-----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, UG/AWFlNgxxEVkeftNn8Ktes5hU+n0cpxHS6PWpEOtoipANt42q54rQy9Di6RcNv PCkzjl5ByvP/q0yqnjDgiA== 0000950123-96-001820.txt : 19960424 0000950123-96-001820.hdr.sgml : 19960424 ACCESSION NUMBER: 0000950123-96-001820 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19960423 EFFECTIVENESS DATE: 19960501 SROS: NONE 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: 1933 Act SEC FILE NUMBER: 033-58131 FILM NUMBER: 96549768 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-07259 FILM NUMBER: 96549769 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 POST-EFFECTIVE AMENDMENT NO. 1 TO FORM N-4 1 Registration No.33-58131 811-7259 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Post-Effective Amendment No. 1 and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 1 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 Assistant Secretary The Travelers Life and Annuity Company One Tower Square Hartford, Connecticut 06183 ---------------------------- (Name and Address of Agent for Service) Approximate Date of Proposed Public Offering: ____________________ It is proposed that this filing become effective (check appropriate box) _____ immediately upon filing pursuant to paragraph (b) of Rule 485. X on May 1, 1996 pursuant to paragraph (b) of Rule 485. - ----- _____ 60 days after filing pursuant to paragraph (a)(1) of Rule 485. _____ on __________ pursuant to paragraph (a)(1) of Rule 485. If appropriate, check the following box: _____ this post-effective amendment designates a new effective date for a previously filed post-effective amendment. PURSUANT TO RULE 24f-2 OF THE INVESTMENT COMPANY ACT OF 1940, THE REGISTRANT HEREBY DECLARES THAT AN INDEFINITE AMOUNT OF VARIABLE ANNUITY CONTRACT UNITS WAS REGISTERED UNDER THE SECURITIES ACT OF 1933. A RULE 24f-2 NOTICE FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 WAS FILED ON FEBRUARY 29, 1996. 2 THE TRAVELERS FUND BD II FOR VARIABLE ANNUITIES Cross-Reference Sheet Form N-4
ITEM NO. CAPTION IN PROSPECTUS - --- --------------------- 1. Cover Page Prospectus 2. Definitions Glossary of Special Terms 3. Synopsis Prospectus Summary 4. Condensed Financial Information Condensed Financial Information 5. General Description of Registrant, The Insurance Company; The Separate Depositor, and Portfolio Companies Account and the Underlying Funds 6. Deductions and Expenses Charges and Deductions; Distribution of Variable Annuity Contracts 7. General Description of Variable The Contract Annuity Contracts 8. Annuity Period The Annuity Period 9. Death Benefit Death Benefit 10. Purchases and Contract Value The Contract; Distribution of Variable Annuity Contracts 11. Redemptions Surrenders and Redemptions 12. Taxes Federal Tax Considerations 13. Legal Proceedings Legal Proceedings and Opinions 14. Table of Contents of the Statement Appendix B - Contents of the Statement of Additional Information of Additional Information CAPTION IN STATEMENT OF ADDITIONAL INFORMATION --------------------------------------------------- 15. Cover Page Cover Page 16. Table of Contents Table of Contents 17. General Information and History The Insurance Company 18. Services Principal Underwriter; Distribution and Management Agreement 19. Purchase of Securities Being Offered Valuation of Assets 20. Underwriters Principal Underwriter 21. Calculation of Performance Data Performance Information 22. Annuity Payments Not Applicable 23. Financial Statements Financial Statements
3 PART A INFORMATION REQUIRED IN A PROSPECTUS 4 PROSPECTUS This Prospectus describes an individual flexible premium variable annuity contract (the "Contract") offered by The Travelers Life and Annuity Company (the "Company"). The Contract is currently available for use in connection with (1) individual nonqualified purchases; (2) Individual Retirement Annuities (IRAs) pursuant to Section 408 of the Internal Revenue Code of 1986, as amended (the "Code"); and (3) qualified retirement plans. Qualified contracts include contracts qualifying under Section 401(a), 403(b) or 408(b) of the Code. Purchase Payments made under the Contract will accumulate on a fixed and/or a variable basis, as selected by the Contract Owner. If on a variable basis, the value of the Contract prior to the Maturity Date will vary continuously to reflect the investment experience of underlying funds ("Underlying Funds") available under The Travelers Fund BD II for Variable Annuities ("Fund BD II"). The Underlying Funds currently available are: Smith Barney Income and Growth Portfolio, Alliance Growth Portfolio, American Capital Enterprise Portfolio, Smith Barney International Equity Portfolio, Smith Barney Pacific Basin Portfolio, TBC Managed Income Portfolio, Putnam Diversified Income Portfolio, G.T. Global Strategic Income Portfolio, Smith Barney High Income Portfolio, MFS Total Return Portfolio, and AIM Capital Appreciation Portfolio, and Smith Barney Money Market Portfolio of the Smith Barney Travelers Series Fund, Inc., and Smith Barney Total Return Portfolio of the Smith Barney Series Fund. This Prospectus provides the information about Fund BD II that you should know before investing. Please read it and retain it for future reference. Additional information about Fund BD II is contained in a Statement of Additional Information ("SAI") dated May 1, 1996 which has been filed with the Securities and Exchange Commission ("SEC") and is incorporated by reference into this Prospectus. A copy may be obtained, without charge, by writing to The Travelers Life and Annuity Company, Annuity Investor Services, One Tower Square, Hartford, Connecticut 06183-9061, or by calling 1-800-842-8573. The Table of Contents of the SAI appears in Appendix A of this Prospectus. THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUS FOR THE UNDERLYING FUNDS. BOTH THE CONTRACT PROSPECTUS AND THE UNDERLYING FUND PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THIS PROSPECTUS IS DATED MAY 1, 1996 5 TABLE OF CONTENTS GLOSSARY OF SPECIAL TERMS.............................................................. 4 PROSPECTUS SUMMARY..................................................................... 5 FEE TABLE.............................................................................. 7 CONDENSED FINANCIAL INFORMATION........................................................ 9 THE INSURANCE COMPANY.................................................................. 10 THE SEPARATE ACCOUNT AND THE UNDERLYING FUNDS.......................................... 10 The Travelers Fund BD II For Variable Annuities (Fund BD II)......................... 10 The Underlying Funds................................................................. 10 Underlying Fund Investment Managers.................................................. 12 Substitution and Additions........................................................... 12 PERFORMANCE INFORMATION................................................................ 12 THE CONTRACT........................................................................... 13 Purchase Payments.................................................................... 13 Right to Return...................................................................... 13 Accumulation Units................................................................... 13 CHARGES AND DEDUCTIONS................................................................. 14 Contingent Deferred Sales Charge..................................................... 14 Administrative Charges............................................................... 15 Mortality and Expense Risk Charge.................................................... 15 Reduction or Elimination of Contract Charges......................................... 15 Underlying Fund Charges.............................................................. 16 Premium Tax.......................................................................... 16 Changes In Taxes Based Upon Premium or Value......................................... 16 OWNERSHIP PROVISIONS................................................................... 16 Types of Ownership................................................................... 16 Beneficiary.......................................................................... 16 Annuitant............................................................................ 17 TRANSFERS.............................................................................. 17 Dollar-Cost Averaging (Automated Transfers).......................................... 17 Telephone Transfers.................................................................. 18 SURRENDERS AND REDEMPTIONS............................................................. 18 Systematic Withdrawals............................................................... 18 DEATH BENEFIT.......................................................................... 19 Death Proceeds Prior to the Maturity Date............................................ 19 Death Proceeds After the Maturity Date............................................... 20 THE ANNUITY PERIOD..................................................................... 20 Maturity Date........................................................................ 20 Allocation of Annuity................................................................ 20 Variable Annuity..................................................................... 21 Fixed Annuity........................................................................ 21
2 6 PAYMENT OPTIONS........................................................................ 21 Election of Options.................................................................. 21 Annuity Options...................................................................... 22 Income Options....................................................................... 22 MISCELLANEOUS CONTRACT PROVISIONS...................................................... 23 Termination.......................................................................... 23 Misstatement......................................................................... 23 Required Reports..................................................................... 23 Suspension of Payments............................................................... 23 Transfers of Contract Values of Other Annuities...................................... 23 FEDERAL TAX CONSIDERATIONS............................................................. 24 General Taxation of Annuities........................................................ 24 Tax Law Diversification Requirements for Variable Annuities.......................... 24 Ownership of the Investments......................................................... 24 Penalty Tax for Premature Distributions.............................................. 24 Mandatory Distributions for Qualified Plans.......................................... 25 Nonqualified Annuity Contracts....................................................... 25 Individual Retirement Annuities...................................................... 25 Qualified Pension and Profit-Sharing Plans........................................... 26 Federal Income Tax Withholding....................................................... 26 VOTING RIGHTS.......................................................................... 27 DISTRIBUTION OF VARIABLE ANNUITY CONTRACTS............................................. 27 Conformity with State and Federal Laws............................................... 27 LEGAL PROCEEDINGS AND OPINIONS......................................................... 28 THE FIXED ACCOUNT...................................................................... 28 Transfers............................................................................ 28 APPENDIX A............................................................................. 29 APPENDIX B............................................................................. 30
3 7 GLOSSARY OF SPECIAL TERMS - -------------------------------------------------------------------------------- The following terms are used throughout the Prospectus and have the indicated meanings: ACCUMULATION UNIT -- An accounting unit of measure used to calculate the value of a Contract before Annuity Payments begin. ACCUMULATION UNIT VALUE -- The dollar amount of an Accumulation Unit. ANNUITANT -- The person on whose life this contract is issued and the amount of the monthly Annuity Payments depend. ANNUITY PAYMENTS -- A series of periodic payments for life; for life with either a minimum number of payments or a determinable sum assured; or for the joint lifetime of the Annuitant and another person and thereafter during the lifetime of the survivor. ANNUITY UNIT -- An accounting unit of measure used to calculate the amount of Annuity Payments. CASH SURRENDER VALUE -- The amount payable to the Contract Owner or other payee upon full or partial surrender of the Contract during the lifetime of the Annuitant. The amount will be the contract value, less any applicable surrender charge and any premium tax not previously deducted. COMPANY (WE, OUR) -- The Travelers Life and Annuity Company. COMPANY'S HOME OFFICE -- The principal offices of The Travelers Life and Annuity Company located at One Tower Square, Hartford, Connecticut 06183-9061. CONTRACT DATE -- The date on which the Contact, benefits and the contract provisions become effective. CONTRACT OWNER (YOU, YOUR) -- The person or entity to whom the Contract is issued. CONTRACT VALUE -- The current value of Accumulation Units credited to the Contract less any administrative charges. CONTRACT YEARS -- Twelve-month periods beginning on the Contract Date. FIXED ACCOUNT -- An additional account into which Purchase Payments may be allocated and which is included in the Contract Value. Purchase Payments allocated to the Fixed Account will earn interest at a rate guaranteed by the Company; this rate will change from time to time. INCOME PAYMENTS -- Optional forms of payments made by the Company which are based on an agreed-upon number of payments or payment amount. MATURITY DATE -- The date on which the first Annuity or Income Payment is to begin under a Contract. PURCHASE PAYMENT -- A gross amount paid to the Company during the accumulation period. SEPARATE ACCOUNT -- Assets set aside by the Company, the investment experience of which is kept separate from that of other assets of the Company (Fund BD II). SUB-ACCOUNT -- The portion of the assets of the Separate Account which is allocated to a particular Underlying Fund. UNDERLYING FUND(S) -- The investment option(s) available under the Separate Account. VALUATION DATE -- A day on which Separate Account assets are valued. A Valuation Date is any day on which the New York Stock Exchange is open for trading. The value of Accumulation Units and Annuity Units will be determined as of the close of trading on the New York Stock Exchange. VALUATION PERIOD -- The period between the close of business on successive Valuation Dates. VARIABLE ANNUITY -- An annuity contract which provides for accumulation and for Annuity Payments which vary in amount in accordance with the investment experience of a Separate Account. 4 8 PROSPECTUS SUMMARY - -------------------------------------------------------------------------------- INTRODUCTION The Contract described in this Prospectus is both an insurance policy and a security. As an insurance policy, it is subject to the insurance laws and regulations of each state in which it is available for distribution. As a security, it is subject to the federal securities laws. The Contract is an individual flexible premium variable annuity. It allows you to allocate Purchase Payments to any or all of the Underlying Funds currently available under Fund BD II, as well as to the Fixed Account. (See "Underlying Funds" on page 10.) An initial lump-sum Purchase Payment of at least $5,000 must be made to the Contract; additional Purchase Payments of at least $500 may be made. In some states, subsequent Purchase Payments are not allowed. (See "Purchase Payments," page 13.) Purchase payments over $1,000,000 may be made with the Company's prior consent. RIGHT TO RETURN You may return the Contract and receive a full refund of the Contract Value (including charges) within twenty days after the Contract is delivered to you, unless state law requires a longer period. (See "Right to Return," page 13.) CHARGES AND EXPENSES No sales charges are deducted from Purchase Payments when they are received. However, a Contingent Deferred Sales Charge ("CDSC" or "surrender charge") may apply if you make a full or partial surrender of the Contract Value during the first seven years following each Purchase Payment. The maximum surrender charge that could be assessed is 6% of the amount withdrawn. (See "Contingent Deferred Sales Charge," page 14.) Other charges include the contract administrative expense charge ($30 annually) and a Sub-Account administrative expense charge (0.15% on an annual basis of the average daily net assets allocated to each of the Underlying Funds). (See "Administrative Charges," page 15.) A mortality and expense risk charge, equivalent on an annual basis to 1.25% of the daily net assets of amounts allocated to each Underlying Funds will also be charged. (See "Mortality and Expense Risk Charge," page 15.) If applicable, state premium taxes will also be deducted and paid when due. (See "Premium Tax," page 16.) TRANSFERS Prior to the Maturity Date, you may reallocate the Contract Value among the Fixed Account and any of the Underlying Funds available under Fund BD II. Transfers between the variable Sub-Accounts are unlimited. Transfers between the Fixed Account and any of the Underlying Funds are subject to certain restrictions. (See "Transfers," page 17, and "The Fixed Account," page 28.) Dollar-Cost Averaging, or automated transfers, are also available. The minimum automated transfer amount is $400. (See "Dollar Cost Averaging (Automated Transfers)," on page 17.) SURRENDERS Prior to the Maturity Date, you may surrender all or part of the Contract Value subject to certain charges and limitations. You will be liable for income tax on the taxable portion of any full or partial surrender, and you may incur a 10% tax penalty if such surrender is made prior to the age of 59 1/2. (See "Surrenders and Redemptions," page 18 and "Penalty Tax for Premature Distributions" page 24.) Systematic withdrawals of at least $100 on a monthly, quarterly, semiannual or annual basis may be elected if your Contract Value is at least $15,000. All applicable surrender charges and premium taxes will be deducted. (See "Systematic Withdrawals," on page 18.) 5 9 DEATH BENEFIT A death benefit is payable to the Beneficiary upon the death of the Annuitant prior to the Maturity Date with no Contingent Annuitant surviving. The death benefit will vary based on the Annuitant's age at the time of death. (See "Death Benefit," page 19.) THE ANNUITY PERIOD On the Maturity Date, or other agreed-upon payment date, the Company will provide Annuity or Income Payments as described in the section entitled "The Annuity Period." (See page 20.) THE FIXED ACCOUNT Although this Prospectus specifically applies only to the variable features of the Contract, the Contract also allows you to allocate Purchase Payments to a Fixed Account where they will earn interest at a rate guaranteed by the Company, which interest rate will not be less than 3% per year. (See "The Fixed Account," page 28.) 6 10 FEE TABLE - -------------------------------------------------------------------------------- FUND BD II AND ITS UNDERLYING FUNDS The purpose of the Fee Table is to assist Contract Owners in understanding the various costs and expenses that he or she will bear, directly or indirectly, under the Contract. The information listed reflects expenses of the Sub-Accounts as well as of the Underlying Fund Expenses. Additional information regarding the charges and deductions assessed under the Contract can be found on page 14. Expenses shown do not include premium taxes, which may be applicable. CONTRACT OWNER TRANSACTION EXPENSES Contingent Deferred Sales Charge (as a percentage of purchase payments):
----------------------------------------------------------------------------------- LENGTH OF TIME FROM PURCHASE PAYMENT CONTINGENT DEFERRED (NUMBER OF YEARS) SURRENDER CHARGE ----------------------------------------------------------------------------------- 1 6% 2 6% 3 6% 4 3% 5 2% 6 1% 7 and thereafter 0% Annual Contract Administrative Charge (Waived if Contract Value is $40,000 or more) $30
ANNUAL SUB-ACCOUNT CHARGES
- ----------------------------------------------------------------------------------------------------------- STANDARD ENHANCED DEATH BENEFIT DEATH BENEFIT - ----------------------------------------------------------------------------------------------------------- Mortality and Expense Risk Fee (as a percentage of daily net asset value) 1.02% 1.30% Sub-Account Administrative Charge (as a percentage of daily net asset value) 0.15% 0.15% TOTAL SUB-ACCOUNT CHARGES 1.17% 1.45%
UNDERLYING FUND EXPENSES (as a percentage of average net assets of the Underlying Fund)
- ------------------------------------------------------------------------------------------------------------ MANAGEMENT OTHER TOTAL UNDERLYING FEE EXPENSES FUND EXPENSES - ------------------------------------------------------------------------------------------------------------ Smith Barney Income and Growth Portfolio 0.65% 0.08%1 0.73% Alliance Growth Portfolio 0.80% 0.10%1 0.90% American Capital Enterprise Portfolio 0.70% 0.18%1 0.88% Smith Barney International Equity Portfolio 0.90% 0.54%1* 1.44% Smith Barney Pacific Basin Portfolio 0.90% 0.93%1 1.83% TBC Managed Income Portfolio 0.65% 0.27%1 0.92% Putnam Diversified Income Portfolio 0.75% 0.22%1 0.97% G.T. Global Strategic Income Portfolio 0.80% 0.67%1* 1.47% Smith Barney High Income Portfolio 0.60% 0.10%1 0.70% MFS Total Return Portfolio 0.80% 0.15%1 0.95% Smith Barney Money Market Portfolio 0.60% 0.05%1 0.65% AIM Capital Appreciation Portfolio 0.80% 0.20%1 1.00% Smith Barney Total Return Portfolio 0.75% 0.25%2 1.00%
(1) Other expenses are as of October 31, 1995, taking into account the current expense limitations agreed to by the Managers. The Managers waived all of their fees for the period and reimbursed the Funds for their expenses. If such fees were not waived and expenses were not reimbursed, Total Underlying Expenses for the Smith Barney/Travelers Series Fund Portfolios would have been: Smith Barney Income and Growth Portfolio, 0.94%; Alliance Growth Portfolio, 0.97%; American Capital Enterprise Portfolio, 1.26%; Smith Barney International Equity Portfolio, 1.21%; Smith Barney Pacific Basin Portfolio, 2.23%; TBC Managed Income Portfolio, 1.29%; Putnam Diversified Income Portfolio, 1.31%; G.T. Global Strategic Income Portfolio, 1.93%; Smith Barney High Income Portfolio, 1.07%; MFS Total Return Portfolio, 1.06%; Smith Barney Money Market Portfolio, 0.94%. (2) Other expenses are as of December 31, 1995, taking into account the current expense limitations agreed to by the Managers. The Managers waived all of their fees for the period and reimbursed the Funds for their expenses. The Smith Barney Series Fund Total Return Portfolio had no fees waived and no expenses reimbursed. * Smith Barney International Equity Portfolio and G.T. Global Strategic Income Portfolio earned credits from the Custodian which reduced the service fees incurred. When these credits are taken into consideration, Total Underlying Fund Expenses are 1.21% and 1.11% respectively. 7 11 EXAMPLE* THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. STANDARD DEATH BENEFIT ELECTION - --------------------------------------------------------------------------------
A $1,000 investment would be If the Contract is not subject to the following surrendered at the end of expenses, assuming a 5% the period shown or if it annual return on assets, if is annuitized, a $1,000 the Contract is surrendered investment would be subject or if certain income to the following expenses, options are elected at the assuming a 5% annual return end of the period shown**: on assets: - ------------------------------------------------------------------------------------------------------------------------ ONE YEAR THREE YEARS ONE YEAR THREE YEARS - ------------------------------------------------------------------------------------------------------------------------ Smith Barney Income and Growth Portfolio $ 80 $ 123 $ 20 $63 Alliance Growth Portfolio 82 127 22 67 American Capital Enterprise Portfolio 81 126 21 66 Smith Barney International Equity Portfolio 85 138 25 78 Smith Barney Pacific Basin Portfolio 86 139 26 79 TBC Managed Income Portfolio 81 126 21 66 Putnam Diversified Income Portfolio 82 129 22 69 G.T. Global Strategic Income Portfolio 84 133 24 73 Smith Barney High Income Portfolio 80 121 20 61 MFS Total Return Portfolio 82 129 22 69 Smith Barney Money Market Portfolio 80 121 20 61 AIM Capital Appreciation Portfolio 82 127 22 67 Smith Barney Total Return Portfolio 83 130 23 70
ENHANCED DEATH BENEFIT ELECTION - --------------------------------------------------------------------------------
A $1,000 investment would be If the Contract is not subject to the following surrendered at the end of expenses, assuming a 5% the period shown or if it annual return on assets, if is annuitized, a $1,000 the Contract is surrendered investment would be subject or if certain income to the following expenses, options are elected at the assuming a 5% annual return end of the period shown**: on assets: - ------------------------------------------------------------------------------------------------------------------------ ONE YEAR THREE YEARS ONE YEAR THREE YEARS - ------------------------------------------------------------------------------------------------------------------------ Smith Barney Income and Growth Portfolio $ 83 $ 131 $ 23 $71 Alliance Growth Portfolio 85 136 25 76 American Capital Enterprise Portfolio 84 135 24 75 Smith Barney International Equity Portfolio 88 146 28 86 Smith Barney Pacific Basin Portfolio 89 148 29 88 TBC Managed Income Portfolio 84 135 24 75 Putnam Diversified Income Portfolio 85 137 25 77 G.T. Global Strategic Income Portfolio 87 142 27 82 Smith Barney High Income Portfolio 83 130 23 70 MFS Total Return Portfolio 85 137 25 77 Smith Barney Money Market Portfolio 83 130 23 70 AIM Capital Appreciation Portfolio 85 136 25 76 Smith Barney Total Return Portfolio 86 139 26 79
* The Example reflects the $30 Annual Contract Administrative Charge as an annual charge of 0.075% of assets based on an anticipated average account value of $40,000. ** The Contingent Deferred Sales Charge is waived if annuity payout has begun or if an income option of at least five years' duration is begun after the first Contract Year. (See "Charges and Deductions-Contingent Deferred Sales Charge," page 6.) 8 12 CONDENSED FINANCIAL INFORMATION THE TRAVELERS FUND BD II FOR VARIABLE ANNUITIES ACCUMULATION UNIT VALUES (UNAUDITED)
YEAR ENDING PERIOD ENDING DECEMBER 31, 1995 DECEMBER 31, 1994 STANDARD ENHANCED STANDARD ENHANCED - -------------------------------------------------------------------------------------------------------------------- SMITH BARNEY/TRAVELERS SERIES FUND INC. ALLIANCE GROWTH PORTFOLIO Unit Value at beginning of period (1) $ 1.047 $ 1.046 $1.000 $1.000 Unit Value at end of period 1.396 1.390 1.047 1.046 Number of units outstanding at end of period (thousands) 1,573,668 452,737 16,522 7,338 AMERICAN CAPITAL ENTERPRISE PORTFOLIO Unit Value at beginning of period (2) $ 1.039 $ 1.037 $1.000 $1.000 Unit Value at end of period 1.362 1.356 1.039 1.037 Number of units outstanding at end of period (thousands) 764,534 329,130 2,941 1,618 TBC MANAGED INCOME PORTFOLIO Unit Value at beginning of period (3) $ 0.997 $ 0.995 $1.000 $1.000 Unit Value at end of period 1.142 1.137 0.997 0.995 Number of units outstanding at end of period (thousands) 225,876 89,569 2,849 980 G.T. GLOBAL STRATEGIC INCOME PORTFOLIO Unit Value at beginning of period (2) $ 0.945 $ 0.944 $1.000 $1.000 Unit Value at end of period 1.121 1.116 0.945 0.944 Number of units outstanding at end of period (thousands) 32,765 79,526 2,400 1,063 SMITH BARNEY HIGH INCOME PORTFOLIO Unit Value at beginning of period (4) $ 0.988 $ 0.986 $1.000 $1.000 Unit Value at end of period 1.162 1.157 0.988 0.986 Number of units outstanding at end of period (thousands) 242,593 331,521 3,105 1,147 SMITH BARNEY INTERNATIONAL EQUITY PORTFOLIO Unit Value at beginning of period (1) $ 0.955 $ 0.954 $1.000 $1.000 Unit Value at end of period 1.050 1.046 0.955 0.954 Number of units outstanding at end of period (thousands) 556,129 200,940 14,141 5,898 SMITH BARNEY INCOME AND GROWTH PORTFOLIO Unit Value at beginning of period (1) $ 0.981 $ 0.980 $1.000 $1.000 Unit Value at end of period 1.291 1.285 0.981 0.980 Number of units outstanding at end of period (thousands) 596,201 146,469 6,654 3,015 SMITH BARNEY MONEY MARKET PORTFOLIO Unit Value at beginning of period (1) $ 1.016 $ 1.014 $1.000 $1.000 Unit Value at end of period 1.058 1.054 1.016 1.014 Number of units outstanding at end of period (thousands) 2,373,923 819,856 7,171 3,736 PUTNAM DIVERSIFIED INCOME PORTFOLIO Unit Value at beginning of period (1) $ 1.009 $ 1.007 $1.000 $1.000 Unit Value at end of period 1.170 1.165 1.009 1.007 Number of units outstanding at end of period (thousands) 823,783 126,460 5,803 3,669 SMITH BARNEY PACIFIC BASIN PORTFOLIO Unit Value at beginning of period (2) $ 0.899 $ 0.898 $1.000 $1.000 Unit Value at end of period 0.910 0.906 0.899 0.898 Number of units outstanding at end of period (thousands) 37,278 19,544 1,842 978 MFS TOTAL RETURN PORTFOLIO Unit Value at beginning of period (1) $ 0.979 $ 0.977 $1.000 $1.000 Unit Value at end of period 1.216 1.211 0.979 0.977 Number of units outstanding at end of period (thousands) 912,547 101,550 9,099 3,480 AIM CAPITAL APPRECIATION PORTFOLIO Unit Value at beginning of period (5) $ 1.000 $ 1.000 $-- $-- Unit Value at end of period 0.958 0.957 -- -- Number of units outstanding at end of period (thousands) 2,536,732 908,266 -- -- SMITH BARNEY SERIES FUND: SMITH BARNEY TOTAL RETURN PORTFOLIO Unit Value at beginning of period (6) $ 1.010 $ 1.010 $1.000 $1.000 Unit Value at end of period 1.251 1.247 1.010 1.010 Number of units outstanding at end of period (thousands) 651,440 148,894 1,109 277
(1) Initial period covers June 20, 1994 (date of availability under Fund BD II) to December 31, 1994. (2) Initial period covers June 21, 1994 (date of availability under Fund BD II) to December 31, 1994. (3) Initial period covers June 28, 1994 (date of availability under Fund BD II) to December 31, 1994. (4) Initial period covers June 22, 1994 (date of availability under Fund BD II) to December 31, 1994. (5) Initial period covers October 2, 1995 (date of availability under Fund BD II) to December 31, 1994. (6) Initial period covers November 21, 1994 (date of availability under Fund BD II) to December 31, 1994. The financial statements of Fund BD II are contained in the Statement of Additional Information, and in the Annual Report to Contract Owners. The financial statements of The Travelers Life and Annuity Company and Subsidiaries are contained in the Statement of Additional Information. 9 13 THE INSURANCE COMPANY - -------------------------------------------------------------------------------- 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, and intends to seek licensure in the remaining states, except New York. The Company is an indirect wholly owned subsidiary of Travelers Group Inc., a financial services holding company. The Company's Home Office is located at One Tower Square, Hartford, Connecticut 06183. THE SEPARATE ACCOUNT AND THE UNDERLYING FUNDS - -------------------------------------------------------------------------------- THE TRAVELERS FUND BD II FOR VARIABLE ANNUITIES (FUND BD II) Fund BD II was established on February 22, 1995 and is registered with the SEC as a unit investment trust under the Investment Company Act of 1940, as amended (the "1940 Act"). The assets of Fund BD II will be invested exclusively in the shares of the Underlying Funds. The assets of Fund BD II are held for the exclusive benefit of the owners of this separate account, according to the laws of Connecticut. Income, gains and losses, whether or not realized, from assets allocated to Fund BD II are, in accordance with the Contracts, credited to or charged against Fund BD II without regard to other income, gains and losses of the Company. The assets held by Fund BD II are not chargeable with liabilities arising out of any other business which the Company may conduct. Obligations under the Contract are obligations of the Company. All investment income and other distributions of the Underlying Funds are payable to Fund BD II. All such income and/or distributions are reinvested in shares of the respective Underlying Fund at net asset value. Shares of the Underlying Funds listed above are currently sold only to life insurance company separate accounts to fund variable annuity and variable life insurance contracts. Fund shares are not sold to the general public. THE UNDERLYING FUNDS Purchase Payments are allocated to the Underlying Funds in accordance with the selection made by the Contract Owner. More detailed information about the options and their inherent risks may be found in the current prospectuses for the Underlying Funds. These prospectuses are included with and must accompany this Prospectus. Since there are varying degrees of risk inherent in each option, please read them carefully before investing. Additional copies of the prospectuses may be obtained by contacting your registered representative or by calling 1-800-842-8573. Fund BD II currently invests in the following Underlying Funds: SMITH BARNEY/TRAVELERS SERIES FUND INC.: SMITH BARNEY INCOME AND GROWTH PORTFOLIO. The objective of the Income and Growth Portfolio is current income and long-term growth of income and capital by investing primarily, but not exclusively, in common stocks. ALLIANCE GROWTH PORTFOLIO. The objective of the Growth Portfolio is long-term growth of capital by investing predominantly in equity securities of companies with a favorable outlook for earnings and whose rate of growth is expected to exceed that of the U.S. economy over time. Current income is only an incidental consideration. AMERICAN CAPITAL ENTERPRISE PORTFOLIO. The Enterprise Portfolio's objective is capital appreciation through investment in securities believed to have above-average potential for capital appreciation. Any income received on such securities is incidental to the objective of capital appreciation. SMITH BARNEY INTERNATIONAL EQUITY PORTFOLIO. The objective of the International Equity Portfolio is total return on assets from growth of capital and income by investing at least 65% of its assets in a diversified portfolio of equity securities of established non-U.S. issuers. 10 14 SMITH BARNEY PACIFIC BASIN PORTFOLIO. The Pacific Basin Portfolio's objective is long-term capital appreciation through investment primarily in equity securities of companies in Asian Pacific Countries. TBC MANAGED INCOME PORTFOLIO. The objective of the Managed Income Portfolio is to seek high current income consistent with prudent risk of capital through investments in corporate debt obligations, preferred stocks, and obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities. PUTNAM DIVERSIFIED INCOME PORTFOLIO. The objective of the Diversified Income Portfolio is to seek high current income consistent with preservation of capital. The Portfolio will allocate its investments among the U.S. Government Sector, the High Yield Sector, and the International Sector of the fixed income securities markets. G.T. GLOBAL STRATEGIC INCOME PORTFOLIO. The Strategic Income Portfolio's investment objective is primarily to seek high current income and secondarily to seek capital appreciation. The Portfolio allocates its assets among debt securities of issuers in the United States, developed foreign countries, and emerging markets. SMITH BARNEY HIGH INCOME PORTFOLIO. The investment objective of the High Income Portfolio is high current income. Capital appreciation is a secondary objective. The Portfolio will invest at least 65% of its assets in high-yielding corporate debt obligations and preferred stock. MFS TOTAL RETURN PORTFOLIO. The Total Return Portfolio's objective is to obtain above-average income (compared to a portfolio entirely invested in equity securities) consistent with the prudent employment of capital. Generally, at least 40% of the Portfolio's assets will be invested in equity securities. SMITH BARNEY MONEY MARKET PORTFOLIO. The investment objective of the Money Market Portfolio is maximum current income and preservation of capital by investing in high quality, short-term money market instruments. AIM CAPITAL APPRECIATION PORTFOLIO. The investment objective of the AIM Capital Appreciation Portfolio is to seek capital appreciation by investing principally in common stock, with emphasis on medium-sized and smaller emerging growth companies. SMITH BARNEY SERIES FUND INC: SMITH BARNEY TOTAL RETURN PORTFOLIO. The investment objective of the Smith Barney Total Return Portfolio is to provide total return, consisting of long-term capital appreciation and income. The Portfolio will seek to achieve its goal by investing primarily in a diversified portfolio of dividend-paying common stock. 11 15 UNDERLYING FUND INVESTMENT MANAGERS The Underlying Funds receive investment management and advisory services from the following investment professionals:
- ---------------------------------------------------------------------------------------------- FUND INVESTMENT MANAGER SUB-ADVISER - ---------------------------------------------------------------------------------------------- Smith Barney Income and Smith Barney Mutual Funds Growth Portfolio Management Inc.("SBMFM") - ---------------------------------------------------------------------------------------------- Alliance Growth Portfolio SBMFM Alliance Capital Management L.P. - ---------------------------------------------------------------------------------------------- American Capital Enterprise SBMFM American Capital Asset Portfolio Management, Inc - ---------------------------------------------------------------------------------------------- Smith Barney Int'l Equity SBMFM Portfolio - ---------------------------------------------------------------------------------------------- Smith Barney Pacific Basin SBMFM Portfolio - ---------------------------------------------------------------------------------------------- TBC Managed Income Portfolio SBMFM The Boston Company Asset Management, Inc. - ---------------------------------------------------------------------------------------------- Putnam Diversified Income SBMFM Putnam Investment Management, Portfolio Inc. - ---------------------------------------------------------------------------------------------- G.T. Global Strategic Income SBMFM G.T. Capital Management Inc. Portfolio - ---------------------------------------------------------------------------------------------- Smith Barney High Income SBMFM Portfolio - ---------------------------------------------------------------------------------------------- MFS Total Return Portfolio SBMFM Massachusetts Financial Services Company - ---------------------------------------------------------------------------------------------- Smith Barney Money Market SBMFM Portfolio - ---------------------------------------------------------------------------------------------- AIM Capital Appreciation SBMFM AIM Capital Management, Inc Portfolio - ---------------------------------------------------------------------------------------------- Smith Barney Total Return SBMFM Portfolio - ----------------------------------------------------------------------------------------------
