-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RnXX/vawKZXEozNQ1G/ANRpqAwa5vhqzbvzX7Jhb0G2IqaHBgZrf2jLjXGxmwcOp tf8ldq6Su7gdE7asxXuEFQ== 0000950123-00-003809.txt : 20000419 0000950123-00-003809.hdr.sgml : 20000419 ACCESSION NUMBER: 0000950123-00-003809 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20000418 EFFECTIVENESS DATE: 20000501 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRAVELERS FUND BD II FOR VARIABLE ANNUITIES CENTRAL INDEX KEY: 0000941729 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 060904249 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 033-58131 FILM NUMBER: 604051 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 811-07259 FILM NUMBER: 604052 BUSINESS ADDRESS: STREET 1: FINANCIAL SERVICES LEGAL DIVISION STREET 2: ONE TOWER SQUARE CITY: HARTFORD STATE: CT ZIP: 06183 BUSINESS PHONE: 2032777379 MAIL ADDRESS: STREET 1: FINANCIAL SERVICES LEGAL DIVISION STREET 2: ONE TOWER SQUARE CITY: HARTFORD STATE: CT ZIP: 06183 485BPOS 1 TRAVELERS FUND BD II FOR VARIABLE ANNUITIES 1 Registration No. 33-58131 811-07259 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Post-Effective Amendment No. 5 and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 5 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 will become effective (check appropriate box): ____ immediately upon filing pursuant to paragraph (b) of Rule 485. X on May 1, 2000 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. 2 PART A Information Required in a Prospectus 3 TRAVELERS VINTAGE ANNUITY PROSPECTUS: THE TRAVELERS FUND BD FOR VARIABLE ANNUITIES THE TRAVELERS FUND BD II FOR VARIABLE ANNUITIES This prospectus describes TRAVELERS VINTAGE ANNUITY, a flexible premium variable annuity contract (the "Contract") issued by The Travelers Insurance Company or The Travelers Life and Annuity Company, depending on the state in which you purchased your Contract. 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"). We may issue it 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, we refer to Contracts and certificates as "Contracts." You can choose to have your premium ("purchase payments") accumulate on a fixed basis and/ or a variable basis. Your contract value will vary daily to reflect the investment experience of the subaccounts ("funding options") you select and any interest credited to the Fixed Account. The variable funding options are: DREYFUS VARIABLE INVESTMENT FUND Small Cap Portfolio GREENWICH STREET SERIES FUND Equity Index Portfolio -- Class II Shares Total Return Portfolio SALOMON BROTHERS VARIABLE SERIES FUND INC. Investors Fund Total Return Fund SMITH BARNEY CONCERT ALLOCATION SERIES INC. Select Balanced Portfolio Select Growth Portfolio TRAVELERS SERIES FUND INC. AIM Capital Appreciation Portfolio Alliance Growth Portfolio INVESCO Strategic Income Portfolio(1) MFS Total Return Portfolio Putnam Diversified Income Portfolio Smith Barney High Income Portfolio Smith Barney International Equity Portfolio Smith Barney Large Cap Value Portfolio Smith Barney Large Capitalization Growth Portfolio Smith Barney Money Market Portfolio Smith Barney Pacific Basin Portfolio Travelers Managed Income Portfolio Van Kampen 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 - --------------- (1)formerly GT Global Strategic Income Portfolio The Fixed Account is described in Appendix C. 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. READ AND RETAIN THEM FOR FUTURE REFERENCE. This prospectus provides the information that you should know before investing in the Contract. You can receive additional information about the Travelers Fund BD for Variable Annuities or the Travelers Fund BD II for Variable Annuities ("Separate Account") by requesting a copy of the Statement of Additional Information ("SAI") dated May 1, 2000. 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 Insurance Company, Annuity Investor Services, One Tower Square, Hartford, Connecticut 06183, call 1-800-842-8573 or access the SEC's website (http://www.sec.gov). See Appendix D for the SAI's table of contents. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. VARIABLE ANNUITY CONTRACTS ARE NOT DEPOSITS OF ANY BANK, AND ARE NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. PROSPECTUS DATED MAY 1, 2000 4 TABLE OF CONTENTS Index of Special Terms................ 2 Summary............................... 3 Fee Table............................. 6 Condensed Financial Information....... 10 The Annuity Contract.................. 10 Contract Owner Inquiries......... 10 Purchase Payments................ 10 Accumulation Units............... 10 The Funding Options.............. 11 Charges and Deductions................ 13 General.......................... 13 Withdrawal Charge................ 14 Free Withdrawal Allowance........ 14 Administrative Charges........... 15 Mortality and Expense Risk Charge......................... 15 Funding Option Expenses.......... 15 Premium Tax...................... 15 Changes in Taxes Based Upon Premium or Value............... 15 Transfers............................. 16 Dollar Cost Averaging............ 16 Access to Your Money.................. 17 Systematic Withdrawals........... 17 Loans............................ 17 Ownership Provisions.................. 18 Types of Ownership............... 18 Beneficiary...................... 18 Annuitant........................ 18 Death Benefit......................... 18 Death Proceeds Before the Maturity Date.................. 19 Payment of Proceeds.............. 21 Death Proceeds After the Maturity Date........................... 23 The Annuity Period.................... 23 Maturity Date.................... 23 Allocation of Annuity............ 24 Variable Annuity................. 24 Fixed Annuity.................... 25 Payment Options....................... 25 Election of Options.............. 25 Annuity Options.................. 25 Income Options................... 26 Miscellaneous Contract Provisions..... 26 Right to Return.................. 26 Termination...................... 26 Required Reports................. 27 Suspension of Payments........... 27 Transfers of Contract Values to Other Annuities................ 27 The Separate Accounts................. 27 Performance Information.......... 27 Federal Tax Considerations............ 28 General Taxation of Annuities.... 28 Types of Contracts: Qualified or Nonqualified................... 29 Nonqualified Annuity Contracts... 29 Qualified Annuity Contracts...... 29 Penalty Tax for Premature Distributions.................. 30 Diversification Requirements for Variable Annuities............. 30 Ownership of the Investments..... 30 Mandatory Distributions for Qualified Plans................ 30 Taxation of Death Benefit Proceeds....................... 30 Other Information..................... 31 The Insurance Companies.......... 31 Financial Statements............. 31 IMSA............................. 31 Distribution of Variable Annuity Contracts...................... 31 Conformity with State and Federal Laws........................... 32 Voting Rights.................... 32 Legal Proceedings and Opinions... 32 Appendix A: Condensed Financial Information for The Travelers Insurance Company: Separate Account BD.................................. A-1 Appendix B: Condensed Financial Information for The Travelers Life and Annuity Company: Separate Account BD II....................... B-1 Appendix C: The Fixed Account......... C-1 Appendix D: Contents of the Statement of Additional Information........... D-1
INDEX OF SPECIAL TERMS The following terms are italicized throughout the prospectus. Refer to the page listed for an explanation of each term. Accumulation Period................... 10 Accumulation Unit..................... 10 Annuitant............................. 18 Annuity Payments...................... 10 Annuity Unit.......................... 10 Cash Surrender Value.................. 17 Contingent Annuitant.................. 18 Contract Date......................... 10 Contract Owner (You, Your)............ 18 Contract Value........................ 10 Contract Year......................... 10 Death Report Date..................... 19 Fixed Account......................... C-1 Funding Option(s)..................... 11 Maturity Date......................... 10 Purchase Payment...................... 10 Underlying Fund....................... 11 Written Request....................... 10
2 5 SUMMARY: TRAVELERS VINTAGE VARIABLE ANNUITY THIS SUMMARY DETAILS SOME OF THE MORE IMPORTANT POINTS THAT YOU SHOULD KNOW AND CONSIDER BEFORE PURCHASING THE CONTRACT. PLEASE READ THE ENTIRE PROSPECTUS CAREFULLY. WHAT COMPANY WILL ISSUE MY CONTRACT? Your issuing company is either The Travelers Insurance Company or The Travelers Life and Annuity Company, ("the Company," "We" or "Us") depending on where you purchased your Contract. Each company sponsors its own separate account, both of which are described later in this prospectus. The Travelers Insurance Company sponsors the Travelers Fund BD for Variable Annuities ("Fund BD"); The Travelers Life and Annuity Company sponsors the Travelers Fund BD II for Variable Annuities ("Fund BD II"). When we refer to the Separate Account, we are referring to either Fund BD or Fund BD II, depending upon your issuing company. Your issuing company is The Travelers Life and Annuity Company unless you purchased your contract in the following locations listed below, which contracts are issued by The Travelers Insurance Company.() Bahamas North Carolina Oregon(1) U.S. Virgin Islands British Virgin Islands New Hampshire Puerto Rico Washington(1) Guam New Jersey Tennessee Wyoming Maine New York
- --------------- (1) The Travelers Insurance Company issues only single premium contracts with variable and fixed accounts for these states. The Travelers Life and Annuity Company issues only flexible premium contracts with variable with accounts in these states. Please refer to your Contract or ask your agent for more information. You may also refer to the cover page of your Contract for the name of your issuing company. You may only purchase a Contract where the Contract has been approved. Not all locations have approved all Contracts. CAN YOU GIVE ME A GENERAL DESCRIPTION OF THE VARIABLE ANNUITY CONTRACT? The Contract offered by the Company is intended for retirement savings or other long-term investment purposes. The Contract provides a death benefit as well as guaranteed payout options. You direct your payment(s) to one or more of the variable funding options 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 can also lose money in the variable funding options. The Contract, like all deferred variable annuity contracts, has two phases: the accumulation phase and the payout phase. During the accumulation phase generally, 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 payout phase occurs when you begin receiving payments from your Contract. The amount of money you accumulate in your Contract determines the amount of income (annuity payments) you receive during the payout phase. During the payout phase, you may choose to receive annuity payments from the Fixed Account or the variable funding options. If you want to receive payments from your annuity, you can choose one of a number of annuity options or income options. Once you choose one of the annuity options or income options and begin to receive payments, it cannot be changed. During the payout 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 6 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) other 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. Purchase of this Contract through a tax qualified retirement plan ("Plan") does not provide any additional tax deferral benefits beyond those provided by the Plan. Accordingly, if you are purchasing this Contract through a Plan, you should consider purchasing this Contract for its Death Benefit, Annuity Option Benefits, and other non-tax-related benefits. 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. IS THERE A RIGHT TO RETURN PERIOD? 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 right to return period, or the return of purchase payments, the Company will comply. You bear the investment risk on the purchase payment 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. WHAT TYPES OF INVESTMENT OPTIONS ARE AVAILABLE? You can direct your money into the Fixed Account or any or all of the funding options shown on the cover page. The funding options are described in the prospectuses for the funds. Depending on market conditions, you may make or lose money in any of these options. The value of the Contract will vary depending upon the investment performance of the funding options you choose. Past performance is not a guarantee of future results. Standard and Nonstandard performance is shown in the Statement of Additional Information that you may request free of charge. 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. We may, in the future, charge a fee for any transfer request, or limit the number of transfers allowed. At a minimum, we would always allow one transfer every six months. We reserve the right to restrict transfers that we determine will disadvantage other contract owners. You may transfer between the Fixed Account and the funding options twice a year (during the 30 days after the six-month contract date anniversary), provided the amount is not greater than 15% of the Fixed Account Value on that date. WHAT EXPENSES WILL BE ASSESSED UNDER THE CONTRACT? 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 contract administrative charge of $30. The subaccount administrative charge and the mortality and expense risk ("M&E") charge are deducted from the amounts in the variable funding options. The subaccount administrative charge is 0.15% annually. The annual M&E charge depends on the death benefit you choose: 1.02% for the Standard Death Benefit, 1.30% for the Enhanced Death Benefit. Each underlying Fund also charges for management and other expenses. A withdrawal charge will apply to withdrawals from the Contract, and is calculated as a percentage of the purchase payments. The maximum percentage is 6%, decreasing to 0% in years seven and later. HOW WILL MY CONTRIBUTIONS AND WITHDRAWALS BE TAXED? Generally, the payments you make to a qualified Contract during the accumulation phase are made with before-tax dollars. You will be 4 7 taxed on your purchase payments, credits 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 credits and 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. HOW MAY I ACCESS MY MONEY? You can take withdrawals any time during the accumulation phase. Withdrawal charges, income taxes, and/or a penalty tax may apply to taxable amounts withdrawn. WHAT IS THE DEATH BENEFIT UNDER THE CONTRACT? You may choose to purchase the Standard or Enhanced Death Benefit. The death benefit applies upon the first death of the owner, joint owner, or annuitant. Assuming you are the Annuitant, the death benefit is as follows: If you die before the Contract is in the payout phase, the person you have chosen as your beneficiary will receive a death benefit. The death benefit value is calculated at the close of the business day on which the Company's Home Office receives due proof of death and written payment instructions. The enhanced death benefit may not be available in all states. Please refer to the Death Benefit section in the prospectus for more details. ARE THERE ANY ADDITIONAL FEATURES? This Contract has other features you may be interested in. These include: -- DOLLAR COST AVERAGING. This is a program that allows you to invest a fixed amount of money in funding options each month, theoretically giving you a lower average cost per unit over time than a single one-time purchase. Dollar Cost Averaging requires regular investments regardless of fluctuating price levels, and does not guarantee profits or prevent losses in a declining market. Potential investors should consider their financial ability to continue purchases through periods of low price levels. -- SYSTEMATIC WITHDRAWAL OPTION. Before the maturity date, you can arrange to have money sent to you at set intervals throughout the year. Of course, any applicable income and penalty taxes will apply on amounts withdrawn. -- AUTOMATIC REBALANCING. You may elect to have the Company periodically reallocate the values in your Contract to match your original (or your latest) funding option allocation request. 5 8 FEE TABLE - -------------------------------------------------------------------------------- CONTRACT OWNER TRANSACTION EXPENSES WITHDRAWAL CHARGE (as a percentage of the purchase payments withdrawn):
YEARS SINCE PURCHASE WITHDRAWAL PAYMENT MADE CHARGE 0-1 6% 2 6% 3 6% 4 3% 5 2% 6 1% 7+ 0%
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)
STANDARD ENHANCED DEATH BENEFIT DEATH BENEFIT - --------------------------------------------------------------------------------------------- Mortality & 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, 1999, unless otherwise noted)
TOTAL ANNUAL OPERATING MANAGEMENT FEE OTHER EXPENSES EXPENSES (AFTER EXPENSE (AFTER EXPENSE (AFTER EXPENSE FUNDING OPTIONS: REIMBURSEMENT) 12B-1 FEES REIMBURSEMENT) REIMBURSEMENT) - ------------------------------------------------------------------------------------------------------------ DREYFUS VARIABLE INVESTMENT FUND Small Cap Portfolio...................... 0.75% 0.03% 0.78% GREENWICH STREET SERIES FUND Equity Index Portfolio -- Class II Shares 0.21% 0.25% 0.05% 0.51%(1) Total Return Portfolio................... 0.75% 0.04% 0.79%(2) SALOMON BROTHERS VARIABLE SERIES FUND INC. Investors Fund........................... 0.53% 0.45% 0.98%(3) Total Return Fund........................ 0.15% 0.85% 1.00%(3) SMITH BARNEY CONCERT ALLOCATION SERIES INC. Select Balanced Portfolio................ 0.35% 0.76% 1.11%(4) Select Conservative Portfolio**.......... 0.35% 0.72% 1.07%(4) Select Growth Portfolio.................. 0.35% 0.88% 1.23%(4) Select High Growth Portfolio**........... 0.35% 0.89% 1.24%(4) Select Income Portfolio**................ 0.35% 0.67% 1.02%(4) TRAVELERS SERIES FUND INC. AIM Capital Appreciation Portfolio....... 0.80% 0.04% 0.84%(5) Alliance Growth Portfolio................ 0.80% 0.02% 0.82%(5) INVESCO Strategic Income Portfolio....... 0.80% 0.33% 1.13%(5) MFS Total Return Portfolio............... 0.80% 0.04% 0.84%(5) Putnam Diversified Income Portfolio...... 0.75% 0.08% 0.83%(5) Smith Barney High Income Portfolio....... 0.60% 0.06% 0.66%(5) Smith Barney International Equity Portfolio.............................. 0.90% 0.10% 1.00%(5) Smith Barney Large Capitalization Growth Portfolio.............................. 0.75% 0.11% 0.86%(5) Smith Barney Large Cap Value Portfolio... 0.65% 0.02% 0.67%(5) Smith Barney Money Market Portfolio...... 0.50% 0.04% 0.54%(5) Smith Barney Pacific Basin Portfolio..... 0.90% 0.40% 1.30%(5) Travelers Managed Income Portfolio....... 0.65% 0.11% 0.76%(5) Van Kampen Enterprise Portfolio.......... 0.70% 0.03% 0.73%(5)
6 9
TOTAL ANNUAL OPERATING MANAGEMENT FEE OTHER EXPENSES EXPENSES (AFTER EXPENSE (AFTER EXPENSE (AFTER EXPENSE FUNDING OPTIONS: REIMBURSEMENT) 12B-1 FEES REIMBURSEMENT) REIMBURSEMENT) - ------------------------------------------------------------------------------------------------------------ THE TRAVELERS SERIES TRUST Convertible Bond Portfolio............... 0.60% 0.20% 0.80%(6) Disciplined Mid Cap Stock Portfolio...... 0.70% 0.25% 0.95%(7) Disciplined Small Cap Stock Portfolio.... 0.80% 0.20% 1.00%(6) MFS Emerging Growth Portfolio............ 0.75% 0.12% 0.87% MFS Research Portfolio................... 0.80% 0.19% 0.99% Strategic Stock Portfolio................ 0.60% 0.30% 0.90%(6)
- --------------- ** No longer available to new Contract Owners. Notes: NOTES: The purpose of this 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 Portfolio Management Fee for EQUITY INDEX PORTFOLIO -- CLASS II SHARES includes 0.06% for fund administration and a distribution plan or "Rule 12b-1 plan". Fees for Class II reflect the period from 3/22/99 (inception date) to 12/31/99. On March 22, 1999, the fund adopted its current fee structure. (2) The Portfolio Management Fee for the TOTAL RETURN PORTFOLIO includes 0.20% for fund administration. (3) The Adviser has waived all or a portion of its Management Fees for the year ended December 31, 1999. If such fees were not waived or expenses reimbursed, the Management Fee, Other Expenses, and Total Annual Operating Expenses would have been as follows: 0.70%, 0.45% and 1.15% respectively for the INVESTORS FUND and 0.80%, 0.85%, and 1.65% respectively for the TOTAL RETURN FUND. (4) Each Portfolio of the SMITH BARNEY CONCERT ALLOCATION SERIES INC. (a "fund of funds") invests in the shares of other mutual funds ("underlying funds"). The Management Fee for each Portfolio is 0.35%. While the Portfolios have no direct expenses, the "Other Expenses" figure represents a weighted average of the total expense ratios of the underlying funds as of 1/31/00 (the fiscal year end of the Portfolios). (5) Expenses are as of October 31, 1999 (the Fund's fiscal year end). There were no fees waived or expenses reimbursed for these funds in 1999. (6) Travelers Insurance Company has agreed to reimburse the CONVERTIBLE BOND PORTFOLIO, the STRATEGIC STOCK PORTFOLIO, and the DISCIPLINED SMALL CAP STOCK PORTFOLIO for expenses for the period ended December 31, 1999 which exceeded 0.80%, 0.90%, 1.00% and 1.00% respectively. Without such voluntary arrangements, the actual annualized Total Annual Operating Expenses would have been 1.23%, 0.99%, and 1.49% respectively. (7) Other Expenses reflect the current expense reimbursement arrangement with Travelers Insurance Company. Travelers has agreed to reimburse the Portfolio for the amount by which its aggregate expenses (including management fees, but excluding brokerage commissions, interest charges and taxes) exceeds 0.95%. Without such arrangements, the Total Annual Operating Expenses for the Portfolio would have been 0.99% for the DISCIPLINED MID CAP STOCK PORTFOLIO. 7 10 EXAMPLE*: STANDARD DEATH BENEFIT Assuming a 5% annual return on assets, a $1,000 investment would be subject to the following expenses:
- ------------------------------------------------------------------------------------------------------------------ IF CONTRACT IS SURRENDERED AT THE IF CONTRACT IS NOT SURRENDERED OR END OF PERIOD SHOWN: ANNUITIZED AT END OF PERIOD SHOWN: ------------------------------------- ------------------------------------- FUNDING OPTION 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS - ------------------------------------------------------------------------------------------------------------------ DREYFUS VARIABLE INVESTMENT FUND Small Cap Portfolio............ 80 122 126 229 20 62 106 229 GREENWICH STREET SERIES FUND Equity Index Portfolio -- Class II Shares.................... 77 113 112 200 17 53 92 200 Total Return Portfolio......... 80 122 126 230 20 62 106 230 SALOMON BROTHERS VARIABLE SERIES FUND INC. Investors Fund................. 82 128 136 250 22 68 116 250 Total Return Fund.............. 82 128 137 252 22 68 117 252 SMITH BARNEY CONCERT ALLOCATION SERIES INC. Select Balanced Portfolio...... 83 132 143 263 23 72 123 263 Select Conservative Portfolio**.................. 83 130 141 259 23 70 121 259 Select Growth Portfolio........ 84 135 149 275 24 75 129 275 Select High Growth Portfolio**.................. 85 136 149 276 25 76 129 276 Select Income Portfolio**...... 82 129 138 254 22 69 118 254 TRAVELERS SERIES FUND INC. AIM Capital Appreciation Portfolio.................... 81 123 129 235 21 63 109 235 Alliance Growth Portfolio...... 80 123 128 233 20 63 108 233 INVESCO Strategic Income Portfolio.................... 83 132 144 265 23 72 124 265 MFS Total Return Portfolio..... 81 123 129 235 21 63 109 235 Putnam Diversified Income Portfolio.................... 80 123 128 234 20 63 108 234 Smith Barney High Income Portfolio.................... 79 118 120 216 19 58 100 216 Smith Barney International Equity Portfolio............. 82 128 137 252 22 68 117 252 Smith Barney Large Capitalization Growth Portfolio.................... 81 124 130 237 21 64 110 237 Smith Barney Large Cap Value Portfolio.................... 79 118 120 217 19 58 100 217 Smith Barney Money Market Portfolio.................... 78 114 114 203 18 54 94 203 Smith Barney Pacific Basin Portfolio.................... 85 137 152 282 25 77 132 282 Travelers Managed Income Portfolio.................... 80 121 125 227 20 61 105 227 Van Kampen Enterprise Portfolio.................... 79 120 123 224 19 60 103 224 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.. 81 124 131 238 21 64 111 238 MFS Research Portfolio......... 82 128 137 251 22 68 117 251 Strategic Stock Portfolio...... 81 125 132 241 21 65 112 241
* 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 0.014% OF ASSETS. ** No longer available to new Contract Owners. The Withdrawal Charge is waived if annuity payout has begun or if an income option of at least 5 years' duration is begun after the first Contract Year. (See "Charges and Deductions"). 8 11 EXAMPLE*: ENHANCED DEATH BENEFIT Assuming a 5% annual return on assets, a $1,000 investment would be subject to the following expenses:
- ------------------------------------------------------------------------------------------------------------------ IF CONTRACT IS SURRENDERED AT THE IF CONTRACT IS NOT SURRENDERED OR END OF PERIOD SHOWN: ANNUITIZED AT END OF PERIOD SHOWN: ------------------------------------- ------------------------------------- FUNDING OPTION 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS - ------------------------------------------------------------------------------------------------------------------ DREYFUS VARIABLE INVESTMENT FUND Small Cap Portfolio............ 83 130 140 258 23 70 120 258 GREENWICH STREET SERIES FUND Equity Index Portfolio -- Class II Shares.................... 80 122 126 230 20 62 106 230 Total Return Portfolio......... 83 130 141 259 23 70 121 259 SALOMON BROTHERS VARIABLE SERIES FUND INC. Investors Fund................. 85 136 150 278 25 76 130 278 Total Return Fund.............. 85 137 151 280 25 77 131 280 SMITH BARNEY CONCERT ALLOCATION SERIES INC. Select Balanced Portfolio...... 86 140 157 291 26 80 137 291 Select Conservative Portfolio **........................... 86 139 155 287 26 79 135 287 Select Growth Portfolio........ 87 144 163 303 27 84 143 303 Select High Growth Portfolio**.................. 87 144 163 304 27 84 143 304 Select Income Portfolio**...... 85 137 152 282 25 77 132 282 TRAVELERS SERIES FUND INC. AIM Capital Appreciation Portfolio.................... 83 132 143 264 23 72 123 264 Alliance Growth Portfolio...... 83 131 142 262 23 71 122 262 INVESCO Strategic Income Portfolio.................... 86 141 158 293 26 81 138 293 MFS Total Return Portfolio..... 83 132 143 264 23 72 123 264 Putnam Diversified Income Portfolio.................... 83 132 143 263 23 72 123 263 Smith Barney High Income Portfolio.................... 82 127 134 246 22 67 114 246 Smith Barney International Equity Portfolio............. 85 137 151 280 25 77 131 280 Smith Barney Large Capitalization Growth Portfolio.................... 84 133 144 266 24 73 124 266 Smith Barney Large Cap Value Portfolio.................... 82 127 135 247 22 67 115 247 Smith Barney Money Market Portfolio.................... 80 123 128 233 20 63 108 233 Smith Barney Pacific Basin Portfolio.................... 88 146 166 309 28 86 146 309 Travelers Managed Income Portfolio.................... 83 130 139 256 23 70 119 256 Van Kampen Enterprise Portfolio.................... 82 129 138 253 22 69 118 253 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.. 84 133 145 267 24 73 125 267 MFS Research Portfolio......... 85 136 151 279 25 76 131 279 Strategic Stock Portfolio...... 84 134 146 270 24 74 126 270
* 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 0.014% OF ASSETS. ** No longer available to new Contract Owners. The Withdrawal Charge is waived if annuity payout has begun or if an income option of at least 5 years' duration is begun after the first Contract Year. (See "Charges and Deductions"). 9 12 CONDENSED FINANCIAL INFORMATION - -------------------------------------------------------------------------------- See Appendices A and B. THE ANNUITY CONTRACT - -------------------------------------------------------------------------------- Travelers Vintage Annuity is a contract between the contract owner ("you"), and the Company. You make purchase payments to us and we credit them to your Contract. The Company promises to pay you an income, in the form of annuity or income payments, beginning on a future date that you choose, the maturity date. The purchase payments accumulate tax deferred in the funding options of your choice. We offer multiple variable funding options, and one fixed account option. The contract owner assumes the risk of gain or loss according to the performance of the variable funding options. The contract value is the amount of purchase payments, plus or minus any investment experience or interest. The contract value also reflects all surrenders 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 become effective is referred to as the contract date. Each 12-month period following the 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. CONTRACT OWNER INQUIRIES Any questions you have about your Contract should be directed to the Company's Home Office at 1-800-842-8573. PURCHASE PAYMENTS The initial purchase payment must be at least $5,000. You may make additional payments of at least $500 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. 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 in good order at our Home Office. Subsequent purchase payments will be credited to a Contract on the same business day, if received in good order by our Home Office by 4:00 p.m. Eastern time. A business day is any day that the New York Stock Exchange is open. Our business day ends at 4:00 p.m. Eastern time unless we need to close earlier due to an emergency. ACCUMULATION UNITS The period between the contract effective date and the maturity date is the accumulation period. During the accumulation period, 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 their values 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 its accumulation unit. We calculate the value of an accumulation unit for each funding option each day the New York Stock Exchange is open. The values are calculated as of 4:00 p.m. Eastern time. After the value is calculated, we credit your Contract. During the annuity period (i.e., after the maturity date), you are credited with annuity units. 10 13 THE FUNDING OPTIONS You choose which of the following variable funding options to have your purchase payments allocated to. These funding options are subsections of the Separate Account, which invest in the underlying mutual funds ("underlying funds"). 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. You are not investing directly in the underlying fund. Since each option has varying degrees of risk, please read the prospectuses carefully before investing. Contact your registered representative or call 1-800-842-8573 to request additional copies of the prospectuses. If any of the funding options become unavailable for allocating purchase payments, or if we believe that further investment in a funding option is 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 state and SEC approval, if necessary. From time to time we may make new funding options available. The current variable funding options are listed below, along with their investment advisers and any subadviser:
INVESTMENT FUNDING OPTION OBJECTIVE INVESTMENT ADVISER/SUBADVISER - -------------------------------------------------------------------------------------------------------------------- DREYFUS VARIABLE INVESTMENT FUND Small Cap Portfolio Seeks to maximize capital appreciation. The Dreyfus Corporation GREENWICH STREET SERIES FUND Equity Index Portfolio-- Seeks to replicate, before deduction of expenses, Travelers Investment Management Class II Shares the total return performance of the S&P 500 Index. Co. ("TIMCO") Total Return Portfolio An equity portfolio that seeks to provide total SSB Citi Fund Management LLC return, consisting of long-term capital ("SSB Citi") appreciation and income. The Portfolio will invest primarily in a diversified portfolio of dividend-paying common stocks. SALOMON BROTHERS VARIABLE SERIES FUND, INC. Investors Fund Seeks long-term growth of capital, and, Salomon Brothers Asset secondarily, current income, through investments Management ("SBAM") in common stocks of well-known companies. Total Return Fund Seeks above-average income (compared to a portfo- SBAM lio invested entirely in equity securities). Secondarily, seeks opportunities for growth of capital and income. SMITH BARNEY CONCERT ALLOCATION SERIES INC. Select Balanced Portfolio Seeks a balance of growth of capital and income by Travelers Investment Advisers investing in a select group of mutual funds. ("TIA") Select Growth Portfolio Seeks long-term growth of capital by investing in TIA 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: Alliance Capital medium-sized and smaller companies. Management L.P. Alliance Growth Portfolio Seeks long-term growth of capital. Current income TIA is only an incidental consideration. The Portfolio Subadviser: Alliance Capital invests predominantly in equity securities of Management L.P. companies with a favorable outlook for earnings and whose rate of growth is expected to exceed that of the U.S. economy over time.
11 14
INVESTMENT FUNDING OPTION OBJECTIVE INVESTMENT ADVISER/SUBADVISER - -------------------------------------------------------------------------------------------------------------------- TRAVELERS SERIES FUND, INC., CONT. INVESCO Strategic Income Seeks primarily high current income and, TIA 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 SSB Citi Portfolio a secondary objective. The Portfolio will invest at least 65% of its assets in high-yielding corporate debt obligations and preferred stock. Smith Barney International Seeks total return on assets from growth of SSB Citi 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 SSB Citi Capitalization Growth equity securities of companies with large market Portfolio capitalizations. Smith Barney Large Cap Seeks current income and long-term growth of SSB Citi Value Portfolio income and capital by investing primarily, but not exclusively, in common stocks. Smith Barney Money Market Seeks maximum current income and preservation of SSB Citi Portfolio capital. Smith Barney Pacific Basin Seeks long-term capital appreciation through SSB Citi Portfolio investment primarily in equity securities of companies in Asian Pacific countries. Travelers Managed Income Seeks high current income consistent with prudent TIA Portfolio risk of capital through investments in corporate Subadviser: Travelers Asset debt obligations, preferred stocks, and Management International obligations issued or guaranteed by the U.S. Company LLC ("TAMIC") Government or its agencies or instrumentalities. Van Kampen Enterprise Seeks capital appreciation through investment in SSB Citi Portfolio securities believed to have above-average Subadviser: Van Kampen Asset potential for capital appreciation. Any income 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 TAMIC investing in convertible bond securities and in combinations of nonconvertible fixed-income 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 U.S. common Subadviser: TIMCO stocks. 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.
12 15
INVESTMENT FUNDING OPTION OBJECTIVE INVESTMENT ADVISER/SUBADVISER - -------------------------------------------------------------------------------------------------------------------- TRAVELERS SERIES TRUST, CONT. MFS Emerging Growth Seeks to provide long-term growth of capital. TAMIC Portfolio Dividend and interest income from portfolio Subadviser: MFS securities, if any, is incidental to the MFS Portfolio's investment objective. 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) a subset of the S&P Industrial Index.
