<PAGE> 1
PORTFOLIO ARCHITECT
ANNUAL REPORT
DECEMBER 31, 1996
THE TRAVELERS FUND ABD II
FOR VARIABLE ANNUITIES
[TRAVELERSLIFE LOGO]
The Travelers Insurance Company
The Traverlers Life and Annuity Company
One Tower Square
Hartford, CT 06183
<PAGE> 2
THE TRAVELERS FUND ABD II
FOR VARIABLE ANNUITIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<S> <C> <C>
ASSETS:
Investments in eligible funds at market value:
Capital Appreciation Fund, 780 shares (cost $30,910)............................... $ 28,636
Travelers Series Fund Inc.:
Alliance Growth Portfolio, 139 shares (cost $2,336)............................. 2,334
Putnam Diversified Income Portfolio, 287 shares (cost $3,477)................... 3,325
The Travelers Series Trust:
Travelers Quality Bond Portfolio, 9,203 shares (cost $95,608)................... 92,947
Lazard International Stock Portfolio, 544 shares (cost $5,700).................. 5,860
MFS Emerging Growth Portfolio, 3,022 shares (cost $32,647)...................... 31,883
Large Cap Portfolio, 707 shares (cost $7,828)................................... 7,983
Equity Income Portfolio, 2,795 shares (cost $31,132)............................ 30,994
----------
Total Investments (cost $209,638).............................................. $ 203,962
Dividends receivable................................................................ 4,649
------------
Total Assets................................................................... 208,611
------------
LIABILITIES:
Accrued liabilities................................................................. 58
------------
Total Liabilities.............................................................. 58
------------
NET ASSETS: $ 208,553
============
</TABLE>
See Notes to Financial Statements
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THE TRAVELERS FUND ABD II
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS
FOR THE PERIOD DECEMBER 16, 1996
(DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends............................................................................ $ 5,162
EXPENSES:
Insurance charges.................................................................... $ 54
Administrative fees.................................................................. 5
-----------
Total expenses...................................................................... 59
------------
Net investment income.............................................................. 5,103
------------
UNREALIZED LOSS ON INVESTMENTS:
December 31, 1996.................................................................. (5,676)
-------------
Net decrease in net assets resulting from operations................................. $ (573)
=============
</TABLE>
See Notes to Financial Statements
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<PAGE> 4
THE TRAVELERS FUND ABD II
FOR VARIABLE ANNUITIES
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD DECEMBER 16, 1996
(DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
1996
----
<S> <C>
OPERATIONS:
Net investment income......................................................... $ 5,103
Unrealized loss on investments................................................ (5,676)
------------
Net decrease in net assets resulting from operations......................... (573)
------------
UNIT TRANSACTIONS:
Participant purchase payments.................................................
(applicable to 206,161 units)................................................ 209,126
------------
Net increase in net assets resulting from unit transactions................ 209,126
------------
Net increase in net assets................................................ 208,553
NET ASSETS:
Beginning of period........................................................... -
------------
End of period................................................................. $ 208,553
============
</TABLE>
See Notes to Financial Statements
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<PAGE> 5
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Fund ABD II for Variable Annuities ("Fund ABD II") is a
separate account of The Travelers Life and Annuity Company ("Travelers
Life"), which is a wholly owned subsidiary of The Travelers Insurance
Company ("The Travelers"), an indirect wholly owned subsidiary of Travelers
Group Inc., and is available for funding certain variable annuity contracts
issued by Travelers Life. Fund ABD II is registered under the Investment
Company Act of 1940, as amended, as a unit investment trust.
Participant purchase payments applied to Fund ABD II are invested in one or
more eligible funds in accordance with the selection made by the contract
owner. As of December 31, 1996, the eligible funds available under Fund ABD
II are: Capital Appreciation Fund; Cash Income Trust; Alliance Growth
Portfolio, Putnam Diversified Income Portfolio, and MFS Total Return
Portfolio of Travelers Series Fund Inc.; Travelers Quality Bond Portfolio,
Lazard International Stock Portfolio, MFS Emerging Growth Portfolio,
Federated Stock Portfolio, Federated High Yield Portfolio, Large Cap
Portfolio and Equity Income Portfolio of The Travelers Series Trust. All of
the funds are Massachusetts business trusts, except Travelers Series Fund
Inc. which is incorporated under Maryland law. All eligible funds are
managed by affiliates of The Travelers.