SUBSTITUTIONS AND ADDITIONS If any of the Underlying Funds should become unavailable for allocating purchase payments, or if, in the judgment of the Company further investment in an Underlying Fund becomes inappropriate for the purposes of the Contract, we may substitute another registered, open-end management investment company. Substitution may be made with respect to both existing investments and the investment of any future Purchase Payments. However, no such substitution will be made without notice to Contract Owners, state approval if applicable, and without prior approval of the, to the extent required by the 1940 Act, or other applicable law. Additional Underlying Funds may also be added under the Contract. PERFORMANCE INFORMATION - -------------------------------------------------------------------------------- From time to time, the Company may advertise different types of historical performance for the Underlying Funds available through Fund BD II. The Company may advertise the "standardized average annual total returns" of each, calculated in a manner prescribed by the SEC, as well as the "non-standardized total return," as described below. "Standardized average annual total return" will show the percentage rate of return of a hypothetical initial investment of $1,000 for the most recent one-, five- and ten-year periods (or 12 16 fractional periods thereof). This standardized calculation reflects the deduction of all applicable charges made to the Contract, except for premium taxes which may be imposed by certain states. "Non-standardized total return" will be calculated in a similar manner, except non-standardized total returns will not reflect the deduction of any applicable Contingent Deferred Sales Charge or the $30 annual contract administrative charge, which would decrease the level of performance shown if reflected in these calculations. Performance information may be quoted numerically or may be presented in a table, graph or other illustration. Advertisements may include data comparing performance to well-known indices of market performance (including, but not limited to, the Dow Jones Industrial Average, the Standard & Poor's (S&P) 500 Index and the S&P 400 Index, the Lehman Brothers Long T-Bond Index, the Russell 1000, 2000 and 3000 Indices, the Value Line Index, and the Morgan Stanley Capital International's EAFE Index). Advertisements may also include published editorial comments and performance rankings compiled by independent organizations (including, but not limited to, Lipper Analytical Services, Inc. and Morningstar, Inc.) and publications that monitor the performance of Fund BD II and the Underlying Funds. The total return quotations are based upon historical earnings and are not necessarily representative of future performance. A Contract Owner's Contract Value at redemption may be more or less than original cost. The SAI contains more detailed information about these performance calculations, including actual examples of each type of performance advertised. THE CONTRACT - -------------------------------------------------------------------------------- Purchase Payments are paid to the Company and credited to the Contract Owner's account to accumulate until the Maturity Date. The Contract Owner assumes the risk of gain or loss according to the performance of the selected Sub-Account(s). There is generally no guarantee that the Contract Value at the Maturity Date will equal or exceed the total Purchase Payments made under the Contract, except as specified or elected under the Death Benefit provisions described on page . PURCHASE PAYMENTS The minimum initial Purchase Payment must be at least $5,000. Additional payments of at least $500 may be made under the Contract at any time. Purchase Payments over $1,000,000 may be made with the Company's prior consent. In some states, subsequent Purchase Payments are not allowed to this Contract. The initial Purchase Payment is due and payable before the Contract becomes effective. The Company will apply the initial Purchase Payment within two business days following its receipt at the Company's Home Office. Subsequent Purchase Payments will be credited to the Contract on the basis of Accumulation Unit values next determined after receipt of the Purchase Payment. RIGHT TO RETURN You may return the Contract for a full refund of the Contract Value (including charges) within twenty days after you receive it (the "free-look period"). Where state law requires a longer period, or the return of Purchase Payments, the Company will comply. The Contract Owner bears the investment risk during the free-look period; therefore, the Contract Value returned may be greater or less than your Purchase Payment. If the Contract is purchased as an Individual Retirement Annuity and is returned within the first seven days after delivery, your Purchase Payment will be refunded in full. During the remainder of the free-look period, the Contract Value (including charges) will be refunded. All Contract Values will be determined as of the next valuation date following the Company's receipt of the Owner's written request for refund. ACCUMULATION UNITS The number of Accumulation Units to be credited to the Contract once a Purchase Payment has been received by the Company will be determined by dividing the amount allocated to each 13 17 Underlying Fund by the current applicable Accumulation Unit Value. The value of an Accumulation Unit may increase or decrease. The initial Accumulation Unit Value applicable to each segment of the Separate Account was established at $1.00. The value of an Accumulation Unit on any Valuation Date is determined by multiplying the value on the immediately preceding Valuation Date by the net investment factor for the Valuation Period just ended. The net investment factor, calculated for each Underlying Fund, takes into account the investment performance, expenses and the deduction of certain expenses. The net investment factor is described more fully in the SAI. CHARGES AND DEDUCTIONS - -------------------------------------------------------------------------------- CONTINGENT DEFERRED SALES CHARGE ("CDSC") No sales charges are deducted from Purchase Payments when they are received and applied under the Contract. However, a CDSC will be assessed if a full or partial surrender of the Contract Value is made during the first six years following a Purchase Payment. The length of time from receipt of the Purchase Payment to the time of surrender determines the amount of the charge. This charge will not exceed the aggregate amount of the Purchase Payments made under the Contract. The purpose of the surrender charge is to help defray expenses incurred in the sale of the Contract, including commissions and other expenses associated with the printing and distribution of prospectuses and sales material. However, the Company expects that the Contingent Deferred Sales Charges assessed under the Contract will be insufficient to cover these expenses; the difference will be covered by the general assets of the Company which are attributable, in part, to mortality and expense risk charges under the Contract which are described below. The surrender charge is equal to a percentage of the amount withdrawn from the Contract (not to exceed the aggregate amount of the Purchase Payments made under the Contract), and is calculated as follows:
LENGTH OF TIME FROM PURCHASE PAYMENT CONTINGENT DEFERRED (NUMBER OF YEARS) SALES CHARGE - ---------------------------------------------------- 1 6% 2 6% 3 6% 4 3% 5 2% 6 1% 7 and thereafter 0%
For purposes of determining the amount of any CDSC, surrenders will be deemed to be taken first from any applicable free withdrawal amount (as described below); next from remaining Purchase Payments (on a first-in, first-out basis); and then from contract earnings (in excess of any free withdrawal amount). Unless the Company receives instructions to the contrary, the CDSC will be deducted from the amount requested. No CDSC will be assessed (1) in the event of distributions resulting from the death of the Contract Owner or the death of the Annuitant with no Contingent Annuitant surviving; (2) if an annuity payout has begun; or (3) if an income option of at least five years' duration is begun after the first Contract Year. FREE WITHDRAWAL ALLOWANCE. There is a 15% free withdrawal allowance available each year after the first Contract Year. The available withdrawal amount will be calculated as of the first Valuation Date of any given Contract Year. The free withdrawal allowance applies to partial surrenders of any amount and to full surrenders, except those full surrenders transferred directly to annuity contracts issued by other financial institutions. 14 18 ADMINISTRATIVE CHARGES CONTRACT ADMINISTRATIVE CHARGE. An administrative charge of $30 will be deducted annually from the Contract to compensate the Company for expenses incurred in establishing and administering the Contract. The contract administrative charge will be deducted from the Contract Value on the fourth Friday of August of each year by cancelling Accumulation Units in each Sub-Account on a pro rata basis. This charge will be prorated from the date of purchase to the next date of assessment of charge. A prorated charge will also be assessed upon voluntary or involuntary surrender of the Contract. The Contract Administrative Charge will not be assessed upon distributions resulting from the death of the Contract Owner or the Annuitant with no Contingent Annuitant surviving, or after an annuity payout has begun, or if the Contract Value is equal to or greater than $40,000 on the charge assessment date. SUB-ACCOUNT ADMINISTRATIVE CHARGE. An administrative charge is deducted on each Valuation Date from the amounts allocated to the variable Underlying Funds in order to compensate the Company for certain administrative and operating expenses. The charge is equivalent, on an annual basis, to 0.15% of the daily net asset value allocated to each of the Underlying Funds. Neither administrative charge can be increased. The charges are set at a level which does not exceed the average expected cost of the administrative services to be provided while the Contract is in force, and the Company does not expect to make a profit from these charges. MORTALITY AND EXPENSE RISK CHARGE A mortality and expense risk charge is deducted on each Valuation Date from amounts held in the Separate Account. This charge is intended to cover the mortality and expense risks associated with guarantees which the Company provides under the Contract. The mortality risk portion of the insurance charge compensates the Company for guaranteeing to provide Annuity Payments to an Annuitant according to the terms of the Contract regardless of how long the Annuitant lives and no matter what the actual mortality experience of other Annuitants under the Contract might be, and for guaranteeing to provide the standard or the enhanced death benefit if an Annuitant dies prior to the Maturity Date. The expense risk charge compensates the Company for the risk that the charges under the Contract, which cannot be increased during the duration of the Contract, will be insufficient to cover actual costs. For those Contract Owners who have elected a standard death benefit provision, the insurance charge is equivalent, on an annual basis, to 1.02% of the daily net asset value of amounts held in the Separate Account. For those Contract Owners who have elected an enhanced death benefit provision, the insurance charge is equivalent, on an annual basis, to 1.30% of the daily net asset value of amounts held in the Separate Account. The Company reserves the right to lower the mortality and expense risk charge at any time. If the amount deducted for mortality and expense risks is not sufficient to cover the mortality costs and expense shortfalls, the loss is borne by the Company. If the deduction is more than sufficient, the excess will be a profit to the Company. The Company expects to make a profit from the mortality and expense risk charge. REDUCTION OR ELIMINATION OF CONTRACT CHARGES The CDSC, the administrative charges, and the mortality and expense risk charge under the Contract may be reduced or eliminated when certain sales of the Contract result in savings or reduction of sales expenses. The entitlement to such a reduction in the Contingent Deferred Sales Charges or the administrative charge will be based on the following: (1) the size and type of group to which sales are to be made; (2) the total amount of Purchase Payments to be received; and (3) any prior or existing relationship with the Company. There may be other circumstances, of which the Company is not presently aware, which could result in fewer sales expenses. In no event will reduction or elimination of the Contingent Deferred Sales Charge or the administrative 15 19 charge be permitted where such reduction or elimination will be unfairly discriminatory to any person. UNDERLYING FUND CHARGES Fund BD II purchases shares of the Underlying Funds at net asset value. The net asset value of each Underlying Fund reflects investment management fees and other expenses already deducted from the assets of the Underlying Funds. For a complete description of these investment advisory fees and other expenses, refer to the prospectus for the Underlying Funds. PREMIUM TAX Certain state and local governments impose premium taxes. These taxes currently range from 0.5% to 5.0%, depending upon jurisdiction. The Company, in its sole discretion and in compliance with any applicable state law, will determine the method used to recover premium tax expenses incurred. Where required, the Company will deduct any applicable premium taxes from the Contract Value either upon death, surrender, annuitization, or at the time Purchase Payments are made to the Contract, but no earlier than when the Company has a tax liability under state law. CHANGES IN TAXES BASED UPON PREMIUM OR VALUE If there is any change in a law assessing taxes against the Company based upon the premiums of the contract, gains in the contract or value of the contract, we reserve the right to charge you proportionately for this tax. OWNERSHIP PROVISIONS - -------------------------------------------------------------------------------- TYPES OF OWNERSHIP OWNER. The Contract belongs to the Owner designated on the Contract Specifications page, or to any other person subsequently named pursuant to a valid assignment. An assignment of ownership or a collateral assignment may be made only for nonqualified contracts. The Owner has sole power during the Annuitant's lifetime to exercise any rights and to receive all benefits given in the contract provided the Owner has not named an irrevocable beneficiary and provided the Contract is not assigned. The Owner is the recipient of all payments while the Annuitant is alive unless the Owner directs them to an alternate recipient. An alternate recipient under a payment direction does not become the Owner. JOINT OWNER. For nonqualified contracts only, Joint Owners may be named in a written request prior to the Contract Date. Joint Owners may independently exercise transfers between the Sub-Accounts or between the Fixed Account and the Sub-Accounts. All other rights of ownership must be exercised by joint action. Joint owners own equal shares of any benefits accruing or payments made to them. All rights of a Joint Owner end at death if another Joint Owner survives. The entire interest of the deceased Joint Owner in the Contract will pass to the surviving Joint Owner. SUCCEEDING OWNER. For nonqualified contracts only, if Joint Owners are not named, the Contract Owner may name a Succeeding Owner in a written request. The Succeeding Owner becomes the Owner if living when the Owner dies. The Succeeding Owner has no interest in the Contract before then. The Owner may change or delete a Succeeding Owner by written request. BENEFICIARY The Beneficiary is the party named by the Owner in a written request. The Beneficiary has the right to receive any remaining contractual benefits upon the death of the Annuitant or the Owner. If there is more than one Beneficiary surviving the Annuitant, the Beneficiaries will share equally in benefits unless different shares are recorded with the Company by written request prior to the death of the Annuitant or Owner. 16 20 With nonqualified contracts, the Beneficiary may differ from the designated beneficiary as defined by the distribution provisions of the Contract. The designated beneficiary may take the contract benefits in lieu of the Beneficiary upon the death of the Contract Owner. Unless an irrevocable Beneficiary has been named, the Owner has the right to change any Beneficiary by written request during the lifetime of the Annuitant and while the Contract continues. ANNUITANT The Annuitant is designated on the Contract Specifications page, and is the individual on whose life the Maturity Date and the amount of the monthly annuity payments depend. The Annuitant may not be changed after the Contract Date. For nonqualified contracts only, the Contract Owner may also name one individual as a Contingent Annuitant by written request prior to the Contract Date. A Contingent Annuitant may not be changed, deleted or added to the Contract after the Contract Date. If an Annuitant who is not also an owner or a joint owner dies prior to the Maturity Date while this Contract is in effect and while the Contingent Annuitant is living: 1) the Contract Value will not be payable upon the Annuitant's death; 2) the Contingent Annuitant becomes the Annuitant; and 3) all other rights and benefits provided by this Contract will continue in effect. When a Contingent Annuitant becomes the Annuitant, the Maturity Date remains the same as previously in effect, unless otherwise provided. TRANSFERS - -------------------------------------------------------------------------------- Prior to the Maturity Date, the Contract Owner may transfer all or part of the Contract Value between Sub-Accounts. There are no charges or restrictions on the amount or frequency of transfers currently; however, the Company reserves the right to charge a fee for any transfer request, and to limit the number of transfers to one in any six month period. Since different Underlying Funds have different expenses, a transfer of Contract Values from one Sub-Account to another could result in a Contract Owner's investment becoming subject to higher or lower expenses. DOLLAR-COST AVERAGING (AUTOMATED TRANSFERS) Dollar-cost averaging permits the Contract Owner to transfer a fixed dollar amount to other Sub-Accounts on a monthly or quarterly basis so that more Accumulation Units are purchased in a Sub-Account if the value per unit is low and less Accumulation Units are purchased if the value per unit is high. Therefore, a lower-than-average value per unit may be achieved over the long run. You may elect automated transfers through written request or other method acceptable to the Company. You must have a minimum total Contract Value of $5,000 to enroll in the Dollar-Cost Averaging program. The minimum total automated transfer amount is $400. Certain restrictions apply for automated transfers from the Fixed Account that do not apply to automated transfers from any of the Sub-Accounts. You may establish automated transfers of Contract Values from the Fixed Account at any time. Automated transfers from the Fixed Account may not deplete your Fixed Account Value in a period of less than twelve months from your enrollment in the Dollar-Cost Averaging program. You may start or stop participation in the Dollar-Cost Averaging program at any time, but you must give the Company at least 30 days' notice to change any automated transfer instructions that are currently in place. Automated transfers are subject to all of the other provisions and terms of the Contract, including provisions relating to the transfer of money between Sub-Accounts. The Company reserves the right to suspend or modify transfer privileges at any time and to assess a processing fee for this service. 17 21 Before transferring any part of the Contract Value, Contract Owners should consider the risks involved in switching between investments available under this Contract. Dollar-cost averaging requires regular investments regardless of fluctuating price levels, and does not guarantee profits or prevent losses in a declining market. A potential investor should consider his or her financial ability to continue purchases through periods of low price levels. TELEPHONE TRANSFERS A Contract Owner may place a transfer request via telephone. The telephone transfer privilege is available automatically; no special election is necessary for a Contract Owner to have this privilege available. All transfers must be in accordance with the terms of the Contract. Transfer instructions are currently accepted on each Valuation Date between 9:00 a.m. and 4:00 p.m., Eastern time, at 1-800-842-8573. Once instructions have been accepted, they may not be rescinded; however, new telephone instructions may be given the following day. If the transfer instructions are not in good order, the Company will not execute the transfer and will promptly notify the caller. The Company will make a reasonable effort to record each telephone transfer conversation, but in the event that no recording is effective or available, the Contract Owner will remain liable for each telephone transfer effected. Additionally, the Company is not liable for acting upon instructions believed to be genuine and in accordance with the procedures described above. As a result of this policy, the Contract Owner may bear the risk of loss in the event that the Company follows instructions that prove to be fraudulent. SURRENDERS AND REDEMPTIONS - -------------------------------------------------------------------------------- A Contract Owner may redeem all or any portion of the Cash Surrender Value of the Contract at any time prior to the Maturity Date. The Contract Owner must submit a written request (in the proper form) specifying the investment option from which the surrender is to be made. The Cash Surrender Value will be determined as of the next valuation following receipt of the Owner's surrender request at the Company's Home Office. The Cash Surrender Value may be more or less than the Purchase Payments made depending on the Contract Value at the time of surrender. The Company may defer payment of any Cash Surrender Value for a period of not more than seven days after the request is received in the mail, but it is the Company's intent to pay as soon as possible. Requests for surrender that are not in good order will not be processed until the deficiencies are corrected. The Company will contact the Contract Owner to advise of the reason for the delay and what is needed to act upon the surrender request. SYSTEMATIC WITHDRAWALS Prior to the Maturity Date of the Contract, a Contract Owner may elect in writing on A form provided by the Company to take systematic withdrawals from the Contract by surrendering a specified dollar amount (at least $100) on a monthly, quarterly, semiannual or annual basis. The election must be made on the form provided by the Company. Any applicable surrender charges above the free withdrawal allowance and any applicable premium taxes will be deducted. The minimum Contract Value required to begin systematic withdrawals is $15,000. The Company will process the withdrawals as directed by surrendering on a pro-rata basis Accumulation Units from all investment options in which the Contract Owner has an interest, unless otherwise directed. The Contract Owner may begin or discontinue systematic withdrawals at any time by notifying the Company in writing, but at least 30 days' notice must be given to change any systematic withdrawal instructions that are currently in place. The Company reserves the right to discontinue offering systematic withdrawals or to assess a processing fee for this service upon 30 days' written notice to Contract Owners. Each systematic withdrawal is subject to federal income taxes on the taxable portion. In addition, a 10% federal penalty tax may be assessed on systematic withdrawals if the Contract Owner is under age 59 1/2. Contract Owners should consult with their tax adviser regarding the tax consequences of systematic withdrawals. 18 22 DEATH BENEFIT - -------------------------------------------------------------------------------- Prior to the Maturity Date, a Death Benefit is payable to the Beneficiary upon the death of the Annuitant, Contract Owner or the first of Joint Owners, provided there is no Contingent Annuitant. Two different types of death benefits are available under the Contract: a Standard Death Benefit and an Enhanced Death Benefit (the Enhanced Death Benefit may not be available in all jurisdictions). Death Benefits are payable upon the Company's receipt at its Home Office of due proof of death. A Beneficiary may request that a death benefit payable under the Contract be applied to one of the settlement options available under the Contract, subject to the contract provisions. (See also "Nonqualified Annuity Contracts," page .) See Appendix A for Contracts issued in the state of Florida. For nonqualified contracts, if the Contract Owner (including the first of joint owners) dies before the Maturity Date, a distribution may be required under the minimum distribution requirements of the federal tax law. If so required, the Company will recalculate the value of the Contract under the provisions of "Death Proceeds Prior to the Maturity Date," below. The value of the Contract, as recalculated, will be credited to the party taking distributions upon the death of the Contract Owner with the Annuitant or Contingent Annuitant surviving. This will generally be the surviving joint owner or succeeding owner, or otherwise the Beneficiary in accordance with all the circumstances and the terms of the Contract. This party may differ from the Beneficiary who was named by the Owner in a written request and who would receive any remaining contractual benefits upon the death of the Annuitant. This party may be paid in a single lump sum, or by other options, but should take distributions as required by minimum distribution rules of the federal tax law. If the Contract Owner's spouse is the surviving joint owner, the spouse may elect to continue the Contract as owner in lieu of taking a distribution under the Contract. (See generally, "Nonqualified Annuity Contracts," page .) In this case, all references to age in the "Death Proceeds Prior to the Maturity Date" section will be based on the Contract Owner's age rather than the Annuitant's age. DEATH PROCEEDS PRIOR TO THE MATURITY DATE STANDARD DEATH BENEFIT. Under the standard death benefit, if the Annuitant dies BEFORE AGE 75 and before the Maturity Date, the Company will pay to the Beneficiary a death benefit in an amount equal to the greatest of (1), (2) or (3) below, each reduced by any applicable premium tax or prior surrenders not previously deducted: 1) the Contract Value; 2) the total Purchase Payments made under the Contract; or 3) the Contract Value on the latest fifth contract year anniversary immediately preceding the date on which the Company receives due proof of death. If the Annuitant dies ON OR AFTER AGE 75, BUT BEFORE AGE 85 and before the Maturity Date, the Company will pay to the Beneficiary a death benefit in an amount equal to the greatest of (1), (2) or (3) below, each reduced by any applicable premium tax or prior surrenders not previously deducted: 1) the Contract Value; 2) the total Purchase Payments made under the Contract; or the Contract Value on the latest fifth contract year anniversary occurring on or before the Annuitant's 75th birthday. If the Annuitant dies ON OR AFTER AGE 85 and before the Maturity Date, the Company will pay to the Beneficiary a death benefit in an amount equal to the Contract Value, less any applicable premium tax. See Appendix A for Contracts issued in the state of Florida. 19 23 ENHANCED DEATH BENEFIT. Under the enhanced death benefit, if the Annuitant dies BEFORE AGE 75 and before the Maturity Date, the Company will pay to the Beneficiary a death benefit equal to the greater of (1) the guaranteed death benefit, or (2) the Contract Value less any applicable premium tax. The guaranteed death benefit is equal to the Purchase Payments made to the Contract (minus surrenders and applicable premium tax) increased by 5% on each contract date anniversary, but not beyond the contract date anniversary following the Annuitant's 75th birthday, with a maximum guaranteed death benefit of 200% of the total of Purchase Payments minus surrenders and minus applicable premium tax. If the Annuitant dies ON OR AFTER AGE 75, BUT BEFORE AGE 85 and before the Maturity Date, the Company will pay to the Beneficiary a death benefit in an amount equal to the greater of (1) the guaranteed death benefit as of the Annuitant's 75th birthday, plus additional purchase payments, minus surrenders and applicable premium tax; or (2) the Contract Value less any applicable premium tax. If the Annuitant dies ON OR AFTER AGE 85 but before the Maturity Date, the Company will pay to the Beneficiary a death benefit equal to the Contract Value less any applicable premium tax. DEATH PROCEEDS AFTER THE MATURITY DATE If the Annuitant dies on or after the Maturity Date, the Company will pay the Beneficiary a death benefit consisting of any benefit remaining under the Annuity or Income Option then in effect. THE ANNUITY PERIOD - -------------------------------------------------------------------------------- MATURITY DATE Annuity Payments will ordinarily begin on the Maturity Date stated in the Contract. If no Maturity Date is elected, the Maturity Date will be the Annuitant's 70th birthday for qualified contracts and the Annuitant's 75th birthday, or ten years after the Contract Date, if later, for nonqualified contracts. The Maturity Date is the date on which the Company will begin paying the first of a series of Annuity or Income Payments in accordance with the Settlement Option selected by the Contract Owner. Annuity or Income Payments will begin on the Maturity Date unless the Contract has been fully surrendered or the proceeds have been paid to the Beneficiary prior to that date. The Company may require proof that the Annuitant is alive before Annuity Payments are made. See Appendix A for Contracts issued in the state of Florida. For nonqualified Contracts, at least 30 days before the original Maturity Date, a Contract Owner may elect to extend the Maturity Date to any time prior to the Annuitant's 85th birthday or, for qualified Contracts, to a later date with the Company's consent. Certain annuity options taken at the Maturity Date may be used to meet the minimum required distribution requirements of federal tax law, or a program of partial surrenders may be used instead. These mandatory distribution requirements take effect generally upon the death of the Contract Owner, or with qualified contracts upon either the Contract Owner's attainment of age 70 1/2 or the death of the Contract Owner. Independent tax advice should be sought regarding the election of minimum required distributions. See Appendix A for Contracts issued in the state of Florida. ALLOCATION OF ANNUITY When an Annuity Option is elected, it may be elected as a Variable Annuity, a Fixed Annuity, or a combination of both. If, at the time Annuity Payments begin, no election has been made to the contrary, the Contract Value shall be applied to provide an annuity funded by the same investment options. At least 15 days prior to the Maturity Date, you may reallocate the basis on which Annuity Payments will be determined. (See "Transfers," page .) 20 24 VARIABLE ANNUITY ANNUITY UNIT VALUE. The initial value of an Annuity Unit applicable to each Funding Option was established at $1. The Annuity Unit Value as of any Valuation Date is equal to (a) the value of the Annuity Unit on the immediately preceding Valuation Date, multiplied by (b) the corresponding net investment factor for the Valuation Period just ended, divided by (c) the assumed net investment factor for the Valuation Period. (For example, the assumed net investment factor based on an annual assumed net investment rate of 3.0% for a Valuation Period of one day is 1.000081 and, for a period of two days, is 1.000081 X 1.000081.) The value of an Annuity Unit as of any date other than a Valuation Date is equal to its value on the next succeeding Valuation Date. The number of Annuity Units credited to the Contract is determined by dividing the first monthly Annuity Payment attributable to each Sub-Account by the corresponding Annuity Unit Value as of 14 days prior to the date Annuity Payments commence. The number of Annuity Units remains fixed during the annuity period. DETERMINATION OF FIRST ANNUITY PAYMENT. The Contract contains tables used to determine the first monthly Annuity Payment. The amount applied to effect an Annuity will be the Contract Value as of 14 days before the date Annuity Payments commence less any applicable premium taxes not previously deducted. The amount of the first monthly payment depends on the Annuity Option elected. A formula for determining the adjusted age is contained in the Contract. The total first monthly Annuity Payment is determined by multiplying the benefit per $1,000 of value shown in the tables of the Contract by the number of thousands of dollars of value of the Contract applied to that Annuity Option. The Company reserves the right to require satisfactory proof of age of any person on whose life Annuity Payments are based before making the first payment under any of the Settlement Options. DETERMINATION OF SECOND AND SUBSEQUENT ANNUITY PAYMENTS. The dollar amount of the second and subsequent Annuity Payments is not predetermined and may change from month to month based on the investment experience of the applicable Underlying Fund. The total amount of each Annuity Payment will be equal to the sum of the basic payments in each Underlying Fund. The actual amounts of these payments are determined by multiplying the number of Annuity Units credited to each Underlying Fund by the corresponding Annuity Unit Value as of the date 14 days prior to the date before payment is due. See Appendix A for Contracts issued in the state of Florida. FIXED ANNUITY A Fixed Annuity provides for payments that do not vary during the Annuity Period. The dollar amount of the first Fixed Annuity Payment will be calculated as described under "Variable Annuity" above. All subsequent payments will be made in the same amount. If it would produce a larger payment, the Company agrees that the first Fixed Annuity Payment will be determined using the Life Annuity Tables in effect on the Maturity Date. PAYMENT OPTIONS - -------------------------------------------------------------------------------- ELECTION OF OPTIONS On the Maturity Date, or other agreed-upon date, the Company will pay an amount payable under the Contract in one lump sum, or in accordance with the payment option selected by the Contract Owner. Election of an option must be made in writing in A form satisfactory to the Company. Any election made during the lifetime of the Annuitant must be made by the Contract Owner. While the Annuitant is alive, the Contract Owner may change a Settlement Option election by written request at any time prior to the Maturity Date. Once Annuity or Income Payments have begun, no further election changes are allowed. During the Annuitant's lifetime, if no election has been made prior to the Maturity Date, the Company will pay to the Contract Owner the first of a series of monthly Annuity Payments based on the life of the Annuitant, in accordance with Annuity 21 25 Option 2 (Life Annuity with 120 monthly payments assured). For certain qualified contracts, Annuity Option 4 (Joint and Last Survivor Joint Life Annuity -- Annuity Reduced on Death of Primary Payee) will be the automatic option as described in the contract. The minimum amount that can be placed under an Annuity or Income Option will be $2,000 unless the Company consents to a lesser amount. If any monthly periodic payment due any payee is less than $100, the Company reserves the right to make payments at less frequent intervals, or to pay the Contract Value in one lump-sum payment. See Appendix A for Contracts issued in the state of Florida. ANNUITY OPTIONS Subject to the conditions described in "Election of Options" above, all or any part of the Cash Surrender Value of the Contract may be paid under one or more of the following Annuity Options. Payments under the Annuity Options may be elected on a monthly, quarterly, semiannual or annual basis. OPTION 1 -- LIFE ANNUITY -- NO REFUND. The Company will make Annuity Payments during the lifetime of the Annuitant, terminating with the last payment preceding death. This option offers the maximum periodic payment, since THERE IS NO ASSURANCE OF A MINIMUM NUMBER OF PAYMENTS OR PROVISION FOR A DEATH BENEFIT FOR BENEFICIARIES. OPTION 2 -- LIFE ANNUITY WITH 120, 180 OR 240 MONTHLY PAYMENTS ASSURED. The Company will make monthly Annuity Payments during the lifetime of the Annuitant, with the agreement that if, at the death of that person, payments have been made for less than 120, 180 or 240 months, as elected, payments will be continued during the remainder of the period to the Beneficiary. OPTION 3 -- JOINT AND LAST SURVIVOR LIFE ANNUITY -- NO REFUND. The Company will make Annuity Payments during the joint lifetime of the two persons on whose lives payments are based, and during the lifetime of the survivor. No further payments will be made following the death of the survivor. OPTION 4 -- JOINT AND LAST SURVIVOR LIFE ANNUITY -- ANNUITY REDUCED ON DEATH OF PRIMARY PAYEE. The Company will make Annuity Payments during the lifetime of the two persons on whose lives payments are based. One of the two persons will be designated as the primary payee, the other will be designated as the secondary payee. On the death of the secondary payee, if survived by the primary payee, the Company will continue to make Annuity Payments to the primary payee in the same amount that would have been payable during the joint lifetime of the two persons. On the death of the primary payee, if survived by the secondary payee, the Company will continue to make Annuity Payments to the secondary payee in an amount equal to 50% of the payments which would have been made during the lifetime of the primary payee. No further payments will be made following the death of the survivor. OPTION 5 -- OTHER ANNUITY OPTIONS. The Company will make any other arrangements for Annuity Payments as may be mutually agreed upon. INCOME OPTIONS Instead of one of the Annuity Options described above, and subject to the conditions described under "Election of Options," all or part of the Cash Surrender Value of the Contract may be paid under one or more of the following Income Options, provided that they are consistent with federal tax law qualification requirements. Payments under the Income Options may be elected on a monthly, quarterly, semiannual or annual basis: OPTION 1 -- PAYMENTS OF A FIXED AMOUNT. The Company will make equal payments of the amount elected until the Contract Value applied under this option has been exhausted. The first payment and all later payments will be paid from each Sub-Account or the Fixed Account in proportion to the Cash Surrender Value attributable to that Account. The final payment will include any amount insufficient to make another full payment. 