CHARGES AND DEDUCTIONS - -------------------------------------------------------------------------------- GENERAL We deduct the charges described below. The charges are for the service and benefits we provide, costs and expenses we incur, and risks we assume under the Contracts. Services and benefits we provide include: - the ability for you to make withdrawals and surrenders under the Contracts; - the death benefit paid on the death of the contract owner, annuitant, or first of the joint owners, - the available funding options and related programs (including dollar-cost averaging, portfolio rebalancing, and systematic withdrawal programs); - administration of the annuity options available under the Contracts; and - the distribution of various reports to contract owners. Costs and expenses we incur include: - losses associated with various overhead and other expenses associated with providing the services and benefits provided by the Contracts, - sales and marketing expenses including commission payments to your Smith Barney Financial Consultant, and - other costs of doing business. Risks we assume include: - that annuitants may live longer than estimated when the annuity factors under the Contracts were established; - that the amount of the death benefit will be greater than the contract value, and - that the costs of providing the services and benefits under the Contracts will exceed the charges deducted. We may also deduct a charge for taxes. Unless otherwise specified, charges are deducted proportionately from all funding options in which you are invested. 13 16 We may reduce or eliminate the withdrawal charge, the administrative charges and/or the mortality and expense risk charge under the Contract when certain sales or administration of the Contract result in savings or reduced expenses and/or risks. For certain trusts, we may change the order in which purchase payments and earnings are withdrawn in order to determine the withdrawal charge. We will not reduce or eliminate the withdrawal charge or the administrative charge where such reduction or elimination would be unfairly discriminatory to any person. WITHDRAWAL CHARGE We do not deduct a sales charge from purchase payments when they are made to the Contract. However, a withdrawal charge will apply if purchase payments are withdrawn before they have been in the Contract for seven years. We will assess the charge as a percentage of the purchase payment withdrawn as follows:
YEARS SINCE PURCHASE WITHDRAWAL PAYMENT MADE CHARGE 0-1 6% 2 6% 3 6% 4 3% 5 2% 6 1% 7+ 0%
For purposes of the withdrawal charge calculation, withdrawals are deemed to be taken first from: (a) any purchase payment to which no withdrawal charge applies, and then (b) any remaining free withdrawal allowance (as described below) (after being reduced by (a)), then (c) from any purchase payment to which a withdrawal charge applies (on a first-in, first-out basis), then (d) from any Contract earnings. Unless you instruct us otherwise, we will deduct the withdrawal charge from the amount requested. We will not deduct a withdrawal charge: - due to the death of the contract owner or the annuitant (with no contingent annuitant surviving); - if an annuity payout has begun - due to a minimum distribution under our minimum distribution rules then in effect; or - if an income option of at least five year's duration is begun after the first contract year. FREE WITHDRAWAL ALLOWANCE Beginning in the second contract year, you may withdraw up to 15% of the contract value annually without a withdrawal charge. We calculate the available withdrawal amount as of the end of the previous contract year. The free withdrawal provision applies to all partial withdrawals, except those transferred directly to annuity contracts issued by other financial institutions. We reserve the right to not permit the provision on a full surrender. In Washington state, the free withdrawal provision applies to all withdrawals. 14 17 ADMINISTRATIVE CHARGES We will deduct an annual contract administrative charge on the fourth Friday of each August from Contracts with a value of less than $40,000 on that date. This charge compensates us for expenses incurred in establishing and maintaining the Contract. The $30 charge is deducted from the contract value by canceling accumulation units applicable to each variable funding option on a pro rata basis. For the first Contract year this charge will be prorated (i.e. calculated) from the date of purchase. A prorated charge will also be made if the Contract is completely withdrawn or terminated. We will not deduct a contract administrative charge: (1) from the distribution of death proceeds; (2) after an annuity payout has begun, or (3) if the contract value on the date of assessment equals or is greater than $40,000. An administrative expense charge (sometimes called "sub-account administrative charge") is deducted on each business day from amounts allocated to the variable funding options in order to compensate the Company for certain related 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 ("M&E") charge from amounts held in the variable funding options. The deduction is reflected in our calculation of accumulation and annuity unit values. The charges stated are the maximum for this product. We reserve the right to lower this charge at any time. If you choose the Standard Death Benefit, the M&E charge is 1.02% annually. If you choose the Enhanced Death Benefit, the M&E charge is 1.30% annually. This charge compensates the Company for risks assumed, benefits provided and expenses incurred, including the payment of commissions to your sales agent. FUNDING OPTION EXPENSES The charges and expenses of the 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. We 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 we have a tax liability under state law. CHANGES IN TAXES BASED UPON PREMIUM OR VALUE If there is any change in a law assessing taxes against the Company based upon premiums, contract gains or value of the contract, we reserve the right to charge you proportionately for this tax. 15 18 TRANSFERS - -------------------------------------------------------------------------------- Up to 30 days before the maturity date, you may transfer all or part of the contract value between funding options. Transfers are made at the value(s) next determined after we receive your request at the Home Office. 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. We also reserve the right to restrict transfers by any market timing firm or any other third party authorized to initiate transfers on behalf of multiple contract owners. We may, among other things, not accept: 1) the transfer instructions of any agent acting under a power of attorney on behalf of more than one owner, or 2) the transfer or exchange instructions of individual owners who have executed pre-authorized transfer forms which are submitted by market timing firms or other third parties on behalf of more than one owner. We further reserve the right to limit transfers that we determine will disadvantage other contract owners. 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. DOLLAR COST AVERAGING Dollar cost averaging or the pre-authorized transfer program (the "DCA Program") allows you to transfer a set dollar amount to other funding options on a monthly or quarterly basis during the accumulation phase of the Contract. Using this method, more accumulation units are purchased in a funding option if the value per unit is low and fewer accumulation units are purchased if the value per unit is high. Therefore, a lower-than-average cost per unit may be achieved over the long run. You may elect the DCA Program 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 DCA Program. The minimum amount that may be transferred through this program is $100. You may establish pre-authorized transfers of Contract Values from the Fixed Account, subject to certain restrictions. Under the DCA Program, automated transfers from the Fixed Account may not deplete your Fixed Account Value in less than twelve months from your enrollment in the DCA Program. In addition to the DCA Program, Travelers may credit increased interest rates to contract owners under an administrative Special DCA Program established at the discretion of Travelers, depending on availability and state law. Under this program, the contract owner may pre-authorize level transfers to any of the funding options under either a 6 Month Program or 12 Month Program. The 6 Month Program and the 12 Month Program will generally have different credited interest rates. Under the 6 Month Program, the interest rate can accrue up to 6 months on funds in the Special DCA Program and all purchase payments and accrued interest must be transferred on a level basis to the selected funding option in 6 months. Under the 12 Month Program, the interest rate can accrue up to 12 months on funds in the Special DCA Program and all purchase payments and accrued interest in this Program must be transferred on a level basis to the selected funding options in 12 months. The pre-authorized transfers will begin after the initial Program purchase payment and complete enrollment instructions are received by Travelers. If complete Program enrollment instructions are not received by the Company within 15 days of receipt of the initial Program purchase payment, the entire balance in the Program will be credited with the non-Program interest rate then in effect for the Fixed Account. 16 19 You may start or stop participation in the DCA 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. If you stop the Special DCA Program and elect to remain in the Fixed Account, your Contract Value will be credited for the remainder of 6 or 12 months with the interest rate for non-Program funds. A contract owner may only have one DCA Program or Special DCA Program in place at one time. Any subsequent purchase payments received by the Company within the Program period selected will be allocated to the current funding options over the remainder of that Program transfer period, unless otherwise directed by the contract owner. All provisions and terms of the Contract apply to the DCA and Special DCA Programs, including provisions relating to the transfer of money between investment options. We reserve the right to suspend or modify transfer privileges at any time and to assess a processing fee for this service. ACCESS TO YOUR MONEY - -------------------------------------------------------------------------------- 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. Unless you submit a written request specifying the fixed or variable funding option(s) from which amounts are to be withdrawn, the withdrawal will be made on a pro rata basis. 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. Withdrawals during the annuity period are not allowed. We may defer payment of any cash surrender value for a period of up to seven days after the written request is received, but it is our intent to pay as soon as possible. We cannot process requests for withdrawals 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 After the first contract year and 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 premium taxes and withdrawal charge will be deducted. To elect systematic withdrawals, you must have a contract value of at least $15,000 and you must make the election on the form provided by the Company. We will surrender accumulation units pro rata from all investment options in which you have an interest, unless you instruct us otherwise. You may begin or discontinue systematic withdrawals at any time by notifying us in writing, but at least 30 days' notice must be given to change any systematic withdrawal instructions that are currently in place. We reserve the right to discontinue offering systematic withdrawals or to assess a processing fee for this service upon 30 days' written notice to contract owners (where allowed by state law). Each systematic withdrawal is subject to federal income taxes on the taxable portion. In addition, a 10% federal penalty tax may be assessed on systematic withdrawals if the contract owner is under age 59 1/2. You should consult with your tax adviser regarding the tax consequences of systematic withdrawals. LOANS Loans may be available under your Contract. If available, all loan provisions are described in your Contract or loan agreement. 17 20 OWNERSHIP PROVISIONS - -------------------------------------------------------------------------------- TYPES OF OWNERSHIP CONTRACT OWNER 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 (e.g. spouses) 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 both owners. Joint owners own equal shares of any benefits accruing or payments made to them. 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 had no interest in the Contract before then. The contract owner may change or delete a succeeding owner by written request. BENEFICIARY You name the beneficiary in a written request. The beneficiary has the right to receive any death proceeds under the contract upon the death of the annuitant or a contract owner. If more than one beneficiary survives the annuitant or contract owner, they 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. In the case of a non-spousal beneficiary or a spousal beneficiary who has not chosen to assume the contract, the death benefit proceeds will be held in a fixed account until the beneficiary elects a Settlement Option or takes a distribution. 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. A contingent annuitant may not be changed, deleted or added after the Contract becomes effective. DEATH BENEFIT - -------------------------------------------------------------------------------- Before the maturity date, when there is no contingent annuitant, a death benefit is payable when either the annuitant or a contract owner dies. At purchase, you elect either the Standard Death Benefit, or the Enhanced Death Benefit (also referred to as the "Roll-Up Death Benefit"). The 18 21 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 payment instructions (the death report date). DEATH PROCEEDS BEFORE THE MATURITY DATE STANDARD DEATH BENEFIT DEATH OF ANY OWNER OR THE ANNUITANT BEFORE AGE 75. 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: (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. DEATH OF ANY OWNER OR THE ANNUITANT ON OR AFTER AGE 75. 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: (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. ENHANCED DEATH BENEFIT (ROLL-UP DEATH BENEFIT) (NOT AVAILABLE WHEN EITHER THE ANNUITANT OR OWNER IS AGE 76 OR OLDER ON THE CONTRACT DATE) --------------------------------------------------------------------------------------------------------------- AGE OF DEATH DEATH BENEFIT --------------------------------------------------------------------------------------------------------------- If the annuitant dies before age 80, the - the contract value; death benefit will be the greatest of: - the roll-up death benefit value (as described below); or - the step-up value, if any, as described below. --------------------------------------------------------------------------------------------------------------- If the annuitant dies on or after age 80, the death - the contract value; benefit will be the greatest of: - the roll-up death benefit value (as described below) on the annuitant's 80(th) birthday, plus any additional purchase payments and minus any partial surrender reductions (as described below) that occur after the annuitant's 80(th) birthday; or - the step-up value, if any, as described below. ---------------------------------------------------------------------------------------------------------------
19 22 ROLL-UP DEATH BENEFIT (not available when either the annuitant or owner is age 76 or older on the contract date)
- ------------------------------------------------------------------------------------------ AGE AT DEATH DEATH BENEFIT - ------------------------------------------------------------------------------------------ If the annuitant dies before age 80, the - the contract value; death benefit will be the greatest of: - the roll-up death benefit value (as described below); or - the step-up value, if any, as described below. - ------------------------------------------------------------------------------------------ If the annuitant dies on or after age 80, - the contract value; the death benefit will be the greatest - the roll-up death benefit value (as of: described below) on the annuitant's 80(th) birthday, plus any additional purchase payments and minus any partial surrender reductions (as described below) that occur after the annuitant's 80(th) birthday; or - the step-up value, if any, as described below. - ------------------------------------------------------------------------------------------
STEP-UP VALUE (FOR ANNUAL STEP-UP AND ROLL-UP DEATH BENEFITS) A step-up value will be established on the seventh contract date anniversary (provided it is before the death report date). The initial step-up value will equal the contract value on that anniversary. Whenever a purchase payment is made, the step-up value will be increased by the amount of that purchase payment. Whenever a partial surrender is taken, the step-up value will be reduced by a partial surrender reduction as described below. On each contract date anniversary that occurs before the annuitant's 80th birthday and before the annuitant's death, if the contract value is greater than the step-up value, the step-up value will be reset to equal the contract value on that date. If the step-up value is greater than the contract value, the step-up value will remain unchanged. The step-up value will not be reduced on these anniversary recalculations (provided no surrenders are made on that day). The only changes made to the step-up value on or after the annuitant's 80th birthday will be those related to additional purchase payments or partial surrenders as described below. If the death report date is before the seventh contract date anniversary, there is no step-up value. 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 to equal a) plus b) minus c), increased by 5%, where: a) is the roll-up death benefit value as of the previous contract date anniversary b) is any purchase payment made during the previous contract year c) is any partial surrender reduction (as described below) during the previous contract year On dates other than the contract date anniversary, the roll-up death benefit value will equal a) plus b) minus c) where: a) is the roll-up death benefit value as of the previous contract date anniversary 20 23 b) is any purchase payment made during the previous contract year c) is any partial surrender reduction (as described below) during the previous contract year The maximum roll-up death benefit equals 200% of the difference between all purchase payments and all partial surrender reductions (as described below). 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. For example, assume your current contract value is $55,000. If your original step-up value is $50,000, and you decide to make a partial withdrawal of $10,000, the step-up value would be reduced as follows: 50,000 X (10,000/55,000) = 9,090 Your new step-up value would be 50,000-9,090, or $40,910. The following example shows what would happen in a declining market. Assume your current contract value is $30,000. If your original step-up value is $50,000, and you decide to make a partial withdrawal of $10,000, the step-up value would be reduced as follows: 50,000 X (10,000/30,000) = 16,666 Your new step-up value would be 50,000-16,666, or $33,334. PAYMENT OF PROCEEDS The process of paying death benefit proceeds before the maturity date under various situations for nonqualified contracts and qualified contracts is summarized in the charts below. The charts do not encompass every situation and are merely intended as a general guide. More detailed information is provided in your Contract. Generally, the person(s) receiving the benefit may request that the proceeds be paid in a lump sum, or be applied to one of the settlement options available under the Contract. 21 24 NONQUALIFIED CONTRACTS - --------------------------------------------------------------------------------------------------------------- BEFORE THE MATURITY DATE, THE COMPANY WILL PAY THE UNLESS... MANDATORY PAYOUT UPON THE DEATH OF THE PROCEEDS TO: RULES APPLY* - --------------------------------------------------------------------------------------------------------------- Owner (who is not the The beneficiary(ies), or Unless, the beneficiary is the Yes annuitant) (with no joint if none, to the contract contract owner's spouse and owner) owner's estate the spouse elects to continue the contract as the new owner rather than receive the distribution. - --------------------------------------------------------------------------------------------------------------- Owner (who is the annuitant) The beneficiary(ies), or Unless, the beneficiary is the Yes (with no joint owner) if none, to the contract contract owner's spouse and owner's estate. the spouse elects to continue the contract as the new owner rather than receive the distribution. - --------------------------------------------------------------------------------------------------------------- Joint Owner (who is not the The surviving joint Unless the surviving joint Yes annuitant) owner. owner is the spouse and elects to assume and continue the contract. - --------------------------------------------------------------------------------------------------------------- Joint Owner (who is the The beneficiary(ies), or Unless, the beneficiary is the Yes annuitant) if none, to the contract contract owner's spouse and owner's estate. the spouse elects to assume and continue the contract. Or, unless there is a contingent annuitant the contingent annuitant becomes the annuitant and the proceeds will be paid to the surviving joint owner. If the surviving joint owner is the spouse, the spouse, may elect to assume and continue the contract. - --------------------------------------------------------------------------------------------------------------- Owner (with a surviving succeeding owner Unless the succeeding owner is Yes succeeding owner) the contract owner's spouse and the spouse elects to continue the contract as the new owner rather than receive the distribution. - --------------------------------------------------------------------------------------------------------------- Annuitant (who is not the The beneficiary(ies) Unless, there is a contingent No contract owner) annuitant. Then, the contingent annuitant becomes the annuitant and the Contract continues in effect (generally using the original maturity date). The proceeds will then be paid upon the death of the contingent annuitant or owner. - --------------------------------------------------------------------------------------------------------------- Annuitant (who is the contract See death of "owner who N/A owner) is the annuitant" above - --------------------------------------------------------------------------------------------------------------- Annuitant (where owner is a The beneficiary(ies) Yes (Death of nonnatural person/trust) (e.g. the trust) annuitant is treated as death of the owner in these circumstances.) - --------------------------------------------------------------------------------------------------------------- Contingent Annuitant (assuming No death proceeds are N/A annuitant is still alive) payable; contract continues. - ---------------------------------------------------------------------------------------------------------------
22 25 - --------------------------------------------------------------------------------------------------------------- BEFORE THE MATURITY DATE, THE COMPANY WILL PAY THE UNLESS... MANDATORY PAYOUT UPON THE DEATH OF THE PROCEEDS TO: RULES APPLY* - --------------------------------------------------------------------------------------------------------------- Beneficiary No death proceeds are N/A payable; contract continues. - --------------------------------------------------------------------------------------------------------------- Contingent Beneficiary No death proceeds are N/A payable; contract continues. - ---------------------------------------------------------------------------------------------------------------
* Certain payout rules of the Internal Revenue Code (IRC) are triggered upon the death of any Owner. Non-spousal Beneficiaries (as well as spousal beneficiaries who choose not to assume the contract) must begin taking distributions based on the Beneficiary's life expectancy within one year of death or take a complete distribution of contract proceeds within 5 years of death. QUALIFIED CONTRACTS - -------------------------------------------------------------------------------------------------------------- BEFORE THE MATURITY DATE, UPON THE COMPANY WILL PAY THE UNLESS... MANDATORY PAYOUT THE DEATH OF THE PROCEEDS TO: RULES APPLY (SEE * ABOVE) - -------------------------------------------------------------------------------------------------------------- Owner/Annuitant The beneficiary(ies), or Yes if none, to the contract owner's estate - -------------------------------------------------------------------------------------------------------------- Beneficiary No death proceeds are N/A payable; contract continues. - -------------------------------------------------------------------------------------------------------------- Contingent Beneficiary No death proceeds are N/A payable; contract continues. - --------------------------------------------------------------------------------------------------------------
DEATH PROCEEDS AFTER THE MATURITY DATE If any owner or 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, or unless you elect another 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. Not all options may be available in all states. You may choose to annuitize at any time after you purchase the contract. 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 23 26 contract, if later. (For Contracts issued in Florida and New York, the maturity date elected may not be later than the annuitant's 90th birthday.) At least 30 days before the original maturity date, a contract owner may elect to extend the maturity date to any time prior to the annuitant's 85th birthday or for qualified contracts, to a later date with the Company's consent. Certain annuity options taken at the maturity date may be used to meet the minimum required distribution requirements of federal tax law, or a program of partial surrenders may be used instead. These mandatory distribution requirements take effect generally upon the death of the contract owner, or with qualified contracts upon either the later of the April 1 following the contract owner's attainment of age 70 1/2 or year of retirement; or the death of the contract owner. You should seek independent tax advice 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. If, at the time annuity payments begin, no election has been made to the contrary, the cash surrender value will be applied to provide an annuity funded by the same investment options as you have selected during the accumulation period (contract value, in Oregon). At least 30 days before the maturity date, you may transfer the 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 the 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 accumulation unit value as of 14 days before the date annuity payments begin. An annuity unit is used to measure the dollar value of an annuity payment. 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. If a variable annuity is elected, the amount applied to it will be the value of the funding options 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 and the annuitant's adjusted age. 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 Contract tables by the number of thousands of dollars of contract value applied to that annuity option and factors in an assumed daily net investment factor. The Assumed Daily Net Investment factor corresponds to an annual interest rate of 3%, used to determine the guaranteed payout rates shown. If investment rates are higher at the time annuitization is selected, payout rates will be higher than those shown. 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 payment options. DETERMINATION OF SECOND AND SUBSEQUENT ANNUITY PAYMENTS. The dollar amount of all subsequent annuity payments changes from month to month based on the investment experience of the applicable funding options. 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 the date the payment is due. 24 27 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," except that the amount applied to begin the annuity will be the cash surrender value, determined as of the date annuity payments begin. Payout rates will not be lower than those shown in the Contract. 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. 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 or income 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 contract value in a lump-sum. On the maturity date, we will pay the amount due under the Contract in accordance with the payment option that you select. You may choose to receive a single lump-sum payment. 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. ANNUITY OPTIONS Subject to the conditions described in "Election of Options" above, all or any part of the cash surrender value (less any applicable premium taxes) 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. We may offer additional options. Option 1 -- Life Annuity -- No Refund. The Company will make annuity payments during the lifetime of the annuitant ending with the last payment before 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, we will continue making payments to the beneficiary during the remainder of the period. Option 3 -- Joint and Last Survivor Life Annuity -- No Refund. The Company will make regular annuity payments during the lifetime of the annuitant and a second person. When either person dies, we will continue making payments to the survivor. No further payments will be made following the death of the survivor. 25 28 Option 4 -- Joint and Last Survivor Life Annuity -- Annuity Reduced on Death of Primary Payee. The Company will make annuity payments during the lifetimes of the annuitant and a second person. One will be designated the primary payee, the other will be designated the secondary payee. On the death of the secondary payee, the Company will continue to make monthly annuity payments to the primary payee in the same amount that would have been payable during the joint lifetime of the two persons. On the death of the primary payee, 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 Options as may be mutually agreed upon. MISCELLANEOUS CONTRACT PROVISIONS - -------------------------------------------------------------------------------- RIGHT TO RETURN PERIOD 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 that 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 at the close of business on the day we receive a written request for a refund. TERMINATION You do not need to make any purchase payments after the first to keep the Contract in effect. However, we reserve 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's last known address and to any 26 29 assignee of record. If the Contract is terminated, we will pay you the cash surrender value less any applicable premium tax, outstanding loans and any applicable administrative charge. REQUIRED REPORTS As often as required by law, but at least once in each contract year before the due date of the first annuity payment, 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 report date 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 and 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 ("the Exchange") is closed; (2) when trading on the Exchange is restricted; (3) when an emergency exists as determined by the SEC so that the sale of securities held in the Separate Account may not reasonably occur or so that the Company may not reasonably determine the value 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 Where state law permits, we may allow 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 ACCOUNTS - -------------------------------------------------------------------------------- The Travelers Insurance Company and the Travelers Life and Annuity Company each sponsor separate accounts: The Travelers Fund BD for Variable Annuities ("Fund BD") and the Travelers Fund BD II for Variable Annuities ("Fund BD II"), respectively. Fund BD and Fund BD II were established on October 22, 1993 and February 22, 1995, respectively and are registered with the SEC as unit investment trusts (separate account) under the Investment Company Act of 1940, as amended (the "1940 Act"). The Separate Account assets attributable to the Contracts will be invested exclusively in the shares of the variable funding options. The assets of Fund BD and Fund BD II are held for the exclusive and separate benefit of the owners of each separate account, according to the laws of Connecticut. Income, gains and losses, whether or not realized, from assets allocated to the Separate Account are, in accordance with the Contracts, credited to or charged against the Separate Account without regard to other income, gains and losses of the Company. The assets held by the Separate Account 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 the Separate Account. All such income and/or distributions are reinvested in shares of the respective funding option 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. PERFORMANCE INFORMATION From time to time, we may advertise several 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, and the "nonstandardized total return," as described below. Specific examples of the performance information appear in the SAI. 27 30 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 contract administrative charge is converted to a percentage of assets based on the actual fee collected, divided by the average net assets for Contracts 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 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 before they became available under the Separate Account, the nonstandardized average annual total return quotations will reflect 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, the S&P 400 Index, the Lehman Brothers Long T-Bond Index, the Russell 1000, 2000 and 3000 Indices, the Value Line Index, and the Morgan Stanley Capital International's EAFE Index). Advertisements may also include published editorial comments and performance rankings compiled by independent organizations (including, but not limited to, Lipper Analytical Services, Inc. and Morningstar, Inc.) and publications that monitor the performance of the Separate Account and the variable funding options. FEDERAL TAX CONSIDERATIONS - -------------------------------------------------------------------------------- The following general discussion of the federal income tax consequences under this Contract 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 adviser regarding your personal situation. For your information, a more detailed tax 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. TAX-FREE EXCHANGES: The Internal Revenue Code provides that, generally, no gain or loss is recognized when an annuity contract is received in exchange for a life, endowment, or annuity contract. Since different annuity contracts have different expenses, fees and benefits, a tax-free exchange could result in your investment becoming subject to higher or lower fees and/or expenses. 28 31 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), Keogh Plans, and certain other qualified deferred compensation plans. An exception to this is a qualified plan called a Roth IRA. Under Roth IRAs, after-tax contributions accumulate until maturity, when amounts (including earnings) may be withdrawn tax-free. 