The following is a summary of significant accounting policies consistently
followed by Fund ABD II in the preparation of its financial statements.
SECURITY VALUATION. Investments are valued daily at the net asset values
per share of the underlying funds.
FEDERAL INCOME TAXES. The operations of Fund ABD II form a part of the
total operations of Travelers Life and are not taxed separately. Travelers
Life is taxed as a life insurance company under the Internal Revenue Code of
1986, as amended (the "Code"). Under existing federal income tax law, no
taxes are payable on the investment income of Fund ABD II. Fund ABD II is
not taxed as a "regulated investment company" under Subchapter M of the
Code.
OTHER. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Security transactions are accounted for on the trade date. Dividend income
is recorded on the ex-dividend date.
2. INVESTMENTS
Purchases of investments aggregated $209,638, for the period ended December
31, 1996. There were no sales for the period ended December 31, 1996.
Realized gains and losses from investment transactions are reported on an
identified cost basis. The cost of investments in eligible funds was
$209,638 at December 31, 1996. Gross unrealized appreciation for all
investments at December 31, 1996 was $315. Gross unrealized depreciation
for all investments at December 31, 1996 was $5,991.
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<PAGE> 6
NOTES TO FINANCIAL STATEMENTS - CONTINUED
3. CONTRACT CHARGES
Insurance charges are paid for the mortality and expense risks assumed by
Travelers Life. These charges are equivalent to 1.25% of the average net
assets of Fund ABD II on an annual basis.
Administrative fees are paid for administrative expenses incurred by
Travelers Life. This charge is equivalent to 0.15% of the average net assets
of Fund ABD II on an annual basis.
For contracts in the accumulation phase with a contract value less than
$40,000, an annual charge of $30 (prorated for partial periods) is deducted
from participant account balances and paid to Travelers Life to cover
contract administrative charges.
No sales charge is deducted from participant purchase payments when they are
received. However, Travelers Life generally assesses a contingent deferred
sales charge of up to 6% if a participant's purchase payment is surrendered
within seven years of its payment date. No contingent deferred sales
charges were assessed for the period ended December 31, 1996.
4. NET CONTRACT OWNERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------------------------------------
ACCUMULATION UNIT NET
UNITS VALUE ASSETS
----- ----- ------
<S> <C> <C> <C>
Capital Appreciation Fund............................................. 29,824 $ 1.032 $ 30,772
Travelers Series Fund Inc.
Alliance Growth Portfolio............................................ 2,250 1.037 2,333
Putnam Diversified Income Portfolio.................................. 3,300 1.007 3,323
The Travelers Series Trust
Travelers Quality Bond Portfolio..................................... 95,203 1.001 95,290
Lazard International Stock Portfolio................................. 5,702 1.027 5,857
MFS Emerging Growth Portfolio........................................ 31,886 1.004 32,019
Large Cap Portfolio.................................................. 7,800 1.023 7,979
Equity Income Portfolio.............................................. 30,196 1.026 30,980
---------------
Net Contract Owners' Equity.................................................................................... $ 208,553
===============
</TABLE>
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<PAGE> 7
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. SCHEDULE OF FUND ABD II OPERATIONS AND CHANGES IN NET ASSETS
FOR THE PERIOD DECEMBER 16, 1996
(DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
PUTNAM LAZARD
CAPITAL ALLIANCE DIVERSIFIED TRAVELERS INTERNATIONAL
APPRECIATION GROWTH INCOME QUALITY BOND STOCK
FUND PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends............................... $ 2,151 $ 86 $ 177 $ 2,347 $ -
---------- ------------- ---------- ------------ ------------
EXPENSES:
Insurance charges....................... 13 1 2 4 3
Administrative fees..................... 2 - - - -
---------- ------------- ---------- ------------ ------------
Net investment income (loss)...... 2,136 85 175 2,343 (3)
---------- ------------- ---------- ------------ ------------
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
End of period....................... (2,274) (2) (152) (2,661) 160
---------- ------------- ---------- ------------ ------------
Net increase (decrease) in net assets
resulting from operations......... (138) 83 23 (318) 157
---------- ------------- ---------- ------------ ------------
UNIT TRANSACTIONS:
Participant purchase payments........... 30,910 2,250 3,300 95,608 5,700
---------- ------------- ---------- ------------ ------------
Net increase in net assets resulting
from unit transactions............ 30,910 2,250 3,300 95,608 5,700
---------- ------------- ---------- ------------ ------------
Net increase in net assets........ 30,772 2,333 3,323 95,290 5,857
NET ASSETS:
Beginning of period................. - - - - -
---------- ------------- ---------- ------------ ------------
End of period....................... $ 30,772 $ 2,333 $ 3,323 $ 95,290 $ 5,857
========== ============= ========== ============ ============
</TABLE>
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<PAGE> 8
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
MFS EMERGING
GROWTH LARGE CAP EQUITY INCOME
PORTFOLIO PORTFOLIO PORTFOLIO COMBINED
------------- ----------- ------------ ----------
<S> <C> <C> <C>
$ 151 $ 28 $ 222 $ 5,162
--------- ---------- ----------- ----------
14 4 13 54
1 - 2 5
--------- ---------- ----------- ----------
136 24 207 5,103
--------- ---------- ----------- ----------
(764) 155 (138) (5,676)
--------- ---------- ----------- ----------
(628) 179 69 (573)
--------- ---------- ----------- ----------
32,647 7,800 30,911 209,126
--------- ---------- ----------- ----------
32,647 7,800 30,911 209,126
--------- ---------- ----------- ----------
32,019 7,979 30,980 208,553
- - - -
--------- ---------- ----------- ----------
$ 32,019 $ 7,979 $ 30,980 $ 208,553
========= ========== =========== ==========
</TABLE>
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<PAGE> 9
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF ACCUMULATION UNITS FOR FUND ABD II
FOR THE PERIOD DECEMBER 16, 1996
(DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1996.
<TABLE>
<CAPTION>
PUTNAM
CAPITAL ALLIANCE DIVERSIFIED TRAVELERS
APPRECIATION GROWTH INCOME QUALITY BOND
FUND PORTFOLIO PORTFOLIO FUND
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Accumulation units beginning of period.................... - - - -
Accumulation units purchased and
transferred from other Travelers accounts.............. 29,824 2,250 3,300 95,203
Accumulation units redeemed and
transferred to other Travelers accounts................ - - - -
------------- ------------ ------------ ------------
Accumulation units end of period.......................... 29,824 2,250 3,300 95,203
============= ============= ============= =============
<CAPTION>
LAZARD MFS EMERGING
INTERNATIONAL GROWTH LARGE CAP EQUITY INCOME
STOCK PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ------------ ---------- -------------
<S> <C> <C> <C> <C>
Accumulation units beginning of period.................... - - - -
Accumulation units purchased and
transferred from other Travelers accounts.............. 5,702 31,886 7,800 30,196
Accumulation units redeemed and
transferred to other Travelers accounts................ - - - -
------------- ------------ ------------ ------------
Accumulation units end of period.......................... 5,702 31,886 7,800 30,196
============= ============= ============= =============
</TABLE>
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<PAGE> 10
REPORT OF INDEPENDENT ACCOUNTANTS
To the Owners of Variable Annuity Contracts of
The Travelers Fund ABD II for Variable Annuities:
We have audited the accompanying statement of assets and liabilities of The
Travelers Fund ABD II for Variable Annuities as of December 31, 1996, and the
related statement of operations and changes in net assets for the period
December 16, 1996 (date operations commenced) to December 31, 1996. These
financial statements are the responsibility of management. Our responsibility
is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of shares owned as of December 31, 1996, by
correspondence with the underlying funds. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Travelers Fund ABD II for
Variable Annuities as of December 31, 1996, the results of its operations and
the changes in its net assets for the period December 16, 1996 (date operations
commenced) to December 31, 1996, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 7, 1997
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<PAGE> 11
Independent Accountants
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
This report is prepared for the general information of contract owners and is
not an offer of shares of The Travelers Fund ABD II for Variable Annuities or
Fund ABD II's underlying funds. It should not be used in connection with any
offer except in conjunction with the Prospectuses for the Variable Annuity
products offered by The Travelers Life and Annuity Company and the Prospectuses
of the underlying funds, which collectively contain all pertinent information,
including the applicable sales commissions.
FNDABDII (Annual) (12-96) Printed in U.S.A.