22 26 OPTION 2 -- PAYMENTS FOR A FIXED PERIOD. The Company will make payments for the period selected. The amount of each payment will be equal to the remaining Contract Value applied under this option divided by the number of remaining payments. OPTION 3 -- OTHER INCOME OPTIONS. The Company will make any other arrangements for Income Payments as may be mutually agreed upon. The amount applied to effect an Income Option will be the Contract Value as of 14 days before the date Income Payments commence, less any applicable premium taxes not previously deducted and any applicable contingent deferred sales charge. The Contract Value used to determine the amount of any Income Payment will be determined on the same basis as the Contract Value during the Accumulation Period, including the deduction for mortality and expense risks and the Sub-Account Administrative Charge. Income Options differ from Annuity Options in that the amount of the payments made under Income Options are unrelated to the length of life of any person. Although the Company continues to deduct the charge for mortality and expense risks, it assumes no mortality risks for amounts applied under any Income Option. Moreover, payments are unrelated to the actual life span of any person. Thus, the Annuitant may outlive the payment period. MISCELLANEOUS CONTRACT PROVISIONS - -------------------------------------------------------------------------------- TERMINATION No Purchase Payments after the first are required to keep the Contract in effect. However, the Company reserves the right to terminate the Contract on any Valuation Date if the Contract Value as of that date is less than $1,000 and no Purchase Payments have been made for at least two years, unless otherwise specified by state law. Termination will not occur until 31 days after the Company has mailed notice of termination to the Contract Owner at his or her last known address and to any assignee of record. If the Contract is terminated, the Company will pay to the Contract Owner the Cash Surrender Value (Contract Value, in the states of Washington and New Jersey), less any applicable administrative charge or premium tax. MISSTATEMENT If the Annuitant's or Contract Owner's sex or date of birth was misstated, all benefits under the Contract are what the Purchase Payment paid would have purchased at the correct sex and age. Proof of the Annuitant's or Contract Owner's age may be filed at any time at the Company's Home Office. REQUIRED REPORTS As often as required by law, but at least once in each Contract Year before the due date of the first Annuity Payment, the Company will furnish a report showing the number of Accumulation Units credited to the Contract and the corresponding Accumulation Unit Value as of the date of the report for each Underlying Fund to which the Contract Owner has allocated amounts during the applicable period. The Company will keep all records required under federal or state laws. SUSPENSION OF PAYMENTS The Company reserves the right to suspend or postpone the date of any payment of any benefit or values for any Valuation Period (1) when the New York Stock Exchange ("Exchange") is closed; (2) when trading on the Exchange is restricted; (3) an emergency exists as determined by the SEC so that disposal of the securities held in the Sub-Accounts is not reasonably practicable or it is not reasonably practicable to determine the value of the Separate Account's net assets; or (4) during any other period when the SEC, by order, so permits for the protection of securityholders. TRANSFERS OF CONTRACT VALUES TO OTHER ANNUITIES The Company may permit Contract Owners to transfer their Contract Values into other annuities offered by the Company or its affiliated insurance Companies under rules then in effect. 23 27 FEDERAL TAX CONSIDERATIONS - -------------------------------------------------------------------------------- The following description of the federal income tax consequences under this Contract is not exhaustive and is not intended to cover all situations. Because of the complexity of the law and the fact that the tax results will vary according to the factual status of the individual involved, tax advice may be needed by a person contemplating purchase of an annuity contract and by a Contract Owner or Beneficiary who may make elections under a contract. For further information, a qualified tax adviser should be consulted. GENERAL TAXATION OF ANNUITIES Amounts credited to the Contract are not generally taxable until they are received by the Contract Owner or the Beneficiary, either in the form of Annuity Payments or other distributions. Distributions from annuities that include previously taxed amounts may be taxed on either an income-first basis or an income-last basis, or on a pro-rata basis according to the type of plan or due to other circumstances. TAX LAW DIVERSIFICATION REQUIREMENTS FOR VARIABLE ANNUITIES The Code requires that any nonqualified variable annuity contracts based on a segregated asset account shall not be treated as an annuity for any period if investments made in the account are not adequately diversified. Final tax regulations define how segregated assets accounts must be diversified. The Company monitors the diversification of investments constantly and believes that its accounts are adequately diversified. The consequence of any failure is essentially the loss to the contract owner of tax deferred treatment. The Company intends to administer all contracts subject to this provision of law in a manner that will maintain adequate diversification. OWNERSHIP OF THE INVESTMENTS Assets in the segregated asset accounts must be owned by the Company and not by the Contract Owner for federal income tax purposes. Otherwise, the deferral of taxes is lost and income and gains from the accounts would be includable annually in the Contract Owner's gross income. The Internal Revenue Service has stated in published rulings that a variable contract owner will be considered the owner of the assets of a segregated asset account if the owner possesses an incident of ownership in those assets, such as the ability to exercise investment control over the assets. The Treasury Department announced, in connection with the issuance of temporary regulations concerning investment diversification, that those regulations "do not provide guidance concerning the circumstances in which investor control of the investments of a segregated asset account may cause the investor, rather than the insurance company, to be treated as the owner of the assets of the account." This announcement, dated September 15, 1986, also stated that the guidance would be issued by way of regulations or rulings on the "extent to which policyholders may direct their investments to particular subaccounts [of a segregated asset account] without being treated as owners of the underlying assets." As of the date of this prospectus, no such guidance has been issued. The Company does not know if such guidance will be issued, or if it is, what standards it may set. Furthermore, the Company does not know if such guidance may be issued with retroactive effect. New regulations are generally issued with a prospective-only effect as to future sales or as to future voluntary transactions in existing contracts. The Company therefore reserves the right to modify the contract as necessary to attempt to prevent contract owners from being considered the owner of the assets of the accounts. PENALTY TAX FOR PREMATURE DISTRIBUTIONS Taxable distributions taken before the Contract Owner has attained the age of 59 1/2 will be subject to a 10% additional tax penalty unless the distribution is taken in a series of periodic distributions for life or life expectancy, or unless the distribution follows the death or disability of the Contract Owner. Other exceptions may be available in certain tax-qualified plans. 24 28 MANDATORY DISTRIBUTIONS FOR QUALIFIED PLANS Federal tax law requires that minimum annual distributions begin by April 1st of the calendar year following the calendar year in which a participant under a qualified plan, a Section 403(b) annuity, or an IRA attains age 70 1/2. Distributions must also begin or be continued according to required patterns following the death of the Owner or the Annuitant. NONQUALIFIED ANNUITY CONTRACTS Individuals may purchase tax-deferred annuities without tax law funding limits. The Purchase Payments receive no tax benefit, deduction or deferral, but increases in the value of the contract are generally deferred from tax until distribution. If a nonqualified annuity is owned by other than an individual, however (e.g., by a corporation), the increases in value attributable to Purchase Payments made after February 28, 1986 are includable in income annually. Furthermore, for contracts issued after April 22, 1987, all deferred increases in value will be includable in the income of a Contract Owner when the Contract Owner transfers the contract without adequate consideration. If two or more annuity contracts are purchased from the same insurer within the same calendar year, distributions from any of them will be taxed based upon the amount of income in all of the same calendar year series of annuities. This will generally have the effect of causing taxes to be paid sooner on the deferred gain in the contracts. Those receiving partial distributions made before the Maturity Date will generally be taxed on an income-first basis to the extent of income in the contract. If you are exchanging another annuity contract for this annuity, certain pre-August 14, 1982 deposits into an annuity contract that have been placed in the contract by means of a tax-deferred exchange under Section 1035 of the Code may be withdrawn first without income tax liability. This information on deposits must be provided to the Company by the other insurance company at the time of the exchange. There is income in the contract generally to the extent the Cash Value exceeds the investment in the contract. The investment in the contract is equal to the amount of premiums paid less any amount received previously which was excludable from gross income. Any direct or indirect borrowing against the value of the contract or pledging of the contract as security for a loan will be treated as a cash distribution under the tax law. The federal tax law requires that nonqualified annuity contracts meet minimum mandatory distribution requirements upon the death of the Contract Owner, including the first of joint owners. Failure to meet these requirements will cause the surviving joint owner, the succeeding Contract Owner, or the Beneficiary to lose the tax benefits associated with annuity contracts, i.e., primarily the tax deferral prior to distribution. The distribution required depends, among other things, upon whether an Annuity Option is elected or whether the new Contract Owner is the surviving spouse. Contracts will be administered by the Company in accordance with these rules and the Company will make a notification when payments should be commenced. INDIVIDUAL RETIREMENT ANNUITIES To the extent of earned income for the year and not exceeding $2,000 per individual, an individual may make deductible contributions to an individual retirement annuity (IRA). There are certain limits on the deductible amount based on the adjusted gross income of the individual and spouse and based on their participation in a retirement plan. If an individual is married and the spouse does not have earned income, the individual may establish IRAs for the individual and spouse. Purchase Payments may then be made annually into IRAs for both spouses in the maximum amount of 100% of earned income up to a combined limit of $2,250. The Code provides for the purchase of a Simplified Employee Pension (SEP) plan. A SEP is funded through an IRA with an annual employer contribution limit of 15% of compensation up to $30,000 for each participant. 25 29 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. 2. OTHER NON-PERIODIC DISTRIBUTIONS (FULL OR PARTIAL REDEMPTIONS) To the extent not described as requiring 20% withholding in 1 above, the portion of a non-periodic distribution which constitutes taxable income will be subject to federal income tax withholding, if the aggregate distributions exceed $200 for the year, unless the recipient elects not to have taxes withheld. If no such election is made, 10% of the taxable distribution will be withheld as federal income tax. Election forms will be provided at the time distributions are requested. This form of withholding applies to all annuity programs. 3. PERIODIC DISTRIBUTIONS (DISTRIBUTIONS PAYABLE OVER A PERIOD GREATER THAN ONE YEAR) The portion of a periodic distribution which constitutes taxable income will be subject to federal income tax withholding under the wage withholding tables as if the recipient were married claiming three exemptions. A recipient may elect not to have income taxes withheld or have income taxes withheld at a different rate by providing a completed election form. Election forms will be provided at the time distributions are requested. This form of withholding applies to all annuity programs. As of January 1, 1996, a recipient receiving periodic payments (e.g., monthly or annual payments under an Annuity Option) which total $14,350 or less per year, will generally be exempt from periodic withholding. Recipients who elect not to have withholding made are liable for payment of federal income tax on the taxable portion of the distribution. All recipients may also be subject to penalties under the estimated tax payment rules if withholding and estimated tax payments are not sufficient to cover tax liabilities. 26 30 Recipients who do not provide a social security number or other taxpayer identification number will not be permitted to elect out of withholding. Additionally, United States citizens residing outside of the country, or U.S. legal residents temporarily residing outside the country, are not permitted to elect out of withholding. VOTING RIGHTS - -------------------------------------------------------------------------------- The Contract Owner has certain voting rights in Fund BD II and the Underlying Funds. The number of votes which a Contract Owner may cast in the accumulation period is equal to the number of Accumulation Units credited to the account under the Contract. During the annuity period, the Contract Owner may cast the number of votes equal to (i) the reserve related to the Contract divided by (ii) the value of an Accumulation Unit, and a Contract Owner's voting rights will decline as the reserve for the Contract declines. Each person having a voting interest in Fund BD II will receive periodic reports relating to the Underlying Fund(s) in which he or she has an interest, as well as any proxy materials, including a form on which to give voting instructions with respect to the proportion of the Underlying Fund shares held by Fund BD II which correspond to his or her interest in the Sub-Account. Upon the death of the Contract Owner, all voting rights will vest in the Beneficiary of the Contract, except in the case of Contracts where the surviving spouse becomes the Contract Owner. The Company will vote shares of Underlying Funds held by Fund BD II at regular and special meetings of the Underlying Fund shareholders in accordance with instructions received from persons having a voting interest in Fund BD II. The Company will vote shares for which it has not received instructions in the same proportion as it votes shares for which it has received instructions. However, if the 1940 Act or any regulation thereunder should be amended, or if the present interpretation thereof should change, and as a result the Company determines that it is permitted to vote shares of the Underlying Funds in its own right, it may elect to do so. DISTRIBUTION OF VARIABLE ANNUITY CONTRACTS - -------------------------------------------------------------------------------- The Company intends to sell the Contracts in all jurisdictions where it is licensed to do business and where the Contract is approved. The Contracts will be sold by life insurance sales agents who represent the Company, and who are licensed registered representatives of the Company or certain other registered broker-dealers. The compensation paid to sales representatives will not exceed 6.25% of the payments made under the Contracts. From time to time the Company may pay or permit other promotional incentives, in cash, credit or other compensation. Any sales representative or employee will have been qualified to sell Variable Annuities under applicable federal and state laws. Each broker-dealer is registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934, and all are members of the National Association of Securities Dealers, Inc. Tower Square Securities, Inc., an affiliate of the Company, is the principal underwriter for the Contracts. CONFORMITY WITH STATE AND FEDERAL LAWS The Contract is governed by the laws of the state in which it is delivered. Any paid-up Annuity, Cash Surrender Value or death benefits that are available under the Contract are not less than the minimum benefits required by the statutes of the state in which the Contract is delivered. The Company may at any time make any changes, including retroactive changes, in the Contract to the extent that the change is required to meet the requirements of any law or regulation issued by any governmental agency to which the company, the Contract or the Contract Owner is subject. 27 31 LEGAL PROCEEDINGS AND OPINIONS - -------------------------------------------------------------------------------- There are no pending material legal proceedings affecting Fund BD II. Legal matters in connection with the federal laws and regulations affecting the issue and sale of the Contract described in this Prospectus, as well as the organization of the Company, its authority to issue variable annuity contracts under Connecticut law and the validity of the forms of the variable annuity contracts under Connecticut law, have been reviewed by the General Counsel of the Life and Annuities Division of the Company. THE FIXED ACCOUNT - -------------------------------------------------------------------------------- Under the Fixed Account, the Company assumes the risk of investment gain or loss, guarantees a specified interest rate, and guarantees a specified periodic annuity payment. The investment gain or loss of Fund BD II or any of the Sub-Accounts does not affect the Fixed Account portion of the Contract Owner's Contract Value, or the dollar amount of fixed annuity payments made under any payout option. The Company guarantees that, at any time, the Fixed Account Contract Value will not be less than the amount of the Purchase Payments allocated to the Fixed Account, plus interest credited as described above, less any applicable premium taxes or prior surrenders. If the Contract Owner effects a surrender, the amount available from the Fixed Account will be reduced by any applicable Contingent Deferred Sales Charge. Purchase Payments allocated to the Fixed Account portion of the Contract and any transfers made to the Fixed Account become part of the general account of the Company which supports insurance and annuity obligations. Neither the general account nor any interest therein is registered under, nor subject to the provisions of the 1933 or 1940 Acts. The Company will invest the assets of the Fixed Account at its discretion. Investment income from such Fixed Account assets will be allocated by the Company between itself and the Contracts participating in the Fixed Account. Investment income from the Fixed Account allocated to the Company includes compensation for mortality and expense risks borne by the Company in connection with Fixed Account Contracts. The amount of such investment income allocated to the Contracts will vary from year to year in the sole discretion of the Company at such rate or rates as the Company prospectively declares from time to time. The initial rate for any deposit into the Fixed Account is guaranteed for one year from the date of such deposit. Subsequent renewal rates will be guaranteed for the calendar quarter. The Company also guarantees that for the life of the Contract it will credit interest at not less than 3% per year. Any interest credited to amounts allocated to the Fixed Account in excess of 3% per year will be determined in the sole discretion of the company. The contract owner assumes the risk that interest credit to the Fixed Account may not exceed the minimum guarantee of 3% for any given year. TRANSFERS Transfers from the Fixed Account to any other available investment option(s) will be permitted twice a year during the 30 days following the semiannual Contract Date anniversary in an amount of up to 15% of the Fixed Account Value on the semiannual Contract Date anniversary. (This restriction does not apply to transfers from the Dollar-Cost Averaging Program.) Amounts previously transferred from the Fixed Account to the Sub-Accounts may not be transferred back to the Fixed Account for a period of at least 6 months from the date of transfer. The Company reserves the right to waive either of these restrictions in its discretion. Automated transfers from the Fixed Account to any of the Sub-Accounts may begin at any time. Automated transfers from the Fixed Account may not deplete your Fixed Account value in a period of less than twelve months from your enrollment in the Dollar-Cost Averaging program. 28 32 APPENDIX A FOR CONTRACTS ISSUED IN THE STATE OF FLORIDA - -------------------------------------------------------------------------------- DEATH BENEFITS DEATH PROCEEDS PRIOR TO THE MATURITY DATE The Enhanced Death Benefit is not available in Florida. STANDARD DEATH BENEFIT. Under the standard death benefit, if the Annuitant dies BEFORE AGE 75 and before the Maturity Date, the Company will pay to the Beneficiary a death benefit in an amount equal to the greatest of (1), (2) or (3) below, less any applicable premium tax or prior surrenders not previously deducted: 1) the Contract Value; 2) the total Purchase Payments made under the Contract; or 3) the Contract Value on the latest fifth contract year anniversary immediately preceding the date on which the Company receives due proof of death. IF THE ANNUITANT DIES ON OR AFTER AGE 75, BUT BEFORE AGE 90 and before the Maturity Date, the Company will pay to the Beneficiary a death benefit in an amount equal to the greatest of (1), (2) or (3) below, less any applicable premium tax or prior surrenders not previously deducted: 1) the Contract Value; 2) the total Purchase Payments made under the Contract; or 3) the Contract Value on the latest fifth contract year anniversary occurring on or before the Annuitant's 75th birthday. THE ANNUITY PERIOD MATURITY DATE The maturity date may not be any date beyond the Annuitant's 90th birthday. THE VARIABLE ANNUITY Variable payouts are not permitted in Florida. Contract Owners may only have their Contract Values applied to provide a Fixed Annuity. Disregard the "Variable Annuity" section described on page 19. ELECTION OF OPTIONS ON THE MATURITY DATE, OR OTHER AGREED-UPON DATE, THE COMPANY WILL PAY AN AMOUNT PAYABLE UNDER THE CONTRACT IN ACCORDANCE WITH THE PAYMENT OPTION SELECTED BY THE CONTRACT OWNER. Election of an option must be made in writing in a form satisfactory to the Company. Any election made during the lifetime of the Annuitant must be made by the Contract Owner. While the Annuitant is alive, the Contract Owner may change a Settlement Option election by Written Request at any time prior to the Maturity Date. Once Annuity or Income Payments have begun, no further election changes are allowed. During the Annuitant's lifetime, if no election has been made prior to the Maturity Date, the Company will pay to the Contract Owner the first of a series of monthly Annuity Payments based on the life of the Annuitant, in accordance with Annuity Option 2 (Life Annuity with 120 monthly payments assured). For certain tax-qualified contracts, Annuity Option 4 (Joint and Last Survivor Joint Life Annuity -- Annuity Reduced on Death of Primary Payee) will be the automatic option as described in the contract. The minimum amount that can be placed under an Annuity or Income Option will be $2,000 unless the Company consents to a lesser amount. If any monthly periodic payment due any payee is less than $100.00, the Company reserves the right to make payments at less frequent intervals, or to pay the Contract Value in one lump-sum payment. 29 33 APPENDIX B CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION - -------------------------------------------------------------------------------- The Statement of Additional Information contains more specific information and financial statements relating to the Separate Account and The Travelers Life and Annuity Company. A list of the contents of the Statement of Additional Information is set forth below: The Insurance Company Principal Underwriter Distribution and Management Agreement Valuation of Assets Performance Data Independent Accountants Financial Statements - -------------------------------------------------------------------------------- COPIES OF THE STATEMENT OF ADDITIONAL INFORMATION DATED MAY 1, 1996 (FORM NO. L-12540S) 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 06183-9061. Name: - -------------------------------------------------------------------------------- Address: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 30 34 THIS PAGE INTENTIONALLY LEFT BLANK. 31 35 PART B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION 36 VINTAGE STATEMENT OF ADDITIONAL INFORMATION dated May 1, 1996 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, 1996. A copy of the Prospectus may be obtained by writing to The Travelers Life and Annuity Company, Annuity Services, One Tower Square, Hartford, Connecticut 06183-9061, or by calling 1-800-842-8573. TABLE OF CONTENTS THE INSURANCE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 PRINCIPAL UNDERWRITER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 DISTRIBUTION AND MANAGEMENT AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 VALUATION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
37 THE INSURANCE COMPANY The Travelers Life and Annuity Company (the "Company"), an indirect wholly owned subsidiary of Travelers Group Inc., 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 a majority of the states of the United States, and intends to seek licensure in the remaining states, except New York. 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, which is indirectly owned, through a wholly owned subsidiary, by Travelers Group Inc., a financial services holding company engaged, through its subsidiaries, principally in four business segments: (i) Investment Services; (ii) Consumer Finance Services; (iii) Life Insurance Services; and (iv) Property and Casualty Insurance Services. PRINCIPAL UNDERWRITER Tower Square Securities, Inc. ("Tower Square"), an affiliate of the Company, serves as principal underwriter for Fund BD II and the Contracts. The offering is continuous. Tower Square is an indirect wholly owned subsidiary of Travelers Group Inc. and its principal executive offices are located at One Tower Square, Hartford, Connecticut. DISTRIBUTION AND MANAGEMENT AGREEMENT Under the terms of the Distribution and Management Agreement among Fund BD II, the Company and Tower Square, the Company provides all administrative services and mortality and expense risk guarantees related to variable annuity contracts sold by the Company in connection with the Fund BD II. Tower Square performs the sales functions related to the Contracts. The Company reimburses Tower Square for commissions paid, other sales expenses and certain overhead expenses connected with sales functions. The Company also pays all costs (including costs associated with the preparation of sales literature); all costs of qualifying Fund BD II and the variable annuity contract with regulatory authorities; the costs of proxy solicitation; and all custodian, accountant's and legal fees. The Company also provides without cost to the Fund BD II all necessary office space, facilities, and personnel to manage its affairs. VALUATION OF ASSETS The value of the assets of each Underlying Fund is determined on each Valuation Date as of the close of the New York Stock Exchange. Each security traded on a national securities exchange is valued at the last reported sale price on the Valuation Date. If there has been no sale on that day, then the value of the security is taken to be the mean between the reported bid and 2 38 asked prices on the Valuation Date or on the basis of quotations received from a reputable broker or any other recognized source. Any security not traded on a securities exchange but traded in the over-the-counter-market and for which market quotations are readily available is valued at the mean between the quoted bid and asked prices on the Valuation Date or on the basis of quotations received from a reputable broker or any other recognized source. Securities traded on the over-the-counter-market and listed securities with no reported sales are valued at the mean between the last reported bid and asked prices or on the basis of quotations received from a reputable broker or other recognized source. Short-term investments for which a quoted market price is available are valued at market. Short-term investments maturing in more than sixty days for which there is no reliable quoted market price are valued by "marking to market" (computing a market value based upon quotations from dealers or issuers for securities of a similar type, quality and maturity.) "Marking to market" takes in account unrealized appreciation or depreciation due to changes in interest rates or other factors which would influence the current fair values of such securities. Short-term investments maturing in sixty days or less for which there is no reliable quoted market price are valued at amortized cost which approximates market. NET INVESTMENT FACTOR The net investment factor is used to measure the investment performance of a Sub-Account from one Valuation Period to the next. The net investment factor for a Sub-Account for any Valuation Period is equal to the sum of 1.000000 plus the net investment rate (the gross investment rate less any applicable Sub-Account deductions during the Valuation Period relating to the Insurance Charge and the Sub-Account Administrative Charge). The gross investment rate of a Sub-Account is equal to (a) minus (b) divided by (c) where: (a) = investment income plus capital gains and losses (whether realized or unrealized); (b) = any deduction for applicable taxes (presently zero); and (c) = the value of the assets of the Underlying Fund at the beginning of the Valuation Period. The gross investment rate may be either positive or negative. A Sub-Account's assets are based on the net asset value of the Underlying Fund, and investment income includes any distribution whose ex-dividend date occurs during the Valuation Period. PERFORMANCE INFORMATION From time to time, the Company may advertise several types of historical performance for Sub-Accounts of Fund BD II. The Company may advertise the "standardized average annual total returns" of the Underlying Funds available through the Separate Account, calculated in a manner 3 39 prescribed by the Securities and Exchange Commission, as well as the "non-standardized total return," as described below: STANDARDIZED METHOD. Quotations of average annual total return are computed according to a formula in which a hypothetical initial investment of $1,000 is allocated to an Underlying Fund, and then related to ending redeemable values over one-, five- and ten-year periods, or inception, if an Underlying Fund has not been in existence for one of the prescribed periods. These quotations reflect the deduction of all recurring charges during each period (on a pro rata basis in the case of fractional periods). The deduction for the semiannual administrative charge ($15) is converted to a percentage of assets based on the actual fee collected, divided by the average net assets per contract sold under the Prospectus to which this Statement of Additional Information relates. Each quotation assumes a total redemption at the end of each period with the assessment of any applicable Contingent Deferred Sales Charge at that time. NON-STANDARDIZED METHOD. Non-standardized "total return" will be calculated in a manner similar to "standardized" as describe above. However, non-standardized total return will not reflect the deduction of any applicable Contingent Deferred Sales Charge or the $15 semiannual contract administrative charge, which, if reflected, would decrease the level of performance shown. The Contingent Deferred Sales Charge is not reflected because the Contract is designed for long-term investment. GENERAL. Within the guidelines prescribed by the SEC and the National Association of Securities Dealers, Inc. ("NASD"), performance information may be quoted numerically or may be presented in a table, graph or other illustration. Advertisements may include data comparing performance to well-known indices of market performance (including, but not limited to, the Dow Jones Industrial Average, the Standard & Poor's (S&P) 500 Index and the S&P 400 Index, the Lehman Brothers Long T-Bond Index, the Russell 1000, 2000 and 3000 Indices, the Value Line Index, and the Morgan Stanley Capital International's EAFE Index). Advertisements may also include published editorial comments and performance rankings compiled by independent organizations (including, but not limited to, Lipper Analytical Services, Inc. and Morningstar, Inc.) and publications that monitor the performance of Fund BD II and the Underlying Funds. For Underlying Funds that were in existence prior to the date they became available under Fund BD II, the standardized average total return and non-standardized total return quotations will show the investment performance that such Underlying Funds would have achieved (reduced by the applicable charges) had they been held available under the Contract for the period quoted. The total return quotations are based upon historical earnings and are not necessarily representative of future performance. An Owner's Contract Value at redemption may be more or less than original cost. Average annual total returns for each of the Underlying Funds available under Fund BD II computed according to the standardized and non-standardized methods for the period ending December 31, 1995 are set forth in the following table. 4 40 STANDARDIZED TOTAL RETURN CALCULATIONS
- ---------------------------------------------------------------------------------------------------------------- Regular Since Enhanced Since Inception 1 Year Inception 1 Year Inception Date - ---------------------------------------------------------------------------------------------------------------- Smith Barney Income and Growth 25.50% 14.55% 25.13% 14.22% 6/20/94 Alliance Growth Portfolio 27.27% 20.86% 26.90% 20.51% 6/20/94 American Capital Enterprise Portfolio 25.12% 18.89% 24.74% 18.54% 6/21/94 Smith Barney International Equity Portfolio 3.97% (0.66)% 3.66% (0.96)% 6/20/94 Smith Barney Pacific Basin Portfolio (4.81)% (9.75)% (5.09)% (10.01)% 6/21/94 TBC Managed Income Portfolio 8.54% 5.34% 8.23% 5.03% 6/28/94 Putnam Diversified Income Portfolio 10.00% 7.06% 9.68% 6.74% 6/20/94 G.T. Global Strategic Income Portfolio 12.58% 3.92% 12.25% 3.61% 6/21/94 Smith Barney High Income Portfolio 11.68% 6.59% 11.35% 6.28% 6/22/94 MFS Total Return Portfolio 18.21% 9.93% 17.87% 9.61% 6/20/94 Smith Barney Money Market Portfolio (1.83)% (0.14)% (2.12)% (0.44)% 6/20/94 AIM Capital Appreciation Portfolio --- (9.96)% --- (10.02)% 10/10/95 Smith Barney Total Return Portfolio 17.43% 12.94% 17.09% 12.61% 12/3//93
5 41 NONSTANDARDIZED TOTAL RETURN CALCULATIONS
- ---------------------------------------------------------------------------------------------------------------- Regular Since Enhanced Since Inception 1 Year Inception 1 Year Inception Date - ---------------------------------------------------------------------------------------------------------------- Smith Barney Income and Growth Portfolio 31.52% 18.21% 31.15% 17.88% 6/20/94 Alliance Growth Portfolio 33.29% 24.42% 32.92% 24.08% 6/20/94 American Capital Enterprise Portfolio 31.14% 22.48% 30.77% 22.14% 6/21/94 Smith Barney International Equity Portfolio 9.98% 3.27% 9.68% 2.98% 6/21/94 Smith Barney Pacific Basin Portfolio 1.21% (5.99)% 0.93% (6.25)% 6/21/94 TBC Managed Income Portfolio 14.56% 9.22% 14.24% 8.91% 6/28/94 Putnam Diversified Income Portfolio 16.02% 10.84% 15.70% 10.53% 6/20/94 G.T. Global Strategic Income Portfolio 18.60% 7.77% 18.26% 7.46% 6/21/94 Smith Barney High Income Portfolio 17.70% 10.40% 17.37% 10.09% 6/22/94 MFS Total Return Portfolio 24.23% 13.67% 23.88% 13.35% 6/20/94 Smith Barney Money Market Portfolio 4.19% 3.78% 3.89% 3.49% 6/20/94 AIM Capital Appreciation Portfolio ---- (4.21)% ---- (4.27)% 10/10/95 Smith Barney Total Return Portfolio 23.45% 15.49% 23.10% 15.17% 12/3/93