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 includible 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 includible 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 includible in your income. (See "Penalty Tax for Premature Distributions" below.) There is income in the contract to the extent the contract 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 excludible 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. Federal tax law requires that nonqualified annuity contracts meet minimum mandatory distribution requirements upon the death of the contract owner, including the first of joint owners. If these requirements are not met, the surviving joint owner, or the beneficiary, will have to pay taxes prior to distribution. The distribution required depends, among other things, upon whether an annuity option is elected or whether the new contract owner is the surviving spouse. We will administer Contracts in accordance with these rules and we will notify you when you should begin receiving payments. QUALIFIED ANNUITY CONTRACTS Under a qualified annuity, since amounts paid into the contract have not yet been taxed, the full amount of all distributions, including lump-sum withdrawals and annuity payments, are taxed at the ordinary income tax rate unless the distribution is transferred to an eligible rollover account or contract. The Contract is available as a vehicle for IRA rollovers and for other qualified contracts. There are special rules which govern the taxation of qualified contracts, including withdrawal restrictions, requirements for mandatory distributions, and contribution limits. We have provided a more complete discussion in the SAI. 29 32 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 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 to diversify 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 includable annually in the Contract Owner's gross income. The Internal Revenue Service has stated in published rulings that a variable contract owner will be considered the owner of the assets of a segregated asset account if the owner possesses an incident of ownership in those assets, such as the ability to exercise investment control over the assets. The Treasury Department announced, in connection with the issuance of temporary regulations concerning investment diversification, that those regulations "do not provide guidance concerning the circumstances in which investor control of the investments of a segregated asset account may cause the investor, rather than the insurance company, to be treated as the owner of the assets of the account." This announcement, dated September 15, 1986, also stated that the guidance would be issued by way of regulations or rulings on the "extent to which policyholders may direct their investments to particular subaccounts [of a segregated asset account] without being treated as owners of the underlying assets." As of the date of this prospectus, no such guidance has been issued. The Company does not know if such guidance will be issued, or if it is, what standards it may set. Furthermore, the Company does not know if such guidance may be issued with retroactive effect. New regulations are generally issued with a prospective-only effect as to future sales or as to future voluntary transactions in existing contracts. The Company therefore reserves the right to modify the contract as necessary to attempt to prevent Contract Owners from being considered the owner of the assets of the 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. TAXATION OF DEATH BENEFIT PROCEEDS Amounts may be distributed from a Contract because of the death of an owner or annuitant. Generally, such amounts are includible in the income of the recipient as follows: (i) if distributed 30 33 in a lump sum, they are taxed in the same manner as a full surrender of the contract; or (ii) if distributed under a payment option, they are taxed in the same way as annuity payments. OTHER INFORMATION - -------------------------------------------------------------------------------- THE INSURANCE COMPANIES Please refer to the first page of the Summary of this prospectus to determine which company issued your Contract. The Travelers Insurance Company is a stock insurance company chartered in 1864 in Connecticut and continuously engaged in the insurance business since that time. It is licensed to conduct life insurance business in all states of the United States, the District of Columbia, Puerto Rico, Guam, the U.S. and British Virgin Islands and the Bahamas. The Company is an indirect wholly owned subsidiary of Citigroup Inc. The Company's Home Office is located at One Tower Square, Hartford, Connecticut 06183. The Travelers Life and Annuity Company is a stock insurance company chartered in 1973 in Connecticut and continuously engaged in the insurance business since that time. It is licensed to conduct life insurance business in a majority of the states of the United States, the District of Columbia and Puerto Rico, and intends to seek licensure in the remaining states, except New York. The Company is an indirect wholly owned subsidiary of Citigroup Inc. The Company's Home Office is located at One Tower Square, Hartford, Connecticut 06183. FINANCIAL STATEMENTS The financial statements for each insurance company and for each separate account are located in their respective Statements of Additional Information. IMSA The Companies are members of the Insurance Marketplace Standards Association ("IMSA"), and as such may use the IMSA logo and IMSA membership in advertisements. Companies that belong to IMSA subscribe to a set 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 contacts involving the sale and service of individual life insurance and annuity products. 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. Any sales representative or employee who sells the Contracts will be qualified to sell variable annuities under applicable federal and state laws. Each broker-dealer is registered with the SEC under the Securities Exchange Act of 1934, and all are members of the NASD. The principal underwriter of the Contracts is CFBDS, Inc., 21 Milk St., Boston, MA. CFBDS, Inc. is not affiliated with the Company or the Separate Account. However, it is currently anticipated that Travelers Distribution LLC, an affiliated broker-dealer, may become the principal underwriter for the Contracts during the year 2000. Up-front compensation paid to sales representatives will not exceed 7% of the purchase payments made under the Contracts. If asset based compensation is paid, it will not exceed 2% of the average account value annually. From time to time, the Company may pay or permit other promotional incentives, in cash, credit or other compensation. 31 34 CONFORMITY WITH STATE AND FEDERAL LAWS The Contract is governed by the laws of the state in which it is delivered. Where a state has not approved a contract feature or funding option, it will not be available in that state. 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 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 Companies, their 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 Companies. There are no pending legal proceedings affecting the Separate Account. There is one material pending legal proceeding, other than ordinary routine litigation incidental to business, to which the Company is a party. THE TRAVELERS INSURANCE COMPANY In March 1997, a purported class action entitled Patterman v. The Travelers, Inc., et al. was commenced in the Superior Court of Richmond County, Georgia, alleging, among other things, violations of the Georgia RICO statute and other state laws by an affiliate of the Company, Primerica Financial Services, Inc. and certain of its affiliates. Plaintiffs seek unspecified compensatory and punitive damages and other relief. In October 1997, defendants answered the complaint, denied liability and asserted numerous affirmative defenses. In February 1998, on defendants' motion, the Superior Court of Richmond County transferred the lawsuit to the Superior Court of Gwinnett County, Georgia. Plaintiffs appealed the transfer order, and in December 1998 the Court of Appeals of the State of Georgia reversed the lower court's decision. Defendants petitioned the Georgia Supreme Court to hear an appeal from the decision of the Court of Appeals, and the petition was granted in May 1998. In September 1999, oral argument on defendants' petition was heard and, on February 28, 2000, the Georgia Supreme Court affirmed the Georgia County Appeals and remanded the matter to the Superior Court of Richmond County. In March 2000, defendants moved the Georgia Supreme Court to reconsider its February 28, 2000 decision, and that motion remains pending. Proceedings in the trial court have been stayed pending appeal. Defendants intend to vigorously contest the litigation. THE TRAVELERS LIFE AND ANNUITY COMPANY There are no pending material legal proceedings affecting the Separate Account, the principal underwriter or the Company. 32 35 APPENDIX A - -------------------------------------------------------------------------------- CONDENSED FINANCIAL INFORMATION THE TRAVELERS FUND BD FOR VARIABLE ANNUITIES ACCUMULATION UNIT VALUES
YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997 STANDARD ENHANCED STANDARD ENHANCED STANDARD ENHANCED - ---------------------------------------------------------------------------------------------------------------- DREYFUS VARIABLE INVESTMENT FUND SMALL CAP PORTFOLIO (5/98) Unit Value at beginning of period....... $ .852 $ .851 $ 1.000 $ 1.000 $ -- $ -- Unit Value at end of period............. 1.038 1.033 .852 .851 -- -- Number of units outstanding at end of period (thousands).................... 2,130 302 1,025 49 -- -- GREENWICH STREET SERIES FUND: TOTAL RETURN PORTFOLIO (11/94)* Unit Value at beginning of period....... $ 1.857 $ 1.836 $ 1.790 $ 1.775 $ 1.550 $ 1.541 Unit Value at end of period............. 2.240 2.208 1.857 1.836 1.790 1.775 Number of units outstanding at end of period (thousands).................... 65,203 10,465 73,468 11,654 75,812 11,853 EQUITY INDEX PORTFOLIO--CLASS II (5/99)* Unit Value at beginning of period....... $ 1.000 $ 1.000 $ -- $ -- $ -- $ -- Unit Value at end of period............. 1.088 1.086 -- -- -- -- Number of units outstanding at end of period (thousands).................... 1,740 78 -- -- -- -- SALOMON BROTHERS VARIABLE SERIES FUND INVESTORS FUND (5/98)* Unit Value at beginning of period....... $ 1.014 $ 1.012 $ 1.000 $ 1.000 $ -- $ -- Unit Value at end of period............. 1.119 1.114 1.014 1.012 -- -- Number of units outstanding at end of period (thousands).................... 1,846 171 704 76 -- -- TOTAL RETURN FUND (5/98)* Unit Value at beginning of period....... $ .997 $ .996 $ 1.000 $ 1.000 $ -- $ -- Unit Value at end of period............. .994 .989 .997 .996 -- -- Number of units outstanding at end of period (thousands).................... 769 116 397 70 -- -- SMITH BARNEY CONCERT ALLOCATION SERIES INC.: SELECT HIGH GROWTH PORTFOLIO** (3/97)* Unit Value at beginning of period....... $ 1.242 $ 1.236 $ 1.090 $ 1.087 $ 1.000 $ 1.000 Unit Value at end of period............. 1.558 1.546 1.242 1.236 1.090 1.087 Number of units outstanding at end of period (thousands).................... 807 319 724 326 603 231 PERIOD FROM JUNE 2, 1994 YEAR ENDED YEAR ENDED (EFFECTIVE DATE) TO DECEMBER 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994 STANDARD ENHANCED STANDARD ENHANCED STANDARD ENHANCED - ----------------------------------------- --------------------------------------------------------------- DREYFUS VARIABLE INVESTMENT FUND SMALL CAP PORTFOLIO (5/98) Unit Value at beginning of period....... $ -- $ -- $ -- $ -- $ -- $ -- Unit Value at end of period............. -- -- -- -- -- -- Number of units outstanding at end of period (thousands).................... -- -- -- -- -- -- GREENWICH STREET SERIES FUND: TOTAL RETURN PORTFOLIO (11/94)* Unit Value at beginning of period....... $ 1.251 $ 1.247 $ 1.010 $ 1.010 $ 1.000 $1.000 Unit Value at end of period............. 1.550 1.541 1.251 1.247 1.010 1.010 Number of units outstanding at end of period (thousands).................... 58,898 9,169 32,564 4,874 1,109 277 EQUITY INDEX PORTFOLIO--CLASS II (5/99)* Unit Value at beginning of period....... $ -- $ -- $ -- $ -- $ -- $ -- Unit Value at end of period............. -- -- -- -- -- -- Number of units outstanding at end of period (thousands).................... -- -- -- -- -- -- SALOMON BROTHERS VARIABLE SERIES FUND INVESTORS FUND (5/98)* Unit Value at beginning of period....... $ -- $ -- $ -- $ -- $ -- $ -- Unit Value at end of period............. -- -- -- -- -- -- Number of units outstanding at end of period (thousands).................... -- -- -- -- -- -- TOTAL RETURN FUND (5/98)* Unit Value at beginning of period....... $ -- $ -- $ -- $ -- $ -- $ -- Unit Value at end of period............. -- -- -- -- -- -- Number of units outstanding at end of period (thousands).................... -- -- -- -- -- -- SMITH BARNEY CONCERT ALLOCATION SERIES INC.: SELECT HIGH GROWTH PORTFOLIO** (3/97)* Unit Value at beginning of period....... $ -- $ -- $ -- $ -- $ -- $ -- Unit Value at end of period............. -- -- -- -- -- -- Number of units outstanding at end of period (thousands).................... -- -- -- -- -- --
A-1 36 APPENDIX A - -------------------------------------------------------------------------------- CONDENSED FINANCIAL INFORMATION THE TRAVELERS FUND BD FOR VARIABLE ANNUITIES ACCUMULATION UNIT VALUES (CONTINUED)
YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997 STANDARD ENHANCED STANDARD ENHANCED STANDARD ENHANCED - ---------------------------------------------------------------------------------------------------------------- SELECT GROWTH PORTFOLIO (3/97)* Unit Value at beginning of period....... $ 1.238 $ 1.232 $ 1.099 $ 1.097 $ 1.000 $ 1.000 Unit Value at end of period............. 1.421 1.410 1.238 1.232 1.099 1.097 Number of units outstanding at end of period (thousands).................... 3,487 1,847 3,135 1,839 2,262 1,403 SELECT BALANCED PORTFOLIO (3/97)* Unit Value at beginning of period....... $ 1.183 $ 1.177 $ 1.093 $ 1.091 $ 1.000 $ 1.000 Unit Value at end of period............. 1.258 1.248 1.183 1.177 1.093 1.091 Number of units outstanding at end of period (thousands).................... 3,959 922 4,047 1,087 3,115 778 SELECT CONSERVATIVE PORTFOLIO** (3/97)* Unit Value at beginning of period....... $ 1.162 $ 1.156 $ 1.108 $ 1.105 $ 1.000 $ 1.000 Unit Value at end of period............. 1.196 1.187 1.162 1.156 1.108 1.105 Number of units outstanding at end of period (thousands).................... 1,408 137 1,466 184 640 188 SELECT INCOME PORTFOLIO** (3/97)* Unit Value at beginning of period....... $ 1.154 $ 1.148 $ 1.106 $ 1.104 $ 1.000 $ 1.000 Unit Value at end of period............. 1.148 1.139 1.154 1.148 1.106 1.104 Number of units outstanding at end of period (thousands).................... 831 165 753 185 425 279 TRAVELERS SERIES FUND INC. AIM CAPITAL APPRECIATION PORTFOLIO (11/95)* Unit Value at beginning of period....... $ 1.397 $ 1.385 $ 1.206 $ 1.198 $ 1.088 $ 1.084 Unit Value at end of period............. 1.974 1.951 1.397 1.385 1.206 1.198 Number of units outstanding at end of period (thousands).................... 81,401 14,475 90,905 15,792 91,234 15,591 ALLIANCE GROWTH PORTFOLIO (6/94)* Unit Value at beginning of period....... $ 2.903 $ 2.867 $ 2.276 $ 2.254 $ 1.785 $ 1.772 Unit Value at end of period............. 3.795 3.737 2.903 2.867 2.276 2.254 Number of units outstanding at end of period (thousands).................... 131,228 26,576 142,802 28,710 144,293 30,063 PERIOD FROM JUNE 2, 1994 YEAR ENDED YEAR ENDED (EFFECTIVE DATE) TO DECEMBER 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994 STANDARD ENHANCED STANDARD ENHANCED STANDARD ENHANCED - ----------------------------------------- --------------------------------------------------------------- SELECT GROWTH PORTFOLIO (3/97)* Unit Value at beginning of period....... $ -- $ -- $ -- $ -- $ -- $ -- Unit Value at end of period............. -- -- -- -- -- -- Number of units outstanding at end of period (thousands).................... -- -- -- -- -- -- SELECT BALANCED PORTFOLIO (3/97)* Unit Value at beginning of period....... $ -- $ -- $ -- $ -- $ -- $ -- Unit Value at end of period............. -- -- -- -- -- -- Number of units outstanding at end of period (thousands).................... -- -- -- -- -- -- SELECT CONSERVATIVE PORTFOLIO** (3/97)* Unit Value at beginning of period....... $ -- $ -- $ -- $ -- $ -- $ -- Unit Value at end of period............. -- -- -- -- -- -- Number of units outstanding at end of period (thousands).................... -- -- -- -- -- -- SELECT INCOME PORTFOLIO** (3/97)* Unit Value at beginning of period....... $ -- $ -- $ -- $ -- $ -- $ -- Unit Value at end of period............. -- -- -- -- -- -- Number of units outstanding at end of period (thousands).................... -- -- -- -- -- -- TRAVELERS SERIES FUND INC. AIM CAPITAL APPRECIATION PORTFOLIO (11/95)* Unit Value at beginning of period....... $ 0.958 $ 0.957 $ 1.000 $ 1.000 $ -- $ -- Unit Value at end of period............. 1.088 1.084 0.958 0.957 -- -- Number of units outstanding at end of period (thousands).................... 71,085 12,862 20,366 5,394 -- -- ALLIANCE GROWTH PORTFOLIO (6/94)* Unit Value at beginning of period....... $ 1.396 $ 1.390 $ 1.047 $ 1.046 $ 1.000 $1.000 Unit Value at end of period............. 1.785 1.772 1.396 1.390 1,047 1,046 Number of units outstanding at end of period (thousands).................... 123,294 27,251 79,334 20,571 16,522 7,338
A-2 37 APPENDIX A - -------------------------------------------------------------------------------- CONDENSED FINANCIAL INFORMATION THE TRAVELERS FUND BD FOR VARIABLE ANNUITIES ACCUMULATION UNIT VALUES (CONTINUED)
YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997 STANDARD ENHANCED STANDARD ENHANCED STANDARD ENHANCED - ---------------------------------------------------------------------------------------------------------------- INVESCO STRATEGIC INCOME PORTFOLIO (FORMERLY G.T. GLOBAL STRATEGIC PORTFOLIO) (6/94)* Unit Value at beginning of period....... $ 1.359 $ 1.342 $ 1.397 $ 1.383 $ 1.316 $ 1.306 Unit Value at end of period............. 1.319 1.299 1.359 1.342 1.397 1.383 Number of units outstanding at end of period (thousands).................... 8,991 2,351 11,299 2,624 12,827 2,883 MFS TOTAL RETURN PORTFOLIO (6/94)* Unit Value at beginning of period....... $ 1.819 $ 1.796 $ 1.648 $ 1.632 $ 1.376 $ 1.366 Unit Value at end of period............. 1.845 1.817 1.819 1.796 1.648 1.632 Number of units outstanding at end of period (thousands).................... 78,484 16,860 86,950 18,459 83,811 17,373 PUTNAM DIVERSIFIED INCOME PORTFOLIO (6/94)* Unit Value at beginning of period....... $ 1.326 $ 1.309 $ 1.332 $ 1.319 $ 1.252 $ 1.243 Unit Value at end of period............. 1.325 1.304 1.326 1.309 1.332 1.319 Number of units outstanding at end of period (thousands).................... 45,595 11,060 53,053 12,925 51,751 12,724 SMITH BARNEY HIGH INCOME PORTFOLIO (6/94)* Unit Value at beginning of period....... $ 1.452 $ 1.434 $ 1.463 $ 1.448 $ 1.300 $ 1.291 Unit Value at end of period............. 1.472 1.450 1.452 1.434 1.463 1.448 Number of units outstanding at end of period (thousands).................... 38,357 8,210 44,406 9,312 42,964 8,927 SMITH BARNEY INTERNATIONAL EQUITY PORTFOLIO (6/94)* Unit Value at beginning of period....... $ 1.305 $ 1.289 $ 1.240 $ 1.228 $ 1.222 $ 1.213 Unit Value at end of period............. 2.164 2.131 1.305 1.289 1.240 1.228 Number of units outstanding at end of period (thousands).................... 72,748 15,530 82,330 17,670 87,385 18,731 SMITH BARNEY LARGE CAPITALIZATION GROWTH PORTFOLIO (5/98)* Unit Value at beginning of period....... $ 1.237 $ 1.234 $ 1.000 $ 1.000 $ -- $ -- Unit Value at end of period............. 1.599 1.592 1.237 1.234 -- -- Number of units outstanding at end of period (thousands).................... 25,852 3,416 12,224 1,022 -- -- PERIOD FROM JUNE 2, 1994 YEAR ENDED YEAR ENDED (EFFECTIVE DATE) TO DECEMBER 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994 STANDARD ENHANCED STANDARD ENHANCED STANDARD ENHANCED - ----------------------------------------- --------------------------------------------------------------- INVESCO STRATEGIC INCOME PORTFOLIO (FORMERLY G.T. GLOBAL STRATEGIC PORTFOLIO) (6/94)* Unit Value at beginning of period....... $ 1.121 $ 1.116 $ 0.945 0.944 $ 1.000 $1.000 Unit Value at end of period............. 1.316 1.306 1.121 1.116 0.945 0.944 Number of units outstanding at end of period (thousands).................... 11,505 2,795 6,840 2,180 2,400 1,063 MFS TOTAL RETURN PORTFOLIO (6/94)* Unit Value at beginning of period....... $ 1.216 $ 1.211 $ 0.979 $ 0.977 $ 1.000 $1.000 Unit Value at end of period............. 1.376 1.366 1.216 1.211 0.979 0.977 Number of units outstanding at end of period (thousands).................... 68,236 14,690 41,813 9,473 9,099 3,479 PUTNAM DIVERSIFIED INCOME PORTFOLIO (6/94)* Unit Value at beginning of period....... $ 1.170 $ 1.165 $ 1.009 $ 1.007 $ 1.000 $1.000 Unit Value at end of period............. 1.252 1.243 1.170 1.165 1.009 1.007 Number of units outstanding at end of period (thousands).................... 43,898 11,789 26,078 8,650 5,803 3,683 SMITH BARNEY HIGH INCOME PORTFOLIO (6/94)* Unit Value at beginning of period....... $ 1.162 $ 1.157 $ 0.988 $ 0.986 $ 1.000 $1.000 Unit Value at end of period............. 1.300 1.291 1.162 1.157 0.988 0.986 Number of units outstanding at end of period (thousands).................... 33,737 6,932 20,136 3,772 3,105 1,162 SMITH BARNEY INTERNATIONAL EQUITY PORTFOLIO (6/94)* Unit Value at beginning of period....... $ 1.050 $ 1.046 $ 0.955 $ 0.954 $ 1.000 $1.000 Unit Value at end of period............. 1.222 1.213 1.050 1.046 0.955 0.954 Number of units outstanding at end of period (thousands).................... 77,554 16,662 47,317 12,187 14,141 5,898 SMITH BARNEY LARGE CAPITALIZATION GROWTH PORTFOLIO (5/98)* Unit Value at beginning of period....... $ -- $ -- $ -- $ -- $ -- $ -- Unit Value at end of period............. -- -- -- -- -- -- Number of units outstanding at end of period (thousands).................... -- -- -- -- -- --
A-3 38 APPENDIX A - -------------------------------------------------------------------------------- CONDENSED FINANCIAL INFORMATION THE TRAVELERS FUND BD FOR VARIABLE ANNUITIES ACCUMULATION UNIT VALUES (CONTINUED)
YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997 STANDARD ENHANCED STANDARD ENHANCED STANDARD ENHANCED - ---------------------------------------------------------------------------------------------------------------- SMITH BARNEY LARGE CAP VALUE PORTFOLIO(6/94)* Unit Value at beginning of period....... $ 2.076 $ 2.050 $ 1.913 $ 1.894 $ 1.528 $ 1.517 Unit Value at end of period............. 2.053 2.022 2.076 2.050 1.913 1.894 Number of units outstanding at end of period (thousands).................... 67,688 13,629 71,417 14,891 71,149 15,383 SMITH BARNEY MONEY MARKET PORTFOLIO (6/94)* Unit Value at beginning of period....... $ 1.184 1.169 $ 1.140 $ 1.129 $ 1.098 $ 1.090 Unit Value at end of period............. 1.226 1.207 1.184 1.169 1.140 1.129 Number of units outstanding at end of period (thousands).................... 45,053 6,609 47,121 8,254 38,097 8,610 SMITH BARNEY PACIFIC BASIN PORTFOLIO (6/94)* Unit Value at beginning of period....... $ 0.742 $ 0.733 $ 0.700 $ 0.693 $ 0.983 $ 0.977 Unit Value at end of period............. 1.435 1.413 0.742 0.733 0.700 0.693 Number of units outstanding at end of period (thousands).................... 8,994 2,507 8,930 2,803 10,584 3,223 TRAVELERS MANAGED INCOME PORTFOLIO (6/94)* Unit Value at beginning of period....... $ 1.309 $ 1.293 $ 1.261 $ 1.248 $ 1.163 $ 1.154 Unit Value at end of period............. 1.306 1.286 1.309 1.293 1.261 1.248 Number of units outstanding at end of period (thousands).................... 17,251 4,234 20,492 3,895 17,887 3,091 VAN KAMPEN ENTERPRISE PORTFOLIO (6/94)* Unit Value at beginning of period....... $ 2.601 $ 2.568 $ 2.103 $ 2.083 $ 1.655 $ 1.643 Unit Value at end of period............. 3.238 3.188 2.601 2.568 2.103 2.083 Number of units outstanding at end of period (thousands).................... 50,446 11,752 55,903 12,561 55,871 13,032 THE TRAVELERS SERIES TRUST: CONVERTIBLE BOND PORTFOLIO (5/98)* Unit Value at beginning of period....... $ 1.001 $ 0.999 $ 1.000 $ 1.000 $ -- $ -- Unit Value at end of period............. 1.175 1.169 1.001 0.999 -- -- Number of units outstanding at end of period (thousands).................... 627 181 249 24 -- -- PERIOD FROM JUNE 2, 1994 YEAR ENDED YEAR ENDED (EFFECTIVE DATE) TO DECEMBER 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994 STANDARD ENHANCED STANDARD ENHANCED STANDARD ENHANCED - ----------------------------------------- --------------------------------------------------------------- SMITH BARNEY LARGE CAP VALUE PORTFOLIO(6/94)* Unit Value at beginning of period....... $ 1.291 $ 1.285 $ 0.981 $ 0.980 $ 1.000 $1.000 Unit Value at end of period............. 1.528 1.517 1.291 1.285 0.981 0.980 Number of units outstanding at end of period (thousands).................... 57,479 12,170 31,343 7,140 6,654 3,015 SMITH BARNEY MONEY MARKET PORTFOLIO (6/94)* Unit Value at beginning of period....... $ 1.058 $ 1.054 $ 1.016 $ 1.014 $ 1.000 $1.000 Unit Value at end of period............. 1.098 1.090 1.058 1.054 1.016 1.014 Number of units outstanding at end of period (thousands).................... 49,672 10,176 36,637 9,063 7,171 3,748 SMITH BARNEY PACIFIC BASIN PORTFOLIO (6/94)* Unit Value at beginning of period....... $ 0.910 $ 0.906 $ 0.899 $ 0.898 $ 1.000 $1.000 Unit Value at end of period............. 0.983 0.977 0.910 0.906 0.899 0.898 Number of units outstanding at end of period (thousands).................... 10,513 3,487 6,024 2,351 1,657 878 TRAVELERS MANAGED INCOME PORTFOLIO (6/94)* Unit Value at beginning of period....... $ 1.142 $ 1.137 $ 0.997 $ 0.995 $ 1.000 $1.000 Unit Value at end of period............. 1.163 1.154 1.142 1.137 0.997 0.995 Number of units outstanding at end of period (thousands).................... 15,376 2,502 11,294 1,783 2,849 980 VAN KAMPEN ENTERPRISE PORTFOLIO (6/94)* Unit Value at beginning of period....... $ 1.362 $ 1.356 $ 1.039 $ 1.037 $ 1.000 $1.000 Unit Value at end of period............. 1.655 1.643 1.362 1.356 1,039 1,037 Number of units outstanding at end of period (thousands).................... 45,338 10,652 26,473 6,569 2,941 1,618 THE TRAVELERS SERIES TRUST: CONVERTIBLE BOND PORTFOLIO (5/98)* Unit Value at beginning of period....... $ -- $ -- $ -- $ -- $ -- $ -- Unit Value at end of period............. -- -- -- -- -- -- Number of units outstanding at end of period (thousands).................... -- -- -- -- -- --
A-4 39 APPENDIX A - -------------------------------------------------------------------------------- CONDENSED FINANCIAL INFORMATION THE TRAVELERS FUND BD FOR VARIABLE ANNUITIES ACCUMULATION UNIT VALUES (CONTINUED)
YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997 STANDARD ENHANCED STANDARD ENHANCED STANDARD ENHANCED - ---------------------------------------------------------------------------------------------------------------- DISCIPLINED MID CAP STOCK PORTFOLIO (5/98)* Unit Value at beginning of period....... $ 1.064 $ 1.063 $ 1.000 $ 1.000 $ -- $ -- Unit Value at end of period............. 1.194 1.188 1.064 1.063 -- -- Number of units outstanding at end of period (thousands).................... 1,843 330 398 54 -- -- DISCIPLINED SMALL CAP STOCK PORTFOLIO (5/98)* Unit Value at beginning of period....... $ 0.896 $ 0.894 $ 1.000 $ 1.000 $ -- $ -- Unit Value at end of period............. 1.066 1.061 0.896 0.894 -- -- Number of units outstanding at end of period (thousands).................... 810 68 299 4 -- -- MFS EMERGING GROWTH PORTFOLIO (11/96)* Unit Value at beginning of period....... $ 1.599 $ 1.589 $ 1.204 $ 1.200 $ 1.005 $ 1.005 Unit Value at end of period............. 2.793 2.769 1.599 1,589 1.204 1.200 Number of units outstanding at end of period (thousands).................... 28,193 6,685 25,200 6,079 19,166 4,600 MFS RESEARCH PORTFOLIO (5/98)* Unit Value at beginning of period....... $ 1.037 $ 1.035 $ 1.000 $ 1.000 $ -- $ -- Unit Value at end of period............. 1.267 1.261 1.037 1.035 -- -- Number of units outstanding at end of period (thousands).................... 3,898 1,160 1,354 1,039 -- -- STRATEGIC STOCK PORTFOLIO (5/98)* Unit Value at beginning of period....... $ 0.936 $ 0.934 $ 1.000 $ 1.000 $ -- $ -- Unit Value at end of period............. 0.971 0.966 0.936 0.934 -- -- Number of units outstanding at end of period (thousands).................... 751 180 540 121 -- -- PERIOD FROM JUNE 2, 1994 YEAR ENDED YEAR ENDED (EFFECTIVE DATE) TO DECEMBER 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994 STANDARD ENHANCED STANDARD ENHANCED STANDARD ENHANCED - ----------------------------------------- --------------------------------------------------------------- DISCIPLINED MID CAP STOCK PORTFOLIO (5/98)* Unit Value at beginning of period....... $ -- $ -- $ -- $ -- $ -- $ -- Unit Value at end of period............. -- -- -- -- -- -- Number of units outstanding at end of period (thousands).................... -- -- -- -- -- -- DISCIPLINED SMALL CAP STOCK PORTFOLIO (5/98)* Unit Value at beginning of period....... $ -- $ -- $ -- $ -- $ -- $ -- Unit Value at end of period............. -- -- -- -- -- -- Number of units outstanding at end of period (thousands).................... -- -- -- -- -- -- MFS EMERGING GROWTH PORTFOLIO (11/96)* Unit Value at beginning of period....... $ 1.000 $ 1.000 $ -- $ -- $ -- $ -- Unit Value at end of period............. 1.500 1.005 -- -- -- -- Number of units outstanding at end of period (thousands).................... 4,790 780 -- -- -- -- MFS RESEARCH PORTFOLIO (5/98)* Unit Value at beginning of period....... $ -- $ -- $ -- $ -- $ -- $ -- Unit Value at end of period............. -- -- -- -- -- -- Number of units outstanding at end of period (thousands).................... -- -- -- -- -- -- STRATEGIC STOCK PORTFOLIO (5/98)* Unit Value at beginning of period....... $ -- $ -- $ -- $ -- $ -- $ -- Unit Value at end of period............. -- -- -- -- -- -- Number of units outstanding at end of period (thousands).................... -- -- -- -- -- --
* 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 in most states. The financial statements of Fund BD and the financial statements of The Travelers Insurance Company are contained in the SAI. Funding options not listed above were not yet available through the Separate Account as of December 31, 1999. "Number of Units outstanding at end of period" may include units for contract owners in the payout phase. A-5 40 APPENDIX B - -------------------------------------------------------------------------------- CONDENSED FINANCIAL INFORMATION THE TRAVELERS FUND BD II FOR VARIABLE ANNUITIES ACCUMULATION UNIT VALUES
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996 STANDARD ENHANCED STANDARD ENHANCED STANDARD ENHANCED STANDARD ENHANCED - ----------------------------------------------------------------------------------------------------------------------------------- DREYFUS VARIABLE INVESTMENT FUND SMALL CAP PORTFOLIO (5/98) Unit Value at beginning of period.......................... $ 0.852 $ 0.851 $ 1.000 $ 1.000 -- -- -- -- Unit Value at end of period....... 1.038 1.033 0.852 0.851 -- -- -- -- Number of units outstanding at end of period (thousands)........... 4,918 450 1,713 252 -- -- -- -- GREENWICH STREET SERIES FUND: TOTAL RETURN PORTFOLIO (11/95)* Unit Value at beginning of period.......................... $ 1.857 $ 1.836 $ 1.790 $ 1.775 $ 1.550 $ 1.541 $ 1.251 $ 1.247 Unit Value at end of period....... 2.240 2.208 1.857 1.836 1.790 1.775 1.550 1.541 Number of units outstanding at end of period (thousands)........... 42,818 8,588 42,830 9,425 33,686 5,975 14,921 2,044 EQUITY INDEX PORTFOLIO-CLASS II (5/99) Unit Value at beginning of period.......................... $ 1.000 $ 1.000 $ -- $ -- $ -- $ -- $ -- $ -- Unit Value at end of period....... 1.088 1.086 -- -- -- -- -- -- Number of units outstanding at end of period (thousands)........... 4,475 157 -- -- -- -- -- -- SALOMON BROTHERS VARIABLE SERIES FUNDS, INC. INVESTORS FUND (5/98)* Unit Value at beginning of period.......................... $ 1.014 $ 1.012 $ 1.000 $ 1.000 -- -- -- -- Unit Value at end of period....... 1.119 1.114 1.014 1.012 -- -- -- -- Number of units outstanding at end of period (thousands)........... 2,903 529 1,024 199 -- -- -- -- TOTAL RETURN FUND (5/98)* Unit Value at beginning of period.......................... $ 0.997 $ 0.996 $ 1.000 $ 1.000 -- -- -- -- Unit Value at end of period....... 0.994 0.989 0.997 0.996 -- -- -- -- Number of units outstanding at end of period (thousands)........... 1,620 208 761 128 -- -- -- -- SMITH BARNEY CONCERT ALLOCATION SERIES INC.: SELECT HIGH GROWTH PORTFOLIO** (3/97)* Unit Value at beginning of period.......................... $ 1.242 $ 1.236 $ 1.090 $ 1.087 $ 1.000 $ 1.000 $ -- $ -- Unit Value at end of period....... 1.558 1.546 1.242 1.236 1.090 1.087 -- -- Number of units outstanding at end of period (thousands)........... 2,931 447 3,435 622 2,657 391 -- -- SELECT GROWTH PORTFOLIO (3/97)* Unit Value at beginning of period.......................... $ 1.238 $ 1.232 $ 1.099 $ 1.097 $ 1.000 $ 1.000 $ -- $ -- Unit Value at end of period....... 1.421 1.410 1.238 1.232 1.099 1.097 -- -- Number of units outstanding at end of period (thousands)........... 5,037 2,157 5,356 2,329 3,396 1,191 -- -- SELECT BALANCED PORTFOLIO (3/97)* Unit Value at beginning of period.......................... $ 1.183 $ 1.177 $ 1.093 $ 1.091 $ 1.000 $ 1.000 $ -- $ -- Unit Value at end of period....... 1.258 1.248 1.183 1.177 1.093 1.091 -- -- Number of units outstanding at end of period (thousands)........... 8,078 2,375 7,216 2,594 4,148 1,789 -- -- PERIOD FROM 11/8/95 (EFFECTIVE DATE) TO DECEMBER 31, 1995 STANDARD ENHANCED - ----------------------------------- ------------------- DREYFUS VARIABLE INVESTMENT FUND SMALL CAP PORTFOLIO (5/98) Unit Value at beginning of period.......................... -- -- Unit Value at end of period....... -- -- Number of units outstanding at end of period (thousands)........... -- -- GREENWICH STREET SERIES FUND: TOTAL RETURN PORTFOLIO (11/95)* Unit Value at beginning of period.......................... $ 1.010 $ 1.010 Unit Value at end of period....... 1.251 1.247 Number of units outstanding at end of period (thousands)........... 651 149 EQUITY INDEX PORTFOLIO-CLASS II (5/99) Unit Value at beginning of period.......................... $ -- $ -- Unit Value at end of period....... -- -- Number of units outstanding at end of period (thousands)........... -- -- SALOMON BROTHERS VARIABLE SERIES FUNDS, INC. INVESTORS FUND (5/98)* Unit Value at beginning of period.......................... -- -- Unit Value at end of period....... -- -- Number of units outstanding at end of period (thousands)........... -- -- TOTAL RETURN FUND (5/98)* Unit Value at beginning of period.......................... -- -- Unit Value at end of period....... -- -- Number of units outstanding at end of period (thousands)........... -- -- SMITH BARNEY CONCERT ALLOCATION SERIES INC.: SELECT HIGH GROWTH PORTFOLIO** (3/97)* Unit Value at beginning of period.......................... $ -- $ -- Unit Value at end of period....... -- -- Number of units outstanding at end of period (thousands)........... -- -- SELECT GROWTH PORTFOLIO (3/97)* Unit Value at beginning of period.......................... $ -- $ -- Unit Value at end of period....... -- -- Number of units outstanding at end of period (thousands)........... -- -- SELECT BALANCED PORTFOLIO (3/97)* Unit Value at beginning of period.......................... $ -- $ -- Unit Value at end of period....... -- -- Number of units outstanding at end of period (thousands)........... -- --
