REGISTRATION STATEMENT NO. 333-69753
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 5
THE TRAVELERS LIFE AND ANNUITY COMPANY
(Exact name of registrant as specified in its charter)
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CONNECTICUT
(State or other jurisdiction of incorporation or organization)
I.R.S. Employer Identification Number: 06-0904249
P.O. BOX 990026, HARTFORD, CONNECTICUT
06199-0026 (860) 308-1000 (Address, including Zip
Code, and Telephone Number, including Area Code,
of Registrant's Principal Executive Offices)
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ERNEST J. WRIGHT
Secretary
The Travelers Life and Annuity Company
P. O. Box 990026
Hartford, Connecticut 06199-0026
(860) 308-1000
(Name, Address, including Zip Code, and Telephone Number,
including Area Code of Agent for Service)
Approximate date of commencement of proposed sale to the public: The
investment option interests covered by this registration statement are to be
issued from time to time after the effective date of this registration
statement.
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933 check the following box. X
___
If the registrant elects to deliver its latest annual report to
security-holders, or a complete and legible facsimile thereof, pursuant to Item
11(a)(1) of this form, check the following box. _____
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. ___
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering ____.
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering ____.
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. ___
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PART I
PROSPECTUS
TRAVELERS RETIREMENT ACCOUNT ANNUITY PROSPECTUS:
THE TRAVELERS SEPARATE ACCOUNT FIVE FOR VARIABLE ANNUITIES
THE TRAVELERS SEPARATE ACCOUNT SIX FOR VARIABLE ANNUITIES
This prospectus describes TRAVELERS RETIREMENT ACCOUNT ANNUITY, a flexible
premium deferred variable annuity contract (the "Contract") issued by The
Travelers Insurance Company or The Travelers Life and Annuity Company. The
Travelers Life and Annuity Company does not solicit or issue insurance products
in the state of New York. Refer to the first page of your Contract for the name
of your issuing company. The Contract is available in connection with certain
retirement plans that qualify for special federal income tax treatment
("Qualified Contracts".) We may issue it as an individual Contract or as a group
Contract. When we issue a group Contract, you will receive a certificate
summarizing the Contract's provisions. For convenience, we refer to Contracts
and certificates as "Contracts."
You can choose to have your premium ("Purchase Payments") and any applicable
Purchase Payment Credits accumulate on a variable and, subject to availability,
fixed basis in one of our funding options. Your Contract Value before the
Maturity Date and the amount of monthly income afterwards will vary daily to
reflect the investment experience of the Variable Funding Options you select.
You bear the investment risk of investing in the Variable Funding Options. The
Variable Funding Options are:
Capital Appreciation Fund SALOMON BROTHERS VARIABLE SERIES FUNDS INC.
High Yield Bond Trust All Cap Fund - Class I(4)
Managed Assets Trust Investors Fund - Class I
Money Market Portfolio Small Cap Growth Fund - Class I
AMERICAN FUNDS INSURANCE SERIES SMITH BARNEY INVESTMENT SERIES
Global Growth Fund - Class 2 Shares Smith Barney Premier Selections All Cap Growth Portfolio
Growth Fund - Class 2 Shares THE TRAVELERS SERIES TRUST
Growth-Income Fund - Class 2 Shares Convertible Securities Portfolio
CITISTREET FUNDS, INC. Disciplined Mid Cap Stock Portfolio CitiStreet
Diversified Bond Fund - Class I Equity Income Portfolio CitiStreet
International Stock Fund - Class I Large Cap Portfolio CitiStreet Large
Company Stock Fund - Class I Lazard International Stock Portfolio CitiStreet
Small Company Stock Fund - Class I Merrill Lynch Large Cap Core Portfolio(5)
DELAWARE VIP TRUST MFS Emerging Growth Portfolio
Delaware VIP REIT Series - Standard Class MFS Mid Cap Growth Portfolio
Delaware VIP Small Cap Value Series - Standard Class MFS Value Portfolio
DREYFUS VARIABLE INVESTMENT FUND Pioneer Fund Portfolio(6)
Dreyfus Variable Investment Fund - Appreciation Portfolio Social Awareness Stock Portfolio
- Initial Shares
Dreyfus Variable Investment Fund - Developing Leaders Travelers Quality Bond Portfolio
Portfolio - Initial Shares(1)
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST U.S. Government Securities Portfolio
Mutual Shares Securities Fund - Class 2 Shares TRAVELERS SERIES FUND INC.
Templeton Developing Markets Securities Fund - Class 2 AIM Capital Appreciation Portfolio
Shares
Templeton Foreign Securities Fund - Class 2 Shares MFS Total Return Portfolio
Templeton Growth Securities Fund - Class 2 Shares Pioneer Strategic Income Portfolio(7)
GREENWICH STREET SERIES FUND SB Adjustable Rate Income Portfolio Smith Barney Class
Appreciation Portfolio Smith Barney Aggressive Growth Portfolio
Equity Index Portfolio - Class II Shares Smith Barney High Income Portfolio
JANUS ASPEN SERIES Smith Barney Large Capitalization Growth Portfolio
Mid Cap Growth Portfolio - Service Shares(2) Strategic Equity Portfolio(8)
LAZARD RETIREMENT SERIES, INC. VAN KAMPEN LIFE INVESTMENT TRUST
Lazard Retirement Small Cap Portfolio Comstock Portfolio Class II Shares
LORD ABBETT SERIES FUND, INC. Emerging Growth Portfolio Class II Shares
Growth and Income Portfolio VARIABLE ANNUITY PORTFOLIOS
Mid-Cap Value Portfolio Smith Barney Small Cap Growth Opportunities Portfolio
OPPENHEIMER VARIABLE ACCOUNT FUNDS VARIABLE INSURANCE PRODUCTS FUND II
Oppenheimer Main Street Fund/VA - Service Shares(3) Asset Manager Portfolio - Service Class 2
PIMCO VARIABLE INSURANCE TRUST Contrafund(R)Portfolio - Service Class 2
Total Return Portfolio - Administrative Class VARIABLE INSURANCE PRODUCTS FUND III
PUTNAM VARIABLE TRUST Mid Cap Portfolio - Service Class 2
Putnam VT Small Cap Value Fund - Class IB Shares
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(1) Formerly Small Cap Portfolio - Initial Shares
(2) Formerly Aggressive Growth Portfolio - Service Shares
(3) Formerly Oppenheimer Main Street Growth & Income
Fund/VA - Service Shares
(4) Formerly Capital Fund - Class I
(5) Formerly MFS Research Portfolio
(6) Formerly Utilities Portfolio
(7) Formerly Putnam Diversified Income Portfolio
(8) Formerly Alliance Growth Portfolio
We also offer variable annuity Contracts that do not have Purchase Payment
Credits, and therefore may have lower fees. Over time, the value of the Purchase
Payment Credits could be more than offset by higher charges. You should
carefully consider whether or not this Contract is the most appropriate
investment for you.
The Contract, certain Contract features and/or some of the funding options may
not be available in all states. This prospectus provides the information that
you should know before investing in the Contract. Please keep this prospectus
for future reference. You can receive additional information about your Contract
by requesting a copy of the Statement of Additional Information ("SAI") dated
May 3, 2004. We filed the SAI with the Securities and Exchange Commission
("SEC"), and it is incorporated by reference into this prospectus. To request a
copy, write to The Travelers Insurance Company, Annuity Investor Services, One
Cityplace, 3 CP, Hartford, Connecticut 06103-3415, call 1-800-842-9406 or access
the SEC's website (http://www.sec.gov). See Appendix E for the SAI's table of
contents.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR THE ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. VARIABLE
ANNUITY CONTRACTS ARE NOT DEPOSITS OF ANY BANK, AND ARE NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY.
PROSPECTUS DATED MAY 3, 2004
TABLE OF CONTENTS
Glossary............................................. 3 Payment Options........................................ 33
Summary.............................................. 5 Election of Options............................... 33
Fee Table............................................ 8 Annuity Options................................... 34
Condensed Financial Information...................... 16 Miscellaneous Contract Provisions...................... 35
The Annuity Contract................................. 16 Right to Return................................... 35
Contract Owner Inquiries........................ 17 Termination....................................... 35
Purchase Payments............................... 17 Required Reports.................................. 35
Purchase Payment Credits ....................... 17 Suspension of Payments............................ 35
Conservation Credit............................. 17 The Separate Accounts.................................. 35
Accumulation Units.............................. 17 Performance Information........................... 36
The Variable Funding Options.................... 17 Federal Tax Considerations............................. 36
Fixed Account ....................................... 24 General Taxation of Annuities....................... 36
Charges and Deductions............................... 24 Types of Contracts: Qualified and Non-qualified..... 37
General......................................... 24 Qualified Annuity Contracts......................... 37
Withdrawal Charge............................... 24 Taxation of Qualified Annuity Contracts........... 37
Free Withdrawal Allowance....................... 25 Mandatory Distributions for Qualified Plans....... 37
Transfer Charge................................. 26 Non-qualified Annuity Contracts..................... 37
Mortality and Expense Risk Charge............... 26 Diversification Requirements for Variable
Variable Funding Option Expenses................ 26 Annuities....................................... 38
Floor Benefit/Liquidity Benefit Charges......... 26 Ownership of the Investments...................... 38
CHART Asset Allocation Program Charges ......... 26 Taxation of Death Benefit Proceeds................ 38
Premium Tax..................................... 26 Other Tax Considerations............................ 39
Changes in Taxes Based upon Premium or Treatment of Charges for Optional
Value......................................... 26 Death Benefits.................................. 39
Transfers............................................ 27 Penalty Tax for Premature Distribution............ 39
Access to Your Money................................. 28 Puerto Rico Tax Considerations.................... 39
Systematic Withdrawals.......................... 28 Non-Resident Aliens............................... 39
Ownership Provisions................................. 28 Available Information.................................. 39
Types of Ownership.............................. 28 Incorporation of Certain Documents by
Contract Owner................................ 28 Reference......................................... 40
Beneficiary................................... 29 Other Information...................................... 40
Death Benefit........................................ 29 The Insurance Companies........................... 40
Death Proceeds before the Maturity Date......... 29 Financial Statements.............................. 40
Step-Up Death Benefit Value..................... 30 Distribution of Variable Annuity Contracts........ 41
Payment of Proceeds............................. 30 Conformity with State and Federal Laws............ 42
Beneficiary Contract Continuance................ 30 Voting Rights..................................... 42
Planned Death Benefit........................... 31 Restrictions on Financial Transactions............ 42
Death Proceeds after the Maturity Date.......... 31 Legal Proceedings and Opinions.................... 42
The Annuity Period................................... 31 Appendix A: Condensed Financial
Maturity Date................................... 31 Information for The Travelers Insurance
Liquidity Benefit .............................. 32 Company: Separate Account Five...................... A-1
Allocation of Annuity........................... 32 Appendix B: Condensed Financial Information
Variable Annuity................................ 33 for The Travelers Life and Annuity
Fixed Annuity................................... 33 Company: Separate Account Six....................... B-1
Appendix C: Waiver of Withdrawal Charge
for Nursing Home Confinement........................ C-1
Appendix D: Market Value Adjustment.................... D-1
Appendix E: Contents of the Statement
of Additional Information........................... E-1
2
GLOSSARY
ACCUMULATION UNIT -- an accounting unit of measure used to calculate the value
of this Contract before Annuity Payments begin.
ANNUITANT -- the person on whose life the Maturity Date and Annuity Payments
depend.
ANNUITY PAYMENTS -- a series of periodic payments (a) for life; (b) for life
with a minimum number of payments; (c) for the joint lifetime of the Annuitant
and another person, and thereafter during the lifetime of the survivor; or (d)
for a fixed period.
ANNUITY UNIT -- an accounting unit of measure used to calculate the amount of
Annuity Payments.
CASH SURRENDER VALUE -- the Contract Value less any withdrawal charge and
premium tax not previously deducted.
CODE -- the Internal Revenue Code of 1986, as amended, and all related laws and
regulations that are in effect during the term of this Contract.
CONTINGENT ANNUITANT -- the individual who becomes the Annuitant when the
Annuitant who is not the owner dies prior to the Maturity Date.
CONTRACT DATE -- the date on which the Contract is issued.
CONTRACT OWNER (you) -- the person named in the Contract (on the specifications
page) as the owner of the Contract.
CONTRACT VALUE -- Purchase Payments and any associated Purchase Payment Credits,
plus or minus any investment experience on the amounts allocated to the variable
funds or interest on amounts allocated to the Fixed Account, adjusted by any
applicable charges and withdrawals.
CONTRACT YEARS -- twelve month periods beginning with the Contract Date.
DEATH REPORT DATE -- the day on which we have received 1) Due Proof of Death and
2) written payment instructions or election of spousal or beneficiary contract
continuation.
DUE PROOF OF DEATH -- (i) a copy of a certified death certificate; (ii) a copy
of a certified decree of a court of competent jurisdiction as to the finding of
death; (iii) a written statement by a medical doctor who attended the deceased;
or (iv) any other proof satisfactory to us.
FIXED ACCOUNT -- an account that consists of all of the assets under this
Contract other than those in the Separate Account.
HOME OFFICE -- the Home Office of The Travelers Insurance Company or The
Travelers Life and Annuity Company or any other office that we may designate for
the purpose of administering this Contract.
MATURITY DATE -- the date on which the Annuity Payments are to begin.
PAYMENT OPTION -- an Annuity or Income option elected under your Contract.
PURCHASE PAYMENT -- any premium paid by you to initiate or supplement this
Contract.
PURCHASE PAYMENT CREDIT -- an amount credited to your Contract Value that equals
a percentage of each Purchase Payment made.
QUALIFIED CONTRACT -- a contract used in a retirement plan or program that is
intended to qualify under Sections 401, 403, 408, or 414(d) of the Code.
SEPARATE ACCOUNT -- a segregated account registered with the Securities and
Exchange Commission ("SEC"), the assets of which are invested solely in the
Underlying Funds. The assets of the Separate Account are held exclusively for
the benefit of Contract Owners.
SUBACCOUNT -- that portion of the assets of a Separate Account that is allocated
to a particular Underlying Fund.
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UNDERLYING FUND -- a portfolio of an open-end management investment company that
is registered with the SEC in which the Subaccounts invest.
VALUATION DATE -- a date on which a Subaccount is valued.
VALUATION PERIOD -- the period between successive valuations.
VARIABLE FUNDING OPTION -- an open-end diversified management investment company
that serves as an investment option under the Separate Account.
WE, US, OUR-- The Travelers Insurance Company or the Travelers Life and Annuity
Company.
WRITTEN REQUEST -- written information sent to us in a form and content
satisfactory to us and received at our Home Office.
YOU, YOUR -- the Contract Owner.
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SUMMARY:
TRAVELERS RETIREMENT ACCOUNT
THIS SUMMARY DETAILS SOME OF THE MORE IMPORTANT POINTS THAT YOU SHOULD KNOW AND
CONSIDER BEFORE PURCHASING THE CONTRACT. PLEASE READ THE ENTIRE PROSPECTUS
CAREFULLY.
WHAT COMPANY WILL ISSUE MY CONTRACT? Your issuing company is either The
Travelers Insurance Company or The Travelers Life and Annuity Company, ("the
Company," "we" or "us"). The Travelers Life and Annuity Company does not solicit
or issue insurance products in the state of New York. Refer to your Contract for
the name of your issuing Company. Each company sponsors its own segregated
account ("Separate Account"). The Travelers Insurance Company sponsors the
Travelers Separate Account Five for Variable Annuities ("Separate Account
Five"); The Travelers Life and Annuity Company sponsors the Travelers Separate
Account Six for Variable Annuities ("Separate Account Six"). When we refer to
the Separate Account, we are referring to either Separate Account Five or
Separate Account Six, depending upon your issuing Company. The Contract may not
currently be available for sale in all states.
CAN YOU GIVE ME A GENERAL DESCRIPTION OF THE CONTRACT? We designed the Contract
for retirement savings or other long-term investment purposes. The Contract
provides a death benefit as well as guaranteed payout options. You direct your
payment(s) to one or more of the Variable Funding Options and/or to the Fixed
Account that is part of our general account (the "Fixed Account"). We guarantee
money directed to the Fixed Account as to principal and interest. The Variable
Funding Options fluctuate with the investment performance of the Underlying
Funds and are not guaranteed. You can also lose money in the Variable Funding
Options.
The Contract, like all deferred variable annuity contracts, has two phases: the
accumulation phase and the payout phase (annuity period). During the
accumulation phase generally, your pre-tax contributions accumulate on a
tax-deferred basis and are taxed as income when you make a withdrawal,
presumably when you are in a lower tax bracket. The payout phase occurs when you
begin receiving payments from your Contract. The amount of money you accumulate
in your Contract determines the amount of income (Annuity Payments) you receive
during the payout phase.
During the payout phase, you may choose one of a number of annuity options. You
may receive income payments from the Variable Funding Options and/or the Fixed
Account. If you elect variable income payments, the dollar amount of your
payments may increase or decrease. Once you choose one of the annuity options
and begin to receive payments, it cannot be changed.
WHO CAN PURCHASE THIS CONTRACT? The Contract is currently only available for use
in connection with tax qualified retirement plans ("Plans"), which include
Contracts qualifying under Section 401(a), 403(b), 408 or 457 of the Internal
Revenue Code of 1986, as amended, as well as beneficiary-directed transfers of
death benefit proceeds from another contract. Purchase of this Contract through
a Plan does not provide any additional tax deferral benefits beyond those
provided by the Plan. Accordingly, you should consider purchasing this Contract
for its death benefit, annuity option benefits, and other non-tax-related
benefits.
You may purchase the Contract with an initial payment of at least $20,000. You
may make additional payments of at least $5,000 at any time during the
accumulation phase.
This product is available to owners and Annuitants under the age of 85 as of the
Contract Date.
CAN I EXCHANGE MY CURRENT ANNUITY CONTRACT FOR THIS CONTRACT? The Code generally
permits you to exchange one annuity contract for another in a "tax-free
exchange." Therefore, you can transfer the proceeds from another annuity
contract to make Purchase Payments under this Contract. Before making an
exchange to acquire this Contract, you should carefully compare this Contract to
your current contract. You may have to pay a surrender charge under your current
contract to exchange it for this Contract, and this Contract has its own
surrender charges that would apply to you. The other fees and charges under this
Contract may be higher or lower and the benefits may be different than those of
your current contract. In addition, you may have to pay federal income or
penalty taxes on the exchange if it does not qualify for tax-free treatment. You
should not exchange another contract for this Contract unless you determine,
after evaluating all the facts, that the exchange is in your best interests.
Remember that the person selling you the Contract generally will earn a
commission on the sale.
5
WHO IS THE CONTRACT ISSUED TO? If you purchase an individual Contract, you are
the Contract Owner. If a group Contract is purchased, we issue certificates to
the individual participants. Where we refer to "you," we are referring to the
individual Contract Owner or the group participant, as applicable. We refer to
both contracts and certificates as "Contracts." If a group unallocated Contract
is purchased, we issue only the Contract.
We issue group Contracts in connection with retirement plans. Depending on your
Plan, certain features and/or Variable Funding Options described in this
prospectus may not be available to you. Your Plan provisions supercede the
prospectus. If you have any questions about your specific Plan, contact your
Plan administrator.
IS THERE A RIGHT TO RETURN PERIOD? If you cancel the Contract within ten days
after you receive it, you will receive a full refund of your Contract Value plus
any Contract charges and premium taxes you paid (but not fees and charges
assessed by the Underlying Funds). Where state law requires a different right to
return period, or the return of Purchase Payments, the Company will comply. You
bear the investment risk on the Purchase Payment allocated to a Variable Funding
Option during the right to return period; therefore, the Contract Value we
return may be greater or less than your Purchase Payment.
If you purchased your Contract as an Individual Retirement Annuity, and you
return it within the first seven days after delivery, or longer if your state
permits, we will refund your full Purchase Payment. During the remainder of the
right to return period, we will refund your Contract Value (including charges we
assessed). We will determine your Contract Value at the close of business on the
day we receive a Written Request for a refund.
During the right to return period, you will not bear any Contract fees
associated with the Purchase Payment Credits. If you exercise your right to
return, you will be in the same position as if you had exercised the right to
return in a variable annuity Contract with no Purchase Payment Credit. You
would, however, receive any gains, and we would bear any losses attributable to
the Purchase Payment Credits.
CAN YOU GIVE A GENERAL DESCRIPTION OF THE VARIABLE FUNDING OPTIONS AND HOW THEY
OPERATE? Through its Subaccounts, the Separate Account uses your Purchase
Payments to purchase shares, at your direction, of one or more of the Variable
Funding Options. In turn, each Variable Funding Option invests in an underlying
mutual fund ("Underlying Fund") that holds securities consistent with its own
investment policy. Depending on market conditions, you may make or lose money in
any of these Variable Funding Options.
You can transfer among the Variable Funding Options as frequently as you wish
without any current tax implications. Currently there is no charge for
transfers, nor a limit to the number of transfers allowed. We may, in the
future, charge a fee for any transfer request, or limit the number of transfers
allowed. At a minimum, we would always allow one transfer every six months. We
reserve the right to restrict transfers that we determine will disadvantage
other Contract Owners.
WHAT EXPENSES WILL BE ASSESSED UNDER THE CONTRACT? The Contract has insurance
features and investment features, and there are costs related to each. We deduct
a mortality and expense risk ("M&E") charge daily from the amounts you allocate
to the Separate Account. We deduct the M&E at an annual rate of 0.80% for the
Standard Death Benefit, and 1.25% for the Optional Death Benefit. Each
Underlying Fund also charges for management costs and other expenses.
We will apply a withdrawal charge to withdrawals from the Contract, and will
calculate it as a percentage of the Purchase Payments and any associated
Purchase Payment Credits withdrawn. The maximum percentage is 5%, decreasing to
0% in years six and later.
Upon annuitization, if you select the Variable Annuitization Floor Benefit,
there is a Floor Benefit charge assessed. This charge will vary based upon
market conditions, and will be set at the time you choose this option. Once
established, this charge will remain the same throughout the term of the
annuitization. If you select the Liquidity Benefit, there is a charge of 5% of
the amounts withdrawn.
HOW WILL MY PURCHASE PAYMENTS AND WITHDRAWALS BE TAXED? Generally, the payments
you make to a Qualified Contract during the accumulation phase are made with
before-tax dollars. Generally, you will be taxed on your Purchase Payments,
Purchase Payment Credits and on any earnings when you make a withdrawal or begin
receiving Annuity Payments. Payments to the Contract are made with after-tax
dollars, and any credits and earnings will generally accumulate tax-deferred.
You will be taxed on these earnings when they are withdrawn from the Contract.
If you are younger than 59 1/2 when you take money out, you may be charged a 10%
federal penalty tax on the amount withdrawn.
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HOW MAY I ACCESS MY MONEY? You can take withdrawals any time during the
accumulation phase. Withdrawal charges may apply, and income taxes, and/or a
penalty tax may apply to taxable amounts withdrawn.