6 42 INDEPENDENT ACCOUNTANTS Coopers & Lybrand L.L.P., certified public accountants, 100 Pearl Street, Hartford, Connecticut, are the independent auditors for Fund BD II. The services provided to Fund BD II include primarily the examination of the Fund's financial statements. The Financial Statements of Fund BD II have been audited by Coopers & Lybrand L.L.P., as indicated in their report thereon, and are included herein in reliance upon the authority of said firm as experts in accounting and auditing. The balance sheets of The Travelers Life and Annuity Company (the "Company") as of December 31, 1995 and 1994 and the statements of operations and retained earnings and cash flows for the years then ended, have been included herein in reliance upon the report of KPMG Peat Marwick, LLP, independent certified public accountants, and upon the authority of said firm as experts in accounting and auditing. The report of KPMG Peat Marwick LLP covering the December 31, 1995 and 1994 financial statements of the Company refers to a change in the accounting for investments in accordance with provisions of Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities," in 1994. The statements of operations and retained earnings and cash flows of the Company for the year ended December 31, 1993 have been included herein in reliance upon the report dated September 16, 1994 of Coopers & Lybrand L.L.P., certified public accountants, and upon the authority of said firm as experts in accounting and auditing. 7 43 THE TRAVELERS FUND BD II FOR VARIABLE ANNUITIES STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1995 ASSETS: Investments in eligible funds at market value: Smith Barney/Travelers Series Fund Inc.: Alliance Growth Portfolio, 185,439 shares (cost $2,538,617)................. $ 2,496,002 American Capital Enterprise Portfolio, 97,951 shares (cost $1,282,128)...... 1,263,570 TBC Managed Income Portfolio, 31,455 shares (cost $355,126)................. 341,596 G.T. Global Strategic Income Portfolio, 11,136 shares (cost $122,501)....... 121,048 Smith Barney High Income Portfolio, 54,613 shares (cost $626,668).......... 605,660 Smith Barney International Equity Portfolio, 70,849 shares (cost $736,324).. 756,671 Smith Barney Income and Growth Portfolio, 72,893 shares (cost $935,968)..... 937,403 Smith Barney Money Market Portfolio, 2,886,060 shares (cost $2,886,060)..... 2,886,060 Putnam Diversified Income Portfolio, 94,488 shares (cost $1,096,398)........ 1,066,768 Smith Barney Pacific Basin Portfolio, 5,520 shares (cost $49,167)........... 51,003 MFS Total Return Portfolio, 91,256 shares (cost $1,085,806)................. 1,085,946 AIM Capital Appreciation Portfolio, 321,132 shares (cost $3,108,343)........ 3,082,868 Smith Barney Series Fund: Total Return Portfolio, 77,431 shares (cost $983,136)....................... 986,473 ----------- Total Investments (cost $15,806,242)...................................... 15,681,068 ----------- Receivables: Dividends..................................................................... 255,886 Purchase payments and transfers from other Travelers accounts................. 1,360,447 Other assets.................................................................... 106 ----------- Total Assets.............................................................. 17,297,507 ----------- LIABILITIES: Payable for contract surrenders and transfers to other Travelers accounts....... 8,445 Accrued liabilities............................................................. 2,616 ----------- Total Liabilities......................................................... 11,061 ----------- NET ASSETS........................................................................ $17,286,446 ===========
See Notes to Financial Statements -1- 44 THE TRAVELERS FUND BD II FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS FOR THE PERIOD NOVEMBER 8, 1995 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1995 INVESTMENT INCOME: Dividends.................................................... $ 262,043 EXPENSES: Insurance charges............................................ $ 14,620 Administrative fees.......................................... 1,589 -------- Total expenses............................................. 16,209 --------- Net investment income.................................... 245,834 --------- REALIZED LOSS AND CHANGE IN UNREALIZED LOSS ON INVESTMENTS: Realized loss from investment transactions: Proceeds from investments sold............................. 136,938 Cost of investments sold................................... 137,447 -------- Net realized loss........................................ (509) Unrealized loss on investments: December 31, 1995.......................................... (125,174) --------- Net realized loss and change in unrealized loss.......... (125,683) --------- Net increase in net assets resulting from operations......... $ 120,151 =========
See Notes to Financial Statements -2- 45 THE TRAVELERS FUND BD II FOR VARIABLE ANNUITIES STATEMENT OF CHANGES IN NET ASSETS FOR THE PERIOD NOVEMBER 8, 1995 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1995
1995 ---------- OPERATIONS: Net investment income.......................................... $ 245,834 Net realized loss from investment transactions................. (509) Net change in unrealized loss on investments................... (125,174) ------------- Net increase in net assets resulting from operations......... 120,151 ------------- UNIT TRANSACTIONS: Participant purchase payments (applicable to 14,991,745 units)............................. 17,056,576 Participant transfers from other Travelers accounts (applicable to 321,920 units)................................ 372,855 Contract surrenders (applicable to 1,879 units).................................. (2,206) Participant transfers to other Travelers accounts (applicable to 229,855 units)................................ (260,930) ------------- Net increase in net assets resulting from unit transactions.. 17,166,295 ------------- Net increase in net assets................................... 17,286,446 NET ASSETS: Beginning of period............................................ - ------------- End of period.................................................. $ 17,286,446 =============
See Notes to Financial Statements -3- 46 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, an indirect wholly owned subsidiary of Travelers Group Inc., and is available for funding certain variable annuity contracts issued by Travelers Life. Fund BD II is registered under the Investment Company Act of 1940, as amended, as a unit investment trust. Participant purchase payments applied to Fund BD II are invested in one or more eligible funds in accordance with the selection made by the contract owner. As of December 31, 1995, the eligible funds available under Fund BD II are: Alliance Growth Portfolio, American Capital Enterprise Portfolio, TBC Managed Income Portfolio, G.T. Global Strategic Income Portfolio, Smith Barney High Income Portfolio, Smith Barney International Equity Portfolio, Smith Barney Income and Growth Portfolio, Smith Barney Money Market Portfolio, Putnam Diversified Income Portfolio, Smith Barney Pacific Basin Portfolio, MFS Total Return Portfolio, and AIM Capital Appreciation Portfolio of Smith Barney/Travelers Series Fund Inc.; and Total Return Portfolio of Smith Barney Series Fund. Smith Barney/Travelers Series Fund Inc. is incorporated under Maryland law. Smith Barney Series Fund is registered as a Massachusetts business trust. Both funds are managed by Smith Barney Mutual Funds Management Inc., an indirect wholly owned subsidiary of Travelers Group Inc. The following is a summary of significant accounting policies consistently followed by Fund BD II in the preparation of its financial statements. SECURITY VALUATION. Investments are valued daily at the net asset values per share of the underlying funds. FEDERAL INCOME TAXES. The operations of Fund BD II form a part of the total operations of Travelers Life and are not taxed separately. Travelers Life is taxed as a life insurance company under the Internal Revenue Code of 1986, as amended (the "Code"). Under existing federal income tax law, no taxes are payable on the investment income of Fund BD II. Fund BD II is not taxed as a "regulated investment company" under Subchapter M of the Code. OTHER. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Security transactions are accounted for on the trade date. Dividend income is recorded on the ex-dividend date. 2. INVESTMENTS Purchases and sales of investments aggregated $15,943,689 and $136,938, respectively, for the period ended December 31, 1995. Realized gains and losses from investment transactions are reported on an identified-cost basis. The cost of investments in eligible funds was $15,806,242 at December 31, 1995. Gross unrealized appreciation for all investments at December 31, 1995 was $27,095. Gross unrealized depreciation for all investments at December 31, 1995 was $152,269. 3. CONTRACT CHARGES Insurance charges are paid to Travelers Life for the mortality and expense risks assumed by Travelers Life. For contracts with a standard death benefit provision, these charges are equivalent to 1.02% of the average net assets of Fund BD II on an annual basis. For contracts with an enhanced death benefit provision, these charges are equivalent to 1.30% of the average net assets of Fund BD II on an annual basis. For contracts in the accumulation phase with a contract value less than $40,000, an annual charge of $30 (prorated for partial periods) is deducted from participant account balances and paid to Travelers Life to cover contract administrative charges. Administrative fees are paid to Travelers Life for administrative expenses incurred by Travelers Life. This charge is equivalent to 0.15% of the average net assets of Fund BD II on an annual basis. -4- 47 NOTES TO FINANCIAL STATEMENTS - CONTINUED No sales charge is deducted from participant purchase payments when they are received. However, The Travelers generally assesses a contingent deferred sales charge of up to 6% if a participant's purchase payment is surrendered within six years of its payment date . No deductions were taken for the period ended December 31, 1995. 4. NET CONTRACT OWNERS' EQUITY
DECEMBER 31, 1995 ---------------------------------------------- ACCUMULATION UNIT NET UNITS VALUE ASSETS ------------ -------- ----------- Smith Barney/Travelers Series Fund Inc.: Alliance Growth Portfolio Standard............................... 1,573,668 $ 1.396 $ 2,196,422 Enhanced............................... 452,737 1.390 629,207 American Capital Enterprise Portfolio Standard............................... 764,534 1.362 1,041,231 Enhanced............................... 329,130 1.356 446,338 TBC Managed Income Portfolio Standard............................... 225,876 1.142 257,885 Enhanced............................... 89,569 1.137 101,831 G.T. Global Strategic Income Portfolio Standard............................... 32,765 1.121 36,716 Enhanced............................... 79,526 1.116 88,736 Smith Barney High Income Portfolio Standard............................... 242,593 1.162 281,962 Enhanced............................... 331,521 1.157 383,676 Smith Barney International Equity Portfolio Standard............................... 556,129 1.050 584,053 Enhanced............................... 200,940 1.046 210,127 Smith Barney Income and Growth Portfolio Standard............................... 596,201 1.291 769,568 Enhanced............................... 146,469 1.285 188,253 Smith Barney Money Market Portfolio Standard............................... 2,373,923 1.058 2,511,927 Enhanced............................... 819,856 1.054 863,812 Putnam Diversified Income Portfolio Standard............................... 823,783 1.170 963,857 Enhanced............................... 126,460 1.165 147,332 Smith Barney Pacific Basin Portfolio Standard............................... 37,278 0.910 33,928 Enhanced............................... 19,544 0.906 17,712 MFS Total Return Portfolio Standard............................... 912,547 1.216 1,109,536 Enhanced............................... 101,550 1.211 122,945 AIM Capital Appreciation Portfolio Standard............................... 2,536,732 0.958 2,429,736 Enhanced............................... 908,266 0.957 869,420 Smith Barney Series Fund: Total Return Portfolio Standard............................... 651,440 1.251 814,618 Enhanced............................... 148,894 1.247 185,618 ------------- Net Contract Owners' Equity $ 17,286,446 =============
-5- 48 NOTES TO FINANCIAL STATEMENTS - CONTINUED 5. SCHEDULE OF FUND BD II OPERATIONS AND CHANGES IN NET ASSETS FOR THE PERIOD NOVEMBER 8, 1995 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1995
AMERICAN TBC G.T. GLOBAL SMITH ALLIANCE CAPITAL MANAGED STRATEGIC BARNEY GROWTH ENTERPRISE INCOME INCOME HIGH INCOME PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ---------- ---------- --------- ----------- ----------- INVESTMENT INCOME: Dividends.............................................. $ 71,580 $ 38,960 $ 18,181 $ 4,427 $ 27,093 ---------- ---------- --------- -------- --------- EXPENSES: Insurance charges...................................... 2,554 1,306 252 102 283 Administrative fees.................................... 275 135 35 12 39 ---------- ---------- --------- -------- --------- Net investment income (loss)......................... 68,751 37,519 17,894 4,313 26,771 ---------- ---------- --------- -------- --------- REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain (loss) from investment transactions: Proceeds from investments sold....................... 55,534 155 60 64 142 Cost of investments sold............................. 56,573 158 60 63 144 ---------- ---------- --------- -------- --------- Net realized gain (loss)............................. (1,039) (3) - 1 (2) Change in unrealized gain (loss) on investments: Unrealized gain (loss) beginning of period........... - - - - - Unrealized gain (loss) end of period................. (42,615) (18,558) (13,530) (1,453) (21,008) ---------- ---------- --------- -------- --------- Net change in unrealized gain (loss) for the period (42,615) (18,558) (13,530) (1,453) (21,008) ---------- ---------- --------- -------- --------- Net increase (decrease) in net assets resulting from operations........................ 25,097 18,958 4,364 2,861 5,761 ---------- ---------- --------- -------- --------- UNIT TRANSACTIONS: Participant purchase payments.......................... 2,815,148 1,430,843 275,352 122,591 659,877 Participant transfers from other Travelers accounts 67,993 37,768 80,000 - - Contract surrenders.................................... (503) - - - - Participant transfers to other Travelers accounts...... (82,106) - - - - ---------- ---------- --------- -------- --------- Net increase in net assets resulting from unit transactions...................................... 2,800,532 1,468,611 355,352 122,591 659,877 ---------- ---------- --------- -------- --------- Net increase in net assets............................ 2,825,629 1,487,569 359,716 125,452 665,638 NET ASSETS: Beginning of period.................................... - - - - - ---------- ---------- --------- -------- --------- End of period.......................................... $2,825,629 $1,487,569 $ 359,716 $125,452 $ 665,638 ========== ========== ========= ======== =========
-6- 49 NOTES TO FINANCIAL STATEMENTS - CONTINUED
SMITH SMITH SMITH BARNEY BARNEY BARNEY PUTNAM SMITH INTERNATIONAL INCOME MONEY DIVERSIFIED BARNEY MFS AIM CAPITAL EQUITY AND GROWTH MARKET INCOME PACIFIC BASIN TOTAL RETURN APPRECIATION TOTAL RETURN PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO COMBINED - ------------- ---------- --------- ----------- ------------- ------------ ------------ ------------ -------- $ 836 $ 15,676 $ 8,627 $ 44,601 $ 149 $ 26,481 $ 3,038 $ 2,394 $ 262,043 -------- -------- ---------- ---------- ------- ---------- ---------- --------- ----------- 751 759 2,031 704 48 857 4,240 733 14,620 83 98 275 100 6 127 313 91 1,589 -------- -------- ---------- ---------- ------- ---------- ---------- --------- ----------- 2 14,819 6,321 43,797 95 25,497 (1,515) 1,570 245,834 -------- -------- ---------- ---------- ------- ---------- ---------- --------- ----------- 35,908 396 44,352 21 19 62 90 135 136,938 35,387 385 44,352 21 18 61 93 132 137,447 -------- -------- ---------- ---------- ------- ---------- ---------- --------- ----------- 521 11 - - 1 1 (3) 3 (509) - - - - - - - - - 20,347 1,435 - (29,630) 1,836 140 (25,475) 3,337 (125,174) -------- -------- ---------- ---------- ------- ---------- ---------- ---------- ----------- 20,347 1,435 - (29,630) 1,836 140 (25,475) 3,337 (125,174) -------- -------- ---------- ---------- ------- ---------- ---------- ---------- ----------- 20,870 16,265 6,321 14,167 1,932 25,638 (26,993) 4,910 120,151 -------- -------- ---------- ---------- ------- ---------- ---------- ---------- ----------- 760,996 911,643 3,527,872 1,086,983 49,035 1,186,910 3,256,149 973,177 17,056,576 12,389 29,913 8,446 15,623 673 22,680 72,615 24,755 372,855 (75) - - - - (627) (500) (501) (2,206) - - (166,900) (5,584) - (2,120) (2,115) (2,105) (260,930) -------- -------- ---------- ---------- ------- ---------- ---------- ---------- ----------- 773,310 941,556 3,369,418 1,097,022 49,708 1,206,843 3,326,149 995,326 17,166,295 -------- -------- ---------- ---------- ------- ---------- ---------- ---------- ----------- 794,180 957,821 3,375,739 1,111,189 51,640 1,232,481 3,299,156 1,000,236 17,286,446 - - - - - - - - - -------- -------- ---------- ---------- ------- ---------- ---------- ---------- ----------- $794,180 $957,821 3,375,739 $1,111,189 $51,640 $1,232,481 $3,299,156 $1,000,236 $17,286,446 ======== ======== ========== ========== ======= ========== ========== ========== ===========
-7- 50 NOTES TO FINANCIAL STATEMENTS - CONTINUED 6. SCHEDULE OF ACCUMULATION UNITS FOR FUND BD II FOR THE PERIOD NOVEMBER 8, 1995 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1995
ALLIANCE AMERICAN CAPITAL TBC MANAGED G.T. GLOBAL GROWTH ENTERPRISE INCOME STRATEGIC INCOME PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO --------- ---------------- ----------- ---------------- Accumulation units beginning of period........ - - - - Accumulation units purchased and transferred from other Travelers accounts... 2,088,195 1,093,664 315,445 112,291 Accumulation units redeemed and transferred to other Travelers accounts..... (61,790) - - - --------- --------- ------- ------- Accumulation units end of period.............. 2,026,405 1,093,664 315,445 112,291 ========= ========= ======= ======= SMITH BARNEY SMITH BARNEY SMITH BARNEY SMITH BARNEY HIGH INCOME INTERNATIONAL INCOME AND MONEY MARKET PORTFOLIO EQUITY PORTFOLIO GROWTH PORTFOLIO PORTFOLIO ------------ ---------------- ---------------- ------------ Accumulation units beginning of period........ - - - - Accumulation units purchased and transferred from other Travelers accounts... 574,114 757,142 742,670 3,351,749 Accumulation units redeemed and transferred to other Travelers accounts..... - (73) - (157,970) ------- ------- ------- --------- Accumulation units end of period.............. 574,114 757,069 742,670 3,193,779 ======= ======= ======= ========= PUTNAM SMITH BARNEY MFS AIM CAPITAL DIVERSIFIED PACIFIC BASIN TOTAL RETURN APPRECIATION INCOME PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ---------------- ------------- ------------ ------------ Accumulation units beginning of period........ - - - - Accumulation units purchased and transferred from other Travelers accounts... 955,065 56,822 1,016,359 3,447,731 Accumulation units redeemed and transferred to other Travelers accounts..... (4,822) - (2,262) (2,733) ------- ------ --------- --------- Accumulation units end of period.............. 950,243 56,822 1,014,097 3,444,998 ======= ====== ========= ========= TOTAL RETURN PORTFOLIO ------------ Accumulation units beginning of period........ - Accumulation units purchased and transferred from other Travelers accounts... 802,418 Accumulation units redeemed and transferred to other Travelers accounts..... (2,084) ------- Accumulation units end of period.............. 800,334 =======
-8- 51 REPORT OF INDEPENDENT ACCOUNTANTS To the Owners of Variable Annuity Contracts of The Travelers Fund BD II for Variable Annuities: We have audited the accompanying statement of assets and liabilities of The Travelers Fund BD II for Variable Annuites as of December 31, 1995, and the related statements of operations and changes in net assets for the period November 8, 1995 (date operations commenced) to December 31, 1995. These financial statements are the responsibility of management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of shares owned as of December 31, 1995, by correspondence with the underlying funds. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides 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, 1995, the results of its operations and the changes in its net assets for the period November 8, 1995 (date operations commenced) to December 31, 1995, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Hartford, Connecticut February 16, 1996 -9- 52 Independent Auditors' Report The Board of Directors and Shareholder of The Travelers Life and Annuity Company: We have audited the accompanying balance sheet of The Travelers Life and Annuity Company as of December 31, 1995 and 1994, and the related statements of operations and retained earnings and cash flows for the years then ended. 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, 1995 and 1994, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. As discussed in note 3 to the financial statements, the Company adopted the provisions of Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities," in 1994. /s/KPMG Peat Marwick LLP Hartford, Connecticut January 16, 1996 7 53 Report of Independent Accountants To the Board of Directors and Shareholder of The Travelers Life and Annuity Company: We have audited the statements of operations and retained earnings and cash flows of The Travelers Life and Annuity Company for the year ended December 31, 1993. These financial statements are the responsibility of Company management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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 audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of The Travelers Life and Annuity Company for the year ended December 31, 1993 in conformity with generally accepted accounting principles. /s/ COOPERS & LYBRAND L.L.P. Hartford, Connecticut September 16, 1994 8 54 THE TRAVELERS LIFE AND ANNUITY COMPANY STATEMENT OF OPERATIONS AND RETAINED EARNINGS
- -------------------------------------------------------------------------------------------------------- (for the year ended December 31, in thousands) 1995 1994 | 1993 - --------------------------------------------------------------------------------------------|----------- | REVENUES | Premiums $ 2,652 $ 3,498 | $ 4,524 Net investment income 63,209 66,093 | 58,044 Realized investment gains (losses) 18,713 (2,074) | 11,955 Other 17,466 18,702 | 9,102 - --------------------------------------------------------------------------------------------|----------- 102,040 86,219 | 83,625 - --------------------------------------------------------------------------------------------|----------- | BENEFITS AND EXPENSES | Current and future insurance benefits 52,390 55,596 | 67,489 Amortization of deferred acquisition costs | and value of insurance in force 1,563 - | - Other operating expenses 4,651 2,758 | 3,075 - --------------------------------------------------------------------------------------------|----------- 58,604 58,354 | 70,564 - --------------------------------------------------------------------------------------------|----------- | Income before federal income taxes 43,436 27,865 | 13,061 - --------------------------------------------------------------------------------------------|----------- | Federal income taxes: | Current 2,555 4,742 | 22,124 Deferred 11,964 4,798 | (22,672) - --------------------------------------------------------------------------------------------|----------- 14,519 9,540 | (548) - --------------------------------------------------------------------------------------------|----------- Net income 28,917 18,325 | 13,609 Retained earnings beginning of year 128,990 110,665 | 97,034 Preference stock tax benefit allocated by parent - - | 22 - --------------------------------------------------------------------------------------------|----------- Retained earnings end of year $ 157,907 $ 128,990 | $ 110,665 - --------------------------------------------------------------------------------------------------------
See notes to financial statements. 9 55 THE TRAVELERS LIFE AND ANNUITY COMPANY BALANCE SHEET
- --------------------------------------------------------------------------------------------------------------- (at December 31, in thousands) 1995 1994 - --------------------------------------------------------------------------------------------------------------- ASSETS Fixed maturities, available for sale at market (cost, $678,293; $624,347) $ 724,639 $ 559,142 Equity securities, at market (cost, $9,453; $14,252) 13,099 16,064 Mortgage loans 125,813 152,359 Real estate held for sale, net of accumulated depreciation of $524; $337 8,995 6,810 Short-term securities 51,381 44,472 Other investments 65,805 72,190 - --------------------------------------------------------------------------------------------------------------- Total investments 989,732 851,037 - --------------------------------------------------------------------------------------------------------------- Cash - 296 Investment income accrued 11,030 10,211 Premium balances receivable 2,277 - Reinsurance recoverables 718 573 Deferred acquisition costs and value of insurance in force 22,560 21,014 Deferred federal income taxes 41,158 94,315 Separate accounts 886,688 820,384 Current federal income taxes 6,691 - Other assets 3,785 3,539 - --------------------------------------------------------------------------------------------------------------- Total assets $ 1,964,639 $ 1,801,369 - --------------------------------------------------------------------------------------------------------------- LIABILITIES Future policy benefits $ 671,027 $ 691,108 Contractholder funds 11,947 - Current federal income taxes - 26,071 Separate accounts 856,867 808,181 Other liabilities 61,247 17,889 - --------------------------------------------------------------------------------------------------------------- Total liabilities 1,601,088 1,543,249 - --------------------------------------------------------------------------------------------------------------- SHAREHOLDER'S EQUITY Common stock, par value $100; 100,000 shares authorized, 30,000 issued and outstanding 3,000 3,000 Additional paid-in capital 167,314 167,354 Retained earnings 157,907 128,990 Unrealized investment gains (losses), net of taxes 35,330 (41,224) - --------------------------------------------------------------------------------------------------------------- Total shareholder's equity 363,551 258,120 - --------------------------------------------------------------------------------------------------------------- Total liabilities and shareholder's equity $ 1,964,639 $ 1,801,369 - ---------------------------------------------------------------------------------------------------------------
See notes to financial statements. 10 56 THE TRAVELERS LIFE AND ANNUITY COMPANY STATEMENT OF CASH FLOWS Increase (Decrease) in Cash
- -------------------------------------------------------------------------------------------------------- (for the year ended December 31, in thousands) 1995 1994 | 1993 - ------------------------------------------------------------------------------------------|------------- | CASH FLOWS FROM OPERATING ACTIVITIES | Premiums collected $ 1,950 $ 3,498 | $ 4,524 Net investment income received 66,219 57,240 | 53,944 Benefits and claims paid (71,710) (72,298) | (74,660) Operating expenses paid (3,013) (4,400) | (3,249) Income taxes refunded (paid) (35,305) 1,030 | (10,661) Trading account investments, (purchases) sales, net - - | 35,093 Other (6,772) 22,507 | (683) - ------------------------------------------------------------------------------------------|------------- Net cash provided by (used in) operating activities (48,631) 7,577 | 4,308 - ------------------------------------------------------------------------------------------|------------- CASH FLOWS FROM INVESTING ACTIVITIES | Investment repayments | Fixed maturities 11,752 29,043 | 29,479 Mortgage loans 24,137 60,260 | 53,835 Proceeds from investments sold, including real estate | held for sale | Fixed maturities 459,971 41,671 | 46,001 Equity securities 11,823 9,373 | 7,676 Mortgage loans 7,013 23,327 | 11,835 Real estate held for sale - 34,181 | 26,014 Investments in | Fixed maturities (515,098) (204,412) | (206,682) Equity securities (156) (375) | (5,280) Mortgage loans (4,890) (5,607) | - Short-term securities, (purchases) sales, net (5,051) (1,146) | (16,430) Other investments, (purchases) sales, net 9,274 682 | 46,595 Securities transactions in course of settlement 45,727 5,722 | 1,133 - ------------------------------------------------------------------------------------------|------------- Net cash provided by (used in) investing activities 44,502 (7,281) | (5,824) - ------------------------------------------------------------------------------------------|------------- CASH FLOWS FROM FINANCING ACTIVITIES | Contractholder fund deposits 5,707 - | - Contractholder fund withdrawals (1,874) - | - - ------------------------------------------------------------------------------------------|------------- Net cash provided by financing activities 3,833 - | - - ------------------------------------------------------------------------------------------|------------- Net increase (decrease) in cash $ (296) $ 296 | $ (1,516) - -------------------------------------------------------------------------------------------------------- Cash at December 31 $ - $ 296 $ - - --------------------------------------------------------------------------------------------------------
See notes to financial statements. 11 57 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS 1. NATURE OF OPERATIONS The Travelers Life and Annuity Company (the Company) is a wholly owned subsidiary of The Travelers Insurance Company (TIC), which is an indirect, wholly owned subsidiary of Travelers Group Inc. (Travelers). The Company primarily writes single premium group annuity close-out contracts and individual structured settlement annuities. The single premium group annuity contracts are typically purchased by employer-sponsored pension plans upon termination of the plan, asset reversion or other significant plan changes. The individual structured settlement contracts are purchased by affiliates, The Travelers Indemnity Company and its subsidiaries, in connection with the settlement of certain of its policyholder obligations. In 1995, the Company also commenced writing individual life and deferred annuity business. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Significant accounting policies used in the preparation of the accompanying financial statements follow. Basis of presentation In December 1992, Primerica Corporation (Primerica) acquired approximately 27% of The Travelers Corporation's common stock (the 27% Acquisition). The 27% Acquisition was accounted for as a purchase. Effective December 31, 1993, Primerica acquired the approximately 73% of The Travelers Corporation common stock which it did not already own, and The Travelers Corporation was merged into Primerica, which was renamed Travelers Group Inc. This was effected through the exchange of .80423 shares of Travelers common stock for each share of The Travelers Corporation common stock (the Merger). All subsidiaries of The Travelers Corporation were contributed to The Travelers Insurance Group Inc. (TIGI). The 27% Acquisition and the Merger were accounted for as a "step acquisition", and the purchase accounting adjustments were "pushed down" as of December 31, 1993 to the subsidiaries of TIGI, including the Company, and reflect adjustments of assets and liabilities of the Company to their fair values determined at each acquisition date (i.e., 27% of values at December 31, 1992 as carried forward and 73% of the values at December 31, 1993). These assets and liabilities were recorded at December 31, 1993 based upon management's then best estimate of their fair values at the respective dates. Evaluation and appraisal of assets and liabilities, including investments, the value of insurance in force, other insurance assets and liabilities and related deferred federal income taxes was completed during 1994. The excess of the 27% share of assigned value of identifiable net assets over cost at December 31, 1992, which was allocated to the Company through "pushdown" accounting, was approximately $1.3 million and is being amortized over ten years on a straight-line basis. The statements of operations and retained earnings and of cash flows and the related accompanying notes for the years ended December 31, 1995 and 1994, which are presented on a purchase accounting basis, are separated from the corresponding 1993 information, which is presented on a historical accounting basis, to indicate the difference in valuation bases. 12 58 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS, Continued 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and benefits and expenses during the reporting period. Actual results could differ from those estimates. Certain prior year amounts have been reclassified to conform with the 1995 presentation. Investments Fixed maturities include bonds, notes and redeemable preferred stocks. Fixed maturities are valued based upon quoted market prices, or if quoted market prices are not available, discounted expected cash flows using market rates commensurate with the credit quality and maturity of the investment. Fixed maturities are classified as "available for sale" and are reported at fair value, with unrealized gains and losses, net of income taxes, charged or credited directly to shareholder's equity. Equity securities, which include common and nonredeemable preferred stocks, are carried at market values that are based primarily on quoted market prices. Changes in market values of equity securities are charged or credited directly to shareholder's equity, net of applicable income taxes. Mortgage loans are carried at amortized cost. For mortgage loans that are determined to be impaired, a reserve is established for the difference between the amortized cost and fair market value of the underlying collateral. Impaired loans were insignificant at December 31, 1995. Real estate held for sale is carried at the lower of cost or fair value less estimated costs to sell. Fair value was established at time of foreclosure by appraisers, either internal or external, using discounted cash flow analyses and other acceptable techniques. Thereafter, an allowance for losses on real estate held for sale is established if the carrying value of the property exceeds its current fair value less estimated costs to sell. There was no such allowance at December 31, 1995. Accrual of income is suspended on fixed maturities or mortgage loans that are in default, or on which it is likely that future payments will not be made as scheduled. Interest income on investments in default is recognized only as payment is received. Investment Gains and Losses Realized investment gains and losses are included as a component of pretax revenues based upon specific identification of the investments sold on the trade date and, prior to the Merger, included adjustments to investment valuation reserves. These adjustments reflected changes considered to be other than temporary in the net realizable value of investments. Also included are gains and losses arising from the remeasurement of the local currency value of foreign investments to U.S. dollars, the functional currency of the Company. 13 59 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS, Continued 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued Separate Accounts Separate account liabilities primarily represent structured settlement annuity obligations, which provide guaranteed levels of return or benefits to contractholders. The separate account assets supporting these obligations, which are legally segregated and are not subject to claims that arise out of any other business of the Company, are carried at amortized cost. Earnings on structured settlement contracts, generally net investment income less policyholder benefits and operating expenses, are included in other revenues. In addition, the Company has other separate accounts, representing funds for which investment income and investment gains and losses accrue directly to, and investment risk is borne by, the contractholders. Each of these accounts have specific investment objectives. The assets and liabilities of these accounts are carried at market value, and amounts assessed to the contractholders for management services are included in revenues. Deposits, net investment income and realized investment gains and losses for these accounts are excluded from revenues, and related liability increases are excluded from benefits and expenses. Deferred Acquisition Costs and Value of Insurance In Force Costs of acquiring individual life insurance and annuity business, principally commissions and certain expenses related to policy issuance, underwriting and marketing, all of which vary with and are primarily related to the production of new business, are deferred. Acquisition costs relating to traditional life insurance are amortized over the period of anticipated premiums; universal life in relation to estimated gross profits; and annuity contracts employing a level yield method. A 10- to 25-year amortization period is used for life insurance, and a 10- to 15-year period is employed for annuities. Deferred acquisition costs are reviewed periodically for recoverability to determine if any adjustment is required. The value of insurance in force represents the actuarially determined present value of anticipated profits to be realized from annuities contracts at the date of the Merger using the same assumptions that were used for computing related liabilities where appropriate. The value of insurance in force was the actuarially determined present value of the projected future profits discounted at an interest rate of 16% for the business acquired. The value of the business in force is amortized over the contract period using current interest crediting rates to accrete interest and using an amortization method based on a level yield method. The value of insurance in force is reviewed periodically for recoverability to determine if any adjustment is required. Future Policy Benefits Benefit reserves represent liabilities for future insurance policy benefits. Benefit reserves for life insurance and annuity policies have been computed based upon mortality, morbidity, persistency and interest assumptions applicable to these coverages, which range from 4.5% to 7.5%, including a provision for adverse deviation. These assumptions consider Company experience and industry standards and may be revised if it is determined that the future experience will differ substantially from that previously assumed. The assumptions vary by plan, age at issue, year of issue and duration. 