B-1 41 APPENDIX B - -------------------------------------------------------------------------------- CONDENSED FINANCIAL INFORMATION THE TRAVELERS FUND BD II FOR VARIABLE ANNUITIES ACCUMULATION UNIT VALUES (CONTINUED)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996 STANDARD ENHANCED STANDARD ENHANCED STANDARD ENHANCED STANDARD ENHANCED - ----------------------------------------------------------------------------------------------------------------------------------- SELECT CONSERVATIVE PORTFOLIO** (3/97)* Unit Value at beginning of period.......................... $ 1.162 $ 1.156 $ 1.108 $ 1.105 $ 1.000 $ 1.000 $ -- $ -- Unit Value at end of period....... 1.196 1.187 1.162 1.156 1.108 1.105 -- -- Number of units outstanding at end of period (thousands)........... 1,316 427 1,424 305 863 105 -- -- SELECT INCOME PORTFOLIO** (3/97)* Unit Value at beginning of period.......................... $ 1.154 $ 1.148 $ 1.106 $ 1.104 $ 1.000 $ 1.000 $ -- $ -- Unit Value at end of period....... 1.148 1.139 1.154 1.148 1.106 1.104 -- -- Number of units outstanding at end of period (thousands)........... 791 30 1,102 76 364 25 -- -- TRAVELERS SERIES FUND INC. AIM CAPITAL APPRECIATION PORTFOLIO (11/95)* Unit Value at beginning of period.......................... $ 1.397 $ 1.385 $ 1.206 $ 1.198 $ 1.088 $ 1.084 $ 0.958 $ 0.957 Unit Value at end of period....... 1.974 1.951 1.397 1.385 1.206 1.198 1.088 1.084 Number of units outstanding at end of period (thousands)........... 59,795 10,758 59,824 11,522 48,942 8,845 29,460 4,246 ALLIANCE GROWTH PORTFOLIO (11/95)* Unit Value at beginning of period.......................... $ 2.903 $ 2.867 $ 2.276 $ 2.254 $ 1.785 $ 1.772 $ 1.396 $ 1.390 Unit Value at end of period....... 3.795 3.737 2.903 2.867 2.276 2.254 1.785 1.772 Number of units outstanding at end of period (thousands)........... 76,734 13,423 67,640 13,083 47,935 8,482 24,031 3,613 INVESCO STRATEGIC INCOME PORTFOLIO (FORMERLY G.T. GLOBAL STRATEGIC INCOME) (11/95)* Unit Value at beginning of period.......................... $ 1.359 $ 1.342 $ 1.397 $ 1.383 $ 1.316 $ 1.306 $ 1.121 $ 1.116 Unit Value at end of period....... 1.319 1.299 1.359 1.342 1.397 1.383 1.316 1.306 Number of units outstanding at end of period (thousands)........... 5,149 850 5,481 973 5,016 954 1,833 463 MFS TOTAL RETURN PORTFOLIO (11/95)* Unit Value at beginning of period.......................... $ 1.819 $ 1.796 $ 1.648 $ 1.632 $ 1.376 $ 1.366 $ 1.216 $ 1.211 Unit Value at end of period....... 1.845 1.817 1.819 1.796 1.648 1.632 1.376 1.366 Number of units outstanding at end of period (thousands)........... 64,327 11,574 58,653 11,646 34,928 6,139 16,651 1,810 PUTNAM DIVERSIFIED INCOME PORTFOLIO (11/95)* Unit Value at beginning of period.......................... $ 1.326 $ 1.309 $ 1.332 $ 1.319 $ 1.252 $ 1.243 $ 1.170 $ 1.165 Unit Value at end of period....... 1.325 1.304 1.326 1.309 1.332 1.319 1.252 1.243 Number of units outstanding at end of period (thousands)........... 31,303 7,149 29,566 7,312 19,504 3,953 10,424 1,461 SMITH BARNEY HIGH INCOME PORTFOLIO (11/95)* Unit Value at beginning of period.......................... $ 1.452 $ 1.434 $ 1.463 $ 1.448 $ 1.300 $ 1.291 $ 1.162 $ 1.157 Unit Value at end of period....... 1.472 1.450 1.452 1.434 1.463 1.448 1.300 1.291 Number of units outstanding at end of period (thousands)........... 30,633 4,266 31,054 4,740 21,213 2,640 7,719 970 SMITH BARNEY INTERNATIONAL EQUITY PORTFOLIO (11/95)* Unit Value at beginning of period.......................... $ 1.305 $ 1.289 $ 1.240 $ 1.228 $ 1.222 $ 1.213 $ 1.050 $ 1.046 Unit Value at end of period....... 2.164 2.131 1.305 1.289 1.240 1.228 1.222 1.213 Number of units outstanding at end of period (thousands)........... 40,313 5,907 38,529 6,199 31,311 4,872 16,855 2,010 PERIOD FROM 11/8/95 (EFFECTIVE DATE) TO DECEMBER 31, 1995 STANDARD ENHANCED - ----------------------------------- ------------------- SELECT CONSERVATIVE PORTFOLIO** (3/97)* Unit Value at beginning of period.......................... $ -- $ -- Unit Value at end of period....... -- -- Number of units outstanding at end of period (thousands)........... -- -- SELECT INCOME PORTFOLIO** (3/97)* Unit Value at beginning of period.......................... $ -- $ -- Unit Value at end of period....... -- -- Number of units outstanding at end of period (thousands)........... -- -- TRAVELERS SERIES FUND INC. AIM CAPITAL APPRECIATION PORTFOLIO (11/95)* Unit Value at beginning of period.......................... $ 1.000 $ 1.000 Unit Value at end of period....... 0.958 0.957 Number of units outstanding at end of period (thousands)........... 2,537 908 ALLIANCE GROWTH PORTFOLIO (11/95)* Unit Value at beginning of period.......................... $ 1.047 $ 1.046 Unit Value at end of period....... 1.396 1.390 Number of units outstanding at end of period (thousands)........... 1,574 453 INVESCO STRATEGIC INCOME PORTFOLIO (FORMERLY G.T. GLOBAL STRATEGIC INCOME) (11/95)* Unit Value at beginning of period.......................... $ 0.945 $ 0.944 Unit Value at end of period....... 1.121 1.116 Number of units outstanding at end of period (thousands)........... 33 80 MFS TOTAL RETURN PORTFOLIO (11/95)* Unit Value at beginning of period.......................... $ 0.979 $ 0.977 Unit Value at end of period....... 1.216 1.211 Number of units outstanding at end of period (thousands)........... 913 102 PUTNAM DIVERSIFIED INCOME PORTFOLIO (11/95)* Unit Value at beginning of period.......................... $ 1.009 $ 1.007 Unit Value at end of period....... 1.170 1.165 Number of units outstanding at end of period (thousands)........... 824 126 SMITH BARNEY HIGH INCOME PORTFOLIO (11/95)* Unit Value at beginning of period.......................... $ 0.988 $ 0.986 Unit Value at end of period....... 1.162 1.157 Number of units outstanding at end of period (thousands)........... 243 332 SMITH BARNEY INTERNATIONAL EQUITY PORTFOLIO (11/95)* Unit Value at beginning of period.......................... $ 0.955 $ 0.954 Unit Value at end of period....... 1.050 1.046 Number of units outstanding at end of period (thousands)........... 556 201
B-2 42 APPENDIX B - -------------------------------------------------------------------------------- CONDENSED FINANCIAL INFORMATION THE TRAVELERS FUND BD II FOR VARIABLE ANNUITIES ACCUMULATION UNIT VALUES (CONTINUED)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996 STANDARD ENHANCED STANDARD ENHANCED STANDARD ENHANCED STANDARD ENHANCED - ----------------------------------------------------------------------------------------------------------------------------------- SMITH BARNEY LARGE CAPITALIZATION GROWTH (5/98)* Unit Value at beginning of period.......................... $ 1.237 $ 1.234 $ 1.000 $ 1.000 $ -- $ -- $ -- $ -- Unit Value at end of period....... 1.599 1.592 1.237 1.234 -- -- -- -- Number of units outstanding at end of period (thousands)........... 46,288 3,491 12,176 1,447 -- -- -- -- SMITH BARNEY LARGE CAP VALUE PORTFOLIO(11/95)* (formerly Smith Barney Income and Growth Portfolio) Unit Value at beginning of period.......................... $ 2.076 $ 2.050 $ 1.913 $ 1.894 $ 1.528 $ 1.517 $ 1.291 $ 1.285 Unit Value at end of period....... 2.053 2.022 2.076 2.050 1.913 1.894 1.528 1.517 Number of units outstanding at end of period (thousands)........... 45,773 8,114 40,967 8,249 27,117 4,645 11,906 1,606 SMITH BARNEY MONEY MARKET PORTFOLIO (11/95)* Unit Value at beginning of period.......................... $ 1.184 $ 1.169 $ 1.140 $ 1.129 $ 1.098 $ 1.090 $ 1.058 $ 1.054 Unit Value at end of period....... 1.226 1.207 1.184 1.169 1.140 1.129 1.098 1.090 Number of units outstanding at end of period (thousands)........... 48,631 5,841 41,370 6,024 25,661 2,417 22,962 2,362 SMITH BARNEY PACIFIC BASIN PORTFOLIO (11/95)* Unit Value at beginning of period.......................... $ 0.742 $ 0.733 $ 0.700 $ 0.693 $ 0.983 $ 0.977 $ 0.910 $ 0.906 Unit Value at end of period....... 1.435 1.413 0.742 0.733 0.700 0.693 0.983 0.977 Number of units outstanding at end of period (thousands)........... 9,217 967 5,083 1,023 5,124 862 2,755 467 TRAVELERS MANAGED INCOME PORTFOLIO (11/95)* Unit Value at beginning of period.......................... $ 1.309 $ 1.293 $ 1.261 $ 1.248 $ 1.163 $ 1.154 $ 1.142 $ 1.137 Unit Value at end of period....... 1.306 1.286 1.309 1.293 1.261 1.248 1.163 1.154 Number of units outstanding at end of period (thousands)........... 20,425 2,551 11,544 2,823 4,489 1,001 2,636 266 VAN KAMPEN ENTERPRISE PORTFOLIO (11/95)* Unit Value at beginning of period.......................... $ 2.601 $ 2.568 $ 2.103 $ 2.083 $ 1.655 $ 1.643 $ 1.362 $ 1.356 Unit Value at end of period....... 3.238 3.188 2.601 2.568 2.103 2.083 1.655 1.643 Number of units outstanding at end of period (thousands)........... 39,297 6,615 35,644 6,741 24,635 4,385 11,360 1,644 TRAVELERS SERIES TRUST: CONVERTIBLE BOND PORTFOLIO (5/98)* Unit Value at beginning of period.......................... $ 1.001 $ 0.999 $ 1.000 $ 1.000 $ -- $ -- $ -- $ -- Unit Value at end of period....... 1.175 1.169 1.001 0.999 -- -- -- -- Number of units outstanding at end of period (thousands)........... 1,597 429 418 22 -- -- -- -- DISCIPLINED MID CAP STOCK PORTFOLIO (5/98)* Unit Value at beginning of period.......................... $ 1.064 $ 1.063 $ 1.000 $ 1.000 $ -- $ -- $ -- $ -- Unit Value at end of period....... 1.194 1.188 1.064 1.063 -- -- -- -- Number of units outstanding at end of period (thousands)........... 3,984 256 550 28 -- -- -- -- DISCIPLINED SMALL CAP STOCK PORTFOLIO (5/98)* Unit Value at beginning of period.......................... $ 0.896 $ 0.894 $ 1.000 $ 1.000 $ -- $ -- $ -- $ -- Unit Value at end of period....... 1.066 1.061 0.896 0.894 -- -- -- -- Number of units outstanding at end of period (thousands)........... 1,074 87 365 17 -- -- -- -- PERIOD FROM 11/8/95 (EFFECTIVE DATE) TO DECEMBER 31, 1995 STANDARD ENHANCED - ----------------------------------- ------------------- SMITH BARNEY LARGE CAPITALIZATION GROWTH (5/98)* Unit Value at beginning of period.......................... $ -- $ -- Unit Value at end of period....... -- -- Number of units outstanding at end of period (thousands)........... -- -- SMITH BARNEY LARGE CAP VALUE PORTFOLIO(11/95)* (formerly Smith Barney Income and Growth Portfolio) Unit Value at beginning of period.......................... $ 0.981 $ 0.980 Unit Value at end of period....... 1.291 1.285 Number of units outstanding at end of period (thousands)........... 596 146 SMITH BARNEY MONEY MARKET PORTFOLIO (11/95)* Unit Value at beginning of period.......................... $ 1.016 $ 1.014 Unit Value at end of period....... 1.058 1.054 Number of units outstanding at end of period (thousands)........... 2,374 820 SMITH BARNEY PACIFIC BASIN PORTFOLIO (11/95)* Unit Value at beginning of period.......................... $ 0.899 $ 0.898 Unit Value at end of period....... 0.910 0.906 Number of units outstanding at end of period (thousands)........... 37 20 TRAVELERS MANAGED INCOME PORTFOLIO (11/95)* Unit Value at beginning of period.......................... $ 0.997 $ 0.995 Unit Value at end of period....... 1.142 1.137 Number of units outstanding at end of period (thousands)........... 226 90 VAN KAMPEN ENTERPRISE PORTFOLIO (11/95)* Unit Value at beginning of period.......................... $ 1.039 $ 1.037 Unit Value at end of period....... 1.362 1.356 Number of units outstanding at end of period (thousands)........... 765 329 TRAVELERS SERIES TRUST: CONVERTIBLE BOND PORTFOLIO (5/98)* Unit Value at beginning of period.......................... $ -- $ -- Unit Value at end of period....... -- -- Number of units outstanding at end of period (thousands)........... -- -- DISCIPLINED MID CAP STOCK PORTFOLIO (5/98)* Unit Value at beginning of period.......................... $ -- $ -- Unit Value at end of period....... -- -- Number of units outstanding at end of period (thousands)........... -- -- DISCIPLINED SMALL CAP STOCK PORTFOLIO (5/98)* Unit Value at beginning of period.......................... $ -- $ -- Unit Value at end of period....... -- -- Number of units outstanding at end of period (thousands)........... -- --
B-3 43 APPENDIX B - -------------------------------------------------------------------------------- CONDENSED FINANCIAL INFORMATION THE TRAVELERS FUND BD II FOR VARIABLE ANNUITIES ACCUMULATION UNIT VALUES (CONTINUED)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996 STANDARD ENHANCED STANDARD ENHANCED STANDARD ENHANCED STANDARD ENHANCED - ----------------------------------------------------------------------------------------------------------------------------------- MFS EMERGING GROWTH PORTFOLIO (11/96)* Unit Value at beginning of period.......................... $ 1.599 $ 1.589 $ 1.204 $ 1.200 $ 1.005 $ 1.005 $ 1.000 $ 1.000 Unit Value at end of period....... 2.793 2.769 1.599 1.589 1.204 1.200 1.005 1.005 Number of units outstanding at end of period (thousands)........... 38,199 7,825 29,937 7,522 17,295 4,256 2,506 466 MFS RESEARCH PORTFOLIO (5/98)* Unit Value at beginning of period.......................... $ 1.037 $ 1.035 $ 1.000 $ 1.000 $ -- $ -- $ -- $ -- Unit Value at end of period....... 1.267 1.261 1.037 1.035 -- -- -- -- Number of units outstanding at end of period (thousands)........... 7,721 1,495 3,295 1,243 -- -- -- -- STRATEGIC STOCK PORTFOLIO (5/98)* Unit Value at beginning of period.......................... $ 0.936 $ 0.934 $ 1.000 $ 1.000 $ -- $ -- $ -- $ -- Unit Value at end of period....... 0.971 0.966 0.936 0.934 -- -- -- -- Number of units outstanding at end of period (thousands)........... 3,336 80 3,336 44 -- -- -- -- PERIOD FROM 11/8/95 (EFFECTIVE DATE) TO DECEMBER 31, 1995 STANDARD ENHANCED - ----------------------------------- ------------------- MFS EMERGING GROWTH PORTFOLIO (11/96)* Unit Value at beginning of period.......................... $ -- $ -- Unit Value at end of period....... -- -- Number of units outstanding at end of period (thousands)........... -- -- MFS RESEARCH PORTFOLIO (5/98)* Unit Value at beginning of period.......................... $ -- $ -- Unit Value at end of period....... -- -- Number of units outstanding at end of period (thousands)........... -- -- STRATEGIC STOCK PORTFOLIO (5/98)* Unit Value at beginning of period.......................... $ -- $ -- Unit Value at end of period....... -- -- Number of units outstanding at end of period (thousands)........... -- --
* 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 in most states. The financial statements of Fund BD II and the financial statements of The Travelers Life and Annuity Company are contained in the SAI. Funding options not listed above were not yet available through the Separate Account as of December 31, 1999. "Number of Units outstanding at end of period" may include units for contract owners in the payout phase. B-4 44 APPENDIX C - -------------------------------------------------------------------------------- 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 the separate accounts 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 the Separate Account or any of the funding options does not affect the Fixed Account portion of the contract owner's contract value, or the dollar amount of fixed annuity payments made under any payout option. We guarantee that, at any time, the Fixed Account contract value will not be less than the amount of the purchase payments allocated to the Fixed Account, plus interest credited as described below, less any applicable premium taxes or prior surrenders. 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 we prospectively declare 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 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 under 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 six 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. C-1 45 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 Insurance Company or 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 Principal Underwriting Agreement Valuation of Assets Performance Information Mixed and Shared Funding Federal Tax Considerations Independent Accountants Financial Statements - -------------------------------------------------------------------------------- Copies of the Statement of Additional Information dated May 1, 2000 are available without charge. To request a copy, please clip this coupon on the dotted line above, enter your name and address in the spaces provided below, and mail to: The Travelers Life and Annuity Company, Annuity Investor Services, One Tower Square, Hartford, Connecticut 06183. The Travelers Insurance Company Statement of Additional Information is printed on Form L-12253 and The Travelers Life and Annuity Statement of Additional Information is printed on Form L-12540. Name: ___________________________________ Address: ___________________________________ ___________________________________ D-1 46 THIS PAGE INTENTIONALLY LEFT BLANK. 47 L-12253-N May 1, 2000 48 PART B Information Required in a Statement of Additional Information 49 VINTAGE STATEMENT OF ADDITIONAL INFORMATION dated May 1, 2000 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, 2000. 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 or by accessing the Securities and Exchange Commission's website at http://www.sec.gov.
TABLE OF CONTENTS THE INSURANCE COMPANY ..................................................... 2 PRINCIPAL UNDERWRITER ..................................................... 2 DISTRIBUTION AND PRINCIPAL UNDERWRITING AGREEMENT ......................... 3 VALUATION OF ASSETS ....................................................... 3 PERFORMANCE INFORMATION ................................................... 4 MIXED AND SHARED FUNDING .................................................. 8 FEDERAL TAX CONSIDERATIONS ................................................ 8 INDEPENDENT ACCOUNTANTS ................................................... 11 FINANCIAL STATEMENTS ...................................................... F-1
50 THE INSURANCE COMPANY The Travelers Life and Annuity Company (the "Company") is a stock insurance company chartered in 1973 in Connecticut and continuously engaged in the insurance business since that time. The Company is licensed to conduct a life insurance business in all states, (except New Hampshire and New York) and the District of Columbia and Puerto Rico. The Company's Home Office is located at One Tower Square Hartford, Connecticut 06183 and its telephone number is (860) 277-0111. The Company is a wholly owned subsidiary of The Travelers Insurance Company, an indirect, wholly owned subsidiary of Citigroup Inc. ("Citigroup"), a diversified holding company whose businesses provide a broad range of financial services to consumer and corporate customers around the world. Citigroup's activities are conducted through the Global Consumer, Global Corporate and Investment Bank, Global Investment Management and Private Banking, and Investment Activities segments. 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 (the "Comissioner"). 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 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 CFBDS, Inc. serves as principal underwriter for Fund BD II and the Contracts. The offering is continuous. CFBDS's principal executive offices are located at 21 Milk Street, Boston, Massachusetts. CFBDS is not affiliated with the Company or Fund BD II. However, it is currently anticipated that Travelers Distribution LLC, an affiliated broker dealer, may become the principal underwriter for the Contracts during the year 2000. 2 51 DISTRIBUTION AND PRINCIPAL UNDERWRITING AGREEMENT Under the terms of the Distribution and Principal Underwriting Agreement among Fund BD II, CFBDS and the Company, CFBDS acts as agent for the distribution of the Contracts and as principal underwriter for the Contracts. The Company reimburses CFBDS for certain sales and overhead expenses connected with sales functions. VALUATION OF ASSETS FUNDING OPTIONS: The value of the assets of each Funding Option is determined at 4:00 p.m. eastern time on each business day, unless we need to close earlier due to an emergency. A business day is any day the New York Stock Exchange is open. 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. 3 52 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. 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.) 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, 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 a 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 is converted to a percentage of assets based on the actual fee collected, divided by the average net assets for 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 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 Fund BD II, the nonstandardized average annual total return quotations will reflect the investment 4 53 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 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, 1999 are set forth in the following table. 5 54 TRAVELERS VINTAGE STANDARDIZED PERFORMANCE UPDATE AS OF 12/31/99
Standard Death Benefit Option Enhanced Death Benefit Option+ ------------------------------------------------ ---------------------------------- Inception 1 Year 5 Years Inception 1 Year 5 Years Inception Date # - ----------------------------------------------------------------------------------------------- ---------------------------------- STOCK ACCOUNTS: - ------------------------------------------------------------ -------------------------------- ---------------------------------- AIM Capital Appreciation Portfolio 10/10/1995 35.30% - 17.17% 34.90% - 16.84% - ------------------------------------------------------------ -------------------------------- ---------------------------------- Alliance Growth Portfolio 6/20/1994 24.70% 26.05% 27.16% 24.35% 25.75% 26.83% - ------------------------------------------------------------ -------------------------------- ---------------------------------- Dreyfus Small Cap Portfolio 5/6/1998 15.71% - -1.37% 15.37% - -1.66% - ------------------------------------------------------------ -------------------------------- ---------------------------------- Equity Index Portfolio Class II * 5/5/1999 - - 11.20% - - 10.90% - ------------------------------------------------------------ -------------------------------- ---------------------------------- MFS Emerging Growth Portfolio 11/3/1996 68.72% - 37.95% 68.23% - 37.56% - ------------------------------------------------------------ -------------------------------- ---------------------------------- MFS Research Portfolio 5/4/1998 16.23% - 12.00% 15.89% - 11.67% - ------------------------------------------------------------ -------------------------------- ---------------------------------- Salomon Brothers Investors Fund 5/4/1998 4.34% - 3.51% 4.04% - 3.20% - ------------------------------------------------------------ -------------------------------- ---------------------------------- Smith Barney International Equity Portfolio 6/20/1994 59.79% 15.75% 14.87% 59.33% 15.45% 14.55% - ------------------------------------------------------------ -------------------------------- ---------------------------------- Smith Barney Large Cap Growth Portfolio 5/6/1998 23.31% - 29.77% 22.95% - 29.39% - ------------------------------------------------------------ -------------------------------- ---------------------------------- Smith Barney Large Cap Value Portfolio 6/20/1994 -7.04% 14.07% 13.78% -7.30% 13.78% 13.46% - ------------------------------------------------------------ -------------------------------- ---------------------------------- Smith Barney Pacific Basin Portfolio 6/21/1994 87.42% 8.57% 6.62% 86.88% 9.36% 7.36% - ------------------------------------------------------------ -------------------------------- ---------------------------------- Smith Barney Total Return Portfolio 11/21/1994 14.61% 16.58% 16.98% 14.27% 16.26% 16.66% - ------------------------------------------------------------ -------------------------------- ---------------------------------- Strategic Stock Portfolio 5/6/1998 -2.26% - -5.39% -2.55% - -5.66% - ------------------------------------------------------------ -------------------------------- ---------------------------------- Travelers Disciplined Mid Cap Stock Portfolio 5/18/1998 6.14% - 8.04% 5.83% - 7.72% - ------------------------------------------------------------ -------------------------------- ---------------------------------- Travelers Disciplined Small Cap Stock Portfolio 5/8/1998 13.00% - 0.35% 12.67% - 0.05% - ------------------------------------------------------------ -------------------------------- ---------------------------------- Van Kampen Enterprise Portfolio 6/21/1994 18.46% 22.67% 23.59% 18.12% 22.36% 23.25% - ------------------------------------------------------------ -------------------------------- ---------------------------------- BOND ACCOUNTS: - ------------------------------------------------------------ -------------------------------- ---------------------------------- INVESCO Strategic Income Portfolio 6/21/1994 -8.76% 5.94% 4.99% -9.02% 5.67% 4.70% - ------------------------------------------------------------ -------------------------------- ---------------------------------- Putnam Diversified Income Portfolio 6/20/1994 -6.07% 4.76% 5.07% -6.33% 4.49% 4.77% - ------------------------------------------------------------ -------------------------------- ---------------------------------- Smith Barney High Income Portfolio 6/22/1994 -4.61% 7.23% 7.11% -4.89% 6.95% 6.81% - ------------------------------------------------------------ -------------------------------- ---------------------------------- Travelers Convertible Bond Portfolio 5/8/1998 11.31% - 6.80% 10.99% - 6.48% - ------------------------------------------------------------ -------------------------------- ---------------------------------- Travelers Managed Income Portfolio 6/28/1994 -6.28% 4.72% 4.81% -6.54% 4.45% 4.51% - ------------------------------------------------------------ -------------------------------- ---------------------------------- BALANCED ACCOUNTS: - ------------------------------------------------------------ -------------------------------- ---------------------------------- MFS Total Return Portfolio 6/20/1994 -4.57% 11.92% 11.59% -4.85% 11.64% 11.28% - ------------------------------------------------------------ -------------------------------- ---------------------------------- Salomon Brothers Total Return Fund 5/6/1998 -6.37% - -4.05% -6.64% - -4.32% - ------------------------------------------------------------ -------------------------------- ---------------------------------- Smith Barney Concert Select Balanced Portfolio 3/10/1997 0.31% - 6.63% 0.02% - 6.32% - ------------------------------------------------------------ -------------------------------- ---------------------------------- Smith Barney Concert Select Growth Portfolio 3/11/1997 8.79% - 11.60% 8.47% - 11.28% - ------------------------------------------------------------ -------------------------------- ---------------------------------- MONEY MARKET ACCOUNTS: - ------------------------------------------------------------ -------------------------------- ---------------------------------- Smith Barney Money Market Portfolio 6/20/1994 -2.46% 3.14% 3.59% -2.75% 2.88% 3.30% - ------------------------------------------------------------ -------------------------------- ----------------------------------
* Certain funds offer multiple classes of shares. The performance above may reflect the fees and performance of another class of the same fund for periods before the current class existed. If the current class's 12b-1 fee and other expenses were higher, the performance shown would be lower. # The inception date used to calculate standardized performance is based on the date that the investment option became active in the product. 6 55 TRAVELERS VINTAGE NONSTANDARDIZED PERFORMANCE UPDATE AS OF 12/31/99
Standard Death Benefit Option --------------------------------------------------------------------------------- Inception Since Date # YTD 1 Year 3 Years 5 Years Inception - --------------------------------------------------------------- ----------------------------------------------------------------- STOCK ACCOUNTS: - --------------------------------------------------------------- ----------------------------------------------------------------- AIM Capital Appreciation Portfolio 10/10/1995 41.31% 41.31% 21.97% - 17.46% - --------------------------------------------------------------- ----------------------------------------------------------------- Alliance Growth Portfolio 6/20/1994 30.72% 30.72% 28.59% 29.35% 27.25% - --------------------------------------------------------------- ----------------------------------------------------------------- Dreyfus Small Cap Portfolio 8/31/1990 21.72% 21.72% 10.01% 14.42% 34.00% - --------------------------------------------------------------- ----------------------------------------------------------------- Equity Index Portfolio Class II * 11/30/1991 19.19% 19.19% 25.95% 27.13% 19.81% - --------------------------------------------------------------- ----------------------------------------------------------------- MFS Emerging Growth Portfolio 8/30/1996 74.73% 74.73% 40.59% - 38.08% - --------------------------------------------------------------- ----------------------------------------------------------------- MFS Research Portfolio 3/23/1998 22.24% 22.24% - - 15.08% - --------------------------------------------------------------- ----------------------------------------------------------------- Salomon Brothers Investors Fund 2/17/1998 10.35% 10.35% - - 10.63% - --------------------------------------------------------------- ----------------------------------------------------------------- Smith Barney International Equity Portfolio 6/20/1994 65.80% 65.80% 20.99% 17.77% 14.97% - --------------------------------------------------------------- ----------------------------------------------------------------- Smith Barney Large Cap Growth Portfolio 5/1/1998 29.32% 29.32% - - 32.50% - --------------------------------------------------------------- ----------------------------------------------------------------- Smith Barney Large Cap Value Portfolio 6/20/1994 -1.10% -1.10% 10.35% 15.90% 13.88% - --------------------------------------------------------------- ----------------------------------------------------------------- Smith Barney Pacific Basin Portfolio 6/21/1994 93.43% 93.43% 13.43% 9.80% 6.75% - --------------------------------------------------------------- ----------------------------------------------------------------- Smith Barney Total Return Portfolio 12/3/1993 20.62% 20.62% 13.06% 17.19% 15.55% - --------------------------------------------------------------- ----------------------------------------------------------------- Strategic Stock Portfolio 5/1/1998 3.75% 3.75% - - -1.77% - --------------------------------------------------------------- ----------------------------------------------------------------- Travelers Disciplined Mid Cap Stock Portfolio 4/1/1997 12.15% 12.15% - - 21.97% - --------------------------------------------------------------- ----------------------------------------------------------------- Travelers Disciplined Small Cap Stock Portfolio 5/1/1998 19.01% 19.01% - - 3.01% - --------------------------------------------------------------- ----------------------------------------------------------------- Van Kampen Enterprise Portfolio 6/21/1994 24.47% 24.47% 25.07% 25.52% 23.66% - --------------------------------------------------------------- ----------------------------------------------------------------- BOND ACCOUNTS: - --------------------------------------------------------------- ----------------------------------------------------------------- INVESCO Strategic Income Portfolio 6/21/1994 -2.93% -2.93% 0.09% 6.90% 5.14% - --------------------------------------------------------------- ----------------------------------------------------------------- Putnam Diversified Income Portfolio 6/20/1994 -0.07% -0.07% 1.91% 5.60% 5.21% - --------------------------------------------------------------- ----------------------------------------------------------------- Smith Barney High Income Portfolio 6/22/1994 1.40% 1.40% 4.24% 8.31% 7.25% - --------------------------------------------------------------- ----------------------------------------------------------------- Travelers Convertible Bond Portfolio 5/1/1998 17.32% 17.32% - - 10.13% - --------------------------------------------------------------- ----------------------------------------------------------------- Travelers Managed Income Portfolio 6/28/1994 -0.29% -0.29% 3.94% 5.54% 4.96% - --------------------------------------------------------------- ----------------------------------------------------------------- BALANCED ACCOUNTS: - --------------------------------------------------------------- ----------------------------------------------------------------- MFS Total Return Portfolio 6/20/1994 1.44% 1.44% 10.28% 13.51% 11.70% - --------------------------------------------------------------- ----------------------------------------------------------------- Salomon Brothers Total Return Fund 2/17/1998 -0.39% -0.39% - - 2.21% - --------------------------------------------------------------- ----------------------------------------------------------------- Smith Barney Concert Select Balanced Portfolio 3/10/1997 6.32% 6.32% - - 8.51% - --------------------------------------------------------------- ----------------------------------------------------------------- Smith Barney Concert Select Growth Portfolio 3/11/1997 14.80% 14.80% - - 13.33% - --------------------------------------------------------------- ----------------------------------------------------------------- MONEY MARKET ACCOUNTS: - --------------------------------------------------------------- ----------------------------------------------------------------- Smith Barney Money Market Portfolio 6/20/1994 3.55% 3.55% 3.75% 3.83% 3.75% - --------------------------------------------------------------- -----------------------------------------------------------------
Enhanced Death Benefit Option+ ----------------------------------------------------------------- Since YTD 1 Year 3 Years 5 Years Inception - ---------------------------------------------------------------------------------------------------------------------------- STOCK ACCOUNTS: - ---------------------------------------------------------------------------------------------------------------------------- AIM Capital Appreciation Portfolio 40.91% 40.91% 21.63% - 17.13% - ---------------------------------------------------------------------------------------------------------------------------- Alliance Growth Portfolio 30.36% 30.36% 28.23% 28.99% 26.90% - ---------------------------------------------------------------------------------------------------------------------------- Dreyfus Small Cap Portfolio 21.38% 21.38% 9.70% 14.11% 33.63% - ---------------------------------------------------------------------------------------------------------------------------- Equity Index Portfolio Class II * 18.86% 18.86% 25.60% 26.77% 19.48% - ---------------------------------------------------------------------------------------------------------------------------- MFS Emerging Growth Portfolio 74.24% 74.24% 40.19% - 37.70% - ---------------------------------------------------------------------------------------------------------------------------- MFS Research Portfolio 21.90% 21.90% - - 14.76% - ---------------------------------------------------------------------------------------------------------------------------- Salomon Brothers Investors Fund 10.05% 10.05% - - 10.33% - ---------------------------------------------------------------------------------------------------------------------------- Smith Barney International Equity Portfolio 65.34% 65.34% 20.66% 17.44% 14.65% - ---------------------------------------------------------------------------------------------------------------------------- Smith Barney Large Cap Growth Portfolio 28.96% 28.96% - - 32.13% - ---------------------------------------------------------------------------------------------------------------------------- Smith Barney Large Cap Value Portfolio -1.38% -1.38% 10.04% 15.57% 13.56% - ---------------------------------------------------------------------------------------------------------------------------- Smith Barney Pacific Basin Portfolio 92.90% 92.90% 13.11% 9.49% 6.45% - ---------------------------------------------------------------------------------------------------------------------------- Smith Barney Total Return Portfolio 20.28% 20.28% 12.74% 16.86% 15.33% - ---------------------------------------------------------------------------------------------------------------------------- Strategic Stock Portfolio 3.46% 3.46% - - -2.04% - ---------------------------------------------------------------------------------------------------------------------------- Travelers Disciplined Mid Cap Stock Portfolio 11.84% 11.84% - - 21.63% - ---------------------------------------------------------------------------------------------------------------------------- Travelers Disciplined Small Cap Stock Portfolio 18.68% 18.68% - - 2.72% - ---------------------------------------------------------------------------------------------------------------------------- Van Kampen Enterprise Portfolio 24.13% 24.13% 24.73% 25.17% 23.32% - ---------------------------------------------------------------------------------------------------------------------------- BOND ACCOUNTS: - ---------------------------------------------------------------------------------------------------------------------------- INVESCO Strategic Income Portfolio -3.20% -3.20% -0.19% 6.60% 4.85% - ---------------------------------------------------------------------------------------------------------------------------- Putnam Diversified Income Portfolio -0.35% -0.35% 1.62% 5.31% 4.92% - ---------------------------------------------------------------------------------------------------------------------------- Smith Barney High Income Portfolio 1.12% 1.12% 3.95% 8.01% 6.95% - ---------------------------------------------------------------------------------------------------------------------------- Travelers Convertible Bond Portfolio 17.00% 17.00% - - 9.82% - ---------------------------------------------------------------------------------------------------------------------------- Travelers Managed Income Portfolio -0.57% -0.57% 3.65% 5.25% 4.66% - ---------------------------------------------------------------------------------------------------------------------------- BALANCED ACCOUNTS: - ---------------------------------------------------------------------------------------------------------------------------- MFS Total Return Portfolio 1.16% 1.16% 9.97% 13.20% 11.39% - ---------------------------------------------------------------------------------------------------------------------------- Salomon Brothers Total Return Fund -0.67% -0.67% - - 1.93% - ---------------------------------------------------------------------------------------------------------------------------- Smith Barney Concert Select Balanced Portfolio 6.02% 6.02% - - 8.20% - ---------------------------------------------------------------------------------------------------------------------------- Smith Barney Concert Select Growth Portfolio 14.48% 14.48% - - 13.02% - ---------------------------------------------------------------------------------------------------------------------------- MONEY MARKET ACCOUNTS: - ---------------------------------------------------------------------------------------------------------------------------- Smith Barney Money Market Portfolio 3.26% 3.26% 3.46% 3.54% 3.46% - ----------------------------------------------------------------------------------------------------------------------------
