59 1/2. Contract Owners should
consult with their tax adviser regarding the tax consequences of systematic
withdrawals.
DEATH BENEFIT
- --------------------------------------------------------------------------------
Prior to the Maturity Date, a Death Benefit is payable to the Beneficiary upon
the death of the Annuitant, Contract Owner or the first of Joint Owners,
provided there is no Contingent Annuitant. Two different types of death benefits
are available under the Contract: a Standard Death Benefit and an Enhanced Death
Benefit (the Enhanced Death Benefit may not be available in all jurisdictions).
Death Benefits are payable upon the Company's receipt at its Home Office of due
proof of death. A Beneficiary may request that a death benefit payable under the
Contract be applied to one of the settlement options available under the
Contract, subject to the contract provisions. (See also "Nonqualified Annuity
Contracts," page 25.) See Appendices A and B, respectively, for Contracts issued
in the states of New York and Florida.
For nonqualified contracts, if the Contract Owner (including the first of joint
owners) dies before the Maturity Date, a distribution may be required under the
minimum distribution requirements of the federal tax law. If so required, the
Company will recalculate the value of the Contract under the provisions of
"Death Proceeds Prior to the Maturity Date," below. The value of the Contract,
as recalculated, will be credited to the party taking distributions upon the
death of the Contract Owner with the Annuitant or Contingent Annuitant
surviving. This will generally be the surviving joint owner or succeeding owner,
or otherwise the Beneficiary in accordance with all the circumstances and the
terms of the Contract. This party may differ from the Beneficiary who was named
by the Owner in a written request and who would receive any remaining
contractual benefits upon the death of the Annuitant. This party may be paid in
a single lump sum, or by other options, but should take distributions as
required by minimum distribution rules of the federal tax law.
If the Contract Owner's spouse is the surviving joint owner, the spouse may
elect to continue the Contract as owner in lieu of taking a distribution under
the Contract. (See generally, "Nonqualified Annuity Contracts," page 25.) In
this case, all references to age in the "Death Proceeds Prior to the Maturity
Date" section will be based on the Contract Owner's age rather than the
Annuitant's age.
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DEATH PROCEEDS PRIOR TO THE MATURITY DATE
STANDARD DEATH BENEFIT. Under the standard death benefit, if the Annuitant dies
BEFORE AGE 75 and before the Maturity Date, the Company will pay to the
Beneficiary a death benefit in an amount equal to the greatest of (1), (2) or
(3) below, each reduced by any applicable premium tax or prior surrenders not
previously deducted:
1) the Contract Value;
2) the total Purchase Payments made under the Contract; or
3) the Contract Value on the latest fifth contract year anniversary
immediately preceding the date on which the Company receives due proof
of death.
If the Annuitant dies ON OR AFTER AGE 75, BUT BEFORE AGE 85 and before the
Maturity Date, the Company will pay to the Beneficiary a death benefit in an
amount equal to the greatest of (1), (2) or (3) below, each reduced by any
applicable premium tax or prior surrenders not previously deducted:
1) the Contract Value;
2) the total Purchase Payments made under the Contract; or the Contract
Value on the latest fifth contract year anniversary occurring on or
before the Annuitant's 75th birthday.
If the Annuitant dies ON OR AFTER AGE 85 and before the Maturity Date, the
Company will pay to the Beneficiary a death benefit in an amount equal to the
Contract Value, less any applicable premium tax.
See Appendix B for Contracts issued in the state of Florida.
ENHANCED DEATH BENEFIT. Under the enhanced death benefit, if the Annuitant dies
BEFORE AGE 75 and before the Maturity Date, the Company will pay to the
Beneficiary a death benefit equal to the greater of (1) the guaranteed death
benefit, or (2) the Contract Value less any applicable premium tax.
The guaranteed death benefit is equal to the Purchase Payments made to the
Contract (minus surrenders and applicable premium tax) increased by 5% on each
contract date anniversary, but not beyond the contract date anniversary
following the Annuitant's 75th birthday, with a maximum guaranteed death benefit
of 200% of the total of Purchase Payments minus surrenders and minus applicable
premium tax.
If the Annuitant dies ON OR AFTER AGE 75, BUT BEFORE AGE 85 and before the
Maturity Date, the Company will pay to the Beneficiary a death benefit in an
amount equal to the greater of (1) the guaranteed death benefit as of the
Annuitant's 75th birthday, plus additional purchase payments, minus surrenders
and applicable premium tax; or (2) the Contract Value less any applicable
premium tax.
If the Annuitant dies ON OR AFTER AGE 85 but before the Maturity Date, the
Company will pay to the Beneficiary a death benefit equal to the Contract Value
less any applicable premium tax.
DEATH PROCEEDS AFTER THE MATURITY DATE
If the Annuitant dies on or after the Maturity Date, the Company will pay the
Beneficiary a death benefit consisting of any benefit remaining under the
Annuity or Income Option then in effect.
THE ANNUITY PERIOD
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MATURITY DATE
Annuity Payments will ordinarily begin on the Maturity Date stated in the
Contract. If no Maturity Date is elected, the Maturity Date will be the
Annuitant's 70th birthday for qualified contracts and the Annuitant's 75th
birthday, or ten years after the Contract Date, if later, for nonqualified
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contracts. The Maturity Date is the date on which the Company will begin paying
the first of a series of Annuity or Income Payments in accordance with the
Settlement Option selected by the Contract Owner. Annuity or Income Payments
will begin on the Maturity Date unless the Contract has been fully surrendered
or the proceeds have been paid to the Beneficiary prior to that date. The
Company may require proof that the Annuitant is alive before Annuity Payments
are made.
See Appendices A and B, respectively, for Contracts issued in the states of New
York and Florida.
For nonqualified Contracts, at least 30 days before the original Maturity Date,
a Contract Owner may elect to extend the Maturity Date to any time prior to the
Annuitant's 85th birthday or, for qualified Contracts, to a later date with the
Company's consent. Certain annuity options taken at the Maturity Date may be
used to meet the minimum required distribution requirements of federal tax law,
or a program of partial surrenders may be used instead. These mandatory
distribution requirements take effect generally upon the death of the Contract
Owner, or with qualified contracts upon either the Contract Owner's attainment
of age 70 1/2 or the death of the Contract Owner. Independent tax advice should
be sought regarding the election of minimum required distributions.
See Appendix B for Contracts issued in the state of Florida.
ALLOCATION OF ANNUITY
When an Annuity Option is elected, it may be elected as a Variable Annuity, a
Fixed Annuity, or a combination of both. If, at the time Annuity Payments begin,
no election has been made to the contrary, the Contract Value shall be applied
to provide an annuity funded by the same investment options. At least 15 days
prior to the Maturity Date, you may reallocate the basis on which Annuity
Payments will be determined. (See "Transfers," page .)
VARIABLE ANNUITY
ANNUITY UNIT VALUE. The initial value of an Annuity Unit applicable to each
Funding Option was established at $1. The Annuity Unit Value as of any Valuation
Date is equal to (a) the value of the Annuity Unit on the immediately preceding
Valuation Date, multiplied by (b) the corresponding net investment factor for
the Valuation Period just ended, divided by (c) the assumed net investment
factor for the Valuation Period. (For example, the assumed net investment factor
based on an annual assumed net investment rate of 3.0% for a Valuation Period of
one day is 1.000081 and, for a period of two days, is 1.000081 x 1.000081.) 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 Sub-Account by the
corresponding Annuity Unit Value as of 14 days prior to the date Annuity
Payments commence. 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 Contract Value 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. A
formula for determining the adjusted age is contained in the Contract. The total
first monthly Annuity Payment is determined by multiplying the benefit per
$1,000 of value shown in the tables of the Contract by the number of thousands
of dollars of value of the Contract applied to that Annuity Option. The Company
reserves the right to require satisfactory proof of age of any person on whose
life Annuity Payments are based before making the first payment under any of the
Settlement Options.
DETERMINATION OF SECOND AND SUBSEQUENT ANNUITY PAYMENTS. The dollar amount of
the second and subsequent Annuity Payments is not predetermined and may change
from month to month based on the investment experience of the applicable
Underlying Fund. The total amount of each
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Annuity Payment will be equal to the sum of the basic payments in each
Underlying Fund.. The actual amounts of these payments are determined by
multiplying the number of Annuity Units credited to each Underlying Fund by the
corresponding Annuity Unit Value as of the date 14 days prior to the date before
payment is due.
See Appendix B for Contracts issued in the state of Florida.
FIXED ANNUITY
A Fixed Annuity provides for payments that do not vary during the Annuity
Period. The dollar amount of the first Fixed Annuity Payment will be calculated
as described under "Variable Annuity" above. All subsequent payments will be
made in the same amount. If it would produce a larger payment, the Company
agrees that the first Fixed Annuity Payment will be determined using the Life
Annuity Tables in effect on the Maturity Date.
PAYMENT OPTIONS
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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. While the
Annuitant is alive, the Contract Owner may change a Settlement Option election
by written request at any time prior to the Maturity Date. Once Annuity or
Income Payments have begun, no further election changes are allowed. During the
Annuitant's lifetime, if no election has been made prior to the Maturity Date,
the Company will pay to the Contract Owner the first of a series of monthly
Annuity Payments based on the life of the Annuitant, in accordance with Annuity
Option 2 (Life Annuity with 120 monthly payments assured). For certain qualified
contracts, Annuity Option 4 (Joint and Last Survivor Joint Life
Annuity -- Annuity Reduced on Death of Primary Payee) will be the automatic
option as described in the contract.
The minimum amount that can be placed under an Annuity or Income Option will be
$2,000 unless the Company consents to a lesser amount. If any monthly periodic
payment due any payee is less than $100, the Company reserves the right to make
payments at less frequent intervals, or to pay the Contract Value in one
lump-sum payment.
See Appendix B for Contracts issued in the state of Florida.
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. Payments under the Annuity Options may be
elected on a monthly, quarterly, semiannual or annual basis.
OPTION 1 -- LIFE ANNUITY -- NO REFUND. The Company will make Annuity Payments
during the lifetime of the Annuitant, 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.
OPTION 2 -- LIFE ANNUITY WITH 120, 180 OR 240 MONTHLY PAYMENTS ASSURED. The
Company will make monthly Annuity Payments during the lifetime of the Annuitant,
with the agreement that if, at the death of that person, payments have been made
for less than 120, 180 or 240 months, as elected, payments will be continued
during the remainder of the period to the Beneficiary.
OPTION 3 -- 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
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during the lifetime of the survivor. No further payments will be made following
the death of the survivor.
OPTION 4 -- JOINT AND LAST SURVIVOR LIFE ANNUITY -- ANNUITY REDUCED ON DEATH OF
PRIMARY PAYEE. The Company will make Annuity Payments during the 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 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 5 -- OTHER ANNUITY OPTIONS. The Company will make any other arrangements
for Annuity Payments as may be mutually agreed upon.
INCOME OPTIONS
Instead of one of the Annuity Options described above, and subject to the
conditions described under "Election of Options," all or part of the Cash
Surrender Value of the Contract may be paid under one or more of the following
Income Options, provided that they are consistent with federal tax law
qualification requirements. Payments under the Income Options may be elected on
a monthly, quarterly, semiannual or annual basis:
OPTION 1 -- PAYMENTS OF A FIXED AMOUNT. The Company will make equal payments of
the amount elected until the Contract Value applied under this option has been
exhausted. The first payment and all later payments will be paid from each
Sub-Account or the Fixed Account in proportion to the Cash Surrender Value
attributable to that Account. The final payment will include any amount
insufficient to make another full payment.
OPTION 2 -- PAYMENTS FOR A FIXED PERIOD. The Company will make payments for the
period selected. The amount of each payment will be equal to the remaining
Contract Value applied under this option divided by the number of remaining
payments.
OPTION 3 -- OTHER INCOME OPTIONS. The Company will make any other arrangements
for Income Payments as may be mutually agreed upon.
The amount applied to effect an Income Option will be the Contract Value as of
14 days before the date Income Payments commence, less any applicable premium
taxes not previously deducted and any applicable contingent deferred sales
charge. The Contract Value used to determine the amount of any Income Payment
will be determined on the same basis as the Contract Value during the
Accumulation Period, including the deduction for mortality and expense risks and
the Sub-Account Administrative Charge. 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, payments are unrelated to
the actual life span of any person. Thus, the Annuitant may outlive the payment
period.
MISCELLANEOUS CONTRACT PROVISIONS
- --------------------------------------------------------------------------------
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 Contract Value as of that date is less than $1,000 and no
Purchase Payments have been made for at least two years, unless otherwise
specified by state law. Termination will not occur until 31 days after the
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Company has mailed notice of termination to the Contract Owner at his or her
last known address and to any assignee of record. If the Contract is terminated,
the Company will pay to the Contract Owner the Cash Surrender Value (Contract
Value, in the states of Washington, New York and New Jersey), less any
applicable administrative charge or premium tax.
See Appendix A for Contracts issued in the state of New York.
MISSTATEMENT
If the Annuitant's or Contract Owner's sex or date of birth was misstated, all
benefits under the Contract are what the Purchase Payment paid would have
purchased at the correct sex and age. Proof of the Annuitant's or Contract
Owner's age may be filed at any time at the Company's Home Office.
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 showing
the number of Accumulation Units credited to the Contract and the corresponding
Accumulation Unit Value as of the date of the report for each Underlying Fund to
which the Contract Owner has allocated amounts during the applicable period. The
Company will keep all records required under federal or state laws.
SUSPENSION OF PAYMENTS
The Company reserves the right to suspend or postpone the date of any payment of
any benefit or values for any Valuation Period (1) when the New York Stock
Exchange ("Exchange") is closed; (2) when trading on the Exchange is restricted;
(3) an emergency exists as determined by the SEC so that disposal of the
securities held in the Sub-Accounts is not reasonably practicable or it is not
reasonably practicable to determine the value of the Separate Account's net
assets; or (4) during any other period when the SEC, by order, so permits for
the protection of securityholders.
TRANSFERS OF CONTRACT VALUES TO OTHER ANNUITIES
The Company may permit Contract Owners to transfer their Contract Values into
other annuities offered by the Company or its affiliated insurance Companies
under rules then in effect.
FEDERAL TAX CONSIDERATIONS
- --------------------------------------------------------------------------------
The following description of the federal income tax consequences under this
Contract is not exhaustive and is not intended to cover all situations. Because
of the complexity of the law and the fact that the tax results will vary
according to the factual status of the individual involved, tax advice may be
needed by a person contemplating purchase of an annuity contract and by a
Contract Owner or Beneficiary who may make elections under a contract. For
further information, a qualified tax adviser should be consulted.
GENERAL TAXATION OF ANNUITIES
Amounts credited to the Contract are not generally taxable until they are
received by the Contract Owner or the Beneficiary, either in the form of Annuity
Payments or other distributions. Distributions from annuities that include
previously taxed amounts may be taxed on either an income-first basis or an
income-last basis, or on a pro-rata basis according to the type of plan or due
to other circumstances.
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 assets accounts must be diversified. The
Company monitors the diversification of investments constantly and believes that
its accounts are adequately diversified. The consequence of any failure is
essentially the loss to the
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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 includable
annually in the Contract Owner's gross income.
The Internal Revenue Service has stated in published rulings that a variable
contract owner will be considered the owner of the assets of a segregated asset
account if the owner possesses an incident of ownership in those assets, such as
the ability to exercise investment control over the assets. The Treasury
Department announced, in connection with the issuance of temporary regulations
concerning investment diversification, that those regulations "do not provide
guidance concerning the circumstances in which investor control of the
investments of a segregated asset account may cause the investor, rather than
the insurance company, to be treated as the owner of the assets of the account."
This announcement, dated September 15, 1986, also stated that the guidance would
be issued by way of regulations or rulings on the "extent to which policyholders
may direct their investments to particular subaccounts [of a segregated asset
account] without being treated as owners of the underlying assets." As of the
date of this prospectus, no such guidance has been issued.
The Company does not know if such guidance will be issued, or if it is, what
standards it may set. Furthermore, the Company does not know if such guidance
may be issued with retroactive effect. New regulations are generally issued with
a prospective-only effect as to future sales or as to future voluntary
transactions in existing contracts. The Company therefore reserves the right to
modify the contract as necessary to attempt to prevent contract owners from
being considered the owner of the assets of the accounts.
PENALTY TAX FOR PREMATURE DISTRIBUTIONS
Taxable distributions taken before the Contract Owner has attained the age of
59 1/2 will be subject to a 10% additional tax penalty unless the distribution
is taken in a series of periodic distributions for life or life expectancy, or
unless the distribution follows the death or disability of the Contract Owner.
Other exceptions may be available in certain tax-qualified plans.
MANDATORY DISTRIBUTIONS FOR QUALIFIED PLANS
Federal tax law requires that minimum annual distributions begin by April 1st of
the calendar year following the calendar year in which a participant under a
qualified plan, a Section 403(b) annuity, or an IRA attains age 70 1/2.
Distributions must also begin or be continued according to required patterns
following the death of the Owner or the Annuitant.
NONQUALIFIED ANNUITY CONTRACTS
Individuals may purchase tax-deferred annuities without tax law funding limits.
The Purchase Payments receive no tax benefit, deduction or deferral, but
increases in the value of the contract are generally deferred from tax until
distribution. If a nonqualified annuity is owned by other than an individual,
however (e.g., by a corporation), the increases in value attributable to
Purchase Payments made after February 28, 1986 are includable in income
annually. Furthermore, for contracts issued after April 22, 1987, all deferred
increases in value will be includable in the income of a Contract Owner when the
Contract Owner transfers the contract without adequate consideration.
If two or more annuity contracts are purchased from the same insurer within the
same calendar year, distributions from any of them will be taxed based upon the
amount of income in all of the same calendar year series of annuities. This will
generally have the effect of causing taxes to be paid sooner on the deferred
gain in the contracts.
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Those receiving partial distributions made before the Maturity Date will
generally be taxed on an income-first basis to the extent of income in the
contract. If you are exchanging another annuity contract for this annuity,
certain pre-August 14, 1982 deposits into an annuity contract that have been
placed in the contract by means of a tax-deferred exchange under Section 1035 of
the Code may be withdrawn first without income tax liability. This information
on deposits must be provided to the Company by the other insurance company at
the time of the exchange. There is income in the contract generally to the
extent the Cash Value exceeds the investment in the contract. The investment in
the contract is equal to the amount of premiums paid less any amount received
previously which was excludable from gross income. Any direct or indirect
borrowing against the value of the contract or pledging of the contract as
security for a loan will be treated as a cash distribution under the tax law.
The federal tax law requires that nonqualified annuity contracts meet minimum
mandatory distribution requirements upon the death of the Contract Owner,
including the first of joint owners. Failure to meet these requirements will
cause the surviving joint owner, the succeeding Contract Owner, or the
Beneficiary to lose the tax benefits associated with annuity contracts, i.e.,
primarily the tax deferral prior to distribution. The distribution required
depends, among other things, upon whether an Annuity Option is elected or
whether the new Contract Owner is the surviving spouse. Contracts will be
administered by the Company in accordance with these rules and the Company will
make a notification when payments should be commenced.
INDIVIDUAL RETIREMENT ANNUITIES
To the extent of earned income for the year and not exceeding $2,000 per
individual, an individual may make deductible contributions to an individual
retirement annuity (IRA). There are certain limits on the deductible amount
based on the adjusted gross income of the individual and spouse and based on
their participation in a retirement plan. If an individual is married and the
spouse does not have earned income, the individual may establish IRAs for the
individual and spouse. Purchase Payments may then be made annually into IRAs for
both spouses in the maximum amount of 100% of earned income up to a combined
limit of $2,250.
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.
QUALIFIED PENSION AND PROFIT-SHARING PLANS
Under a qualified pension or profit-sharing plan, Purchase Payments made by an
employer are not currently taxable to the participant and increases in the value
of a contract are not subject to taxation until received by a participant or
Beneficiary.
Distributions are taxable to the participant or Beneficiary as ordinary income
in the year of receipt. Any distribution that is considered the participant's
"investment in the contract" is treated as a return of capital and is not
taxable. Certain lump-sum distributions may be eligible for special forward
averaging tax treatment for certain classes of individuals.
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FEDERAL INCOME TAX WITHHOLDING
The portion of a distribution which is taxable income to the recipient will be
subject to federal income tax withholding as follows:
1. ELIGIBLE ROLLOVER DISTRIBUTION FROM SECTION 403(B) PLANS OR ARRANGEMENTS
OR FROM QUALIFIED PENSION AND PROFIT-SHARING PLANS
There is a mandatory 20% tax withholding for plan distributions that are
eligible for rollover to an IRA or to another retirement plan but that
are not directly rolled over. A distribution made directly to a
participant or Beneficiary may avoid this result if:
(a) a periodic settlement distribution is elected based upon a life or
life expectancy calculation, or
(b) a term-for-years settlement distribution is elected for a period of
ten years or more, payable at least annually, or
(c) a minimum required distribution as defined under the tax law is
taken after the attainment of the age of 70 1/2 or as otherwise
required by law.
A distribution including a rollover that is not a direct rollover will
be subject to the 20% withholding, and a 10% additional tax penalty may
apply to any amount not added back in the rollover. The 20% withholding
may be recovered when the participant or Beneficiary files a personal
income tax return for the year if a rollover was completed within 60
days of receipt of the funds, except to the extent that the participant
or spousal Beneficiary is otherwise underwithheld or short on estimated
taxes for that year.
2. OTHER NON-PERIODIC DISTRIBUTIONS (FULL OR PARTIAL REDEMPTIONS)
To the extent not described as requiring 20% withholding in 1 above, the
portion of a non-periodic distribution which constitutes taxable income
will be subject to federal income tax withholding, if the aggregate
distributions exceed $200 for the year, unless the recipient elects not
to have taxes withheld. If no such election is made, 10% of the taxable
distribution will be withheld as federal income tax. Election forms will
be provided at the time distributions are requested. This form of
withholding applies to all annuity programs.
3. PERIODIC DISTRIBUTIONS (DISTRIBUTIONS PAYABLE OVER A PERIOD GREATER THAN
ONE YEAR)
The portion of a periodic distribution which constitutes taxable income
will be subject to federal income tax withholding under the wage
withholding tables as if the recipient were married claiming three
exemptions. A recipient may elect not to have income taxes withheld or
have income taxes withheld at a different rate by providing a completed
election form. Election forms will be provided at the time distributions
are requested. This form of withholding applies to all annuity programs.
As of January 1, 1996, a recipient receiving periodic payments (e.g.,
monthly or annual payments under an Annuity Option) which total $14,350
or less per year, will generally be exempt from periodic withholding.
Recipients who elect not to have withholding made are liable for payment of
federal income tax on the taxable portion of the distribution. All recipients
may also be subject to penalties under the estimated tax payment rules if
withholding and estimated tax payments are not sufficient to cover tax
liabilities.
Recipients who do not provide a social security number or other taxpayer
identification number will not be permitted to elect out of withholding.
Additionally, 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.
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VOTING RIGHTS
- --------------------------------------------------------------------------------
The Contract Owner has certain voting rights in Fund BD and the Underlying
Funds. The number of votes which a Contract 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 Contract Owner may cast the
number of votes equal to (i) the reserve related to the Contract divided by (ii)
the value of an Accumulation Unit, and a Contract Owner's voting rights will
decline as the reserve for the Contract declines.
Each person having a voting interest in Fund BD will receive periodic reports
relating to the Underlying Fund(s) in which he or she has an interest, as well
as any proxy materials, including a form on which to give voting instructions
with respect to the proportion of the Underlying Fund shares held by Fund BD
which correspond to his or her interest in the Sub-Account.
Upon the death of the Contract Owner, all voting rights will vest in the
Beneficiary of the Contract, except in the case of Contracts where the surviving
spouse becomes the Contract Owner.
The Company will vote shares of Underlying Funds held by Fund BD at regular and
special meetings of the Underlying Fund shareholders in accordance with
instructions received from persons having a voting interest in Fund BD. The
Company will vote shares for which it has not received instructions in the same
proportion as it votes shares for which it has received instructions. However,
if the 1940 Act or any regulation thereunder should be amended, or if the
present interpretation thereof should change, and as a result the Company
determines that it is permitted to vote shares of the Underlying Funds in its
own right, it may elect to do so.
DISTRIBUTION OF VARIABLE ANNUITY CONTRACTS
- --------------------------------------------------------------------------------
The Company intends to sell the Contracts in all jurisdictions where it is
licensed to do business and where the Contract is approved. The Contracts will
be sold by life insurance sales agents who represent the Company, and who are
licensed registered representatives of the Company or certain other registered
broker-dealers. The compensation paid to sales representatives will not exceed
6.25% of the payments made under the Contracts.
From time to time the Company may pay or permit other promotional incentives, in
cash, credit or other compensation.
Any sales representative or employee will have been qualified to sell Variable
Annuities under applicable federal and state laws. Each broker-dealer is
registered with the Securities and Exchange Commission under the Securities
Exchange Act of 1934, and all are members of the National Association of
Securities Dealers, Inc. Tower Square Securities, Inc., an affiliate of the
Company, is the principal underwriter for the Contracts.
CONFORMITY WITH STATE AND FEDERAL LAWS
The Contract is governed by the laws of the state in which it is delivered. Any
paid-up Annuity, Cash Surrender Value or death benefits that are available under
the Contract are not less than the minimum benefits required by the statutes of
the state in which the Contract is delivered. 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 law or regulation issued
by any governmental agency to which the company, the Contract or the Contract
Owner is subject.
LEGAL PROCEEDINGS AND OPINIONS
- --------------------------------------------------------------------------------
There are no pending material legal proceedings affecting Fund BD. Legal matters
in connection with the federal laws and regulations affecting the issue and sale
of the Contract described in this Prospectus, as well as the organization of the
Company, its authority to issue variable annuity contracts under Connecticut law
and the validity of the forms of the variable annuity contracts
28
<PAGE> 32
under Connecticut law, have been reviewed by the General Counsel of the Life and
Annuities Division of the Company.
THE FIXED ACCOUNT
- --------------------------------------------------------------------------------
Under the Fixed Account, the Company assumes the risk of investment gain or
loss, guarantees a specified interest rate, and guarantees a specified periodic
annuity payment. The investment gain or loss of Fund BD or any of the
Sub-Accounts does not affect the Fixed Account portion of the Contract Owner's
Contract Value, or the dollar amount of fixed annuity payments made under any
payout option.
The Company guarantees that, at any time, the Fixed Account Contract Value will
not be less than the amount of the Purchase Payments allocated to the Fixed
Account, plus interest credited as described above, less any applicable premium
taxes or prior surrenders. If the Contract Owner effects a surrender, the amount
available from the Fixed Account will be reduced by any applicable Contingent
Deferred Sales Charge.
Purchase Payments allocated to the Fixed Account portion of the Contract and any
transfers made to the Fixed Account become part of the general account of the
Company which supports insurance and annuity obligations. Neither the general
account nor any interest therein is registered under, nor subject to the
provisions of the 1933 or 1940 Acts. The Company will invest the assets of the
Fixed Account at its discretion. Investment income from such Fixed Account
assets will be allocated by the Company between itself and the Contracts
participating in the Fixed Account.
Investment income from the Fixed Account allocated to the Company includes
compensation for mortality and expense risks borne by the Company in connection
with Fixed Account Contracts. The amount of such investment income allocated to
the Contracts will vary from year to year in the sole discretion of the Company
at such rate or rates as the Company prospectively declares from time to time.
The initial rate for any deposit into the Fixed Account is guaranteed for one
year from the date of such deposit. Subsequent renewal rates will be guaranteed
for the calendar quarter. The Company also guarantees that for the life of the
Contract it will credit interest at not less than 3% per year. Any interest
credited to amounts allocated to the Fixed Account in excess of 3% per year will
be determined in the sole discretion of the company. The contract owner assumes
the risk that interest credit to the Fixed Account may not exceed the minimum
guarantee of 3% for any given year.
TRANSFERS
Transfers from the Fixed Account to any other available investment option(s)
will be permitted twice a year during the 30 days following the semiannual
Contract Date anniversary in an amount of up to 15% of the Fixed Account Value
on the semiannual Contract Date anniversary. (This restriction does not apply to
transfers from the Dollar-Cost Averaging Program.) Amounts previously
transferred from the Fixed Account to the Sub-Accounts may not be transferred
back to the Fixed Account for a period of at least 6 months from the date of
transfer. The Company reserves the right to waive either of these restrictions
in its discretion.
Automated transfers from the Fixed Account to any of the Sub-Accounts may begin
at any time. Automated transfers from the Fixed Account may not deplete your
Fixed Account value in a period of less than twelve months from your enrollment
in the Dollar-Cost Averaging program.
29
<PAGE> 33
APPENDIX A
FOR CONTRACTS ISSUED IN THE STATE OF NEW YORK
- --------------------------------------------------------------------------------
SUBSTITUTION
No substitution of shares of any of the Underlying Funds for shares of another
open-end management investment company will be made without prior approval of
the New York Insurance Commissioner.
RIGHT TO RETURN
The Contract may be returned for a full refund of the Contract Value (including
charges) within twenty days after delivery of the Contract to the Contract Owner
(the "free-look period"). For purposes of determining the refund amount, all
Contract Values will be determined as of the Return Date, which is the next
valuation after the date you mail or deliver the Written Request to the
Company's Home Office or to your Agent. If the Contract is returned within the
first 7 days of the free-look period, we will calculate the Contract Value by
using the investment experience of the Smith Barney Money Market Portfolio
Sub-Account as of the Return Date. If the Contract is returned during the last 8
to 20 days of the free-look period, we will calculate the Contract Value Date by
using the investment experience of the Sub-Accounts(s) selected on your
application, or as you have instructed us more recently. If Purchase Payments
are allocated to the Fixed Account during the free-look period, then the full
Contract Value will be returned. After the Contract is returned, it will be
considered as if never in effect.
FREE WITHDRAWAL ALLOWANCE
There is a 10% free withdrawal allowance available each year after the first
Contract Year. The available withdrawal amount will be calculated as of the
first Valuation Date of any given Contract Year. The free withdrawal allowance
applies to partial surrenders of any amount and to full surrenders, except those
full surrenders transferred directly to annuity contracts issued by other
financial institutions.
ANNUITANT
If the Owner of a Contract is also the Annuitant, a Contingent Annuitant may not
be named.
DOLLAR-COST AVERAGING (AUTOMATED TRANSFERS)
You may establish automated transfers of Contract Values on a monthly or
quarterly basis from the Fixed Account and certain of the Sub-Accounts to other
Sub-Accounts only through written request.
SYSTEMATIC WITHDRAWALS
The Company waives the right to discontinue offering systematic withdrawals or
to assess a processing fee for this service.
DEATH BENEFIT
The Enhanced Death Benefit is not available in New York.
MATURITY DATE
The Maturity Date may not be any date beyond the Annuitant's 85th birthday.
30
<PAGE> 34
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 Contract Value as of that date is less than $1,000 and no
Purchase Payments have been made for at least three years, unless otherwise
specified by state law. However, the Company reserves the right to terminate the
Contract on any Valuation Date if the Contract Value as of that date is less
than $1,000 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 Contract Owner at his or her last known address and to any
assignee of record. If the Contract is terminated, the Company will pay to the
Contract Owner the Contract Value, if any, less any applicable administrative
charge or premium tax. No Contingent Deferred Sales Charge will apply in the
event of termination by the Company.
31
<PAGE> 35
APPENDIX B
FOR CONTRACTS ISSUED IN THE STATE OF FLORIDA
- --------------------------------------------------------------------------------
DEATH BENEFIT
DEATH PROCEEDS PRIOR TO THE MATURITY DATE
The Enhanced Death Benefit is not available in Florida.
STANDARD DEATH BENEFIT. Under the standard death benefit, if the Annuitant dies
BEFORE AGE 75 and before the Maturity Date, the Company will pay to the
Beneficiary a death benefit in an amount equal to the greatest of (1), (2) or
(3) below, less any applicable premium tax or prior surrenders not previously
deducted:
1) the Contract Value;
2) the total Purchase Payments made under the Contract; or
3) the Contract Value on the latest fifth contract year anniversary
immediately preceding the date on which the Company receives due proof
of death.
IF THE ANNUITANT DIES ON OR AFTER AGE 75, BUT BEFORE AGE 90 and before the
Maturity Date, the Company will pay to the Beneficiary a death benefit in an
amount equal to the greatest of (1), (2) or (3) below, less any applicable
premium tax or prior surrenders not previously deducted:
1) the Contract Value;
2) the total Purchase Payments made under the Contract; or
3) the Contract Value on the latest fifth contract year anniversary
occurring on or before the Annuitant's 75th birthday.
THE ANNUITY PERIOD
MATURITY DATE
The maturity date may not be any date beyond the Annuitant's 90th birthday.
THE VARIABLE ANNUITY
Variable payouts are not permitted in Florida. Contract Owners may only have
their Contract Values applied to provide a Fixed Annuity.
Disregard the "Variable Annuity" section described on page 21.
ELECTION OF OPTIONS
ON THE MATURITY DATE, OR OTHER AGREED-UPON DATE, THE COMPANY WILL PAY AN AMOUNT
PAYABLE UNDER THE CONTRACT 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. While the Annuitant is alive, the
Contract Owner may change a Settlement Option election by Written Request at any
time prior to the Maturity Date. Once Annuity or Income Payments have begun, no
further election changes are allowed. During the Annuitant's lifetime, if no
election has been made prior to the Maturity Date, the Company will pay to the
Contract Owner the first of a series of monthly Annuity Payments based on the
life of the Annuitant, in accordance with Annuity Option 2 (Life Annuity with
120 monthly payments assured). For certain tax-qualified contracts, Annuity
Option 4 (Joint and Last Survivor Joint Life Annuity -- Annuity Reduced on Death
of Primary Payee) will be the automatic option as described in the contract.
The minimum amount that can be placed under an Annuity or Income Option will be
$2,000 unless the Company consents to a lesser amount. If any monthly periodic
payment due any payee is less than $100, the Company reserves the right to make
payments at less frequent intervals, or to pay the Contract Value in one
lump-sum payment.
32
<PAGE> 36
APPENDIX C
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
The Statement of Additional Information contains more specific information and
financial statements relating to the Separate Account and The Travelers
Insurance Company. A list of the contents of the Statement of Additional
Information is set forth below:
The Insurance Company
Principal Underwriter
Distribution and Management Agreement
Valuation of Assets
Performance Data
Independent Accountants
Financial Statements
- --------------------------------------------------------------------------------
COPIES OF THE STATEMENT OF ADDITIONAL INFORMATION DATED MAY 1, 1996 (FORM NO.
L-12253S) ARE AVAILABLE WITHOUT CHARGE. TO REQUEST A COPY, PLEASE CLIP THIS
COUPON ON THE DOTTED LINE, ENTER YOUR NAME AND ADDRESS IN THE SPACES PROVIDED
BELOW, AND MAIL TO: THE TRAVELERS INSURANCE COMPANY, ANNUITY INVESTOR SERVICES,
ONE TOWER SQUARE, HARTFORD, CONNECTICUT 06183-9061.
Name:
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
33
<PAGE> 37
PART B
Information Required in a Statement of Additional Information
<PAGE> 38
VINTAGE
STATEMENT OF ADDITIONAL INFORMATION
dated
May 1, 1996
for
THE TRAVELERS FUND BD FOR VARIABLE ANNUITIES
ISSUED BY
THE TRAVELERS INSURANCE COMPANY
This Statement of Additional Information is not a prospectus but relates to,
and should be read in conjunction with, the Individual Variable Annuity
Contract Prospectus dated May 1, 1996. A copy of the Prospectus may be
obtained by writing to The Travelers Insurance Company, Annuity Services, One
Tower Square, Hartford, Connecticut 06183-9061, or by calling 1-800-842-8573.
TABLE OF CONTENTS
<TABLE>
<S> <C>
THE INSURANCE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
PRINCIPAL UNDERWRITER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
DISTRIBUTION AND MANAGEMENT AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
VALUATION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
INDEPENDENT ACCOUNTANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
1
<PAGE> 39
THE INSURANCE COMPANY
The Travelers Insurance Company (the "Company"), is a stock insurance
company chartered in 1864 in Connecticut and continuously engaged in the
insurance business since that time. The Company is 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's Home Office is located at One Tower Square, Hartford,
Connecticut 06183, and its telephone number is (860) 277-0111.
The Company is a wholly owned subsidiary of The Travelers Insurance
Group Inc., which is indirectly owned, through a wholly owned subsidiary, by
Travelers Group Inc., a financial services holding company engaged, through its
subsidiaries, principally in four business segments: (i) Investment Services;
(ii) Consumer Finance Services; (iii) Life Insurance Services; and (iv)
Property and Casualty Insurance Services.
