<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. 3
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 3
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, 1998 pursuant to paragraph (b) of Rule 485.
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485.
[ ] on __________ pursuant to paragraph (a)(1) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE> 2
THE TRAVELERS FUND BD II FOR VARIABLE ANNUITIES
Cross-Reference Sheet
Form N-4
<TABLE>
<CAPTION>
ITEM
NO. CAPTION IN PROSPECTUS
- --- ---------------------
<S> <C>
1. Cover Page Prospectus
2. Definitions Glossary of Special Terms
3. Synopsis Prospectus Summary
4. Condensed Financial Information Condensed Financial Information
5. General Description of Registrant, The Insurance Company; The Separate
Depositor, and Portfolio Companies Account and the Underlying Funds
6. Deductions 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
CONTRACT PROFILE (BD II)
MAY 1, 1998
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 payment 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 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.
The Contract, like all deferred variable annuity contracts, has two phases: the
accumulation phase and the income phase. During the accumulation phase, under a
qualified contract, your pre-tax 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 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 annuity
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 begin to
receive payments, it cannot be changed. During the income phase, you have the
same investment choices you had during the accumulation phase. If amounts are
directed to the variable 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.)
<PAGE> 5
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.
4. INVESTMENT OPTIONS. You can direct your money into the Fixed Account or any
or all of the following variable funding options. The funding options 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:
DREYFUS VARIABLE INVESTMENT FUND
Small Cap Portfolio
GREENWICH STREET SERIES FUND
Total Return Portfolio
SALOMON BROTHERS VARIABLE SERIES FUNDS, INC.
Salomon Brothers Variable
Total Return Fund
Salomon Brothers Variable Investors Fund
SMITH BARNEY CONCERT ALLOCATION SERIES, INC.
Concert Select Balanced Portfolio
Concert Select Growth Portfolio
TRAVELERS SERIES FUND, INC.
AIM Capital Appreciation Portfolio
Alliance Growth Portfolio
G.T. Global Strategic Income Portfolio
MFS Total Return Portfolio
Putnam Diversified Income Portfolio
Smith Barney High Income Portfolio
TRAVELERS SERIES FUND, INC., CONTINUED
Smith Barney International Equity Portfolio
Smith Barney Large Capitalization
Growth Portfolio
Smith Barney Large Cap
Value Portfolio
Smith Barney Money Market Portfolio
Smith Barney Pacific Basin Portfolio
TBC Managed Income Portfolio
Van Kampen American Capital Enterprise
Portfolio
THE TRAVELERS SERIES TRUST
Convertible Bond Portfolio
Disciplined Mid Cap Stock Portfolio
Disciplined Small Cap Stock Portfolio
MFS Emerging Growth Portfolio
MFS Research Portfolio
Strategic Stock 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 has a charge for investment
management and other expenses. The charges, which vary by funding option, range
from 0.65% to 1.38% annually, of the average daily net asset balance of the
funding option. For the Select Portfolios, the management fee is 0.35% plus a
pro rata portion of the management fees and other expenses of the underlying
funds.
If you withdraw amounts under the contract, the Company may deduct a withdrawal
charge (0% to 6%) of the amount of purchase payments withdrawn 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
"Total Annual Insurance Charges" column includes the total of the mortality and
expense risk ("insurance") charge for the standard death benefit and the
enhanced death benefit and, for each, the sub-account administrative charges,
and reflects the $30 annual contract charge as .018%. The "Total Annual Funding
Option Expenses" column reflects the investment charges for each portfolio. The
ii
<PAGE> 6
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 pro rata underlying funding
option expenses. Such expenses range from .50% to 1.29%, as described fully in
the Fund prospectus. 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 expenses for the Enhanced Death Benefit.
<TABLE>
<CAPTION>
TOTAL EXAMPLES: TOTAL
TOTAL ANNUAL ANNUAL EXPENSES
ANNUAL FUNDING TOTAL AT END OF:
INSURANCE OPTION ANNUAL -----------------
PORTFOLIO NAME CHARGES EXPENSES CHARGES 1 YEAR 10 YEARS
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
DREYFUS VARIABLE INVESTMENT FUND
Small Cap Portfolio.......................... (a) 1.19% 0.78% 1.97% 80 229
(b) 1.47% 0.78% 2.25% 83 258
GREENWICH STREET SERIES FUND
Total Return Portfolio....................... (a) 1.19% 0.79% 1.98% 80 230
(b) 1.47% 0.79% 2.26% 83 259
SALOMON BROTHERS VARIABLE SERIES FUNDS, INC.
Salomon Brothers Variable Total Return
Fund....................................... (a) 1.19% 1.00% 2.19% 82 252
(b) 1.47% 1.00% 2.47% 85 280
Salomon Brothers Variable Investors Fund..... (a) 1.19% 1.00% 2.19% 82 252
(b) 1.47% 1.00% 2.47% 85 280
SMITH BARNEY CONCERT ALLOCATION SERIES, INC.
Concert Select Balanced Portfolio............ (a) 1.19% 1.10% 2.29% 83 262
(b) 1.47% 1.10% 2.57% 86 290
Concert Select Conservative Portfolio*....... (a) 1.19% 1.06% 2.25% 83 258
(b) 1.47% 1.06% 2.53% 86 286
Concert Select Growth Portfolio.............. (a) 1.19% 1.15% 2.34% 84 267
(b) 1.47% 1.15% 2.62% 86 295
Concert Select High Growth Portfolio*........ (a) 1.19% 1.24% 2.43% 85 276
(b) 1.47% 1.24% 2.71% 87 304
Concert Select Income Portfolio*............. (a) 1.19% 1.00% 2.19% 82 252
(b) 1.47% 1.00% 2.47% 85 280
TRAVELERS SERIES FUND, INC.
AIM Capital Appreciation Portfolio........... (a) 1.19% 0.85% 2.04% 81 237
(b) 1.47% 0.85% 2.32% 83 265
Alliance Growth Portfolio.................... (a) 1.19% 0.82% 2.01% 80 234
(b) 1.47% 0.82% 2.29% 83 262
G.T. Global Strategic Income Portfolio....... (a) 1.19% 1.07% 2.26% 83 259
(b) 1.47% 1.07% 2.54% 86 287
MFS Total Return Portfolio................... (a) 1.19% 0.86% 2.05% 81 238
(b) 1.47% 0.86% 2.33% 84 266
Putnam Diversified Income Portfolio.......... (a) 1.19% 0.88% 2.07% 81 240
(b) 1.47% 0.88% 2.35% 84 268
Smith Barney High Income Portfolio........... (a) 1.19% 0.70% 1.89% 79 221
(b) 1.47% 0.70% 2.17% 82 250
Smith Barney International Equity
Portfolio.................................. (a) 1.19% 1.01% 2.20% 82 253
(b) 1.47% 1.01% 2.48% 85 281
Smith Barney Large Capitalization Growth
Portfolio.................................. (a) 1.19% 1.00% 2.19% 82 252
(b) 1.47% 1.00% 2.47% 85 280
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C> <C> <C>
* Not available to new contract owners after May 1, 1998.
</TABLE>
iii
<PAGE> 7
<TABLE>
<CAPTION>
TOTAL EXAMPLES: TOTAL
TOTAL ANNUAL ANNUAL EXPENSES
ANNUAL FUNDING TOTAL AT END OF:
INSURANCE OPTION ANNUAL -----------------
PORTFOLIO NAME CHARGES EXPENSES CHARGES 1 YEAR 10 YEARS
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Smith Barney Large Cap Value Portfolio....... (a) 1.19% 0.69% 1.88% 79 220
(formerly Smith Barney Income and Growth
Portfolio) (b) 1.47% 0.69% 2.16% 82 249
Smith Barney Money Market Portfolio.......... (a) 1.19% 0.65% 1.84% 79 216
(b) 1.47% 0.65% 2.12% 81 245
Smith Barney Pacific Basin Portfolio......... (a) 1.19% 1.38% 2.57% 86 290
(b) 1.47% 1.38% 2.85% 89 317
TBC Managed Income Portfolio................. (a) 1.19% 0.87% 2.06% 81 239
(b) 1.47% 0.87% 2.34% 84 267
Van Kampen American Capital Enterprise
Portfolio.................................. (a) 1.19% 0.74% 1.93% 80 225
(b) 1.47% 0.74% 2.21% 82 254
THE TRAVELERS SERIES TRUST
Convertible Bond Portfolio................... (a) 1.19% 0.80% 1.99% 80 231
(b) 1.47% 0.80% 2.27% 83 260
Disciplined Mid Cap Stock Portfolio.......... (a) 1.19% 0.95% 2.14% 82 247
(b) 1.47% 0.95% 2.42% 84 275
Disciplined Small Cap Stock Portfolio........ (a) 1.19% 1.00% 2.19% 82 252
(b) 1.47% 1.00% 2.47% 85 280
MFS Emerging Growth Portfolio................ (a) 1.19% 0.95% 2.14% 82 247
(b) 1.47% 0.95% 2.42% 84 275
MFS Research Portfolio....................... (a) 1.19% 1.00% 2.19% 82 252
(b) 1.47% 1.00% 2.47% 85 280
Strategic Stock Portfolio.................... (a) 1.19% 0.90% 2.09% 81 242
(b) 1.47% 0.90% 2.37% 84 270
</TABLE>
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 nonqualified 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 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 withdrawals 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 previous contract year) 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 variable 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.
Performance information that predates the separate account is considered
"nonstandard" by the SEC. Such nonstandard performance information is shown in
the Statement of Additional Information that you may request free of charge.
iv
<PAGE> 8
LAST TEN CALENDAR YEARS (OR FULL YEARS SINCE INCEPTION):
<TABLE>
<CAPTION>
STANDARD DEATH BENEFIT ENHANCED DEATH BENEFIT
- ---------------------------------------------------------------------------------------------------------------------------------
INCEPTION
PORTFOLIO NAME 1997 1996 1995 1997 1996 1995 DATE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
GREENWICH STREET SERIES FUND
Total Return Portfolio.... 15.47% 23.93% 23.43% 15.14% 23.59% 23.08% 11/21/94
TRAVELERS SERIES FUND, INC.
AIM Capital Appreciation
Portfolio............... 10.83% 13.55% -- 10.52% 13.23% -- 10/10/95
Alliance Growth
Portfolio............... 27.51% 27.85% 33.27% 27.15% 27.49% 32.90% 6/20/94
G.T. Global Strategic
Income Portfolio........ 6.14% 17.39% 18.58% 5.84% 17.06% 18.24% 6/20/94
MFS Total Return
Portfolio............... 19.76% 13.14% 24.21% 19.43% 12.82% 23.86% 6/20/94
Putnam Diversified Income
Portfolio............... 6.42% 6.95% 16.00% 6.13% 6.65% 15.68% 6/20/94
Smith Barney High Income
Portfolio............... 12.51% 11.80% 17.68% 12.20% 11.48% 17.35% 6/20/94
Smith Barney International
Equity Portfolio........ 1.49% 16.32% 9.96% 1.20% 15.99% 9.66% 6/20/94
Smith Barney Large Cap
Value Portfolio
(formerly Smith Barney
Income and Growth
Portfolio).............. 25.14% 18.36% 31.50% 24.79% 18.02% 31.33% 6/20/94
Smith Barney Money Market
Portfolio............... 3.85% 3.71% 4.17% 3.56% 3.42% 3.87% 6/20/94
Smith Barney Pacific Basin
Portfolio............... -28.88% 8.03% 1.19% -29.08% 7.73% 0.91% 6/20/94
TBC Managed Income
Portfolio............... 8.43% 1.79% 14.54% 8.13% 1.51% 14.22% 6/20/94
Van Kampen American
Capital Enterprise
Portfolio............... 27.09% 21.47% 31.12% 26.73% 21.13% 30.75% 6/20/94
THE TRAVELERS SERIES TRUST
MFS Emerging Growth
Portfolio............... 19.77% -- -- 19.43% -- -- 8/30/96
</TABLE>
Those funding options not illustrated above do not yet have one full year of
performance history.
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 benefits will be determined at the close of the
business day on which the Company's Home Office receives due proof of death and
written distribution instructions. In most states, you may choose (at the 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 value 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.
Under the 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.
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<PAGE> 9
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, please refer to Appendix C.
In all cases described above, amounts will be reduced by any applicable premium
tax, outstanding loans or withdrawals not previously deducted. The enhanced
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.
TRANSFERS
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 variable 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.
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 charges and 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 Investor Services
One Tower Square
Hartford, CT 06183-9061
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<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")). 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:
DREYFUS VARIABLE INVESTMENT FUND
Small Cap Portfolio
GREENWICH STREET SERIES FUND
Total Return Portfolio
SALOMON BROTHERS VARIABLE SERIES FUNDS, INC.
Salomon Brothers Variable Investors Fund
Salomon Brothers Variable Total Return Fund
SMITH BARNEY CONCERT ALLOCATION SERIES, INC.
Concert Select Balanced Portfolio
Concert Select Growth Portfolio
TRAVELERS SERIES FUND, INC.
AIM Capital Appreciation Portfolio
Alliance Growth Portfolio
G.T. Global Strategic Income Portfolio
MFS Total Return Portfolio
Putnam Diversified Income Portfolio
Smith Barney High Income Portfolio
Smith Barney International Equity Portfolio
Smith Barney Large Capitalization Growth Portfolio
Smith Barney Large Cap Value Portfolio
Smith Barney Money Market Portfolio
Smith Barney Pacific Basin Portfolio
TBC Managed Income Portfolio
Van Kampen American Capital Enterprise Portfolio
THE TRAVELERS SERIES TRUST
Convertible Bond Portfolio
Disciplined Mid Cap Stock Portfolio
Disciplined Small Cap Stock Portfolio
MFS Emerging Growth Portfolio
MFS Research Portfolio
Strategic Stock Portfolio
The Fixed Account 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, 1998. 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 Company, Annuity Investor
Services, One Tower Square, Hartford, Connecticut 06183-9061, call
1-800-842-8573, or access the SEC's Website (http://www.sec.gov). The Table of
Contents of the SAI appears in Appendix D 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, 1998
<PAGE> 11
TABLE OF CONTENTS
<TABLE>
<S> <C>
INDEX OF SPECIAL TERMS................. 2
FEE TABLE.............................. 3
CONDENSED FINANCIAL INFORMATION........ 6
THE ANNUITY CONTRACT................... 7
Purchase Payments...................... 7
Accumulation Units..................... 7
The Funding Options.................... 7
Substitutions and Additions............ 10
CHARGES AND DEDUCTIONS................. 10
Withdrawal Charge...................... 10
Free Withdrawal Allowance.............. 10
Administrative Charges................. 10
Mortality and Expense Risk Charge...... 11
Reduction or Elimination of Contract
Charges.............................. 11
Funding Option Expenses................ 11
Premium Tax............................ 11
Changes in Taxes Based Upon Premium or
Value................................ 12
OWNERSHIP PROVISIONS................... 12
Types of Ownership..................... 12
Beneficiary............................ 12
Annuitant.............................. 12
TRANSFERS.............................. 13
Dollar Cost Averaging.................. 13
SURRENDERS AND REDEMPTIONS............. 13
Systematic Withdrawals................. 13
Loans.................................. 14
DEATH BENEFIT.......................... 14
Death Proceeds Before the Maturity
Date................................. 14
Death Proceeds After the Maturity
Date................................. 16
THE ANNUITY PERIOD..................... 16
Maturity Date.......................... 16
Allocation of Annuity.................. 16
Variable Annuity....................... 16
Fixed Annuity.......................... 17
PAYMENT OPTIONS........................ 17
Election of Options.................... 17
Annuity Options........................ 18
Income Options......................... 18
MISCELLANEOUS CONTRACT PROVISIONS...... 19
Right to Return........................ 19
Termination............................ 19
Required Reports....................... 19
Suspension of Payments................. 19
Transfers of Contract Values to Other
Annuities............................ 19
THE SEPARATE ACCOUNT................... 19
Mixed and Shared Funding............... 20
Performance Information................ 20
FEDERAL TAX CONSIDERATIONS............. 21
General Taxation of Annuities.......... 21
Types of Contracts: Qualified or
Nonqualified......................... 21
Nonqualified Annuity Contracts......... 21
Qualified Annuity Contracts............ 22
Penalty Tax for Premature
Distributions........................ 22
Diversification Requirements for
Variable Annuities................... 22
Ownership of the Investments........... 22
Mandatory Distributions for Qualified
Plans................................ 23
OTHER INFORMATION...................... 23
The Insurance Company.................. 23
IMSA................................... 23
Year 2000 Compliance................... 23
Distribution of Variable Annuity
Contracts............................ 23
Conformity with State and Federal
Laws................................. 24
Voting Rights.......................... 24
Legal Proceedings And Opinions......... 24
APPENDIX A: Condensed Financial
Information.......................... 25
APPENDIX B: The Fixed Account.......... 27
APPENDIX C............................. 28
APPENDIX D: Contents of the Statement
of Additional Information............ 29
</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...................... 7
Annuitant.............................. 12
Annuity Payments....................... 16
Annuity Unit........................... 16
Cash Surrender Value................... 13
Contract Date.......................... 7
Contract Owner (You, Your)............. 7
Contract Value......................... 7
Contract Year.......................... 7
Fixed Account.......................... 27
Funding Option(s)...................... 7
Income Payments........................ 17
Maturity Date.......................... 7
Purchase Payment....................... 7
Written Request........................ 7
</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 as of December 31, 1997,
unless otherwise noted.)
</TABLE>
<TABLE>
<CAPTION>
MANAGEMENT FEE OTHER EXPENSES TOTAL
(AFTER EXPENSE (AFTER EXPENSE UNDERLYING
UNDERLYING FUNDING OPTIONS: REIMBURSEMENT) REIMBURSEMENT) FUND EXPENSES
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DREYFUS VARIABLE INVESTMENT FUND
Small Cap Portfolio................................. 0.75% 0.03% 0.78%
GREENWICH STREET SERIES FUND
Total Return Portfolio.............................. 0.55% 0.24% 0.79%
SALOMON BROTHERS VARIABLE SERIES FUNDS, INC.
Salomon Brothers Variable Total Return Fund......... 0.80% 0.20%(1) 1.00%
Salomon Brothers Variable Investors Fund............ 0.70% 0.30%(1) 1.00%
SMITH BARNEY CONCERT ALLOCATION SERIES, INC.
Concert Select Balanced Portfolio................... 0.35% 0.75%(2) 1.10%
Concert Select Conservative Portfolio(7)............ 0.35% 0.71%(2) 1.06%
Concert Select Growth Portfolio..................... 0.35% 0.80%(2) 1.15%
Concert Select High Growth Portfolio(7)............. 0.35% 0.89%(2) 1.24%
Concert Select Income Portfolio(7).................. 0.35% 0.65%(2) 1.00%
TRAVELERS SERIES FUND, INC.
AIM Capital Appreciation Portfolio.................. 0.80% 0.05%(4) 0.85%
Alliance Growth Portfolio........................... 0.80% 0.02%(4) 0.82%
G.T. Global Strategic Income Portfolio.............. 0.80% 0.27%(3) 1.07%
MFS Total Return Portfolio.......................... 0.80% 0.06%(4) 0.86%
Putnam Diversified Income Portfolio................. 0.75% 0.13%(4) 0.88%
Smith Barney High Income Portfolio.................. 0.60% 0.10%(4) 0.70%
Smith Barney International Equity Portfolio......... 0.90% 0.11%(4) 1.01%
Smith Barney Large Cap Growth Portfolio............. 0.75% 0.25%(4) 1.00%
Smith Barney Large Cap Value Portfolio
(formerly Smith Barney Income and Growth
Portfolio)..................................... 0.65% 0.04%(4) 0.69%
Smith Barney Money Market Portfolio................. 0.60% 0.05%(3) 0.65%
Smith Barney Pacific Basin Portfolio................ 0.90% 0.48%(3) 1.38%
TBC Managed Income Portfolio........................ 0.65% 0.22%(4) 0.87%
Van Kampen American Capital Enterprise Portfolio.... 0.70% 0.04%(4) 0.74%
</TABLE>
3
<PAGE> 13
<TABLE>
<CAPTION>
MANAGEMENT FEE OTHER EXPENSES TOTAL
(AFTER EXPENSE (AFTER EXPENSE UNDERLYING
UNDERLYING FUNDING OPTIONS: REIMBURSEMENT) REIMBURSEMENT) FUND EXPENSES
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
THE TRAVELERS SERIES TRUST
Convertible Bond Portfolio.......................... 0.60% 0.20%(5) 0.80%
Disciplined Mid Cap Stock Portfolio................. 0.70% 0.25%(6) 0.95%
Disciplined Small Cap Stock Portfolio............... 0.80% 0.20%(5) 1.00%
MFS Emerging Growth Portfolio....................... 0.75% 0.20%(6) 0.95%
MFS Research Portfolio.............................. 0.80% 0.20%(5) 1.00%
Strategic Stock Portfolio........................... 0.60% 0.30%(5) 0.90%
</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. "Other Expenses" include operating costs of the fund. These expenses
are reflected in each funding option's net asset value and are not deducted from
the account value under the Contract.
(1) The amounts set forth for Other Expenses are based on estimates for the
current fiscal year and will include fees for shareholder services,
administrative fees, custodial fees, legal and accounting fees, printing
costs and registration fees. These expenses reflect the voluntary agreement
by the Fund's adviser to impose an expense cap for the fiscal year ending
December 31, 1998 on the total operating expenses of each Fund (exclusive of
taxes, interest and extraordinary expenses such as litigation and
indemnification expenses) at the amounts shown in the table through the
reimbursement of expenses. Absent such agreement, the ratio of other
expenses and total operating expenses to the average daily net assets would
be 1.91% and 2.61%, respectively, for the INVESTORS FUND; and 1.91% and
2.71%, respectively, for the TOTAL RETURN FUND.
(2) The Concert Allocation Series Select Portfolios (a "Fund of Funds") invest
in the shares of other mutual funds. Their management fee is 0.35% 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 January 31, 1998, 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 0.50% to 1.29%.
(3) Other expenses are as of October 31, 1997 and take into account the current
expense limitations agreed to by the Portfolios' investment manager (the
"Manager"). The Manager waived all of its fees for the period and reimbursed
the Portfolios for their expenses. Without such arrangements, the Total
Expenses for the Portfolios would have been as follows: 1.58% for SMITH
BARNEY PACIFIC BASIN PORTFOLIO; 1.38% for G.T. GLOBAL STRATEGIC INCOME
PORTFOLIO; and 0.67% for SMITH BARNEY MONEY MARKET PORTFOLIO.
(4) Other expenses are as of October 31, 1997 (the Fund's fiscal year end).
There were no fees waived or expenses reimbursed for these funds in 1997.
(5) Other Expenses are based on estimates for the current fiscal year and will
include fees for shareholder services, administrative fees, custodial fees ,
legal and accounting fees, printing costs and registration fees.
Additionally, these fees reflect a voluntary expense reimbursement
arrangement by Travelers to reimburse the Portfolios for the amount by which
their aggregate total operating expenses exceed 1.00% for the DISCIPLINED
SMALL CAP STOCK PORTFOLIO and MFS RESEARCH PORTFOLIO; 0.80% for the
CONVERTIBLE BOND PORTFOLIO, and 0.90% for STRATEGIC STOCK PORTFOLIO. These
expenses have been illustrated at a limit which the Portfolios' adviser
believes to be in line with the actual projected expenses of the Portfolios.
(6) Other Expenses reflect the current expense reimbursement arrangement with
Travelers where Travelers has agreed to reimburse the Portfolios for the
amount by which their aggregate expenses (including management fees, but
excluding brokerage commissions, interest charges and taxes) exceeds 0.95%.
Without such arrangements, the Total Funding Option Expenses would have been
1.05% for MFS EMERGING GROWTH PORTFOLIO, and 1.82% for DISCIPLINED MID CAP
STOCK PORTFOLIO.
(7) Not available to new contract owners after May 1, 1998.
4
<PAGE> 14
EXAMPLE*: STANDARD DEATH BENEFIT
Assuming a 5% annual return on assets, a $1,000 investment would be subject to
the following expenses:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
IF CONTRACT IS SURRENDERED AT THE IF CONTRACT IS NOT SURRENDERED OR
END OF PERIOD SHOWN: ANNUITIZED AT END OF PERIOD SHOWN:
------------------------------------- -------------------------------------
UNDERLYING FUNDING OPTION 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
DREYFUS VARIABLE INVESTMENT FUND
Small Cap Portfolio.................. $80 $122 $126 $229 $20 $62 $106 $229
GREENWICH STREET SERIES FUND
Total Return Portfolio............... 80 122 127 230 20 62 107 230
SALOMON BROTHERS VARIABLE SERIES FUNDS,
INC.
Salomon Brothers Variable Total
Return Fund........................ 82 128 137 252 22 68 117 252
Salomon Brothers Variable Investors
Fund............................... 82 128 137 252 22 68 117 252
SMITH BARNEY CONCERT ALLOCATION SERIES,
INC.
Concert Select Balanced Portfolio.... 83 131 142 262 23 71 122 262
Concert Select Conservative
Portfolio***....................... 83 130 140 258 23 70 120 258
Concert Select Growth Portfolio...... 84 133 145 267 24 73 125 267
Concert Select High Growth
Portfolio***....................... 85 136 149 276 25 76 129 276
Concert Select Income Portfolio***... 82 128 137 252 22 68 117 252
TRAVELERS SERIES FUND, INC.
AIM Capital Appreciation Portfolio... 81 124 130 237 21 64 110 237
Alliance Growth Portfolio............ 80 123 128 234 20 63 108 234
G.T. Global Strategic Income
Portfolio.......................... 83 131 141 259 23 71 121 259
MFS Total Return Portfolio........... 81 124 130 238 21 64 110 238
Putnam Diversified Income
Portfolio.......................... 81 125 131 240 21 65 111 240
Smith Barney High Income Portfolio... 79 119 122 221 19 59 102 221
Smith Barney International Equity
Portfolio.......................... 82 129 138 253 22 69 118 253
Smith Barney Large Capitalization
Growth Portfolio................... 82 128 137 252 22 68 117 252
Smith Barney Large Cap Value
Portfolio (formerly Smith Barney
Income and Growth Portfolio)....... 79 119 122 220 19 59 102 220
Smith Barney Money Market Portfolio.. 79 118 119 216 19 58 99 216
Smith Barney Pacific Basin
Portfolio.......................... 86 140 156 290 26 80 136 290
TBC Managed Income Portfolio......... 81 125 131 239 21 65 111 239
Van Kampen American Capital
Enterprise Portfolio............... 80 121 124 225 20 61 104 225
THE TRAVELERS SERIES TRUST
Convertible Bond Portfolio........... 80 122 127 231 20 62 107 231
Disciplined Mid Cap Stock
Portfolio.......................... 82 127 135 247 22 67 115 247
Disciplined Small Cap Stock
Portfolio.......................... 82 128 137 252 22 68 117 252
MFS Emerging Growth Portfolio........ 82 127 135 247 22 67 115 247
MFS Research Portfolio............... 82 128 137 252 22 68 117 252
Strategic Stock Portfolio............ 81 125 132 242 21 65 112 242
</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 0.018% 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.")
*** Not available to new contract owners after May 1, 1998.
5
<PAGE> 15
EXAMPLE*: ENHANCED DEATH BENEFIT
Assuming a 5% annual return on assets, a $1,000 investment would be subject to
the following expenses:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
IF CONTRACT IS SURRENDERED AT THE IF CONTRACT IS NOT SURRENDERED OR
END OF PERIOD SHOWN: ANNUITIZED AT END OF PERIOD SHOWN:
------------------------------------- -------------------------------------
UNDERLYING FUNDING OPTION 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DREYFUS VARIABLE INVESTMENT FUND
Small Cap Portfolio.................. $83 $130 $140 $258 $23 $70 $120 $258
GREENWICH STREET SERIES FUND
Total Return Portfolio............... 83 131 141 259 23 71 121 259
SALOMON BROTHERS VARIABLE SERIES FUNDS,
INC.
Salomon Brothers Variable Total
Return Fund........................ 85 137 151 280 25 77 131 280
Salomon Brothers Variable Investors
Fund............................... 85 137 151 280 25 77 131 280
SMITH BARNEY CONCERT ALLOCATION SERIES,
INC.
Concert Select Balanced Portfolio.... 86 140 156 290 26 80 136 290
Concert Select Conservative
Portfolio***....................... 86 139 154 286 26 79 134 286
Concert Select Growth Portfolio...... 86 141 159 295 26 81 139 295
Concert Select High Growth
Portfolio***....................... 87 144 163 304 27 84 143 304
Concert Select Income Portfolio***... 85 137 151 280 25 77 131 280
TRAVELERS SERIES FUND, INC.
AIM Capital Appreciation Portfolio... 83 132 144 265 23 72 124 265
Alliance Growth Portfolio............ 83 131 142 262 23 71 122 262
G.T. Global Strategic Income
Portfolio.......................... 86 139 155 287 26 79 135 287
MFS Total Return Portfolio........... 84 133 144 266 24 73 124 266
Putnam Diversified Income
Portfolio.......................... 84 133 145 268 24 73 125 268
Smith Barney High Income Portfolio... 82 128 136 250 22 68 116 250
Smith Barney International Equity
Portfolio.......................... 85 137 152 281 25 77 132 281
Smith Barney Large Capitalization
Growth Portfolio................... 85 137 151 280 25 77 131 280
Smith Barney Large Cap Value
Portfolio (formerly Smith Barney
Income and Growth Portfolio)....... 82 128 136 249 22 68 116 249
Smith Barney Money Market Portfolio.. 81 126 134 245 21 66 114 245
Smith Barney Pacific Basin
Portfolio.......................... 89 148 170 317 29 88 150 317
TBC Managed Income Portfolio......... 84 133 145 267 24 73 125 267
Van Kampen American Capital
Enterprise Portfolio............... 82 129 138 254 22 69 118 254
THE TRAVELERS SERIES TRUST
Convertible Bond Portfolio........... 83 131 141 260 23 71 121 260
Disciplined Mid Cap Stock
Portfolio.......................... 84 135 149 275 24 75 129 275
Disciplined Small Cap Stock
Portfolio.......................... 85 137 151 280 25 77 131 280
MFS Emerging Growth Portfolio........ 84 135 149 275 24 75 129 275
MFS Research Portfolio............... 85 137 151 280 25 77 131 280
Strategic Stock Portfolio............ 84 134 146 270 24 74 126 270
</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 0.018% 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.")
*** Not available to new contract owners after May 1, 1998.
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
This information is located in Appendix A.
6
<PAGE> 16
THE ANNUITY CONTRACT
- --------------------------------------------------------------------------------
Travelers Vintage Annuity is a contract between you (the contract owner) and
Travelers Life and Annuity Company ("us" or the "Company"). 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. You assume 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. 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.
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.
7
<PAGE> 17
The current funding options are listed below, along with their investment
advisers and any subadviser:
<TABLE>
<CAPTION>
INVESTMENT
FUNDING OPTION OBJECTIVE INVESTMENT ADVISER/SUBADVISER
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DREYFUS VARIABLE INVESTMENT
FUND
Small Cap Portfolio Seeks to maximize capital appreciation. The Dreyfus Corporation
GREENWICH STREET SERIES FUND
Total Return Portfolio An equity portfolio that seeks to provide total Mutual Management Corporation
return, consisting of long-term capital ("MMC") (formerly Smith Barney
appreciation and income. The Portfolio will invest Mutual Funds Management, Inc.)
primarily in a diversified portfolio of
dividend-paying common stocks.
SALOMON BROTHERS VARIABLE
SERIES FUND, INC.
Salomon Brothers Variable Seeks long-term growth of capital. Current income Salomon Brothers Asset
Investors Fund is a secondary objective. Management ("SBAM")
Salomon Brothers Variable Seeks above-average income (compared to a portfo- SBAM
Total Return Fund lio invested entirely in equity securities).
Secondarily, seeks opportunities for growth of
capital and income.
SMITH BARNEY CONCERT ALLOCATION
SERIES, INC.
Concert Select Balanced Seeks a balance of growth of capital and income by Travelers Investment Advisers
Portfolio investing in a select group of mutual funds. ("TIA")
Concert Select Growth Seeks long-term growth of capital by investing in TIA
Portfolio a select group of mutual funds.
TRAVELERS SERIES FUND, INC.
AIM Capital Appreciation Seeks capital appreciation by investing TIA
Portfolio principally in common stock, with emphasis on Subadviser: AIM Capital
medium-sized and smaller emerging growth Management Inc.
companies.
Alliance Growth Portfolio Seeks long-term growth of capital by investing TIA
predominantly in equity securities of companies Subadviser: Alliance Capital
with a favorable outlook for earnings and whose Management L.P.
rate of growth is expected to exceed that of the
U.S. economy over time. Current income is only an
incidental consideration.
G.T. Global Strategic Seeks primarily high current income and, TIA
Income Portfolio secondarily, capital appreciation. The Portfolio Subadviser: Chancellor LGT
allocates its assets among debt securities of Asset Management, Inc.
issuers in the U.S., developed foreign countries,
and emerging markets.
MFS Total Return Portfolio Seeks to obtain above-average income (compared to TIA
a portfolio entirely invested in equity Subadviser: Massachusetts
securities) consistent with the prudent employment Financial Services Company
of capital. Generally, at least 40% of the ("MFS")
Portfolio's assets will be invested in equity
securities.
Putnam Diversified Income Seeks high current income consistent with TIA
Portfolio preservation of capital. The Portfolio will Subadviser: Putnam Investment
allocate its investments among the U.S. Government Management, Inc.
Sector, the High Yield Sector, and the
International Sector of the fixed income
securities markets.
Smith Barney High Income Seeks high current income. Capital appreciation is MMC
Portfolio a secondary objective. The Portfolio will invest
at least 65% of its assets in high-yielding
corporate debt obligations and preferred stock.
</TABLE>
8
<PAGE> 18
<TABLE>
<CAPTION>
INVESTMENT
FUNDING OPTION OBJECTIVE INVESTMENT ADVISER/SUBADVISER
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TRAVELERS SERIES FUND INC.,
CONT.
Smith Barney International Seeks total return on assets from growth of MMC
Equity Portfolio capital and income by investing at least 65% of
its assets in a diversified portfolio of equity
securities of established non-U.S. issuers.
Smith Barney Large Seeks long-term growth of capital by investing in MMC
Capitalization Growth equity securities of companies with large market
Portfolio capitalizations.
Smith Barney Large Cap Seeks current income and long-term growth of MMC
Value Portfolio (formerly income and capital by investing primarily, but not
"Smith Barney Income exclusively, in common stocks.
and Growth Portfolio")
Smith Barney Money Market Seeks maximum current income and preservation of MMC
Portfolio capital by investing in high quality, short-term
money market instruments. An investment in this
fund is neither insured not guaranteed by the U.S.
Government, and there is no assurance that a
stable $1 value per share will be maintained.
Smith Barney Pacific Basin Seeks long-term capital appreciation, through MMC
Portfolio investment primarily in equity securities of
companies in Asian Pacific Countries.
TBC Managed Income Seeks high current income consistent with prudent TIA
Portfolio risk of capital through investments in corporate Subadviser: The Boston Company
debt obligations, preferred stocks, and Asset Management Inc.
obligations issued or guaranteed by the U.S.
Government or its agencies or instrumentalities.
Van Kampen American Capital Seeks capital appreciation through investment in MMC
Enterprise Portfolio securities believed to have above-average Subadviser: Van Kampen American
potential for capital appreciation. Any income Capital Asset Management Inc.
received on such securities is incidental to the
objective of capital appreciation.
