<PAGE> 1
Registration No. 33-58131
811-7259
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 2
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 2
THE TRAVELERS FUND BD II FOR VARIABLE ANNUITIES
-----------------------------------------------
(Exact Name of Registrant)
THE TRAVELERS LIFE AND ANNUITY COMPANY
--------------------------------------
(Name of Depositor)
ONE TOWER SQUARE, HARTFORD, CONNECTICUT 06183
---------------------------------------------
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number, including area code: (860) 277-0111
ERNEST J. WRIGHT
Secretary
The Travelers Life and Annuity Company
One Tower Square
Hartford, Connecticut 06183
---------------------------
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: _____________________
It is proposed that this filing become effective (check appropriate box)
- ---- immediately upon filing pursuant to paragraph (b) of Rule 485.
X on May 1, 1997 pursuant to paragraph (b) of Rule 485.
- ---
- ---- 60 days after filing pursuant to paragraph (a)(1) of Rule 485.
- ---- on __________ pursuant to paragraph (a)(1) of Rule 485.
If appropriate, check the following box:
- --- this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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, 1996 was filed on February 28, 1997.
<PAGE> 2
THE TRAVELERS FUND BD II FOR VARIABLE ANNUITIES
Cross-Reference Sheet
Form N-4
<TABLE>
<CAPTION>
ITEM
NO. CAPTION IN PROSPECTUS
- --- ---------------------
<S> <C> <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 and Expenses 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 Contracts
11. Redemptions Surrenders and Redemptions
12. Taxes Federal Tax Considerations
13. Legal Proceedings Legal Proceedings and Opinions
14. Table of Contents of the Statement Appendix B - 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
TRAVELERS VINTAGE VARIABLE ANNUITY
(FUND BD II) CONTRACT PROFILE
MAY 1, 1997
THIS PROFILE IS A SUMMARY OF SOME OF THE MORE IMPORTANT POINTS THAT YOU SHOULD
KNOW AND CONSIDER BEFORE PURCHASING THE CONTRACT. THE CONTRACT IS MORE FULLY
DESCRIBED IN THE FULL PROSPECTUS WHICH IS ATTACHED TO THIS PROFILE. PLEASE READ
THE PROSPECTUS CAREFULLY. THE TERMS "WE," "US," "OUR" AND THE "COMPANY" REFER TO
TRAVELERS LIFE AND ANNUITY COMPANY. "YOU" AND "YOUR" REFER TO THE CONTRACT
OWNER.
1. THE VARIABLE ANNUITY CONTRACT. The Contract offered by Travelers Life and
Annuity Company is a variable annuity that is intended for retirement savings or
other long-term investment purposes. The Contract provides a death benefit as
well as guaranteed income options. Generally, an individual Contract will be
issued; however in some states, a group contract may be issued, and you will
receive a Certificate. For convenience, we refer to both Contracts and
Certificates as "Contracts." Under a tax-qualified Contract, you can make one or
more payments, as you choose, on a tax-deferred basis. Under a non tax-qualified
Contract, you can make one or more payments with after-tax dollars. You direct
your payment(s) to one or more of the variable funding options listed in Section
4 and/or to the Fixed Account. We guarantee money directed to the Fixed Account
as to principal and interest. The initial interest rate is guaranteed for a
one-year period. After that, interest is declared each calendar quarter by the
Company. The variable funding options are designed to produce a higher rate of
return than the Fixed Account, however, this is not guaranteed. You may also
lose money in the variable funding options.
You can transfer between the funding options as frequently as you wish without
any current tax implications. Currently there is no charge for transfers, nor a
limit to the number of transfers allowed. The Company may, in the future, charge
a fee for any transfer request, or limit the number of transfers allowed. The
Company, at the minimum, would always allow one transfer every six months. You
may transfer between the Fixed Account and the funding options twice a year
(during the 30 days after the six-month contract date anniversary), provided the
amount is not greater than 15% of the Fixed Account value on that date.
The Contract, like all deferred variable annuity contracts, has two phases: the
accumulation phase and the income phase. During the accumulation phase, under a
tax-qualified contract, your tax-deferred contributions accumulate on a
tax-deferred basis and are taxed as income when you make a withdrawal,
presumably when you are in a lower tax bracket. During the accumulation phase,
under a tax-nonqualified contract, earnings on your after-tax contributions
accumulate on a tax-deferred basis and are taxed as income when you make a
withdrawal. The income phase occurs when you begin receiving regular payments
from your Contract. The amount of money you accumulate in your Contract
determines the amount of income (annuity payments) you receive during the income
phase.
2. ANNUITY PAYMENTS (THE INCOME PHASE). You may choose to receive income
payments from the Fixed Account or the variable funding options. If you want to
receive regular income payments from your annuity, you can choose one of the
following annuity options: Option 1 -- payments for your life (life
annuity) -- assuming that you are the annuitant; Option 2 -- payments for your
life with an added guarantee that payments will continue to your beneficiary for
a certain number of months (120, 180 or 240, as you select), if you should die
during that period; Option 3 -- Joint and Last Survivor Annuity, in which
payments are made for your life and the life of another person (usually your
spouse). This option can also be elected with payments continuing at a reduced
rate after the death of one payee. There are also two Income Options: Fixed
Amount -- the cash surrender value of your Contract will be paid to you in equal
payments; or Fixed Period -- the cash surrender value will be used to make
payments for a fixed time period. If you should die before the end of the Fixed
Period, the remaining amount would go to your beneficiary.
Once you make an election of an annuity option or an income option and once
payments begin, it cannot be changed. During the income phase, you have the same
investment choices you had
<PAGE> 5
during the accumulation phase. If amounts are directed to the funding options,
the dollar amount of your payments may increase or decrease.
3. PURCHASE. You may purchase the Contract with an initial payment of at least
$5,000. You may make additional payments of at least $500 at any time during the
accumulation phase. (In some states, additional payments are not allowed.)
4. INVESTMENT OPTIONS. You can direct your money into the Fixed Account or any
or all of the following variable funding options. They are described in the
prospectuses for the funds. The Concert Allocation Series "Select Portfolios"
invest exclusively in shares of 29 underlying mutual funds ("Fund of Funds"), as
described in the Fund prospectus. Depending on market conditions, you may make
or lose money in any of these variable options:
Smith Barney Income and Growth Portfolio
Alliance Growth Portfolio
Van Kampen American Capital Enterprise
Portfolio
Smith Barney International Equity Portfolio
Smith Barney Pacific Basis Portfolio
TBC Managed Income Portfolio
Putnam Diversified Income Portfolio
G.T. Global Strategic Income Portfolio
Smith Barney High Income Portfolio
MFS Total Return Portfolio
Smith Barney Money Market Portfolio
AIM Capital Appreciation Portfolio
Smith Barney Total Return Portfolio
MFS Emerging Growth Portfolio
Select High Growth Portfolio
Select Growth Portfolio
Select Balanced Portfolio
Select Conservative Portfolio
Select Income Portfolio
5. EXPENSES. The Contract has insurance features and investment features, and
there are costs related to each. For contracts with a value of less than
$40,000, the Company deducts an annual administrative charge of $30. The annual
insurance charge varies depending on which death benefit you choose. For the
standard death benefit, the insurance charge is 1.02% of the amounts you direct
to the variable funding options; for the enhanced death benefit (if available)
the insurance charge is 1.30%. There is a related sub-account administrative
charge of .15% annually of the amounts directed to the variable funding options,
regardless of which death benefit is elected.
Each funding option other than the Select Portfolios have investment charges for
management and other expenses. The charges range from 0.60% to 1.25% annually,
of the average daily net asset balance of the funding option, depending on the
funding option. For the Select Portfolios, the management fee is 0.35% plus a
prorata portion of the management fees and other expenses of the underlying
funds.
If you withdraw money, the Company may deduct a withdrawal charge (0% to 6%) of
the purchase payments from the contract. If you withdraw all amounts under the
contract, or if you begin receiving annuity payments, the Company may be
required by your state to deduct a premium tax of 0%-5%.
The following table is designed to help you understand the Contract charges. The
column "Total Annual Insurance Charges" shows the total of the $30 annual
contract charge (which is represented as .021% below), the mortality and expense
risk ("insurance") charge of 1.02% for the standard death benefit and 1.30% for
the enhanced death benefit and, for each, the sub-account charge of .15%. The
column "Total Annual Funding Option Expenses" shows the investment charges for
each portfolio. The columns under the heading "Examples" show you how much you
would pay under the Contract for a one-year period and for a 10-year period.
The examples assume that you invested $1,000 in a Contract that earns 5%
annually and that you withdraw your money at the end of year 1 and at the end of
year 10. For year 1, the Total Annual Insurance Charges are assessed as well as
the withdrawal charges. For year 10, the example shows the aggregate of all the
annual charges assessed during that time, but no withdrawal charge is shown. For
these examples, the premium tax is assumed to be 0%. In the table below, "(a)"
represents charges and expenses for the Standard Death Benefit, and "(b)"
represents charges and
2
<PAGE> 6
expenses for the Enhanced Death Benefit. "Total Annual Insurance Charges"
includes the mortality and expense risk charge and the administrative charges.
The charges below reflect any expense reimbursement or fee waiver. For more
detailed information, see the Fee Table in the Contract Prospectus. For the five
Concert Allocation Series Select Portfolios which invest in underlying funds
exclusively, the charges include an estimate of the prorata underlying funding
option expenses. Such expenses range from .46% to 1.74%, as described fully in
the Fund prospectus.
<TABLE>
<CAPTION>
EXAMPLES:
TOTAL ANNUAL TOTAL ANNUAL EXPENSES
TOTAL ANNUAL FUNDING OPTION TOTAL ANNUAL AT END OF:
PORTFOLIO NAME INSURANCE CHARGES EXPENSES CHARGES 1 YEAR 10 YEARS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Smith Barney Income
and Growth..................... 1.19%(a) 0.73% 1.92%(a) $ 80(a) $224(a)
1.47%(b) 2.20%(b) 82(b) 253(b)
Alliance Growth.................. 1.19%(a) 0.87% 2.06%(a) 81(a) 239(a)
1.47%(b) 2.34%(b) 84(b) 268(b)
Van Kampen American
Capital Enterprise............. 1.19 %(a) 0.83 % 2.02 %(a) 81 (a) 235 (a)
1.47%(b) 2.30%(b) 83(b) 264(b)
Smith Barney
International Equity........... 1.19%(a) 1.10% 2.29%(a) 83(a) 263(a)
1.47%(b) 2.57%(b) 86(b) 291(b)
Smith Barney Pacific Basin....... 1.19%(a) 1.34% 2.53%(a) 86(a) 287(a)
1.47%(b) 2.81%(b) 88(b) 314(b)
TBC Managed Income............... 1.19%(a) 0.92% 2.11%(a) 81(a) 244(a)
1.47%(b) 2.39%(b) 84(b) 273(b)
Putnam Diversified Income........ 1.19%(a) 0.96% 2.15%(a) 82(a) 248(a)
1.47%(b) 2.43%(b) 85(b) 277(b)
G.T. Global Strategic Income..... 1.19%(a) 1.23% 2.42%(a) 85(a) 276(a)
1.47%(b) 2.70%(b) 87(b) 303(b)
Smith Barney High Income......... 1.19%(a) 0.84% 2.03%(a) 81(a) 236(a)
1.47%(b) 2.31%(b) 83(b) 265(b)
MFS Total Return................. 1.19%(a) 0.91% 2.10%(a) 81(a) 243(a)
1.47%(b) 2.38%(b) 84(b) 272(b)
Smith Barney Money Market........ 1.19%(a) 0.65% 1.84%(a) 79(a) 216(a)
1.47%(b) 2.12%(b) 82(b) 245(b)
AIM Capital Appreciation......... 1.19%(a) 0.96% 2.15%(a) 82(a) 248(a)
1.47%(b) 2.43%(b) 85(b) 277(b)
Smith Barney Total Return........ 1.19%(a) 0.83% 2.02%(a) 81(a) 235(a)
1.47%(b) 2.30%(b) 83(b) 264(b)
MFS Emerging Growth.............. 1.19%(a) 0.95% 2.14%(a) 82(a) 247(a)
1.47%(b) 2.42%(b) 85(b) 276(b)
Concert Allocation Series
Select Portfolios
Select High Growth............. 1.19%(a) 1.26% 2.45%(a) 85(a) 279(a)
1.47%(b) 2.73%(b) 88(b) 306(b)
Select Growth.................. 1.19%(a) 1.20% 2.39%(a) 84(a) 273(a)
1.47%(b) 2.67%(b) 87(b) 300(b)
Select Balanced................ 1.19%(a) 1.13% 2.32%(a) 84(a) 266(a)
1.47%(b) 2.60%(b) 86(b) 294(b)
Select Conservative............ 1.19%(a) 1.11% 2.30%(a) 83(a) 264(a)
1.47%(b) 2.58%(b) 86(b) 292(b)
Select Income.................. 1.19%(a) 1.05% 2.24%(a) 83(a) 258(a)
1.47%(b) 2.52%(b) 86(b) 286(b)
</TABLE>
3
<PAGE> 7
6. TAXES. The payments you make to a qualified Contract during the accumulation
phase are made with before-tax dollars. You will be taxed on your purchase
payments and on any earnings when you make a withdrawal or begin receiving
annuity or income payments. Under a non tax-qualified Contract, payments to the
contract are made with after tax dollars, and any earnings will accumulate
tax-deferred. You will be taxed on these earnings when they are withdrawn from
the Contract.
For owners of tax-qualified Contracts, if you reach a certain age, you may be
required by federal tax laws to begin receiving payments from your annuity or
risk paying a penalty tax. In those cases, we can calculate and pay you the
minimum required distribution amounts. If you are younger than 59 1/2 when you
take money out, you may be charged a 10% federal penalty tax on the amount
withdrawn.
7. ACCESS TO YOUR MONEY. You can take out money any time during the
accumulation phase. A withdrawal charge may apply. The amount of the charge
depends on a number of factors, including the length of time since the purchase
payment was made (6% if withdrawn within one year, gradually decreasing to 0%
for payments held by the company for 7 years or more). After the first contract
year, you may withdraw up to 15% (10% in New York) of the contract value (as of
the end of the prior year end) without a withdrawal charge. Of course, you may
also have to pay income taxes and a tax penalty on any money you take out.
8. PERFORMANCE. The value of the Contract will vary depending upon the
investment performance of the funding options you choose. The following chart
shows total returns for each funding option for the time periods shown. These
numbers reflect the insurance charges, administrative charge, investment charges
and all other expenses of the funding option. The numbers do not reflect any
withdrawal charge, or any applicable taxes which, if applied, would reduce such
performance. Past performance is not a guarantee of future results.
LAST TEN CALENDAR YEARS (OR FULL YEARS SINCE INCEPTION):
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
PORTFOLIO NAME 1996 1995 1994 INCEPTION DATE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Smith Barney Income and Growth.................. 18.36%(a) 31.51%(a) --(a) 06/20/94
18.02%(b) 31.14%(b) --(b)
Alliance Growth................................. 27.85%(a) 33.28%(a) --(a) 06/24/94
27.49%(b) 32.90%(b) --(b)
Van Kampen American Capital Enterprise.......... 21.47%(a) 31.12%(a) --(a) 06/21/94
21.13%(b) 30.75%(b) --(b)
Smith Barney International Equity............... 16.32%(a) 9.97%(a) --(a) 06/20/94
15.99%(b) 9.66%(b) --(b)
Smith Barney Pacific Basin...................... 8.03%(a) 1.19%(a) --(a) 06/21/94
7.73%(b) 0.91%(b) --(b)
TBC Managed Income.............................. 1.79%(a) 14.55%(a) --(a) 06/28/94
1.51%(b) 14.23%(b) --(b)
Putnam Diversified Income....................... 6.95%(a) 16.01%(a) --(a) 06/20/94
6.65%(b) 15.68%(b) --(b)
G.T. Global Strategic Income.................... 17.39%(a) 18.58%(a) --(a) 06/21/94
17.06%(b) 18.25%(b) --(b)
Smith Barney High Income........................ 11.80%(a) 17.68%(a) --(a) 06/22/94
11.48%(b) 17.35%(b) --(b)
MFS Total Return Portfolio...................... 13.14%(a) 24.21%(a) --(a) 06/20/94
12.82%(b) 23.87%(b) --(b)
Smith Barney Money Market....................... 3.71%(a) 4.17%(a) --(a) 06/20/94
3.42%(b) 3.88%(b) --(b)
AIM Capital Appreciation........................ 13.55%(a) --(a) --(a) 10/10/95
13.23%(b) --(b) --(b)
Smith Barney Total Return....................... 23.93%(a) 23.43%(a) 6.00%(a) 12/03/93
23.59%(b) 23.09%(b) 5.70%(b)
</TABLE>
Those funding options not illustrated above do not yet have one full year of
performance history.
4
<PAGE> 8
9. DEATH BENEFIT. Assuming you are the Annuitant, if you die before you move to
the income phase, the person you have chosen as your beneficiary will receive a
death benefit. The death benefit paid depends on your age at the time of your
death. The value of the death benefit will be determined at the close of the
business day on which the Company's Home Office receives due proof of death. In
most states, you may choose (at time of purchase) between the standard death
benefit and the enhanced death benefit. Under the standard death benefit, if you
die before you reach age 85 and before the maturity date, the death benefit
equals the greatest of: (1) the contract value; (2) the total purchase payments
made under the Contract less all partial withdrawals; or (3) the contract on the
latest fifth contract year anniversary occurring on or before your 75(th)
birthday.
Assuming you are the annuitant, if you die on or after age 85 and before the
maturity date, the death benefit payable will be the contract value, less any
applicable premium tax or outstanding loans.
On or after June 1, 1997, if approved in your state, you may select the
following new enhanced death benefit. If you die before you reach age 80 and
before the maturity date, the enhanced death benefit equals the greatest of (1)
the contract value; (2) the 5% Roll-Up Death Benefit Value; or (3) the maximum
of all annual Step-Up Death Benefit Values. See the Contract prospectus for a
complete explanation of this enhanced death benefit.
If you die on or after age 80, different death benefit values will be payable to
your beneficiary. See the Contract prospectus for details.
Assuming you are the annuitant, if you die on or after age 90 and before the
maturity date, the death benefit payable will be the contract value less any
applicable premium tax or outstanding loans.
For contracts sold prior to June 1, 1997 (or before state approval is received)
under the enhanced death benefit, if you die before you reach age 85 and before
the maturity date, the death benefit equals the greatest of: (1) the contract
value; or (2) the guaranteed death benefit (i.e., up to a maximum of 200% of
your purchase payments) as of your 75(th) birthday. See the Contract prospectus
for a complete explanation of "guaranteed death benefit".
Assuming you are the annuitant, if you die on or after age 85 and before the
maturity date, the death benefit payable will be the contract value, less any
applicable premium tax or outstanding loans.
In all cases described above amounts will be reduced by any applicable premium
tax, outstanding loans or withdrawals not previously deducted. This death
benefit may not be available in all states. Certain states may have varying age
requirements. Please refer to the Contract prospectus.
10. OTHER INFORMATION
RIGHT TO RETURN
If you cancel the Contract within twenty days after you receive it, you will
receive a full refund of the Contract value (including charges). Where state law
requires a longer period, or the return of purchase payments, the Company will
comply. You bear the investment risk during the right to return period;
therefore, the Contract Value returned may be greater or less than your purchase
payment. If the Contract is purchased as an Individual Retirement Annuity, and
is returned within the first seven days after delivery, your full purchase
payment will be refunded; during the remainder of the right to return period,
the Contract Value (including charges) will be refunded. The Contract Value will
be determined at the close of business on the day we receive a written request
for a refund.
WHO SHOULD PURCHASE THIS CONTRACT?
The Contract is currently available for use in connection with (1) individual
nonqualified purchases; (2) Individual Retirement Annuities (IRAs) and (3)
qualified retirement plans. Qualified contracts include contracts qualifying
under Section 401(a), 403(b), or 408(b) of the Internal Revenue Code of 1986, as
amended.
5
<PAGE> 9
ADDITIONAL FEATURES
This Contract has other features you may be interested in. These include:
DOLLAR COST AVERAGING. This is a program that allows you to invest a fixed
amount of money in funding options each month, theoretically giving you a lower
average cost per unit over time than a single one-time purchase. Dollar Cost
Averaging requires regular investments regardless of fluctuating price levels,
and does not guarantee profits or prevent losses in a declining market.
Potential investors should consider their financial ability to continue
purchases through periods of low price levels.
SYSTEMATIC WITHDRAWAL OPTION. Before the maturity date, you can arrange to
have money sent to you at set intervals throughout the year. Of course, any
applicable income and penalty taxes will apply on amounts withdrawn.
AUTOMATIC REBALANCING. You may elect to have the Company periodically
reallocate the values in your contract to match your original (or your latest)
funding option allocation request.
11. INQUIRIES. If you need more information, please contact us at (800)
842-8573 or:
Travelers Life and Annuity Company
Annuity Services
One Tower Square
Hartford, CT 06183
6
<PAGE> 10
TRAVELERS VINTAGE PROSPECTUS
This prospectus describes Travelers Vintage, a flexible premium variable annuity
contract (the "Contract") issued by The Travelers Life and Annuity Company (the
"Company"). The Contract is available in connection with certain retirement
plans that qualify for special federal income tax treatment ("qualified
Contracts") as well as those that do not qualify for such treatment
("nonqualified Contracts"). Vintage may be issued as an individual Contract or
as a group Contract. In states where only group Contracts are available, you
will be issued a certificate summarizing the provisions of the group Contract.
For convenience, this prospectus refers to both Contracts and Certificates as
"Contracts."
You can choose to have your purchase payments accumulate on a fixed basis (i.e.
a Fixed Account funded through the Company's general account) and/or a variable
basis (i.e., one or more of the sub-accounts ("funding options") of the
Travelers Fund BD II for Variable Annuities ("Fund BD II")). Your contract value
will vary daily to reflect the investment experience of the funding options you
select and any interest credited to the Fixed Account. The variable funding
options currently available are: Smith Barney Income and Growth Portfolio,
Alliance Growth Portfolio, Van Kampen 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, AIM Capital Appreciation Portfolio, and Smith Barney
Money Market Portfolio of the Travelers Series Fund, Inc.; Total Return
Portfolio of the Smith Barney Series Fund; MFS Emerging Growth Portfolio of the
Travelers Series Trust; and Select High Growth Portfolio, Select Growth
Portfolio, Select Balanced Portfolio, Select Conservative Portfolio and Select
Income Portfolio of the Smith Barney Concert Allocation Series Inc. The Fixed
Account funding option is described in Appendix B. Unless specified otherwise,
this prospectus refers to the variable funding options. The contracts and/or
some of the funding options may not be available in all states. THIS PROSPECTUS
IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUSES FOR THE VARIABLE
FUNDING OPTIONS. THESE PROSPECTUSES SHOULD BE READ AND RETAINED FOR FUTURE
REFERENCE.
This Prospectus provides the information that you should know before investing
in the Contract. You can receive additional information about Fund BD II by
requesting a copy of the Statement of Additional Information ("SAI") dated May
1, 1997. The SAI has been filed with the Securities and Exchange Commission
("SEC") and is incorporated by reference into this Prospectus. To request a
copy, write to The Travelers Life and Annuity Insurance Company, Annuity
Services, One Tower Square, Hartford, Connecticut 06183-9061, or call
1-800-842-8573. The Table of Contents of the SAI appears in Appendix C of this
Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
VARIABLE ANNUITY CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR
GUARANTEED BY ANY BANK, NOR ARE THEY FEDERALLY INSURED OR OTHERWISE PROTECTED BY
THE FDIC, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY; THEY ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL INVESTMENT.
PROSPECTUS DATED MAY 1, 1997
<PAGE> 11
TABLE OF CONTENTS
<TABLE>
<S> <C>
INDEX OF SPECIAL TERMS................. 2
FEE TABLE.............................. 3
THE ANNUITY CONTRACT................... 5
Purchase Payments...................... 5
Accumulation Units..................... 5
The Funding Options.................... 6
Substitutions and Additions............ 7
CHARGES AND DEDUCTIONS................. 7
Withdrawal Charge...................... 7
Free Withdrawal Allowance.............. 7
Administrative Charges................. 7
Mortality and Expense Risk Charge...... 8
Reduction or Elimination of Contract
Charges.............................. 8
Funding Option Expenses................ 8
Premium Tax............................ 8
Changes in Taxes Based Upon Premium or
Value................................ 9
OWNERSHIP PROVISIONS................... 9
Types of Ownership..................... 9
Beneficiary............................ 9
Annuitant.............................. 10
TRANSFERS.............................. 10
Dollar Cost Averaging.................. 10
SURRENDERS AND REDEMPTIONS............. 10
Systematic Withdrawals................. 11
Loans.................................. 11
DEATH BENEFIT.......................... 11
Death Proceeds Before the Maturity
Date................................. 12
Death Proceeds After the Maturity
Date................................. 14
THE ANNUITY PERIOD..................... 14
Maturity Date.......................... 14
Allocation of Annuity.................. 14
Variable Annuity....................... 14
Fixed Annuity.......................... 15
PAYMENT OPTIONS........................ 15
Election of Options.................... 15
Annuity Options........................ 16
Income Options......................... 16
MISCELLANEOUS CONTRACT PROVISIONS...... 17
Right to Return........................ 17
Termination............................ 17
Required Reports....................... 17
Suspension of Payments................. 17
Transfers of Contract Values to Other
Annuities............................ 17
THE SEPARATE ACCOUNT................... 18
Mixed and Shared Funding............... 18
Performance Information................ 18
FEDERAL TAX CONSIDERATIONS............. 19
General Taxation of Annuities.......... 19
Types of Contracts: Qualified or
Nonqualified......................... 19
Nonqualified Annuity Contracts......... 19
Qualified Annuity Contracts............ 20
Penalty Tax for Premature
Distributions........................ 20
Diversification Requirements for
Variable Annuities................... 20
Ownership of the Investments........... 20
Mandatory Distributions for Qualified
Plans................................ 21
OTHER INFORMATION...................... 21
The Insurance Company.................. 21
Distribution Of Variable Annuity
Contracts............................ 21
Conformity with State and Federal
Laws................................. 22
Voting Rights.......................... 22
Legal Proceedings and Opinions......... 22
APPENDIX A: Condensed Financial
Information.......................... 23
APPENDIX B: The Fixed Account.......... 24
APPENDIX C: Table of Contents of the
Statement of Additional
Information.......................... 25
</TABLE>
INDEX OF SPECIAL TERMS
The following terms are italicized throughout the prospectus. Refer to the page
listed for an explanation of each term.
<TABLE>
<S> <C>
Accumulation Unit...................... 5
Annuitant.............................. 9
Annuity Payments....................... 12
Annuity Unit........................... 13
Cash Surrender Value................... 10
Contract Date.......................... 5
Contract Owner (You, Your)............. 4
Contract Value......................... 5
Contract Year.......................... 5
Fixed Account.......................... 24
Funding Option(s)...................... 5
Income Payments........................ 14
Maturity Date.......................... 5
Purchase Payment....................... 4
Written Request........................ 5
</TABLE>
2
<PAGE> 12
FEE TABLE
- --------------------------------------------------------------------------------
CONTRACT OWNER TRANSACTION EXPENSES
<TABLE>
<S> <C>
WITHDRAWAL CHARGE (as a percentage of purchase payments):
LENGTH OF TIME FROM PURCHASE PAYMENT
</TABLE>
<TABLE>
<CAPTION>
(NUMBER OF YEARS) CHARGE
<S> <C>
1 6%
2 6%
3 6%
4 3%
5 2%
6 1%
7 and thereafter 0%
</TABLE>
- ----
<TABLE>
<S> <C>
ANNUAL CONTRACT ADMINISTRATIVE CHARGE $30
(Waived if contract value is $40,000 or more)
ANNUAL SEPARATE ACCOUNT CHARGES:
(as a percentage of the average daily net assets of the
Separate Account)
</TABLE>
<TABLE>
<CAPTION>
STANDARD ENHANCED
DEATH BENEFIT DEATH BENEFIT
--------------------------------------------------------------------------------------------
<S> <C> <C>
Mortality and Expense Risk Charge.................... 1.02% 1.30%
Administrative Expense Charge........................ 0.15% 0.15%
------------- -------------
Total Separate Account Charges..................... 1.17% 1.45%
FUNDING OPTION EXPENSES:
(as a percentage of average daily net assets of the Funding
Option)
</TABLE>
<TABLE>
<CAPTION>
MANAGEMENT OTHER
FEE (AFTER EXPENSES (AFTER TOTAL FUNDING
REIMBURSEMENT) REIMBURSEMENT) OPTION EXPENSES
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Smith Barney Income and Growth Portfolio 0.65% 0.08% 0.73%
Alliance Growth Portfolio 0.80% 0.07% 0.87%
Van Kampen American Capital Enterprise
Portfolio 0.70% 0.13% 0.83%
Smith Barney International Equity Portfolio 0.90% 0.20%* 1.10%
Smith Barney Pacific Basin Portfolio 0.90% 0.44%(1)* 1.34%
TBC Managed Income Portfolio 0.65% 0.27% 0.92%
Putnam Diversified Income Portfolio 0.75% 0.21% 0.96%
G.T. Global Strategic Income Portfolio 0.80% 0.43%(1)* 1.23%
Smith Barney High Income Portfolio 0.60% 0.24% 0.84%
MFS Total Return Portfolio 0.80% 0.11% 0.91%
Smith Barney Money Market Portfolio 0.60% 0.05%(1) 0.65%
AIM Capital Appreciation Portfolio 0.80% 0.16% 0.96%
Smith Barney Total Return Portfolio 0.55% 0.28%(2) 0.83%
MFS Emerging Growth Portfolio 0.75% 0.20%(2) 0.95%
Select High Growth Portfolio(3) 0.35%(3) 0.91%(3) 1.26%(3)
Select Growth Portfolio(3) 0.35%(3) 0.85%(3) 1.20%(3)
Select Balanced Portfolio(3) 0.35%(3) 0.78%(3) 1.13%(3)
Select Conservative Portfolio(3) 0.35%(3) 0.76%(3) 1.11%(3)
Select Income Portfolio(3) 0.35%(3) 0.70%(3) 1.05%(3)
</TABLE>
NOTES:
The purpose of the Fee Table is to assist Contract Owners in understanding the
various costs and expenses that a Contract Owner will bear, directly or
indirectly. See "Charges and Deductions" in this prospectus for additional
information. Expenses shown do not include premium taxes, which may be
applicable.