PRINCIPAL UNDERWRITER
Tower Square Securities, Inc. ("Tower Square "), an affiliate of the
Company, serves as principal underwriter for Fund BD and the Contracts. The
offering is continuous. Tower Square is an indirect wholly owned subsidiary of
Travelers Group Inc. and its principal executive offices are located at One
Tower Square, Hartford, Connecticut.
DISTRIBUTION AND MANAGEMENT AGREEMENT
Under the terms of the Distribution and Management Agreement among
Fund BD, the Company and Tower Square, the Company provides all administrative
services and mortality and expense risk guarantees related to variable annuity
contracts sold by the Company in connection with the Fund BD. Tower Square
performs the sales functions related to the Contracts. The Company reimburses
Tower Square for commissions paid, other sales expenses and certain overhead
expenses connected with sales functions. The Company also pays all costs
(including costs associated with the preparation of sales literature); all
costs of qualifying the Fund BD and the variable annuity contract with
regulatory authorities; the costs of proxy solicitation; and all custodian,
accountant's and legal fees. The Company also provides without cost to the
Fund BD all necessary office space, facilities, and personnel to manage its
affairs.
PERFORMANCE INFORMATION
From time to time, the Company may advertise several types of historical
performance for Sub-Accounts of Fund BD. The Company may advertise the
"standardized average annual total returns" of the Underlying Funds available
through the Separate Account, calculated in a manner
2
<PAGE> 40
prescribed by the Securities and Exchange Commission, as well as the
"non-standardized total return," as described below:
STANDARDIZED METHOD. Quotations of average annual total return are
computed according to a formula in which a hypothetical initial investment of
$1,000 is allocated to an Underlying Fund, and then related to ending
redeemable values over one-, five- and ten-year periods, or inception, if an
Underlying Fund has not in existence for one of the prescribed periods. These
quotations reflect the deduction of all recurring charges during each period
(on a pro rata basis in the case of fractional periods). The deduction for the
semiannual administrative charge ($15) is converted to a percentage of assets
based on the actual fee collected, divided by the average net assets per
contract sold under the Prospectus to which this Statement of Additional
Information relates. Each quotation assumes a total redemption at the end of
each period with the assessment of any applicable Contingent Deferred Sales
Charge at that time.
NON-STANDARDIZED METHOD. Non-standardized "total return" will be
calculated in a manner similar to "standardized" as describe above. However,
non-standardized total return will not reflect the deduction of any applicable
Contingent Deferred Sales Charge or the $15 semiannual contract administrative
charge, which, if reflected, would decrease the level of performance shown.
The Contingent Deferred Sales Charge is not reflected because the Contract is
designed for long-term investment.
GENERAL. Within the guidelines prescribed by the SEC and the National
Association of Securities Dealers, Inc. ("NASD"), performance information may
be quoted numerically or may be presented in a table, graph or other
illustration. Advertisements may include data comparing performance to
well-known indices of market performance (including, but not limited to, the
Dow Jones Industrial Average, the Standard & Poor's (S&P) 500 Index and the S&P
400 Index, the Lehman Brothers Long T-Bond Index, the Russell 1000, 2000 and
3000 Indices, the Value Line Index, and the Morgan Stanley Capital
International's EAFE Index). Advertisements may also include published
editorial comments and performance rankings compiled by independent
organizations (including, but not limited to, Lipper Analytical Services, Inc.
and Morningstar, Inc.) and publications that monitor the performance of Fund BD
and the Underlying Funds.
For Underlying Funds that were in existence prior to the date they
became available under Fund BD, the standardized average 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 available under the Contract for the period quoted.
The total return quotations are based upon historical earnings and are not
necessarily representative of future performance. An Owner's Contract Value at
redemption may be more or less than original cost.
Average annual total returns for each of the Underlying Funds
available under Fund BD computed according to the standardized and
non-standardized methods for the period ending December 31, 1995 are set forth
in the following table.
3
<PAGE> 41
STANDARDIZED TOTAL RETURN CALCULATIONS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Regular Since Enhanced Since Inception
1 Year Inception 1 Year Inception Date
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Smith Barney Income
and Growth 25.50% 14.55% 25.13% 14.22% 6/20/94
Alliance Growth Portfolio 27.27% 20.86% 26.90% 20.51% 6/20/94
American Capital Enterprise
Portfolio 25.12% 18.89% 24.74% 18.54% 6/21/94
Smith Barney International
Equity Portfolio 3.97% (0.66)% 3.66% (0.96)% 6/20/94
Smith Barney Pacific Basin
Portfolio (4.81)% (9.75)% (5.09)% (10.01)% 6/21/94
TBC Managed Income
Portfolio 8.54% 5.34% 8.23% 5.03% 6/28/94
Putnam Diversified
Income Portfolio 10.00% 7.06% 9.68% 6.74% 6/20/94
G.T. Global Strategic
Income Portfolio 12.58% 3.92% 12.25% 3.61% 6/21/94
Smith Barney High
Income Portfolio 11.68% 6.59% 11.35% 6.28% 6/22/94
MFS Total Return
Portfolio 18.21% 9.93% 17.87% 9.61% 6/20/94
Smith Barney Money
Market Portfolio (1.83)% (0.14)% (2.12)% (0.44)% 6/20/94
AIM Capital Appreciation
Portfolio --- (9.96)% --- (10.02)% 10/10/95
Smith Barney Total
Return Portfolio 17.43% 12.94% 17.09% 12.61% 12/3//93
</TABLE>
4
<PAGE> 42
NONSTANDARDIZED TOTAL RETURN CALCULATIONS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Regular Since Enhanced Since Inception
1 Year Inception 1 Year Inception Date
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Smith Barney Income
and Growth Portfolio 31.52% 18.21% 31.15% 17.88% 6/20/94
Alliance Growth Portfolio 33.29% 24.42% 32.92% 24.08% 6/20/94
American Capital Enterprise
Portfolio 31.14% 22.48% 30.77% 22.14% 6/21/94
Smith Barney International
Equity Portfolio 9.98% 3.27% 9.68% 2.98% 6/21/94
Smith Barney Pacific Basin
Portfolio 1.21% (5.99)% 0.93% (6.25)% 6/21/94
TBC Managed Income
Portfolio 14.56 % 9.22% 14.24% 8.91% 6/28/94
Putnam Diversified
Income Portfolio 16.02% 10.84% 15.70% 10.53% 6/20/94
G.T. Global Strategic
Income Portfolio 18.60% 7.77% 18.26% 7.46% 6/21/94
Smith Barney High
Income Portfolio 17.70% 10.40% 17.37% 10.09% 6/22/94
MFS Total Return
Portfolio 24.23% 13.67% 23.88% 13.35% 6/20/94
Smith Barney Money
Market Portfolio 4.19% 3.78% 3.89% 3.49% 6/20/94
AIM Capital Appreciation
Portfolio ---- (4.21)% ---- (4.27)% 10/10/95
Smith Barney Total
Return Portfolio 23.45% 15.49% 23.10% 15.17% 12/3/93
</TABLE>
5
<PAGE> 43
VALUATION OF ASSETS
The value of the assets of each Underlying Fund is determined on each
Valuation Date as of the close of the New York Stock Exchange. Each security
traded on a national securities exchange is valued at the last reported sale
price on the 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 computing a
market value based upon quotations from dealers or issuers for securities of a
similar type, quality and maturity. This computation takes into account
unrealized appreciation or depreciation due to changes in interest rates or
other factors which would influence the current fair values of such securities.
Short-term investments maturing in sixty days or less for which there is no
reliable quoted market price are valued at amortized cost which approximates
market.
NET INVESTMENT FACTOR
The net investment factor is used to measure the investment
performance of a Sub-Account from one Valuation Period to the next. The net
investment factor for a Sub-Account for any Valuation Period is equal to the
sum of 1.000000 plus the net investment rate (the gross investment rate less
any applicable Sub-Account deductions during the Valuation Period relating to
the Insurance Charge and the Sub-Account Administrative Charge). The gross
investment rate of a Sub-Account is equal to (a) minus (b) divided by (c)
where:
(a) = investment income plus capital gains and losses (whether
realized or unrealized);
(b) = any deduction for applicable taxes (presently zero); and
(c) = the value of the assets of the Underlying Fund at the beginning
of the Valuation Period.
6
<PAGE> 44
The gross investment rate may be either positive or negative. A
Sub-Account's assets are based on the net asset value of the Underlying Fund,
and investment income includes any distribution whose ex-dividend date occurs
during the Valuation Period.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., certified public accountants, 100 Pearl Street,
Hartford, Connecticut, are the independent auditors for Fund BD. The services
provided to Fund BD include primarily the examination of the Fund's financial
statements. The Financial Statements of Fund BD have been audited by Coopers
& Lybrand L.L.P., as indicated in their report thereon, and are included
herein in reliance upon the authority of said firm as experts in accounting and
auditing.
The consolidated balance sheet of The Travelers Insurance Company and
Subsidiaries (the "Company") as of December 31, 1995 and 1994 and the
consolidated statements of operations and retained earnings and cash flows for
the years then ended, have been included herein in reliance upon the report of
KPMG Peat Marwick LLP, independent certified public accountants, and upon the
authority of said firm as experts in accounting and auditing. The report of
KPMG Peat Marwick LLP covering the December 31, 1995 consolidatd financial
statements of the Company refers to a change in the accounting for investments
in accordance with provisions of Statement of Financial Accounting Standards
No.115, "Accounting for Certain Investments in Debt and Equity Securities," in
1994.
The statements of operations and retained earnings and cash flows of
the Company for the year ended December 31, 1993, have been included herein in
reliance upon the report dated January 24, 1994 of Coopers & Lybrand, L.L.P.,
certified public accountants, and upon the authority of said firm as experts in
accounting and auditing.
7
<PAGE> 45
THE TRAVELERS FUND BD
FOR VARIABLE ANNUITIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments in eligible funds at market value:
Smith Barney/Travelers Series Fund Inc.:
Alliance Growth Portfolio, 10,001,039 shares (cost $121,591,429) . . . . . . . . $134,613,989
American Capital Enterprise Portfolio, 3,330,913 shares (cost $40,779,755) . . . 42,968,778
TBC Managed Income Portfolio, 1,297,826 shares (cost $13,702,089) . . . . . . . 14,094,386
G.T. Global Strategic Income Portfolio, 892,517 shares (cost $9,094,420) . . . . 9,701,655
Smith Barney High Income Portfolio, 2,391,941 shares (cost $25,842,064) . . . . 26,526,620
Smith Barney International Equity Portfolio, 5,811,337 shares (cost $59,320,996) 62,065,081
Smith Barney Income and Growth Portfolio, 3,766,892 shares (cost $43,084,361) . 48,442,236
Smith Barney Money Market Portfolio, 47,355,849 shares (cost $47,355,849) . . . 47,355,849
Putnam Diversified Income Portfolio, 3,411,029 shares (cost $37,062,862) . . . . 38,510,523
Smith Barney Pacific Basin Portfolio, 821,044 shares (cost $7,680,475) . . . . . 7,586,445
MFS Total Return Portfolio, 5,067,401 shares (cost $55,295,242) . . . . . . . . 60,302,077
AIM Capital Appreciation Portfolio, 2,481,702 shares (cost $24,394,687) . . . . 23,824,342
Smith Barney Series Fund:
Total Return Portfolio, 3,649,021 shares (cost $44,190,255) . . . . . . . . . . 46,488,528
------------
Total Investments (cost $529,394,484) . . . . . . . . . . . . . . . . . . . . 562,480,509
------------
Receivables:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,496,694
Purchase payments and transfers from other Travelers accounts . . . . . . . . . . . 4,935,082
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 696
------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 579,912,981
------------
LIABILITIES:
Payable for contract surrenders and transfers to other Travelers accounts . . . . . . . 389,841
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97,211
------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 487,052
------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $579,425,929
============
</TABLE>
See Notes to Financial Statements
-1-
<PAGE> 46
THE TRAVELERS FUND BD
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . $14,236,242
EXPENSES:
Insurance charges . . . . . . . . . . . . . . . . . . . . . . . $ 2,942,696
Administrative fees . . . . . . . . . . . . . . . . . . . . . . 408,008
Total expenses . . . . . . . . . . . . . . . . . . . . . . . 3,350,704
----------- -----------
Net investment income . . . . . . . . . . . . . . . . . . . 10,885,538
-----------
REALIZED GAIN AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain from investment transactions:
Proceeds from investments sold . . . . . . . . . . . . . . . 14,726,653
Cost of investments sold . . . . . . . . . . . . . . . . . . 14,522,551
-----------
Net realized gain . . . . . . . . . . . . . . . . . . . . . 204,102
Change in unrealized gain (loss) on investments:
Unrealized loss at December 31, 1994 . . . . . . . . . . . . (2,023,137)
Unrealized gain at December 31, 1995 . . . . . . . . . . . . 33,086,025
-----------
Net change in unrealized gain (loss) for the year . . . . . 35,109,162
-----------
Net realized gain and change in unrealized gain (loss) . . 35,313,264
-----------
Net increase in net assets resulting from operations . . . . $46,198,802
===========
</TABLE>
See Notes to Financial Statements
-2-
<PAGE> 47
THE TRAVELERS FUND BD
FOR VARIABLE ANNUITIES
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995 AND
THE PERIOD JUNE 20, 1994 (DATE OPERATIONS COMMENCED)
TO DECEMBER 31, 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . $ 10,885,538 $ 434,171
Net realized gain (loss) from investment transactions . . . . . 204,102 (3,136)
Net change in unrealized gain (loss) on investments . . . . . . 35,109,162 (2,023,137)
------------ ------------
Net increase (decrease) in net assets resulting from operations 46,198,802 (1,592,102)
------------ ------------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 354,498,881 and 107,339,545 units, respectively) 402,861,925 108,566,524
Participant transfers from other Travelers accounts
(applicable to 71,152,191 and 6,423,931 units, respectively) 80,569,733 6,471,798
Administrative charges
(applicable to 47,422 and 811 units, respectively) . . . . . (55,076) (830)
Contract surrenders
(applicable to 8,346,617 and 761,076 units, respectively) . . (7,774,891) (766,681)
Participant transfers to other Travelers accounts
(applicable to 42,873,181 and 5,473,688 units, respectively) (47,707,531) (5,520,208)
Other payments to participants
(applicable to 1,036,056 and 651,396 units, respectively) . . (1,169,880) (655,654)
------------ ------------
Net increase in net assets resulting from unit transactions 426,724,280 108,094,949
------------ ------------
Net increase in net assets . . . . . . . . . . . . . . . . 472,923,082 106,502,847
NET ASSETS:
Beginning of period . . . . . . . . . . . . . . . . . . . . . . 106,502,847 -
------------ ------------
End of period . . . . . . . . . . . . . . . . . . . . . . . . . $579,425,929 $106,502,847
============ ============
</TABLE>
See Notes to Financial Statements
-3-
<PAGE> 48
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Fund BD for Variable Annuities ("Fund BD") is a separate
account of The Travelers Insurance Company ("The Travelers"), an
indirect wholly owned subsidiary of Travelers Group Inc., and is
available for funding certain variable annuity contracts issued by The
Travelers. Fund BD is registered under the Investment Company Act of
1940, as amended, as a unit investment trust.
Participant purchase payments applied to Fund BD are invested in one
or more eligible funds in accordance with the selection made by the
contract owner. As of December 31, 1995, the eligible funds available
under Fund BD are: Alliance Growth Portfolio, American Capital
Enterprise Portfolio, TBC Managed Income Portfolio, G.T. Global
Strategic Income Portfolio, Smith Barney High Income Portfolio, Smith
Barney International Equity Portfolio, Smith Barney Income and Growth
Portfolio, Smith Barney Money Market Portfolio, Putnam Diversified
Income Portfolio, Smith Barney Pacific Basin Portfolio, MFS Total
Return Portfolio, and AIM Capital Appreciation Portfolio of Smith
Barney/Travelers Series Fund Inc.; and Total Return Portfolio of Smith
Barney Series Fund. Smith Barney/Travelers Series Fund Inc. is
incorporated under Maryland law. Smith Barney Series Fund is
registered as a Massachusetts business trust. Both Funds are managed
by Smith Barney Mutual Funds Management Inc., an indirect wholly owned
subsidiary of Travelers Group Inc.
The following is a summary of significant accounting policies
consistently followed by Fund BD in the preparation of its financial
statements. Certain prior period amounts have been reclassified to
conform to the current year's presentation.
SECURITY VALUATION. Investments are valued daily at the net asset
values per share of the underlying funds.
FEDERAL INCOME TAXES. The operations of Fund BD form a part of the
total operations of The Travelers and are not taxed separately. The
Travelers is taxed as a life insurance company under the Internal
Revenue Code of 1986, as amended (the "Code"). Under existing federal
income tax law, no taxes are payable on the investment income of Fund
BD. Fund BD is not taxed as a "regulated investment company" under
Subchapter M of the Code.
OTHER. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Security transactions are accounted for on the trade date. Dividend
income is recorded on the ex-dividend date.
2. INVESTMENTS
Purchases and sales of investments aggregated $436,168,475 and
$14,726,653, respectively, for the year ended December 31, 1995.
Realized gains and losses from investment transactions are reported on
an identified cost basis. The cost of investments in eligible funds
was $529,394,484 at December 31, 1995. Gross unrealized appreciation
for all investments at December 31, 1995 was $33,750,400. Gross
unrealized depreciation for all investments at December 31, 1995 was
$664,375.
3. CONTRACT CHARGES
Insurance charges are paid to The Travelers for the mortality and
expense risks assumed by The Travelers. For contracts with a standard
death benefit provision, these charges are equivalent to 1.02% of the
average net assets of Fund BD on an annual basis. For contracts with
an enhanced death benefit provision, these charges are equivalent to
1.30% of the average net assets of Fund BD on an annual basis.
For contracts in the accumulation phase with a contract value less
than $40,000, an annual charge of $30 (prorated for partial periods)
is deducted from participant account balances and paid to The
Travelers to cover contract administrative charges.
Administrative fees are paid to The Travelers for administrative
expenses incurred by The Travelers. This charge is equivalent to 0.15%
of the average net assets of Fund BD on an annual basis.
-4-
<PAGE> 49
NOTES TO FINANCIAL STATEMENTS - CONTINUED
No sales charge is deducted from participant purchase payments when
they are received. However, The Travelers generally assesses a
contingent deferred sales charge of up to 6% if a participant's
purchase payment is surrendered within six years of its payment date.
Contract surrender payments are stated prior to the deduction of
$159,900 and $70 of contingent deferred sales charges for the year
ended December 31, 1995 and the period June 20, 1994 (date operations
commenced) to December 31, 1994, respectively.
4. NET CONTRACT OWNERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31, 1995
ACCUMULATION ANNUITY UNIT NET
UNITS UNITS VALUE ASSETS
----- ----- ----- ------
<S> <C> <C> <C> <C>
Smith Barney/Travelers Series Fund Inc.:
Alliance Growth Portfolio
Standard . . . . . . . . . . . . 79,318,813 14,963 $1.396 $110,727,241
Enhanced . . . . . . . . . . . . 20,570,563 - 1.390 28,588,210
American Capital Enterprise Portfolio
Standard . . . . . . . . . . . . 26,472,613 - 1.362 36,052,454
Enhanced . . . . . . . . . . . . 6,569,199 - 1.356 8,908,332
TBC Managed Income Portfolio
Standard . . . . . . . . . . . . 11,294,401 - 1.142 12,894,999
Enhanced . . . . . . . . . . . . 1,782,544 - 1.137 2,026,597
G.T. Global Strategic Income Portfolio
Standard . . . . . . . . . . . . 6,831,898 7,822 1.121 7,664,484
Enhanced . . . . . . . . . . . . 2,179,982 - 1.116 2,432,451
Smith Barney High Income Portfolio
Standard . . . . . . . . . . . . 20,136,396 - 1.162 23,404,348
Enhanced . . . . . . . . . . . . 3,757,709 14,084 1.157 4,365,201
Smith Barney International Equity Portfolio
Standard . . . . . . . . . . . . 47,288,696 27,818 1.050 49,692,250
Enhanced . . . . . . . . . . . . 12,187,363 - 1.046 12,744,554
Smith Barney Income and Growth Portfolio
Standard . . . . . . . . . . . . 31,342,864 - 1.291 40,456,893
Enhanced . . . . . . . . . . . . 7,140,022 - 1.285 9,176,851
Smith Barney Money Market Portfolio
Standard . . . . . . . . . . . . 36,636,844 - 1.058 38,766,381
Enhanced . . . . . . . . . . . . 9,052,010 10,832 1.054 9,548,673
Putnam Diversified Income Portfolio
Standard . . . . . . . . . . . . 26,058,405 19,255 1.170 30,511,423
Enhanced . . . . . . . . . . . . 8,637,241 12,948 1.165 10,077,754
Smith Barney Pacific Basin Portfolio
Standard . . . . . . . . . . . . 6,012,322 11,814 0.910 5,482,716
Enhanced . . . . . . . . . . . . 2,351,049 - 0.906 2,130,650
MFS Total Return Portfolio
Standard . . . . . . . . . . . . 41,793,597 19,648 1.216 50,838,295
Enhanced . . . . . . . . . . . . 9,472,991 - 1.211 11,468,649
AIM Capital Appreciation Portfolio
Standard . . . . . . . . . . . . 20,366,025 - 0.958 19,506,963
Enhanced . . . . . . . . . . . . 5,394,325 - 0.957 5,163,603
Smith Barney Series Fund:
Total Return Portfolio
Standard . . . . . . . . . . . . 32,563,665 - 1.251 40,720,342
Enhanced . . . . . . . . . . . . 4,873,580 - 1.247 6,075,615
------------
Net Contract Owners' Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $579,425,929
============
</TABLE>
-5-
<PAGE> 50
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. SCHEDULE OF FUND BD OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995 AND THE PERIOD JUNE 20, 1994
(DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1994
<TABLE>
<CAPTION>
ALLIANCE GROWTH AMERICAN CAPITAL TBC MANAGED
PORTFOLIO ENTERPRISE PORTFOLIO INCOME PORTFOLIO
-------------------------- ------------------------ ------------------------
1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . . . $ 4,161,477 $ 282,361 $ 1,467,553 $ 21,050 $ 735,632 $ 49,991
------------ ----------- ----------- ---------- ----------- ----------
EXPENSES:
Insurance charges . . . . . . . . . . . . 756,535 67,623 196,954 14,518 86,861 10,802
Administrative fees . . . . . . . . . . . 104,779 9,140 27,184 1,949 12,219 1,489
------------ ----------- ----------- ---------- ----------- ----------
Net investment income (loss) . . . . . 3,300,163 205,598 1,243,415 4,583 636,552 37,700
------------ ----------- ----------- ---------- ----------- ----------
REALIZED GAIN (LOSS) AND CHANGE IN
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment
transactions:
Proceeds from investments sold . . . 420,100 5,096 137,452 35,014 175,140 20,259
Cost of investments sold . . . . . . 325,568 5,111 108,756 33,739 170,011 20,167
------------ ----------- ----------- ---------- ----------- ----------
Net realized gain (loss) . . . . . 94,532 (15) 28,696 1,275 5,129 92
------------ ----------- ----------- ---------- ----------- ----------
Change in unrealized gain (loss) on
investments:
Unrealized gain (loss) beginning of
period . . . . . . . . . . . . . . 141,949 - 32,282 - (51,965) -
Unrealized gain (loss) end of period 13,022,560 141,949 2,189,023 32,282 392,297 (51,965)
------------ ----------- ----------- ---------- ----------- ----------
Net change in unrealized gain (loss)
for the period . . . . . . . . . . . . 12,880,611 141,949 2,156,741 32,282 444,262 (51,965)
------------ ----------- ----------- ---------- ----------- ----------
Net increase (decrease) in net assets
resulting from operations . . . . . 16,275,306 347,532 3,428,852 38,140 1,085,943 (14,173)
------------ ----------- ----------- ---------- ----------- ----------
UNIT TRANSACTIONS:
Participant purchase payments . . . . . . 86,330,764 23,776,112 32,824,166 4,637,048 9,503,149 3,694,743
Participant transfers from other
Travelers accounts . . . . . . . . . . 18,954,600 1,597,148 6,023,872 232,338 1,402,447 182,215
Administrative charges . . . . . . . . . (15,912) (198) (3,138) (34) (1,145) (12)
Contract surrenders . . . . . . . . . . . (1,885,730) (67,588) (349,775) (24,746) (258,982) (6,923)
Participant transfers to other
Travelers accounts . . . . . . . . . . (5,093,545) (595,026) (1,671,606) (88,314) (581,784) (33,091)
Other payments to participants . . . . . (224,238) (83,773) (23,650) (62,367) (42,780) (8,011)
------------ ----------- ----------- ---------- ----------- ----------
Net increase in net assets resulting
from unit transactions . . . . . . . . 98,065,939 24,626,675 36,799,869 4,693,925 10,020,905 3,828,921
------------ ----------- ----------- ---------- ----------- ----------
Net increase in net assets . . . . . 114,341,245 24,974,207 40,228,721 4,732,065 11,106,848 3,814,748
NET ASSETS:
Beginning of period . . . . . . . . . . 24,974,207 - 4,732,065 - 3,814,748 -
------------ ----------- ----------- ---------- ----------- ----------
End of period . . . . . . . . . . . . . $139,315,452 $24,974,207 $44,960,786 $4,732,065 $14,921,596 $3,814,748
============ =========== =========== ========== =========== ==========
</TABLE>
-6-
<PAGE> 51
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
SMITH BARNEY SMITH BARNEY
G.T. GLOBAL STRATEGIC SMITH BARNEY INTERNATIONAL EQUITY INCOME AND GROWTH
INCOME PORTFOLIO HIGH INCOME PORTFOLIO PORTFOLIO PORTFOLIO
-------------------------- -------------------------- -------------------------- --------------------------
1995 1994 1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
$ 374,859 $ 31,413 $ 1,166,940 $ 86,229 $ 71,145 $ - $ 823,312 $ 51,640
----------- ---------- ----------- ---------- ----------- ----------- ----------- ----------
66,231 9,319 128,351 10,840 388,285 51,391 249,794 25,244
9,065 1,269 18,031 1,461 53,700 6,926 34,696 3,390
----------- ---------- ----------- ---------- ----------- ----------- ----------- ----------
299,563 20,825 1,020,558 73,928 (370,840) (58,317) 538,822 23,006
----------- ---------- ----------- ---------- ----------- ----------- ----------- ----------
338,190 27,857 596,151 59,482 266,046 3,916 161,301 144,879
330,843 28,070 584,832 59,585 284,870 4,123 139,017 146,756
----------- ---------- ----------- ---------- ----------- ----------- ----------- ----------
7,347 (213) 11,319 (103) (18,824) (207) 22,284 (1,877)
----------- ---------- ----------- ---------- ----------- ----------- ----------- ----------
(179,821) - (113,195) - (1,182,006) - (196,959) -
607,235 (179,821) 684,556 (113,195) 2,744,085 (1,182,006) 5,357,875 (196,959)
----------- ---------- ----------- ---------- ----------- ----------- ----------- ----------
787,056 (179,821) 797,751 (113,195) 3,926,091 (1,182,006) 5,554,834 (196,959)
----------- ---------- ----------- ---------- ----------- ----------- ----------- ----------
1,093,966 (159,209) 1,829,628 (39,370) 3,536,427 (1,240,530) 6,115,940 (175,830)
----------- ---------- ----------- ---------- ----------- ----------- ----------- ----------
5,402,931 3,465,431 20,687,029 4,196,111 33,434,139 19,715,616 30,974,631 9,570,839
952,268 89,455 3,098,805 149,421 9,317,337 1,189,569 4,408,848 355,350
(1,400) (29) (1,805) (68) (10,690) (169) (4,438) (70)
(114,398) (30,970) (428,763) (5,626) (703,459) (59,760) (401,636) (47,477)
(459,906) (89,376) (1,450,391) (86,624) (2,189,208) (405,848) (898,610) (150,971)
(46,771) (5,057) (177,874) (924) (75,039) (71,582) (46,045) (66,787)
----------- ---------- ----------- ---------- ----------- ----------- ----------- ----------
5,732,724 3,429,454 21,727,001 4,252,290 39,773,080 20,367,826 34,032,750 9,660,884
----------- ---------- ----------- ---------- ----------- ----------- ----------- ----------
6,826,690 3,270,245 23,556,629 4,212,920 43,309,507 19,127,296 40,148,690 9,485,054
3,270,245 - 4,212,920 - 19,127,296 - 9,485,054 -
----------- ---------- ----------- ---------- ----------- ----------- ----------- ----------
$10,096,935 $3,270,245 $27,769,549 $4,212,920 $62,436,803 $19,127,296 $49,633,744 $9,485,054
=========== ========== =========== ========== =========== =========== =========== ==========
</TABLE>
-7-
<PAGE> 52
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. SCHEDULE OF FUND BD OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995 AND THE PERIOD JUNE 20, 1994
(DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1994 (CONTINUED)
<TABLE>
<CAPTION>
SMITH BARNEY PUTNAM SMITH BARNEY
MONEY MARKET PORTFOLIO DIVERSIFIED INCOME PORTFOLIO PACIFIC BASIN PORTFOLIO
-------------------------- ---------------------------- -------------------------
1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . . . $ 1,162,345 $ 94,196 $ 1,761,448 $ 78,181 $ 22,050 $ -
----------- ----------- ----------- ----------- ----------- ----------
EXPENSES:
Insurance charges . . . . . . . . . . . . 243,101 23,636 229,754 26,796 48,102 7,615
Administrative fees . . . . . . . . . . . 33,566 3,180 31,336 3,552 6,534 1,035
----------- ----------- ----------- ----------- ----------- ----------
Net investment income (loss) . . . . . 885,678 67,380 1,500,358 47,833 (32,586) (8,650)
----------- ----------- ----------- ----------- ----------- ----------
REALIZED GAIN (LOSS) AND CHANGE IN
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment
transactions:
Proceeds from investments sold . . . . 11,782,693 1,183,375 262,948 110,000 73,530 51,475
Cost of investments sold . . . . . . . 11,782,693 1,183,375 254,352 108,632 83,120 55,325
----------- ----------- ----------- ----------- ----------- ----------
Net realized gain (loss) . . . . . . . - - 8,596 1,368 (9,590) (3,850)
----------- ----------- ----------- ----------- ----------- ----------
CHANGE IN UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Unrealized gain (loss) beginning
of period . . . . . . . . . . . . . . - - (62,230) - (219,183) -
Unrealized gain (loss) end
of period . . . . . . . . . . . . . - - 1,447,661 (62,230) (94,030) (219,183)
----------- ----------- ----------- ----------- ----------- ----------
Net change in unrealized gain (loss)
for the period . . . . . . . . . . . - - 1,509,891 (62,230) 125,153 (219,183)
----------- ----------- ----------- ----------- ----------- ----------
Net increase (decrease) in net assets
resulting from operations . . . . . 885,678 67,380 3,018,845 (13,029) 82,977 (231,683)
----------- ----------- ----------- ----------- ----------- ----------
UNIT TRANSACTIONS:
Participant purchase payments . . . . . . 60,911,919 14,531,209 24,989,920 9,015,388 4,212,825 2,824,957
Participant transfers from other
Travelers accounts . . . . . . . . . . 8,062,764 705,274 4,735,354 650,976 992,308 113,041
Administrative charges . . . . . . . . . (2,266) (34) (4,087) (87) (933) (19)
Contract surrenders . . . . . . . . . . . (1,963,486) (387,190) (545,688) (31,316) (79,023) (24,246)
Participant transfers to other Travelers
accounts . . . . . . . . . . . . . . . (30,581,456) (3,580,900) (1,069,291) (51,683) (118,912) (111,286)
Other payments to participants . . . . . (82,649) (251,189) (97,206) (8,919) (11,072) (35,568)
----------- ----------- ----------- ----------- ----------- ----------
Net increase in net assets resulting from
unit transactions . . . . . . . . . . 36,344,826 11,017,170 28,009,002 9,574,359 4,995,193 2,766,879
----------- ----------- ----------- ----------- ----------- ----------
Net increase in net assets . . . . . . 37,230,504 11,084,550 31,027,847 9,561,330 5,078,170 2,535,196
NET ASSETS:
Beginning of period . . . . . . . . . . 11,084,550 - 9,561,330 - 2,535,196 -
----------- ----------- ----------- ----------- ----------- ----------
End of period . . . . . . . . . . . . . $48,315,054 $11,084,550 $40,589,177 $ 9,561,330 $ 7,613,366 $2,535,196
=========== =========== =========== =========== =========== ==========
</TABLE>
-8-
<PAGE> 53
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
MFS AIM CAPITAL TOTAL RETURN
TOTAL RETURN PORTFOLIO APPRECIATION PORTFOLIO PORTFOLIO COMBINED
-------------------------- -------------------------- -------------------------- -----------------------------
1995 1994 1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1,727,749 $ 61,075 $ 24,151 $ - $ 737,581 $ - $ 14,236,242 $ 756,136
----------- ----------- ----------- ----------- ----------- ---------- ------------ ------------
328,157 35,131 30,738 - 189,833 748 2,942,696 283,663
45,649 4,808 4,267 - 26,982 103 408,008 38,302
----------- ----------- ----------- ----------- ----------- ---------- ------------ ------------
1,353,943 21,136 (10,854) - 520,766 (851) 10,885,538 434,171
----------- ----------- ----------- ----------- ----------- ---------- ------------ ------------
469,662 76,984 3,087 - 40,353 105 14,726,653 1,718,442
419,739 76,589 3,199 - 35,551 106 14,522,551 1,721,578
----------- ----------- ----------- ----------- ----------- ---------- ------------ ------------
49,923 395 (112) - 4,802 (1) 204,102 (3,136)
----------- ----------- ----------- ----------- ----------- ---------- ------------ ------------
(205,882) - - - 13,873 - (2,023,137) -
5,006,835 (205,882) (570,345) - 2,298,273 13,873 33,086,025 (2,023,137)
----------- ----------- ----------- ----------- ----------- ---------- ------------ ------------
5,212,717 (205,882) (570,345) - 2,284,400 13,873 35,109,162 (2,023,137)
----------- ----------- ----------- ----------- ----------- ---------- ------------ ------------
6,616,583 (184,351) (581,311) - 2,809,968 13,021 46,198,802 (1,592,102)
----------- ----------- ----------- ----------- ----------- ---------- ------------ ------------
37,218,089 11,987,268 19,736,982 - 36,635,381 1,151,802 402,861,925 108,566,524
9,146,918 971,906 6,338,146 - 7,136,066 235,105 80,569,733 6,471,798
(6,585) (110) - - (2,677) - (55,076) (830)
(762,981) (80,839) (26,938) - (254,032) - (7,774,891) (766,681)
(2,036,463) (327,089) (796,313) - (760,046) - (47,707,531) (5,520,208)
(173,925) (61,477) - - (168,631) - (1,169,880) (655,654)
----------- ----------- ----------- ----------- ----------- ---------- ------------ ------------
43,385,053 12,489,659 25,251,877 - 42,586,061 1,386,907 426,724,280 108,094,949
----------- ----------- ----------- ----------- ----------- ---------- ------------ ------------
50,001,636 12,305,308 24,670,566 - 45,396,029 1,399,928 472,923,082 106,502,847
12,305,308 - - - 1,399,928 - 106,502,847 -
----------- ----------- ----------- ----------- ----------- ---------- ------------ ------------
$62,306,944 $12,305,308 $24,670,566 $ - $46,795,957 $1,399,928 $579,425,929 $106,502,847
=========== =========== =========== =========== =========== ========== ============ ============
</TABLE>
-9-
<PAGE> 54
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF ACCUMULATION AND ANNUITY UNITS FOR FUND BD
FOR THE YEAR ENDED DECEMBER 31, 1995 AND THE PERIOD JUNE 20, 1994
(DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1994
<TABLE>
<CAPTION>
AMERICAN CAPITAL TBC MANAGED
ALLIANCE GROWTH PORTFOLIO ENTERPRISE PORTFOLIO INCOME PORTFOLIO
-------------------------- -------------------------- --------------------------
1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation and annuity units
beginning of period . . . . . . . . 23,860,599 - 4,558,743 - 3,829,067 -
Accumulation units purchased and
transferred to other Travelers
accounts . . . . . . . . . . . . . 81,629,940 24,584,144 30,054,909 4,729,348 10,065,751 3,877,253
Accumulation units redeemed and
transferred to other Travelers
accounts . . . . . . . . . . . . . (5,583,996) (723,545) (1,571,840) (170,605) (817,873) (48,186)
Annuity units . . . . . . . . . . . (2,204) - - - - -
---------- ---------- ---------- ---------- ---------- ----------
Accumulation and annuity units
end of period . . . . . . . . . . . 99,904,339 23,860,599 33,041,812 4,558,743 13,076,945 3,829,067
========== ========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
G.T. GLOBAL STRATEGIC SMITH BARNEY SMITH BARNEY INTERNATIONAL
INCOME PORTFOLIO HIGH INCOME PORTFOLIO EQUITY PORTFOLIO
-------------------------- -------------------------- -------------------------
1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation and annuity units
beginning of period . . . . . . . . 3,462,455 - 4,267,721 - 20,039,144 -
Accumulation units purchased and
transferred from other Travelers
accounts . . . . . . . . . . . . . 6,161,791 3,588,907 21,533,742 4,360,944 42,509,931 20,573,922
Accumulation units redeemed and
transferred to other Travelers
accounts . . . . . . . . . . . . . (603,392) (126,452) (1,892,168) (92,280) (3,041,102) (534,778)
Annuity units . . . . . . . . . . . (1,152) - (1,106) (943) (4,096) -
---------- ---------- ---------- ---------- ---------- ----------
Accumulation and annuity units
end of period . . . . . . . . . . . 9,019,702 3,462,455 23,908,189 4,267,721 59,503,877 20,039,144
========== ========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
SMITH BARNEY INCOME SMITH BARNEY PUTNAM DIVERSIFIED
AND GROWTH PORTFOLIO MONEY MARKET PORTFOLIO INCOME PORTFOLIO
-------------------------- -------------------------- -------------------------
1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation and annuity units
beginning of period . . . . . . . . 9,668,753 - 10,919,262 - 9,486,475 -
Accumulation units purchased and
transferred from other Travelers
accounts . . . . . . . . . . . . . 29,977,228 9,936,934 66,074,922 15,099,263 26,813,384 9,577,518
Accumulation units redeemed and
transferred to other Travelers
accounts . . . . . . . . . . . . . (1,163,095) (268,181) (31,293,647) (4,179,275) (1,568,158) (90,159)
Annuity units . . . . . . . . . . . - - (851) (726) (3,852) (884)
---------- ---------- ---------- ---------- ---------- ----------
Accumulation and annuity units
end of period . . . . . . . . . . . 38,482,886 9,668,753 45,699,686 10,919,262 34,727,849 9,486,475
========== ========== ========== ========== ========== ==========
</TABLE>
-10-
<PAGE> 55
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF ACCUMULATION AND ANNUITY UNITS FOR FUND BD
FOR THE YEAR ENDED DECEMBER 31, 1995 AND THE PERIOD JUNE 20, 1994
(DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1994 (CONTINUED)
<TABLE>
<CAPTION>
SMITH BARNEY MFS AIM CAPITAL
PACIFIC BASIN PORTOLIO TOTAL RETURN PORTFOLIO APPRECIATION PORTFOLIO
------------------------- -------------------------- -------------------------
1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation and annuity units
beginning of period 2,820,564 - 12,577,846 - - -
Accumulation units purchased and
transferred from other Travelers
accounts 5,792,679 2,997,045 41,380,324 13,052,322 26,610,743 -
Accumulation units redeemed and
transferred to other Travelers
accounts (236,319) (176,481) (2,669,053) (474,476) (850,393) -
Annuity units (1,739) - (2,881) - - -
--------- --------- ---------- ---------- ---------- ----------
Accumulation and annuity units
end of period 8,375,185 2,820,564 51,286,236 12,577,846 25,760,350 -
========= ========= ========== ========== ========== ----------
TOTAL RETURN
PORTFOLIO
-------------------------
1995 1994
---- ----
Accumulation and annuity units
beginning of period 1,385,876 -
Accumulation units purchased and
transferred from other Travelers
accounts 37,045,728 1,385,876
Accumulation units redeemed and
transferred to other Travelers
accounts (994,359) -
Annuity units - -
---------- ---------
Accumulation and annuity units
end of period 37,437,245 1,385,876
========== =========
</TABLE>
-11-
<PAGE> 56
REPORT OF INDEPENDENT ACCOUNTANTS
To the Owners of Variable Annuity Contracts of
The Travelers Fund BD for Variable Annuities:
We have audited the accompanying statement of assets and liabilities of The
Travelers Fund BD for Variable Annuities as of December 31, 1995, and the
related statement of operations for the year then ended, and the statement of
changes in net assets for each of the applicable periods ended December 31,
1995 and 1994. These financial statements are the responsibility of
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of shares owned as of December 31, 1995, by
correspondence with the underlying funds. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Travelers Fund BD for
Variable Annuities as of December 31, 1995, the results of its operations for
the year then ended, and the changes in its net assets for each of the
applicable periods ended December 31, 1995 and 1994, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 7, 1996
-12-
<PAGE> 57
Independent Auditors' Report
The Board of Directors and Shareholder of
The Travelers Insurance Company and Subsidiaries:
We have audited the accompanying consolidated balance sheet of The Travelers
Insurance Company and Subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of operations and retained earnings and cash
flows for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of The Travelers
Insurance Company and Subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles.