WHAT IS THE DEATH BENEFIT UNDER THE CONTRACT? You may choose to purchase the
Standard or Optional Death Benefit. If you die before the Contract is in the
payout phase, the person you have chosen as your beneficiary will receive a
death benefit. We calculate the death benefit value at the close of the business
day on which our Home Office receives (1) Due Proof of Death and (2) written
payment instructions or the election of beneficiary contract continuance. Please
refer to the Death Benefit section in the prospectus for more details.
WHERE MAY I FIND OUT MORE ABOUT ACCUMULATION UNIT VALUES? The Condensed
Financial Information in Appendix A or Appendix B to this prospectus provides
more information about Accumulation Unit values.
ARE THERE ANY ADDITIONAL FEATURES? This Contract has other features you may be
interested in. These include:
o DOLLAR COST AVERAGING. This is a program that allows you to invest a
fixed amount of money in Variable Funding Options each month,
theoretically giving you a lower average cost per unit over time than a
single one-time purchase. Dollar Cost Averaging requires regular
investments regardless of fluctuating price levels, and does not
guarantee profits or prevent losses in a declining market. Potential
investors should consider their financial ability to continue purchases
through periods of low price levels.
o SYSTEMATIC WITHDRAWAL OPTION. Before the Maturity Date, you can arrange
to have money sent to you at set intervals throughout the year. Of
course, any applicable income and penalty taxes will apply on amounts
withdrawn. Withdrawals in excess of the free withdrawal allowance may
be subject to a withdrawal charge.
o MANAGED DISTRIBUTION PROGRAM. This program allows us to automatically
calculate and distribute to you, in November of the applicable tax
year, an amount that will satisfy the Internal Revenue Service's
minimum distribution requirements imposed on certain Contracts once the
owner reaches age 70 1/2or retires. These minimum distributions occur
during the accumulation phase.
o ASSET ALLOCATION ADVICE. If allowed, you may elect to enter into a
separate advisory agreement with CitiStreet Financial Services LLC.
("CitiStreet"), an affiliate of the Company, for the purpose of
receiving asset allocation advice under CitiStreet's CHART Program. The
CHART Program allocates all Purchase Payments among the CitiStreet
Funds. The CHART Program and applicable fees are fully described in a
separate disclosure statement.
o BENEFICIARY CONTRACT CONTINUANCE (NOT PERMITTED FOR NON-NATURAL
BENEFICIARIES). If you die before the Maturity Date, and if the value
of any beneficiary's portion of the death benefit is between $20,000
and $1,000,000 as of the date of your death, that beneficiary(s) may
elect to continue his/her portion of the Contract.
7
FEE TABLE
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The following tables describe the fees and expenses that you will pay when
buying, owning, and surrendering the Contract. The first table describes the
fees and expenses that you will pay at the time that you buy the Contract,
surrender the Contract, or transfer Contract Value between Variable Funding
Options. Expenses shown do not include premium taxes, which may be applicable.
CONTRACT OWNER TRANSACTION EXPENSES
WITHDRAWAL CHARGE...................................... 5%(1)
(AS A PERCENTAGE OF THE PURCHASE PAYMENTS AND ANY APPLICABLE PURCHASE
PAYMENT CREDITS WITHDRAWN)
TRANSFER CHARGE........................................ $10(2)
(ASSESSED ON TRANSFERS THAT EXCEED 12 PER YEAR)
LIQUIDITY BENEFIT CHARGE...............................5%...
(DURING THE ANNUITY PERIOD, IF YOU HAVE ELECTED THE LIQUIDITY BENEFIT,
A SURRENDER CHARGE OF 5% OF THE AMOUNT WITHDRAWN WILL BE ASSESSED. SEE
"LIQUIDITY BENEFIT").
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(1) The withdrawal charge declines to zero after the Purchase Payment has been
in the Contract for 6 years. The charge is as follows:
YEARS SINCE PURCHASE PAYMENT MADE
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GREATER THAN OR EQUAL TO BUT LESS THAN WITHDRAWAL CHARGE
0 years 1 years 5%
1 years 2 years 4%
2 years 3 years 3%
3 years 4 years 2%
4 years 5 years 1%
5 years+ 0%
(2) We do not currently assess the transfer charge.
8
The next table describes the fees and expenses that you will pay periodically
during the time that you own the Contract, not including Underlying Fund fees
and expenses.
ANNUAL SEPARATE ACCOUNT CHARGES
(AS A PERCENTAGE OF THE AVERAGE DAILY NET ASSETS OF THE SEPARATE ACCOUNT)
STANDARD DEATH BENEFIT:
Mortality and Expense Risk Charge............. 0.80%
Administrative Expense Charge................. None
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Total Annual Separate Account Charges.... 0.80%
OPTIONAL DEATH BENEFIT:
Mortality and Expense Risk Charge............. 1.25%
Administrative Expense Charge................. None
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Total Annual Separate Account Charges.... 1.25%
During the annuity period, if you have elected the Variable Annuitization Floor
Benefit, a total annual separate account charge of up to 3.80% or 4.25% may
apply. See "Variable Annuitization Floor Benefit").
UNDERLYING FUND EXPENSES AS OF DECEMBER 31, 2003 (UNLESS OTHERWISE INDICATED):
The first table below shows the range (minimum and maximum) of the total annual
operating expenses charged by all of the Underlying Funds, before any voluntary
or contractual fee waivers and/or expense reimbursements. The second table shows
each Underlying Fund's management fee, distribution and/or service fees (12b-1)
if applicable, and other expenses. The Underlying Funds provided this
information and we have not independently verified it. More detail concerning
each Underlying Fund's fees and expenses is contained in the prospectus for each
Underlying Fund. Current prospectuses for the Underlying Funds can be obtained
by calling 1-800-842-9406.
MINIMUM AND MAXIMUM TOTAL ANNUAL UNDERLYING FUND OPERATING EXPENSES
MINIMUM MAXIMUM
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TOTAL ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Underlying Fund
assets, including management fees, distribution
and/or service fees (12b-1) fees, and other expenses. 0.42% 4.72%
UNDERLYING FUND FEES AND EXPENSES
(as a percentage of average daily net assets
DISTRIBUTION TOTAL CONTRACTUAL NET TOTAL
AND/OR ANNUAL FEE WAIVER ANNUAL
MANAGEMENT SERVICE(12B-1) OTHER OPERATING AND/OR EXPENSE OPERATING
UNDERLYING FUND: FEE FEES EXPENSES EXPENSES REIMBURSEMENT EXPENSES
- ------------------------------ -------------- ------------- - --------- ------------ ---------------- ----------------
Capital Appreciation Fund 0.75% -- 0.07% 0.82% --
0.82%(17)
High Yield Bond Trust
0.52% -- 0.13% 0.65% -- 0.65%(1)
Managed Assets Trust
0.50% -- 0.09% 0.59% -- 0.59%(17)
Money Market Portfolio
0.32% -- 0.10% 0.42% -- 0.42%(2)
AIM VARIABLE INSURANCE
FUNDS, INC.
AIM V.I. Premier Equity
Fund - Series I+ 0.61% -- 0.24% 0.85% -- 0.85%
AMERICAN FUNDS INSURANCE
SERIES
Global Growth Fund -
Class 2 Shares* 0.66% 0.25% 0.04% 0.95% -- 0.95%
Growth Fund - Class 2
Shares* 0.37% 0.25% 0.02% 0.64% -- 0.64%
Growth-Income Fund -
Class 2 Shares* 0.33% 0.25% 0.01% 0.59% -- 0.59%
CITISTREET FUNDS, INC.
CitiStreet Diversified
Bond Fund - Class I 0.44% -- 0.11% 0.55% -- 0.55%
9
DISTRIBUTION TOTAL CONTRACTUAL NET TOTAL
AND/OR ANNUAL FEE WAIVER ANNUAL
MANAGEMENT SERVICE(12B-1) OTHER OPERATING AND/OR EXPENSE OPERATING
UNDERLYING FUND: FEE FEES EXPENSES EXPENSES REIMBURSEMENT EXPENSES
- ------------------------------ -------------- ------------- - --------- ------------ ---------------- ----------------
CitiStreet International
Stock Fund - Class I 0.74% -- 0.16% 0.90% -- 0.90%
CitiStreet Large Company
Stock Fund - Class I 0.53% -- 0.10% 0.63% -- 0.63%
CitiStreet Small Company
Stock Fund - Class I 0.60% -- 0.19% 0.79% -- 0.79%
CITISTREET FUNDS, INC. **
CitiStreet Diversified
Bond Fund - Class I 0.44% -- 1.36% 1.80% -- 1.80%
CitiStreet International
Stock Fund - Class I 0.74% -- 1.41% 2.15% -- 2.15%
CitiStreet Large Company
Stock Fund - Class I 0.53% -- 1.35% 1.88% -- 1.88%
CitiStreet Small Company
Stock Fund - Class I 0.60% -- 1.44% 2.04% -- 2.04%
CREDIT SUISSE TRUST
Credit Suisse Trust
Emerging Market
Portfolio+ 1.25% -- 0.56% 1.81% -- --(24)
DELAWARE VIP TRUST
Delaware VIP REIT Series
- Standard Class 0.75% -- 0.11% 0.86% -- 0.86%(3)
Delaware VIP Small Cap
Value Series - Standard
Class 0.75% -- 0.11% 0.86% -- 0.86%(4)
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus Variable
Investment Fund -
Appreciation Portfolio
- Initial Shares 0.75% -- 0.05% 0.80% -- 0.80%
Dreyfus Variable
Investment Fund -
Developing Leaders
Portfolio - Initial
Shares 0.75% -- 0.07% 0.82% -- 0.82%
FRANKLIN TEMPLETON VARIABLE
INSURANCE PRODUCTS TRUST
Mutual Shares Securities
Fund - Class 2 Shares* 0.60% 0.25% 0.20% 1.05% -- 1.05%(5)
Templeton Developing
Markets Securities Fund
- Class 2 Shares* 1.25% 0.25% 0.30% 1.80% -- 1.80%
Templeton Foreign
Securities Fund - Class
2 Shares* 0.69% 0.25% 0.22% 1.16% 0.04% 1.12%(6)
Templeton Growth
Securities Fund - Class
2 Shares* 0.81% 0.25% 0.07% 1.13% -- 1.13%(7)
GREENWICH STREET SERIES FUND
Appreciation Portfolio 0.75% -- 0.02% 0.77% -- 0.77%
Equity Index Portfolio -
Class II Shares* 0.31% 0.25% 0.04% 0.60% -- 0.60%
Fundamental Value
Portfolio+ 0.75% -- 0.02% 0.77% -- 0.77%
JANUS ASPEN SERIES
Balanced Portfolio -
Service Shares* 0.65% 0.25% 0.02% 0.92% -- 0.92%
Mid Cap Growth Portfolio
- Service Shares* 0.65% 0.25% 0.02% 0.92% -- 0.92%
Worldwide Growth
Portfolio - Service
Shares* 0.65% 0.25% 0.06% 0.96% -- 0.96%
LAZARD RETIREMENT SERIES,
INC.
Lazard Retirement Small
Cap Portfolio* 0.75% 0.25% 0.42% 1.42% 0.17% 1.25%(8)
LORD ABBETT SERIES FUND, INC.
Growth and Income
Portfolio 0.50% -- 0.35% 0.85% -- 0.85%
Mid-Cap Value Portfolio 0.75% -- 0.33% 1.08% -- 1.08%
10
DISTRIBUTION TOTAL CONTRACTUAL NET TOTAL
AND/OR ANNUAL FEE WAIVER ANNUAL
MANAGEMENT SERVICE(12B-1) OTHER OPERATING AND/OR EXPENSE OPERATING
UNDERLYING FUND: FEE FEES EXPENSES EXPENSES REIMBURSEMENT EXPENSES
- ------------------------------ -------------- ------------- - --------- ------------ ---------------- ----------------
OPPENHEIMER VARIABLE ACCOUNT
FUNDS
Oppenheimer Main Street
Fund/VA - Service
Shares* 0.68% 0.25% 0.03% 0.96% -- 0.96%
PIMCO VARIABLE INSURANCE
TRUST
Total Return Portfolio -
Administrative Class* 0.25% 0.15% 0.26% 0.66% 0.01% 0.65%(9)
PUTNAM VARIABLE TRUST
Putnam VT Discovery
Growth Fund - Class IB
Shares* 0.70% 0.25% 0.86% 1.81% -- 1.81%(10)
Putnam VT International
Equity Fund - Class IB
Shares* 0.77% 0.25% 0.22% 1.24% -- 1.24%(10)
Putnam VT Small Cap Value
Fund - Class IB Shares* 0.80% 0.25% 0.12% 1.17% -- 1.17%(10)
SALOMON BROTHERS VARIABLE
SERIES FUNDS INC.
All Cap Fund - Class I 0.85% -- 0.13% 0.98% -- 0.98%
Investors Fund - Class I 0.70% -- 0.12% 0.82% -- 0.82%
Small Cap Growth Fund -
Class I 0.75% -- 0.51% 1.26% -- 1.26%
Total Return Fund -
Class I+ 0.80% -- 0.21% 1.01% -- --(24)
SMITH BARNEY INVESTMENT
SERIES
Smith Barney Large Cap
Core Portfolio+ 0.75% -- 0.16% 0.91% -- 0.91%
Smith Barney Premier
Selections All Cap
Growth Portfolio 0.75% -- 0.15% 0.90% -- 0.90%
STRONG VARIABLE INSURANCE
FUNDS, INC.
Strong Multi Cap Value
Fund II+ 0.75% -- 0.86% 1.61% -- --(11)
THE TRAVELERS SERIES TRUST
Convertible Securities
Portfolio 0.60% -- 0.18% 0.78% -- 0.78%(12)
Disciplined Mid Cap Stock
Portfolio 0.70% -- 0.12% 0.82% -- 0.82%(13)
Equity Income Portfolio 0.75% -- 0.12% 0.87% -- 0.87%(13)
Federated Stock Portfolio+ 0.63% -- 0.29% 0.92% -- 0.92%(13)
Large Cap Portfolio 0.75% -- 0.11% 0.86% -- 0.86%(13)
Lazard International
Stock Portfolio 0.83% -- 0.17% 1.00% -- 1.00%(17)
Merrill Lynch Large Cap
Core Portfolio 0.80% -- 0.19% 0.99% -- 0.99%(14)
MFS Emerging Growth
Portfolio 0.75% -- 0.14% 0.89% -- 0.89%(13)
MFS Mid Cap Growth
Portfolio 0.80% -- 0.12% 0.92% -- 0.92%(14)
MFS Value Portfolio 0.75% -- 0.33% 1.08% -- --(14)
Pioneer Fund Portfolio 0.72% -- 0.40% 1.12% -- 1.12%(15)
Social Awareness Stock
Portfolio 0.62% -- 0.16% 0.78% -- 0.78%(17)
Travelers Quality Bond
Portfolio 0.32% -- 0.11% 0.43% -- 0.43%(16)
U.S. Government
Securities Portfolio 0.32% -- 0.10% 0.42% -- 0.42%(17)
TRAVELERS SERIES FUND INC.
AIM Capital Appreciation
Portfolio 0.80% -- 0.05% 0.85% -- 0.85%
MFS Total Return Portfolio 0.80% -- 0.02% 0.82% -- 0.82%
11
DISTRIBUTION TOTAL CONTRACTUAL NET TOTAL
AND/OR ANNUAL FEE WAIVER ANNUAL
MANAGEMENT SERVICE(12B-1) OTHER OPERATING AND/OR EXPENSE OPERATING
UNDERLYING FUND: FEE FEES EXPENSES EXPENSES REIMBURSEMENT EXPENSES
- ------------------------------ -------------- ------------- - --------- ------------ ---------------- ----------------
Pioneer Strategic Income
Portfolio 0.75% -- 0.25% 1.00% -- 1.00%
SB Adjustable Rate Income
Portfolio Smith Barney
Class* 0.60% 0.25% 3.87% 4.72% 3.72% 1.00%(18)
Smith Barney Aggressive
Growth Portfolio 0.80% -- 0.02% 0.82% -- 0.82%
Smith Barney High Income
Portfolio 0.60% -- 0.09% 0.69% -- 0.69%
Smith Barney
International All Cap
Growth Portfolio+ 0.90% -- 0.09% 0.99% -- 0.99%
Smith Barney Large
Capitalization Growth
Portfolio 0.75% -- 0.04% 0.79% -- 0.79%
Strategic Equity Portfolio 0.80% -- 0.04% 0.84% -- 0.84%
VAN KAMPEN LIFE INVESTMENT
TRUST
Comstock Portfolio Class
II Shares* 0.60% 0.25% 0.05% 0.90% -- 0.90%
Emerging Growth Portfolio
Class II Shares* 0.70% 0.25% 0.07% 1.02% -- 1.02%
Enterprise Portfolio
Class II Shares* 0.50% 0.25% 0.14% 0.89% -- --(19)
VARIABLE ANNUITY PORTFOLIOS
Smith Barney Small Cap
Growth Opportunities
Portfolio 0.75% -- 0.40% 1.15% -- --(24)
VARIABLE INSURANCE PRODUCTS
FUND II
Asset Manager Portfolio -
Service Class 2* 0.53% 0.10% 0.11% 0.74% -- --(20)
Contrafund(R)Portfolio -
Service Class 2* 0.58% 0.25% 0.10% 0.93% -- --(21)
VARIABLE INSURANCE PRODUCTS
FUND III
Dynamic Capital
Appreciation Portfolio
- Service Class 2* 0.58% 0.25% 1.27% 2.10% -- --(22)
Mid Cap Portfolio -
Service Class 2* 0.58% 0.25% 0.12% 0.95% -- --(23)
- --------------
* The 12b-1 fees deducted from these classes cover certain distribution,
shareholder support and administrative services provided by
intermediaries (the insurance company, broker dealer or other service
provider).
** Includes 0.0125 CHART asset allocation fee.
+ Closed to new investors.
NOTES
(1) Management fee is based on 0.50% on first $50 million of net assets;
0.40% on the next $100 million; 0.30% on the next $100 million and 0.25%
on assets in excess of $250 million. Other Expenses include 0.06%
adminstrative services fee the Fund pays to Travelers Insurance Company.
(2) Fund has a voluntary waiver of 0.40%. Other Expenses include 0.06%
administrative services fee the Fund pays to Travelers Insurance Company.
(3) The investment advisor for the Delaware VIP REIT Series is Delaware
Management Company ("DMC"). For the period May 1, 2002 through April 30,
2004, the advisor waived its management fee and/or reimbursed the Series
for expenses to the extent that total expenses (excluding any taxes,
interest, brokerage fees, and extraordinary expenses) would not exceed
0.95%. Effective May 1, 2004 through April 30, 2005, DMC has
contractually agreed to waive its management fee and/or reimburse the
Series for expenses to the extent that total expenses (excluding any
taxes, interest, brokerage fees, and extraordinary expenses) would not
exceed 0.95%. Under its Management Agreement, the Series pays a
management fee based on average daily net assets as follows: 0.75% on the
first $500 million, 0.70% on the next $500 million, 0.65% on the next
$1,500 million, 0.60% on assets in excess of $2,500 million, all per
year.
(4) The investment advisor for the Delaware VIP Small Cap Value Series is
Delaware Management Company ("DMC"). For the period May 1, 2002 through
April 30, 2004, the advisor waived its management fee and/or reimbursed
the Series for expenses to the extent that total expenses (excluding any
taxes, interest, brokerage fees, and extraordinary expenses) would not
exceed 0.95%. Effective May 1, 2004 through April 30, 2005, DMC has
contractually agreed to waive its management fee and/or reimbursed the
Series for expenses to the extent that total expenses (excluding any
taxes, interest, brokerage fees, and extraordinary expenses) would not
exceed 0.95%. Under its Management Agreement, the Series pays a
management fee based on average daily net assets as follows: 0.75% on the
first $500 million, 0.70% on the next $500 million, 0.65% on the next
$1,500 million, 0.60% on assets in excess of $2,500 million, all per
year.
12
(5) While the maximum amount payable under the Fund's Class 2 rule 12b-1 plan
is 0.35% per year of the Fund's Class 2 average annual net assets, the
Fund's Board of Trustees has set the current rate at 0.25% per year.
(6) The manager has agreed in advance to reduce its fee to reflect reduced
services resulting from the Fund's investment in a Franklin Templeton
money fund. This reduction is required by the Fund's Board of Trustees
(Board) and an order of the Securities and Exchange Commission (SEC).
(7) The Fund administration fee is paid indirectly through the management
fee. While the maximum amount payable under the Fund's Class 2 rule 12b-1
plan is 0.35% per year of the Fund's Class 2 average annual net assets,
the Fund's Board of Trustees has set the current rate at 0.25% per year.
(8) Reflects a contractual obligation by the Investment Manager to waive its
fee and, if necessary, reimburse the Portfolio through December 31, 2004
to the extent Total Annual Portfolio Operating Expenses exceed 1.25% of
the Portfolio's average daily net assets.
(9) "Other Expenses" reflects a 0.25% administrative fee, and 0.01%
representing the Portfolio's pro rata Trustees' fees. PIMCO has
contractually agreed to reduce total annual portfolio operating expenses
for the Administrative Class shares to the extent they would exceed, due
to the payment of organizational expenses and Trustees' fees 0.65% of
average daily net assets. Under the Expense Limitation Agreement, PIMCO
may recoup these waivers and reimbursements in future periods, not
exceeding three years, provided total expenses, including such
recoupment, do not exceed the annual expense limit.
(10) There was no fee waiver or expense reimbursement for 2003, but effective
January 28, 2004 there will be a limit in effect. Effective January 28,
2004, Putnam Management has agreed to limit its compensation (and, to the
extent necessary, bear other expenses) through December 31, 2004, to the
extent that each fund's net expenses as a percentage of its net assets
exceed the average expense ratio for the fund's Lipper peer group of
funds underlying variable insurance products.
(11) The Fund participated in a program under which it received a credit for
part of the brokerage commission paid in transactions with participating
brokers. This credit was applied to the Fund's Operating Expenses that
were not attributable to Strong or its affiliates. Total Annual Operating
Expenses do not reflect these credits or voluntary waiver of fess and/or
expense absorptions. After giving effect to these credits and with
waivers and/or absorptions, Total Annual Operating expenses were 1.13%.
We can modify or terminate voluntary waivers and/or absorptions at any
time.
(12) Fund has a voluntary waiver of 0.80%. Other Expenses include 0.06%
administrative services fee the Fund pays to Travelers Insurance Company.
(13) Fund has a voluntary waiver of 0.95%. Other Expenses include 0.06%
administrative services fee the Fund pays to Travelers Insurance Company.
(14) Fund has a voluntary waiver of 1.00%. Other Expenses include 0.06%
administrative services fee the Fund pays to Travelers Insurance Company.
(15) Effective 5/1/03, shareholders approved a new Investment Advisory
Agreement that increased the management fee from 0.65% to 0.75%. The
actual Management Fee for the year was a blended rate of 0.72%. Other
Expenses include 0.06% adminstrative services fee the Fund pays to
Travelers Insurance Company.
(16) Fund has a voluntary waiver of 0.75%. Other Expenses include 0.06%
administrative services fee the Fund pays to Travelers Insurance Company.