14 60 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS, Continued 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued Contractholder Funds Contractholder funds represent receipts from the issuance of universal life and certain individual annuity contracts. Such receipts are considered deposits on investment contracts that do not have substantial mortality or morbidity risk. Account balances are also increased by interest credited and reduced by withdrawals, mortality charges and administrative expenses charged to the contractholders. Calculations of contractholder account balances reflect lapse, withdrawal and interest rate assumptions based on contract provisions, the Company's experience and industry standards. Interest rates credited to contractholder funds range from 4.2% to 6.5%. 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 a variety of publications of the National Association of Insurance Commissioners as well as state laws, regulations, and general administrative rules. Permitted statutory accounting practices encompass all accounting practices not so prescribed. The impact of any permitted accounting practices on the statutory surplus of the Company is not material. Premiums Premiums are recognized as revenues when due. Reserves are established for the portion of premiums that will be earned in future periods. Other Revenues Other revenues include surrender, mortality and administrative charges and fees as earned on investment and other insurance contracts. Other revenues also include structured settlement policyholder revenues, which relate to contracts issued through a separate account of the Company, net of the related policyholder benefits and expenses. Federal Income Taxes The provision for federal income taxes is comprised of two components, current income taxes and deferred income taxes. Deferred federal income taxes arise from changes during the year in cumulative temporary differences between the tax basis and book basis of assets and liabilities. The deferred federal income tax asset is recognized to the extent that future realization of the tax benefit is more likely than not, with a valuation allowance for the portion that is not likely to be recognized. 15 61 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS, Continued 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued Accounting Standards not yet Adopted Statement of Financial Accounting Standards No. 121, "Accounting for Long-Lived Assets and for Long-Lived Assets to be Disposed Of" establishes accounting standards for the impairment of long-lived assets, certain identifiable intangibles, and goodwill related to those assets to be held and used and for long-lived assets and certain identifiable intangibles to be disposed of. This statement requires the write down to fair value when long-lived assets to be held and used are impaired. It also requires long-lived assets to be disposed of (e.g., real estate held for sale) to be carried at the lower of cost or fair value less cost to sell and does not allow such assets to be depreciated. The adoption of this statement, effective January 1, 1996, did not have a material effect on results of operations, financial condition or liquidity. In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (FAS 123). This statement addresses alternative accounting treatments for stock-based compensation, such as stock options and restricted stock. FAS 123 permits either expensing the value of stock-based compensation over the period earned or disclosing in the financial statement footnotes the pro forma impact to net income as if the value of stock-based compensation awards had been expensed. The value of awards would be measured at the grant date based upon estimated fair value, using option pricing models. The requirements of this statement will be effective for 1996 financial statements, although earlier adoption is permissible if an entity elects to expense the cost of stock-based compensation. The Company, along with affiliated companies, participates in stock option and incentive plans sponsored by Travelers. The Company is currently evaluating the disclosure requirements and expense recognition alternatives addressed by this statement. 3. CHANGES IN ACCOUNTING PRINCIPLES Accounting by Creditors for Impairment of a Loan Effective January 1, 1995, the Company adopted Statement of Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment of a Loan," and Statement of Financial Accounting Standards No. 118, "Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosures," which describe how impaired loans should be measured when determining the amount of a loan loss accrual. These statements amended existing guidance on the measurement of restructured loans in a troubled debt restructuring involving a modification of terms. Their adoption did not have a material impact on the Company's financial condition, results of operations or liquidity. Accounting for Certain Debt and Equity Securities Effective January 1, 1994, the Company adopted Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" (FAS 115), which addresses accounting and reporting for investments in equity securities that have a readily determinable fair value and for all debt securities. Investment securities have been classified as "available for sale" and are reported at fair value, with unrealized gains and losses, net of income taxes, charged or credited directly to shareholder's equity. Previously, securities classified as available for sale were carried at the lower of aggregate cost or market value. Initial adoption of this standard resulted in an increase of approximately $530 thousand (net of taxes) to net unrealized gains in shareholder's equity. See note 12 for additional disclosures. 16 62 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS, Continued 4. REINSURANCE The Company participates in reinsurance in order to limit losses, minimize exposure to large risks, provide capacity for future growth and to effect business-sharing arrangements. The Company remains primarily liable as the direct insurer on all risks reinsured. Life insurance in force ceded to affiliates at December 31, 1995 and 1994 was $97.7 million and $106.0 million, respectively. At December 31, 1995 and 1994, $601.2 million and $0, respectively, was ceded to non-affiliates. 5. SHAREHOLDER'S EQUITY Unrealized Investment Gains (Losses) An analysis of the change in unrealized gains and losses on investments is shown in note 12. Additional Paid-in Capital As a result of the finalization of the evaluations and appraisals used to assign fair value to assets and liabilities under purchase accounting, additional paid-in capital was increased by $1.3 million in 1994. It was decreased by $70.4 million in 1993 based upon the initial evaluations and appraisals. Shareholder's Equity and Dividend Availability Statutory net income was $23.0 million and $5.7 million for the years ended December 31, 1995 and 1994, respectively. Statutory net loss was $23.0 million for the year ended December 31, 1993. Statutory capital and surplus was $257.8 million and $233.0 million at December 31, 1995 and 1994, 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 $16.4 million is available in 1996 for dividend payments by the Company without prior approval of the Connecticut Insurance Department. 17 63 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS, Continued 6. DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS The Company has, in the normal course of business, provided fixed rate loan commitments and commitments to partnerships. The Company does not hold or issue derivative instruments for trading purposes. The off-balance-sheet risks of fixed rate loan commitments, commitments to partnerships and forward contracts were not significant at December 31, 1995 and 1994. Fair Value of Certain Financial Instruments The Company uses various financial instruments in the normal course of its business. Fair values of financial instruments which are considered insurance contracts are not required to be disclosed and are not included in the amounts discussed. At December 31, 1995, investments in fixed maturities had a carrying value and a fair value of $724.6 million, compared with a carrying value and a fair value of $559.1 million at December 31, 1994. See note 12. At December 31, 1995 and 1994, mortgage loans had a carrying value of $125.8 million and $152.4 million, respectively, which approximates fair value. In estimating fair value, the Company used interest rates reflecting the higher returns required in the real estate financing market. The carrying values of $1.9 million and $2.4 million of financial instruments classified as other assets approximated their fair values at December 31, 1995 and 1994, respectively. The carrying values of $55.3 million and $14.2 million of financial instruments classified as other liabilities also approximated their fair values at December 31, 1995 and 1994, respectively. Fair value is determined using various methods including discounted cash flows, as appropriate for the various financial instruments. The assets of separate accounts providing a guaranteed return had a carrying value and a fair value of $869.1 million and $923.0 million, respectively, at December 31, 1995, compared to a carrying value and a fair value of $820.4 million and $757.2 million, respectively, at December 31, 1994. The liabilities of separate accounts providing a guaranteed return had a carrying value and a fair value of $839.1 million and $766.3 million, respectively, at December 31, 1995, compared to a carrying value and a fair value of $808.2 million and $681.4 million, respectively, at December 31, 1994. The carrying values of short-term securities and investment income accrued approximated their fair values. 18 64 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS, Continued 7. COMMITMENTS AND CONTINGENCIES Financial Instruments with Off-Balance-Sheet Risk See note 6 for a discussion of financial instruments with off-balance- sheet risk. Litigation The Company is a defendant in various litigation matters. Although there can be no assurances, as of December 31, 1995, the Company believes, based on information currently available, that the ultimate resolution of these legal proceedings would not be likely to have a material adverse effect on its results of operations, financial condition or liquidity. 8. BENEFIT PLANS Pension Plans The Company participates in qualified and nonqualified, noncontributory defined benefit pension plans sponsored by an affiliate. Benefits for the qualified plan are based on an account balance formula. Under this formula, each employee's accrued benefit can be expressed as an account that is credited with amounts based upon the employee's pay, length of service and a specified interest rate, all subject to a minimum benefit level. This plan is funded in accordance with the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code. For the nonqualified plan, contributions are based on benefits paid. The Company's share of net pension expense was not significant for 1995, 1994 or 1993. Other Benefit Plans In addition to pension benefits, the Company provides certain health care and life insurance benefits for retired employees through a plan sponsored by TIGI. Covered employees may become eligible for these benefits if they reach retirement age while working for the Company. These retirees may elect certain prepaid health care benefit plans. Life insurance benefits generally are set at a fixed amount. The cost recognized by the Company for these benefits represents its allocated share of the total costs of the plan, net of employee contributions. The Company's share of the total cost of the plan for 1995, 1994 and 1993 was not significant. The Merger resulted in a change in control of The Travelers Corporation as defined in the applicable plans, and provisions of some employee benefit plans secured existing compensation and benefit entitlements earned prior to the change in control, and provided a salary and benefit continuation floor for employees whose employment was affected. These merger-related costs were assumed by TIGI. 19 65 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS, Continued 8. BENEFIT PLANS Savings, Investment and Stock Ownership Plan Under the savings, investment and stock ownership plan available to substantially all employees of TIGI, the Company matches a portion of employee contributions. Effective April 1, 1993, the match decreased from 100% to 50% of an employee's first 5% contribution and a variable match based on the profitability of TIGI and its subsidiaries was added. The Company's matching obligation was not significant for 1995, 1994 or 1993. 9. RELATED PARTY TRANSACTIONS The principal banking functions, including payment of salaries and expenses, for certain subsidiaries and affiliates of TIGI, including the Company, are handled by TIC. Settlements for these functions between TIC and its affiliates are made regularly. TIC provides various employee benefit coverages to certain subsidiaries of TIGI. The premiums for these coverages were charged in accordance with cost allocation procedures based upon salaries or census. In addition, investment advisory and management services, data processing services and claims processing services are provided by affiliated companies. Charges for these services are shared by the companies on cost allocation methods based generally on estimated usage by department. TIGI and its subsidiaries maintain a short-term investment pool in which the Company participates. The position of each company participating in the pool is calculated and adjusted daily. At December 31, 1995 and 1994, the pool totaled approximately $2.2 billion and $1.5 billion, respectively. The Company's share of the pool amounted to $49.5 million and $44.5 million at December 31, 1995 and 1994, 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 $100 million. TIC's obligation is to pay in full to any owner or beneficiary of the TTM Modified Guaranteed Annuity Contracts principal and interest as and when due under the annuity contract to the extent that the Company fails to make such payment. In addition, TIC guarantees that the Company will maintain a minimum statutory capital and surplus level. The Company sells structured settlement annuities to its affiliates, The Travelers Indemnity Company and its subsidiaries. Such deposits were $36.6 million, $37.6 million and $48.4 million for 1995, 1994 and 1993, respectively. The Company began marketing variable annuity products through its affiliate, Smith Barney, Inc., in 1995. Deposits related to these products were $20.5 million in 1995. Most leasing functions for TIGI and its subsidiaries are handled by TIC. Leasing expenses are shared by the companies on a cost allocation method based generally on estimated usage by department. 20 66 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS, Continued 10. FEDERAL INCOME TAXES
------------------------------------------------------------------------------------------ (in thousands) 1995 1994 | 1993 ----------------------------------------------------------------------------|------------- | Effective tax rate | ------------------ | | Income before federal income taxes $ 43,436 $ 27,865 | $ 13,061 Statutory tax rate 35% 35% | 35% ----------------------------------------------------------------------------|------------- | Expected federal income taxes $ 15,203 $ 9,753 | $ 4,571 Tax effect of: | Nontaxable investment income (13) (90) | (85) Adjustments to benefit and other reserves - (117) | (4,705) Adjustment to deferred tax asset for | enacted change in tax rates from | 34% to 35% - - | (255) Other, net (671) (6) | (74) ----------------------------------------------------------------------------|------------- Federal income taxes $ 14,519 $ 9,540 | $ (548) ----------------------------------------------------------------------------|------------- | Effective tax rate 33% 34% | (4)% ----------------------------------------------------------------------------|------------- | Composition of federal income taxes | ----------------------------------- | Current: | United States $ 2,555 $ 4,742 | $ 22,124 ----------------------------------------------------------------------------|------------- | Deferred: | United States 11,964 4,798 | (22,672) ----------------------------------------------------------------------------|------------- Federal income taxes $ 14,519 $ 9,540 | $ (548) ------------------------------------------------------------------------------------------
21 67 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS, Continued 10. FEDERAL INCOME TAXES, Continued The net deferred tax assets at December 31, 1995 and 1994 were comprised of the tax effects of temporary differences related to the following assets and liabilities:
(in thousands) 1995 1994 ----------------------------------------------------------------------------------------------- Deferred tax assets: Benefit, reinsurance and other reserves $ 67,104 $ 70,729 Investments - 30,908 Other 2,570 2,766 ----------------------------------------------------------------------------------------------- Total 69,674 104,403 ----------------------------------------------------------------------------------------------- Deferred tax liabilities: Investments 19,625 - Deferred acquisition costs and value of insurance in force 6,285 7,355 Other 536 663 ----------------------------------------------------------------------------------------------- Total 26,446 8,018 ----------------------------------------------------------------------------------------------- Net deferred tax asset before valuation allowance 43,228 96,385 Valuation allowance for deferred tax assets (2,070) (2,070) ----------------------------------------------------------------------------------------------- Net deferred tax asset after valuation allowance $ 41,158 $ 94,315 -----------------------------------------------------------------------------------------------
Starting in 1994 and continuing for at least five years, TIC and its life insurance subsidiaries, including the Company, will file a consolidated federal income tax return. Federal income taxes are allocated to each member on a separate return basis adjusted for credits and other amounts required by the consolidation process. Any resulting liability will be paid currently to TIC. Any credits for losses will be paid by TIC to the extent that such credits are for tax benefits that have been utilized in the consolidated federal income tax return. A net deferred tax asset valuation allowance of $2.1 million has been established to reduce the deferred tax asset on investment losses to the amount that, based upon available evidence, is more likely than not to be realized. Reversal of the valuation allowance is contingent upon the recognition of future capital gains in the Company's consolidated life insurance company federal income tax return through 1998, and the consolidated federal income tax return of Travelers commencing in 1999, or a change in circumstances which causes the recognition of the benefits to become more likely than not. There was no change in the valuation allowance during 1995. The initial recognition of any benefit provided by the reversal of the valuation allowance will be recognized by reducing goodwill. 22 68 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS, Continued 10. FEDERAL INCOME TAXES, Continued In management's judgment, the $41.2 million "net deferred tax asset after valuation allowance" as of December 31, 1995, is fully recoverable against expected future years' taxable ordinary income and capital gains. At December 31, 1995, the Company has no ordinary or capital loss carryforwards. The "policyholders surplus account", which arose under prior tax law, is generally that portion of the gain from operations that has not been subjected to tax, plus certain deductions. The balance of this account, which, under provisions of the Tax Reform Act of 1984, will not increase after 1983, is estimated to be $2.0 million. This amount has not been subjected to current income taxes but, under certain conditions that management considers to be remote, may become subject to income taxes in future years. At current rates, the maximum amount of such tax (for which no provision has been made in the financial statements) would be approximately $700 thousand. 11. NET INVESTMENT INCOME
------------------------------------------------------------------------------------------------ (For the year ended December 31, in thousands) 1995 1994 | 1993 ---------------------------------------------------------------------------------|-------------- | Gross investment income | ----------------------- | Fixed maturities $ 49,486 $ 44,354 | $ 39,189 Equity securities 497 827 | 930 Mortgage loans 11,644 17,178 | 25,258 Real estate held for sale 2,476 6,299 | 19,028 Other 2,552 4,480 | (4,062) ---------------------------------------------------------------------------------|-------------- 66,655 73,138 | 80,343 ---------------------------------------------------------------------------------|-------------- | Investment expenses 3,446 7,045 | 22,299 ---------------------------------------------------------------------------------|-------------- Net investment income $ 63,209 $ 66,093 | $ 58,044 ------------------------------------------------------------------------------------------------
23 69 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS, Continued 12. INVESTMENTS AND INVESTMENT GAINS (LOSSES) Realized investment gains (losses) for the periods were as follows:
------------------------------------------------------------------------------------------------ (For the year ended December 31, in thousands) 1995 1994 | 1993 ----------------------------------------------------------------------------------|------------- | Realized | -------- | | Fixed maturities $ (4,240) $ (908) | $ 8,659 Equity securities 6,138 1,675 | 1,580 Mortgage loans 725 36 | (1,564) Real estate held for sale (35) - | (8,310) Other 16,125 (2,877) | 11,590 ----------------------------------------------------------------------------------|------------- Realized investment gains (losses) $ 18,713 $ (2,074) | $ 11,955 ------------------------------------------------------------------------------------------------
Changes in net unrealized investment gains (losses) that are included as a separate component of shareholder's equity were as follows:
(For the year ended December 31, in thousands) 1995 1994 1993 ------------------------------------------------------------------------------------------------ | Unrealized | ---------- | | Fixed maturities $ 111,551 $ (65,205) | $ (20,059) Equity securities 1,834 (27) | (1,389) Other 4,390 (28) | 8,524 ----------------------------------------------------------------------------------|------------- 117,775 (65,260) | (12,924) Related taxes 41,221 (22,841) | (3,445) ----------------------------------------------------------------------------------|------------- Change in unrealized investment gains (losses) 76,554 (42,419) | (9,479) Balance beginning of year (41,224) 1,195 | 10,674 ------------------------------------------------------------------------------------------------ Balance end of year $ 35,330 $ (41,224) $ 1,195 ------------------------------------------------------------------------------------------------
The initial adoption of FAS 115 resulted in an increase of approximately $530 thousand (net of taxes) to net unrealized investment gains in 1994. Fixed Maturities Proceeds from sales of fixed maturities classified as available for sale were $460.0 million and $41.7 million in 1995 and 1994, respectively. Gross gains of $7.9 million and $869 thousand and gross losses of $10.3 million and $1.9 million in 1995 and 1994, respectively, were realized on those sales. 24 70 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS, Continued 12. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued Prior to December 31, 1993, fixed maturities that were intended to be held to maturity were recorded at amortized cost and classified as held for investment. Proceeds from sales of such securities were $16.4 million in 1993, resulting in gross realized gains of $617 thousand. Prior to December 31, 1993, the carrying values of the trading portfolio fixed maturities were adjusted to market value as it was likely they would be sold prior to maturity. Sales of trading portfolio fixed maturities were $96.6 million in 1993, resulting in gross realized gains of $12.4 million. The amortized cost and market values of investments in fixed maturities were as follows:
------------------------------------------------------------------------------------------------ December 31, 1995 ------------------------------------------------------------------------------------------------ Gross Gross Amortized unrealized unrealized Market (in thousands) cost gains losses value ------------------------------------------------------------------------------------------------ Available for sale: Mortgage-backed securities - CMOs and pass through securities $ 89,044 $ 2,545 $ 378 $ 91,211 U.S. Treasury securities and obligations of U.S. Government and government agencies and authorities 160,988 24,267 1 185,254 Obligations of states and political subdivisions 3,500 499 - 3,999 All other corporate bonds 424,676 21,576 2,162 444,090 Redeemable preferred stock 85 - - 85 ------------------------------------------------------------------------------------------------ Total $ 678,293 $ 48,887 $ 2,541 $ 724,639 ------------------------------------------------------------------------------------------------
25 71 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS, Continued 12. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued
------------------------------------------------------------------------------------------------ December 31, 1994 ------------------------------------------------------------------------------------------------ Gross Gross Amortized unrealized unrealized Market (in thousands) cost gains losses value ------------------------------------------------------------------------------------------------ Available for sale: Mortgage-backed securities - CMOs and pass through securities $ 60,102 $ 14 $ 4,624 $ 55,492 U.S. Treasury securities and obligations of U.S. Government and government agencies and authorities 188,043 25 24,301 163,767 Obligations of states and political subdivisions 3,000 - 184 2,816 Debt securities issued by foreign governments 20,076 - 2,157 17,919 All other corporate bonds 352,197 1,140 35,055 318,282 Redeemable preferred stock 929 13 76 866 ------------------------------------------------------------------------------------------------ Total $ 624,347 $ 1,192 $ 66,397 $ 559,142 ------------------------------------------------------------------------------------------------
The amortized cost and market value of fixed maturities available for sale at December 31, 1995, by contractual maturity, are shown below. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
------------------------------------------------------------------------------------------------ Maturity Amortized Market (in thousands) cost value ------------------------------------------------------------------------------------------------ Due in one year or less $ 7,858 $ 8,245 Due after 1 year through 5 years 28,392 29,022 Due after 5 years through 10 years 172,831 178,526 Due after 10 years 380,168 417,635 ------------------------------------------------------------------------------------------------ 589,249 633,428 Mortgage-backed securities 89,044 91,211 ------------------------------------------------------------------------------------------------ Total $ 678,293 $ 724,639 ------------------------------------------------------------------------------------------------
The Company makes significant investments in collateralized mortgage obligations (CMOs). CMOs typically have high credit quality, offer good liquidity, and provide a significant advantage in yield and total return compared to U.S. Treasury securities. The Company's investment strategy is to purchase CMO tranches which are protected against prepayment risk, primarily planned amortization class (PAC) tranches. Prepayment protected tranches are preferred because they provide stable cash flows in a variety of scenarios. The Company does invest in other types of CMO tranches if a careful assessment indicates a favorable risk/return tradeoff. The Company does not purchase residual interests in CMOs. 26 72 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS, Continued 12. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued At December 31, 1995 and 1994, the Company held CMOs with a market value of $68.6 million and $55.5 million, respectively. Approximately 94% and 96% of the Company's CMO holdings are fully collateralized by GNMA, FNMA or FHLMC securities at December 31, 1995 and 1994, respectively. Virtually all of these securities are rated AAA. Equity Securities The cost and market values of investments in equity securities were as follows:
------------------------------------------------------------------------------------------------ December 31, 1995 ------------------------------------------------------------------------------------------------ Gross Gross unrealized unrealized Market (in thousands) Cost gains losses value ------------------------------------------------------------------------------------------------ Common stocks $ 3,310 $ 3,374 $ 68 $ 6,616 Nonredeemable preferred stocks 6,143 340 - 6,483 ------------------------------------------------------------------------------------------------ Total $ 9,453 $ 3,714 $ 68 $ 13,099 ------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------ December 31, 1994 ------------------------------------------------------------------------------------------------ Gross Gross unrealized unrealized Market (in thousands) Cost gains losses value ------------------------------------------------------------------------------------------------ Common stocks $ 6,141 $ 3,177 $ 654 $ 8,664 Nonredeemable preferred stocks 8,111 7 718 7,400 ------------------------------------------------------------------------------------------------ Total $ 14,252 $ 3,184 $ 1,372 $ 16,064 ------------------------------------------------------------------------------------------------
Proceeds from sales of equity securities were $11.8 million and $9.4 million in 1995 and 1994, respectively. Gross gains of $4.9 million and $2.8 million and gross losses of $474 thousand and $369 thousand in 1995 and 1994, respectively, were realized on those sales. Mortgage loans and real estate held for sale Underperforming assets include delinquent mortgage loans, loans in the process of foreclosure, foreclosed loans and loans modified at interest rates below market. The Company continues its strategy, adopted in conjunction with the Merger, to dispose of these real estate assets and some of the mortgage loans and to reinvest the proceeds to obtain current market yields. 27 73 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS, Continued 12. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued At December 31, 1995 and 1994, the Company's mortgage loan and real estate held for sale portfolios consisted of the following:
------------------------------------------------------------------------------ (in thousands) 1995 1994 ------------------------------------------------------------------------------ Current mortgage loans $ 108,142 $ 134,868 Underperforming mortgage loans 17,671 17,491 ------------------------------------------------------------------------------ Total 125,813 152,359 ------------------------------------------------------------------------------ Real estate held for sale 8,995 6,810 ------------------------------------------------------------------------------ Total $ 134,808 $ 159,169 ------------------------------------------------------------------------------
Aggregate annual maturities on mortgage loans at December 31, 1995 are as follows:
(in thousands) ----------------------------------------------------- Past maturity $ 3,437 1996 21,927 1997 5,966 1998 21,237 1999 9,700 2000 6,016 Thereafter 57,530 ----------------------------------------------------- Total $ 125,813 -----------------------------------------------------
Concentrations At December 31, 1995 and 1994, the Company had no concentration of credit risk in a single investee exceeding 10% of shareholder's equity. The Company participates in a short-term investment pool maintained by TIGI and its subsidiaries. See note 9. Included in fixed maturities are below investment grade assets totaling $59.0 million and $51.1 million at December 31, 1995 and 1994, respectively. The Company defines its below investment grade assets as those securities rated "Ba1" or below by external rating agencies, or the equivalent by internal analysts when a public rating does not exist. Such assets include publicly traded below investment grade bonds and certain other privately issued bonds that are classified as below investment grade loans. 28 74 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS, Continued 12. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued The Company also had significant concentrations of investments, primarily fixed maturities, in the following industries:
-------------------------------------------------------------------------------------------------- (in thousands) 1995 1994 -------------------------------------------------------------------------------------------------- Oil and gas $ 63,835 $ 39,749 Transportation 44,119 38,523 Banking 33,168 42,191 Chemical manufacturing 16,032 27,326 --------------------------------------------------------------------------------------------------
Below investment grade assets included in the totals of the previous table were as follows:
-------------------------------------------------------------------------------------------------- (in thousands) 1995 1994 -------------------------------------------------------------------------------------------------- Oil and gas $ 3,469 $ 4,002 Transportation 18,648 2,678 Banking 632 5,124 --------------------------------------------------------------------------------------------------
Concentrations of mortgage loans by property type at December 31, 1995 and 1994 were as follows:
------------------------------------------------------------------------------------------------- (in thousands) 1995 1994 ------------------------------------------------------------------------------------------------- Office $ 32,024 $ 40,559 Agricultural 29,820 32,890 Retail 27,870 31,712 -------------------------------------------------------------------------------------------------
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. 29 75 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS, Continued 12. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued Investment Valuation Reserves There were no investment valuation reserves at December 31, 1995, 1994 and 1993. Investment valuation reserve activity during 1993 was as follows:
------------------------------------------------------------------------------------------------ (in thousands) 1993 ------------------------------------------------------------------------------------------------ Beginning of year $ 41,443 Increase 8,355 Impairments, net of gains/recoveries (6,887) Purchase accounting adjustment (42,911) ------------------------------------------------------------------------------------------------ End of year $ - ------------------------------------------------------------------------------------------------
Increases in the investment valuation reserves were reflected as realized investment losses. Nonincome Producing Investments included in the balance sheets that were nonincome producing for the preceding 12 months were insignificant. Restructured Investments The Company had mortgage loan and debt securities which were restructured at below market terms totaling approximately $17.7 million and $17.4 million at December 31, 1995 and 1994, respectively. At December 31, 1993, the Company's restructured assets were recorded at purchase accounting value. The new terms typically defer a portion of contract interest payments to varying future periods. The accrual of interest is suspended on all restructured assets, and interest income is reported only as payment is received. Gross interest income on restructured assets that would have been recorded in accordance with the original terms of such assets amounted to $4.9 million in 1995 and $5.2 million in 1994. Interest on these assets, included in net investment income, aggregated $2.0 million in 1995 and $1.4 million in 1994. 30 76 THE TRAVELERS LIFE AND ANNUITY COMPANY NOTES TO FINANCIAL STATEMENTS, Continued 13. LIFE AND ANNUITY DEPOSIT FUNDS AND RESERVES At December 31, 1995, the Company had $683.0 million of life and annuity deposit funds and reserves. Of that total, $671.2 million were not subject to discretionary withdrawal based on contract terms. The remaining $11.8 million were life and annuity products that were subject to discretionary withdrawal by the contractholders. Included in the amount that is subject to discretionary withdrawal were $8.2 million of liabilities that are surrenderable with market value adjustments. An additional $3.6 million of the life insurance and individual annuity liabilities are subject to discretionary withdrawals with an average surrender charge of 6.6%. The life insurance risks would have to be underwritten again if transferred to another carrier, which is considered a significant deterrent for long-term policyholders. Insurance liabilities that are surrendered or withdrawn from the Company are reduced by outstanding policy loans and related accrued interest prior to payout. 14. RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES The following table reconciles net income to net cash provided by (used in) operating activities:
(For the year ended December 31, in thousands) 1995 1994 1993 ------------------------------------------------------------------------------------------------------- | Net income $ 28,917 $ 18,325 | $ 13,609 Reconciling adjustments | Realized (gains) losses (18,713) 2,074 | (11,955) Deferred federal income taxes 11,964 4,798 | (22,672) Amortization of deferred policy acquisition costs and | value of insurance in force 1,563 - | - Deferred policy acquisition costs (3,109) (21,014) | - Investment income accrued (819) 1,085 | (9,607) Insurance reserves (20,081) (16,062) | 80,238 Trading account investments, (purchases) sales, net - - | 35,093 Other (48,353) 18,371 | (80,398) -----------------------------------------------------------------------------------------|------------- | Net cash provided by (used in) operating activities $ (48,631) $ 7,577 | $ 4,308 -------------------------------------------------------------------------------------------------------