As discussed in note 3 to the consolidated financial statements, the Company
adopted the provisions of Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," in 1994.
/s/KPMG Peat Marwick LLP
------------------------
Hartford, Connecticut
January 16, 1996
14
<PAGE> 58
Report of Independent Accountants
To the Board of Directors and Shareholder of
The Travelers Insurance Company and Subsidiaries:
We have audited the consolidated statements of operations and retained earnings
and cash flows of The Travelers Insurance Company and Subsidiaries for the year
ended December 31, 1993. These consolidated financial statements are the
responsibility of Company management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall consolidated
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated results of operations and
cash flows of The Travelers Insurance Company and Subsidiaries for the year
ended December 31, 1993 in conformity with generally accepted accounting
principles.
/s/ COOPERS & LYBRAND L.L.P.
- ----------------------------
Hartford, Connecticut
January 24, 1994
15
<PAGE> 59
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
(for the year ended December 31, in millions) 1995 1994 | 1993
- ---------------------------------------------------------------------------------------------|-------
<S> <C> <C> | <C>
REVENUES |
Premiums $1,496 $1,492 | $ 330
Net investment income 1,824 1,702 | 1,730
Realized investment gains (losses) 106 13 | (39)
Other 221 199 | 153
- ---------------------------------------------------------------------------------------------|-------
3,647 3,406 | 2,174
- ---------------------------------------------------------------------------------------------|-------
|
BENEFITS AND EXPENSES |
Current and future insurance benefits 1,185 1,216 | 792
Interest credited to contractholders 967 961 | 1,200
Amortization of deferred acquisition costs and |
value of insurance in force 290 281 | 56
Other operating expenses 368 351 | 211
- ---------------------------------------------------------------------------------------------|-------
2,810 2,809 | 2,259
- ---------------------------------------------------------------------------------------------|-------
|
Income (loss) from continuing operations before |
federal income taxes 837 597 | (85)
- ---------------------------------------------------------------------------------------------|-------
|
Federal income taxes: |
Current 233 (96) | (58)
Deferred 57 307 | (48)
- ---------------------------------------------------------------------------------------------|-------
290 211 | (106)
- ---------------------------------------------------------------------------------------------|-------
|
Income from continuing operations 547 386 | 21
|
Discontinued operations, net of income taxes |
Income from operations (net of taxes of $18, $83 and $48) 72 150 | 120
Gain on disposition (net of taxes of $68, $18 and $0) 131 9 | -
- ---------------------------------------------------------------------------------------------|-------
Income from discontinued operations 203 159 | 120
- ---------------------------------------------------------------------------------------------|-------
|
Net income 750 545 | 141
Retained earnings beginning of year 1,562 1,017 | 888
Dividend to parent - - | (14)
Preference stock tax benefit allocated by parent - - | 2
- ---------------------------------------------------------------------------------------------|-------
Retained earnings end of year $2,312 $1,562 | $1,017
- -----------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
16
<PAGE> 60
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
(at December 31, in millions) 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Fixed maturities, available for sale at market (cost, $18,187; $18,579) $18,842 $17,260
Equity securities, at market (cost, $182; $173) 224 169
Mortgage loans 3,626 4,938
Real estate held for sale, net of accumulated depreciation of $9; $9 293 383
Policy loans 1,888 1,581
Short-term securities 1,554 2,279
Other investments 874 885
- -------------------------------------------------------------------------------------------------------------
Total investments 27,301 27,495
- -------------------------------------------------------------------------------------------------------------
Cash 73 102
Investment income accrued 338 362
Premium balances receivable 107 215
Reinsurance recoverables 4,107 2,915
Deferred acquisition costs and value of insurance in force 1,962 1,939
Deferred federal income taxes - 950
Separate and variable accounts 6,949 5,160
Other assets 1,464 1,397
- -------------------------------------------------------------------------------------------------------------
Total assets $42,301 $40,535
- -------------------------------------------------------------------------------------------------------------
LIABILITIES
Contractholder funds $14,525 $16,354
Future policy benefits 11,783 11,480
Policy and contract claims 571 1,222
Separate and variable accounts 6,916 5,128
Short-term debt 73 74
Deferred federal income taxes 32 -
Other liabilities 2,173 1,923
- -------------------------------------------------------------------------------------------------------------
Total liabilities 36,073 36,181
- -------------------------------------------------------------------------------------------------------------
SHAREHOLDER'S EQUITY
Common stock, par value $2.50; 40 million
shares authorized, issued and outstanding 100 100
Additional paid-in capital 3,134 3,452
Retained earnings 2,312 1,562
Unrealized investment gains (losses), net of taxes 682 (760)
- -------------------------------------------------------------------------------------------------------------
Total shareholder's equity 6,228 4,354
- -------------------------------------------------------------------------------------------------------------
Total liabilities and shareholder's equity $42,301 $40,535
- -------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
17
<PAGE> 61
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
(for the year ended December 31, in millions) 1995 1994 | 1993
- -------------------------------------------------------------------------------------------------|----------
<S> <C> <C> | <C>
CASH FLOWS FROM OPERATING ACTIVITIES |
Premiums collected $ 1,346 $ 1,394 | $ 551
Net investment income received 1,855 1,719 | 1,638
Other revenues received 90 (2) | 2
Benefits and claims paid (846) (1,115) | (960)
Interest credited to contractholders (960) (868) | (1,097)
Operating expenses paid (615) (536) | (231)
Income taxes (paid) refunded (63) (27) | 25
Trading account investments, (purchases) sales, net - - | (1,585)
Other (137) (81) | 308
- -------------------------------------------------------------------------------------------------|----------
Net cash provided by (used in) operating activities 670 484 | (1,349)
Net cash provided by (used in) discontinued operations (596) 233 | (23)
- -------------------------------------------------------------------------------------------------|-----------
Net cash provided by (used in) operations 74 717 | (1,372)
- -------------------------------------------------------------------------------------------------|-----------
CASH FLOWS FROM INVESTING ACTIVITIES |
Investment repayments |
Fixed maturities 1,974 2,528 | 2,369
Mortgage loans 680 1,266 | 1,103
Proceeds from investments sold |
Fixed maturities 6,773 1,316 | 99
Equity securities 379 357 | 75
Mortgage loans 704 546 | 290
Real estate held for sale 253 728 | 949
Investments in |
Fixed maturities (10,748) (4,594) | (2,968)
Equity securities (305) (340) | (51)
Mortgage loans (144) (102) | (246)
Policy loans, net (325) (193) | (2)
Short-term securities, (purchases) sales, net 291 (367) | 850
Other investments, (purchases) sales, net (267) (299) | 41
Securities transactions in course of settlement 258 24 | (7)
Net cash provided by (used in) investing activities of |
discontinued operations 1,425 (261) | 113
- -------------------------------------------------------------------------------------------------|----------
Net cash provided by investing activities 948 609 | 2,615
- -------------------------------------------------------------------------------------------------|----------
CASH FLOWS FROM FINANCING ACTIVITIES |
Issuance (redemption) of short-term debt, net (1) 73 | -
Contractholder fund deposits 2,705 1,951 | 2,884
Contractholder fund withdrawals (3,755) (3,357) | (4,264)
Dividends to parent company - - | (14)
Return of capital to parent company - (23) | -
Net cash provided by financing activities |
of discontinued operations - 84 | 121
Other - (2) | 6
- -------------------------------------------------------------------------------------------------|----------
Net cash used in financing activities (1,051) (1,274) | (1,267)
- -------------------------------------------------------------------------------------------------|----------
Net increase (decrease) in cash $ (29) $ 52 | $ (24)
- ------------------------------------------------------------------------------------------------------------
Cash at December 31 $ 73 $ 102 $ 50
- -----------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
18
<PAGE> 62
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS
The Travelers Insurance Company is a wholly owned subsidiary of The
Travelers Insurance Group Inc. (TIGI), which is an indirect, wholly owned
subsidiary of Travelers Group Inc. (Travelers).
The Travelers Insurance Company and its subsidiaries (the Company)
principally operates through one major business segment: Life and
Annuity, which offers individual life, long-term care, annuities and
investment products to individuals and small businesses, and investment
products to employer-sponsored retirement and savings plans. The
Company's Corporate and Other Operations segment manages the investment
portfolio of the Company.
Individual products are primarily marketed through independent agents and
through two of the Company's affiliates, The Copeland Companies and the
financial consultants of Smith Barney, Inc. (Smith Barney). Group pension
products and annuities are marketed by the Company's salaried staff
directly to plan sponsors and are also placed through independent
consultants and investment advisers.
The Company sold group life and health insurance through its Managed Care
and Employee Benefits Operations (MCEBO) through 1994. See note 4.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies used in the preparation of the
accompanying financial statements follow.
Basis of presentation
The consolidated financial statements include the accounts of the
Company and its insurance and noninsurance subsidiaries. Significant
intercompany transactions have been eliminated.
In December 1992, Primerica Corporation (Primerica) acquired
approximately 27% of the common stock of the Company's then parent, The
Travelers Corporation (the 27% Acquisition). The 27% Acquisition was
accounted for as a purchase. Effective December 31, 1993, Primerica
acquired the approximately 73% of The Travelers Corporation common stock
which it did not already own, and The Travelers Corporation was merged
into Primerica, which was renamed Travelers Group Inc. This was effected
through the exchange of .80423 shares of Travelers common stock for each
share of The Travelers Corporation common stock (the Merger). All
subsidiaries of The Travelers Corporation were contributed to TIGI. In
conjunction with the Merger, Travelers contributed Travelers Insurance
Holdings Inc. (formerly Primerica Insurance Holdings, Inc.) and its
subsidiaries (TIHI) to TIGI, which in turn contributed TIHI to the
Company.
TIHI is an intermediate holding company whose primary subsidiaries are
Primerica Life Insurance Company and its subsidiary National Benefit
Life Insurance Company, which primarily offers individual life
insurance. Through September 1995 it also sold specialty accident and
health insurance through its subsidiary Transport Life Insurance Company
(see note 4).
19
<PAGE> 63
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
The consolidated financial statements and the accompanying notes reflect
the historical operations of the Company for the year ended December 31,
1993. The results of operations of TIHI and its subsidiaries are not
included in the 1993 financial statements.
The 27% Acquisition and the Merger were accounted for as a "step
acquisition", and the purchase accounting adjustments were "pushed down"
as of December 31, 1993 to the subsidiaries of TIGI, including the
Company, and reflect adjustments of assets and liabilities of the Company
(except TIHI) to their fair values determined at each acquisition date
(i.e., 27% of values at December 31, 1992 as carried forward and 73% of
the values at December 31, 1993). These assets and liabilities were
recorded at December 31, 1993 based upon management's then best estimate
of their fair values at the respective dates. Evaluation and appraisal of
assets and liabilities, including investments, the value of insurance in
force, other insurance assets and liabilities and related deferred
federal income taxes was completed during 1994. The excess of the 27%
share of assigned value of identifiable net assets over cost at December
31, 1992, which was allocated to the Company through "pushdown"
accounting, was approximately $56 million and is being amortized over ten
years on a straight-line basis. The excess of the purchase price of the
common stock over the fair value of the 73% of net assets acquired at
December 31, 1993, which was allocated to the Company through "pushdown"
accounting, was approximately $340 million and is being amortized over 40
years on a straight-line basis.
The consolidated statements of operations and retained earnings and of
cash flows and the related accompanying notes for the years ended
December 31, 1995 and 1994, which are presented on a purchase accounting
basis, are separated from the corresponding 1993 information, which is
presented on a historical accounting basis, to indicate the difference in
valuation bases.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and benefits
and expenses during the reporting period. Actual results could differ
from those estimates.
As more fully described in note 4, all of the operations comprising MCEBO
are presented as a discontinued operation and, accordingly, prior year
amounts have been restated.
Certain prior year amounts have been reclassified to conform with the
1995 presentation.
Investments
Fixed maturities include bonds, notes and redeemable preferred stocks.
Fixed maturities are valued based upon quoted market prices, or if quoted
market prices are not available, discounted expected cash flows using
market rates commensurate with the credit quality and maturity of the
investment. Fixed maturities are classified as "available for sale" and
are reported at fair value, with unrealized investment gains and losses,
net of income taxes, charged or credited directly to shareholder's
equity.
20
<PAGE> 64
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Equity securities, which include common and nonredeemable preferred
stocks, are available for sale and carried at fair value based primarily
on quoted market prices. Changes in fair values of equity securities are
charged or credited directly to shareholder's equity, net of income
taxes.
Mortgage loans are carried at amortized cost. For mortgage loans that are
determined to be impaired, a reserve is established for the difference
between the amortized cost and fair market value of the underlying
collateral. Impaired loans were insignificant at December 31, 1995.
Real estate held for sale is carried at the lower of cost or fair value
less estimated costs to sell. Fair value was established at time of
foreclosure by appraisers, either internal or external, using discounted
cash flow analyses and other acceptable techniques. Thereafter, an
allowance for losses on real estate held for sale is established if the
carrying value of the property exceeds its current fair value less
estimated costs to sell. There was no such allowance at December 31,
1995.
Accrual of income is suspended on fixed maturities or mortgage loans that
are in default, or on which it is likely that future payments will not be
made as scheduled. Interest income on investments in default is
recognized only as payment is received.
Gains or losses arising from futures contracts used to hedge investments
are treated as basis adjustments and are recognized in income over the
life of the hedged investments.
Gains and losses arising from forward contracts used to hedge foreign
investments in the Company's U.S. portfolios are a component of realized
investment gains and losses. Gains and losses arising from forward
contracts used to hedge investments in Canadian operations are reflected
directly in shareholder's equity, net of income taxes.
Interest rate swaps are used to manage interest rate risk in the
investment portfolio and are marked to market with unrealized gains and
losses recorded as a component of shareholder's equity, net of income
taxes. Rate differentials on interest rate swap agreements are accrued
between settlement dates and are recognized as an adjustment to interest
income from the related investment.
Investment Gains and Losses
Realized investment gains and losses are included as a component of
pretax revenues based upon specific identification of the investments
sold on the trade date and, prior to the Merger, included adjustments to
investment valuation reserves. These adjustments reflected changes
considered to be other than temporary in the net realizable value of
investments. Also included are gains and losses arising from the
remeasurement of the local currency value of foreign investments to U.S.
dollars, the functional currency of the Company. The foreign exchange
effects of Canadian operations are included in unrealized gains and
losses.
21
<PAGE> 65
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Policy Loans
Policy loans are carried at the amount of the unpaid balances that are
not in excess of the net cash surrender values of the related insurance
policies. The carrying value of policy loans, which have no defined
maturities, is considered to be fair value.
Deferred Acquisition Costs and Value of Insurance in Force
Costs of acquiring individual life insurance, annuities and health
business, principally commissions and certain expenses related to policy
issuance, underwriting and marketing, all of which vary with and are
primarily related to the production of new business, are deferred.
Acquisition costs relating to traditional life insurance and guaranteed
renewable health contracts, including long-term care, are amortized over
the period of anticipated premiums; universal life in relation to
estimated gross profits; and annuity contracts employing a level yield
method. For life insurance, a 10- to 25-year amortization period is
used; for guaranteed renewable health, a 10- to 20-year period, and a
10- to 15-year period is employed for annuities. Deferred acquisition
costs are reviewed periodically for recoverability to determine if any
adjustment is required.
The value of insurance in force represents the actuarially determined
present value of anticipated profits to be realized from life insurance,
annuities and health contracts at the date of the Merger using the same
assumptions that were used for computing related liabilities where
appropriate. The value of insurance in force was the actuarially
determined present value of the projected future profits discounted at
interest rates ranging from 14% to 18% for the business acquired. The
value of the business in force is amortized over the contract period
using current interest crediting rates to accrete interest and using
amortization methods based on the specified products. Traditional life
insurance and guaranteed renewable health policies are amortized over
the period of anticipated premiums; universal life is amortized in
relation to estimated gross profits; and annuity contracts are amortized
employing a level yield method. The value of insurance in force is
reviewed periodically for recoverability to determine if any adjustment
is required.
Separate and Variable Accounts
Separate and variable accounts primarily represent funds for which
investment income and investment gains and losses accrue directly to,
and investment risk is borne by, the contractholders. Each account has
specific investment objectives. The assets of each account are legally
segregated and are not subject to claims that arise out of any other
business of the Company. The assets of these accounts are carried at
market value. Certain other separate accounts provide guaranteed levels
of return or benefits and the assets of these accounts are carried at
amortized cost. Amounts assessed to the contractholders for management
services are included in revenues. Deposits, net investment income and
realized investment gains and losses for these accounts are excluded
from revenues, and related liability increases are excluded from
benefits and expenses.
22
<PAGE> 66
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Goodwill
The excess of the 27% share of assigned value of identifiable assets
over cost at December 31, 1992 allocated to the Company as a result of
the 27% Acquisition amounted to approximately $56 million and is being
amortized over 10 years on a straight-line basis. Goodwill resulting
from the excess of the purchase price over the fair value of the 73% of
net assets acquired related to the Merger amounted to approximately $340
million at December 31, 1993 and is being amortized over 40 years on a
straight-line basis. TIHI has goodwill of $239 million.
Contractholder Funds
Contractholder funds represent receipts from the issuance of universal
life, pension investment and certain individual annuity contracts. Such
receipts are considered deposits on investment contracts that do not
have substantial mortality or morbidity risk. Account balances are also
increased by interest credited and reduced by withdrawals, mortality
charges and administrative expenses charged to the contractholders.
Calculations of contractholder account balances for investment contracts
reflect lapse, withdrawal and interest rate assumptions based on
contract provisions, the Company's experience and industry standards.
Interest rates credited to contractholder funds range from 3.8% to 8.6%.
Contractholder funds also include other funds that policyholders leave
on deposit with the Company.
Future Policy Benefits
Benefit reserves represent liabilities for future insurance policy
benefits. Benefit reserves for life insurance, annuities, and accident
and health policies have been computed based upon mortality, morbidity,
persistency and interest assumptions applicable to these coverages,
which range from 2.5% to 10.0%, including adverse deviation. These
assumptions consider Company experience and industry standards and may
be revised if it is determined that the future experience will differ
substantially from that previously assumed. The assumptions vary by
plan, age at issue, year of issue and duration. Appropriate recognition
has been given to experience rating and reinsurance.
Operating Lease Obligations
At December 31, 1993, operating lease obligations were recorded at the
value assigned at the acquisition dates and included in the consolidated
balance sheet as a component of other liabilities. This liability is
being amortized over the respective lease periods.
23
<PAGE> 67
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Permitted Statutory Accounting Practices
The Company, domiciled principally in Connecticut and Massachusetts,
prepares statutory financial statements in accordance with the accounting
practices prescribed or permitted by the insurance departments of those
states. Prescribed statutory accounting practices include a variety of
publications of the National Association of Insurance Commissioners as
well as state laws, regulations, and general administrative rules.
Permitted statutory accounting practices encompass all accounting
practices not so prescribed. The impact of any permitted accounting
practices on statutory surplus of the Company is not material.
Premiums
Premiums are recognized as revenues when due. Reserves are established
for the portion of premiums that will be earned in future periods and for
deferred profits on limited-payment policies that are being recognized in
income over the policy term.
Other Revenues
Other revenues include surrender, mortality and administrative charges
and fees as earned on investment, universal life and other insurance
contracts. Other revenues also include gains and losses on dispositions
of assets and operations other than realized investment gains and losses,
revenues of noninsurance subsidiaries, and the pretax operating results
of real estate joint ventures.
Interest Credited to Contractholders
Interest credited to contractholders represents amounts earned by
universal life, pension investment and certain individual annuity
contracts in accordance with contract provisions.
Federal Income Taxes
The provision for federal income taxes is comprised of two components,
current income taxes and deferred income taxes. Deferred federal income
taxes arise from changes during the year in cumulative temporary
differences between the tax basis and book basis of assets and
liabilities. The deferred federal income tax asset is recognized to the
extent that future realization of the tax benefit is more likely than
not, with a valuation allowance for the portion that is not likely to be
recognized.
24
<PAGE> 68
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Accounting Standards not yet Adopted
Statement of Financial Accounting Standards No. 121, "Accounting for
Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to
be held and used and for long-lived assets and certain identifiable
intangibles to be disposed of. This statement requires the write down to
fair value when long-lived assets to be held and used are impaired. It
also requires long-lived assets to be disposed of (e.g., real estate held
for sale) to be carried at the lower of cost or fair value less cost to
sell and does not allow such assets to be depreciated. The adoption of
this statement, effective January 1, 1996, did not have a material effect
on the Company's results of operations, financial condition or liquidity.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (FAS 123). This statement addresses alternative
accounting treatments for stock-based compensation, such as stock options
and restricted stock. FAS 123 permits either expensing the value of
stock-based compensation over the period earned or disclosing in the
financial statement footnotes the pro forma impact to net income as if
the value of stock-based compensation awards had been expensed. The value
of awards would be measured at the grant date based upon estimated fair
value, using option pricing models. The requirements of this statement
will be effective for 1996 financial statements, although earlier
adoption is permissible if an entity elects to expense the cost of
stock-based compensation. The Company, along with affiliated companies,
participates in stock option and incentive plans sponsored by Travelers.
The Company is currently evaluating the disclosures requirements and
expense recognition alternatives addressed by this statement.
3. CHANGES IN ACCOUNTING PRINCIPLES
Accounting by Creditors for Impairment of a Loan
Effective January 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment of
a Loan," and Statement of Financial Accounting Standards No. 118,
"Accounting by Creditors for Impairment of a Loan - Income Recognition
and Disclosures," which describe how impaired loans should be measured
when determining the amount of a loan loss accrual. These statements
amended existing guidance on the measurement of restructured loans in a
troubled debt restructuring involving a modification of terms. Their
adoption did not have a material impact on the Company's financial
condition, results of operations or liquidity.
25
<PAGE> 69
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
3. CHANGES IN ACCOUNTING PRINCIPLES, Continued
Accounting for Certain Debt and Equity Securities
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt
and Equity Securities" (FAS 115), which addresses accounting and
reporting for investments in equity securities that have a readily
determinable fair value and for all debt securities. Investment
securities have been classified as "available for sale" and are reported
at fair value, with unrealized gains and losses, net of income taxes,
charged or credited directly to shareholder's equity. Previously,
securities classified as available for sale were carried at the lower of
aggregate cost or market value. Initial adoption of this standard
resulted in an increase of approximately $232 million (net of taxes) to
net unrealized gains which is included in shareholder's equity.
This increase included an unrealized gain of $133 million (net of income
taxes) on TIHI's investment in the common stock of Travelers. See note
15.
4. ACQUISITIONS AND DISPOSITIONS
In December 1994, the Company and its affiliates sold their group dental
insurance business to Metropolitan Life Insurance Company (MetLife) and
realized a gain on the sale of $9 million (aftertax). On January 3, 1995,
the Company and its affiliates completed the sale of their group life and
related non-medical group insurance businesses to MetLife for $350
million and realized a gain on the sale of $20 million (aftertax). In
connection with the sale, the Company ceded 100% of its risks in the
group life and related businesses to MetLife on an indemnity reinsurance
basis, effective January 1, 1995. In connection with the reinsurance
transaction, the Company transferred assets with a fair market value of
approximately $1.5 billion to MetLife, equal to the statutory reserves
and other liabilities transferred.
On January 3, 1995, the Company and MetLife and certain of their
affiliates formed The MetraHealth Companies, Inc. (MetraHealth) joint
venture by contributing their group medical businesses to MetraHealth, in
exchange for shares of common stock of MetraHealth. No gain was
recognized upon the formation of the joint venture. Upon formation of the
joint venture, the Company owned 42.6% of the outstanding capital stock
of MetraHealth, TIGI owned 7.4% and the other 50% was owned by MetLife
and its affiliates. In March 1995, MetraHealth acquired HealthSpring,
Inc. for common stock of MetraHealth, resulting in a reduction in the
ownership interests of the Company to 41.10%, TIGI to 7.15%, and MetLife
to 48.25%.
In connection with the formation of the joint venture, the transfer of
the fee-based medical business (Administrative Services Only) and other
noninsurance business to MetraHealth was completed on January 3, 1995. As
the medical insurance business of the Company came due for renewal, the
risks were transferred to MetraHealth and the related operating results
for this medical insurance business were reported by the Company in 1995
as part of discontinued operations.
26
<PAGE> 70
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
4. ACQUISITIONS AND DISPOSITIONS, continued
On October 2, 1995, the Company and its affiliates completed the sale of
their ownership in MetraHealth to United HealthCare Corporation. Gross
proceeds to the Company were $708 million in cash, and could increase by
up to $144 million if a contingency payment based on 1995 results is
made. The gain to the Company, not including the contingency payment,
was $111 million (aftertax) and was recognized in the fourth quarter of
1995.
All of the businesses sold to MetLife or contributed to MetraHealth were
included in the Company's MCEBO segment in 1994. In 1995 the Company's
results reflect the medical insurance business not yet transferred, plus
its equity interest in the earnings of MetraHealth through the date of
the sale. These operations have been accounted for as a discontinued
operation. Revenues from discontinued operations for the years ended
December 31, 1995, 1994 and 1993 amounted to $1.2 billion, $3.3 billion
and $3.3 billion, respectively. The assets and liabilities of the
discontinued operations have not been segregated in the consolidated
balance sheet as of December 31, 1995 and 1994. The assets and
liabilities of the discontinued operations consist primarily of
investments and insurance-related assets and liabilities. At December
31, 1995, these assets and liabilities each amounted to $1.8 billion. At
December 31, 1994, these assets and liabilities amounted to $3.4 billion
and $3.2 billion, respectively.
In September 1995, Travelers made a pro rata distribution to its
stockholders of shares of Class A Common Stock of Transport Holdings
Inc., which at the time was a wholly owned subsidiary of Travelers and
was the indirect owner of the business of Transport Life Insurance
Company (Transport). Immediately prior to this distribution, the Company
dividended Transport, an indirect, wholly owned subsidiary of the
Company, to its parent, resulting in a reduction in additional paid-in
capital of $334 million. The results of Transport through September 1995
are included in income from continuing operations.
On December 31, 1993, in conjunction with the Merger, Travelers
contributed TIHI to TIGI, which TIGI then contributed to the Company at
a carrying value of $2.1 billion. Through its subsidiaries, TIHI
primarily offers individual life insurance and, until the dividend of
Transport, specialty accident and health insurance.
5. COMMERCIAL PAPER AND LINES OF CREDIT
The Company issues commercial paper directly to investors and had $73
million outstanding at December 31, 1995. The Company maintains unused
credit availability under bank lines of credit at least equal to the
amount of the outstanding commercial paper.
Travelers, Commercial Credit Company (CCC) (an indirect wholly owned
subsidiary of Travelers) and the Company have an agreement with a
syndicate of banks to provide $1.0 billion of revolving credit, to be
allocated to any of Travelers, CCC or the Company. The Company's
participation in this agreement is limited to $250 million. The
revolving credit facility consists of a five-year revolving credit
facility which expires in 1999. At December 31, 1995, $125 million was
allocated to the Company. Under this facility the Company is required to
maintain certain minimum equity and risk-based capital levels. At
December 31, 1995, the Company was in compliance with these provisions.
27
<PAGE> 71
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
6. REINSURANCE
The Company participates in reinsurance in order to limit losses,
minimize exposure to large risks, provide additional capacity for future
growth and to effect business-sharing arrangements. Reinsurance is
accomplished through various plans of reinsurance, primarily
coinsurance, modified coinsurance and yearly renewable term. The Company
remains primarily liable as the direct insurer on all risks reinsured.
It is the policy of the Company to obtain reinsurance for amounts above
certain retention limits on individual life policies which vary with age
and underwriting classification. Generally, the maximum retention on an
ordinary life risk is $1.5 million. The Company writes workers'
compensation business through its Accident Department. This business is
ceded 100% to an affiliate, The Travelers Indemnity Company.
A summary of reinsurance financial data reflected within the
consolidated statement of operations and retained earnings is presented
below (in millions):
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
1995 1994 | 1993
-------------------------------------------------------------------------------|---------
<S> <C> <C> | <C>
Written Premiums: |
Direct $2,166 $2,153 | $ 854
|
Assumed from: |
Non-affiliated companies - - | 13
|
Ceded to: |
Affiliated companies (374) (358) | (480)
Non-affiliated companies (302) (306) | (57)
-------------------------------------------------------------------------------|---------
Total net written premiums $1,490 $1,489 | $ 330
===============================================================================|=========
|
Earned Premiums: |
Direct $2,067 $2,301 | $ 850
|
Assumed from: |
Non-affiliated companies - - | 13
|
|
Ceded to: |
Affiliated companies (283) (384) | (480)
Non-affiliated companies (298) (305) | (58)
-------------------------------------------------------------------------------|---------
Total net earned premiums $1,486 $1,612 | $ 325
=========================================================================================
</TABLE>
28
<PAGE> 72
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
6. REINSURANCE, Continued
Reinsurance recoverables at December 31 include amounts recoverable on
unpaid and paid losses and were as follows (in millions):
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
1995 1994
----------------------------------------------------------------------------
<S> <C> <C>
Reinsurance Recoverables:
Life and accident and health business:
Non-affiliated companies $1,744 $ 661
Affiliated companies - 3
Property-casualty business:
Affiliated companies 2,363 2,251
----------------------------------------------------------------------------
Total Reinsurance Recoverables $4,107 $2,915
============================================================================
</TABLE>
Total reinsurance recoverable at December 31, 1995 includes $929 million
recoverable from MetLife in connection with the sale of the Company's
group life and related businesses. See note 4.
7. SHAREHOLDER'S EQUITY
Additional Paid-In Capital
The decrease of $318 million in additional paid-in capital during 1995 is
due primarily to the dividend of Transport to the Company's parent (see
note 4).
The increase of $273 million in additional paid-in capital during 1994 is
due primarily to the finalization of the evaluations and appraisals used
to assign fair values to assets and liabilities under purchase
accounting.
The increase of $1.7 billion in additional paid-in capital during 1993
arose from a contribution of $400 million from The Travelers Corporation
and the contribution of TIHI (see notes 2 and 4). This was partially
offset by the impact of the initial evaluations and appraisals used to
assign fair values to assets and liabilities under purchase accounting.
Unrealized Investment Gains (Losses)
An analysis of the change in unrealized gains and losses on investments
is shown in note 15.
Shareholder's Equity and Dividend Availability
Statutory net income, including TIHI, was $235 million and $100 million
for the years ended December 31, 1995 and 1994, respectively. Statutory
net loss, excluding TIHI, was $648 million for the year ended December
31, 1993.
Statutory capital and surplus was $3.2 billion and $2.1 billion at
December 31, 1995 and 1994, respectively.
29
<PAGE> 73
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
7. SHAREHOLDER'S EQUITY, Continued
The Company is currently subject to various regulatory restrictions that
limit the maximum amount of dividends available to be paid to its parent
without prior approval of insurance regulatory authorities. Statutory
surplus of $506 million is available in 1996 for dividend payments by the
Company without prior approval of the Connecticut Insurance Department.
Dividend payments to the Company from its insurance subsidiaries are
subject to similar restrictions and are limited to $16 million in 1996.
8. DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS
Derivative Financial Instruments with Off-Balance Sheet Risk
The Company uses derivative financial instruments, including financial
futures, interest rate swaps and forward contracts, as a means of hedging
exposure to foreign currency and/or interest rate risk on anticipated
transactions or existing assets and liabilities. Also, in the normal
course of business, the Company has fixed and variable rate loan
commitments and unfunded commitments to partnerships. The Company does
not hold or issue derivative instruments for trading purposes.