(1) Other expenses are as of October 31, 1996, 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 Funding
Option Expenses for the Travelers Series Fund Inc. Portfolios would have
been: Smith Barney Pacific Basin Portfolio, 1.58%; G.T. Global Strategic
Income Portfolio, 1.38%; Smith Barney Money Market Portfolio, 0.74%.
3
<PAGE> 13
(2) Other expenses for the Smith Barney Series Fund Total Return Portfolio and
the Travelers Series Trust MFS Emerging Growth Portfolio are as of December
31, 1996 taking into account the current expense limitations agreed to by
the Managers. For the MFS Emerging Growth Portfolio, The Managers have
waived all of their fees for the period and reimbursed the Fund for their
expenses. Total Underlying Expenses for this fund without the fees waived
and the expenses reimbursed would have been 2.09%.
(3) The Concert Allocation Series Select Portfolios (a "Fund of Funds") invest
in the shares of other mutual funds. Their management fee is .35% and they
have no expenses. The other expenses shown are based on the expected
weighted average of underlying fund expense ratios (which include a
management fee and other expenses) as of October 31, 1996, the underlying
funds' fiscal year end. See the Fund prospectus for information regarding
the equity/fixed income (including money market) investment target and range
for each portfolio, and for the expense ratios for the underlying funds.
Such ratios range from 0.46% to 1.74%.
* Travelers Series Fund Inc. Portfolios, Smith Barney International Equity,
Smith Barney Pacific Basin and G.T. Global Strategic Income earned credits
from the Custodian which reduced the service fees incurred. When these credits
are taken into consideration, Total Funding Option Expenses are 1.05%, 1.17%
and 1.11% respectively.
EXAMPLE*
Assuming a 5% annual return on assets, a $1,000 investment would be subject to
the following expenses:
(a) If the Contract is surrendered or if certain income options are elected
at the end of the period shown,**:
(b) If the Contract is not surrendered at the end of the period shown or if
it is annuitized:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
STANDARD DEATH BENEFIT ENHANCED DEATH BENEFIT
1 YEAR 3 YEARS 1 YEAR 3 YEARS
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Smith Barney Income and Growth Portfolio............................ $ 80(a) $ 120(a) $ 82(a) $ 129(a)
20(b) 60(b) 22(b) 69(b)
Alliance Growth Portfolio........................................... 81(a) 125(a) 84(a) 133(a)
21(b) 65(b) 24(b) 73(b)
Van Kampen American Capital Enterprise Portfolio.................... 81(a) 123(a) 83(a) 132(a)
21(b) 63(b) 23(b) 72(b)
Smith Barney International Equity Portfolio......................... 83(a) 132(a) 86(a) 140(a)
23(b) 72(b) 26(b) 80(b)
Smith Barney Pacific Basin Portfolio................................ 86(a) 139(a) 88(a) 147(a)
26(b) 79(b) 28(b) 87(b)
TBC Managed Income Portfolio........................................ 81(a) 126(a) 84(a) 135(a)
21(b) 66(b) 24(b) 75(b)
Putnam Diversified Income Portfolio................................. 82(a) 127(a) 85(a) 136(a)
22(b) 67(b) 25(b) 76(b)
G.T. Global Strategic Income Portfolio.............................. 85(a) 135(a) 87(a) 144(a)
25(b) 75(b) 27(b) 84(b)
Smith Barney High Income Portfolio.................................. 81(a) 124(a) 83(a) 132(a)
21(b) 64(b) 23(b) 72(b)
MFS Total Return Portfolio.......................................... 81(a) 126(a) 84(a) 134(a)
21(b) 66(b) 24(b) 74(b)
Smith Barney Money Market Portfolio................................. 79(a) 118(a) 82(a) 126(a)
19(b) 58(b) 22(b) 66(b)
MFS Emerging Growth Portfolio....................................... 82(a) 127(a) 85(a) 135(a)
22(b) 67(b) 25(b) 75(b)
AIM Capital Appreciation Portfolio.................................. 82(a) 127(a) 85(a) 136(a)
22(b) 67(b) 25(b) 76(b)
Smith Barney Total Return Portfolio................................. 81(a) 123(a) 83(a) 132(a)
21(b) 63(b) 23(b) 72(b)
Select High Growth Portfolio........................................ 85(a) 136(a) 88(a) 145(a)
25(b) 76(b) 28(b) 85(b)
Select Growth Portfolio............................................. 84(a) 135(a) 87(a) 143(a)
24(b) 75(b) 27(b) 83(b)
Select Balanced Portfolio........................................... 84(a) 132(a) 86(a) 141(a)
24(b) 72(b) 26(b) 81(b)
Select Conservative Portfolio....................................... 83(a) 132(a) 86(a) 140(a)
23(b) 72(b) 26(b) 80(b)
Select Income Portfolio............................................. 83(a) 130(a) 86(a) 138(a)
23(b) 70(b) 26(b) 78(b)
</TABLE>
* THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THE
EXAMPLE REFLECTS THE $30 ANNUAL CONTRACT ADMINISTRATIVE CHARGE AS AN ANNUAL
CHARGE OF 0.021% OF ASSETS.
** THE WITHDRAWAL 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.")
4
<PAGE> 14
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
This information is located in Appendix A, page 23.
THE ANNUITY CONTRACT
- --------------------------------------------------------------------------------
Travelers Vintage Annuity is a contract between you (the contract owner) and
Travelers Life and Annuity Company (called "us" or the "Company"). Residents of
certain states, where applicable, will be issued certificates representing
participation in a master group contract owned by a trustee of an existing
trust. These certificates contain the same provisions as the individual
contracts. Under this contract, you make purchase payments to us and we credit
them to your account. The Company promises to pay you an income, in the form of
annuity or income payments, beginning on a future date that you choose, the
maturity date. The purchase payments accumulate tax deferred in the funding
options of your choice. We offer multiple variable funding options, and one
fixed account option. The contract owner assumes the risk of gain or loss
according to the performance of the variable funding options. The contract value
is the amount of purchase payments, plus or minus any investment experience or
interest. The contract value also reflects all withdrawals made and charges
deducted. There is generally no guarantee that at the maturity date the contract
value will equal or exceed the total purchase payments made under the Contract,
except as specified or elected under the Death Benefit provisions described in
this prospectus. The date the Contract and its benefits became effective is
referred to as the contract date. Each anniversary of this contract date is
called a contract year.
Certain changes and elections must be made in writing to the Company. Where the
term "written request" is used, it means that written information must be sent
to the Company's Home Office in a form and content satisfactory to us.
PURCHASE PAYMENTS
The initial purchase payment must be at least $5,000. Additional payments of at
least $500 may be made under the Contract at any time. Under certain
circumstances, we may waive the minimum purchase payment requirement. Purchase
payments over $1,000,000 may be made with our prior consent. In some states, we
do not accept additional purchase payments. The initial purchase payment is due
and payable before the Contract becomes effective.
We will apply the initial purchase payment within two business days after we
receive it at our Home Office. Subsequent purchase payments will be credited to
a Contract within one business day. Our business day ends when the New York
Stock Exchange closes, usually 4:00 p.m. Eastern time.
ACCUMULATION UNITS
An accumulation unit is used to calculate the value of a Contract. An
accumulation unit works like a share of a mutual fund. Each funding option has a
corresponding accumulation unit value. The accumulation units are valued each
business day and may increase or decrease from day to day. The number of
accumulation units we will credit to your Contract once we receive a purchase
payment is determined by dividing the amount directed to each funding option by
the value of the accumulation unit. We calculate the value of an accumulation
unit for each funding option each day after the New York Stock Exchange closes.
After the value is calculated, your account is credited. During the annuity
period (i.e., after the maturity date), you are credited with annuity units.
5
<PAGE> 15
THE FUNDING OPTIONS
You choose which of the following variable funding options to have your purchase
payments allocated to. You will find detailed information about the options and
their inherent risks in the current prospectuses for the funding options which
must accompany this prospectus. Since each option has varying degrees of risk,
please read the prospectuses carefully before investing. Additional copies of
the prospectuses may be obtained by contacting your registered representative or
by calling 1-800-842-8573.
The current funding options are listed below, along with their investment
advisers and any subadviser:
<TABLE>
<CAPTION>
INVESTMENT
FUNDING OPTION OBJECTIVE INVESTMENT MANAGER SUB-ADVISER
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Smith Barney Income and current income and Smith Barney Mutual Funds
Growth Portfolio long-term growth of Management Inc. ("SBMFM")
income and capital
Alliance Growth Portfolio long-term growth of Travelers Investment Advisors Alliance Capital
capital ("TIA") Management L.P.
Van Kampen American Capital capital appreciation TIA American Capital Asset
Enterprise Portfolio Management, Inc
Smith Barney International total return on assets SBMFM
Equity Portfolio from growth of capital
and income
Smith Barney Pacific Basin long-term capital SBMFM
Portfolio appreciation
TBC Managed Income Portfolio high current income TIA The Boston Company Asset
consistent with Management, Inc.
prudent risk of
capital
Putnam Diversified Income high current income TIA Putnam Investment Management,
Portfolio consistent with Inc.
preservation of
capital
G.T. Global Strategic Income high current income and, TIA GT Asset Management Inc.
Portfolio secondarily, capital
appreciation
Smith Barney High Income high current income SBMFM
Portfolio
MFS Total Return Portfolio above-average income TIA Massachusetts Financial
(compared to a Services Company
portfolio entirely
invested in equity
securities) consistent
with the prudent
employment of capital
Smith Barney Money Market maximum current income SBMFM
Portfolio and preservation of
capital
AIM Capital Appreciation capital appreciation TIA AIM Capital Management, Inc.
Portfolio
Smith Barney Total Return total return, consisting SBMFM
Portfolio of long-term capital
appreciation and
income
MFS Emerging Growth Portfolio long-term growth of Travelers Asset Management Massachusetts Financial
capital International Corporation Services Company
(TAMIC)
Select High Growth Portfolio capital appreciation TIA
Select Growth Portfolio long-term growth of TIA
capital
Select Balanced Portfolio a balance of growth of TIA
capital and income
Select Conservative Portfolio income and, secondarily, TIA
long-term growth of
capital
Select Income Portfolio high current income TIA
</TABLE>
6
<PAGE> 16
SUBSTITUTIONS AND ADDITIONS
If any of the funding options should become unavailable for allocating purchase
payments, or if we believe that further investment in a funding option becomes
inappropriate for the purposes of the Contract, we may substitute another
funding option. However, we will not make any substitutions without notifying
you and obtaining any applicable state and SEC approval. From time to time we
may make new funding options available.
CHARGES AND DEDUCTIONS
- --------------------------------------------------------------------------------
WITHDRAWAL CHARGE
No sales charges are deducted from purchase payments when they are applied under
the Contract. However, a withdrawal charge will be deducted, if any or all of
the contract value is withdrawn during the first six years following a purchase
payment. The length of time from when we receive the purchase payment to the
time of withdrawal determines the amount of the charge.
The withdrawal charge is equal to a percentage of the amount of purchase
payments withdrawn from the Contract and is calculated as follows:
<TABLE>
<CAPTION>
LENGTH OF TIME FROM
PURCHASE PAYMENT WITHDRAWAL
(NUMBER OF YEARS) CHARGE
<S> <C>
1 6%
2 6%
3 6%
4 3%
5 2%
6 1%
7 and thereafter 0%
</TABLE>
For purposes of the withdrawal charge calculation, withdrawals will be deemed to
be taken first from any 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 you instruct
us otherwise, we will deduct the withdrawal charge from the amount requested.
We will not deduct a withdrawal charge (1) from payments we make due to 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.
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 end
of the previous contract year. The free withdrawal allowance applies to partial
withdrawals and to full withdrawals, except those transferred directly to
annuity contracts issued by other financial institutions.
ADMINISTRATIVE CHARGES
An administrative charge of $30 is deducted annually from Contracts with a value
of less than $40,000. This charge compensates us for expenses incurred in
establishing and maintaining the Contract. The charge is deducted from the
contract value on the fourth Friday of August of each year by cancelling
accumulation units applicable to each funding option on a pro rata basis. This
charge will be prorated from the date of purchase to the next charge deduction
date. A prorated charge will also be made if the Contract is completely
withdrawn or terminated. We will not
7
<PAGE> 17
deduct a Contract administrative charge: (1) if the distribution results from
the death of the contract owner or the annuitant with no contingent annuitant
surviving, (2) after an annuity payout has begun, or (3) if the contract value
on the date of assessment is equal to or greater than $40,000.
An administrative charge is deducted on each business day from amounts allocated
to the variable funding options in order to compensate the Company for certain
administrative and operating expenses. The charge equals, on an annual basis,
0.15% of the daily net asset value allocated to each of the variable funding
options.
MORTALITY AND EXPENSE RISK CHARGE
Each business day, the Company deducts a mortality and expense risk charge from
amounts held in the variable funding options. The deduction is reflected in our
calculation of accumulation and annuity unit values. We reserve the right to
lower the mortality and expense risk charge at any time. The mortality risk
portion of the insurance charge compensates us for guaranteeing to provide
annuity payments according to the terms of the Contract regardless of how long
the annuitant lives and for guaranteeing to provide the standard or the enhanced
death benefit if an annuitant dies prior to the maturity date. The expense risk
portion compensates us 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.
REDUCTION OR ELIMINATION OF CONTRACT CHARGES
The withdrawal charge, the administrative charges, and the mortality and expense
risk charge under the Contract may be reduced or eliminated when certain sales
or administration of the Contract result in savings or reduction of sales or
administrative expenses and/or mortality and expense risks. Any such reduction
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 administrative charges or mortality and expense risk
charges. For certain trusts, the Company may change the order in which purchase
payments and earnings are withdrawn in order to determine the withdrawal charge.
In no event will reduction or elimination of the withdrawal charge or the
administrative charge be permitted where such reduction or elimination will be
unfairly discriminatory to any person.
FUNDING OPTION EXPENSES
The deductions from and expenses paid out of the assets of the various funding
options are summarized in the fee table and are described in the accompanying
prospectuses.
PREMIUM TAX
Certain state and local governments charge premium taxes ranging from 0% to 5%,
depending upon jurisdiction. The Company is responsible for paying these taxes
and will determine the method used to recover premium tax expenses incurred.
Where required, the Company will deduct any applicable premium taxes from the
contract value either upon death, surrender,
8
<PAGE> 18
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, contract gains or value of the contract, we reserve the right to
charge you proportionately for this tax.
OWNERSHIP PROVISIONS
- --------------------------------------------------------------------------------
TYPES OF OWNERSHIP
Contract Owner (you). The Contract belongs to the contract owner named in the
contract (on the Specifications page), or to any other person to whom the
Contract is subsequently assigned. An assignment of ownership or a collateral
assignment may be made only for nonqualified contracts. You have sole power
during the annuitant's lifetime to exercise any rights and to receive all
benefits given in the contract provided you have not named an irrevocable
beneficiary and provided the Contract is not assigned.
You receive all payments while the annuitant is alive unless you direct them to
an alternate recipient. An alternate recipient does not become the contract
owner.
Joint Owner. For nonqualified contracts only, joint owners may be named in a
written request before the Contract is in effect. Joint owners may independently
exercise transfers allowed under the Contract. All other rights of ownership
must be exercised by 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
the other joint owner survives. The entire interest of the deceased joint owner
in the Contract will pass to the surviving joint owner.
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 contract owner if living when the contract owner
dies. The succeeding owner has no interest in the Contract before then. The
contract owner may change or delete a succeeding owner by written request.
BENEFICIARY
The beneficiary is named by you in a written request. The beneficiary has the
right to receive any remaining contractual benefits upon the death of the
annuitant or the contract owner. If more than one beneficiary survives the
annuitant, the beneficiaries will share equally in benefits unless different
shares are recorded with the Company by written request before the death of the
annuitant or contract owner.
With nonqualified contracts, as discussed under "Death Benefit,"the beneficiary
named in the Contract may differ from the designated beneficiary (for example,
the joint owner or a contingent annuitant). In such cases, the designated
beneficiary receives the contract (rather than the beneficiary) upon your death.
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.
9
<PAGE> 19
ANNUITANT
The annuitant is designated in the contract (on the Specifications page), and is
the individual on whose life the maturity date and the amount of the monthly
annuity payments depend. The annuitant may not be changed after the Contract is
in effect.
For nonqualified contracts only, the contract owner may also name one individual
as a contingent annuitant by written request before the Contract becomes
effective. A contingent annuitant may not be changed, deleted or added to the
Contract after the Contract becomes effective.
TRANSFERS
- --------------------------------------------------------------------------------
Before the maturity date, you may transfer all or part of the contract value
between funding options. There are no charges or restrictions on the amount or
frequency of transfers currently; however, we reserve the right to charge a fee
for any transfer request, and to limit the number of transfers to one in any
six-month period. Since different funding options have different expenses, a
transfer of contract values from one funding option to another could result in
your investment becoming subject to higher or lower expenses.
DOLLAR COST AVERAGING
Dollar cost averaging (or "automated transfers") allows you to transfer a set
dollar amount to other funding options on a monthly or quarterly basis so that
more accumulation units are purchased in a funding option 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.
You may elect automated transfers through written request or other method
acceptable to the Company. You must have a minimum total Contract Value of
$5,000 to enroll in the Dollar Cost Averaging program. The minimum total
automated transfer amount is $400.
You may establish automated transfers of Contract Values from the Fixed Account,
subject to certain restrictions. Automated transfers from the Fixed Account may
not deplete your Fixed Account Value in 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. All provisions and
terms of the Contract apply to automated transfers, including provisions
relating to the transfer of money between funding options. We reserve the right
to suspend or modify transfer privileges at any time and to assess a processing
fee for this service.
SURRENDERS AND REDEMPTIONS
- --------------------------------------------------------------------------------
Any time before the maturity date, you may redeem all or any portion of the cash
surrender value, that is, the contract value, less any withdrawal charge and any
premium tax not previously deducted. You must submit a written request
specifying the fixed or variable funding option(s) from which amounts are to be
withdrawn. The cash surrender value will be determined as of the close of
business after we receive your surrender request at the Home Office. The cash
surrender value may be more or less than the purchase payments made depending on
the contract value at the time of surrender.
We may defer payment of any cash surrender value for a period of not more than
seven days after the request is received, but it is our intent to pay as soon as
possible. We cannot process
10
<PAGE> 20
withdrawal requests that are not in good order. We will contact you if there is
a deficiency causing a delay and will advise what is needed to act upon the
withdrawal request.
SYSTEMATIC WITHDRAWALS
Before the maturity date, you may choose to withdraw a specified dollar amount
(at least $100) on a monthly, quarterly, semiannual or annual basis. Any
applicable withdrawal charges (in excess of the free withdrawal allowance) and
any applicable premium taxes will be deducted. To elect systematic withdrawals,
you must have a minimum contract value of $15,000. We will surrender
accumulation units from all funding options in which you have an interest,
unless you instruct us otherwise. You may begin or discontinue systematic
withdrawals at any time by notifying us in writing, but at least 30 days' notice
must be given to change any systematic withdrawal instructions that are
currently in place.
We reserve the right to discontinue offering systematic withdrawals or to assess
a processing fee for this service upon 30 days' written notice to contract
owners (where allowed by state law).
Each systematic withdrawal is subject to federal income taxes on the taxable
portion. In addition, a 10% federal penalty tax may be assessed on systematic
withdrawals if the contract owner is under age 59 1/2. You should consult with
your tax adviser regarding the tax consequences of systematic withdrawals.
LOANS
Loans may be available under your Contract. If available, all loan provisions
are described in your Contract or loan agreement.
DEATH BENEFIT
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Before the maturity date, a death benefit is payable to the beneficiary when
either the annuitant, contract owner or the first of joint owners dies and 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 receipt at our 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.")
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, we
will recalculate the value of the death benefit under the provisions of "Death
Proceeds Before the Maturity Date," below. The value of the death benefit, 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
contract 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 your spouse is the surviving joint owner, he or she may elect to continue the
Contract as owner rather than taking a distribution under the Contract. (See
"Nonqualified Annuity Contracts" in this prospectus.) In this case, all
references to age in the "Death Proceeds Before 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 BEFORE 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 outstanding loans 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 (AGE 90 IN FLORIDA)
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 loans 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.
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 or outstanding loans.
NEW ENHANCED DEATH BENEFIT FOR CONTRACTS ISSUED ON OR AFTER JUNE 1, 1997
(WHERE STATE APPROVAL HAS BEEN RECEIVED)
IF THE ANNUITANT DIES BEFORE AGE 80 AND BEFORE THE MATURITY DATE, the Company
will pay to the beneficiary the greatest of (1), (2) or (3) below, each reduced
by any applicable premium tax or outstanding loans:
1) the contract value;
2) the Roll-Up Death Benefit Value (as described below) available at the
Death Report Date; or
3) the maximum of all Step-Up Death Benefit Values (as described below) in
effect on the Death Report Date.
IF THE ANNUITANT DIES ON OR AFTER AGE 80, BUT BEFORE AGE 90 AND BEFORE THE
maturity date, the Company will pay to the beneficiary the greatest of (1), (2)
or (3) below, each reduced by any applicable premium tax or outstanding loans as
of the Death Report Date:
1) the contract value;
2) the Roll-Up Death Benefit Value (as described below) available at the
annuitant's 80th birthday, plus any additional purchase payments and
less any Partial Surrender Reductions (as described below) which occur
after the annuitant's 80th birthday; or
3) the maximum of all Step-Up Death Benefit Values (as described below) in
effect on the Death Report Date which are associated with any contract
date anniversary occurring on or before the annuitant's 80th birthday.
IF THE ANNUITANT DIES ON OR AFTER AGE 90 AND BEFORE THE MATURITY DATE, the death
benefit payable as of the Death Report Date will be the Contract Value, less any
applicable premium tax or outstanding loans.
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THE 5% ROLL-UP DEATH BENEFIT VALUE. On the contract date, the Roll-Up Death
Benefit Value is equal to the purchase payment. On each contract date
anniversary, the Roll-Up Death Benefit Value will be recalculated as follows:
a) the Roll-Up Death Benefit Value as of the previous contract date
anniversary;
b) plus any purchase payments during the previous contract year;
c) minus any Partial Surrender Reductions (as described below) during the
previous contract year;
d) the sum of (a) through (c) increased by 5% equals the new Roll-Up Death
Benefit Value.
On dates other than the contract date anniversary, the Roll-Up Death Benefit
Value equals:
a) the Roll-Up Death Benefit Value on the previous contract date
anniversary;
b) plus any purchase payments made since the previous contract date
anniversary;
c) minus any Partial Surrender Reductions (as described below) since the
previous contract date anniversary.
The maximum Roll-Up Death Benefit payable equals 200% of the difference between
all purchase payments and all Partial Surrender Reductions (as described below).
ANNUAL STEP-UP DEATH BENEFIT VALUE. A separate Step-Up Death Benefit Value will
be established on each anniversary of the contract date which occurs on or prior
to the Death Report Date and will initially equal the contract value on that
anniversary. After a Step-Up Death Benefit Value has been established, it will
be recalculated each time a purchase payment is made or a partial surrender is
taken until the Death Report Date. Step-Up Death Benefit Values will be
recalculated by increasing them by the amount of each applicable Purchase
Payment and by reducing them by a Partial Surrender Reduction (as described
below) for each applicable partial surrender. Recalculations of Step-Up Death
Benefit Values related to any purchase payments or any partial surrenders will
be made in the order that such purchase payment or partial surrenders occur.
THE PARTIAL SURRENDER REDUCTION referenced above is equal to (1) the amount of a
Death Benefit Value (Step-Up or Roll-Up) immediately prior to the reduction for
the partial surrender, multiplied by (2) the amount of the partial surrender
divided by the contract value immediately prior to the partial surrender.
If state approval has not been received for the above New Enhanced Death
Benefit, and for contracts sold prior to such approval, the following will
apply:
ENHANCED DEATH BENEFIT FOR CONTRACTS ISSUED BEFORE JUNE 1, 1997. 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 or outstanding loans.
The guaranteed death benefit is equal to the purchase payments made to the
Contract (minus surrenders, outstanding loans, 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 outstanding loans 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 and outstanding loans.
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 and outstanding loans.
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NOTE: 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.
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
contracts. (In those states that require a later maturity date, the Company will
comply. Refer to your Contract.) 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.
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 the later of the April 1 following the
contract owner's attainment of age 70 1/2 or the year of retirement; or upon the
death of the contract owner. Independent tax advice should be sought regarding
the election of minimum required distributions.
ALLOCATION OF ANNUITY
When an annuity option is elected, it may be elected as a variable annuity, a
fixed annuity, or a combination of both. (In Florida, the variable annuity
option is not available under this contract.) 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 funding options. At least 15
days prior to the maturity date, you may reallocate the basis on which annuity
payments will be determined. (See "Transfers.")
VARIABLE ANNUITY
You may choose an annuity payout that fluctuates depending on the investment
experience of variable funding options. The number of annuity units credited to
the Contract is determined by dividing the first monthly annuity payment
attributable to each funding option by the corresponding annuity unit value as
of 14 days before the date annuity payments begin. The number of annuity units
(but not their value) remains fixed during the annuity period.
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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 begin 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 funding
option. The total amount of each annuity payment will be equal to the sum of the
basic payments in each funding option. The actual amounts of these payments are
determined by multiplying the number of annuity units credited to each funding
option by the corresponding annuity unit value as of the date 14 days before
payment is due.
FIXED ANNUITY
You may choose a fixed annuity that provides payments which do not vary during
the annuity period. We will calculate the dollar amount of the first fixed
annuity payment as described under "Variable Annuity" above, except that amount
applied to effect the annuity will be the cash surrender value, determined as of
the date annuity payments begin. If it would produce a larger payment, the first
fixed annuity payment will be determined using the Life Annuity Tables in effect
on the maturity date.
PAYMENT OPTIONS
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ELECTION OF OPTIONS
While the annuitant is alive, you can change your annuity or income option
selection any time up to the maturity date. Income options differ from annuity
options in that the amount of the payments made under income options are not
based upon the life of any person. Therefore, the annuitant may outlive the
payment period. Once annuity or income payments have begun, no further elections
are allowed.
During the annuitant's lifetime, if you do not elect otherwise before the
maturity date, we will pay you (or another designated payee) the first of a
series of monthly annuity 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 we agree to a lesser amount. If any monthly periodic payment due
is less than $100, the Company reserves the right to make payments at less
frequent intervals, or to pay the cash surrender value in a lump sum.
On the maturity date, we will pay the amount due under the Contract in one lump
sum (except in Florida, where this is not permitted), or in accordance with the
payment option that you select. You must elect an option in writing, in a form
satisfactory to the Company. Any election made during the lifetime of the
annuitant must be made by the contract owner.
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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 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
annuitant and a second person. One will be designated as the primary payee, the
other will be designated as the secondary payee. On the death of the secondary
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, the Company will continue to
make annuity payments to the secondary payee in an amount equal to 50% of the
payments which would have been made during the lifetime of the primary payee. No
further payments will be made once both payees have died.
Option 5 -- Other Annuity Options. The Company will make any other arrangements
for annuity payments as may be mutually agreed upon.
INCOME OPTIONS
Instead of one of the annuity options described above, and subject to the
conditions described under "Election of Options," all or part of the Contract's
cash surrender value (or, if required by state law, contract value) may be paid
under one or more of the following income options, provided that they are
consistent with federal tax law qualification requirements. Payments under the
income options may be elected on a monthly, quarterly, semiannual or annual
basis:
Option 1 -- Payments of a Fixed Amount. The Company will make equal payments of
the amount elected until the cash surrender value applied under this option has
been exhausted. The first payment and all later payments will be paid from each
funding option or the Fixed Account in proportion to the cash surrender value
attributable to each funding option and/or Fixed Account. The final payment will
include any amount insufficient to make another full payment.
Option 2 -- Payments for a Fixed Period. The Company will make payments for the
period selected. The amount of each payment will be equal to the remaining cash
surrender value applied under this option divided by the number of remaining
payments.
Option 3 -- Other Income Options. The Company will make any other arrangements
for Income Payments as may be mutually agreed upon.
The amount applied to effect an income option will be the cash surrender value
as of 14 days before the date income payments begins, less any applicable
premium taxes not previously deducted and any applicable withdrawal charge. The
cash surrender value used to determine the
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amount of any income payment will be determined on the same basis as the cash
surrender value during the accumulation period, including the deduction for
mortality and expense risks and the Administrative Expense Charge.
MISCELLANEOUS CONTRACT PROVISIONS
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RIGHT TO RETURN
You may return the Contract for a full refund of the contract value (including
charges) within twenty days after you receive it (the "right to return period").
You bear the investment risk during the right to return period; therefore, the
contract value returned may be greater or less than your purchase payment. If
the Contract is purchased as an Individual Retirement Annuity and is returned
within the first seven days after delivery, your purchase payment will be
refunded in full; during the remainder of the right to return period, the
contract value (including charges) will be refunded. The contract value will be
determined following the close of the business day on which we receive a written
request for a refund. Where state law requires a longer period, or the return of
purchase payments or other variation of this provision, the Company will comply.
Refer to your contract for any state-specific information.
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
business day if the contract value as of that date is less than $1,000 and no
purchase payments have been made for at least two years, unless otherwise
specified by state law. Termination will not occur until 31 days after the
Company has mailed notice of termination to the contract owner 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 that so require), less any applicable administrative charge
or premium tax.
REQUIRED REPORTS
As often as required by law, but at least once in each contract year before the
due date of the first annuity payment, we will furnish a report showing the
number of accumulation units credited to the Contract and the corresponding
accumulation unit value(s) as of the date of the report for each funding option
to which the contract owner has allocated amounts during the applicable period.
The Company will keep all records required under federal or state laws.
SUSPENSION OF PAYMENTS
The Company reserves the right to suspend or postpone the date of any payment of
any payment or determination of values benefit or on any business day (1) when
the New York Stock Exchange ("Exchange") is closed; (2) when trading on the
Exchange is restricted; (3) when an emergency exists as determined by the SEC so
the sale of securities held in the Separate Account may not reasonably occur or
so that the Company may not reasonably 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 security holders.