THE TRAVELERS SERIES TRUST
Convertible Bond Portfolio Seeks current income and capital appreciation by Travelers Asset Management
investing in convertible securities and in International Corporation
combinations of nonconvertible fixed-income ("TAMIC")
securities and warrants or call options that
together resemble convertible securities.
Disciplined Mid Cap Stock Seeks growth of capital by investing primarily in TAMIC
Portfolio a broadly diversified portfolio of common stocks. Subadviser: Travelers
Investment Management Company
("TIMCO")
Disciplined Small Cap Stock Seeks long term capital appreciation by investing TAMIC
Portfolio primarily (at least 65% of its total assets) in Subadviser: TIMCO
the common stocks of U.S. Companies with
relatively small market capitalizations at the
time of investment.
MFS Emerging Growth Seeks long-term growth of capital. Dividend and TAMIC
Portfolio interest income from portfolio securities, if any, Subadviser: MFS
is incidental.
MFS Research Portfolio Seeks to provide long-term growth of capital and TAMIC
future income. Subadviser: MFS
Strategic Stock Portfolio Seeks to provide an above-average total return TAMIC
through a combination of potential capital, Subadviser: TIMCO
appreciation and dividend income by investing
primarily in high dividend yielding stocks
periodically selected from the companies included
in (i) the Dow Jones Industrial Average and (ii)
the Russell 1000 Stock Index.
</TABLE>
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<PAGE> 19
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 (10% in New York). 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. In Washington state, the free withdrawal provision applies to all
withdrawals.
ADMINISTRATIVE CHARGES
A contract 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 deduct a Contract administrative charge:
(1) if the distribution results from the death of the
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<PAGE> 20
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 expense 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 mortality and expense risk 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 mortality and expense risk 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, 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.
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<PAGE> 21
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, 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.
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.
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<PAGE> 22
TRANSFERS
- --------------------------------------------------------------------------------
At any time up to 30 days 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. After the maturity date, you may make transfers between funding
options only with our consent. For information regarding the transfer of funds
between the Fixed Account and variable funding options, please refer to Appendix
B.
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 cost per unit
is low and less accumulation units are purchased if the cost per unit is high.
Therefore, a lower-than-average cost 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 (six months
under certain special circumstances) 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 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
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<PAGE> 23
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
- --------------------------------------------------------------------------------
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). The death
benefit is calculated at the close of the business day on which the Company's
Home Office receives due proof of death and written instructions on the
distribution of death benefit proceeds.
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.
ENHANCED DEATH BENEFIT
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
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<PAGE> 24
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.
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 Payments 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.
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.
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<PAGE> 25
When a contingent annuitant becomes the annuitant, the maturity date remains the
same as previously in effect, unless otherwise provided.
ENHANCED DEATH BENEFIT FOR CONTRACTS ISSUED PRIOR TO JUNE 1, 1997 (SEE
APPENDIX C)
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
- --------------------------------------------------------------------------------
MATURITY DATE
Under the Contract, you can receive regular income payments (annuity payments).
You can choose the month and the year in which those payments begin (maturity
date). You can also choose among income plans (annuity or income options). While
the annuitant is alive, you can change your selection any time up to the
maturity date. Annuity or income payments will begin on the maturity date stated
in the Contract unless the Contract has been fully surrendered or the proceeds
have been paid to the beneficiary before that date. Annuity payments are a
series of periodic payments (a) for life; (b) for life with either a minimum
number of payments or a specific amount assured; or (c) for the joint lifetime
of the annuitant and another person, and thereafter during the lifetime of the
survivor. We may require proof that the annuitant is alive before annuity
payments are made.
Unless you elect otherwise, the maturity date will be the annuitant's 70th
birthday for qualified contracts, or, for nonqualified contracts, the
annuitant's 75th birthday or ten years after the effective date of the contract,
if later. (For Contracts issued in Florida, the maturity date elected may not be
later than the annuitant's 90th birthday.)
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. (Variable payouts may not be available
in all states. Refer to your contract.) If, at the time annuity payments begin,
no election has been made to the contrary, the cash surrender value shall be
applied to provide an annuity funded by the same funding options selected during
the accumulation period. At least 30 days prior to the maturity date, you may
transfer your contract value among the funding options in order to change 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.
DETERMINATION OF FIRST ANNUITY PAYMENT. The Contract contains tables used to
determine the first monthly annuity payment. The amount applied to effect an
annuity will be the cash surrender value
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<PAGE> 26
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. If it would produce
a larger payment, the first fixed annuity payment will be determined using the
Life Annuity Tables in effect on the maturity date.
PAYMENT OPTIONS
- --------------------------------------------------------------------------------
ELECTION OF OPTIONS
While the annuitant is alive, you can change your annuity 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.
The amount applied to effect an annuity or income option will be the cash
surrender value as of the date payments begin, less any applicable premium taxes
not previously deducted. The cash surrender value used to determine the amount
of any such 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.
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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<PAGE> 27
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.
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<PAGE> 28
MISCELLANEOUS CONTRACT PROVISIONS
- --------------------------------------------------------------------------------
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 or
determination of values 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.
THE SEPARATE ACCOUNT
- --------------------------------------------------------------------------------
The Travelers Fund BD II for Variable Annuities ("Fund BD II") was established
on February 22, 1995 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.
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<PAGE> 29
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.
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 Contract's funding options. We may advertise the "standardized average
annual total returns" of the funding option, calculated in a manner prescribed
by the SEC, as well as the "non-standardized total returns," as described below.
Specific examples of the performance information appear in the SAI.
STANDARDIZED METHOD. Quotations of average annual total returns are computed
according to a formula in which a hypothetical initial investment of $1,000 is
applied to the funding option, and then related to ending redeemable values over
one-, five-, and ten-year periods, or for a period covering the time during
which the funding option has been in existence, if less. These quotations
reflect the deduction of all recurring charges during each period (on a pro rata
basis in the case of fractional periods). The deduction for the annual
administrative charge ($30) is converted to a percentage of assets based on the
actual fee collected (or anticipated to be collected, if a new product), divided
by the average net assets for Contracts sold (or anticipated to be sold). Each
quotation assumes a total redemption at the end of each period with the
applicable withdrawal charge deducted at that time.
NONSTANDARDIZED METHOD. Nonstandardized "total returns" will be calculated in a
similar manner based on the performance of the funding options over a period of
time, usually for the calendar year-to-date, and for the past one-, three-,
five- and ten-year periods. Nonstandardized total returns will not reflect the
deduction of the $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.
For funding options that were in existence prior to the date they became
available under the Separate Account, the standardized average annual total
return quotations may be accompanied by returns showing the investment
performance that such funding options would have achieved (reduced by the
applicable charges) had they been held under the Contract for the period quoted.
The total return quotations are based upon historical earnings and are not
necessarily representative of future performance.
GENERAL. Within the guidelines prescribed by the SEC and the National
Association of Securities Dealers, Inc. ("NASD"), performance information may be
quoted numerically or may be presented in a table, graph or other illustration.
Advertisements may include data comparing performance to well-known indices of
market performance (including, but not limited to, the Dow Jones Industrial
Average, the Standard & Poor's (S&P) 500 Index and the S&P 400 Index, the
20
<PAGE> 30
Lehman Brothers Long T-Bond Index, the Russell 1000, 2000 and 3000 Indices, the
Value Line Index, and the Morgan Stanley Capital International's EAFE Index).
Advertisements may also include published editorial comments and performance
rankings compiled by independent organizations (including, but not limited to,
Lipper Analytical Services, Inc. and Morningstar, Inc.) and publications that
monitor the performance of the Separate Account and the variable funding
options.
FEDERAL TAX CONSIDERATIONS
- --------------------------------------------------------------------------------
The following 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 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.
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<PAGE> 31
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 rates, 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.
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 be owned by the Company and not by the Contract Owner for federal income
tax purposes. Otherwise, the deferral of taxes is lost and income and gains from
the accounts would be includible annually in the Contract Owner's gross income.
The Internal Revenue Service has stated in published rulings that a variable
contract owner will be considered the owner of the assets of a segregated asset
account if the owner possesses an incident of ownership in those assets, such as
the ability to exercise investment control over the assets. The Treasury
Department announced, in connection with the issuance of temporary regulations
concerning investment diversification, that those regulations "do not provide
guidance concerning the circumstances in which investor control of the
investments of a segregated asset account may cause the investor, rather than
the insurance company, to be treated as the owner of the assets of the account."
This announcement, dated September 15, 1986, also stated that the guidance would
be issued by way of regulations or rulings on the "extent to which policyholders
may direct their investments to particular subaccounts [of a segregated asset
account] without being treated as owners of the underlying assets." As of the
date of this prospectus, no such guidance has been issued.
The Company does not know if such guidance will be issued, or if it is, what
standards it may set. Furthermore, the Company does not know if such guidance
may be issued with retroactive effect. New regulations are generally issued with
a prospective-only effect as to future sales or as to future voluntary
transactions in existing contracts. The Company therefore reserves the right to
modify the
22
<PAGE> 32
contract as necessary to attempt to prevent Contract Owners from being
considered the owner of the assets of the separate account.
MANDATORY DISTRIBUTIONS FOR QUALIFIED PLANS
Federal tax law requires that minimum annual distributions begin by April 1st of
the calendar year following the calendar year in which an IRA owner attains age
70 1/2. Participants in qualified plans and 403(b) annuities may defer minimum
distributions until the later of April 1st of the calendar year following the
calendar year in which they attain age 70 1/2 or the year of retirement.
Distributions must begin or be continued according to required patterns
following the death of the contract owner or annuitant of both qualified and
nonqualified annuities.
OTHER INFORMATION
- --------------------------------------------------------------------------------
THE INSURANCE COMPANY
The Travelers Life and Annuity Company (the "Company") is a stock insurance
company chartered in 1864 in the State of Connecticut and continuously engaged
in the insurance business since that time. The Company is licensed to conduct a
life insurance business in 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.
IMSA
The Company is a member of the Insurance Marketplace Standards Association
("IMSA"), and as such may use the IMSA logo and IMSA membership in its
advertisements. Companies that belong to IMSA subscribe to a act of ethical
standards covering the various aspects of sales and service for individually
sold life insurance and annuities. IMSA members have adopted policies and
procedures that demonstrate a commitment to honesty, fairness and integrity in
all customer contracts involving the sale and service of individual life
insurance and annuity products.
YEAR 2000 COMPLIANCE
Generally, computer programs were designed without considering the impact of the
upcoming change in the century. As a result, software and computer systems may
need to be upgraded or replaced in order to comply with "Year 2000"
requirements. If not corrected, these computer applications could fail or create
erroneous results by or at the Year 2000. The business, financial condition, and
results of operations of a company could be materially and adversely affected by
the failure of its systems and applications (or those either provided or
operated by third-parties) to properly operate or manage dates beyond the year
1999.
The Company has investigated the nature and extent of the work required for our
computer systems to process beyond the turn of the century, and has made
progress toward achieving this goal, including upgrading and/or replacing
existing systems. We are confirming with our service providers that they are
also in the process of replacing or modifying their systems with the same goal.
We expect that our principal systems will be Year 2000 compliant by early 1999.
While these efforts involve substantial costs, we closely monitor associated
costs and continue to evaluate associated risks based on actual expenses. While
it is likely that these efforts will be successful, if necessary modifications
and conversions are not completed in a timely manner, the Year 2000 issue could
have a material adverse effect on certain operations of the Company.
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
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<PAGE> 33
other registered broker-dealers. Such sales representatives may receive
compensation of up to 7% 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 Travelers Distribution Company, an affiliated
broker-dealer, may become the principal underwriter for the Contracts during
1998.
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 the Separate Account,
the Principal Underwriter or the Company. 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 passed on by the General Counsel of the Company.
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<PAGE> 34
APPENDIX A
- --------------------------------------------------------------------------------
CONDENSED FINANCIAL INFORMATION
THE TRAVELERS FUND BD II FOR VARIABLE ANNUITIES
ACCUMULATION UNIT VALUES
<TABLE>
<CAPTION>
PERIOD FROM
9/25/95
YEAR ENDED YEAR ENDED (EFFECTIVE DATE) TO
DECEMBER 31, 1997 DECEMBER 31, 1996 DECEMBER 31, 1995
STANDARD ENHANCED STANDARD ENHANCED STANDARD ENHANCED
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
TRAVELERS SERIES FUND INC.
ALLIANCE GROWTH PORTFOLIO (11/95)*
Unit Value at beginning of period $ 1.785 $ 1.772 $ 1.396 $ 1.390 $ 1.390 $ 1.385
Unit Value at end of period 2.276 2.254 1.785 1.772 1.396 1.390
Number of units outstanding at end of period (thousands) 47,935 8,482 24,031 3,613 1,574 453
VAN KAMPEN AMERICAN CAPITAL ENTERPRISE PORTFOLIO (11/95)*
Unit Value at beginning of period $ 1.655 $ 1.643 $ 1.362 $ 1.356 $ 1.362 $ 1.357
Unit Value at end of period 2.103 2.083 1.655 1.643 1.362 1.356
Number of units outstanding at end of period (thousands) 24,635 4,385 11,360 1,644 765 329
TBC MANAGED INCOME PORTFOLIO (11/95)*
Unit Value at beginning of period $ 1.163 $ 1.154 $ 1.142 $ 1.137 $ 1.097 $ 1.093
Unit Value at end of period 1.261 1.248 1.163 1.154 1.142 1.137
Number of units outstanding at end of period (thousands) 4,489 1,001 2,636 266 226 90
G.T. GLOBAL STRATEGIC INCOME PORTFOLIO (11/95)*
Unit Value at beginning of period $ 1.316 $ 1.306 $ 1.121 $ 1.116 $ 1.057 $ 1.054
Unit Value at end of period 1.397 1.383 1.316 1.306 1.121 1.116
Number of units outstanding at end of period (thousands) 5,016 954 1,833 463 33 80
SMITH BARNEY HIGH INCOME PORTFOLIO (11/95)*
Unit Value at beginning of period $ 1.300 $ 1.291 $ 1.162 $ 1.157 $ 1.111 $ 1.108
Unit Value at end of period 1.463 1.448 1.300 1.291 1.162 1.157
Number of units outstanding at end of period (thousands) 21,213 2,640 7,719 970 243 332
SMITH BARNEY INTERNATIONAL EQUITY PORTFOLIO (11/95)*
Unit Value at beginning of period $ 1.222 $ 1.213 $ 1.050 $ 1.046 $ 0.955 $ 0.954
Unit Value at end of period 1.240 1.228 1.222 1.213 1.050 1.046
Number of units outstanding at end of period (thousands) 31,311 4,872 16,855 2,010 556 201
SMITH BARNEY LARGE CAP VALUE PORTFOLIO(11/95)*
(formerly Smith Barney Income and Growth Portfolio)
Unit Value at beginning of period $ 1.528 $ 1.517 $ 1.291 $ 1.285 $ 0.981 $ 0.980
Unit Value at end of period 1.913 1.894 1.528 1.517 1.291 1.285
Number of units outstanding at end of period (thousands) 27,117 4,645 11,906 1,606 596 146
SMITH BARNEY MONEY MARKET PORTFOLIO (11/95)*
Unit Value at beginning of period $ 1.098 $ 1.090 $ 1.058 $ 1.054 $ 1.016 $ 1.014
Unit Value at end of period 1.140 1.129 1.098 1.090 1.058 1.054
Number of units outstanding at end of period (thousands) 25,661 2,417 22,962 2,362 2,374 820
PUTNAM DIVERSIFIED INCOME PORTFOLIO (11/95)*
Unit Value at beginning of period $ 1.252 $ 1.243 $ 1.170 $ 1.165 $ 1.009 $ 1.007
Unit Value at end of period 1.332 1.319 1.252 1.243 1.170 1.165
Number of units outstanding at end of period (thousands) 19,504 3,953 10,424 1,461 824 126
SMITH BARNEY PACIFIC BASIN PORTFOLIO (11/95)*
Unit Value at beginning of period $ 0.983 $ 0.977 $ 0.910 $ 0.906 $ 0.899 $ 0.898
Unit Value at end of period 0.700 0.693 0.983 0.977 0.910 0.906
Number of units outstanding at end of period (thousands) 5,124 862 2,755 467 37 20
MFS TOTAL RETURN PORTFOLIO (11/95)*
Unit Value at beginning of period $ 1.376 $ 1.366 $ 1.216 $ 1.211 $ 0.979 $ 0.977
Unit Value at end of period 1.648 1.632 1.376 1.366 1.216 1.211
Number of units outstanding at end of period (thousands) 34,928 6,139 16,651 1,810 913 102
AIM CAPITAL APPRECIATION PORTFOLIO (11/95)*
Unit Value at beginning of period $ 1.088 $ 1.084 $ 0.958 $ 0.957 $ 1.000 $ 1.000
Unit Value at end of period 1.206 1.198 1.088 1.084 0.958 0.957
Number of units outstanding at end of period (thousands) 48,942 8,845 29,460 4,246 2,537 908
GREENWICH STREET SERIES FUND:
TOTAL RETURN PORTFOLIO (11/95)*
Unit Value at beginning of period $ 1.550 $ 1.541 $ 1.251 $ 1.247 $ 1.010 $ 1.010
Unit Value at end of period 1.790 1.775 1.550 1.541 1.251 1.247
Number of units outstanding at end of period (thousands) 33,686 5,975 14,921 2,044 651 149
TRAVELERS SERIES TRUST:
MFS EMERGING GROWTH PORTFOLIO (11/96)*
Unit Value at beginning of period $ 1.005 $ 1.005 $ 1.000 $ 1.000 $ -- $ --
Unit Value at end of period 1.204 1.200 1.500 1.005 -- --
Number of units outstanding at end of period (thousands) 17,295 4,256 2,506 466 -- --
</TABLE>
25
<PAGE> 35
<TABLE>
<CAPTION>
PERIOD FROM
9/25/95
YEAR ENDED YEAR ENDED (EFFECTIVE DATE) TO
DECEMBER 31, 1997 DECEMBER 31, 1996 DECEMBER 31, 1995
STANDARD ENHANCED STANDARD ENHANCED STANDARD ENHANCED
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SMITH BARNEY CONCERT ALLOCATION SERIES INC.:
SELECT HIGH GROWTH PORTFOLIO** (3/97)*
Unit Value at beginning of period $ 0.970 $ 0.969 $ -- $ -- $ -- $ --
Unit Value at end of period 1.090 1.087 -- -- -- --
Number of units outstanding at end of period (thousands) 2,657 391 -- -- -- --
SELECT GROWTH PORTFOLIO (3/97)*
Unit Value at beginning of period $ 1.000 $ 1.000 $ -- $ -- $ -- $ --
Unit Value at end of period 1.099 1.097 -- -- -- --
Number of units outstanding at end of period (thousands) 3,396 1,191 -- -- -- --
SELECT BALANCED PORTFOLIO (3/97)*
Unit Value at beginning of period $ 1.000 $ 1.000 $ -- $ -- $ -- $ --
Unit Value at end of period 1.093 1.091 -- -- -- --
Number of units outstanding at end of period (thousands) 4,148 1,789 -- -- -- --
SELECT CONSERVATIVE PORTFOLIO** (3/97)*
Unit Value at beginning of period $ 1.000 $ 1.000 $ -- $ -- $ -- $ --
Unit Value at end of period 1.108 1.105 -- -- -- --
Number of units outstanding at end of period (thousands) 863 105 -- -- -- --
SELECT INCOME PORTFOLIO** (3/97)*
Unit Value at beginning of period $ 1.000 $ 1.000 $ -- $ -- $ -- $ --
Unit Value at end of period 1.106 1.104 -- -- -- --
Number of units outstanding at end of period (thousands) 364 25 -- -- -- --
</TABLE>
* Reflects date money was first applied to the funding option through the
Separate Account. Condensed Financial Information is shown as of this date.
** Not available to new contract owners after May 1, 1998.
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 Travelers Life and Annuity
are contained in the Statement of Additional Information.
Funding options not listed above were not yet available through the Separate
Account as of December 31, 1997.
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<PAGE> 36
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, 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 credited
to the Fixed Account may not exceed the minimum guarantee of 3% for any given
year.
TRANSFERS
You may make transfers from the Fixed Account to any other available variable
funding option(s) twice a year during the 30 days following the semiannual
anniversary of the Contract effective date. The transfers are limited to an
amount of up to 15% of the Fixed Account Value on the semiannual Contract
effective date anniversary. (This restriction does not apply to transfers 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.
27
<PAGE> 37
APPENDIX C
- --------------------------------------------------------------------------------
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 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.
28
<PAGE> 38
APPENDIX D
- --------------------------------------------------------------------------------
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
The Statement of Additional Information contains more specific information and
financial statements relating to The Travelers 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
Performance Information
Valuation of Assets
Federal Tax Considerations
Independent Accountants
Financial Statements
- -------------------------------------------------------------------------------
Copies of the Statement of Additional Information dated May 1, 1998 (Form No.
L-12253S) are available without charge. To request a copy, please clip this
coupon on the dotted line, enter your name and address in the spaces provided
below, and mail to: The Travelers Insurance Company, Annuity Investor Services,
One Tower Square, Hartford, Connecticut 06183-9061.
Name:
- --------------------------------------------------------------------------------
Address:
================================================================================
29
<PAGE> 39
THIS PAGE INTENTIONALLY LEFT BLANK.
<PAGE> 40
PART B
Information Required in a Statement of Additional Information
<PAGE> 41
VINTAGE
STATEMENT OF ADDITIONAL INFORMATION
dated
May 1, 1998
for
THE TRAVELERS FUND BD II 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, 1998. A copy of the Prospectus may be obtained
by writing to The Travelers Life and Annuity Company, Annuity Investor Services,
One Tower Square, Hartford, Connecticut 06183-9061, or by calling
1-800-842-8573. This SAI should be read in conjunction with the accompanying
1997 Annual Report for the Fund.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
THE INSURANCE COMPANY ........................................................2
PRINCIPAL UNDERWRITER ........................................................2
DISTRIBUTION AND MANAGEMENT AGREEMENT ........................................2
PERFORMANCE INFORMATION ......................................................3
VALUATION OF ASSETS ........................................................7
FEDERAL TAX CONSIDERATIONS ...................................................8
INDEPENDENT ACCOUNTANTS .....................................................11
FINANCIAL STATEMENTS .......................................................F-1
</TABLE>
<PAGE> 42
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.
STATE REGULATION. The Company is subject to the laws of the state of Connecticut
governing insurance companies and to regulation by the Insurance Commissioner of
the state of Connecticut. An annual statement covering the operations of the
Company for the preceding year, as well as its financial conditions as of
December 31 of such year, must be filed with the Commissioner in a prescribed
format on or before March 1 of each year. The Company's books and assets are
subject to review or examination by the Commissioner or his agents at all times,
and a full examination of its operations is conducted at least once every four
years.
The Company is also subject to the insurance laws and regulations of all
other states in which it is licensed to operate. However, the insurance
departments of each of these states generally apply the laws of the home state
(jurisdiction of domicile) in determining the field of permissible investments.
THE SEPARATE ACCOUNT. Fund BD II meets the definition of a separate account
under the federal securities laws, and will comply with the provisions of the
1940 Act. Additionally, the operations of Fund BD II are subject to the
provisions of Section 38a-433 of the Connecticut General Statutes which
authorizes the Connecticut Insurance Commissioner to adopt regulations under it.
Section 38a-433 contains no restrictions on the investments of the Separate
Account, and the Commissioner has adopted no regulations under the Section that
affect the Separate Account.
PRINCIPAL UNDERWRITER
Tower Square Securities, Inc. ("Tower Square"), an affiliate of the
Company, serves as principal underwriter for Fund BD II 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 Travelers
Distribution Company, an affiliated broker-dealer, will become the principal
underwriter during 1998.
DISTRIBUTION AND MANAGEMENT AGREEMENT
Under the terms of the Distribution and Management Agreement among Fund
BD II, 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 Fund BD II. 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 BD II and the variable annuity contract with
2
<PAGE> 43
regulatory authorities; the costs of proxy solicitation; and all custodian,
accountant's and legal fees. The Company also provides without cost to Fund BD
II 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 the funding options of Fund BD II. 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 "nonstandardized total
returns," as described below:
STANDARDIZED METHOD. Quotations of average annual total returns are
computed according to a formula in which a hypothetical initial investment of
$1,000 is allocated to an funding option, and then related to ending redeemable
values over one-, five- and ten-year periods, or for a period covering the time
during which the funding option has been in existence, if less. If a Funding
Option has been in existence for less than one year, the "since inception" total
return performance quotations are year-to-date and are not average annual total
returns. These quotations reflect the deduction of all recurring charges during
each period (on a pro rata basis in the case of fractional periods). The
deduction for the annual contract administrative charge ($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.
NONSTANDARDIZED METHOD. Nonstandardized "total returns" will be
calculated in a similar manner based on the performance of the funding options
over a period of time, usually for the calendar year-to-date, and for the past
one-, three-, five- and ten-year periods. Nonstandard total returns will not
reflect the deduction of the $30 annual contract administrative charge, which,
if reflected, would decrease the level of performance shown.
For funding options that were in existence prior to the date they became
available under Fund BD II, the standardized average annual total return
quotations may be accompanied by returns showing 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.
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
3
<PAGE> 44
limited to, Lipper Analytical Services, Inc. and Morningstar, Inc.) and
publications that monitor the performance of Fund BD II and the funding options.
Average annual total returns for each of the funding options available
under Fund BD II computed according to the standardized and nonstandardized
methods for the period ending December 31, 1997 are set forth in the following
table.
4
<PAGE> 45
TOTAL RETURN CALCULATIONS - FUNDING OPTIONS OF FUND BD II
STANDARD DEATH BENEFIT
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
-----------------------------------------
(taking into account all charges and fees)
)
- ---------------------------------------------------------------------------------------------------
PORTFOLIO NAME SUBACCOUNT 1 YEAR 5 YEAR 10 YEAR
INCEPTION
DATE (1)
===================================================================================================
<S> <C> <C> <C> <C>
DREYFUS VARIABLE INVESTMENT FUND
Small Cap Portfolio 5/1/98 -- -- --
GREENWICH STREET SERIES FUND
Total Return Portfolio 11/21/94 9.46% 19.90%* --
SALOMON BROTHERS VARIABLE SERIES
FUNDS, INC
Salomon Brothers Total Return Fund 5/1/98 -- -- --
Salomon Brothers Variable
Investors Fund 5/1/98 -- -- --
SMITH BARNEY CONCERT ALLOCATION
SERIES, INC
Concert Select Balanced Portfolio 3/10/97 3.29%* -- --
Concert Select Conservative
Portfolio 3/10/97 4.75%* -- --
Concert Select Growth Portfolio 3/10/97 3.90%* -- --
Concert Select High Growth
Portfolio 3/10/97 2.94%* -- --
Concert Select Income Portfolio 3/10/97 4.58%* -- --
TRAVELERS SERIES FUND, INC
AIM Capital Appreciation Portfolio 10/10/95 4.83% 6.29%* --
Alliance Growth Portfolio 6/20/94 21.51% 25.71%* --
G.T. Global Strategic Income Portfolio 6/20/94 0.14% 9.23%* --
MFS Total Return Portfolio 6/20/94 13.76% 14.56%* --
Putnam Diversified Income Portfolio 6/20/94 0.42% 7.74%* --
Smith Barney High Income Portfolio 6/20/94 6.51% 10.70%* --
Smith Barney International Equity Portfolio 6/20/94 -4.51% 5.53%* --
Smith Barney Large Cap Growth Portfolio 5/1/98 -- -- --
Smith Barney Large Cap Value Portfolio 6/20/94 19.14% 19.58%* --
Smith Barney Money Market Portfolio 6/20/94 -2.14% 2.98%* --
Smith Barney Pacific Basin Portfolio 6/20/94 -33.15% -10.42%* --
TBC Managed Income Portfolio 6/20/94 2.43% 6.07%* --
Van Kampen Amer. Cap. Enterprise Portfolio 6/20/94 21.09% 22.91%* --
THE TRAVELERS SERIES TRUST
Convertible Bond Portfolio 5/1/98 -- -- --
Disciplined Mid Cap Stock Portfolio 5/1/98 -- -- --
Disciplined Small Cap Stock Portfolio 5/1/98 -- -- --
MFS Emerging Growth Portfolio 8/30/96 13.76% 13.19%* --
MFS Research Portfolio 5/1/98 -- -- --
Strategic Stock Portfolio 5/1/98 -- -- --
- ---------------------------------------------------------------------------------------------------
* Since inception.
</TABLE>
<TABLE>
<CAPTION>
NONSTANDARDIZED TOTAL RETURNS
-----------------------------
(taking into account all charges and fees except
deferred sales charges and contract administrative charge)
- ---------------------------------------------------------------------------------------------------------------
PORTFOLIO NAME FUND 1 YEAR 3 YEAR 5 YEAR 10 YEAR
INCEPTION
DATE (2)
===============================================================================================================
<S> <C> <C> <C> <C> <C>
DREYFUS VARIABLE INVESTMENT FUND
Small Cap Portfolio 8/31/90 -- -- -- --
GREENWICH STREET SERIES FUND
Total Return Portfolio 12/3/93 15.48% 20.88% 17.47%* --
SALOMON BROTHERS VARIABLE SERIES
FUNDS, INC
Salomon Brothers Total Return Fund 1/2/98 -- -- -- --
Salomon Brothers Variable
Investors Fund 1/2/98 -- -- -- --
SMITH BARNEY CONCERT ALLOCATION
SERIES, INC
Concert Select Balanced Portfolio 3/10/97 9.31%* -- -- --
Concert Select Conservative
Portfolio 3/10/97 10.76%* -- -- --
Concert Select Growth Portfolio 3/10/97 9.92%* -- -- --
Concert Select High Growth
Portfolio 3/10/97 8.96%* -- -- --
Concert Select Income Portfolio 3/10/97 10.59%* -- -- --
TRAVELERS SERIES FUND, INC
AIM Capital Appreciation Portfolio 10/95 10.85% 8.85%* -- --
Alliance Growth Portfolio 6/20/94 27.53% 29.51% 26.20%* --
G.T. Global Strategic Income Portfolio 6/20/94 6.16% 13.90% 9.93%* --
MFS Total Return Portfolio 6/20/94 19.78% 18.95% 15.19%* --
Putnam Diversified Income Portfolio 6/20/94 6.44% 9.72% 8.46%* --
Smith Barney High Income Portfolio 6/20/94 12.53% 13.97% 11.38%* --
Smith Barney International Equity Portfolio 6/20/94 1.51% 9.10% 6.28%* --
Smith Barney Large Cap Growth Portfolio 2/28/98 -- -- -- --
Smith Barney Large Cap Value Portfolio 6/20/94 25.16% 24.88% 20.14%* --
Smith Barney Money Market Portfolio 6/20/94 3.87% 3.92% 3.78%* --
Smith Barney Pacific Basin Portfolio 6/20/94 -28.87% -8.02% -9.62%* --
TBC Managed Income Portfolio 6/20/94 8.45% 8.14% 6.82%* --
Van Kampen Amer. Cap. Enterprise Portfolio 6/20/94 27.11% 26.49% 23.43%* --
THE TRAVELERS SERIES TRUST
Convertible Bond Portfolio 5/1/98 -- -- -- --
Disciplined Mid Cap Stock Portfolio 5/1/98 -- -- -- --
Disciplined Small Cap Stock Portfolio 5/1/98 -- -- -- --
MFS Emerging Growth Portfolio 8/30/96 19.78% 19.25%* -- --
MFS Research Portfolio 3/23/98 -- -- -- --
Strategic Stock Portfolio 5/1/98 -- -- -- --
- -----------------------------------------------------------------------------------------------------------------
* Since inception.
</TABLE>
5
<PAGE> 46
TOTAL RETURN CALCULATIONS - FUNDING OPTIONS OF FUND BD II
ENHANCED DEATH BENEFIT
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
(taking into account all charges and fees)
- ----------------------------------------------------------------------------------------------------
PORTFOLIO NAME SUBACCOUNT 1 YEAR 5 YEAR 10 YEAR
INCEPTION
DATE (1)
====================================================================================================
<S> <C> <C> <C> <C>
DREYFUS VARIABLE INVESTMENT FUND
Small Cap Portfolio 5/1/98 -- -- --
GREENWICH STREET SERIES FUND
Total Return Portfolio 11/94 9.14% 19.56%* --
SALOMON BROTHERS VARIABLE SERIES
FUNDS, INC
Salomon Brothers Total Return Fund 5/1/98 -- -- --
Salomon Brothers Variable
Investors Fund 5/1/98 -- -- --
SMITH BARNEY CONCERT ALLOCATION
SERIES, INC
Concert Select Balanced Portfolio 3/10/97 3.04%* -- --
Concert Select Conservative
Portfolio 3/10/97 4.51%* -- --
Concert Select Growth Portfolio 3/10/97 3.66%* -- --
Concert Select High Growth Portfolio 3/10/97 2.69%* -- --
Concert Select Income Portfolio 3/10/97 4.34%* -- --
TRAVELERS SERIES FUND, INC
AIM Capital Appreciation Portfolio 10/10/95 4.52% 5.97%* --
Alliance Growth Portfolio 6/20/94 21.15% 25.35%* --
G.T. Global Strategic Income 6/20/94 -0.16% 8.92%* --
Portfolio
MFS Total Return Portfolio 6/20/94 13.42% 14.24%* --
Putnam Diversified Income Portfolio 6/20/94 0.13% 7.43%* --
Smith Barney High Income Portfolio 6/20/94 6.20% 10.39%* --
Smith Barney International Equity 6/20/94 -4.80% 5.22%* --
Portfolio
Smith Barney Large Cap Growth Portfolio -- -- -- --
Smith Barney Large Cap Value Portfolio 6/20/94 18.79% 19.24%* --
Smith Barney Money Market Portfolio 6/20/94 -2.44% 2.68%* --
Smith Barney Pacific Basin Portfolio 6/20/94 -33.33% -10.67%* --
TBC Managed Income Portfolio 6/20/94 2.13% 5.76%* --
Van Kampen Amer. Cap. Enterprise Portfolio 6/20/94 20.73% 22.56%* --
THE TRAVELERS SERIES TRUST
Convertible Bond Portfolio 5/1/98 -- -- --
Disciplined Mid Cap Stock Portfolio 5/1/98 -- -- --
Disciplined Small Cap Stock Portfolio 5/1/98 -- -- --
MFS Emerging Growth Portfolio 8/30/96 13.43% 12.84%* --
MFS Research Portfolio 5/1/98 -- -- --
Strategic Stock Portfolio 5/1/98 -- -- --
- ---------------------------------------------------------------------------------------------------
</TABLE>
TOTAL RETURN CALCULATIONS - FUNDING OPTIONS OF FUND BD II
ENHANCED DEATH BENEFIT
<TABLE>
<CAPTION>
NONSTANDARDIZED TOTAL RETURNS
(taking into account all charges and fees except
deferred sales charges and contract administrative charge)
- ---------------------------------------------------------------------------------------------------------------------
PORTFOLIO NAME FUND 1 YEAR 3 YEAR 5 YEAR 10 YEAR
INCEPTION
DATE (2)
=====================================================================================================================
<S> <C> <C> <C> <C> <C>
DREYFUS VARIABLE INVESTMENT FUND
Small Cap Portfolio 8/31/90 -- -- -- --
GREENWICH STREET SERIES FUND
Total Return Portfolio 12/93 15.16% 20.54% 17.15%* --
SALOMON BROTHERS VARIABLE SERIES
FUNDS, INC
Salomon Brothers Total Return Fund 1/2/98 -- -- -- --
Salomon Brothers Variable
Investors Fund 1/2/98 -- -- -- --
SMITH BARNEY CONCERT ALLOCATION
SERIES, INC
Concert Select Balanced Portfolio 3/10/97 9.06%* -- -- --
Concert Select Conservative
Portfolio 3/10/97 10.53%* -- -- --
Concert Select Growth Portfolio 3/10/97 9.67%* -- -- --
Concert Select High Growth 3/10/97 8.71%* -- -- --
Portfolio
Concert Select Income Portfolio 3/10/97 10.36%* -- -- --
TRAVELERS SERIES FUND, INC
AIM Capital Appreciation Portfolio 10/95 10.54% 8.47%* -- --
Alliance Growth Portfolio 6/20/94 27.17% 29.14% 25.85%* --
G.T. Global Strategic Income 6/20/94 5.86% 13.58% 9.62%* --
Portfolio
MFS Total Return Portfolio 6/20/94 19.45% 18.62% 14.86%* --
Putnam Diversified Income Portfolio 6/20/94 6.14% 9.41% 8.15%* --
Smith Barney High Income Portfolio 6/20/94 12.22% 13.65% 11.07%* --
Smith Barney International Equity 6/20/94 1.22% 8.79% 5.99%* --
Portfolio
Smith Barney Large Cap Growth Portfolio -- -- -- -- --
Smith Barney Large Cap Value Portfolio 6/20/94 24.81% 24.53% 19.80%* --
Smith Barney Money Market Portfolio 6/20/94 3.58% 3.63% 3.49%* --
Smith Barney Pacific Basin Portfolio 6/20/94 -29.07% -8.28% -9.87%* --
TBC Managed Income Portfolio 6/20/94 8.15% 7.84% 6.52%* --
Van Kampen Amer. Cap. Enterprise Portfolio 6/20/94 26.75% 26.14% 23.09%* --
THE TRAVELERS SERIES TRUST
Convertible Bond Portfolio 5/1/98 -- -- -- --
Disciplined Mid Cap Stock Portfolio 5/1/98 -- -- -- --
Disciplined Small Cap Stock Portfolio 5/1/98 -- -- -- --
MFS Emerging Growth Portfolio 8/30/96 19.45% 18.91%* -- --
MFS Research Portfolio 3/23/98 -- -- -- --
Strategic Stock Portfolio 5/1/98 -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 47
VALUATION OF ASSETS
FUNDING OPTIONS: 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
into account unrealized appreciation or depreciation due to changes in interest
rates or other factors which would influence the current fair values of such
securities. Short-term investments maturing in sixty days or less for which
there is no reliable quoted market price are valued at amortized cost which
approximates market.