These derivative financial instruments have off-balance-sheet risk.
Financial instruments with off-balance-sheet risk involve, to varying
degrees, elements of credit and market risk in excess of the amount
recognized in the consolidated balance sheet. The contract or notional
amounts of these instruments reflect the extent of involvement the
Company has in a particular class of financial instrument. However, the
maximum loss or cash flow associated with these instruments can be less
than these amounts. For forward contracts and interest rate swaps, credit
risk is limited to the amounts calculated to be due the Company on such
contracts. For unfunded commitments to partnerships, credit exposure is
the amount of the unfunded commitments. For fixed and variable rate loan
commitments, credit exposure is represented by the contractual amount of
these instruments.
The Company monitors creditworthiness of counterparties to these
financial instruments by using criteria of acceptable risk that are
consistent with on-balance-sheet financial instruments. The controls
include credit approvals, limits and other monitoring procedures. Some
transactions include the use of collateral to minimize credit risk and
lower the effective cost to the borrower.
The Company uses exchange traded financial futures contracts to manage
its exposure to changes in interest rates which arises from the sale of
certain insurance and investment products. To hedge against adverse
changes in interest rates, the Company enters short positions in
financial futures contracts which offset asset price changes resulting
from changes in market interest rates until an investment is purchased.
30
<PAGE> 74
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
8. DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS,
Continued
Futures contracts have little credit risk since organized exchanges are
the counterparties. Margin payments are required to enter a futures
contract and contract gains or losses are settled daily in cash. The
contract amount of futures contracts represents the extent of the
Company's involvement, but not future cash requirements, as open
positions are typically closed out prior to the delivery date of the
contract. At December 31, 1995, the Company's futures contracts have no
fair value because these contracts are marked to market and settled in
cash.
The Company may occasionally enter into interest rate swaps in connection
with other financial instruments to provide greater risk diversification
and better match an asset with a corresponding liability. Under interest
rate swaps, the Company agrees with other parties to exchange, at
specified intervals, the difference between fixed-rate and floating rate
interest amounts calculated by reference to an agreed notional principal
amount. Generally, no cash is exchanged at the outset of the contract and
no principal payments are made by either party. A single net payment is
usually made by one counterparty at each due date. Swap agreements are
not exchange traded so they are subject to the risk of default by the
counterparty. In all cases, counterparties under these agreements are
major financial institutions with the risk of non-performance considered
remote.
The off-balance-sheet risks of interest rate swaps, financial futures
contracts, forward contracts, fixed and variable rate loan commitments
and unfunded commitments to partnerships were not significant at December
31, 1995 and 1994.
Derivative Financial Instruments without Off-Balance Sheet Risk
The Company purchased a 5-year interest rate cap, with a notional amount
of $200 million, from Travelers Group Inc. in 1995 to hedge against
losses that could result from increasing interest rates. This instrument,
which does not have off-balance sheet risk, gives the Company the right
to receive payments if interest rates exceed specific levels at specified
dates. The premium of $2 million paid for this instrument is being
amortized over its life. The interest rate cap asset is reported at fair
value which is $1 million at December 31, 1995.
Fair Value of Certain Financial Instruments
The Company uses various financial instruments in the normal course of
its business. Fair values of financial instruments which are considered
insurance contracts are not required to be disclosed and are not included
in the amounts discussed.
At December 31, 1995, investments in fixed maturities had a carrying
value and a fair value of $18.8 billion, compared with a carrying value
and a fair value of $17.3 billion at December 31, 1994. See note 15.
At December 31, 1995, mortgage loans had a carrying value of $3.6
billion, which approximated fair value, compared with a carrying value of
$4.9 billion, which approximated fair value at December 31, 1994. In
estimating fair value, the Company used interest rates reflecting the
higher returns required in the real estate financing market.
31
<PAGE> 75
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
8. DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS,
Continued
The carrying values of $647 million and $417 million of financial
instruments classified as other assets approximated their fair values at
December 31, 1995 and 1994, respectively. The carrying values of $1.3
billion and $1.2 billion of financial instruments classified as other
liabilities also approximated their fair values at December 31, 1995 and
1994, respectively. Fair value is determined using various methods
including discounted cash flows, as appropriate for the various financial
instruments.
At December 31, 1995, contractholder funds with defined maturities had a
carrying value of $2.4 billion and a fair value of $2.5 billion, compared
with a carrying value of $4.2 billion and a fair value of $4.0 billion at
December 31, 1994. The fair value of these contracts is determined by
discounting expected cash flows at an interest rate commensurate with the
Company's credit risk and the expected timing of cash flows.
Contractholder funds without defined maturities had a carrying value of
$9.3 billion and a fair value of $9.0 billion at December 31, 1995,
compared with a carrying value of $9.1 billion and a fair value of $8.8
billion at December 31, 1994. These contracts generally are valued at
surrender value.
The assets of separate accounts providing a guaranteed return had a
carrying value and a fair value of $1.5 billion and $1.6 billion,
respectively, at December 31, 1995, compared with a carrying value and a
fair value of $1.5 billion and $1.4 billion, respectively, at December
31, 1994. The liabilities of separate accounts providing a guaranteed
return had a carrying value and a fair value of $1.5 billion and $1.4
billion, respectively, at December 31, 1995, compared with a carrying
value and a fair value of $1.5 billion and $1.3 billion, respectively, at
December 31, 1994.
The carrying values of cash, short-term securities and investment income
accrued approximated their fair values.
The carrying value of policy loans, which have no defined maturities, was
considered to be fair value.
9. COMMITMENTS AND CONTINGENCIES
Financial Instruments with Off-Balance-Sheet Risk
See note 8 for a discussion of financial instruments with
off-balance-sheet risk.
Litigation
The Company is a defendant or codefendant in various litigation matters.
Although there can be no assurances, as of December 31, 1995, the Company
believes, based on information currently available, that the ultimate
resolution of these legal proceedings would not be likely to have a
material adverse effect on its results of operations, financial condition
or liquidity.
32
<PAGE> 76
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
10. BENEFIT PLANS
Pension Plans
The Company participates in qualified and nonqualified, noncontributory
defined benefit pension plans sponsored by an affiliate covering the
majority of the Company's U.S. employees. Benefits for the qualified plan
are based on an account balance formula. Under this formula, each
employee's accrued benefit can be expressed as an account that is
credited with amounts based upon the employee's pay, length of service
and a specified interest rate, all subject to a minimum benefit level.
This plan is funded in accordance with the Employee Retirement Income
Security Act of 1974 and the Internal Revenue Code. For the nonqualified
plan, contributions are based on benefits paid.
Certain subsidiaries of TIHI participate in a noncontributory defined
benefit plan sponsored by their ultimate parent, Travelers.
The Company's share of net pension expense was not significant for 1995,
1994 and 1993.
Through plans sponsored by TIGI, the Company also provides defined
contribution pension plans for certain agents. Company contributions are
primarily a function of production. The expense for these plans was not
significant in 1995, 1994 and 1993.
Other Benefit Plans
In addition to pension benefits, the Company provides certain health care
and life insurance benefits for retired employees through a plan
sponsored by TIGI. This plan does not include employees of TIHI. Covered
employees may become eligible for these benefits if they reach retirement
age while working for the Company. These retirees may elect certain
prepaid health care benefit plans. Life insurance benefits generally are
set at a fixed amount. The cost recognized by the Company for these
benefits represents its allocated share of the total costs of the plan,
net of employee contributions. The Company's share of the total cost of
the plan for 1995, 1994 and 1993 was not significant.
The Merger resulted in a change in control of The Travelers Corporation
as defined in the applicable plans, and provisions of some employee
benefit plans secured existing compensation and benefit entitlements
earned prior to the change in control, and provided a salary and benefit
continuation floor for employees whose employment was affected. These
merger-related costs were assumed by TIGI.
Savings, Investment and Stock Ownership Plan
Under the savings, investment and stock ownership plan available to
substantially all employees of TIGI (except TIHI), the Company matches a
portion of employee contributions. Effective April 1, 1993, the match
decreased from 100% to 50% of an employee's first 5% contribution and a
variable match based on the profitability of TIGI and its subsidiaries
was added. The Company's matching obligation was not significant in 1995,
1994 and 1993.
33
<PAGE> 77
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
11. RELATED PARTY TRANSACTIONS
The principal banking functions, including payment of salaries and
expenses, for certain subsidiaries and affiliates of TIGI (excluding
TIHI) are handled by the Company. Settlements for these payments between
the Company and its affiliates are made regularly. The Company provides
various employee benefits coverages to employees of certain subsidiaries
of TIGI. The premiums for these coverages were charged in accordance with
cost allocation procedures based upon salaries or census. In addition,
investment advisory and management services, data processing services and
claims processing services are shared with affiliated companies. Charges
for these services are shared by the companies on cost allocation methods
based generally on estimated usage by department.
TIGI and its subsidiaries maintain a short-term investment pool in which
the Company participates. The position of each company participating in
the pool is calculated and adjusted daily. At December 31, 1995 and 1994,
the pool totaled approximately $2.2 billion and $1.5 billion,
respectively. The Company's share of the pool amounted to $1.4 billion
and $1.1 billion at December 31, 1995 and 1994, respectively, and is
included in short-term securities in the consolidated balance sheet.
The Company sells structured settlement annuities to its affiliates, The
Travelers Indemnity Company and its subsidiaries. Such deposits were $38
million, $39 million and $50 million for 1995, 1994 and 1993,
respectively.
The Company markets individual annuity products through The Copeland
Companies, a subsidiary of TIGI. Deposits related to these products were
$684 million, $635 million and $581 million in 1995, 1994 and 1993,
respectively.
The Company markets variable annuity products and life and accident and
health insurance through its affiliate, Smith Barney. Premiums and
deposits related to these products were $580 million and $161 million in
1995 and 1994, respectively.
The Company leases new furniture and equipment from a noninsurance
subsidiary of TIGI. The rental expense charged to the Company for this
furniture and equipment was not significant in 1995, 1994 and 1993.
At December 31, 1995 and 1994, TIC had an investment of $24 million and
$23 million, respectively, in bonds of its affiliate, Commercial Credit
Company. This is included in fixed maturities in the consolidated balance
sheet.
TIHI had an investment of $445 million and $231 million in common stock
of Travelers at December 31, 1995 and 1994, respectively. This is carried
at fair value. At December 31, 1994, Transport had an investment of $35
million in nonredeemable preferred stock of Travelers which was carried
at fair value. TIHI had notes receivable from Travelers of $30 million at
December 31, 1994, which were carried at cost. The notes were paid during
1995. These assets are included in other investments in the consolidated
balance sheet.
34
<PAGE> 78
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
12. LEASES
The Company has entered into various operating and capital lease
agreements for office space and data processing and certain other
equipment. Rental expense under operating leases was $22 million, $23
million and $26 million, in 1995, 1994 and 1993, respectively. Future net
minimum rental and lease payments are estimated as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
Minimum operating Sublease
(in millions) rental payments rental income
--------------------------------------------------------------------------------------
<S> <C> <C>
Year ending December 31,
1996 $103 $26
1997 88 19
1998 77 10
1999 71 6
2000 64 6
Thereafter 310 28
--------------------------------------------------------------------------------------
$713 $95
--------------------------------------------------------------------------------------
</TABLE>
The Company is reimbursed by affiliates of TIGI for utilization of space
and equipment.
35
<PAGE> 79
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
13. FEDERAL INCOME TAXES
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
(in millions) 1995 1994 | 1993
----------------------------------------------------------------------------|---------
<S> <C> <C> | <C>
Effective tax rate |
|
Income before federal income taxes $837 $ 597 | $ (85)
Statutory tax rate 35% 35% | 35%
----------------------------------------------------------------------------|---------
|
Expected federal income taxes $293 $ 209 | $ (30)
Tax effect of: |
Nontaxable investment income (4) (4) | (1)
Adjustments to benefit and other reserves - - | (50)
Adjustment to deferred tax asset for |
enacted change in tax rates from |
34% to 35% - - | (18)
Other, net 1 6 | (7)
----------------------------------------------------------------------------|---------
Federal income taxes (benefit) $290 $ 211 | $(106)
----------------------------------------------------------------------------|---------
|
Effective tax rate 35% 35% | 125%
----------------------------------------------------------------------------|---------
|
Composition of federal income taxes |
Current: |
United States $220 $(108) | $ (61)
Foreign 13 12 | 3
----------------------------------------------------------------------------|---------
Total 233 (96) | (58)
----------------------------------------------------------------------------|---------
|
Deferred: |
United States 52 302 | (48)
Foreign 5 5 | -
----------------------------------------------------------------------------|-----------
Total 57 307 | (48)
----------------------------------------------------------------------------|-----------
Federal income taxes $290 $ 211 | $ (106)
----------------------------------------------------------------------------------------
</TABLE>
Tax benefits allocated directly to shareholder's equity for the years
ended December 31, 1995 and 1994 were $7 million and $2 million,
respectively.
36
<PAGE> 80
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
13. FEDERAL INCOME TAXES, Continued
The net deferred tax liability at December 31, 1995 and the net deferred
tax asset at December 31, 1994 were comprised of the tax effects of
temporary differences related to the following assets and liabilities:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
(in millions) 1995 1994
--------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Benefit, reinsurance and other reserves $ 447 $ 453
Contractholder funds 54 158
Investments - 690
Other employee benefits 83 87
Other 264 257
--------------------------------------------------------------------------------------------
Total 848 1,645
--------------------------------------------------------------------------------------------
Deferred tax liabilities:
Deferred acquisition costs and value of insurance in force 538 529
Investments 152 -
Prepaid pension expense 9 5
Other 81 61
--------------------------------------------------------------------------------------------
Total 780 595
--------------------------------------------------------------------------------------------
Net deferred tax asset before valuation allowance 68 1,050
Valuation allowance for deferred tax assets (100) (100)
--------------------------------------------------------------------------------------------
Net deferred tax (liability) asset after valuation allowance $ (32) $ 950
--------------------------------------------------------------------------------------------
</TABLE>
Starting in 1994 and continuing for at least five years, the Company and
its life insurance subsidiaries will file a consolidated federal income
tax return. Federal income taxes are allocated to each member of the
consolidated return on a separate return basis adjusted for credits and
other amounts required by the consolidation process. Any resulting
liability will be paid currently to the Company. Any credits for losses
will be paid by the Company to the extent that such credits are for tax
benefits that have been utilized in the consolidated federal income tax
return.
37
<PAGE> 81
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
13. FEDERAL INCOME TAXES, Continued
A net deferred tax asset valuation allowance of $100 million has been
established to reduce the deferred tax asset on investment losses to the
amount that, based upon available evidence, is more likely than not to be
realized. Reversal of the valuation allowance is contingent upon the
recognition of future capital gains in the Company's consolidated life
insurance company federal income tax return through 1998, and the
consolidated federal income tax return of Travelers commencing in 1999,
or a change in circumstances which causes the recognition of the benefits
to become more likely than not. There was no change in the valuation
allowance during 1995. The initial recognition of any benefit produced by
the reversal of the valuation allowance will be recognized by reducing
goodwill.
At December 31, 1995, the Company has no ordinary or capital loss
carryforwards.
The "policyholders surplus account", which arose under prior tax law, is
generally that portion of the gain from operations that has not been
subjected to tax, plus certain deductions. The balance of this account,
which, under provisions of the Tax Reform Act of 1984, will not increase
after 1983, is estimated to be $932 million. This amount has not been
subjected to current income taxes but, under certain conditions that
management considers to be remote, may become subject to income taxes in
future years. At current rates, the maximum amount of such tax (for which
no provision has been made in the financial statements) would be
approximately $326 million.
14. NET INVESTMENT INCOME
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
(For the year ended December 31, in millions) 1995 1994 | 1993
--------------------------------------------------------------------------------|-----------
<S> <C> <C> | <C>
Gross investment income |
Fixed maturities $1,191 $1,082 | $1,069
Mortgage loans 419 511 | 655
Policy loans 163 110 | 104
Real estate held for sale 111 174 | 371
Other 97 52 | 8
--------------------------------------------------------------------------------|-----------
1,981 1,929 | 2,207
--------------------------------------------------------------------------------|-----------
|
Investment expenses 157 227 | 477
--------------------------------------------------------------------------------|-----------
Net investment income $1,824 $1,702 | $1,730
--------------------------------------------------------------------------------------------
</TABLE>
38
<PAGE> 82
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
15. INVESTMENTS AND INVESTMENT GAINS (LOSSES)
Realized investment gains (losses) for the periods were as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
(For the year ended December 31, in millions) 1995 1994 | 1993
-------------------------------------------------------------------------------|----------
<S> <C> <C> | <C>
Realized |
Fixed maturities $(43) $(3) | $ 159
Equity securities 36 18 | 12
Mortgage loans 47 - | (35)
Real estate held for sale 18 - | (212)
Other 48 (2) | 37
-------------------------------------------------------------------------------|----------
Realized investment gains (losses) $106 $13 | $ (39)
------------------------------------------------------------------------------------------
</TABLE>
Changes in net unrealized investment gains (losses) that are included as
a separate component of shareholder's equity were as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
(For the year ended December 31, in millions) 1995 1994 | 1993
---------------------------------------------------------------------------------|----------
<S> <C> <C> | <C>
Unrealized |
Fixed maturities $1,974 $(1,319) | $(235)
Equity securities 46 (25) | (17)
Other 200 165 | 28
---------------------------------------------------------------------------------|----------
2,220 (1,179) | (224)
Related taxes 778 (412) | (83)
---------------------------------------------------------------------------------|----------
Change in unrealized investment gains (losses) 1,442 (767) | (141)
Contribution of TIHI - - | 5
Balance beginning of year (760) 7 | 143
--------------------------------------------------------------------------------------------
Balance end of year $ 682 $ (760) $ 7
--------------------------------------------------------------------------------------------
</TABLE>
The initial adoption of FAS 115 resulted in an increase of approximately
$232 million (net of taxes) to net unrealized gains in 1994.
Fixed Maturities
Proceeds from sales of fixed maturities classified as available for sale
were $6.8 billion and $1.3 billion in 1995 and 1994, respectively. Gross
gains of $80 million and $14 million and gross losses of $124 million and
$26 million in 1995 and 1994, respectively, were realized on those sales.
Prior to December 31, 1993, fixed maturities that were intended to be
held to maturity were recorded at amortized cost and classified as held
for investment. Sales from the amortized cost portfolios have been made
periodically. Such sales were $99 million in 1993, resulting in gross
realized gains of $6 million and gross realized losses of $1 million.
39
<PAGE> 83
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
15. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued
Prior to December 31, 1993, the carrying values of the trading portfolio
fixed maturities were adjusted to market value as it was likely they
would be sold prior to maturity. Sales of trading portfolio fixed
maturities were $4.0 billion in 1993. Gross gains of $139 million and
gross losses of $2 million were realized on those sales.
The amortized cost and market value of investments in fixed maturities
were as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
December 31, 1995
-------------------------------------------------------------------------------------------------
Gross Gross
Amortized unrealized unrealized Market
(in millions) cost gains losses value
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available for sale:
Mortgage-backed securities -
CMOs and pass through
securities $ 4,174 $103 $15 $ 4,262
U.S. Treasury securities
and obligations of U.S.
Government and
government agencies
and authorities 1,327 116 - 1,443
Obligations of states,
municipalities and
political subdivisions 91 2 - 93
Debt securities issued by
foreign governments 311 17 - 328
All other corporate bonds 12,283 442 10 12,715
Redeemable preferred stock 1 - - 1
-------------------------------------------------------------------------------------------------
Total $18,187 $680 $25 $18,842
-------------------------------------------------------------------------------------------------
</TABLE>
40
<PAGE> 84
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
15. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
December 31, 1994
-------------------------------------------------------------------------------------------------
Gross Gross
Amortized unrealized unrealized Market
(in millions) cost gains losses value
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available for sale:
Mortgage-backed securities -
CMOs and pass through
securities $ 3,779 $ 3 $ 304 $ 3,478
U.S. Treasury securities
and obligations of U.S.
Government and
government agencies
and authorities 3,080 3 306 2,777
Obligations of states,
municipalities and
political subdivisions 87 - 7 80
Debt securities issued by
foreign governments 398 - 26 372
All other corporate bonds 11,225 14 696 10,543
Redeemable preferred stock 10 - - 10
-------------------------------------------------------------------------------------------------
Total $18,579 $20 $1,339 $17,260
-------------------------------------------------------------------------------------------------
</TABLE>
The amortized cost and market value of fixed maturities at December 31,
1995, by contractual maturity, are shown below. Actual maturities will
differ from contractual maturities because borrowers may have the right
to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
Maturity Amortized Market
(in millions) cost value
-----------------------------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 788 $ 792
Due after 1 year through 5 years 5,053 5,156
Due after 5 years through 10 years 5,176 5,416
Due after 10 years 2,996 3,216
-----------------------------------------------------------------------------------------------
14,013 14,580
Mortgage-backed securities 4,174 4,262
-----------------------------------------------------------------------------------------------
Total $18,187 $18,842
-----------------------------------------------------------------------------------------------
</TABLE>
41
<PAGE> 85
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
15. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued
The Company makes significant investments in collateralized mortgage
obligations (CMOs). CMOs typically have high credit quality, offer good
liquidity, and provide a significant advantage in yield and total return
compared to U.S. Treasury securities. The Company's investment strategy
is to purchase CMO tranches which are protected against prepayment risk,
primarily planned amortization class (PAC) tranches. Prepayment protected
tranches are preferred because they provide stable cash flows in a
variety of scenarios. The Company does invest in other types of CMO
tranches if a careful assessment indicates a favorable risk/return
tradeoff. The Company does not purchase residual interests in CMOs.
At December 31, 1995 and 1994, the Company held CMOs with a market value
of $2.3 billion and $2.2 billion, respectively. Approximately 89% of the
Company's CMO holdings are fully collateralized by GNMA, FNMA or FHLMC
securities at December 31, 1995 and 1994. In addition, the Company held
$917 million and $1.3 billion of GNMA, FNMA or FHLMC mortgage-backed
securities at December 31, 1995 and 1994, respectively. Virtually all of
these securities are rated AAA. The Company also held $1.3 billion and
$927 million of securities that are backed primarily by credit card or
car loan receivables at December 31, 1995 and 1994, respectively.
Equity Securities
The cost and market values of investments in equity securities were as
follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
December 31, 1995
-------------------------------------------------------------------------------------------------
Gross Gross
unrealized unrealized Market
(in millions) Cost gains losses value
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stocks $138 $48 $5 $181
Nonredeemable preferred stocks 44 2 3 43
-------------------------------------------------------------------------------------------------
Total $182 $50 $8 $224
-------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
December 31, 1994
---------------------------------------------------------------------------------------------------
Gross Gross
unrealized unrealized Market
(in millions) Cost gains losses value
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stocks $ 133 $ 19 $ 21 $ 131
Nonredeemable preferred stocks 40 - 2 38
---------------------------------------------------------------------------------------------------
Total $ 173 $ 19 $ 23 $ 169
---------------------------------------------------------------------------------------------------
</TABLE>
42
<PAGE> 86
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
15. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued
Proceeds from sales of equity securities were $379 million and $357
million in 1995 and 1994, respectively. Gross gains of $27 million and
$24 million and gross losses of $2 million and $6 million in 1995 and
1994, respectively, were realized on those sales.
Mortgage loans and real estate held for sale
Underperforming assets include delinquent mortgage loans, loans in the
process of foreclosure, foreclosed loans and loans modified at interest
rates below market. The Company continues its strategy, adopted in
conjunction with the Merger, to dispose of these real estate assets and
some of the mortgage loans and to reinvest the proceeds to obtain current
market yields.
At December 31, 1995 and 1994, the Company's mortgage loan and real
estate held for sale portfolios consisted of the following (in millions):
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
1995 1994
---------------------------------------------------------------------------------
<S> <C> <C>
Current mortgage loans $ 3,385 $ 4,467
Underperforming mortgage loans 241 471
---------------------------------------------------------------------------------
Total 3,626 4,938
---------------------------------------------------------------------------------
Real estate held for sale 293 383
---------------------------------------------------------------------------------
Total $ 3,919 $ 5,321
---------------------------------------------------------------------------------
</TABLE>
Aggregate annual maturities on mortgage loans at December 31, 1995 are
as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------
(in millions)
-------------------------------------------------------
<S> <C>
Past maturity $ 189
1996 462
1997 398
1998 589
1999 339
2000 382
Thereafter 1,267
-------------------------------------------------------
Total $ 3,626
-------------------------------------------------------
</TABLE>
43
<PAGE> 87
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
15. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued
Concentrations
At December 31, 1995 and 1994, the Company had no concentration of credit
risk in a single investee exceeding 10% of consolidated shareholder's
equity.
The Company participates in a short-term investment pool maintained by
TIGI and its subsidiaries. See note 11.
Included in fixed maturities are below investment grade assets totaling
$1.0 billion and $922 million at December 31, 1995 and 1994,
respectively. The Company defines its below investment grade assets as
those securities rated "Ba1" or below by external rating agencies, or the
equivalent by internal analysts when a public rating does not exist. Such
assets include publicly traded below investment grade bonds and certain
other privately issued bonds that are classified as below investment
grade loans.
The Company also had significant concentrations of investments, primarily
fixed maturities, in the following industries:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
(in millions) 1995 1994
---------------------------------------------------------------------------------------------------
<S> <C> <C>
Finance $ 1,491 $ 1,241
Banking 1,226 953
Electric utilities 1,023 1,222
Oil and gas 861 859
---------------------------------------------------------------------------------------------------
</TABLE>
Below investment grade assets included in the totals above, were as
follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
(in millions) 1995 1994
---------------------------------------------------------------------------------------------------
<S> <C> <C>
Finance $ 56 $ 75
Banking 8 21
Electric utilities 26 32
Oil and gas 66 33
---------------------------------------------------------------------------------------------------
</TABLE>
At December 31, 1995 and 1994, significant concentrations of mortgage
loans were for properties located in highly populated areas in the states
listed below:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
(in millions) 1995 1994
---------------------------------------------------------------------------------------------------
<S> <C> <C>
California $ 736 $ 929
New York 400 558
---------------------------------------------------------------------------------------------------
</TABLE>
44
<PAGE> 88
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
15. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued
Other mortgage loan investments are fairly evenly dispersed throughout
the United States, with no holdings in any state exceeding $332 million
and $432 million at December 31, 1995 and 1994, respectively.
Concentrations of mortgage loans by property type at December 31, 1995
and 1994 were as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
(in millions) 1995 1994
---------------------------------------------------------------------------------------------------
<S> <C> <C>
Office $ 1,513 $ 2,065
Apartment 580 1,029
Agricultural 556 540
Retail 426 606
---------------------------------------------------------------------------------------------------
</TABLE>
The Company monitors creditworthiness of counterparties to all financial
instruments by using controls that include credit approvals, limits and
other monitoring procedures. Collateral for fixed maturities often
includes pledges of assets, including stock and other assets, guarantees
and letters of credit. The Company's underwriting standards with respect
to new mortgage loans generally require loan to value ratios of 75% or
less at the time of mortgage origination.
Investment Valuation Reserves
There were no investment valuation reserves at December 31, 1995 and
1994. Investment valuation reserve activity during 1994 and 1993 was as
follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
(in millions) 1994 | 1993
--------------------------------------------------------------------------------------|------------
<S> <C> | <C>
Beginning of year $ 67 | $ 1,417
Increase - | 195
Impairments, net of gains/recoveries - | (602)
FAS 115/Purchase accounting adjustment (67) | (943)
---------------------------------------------------------------------------------------------------
End of year $ - $ 67
---------------------------------------------------------------------------------------------------
</TABLE>
At December 31, 1993, investment valuation reserves were comprised of $67
million for securities. Increases in the investment valuation reserves
were reflected as realized investment losses.
45
<PAGE> 89
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
15. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued
Nonincome Producing
Investments included in the consolidated balance sheets that were
nonincome producing for the preceding 12 months were as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
(in millions) 1995 1994
---------------------------------------------------------------------------------------------------
<S> <C> <C>
Mortgage loans $ 65 $ 127
Real estate 18 73
Fixed maturities 4 6
---------------------------------------------------------------------------------------------------
Total $ 87 $ 206
---------------------------------------------------------------------------------------------------
</TABLE>
Restructured Investments
The Company had mortgage loans and debt securities which were
restructured at below market terms totaling approximately $67 million and
$259 million at December 31, 1995 and 1994, respectively. The new terms
typically defer a portion of contract interest payments to varying future
periods. The accrual of interest is suspended on all restructured assets,
and interest income is reported only as payment is received. Gross
interest income on restructured assets that would have been recorded in
accordance with the original terms of such loans amounted to $16 million
in 1995 and $52 million in 1994. Interest on these assets, included in
net investment income, aggregated $8 million and $17 million in 1995 and
1994, respectively.
16. LIFE AND ANNUITY DEPOSIT FUNDS AND RESERVES
At December 31, 1995, the Company had $22.4 billion of life and annuity
deposit funds and reserves. Of that total, $11.4 billion were not subject
to discretionary withdrawal based on contract terms and related market
conditions. The remaining $11.0 billion were for life and annuity
products that were subject to discretionary withdrawal by the
contractholders. Included in the amount that were subject to
discretionary withdrawal were $1.5 billion of liabilities that are
surrenderable with market value adjustments. An additional $5.8 billion
of the life insurance and individual annuity liabilities are subject to
discretionary withdrawals with an average surrender charge of 5.2%.
Another $870 million of liabilities are surrenderable at book value over
5 to 10 years. In the payout phase, these funds are credited at
significantly reduced interest rates. The remaining $2.8 billion of
liabilities are surrenderable without charge. Approximately 25% of these
liabilities relate to individual life products. These risks would have to
be underwritten again if transferred to another carrier, which is
considered a significant deterrent for long-term policyholders. Insurance
liabilities that are surrendered or withdrawn from the Company are
reduced by outstanding policy loans and related accrued interest prior to
payout.
46
<PAGE> 90
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
17. RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES
The following table reconciles net income to net cash provided by (used
in) operating activities:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
(For the year ended December 31, in millions) 1995 1994 | 1993
---------------------------------------------------------------------------------------|-----------
<S> <C> <C> | <C>
Net income from continuing operations $ 547 $ 386 | $ 21
Reconciling adjustments |
Realized (gains) losses (106) (13) | 39
Deferred federal income taxes 57 307 | (48)
Amortization of deferred policy acquisition |
costs and value of insurance in force 290 281 | 56
Additions to deferred policy acquisition costs (454) (435) | 51
Trading account investments, |
(purchases) sales, net - - | (1,585)
Investment income accrued (9) (47) | 3
Premium balances receivable (8) 5 | (5)
Insurance reserves and accrued expenses 291 212 | 166
Restructuring reserves - - | (79)
Other, including investment valuation reserves |
in 1993 62 (212) | 32
---------------------------------------------------------------------------------------|-----------
Net cash provided by (used in) |
operating activities 670 484 | (1,349)
Net cash provided by (used in) |
discontinued operations (596) 233 | (23)
---------------------------------------------------------------------------------------|-----------
Net cash provided by (used in) |
operations $ 74 $ 717 | $ (1,372)
---------------------------------------------------------------------------------------------------
</TABLE>
47
<PAGE> 91
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
18. NONCASH INVESTING AND FINANCING ACTIVITIES
Significant noncash investing and financing activities include: a) the
1995 transfer of assets with a fair market value of approximately $1.5
billion and statutory reserves and other liabilities of approximately
$1.5 billion to MetLife (see note 4); b) the 1995 dividend of Transport
Life Insurance Company to the Company's parent (see note 4); c) the
acquisition of real estate through foreclosures of mortgage loans
amounting to $97 million, $229 million and $563 million in 1995, 1994 and
1993, respectively; d) the acceptance of purchase money mortgages for
sales of real estate aggregating $27 million, $96 million and $190
million in 1995, 1994 and 1993, respectively; e) the 1994 exchange of $23
million of TIHI's investment in Travelers common stock for $35 million of
Travelers nonredeemable preferred stock; f) the 1993 contribution of TIHI
by Travelers (see note 4); g) the 1993 contribution of $400 million of
bond investments by The Travelers Corporation (see note 7); h) increases
in investment valuation reserves in 1993 for real estate held for sale
(see note 15); and i) the 1993 transfer of $352 million of mortgage loans
and bonds from the Company's general account to two separate accounts.
48
<PAGE> 92
VINTAGE
STATEMENT OF ADDITIONAL INFORMATION
Individual Variable Annuity Contracts
issued by
The Travelers Insurance Company
One Tower Square
Hartford, Connecticut 06183
L-12253S May, 1996
8
<PAGE> 93
PART C
Other Information
Item 24. Financial Statements and Exhibits
(a) The financial statements of the Registrant and the Report of Independent
Accountants thereto are contained in the Statement of Additional Information.
The financial statements of the Registrant include:
Statement of Assets and Liabilities as of December 31, 1995
Statement of Operations for the year ended December 31, 1995
Statement of Changes in Net Assets for the period June 20, 1994
(date operations commenced) to December 31, 1995
Statement of Investments as of December 31, 1995
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, 1995, 1994 and 1993
Consolidated Balance Sheet as of December 31, 1995 and 1994
Consolidated Statement of Cash Flows for the years ended
December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
(b) Exhibits
1. Resolution of The Travelers Insurance Company Board of Directors
authorizing the establishment of the Registrant.
2. Not Applicable.
3. Form of Distribution and Management Agreement among the
Registrant, The Travelers Insurance Company and Travelers
Equities Sales, Inc. (now known as Tower Square Securities,
Inc.) (Incorporated herein by reference to Exhibit 3. to
Post-Effective Amendment No. 2 to the Registration Statement on
Form N-4, filed on April 27, 1995.)
3(b). Form of Selling Agreement.
4. Variable Annuity Contract.
5. Application.
6(a). Charter of The Travelers Insurance Company, as amended on
October 19, 1994. (Incorporated herein by reference to Exhibit
3(a)(i) to Registration Statement on Form S-2, File No.
33-58677, filed via Edgar on April 18, 1995.)
<PAGE> 94
6(b). By-Laws of The Travelers Insurance Company, as amended on
October 20, 1994. (Incorporated herein by reference to Exhibit
3(b)(i) to the Registration Statement on Form S-2, File No.
33-58677, filed via Edgar on April 18, 1995.)
9. Opinion of Counsel as to the legality of securities being
registered. (Incorporated by reference to the Registrant's most
recent 24f-2 Notice filed on February 29, 1996.)
10(a). Consent of Coopers & Lybrand L.L.P., Independent Accountants, to
the inclusion of their report on the audited financial
statements of the Registrant and their report on the
consolidated financial statements of The Travelers Insurance
Company and Subsidiaries contained in Part B of this
Registration Statement, and to the reference fo such firm as
"Experts" in accounting and auditing.
10(b). Consent of KPMG Peat Marwick LLP, Independent Auditors, to the
inclusion of their report on the consolidated financial
statements of The Travelers Insurance Company contained in Part
B of this Registration Statement, and to the reference to their
firm as "experts" under the heading "Independent Accountants."
13. Schedule for Computation of Total Return Calculations -
Standardized and Non-Standardized.
15(a). Powers of Attorney authorizing Ernest J. Wright or Kathleen A.
McGah as signatory for Jay S. Fishman and Ian R. Stuart.
15(b). Powers of Attorney authorizing Jay S. Fishman or Ernest J.
Wright as signatory for Robert I. Lipp, Charles O. Prince, III,
Marc P. Weill, Irwin R. Ettinger and Donald T. DeCarlo.
(Incorporated herein by reference to Exhibit 15(b) to
Post-Effective Amendment No. 2 to the Registration Statement on
Form N-4, filed on April 27, 1995.)
15(c). Power of Attorney authorizing Jay S. Fishman or Ernest J. Wright
as signatory for Michael A. Carpenter.