* Certain funds offer multiple classes of shares. The performance above may reflect the fees and performance of another class of the same fund for periods before the current class existed. If the current class's 12b-1 fee and other expenses were higher, the performance shown would be lower. # The inception date is the date that the underlying fund commenced operations. 7 56 MIXED AND SHARED FUNDING Certain variable annuity separate accounts and variable life insurance separate accounts may invest in the Funding Options simultaneously (called "mixed" and "shared" funding). It is conceivable that in the future it may be disadvantageous to do so. Although the Company and the Funding Options do not currently foresee any such disadvantages either to variable annuity contract owners or variable life policy owners, each Funding Option's Board of Directors intends to monitor events in order to identify any material conflicts between them and to determine what action, if any, should be taken. If a Board of Directors was to conclude that separate funds should be established for variable life and variable annuity separate accounts, the variable annuity contract owners would not bear any of the related expenses, but variable annuity contract owners and variable life insurance policy owners would no longer have the economies of scale resulting from a larger combined fund. 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 generally 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 8 57 withdrawn first without income tax liability. This information on deposits must be provided to the Company by the other insurance company at the time of the exchange. There is income in the contract generally to the extent the cash value exceeds the investment in the contract. The investment in the contract is equal to the amount of premiums paid less any amount received previously which was excludable from gross income. Any direct or indirect borrowing against the value of the contract or pledging of the contract as security for a loan will be treated as a cash distribution under the tax law. The federal tax law requires that nonqualified annuity contracts meet minimum mandatory distribution requirements upon the death of the contract owner, including the first of joint owners. Failure to meet these requirements will cause the surviving joint owner, or the beneficiary to lose the tax benefits associated with annuity contracts, i.e., primarily the tax deferral prior to distribution. The distribution required depends, among other things, upon whether an annuity option is elected or whether the new contract owner is the surviving spouse. Contracts will be administered by the Company in accordance with these rules and the Company will make a notification when payments should be commenced. INDIVIDUAL RETIREMENT ANNUITIES To the extent of earned income for the year and not exceeding $2,000 per individual, an individual may make deductible contributions to an individual retirement annuity (IRA). There are certain limits on the deductible amount based on the adjusted gross income of the individual and spouse and based on their participation in a retirement plan. If an individual is married and the spouse does not have earned income, the individual may establish IRAs for the individual and spouse. Purchase payments may then be made annually into IRAs for both spouses in the maximum amount of 100% of earned income up to a combined limit of $4,000. 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 9 58 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. 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 59 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, 1999, a recipient receiving periodic payments (e.g., monthly or annual payments under an annuity option) which total $14,850 or less per year, will generally be exempt from periodic withholding. Recipients who elect not to have withholding made are liable for payment of federal income tax on the taxable portion of the distribution. All recipients may also be subject to penalties under the estimated tax payment rules if withholding and estimated tax payments are not sufficient to cover tax liabilities. Recipients who do not provide a social security number or other taxpayer identification number will not be permitted to elect out of withholding. Additionally, U.S citizens residing outside of the country, or U.S. legal residents temporarily residing outside the country, are not permitted to elect out of withholding. INDEPENDENT ACCOUNTANTS The financial statements of The Travelers Life and Annuity Company as of December 31, 1999 and 1998, and for each of the years in the three-year period ended December 31, 1999, included herein, and the financial statements of Fund BD II as of and for the year ended December 31, 1999, also included herein, have been included in reliance upon the reports of KPMG LLP, independent certified public accountants, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing. 11 60 ANNUAL REPORT DECEMBER 31, 1999 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 61 THE TRAVELERS FUND BD II FOR VARIABLE ANNUITIES STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1999 ASSETS: Investments in eligible funds at market value: Dreyfus Variable Investment Fund, 83,801 shares (cost $4,668,492) ....................... $ 5,559,391 Greenwich Street Series Fund, 5,854,208 shares (cost $101,441,099) ...................... 120,110,503 Salomon Brothers Variable Series Funds Inc., 491,426 shares (cost $5,405,368) ........... 5,655,129 Smith Barney Concert Allocation Series Inc., 2,377,824 shares (cost $27,110,844) ........ 31,611,286 The Travelers Series Trust, 6,178,859 shares (cost $82,518,594) ......................... 151,989,676 Travelers Series Fund Inc., 124,651,332 shares (cost $991,619,885) ...................... 1,279,060,239 --------------- Total Investments (cost $1,212,764,282) ............................................. $1,593,986,224 Receivables: Dividends ............................................................................... 134,152 Purchase payments and transfers from other Travelers accounts ........................... 1,616,133 Other assets .............................................................................. 297 --------------- Total Assets ........................................................................ 1,595,736,806 --------------- LIABILITIES: Payables: Contract surrenders and transfers to other Travelers accounts ........................... 1,038,746 Insurance charges ....................................................................... 407,595 Administrative fees .................................................................... 57,671 --------------- Total Liabilities ................................................................... 1,504,012 --------------- NET ASSETS: $1,594,232,794 ===============
See Notes to Financial Statements -1- 62 THE TRAVELERS FUND BD II FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999 INVESTMENT INCOME: Dividends ................................................................... $ 49,768,274 EXPENSES: Insurance charges ........................................................... $13,840,204 Administrative fees ......................................................... 1,953,832 ------------ Total expenses ............................................................ 15,794,036 ------------- Net investment income ................................................... 33,974,238 ------------- REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain (loss) from investment transactions: Proceeds from investments sold ............................................ 982,108,110 Cost of investments sold .................................................. 947,682,247 ------------ Net realized gain (loss) ................................................ 34,425,863 Change in unrealized gain (loss) on investments: Unrealized gain at December 31, 1998 ........................................ 156,719,386 Unrealized gain at December 31, 1999 ........................................ 381,221,942 ------------ Net change in unrealized gain (loss) for the year ....................... 224,502,556 ------------- Net realized gain (loss) and change in unrealized gain (loss) .......... 258,928,419 ------------- Net increase in net assets resulting from operations .......................... $292,902,657 =============
See Notes to Financial Statements -2- 63 THE TRAVELERS FUND BD II FOR VARIABLE ANNUITIES STATEMENT OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998 ---- ---- OPERATIONS: Net investment income ............................................................ $ 33,974,238 $ 26,472,860 Net realized gain (loss) from investment transactions ............................ 34,425,863 6,287,237 Net change in unrealized gain (loss) on investments .............................. 224,502,556 83,239,157 ---------------- --------------- Net increase in net assets resulting from operations............................ 292,902,657 115,999,254 ---------------- --------------- UNIT TRANSACTIONS: Participant purchase payments (applicable to 81,097,207 and 176,982,164 units, respectively) ................ 138,224,630 281,104,022 Participant transfers from other Travelers accounts (applicable to 832,988,508 and 687,354,867 units, respectively) ............... 1,116,649,737 867,501,168 Administrative and asset allocation charges (applicable to 112,174 and 112,857 units, respectively) ....................... (209,738) (175,802) Contract surrenders (applicable to 39,823,422 and 17,990,366 units, respectively) ................. (70,379,394) (29,495,629) Participant transfers to other Travelers accounts (applicable to 756,377,558 and 613,483,189 units, respectively) ............... (1,002,170,368) (749,605,940) Other payments to participants (applicable to 9,043,464 and 6,957,789 units, respectively) ................... (17,040,756) (11,571,122) ---------------- --------------- Net increase in net assets resulting from unit transactions .................... 165,074,111 357,756,697 ---------------- --------------- Net increase in net assets .................................................... 457,976,768 473,755,951 NET ASSETS: Beginning of year ................................................................ 1,136,256,026 662,500,075 ---------------- --------------- End of year ...................................................................... $ 1,594,232,794 $1,136,256,026 ================ ===============
See Notes to Financial Statements -3- 64 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 Citigroup 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. Fund BD II is comprised of the Travelers Vintage Annuity product. 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, 1999, the eligible funds available under Fund BD II were: Alliance Growth Portfolio, Van Kampen Enterprise Portfolio, Travelers Managed Income Portfolio (formerly TBC Managed Income Portfolio), INVESCO Strategic Income Portfolio (formerly G.T. Global Strategic Income Portfolio), Smith Barney High Income Portfolio, Smith Barney International Equity Portfolio, Smith Barney Large Cap Value Portfolio, Smith Barney Money Market Portfolio, Putnam Diversified Income Portfolio, Smith Barney Pacific Basin Portfolio, MFS Total Return Portfolio, AIM Capital Appreciation Portfolio and Smith Barney Large Capitalization Growth Portfolio of Travelers Series Fund Inc.; MFS Emerging Growth Portfolio, Disciplined Mid Cap Stock Portfolio, Convertible Bond Portfolio, Disciplined Small Cap Stock Portfolio, MFS Research Portfolio and Strategic Stock Portfolio of The Travelers Series Trust; Total Return Portfolio and Equity Index Portfolio Class II of Greenwich Street Series Fund; Select High Growth Portfolio, Select Growth Portfolio, Select Balanced Portfolio, Select Conservative Portfolio and Select Income Portfolio of Smith Barney Concert Allocation Series Inc.; Small Cap Portfolio of Dreyfus Variable Investment Fund and Salomon Brothers Variable Investors Fund and Salomon Brothers Variable Total Return Fund of Salomon Brothers Variable Series Funds Inc. Travelers Series Fund Inc., Smith Barney Concert Allocation Series Inc. and Salomon Brothers Variable Series Funds Inc. are incorporated under Maryland law. The Travelers Series Trust, Greenwich Street Series Fund and Dreyfus Variable Investment Fund are registered as Massachusetts business trusts. All eligible trusts except Dreyfus Variable Investment Fund 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. -4- 65 NOTES TO FINANCIAL STATEMENTS - CONTINUED 2. INVESTMENTS The aggregate costs of purchases and proceeds from sales of investments were $1,181,357,315 and $982,108,110, respectively, for the year ended December 31, 1999. Realized gains and losses from investment transactions are reported on an average cost basis. The cost of investments in eligible funds was $1,212,764,282 at December 31, 1999. Gross unrealized appreciation for all investments at December 31, 1999 was $387,740,873. Gross unrealized depreciation for all investments at December 31, 1999 was $6,518,931. 3. CONTRACT CHARGES Insurance charges are paid for the mortality and expense risks assumed by Travelers Life. Each business day, Travelers Life deducts a mortality and expense charge, which is reflected in the calculation of accumulation and annuity unit values. This charge equals, on an annual basis, 1.02% and 1.30%, of the amounts held in each funding option for the Standard Death Benefit and the Enhanced Death Benefit, respectively. Administrative fees are paid for administrative expenses. This fee is also deducted each business day and reflected in the calculation of accumulation and annuity unit values. This charge equals, on an annual basis, 0.15% of the amounts held in each funding option. 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 $1,685,474 and $686,636 of contingent deferred sales charges for the years ended December 31, 1999 and 1998, respectively. 4. CHANGE IN ACCOUNTING On January 1, 1999, in conjunction with the implementation of a new system, Fund BD II changed its basis of reporting realized gains and losses for investment transactions from an identified basis to an average cost basis. The accounting change had no effect on net assets. -5- 66 NOTES TO FINANCIAL STATEMENTS - CONTINUED 5. NET CONTRACT OWNERS' EQUITY
DECEMBER 31, 1999 --------------------------------------------------------- ACCUMULATION ANNUITY UNIT NET UNITS UNITS VALUE ASSETS ----- ----- ------ ------ Dreyfus Variable Investment Fund Small Cap Portfolio Standard Death Benefit ............................ 4,918,004 - $ 1.038 $ 5,102,751 Enhanced Death Benefit ............................ 449,652 - 1.033 464,385 Greenwich Street Series Fund Total Return Portfolio Standard Death Benefit ............................ 42,818,333 - 2.240 95,917,714 Enhanced Death Benefit ............................ 8,567,818 20,360 2.208 18,965,361 Equity Index Portfolio Class II Standard Death Benefit ............................ 4,474,800 - 1.088 4,870,622 Enhanced Death Benefit ............................ 157,335 - 1.086 170,936 Salomon Brothers Variable Series Funds Inc. Salomon Brothers Variable Total Return Fund Standard Death Benefit ............................ 1,619,636 - 0.994 1,609,283 Enhanced Death Benefit ............................ 208,331 - 0.989 206,038 Salomon Brothers Variable Investors Fund Standard Death Benefit ............................ 2,903,384 - 1.119 3,248,820 Enhanced Death Benefit ............................ 529,114 - 1.114 589,315 Smith Barney Concert Allocation Series Inc. Select Balanced Portfolio Standard Death Benefit ............................ 8,078,329 - 1.258 10,162,306 Enhanced Death Benefit ............................ 2,374,648 - 1.248 2,963,796 Select Conservative Portfolio Standard Death Benefit ............................ 1,316,441 - 1.196 1,574,716 Enhanced Death Benefit ............................ 427,418 - 1.187 507,322 Select Growth Portfolio Standard Death Benefit ............................ 5,037,394 - 1.421 7,158,973 Enhanced Death Benefit ............................ 2,157,254 - 1.410 3,041,796 Select High Growth Portfolio Standard Death Benefit ............................ 2,931,329 - 1.558 4,567,002 Enhanced Death Benefit ............................ 447,062 - 1.546 691,058 Select Income Portfolio Standard Death Benefit ............................ 791,474 - 1.148 908,592 Enhanced Death Benefit ............................ 30,026 - 1.139 34,203
-6- 67 NOTES TO FINANCIAL STATEMENTS - CONTINUED 5. NET CONTRACT OWNERS' EQUITY (CONTINUED)
DECEMBER 31, 1999 --------------------------------------------------------- ACCUMULATION ANNUITY UNIT NET UNITS UNITS VALUE ASSETS ----- ----- ------ ------ The Travelers Series Trust MFS Emerging Growth Portfolio Standard Death Benefit ......................... 38,199,495 - $2.793 $ 106,702,016 Enhanced Death Benefit ......................... 7,824,809 - 2.769 21,664,037 MFS Research Portfolio Standard Death Benefit ......................... 7,720,777 - 1.267 9,783,618 Enhanced Death Benefit ......................... 1,494,593 - 1.261 1,885,135 Strategic Stock Portfolio Standard Death Benefit ......................... 3,335,751 - 0.971 3,237,883 Enhanced Death Benefit ......................... 79,989 - 0.966 77,283 Convertible Bond Portfolio Standard Death Benefit ......................... 1,597,497 - 1.175 1,876,459 Enhanced Death Benefit ......................... 429,444 - 1.169 502,106 Disciplined Mid Cap Stock Portfolio Standard Death Benefit ......................... 3,984,156 - 1.194 4,755,888 Enhanced Death Benefit ......................... 256,491 - 1.188 304,781 Disciplined Small Cap Stock Portfolio Standard Death Benefit ......................... 1,073,827 - 1.066 1,144,559 Enhanced Death Benefit ......................... 86,626 - 1.061 91,907 Travelers Series Fund Inc. AIM Capital Appreciation Portfolio Standard Death Benefit ......................... 59,794,915 - 1.974 118,048,541 Enhanced Death Benefit ......................... 10,757,693 - 1.951 20,988,246 Alliance Growth Portfolio Standard Death Benefit ......................... 76,734,335 - 3.795 291,224,445 Enhanced Death Benefit ......................... 13,423,385 - 3.737 50,161,646 INVESCO Strategic Income Portfolio Standard Death Benefit ......................... 5,149,182 - 1.319 6,793,998 Enhanced Death Benefit ......................... 849,705 - 1.299 1,103,907 MFS Total Return Portfolio Standard Death Benefit ......................... 64,327,238 - 1.845 118,697,068 Enhanced Death Benefit ......................... 11,553,977 20,436 1.817 21,029,225 Putnam Diversified Income Portfolio Standard Death Benefit ......................... 31,303,028 - 1.325 41,466,818 Enhanced Death Benefit ......................... 7,121,771 26,864 1.304 9,324,046
-7- 68 NOTES TO FINANCIAL STATEMENTS - CONTINUED 5. NET CONTRACT OWNERS' EQUITY (CONTINUED)
DECEMBER 31, 1999 --------------------------------------------------------- ACCUMULATION ANNUITY UNIT NET UNITS UNITS VALUE ASSETS ----- ----- ------ ------ Travelers Series Fund Inc. (continued) Smith Barney International Equity Portfolio Standard Death Benefit ......................... 40,313,454 - $2.164 $ 87,253,746 Enhanced Death Benefit ......................... 5,876,973 29,942 2.131 12,588,291 Smith Barney Money Market Portfolio Standard Death Benefit ......................... 48,631,112 - 1.226 59,610,280 Enhanced Death Benefit ......................... 5,840,571 - 1.207 7,049,022 Smith Barney High Income Portfolio Standard Death Benefit ......................... 30,633,089 - 1.472 45,102,842 Enhanced Death Benefit ......................... 4,241,382 24,744 1.450 6,184,640 Smith Barney Large Capitalization Growth Portfolio Standard Death Benefit ......................... 46,287,883 - 1.599 74,023,560 Enhanced Death Benefit ......................... 3,491,177 - 1.592 5,557,278 Smith Barney Large Cap Value Portfolio Standard Death Benefit ......................... 45,773,195 - 2.053 93,979,738 Enhanced Death Benefit ......................... 8,095,578 18,514 2.022 16,403,318 Smith Barney Pacific Basin Portfolio Standard Death Benefit ......................... 9,217,437 - 1.435 13,230,385 Enhanced Death Benefit ......................... 967,291 - 1.413 1,367,082 Travelers Managed Income Portfolio Standard Death Benefit ......................... 20,425,251 - 1.306 26,665,400 Enhanced Death Benefit ......................... 2,524,557 26,811 1.286 3,279,856 Van Kampen Enterprise Portfolio Standard Death Benefit ......................... 39,297,380 - 3.238 127,230,448 Enhanced Death Benefit ......................... 6,599,024 16,119 3.188 21,088,307 --------------- Net Contract Owners' Equity ....................................................................... $1,594,232,794 ===============
-8- 69 NOTES TO FINANCIAL STATEMENTS - CONTINUED 6. STATEMENT OF INVESTMENTS
INVESTMENT OPTIONS NO. OF MARKET SHARES VALUE ---------------- ----------------- DREYFUS VARIABLE INVESTMENT FUND (0.3%) Small Cap Portfolio Total (Cost $4,668,492) 83,801 $ 5,559,391 ---------------- ----------------- GREENWICH STREET SERIES FUND (7.5%) Total Return Portfolio (Cost $96,775,343) 5,713,381 115,067,504 Equity Index Portfolio Class II (Cost $4,665,756) 140,827 5,042,999 ---------------- ----------------- Total (Cost $101,441,099) 5,854,208 120,110,503 ---------------- ----------------- SALOMON BROTHERS VARIABLE SERIES FUNDS INC. (0.4%) Salomon Brothers Variable Total Return Fund (Cost $1,851,609) 177,503 1,815,856 Salomon Brothers Variable Investors Fund (Cost $3,553,759) 313,923 3,839,273 ---------------- ----------------- Total (Cost $5,405,368) 491,426 5,655,129 ---------------- ----------------- SMITH BARNEY CONCERT ALLOCATION SERIES INC. (2.0%) Select Balanced Portfolio (Cost $12,089,248) 1,063,163 13,130,063 Select Conservative Portfolio (Cost $2,023,489) 177,854 2,082,673 Select Growth Portfolio (Cost $8,279,932) 718,301 10,199,878 Select High Growth Portfolio (Cost $3,768,070) 334,752 5,255,603 Select Income Portfolio (Cost $950,105) 83,754 943,069 ---------------- ----------------- Total (Cost $27,110,844) 2,377,824 31,611,286 ---------------- ----------------- THE TRAVELERS SERIES TRUST (9.5%) MFS Emerging Growth Portfolio (Cost $62,318,955) 4,302,045 128,286,994 MFS Research Portfolio (Cost $9,386,160) 893,734 11,672,164 Strategic Stock Portfolio (Cost $3,273,205) 342,821 3,404,211 Convertible Bond Portfolio (Cost $2,088,483) 203,370 2,377,393 Disciplined Mid Cap Stock Portfolio (Cost $4,430,886) 321,082 5,012,093 Disciplined Small Cap Stock Portfolio (Cost $1,020,905) 115,807 1,236,821 ---------------- ----------------- Total (Cost $82,518,594) 6,178,859 151,989,676 ---------------- ----------------- TRAVELERS SERIES FUND INC. (80.3%) AIM Capital Appreciation Portfolio (Cost $80,233,615) 6,718,486 139,072,657 Alliance Growth Portfolio (Cost $218,324,483) 10,388,003 341,557,552 INVESCO Strategic Income Portfolio (Cost $9,109,523) 758,081 7,906,781 MFS Total Return Portfolio (Cost $133,120,652) 8,619,859 139,900,312 Putnam Diversified Income Portfolio (Cost $52,994,886) 4,437,146 50,805,326 Smith Barney International Equity Portfolio (Cost $73,138,506) 4,342,923 99,756,935 Smith Barney Money Market Portfolio (Cost $65,961,795) 65,961,795 65,961,795 Smith Barney High Income Portfolio (Cost $54,144,163) 4,247,404 51,308,641 Smith Barney Large Capitalization Growth Portfolio (Cost $63,536,544) 4,961,634 79,336,529 Smith Barney Large Cap Value Portfolio (Cost $103,447,286) 5,661,764 110,461,011 Smith Barney Pacific Basin Portfolio (Cost $8,889,097) 972,367 14,556,339 Travelers Managed Income Portfolio (Cost $30,205,124) 2,602,676 29,956,805 Van Kampen Enterprise Portfolio (Cost $98,514,211) 4,979,194 148,479,556 ---------------- ----------------- Total (Cost $991,619,885) 124,651,332 1,279,060,239 ---------------- ----------------- TOTAL INVESTMENT OPTIONS (100%) (Cost $1,212,764,282) $1,593,986,224 =================
-9- 70 NOTES TO FINANCIAL STATEMENTS - CONTINUED 7. SCHEDULE OF FUND BD II OPERATIONS AND CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
SMALL CAP PORTFOLIO TOTAL RETURN PORTFOLIO ----------------------------------------------------------- 1999 1998 1999 1998 ---- ---- ---- ---- INVESTMENT INCOME: Dividends ................................................. $ 1,685 $ 16,394 $ 6,460,432 $ 4,630,483 ------------ ------------ -------------- -------------- EXPENSES: Insurance charges ......................................... 34,440 4,856 1,123,350 929,344 Administrative fees ....................................... 4,930 682 157,736 130,535 ------------ ------------ -------------- -------------- Net investment income (loss) ........................ (37,685) 10,856 5,179,346 3,570,604 ------------ ------------ -------------- -------------- REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain (loss) from investment transactions: Proceeds from investments sold ......................... 529,307 29,905 10,806,333 5,569,201 Cost of investments sold ............................... 487,000 45,027 9,673,550 4,435,408 ------------ ------------ -------------- -------------- Net realized gain (loss) ............................ 42,307 (15,122) 1,132,783 1,133,793 ------------ ------------ -------------- -------------- Change in unrealized gain (loss) on investments: Unrealized gain (loss) beginning of year ............... 68,574 - 4,871,904 6,850,155 Unrealized gain (loss) end of year ..................... 890,899 68,574 18,292,161 4,871,904 ------------ ------------ -------------- -------------- Net change in unrealized gain (loss) for the year ... 822,325 68,574 13,420,257 (1,978,251) ------------ ------------ -------------- -------------- Net increase (decrease) in net assets resulting from operations ........................... 826,947 64,308 19,732,386 2,726,146 ------------ ------------ -------------- -------------- UNIT TRANSACTIONS: Participant purchase payments ............................. 1,493,757 1,085,114 3,658,486 19,297,039 Participant transfers from other Travelers accounts ....... 2,259,822 554,843 10,706,608 15,416,792 Administrative and asset allocation charges ............... (544) (37) (17,662) (17,925) Contract surrenders ....................................... (212,672) (1,682) (4,441,094) (2,558,282) Participant transfers to other Travelers accounts ......... (474,872) (27,848) (9,932,330) (7,895,368) Other payments to participants ............................ - - (1,693,980) (1,006,451) ------------ ------------ -------------- -------------- Net increase (decrease) in net assets resulting from unit transactions .................... 3,065,491 1,610,390 (1,719,972) 23,235,805 ------------ ------------ -------------- -------------- Net increase (decrease) in net assets ............... 3,892,438 1,674,698 18,012,414 25,961,951 NET ASSETS: Beginning of year ...................................... 1,674,698 - 96,870,661 70,908,710 ------------ ------------ -------------- -------------- End of year ............................................ $ 5,567,136 $ 1,674,698 $ 114,883,075 $ 96,870,661 ============ ============ ============== ============== EQUITY INDEX PORTFOLIO CLASS II --------------------------- 1999 1998 ---- ---- < INVESTMENT INCOME: Dividends ................................................. $ 3,004 $ - ------------ ----------- EXPENSES: Insurance charges ......................................... 11,377 - Administrative fees ....................................... 1,662 - ------------ ----------- Net investment income (loss) ........................ (10,035) - ------------ ----------- REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain (loss) from investment transactions: Proceeds from investments sold ......................... 354,577 - Cost of investments sold ............................... 342,739 - ------------ ----------- Net realized gain (loss) ............................ 11,838 - ------------ ----------- Change in unrealized gain (loss) on investments: Unrealized gain (loss) beginning of year ............... - - Unrealized gain (loss) end of year ..................... 377,244 - ------------ ----------- Net change in unrealized gain (loss) for the year ... 377,244 - ------------ ----------- Net increase (decrease) in net assets resulting from operations ........................... 379,047 - ------------ ----------- UNIT TRANSACTIONS: Participant purchase payments ............................. 1,759,749 - Participant transfers from other Travelers accounts ....... 3,273,429 - Administrative and asset allocation charges ............... (48) - Contract surrenders ....................................... (22,832) - Participant transfers to other Travelers accounts ......... (347,787) - Other payments to participants ............................ - - ------------ ----------- Net increase (decrease) in net assets resulting from unit transactions .................... 4,662,511 - ------------ ----------- Net increase (decrease) in net assets ............... 5,041,558 - NET ASSETS: Beginning of year ...................................... - - ------------ ----------- End of year ............................................ $ 5,041,558 $ - ============ ===========
-10- 71 NOTES TO FINANCIAL STATEMENTS - CONTINUED
SALOMON BROTHERS VARIABLE TOTAL SALOMON BROTHERS VARIABLE RETURN FUND INVESTORS FUND SELECT BALANCED PORTFOLIO SELECT CONSERVATIVE PORTFOLIO - ------------------------------- --------------------------- --------------------------- ------------------------------- 1999 1998 1999 1998 1999 1998 1999 1998 ---- ---- ---- ---- ---- ---- ---- ---- $ 43,554 $ 15,309 $ 19,672 $ 5,048 $ 475,879 $ 293,039 $ 69,842 $ 40,576 - ------------ ----------- ------------ ----------- ------------- ------------ ----------- ----------- 15,709 3,719 26,377 4,192 135,333 107,208 22,513 17,334 2,196 527 3,700 599 18,712 14,686 3,129 2,450 - ------------ ----------- ------------ ----------- ------------- ------------ ----------- ----------- 25,649 11,063 (10,405) 257 321,834 171,145 44,200 20,792 - ------------ ----------- ------------ ----------- ------------- ------------ ----------- ----------- 371,831 195,786 308,988 148,089 1,343,237 845,810 645,281 156,029 365,084 199,208 283,637 153,256 1,263,574 728,104 622,097 142,096 - ------------ ----------- ------------ ----------- ------------- ------------ ----------- ----------- 6,747 (3,422) 25,351 (5,167) 79,663 117,706 23,184 13,933 - ------------ ----------- ------------ ----------- ------------- ------------ ----------- ----------- 18,000 - 100,293 - 683,123 252,648 72,180 35,641 (35,754) 18,000 285,514 100,293 1,040,815 683,123 59,184 72,180 - ------------ ----------- ------------ ----------- ------------- ------------ ----------- ----------- (53,754) 18,000 185,221 100,293 357,692 430,475 (12,996) 36,539 - ------------ ----------- ------------ ----------- ------------- ------------ ----------- ----------- (21,358) 25,641 200,167 95,383 759,189 719,326 54,388 71,264 - ------------ ----------- ------------ ----------- ------------- ------------ ----------- ----------- 541,596 785,337 939,190 872,280 1,172,694 3,710,667 421 585,526 822,386 307,521 1,844,831 415,098 910,735 1,572,169 560,482 420,977 (231) (28) (476) (39) (1,521) (1,568) (256) (271) (47,574) (4,004) (163,941) (5,515) (438,660) (166,605) (72,311) (13,994) (361,253) (228,099) (213,699) (137,327) (812,826) (491,046) (389,700) (110,470) (4,613) - (7,817) - (55,259) (236,156) (78,260) (17,902) - ------------ ----------- ------------ ----------- ------------- ------------ ----------- ----------- 950,311 860,727 2,398,088 1,144,497 775,163 4,387,461 20,376 863,866 - ------------ ----------- ------------ ----------- ------------- ------------ ----------- ----------- 928,953 886,368 2,598,255 1,239,880 1,534,352 5,106,787 74,764 935,130 - ------------ ----------- ------------ ----------- ------------- ------------ ----------- ----------- 886,368 - 1,239,880 - 11,591,750 6,484,963 2,007,274 1,072,144 - ------------ ----------- ------------ ----------- ------------- ------------ ----------- ----------- $1,815,321 $ 886,368 $3,838,135 $1,239,880 $13,126,102 $11,591,750 $2,082,038 $2,007,274 ============ =========== ============ =========== ============= ============ =========== ===========
-11- 72 NOTES TO FINANCIAL STATEMENTS - CONTINUED 7. SCHEDULE OF FUND BD II OPERATIONS AND CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