TRANSFERS OF CONTRACT VALUES TO OTHER ANNUITIES
We may permit contract owners to transfer their contract values into other
annuities offered by us or our affiliated insurance companies under rules then
in effect.
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THE SEPARATE ACCOUNT
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The Travelers Fund BD II for Variable Annuities ("Fund BD II") was established
on October 22, 1993 and is registered with the SEC as a unit investment trust
("separate account") under the Investment Company Act of 1940, as amended (the
"1940 Act"). The assets of Fund BD II will be invested exclusively in the shares
of the variable funding options.
The assets of Fund BD II 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 II are, in
accordance with the Contracts, credited to or charged against Fund BD II without
regard to other income, gains and losses of the Company. The assets held by Fund
BD II are not chargeable with liabilities arising out of any other business
which the Company may conduct. Obligations under the Contract are obligations of
the Company.
All investment income and other distributions of the funding options are payable
to Fund BD II. All such income and/or distributions are reinvested in shares of
the respective funding options at net asset value. Shares of the funding options
are currently sold only to life insurance company separate accounts to fund
variable annuity and variable life insurance contracts. Fund shares are not sold
to the general public.
MIXED AND SHARED FUNDING
It is conceivable that in the future it may be disadvantageous for both variable
annuity and variable life insurance separate accounts, or for variable separate
accounts of different insurance companies, to invest simultaneously in the same
portfolios (called "mixed" and "shared" funding). Currently neither the
insurance companies nor the portfolios foresee any such disadvantages to the
companies or to variable contract owners. Each portfolio's board of trustees,
directors or managers intends to monitor events in order to identify any
material conflicts between such policy owners and to determine what action, if
any, should be taken in response thereto.
PERFORMANCE INFORMATION
From time to time, we may advertise different types of historical performance
for the Underlying Funds available through Fund BD II. 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.
"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 including the withdrawal charge. It excludes 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 withdrawal 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
II and the funding options.
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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.
FEDERAL TAX CONSIDERATIONS
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The following description of the federal income tax consequences under this
Contract is not exhaustive and is not intended to cover all situations and is
not meant to provide tax advice. Because of the complexity of the law and the
fact that the tax results will vary depending on many factors, you should
consult your tax advisor regarding your personal situation. For your
information, a more detailed discussion is contained in the SAI.
GENERAL TAXATION OF ANNUITIES
Congress has recognized the value of saving for retirement by providing certain
tax benefits, in the form of tax deferral, for money put into an annuity. The
Internal Revenue Code (Code) governs how this money is ultimately taxed,
depending upon the type of contract, qualified or non-qualified, and the manner
in which the money is distributed, as briefly described below.
TYPES OF CONTRACTS: QUALIFIED OR NONQUALIFIED
If you purchase an annuity contract with proceeds of an eligible rollover
distribution from any pension plan, specially sponsored program, or individual
retirement annuity (IRA) with pre-tax dollars, your contract is referred to as a
qualified contract. Some examples of qualified contracts are: IRAs, 403(b)
annuities, pension and profit-sharing plans (including 401(k) plans), and Keogh
Plans and certain other qualified deferred compensation plans. If you purchase
the contract on an individual basis with after-tax dollars and not under one of
the programs described above, your contract is referred to as nonqualified.
NONQUALIFIED ANNUITY CONTRACTS
As the owner of a nonqualified annuity, you do not receive any tax benefit
(deduction or deferral of income) on purchase payments, but you will not be
taxed on increases in the value of your contract until a distribution
occurs -- either as a withdrawal (distribution made prior to the maturity date),
or as annuity payments. When a withdrawal is made, you are taxed on the amount
of the withdrawal that is considered earnings. Similarly, when you receive an
annuity payment, part of each payment is considered a return of your purchase
payments and will not be taxed. The remaining portion of the annuity payment
(i.e., any earnings) will be considered ordinary income for tax purposes.
If a nonqualified annuity is owned by other than an individual, however, (e.g.,
by a corporation), increases in the value of the contract attributable to
purchase payments made after February 28, 1986 are includable in income
annually. Furthermore, for contracts issued after April 22, 1987, if you
transfer the contract without adequate consideration, all deferred increases in
value will be includable in your income at the time of the transfer.
If you make a partial withdrawal, this money will generally be taxed as first
coming from earnings, (income in the contract), and then from your purchase
payments. These withdrawn earnings are includable in your income. (See "Penalty
Tax for Premature Distributions" below). There is income in the contract to the
extent the cash value exceeds your investment in the contract. The investment in
the contract equals the total purchase payments you paid less any amount
received previously which was excludable from gross income. Any direct or
indirect borrowing against the
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value of the contract or pledging of the contract as security for a loan will be
treated as a cash distribution under the tax law.
Federal tax law requires that nonqualified annuity contracts meet minimum
mandatory distribution requirements upon the death of the contract owner,
including the first of joint owners. If these requirements are not met, the
surviving joint owner, or the beneficiary, will have to pay taxes prior to
distribution. The distribution required depends, among other things, upon
whether an annuity option is elected or whether the new contract owner is the
surviving spouse. We will administer Contracts in accordance with these rules
and we will notify you when you should begin receiving payments.
QUALIFIED ANNUITY CONTRACTS
Under a qualified annuity, since amounts paid into the contract have not yet
been taxed, the full amount of all distributions, including lump-sum withdrawals
and annuity payments, are taxed at the ordinary income tax rate, unless the
distribution is transferred to an eligible rollover account or contract. The
Contract is available as a vehicle for IRA rollovers and for other qualified
contracts. There are special rules which govern the taxation of qualified
contracts, including requirements for mandatory distributions and contribution
limits. We have provided a more complete discussion in the SAI.
PENALTY TAX FOR PREMATURE DISTRIBUTIONS
Taxable distributions taken before the contract owner has reached the age of
59 1/2 will be subject to a 10% additional tax penalty unless the distribution
is taken in a series of periodic distributions, for life or life expectancy, or
unless the distribution follows the death or disability of the contract owner.
Other exceptions may be available in certain tax-qualified plans.
The Code requires that any nonqualified variable annuity contracts based on a
separate account shall not be treated as an annuity for any period if
investments made in the account are not adequately diversified. Final tax
regulations define how separate accounts must be diversified. The Company
monitors the diversification of investments constantly and believes that its
accounts are adequately diversified. The consequence of any failure is
essentially the loss to the Contract Owner of tax deferred treatment. The
Company intends to administer all contracts subject to this provision of law in
a manner that will maintain adequate diversification.
DIVERSIFICATION REQUIREMENTS FOR VARIABLE ANNUITIES
The Code requires that any nonqualified variable annuity contracts based on a
separate account shall not be treated as an annuity for any period if
investments made in the account are not adequately diversified. Final tax
regulations define how separate accounts must be diversified. The Company
monitors the diversification of investments constantly and believes that its
accounts are adequately diversified. The consequence of any failure is
essentially the loss to the Contract Owner of tax deferred treatment. The
Company intends to administer all contracts subject to this provision of law in
a manner that will maintain adequate diversification.
OWNERSHIP OF THE INVESTMENTS
Assets in the separate accounts, also referred to as segregated asset accounts
must owned by the Company and not by the Contract Owner for federal income tax
purposes. Otherwise, the deferral of taxes is lost and income and gains from the
accounts would be includible annually in the Contract Owner's gross income.
The Internal Revenue Service has stated in published rulings that a variable
contract owner will be considered the owner of the assets of a segregated asset
account if the owner possesses an incident of ownership in those assets, such as
the ability to exercise investment control over the assets. The Treasury
Department announced, in connection with the issuance of temporary
20
<PAGE> 30
regulations concerning investment diversification, that those regulations "do
not provide guidance concerning the circumstances in which investor control of
the investments of a segregated asset account may cause the investor, rather
than the insurance company, to be treated as the owner of the assets of the
account." This announcement, dated September 15, 1986, also stated that the
guidance would be issued by way of regulations or rulings on the "extent to
which policyholders may direct their investments to particular subaccounts [of a
segregated asset account] without being treated as owners of the underlying
assets." As of the date of this prospectus, no such guidance has been issued.
The Company does not know if such guidance will be issued, or if it is, what
standards it may set. Furthermore, the Company does not know if such guidance
may be issued with retroactive effect. New regulations are generally issued with
a prospective-only effect as to future sales or as to future voluntary
transactions in existing contracts. The Company therefore reserves the right to
modify the contract as necessary to attempt to prevent Contract Owners from
being considered the owner of the assets of the separate account.
MANDATORY DISTRIBUTIONS FOR QUALIFIED PLANS
Federal tax law requires that minimum annual distributions begin by April 1st of
the calendar year following the calendar year in which an IRA owner attains age
70 1/2. Participants in qualified plans and 403(b) annuities may defer minimum
distributions until the later of April 1st of the calendar year following the
calendar year in which they attain age 70 1/2. Distributions must begin or be
continued according to required patterns following the death of the contract
owner or annuitant of both qualified and nonqualified annuities.
OTHER INFORMATION
- --------------------------------------------------------------------------------
THE INSURANCE COMPANY
The Travelers Life and Annuity Company (the "Company") is a stock insurance
company chartered in 1973 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 a majority of the states of the United States, and
intends to seek licensure in the remaining states, except New York. 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.
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. Such sales representatives may receive compensation of up to
6.5% 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; however, it is
currently anticipated that an affiliated broker-dealer may become the principal
underwriter for the Contracts during 1997.
21
<PAGE> 31
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. We reserve the right to make any
changes, including retroactive changes, in the Contract to the extent that the
change is required to meet the requirements of any law or regulation issued by
any governmental agency to which the company, the Contract or the contract owner
is subject.
VOTING RIGHTS
The Company is the legal owner of the shares of the funding options. However, we
believe that when a funding option solicits proxies in conjunction with a vote
of shareholders we are required to obtain from you and from other owners
instructions on how to vote those shares. When we receive those instructions, we
will vote all of the shares we own in proportion to those instructions. This
will also include any shares we own on our own behalf. Should we determine that
we are no longer required to comply with the above, we will vote on the shares
in our own right.
LEGAL PROCEEDINGS AND OPINIONS
There are no pending material legal proceedings affecting Fund BD II. 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 under Connecticut law, have been reviewed by the General Counsel of
the Company.
22
<PAGE> 32
APPENDIX A
- --------------------------------------------------------------------------------
CONDENSED FINANCIAL INFORMATION
THE TRAVELERS FUND BD II FOR VARIABLE ANNUITIES
ACCUMULATION UNIT VALUES
<TABLE>
<CAPTION>
PERIOD FROM
NOVEMBER 8, 1995
YEAR ENDING (DATE OPERATIONS COMMENCED)
DECEMBER 31, 1996 TO DECEMBER 31, 1995
STANDARD ENHANCED STANDARD ENHANCED
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TRAVELERS SERIES FUND INC.
ALLIANCE GROWTH PORTFOLIO
Unit Value at beginning of period $ 1.396 $ 1.390 $ 1.047 $ 1.046
Unit Value at end of period 1.785 1.772 1.396 1.390
Number of units outstanding at end of period 24,031,009 3,613,086 1,573,668 452,737
VAN KAMPEN AMERICAN CAPITAL ENTERPRISE
PORTFOLIO
Unit Value at beginning of period $ 1.362 $ 1.356 $ 1.039 $ 1.037
Unit Value at end of period 1.655 1.643 1.362 1.356
Number of units outstanding at end of period 11,360,286 1,644,330 764,534 329,130
TBC MANAGED INCOME PORTFOLIO
Unit Value at beginning of period $ 1.142 $ 1.137 $ 0.997 $ 0.995
Unit Value at end of period 1.163 1.154 1.142 1.137
Number of units outstanding at end of period 2,635,535 265,598 225,876 89,569
G.T. GLOBAL STRATEGIC INCOME PORTFOLIO
Unit Value at beginning of period $ 1.121 $ 1.116 $ 0.945 $ 0.944
Unit Value at end of period 1.316 1.306 1.121 1.116
Number of units outstanding at end of period 1,832,502 463,308 32,765 79,526
SMITH BARNEY HIGH INCOME PORTFOLIO
Unit Value at beginning of period $ 1.162 $ 1.157 $ 0.988 $ 0.986
Unit Value at end of period 1.300 1.291 1.162 1.157
Number of units outstanding at end of period 7,719,068 970,188 242,593 331,521
SMITH BARNEY INTERNATIONAL EQUITY PORTFOLIO
Unit Value at beginning of period $ 1.050 $ 1.046 $ 0.955 $ 0.954
Unit Value at end of period 1.222 1.213 1.050 1.046
Number of units outstanding at end of period 16,854,894 2,009,974 556,129 200,940
SMITH BARNEY INCOME AND GROWTH PORTFOLIO
Unit Value at beginning of period $ 1.291 $ 1.285 $ 0.981 $ 0.980
Unit Value at end of period 1.528 1.517 1.291 1.285
Number of units outstanding at end of period 11,905,953 1,606,074 596,201 146,469
SMITH BARNEY MONEY MARKET PORTFOLIO
Unit Value at beginning of period $ 1.058 $ 1.054 $ 1.016 $ 1.014
Unit Value at end of period 1.098 1.090 1.058 1.054
Number of units outstanding at end of period 22,961,508 2,362,442 2,373,923 819,856
PUTNAM DIVERSIFIED INCOME PORTFOLIO
Unit Value at beginning of period $ 1.170 $ 1.165 $ 1.009 $ 1.007
Unit Value at end of period 1.252 1.243 1.170 1.165
Number of units outstanding at end of period 10,424,494 1,460,865 823,783 126,460
SMITH BARNEY PACIFIC BASIN PORTFOLIO
Unit Value at beginning of period $ 0.910 $ 0.906 $ 0.899 $ 0.898
Unit Value at end of period 0.983 0.977 0.910 0.906
Number of units outstanding at end of period 2,754,609 467,106 37,278 19,544
MFS TOTAL RETURN PORTFOLIO
Unit Value at beginning of period $ 1.216 $ 1.211 $ 0.979 $ 0.977
Unit Value at end of period 1.376 1.366 1.216 1.211
Number of units outstanding at end of period 16,650,570 1,810,076 912,547 101,550
AIM CAPITAL APPRECIATION PORTFOLIO
Unit Value at beginning of period $ 0.958 $ 0.957 $ 1.000 $ 1.000
Unit Value at end of period 1.088 1.084 0.958 0.957
Number of units outstanding at end of period 29,460,488 4,246,308 2,536,732 908,266
THE TRAVELERS SERIES TRUST
MFS EMERGING GROWTH PORTFOLIO
Unit Value at beginning of period $ 1.000 $ 1.000 $ -- $ --
Unit Value at end of period 1.005 1.005 -- --
Number of units outstanding at end of period 2,505,629 466,025 -- --
SMITH BARNEY SERIES FUND:
TOTAL RETURN PORTFOLIO
Unit Value at beginning of period $ 1.251 $ 1.247 $ 1.010 $ 1.010
Unit Value at end of period 1.550 1.541 1.251 1.247
Number of units outstanding at end of period 14,921,227 2,043,711 651,440 148,894
</TABLE>
The financial statements of Fund BD II are contained in the Annual Report to
Contract Owners, which is incorporated by reference in the Statement of
Additional Information. The financial statements of The Travelers Life and
Annuity Company are contained in the Statement of Additional Information.
23
<PAGE> 33
APPENDIX B
- --------------------------------------------------------------------------------
THE FIXED ACCOUNT
The Fixed Account is secured by part of the general assets of the Company. The
general assets of the Company include all assets of the Company other than those
held in Fund BD II or any other separate account sponsored by the Company or its
affiliates.
The staff of the SEC does not generally review the disclosure in the prospectus
relating to the Fixed Account. Disclosure regarding the Fixed Account and the
general account may, however, be subject to certain provisions of the federal
securities laws relating to the accuracy and completeness of statements made in
the prospectus.
Under the Fixed Account, the Company assumes the risk of investment gain or
loss, guarantees a specified interest rate, and guarantees a specified periodic
annuity payment. The investment gain or loss of Fund BD II or any of the funding
options does not affect the Fixed Account portion of the contract owner's
contract value, or the dollar amount of fixed annuity payments made under any
payout option.
We guarantee that, at any time, the Fixed Account contract value will not be
less than the amount of the purchase payments allocated to the Fixed Account,
plus interest credited as described 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 withdrawal
charge as described under "Charges and Deductions" in this prospectus.
Purchase payments allocated to the Fixed Account and any transfers made to the
Fixed Account become part of the Company's general account which supports
insurance and annuity obligations. Neither the general account nor any interest
therein is registered under, nor subject to the provisions of the Securities Act
of 1933 or Investment Company Act of 1940. We will invest the assets of the
Fixed Account at our discretion. Investment income from such Fixed Account
assets will be allocated to us and to the Contracts participating in the Fixed
Account.
Investment income from the Fixed Account allocated to us includes compensation
for mortality and expense risks borne by us in connection with Fixed Account
Contracts. The amount of such investment income allocated to the Contracts will
vary from year to year in our sole discretion at such rate or rates as the
Company prospectively declares from time to time.
The initial rate for any allocations into the Fixed Account is guaranteed for
one year from the date of such allocation. Subsequent renewal rates will be
guaranteed for the calendar quarter. We also guarantee that for the life of the
Contract we will credit interest at not less than 3% per year. Any interest
credited to amounts allocated to the Fixed Account in excess of 3% per year will
be determined in our sole discretion. You assume the risk that interest credit
to the Fixed Account may not exceed the minimum guarantee of 3% for any given
year.
TRANSFERS
You may make transfers from the Fixed Account to any other available funding
option(s) twice a year during the 30 days following the semi-annual anniversary
of the Contract effective date. The transfers are limited to an amount of up to
15% of the Fixed Account Value on the semi-annual Contract effective date
anniversary. (This restriction does not apply to transfers from the Dollar Cost
Averaging Program.) Amounts previously transferred from the Fixed Account to
other funding options may not be transferred back to the Fixed Account for a
period of at least 6 months from the date of transfer. We reserve the right to
waive either of these restrictions.
Automated transfers from the Fixed Account to any of the funding options may
begin at any time. Automated transfers from the Fixed Account may not deplete
your Fixed Account value in a period of less than twelve months from your
enrollment in the Dollar Cost Averaging program.
24
<PAGE> 34
APPENDIX C
- --------------------------------------------------------------------------------
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
The Statement of Additional Information contains more specific information and
financial statements relating to The Travelers Life and Annuity Company. A list
of the contents of the Statement of Additional Information is set forth below:
The Insurance Company
Principal Underwriter
Distribution and Management Agreement
Valuation of Assets
Performance Data
Independent Accountants
Financial Statements
- --------------------------------------------------------------------------------
Copies of the Statement of Additional Information dated May 1, 1997 (Form No.
L-12540S) 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 Life and Annuity Company, Annuity Services,
One Tower Square, Hartford, Connecticut 06183-9061.
Name:
- --------------------------------------------------------------------------------
Address:
================================================================================
25
<PAGE> 35
VINTAGE
STATEMENT OF ADDITIONAL INFORMATION
dated
May 1, 1997
for
THE TRAVELERS FUND BDII FOR VARIABLE ANNUITIES
ISSUED BY
THE TRAVELERS LIFE AND ANNUITY COMPANY
This Statement of Additional Information ("SAI") is not a prospectus but relates
to, and should be read in conjunction with, the Individual Variable Annuity
Contract Prospectus dated May 1, 1997. A copy of the Prospectus may be obtained
by writing to The Travelers Life and Annuity Company, Annuity Services, One
Tower Square, Hartford, Connecticut 06183-9061, 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.................................................... 5
TELEPHONE TRANSFERS.................................................... 6
FEDERAL TAX CONSIDERATIONS............................................. 6
INDEPENDENT ACCOUNTANTS................................................ 9
FINANCIAL STATEMENTS................................................... F-1
</TABLE>
<PAGE> 36
THE INSURANCE COMPANY
The Travelers Life and Annuity Company (the "Company"), is a stock
insurance company chartered in 1973 in Connecticut. It is a wholly owned
subsidiary of The Travelers Insurance Company, 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"), a wholly-owned
subsidiary of the Company, serves as principal underwriter for Fund BDII and the
Contracts. The offering is continuous. Tower Square's principal executive
offices are located at One Tower Square, Hartford, Connecticut. It is
anticipated that an affiliated broker-dealer will become the principal
underwriter during 1997.
DISTRIBUTION AND MANAGEMENT AGREEMENT
Under the terms of the Distribution and Management Agreement among Fund
BDII, 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 BDII. 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 Fund BDII 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 BDII 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 funding options of Fund BDII. The Company may advertise the
"standardized average annual total returns" of the funding options available
through the Separate Account, calculated in a manner prescribed by the
Securities and Exchange Commission, as well as the "non-standardized total
return," as described below:
2
<PAGE> 37
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 funding option, and then related to ending redeemable
values over one-, five- and ten-year periods, or inception, if a funding option
has not been in existence for one of the prescribed periods. These quotations
reflect the deduction of all recurring charges during each period (on a pro rata
basis in the case of fractional periods). The deduction for the annual contract
administrative charge ($30) is converted to a percentage of assets based on the
actual fee collected, divided by the average net assets per contract sold under
the Prospectus to which this SAI relates. Each quotation assumes a total
redemption at the end of each period with the assessment of any applicable
withdrawal 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
withdrawal charge or the $30 annual contract administrative charge, which, if
reflected, would decrease the level of performance shown. The withdrawal charge
is not reflected because the Contract is designed for long-term investment.
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 BDII and the funding options.
For funding options that were in existence before they became available
under Fund BDII, the standardized average total return and non-standardized
total return quotations will show the investment performance that such funding
options 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. A Contract Owner's Contract Value at
redemption may be more or less than original cost.
Average annual total returns for each of the funding options available under
Fund BDII computed according to the standardized and non-standardized methods
for the period ending December 31, 1996 are set forth in the following table.
3
<PAGE> 38
STANDARDIZED TOTAL RETURN CALCULATIONS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Portfolio Name Regular Since Enhanced Since Inception
1 Year Inception 1 Year Inception Date
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Smith Barney Income and 12.36% 16.33% 12.02% 15.99% 6/20/94
Growth
Alliance Growth 21.85% 23.97% 21.49% 23.61% 6/20/94
American Capital 15.47% 20.22% 15.13% 19.87% 6/21/94
Enterprise
Smith Barney 10.32% 6.07% 9.99% 5.76% 6/20/94
International Equity
Smith Barney Pacific Basin 2.03% -3.08% 1.73% -3.35% 6/21/94
TBC Managed Income -4.21% 3.94% -4.49% 3.63% 6/28/94
Putnam Diversified Income 0.95% 7.14% 0.64% 6.82% 6/20/94
G.T. Global Strategic 11.39% 9.39% 11.06% 9.07% 6/21/94
Income
Smith Barney High Income 5.80% 8.85% 5.48% 8.52% 6/22/94
MFS Total Return 7.14% 11.42% 6.82% 11.09% 6/20/94
Portfolio
Smith Barney Money Market -2.29% 1.45% -2.58% 1.14% 6/20/94
AIM Capital Appreciation 7.55% 2.24% 7.23% 1.94% 10/10/95
Smith Barney Total Return 17.93% 17.40% 17.58% 17.06% 12/3/93
MFS Emerging Growth N/A -5.48% N/A -5.52% 8/30/96
</TABLE>
NONSTANDARDIZED TOTAL RETURN CALCULATIONS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Regular Since Enhanced Since Inception
Portfolio Name 1 Year Inception 1 Year Inception Date
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Smith Barney Income and 18.38% 18.21% 18.05% 17.88% 6/20/94
Growth
Alliance Growth 27.87% 25.68% 27.51% 25.33% 6/20/94
American Capital 21.49% 22.01% 21.15% 21.67% 6/21/94
Enterprise
Smith Barney 16.34% 8.23% 16.01% 7.93% 6/20/94
International Equity
Smith Barney Pacific Basin 8.05% -0.66% 7.75% -0.93% 6/21/94
TBC Managed Income 1.82% 6.18% 1.53% 5.88% 6/28/94
Putnam Diversified Income 6.97% 9.26% 6.67% 8.96% 6/20/94
G.T. Global Strategic 17.41% 11.45% 17.08% 11.14% 6/21/94
Income
Smith Barney High Income 11.82% 10.92% 11.50% 10.61% 6/22/94
MFS Total Return 13.16% 13.42% 12.84% 13.10% 6/20/94
Portfolio
Smith Barney Money Market 3.73% 3.75% 3.44% 3.46% 6/20/94
AIM Capital Appreciation 13.57% 7.11% 13.25% 6.81% 10/10/95
Smith Barney Total Return 23.96% 18.13% 23.61% 17.80% 12/3/93
MFS Emerging Growth N/A 0.53% N/A 0.48% 8/30/96
</TABLE>
4
<PAGE> 39
VALUATION OF ASSETS
The value of the assets of each funding option is determined on each
business 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
business day. If there has been no sale on that day, then the value of the
security is taken to be the mean between the reported bid and asked prices on
the business day or on the basis of quotations received from a reputable broker
or any other recognized source.
Any security not traded on a securities exchange but traded in the
over-the-counter-market and for which market quotations are readily available is
valued at the mean between the quoted bid and asked prices on the business day
or on the basis of quotations received from a reputable broker or any other
recognized source.
Securities traded on the over-the-counter-market and listed securities
with no reported sales are valued at the mean between the last reported bid and
asked prices or on the basis of quotations received from a reputable broker or
other recognized source.
Short-term investments for which a quoted market price is available are
valued at market. Short-term investments maturing in more than sixty days for
which there is no reliable quoted market price are valued by "marking to market"
(computing a market value based upon quotations from dealers or issuers for
securities of a similar type, quality and maturity.) "Marking to market" takes
in 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 CONTRACT VALUE: The value of an Accumulation Unit on any business day is
determined by multiplying the value on the immediately preceding business day by
the net investment factor for the valuation period just ended. The net
investment factor is used to measure the investment performance of a funding
option from one valuation period to the next. The net investment factor for a
funding option for any valuation period is equal to the sum of 1.000000 plus the
net investment rate (the gross investment rate less any applicable funding
option deductions during the valuation period relating to the mortality and
expense risk charge and the administrative expense charge). The gross investment
rate of a funding option is equal to (a) minus (b), divided by (c) where:
(a) = investment income plus capital gains and losses (whether realized or
unrealized); (b) = any deduction for applicable taxes (presently zero); and
(c) = the value of the assets of the funding option at the beginning of the
valuation period.
The gross investment rate may be either positive or negative. A
Sub-Account's assets are based on the net asset value of the funding option, and
investment income includes any distribution whose ex-dividend date occurs during
the valuation period.
5
<PAGE> 40
ACCUMULATION UNIT VALUE. The value of the accumulation unit for each funding
option was initially established at $1.00. The value of an accumulation unit on
any business day is determined by multiplying the value on the preceding
business day by the net investment factor for the business day just ended. The
net investment factor is calculated for each funding option and takes into
account the investment performance, expenses and the deduction of certain
expenses.
ANNUITY UNIT VALUE. The initial Annuity Unit Value applicable to each funding
option was established at $1.00. An Annuity Unit Value as of any business day is
equal to (a) the value of the Annuity Unit on the preceding business day,
multiplied by (b) the corresponding net investment factor for the business day
just ended, divided by (c) the assumed net investment factor for the valuation
period. (For example, the assumed net investment factor based on an annual
assumed net investment rate of 3.0% for a valuation period of one day is
1.000081 and, for a period of two days, is 1.000081 x 1.000081.)
TELEPHONE TRANSFERS
A contract owner may place a transfer request by telephone. The telephone
transfer privilege is available automatically; no special election is necessary
for a contract owner to have this privilege. All transfers must be in accordance
with the terms of the Contract. Transfer instructions are currently accepted on
each business day 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.
FEDERAL TAX CONSIDERATIONS
The following description of the federal income tax consequences under this
Contract is not exhaustive and is not intended to cover all situations. Because
of the complexity of the law and the fact that the tax results will vary
according to the factual status of the individual involved, tax advice may be
needed by a person contemplating purchase of an annuity contract and by a
contract owner or beneficiary who may make elections under a contract. For
further information, please consult a qualified tax adviser.
MANDATORY DISTRIBUTIONS FOR QUALIFIED PLANS
Federal tax law requires that minimum annual distributions begin by April 1st
of the calendar year following the calendar year in which a participant under a
qualified plan, a Section 403(b) annuity, or an IRA attains age 701/2.
Distributions must also begin or be continued according to required patterns
following the death of the contract owner or the annuitant.
6
<PAGE> 41
NONQUALIFIED ANNUITY CONTRACTS
Individuals may purchase tax-deferred annuities without tax law funding
limits. The purchase payments receive no tax benefit, deduction or deferral, but
increases in the value of the contract are generally deferred from tax until
distribution. If a nonqualified annuity is owned by other than an individual,
however, (e.g., by a corporation), the increases in value attributable to
purchase payments made after February 28, 1986 are includable in income
annually. Furthermore, for contracts issued after April 22, 1987, all deferred
increases in value will be includable in the income of a contract owner when the
contract owner transfers the contract without adequate consideration.
If two or more annuity contracts are purchased from the same insurer within
the same calendar year, distributions from any of them will be taxed based upon
the amount of income in all of the same calendar year series of annuities. This
will generally have the effect of causing taxes to be paid sooner on the
deferred gain in the contracts.
Those receiving partial distributions made before the maturity date will
generally be taxed on an income-first basis to the extent of income in the
contract. If you are exchanging another annuity contract for this annuity,
certain pre-August 14, 1982 deposits into an annuity contract that have been
placed in the contract by means of a tax-deferred exchange under Section 1035 of
the Code may be withdrawn first without income tax liability. This information
on deposits must be provided to the Company by the other insurance company at
the time of the exchange. There is income in the contract generally to the
extent the cash value exceeds the investment in the contract. The investment in
the contract is equal to the amount of premiums paid less any amount received
previously which was excludable from gross income. Any direct or indirect
borrowing against the value of the contract or pledging of the contract as
security for a loan will be treated as a cash distribution under the tax law.