<PAGE> 95
Item 25. Directors and Officers of the Depositor
<TABLE>
<CAPTION>
Name and Principal Positions and Offices
Business Address with Depositor
- ---------------- -------------------------
<S> <C>
Robert I. Lipp* Director and Chairman
Michael A. Carpenter* Director, President and Chief Executive Officer
Jay S. Fishman* Director
Charles O. Prince, III** Director
Marc P. Weill** Director and Senior Vice President
Irwin R. Ettinger** Director
Donald T. DeCarlo* Director, General Counsel and Secretary
Stuart Baritz** Senior Vice President
Jay S. Benet* Senior Vice President
George C. Kokulis* Senior Vice President
Warren H. May* Senior Vice President
Kathleen M. D'Auria* Vice President
Elizabeth Charron* Vice President
Robert Hamilton* Vice President
Ian R. Stuart* Vice President, Chief Financial Officer,
Chief Accounting Officer and Controller
Charles N. Vest* Vice President and Actuary
William H. White* Vice President and Treasurer
Bethann C. Maas* Second Vice President
Ernest J. Wright* Assistant Secretary
Kathleen A. McGah Assistant Secretary
Principal Business Address:
* The Travelers Insurance Company ** Travelers Group Inc.
One Tower Square 388 Greenwich Street
Hartford, Connecticut 06183 New York , New York 10013
</TABLE>
<PAGE> 96
Item 26. Persons Controlled By or Under Common Control with the Depositor.
OWNERSHIP OF THE TRAVELERS INSURANCE COMPANY
<TABLE>
<CAPTION>
State of Principal
Company Organization Ownership Business
- ------- ------------ --------- ---------
<S> <C> <C> <C>
Travelers Group Inc. Delaware Publicly Held ---------
Associated Madison Companies Inc. Delaware 100.00 ---------
The Travelers Insurance Group, Inc. Connecticut 100.00 ---------
The Travelers Insurance Company Connecticut 100.00 Insurance
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE
TRAVELERS INSURANCE COMPANY
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly or
Indirectly by
State of Travelers Principal
Company Organization Group Inc. Business
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AC Health Ventures, Inc. Delaware 100.00 Inactive
AMCO Biotech, Inc. Delaware 100.00 Inactive
Associated Madison Companies, Inc. Delaware 100.00 Holding company.
American National Life Insurance (T & C), Ltd. Turks and Caicos 100.00 Insurance
Islands
ERISA Corporation New York 100.00 Inactive
Mid-America Insurance Services, Inc. Georgia 100.00 Third party
administrator
National Marketing Corporation Pennsylvania 100.00 Inactive
</TABLE>
1
<PAGE> 97
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly or
Indirectly by
State of Travelers Principal
Company Organization Group Inc. Business
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PFS Services, Inc. Georgia 100.00 General partner
The Travelers Insurance Group Inc. Connecticut 100.00 Holding company
Constitution Plaza, Inc. Connecticut 100.00 Real estate brokerage
KP Properties Corporation Massachusetts 100.00 Real estate
KPI 85, Inc. Massachusetts 100.00 Real estate
KRA Advisers Corporation Massachusetts 100.00 Real estate
KRP Corporation Massachusetts 100.00 Real estate
La Metropole S.A. Belgium 98.83 P-C insurance/
reinsurance
Principal Financial Associates, Delaware 100.00 Inactive
Inc.
Winthrop Financial Group, Inc. Delaware 100.00 Leasing company.
The Prospect Company Delaware 100.00 Investments
89th & York Avenue Corporation New York 100.00 Real estate
979 Third Avenue Corporation Delaware 100.00 Real estate
Meadow Lane, Inc. Georgia 100.00 Real estate
development
Panther Valley, Inc. New Jersey 100.00 Real estate management
Prospect Management Services Delaware 100.00 Real estate management
Company
The Travelers Asset Funding Connecticut 100.00 Investment adviser
Corporation
Travelers Capital Funding Connecticut 100.00 Furniture/equipment
Corporation
The Travelers Corporation of Bermuda Bermuda 99.99 Pensions
Limited
</TABLE>
2
<PAGE> 98
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly or
Indirectly by
State of Travelers Principal
Company Organization Group Inc. Business
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
The Travelers Insurance Company Connecticut 100.00 Insurance
The Plaza Corporation Connecticut 100.00 Holding company
Joseph A. Wynne Agency California 100.00 Inactive
The Copeland Companies New Jersey 100.00 Holding company
American Odyssey Funds New Jersey 100.00 Investment advisor
Management, Inc.
American Odyssey Maryland 100.00 Investment management
Funds, Inc.
Copeland New Jersey 100.00 Administrative
Administrative services
Services, Inc.
Copeland Associates, Delaware 100.00 Fixed/variable
Inc. annuities
Copeland Ohio 99.00 Fixed/variable
Associates Agency annuities
of Ohio, Inc.
Copeland Alabama 100.00 Fixed/variable
Associates of annuities
Alabama, Inc.
Copeland Montana 100.00 Fixed/variable
Associates of annuities
Montana, Inc.
Copeland Benefits New Jersey 51.00 Investment marketing
Management
Company
Copeland New Jersey 100.00 Fixed/variable
Equities, Inc. annuities
H.C. Copeland Massachusetts 100.00 Fixed annuities
Associates, Inc.
of Massachusetts
Copeland Financial New Jersey 100.00 Investment advisory
Services, Inc. services.
Copeland Healthcare New Jersey 100.00 Life insurance
Services, Inc. marketing
H.C. Copeland and Texas 100.00 Fixed/variable
Associates, Inc. of annuities
Texas
Tower Square Securities, Connecticut 100.00 Broker dealer
Inc.
The Travelers Life and Annuity Connecticut 100.00 Life insurance
Company
</TABLE>
3
<PAGE> 99
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly or
Indirectly by
State of Travelers Principal
Company Organization Group Inc. Business
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
The Travelers Marine Corporation California 100.00 General insurance
brokerage
Three Parkway Inc. - I Pennsylvania 100.00 Investment real estate
Three Parkway Inc. - II Pennsylvania 100.00 Investment real estate
Three Parkway Inc. - III Pennsylvania 100.00 Investment real estate
Travelers Insurance Holdings Georgia 100.00 Holding company
Inc.
AC RE, Ltd. Bermuda 100.00 Reinsurance
American Financial Life Texas 100.00 Insurance
Insurance Company
Primerica Life Insurance Massachusetts 100.00 Life insurance
Company
National Benefit Life New York 100.00 Insurance
Insurance Company
Primerica Financial Canada 100.00 Holding company
Services (Canada) Ltd.
PFSL Investments Canada 100.00 Mutual fund dealer
Canada Ltd.
Primerica Canada 82.82 General agent
Financial Services
Ltd.
Primerica Life Canada 100.00 Life insurance
Insurance Company
of Canada
Travelers/Net Plus, Inc. Connecticut 100.00
The Travelers Insurance Corporation Australia 100.00 Inactive
Proprietary Limited
Travelers Asset Management New York 100.00 Investment adviser
International Corporation
Travelers Canada Corporation Canada 100.00 Inactive
Travelers Mortgage Securities Delaware 100.00 Collateralized
Corporation obligations
Travelers of Ireland Limited Ireland 99.90 Data processing
</TABLE>
4
<PAGE> 100
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly or
Indirectly by
State of Travelers Principal
Company Organization Group Inc. Business
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Travelers/Aetna Property Casualty Delaware 100.00 Holding company
Corp.
The Aetna Casualty and Surety Connecticut 100.00 Insurance company
Company
ABP Community Urban Connecticut 100.00
Redevelopment Corporation
AE Development Group, Inc. Connecticut 100.00
Aetna Casualty & Surety Connecticut 100.00 Insurance company
Company of America
Aetna Casualty & Surety Canada 100.00
Company of Canada
Aetna Casualty & Surety Illinois 100.00 Insurance company
Company of Illinois
Aetna Casualty Company of Connecticut 100.00 Insurance company
Connecticut
Aetna Commercial Insurance Connecticut 100.00 Insurance company
Company
Aetna Excess and Surplus Connecticut 100.00 Insurance company
Lines Company
Aetna Financial Futures, Connecticut 100.00
Inc.
Aetna Lloyds of Texas Texas 100.00 Insurance company
Insurance Company
Aetna National Accounts United Kingdom 100.00 Insurance company
U.K. Limited
Aetna Opportunity Connecticut 100.00
Corporation
Aetna Property Services, Delaware 100.00
Inc.
AFF, Inc. Connecticut 100.00
Axia Services, Inc. New York 100.00
Farmington Management, Inc. Connecticut 100.00
The Farmington Casualty Connecticut 100.00 Insurance company
Company
</TABLE>
5
<PAGE> 101
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly or
Indirectly by
State of Travelers Principal
Company Organization Group Inc. Business
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Urban Diversified Connecticut 100.00
Properties, Inc.
The Standard Fire Insurance Connecticut 100.00 Insurance company
Company
AE Properties, Inc. California 100.00
Aetna Insurance Company Connecticut 100.00 Insurance company
Aetna Insurance Company of Illinois 100.00 Insurance company
Illinois
Aetna Personal Security Connecticut 100.00 Insurance company
Insurance Company
Community Rehabilitation Connecticut 100.00
Investment Corporation
The Automobile Insurance Connecticut 100.00 Insurance company
Company of Hartford,
Connecticut
The Travelers Indemnity Company Connecticut 100.00 P-C insurance
Commercial Insurance Delaware 100.00 Holding company
Resources, Inc.
Gulf Insurance Company Missouri 100.00 P-C insurance
Atlantic Texas 100.00 P-C insurance
Insurance Company
Gulf Risk Delaware 100.00 Claims/risk management
Services, Inc.
Gulf Underwriters North Carolina 100.00 P-C ins/surplus lines
Insurance Company
Select Insurance Texas 100.00 P-C insurance
Company
Countersignature Agency, Florida 100.00 Countersign ins
Inc. policies
First Trenton Indemnity New Jersey 100.00 P-C insurance
Company
Laramia Insurance Agency, North Carolina 100.00 Flood insurance
Inc.
Lynch, Ryan & Associates, Massachusetts 100.00 Cost containment
Inc.
</TABLE>
6
<PAGE> 102
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly or
Indirectly by
State of Travelers Principal
Company Organization Group Inc. Business
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
The Charter Oak Fire Connecticut 100.00 P-C insurance
Insurance Company
The Parker Realty and Vermont 58.00 Real estate
Insurance Agency, Inc.
The Phoenix Insurance Connecticut 100.00 P-C insurance
Company
Constitution State Montana 100.00 Service company
Service Company
The Travelers Georgia 100.00 P-C insurance
Indemnity Company
of America
The Travelers Connecticut 100.00 Insurance
Indemnity Company
of Connecticut
The Travelers Illinois 100.00 P-C insurance
Indemnity Company
of Illinois
The Premier Insurance Massachusetts 100.00 Insurance
Company of Massachusetts
The Travelers Home and Indiana 100.00 P-C insurance
Marine Insurance Company
The Travelers Indemnity Missouri 100.00 P-C insurance
Company of Missouri
The Travelers Lloyds Texas 100.00 Non-life insurance
Insurance Company
TI Home Mortgage Brokerage, Delaware 100.00 Mortgage brokerage
Inc. services
TravCo Insurance Company Indiana 100.00 P-C insurance
Travelers Bond Investments, Connecticut 100.00 Bond investments
Inc.
Travelers General Agency of Hawaii 100.00 Insurance agency
Hawaii, Inc.
Travelers Medical Delaware 100.00 Managed care
Management Services Inc.
Travelers Specialty Connecticut 100.00 Insurance management
Property Casualty Company,
Inc.
VIPortfolio Agency, Inc. Delaware 100.00 Insurance agency
Primerica Finance Corporation Delaware 100.00 Holding company
</TABLE>
7
<PAGE> 103
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly or
Indirectly by
State of Travelers Principal
Company Organization Group Inc. Business
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PFS Distributors, Inc. Georgia 100.00 General partner
PFS Investments Inc. Georgia 100.00 Broker dealer
PFS T.A., Inc. Delaware 100.00 Joint venture partner
Primerica Financial Services Home Mortgages, Georgia 100.00 Mortgage loan broker
Inc.
Primerica Financial Services, Inc. Nevada 100.00 General agency
Primerica Financial Services Agency of New New York 100.00 General agency
York, Inc. licensing
Primerica Financial Services Insurance Connecticut 100.00 General agency
Marketing of Connecticut, Inc. licensing
Primerica Financial Services Insurance Idaho 100.00 General agency
Marketing of Idaho, Inc. licensing
Primerica Financial Services Insurance Nevada 100.00 General agency
Marketing of Nevada, Inc. licensing
Primerica Financial Services Insurance Pennsylvania 100.00 General agency
Marketing of Pennsylvania, Inc. licensing
Primerica Financial Services Insurance United States Virgin 100.00 General agency
Marketing of the Virgin Islands, Inc. Islands licensing
Primerica Financial Services Insurance Wyoming 100.00 General agency
Marketing of Wyoming, Inc. licensing
Primerica Financial Services Insurance Delaware 100.00 General agency
Marketing, Inc. licensing
Primerica Financial Services of Alabama, Alabama 100.00 General agency
Inc. licensing
Primerica Financial Services of New New Mexico 100.00 General agency
Mexico, Inc. licensing
Primerica Insurance Agency of Massachusetts 100.00 General agency
Massachusetts, Inc. licensing
Primerica Insurance Marketing Services of Puerto Rico 100.00 Insurance agency
Puerto Rico, Inc.
Primerica Insurance Services of Louisiana, Louisiana 100.00 General agency
Inc. licensing
Primerica Insurance Services of Maryland, Maryland 100.00 General agency
Inc. licensing
</TABLE>
8
<PAGE> 104
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly or
Indirectly by
State of Travelers Principal
Company Organization Group Inc. Business
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Primerica Services, Inc. Georgia 100.00 Print operations
RCM Acquisition Inc. Delaware 100.00 Investments
SCN Acquisitions Company Delaware 100.00 Investments
SL&H Reinsurance, Ltd. Nevis 100.00 Reinsurance
Southwest Service Agreements, Inc. North Carolina 100.00 Warranty/service
agreements
Southwest Warranty Corporation Florida 100.00 Extended automobile
warranty
CCC Holdings, Inc. Delaware 100.00 Holding company
Commercial Credit Company Delaware 100.00 Holding company.
American Health and Life Insurance Company Maryland 100.00 LH&A Insurance
Brookstone Insurance Company Vermont 100.00 Insurance managers
CC Finance Company, Inc. New York 100.00 Consumer lending
CC Financial Services, Inc. Hawaii 100.00 Financial services
CCC Fairways, Inc. Delaware 100.00 Investment company
City Loan Financial Services, Inc. Ohio 100.00 Consumer finance
Commercial Credit Banking Corporation Oregon 100.00 Consumer finance
Commercial Credit Consumer Services, Inc. Minnesota 100.00 Consumer finance
Commercial Credit Corporation <AL> Alabama 100.00 Consumer finance
Commercial Credit Corporation <CA> California 100.00 Consumer finance
Commercial Credit Corporation <IA> Iowa 100.00 Consumer finance
</TABLE>
9
<PAGE> 105
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly or
Indirectly by
State of Travelers Principal
Company Organization Group Inc. Business
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial Credit of Alabama, Inc. Delaware 100.00 Consumer lending
Commercial Credit Corporation <KY> Kentucky 100.00 Consumer finance
Certified Insurance Agency, Inc. Kentucky 100.00 Insurance agency
Commercial Credit Investment, Inc. Kentucky 100.00 Investment company
National Life Insurance Agency of Kentucky 100.00 Insurance agency
Kentucky, Inc.
Union Casualty Insurance Agency, Inc. Kentucky 100.00 Insurance agency
Commercial Credit Corporation <MD> Maryland 100.00 Consumer finance
Action Data Services, Inc. Missouri 100.00 Data processing
Commercial Credit Plan, Incorporated Oklahoma 100.00 Consumer finance
<OK>
Commercial Credit Corporation <NY> New York 100.00 Consumer finance
Commercial Credit Corporation <SC> South Carolina 100.00 Consumer finance
Commercial Credit Corporation <WV> West Virginia 100.00 Consumer finance
Commercial Credit Corporation NC North Carolina 100.00 Consumer finance
Commercial Credit Europe, Inc. Delaware 100.00 Inactive
Commercial Credit Far East Inc. Delaware 100.00 Inactive
Commercial Credit Insurance Services, Inc. Maryland 100.00 Insurance broker
Commercial Credit Insurance Agency Mississippi 100.00 Insurance agency
(P&C) of Mississippi, Inc.
Commercial Credit Insurance Agency of Alabama 100.00 Insurance agency
Alabama, Inc.
Commercial Credit Insurance Agency of Kentucky 100.00 Insurance agency
Kentucky, Inc.
</TABLE>
10
<PAGE> 106
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly or
Indirectly by
State of Travelers Principal
Company Organization Group Inc. Business
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial Credit Insurance Agency of Massachusetts 100.00 Insurance agency
Massachusetts, Inc.
Commercial Credit Insurance Agency of Nevada 100.00 Credit LH&A, P-C
Nevada, Inc. insurance
Commercial Credit Insurance Agency of New Mexico 100.00 Insurance
New Mexico, Inc. agency/Broker
Commercial Credit Insurance Agency of Ohio 100.00 Insurance
Ohio, Inc. agency/broker
Commercial Credit International, Inc. Delaware 100.00 Holding company
Commercial Credit International Oregon 100.00 International lending
Banking Corporation
Commercial Credit Corporation Canada 100.00 Second mortgage loans
CCC Limited
Commercial Credit Services do Brazil 99.00 Inactive
Brazil Ltda.
Commercial Credit Services Belgium Belgium 100.00 Inactive
S.A.
Commercial Credit Limited Delaware 100.00 Inactive
Commercial Credit Loan, Inc. <NY> New York 100.00 Consumer finance
Commercial Credit Loans, Inc. <DE> Delaware 100.00 Consumer finance
Commercial Credit Loans, Inc. <OH> Ohio 100.00 Consumer finance
Commercial Credit Loans, Inc. <VA> Virginia 100.00 Consumer finance
Commercial Credit Management Corporation Maryland 100.00 Intercompany services
Commercial Credit Plan Incorporated <TN> Tennessee 100.00 Consumer finance
Commercial Credit Plan Incorporated <UT> Utah 100.00 Consumer finance
Commercial Credit Plan Incorporated of Delaware 100.00 Consumer finance
Georgetown
Commercial Credit Plan Industrial Loan Virginia 100.00 Consumer finance
Company
</TABLE>
11
<PAGE> 107
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly or
Indirectly by
State of Travelers Principal
Company Organization Group Inc. Business
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial Credit Plan, Incorporated <CO> Colorado 100.00 Consumer finance
Commercial Credit Plan, Incorporated <DE> Delaware 100.00 Consumer finance
Commercial Credit Plan, Incorporated <GA> Georgia 100.00 Consumer finance
Commercial Credit Plan, Incorporated <MO> Missouri 100.00 Consumer finance
Commercial Credit Securities, Inc. Delaware 100.00 Broker dealer
DeAlessandro & Associates, Inc. Delaware 100.00 Insurance consulting
Park Tower Holdings, Inc. Delaware 100.00 Holding company
CC Retail Services, Inc. Delaware 100.00 Leasing, financing
Troy Textiles, Inc. Delaware 100.00 Factoring. Company is
inactive.
COMCRES, Inc. Delaware 100.00 Inactive
Commercial Credit Development Delaware 100.00 Direct loan
Corporation
Myers Park Properties, Inc. Delaware 100.00 Inactive
Penn Re, Inc. North Carolina 100.00 Management company
Plympton Concrete Products, Inc. Delaware 100.00 Inactive
Resource Deployment, Inc. Texas 100.00 Management company
The Travelers Bank Delaware 100.00 Banking services
The Travelers Bank USA Delaware 100.00 Credit card bank
Travelers Home Equity, Inc. North Carolina 100.00 Financial services
CC Consumer Services of Alabama, Inc. Alabama 100.00 Financial services
</TABLE>
12
<PAGE> 108
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly or
Indirectly by
State of Travelers Principal
Company Organization Group Inc. Business
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CC Home Lenders Financial, Inc. Georgia 100.00 Financial services
CC Home Lenders, Inc. Ohio 100.00 Financial services
Commercial Credit Corporation <TX> Texas 100.00 Consumer finance
Commercial Credit Financial of Kentucky 100.00 Consumer finance
Kentucky, Inc.
Commercial Credit Financial of West West Virginia 100.00 Consumer finance
Virginia, Inc.
Commercial Credit Plan Consumer Pennsylvania 100.00 Financial services
Discount Company
Commercial Credit Services of Kentucky 100.00 Financial services.
Kentucky, Inc.
Travelers Home Equity Services, Inc. North Carolina 100.00 Financial services
Triton Insurance Company Missouri 100.00 P-C insurance
Verochris Corporation Delaware 100.00 Joint venture company
AMC Aircraft Corp. Delaware 100.00 Aviation
World Service Life Insurance Company Colorado 100.00 Life insurance
Greenwich Street Capital Partners, Inc. Delaware 100.00 Investments
Greenwich Street Investments, Inc. Delaware 100.00 Investments
Greenwich Street Capital Partners Offshore Delaware 100.00 Investments
Holdings, Inc.
Margco Holdings, Inc. Delaware 100.00 Holding company
Berg Associates New Jersey 100.00 Inactive
Berg Enterprises Realty, Inc. <NY> New York 100.00 Inactive
Dublin Escrow, Inc. California 100.00 Inactive
</TABLE>
13
<PAGE> 109
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly or
Indirectly by
State of Travelers Principal
Company Organization Group Inc. Business
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
M.K.L. Realty Corporation New Jersey 66.67 Holding company
MRC Holdings, Inc. Delaware 100.00 Real estate
The Berg Agency, Inc. <NJ> New Jersey 100.00 Inactive
Mirasure Insurance Company, Ltd. Bermuda 100.00 Inactive
Pacific Basin Investments Ltd. Delaware 100.00 Inactive
Primerica Corporation <WY> Wyoming 100.00 Inactive
Primerica, Inc. Delaware 100.00 Name saver
RCM Capital Trust Company California 100.00 Trust company
Smith Barney Corporate Trust Company Delaware 100.00 Trust company
Smith Barney Holdings Inc. Delaware 100.00 Holding company
Mutual Management Corp. New York 100.00 Inactive
R-H Capital, Inc. Delaware 100.00 Investments
R-H Sports Enterprises Inc Georgia 100.00 Sports representation
SB Cayman Holdings I Inc. Delaware 100.00 Holding company
Greenwich (Cayman) I Limited Cayman Islands 100.00 Corporate services
Greenwich (Cayman) II Limited Cayman Islands 100.00 Corporate services
Greenwich (Cayman) III Limited Cayman Islands 100.00 Corporate services
SB Cayman Holdings II Inc. Delaware 100.00 Holding company
SB Cayman Holdings III Inc. Delaware 100.00 Holding company
</TABLE>
14
<PAGE> 110
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly or
Indirectly by
State of Travelers Principal
Company Organization Group Inc. Business
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SB Cayman Holdings IV Inc. Delaware 100.00 Holding company
Smith Barney (Delaware) Inc. Delaware 100.00 Holding company
1345 Media Corp. Delaware 100.00 Holding company
Americas Avenue Corporation Delaware 100.00 Inactive
Corporate Realty Advisors, Inc. Delaware 100.00 Realty trust adviser
IPO Holdings Inc. Delaware 100.00 Holding company
Institutional Property Owners, Inc. V Delaware 100.00 Investments
Institutional Property Owners, Inc. Delaware 100.00 General partner
VI
MLA 50 Corporation Delaware 100.00 Limited partner
MLA GP Corporation Delaware 100.00 General partner
Municipal Markets Advisors Incorporated Delaware 100.00 Public finance
SBF Corp. Delaware 100.00 Merchant banking
investments
Smith Barney Acquisition Corporation Delaware 100.00 Offshore fund adviser
Smith Barney Global Capital Management, Delaware 100.00 Investment management
Inc.
Smith Barney Investment, Inc. Delaware 100.00 Inactive
Smith Barney Realty, Inc. Delaware 100.00 Investments
Smith Barney Risk Investors, Inc. Delaware 100.00 Investments
Smith Barney Venture Corp. Delaware 100.00 Investments
Smith Barney (Ireland) Limited Ireland 100.00 Fund management
</TABLE>
15
<PAGE> 111
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly or
Indirectly by
State of Travelers Principal
Company Organization Group Inc. Business
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Smith Barney Asia Inc. Delaware 100.00 Investment banking
Smith Barney Asset Management Group (Asia) Pte. Singapore 100.00 Asset management
Ltd.
Smith Barney Canada Inc. Canada 100.00 Investment dealer
Smith Barney Capital Services Inc. Delaware 100.00 Derivative product
transactions
Smith Barney Cayman Islands, Ltd. Cayman Islands 100.00 Securities trading
Smith Barney Commercial Corp. Delaware 100.00 Commercial credit
Smith Barney Commercial Corporation Asia Hong Kong 99.00 Commodities trading
Limited
Smith Barney Europe Holdings, Ltd. United Kingdom 100.00 Holding corp.
Smith Barney Europe, Ltd. United Kingdom 100.00 Securities brokerage
Smith Barney Shearson Futures, Ltd. United Kingdom 100.00 Inactive
Smith Barney Futures Management Inc. Delaware 100.00 Commodities pool
operator
Smith Barney Offshore Fund Ltd. Delaware 100.00 Commodity pool
Smith Barney Overview Fund PLC Dublin 100.00 Commodity fund
Smith Barney Inc. Delaware 100.00 Broker dealer
Institutional Property Owners, Inc. VII Delaware 100.00 Never activated
SBHU Life Agency, Inc. Delaware 100.00 Insurance brokerage
Robinson-Humphrey Insurance Services Georgia 100.00 Insurance brokerage
Inc.
Robinson-Humphrey Insurance Alabama 100.00 Insurance brokerage
Services of Alabama, Inc.
SBHU Life & Health Agency, Inc. Delaware 100.00 Insurance brokerage
</TABLE>
16
<PAGE> 112
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly or
Indirectly by
State of Travelers Principal
Company Organization Group Inc. Business
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SBHU Life Agency of Arizona, Inc. Arizona 100.00 Insurance brokerage
SBHU Life Agency of Indiana, Inc. Indiana 100.00 Insurance brokerage
SBHU Life Agency of Utah, Inc. Utah 100.00 Insurance brokerage
SBHU Life Insurance Agency of Massachusetts 100.00 Insurance brokerage
Massachusetts, Inc.
SBS Insurance Agency of Hawaii, Inc. Hawaii 100.00 Insurance brokerage
SBS Insurance Agency of Idaho, Inc. Idaho 100.00 Insurance brokerage
SBS Insurance Agency of Maine, Inc. Maine 100.00 Insurance brokerage
SBS Insurance Agency of Montana, Inc. Montana 100.00 Insurance brokerage
SBS Insurance Agency of Nevada, Inc. Nevada 100.00 Insurance brokerage
SBS Insurance Agency of North North Carolina 100.00 Insurance brokerage
Carolina, Inc.
SBS Insurance Agency of Ohio, Inc. Ohio 100.00 Insurance brokerage
SBS Insurance Agency of South Dakota, South Dakota 100.00 Insurance brokerage
Inc.
SBS Insurance Agency of Wyoming, Inc. Wyoming 100.00 Insurance brokerage
SBS Insurance Brokerage Agency of Arkansas 100.00 Insurance brokerage
Arkansas, Inc.
SBS Insurance Brokers of Kentucky, Kentucky 100.00 Insurance brokerage
Inc.
SBS Insurance Brokers of Louisiana, Louisiana 100.00 Insurance brokerage
Inc.
SBS Insurance Brokers of New New Hampshire 100.00 Insurance brokerage
Hampshire, Inc.
SBS Insurance Brokers of North North Dakota 100.00 Insurance brokerage
Dakota, Inc.
SBS Life Insurance Agency of Puerto Puerto Rico 100.00 Insurance brokerage
Rico, Inc.
</TABLE>
17
<PAGE> 113
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly or
Indirectly by
State of Travelers Principal
Company Organization Group Inc. Business
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SLB Insurance Agency of Maryland, Maryland 100.00 Insurance brokerage
Inc.
Smith Barney Life Agency Inc. Louisiana 100.00 Insurance brokerage
Smith Barney (France) S.A. France 100.00 Commodities trading
Smith Barney (Hong Kong) Limited Hong Kong 100.00 Broker dealer
Smith Barney (Netherlands) Inc. Delaware 100.00 Broker dealer
Smith Barney International Incorporated Oregon 100.00 Broker dealer
Smith Barney (Singapore) Pte Ltd Singapore 100.00 Commodities
Smith Barney Pacific Holdings, Inc. British Virgin 100.00 Holding company
Islands
Smith Barney (Asia) Limited Hong Kong 100.00 Broker dealer
Smith Barney (Pacific) Limited Hong Kong 100.00 Commodities dealer
Smith Barney Securities Pte Ltd Singapore 100.00 Securities brokerage
Smith Barney Research Pte. Ltd. Singapore 100.00 Inactive
The Robinson-Humphrey Company, Inc. Delaware 100.00 Broker dealer
Smith Barney Mortgage Brokers Inc. Delaware 100.00 Mortgage brokerage
Smith Barney Mortgage Capital Corp. Delaware 100.00 Mortgage-backed
securities
Smith Barney Mortgage Capital Group, Inc. Delaware 100.00 Mortgage trading
Smith Barney Mutual Funds Management Inc. Delaware 100.00 Investment management
Smith Barney Strategy Advisers Inc. Delaware 100.00 Investment management
E.C. Tactical Management S.A. Luxembourg 100.00 Investment management
</TABLE>
18
<PAGE> 114
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly or
Indirectly by
State of Travelers Principal
Company Organization Group Inc. Business
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Smith Barney Offshore, Inc. Delaware 100.00 Decathlon Fund advisor
Decathlon Offshore Limited Cayman Islands 100.00 Commodity fund
Smith Barney S.A. France 100.00 Commodities trading
Smith Barney Asset Management France SA France 100.00 Com. based asset
management
Smith Barney Shearson (Chile) Corredora de Chile 100.00 Insurance brokerage
Seguro Limitada
Structured Mortgage Securities Corporation Delaware 100.00 Mortgage-backed
securities
The Travelers Investment Management Company Connecticut 100.00 Investment advisor
Smith Barney Private Trust Company New York 100.00 Trust company.
Smith Barney Private Trust Company of Florida Florida 100.00 Trust company
Tinmet Corporation Delaware 100.00 Inactive
Travelers Services Inc. Delaware 100.00 Holding company
Tribeca Management Inc. Delaware 100.00
TRV Employees Investments, Inc. Delaware 100.00 Investments
TRV/RCM Corp. Delaware 100.00 Inactive
TRV/RCM LP Corp. Delaware 100.00 Inactive
</TABLE>
19
<PAGE> 115
Item 27. Number of Contract Owners
As of March 31, 1996, 14,598 contract owners held qualified and non-qualified
contracts offered by the Registrant.
Item 28. Indemnification
Section 33-320a of the Connecticut General Statutes ("C.G.S.") regarding
indemnification of directors and officers of Connecticut corporations provides
in general that Connecticut corporations shall indemnify their officers,
directors and certain other defined individuals against judgments, fines,
penalties, amounts paid in settlement and reasonable expenses actually incurred
in connection with proceedings against the corporation. The corporation's
obligation to provide such indemnification generally does not apply unless (1)
the individual is successful on the merits in the defense of any such
proceeding; or (2) a determination is made (by persons specified in the
statute) that the individual acted in good faith and in the best interests of
the corporation; or (3) the court, upon application by the individual,
determines in view of all of the circumstances that such person is fairly and
reasonably entitled to be indemnified, and then for such amount as the court
shall determine. With respect to proceedings brought by or in the right of the
corporation, the statute provides that the corporation shall indemnify its
officers, directors and certain other defined individuals, against reasonable
expenses actually incurred by them in connection with such proceedings, subject
to certain limitations.
C.G.S. Section 33-320a provides an exclusive remedy; a Connecticut corporation
cannot indemnify a director or officer to an extent either greater or less than
that authorized by the statute, e.g., pursuant to its certificate of
incorporation, by-laws, or any separate contractual arrangement. However, the
statute does specifically authorize a corporation to procure indemnification
insurance to provide greater indemnification rights. The premiums for such
insurance may be shared with the insured individuals on an agreed basis.
Travelers Group Inc. also provides liability insurance for its directors and
officers and the directors and officers of its subsidiaries, including the
Depositor. This insurance provides for coverage against loss from claims made
against directors and officers in their capacity as such, including, subject to
certain exceptions, liabilities under the Federal securities laws.
Rule 484 Undertaking
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liability (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
<PAGE> 116
Item 29. Principal Underwriter
(a) Tower Square Securities, Inc.
One Tower Square
Hartford, Connecticut 06183
Tower Square Securities, Inc. also serves as principal underwriter for the
following :
The Travelers Growth and Income Stock Account for Variable Annuities
The Travelers Quality Bond Account for Variable Annuities
The Travelers Money Market Account for Variable Annuities
The Travelers Timed Growth and Income Stock Account for Variable Annuities
The Travelers Timed Short-Term Bond Account for Variable Annuities
The Travelers Timed Aggressive Stock Account for Variable Annuities
The Travelers Timed Bond Account for Variable Annuities
The Travelers Fund U for Variable Annuities
The Travelers Fund VA for Variable Annuities
The Travelers Fund BD II for Variable Annuities
The Travelers Fund ABD for Variable Annuities
The Travelers Fund ABD II for Variable Annuities
The Travelers Fund UL for Variable Life Insurance
The Travelers Fund UL II for Variable Annuities
The Travelers Variable Life Insurance Separate Account One
The Travelers Variable Life Insurance Separate Account Three
The Travelers Separate Account QP for Variable Annuities
The Travelers Separate Account QP II for Variable Annuities
<TABLE>
<CAPTION>
(b)Name and Principal Positions and Offices Positions and Offices
Business Address * With Underwriter With Registrant
------------------ ---------------- -------------------
<S> <C> <C>
Russell H. Johnson Chairman and Chief Executive -----
Officer
Donald R. Munson, Jr. Director, President and Chief -----
Operating Officer
William F. Scully, III Member, Board of Directors, -----
Senior Vice President, Treasurer
and Chief Financial Officer
Cynthia P. Macdonald Vice President, Chief Compliance -----
Officer, Assistant Secretary
Jay S. Benet Member, Board of Directors -----
George C. Kokulis Member, Board of Directors -----
Warren H. May Member, Board of Directors -----
Kathleen A. McGah General Counsel and Secretary Assistant Secretary
Robert C. Hamilton Vice President -----
Tracey Kiff-Judson Second Vice President -----
Robin A. Jones Second Vice President -----
Whitney F. Burr Second Vice President -----
Marlene M. Ibsen Second Vice President -----
</TABLE>
<PAGE> 117
<TABLE>
<CAPTION>
(cont'd)
(b)Name and Principal Positions and Offices Positions and Offices
Business Address * With Underwriter With Registrant
- ------------------ ---------------- -------------------
<S> <C> <C>
John J. Williams, Jr. Director and Assistant Compliance -----
Officer
Susan M. Curcio Director and Operations Manager -----
Gregory C. Macdonald Director -----
Thomas P. Tooley Director -----
Nancy S. Waldrop Assistant Treasurer -----
</TABLE>
* Principal business address: One Tower Square, Hartford, Connecticut 06183
(c)Tower Square Securities, Inc. serves as the principal underwriter. The
compensation listed below is for the year ending December 31, 1995.
<TABLE>
<CAPTION>
Name of Net Underwriting Compensation on
Principal Discounts and Redemption or Brokerage Other
Underwriter Commissions Annuitization Commissions Compensation*
- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Tower Square $ 0 $ 0 $ 0 $ 0
Securities, Inc.
</TABLE>
Item 30. Location of Accounts and Records
(1)The Travelers Insurance Company
One Tower Square
Hartford, Connecticut 06183
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
The undersigned Registrant hereby undertakes:
(a)To file a post-effective amendment to this registration statement as
frequently as is necessary to ensure that the audited financial statements in
the registration statement are never more than sixteen months old for so long
as payments under the variable annuity contracts may be accepted;
(b)To include either (1) as part of any application to purchase a contract
offered by the prospectus, a space that an applicant can check to request a
Statement of Additional Information, or (2) a post card or similar written
communication affixed to or included in the prospectus that the applicant can
remove to send for a Statement of Additional Information; and
(c)To deliver any Statement of Additional Information and any financial
statements required to be made available under this Form N-4 promptly upon
written or oral request.
<PAGE> 118
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets the requirements of Securities Act
Rule 485(b) for effectiveness of this post-effective amendment to this
Registration Statement and has duly caused this post-effective amendment to
this Registration Statement to be signed on its behalf in the City of Hartford,
State of Connecticut, on April __,1996.