SELECT GROWTH PORTFOLIO SELECT HIGH GROWTH PORTFOLIO ------------------------------ ---------------------------- 1999 1998 1999 1998 ---- ---- ---- ---- INVESTMENT INCOME: Dividends ........................................................ $ 213,124 $ 157,884 $ 84,973 $ 43,929 ------------- ----------- ----------- ----------- EXPENSES: Insurance charges ................................................ 105,281 84,405 51,963 47,174 Administrative fees .............................................. 14,295 11,510 7,348 6,670 ------------- ----------- ----------- ----------- Net investment income (loss) ................................. 93,548 61,969 25,662 (9,915) ------------- ----------- ----------- ----------- REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain (loss) from investment transactions: Proceeds from investments sold ................................. 1,723,393 605,873 1,182,306 339,553 Cost of investments sold ....................................... 1,519,508 512,867 1,007,549 309,873 ------------- ----------- ----------- ----------- Net realized gain (loss) ..................................... 203,885 93,006 174,757 29,680 ------------- ----------- ----------- ----------- Change in unrealized gain (loss) on investments: Unrealized gain (loss) beginning of year ....................... 887,494 127,547 600,822 107,199 Unrealized gain (loss) end of year ............................. 1,919,945 887,494 1,487,533 600,822 ------------- ----------- ----------- ----------- Net change in unrealized gain (loss) for the year ............ 1,032,451 759,947 886,711 493,623 ------------- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations .................................... 1,329,884 914,922 1,087,130 513,388 ------------- ----------- ----------- ----------- UNIT TRANSACTIONS: Participant purchase payments .................................... 494,870 1,537,757 67,900 743,836 Participant transfers from other Travelers accounts .............. 662,878 3,050,730 228,054 801,633 Administrative and asset allocation charges ...................... (1,698) (1,747) (866) (914) Contract surrenders .............................................. (511,625) (283,894) (382,052) (58,952) Participant transfers to other Travelers accounts ................ (1,255,419) (693,899) (730,519) (282,603) Other payments to participants ................................... (17,498) (63,693) (48,265) - ------------- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from unit transactions ............................. (628,492) 3,545,254 (865,748) 1,203,000 ------------- ----------- ----------- ----------- Net increase (decrease) in net assets ........................ 701,392 4,460,176 221,382 1,716,388 NET ASSETS: Beginning of year .............................................. 9,499,377 5,039,201 5,036,678 3,320,290 ------------- ----------- ----------- ----------- End of year .................................................... $ 10,200,769 $9,499,377 $5,258,060 $5,036,678 ============= =========== =========== =========== SELECT INCOME PORTFOLIO ------------------------------ 1999 1998 ---- ---- INVESTMENT INCOME: Dividends ........................................................ $ 43,021 $ 20,869 ----------- ----------- EXPENSES: Insurance charges ................................................ 12,786 10,890 Administrative fees .............................................. 1,862 1,580 ----------- ----------- Net investment income (loss) ................................. 28,373 8,399 ----------- ----------- REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain (loss) from investment transactions: Proceeds from investments sold ................................. 541,033 137,271 Cost of investments sold ....................................... 545,357 128,490 ----------- ----------- Net realized gain (loss) ..................................... (4,324) 8,781 ----------- ----------- Change in unrealized gain (loss) on investments: Unrealized gain (loss) beginning of year ....................... 28,795 6,863 Unrealized gain (loss) end of year ............................. (7,036) 28,795 ----------- ----------- Net change in unrealized gain (loss) for the year ............ (35,831) 21,932 ----------- ----------- Net increase (decrease) in net assets resulting from operations .................................... (11,782) 39,112 ----------- ----------- UNIT TRANSACTIONS: Participant purchase payments .................................... 1,813 541,045 Participant transfers from other Travelers accounts .............. 54,732 501,765 Administrative and asset allocation charges ...................... (265) (180) Contract surrenders .............................................. (21,905) (33,981) Participant transfers to other Travelers accounts ................ (374,864) (101,704) Other payments to participants ................................... (63,153) (18,100) ----------- ----------- Net increase (decrease) in net assets resulting from unit transactions ............................. (403,642) 888,845 ----------- ----------- Net increase (decrease) in net assets ........................ (415,424) 927,957 NET ASSETS: Beginning of year .............................................. 1,358,219 430,262 ----------- ----------- End of year .................................................... $ 942,795 $1,358,219 =========== ===========
-12- 73 NOTES TO FINANCIAL STATEMENTS - CONTINUED
MFS EMERGING GROWTH PORTFOLIO MFS RESEARCH PORTFOLIO STRATEGIC STOCK PORTFOLIO CONVERTIBLE BOND PORTFOLIO - ------------------------------- -------------------------- ----------------------------- --------------------------- 1999 1998 1999 1998 1999 1998 1999 1998 ---- ---- ---- ---- ---- ---- ---- ---- $ - $ - $ - $ 7,324 $ 42 $ 36,872 $ 1,499 $ 10,406 - -------------- ------------- ------------- ------------ ------------ ----------- ----------- ----------- 827,846 448,892 87,995 14,961 43,817 8,866 14,450 1,083 115,875 62,560 12,248 2,019 6,414 1,300 1,983 157 - -------------- ------------- ------------- ------------ ------------ ----------- ----------- ----------- (943,721) (511,452) (100,243) (9,656) (50,189) 26,706 (14,934) 9,166 - -------------- ------------- ------------- ------------ ------------ ----------- ----------- ----------- 5,174,002 3,362,483 1,323,675 826,352 2,028,963 188,500 126,503 14,335 3,606,240 2,671,014 1,211,243 819,872 1,962,476 207,858 120,628 15,123 - -------------- ------------- ------------- ------------ ------------ ----------- ----------- ----------- 1,567,762 691,469 112,432 6,480 66,487 (19,358) 5,875 (788) - -------------- ------------- ------------- ------------ ------------ ----------- ----------- ----------- 13,444,437 1,705,372 346,202 - 54,865 - 7,840 - 65,968,039 13,444,437 2,286,004 346,202 131,006 54,865 288,910 7,840 - -------------- ------------- ------------- ------------ ------------ ----------- ----------- ----------- 52,523,602 11,739,065 1,939,802 346,202 76,141 54,865 281,070 7,840 - -------------- ------------- ------------- ------------ ------------ ----------- ----------- ----------- 53,147,643 11,919,082 1,951,991 343,026 92,439 62,213 272,011 16,218 - -------------- ------------- ------------- ------------ ------------ ----------- ----------- ----------- 8,608,350 16,687,370 2,860,263 3,215,369 1,152,394 2,501,332 361,703 284,595 17,932,199 11,582,826 4,077,189 2,190,409 1,046,992 659,886 1,429,916 148,423 (12,901) (8,737) (1,077) (103) (439) (107) (178) (6) (3,541,756) (848,584) (364,921) (27,653) (63,224) (9,686) (45,080) (205) (7,158,452) (5,159,790) (1,485,136) (1,018,554) (2,043,093) (51,299) (61,335) (7,999) (418,698) (297,165) (72,050) - (32,242) - (19,498) - - -------------- ------------- ------------- ------------ ------------ ----------- ----------- ----------- 15,408,742 21,955,920 5,014,268 4,359,468 60,388 3,100,126 1,665,528 424,808 - -------------- ------------- ------------- ------------ ------------ ----------- ----------- ----------- 68,556,385 33,875,002 6,966,259 4,702,494 152,827 3,162,339 1,937,539 441,026 59,809,668 25,934,666 4,702,494 - 3,162,339 - 441,026 - - -------------- ------------- ------------- ------------ ------------ ----------- ----------- ----------- $128,366,053 $59,809,668 $11,668,753 $ 4,702,494 $ 3,315,166 $3,162,339 $2,378,565 $ 441,026 ============== ============= ============= ============ ============ =========== =========== ===========
-13- 74 NOTES TO FINANCIAL STATEMENTS - CONTINUED 7. SCHEDULE OF FUND BD II OPERATIONS AND CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
DISCIPLINED MID CAP STOCK DISCIPLINED SMALL CAP STOCK PORTFOLIO PORTFOLIO ------------------------- ----------------------------- 1999 1998 1999 1998 ---- ---- ---- ---- INVESTMENT INCOME: Dividends ............................................. $ 121,426 $ 404 $ - $ 1,000 ----------- ---------- ----------- ---------- EXPENSES: Insurance charges ..................................... 28,169 1,131 7,853 904 Administrative fees ................................... 4,067 162 1,135 130 ----------- ---------- ----------- ---------- Net investment income (loss) ...................... 89,190 (889) (8,988) (34) ----------- ---------- ----------- ---------- REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain (loss) from investment transactions: Proceeds from investments sold ...................... 270,796 38,205 195,093 26,578 Cost of investments sold ............................ 265,459 42,630 183,162 31,600 ----------- ---------- ----------- ---------- Net realized gain (loss) .......................... 5,337 (4,425) 11,931 (5,022) ----------- ---------- ----------- ---------- Change in unrealized gain (loss) on investments: Unrealized gain (loss) beginning of year ............ 90,424 - 28,248 - Unrealized gain (loss) end of year .................. 581,208 90,424 215,916 28,248 ----------- ---------- ----------- ---------- Net change in unrealized gain (loss) for the year . 490,784 90,424 187,668 28,248 ----------- ---------- ----------- ---------- Net increase (decrease) in net assets resulting from operations ......................... 585,311 85,110 190,611 23,192 ----------- ---------- ----------- ---------- UNIT TRANSACTIONS: Participant purchase payments ......................... 1,452,266 365,542 398,084 217,711 Participant transfers from other Travelers accounts ... 2,733,163 195,953 450,066 127,325 Administrative and asset allocation charges ........... (883) (19) (146) (12) Contract surrenders ................................... (72,412) (647) (6,920) (129) Participant transfers to other Travelers accounts ..... (165,623) (26,234) (71,349) (25,905) Other payments to participants ........................ (86,900) (3,958) (66,062) - ----------- ---------- ----------- ---------- Net increase (decrease) in net assets resulting from unit transactions .................. 3,859,611 530,637 703,673 318,990 ----------- ---------- ----------- ---------- Net increase (decrease) in net assets ............. 4,444,922 615,747 894,284 342,182 NET ASSETS: Beginning of year ................................... 615,747 - 342,182 - ----------- ---------- ----------- ---------- End of year ......................................... $5,060,669 $615,747 $1,236,466 $342,182 =========== ========== =========== ========== AIM CAPITAL APPRECIATION PORTFOLIO --------------------------- 1999 1998 ---- ---- INVESTMENT INCOME: Dividends ............................................. $ - $ 117,554 ------------- ------------ EXPENSES: Insurance charges ..................................... 1,114,385 886,690 Administrative fees ................................... 157,217 124,887 ------------- ------------ Net investment income (loss) ...................... (1,271,602) (894,023) ------------- ------------ REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain (loss) from investment transactions: Proceeds from investments sold ...................... 10,240,726 4,140,986 Cost of investments sold ............................ 7,951,137 3,224,210 ------------- ------------ Net realized gain (loss) .......................... 2,289,589 916,776 ------------- ------------ Change in unrealized gain (loss) on investments: Unrealized gain (loss) beginning of year ............ 19,362,760 6,861,140 Unrealized gain (loss) end of year .................. 58,839,042 19,362,760 ------------- ------------ Net change in unrealized gain (loss) for the year . 39,476,282 12,501,620 ------------- ------------ Net increase (decrease) in net assets resulting from operations ......................... 40,494,269 12,524,373 ------------- ------------ UNIT TRANSACTIONS: Participant purchase payments ......................... 5,765,778 16,639,377 Participant transfers from other Travelers accounts ... 8,663,126 11,270,899 Administrative and asset allocation charges ........... (20,253) (20,631) Contract surrenders ................................... (6,527,626) (2,447,800) Participant transfers to other Travelers accounts ..... (7,261,045) (7,003,898) Other payments to participants ........................ (1,612,995) (1,048,620) ------------- ------------ Net increase (decrease) in net assets resulting from unit transactions .................. (993,015) 17,389,327 ------------- ------------ Net increase (decrease) in net assets ............. 39,501,254 29,913,700 NET ASSETS: Beginning of year ................................... 99,535,533 69,621,833 ------------- ------------ End of year ......................................... $139,036,787 $99,535,533 ============= ============
-14- 75 NOTES TO FINANCIAL STATEMENTS - CONTINUED
INVESCO STRATEGIC INCOME PUTNAM DIVERSIFIED INCOME ALLIANCE GROWTH PORTFOLIO PORTFOLIO MFS TOTAL RETURN PORTFOLIO PORTFOLIO - ---------------------------- --------------------------- --------------------------- -------------------------- 1999 1998 1999 1998 1999 1998 1999 1998 ---- ---- ---- ---- ---- ---- ---- ---- $ 15,224,827 $ 11,136,395 $ 479,368 $ 964,835 $ 10,102,355 $ 4,519,417 $ 2,775,899 $ 1,797,250 - ------------ ------------- ------------ ------------ ------------- ------------- ------------ ------------ 2,907,914 1,882,382 87,382 95,709 1,475,016 1,061,279 533,926 441,269 410,427 265,187 12,366 13,467 207,979 149,339 74,727 61,597 - ------------ ------------- ------------ ------------ ------------- ------------- ------------ ------------ 11,906,486 8,988,826 379,620 855,659 8,419,360 3,308,799 2,167,246 1,294,384 - ------------ ------------- ------------ ------------ ------------- ------------- ------------ ------------ 12,234,533 6,171,002 1,597,834 1,550,891 13,754,526 2,996,328 6,253,255 2,276,601 9,057,865 3,984,852 1,812,536 1,516,824 12,855,222 2,265,808 6,438,729 2,130,513 - ------------ ------------- ------------ ------------ ------------- ------------- ------------ ------------ 3,176,668 2,186,150 (214,702) 34,067 899,304 730,520 (185,474) 146,088 - ------------ ------------- ------------ ------------ ------------- ------------- ------------ ------------ 60,052,903 26,592,251 (776,069) 416,223 14,276,828 8,794,710 (178,435) 1,683,521 123,233,068 60,052,903 (1,202,742) (776,069) 6,779,660 14,276,828 (2,189,559) (178,435) - ------------ ------------- ------------ ------------ ------------- ------------- ------------ ------------ 63,180,165 33,460,652 (426,673) (1,192,292) (7,497,168) 5,482,118 (2,011,124) (1,861,956) - ------------ ------------- ------------ ------------ ------------- ------------- ------------ ------------ 78,263,319 44,635,628 (261,755) (302,566) 1,821,496 9,521,437 (29,352) (421,484) - ------------ ------------- ------------ ------------ ------------- ------------- ------------ ------------ 27,568,531 49,359,571 345,771 1,444,980 12,715,984 36,360,884 3,257,471 12,778,268 34,830,220 33,744,376 871,898 1,175,985 21,130,349 25,020,238 7,843,614 10,538,715 (46,936) (38,006) (1,099) (1,377) (21,685) (18,249) (8,219) (8,100) (14,009,674) (5,783,287) (661,628) (424,995) (6,606,288) (3,460,449) (3,068,836) (1,523,216) (15,482,964) (14,018,045) (1,061,970) (1,225,167) (15,169,153) (6,313,567) (5,026,592) (3,118,802) (3,618,750) (2,244,825) (89,803) (235,798) (1,777,762) (1,061,539) (963,784) (658,437) - ------------ ------------- ------------ ------------ ------------- ------------- ------------ ------------ 29,240,427 61,019,784 (596,831) 733,628 10,271,445 50,527,318 2,033,654 18,008,428 - ------------ ------------- ------------ ------------ ------------- ------------- ------------ ------------ 107,503,746 105,655,412 (858,586) 431,062 12,092,941 60,048,755 2,004,302 17,586,944 233,882,345 128,226,933 8,756,491 8,325,429 127,633,352 67,584,597 48,786,562 31,199,618 - ------------ ------------- ------------ ------------ ------------- ------------- ------------ ------------ $341,386,091 $233,882,345 $ 7,897,905 $ 8,756,491 $139,726,293 $127,633,352 $50,790,864 $48,786,562 ============ ============= ============ ============ ============= ============= ============ ============
-15- 76 NOTES TO FINANCIAL STATEMENTS - CONTINUED 7. SCHEDULE OF FUND BD II OPERATIONS AND CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
SMITH BARNEY INTERNATIONAL EQUITY SMITH BARNEY MONEY MARKET PORTFOLIO PORTFOLIO --------------------------------- -------------------------------- 1999 1998 1999 1998 ---- ---- ---- ---- INVESTMENT INCOME: Dividends ................................................. $ 209,437 $ $ 2,480,309 $ 2,017,269 -------------- -------------- -------------- --------------- EXPENSES: Insurance charges ......................................... 726,796 580,838 559,279 431,705 Administrative fees ....................................... 103,293 82,311 79,819 61,745 -------------- -------------- -------------- --------------- Net investment income (loss) .......................... (620,652) (663,149) 1,841,211 1,523,819 -------------- -------------- -------------- --------------- REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain (loss) from investment transactions: Proceeds from investments sold .......................... 423,682,187 264,579,558 447,289,359 300,946,604 Cost of investments sold ................................ 402,397,660 266,592,695 447,289,359 300,946,604 -------------- -------------- -------------- --------------- Net realized gain (loss) .............................. 21,284,527 (2,013,137) - - -------------- -------------- -------------- --------------- Change in unrealized gain (loss) on investments: Unrealized gain (loss) beginning of year ................ 3,992,500 (2,438,068) - - Unrealized gain (loss) end of year ...................... 26,618,429 3,992,500 - - -------------- -------------- -------------- --------------- Net change in unrealized gain (loss) for the year ..... 22,625,929 6,430,568 - - -------------- -------------- -------------- --------------- Net increase (decrease) in net assets resulting from operations ............................. 43,289,804 3,754,282 1,841,211 1,523,819 -------------- -------------- -------------- --------------- UNIT TRANSACTIONS: Participant purchase payments ............................. 4,074,476 10,293,289 10,087,291 21,445,937 Participant transfers from other Travelers accounts ....... 424,118,617 295,219,809 469,491,236 358,708,002 Administrative and asset allocation charges ............... (10,436) (11,295) (4,604) (3,745) Contract surrenders ....................................... (3,359,590) (1,781,717) (7,832,287) (2,355,637) Participant transfers to other Travelers accounts ......... (425,831,567) (293,326,178) (462,135,135) (354,956,853) Other payments to participants ............................ (752,688) (652,379) (802,309) (333,353) -------------- -------------- -------------- --------------- Net increase (decrease) in net assets resulting from unit transactions ...................... (1,761,188) 9,741,529 8,804,192 22,504,351 -------------- -------------- -------------- --------------- Net increase (decrease) in net assets ................. 41,528,616 13,495,811 10,645,403 24,028,170 NET ASSETS: Beginning of year ....................................... 58,313,421 44,817,610 56,013,899 31,985,729 -------------- -------------- -------------- --------------- End of year ............................................. $ 99,842,037 $ 58,313,421 $ 66,659,302 $ 56,013,899 ============== ============== ============== =============== SMITH BARNEY HIGH INCOME PORTFOLIO -------------------------------- 1999 1998 ---- ---- INVESTMENT INCOME: Dividends ................................................. $ 3,613,962 $ 3,075,417 ------------ ------------ EXPENSES: Insurance charges ......................................... 547,371 480,113 Administrative fees ....................................... 77,813 68,189 ------------ ------------ Net investment income (loss) .......................... 2,988,778 2,527,115 ------------ ------------ REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain (loss) from investment transactions: Proceeds from investments sold .......................... 8,604,031 3,834,210 Cost of investments sold ................................ 8,965,235 3,443,039 ------------ ------------ Net realized gain (loss) .............................. (361,204) 391,171 ------------ ------------ Change in unrealized gain (loss) on investments: Unrealized gain (loss) beginning of year ................ (888,047) 2,670,671 Unrealized gain (loss) end of year ...................... (2,835,522) (888,047) ------------ ------------ Net change in unrealized gain (loss) for the year ..... (1,947,475) (3,558,718) ------------ ------------ Net increase (decrease) in net assets resulting from operations ............................. 680,099 (640,432) ------------ ------------ UNIT TRANSACTIONS: Participant purchase payments ............................. 4,733,955 14,996,860 Participant transfers from other Travelers accounts ....... 6,100,515 11,848,781 Administrative and asset allocation charges ............... (7,199) (7,138) Contract surrenders ....................................... (3,354,037) (1,578,007) Participant transfers to other Travelers accounts ......... (8,047,140) (6,838,393) Other payments to participants ............................ (727,508) (723,059) ------------ ------------ Net increase (decrease) in net assets resulting from unit transactions ...................... (1,301,414) 17,699,044 ------------ ------------ Net increase (decrease) in net assets ................. (621,315) 17,058,612 NET ASSETS: Beginning of year ....................................... 51,908,797 34,850,185 ------------ ------------ End of year ............................................. $51,287,482 $51,908,797 ============ ============
-16- 77 NOTES TO FINANCIAL STATEMENTS - CONTINUED
SMITH BARNEY LARGE SMITH BARNEY LARGE CAP VALUE SMITH BARNEY PACIFIC BASIN TRAVELERS MANAGED INCOME CAPITALIZATION GROWTH PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO - -------------------------------- ------------------------------- ----------------------------- ----------------------------- 1999 1998 1999 1998 1999 1998 1999 1998 ---- ---- ---- ---- ---- ---- ---- ---- $ 177,735 $ 9,714 $ 4,037,512 $ 3,151,979 $ $ 58,199 $ 882,060 $ 540,590 - ------------- ------------- ------------- ------------- ------------- ------------- ------------ ------------ 510,977 32,872 1,183,710 900,154 76,310 46,605 266,429 134,186 73,520 4,656 166,820 126,694 10,846 6,584 37,764 18,699 - ------------- ------------- ------------- ------------- ------------- ------------- ------------ ------------ (406,762) (27,814) 2,686,982 2,125,131 (87,156) 5,010 577,867 387,705 - ------------- ------------- ------------- ------------- ------------- ------------- ------------ ------------ 1,134,469 91,843 9,503,640 3,406,709 8,267,325 31,497,782 4,011,367 1,295,854 995,694 89,852 8,508,215 2,453,068 7,294,721 31,922,287 4,014,313 1,168,760 - ------------- ------------- ------------- ------------- ------------- ------------- ------------ ------------ 138,775 1,991 995,425 953,641 972,604 (424,505) (2,946) 127,094 - ------------- ------------- ------------- ------------- ------------- ------------- ------------ ------------ 2,552,493 - 12,449,248 9,376,827 565,209 (275,942) 292,140 433,886 15,799,985 2,552,493 7,013,726 12,449,248 5,667,242 565,209 (248,319) 292,140 - ------------- ------------- ------------- ------------- ------------- ------------- ------------ ------------ 13,247,492 2,552,493 (5,435,522) 3,072,421 5,102,033 841,151 (540,459) (141,746) - ------------- ------------- ------------- ------------- ------------- ------------- ------------ ------------ 12,979,505 2,526,670 (1,753,115) 6,151,193 5,987,481 421,656 34,462 373,053 - ------------- ------------- ------------- ------------- ------------- ------------- ------------ ------------ 17,909,127 8,438,816 11,319,492 26,757,535 477,458 480,535 2,598,193 5,725,970 37,646,730 6,504,236 17,027,257 20,371,216 12,512,150 29,773,194 14,022,929 7,951,464 (8,204) (308) (19,321) (16,207) (1,115) (972) (2,751) (1,723) (1,893,293) (74,054) (5,306,761) (3,029,261) (469,612) (187,199) (1,244,184) (377,694) (3,826,825) (551,021) (11,283,305) (7,657,455) (8,401,053) (30,040,862) (3,909,160) (1,556,754) (70,541) - (1,583,279) (1,255,380) (28,914) (107,389) (341,481) (235,942) - ------------- ------------- ------------- ------------- ------------- ------------- ------------ ------------ 49,756,994 14,317,669 10,154,083 35,170,448 4,088,914 (82,693) 11,123,546 11,505,321 - ------------- ------------- ------------- ------------- ------------- ------------- ------------ ------------ 62,736,499 16,844,339 8,400,968 41,321,641 10,076,395 338,963 11,158,008 11,878,374 16,844,339 - 101,982,088 60,660,447 4,521,072 4,182,109 18,787,248 6,908,874 - ------------- ------------- ------------- ------------- ------------- ------------- ------------ ------------ $79,580,838 $16,844,339 $110,383,056 $101,982,088 $14,597,467 $ 4,521,072 $29,945,256 $18,787,248 ============= ============= ============= ============= ============= ============= ============ ============
-17- 78 NOTES TO FINANCIAL STATEMENTS - CONTINUED 7. SCHEDULE OF FUND BD II OPERATIONS AND CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
VAN KAMPEN ENTERPRISE PORTFOLIO COMBINED ---------------------------------- ------------------------------- 1999 1998 1999 1998 ---- ---- ---- ---- INVESTMENT INCOME: Dividends ................................................. $ 2,246,657 $ 4,717,666 $ 49,768,274 $ 37,385,822 ------------- ------------- ---------------- --------------- EXPENSES: Insurance charges ......................................... 1,301,450 907,473 13,840,204 9,566,234 Administrative fees ....................................... 183,949 127,806 1,953,832 1,346,728 ------------- ------------- ---------------- --------------- Net investment income (loss) .......................... 761,258 3,682,387 33,974,238 26,472,860 ------------- ------------- ---------------- --------------- REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain (loss) from investment transactions: Proceeds from investments sold .......................... 8,609,540 3,394,184 982,108,110 638,666,522 Cost of investments sold ................................ 6,642,258 2,198,347 947,682,247 632,379,285 ------------- ------------- ---------------- --------------- Net realized gain (loss) .............................. 1,967,282 1,195,837 34,425,863 6,287,237 ------------- ------------- ---------------- --------------- Change in unrealized gain (loss) on investments: Unrealized gain (loss) beginning of year ................ 23,714,655 10,279,585 156,719,386 73,480,229 Unrealized gain (loss) end of year ...................... 49,965,344 23,714,655 381,221,942 156,719,386 ------------- ------------- ---------------- --------------- Net change in unrealized gain (loss) for the year ..... 26,250,689 13,435,070 224,502,556 83,239,157 ------------- ------------- ---------------- --------------- Net increase (decrease) in net assets resulting from operations ............................. 28,979,229 18,313,294 292,902,657 115,999,254 ------------- ------------- ---------------- --------------- UNIT TRANSACTIONS: Participant purchase payments ............................. 12,407,567 23,951,480 138,224,630 281,104,022 Participant transfers from other Travelers accounts ....... 13,397,614 17,427,903 1,116,649,737 867,501,168 Administrative and asset allocation charges ............... (18,725) (16,358) (209,738) (175,802) Contract surrenders ....................................... (5,636,599) (2,458,500) (70,379,394) (29,495,629) Participant transfers to other Travelers accounts ......... (8,856,202) (6,740,800) (1,002,170,368) (749,605,940) Other payments to participants ............................ (2,006,647) (1,370,976) (17,040,756) (11,571,122) ------------- ------------- ---------------- --------------- Net increase (decrease) in net assets resulting from unit transactions ...................... 9,287,008 30,792,749 165,074,111 357,756,697 ------------- ------------- ---------------- --------------- Net increase (decrease) in net assets ................. 38,266,237 49,106,043 457,976,768 473,755,951 NET ASSETS: Beginning of year ....................................... 110,052,518 60,946,475 1,136,256,026 662,500,075 ------------- ------------- ---------------- --------------- End of year ............................................. $148,318,755 $110,052,518 $ 1,594,232,794 $1,136,256,026 ============= ============= ================ ===============
-18- 79 NOTES TO FINANCIAL STATEMENTS - CONTINUED 8. SCHEDULE OF ACCUMULATION AND ANNUITY UNITS FOR FUND BD II FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
EQUITY INDEX PORTFOLIO SMALL CAP PORTFOLIO TOTAL RETURN PORTFOLIO CLASS II ------------------------ ------------------------ ----------------------- 1999 1998 1999 1998 1999 1998 ---- ---- ---- ---- ---- ---- Accumulation and annuity units beginning of year ............................. 1,965,159 - 52,268,557 39,661,235 - - Accumulation units purchased and transferred from other Travelers accounts ..... 4,146,533 2,009,376 7,114,692 19,027,357 4,985,688 - Accumulation units redeemed and transferred to other Travelers accounts ....... (744,036) (44,217) (7,983,238) (6,433,894) (353,553) - Annuity units ................................... - - 6,500 13,859 - - ----------- ---------- ----------- ----------- ----------- -------- Accumulation and annuity units end of year ................................... 5,367,656 1,965,159 51,406,511 52,268,557 4,632,135 - =========== ========== =========== =========== =========== ========
SALOMON BROTHERS VARIABLE TOTAL SALOMON BROTHERS VARIABLE RETURN FUND INVESTORS FUND ------------------------------- ------------------------- 1999 1998 1999 1998 ---- ---- ---- ---- Accumulation and annuity units beginning of year .......................... 888,838 - 1,223,148 - Accumulation units purchased and transferred from other Travelers accounts .. 1,350,460 1,128,729 2,561,897 1,373,269 Accumulation units redeemed and transferred to other Travelers accounts .... (411,331) (239,891) (352,547) (150,121) Annuity units ................................ - - - - ---------- ---------- ---------- ----------- Accumulation and annuity units end of year ................................ 1,827,967 888,838 3,432,498 1,223,148 ========== ========== ========== =========== SELECT BALANCED PORTFOLIO ------------------------- 1999 1998 ---- ---- Accumulation and annuity units beginning of year .......................... 9,810,353 5,936,901 Accumulation units purchased and transferred from other Travelers accounts .. 1,736,921 4,661,426 Accumulation units redeemed and transferred to other Travelers accounts .... (1,094,297) (787,974) Annuity units ................................ - - ----------- ---------- Accumulation and annuity units end of year ................................ 10,452,977 9,810,353 =========== ==========
SELECT CONSERVATIVE PORTFOLIO SELECT GROWTH PORTFOLIO ----------------------------- ----------------------- 1999 1998 1999 1998 ---- ---- ---- ---- Accumulation and annuity units beginning of year ......................... 1,728,666 968,176 7,685,371 4,587,140 Accumulation units purchased and transferred from other Travelers accounts . 475,681 889,003 903,523 3,985,489 Accumulation units redeemed and transferred to other Travelers accounts ... (460,488) (128,513) (1,394,246) (887,258) Annuity units ............................... - - - - ---------- ---------- ----------- ---------- Accumulation and annuity units end of year ............................... 1,743,859 1,728,666 7,194,648 7,685,371 ========== ========== =========== ========== SELECT HIGH GROWTH PORTFOLIO ---------------------------- 1999 1998 ---- ---- Accumulation and annuity units beginning of year ......................... 4,057,171 3,048,275 Accumulation units purchased and transferred from other Travelers accounts . 221,575 1,336,968 Accumulation units redeemed and transferred to other Travelers accounts ... (900,355) (328,072) Annuity units ............................... - - ---------- ---------- Accumulation and annuity units end of year ............................... 3,378,391 4,057,171 ========== ==========
-19- 80 NOTES TO FINANCIAL STATEMENTS - CONTINUED 8. SCHEDULE OF ACCUMULATION AND ANNUITY UNITS FOR FUND BD II FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
SELECT INCOME PORTFOLIO MFS EMERGING GROWTH PORTFOLIO MFS RESEARCH PORTFOLIO ----------------------- ----------------------------- ---------------------- 1999 1998 1999 1998 1999 1998 ---- ---- ---- ---- ---- ---- Accumulation and annuity units beginning of year ............................. 1,177,339 389,101 37,458,508 21,550,926 4,538,697 - Accumulation units purchased and transferred from other Travelers accounts ..... 49,214 923,029 14,515,184 20,689,579 6,435,758 5,613,771 Accumulation units redeemed and transferred to other Travelers accounts ....... (405,053) (134,791) (5,949,388) (4,781,997) (1,759,085) (1,075,074) Annuity units ................................... - - - - - - ---------- ---------- ----------- ----------- ----------- ----------- Accumulation and annuity units end of year ................................... 821,500 1,177,339 46,024,304 37,458,508 9,215,370 4,538,697 ========== ========== =========== =========== =========== ===========
DISCIPLINED MID CAP STOCK STRATEGIC STOCK PORTFOLIO CONVERTIBLE BOND PORTFOLIO PORTFOLIO ------------------------- -------------------------- ------------------------- 1999 1998 1999 1998 1999 1998 ---- ---- ---- ---- ---- ---- Accumulation and annuity units beginning of year ............................. 3,380,160 - 440,546 - 578,564 - Accumulation units purchased and transferred from other Travelers accounts ..... 2,260,759 3,447,134 1,705,946 449,233 3,968,349 613,019 Accumulation units redeemed and transferred to other Travelers accounts ....... (2,225,179) (66,974) (119,551) (8,687) (306,266) (34,455) Annuity units ................................... - - - - - - ----------- ---------- ---------- --------- ---------- --------- Accumulation and annuity units end of year ................................... 3,415,740 3,380,160 2,026,941 440,546 4,240,647 578,564 =========== ========== ========== ========= ========== =========
DISCIPLINED SMALL CAP STOCK AIM CAPITAL APPRECIATION PORTFOLIO PORTFOLIO ALLIANCE GROWTH PORTFOLIO --------------------------- ------------------------ ------------------------- 1999 1998 1999 1998 1999 1998 ---- ---- ---- ---- ---- ---- Accumulation and annuity units beginning of year ............................. 382,099 - 71,346,201 57,787,169 80,722,988 56,417,647 Accumulation units purchased and transferred from other Travelers accounts ..... 931,348 414,538 9,782,754 22,217,787 19,927,101 33,471,642 Accumulation units redeemed and transferred to other Travelers accounts ....... (152,994) (32,439) (10,576,347) (8,658,755) (10,492,369) (9,166,301) Annuity units ................................... - - - - - - ---------- --------- ------------ ----------- ------------ ----------- Accumulation and annuity units end of year ................................... 1,160,453 382,099 70,552,608 71,346,201 90,157,720 80,722,988 ========== ========= ============ =========== ============ ===========
-20- 81 NOTES TO FINANCIAL STATEMENTS - CONTINUED 8. SCHEDULE OF ACCUMULATION AND ANNUITY UNITS FOR FUND BD II FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
INVESCO STRATEGIC INCOME PUTNAM DIVERSIFIED INCOME PORTFOLIO MFS TOTAL RETURN PORTFOLIO PORTFOLIO ------------------------- -------------------------- ------------------------- 1999 1998 1999 1998 1999 1998 ---- ---- ---- ---- ---- ---- Accumulation and annuity units beginning of year ......................... 6,454,395 5,969,617 70,312,855 41,066,792 36,896,384 23,457,375 Accumulation units purchased and transferred from other Travelers accounts . 922,242 1,878,273 18,435,377 35,565,885 8,439,990 17,421,700 Accumulation units redeemed and transferred to other Travelers accounts ... (1,377,750) (1,393,495) (12,853,284) (6,333,554) (6,893,776) (4,000,490) Annuity units ............................... - - 6,703 13,732 9,065 17,799 ----------- ----------- ------------ ------------ ----------- ----------- Accumulation and annuity units end of year ............................... 5,998,887 6,454,395 75,901,651 70,312,855 38,451,663 36,896,384 =========== =========== ============ ============ =========== ===========
SMITH BARNEY INTERNATIONAL EQUITY SMITH BARNEY MONEY MARKET PORTFOLIO PORTFOLIO --------------------------------- ------------------------- 1999 1998 1999 1998 ---- ---- ---- ---- Accumulation and annuity units beginning of year ........................ 44,747,699 36,182,945 47,393,861 28,077,883 Accumulation units purchased and transferred from other Travelers accounts 305,560,059 231,937,728 399,332,307 327,092,440 Accumulation units redeemed and transferred to other Travelers accounts .. (304,097,753) (223,392,552) (392,254,485) (307,776,462) Annuity units .............................. 10,364 19,578 - - ------------- ------------- ------------- ------------- Accumulation and annuity units end of year .............................. 46,220,369 44,747,699 54,471,683 47,393,861 ============= ============= ============= ============= SMITH BARNEY HIGH INCOME PORTFOLIO ------------------------ 1999 1998 ---- ---- Accumulation and annuity units beginning of year ........................ 35,810,119 23,853,145 Accumulation units purchased and transferred from other Travelers accounts 7,446,550 18,226,399 Accumulation units redeemed and transferred to other Travelers accounts .. (8,365,806) (6,285,817) Annuity units .............................. 8,352 16,392 ----------- ----------- Accumulation and annuity units end of year .............................. 34,899,215 35,810,119 =========== ===========