THE CONTRACT VALUE: The value of an Accumulation Unit on any business day is
determined by multiplying the value on the preceding business day by the net
investment factor for the valuation period just ended. The net investment factor
is used to measure the investment performance of a funding option from one
valuation period to the next. The net investment factor for a funding option for
any valuation period is equal to the sum of 1.000000 plus the net investment
rate (the gross investment rate less any applicable funding option deductions
during the valuation period relating to the mortality and expense risk charge
and the administrative expense charge). The gross investment rate of a funding
option is equal to (a) minus (b), divided by (c) where:
(a) = investment income plus capital gains and losses (whether realized or
unrealized);
(b) = any deduction for applicable taxes (presently zero); and
(c) = the value of the assets of the funding option at the beginning of the
valuation period.
The gross investment rate may be either positive or negative. A funding
option's investment income includes any distribution whose ex-dividend date
occurs during the valuation period.
ACCUMULATION UNIT VALUE. The value of the accumulation unit for each funding
option was initially established at $1.00. The value of an accumulation unit on
any business day is determined by multiplying the value on the preceding
business day by the net investment factor for the valuation period just ended.
The net investment factor is calculated for each funding option and takes into
account the investment performance, expenses and the deduction of certain
expenses.
7
<PAGE> 48
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.)
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 70 1/2. Distributions must also begin or be continued according to required
patterns following the death of the contract owner or the annuitant.
NONQUALIFIED ANNUITY CONTRACTS
Individuals may purchase tax-deferred annuities without tax law funding
limits. The purchase payments receive no tax benefit, deduction or deferral, but
increases in the value of the contract are generally deferred from tax until
distribution. If a nonqualified annuity is owned by other than an individual,
however, (e.g., by a corporation), the increases in value attributable to
purchase payments made after February 28, 1986 are includable in income
annually. Furthermore, for contracts issued after April 22, 1987, all deferred
increases in value will be includable in the income of a contract owner when the
contract owner transfers the contract without adequate consideration.
If two or more annuity contracts are purchased from the same insurer
within the same calendar year, distributions from any of them will be taxed
based upon the amount of income in all of the same calendar year series of
annuities. This will generally have the effect of causing taxes to be paid
sooner on the deferred gain in the contracts.
Those receiving partial distributions made before the maturity date will
generally be taxed on an income-first basis to the extent of income in the
contract. If you are exchanging another annuity contract for this annuity,
certain pre-August 14, 1982 deposits into an annuity contract that have been
placed in the contract by means of a tax-deferred exchange under Section 1035 of
the Code may be 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
8
<PAGE> 49
excludable from gross income. Any direct or indirect borrowing against the value
of the contract or pledging of the contract as security for a loan will be
treated as a cash distribution under the tax law.
The federal tax law requires that nonqualified annuity contracts meet
minimum mandatory distribution requirements upon the death of the contract
owner, including the first of joint owners. Failure to meet these requirements
will cause the surviving joint owner, or the beneficiary to lose the tax
benefits associated with annuity contracts, i.e., primarily the tax deferral
prior to distribution. The distribution required depends, among other things,
upon whether an annuity option is elected or whether the new contract owner is
the surviving spouse. Contracts will be administered by the Company in
accordance with these rules and the Company will make a notification when
payments should be commenced.
INDIVIDUAL RETIREMENT ANNUITIES
To the extent of earned income for the year and not exceeding $2,000 per
individual, an individual may make deductible contributions to an individual
retirement annuity (IRA). There are certain limits on the deductible amount
based on the adjusted gross income of the individual and spouse and based on
their participation in a retirement plan. If an individual is married and the
spouse does not have earned income, the individual may establish IRAs for the
individual and spouse. Purchase payments may then be made annually into IRAs for
both spouses in the maximum amount of 100% of earned income up to a combined
limit of $4,000.
The Code provides for the purchase of a Simplified Employee Pension
(SEP) plan. A SEP is funded through an IRA with an annual employer contribution
limit of 15% of compensation up to $30,000 for each participant.
SIMPLE Plan IRA Form
Effective January 1, 1997, employers may establish a savings incentive
match plan for employees ("SIMPLE plan") under which employees can make elective
salary reduction contributions to an IRA based on a percentage of compensation
of up to $6,000. (Alternatively, the employer can establish a SIMPLE cash or
deferred arrangement under IRS Section 401(k)). Under a SIMPLE plan IRA, the
employer must either make a matching contribution of 100% on the first 3% or 7%
contribution for all eligible employees. Early withdrawals are subject to the
10% early withdrawal penalty generally applicable to IRAs, except that an early
withdrawal by an employee under a SIMPLE plan IRA, within the first two years of
participation, shall be subject to a 25% early withdrawal tax.
ROTH IRAS
Effective January 1, 1998, Section 408A of the Code permits certain
individuals to contribute to a Roth IRA. Eligibility to make contributions is
based upon income, and the applicable limits vary based on marital status and/or
whether the contribution is a rollover contribution from another IRA or an
annual contribution. Contributions to a Roth IRA, which are subject to certain
limitations ($2,000 per year for annual contributions), are not deductible and
must be made in cash or as a rollover or transfer from another Roth IRA or other
IRA. A conversion of a "traditional" IRA to a Roth IRA may be subject to tax and
other special rules apply. You should consult a tax adviser before combining any
converted amounts with other Roth IRA contributions, including any other
conversion amounts from other tax years.
9
<PAGE> 50
Qualified distributions from a Roth IRA are tax-free. A qualified
distribution requires that the Roth IRA has been held for at least 5 years, and
the distribution is made after age 59 1/2, on death or disability of the owner,
or for a limited amount ($10,000) for a qualified first time home purchase for
the owner or certain relatives. Income tax and a 10% penalty tax may apply to
distributions made (1) before age 59 1/2 (subject to certain exceptions) or (2)
during five taxable years starting with the year in which the first contribution
is made to the Roth IRA.
QUALIFIED PENSION AND PROFIT-SHARING PLANS
Under a qualified pension or profit-sharing plan, purchase payments made
by an employer are not currently taxable to the participant and increases in the
value of a contract are not subject to taxation until received by a participant
or beneficiary.
Distributions are taxable to the participant or beneficiary as ordinary
income in the year of receipt. Any distribution that is considered the
participant's "investment in the contract" is treated as a return of capital and
is not taxable. Certain lump-sum distributions may be eligible for special
forward averaging tax treatment for certain classes of individuals.
FEDERAL INCOME TAX WITHHOLDING
The portion of a distribution which is taxable income to the recipient
will be subject to federal income tax withholding as follows:
1. ELIGIBLE ROLLOVER DISTRIBUTION FROM SECTION 403(b) PLANS OR ARRANGEMENTS OR
FROM QUALIFIED PENSION AND PROFIT-SHARING PLANS
There is a mandatory 20% tax withholding for plan distributions that are
eligible for rollover to an IRA or to another retirement plan but that are not
directly rolled over. A distribution made directly to a participant or
beneficiary may avoid this result if:
(a) a periodic settlement distribution is elected based upon a life or life
expectancy calculation, or
(b) a term-for-years settlement distribution is elected for a period of ten
years or more, payable at least annually, or
(c) a minimum required distribution as defined under the tax law is taken
after the attainment of the age of 70 1/2 or as otherwise required by
law.
A distribution including a rollover that is not a direct rollover will
be subject to the 20% withholding, and a 10% additional tax penalty may apply to
any amount not added back in the rollover. The 20% withholding may be recovered
when the participant or beneficiary files a personal income tax return for the
year if a rollover was completed within 60 days of receipt of the funds, except
to the extent that the participant or spousal beneficiary is otherwise
underwithheld or short on estimated taxes for that year.
10
<PAGE> 51
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, 1998, a recipient receiving
periodic payments (e.g., monthly or annual payments under an annuity option)
which total $15,200 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
Financial statements as of and for the year ended December 31, 1997 of
Fund BD II, included in the Annual Report incorporated by reference in this SAI,
have been incorporated herein in reliance on the report of Coopers & Lybrand
L.L.P., independent accountants, given on the authority of that firm as experts
in accounting and auditing.
The financial statements of The Travelers Life and Annuity Company as of
December 31, 1997 and 1996, and for each of the years in the three-year period
ended December 31, 1997, have been included herein in reliance upon the report
of KPMG Peat Marwick LLP, independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing.
11
<PAGE> 52
ANNUAL REPORT
DECEMBER 31, 1997
THE TRAVELERS FUND BD II
FOR VARIABLE ANNUITIES
[TRAVELERS LIFE & ANNUITY LOGO]
The Travelers Insurance Company
The Travelers Life and Annuity Company
One Tower Square
Hartford, CT 06183
<PAGE> 53
THE TRAVELERS FUND BD II
FOR VARIABLE ANNUITIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Investments in eligible funds at market value:
Travelers Series Fund Inc., 57,523,433 shares (cost $484,268,916) .............. $548,663,720
The Travelers Series Trust, 2,057,916 shares (cost $24,142,052) ............... 25,847,424
Greenwich Street Series Fund, 4,020,841 shares (cost $63,997,071) ............. 70,847,226
Smith Barney Concert Allocation Series Inc., 1,463,310 shares (cost $15,797,172) 16,327,070
Total Investments (cost $588,205,211) ...................................... $661,685,440
Receivables:
Dividends ...................................................................... 55,325
Purchase payments and transfers from other Travelers accounts .................. 8,265,175
Other assets ..................................................................... 316
------------
Total Assets ................................................................. 670,006,256
------------
LIABILITIES:
Payable for contract surrenders and transfers to other Travelers accounts ........ 7,462,710
Accrued liabilities .............................................................. 43,471
------------
Total Liabilities ............................................................ 7,506,181
------------
NET ASSETS: ......................................................................... $662,500,075
============
</TABLE>
See Notes to Financial Statements
-1-
<PAGE> 54
THE TRAVELERS FUND BD II
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Dividends ........................................... $ 4,719,028
EXPENSES:
Insurance charges ................................... $ 4,591,948
Administrative fees ................................. 668,938
-------------
Total expenses .................................... 5,260,886
-------------
Net investment loss ............................. (541,858)
-------------
REALIZED GAIN AND CHANGE IN UNREALIZED GAIN ON
INVESTMENTS:
Realized gain from investment transactions:
Proceeds from investments sold .................... 236,812,432
Cost of investments sold .......................... 233,076,182
-------------
Net realized gain ............................... 3,736,250
Change in unrealized gain on investments:
Unrealized gain at December 31, 1996 .............. 13,880,806
Unrealized gain at December 31, 1997 .............. 73,480,229
-------------
Net change in unrealized gain for the year ...... 59,599,423
-------------
Net realized gain and change in unrealized gain 63,335,673
-------------
Net increase in net assets resulting from operations $ 62,793,815
=============
</TABLE>
See Notes to Financial Statements
-2-
<PAGE> 55
THE TRAVELERS FUND BD II
FOR VARIABLE ANNUITIES
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
OPERATIONS:
Net investment income (loss) .................................... $ (541,858) $ 4,583,320
Net realized gain from investment transactions .................. 3,736,250 598,325
Net change in unrealized gain (loss) on investments ............. 59,599,423 14,005,980
------------- -------------
Net increase in net assets resulting from operations .......... 62,793,815 19,187,625
------------- -------------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 212,510,724 and 182,948,181 units, respectively) 305,552,932 226,873,244
Participant transfers from other Travelers accounts
(applicable to 304,613,637 and 55,121,934 units, respectively) 370,995,750 65,242,361
Administrative charges
(applicable to 49,225 and 15,382 units, respectively) ......... (76,062) (18,946)
Contract surrenders
(applicable to 7,258,742 and 1,897,753 units, respectively) ... (10,937,049) (2,337,255)
Participant transfers to other Travelers accounts
(applicable to 285,276,584 and 50,981,143 units, respectively) (331,281,698) (55,932,256)
Other payments to participants
(applicable to 2,772,990 and 810,905 units, respectively) ..... (3,790,797) (1,058,035)
------------- -------------
Net increase in net assets resulting from unit transactions . 330,463,076 232,769,113
------------- -------------
Net increase in net assets ................................ 393,256,891 251,956,738
NET ASSETS:
Beginning of year ............................................... 269,243,184 17,286,446
------------- -------------
End of year ..................................................... $ 662,500,075 $ 269,243,184
============= =============
</TABLE>
See Notes to Financial Statements
-3-
<PAGE> 56
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, 1997, the eligible funds available under Fund BD II are:
Alliance Growth Portfolio, Van Kampen 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.; MFS Emerging Growth Portfolio of The Travelers Series Trust; Total
Return Portfolio of Greenwich Street Series Fund (formerly Smith Barney Series
Fund); and Select High Growth Portfolio, Select Growth Portfolio, Select
Balanced Portfolio, Select Conservative Portfolio and Select Income Portfolio of
Smith Barney Concert Allocation Series Inc. Travelers Series Fund Inc. and Smith
Barney Concert Allocation Series Inc. are incorporated under Maryland law. The
Travelers Series Trust and Greenwich Street Series Fund are registered as
Massachusetts business trusts. All eligible funds are managed by affiliates of
The Travelers. Not all funds may be available in all states or to all contract
owners.
The following is a summary of significant accounting policies consistently
followed by Fund BD 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.
SECURITY TRANSACTIONS. Security transactions are accounted for on the trade
date. Dividend income is recorded on the ex-dividend date.
FEDERAL INCOME TAXES. The operations of Fund BD 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.
2. INVESTMENTS
The aggregate costs of purchases and proceeds from sales of investments were
$568,123,809 and $236,812,432, respectively, for the year ended December 31,
1997. Realized gains and losses from investment transactions are reported on an
identified cost basis. The cost of investments in eligible funds was
$588,205,211 at December 31, 1997. Gross unrealized appreciation for all
investments at December 31, 1997 was $76,194,239. Gross unrealized depreciation
for all investments at December 31, 1997 was $2,714,010.
-4-
<PAGE> 57
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 $217,306 and
$26,151 of contingent deferred sales charges for the years ended December 31,
1997 and 1996, respectively.
-5-
<PAGE> 58
NOTES TO FINANCIAL STATEMENTS - CONTINUED
4. NET CONTRACT OWNERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31, 1997
ACCUMULATION UNIT NET
UNITS VALUE ASSETS
----- ----- ------
<S> <C> <C> <C>
TRAVELERS SERIES FUND INC
Alliance Growth Portfolio
Standard ..................................... 47,935,239 $ 2.276 $109,109,519
Enhanced ..................................... 8,482,408 2.254 19,117,414
Van Kampen American Capital Enterprise Portfolio
Standard ..................................... 24,635,450 2.103 51,814,773
Enhanced ..................................... 4,384,826 2.083 9,131,702
TBC Managed Income Portfolio
Standard ..................................... 4,488,528 1.261 5,658,877
Enhanced ..................................... 1,001,269 1.248 1,249,997
G.T. Global Strategic Income Portfolio
Standard ..................................... 5,016,054 1.397 7,006,562
Enhanced ..................................... 953,563 1.383 1,318,867
Smith Barney High Income Portfolio
Standard ..................................... 21,213,238 1.463 31,027,036
Enhanced ..................................... 2,639,907 1.448 3,823,149
Smith Barney International Equity Portfolio
Standard ..................................... 31,311,119 1.240 38,834,723
Enhanced ..................................... 4,871,826 1.228 5,982,887
Smith Barney Income and Growth Portfolio
Standard ..................................... 27,117,422 1.913 51,863,526
Enhanced ..................................... 4,645,333 1.894 8,796,921
Smith Barney Money Market Portfolio
Standard ..................................... 25,661,233 1.140 29,257,532
Enhanced ..................................... 2,416,650 1.129 2,728,197
Putnam Diversified Income Portfolio
Standard ..................................... 19,504,257 1.332 25,984,875
Enhanced ..................................... 3,953,118 1.319 5,214,743
Smith Barney Pacific Basin Portfolio
Standard ..................................... 5,124,475 0.700 3,584,968
Enhanced ..................................... 862,053 0.693 597,141
MFS Total Return Portfolio
Standard ..................................... 34,927,831 1.648 57,566,200
Enhanced ..................................... 6,138,961 1.632 10,018,397
AIM Capital Appreciation Portfolio
Standard ..................................... 48,942,401 1.206 59,021,877
Enhanced ..................................... 8,844,768 1.198 10,599,956
THE TRAVELERS SERIES TRUST
MFS Emerging Growth Portfolio
Standard ..................................... 17,294,943 1.204 20,826,373
Enhanced ..................................... 4,255,983 1.200 5,108,293
GREENWICH STREET SERIES FUND
Total Return Portfolio
Standard ..................................... 33,686,043 1.790 60,304,524
Enhanced ..................................... 5,975,192 1.775 10,604,186
SMITH BARNEY CONCERT ALLOCATION SERIES INC
Select High Growth Portfolio
Standard ..................................... 2,656,918 1.090 2,894,856
Enhanced ..................................... 391,357 1.087 425,434
Select Growth Portfolio
Standard ..................................... 3,396,120 1.099 3,733,000
Enhanced ..................................... 1,191,020 1.097 1,306,201
Select Balanced Portfolio
Standard ..................................... 4,148,291 1.093 4,534,330
Enhanced ..................................... 1,788,610 1.091 1,950,633
Select Conservative Portfolio
Standard ..................................... 863,063 1.108 955,967
Enhanced ..................................... 105,113 1.105 116,177
Select Income Portfolio
Standard ..................................... 364,454 1.106 403,062
Enhanced ..................................... 24,647 1.104 27,200
------------
Net Contract Owners' Equity ....................... $662,500,075
============
</TABLE>
-6-
<PAGE> 59
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. STATEMENT OF INVESTMENTS
<TABLE>
<CAPTION>
INVESTMENT OPTIONS NO. OF MARKET
SHARES VALUE
------ -----
<S> <C> <C>
TRAVELERS SERIES FUND INC. (82.9%)
Alliance Growth Portfolio (Cost $101,511,528) 5,917,034 $128,103,779
Van Kampen American Capital Enterprise Portfolio (Cost $50,600,654) 2,994,601 60,880,239
TBC Managed Income Portfolio (Cost $6,475,449) 588,529 6,909,335
G.T. Global Strategic Income Portfolio (Cost $7,878,432) 650,051 8,294,655
Smith Barney High Income Portfolio (Cost $32,187,580) 2,585,924 34,858,251
Smith Barney International Equity Portfolio (Cost $52,687,729) 3,895,323 50,249,661
Smith Barney Income and Growth Portfolio (Cost $51,231,882) 3,178,223 60,608,709
Smith Barney Money Market Portfolio (Cost $24,531,613) 24,531,613 24,531,613
Putnam Diversified Income Portfolio (Cost $29,505,953) 2,503,168 31,189,474
Smith Barney Pacific Basin Portfolio (Cost $6,246,577) 825,814 5,970,635
MFS Total Return Portfolio (Cost $58,707,937) 4,229,489 67,502,647
AIM Capital Appreciation Portfolio (Cost $62,703,582) 5,623,664 69,564,722
------------ ------------
Total (Cost $484,268,916) 57,523,433 548,663,720
------------ ------------
THE TRAVELERS SERIES TRUST (3.9%)
MFS Emerging Growth Portfolio
Total (Cost $24,142,052) 2,057,916 25,847,424
------------ ------------
GREENWICH STREET SERIES FUND (10.7%)
Total Return Portfolio
Total (Cost $63,997,071) 4,020,841 70,847,226
------------ ------------
SMITH BARNEY CONCERT ALLOCATION SERIES INC. (2.5%)
Select High Growth Portfolio (Cost $3,213,308) 301,590 3,320,507
Select Growth Portfolio (Cost $4,899,940) 449,284 5,027,487
Select Balanced Portfolio (Cost $6,235,760) 579,322 6,488,408
Select Conservative Portfolio (Cost $1,024,737) 94,592 1,060,378
Select Income Portfolio (Cost $423,427) 38,522 430,290
------------ ------------
Total (Cost $15,797,172) 1,463,310 16,327,070
------------ ------------
TOTAL INVESTMENT OPTIONS (100%)
(COST $588,205,211) $661,685,440
============
</TABLE>
-7-
<PAGE> 60
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF FUND BD II OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
VAN KAMPEN
AMERICAN CAPITAL
ALLIANCE GROWTH PORTFOLIO ENTERPRISE PORTFOLIO
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ............................................. $ -- $ 1,749,884 $ -- $ 65,661
------------- ------------ ------------ ------------
EXPENSES:
Insurance charges ..................................... 881,791 239,371 417,556 107,644
Administrative fees ................................... 124,597 33,611 59,444 15,377
------------- ------------ ------------ ------------
Net investment income (loss) .................... (1,006,388) 1,476,902 (477,000) (57,360)
------------- ------------ ------------ ------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold .................... 732,086 115,510 232,006 179,400
Cost of investments sold .......................... 553,312 97,909 161,526 156,110
------------- ------------ ------------ ------------
Net realized gain (loss) ........................ 178,774 17,601 70,480 23,290
------------- ------------ ------------ ------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .......... 4,561,590 (42,615) 1,791,072 (18,558)
Unrealized gain (loss) end of year ................ 26,592,251 4,561,590 10,279,585 1,791,072
------------- ------------ ------------ ------------
Net change in unrealized gain (loss) for the year 22,030,661 4,604,205 8,488,513 1,809,630
------------- ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations ....................... 21,203,047 6,098,708 8,081,993 1,775,560
------------- ------------ ------------ ------------
UNIT TRANSACTIONS:
Participant purchase payments ......................... 47,077,956 34,649,407 25,093,955 16,501,913
Participant transfers from other Travelers accounts ... 18,767,525 7,299,315 8,649,103 2,552,870
Administrative charges ................................ (16,453) (3,897) (6,057) (1,313)
Contract surrenders ................................... (1,971,086) (387,974) (1,128,220) (141,838)
Participant transfers to other Travelers accounts ..... (5,373,999) (1,038,182) (1,045,309) (587,799)
Other payments to participants ........................ (755,258) (147,805) (198,607) (87,345)
------------- ------------ ------------ ------------
Net increase in net assets resulting
from unit transactions .......................... 57,728,685 40,370,864 31,364,865 18,236,488
------------- ------------ ------------ ------------
Net increase in net assets ...................... 78,931,732 46,469,572 39,446,858 20,012,048
NET ASSETS:
Beginning of year ................................. 49,295,201 2,825,629 21,499,617 1,487,569
------------- ------------ ------------ ------------
End of year ....................................... $ 128,226,933 $ 49,295,201 $ 60,946,475 $ 21,499,617
============= ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
TBC MANAGED
INCOME PORTFOLIO
1997 1996
---- ----
<S> <C> <C>
INVESTMENT INCOME:
Dividends ............................................. $ -- $ 144,329
----------- -----------
EXPENSES:
Insurance charges ..................................... 49,769 20,601
Administrative fees ................................... 7,098 2,972
----------- -----------
Net investment income (loss) .................... (56,867) 120,756
----------- -----------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold .................... 420,772 443,906
Cost of investments sold .......................... 413,801 463,432
----------- -----------
Net realized gain (loss) ........................ 6,971 (19,526)
----------- -----------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .......... (21,610) (13,530)
Unrealized gain (loss) end of year ................ 433,886 (21,610)
----------- -----------
Net change in unrealized gain (loss) for the year 455,496 (8,080)
----------- -----------
Net increase (decrease) in net assets
resulting from operations ....................... 405,600 93,150
----------- -----------
UNIT TRANSACTIONS:
Participant purchase payments ......................... 2,833,792 3,072,427
Participant transfers from other Travelers accounts ... 925,966 349,692
Administrative charges ................................ (719) (212)
Contract surrenders ................................... (94,062) (12,989)
Participant transfers to other Travelers accounts ..... (486,399) (491,338)
Other payments to participants ........................ (45,750) --
----------- -----------
Net increase in net assets resulting
from unit transactions .......................... 3,132,828 2,917,580
----------- -----------
Net increase in net assets ...................... 3,538,428 3,010,730
NET ASSETS:
Beginning of year ................................. 3,370,446 359,716
----------- -----------
End of year ....................................... $ 6,908,874 $ 3,370,446
=========== ===========
</TABLE>
-8-
<PAGE> 61
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
G.T. GLOBAL STRATEGIC SMITH BARNEY SMITH BARNEY
INCOME PORTFOLIO HIGH INCOME PORTFOLIO INTERNATIONAL EQUITY PORTFOLIO
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
$ -- $ 239,292 $ -- $ 625,383 $ -- $ 22,493
- ----------- ----------- ------------ ------------ ------------- ------------
60,882 14,195 213,529 54,325 306,167 107,608
8,670 1,970 30,465 7,674 54,224 16,122
- ----------- ----------- ------------ ------------ ------------- ------------
(69,552) 223,127 (243,994) 563,384 (360,391) (101,237)
- ----------- ----------- ------------ ------------ ------------- ------------
250,620 12,114 377,090 118,732 74,413,842 4,446,920
218,454 11,608 344,965 118,637 70,693,976 3,960,097
- ----------- ----------- ------------ ------------ ------------- ------------
32,166 506 32,125 95 3,719,866 486,823
- ----------- ----------- ------------ ------------ ------------- ------------
33,836 (1,453) 138,086 (21,008) 754,036 20,347
416,223 33,836 2,670,671 138,086 (2,438,068) 754,036
- ----------- ----------- ------------ ------------ ------------- ------------
382,387 35,289 2,532,585 159,094 (3,192,104) 733,689
- ----------- ----------- ------------ ------------ ------------- ------------
345,001 258,922 2,320,716 722,573 167,371 1,119,275
- ----------- ----------- ------------ ------------ ------------- ------------
4,062,420 2,320,799 19,554,203 9,279,640 16,944,027 17,392,360
1,319,922 331,095 3,746,308 1,222,919 104,954,168 10,287,941
(653) (164) (2,715) (580) (6,694) (1,790)
(120,207) (13,081) (506,524) (76,933) (641,705) (168,200)
(215,137) (6,536) (1,479,106) (462,926) (99,450,511) (6,285,736)
(82,404) -- (67,720) (65,308) (182,508) (104,568)
- ----------- ----------- ------------ ------------ ------------- ------------
4,963,941 2,632,113 21,244,446 9,896,812 21,616,777 21,120,007
- ----------- ----------- ------------ ------------ ------------- ------------
5,308,942 2,891,035 23,565,162 10,619,385 21,784,148 22,239,282
3,016,487 125,452 11,285,023 665,638 23,033,462 794,180
- ----------- ----------- ------------ ------------ ------------- ------------
$ 8,325,429 $ 3,016,487 $ 34,850,185 $ 11,285,023 $ 44,817,610 $ 23,033,462
=========== =========== ============ ============ ============= ============
</TABLE>
<TABLE>
<CAPTION>
SMITH BARNEY INCOME
AND GROWTH PORTFOLIO
1997 1996
---- ----
<S> <C>
$ -- $ 455,102
- ------------ ------------
401,449 97,155
56,935 13,920
- ------------ ------------
(458,384) 344,027
- ------------ ------------
542,887 82,485
399,665 69,287
- ------------ ------------
143,222 13,198
- ------------ ------------
1,308,970 1,435
9,376,827 1,308,970
- ------------ ------------
8,067,857 1,307,535
- ------------ ------------
7,752,695 1,664,760
- ------------ ------------
25,405,607 15,205,943
10,329,030 3,567,741
(5,831) (1,280)
(1,199,451) (178,977)
(2,080,124) (444,378)
(172,269) (140,840)
- ------------ ------------
32,276,962 18,008,209
- ------------ ------------
40,029,657 19,672,969
20,630,790 957,821
- ------------ ------------
$ 60,660,447 $ 20,630,790
============ ============
</TABLE>
-9-
<PAGE> 62
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF FUND BD II OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 (CONTINUED)
<TABLE>
<CAPTION>
SMITH BARNEY PUTNAM
MONEY MARKET PORTFOLIO DIVERSIFIED INCOME PORTFOLIO
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ............................................. $ 1,460,052 $ 734,489 $ -- $ 775,071
------------- ------------ ------------ ------------
EXPENSES:
Insurance charges ..................................... 309,270 161,431 227,383 77,461
Administrative fees ................................... 44,027 22,917 32,184 11,041
------------- ------------ ------------ ------------
Net investment income (loss) .................... 1,106,755 550,141 (259,567) 686,569
------------- ------------ ------------ ------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold .................... 129,557,007 22,760,375 454,711 361,079
Cost of investments sold .......................... 129,557,007 22,760,375 450,698 356,390
------------- ------------ ------------ ------------
Net realized gain (loss) ........................ -- -- 4,013 4,689
------------- ------------ ------------ ------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .......... -- -- 11,889 (29,630)
Unrealized gain (loss) end of year ................ -- -- 1,683,521 11,889
------------- ------------ ------------ ------------
Net change in unrealized gain (loss) for the year -- -- 1,671,632 41,519
------------- ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations ....................... 1,106,755 550,141 1,416,078 732,777
------------- ------------ ------------ ------------
UNIT TRANSACTIONS:
Participant purchase payments ......................... 37,218,989 44,038,947 13,450,688 12,719,514
Participant transfers from other Travelers accounts ... 144,063,574 16,886,657 3,933,503 1,427,681
Administrative charges ................................ (2,414) (945) (3,655) (1,014)
Contract surrenders ................................... (918,683) (461,230) (514,487) (283,811)
Participant transfers to other Travelers accounts ..... (176,681,199) (36,332,462) (1,811,753) (827,078)
Other payments to participants ........................ (580,295) (277,845) (134,175) (15,839)
------------- ------------ ------------ ------------
Net increase in net assets resulting
from unit transactions ........................... 3,099,972 23,853,122 14,920,121 13,019,453
------------- ------------ ------------ ------------
Net increase in net assets ...................... 4,206,727 24,403,263 16,336,199 13,752,230
NET ASSETS:
Beginning of year ................................. 27,779,002 3,375,739 14,863,419 1,111,189
------------- ------------ ------------ ------------
End of year ....................................... $ 31,985,729 $ 27,779,002 $ 31,199,618 $ 14,863,419
============= ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
SMITH BARNEY
PACIFIC BASIN PORTFOLIO
1997 1996
---- ----
<S> <C> <C>
INVESTMENT INCOME:
Dividends ............................................. $ -- $ 19,513
------------ -----------
EXPENSES:
Insurance charges ..................................... 158 17,947
Administrative fees ................................... 6,618 2,375
------------ -----------
Net investment income (loss) .................... (6,776) (809)
------------ -----------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold .................... 26,053,417 7,758,018
Cost of investments sold .......................... 27,025,264 7,712,954
------------ -----------
Net realized gain (loss) ........................ (971,847) 45,064
------------ -----------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .......... 53,691 1,836
Unrealized gain (loss) end of year ................ (275,942) 53,691
------------ -----------
Net change in unrealized gain (loss) for the year (329,633) 51,855
------------ -----------
Net increase (decrease) in net assets
resulting from operations ....................... (1,308,256) 96,110
------------ -----------
UNIT TRANSACTIONS:
Participant purchase payments ......................... 2,205,368 2,993,075
Participant transfers from other Travelers accounts ... 33,843,799 8,020,835
Administrative charges ................................ (954) (370)
Contract surrenders ................................... (79,311) (11,727)
Participant transfers to other Travelers accounts ..... (33,605,393) (7,984,301)
Other payments to participants ........................ (38,406) --
------------ -----------
Net increase in net assets resulting
from unit transactions .......................... 2,325,103 3,017,512
------------ -----------
Net increase in net assets ...................... 1,016,847 3,113,622
NET ASSETS:
Beginning of year ................................. 3,165,262 51,640
------------ -----------
End of year ....................................... $ 4,182,109 $ 3,165,262
============ ===========
</TABLE>
-10-
<PAGE> 63
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
AIM CAPITAL MFS EMERGING
MFS TOTAL RETURN PORTFOLIO APPRECIATION PORTFOLIO GROWTH PORTFOLIO TOTAL RETURN PORTFOLIO
1997 1996 1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
$ -- $ 832,634 $ -- $ 35,100 $ 439,667 $ 13,776 $ 2,819,309 $ 394,497
- ------------ ------------ ------------ ------------ ------------ ----------- ------------ ------------
449,112 121,785 565,729 197,164 141,590 2,585 503,712 114,672
63,766 17,434 80,459 27,944 20,232 351 71,448 16,252
- ------------ ------------ ------------ ------------ ------------ ----------- ------------ ------------
(512,878) 693,415 (646,188) (190,008) 277,845 10,840 2,244,149 263,573
- ------------ ------------ ------------ ------------ ------------ ----------- ------------ ------------
1,195,009 122,229 796,430 189,761 684,958 -- 501,439 107,077
991,043 113,231 669,177 187,142 633,928 -- 396,281 92,109
- ------------ ------------ ------------ ------------ ------------ ----------- ------------ ------------
203,966 8,998 127,253 2,619 51,030 -- 105,158 14,968
- ------------ ------------ ------------ ------------ ------------ ----------- ------------ ------------
1,072,467 140 1,950,900 (25,475) (93,591) -- 2,319,470 3,337
8,794,710 1,072,467 6,861,140 1,950,900 1,705,372 (93,591) 6,850,155 2,319,470
- ------------ ------------ ------------ ------------ ------------ ----------- ------------ ------------
7,722,243 1,072,327 4,910,240 1,976,375 1,798,963 (93,591) 4,530,685 2,316,133
- ------------ ------------ ------------ ------------ ------------ ----------- ------------ ------------
7,413,331 1,774,740 4,391,305 1,788,986 2,127,838 (82,751) 6,879,992 2,594,674
- ------------ ------------ ------------ ------------ ------------ ----------- ------------ ------------
29,292,210 19,949,329 24,085,122 27,035,886 16,234,637 2,458,877 29,547,521 19,255,127
9,887,470 3,146,849 9,106,236 5,567,585 6,184,899 622,001 11,320,000 3,959,180
(6,249) (1,570) (13,062) (4,115) (1,929) -- (8,180) (1,696)
(1,064,999) (144,598) (1,468,796) (343,921) (167,796) (647) (1,002,438) (111,329)
(3,008,984) (517,750) (2,435,679) (636,435) (1,315,407) (10,312) (1,698,306) (307,023)
(312,103) (55,560) (696,990) (53,445) (114,744) -- (409,568) (109,480)
- ------------ ------------ ------------ ------------ ------------ ----------- ------------ ------------
34,787,345 22,376,700 28,576,831 31,565,555 20,819,660 3,069,919 37,749,029 22,684,779
- ------------ ------------ ------------ ------------ ------------ ----------- ------------ ------------
42,200,676 24,151,440 32,968,136 33,354,541 22,947,498 2,987,168 44,629,021 25,279,453
25,383,921 1,232,481 36,653,697 3,299,156 2,987,168 -- 26,279,689 1,000,236
- ------------ ------------ ------------ ------------ ------------ ----------- ------------ ------------
$ 67,584,597 $ 25,383,921 $ 69,621,833 $ 36,653,697 $ 25,934,666 $ 2,987,168 $ 70,908,710 $ 26,279,689
============ ============ ============ ============ ============ =========== ============ ============
</TABLE>
-11-
<PAGE> 64
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF FUND BD II OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 (CONTINUED)
<TABLE>
<CAPTION>
SELECT HIGH GROWTH PORTFOLIO SELECT GROWTH PORTFOLIO
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ............................................. $ -- $- $ -- $-
----------- -- ----------- --
EXPENSES:
Insurance charges ..................................... 15,141 - 17,499 -
Administrative fees ................................... 2,177 - 2,398 -
----------- -- ----------- --
Net investment income (loss) .................... (17,318) - (19,897) -
----------- -- ----------- --
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold .................... 11,871 - 119,596 -
Cost of investments sold .......................... 10,454 - 105,666 -
----------- -- ----------- --
Net realized gain (loss) ........................ 1,417 - 13,930 -
----------- -- ----------- --
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .......... -- - -- -
Unrealized gain (loss) end of year ................ 107,199 - 127,547 -
----------- -- ----------- --
Net change in unrealized gain (loss) for the year 107,199 - 127,547 -
----------- -- ----------- --
Net increase (decrease) in net assets
resulting from operations ....................... 91,298 - 121,580 -
----------- -- ----------- --
UNIT TRANSACTIONS:
Participant purchase payments ......................... 1,961,168 - 4,140,789 -
Participant transfers from other Travelers accounts ... 1,271,640 - 937,045 -
Administrative charges ................................ (82) - (227) -
Contract surrenders ................................... (3,734) - (10,285) -
Participant transfers to other Travelers accounts ..... -- - (149,701) -
Other payments to participants ........................ -- - -- -
----------- -- ----------- --
Net increase in net assets resulting
from unit transactions .......................... 3,228,992 - 4,917,621 -
----------- -- ----------- --
Net increase in net assets ...................... 3,320,290 - 5,039,201 -
NET ASSETS:
Beginning of year ................................. -- - -- -
----------- -- ----------- --
End of year ....................................... $ 3,320,290 $- $ 5,039,201 $-
=========== == =========== ==
</TABLE>
<TABLE>
<CAPTION>
SELECT BALANCED PORTFOLIO
1997 1996
---- ----
<S> <C> <C>
INVESTMENT INCOME:
Dividends ............................................. $ -- $--
----------- ---
EXPENSES:
Insurance charges ..................................... 26,874 --
Administrative fees ................................... 3,580 --
----------- ---
Net investment income (loss) .................... (30,454) --
----------- ---
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold .................... 288,850 --
Cost of investments sold .......................... 277,252 --
----------- ---
Net realized gain (loss) ........................ 11,598 --
----------- ---
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .......... -- --
Unrealized gain (loss) end of year ................ 252,648 --
----------- ---
Net change in unrealized gain (loss) for the year 252,648 --
----------- ---
Net increase (decrease) in net assets
resulting from operations ....................... 233,792 --
----------- ---
UNIT TRANSACTIONS:
Participant purchase payments ......................... 5,194,754 --
Participant transfers from other Travelers accounts ... 1,371,868 --
Administrative charges ................................ (156) --
Contract surrenders ................................... (20,071) --
Participant transfers to other Travelers accounts ..... (295,224) --
Other payments to participants ........................ -- --
----------- ---
Net increase in net assets resulting
from unit transactions .......................... 6,251,171 --
----------- ---
Net increase in net assets ...................... 6,484,963 --
NET ASSETS:
Beginning of year ................................. -- --
----------- ---
End of year ....................................... $ 6,484,963 $--
=========== ===
</TABLE>
-12-
<PAGE> 65
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
SELECT CONSERVATIVE PORTFOLIO SELECT INCOME PORTFOLIO COMBINED
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
$ - $ - $ - $ - $ 4,719,028 $ 6,107,224
------------ ----- --------- ----- -------------- -------------
3,516 - 821 - 4,591,948 1,333,944
499 - 117 - 668,938 189,960
------------ ----- --------- ----- -------------- -------------
(4,015) - (938) - (541,858) 4,583,320
------------ ----- --------- ----- -------------- -------------
136,242 - 43,599 - 236,812,432 36,697,606
131,428 - 42,285 - 233,076,182 36,099,281
------------ ----- --------- ----- -------------- -------------
4,814 - 1,314 - 3,736,250 598,325
------------ ----- --------- ----- -------------- -------------
- - - - 13,880,806 (125,174)
35,641 - 6,863 - 73,480,229 13,880,806
------------ ----- --------- ----- -------------- -------------
35,641 - 6,863 - 59,599,423 14,005,980
------------ ----- --------- ----- -------------- -------------
36,440 - 7,239 - 62,793,815 19,187,625
------------ ----- --------- ----- -------------- -------------
881,469 - 368,257 - 305,552,932 226,873,244
299,232 - 84,462 - 370,995,750 65,242,361
(25) - (7) - (76,062) (18,946)
(13,817) - (11,377) - (10,937,049) (2,337,255)
(131,155) - (18,312) - (331,281,698) (55,932,256)
- - - - (3,790,797) (1,058,035)
------------ ----- --------- ----- -------------- -------------
1,035,704 - 423,023 - 330,463,076 232,769,113
------------ ----- --------- ----- -------------- -------------
1,072,144 - 430,262 - 393,256,891 251,956,738
- - - - 269,243,184 17,286,446
------------ ----- --------- ----- -------------- -------------
$ 1,072,144 $ - $430,262 $ - $ 662,500,075 $269,243,184
============ ===== ========= ===== ============== =============
</TABLE>
-13-
<PAGE> 66
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF ACCUMULATION UNITS FOR FUND BD II
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
VAN KAMPEN
AMERICAN CAPITAL TBC MANAGED
ALLIANCE GROWTH PORTFOLIO ENTERPRISE PORTFOLIO INCOME PORTFOLIO
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation units beginning of year 27,644,095 2,026,405 13,004,616 1,093,664 2,901,133 315,445
Accumulation units purchased and
transferred from other Travelers
accounts ........................ 32,819,155 26,601,698 17,226,005 12,436,976 3,113,712 3,034,567
Accumulation units redeemed and
transferred to other Travelers
accounts ........................ (4,045,603) (984,008) (1,210,345) (526,024) (525,048) (448,879)
----------- ----------- ----------- ----------- ---------- ----------
Accumulation units end of year ..... 56,417,647 27,644,095 29,020,276 13,004,616 5,489,797 2,901,133
=========== =========== =========== =========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
G.T. GLOBAL STRATEGIC SMITH BARNEY SMITH BARNEY INTERNATIONAL
INCOME PORTFOLIO HIGH INCOME PORTFOLIO EQUITY PORTFOLIO
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation units beginning of year 2,295,810 112,291 8,689,256 574,114 18,864,868 757,069
Accumulation units purchased and
transferred from other Travelers
accounts ........................ 3,980,326 2,200,023 16,642,827 8,612,189 94,826,692 23,544,001
Accumulation units redeemed and
transferred to other Travelers
accounts ........................ (306,519) (16,504) (1,478,938) (497,047) (77,508,615) (5,436,202)
---------- ---------- ----------- ---------- ----------- -----------
Accumulation units end of year ..... 5,969,617 2,295,810 23,853,145 8,689,256 36,182,945 18,864,868
========== ========== =========== ========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
SMITH BARNEY INCOME SMITH BARNEY PUTNAM DIVERSIFIED
AND GROWTH PORTFOLIO MONEY MARKET PORTFOLIO INCOME PORTFOLIO
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation units beginning of year 13,512,027 742,670 25,323,950 3,193,779 11,885,359 950,243
Accumulation units purchased and
transferred from other Travelers
accounts ........................ 20,180,381 13,297,626 161,814,352 56,287,533 13,499,883 11,872,273
Accumulation units redeemed and
transferred to other Travelers
accounts ........................ (1,929,653) (528,269) (159,060,419) (34,157,362) (1,927,867) (937,157)
----------- ----------- ------------ ----------- ----------- -----------
Accumulation units end of year ..... 31,762,755 13,512,027 28,077,883 25,323,950 23,457,375 11,885,359
=========== =========== ============ =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
SMITH BARNEY MFS AIM CAPITAL
PACIFIC BASIN PORTFOLIO TOTAL RETURN PORTFOLIO APPRECIATION PORTFOLIO
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation units beginning of year 3,221,715 56,822 18,460,646 1,014,097 33,706,796 3,444,998
Accumulation units purchased and
transferred from other Travelers
accounts ........................ 39,296,051 11,406,814 25,519,291 17,996,071 28,053,552 31,258,008
Accumulation units redeemed and
transferred to other Travelers
accounts ........................ (36,531,238) (8,241,921) (2,913,145) (549,522) (3,973,179) (996,210)
----------- ----------- ----------- ----------- ----------- -----------
Accumulation units end of year ..... 5,986,528 3,221,715 41,066,792 18,460,646 57,787,169 33,706,796
=========== =========== =========== =========== =========== ===========
</TABLE>
-14-
<PAGE> 67
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF ACCUMULATION UNITS FOR FUND BD II
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 (CONTINUED)
<TABLE>
<CAPTION>
MFS EMERGING TOTAL RETURN SELECT HIGH
GROWTH PORTFOLIO PORTFOLIO GROWTH PORTFOLIO
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation units beginning of year ....... 2,971,654 -- 16,964,938 800,334 -- --
Accumulation units purchased and
transferred from other Travelers accounts 20,021,481 2,982,336 24,576,075 16,540,000 3,051,712 --
Accumulation units redeemed and
transferred to other Travelers accounts . (1,442,209) (10,682) (1,879,778) (375,396) (3,437) --
----------- ---------- ----------- ----------- ---------- -
Accumulation units end of year ............. 21,550,926 2,971,654 39,661,235 16,964,938 3,048,275 --
=========== ========== =========== =========== ========== ==
</TABLE>
<TABLE>
<CAPTION>
SELECT GROWTH SELECT BALANCED SELECT CONSERVATIVE
PORTFOLIO PORTFOLIO PORTFOLIO
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation units beginning of year ....... -- - -- - -- --
Accumulation units purchased and
transferred from other Travelers accounts 4,733,409 - 6,244,028 - 1,108,928 --
Accumulation units redeemed and
transferred to other Travelers accounts . (146,269) - (307,127) - (140,752) --
---------- - ---------- - ---------- -
Accumulation units end of year ............. 4,587,140 - 5,936,901 - 968,176 --
========== = ========== = ========== =
</TABLE>
<TABLE>
<CAPTION>
SELECT INCOME
PORTFOLIO COMBINED
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Accumulation units beginning of year ....... -- - 199,446,863 15,081,931
Accumulation units purchased and
transferred from other Travelers accounts 416,501 - 517,124,361 238,070,115
Accumulation units redeemed and
transferred to other Travelers accounts . (27,400) - (295,357,541) (53,705,183)
-------- ------------ ------------
Accumulation units end of year ............. 389,101 - 421,213,683 199,446,863
======== = ============ ============
</TABLE>
-15-
<PAGE> 68
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, 1997, and the
related statement of operations for the year then ended and the statement of
changes in net assets for each of the two years in the period then ended. These
financial statements are the responsibility of management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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, 1997, 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, 1997, the results of its operations for
the year then ended and the changes in its net assets for each of the two years
in the period then ended, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 19, 1998
-16-
<PAGE> 69
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) (12-97) Printed in U.S.A.
<PAGE> 70
THE TRAVELERS LIFE AND ANNUITY COMPANY
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholder
The Travelers Life and Annuity Company:
We have audited the accompanying balance sheets of The Travelers Life and
Annuity Company as of December 31, 1997 and 1996, and the related statements of
income and retained earnings and cash flows for each of the years in the
three-year period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Travelers Life and Annuity
Company as of December 31, 1997 and 1996, and the results of its operations and
its cash flows for each of the years in the three-year period ended December 31,
1997, in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
January 26, 1998
F-1
<PAGE> 71
THE TRAVELERS LIFE AND ANNUITY COMPANY
STATEMENTS OF INCOME AND RETAINED EARNINGS
($ in thousands)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
REVENUES
Premiums $ 35,190 $ 17,462 $ 10,691
Net investment income 168,653 151,326 123,197
Realized investment gains (losses) 44,871 (9,613) 18,713
Other 8,163 2,276 1,286
-------- -------- --------
Total Revenues 256,877 161,451 153,887
-------- -------- --------
BENEFITS AND EXPENSES
Current and future insurance benefits 95,639 77,285 73,818
Interest credited to contractholders 35,165 35,607 30,472
Operating expenses, including amortization of deferred acquisition
costs and value of insurance in force 16,498 8,977 6,161
-------- -------- --------
Total Benefits and Expenses 147,302 121,869 110,451
-------- -------- --------
Income before federal income taxes 109,575 39,582 43,436
-------- -------- --------
Federal income taxes:
Current 33,859 29,456 2,555
Deferred expense (benefit) 4,344 (15,665) 11,964
-------- -------- --------
Total Federal Income Taxes 38,203 13,791 14,519
-------- -------- --------
Net income 71,372 25,791 28,917
Retained earnings beginning of year 167,698 157,907 128,990
Dividends to parent 14,000 16,000 -
-------- -------- --------
Retained Earnings End of Year $225,070 $167,698 $157,907
======== ======== ========
</TABLE>
See Notes to Financial Statements.
F-2
<PAGE> 72
THE TRAVELERS LIFE AND ANNUITY COMPANY
BALANCE SHEETS
($ in thousands)
<TABLE>
<CAPTION>
DECEMBER 31, 1997 1996
- ------------ ---- ----
<S> <C> <C>
ASSETS
Fixed maturities, available for sale at fair value (cost, $1,571,121; $1,440,806) $1,678,120 $1,484,670
Equity securities, at fair value (cost, $15,092; $12,396) 16,289 15,902
Mortgage loans 160,247 128,440
Real estate held for sale - 10,111
Policy loans 2,894 1,750
Short-term securities 169,229 81,162
Other invested assets 118,348 88,641
---------- ----------
Total Investments $2,145,127 $1,810,676
---------- ----------
Separate accounts 812,059 290,940
Deferred acquisition costs and value of insurance in force 90,966 40,027
Deferred federal income taxes 33,661 57,617
Other assets 73,414 55,023
---------- ----------
Total Assets $3,155,227 $2,254,283
---------- ----------
LIABILITIES
Future policy benefits $971,602 $967,621
Contractholder funds 818,971 582,183
Separate accounts 812,059 290,716
Other liabilities 86,934 41,895
---------- ----------
Total Liabilities $2,689,566 $1,882,415
---------- ----------
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 225,070 167,698
Unrealized investment gains, net of taxes 70,277 33,856
---------- ----------
Total Shareholder's Equity 465,661 371,868
---------- ----------
Total Liabilities and Shareholder's Equity $3,155,227 $2,254,283
========== ==========
</TABLE>
See Notes to Financial Statements.
F-3
<PAGE> 73
THE TRAVELERS LIFE AND ANNUITY COMPANY
STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH
($ in thousands)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1997 1996 1995
- ------------------------------- ---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Premiums collected $ 34,553 $ 6,472 $ 1,950
Net investment income received 170,460 71,083 66,219
Benefits and claims paid (90,820) (70,331) (71,710)
Interest credited to contractholders (35,165) (813) -
Operating expenses paid (40,868) (5,482) (3,013)
Income taxes paid (22,440) (23,931) (35,305)
Other (7,702) (6,857) (6,772)
---------- --------- ---------
Net Cash Provided by (Used in) Operating Activities 8,018 (29,859) (48,631)
---------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of investments
Fixed maturities 81,899 20,301 11,752
Mortgage loans 8,972 37,789 24,137
Proceeds from sales of investments
Fixed maturities 856,846 978,970 459,971
Equity securities 12,404 12,818 11,823
Mortgage loans 5,483 22,437 7,013
Real estate held for sale 4,493 - -
Purchases of investments
Fixed maturities (1,020,803) (994,443) (515,098)
Equity securities (6,382) (5,412) (156)
Mortgage loans (41,967) (21,450) (4,890)
Policy loans (1,144) (1,750) -
Short-term securities, purchases, net (88,067) (19,688) (5,051)
Other investments, (purchases) sales, net (51,502) (6,160) 9,274
Securities transactions in course of settlement 10,526 (51,703) 45,727
---------- --------- ---------
Net Cash Provided by (Used in) Investing Activities (229,242) (28,291) 44,502
---------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Contractholder fund deposits 325,932 96,490 5,707
Contractholder fund withdrawals (89,145) (22,340) (1,874)
Dividends to parent company (14,000) (16,000) -
---------- --------- ---------
Net Cash Provided by Financing Activities $ 222,787 $ 58,150 $ 3,833
---------- --------- ---------
Net increase (decrease) in cash $ 1,563 $ - $ (296)
---------- --------- ---------
Cash at December 31, $ 1,563 $ - $ -
========== ========= =========
</TABLE>
See Notes to Financial Statements.
F-4
<PAGE> 74
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies used in the preparation of the accompanying
financial statements follow.
Basis of Presentation
The Travelers Life and Annuity Company (the Company) is a wholly owned
subsidiary of The Travelers Insurance Company (TIC), an indirect wholly
owned subsidiary of Travelers Group Inc. (Travelers Group). The financial
statements and accompanying footnotes of the Company are prepared in
conformity with generally accepted accounting principles. The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and benefits and expenses during the
reporting period. Actual results could differ from those estimates.
The accompanying financial statements reflect a change in presentation of
the assets, liabilities and operations of the structured settlement
separate account business of the Company. The assets and liabilities were
previously reported in separate account line items and are now incorporated
in various financial statement classifications. As a result of this change,
invested assets in the amount of $814.5 million and $863.6 million at
December 31, 1997 and 1996, respectively, associated with structured
settlement contract obligations, are reported as investments. The related
structured settlement contract obligations, which were $842.3 million and
$809.1 million at December 31, 1997 and 1996, respectively, are included in
future policy benefits and contractholder funds. Additionally, structured
settlement transactions included in the income statement for the years
ended December 31, 1997, 1996 and 1995 are premiums of $23.2 million, $8.1
million and $8.0 million, respectively, net investment income of $65.9
million, $62.3 million and $60.0 million, respectively, and benefits and
expenses of $66.5 million, $56.4 million and $51.8 million, respectively.
The 1996 and 1995 amounts were previously reported as a net $13.9 million
and $16.2 million, respectively, included in other revenue.
This change in presentation has no effect on net income, total assets,
total liabilities, or shareholder's equity as reflected in the statements
of income and retained earnings, and balance sheets for the periods
presented.
The Company has determined that a change in presentation was warranted
because of the nature of this particular separate account and the change in
product focus of the Company. The assets of the structured settlement
separate account are owned by, and investment risk is borne by, the
Company, which also guarantees the obligations of this separate account.
Consequently, the Company, not the contractholder, bears the risks of this
separate account.
The Company is now offering a variety of variable annuity products where
the investment risk is borne by the contractholder, not the Company, and
the benefits are not guaranteed. The premiums and deposits related to these
products are reported in separate accounts. The Company considers it
necessary to differentiate, for financial statement purposes, the results
of the risks it has assumed from those it has not. See also Note 6.
Certain reclassifications have been made to the prior year's financial
statements to conform to the current year's presentation.
F-5
<PAGE> 75
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Accounting Changes
EMPLOYERS' DISCLOSURES ABOUT PENSIONS AND OTHER POSTRETIREMENT BENEFITS
In February, 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits" (FAS 132).
FAS 132 supersedes the disclosure requirements in FASB Statements No. 87,
"Employers' Accounting for Pensions," No. 88, "Employers' Accounting for
Settlements and Curtailments of Defined Benefits Pension Plans and
Termination of Benefits," and No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." FAS 132 addresses disclosure
only and does not address measurement or recognition. In addition to other
disclosure changes, FAS 132 allows employers to disclose total
contributions to multi-employer plans without disaggregating the amounts
attributable to pensions and other postretirement benefits. This statement
is effective for fiscal years beginning after December 15, 1997. Earlier
application is encouraged. Effective December 31, 1997, the Company adopted
FAS 132. The adoption of this standard did not have any impact on results
of operations, financial condition or liquidity.
ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND
EXTINGUISHMENTS OF LIABILITIES
Effective January 1, 1997, the Company adopted Statement of Financial
Accounting Standards No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities" (FAS 125). FAS 125
establishes accounting and reporting standards for transfers and servicing
of financial assets and extinguishments of liabilities. These standards are
based on an approach that focuses on control. Under this approach, after a
transfer of financial assets, an entity recognizes the financial and
servicing assets it controls and the liabilities it has incurred,
derecognizes financial assets when control has been surrendered, and
derecognizes liabilities when extinguished. FAS 125 provides standards for
distinguishing transfers of financial assets that are sales from transfers
that are secured borrowings. The requirements of FAS 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 Statement of
Financial Accounting Standards 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. Application of FAS 125
prior to the effective date or retroactively is not permitted. The adoption
of the provisions of FAS 125 effective January 1, 1997 did not have a
material impact on results of operations, financial condition or liquidity.
The adoption of the provisions of FAS 127 effective January, 1998 will not
have a material impact on the results of operations, financial condition or
liquidity of the Company.
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.
F-6
<PAGE> 76
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Accounting for Stock-Based Compensation
In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" (FAS 123).
This statement establishes financial accounting and reporting standards for
stock-based employee compensation plans as well as transactions in which an
entity issues its equity instruments to acquire goods or services from
non-employees. This statement defines a fair value-based method of
accounting for employee stock options or similar equity instruments, and
encourages all entities to adopt this method of accounting for all employee
stock compensation plans. However, it also allows an entity to continue to
measure compensation cost for those plans using the intrinsic value-based
method of accounting prescribed by Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25). Entities electing
to remain with the accounting method prescribed in APB 25 must make
pro-forma disclosures of net income and earnings per share, as if the fair
value-based method of accounting defined by FAS 123 had been applied. FAS
123 is applicable to fiscal years beginning after December 15, 1995. The
Company has elected to continue to account for its stock-based employee
compensation plans using the accounting method prescribed by APB 25 and,
had the Company applied FAS 123 in accounting for stock options, net income
would have been reduced by an insignificant amount in 1997, 1996 and 1995.
The Company has adopted FAS 123 for its stock-based non-employee
compensation plans.
Accounting Policies
INVESTMENTS
Fixed maturities include bonds, notes and redeemable preferred stocks. Fair
values of investments in fixed maturities are based on quoted market prices
or dealer quotes or, if these are not available, discounted expected cash
flows using market rates commensurate with the credit quality and maturity
of the investment. Fixed maturities are classified as "available for sale"
and are reported at fair value, with unrealized investment gains and
losses, net of income taxes, charged or credited directly to shareholder's
equity.
Equity securities, which include common and non-redeemable preferred
stocks, are classified as "available for sale" and are carried at fair
value based primarily on quoted market prices. Changes in fair values of
equity securities are charged or credited directly to shareholder's equity,
net of income taxes.
Mortgage loans are carried at amortized cost. A mortgage loan is considered
impaired when it is probable that the Company will be unable to collect
principal and interest amounts due. For mortgage loans that are determined
to be impaired, a reserve is established for the difference between the
amortized cost and fair market value of the underlying collateral. In
estimating fair value, the Company uses interest rates reflecting the
higher returns required in the current real estate financing market.
Impaired loans were insignificant at December 31, 1997 and 1996.
Real estate held for sale is carried at the lower of cost or fair value
less estimated cost 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 accepted
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.
Short-term securities, consisting primarily of money market instruments and
other debt issues purchased with a maturity of less than one year, are
carried at amortized cost which approximates market.
F-7
<PAGE> 77
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
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.
Included in investments are invested assets associated with Structured
Settlement Guaranteed Separate Accounts where the investment risk is borne
by the Company. See Note 6.
INVESTMENT GAINS AND LOSSES
Realized investment gains and losses are included as a component of pre-tax
revenues based upon specific identification of the investments sold on the
trade date. Also included are gains and losses arising from the
remeasurement of the local currency value of foreign investments to U.S.
dollars, the functional currency of the Company.
POLICY LOANS
Policy loans are carried at the amount of the unpaid balances that are not
in excess of the net cash surrender values of the related insurance
policies. The carrying value of policy loans, which have no defined
maturities, is considered to be fair value.
SEPARATE ACCOUNTS
The Company has separate account assets and liabilities representing funds
for which investment income and investment gains and losses accrue directly
to, and investment risk is borne by, the contractholders. Each of these
accounts have specific investment objectives. The assets and liabilities of
these accounts are carried at fair value, and amounts assessed to the
contractholders for management services are included in 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.
The Company also has a separate account for structured settlement annuity
obligations where the investment risk is borne by the Company. The assets
and liabilities of this separate account are included in investments,
future policy benefits and contractholder funds for financial reporting
purposes. See Note 6.
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.
F-8
<PAGE> 78
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
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 3.0% to 7.5%,
including a provision for adverse deviation. These assumptions consider
Company experience and industry standards. The assumptions vary by plan,
age at issue, year of issue and duration.
CONTRACTHOLDER FUNDS
Contractholder funds represent receipts from the issuance of universal
life, certain individual annuity contracts, and structured settlement
contracts. Contractholder fund balances are increased by such receipts and
credited interest and reduced by withdrawals, mortality charges and
administrative expenses charged to the contractholders. Interest rates
credited to contractholder funds range from 3.9% to 7.2%.
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 earned on investment and other insurance contracts.
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.
F-9
<PAGE> 79
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Future Application of Accounting Standards
In December 1997, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of
Position 97-3, "Accounting by Insurance and Other Enterprises for
Insurance-Related Assessments" (SOP 97-3). SOP 97-3 provides guidance for
determining when an entity should recognize a liability for guaranty-fund
and other insurance-related assessments, how to measure that liability, and
when an asset may be recognized for the recovery of such assessments
through premium tax offsets or policy surcharges. This SOP is effective for
financial statements for fiscal years beginning after December 15, 1998,
and the effect of initial adoption is to be reported as a cumulative
catch-up adjustment. Restatement of previously issued financial statements
is not allowed. The Company has not yet determined when it will implement
this SOP and does not anticipate any material impact on the Company's
financial condition, results of operations or liquidity.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" (FAS 130). FAS 130 establishes
standards for the reporting and display of comprehensive income and its
components in a full set of general-purpose financial statements. All items
that are required to be recognized under accounting standards as components
of comprehensive income are to be reported in a financial statement that is
displayed with the same prominence as other financial statements. FAS 130
stipulates that comprehensive income reflect the change in equity of an
enterprise during a period from transactions and other events and
circumstances from non-owner sources. Comprehensive income will thus
represent the sum of net income and other comprehensive income, although
FAS 130 does not require the use of the terms comprehensive income or other
comprehensive income. The accumulated balance of other comprehensive income
shall be displayed separately from retained earnings and additional paid-in
capital in the statement of financial position. FAS 130 is effective for
fiscal years beginning after December 15, 1997. The Company anticipates
that the adoption of FAS 130 will result primarily in reporting unrealized
gains and losses on investments in debt and equity securities in
comprehensive income.
In June 1997, the FASB also issued Statement of Financial Accounting
Standards No. 131, "Disclosures About Segments of an Enterprise and Related
Information" (FAS 131). FAS 131 establishes standards for the way that
public enterprises report information about operating segments in annual
financial statements and requires that selected information about those
operating segments be reported in interim financial statements. FAS 131
supersedes Statement of Financial Accounting Standards No. 14, "Financial
Reporting for Segments of a Business Enterprise" (FAS 14). FAS 131 requires
that all public enterprises report financial and descriptive information
about its reportable operating segments. Operating segments are defined as
components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decisionmaker
in deciding how to allocate resources and in assessing performance. FAS 131
is effective for fiscal years beginning after December 15, 1997. The
Company's reportable operating segment will not change as a result of the
adoption of FAS 131.
F-10
<PAGE> 80
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
2. 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, 1997 and 1996 was
$76.4 million and $90.7 million, respectively. Life insurance in force
ceded to non-affiliates at December 31, 1997 and 1996, was $4.5 billion and
$2.2 billion, respectively.
3. SHAREHOLDER'S EQUITY
Unrealized Investment Gains (Losses)
See Note 11 for an analysis of the change in unrealized gains and losses on
investments.
Shareholder's Equity and Dividend Availability
The Company's statutory net income was $80.3 million, $17.9 million and
$23.0 million for the years ended December 31, 1997, 1996 and 1995,
respectively.
Statutory capital and surplus was $328.2 million and $254.1 million at
December 31, 1997 and 1996, 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 $63.6 million is available in 1998 for dividend payments by the
Company without prior approval of the Connecticut Insurance Department.
4. DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS
Derivative Financial Instruments
The Company uses derivative financial instruments, including financial
futures, equity options, forward contracts and interest rate swaps as a
means of hedging exposure to foreign currency, equity price changes and/or
interest rate risk on anticipated transactions or existing assets and
liabilities. The Company does not hold or issue derivative instruments for
trading purposes.
These derivative financial instruments have off-balance sheet risk.
Financial instruments with off-balance sheet risk involve, to varying
degrees, elements of credit and market risk in excess of the amount
recognized in the balance sheet. The contract or notional amounts of these
instruments reflect the extent of involvement the Company has in a
particular class of financial instrument. However, the maximum loss of cash
flow associated with these instruments can be less than these amounts. For
forward contracts and interest rate swaps, credit risk is limited to the
amounts calculated to be due the Company on such contracts. Financial
futures contracts and purchased listed option contracts have little credit
risk since organized exchanges are the counterparties.
F-11
<PAGE> 81
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
The Company monitors creditworthiness of counterparties to these financial
instruments by using criteria of acceptable risk that are consistent with
on-balance sheet financial instruments. The controls include credit
approvals, limits and other monitoring procedures.
The Company uses exchange traded financial futures contracts to manage its
exposure to changes in interest rates which arise from the sale of certain
insurance and investment products, or the need to reinvest proceeds from
the sale or maturity of investments. To hedge against adverse changes in
interest rates, the Company enters long or short positions in financial
futures contracts to offset asset price changes resulting from changes in
market interest rates until an investment is purchased or a product is
sold.
Margin payments are required to enter a futures contract and contract gains
or losses are settled daily in cash. The contract amount of futures
contracts represents the extent of the Company's involvement, but not
future cash requirements, as open positions are typically closed out prior
to the delivery date of the contract.
At December 31, 1997 and 1996, the Company held financial futures contracts
with notional amounts of $156.3 million and $20.3 million, respectively. At
December 31, 1997 and 1996, the Company's futures contracts had no fair
value because these contracts are marked to market and settled in cash
daily.
The off-balance sheet risks of equity options, forward contracts, and
interest rate swaps were not significant at December 31, 1997 and 1996.
Financial Instruments with Off-Balance Sheet Risk
In the normal course of business, the Company issues fixed and variable
rate loan commitments and has unfunded commitments to partnerships. The
off-balance sheet risk of these financial instruments was not significant
at December 31, 1997 and 1996.
Fair Value of Certain Financial Instruments
The Company uses various financial instruments in the normal course of its
business. Fair values of financial instruments that are considered
insurance contracts are not required to be disclosed and are not included
in the amounts discussed.
At December 31, 1997, investments in fixed maturities had a carrying value
and a fair value of $1.7 billion, compared with a carrying value and a fair
value of $1.5 billion at December 31, 1996. See Notes 1 and 11.
At December 31, 1997 and 1996, mortgage loans had a carrying value of
$160.2 million and $128.4 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 $33.8 million and $22.7 million of financial
instruments classified as other assets approximated their fair values at
December 31, 1997 and 1996, respectively. The carrying values of $72.7
million and $38.5 million of financial instruments classified as other
liabilities also approximated their fair values at December 31, 1997 and
1996, respectively. Fair value is determined using various methods,
including discounted cash flows, as appropriate for the various financial
instruments.
F-12
<PAGE> 82
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
At December 31, 1997, contractholder funds with defined maturities had a
carrying value of $694.9 million and a fair value of $695.9 million,
compared with a carrying value of $546.5 million and a fair value of $545.2
million at December 31, 1996. The fair value of these contracts is
determined by discounting expected cash flows at an interest rate
commensurate with the Company's credit risk and the expected timing of cash
flows. Contractholder funds without defined maturities had a carrying value
of $98.5 million and a fair value of $93.9 million at December 31, 1997,
compared with a carrying value of $26.9 million and a fair value of $25.6
million at December 31, 1996. These contracts generally are valued at
surrender value.
The carrying values of short-term securities and policy loans approximated
their fair values.
5. 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,
1997 and 1996.
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,
1997, 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.
6. STRUCTURED SETTLEMENT CONTRACTS
The Company has structured settlement contracts that provide guarantees for
the contractholders independent of the investment performance of the assets
held in the related separate account. The assets held in the separate
account are owned by the Company and contractholders do not share in their
investment performance.
The Company maintains assets sufficient to fund the guaranteed benefits
attributable to the liabilities. Assets held in the separate account cannot
be used to satisfy any other obligations of the Company.
The Company reports the related assets and liabilities in investments,
future policy benefit reserves and contractholder funds.
F-13
<PAGE> 83
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
7. BENEFIT PLANS
Pension and Other Postretirement Benefits
The Company participates in a qualified, noncontributory defined benefit
pension plan sponsored by an affiliate. In addition, the Company provides
certain other postretirement benefits to retired employees through a plan
sponsored by an affiliate. The Company's share of net expense for the
qualified pension and other postretirement benefit plans was not
significant for 1997, 1996 and 1995. Beginning January 1, 1996, the
Company's other postretirement benefit plans were amended to restrict
benefit eligibility to retirees and certain retiree-eligible employees.
Previously, covered employees could become eligible for postretirement
benefits if they reached retirement age while working for the Company.
401(k) Savings Plan
Substantially all of the Company's employees are eligible to participate in
a 401(k) savings plan sponsored by Travelers Group. Prior to January 1,
1996, the Company made matching contributions to the 401(k) savings plan on
behalf of participants in the amount of 50% of the first 5% of pre-tax
contributions made by the employee, plus an additional variable matching
contribution based on the profitability of The Travelers Insurance Group
Inc. (TIGI) and its subsidiaries. During 1996, the Company made matching
contributions in an amount equal to the lesser of 100% of the pre-tax
contributions made by the employee or $1,000. Effective January 1, 1997,
the Company discontinued matching contributions for the majority of its
employees. The Company's expenses in connection with the 401(k) savings
plan were not significant in 1997, 1996 and 1995.