THE TRAVELERS FUND BD FOR VARIABLE ANNUITIES
(Registrant)
THE TRAVELERS INSURANCE COMPANY
(Depositor)
By: *IAN R. STUART
------------------------------
Ian R. Stuart
Vice President, Chief Financial Officer,
Chief Accounting Officer and Controller
Pursuant to the requirements of the Securities Act of 1933, this post-effective
amendment to this Registration Statement has been signed below by the following
persons in the capacities indicated on April __, 1996.
<TABLE>
<S> <C>
*ROBERT I. LIPP Director and Chairman of the Board
- --------------------------------------
(Robert I. Lipp)
*MICHAEL A. CARPENTER Director, President and Chief Executive Officer
- --------------------------------------
(Michael A. Carpenter)
*JAY S. FISHMAN Director
- --------------------------------------
(Jay S. Fishman)
*CHARLES O. PRINCE, III Director
- --------------------------------------
(Charles O. Prince, III)
*MARC P. WEILL Director
- --------------------------------------
(Marc P. Weill)
*IRWIN R. ETTINGER Director
- --------------------------------------
(Irwin R. Ettinger)
*DONALD T. DeCARLO Director
- --------------------------------------
(Donald T. DeCarlo)
*IAN R. STUART Vice President, Chief Financial Officer,
- -------------------------------------- Chief Accounting Officer and Controller
(Ian R. Stuart)
*By: /s/Ernest J. Wright
----------------------------------------------
Ernest J. Wright, Attorney-in-Fact
</TABLE>
<PAGE> 119
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
- ------------ ----------- ----------------
<S> <C>
1 Resolution of The Travelers Insurance Company Electronically
Board of Directors authorizing the establishment
of the Registrant.
3 Form of Distribution and Management Agreement among
the Registrant, The Travelers Insurance Company and
Travelers Equities Sales, Inc. (now known as Tower Square
Securities, Inc.) (Incorporated herein by reference to Exhibit
3 to Post-Effective Amendment No. 2 to the Registration
Statement on Form N-4, filed April 27, 1996.)
3(b). Form of Selling Agreement Electronically
4 Variable Annuity Contract. Electronically
5. Application Electronically
6(a) Charter of The Travelers Insurance Company, as
amended on October 19, 1994. (Incorporated herein
by reference to Exhibit 3(a)(i) to the Registration
Statement on Form S-2, File No. 33-58677, filed via
Edgar on April 18, 1995.)
6(b) By-Laws of The Travelers Insurance Company, as
amended on October 20, 1994. (Incorporated herein
by reference to Exhibit 3(b)(i) to the Registration
Statement on Form S-2, File No. 33-58677, filed via
Edgar on April 18, 1995.)
9 Opinion of Counsel as to the legality of securities being
registered by Registrant. (Incorporated herein by
reference to the Registrant's most recent 24f-2 Notice filed
on February 29, 1996.)
10(a) Consent of Coopers & Lybrand L.L.P., Independent Electronically
Accountants, to the inclusion of their report on the
audited financial statements of the Registrant and their
report on the consolidated financial statements of The Travelers
Insurance Company and subsidiaries contained in Part B of this
Registration Statement, and to the reference to such firm
as "Experts" in accounting and auditing.
</TABLE>
<PAGE> 120
<TABLE>
<S> <C>
10(b) Consent of KPMG Peat Marwick LLP, Independent Electronically
Auditors, to the inclusion of their report on the
consolidated financial statements of The Travelers
Insurance Company contained in Part B of this
Registration Statement, and to the reference to
such firm as "Experts" under the heading
"Independent Accountants."
13 Schedule for Computation of Total Return Electronically
Calculations - Standardized and Non-Standardized.
15(a) Powers of Attorney authorizing Ernest J. Wright or Electronically
Kathleen A. McGah as signatory for Jay S. Fishman
and Ian R. Stuart.
15(b) Powers of Attorney authorizing Jay S. Fishman or
Ernest J. Wright as signatory for Robert I. Lipp,
Charles O. Prince, III, Marc P. Weill, Irwin R. Ettinger
and Donald T. DeCarlo. (Incorporated herein by
reference to Exhibit 15(b) to Post-Effective Amendment
No. 15(b) to the Registration Statement on Form N-4,
filed April 27, 1995.)
15(d). Power of Attorney authorizing Jay S. Fishman or Electronically
Ernest J. Wright as signatory for Michael A. Carpenter.
</TABLE>
<PAGE> 1
EXHIBIT 1
RESOLUTION
I, ERNEST J. WRIGHT, Assistant Secretary of THE TRAVELERS INSURANCE
COMPANY, DO HEREBY CERTIFY that by unanimous consent action of the Board of
Directors of The Travelers Insurance Company effective the 7th day of May,
1982, the following resolutions were adopted:
VOTED: That pursuant to authority granted by Section 38a-154a of the
Connecticut General Statutes, the Chairman of the Board, the
President, or Chairman of the Finance Committee, or any one of
them acting alone, is authorized to establish a separate account
or accounts to invest in shares of investment companies advised by
affiliates of the Company pursuant to plans and contracts issued
and sold by the Company in connection therewith.
VOTED: That the proper officers are authorized to take such action as may
be necessary to register the separate account or accounts to be
established to hold shares of investment companies advised by
affiliates of the Company as a unit investment trust investment
company under the Investment Company Act of 1940; to file any
necessary or appropriate exemptive requests, and any amendments
thereto, for such separate account or accounts under the
Investment Company Act of 1940; to file a registration statement,
and any amendments, exhibits and other documents thereto, in order
to register plans and contracts of the Company and interests in
such separate account or accounts in connection therewith under
the Securities Act of 1933; and to take any and all action as may
in their judgment be necessary or appropriate in connection
therewith.
I FURTHER CERTIFY that by unanimous consent action of the Board of
Directors of The Travelers Insurance Company effective the 21st day of
September, 1994, the following resolution was adopted:
VOTED: That each officer and director who may be required, on their own
behalf and in the name and on behalf of the Company, to execute
one or more registration statements, and any amendments thereto,
under the Securities Act of 1933 and the Investment Company Act of
1940 relating to the separate account or accounts to be
established to invest in shares of investment companies is
authorized to execute a power of attorney appointing
representatives to act as their attorney and agent to execute said
registration statement, and any amendments thereto, in their name,
place and stead; and that the Secretary, or any Assistant
Secretary designated by the Secretary, is designated and appointed
the agent for service of process of the Company under the
Securities Act of 1933 and the Investment Company Act of 1940 in
connection with such registration statement, and any amendments
thereto, with all the powers incident to such appointment.
AND I DO FURTHER CERTIFY that the foregoing actions of the said
Board of Directors is still in full force and effect.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
THE TRAVELERS INSURANCE ANNUITY COMPANY at Hartford, Connecticut, this __th day
of April, 1996.
/s/Ernest J. Wright
Ernest J. Wright
Assistant Secretary
<PAGE> 1
EXHIBIT 3(b)
FORM OF
SELLING AGREEMENT
FOR VARIABLE CONTRACTS
ISSUED BY
TRAVELERS AFFILIATED INSURANCE COMPANIES
One Tower Square
Hartford, Connecticut 06183
Tower Square Securities, Inc. (hereafter referred to as TSSI) as
the Principal Underwriter, SMITH BARNEY INC. (hereafter referred to as the
Broker/Dealer), and SBHU LIFE AGENCY, INC. and each company identified on
Exhibit A to this Agreement (hereafter collectively referred to as SBHU), enter
into this agreement effective on __________, 1995 for the purpose of
authorizing the Broker/Dealer and SBHU, through its licensed individual agents
described in paragraph 4, to solicit applications for such variable life
insurance, variable annuity, and modified guaranteed annuity contracts (the
"Contract(s)") as may be issued by The Travelers Insurance Company, The
Travelers Life and Annuity Company, and any affiliated insurance companies
(hereafter referred to as "Insurance Companies" or in their individual
capacity, "Insurance Company") and identified by policy forms in the
Compensation Schedules attached to this agreement as they may be amended by the
Insurance Companies from time to time. The parties represent and agree as
follows:
1. The Insurance Companies are engaged in the issuance of
the Contracts in accordance with federal securities laws
and the applicable insurance laws of those states in
which the Contracts have been qualified for sale. The
Contracts may be considered securities under the
Securities Act of 1933; therefore, the offering and
distribution of the Contracts is made through TSSI as a
registered Broker/Dealer under the Securities Exchange
Act of 1934 and as a member of the National Association
of Securities Dealers, Inc. ("NASD"). The terms of the
offering of the Contracts are more particularly described
in the prospectus(es) for the Contracts.
2. The Broker/Dealer certifies that it is a registered
Broker/Dealer under the Securities Exchange Act of 1934
and a member of NASD. The Broker/Dealer agrees to abide
by all rules and regulations of the NASD, and to comply
with all applicable state and Federal laws and the rules
and regulations of authorized regulatory agencies
affecting the sale of the Contracts.
<PAGE> 2
3. SBHU certifies that it is licensed as an insurance agency
in accordance with the applicable insurance laws of those
states in which the Contracts have been qualified for
sale. Any provisions of this Agreement that must be
performed by an entity that is licensed as an insurance
agency will be carried out by SBHU. Broker/Dealer will
carry out such functions that must be performed by a
registered Broker/Dealer.
4. The Broker/Dealer will select persons to be employed and
supervised by it who will be trained and qualified to
solicit applications for the Contracts in conformance
with applicable state and Federal laws and regulations.
Persons so trained and qualified will be registered
representatives of the Broker/Dealer in accordance with
the rules of NASD and they will be properly licensed in
accordance with the insurance laws of those jurisdictions
in which the Contracts may be lawfully distributed and in
which they solicit applications for such Contracts. The
Insurance Company shall have ultimate authority to
determine whether it shall appoint or terminate a
particular registered representative as an agent of the
Insurance Company with the various state insurance
departments.
5. The Broker/Dealer will review all Contract proposals and
applications for suitability and for completeness and
correctness as to form. The Broker/Dealer will promptly
return to the applicant all applications, together with
any payments received therewith, deemed by the
Broker/Dealer to be unsuitable or not complete and
correct as to form. The Insurance Companies reserve the
right to reject any Contract application and return any
payment made in connection with an application which is
rejected. The Insurance Companies agree to promptly
notify the Broker/Dealer of any such rejection.
a. If the Broker/Dealer is soliciting the sale of
variable annuities or modified guaranteed
annuities, the Broker/Dealer will promptly
forward to the Insurance Companies, at addresses
provided by the Insurance Companies from time to
time, all of the necessary information from
applications taken by Broker/Dealer and found
suitable and in good form, together with all
payments received from such applications.
Broker/Dealer is responsible for accurately
communicating to the Insurance Companies
investment instructions for all business
submitted by Broker/Dealer to the Insurance
Companies. Contracts issued by the Insurance
Companies will be forwarded to the Broker/Dealer
for prompt delivery to the Contract owner. The
Broker/Dealer shall obtain and retain a receipt
for each Contract which Broker/Dealer delivers.
2
<PAGE> 3
b. If the Broker/Dealer is soliciting the sale of
variable life insurance, the Broker/Dealer will
promptly forward to one of the general agents
appearing on the Insurance Companies' most
current list of approved general agents for
variable life insurance (the "Approved General
Agent") all of the necessary information from
applications taken by Broker/Dealer and found
suitable and in good form, including accurate
investment instructions, together with all
payments received with such applications.
Contracts issued by the Insurance Companies will
be forwarded to the Approved General Agent, who
will forward them to the Broker/Dealer. The
Broker/Dealer shall obtain and retain a receipt
for each Contract which Broker/Dealer delivers.
The Broker/Dealer shall promptly return to the Insurance
Companies, or as reasonably directed by the Insurance
Companies, all undelivered Contracts and all receipts for
cancellation of Contracts that Broker/Dealer receives.
6. The Broker/Dealer will perform the selling functions
required by this agreement in accordance with the terms
and conditions of the then current prospectus(es)
applicable to the Contract and will make no
representations not included in the prospectus or in any
authorized supplemental material. No sales solicitation,
including the delivery of supplemental sales literature
or other such materials, shall occur, be delivered to, or
used with a prospective purchaser unless accompanied or
preceded by appropriate then current prospectus(es). Any
material prepared or used by the Broker/Dealer or its
registered representatives, which describes in whole or
in part or refers by name or form number to the Insurance
Companies' Contracts (including underlying investment
funds available under the Contracts), or uses the name of
the Insurance Companies or the logos or Service Marks of
the Insurance Companies, must be approved by the
Insurance Companies in writing prior to any such use.
7. The Insurance Companies represent and warrant that all
advertising, brochures and other materials developed by
them and delivered to Broker/Dealer a) have been read and
approved by the Insurance Companies; b) are in conformity
with the terms and conditions of the applicable
Contracts; c) meet the requirements of all federal, state
and local statutes and regulations applicable to the
Insurance Companies; and d) have been approved by any
regulatory authority whose approval of such material is
required, whether such approval is required before or
after such material is used.
3
<PAGE> 4
8. The Insurance Companies will not identify Broker/Dealer
in any advertising, publicity release or other material
intended for distribution to the public without securing
the prior written approval of Broker/Dealer.
9. The Insurance Companies shall give the Broker/Dealer
prior written notice of any change to the list of states
where the Insurance Companies' products are approved for
sale or to the regulatory status of the Insurance
Companies' products, within a reasonable amount of time
to permit the Broker/Dealer to act on such information.
10. The Insurance Companies shall not suspend sales of any
Contracts or amend any Contracts without giving prior
written notice to the Broker/Dealer. The Insurance
Companies shall provide such notice at least thirty days
prior to suspending sales or amending Contracts, except
where such suspension or amendment is:
(a) necessary for compliance with federal, state, or
local laws, regulations, or administrative
orders; or
(b) necessary to prevent administrative or financial
hardship to the Insurance Companies.
11. Commissions, allowances and any other fees payable to the
Broker/Dealer on sales of the Contracts solicited by the
Broker/Dealer will be paid to the Broker/Dealer, or as
necessary to meet any state insurance law requirements,
to SBHU, in accordance with the Compensation Schedule(s)
attached to this agreement as they may be amended from
time to time and in effect at the time the Contract
payments are received by the Insurance Companies (in the
case of annuities) or at the time applications are
received by the Insurance Companies (in the case of life
insurance), and in accordance with any administrative
procedures agreed to by the Insurance Companies and the
Broker/Dealer and in effect at the time such payments are
received by the Insurance Companies. The Insurance
Companies reserve the right to revise the Compensation
Schedules at any time upon written notice to
Broker/Dealer. Commission to the Broker/Dealer's
registered representative for Contracts solicited by the
registered representative and issued by the Insurance
Companies will be governed by agreement between the
Broker/Dealer and its registered representative and its
payment will be the responsibility of the Broker/Dealer.
12. If the Insurance Companies return all or a portion of a
premium paid with respect to a Contract, Broker/Dealer
shall be obligated to refund to the Insurance Companies
applicable commissions on the amount of such premium only
where:
4
<PAGE> 5
(a) the Contract solicited is returned not taken
under the policy "free look" provisions;
(b) premiums are refunded due to overpayments,
errors in billing or in the timing of automatic
premium collection deductions, or errors
resulting in policy reissue;
(c) the check delivered in payment of any Contract
premium does not clear and the premium is not
otherwise collected;
(d) the Contract is terminated or there is a refund
of premium and an act, error or omission of the
Broker/Dealer or its registered representative
materially contributed to the termination of the
Contract or the need to return premium;
(e) the application is rejected by the Insurance
Companies;
(f) the Insurance Companies are directed by a
judicial or regulatory authority to return
premium without assessment of a surrender
charge;
(g) the applicant's initial premium on a 1035
exchange is returned because the expected
rollover amount from another Contract is not
transferred due to the exchange not meeting the
legal requirements to qualify for a tax-free
exchange;
(h) the Insurance Companies return unearned premium
on a life insurance Contract as required by the
provisions of the Contract;
(i) the Insurance Companies determine that it has a
legal liability to return premiums on a life
insurance Contract within the first year after
the Contract is issued; or
(j) the Insurance Companies and Broker/Dealer
mutually agree to return all or a portion of a
premium paid with respect to a Contract.
13. This agreement will continue unless terminated by either
party upon thirty days prior written notice, except that
the Insurance Companies reserve the right to terminate
this agreement immediately, without notice, in the event
Broker/Dealer ceases to be a registered Broker/Dealer or
a member of the NASD. Failure of any party to terminate
this agreement for any of the causes set forth in this
agreement will not constitute a waiver of the right to
terminate this agreement at a later time for any of these
causes. After any termination of the Agreement, both
parties will continue to process any applications for
Contracts submitted by Broker/Dealer to the
5
<PAGE> 6
Insurance Companies prior to such termination, and the
Insurance Companies shall issue Contracts based on such
applications in accordance with the provisions of the
Agreement.
14. For the purpose of compliance with any applicable federal
or state securities laws or regulations promulgated under
them, the Broker/Dealer acknowledges and agrees that in
performing the Broker/Dealer services covered by this
agreement, it is acting in the capacity of an independent
broker and dealer as defined by the By-Laws of the NASD
and not as an agent or employee of either the Insurance
Companies or any registered investment company.
In furtherance of its responsibilities as a
Broker/Dealer, the Broker/Dealer warrants and represents
that it has established a system to supervise the
activities of its registered representatives and
associated persons that is designed to achieve compliance
with the applicable securities laws and regulations with
the rules of NASD, and the Broker/Dealer acknowledges
that it is responsible for such supervision and
compliance in connection with its solicitation and sale
of the Contracts.
The Broker/Dealer shall be responsible for compliance
with all state and federal laws and regulations
applicable to the Broker/Dealer's activities with respect
to the Contracts. The Broker/Dealer shall obtain proper
customer authorization and shall accurately and in a
timely fashion communicate to the Insurance Companies
investment instructions relating to the Contracts. Each
party to this agreement will hold harmless and indemnify
the Registered Investment Companies which are used to
fund the Contracts, the Insurance Companies or the
Broker/Dealer, as appropriate, for any loss or expense
suffered as a result of the violation or noncompliance by
that party or the Associated Persons of that party of any
applicable law or regulation or any provision of this
agreement, including the Insurance Companies as a result
of Broker/Dealer's inaccurate communication to the
Insurance Companies of investment instructions relating
to the Contracts, provided, however, that no party or any
of its employees or agents will be liable to the other
party for any indirect, special or consequential damages
arising out of or in connection with the performance of
any services pursuant to this Agreement.
15. During the term of this Agreement and after its
termination, the Insurance Companies agree that they will
keep confidential and will not use confidential
information obtained through this Agreement, which
includes, without limitation, the names, addresses and
telephone numbers of the Broker/Dealer's clients where
the Insurance Companies did not have a pre-existing
relationship with such client, for any purposes not
contemplated by this agreement, nor will the Insurance
Companies use
6
<PAGE> 7
such confidential information to solicit sales of goods
or services (including without limitation life, annuity,
and long-term care insurance), nor will the Insurance
Companies disclose such confidential information to any
other party without the Broker/Dealer's consent except as
necessary to carry out the duties contemplated by this
Agreement. The Insurance Companies will not attempt in
any organized fashion to actively induce representatives
of the Broker/Dealer to become independent agents of TSSI
or the Insurance Companies. The Insurance Companies
further agree that without prior approval of the
Broker/Dealer it will not contact registered
representatives of the Broker/Dealer except for the
purposes of servicing their clients' Contracts or for
providing wholesaling support for variable life insurance
Contracts to be issued by the Insurance Companies.
16. The Insurance Companies and the Broker/Dealer agree to
cooperate fully with each other in the event of any
material written customer complaints or regulatory
investigations or proceedings relating to activities
conducted pursuant to this Agreement. Each party shall
promptly notify the other of any such complaint or
investigation and shall consult with the other party
prior to sending any written response with respect to any
such complaint or investigation.
17. All notices to the Insurance Companies relating to this
agreement should be sent to the above address to the
attention of The Travelers Insurance Companies, FS Legal
Department, One Tower Square - 6SHS, Hartford,
Connecticut 06183. All notices to the Broker/Dealer or
SBHU will be duly given if mailed or faxed to the address
shown below to the attention of Jerald E. Hampton.
18. No modification, amendment, supplement to or waiver of
any provisions of the Agreement shall be binding upon the
parties hereto unless made in writing and duly signed by
both parties (except for a change in the Compensation
Schedule or the addition of new products where permitted
in the Agreement). A failure or delay of any party to
exercise any option provided in the Agreement or to
require at any time performance of any of the provisions
of the Agreement shall in no way be construed as a waiver
of such provision.
19. Neither party may assign the Agreement and/or any of its
rights and/or obligations thereunder to any entity that
is not affiliated to the assigning party, without the
other party's consent. The assigning party shall provide
written notice of any such assignment. TSSI reserves
the rights to designate, at its sole discretion, an
alternative Principal Underwriter for the distribution of
the Contracts covered by this Agreement. The designation
will constitute substitution of parties to this Agreement
with assumption of the rights and obligations created by
this agreement as applicable.
7
<PAGE> 8
20. All rules and procedures established by the Insurance
Companies must be reasonable, must not conflict with any
statutes or governmental rules or regulations, and must
be communicated to the Broker/Dealer before the
Broker/Dealer will be subject to them.
21. Should any portion of the Agreement for any reason be
held to be void in law or in equity, the Agreement shall
be construed insofar as is possible, as if such portion
had never been contained therein.
22. Unless otherwise directed by any regulatory authority or
the Contract Owner, the Insurance Companies will only
take instructions from the Broker/Dealer regarding
changes in agent of record.
23. The Broker/Dealer shall be entitled to receive any earned
compensation generated regardless of any events occurring
after the sale resulting in such compensation, including
the termination of this Agreement, unless the
Broker/Dealer ceases to be a registered Broker/Dealer or
member of the NASD, or if the payment of such
compensation would be prohibited by any applicable law or
regulatory authority.
24. The terms "Associated person," "Broker/Dealer," and
"member as used herein shall be defined consistently with
the definition of similar such terms as contained in
Article I of the NASD By-Laws. This Agreement will be
construed in accordance with the laws of the State of
Connecticut.
In reliance on the representations set forth and in consideration
of the undertakings described, the parties represented below do hereby Contract
and agree.
TOWER SQUARE SECURITIES, SMITH BARNEY INC.
INC. 399 GREENWICH STREET
NEW YORK, NEW YORK 10013
By By
---------------------------- --------------------------
Title Title
------------------------- -----------------------
Date of Execution Date of Execution
------------- ----------
Taxpayer I.D.
--------------
SBHU LIFE AGENCY OF SBHU LIFE AGENCY OF
MASSACHUSETTS, INC. OHIO, INC.
8
<PAGE> 9
By By
---------------------------- --------------------------
Title Title
------------------------- -----------------------
Date of Execution Date of Execution
------------- ----------
Taxpayer I.D. Taxpayer I.D.
----------------- --------------
SHEARSON LEHMAN HUTTON SBHU LIFE AGENCY OF
INSURANCE BROKERS OF NEW TEXAS, INC.
HAMPSHIRE, INC.
By By
---------------------------- --------------------------
Title Title
------------------------- -----------------------
Date of Execution Date of Execution
------------- ----------
Taxpayer I.D. Taxpayer I.D.
----------------- --------------
SBS INSURANCE BROKERS SBHU LIFE AGENCY, INC. AND
OF NORTH DAKOTA, INC. OTHER COMPANIES IDENTIFIED ON
EXHIBIT A
By By
---------------------------- --------------------------
Title Title
------------------------- -----------------------
Date of Execution Date of Execution
------------- ----------
Taxpayer I.D. Taxpayer I.D.
----------------- --------------
9
<PAGE> 10
EXHIBIT A
SMITH BARNEY INC. INSURANCE SUBSIDIARIES
Robinson Humphrey Insurance Services of Alabama, Inc.
SBHU Life Agency of Arizona, Inc.
SBS Insurance Brokerage Agency of Arkansas, Inc.
Shearson Lehman Hutton Insurance Agency of Hawaii, Inc.
SBS Insurance Agency of Idaho, Inc.
SBHU Life Agency of Indiana, Inc.
SBS Insurance Brokers of Kentucky, Inc.
Smith Barney Harris Upham Life Agency, Inc.
SBS Insurance Agency of Maine, Inc.
SBHU Life Agency of Massachusetts, Inc.
SBS Insurance Agency of Nevada, Inc.
Shearson Lehman Hutton Insurance Brokers of New Hampshire, Inc.
SBS Insurance Brokers of North Dakota, Inc.
SBHU Life Agency of Ohio, Inc.
SBHU Life Agency of Oklahoma, Inc.
SBS Insurance Agency of South Dakota, Inc.
SBHU Life Agency of Texas, Inc.
SBHU Life Agency of Utah, Inc.
SBS Insurance Agency of Wyoming, Inc.
10
<PAGE> 1
EXHIBIT 4
TheTRAVELERS
THE TRAVELERS INSURANCE COMPANY - One Tower Square - Hartford, Connecticut -
06183
A STOCK COMPANY
We are pleased to provide you the benefits of this Annuity Contract. Please
read your contract and all attached forms carefully.
RIGHT TO EXAMINE THIS CONTRACT
If this contract is returned to us at Our Office or to our Agent to be
cancelled within 20 days after its delivery to you, we will pay you
the Contract Value determined as of the next valuation after we
receive the Written Request at Our Office, plus any premium tax
charges and contract charges paid. After the contract is returned, it
will be considered as never in effect.
This contract is issued in consideration of the purchase payment. It is subject
to the terms and conditions stated on the attached pages, all of which are a
part of it.
Executed at Hartford, Connecticut
President
This is a legal contract between you and us. READ YOUR CONTRACT CAREFULLY
INDIVIDUAL VARIABLE ANNUITY CONTRACT
NON TAX QUALIFIED
LIFE ANNUITY COMMENCING AT MATURITY DATE
ELECTIVE OPTIONS NON-PARTICIPATING
ANNUITY PAYMENTS AND OTHER VALUES PROVIDED BY THIS CONTRACT, WHEN
BASED ON THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT, ARE
VARIABLE AND ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
Right to Examine this Contract Cover Page
Contract Specifications Page 3
Definitions Page 4
Owner, Beneficiary and Annuitant Provisions Pages 5 & 6
Purchase Payment and Valuation Provisions Pages 7 - 9
Death Benefit Provisions Page 10
Settlement Provisions Pages 11- 13
General Provisions Pages 14 & 15
Table of Values Page 16
Life Annuity Tables Pages 18 & 19
Any Riders or Endorsements follow the Life Annuity Tables.
</TABLE>
<PAGE> 3
CONTRACT SPECIFICATIONS
<TABLE>
<S> <C> <C>
OWNER
JOINT OWNER
ANNUITANT SPECIMEN VINTG NQUAL SB CA
CONTINGENT ANNUITANT
02/14/1996 CONTRACT DATE
CONTRACT NUMBER 000000 - 7777777 (SB)
09/01/2000 MATURITY DATE
MONTHLY LIFE Annuity
</TABLE>
PURCHASE PAYMENTS:
Minimum Initial Purchase Payment: $5,000
Minimum Subsequent Purchase Payment: $500
Maximum Purchase Payment: $1,000,000 unless we consent to a larger amount
<TABLE>
<CAPTION>
SUBACCOUNT
SEPARATE ACCOUNT: THE TRAVELERS FUND BD DEDUCTION PER DAY
-----------------------
<S> <C>
Underlying Funds -
Smith Barney/Travelers Series Fund, Inc.
Smith Barney Income & Growth Portfolio .0000321
Alliance Growth Portfolio .0000321
American Capital Enterprise Portfolio .0000321
Smith Barney International Equity Portfolio .0000321
Smith Barney Pacific Basin Portfolio .0000321
TBC Managed Income Portfolio .0000321
Putnam Diversified Income Portfolio .0000321
GT Global Strategic Income Portfolio .0000321
Smith Barney High Income Portfolio .0000321
MFS Total Return Portfolio .0000321
Smith Barney Money Market Portfolio .0000321
Smith Barney Series Fund
Total Return Portfolio .0000321
</TABLE>
Information about the Separate Account is provided in the prospectus for Fund
BD.
FIXED ACCOUNT GUARANTEED INTEREST PERIODS: The initial rate for any deposit is
guaranteed for one year from date of deposit. Subsequent renewal rates will be
guaranteed for the calendar quarter.
TRANSFER CHARGE: $0.00
You may transfer up to 15% of the Fixed Account value to any of the
Sub-Accounts twice a year during the 30 days following the semi-annual Contract
Date anniversary.
<PAGE> 4
AMOUNTS DEDUCTED ON SURRENDER (FIRST IN, FIRST OUT BASIS):
<TABLE>
<CAPTION>
YEARS SINCE PURCHASE PERCENT OF PURCHASE
PAYMENT WAS PAID PAYMENTS (NOT PREVIOUSLY SURRENDERED)
-------------------------------------
<S> <C>
1 6%
2 6%
3 6%
4 3%
5 2%
6 1%
7 AND THEREAFTER 0%
</TABLE>
After the first Contract Year, you may take partial surrenders annually of up
to 15% of your Contract Value as of the first Valuation Date of any given
Contract Year without imposition of amounts deducted on surrender.
CONTRACT CHARGE
$30.00, Annually. This charge will be taken on the fourth Friday of August of
each year. This charge will be waived if your Contract Value is equal or
greater than $40,000 on the date the charge would be taken. No Contract Charge
will be deducted from the Fixed Account.
ASSUMED DAILY NET INVESTMENT FACTOR is 1.000081 for all Sub-Accounts.
TERMINATION
We reserve the right to terminate this contract when the Contract Value is less
than the Termination Amount of $1,000 and no purchase payments have been made
for at least two years.
<PAGE> 5
DEFINITIONS
(a) ACCOUNT(S) --the Sub-Accounts and/or the Fixed Account under this
contract.
(b) ACCUMULATION UNIT -- an accounting unit of measure used to calculate the
value of this contract before Annuity payments begin.
(c) AGE--age last birthday.
(d) ANNUITANT--the person on whose life the Maturity Date and Annuity
payments depend.
(e) ANNUITY UNIT--an accounting unit of measure used to calculate the amount
of Annuity payments.
(f) CODE--the Internal Revenue Code of 1986, as amended, and all related laws
and regulations which are in effect during the term of this contract.
(g) CONTRACT DATE --the date on which the contract is issued.
(h) CONTRACT YEARS--twelve month periods beginning with the Contract Date.
(i) DEATH REPORT DATE--the Valuation Date coincident with or next following
the day on which we have received 1) Due Proof of Death and 2) Written
Request for an election of a single sum payment or an alternate
Settlement Option as described in the contract.
(j) DUE PROOF OF DEATH--(i) a copy of a certified death certificate; (ii) a
copy of a certified decree of a court of competent jurisdiction as to the
finding of death; (iii) a written statement by a medical doctor who
attended the deceased; or (iv) any other proof satisfactory to us.
(k) FIXED ACCOUNT--an account that consists of all the assets under this
contract other than those in the Separate Account.
(l) MATURITY DATE--the date on which the Annuity or Income payments are to
begin.
(m) OUR OFFICE--the Home Office of The Travelers Insurance Company or any
other office which we may designate for the purpose of administering this
contract.
(n) RECORDED--a Written Request is recorded when the information is noted in
our file for this contract.
(o) SEPARATE ACCOUNTS--those Separate Accounts indicated in the CONTRACT
SPECIFICATIONS which we established for this class of contracts and
certain other contracts.
(p) SETTLEMENT OPTION--an Annuity or Income option elected under this
contract.
(q) SUB-ACCOUNT--that portion of the assets of a Separate Account which is
allocated to a particular Underlying Fund.
(r) UNDERLYING FUND -- an open-end investment management company indicated in
the CONTRACT SPECIFICATIONS, which serves as an investment option under
the Separate Account.
(s) VALUATION DATE--a date on which a Sub-Account is valued.
(t) VALUATION PERIOD--the period between successive valuations.
(u) WE, US, OUR--The Travelers Insurance Company.
(v) WRITTEN REQUEST--written information including requests for contract
changes sent to us in a form and content satisfactory to us and received
at Our Office.
(w) YOU, YOUR--the owner including a joint owner.
Page 4
<PAGE> 6
OWNER, BENEFICIARY AND ANNUITANT PROVISIONS
OWNER
This contract belongs to the owner shown on the CONTRACT SPECIFICATIONS or to
any person subsequently named in a Written Request of transfer of owner as
provided below. As owner, you have sole power during the Annuitant's lifetime
to exercise any rights and to receive all benefits given in this contract
provided you have not named an irrevocable Beneficiary and provided the
contract is not assigned.
You will be the recipient of all payments while the Annuitant is alive unless
you direct them to an alternate recipient under a Recorded payment direction.
An alternate recipient under a payment direction does not become the owner. A
payment direction is revocable by you at any time by Written Request giving 30
days advance notice.
JOINT OWNER
Joint owners may be named in a Written Request prior to the Contract Date.
Joint owners may independently exercise transfers between Accounts. All other
rights of ownership must be exercised by joint action. Joint owners own equal
shares of any benefits accruing or payments made to them. All rights of a joint
owner end at death if another joint owner survives. The entire interest of the
deceased joint owner in this contract will pass to the surviving joint owner.
SUCCEEDING OWNER
If joint owners are not named, you may name a succeeding owner by Written
Request prior to the Contract Date . The succeeding owner becomes the owner if
living when you die. The succeeding owner has no interest in this contract
before then. You may change or delete a succeeding owner by Written Request.
TRANSFER OF OWNER
You may transfer ownership by Written Request. You may not revoke any transfer
after the effective date. Once the transfer of owner is Recorded by us, it will
take effect as of the date of your Request, subject to any payments made or
other actions taken by us before the recording.
Unless provided otherwise, a transfer does not affect the interest of any
Beneficiary designated prior to the effective date of the transfer.
We are not responsible for advising you or the proposed new owner about the
income tax consequences of a transfer of owner.
ASSIGNMENT
You may collaterally assign ownership of all or a portion of this contract by
Written Request without the approval of any Beneficiary unless irrevocably
named. You may not exercise any rights of ownership while the assignment
remains in effect without the approval of the collateral assignee. We are not
responsible for the validity of any assignment. Once the collateral assignment
is Recorded by us, it will take effect as of the date of your Written Request,
subject to any payments made or other actions taken by us before the Request is
received.
If a claim is made based on an assignment, we may require proof of interest of
the claimant. A Recorded assignment takes precedence over any rights of a
Beneficiary. Any amounts due under a Recorded assignment will be paid in a
single sum.
We are not responsible for advising you about the income tax consequences of an
assignment.
CREDITOR CLAIMS
To the extent permitted by law, no right or benefit of the owner or Beneficiary
under this contract shall be subject to the claims of creditors or any legal
process except as may be provided by an assignment.
BENEFICIARY
The Beneficiary is the party named in a Written Request. The Beneficiary has
the right to receive any remaining contractual benefits upon the death of the
Annuitant, or under certain circumstances, upon the death of the owner. If
there is more than one Beneficiary surviving the Annuitant, the Beneficiaries
will share equally in benefits unless different shares are Recorded with us by
Written Request prior to the death of the Annuitant.
Unless an irrevocable Beneficiary has been named, you have the right to change
any Beneficiary by Written Request during the lifetime of the Annuitant and
while the contract continues.
<PAGE> 7
Once a change in Beneficiary is Recorded by us, it will take effect as of the
date of the Written Request, subject to any payments made or other actions
taken by us before the recording.
If no Beneficiary has been named by you, or if no Beneficiary is living when
the Annuitant dies, the interest of any Beneficiary will pass:
a. if you are living, to you;
b. if you have died and there is a surviving joint owner, to the joint
owner;
c. if you have died and there is a surviving succeeding owner, to the
succeeding owner, or;
d. if you have died and there is neither a joint owner nor succeeding
owner surviving, to your estate.
ANNUITANT
The Annuitant is the individual shown on the CONTRACT SPECIFICATIONS on whose
life the first Annuity payment is made. The Annuitant may not be changed after
the Contract Date.
CONTINGENT ANNUITANT
You may name one individual as a contingent annuitant by Written Request prior
to the Contract Date. A contingent annuitant may not be changed, deleted or
added to the contract after the Contract Date.
If the Annuitant dies prior to the Maturity Date while this contract is in
effect and while the contingent annuitant is living:
a. the death benefit will not be payable upon the Annuitant's death;
b. the contingent annuitant becomes the Annuitant; and
c. all other rights and benefits provided by this contract will
continue in effect.
When a contingent annuitant becomes the Annuitant, the Maturity Date remains
the same as previously in effect, unless otherwise provided.