15. NONCASH INVESTING AND FINANCING ACTIVITIES Significant noncash investing and financing activities include: a) the transfer of $2.6 million and $5.6 million of mortgage loans and real estate held for sale from one of the Company's separate accounts to the general account in 1995 and 1994, respectively; b) acquisition of real estate through foreclosures of mortgage loans amounting to $10.3 million and $7.7 million in 1994 and 1993, respectively; and c) increases in investment valuation reserves in 1993 for mortgage loans and real estate held for sale (see note 12). 31 77 VINTAGE STATEMENT OF ADDITIONAL INFORMATION Individual Variable Annuity Contract issued by The Travelers Life and Annuity Company One Tower Square Hartford, Connecticut 06183 L-12540S May, 1996 8 78 PART C OTHER INFORMATION Item 24. Financial Statements and Exhibits (a) The audited financial statements of the Registrant and the Report of Independent Accountants are contained in the Statement of Additional Information. The financial statements of the Registrant are: Statement of Assets and Liabilities as of December 31, 1995 Statement of Operations for the period September 25, 1995 (date operations commenced) to December 31, 1995 Statement of Investments as of December 31, 1995 Notes to Financial Statements The financial statements of The Travelers Life and Annuity Company and the Report of Independent Accountants are contained in the Statement of Additional Information. These financial statements include: Statement of Operations and Retained Earnings for the years ended December 31, 1995, 1994 and 1993 Balance Sheet as of December, 1995 and 1994 Statement of Cash Flows for the years ended December 31, 1995, 1994 and 1993 Notes to Financial Statements (b) Exhibits 1. Resolution of The Travelers Life and Annuity Company Board of Directors authorizing the establishment of the Registrant. (Incorporated herein by reference to Registration Statement on Form N-4, File No. 33-58131, filed via Edgar on March 17, 1995.) 2. Not Applicable. 3. Distribution and Management Agreement among the Registrant, The Travelers Life and Annuity Company and Tower Square Securities, Inc. (Incorporated herein by reference to Exhibit 3 to Pre-Effective Amendment No. 1 to the Registration Statement on Form N-4, filed September 8, 1995.) 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 Application. (Incorporated herein by reference to Pre-Effective Amendment No. 1 to the Registration Statement on Form N-4, filed September 8, 1995.) 6(a). Charter of The Travelers Life and Annuity Company, as amended on April 10, 1990. (Incorporated herein by reference to Registration Statement on Form N-4, File No. 33-58131, filed via Edgar on March 17, 1995.) 79 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 Registrant's most recent Form 24f-2 Notice filed on February 29, 1995.) 10(a). Consent of Coopers & Lybrand L.L.P., Independent Accountants, to the inclusion of their report on the audited financial statements of the Registrant and their report on the financial statements The Travelers Life and Annuity Company contained in Part B of this Registration Statement, and to the reference to such firm as "Experts" in accounting and auditing. 10(b). Consent of KPMG Peat Marwick LLP, Independent Auditors, to the inclusion of their report on the financial statements of The Travelers Life and Annuity Company contained in Part B of this Registration Statement, and to the reference to their firm as "experts" under the heading "Independent Accountants." 11. None. 12. None. 13. Schedule for Computation of Total Return Calculations - Standardized and Non- Standardized. 15(a). Powers of Attorney authorizing Jay S. Fishman or Ernest J. Wright as signatory for Donald T. DeCarlo and Christine B. Mead. (Incorporated herein by reference to Exhibit 15(a) to Pre-Effective Amendment No. 1 to the Registration Statement on Form N-4, filed September 8, 1995.) 15(b). Powers of Attorney authorizing Jay S. Fishman or Ernest J. Wright as a signatory for Michael A. Carpenter, Robert I. Lipp, Charles O. Prince III, Marc P. Weill, and Irwin R. Ettinger. (Incorporated herein by reference to Registration Statement on Form N-4, File No. 33-58131, filed via Edgar on March 17, 1995.) 15(c). Powers of Attorney authorizing Ernest J. Wright or Kathleen A. McGah as signatory for Jay S. Fishman or Ian R. Stuart. 80 Item 25. Directors and Officers of the Depositor
Name and Principal Positions and Offices Business Address with Depositor - ---------------- --------------------------- Michael A. Carpenter* Chairman, President and Chief Executive Officer Robert I. Lipp* Director Jay S. Fishman* Director Charles O. Prince, III** Director Marc P. Weill** Director and Senior Vice President Irwin R. Ettinger** Director Donald T. DeCarlo* Director, General Counsel and Secretary Stuart Baritz** Senior Vice President Jay S. Benet* Senior Vice President George C. Kokulis* Senior Vice President Warren H. May* Senior Vice President Kathleen M. D'Auria* Vice President Elizabeth Charron* Vice President Robert Hamilton* Vice President Ian R. Stuart* Vice President, Chief Financial Officer, Chief Accounting Officer and Controller Charles N. Vest* Vice President and Actuary William H. White* Vice President and Treasurer Bethann C. Maas* Second Vice President Ernest J. Wright* Assistant Secretary Kathleen A. McGah Assistant Secretary Principal Business Address: * The Travelers Life and Annuity Company ** Travelers Group Inc. One Tower Square 388 Greenwich Street Hartford, Connecticut 06183 New York, New York 10013
81 Item 26. Persons Controlled by or under Common Control with The Travelers(R) Life and Annuity Company or Registrant OWNERSHIP OF THE TRAVELERS LIFE AND ANNUITY COMPANY
Company State of Organization Ownership Principal Business - ------- ---------------------- --------- ------------------- Travelers Group Inc. Delaware Publicly Held ---------------- Associated Madison Companies Inc. Delaware 100.00 ---------------- The Travelers Insurance Group, Inc. Connecticut 100.00 ---------------- The Travelers Insurance Company Connecticut 100.00 Insurance The Travelers Life and Annuity Company Connecticut 100.00 Insurance - ----------------------------------------------------------------------------------------------------------------------------
PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE TRAVELERS LIFE AND ANNUITY COMPANY
% of Voting Securities Owned Directly State of or Indirectly by Principal Company Organization The Travelers Inc. Business - ---------------------------------------------------------------------------------------------------------------------------- AC Health Ventures, Inc. Delaware 100.00 Inactive AMCO Biotech, Inc. Delaware 100.00 Inactive Associated Madison Companies, Inc. Delaware 100.00 Holding company. American National Life Insurance (T & C), Ltd. Turks and Caicos Islands 100.00 Insurance ERISA Corporation New York 100.00 Inactive
1 82
% of Voting Securities Owned Directly State of or Indirectly by Principal Company Organization The Travelers Inc. Business - ---------------------------------------------------------------------------------------------------------------------------- Mid-America Insurance Services, Inc. Georgia 100.00 Third party administrator National Marketing Corporation Pennsylvania 100.00 Inactive PFS Services, Inc. Georgia 100.00 General partner The Travelers Insurance Group Inc. Connecticut 100.00 Holding company Constitution Plaza, Inc. Connecticut 100.00 Real estate brokerage KP Properties Corporation Massachusetts 100.00 Real estate KPI 85, Inc. Massachusetts 100.00 Real estate KRA Advisers Corporation Massachusetts 100.00 Real estate KRP Corporation Massachusetts 100.00 Real estate La Metropole S.A. Belgium 98.83 P-C insurance/reinsurance Principal Financial Associates, Inc. Delaware 100.00 Inactive Winthrop Financial Group, Inc. Delaware 100.00 Leasing company. The Prospect Company Delaware 100.00 Investments 89th & York Avenue Corporation New York 100.00 Real estate 979 Third Avenue Corporation Delaware 100.00 Real estate Meadow Lane, Inc. Georgia 100.00 Real estate development Panther Valley, Inc. New Jersey 100.00 Real estate management Prospect Management Services Company Delaware 100.00 Real estate management The Travelers Asset Funding Corporation Connecticut 100.00 Investment adviser
2 83
% of Voting Securities Owned Directly State of or Indirectly by Principal Company Organization The Travelers Inc. Business - ------------------------------------------------------------------------------------------------------------------------------- Travelers Capital Funding Corporation Connecticut 100.00 Furniture/equipment The Travelers Corporation of Bermuda Limited Bermuda 99.99 Pensions The Travelers Insurance Company Connecticut 100.00 Insurance The Plaza Corporation Connecticut 100.00 Holding company Joseph A. Wynne Agency California 100.00 Inactive The Copeland Companies New Jersey 100.00 Holding company American Odyssey Funds Management, Inc. New Jersey 100.00 Investment advisor American Odyssey Funds, Inc. Maryland 100.00 Investment management Copeland Administrative Services, Inc. New Jersey 100.00 Administrative services Copeland Associates, Inc. Delaware 100.00 Fixed/variable annuities Copeland Associates Agency of Ohio, Inc. Ohio 99.00 Fixed/variable annuities Copeland Associates of Alabama, Inc. Alabama 100.00 Fixed/variable annuities Copeland Associates of Montana, Inc. Montana 100.00 Fixed/variable annuities Copeland Benefits Management Company New Jersey 51.00 Investment marketing Copeland Equities, Inc. New Jersey 100.00 Fixed/variable annuities H.C. Copeland Associates, Inc. of Massachusetts 100.00 Fixed annuities Massachusetts Copeland Financial Services, Inc. New Jersey 100.00 Investment advisory services. Copeland Healthcare Services, Inc. New Jersey 100.00 Life insurance marketing H.C. Copeland and Associates, Inc. of Texas Texas 100.00 Fixed/variable annuities
3 84
% of Voting Securities Owned Directly State of or Indirectly by Principal Company Organization The Travelers Inc. Business - ----------------------------------------------------------------------------------------------------------------------- Tower Square Securities, Inc. Connecticut 100.00 Broker dealer The Travelers Life and Annuity Company Connecticut 100.00 Life insurance The Travelers Marine Corporation California 100.00 General insurance brokerage Three Parkway Inc. - I Pennsylvania 100.00 Investment real estate Three Parkway Inc. - II Pennsylvania 100.00 Investment real estate Three Parkway Inc. - III Pennsylvania 100.00 Investment real estate Travelers Insurance Holdings Inc. Georgia 100.00 Holding company AC RE, Ltd. Bermuda 100.00 Reinsurance American Financial Life Insurance Company Texas 100.00 Insurance Primerica Life Insurance Company Massachusetts 100.00 Life insurance National Benefit Life Insurance Company New York 100.00 Insurance Primerica Financial Services (Canada) Ltd. Canada 100.00 Holding company PFSL Investments Canada Ltd. Canada 100.00 Mutual fund dealer Primerica Financial Services Ltd. Canada 82.82 General agent Primerica Life Insurance Company of Canada Canada 100.00 Life insurance Travelers/Net Plus, Inc. Connecticut 100.00 The Travelers Insurance Corporation Proprietary Limited Australia 100.00 Inactive Travelers Asset Management International Corporation New York 100.00 Investment adviser Travelers Canada Corporation Canada 100.00 Inactive
4 85
% of Voting Securities Owned Directly State of or Indirectly by Principal Company Organization The Travelers Inc. Business - ------------------------------------------------------------------------------------------------------------------------ Travelers Mortgage Securities Corporation Delaware 100.00 Collateralized obligations Travelers of Ireland Limited Ireland 99.90 Data processing Travelers/Aetna Property Casualty Corp. Delaware 100.00 Holding company The Aetna Casualty and Surety Company Connecticut 100.00 Insurance company ABP Community Urban Redevelopment Corporation Connecticut 100.00 AE Development Group, Inc. Connecticut 100.00 Aetna Casualty & Surety Company of America Connecticut 100.00 Insurance company Aetna Casualty & Surety Company of Canada Canada 100.00 Aetna Casualty & Surety Company of Illinois Illinois 100.00 Insurance company Aetna Casualty Company of Connecticut Connecticut 100.00 Insurance company Aetna Commercial Insurance Company Connecticut 100.00 Insurance company Aetna Excess and Surplus Lines Company Connecticut 100.00 Insurance company Aetna Financial Futures, Inc. Connecticut 100.00 Aetna Lloyds of Texas Insurance Company Texas 100.00 Insurance company Aetna National Accounts U.K. Limited United Kingdom 100.00 Insurance company Aetna Opportunity Corporation Connecticut 100.00 Aetna Property Services, Inc. Delaware 100.00 AFF, Inc. Connecticut 100.00 Axia Services, Inc. New York 100.00
5 86
% of Voting Securities Owned Directly State of or Indirectly by Principal Company Organization The Travelers Inc. Business - ---------------------------------------------------------------------------------------------------------------------- Farmington Management, Inc. Connecticut 100.00 The Farmington Casualty Company Connecticut 100.00 Insurance company Urban Diversified Properties, Inc. Connecticut 100.00 The Standard Fire Insurance Company Connecticut 100.00 Insurance company AE Properties, Inc. California 100.00 Aetna Insurance Company Connecticut 100.00 Insurance company Aetna Insurance Company of Illinois Illinois 100.00 Insurance company Aetna Personal Security Insurance Company Connecticut 100.00 Insurance company Community Rehabilitation Investment Corporation Connecticut 100.00 The Automobile Insurance Company of Hartford, Connecticut 100.00 Insurance company Connecticut The Travelers Indemnity Company Connecticut 100.00 P-C insurance Commercial Insurance Resources, Inc. Delaware 100.00 Holding company Gulf Insurance Company Missouri 100.00 P-C insurance Atlantic Insurance Company Texas 100.00 P-C insurance Gulf Risk Services, Inc. Delaware 100.00 Claims/risk management Gulf Underwriters Insurance Company North Carolina 100.00 P-C ins/surplus lines Select Insurance Company Texas 100.00 P-C insurance Countersignature Agency, Inc. Florida 100.00 Countersign ins policies First Trenton Indemnity Company New Jersey 100.00 P-C insurance
6 87
% of Voting Securities Owned Directly State of or Indirectly by Principal Company Organization The Travelers Inc. Business - ------------------------------------------------------------------------------------------------------------------------- Laramia Insurance Agency, Inc. North Carolina 100.00 Flood insurance Lynch, Ryan & Associates, Inc. Massachusetts 100.00 Cost containment The Charter Oak Fire Insurance Company Connecticut 100.00 P-C insurance The Parker Realty and Insurance Agency, Inc. Vermont 58.00 Real estate The Phoenix Insurance Company Connecticut 100.00 P-C insurance Constitution State Service Company Montana 100.00 Service company The Travelers Indemnity Company of America Georgia 100.00 P-C insurance The Travelers Indemnity Company of Connecticut Connecticut 100.00 Insurance The Travelers Indemnity Company of Illinois Illinois 100.00 P-C insurance The Premier Insurance Company of Massachusetts Massachusetts 100.00 Insurance The Travelers Home and Marine Insurance Company Indiana 100.00 P-C insurance The Travelers Indemnity Company of Missouri Missouri 100.00 P-C insurance The Travelers Lloyds Insurance Company Texas 100.00 Non-life insurance TI Home Mortgage Brokerage, Inc. Delaware 100.00 Mortgage brokerage services TravCo Insurance Company Indiana 100.00 P-C insurance Travelers Bond Investments, Inc. Connecticut 100.00 Bond investments Travelers General Agency of Hawaii, Inc. Hawaii 100.00 Insurance agency Travelers Medical Management Services Inc. Delaware 100.00 Managed care Travelers Specialty Property Casualty Company, Inc. Connecticut 100.00 Insurance management
7 88
% of Voting Securities Owned Directly State of or Indirectly by Principal Company Organization The Travelers Inc. Business - --------------------------------------------------------------------------------------------------------------------------- VIPortfolio Agency, Inc. Delaware 100.00 Insurance agency Primerica Finance Corporation Delaware 100.00 Holding company PFS Distributors, Inc. Georgia 100.00 General partner PFS Investments Inc. Georgia 100.00 Broker dealer PFS T.A., Inc. Delaware 100.00 Joint venture partner Primerica Financial Services Home Mortgages, Inc. Georgia 100.00 Mortgage loan broker Primerica Financial Services, Inc. Nevada 100.00 General agency Primerica Financial Services Agency of New York 100.00 General agency licensing New York, Inc. Primerica Financial Services Insurance Marketing of Connecticut 100.00 General agency licensing Connecticut, Inc. Primerica Financial Services Insurance Marketing of Idaho 100.00 General agency licensing Idaho, Inc. Primerica Financial Services Insurance Marketing of Nevada 100.00 General agency licensing Nevada, Inc. Primerica Financial Services Insurance Marketing of Pennsylvania 100.00 General agency licensing Pennsylvania, Inc. Primerica Financial Services Insurance Marketing of the United States 100.00 General agency licensing Virgin Islands, Inc. Virgin Islands Primerica Financial Services Insurance Marketing of Wyoming 100.00 General agency licensing Wyoming, Inc. Primerica Financial Services Insurance Marketing, Inc. Delaware 100.00 General agency licensing Primerica Financial Services of Alabama, Inc. Alabama 100.00 General agency licensing Primerica Financial Services of New Mexico, Inc. New Mexico 100.00 General agency licensing Primerica Insurance Agency of Massachusetts, Inc. Massachusetts 100.00 General agency licensing Primerica Insurance Marketing Services of Puerto Rico 100.00 Insurance agency Puerto Rico, Inc. 8
89
% of Voting Securities Owned Directly State of or Indirectly by Principal Company Organization The Travelers Inc. Business - -------------------------------------------------------------------------------------------------------------------------- Primerica Insurance Services of Louisiana 100.00 General agency licensing Louisiana, Inc. Primerica Insurance Services of Maryland 100.00 General agency licensing Maryland, Inc. Primerica Services, Inc. Georgia 100.00 Print operations RCM Acquisition Inc. Delaware 100.00 Investments SCN Acquisitions Company Delaware 100.00 Investments SL&H Reinsurance, Ltd. Nevis 100.00 Reinsurance Southwest Service Agreements, Inc. North Carolina 100.00 Warranty/service agreements Southwest Warranty Corporation Florida 100.00 Extended automobile warranty CCC Holdings, Inc. Delaware 100.00 Holding company Commercial Credit Company Delaware 100.00 Holding company. American Health and Life Insurance Company Maryland 100.00 LH&A Insurance Brookstone Insurance Company Vermont 100.00 Insurance managers CC Finance Company, Inc. New York 100.00 Consumer lending CC Financial Services, Inc. Hawaii 100.00 Financial services CCC Fairways, Inc. Delaware 100.00 Investment company City Loan Financial Services, Inc. Ohio 100.00 Consumer finance Commercial Credit Banking Corporation Oregon 100.00 Consumer finance Commercial Credit Consumer Services, Inc. Minnesota 100.00 Consumer finance Commercial Credit Corporation (AL) Alabama 100.00 Consumer finance
9 90
% of Voting Securities Owned Directly State of or Indirectly by Principal Company Organization The Travelers Inc. Business - ---------------------------------------------------------------------------------------------------------------- Commercial Credit Corporation (CA) California 100.00 Consumer finance Commercial Credit Corporation (IA) Iowa 100.00 Consumer finance Commercial Credit of Alabama, Inc. Delaware 100.00 Consumer lending Commercial Credit Corporation (KY) Kentucky 100.00 Consumer finance Certified Insurance Agency, Inc. Kentucky 100.00 Insurance agency Commercial Credit Investment, Inc. Kentucky 100.00 Investment company National Life Insurance Agency of Kentucky, Inc. Kentucky 100.00 Insurance agency Union Casualty Insurance Agency, Inc. Kentucky 100.00 Insurance agency Commercial Credit Corporation (MD) Maryland 100.00 Consumer finance Action Data Services, Inc. Missouri 100.00 Data processing Commercial Credit Plan, Incorporated (OK) Oklahoma 100.00 Consumer finance Commercial Credit Corporation (NY) New York 100.00 Consumer finance Commercial Credit Corporation (SC) South Carolina 100.00 Consumer finance Commercial Credit Corporation (WV) West Virginia 100.00 Consumer finance Commercial Credit Corporation NC North Carolina 100.00 Consumer finance Commercial Credit Europe, Inc. Delaware 100.00 Inactive Commercial Credit Far East Inc. Delaware 100.00 Inactive Commercial Credit Insurance Services, Inc. Maryland 100.00 Insurance broker Commercial Credit Insurance Agency (P&C) of Mississippi 100.00 Insurance agency Mississippi, Inc.
10 91
% of Voting Securities Owned Directly State of or Indirectly by Principal Company Organization The Travelers Inc. Business - -------------------------------------------------------------------------------------------------------------------------------- Commercial Credit Insurance Agency of Alabama, Inc. Alabama 100.00 Insurance agency Commercial Credit Insurance Agency of Kentucky, Inc. Kentucky 100.00 Insurance agency Commercial Credit Insurance Agency of Massachusetts, Inc. Massachusetts 100.00 Insurance agency Commercial Credit Insurance Agency of Nevada, Inc. Nevada 100.00 Credit LH&A, P-C insurance Commercial Credit Insurance Agency of New Mexico, Inc. New Mexico 100.00 Insurance agency/Broker Commercial Credit Insurance Agency of Ohio, Inc. Ohio 100.00 Insurance agency/broker Commercial Credit International, Inc. Delaware 100.00 Holding company Commercial Credit International Banking Corporation Oregon 100.00 International lending Commercial Credit Corporation CCC Limited Canada 100.00 Second mortgage loans Commercial Credit Services do Brazil Ltda. Brazil 99.00 Inactive Commercial Credit Services Belgium S.A. Belgium 100.00 Inactive Commercial Credit Limited Delaware 100.00 Inactive Commercial Credit Loan, Inc. (NY) New York 100.00 Consumer finance Commercial Credit Loans, Inc. (DE) Delaware 100.00 Consumer finance Commercial Credit Loans, Inc. (OH) Ohio 100.00 Consumer finance Commercial Credit Loans, Inc. (VA) Virginia 100.00 Consumer finance Commercial Credit Management Corporation Maryland 100.00 Intercompany services Commercial Credit Plan Incorporated (TN) Tennessee 100.00 Consumer finance Commercial Credit Plan Incorporated (UT) Utah 100.00 Consumer finance
11 92
% of Voting Securities Owned Directly State of or Indirectly by Principal Company Organization The Travelers Inc. Business - ------------------------------------------------------------------------------------------------------------------------------------ Commercial Credit Plan Incorporated of Georgetown Delaware 100.00 Consumer finance Commercial Credit Plan Industrial Loan Company Virginia 100.00 Consumer finance Commercial Credit Plan, Incorporated (CO) Colorado 100.00 Consumer finance Commercial Credit Plan, Incorporated (DE) Delaware 100.00 Consumer finance Commercial Credit Plan, Incorporated (GA) Georgia 100.00 Consumer finance Commercial Credit Plan, Incorporated (MO) Missouri 100.00 Consumer finance Commercial Credit Securities, Inc. Delaware 100.00 Broker dealer DeAlessandro & Associates, Inc. Delaware 100.00 Insurance consulting Park Tower Holdings, Inc. Delaware 100.00 Holding company CC Retail Services, Inc. Delaware 100.00 Leasing, financing Troy Textiles, Inc. Delaware 100.00 Factoring. Company is inactive. COMCRES, Inc. Delaware 100.00 Inactive Commercial Credit Development Corporation Delaware 100.00 Direct loan Myers Park Properties, Inc. Delaware 100.00 Inactive Penn Re, Inc. North Carolina 100.00 Management company Plympton Concrete Products, Inc. Delaware 100.00 Inactive Resource Deployment, Inc. Texas 100.00 Management company The Travelers Bank Delaware 100.00 Banking services The Travelers Bank USA Delaware 100.00 Credit card bank
12 93
% of Voting Securities Owned Directly State of or Indirectly by Principal Company Organization The Travelers Inc. Business - ------------------------------------------------------------------------------------------------------------------------- Travelers Home Equity, Inc. North Carolina 100.00 Financial services CC Consumer Services of Alabama, Inc. Alabama 100.00 Financial services CC Home Lenders Financial, Inc. Georgia 100.00 Financial services CC Home Lenders, Inc. Ohio 100.00 Financial services Commercial Credit Corporation (TX) Texas 100.00 Consumer finance Commercial Credit Financial of Kentucky, Inc. Kentucky 100.00 Consumer finance Commercial Credit Financial of West Virginia 100.00 Consumer finance West Virginia, Inc. Commercial Credit Plan Consumer Discount Company Pennsylvania 100.00 Financial services Commercial Credit Services of Kentucky, Inc. Kentucky 100.00 Financial services. Travelers Home Equity Services, Inc. North Carolina 100.00 Financial services Triton Insurance Company Missouri 100.00 P-C insurance Verochris Corporation Delaware 100.00 Joint venture company AMC Aircraft Corp. Delaware 100.00 Aviation World Service Life Insurance Company Colorado 100.00 Life insurance Greenwich Street Capital Partners, Inc. Delaware 100.00 Investments Greenwich Street Investments, Inc. Delaware 100.00 Investments Greenwich Street Capital Partners Offshore Holdings, Inc. Delaware 100.00 Investments Margco Holdings, Inc. Delaware 100.00 Holding company Berg Associates New Jersey 100.00 Inactive
13 94
% of Voting Securities Owned Directly State of or Indirectly by Principal Company Organization The Travelers Inc. Business - ------------------------------------------------------------------------------------------------------------------------- Berg Enterprises Realty, Inc. (NY) New York 100.00 Inactive Dublin Escrow, Inc. California 100.00 Inactive M.K.L. Realty Corporation New Jersey 66.67 Holding company MRC Holdings, Inc. Delaware 100.00 Real estate The Berg Agency, Inc. (NJ) New Jersey 100.00 Inactive Mirasure Insurance Company, Ltd. Bermuda 100.00 Inactive Pacific Basin Investments Ltd. Delaware 100.00 Inactive Primerica Corporation (WY) Wyoming 100.00 Inactive Primerica, Inc. Delaware 100.00 Name saver RCM Capital Trust Company California 100.00 Trust company Smith Barney Corporate Trust Company Delaware 100.00 Trust company Smith Barney Holdings Inc. Delaware 100.00 Holding company Mutual Management Corp. New York 100.00 Inactive R-H Capital, Inc. Delaware 100.00 Investments R-H Sports Enterprises Inc Georgia 100.00 Sports representation SB Cayman Holdings I Inc. Delaware 100.00 Holding company Greenwich (Cayman) I Limited Cayman Islands 100.00 Corporate services Greenwich (Cayman) II Limited Cayman Islands 100.00 Corporate services Greenwich (Cayman) III Limited Cayman Islands 100.00 Corporate services
14 95
% of Voting Securities Owned Directly State of or Indirectly by Principal Company Organization The Travelers Inc. Business - -------------------------------------------------------------------------------------------------------------------------------- SB Cayman Holdings II Inc. Delaware 100.00 Holding company SB Cayman Holdings III Inc. Delaware 100.00 Holding company SB Cayman Holdings IV Inc. Delaware 100.00 Holding company Smith Barney (Delaware) Inc. Delaware 100.00 Holding company 1345 Media Corp. Delaware 100.00 Holding company Americas Avenue Corporation Delaware 100.00 Inactive Corporate Realty Advisors, Inc. Delaware 100.00 Realty trust adviser IPO Holdings Inc. Delaware 100.00 Holding company Institutional Property Owners, Inc. V Delaware 100.00 Investments Institutional Property Owners, Inc. VI Delaware 100.00 General partner MLA 50 Corporation Delaware 100.00 Limited partner MLA GP Corporation Delaware 100.00 General partner Municipal Markets Advisors Incorporated Delaware 100.00 Public finance SBF Corp. Delaware 100.00 Merchant banking investments Smith Barney Acquisition Corporation Delaware 100.00 Offshore fund adviser Smith Barney Global Capital Management, Inc. Delaware 100.00 Investment management Smith Barney Investment, Inc. Delaware 100.00 Inactive Smith Barney Realty, Inc. Delaware 100.00 Investments Smith Barney Risk Investors, Inc. Delaware 100.00 Investments
15 96
% of Voting Securities Owned Directly State of or Indirectly by Principal Company Organization The Travelers Inc. Business - ----------------------------------------------------------------------------------------------------------------------------------- Smith Barney Venture Corp. Delaware 100.00 Investments Smith Barney (Ireland) Limited Ireland 100.00 Fund management Smith Barney Asia Inc. Delaware 100.00 Investment banking Smith Barney Asset Management Group (Asia) Pte. Ltd. Singapore 100.00 Asset management Smith Barney Canada Inc. Canada 100.00 Investment dealer Smith Barney Capital Services Inc. Delaware 100.00 Derivative product transactions Smith Barney Cayman Islands, Ltd. Cayman Islands 100.00 Securities trading Smith Barney Commercial Corp. Delaware 100.00 Commercial credit Smith Barney Commercial Corporation Asia Limited Hong Kong 99.00 Commodities trading Smith Barney Europe Holdings, Ltd. United Kingdom 100.00 Holding corp. Smith Barney Europe, Ltd. United Kingdom 100.00 Securities brokerage Smith Barney Shearson Futures, Ltd. United Kingdom 100.00 Inactive Smith Barney Futures Management Inc. Delaware 100.00 Commodities pool operator Smith Barney Offshore Fund Ltd. Delaware 100.00 Commodity pool Smith Barney Overview Fund PLC Dublin 100.00 Commodity fund Smith Barney Inc. Delaware 100.00 Broker dealer Institutional Property Owners, Inc. VII Delaware 100.00 Never activated SBHU Life Agency, Inc. Delaware 100.00 Insurance brokerage Robinson-Humphrey Insurance Services Inc. Georgia 100.00 Insurance brokerage
16 97
% of Voting Securities Owned Directly State of or Indirectly by Principal Company Organization The Travelers Inc. Business - ----------------------------------------------------------------------------------------------------------------------- Robinson-Humphrey Insurance Services of Alabama, Inc. Alabama 100.00 Insurance brokerage SBHU Life & Health Agency, Inc. Delaware 100.00 Insurance brokerage SBHU Life Agency of Arizona, Inc. Arizona 100.00 Insurance brokerage SBHU Life Agency of Indiana, Inc. Indiana 100.00 Insurance brokerage SBHU Life Agency of Utah, Inc. Utah 100.00 Insurance brokerage SBHU Life Insurance Agency of Massachusetts, Inc. Massachusetts 100.00 Insurance brokerage SBS Insurance Agency of Hawaii, Inc. Hawaii 100.00 Insurance brokerage SBS Insurance Agency of Idaho, Inc. Idaho 100.00 Insurance brokerage SBS Insurance Agency of Maine, Inc. Maine 100.00 Insurance brokerage SBS Insurance Agency of Montana, Inc. Montana 100.00 Insurance brokerage SBS Insurance Agency of Nevada, Inc. Nevada 100.00 Insurance brokerage SBS Insurance Agency of North Carolina, Inc. North Carolina 100.00 Insurance brokerage SBS Insurance Agency of Ohio, Inc. Ohio 100.00 Insurance brokerage SBS Insurance Agency of South Dakota, Inc. South Dakota 100.00 Insurance brokerage SBS Insurance Agency of Wyoming, Inc. Wyoming 100.00 Insurance brokerage SBS Insurance Brokerage Agency of Arkansas, Inc. Arkansas 100.00 Insurance brokerage SBS Insurance Brokers of Kentucky, Inc. Kentucky 100.00 Insurance brokerage SBS Insurance Brokers of Louisiana, Inc. Louisiana 100.00 Insurance brokerage SBS Insurance Brokers of New Hampshire, Inc. New Hampshire 100.00 Insurance brokerage
17 98
% of Voting Securities Owned Directly State of or Indirectly by Principal Company Organization The Travelers Inc. Business - ------------------------------------------------------------------------------------------------------------------------------ SBS Insurance Brokers of North Dakota, Inc. North Dakota 100.00 Insurance brokerage SBS Life Insurance Agency of Puerto Rico, Inc. Puerto Rico 100.00 Insurance brokerage SLB Insurance Agency of Maryland, Inc. Maryland 100.00 Insurance brokerage Smith Barney Life Agency Inc. Louisiana 100.00 Insurance brokerage Smith Barney (France) S.A. France 100.00 Commodities trading Smith Barney (Hong Kong) Limited Hong Kong 100.00 Broker dealer Smith Barney (Netherlands) Inc. Delaware 100.00 Broker dealer Smith Barney International Incorporated Oregon 100.00 Broker dealer Smith Barney (Singapore) Pte Ltd Singapore 100.00 Commodities Smith Barney Pacific Holdings, Inc. British Virgin 100.00 Holding company Islands Smith Barney (Asia) Limited Hong Kong 100.00 Broker dealer Smith Barney (Pacific) Limited Hong Kong 100.00 Commodities dealer Smith Barney Securities Pte Ltd Singapore 100.00 Securities brokerage Smith Barney Research Pte. Ltd. Singapore 100.00 Inactive The Robinson-Humphrey Company, Inc. Delaware 100.00 Broker dealer Smith Barney Mortgage Brokers Inc. Delaware 100.00 Mortgage brokerage Smith Barney Mortgage Capital Corp. Delaware 100.00 Mortgage-backed securities Smith Barney Mortgage Capital Group, Inc. Delaware 100.00 Mortgage trading Smith Barney Mutual Funds Management Inc. Delaware 100.00 Investment management
18 99
% of Voting Securities Owned Directly State of or Indirectly by Principal Company Organization The Travelers Inc. Business - ------------------------------------------------------------------------------------------------------------------------------- Smith Barney Strategy Advisers Inc. Delaware 100.00 Investment management E.C. Tactical Management S.A. Luxembourg 100.00 Investment management Smith Barney Offshore, Inc. Delaware 100.00 Decathlon Fund advisor Decathlon Offshore Limited Cayman Islands 100.00 Commodity fund Smith Barney S.A. France 100.00 Commodities trading Smith Barney Asset Management France SA France 100.00 Com. based asset management Smith Barney Shearson (Chile) Corredora de Chile 100.00 Insurance brokerage Seguro Limitada Structured Mortgage Securities Corporation Delaware 100.00 Mortgage-backed securities The Travelers Investment Management Company Connecticut 100.00 Investment advisor Smith Barney Private Trust Company New York 100.00 Trust company. Smith Barney Private Trust Company of Florida Florida 100.00 Trust company Tinmet Corporation Delaware 100.00 Inactive Travelers Services Inc. Delaware 100.00 Holding company Tribeca Management Inc. Delaware 100.00 TRV Employees Investments, Inc. Delaware 100.00 Investments TRV/RCM Corp. Delaware 100.00 Inactive TRV/RCM LP Corp. Delaware 100.00 Inactive
19 100 Item 27. Number of Contract Owners As of March 31, 1995, 1,200 contract owners held qualified and non-qualified contracts offered through the Registrant. Item 28. Indemnification Section 33-320a of the Connecticut General Statutes ("C.G.S.") regarding indemnification of directors and officers of Connecticut corporations provides in general that Connecticut corporations shall indemnify their officers, directors and certain other defined individuals against judgments, fines, penalties, amounts paid in settlement and reasonable expenses actually incurred in connection with proceedings against the corporation. The corporation's obligation to provide such indemnification generally does not apply unless (1) the individual is successful on the merits in the defense of any such proceeding; or (2) a determination is made (by persons specified in the statute) that the individual acted in good faith and in the best interests of the corporation; or (3) the court, upon application by the individual, determines in view of all of the circumstances that such person is fairly and reasonably entitled to be indemnified, and then for such amount as the court shall determine. With respect to proceedings brought by or in the right of the corporation, the statute provides that the corporation shall indemnify its officers, directors and certain other defined individuals, against reasonable expenses actually incurred by them in connection with such proceedings, subject to certain limitations. C.G.S. Section 33-320a provides an exclusive remedy; a Connecticut corporation cannot indemnify a director or officer to an extent either greater or less than that authorized by the statute, e.g., pursuant to its certificate of incorporation, by-laws, or any separate contractual arrangement. However, the statute does specifically authorize a corporation to procure indemnification insurance to provide greater indemnification rights. The premiums for such insurance may be shared with the insured individuals on an agreed basis. Travelers Group Inc. also provides liability insurance for its directors and officers and the directors and officers of its subsidiaries, including the Depositor. This insurance provides for coverage against loss from claims made against directors and officers in their capacity as such, including, subject to certain exceptions, liabilities under the Federal securities laws. Rule 484 Undertaking Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liability (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. Item 29. Principal Underwriter (a) Tower Square Securities, Inc. One Tower Square Hartford, Connecticut 06183 101 Tower Square Securities, Inc. also serves as principal underwriter for the following : The Travelers Growth and Income Stock Account for Variable Annuities The Travelers Quality Bond Account for Variable Annuities The Travelers Money Market Account for Variable Annuities The Travelers Timed Growth and Income Stock Account for Variable Annuities The Travelers Timed Short-Term Bond Account for Variable Annuities The Travelers Timed Aggressive Stock Account for Variable Annuities The Travelers Timed Bond Account for Variable Annuities The Travelers Fund U for Variable Annuities The Travelers Fund VA for Variable Annuities The Travelers Fund BD for Variable Annuities The Travelers Fund ABD for Variable Annuities The Travelers Fund ABD II for Variable Annuities The Travelers Separate Account QP for Variable Annuities The Travelers Separate Account QP II for Variable Annuities The Travelers Fund UL for Variable Life Insurance The Travelers Fund UL II for Variable Life Insurance The Travelers Variable Life Insurance Separate Account One The Travelers Variable Life Insurance Separate Account Three (b) Name and Principal Positions and Offices Positions and Offices Business Address * With Underwriter With Registrant ------------------ ---------------- ----------------- Russell H. Johnson Chairman and Chief Executive ----- Officer Donald R. Munson, Jr. Director, President and Chief ----- Operating Officer William F. Scully, III Member, Board of Directors, ----- Senior Vice President, Treasurer and Chief Financial Officer Cynthia P. Macdonald Vice President, Chief Compliance ----- Officer, Assistant Secretary Jay S. Benet Member, Board of Directors ----- George C. Kokulis Member, Board of Directors ----- Warren H. May Member, Board of Directors ----- Kathleen A. McGah General Counsel and Secretary Assistant Secretary Robert C. Hamilton Vice President ----- Tracey Kiff-Judson Second Vice President ----- Robin A. Jones Second Vice President ----- Whitney F. Burr Second Vice President ----- Marlene M. Ibsen Second Vice President ----- John J. Williams, Jr. Director and Assistant Compliance ----- Officer Susan M. Curcio Director and Operations Manager -----
102 (cont'd) (b) Name and Principal Positions and Offices Positions and Offices Business Address * With Underwriter With Registrant ------------------ ---------------- ----------------- Gregory C. Macdonald Director ----- Thomas P. Tooley Director ----- Nancy S. Waldrop Assistant Treasurer -----
* Principal business address: One Tower Square, Hartford, Connecticut 06183 (c) Tower Square Securities, Inc. serves as the principal underwriter. The compensation listed below is for the year ending December 31, 1995.