8. RELATED PARTY TRANSACTIONS
The principal banking functions, including payment of salaries and
expenses, for certain subsidiaries and affiliates of TIGI, including the
Company, are handled by two companies. TIC handles banking functions for
the life and annuity operations of Travelers Life and Annuity and some of
its non-insurance affiliates. The Travelers Indemnity Company handles
banking functions for the property-casualty operations, including most of
its property-casualty insurance and non-insurance affiliates. Settlements
between companies are made at least monthly. TIC provides various employee
benefit coverages to certain subsidiaries of TIGI. The premiums for these
coverages were charged in accordance with cost allocation procedures based
upon salaries or census. In addition, investment advisory and management
services, data processing services and claims processing services are
provided by affiliated companies. Charges for these services are shared by
the companies on cost allocation methods based generally on estimated usage
by department.
TIC maintains a short-term investment pool in which the Company
participates. The position of each company participating in the pool is
calculated and adjusted daily. At December 31, 1997 and 1996, the pool
totaled approximately $2.6 billion and $2.9 billion, respectively. The
Company's share of the pool amounted to $145.5 million and $68.2 million at
December 31, 1997 and 1996, 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 $400
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.
F-14
<PAGE> 84
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
The Company sells structured settlement annuities to an affiliate, The
Travelers Indemnity Company. Premiums and deposits were $70.6 million,
$36.9 million and $36.6 million for 1997, 1996 and 1995, respectively.
The Company began marketing variable annuity products through its
affiliate, Salomon Smith Barney, in 1995. Premiums and deposits
related to these products were $615.6 million, $300.0 million and $20.5
million in 1997, 1996 and 1995, respectively.
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. To further encourage employee
stock ownership, during 1997 Travelers Group introduced the WealthBuilder
stock option program. Under this program, all employees meeting certain
requirements have been granted Travelers Group stock options.
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 1997, 1996 and 1995.
At December 31, 1997 and 1996, the Company had investments in Tribeca
Investments LLC in the amounts of $16.5 million and $7.8 million, included
in other invested assets.
9. FEDERAL INCOME TAXES
($ in thousands)
<TABLE>
<CAPTION>
EFFECTIVE TAX RATE
FOR THE YEAR ENDED DECEMBER 31, 1997 1996 1995
------------------------------- ---- ---- ----
<S> <C> <C> <C>
Income Before Federal Income Taxes $109,575 $39,582 $43,436
Statutory Tax Rate 35% 35% 35%
-------- ------- -------
Expected Federal Income Taxes 38,351 13,854 15,203
Tax Effect of:
Non-taxable investment income (24) (15) (13)
Other, net (124) (48) (671)
-------- ------- -------
Federal Income Taxes 38,203 $13,791 $14,519
======== ======= =======
Effective Tax Rate 35% 35% 33%
-------- ------- -------
COMPOSITION OF FEDERAL INCOME TAXES
Current:
United States 33,805 $29,435 $2,555
Foreign 54 21 -
-------- ------- -------
Total 33,859 29,456 2,555
-------- ------- -------
Deferred:
United States 4,344 (15,665) 11,964
-------- ------- -------
Total Net Earned Premiums $38,203 $13,791 $14,519
======== ======= =======
</TABLE>
F-15
<PAGE> 85
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
The net deferred tax assets at December 31, 1997 and 1996 were comprised of
the tax effects of temporary differences related to the following assets
and liabilities:
<TABLE>
<CAPTION>
($ in thousands) 1997 1996
---- ----
<S> <C> <C>
Deferred Tax Assets:
Benefit, reinsurance and other reserves $100,969 $79,484
Other 2,571 3,043
-------- -------
Total 103,540 82,527
-------- -------
Deferred Tax Liabilities:
Investments, net 42,933 12,113
Deferred acquisition costs and value of insurance in force 23,650 10,066
Other 1,226 662
------- -------
Total 67,809 22,841
------- -------
Net Deferred Tax Asset Before Valuation Allowance 35,731 59,686
Valuation Allowance for Deferred Tax Assets (2,070) (2,070)
------- -------
Net Deferred Tax Asset After Valuation Allowance $33,661 $57,616
------- -------
</TABLE>
Starting in 1994 and continuing for at least five years, TIC and its life
insurance subsidiaries, including the Company, has filed, and 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 has
been, and will be, paid currently to TIC. Any credits for losses have been,
and will be, paid by TIC to the extent that such credits are for tax
benefits that have been utilized in the consolidated federal income tax
return.
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 if
life/non-life consolidation is elected in 1999, 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
1997. The initial recognition of any benefit provided by the reversal of
the valuation allowance will be recognized by reducing goodwill.
In management's judgment, the $33.7 million "net deferred tax asset after
valuation allowance" as of December 31, 1997, is fully recoverable against
expected future years' taxable ordinary income and capital gains. At
December 31, 1997, 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 $700 thousand.
F-16
<PAGE> 86
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
10. NET INVESTMENT INCOME
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
($ in thousands) 1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
GROSS INVESTMENT INCOME
Fixed maturities $120,900 $113,296 $105,821
Equity securities 704 554 835
Mortgage loans 14,905 18,278 14,974
Real estate held for sale 1,457 3,480 2,476
Other 32,459 19,854 2,537
-------- -------- --------
170,425 155,462 126,643
-------- -------- --------
Investment expenses 1,772 4,136 3,446
-------- -------- --------
Net investment income $168,653 $151,326 $123,197
-------- -------- --------
</TABLE>
11. INVESTMENTS AND INVESTMENT GAINS (LOSSES)
Realized investment gains (losses) for the periods were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
($ in thousands) 1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
REALIZED INVESTMENT GAINS (LOSSES)
Fixed maturities $29,236 $(11,491) $(4,240)
Equity securities 8,385 4,613 6,138
Mortgage loans (8) 1,979 725
Real estate held for sale 2,164 (73) (35)
Other 5,094 (4,641) 16,125
------- -------- -------
Total Realized Investment Gains (Losses) $44,871 $(9,613) $18,713
------- -------- -------
</TABLE>
Changes in net unrealized investment gains (losses) that are included as a
separate component of shareholder's equity were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
($ in thousands) 1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
UNREALIZED INVESTMENT GAINS (LOSSES)
Fixed maturities $34,451 $(23,953) $111,551
Equity securities (2,394) (746) 1,834
Other 23,975 22,431 4,390
------- -------- --------
Total Unrealized Investment Gains (Losses) 56,032 (2,268) 117,775
Related taxes 19,611 (794) 41,221
------- -------- --------
Change in unrealized investment gains (losses) 36,421 (1,474) 76,554
Balance beginning of year 33,856 35,330 (41,224)
------- -------- -------
Balance End of Year $70,277 $33,856 $35,330
------- -------- -------
</TABLE>
F-17
<PAGE> 87
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Fixed Maturities
Proceeds from sales of fixed maturities classified as available for sale
were $856.8 million and $2.1 billion in 1997 and 1996, respectively. Gross
gains of $38.1 million and $8.4 million and gross losses of $8.9 million
and $19.9 million in 1997 and 1996, respectively, were realized on those
sales.
Fair values of investments in fixed maturities are based on quoted market
prices or dealer quotes or, if these are not available, discounted expected
cash flows using market rates commensurate with the credit quality and
maturity of the investment. The fair value of investments for which a
quoted market price or dealer quote are not available amounted to $485.3
million and $360.1 million at December 31, 1997 and 1996, respectively.
The amortized cost and fair values of investments in fixed maturities were
as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 GROSS GROSS
($ in thousands) AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---- ----- ------ -----
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE:
Mortgage-backed securities - CMOs and
pass-through securities $ 144,921 $ 8,254 $ (223) $ 152,952
U.S. Treasury securities and
obligations of U.S. Government and
government agencies and authorities 248,081 34,111 (123) 282,069
Obligations of states and political
subdivisions 14,560 392 (2) 14,950
Debt securities issued by foreign
governments 85,367 6,194 (228) 91,333
All other corporate bonds 1,077,211 59,972 (1,387) 1,135,796
Redeemable preferred stock 981 48 (9) 1,020
---------- -------- ------- ----------
Total Available For Sale $1,571,121 $108,971 $(1,972) $1,678,120
========== ======== ======= ==========
</TABLE>
F-18
<PAGE> 88
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1996 GROSS GROSS
($ in thousands) AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---- ----- ------ -----
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE:
Mortgage-backed securities - CMOs and
pass-through securities $154,788 $ 3,312 $(901) $157,199
U.S. Treasury securities and obligations of
U.S. Government and government agencies and
authorities 255,858 16,855 (61) 272,652
Obligations of states and political
subdivisions 16,124 263 (189) 16,198
Debt securities issued by foreign
governments 109,120 3,215 (1,447) 110,888
All other corporate bonds 904,831 28,204 (5,387) 927,648
Redeemable preferred stock 85 - - 85
---------- ------- ------- ----------
Total Available For Sale $1,440,806 $51,849 $(7,985) $1,484,670
========== ======= ======= ==========
</TABLE>
The amortized cost and fair value of fixed maturities available for sale at
December 31, 1997, by contractual maturity, are shown below. Actual
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>
($ in thousands) AMORTIZED FAIR
COST VALUE
<S> <C> <C>
MATURITY:
Due in one year or less $ 17,978 $ 18,312
Due after 1 year through 5 years 211,272 216,191
Due after 5 years through 10 years 381,690 401,338
Due after 10 years 815,260 889,327
---------- ----------
1,426,200 1,525,168
---------- ----------
Mortgage-backed securities 144,921 152,952
---------- ----------
Total Maturity $1,571,121 $1,678,120
========== ==========
</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.
F-19
<PAGE> 89
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
At December 31, 1997 and 1996, the Company held CMOs with a market value of
$122.8 million and $126.3 million, respectively. The Company's CMO holdings
were 97.5% and 97.6% collateralized by GNMA, FNMA or FHLMC securities at
December 31, 1997 and 1996, respectively.
Equity Securities
The cost and market values of investments in equity securities were as
follows:
<TABLE>
<CAPTION>
EQUITY SECURITIES: GROSS GROSS
($ in thousands) UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
---- ----- ------ ----------
<S> <C> <C> <C> <C>
DECEMBER 31, 1997
Common stocks $ 3,318 $ 583 $ (70) $ 3,831
Non-redeemable preferred stocks 11,774 931 (247) 12,458
------- ------ ----- -------
Total Equity Securities $15,092 $1,514 $(317) $16,289
------- ------ ----- -------
DECEMBER 31, 1996
Common stocks $ 2,722 $3,441 $(163) $ 6,000
Non-redeemable preferred stocks 9,674 323 (95) 9,902
------- ------ ----- -------
Total Equity Securities $12,396 $3,764 $(258) $15,902
------- ------ ------ -------
</TABLE>
Proceeds from sales of equity securities were $12.4 million and $20.3
million in 1997 and 1996, respectively. Gross gains of $8.6 million and
$4.7 million and gross losses of $172 thousand and $155 thousand in 1997
and 1996, respectively, were realized on those sales.
Mortgage Loans and Real Estate Held For Sale
Underperforming assets include delinquent mortgage loans, loans in the
process of foreclosure, foreclosed loans and loans modified at interest
rates below market.
At December 31, 1997 and 1996, the Company's mortgage loan portfolios and
real estate held for sale consisted of the following:
<TABLE>
<CAPTION>
($ in thousands) 1997 1996
---- ----
<S> <C> <C>
Current Mortgage Loans $ 160,247 $128,292
Underperforming Mortgage Loans - 148
--------- --------
Total 160,247 128,440
--------- --------
Real Estate Held For Sale - 10,111
--------- --------
Total $ 160,247 $138,551
--------- --------
</TABLE>
F-20
<PAGE> 90
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Aggregate annual maturities on mortgage loans at December 31, 1997 are as
follows:
<TABLE>
<CAPTION>
($ in thousands)
<S> <C>
Past Maturity $ -
1998 5,108
1999 8,773
2000 8,920
2001 11,352
2002 17,986
Thereafter 108,108
--------
Total $160,247
========
</TABLE>
Joint Venture
In October 1997, TIC and Tishman Speyer Properties (Tishman), a worldwide
real estate owner, developer and manager, formed a joint real estate
venture with an initial equity commitment of $792 million. TIC and certain
of its affiliates committed $420 million in real estate equity and $100
million in cash while Tishman committed $272 million in properties and
cash. Both companies are serving as asset managers for the venture and
Tishman is primarily responsible for the venture's real estate acquisition
and development efforts. The Company's investment in the joint venture
totaled $54.8 million at December 31, 1997.
Concentrations
At December 31, 1997 and 1996, the Company had investments of $50.8 million
and $75.1 million in the State of Israel, respectively. Additionally, in
1996 the Company had $40.6 million in Merrill Lynch Trust Series 45.
The Company participates in a short-term investment pool maintained by an
affiliate. See Note 8.
Included in fixed maturities are below investment grade assets totaling
$76.7 million and $81.7 million at December 31, 1997 and 1996,
respectively. The Company defines its below investment grade assets as
those securities rated "Ba1" or below by external rating agencies, or the
equivalent by internal analysts when a public rating does not exist. Such
assets include publicly traded below investment grade bonds and certain
other privately issued bonds that are classified as below investment grade
bonds.
The Company also had concentrations of investments, primarily fixed
maturities, in the following industries:
<TABLE>
<CAPTION>
($ in thousands) 1997 1996
---- ----
<S> <C> <C>
Transportation $138,903 $ 86,819
Banking 130,966 71,506
Electric utilities 106,724 76,426
------- ------
</TABLE>
Below investment grade assets included in the preceding table were not
significant.
F-21
<PAGE> 91
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Concentrations of mortgage loans by property type at December 31, 1997 and
1996 were as follows:
<TABLE>
<CAPTION>
($ in thousands) 1997 1996
---- ----
<S> <C> <C>
Agricultural $62,463 $49,801
Office 47,453 35,333
Retail 23,214 21,924
------ ------
</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 at December 31,
1996. 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. Interest on these assets, included in net investment income
was insignificant.
12. LIFE AND ANNUITY DEPOSIT FUNDS AND RESERVES
At December 31, 1997, the Company had $1.8 million of life and annuity
deposit funds and reserves. Of that total, $1.5 million were not subject to
discretionary withdrawal based on contract terms. The remaining $.3 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 $.2 million of liabilities that are
surrenderable with market value adjustments. An additional $.1 million of
the life insurance and individual annuity liabilities are subject to
discretionary withdrawals with an average surrender charge of 4.8%. The
life insurance risks would have to be underwritten again if transferred to
another carrier, which is considered a significant deterrent for long-term
policyholders. Insurance liabilities that are surrendered or withdrawn from
the Company are reduced by outstanding policy loans and related accrued
interest prior to payout.
F-22
<PAGE> 92
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
13. RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES
The following table reconciles net income to net cash provided by (used in)
operating activities:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1997 1996 1995
---- ---- ----
($ in thousands)
<S> <C> <C> <C>
Net Income From Continuing Operations $71,372 $ 25,791 $ 28,917
Adjustments to reconcile net income to cash provided by
operating activities:
Realized (gains) losses (44,871) 9,613 (18,713)
Deferred federal income taxes 4,344 (15,665) 11,964
Amortization of deferred policy acquisition costs and
value of insurance in force 6,036 3,286 1,563
Additions to deferred policy acquisition costs (56,975) (20,753) (3,109)
Investment income accrued 908 1,308 (819)
Premium balances receivable (3,450) (3,561) (2,277)
Insurance reserves and accrued expenses 3,981 (16,459) (20,081)
Other 26,673 (13,419) (46,076)
------ -------- --------
Net cash provided by (used in) operations $8,018 $(29,859) $(48,631)
------ -------- --------
</TABLE>
14. NON-CASH INVESTING AND FINANCING ACTIVITIES
There were no significant non-cash investing and financing activities for
1997, 1996 and 1995.
F-23
<PAGE> 93
VINTAGE
STATEMENT OF ADDITIONAL INFORMATION
Individual Variable Annuity Contract
issued by
The Travelers Life and Annuity Company
One Tower Square
Hartford, Connecticut 06183
L-12540S May, 1998
12
<PAGE> 94
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, 1997
Statement of Operations for the year ended December 31, 1997
Statement of Changes in Net Assets for the year ended December
31, 1997 and 1996
Statement of Investments as of December 31, 1997
Notes to Financial Statements
The financial statements of The Travelers Life and Annuity Company and
the report of Independent Accountants are contained in the Statement
of Additional Information. These financial statements include:
Statements of Income and Retained Earnings for the years ended
December 31, 1997, 1996 and 1995
Balance Sheets as of December, 1997 and 1996
Statements of Cash Flows for the years ended December 31, 1997,
1996 and 1995
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.)
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.)
<PAGE> 95
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.
(Incorporated herein by reference to Exhibit 9 to Post-Effective
Amendment No. 3 to the Registration Statement on Form N-4 filed April
29, 1997.)
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. (Incorporated herein by reference to Exhibit No.
13 to Post-Effective Amendment No. 2 to the Registration Statement on
Form N-4, filed April 29, 1997.)
15(a). Powers of Attorney authorizing Ernest J. Wright or Kathleen A. McGah as
signatory for Michael A. Carpenter, Jay S. Benet, George C. Kokulis, Ian
R. Stuart and Katherine M. Sullivan. (Incorporated herein by reference
to Exhibit No. 15(a) to Post-Effective Amendment No. 2 to the
Registration Statement on Form N-4, filed April 29, 1997.)
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.)
<PAGE> 96
Item 25. Directors and Officers of the Depositor
Name and Principal Positions and Offices
Business Address with Depositor
- ---------------- --------------
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
Virginia M. Meany* Vice President
Selig Ehrlich* 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
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> 97
Item 26. Persons controlled by or Under Common Control with the Depositer 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 -------------
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
or Indirectly
State of by Travelers Principal
Company Organization Group Inc. Business
<S> <C> <C> <C>
AC Health Ventures, Inc. DE 100 Inactive
AMCO Biotech, Inc. DE 100 Inactive
Associated Madison Companies, Inc. DE 100 Holding company.
ERISA Corporation NY 100 Inactive
Mid-America Insurance Services, Inc. GA 100 Third party administrator
National Marketing Corporation PA 100 Inactive
PFS Services, Inc. GA 100 General partner and holding company
PFS Shareholder Services GA 50 General partnership
</TABLE>
March 31, 1998
<PAGE> 98
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers
Company Organization Group Inc.
<S> <C> <C>
The Travelers Insurance Group Inc. CT 100
Constitution Plaza, Inc. CT 100
KP Properties Corporation MA 100
KPI 85, Inc. MA 100
KRA Advisers Corporation MA 100
KRP Corporation MA 100
Blue-Ash Associates Limited Partnership 100
KBA 3 Limited Partnership 100
KBA Limited Partnership 100
La Metropole S.A. 98.83
The Prospect Company DE 100
89th & York Avenue Corporation NY 100
Meadow Lane, Inc. GA 100
Panther Valley, Inc. NJ 100
Prospect Management Services Company DE 100
The Travelers Asset Funding Corporation CT 100
The Travelers Insurance Company CT 100
Applied Expert Systems Inc. MA 23.4
The Plaza Corporation CT 100
The Copeland Companies (Holding Company) NJ 100
American Odyssey Funds Management, Inc. NJ 100
American Odyssey Funds, Inc. MD 100
Copeland Associates, Inc. DE 100
Copeland Associates Agency of Ohio, Inc. OH 99
Copeland Associates of Alabama, Inc. AL 100
Copeland Associates of Montana, Inc. MT 100
Copeland Associates of Nevada, Inc. NV 100
Copeland Benefits Management Company NJ 51
Copeland Equities, Inc. NJ 100
Donald F. Smith & Associates NJ 100
Donald F. Smith Insurance Benefit Services, Inc. MA 100
<CAPTION>
Principal
Company Business
<S> <C>
acting as transfer agent
The Travelers Insurance Group Inc. Holding company
Constitution Plaza, Inc. Real estate brokerage
KP Properties Corporation Real estate
KPI 85, Inc. Real estate
KRA Advisers Corporation Real estate
KRP Corporation Real estate
Blue-Ash Associates Limited Partnership Real estate
KBA 3 Limited Partnership Real estate
KBA Limited Partnership Real estate
La Metropole S.A. P-C insurance/reinsurance
The Prospect Company Investments
89th & York Avenue Corporation Real estate
Meadow Lane, Inc. Real estate development
Panther Valley, Inc. Real estate management
Prospect Management Services Company Real estate management
The Travelers Asset Funding Corporation Investment adviser
The Travelers Insurance Company Insurance
Applied Expert Systems Inc. EDP Software
The Plaza Corporation Holding company
The Copeland Companies (Holding Company) Holding company
American Odyssey Funds Management, Inc. Investment advisor
American Odyssey Funds, Inc. Investment management
Copeland Associates, Inc. Fixed/variable annuities
Copeland Associates Agency of Ohio, Inc. Fixed/variable annuities
Copeland Associates of Alabama, Inc. Fixed/variable annuities
Copeland Associates of Montana, Inc. Fixed/variable annuities
Copeland Associates of Nevada, Inc. Insurance
Copeland Benefits Management Company Investment marketing
Copeland Equities, Inc. Fixed/variable annuities
Donald F. Smith & Associates Insurance agency
Donald F. Smith Insurance Benefit Services, Inc. Insurance agent
</TABLE>
<PAGE> 99
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers
Company Organization Group Inc.
<S> <C> <C>
H.C. Copeland Associates, Inc. of Massachusetts MA 100
Smith Annuity Services, Inc. NJ 100
Copeland Financial Services, Inc. NJ 100
Copeland Mortgage Services, Inc. NJ 100
H.C. Copeland and Associates, Inc. of Texas TX 100
Three Parkway Inc. - I PA 100
Three Parkway Inc. - II PA 100
Three Parkway Inc. - III PA 100
Tower Square Securities, Inc. CT 100
Tower Square Securities Insurance Agency of Alabama, Inc. AL 100
Tower Square Securities Insurance Agency of Massachusetts, Inc. MA 100
Tower Square Securities Insurance Agency of New Mexico, NM 100
Tower Square Securities Insurance Agency of Ohio, Inc. OH 100
Tower Square Securities Insurance Agency of Texas, Inc. TX 100
Travelers Asset Management International Corporation NY 100
Travelers Distribution Company DE 100
Travelers Investment Adviser, Inc. DE 100
Travelers/Net Plus Insurance Agency, Inc. MA 100
Travelers/Net Plus, Inc. CT 100
Travelers/Net Plus Agency of Ohio, Inc. OH 100
The Travelers Life and Annuity Company CT 100
Travelers Group Investment Management, LLC DE 50
Travelers Insurance Holdings Inc. GA 100
American Financial Life Insurance Company TX 100
Primerica Life Insurance Company MA 100
National Benefit Life Insurance Company NY 100
Primerica Financial Services (Canada) Ltd. 100
PFSL Investments Canada Ltd. 100
Primerica Client Services, Inc. (Canada) 100
Primerica Financial Services Ltd. 82.82
Primerica Life Insurance Company of Canada 100
The Travelers Insurance Corporation Proprietary Limited 100
Travelers Canada Corporation 100
Travelers Mortgage Securities Corporation DE 100
<CAPTION>
Principal
Company Business
<S> <C>
H.C. Copeland Associates, Inc. of Massachusetts Fixed annuities
Smith Annuity Services, Inc. Broker dealer
Copeland Financial Services, Inc. Investment advisory services.
Copeland Mortgage Services, Inc. Mortgage services
H.C. Copeland and Associates, Inc. of Texas Fixed/variable annuities
Three Parkway Inc. - I Investment real estate
Three Parkway Inc. - II Investment real estate
Three Parkway Inc. - III Investment real estate
Tower Square Securities, Inc. Broker dealer
Tower Square Securities Insurance Agency of Alabama, Inc. Insurance Agency
Tower Square Securities Insurance Agency of Massachusetts, Inc. Insurance Agency
Tower Square Securities Insurance Agency of New Mexico, Insurance Agency
Tower Square Securities Insurance Agency of Ohio, Inc. Insurance Agency
Tower Square Securities Insurance Agency of Texas, Inc. Insurance Agency
Travelers Asset Management International Corporation Investment adviser
Travelers Distribution Company Broker dealer
Travelers Investment Adviser, Inc. Investment advisor
Travelers/Net Plus Insurance Agency, Inc. Insurance agency
Travelers/Net Plus, Inc. Insurance agency
Travelers/Net Plus Agency of Ohio, Inc. Insurance agency
The Travelers Life and Annuity Company Life insurance
Travelers Group Investment Management, LLC Investment advisor
Travelers Insurance Holdings Inc. Holding company
American Financial Life Insurance Company Insurance
Primerica Life Insurance Company Life insurance
National Benefit Life Insurance Company Insurance
Primerica Financial Services (Canada) Ltd. Holding company
PFSL Investments Canada Ltd. Mutual fund dealer
Primerica Client Services, Inc. (Canada) Discount purchase club
Primerica Financial Services Ltd. General agent
Primerica Life Insurance Company of Canada Life insurance
The Travelers Insurance Corporation Proprietary Limited Inactive
Travelers Canada Corporation Inactive
Travelers Mortgage Securities Corporation Collateralized obligations
</TABLE>
<PAGE> 100
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers
Company Organization Group Inc.
<S> <C> <C>
Travelers Property Casualty Corp. DE 82
The Standard Fire Insurance Company CT 100
AE Properties, Inc. CA 100
AE Town and Country Limited 51
Bayhill Five Associates CA 75
Bayhill Four Associates CA 78
Bayhill Restaurant II Associates CA 50
Bayhill VII Associates CA 50
Crossroads Limited CA 50
Industry Land Development Company CT 100
Industry Partners Inc. 57
Koll Business Centers - Bay Area 50
Community Rehabilitation Investment Corporation CT 100
The Automobile Insurance Company of Hartford, Connecticut CT 100
TravCal Secure Insurance Company CA 100
TravCal Indemnity Company CA 100
Travelers Personal Security Insurance Company CT 100
Travelers Property Casualty Insurance Company CT 100
Travelers Property Casualty Insurance Company of Illinois IL 100
The Travelers Indemnity Company CT 100
Commercial Insurance Resources, Inc. DE 100
Gulf Insurance Company MO 100
Aetna National Accounts U.K. Limited 100
Atlantic Insurance Company TX 100
Gulf Group Lloyds TX 0
Gulf Risk Services, Inc. DE 100
Gulf Underwriters Insurance Company MO 100
Select Insurance Company TX 100
Countersignature Agency, Inc. FL 100
First Floridian Auto and Home Insurance Company FL 100
First Trenton Indemnity Company NJ 100
Red Oak Insurance Company NJ 100
Laramia Insurance Agency, Inc. NC 100
Secure Affinity Agency, Inc. DE 100
<CAPTION>
Principal
Company Business
<S> <C>
Travelers Property Casualty Corp. Holding company
The Standard Fire Insurance Company Insurance compny
AE Properties, Inc. Insurance
AE Town and Country Limited
Bayhill Five Associates
Bayhill Four Associates
Bayhill Restaurant II Associates
Bayhill VII Associates
Crossroads Limited
Industry Land Development Company
Industry Partners Inc.
Koll Business Centers - Bay Area
Community Rehabilitation Investment Corporation Investment services
The Automobile Insurance Company of Hartford, Connecticut Insurance company
TravCal Secure Insurance Company Auto insurance
TravCal Indemnity Company Auto insurance
Travelers Personal Security Insurance Company Insurance company
Travelers Property Casualty Insurance Company Insurance company
Travelers Property Casualty Insurance Company of Illinois Insurance company
The Travelers Indemnity Company P-C insurance
Commercial Insurance Resources, Inc. Holding company
Gulf Insurance Company P-C insurance
Aetna National Accounts U.K. Limited Insurance company
Atlantic Insurance Company P-C insurance
Gulf Group Lloyds P-C insurance
Gulf Risk Services, Inc. Claims/risk management
Gulf Underwriters Insurance Company P-C ins/surplus lines
Select Insurance Company P-C insurance
Countersignature Agency, Inc. Countersign ins policies
First Floridian Auto and Home Insurance Company Insurance company
First Trenton Indemnity Company P-C insurance
Red Oak Insurance Company Insurance company
Laramia Insurance Agency, Inc. Flood insurance
Secure Affinity Agency, Inc. P-C insurance agency
</TABLE>
<PAGE> 101
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers
Company Organization Group Inc.
<S> <C> <C>
The Charter Oak Fire Insurance Company CT 100
The Parker Realty and Insurance Agency, Inc. VT 58
The Phoenix Insurance Company CT 100
Constitution State Service Company MT 100
Constitution State Services LLC 100
The Travelers Indemnity Company of America CT 100
The Travelers Indemnity Company of Connecticut CT 100
The Travelers Indemnity Company of Illinois IL 100
The Premier Insurance Company of Massachusetts MA 100
The Travelers Home and Marine Insurance Company IN 100
The Travelers Indemnity Company of Missouri MO 100
The Travelers Lloyds Insurance Company TX 100
The Travelers Marine Corporation CA 100
TI Home Mortgage Brokerage, Inc. DE 100
TravCo Insurance Company IN 100
Travelers Bond Investments, Inc. CT 100
Travelers General Agency of Hawaii, Inc. HI 100
Travelers Medical Management Services Inc. DE 100
Travelers Specialty Property Casualty Company, Inc. CT 100
Travelers Casualty and Surety Company CT 100
AE Development Group, Inc. CT 100
Aetna Casualty & Surety Company of Canada 100
Charter Oak Services Corporation NY 100
Farmington Casualty Company CT 100
Farmington Management, Inc. CT 100
Ponderosa Homes CT 77
Travelers Casualty and Surety Company of America CT 100
Travelers Casualty and Surety Company of Illinois IL 100
Travelers Casualty Company of Connecticut CT 100
Travelers Commercial Insurance Company CT 100
Travelers Excess and Surplus Lines Company CT 100
Travelers Information Services Inc. CT 50
Travelers Lloyds of Texas Insurance Company TX 100
<CAPTION>
Principal
Company Business
<S> <C>
The Charter Oak Fire Insurance Company P-C insurance
The Parker Realty and Insurance Agency, Inc. Real estate
The Phoenix Insurance Company P-C insurance
Constitution State Service Company Service company
Constitution State Services LLC
The Travelers Indemnity Company of America P-C insurance
The Travelers Indemnity Company of Connecticut Insurance
The Travelers Indemnity Company of Illinois P-C insurance
The Premier Insurance Company of Massachusetts Insurance
The Travelers Home and Marine Insurance Company P-C insurance
The Travelers Indemnity Company of Missouri P-C insurance
The Travelers Lloyds Insurance Company Non-life insurance
The Travelers Marine Corporation General insurance brokerage
TI Home Mortgage Brokerage, Inc. Mortgage brokerage services
TravCo Insurance Company P-C insurance
Travelers Bond Investments, Inc. Bond investments
Travelers General Agency of Hawaii, Inc. Insurance agency
Travelers Medical Management Services Inc. Managed care
Travelers Specialty Property Casualty Company, Inc. Insurance management
Travelers Casualty and Surety Company Insurance company
AE Development Group, Inc. Insurance
Aetna Casualty & Surety Company of Canada Insurance company
Charter Oak Services Corporation Insurance
Farmington Casualty Company Insurance company
Farmington Management, Inc. Management services
Ponderosa Homes
Travelers Casualty and Surety Company of America Insurance company
Travelers Casualty and Surety Company of Illinois Insurance company
Travelers Casualty Company of Connecticut Insurance company
Travelers Commercial Insurance Company Insurance company
Travelers Excess and Surplus Lines Company Insurance Company
Travelers Information Services Inc. Insurance
Travelers Lloyds of Texas Insurance Company Insurance company
</TABLE>
<PAGE> 102
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers
Company Organization Group Inc.
<S> <C> <C>
Urban Diversified Properties, Inc. CT 100
Carlsbad Research Center CA 50
Carlsbad Research Center Number Four 50
Carlsbad Research Center Number One 50
Carlsbad Research Center Number Seven 50
Carlsbad Research Center Number Six 50
Carlsbad Research Center Number Three 50
Carlsbad Research Center Number Two 50
Primerica Client Services, Inc. (USA) DE 100
Primerica Convention Services, Inc. GA 100
Primerica Finance Corporation DE 100
PFS Distributors, Inc. GA 100
PFS Investments Inc. GA 100
PFS T.A., Inc. DE 100
PFS Shareholder Services GA 50
Primerica Financial Services Home Mortgages, Inc. GA 100
Primerica Financial Services Home Mortgages Limited Partnership of Arizona 100
Primerica Financial Services Limited Partnership of North Carolina 100
Primerica Financial Services, Inc. NV 100
Primerica Financial Services Agency of New York, Inc. NY 100
Primerica Financial Services Agency of Ohio, Inc. OH 100
Primerica Financial Services Insurance Marketing of Connecticut, Inc. CT 100
Primerica Financial Services Insurance Marketing of Idaho, Inc. ID 100
Primerica Financial Services Insurance Marketing of Maine, Inc. ME 100
Primerica Financial Services Insurance Marketing of Nevada, Inc. NV 100
Primerica Financial Services Insurance Marketing of Pennsylvania, Inc. PA 100
<CAPTION>
Principal
Company Business
<S> <C>
Urban Diversified Properties, Inc. Insurance
Carlsbad Research Center
Carlsbad Research Center Number Four
Carlsbad Research Center Number One
Carlsbad Research Center Number Seven
Carlsbad Research Center Number Six
Carlsbad Research Center Number Three
Carlsbad Research Center Number Two
Primerica Client Services, Inc. (USA) Discount purchase club
Primerica Convention Services, Inc. Convention planner
Primerica Finance Corporation Holding company
PFS Distributors, Inc. General partner
PFS Investments Inc. Broker dealer
PFS T.A., Inc. Joint venture partner
PFS Shareholder Services General partnership which
acts as the sole transfer agent
transfer agent; its
Primerica Financial Services Home Mortgages, Inc. Mortgage loan broker
Primerica Financial Services Home Mortgages Limited Partnership of Arizona
Primerica Financial Services Limited Partnership of North Carolina Entity was formed in North Carolina
to obtain the registration necessary
to allow PFS agents who become
limited partners to solicit
$.M.A.R.T. loans.
Primerica Financial Services, Inc. General agency
Primerica Financial Services Agency of New York, Inc. General agency licensing
Primerica Financial Services Agency of Ohio, Inc. Receive agency commissions
Primerica Financial Services Insurance Marketing of Connecticut, Inc. General agency licensing
Primerica Financial Services Insurance Marketing of Idaho, Inc. General agency licensing
Primerica Financial Services Insurance Marketing of Maine, Inc. General agency licensing
Primerica Financial Services Insurance Marketing of Nevada, Inc. General agency licensing
Primerica Financial Services Insurance Marketing of Pennsylvania, Inc. General agency licensing
</TABLE>
<PAGE> 103
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers
Company Organization Group Inc.