<PAGE> 8
PURCHASE PAYMENT AND VALUATION PROVISIONS
PURCHASE PAYMENTS
PURCHASE PAYMENT
Purchase payments are the payments you make for this contract and the benefits
it provides. An initial lump sum purchase payment must be made to the contract
and is due and payable before the contract becomes effective. Each purchase
payment is payable as shown on the CONTRACT SPECIFICATIONS to us at Our Office
or to one of our authorized representatives. No purchase payments after the
initial purchase payment are required to continue this contract in force,
except as provided in the "Termination" provision.
Net purchase payments are that part of your purchase payments applied to the
Contract Value. A net purchase payment is equal to the purchase payment less
any applicable premium tax charge.
ALLOCATION OF PURCHASE PAYMENTS
We will apply any net purchase payments to provide Accumulation Units of
selected Sub-Accounts and/or the Fixed Account of this contract. The initial
payment will be applied within two business days following its receipt at Our
Office. Any subsequent purchase payments will be applied as of the next
valuation following receipt of those payments at Our Office. The net purchase
payment will be allocated to the Accounts in the proportion specified by you
for this contract. By Written Request, you may change your choice of Accounts
or allocation percentages. The available Underlying Funds to which Sub-Account
assets are allocated are shown on the CONTRACT SPECIFICATIONS; funds may be
subsequently added or may be deleted.
SUB-ACCOUNT VALUATION
NUMBER OF ACCUMULATION UNITS
The number of Accumulation Units to be credited to each Sub-Account once a
purchase payment has been received by us will be determined by dividing the net
purchase payment applied to that Sub-Account by the then Accumulation Unit
Value of that Sub-Account.
ACCUMULATION UNIT VALUE
The initial value of an Accumulation Unit for each Sub-Account was set at
$1.00. We determine the value of an Accumulation Unit in each Sub-Account on
each Valuation Date by multiplying the value on the immediately preceding
Valuation Date by the net investment factor for that Sub-Account for the
Valuation Period just ended.
The value of an Accumulation Unit on any date other than a Valuation Date will
be equal to its value as of the next Valuation Date .
NET INVESTMENT FACTOR
The net investment factor is a factor applied to measure the investment
performance of a Sub-Account from one Valuation Period to the next. The net
investment factor for a Sub-Account for any Valuation Period is equal to the
sum of 1.0000 plus the net investment rate.
Each Sub-Account's net investment rate for a Valuation Period is equal to the
gross investment rate for that Sub-Account, less the applicable Sub-Account
deduction for the Valuation Period.
All Sub-Account deductions are shown on the CONTRACT SPECIFICATIONS.
The gross investment rate of a Sub-Account for a Valuation Period is equal to
(l) divided by (2) where (1) is:
a. investment income, plus
b. capital gains and losses, whether realized or unrealized; less
c. a deduction for any tax levied against the Separate Account and its
Underlying Funds; and
(2) is the amount of the assets at the beginning of the Valuation Period.
<PAGE> 9
The gross investment rate for a Sub-Account may be either positive or negative.
If a Sub-Account is invested in shares of an Underlying Fund, assets are based
on the net asset value of the Underlying Fund. Investment income includes any
distribution whose ex-dividend date occurs during the Valuation Period.
FIXED ACCOUNT VALUATION
NUMBER OF ACCUMULATION UNITS--We will determine the number of Accumulation
Units to be credited to the Fixed Account on receipt of a purchase payment by
dividing the net purchase payment applied to the Fixed Account by the then
dollar value of one Accumulation Unit Value of the Fixed Account.
ACCUMULATION UNIT VALUE--We determine the value of an Accumulation Unit in the
Fixed Account on any day by multiplying the value on the immediately preceding
day by the net interest factor for the day on which the value is being
determined.
NET INTEREST FACTOR--The net interest factor for any day is the guaranteed net
interest rate which is equivalent to an effective annual interest rate of
3.00%, plus 1.0000. The method of crediting additional interest will be at our
discretion.
Interest is declared in advance. Before Annuity or Income payments begin, we
may credit the Fixed Account with annual interest rates higher than the
minimum guaranteed interest rate of 3.00%. Interest rates may be higher or
lower than the initial interest rates, but not less than the minimum guaranteed
interest rate of 3.00%. Additional amounts may be credited by us at our
discretion for the guaranteed interest periods shown on the CONTRACT
SPECIFICATIONS.
TRANSFER BETWEEN ACCOUNTS
You may transfer all or any part of the Contract Value from one Sub-Account to
any other Sub-Account at any time up to 30 days before the due date of the
first Annuity or Income payment. Additionally, you may transfer a part of the
Fixed Account value to any of the Sub-Accounts, twice a year during the 30 days
following the semi-annual Contract Date anniversary in the amount shown on the
CONTRACT SPECIFICATIONS.
Amounts may generally be transferred from the Sub-Accounts to the Fixed Account
at any time, up to 30 days before the due date of the first Annuity or Income
payment. Amounts previously transferred from the Fixed Account to the
Sub-Accounts may not be transferred back to the Fixed Account for a period of
at least 6 months from the date of transfer. We reserve the right to limit the
number of transfers from one Sub-Account to any other Sub-Account or to the
Fixed Account. We will not limit these transfers to less than one in any six
month period.
Transfers between Accounts will result in the addition or deletion of
Accumulation Units having a total value equal to the dollar amount being
transferred to or from a particular Account. The number of Accumulation Units
will be determined by using the Accumulation Unit Value of the Accounts
involved as of the next valuation after we receive notification of request for
transfer. Transfers will be subject to any applicable Transfer charge stated
on the CONTRACT SPECIFICATIONS.
CONTRACT VALUES
CONTRACT VALUE
The Contract Value of this contract on any date equals the sum of the
accumulated values in the Accounts. The accumulated value in an Account equals
the number of outstanding Accumulation Units credited to that Account,
multiplied by the then Accumulation Unit Value for that Account.
The Guaranteed Value of the Fixed Account equals the accumulated value of the
Fixed Account calculated by using the guaranteed net interest factor. The
Guaranteed Values of the Fixed Account are shown in the Table of Values.
CONTRACT CHARGE
A Contract Charge in the amount and for the period shown on the CONTRACT
SPECIFICATIONS will be deducted from the Contract Value to reimburse us for
administrative expenses relating to the contract. The Contract Charge will be
deducted by surrendering on a pro rata basis Accumulation Units from all
Sub-Accounts in which you have an interest.
We will deduct the charge on a pro rata basis if the contract has been in
effect for less than a full period on the date a Contract Charge is deducted.
The Contract Charge will also be prorated upon full surrender or termination of
the contract.
<PAGE> 10
CASH SURRENDER
You may elect by Written Request to receive the Cash Surrender Value of this
contract before the due date of the first Annuity or Income payment and without
the consent of any Beneficiary unless irrevocably named. You may elect either a
full or partial surrender of the Cash Surrender Value. In the case of a full
surrender, this contract will be cancelled. A partial surrender will result in
a reduction in your Contract Value. If you have a balance in more than one
Account, your Contract Value will be reduced from all your Accounts on a pro
rata basis, unless you request otherwise.
The Cash Surrender Value will be determined as of the next valuation following
receipt of your Written Request. We may delay payment of the Cash Surrender
Value of the Sub-Accounts for a period of not more than seven days after we
receive your Written Request. We may delay payment of the Cash Surrender Value
of the Fixed Account for a period of not more than six months after we receive
your Written Request.
CASH SURRENDER VALUE
The Cash Surrender Value is equal to the Contract Value less any amounts
deducted on surrender which are shown on the CONTRACT SPECIFICATIONS and any
applicable premium tax not previously deducted.
The Guaranteed Cash Surrender Value of the Fixed Account equals the Guaranteed
Value of the Fixed Account less any amounts deducted on surrender which are
shown on the CONTRACT SPECIFICATIONS and less any applicable premium tax not
previously deducted. For Guaranteed Cash Surrender Values of the Fixed Account,
see the Table of Values.
CONTRACT CONTINUATION
Except as provided in the "Termination" provision, this contract does not
require continuing purchase payments and will automatically continue as a
paid-up contract during the lifetime of the Annuitant until the Maturity Date
or until it is surrendered.
Page 9
<PAGE> 11
DEATH BENEFIT PROVISIONS
DEATH OF ANNUITANT
A death benefit is payable to the Beneficiary upon the death of the Annuitant
before the Maturity Date, unless prior to the Maturity Date there is a
contingent annuitant surviving. A death benefit is also payable under those
Settlement Options which provide for death benefits. We will pay the
Beneficiary the death benefit in a single sum as described below upon receiving
Due Proof of Death. A Beneficiary may request that a death benefit payable
under this contract be applied to a Settlement Option subject to the provisions
of this contract and the current Tax Law Qualification Rider.
DEATH OF OWNER WITH ANNUITANT SURVIVING
If the owner dies (including the first of joint owners) before the Maturity
Date and with the Annuitant surviving, we will recalculate the value of the
contract under provisions of DEATH PROCEEDS PRIOR TO THE MATURITY DATE below.
The value of the contract, as recalculated, will be paid in a single lump sum
or by other election to the party taking proceeds under the current Tax Law
Qualification Rider. The party must take distributions no later than under the
applicable elections of that provision. All references to age in the DEATH
PROCEEDS PRIOR TO MATURITY DATE provision will be based on the owner's age
rather than the Annuitant's age.
DEATH PROCEEDS PRIOR TO THE MATURITY DATE
If the Annuitant dies before age 75 and before the Maturity Date, we will pay
the Beneficiary the greater of a), b), or c) below, less any applicable premium
tax or prior surrenders not previously deducted as of the Death Report Date:
a. the Contract Value of the contract;
b. the total purchase payments under the contract; or
c. the Contract Value of the Contract on the fifth Contract Year
anniversary immediately preceding the Death Report Date.
If the Annuitant dies on or after age 75, but before age 85 and before the
Maturity Date, we will pay the Beneficiary the greater of a), b), or c) below,
less any applicable premium tax or prior surrenders not previously deducted as
of the Death Report Date:
a. the Contract Value of the contract;
b. the total purchase payments under the contract; or
c. the Contract Value of the Contract on the latest fifth Contract
Year anniversary occurring on or before the Annuitant's 75th
birthday.
If the Annuitant dies on or after age 85 and before the Maturity Date, we will
pay the Beneficiary the Contract Value of the contract less any applicable
premium tax as of the Death Report Date.
DEATH PROCEEDS AFTER THE MATURITY DATE
If the Annuitant dies on or after the Maturity Date, we will pay the
Beneficiary a death benefit consisting of any benefit remaining under the
Annuity or Income option then in effect.
Page 10
<PAGE> 12
SETTLEMENT PROVISIONS
MATURITY DATE
The Maturity Date is shown on the CONTRACT SPECIFICATIONS. This is the date on
which we will begin paying to you the first of a series of Annuity or Income
payments in accordance with the Settlement Option elected by you. Annuity or
Income payments will begin under this contract on the Maturity Date unless the
contract has been fully surrendered or the proceeds have been paid to the
Beneficiary prior to that date. We may require proof that the Annuitant is
alive before Annuity payments are made. If no Maturity Date is specified, the
automatic Maturity Date will be the greater of when the Annuitant reaches age
75 or ten years after the Contract Date.
Additionally, at least 30 days before the original Maturity Date, you may
change the Maturity Date by Written Request to any time prior to the
Annuitant's 85th birthday or to a later date with our consent.
ELECTION OF SETTLEMENT OPTIONS
On the Maturity Date, or other agreed upon date, we will pay any amount payable
under this contract to you in one lump sum or in accordance with the option
elected by you. While the Annuitant is alive, you may change your Settlement
Option election by Written Request, but only before the Maturity Date . Once
Annuity or Income payments have commenced, no further election changes are
allowed.
During the Annuitant's lifetime, if no election has been made on the Maturity
Date, we will pay to you the first of a series of monthly Annuity payments
based on the life of the Annuitant, in accordance with Annuity Option 2, with
120 monthly payments assured.
MINIMUM AMOUNTS
The minimum amount that can be placed under a Settlement Option is $2,000
unless we consent to a lesser amount. If any periodic payments due are less
than $100.00, we reserve the right to make payments at less frequent intervals.
ALLOCATION OF ANNUITY
At the time election of one of the Annuity Options is made, the person electing
the option may further elect to have the Contract Value applied to provide a
Variable Annuity, a Fixed Annuity or a combination of both.
If no election is made to the contrary, the value of a Sub-Account will be
applied when Annuity payments start to provide an Annuity which varies with the
investment experience of that same Sub-Account and the value of the Fixed
Account will be applied to provide a Fixed Annuity.
You may elect to transfer Contract Value from one Account to another, as
described in the provision "Transfer Between Accounts," in order to reallocate
the basis on which Annuity payments will be determined. Once Annuity payments
have begun, no further transfers are allowed.
VARIABLE ANNUITY
AMOUNT OF BASIC FIRST PAYMENT
The LIFE ANNUITY TABLES are used to determine the basic first monthly Annuity
payment. They show the dollar amount of the basic first monthly Annuity payment
which can be purchased with each $1,000 applied. The amount applied to an
Annuity will be the Cash Surrender Value as of 14 days before the date Annuity
payments start. We reserve the right to require satisfactory proof of the age
of any person on whose life Annuity payments are based before making the first
payment under any of these options.
ANNUITY UNIT VALUE
The initial value of an Annuity Unit for each Sub-Account was set at $1.00. On
any Valuation Date, the Annuity Unit Value for a Sub-Account equals the
Sub-Account Annuity Unit Value on the immediately preceding Valuation Date,
multiplied by the net investment factor for that Sub-Account for the Valuation
Period just ended, divided by the Assumed Daily Net Investment Factor. The
Assumed Daily Net Investment Factor is shown on the CONTRACT SPECIFICATIONS.
<PAGE> 13
The value of an Annuity Unit as of any date other than a Valuation Date will be
equal to its value as of the next succeeding Valuation Date.
NUMBER OF ANNUITY UNITS
We determine the number of Annuity Units credited to this contract in each
Sub-Account by dividing the basic first monthly Annuity payment attributable to
that Sub-Account by the Sub-Account's Annuity Unit Value as of 14 days before
the due date of the first Annuity payment.
AMOUNT OF SECOND AND SUBSEQUENT BASIC PAYMENTS
The dollar amount of the second and subsequent payments may change from month
to month. The total amount of each Annuity payment will be equal to the sum of
the basic payments in each Sub-Account.
The actual amount of the basic payments in each Sub-Account is found by
multiplying the number of Annuity Units credited to the contract in that
Sub-Account by the Annuity Unit Value of the Sub-Account as of the date 14 days
prior to the date on which the payment is due.
FIXED ANNUITY
A Fixed Annuity is an Annuity with payments which remain fixed as to dollar
amount throughout the payment period. The dollar amount of the first Fixed
Annuity payment will be calculated as described above in the "Amount of Basic
First Payment" provision. All subsequent payments will be in the same amount
and that amount will be assured throughout the payment period. If it would
produce a larger payment, we agree that the first Fixed Annuity payment will be
determined using the Life Annuity Tables in effect on the Maturity Date.
ANNUITY OPTIONS
Subject to conditions stated in ELECTIONS OF SETTLEMENT OPTIONS and MINIMUM
AMOUNTS, all or any part of the Cash Surrender Value of this contract may be
paid under one or more of the Annuity Options below.
OPTION 1. LIFE ANNUITY--NO REFUND
We will make monthly Annuity payments during the lifetime of the person on
whose life the payments are based, ending with the last monthly payment
preceding death.
OPTION 2. LIFE ANNUITY WITH 120, 180 OR 240 MONTHLY PAYMENTS ASSURED
We will make monthly Annuity payments during the lifetime of the person on
whose life the payments are based and under the conditions stated below.
If at the death of that person, payments have been made for less than 120, 180
or 240 months, as elected, we will continue to make payments to the designated
Beneficiary during the remainder of the period.
OPTION 3. JOINT AND LAST SURVIVOR LIFE ANNUITY
We will make monthly Annuity payments during the joint lifetime of two persons
on whose lives payments are based and during the lifetime of the survivor.
No more payments will be made after the death of the survivor.
OPTION 4. JOINT AND LAST SURVIVOR LIFE ANNUITY--ANNUITY REDUCED ON DEATH OF
PRIMARY PAYEE
We will make monthly Annuity payments during the joint lifetime of two persons
on whose lives payments are based. One of the two persons will be designated as
the primary payee. The other will be designated the secondary payee. On the
death of the secondary payee, if survived by the primary payee, we will
continue to make monthly Annuity payments 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, we will
continue to make monthly 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.
<PAGE> 14
OPTION 5. OTHER ANNUITY OPTIONS We will make any other arrangements for Annuity
payments as may be mutually agreed.
INCOME OPTIONS
We will pay all or any part of the Cash Surrender Value to you under one or
more of the Income Options below subject to the conditions stated in ELECTION
OF SETTLEMENT OPTIONS and MINIMUM AMOUNTS and the currently effective Tax Law
Qualification Rider.
The Cash Surrender Value used to determine the amount of any Income payment
will be based on the Accumulation Unit Value as of 14 days before the date an
Income payment is due and will be determined the same way as in the
Accumulation Period.
OPTION 1. PAYMENTS OF A FIXED AMOUNT We will make equal payments each month in
the amount elected until the Cash Surrender Value applied under this option is
gone.
The first monthly payment will be paid from each Sub-Account in proportion to
its Cash Surrender Values applied.
The second payment and all later payments from each Sub-Account will be the
same as the first payment under this option. The final payment will include any
amount that is not enough to make another full payment.
OPTION 2. PAYMENTS FOR A FIXED PERIOD We will make monthly payments for the
period selected. The amount of each payment will be equal to the then remaining
Cash Surrender Value applied under this option divided by the number of
remaining payments.
OPTION 3. OTHER INCOME OPTIONS We will make any other arrangements for Income
payments as may be mutually agreed.
Page 13
<PAGE> 15
GENERAL PROVISIONS
THE CONTRACT The entire contract between you and us consists of the contract
and all attached pages.
CONTRACT CHANGES The only way this contract may be changed is by a written
endorsement signed by one of our officers.
SUBSTITUTION OF SEPARATE ACCOUNT OR UNDERLYING FUNDS
If it is not possible to continue to offer a Separate Account or Underlying
Fund, or in our judgment becomes inappropriate for the purposes of this
contract, we may substitute another Separate Account or Underlying Fund without
your consent. Substitution may be made with respect to both existing
investments and investment of future premium payments. However, no such
substitution will be made without notice to you and without prior approval of
the Securities and Exchange Commission. to the extent required by law.
MISSTATEMENT
If the Annuitant's or owner's sex or date of birth was misstated, all benefits
of this contract are what the purchase payment paid would have purchased at the
correct sex and age. Proof of the Annuitant's and owner's ages may be filed at
any time at Our Office.
INCONTESTABILITY We will not contest this contract from its Contract Date.
TERMINATION
We reserve the right to terminate this contract on any Valuation Date if the
Contract Value as of the date is less than the Termination Amount shown on the
CONTRACT SPECIFICATIONS, and purchase payments have not been made to this
contract for at least two years. Termination will not occur until 31 days after
we have mailed notice of termination to you at your last known address and to
any assignee of record. If this contract is terminated, we will pay you the
Cash Surrender Value, if any.
REQUIRED REPORTS
We will furnish a report to the owner as often as required by law, but at least
once in each Contract Year before the due date of the first Annuity or Income
payment. The report will show the number of Accumulation Units credited to the
contract in each Account and the corresponding Accumulation Unit Value as of
the date of the report.
VOTING RIGHTS
So long as federal law requires, you may have the right to vote at the meetings
of the shareholders of the Underlying Funds. If you have voting rights, we will
send a notice to you telling you the time and place of a meeting. The notice
will also explain matters to be voted upon and how many votes you get.
MORTALITY AND EXPENSES
Our actual mortality and expense experience will not affect the amount of any
Annuity or Income payments or any other values under this contract.
NON-PARTICIPATING This contract does not share in our surplus earnings, so you
will receive no dividends under it.
CONFORMITY WITH STATE AND FEDERAL LAWS
This contract is governed by the law of the state in which it is delivered. Any
paid-up Annuity, Cash Surrender or death benefits that are available under this
contract are not less than the minimum benefits required by the statutes of the
state in which this contract is delivered.
Upon receiving appropriate state approval, we may at any time make any changes,
including retroactive changes, in this contract to the extent that the change
is required to meet the requirements of any law or regulation issued by any
governmental agency to which we or you are subject.
14
<PAGE> 16
EMERGENCY PROCEDURE
We reserve the right to suspend or postpone the date of any payment of any
benefit or values for any Valuation Period (1) when the New York Stock Exchange
is closed; (2) when trading on the Exchange is restricted; (3) when an
emergency exists as determined by the Securities and Exchange Commission so
that disposal of the securities held in the Sub-Accounts is not reasonably
practicable or it is not reasonably practicable to determine the value of the
Sub-Account's net assets, or (4) during any other period when the Securities
and Exchange Commission, by order, so permits for the protection of security
holders. Any provision of this contract which specifies a Valuation Date will
be superseded by this Emergency Procedure.
RELATION OF THIS CONTRACT TO THE SEPARATE ACCOUNTS AND SUB-ACCOUNTS
We will have exclusive and absolute ownership and control of the assets of our
Separate Account and the Sub-Accounts. That portion of the assets of a Separate
Account or Sub-Account equal to the reserves and other contract liabilities
with respect to such Separate Account or Sub-Account shall not be chargeable
with liabilities arising out of any other business we conduct. Our
determination of the value of an Accumulation Unit and an Annuity Unit by the
method described in this contract will be conclusive.
Page 15
<PAGE> 17
TABLE OF VALUES
(GUARANTEED VALUES OF THE FIXED ACCOUNT PER $1.000 OF NET PURCHASE PAYMENT
APPLIED
<TABLE>
<CAPTION>
NO. OF FULL GUARANTEED NO. OF FULL GUARANTEED
YEARS FROM CASH YEARS FROM CASH
DATE PAYT. GUARANTEED SURRENDER DATE PAYMT. GUARANTEED SURRENDER
IS APPLIED VALUE VALUE IS APPLIED VALUE VALUE
<S> <C> <C> <C> <C> <C>
1030 970 36 2898 2898
2 1060 1000 37 2985 2985
3 1092 1032 38 3074 3074
4 1125 1095 39 3167 3167
5 1159 1139 40 3262 3262
6 1194 1184 41 3359 3359
7 1229 1229 42 3460 3460
8 1266 1266 43 3564 3564
9 1304 1304 44 3671 3671
10 1343 1343 45 3781 3781
11 1384 1384 46 3895 3895
12 1425 1425 47 4011 4011
13 1468 1468 48 4132 4132
14 1512 1512 49 4256 4256
15 1557 1557 50 4383 4383
16 1604 1604 51 4515 4515
17 1652 1652 52 4650 4650
18 1702 1702 53 4790 4790
19 1753 1753 54 4934 4934
20 1806 1806 55 5082 5082
21 1860 1860 56 5234 5234
22 1916 1916 57 5391 5391
23 1973 1973 58 5553 5553
24 2032 2032 59 5720 5720
25 2093 2093 60 5891 5891
26 2156 2156 61 6068 6068
27 2221 2221 62 6250 6250
28 2287 2287 63 6437 6437
29 2356 2356 64 6631 6631
30 2427 2427 65 6829 6829
31 2500 2500 66 7034 7034
32 2575 2575 67 7245 7245
33 2652 2652 68 7463 7463
34 2731 2731 69 7687 7687
35 2813 2813 70 7917 7917
</TABLE>
Page 16
<PAGE> 18
This Page Intentionally Left Blank
Page 17
<PAGE> 19
LIFE ANNUITY TABLES
DOLLAR AMOUNT OF THE FIRST MONTHLY ANNUITY PAYMENT WHICH IS PURCHASED
WITH EACH $1,000 APPLIED
OPTIONS 1 AND 2 - SINGLE LIFE ANNUITIES
<TABLE>
<CAPTION>
120 180 240
ADJUSTED ADJUSTED MONTHLY MONTHLY MONTHLY
AGE AGE NO PAYMENTS PAYMENTS PAYMENTS
MALE FEMALE REFUND ASSURED ASSURED ASSURED
<S> <C> <C> <C> <C> <C>
50 54 $4.13 $4.10 $4.06 $4.00
51 55 4.20 4.17 4.13 4.06
52 56 4.28 4.25 4.20 4.12
53 57 4.37 4.33 4.27 4.18
54 58 4.46 4.41 4.35 4.25
55 59 4.55 4.50 4.42 4.31
56 60 4.65 4.59 4.51 4.38
57 61 4.76 4.69 4.59 4.44
58 62 4.87 4.79 4.68 4.51
59 63 4.99 4.90 4.77 4.58
60 64 5.12 5.01 4.86 4.65
61 65 5.26 5.13 4.96 4.72
62 66 5.40 5.25 5.06 4.79
63 67 5.56 5.39 5.16 4.85
64 68 5.72 5.52 5.27 4.92
65 69 5.90 5.67 5.37 4.99
66 70 6.09 5.82 5.48 5.05
67 71 6.29 5.97 5.59 5.11
68 72 6.51 6.13 5.69 5.16
69 73 6.74 6.30 5.80 5.21
70 74 6.99 6.48 5.90 5.26
71 75 7.26 6.66 6.01 5.31
72 76 7.54 6.84 6.11 5.34
73 77 7.86 7.03 6.20 5.38
74 78 8.19 7.22 6.29 5.41
75 79 8.55 7.41 6.38 5.43
</TABLE>
OPTION 3 - JOINT AND LAST SURVIVOR LIFE ANNUITY
<TABLE>
<CAPTION>
ADJUSTED AGE OF ADJUSTED AGE OF SECOND LIFE
FIRST LIFE M-51 M-56 M-58 M-61 M-63 M-66 M-71
MALE FEMALE F-55 F-60 F-62 F-65 F-67 F-70 F-75
<S> <C> <C> <C> <C> <C> <C> <C> <C>
50 54 $3.69 $3.81 $3.85 $3.91 $3.94 $3.98 $4.04
55 59 3.82 3.99 4.06 4.15 4.20 4.28 4.38
57 61 3.87 4.06 4.14 4.25 4.32 4.41 4.53
60 64 3.93 4.17 4.26 4.40 4.48 4.61 4.78
62 66 3.97 4.23 4.34 4.49 4.60 4.74 4.96
65 69 4.02 4.32 4.44 4.63 4.76 4.95 5.24
70 74 4.09 4.43 4.59 4.83 5.01 5.27 5.72
</TABLE>
Dollar amounts of the first monthly payments for ages not shown in these Tables
will be calculated on the same basis as those shown and may be obtained from
us. Amounts shown in these Tables are based on the Progressive Annuity Table,
with a two year set-back, (assuming births in the year 1900) with interest at
the rate of 3~G per annum. The adjusted age of the person on whose life the
Annuity is based is determined from the actual age last birthday on the due
date of the first Annuity payment in the following manner.
<TABLE>
<S> <C> <C> <C>
Calendar Year in which
First Payment is Due . 1991-2000 2001-2010 2011 & later
Adjusted Age is Actual Age plus 2 plus 1 plus 0
</TABLE>
Page 18
<PAGE> 20
OPTION 4-JOINT AND LAST SURVIVOR LIFE ANNUITY
ANNUITY REDUCES ON DEATH OF PRIMARY PAYEE
<TABLE>
<CAPTION>
ADJUSTED AGE OF
PRIMARY PAYEE ADJUSTED AGE OF SECOND PAYEE
MALE 50 55 60 65
<S> <C> <C> <C> <C>
50 $3.82 $3.90 $3.96 $4.01
55 4.05 4.15 4.25 4.34
60 4.31 4.45 4.59 4.73
65 4.60 4.78 4.98 5.19
70 4.93 5.16 5.43 5.71
</TABLE>
<TABLE>
<CAPTION>
ADJUSTED AGE OF
PRIMARY PAYEE ADJUSTED AGE OF SECOND PAYEE
FEMALE 50 55 60 65
<S> <C> <C> <C> <C>
50 $3.70 $3.75 $3.79 $3.81
55 3.93 4.00 4.06 4.11
60 4.19 4.30 4.40 4.48
65 4.48 4.64 4.79 4.92
70 4.81 5.03 5.25 5.46
</TABLE>
Dollar amounts of the monthly payments for ages not shown in these Tables will
be calculated on the same basis as those shown and may be obtained from us.
Amounts shown in these Tables are based on the Progressive Annuity Table, with
a two year set-back, (assuming births in the year 1900) with interest at the
rate of 3~G per annum. The adjusted age of the person on whose life the annuity
is based is determined from the actual age last birthday on the due date of the
first annuity payment in the following manner.
<TABLE>
<S> <C> <C> <C>
Calendar Year in Which
First Payment is Due . . . 1991-2000 2001-2010 2011 & later
Adjusted Age is Actual Age . plus 2 plus 1 plus 0
</TABLE>
Page 19
<PAGE> 21
TAX LAW QUALIFICATION RIDER
This rider is made a part of this contract at its Contract Date in order to
comply with the tax rules under Section 72(s) of the Code for required
distributions upon the death of any contract owner. The following conditions,
restrictions and limitations must apply to maintain the tax qualified status of
your Annuity.
REQUIRED DISTRIBUTIONS WHERE OWNER AND ANNUITANT DIE SIMULTANEOUSLY
If you are the owner and the Annuitant or you are the owner and you die
simultaneously with the Annuitant before payment of an Annuity or Income option
begins, an amount equal to the Death Benefit will be distributed within five
years of your death to the contract Beneficiary unless:
a. the Beneficiary elects by Written Request to have the proceeds distributed
over the Beneficiary's life or over a period not extending beyond life
expectancy, and the payments begin within one year of your death; or
b. the sole Beneficiary is your spouse who elects by Written Request to
continue the contract as the owner and Annuitant.
If you are the owner and the Annuitant or you are the owner and you die
simultaneously with the Annuitant after an Annuity or Income option begins but
before your entire interest has been distributed, the remaining proceeds of the
contract will be distributed at least as rapidly as they were being distributed
under the method of payment in effect at the time of your death.
The death of the first joint owner triggers these distribution requirements.
NON-NATURAL OWNER HOLDING FOR NATURAL PERSONS
The above rules also apply if you are not an individual and the primary
Annuitant dies before payment of an Annuity or Income option begins. Payments
will be made to the Beneficiary. The primary Annuitant is the first-named
Annuitant and the individual who is of primary importance in affecting the
timing or amount of payments under the contract.
If you are not an individual and the primary annuitant dies after payment of an
Annuity or Income option begins, the remaining proceeds of the contract will be
distributed at least as rapidly as they were being distributed under the method
of payment in effect at the time of the primary Annuitant's death.
REQUIRED DISTRIBUTIONS WHERE OWNER AND ANNUITANT DO NOT DIE SIMULTANEOUSLY
If you are the owner but not the Annuitant, and you die before the Annuitant
and before payment of an Annuity or Income option begins, an amount equal to
the Death Benefit will be distributed within five years of your death to the
joint or succeeding owner surviving you (for this circumstance, the joint or
succeeding owner is the "designated beneficiary" of Section 72(s) of the Code),
unless:
a. the joint or succeeding owner elects by Written Request to have
the proceeds distributed over his or her life or over a period
not extending beyond life expectancy, and the payments begin
within one year of your death; or
b. the sole joint or succeeding owner is your spouse, who elects by
Written Request to continue the contract as owner.
The joint owner is determined by contract designation. The succeeding owner is
the owner who succeeds to your interest by contract designation, by Recorded
administrative change, or if no contract designation or subsequent change was
made, the succeeding owner in this circumstance is the Beneficiary. If there is
no joint or succeeding owner or Beneficiary surviving you, ownership of this
contract passes to your estate. The individual taking the contract benefits
through your estate must take complete distribution within five years of your
death.
If you are the owner but not the Annuitant, and you die before the Annuitant
but after payment of an Annuity or Income option begins, the remaining proceeds
of the contract will be distributed at least as rapidly as they were being
distributed under the method of payment in effect at the time of your death.
The death of the first joint owner triggers these distribution requirements.
<PAGE> 22
ADMINISTRATIVE COMPLIANCE
If the Code and related law, regulations and rulings require a distribution
other than described above in order to keep this Annuity contract qualified
under the Code, we will administer the contract in accordance with these laws,
regulations and rulings. We will provide you with a revised rider describing
any necessary changes, following all regulatory approvals.
THE TRAVELERS INSURANCE COMPANY
President
<PAGE> 23
Individual Variable Annuity Contract
Non Tax Qualified Non-Participating
ENDORSEMENTS
<PAGE> 1
EXHIBIT 5
TravelersInsurance Variable Annuity
A Member of TravelersGroup (LOGO APPEARS HERE) Application
Annuity Investor Services * One Tower Square * Hartford, CT 06183-9061
- --------------------------------------------------------------------------------
Owner
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Date of Birth
- --------------------------------------------------------------------------------
SS# Sex /_/M /_/F
- --------------------------------------------------------------------------------
U.S. Citizen /_/Y /_/N The Owner stated above will be used for all
correspondence and tax reporting purposes.
- --------------------------------------------------------------------------------
/_/ Succeeding Owner /_/ Joint Owner (check one, if any) Relationship to Owner
<TABLE>
<S> <C> <C>
Name
SS# Date of Birth
- ----------------------------------------------------------------------------------------------------------
Annuitant (if different from owner)
- ----------------------------------------------------------------------------------------------------------
Name
SS# Date of Birth
- ----------------------------------------------------------------------------------------------------------
</TABLE>
Sex /_/M /_/F If no Annuitant is specified, the Owner stated above will be
the Annuitant.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
Contingent Annuitant (if any)
- ----------------------------------------------------------------------------------------------------------------------
Name Date of Birth
- ----------------------------------------------------------------------------------------------------------------------
Beneficiary Information
- ----------------------------------------------------------------------------------------------------------------------
Full Name Relationship to Owner Percent
- ----------------------------------------------------------------------------------------------------------------------
%
- ----------------------------------------------------------------------------------------------------------------------
%
- ----------------------------------------------------------------------------------------------------------------------
Type of Plan Portfolio Allocation
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
/_/ Non Qualified /_/ Corp 401(a) rollover/transfer
/_/ TSA 403(b) rollover/transfer /_/ IRA rollover/transfer
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Dollar Cost Averaging Systematic Withdrawal
/_/Y /_/N /_/Y /_/N Smith Barney Income and Growth %
- ----------------------------------------------------------------------------------------------------------------------
Replacement Information Alliance Growth %
- ----------------------------------------------------------------------------------------------------------------------
Will the contract applied for American Capital Enterprise %
replace any existing annuity -------------------------------------------------------------------
contract or life insurance policy? Smith Barney International Equity %
/_/Y /_/N If Yes, specify company -------------------------------------------------------------------
name and contract # in Smith Barney Pacific Basin %
Remarks section below. -------------------------------------------------------------------
TBC Managed Income %
- ----------------------------------------------------------------------------------------------------------------------
Remarks: Putnam Diversified Income %
-------------------------------------------------------------------
GT Global Strategic Income %
-------------------------------------------------------------------
Smith Barney High Income %
-------------------------------------------------------------------
MFS Total Return %
-------------------------------------------------------------------
Smith Barney Money Market %
-------------------------------------------------------------------
Smith Barney Total Return Portfolio %
-------------------------------------------------------------------
AIM Capital Appreciation Portfolio %
- ----------------------------------------------------------------------------------------------------------------------
Initial Purchase Payment $ Travelers Fixed Account %
- ----------------------------------------------------------------------------------------------------------------------
Acknowledgement Total 100.000 %
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
I understand the contract will take effect when the first purchase payment is
received and the application is approved in the Home Office of The Travelers
Insurance Company. All payments and values provided by the contract applied
for, when based on investment experience of a separate account, are variable
and are not guaranteed as to a fixed dollar. No agent is authorized to make
changes to the contract or application. I acknowledge receipt of a current
prospectus.
<PAGE> 2
In Non-Qualified situations where the owner is a trust, I/we hereby certify the
trust is solely for the benefit of a natural person and not a Deferred
Compensation Plan. For Non-Qualified contracts, if the Owner dies and is
survived by the Annuitant before payment of an Annuity Option or Income Option
begins, any surviving Joint or Succeeding Owner assumes full ownership of the
contract and not the Beneficiary named in a Written Request.
- -------------------------------------- -----------------------------
Contract Owner's Signature Signed at (City, State)
- -------------------------------------- ----------------------------
Joint Contract Owner's Signature Date Completed
I acknowledge that all data representations and signatures recorded by me or in
my presence in response to my inquiry and request and all such representations
and signatures are accurate and valid to the best of my knowledge and belief.