The federal tax law requires that nonqualified annuity contracts meet minimum
mandatory distribution requirements upon the death of the contract owner,
including the first of joint owners. Failure to meet these requirements will
cause the surviving joint owner, or the beneficiary to lose the tax benefits
associated with annuity contracts, i.e., primarily the tax deferral prior to
distribution. The distribution required depends, among other things, upon
whether an annuity option is elected or whether the new contract owner is the
surviving spouse. Contracts will be administered by the Company in accordance
with these rules and the Company will make a notification when payments should
be commenced.
INDIVIDUAL RETIREMENT ANNUITIES
To the extent of earned income for the year and not exceeding $2,000 per
individual, an individual may make deductible contributions to an individual
retirement annuity (IRA). There are certain limits on the deductible amount
based on the adjusted gross income of the individual and spouse and based on
their participation in a retirement plan. If an individual is married and the
spouse does not have earned income, the individual may establish IRAs for the
individual and spouse. Purchase payments may then be made annually into IRAs for
both spouses in the maximum amount of 100% of earned income up to a combined
limit of $4,000.
7
<PAGE> 42
The Code provides for the purchase of a Simplified Employee Pension (SEP)
plan. A SEP is funded through an IRA with an annual employer contribution limit
of 15% of compensation up to $30,000 for each participant.
SIMPLE Plan IRA Form
Effective January 1, 1997, employers may establish a savings incentive match
plan for employees ("SIMPLE plan") under which employees can make elective
salary reduction contributions to an IRA based on a percentage of compensation
of up to $6,000. (Alternatively, the employer can establish a SIMPLE cash or
deferred arrangement under IRS Section 401(k)). Under a SIMPLE plan IRA, the
employer must either make a matching contributionof 100% on the first 3% or 7%
contribution for all eligible employees. Early withdrawals are subject to the
10% early withdrawal penalty generally applicable to IRAs, except that an early
withdrawal by an employee under a SIMPLE plan IRA, within the first two years of
participation, shall be subject to a 25% early withdrawal tax.
QUALIFIED PENSION AND PROFIT-SHARING PLANS
Under a qualified pension or profit-sharing plan, purchase payments made by
an employer are not currently taxable to the participant and increases in the
value of a contract are not subject to taxation until received by a participant
or beneficiary.
Distributions are taxable to the participant or beneficiary as ordinary
income in the year of receipt. Any distribution that is considered the
participant's "investment in the contract" is treated as a return of capital and
is not taxable. Certain lump-sum distributions may be eligible for special
forward averaging tax treatment for certain classes of individuals.
FEDERAL INCOME TAX WITHHOLDING
The portion of a distribution which is taxable income to the recipient will
be subject to federal income tax withholding as follows:
1. ELIGIBLE ROLLOVER DISTRIBUTION FROM SECTION 403(b) PLANS OR ARRANGEMENTS OR
FROM QUALIFIED PENSION AND PROFIT-SHARING PLANS
There is a mandatory 20% tax withholding for plan distributions that are
eligible for rollover to an IRA or to another retirement plan but that are not
directly rolled over. A distribution made directly to a participant or
beneficiary may avoid this result if:
(a) a periodic settlement distribution is elected based upon a life or life
expectancy calculation, or
(b) a term-for-years settlement distribution is elected for a period of ten
years or more, payable at least annually, or
(c) a minimum required distribution as defined under the tax law is taken after
the attainment of the age of 70 1/2 or as otherwise required by law.
A distribution including a rollover that is not a direct rollover will be
subject to the 20% withholding, and a 10% additional tax penalty may apply to
any amount not added back in the rollover. The 20% withholding may be recovered
when the participant or beneficiary files a
8
<PAGE> 43
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, 1997, a recipient receiving
periodic payments (e.g., monthly or annual payments under an annuity option)
which total $14,850 or less per year, will generally be exempt from periodic
withholding.
Recipients who elect not to have withholding made are liable for payment of
federal income tax on the taxable portion of the distribution. All recipients
may also be subject to penalties under the estimated tax payment rules if
withholding and estimated tax payments are not sufficient to cover tax
liabilities.
Recipients who do not provide a social security number or other taxpayer
identification number will not be permitted to elect out of withholding.
Additionally, U.S citizens residing outside of the country, or U.S. legal
residents temporarily residing outside the country, are not permitted to elect
out of withholding.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., independent accountants, 100 Pearl Street,
Hartford, Connecticut, are the independent auditors for Fund BDII. The services
provided to Fund BDII included primarily the audit of the Fund's financial
statements. Financial statements for the year ended December 31, 1996 of Fund
BDII appear in the Fund's annual report, which is incoporated by reference in
this SAI. Such financial statements have been audited by Coopers & Lybrand
L.L.P., as indicated in their report thereon in reliance upon the authority of
said firm as experts in accounting and auditing.
The financial statements of The Travelers Life and Annuity Company
as of December 31, 1996 and 1995, and for each of the years in
the three-year period ended December 31, 1996, 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.
9
<PAGE> 44
THE TRAVELERS LIFE AND ANNUITY COMPANY
STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
(for the year ended December 31, in thousands) 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Premiums $ 9,357 $ 2,652 $ 3,498
Net investment income 89,040 63,209 66,093
Realized investment gains (losses) (9,613) 18,713 (2,074)
Other 16,223 17,466 18,702
- ----------------------------------------------------------------------------------------------------------
Total revenues 105,007 102,040 86,219
- ----------------------------------------------------------------------------------------------------------
BENEFITS AND EXPENSES
Current and future insurance benefits 56,448 52,390 55,596
Amortization of deferred acquisition costs
and value of insurance in force 3,286 1,563 -
Other operating expenses 5,691 4,651 2,758
- ----------------------------------------------------------------------------------------------------------
Total benefits and expenses 65,425 58,604 58,354
- ----------------------------------------------------------------------------------------------------------
Income before federal income taxes 39,582 43,436 27,865
- ----------------------------------------------------------------------------------------------------------
Federal income taxes:
Current 29,456 2,555 4,742
Deferred expense (benefit) (15,665) 11,964 4,798
- ----------------------------------------------------------------------------------------------------------
Total federal income taxes 13,791 14,519 9,540
- ----------------------------------------------------------------------------------------------------------
Net income 25,791 28,917 18,325
Retained earnings beginning of year 157,907 128,990 110,665
Dividends to parent 16,000 - -
- ----------------------------------------------------------------------------------------------------------
Retained earnings end of year $167,698 $157,907 $128,990
- ----------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
9
<PAGE> 45
THE TRAVELERS LIFE AND ANNUITY COMPANY
BALANCE SHEETS
<TABLE>
<CAPTION>
(at December 31, in thousands) 1996 1995
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Fixed maturities, available for sale at fair value
(cost, $672,173; $678,293) $ 694,535 $ 724,639
Equity securities, at fair value (cost, $6,654; $9,453) 9,554 13,099
Mortgage loans 90,542 125,813
Real estate held for sale, net of accumulated depreciation of $0; $524 10,111 8,995
Policy loans 1,750 -
Short-term securities 70,755 51,381
Other investments 69,754 65,805
- -----------------------------------------------------------------------------------------------------------------
Total investments 947,001 989,732
- -----------------------------------------------------------------------------------------------------------------
Separate accounts 1,187,812 886,688
Deferred acquisition costs and value of insurance in force 40,027 22,560
Deferred federal income taxes 57,616 41,158
Other assets 21,827 24,501
- -----------------------------------------------------------------------------------------------------------------
Total assets $2,254,283 $1,964,639
- -----------------------------------------------------------------------------------------------------------------
LIABILITIES
Future policy benefits $ 654,534 $ 671,027
Contractholder funds 86,097 11,947
Separate accounts 1,124,605 856,867
Other liabilities 17,179 61,247
- -----------------------------------------------------------------------------------------------------------------
Total liabilities 1,882,415 1,601,088
- -----------------------------------------------------------------------------------------------------------------
SHAREHOLDER'S EQUITY
Common stock, par value $100; 100,000
shares authorized, 30,000 issued and outstanding 3,000 3,000
Additional paid-in capital 167,314 167,314
Retained earnings 167,698 157,907
Unrealized investment gains, net of taxes 33,856 35,330
- -----------------------------------------------------------------------------------------------------------------
Total shareholder's equity 371,868 363,551
- -----------------------------------------------------------------------------------------------------------------
Total liabilities and shareholder's equity $2,254,283 $1,964,639
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
10
<PAGE> 46
THE TRAVELERS LIFE AND ANNUITY COMPANY
STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
(for the year ended December 31, in thousands) 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Premiums collected $ 6,472 $ 1,950 $ 3,498
Net investment income received 71,083 66,219 57,240
Benefits and claims paid (70,331) (71,710) (72,298)
Interest credited to contractholders (813) - -
Operating expenses paid (5,482) (3,013) (4,400)
Income taxes refunded (paid) (23,931) (35,305) 1,030
Other (6,857) (6,772) 22,507
- -------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities (29,859) (48,631) 7,577
- -------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of investments
Fixed maturities 20,301 11,752 29,043
Mortgage loans 37,789 24,137 60,260
Proceeds from sales of investments
Fixed maturities 978,970 459,971 41,671
Equity securities 12,818 11,823 9,373
Mortgage loans 22,437 7,013 23,327
Real estate held for sale - - 34,181
Purchases of investments
Fixed maturities (994,443) (515,098) (204,412)
Equity securities (5,412) (156) (375)
Mortgage loans (21,450) (4,890) (5,607)
Policy loans (1,750) - -
Short-term securities, (purchases) sales, net (19,688) (5,051) (1,146)
Other investments, (purchases) sales, net (6,160) 9,274 682
Securities transactions in course of settlement (51,703) 45,727 5,722
- -------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (28,291) 44,502 (7,281)
- -------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Contractholder fund deposits 96,490 5,707 -
Contractholder fund withdrawals (22,340) (1,874) -
Dividends to parent company (16,000) - -
- -------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 58,150 3,833 -
- -------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash $ - $ (296) $ 296
- -------------------------------------------------------------------------------------------------------------
Cash at December 31 $ - $ - $ 296
- -------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
11
<PAGE> 47
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS
The Travelers Life and Annuity Company (the Company) is a wholly owned
subsidiary of The Travelers Insurance Company (TIC), which is a wholly
owned subsidiary of The Travelers Insurance Group Inc. (TIGI), which is
an indirect wholly owned subsidiary of Travelers Group Inc. (Travelers
Group), a financial services holding company engaged, through its
subsidiaries, principally in four business segments: (i) Investment
Services; (ii) Consumer Finance Services; (iii) Property & Casualty
Insurance Services; and (iv) Life Insurance Services (through TIC and its
subsidiaries). The periodic reports of Travelers Group provide additional
business and financial information concerning that company and its
consolidated subsidiaries.
The Company offers fixed and variable deferred annuities and individual
life insurance to individuals and small businesses. It also provides
single premium group annuity close-out contracts and individual
structured settlement annuities.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies used in the preparation of the
accompanying financial statements follow.
Basis of presentation
The financial statements and accompanying footnotes of the Company are
prepared in conformity with generally accepted accounting principles. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and benefits
and expenses during the reporting period. Actual results could differ
from those estimates.
Certain prior year amounts have been reclassified to conform with the
1996 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.
Equity securities, which include common and nonredeemable preferred
stocks, are classified as "available for sale" and are carried at fair
value based primarily on quoted market prices. Changes in fair values of
equity securities are charged or credited directly to shareholder's
equity, net of income taxes.
12
<PAGE> 48
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Mortgage loans are carried at amortized cost. A mortgage loan is
considered impaired when it is probable that the Company will be unable
to collect principal and interest amounts due. For mortgage loans that
are determined to be impaired, a reserve is established for the
difference between the amortized cost and fair market value of the
underlying collateral. In estimating fair value, the Company uses
interest rates reflecting the higher returns required in the current real
estate financing market. Impaired loans were insignificant at December
31, 1996 and 1995.
Real estate held for sale is carried at the lower of cost or fair value
less estimated costs to sell. Fair value of foreclosed properties is
established at the time of foreclosure by internal analysis or external
appraisers, 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, 1996 and 1995.
Short-term securities, consisting primarily of money market instruments
and other debt issues purchased with a maturity of less than one year,
are carried at amortized cost which approximates market.
Accrual of income, included in other assets, is suspended on fixed
maturities or mortgage loans that are in default, or on which it is
likely that future payments will not be made as scheduled. Interest
income on investments in default is recognized only as payment is
received.
Investment Gains and Losses
Realized investment gains and losses are included as a component of
pre-tax revenues based upon specific identification of the investments
sold on the trade date. Also included are gains and losses arising from
the remeasurement of the local currency value of foreign investments to
U.S. dollars, the functional currency of the Company.
Policy Loans
Policy loans are carried at the amount of the unpaid balances that are
not in excess of the net cash surrender values of the related insurance
policies. The carrying value of policy loans, which have no defined
maturities, is considered to be fair value.
Separate Accounts
Separate account liabilities primarily represent structured settlement
annuity obligations, which provide guaranteed levels of return or
benefits to contractholders. The separate account assets supporting these
obligations, which are legally segregated and are not subject to claims
that arise out of any other business of the Company, are primarily
carried at fair value. Earnings on structured settlement contracts,
generally net investment income less policyholder benefits and operating
expenses, are included in other revenues.
13
<PAGE> 49
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
In addition, the Company has other separate accounts, representing funds
for which investment income and investment gains and losses accrue
directly to, and investment risk is borne by, the contractholders. Each
of these accounts have specific investment objectives. The assets and
liabilities of these accounts are carried at fair value, and amounts
assessed to the contractholders for management services are included in
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.
Deferred Acquisition Costs and Value of Insurance In Force
Costs of acquiring individual life insurance and annuity business,
principally commissions and certain expenses related to policy issuance,
underwriting and marketing, all of which vary with and are primarily
related to the production of new business, are deferred. Acquisition
costs relating to traditional life insurance are amortized in relation
to anticipated premiums; universal life in relation to estimated
gross profits; and annuity contracts employing a level yield method. A
10- to 25-year amortization period is used for life insurance, and a 10-
to 20-year period is employed for annuities. Deferred acquisition costs
are reviewed periodically for recoverability to determine if any
adjustment is required. Adjustments, if any are charged to income.
The value of insurance in force represents the actuarially determined
present value of anticipated profits to be realized from annuities
contracts at the date of acquisition using the same assumptions that were
used for computing related liabilities where appropriate. The value of
insurance in force was the actuarially determined present value of the
projected future profits discounted at an interest rate of 16% for the
business acquired. The value of the business in force is amortized using
current interest crediting rates to accrete interest and amortized
employing a level yield method. The value of insurance in force is
reviewed periodically for recoverability to determine if any adjustment
is required. Adjustments, if any are charged to income.
Future Policy Benefits
Benefit reserves represent liabilities for future insurance policy
benefits. Benefit reserves for life insurance and annuity policies have
been computed based upon mortality, morbidity, persistency and interest
assumptions applicable to these coverages, which range from 4.5% to 7.5%,
including a provision for adverse deviation. These assumptions consider
Company experience and industry standards. The assumptions vary by plan,
age at issue, year of issue and duration.
14
<PAGE> 50
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Contractholder Funds
Contractholder funds represent receipts from the issuance of universal
life and certain individual annuity contracts. Contractholder Fund
balances are increased by such receipts and credited interest and reduced
by withdrawals, mortality charges and administrative expenses charged to
the contractholders. Interest rates credited to contractholder funds
range from 3.9% to 7.0%.
Permitted Statutory Accounting Practices
The Company, domiciled in the State of Connecticut, prepares statutory
financial statements in accordance with the accounting practices
prescribed or permitted by the State of Connecticut Insurance Department.
Prescribed statutory accounting practices include certain publications
of the National Association of Insurance Commissioners as well as state
laws, regulations, and general administrative rules. Permitted statutory
accounting practices encompass all accounting practices not so
prescribed. The impact of any permitted accounting practices on the
statutory surplus of the Company is not material.
Premiums
Premiums are recognized as revenues when due. Reserves are established
for the portion of premiums that will be earned in future periods.
Other Revenues
Other revenues include surrender, mortality and administrative charges
and fees as earned on investment and other insurance contracts. Other
revenues also include structured settlement policyholder revenues, which
relate to contracts issued through a separate account of the Company, net
of the related policyholder benefits and expenses.
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.
15
<PAGE> 51
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Future Application of Accounting Standards
In June 1996, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 125 (FAS 125),
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." FAS 125 provides accounting and
reporting standards for transfers and servicing of financial assets and
extinguishments of liabilities. These standards are based on consistent
application of a financial-components approach that focuses on control.
Under that approach, after a transfer of financial assets, an entity
recognizes the financial and servicing assets it controls and the
liabilities it has incurred, derecognizes financial assets when control
has been surrendered and derecognizes liabilities when extinguished. FAS
125 provides consistent standards for distinguishing transfers of
financial assets that are sales from transfers that are secured
borrowings. The requirements of FAS No. 125 are effective for transfers
and servicing of financial assets and extinguishments of liabilities
occurring after December 31, 1996, and are to be applied prospectively.
However, in December 1996 the FASB issued FAS No. 127, "Deferral of the
Effective Date of Certain Provisions of FASB Statement No. 125," which
delays until January 1, 1998 the effective date for certain provisions.
The adoption of the provisions of this statement effective January 1,
1997 will not have a material impact on results of operations, financial
condition or liquidity and the Company is currently evaluating the impact
of the provisions whose effective date has been delayed until January 1,
1998.
3. CHANGES IN ACCOUNTING PRINCIPLES
Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This
statement establishes accounting standards for the impairment of
long-lived assets and certain identifiable intangibles to be disposed.
This statement requires a write down to fair value when long-lived assets
to be held and used are impaired. The statement also requires long-lived
assets to be disposed (e.g., real estate held for sale) 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 standard did not have a
material impact on the Company's financial condition, results of
operations or liquidity.
Accounting for Stock-Based Compensation
The Company participates in a stock option plan sponsored by Travelers
Group that provides for the granting of stock options in Travelers Group
common stock to officers and key employees. The Company applies
Accounting Principles Board Opinion No. 25 (APB 25) and related
interpretations in accounting for stock options. Since stock options are
issued at fair market value on the date of award, no compensation cost
has been recognized for these awards. 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 provides an alternative to APB 25 whereby fair values may
be ascribed to options using a valuation model and amortized to
compensation cost over the vesting period of the options. Had the Company
applied FAS 123 in accounting for stock options, net income would have
been reduced by an insignificant amount in 1996 and 1995.
16
<PAGE> 52
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
3. CHANGES IN ACCOUNTING PRINCIPLES, Continued
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.
4. REINSURANCE
The Company participates in reinsurance in order to limit losses,
minimize exposure to large risks, provide capacity for future growth and
to effect business-sharing arrangements. The Company remains primarily
liable as the direct insurer on all risks reinsured.
Life insurance in force ceded to TIC at December 31, 1996 and 1995 was
$90.7 million and $97.7 million, respectively. At December 31, 1996 and
1995, $2.2 billion and $601.2 million, respectively, was ceded to
non-affiliates.
5. SHAREHOLDER'S EQUITY
Unrealized Investment Gains (Losses)
An analysis of the change in unrealized gains and losses on investments
is shown in Note 12.
Shareholder's Equity and Dividend Availability
The Company's statutory net income was $17.9 million, $23.0 million and
$5.7 million for the years ended December 31, 1996, 1995 and 1994,
respectively.
Statutory capital and surplus was $254.1 million and $257.8 million at
December 31, 1996 and 1995, respectively.
The Company is currently subject to various regulatory restrictions that
limit the maximum amount of dividends available to be paid to its parent
without prior approval of insurance regulatory authorities. Statutory
surplus of $14.8 million is available in 1997 for dividend payments by
the Company without prior approval of the Connecticut Insurance
Department.
17
<PAGE> 53
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
6. DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company does not hold or issue derivative instruments for trading
purposes. The carrying value of derivative instruments was not
significant at December 31, 1996 and 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, 1996, investments in fixed maturities had a carrying
value and a fair value of $694.5 million, compared with a carrying value
and a fair value of $724.6 million at December 31, 1995. See Note 12.
At December 31, 1996 and 1995, mortgage loans had a carrying value of
$90.5 million and $125.8 million, respectively, which approximates fair
value. In estimating fair value, the Company used interest rates
reflecting the higher returns required in the current real estate
financing market.
The carrying values of $2.1 million and $1.9 million of financial
instruments classified as other assets approximated their fair values at
December 31, 1996 and 1995, respectively. The carrying values of $13.3
million and $55.3 million of financial instruments classified as other
liabilities also approximated their fair values at December 31, 1996 and
1995, respectively. Fair value is determined using various methods
including discounted cash flows, as appropriate for the various financial
instruments.
The assets of separate accounts providing a guaranteed return had a
carrying value and a fair value of $896.9 million and $901.0 million,
respectively, at December 31, 1996, compared to a carrying value and a
fair value of $869.1 million and $923.0 million, respectively, at
December 31, 1995. The liabilities of separate accounts providing a
guaranteed return had a carrying value and a fair value of $808.7 million
and $695.3 million, respectively, at December 31, 1996, compared to a
carrying value and a fair value of $839.1 million and $766.3 million,
respectively, at December 31, 1995.
The carrying values of short-term securities and policy loans
approximated their fair values.
18
<PAGE> 54
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
7. COMMITMENTS AND CONTINGENCIES
Financial Instruments with Off-Balance Sheet Risk
The Company has, in the normal course of business, provided fixed rate
loan commitments and commitments to partnerships.
The off-balance sheet risks of fixed rate loan commitments, commitments
to partnerships and forward contracts were not significant at December
31, 1996 and 1995.
Litigation
The Company is a defendant in various litigation matters in the normal
course of business. Although there can be no assurances, as of December
31, 1996, 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.
8. BENEFIT PLANS
Pension Plans
The Company participates in a qualified, noncontributory defined benefit
pension plan sponsored by Travelers Group covering the majority of
Travelers Group'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.
The Company also participates in a nonqualified, noncontributory defined
benefit pension plan sponsored by an affiliate covering the majority of
the Company's U.S. employees. Contributions are based on benefits paid.
The Company's share of net pension expense was not significant for 1996,
1995 or 1994.
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. Retirees may elect certain prepaid health care benefit
plans. Life insurance benefits are generally set at a fixed amount.
Beginning January 1, 1996, these plans were amended to restrict benefit
eligibility to retirees and certain retiree-eligible employees. The cost
recognized by the Company for these benefits represents its allocated
share of the total costs of the plan, net of retiree contributions. The
Company's share of the total cost of the plan for 1996, 1995 and 1994 was
not significant.
19
<PAGE> 55
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
8. BENEFIT PLANS, Continued
Savings, Investment and Stock Ownership Plan
Under the savings, investment and stock ownership plan available to
substantially all employees of TIGI, 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 through
December 31, 1995. Effective January 1, 1996, the match remained at 50%
of an employee's first 5% contribution with a maximum of $1,000.
Effective January 1, 1997, employee contributions will be matched with
Travelers Group stock options. The Company's expense was not significant
for 1996, 1995 or 1994.
9. RELATED PARTY TRANSACTIONS
The principal banking functions, including payment of salaries and
expenses, for certain subsidiaries and affiliates of TIGI, including the
Company, are handled by TIC. Settlements for these functions between TIC
and its affiliates are made regularly. TIC provides various employee
benefit coverages to certain subsidiaries of TIGI. The premiums for these
coverages were charged in accordance with cost allocation procedures
based upon salaries or census. In addition, investment advisory and
management services, data processing services and claims processing
services are provided by affiliated companies. Charges for these services
are shared by the companies on cost allocation methods based generally on
estimated usage by department.
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, 1996 and 1995,
the pool totaled approximately $2.9 billion and $2.2 billion,
respectively. The Company's share of the pool amounted to $68.2 million
and $49.5 million at December 31, 1996 and 1995, respectively, and is
included in short-term securities in the balance sheet.
The Company's TTM Modified Guaranteed Annuity Contracts are subject to a
limited guarantee agreement by TIC in a principal amount of up to $250
million. TIC's obligation is to pay in full to any owner or beneficiary
of the TTM Modified Guaranteed Annuity Contracts principal and interest
as and when due under the annuity contract to the extent that the Company
fails to make such payment. In addition, TIC guarantees that the Company
will maintain a minimum statutory capital and surplus level.
The Company sells structured settlement annuities to an affiliate,
Travelers Property Casualty Corp., (TAP), formerly Travelers/Aetna
Property Casualty Corp. Such deposits were $36.9 million, $36.6 million
and $37.6 million for 1996, 1995 and 1994, respectively.
The Company began marketing variable annuity products through its
affiliate, Smith Barney, Inc., in 1995. Deposits related to these
products were $300.0 million and $20.5 million in 1996 and 1995,
respectively.
Most leasing functions for TIGI and its subsidiaries are handled by TAP.
Rent expense related to these leases are shared by the companies on a
cost allocation method based generally on estimated usage by department.
The company's rent expense was insignificant in 1996, 1995 and 1994.
20
<PAGE> 56
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
10. FEDERAL INCOME TAXES
<TABLE>
<CAPTION>
(in thousands) 1996 1995 1994
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Effective tax rate
Income before federal income taxes $ 39,582 $43,436 $27,865
Statutory tax rate 35% 35% 35%
-------------------------------------------------------------------------------------------
Expected federal income taxes $ 13,854 $15,203 $ 9,753
Tax effect of:
Nontaxable investment income (15) (13) (90)
Adjustments to benefit and other reserves - - (117)
Other, net (48) (671) (6)
--------------------------------------------------------------------------------------------
Federal income taxes $ 13,791 $14,519 $ 9,540
--------------------------------------------------------------------------------------------
Effective tax rate 35% 33% 34%
-------------------------------------------------------------------------------------------
Composition of federal income taxes
Current:
United States $ 29,435 $ 2,555 $ 4,742
Foreign 21 - -
--------------------------------------------------------------------------------------------
Total 29,456 2,555 4,742
--------------------------------------------------------------------------------------------
Deferred:
United States (15,665) 11,964 4,798
--------------------------------------------------------------------------------------------
Federal income taxes $ 13,791 $14,519 $ 9,540
--------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE> 57
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
10. FEDERAL INCOME TAXES, Continued
The net deferred tax assets at December 31, 1996 and 1995 were comprised
of the tax effects of temporary differences related to the following
assets and liabilities:
<TABLE>
<CAPTION>
(in thousands) 1996 1995
------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Benefit, reinsurance and other reserves $79,484 $ 67,104
Other 3,043 2,570
------------------------------------------------------------------------------------------
Total 82,527 69,674
------------------------------------------------------------------------------------------
Deferred tax liabilities:
Investments, Net 12,113 19,625
Deferred acquisition costs and
value of insurance in force 10,066 6,285
Other 662 536
------------------------------------------------------------------------------------------
Total 22,841 26,446
------------------------------------------------------------------------------------------
Net deferred tax asset before valuation allowance 59,686 43,228
Valuation allowance for deferred tax assets (2,070) (2,070)
------------------------------------------------------------------------------------------
Net deferred tax asset after valuation allowance $57,616 $41,158
------------------------------------------------------------------------------------------
</TABLE>
Starting in 1994 and continuing for at least five years, TIC and its life
insurance subsidiaries, including the Company, will file a consolidated
federal income tax return. Federal income taxes are allocated to each
member on a separate return basis adjusted for credits and other amounts
required by the consolidation process. Any resulting liability will be
paid currently to TIC. Any credits for losses will be paid by TIC to the
extent that such credits are for tax benefits that have been utilized in
the consolidated federal income tax return.
A net deferred tax asset valuation allowance of $2.1 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 Group 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 1996. The initial recognition of any benefit
provided by the reversal of the valuation allowance will be recognized by
reducing goodwill.
22
<PAGE> 58
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
10. FEDERAL INCOME TAXES, Continued
In management's judgment, the $57.6 million "net deferred tax asset after
valuation allowance" as of December 31, 1996, is fully recoverable
against expected future years' taxable ordinary income and capital gains.
At December 31, 1996, 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 $2.0 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 $700 thousand.
11. NET INVESTMENT INCOME
<TABLE>
<CAPTION>
(For the year ended December 31, in thousands) 1996 1995 1994
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross investment income
Fixed maturities $54,029 $49,486 $44,354
Equity securities 411 497 827
Mortgage loans 15,491 11,644 17,178
Real estate held for sale 3,480 2,476 6,299
Other 19,770 2,552 4,480
---------------------------------------------------------------------------------------
93,181 66,655 73,138
---------------------------------------------------------------------------------------
Investment expenses 4,141 3,446 7,045
---------------------------------------------------------------------------------------
Net investment income $89,040 $63,209 $66,093
---------------------------------------------------------------------------------------
</TABLE>
23
<PAGE> 59
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
12. INVESTMENTS AND INVESTMENT GAINS (LOSSES)
Realized investment gains (losses) for the periods were as follows:
<TABLE>
<CAPTION>
(For the year ended December 31, in thousands) 1996 1995 1994
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Realized
Fixed maturities $(11,491) $(4,240) $ (908)
Equity securities 4,613 6,138 1,675
Mortgage loans 1,979 725 36
Real estate held for sale (73) (35) -
Other (4,641) 16,125 (2,877)
-----------------------------------------------------------------------------------------
Realized investment gains (losses) $ (9,613) $18,713 $(2,074)
-----------------------------------------------------------------------------------------
</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 thousands) 1996 1995 1994
------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Unrealized
Fixed maturities $(23,953) $111,551 $(65,205)
Equity securities (746) 1,834 (27)
Other 22,431 4,390 (28)
------------------------------------------------------------------------------------------
(2,268) 117,775 (65,260)
Related taxes (794) 41,221 (22,841)
------------------------------------------------------------------------------------------
Change in unrealized investment gains (losses) (1,474) 76,554 (42,419)
Balance beginning of year 35,330 (41,224) 1,195
------------------------------------------------------------------------------------------
Balance end of year $ 33,856 $ 35,330 $(41,224)
------------------------------------------------------------------------------------------
</TABLE>
Fixed Maturities
Proceeds from sales of fixed maturities classified as available for sale
were $979.0 million and $460.0 million in 1996 and 1995, respectively.