<S> <C> <C>
Primerica Financial Services Insurance Marketing of the Virgin Islands, Inc. 100
Primerica Financial Services Insurance Marketing of Wyoming, Inc. WY 100
Primerica Financial Services Insurance Marketing, Inc. DE 100
Primerica Financial Services of Alabama, Inc. AL 100
Primerica Financial Services of Arizona, Inc. AZ 100
Primerica Financial Services of Kentucky Inc. KY 100
Primerica Financial Services of New Mexico, Inc. NM 100
Primerica Insurance Agency of Massachusetts, Inc. MA 100
Primerica Insurance Marketing Services of Puerto Rico, Inc. PR 100
Primerica Insurance Services of Louisiana, Inc. LA 100
Primerica Insurance Services of Maryland, Inc. MD 100
Primerica Insurance Services of Texas, Inc. TX 100
Primerica Services, Inc. GA 100
RCM Acquisition Inc. DE 100
SCN Acquisitions Company DE 100
SL&H Reinsurance, Ltd. 100
Southwest Service Agreements, Inc. NC 100
Southwest Warranty Corporation FL 100
Berg Associates NJ 100
CCC Holdings, Inc. DE 100
CCC Fairways, Inc. DE 100
Commercial Credit Company DE 100
American Health and Life Insurance Company MD 100
Brookstone Insurance Company VT 100
CC Credit Card Corporation DE 100
CC Finance Company, Inc. NY 100
<CAPTION>
Principal
Company Business
<S> <C>
Primerica Financial Services Insurance Marketing of the Virgin Islands, Inc. General agency licensing
Primerica Financial Services Insurance Marketing of Wyoming, Inc. General agency licensing
Primerica Financial Services Insurance Marketing, Inc. General agency licensing
Primerica Financial Services of Alabama, Inc. General agency licensing
Primerica Financial Services of Arizona, Inc. General agency licensing
Primerica Financial Services of Kentucky Inc. General agency licensing
Primerica Financial Services of New Mexico, Inc. General agency licensing
Primerica Insurance Agency of Massachusetts, Inc. General agency licensing
Primerica Insurance Marketing Services of Puerto Rico, Inc. Insurance agency
Primerica Insurance Services of Louisiana, Inc. General agency licensing
Primerica Insurance Services of Maryland, Inc. General agency licensing
Primerica Insurance Services of Texas, Inc. General agency licensing
Primerica Services, Inc. Print operations
RCM Acquisition Inc. Investments
SCN Acquisitions Company Investments
SL&H Reinsurance, Ltd. Reinsurance
Southwest Service Agreements, Inc. Warranty/service agreements
Southwest Warranty Corporation Extended automobile warranty
Berg Associates Inactive
CCC Holdings, Inc. Holding company
CCC Fairways, Inc. Investment company
Commercial Credit Company Holding company.
American Health and Life Insurance Company LH&A Insurance
Brookstone Insurance Company Insurance managers
CC Credit Card Corporation Limited Purpose securitization
vehicle
CC Finance Company, Inc. Consumer lending
</TABLE>
<PAGE> 104
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers
Company Organization Group Inc.
<S> <C> <C>
CC Finance System Incorporated DE 100
CC Consumer Discount Company PA 100
CC Finance Credit Corp. DE 100
CC Financial Management Services, Inc. DE 100
CC Financial Services Inc. DE 100
CC Advertising Agency, Inc. KS 100
CC Financial Services of Minnesota Inc. MN 100
CC Financial Services of Nevada Inc. NV 100
CC of West Virginia Inc. WV 100
The Midwestern Agency Corporation, Inc. IA 100
CC Financial Services of Des Moines Inc. IA 100
CC Mortgage Corporation VA 100
Dealers Credit, Inc. DE 100
CC Financial Services, Inc. HI 100
Chesapeake Appraisal and Settlement Services Inc. MD 100
Chesapeake Appraisal and Settlement Services Agency of Ohio Inc. OH 100
Chesapeake West Escrow Services Inc. CA 100
City Loan Financial Services, Inc. OH 100
City Loan Financial, Inc. OH 100
Commercial Credit Banking Corporation OR 100
Commercial Credit Consumer Services, Inc. MN 100
Commercial Credit Corporation (Hawaii) HI 100
Commercial Credit Corporation (AL) AL 100
Commercial Credit Corporation (CA) CA 100
Commercial Credit Corporation (IA) IA 100
Commercial Credit of Alabama, Inc. DE 100
Commercial Credit of Mississippi, Inc. DE 100
Commercial Credit Corporation (KY) KY 100
<CAPTION>
Principal
Company Business
<S> <C>
CC Finance System Incorporated Holding company
CC Consumer Discount Company Consumer loans
CC Finance Credit Corp. Consumer credit
CC Financial Management Services, Inc. Mgt, payroll, leaseholding
CC Financial Services Inc. Consumer credit
CC Advertising Agency, Inc. Advertising discounts
CC Financial Services of Minnesota Inc. Consumer credit
CC Financial Services of Nevada Inc. Credit insurance
CC of West Virginia Inc. Industrial loans
The Midwestern Agency Corporation, Inc. Insurance commissions
CC Financial Services of Des Moines Inc. Consumer loans
CC Mortgage Corporation Second mortgages
Dealers Credit, Inc. Insurance agent
CC Financial Services, Inc. Consumer lending
Chesapeake Appraisal and Settlement Services Inc. Appraisal/title
Chesapeake Appraisal and Settlement Services Agency of Ohio Inc. Appraisal/Title
Chesapeake West Escrow Services Inc.
City Loan Financial Services, Inc. Direct loan
City Loan Financial, Inc. Consumer finance
Commercial Credit Banking Corporation Consumer finance
Commercial Credit Consumer Services, Inc. Consumer finance
Commercial Credit Corporation (Hawaii) Financial services
Commercial Credit Corporation (AL) Consumer finance
Commercial Credit Corporation (CA) Consumer finance
Commercial Credit Corporation (IA) Consumer finance
Commercial Credit of Alabama, Inc. Consumer lending
Commercial Credit of Mississippi, Inc. Consumer finance
Commercial Credit Corporation (KY) Consumer finance
</TABLE>
<PAGE> 105
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers
Company Organization Group Inc.
<S> <C> <C>
Certified Insurance Agency, Inc. KY 100
Commercial Credit Investment, Inc. KY 100
National Life Insurance Agency of Kentucky, Inc. KY 100
Union Casualty Insurance Agency, Inc. KY 100
Commercial Credit Corporation (MD) MD 100
Action Data Services, Inc. MO 100
Commercial Credit Plan, Incorporated (OK) OK 100
Commercial Credit Corporation (NY) NY 100
Commercial Credit Corporation (SC) SC 100
Commercial Credit Corporation (WV) WV 100
Commercial Credit Corporation NC NC 100
Commercial Credit Europe, Inc. DE 100
Commercial Credit Far East Inc. DE 100
Commercial Credit Insurance Services, Inc. MD 100
Commercial Credit Insurance Agency (P&C) of Mississippi, Inc. MS 100
Commercial Credit Insurance Agency of Alabama, Inc. AL 100
Commercial Credit Insurance Agency of Hawaii, Inc. HI 100
Commercial Credit Insurance Agency of Kentucky, Inc. KY 100
Commercial Credit Insurance Agency of Massachusetts, Inc. MA 100
Commercial Credit Insurance Agency of Nevada, Inc. NV 100
Commercial Credit Insurance Agency of New Mexico, Inc. NM 100
Commercial Credit Insurance Agency of Ohio, Inc. OH 100
Commercial Credit International, Inc. DE 100
Commercial Credit International Banking Corporation OR 100
Commercial Credit Corporation CCC Limited 100
Commercial Credit Services do Brazil Ltda. 99
Commercial Credit Services Belgium S.A. 100
Commercial Credit Limited DE 100
<CAPTION>
Principal
Company Business
<S> <C>
Certified Insurance Agency, Inc. Insurance agency
Commercial Credit Investment, Inc. Investment company
National Life Insurance Agency of Kentucky, Inc. Insurance agency
Union Casualty Insurance Agency, Inc. Insurance agency
Commercial Credit Corporation (MD) Consumer finance
Action Data Services, Inc. Data processing
Commercial Credit Plan, Incorporated (OK) Consumer finance
Commercial Credit Corporation (NY) Consumer finance
Commercial Credit Corporation (SC) Consumer finance
Commercial Credit Corporation (WV) Consumer finance
Commercial Credit Corporation NC Consumer finance
Commercial Credit Europe, Inc. Inactive
Commercial Credit Far East Inc. Inactive
Commercial Credit Insurance Services, Inc. Insurance broker
Commercial Credit Insurance Agency (P&C) of Mississippi, Inc. Insurance agency
Commercial Credit Insurance Agency of Alabama, Inc. Insurance agency
Commercial Credit Insurance Agency of Hawaii, Inc. Insurance agency
Commercial Credit Insurance Agency of Kentucky, Inc. Insurance agency
Commercial Credit Insurance Agency of Massachusetts, Inc. Insurance agency
Commercial Credit Insurance Agency of Nevada, Inc. Credit LH&A, P-C insurance
Commercial Credit Insurance Agency of New Mexico, Inc. Insurance agency/Broker
Commercial Credit Insurance Agency of Ohio, Inc. Insurance agency/broker
Commercial Credit International, Inc. Holding company
Commercial Credit International Banking Corporation International lending
Commercial Credit Corporation CCC Limited Second mortgage loans
Commercial Credit Services do Brazil Ltda. Inactive
Commercial Credit Services Belgium S.A. Inactive
Commercial Credit Limited Inactive
</TABLE>
<PAGE> 106
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers Principal
Company Organization Group Inc. Business
<S> <C> <C> <C>
Commercial Credit Loan, Inc. (NY) NY 100 Consumer finance
Commercial Credit Loans, Inc. (DE) DE 100 Consumer finance
Commercial Credit Loans, Inc. (OH) OH 100 Consumer finance
Commercial Credit Loans, Inc. (VA) VA 100 Consumer finance
Commercial Credit Management Corporation MD 100 Intercompany services
Commercial Credit Plan Incorporated (TN) TN 100 Consumer finance
Commercial Credit Plan Incorporated (UT) UT 100 Consumer finance
Commercial Credit Plan Incorporated of Georgetown DE 100 Consumer finance
Commercial Credit Plan Industrial Loan Company VA 100 Consumer finance
Commercial Credit Plan, Incorporated (CO) CO 100 Consumer finance
Commercial Credit Plan, Incorporated (DE) DE 100 Consumer finance
Commercial Credit Plan, Incorporated (GA) GA 100 Consumer finance
Commercial Credit Plan, Incorporated (MO) MO 100 Consumer finance
Commercial Credit Securities, Inc. DE 100 Broker dealer
DeAlessandro & Associates, Inc. DE 100 Inactive
Park Tower Holdings, Inc. DE 100 Holding company
CC Retail Services, Inc. DE 100 Leasing, financing
Park Tower Brokerage Associates DE 100 Insurance agency
Troy Textiles, Inc. DE 100 Inactive
Commercial Credit Development Corporation DE 100 Direct loan
Myers Park Properties, Inc. DE 100 Inactive
Travelers Home Mortgage Services of Alabama, Inc. DE 100 Inactive
Penn Re, Inc. NC 100 Management company
Plympton Concrete Products, Inc. DE 100 Inactive
Resource Deployment, Inc. TX 100 Management company
SBHU Mortgage Pass-Through Corporation DE 100 Home equity loans
The Travelers Bank USA DE 100 Credit card bank
</TABLE>
<PAGE> 107
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers Principal
Company Organization Group Inc. Business
<S> <C> <C> <C>
Travelers Bank & Trust, fsb DE 100 Banking services
Travelers Home Equity, Inc. NC 100 Financial services
CC Consumer Services of Alabama, Inc. AL 100 Financial services
CC Home Lenders Financial, Inc. GA 100 Financial services
CC Home Lenders, Inc. OH 100 Financial services
Commercial Credit Corporation (TX) TX 100 Consumer finance
Commercial Credit Financial of Kentucky, Inc. KY 100 Consumer finance
Commercial Credit Financial of West Virginia, Inc. WV 100 Consumer finance
Commercial Credit Plan Consumer Discount Company PA 100 Financial services
Commercial Credit Services of Kentucky, Inc. KY 100 Financial services.
Travelers Home Mortgage Services, Inc. NC 100 Financial services
Travelers Home Mortgage Services of Pennsylvania, Inc. PA 100 Financial services
Triton Insurance Company MO 100 P-C insurance
Verochris Corporation DE 100 Joint venture company
AMC Aircraft Corp. DE 100 Aviation
World Service Life Insurance Company CO 100 Life insurance
Greenwich Street Capital Partners, Inc. DE 100 Investments
Greenwich Street Investments, Inc. DE 100 Investments
Greenwich Street Capital Partners Offshore Holdings, Inc. DE 100 Investments
Mirasure Insurance Company, Ltd. 100 Inactive
MRC Holdings, Inc. DE 100 Real estate
Pacific Basin Investments Ltd. DE 100 Inactive
Primerica Corporation (WY) WY 100 Inactive
Primerica, Inc. DE 100 Name saver
Salomon Smith Barney Holdings Inc. DE 100 Holding Company
Basis Clearing Inc 100
Genesis Crude Oil, L.P. 11.77
</TABLE>
<PAGE> 108
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers Principal
Company Organization Group Inc. Business
<S> <C> <C> <C>
Mutual Management Corp. DE 100 Investment management
Smith Barney Asset Management Co., Ltd. 100 Investment advisor
Smith Barney Management Company (Ireland) Limited 100 Fund management
Smith Barney Strategy Advisers Inc. DE 100 Investment management
The Advisers Fund L.P. DE 100 Investment fund
Travelers Group Investment Management, LLC DE 50 Investment advisor
New Amsterdam Investing Ltd. NY 100
Nextco Inc. DE 100 Purchasing
Phibro Energy Production, Inc. DE 100
Anglo Suisse USSR LP 54.55
White Nights Limited Liability Company 11.25
Golden Mammoth 21.88
Phibro Energy Production G.P. Inc DE 100
Anglo Suisse USSR LP 1
White Nights Limited Liability Company 11.25
White Nights Limited Liability Company 38.75
Phibro Inc. DE 100
MC2 Technologies, Inc. DE 100
Phibro Commodities 100
Phibro Energy Clearing, Inc. DE 100
Phibro Energy Hong Kong Limited 100
Phibro Energy Oil, Inc. DE 100
Phibro GmbH 100
Allcom Trading Company Limited 50
Allcomex Trading Company Limited 50
Derby Resources AG 100
Phibro (Asia) Pte Ltd 100
Phibro Energy (Overseas) AG 100
</TABLE>
<PAGE> 109
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers Principal
Company Organization Group Inc. Business
<S> <C> <C> <C>
Phibro Energy Marketing AG 100
Phibro Energy Representacoes Commerciaia Ltda. 100
Phibro S.A. AG 100
Philipp Brothers AG 100
Politrade Sp. 50
Scanports Shipping Limited 100
Shipalks Shipping AG 100
Scansport Limited 100
Shipalks Shipping Limited 100
Turavent Oil AG 100
Phibro Holdings Limited 100
Carisgreen Limited 100
Phibro Bullion Limited 100
Phibro Energy Marketing Limited 100
Phibro Futures and Metals Limited 100
Phibro International Sales Corp. 100
Phibro Trading Pte Ltd 100
Phillip Brothers Limited 100
Scanport Shipping, Inc. DE 100
Phibro Resources Corp. DE 100
The S.W. Shattuck Chem Co., Inc. CO 100
Phillip Brothers Inc. NY 100
Derby & Co. Inc. NY 100
Phillip Brothers Trading Corp. DE 100
Ropin Steel Co., Inc. IL 100
R-H Capital, Inc. DE 100 Investments
RH Sports Enterprises Inc GA 100 Sports representation
Salomon Brothers Canada Holding Co 1
</TABLE>
<PAGE> 110
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers Principal
Company Organization Group Inc. Business
<S> <C> <C> <C>
Salomon Smith Barney Canada Inc. 100 Investment dealer
Salomon Brothers Finanz AG 100
Salomon Brothers Holding Company Inc DE 100
Banco Patrimonio de Investimento 50
Concord Venture Capital 13.83
Grove Street Film Corp DE 100 A wholly-owned subsidiary of
Salomon Brothers Holding Company
Inc. It is a special purpose
subsidiary established to buy and
sell films.
Hannuri Salomon 24
Liberty Brokerage 14.8
Loan Participation Holding Corporation DE 100 Holding Company of Home
Mortgage Access Corporation.
Home Mortgage Access Corporation DC 100
Home MAC Government Financial Corporation DC 100
Home MAC Government Financial Corporation West DC 100
Home MAC Mortgage Securities Corporation DC 100 A wholly-owned, limited purpose
finance subsidiary of Home
Mortgage Access Corporation,
organized to raise funds through
the issuance and sale of
Collateralized Mortgage
Obligations.
Merchants Bankers Associados S.A. 49
PB-SB Investments, Inc DE 100 A wholly-owned subsidiary of
Salomon Brothers Holding Company
Inc established to act as General
or Managing Partner in various
real estate and oil and gas
exploration limited and general
partnerships.
PB-SB 1988 II 23.06
</TABLE>
<PAGE> 111
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers Principal
Company Organization Group Inc. Business
<S> <C> <C> <C>
PB-SB Ventures, Inc DE 100 A wholly-owned subsidiary of
Salomon Brothers Holding Company
Inc established to act as a
General Partner in several limited
partnerships investing in venture
capital deals, and securities of
various types.
PT SB NUSA Securities 60
Salomon (International) Finance AG 100
Phibro S.A. Sp 100
Phibro-Salomon Investments 100
Salomon Brothers Europe Limited 25
Anglo Chemical Metals Limited 100
Charles Wade & Co. Limited 100
Cocoa Merchants Limited 100
Cresthayes Limited 100
Damsonbush Limited 100
Hilsrest Limited 100
Ion Trading Systems Limited 51
PE 1994 Limited 100
Phibro Energy Services Limited 100
Phibro West Afrique Limited 100
Phibro-Salomon Nominees Limited 100
Philipp Brothers Bullion Limited 100
Philipp Brothers Futures Limited 100
PS4 Limited 100
Salomon Brothers Asset Management Limited 100
Salomon Brothers Eastern Europe Limited 100
Salomon Brothers International Limited 100
SBE 1991 Limited 100
SBI 1984 100
Salomon Brothers Nominees Limited 100
</TABLE>
<PAGE> 112
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers Principal
Company Organization Group Inc. Business
<S> <C> <C> <C>
Salomon Brothers UK Equity Limited 100
Salomon Brothers UK Limited 100
SB Corporation Limited 100
SB Finance PLC 100
SB Funding No 1 Limited 100
SB Funding No 2 Limited 100
SB Mortgage Securities No 21 PLC 100
SB Mortgage Securities No 22 PLC 100
SB Mortgage Securities No 23 PLC 100
SB Mortgage Securities No 24 PLC 100
SB Placement No 2 Limited 100
SB Portfolio Services Limited 100
SB Residential PLC 100
Wavendown Limited 100
Salomon Brothers Holdings GmbH 77.63
Salomon Brothers Asia Limited 100
Salomon Brothers Asia Management Services Ltd 100
Salomon Contractuals Limited 100
Salomon International Financial Products 100
Salomon Brothers Hong Kong Limited 25
Salomon Brothers Hong Kong Nom. Ltd. 100
Salomon Brothers Overseas Inc 100
Salomon Analytics Inc DE 100 A wholly-owned subsidiary of
Salomon Brothers Inc established
to sell Salomon's Yield Book
technology externally.
Salomon Brothers Asia Capital Corp DE 100
Darkland International Limited 100
Emeraldgrange Limited 100
Hualaford Limited 100
</TABLE>
<PAGE> 113
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers Principal
Company Organization Group Inc. Business
<S> <C> <C> <C>
Ilshin No. 4 Venture Investment Partnership 90
Kookmin No. 5 Investment Partnership 90
Solom International Limited 100
Samchully Investment Partnership No. 3 90
Underwood Enterprises Limited 100
Salomon Brothers Asia Pacific Ltd. DE 100
Salomon Brothers Asset Management (Ireland) Ltd 100
Salomon Brothers Asset Management Asia Pacific Ltd 100
Salomon Brothers Asset Management Inc DE 100
Salomon Brothers Asset Management G.P. DE 100
Mastholm Asset Management LLC 20
Salomon Brothers Asset Management Japan Ltd 100
Salomon Brothers Australia Ltd. 100
Salomon Brothers Canada Holding Co 99
Salomon Smith Barney Canada Inc. 100 Investment dealer
Salomon Brothers China Ltd 100
Salomon Brothers Finance AG 100
Salomon Brothers Hong Kong Futures 100
Salomon Brothers Hong Kong Limited 75
Salomon Brothers Hong Kong Nom. Ltd. 100
Salomon Brothers Housing Investment Inc DE 100 A wholly-owned subsidiary of
Salomon Brothers Holding Company
Inc, is a limited partner in 4
partnerships.
Corporate Housing Initiatives Fund LP 26.76
Corporate Housing Initiatives Fund LP II 9.34
Enterprise Housing Partners 1992 17.62
Enterprise Housing Partners 1995 7.64
Enterprise Housing Partners 1996 13.33
New York Equity Fund 1992 Ltd 11.93
</TABLE>
<PAGE> 114
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers
Company Organization Group Inc.
<S> <C> <C>
New York Equity Fund 1993 Ltd 8.92
New York Equity Fund 1994 Ltd 8.87
New York Equity Fund 1995 9.25
Salomon Brothers Inc DE 100
Hannuri Salomon 25
Salomon Brothers UK Limited 0
Salomon Brothers International Operations (Japan) Inc DE 100
Salomon Brothers International Operations (Jersey) Limited 100
Salomon Brothers International Operations (Overseas) Limited 100
Salomon Brothers International Operations Inc DE 100
Salomon Brothers Mortgage Securities II, Inc DE 100
Salomon Brothers Mortgage Securities III, Inc DE 100
Salomon Brothers Mortgage Securities Inc DE 100
Salomon Brothers Mortgage Securities VI, Inc DE 100
Salomon Brothers Mortgage Securities VII, Inc DE 100
Salomon Brothers Pacific Holding Company Inc DE 100
Salomon Brothers Holdings GmbH 22.37
Salomon Brothers Asia Limited 100
Salomon Brothers Asia Management Services Ltd 100
Salomon Contractuals Limited 100
Salomon International Financial Products 100
Salomon Brothers Properties, Inc DE 100
Salomon Brothers Investments Inc DE 100
Salomon Brothers Finance Corporation and Co beschrankthaftende KG 28
Salomon Brothers AG 100
Salomon Brothers Corporate Support GmbH 100
<CAPTION>
Principal
Company Business
<S> <C>
New York Equity Fund 1993 Ltd
New York Equity Fund 1994 Ltd
New York Equity Fund 1995
Salomon Brothers Inc
Hannuri Salomon
Salomon Brothers UK Limited
Salomon Brothers International Operations (Japan) Inc A wholly-owned subsidiary of Salomon
Brothers Holding Company Inc that
was created to fund payroll and
other expenses of expatriates.
Salomon Brothers International Operations (Jersey) Limited
Salomon Brothers International Operations (Overseas) Limited
Salomon Brothers International Operations Inc
Salomon Brothers Mortgage Securities II, Inc
Salomon Brothers Mortgage Securities III, Inc
Salomon Brothers Mortgage Securities Inc
Salomon Brothers Mortgage Securities VI, Inc
Salomon Brothers Mortgage Securities VII, Inc
Salomon Brothers Pacific Holding Company Inc
Salomon Brothers Holdings GmbH
Salomon Brothers Asia Limited
Salomon Brothers Asia Management Services Ltd
Salomon Contractuals Limited
Salomon International Financial Products
Salomon Brothers Properties, Inc
Salomon Brothers Investments Inc
Salomon Brothers Finance Corporation and Co beschrankthaftende KG
Salomon Brothers AG
Salomon Brothers Corporate Support GmbH
</TABLE>
<PAGE> 115
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers
Company Organization Group Inc.
<S> <C> <C>
Salomon Brothers Kapitalanlage-Gesellschaft mbH 100
Salomon Brothers Real Estate Development Corp DE 100
Crow Wood Terrace 50
Vallejo Highlands 50
Vallejo Somerset 50
Salomon Brothers Realty Corp NY 100
Salomon Brothers Russia Holding Company Inc DE 100
AO Salomon Brothers 100
Salomon Brothers S.A. 100
Salomon Brothers Services GmbH 100
Salomon Brothers Services Inc DE 100
Salomon Brothers Asia Management Services Limited (Hong Kong) 100
Salomon Brothers SIM SPA 100
Salomon Brothers Singapore Pte Ltd 100
Salomon Brothers Taiwan Limited 100
Salomon Brothers Tosca Inc DE 100
Salomon Capital Access for Savings Institutions, Inc DE 100
Salomon Capital Access Corporation DE 100
Salomon Forex Inc DE 100
Salomon Brothers Finance Corporation DE 100
Salomon Brothers Finance Corporation and Co beschrankthaftende KG 19
<CAPTION>
Principal
Company Business
<S> <C>
Salomon Brothers Kapitalanlage-Gesellschaft mbH
Salomon Brothers Real Estate Development Corp
Crow Wood Terrace
Vallejo Highlands
Vallejo Somerset
Salomon Brothers Realty Corp A wholly-owned subsidiary of Salomon
Brothers Holding Company Inc, trades
mortgage loans. The primary
activities of the entity are
currently trading and taking
positions in mortgage whole loans
and acting as a real estate
investment banker.
Salomon Brothers Russia Holding Company Inc
AO Salomon Brothers
Salomon Brothers S.A.
Salomon Brothers Services GmbH
Salomon Brothers Services Inc
Salomon Brothers Asia Management Services Limited (Hong Kong)
Salomon Brothers SIM SPA
Salomon Brothers Singapore Pte Ltd
Salomon Brothers Taiwan Limited
Salomon Brothers Tosca Inc
Salomon Capital Access for Savings Institutions, Inc
Salomon Capital Access Corporation A wholly-owned, limited purpose
finance subsidiary of Salomon
Capital Access for Savings
Institutions, Inc. The company
raises funds through the issuance
and sale of Collateralized Mortgage
Obligations (CMOs).
Salomon Forex Inc
Salomon Brothers Finance Corporation
Salomon Brothers Finance Corporation and Co beschrankthaftende KG
</TABLE>
<PAGE> 116
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers Principal
Company Organization Group Inc. Business
<S> <C> <C>
Salomon Brothers AG 100
Salomon Brothers Corporate Support GmbH 100
Salomon Brothers Kapitalanlage-Gesellschaft mbH 100
Salomon International Limited DE 100
Salomon Brothers Europe Limited 75
Anglo Chemical Metals Limited 100
Charles Wade & Co. Limited 100
Cocoa Merchants Limited 100
Cresthayes Limited 100
Damsonbush Limited 100
Hilsrest Limited 100
Ion Trading Systems Limited 51
PE 1994 Limited 100
Phibro Energy Services Limited 100
Phibro West Afrique Limited 100
Phibro-Salomon Nominees Limited 100
Philipp Brothers Bullion Limited 100
Philipp Brothers Futures Limited 100
PS4 Limited 100
Salomon Brothers Asset Management Limited 100
Salomon Brothers Eastern Europe Limited 100
Salomon Brothers International Limited 100
SBE 1991 Limited 100
SBI 1984 100
Salomon Brothers Nominees Limited 100
Salomon Brothers UK Equity Limited 100
Salomon Brothers UK Limited 100
SB Corporation Limited 100
SB Finance PLC 100
SB Funding No 1 Limited 100
SB Funding No 2 Limited 100
</TABLE>
<PAGE> 117
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers
Company Organization Group Inc.
<S> <C> <C>
SB Mortgage Securities No 21 PLC 100
SB Mortgage Securities No 22 PLC 100
SB Mortgage Securities No 23 PLC 100
SB Mortgage Securities No 24 PLC 100
SB Placement No 2 Limited 100
SB Portfolio Services Limited 100
SB Residential PLC 100
Wavendown Limited 100
Salomon Loan Fund Inc DE 100
Salomon Loan Fund I LLC 99
Salomon Millennium Bridge Fund Inc DE 100
Salomon Northpoint Corp DE 100
Salomon Plaza Holdings Inc DE 100
Plaza Holdings Inc. DE 100
Salomon Brothers Finance Corporation and Co beschrankthaftende KG 53
Salomon Brothers AG 100
Salomon Brothers Corporate Support GmbH 100
Salomon Brothers Kapitalanlage-Gesellschaft mbH 100
Salomon Swapco Inc DE 100
SARCO DE 100
SB Contractual Products, Inc DE 100
SB Funding Corp. DE 100
SB Graphics Corp DE 100
SB Insurances Limited 100
SB Management Services Inc DE 100
SB Motel Corp DE 100
SB Motel Durham I-85 Corp DE 100
SB Motel Mortgage Corp DE 100
<CAPTION>
Principal
Company Business
<S> <C>
SB Mortgage Securities No 21 PLC
SB Mortgage Securities No 22 PLC
SB Mortgage Securities No 23 PLC
SB Mortgage Securities No 24 PLC
SB Placement No 2 Limited
SB Portfolio Services Limited
SB Residential PLC
Wavendown Limited
Salomon Loan Fund Inc
Salomon Loan Fund I LLC
Salomon Millennium Bridge Fund Inc
Salomon Northpoint Corp
Salomon Plaza Holdings Inc
Plaza Holdings Inc. Holding Company of Salomon
BrothersFinance Corporation and Co.
beschrankt haftende KG.
Salomon Brothers Finance Corporation and Co beschrankthaftende KG
Salomon Brothers AG
Salomon Brothers Corporate Support GmbH
Salomon Brothers Kapitalanlage-Gesellschaft mbH
Salomon Swapco Inc
SARCO
SB Contractual Products, Inc
SB Funding Corp.
SB Graphics Corp
SB Insurances Limited
SB Management Services Inc
SB Motel Corp
SB Motel Durham I-85 Corp
SB Motel Mortgage Corp
</TABLE>
<PAGE> 118
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers
Company Organization Group Inc.
<S> <C> <C>
SB-MBA Participation Corporation NY 100
SB/EJV Participation Corp DE 100
Bridge Information Systems, Inc. 3.05
Salomon Loan Fund I LLC 1
SB/OT Participation Corp. DE 100
Seals SA 100
Seven World Holdings Inc DE 100
Salomon International Investments Inc 100
Seven World Technologies, Inc DE 100
Structured Placements Corp DE 100
Structured Products Corp DE 100
TCEP Participation Corp NY 100
TCP Corp DE 100
FINIS 22
The Downtown Conference Center Inc DE 100
Third Street Promenade Productions Inc DE 100
Salomon Inc SI Financing Trust I 100
Salomon Technology Services Inc. DE 100
SB Cayman Holdings I Inc. DE 100
Smith Barney Private Trust Company (Cayman) Limited 50
Greenwich (Cayman) I Limited 50
Greenwich (Cayman) II Limited 50
Greenwich (Cayman) III Limited 50
<CAPTION>
Principal
Company Business
<S> <C>
SB-MBA Participation Corporation A wholly-owned subsidiary of Salomon
Brothers Holding Company Inc
established to invest in an Argentine
joint venture.
SB/EJV Participation Corp A wholly-owned subsidiary of Salomon
Brothers Holding Company Inc
established as a limited partner for
Electronic Joint Venture.
Bridge Information Systems, Inc.
Salomon Loan Fund I LLC
SB/OT Participation Corp.
Seals SA
Seven World Holdings Inc
Salomon International Investments Inc
Seven World Technologies, Inc Principal Activity: Software
Developer
Structured Placements Corp
Structured Products Corp
TCEP Participation Corp
TCP Corp
FINIS
The Downtown Conference Center Inc
Third Street Promenade Productions Inc
Salomon Inc SI Financing Trust I
Salomon Technology Services Inc.
SB Cayman Holdings I Inc. Holding company
Smith Barney Private Trust Company (Cayman) Limited Trust company
Greenwich (Cayman) I Limited Corporate services
Greenwich (Cayman) II Limited Corporate services
Greenwich (Cayman) III Limited Corporate services
</TABLE>
<PAGE> 119
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers Principal
Company Organization Group Inc. Business
<S> <C> <C> <C>
SB Cayman Holdings II Inc. DE 100 Holding company
Smith Barney Private Trust Company (Cayman) Limited 50 Trust company
Greenwich (Cayman) I Limited 50 Corporate services
Greenwich (Cayman) II Limited 50 Corporate services
Greenwich (Cayman) III Limited 50 Corporate services
SB Cayman Holdings III Inc. DE 100 Holding company
Smith Barney Credit Services (Cayman) Ltd. 50 Corporate services
SB Cayman Holdings IV Inc. DE 100 Holding company
Smith Barney Credit Services (Cayman) Ltd. 50 Corporate services
SFH Jersey Limited 20 Investment banking
Smith Barney (Delaware) Inc. DE 100 Holding company
1345 Media Corp. DE 100 Holding company
Corporate Realty Advisors, Inc. DE 100 Realty trust adviser
IPO Holdings Inc. DE 100 Holding company
Institutional Property Owners, Inc. V DE 100 Investments
Institutional Property Owners, Inc. VI DE 100 General partner
MLA 50 Corporation DE 100 Limited partner
MLA GP Corporation DE 100 General partner
MLA Associates, L.P. 100 Energy investments
Smith Barney Acquisition Corporation DE 100 Offshore fund adviser
Smith Barney Acquisition Fund, Inc. 100 Commodities fund
Smith Barney Global Capital Management, Inc. DE 100 Investment management
Smith Barney Real Estate Opportunity Fund, L.P. 50 Real estate investment
Smith Barney Realty, Inc. DE 100 Investments
Smith Barney Risk Investors, Inc. DE 100 Investments
Smith Barney Consulting Partnership, LP DE 100 Advisory services
Smith Barney Investors L.P. 100 Investments
Smith Barney Venture Corp. DE 100 Investments
</TABLE>
<PAGE> 120
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers Principal
Company Organization Group Inc. Business
<S> <C> <C> <C>
First Century Company DE 100 Holding company
First Century Partnership II 100 Investment fund
First Century Management Company DE 100 Investment adviser
First Century Partnership III 100 Investment fund
Smith Barney (Ireland) Limited 100 Fund management
Smith Barney Asia Inc. DE 100 Investment banking
Smith Barney Asset Management Group (Asia) Pte. Ltd. 100 Asset management
Smith Barney Capital Services Inc. DE 100 Derivative product transactions
Smith Barney Cayman Islands, Ltd. 100 Securities trading
Smith Barney Commercial Corp. DE 100 Commercial credit
Smith Barney Commercial Corporation Asia Limited 99 Fx trading
Smith Barney Europe Holdings, Ltd. 100
Smith Barney Europe Ltd. 100 Broad Scope Financial Services
Smith Barney Funding Corp. DE 100
Smith Barney Futures Management Inc. DE 100 Commodities pool operator
ERISA Futures Fund L.P. 100 Commodity pool
F-1000 Futures Fund L.P., Michigan Series I 100 Commodity pool
F-1000 Futures Fund L.P., Michigan Series II 100 Commodity pool
F-1000 Futures Fund L.P., Series IX 100 Commodity pool
F-1000 Futures Fund L.P., Series VIII 100 Commodity pool
Greenbrier Futures Fund L.P. 100 Commodity pool
Hutton Investors Futures Fund L.P. II 100 Commodity pool
Monetary Venture Fund 100 Commodity pool
Shearson Lehman Futures 1000 Plus, L.P. 100 Commodity pool
Shearson Lehman Select Advisors Futures Fund L.P. 100 Commodity pool
SLB Mid-West Futures Fund L.P. 100 Commodity pool
SLH Performance Partners Futures Fund L.P. 100 Commodity pool
</TABLE>
<PAGE> 121
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers
Company Organization Group Inc.