(17) Fund has a voluntary waiver of 1.25%. Other Expenses include 0.06%
administrative services fee the Fund pays to Travelers Insurance Company.
(18) Pursuant to an agreement, the Investment Advisor has agreed, for the
period of one year, commencing November 1, 2003, to limit its fee and to
reimburse expenses to the extent necessary to limit total operating
expenses to 1.00%.
(19) Under the terms of the Advisory agreement, if the total ordinary business
expenses, exclusive of taxes, distribution fees and interest, exceed .95%
of the average daily net assets of the Portfolio, the Adviser will
reimburse the Portfolio for the amount of the excess. Additionally, the
Adviser has voluntarily agreed to reimburse the Portfolio for all
expenses as a percentage of average daily net assets in excess of .60%
and .85% for Classes I and II, respectively. For the year ended December
31, 2003, the Adviser waived $57,431 of its investment advisory fees.
This waiver is voluntary in nature and can be discontinued at the
Adviser's discretion.
(20) A portion of the brokerage commissions that the fund pays may be
reimbursed and used to reduce the fund's expenses. In addition, through
arrangements with the fund's custodian, credits realized as a result of
uninvested cash balances are used to reduce the fund's custodian
expenses. Including these reductions, the total class operating expenses
would have been 0.73%. These offsets may be discontinued at any time.
(21) A portion of the brokerage commissions that the fund pays may be
reimbursed and used to reduce the fund's expenses. In addition, through
arrangements with the fund's custodian, credits realized as a result of
uninvested cash balances are used to reduce the fund's custodian
expenses. Including these reductions, the total class operating expenses
would have been 0.90%. These offsets may be discontinued at any time.
(22) A portion of the brokerage commissions that the fund pays may be
reimbursed and used to reduce the fund's expenses. Including this
reduction, the total class operating expenses would have been 1.15%. The
fund's manager has voluntarily agreed to reimburse the class to the
extent that total operating expenses (excluding interest, taxes, certain
securities lending costs, brokerage commissions and extraordinary
expenses) exceed 1.25%. The expense ratio shown reflects the expense cap
in effect at period end. This arrangement can be discountinued by the
fund's manager at any time.
(23) A portion of the brokerage commissions that the fund pays may be
reimbursed and used to reduce the fund's expenses. In addition, through
arrangements with the fund's custodian, credits realized as a result of
uninvested cash balances are used to reduce the fund's custodian
expenses. Including these reductions, the total class operating expenses
would have been 0.93%. These offsets may be discontinued at any time.
(24) The table below shows the amount of the waiver or reimbursement and the
net total annual operating expenses for Underlying Funds that have
entered into a voluntary fee waiver and/or expense reimbursement
arrangement. The net total annual operating expense figure reflects the
fee waivers and/or expense reimbursements that were in effect as of the
Underlying Fund's fiscal year end. However, as these arrangements are
voluntary, they may be changed or terminated at any time, in which case
the Underlying Fund would be subject to different net total annual
operating expenses. Without such waivers performance would be lower.
13
VOLUNTARY FEE
WAIVER AND/OR
EXPENSE NET TOTAL ANNUAL
FUNDING OPTION REIMBURSEMENT OPERATING EXPENSES
Credit Suisse Trust Emerging Market Portfolio 0.41% 1.40%
Total Return Fund - Class I 0.01% 1.00%
Strong Multi Cap Value Fund II 0.48% 1.13%
MFS Value Portfolio 0.08% 1.00%
Enterprise Portfolio Class II Shares 0.04% 0.85%
Smith Barney Small Cap Growth Opportunities Portfolio 0.25% 0.90%
Asset Manager Portfolio - Service Class 2 0.01% 0.73%
Contrafund(R)Portfolio - Service Class 2 0.03% 0.90%
Dynamic Capital Appreciation Portfolio - Service Class 2 0.95% 1.15%
Mid Cap Portfolio - Service Class 2 0.02% 0.93%
14
EXAMPLES
These examples are intended to help you compare the cost of investing in the
Contract with the cost of investing in other variable annuity Contracts. These
costs include Contract Owner transaction expenses, Contract fees, separate
account annual expenses, and Underlying Fund total annual operating expenses.
These examples do not represent past or future expenses. Your actual expenses
may be more or less than those shown.
These examples assume that you invest $10,000 in the Contract for the time
periods indicated and that your investment has a 5% return each year. The
examples reflect the annual Contract administrative charge and are based on the
minimum and maximum Underlying Fund total annual operating expenses shown above,
and do not reflect any Underlying Fund fee waivers and/or expense
reimbursements.
The examples assume you have elected the Optional Death Benefit and that you
have allocated all of your Contract Value to either the Underlying Fund with the
maximum total annual operating expenses or the Underlying Fund with the minimum
total annual operating expenses. Your actual expenses will be less than those
shown if you do not elect the Optional Death Benefit.
EXAMPLE MAXIMUM CHARGES(ASSUMING YOU SELECT THE OPTIONAL DEATH BENEFIT)
- ----------------------------------------------------------------------------------------------------------------------------
If Contract is surrendered at the If Contract is NOT surrendered or
end of period shown: annuitized at the end of period shown**:
------------------------------------ ----------------------------------------
FUNDING OPTION 1 3 5 10 1 3 5 10
YEAR YEARS YEARS YEARS YEAR YEARS YEARS YEARS
- ----------------------------------------------------------------------------------------------------------------------------
Underlying Fund with Minimum Total
Annual Operating Expenses 670 826 1007 1976 170 526 907 1976
Underlying Fund with Maximum Total
Annual Operating Expenses 1094 2065 3013 5688 594 1765 2913 5688
15
CONDENSED FINANCIAL INFORMATION
================================================================================
See Appendices A and B.
THE ANNUITY CONTRACT
================================================================================
Travelers Retirement Account Annuity is a Contract between the Contract Owner
("you") and the Company. This is the prospectus -- it is not the Contract. The
prospectus highlights many Contract provisions to focus your attention on the
Contract's essential features. Your rights and obligations under the Contract
will be determined by the language of the Contract itself. When you receive your
Contract, we suggest you read it promptly and carefully. There may be
differences in your Contract from the descriptions in this prospectus because of
the requirements of the state where we issued your Contract. We will include any
such differences in your Contract.
The Company offers several different annuities that your investment professional
may be authorized to offer to you. Each annuity offers different features and
benefits that may be appropriate for you. In particular, the annuities differ
based on variations in the standard and optional death benefit protection
provided for your beneficiaries, the availability of optional living benefits,
the ability to access your contract value if necessary and the charges that you
will be subject to if you make a withdrawal or surrender the annuity. The
separate account charges and other charges may be different between each annuity
we offer. Optional death benefits and living benefits are subject to a separate
charge for the additional protections they offer to you and your beneficiaries.
Furthermore, annuities that offer greater flexibility to access you contract
value generally are subject to higher separate account charges than annuities
that deduct charges if you make a withdrawal or surrender.
We encourage you to evaluate the fees, expenses, benefits and features of this
annuity against those of other investment products, including other annuity
products offered by us and other insurance companies. Before purchasing this or
any other investment product you should consider whether the product you
purchase is consistent with your risk tolerance, investment objectives,
investment time horizon, financial and tax situation, liquidity needs and how
you intend to use the annuity.
You make Purchase Payments to us and we credit them to your Contract. We promise
to pay you an income, in the form of Annuity Payments, beginning on a future
date that you choose, the Maturity Date. The Purchase Payments accumulate tax
deferred in the funding options of your choice. We offer multiple Variable
Funding Options. We may also offer a Fixed Account option. Where permitted by
law, we reserve the right to restrict Purchase Payments into the Fixed Account
whenever the credited interest rate on the Fixed Account is equal to the minimum
guaranteed interest rate specified under the Contract. The Contract Owner
assumes the risk of gain or loss according to the performance of the Variable
Funding Options. The Contract Value is the amount of Purchase Payments and any
associated Purchase Payment Credits, plus or minus any investment experience on
the amounts you allocate to the Separate Account ("Separate Account Contract
Value") or interest on the amounts you allocate to the Fixed Account ("Fixed
Account Contract Value"). The Contract Value also reflects all withdrawals made
and charges deducted. There is generally no guarantee that at the Maturity Date
the Contract Value will equal or exceed the total Purchase Payments made under
the Contract. The date the Contract and its benefits become effective is
referred to as the Contract Date. Each 12-month period following the Contract
Date is called a Contract Year.
Certain changes and elections must be made in writing to the Company. Where the
term "Written Request" is used, it means that you must send written information
to our Home Office in a form and content satisfactory to us.
This product is available to owners and Annuitants under the age of 85 as of the
Contract Date.
Purchase of this Contract through a tax qualified retirement plan or IRA does
not provide any additional tax deferral benefits beyond those provided by the
plan or the IRA. Accordingly, if you are purchasing this Contract through a plan
or IRA, you should consider purchasing this Contract for its Death Benefit,
Annuity Option Benefits, and other non-tax-related benefits. You should consult
with your financial adviser to determine if this Contract is appropriate for
you.
16
CONTRACT OWNER INQUIRIES
Any questions you have about your Contract should be directed to our Home Office
at 1-800-842-9406.
PURCHASE PAYMENTS
Your initial Purchase Payment is due and payable before the Contract becomes
effective. The initial Purchase Payment must be at least $20,000. You may make
additional payments of at least $5,000 at any time. No additional payments are
allowed if this Contract is purchased with a beneficiary-directed transfer of
death benefit proceeds. Under certain circumstances, we may waive the minimum
Purchase Payment requirement. Purchase Payments over $1,000,000 may be made only
with our prior consent.
We will apply the initial Purchase Payment less any applicable premium tax (net
Purchase Payment) within two business days after we receive it in good order at
our Home Office. We will credit subsequent Purchase Payments to a Contract on
the same business day we receive it, if it is received in good order by our Home
Office by 4:00 p.m. Eastern time. A business day is any day that the New York
Stock Exchange is open for regular trading (except when trading is restricted
due to an emergency as defined by the Securities and Exchange Commission).
Purchase Payments allocated to the Fixed Account are not eligible for Purchase
Payment Credits.
Where permitted by state law, we reserve the right to restrict Purchase Payments
into the Fixed Account whenever the credited interest rate on the Fixed Account
is equal to the minimum guaranteed interest rate specified under the Contract.
PURCHASE PAYMENT CREDITS
If, for an additional charge, you select the Optional Death Benefit, we will add
a credit to your Contract with each Purchase Payment. Each credit is added to
the Contract Value when the corresponding Purchase Payment is applied, and will
equal 2% of each Purchase Payment. These credits are applied pro rata to the
same Variable Funding Options to which your Purchase Payment was applied.
Purchase Payments allocated to the Fixed Account are not eligible for Purchase
Payment Credits.
You should know that over time and under certain circumstances (such as a period
of poor market performance) the costs associated with the Purchase Payment
Credits may more than offset the Purchase Payment Credits and related earnings.
You should consider this possibility before purchasing the Optional Death
Benefit.
CONSERVATION CREDIT
If you are purchasing this Contract with funds from another Contract issued by
us or our affiliates, you may receive a conservation credit to your Purchase
Payments. If applied, we will determine the amount of such credit.
ACCUMULATION UNITS
The period between the Contract Date and the Maturity Date is the Accumulation
Period. During the Accumulation Period, and Accumulation Unit is used to
calculate the value of a Contract. Each Variable Funding Option has a
corresponding Accumulation Unit value. The Accumulation Units are valued each
business day and their values may increase or decrease from day to day. The
number of Accumulation Units we will credit to your Contract once we receive a
Purchase Payment is determined by dividing the amount directed to each Variable
Funding Option by the value of its Accumulation Unit. We calculate the value of
an Accumulation Unit for each Variable Funding Option each day the New York
Stock Exchange is open. The values are calculated as of 4:00 p.m. Eastern time.
After the value is calculated, we credit your Contract. During the Annuity
Period (i.e., after the Maturity Date), you are credited with Annuity Units.
THE VARIABLE FUNDING OPTIONS
You choose the Variable Funding Options to which you allocate your Purchase
Payments. These Variable Funding Options are Subaccounts of the Separate
Account. The Subaccounts invest in the Underlying Funds. You are not investing
directly in the Underlying Fund. Each Underlying Fund is a portfolio of an
open-end management investment company that is registered with the SEC under the
Investment Company Act of 1940. These Underlying Funds are not publicly traded
and are offered only through variable annuity and variable life insurance
products. They are not the same retail mutual funds as those offered outside of
a variable annuity or
17
variable life insurance product, although the investment practices and fund
names may be similar, and the portfolio managers may be identical. Accordingly,
the performance of the retail mutual fund is likely to be different from that of
the Underlying Fund, and Contract Owners should not compare the two.
You will find detailed information about the funds and their inherent risks in
the current fund prospectuses for the Underlying Funds. Since each option has
varying degrees of risk, please read the prospectuses carefully. There is no
assurance that any of the Underlying Funds will meet its investment objectives.
Contact your registered representative or call 1-800-842-9406 to request
additional copies of the prospectuses.
If any of the Underlying Funds become unavailable for allocating Purchase
Payments, or if we believe that further investment in an Underlying Fund is
inappropriate for the purposes of the Contract, we may substitute another
funding option. However, we will not make any substitutions without notifying
you and obtaining any state and SEC approval, if necessary. From time to time we
may make new funding options available.
ADMINISTRATIVE, MARKETING AND SUPPORT SERVICE FEES. The Company and TDLLC have
arrangements with the investment adviser, subadviser, distributor, and/or
affiliated companies of many of the Underlying Funds under which the Company and
TDLLC receive payments in connection with our provision of administrative,
marketing or other support services to the Funds. Proceeds of these payments may
be used for any corporate purpose, including payment of expenses that the
Company and TDLLC incur in promoting, issuing, distributing and administering
the Contracts.
The payments are generally based on a percentage of the average assets of each
Underlying Fund allocated to the Variable Funding Options under the Contract or
other contracts offered by the Company. Aggregate fees relating to the different
Funds may vary in amount and may be as much as 0.60% of the average net assets
of an Underlying Fund attributable to the relevant Contracts. A portion of these
payments may come from revenue derived from the Distribution and/or Service Fees
(12b-1 fees) that are deducted from an Underlying Fund's assets as part of its
Total Annual Operating Expenses. The arrangements may vary for each Underlying
Fund.
The current Variable Funding Options are listed below, along with their
investment advisers and any subadviser:
FUNDING INVESTMENT INVESTMENT
OPTION OBJECTIVE ADVISER/SUBADVISER
- ----------------------------------------- ------------------------------------------- --------------------------------------
Capital Appreciation Fund Seeks growth of capital. The Fund Travelers Asset Management
normally invests in equity securities International Company LLC ("TAMIC")
of issuers of any size and in any Subadviser: Janus Capital Corp.
industry.
High Yield Bond Trust Seeks high current income. The Fund Travelers Asset Management
normally invests in below International Company LLC ("TAMIC")
investment-grade bonds and debt
securities.
Managed Assets Trust Seeks high total return. The Fund Travelers Asset Management
normally invests in equities, International Company LLC ("TAMIC")
convertible and fixed-income Subadviser: Travelers Investment
securities. The Fund's policy is to Management Company ("TIMCO")
allocate investments among asset
classes.
Money Market Portfolio Seeks high current return with Travelers Asset Management
preservation of capital and liquidity. International Company LLC ("TAMIC")
The Fund normally invests in
high-quality short term money market
instruments.
AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Premier Equity Fund - Seeks to achieve long term growth of A I M Advisers, Inc.
Series I+ capital. Income is a secondary
objective. The Fund normally invests
in equity securities, including
convertible securities.
AMERICAN FUNDS INSURANCE SERIES
Global Growth Fund - Class 2 Shares Seeks capital appreciation. The Fund Capital Research and Management
normally invests in common stocks of Co.("CRM")
companies located around the world.
Growth Fund - Class 2 Shares Seeks capital appreciation. The Fund Capital Research and Management Co.
normally invests in common stocks of
companies that appear to offer superior
opportunities for growth of capital.
Growth-Income Fund - Class 2 Shares Seeks capital appreciation and income. Capital Research and Management Co.
The Fund normally invests in common
stocks or other securities that
demonstrate the potential for
appreciation and/or dividends.
18
FUNDING INVESTMENT INVESTMENT
OPTION OBJECTIVE ADVISER/SUBADVISER
- ----------------------------------------- ------------------------------------------- --------------------------------------
CITISTREET FUNDS, INC.
CitiStreet Diversified Bond Fund - Seeks maximum long term total return. CitiStreet Funds Management
Class I The Fund normally invests in fixed LLC("CitiStreet")
income securities. Subadviser: Western
AssetManagement Company; Salomon
Brothers Asset Management
("SBAM"); and SSgA Funds
Management ("SSgA")
CitiStreet International Stock Seeks maximum long term total return. CitiStreet
Fund - Class I The Fund normally invests in the common Subadviser: Bank of Ireland Asset
stocks of established non-U.S. Management (U.S.) Limited;
companies. Citigroup Asset Management
Limited, and SSgA
CitiStreet Large Company Stock Seeks maximum long term total return. CitiStreet
Fund - Class I The Fund normally invests in the common Subadviser: Wellington Management
stocks of large, well established Company; Smith Barney Fund
companies. Management LLC, and SSgA
CitiStreet Small Company Stock Seeks maximum long term total return. CitiStreet
Fund - Class I The Fund normally invests in the common Subadviser: TCW Investment
stocks of small companies. Management; SBAM; and SSgA
CREDIT SUISSE TRUST
Credit Suisse Trust Emerging Seeks long term growth of capital. The Credit Suisse Asset Management, LLC
Market Portfolio+ Fund normally invests in equity Subadviser: Credit Suisse Asset
securities of companies located in, or Management Limited
conducting a majority of their
business, in emerging markets.
DELAWARE VIP TRUST
Delaware VIP REIT Series - Seeks to achieve maximum long term Delaware Management
Standard Class total return with capital appreciation Company("Delaware")
as a secondary objective. The Fund
normally invests in companies that
manage a portfolio of real estate to
earn profits for shareholders (REITS).
Delaware VIP Small Cap Value Seeks capital appreciation. The Fund Delaware Management Company
Series - Standard Class normally invests in securities of small
capitalization companies.
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus Variable Investment Fund - Seeks long term capital growth The Dreyfus Corporation ("Dreyfus")
Appreciation Portfolio - Initial consistent with the preservation of Subadviser: Fayez Sarofim & Co.
Shares capital. Current income is a secondary
objective. The Fund normally invests in
common stocks of established companies.
Dreyfus Variable Investment Fund - Seeks to maximize capital appreciation. The Dreyfus Corporation
Developing Leaders Portfolio - The Fund normally invests in companies
Initial Shares with market capitalizations of less
than $2 billion at the time of purchase.
FRANKLIN TEMPLETON VARIABLE INSURANCE
PRODUCTS TRUST
Mutual Shares Securities Fund - Seeks capital appreciation. Income is a Franklin Mutual Advisers, LLC
Class 2 Shares secondary objective. The Fund normally
invests in equity securities of
companies believed to be undervalued.
Templeton Developing Markets Seeks long-term capital appreciation. Templeton Asset Management Ltd.
Securities Fund - Class 2 Shares The Fund normally invests in the
investments of emerging market
countries, primarily equity securities.
Templeton Foreign Securities Fund Seeks long-term capital growth. The Templeton Investment Counsel, LLC
- Class 2 Shares Fund normally invests in investments,
primarily equity securities, of issuers
located outside of the U.S., including
those in emerging markets.
Templeton Growth Securities Fund - Seeks long-term capital growth. The Templeton Global Advisors Limited
Class 2 Shares Fund normally invests in equity
securities of companies located
anywhere in the world, including the
U.S. and emerging markets.
GREENWICH STREET SERIES FUND
Appreciation Portfolio Seeks long- term appreciation of Smith Barney Fund Management
capital. The Fund normally invests in
LLC("SBFM") equity securities of U.S.
companies.
19
FUNDING INVESTMENT INVESTMENT
OPTION OBJECTIVE ADVISER/SUBADVISER
- ----------------------------------------- ------------------------------------------- --------------------------------------
Equity Index Portfolio - Class II Seeks investment results that, before TIMCO
Shares expenses, correspond to the price and
yield performance of the S&P 500 Index.
The Fund normally invests in equity
securities, or other investments with
similar economic characteristics that
are included in the S&P 500 Index.
Fundamental Value Portfolio+ Seeks long-term capital growth. Current SBFM
income is a secondary consideration.
The Fund normally invests in common
stocks, and common stock equivalents of
companies, believed to be undervalued.
JANUS ASPEN SERIES
Balanced Portfolio - Service Seeks long term capital growth, Janus Capital
Shares+ consistent with preservation of capital
and balanced by current income. The
Fund normally invests in common stocks
selected for their growth potential and
other securities selected for their
income potential.
Mid Cap Growth Portfolio - Service Seeks capital growth. The Fund normally Janus Capital Management
Shares invests in equity securities of LLC("Janus Capital")
mid-sized companies.
Worldwide Growth Portfolio - Seeks growth of capital in a manner Janus Capital
Service Shares+ consistent with the preservation of
capital. The Fund normally invests in
the common stocks of companies of any
size throughout the world.
LAZARD RETIREMENT SERIES, INC.
Lazard Retirement Small Cap Seeks long-term capital appreciation. Lazard Asset Management, LLC
Portfolio The Fund normally invests in equity
securities, principally common stocks,
of relatively small U.S. companies that
are believed to be undervalued based on
their earnings, cash flow or asset
values.
LORD ABBETT SERIES FUND, INC.
Growth and Income Portfolio Seeks long-term growth of capital and Lord Abbett & Co.
income without excessive fluctuations
in market value. The Fund normally
invests in equity securities of large,
seasoned, U.S. and multinational
companies believed to be undervalued.
Mid-Cap Value Portfolio Seeks capital appreciation. The Fund Lord Abbett & Co.
normally invests in common stocks of
mid-sized companies believed to be
undervalued.
OPPENHEIMER VARIABLE ACCOUNT FUNDS
Oppenheimer Main Street Fund/VA - Seeks high total return. The Fund OppenheimerFunds, Inc.
Service Shares normally invests in common stocks of
U.S. companies and it may invest in
debt securities, as well.
PIMCO VARIABLE INSURANCE TRUST
Total Return Portfolio - Seeks maximum total return, consistent Pacific Investment Management
Administrative Class with preservation of capital and Company LLC
prudent investment management. The Fund
normally invests in intermediate
maturity fixed income securities.
PUTNAM VARIABLE TRUST
Putnam VT Discovery Growth Fund - Seeks long-term growth of capital. The Putnam Investment Management
Class IB Shares+ Fund normally invests in the common
stocks of U.S. companies believed to be
fast-growing and whose earnings are
likely to increase over time.
Putnam VT International Equity Seeks capital appreciation. The Fund Putnam Investment
Fund - Class IB Shares+ normally invests in common stocks of Management("Putnam")
companies outside the U S.
Putnam VT Small Cap Value Fund - Seeks capital appreciation. The Fund Putnam Investment Management
Class IB Shares normally invests in the common stocks
of U.S. companies believed to be
undervalued in the market.