Gross gains of $8.4 million and $7.9 million and gross losses of $19.9
million and $10.3 million in 1996 and 1995, respectively, were realized
on those sales.
24
<PAGE> 60
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
12. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued
The amortized cost and fair values of investments in fixed maturities
were as follows:
<TABLE>
<CAPTION>
December 31, 1996
----------------------------------------------------------------------------------------------------
Gross Gross
Amortized unrealized unrealized Fair
(in thousands) cost gains losses value
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available for sale:
Mortgage-backed securities -
CMOs and pass through
securities $ 88,138 $ 1,637 $ 629 $ 89,146
U.S. Treasury securities
and obligations of U.S.
Government and
government agencies
and authorities 115,059 10,371 61 125,369
Obligations of states and
political subdivisions 3,500 255 -- 3,755
Debt securities issued
by foreign governments 56,097 1,473 1,269 56,301
All other corporate bonds 409,294 13,862 3,277 419,879
Redeemable preferred stock 85 -- -- 85
----------------------------------------------------------------------------------------------------
Total $672,173 $27,598 $5,236 $694,535
----------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE> 61
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
12. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued
<TABLE>
<CAPTION>
December 31, 1995
------------------------------------------------------------------------------------------
Gross Gross
Amortized unrealized unrealized Fair
(in thousands) cost gains losses value
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available for sale:
Mortgage-backed securities -
CMOs and pass through
securities $ 89,044 $ 2,545 $ 378 $ 91,211
U.S. Treasury securities
and obligations of U.S.
Government and
government agencies
and authorities 160,988 24,267 1 185,254
Obligations of states and
political subdivisions 3,500 499 - 3,999
All other corporate bonds 424,676 21,576 2,162 444,090
Redeemable preferred stock 85 - - 85
------------------------------------------------------------------------------------------
Total $678,293 $48,887 $2,541 $724,639
------------------------------------------------------------------------------------------
</TABLE>
The amortized cost and fair value of fixed maturities available for sale
at December 31, 1996, 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 Fair
(in thousands) cost value
-------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 11,184 $ 11,204
Due after 1 year through 5 years 50,397 50,366
Due after 5 years through 10 years 169,634 173,049
Due after 10 years 352,820 370,770
-------------------------------------------------------------------------
584,035 605,389
Mortgage-backed securities 88,138 89,146
-------------------------------------------------------------------------
Total $672,173 $694,535
-------------------------------------------------------------------------
</TABLE>
The Company makes significant investments in collateralized mortgage
obligations (CMOs). CMOs typically have high credit quality, offer good
liquidity, and provide a significant advantage in yield and total return
compared to U.S. Treasury securities. The Company's investment strategy
is to purchase CMO tranches which are protected against prepayment risk,
including planned amortization class (PAC) tranches. Prepayment protected
tranches are preferred because they provide stable cash flows in a
variety of interest rate scenarios. The Company does invest in other
types of CMO tranches if a careful assessment indicates a favorable
risk/return tradeoff. The Company does not purchase residual interests in
CMOs.
26
<PAGE> 62
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
12. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued
At December 31, 1996 and 1995, the Company held CMOs with a market value
of $67.7 million and $68.6 million, respectively. The Company's CMO
holdings are 100% and approximately 94% collateralized by GNMA, FNMA or
FHLMC securities at December 31, 1996 and 1995, respectively.
Equity Securities
The cost and market values of investments in equity securities were as
follows:
<TABLE>
<CAPTION>
December 31, 1996
----------------------------------------------------------------------------------------------------
Gross Gross
unrealized unrealized Fair
(in thousands) Cost gains losses value
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stocks $1,630 $2,845 $83 $4,392
Nonredeemable preferred stocks 5,024 138 - 5,162
----------------------------------------------------------------------------------------------------
Total $6,654 $2,983 $83 $9,554
----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
December 31, 1995
----------------------------------------------------------------------------------------------------
Gross Gross
unrealized unrealized Fair
(in thousands) Cost gains losses value
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stocks $3,310 $3,374 $ 68 $ 6,616
Nonredeemable preferred stocks 6,143 340 - 6,483
----------------------------------------------------------------------------------------------------
Total $9,453 $3,714 $ 68 $13,099
----------------------------------------------------------------------------------------------------
</TABLE>
Proceeds from sales of equity securities were $12.8 million and $11.8
million in 1996 and 1995, respectively. Gross gains of $4.7 million and
$4.9 million and gross losses of $155 thousand and $474 thousand in 1996
and 1995, respectively, were realized on those sales.
Real estate held for sale and mortgage loans
Underperforming assets include delinquent mortgage loans, loans in the
process of foreclosure, foreclosed loans and loans modified at interest
rates below market.
27
<PAGE> 63
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
12. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued
At December 31, 1996 and 1995, the Company's real estate held for sale
and mortgage loan portfolios consisted of the following:
<TABLE>
<CAPTION>
(in thousands) 1996 1995
---------------------------------------------------------------------------
<S> <C> <C>
Current mortgage loans $ 90,394 $108,142
Underperforming mortgage loans 148 17,671
---------------------------------------------------------------------------
Total 90,542 125,813
---------------------------------------------------------------------------
Real estate held for sale 10,111 8,995
---------------------------------------------------------------------------
Total $100,653 $134,808
---------------------------------------------------------------------------
</TABLE>
Aggregate annual maturities on mortgage loans at December 31, 1996 are as
follows:
<TABLE>
<CAPTION>
(in thousands)
---------------------------------------------------
<S> <C>
Past maturity $ 1,677
1997 5,662
1998 316
1999 5,088
2000 5,734
2001 5,678
Thereafter 66,387
---------------------------------------------------
Total $90,542
---------------------------------------------------
</TABLE>
Concentrations
At December 31, 1996 the Company had investments of $75.1 million in the
State of Israel and $40.6 million in Merrill Lynch Trust Series 45. In
1995, the Company had no concentration of credit risk in a single
investee exceeding 10% of shareholder's equity.
The Company participates in a short-term investment pool maintained by an
affiliate. See Note 9.
Included in fixed maturities are below investment grade assets totaling
$40.7 million and $59.0 million at December 31, 1996 and 1995,
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.
28
<PAGE> 64
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
12. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued
The Company also had concentrations of investments, primarily fixed
maturities, in the following industries:
<TABLE>
<CAPTION>
(in thousands) 1996 1995
------------------------------------------------------------------------------------------
<S> <C> <C>
Foreign governments $108,850 $ -
Finance 90,222 25,853
Transportation 86,819 44,118
------------------------------------------------------------------------------------------
</TABLE>
Below investment grade assets included in the totals of the previous
table were as follows:
<TABLE>
<CAPTION>
(in thousands) 1996 1995
----------------------------------------------------------------------------------------
<S> <C> <C>
Foreign governments $6,567 $ -
Finance 2,386 451
Transportation 776 18,648
----------------------------------------------------------------------------------------
</TABLE>
Concentrations of mortgage loans by property type at December 31, 1996
and 1995 were as follows:
<TABLE>
<CAPTION>
(in thousands) 1996 1995
-----------------------------------------------------------------------------------------
<S> <C> <C>
Agricultural $33,501 $29,820
Office 22,533 32,024
Retail 20,024 27,870
-----------------------------------------------------------------------------------------
</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.
Non-Income Producing Investments
Investments included in the balance sheets that were non-income producing
for the preceding 12 months were insignificant.
Restructured Investments
The Company had mortgage loan and debt securities which were restructured
at below market terms totaling approximately $1.0 million and $17.7
million at December 31, 1996 and 1995, 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 assets was insignificant in
1996 and amounted to $4.9 million in 1995. Interest on these assets,
included in net investment income, was insignificant in 1996 and amounted
to $2.0 million in 1995.
29
<PAGE> 65
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
13. LIFE AND ANNUITY DEPOSIT FUNDS AND RESERVES
At December 31, 1996, the Company had $740.6 million of life and annuity
deposit funds and reserves. Of that total, $659.0 million were not
subject to discretionary withdrawal based on contract terms. The
remaining $81.6 million were life and annuity products that were subject
to discretionary withdrawal by the contractholders. Included in the
amount that is subject to discretionary withdrawal were $50.4 million of
liabilities that are surrenderable with market value adjustments. An
additional $31.2 million of the life insurance and individual annuity
liabilities are subject to discretionary withdrawals with an average
surrender charge of 6.7%. The life insurance risks would have to be
underwritten again if transferred to another carrier, which is considered
a significant deterrent for long-term policyholders. Insurance
liabilities that are surrendered or withdrawn from the Company are
reduced by outstanding policy loans and related accrued interest prior to
payout.
14. 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 thousands) 1996 1995 1994
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income from continuing operations $ 25,791 $ 28,917 $ 18,325
Adjustments to reconcile net income to
cash provided by operating activities
Realized (gains) losses 9,613 (18,713) 2,074
Deferred federal income taxes (15,665) 11,964 4,798
Amortization of deferred policy acquisition
costs and value of insurance in force 3,286 1,563 -
Additions to deferred policy acquisition costs (20,753) (3,109) (21,014)
Investment income accrued 1,308 (819) 1,085
Premium balances receivable (3,561) (2,277) -
Insurance reserves and accrued expenses (16,459) (20,081) (16,062)
Other (13,419) (46,076) 18,371
------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities $(29,859) $(48,631) $ 7,577
------------------------------------------------------------------------------------------------------------
</TABLE>
15. NONCASH INVESTING AND FINANCING ACTIVITIES
Significant noncash investing and financing activities include: a) the
transfer of $2.6 million of real estate held for sale and mortgage loans
from one of the Company's separate accounts to the general account in
1995, b) acquisition of real estate through foreclosures of mortgage
loans amounting to $1.1 million, $0 and $10.3 million in 1996, 1995 and
1994, respectively.
30
<PAGE> 66
VINTAGE
STATEMENT OF ADDITIONAL INFORMATION
Individual Variable Annuity Contract
issued by
The Travelers Life and Annuity Company
One Tower Square
Hartford, Connecticut 06183
May, 1997
10
<PAGE> 67
VINTAGE ANNUITY
ANNUAL REPORT
December 31, 1996
The Travelers Fund BD II
for Variable Annuities
TravelersLife and Annuity
A Member of TravelersGroup[LOGO]
The Travelers Insurance Company
The Travelers Life and Annuity Company
One Tower Square
Hartford, CT 06183
<PAGE> 68
THE TRAVELERS FUND BD II
FOR VARIABLE ANNUITIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<S> <C> <C>
ASSETS:
Investments in eligible funds at market value:
Travelers Series Fund Inc.:
Alliance Growth Portfolio, 2,918,162 shares (cost $44,405,174)............................. $ 48,966,764
Van Kampen American Capital Enterprise Portfolio, 1,343,721 shares (cost $19,453,154)...... 21,244,226
TBC Managed Income Portfolio, 309,691 shares (cost $3,335,308)............................. 3,313,698
G.T. Global Strategic Income Portfolio, 253,089 shares (cost $2,972,864)................... 3,006,700
Smith Barney High Income Portfolio, 942,925 shares (cost $11,026,143)...................... 11,164,229
Smith Barney International Equity Portfolio, 1,807,787 shares (cost $21,951,774)........... 22,705,810
Smith Barney Income and Growth Portfolio, 1,358,832 shares (cost $19,155,043).............. 20,464,013
Smith Barney Money Market Portfolio, 27,673,051 shares (cost $27,673,051).................. 27,673,051
Putnam Diversified Income Portfolio, 1,277,767 shares (cost $14,771,881)................... 14,783,770
Smith Barney Pacific Basin Portfolio, 315,107 shares (cost $3,109,988)..................... 3,163,679
MFS Total Return Portfolio, 1,915,813 shares (cost $24,158,789)............................ 25,231,256
AIM Capital Appreciation Portfolio, 3,301,416 shares (cost $34,463,713).................... 36,414,613
The Travelers Series Trust:
MFS Emerging Growth Portfolio, 275,528 shares (cost $3,000,407)............................ 2,906,816
Smith Barney Series Fund:
Total Return Portfolio, 1,652,878 shares (cost $23,680,295)................................ 25,999,765
-----------------
Total Investments (cost $253,157,584)..................................................... $ 267,038,390
RECEIVABLES:
Dividends................................................................................... 56,333
Purchase payments and transfers from other Travelers accounts............................... 2,370,836
Other assets................................................................................. 4,851
-------------------
Total Assets............................................................................... 269,470,410
-------------------
LIABILITIES:
Payable for contract surrenders and transfers to other Travelers accounts.................... 191,971
Accrued liabilities.......................................................................... 35,255
-------------------
Total Liabilities.......................................................................... 227,226
-------------------
NET ASSETS: $ 269,243,184
===================
</TABLE>
See Notes to Financial Statements
-1-
<PAGE> 69
THE TRAVELERS FUND BD II
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends.................................................................................... $ 6,107,224
EXPENSES:
Insurance charges............................................................................ $ 1,333,944
Administrative charges....................................................................... 189,960
-----------------
Total expenses.............................................................................. 1,523,904
-------------------
Net investment income...................................................................... 4,583,320
-------------------
REALIZED GAIN AND CHANGE IN UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Realized gain from investment transactions:
Proceeds from investments sold.............................................................. 36,697,606
Cost of investments sold.................................................................... 36,099,281
-----------------
Net realized gain.......................................................................... 598,325
Change in unrealized gain (loss) on investments:
Unrealized loss at December 31, 1995........................................................ (125,174)
Unrealized gain at December 31, 1996........................................................ 13,880,806
-----------------
Net change in unrealized gain (loss) for the year.......................................... 14,005,980
-------------------
Net realized gain and change in unrealized gain (loss).................................... 14,604,305
-------------------
Net increase in net assets resulting from operations......................................... $ 19,187,625
===================
</TABLE>
See Notes to Financial Statements
-2-
<PAGE> 70
THE TRAVELERS FUND BD II
FOR VARIABLE ANNUITIES
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
THE PERIOD NOVEMBER 8, 1995 (DATE OPERATIONS COMMENCED)
TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
OPERATIONS:
Net investment income........................................................................ $ 4,583,320 $ 245,834
Net realized gain (loss) from investment transactions........................................ 598,325 (509)
Net change in unrealized gain (loss) on investments.......................................... 14,005,980 (125,174)
----------------- -------------------
Net increase in net assets resulting from operations........................................ 19,187,625 120,151
----------------- -------------------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 182,948,181 and 14,991,745 units, respectively).............................. 226,873,244 17,056,576
Participant transfers from other Travelers accounts
(applicable to 55,121,934 and 321,920 units, respectively).................................. 65,242,361 372,855
Administrative charges
(applicable to 15,382 units)................................................................ (18,946) -
Contract surrenders
(applicable to 1,897,753 and 1,879 units, respectively)..................................... (2,337,255) (2,206)
Participant transfers to other Travelers accounts
(applicable to 50,981,143 and 229,855 units, respectively).................................. (55,932,256) (260,930)
Other payments to participants
(applicable to 810,905 units)............................................................... (1,058,035) -
----------------- -------------------
Net increase in net assets resulting from unit transactions................................ 232,769,113 17,166,295
----------------- -------------------
Net increase in net assets................................................................ 251,956,738 17,286,446
NET ASSETS:
Beginning of period.......................................................................... 17,286,446 -
----------------- -------------------
End of period................................................................................ $ 269,243,184 $ 17,286,446
================= ===================
</TABLE>
See Notes to Financial Statements
-3-
<PAGE> 71
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Fund BD II for Variable Annuities ("Fund BD II") is a
separate account of The Travelers Life and Annuity Company ("Travelers
Life"), which is a wholly owned subsidiary of The Travelers Insurance
Company ("The Travelers"), an indirect wholly owned subsidiary of Travelers
Group Inc., and is available for funding certain variable annuity contracts
issued by Travelers Life. Fund BD II is registered under the Investment
Company Act of 1940, as amended, as a unit investment trust.
Participant purchase payments applied to Fund BD II are invested in one or
more eligible funds in accordance with the selection made by the contract
owner. As of December 31, 1996, the eligible funds available under Fund BD
II are: Alliance Growth Portfolio, Van Kampen American Capital Enterprise
Portfolio (formerly 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 Travelers
Series Fund Inc. (formerly Smith Barney/Travelers Series Fund Inc.); MFS
Emerging Growth Portfolio of The Travelers Series Trust; and Total Return
Portfolio of Smith Barney Series Fund. Travelers Series Fund Inc. is
incorporated under Maryland law. Smith Barney Series Fund and The
Travelers Series Trust are registered as Massachusetts business trusts.
All eligible funds are managed by affiliates of The Travelers.
The following is a summary of significant accounting policies consistently
followed by Fund BD II in the preparation of its financial statements.
SECURITY VALUATION. Investments are valued daily at the net asset values
per share of the underlying funds.
FEDERAL INCOME TAXES. The operations of Fund BD II form a part of the
total operations of Travelers Life and are not taxed separately. Travelers
Life is taxed as a life insurance company under the Internal Revenue Code
of 1986, as amended (the "Code"). Under existing federal income tax law,
no taxes are payable on the investment income of Fund BD II. Fund BD II is
not taxed as a "regulated investment company" under Subchapter M of the
Code.
OTHER. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
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 $273,450,623 and $36,697,606,
respectively, for the year ended December 31, 1996. Realized gains and
losses from investment transactions are reported on an identified cost
basis. The cost of investments in eligible funds was $253,157,584 at
December 31, 1996. Gross unrealized appreciation for all investments at
December 31, 1996 was $13,996,007. Gross unrealized depreciation for all
investments at December 31, 1996 was $115,201.
-4-
<PAGE> 72
NOTES TO FINANCIAL STATEMENTS - CONTINUED
3. CONTRACT CHARGES
Insurance charges are paid for the mortality and expense risks assumed by
Travelers Life. For contracts with a standard death benefit provision,
these charges are equivalent to 1.02% of the average net assets of Fund BD
II 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 II on an annual basis.
Administrative fees are paid for administrative expenses incurred by
Travelers Life. This charge is equivalent to 0.15% of the average net
assets of Fund BD II 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 Travelers Life to cover
contract administrative charges.
No sales charge is deducted from participant purchase payments when they
are received. However, Travelers Life generally assesses a contingent
deferred sales charge of up to 6% if a participant's purchase payment is
surrendered within six years of its payment date. Contract surrender
payments include $26,151 of contingent deferred sales charges for the year
ended December 31, 1996. No deductions were taken for the period November
8, 1995 (date operations commenced) to December 31, 1995.
-5-
<PAGE> 73
NOTES TO FINANCIAL STATEMENTS - CONTINUED
4. NET CONTRACT OWNERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------------------------------------
ACCUMULATION UNIT NET
UNITS VALUE ASSETS
----- ------ ------
<S> <C> <C> <C>
Travelers Series Fund Inc.
Alliance Growth Portfolio
Standard.............................................. 24,031,009 $ 1.785 $ 42,891,960
Enhanced.............................................. 3,613,086 1.772 6,403,241
Van Kampen American Capital Enterprise Portfolio
Standard.............................................. 11,360,286 1.655 18,797,963
Enhanced.............................................. 1,644,330 1.643 2,701,654
TBC Managed Income Portfolio
Standard.............................................. 2,635,535 1.163 3,063,848
Enhanced.............................................. 265,598 1.154 306,598
G.T. Global Strategic Income Portfolio
Standard.............................................. 1,832,502 1.316 2,411,175
Enhanced.............................................. 463,308 1.306 605,312
Smith Barney High Income Portfolio
Standard.............................................. 7,719,068 1.300 10,032,935
Enhanced.............................................. 970,188 1.291 1,252,088
Smith Barney International Equity Portfolio
Standard.............................................. 16,854,894 1.222 20,594,877
Enhanced.............................................. 2,009,974 1.213 2,438,585
Smith Barney Income and Growth Portfolio
Standard.............................................. 11,905,953 1.528 18,193,877
Enhanced.............................................. 1,606,074 1.517 2,436,913
Smith Barney Money Market Portfolio
Standard.............................................. 22,961,508 1.098 25,204,164
Enhanced.............................................. 2,362,442 1.090 2,574,838
Putnam Diversified Income Portfolio
Standard.............................................. 10,424,494 1.252 13,047,868
Enhanced.............................................. 1,460,865 1.243 1,815,551
Smith Barney Pacific Basin Portfolio
Standard.............................................. 2,754,609 0.983 2,709,112
Enhanced.............................................. 467,106 0.977 456,150
MFS Total Return Portfolio
Standard.............................................. 16,650,570 1.376 22,910,883
Enhanced.............................................. 1,810,076 1.366 2,473,038
AIM Capital Appreciation Portfolio
Standard.............................................. 29,460,488 1.088 32,050,014
Enhanced.............................................. 4,246,308 1.084 4,603,683
The Travelers Series Trust
MFS Emerging Growth Portfolio
Standard.............................................. 2,505,629 1.005 2,518,893
Enhanced.............................................. 466,025 1.005 468,275
Smith Barney Series Fund
Total Return Portfolio
Standard.............................................. 14,921,227 1.550 23,130,231
Enhanced.............................................. 2,043,711 1.541 3,149,458
-----------------
Net Contract Owners' Equity............................................................... $ 269,243,184
=================
</TABLE>
-6-
<PAGE> 74
This page intentionally left blank.
-7-
<PAGE> 75
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. SCHEDULE OF FUND BD II OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE PERIOD NOVEMBER 8, 1995
(DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
VAN KAMPEN
AMERICAN CAPITAL
ALLIANCE GROWTH PORTFOLIO ENTERPRISE PORTFOLIO
-------------------------------- -------------------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends................................................. $ 1,749,884 $ 71,580 $ 65,661 $ 38,960
------------- ----------------- ------------------- -----------------
EXPENSES:
Insurance charges......................................... 239,371 2,554 107,644 1,306
Administrative fees....................................... 33,611 275 15,377 135
------------- ----------------- ------------------- -----------------
Net investment income (loss)........................ 1,476,902 68,751 (57,360) 37,519
------------- ----------------- ------------------- -----------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold........................ 115,510 55,534 179,400 155
Cost of investments sold.............................. 97,909 56,573 156,110 158
------------- ----------------- ------------------- -----------------
Net realized gain (loss)............................ 17,601 (1,039) 23,290 (3)
------------- ----------------- ------------------- -----------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of period............ (42,615) - (18,558) -
Unrealized gain (loss) end of period.................. 4,561,590 (42,615) 1,791,072 (18,558)
------------- ----------------- ------------------- -----------------
Net change in unrealized gain (loss) for the period. 4,604,205 (42,615) 1,809,630 (18,558)
------------- ----------------- ------------------- -----------------
Net increase (decrease) in net assets
resulting from operations........................... 6,098,708 25,097 1,775,560 18,958
------------- ----------------- ------------------- -----------------
UNIT TRANSACTIONS:
Participant purchase payments............................. 34,649,407 2,815,148 16,501,913 1,430,843
Participant transfers from other Travelers accounts....... 7,299,315 67,993 2,552,870 37,768
Administrative charges.................................... (3,897) - (1,313) -
Contract surrenders....................................... (387,974) (503) (141,838) -
Participant transfers to other Travelers accounts......... (1,038,182) (82,106) (587,799) -
Other payments to participants............................ (147,805) - (87,345) -
------------- ----------------- ------------------- -----------------
Net increase in net assets resulting
from unit transactions.............................. 40,370,864 2,800,532 18,236,488 1,468,611
------------- ----------------- ------------------- -----------------
Net increase in net assets.......................... 46,469,572 2,825,629 20,012,048 1,487,569
NET ASSETS:
Beginning of period................................... 2,825,629 - 1,487,569 -
------------- ----------------- ------------------- -----------------
End of period......................................... $ 49,295,201 $ 2,825,629 $ 21,499,617 $ 1,487,569
============= ================= =================== =================
</TABLE>
<TABLE>
<CAPTION>
TBC MANAGED
INCOME PORTFOLIO
------------------------------------
1996 1995
---- ----
<S> <C> <C>
INVESTMENT INCOME:
Dividends................................................. $ 144,329 $ 18,181
----------------- ------------------
EXPENSES:
Insurance charges......................................... 20,601 252
Administrative fees....................................... 2,972 35
----------------- ------------------
Net investment income (loss)........................ 120,756 17,894
----------------- ------------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold........................ 443,906 60
Cost of investments sold.............................. 463,432 60
----------------- ------------------
Net realized gain (loss)............................ (19,526) -
----------------- ------------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of period............ (13,530) -
Unrealized gain (loss) end of period.................. (21,610) (13,530)
----------------- ------------------
Net change in unrealized gain (loss) for the period. (8,080) (13,530)
----------------- ------------------
Net increase (decrease) in net assets
resulting from operations........................... 93,150 4,364
----------------- ------------------
UNIT TRANSACTIONS:
Participant purchase payments............................. 3,072,427 275,352
Participant transfers from other Travelers accounts....... 349,692 80,000
Administrative charges.................................... (212) -
Contract surrenders....................................... (12,989) -
Participant transfers to other Travelers accounts......... (491,338) -
Other payments to participants............................ - -
----------------- ------------------
Net increase in net assets resulting
from unit transactions............................. 2,917,580 355,352
----------------- ------------------
Net increase in net assets.......................... 3,010,730 359,716
NET ASSETS:
Beginning of period................................... 359,716 -
----------------- ------------------
End of period......................................... $ 3,370,446 $ 359,716
================= ==================
</TABLE>
-8-
<PAGE> 76
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
G.T. GLOBAL STRATEGIC SMITH BARNEY
INCOME PORTFOLIO HIGH INCOME PORTFOLIO
--------------------------------- -----------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.................................................
$ 239,292 $ 4,427 $ 625,383 $ 27,093
---------------- ---------------- ------------- ---------------
EXPENSES:
Insurance charges......................................... 14,195 102 54,325 283
Administrative fees....................................... 1,970 12 7,674 39
---------------- ---------------- ------------- ---------------
Net investment income (loss)........................ 223,127 4,313 563,384 26,771
---------------- ---------------- ------------- ---------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold........................ 12,114 64 118,732 142
Cost of investments sold.............................. 11,608 63 118,637 144
---------------- ---------------- ------------- ---------------
Net realized gain (loss)............................ 506 1 95 (2)
---------------- ---------------- ------------- ---------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of period............ (1,453) - (21,008) -
Unrealized gain (loss) end of period.................. 33,836 (1,453) 138,086 (21,008)
---------------- ---------------- ------------- ---------------
Net change in unrealized gain (loss) for the period. 35,289 (1,453) 159,094 (21,008)
---------------- ---------------- ------------- ---------------
Net increase (decrease) in net assets
resulting from operations........................... 258,922 2,861 722,573 5,761
---------------- ---------------- ------------- ---------------
UNIT TRANSACTIONS:
Participant purchase payments............................. 2,320,799 122,591 9,279,640 659,877
Participant transfers from other Travelers accounts....... 331,095 - 1,222,919 -
Administrative charges.................................... (164) - (580) -
Contract surrenders....................................... (13,081) - (76,933) -
Participant transfers to other Travelers accounts......... (6,536) - (462,926) -
Other payments to participants............................ - - (65,308) -
---------------- ---------------- ------------- ---------------
Net increase in net assets resulting
from unit transactions.............................. 2,632,113 122,591 9,896,812 659,877
---------------- ---------------- ------------- ---------------
Net increase in net assets.......................... 2,891,035 125,452 10,619,385 665,638
NET ASSETS:
Beginning of period................................... 125,452 - 665,638 -
---------------- ---------------- ------------- ---------------
End of period......................................... $ 3,016,487 $ 125,452 $ 11,285,023 $ 665,638
================ ================ ============= ===============
</TABLE>
<TABLE>
<CAPTION>
SMITH BARNEY SMITH BARNEY INCOME
INTERNATIONAL EQUITY PORTFOLIO AND GROWTH PORTFOLIO
------------------------------- --------------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.................................................