<S> <C> <C>
Smith Barney Diversified Futures Fund L.P. 100
Smith Barney International Advisors Currency Fund L.P. 100
Smith Barney Mid-West Futures Fund LP II 100
Smith Barney Offshore Fund Ltd. DE 100
Smith Barney Overview Fund PLC 100
Smith Barney Principal Plus Futures Fund LP 100
Smith Barney Tidewater Futures Fund LP 100
Smith Barney Inc. DE 100
KEB Smith Barney Securities Co., Ltd. 49
Russian American Investment Bank Partners, LP 20
SBHU Life Agency, Inc. DE 100
Robinson-Humphrey Insurance Services Inc. GA 100
Robinson-Humphrey Insurance Services of Alabama, Inc. AL 100
SBHU Life Agency of Arizona, Inc. AZ 100
SBHU Life Agency of Indiana, Inc. IN 100
SBHU Life Agency of Ohio, Inc. OH 100
SBHU Life Agency of Oklahoma, Inc. OK 100
SBHU Life Agency of Texas, Inc. TX 100
SBHU Life Agency of Utah, Inc. UT 100
SBHU Life Insurance Agency of Massachusetts, Inc. MA 100
SBS Insurance Agency of Hawaii, Inc. HI 100
SBS Insurance Agency of Idaho, Inc. ID 100
SBS Insurance Agency of Maine, Inc. ME 100
SBS Insurance Agency of Montana, Inc. MT 100
SBS Insurance Agency of Nevada, Inc. NV 100
SBS Insurance Agency of Ohio, Inc. OH 100
SBS Insurance Agency of South Dakota, Inc. SD 100
<CAPTION>
Principal
Company Business
<S> <C>
Smith Barney Diversified Futures Fund L.P. Investment fund
Smith Barney International Advisors Currency Fund L.P. Commodity pool
Smith Barney Mid-West Futures Fund LP II
Smith Barney Offshore Fund Ltd. Commodity pool
Smith Barney Overview Fund PLC Commodity fund
Smith Barney Principal Plus Futures Fund LP
Smith Barney Tidewater Futures Fund LP
Smith Barney Inc. Broker dealer
KEB Smith Barney Securities Co., Ltd. Broker dealer
Russian American Investment Bank Partners, LP Joint ventures
SBHU Life Agency, Inc. Insurance brokerage
Robinson-Humphrey Insurance Services Inc. Insurance brokerage
Robinson-Humphrey Insurance Services of Alabama, Inc. Insurance brokerage
SBHU Life Agency of Arizona, Inc. Insurance brokerage
SBHU Life Agency of Indiana, Inc. Insurance brokerage
SBHU Life Agency of Ohio, Inc. Insurance brokerage
SBHU Life Agency of Oklahoma, Inc. Insurance brokerage
SBHU Life Agency of Texas, Inc. Insurance brokerage
SBHU Life Agency of Utah, Inc. Insurance brokerage
SBHU Life Insurance Agency of Massachusetts, Inc. Insurance brokerage
SBS Insurance Agency of Hawaii, Inc. Insurance brokerage
SBS Insurance Agency of Idaho, Inc. Insurance brokerage
SBS Insurance Agency of Maine, Inc. Insurance brokerage
SBS Insurance Agency of Montana, Inc. Insurance brokerage
SBS Insurance Agency of Nevada, Inc. Insurance brokerage
SBS Insurance Agency of Ohio, Inc. Insurance brokerage
SBS Insurance Agency of South Dakota, Inc. Insurance brokerage
</TABLE>
<PAGE> 122
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers Principal
Company Organization Group Inc. Business
<S> <C> <C> <C>
SBS Insurance Agency of Wyoming, Inc. WY 100 Insurance brokerage
SBS Insurance Brokerage Agency of Arkansas, Inc. AR 100 Insurance brokerage
SBS Insurance Brokers of Kentucky, Inc. KY 100 Insurance brokerage
SBS Insurance Brokers of New Hampshire, Inc. NH 100 Insurance brokerage
SBS Insurance Brokers of North Dakota, Inc. ND 100 Insurance brokerage
SBS Life Insurance Agency of Puerto Rico, Inc. PR 100 Insurance brokerage
SLB Insurance Agency of Maryland, Inc. MD 100 Insurance brokerage
Smith Barney Life Agency Inc. LA 100 Insurance brokerage
Smith Barney (Hong Kong) Limited 100 Introducing broker
Smith Barney (Netherlands) Inc. DE 100 Broker dealer
Smith Barney International Incorporated OR 100 Broker dealer
Smith Barney (Singapore) Pte Ltd 100 Commodities
Smith Barney Pacific Holdings, Inc. 100 Holding company
Smith Barney (Asia) Limited 100 Introducing Broker
Smith Barney (Pacific) Limited 100 Commodities dealer
Smith Barney Securities Pte Ltd 100 Securities brokerage
Smith Barney Puerto Rico Inc. PR 100 Broker dealer
The Robinson-Humphrey Company, LLC DE 100
Thirty Fourth Street Partners L.P. 100 Real estate
Smith Barney Mortgage Brokers Inc. DE 100 Mortgage brokerage
Smith Barney Mortgage Capital Corp. DE 100 Mortgage-backed securities
Smith Barney Mortgage Capital Group, Inc. DE 100 Mortgage trading
Smith Barney Offshore, Inc. DE 100 Decathlon Fund advisor
Decathlon Offshore Limited 100 Commodity fund
Smith Barney Private Trust GmbH 100
Smith Barney SA 99 Commodities trading
Smith Barney Asset Management France SA 99.92 Com. based asset management
</TABLE>
<PAGE> 123
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers Principal
Company Organization Group Inc. Business
<S> <C> <C> <C>
Smith Barney Securities Investment Consulting Co. Ltd. 99 Investrment analysis
Smith Barney Shearson (Chile) Corredora de Seguro Limitada 100 Insurance brokerage
SP Insurance Company Limited 100
Structured Mortgage Securities Corporation DE 100 Mortgage-backed securities
The Travelers Investment Management Company CT 100 Investment advisor
Smith Barney Corporate Trust Company DE 100 Trust company
Smith Barney Private Trust Bank of Michigan MI 100 Holding Company
Smith Barney Private Trust Company NY 100 Trust company.
Smith Barney Private Trust Company of Florida FL 100 Trust company
Smith Barney Private Trust Company of New Jersey NJ 100 Holding Company
Smith Barney Private Trust Company of Texas TX 100 Trust company
Tinmet Corporation DE 100 Inactive
Travelers Group Diversified Distribution Services, Inc. DE 100 Alternative marketing
Travelers Group Exchange, Inc. DE 100 Insurance agency
TGE Insurance Agency of Alabama, Inc. AL 100 Insurance agency
TGE Insurance Agency of Kentucky, Inc. KY 100 Insurance agency
TGE Insurance Agency of Massachusetts, Inc. DE 100 Insurance agency
TGE Insurance Agency of Mississippi, Inc. P.C. MS 100 Insurance agency
TGE Insurance Agency of New Mexico, Inc. NM 100 Insurance agency
TGE Insurance Agency of Ohio, Inc. OH 100 Insurance agency
TGE Insurance Agency of Texas, Inc. TX 100 Insurance agency
Travelers Services Inc. DE 100 Holding company
Tribeca Management Inc. DE 100 Management services
TRV Employees Investments, Inc. DE 100 Investments
TRV/RCM Corp. DE 100 Inactive
TRV/RCM LP Corp. DE 100 Inactive
</TABLE>
<PAGE> 124
OWNERSHIP OF THE TRAVELERS INSURANCE COMPANY
<TABLE>
<CAPTION>
Company State of Organization Ownership Principal Business
<S> <C> <C> <C>
Travelers Group Inc. Delaware Publicly Held -------------
Associated Madison Companies Inc. Delaware 100.00 -------------
The Travelers Insurance Group, Inc. Connecticut 100.00 -------------
The Travelers Insurance Company Connecticut 100.00 Insurance
</TABLE>
PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE
TRAVELERS INSURANCE COMPANY
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers Principal
Company Organization Group Inc. Business
<S> <C> <C> <C>
AC Health Ventures, Inc. DE 100 Inactive
AMCO Biotech, Inc. DE 100 Inactive
Associated Madison Companies, Inc. DE 100 Holding company.
ERISA Corporation NY 100 Inactive
Mid-America Insurance Services, Inc. GA 100 Third party administrator
National Marketing Corporation PA 100 Inactive
PFS Services, Inc. GA 100 General partner and holding company
PFS Shareholder Services GA 50 General partnership
</TABLE>
March 31, 1998
<PAGE> 125
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers
Company Organization Group Inc.
<S> <C> <C>
The Travelers Insurance Group Inc. CT 100
Constitution Plaza, Inc. CT 100
KP Properties Corporation MA 100
KPI 85, Inc. MA 100
KRA Advisers Corporation MA 100
KRP Corporation MA 100
Blue-Ash Associates Limited Partnership 100
KBA 3 Limited Partnership 100
KBA Limited Partnership 100
La Metropole S.A. 98.83
The Prospect Company DE 100
89th & York Avenue Corporation NY 100
Meadow Lane, Inc. GA 100
Panther Valley, Inc. NJ 100
Prospect Management Services Company DE 100
The Travelers Asset Funding Corporation CT 100
The Travelers Insurance Company CT 100
Applied Expert Systems Inc. MA 23.4
The Plaza Corporation CT 100
The Copeland Companies (Holding Company) NJ 100
American Odyssey Funds Management, Inc. NJ 100
American Odyssey Funds, Inc. MD 100
Copeland Associates, Inc. DE 100
Copeland Associates Agency of Ohio, Inc. OH 99
Copeland Associates of Alabama, Inc. AL 100
Copeland Associates of Montana, Inc. MT 100
Copeland Associates of Nevada, Inc. NV 100
Copeland Benefits Management Company NJ 51
Copeland Equities, Inc. NJ 100
Donald F. Smith & Associates NJ 100
Donald F. Smith Insurance Benefit Services, Inc. MA 100
<CAPTION>
Principal
Company Business
<S> <C>
acting as transfer agent
The Travelers Insurance Group Inc. Holding company
Constitution Plaza, Inc. Real estate brokerage
KP Properties Corporation Real estate
KPI 85, Inc. Real estate
KRA Advisers Corporation Real estate
KRP Corporation Real estate
Blue-Ash Associates Limited Partnership Real estate
KBA 3 Limited Partnership Real estate
KBA Limited Partnership Real estate
La Metropole S.A. P-C insurance/reinsurance
The Prospect Company Investments
89th & York Avenue Corporation Real estate
Meadow Lane, Inc. Real estate development
Panther Valley, Inc. Real estate management
Prospect Management Services Company Real estate management
The Travelers Asset Funding Corporation Investment adviser
The Travelers Insurance Company Insurance
Applied Expert Systems Inc. EDP Software
The Plaza Corporation Holding company
The Copeland Companies (Holding Company) Holding company
American Odyssey Funds Management, Inc. Investment advisor
American Odyssey Funds, Inc. Investment management
Copeland Associates, Inc. Fixed/variable annuities
Copeland Associates Agency of Ohio, Inc. Fixed/variable annuities
Copeland Associates of Alabama, Inc. Fixed/variable annuities
Copeland Associates of Montana, Inc. Fixed/variable annuities
Copeland Associates of Nevada, Inc. Insurance
Copeland Benefits Management Company Investment marketing
Copeland Equities, Inc. Fixed/variable annuities
Donald F. Smith & Associates Insurance agency
Donald F. Smith Insurance Benefit Services, Inc. Insurance agent
</TABLE>
<PAGE> 126
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers
Company Organization Group Inc.
<S> <C> <C>
H.C. Copeland Associates, Inc. of Massachusetts MA 100
Smith Annuity Services, Inc. NJ 100
Copeland Financial Services, Inc. NJ 100
Copeland Mortgage Services, Inc. NJ 100
H.C. Copeland and Associates, Inc. of Texas TX 100
Three Parkway Inc. - I PA 100
Three Parkway Inc. - II PA 100
Three Parkway Inc. - III PA 100
Tower Square Securities, Inc. CT 100
Tower Square Securities Insurance Agency of Alabama, Inc. AL 100
Tower Square Securities Insurance Agency of Massachusetts, Inc. MA 100
Tower Square Securities Insurance Agency of New Mexico, NM 100
Tower Square Securities Insurance Agency of Ohio, Inc. OH 100
Tower Square Securities Insurance Agency of Texas, Inc. TX 100
Travelers Asset Management International Corporation NY 100
Travelers Distribution Company DE 100
Travelers Investment Adviser, Inc. DE 100
Travelers/Net Plus Insurance Agency, Inc. MA 100
Travelers/Net Plus, Inc. CT 100
Travelers/Net Plus Agency of Ohio, Inc. OH 100
The Travelers Life and Annuity Company CT 100
Travelers Group Investment Management, LLC DE 50
Travelers Insurance Holdings Inc. GA 100
American Financial Life Insurance Company TX 100
Primerica Life Insurance Company MA 100
National Benefit Life Insurance Company NY 100
Primerica Financial Services (Canada) Ltd. 100
PFSL Investments Canada Ltd. 100
Primerica Client Services, Inc. (Canada) 100
Primerica Financial Services Ltd. 82.82
Primerica Life Insurance Company of Canada 100
The Travelers Insurance Corporation Proprietary Limited 100
Travelers Canada Corporation 100
Travelers Mortgage Securities Corporation DE 100
<CAPTION>
Principal
Company Business
<S> <C>
H.C. Copeland Associates, Inc. of Massachusetts Fixed annuities
Smith Annuity Services, Inc. Broker dealer
Copeland Financial Services, Inc. Investment advisory services.
Copeland Mortgage Services, Inc. Mortgage services
H.C. Copeland and Associates, Inc. of Texas Fixed/variable annuities
Three Parkway Inc. - I Investment real estate
Three Parkway Inc. - II Investment real estate
Three Parkway Inc. - III Investment real estate
Tower Square Securities, Inc. Broker dealer
Tower Square Securities Insurance Agency of Alabama, Inc. Insurance Agency
Tower Square Securities Insurance Agency of Massachusetts, Inc. Insurance Agency
Tower Square Securities Insurance Agency of New Mexico, Insurance Agency
Tower Square Securities Insurance Agency of Ohio, Inc. Insurance Agency
Tower Square Securities Insurance Agency of Texas, Inc. Insurance Agency
Travelers Asset Management International Corporation Investment adviser
Travelers Distribution Company Broker dealer
Travelers Investment Adviser, Inc. Investment advisor
Travelers/Net Plus Insurance Agency, Inc. Insurance agency
Travelers/Net Plus, Inc. Insurance agency
Travelers/Net Plus Agency of Ohio, Inc. Insurance agency
The Travelers Life and Annuity Company Life insurance
Travelers Group Investment Management, LLC Investment advisor
Travelers Insurance Holdings Inc. Holding company
American Financial Life Insurance Company Insurance
Primerica Life Insurance Company Life insurance
National Benefit Life Insurance Company Insurance
Primerica Financial Services (Canada) Ltd. Holding company
PFSL Investments Canada Ltd. Mutual fund dealer
Primerica Client Services, Inc. (Canada) Discount purchase club
Primerica Financial Services Ltd. General agent
Primerica Life Insurance Company of Canada Life insurance
The Travelers Insurance Corporation Proprietary Limited Inactive
Travelers Canada Corporation Inactive
Travelers Mortgage Securities Corporation Collateralized obligations
</TABLE>
<PAGE> 127
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers
Company Organization Group Inc.
<S> <C> <C>
Travelers Property Casualty Corp. DE 82
The Standard Fire Insurance Company CT 100
AE Properties, Inc. CA 100
AE Town and Country Limited 51
Bayhill Five Associates CA 75
Bayhill Four Associates CA 78
Bayhill Restaurant II Associates CA 50
Bayhill VII Associates CA 50
Crossroads Limited CA 50
Industry Land Development Company CT 100
Industry Partners Inc. 57
Koll Business Centers - Bay Area 50
Community Rehabilitation Investment Corporation CT 100
The Automobile Insurance Company of Hartford, Connecticut CT 100
TravCal Secure Insurance Company CA 100
TravCal Indemnity Company CA 100
Travelers Personal Security Insurance Company CT 100
Travelers Property Casualty Insurance Company CT 100
Travelers Property Casualty Insurance Company of Illinois IL 100
The Travelers Indemnity Company CT 100
Commercial Insurance Resources, Inc. DE 100
Gulf Insurance Company MO 100
Aetna National Accounts U.K. Limited 100
Atlantic Insurance Company TX 100
Gulf Group Lloyds TX 0
Gulf Risk Services, Inc. DE 100
Gulf Underwriters Insurance Company MO 100
Select Insurance Company TX 100
Countersignature Agency, Inc. FL 100
First Floridian Auto and Home Insurance Company FL 100
First Trenton Indemnity Company NJ 100
Red Oak Insurance Company NJ 100
Laramia Insurance Agency, Inc. NC 100
Secure Affinity Agency, Inc. DE 100
<CAPTION>
Principal
Company Business
<S> <C>
Travelers Property Casualty Corp. Holding company
The Standard Fire Insurance Company Insurance compny
AE Properties, Inc. Insurance
AE Town and Country Limited
Bayhill Five Associates
Bayhill Four Associates
Bayhill Restaurant II Associates
Bayhill VII Associates
Crossroads Limited
Industry Land Development Company
Industry Partners Inc.
Koll Business Centers - Bay Area
Community Rehabilitation Investment Corporation Investment services
The Automobile Insurance Company of Hartford, Connecticut Insurance company
TravCal Secure Insurance Company Auto insurance
TravCal Indemnity Company Auto insurance
Travelers Personal Security Insurance Company Insurance company
Travelers Property Casualty Insurance Company Insurance company
Travelers Property Casualty Insurance Company of Illinois Insurance company
The Travelers Indemnity Company P-C insurance
Commercial Insurance Resources, Inc. Holding company
Gulf Insurance Company P-C insurance
Aetna National Accounts U.K. Limited Insurance company
Atlantic Insurance Company P-C insurance
Gulf Group Lloyds P-C insurance
Gulf Risk Services, Inc. Claims/risk management
Gulf Underwriters Insurance Company P-C ins/surplus lines
Select Insurance Company P-C insurance
Countersignature Agency, Inc. Countersign ins policies
First Floridian Auto and Home Insurance Company Insurance company
First Trenton Indemnity Company P-C insurance
Red Oak Insurance Company Insurance company
Laramia Insurance Agency, Inc. Flood insurance
Secure Affinity Agency, Inc. P-C insurance agency
</TABLE>
<PAGE> 128
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers
Company Organization Group Inc.
<S> <C> <C>
The Charter Oak Fire Insurance Company CT 100
The Parker Realty and Insurance Agency, Inc. VT 58
The Phoenix Insurance Company CT 100
Constitution State Service Company MT 100
Constitution State Services LLC 100
The Travelers Indemnity Company of America CT 100
The Travelers Indemnity Company of Connecticut CT 100
The Travelers Indemnity Company of Illinois IL 100
The Premier Insurance Company of Massachusetts MA 100
The Travelers Home and Marine Insurance Company IN 100
The Travelers Indemnity Company of Missouri MO 100
The Travelers Lloyds Insurance Company TX 100
The Travelers Marine Corporation CA 100
TI Home Mortgage Brokerage, Inc. DE 100
TravCo Insurance Company IN 100
Travelers Bond Investments, Inc. CT 100
Travelers General Agency of Hawaii, Inc. HI 100
Travelers Medical Management Services Inc. DE 100
Travelers Specialty Property Casualty Company, Inc. CT 100
Travelers Casualty and Surety Company CT 100
AE Development Group, Inc. CT 100
Aetna Casualty & Surety Company of Canada 100
Charter Oak Services Corporation NY 100
Farmington Casualty Company CT 100
Farmington Management, Inc. CT 100
Ponderosa Homes CT 77
Travelers Casualty and Surety Company of America CT 100
Travelers Casualty and Surety Company of Illinois IL 100
Travelers Casualty Company of Connecticut CT 100
Travelers Commercial Insurance Company CT 100
Travelers Excess and Surplus Lines Company CT 100
Travelers Information Services Inc. CT 50
Travelers Lloyds of Texas Insurance Company TX 100
<CAPTION>
Principal
Company Business
<S> <C>
The Charter Oak Fire Insurance Company P-C insurance
The Parker Realty and Insurance Agency, Inc. Real estate
The Phoenix Insurance Company P-C insurance
Constitution State Service Company Service company
Constitution State Services LLC
The Travelers Indemnity Company of America P-C insurance
The Travelers Indemnity Company of Connecticut Insurance
The Travelers Indemnity Company of Illinois P-C insurance
The Premier Insurance Company of Massachusetts Insurance
The Travelers Home and Marine Insurance Company P-C insurance
The Travelers Indemnity Company of Missouri P-C insurance
The Travelers Lloyds Insurance Company Non-life insurance
The Travelers Marine Corporation General insurance brokerage
TI Home Mortgage Brokerage, Inc. Mortgage brokerage services
TravCo Insurance Company P-C insurance
Travelers Bond Investments, Inc. Bond investments
Travelers General Agency of Hawaii, Inc. Insurance agency
Travelers Medical Management Services Inc. Managed care
Travelers Specialty Property Casualty Company, Inc. Insurance management
Travelers Casualty and Surety Company Insurance company
AE Development Group, Inc. Insurance
Aetna Casualty & Surety Company of Canada Insurance company
Charter Oak Services Corporation Insurance
Farmington Casualty Company Insurance company
Farmington Management, Inc. Management services
Ponderosa Homes
Travelers Casualty and Surety Company of America Insurance company
Travelers Casualty and Surety Company of Illinois Insurance company
Travelers Casualty Company of Connecticut Insurance company
Travelers Commercial Insurance Company Insurance company
Travelers Excess and Surplus Lines Company Insurance Company
Travelers Information Services Inc. Insurance
Travelers Lloyds of Texas Insurance Company Insurance company
</TABLE>
<PAGE> 129
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers
Company Organization Group Inc.
<S> <C> <C>
Urban Diversified Properties, Inc. CT 100
Carlsbad Research Center CA 50
Carlsbad Research Center Number Four 50
Carlsbad Research Center Number One 50
Carlsbad Research Center Number Seven 50
Carlsbad Research Center Number Six 50
Carlsbad Research Center Number Three 50
Carlsbad Research Center Number Two 50
Primerica Client Services, Inc. (USA) DE 100
Primerica Convention Services, Inc. GA 100
Primerica Finance Corporation DE 100
PFS Distributors, Inc. GA 100
PFS Investments Inc. GA 100
PFS T.A., Inc. DE 100
PFS Shareholder Services GA 50
Primerica Financial Services Home Mortgages, Inc. GA 100
Primerica Financial Services Home Mortgages Limited Partnership of Arizona 100
Primerica Financial Services Limited Partnership of North Carolina 100
Primerica Financial Services, Inc. NV 100
Primerica Financial Services Agency of New York, Inc. NY 100
Primerica Financial Services Agency of Ohio, Inc. OH 100
Primerica Financial Services Insurance Marketing of Connecticut, Inc. CT 100
Primerica Financial Services Insurance Marketing of Idaho, Inc. ID 100
Primerica Financial Services Insurance Marketing of Maine, Inc. ME 100
Primerica Financial Services Insurance Marketing of Nevada, Inc. NV 100
Primerica Financial Services Insurance Marketing of Pennsylvania, Inc. PA 100
<CAPTION>
Principal
Company Business
<S> <C>
Urban Diversified Properties, Inc. Insurance
Carlsbad Research Center
Carlsbad Research Center Number Four
Carlsbad Research Center Number One
Carlsbad Research Center Number Seven
Carlsbad Research Center Number Six
Carlsbad Research Center Number Three
Carlsbad Research Center Number Two
Primerica Client Services, Inc. (USA) Discount purchase club
Primerica Convention Services, Inc. Convention planner
Primerica Finance Corporation Holding company
PFS Distributors, Inc. General partner
PFS Investments Inc. Broker dealer
PFS T.A., Inc. Joint venture partner
PFS Shareholder Services General partnership which
acts as the sole transfer agent
transfer agent; its
Primerica Financial Services Home Mortgages, Inc. Mortgage loan broker
Primerica Financial Services Home Mortgages Limited Partnership of Arizona
Primerica Financial Services Limited Partnership of North Carolina Entity was formed in North Carolina
to obtain the registration necessary
to allow PFS agents who become
limited partners to solicit
$.M.A.R.T. loans.
Primerica Financial Services, Inc. General agency
Primerica Financial Services Agency of New York, Inc. General agency licensing
Primerica Financial Services Agency of Ohio, Inc. Receive agency commissions
Primerica Financial Services Insurance Marketing of Connecticut, Inc. General agency licensing
Primerica Financial Services Insurance Marketing of Idaho, Inc. General agency licensing
Primerica Financial Services Insurance Marketing of Maine, Inc. General agency licensing
Primerica Financial Services Insurance Marketing of Nevada, Inc. General agency licensing
Primerica Financial Services Insurance Marketing of Pennsylvania, Inc. General agency licensing
</TABLE>
<PAGE> 130
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers
Company Organization Group Inc.
<S> <C> <C>
Primerica Financial Services Insurance Marketing of the Virgin Islands, Inc. 100
Primerica Financial Services Insurance Marketing of Wyoming, Inc. WY 100
Primerica Financial Services Insurance Marketing, Inc. DE 100
Primerica Financial Services of Alabama, Inc. AL 100
Primerica Financial Services of Arizona, Inc. AZ 100
Primerica Financial Services of Kentucky Inc. KY 100
Primerica Financial Services of New Mexico, Inc. NM 100
Primerica Insurance Agency of Massachusetts, Inc. MA 100
Primerica Insurance Marketing Services of Puerto Rico, Inc. PR 100
Primerica Insurance Services of Louisiana, Inc. LA 100
Primerica Insurance Services of Maryland, Inc. MD 100
Primerica Insurance Services of Texas, Inc. TX 100
Primerica Services, Inc. GA 100
RCM Acquisition Inc. DE 100
SCN Acquisitions Company DE 100
SL&H Reinsurance, Ltd. 100
Southwest Service Agreements, Inc. NC 100
Southwest Warranty Corporation FL 100
Berg Associates NJ 100
CCC Holdings, Inc. DE 100
CCC Fairways, Inc. DE 100
Commercial Credit Company DE 100
American Health and Life Insurance Company MD 100
Brookstone Insurance Company VT 100
CC Credit Card Corporation DE 100
CC Finance Company, Inc. NY 100
<CAPTION>
Principal
Company Business
<S> <C>
Primerica Financial Services Insurance Marketing of the Virgin Islands, Inc. General agency licensing
Primerica Financial Services Insurance Marketing of Wyoming, Inc. General agency licensing
Primerica Financial Services Insurance Marketing, Inc. General agency licensing
Primerica Financial Services of Alabama, Inc. General agency licensing
Primerica Financial Services of Arizona, Inc. General agency licensing
Primerica Financial Services of Kentucky Inc. General agency licensing
Primerica Financial Services of New Mexico, Inc. General agency licensing
Primerica Insurance Agency of Massachusetts, Inc. General agency licensing
Primerica Insurance Marketing Services of Puerto Rico, Inc. Insurance agency
Primerica Insurance Services of Louisiana, Inc. General agency licensing
Primerica Insurance Services of Maryland, Inc. General agency licensing
Primerica Insurance Services of Texas, Inc. General agency licensing
Primerica Services, Inc. Print operations
RCM Acquisition Inc. Investments
SCN Acquisitions Company Investments
SL&H Reinsurance, Ltd. Reinsurance
Southwest Service Agreements, Inc. Warranty/service agreements
Southwest Warranty Corporation Extended automobile warranty
Berg Associates Inactive
CCC Holdings, Inc. Holding company
CCC Fairways, Inc. Investment company
Commercial Credit Company Holding company.
American Health and Life Insurance Company LH&A Insurance
Brookstone Insurance Company Insurance managers
CC Credit Card Corporation Limited Purpose securitization
vehicle
CC Finance Company, Inc. Consumer lending
</TABLE>
<PAGE> 131
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers
Company Organization Group Inc.
<S> <C> <C>
CC Finance System Incorporated DE 100
CC Consumer Discount Company PA 100
CC Finance Credit Corp. DE 100
CC Financial Management Services, Inc. DE 100
CC Financial Services Inc. DE 100
CC Advertising Agency, Inc. KS 100
CC Financial Services of Minnesota Inc. MN 100
CC Financial Services of Nevada Inc. NV 100
CC of West Virginia Inc. WV 100
The Midwestern Agency Corporation, Inc. IA 100
CC Financial Services of Des Moines Inc. IA 100
CC Mortgage Corporation VA 100
Dealers Credit, Inc. DE 100
CC Financial Services, Inc. HI 100
Chesapeake Appraisal and Settlement Services Inc. MD 100
Chesapeake Appraisal and Settlement Services Agency of Ohio Inc. OH 100
Chesapeake West Escrow Services Inc. CA 100
City Loan Financial Services, Inc. OH 100
City Loan Financial, Inc. OH 100
Commercial Credit Banking Corporation OR 100
Commercial Credit Consumer Services, Inc. MN 100
Commercial Credit Corporation (Hawaii) HI 100
Commercial Credit Corporation (AL) AL 100
Commercial Credit Corporation (CA) CA 100
Commercial Credit Corporation (IA) IA 100
Commercial Credit of Alabama, Inc. DE 100
Commercial Credit of Mississippi, Inc. DE 100
Commercial Credit Corporation (KY) KY 100
<CAPTION>
Principal
Company Business
<S> <C>
CC Finance System Incorporated Holding company
CC Consumer Discount Company Consumer loans
CC Finance Credit Corp. Consumer credit
CC Financial Management Services, Inc. Mgt, payroll, leaseholding
CC Financial Services Inc. Consumer credit
CC Advertising Agency, Inc. Advertising discounts
CC Financial Services of Minnesota Inc. Consumer credit
CC Financial Services of Nevada Inc. Credit insurance
CC of West Virginia Inc. Industrial loans
The Midwestern Agency Corporation, Inc. Insurance commissions
CC Financial Services of Des Moines Inc. Consumer loans
CC Mortgage Corporation Second mortgages
Dealers Credit, Inc. Insurance agent
CC Financial Services, Inc. Consumer lending
Chesapeake Appraisal and Settlement Services Inc. Appraisal/title
Chesapeake Appraisal and Settlement Services Agency of Ohio Inc. Appraisal/Title
Chesapeake West Escrow Services Inc.
City Loan Financial Services, Inc. Direct loan
City Loan Financial, Inc. Consumer finance
Commercial Credit Banking Corporation Consumer finance
Commercial Credit Consumer Services, Inc. Consumer finance
Commercial Credit Corporation (Hawaii) Financial services
Commercial Credit Corporation (AL) Consumer finance
Commercial Credit Corporation (CA) Consumer finance
Commercial Credit Corporation (IA) Consumer finance
Commercial Credit of Alabama, Inc. Consumer lending
Commercial Credit of Mississippi, Inc. Consumer finance
Commercial Credit Corporation (KY) Consumer finance
</TABLE>
<PAGE> 132
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers
Company Organization Group Inc.
<S> <C> <C>
Certified Insurance Agency, Inc. KY 100
Commercial Credit Investment, Inc. KY 100
National Life Insurance Agency of Kentucky, Inc. KY 100
Union Casualty Insurance Agency, Inc. KY 100
Commercial Credit Corporation (MD) MD 100
Action Data Services, Inc. MO 100
Commercial Credit Plan, Incorporated (OK) OK 100
Commercial Credit Corporation (NY) NY 100
Commercial Credit Corporation (SC) SC 100
Commercial Credit Corporation (WV) WV 100
Commercial Credit Corporation NC NC 100
Commercial Credit Europe, Inc. DE 100
Commercial Credit Far East Inc. DE 100
Commercial Credit Insurance Services, Inc. MD 100
Commercial Credit Insurance Agency (P&C) of Mississippi, Inc. MS 100
Commercial Credit Insurance Agency of Alabama, Inc. AL 100
Commercial Credit Insurance Agency of Hawaii, Inc. HI 100
Commercial Credit Insurance Agency of Kentucky, Inc. KY 100
Commercial Credit Insurance Agency of Massachusetts, Inc. MA 100
Commercial Credit Insurance Agency of Nevada, Inc. NV 100
Commercial Credit Insurance Agency of New Mexico, Inc. NM 100
Commercial Credit Insurance Agency of Ohio, Inc. OH 100
Commercial Credit International, Inc. DE 100
Commercial Credit International Banking Corporation OR 100
Commercial Credit Corporation CCC Limited 100
Commercial Credit Services do Brazil Ltda. 99
Commercial Credit Services Belgium S.A. 100
Commercial Credit Limited DE 100
<CAPTION>
Principal
Company Business
<S> <C>
Certified Insurance Agency, Inc. Insurance agency
Commercial Credit Investment, Inc. Investment company
National Life Insurance Agency of Kentucky, Inc. Insurance agency
Union Casualty Insurance Agency, Inc. Insurance agency
Commercial Credit Corporation (MD) Consumer finance
Action Data Services, Inc. Data processing
Commercial Credit Plan, Incorporated (OK) Consumer finance
Commercial Credit Corporation (NY) Consumer finance
Commercial Credit Corporation (SC) Consumer finance
Commercial Credit Corporation (WV) Consumer finance
Commercial Credit Corporation NC Consumer finance
Commercial Credit Europe, Inc. Inactive
Commercial Credit Far East Inc. Inactive
Commercial Credit Insurance Services, Inc. Insurance broker
Commercial Credit Insurance Agency (P&C) of Mississippi, Inc. Insurance agency
Commercial Credit Insurance Agency of Alabama, Inc. Insurance agency
Commercial Credit Insurance Agency of Hawaii, Inc. Insurance agency
Commercial Credit Insurance Agency of Kentucky, Inc. Insurance agency
Commercial Credit Insurance Agency of Massachusetts, Inc. Insurance agency
Commercial Credit Insurance Agency of Nevada, Inc. Credit LH&A, P-C insurance
Commercial Credit Insurance Agency of New Mexico, Inc. Insurance agency/Broker
Commercial Credit Insurance Agency of Ohio, Inc. Insurance agency/broker
Commercial Credit International, Inc. Holding company
Commercial Credit International Banking Corporation International lending
Commercial Credit Corporation CCC Limited Second mortgage loans
Commercial Credit Services do Brazil Ltda. Inactive
Commercial Credit Services Belgium S.A. Inactive
Commercial Credit Limited Inactive
</TABLE>
<PAGE> 133
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers Principal
Company Organization Group Inc. Business
<S> <C> <C> <C>
Commercial Credit Loan, Inc. (NY) NY 100 Consumer finance
Commercial Credit Loans, Inc. (DE) DE 100 Consumer finance
Commercial Credit Loans, Inc. (OH) OH 100 Consumer finance
Commercial Credit Loans, Inc. (VA) VA 100 Consumer finance
Commercial Credit Management Corporation MD 100 Intercompany services
Commercial Credit Plan Incorporated (TN) TN 100 Consumer finance
Commercial Credit Plan Incorporated (UT) UT 100 Consumer finance
Commercial Credit Plan Incorporated of Georgetown DE 100 Consumer finance
Commercial Credit Plan Industrial Loan Company VA 100 Consumer finance
Commercial Credit Plan, Incorporated (CO) CO 100 Consumer finance
Commercial Credit Plan, Incorporated (DE) DE 100 Consumer finance
Commercial Credit Plan, Incorporated (GA) GA 100 Consumer finance
Commercial Credit Plan, Incorporated (MO) MO 100 Consumer finance
Commercial Credit Securities, Inc. DE 100 Broker dealer
DeAlessandro & Associates, Inc. DE 100 Inactive
Park Tower Holdings, Inc. DE 100 Holding company
CC Retail Services, Inc. DE 100 Leasing, financing
Park Tower Brokerage Associates DE 100 Insurance agency
Troy Textiles, Inc. DE 100 Inactive
Commercial Credit Development Corporation DE 100 Direct loan
Myers Park Properties, Inc. DE 100 Inactive
Travelers Home Mortgage Services of Alabama, Inc. DE 100 Inactive
Penn Re, Inc. NC 100 Management company
Plympton Concrete Products, Inc. DE 100 Inactive
Resource Deployment, Inc. TX 100 Management company
SBHU Mortgage Pass-Through Corporation DE 100 Home equity loans
The Travelers Bank USA DE 100 Credit card bank
</TABLE>
<PAGE> 134
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers Principal
Company Organization Group Inc. Business
<S> <C> <C> <C>
Travelers Bank & Trust, fsb DE 100 Banking services
Travelers Home Equity, Inc. NC 100 Financial services
CC Consumer Services of Alabama, Inc. AL 100 Financial services
CC Home Lenders Financial, Inc. GA 100 Financial services
CC Home Lenders, Inc. OH 100 Financial services
Commercial Credit Corporation (TX) TX 100 Consumer finance
Commercial Credit Financial of Kentucky, Inc. KY 100 Consumer finance
Commercial Credit Financial of West Virginia, Inc. WV 100 Consumer finance
Commercial Credit Plan Consumer Discount Company PA 100 Financial services
Commercial Credit Services of Kentucky, Inc. KY 100 Financial services.