SMITH BARNEY LARGE CAPITALIZATION SMITH BARNEY LARGE CAP VALUE GROWTH PORTFOLIO PORTFOLIO --------------------------------- ---------------------------- 1999 1998 1999 1998 ---- ---- ---- ---- Accumulation and annuity units beginning of year .......................... 13,623,717 - 49,228,856 31,762,755 Accumulation units purchased and transferred from other Travelers accounts .. 40,258,424 14,230,722 13,312,090 23,614,325 Accumulation units redeemed and transferred to other Travelers accounts .... (4,103,081) (607,005) (8,659,565) (6,160,832) Annuity units ................................ - - 5,906 12,608 ----------- ----------- ----------- ----------- Accumulation and annuity units end of year ................................ 49,779,060 13,623,717 53,887,287 49,228,856 =========== =========== =========== =========== SMITH BARNEY PACIFIC BASIN PORTFOLIO -------------------------- 1999 1998 ---- ---- Accumulation and annuity units beginning of year .......................... 6,105,674 5,986,528 Accumulation units purchased and transferred from other Travelers accounts .. 14,952,721 43,412,299 Accumulation units redeemed and transferred to other Travelers accounts .... (10,873,667) (43,293,153) Annuity units ................................ - - ------------ ------------ Accumulation and annuity units end of year ................................ 10,184,728 6,105,674 ============ ============
-21- 82 NOTES TO FINANCIAL STATEMENTS - CONTINUED 8. SCHEDULE OF ACCUMULATION AND ANNUITY UNITS FOR FUND BD II FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
TRAVELERS MANAGED INCOME PORTFOLIO VAN KAMPEN ENTERPRISE PORTFOLIO -------------------------- ------------------------------- 1999 1998 1999 1998 ---- ---- ---- ---- Accumulation and annuity units beginning of year .......................... 14,385,067 5,489,797 42,395,521 29,020,276 Accumulation units purchased and transferred from other Travelers accounts .. 12,810,019 10,565,765 9,542,553 18,140,146 Accumulation units redeemed and transferred to other Travelers accounts .... (4,227,587) (1,688,188) (6,030,699) (4,775,872) Annuity units ................................ 9,120 17,693 5,148 10,971 ----------- ----------- ----------- ----------- Accumulation and annuity units end of year ................................ 22,976,619 14,385,067 45,912,523 42,395,521 =========== =========== =========== =========== COMBINED ---------------------------- 1999 1998 ---- ---- Accumulation and annuity units beginning of year .......................... 647,006,513 421,213,683 Accumulation units purchased and transferred from other Travelers accounts .. 914,085,715 864,337,031 Accumulation units redeemed and transferred to other Travelers accounts .... (805,417,776) (638,666,833) Annuity units ................................ 61,158 122,632 ------------- ------------- Accumulation and annuity units end of year ................................ 755,735,610 647,006,513 ============= =============
-22- 83 INDEPENDENT AUDITORS' REPORT 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, 1999, and the related statement of operations for the year then ended and the statement of changes in net assets for each of the two years in the period then ended. These financial statements are the responsibility of management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of shares owned as of December 31, 1999, 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, 1999, 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. /s/ KPMG LLP Hartford, Connecticut February 18, 2000 -23- 84 Independent Auditors KPMG LLP 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 Prospectus for The Travelers Fund BD II for Variable Annuities product(s) 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) (12-99) Printed in U.S.A. 85 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, 1999 and 1998, and the related statements of income, changes in retained earnings and accumulated other changes in equity from non-owner sources and cash flows for each of the years in the three-year period ended December 31, 1999. 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, 1999 and 1998, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 1999, in conformity with generally accepted accounting principles. /s/ KPMG LLP - --------------------- Hartford, Connecticut January 18, 2000 F-1 86 THE TRAVELERS LIFE AND ANNUITY COMPANY STATEMENTS OF INCOME ($ in thousands)
FOR THE YEARS ENDED DECEMBER 31, 1999 1998 1997 ---- ---- ---- REVENUES Premiums $25,270 $23,677 $35,190 Net investment income 177,179 171,003 168,653 Realized investment gains (losses) (4,973) 18,493 44,871 Fee income 54,749 17,718 5,004 Other revenues 13,045 11,168 3,159 - ---------------------------------------------------------------------------------------------------------------------------- Total Revenues 265,270 242,059 256,877 - ---------------------------------------------------------------------------------------------------------------------------- BENEFITS AND EXPENSES Current and future insurance benefits 78,072 81,371 95,639 Interest credited to contractholders 56,216 51,535 35,165 Amortization of deferred acquisition costs 38,902 15,956 4,944 Operating expenses 11,326 5,012 11,554 - ---------------------------------------------------------------------------------------------------------------------------- Total Benefits and Expenses 184,516 153,874 147,302 - ---------------------------------------------------------------------------------------------------------------------------- Income before federal income taxes 80,754 88,185 109,575 - ---------------------------------------------------------------------------------------------------------------------------- Federal income taxes: Current 21,738 18,917 33,859 Deferred expense 6,410 11,783 4,344 - ---------------------------------------------------------------------------------------------------------------------------- Total Federal Income Taxes 28,148 30,700 38,203 ============================================================================================================================ Net income $52,606 $57,485 $71,372 ============================================================================================================================
See Notes to Financial Statements. F-2 87 THE TRAVELERS LIFE AND ANNUITY COMPANY BALANCE SHEETS ($ in thousands)
DECEMBER 31, 1999 1998 - -------------------------------------------------------------------------------------------------------------------------- ASSETS Fixed maturities, available for sale at fair value (cost, $1,764,329; $1,707,347) $1,713,948 $1,838,681 Equity securities, at fair value (cost, $34,373; $25,826) 33,169 26,685 Mortgage loans 155,719 174,565 Short-term securities 81,119 126,176 Other invested assets 190,622 136,122 - -------------------------------------------------------------------------------------------------------------------------- Total Investments 2,174,577 2,302,229 - -------------------------------------------------------------------------------------------------------------------------- Separate accounts 4,795,165 2,178,474 Deferred acquisition costs 350,088 177,808 Deferred federal income taxes 74,478 12,395 Premium balances receivable 22,420 16,074 Other assets 84,605 57,524 - -------------------------------------------------------------------------------------------------------------------------- Total Assets $7,501,333 $4,744,504 - -------------------------------------------------------------------------------------------------------------------------- LIABILITIES Future policy benefits $950,959 $963,171 Contractholder funds 1,174,636 947,411 Separate accounts 4,795,165 2,178,474 Other liabilities 114,408 114,690 - -------------------------------------------------------------------------------------------------------------------------- Total Liabilities 7,035,168 4,203,746 - -------------------------------------------------------------------------------------------------------------------------- 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 167,316 167,314 Retained earnings 335,161 282,555 Accumulated other changes in equity from non-owner sources (39,312) 87,889 - -------------------------------------------------------------------------------------------------------------------------- Total Shareholder's Equity 466,165 540,758 - -------------------------------------------------------------------------------------------------------------------------- Total Liabilities and Shareholder's Equity $7,501,333 $4,744,504 ==========================================================================================================================
See Notes to Financial Statements. F-3 88 THE TRAVELERS LIFE AND ANNUITY COMPANY STATEMENTS OF CHANGES IN RETAINED EARNINGS AND ACCUMULATED OTHER CHANGES IN EQUITY FROM NON-OWNER SOURCES ($ in thousands)
- ----------------------------------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN RETAINED EARNINGS 1999 1998 1997 - ----------------------------------------------------------------------------------------------------------- Balance, beginning of year $282,555 $225,070 $167,698 Net income 52,606 57,485 71,372 Dividends to parent - - 14,000 =========================================================================================================== Balance, end of year $335,161 $282,555 $225,070 =========================================================================================================== - ----------------------------------------------------------------------------------------------------------- STATEMENTS OF ACCUMULATED OTHER CHANGES IN EQUITY FROM NON-OWNER SOURCES - ----------------------------------------------------------------------------------------------------------- Balance, beginning of year $87,889 $70,277 $33,856 Unrealized gains (losses), net of tax (127,201) 17,612 36,421 =========================================================================================================== Balance, end of year $(39,312) $87,889 $70,277 =========================================================================================================== - ----------------------------------------------------------------------------------------------------------- SUMMARY OF CHANGES IN EQUITY FROM NON-OWNER SOURCES - ----------------------------------------------------------------------------------------------------------- Net Income $52,606 $57,485 $71,372 Other changes in equity from non-owner sources (127,201) 17,612 36,421 - ----------------------------------------------------------------------------------------------------------- Total changes in equity from non-owner sources $(74,595) $75,097 $107,793 ===========================================================================================================
See Notes to Financial Statements. F-4 89 THE TRAVELERS LIFE AND ANNUITY COMPANY STATEMENTS OF CASH FLOWS INCREASE (DECREASE) IN CASH ($ in thousands)
FOR THE YEARS ENDED DECEMBER 31, 1999 1998 1997 - ---------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Premiums collected $24,804 $22,300 $34,553 Net investment income received 150,107 146,158 170,460 Benefits and claims paid (94,503) (90,872) (90,820) Interest credited to contractholders (50,219) (51,535) (35,165) Operating expenses paid (235,166) (122,327) (64,698) Income taxes paid (29,369) (25,214) (22,440) Other, including fee income 46,028 (46,099) (16,128) - ---------------------------------------------------------------------------------------------------------------------------- Net Cash Provided by (Used in) Operating Activities (188,318) (75,391) 8,018 - ---------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from maturities of investments Fixed maturities 213,402 113,456 81,899 Mortgage loans 28,002 25,462 8,972 Proceeds from sales of investments Fixed maturities 774,096 1,095,976 856,846 Equity securities 5,146 6,020 12,404 Mortgage loans - - 5,483 Real estate held for sale - - 4,493 Purchases of investments Fixed maturities (1,025,110) (1,320,704) (1,020,803) Equity securities (12,524) (13,653) (6,382) Mortgage loans (8,520) (39,158) (41,967) Policy loans, net (5,316) (2,010) (1,144) Short-term securities (purchases) sales, net 45,057 43,054 (88,067) Other investments (purchases) sales, net (44,621) 1,110 (51,502) Securities transactions in course of settlement, net (7,033) 36,459 10,526 - ---------------------------------------------------------------------------------------------------------------------------- Net Cash Used in Investing Activities (37,421) (53,988) (229,242) - ---------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Contractholder fund deposits 308,953 211,476 325,932 Contractholder fund withdrawals (83,817) (83,036) (89,145) Dividends to parent company - - (14,000) - ---------------------------------------------------------------------------------------------------------------------------- Net Cash Provided by Financing Activities 225,136 128,440 222,787 - ---------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash (603) (939) 1,563 ============================================================================================================================ Cash at December 31, $21 $624 $1,563 ============================================================================================================================
See Notes to Financial Statements. F-5 90 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 Citigroup Inc. (Citigroup). 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 Company offers 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. Certain prior year amounts have been reclassified to conform to the 1999 presentation. ACCOUNTING CHANGES 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). This statement 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. Effective January 1, 1998, the Company adopted the collateral provisions of FAS 125 which were not effective until 1998 in accordance with Statement of Financial Accounting Standards No. 127, "Deferral of the Effective Date of Certain Provisions of SFAS 125". The adoption of the collateral provisions of FAS 125 created additional assets and liabilities on the Company's statement of financial position related to the recognition of securities provided and received as collateral. There was no impact on the results of operations from the adoption of the collateral provisions of FAS 125. F-6 91 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL USE During the third quarter of 1998, the Company adopted (effective January 1, 1998) the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants' Statement of Position 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use" (SOP 98-1). SOP 98-1 provides guidance on accounting for the costs of computer software developed or obtained for internal use and for determining when specific costs should be capitalized or expensed. The adoption of SOP 98-1 had no impact on the Company's financial condition, statement of operations or liquidity. ACCOUNTING BY INSURANCE AND OTHER ENTERPRISES FOR INSURANCE - RELATED ASSESSMENTS In January 1999, the Company adopted (effective January 1, 1999) 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. The adoption of this SOP had no impact on the Company's financial condition, results of operations or liquidity. 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. Also included in fixed maturities are loan-backed and structured securities, which are amortized using the retrospective method. The effective yield used to determine amortization is calculated based upon actual historical and projected future cash flows, which are obtained from a widely accepted securities data provider. 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 current real estate financing market. Impaired loans were insignificant at December 31, 1999 and 1998. 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 92 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) Other invested assets include partnership investments and real estate joint ventures accounted for on the equity method of accounting. All changes in equity of these investments are recorded in net investment income. Accrual of investment 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. DERIVATIVE FINANCIAL INSTRUMENTS The Company uses derivative financial instruments, including financial futures, 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. Hedge accounting is used to account for derivatives. To qualify for hedge accounting the changes in value of the derivative must be expected to substantially offset the changes in value of the hedged item. Hedges are monitored to ensure that there is a high correlation between the derivative instruments and the hedged investment. Gains and losses arising from financial futures contracts are used to adjust the basis of hedged investments and are recognized in net investment income over the life of the investment. Forward contracts, and interest rate options were not significant at December 31, 1999 and 1998. Information concerning derivative financial instruments is included in Note 4. 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 fee income. 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. F-8 93 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) DEFERRED ACQUISITION COSTS 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 15 to 20-year amortization period is used for life insurance, and a seven 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. VALUE OF INSURANCE IN FORCE The value of insurance in force is an asset recorded at the time of acquisition of an insurance company. It represents the actuarially determined present value of anticipated profits to be realized from annuity 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 annuity business acquired. The annuity contracts are amortized employing a level yield method. The value of insurance in force is reviewed periodically for recoverability to determine if any adjustment is required. 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 3.3% to 10.0%. OTHER LIABILITIES Included in Other Liabilities is the Company's estimate of its liability for guaranty fund and other insurance-related assessments. State guaranty fund assessments are based upon the Company's share of premium written or received in one or more years prior to an insolvency occurring in the industry. Once an insolvency has occurred, the Company recognizes a liability for such assessments if it is probable that an assessment will be imposed and the amount of the assessment can be reasonably estimated. At December 31, 1999, the Company's liability for guaranty fund assessments was not significant. F-9 94 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) 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 (NAIC) 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. The NAIC recently completed a process intended to codify statutory accounting practices for certain insurance enterprises. As a result of this process, the NAIC issued a revised statutory Accounting Practices and Procedures Manual - version effective January 1, 2001 (the revised Manual) that will be effective for years beginning January 1, 2001. It is expected that the State of Connecticut will require that, effective January 1, 2001, insurance companies domiciled in Connecticut prepare their statutory basis financial statements in accordance with the revised Manual subject to any deviations prescribed or permitted by the Connecticut insurance commissioner. The Company has not yet determined the impact that this change will have on its statutory capital and surplus. PREMIUMS Premiums are recognized as revenues when due. Reserves are established for the portion of premiums that will be earned in future periods. FEE INCOME Fee income includes mortality and equity protection charges and fees earned on Universal Life and Deferred Annuity businesses. 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 comprises 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. FUTURE APPLICATION OF ACCOUNTING STANDARDS In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (FAS 133). This statement establishes accounting and reporting standards for derivative instruments, F-10 95 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) including certain derivative instruments embedded in other contracts, (collectively referred to as derivatives) and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designated as (a) a hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment, (b) a hedge of the exposure to variable cash flows of a forecasted transaction, or (c) a hedge of the foreign currency exposure of a net investment in a foreign operation, an unrecognized firm commitment, an available-for-sale security, or a foreign-currency-denominated forecasted transaction. The accounting for changes in the fair value of a derivative (that is, gains and losses) depends on the intended use of the derivative and the resulting designation. Upon initial application of FAS 133, hedging relationships must be designated anew and documented pursuant to the provisions of this statement. FAS 133 was to be effective for all fiscal quarters of fiscal years beginning after June 15, 1999. However, in June 1999 the FASB issued Statement of Financial Standards No. 137, "Deferral of the Effective Date of FASB Statement No. 133" (FAS 137) which allows entities that have not adopted FAS 133 to defer its effective date to all fiscal quarters of all fiscal years beginning after June 15, 2000. The Company expects to adopt the deferral provisions of FAS 137 and has not yet determined the impact that FAS 133 will have on its financial statements. 2. REINSURANCE The Company participates in reinsurance in order to limit losses, minimize exposure to large risks, provide additional capacity for future growth and to effect business-sharing arrangements. Reinsurance is accomplished through various plans of reinsurance, primarily yearly renewable term coinsurance and modified coinsurance. The Company remains primarily liable as the direct insurer on all risks reinsured. Total in-force business ceded under reinsurance contracts is $12.8 billion and $8.8 billion at December 31, 1999 and 1998, including $63 million and $70 million, respectively to TIC. Total life insurance premiums ceded were $6.5 million, $4.2 million and $2.4 million in 1999, 1998 and 1997, respectively. Ceded premiums paid to TIC were immaterial for these same periods. 3. SHAREHOLDER'S EQUITY Shareholder's Equity and Dividend Availability The Company's statutory net income (loss) was $(23.4) million, $(3.2) million and $80.3 million for the years ended December 31, 1999, 1998 and 1997, respectively. Statutory capital and surplus was $294 million and $328 million at December 31, 1999 and 1998, 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 $29.4 million is available in 2000 for dividend payments by the Company without prior approval of the Connecticut Insurance Department. F-11 96 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) Accumulated Other Changes in Equity from Non-Owner Sources, Net of Tax Changes in each component of Accumulated Other Changes in Equity From Non-Owner Sources were as follows:
- -------------------------------------------------------------------------------------------------------------------- NET ACCUMULATED UNREALIZED FOREIGN OTHER CHANGES GAINS ON CURRENCY IN EQUITY FROM INVESTMENT TRANSLATION NON-OWNER ($ in thousands) SECURITIES ADJUSTMENT SOURCES - -------------------------------------------------------------------------------------------------------------------- BALANCE, JANUARY 1, 1997 $33,856 $ -- $33,856 Unrealized gains on investment securities, net of tax of $35,316 65,587 -- 65,587 Less: reclassification adjustment for gains included in net income, net of tax of $(15,705) (29,166) -- (29,166) - -------------------------------------------------------------------------------------------------------------------- CURRENT PERIOD CHANGE 36,421 -- 36,421 - -------------------------------------------------------------------------------------------------------------------- BALANCE, DECEMBER 31, 1997 70,277 -- 70,277 Unrealized gain on investment securities, net of tax of $15,957 29,632 -- 29,632 Less: reclassification adjustment for gains included in net income, net of tax of $(6,473) (12,020) -- (12,020) - -------------------------------------------------------------------------------------------------------------------- CURRENT PERIOD CHANGE 17,612 -- 17,612 - -------------------------------------------------------------------------------------------------------------------- BALANCE, DECEMBER 31, 1998 87,889 -- 87,889 Unrealized gains on investment securities, net of tax of $(70,234) (130,433) -- (130,433) Less: reclassification adjustment for losses included in net income, net of tax of $1,741 3,232 -- 3,232 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- CURRENT PERIOD CHANGE (127,201) -- (127,201) ==================================================================================================================== BALANCE, DECEMBER 31, 1999 $ (39,312) $ -- $ (39,312) ====================================================================================================================
4. DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS Derivative Financial Instruments The Company uses derivative financial instruments, including financial futures, interest rate swaps, options and forward contracts as a means of hedging exposure to interest rate, equity price, and foreign currency 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 F-12 97 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) associated with these instruments can be less than these amounts. For interest rate swaps, options, and forward contracts, credit risk is limited to the amounts that it would cost the Company to replace the contracts. Financial futures contracts and purchased listed option contracts have very little credit risk since organized exchanges are the counterparties. The Company as a writer of option contracts has no credit risk since the counterparty has no performance obligation after it has paid a cash premium. 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 that 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 which 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, 1999 and 1998, the Company held financial futures contracts with notional amounts of $48.7 million and $41.5 million, respectively. The deferred gains and/or losses on these contracts were not significant at December 31, 1999 and 1998. At December 31, 1999 and 1998, the Company's futures contracts had no fair value because these contracts are marked to market and settled in cash daily. The Company enters into interest rate swaps in connection with other financial instruments to provide greater risk diversification and better match assets and liabilities. Under interest rate swaps, the Company agrees with other parties to exchange, at specified intervals, the difference between fixed-rate and floating-rate interest amounts calculated by reference to an agreed notional principal amount. Generally, no cash is exchanged at the outset of the contract and no principal payments are made by either party. A single net payment is usually made by one counterparty at each due date. Swap agreements are not exchange traded so they are subject to the risk of default by the counterparty. As of December 31, 1999 and 1998, the Company held interest rate swap contracts with notional amounts of $231.1 million and $165.3 million, respectively. The fair value of these financial instruments was $9.5 million (loss position) at December 31, 1999, and was $3.4 million (gain position) and $.7 million (loss position) at December 31, 1998. The fair values were determined using the discounted cash flow method. At December 31, 1999, the Company held swap contracts with affiliate counterparties with a notional amount of $43.7 million and a fair value of $4.7 million (loss position). F-13 98 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) The Company uses equity option contracts to manage its exposure to changes in equity market prices that arise from the sale of certain insurance products. To hedge against adverse changes in the equity market prices, the Company enters long positions in equity option contracts with major financial institutions. These contracts allow the Company, for a fee, the right to receive a payment if the Standard and Poor's 500 Index falls below agreed upon strike prices. At December 31, 1999 and 1998, the Company held equity option contracts with notional amounts of $275.4 million and zero, respectively. The fair value of these financial instruments was $32.6 million (gain position) at December 31, 1999. The fair values were determined using the discounted cash flow method. The off-balance sheet risks of interest rate options and forward contracts were not significant at December 31, 1999 and 1998. 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 and joint ventures. The off-balance sheet risk of these financial instruments was not significant at December 31, 1999 and 1998. 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, 1999, investments in fixed maturities had a carrying value and a fair value of $1.8 billion and $1.7 billion, respectively, compared with a carrying value and a fair value of $1.7 billion and $1.8 billion, respectively, at December 31, 1998. See Notes 1 and 10. At December 31, 1999, mortgage loans had a carrying value of $155.7 million and a fair value of $156.0 million and in 1998 had a carrying value of $174.6 million and a fair value of $185.7 million. In estimating fair value, the Company used interest rates reflecting the current real estate financing market. The carrying values of short-term securities and policy loans totaling $91.3 million and $131.1 million in 1999 and 1998, respectively, approximated their fair values and are included in other invested assets. The carrying values of $57.6 million and $36.5 million of financial instruments classified as other assets approximated their fair values at December 31, 1999 and 1998, respectively. The carrying values of $100.2 million and $98.4 million of financial instruments classified as other liabilities also approximated their fair values at December 31, 1999 and 1998, respectively. Fair value is determined using various methods, including discounted cash flows, as appropriate for the various financial instruments. F-14 99 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) At December 31, 1999, contractholder funds with defined maturities had a carrying value of $878.9 million and a fair value of $780.5 million, compared with a carrying value of $725.6 million and a fair value of $698.1 million at December 31, 1998. 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 $481.8 million and a fair value of $409.2 million at December 31, 1999, compared with a carrying value of $483.0 million and a fair value of $442.5 million at December 31, 1998. These contracts generally are valued at surrender value. 5. COMMITMENTS AND CONTINGENCIES Financial Instruments with Off-Balance Sheet Risk See Note 4. Litigation In the ordinary course of business, the Company is a defendant or co-defendant in various litigation matters incidental to and typical of the businesses in which it is engaged. In the opinion of the Company's management, 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. BENEFIT PLANS Pension and Other Postretirement Benefits The Company participates in a qualified, noncontributory defined benefit pension plan sponsored by Citigroup. In addition, the Company provides certain other postretirement benefits to retired employees through a plan sponsored by The Travelers Insurance Group Inc. (TIGI), TIC's direct parent. The Company's share of net expense for the qualified pension and other postretirement benefit plans was not significant for 1999, 1998 and 1997. 401(k) Savings Plan Substantially all of the Company's employees are eligible to participate in a 401(k) savings plan sponsored by Citigroup. 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 1999, 1998 and 1997. 7. 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 & 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 F-15 100 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) 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, 1999 and 1998, the pool totaled approximately $2.6 billion and $2.3 billion, respectively. The Company's share of the pool amounted to $31.4 million and $93.1 million at December 31, 1999 and 1998, 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 $450 million. TIC's obligation is to pay in full to any owner or beneficiary of the TTM Modified Guaranteed Annuity Contracts principal and interest as and when due under the annuity contract to the extent that the Company fails to make such payment. In addition, TIC guarantees that the Company will maintain a minimum statutory capital and surplus level. The Company sold structured settlement annuities to the insurance affiliates of Travelers Property Casualty Corp. (TAP). Premiums and deposits were $8.9 million and $70.6 million for 1998 and 1997, respectively. The reduction in premiums and deposits from 1997 to 1998 was a result of a decision during 1998 to use TIC as the primary issuer of structured settlement annuities and the Company as the assignment company. Policy reserves and contractholder fund liabilities associated with these structured settlements were $766.4 million and $808.7 million at December 31, 1999 and 1998, respectively. The Company began distributing variable annuity products through its affiliate, the Financial Consultants of Salomon Smith Barney (SSB) in 1995. Premiums and deposits related to these products were $1.1 billion, $932.1 million and $615.6 million in 1999, 1998 and 1997, respectively. In 1996, the Company began marketing various life products through SSB as well. New premiums related to such products were $40.8 million, $44.5 million and $24.4 million in 1999, 1998 and 1997, respectively. During 1998, the Company began distributing deferred annuity products through its affiliates Primerica Financial Services (Primerica), Citibank, N.A. (Citibank) and The Copeland Companies (Copeland). Deposits received from Primerica were $763 million and $216 million. Deposits from Citibank and Copeland were immaterial for 1999 and 1998. The Company participates in a stock option plan sponsored by Citigroup that provides for the granting of stock options in Citigroup common stock to officers and key employees. To further encourage employee stock ownership, during 1997 Citigroup introduced the WealthBuilder stock option program. Under this program, all employees meeting certain requirements are granted Citigroup stock options. Most leasing functions for TIGI and its subsidiaries are handled by TAP. Rent expense related to these leases is shared by the companies on a cost allocation method based generally on estimated usage by department. The Company's rent expense was insignificant in 1999, 1998 and 1997. F-16 101 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) At December 31, 1999 and 1998, the Company had investments in Tribeca Investments, L.L.C., an affiliate of the Company, in the amounts of $22.3 million and $18.3 million, respectively, included in other invested assets. The Company has loaned $16.6 million of Corporate Bonds to SSB as of December 31, 1999. 8. FEDERAL INCOME TAXES The net deferred tax assets at December 31, 1999 and 1998 were comprised of the tax effects of temporary differences related to the following assets and liabilities:
($ in thousands) 1999 1998 ---- ---- ---------------------------------------------------------------------------------------------------------------- Deferred Tax Assets: Benefit, reinsurance and other reserves $161,629 $121,150 Investments, net 14,270 -- Other 2,394 2,810 ---------------------------------------------------------------------------------------------------------------- Total 178,293 123,960 ---------------------------------------------------------------------------------------------------------------- Deferred Tax Liabilities: Investments, net -- (56,103) Deferred acquisition costs and value of insurance in force (100,537) (51,993) Other (1,208) (1,399) ---------------------------------------------------------------------------------------------------------------- Total (101,745) (109,495) ---------------------------------------------------------------------------------------------------------------- Net Deferred Tax (Liability) Asset Before Valuation Allowance 76,548 14,465 Valuation Allowance for Deferred Tax Assets (2,070) (2,070) ---------------------------------------------------------------------------------------------------------------- Net Deferred Tax Asset After Valuation Allowance $74,478 $12,395 ----------------------------------------------------------------------------------------------------------------