20
FUNDING INVESTMENT INVESTMENT
OPTION OBJECTIVE ADVISER/SUBADVISER
- ----------------------------------------- ------------------------------------------- --------------------------------------
SALOMON BROTHERS VARIABLE SERIES
FUNDS INC.
All Cap Fund - Class I Seeks capital appreciation. The Fund Salomon Brothers Asset Management
normally invests in common stocks and ("SBAM")
their equivalents of companies believed
to be undervalued in the marketplace.
Investors Fund - Class I Seeks long term growth of capital. SBAM
Secondarily seeks current income. The
Fund normally invests in common stocks
of established companies.
Small Cap Growth Fund - Class I Seeks long term growth of capital. The SBAM
Fund normally invests in equity
securities of companies with small
market capitalizations.
Total Return Fund - Class I+ Seeks above average income (compared to SBAM
a portfolio invested entirely in equity
securities). Secondarily seeks growth
of capital and income. The Fund
normally invests in a broad range of
equity and fixed-income securities of
U.S. and foreign issuers.
SMITH BARNEY INVESTMENT SERIES
Smith Barney Large Cap Core Seeks capital appreciation. The Fund Smith Barney Fund Management LLC
Portfolio+ normally invests in the equity
securities of U.S. companies with large
market capitalizations.
Smith Barney Premier Selections Seeks long term capital growth. The Smith Barney Fund Management LLC
All Cap Growth Portfolio Fund consists of a Large Cap Growth
segment, Mid Cap Growth segment and
Small Cap Growth segment. All three
segments normally invest in equity
securities. The Large Cap Growth
segment invests in large sized
companies. The Mid Cap Growth segment
invests in medium sized companies. The
Small Cap Growth segment invests in
small sized companies.
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Multi Cap Value Fund II+ Seeks long term capital growth. Current Strong Capital Management Inc.
income is a secondary objective. The
Fund normally invests in the common
stocks of U.S. companies believed to be
undervalued relative to the market.
THE TRAVELERS SERIES TRUST
Convertible Securities Portfolio Seeks current income and capital Travelers Asset Management
appreciation. The Fund normally invests International Company LLC ("TAMIC")
in convertible securities.
Disciplined Mid Cap Stock Portfolio Seeks growth of capital. The Fund TAMIC
normally invests in the equity Subadviser: Travelers Investment
securities of companies with mid-size Management Company ("TIMCO")
market capitalizations.
Equity Income Portfolio Seeks reasonable income. The Fund TAMIC
normally invests in equity securities Subadviser: Fidelity Management &
with a focus on income producing Research Company ("FMR")
equities.
Federated Stock Portfolio+ Seeks growth of income and capital. The TAMIC
Fund normally invests in equity Subadviser: Federated Investment
securities that are selected on the Management Company
basis of traditional research
techniques.
Large Cap Portfolio Seeks long term growth of capital. The TAMIC
Fund normally invests in the securities Subadviser: FMR
of companies with large market
capitalizations.
Lazard International Stock Seeks capital appreciation. The Fund TAMIC
Portfolio normally invests in equity securities Subadviser: Lazard Asset Management
of non-U.S. domiciled companies located
in developed markets.
Merrill Lynch Large Cap Core Seeks long-term capital growth. The TAMIC
Portfolio Fund normally invests in a diversified Subadviser: Merrill Lynch
portfolio of equity securities of large Investment Managers, L.P. ("MLIM")
cap companies located in the United
States.
MFS Emerging Growth Portfolio Seeks long term growth of capital. The TAMIC
Fund normally invests in common stock Subadviser: Massachusetts
and related securities of emerging Financial Services ("MFS")
growth companies.
21
FUNDING INVESTMENT INVESTMENT
OPTION OBJECTIVE ADVISER/SUBADVISER
- ----------------------------------------- ------------------------------------------- --------------------------------------
MFS Mid Cap Growth Portfolio Seeks long term growth of capital. The TAMIC
Fund normally invests in equity Subadviser: MFS
securities of companies with medium
market capitalization that are believed
to have above average growth potential.
MFS Value Portfolio Seeks capital appreciation and TAMIC
reasonable income. The Fund normally Subadviser: MFS
invests in income producing equity
securities of companies believed to be
undervalued in the market.
Pioneer Fund Portfolio Seeks reasonable income and capital TAMIC
growth. The Fund normally invests in
Subadviser: Pioneer Investment equity
securities that are carefully
Management Inc. selected, reasonably
priced securities.
Social Awareness Stock Portfolio Seeks long term capital appreciation Smith Barney Fund Management
and retention of net investment income. LLC("SBFM")
The Fund normally invests in equity
securities. The Fund seeks companies
that meet certain investment criteria
and social criteria.
Travelers Quality Bond Portfolio Seeks current income and total return TAMIC
with moderate capital volatility.
The Fund normally invests in investment-
grade bonds and debt securities.
U.S. Government Securities Seeks current income, total return and TAMIC
Portfolio high credit quality. The Fund normally
invests in securities issued or
guaranteed by the U.S. Government, its
agencies or instrumentalities.
TRAVELERS SERIES FUND INC.
AIM Capital Appreciation Portfolio Seeks capital appreciation. The Fund Travelers Investment Adviser Inc.
normally invests in common stocks of ("TIA")
companies that are likely to benefit Subadviser: AIM Capital
from new products, services or Management Inc.
processes or have experienced
above-average earnings growth.
MFS Total Return Portfolio Seeks above average income consistent TIA
with the prudent employment of capital. Subadviser: MFS
Secondarily, seeks growth of capital
and income. The Fund normally invests
in a broad range of equity and
fixed-income securities of both U.S.
and foreign issuers.
Pioneer Strategic Income Portfolio Seeks high current income consistent TIA
with preservation of capital. The Fund Subadviser: Putnam Investment
normally invests in debt securities of Management, Inc.
U.S. and foreign governments and
corporations.
SB Adjustable Rate Income Seeks high current income and to limit Smith Barney Fund Management LLC
Portfolio Smith Barney Class the degree of fluctuation of its net
asset value resulting from movements in
interest rates. The Fund normally
invests in adjustable rate securities.
Smith Barney Aggressive Growth Seeks long-term capital appreciation. SBFM
Portfolio The Fund normally invests in common
stocks of companies that are
experiencing, or are expected to
experience, growth in earnings.
Smith Barney High Income Portfolio Seeks high current income. Secondarily, SBFM
seeks capital appreciation. The Fund
normally invests in high yield
corporate debt and preferred stock of
U.S. and foreign issuers.
Smith Barney International All Cap Seeks total return on assets from SBFM
Growth Portfolio+ growth of capital and income. The Fund
normally invests in equity securities
of foreign companies.
Smith Barney Large Capitalization Seeks long term growth of capital. The SBFM
Growth Portfolio Fund normally invests in equities, or
similar securities, of companies with
large market capitalizations.
Strategic Equity Portfolio Seeks capital appreciation. The Fund TIA
normally invests in the equity Subadviser: Fidelity Management &
securities, primarily in common stocks Research Company ("FMR")
of domestic issuers, and is not
constrained to any particular
investment style.
22
FUNDING INVESTMENT INVESTMENT
OPTION OBJECTIVE ADVISER/SUBADVISER
- ----------------------------------------- ------------------------------------------- --------------------------------------
VAN KAMPEN LIFE INVESTMENT TRUST
Comstock Portfolio Class II Shares Seeks capital growth and income. The Van Kampen Asset Management
Fund normally invests in common and Inc.("Van
Kampen") preferred stocks, and
convertible securities, of well
established undervalued companies.
Emerging Growth Portfolio Class II Seeks capital appreciation. The Fund Van Kampen Asset Management
Shares normally invests in common stocks of Inc.("Van Kampen")
emerging growth companies.
Enterprise Portfolio Class II Seeks capital appreciation. The Fund Van Kampen Asset Management
Shares+ normally invests in common stocks of Inc.("Van Kampen")
companies believed to have
above-average potential for capital
appreciation.
VARIABLE ANNUITY PORTFOLIOS
Smith Barney Small Cap Growth Seeks long term capital growth. The Citi Fund Management, Inc.
Opportunities Portfolio Fund normally invests in equity
securities of small cap companies and
related investments.
VARIABLE INSURANCE PRODUCTS FUND II
Asset Manager Portfolio - Service Seeks high total return with reduced Fidelity Management & Research
Class 2 risk over the long-term. The Fund Company("FMR")
normally invests by allocating assets
among stocks, bonds and short-term
instruments.
Contrafund(R)Portfolio - Service Seeks long term capital appreciation. Fidelity Management & Research
Class 2 The Fund normally invests in common Company("FMR")
stocks of companies whose value may not
be fully recognized by the public.
VARIABLE INSURANCE PRODUCTS FUND III
Dynamic Capital Appreciation Seeks capital appreciation. The Fund Fidelity Management & Research
Portfolio - Service Class 2+ normally invests in growth and/or value Company("FMR")
common stocks of domestic and foreign
issuers.
Mid Cap Portfolio - Service Class 2 Seeks long term growth of capital. The Fidelity Management & Research
Fund normally invests in common stocks Company("FMR")
of companies with medium market
capitalizations.
- --------------
+ Closed to new investors.
23
FIXED ACCOUNT
================================================================================
We may offer our Fixed Account as a funding option. Please see separate
prospectus for more information.
CHARGES AND DEDUCTIONS
================================================================================
GENERAL
We deduct the charges described below. The charges are for the service and
benefits we provide, costs and expenses we incur, and risks we assume under the
Contracts. Services and benefits we provide include:
o the ability for you to make withdrawals and surrenders under the
Contracts
o the death benefit paid on the death of the Contract Owner, Annuitant, or
first of the joint owners
o the available funding options and related programs (including dollar
cost averaging, portfolio rebalancing, and systematic withdrawal
programs)
o administration of the annuity options available under the Contracts
o the distribution of various reports to Contract Owners
Costs and expenses we incur include:
o losses associated with various overhead and other expenses associated
with providing the services and benefits provided by the Contracts
o sales and marketing expenses including commission payments to your sales
agent
o other costs of doing business.
Risks we assume include:
o that Annuitants may live longer than estimated when the annuity factors
under the Contracts were established
o that the amount of the death benefit will be greater than the Contract
Value
o that the costs of providing the services and benefits under the
Contracts will exceed the charges deducted.
We may also deduct a charge for taxes.
Unless otherwise specified, charges are deducted proportionately from all
funding options in which you are invested.
We may reduce or eliminate the withdrawal charge and/or the mortality and
expense risk charge under the Contract when certain sales or administration of
the Contract result in savings or reduced expenses and/or risks. For certain
trusts, we may change the order in which Purchase Payments and earnings are
withdrawn in order to determine the withdrawal charge. We will not reduce or
eliminate the withdrawal charge where such reduction or elimination would be
unfairly discriminatory to any person.
The amount of a charge may not necessarily correspond to the costs associated
with providing the services or benefits indicated by the designated charge. For
example, the withdrawal charge we collect may not fully cover all of the sales
and distribution expenses we actually incur. The amount of any fee or charge is
not impacted by an outstanding loan. We may also profit on one or more of the
charges. We may use any such profits for any corporate purpose, including the
payment of sales expenses.
WITHDRAWAL CHARGE
We do not deduct a sales charge from Purchase Payments when they are made to the
Contract. However, a withdrawal charge will apply if Purchase Payments and any
applicable Purchase Payment Credits are withdrawn
24
before they have been in the Contract for five years. We will assess the charge
as a percentage of the Purchase Payment and any applicable Purchase Payment
Credits withdrawn as follows:
YEARS SINCE PURCHASE PAYMENT MADE
-----------------------------------------
GREATER THAN OR EQUAL TO BUT LESS THAN WITHDRAWAL CHARGE
0 years 1 year 5%
1 year 2 years 4%
2 years 3 years 3%
3 years 4 years 2%
4 years 5 years 1%
5+ years 0%
For purposes of the withdrawal charge calculation, withdrawals are deemed to be
taken first from:
(a) any Purchase Payment and any applicable Purchase Payment Credits to
which no withdrawal charge applies then;
(b) any remaining free withdrawal allowance (as described below) (after
being reduced by (a), then;
(c) any remaining Purchase Payment and any applicable Purchase Payment
Credits to which a withdrawal charge applies (on a first-in, first-out
basis), then;
(d) any Contract earnings.
Unless you instruct us otherwise, we will deduct the withdrawal charge from the
amount requested.
IF YOU DID NOT PURCHASE YOUR CONTRACT UNDER A 457 OR 403(B) QUALIFIED PLAN, WE
WILL NOT DEDUCT A WITHDRAWAL CHARGE:
o from payments we make due to the death of the Annuitant
o if a life annuity payout has begun, other than the Liquidity Benefit
Option (See "Liquidity Benefit")
o if an income option of at least ten years' duration is elected
o from amounts withdrawn which are deposited to other contracts issued by
us or our affiliate, subject to our approval
o if withdrawals are taken under our Managed Distribution Program, if
elected by you (see Access to Your Money)' or
o if you are confined to an eligible nursing home, as described in
Appendix C
IF YOU PURCHASED YOUR CONTRACT UNDER A 457 OR 403(B) QUALIFIED PLAN, WE WILL NOT
DEDUCT A WITHDRAWAL CHARGE:
o from payments we make due to the death of the Annuitant
o if a life annuity payout has begun
o if payments for a period of at least five years have begun
o from amounts withdrawn which are deposited to other contracts issued by
us or our affiliate, subject to our approval
o if withdrawals are taken as a minimum distribution, as defined under The
Code
o if withdrawals are taken due to a hardship, as defined under The Code
o if withdrawals are taken due to a disability, as defined under The Code,
of the Annuitant;
o if you are confined to an eligible nursing home, as described in
Appendix C (403 (B) PLANS ONLY).
FREE WITHDRAWAL ALLOWANCE
Beginning in the second Contract Year, you may withdraw up to 20% of the
Contract Value annually. We calculate the available withdrawal amount as of the
end of the previous Contract Year. The free withdrawal
25
provision applies to all withdrawals except those transferred directly to
annuity contracts issued by other financial institutions. We reserve the right
to modify the free withdrawal provision.
TRANSFER CHARGE
We reserve the right to assess a transfer charge of up to $10.00 on transfers
exceeding 12 per year. We will notify you in writing at your last known address
at least 31 days before we impose any such transfer charge.
MORTALITY AND EXPENSE RISK CHARGE
Each business day, we deduct a mortality and expense risk ("M&E") charge from
amounts we hold in the Variable Funding Options. We reflect the deduction in our
calculation of accumulation and Annuity Unit values. The charges stated are the
maximum for this product. We reserve the right to lower this charge at any time.
If you choose the Standard Death Benefit, the M&E charge is 0.80% annually. If
you choose the Optional Death Benefit, the M&E charge is 1.25% annually. This
charge compensates the Company for risks assumed, benefits provided and expenses
incurred, including the payment of commissions to your sales agent.
VARIABLE FUNDING OPTION EXPENSES
We summarized the charges and expenses of the Underlying Funds in the fee table.
Please review the prospectus for each Underlying Fund for a more complete
description of that fund and its expenses. Underlying Fund expenses are not
fixed or guaranteed and are subject to change by the Fund.
FLOOR BENEFIT/LIQUIDITY BENEFIT CHARGES
If you select the Variable Annuitization Floor Benefit, we deduct a charge upon
election of this benefit. This charge compensates us for guaranteeing a minimum
variable Annuity Payment regardless of the performance of the Variable Funding
Options you selected. This charge will vary based upon market conditions, but
will never increase your annual Separate Account charge by more than 3%. The
charge will be set at the time of election, and will remain level throughout the
term of annuitization. If the Liquidity Benefit is selected, there is a
surrender charge of 5% of the amounts withdrawn. Please refer to Payment Options
for a description of these benefits.
CHART ASSET ALLOCATION PROGRAM CHARGES
Under the CHART Program, Purchase Payments and cash values are allocated among
the specified asset allocation funds. The charge for this advisory service is
equal to a maximum of 0.80% of the assets subject to the CHART Program. The
CHART Program fee will be paid by quarterly withdrawals from the cash values
allocated to the asset allocation funds. We will not treat these withdrawals as
taxable distributions. Please refer to Miscellaneous Contract Provisions for
further information.
PREMIUM TAX
Certain state and local governments charge premium taxes ranging from 0% to 5%,
depending upon jurisdiction. We are responsible for paying these taxes and will
determine the method used to recover premium tax expenses incurred. We will
deduct any applicable premium taxes from your Contract Value either upon death,
surrender, annuitization, or at the time you make Purchase Payments to the
Contract, but no earlier than when we have a tax liability under state law.
CHANGES IN TAXES BASED UPON PREMIUM OR VALUE
If there is any change in a law assessing taxes against the Company based upon
premiums, Contract gains or value of the Contract, we reserve the right to
charge you proportionately for this tax.
26
TRANSFERS
================================================================================
Subject to the limitations described below, you may transfer all or part of your
Contract Value between Variable Funding Options at any time up to 30 days before
the Maturity Date. After the Maturity Date, you may make transfers only if
allowed by your Contract or with our consent. Transfer requests received at our
Home Office that are in good order before the close of the New York Stock
Exchange (NYSE) will be processed according to the value(s) next computed
following the close of business. Transfer requests received on a non-business
day or after the close of the NYSE will be processed based on the value(s) next
computed on the next business day.
Where permitted by state law, we reserve the right to restrict transfers from
the Variable Funding Options to the Fixed Account whenever the credited interest
rate on the Fixed Account is equal to the minimum guaranteed interest rate
specified under the Contract.
Currently, there are no charges for transfers; however, we reserve the right to
charge a fee for any transfer request which exceeds twelve per year. Since each
Underlying Fund may have different overall expenses, a transfer of Contract
Values from one Variable Funding Option to another could result in your
investment becoming subject to higher or lower expenses. Also, when making
transfers, you should consider the inherent risks associated with the Variable
Funding Options to which your Contract Value is allocated.
MARKET TIMING/EXCESSIVE TRADING
THE CONTRACT IS INTENDED FOR USE AS A LONG-TERM INVESTMENT VEHICLE AND IS NOT
DESIGNED TO SERVE AS A VEHICLE FOR EXCESSIVE TRADING OR MARKET TIMING IN AN
ATTEMPT TO TAKE ADVANTAGE OF SHORT-TERM FLUCTUATIONS IN THE STOCK MARKET. If, in
our sole discretion, we determine you are engaging in excessive trading
activity, trading activity that we believe is indicative of market timing, or
any similar trading activity which will potentially hurt the rights or interests
of other Contract Owners, we will exercise our contractual right to restrict
your number of transfers to one every six months. We will notify you in writing
if we choose to exercise our contractual right to restrict your transfers.
In determining whether we believe you are engaged in excessive trading or market
timing activity, we will consider, among other things, the following factors:
o the dollar amount you request to transfer;
o the number of transfers you made within the previous three
months;
o whether your transfers follow a pattern designed to take
advantage of short term market fluctuations; and
o whether your transfers are part of a group of transfers made
by a third party on behalf of several individual Contract
Owners.
We also reserve the right to restrict the right to request transfers by any
market timing firm or any other third party who has been authorized to initiate
transfers on behalf of multiple Contract Owners. We will notify you in writing
before we restrict your right to request transfers through such market timing
firm or other third party. We may, among other things:
o reject the transfer instructions of any agent acting under a
power of attorney on behalf of more than one owner, or
o reject the transfer or exchange instructions of individual
owners who have executed pre-authorized transfer forms which
are submitted by market timing firms or other third parties on
behalf of more than one owner.
None of these restrictions are applicable to transfers made under a Dollar Cost
Averaging Program, a rebalancing program, or, if applicable, any asset
allocation program described in this prospectus.
FUTURE MODIFICATIONS. We will continue to monitor the transfer activity
occurring among the Variable Funding Options, and may modify these transfer
restrictions at any time if we deem it necessary to protect the interest of
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all Contract Owners. These modifications may include curtailing or eliminating,
without notice, the ability to use the Internet, facsimile or telephone in
making transfers.
ACCESS TO YOUR MONEY
================================================================================
Any time before the Maturity Date, you may redeem all or any portion of the Cash
Surrender Value, that is, the Contract Value less any withdrawal charge and any
premium tax not previously deducted. Unless you submit a Written Request
specifying the fixed or Variable Funding Option(s) from which we are to withdraw
amounts, we will make the withdrawal on a pro rata basis. We will determine the
Cash Surrender Value as of the close of business after we receive your surrender
request at our Home Office. The Cash Surrender Value may be more or less than
the Purchase Payments you made. You may not make withdrawals during the annuity
period.
For amounts allocated to the Variable Funding Options, we may defer payment of
any Cash Surrender Value for a period of up to five business days after the
Written Request is received. For amounts allocated to the Fixed Account, we may
defer payment of any Cash Surrender Value for a period up to six months. In
either case, it is our intent to pay as soon as possible. We cannot process
requests for withdrawals that are not in good order. We will contact you if
there is a deficiency causing a delay and will advise what is needed to act upon
the withdrawal request.
SYSTEMATIC WITHDRAWALS
Before the Maturity Date, you may choose to withdraw a specified dollar amount
(at least $100) on a monthly, quarterly, semiannual or annual basis. We will
deduct any applicable premium taxes and withdrawal charge. To elect systematic
withdrawals, you must have a Contract Value of at least $15,000 and you must
make the election on the form we provide. We will surrender Accumulation Units
pro rata from all funding options in which you have an interest, unless you
instruct us otherwise. You may begin or discontinue systematic withdrawals at
any time by notifying us in writing, but you must give at least 30 days notice
to change any systematic withdrawal instructions that are currently in place.
We reserve the right to discontinue offering systematic withdrawals or to assess
a processing fee for this service upon 30 days written notice to Contract Owners
(where allowed by state law).
Each systematic withdrawal is subject to federal income taxes on the taxable
portion. In addition, a 10% federal penalty tax may be assessed on systematic
withdrawals if the Contract Owner is under age 59 1/2. You should consult with
your tax adviser regarding the tax consequences of systematic withdrawals.
MANAGED DISTRIBUTION PROGRAM. Under the systematic withdrawal option, you may
choose to participate in the Managed Distribution Program. At no cost to you,
you may instruct us to calculate and make minimum distributions that may be
required by the IRS upon reaching age 701/2. (See Federal Tax Considerations")
These payments will not be subject to the withdrawal charge and will be in lieu
of the free withdrawal allowance. No Dollar Cost Averaging will be permitted if
you are participating in the Managed Distribution Program.
OWNERSHIP PROVISIONS
================================================================================
TYPES OF OWNERSHIP
CONTRACT OWNER
The Contract belongs to the Contract Owner named in the Contract (on the
Contract Specifications page). The Annuitant is the individual upon whose life
the Maturity Date and the amount of monthly payments depend. Because this is a
Qualified Contract, the owner and the Annuitant must always be the same person,
and there can be only one Contract Owner. You have sole power to exercise any
rights and to receive all benefits given in the Contract provided you have not
named an irrevocable beneficiary.
If this Contract is purchased by a beneficiary of another contract who directly
transferred the death proceeds due under that contract, he/she will be granted
the same rights the owner has under the Contract except that he/she cannot take
a loan or make additional Purchase Payments.