Name of Net Underwriting Compensation on Principal Discounts and Redemption or Brokerage Other Underwriter Commissions Annuitization Commissions Compensation* - ----------- ----------- ------------- ----------- ------------- Tower Square $ 0 $ 0 $ 0 $ 0 Securities, Inc.
(c) Not applicable. Item 30. Location of Accounts and Records (1) The Travelers Life and Annuity Company One Tower Square Hartford, Connecticut 06183 Item 31. Management Services Not applicable. Item 32. Undertakings The undersigned Registrant hereby undertakes: (a) To file a post-effective amendment to this registration statement as frequently as is necessary to ensure that the audited financial statements in the registration statement are never more than sixteen months old for so long as payments under the variable annuity contracts may be accepted; (b) To include either (1) as part of any application to purchase a contract offered by the prospectus, a space that an applicant can check to request a Statement of Additional Information, or (2) a post card or similar written communication affixed to or included in the prospectus that the applicant can remove to send for a Statement of Additional Information; and (c) To deliver any Statement of Additional Information and any financial statements required to be made available under this Form N-4 promptly upon written or oral request. 103 SIGNATURES As required by the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets the requirements of Securities Act Rule 485(b) for effectiveness of this post-effective amendment to this Registration Statement and has duly caused this post-effective amendment to this Registration Statement to be signed on its behalf, in the City of Hartford, State of Connecticut, on this 22nd day of April, 1996. THE TRAVELERS FUND BD II FOR VARIABLE ANNUITIES (Registrant) THE TRAVELERS LIFE AND ANNUITY COMPANY (Depositor) By: *IAN R. STUART ------------------------------------------ Ian R. Stuart Vice President and Chief Financial Officer Chief Accounting Officer and Controller Pursuant to the requirements of the Securities Act of 1933, this post-effective amendment to this Registration Statement has been signed below by the following persons in the capacities indicated on April 22, 1996. *MICHAEL A. CARPENTER Chairman of the Board, President and - ------------------------------------------- and Chief Executive Officer (Michael A. Carpenter) *ROBERT I. LIPP Director - ------------------------------------------- (Robert I. Lipp) *IAN R. STUART Director - ------------------------------------------- (Jay S. Fishman) *CHARLES O. PRINCE III Director - ------------------------------------------- (Charles O. Prince III) *MARC P. WEILL Director - ------------------------------------------- (Marc P. Weill) *IRWIN R. ETTINGER Director - ------------------------------------------- (Irwin R. Ettinger) *DONALD. T. DeCARLO Director - ------------------------------------------- (Donald T. DeCarlo) *IAN R. STUART Vice President, Chief Financial Officer - ------------------------------------------- Chief Accounting Officer and Controller (Ian R. Stuart) *By: /s/Ernest J. Wright ------------------------------------------------------ Ernest J. Wright, Attorney-in-Fact
104 Description of Non-Standard Returns calculations Fund BD/BD II The Following notation will be used for a fund's prices, or unit values: UVINCEP: Unit Value at fund inception UV85: Unit Value at year-end, 1985. (Year-minus-10) UV90: Unit Value at year-end, 1990. (Year-minus-5) UV92: Unit Value at year-end, 1992. (Year-minus-3) UV94: Unit Value at year-end, 1994. (Prior year) UV95: Unit Value at year-end, 1995. (Current year) ALLIANCE GROWTH STOCK
UNIT VALUE RETURN ---------- ------ INCEPTION (06/20/94 ): 1.000000 24.42 12/85: 12/90: 12/92: 12/94: 1.047185 33.29 CURRENT 12/95: 1.395807
AMCAP GROWTH STOCK
UNIT VALUE RETURN ---------- ------ INCEPTION (06/21/94 ): 1.000000 22.48 12/85: 12/90: 12/92: 12/94: 1.038598 31.14 CURRENT 12/95: 1.361968
TBC MANAGED INCOME
UNIT VALUE RETURN ---------- ------ INCEPTION (06/28/94 ): 1.000000 9.22 12/85: 12/90: 12/92: 12/94: .996653 14.56 CURRENT 12/95: 1.141791
GT GLOBAL STRATEGIC INCOME
UNIT VALUE RETURN ---------- ------ INCEPTION (06/21/94 ): 1.000000 7.77 12/85: 12/90: 12/92: 12/94: .944948 18.60 CURRENT 12/95: 1.120662
105 SB HIGH INCOME
UNIT VALUE RETURN ---------- ------ INCEPTION (06/22/94 ): 1.000000 10.40 12/85: 12/90: 12/92: 12/94: .987591 17.70 CURRENT 12/95: 1.162368
SB INTERNATIONAL EQUITY
UNIT VALUE RETURN ---------- ------ INCEPTION (06/20/94 ): 1.000000 3.27 12/85: 12/90: 12/92: 12/94: .954944 9.98 CURRENT 12/95: 1.050280
SB INCOME & GROWTH
UNIT VALUE RETURN ---------- ------ INCEPTION (06/20/94 ): 1.000000 18.21 12/85: 12/90: 12/92: 12/94: .981491 31.52 CURRENT 12/95: 1.290871
SB MONEY MARKET
UNIT VALUE RETURN ---------- ------ INCEPTION (06/20/94 ): 1.000000 3.78 12/85: 12/90: 12/92: 12/94: 1.015687 4.19 CURRENT 12/95: 1.058195
PUTNAM DIVERSIFIED INCOME
UNIT VALUE RETURN ---------- ------ INCEPTION (06/20/94 ): 1.000000 10.84 12/85: 12/90: 12/92: 12/94: 1.008510 16.02 CURRENT 12/95: 1.170101
SB PACIFIC BASIN
UNIT VALUE RETURN ---------- ------ INCEPTION (06/21/94 ): 1.000000 -5.99 12/85: 12/90: 12/92: 12/94: .899312 1.21 CURRENT 12/95: .910187
106 MFS TOTAL RETURN
UNIT VALUE RETURN ---------- ------ INCEPTION (06/20/94 ): 1.000000 13.67 12/85: 12/90: 12/92: 12/94: .978766 24.23 CURRENT 12/95: 1.215923
SB TOTAL RETURN
UNIT VALUE RETURN ---------- ------ INCEPTION (11/21/94 ): 1.000000 22.45 12/85: 12/90: 12/92: 12/94: 1.013044 23.45 CURRENT 12/95: 1.250571
AIM CAPITAL APPRECIATION
UNIT VALUE RETURN ---------- ------ INCEPTION (10/10/95 ): 1.000000 -4.21 12/85: 12/90: 12/92: 12/94: CURRENT 12/95: .957880
107 EXHIBIT INDEX
Exhibit No. Description Method of Filing - ------- ----------- ---------------- 1. Resolution of The Travelers Life and Annuity Company Board of Directors authorizing the establishment of the Registrant. (Incorporated herein by reference to Registration Statement on Form N-4, File No. 33-58131, filed via Edgar on March 17, 1995.) 3. Distribution and Management Agreement. (Incorporated herein by reference to Exhibit 3 to Pre-Effective Amendment No. 1 to the Registration Statement on Form N-4, filed September 8, 1995.) 3(b). Selling Agreement Electronically 4. Variable Annuity Contracts. (Incorporated herein reference to Registration Statement on Form N-4, File No. 33-58131, filed via Edgar on March 17, 1995.) 5. Form of Application. (Incorporated herein by reference to Exhibit 5 to Pre-Effective Amendment No. 1 to the Registration Statement on Form N-4, filed September 8, 1995.) 6(a). Charter of The Travelers Life and Annuity Company, as amended on April 10, 1990. (Incorporated herein by reference to Registration Statement on Form N-4, File No. 33-58131, filed via Edgar on March 17, 1995.) 6(b). By-Laws of The Travelers Life and Annuity Company, as amended on October 20, 1994. (Incorporated herein by reference to Registration Statement on Form N-4, File No. 33-58131, filed via Edgar on March 17, 1995.) 9. Opinion of Counsel as to the legality of securities being registered by Registrant. (Incorporated herein by reference to the Registrant's most recent Form 24f-2 Notice filed on February 29, 1996.) 10(a). Consent of Coopers & Lybrand L.L.P., Independent Electronically Accountants, to the inclusion of their report on the audited financial statements of the Registrant and their report on the financial statements of The Travelers Life and Annuity Company contained in Part B of this Registration Statement, and to the reference to such firm as "Experts" in accounting and auditing.
108 10(b). Consent of KPMG Peat Marwick LLP, Independent Electronically Auditors, to the inclusion of their report on the financial statements of The Travelers Life and Annuity Company contained in Part B of this Registration Statement, and to the reference to their firm as "experts" under the heading "Independent Accountants." 13. Schedule for Computation of Total Return Calculations - Electronically Standardized and Non-Standardized. 15(a). Powers of Attorney authorizing Jay S. Fishman or Ernest J. Wright as signatory for Donald T. DeCarlo and Christine B. Mead. (Incorporated herein by reference To Exhibit 15 to Pre-Effective Amendment No. 1 to the Registration Statement on Form N-4, filed September 8, 1995.) 15(b). Powers of Attorney authorizing Jay S. Fishman or Ernest J. Wright as signatory for Michael A. Carpenter, Robert I. Lipp, Charles O. Prince III, Marc P. Weill, and Irwin R. Ettinger. (Incorporated herein by reference to Registration Statement on Form N-4, File No. 33-58131, filed via Edgar on March 17, 1995.) 15(c). Powers of Attorney authorizing Ernest. J. Wright or Electronically Kathleen A. McGah as signatory for Jay S. Fishman and Ian R. Stuart.
EX-99.3B 2 FORM OF SELLING AGREEMENT 1 EXHIBIT 3(b) FORM OF SELLING AGREEMENT FOR VARIABLE CONTRACTS ISSUED BY TRAVELERS AFFILIATED INSURANCE COMPANIES One Tower Square Hartford, Connecticut 06183 Tower Square Securities, Inc. (hereafter referred to as TSSI) as the Principal Underwriter, SMITH BARNEY INC. (hereafter referred to as the Broker/Dealer), and SBHU LIFE AGENCY, INC. and each company identified on Exhibit A to this Agreement (hereafter collectively referred to as SBHU), enter into this agreement effective on __________, 1995 for the purpose of authorizing the Broker/Dealer and SBHU, through its licensed individual agents described in paragraph 4, to solicit applications for such variable life insurance, variable annuity, and modified guaranteed annuity contracts (the "Contract(s)") as may be issued by The Travelers Insurance Company, The Travelers Life and Annuity Company, and any affiliated insurance companies (hereafter referred to as "Insurance Companies" or in their individual capacity, "Insurance Company") and identified by policy forms in the Compensation Schedules attached to this agreement as they may be amended by the Insurance Companies from time to time. The parties represent and agree as follows: 1. The Insurance Companies are engaged in the issuance of the Contracts in accordance with federal securities laws and the applicable insurance laws of those states in which the Contracts have been qualified for sale. The Contracts may be considered securities under the Securities Act of 1933; therefore, the offering and distribution of the Contracts is made through TSSI as a registered Broker/Dealer under the Securities Exchange Act of 1934 and as a member of the National Association of Securities Dealers, Inc. ("NASD"). The terms of the offering of the Contracts are more particularly described in the prospectus(es) for the Contracts. 2. The Broker/Dealer certifies that it is a registered Broker/Dealer under the Securities Exchange Act of 1934 and a member of NASD. The Broker/Dealer agrees to abide by all rules and regulations of the NASD, and to comply with all applicable state and Federal laws and the rules and regulations of authorized regulatory agencies affecting the sale of the Contracts. 2 3. SBHU certifies that it is licensed as an insurance agency in accordance with the applicable insurance laws of those states in which the Contracts have been qualified for sale. Any provisions of this Agreement that must be performed by an entity that is licensed as an insurance agency will be carried out by SBHU. Broker/Dealer will carry out such functions that must be performed by a registered Broker/Dealer. 4. The Broker/Dealer will select persons to be employed and supervised by it who will be trained and qualified to solicit applications for the Contracts in conformance with applicable state and Federal laws and regulations. Persons so trained and qualified will be registered representatives of the Broker/Dealer in accordance with the rules of NASD and they will be properly licensed in accordance with the insurance laws of those jurisdictions in which the Contracts may be lawfully distributed and in which they solicit applications for such Contracts. The Insurance Company shall have ultimate authority to determine whether it shall appoint or terminate a particular registered representative as an agent of the Insurance Company with the various state insurance departments. 5. The Broker/Dealer will review all Contract proposals and applications for suitability and for completeness and correctness as to form. The Broker/Dealer will promptly return to the applicant all applications, together with any payments received therewith, deemed by the Broker/Dealer to be unsuitable or not complete and correct as to form. The Insurance Companies reserve the right to reject any Contract application and return any payment made in connection with an application which is rejected. The Insurance Companies agree to promptly notify the Broker/Dealer of any such rejection. a. If the Broker/Dealer is soliciting the sale of variable annuities or modified guaranteed annuities, the Broker/Dealer will promptly forward to the Insurance Companies, at addresses provided by the Insurance Companies from time to time, all of the necessary information from applications taken by Broker/Dealer and found suitable and in good form, together with all payments received from such applications. Broker/Dealer is responsible for accurately communicating to the Insurance Companies investment instructions for all business submitted by Broker/Dealer to the Insurance Companies. Contracts issued by the Insurance Companies will be forwarded to the Broker/Dealer for prompt delivery to the Contract owner. The Broker/Dealer shall obtain and retain a receipt for each Contract which Broker/Dealer delivers. 2 3 b. If the Broker/Dealer is soliciting the sale of variable life insurance, the Broker/Dealer will promptly forward to one of the general agents appearing on the Insurance Companies' most current list of approved general agents for variable life insurance (the "Approved General Agent") all of the necessary information from applications taken by Broker/Dealer and found suitable and in good form, including accurate investment instructions, together with all payments received with such applications. Contracts issued by the Insurance Companies will be forwarded to the Approved General Agent, who will forward them to the Broker/Dealer. The Broker/Dealer shall obtain and retain a receipt for each Contract which Broker/Dealer delivers. The Broker/Dealer shall promptly return to the Insurance Companies, or as reasonably directed by the Insurance Companies, all undelivered Contracts and all receipts for cancellation of Contracts that Broker/Dealer receives. 6. The Broker/Dealer will perform the selling functions required by this agreement in accordance with the terms and conditions of the then current prospectus(es) applicable to the Contract and will make no representations not included in the prospectus or in any authorized supplemental material. No sales solicitation, including the delivery of supplemental sales literature or other such materials, shall occur, be delivered to, or used with a prospective purchaser unless accompanied or preceded by appropriate then current prospectus(es). Any material prepared or used by the Broker/Dealer or its registered representatives, which describes in whole or in part or refers by name or form number to the Insurance Companies' Contracts (including underlying investment funds available under the Contracts), or uses the name of the Insurance Companies or the logos or Service Marks of the Insurance Companies, must be approved by the Insurance Companies in writing prior to any such use. 7. The Insurance Companies represent and warrant that all advertising, brochures and other materials developed by them and delivered to Broker/Dealer a) have been read and approved by the Insurance Companies; b) are in conformity with the terms and conditions of the applicable Contracts; c) meet the requirements of all federal, state and local statutes and regulations applicable to the Insurance Companies; and d) have been approved by any regulatory authority whose approval of such material is required, whether such approval is required before or after such material is used. 3 4 8. The Insurance Companies will not identify Broker/Dealer in any advertising, publicity release or other material intended for distribution to the public without securing the prior written approval of Broker/Dealer. 9. The Insurance Companies shall give the Broker/Dealer prior written notice of any change to the list of states where the Insurance Companies' products are approved for sale or to the regulatory status of the Insurance Companies' products, within a reasonable amount of time to permit the Broker/Dealer to act on such information. 10. The Insurance Companies shall not suspend sales of any Contracts or amend any Contracts without giving prior written notice to the Broker/Dealer. The Insurance Companies shall provide such notice at least thirty days prior to suspending sales or amending Contracts, except where such suspension or amendment is: (a) necessary for compliance with federal, state, or local laws, regulations, or administrative orders; or (b) necessary to prevent administrative or financial hardship to the Insurance Companies. 11. Commissions, allowances and any other fees payable to the Broker/Dealer on sales of the Contracts solicited by the Broker/Dealer will be paid to the Broker/Dealer, or as necessary to meet any state insurance law requirements, to SBHU, in accordance with the Compensation Schedule(s) attached to this agreement as they may be amended from time to time and in effect at the time the Contract payments are received by the Insurance Companies (in the case of annuities) or at the time applications are received by the Insurance Companies (in the case of life insurance), and in accordance with any administrative procedures agreed to by the Insurance Companies and the Broker/Dealer and in effect at the time such payments are received by the Insurance Companies. The Insurance Companies reserve the right to revise the Compensation Schedules at any time upon written notice to Broker/Dealer. Commission to the Broker/Dealer's registered representative for Contracts solicited by the registered representative and issued by the Insurance Companies will be governed by agreement between the Broker/Dealer and its registered representative and its payment will be the responsibility of the Broker/Dealer. 12. If the Insurance Companies return all or a portion of a premium paid with respect to a Contract, Broker/Dealer shall be obligated to refund to the Insurance Companies applicable commissions on the amount of such premium only where: 4 5 (a) the Contract solicited is returned not taken under the policy "free look" provisions; (b) premiums are refunded due to overpayments, errors in billing or in the timing of automatic premium collection deductions, or errors resulting in policy reissue; (c) the check delivered in payment of any Contract premium does not clear and the premium is not otherwise collected; (d) the Contract is terminated or there is a refund of premium and an act, error or omission of the Broker/Dealer or its registered representative materially contributed to the termination of the Contract or the need to return premium; (e) the application is rejected by the Insurance Companies; (f) the Insurance Companies are directed by a judicial or regulatory authority to return premium without assessment of a surrender charge; (g) the applicant's initial premium on a 1035 exchange is returned because the expected rollover amount from another Contract is not transferred due to the exchange not meeting the legal requirements to qualify for a tax-free exchange; (h) the Insurance Companies return unearned premium on a life insurance Contract as required by the provisions of the Contract; (i) the Insurance Companies determine that it has a legal liability to return premiums on a life insurance Contract within the first year after the Contract is issued; or (j) the Insurance Companies and Broker/Dealer mutually agree to return all or a portion of a premium paid with respect to a Contract. 13. This agreement will continue unless terminated by either party upon thirty days prior written notice, except that the Insurance Companies reserve the right to terminate this agreement immediately, without notice, in the event Broker/Dealer ceases to be a registered Broker/Dealer or a member of the NASD. Failure of any party to terminate this agreement for any of the causes set forth in this agreement will not constitute a waiver of the right to terminate this agreement at a later time for any of these causes. After any termination of the Agreement, both parties will continue to process any applications for Contracts submitted by Broker/Dealer to the 5 6 Insurance Companies prior to such termination, and the Insurance Companies shall issue Contracts based on such applications in accordance with the provisions of the Agreement. 14. For the purpose of compliance with any applicable federal or state securities laws or regulations promulgated under them, the Broker/Dealer acknowledges and agrees that in performing the Broker/Dealer services covered by this agreement, it is acting in the capacity of an independent broker and dealer as defined by the By-Laws of the NASD and not as an agent or employee of either the Insurance Companies or any registered investment company. In furtherance of its responsibilities as a Broker/Dealer, the Broker/Dealer warrants and represents that it has established a system to supervise the activities of its registered representatives and associated persons that is designed to achieve compliance with the applicable securities laws and regulations with the rules of NASD, and the Broker/Dealer acknowledges that it is responsible for such supervision and compliance in connection with its solicitation and sale of the Contracts. The Broker/Dealer shall be responsible for compliance with all state and federal laws and regulations applicable to the Broker/Dealer's activities with respect to the Contracts. The Broker/Dealer shall obtain proper customer authorization and shall accurately and in a timely fashion communicate to the Insurance Companies investment instructions relating to the Contracts. Each party to this agreement will hold harmless and indemnify the Registered Investment Companies which are used to fund the Contracts, the Insurance Companies or the Broker/Dealer, as appropriate, for any loss or expense suffered as a result of the violation or noncompliance by that party or the Associated Persons of that party of any applicable law or regulation or any provision of this agreement, including the Insurance Companies as a result of Broker/Dealer's inaccurate communication to the Insurance Companies of investment instructions relating to the Contracts, provided, however, that no party or any of its employees or agents will be liable to the other party for any indirect, special or consequential damages arising out of or in connection with the performance of any services pursuant to this Agreement. 15. During the term of this Agreement and after its termination, the Insurance Companies agree that they will keep confidential and will not use confidential information obtained through this Agreement, which includes, without limitation, the names, addresses and telephone numbers of the Broker/Dealer's clients where the Insurance Companies did not have a pre-existing relationship with such client, for any purposes not contemplated by this agreement, nor will the Insurance Companies use 6 7 such confidential information to solicit sales of goods or services (including without limitation life, annuity, and long-term care insurance), nor will the Insurance Companies disclose such confidential information to any other party without the Broker/Dealer's consent except as necessary to carry out the duties contemplated by this Agreement. The Insurance Companies will not attempt in any organized fashion to actively induce representatives of the Broker/Dealer to become independent agents of TSSI or the Insurance Companies. The Insurance Companies further agree that without prior approval of the Broker/Dealer it will not contact registered representatives of the Broker/Dealer except for the purposes of servicing their clients' Contracts or for providing wholesaling support for variable life insurance Contracts to be issued by the Insurance Companies. 16. The Insurance Companies and the Broker/Dealer agree to cooperate fully with each other in the event of any material written customer complaints or regulatory investigations or proceedings relating to activities conducted pursuant to this Agreement. Each party shall promptly notify the other of any such complaint or investigation and shall consult with the other party prior to sending any written response with respect to any such complaint or investigation. 17. All notices to the Insurance Companies relating to this agreement should be sent to the above address to the attention of The Travelers Insurance Companies, FS Legal Department, One Tower Square - 6SHS, Hartford, Connecticut 06183. All notices to the Broker/Dealer or SBHU will be duly given if mailed or faxed to the address shown below to the attention of Jerald E. Hampton. 18. No modification, amendment, supplement to or waiver of any provisions of the Agreement shall be binding upon the parties hereto unless made in writing and duly signed by both parties (except for a change in the Compensation Schedule or the addition of new products where permitted in the Agreement). A failure or delay of any party to exercise any option provided in the Agreement or to require at any time performance of any of the provisions of the Agreement shall in no way be construed as a waiver of such provision. 19. Neither party may assign the Agreement and/or any of its rights and/or obligations thereunder to any entity that is not affiliated to the assigning party, without the other party's consent. The assigning party shall provide written notice of any such assignment. TSSI reserves the rights to designate, at its sole discretion, an alternative Principal Underwriter for the distribution of the Contracts covered by this Agreement. The designation will constitute substitution of parties to this Agreement with assumption of the rights and obligations created by this agreement as applicable. 7 8 20. All rules and procedures established by the Insurance Companies must be reasonable, must not conflict with any statutes or governmental rules or regulations, and must be communicated to the Broker/Dealer before the Broker/Dealer will be subject to them. 21. Should any portion of the Agreement for any reason be held to be void in law or in equity, the Agreement shall be construed insofar as is possible, as if such portion had never been contained therein. 22. Unless otherwise directed by any regulatory authority or the Contract Owner, the Insurance Companies will only take instructions from the Broker/Dealer regarding changes in agent of record. 23. The Broker/Dealer shall be entitled to receive any earned compensation generated regardless of any events occurring after the sale resulting in such compensation, including the termination of this Agreement, unless the Broker/Dealer ceases to be a registered Broker/Dealer or member of the NASD, or if the payment of such compensation would be prohibited by any applicable law or regulatory authority. 