F-17 102 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) TIC and its life insurance subsidiaries, including the Company, 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. The $2.1 million valuation allowance is sufficient to cover any capital losses on investments that may exceed the capital gains able to be generated in the life insurance group's consolidated federal income tax return based upon management's best estimate of the character of the reversing temporary differences. Reversal of the valuation allowance is contingent upon the recognition of future capital gains or a change in circumstances that causes the recognition of the benefits to become more likely than not. There was no change in the valuation allowance during 1999. 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 $74.5 million "net deferred tax asset after valuation allowance" as of December 31, 1999, is fully recoverable against expected future years' taxable ordinary income and capital gains. At December 31, 1999, the Company had 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 is approximately $2 million. Income taxes are not provided for on this amount because under current U.S. tax rules such taxes will become payable only to the extent such amounts are distributed as a dividend or exceed limits prescribed by federal law. Distributions are not contemplated from this account. At current rates the maximum amount of such tax would be approximately $700 thousand. 9. NET INVESTMENT INCOME
-------------------------------------------------------------------------------------------------------------- FOR THE YEAR ENDED DECEMBER 31, ($ in thousands) 1999 1998 1997 -------------------------------------------------------------------------------------------------------------- GROSS INVESTMENT INCOME Fixed maturities $136,039 $130,825 $120,900 Joint venture and partnership income 22,175 22,107 32,336 Mortgage loans 16,126 15,969 14,905 Other 4,417 3,322 2,284 -------------------------------------------------------------------------------------------------------------- 178,757 172,223 170,425 -------------------------------------------------------------------------------------------------------------- Investment expenses 1,578 1,220 1,772 -------------------------------------------------------------------------------------------------------------- Net investment income $177,179 $171,003 $168,653 --------------------------------------------------------------------------------------------------------------
F-18 103 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) 10. INVESTMENTS AND INVESTMENT GAINS (LOSSES) Realized investment gains (losses) for the periods were as follows:
-------------------------------------------------------------------------------------------------------------- FOR THE YEAR ENDED DECEMBER 31, ($ in thousands) 1999 1998 1997 -------------------------------------------------------------------------------------------------------------- REALIZED INVESTMENT GAINS (LOSSES) Fixed maturities $2,657 $15,620 $29,236 Equity Securities 1,193 1,819 8,385 Other 1,025 525 2,180 Joint venture and partnerships (9,848) 529 5,070 -------------------------------------------------------------------------------------------------------------- Total Realized Investment Gains (Losses) $(4,973) $18,493 $44,871 --------------------------------------------------------------------------------------------------------------
Changes in net unrealized investment gains (losses) that are included as accumulated other changes in equity from non-owner sources in shareholder's equity were as follows:
-------------------------------------------------------------------------------------------------------------- FOR THE YEAR ENDED DECEMBER 31, ($ in thousands) 1999 1998 1997 -------------------------------------------------------------------------------------------------------------- UNREALIZED INVESTMENT GAINS (LOSSES) Fixed maturities $(181,715) $24,336 $34,451 Other (13,979) 2,760 21,581 -------------------------------------------------------------------------------------------------------------- Total unrealized investment gains (losses) (195,694) 27,096 56,032 Related taxes (68,493) 9,484 19,611 -------------------------------------------------------------------------------------------------------------- Change in unrealized investment gains (losses) (127,201) 17,612 36,421 Balance beginning of year 87,889 70,277 33,856 -------------------------------------------------------------------------------------------------------------- Balance End of Year $(39,312) $87,889 $70,277 --------------------------------------------------------------------------------------------------------------
F-19 104 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) Fixed Maturities The amortized cost and fair values of investments in fixed maturities were as follows:
----------------------------------------------------------------------------------------------------------------- GROSS GROSS DECEMBER 31, 1999 AMORTIZED COST UNREALIZED UNREALIZED FAIR ($ in thousands) GAINS LOSSES VALUE ----------------------------------------------------------------------------------------------------------------- AVAILABLE FOR SALE: Mortgage-backed securities - CMOs and pass-through securities $211,864 $2,103 $(7,818) $206,149 U.S. Treasury securities and obligations of U.S. Government and government agencies and authorities 116,082 2,613 (3,704) 114,991 Obligations of states and political subdivisions 29,801 7 (3,312) 26,496 Debt securities issued by foreign governments 44,159 2,813 (198) 46,774 All other corporate bonds 1,358,769 10,351 (52,811) 1,316,309 Redeemable preferred stock 3,654 41 (466) 3,229 ----------------------------------------------------------------------------------------------------------------- Total Available For Sale $1,764,329 $17,928 $(68,309) $1,713,948 -----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------- GROSS GROSS DECEMBER 31, 1998 AMORTIZED COST UNREALIZED UNREALIZED FAIR ($ in thousands) GAINS LOSSES VALUE ----------------------------------------------------------------------------------------------------------------- AVAILABLE FOR SALE: Mortgage-backed securities - CMOs and pass-through securities $220,105 $ 11,571 $(193) $231,483 U.S. Treasury securities and obligations of U.S. Government and government agencies and authorities 289,376 53,782 (274) 342,884 Obligations of states and political subdivisions 28,749 994 (17) 29,726 Debt securities issued by foreign governments 40,786 2,966 (375) 43,377 All other corporate bonds 1,124,298 75,870 (13,000) 1,187,168 Redeemable preferred stock 4,033 119 (109) 4,043 ----------------------------------------------------------------------------------------------------------------- Total Available For Sale $1,707,347 $145,302 $(13,968) $1,838,681 -----------------------------------------------------------------------------------------------------------------
Proceeds from sales of fixed maturities classified as available for sale were $774 million, $1.1 billion and $857 million in 1999, 1998 and 1997, respectively. Gross gains of $24.6 million, $32.6 million and $38.1 million and gross losses of $22.0 million, $17.0 million and $8.9 million in 1999, 1998 and 1997, respectively were realized on those sales. F-20 105 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) 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 $486.2 million and $427.0 million at December 31, 1999 and 1998, respectively. The amortized cost and fair value of fixed maturities available for sale at December 31, 1999, by contractual maturity, are shown below. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
------------------------------------------------------------------------------------------- AMORTIZED FAIR ($ in thousands) COST VALUE ------------------------------------------------------------------------------------------- MATURITY: Due in one year or less $40,556 $40,092 Due after 1 year through 5 years 327,632 322,082 Due after 5 years through 10 years 451,635 441,307 Due after 10 years 732,642 704,318 ------------------------------------------------------------------------------------------- 1,552,465 1,507,799 ------------------------------------------------------------------------------------------- Mortgage-backed securities 211,864 206,149 ------------------------------------------------------------------------------------------- Total Maturity $1,764,329 $1,713,948 -------------------------------------------------------------------------------------------
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. At December 31, 1999 and 1998, the Company held CMOs with a market value of $167.7 million and $181.6 million, respectively. The Company's CMO holdings were 65.9% and 62.9% collateralized by GNMA, FNMA or FHLMC securities at December 31, 1999 and 1998, respectively. F-21 106 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) Equity Securities The cost and market values of investments in equity securities were as follows:
------------------------------------------------------------------------------------------------------------------ EQUITY SECURITIES: GROSS UNREALIZED GROSS UNREALIZED ($ in thousands) COST GAINS LOSSES FAIR VALUE ------------------------------------------------------------------------------------------------------------------ DECEMBER 31, 1999 Common stocks $4,966 $ 730 $ (256) $5,440 Non-redeemable preferred stocks 29,407 533 (2,211) 27,729 ------------------------------------------------------------------------------------------------------------------ Total Equity Securities $34,373 $1,263 $(2,467) $33,169 ------------------------------------------------------------------------------------------------------------------ DECEMBER 31, 1998 Common stocks $5,185 $ 889 $(292) $5,782 Non-redeemable preferred stocks 20,641 707 (445) 20,903 ------------------------------------------------------------------------------------------------------------------ Total Equity Securities $25,826 $1,596 $(737) $26,685 ------------------------------------------------------------------------------------------------------------------
Proceeds from sales of equity securities were $5.1 million, $6.0 million and $12.4 million in 1999, 1998 and 1997, respectively. Gross gains of $1.5 million, $2.6 million and $8.6 million were realized on those sales during 1999, 1998 and 1997, respectively. Gross losses were insignificant during the same periods. Mortgage Loans Underperforming assets include delinquent mortgage loans, loans in the process of foreclosure and loans modified at interest rates below market. At December 31, 1999 and 1998, the Company's mortgage loan portfolios consisted of the following:
----------------------------------------------------------------------------------- ($ in thousands) 1999 1998 ----------------------------------------------------------------------------------- Current Mortgage Loans $151,814 $170,635 Underperforming Mortgage Loans 3,905 3,930 ----------------------------------------------------------------------------------- Total $155,719 $174,565 -----------------------------------------------------------------------------------
Aggregate annual maturities on mortgage loans at December 31, 1999 are as follows: ---------------------------------------------------------------- ($ in thousands) 2000 $20,791 2001 1,563 2002 6,292 2003 4,896 2004 4,167 Thereafter 118,010 ================================================================ Total $155,719 ================================================================
F-22 107 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) Concentrations Significant individual investment concentrations included:
--------------------------------------------------------------------- ($ in thousands) 1999 1998 --------------------------------------------------------------------- Tishman Speyer Joint Venture $63,199 $62,400 Bell South Corp. 23,689 53,322 ---------------------------------------------------------------------
The Company participates in a short-term investment pool maintained by an affiliate. See Note 7. Included in fixed maturities are below investment grade assets totaling $141.4 million and $102.4 million at December 31, 1999 and 1998, respectively. The Company defines its below investment grade assets as those securities rated "Ba1" or below by external rating agencies, or the equivalent by internal analysts when a public rating does not exist. Such assets include publicly traded below investment grade bonds and certain other privately issued bonds and notes that are classified as below investment grade bonds. The Company's industry concentrations of investments, primarily fixed maturities, were as follows:
--------------------------------------------------------------------- ($ in thousands) 1999 1998 --------------------------------------------------------------------- Banking $152,848 $160,713 Transportation 139,519 155,116 Electric utilities 103,897 109,027 Finance 103,385 69,916 Oil & Gas 102,739 45,172 ---------------------------------------------------------------------
The Company held investments in Foreign Banks in the amount of $125 million and $115 million at December 31, 1999 and 1998, respectively, which are included in the table above. Below investment grade assets included in the preceding table were not significant. 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 December 31, 1999 and 1998 balance sheets that were non-income producing were insignificant. F-23 108 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) Restructured Investments Mortgage loan and debt securities which were restructured at below market terms at December 31, 1999 and 1998 were insignificant. The new terms of restructured investments 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. 11. DEPOSIT FUNDS AND RESERVES At December 31, 1999, the Company had $2.1 billion of life and annuity deposit funds and reserves. Of that total, $1.4 billion were not subject to discretionary withdrawal based on contract terms. The remaining $.7 billion 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 $.5 billion of liabilities that are surrenderable with market value adjustments. The remaining $.2 billion of life insurance and individual annuity liabilities are subject to discretionary withdrawals with an average surrender charge of 4.9%. The life insurance risks would have to be underwritten again if transferred to another carrier, which is considered a significant deterrent for long-term policyholders. Insurance liabilities that are surrendered or withdrawn from the Company are reduced by outstanding policy loans and related accrued interest prior to payout. 12. RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES The following table reconciles net income to net cash provided by (used in) operating activities:
------------------------------------------------------------------------------------------------------------------ FOR THE YEAR ENDED DECEMBER 31, 1999 1998 1997 ---- ---- ---- ($ in thousands) ------------------------------------------------------------------------------------------------------------------ Net Income From Continuing Operations $ 52,606 $ 57,485 $ 71,372 Adjustments to reconcile net income to cash provided by operating activities: Realized gains (4,973) (18,493) (44,871) Deferred federal income taxes 6,410 11,783 4,344 Amortization of deferred policy acquisition costs 38,902 15,956 4,944 Additions to deferred policy acquisition costs (211,182) (120,278) (56,975) Investment income accrued (27,072) (3,821) 908 Premium balances (466) (6,786) (3,450) Insurance reserves (16,431) (8,431) 3,981 Other (26,112) (2,806) 27,765 ------------------------------------------------------------------------------------------------------------------ Net cash provided by (used in) operations $(188,318) $(75,391) $8,018 ------------------------------------------------------------------------------------------------------------------
13. NON-CASH INVESTING AND FINANCING ACTIVITIES There were no significant non-cash investing and financing activities for 1999, 1998 and 1997. F-24 109 VINTAGE STATEMENT OF ADDITIONAL INFORMATION FUND BD II FOR VARIABLE ANNUITIES Individual Variable Annuity Contract issued by The Travelers Life and Annuity Company One Tower Square Hartford, Connecticut 06183 L-12540S May 2000 110 PART C Other Information Item 24. Financial Statements and Exhibits (a) The financial statements of the Registrant and the Report of Independent Auditors thereto are contained in the Registrant's Annual Report and are included in the Statement of Additional Information. The financial statements of the Registrant include: Statement of Assets and Liabilities as of December 31, 1999 Statement of Operations for the year ended December 31, 1999 Statement of Changes in Net Assets for the years ended December 31, 1999 and 1998 Statement of Investments as of December 31, 1999 Notes to Financial Statements The financial statements of The Travelers Life and Annuity Company and the report of Independent Auditors, are contained in the Statement of Additional Information. The financial statements of The Travelers Life and Annuity Company include: Statements of Income for the years ended December 31, 1999, 1998 and 1997 Balance Sheets as of December 31, 1999 and 1998 Statements of Changes in Retained Earnings and Accumulated Other Changes in Equity from Non-Owner Sources for the years ended December 31, 1999, 1998 and 1997 Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997 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(a). Distribution and Principal Underwriting Agreement among the Registrant, The Travelers Life and Annuity Company and CFBDS, Inc. (Incorporated herein by reference to Exhibit 3(a) to Pre-Effective Amendment No. 1 to the Registration Statement on Form N-4, File No. 333-60215 filed November 9, 1998) 3(b). Selling Agreement. (Incorporated herein by reference to Exhibit 3(b) to the Registration Statement on Form N-4, filed May 23, 1997.) (Incorporated herein by reference to Exhibit 3(b) to Pre-Effective Amendment No. 1 to the Registration Statement on Form N-4, File No. 333-60215 filed November 9, 1998) 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.) 111 6(a). Charter of The Travelers Life and Annuity Company, as amended on April 10, 1990. (Incorporated herein by reference to Registration Statement on Form N-4, File No. 33-58131, filed via Edgar on March 17, 1995.) 6(b). By-Laws of The Travelers Life and Annuity Company, as amended on October 20, 1994. (Incorporated herein by reference to Registration Statement on Form N-4, File No. 33-58131, filed via Edgar on March 17, 1995.) 7. None. 8. None. 9. Opinion of Counsel as to the legality of securities being registered. (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. Consent of KPMG 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 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.) 15(b). Powers of Attorney authorizing Ernest J. Wright or Kathleen A. McGah as signatory for George C. Kokulis, Katherine M. Sullivan and Glenn D. Lammey. Item 25. Directors and Officers of the Depositor
Name and Principal Positions and Offices Business Address with Insurance Company - ---------------------- ---------------------- George C. Kokulis* Director, President and Chief Executive Officer Katherine M. Sullivan* Director and Senior Vice President Marc P. Weill** Director and Senior Vice President Mary Jean Thornton* Executive Vice President and Chief Information Officer Stuart Baritz*** Senior Vice President Barry Jacobson* Senior Vice President Russell H. Johnson* Senior Vice President Marla Berman Lewitus* Senior Vice President and General Counsel Brendan Lynch* Senior Vice President Warren H. May* Senior Vice President Kathleen Preston* Senior Vice President
112
David A. Tyson* Senior Vice President F. Denney Voss* Senior Vice President Glenn D. Lammey* Chief Financial Officer, Chief Accounting Officer and Controller David A. Golino* Vice President Donald R. Munson, Jr.* Vice President Anthony Cocolla Second Vice President Scott R. Hansen Second Vice President Linn K. Richardson* Second Vice President and Actuary Paul Weissman Second Vice President and Actuary Ernest J. Wright* Vice President and Secretary Kathleen A. McGah* Assistant Secretary and Deputy General Counsel
Principal Business Address: * The Travelers Life and Annuity Company ** Citigroup Inc. One Tower Square 388 Greenwich Street Hartford, CT 06183 New York, N.Y. 10013 *** Travelers Portfolio Group 1345 Avenue of the Americas New York, NY 10105
Item 26. Persons Controlled by or Under Common Control with the Depositor or Registrant Incorporated herein by reference to Exhibit 16 to Post-Effective Amendment No.2 to the Registration Statement on Form N-4, File No. 333-40191, filed April 12, 2000. Item 27. Number of Contract Owners As of February 29, 2000, 17,980 contract owners held qualified and non-qualified contracts offered by the Registrant. Item 28. Indemnification Sections 33-770 to 33-778, inclusive 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 wholly 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 and in all other cases, his conduct was at least not opposed to the best interests of the corporation, and in a criminal case he had no reasonable cause to believe his conduct was unlawful; 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 113 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. Citigroup Inc. also provides liability insurance for its directors and officers and the directors and officers of its subsidiaries, including the Registrant. This insurance provides for coverage against loss from claims made against directors and officers in their capacity as such, including, subject to certain exceptions, liabilities under the federal securities laws. Rule 484 Undertaking Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (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. Item 29. Principal Underwriter (a) CFBDS, Inc. 21 Milk Street Boston, MA 02109 CFBDS, Inc. also serves as principal underwriter for the following : (a) CFBDS, the Registrant's Distributor, is also the distributor for CitiFunds(SM) International Growth & Income Portfolio, CitiFunds(SM) International Growth Portfolio, CitiFunds(SM) U.S. Treasury Reserves, CitiFunds(SM) Cash Reserves, CitiFunds(SM) Premium U.S. Treasury Reserves, CitiFunds(SM) Premium Liquid Reserves, CitiFunds(SM) Institutional U.S. Treasury Reserves, CitiFunds(SM) Institutional Liquid Reserves, CitiFunds(SM) Institutional Cash Reserves, CitiFunds(SM) Tax Free Reserves, CitiFunds(SM) Institutional Tax Free Reserves, CitiFunds(SM) California Tax Free Reserves, CitiFunds(SM) Connecticut Tax Free Reserves, CitiFunds(SM) New York Tax Free Reserves, CitiFunds(SM) New York Tax Free Income Portfolio, CitiFunds(SM) National Tax Free Income Portfolio, CitiFunds(SM) California Tax Free Income Portfolio, CitiFunds(SM) Intermediate Income Portfolio, CitiFunds(SM) Balanced Portfolio, CitiFunds(SM) Small Cap Value Portfolio, CitiFunds(SM) Growth & Income Portfolio, CitiFunds(SM) Large Cap Growth Portfolio, CitiFunds(SM) Small Cap Growth Portfolio, CitiFunds(SM) Short-Term U.S. Government Income Portfolio, CitiFunds(SM) Emerging Asian Markets Equity Portfolio CitiSelect(R) VIP Folio 200, CitiSelect(R) VIP Folio 300, CitiSelect(R) VIP Folio 400, CitiSelect(R) VIP Folio 500, CitiFunds(SM) Small Cap Growth VIP Portfolio, CitiSelect(R) Folio 100, CitiSelect(R) Folio 200, CitiSelect(R) Folio 300, CitiSelect(R) Folio 400, and CitiSelect(R) Folio 500. 114 CFBDS is also the placement agent for Large Cap Value Portfolio, Small Cap Value Portfolio, International Portfolio, Foreign Bond Portfolio, Intermediate Income Portfolio, Short-Term Portfolio, Growth & Income Portfolio, U.S. Fixed Income Portfolio, High Yield Portfolio, Large Cap Growth Portfolio, Small Cap Growth Portfolio, International Equity Portfolio, Balanced Portfolio, Government Income Portfolio, Tax Free Reserves Portfolio, Cash Reserves Portfolio and U.S. Treasury Reserves Portfolio, Emerging Asian Markets Equity Portfolio. CFBDS also serves as the distributor for the following funds: 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 Separate Account PF for Variable Annuities, The Travelers Separate Account PF II for Variable Annuities, The Travelers Separate Account QP for Variable Annuities, The Travelers Separate Account TM for Variable Annuities, The Travelers Separate Account TM II for Variable Annuities, The Travelers Separate Account Five for Variable Annuities, The Travelers Separate Account Six for Variable Annuities, The Travelers Separate Account Seven for Variable Annuities, The Travelers Separate Account Eight for Variable Annuities, The Travelers Separate Account Nine for Variable Annuities, The Travelers Separate Account Ten for Variable Annuities, The Travelers Fund UL for Variable Life Insurance, The Travelers Fund UL II for Variable Life Insurance, The Travelers Fund UL III 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 MGA, The Travelers Separate Account MGA II, 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 CFBDS is also the distributor for the following funds: Emerging Growth Fund, Government Fund, Growth and Income Fund, International Equity Fund, Municipal Fund, Balanced Investments, Emerging Markets Equity Investments, Government Money Investments, High Yield Investments, Intermediate Fixed Income Investments, International Equity Investments, International Fixed Income Investments, Large Capitalization Growth Investments, Large Capitalization Value Equity Investments, Long-Term Bond Investments, Mortgage Backed Investments, Municipal Bond Investments, Small Capitalization Growth Investments, Small Capitalization Value Equity Investments, Appreciation Portfolio, Diversified Strategic Income Portfolio, Emerging Growth Portfolio, Equity Income Portfolio, Equity Index Portfolio, Growth & Income Portfolio, Intermediate High Grade Portfolio, International Equity Portfolio, Money Market Portfolio, Total Return Portfolio. CFBDS is also the distributor for the following Smith Barney Mutual Fund registrants: Smith Barney Adjustable Rate Government Income Fund, Smith Barney Aggressive Growth Fund Inc., Smith Barney Appreciation Fund, Smith Barney Arizona Municipals Fund Inc., Smith Barney California Municipals Fund Inc., Smith Barney Large Cap Blend Fund, Smith Barney Fundamental Value Fund Inc., Smith Barney Balanced Fund, Smith Barney Convertible Fund, Smith Barney Diversified Strategic Income Fund, Smith Barney Exchange Reserve Fund, Smith Barney High Income Fund, Smith Barney Municipal High Income Fund, Smith Barney Premium Total Return Fund, Smith Barney Total Return Bond Fund, Smith Barney Contrarian Fund, Smith Barney Government Securities Fund, Smith Barney Hansberger Global Small Cap Value Fund, Smith Barney Hansberger Global Value Fund, Smith Barney Investment Grade Bond Fund, Smith Barney Special Equities Fund, Smith Barney Intermediate Maturity California Municipals Fund, Smith Barney Intermediate Maturity New York Municipals Fund, Smith Barney Large Capitalization Growth Fund, Smith Barney S&P 500 Index Fund, Smith Barney 115 Mid Cap Blend Fund, Smith Barney Managed Governments Fund Inc., Smith Barney Managed Municipals Fund Inc., Smith Barney Massachusetts Municipals Fund, Cash Portfolio, Government Portfolio, Retirement Portfolio, California Money Market Portfolio, Florida Portfolio, Georgia Portfolio, Limited Term Portfolio, New York Money Market Portfolio, New York Portfolio, Pennsylvania Portfolio, Smith Barney Municipal Money Market Fund, Inc., Smith Barney Natural Resources Fund Inc., Smith Barney New Jersey Municipals Fund Inc., Smith Barney Oregon Municipals Fund, Zeros Plus Emerging Growth Series 2000, Smith Barney Security and Growth Fund, Smith Barney Small Cap Blend Fund, Inc., Smith Barney Telecommunications Income Fund, Smith Barney High Income Portfolio, Smith Barney Large Cap Value Portfolio, Smith Barney International Equity Portfolio, Smith Barney Large Capitalization Growth Portfolio, Smith Barney Money Market Portfolio, Smith Barney Pacific Basin Portfolio, Balanced Portfolio, Conservative Portfolio, Growth Portfolio, High Growth Portfolio, Income Portfolio, Global Portfolio, Select Balanced Portfolio, Select Conservative Portfolio, Select Growth Portfolio, Select High Growth Portfolio, Select Income Portfolio, Concert Social Awareness Fund, Large Cap Value Fund, Short-Term High Grade Bond Fund, U.S. Government Securities Fund, Cash Portfolio, Government Portfolio, Municipal Portfolio, Concert Peachtree Growth Fund, Income and Growth Portfolio, Reserve Account Portfolio, U.S. Government/High Quality Securities Portfolio, Emerging Markets Portfolio, European Portfolio, Global Government Bond Portfolio, International Balanced Portfolio, International Equity Portfolio, Pacific Portfolio, AIM Capital Appreciation Portfolio, Alliance Growth Portfolio, GT Global Strategic Income Portfolio, MFS Total Return Portfolio, Putnam Diversified Income Portfolio, TBC Managed Income Portfolio, Van Kampen American Capital Enterprise Portfolio, Centurion Tax-Managed U.S. Equity Fund, Centurion Tax-Managed International Equity Fund, Centurion U.S. Protection Fund, Centurion International Protection Fund, Global High-Yield Bond Fund, International Equity Fund, Emerging Opportunities Fund, Core Equity Fund, Long-Term Bond Fund, Global Dimensions Fund L.P., Citicorp Private Equity L.P., AIM V.I. Capital Appreciation Fund, AIM V.I. Government Series Fund, AIM V.I. Growth Fund, AIM V.I. International Equity Fund, AIM V.I. Value Fund, Fidelity VIP Growth Portfolio, Fidelity VIP High Income Portfolio, Fidelity VIP Equity Income Portfolio, Fidelity VIP Overseas Portfolio, Fidelity VIP II Contrafund Portfolio, Fidelity VIP II Index 500 Portfolio, MFS World Government Series, MFS Money Market Series, MFS Bond Series, MFS Total Return Series, MFS Research Series, MFS Emerging Growth Series. CFBDS is also the distributor for the following Salomon Brothers funds: Salomon Brothers Institutional Money Market Fund, Salomon Brothers Cash Management Fund, Salomon Brothers New York Municipal Money Market Fund, Salomon Brothers National Intermediate Municipal Fund, Salomon Brothers U.S. Government Income Fund, Salomon Brothers High Yield Bond Fund, Salomon Brothers Strategic Bond Fund, Salomon Brothers Total Return Fund, Salomon Brothers Asia Growth Fund, Salomon Brothers Capital Fund Inc, Salomon Brothers Investors Fund Inc, Salomon Brothers Opportunity Fund Inc, Salomon Brothers Institutional High Yield Bond Fund, Salomon Brothers Institutional Emerging Markets Debt Fund, Salomon Brothers Variable Investors Fund, Salomon Brothers Variable Capital Fund, Salomon Brothers Variable Total Return Fund, Salomon Brothers Variable High Yield Bond Fund, Salomon Brothers Variable Strategic Bond Fund, Salomon Brothers Variable U.S. Government Income Fund, and Salomon Brothers Variable Asia Growth Fund. (b) The information required by this Item 29 with respect to each director and officer of CFBDS, Inc. is incorporated by reference to Schedule A of Form BD filed by CFBDS pursuant to the Securities and Exchange Act of 1934 (File No. 8-32417). (c) Not Applicable. 116 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. 117 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 18th day of April 2000. THE TRAVELERS FUND BD II FOR VARIABLE ANNUITIES (Registrant) THE TRAVELERS LIFE AND ANNUITY COMPANY (Depositor) By:*GLENN D. LAMMEY ----------------------------------------- Glenn D. Lammey, Chief Financial Officer, Chief Accounting Officer and Controller As required by the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on the 18th day of April 2000. *GEORGE C. KOKULIS Director, President and Chief Executive Officer - -------------------- (George C. Kokulis) (Principal Executive Officer) *KATHERINE M. SULLIVAN Director - ------------------------------ (Katherine M. Sullivan) *MARC P. WEILL Director - -------------------- (Marc P. Weill) *By: /s/Ernest J. Wright, Attorney-in-Fact 118 EXHIBIT INDEX
Exhibit No. Description Method of Filing - ------- ----------- ---------------- 10. Consent of KPMG LLP, Independent Certified Electronically Public Accountants. 15(b). Powers of Attorney authorizing Ernest J. Wright and Electronically Kathleen A. McGah as signatory for George C. Kokulis, Katherine M. Sullivan and Glenn D. Lammey.
EX-99.10 2 CONSENT OF KPMG LLP 1 Exhibit 10 Consent of Independent Certified Public Accountants Board of Directors The Travelers Life and Annuity Company We consent to the use of our reports included herein and to the reference to our firm as experts under the heading "Independent Accountants." /s/KPMG LLP Hartford, Connecticut April 14, 2000 EX-99.15.B 3 POWERS OF ATTORNEY 1 Exhibit 15(b) THE TRAVELERS FUND BD II FOR VARIABLE ANNUITIES POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: That I, GEORGE C. KOKULIS of Simsbury, Connecticut, Director, President and Chief Executive Officer of The Travelers Life and Annuity Company (hereafter the "Company"), do hereby make, constitute and appoint ERNEST J. WRIGHT, Secretary of said Company, and KATHLEEN A. McGAH, Assistant Secretary of said Company, or either one of them acting alone, my true and lawful attorney-in-fact, for me, and in my name, place and stead, to sign registration statements on behalf of said Company on Form N-4 or other appropriate form under the Securities Act of 1933 and the Investment Company Act of 1940 for The Travelers Fund BD II for Variable Annuities, a separate account of the Company dedicated specifically to the funding of variable annuity contracts to be offered by said Company, and further, to sign any and all amendments thereto, including post-effective amendments, that may be filed by the Company on behalf of said registrant. IN WITNESS WHEREOF, I have hereunto set my hand this 10th day of April 7, 2000. /s/George C. Kokulis Director, President and Chief Executive Officer The Travelers Life and Annuity Company 2 THE TRAVELERS FUND BD II FOR VARIABLE ANNUITIES POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: That I, KATHERINE M. SULLIVAN of Longmeadow, Massachusetts, a Director of The Travelers Life and Annuity Company (hereafter the "Company"), do hereby make, constitute and appoint ERNEST J. WRIGHT, Secretary of said Company, and KATHLEEN A. McGAH, Assistant Secretary of said Company, or either one of them acting alone, my true and lawful attorney-in-fact, for me, and in my name, place and stead, to sign registration statements on behalf of said Company on Form N-4 or other appropriate form under the Securities Act of 1933 and the Investment Company Act of 1940 for The Travelers Fund BD II for Variable Annuities, a separate account of the Company dedicated specifically to the funding of variable annuity contracts to be offered by said Company, and further, to sign any and all amendments thereto, including post-effective amendments, that may be filed by the Company on behalf of said registrant. IN WITNESS WHEREOF, I have hereunto set my hand this 31st day of March 2000. /s/Katherine M. Sullivan Director The Travelers Life and Annuity Company 3 THE TRAVELERS FUND BD II FOR VARIABLE ANNUITIES POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: That I, GLENN D. LAMMEY of Simsbury, Connecticut, Chief Financial Officer, Chief Accounting Officer and Controller of The Travelers Life and Annuity Company (hereafter the "Company"), do hereby make, constitute and appoint ERNEST J. WRIGHT, Secretary of said Company, and KATHLEEN A. McGAH, Assistant Secretary of said Company, or either one of them acting alone, my true and lawful attorney-in-fact, for me, and in my name, place and stead, to sign registration statements on behalf of said Company on Form N-4 or other appropriate form under the Securities Act of 1933 and the Investment Company Act of 1940 for The Travelers Fund BD II for Variable Annuities, a separate account of the Company dedicated specifically to the funding of variable annuity contracts to be offered by said Company, and further, to sign any and all amendments thereto, including post-effective amendments, that may be filed by the Company on behalf of said registrant. IN WITNESS WHEREOF, I have hereunto set my hand this 31st day of March 2000. /s/Glenn D. Lammey Chief Financial Officer, Chief Accounting Officer and Controller The Travelers Life and Annuity Company -----END PRIVACY-ENHANCED MESSAGE-----