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BENEFICIARY
You name the beneficiary in a Written Request. The beneficiary has the right to
receive any death benefit proceeds remaining under the Contract upon the death
of the Contract Owner. If more than one beneficiary survives the Annuitant or
Contract Owner, they will share equally in benefits unless you recorded
different shares with the Company by Written Request before the death of the
Contract Owner. In the case of a non-spousal beneficiary or a spousal
beneficiary who has not chosen to assume the Contract, we will not transfer or
otherwise remove the death benefit proceeds from either the Variable Funding
Options or the Fixed Account, as most recently elected by the Contract Owner,
until the Death Report Date.
Unless you have named an irrevocable beneficiary you have the right to change
any beneficiary by Written Request during the lifetime of the Annuitant and
while the Contract continues.
DEATH BENEFIT
================================================================================
Before the Maturity Date, generally, a death benefit is payable when you die. At
purchase, you elect either the standard death benefit or the optional death
benefit. We calculate the death benefit at the close of the business day on
which our Home Office receives (1) Due Proof of Death and (2) written payment
instructions or election of beneficiary contract continuance ("Death Report
Date").
DEATH PROCEEDS BEFORE THE MATURITY DATE
STANDARD DEATH BENEFIT
- --------------------------------------------------------------------------------
ANNUITANT'S AGE ON THE CONTRACT DATE DEATH BENEFIT PAYABLE
- --------------------------------------------------------------------------------
Before Age 80 Greater of:
1. Contract Value on the Death Report
Date, or
2. Total Purchase Payments less the
total of any withdrawals (and
related charges).
- --------------------------------------------------------------------------------
On or after Age 80 Contract Value
- --------------------------------------------------------------------------------
OPTIONAL DEATH BENEFIT AND CREDIT
The Optional Death Benefit and Credit varies depending on the Annuitant's age on
the Contract Date.
- --------------------------------------------------------------------------------
ANNUITANT'S AGE ON THE CONTRACT DATE DEATH BENEFIT PAYABLE
- --------------------------------------------------------------------------------
Under Age 70 Greater of:
1) Contract Value on the Death Report
Date , or
2) Total Purchase Payments less the
total of any withdrawals (and
related charges); or
3) Maximum Step-Up death benefit
value (described below) associated
with Contract Date anniversaries
beginning with the 5th, and ending
with the last before the
Annuitant's 76th birthday.
- --------------------------------------------------------------------------------
Age 70-75 Greater of:
1) Contract Value, or
2) Total Purchase Payments less the
total of any withdrawals (and
related charges); or
3) Step-Up death benefit value
(described below) associated with
the 5th Contract Date anniversary.
- --------------------------------------------------------------------------------
Age 76-80 Greater of (1) or (2) above.
- --------------------------------------------------------------------------------
Age over 80 Contract Value
- --------------------------------------------------------------------------------
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STEP-UP DEATH BENEFIT VALUE
We will establish a separate Step-Up death benefit value on the fifth Contract
Date anniversary and on each subsequent Contract Date anniversary on or before
the Death Report Date. The Step-Up death benefit value will initially equal the
Contract Value on that anniversary. After a Step-Up death benefit value has been
established, we will recalculate it each time a Purchase Payment is made or a
withdrawal is taken until the Death Report Date. We will recalculate Step-Up
death benefit values by increasing them by the amount of each applicable
Purchase Payment and by reducing them by a partial surrender reduction (as
described below) for each applicable withdrawal. Recalculations of Step-Up death
benefit values related to any Purchase Payments or any withdrawals will be made
in the order that such Purchase Payments or partial surrender reductions occur.
PARTIAL SURRENDER REDUCTION. If you make a withdrawal, we will reduce the
Step-Up value by a partial surrender reduction which equals: (1) the step-up
value immediately prior to the withdrawal, multiplied by (2) the amount of the
withdrawal, divided by (3) the Contract Value before the withdrawal.
For example, assume your current Contract Value is $55,000. If your step-up
value immediately prior to the withdrawal is $50,000, and you decide to make a
withdrawal of $10,000, we would reduce the step-up value as follows:
50,000 x (10,000/55,000) = 9,090
Your new step-up value would be 50,000-9,090, or $40,910.
The following example shows what would happen in a declining market. Assume your
current Contract Value is $30,000. If your step-up value immediately prior to
the withdrawal is $50,000, and you decide to make a withdrawal of $10,000, we
would reduce the step-up value as follows:
50,000 x (10,000/30,000) = 16,666
Your new step-up value would be 50,000-16,666, or $33,334.
PAYMENT OF PROCEEDS
We describe the process of paying death benefit proceeds before the Maturity
Date in the chart below. The chart does not encompass every situation and is
merely intended as a general guide. More detailed information is provided in
your Contract. Generally, the person(s) receiving the benefit may request that
the proceeds be paid in a lump sum, or be applied to one of the settlement
options available under the Contract.
- --------------------------------------------------------------------------------
BEFORE THE MATURITY DATE, THE COMPANY WILL MANDATORY PAYOUT
UPON THE DEATH OF THE PAY THE PROCEEDS TO: RULES APPLY*
- --------------------------------------------------------------------------------
OWNER/ANNUITANT The beneficiary (ies), or if Yes
none, to the Contract
Owner's estate.
- --------------------------------------------------------------------------------
BENEFICIARY No death proceeds are payable; N/A
Contract continues.
- --------------------------------------------------------------------------------
CONTINGENT BENEFICIARY No death proceeds are payable; N/A
Contract continues.
- --------------------------------------------------------------------------------
- --------------
* Certain payout rules of the Internal Revenue Code (IRC) are triggered upon
the death of the Owner. Non-spousal beneficiaries (as well as spousal
beneficiaries who choose not to assume the Contract) must begin taking
distributions based on the beneficiary's life expectancy within one year of
death or take a complete distribution of Contract proceeds within 5 years of
death. If mandatory distributions have begun, the 5 year payout option is
not available.
BENEFICIARY CONTRACT CONTINUANCE (NOT PERMITTED FOR NON-NATURAL BENEFICIARIES)
If you die before the Maturity Date, and if the value of any beneficiary's
portion of the death benefit is between $20,000 and $1,000,000 as of the Death
Report Date, (more than $1,000,000 is subject to Home Office approval), your
beneficiary(s) may elect to continue his/her portion of the Contract subject to
applicable Internal Revenue Code distribution requirements, rather than receive
the death benefit in a lump sum. If the beneficiary chooses to continue the
Contract, the beneficiary can extend the payout phase of the Contract enabling
the
30
beneficiary to "stretch" the death benefit distributions out over his life
expectancy as permitted by the Internal Revenue Code.
If your beneficiary elects to continue the Contract, the death benefit will be
calculated as of the Death Report Date. The initial Contract Value of the
continued Contract (the "adjusted Contract Value") will equal the greater of the
Contract Value or the death benefit calculated on the Death Report Date and will
be allocated to the funding options in the same proportion as prior to the Death
Report Date. If the adjusted Contract Value is allocated to the Variable Funding
Options, the beneficiary bears the investment risk.
The beneficiary who continues the Contract will be granted the same rights as
the owner under the original Contract, except the beneficiary cannot:
o take a loan
o make additional Purchase Payments
The beneficiary may also name his/her own beneficiary ("succeeding beneficiary")
and has the right to take withdrawals at any time after the Death Report Date
without a withdrawal charge. All other fees and charges applicable to the
original Contract will also apply to the continued Contract. All benefits and
features of the continued Contract will be based on the beneficiary's age on the
Death Report Date as if the beneficiary had purchased the Contract with the
adjusted Contract Value on the Death Report Date.
PLANNED DEATH BENEFIT (INDIVIDUAL CONTRACTS ONLY)
You may request that rather than receive a lump-sum death benefit, the
beneficiary(ies) receive all or a portion of the death benefit proceeds either:
o through an annuity for life or a period that does not exceed the
beneficiary's life expectancy or
o under the terms of the Beneficiary Continuance provision described
above. If the Beneficiary Continuance provision is selected as a planned
death benefit, no surrenders will be allowed other than payments meant
to satisfy minimum distribution amounts or systematic withdrawal
amounts, if greater.
You must make the planned death benefit request as well as any revocation of
this request in writing. Upon your death, your beneficiary(s) cannot revoke or
modify this request. If the death benefit at the time we receive Due Proof of
Death is less than $2,000, we will only pay a lump sum to the beneficiary. If
periodic payments due under the planned death benefit election are less than
$100, we reserve the right to make Annuity Payments at less frequent intervals,
resulting in a payment of at least $100 per year. If no beneficiary is alive
when death benefits become payable, we will pay the death benefit as provided in
your Contract.
DEATH PROCEEDS AFTER THE MATURITY DATE
If any Contract Owner or the Annuitant dies on or after the Maturity Date, the
Company will pay the beneficiary a death benefit consisting of any benefit
remaining under the annuity or income option then in effect.
THE ANNUITY PERIOD
================================================================================
MATURITY DATE
Under the Contract, you can receive regular payments ("Annuity Payments"). You
can choose the month and the year in which those payments begin ("Maturity
Date"). You can also choose among income payouts (annuity options) or elect a
lump sum distribution. While the Annuitant is alive, you can change your
selection any time up to the Maturity Date. Annuity Payments will begin on the
Maturity Date stated in the Contract unless (1) you fully surrendered the
Contract; (2) we paid the proceeds to the beneficiary before that date; or (3)
you elected another date. Annuity Payments are a series of periodic payments (a)
for life; (b) for life with either a minimum number of payments or a specific
amount assured; or (c) for the joint lifetime of the Annuitant and another
person, and thereafter during the lifetime of the survivor. We may require proof
that the Annuitant is alive before we make Annuity Payments. Not all options may
be available in all states.
31
You may choose to annuitize at any time after you purchase your Contract. Unless
you elect otherwise, the Maturity Date will be the Annuitant's 90th birthday or
ten years after the effective date of the Contract, if later.
At least 30 days before the original Maturity Date, you may elect to extend the
Maturity Date to any time prior to the Annuitant's 90th birthday or to a later
date with our consent. You may use certain annuity options taken at the Maturity
Date to meet the minimum required distribution requirements of federal tax law,
or you may use a program of withdrawals instead. These mandatory distribution
requirements take effect generally upon the death of the Contract Owner, or with
certain Qualified Contracts upon either the later of the Contract Owner's
attainment of age 70 1/2 or year of retirement; or the death of the Contract
Owner. You should seek independent tax advice regarding the election of minimum
required distributions.
LIQUIDITY BENEFIT (BENEFIT NOT AVAILABLE UNDER 457 PLANS)
If you select any annuity option that guarantees you payments for a minimum
period of time ("period certain"), you may take a lump sum payment (equal to a
portion or all of the value of the remaining payments) any time after the first
Contract Year. There is a charge of 5% of the amount withdrawn under this
option.
For variable Annuity Payments, we use the Assumed Net Investment Factor,
("ANIF") as the interest rate to determine the lump sum amount. If you request
only a percentage of the amount available, we will reduce the amount of each
payment during the rest of the period certain by that percentage. After the
period expires, your payments will increase to the level they would have been
had no liquidation taken place.
For fixed Annuity Payments, we calculate the present value of the remaining
period certain payments using a current interest rate. The current interest rate
used depends on the amount of time left in the annuity option you elected. The
current rate will be the same rate we would give someone electing an annuity
option for that same amount of time. If you request a percentage of the amount
available during the period certain, we will reduce the amount of each payment
during the rest of the period certain by that percentage. After the period
certain expires, your payments will increase to the level they would have been
had no liquidation taken place.
The market value adjustment formula for calculating the present value described
above for fixed Annuity Payments is as follows:
n t/365
Present Value = sum of [Payments X (1/1 + iC)
s = 1
Where
iC = the interest rate described above
n = the number of payments remaining in the Contract Owner's period
certain at the time of request for this benefit
t = the number of days remaining until that payment is made, adjusting
for leap years.
See Appendix E for examples of this market value adjustment.
ALLOCATION OF ANNUITY
You may elect to receive your Annuity Payments in the form of a variable
annuity, a fixed annuity, or a combination of both. If, at the time Annuity
Payments begin, you have not made an election, we will apply your Contract Value
to provide an annuity funded by the same funding options as you have selected
during the accumulation period. At least 30 days before the Maturity Date, you
may transfer the Contract Value among the funding options in order to change the
basis on which we will determine Annuity Payments. (See Transfers.)
ANNUITIZATION CREDIT. This credit is applied to the Contract Value used to
purchase one of the annuity options described below. The credit equals 0.5% of
your Contract Value if you annuitize during Contract Years 2-5, 1% during
Contract Years 6-10, and 2% after Contract Year 10. There is no credit applied
to Contracts held less than 1 year.
32
VARIABLE ANNUITY
You may choose an annuity payout that fluctuates depending on the investment
experience of the Variable Funding Options. We determine the number of Annuity
Units credited to the Contract by dividing the first monthly Annuity Payment
attributable to each Variable Funding Option by the corresponding Accumulation
Unit value as of 14 days before the date Annuity Payments begin. We use an
Annuity Unit to measure the dollar value of an Annuity Payment. The number of
Annuity Units (but not their value) remains fixed during the annuity period.
DETERMINATION OF FIRST ANNUITY PAYMENT. Your Contract contains the tables we use
to determine your first monthly Annuity Payment. If you elect a variable
annuity, the amount we apply to it will be the Contract Value as of 14 days
before the date Annuity Payments begin, less any applicable premium taxes not
previously deducted.
The amount of your first monthly payment depends on the annuity option you
elected and the Annuitant's adjusted age. Your Contract contains the formula for
determining the adjusted age. We determine the total first monthly Annuity
Payment by multiplying the benefit per $1,000 of value shown in the Contract
tables by the number of thousands of dollars of Contract Value you apply to that
annuity option. The Contract tables factor in an assumed daily net investment
factor. We call this your net investment rate. For example, a net investment
rate of 3% corresponds to an annual interest rate of 3%. This means that if the
annualized investment performance, after expenses, of your Variable Funding
Options is less than 3%, then the dollar amount of your variable Annuity
Payments will decrease. However, if the annualized investment performance, after
expenses, of your Variable Funding Options is greater than 3%, then the dollar
amount of your variable Annuity Payments will increase.
DETERMINATION OF SECOND AND SUBSEQUENT ANNUITY PAYMENTS. The dollar amount of
all subsequent Annuity Payments changes from month to month based on the
investment experience, as described above, of the applicable funding options.
The total amount of each Annuity Payment will equal the sum of the basic
payments in each funding option. We determine the actual amounts of these
payments by multiplying the number of Annuity Units we credited to each funding
option by the corresponding Annuity Unit value as of the date 14 days before the
date the payment is due.
FIXED ANNUITY
You may choose a fixed annuity that provides payments that do not vary during
the annuity period. We will calculate the dollar amount of the first fixed
Annuity Payment as described under Variable Annuity, except that the amount we
apply to begin the annuity will be your Contract Value as of the date Annuity
Payments begin. Payout rates will not be lower than that shown in the Contract.
If it would produce a larger payment, the first fixed Annuity Payment will be
determined using the Life Annuity Tables in effect on the Maturity Date.
If you have elected the Increasing Benefit Option, the payments will be
calculated as above. However, the initial payment will be less than that
reflected in the table and the subsequent payments will be increased by the
percentage you elected.
PAYMENT OPTIONS
================================================================================
ELECTION OF OPTIONS
While the Annuitant is alive, you can change your annuity option selection any
time up to the Maturity Date. Once Annuity Payments have begun, no further
elections are allowed.
During the Annuitant's lifetime, if you do not elect otherwise before the
Maturity Date, we will pay you (or another designated payee) the first of a
series of monthly Annuity Payments based on the life of the Annuitant, in
accordance with Annuity Option 2 (Life Annuity with 120 monthly payments
assured). For certain Qualified Contracts, Annuity Option 4 (Joint and Last
Survivor Life Annuity -- Annuity Reduced on Death of Primary Payee) will be the
automatic option as described in the Contract.
33
The minimum amount that can be placed under an annuity option will be $2,000
unless we agree to a lesser amount. If any monthly periodic payment due is less
than $100, the Company reserves the right to make payments at less frequent
intervals, or to pay the Contract Value in a lump-sum.
On the Maturity Date, we will pay the amount due under the Contract in
accordance with the Payment Option that you select. You may choose to receive a
single lump-sum payment. You must elect an option in writing, in a form
satisfactory to the Company. Any election made during the lifetime of the
Annuitant must be made by the Contract Owner.
VARIABLE ANNUITIZATION FLOOR BENEFIT (BENEFIT NOT AVAILABLE UNDER 457 PLANS).
This benefit may not be available, or may only be available under certain
annuity options, if we determine market conditions so dictate. If available, we
will guarantee that, regardless of the performance of the Variable Funding
Options selected by you, your Annuity Payments will never be less than a certain
percentage of your first Annuity Payment. This percentage will vary depending on
market conditions, but will never be less than 50%. You may not elect this
benefit if you are over age 80. Additionally, you must select from certain funds
available under this guarantee. Currently, these funds are the Equity Index
Portfolio Class II, the Travelers Quality Bond Portfolio, and the U.S.
Government Securities Portfolio. We may, at our discretion, increase or decrease
the number of funds available under this benefit. This benefit is not currently
available under Annuity Option 5. The benefit is not available with the 5% ANIF
under any Option. If you select this benefit, you may not elect to liquidate any
portion of your Contract.
There is a charge for this guarantee, which will begin upon election of this
benefit. This charge will vary based upon market conditions, and will be
established at the time the benefit is elected. Once established, the charge
will remain level throughout the remainder of the annuitization, and will never
increase your annual Separate Account charge by more than 3% per year.
We reserve the right to restrict the amount of Contract Value to be annuitized
under this benefit.
ANNUITY OPTIONS
Subject to the conditions described in "Election of Options" above, we may pay
all or any part of the Cash Surrender Value under one or more of the following
annuity options. Payments under the annuity options are generally made on a
monthly basis. We may offer additional options.
Option 1 -- Life Annuity -- No Refund. The Company will make Annuity Payments
during the lifetime of the Annuitant ending with the last payment before death.
This option offers the maximum periodic payment, since there is no assurance of
a minimum number of payments or provision for a death benefit for beneficiaries.
Option 2 -- Life Annuity with 120, 180 or 240 Monthly Payments Assured. The
Company will make monthly Annuity Payments during the lifetime of the Annuitant,
with the agreement that if, at the death of that person, payments have been made
for less than 120, 180 or 240 months, as elected, we will continue making
payments to the beneficiary during the remainder of the period.
Option 3 -- Joint and Last Survivor Life Annuity -- No Refund. The Company will
make regular Annuity Payments during the lifetime of the Annuitant and a second
person. When either person dies, we will continue making payments to the
survivor. No further payments will be made following the death of the survivor.
Option 4 -- Joint and Last Survivor Life Annuity -- Annuity Reduced on Death of
Primary Payee. The Company will make Annuity Payments during the lifetimes of
the Annuitant and a second person. You will designate one as primary payee, and
the other will be designated as secondary payee. On the death of the secondary
payee, the Company will continue to make monthly Annuity Payments to the primary
payee in the same amount that would have been payable during the joint lifetime
of the two persons. On the death of the primary payee, the Company will continue
to make Annuity Payments to the secondary payee in an amount equal to 50% of the
payments, which would have been made during the lifetime of the primary payee.
No further payments will be made once both payees have died.
Option 5 -- Payments for a Fixed Period without Life Contingency. We will make
periodic payments for the period selected.
Option 6 -- Other Annuity Options. We will make any other arrangements for
Annuity Payments as may be mutually agreed upon.
34
MISCELLANEOUS CONTRACT PROVISIONS
================================================================================
RIGHT TO RETURN
You may return the Contract for a full refund of the Contract Value plus any
Contract charges and premium taxes you paid (but not any fees and charges the
Underlying Fund assessed) within ten days after you receive it (the "right to
return period"). You bear the investment risk of investing in the Variable
Funding Options during the right to return period; therefore, the Contract Value
we return may be greater or less than your Purchase Payment.
If you purchase the Contract as an Individual Retirement Annuity, and return it
within the first seven days after delivery, or longer if your state permits, we
will refund your Purchase Payment in full; during the remainder of the right to
return period, we will refund the Contract Value (including charges).
We will determine the Contract Value following the close of the business day on
which we receive your Contract and a Written Request for a refund. Where state
law requires a different period, or the return of Purchase Payments or other
variations of this provision, we will comply. Refer to your Contract for any
state-specific information.
TERMINATION
You do not need to make any Purchase Payments after the first to keep the
Contract in effect. However, we reserve the right to terminate the Contract on
any business day if your Contract Value as of that date is less than $2,000 and
you have not made Purchase Payments for at least two years, unless otherwise
specified by state law. Termination will not occur until 31 days after we have
mailed notice of termination to your last known address and to any assignee of
record. If we terminate the Contract, we will pay you the Cash Surrender Value
less any applicable taxes.
REQUIRED REPORTS
As often as required by law, but at least once in each Contract Year before the
due date of the first Annuity Payment, we will furnish a report showing the
number of Accumulation Units credited to the Contract and the corresponding
Accumulation Unit value(s) as of the report date for each funding option to
which the Contract Owner has allocated amounts during the applicable period. The
Company will keep all records required under federal and state laws.
SUSPENSION OF PAYMENTS
The Company reserves the right to suspend or postpone the date of any payment or
determination of values on any business day (1) when the New York Stock Exchange
("the Exchange") is closed; (2) when trading on the Exchange is restricted; (3)
when an emergency exists, as determined by the SEC, so that the sale of
securities held in the Separate Account may not reasonably occur, or so that the
Company may not reasonably determine the value the Separate Account's net
assets; or (4) during any other period when the SEC, by order, so permits for
the protection of security holders. Payments from the Fixed Account may be
delayed up to 6 months.
THE SEPARATE ACCOUNTS
================================================================================
The Travelers Insurance Company and The Travelers Life and Annuity Company each
sponsor Separate Accounts: Separate Account Five and Separate Account Six,
respectively. Both Separate Account Five and Separate Account Six were
established on March 27, 1997 and are registered with the SEC as unit investment
trusts ("Separate Account") under the Investment Company Act of 1940, as
amended. We will invest Separate Account assets attributable to the Contracts
exclusively in the shares of the Variable Funding Options.
We hold the assets of Separate Account Five and Separate Account Six for the
exclusive and separate benefit of the owners of each Separate Account, according
to the laws of Connecticut. Income, gains and losses, whether or not realized,
from assets allocated to the Separate Account are, in accordance with the
Contracts, credited to or charged against the Separate Account without regard to
other income, gains and losses of the Company. The
35
assets held by the Separate Account are not chargeable with liabilities arising
out of any other business that we may conduct. Obligations under the Contract
are obligations of the Company.
All investment income and other distributions of the funding options are payable
to the Separate Account. We reinvest all such income and/or distributions in
shares of the respective funding option at net asset value. Shares of the
funding options are currently sold only to life insurance company Separate
Accounts to fund variable annuity and variable life insurance contracts.