Will the contract applied for replace any existing annuity contract or life
insurance policy? /_/Y /_/N
- ---------------------------------- -----------------------------
Licensed Agent's Signature Date
- ---------------------------------- -----------------------------
Print Name Soc Sec. #
<PAGE> 1
EXHIBIT 10(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Post-Effective Amendment No. 3 of the
Registration Statement on Form N-4 of our report dated February 17, 1996, on
our audit of the financial statements of The Travelers Fund BD for Variable
Annuities for the year ended December 31, 1995, and of our report dated January
24, 1994, relating to our audit of 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. We also consent to the
reference to our Firm as experts in accounting and auditing under the caption
"Independent Accountants" in the Statement of Additional Information.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
April 18, 1996
<PAGE> 1
Exhibit 10(b)
Consent of Independent Certified Public Accountants
The Board of Directors
The Travelers Insurance Company:
We consent to the use of our report included herein and to the reference to our
Firm as experts under the heading "Independent Accountants" in the Prospectus.
Our report refers to a change in accounting for investments in accordance with
the provisions of Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," in 1994.
/s/ KPMG Peat Marwick
April 18, 1996
<PAGE> 1
EXHIBIT 13
THE TRAVELERS FUND BD FOR VARIABLE ANNUITIES
SCHEDULE FOR COMPUTATION OF TOTAL RETURN CALCULATIONS
Total Return Calculation (Standardized)
The "1-year rate" represents fund performance for the most recent fiscal year.
The "since inception rate" covers the applicable inception date noted through
the end of the most recent fiscal year.
1/n
T = (ERV/P) where:
T = average annual total return
P = a hypothetical initial payment of $1,000
n = the applicable year (1, 5, 10) or portion thereof
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 $30 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
August 31st 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. The applicable contingent deferred sales is reflected in the return
calculations. The charge applies for six years and is a percentage of the
amount surrendered (6%, 6%, 6%, 3%, 2%, 1%).
Total Return Calculation (Non-Standardized)
The non-standardized rate represents fund performance for the calendar
year-to-date, and for the most recent applicable 1-year, 3-year, 5-year and
10-year periods ending with the most recent fiscal year end.
The non-standardized total returns reflect a percentage change in the value of
an Accumulation Unit based on the performance of an account over the applicable
period 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 annual administrative charge or contingent deferred sales charges.
The deduction of the annual administrative charge or the contingent deferred
sales charge would reduce any percentage increase or make greater any
percentage decrease.
For a Schedule of the Computation of the Total Return Quotations, both
Standardized and Non-Standardized, see attached.
<PAGE> 2
PAGE 1
VINTAGE REGULAR DB STANDARDIZED PERFORMANCE
KASB - ALLIANCE GROWTH STOCK
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE
- ---- ----- ------- ------- ------- ------- ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
06/20/94 1.000000 1,000.00 1,000.000 .000750
06/30/94 .985459 .000750
08/31/94 1.036952 -.15 -.145 .000750
09/30/94 1.054122 .000750
12/30/94 1.047185 1,000.00 954.941 .000750
03/31/95 1.119181 .000160
06/30/95 1.271698 .000160
08/31/95 1.347942 -.12 -.091 -.19 -.142 .000160
09/29/95 1.380993 .000160
12/29/95 1.395807 -.07 -.049 -.07 -.052 .000160
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION
<S> <C> <C>
ENDING UNITS 954.801 999.661
ACCOUNT VALUE 1,332.72 1,395.33
SURRENDER VALUE 1,272.72 1,335.33
TOTAL RETURN 27.27 % 33.53 %
ANNUALIZED RETURN 20.86 %
</TABLE>
<PAGE> 3
PAGE 2
VINTAGE REGULAR DB STANDARDIZED PERFORMANCE
KCSB - AIM CAPITAL APPRECIATION
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE
- ---- ----- ------- ----- ------- ----- -------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10/10/95 1.000000 1,000.00 1000.000 .000160
12/29/95 .957880 -.03 -.036 .000160
</TABLE>
<TABLE>
<CAPTION>
SINCE INCEPTION
<S> <C>
ENDING UNITS 999.964
ACCOUNT VALUE 957.85
SURRENDER VALUE 900.37
TOTAL RETURN -9.96 %
</TABLE>
<PAGE> 4
PAGE 3
VINTAGE REGULAR DB STANDARDIZED PERFORMANCE
KESB - AMCAP GROWTH STOCK
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE
- ---- ----- ------- ------- --------- ------- -------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
06/21/94 1.000000 1,000.00 1,000.000 .000750
06/30/94 .986273 .000750
08/31/94 1.061716 -.15 -.142 .000750
09/30/94 1.039042 .000750
12/30/94 1.038598 1,000.00 962.836 .000750
03/31/95 1.122009 .000160
06/30/95 1.247025 .000160
08/31/95 1.327909 -.12 -.092 -.19 -.144 .000160
09/29/95 1.361487 .000160
12/29/95 1.361968 -.07 -.050 -.07 -.052 .000160
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION
<S> <C> <C>
ENDING UNITS 962.695 999.662
ACCOUNT VALUE 1,311.16 1,361.51
SURRENDER VALUE 1,251.16 1,301.51
TOTAL RETURN 25.12 % 30.15 %
ANNUALIZED RETURN 18.89 %
</TABLE>
<PAGE> 5
PAGE 4
VINTAGE REGULAR DB STANDARDIZED PERFORMANCE
KFSB - TBC MANAGED INCOME
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE
- ---- ----- --------- ------- --------- ------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
06/28/94 1.000000 1,000.00 1,000.000 .000750
06/30/94 .997936 .000750
08/31/94 1.009924 -.13 -.131 .000750
09/30/94 1.000974 .000750
12/30/94 .996653 1,000.00 1,003.358 .000750
03/31/95 1.030866 .000160
06/30/95 1.086949 .000160
08/31/95 1.091827 -.11 -.103 -.17 -.154 .000160
09/29/95 1.101802 .000160
12/29/95 1.141791 -.06 -.052 -.06 -.051 .000160
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION
<S> <C> <C>
ENDING UNITS 1,003.204 999.664
ACCOUNT VALUE 1,145.45 1,141.41
SURRENDER VALUE 1,085.45 1,081.41
TOTAL RETURN 8.54 % 8.14 %
ANNUALIZED RETURN 5.34 %
</TABLE>
<PAGE> 6
PAGE 5
VINTAGE REGULAR DB STANDARDIZED PERFORMANCE
KGSB - GT GLOBAL STRATEGIC INCOME
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE
- ---- ----- --------- ------- --------- ------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
06/21/94 1.000000 1,000.00 1,000.000 .000750
06/30/94 .994712 .000750
08/31/94 1.002719 -.15 -.146 .000750
09/30/94 .995774 .000750
12/30/94 .944948 1,000.00 1,058.259 .000750
03/31/95 .971239 .000160
06/30/95 1.035311 .000160
08/31/95 1.036243 -.11 -.108 -.16 -.157 .000160
09/29/95 1.062162 .000160
12/29/95 1.120662 -.06 -.054 -.06 -.051 .000160
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION
<S> <C> <C>
ENDING UNITS 1,058.098 999.646
ACCOUNT VALUE 1,185.77 1,120.27
SURRENDER VALUE 1,125.77 1,060.27
TOTAL RETURN 12.58 % 6.03 %
ANNUALIZED RETURN 3.92 %
</TABLE>
<PAGE> 7
PAGE 6
VINTAGE REGULAR DB STANDARDIZED PERFORMANCE
KHSB - SB HIGH INCOME
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE
- ---- ----- --------- ------- --------- ------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
06/22/94 1.000000 1,000.00 1,000.000 .000750
06/30/94 1.000743 .000750
08/31/94 1.008728 -.14 -.143 .000750
09/30/94 1.007761 .000750
12/30/94 .987591 1,000.00 1,012.565 .000750
03/31/95 1.035328 .000160
06/30/95 1.082768 .000160
08/31/95 1.103795 -.11 -.103 -.17 -.153 .000160
09/29/95 1.115852 .000160
12/29/95 1.162368 -.06 -.052 -.06 -.051 .000160
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION
<S> <C> <C>
ENDING UNITS 1,012.410 999.652
ACCOUNT VALUE 1,176.79 1,161.96
SURRENDER VALUE 1,116.79 1,101.96
TOTAL RETURN 11.68 % 10.20 %
ANNUALIZED RETURN 6.59 %
</TABLE>
<PAGE> 8
PAGE 7
VINTAGE REGULAR DB STANDARDIZED PERFORMANCE
KISB - SB INTERNATIONAL EQUITY
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE
- ---- ----- --------- ------- --------- ------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
06/20/94 1.000000 1,000.00 1,000.000 .000750
06/30/94 1.026673 .000750
08/31/94 1.049587 -.15 -.144 .000750
09/30/94 1.022658 .000750
12/30/94 .954944 1,000.00 1,047.182 .000750
03/31/95 .917500 .000160
06/30/95 1.011661 .000160
08/31/95 1.031348 -.11 -.108 -.17 -.161 .000160
09/29/95 1.050095 .000160
12/29/95 1.050280 -.06 -.055 -.05 -.052 .000160
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION
<S> <C> <C>
ENDING UNITS 1,047.019 999.642
ACCOUNT VALUE 1,099.66 1,049.90
SURRENDER VALUE 1,039.66 989.90
TOTAL RETURN 3.97 % -1.01 %
ANNUALIZED RETURN -.66 %
</TABLE>
<PAGE> 9
PAGE 8
VINTAGE REGULAR DB STANDARDIZED PERFORMANCE
KJSB - SB INCOME & GROWTH
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE
- ---- ----- --------- ------- --------- ------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
06/20/94 1.000000 1,000.00 1,000.000 .000750
06/30/94 .986696 .000750
08/31/94 1.023616 -.15 -.146 .000750
09/30/94 1.011679 .000750
12/30/94 .981491 1,000.00 1,018.858 .000750
03/31/95 1.062254 .000160
06/30/95 1.135578 .000160
08/31/95 1.184840 -.12 -.100 -.18 -.149 .000160
09/29/95 1.217392 .000160
12/29/95 1.290871 -.07 -.051 -.07 -.050 .000160
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION
<S> <C> <C>
ENDING UNITS 1,018.707 999.654
ACCOUNT VALUE 1,315.02 1,290.42
SURRENDER VALUE 1,255.02 1,230.42
TOTAL RETURN 25.50 % 23.04 %
ANNUALIZED RETURN 14.55 %
</TABLE>
<PAGE> 10
PAGE 9
VINTAGE REGULAR DB STANDARDIZED PERFORMANCE
KMSB - SB MONEY MARKET
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE
- ---- ----- --------- ------- --------- ------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
06/20/94 1.000000 1,000.00 1,000.000 .000750
06/30/94 1.000609 .000750
08/31/94 1.004912 -.15 -.148 .000750
09/30/94 1.007300 .000750
12/30/94 1.015687 1,000.00 984.555 .000750
03/31/95 1.026068 .000160
06/30/95 1.037078 .000160
08/31/95 1.044340 -.11 -.104 -.16 -.157 .000160
09/29/95 1.047683 .000160
12/29/95 1.058195 -.05 -.051 -.06 -.052 .000160
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION
<S> <C> <C>
ENDING UNITS 984.400 999.643
ACCOUNT VALUE 1,041.69 1,057.82
SURRENDER VALUE 981.69 997.82
TOTAL RETURN -1.83 % -.22 %
ANNUALIZED RETURN -.14 %
</TABLE>
<PAGE> 11
PAGE 10
VINTAGE REGULAR DB STANDARDIZED PERFORMANCE
KPSB - PUTNAM DIVERSIFIED INCOME
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE
- ---- ----- --------- ------- --------- ------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
06/20/94 1.000000 1,000.00 1,000.000 .000750
06/30/94 1.000680 .000750
08/31/94 1.011665 -.15 -.147 .000750
09/30/94 1.014679 .000750
12/30/94 1.008510 1,000.00 991.562 .000750
03/31/95 1.055554 .000160
06/30/95 1.102322 .000160
08/31/95 1.112083 -.11 -.101 -.17 -.153 .000160
09/29/95 1.121984 .000160
12/29/95 1.170101 -.06 -.051 -.06 -.051 .000160
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION
<S> <C> <C>
ENDING UNITS 991.410 999.649
ACCOUNT VALUE 1,160.05 1,169.69
SURRENDER VALUE 1,100.05 1,109.69
TOTAL RETURN 10.00 % 10.97 %
ANNUALIZED RETURN 7.06 %
</TABLE>
<PAGE> 12
PAGE 11
VINTAGE REGULAR DB STANDARDIZED PERFORMANCE
KRSB - SB TOTAL RETURN
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE
- ---- ----- --------- ------- --------- ------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
12/03/93 .928042 1,000.00 1,077.537 .000750
08/31/94 1.046264 -.59 -.566 .000750
12/30/94 1.013044 1,000.00 987.124 .000750
03/31/95 1.078553 .000160
06/30/95 1.177547 .000160
08/31/95 1.205359 -.12 -.097 -.19 -.161 .000160
09/29/95 1.214969 .000160
12/29/95 1.250571 -.06 -.051 -.07 -.056 .000160
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION
<S> <C> <C>
ENDING UNITS 986.976 1076.754
ACCOUNT VALUE 1,234.28 1,346.56
SURRENDER VALUE 1,174.28 1,286.56
TOTAL RETURN 17.43 % 28.66 %
ANNUALIZED RETURN 12.94 %
</TABLE>
<PAGE> 13
PAGE 12
VINTAGE REGULAR DB STANDARDIZED PERFORMANCE
KSSB - SB PACIFIC BASIN
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE
- ---- ----- --------- ------- --------- ------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
06/21/94 1.000000 1,000.00 1,000.000 .000750
06/30/94 .997711 .000750
08/31/94 1.031654 -.15 -.144 .000750
09/30/94 1.001746 .000750
12/30/94 .899312 1,000.00 1,111.961 .000750
03/31/95 .872934 .000160
06/30/95 .925707 .000160
08/31/95 .921901 -.11 -.117 -.16 -.169 .000160
09/29/95 .913159 .000160
12/29/95 .910187 -.05 -.059 -.05 -.053 .000160
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION
<S> <C> <C>
ENDING UNITS 1,111.785 999.634
ACCOUNT VALUE 1,011.93 909.85
SURRENDER VALUE 951.93 855.26
TOTAL RETURN -4.81 % -14.47 %
ANNUALIZED RETURN -9.75 %
</TABLE>
<PAGE> 14
PAGE 13
VINTAGE REGULAR DB STANDARDIZED PERFORMANCE
KTSB - MFS TOTAL RETURN
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE
- ---- ----- --------- ------- --------- ------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
06/20/94 1.000000 1,000.00 1,000.000 .000750
06/30/94 .984592 .000750
08/31/94 1.018774 -.15 -.147 .000750
09/30/94 1.002750 .000750
12/30/94 .978766 1,000.00 1,021.695 .000750
03/31/95 1.035973 .000160
06/30/95 1.098888 .000160
08/31/95 1.124611 -.11 -.102 -.17 -.152 .000160
09/29/95 1.153454 .000160
12/29/95 1.215923 -.06 -.052 -.06 -.051 .000160
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION
<S> <C> <C>
ENDING UNITS 1,021.541 999.650
ACCOUNT VALUE 1,242.11 1,215.50
SURRENDER VALUE 1,182.11 1,155.50
TOTAL RETURN 18.21 % 15.55 %
ANNUALIZED RETURN 9.93 %
</TABLE>
<PAGE> 15
PAGE 1
VINTAGE ENHANCED DB STANDARDIZED PERFORMANCE
KASE - ALLIANCE GROWTH STOCK
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE
- ---- ----- --------- ------- --------- ------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
06/20/94 1.000000 1,000.00 1,000.000 .000750
06/30/94 .985382 .000750
08/31/94 1.036378 -.15 -.145 .000750
09/30/94 1.053296 .000750
12/30/94 1.045632 1,000.00 956.359 .000750
03/31/95 1.116740 .000160
06/30/95 1.268038 .000160
08/31/95 1.343428 -.12 -.091 -.19 -.142 .000160
09/29/95 1.376065 .000160
12/29/95 1.389856 -.07 -.049 -.07 -.052 .000160
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION
<S> <C> <C>
ENDING UNITS 956.219 999.661
ACCOUNT VALUE 1,329.01 1,389.39
SURRENDER VALUE 1,269.01 1,329.39
TOTAL RETURN 26.90 % 32.94 %
ANNUALIZED RETURN 20.51 %
</TABLE>
<PAGE> 16
PAGE 2
VINTAGE ENHANCED DB STANDARDIZED PERFORMANCE
KCSE - AIM CAPITAL APPRECIATION
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE
- ---- ----- --------- ------- --------- ------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10/10/95 1.000000 1,000.00 1,000.000 .000160
12/29/95 .957290 -.03 -.036 .000160
</TABLE>
<TABLE>
<CAPTION>
SINCE INCEPTION
<S> <C>
ENDING UNITS 999.964
ACCOUNT VALUE 957.26
SURRENDER VALUE 899.82
TOTAL RETURN -10.02 %
</TABLE>
<PAGE> 17
PAGE 3
VINTAGE ENHANCED DB STANDARDIZED PERFORMANCE
KESE - AMCAP GROWTH STOCK
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE
- ---- ----- --------- ------- --------- ------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
06/21/94 1.000000 1,000.00 1,000.000 .000750
06/30/94 .986205 .000750
08/31/94 1.061136 -.15 -.142 .000750
09/30/94 1.038238 .000750
12/30/94 1.037072 1,000.00 964.253 .000750
03/31/95 1.119575 .000160
06/30/95 1.243451 .000160
08/31/95 1.323473 -.12 -.092 -.19 -.144 .000160
09/29/95 1.356636 .000160
12/29/95 1.356166 -.07 -.050 -.07 -.052 .000160
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION
<S> <C> <C>
ENDING UNITS 964.111 999.662
ACCOUNT VALUE 1,307.49 1,355.71
SURRENDER VALUE 1,247.49 1,295.71
TOTAL RETURN 24.75 % 29.57 %
ANNUALIZED RETURN 18.54 %
</TABLE>
<PAGE> 18
PAGE 4
VINTAGE ENHANCED DB STANDARDIZED PERFORMANCE
KFSE - TBC MANAGED INCOME
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE
- ---- ----- --------- ------- --------- ------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
06/28/94 1.000000 1,000.00 1,000.000 .000750
06/30/94 .997920 .000750
08/31/94 1.009429 -.13 -.131 .000750
09/30/94 1.000255 .000750
12/30/94 .995239 1,000.00 1,004.784 .000750
03/31/95 1.028680 .000160
06/30/95 1.083893 .000160
08/31/95 1.088242 -.11 -.103 -.17 -.154 .000160
09/29/95 1.097942 .000160
12/29/95 1.136987 -.06 -.052 -.06 -.051 .000160
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION
<S> <C> <C>
ENDING UNITS 1,004.629 999.663
ACCOUNT VALUE 1,142.25 1,136.60
SURRENDER VALUE 1,082.25 1,076.60
TOTAL RETURN 8.23 % 7.66 %
ANNUALIZED RETURN 5.03 %
</TABLE>
<PAGE> 19
PAGE 5
VINTAGE ENHANCED DB STANDARDIZED PERFORMANCE
KGSE - GT GLOBAL STRATEGIC INCOME
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE
- ---- ----- --------- ------- --------- ------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
06/21/94 1.000000 1,000.00 1,000.000 .000750
06/30/94 .994643 .000750
08/31/94 1.002171 -.15 -.146 .000750
09/30/94 .994999 .000750
12/30/94 .943557 1,000.00 1,059.819 .000750
03/31/95 .969137 .000160
06/30/95 1.032348 .000160
08/31/95 1.032781 -.11 -.108 -.16 -.158 .000160
09/29/95 1.058379 .000160
12/29/95 1.115890 -.06 -.054 -.06 -.051 .000160
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION
<S> <C> <C>
ENDING UNITS 1,059.657 999.646
ACCOUNT VALUE 1,182.46 1,115.50
SURRENDER VALUE 1,122.46 1,055.50
TOTAL RETURN 12.25 % 5.55 %
ANNUALIZED RETURN 3.61 %
</TABLE>
<PAGE> 20
PAGE 6
VINTAGE ENHANCED DB STANDARDIZED PERFORMANCE
KHSE - SB HIGH INCOME
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE
- ---- ----- --------- ------- --------- ------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
06/22/94 1.000000 1,000.00 1,000.000 .000750
06/30/94 1.000680 .000750
08/31/94 1.008181 -.14 -.143 .000750
09/30/94 1.006981 .000750
12/30/94 .986130 1,000.00 1,014.065 .000750
03/31/95 1.033081 .000160
06/30/95 1.079664 .000160
08/31/95 1.100100 -.11 -.103 -.17 -.153 .000160
09/29/95 1.111869 .000160
12/29/95 1.157405 -.06 -.052 -.06 -.051 .000160
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION
<S> <C> <C>
ENDING UNITS 1,013.910 999.652
ACCOUNT VALUE 1,173.50 1,157.00
SURRENDER VALUE 1,113.50 1,097.00
TOTAL RETURN 11.35 % 9.70 %
ANNUALIZED RETURN 6.28 %
</TABLE>
<PAGE> 21
PAGE 7
VINTAGE ENHANCED DB STANDARDIZED PERFORMANCE
KISE - SB INTERNATIONAL EQUITY
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE
- ---- ----- --------- ------- --------- ------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
06/20/94 1.000000 1,000.00 1,000.000 .000750
06/30/94 1.026593 .000750
08/31/94 1.049009 -.15 -.144 .000750
09/30/94 1.021856 .000750
12/30/94 .953532 1,000.00 1,048.733 .000750
03/31/95 .915495 .000160
06/30/95 1.008743 .000160
08/31/95 1.027883 -.11 -.108 -.17 -.162 .000160
09/29/95 1.046336 .000160
12/29/95 1.045789 -.06 -.055 -.05 -.052 .000160
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION
<S> <C> <C>
ENDING UNITS 1,048.570 999.642
ACCOUNT VALUE 1,096.58 1,045.41
SURRENDER VALUE 1,036.58 985.41
TOTAL RETURN 3.66 % -1.46 %
ANNUALIZED RETURN -.96 %
</TABLE>
<PAGE> 22
PAGE 8
VINTAGE ENHANCED DB STANDARDIZED PERFORMANCE
KJSE - SB INCOME & GROWTH
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE
- ---- ----- --------- ------- --------- ------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
06/20/94 1.000000 1,000.00 1,000.000 .000750
06/30/94 .986619 .000750
08/31/94 1.023049 -.15 -.146 .000750
09/30/94 1.010885 .000750
12/30/94 .980034 1,000.00 1,020.373 .000750
03/31/95 1.059933 .000160
06/30/95 1.132304 .000160
08/31/95 1.180863 -.12 -.100 -.18 -.149 .000160
09/29/95 1.213038 .000160
12/29/95 1.285355 -.07 -.051 -.06 -.050 .000160
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION
<S> <C> <C>
ENDING UNITS 1,020.221 999.654
ACCOUNT VALUE 1,311.35 1,284.91
SURRENDER VALUE 1,251.35 1,224.91
TOTAL RETURN 25.13 % 22.49 %
ANNUALIZED RETURN 14.22 %
</TABLE>
<PAGE> 23
PAGE 9
VINTAGE ENHANCED DB STANDARDIZED PERFORMANCE
KMSE - SB MONEY MARKET
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE
- ---- ----- --------- ------- --------- ------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
06/20/94 1.000000 1,000.00 1,000.000 .000750
06/30/94 1.000530 .000750
08/31/94 1.004351 -.15 -.148 .000750
09/30/94 1.006507 .000750
12/30/94 1.014181 1,000.00 986.017 .000750
03/31/95 1.023835 .000160
06/30/95 1.034101 .000160
08/31/95 1.040838 -.11 -.104 -.16 -.157 .000160
09/29/95 1.043936 .000160
12/29/95 1.053676 -.05 -.052 -.06 -.052 .000160
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION
<S> <C> <C>
ENDING UNITS 985.862 999.643
ACCOUNT VALUE 1,038.78 1,053.30
SURRENDER VALUE 978.78 993.30
TOTAL RETURN -2.12 % -.67 %
ANNUALIZED RETURN -.44 %
</TABLE>
<PAGE> 24
PAGE 10
VINTAGE ENHANCED DB STANDARDIZED PERFORMANCE
KPSE - PUTNAM DIVERSIFIED INCOME
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE
- ---- ----- --------- ------- --------- ------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
06/20/94 1.000000 1,000.00 1,000.000 .000750
06/30/94 1.000601 .000750
08/31/94 1.011105 -.15 -.147 .000750
09/30/94 1.013886 .000750
12/30/94 1.007016 1,000.00 993.033 .000750
03/31/95 1.053251 .000160
06/30/95 1.099150 .000160
08/31/95 1.108356 -.11 -.101 -.17 -.153 .000160
09/29/95 1.117977 .000160
12/29/95 1.165112 -.06 -.051 -.06 -.051 .000160
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION
<S> <C> <C>
ENDING UNITS 992.881 999.649
ACCOUNT VALUE 1,156.82 1,164.70
SURRENDER VALUE 1,096.82 1,104.70
TOTAL RETURN 9.68 % 10.47 %
ANNUALIZED RETURN 6.74 %
</TABLE>
<PAGE> 25
PAGE 11
VINTAGE ENHANCED DB STANDARDIZED PERFORMANCE
KRSE - SB TOTAL RETURN
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE
- ---- ----- --------- ------- --------- ------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
12/03/93 .930558 1,000.00 1,074.624 .000750
08/31/94 1.046923 -.59 -.565 .000750
12/30/94 1.012743 1,000.00 987.417 .000750
03/31/95 1.077488 .000160
06/30/95 1.175569 .000160
08/31/95 1.202763 -.12 -.097 -.19 -.161 .000160
09/29/95 1.212081 .000160
12/29/95 1.246730 -.06 -.051 -.07 -.055 .000160
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION
<S> <C> <C>
ENDING UNITS 987.269 1,073.843
ACCOUNT VALUE 1,230.86 1,338.79
SURRENDER VALUE 1,170.86 1,278.79
TOTAL RETURN 17.09 % 27.88 %
ANNUALIZED RETURN 12.61 %
</TABLE>
<PAGE> 26
PAGE 12
VINTAGE ENHANCED DB STANDARDIZED PERFORMANCE
KSSE - SB PACIFIC BASIN
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE
- ---- ----- --------- ------- --------- ------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
06/21/94 1.000000 1,000.00 1,000.000 .000750
06/30/94 .997642 .000750
08/31/94 1.031096 -.15 -.144 .000750
09/30/94 1.000974 .000750
12/30/94 .897995 1,000.00 1,113.592 .000750
03/31/95 .871049 .000160
06/30/95 .923065 .000160
08/31/95 .918828 -.11 -.118 -.16 -.170 .000160
09/29/95 .909910 .000160
12/29/95 .906317 -.05 -.059 -.05 -.053 .000160
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION
<S> <C> <C>
ENDING UNITS 1,113.415 999.634
ACCOUNT VALUE 1,009.11 905.98
SURRENDER VALUE 949.11 851.63
TOTAL RETURN -5.09 % -14.84 %
ANNUALIZED RETURN -10.01 %
</TABLE>
<PAGE> 27
PAGE 13
VINTAGE ENHANCED DB STANDARDIZED PERFORMANCE
KTSE - MFS TOTAL RETURN
<TABLE>
<CAPTION>
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE
- ---- ----- --------- ------- --------- ------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
06/20/94 1.000000 1,000.00 1,000.000 .000750
06/30/94 .984517 .000750
08/31/94 1.018213 -.15 -.147 .000750
09/30/94 1.001965 .000750
12/30/94 .977320 1,000.00 1,023.206 .000750
03/31/95 1.033719 .000160
06/30/95 1.095736 .000160
08/31/95 1.120855 -.11 -.102 -.17 -.153 .000160
09/29/95 1.149344 .000160
12/29/95 1.210749 -.06 -.052 -.06 -.051 .000160
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION
<S> <C> <C>
ENDING UNITS 1,023.052 999.650
ACCOUNT VALUE 1,238.66 1,210.33
SURRENDER VALUE 1,178.66 1,150.33
TOTAL RETURN 17.87 % 15.03 %
ANNUALIZED RETURN 9.61 %
</TABLE>
<PAGE> 28
Description of Non-Standard Returns calculations Fund BD/BD II
The Following notation will be used for a fund's prices, or unit values:
UVINCEP: Unit Value at fund inception
UV85: Unit Value at year-end, 1985. (Year-minus-10)
UV90: Unit Value at year-end, 1990. (Year-minus-5)
UV92: Unit Value at year-end, 1992. (Year-minus-3)
UV94: Unit Value at year-end, 1994. (Prior year)
UV95: Unit Value at year-end, 1995. (Current year)
ALLIANCE GROWTH STOCK
<TABLE>
<CAPTION>
UNIT VALUE RETURN
---------- ------
<S> <C> <C>
INCEPTION (06/20/94 ): 1.000000 24.42
12/85:
12/90:
12/92:
12/94: 1.047185 33.29
CURRENT 12/95: 1.395807
</TABLE>
AMCAP GROWTH STOCK
<TABLE>
<CAPTION>
UNIT VALUE RETURN
---------- ------
<S> <C> <C>
INCEPTION (06/21/94 ): 1.000000 22.48
12/85:
12/90:
12/92:
12/94: 1.038598 31.14
CURRENT 12/95: 1.361968
</TABLE>
TBC MANAGED INCOME
<TABLE>
<CAPTION>
UNIT VALUE RETURN
---------- ------
<S> <C> <C>
INCEPTION (06/28/94 ): 1.000000 9.22
12/85:
12/90:
12/92:
12/94: .996653 14.56
CURRENT 12/95: 1.141791
</TABLE>
GT GLOBAL STRATEGIC INCOME
<TABLE>
<CAPTION>
UNIT VALUE RETURN
---------- ------
<S> <C> <C>
INCEPTION (06/21/94 ): 1.000000 7.77
12/85:
12/90:
12/92:
12/94: .944948 18.60
CURRENT 12/95: 1.120662
</TABLE>
<PAGE> 29
SB HIGH INCOME
<TABLE>
<CAPTION>
UNIT VALUE RETURN
---------- ------
<S> <C> <C>
INCEPTION (06/22/94 ): 1.000000 10.40
12/85:
12/90:
12/92:
12/94: .987591 17.70
CURRENT 12/95: 1.162368
</TABLE>
SB INTERNATIONAL EQUITY
<TABLE>
<CAPTION>
UNIT VALUE RETURN
---------- ------
<S> <C> <C>
INCEPTION (06/20/94 ): 1.000000 3.27
12/85:
12/90:
12/92:
12/94: .954944 9.98
CURRENT 12/95: 1.050280
</TABLE>
SB INCOME & GROWTH
<TABLE>
<CAPTION>
UNIT VALUE RETURN
---------- ------
<S> <C> <C>
INCEPTION (06/20/94 ): 1.000000 18.21
12/85:
12/90:
12/92:
12/94: .981491 31.52
CURRENT 12/95: 1.290871
</TABLE>
SB MONEY MARKET
<TABLE>
<CAPTION>
UNIT VALUE RETURN
---------- ------
<S> <C> <C>
INCEPTION (06/20/94 ): 1.000000 3.78
12/85:
12/90:
12/92:
12/94: 1.015687 4.19
CURRENT 12/95: 1.058195
</TABLE>
PUTNAM DIVERSIFIED INCOME
<TABLE>
<CAPTION>
UNIT VALUE RETURN
---------- ------
<S> <C> <C>
INCEPTION (06/20/94 ): 1.000000 10.84
12/85:
12/90:
12/92:
12/94: 1.008510 16.02
CURRENT 12/95: 1.170101
</TABLE>
SB PACIFIC BASIN
<TABLE>
<CAPTION>
UNIT VALUE RETURN
---------- ------
<S> <C> <C>
INCEPTION (06/21/94 ): 1.000000 -5.99
12/85:
12/90:
12/92:
12/94: .899312 1.21
CURRENT 12/95: .910187
</TABLE>
<PAGE> 30
MFS TOTAL RETURN
<TABLE>
<CAPTION>
UNIT VALUE RETURN
---------- ------
<S> <C> <C>
INCEPTION (06/20/94 ): 1.000000 13.67
12/85:
12/90:
12/92:
12/94: .978766 24.23
CURRENT 12/95: 1.215923
</TABLE>
SB TOTAL RETURN
<TABLE>
<CAPTION>
UNIT VALUE RETURN
---------- ------
<S> <C> <C>
INCEPTION (11/21/94 ): 1.000000 22.45
12/85:
12/90:
12/92:
12/94: 1.013044 23.45
CURRENT 12/95: 1.250571
</TABLE>
AIM CAPITAL APPRECIATION
<TABLE>
<CAPTION>
UNIT VALUE RETURN
---------- ------
<S> <C> <C>
INCEPTION (10/10/95 ): 1.000000 -4.21
12/85:
12/90:
12/92:
12/94:
CURRENT 12/95: .957880
</TABLE>
<PAGE> 1
THE TRAVELERS FUND BD FOR VARIABLE ANNUITIES
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, JAY S. FISHMAN of Haworth, New Jersey, Director of The
Travelers Insurance Company (hereinafter the "Company"), do hereby make,
constitute and appoint ERNEST J. WRIGHT, Assistant Secretary of said Company,
and KATHLEEN A. McGAH, Assistant Secretary of said Company, or either one of
them acting alone, my true and lawful attorney-in-fact, for me, and in my name,
place and stead, to sign registration statements on behalf of said Company on
Form N-4 or other appropriate form under the Securities Act of 1933 for The
Travelers Fund BD for Variable Annuities, a separate account of the Company
dedicated specifically to the funding of variable annuity contracts to be
offered by the Company, and further, to sign any and all amendments thereto,
including post-effective amendments, that may be filed by the Company on behalf
of said registrant.
IN WITNESS WHEREOF, I have hereunto set my hand this 1st day
of April, 1996.
/s/Jay S. Fishman
Director
The Travelers Insurance Company
<PAGE> 2
THE TRAVELERS FUND BD FOR VARIABLE ANNUITIES
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, IAN R. STUART of East Hampton, Connecticut, Vice
President, Chief Financial Officer, Chief Accounting Officer and Controller of
The Travelers Insurance Company (hereinafter the "Company"), do hereby make,
constitute and appoint ERNEST J. WRIGHT, Assistant Secretary of said Company,
and KATHLEEN A. McGAH, Assistant Secretary of said Company, or either one of
them acting alone, my true and lawful attorney-in-fact, for me, and in my name,
place and stead, to sign registration statements on behalf of said Company on
Form N-4 or other appropriate form under the Securities Act of 1933 for The
Travelers Fund BD for Variable Annuities, a separate account of the Company
dedicated specifically to the funding of variable annuity contracts to be
offered by the Company, and further, to sign any and all amendments thereto,
including post-effective amendments, that may be filed by the Company on behalf
of said registrant.
IN WITNESS WHEREOF, I have hereunto set my hand this 1st day
of April, 1996.
/s/Ian R. Stuart
Vice President, Chief Financial Officer,
Chief Accounting Officer and Controller
The Travelers Insurance Company
<PAGE> 1
EXHIBIT 15 (D)
THE TRAVELERS FUND BD FOR VARIABLE ANNUITIES
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, MICHAEL A. CARPENTER of Greenwich, Connecticut, Director,
President and Chief Executive Officer of The Travelers Insurance Company
(hereinafter the "Company"), do hereby make, constitute and appoint JAY S.
FISHMAN, Director and Chief Finan-cial Officer of said Company, and ERNEST J.
WRIGHT, Assistant Secretary of said Company, or either one of them acting
alone, my true and lawful attorney-in-fact, for me, and in my name, place and
stead, to sign registration statements on behalf of said Com-pany on Form N-4
or other appropriate form under the Securities Act of 1933 for The Travelers
Fund BD for Variable Annuities, a separate account of the Company dedicated
specifically to the funding of variable annuity contracts to be offered by the
Com-pany, and further, to sign any and all amendments thereto, including
post-effective amendments, that may be filed by the Company on behalf of said
registrant.
IN WITNESS WHEREOF, I have hereunto set my hand this 12th day of June,
1995.
/s/Michael A. Carpenter
Director, President and
Chief Executive Officer
The Travelers Insurance Company