Travelers Home Mortgage Services, Inc. NC 100 Financial services
Travelers Home Mortgage Services of Pennsylvania, Inc. PA 100 Financial services
Triton Insurance Company MO 100 P-C insurance
Verochris Corporation DE 100 Joint venture company
AMC Aircraft Corp. DE 100 Aviation
World Service Life Insurance Company CO 100 Life insurance
Greenwich Street Capital Partners, Inc. DE 100 Investments
Greenwich Street Investments, Inc. DE 100 Investments
Greenwich Street Capital Partners Offshore Holdings, Inc. DE 100 Investments
Mirasure Insurance Company, Ltd. 100 Inactive
MRC Holdings, Inc. DE 100 Real estate
Pacific Basin Investments Ltd. DE 100 Inactive
Primerica Corporation (WY) WY 100 Inactive
Primerica, Inc. DE 100 Name saver
Salomon Smith Barney Holdings Inc. DE 100 Holding Company
Basis Clearing Inc 100
Genesis Crude Oil, L.P. 11.77
</TABLE>
<PAGE> 135
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers Principal
Company Organization Group Inc. Business
<S> <C> <C> <C>
Mutual Management Corp. DE 100 Investment management
Smith Barney Asset Management Co., Ltd. 100 Investment advisor
Smith Barney Management Company (Ireland) Limited 100 Fund management
Smith Barney Strategy Advisers Inc. DE 100 Investment management
The Advisers Fund L.P. DE 100 Investment fund
Travelers Group Investment Management, LLC DE 50 Investment advisor
New Amsterdam Investing Ltd. NY 100
Nextco Inc. DE 100 Purchasing
Phibro Energy Production, Inc. DE 100
Anglo Suisse USSR LP 54.55
White Nights Limited Liability Company 11.25
Golden Mammoth 21.88
Phibro Energy Production G.P. Inc DE 100
Anglo Suisse USSR LP 1
White Nights Limited Liability Company 11.25
White Nights Limited Liability Company 38.75
Phibro Inc. DE 100
MC2 Technologies, Inc. DE 100
Phibro Commodities 100
Phibro Energy Clearing, Inc. DE 100
Phibro Energy Hong Kong Limited 100
Phibro Energy Oil, Inc. DE 100
Phibro GmbH 100
Allcom Trading Company Limited 50
Allcomex Trading Company Limited 50
Derby Resources AG 100
Phibro (Asia) Pte Ltd 100
Phibro Energy (Overseas) AG 100
</TABLE>
<PAGE> 136
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers Principal
Company Organization Group Inc. Business
<S> <C> <C> <C>
Phibro Energy Marketing AG 100
Phibro Energy Representacoes Commerciaia Ltda. 100
Phibro S.A. AG 100
Philipp Brothers AG 100
Politrade Sp. 50
Scanports Shipping Limited 100
Shipalks Shipping AG 100
Scansport Limited 100
Shipalks Shipping Limited 100
Turavent Oil AG 100
Phibro Holdings Limited 100
Carisgreen Limited 100
Phibro Bullion Limited 100
Phibro Energy Marketing Limited 100
Phibro Futures and Metals Limited 100
Phibro International Sales Corp. 100
Phibro Trading Pte Ltd 100
Phillip Brothers Limited 100
Scanport Shipping, Inc. DE 100
Phibro Resources Corp. DE 100
The S.W. Shattuck Chem Co., Inc. CO 100
Phillip Brothers Inc. NY 100
Derby & Co. Inc. NY 100
Phillip Brothers Trading Corp. DE 100
Ropin Steel Co., Inc. IL 100
R-H Capital, Inc. DE 100 Investments
RH Sports Enterprises Inc GA 100 Sports representation
Salomon Brothers Canada Holding Co 1
</TABLE>
<PAGE> 137
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers Principal
Company Organization Group Inc. Business
<S> <C> <C> <C>
Salomon Smith Barney Canada Inc. 100 Investment dealer
Salomon Brothers Finanz AG 100
Salomon Brothers Holding Company Inc DE 100
Banco Patrimonio de Investimento 50
Concord Venture Capital 13.83
Grove Street Film Corp DE 100 A wholly-owned subsidiary of
Salomon Brothers Holding Company
Inc. It is a special purpose
subsidiary established to buy and
sell films.
Hannuri Salomon 24
Liberty Brokerage 14.8
Loan Participation Holding Corporation DE 100 Holding Company of Home
Mortgage Access Corporation.
Home Mortgage Access Corporation DC 100
Home MAC Government Financial Corporation DC 100
Home MAC Government Financial Corporation West DC 100
Home MAC Mortgage Securities Corporation DC 100 A wholly-owned, limited purpose
finance subsidiary of Home
Mortgage Access Corporation,
organized to raise funds through
the issuance and sale of
Collateralized Mortgage
Obligations.
Merchants Bankers Associados S.A. 49
PB-SB Investments, Inc DE 100 A wholly-owned subsidiary of
Salomon Brothers Holding Company
Inc established to act as General
or Managing Partner in various
real estate and oil and gas
exploration limited and general
partnerships.
PB-SB 1988 II 23.06
</TABLE>
<PAGE> 138
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers Principal
Company Organization Group Inc. Business
<S> <C> <C> <C>
PB-SB Ventures, Inc DE 100 A wholly-owned subsidiary of
Salomon Brothers Holding Company
Inc established to act as a
General Partner in several limited
partnerships investing in venture
capital deals, and securities of
various types.
PT SB NUSA Securities 60
Salomon (International) Finance AG 100
Phibro S.A. Sp 100
Phibro-Salomon Investments 100
Salomon Brothers Europe Limited 25
Anglo Chemical Metals Limited 100
Charles Wade & Co. Limited 100
Cocoa Merchants Limited 100
Cresthayes Limited 100
Damsonbush Limited 100
Hilsrest Limited 100
Ion Trading Systems Limited 51
PE 1994 Limited 100
Phibro Energy Services Limited 100
Phibro West Afrique Limited 100
Phibro-Salomon Nominees Limited 100
Philipp Brothers Bullion Limited 100
Philipp Brothers Futures Limited 100
PS4 Limited 100
Salomon Brothers Asset Management Limited 100
Salomon Brothers Eastern Europe Limited 100
Salomon Brothers International Limited 100
SBE 1991 Limited 100
SBI 1984 100
Salomon Brothers Nominees Limited 100
</TABLE>
<PAGE> 139
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers Principal
Company Organization Group Inc. Business
<S> <C> <C> <C>
Salomon Brothers UK Equity Limited 100
Salomon Brothers UK Limited 100
SB Corporation Limited 100
SB Finance PLC 100
SB Funding No 1 Limited 100
SB Funding No 2 Limited 100
SB Mortgage Securities No 21 PLC 100
SB Mortgage Securities No 22 PLC 100
SB Mortgage Securities No 23 PLC 100
SB Mortgage Securities No 24 PLC 100
SB Placement No 2 Limited 100
SB Portfolio Services Limited 100
SB Residential PLC 100
Wavendown Limited 100
Salomon Brothers Holdings GmbH 77.63
Salomon Brothers Asia Limited 100
Salomon Brothers Asia Management Services Ltd 100
Salomon Contractuals Limited 100
Salomon International Financial Products 100
Salomon Brothers Hong Kong Limited 25
Salomon Brothers Hong Kong Nom. Ltd. 100
Salomon Brothers Overseas Inc 100
Salomon Analytics Inc DE 100 A wholly-owned subsidiary of
Salomon Brothers Inc established
to sell Salomon's Yield Book
technology externally.
Salomon Brothers Asia Capital Corp DE 100
Darkland International Limited 100
Emeraldgrange Limited 100
Hualaford Limited 100
</TABLE>
<PAGE> 140
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers Principal
Company Organization Group Inc. Business
<S> <C> <C> <C>
Ilshin No. 4 Venture Investment Partnership 90
Kookmin No. 5 Investment Partnership 90
Solom International Limited 100
Samchully Investment Partnership No. 3 90
Underwood Enterprises Limited 100
Salomon Brothers Asia Pacific Ltd. DE 100
Salomon Brothers Asset Management (Ireland) Ltd 100
Salomon Brothers Asset Management Asia Pacific Ltd 100
Salomon Brothers Asset Management Inc DE 100
Salomon Brothers Asset Management G.P. DE 100
Mastholm Asset Management LLC 20
Salomon Brothers Asset Management Japan Ltd 100
Salomon Brothers Australia Ltd. 100
Salomon Brothers Canada Holding Co 99
Salomon Smith Barney Canada Inc. 100 Investment dealer
Salomon Brothers China Ltd 100
Salomon Brothers Finance AG 100
Salomon Brothers Hong Kong Futures 100
Salomon Brothers Hong Kong Limited 75
Salomon Brothers Hong Kong Nom. Ltd. 100
Salomon Brothers Housing Investment Inc DE 100 A wholly-owned subsidiary of
Salomon Brothers Holding Company
Inc, is a limited partner in 4
partnerships.
Corporate Housing Initiatives Fund LP 26.76
Corporate Housing Initiatives Fund LP II 9.34
Enterprise Housing Partners 1992 17.62
Enterprise Housing Partners 1995 7.64
Enterprise Housing Partners 1996 13.33
New York Equity Fund 1992 Ltd 11.93
</TABLE>
<PAGE> 141
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers
Company Organization Group Inc.
<S> <C> <C>
New York Equity Fund 1993 Ltd 8.92
New York Equity Fund 1994 Ltd 8.87
New York Equity Fund 1995 9.25
Salomon Brothers Inc DE 100
Hannuri Salomon 25
Salomon Brothers UK Limited 0
Salomon Brothers International Operations (Japan) Inc DE 100
Salomon Brothers International Operations (Jersey) Limited 100
Salomon Brothers International Operations (Overseas) Limited 100
Salomon Brothers International Operations Inc DE 100
Salomon Brothers Mortgage Securities II, Inc DE 100
Salomon Brothers Mortgage Securities III, Inc DE 100
Salomon Brothers Mortgage Securities Inc DE 100
Salomon Brothers Mortgage Securities VI, Inc DE 100
Salomon Brothers Mortgage Securities VII, Inc DE 100
Salomon Brothers Pacific Holding Company Inc DE 100
Salomon Brothers Holdings GmbH 22.37
Salomon Brothers Asia Limited 100
Salomon Brothers Asia Management Services Ltd 100
Salomon Contractuals Limited 100
Salomon International Financial Products 100
Salomon Brothers Properties, Inc DE 100
Salomon Brothers Investments Inc DE 100
Salomon Brothers Finance Corporation and Co beschrankthaftende KG 28
Salomon Brothers AG 100
Salomon Brothers Corporate Support GmbH 100
<CAPTION>
Principal
Company Business
<S> <C>
New York Equity Fund 1993 Ltd
New York Equity Fund 1994 Ltd
New York Equity Fund 1995
Salomon Brothers Inc
Hannuri Salomon
Salomon Brothers UK Limited
Salomon Brothers International Operations (Japan) Inc A wholly-owned subsidiary of Salomon
Brothers Holding Company Inc that
was created to fund payroll and
other expenses of expatriates.
Salomon Brothers International Operations (Jersey) Limited
Salomon Brothers International Operations (Overseas) Limited
Salomon Brothers International Operations Inc
Salomon Brothers Mortgage Securities II, Inc
Salomon Brothers Mortgage Securities III, Inc
Salomon Brothers Mortgage Securities Inc
Salomon Brothers Mortgage Securities VI, Inc
Salomon Brothers Mortgage Securities VII, Inc
Salomon Brothers Pacific Holding Company Inc
Salomon Brothers Holdings GmbH
Salomon Brothers Asia Limited
Salomon Brothers Asia Management Services Ltd
Salomon Contractuals Limited
Salomon International Financial Products
Salomon Brothers Properties, Inc
Salomon Brothers Investments Inc
Salomon Brothers Finance Corporation and Co beschrankthaftende KG
Salomon Brothers AG
Salomon Brothers Corporate Support GmbH
</TABLE>
<PAGE> 142
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers
Company Organization Group Inc.
<S> <C> <C>
Salomon Brothers Kapitalanlage-Gesellschaft mbH 100
Salomon Brothers Real Estate Development Corp DE 100
Crow Wood Terrace 50
Vallejo Highlands 50
Vallejo Somerset 50
Salomon Brothers Realty Corp NY 100
Salomon Brothers Russia Holding Company Inc DE 100
AO Salomon Brothers 100
Salomon Brothers S.A. 100
Salomon Brothers Services GmbH 100
Salomon Brothers Services Inc DE 100
Salomon Brothers Asia Management Services Limited (Hong Kong) 100
Salomon Brothers SIM SPA 100
Salomon Brothers Singapore Pte Ltd 100
Salomon Brothers Taiwan Limited 100
Salomon Brothers Tosca Inc DE 100
Salomon Capital Access for Savings Institutions, Inc DE 100
Salomon Capital Access Corporation DE 100
Salomon Forex Inc DE 100
Salomon Brothers Finance Corporation DE 100
Salomon Brothers Finance Corporation and Co beschrankthaftende KG 19
<CAPTION>
Principal
Company Business
<S> <C>
Salomon Brothers Kapitalanlage-Gesellschaft mbH
Salomon Brothers Real Estate Development Corp
Crow Wood Terrace
Vallejo Highlands
Vallejo Somerset
Salomon Brothers Realty Corp A wholly-owned subsidiary of Salomon
Brothers Holding Company Inc, trades
mortgage loans. The primary
activities of the entity are
currently trading and taking
positions in mortgage whole loans
and acting as a real estate
investment banker.
Salomon Brothers Russia Holding Company Inc
AO Salomon Brothers
Salomon Brothers S.A.
Salomon Brothers Services GmbH
Salomon Brothers Services Inc
Salomon Brothers Asia Management Services Limited (Hong Kong)
Salomon Brothers SIM SPA
Salomon Brothers Singapore Pte Ltd
Salomon Brothers Taiwan Limited
Salomon Brothers Tosca Inc
Salomon Capital Access for Savings Institutions, Inc
Salomon Capital Access Corporation A wholly-owned, limited purpose
finance subsidiary of Salomon
Capital Access for Savings
Institutions, Inc. The company
raises funds through the issuance
and sale of Collateralized Mortgage
Obligations (CMOs).
Salomon Forex Inc
Salomon Brothers Finance Corporation
Salomon Brothers Finance Corporation and Co beschrankthaftende KG
</TABLE>
<PAGE> 143
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers Principal
Company Organization Group Inc. Business
<S> <C> <C>
Salomon Brothers AG 100
Salomon Brothers Corporate Support GmbH 100
Salomon Brothers Kapitalanlage-Gesellschaft mbH 100
Salomon International Limited DE 100
Salomon Brothers Europe Limited 75
Anglo Chemical Metals Limited 100
Charles Wade & Co. Limited 100
Cocoa Merchants Limited 100
Cresthayes Limited 100
Damsonbush Limited 100
Hilsrest Limited 100
Ion Trading Systems Limited 51
PE 1994 Limited 100
Phibro Energy Services Limited 100
Phibro West Afrique Limited 100
Phibro-Salomon Nominees Limited 100
Philipp Brothers Bullion Limited 100
Philipp Brothers Futures Limited 100
PS4 Limited 100
Salomon Brothers Asset Management Limited 100
Salomon Brothers Eastern Europe Limited 100
Salomon Brothers International Limited 100
SBE 1991 Limited 100
SBI 1984 100
Salomon Brothers Nominees Limited 100
Salomon Brothers UK Equity Limited 100
Salomon Brothers UK Limited 100
SB Corporation Limited 100
SB Finance PLC 100
SB Funding No 1 Limited 100
SB Funding No 2 Limited 100
</TABLE>
<PAGE> 144
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers
Company Organization Group Inc.
<S> <C> <C>
SB Mortgage Securities No 21 PLC 100
SB Mortgage Securities No 22 PLC 100
SB Mortgage Securities No 23 PLC 100
SB Mortgage Securities No 24 PLC 100
SB Placement No 2 Limited 100
SB Portfolio Services Limited 100
SB Residential PLC 100
Wavendown Limited 100
Salomon Loan Fund Inc DE 100
Salomon Loan Fund I LLC 99
Salomon Millennium Bridge Fund Inc DE 100
Salomon Northpoint Corp DE 100
Salomon Plaza Holdings Inc DE 100
Plaza Holdings Inc. DE 100
Salomon Brothers Finance Corporation and Co beschrankthaftende KG 53
Salomon Brothers AG 100
Salomon Brothers Corporate Support GmbH 100
Salomon Brothers Kapitalanlage-Gesellschaft mbH 100
Salomon Swapco Inc DE 100
SARCO DE 100
SB Contractual Products, Inc DE 100
SB Funding Corp. DE 100
SB Graphics Corp DE 100
SB Insurances Limited 100
SB Management Services Inc DE 100
SB Motel Corp DE 100
SB Motel Durham I-85 Corp DE 100
SB Motel Mortgage Corp DE 100
<CAPTION>
Principal
Company Business
<S> <C>
SB Mortgage Securities No 21 PLC
SB Mortgage Securities No 22 PLC
SB Mortgage Securities No 23 PLC
SB Mortgage Securities No 24 PLC
SB Placement No 2 Limited
SB Portfolio Services Limited
SB Residential PLC
Wavendown Limited
Salomon Loan Fund Inc
Salomon Loan Fund I LLC
Salomon Millennium Bridge Fund Inc
Salomon Northpoint Corp
Salomon Plaza Holdings Inc
Plaza Holdings Inc. Holding Company of Salomon
BrothersFinance Corporation and Co.
beschrankt haftende KG.
Salomon Brothers Finance Corporation and Co beschrankthaftende KG
Salomon Brothers AG
Salomon Brothers Corporate Support GmbH
Salomon Brothers Kapitalanlage-Gesellschaft mbH
Salomon Swapco Inc
SARCO
SB Contractual Products, Inc
SB Funding Corp.
SB Graphics Corp
SB Insurances Limited
SB Management Services Inc
SB Motel Corp
SB Motel Durham I-85 Corp
SB Motel Mortgage Corp
</TABLE>
<PAGE> 145
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers
Company Organization Group Inc.
<S> <C> <C>
SB-MBA Participation Corporation NY 100
SB/EJV Participation Corp DE 100
Bridge Information Systems, Inc. 3.05
Salomon Loan Fund I LLC 1
SB/OT Participation Corp. DE 100
Seals SA 100
Seven World Holdings Inc DE 100
Salomon International Investments Inc 100
Seven World Technologies, Inc DE 100
Structured Placements Corp DE 100
Structured Products Corp DE 100
TCEP Participation Corp NY 100
TCP Corp DE 100
FINIS 22
The Downtown Conference Center Inc DE 100
Third Street Promenade Productions Inc DE 100
Salomon Inc SI Financing Trust I 100
Salomon Technology Services Inc. DE 100
SB Cayman Holdings I Inc. DE 100
Smith Barney Private Trust Company (Cayman) Limited 50
Greenwich (Cayman) I Limited 50
Greenwich (Cayman) II Limited 50
Greenwich (Cayman) III Limited 50
<CAPTION>
Principal
Company Business
<S> <C>
SB-MBA Participation Corporation A wholly-owned subsidiary of Salomon
Brothers Holding Company Inc
established to invest in an Argentine
joint venture.
SB/EJV Participation Corp A wholly-owned subsidiary of Salomon
Brothers Holding Company Inc
established as a limited partner for
Electronic Joint Venture.
Bridge Information Systems, Inc.
Salomon Loan Fund I LLC
SB/OT Participation Corp.
Seals SA
Seven World Holdings Inc
Salomon International Investments Inc
Seven World Technologies, Inc Principal Activity: Software
Developer
Structured Placements Corp
Structured Products Corp
TCEP Participation Corp
TCP Corp
FINIS
The Downtown Conference Center Inc
Third Street Promenade Productions Inc
Salomon Inc SI Financing Trust I
Salomon Technology Services Inc.
SB Cayman Holdings I Inc. Holding company
Smith Barney Private Trust Company (Cayman) Limited Trust company
Greenwich (Cayman) I Limited Corporate services
Greenwich (Cayman) II Limited Corporate services
Greenwich (Cayman) III Limited Corporate services
</TABLE>
<PAGE> 146
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers Principal
Company Organization Group Inc. Business
<S> <C> <C> <C>
SB Cayman Holdings II Inc. DE 100 Holding company
Smith Barney Private Trust Company (Cayman) Limited 50 Trust company
Greenwich (Cayman) I Limited 50 Corporate services
Greenwich (Cayman) II Limited 50 Corporate services
Greenwich (Cayman) III Limited 50 Corporate services
SB Cayman Holdings III Inc. DE 100 Holding company
Smith Barney Credit Services (Cayman) Ltd. 50 Corporate services
SB Cayman Holdings IV Inc. DE 100 Holding company
Smith Barney Credit Services (Cayman) Ltd. 50 Corporate services
SFH Jersey Limited 20 Investment banking
Smith Barney (Delaware) Inc. DE 100 Holding company
1345 Media Corp. DE 100 Holding company
Corporate Realty Advisors, Inc. DE 100 Realty trust adviser
IPO Holdings Inc. DE 100 Holding company
Institutional Property Owners, Inc. V DE 100 Investments
Institutional Property Owners, Inc. VI DE 100 General partner
MLA 50 Corporation DE 100 Limited partner
MLA GP Corporation DE 100 General partner
MLA Associates, L.P. 100 Energy investments
Smith Barney Acquisition Corporation DE 100 Offshore fund adviser
Smith Barney Acquisition Fund, Inc. 100 Commodities fund
Smith Barney Global Capital Management, Inc. DE 100 Investment management
Smith Barney Real Estate Opportunity Fund, L.P. 50 Real estate investment
Smith Barney Realty, Inc. DE 100 Investments
Smith Barney Risk Investors, Inc. DE 100 Investments
Smith Barney Consulting Partnership, LP DE 100 Advisory services
Smith Barney Investors L.P. 100 Investments
Smith Barney Venture Corp. DE 100 Investments
</TABLE>
<PAGE> 147
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers Principal
Company Organization Group Inc. Business
<S> <C> <C> <C>
First Century Company DE 100 Holding company
First Century Partnership II 100 Investment fund
First Century Management Company DE 100 Investment adviser
First Century Partnership III 100 Investment fund
Smith Barney (Ireland) Limited 100 Fund management
Smith Barney Asia Inc. DE 100 Investment banking
Smith Barney Asset Management Group (Asia) Pte. Ltd. 100 Asset management
Smith Barney Capital Services Inc. DE 100 Derivative product transactions
Smith Barney Cayman Islands, Ltd. 100 Securities trading
Smith Barney Commercial Corp. DE 100 Commercial credit
Smith Barney Commercial Corporation Asia Limited 99 Fx trading
Smith Barney Europe Holdings, Ltd. 100
Smith Barney Europe Ltd. 100 Broad Scope Financial Services
Smith Barney Funding Corp. DE 100
Smith Barney Futures Management Inc. DE 100 Commodities pool operator
ERISA Futures Fund L.P. 100 Commodity pool
F-1000 Futures Fund L.P., Michigan Series I 100 Commodity pool
F-1000 Futures Fund L.P., Michigan Series II 100 Commodity pool
F-1000 Futures Fund L.P., Series IX 100 Commodity pool
F-1000 Futures Fund L.P., Series VIII 100 Commodity pool
Greenbrier Futures Fund L.P. 100 Commodity pool
Hutton Investors Futures Fund L.P. II 100 Commodity pool
Monetary Venture Fund 100 Commodity pool
Shearson Lehman Futures 1000 Plus, L.P. 100 Commodity pool
Shearson Lehman Select Advisors Futures Fund L.P. 100 Commodity pool
SLB Mid-West Futures Fund L.P. 100 Commodity pool
SLH Performance Partners Futures Fund L.P. 100 Commodity pool
</TABLE>
<PAGE> 148
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers
Company Organization Group Inc.
<S> <C> <C>
Smith Barney Diversified Futures Fund L.P. 100
Smith Barney International Advisors Currency Fund L.P. 100
Smith Barney Mid-West Futures Fund LP II 100
Smith Barney Offshore Fund Ltd. DE 100
Smith Barney Overview Fund PLC 100
Smith Barney Principal Plus Futures Fund LP 100
Smith Barney Tidewater Futures Fund LP 100
Smith Barney Inc. DE 100
KEB Smith Barney Securities Co., Ltd. 49
Russian American Investment Bank Partners, LP 20
SBHU Life Agency, Inc. DE 100
Robinson-Humphrey Insurance Services Inc. GA 100
Robinson-Humphrey Insurance Services of Alabama, Inc. AL 100
SBHU Life Agency of Arizona, Inc. AZ 100
SBHU Life Agency of Indiana, Inc. IN 100
SBHU Life Agency of Ohio, Inc. OH 100
SBHU Life Agency of Oklahoma, Inc. OK 100
SBHU Life Agency of Texas, Inc. TX 100
SBHU Life Agency of Utah, Inc. UT 100
SBHU Life Insurance Agency of Massachusetts, Inc. MA 100
SBS Insurance Agency of Hawaii, Inc. HI 100
SBS Insurance Agency of Idaho, Inc. ID 100
SBS Insurance Agency of Maine, Inc. ME 100
SBS Insurance Agency of Montana, Inc. MT 100
SBS Insurance Agency of Nevada, Inc. NV 100
SBS Insurance Agency of Ohio, Inc. OH 100
SBS Insurance Agency of South Dakota, Inc. SD 100
<CAPTION>
Principal
Company Business
<S> <C>
Smith Barney Diversified Futures Fund L.P. Investment fund
Smith Barney International Advisors Currency Fund L.P. Commodity pool
Smith Barney Mid-West Futures Fund LP II
Smith Barney Offshore Fund Ltd. Commodity pool
Smith Barney Overview Fund PLC Commodity fund
Smith Barney Principal Plus Futures Fund LP
Smith Barney Tidewater Futures Fund LP
Smith Barney Inc. Broker dealer
KEB Smith Barney Securities Co., Ltd. Broker dealer
Russian American Investment Bank Partners, LP Joint ventures
SBHU Life Agency, Inc. Insurance brokerage
Robinson-Humphrey Insurance Services Inc. Insurance brokerage
Robinson-Humphrey Insurance Services of Alabama, Inc. Insurance brokerage
SBHU Life Agency of Arizona, Inc. Insurance brokerage
SBHU Life Agency of Indiana, Inc. Insurance brokerage
SBHU Life Agency of Ohio, Inc. Insurance brokerage
SBHU Life Agency of Oklahoma, Inc. Insurance brokerage
SBHU Life Agency of Texas, Inc. Insurance brokerage
SBHU Life Agency of Utah, Inc. Insurance brokerage
SBHU Life Insurance Agency of Massachusetts, Inc. Insurance brokerage
SBS Insurance Agency of Hawaii, Inc. Insurance brokerage
SBS Insurance Agency of Idaho, Inc. Insurance brokerage
SBS Insurance Agency of Maine, Inc. Insurance brokerage
SBS Insurance Agency of Montana, Inc. Insurance brokerage
SBS Insurance Agency of Nevada, Inc. Insurance brokerage
SBS Insurance Agency of Ohio, Inc. Insurance brokerage
SBS Insurance Agency of South Dakota, Inc. Insurance brokerage
</TABLE>
<PAGE> 149
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers Principal
Company Organization Group Inc. Business
<S> <C> <C> <C>
SBS Insurance Agency of Wyoming, Inc. WY 100 Insurance brokerage
SBS Insurance Brokerage Agency of Arkansas, Inc. AR 100 Insurance brokerage
SBS Insurance Brokers of Kentucky, Inc. KY 100 Insurance brokerage
SBS Insurance Brokers of New Hampshire, Inc. NH 100 Insurance brokerage
SBS Insurance Brokers of North Dakota, Inc. ND 100 Insurance brokerage
SBS Life Insurance Agency of Puerto Rico, Inc. PR 100 Insurance brokerage
SLB Insurance Agency of Maryland, Inc. MD 100 Insurance brokerage
Smith Barney Life Agency Inc. LA 100 Insurance brokerage
Smith Barney (Hong Kong) Limited 100 Introducing broker
Smith Barney (Netherlands) Inc. DE 100 Broker dealer
Smith Barney International Incorporated OR 100 Broker dealer
Smith Barney (Singapore) Pte Ltd 100 Commodities
Smith Barney Pacific Holdings, Inc. 100 Holding company
Smith Barney (Asia) Limited 100 Introducing Broker
Smith Barney (Pacific) Limited 100 Commodities dealer
Smith Barney Securities Pte Ltd 100 Securities brokerage
Smith Barney Puerto Rico Inc. PR 100 Broker dealer
The Robinson-Humphrey Company, LLC DE 100
Thirty Fourth Street Partners L.P. 100 Real estate
Smith Barney Mortgage Brokers Inc. DE 100 Mortgage brokerage
Smith Barney Mortgage Capital Corp. DE 100 Mortgage-backed securities
Smith Barney Mortgage Capital Group, Inc. DE 100 Mortgage trading
Smith Barney Offshore, Inc. DE 100 Decathlon Fund advisor
Decathlon Offshore Limited 100 Commodity fund
Smith Barney Private Trust GmbH 100
Smith Barney SA 99 Commodities trading
Smith Barney Asset Management France SA 99.92 Com. based asset management
</TABLE>
<PAGE> 150
<TABLE>
<CAPTION>
% of
Voting
Securities
Owned
Directly
or Indirectly
State of by Travelers Principal
Company Organization Group Inc. Business
<S> <C> <C> <C>
Smith Barney Securities Investment Consulting Co. Ltd. 99 Investrment analysis
Smith Barney Shearson (Chile) Corredora de Seguro Limitada 100 Insurance brokerage
SP Insurance Company Limited 100
Structured Mortgage Securities Corporation DE 100 Mortgage-backed securities
The Travelers Investment Management Company CT 100 Investment advisor
Smith Barney Corporate Trust Company DE 100 Trust company
Smith Barney Private Trust Bank of Michigan MI 100 Holding Company
Smith Barney Private Trust Company NY 100 Trust company.
Smith Barney Private Trust Company of Florida FL 100 Trust company
Smith Barney Private Trust Company of New Jersey NJ 100 Holding Company
Smith Barney Private Trust Company of Texas TX 100 Trust company
Tinmet Corporation DE 100 Inactive
Travelers Group Diversified Distribution Services, Inc. DE 100 Alternative marketing
Travelers Group Exchange, Inc. DE 100 Insurance agency
TGE Insurance Agency of Alabama, Inc. AL 100 Insurance agency
TGE Insurance Agency of Kentucky, Inc. KY 100 Insurance agency
TGE Insurance Agency of Massachusetts, Inc. DE 100 Insurance agency
TGE Insurance Agency of Mississippi, Inc. P.C. MS 100 Insurance agency
TGE Insurance Agency of New Mexico, Inc. NM 100 Insurance agency
TGE Insurance Agency of Ohio, Inc. OH 100 Insurance agency
TGE Insurance Agency of Texas, Inc. TX 100 Insurance agency
Travelers Services Inc. DE 100 Holding company
Tribeca Management Inc. DE 100 Management services
TRV Employees Investments, Inc. DE 100 Investments
TRV/RCM Corp. DE 100 Inactive
TRV/RCM LP Corp. DE 100 Inactive
</TABLE>
<PAGE> 151
Item 27. Number of Contract Owners
As of March 1, 1998, 11,912 contract owners held qualified and non-qualified
contracts offered through the Registrant.
Item 28. Indemnification
Section 33-770 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 33-770 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> 152
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 BD III for Variable Annuities
The Travelers Fund BD IV for Variable Annuities
The Travelers Fund ABD for Variable Annuities
The Travelers Fund ABD II for Variable Annuities
The Travelers 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 Two
The Travelers Variable Life Insurance Separate Account Three
The Travelers Variable Life Insurance Separate Account Four
The Travelers Separate Account QP for Variable Annuities
The Travelers Separate Account PF for Variable Annuities
The Travelers Separate Account PF II for Variable Annuities
<TABLE>
<CAPTION>
(b) Name and Principal Positions and Offices
Business Address * With Underwriter
------------------ ----------------
<S> <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> 153
<TABLE>
<CAPTION>
(b) Name and Principal Positions and Offices
Business Address * With Underwriter
------------------ ----------------
<S> <C>
Michael P. Kiley Vice President
Tracey Kiff-Judson 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> 154
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 10th day of April, 1998.
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 10, 1998.
*MICHAEL A. CARPENTER Director, Chairman of the Board, President
- ---------------------------- and Chief Executive Officer
(Michael A. Carpenter)
*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
- ---------------------------- Financial Officer, Chief Accounting Officer
(Ian R. Stuart) and Controller
*KATHERINE M. SULLIVAN Director, Senior Vice President and
- ---------------------------- General Counsel
(Katherine M. Sullivan)
*MARC P. WEILL Director
- ----------------------------
(Marc P. Weill)
*By: Ernest J. Wright, Attorney-in-Fact
<PAGE> 155
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 registered
by Registrant. (Incorporated herein by reference to Exhibit 9 to
Post-Effective Amendment No. 3 to the Registration Statement on Form
N-4 filed April 29, 1997.)
10(a). Consent of Coopers & Lybrand L.L.P., Independent Accountants. Electronically
10(b). Consent of KPMG Peat Marwick LLP, Independent Certified Public Electronically
Accountants.
</TABLE>
<PAGE> 156
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
- --- ----------- ----------------
<S> <C> <C>
13. Schedule for computation of each performance quotation Standardized
and Non-Standardized. (Incorporated herein by reference to Exhibit 13
to the Post-Effective Amendment No. 2 to the Registration Statement
on Form N-4, filed April 29,1997.)
15(a). Powers of Attorney authorizing Ernest J. Wright and
Kathleen A. McGah as signatory for Michael A. Carpenter,
Jay S. Benet, George C. Kokulis, Ian R. Stuart and
Katherine M. Sullivan. (Incorporated herein by reference to
Exhibit No. 15(a) to Post-Effective Amendment No. 2 to the
Registration Statement on Form N-4, filed April 29, 1997.)
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.)
</TABLE>
<PAGE> 1
EXHIBIT 10(A)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this post-effective amendment
no. 3 to the registration statement of The Travelers Fund BD II for Variable
Annuities (the "Fund") on Form N-4 (File No. 33-58131; 811-7259) of our report
dated February 19, 1998, 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, 1997 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 the registration statement.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
April 10, 1998
<PAGE> 1
EXHIBIT 10(B)
Consent of Independent Certified Public 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 10, 1998