Certain variable annuity Separate Accounts and variable life insurance Separate
Accounts may invest in the funding options simultaneously (called "mixed" and
"shared" funding). It is conceivable that in the future it may be
disadvantageous to do so. Although the Company and the Variable Funding Options
do not currently foresee any such disadvantages either to variable annuity
Contract Owners or variable life policy owners, each Variable Funding Option's
Board of Directors intends to monitor events in order to identify any material
conflicts between them and to determine what action, if any, should be taken. If
a Board of Directors was to conclude that separate funds should be established
for variable life and variable annuity Separate Accounts, the variable annuity
Contract Owners would not bear any of the related expenses, but variable annuity
Contract Owners and variable life insurance policy owners would no longer have
the economies of scale resulting from a larger combined fund.
PERFORMANCE INFORMATION
In advertisements for the Contract, we may include performance figures to show
you how a Variable Funding Option has performed in the past. These figures are
rates of return or yield quotations shown as a percent. These figures show past
performance of a Variable Funding Option and are not an indication of how a
Variable Funding Option will perform in the future.
Our advertisements may show performance figures assuming that you do not elect
any optional features such as the Optional Death Benefit. However, if you elect
optional features, they involve additional charges that will serve to decrease
the performance of your Variable Funding Options. You may wish to speak with
your registered representative to obtain performance information specific to the
optional features you may wish to select.
Performance figures for each Variable Funding Option are based in part on the
performance of a corresponding Underlying Fund. In some cases, the Underlying
Fund may have existed before the technical inception of the corresponding
Variable Fund Option. In those cases, we can create "hypothetical historical
performance" of a Variable Fund Option. These figures show the performance that
the Variable Fund Option would have achieved had it been available during the
entire history of the Underlying Fund.
FEDERAL TAX CONSIDERATIONS
================================================================================
The following general discussion of the federal income tax consequences related
to your investment in this Contract is not intended to cover all situations, and
is not meant to provide tax or legal advice. Because of the complexity of the
law and the fact that the tax results will vary depending on many factors, you
should consult your tax and/or legal adviser regarding the tax implications of
purchasing this Contract based upon your individual situation. For further tax
information, an additional discussion of certain tax matters is contained in the
SAI.
GENERAL TAXATION OF ANNUITIES
Congress has recognized the value of saving for retirement by providing certain
tax benefits, in the form of tax deferral, for premiums paid under an annuity
and permitting tax-free transfers between the various investment options offered
under the Contract. The Internal Revenue Code ("Code") governs how earnings on
your investment in the Contract are ultimately taxed, depending upon the type of
Contract, qualified or non-qualified, and the manner in which the money is
distributed, as briefly described below. In analyzing the benefits of tax
deferral it is important to note that the Jobs and Growth Tax Relief
Reconciliation Act of 2003 amended Code Section 1 to reduce the marginal tax
rates on long-term capital gains and dividends to 5% and 15%. The reduced rates
apply during 2003 through 2008, and thereafter will increase to prior levels.
Earnings under annuity Contracts continue to be taxed as ordinary income (top
rate of 35%).
36
TAX-FREE EXCHANGES: Code Section 1035 provides that, if certain conditions are
met, no gain or loss is recognized when an annuity contract is received in
exchange for a life, endowment, or annuity contract. Since different annuity
Contracts have different expenses, fees and benefits, a tax-free exchange could
result in your investment becoming subject to higher or lower fees and/or
expenses.
TYPES OF CONTRACTS: QUALIFIED AND NON-QUALIFIED
QUALIFIED ANNUITY CONTRACTS
If you purchase your Contract with proceeds of an eligible rollover distribution
from any qualified employee pension plan or individual retirement annuity (IRA),
your Contract is referred to as a Qualified Contract. Some examples of Qualified
Contracts are: IRAs, tax-sheltered annuities established by public school
systems or certain tax-exempt organizations under Code Section 403(b), corporate
sponsored pension and profit-sharing plans (including 401(k) plans), Keogh Plans
(for self-employed individuals), and certain other qualified deferred
compensation plans. Another type of Qualified Contract is a Roth IRA, under
which after-tax contributions accumulate until maturity, when amounts (including
earnings) may be withdrawn tax-free. The rights and benefits under a Qualified
Contract may be limited by the terms of the retirement plan, regardless of the
terms and conditions of the Contract. Plan participants making contributions to
Qualified Contracts will be subject to minimum distribution rules as provided by
the Code and described below.
TAXATION OF QUALIFIED ANNUITY CONTRACTS
Under a qualified annuity, since amounts paid into the Contract have generally
not yet been taxed, the full amount of such distributions, including the amount
attributable to Purchase Payments, whether paid in the form of lump-sum
withdrawals or Annuity Payments, are generally taxed at the ordinary income tax
rate unless the distribution is transferred to an eligible rollover account or
Contract. The Contract is available as a vehicle for IRA rollovers and for other
Qualified Contracts. There are special rules which govern the taxation of
Qualified Contracts, including withdrawal restrictions, requirements for
mandatory distributions, and contribution limits. We have provided a more
complete discussion in the SAI.
MANDATORY DISTRIBUTIONS FOR QUALIFIED PLANS
Federal tax law requires that minimum annual distributions begin by April 1st of
the calendar year following the calendar year in which an IRA owner attains age
701/2. Participants in qualified plans and 403(b) annuities may defer minimum
distributions until the later of April 1st of the calendar year following the
calendar year in which they attain age 70 1/2 or the year of retirement. If you
own more than one individual retirement annuity and/or account, you may satisfy
the minimum distribution rules on an aggregate basis (i.e. determine the total
amount of required distributions from all IRAs and take the required amount from
any one or more IRAs). A similar aggregate approach is available to meet your
403(b) minimum distribution requirements if you have multiple 403(b) annuities.
MINIMUM DISTRIBUTIONS FOR BENEFICIARIES UPON THE CONTRACT OWNER'S DEATH: Upon
the death of the Contract Owner and/or Annuitant of a Qualified Contract, the
funds remaining in the Contract must be completely withdrawn within 5 years from
the date of death (including in a single lump sum) or minimum distributions may
be taken over the life expectancy of the beneficiary provided such distributions
are payable at least annually and begin within one year from the date of death.
Special rules apply where the beneficiary is the surviving spouse, which allow
the spouse to assume the Contract and defer the minimum distribution
requirements. NOTE TO PARTICIPANTS IN QUALIFIED PLANS INCLUDING 401, 403(b), 457
AS WELL AS IRA OWNERS: While annual plan contribution limits may be increased
from time to time by Congress and the IRS for federal income tax purposes, these
limits must be adopted by each state for the higher limits to be effective at a
state income tax level. In other words, the permissible contribution limit for
income tax purposes may be different at the federal level from your state's
income tax laws. Therefore, in certain states, a portion of the contributions
may not be excludible or deductible from state income taxes. Please consult your
employer or tax adviser regarding this issue.
NON-QUALIFIED ANNUITY CONTRACTS
If you purchase the Contract on an individual basis with after-tax dollars and
not under one of the programs described above, your Contract is referred to as
non-qualified.
37
As the owner of a non-qualified annuity, you do not receive any tax benefit
(deduction or deferral of income) on Purchase Payments, but you will not be
taxed on increases in the value of your Contract until a distribution occurs --
either as a withdrawal (distribution made prior to the Maturity Date), or as
Annuity Payments. When a withdrawal is made, you are taxed on the amount of the
withdrawal that is considered earnings under federal tax laws. Similarly, when
you receive an Annuity Payment, part of each payment is considered a return of
your Purchase Payments and will not be taxed. The remaining portion of the
Annuity Payment (i.e., any earnings) will be considered ordinary income for
federal income tax purposes.
If a non-qualified annuity is owned by other than an individual, however, (e.g.,
by a corporation), increases in the value of the Contract attributable to
Purchase Payments made after February 28, 1986 are includable in income annually
and taxed at ordinary income tax rates. Furthermore, for Contracts issued after
April 22, 1987, if you transfer the Contract to another person or entity without
adequate consideration, all deferred increases in value will be includable in
your income at the time of the transfer.
If you make a partial withdrawal, this money will generally be taxed as first
coming from earnings, (income in the Contract), and then from your Purchase
Payments. These withdrawn earnings are includable in your taxable income. (See
Penalty Tax for Premature Distributions below.) There is income in the Contract
to the extent the Contract Value exceeds your investment in the Contract. The
investment in the Contract equals the total Purchase Payments you paid less any
amount received previously which was excludible from gross income. Any direct or
indirect borrowing against the value of the Contract or pledging of the Contract
as security for a loan will be treated as a cash distribution under the tax law,
and will have tax consequences in the year taken.
Federal tax law requires that non-qualified annuity Contracts meet minimum
mandatory distribution requirements upon the death of the Contract Owner,
including the death of either of the joint owners. If these requirements are not
met, the Contract will not be treated as an annuity Contract for federal income
tax purposes and earnings under the Contract will be taxable currently, not when
distributed. The distribution required depends, among other things, upon whether
an annuity option is elected or whether the succeeding Contract Owner is the
surviving spouse. We will administer Contracts in accordance with these rules
and we will notify you when you should begin receiving payments. There is a more
complete discussion of these rules in the SAI.
DIVERSIFICATION REQUIREMENTS FOR VARIABLE ANNUITIES
The Code requires that any non-qualified variable annuity Contracts based on a
Separate Account must meet specific diversification standards. Non-qualified
variable annuity Contracts shall not be treated as an annuity for Federal income
tax purposes if investments made in the account are not adequately diversified.
Final tax regulations define how Separate Accounts must be diversified. The
Company monitors the diversification of investments constantly and believes that
its accounts are adequately diversified. The consequence of any failure to
diversify is essentially the loss to the Contract Owner of tax-deferred
treatment, requiring the current inclusion of a proportionate share of the
income and gains from the Separate Account assets in the income of each Contract
Owner. 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
In certain circumstances, owners of variable annuity contracts have been
considered to be the owners of the assets of the underlying Separate Account for
Federal income tax purposes due to their ability to exercise investment control
over those assets. When this is the case, the contract owners have been
currently taxed on income and gains attributable to the variable account assets.
There is little guidance in this area, and some features of the Contract, such
as the number of funds available and the flexibility of the Contract Owner to
allocate premium payments and transfer amounts among the funding options, have
not been addressed in public rulings. While we believe that the Contract does
not give the Contract Owner investment control over Separate Account assets, we
reserve the right to modify the Contract as necessary to prevent a Contract
Owner from being treated as the owner of the Separate Account assets supporting
the Contract.
TAXATION OF DEATH BENEFIT PROCEEDS
Amounts may be distributed from a non-qualified Contract because of the death of
an owner or annuitant. Generally, such amounts are includable in the income of
the recipient as follows: (i) if distributed in a lump
38
sum, they are taxed in the same manner as a full surrender of the Contract; or
(ii) if distributed under a payment option, they are taxed in the same way as
Annuity Payments.
OTHER TAX CONSIDERATIONS
TREATMENT OF CHARGES FOR OPTIONAL BENEFITS
The Contract may provide one or more optional enhanced death benefits or other
minimum guaranteed benefit that in some cases may exceed the greater of purchase
price or the Contract Value. It is possible that the Internal Revenue Service
may take the position that the charges for the optional enhanced benefit(s) are
deemed to be taxable distributions to you. Although we do not believe that a
charge under such optional enhanced benefit should be treated as a taxable
withdrawal, you should consult with your tax adviser before selecting any rider
or endorsement to the Contract.
PENALTY TAX FOR PREMATURE DISTRIBUTIONS
For both Qualified and Non-qualified Contracts, taxable distributions taken
before the Contract Owner has reached the age of 59 1/2 will be subject to a 10%
additional tax penalty unless the distribution is taken in a series of periodic
distributions, for life or life expectancy, or unless the distribution follows
the death or disability of the Contract Owner. Other exceptions may be available
in certain qualified plans. The 10% additional tax is in addition to any
penalties that may apply under your Contract and the normal income taxes due on
the distribution.
PUERTO RICO TAX CONSIDERATIONS
The Puerto Rico Internal Revenue Code of 1994 (the "1994 Code") taxes
distributions from non-qualified annuity Contracts differently than in the U.S.
Distributions that are not in the form of an annuity (including partial
surrenders and period certain payments) are treated under the 1994 Code first as
a return of investment. Therefore, no taxable income is recognized for Puerto
Rico tax purposes until the cumulative amount paid exceeds your tax basis. The
amount of income on annuity distributions (payable over your lifetime) is also
calculated differently under the 1994 Code. Since Puerto Rico residents are also
subject to U.S. income tax on all income other than income sourced to Puerto
Rico, the timing of recognition of income from an annuity Contract could vary
between the two jurisdictions. Although the 1994 Code provides a credit against
the Puerto Rico income tax for U.S. income taxes paid, an individual may not get
full credit because of the timing differences. You should consult with a
personal tax adviser regarding the tax consequences of purchasing an annuity
Contract and/or any proposed distribution, particularly a partial distribution
or election to annuitize.
NON-RESIDENT ALIENS
Distributions to non-resident aliens ("NRAs") are subject to special and complex
tax and withholding rules under the Code, some of which are based upon the
particular facts and circumstances of the Contract Owner, the beneficiary and
the transaction itself. In addition, Annuity Payments to NRAs in many countries
are exempt from U.S. tax (or subject to lower rates) based upon a tax treaty.
NRAs should seek guidance from a tax adviser regarding their personal situation.
AVAILABLE INFORMATION
================================================================================
The Companies are both subject to the information requirements of the Securities
and Exchange Act of 1934 ("the 1934 Act"), as amended, and file reports, proxy
statements and other information with the Securities and Exchange Commission
("Commission"). You may read and copy this information and other information at
the following locations:
o public reference facilities of the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C., 20549
o the Commission's Regional Offices located at 233 Broadway, New York, New
York 10279
39
o the Commission's Regional Offices located at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661.
Under the Securities Act of 1933, the Companies have each filed with the
Commission registration statements (the "Registration Statement") relating to
the Contracts offered by this prospectus. This prospectus has been filed as a
part of the Registration Statement and does not contain all of the information
set forth in the Registration Statement and the exhibits. Reference is hereby
made to such Registration Statement and exhibits for further information about
the Companies and the Contracts. The Registration Statement and the exhibits may
be inspected and copied as described above. Although the Companies each furnish
the annual reports on Form 10-K for the year ended December 31, 2003 to owners
of Contracts or certificates, we do not plan to furnish subsequent annual
reports containing financial information to the owners of Contracts or
certificates described in this prospectus.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
================================================================================
Each Company's latest annual report on Form 10-K has been filed with the
Commission. They are both incorporated by reference into this prospectus and a
copy of your issuing Company's 10-K must accompany this prospectus.
The Forms 10-K for the fiscal year ended December 31, 2003 contain additional
information about each Company including audited financial statements for the
latest fiscal year. The Travelers Insurance Company filed its Form 10-K on March
22, 2004 via Edgar, File No. 33-03094. The Travelers Life and Annuity Company
filed its Form 10-K on March 22, 2004 via Edgar, File No. 33-58677.
If requested, we will furnish, without charge, a copy of any and all of the
documents incorporated by reference, other than exhibits to those documents
(unless such exhibits are specifically incorporated by reference in those
documents.) You may direct your requests to: The Travelers Insurance Company,
One Cityplace, 3 CP, Hartford, Connecticut 06103-3415, Attention: Annuity
Services. The telephone number is (800) 842-9406. You may also obtain copies of
any documents, incorporated by reference into this prospectus by accessing the
SEC's website (http://www.sec.gov).
OTHER INFORMATION
================================================================================
THE INSURANCE COMPANIES
Please refer to your Contract to determine which Company issued your Contract.
The Travelers Insurance Company is a stock insurance company chartered in 1863
in Connecticut and continuously engaged in the insurance business since that
time. It is licensed to conduct life insurance business in all states of the
United States, the District of Columbia, Puerto Rico, Guam, the U.S. and British
Virgin Islands and the Bahamas. The Company is an indirect wholly owned
subsidiary of Citigroup Inc. The Company's Home Office is located at One
Cityplace, Hartford, Connecticut 06103-3415.
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 all states of
the United States (except New York), the District of Columbia and Puerto Rico.
The Company is an indirect wholly-owned subsidiary of Citigroup Inc. The
Company's Home Office is located at One Cityplace, Hartford, Connecticut
06103-3415.
FINANCIAL STATEMENTS
The financial statements for the Company and its Separate Account are located in
the Statement of Additional Information.
40
DISTRIBUTION OF VARIABLE ANNUITY CONTRACTS
DISTRIBUTION AND PRINCIPAL UNDERWRITING AGREEMENT. Travelers Distribution LLC
("TDLLC") serves as the principal underwriter and distributor of the securities
offered through this Prospectus pursuant to the terms of the Distribution and
Principal Underwriting Agreement. TDLLC also acts as the principal underwriter
and distributor of other variable annuity contracts and variable life insurance
policies issued by the Company and its affiliated companies.
TDLLC's principal executive offices are located at One Cityplace, Hartford,
Connecticut 06103. TDLLC is registered as a broker-dealer with the Securities
and Exchange Commission ("SEC") under the Securities Exchange Act of 1934, as
well as the securities commissions in the states in which it operates, and is a
member of the National Association of Securities Dealers, Inc. ("NASD"). TDLLC
is affiliated with the Company and each Separate Account. TDLLC, as the
principal underwriter and distributor, does not retain any fees under the
Contracts.
The Contracts are offered on a continuous basis. TDLLC enters into selling
agreements with broker-dealers who are registered with the SEC and are members
of the NASD, and with entities that may offer the Contracts but are exempt from
registration. Applications for the Contract are solicited by registered
representatives who are associated persons of such broker-dealer firms. Such
representatives act as appointed agents of the Company under applicable state
insurance law and must be licensed to sell variable insurance products. We
intend to offer the Contract in all jurisdictions where we are licensed to do
business and where the Contract is approved.
COMPENSATION. Broker-dealers who have selling agreements with TDLLC are paid
compensation for the promotion and sale of the Contracts according to one or
more schedules. Registered representatives who solicit sales of the Contract
typically receive a portion of the compensation payable to the broker-dealer
firm, depending on the agreement between the firm and the registered
representative. Compensation paid on the Contracts, as well as other incentives
or payments, are not assessed as an additional direct charge to Contract owners
or the Separate Account. We intend to recoup commissions and other sales
expenses through fees and charges imposed under the Contract and from profits on
payments received by the Company and TDLLC for providing administrative,
marketing and other support and services to the Funds.
The amount and timing of compensation may vary depending on the selling
agreement but is not expected to exceed 10% of Purchase Payments (if up-front
compensation is paid to registered representatives) and up to 2% annually of
average account value (if asset-based compensation is paid to registered
representatives). We may also periodically establish commission specials;
however, commissions paid under these specials will not exceed the amounts
described immediately above. To the extent permitted by NASD rules and other
applicable laws and regulations, TDLLC may pay or allow other promotional
incentives or payments in the form of cash or other compensation.
Broker-dealer firms may receive separate compensation or reimbursement for,
among other things, training of sales personnel, marketing or other services
they provide to the Company or our affiliates. In addition, the Company or TDLLC
may enter into special compensation arrangements with certain broker-dealer
firms based on aggregate or anticipated sales of the Contracts or other
criteria. These special compensation arrangements will not be offered to all
broker-dealer firms and the terms of such arrangements may differ between
broker-dealer firms.
The Company and TDLLC have entered into such arrangements with AIG Advisor Group
(including Advantage Capital Corporation, FSC Securities Corporation, Royal
Alliance Associates, Inc., Sentra Securities Corporation, Spelman & Co., Inc.
and SunAmerica Securities, Inc.), ING Advisors Network (including Financial
Network Corporation, Locust Street Securities, Multi-Financial Securities, IFG
Network Securities, VESTAX Securities, Washington Square Securities and
PrimeVest Financial Services), Merrill Lynch, NFP Securities, Inc., and Piper
Jaffray. Any such compensation payable to a broker-dealer firm will be made by
TDLLC or the Company out of their own assets and will not result in any
additional direct charge to you.
The Company and TDLLC have entered into selling agreements with certain
broker-dealer firms that have an affiliate that acts as investment adviser to
one or more Underlying Funds or serves as a subadviser to a Portfolio of The
Travelers Series Trust or Travelers Series Fund Inc., which are offered under
the Contracts. These firms include Fidelity Management & Research Company,
Morgan Stanley Investment Advisers Inc., Merrill Lynch Investment Managers,
L.P., Salomon Brothers Asset Management and Smith Barney Fund Management.
41
TOWER SQUARE SECURITIES. TDLLC has entered into a selling agreement with Tower
Square Securities, Inc. ("Tower Square"), which is affiliated with the Company.
Registered representatives of Tower Square, who are properly licensed and
appointed, may offer the Contract to customers. Such representatives are
eligible for various cash benefits, such as bonuses, commission advances and
non-cash compensation programs offered by the Company. Sales of the Contracts
may help qualify a Tower Square representative for such benefits. Sales
representatives may receive other payments from the Company for services that do
not directly involve the sale of the Contracts, including payments made for the
recruitment and training of personnel, production of promotional literature, and
similar services. In addition, sales representatives who meet certain Company
productivity, persistency and length of the services standards may be eligible
for additional compensation.
CITISTREET LLC. The Company has entered into an agreement with CitiStreet LLC
("CitiStreet"), an affiliate of the Company, whereby the Company pays CitiStreet
fees in connection with CitiStreet's provision of certain administrative,
recordkeeping, marketing and support services in support of annuity contracts
purchased from the Company in connection with Section 401(a), 401(k), 403(b),
457(b) and 408(b) plans. The Company will also provide compensation to
CitiStreet LLC in connection with the sale of the Contracts to such plans.
CONFORMITY WITH STATE AND FEDERAL LAWS
The laws of the state in which the Contract is issued govern that Contract.
Where a state has not approved a Contract feature or funding option, it will not
be available in that state. Any paid-up annuity, Cash Surrender Value or death
benefits that are available under the Contract are not less than the minimum
benefits required by the statutes of the state in which we delivered the
Contract. We reserve the right to make any changes, including retroactive
changes, in the Contract to the extent that the change is required to meet the
requirements of any law or regulation issued by any governmental agency to which
the Company, the Contract or the Contract Owner is subject.
VOTING RIGHTS
The Company is the legal owner of the shares of the Underlying Funds. However,
we believe that when an Underlying Fund solicits proxies in conjunction with a
vote of shareholders we are required to obtain from you and from other owners
instructions on how to vote those shares. We will vote all shares, including
those we may own on our own behalf, and those where we have not received
instructions from Contract Owners, in the same proportion as shares for which we
received voting instructions. Should we determine that we are no longer required
to comply with the above, we will vote on the shares in our own right. In
certain limited circumstances, and when permitted by law, we may disregard
voting instructions. If we do disregard voting instructions, a summary of that
action and the reasons for such action would be included in the next annual
report to Contract Owners.
RESTRICTIONS ON FINANCIAL TRANSACTIONS
Federal laws designed to counter terrorism and prevent money laundering might,
in certain circumstances, require us to block a Contract Owner's ability to make
certain transactions and thereby refuse to accept any request for transfers,
withdrawals, surrenders, or death benefits, until the instructions are received
from the appropriate regulator. We may also be required to provide additional
information about you and your Contract to government regulators.