$ 22,493 $ 836 $ 455,102 $ 15,676
--------------- --------------- -------------- -----------------
EXPENSES:
Insurance charges......................................... 107,608 751 97,155 759
Administrative fees....................................... 16,122 83 13,920 98
--------------- --------------- -------------- -----------------
Net investment income (loss)........................ (101,237) 2 344,027 14,819
--------------- --------------- -------------- -----------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold........................ 4,446,920 35,908 82,485 396
Cost of investments sold.............................. 3,960,097 35,387 69,287 385
--------------- --------------- -------------- -----------------
Net realized gain (loss)............................ 486,823 521 13,198 11
--------------- --------------- -------------- -----------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of period............ 20,347 - 1,435 -
Unrealized gain (loss) end of period.................. 754,036 20,347 1,308,970 1,435
--------------- --------------- -------------- -----------------
Net change in unrealized gain (loss) for the period. 733,689 20,347 1,307,535 1,435
--------------- --------------- -------------- -----------------
Net increase (decrease) in net assets
resulting from operations........................... 1,119,275 20,870 1,664,760 16,265
--------------- --------------- -------------- -----------------
UNIT TRANSACTIONS:
Participant purchase payments............................. 17,392,360 760,996 15,205,943 911,643
Participant transfers from other Travelers accounts....... 10,287,941 12,389 3,567,741 29,913
Administrative charges.................................... (1,790) - (1,280) -
Contract surrenders....................................... (168,200) (75) (178,977) -
Participant transfers to other Travelers accounts......... (6,285,736) - (444,378) -
Other payments to participants............................ (104,568) - (140,840) -
--------------- --------------- -------------- -----------------
Net increase in net assets resulting
from unit transactions.............................. 21,120,007 773,310 18,008,209 941,556
--------------- --------------- -------------- -----------------
Net increase in net assets.......................... 22,239,282 794,180 19,672,969 957,821
NET ASSETS:
Beginning of period................................... 794,180 - 957,821 -
--------------- --------------- -------------- -----------------
End of period......................................... $ 23,033,462 $ 794,180 $ 20,630,790 $ 957,821
=============== =============== ============== =================
</TABLE>
-9-
<PAGE> 77
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. SCHEDULE OF FUND BD II OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE PERIOD NOVEMBER 8, 1995
(DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
SMITH BARNEY PUTNAM
MONEY MARKET PORTFOLIO DIVERSIFIED INCOME PORTFOLIO
----------------------------- -----------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.................................................. $ 734,489 $ 8,627 $ 775,071 $ 44,601
------------- ------------- ------------- -------------
EXPENSES:
Insurance charges.......................................... 161,431 2,031 77,461 704
Administrative fees........................................ 22,917 275 11,041 100
------------- ------------- ------------- -------------
Net investment income (loss)......................... 550,141 6,321 686,569 43,797
------------- ------------- ------------- -------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold......................... 22,760,375 44,352 361,079 21
Cost of investments sold............................... 22,760,375 44,352 356,390 21
------------- ------------- ------------- -------------
Net realized gain (loss)............................. - - 4,689 -
------------- ------------- ------------- -------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of period............. - - (29,630) -
Unrealized gain (loss) end of period................... - - 11,889 (29,630)
------------- ------------- ------------- -------------
Net change in unrealized gain (loss) for the period.. - - 41,519 (29,630)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations............................ 550,141 6,321 732,777 14,167
------------- ------------- ------------- -------------
UNIT TRANSACTIONS:
Participant purchase payments.............................. 44,038,947 3,527,872 12,719,514 1,086,983
Participant transfers from other Travelers accounts........ 16,886,657 8,446 1,427,681 15,623
Administrative charges..................................... (945) - (1,014) -
Contract surrenders........................................ (461,230) - (283,811) -
Participant transfers to other Travelers accounts.......... (36,332,462) (166,900) (827,078) (5,584)
Other payments to participants............................. (277,845) - (15,839) -
------------- ------------- ------------- -------------
Net increase in net assets resulting
from unit transactions............................... 23,853,122 3,369,418 13,019,453 1,097,022
------------- ------------- ------------- -------------
Net increase in net assets........................... 24,403,263 3,375,739 13,752,230 1,111,189
NET ASSETS:
Beginning of period.................................... 3,375,739 - 1,111,189 -
------------- ------------- ------------- -------------
End of period.......................................... $ 27,779,002 $ 3,375,739 $ 14,863,419 $ 1,111,189
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
SMITH BARNEY
PACIFIC BASIN PORTFOLIO
-----------------------------
1996 1995
---- ----
<S> <C> <C>
INVESTMENT INCOME:
Dividends.................................................. $ 19,513 $ 149
------------- -------------
EXPENSES:
Insurance charges.......................................... 17,947 48
Administrative fees........................................ 2,375 6
------------- -------------
Net investment income (loss)......................... (809) 95
------------- -------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold......................... 7,758,018 19
Cost of investments sold............................... 7,712,954 18
------------- -------------
Net realized gain (loss)............................. 45,064 1
------------- -------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of period............. 1,836 -
Unrealized gain (loss) end of period................... 53,691 1,836
------------- -------------
Net change in unrealized gain (loss) for the period.. 51,855 1,836
------------- -------------
Net increase (decrease) in net assets
resulting from operations............................ 96,110 1,932
------------- -------------
UNIT TRANSACTIONS:
Participant purchase payments.............................. 2,993,075 49,035
Participant transfers from other Travelers accounts........ 8,020,835 673
Administrative charges..................................... (370) -
Contract surrenders........................................ (11,727) -
Participant transfers to other Travelers accounts.......... (7,984,301) -
Other payments to participants............................. - -
------------- -------------
Net increase in net assets resulting
from unit transactions............................... 3,017,512 49,708
------------- -------------
Net increase in net assets........................... 3,113,622 51,640
NET ASSETS:
Beginning of period.................................... 51,640 -
------------- -------------
End of period.......................................... $ 3,165,262 $ 51,640
============= =============
</TABLE>
-10-
<PAGE> 78
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
AIM CAPITAL
MFS TOTAL RETURN PORTFOLIO APPRECIATION PORTFOLIO
----------------------------- -----------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.................................................. $ 832,634 $ 26,481 $ 35,100 $ 3,038
------------- ------------- ------------- -------------
EXPENSES:
Insurance charges.......................................... 121,785 857 197,164 4,240
Administrative fees........................................ 17,434 127 27,944 313
------------- ------------- ------------- -------------
Net investment income (loss)......................... 693,415 25,497 (190,008) (1,515)
------------- ------------- ------------- -------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold......................... 122,229 62 189,761 90
Cost of investments sold............................... 113,231 61 187,142 93
------------- ------------- ------------- -------------
Net realized gain (loss)............................. 8,998 1 2,619 (3)
------------- ------------- ------------- -------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of period............. 140 - (25,475) -
Unrealized gain (loss) end of period................... 1,072,467 140 1,950,900 (25,475)
------------- ------------- ------------- -------------
Net change in unrealized gain (loss) for the period.. 1,072,327 140 1,976,375 (25,475)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations............................ 1,774,740 25,638 1,788,986 (26,993)
------------- ------------- ------------- -------------
UNIT TRANSACTIONS:
Participant purchase payments.............................. 19,949,329 1,186,910 27,035,886 3,256,149
Participant transfers from other Travelers accounts........ 3,146,849 22,680 5,567,585 72,615
Administrative charges..................................... (1,570) - (4,115) -
Contract surrenders........................................ (144,598) (627) (343,921) (500)
Participant transfers to other Travelers accounts.......... (517,750) (2,120) (636,435) (2,115)
Other payments to participants............................. (55,560) - (53,445) -
------------- ------------- ------------- -------------
Net increase in net assets resulting
from unit transactions............................... 22,376,700 1,206,843 31,565,555 3,326,149
------------- ------------- ------------- -------------
Net increase in net assets........................... 24,151,440 1,232,481 33,354,541 3,299,156
NET ASSETS:
Beginning of period.................................... 1,232,481 - 3,299,156 -
------------- ------------- ------------- -------------
End of period.......................................... $ 25,383,921 $ 1,232,481 $ 36,653,697 $ 3,299,156
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
MFS EMERGING
GROWTH PORTFOLIO TOTAL RETURN PORTFOLIO
----------------------------- -----------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.................................................. $ 13,776 $ - $ 394,497 $ 2,394
------------- ------------- ------------- -------------
EXPENSES:
Insurance charges.......................................... 2,585 - 114,672 733
Administrative fees........................................ 351 - 16,252 91
------------- ------------- ------------- -------------
Net investment income (loss)......................... 10,840 - 263,573 1,570
------------- ------------- ------------- -------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold......................... - - 107,077 135
Cost of investments sold............................... - - 92,109 132
------------- ------------- ------------- -------------
Net realized gain (loss)............................. - - 14,968 3
------------- ------------- ------------- -------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of period............. - - 3,337 -
Unrealized gain (loss) end of period................... (93,591) - 2,319,470 3,337
------------- ------------- ------------- -------------
Net change in unrealized gain (loss) for the period.. (93,591) - 2,316,133 3,337
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations............................ (82,751) - 2,594,674 4,910
------------- ------------- ------------- -------------
UNIT TRANSACTIONS:
Participant purchase payments.............................. 2,458,877 - 19,255,127 973,177
Participant transfers from other Travelers accounts........ 622,001 - 3,959,180 24,755
Administrative charges..................................... - - (1,696) -
Contract surrenders........................................ (647) - (111,329) (501)
Participant transfers to other Travelers accounts.......... (10,312) - (307,023) (2,105)
Other payments to participants............................. - - (109,480) -
------------- ------------- ------------- -------------
Net increase in net assets resulting
from unit transactions............................... 3,069,919 - 22,684,779 995,326
------------- ------------- ------------- -------------
Net increase in net assets........................... 2,987,168 - 25,279,453 1,000,236
NET ASSETS:
Beginning of period.................................... - - 1,000,236 -
------------- ------------- ------------- -------------
End of period.......................................... $ 2,987,168 $ - $ 26,279,689 $ 1,000,236
============= ============= ============= =============
</TABLE>
-11-
<PAGE> 79
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. SCHEDULE OF FUND BD II OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE PERIOD NOVEMBER 8, 1995
(DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
COMBINED
----------------------------------
1996 1995
---- ----
<S> <C> <C>
INVESTMENT INCOME:
Dividends................................................. $ 6,107,224 $ 262,043
------------------ ---------------
EXPENSES:
Insurance charges......................................... 1,333,944 14,620
Administrative fees....................................... 189,960 1,589
------------------ ---------------
Net investment income (loss)........................ 4,583,320 245,834
------------------ ---------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold........................ 36,697,606 136,938
Cost of investments sold.............................. 36,099,281 137,447
------------------ ---------------
Net realized gain (loss)............................ 598,325 (509)
------------------ ---------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of period............ (125,174) -
Unrealized gain (loss) end of period.................. 13,880,806 (125,174)
------------------ ---------------
Net change in unrealized gain (loss) for the period. 14,005,980 (125,174)
------------------ ---------------
Net increase (decrease) in net assets
resulting from operations........................... 19,187,625 120,151
------------------ ---------------
UNIT TRANSACTIONS:
Participant purchase payments............................. 226,873,244 17,056,576
Participant transfers from other Travelers accounts....... 65,242,361 372,855
Administrative charges.................................... (18,946) -
Contract surrenders....................................... (2,337,255) (2,206)
Participant transfers to other Travelers accounts......... (55,932,256) (260,930)
Other payments to participants............................ (1,058,035) -
------------------ ---------------
Net increase in net assets resulting
from unit transacions............................... 232,769,113 17,166,295
------------------ ---------------
Net increase in net assets.......................... 251,956,738 17,286,446
NET ASSETS:
Beginning of period................................... 17,286,446 -
------------------ ---------------
End of period......................................... $ 269,243,184 $ 17,286,446
================== ===============
</TABLE>
-12-
<PAGE> 80
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF ACCUMULATION UNITS FOR FUND BD II
FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE PERIOD NOVEMBER 8, 1995
(DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
VAN KAMPEN
AMERICAN CAPITAL
ALLIANCE GROWTH PORTFOLIO ENTERPRISE PORTFOLIO
--------------------------------- -----------------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Accumulation units beginning of period................ 2,026,405 - 1,093,664 -
Accumulation units purchased and
transferred from other Travelers accounts.......... 26,601,698 2,088,195 12,436,976 1,093,664
Accumulation units redeemed and
transferred to other Travelers accounts............ (984,008) (61,790) (526,024) -
-------------- --------------- --------------- --------------
Accumulation units end of period...................... 27,644,095 2,026,405 13,004,616 1,093,664
============== =============== =============== ==============
</TABLE>
<TABLE>
<CAPTION>
TBC MANAGED
INCOME PORTFOLIO
------------------------------------
1996 1995
---- ----
<S> <C> <C>
Accumulation units beginning of period................ 315,445 -
Accumulation units purchased and
transferred from other Travelers accounts.......... 3,034,567 315,445
Accumulation units redeemed and
transferred to other Travelers accounts............ (448,879) -
---------------- -----------------
Accumulation units end of period...................... 2,901,133 315,445
================ =================
</TABLE>
<TABLE>
<CAPTION>
G.T. GLOBAL STRATEGIC SMITH BARNEY
INCOME PORTFOLIO HIGH INCOME PORTFOLIO
--------------------------------- -----------------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Accumulation units beginning of period................ 112,291 - 574,114 -
Accumulation units purchased and
transferred from other Travelers accounts.......... 2,200,023 112,291 8,612,189 574,114
Accumulation units redeemed and
transferred to other Travelers accounts............ (16,504) - (497,047) -
-------------- --------------- --------------- --------------
Accumulation units end of period...................... 2,295,810 112,291 8,689,256 574,114
============== =============== =============== ==============
</TABLE>
<TABLE>
<CAPTION>
SMITH BARNEY INTERNATIONAL
EQUITY PORTFOLIO
-------------------------------------
1996 1995
---- ----
<S> <C> <C>
Accumulation units beginning of period................ 757,069 -
Accumulation units purchased and
transferred from other Travelers accounts.......... 23,544,001 757,142
Accumulation units redeemed and
transferred to other Travelers accounts............ (5,436,202) (73)
---------------- -----------------
Accumulation units end of period...................... 18,864,868 757,069
================ =================
</TABLE>
<TABLE>
<CAPTION>
SMITH BARNEY INCOME SMITH BARNEY
AND GROWTH PORTFOLIO MONEY MARKET PORTFOLIO
--------------------------------- -----------------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Accumulation units beginning of period................ 742,670 - 3,193,779 -
Accumulation units purchased and
transferred from other Travelers accounts.......... 13,297,626 742,670 56,287,533 3,351,749
Accumulation units redeemed and
transferred to other Travelers accounts............ (528,269) - (34,157,362) (157,970)
-------------- --------------- --------------- --------------
Accumulation units end of period...................... 13,512,027 742,670 25,323,950 3,193,779
============== =============== =============== ==============
</TABLE>
<TABLE>
<CAPTION>
PUTNAM DIVERSIFIED
INCOME PORTFOLIO
-------------------------------------
1996 1995
---- ----
<S> <C> <C>
Accumulation units beginning of period................ 950,243 -
Accumulation units purchased and
transferred from other Travelers accounts.......... 11,872,273 955,065
Accumulation units redeemed and
transferred to other Travelers accounts............ (937,157) (4,822)
---------------- -----------------
Accumulation units end of period...................... 11,885,359 950,243
================ =================
</TABLE>
-13-
<PAGE> 81
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF ACCUMULATION UNITS FOR FUND BD II
FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE PERIOD NOVEMBER 8, 1995
(DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
SMITH BARNEY MFS
PACIFIC BASIN PORTFOLIO TOTAL RETURN PORTFOLIO
----------------------------------- ---------------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Accumulation units beginning of period............ 56,822 - 1,014,097 -
Accumulation units purchased and
transferred from other Travelers accounts...... 11,406,814 56,822 17,996,071 1,016,359
Accumulation units redeemed and
transferred to other Travelers accounts........ (8,241,921) - (549,522) (2,262)
--------------- ---------------- ---------------- -------------
Accumulation units end of period.................. 3,221,715 56,822 18,460,646 1,014,097
=============== ================ ================ =============
</TABLE>
<TABLE>
<CAPTION>
AIM CAPITAL
APPRECIATION PORTFOLIO
--------------------------------------
1996 1995
---- ----
<S> <C> <C>
Accumulation units beginning of period............ 3,444,998 -
Accumulation units purchased and
transferred from other Travelers accounts...... 31,258,008 3,447,731
Accumulation units redeemed and
transferred to other Travelers accounts........ (996,210) (2,733)
-------------- ------------------
Accumulation units end of period.................. 33,706,796 3,444,998
============== ===================
</TABLE>
<TABLE>
<CAPTION>
MFS EMERGING TOTAL RETURN
GROWTH PORTFOLIO PORTFOLIO
----------------------------------- ---------------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Accumulation units beginning of period............ - - 800,334 -
Accumulation units purchased and
transferred from other Travelers accounts...... 2,982,336 - 16,540,000 802,418
Accumulation units redeemed and
transferred to other Travelers accounts........ (10,682) - (375,396) (2,084)
--------------- ---------------- ---------------- --------------
Accumulation units end of period.................. 2,971,654 - 16,964,938 800,334
=============== ================ ================ ==============
</TABLE>
-14-
<PAGE> 82
REPORT OF INDEPENDENT ACCOUNTANTS
To the Owners of Variable Annuity Contracts of
The Travelers Fund BD II for Variable Annuities:
We have audited the accompanying statement of assets and liabilities of The
Travelers Fund BD II for Variable Annuities as of December 31, 1996, 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,
1996 and 1995. 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, 1996, 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 II for
Variable Annuities as of December 31, 1996, 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, 1996 and 1995, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 7, 1997
-15-
<PAGE> 83
This page intentionally left blank.
<PAGE> 84
Independent Accountants
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
This report is prepared for the general information of contract owners and is
not an offer of shares of The Travelers Fund BD II for Variable Annuities or
Fund BD II's underlying funds. It should not be used in connection with any
offer except in conjunction with the Prospectuses for the Variable Annuity
products offered by The Travelers Life and Annuity Company and the Prospectuses
of the underlying funds, which collectively contain all pertinent information,
including the applicable sales commissions.
FNDBDII (Annual) (12-96) Printed in U.S.A.
<PAGE> 85
PART C
Other Information
Item 24. Financial Statements and Exhibits
(a) The financial statements of the Registrant and the Report of
Independent Accountants are contained in the Registrant's Annual Report
and are incorporated in the Statement of Additional Information by
reference. The financial statements of the Registrant are:
Statement of Assets and Liabilities as of December 31, 1996
Statement of Operations for the year ended December 31, 1996
Statement of Changes in Net Assets for the year ended December
31, 1996 and for the period November 8,
1995 (date operations commenced) to December 31, 1995.
Statement of Investments as of December 31, 1996
Notes to Financial Statements
The audited financial statements of The Travelers Life and Annuity
Company and the report of Independent Accountants are contained in the
Statement of Additional Information. These consolidated financial
statements include:
Statements of Income and Retained Earnings for the years
ended December 31, 1996, 1995 and 1994
Balance Sheet as of December, 1996 and 1995
Statement of Cash Flows for the years ended December 31, 1996,
1995 and 1994
Notes to Financial Statements
(b) Exhibits
1. Resolution of The Travelers Life and Annuity Company
Board of Directors authorizing the establishment of the
Registrant. (Incorporated herein by reference to Registration
Statement on Form N-4, File No. 33-58131, filed via Edgar on
March 17, 1995.)
2. Not Applicable.
3. Distribution and Management Agreement among the Registrant,
The Travelers Life and Annuity Company and Tower Square
Securities, Inc. (Incorporated herein by reference to Exhibit 3
to Pre-Effective Amendment No. 1 to the Registration Statement
on Form N-4, filed September 8, 1995.)
3(b). Form of Selling Agreement. (Incorporated herein by reference
to Exhibit 3(b) to Post-Effective Amendment No. 1 to the
Registration Statement on Form N-4, filed April 23, 1996.)
4. Variable Annuity Contracts. (Incorporated herein by reference
to Registration Statement on Form N-4, File No. 33-58131, filed
via Edgar on March 17, 1995.)
5. Form of Applications. (Incorporated herein by reference to
Pre-Effective Amendment No. 1 to the Registration Statement on
Form N-4, filed September 8, 1995.)
<PAGE> 86
6(a). Charter of The Travelers Life and Annuity Company, as
amended on April 10, 1990. (Incorporated herein by reference to
Registration Statement on Form N-4, File No. 33-58131, filed via
Edgar on March 17, 1995.)
6(b). By-Laws of The Travelers Life and Annuity Company, as amended
on October 20, 1994. (Incorporated herein by reference to
Registration Statement on Form N-4, File No. 33-58131, filed via
Edgar on March 17, 1995.)
7. None.
8. None.
9. Opinion of Counsel as to the legality of securities being
registered.
10(a). Consent of Coopers & Lybrand L.L.P., Independent Accountants.
10(b). Consent of KPMG Peat Marwick LLP, Independent Certified Public
Accountants.
11. None.
12. None.
13. Schedule for computation of each performance quotation -
Standardized and Non-Standardized.
15(a). Powers of Attorney authorizing Ernest J. Wright or Kathleen
A. McGah as signatory for Michael A. Carpenter, Jay S. Benet,
George C. Kokulis, Ian R. Stuart and Katherine M. Sullivan.
15(b). Powers of Attorney authorizing Jay S. Fishman or Ernest J.
Wright as a signatory for Michael A. Carpenter, Robert I. Lipp,
Charles O. Prince III, Marc P. Weill, and Irwin R. Ettinger.
(Incorporated herein by reference to Registration Statement on
Form N-4, File No. 33-58131, filed via Edgar on March 17, 1995.)
27. Financial Data Schedules
<PAGE> 87
Item 25. Directors and Officers of the Depositor
<TABLE>
<CAPTION>
Name and Principal Positions and Offices
Business Address with Depositor
- ---------------- --------------
<S> <C>
Michael A. Carpenter* Director, Chairman of the Board
President and Chief Executive Officer
Jay S. Benet* Director and Senior Vice President
George C. Kokulis* Director and Senior Vice President
Robert I. Lipp* Director
Ian R. Stuart* Director, Senior Vice President,
Chief Financial Officer, Chief
Accounting Officer and Controller
Katherine M. Sullivan* Director and Senior Vice President
and General Counsel
Marc P. Weill** Director and Senior Vice President
Stuart Baritz** Senior Vice President
Elizabeth C. Georgakopoulos* Senior Vice President
Barry Jacobson* Senior Vice President
Russell H. Johnson* Senior Vice President
Warren H. May* Senior Vice President
Christine M. Modie* Senior Vice President
David A. Tyson* Senior Vice President
F. Denney Voss* Senior Vice President
Paula Burton* Vice President
Charles N. Vest* Vice President and Actuary
Donald R. Munson, Jr.* Second Vice President
Ernest J. Wright* Vice President and Secretary
Kathleen A. McGah* Assistant Secretary and Counsel
</TABLE>
Principal Business Address:
* The Travelers Life and Annuity Company ** Travelers Group Inc.
One Tower Square 388 Greenwich Street
Hartford, Connecticut 06183 New York, New York 10013
<PAGE> 88
Item 26. Persons Controlled by or under Common Control with the Travelers Life
and Annuity Company or Registrant
OWNERSHIP OF THE TRAVELERS LIFE AND ANNUITY COMPANY
<TABLE>
<CAPTION>
Company State of Organization Ownership Principal Business
- ------- ---------------------- --------- ------------------
<S> <C> <C> <C>
Travelers Group Inc. Delaware Publicly Held ----------------
Associated Madison Companies Inc. Delaware 100.00 ----------------
PFS Services Inc. Georgia 100.00 ----------------
The Travelers Insurance Group, Inc. Connecticut 100.00 ----------------
The Travelers Insurance Company Connecticut 100.00 Insurance
The Travelers Life and Annuity Company Connecticut 100.00 Insurance
</TABLE>
- --------------------------------------------------------------------------------
PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
THE TRAVELERS LIFE AND ANNUITY COMPANY
<TABLE>
<CAPTION>
% of Voting
Securities
Owned Directly
State of or Indirectly by
Organization The Travelers Inc. Principal Business
------------ ----------------- ------------------
<S> <C> <C> <C>
AC Health Ventures, Inc. Delaware 100.00 Inactive
AMCO Biotech, Inc. Delaware 100.00 Inactive
Associated Madison Companies, Inc. Delaware 100.00 Holding company.
American National Life Insurance (T & C), Ltd. Turks and
Caicos Islands 100.00 Insurance
ERISA Corporation New York 100.00 Inactive
Mid-America Insurance Services, Inc. Georgia 100.00 Third party
administrator
National Marketing Corporation Pennsylvania 100.00 Inactive
PFS Services, Inc. Georgia 100.00 General partner and
holding company
The Travelers Insurance Group Inc. Connecticut 100.00 Holding company
</TABLE>
3/18/97
<PAGE> 89
<TABLE>
<CAPTION>
% of Voting
Securities
Owned Directly
State of or Indirectly by
Organization The Travelers Inc. Principal Business
------------ ----------------- ------------------
<S> <C> <C> <C>
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
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 Company Delaware 100.00 Real estate management
The Travelers Asset Funding Corporation Connecticut 100.00 Investment adviser
Travelers Capital Funding Corporation Connecticut 100.00 Furniture/equipment
The Travelers Insurance Company Connecticut 100.00 Insurance
The Plaza Corporation Connecticut 100.00 Holding company
The Copeland Companies New Jersey 100.00 Holding company
American Odyssey Funds Management,
Inc. New Jersey 100.00 Investment advisor
American Odyssey Funds, Inc. Maryland 100.00 Investment management
Copeland Administrative Services, Inc. New Jersey 100.00 Administrative
services
Copeland Associates, Inc. Delaware 100.00 Fixed/variable
annuities
Copeland Associates Agency of
Ohio, Inc. Ohio 99.00 Fixed/variable
annuities
Copeland Associates of Alabama,
Inc. Alabama 100.00 Fixed/variable
annuities
Copeland Associates of Montana,
Inc. Montana 100.00 Fixed/variable
annuities
Copeland Benefits Management
Company New Jersey 51.00 Investment marketing
Copeland Equities, Inc. New Jersey 100.00 Fixed/variable
annuities
H.C. Copeland Associates, Inc. of
Massachusetts Massachusetts 100.00 Fixed annuities
Copeland Financial Services, Inc. New Jersey 100.00 Investment advisory
services.
Copeland Healthcare Services, Inc. New Jersey 100.00 Life insurance
marketing
H.C. Copeland and Associates, Inc.