24. The terms "Associated person," "Broker/Dealer," and "member as used herein shall be defined consistently with the definition of similar such terms as contained in Article I of the NASD By-Laws. This Agreement will be construed in accordance with the laws of the State of Connecticut. In reliance on the representations set forth and in consideration of the undertakings described, the parties represented below do hereby Contract and agree. TOWER SQUARE SECURITIES, SMITH BARNEY INC. INC. 399 GREENWICH STREET NEW YORK, NEW YORK 10013 By By ---------------------------- -------------------------- Title Title ------------------------- ----------------------- Date of Execution Date of Execution ------------- ---------- Taxpayer I.D. -------------- SBHU LIFE AGENCY OF SBHU LIFE AGENCY OF MASSACHUSETTS, INC. OHIO, INC. 8 9 By By ---------------------------- -------------------------- Title Title ------------------------- ----------------------- Date of Execution Date of Execution ------------- ---------- Taxpayer I.D. Taxpayer I.D. ----------------- -------------- SHEARSON LEHMAN HUTTON SBHU LIFE AGENCY OF INSURANCE BROKERS OF NEW TEXAS, INC. HAMPSHIRE, INC. By By ---------------------------- -------------------------- Title Title ------------------------- ----------------------- Date of Execution Date of Execution ------------- ---------- Taxpayer I.D. Taxpayer I.D. ----------------- -------------- SBS INSURANCE BROKERS SBHU LIFE AGENCY, INC. AND OF NORTH DAKOTA, INC. OTHER COMPANIES IDENTIFIED ON EXHIBIT A By By ---------------------------- -------------------------- Title Title ------------------------- ----------------------- Date of Execution Date of Execution ------------- ---------- Taxpayer I.D. Taxpayer I.D. ----------------- -------------- 9 10 EXHIBIT A SMITH BARNEY INC. INSURANCE SUBSIDIARIES Robinson Humphrey Insurance Services of Alabama, Inc. SBHU Life Agency of Arizona, Inc. SBS Insurance Brokerage Agency of Arkansas, Inc. Shearson Lehman Hutton Insurance Agency of Hawaii, Inc. SBS Insurance Agency of Idaho, Inc. SBHU Life Agency of Indiana, Inc. SBS Insurance Brokers of Kentucky, Inc. Smith Barney Harris Upham Life Agency, Inc. SBS Insurance Agency of Maine, Inc. SBHU Life Agency of Massachusetts, Inc. SBS Insurance Agency of Nevada, Inc. Shearson Lehman Hutton Insurance Brokers of New Hampshire, Inc. SBS Insurance Brokers of North Dakota, Inc. SBHU Life Agency of Ohio, Inc. SBHU Life Agency of Oklahoma, Inc. SBS Insurance Agency of South Dakota, Inc. SBHU Life Agency of Texas, Inc. SBHU Life Agency of Utah, Inc. SBS Insurance Agency of Wyoming, Inc. 10 EX-99.10A 3 CONSENT OF LYBRAND L.L.P. 1 EXHIBIT 10(a) CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the inclusion in this Post-Effective Amendment No. 1 of the Registration Statement on Form N-4 of our report dated February 16, 1996, on our audit of the financial statements of The Travelers Fund BD II for Variable Annuities for the period ended December 31, 1995, and of our report dated September 16, 1994, relating to our audit of the statements of operations and retained earnings and cash flows of The Travelers Life and Annuity Company for the year ended December 31, 1993. We also consent to the reference to our Firm as experts in accounting and auditing under the caption "Independent Accountants" in the Statement of Additional Information. COOPERS & LYBRAND L.L.P. Hartford, Connecticut April 18, 1996 EX-99.10B 4 CONSENT OF KPMG PEAT MARWICK LLP 1 Exhibit 10(b) Consent of Independent Certified Public Accountants The Board of Directors The Travelers Life and Annuity Company We consent to the use of our report included herein and to the reference to our Firm as experts under the heading "Independent Accountants" in the Prospectus. Our report refers to a change in accounting for investments in accordance with the provisions of Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities," in 1994. /s/ KPMG Peat Marwick April 18, 1996 EX-99.13 5 COMPUTATION OF TOTAL RETURN CALCULATIONS 1 EXHIBIT 13 THE TRAVELERS FUND BD II FOR VARIABLE ANNUITIES SCHEDULE FOR COMPUTATION OF TOTAL RETURN CALCULATIONS Total Return Calculation (Standardized) The "1-year rate" represents fund performance for the most recent fiscal year. The "since inception rate" covers the applicable inception date noted through the end of the most recent fiscal year. 1/n T = (ERV/P) where: T = average annual total return P = a hypothetical initial payment of $1,000 n = the applicable year (1, 5, 10) or portion thereof ERV = ending redeemable value of a hypothetical $1,000 payment made at the beginning of each of the periods For calculating the redeemable value, the $30 annual administrative charge was expressed as a percentage of assets based on the actual fee collected divided by the average net assets per contracts sold under that prospectus for each year for which performance was shown, and was assumed to be deducted on August 31st of each year. The unit values used in the calculation reflect the deduction for the investment advisory fees for the fund and the mortality and expense risk charge. The applicable contingent deferred sales is reflected in the return calculations. The charge applies for six years and is a percentage of the amount surrendered (6%, 6%, 6%, 3%, 2%, 1%). Total Return Calculation (Non-Standardized) The non-standardized rate represents fund performance for the calendar year-to-date, and for the most recent applicable 1-year, 3-year, 5-year and 10-year periods ending with the most recent fiscal year end. The non-standardized total returns reflect a percentage change in the value of an Accumulation Unit based on the performance of an account over periods of the applied period, determined by dividing the increase (decrease) in value for that unit by the Accumulation Unit Value at the beginning of the period. This percentage figure reflects the deduction of asset based charges, but does not reflect the deduction of annual administrative charge or contingent deferred sales charges. The deduction of the annual administrative charge or the contingent deferred sales charge would reduce any percentage increase or make greater any percentage decrease. For a Schedule of the Computation of the Total Return Quotations, both Standardized and Non-Standardized, see attached. 2 PAGE 1 VINTAGE REGULAR DB STANDARDIZED PERFORMANCE KASB - ALLIANCE GROWTH STOCK
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE - ---- ----- ------- ------- ------- ------- ---------- ------ ---------- 06/20/94 1.000000 1,000.00 1,000.000 .000750 06/30/94 .985459 .000750 08/31/94 1.036952 -.15 -.145 .000750 09/30/94 1.054122 .000750 12/30/94 1.047185 1,000.00 954.941 .000750 03/31/95 1.119181 .000160 06/30/95 1.271698 .000160 08/31/95 1.347942 -.12 -.091 -.19 -.142 .000160 09/29/95 1.380993 .000160 12/29/95 1.395807 -.07 -.049 -.07 -.052 .000160
ONE YEAR SINCE INCEPTION ENDING UNITS 954.801 999.661 ACCOUNT VALUE 1,332.72 1,395.33 SURRENDER VALUE 1,272.72 1,335.33 TOTAL RETURN 27.27 % 33.53 % ANNUALIZED RETURN 20.86 %
3 PAGE 2 VINTAGE REGULAR DB STANDARDIZED PERFORMANCE KCSB - AIM CAPITAL APPRECIATION
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE - ---- ----- ------- ----- ------- ----- -------- ------ ---------- 10/10/95 1.000000 1,000.00 1000.000 .000160 12/29/95 .957880 -.03 -.036 .000160
SINCE INCEPTION ENDING UNITS 999.964 ACCOUNT VALUE 957.85 SURRENDER VALUE 900.37 TOTAL RETURN -9.96 %
4 PAGE 3 VINTAGE REGULAR DB STANDARDIZED PERFORMANCE KESB - AMCAP GROWTH STOCK
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE - ---- ----- ------- ------- --------- ------- -------- ------ ---------- 06/21/94 1.000000 1,000.00 1,000.000 .000750 06/30/94 .986273 .000750 08/31/94 1.061716 -.15 -.142 .000750 09/30/94 1.039042 .000750 12/30/94 1.038598 1,000.00 962.836 .000750 03/31/95 1.122009 .000160 06/30/95 1.247025 .000160 08/31/95 1.327909 -.12 -.092 -.19 -.144 .000160 09/29/95 1.361487 .000160 12/29/95 1.361968 -.07 -.050 -.07 -.052 .000160
ONE YEAR SINCE INCEPTION ENDING UNITS 962.695 999.662 ACCOUNT VALUE 1,311.16 1,361.51 SURRENDER VALUE 1,251.16 1,301.51 TOTAL RETURN 25.12 % 30.15 % ANNUALIZED RETURN 18.89 %
5 PAGE 4 VINTAGE REGULAR DB STANDARDIZED PERFORMANCE KFSB - TBC MANAGED INCOME
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE - ---- ----- --------- ------- --------- ------- ---------- -------- ---------- 06/28/94 1.000000 1,000.00 1,000.000 .000750 06/30/94 .997936 .000750 08/31/94 1.009924 -.13 -.131 .000750 09/30/94 1.000974 .000750 12/30/94 .996653 1,000.00 1,003.358 .000750 03/31/95 1.030866 .000160 06/30/95 1.086949 .000160 08/31/95 1.091827 -.11 -.103 -.17 -.154 .000160 09/29/95 1.101802 .000160 12/29/95 1.141791 -.06 -.052 -.06 -.051 .000160
ONE YEAR SINCE INCEPTION ENDING UNITS 1,003.204 999.664 ACCOUNT VALUE 1,145.45 1,141.41 SURRENDER VALUE 1,085.45 1,081.41 TOTAL RETURN 8.54 % 8.14 % ANNUALIZED RETURN 5.34 %
6 PAGE 5 VINTAGE REGULAR DB STANDARDIZED PERFORMANCE KGSB - GT GLOBAL STRATEGIC INCOME
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE - ---- ----- --------- ------- --------- ------- ---------- -------- ---------- 06/21/94 1.000000 1,000.00 1,000.000 .000750 06/30/94 .994712 .000750 08/31/94 1.002719 -.15 -.146 .000750 09/30/94 .995774 .000750 12/30/94 .944948 1,000.00 1,058.259 .000750 03/31/95 .971239 .000160 06/30/95 1.035311 .000160 08/31/95 1.036243 -.11 -.108 -.16 -.157 .000160 09/29/95 1.062162 .000160 12/29/95 1.120662 -.06 -.054 -.06 -.051 .000160
ONE YEAR SINCE INCEPTION ENDING UNITS 1,058.098 999.646 ACCOUNT VALUE 1,185.77 1,120.27 SURRENDER VALUE 1,125.77 1,060.27 TOTAL RETURN 12.58 % 6.03 % ANNUALIZED RETURN 3.92 %
7 PAGE 6 VINTAGE REGULAR DB STANDARDIZED PERFORMANCE KHSB - SB HIGH INCOME
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE - ---- ----- --------- ------- --------- ------- ---------- -------- ---------- 06/22/94 1.000000 1,000.00 1,000.000 .000750 06/30/94 1.000743 .000750 08/31/94 1.008728 -.14 -.143 .000750 09/30/94 1.007761 .000750 12/30/94 .987591 1,000.00 1,012.565 .000750 03/31/95 1.035328 .000160 06/30/95 1.082768 .000160 08/31/95 1.103795 -.11 -.103 -.17 -.153 .000160 09/29/95 1.115852 .000160 12/29/95 1.162368 -.06 -.052 -.06 -.051 .000160
ONE YEAR SINCE INCEPTION ENDING UNITS 1,012.410 999.652 ACCOUNT VALUE 1,176.79 1,161.96 SURRENDER VALUE 1,116.79 1,101.96 TOTAL RETURN 11.68 % 10.20 % ANNUALIZED RETURN 6.59 %
8 PAGE 7 VINTAGE REGULAR DB STANDARDIZED PERFORMANCE KISB - SB INTERNATIONAL EQUITY
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE - ---- ----- --------- ------- --------- ------- ---------- -------- ---------- 06/20/94 1.000000 1,000.00 1,000.000 .000750 06/30/94 1.026673 .000750 08/31/94 1.049587 -.15 -.144 .000750 09/30/94 1.022658 .000750 12/30/94 .954944 1,000.00 1,047.182 .000750 03/31/95 .917500 .000160 06/30/95 1.011661 .000160 08/31/95 1.031348 -.11 -.108 -.17 -.161 .000160 09/29/95 1.050095 .000160 12/29/95 1.050280 -.06 -.055 -.05 -.052 .000160
ONE YEAR SINCE INCEPTION ENDING UNITS 1,047.019 999.642 ACCOUNT VALUE 1,099.66 1,049.90 SURRENDER VALUE 1,039.66 989.90 TOTAL RETURN 3.97 % -1.01 % ANNUALIZED RETURN -.66 %
9 PAGE 8 VINTAGE REGULAR DB STANDARDIZED PERFORMANCE KJSB - SB INCOME & GROWTH
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE - ---- ----- --------- ------- --------- ------- ---------- -------- ---------- 06/20/94 1.000000 1,000.00 1,000.000 .000750 06/30/94 .986696 .000750 08/31/94 1.023616 -.15 -.146 .000750 09/30/94 1.011679 .000750 12/30/94 .981491 1,000.00 1,018.858 .000750 03/31/95 1.062254 .000160 06/30/95 1.135578 .000160 08/31/95 1.184840 -.12 -.100 -.18 -.149 .000160 09/29/95 1.217392 .000160 12/29/95 1.290871 -.07 -.051 -.07 -.050 .000160
ONE YEAR SINCE INCEPTION ENDING UNITS 1,018.707 999.654 ACCOUNT VALUE 1,315.02 1,290.42 SURRENDER VALUE 1,255.02 1,230.42 TOTAL RETURN 25.50 % 23.04 % ANNUALIZED RETURN 14.55 %
10 PAGE 9 VINTAGE REGULAR DB STANDARDIZED PERFORMANCE KMSB - SB MONEY MARKET
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE - ---- ----- --------- ------- --------- ------- ---------- -------- ---------- 06/20/94 1.000000 1,000.00 1,000.000 .000750 06/30/94 1.000609 .000750 08/31/94 1.004912 -.15 -.148 .000750 09/30/94 1.007300 .000750 12/30/94 1.015687 1,000.00 984.555 .000750 03/31/95 1.026068 .000160 06/30/95 1.037078 .000160 08/31/95 1.044340 -.11 -.104 -.16 -.157 .000160 09/29/95 1.047683 .000160 12/29/95 1.058195 -.05 -.051 -.06 -.052 .000160
ONE YEAR SINCE INCEPTION ENDING UNITS 984.400 999.643 ACCOUNT VALUE 1,041.69 1,057.82 SURRENDER VALUE 981.69 997.82 TOTAL RETURN -1.83 % -.22 % ANNUALIZED RETURN -.14 %
11 PAGE 10 VINTAGE REGULAR DB STANDARDIZED PERFORMANCE KPSB - PUTNAM DIVERSIFIED INCOME
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE - ---- ----- --------- ------- --------- ------- ---------- -------- ---------- 06/20/94 1.000000 1,000.00 1,000.000 .000750 06/30/94 1.000680 .000750 08/31/94 1.011665 -.15 -.147 .000750 09/30/94 1.014679 .000750 12/30/94 1.008510 1,000.00 991.562 .000750 03/31/95 1.055554 .000160 06/30/95 1.102322 .000160 08/31/95 1.112083 -.11 -.101 -.17 -.153 .000160 09/29/95 1.121984 .000160 12/29/95 1.170101 -.06 -.051 -.06 -.051 .000160
ONE YEAR SINCE INCEPTION ENDING UNITS 991.410 999.649 ACCOUNT VALUE 1,160.05 1,169.69 SURRENDER VALUE 1,100.05 1,109.69 TOTAL RETURN 10.00 % 10.97 % ANNUALIZED RETURN 7.06 %
12 PAGE 11 VINTAGE REGULAR DB STANDARDIZED PERFORMANCE KRSB - SB TOTAL RETURN
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE - ---- ----- --------- ------- --------- ------- ---------- -------- ---------- 12/03/93 .928042 1,000.00 1,077.537 .000750 08/31/94 1.046264 -.59 -.566 .000750 12/30/94 1.013044 1,000.00 987.124 .000750 03/31/95 1.078553 .000160 06/30/95 1.177547 .000160 08/31/95 1.205359 -.12 -.097 -.19 -.161 .000160 09/29/95 1.214969 .000160 12/29/95 1.250571 -.06 -.051 -.07 -.056 .000160
ONE YEAR SINCE INCEPTION ENDING UNITS 986.976 1076.754 ACCOUNT VALUE 1,234.28 1,346.56 SURRENDER VALUE 1,174.28 1,286.56 TOTAL RETURN 17.43 % 28.66 % ANNUALIZED RETURN 12.94 %
13 PAGE 12 VINTAGE REGULAR DB STANDARDIZED PERFORMANCE KSSB - SB PACIFIC BASIN
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE - ---- ----- --------- ------- --------- ------- ---------- -------- ---------- 06/21/94 1.000000 1,000.00 1,000.000 .000750 06/30/94 .997711 .000750 08/31/94 1.031654 -.15 -.144 .000750 09/30/94 1.001746 .000750 12/30/94 .899312 1,000.00 1,111.961 .000750 03/31/95 .872934 .000160 06/30/95 .925707 .000160 08/31/95 .921901 -.11 -.117 -.16 -.169 .000160 09/29/95 .913159 .000160 12/29/95 .910187 -.05 -.059 -.05 -.053 .000160
ONE YEAR SINCE INCEPTION ENDING UNITS 1,111.785 999.634 ACCOUNT VALUE 1,011.93 909.85 SURRENDER VALUE 951.93 855.26 TOTAL RETURN -4.81 % -14.47 % ANNUALIZED RETURN -9.75 %
14 PAGE 13 VINTAGE REGULAR DB STANDARDIZED PERFORMANCE KTSB - MFS TOTAL RETURN
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE - ---- ----- --------- ------- --------- ------- ---------- -------- ---------- 06/20/94 1.000000 1,000.00 1,000.000 .000750 06/30/94 .984592 .000750 08/31/94 1.018774 -.15 -.147 .000750 09/30/94 1.002750 .000750 12/30/94 .978766 1,000.00 1,021.695 .000750 03/31/95 1.035973 .000160 06/30/95 1.098888 .000160 08/31/95 1.124611 -.11 -.102 -.17 -.152 .000160 09/29/95 1.153454 .000160 12/29/95 1.215923 -.06 -.052 -.06 -.051 .000160
ONE YEAR SINCE INCEPTION ENDING UNITS 1,021.541 999.650 ACCOUNT VALUE 1,242.11 1,215.50 SURRENDER VALUE 1,182.11 1,155.50 TOTAL RETURN 18.21 % 15.55 % ANNUALIZED RETURN 9.93 %
15 PAGE 1 VINTAGE ENHANCED DB STANDARDIZED PERFORMANCE KASE - ALLIANCE GROWTH STOCK
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE - ---- ----- --------- ------- --------- ------- ---------- -------- ---------- 06/20/94 1.000000 1,000.00 1,000.000 .000750 06/30/94 .985382 .000750 08/31/94 1.036378 -.15 -.145 .000750 09/30/94 1.053296 .000750 12/30/94 1.045632 1,000.00 956.359 .000750 03/31/95 1.116740 .000160 06/30/95 1.268038 .000160 08/31/95 1.343428 -.12 -.091 -.19 -.142 .000160 09/29/95 1.376065 .000160 12/29/95 1.389856 -.07 -.049 -.07 -.052 .000160
ONE YEAR SINCE INCEPTION ENDING UNITS 956.219 999.661 ACCOUNT VALUE 1,329.01 1,389.39 SURRENDER VALUE 1,269.01 1,329.39 TOTAL RETURN 26.90 % 32.94 % ANNUALIZED RETURN 20.51 %
16 PAGE 2 VINTAGE ENHANCED DB STANDARDIZED PERFORMANCE KCSE - AIM CAPITAL APPRECIATION
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE - ---- ----- --------- ------- --------- ------- ---------- -------- ---------- 10/10/95 1.000000 1,000.00 1,000.000 .000160 12/29/95 .957290 -.03 -.036 .000160
SINCE INCEPTION ENDING UNITS 999.964 ACCOUNT VALUE 957.26 SURRENDER VALUE 899.82 TOTAL RETURN -10.02 %
17 PAGE 3 VINTAGE ENHANCED DB STANDARDIZED PERFORMANCE KESE - AMCAP GROWTH STOCK
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE - ---- ----- --------- ------- --------- ------- ---------- -------- ---------- 06/21/94 1.000000 1,000.00 1,000.000 .000750 06/30/94 .986205 .000750 08/31/94 1.061136 -.15 -.142 .000750 09/30/94 1.038238 .000750 12/30/94 1.037072 1,000.00 964.253 .000750 03/31/95 1.119575 .000160 06/30/95 1.243451 .000160 08/31/95 1.323473 -.12 -.092 -.19 -.144 .000160 09/29/95 1.356636 .000160 12/29/95 1.356166 -.07 -.050 -.07 -.052 .000160
ONE YEAR SINCE INCEPTION ENDING UNITS 964.111 999.662 ACCOUNT VALUE 1,307.49 1,355.71 SURRENDER VALUE 1,247.49 1,295.71 TOTAL RETURN 24.75 % 29.57 % ANNUALIZED RETURN 18.54 %
18 PAGE 4 VINTAGE ENHANCED DB STANDARDIZED PERFORMANCE KFSE - TBC MANAGED INCOME
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE - ---- ----- --------- ------- --------- ------- ---------- -------- ---------- 06/28/94 1.000000 1,000.00 1,000.000 .000750 06/30/94 .997920 .000750 08/31/94 1.009429 -.13 -.131 .000750 09/30/94 1.000255 .000750 12/30/94 .995239 1,000.00 1,004.784 .000750 03/31/95 1.028680 .000160 06/30/95 1.083893 .000160 08/31/95 1.088242 -.11 -.103 -.17 -.154 .000160 09/29/95 1.097942 .000160 12/29/95 1.136987 -.06 -.052 -.06 -.051 .000160
ONE YEAR SINCE INCEPTION ENDING UNITS 1,004.629 999.663 ACCOUNT VALUE 1,142.25 1,136.60 SURRENDER VALUE 1,082.25 1,076.60 TOTAL RETURN 8.23 % 7.66 % ANNUALIZED RETURN 5.03 %
19 PAGE 5 VINTAGE ENHANCED DB STANDARDIZED PERFORMANCE KGSE - GT GLOBAL STRATEGIC INCOME
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE - ---- ----- --------- ------- --------- ------- ---------- -------- ---------- 06/21/94 1.000000 1,000.00 1,000.000 .000750 06/30/94 .994643 .000750 08/31/94 1.002171 -.15 -.146 .000750 09/30/94 .994999 .000750 12/30/94 .943557 1,000.00 1,059.819 .000750 03/31/95 .969137 .000160 06/30/95 1.032348 .000160 08/31/95 1.032781 -.11 -.108 -.16 -.158 .000160 09/29/95 1.058379 .000160 12/29/95 1.115890 -.06 -.054 -.06 -.051 .000160
ONE YEAR SINCE INCEPTION ENDING UNITS 1,059.657 999.646 ACCOUNT VALUE 1,182.46 1,115.50 SURRENDER VALUE 1,122.46 1,055.50 TOTAL RETURN 12.25 % 5.55 % ANNUALIZED RETURN 3.61 %
20 PAGE 6 VINTAGE ENHANCED DB STANDARDIZED PERFORMANCE KHSE - SB HIGH INCOME
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE - ---- ----- --------- ------- --------- ------- ---------- -------- ---------- 06/22/94 1.000000 1,000.00 1,000.000 .000750 06/30/94 1.000680 .000750 08/31/94 1.008181 -.14 -.143 .000750 09/30/94 1.006981 .000750 12/30/94 .986130 1,000.00 1,014.065 .000750 03/31/95 1.033081 .000160 06/30/95 1.079664 .000160 08/31/95 1.100100 -.11 -.103 -.17 -.153 .000160 09/29/95 1.111869 .000160 12/29/95 1.157405 -.06 -.052 -.06 -.051 .000160
ONE YEAR SINCE INCEPTION ENDING UNITS 1,013.910 999.652 ACCOUNT VALUE 1,173.50 1,157.00 SURRENDER VALUE 1,113.50 1,097.00 TOTAL RETURN 11.35 % 9.70 % ANNUALIZED RETURN 6.28 %
21 PAGE 7 VINTAGE ENHANCED DB STANDARDIZED PERFORMANCE KISE - SB INTERNATIONAL EQUITY
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE - ---- ----- --------- ------- --------- ------- ---------- -------- ---------- 06/20/94 1.000000 1,000.00 1,000.000 .000750 06/30/94 1.026593 .000750 08/31/94 1.049009 -.15 -.144 .000750 09/30/94 1.021856 .000750 12/30/94 .953532 1,000.00 1,048.733 .000750 03/31/95 .915495 .000160 06/30/95 1.008743 .000160 08/31/95 1.027883 -.11 -.108 -.17 -.162 .000160 09/29/95 1.046336 .000160 12/29/95 1.045789 -.06 -.055 -.05 -.052 .000160
ONE YEAR SINCE INCEPTION ENDING UNITS 1,048.570 999.642 ACCOUNT VALUE 1,096.58 1,045.41 SURRENDER VALUE 1,036.58 985.41 TOTAL RETURN 3.66 % -1.46 % ANNUALIZED RETURN -.96 %
22 PAGE 8 VINTAGE ENHANCED DB STANDARDIZED PERFORMANCE KJSE - SB INCOME & GROWTH
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE - ---- ----- --------- ------- --------- ------- ---------- -------- ---------- 06/20/94 1.000000 1,000.00 1,000.000 .000750 06/30/94 .986619 .000750 08/31/94 1.023049 -.15 -.146 .000750 09/30/94 1.010885 .000750 12/30/94 .980034 1,000.00 1,020.373 .000750 03/31/95 1.059933 .000160 06/30/95 1.132304 .000160 08/31/95 1.180863 -.12 -.100 -.18 -.149 .000160 09/29/95 1.213038 .000160 12/29/95 1.285355 -.07 -.051 -.06 -.050 .000160
ONE YEAR SINCE INCEPTION ENDING UNITS 1,020.221 999.654 ACCOUNT VALUE 1,311.35 1,284.91 SURRENDER VALUE 1,251.35 1,224.91 TOTAL RETURN 25.13 % 22.49 % ANNUALIZED RETURN 14.22 %
23 PAGE 9 VINTAGE ENHANCED DB STANDARDIZED PERFORMANCE KMSE - SB MONEY MARKET
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE - ---- ----- --------- ------- --------- ------- ---------- -------- ---------- 06/20/94 1.000000 1,000.00 1,000.000 .000750 06/30/94 1.000530 .000750 08/31/94 1.004351 -.15 -.148 .000750 09/30/94 1.006507 .000750 12/30/94 1.014181 1,000.00 986.017 .000750 03/31/95 1.023835 .000160 06/30/95 1.034101 .000160 08/31/95 1.040838 -.11 -.104 -.16 -.157 .000160 09/29/95 1.043936 .000160 12/29/95 1.053676 -.05 -.052 -.06 -.052 .000160
ONE YEAR SINCE INCEPTION ENDING UNITS 985.862 999.643 ACCOUNT VALUE 1,038.78 1,053.30 SURRENDER VALUE 978.78 993.30 TOTAL RETURN -2.12 % -.67 % ANNUALIZED RETURN -.44 %
24 PAGE 10 VINTAGE ENHANCED DB STANDARDIZED PERFORMANCE KPSE - PUTNAM DIVERSIFIED INCOME
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE - ---- ----- --------- ------- --------- ------- ---------- -------- ---------- 06/20/94 1.000000 1,000.00 1,000.000 .000750 06/30/94 1.000601 .000750 08/31/94 1.011105 -.15 -.147 .000750 09/30/94 1.013886 .000750 12/30/94 1.007016 1,000.00 993.033 .000750 03/31/95 1.053251 .000160 06/30/95 1.099150 .000160 08/31/95 1.108356 -.11 -.101 -.17 -.153 .000160 09/29/95 1.117977 .000160 12/29/95 1.165112 -.06 -.051 -.06 -.051 .000160
ONE YEAR SINCE INCEPTION ENDING UNITS 992.881 999.649 ACCOUNT VALUE 1,156.82 1,164.70 SURRENDER VALUE 1,096.82 1,104.70 TOTAL RETURN 9.68 % 10.47 % ANNUALIZED RETURN 6.74 %
25 PAGE 11 VINTAGE ENHANCED DB STANDARDIZED PERFORMANCE KRSE - SB TOTAL RETURN
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE - ---- ----- --------- ------- --------- ------- ---------- -------- ---------- 12/03/93 .930558 1,000.00 1,074.624 .000750 08/31/94 1.046923 -.59 -.565 .000750 12/30/94 1.012743 1,000.00 987.417 .000750 03/31/95 1.077488 .000160 06/30/95 1.175569 .000160 08/31/95 1.202763 -.12 -.097 -.19 -.161 .000160 09/29/95 1.212081 .000160 12/29/95 1.246730 -.06 -.051 -.07 -.055 .000160
ONE YEAR SINCE INCEPTION ENDING UNITS 987.269 1,073.843 ACCOUNT VALUE 1,230.86 1,338.79 SURRENDER VALUE 1,170.86 1,278.79 TOTAL RETURN 17.09 % 27.88 % ANNUALIZED RETURN 12.61 %
26 PAGE 12 VINTAGE ENHANCED DB STANDARDIZED PERFORMANCE KSSE - SB PACIFIC BASIN
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE - ---- ----- --------- ------- --------- ------- ---------- -------- ---------- 06/21/94 1.000000 1,000.00 1,000.000 .000750 06/30/94 .997642 .000750 08/31/94 1.031096 -.15 -.144 .000750 09/30/94 1.000974 .000750 12/30/94 .897995 1,000.00 1,113.592 .000750 03/31/95 .871049 .000160 06/30/95 .923065 .000160 08/31/95 .918828 -.11 -.118 -.16 -.170 .000160 09/29/95 .909910 .000160 12/29/95 .906317 -.05 -.059 -.05 -.053 .000160
ONE YEAR SINCE INCEPTION ENDING UNITS 1,113.415 999.634 ACCOUNT VALUE 1,009.11 905.98 SURRENDER VALUE 949.11 851.63 TOTAL RETURN -5.09 % -14.84 % ANNUALIZED RETURN -10.01 %
27 PAGE 13 VINTAGE ENHANCED DB STANDARDIZED PERFORMANCE KTSE - MFS TOTAL RETURN
PRDT PRICE DOLLAR(1) UNIT(1) DOLLAR(5) UNIT(5) DOLLAR(10) UNIT(10) ANNUAL FEE - ---- ----- --------- ------- --------- ------- ---------- -------- ---------- 06/20/94 1.000000 1,000.00 1,000.000 .000750 06/30/94 .984517 .000750 08/31/94 1.018213 -.15 -.147 .000750 09/30/94 1.001965 .000750 12/30/94 .977320 1,000.00 1,023.206 .000750 03/31/95 1.033719 .000160 06/30/95 1.095736 .000160 08/31/95 1.120855 -.11 -.102 -.17 -.153 .000160 09/29/95 1.149344 .000160 12/29/95 1.210749 -.06 -.052 -.06 -.051 .000160
ONE YEAR SINCE INCEPTION ENDING UNITS 1,023.052 999.650 ACCOUNT VALUE 1,238.66 1,210.33 SURRENDER VALUE 1,178.66 1,150.33 TOTAL RETURN 17.87 % 15.03 % ANNUALIZED RETURN 9.61 %
28 Description of Non-Standard Returns calculations Fund BD/BD II The following notation will be used for a fund's prices, or unit values: UVINCEP: Unit Value at fund inception UV85: Unit Value at year-end, 1985, (Year-minus-10) UV90: Unit Value at year-end, 1990, (Year-minus-5) UV92: Unit Value at year-end, 1992, (Year-minus-3) UV94: Unit Value at year-end, 1994, (Prior year) UV95: Unit Value at year-end, 1995, (Current year) ALLIANCE GROWTH STOCK UNIT VALUE RETURN ---------- ------ INCEPTION (06/20/94): 1.000000 24.42 12/85: 12/90: 12/92: 12/94: 1.047185 33.29 CURRENT 12/95: 1.395807 AMCAP GROWTH STOCK UNIT VALUE RETURN ---------- ------ INCEPTION (06/21/94): 1.000000 22.48 12/85: 12/90: 12/92: 12/94: 1.038598 31.14 CURRENT 12/95: 1.361968 TEC MANAGED INCOME UNIT VALUE RETURN ---------- ------ INCEPTION (06/28/94): 1.000000 9.22 12/85: 12/90: 12/92: 12/94: .996653 14.56 CURRENT 12/95: 1.141791 GT GLOBAL STRATEGIC INCOME UNIT VALUE RETURN ---------- ------ INCEPTION (06/21/94): 1.000000 7.77 12/85: 12/90: 12/92: 12/94: .944948 18.60 CURRENT 12/95: 1.120662 SB HIGH INCOME UNIT VALUE RETURN ---------- ------ 29 INCEPTION (06/22/94): 1.000000 10.40 12/85: 12/90: 12/92: 12/94: .987591 17.70 CURRENT 12/95: 1.162368 SB INTERNATIONAL EQUITY UNIT VALUE RETURN ---------- ------ INCEPTION (06/20/94): 1.000000 3.27 12/85: 12/90: 12/92: 12/94: .954944 9.98 CURRENT 12/95: 1.050280 SB INCOME & GROWTH UNIT VALUE RETURN ---------- ------ INCEPTION (06/20/94): 1.000000 18.21 12/85: 12/90: 12/92: 12/94: .981491 31.52 CURRENT 12/95: 1.290871 SB MONEY MARKET UNIT VALUE RETURN ---------- ------ INCEPTION (06/20/94): 1.000000 3.78 12/85: 12/90: 12/92: 12/94: 1.015687 4.19 CURRENT 12/95: 1.058195 PUTNAM DIVERSIFIED INCOME UNIT VALUE RETURN ---------- ------ INCEPTION (06/20/94): 1.000000 10.84 12/85: 12/90: 12/92: 12/94: 1.008510 16.02 CURRENT 12/95: 1.170101 SB PACIFIC BASIN UNIT VALUE RETURN ---------- ------ INCEPTION (06/21/94): 1.000000 -5.99 12/85: 12/90: 30 12/92: 12/94: .899312 1.21 CURRENT 12/95: .910187 MFS TOTAL RETURN UNIT VALUE RETURN ---------- ------ INCEPTION (06/20/94): 1.000000 13.67 12/85: 12/90: 12/92: 12/94: .978766 24.23 CURRENT 12/95: 1.215923 SB TOTAL RETURN UNIT VALUE RETURN ---------- ------ INCEPTION (11/21/94): 1.000000 22.45 12/85: 12/90: 12/92: 12/94: 1.013044 23.45 CURRENT 12/95: 1.250571 AIM CAPITAL APPRECIATION UNIT VALUE RETURN ---------- ------ INCEPTION (10/10/95): 1.000000 -4.21 12/85: 12/90: 12/92: 12/94: CURRENT 12/95: .957880 EX-99.15C 6 POWERS OF ATTORNEY FOR FISHMAN AND STUART 1 EXHIBIT 15 (C) THE TRAVELERS FUND BD II FOR VARIABLE ANNUITIES POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: That I, JAY S. FISHMAN of Haworth, New Jersey, Director of The Travelers Life and Annuity Company (hereinafter the "Company"), do hereby make, constitute and appoint ERNEST J. WRIGHT, Assistant Secretary of said Company, and KATHLEEN A. McGAH, Assistant Secretary of said Company, or either one of them acting alone, my true and lawful attorney-in-fact, for me, and in my name, place and stead, to sign registration statements on behalf of said Company on Form N-4 or other appropriate form under the Securities Act of 1933 and the Investment Company Act of 1940 for The Travelers Fund BD II for Variable Annuities, a separate account of the Company dedicated specifically to the funding of variable annuity contracts to be offered by the Company, and further, to sign any and all amendments thereto, including post-effective amendments, that may be filed by the Company on behalf of said registrant. IN WITNESS WHEREOF, I have hereunto set my hand this 1st day of April, 1996. /s/Jay S. Fishman Director 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, IAN R. STUART of East Hampton, Connecticut, Vice President, Chief Financial Officer, Chief Accounting Officer and Controller of The Travelers Life and Annuity Company (hereinafter the "Company"), do hereby make, constitute and appoint ERNEST J. WRIGHT, Assistant Secretary of said Company, and KATHLEEN A. McGAH, Assistant Secretary of said Company, or either one of them acting alone, my true and lawful attorney-in-fact, for me, and in my name, place and stead, to sign registration statements on behalf of said Company on Form N-4 or other appropriate form under the Securities Act of 1933 and the Investment Company Act of 1940 for The Travelers Fund BD II for Variable Annuities, a separate account of the Company dedicated specifically to the funding of variable annuity contracts to be offered by the Company, and further, to sign any and all amendments thereto, including post-effective amendments, that may be filed by the Company on behalf of said registrant. IN WITNESS WHEREOF, I have hereunto set my hand this 1st day of April, 1996. /s/Ian R. Stuart Vice President, Chief Financial Officer Chief Accounting Officer and Controller The Travelers Life and Annuity Company -----END PRIVACY-ENHANCED MESSAGE-----