LEGAL PROCEEDINGS AND OPINIONS
Legal matters in connection with the federal laws and regulations affecting the
issue and sale of the Contract described in this prospectus, as well as the
organization of the Companies, their authority to issue variable annuity
contracts under Connecticut law and the validity of the forms of the variable
annuity contracts under Connecticut law, have been passed on by the Deputy
General Counsel of the Companies.
In 2003, several issues in the mutual fund and variable insurance product
industries have come under the scrutiny of federal and state regulators. Like
many other companies in our industry, the Companies have received a request for
information from the Securities and Exchange Commission (SEC) and a subpoena
from the New York Attorney General regarding market timing and late trading. In
March 2004, the SEC requested additional information about the Companies'
variable product operations on market timing, late trading and
42
revenue sharing. The Companies are cooperating fully with all of these reviews
and are not able to predict their outcomes.
Notwithstanding the above, there are no pending legal proceedings affecting
either the Separate Account or the principal underwriter. There are no pending
legal proceedings against either Company likely to have a material adverse
affect on the ability of either Company to meet its obligations under the
applicable contract.
43
APPENDIX A--CONDENSED FINANCIAL INFORMATION
================================================================================
THE TRAVELERS SEPARATE ACCOUNT FIVE FOR VARIABLE ANNUITIES
ACCUMULATION UNIT VALUES (IN DOLLARS)
The following Accumulation Unit Value ("AUV") information should be read in
conjunction with the Separate Account's audited financial statement and notes,
which are included in the Statement of Additional Information ("SAI"). The first
table provides the AUV information for the MINIMUM Separate Account Charge
available under the contract. The second table provides the AUV information for
the MAXIMUM Separate Account Charge available under the contract. The Separate
Account Charges that fall in between this range are included in the SAI, which
is free of charge. You may request a copy of the SAI by calling the toll-free
number found on the first page of this prospectus or by mailing in the coupon
attached in Appendix E. Please refer to the Fee Table section of this prospectus
for more information on Separate Account Charges.
SEPARATE ACCOUNT CHARGES 0.80% 3% AIR
UNIT VALUE AT NUMBER OF UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR
- ------------------------------------------------------------ ------ --------------- --------------- -----------------
Capital Appreciation Fund (5/00) 2003 0.406 0.503 148,185
2002 0.547 0.406 213,843
2001 0.745 0.547 6,402
2000 1.000 0.745 --
High Yield Bond Trust (9/99) 2003 1.107 1.418 27,244
2002 1.067 1.107 --
2001 0.982 1.067 --
2000 0.980 0.982 --
1999 1.000 0.980 --
Managed Assets Trust (6/99) 2003 0.918 1.111 25,510
2002 1.013 0.918 25,510
2001 1.076 1.013 25,510
2000 1.102 1.076 20,767
1999 1.000 1.102 13,609
Money Market Portfolio (9/99) 2003 1.125 1.125 289,912
2002 1.119 1.125 264,365
2001 1.087 1.119 77,342
2000 1.032 1.087 76,073
1999 1.000 1.032 36,453
AIM Variable Insurance Funds
AIM V.I. Premier Equity Fund - Series I (5/01) 2003 0.615 0.763 --
2002 0.888 0.615 --
2001 1.000 0.888 --
A-1
ACCUMULATION UNIT VALUES (IN DOLLARS)
SEPARATE ACCOUNT CHARGES 0.80% 3% AIR (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR
- ------------------------------------------------------------ ------ --------------- --------------- -----------------
CitiStreet Funds, Inc.
CitiStreet Diversified Bond Fund - Class I (9/99) 2003 1.251 1.310 481,357
2002 1.157 1.251 470,261
2001 1.092 1.157 --
2000 0.979 1.092 12,041
1999 1.000 0.979 37,502
CitiStreet International Stock Fund - Class I (7/99) 2003 0.697 0.899 291,178
2002 0.904 0.697 223,222
2001 1.160 0.904 --
2000 1.272 1.160 1,916
1999 1.000 1.272 6,933
CitiStreet Large Company Stock Fund - Class I (9/99) 2003 0.537 0.683 525,471
2002 0.702 0.537 430,013
2001 0.840 0.702 --
2000 0.995 0.840 10,384
1999 1.000 0.995 21,459
CitiStreet Small Company Stock Fund - Class I (9/99) 2003 1.220 1.732 83,489
2002 1.612 1.220 66,192
2001 1.600 1.612 --
2000 1.465 1.600 1,472
1999 1.000 1.465 6,201
Credit Suisse Trust
Emerging Markets Portfolio (10/99) 2003 0.804 1.140 11,251
2002 0.916 0.804 11,251
2001 1.022 0.916 --
2000 1.506 1.022 --
1999 1.000 1.506 --
Delaware VIP Trust
Delaware VIP REIT Series - Standard Class (9/00) 2003 1.366 1.816 31,398
2002 1.318 1.366 19,794
2001 1.221 1.318 --
2000 1.000 1.221 --
A-2
ACCUMULATION UNIT VALUES (IN DOLLARS)
SEPARATE ACCOUNT CHARGES 0.80% 3% AIR (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR
- ------------------------------------------------------------ ------ --------------- --------------- -----------------
Delaware VIP Small Cap Value Series - Standard 2003 1.208 1.701 22,455
Class (10/99)
2002 1.289 1.208 10,600
2001 1.162 1.289 --
2000 0.991 1.162 --
1999 1.000 0.991 --
Dreyfus Variable Investment Fund
Dreyfus VIF Appreciation Portfolio - Initial
Shares (7/99) 2003 0.792 0.952 42,639
2002 0.958 0.792 54,702
2001 1.065 0.958 27,197
2000 1.081 1.065 24,552
1999 1.000 1.081 24,552
Dreyfus VIF Developing Leaders Portfolio - Initial
Shares (10/99) 2003 1.041 1.360 57,302
2002 1.298 1.041 58,130
2001 1.394 1.298 13,264
2000 1.240 1.394 3,246
1999 1.000 1.240 --
Franklin Templeton Variable Insurance Products Trust
Mutual Shares Securities Fund - Class 2 Shares (5/03) 2003 1.000 1.204 6,200
Greenwich Street Series Fund
Appreciation Portfolio (5/01) 2003 0.772 0.954 45,111
2002 0.943 0.772 20,346
2001 1.000 0.943 3,353
Equity Index Portfolio - Class II Shares (7/99) 2003 0.682 0.864 126,629
2002 0.886 0.682 47,426
2001 1.019 0.886 23,609
2000 1.133 1.019 14,389
1999 1.000 1.133 13,350
Fundamental Value Portfolio (5/01) 2003 0.722 0.992 157,189
2002 0.924 0.722 30,684
2001 1.000 0.924 --
A-3
ACCUMULATION UNIT VALUES (IN DOLLARS)
SEPARATE ACCOUNT CHARGES 0.80% 3% AIR (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR
- ------------------------------------------------------------ ------ --------------- --------------- -----------------
Janus Aspen Series
Balanced Portfolio - Service Shares (5/01) 2003 0.891 1.005 25,695
2002 0.962 0.891 --
2001 1.000 0.962 --
Mid Cap Growth Portfolio - Service Shares (5/01) 2003 0.551 0.736 5,302
2002 0.772 0.551 33,784
2001 1.000 0.772 --
Worldwide Growth Portfolio - Service Shares (5/00) 2003 0.453 0.556 5,661
2002 0.615 0.453 5,661
2001 0.801 0.615 5,661
2000 1.000 0.801 --
PIMCO Variable Insurance Trust
Total Return Portfolio - Administrative Class (5/01) 2003 1.144 1.192 6,319
2002 1.057 1.144 7,538
2001 1.000 1.057 --
Putnam Variable Trust
Putnam VT Discovery Growth Fund - Class IB Shares (5/01) 2003 0.564 0.739 --
2002 0.808 0.564 --
2001 1.000 0.808 --
Putnam VT International Equity Fund - Class IB
Shares (5/01) 2003 0.703 0.897 6,667
2002 0.861 0.703 --
2001 1.000 0.861 --
Putnam VT Small Cap Value Fund - Class IB Shares (5/01) 2003 0.886 1.315 43,406
2002 1.093 0.886 40,852
2001 1.000 1.093 --
A-4
ACCUMULATION UNIT VALUES (IN DOLLARS)
SEPARATE ACCOUNT CHARGES 0.80% 3% AIR (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR
- ------------------------------------------------------------ ------ --------------- --------------- -----------------
Salomon Brothers Variable Series Funds Inc.
All Cap Fund - Class I (4/00) 2003 1.077 1.486 3,532
2002 1.449 1.077 --
2001 1.433 1.449 --
2000 1.000 1.433 --
Investors Fund - Class I (10/99) 2003 0.903 1.185 --
2002 1.183 0.903 6,424
2001 1.244 1.183 --
2000 1.088 1.244 --
1999 1.000 1.088 13,535
Small Cap Growth Fund - Class I (5/01) 2003 0.631 0.932 --
2002 0.974 0.631 --
2001 1.000 0.974 --
Total Return Fund - Class I (9/00) 2003 0.975 1.121 --
2002 1.055 0.975 --
2001 1.072 1.055 --
2000 1.000 1.072 --
Smith Barney Investment Series
Smith Barney Large Cap Core Portfolio (5/01) 2003 0.659 0.807 6,455
2002 0.897 0.659 --
2001 1.000 0.897 --
Smith Barney Premier Selections All Cap Growth
Portfolio (5/01) 2003 0.652 0.869 --
2002 0.898 0.652 --
2001 1.000 0.898 --
Strong Variable Insurance Funds, Inc.
Strong Multi Cap Value Fund II (3/00) 2003 0.739 1.014 8,864
2002 0.969 0.739 8,864
2001 0.938 0.969 --
2000 1.000 0.938 --
The Travelers Series Trust
Disciplined Mid Cap Stock Portfolio (8/99) 2003 1.060 1.406 38,942
2002 1.247 1.060 22,864
A-5
ACCUMULATION UNIT VALUES (IN DOLLARS)
SEPARATE ACCOUNT CHARGES 0.80% 3% AIR (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR
- ------------------------------------------------------------ ------ --------------- --------------- -----------------
Disciplined Mid Cap Stock Portfolio (continued) 2001 1.310 1.247 4,950
2000 1.132 1.310 4,950
1999 1.000 1.132 4,950
Equity Income Portfolio (7/99) 2003 0.874 1.137 192,847
2002 1.024 0.874 151,978
2001 1.105 1.024 109,815
2000 1.021 1.105 12,381
1999 1.000 1.021 12,381
Federated Stock Portfolio (11/01) 2003 0.802 1.015 4,216
2002 1.002 0.802 4,216
2001 1.000 1.002 --
Large Cap Portfolio (7/99) 2003 0.652 0.807 96,847
2002 0.851 0.652 96,847
2001 1.038 0.851 96,847
2000 1.224 1.038 52,127
1999 1.000 1.224 12,719
Lazard International Stock Portfolio (8/99) 2003 0.663 0.846 6,318
2002 0.768 0.663 6,318
2001 1.049 0.768 4,591
2000 1.194 1.049 4,591
1999 1.000 1.194 4,591
Merrill Lynch Large Cap Core Portfolio (6/00) 2003 0.649 0.780 --
2002 0.874 0.649 --
2001 1.136 0.874 --
2000 1.000 1.136 --
MFS Emerging Growth Portfolio (5/01) 2003 0.531 0.681 --
2002 0.814 0.531 --
2001 1.000 0.814 --
MFS Mid Cap Growth Portfolio (10/99) 2003 0.668 0.909 47,678
2002 1.317 0.668 45,675
2001 1.739 1.317 33,694
2000 1.603 1.739 30,494
1999 1.000 1.603 --
A-6
ACCUMULATION UNIT VALUES (IN DOLLARS)
SEPARATE ACCOUNT CHARGES 0.80% 3% AIR (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR
- ------------------------------------------------------------ ------ --------------- --------------- -----------------
Pioneer Fund Portfolio (8/99) 2003 0.625 0.768 31,058
2002 0.903 0.625 24,128
2001 1.183 0.903 --
2000 0.959 1.183 --
1999 1.000 0.959 --
Social Awareness Stock Portfolio (7/99) 2003 0.686 0.877 18,473
2002 0.921 0.686 14,167
2001 1.100 0.921 14,167
2000 1.115 1.100 14,167
1999 1.000 1.115 14,167
Travelers Quality Bond Portfolio (8/99) 2003 1.186 1.259 36,759
2002 1.130 1.186 19,941
2001 1.063 1.130 19,941
2000 1.002 1.063 19,941
1999 1.000 1.002 19,941
U.S. Government Securities Portfolio (8/99) 2003 1.301 1.326 328,667
2002 1.154 1.301 366,169
2001 1.099 1.154 20,423
2000 0.968 1.099 20,423
1999 1.000 0.968 20,423
Travelers Series Fund Inc.
AIM Capital Appreciation Portfolio (5/01) 2003 0.654 0.840 --
2002 0.867 0.654 --
2001 1.000 0.867 --
MFS Total Return Portfolio (7/99) 2003 1.073 1.240 153,776
2002 1.141 1.073 135,391
2001 1.150 1.141 53,295
2000 0.994 1.150 --
1999 1.000 0.994 --
Pioneer Strategic Income Portfolio (1/01) 2003 1.084 1.285 32,760
2002 1.032 1.084 27,083
2001 1.000 1.032 --
A-7
ACCUMULATION UNIT VALUES (IN DOLLARS)
SEPARATE ACCOUNT CHARGES 0.80% 3% AIR (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR
- ------------------------------------------------------------ ------ --------------- --------------- -----------------
SB Adjustable Rate Income Portfolio - Class I 2003 1.000 1.001 1,000
Shares (9/03)
Smith Barney Aggressive Growth Portfolio (5/01) 2003 0.634 0.846 251,625
2002 0.949 0.634 15,408
2001 1.000 0.949 2,646
Smith Barney High Income Portfolio (8/99) 2003 0.842 1.065 22,349
2002 0.877 0.842 20,231
2001 0.918 0.877 20,231
2000 1.007 0.918 20,231
1999 1.000 1.007 20,231
Smith Barney International All Cap Growth
Portfolio (12/99) 2003 0.597 0.755 3,291
2002 0.810 0.597 3,291
2001 1.186 0.810 3,291
2000 1.569 1.186 3,291
1999 1.000 1.569 --
Smith Barney Large Capitalization Growth
Portfolio (10/99) 2003 0.677 0.991 5,766
2002 0.907 0.677 --
2001 1.045 0.907 --
2000 1.132 1.045 --
1999 1.000 1.132 --
Strategic Equity Portfolio (7/99) 2003 0.598 0.787 67,954
2002 0.908 0.598 67,954
2001 1.057 0.908 67,954
2000 1.303 1.057 56,806
1999 1.000 1.303 17,222
Van Kampen Life Investment Trust
Comstock Portfolio - Class II Shares (5/03) 2003 1.000 1.257 --
Emerging Growth Portfolio - Class II Shares (5/01) 2003 0.546 0.688 --
2002 0.817 0.546 --
2001 1.000 0.817 --
A-8
ACCUMULATION UNIT VALUES (IN DOLLARS)
SEPARATE ACCOUNT CHARGES 0.80% 3% AIR (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR
- ------------------------------------------------------------ ------ --------------- --------------- -----------------
Enterprise Portfolio - Class II Shares (5/01) 2003 0.637 0.794 --
2002 0.911 0.637 --
2001 1.000 0.911 --
Variable Annuity Portfolios
Smith Barney Small Cap Growth Opportunities
Portfolio (5/01) 2003 0.700 0.986 --
2002 0.949 0.700 --
2001 1.000 0.949 --
Variable Insurance Products Fund II
Asset Manager Portfolio - Service Class 2 (5/00) 2003 0.813 0.949 23,009
2002 0.900 0.813 51,769
2001 0.949 0.900 --
2000 1.000 0.949 --
Contrafund(R)Portfolio - Service Class 2 (5/01) 2003 0.852 1.083 75,992
2002 0.950 0.852 14,509
2001 1.000 0.950 --
Variable Insurance Products Fund III
Dynamic Capital Appreciation Portfolio - Service
Class 2 (5/01) 2003 0.776 0.962 12,814
2002 0.846 0.776 12,814
2001 1.000 0.846 2,853
Mid Cap Portfolio - Service Class 2 (5/01) 2003 0.921 1.264 47,487
2002 1.032 0.921 9,533
2001 1.000 1.032 --
A-9
ACCUMULATION UNIT VALUES (IN DOLLARS)
SEPARATE ACCOUNT CHARGES 1.25% 140 FL
UNIT VALUE AT NUMBER OF UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR
- ------------------------------------------------------------ ------ --------------- --------------- -----------------
Greenwich Street Series Fund
Equity Index Portfolio - Class II Shares (7/99) 2003 0.636 0.791 --
2002 0.841 0.636 --
2001 0.986 0.841 --
2000 1.117 0.986 --
1999 1.000 1.117 --
NOTES
Effective April 30, 2003 Putnam Variable Trust: Putnam VT Voyager II Fund -
Class IB Shares changed its name to Putnam VT Discovery Growth Fund - Class IB
Shares.
Effective April 30, 2003 Putnam Variable Trust: Putnam VT International Growth
Fund - Class IB Shares changed its name to Putnam VT International Equity Fund -
Class IB Shares.
Effective April 30, 2003 Salomon Brother Variable Series Funds Inc.: Capital
Fund - Class I changed its name to All Cap Fund - Class I.
Effective May 1, 2003 Janus Aspen Series: Aggressive Growth Portfolio - Service
Shares changed its name to Mid Cap Growth Portfolio - Service Shares.
Effective May 1, 2003 The Travelers Series Trust: Utilities Portfolio changed
its name to Pioneer Fund Portfolio.
Effective July 1, 2003: The Travelers Series Fund Inc.: Putnam Diversified
Income Portfolio changed its name to Pioneer Strategic Income Portfolio
Effective September 15, 2003: The Travelers Series Fund Inc. Alliance Growth
Portfolio changed its name to Strategic Equity Portfolio.
Effective November 17, 2003: The Travelers Series Trust: MFS Research Portfolio
changed its name to Merrill Lynch Large Cap Core Portfolio.
Effective May 1, 2003 Dreyfus Variable Investment Fund: Small Cap Portfolio -
Initial Shares changed its name to Dreyfus VIF Development Leaders Portfolio -
Initial Shares.
Effective May 1, 2003 Dreyfus Variable Investment Fund: Appreciation Portfolio -
Initial Shares changed its name to Dreyfus VIF Appreciation Portfolio - Initial
Shares.
Funding options not listed above had no amount allocated to them or where not
available as of December 31, 2003.
"Number of Units outstanding at the end of the period" may include units for
Contracts Owners in payout phase, where appropriate.
The date next to each funding option's name reflects the date money first came
into the funding option through the Separate Account.
A-10
NOTES (CONTINUED)
Putnam Variable Trust: Putnam VT Discovery Growth Funds - Class IB Share is no
longer available to new contract owners.
Credit Suisse Trust: Emerging Markets Portfolio is no longer available to new
contract owners.
Strong Variable Insurance Funds, Inc.: Strong Multi Cap Value Fund II is no
longer available to new contract owners.
A-11
APPENDIX B--CONDENSED FINANCIAL INFORMATION
================================================================================
THE TRAVELERS SEPARATE ACCOUNT SIX FOR VARIABLE ANNUITIES
ACCUMULATION UNIT VALUES (IN DOLLARS)
The following Accumulation Unit Value ("AUV") information should be read in
conjunction with the Separate Account's audited financial statement and notes,
which are included in the Statement of Additional Information ("SAI"). The first
table provides the AUV information for the MINIMUM Separate Account Charge
available under the contract. The second table provides the AUV information for
the MAXIMUM Separate Account Charge available under the contract. The Separate
Account Charges that fall in between this range are included in the SAI, which
is free of charge. You may request a copy of the SAI by calling the toll-free
number found on the first page of this prospectus or by mailing in the coupon
attached in Appendix E. Please refer to the Fee Table section of this prospectus
for more information on Separate Account Charges.
SEPARATE ACCOUNT CHARGES 0.80% 3% AIR
UNIT VALUE AT NUMBER OF UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR
- ------------------------------------------------------------ ------ --------------- --------------- -----------------
Capital Appreciation Fund (5/00) 2003 0.406 0.503 1,630,081
2002 0.547 0.406 1,837,286
2001 0.745 0.547 1,046,590
2000 1.000 0.745 1,006,482
High Yield Bond Trust (5/99)
2003 1.107 1.418 381,556
2002 1.067 1.107 411,756
2001 0.982 1.067 314,101
2000 0.980 0.982 101,750
1999 1.000 0.980 92,789
Managed Assets Trust (3/99)
2003 0.918 1.111 968,180
2002 1.013 0.918 1,042,680
2001 1.076 1.013 1,174,637
2000 1.102 1.076 913,007
1999 1.000 1.102 232,345
Money Market Portfolio (4/99) 2003 1.125 1.125 1,753,058
2002 1.119 1.125 1,258,377
2001 1.087 1.119 990,283
2000 1.032 1.087 700,403
1999 1.000 1.032 239,890
AIM Variable Insurance Funds
AIM V.I. Premier Equity Fund - Series I (7/01) 2003 0.615 0.763 103,682
2002 0.888 0.615 55,895
2001 1.000 0.888 --
B-1
ACCUMULATION UNIT VALUES (IN DOLLARS)
SEPARATE ACCOUNT CHARGES 0.80% 3% AIR (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR
- ------------------------------------------------------------ ------ --------------- --------------- -----------------
CitiStreet Funds, Inc.