of Texas Texas 100.00 Fixed/variable
annuities
</TABLE>
2
<PAGE> 90
<TABLE>
<CAPTION>
% of Voting
Securities
Owned Directly
State of or Indirectly by
Organization The Travelers Inc. Principal Business
------------ ----------------- ------------------
<S> <C> <C> <C>
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
Tower Square Securities, Inc. Connecticut 100.00 Broker dealer
Travelers Asset Management International
Corporation New York 100.00 Investment adviser
Travelers Distribution Company Delaware 100.00
Travelers Investment Adviser, Inc. Delaware 100.00 Investment Advisor
Travelers/Net Plus Agency of Ohio, Inc. Ohio 100.00 Insurance agency
Travelers/Net Plus Insurance Agency, Inc. Massachusetts 100.00 Insurance agency
Travelers/Net Plus, Inc. Connecticut 100.00
The Travelers Life and Annuity Company Connecticut 100.00 Life insurance
Travelers Insurance Holdings Inc. Georgia 100.00 Holding company
AC RE, Ltd. Bermuda 100.00 Reinsurance
American Financial Life Insurance Company Texas 100.00 Insurance
Primerica Life Insurance Company Massachusetts 100.00 Life insurance
National Benefit Life Insurance
Company New York 100.00 Insurance
Primerica Financial Services
(Canada) Ltd. Canada 100.00 Holding company
PFSL Investments Canada Ltd. Canada 100.00 Mutual fund dealer
Primerica Financial Services Ltd. Canada 82.82 General agent
Primerica Life Insurance Company
of Canada Canada 100.00 Life insurance
The Travelers Insurance Corporation Proprietary
Limited Australia 100.00 Inactive
Travelers Canada Corporation Canada 100.00 Inactive
Travelers Mortgage Securities Corporation Delaware 100.00 Collateralized
obligations
Travelers of Ireland Limited Ireland 99.90 Data processing
Travelers Property Casualty Corp. Delaware 82.00 Holding company
The Aetna Casualty and Surety Company Connecticut 100.00 Insurance company
AE Development Group, Inc. Connecticut 100.00
Aetna Casualty & Surety Company of Canada Canada 100.00
Aetna Casualty and Surety Company of
America Connecticut 100.00 Insurance company
Aetna Casualty and Surety Company of
Illinois Illinois 100.00 Insurance company
</TABLE>
3
<PAGE> 91
<TABLE>
<CAPTION>
% of Voting
Securities
Owned Directly
State of or Indirectly by
Organization The Travelers Inc. Principal Business
------------ ----------------- ------------------
<S> <C> <C> <C>
Aetna Casualty Company of Connecticut Connecticut 100.00 Insurance company
Aetna Commercial Insurance Company Connecticut 100.00 Insurance company
Aetna Excess and Surplus Lines Company Connecticut 100.00 Insurance Company
Aetna Lloyds of Texas Insurance Company Texas 100.00 Insurance company
Aetna National Accounts U.K. Limited United Kingdom 100.00 Insurance company
Axia Services, Inc. New York 100.00
Farmington Casualty Company Connecticut 100.00 Insurance company
Farmington Management, Inc. Connecticut 100.00
Urban Diversified Properties, Inc. Connecticut 100.00
The Standard Fire Insurance Company Connecticut 100.00
AE Properties, Inc. California 100.00
Aetna Insurance Company Connecticut 100.00 Insurance company
Aetna Insurance Company of Illinois Illinois 100.00 Insurance company
Aetna Personal Security Insurance Company Connecticut 100.00 Insurance company
Community Rehabilitation Investment
Corporation Connecticut 100.00
The Automobile Insurance Company of
Hartford, Connecticut Connecticut 100.00 Insurance company
The Travelers Indemnity Company Connecticut 100.00 P-C insurance
Commercial Insurance Resources, Inc. Delaware 100.00 Holding company
Gulf Insurance Company Missouri 100.00 P-C insurance
Atlantic Insurance Company Texas 100.00 P-C insurance
Gulf Risk Services, Inc. Delaware 100.00 Claims/risk management
Gulf Underwriters Insurance
Company Missouri 100.00 P-C ins/surplus lines
Select Insurance Company Texas 100.00 P-C insurance
Countersignature Agency, Inc. Florida 100.00 Countersign ins
policies
First Floridian Auto and Home Insurance
Company Florida 100.00 Insurance company
First Trenton Indemnity Company New Jersey 100.00 P-C insurance
Laramia Insurance Agency, Inc. North Carolina 100.00 Flood insurance
Secure Affinity Agency, Inc. Delaware 100.00 P-C insurance agency
The Charter Oak Fire Insurance Company Connecticut 100.00 P-C insurance
The Parker Realty and Insurance
Agency, Inc. Vermont 58.00 Real estate
</TABLE>
4
<PAGE> 92
<TABLE>
<CAPTION>
% of Voting
Securities
Owned Directly
State of or Indirectly by
Organization The Travelers Inc. Principal Business
------------ ----------------- ------------------
<S> <C> <C>
The Phoenix Insurance Company Connecticut 100.00 P-C insurance
Constitution State Service Company Montana 100.00 Service company
The Travelers Indemnity Company of
America Georgia 100.00 P-C insurance
The Travelers Indemnity Company of
Connecticut Connecticut 100.00 Insurance
The Travelers Indemnity Company of
Illinois Illinois 100.00 P-C insurance
The Premier Insurance Company of
Massachusetts Massachusetts 100.00 Insurance
The Travelers Home and Marine Insurance
Company Indiana 100.00 P-C insurance
The Travelers Indemnity Company of
Missouri Missouri 100.00 P-C insurance
The Travelers Lloyds Insurance Company Texas 100.00 Non-life insurance
The Travelers Marine Corporation California 100.00 General insurance
brokerage
TI Home Mortgage Brokerage, Inc. Delaware 100.00 Mortgage brokerage
services
TravCo Insurance Company Indiana 100.00 P-C insurance
Travelers Bond Investments, Inc. Connecticut 100.00 Bond investments
Travelers General Agency of Hawaii, Inc. Hawaii 100.00 Insurance agency
Travelers Medical Management
Services Inc. Delaware 100.00 Managed care
Travelers Specialty Property Casualty
Company, Inc. Connecticut 100.00 Insurance management
Primerica Convention Services, Inc. Georgia 100.00
Primerica Finance Corporation Delaware 100.00 Holding company
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, Inc. Georgia 100.00 Mortgage loan broker
Primerica Financial Services, Inc. Nevada 100.00 General agency
Primerica Financial Services Agency of New York, Inc. New York 100.00 General agency
licensing
Primerica Financial Services Insurance Marketing of
Connecticut, Inc. Connecticut 100.00 General agency
licensing
Primerica Financial Services Insurance Marketing of
Idaho, Inc. Idaho 100.00 General agency
licensing
Primerica Financial Services Insurance Marketing of
Nevada, Inc. Nevada 100.00 General agency
licensing
Primerica Financial Services Insurance Marketing of
Pennsylvania, Inc. Pennsylvania 100.00 General agency
licensing
Primerica Financial Services Insurance Marketing of
the Virgin Islands, Inc. United States
Virgin Islands 100.00 General agency
licensing
Primerica Financial Services Insurance Marketing of
Wyoming, Inc. Wyoming 100.00 General agency
licensing
</TABLE>
5
<PAGE> 93
<TABLE>
<CAPTION>
% of Voting
Securities
Owned Directly
State of or Indirectly by
Organization The Travelers Inc. Principal Business
------------ ----------------- ------------------
<S> <C> <C> <C>
Primerica Financial Services Insurance Marketing, Inc. Delaware 100.00 General agency
licensing
Primerica Financial Services of Alabama, Inc. Alabama 100.00 General agency
licensing
Primerica Financial Services of Arizona, Inc. Arizona 100.00 General agency
licensing
Primerica Financial Services of Kentucky Inc. Kentucky 100.00 General agency
licensing
Primerica Financial Services of New Mexico, Inc. New Mexico 100.00 General agency
licensing
Primerica Insurance Agency of Massachusetts, Inc. Massachusetts 100.00 General agency
licensing
Primerica Insurance Marketing Services of
Puerto Rico, Inc. Puerto Rico 100.00 Insurance agency
Primerica Insurance Services of Louisiana, Inc. Louisiana 100.00 General agency
licensing
Primerica Insurance Services of Maryland, Inc. Maryland 100.00 General agency
licensing
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
Berg Associates New Jersey 100.00 Inactive
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 Consumer lending
CCC Fairways, Inc. Delaware 100.00 Investment company
Chesapeake Appraisal and Settlement Services Inc. Maryland 100.00 Appraisal/title
Chesapeake Appraisal and Settlement Services
Agency of Ohio Inc. Ohio 100.00 Appraisal/Title
City Loan Financial Services, Inc. Ohio 100.00 Direct loan
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
</TABLE>
6
<PAGE> 94
<TABLE>
<CAPTION>
% of Voting
Securities
Owned Directly
State of or Indirectly by
Organization The Travelers Inc. Principal Business
------------ ----------------- ------------------
<S> <C> <C> <C>
Commercial Credit Corporation [HI] Hawaii 100.00 Financial services
Commercial Credit Corporation [IA] Iowa 100.00 Consumer finance
Commercial Credit of Alabama, Inc. Delaware 100.00 Consumer lending
Commercial Credit of Mississippi, Inc. Delaware 100.00 Consumer finance
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, Inc. Kentucky 100.00 Insurance agency
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 [OK] Oklahoma 100.00 Consumer finance
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 (P&C) of
Mississippi, Inc. Mississippi 100.00 Insurance agency
Commercial Credit Insurance Agency of Alabama, Inc. Alabama 100.00 Insurance agency
Commercial Credit Insurance Agency of Hawaii, Inc. Hawaii 100.00 Insurance agency
Commercial Credit Insurance Agency of Kentucky, Inc. Kentucky 100.00 Insurance agency
Commercial Credit Insurance Agency of Massachusetts,
Inc. Massachusetts 100.00 Insurance agency
Commercial Credit Insurance Agency of Nevada, Inc. Nevada 100.00 Credit LH&A, P-C
insurance
Commercial Credit Insurance Agency of New
Mexico, Inc. New Mexico 100.00 Insurance agency/
Broker
Commercial Credit Insurance Agency of Ohio, Inc. Ohio 100.00 Insurance agency/
broker
Commercial Credit International, Inc. Delaware 100.00 Holding company
Commercial Credit International Banking Corporation Oregon 100.00 International lending
Commercial Credit Corporation CCC Limited Canada 100.00 Second mortgage loans
</TABLE>
7
<PAGE> 95
<TABLE>
<CAPTION>
% of Voting
Securities
Owned Directly
State of or Indirectly by
Organization The Travelers Inc. Principal Business
------------ ----------------- ------------------
<S> <C> <C> <C>
Commercial Credit Services do Brazil Ltda. Brazil 99.00 Inactive
Commercial Credit Services Belgium S.A. Belgium 100.00 Inactive
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 Georgetown Delaware 100.00 Consumer finance
Commercial Credit Plan Industrial Loan Company Virginia 100.00 Consumer finance
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 Inactive
Park Tower Holdings, Inc. Delaware 100.00 Holding company
CC Retail Services, Inc. Delaware 100.00 Leasing, financing
Troy Textiles, Inc. Delaware 100.00 Inactive
Commercial Credit Development Corporation Delaware 100.00 Direct loan
Myers Park Properties, Inc. Delaware 100.00 Inactive
Travelers Home Mortgage Services of Alabama, 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
</TABLE>
8
<PAGE> 96
<TABLE>
<CAPTION>
% of Voting
Securities
Owned Directly
State of or Indirectly by
Organization The Travelers Inc. Principal Business
------------ ----------------- ------------------
<S> <C> <C> <C>
CC Consumer Services of Alabama, Inc. Alabama 100.00 Financial services
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, Inc. Kentucky 100.00 Consumer finance
Commercial Credit Financial of West Virginia, Inc. West Virginia 100.00 Consumer finance
Commercial Credit Plan Consumer Discount Company Pennsylvania 100.00 Financial services
Commercial Credit Services of Kentucky, Inc. Kentucky 100.00 Financial services.
Travelers Home Mortgage 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 Holdings, Inc. Delaware 100.00 Investments
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
Smith Barney Corporate Trust Company Delaware 100.00 Trust company
Smith Barney Holdings Inc. Delaware 100.00 Holding company
Nextco Inc. Delaware 100.00 Purchasing
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
</TABLE>
9
<PAGE> 97
<TABLE>
<CAPTION>
% of Voting
Securities
Owned Directly
State of or Indirectly by
Organization The Travelers Inc. Principal Business
------------ ----------------- ------------------
<S> <C> <C> <C>
SB Cayman Holdings III Inc. Delaware 100.00 Holding company
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
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. VI Delaware 100.00 General partner
MLA 50 Corporation Delaware 100.00 Limited partner
MLA GP Corporation Delaware 100.00 General partner
Smith Barney Acquisition Corporation Delaware 100.00 Offshore fund adviser
Smith Barney Global Capital Management, Inc. Delaware 100.00 Investment management
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
Smith Barney Asia Inc. Delaware 100.00 Investment banking
Smith Barney Asset Management Group (Asia) Pte. Ltd. Singapore 100.00 Asset management
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 Limited Hong Kong 99.00 Commodities trading
Smith Barney Europe Holdings, Ltd. United Kingdom 100.00 Holding corp.
Smith Barney Europe, Ltd. United Kingdom 100.00 Securities brokerage
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
SBHU Life Agency, Inc. Delaware 100.00 Insurance brokerage
</TABLE>
10
<PAGE> 98
<TABLE>
<CAPTION>
% of Voting
Securities
Owned Directly
State of or Indirectly by
Organization The Travelers Inc. Principal Business
------------ ----------------- ------------------
<S> <C> <C> <C>
Robinson-Humphrey Insurance Services Inc. Georgia 100.00 Insurance brokerage
Robinson-Humphrey Insurance Services of
Alabama, Inc. Alabama 100.00 Insurance brokerage
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, Inc. Massachusetts 100.00 Insurance brokerage
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 Ohio, Inc. Ohio 100.00 Insurance brokerage
SBS Insurance Agency of South Dakota, Inc. South Dakota 100.00 Insurance brokerage
SBS Insurance Agency of Wyoming, Inc. Wyoming 100.00 Insurance brokerage
SBS Insurance Brokerage Agency of Arkansas, Inc. Arkansas 100.00 Insurance brokerage
SBS Insurance Brokers of Kentucky, Inc. Kentucky 100.00 Insurance brokerage
SBS Insurance Brokers of New Hampshire, Inc. New Hampshire 100.00 Insurance brokerage
SBS Insurance Brokers of North Dakota, Inc. North Dakota 100.00 Insurance brokerage
SBS Life Insurance Agency of Puerto Rico, Inc. Puerto Rico 100.00 Insurance brokerage
SLB Insurance Agency of Maryland, Inc. Maryland 100.00 Insurance brokerage
Smith Barney Life Agency Inc. Louisiana 100.00 Insurance brokerage
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 Islands 100.00 Holding company
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 Puerto Rico Inc. Puerto Rico 100.00 Broker dealer
</TABLE>
11
<PAGE> 99
<TABLE>
<CAPTION>
% of Voting
Securities
Owned Directly
State of or Indirectly by
Organization The Travelers Inc. Principal Business
------------ ----------------- ------------------
<S> <C> <C> <C>
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 Asset Management Co., Ltd. Japan 100.00 Investment advisor
Smith Barney Strategy Advisers Inc. Delaware 100.00 Investment management
E.C. Tactical Management S.A. Luxembourg 100.00 Investment management
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 S.A. France 100.00 Com. based asset
management
Smith Barney Securities Investment Consulting Co. Ltd. Taiwan 99.00 Investrment analysis
Smith Barney Shearson (Chile) Corredora de Seguro Limitada Chile 100.00 Insurance brokerage
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 Group Diversified Distribution Services, Inc. Delaware 100.00 Alternative marketing
Travelers Group Exchange, Inc. Delaware 100.00 Insurance agency
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>
12
<PAGE> 100
Item 27. Number of Contract Owners
As of March 1, 1997, 5,449 contract owners held qualified and non-qualified
contracts offered through 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> 101
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 for Variable Annuities
The Travelers Fund ABD for Variable Annuities
The Travelers Fund ABD II for Variable Annuities
The Travelers Separate Account QP for Variable Annuities
The Travelers Separate Account QP II for Variable Annuities
The Travelers Fund UL for Variable Life Insurance
The Travelers Fund UL II for Variable Life Insurance
The Travelers Variable Life Insurance Separate Account One
The Travelers Variable Life Insurance Separate Account Three
The Travelers Variable Life Insurance Separate Account Two
The Travelers Variable Life Insurance Separate Account Four
<TABLE>
<CAPTION>
(b) Name and Principal Positions and Offices
Business Address * With Underwriter
------------------ ----------------
<S> <C> <C>
Russell H. Johnson Chairman of the Board, Chief Executive Officer,
President and Chief Operating Officer
William F. Scully, III Member, Board of Directors,
Senior Vice President, Treasurer
and Chief Financial Officer
Joanne K. Russo Member, Board of Directors
Senior Vice President
Cynthia P. Macdonald Vice President, Chief Compliance Officer
and Assistant Secretary
Kathleen A. McGah General Counsel and Secretary
Jay S. Benet Member, Board of Directors
George C. Kokulis Member, Board of Directors
Warren H. May Member, Board of Directors
Donald R. Munson, Jr. Senior Vice President
Stuart L. Baritz Vice President
</TABLE>
<PAGE> 102
<TABLE>
<CAPTION>
(b) Name and Principal Positions and Offices
Business Address * With Underwriter
------------------ ----------------
<S> <C> <C>
Michael P. Kiley Vice President
Tracey Kiff-Judson Second Vice President
Robin A. Jones Second Vice President
Whitney F. Burr Second Vice President
Marlene M. Ibsen Second Vice President
John J. Williams, Jr. Director and Assistant Compliance Officer
Susan M. Cursio Director and Operations Manager
Dennis D. D'Angelo Director
Thomas P. Tooley Director
Nancy S. Waldrop Assistant Treasurer
</TABLE>
* Principal business address: One Tower Square, Hartford, Connecticut 06183
(c) Not Applicable.
Item 30. Location of Accounts and Records
(1) The Travelers Life and Annuity Company
One Tower Square
Hartford, Connecticut 06183
Item 31. Management Services
Not applicable.
Item 32. Undertakings
The undersigned Registrant hereby undertakes:
(a) To file a post-effective amendment to this registration statement as
frequently as is necessary to ensure that the audited financial
statements in the registration statement are never more than sixteen
months old for so long as payments under the variable annuity contracts
may be accepted;
(b) To include either (1) as part of any application to purchase a contract
offered by the prospectus, a space that an applicant can check to
request a Statement of Additional Information, or (2) a post card or
similar written communication affixed to or included in the prospectus
that the applicant can remove to send for a Statement of Additional
Information; and
(c) To deliver any Statement of Additional Information and any financial
statements required to be made available under this Form N-4 promptly
upon written or oral request.
The Company hereby represents:
(a) That the aggregate charges under the Contracts of the Registrant
described herein are reasonable in relation to the services rendered,
the expenses expected to be incurred, and the risks assumed by the
Company.
<PAGE> 103
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 this 29th day of April, 1997.
THE TRAVELERS FUND BD II FOR VARIABLE ANNUITIES
(Registrant)
THE TRAVELERS LIFE AND ANNUITY COMPANY
(Depositor)
By: *IAN R. STUART
--------------------------------------
Ian R. Stuart
Senior Vice President, Chief
Financial Officer, Chief
Accounting Officer and Controller
As required by the Securities Act of 1933, this post-effective amendment to this
registration statement has been signed by the following persons in the
capacities indicated on April 29, 1997.
<TABLE>
<CAPTION>
<S> <C>
*MICHAEL A. CARPENTER Director, Chairman of the Board, President
- ------------------------------
(Michael A. Carpenter) and Chief Executive Officer
*JAY S. BENET Director
- ------------------------------
(Jay S. Benet)
*GEORGE C. KOKULIS Director
- -----------------------------
(George C. Kokulis
*ROBERT I. LIPP Director
- ------------------------------
(Robert I. Lipp)
*IAN R. STUART Director, Senior Vice President, Chief
- ------------------------------
(Ian R. Stuart) Financial Officer, Chief Accounting Officer
and Controller
*KATHERINE M. SULLIVAN
- ------------------------------ Director, Senior Vice President and
(Katherine M. Sullivan) General Counsel
*MARC P. WEILL Director
- ------------------------------
(Marc P. Weill)
</TABLE>
*By: Ernest J. Wright, Attorney-in-Fact
<PAGE> 104
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
- --- ----------- ----------------
<S> <C> <C>
1. Resolution of The Travelers Life and Annuity
Company Board of Directors authorizing the
establishment of the Registrant. (Incorporated
herein by reference to Registration Statement on
Form N-4, File No. 33-58131, filed via Edgar
on March 17, 1995.)
3(a). Distribution and Management Agreement.
(Incorporated herein by reference to Exhibit 3 to
Pre-Effective Amendment No. 1 to the Registration
Statement on Form N-4, filed September 8, 1995.)
3(b). Form of Selling Agreement. (Incorporated herein by
reference to Exhibit 3(b) to Post-Effective Amendment
No. 1 to the Registration Statement on Form N-4,
filed April 23, 1996.)
4. Variable Annuity Contracts. (Incorporated herein
reference to Registration Statement on Form N-4,
File No. 33-58131, filed via Edgar on
March 17, 1995.)
5. Form of Applications. (Incorporated herein by
reference to Exhibit 5 to Pre-Effective Amendment
No. 1 to the Registration Statement on Form N-4,
filed September 8, 1995.)
6(a). Charter of The Travelers Life and Annuity Company,
as amended on April 10, 1990. (Incorporated
herein by reference to Registration Statement on
Form N-4, File No. 33-58131, filed via Edgar
on March 17, 1995.)
6(b). By-Laws of The Travelers Life and Annuity Company,
as amended on October 20, 1994. (Incorporated
herein by reference to Registration Statement on
Form N-4, File No. 33-58131, filed via Edgar on
March 17, 1995.)
9. Opinion of Counsel as to the legality of securities being Electronically
registered by Registrant.
10(a). Consent of Coopers & Lybrand L.L.P., Independent Electronically
Accountants.
10(b). Consent of KPMG Peat Marwick LLP, Independent Electronically
Certified Public Accountants.
</TABLE>
<PAGE> 105
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
- --- ----------- ----------------
<S> <C> <C>
13. Schedule for computation of each performance quotation - Electronically
Standardized and Non-Standardized.
15(a). Powers of Attorney authorizing Ernest J. Wright and Electronically
Kathleen A. McGah as signatory for Michael A. Carpenter,
Jay S. Benet, George C. Kokulis, Ian R. Stuart and
Katherine M. Sullivan.
15(b). Powers of Attorney authorizing Jay S. Fishman or
Ernest J. Wright as signatory for Michael A. Carpenter,
Robert I. Lipp, Charles O. Prince III, Marc P. Weill,
and Irwin R. Ettinger. (Incorporated herein by reference
to Registration Statement on Form N-4, File No. 33-58131,
filed via Edgar on March 17, 1995.)
27. Financial Data Schedules. Electronically
</TABLE>
<PAGE> 1
EXHIBIT 9
April 28, 1997
The Travelers Life and Annuity Company
The Travelers Fund BD II for Variable Annuities
One Tower Square
Hartford, Connecticut 06183
Gentlemen:
With reference to the Post-Effective Amendment No. 2 to the Registration
Statement on Form N-4 filed by The Travelers Life and Annuity Company and The
Travelers Fund BD II for Variable Annuities with the Securities and Exchange
Commission covering Flexible Premium Variable Annuity Contracts, I have examined
such documents and such law as I have considered necessary and appropriate, and
on the basis of such examination, it is my opinion that:
1. The Travelers Life and Annuity Company is duly organized and
existing under the laws of the State of Connecticut and has been
duly authorized to do business and to issue variable annuity
contracts by the Insurance Commissioner of the State of
Connecticut.
2. The Travelers Fund BD II for Variable Annuities is a duly
authorized and validly existing separate account established
pursuant to Section 38a-433 of the Connecticut General Statutes.
3. The variable annuity contracts covered by the above Registration
Statement, and all Post-Effective Amendments related thereto,
have been approved and authorized by the Insurance Commissioner
of the State of Connecticut and when issued will be valid, legal
and binding obligations of The Travelers Life and Annuity Company
and of The Travelers Fund BD II for Variable Annuities.
4. Assets of The Travelers Fund BD II for Variable Annuities are not
chargeable with liabilities arising out of any other business The
Travelers Life and Annuity Company may conduct.
I hereby consent to the filing of this opinion as an exhibit to the
above-referenced Post-Effective Amendment and to the reference to this opinion
under the caption "Legal Proceedings and Opinion" in the Prospectus constituting
a part of such Post-Effective Amendment.
Very truly yours,
Katherine M. Sullivan
General Counsel
The Travelers Insurance Company
<PAGE> 1
EXHIBIT (10a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Post-Effective Amendment
No. 2 to the Registration Statement of The Travelers Fund BD II for Variable
Annuities (the "Fund") on Form N-4 (File No. 33-58131) of our report dated
February 7, 1997, on our audit of the financial statements of the Fund, which
report is included in the Fund's Annual Report for the year ended December 31,
1996 which is incorporated by reference in this Post-Effective Amendment to the
Registration Statement. 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 24, 1997
<PAGE> 1
Exhibit 10(b)
Consent of Independent Certified Accountants
The Board of Directors
The Travelers Life and Annuity 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".
KPMG Peat Marwick LLP
Hartford, Connecticut
April 23, 1997
<PAGE> 1
EXHIBIT 13
THE TRAVELERS FUND BD II FOR VARIABLE ANNUITIES
SCHEDULE FOR COMPUTATION OF TOTAL RETURN CALCULATIONS
The standardized and nonstandardized average annual total returns are computed
according to the formula described below. A hypothetical initial investment of
$1,000 is applied to the fund, and then related to ending redeemable values as
of the most recent fiscal year end for the calendar year-to-date
(nonstandardized only), and over a 1-year, 3-year (nonstandardized only),
5-year, and 10-year period, or since inception if a fund has not been in
existence for one of the prescribed periods.
T = (ERV/P)1/n - 1 where:
T = average annual total return
P = a hypothetical initial payment of $1,000
n = the applicable year (1, 3, 5, 10) or portion thereof
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of each of the periods
Both the standardized and nonstandardized performance returns reflect the
deduction for the management fees and other expenses for a fund, the mortality
and expense risk charge and the sub-account administrative charge.
For Underlying Funds that were in existence prior to the date they became
available under Fund BD II, the standardized average total return and
nonstandardized total return quotations will show the investment performance
that such funds would have achieved (reduced by the applicable fees/charges) had
they been held under the Contract for the period quoted. The total return
quotations are based upon historical earnings and are not necessarily
representative of future performance. An Owner's Contract Value at redemption
may be more or less than original cost.
Standardized Method
The standardized returns take into consideration all fees and/or charges
applicable to the fund or contract.
Under the standardized method, the $30 annual contract administrative charge is
reflected in the calculation and is assumed to be deducted at the end of August
of each year. It is expressed as a percentage of assets based on the actual fees
collected divided by the average net assets for contracts sold under the
prospectus for each year for which performance is shown.
Each standardized average annual total return quotation assumes a total
redemption at the end of each period with the assessment of any applicable
contingent deferred sales charge (6%, 6%, 6%, 3%, 2%, 1%) at that time.
Nonstandardized Method
Nonstandardized returns do not reflect the deduction of any applicable
contingent deferred sales charge or the $30 annual 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.
For a Schedule of the Computation of the Total Return Quotations, both
Standardized and Nonstandardized, see attached.