CitiStreet Diversified Bond Fund - Class I (3/99) 2003 1.251 1.310 3,142,575
2002 1.157 1.251 3,360,816
2001 1.092 1.157 2,080,975
2000 0.979 1.092 601,543
1999 1.000 0.979 139,623
CitiStreet International Stock Fund - Class I (3/99) 2003 0.697 0.899 2,010,293
2002 0.904 0.697 2,025,194
2001 1.160 0.904 1,238,125
2000 1.272 1.160 474,746
1999 1.000 1.272 90,221
CitiStreet Large Company Stock Fund - Class I (3/99) 2003 0.537 0.683 4,110,325
2002 0.702 0.537 3,575,681
2001 0.840 0.702 2,080,499
2000 0.995 0.840 959,029
1999 1.000 0.995 228,230
CitiStreet Small Company Stock Fund - Class I (3/99) 2003 1.220 1.732 844,568
2002 1.612 1.220 739,822
2001 1.600 1.612 542,731
2000 1.465 1.600 462,418
1999 1.000 1.465 113,574
Credit Suisse Trust
Emerging Markets Portfolio (5/99) 2003 0.804 1.140 46,418
2002 0.916 0.804 45,812
2001 1.022 0.916 54,766
2000 1.506 1.022 71,391
1999 1.000 1.506 54,662
Delaware VIP Trust
Delaware VIP REIT Series - Standard Class (7/99) 2003 1.366 1.816 282,138
2002 1.318 1.366 242,450
2001 1.221 1.318 128,487
2000 0.937 1.221 102,023
1999 1.000 0.937 --
B-2
ACCUMULATION UNIT VALUES (IN DOLLARS)
SEPARATE ACCOUNT CHARGES 0.80% 3% AIR (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR
- ------------------------------------------------------------ ------ --------------- --------------- -----------------
Delaware VIP Small Cap Value Series - Standard
Class (4/99) 2003 1.208 1.701 177,208
2002 1.289 1.208 139,177
2001 1.162 1.289 13,468
2000 0.991 1.162 5,110
1999 1.000 0.991 --
Dreyfus Variable Investment Fund
Dreyfus VIF Appreciation Portfolio - Initial
Shares (3/99) 2003 0.792 0.952 331,736
2002 0.958 0.792 356,023
2001 1.065 0.958 396,091
2000 1.081 1.065 311,873
1999 1.000 1.081 244,529
Dreyfus VIF Developing Leaders Portfolio - Initial
Shares (4/99) 2003 1.041 1.360 589,418
2002 1.298 1.041 540,784
2001 1.394 1.298 388,047
2000 1.240 1.394 305,761
1999 1.000 1.240 45,091
Franklin Templeton Variable Insurance Products Trust
Mutual Shares Securities Fund - Class 2 Shares (8/03) 2003 1.000 1.204 17,090
Greenwich Street Series Fund
Appreciation Portfolio (8/01) 2003 0.772 0.954 100,091
2002 0.943 0.772 82,395
2001 1.000 0.943 14,712
Equity Index Portfolio - Class II Shares (3/99) 2003 0.682 0.864 1,719,505
2002 0.886 0.682 1,579,821
2001 1.019 0.886 1,055,882
2000 1.133 1.019 842,129
1999 1.000 1.133 207,054
Fundamental Value Portfolio (5/01) 2003 0.722 0.992 637,061
2002 0.924 0.722 486,577
2001 1.000 0.924 106,535
B-3
ACCUMULATION UNIT VALUES (IN DOLLARS)
SEPARATE ACCOUNT CHARGES 0.80% 3% AIR (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR
- ------------------------------------------------------------ ------ --------------- --------------- -----------------
Janus Aspen Series
Balanced Portfolio - Service Shares (5/01) 2003 0.891 1.005 123,022
2002 0.962 0.891 83,565
2001 1.000 0.962 --
Mid Cap Growth Portfolio - Service Shares (8/01) 2003 0.551 0.736 --
2002 0.772 0.551 --
2001 1.000 0.772 --
Worldwide Growth Portfolio - Service Shares (5/00) 2003 0.453 0.556 319,311
2002 0.615 0.453 382,579
2001 0.801 0.615 441,531
2000 1.000 0.801 424,750
PIMCO Variable Insurance Trust
Total Return Portfolio - Administrative Class (6/01) 2003 1.144 1.192 385,107
2002 1.057 1.144 388,046
2001 1.000 1.057 42,621
Putnam Variable Trust
Putnam VT Discovery Growth Fund - Class IB Shares (12/01) 2003 0.564 0.739 11,671
2002 0.808 0.564 11,671
2001 1.000 0.808 --
Putnam VT International Equity Fund - Class IB
Shares (5/01) 2003 0.703 0.897 88,330
2002 0.861 0.703 89,130
2001 1.000 0.861 36,530
B-4
ACCUMULATION UNIT VALUES (IN DOLLARS)
SEPARATE ACCOUNT CHARGES 0.80% 3% AIR (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR
- ------------------------------------------------------------ ------ --------------- --------------- -----------------
Putnam VT Small Cap Value Fund - Class IB Shares (6/01) 2003 0.886 1.315 173,137
2002 1.093 0.886 235,414
2001 1.000 1.093 1,734
Salomon Brothers Variable Series Funds Inc.
All Cap Fund - Class I (3/99) 2003 1.077 1.486 357,262
2002 1.449 1.077 340,827
2001 1.433 1.449 172,311
2000 1.222 1.433 70,934
1999 1.000 1.222 13,279
Investors Fund - Class I (3/99) 2003 0.903 1.185 151,723
2002 1.183 0.903 140,603
2001 1.244 1.183 102,276
2000 1.088 1.244 20,655
1999 1.000 1.088 5,119
Small Cap Growth Fund - Class I (6/01) 2003 0.631 0.932 --
2002 0.974 0.631 --
2001 1.000 0.974 997
Total Return Fund - Class I (3/99) 2003 0.975 1.121 13,990
2002 1.055 0.975 10,605
2001 1.072 1.055 7,423
2000 1.002 1.072 5,470
1999 1.000 1.002 --
Smith Barney Investment Series
Smith Barney Large Cap Core Portfolio (5/01) 2003 0.659 0.807 20,096
2002 0.897 0.659 20,096
2001 1.000 0.897 20,096
Smith Barney Premier Selections All Cap Growth
Portfolio (6/01) 2003 0.652 0.869 --
2002 0.898 0.652 --
2001 1.000 0.898 --
B-5
ACCUMULATION UNIT VALUES (IN DOLLARS)
SEPARATE ACCOUNT CHARGES 0.80% 3% AIR (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR
- ------------------------------------------------------------ ------ --------------- --------------- -----------------
Strong Variable Insurance Funds, Inc.
Strong Multi Cap Value Fund II (7/99) 2003 0.739 1.014 9,511
2002 0.969 0.739 9,511
2001 0.938 0.969 6,351
2000 0.877 0.938 6,351
1999 1.000 0.877 6,351
The Travelers Series Trust
Disciplined Mid Cap Stock Portfolio (6/99) 2003 1.060 1.406 298,395
2002 1.247 1.060 244,570
2001 1.310 1.247 156,409
2000 1.132 1.310 87,378
1999 1.000 1.132 --
Equity Income Portfolio (3/99) 2003 0.874 1.137 1,133,992
2002 1.024 0.874 1,011,873
2001 1.105 1.024 343,935
2000 1.021 1.105 212,588
1999 1.000 1.021 216,322
Federated Stock Portfolio (4/99) 2003 0.802 1.015 60,043
2002 1.002 0.802 52,941
2001 0.993 1.002 24,072
2000 0.965 0.993 4,126
1999 1.000 0.965 --
Large Cap Portfolio (3/99) 2003 0.652 0.807 524,562
2002 0.851 0.652 448,487
2001 1.038 0.851 409,069
2000 1.224 1.038 334,348
1999 1.000 1.224 247,021
Lazard International Stock Portfolio (4/99) 2003 0.663 0.846 57,438
2002 0.768 0.663 39,307
2001 1.049 0.768 43,074
2000 1.194 1.049 43,159
1999 1.000 1.194 13,922
Merrill Lynch Large Cap Core Portfolio (3/99) 2003 0.649 0.780 15,265
2002 0.874 0.649 16,447
B-6
ACCUMULATION UNIT VALUES (IN DOLLARS)
SEPARATE ACCOUNT CHARGES 0.80% 3% AIR (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR
- ------------------------------------------------------------ ------ --------------- --------------- -----------------
Merrill Lynch Large Cap Core Portfolio (continued) 2001 1.136 0.874 17,029
2000 1.213 1.136 80,150
1999 1.000 1.213 --
MFS Emerging Growth Portfolio (8/01) 2003 0.531 0.681 --
2002 0.814 0.531 --
2001 1.000 0.814 --
MFS Mid Cap Growth Portfolio (5/99) 2003 0.668 0.909 256,356
2002 1.317 0.668 249,539
2001 1.739 1.317 238,188
2000 1.603 1.739 201,277
1999 1.000 1.603 22,378
Pioneer Fund Portfolio (5/99) 2003 0.625 0.768 139,015
2002 0.903 0.625 177,705
2001 1.183 0.903 175,971
2000 0.959 1.183 136,065
1999 1.000 0.959 52,624
Social Awareness Stock Portfolio (3/99) 2003 0.686 0.877 190,338
2002 0.921 0.686 205,434
2001 1.100 0.921 252,885
2000 1.115 1.100 338,770
1999 1.000 1.115 204,232
Travelers Quality Bond Portfolio (3/99) 2003 1.186 1.259 336,903
2002 1.130 1.186 324,873
2001 1.063 1.130 229,303
2000 1.002 1.063 89,190
1999 1.000 1.002 30,445
U.S. Government Securities Portfolio (3/99) 2003 1.301 1.326 641,656
2002 1.154 1.301 674,168
2001 1.099 1.154 329,688
2000 0.968 1.099 147,364
1999 1.000 0.968 81,239
B-7
ACCUMULATION UNIT VALUES (IN DOLLARS)
SEPARATE ACCOUNT CHARGES 0.80% 3% AIR (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR
- ------------------------------------------------------------ ------ --------------- --------------- -----------------
Travelers Series Fund Inc.
AIM Capital Appreciation Portfolio (11/01) 2003 0.654 0.840 35,106
2002 0.867 0.654 38,688
2001 1.000 0.867 --
MFS Total Return Portfolio (4/99) 2003 1.073 1.240 1,112,494
2002 1.141 1.073 994,730
2001 1.150 1.141 458,197
2000 0.994 1.150 177,102
1999 1.000 0.994 56,338
Pioneer Strategic Income Portfolio (6/99) 2003 1.084 1.285 37,669
2002 1.032 1.084 29,999
2001 0.998 1.032 17,469
2000 1.010 0.998 --
1999 1.000 1.010 --
SB Adjustable Rate Income Portfolio - Class I
Shares (10/03) 2003 1.000 1.001 12,265
Smith Barney Aggressive Growth Portfolio (5/01) 2003 0.634 0.846 829,147
2002 0.949 0.634 372,023
2001 1.000 0.949 148,073
Smith Barney High Income Portfolio (5/99) 2003 0.842 1.065 20,424
2002 0.877 0.842 17,421
2001 0.918 0.877 26,499
2000 1.007 0.918 12,407
1999 1.000 1.007 --
Smith Barney International All Cap Growth
Portfolio (3/99) 2003 0.597 0.755 182,229
2002 0.810 0.597 184,371
2001 1.186 0.810 202,204
2000 1.569 1.186 76,324
1999 1.000 1.569 33,821
Smith Barney Large Capitalization Growth Portfolio (3/99) 2003 0.677 0.991 414,434
2002 0.907 0.677 335,753
B-8
ACCUMULATION UNIT VALUES (IN DOLLARS)
SEPARATE ACCOUNT CHARGES 0.80% 3% AIR (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR
- ------------------------------------------------------------ ------ --------------- --------------- -----------------
Smith Barney Large Capitalization Growth Portfolio
(continued) 2001 1.045 0.907 323,325
2000 1.132 1.045 265,016
1999 1.000 1.132 100,647
Strategic Equity Portfolio (3/99) 2003 0.598 0.787 861,404
2002 0.908 0.598 907,697
2001 1.057 0.908 1,013,052
2000 1.303 1.057 787,876
1999 1.000 1.303 274,568
Van Kampen Life Investment Trust
Comstock Portfolio - Class II Shares (8/03) 2003 1.000 1.257 15,449
Emerging Growth Portfolio - Class II Shares (1/02) 2003 0.546 0.688 --
2002 0.817 0.546 --
2001 1.000 0.817 --
Enterprise Portfolio - Class II Shares (10/01) 2003 0.637 0.794 --
2002 0.911 0.637 --
2001 1.000 0.911 --
Variable Annuity Portfolios
Smith Barney Small Cap Growth Opportunities
Portfolio (5/01) 2003 0.700 0.986 --
2002 0.949 0.700 --
2001 1.000 0.949 --
Variable Insurance Products Fund II
Asset Manager Portfolio - Service Class 2 (6/00) 2003 0.813 0.949 262,244
2002 0.900 0.813 227,798
2001 0.949 0.900 178,530
2000 1.000 0.949 133,640
Contrafund(R) Portfolio - Service Class 2 (9/01) 2003 0.852 1.083 244,184
2002 0.950 0.852 208,513
2001 1.000 0.950 --
B-9
ACCUMULATION UNIT VALUES (IN DOLLARS)
SEPARATE ACCOUNT CHARGES 0.80% 3% AIR (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR
- ------------------------------------------------------------ ------ --------------- --------------- -----------------
Variable Insurance Products Fund III
Dynamic Capital Appreciation Portfolio - Service
Class 2 (5/01) 2003 0.776 0.962 5,993
2002 0.846 0.776 5,993
2001 1.000 0.846 --
Mid Cap Portfolio - Service Class 2 (7/01) 2003 0.921 1.264 103,818
2002 1.032 0.921 100,887
2001 1.000 1.032 --
B-10
ACCUMULATION UNIT VALUES (IN DOLLARS)
SEPARATE ACCOUNT CHARGES 1.25% 140 FL
UNIT VALUE AT NUMBER OF UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR
- ------------------------------------------------------------ ------ --------------- --------------- -----------------
Greenwich Street Series Fund
Equity Index Portfolio - Class II Shares (3/99) 2003 0.636 0.791 --
2002 0.841 0.636 --
2001 0.986 0.841 --
2000 1.117 0.986 --
1999 1.000 1.117 --
NOTES
Effective April 30, 2003 Putnam Variable Trust: Putnam VT Voyager II Fund -
Class IB Shares changed its name to Putnam VT Discovery Growth Fund - Class IB
Shares.
Effective April 30, 2003 Putnam Variable Trust: Putnam VT International Growth
Fund - Class IB Shares changed its name to Putnam VT International Equity Fund -
Class IB Shares.
Effective April 30, 2003 Salomon Brother Variable Series Funds Inc.: Capital
Fund - Class I changed its name to All Cap Fund - Class I.
Effective May 1, 2003 Janus Aspen Series: Aggressive Growth Portfolio - Service
Shares changed its name to Mid Cap Growth Portfolio - Service Shares.
Effective May 1, 2003 The Travelers Series Trust: Utilities Portfolio changed
its name to Pioneer Fund Portfolio.
Effective July 1, 2003: The Travelers Series Fund Inc.: Putnam Diversified
Income Portfolio changed its name to Pioneer Strategic Income Portfolio
Effective September 15, 2003: The Travelers Series Fund Inc. Alliance Growth
Portfolio changed its name to Strategic Equity Portfolio.
Effective November 17, 2003: The Travelers Series Trust: MFS Research Portfolio
changed its name to Merrill Lynch Large Cap Core Portfolio.
Effective May 1, 2003 Dreyfus Variable Investment Fund: Small Cap Portfolio -
Initial Shares changed its name to Dreyfus VIF Development Leaders Portfolio -
Initial Shares.
Effective May 1, 2003 Dreyfus Variable Investment Fund: Appreciation Portfolio -
Initial Shares changed its name to Dreyfus VIF Appreciation Portfolio - Initial
Shares.
Funding options not listed above had no amount allocated to them or where not
available as of December 31, 2003.
"Number of Units outstanding at the end of the period" may include units for
Contracts Owners in payout phase, where appropriate.
The date next to each funding option's name reflects the date money first came
into the funding option through the Separate Account.
B-11
NOTES (CONTINUED)
Putnam Variable Trust: Putnam VT Discovery Growth Funds - Class IB Share is no
longer available to new contract owners.
Credit Suisse Trust: Emerging Markets Portfolio is no longer available to new
contract owners.
Strong Variable Insurance Funds, Inc.: Strong Multi Cap Value Fund II is no
longer available to new contract owners.
B-12
APPENDIX C
================================================================================
WAIVER OF WITHDRAWAL CHARGE FOR NURSING HOME CONFINEMENT
NOT AVAILABLE UNDER SECTION 457 PLANS
NOT AVAILABLE IF OWNER IS AGE 71 OR OLDER ON THE
CONTRACT DATE.
PLEASE REFER TO YOUR CONTRACT FOR STATE VARIATIONS OF THIS WAIVER.
If, after the first Contract Year and before the Maturity Date, the Annuitant
begins confinement in an eligible nursing home, you may surrender or make
withdrawal, subject to the maximum withdrawal amount described below, without
incurring a withdrawal charge. In order for the Company to waive the withdrawal
charge, the withdrawal must be made during continued confinement in an eligible
nursing home after the qualifying period has been satisfied, or within sixty
(60) days after such confinement ends. The qualifying period is confinement in
an eligible nursing home for ninety (90) consecutive days. We will require proof
of confinement in a form satisfactory to us, which may include certification by
a licensed physician that such confinement is medically necessary.
An eligible nursing home is defined as an institution or special nursing unit of
a hospital which:
(a) is Medicare approved as a provider of skilled nursing care services;
and
(b) is not, other than in name only, an acute care hospital, a home for
the aged, a retirement home, a rest home, a community living center,
or a place mainly for the treatment of alcoholism, mental illness or
drug abuse.
OR
Meets all of the following standards:
(a) is licensed as a nursing care facility by the state in which it is
licensed;
(b) is either a freestanding facility or a distinct part of another
facility such as a ward, wing, unit or swing-bed of a hospital or
other facility;
(c) provides nursing care to individuals who are not able to care for
themselves and who require nursing care;
(d) provides, as a primary function, nursing care and room and board; and
charges for these services;
(e) provides care under the supervision of a licensed physician,
registered nurse (RN) or licensed practical nurse (LPN);
(f) may provide care by a licensed physical, respiratory, occupational or
speech therapist; and
(g) is not, other than in name only, an acute care hospital, a home for
the aged, a retirement home, a rest home, a community living center,
or a place mainly for the treatment of alcoholism, mental illness or
drug abuse.
FILING A CLAIM: You must provide the Company with written notice of a claim
during continued confinement after the 90-day qualifying period, or within sixty
days after such confinement ends.
The maximum withdrawal amount for which we will waive the withdrawal charge is
the Contract Value on the next Valuation Date following written proof of claim,
less any Purchase Payments made within a one-year period before confinement in
an eligible nursing home begins, less any Purchase Payments made on or after the
Annuitant's 71st birthday.
We will pay any withdrawal requested under the scope of this waiver as soon as
we receive proper written proof of your claim, and we will pay the withdrawal in
a lump sum. You should consult with your personal tax adviser regarding the tax
impact of any withdrawals taken from your Contract.
C-1
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Registration Fees: $2,780.00 for 10,000,000 in interests of Fixed Account
Annuitization Options with a Market Value Adjustment Cash Out Feature.
Estimate of Printing Costs: $10,000
Cost of Independent Auditors: $5,000
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 33-770 et seq inclusive of the Connecticut General Statutes ("C.G.S.")
regarding indemnification of directors and officers of Connecticut corporations
provides in general that Connecticut corporations shall indemnify their
officers, directors and certain other defined individuals against judgments,
fines, penalties, amounts paid in settlement and reasonable expenses actually
incurred in connection with proceedings against the corporation. The
corporation's obligation to provide such indemnification generally does not
apply unless (1) the individual is wholly successful on the merits in the
defense of any such proceeding; or (2) a determination is made (by persons
specified in the statute) that the individual acted in good faith and in the
best interests of the corporation and in all other cases, his conduct was at
least not opposed to the best interests of the corporation, and in a criminal
case he had no reasonable cause to believe his conduct was unlawful; or (3) the
court, upon application by the individual, determines in view of all of the
circumstances that such person is fairly and reasonably entitled to 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 33-778 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.
Citigroup Inc. also provides liability insurance for its directors and officers
and the directors and officers of its subsidiaries, including the Registrant.
This insurance provides for coverage against loss from claims made against
directors and officers in their capacity as such, including, subject to certain
exceptions, liabilities under the federal securities laws.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 16. EXHIBITS
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION
1. Distribution and Principal Underwriting Agreement.
(Incorporated herein by reference to Exhibit 1 to the
Registration Statement on Form S-2, File No. 333-51800 filed
December 14, 2000.)
2. None.
3(a). Charter of The Travelers Life and Annuity Company, as amended
on April 10, 1990. (Incorporated herein by reference to
Exhibit 6(a) to the Registration Statement on Form N-4, File
No. 333-40191 filed November 13, 1997).
3(b). By-Laws of The Travelers Life and Annuity Company, as amended
on October 20, 1994. (Incorporated herein by reference to
Exhibit 6(b) to the Registration Statement on Form N-4, File
No. 333-40191 filed November 13, 1997.)
4. Contracts. (Incorporated herein by reference to Exhibit 4 to
the Registration Statement on Form N-4, File No. 333-58783
filed November 3, 1998.)
5. Opinion Re: Legality, Including Consent. (Incorporated herein
by reference to Exhibit 5 to the Registration Statement on
Form S-2 filed December 29, 1998.)
8. None.
9. None.
10. None.
11. None.
12. None.
13. Incorporated by reference to the text of the Prospectus.
15. None.
16. None.
23(a). Consent of KPMG LLP, Independent Auditors. Filed herewith.
23(b). Consent of Counsel (see Exhibit 5).
24(a). Power of Attorney authorizing Ernest J. Wright or Kathleen A.
McGah as signatory for J. Eric Daniels, George C. Kokulis,
Katherine M. Sullivan and Glenn Lammey. (Incorporated herein
by reference to Exhibit 24(b) to Post-Effective Amendment No.
1 to the Registration Statement on Form S-2, File No.
333-69753 filed April 3, 2000.)
24(b) Power of Attorney authorizing Ernest J. Wright or Kathleen A.
McGah as signatory for George C. Kokulis, Glenn Lammey, Marla
Berman Lewitus and William R. Hogan. (Incorporated herein by
reference to Exhibit 24(b) to Post-Effective Amendment No. 2
to the Registration statement on Form S-2, File No. 333-69753,
filed April 5, 2001.)
24(c). Power of Attorney authorizing Ernest J. Wright or Kathleen A.
McGah as signatory for Kathleen A. Preston. (Incorporated
herein by reference to Exhibit 24(c) to the Registration
Statement on Form S-2, File No. 333-69753 filed April 1,
2002.)
25. None.
26. None.
27. None.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes as follows, pursuant to Item 512(a)
of Regulation S-K:
(a) Rule 415 Offerings:
1. To file, during any period in which offers or sales of the registered
securities are being made, a post-effective amendment to this
registration statement:
i. to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
ii. to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement; Notwithstanding the
foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low
or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price set represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration
statement, and
iii. to include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
2. That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
3. To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
The undersigned registrant hereby undertakes as follows, pursuant to Item 512(h)
of Regulation S-K:
(h) Request for Acceleration of Effective Date:
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Hartford, State of Connecticut, on March 31, 2004
THE TRAVELERS LIFE AND ANNUITY COMPANY
(Registrant)
By: *GLENN D. LAMMEY
----------------
Glenn D. Lammey, Chief Financial Officer,
Chief Accounting Officer
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities indicated
on March 31, 2004.
*GEORGE C. KOKULIS Director, President and Chief Executive
- ------------------------------
(George C. Kokulis) Officer (Principal Executive Officer)
*GLENN D. LAMMEY Director, Chief Financial Officer, Chief
- ------------------------------- Accounting Officer (Principal Financial
(Glenn D. Lammey) Officer)
*MARLA BERMAN LEWITUS Director
- ------------------------------
(Marla Berman Lewitus)
*KATHLEEN L. PRESTON Director
- -------------------------------
(Kathleen L. Preston)
*By: /s/Ernest J. Wright, Attorney-in-Fact
EXHIBIT INDEX
EXHIBIT LETTER DESCRIPTION
23(a) Consent of KPMG LLP, Independent Auditors