<PAGE> 2
1 PAGE 1
<TABLE>
<CAPTION>
VINTAGE REGULAR DB STANDARDIZED PERFORMANCE
KASB - ALLIANCE GROWTH STOCK
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 ANNUAL FEE
---- ----- ------- ----- ------- ----- -------- ------ ----------
<S> <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 .000750
03/31/95 1.119181 .000160
06/30/95 1.271698 .000160
08/31/95 1.347942 -.19 -.142 .000160
09/29/95 1.380993 .000160
12/29/95 1.395807 1,000.00 716.431 .000160
03/29/96 1.481497 .000210
06/28/96 1.555539 .000210
08/30/96 1.513253 -.15 -.097 -.30 -.198 .000210
09/30/96 1.630989 .000210
12/31/96 1.784859 -.08 -.047 -.12 -.065 .000210
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR TEN YEAR
<S> <C> <C> <C>
ENDING UNITS 716.288 999.449
ACCOUNT VALUE 1,278.47 1,783.88
SURRENDER VALUE 1,218.47 1,723.88
TOTAL RETURN 21.85 % 72.39 % %
ANNUALIZED RETURN 23.97 % %
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
VINTAGE REGULAR DB STANDARDIZED PERFORMANCE
KBSB - MFS EMERGING GROWTH
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 ANNUAL FEE
---- ----- ------- ----- ------- ----- -------- ------ ----------
<S> <C> <C> <C> <C>
08/30/96 1.000000 1000.00 1000.000 .000210
12/31/96 1.005293 -.07 -.071 .000210
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR TEN YEAR
<S> <C> <C> <C>
ENDING UNITS 999.929
ACCOUNT VALUE 1,005.22
SURRENDER VALUE 945.22
TOTAL RETURN - 5.48 % % %
ANNUALIZED RETURN % %
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
VINTAGE REGULAR DB STANDARDIZED PERFORMANCE
KCSB - AIM CAPITAL APPRECIATION
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 ANNUAL FEE
---- ----- ------- ----- ------- ----- -------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
10/10/95 1.000000 1,000.00 1,000.000 .000160
12/29/95 .957880 1,000.00 1,043.972 .000160
03/29/96 1.007039 .000210
06/28/96 1.051683 .000210
08/30/96 1.013934 -.15 -.143 -.19 -.186 .000210
09/30/96 1.083106 .000210
12/31/96 1.087899 -.08 -.071 -.07 -.068 .000210
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR TEN YEAR
<S> <C> <C> <C>
ENDING UNITS 1,043.758 999.746
ACCOUNT VALUE 1,135.50 1,087.62
SURRENDER VALUE 1,075.50 1,027.62
TOTAL RETURN 7.55 % 2.76 % %
ANNUALIZED RETURN 2.24 % %
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
VINTAGE REGULAR DB STANDARDIZED PERFORMANCE
KESB - AMCAP GROWTH STOCK
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 ANNUAL FEE
---- ----- ------- ----- ------- ----- -------- ------ ----------
<S> <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 .000750
03/31/95 1.122009 .000160
06/30/95 1.247025 .000160
08/31/95 1.327909 -.19 -.144 .000160
09/29/95 1.361487 .000160
12/29/95 1.361968 1,000.00 734.232 .000160
03/29/96 1.464234 .000210
06/28/96 1.516666 .000210
08/30/96 1.476913 -.15 -.099 -.29 -.199 .000210
09/30/96 1.587437 .000210
12/31/96 1.654709 -.08 -.049 -.11 -.067 .000210
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR TEN YEAR
<S> <C> <C> <C>
ENDING UNITS 734.083 999.448
ACCOUNT VALUE 1,214.69 1,653.80
SURRENDER VALUE 1,154.69 1,593.80
TOTAL RETURN 15.47 % 59.38 % %
ANNUALIZED RETURN 20.22 % %
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
VINTAGE REGULAR DB STANDARDIZED PERFORMANCE
KFSB - TBC MANAGED INCOME
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 ANNUAL FEE
---- ----- ------- ----- ------- ----- -------- ------ ----------
<S> <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 .000750
03/31/95 1.030866 .000160
06/30/95 1.086949 .000160
08/31/95 1.091827 -.17 -.154 .000160
09/29/95 1.101802 .000160
12/29/95 1.141791 1,000.00 875.817 .000160
03/29/96 1.112265 .000210
06/28/96 1.110061 .000210
08/30/96 1.113044 -.14 -.125 -.23 -.208 .000210
09/30/96 1.131743 .000210
12/31/96 1.162515 -.07 -.061 -.08 -.069 .000210
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR TEN YEAR
<S> <C> <C> <C>
ENDING UNITS 875.631 999.438
ACCOUNT VALUE 1,017.93 1,161.86
SURRENDER VALUE 957.93 1,101.86
TOTAL RETURN -4.21 % 10.19 % %
ANNUALIZED RETURN 3.94 % %
</TABLE>
<PAGE> 7
<TABLE>
<CAPTION>
VINTAGE REGULAR DB STANDARDIZED PERFORMANCE
KGSB - GT GLOBAL STRATEGIC INCOME
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 ANNUAL FEE
---- ----- ------- ----- ------- ----- -------- ------ ----------
<S> <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 .000750
03/31/95 .971239 .000160
06/30/95 1.035311 .000160
08/31/95 1.036243 -.16 -.157 .000160
09/29/95 1.062162 .000160
12/29/95 1.120662 1,000.00 892.330 .000160
03/29/96 1.119396 .000210
06/28/96 1.166372 .000210
08/30/96 1.209982 -.15 -.121 -.24 -.195 .000210
09/30/96 1.251707 .000210
12/31/96 1.315783 -.08 -.061 -.09 -.068 .000210
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR TEN YEAR
<S> <C> <C> <C>
ENDING UNITS 892.148 999.434
ACCOUNT VALUE 1,173.87 1,315.04
SURRENDER VALUE 1,113.87 1,255.04
TOTAL RETURN 11.39 % 25.50 % %
ANNUALIZED RETURN 9.39 % %
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
VINTAGE REGULAR DB STANDARDIZED PERFORMANCE
KHSB - SB HIGH INCOME
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 ANNUAL FEE
---- ----- ------- ----- ------- ----- -------- ------ ----------
<S> <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 .000750
03/31/95 1.035328 .000160
06/30/95 1.082768 .000160
08/31/95 1.103795 -.17 -.153 .000160
09/29/95 1.115852 .000160
12/29/95 1.162368 1,000.00 860.313 .000160
03/29/96 1.186133 .000210
06/28/96 1.199365 .000210
08/30/96 1.214741 -.14 -.119 -.24 -.200 .000210
09/30/96 1.249875 .000210
12/31/96 1.299760 -.08 -.059 -.09 -.068 .000210
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR TEN YEAR
<S> <C> <C> <C>
ENDING UNITS 860.135 999.435
ACCOUNT VALUE 1,117.97 1,299.03
SURRENDER VALUE 1,057.97 1,239.03
TOTAL RETURN 5.80 % 23.90 % %
ANNUALIZED RETURN 8.85 % %
</TABLE>
<PAGE> 9
<TABLE>
<CAPTION>
VINTAGE REGULAR DB STANDARDIZED PERFORMANCE
KISB - SB INTERNATIONAL EQUITY
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 ANNUAL FEE
---- ----- ------- ----- ------- ----- -------- ------ ----------
<S> <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 .000750
03/31/95 .917500 .000160
06/30/95 1.011661 .000160
08/31/95 1.031348 -.17 -.161 .000160
09/29/95 1.050095 .000160
12/29/95 1.050280 1,000.00 952.127 .000160
03/29/96 1.137381 .000210
06/28/96 1.185893 .000210
08/30/96 1.175684 -.15 -.127 -.23 -.197 .000210
09/30/96 1.194989 .000210
12/31/96 1.221893 -.08 -.066 -.08 -.069 .000210
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR TEN YEAR
<S> <C> <C> <C>
ENDING UNITS 951.934 999.428
ACCOUNT VALUE 1,163.16 1,221.19
SURRENDER VALUE 1,103.16 1,161.19
TOTAL RETURN 10.32 % 16.12 % %
ANNUALIZED RETURN 6.07 % %
</TABLE>
<PAGE> 10
<TABLE>
<CAPTION>
VINTAGE REGULAR DB STANDARDIZED PERFORMANCE
KJSB - SB INCOME & GROWTH
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 ANNUAL FEE
---- ----- ------- ----- ------- ----- -------- ------ ----------
<S> <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 .000750
03/31/95 1.062254 .000160
06/30/95 1.135578 .000160
08/31/95 1.184840 -.18 -.149 .000160
09/29/95 1.217392 .000160
12/29/95 1.290871 1,000.00 774.671 .000160
03/29/96 1.361130 .000210
06/28/96 1.398072 .000210
08/30/96 1.380298 -.15 -.106 -.27 -.195 .000210
09/30/96 1.439629 .000210
12/31/96 1.528131 -.08 -.052 -.10 -.067 .000210
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR TEN YEAR
<S> <C> <C> <C>
ENDING UNITS 774.513 999.442
ACCOUNT VALUE 1,183.56 1,527.28
SURRENDER VALUE 1,123.56 1,467.28
TOTAL RETURN 12.36 % 46.73 % %
ANNUALIZED RETURN 16.33 % %
</TABLE>
<PAGE> 11
<TABLE>
<CAPTION>
VINTAGE REGULAR DB STANDARDIZED PERFORMANCE
KMSB - SB MONEY MARKET
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 ANNUAL FEE
---- ----- ------- ----- ------- ----- -------- ------ ----------
<S> <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 .000750
03/31/95 1.026068 .000160
06/30/95 1.037078 .000160
08/31/95 1.044340 -.16 -.157 .000160
09/29/95 1.047683 .000160
12/29/95 1.058195 1,000.00 945.005 .000160
03/29/96 1.067946 .000210
06/28/96 1.077435 .000210
08/30/96 1.084213 -.14 -.132 -.22 -.206 .000210
09/30/96 1.087590 .000210
12/31/96 1.097670 -.07 -.066 -.08 -.070 .000210
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR TEN YEAR
<S> <C> <C> <C>
ENDING UNITS 944.807 999.419
ACCOUNT VALUE 1,037.09 1,097.03
SURRENDER VALUE 977.09 1,037.03
TOTAL RETURN -2.29 % 3.70 % %
ANNUALIZED RETURN 1.45 % %
</TABLE>
<PAGE> 12
<TABLE>
<CAPTION>
VINTAGE REGULAR DB STANDARDIZED PERFORMANCE
KPSB - PUTNAM DIVERSIFIED INCOME
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 ANNUAL FEE
---- ----- ------- ----- ------- ----- -------- ------ ----------
<S> <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 .000750
03/31/95 1.055554 .000160
06/30/95 1.102322 .000160
08/31/95 1.112083 -.17 -.153 .000160
09/29/95 1.121984 .000160
12/29/95 1.170101 1,000.00 854.627 .000160
03/29/96 1.163590 .000210
06/28/96 1.172571 .000210
08/30/96 1.186659 -.14 -.120 -.24 -.203 .000210
09/30/96 1.215280 .000210
12/31/96 1.251655 -.07 -.059 -.09 -.069 .000210
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR TEN YEAR
<S> <C> <C> <C>
ENDING UNITS 854.449 999.428
ACCOUNT VALUE 1,069.47 1,250.94
SURRENDER VALUE 1,009.47 1,190.94
TOTAL RETURN .95 % 19.09 % %
ANNUALIZED RETURN 7.14 % %
</TABLE>
<PAGE> 13
<TABLE>
<CAPTION>
VINTAGE REGULAR DB STANDARDIZED PERFORMANCE
KRSB - SB TOTAL RETURN
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 ANNUAL FEE
---- ----- ------- ----- ------- ----- -------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
12/03/93 0.928042 1,000.00 1,077.537 .000750
08/31/94 1.046264 -.59 -.566 .000750
12/30/94 1.013044 .000750
03/31/95 1.078553 .000160
06/30/95 1.177547 .000160
08/31/95 1.205359 -.19 -.161 .000160
09/29/95 1.214969 .000160
12/29/95 1.250571 1,000.00 799.635 .000160
03/29/96 1.344771 .000210
06/28/96 1.395509 .000210
08/30/96 1.372228 -.15 -.108 -.29 -.213 .000210
09/30/96 1.406871 .000210
12/31/96 1.550156 -.08 -.053 -.11 -.071 .000210
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR TEN YEAR
<S> <C> <C> <C>
ENDING UNITS 799.474 1,076.526
ACCOUNT VALUE 1,239.31 1,668.78
SURRENDER VALUE 1,179.31 1,638.78
TOTAL RETURN 17.93 % 63.88 % %
ANNUALIZED RETURN 17.40 % %
</TABLE>
<PAGE> 14
<TABLE>
<CAPTION>
VINTAGE REGULAR DB STANDARDIZED PERFORMANCE
KSSB - SB PACIFIC BASIN
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 ANNUAL FEE
---- ----- ------- ----- ------- ----- -------- ------ ----------
<S> <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 .000750
03/31/95 .872934 .000160
06/30/95 .925707 .000160
08/31/95 .921901 -.16 -.169 .000160
09/29/95 .913159 .000160
12/29/95 .910187 1,000.00 1,098.675 .000160
03/29/96 .959518 .000210
06/28/96 .990012 .000210
08/30/96 .953795 -.14 -.151 -.20 -.206 .000210
09/30/96 .977259 .000210
12/31/96 .983484 -.08 -.077 -.07 -.070 .000210
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR TEN YEAR
<S> <C> <C> <C>
ENDING UNITS 1,098.447 999.411
ACCOUNT VALUE 1,080.31 982.90
SURRENDER VALUE 1,020.31 923.93
TOTAL RETURN 2.03 % -7.61 % %
ANNUALIZED RETURN -3.08 % %
</TABLE>
<PAGE> 15
<TABLE>
<CAPTION>
VINTAGE REGULAR DB STANDARDIZED PERFORMANCE
KTSB - MFS TOTAL RETURN
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 ANNUAL FEE
---- ----- ------- ----- ------- ----- -------- ------ ----------
<S> <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 .000750
03/31/95 1.035973 .000160
06/30/95 1.098888 .000160
08/31/95 1.124611 -.17 -.152 .000160
09/29/95 1.153454 .000160
12/29/95 1.215923 1,000.00 822.420 .000160
03/29/96 1.250053 .000210
06/28/96 1.268749 .000210
08/30/96 1.259081 -.14 -.114 -.25 -.199 .000210
09/30/96 1.298353 .000210
12/31/96 1.375981 -.08 -.056 -.09 -.068 .000210
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR TEN YEAR
<S> <C> <C> <C>
ENDING UNITS 822.251 999.435
ACCOUNT VALUE 1,131.40 1,375.20
SURRENDER VALUE 1,071.40 1,315.20
TOTAL RETURN 7.14 % 31.52 % %
ANNUALIZED RETURN 11.42 % %
</TABLE>
<PAGE> 16
1 PAGE 1
<TABLE>
<CAPTION>
VINTAGE ENHANCED DB STANDARDIZED PERFORMANCE
KASE - ALLIANCE GROWTH STOCK
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 ANNUAL FEE
---- ----- ------- ----- ------- ----- -------- ------ ----------
<S> <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 .000750
03/31/95 1.116740 .000160
06/30/95 1.268038 .000160
08/31/95 1.343428 -.19 -.142 .000160
09/29/95 1.376065 .000160
12/29/95 1.389856 1,000.00 719.499 .000160
03/29/96 1.474151 .000210
06/28/96 1.546748 .000210
08/30/96 1.503970 -.15 -.098 -.30 -.199 .000210
09/30/96 1.620599 .000210
12/31/96 1.772236 -.08 -.047 -.12 -.065 .000210
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR TEN YEAR
<S> <C> <C> <C>
ENDING UNITS 719.354 999.449
ACCOUNT VALUE 1,274.87 1,771.26
SURRENDER VALUE 1,214.87 1,711.26
TOTAL RETURN 21.49 % 71.13 % %
ANNUALIZED RETURN 23.61 % %
</TABLE>
<PAGE> 17
<TABLE>
<CAPTION>
VINTAGE ENHANCED DB STANDARDIZED PERFORMANCE
KBSE - MFS EMERGING GROWTH
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 ANNUAL FEE
---- ----- ------- ----- ------- ----- -------- ------ ----------
<S> <C> <C> <C> <C>
08/30/96 1.000000 1000.00 1000.000 .000210
12/31/96 1.004828 -.07 -.071 .000210
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR TEN YEAR
<S> <C> <C> <C>
ENDING UNITS 999.929
ACCOUNT VALUE 1,004.76
SURRENDER VALUE 944.76
TOTAL RETURN - 5.52 % % %
ANNUALIZED RETURN % %
</TABLE>
<PAGE> 18
<TABLE>
<CAPTION>
VINTAGE ENHANCED DB STANDARDIZED PERFORMANCE
KCSE - AIM CAPITAL APPRECIATION
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 ANNUAL FEE
---- ----- ------- ----- ------- ----- -------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
10/10/95 1.000000 1,000.00 1,000.000 .000160
12/29/95 .957290 1,000.00 1,044.616 .000160
03/29/96 1.005716 .000210
06/28/96 1.049570 .000210
08/30/96 1.011401 -.14 -.143 -.19 -.186 .000210
09/30/96 1.080143 .000210
12/31/96 1.084162 -.08 -.071 -.07 -.068 .000210
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR TEN YEAR
<S> <C> <C> <C>
ENDING UNITS 1,044.401 999.746
ACCOUNT VALUE 1,132.30 1,083.89
SURRENDER VALUE 1,072.30 1,023.89
TOTAL RETURN 7.23 % 2.39 % %
ANNUALIZED RETURN 1.94 % %
</TABLE>
<PAGE> 19
<TABLE>
<CAPTION>
VINTAGE ENHANCED DB STANDARDIZED PERFORMANCE
KESE - AMCAP GROWTH STOCK
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 ANNUAL FEE
---- ----- ------- ----- ------- ----- -------- ------ ----------
<S> <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 .000750
03/31/95 1.119575 .000160
06/30/95 1.243451 .000160
08/31/95 1.323473 -.19 -.144 .000160
09/29/95 1.356636 .000160
12/29/95 1.356166 1,000.00 737.373 .000160
03/29/96 1.456984 .000210
06/28/96 1.508096 .000210
08/30/96 1.467856 -.15 -.100 -.29 -.200 .000210
09/30/96 1.577330 .000210
12/31/96 1.643013 -.08 -.049 -.11 -.067 .000210
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR TEN YEAR
<S> <C> <C> <C>
ENDING UNITS 737.223 999.448
ACCOUNT VALUE 1,211.27 1,642.11
SURRENDER VALUE 1,151.27 1,582.11
TOTAL RETURN 15.13 % 58.21 % %
ANNUALIZED RETURN 19.87 % %
</TABLE>
<PAGE> 20
<TABLE>
<CAPTION>
VINTAGE ENHANCED DB STANDARDIZED PERFORMANCE
KFSE - TBC MANAGED INCOME
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 ANNUAL FEE
---- ----- ------- ----- ------- ----- -------- ------ ----------
<S> <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 .000750
03/31/95 1.028680 .000160
06/30/95 1.083893 .000160
08/31/95 1.088242 -.17 -.154 .000160
09/29/95 1.097942 .000160
12/29/95 1.136987 1,000.00 879.518 .000160
03/29/96 1.106817 .000210
06/28/96 1.103859 .000210
08/30/96 1.106293 -.14 -.126 -.23 -.208 .000210
09/30/96 1.124607 .000210
12/31/96 1.154371 -.07 -.061 -.08 -.069 .000210
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR TEN YEAR
<S> <C> <C> <C>
ENDING UNITS 879.331 999.437
ACCOUNT VALUE 1,015.07 1,153.72
SURRENDER VALUE 955.07 1,093.72
TOTAL RETURN -4.49 % 9.37 % %
ANNUALIZED RETURN 3.63 % %
</TABLE>
<PAGE> 21
<TABLE>
<CAPTION>
VINTAGE ENHANCED DB STANDARDIZED PERFORMANCE
KGSE - GT GLOBAL STRATEGIC INCOME
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 ANNUAL FEE
---- ----- ------- ----- ------- ----- -------- ------ ----------
<S> <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 .000750
03/31/95 .969137 .000160
06/30/95 1.032348 .000160
08/31/95 1.032781 -.16 -.158 .000160
09/29/95 1.058379 .000160
12/29/95 1.115890 1,000.00 896.146 .000160
03/29/96 1.113849 .000210
06/28/96 1.159794 .000210
08/30/96 1.202577 -.15 -.122 -.23 -.195 .000210
09/30/96 1.243750 .000210
12/31/96 1.306499 -.08 -.061 -.09 -.068 .000210
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR TEN YEAR
<S> <C> <C> <C>
ENDING UNITS 895.963 999.434
ACCOUNT VALUE 1,170.57 1,305.76
SURRENDER VALUE 1,110.57 1,245.76
TOTAL RETURN 11.06 % 24.58 % %
ANNUALIZED RETURN 9.07 % %
</TABLE>
<PAGE> 22
<TABLE>
<CAPTION>
VINTAGE ENHANCED DB STANDARDIZED PERFORMANCE
KHSE - SB HIGH INCOME
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 ANNUAL FEE
---- ----- ------- ----- ------- ----- -------- ------ ----------
<S> <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 .000750
03/31/95 1.033081 .000160
06/30/95 1.079664 .000160
08/31/95 1.100100 -.17 -.153 .000160
09/29/95 1.111869 .000160
12/29/95 1.157405 1,000.00 864.002 .000160
03/29/96 1.180245 .000210
06/28/96 1.192578 .000210
08/30/96 1.207282 -.14 -.119 -.24 -.201 .000210
09/30/96 1.241907 .000210
12/31/96 1.290563 -.08 -.059 -.09 -.068 .000210
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR TEN YEAR
<S> <C> <C> <C>
ENDING UNITS 863.823 999.434
ACCOUNT VALUE 1,114.82 1,289.83
SURRENDER VALUE 1,054.82 1,229.83
TOTAL RETURN 5.48 % 22.98 % %
ANNUALIZED RETURN 8.52 % %
</TABLE>
<PAGE> 23
<TABLE>
<CAPTION>
VINTAGE ENHANCED DB STANDARDIZED PERFORMANCE
KISE - SB INTERNATIONAL EQUITY
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 ANNUAL FEE
---- ----- ------- ----- ------- ----- -------- ------ ----------
<S> <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 .000750
03/31/95 .915495 .000160
06/30/95 1.008743 .000160
08/31/95 1.027883 -.17 -.162 .000160
09/29/95 1.046336 .000160
12/29/95 1.045789 1,000.00 956.216 .000160
03/29/96 1.131726 .000210
06/28/96 1.179183 .000210
08/30/96 1.168464 -.15 -.128 -.23 -.197 .000210
09/30/96 1.187367 .000210
12/31/96 1.213242 -.08 -.066 -.08 -.069 .000210
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR TEN YEAR
<S> <C> <C> <C>
ENDING UNITS 956.022 999.427
ACCOUNT VALUE 1,159.89 1,212.55
SURRENDER VALUE 1,099.89 1,152.55
TOTAL RETURN 9.99 % 15.25 % %
ANNUALIZED RETURN 5.76 % %
</TABLE>
<PAGE> 24
<TABLE>
<CAPTION>
VINTAGE ENHANCED DB STANDARDIZED PERFORMANCE
KJSE - SB INCOME & GROWTH
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 ANNUAL FEE
---- ----- ------- ----- ------- ----- -------- ------ ----------
<S> <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 .000750
03/31/95 1.059933 .000160
06/30/95 1.132304 .000160
08/31/95 1.180863 -.18 -.149 .000160
09/29/95 1.213038 .000160
12/29/95 1.285355 1,000.00 777.995 .000160
03/29/96 1.354368 .000210
06/28/96 1.390158 .000210
08/30/96 1.371823 -.15 -.106 -.27 -.195 .000210
09/30/96 1.430452 .000210
12/31/96 1.517309 -.08 -.052 -.10 -.067 .000210
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR TEN YEAR
<S> <C> <C> <C>
ENDING UNITS 777.837 999.442
ACCOUNT VALUE 1,180.22 1,516.46
SURRENDER VALUE 1,120.22 1,456.46
TOTAL RETURN 12.02 % 45.65 % %
ANNUALIZED RETURN 15.99 % %
</TABLE>
<PAGE> 25
<TABLE>
<CAPTION>
VINTAGE ENHANCED DB STANDARDIZED PERFORMANCE
KMSE - SB MONEY MARKET
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 ANNUAL FEE
---- ----- ------- ----- ------- ----- -------- ------ ----------
<S> <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 .000750
03/31/95 1.023835 .000160
06/30/95 1.034101 .000160
08/31/95 1.040838 -.16 -.157 .000160
09/29/95 1.043936 .000160
12/29/95 1.053676 1,000.00 949.058 .000160
03/29/96 1.062646 .000210
06/28/96 1.071332 .000210
08/30/96 1.077557 -.14 -.132 -.22 -.206 .000210
09/30/96 1.080658 .000210
12/31/96 1.089905 -.07 -.067 -.08 -.070 .000210
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR TEN YEAR
<S> <C> <C> <C>
ENDING UNITS 948.859 999.419
ACCOUNT VALUE 1,034.17 1,089.27
SURRENDER VALUE 974.17 1,029.27
TOTAL RETURN -2.58 % 2.93 % %
ANNUALIZED RETURN 1.14 % %
</TABLE>
<PAGE> 26
<TABLE>
<CAPTION>
VINTAGE ENHANCED DB STANDARDIZED PERFORMANCE
KPSE - PUTNAM DIVERSIFIED INCOME
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 ANNUAL FEE
---- ----- ------- ----- ------- ----- -------- ------ ----------
<S> <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 .000750
03/31/95 1.053251 .000160
06/30/95 1.099150 .000160
08/31/95 1.108356 -.17 -.153 .000160
09/29/95 1.117977 .000160
12/29/95 1.165112 1,000.00 858.287 .000160
03/29/96 1.157818 .000210
06/28/96 1.165934 .000210
08/30/96 1.179366 -.14 -.120 -.24 -.204 .000210
09/30/96 1.207525 .000210
12/31/96 1.242792 -.07 -.059 -.09 -.069 .000210
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR TEN YEAR
<S> <C> <C> <C>
ENDING UNITS 858.107 999.427
ACCOUNT VALUE 1,066.45 1,242.08
SURRENDER VALUE 1,006.45 1,182.08
TOTAL RETURN .64 % 18.21 % %
ANNUALIZED RETURN 6.82 % %
</TABLE>
<PAGE> 27
<TABLE>
<CAPTION>
VINTAGE ENHANCED DB STANDARDIZED PERFORMANCE
KRSE - SB TOTAL RETURN
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 ANNUAL FEE
---- ----- ------- ----- ------- ----- -------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
12/03/93 0.930558 1,000.00 1,074.624 .000750
08/31/94 1.046923 -.59 -.565 .000750
08/31/95 1.202763 -.19 -.161 .000160
09/29/95 1.212081 .000160
12/29/95 1.246730 1,000.00 802.098 .000160
03/29/96 1.339712 .000210
06/28/96 1.389285 .000210
08/30/96 1.365451 -.15 -.108 -.29 -.213 .000210
09/30/96 1.399592 .000210
12/31/96 1.541049 -.08 -.054 -.11 -.071 .000210
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR TEN YEAR
<S> <C> <C> <C>
ENDING UNITS 801.937 1,073.614
ACCOUNT VALUE 1,235.82 1,654.49
SURRENDER VALUE 1,175.82 1,624.49
TOTAL RETURN 17.58 % 62.45 % %
ANNUALIZED RETURN 17.06 % %
</TABLE>
<PAGE> 28
<TABLE>
<CAPTION>
VINTAGE ENHANCED DB STANDARDIZED PERFORMANCE
KSSE - SB PACIFIC BASIN
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 ANNUAL FEE
---- ----- ------- ----- ------- ----- -------- ------ ----------
<S> <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 .000750
03/31/95 .871049 .000160
06/30/95 .923065 .000160
08/31/95 .918828 -.16 -.170 .000160
09/29/95 .909910 .000160
12/29/95 .906317 1,000.00 1,103.367 .000160
03/29/96 .954774 .000210
06/28/96 .984434 .000210
08/30/96 .947960 -.14 -.152 -.20 -.207 .000210
09/30/96 .971048 .000210
12/31/96 .976546 -.08 -.077 -.07 -.070 .000210
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR TEN YEAR
<S> <C> <C> <C>
ENDING UNITS 1,103.138 999.410
ACCOUNT VALUE 1,077.26 975.97
SURRENDER VALUE 1,017.26 917.41
TOTAL RETURN 1.73 % -8.26 % %
ANNUALIZED RETURN -3.35 % %
</TABLE>
<PAGE> 29
<TABLE>
<CAPTION>
VINTAGE ENHANCED DB STANDARDIZED PERFORMANCE
KTSE - MFS TOTAL RETURN
PRDT PRICE DOLLAR1 UNIT1 DOLLAR5 UNIT5 DOLLAR10 UNIT10 ANNUAL FEE
---- ----- ------- ----- ------- ----- -------- ------ ----------
<S> <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 .000750
03/31/95 1.033719 .000160
06/30/95 1.095736 .000160
08/31/95 1.120855 -.17 -.153 .000160
09/29/95 1.149344 .000160
12/29/95 1.210749 1,000.00 825.935 .000160
03/29/96 1.243863 .000210
06/28/96 1.261583 .000210
08/30/96 1.251368 -.14 -.115 -.25 -.199 .000210
09/30/96 1.290091 .000210
12/31/96 1.366261 -.08 -.056 -.09 -.068 .000210
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR FIVE YEAR TEN YEAR
<S> <C> <C> <C>
ENDING UNITS 825.765 999.434
ACCOUNT VALUE 1,128.21 1,365.49
SURRENDER VALUE 1,068.21 1,305.49
TOTAL RETURN 6.82 % 30.55 % %
ANNUALIZED RETURN 11.09 % %
</TABLE>
<PAGE> 30
EXHIBIT 13
SPOTLIGHT ON VINTAGE ANNUITY - PERFORMANCE UPDATE AS OF 12/31/96
FNAME
-----
ALLIANCE GROWTH STOCK
UNIT VALUE RETURN
---------- ------
INCEPTION (06/20/94 ): 1.000000 25.68
12/86:
12/91:
12/93:
12/95: 1.395807 27.87
CURRENT 12/96: 1.784859
AMCAP GROWTH STOCK
UNIT VALUE RETURN
---------- ------
INCEPTION (06/21/94 ): 1.000000 22.01
12/86:
12/91:
12/93:
12/95: 1.361968 21.49
CURRENT 12/96: 1.654709
TBC MANAGED INCOME
UNIT VALUE RETURN
---------- ------
INCEPTION (06/28/94 ): 1.000000 6.18
12/86:
12/91:
12/93:
12/95: 1.141791 1.82
CURRENT 12/96: 1.162515
GT GLOBAL STRATEGIC INCOME
UNIT VALUE RETURN
---------- ------
INCEPTION (06/21/94 ): 1.000000 11.45
12/86:
12/91:
12/93:
12/95: 1.120662 17.41
CURRENT 12/96: 1.315783
SB HIGH INCOME
<PAGE> 31
FNAME
-----
UNIT VALUE RETURN
---------- ------
INCEPTION (06/22/94 ): 1.000000 10.92
12/86:
12/91:
12/93:
12/95: 1.162368 11.82
CURRENT 12/96: 1.299760
SB INTERNATIONAL EQUITY
UNIT VALUE RETURN
---------- ------
INCEPTION (06/20/94 ): 1.000000 8.23
12/86:
12/91:
12/93:
12/95: 1.050280 16.34
CURRENT 12/96: 1.221893
SB INCOME & GROWTH
UNIT VALUE RETURN
---------- ------
INCEPTION (06/20/94 ): 1.000000 18.21
12/86:
12/91:
12/93:
12/95: 1.290871 18.38
CURRENT 12/96: 1.528131
SB MONEY MARKET
UNIT VALUE RETURN
---------- ------
INCEPTION (06/20/94 ): 1.000000 3.75
12/86:
12/91:
12/93:
12/95: 1.058195 3.73
CURRENT 12/96: 1.097670
PUTNAM DIVERSIFIED INCOME
UNIT VALUE RETURN
---------- ------
INCEPTION (06/20/94 ): 1.000000 9.26
12/86:
12/91:
12/93:
12/95: 1.170101 6.97
CURRENT 12/96: 1.251655
SB PACIFIC BASIN
<PAGE> 32
FNAME
-----
UNIT VALUE RETURN
---------- ------
INCEPTION (06/21/94 ): 1.000000 -.66
12/86:
12/91:
12/93:
12/95: .910187 8.05
CURRENT 12/96: .983484
MFS TOTAL RETURN
UNIT VALUE RETURN
---------- ------
INCEPTION (06/20/94 ): 1.000000 13.42
12/86:
12/91:
12/93:
12/95: 1.215923 13.16
CURRENT 12/96: 1.375981
SB TOTAL RETURN
UNIT VALUE RETURN
---------- ------
INCEPTION (11/21/94 ): 1.000000 23.06
12/86:
12/91:
12/93:
12/95: 1.250571 23.96
CURRENT 12/96: 1.550156
AIM CAPITAL APPRECIATION
UNIT VALUE RETURN
---------- ------
INCEPTION (10/10/95 ): 1.000000 7.11
12/86:
12/91:
12/93:
12/95: .957880 13.57
CURRENT 12/96: 1.087899
<PAGE> 1
EXHIBIT 15
THE TRAVELERS FUND BD II FOR VARIABLE ANNUITIES
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, MICHAEL A. CARPENTER of Greenwich, Connecticut,
Chairman of the Board, President and Chief Executive Officer of The Travelers
Life and Annuity Company (hereinafter the "Company"), do hereby make, constitute
and appoint ERNEST J. WRIGHT, Secretary of said Company, and KATHLEEN A. McGAH,
Assistant Secretary of said Company, or either one of them acting alone, my true
and lawful attorney-in-fact, for me, and in my name, place and stead, to sign
registration statements on behalf of said Company on Form N-4 or other
appropriate form under the Securities Act of 1933 and the Investment Company Act
of 1940 for The Travelers Fund BD II for Variable Annuities, a separate account
of the Company dedicated specifically to the funding of variable annuity
contracts to be offered by the Company, and further, to sign any and all
amendments thereto, including post-effective amendments, that may be filed by
the Company on behalf of said registrant.
IN WITNESS WHEREOF, I have hereunto set my hand this 10th day
of June, 1996.
Michael A. Carpenter
Chairman of the Board, President
and Chief Executive Officer
The Travelers Life and Annuity Company
<PAGE> 2
THE TRAVELERS FUND BD II FOR VARIABLE ANNUITIES
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, JAY S. BENET of West Hartford, Connecticut, a director
of The Travelers Life and Annuity Company (hereinafter the "Company"), do hereby
make, constitute and appoint ERNEST J. WRIGHT, Secretary of said Company, and
KATHLEEN A. McGAH, Assistant Secretary of said Company, or either one of them
acting alone, my true and lawful attorney-in-fact, for me, and in my name, place
and stead, to sign registration statements on behalf of said Company on Form N-4
or other appropriate form under the Securities Act of 1933 and the Investment
Company Act of 1940 for The Travelers Fund BD II 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 July, 1996.
Jay S. Benet
Director
The Travelers Insurance Company
<PAGE> 3
THE TRAVELERS FUND BD II FOR VARIABLE ANNUITIES
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, GEORGE C. KOKULIS of Simsbury, Connecticut, a director
of The Travelers Life and Annuity Company (hereinafter the "Company"), do hereby
make, constitute and appoint ERNEST J. WRIGHT, Secretary of said Company, and
KATHLEEN A. McGAH, Assistant Secretary of said Company, or either one of them
acting alone, my true and lawful attorney-in-fact, for me, and in my name, place
and stead, to sign registration statements on behalf of said Company on Form N-4
or other appropriate form under the Securities Act of 1933 and the Investment
Company Act of 1940 for The Travelers Fund BD II 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 July, 1996.
George C. Kokulis
Director
The Travelers Insurance Company
<PAGE> 4
THE TRAVELERS FUND BDII FOR VARIABLE ANNUITIES
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, IAN R. STUART of East Hampton, Connecticut, Director, Senior Vice
President, Chief Financial Officer, Chief Accounting Officer and Controller of
The Travelers Life and Annuity Company (hereinafter the "Company"), do hereby
make, constitute and appoint ERNEST J. WRIGHT, Secretary of said Company,
and KATHLEEN A. McGAH, Assistant Secretary of said Company, or either one of
them acting alone, my true and lawful attorney-in-fact, for me, and in my name,
place and stead, to sign registration statements on behalf of said Company on
Form N-4 or other appropriate form under the Securities Act of 1933 for The
Travelers Fund BDII for Variable Annuities, a separate account of the Company
dedicated specifically to the funding of variable annuity contracts to be
offered by the Company, and further, to sign any and all amendments thereto,
including post-effective amendments, that may be filed by the Company on behalf
of said registrant.
IN WITNESS WHEREOF, I have hereunto set my hand this 10th day
of February, 1997.
Ian R. Stuart
Director, Senior Vice President,
Chief Financial Officer,
Chief Accounting Officer and Controller
The Travelers Life and Annuity Company
<PAGE> 5
THE TRAVELERS FUND BDII FOR VARIABLE ANNUITIES
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, KATHERINE M. SULLIVAN of Longmeadow, Massachusetts, Director, Senior
Vice President and General Counsel of The Travelers Life and Annuity
Company (hereinafter the "Company"), do hereby make, constitute and appoint
ERNEST J. WRIGHT, Secretary of said Company, and KATHLEEN A. McGAH, Assistant
Secretary of said Company, or either one of them acting alone, my true and
lawful attorney-in-fact, for me, and in my name, place and stead, to sign
registration statements on behalf of said Company on Form N-4 or other
appropriate form under the Securities Act of 1933 for The Travelers Fund BD II
for Variable Annuities, a separate account of the Company dedicated
specifically to the funding of variable annuity contracts to be offered by the
Company, and further, to sign any and all amendments thereto, including
post-effective amendments, that may be filed by the Company on behalf of said
registrant.
IN WITNESS WHEREOF, I have hereunto set my hand this 10th day
of June, 1996.
Katherine M. Sullivan
Director, Senior Vice President
and General Counsel
The Travelers Life and Annuity
Company
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000941729
<NAME> FUND BD II
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 253,157,584
<INVESTMENTS-AT-VALUE> 267,038,390
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</TABLE>
