<PAGE> 1
ANNUAL REPORT
DECEMBER 31, 1997
THE TRAVELERS FUND ABD II
FOR VARIABLE ANNUITIES
[Travelers Life & Annuity Logo]
The Travelers Insurance Company
The Travelers Life and Annuity Company
One Tower Square
Hartford, CT 06183
<PAGE> 2
THE TRAVELERS FUND ABD II
FOR VARIABLE ANNUITIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<S> <C> <C>
ASSETS:
Investments in eligible funds at market value:
Capital Appreciation Fund, 174,659 shares (cost $7,981,600)............ $ 8,090,183
Cash Income Trust, 4,975,084 shares (cost $4,975,084).................. 4,975,084
Travelers Series Fund Inc., 1,333,088 shares (cost $22,795,928)........ 23,779,078
The Travelers Series Trust, 3,357,400 shares (cost $42,202,410)........ 42,019,968
Greenwich Street Series Fund, 826,189 shares (cost $11,912,728)........ 11,381,549
------------
Total Investments (cost $89,867,750)............................ $90,245,862
Receivables:
Dividends.............................................................. 9,940
Purchase payments and transfers from other Travelers accounts.......... 1,047,988
Other assets............................................................... 76
------------
Total Assets........................................................ 91,303,866
------------
LIABILITIES:
Payable for contract surrenders and transfers to other Travelers accounts.. 581,432
Accrued liabilities........................................................ 7,031
------------
Total Liabilities................................................... 588,463
------------
NET ASSETS: $90,715,403
============
</TABLE>
See Notes to Financial Statements
-1-
<PAGE> 3
THE TRAVELERS FUND ABD II
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS
DECEMBER 31, 1997
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............................................................. $2,351,458
EXPENSES:
Insurance charges...................................................... $ 280,589
Administrative fees.................................................... 33,670
----------
Total expenses..................................................... 314,259
----------
Net investment income........................................... 2,037,199
----------
REALIZED GAIN AND CHANGE IN UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Realized gain from investment transactions:
Proceeds from investments sold..................................... 5,521,881
Cost of investments sold........................................... 5,338,133
----------
Net realized gain............................................... 183,748
Change in unrealized gain (loss) on investments:
Unrealized loss at December 31, 1996............................... (5,676)
Unrealized gain at December 31, 1997............................... 378,112
----------
Net change in unrealized gain (loss) for the year............... 383,788
----------
Net realized gain and change in unrealized gain (loss)...... 567,536
-----------
Net increase in net assets resulting from operations................... $2,604,735
==========
</TABLE>
-2-
<PAGE> 4
THE TRAVELERS FUND ABD II
FOR VARIABLE ANNUITIES
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997 AND
THE PERIOD DECEMBER 16, 1996 (DATE OPERATIONS COMMENCED)
TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
OPERATIONS:
Net investment income...................................................... $ 2,037,199 $ 5,103
Net realized gain from investment transactions............................. 183,748 -
Net change in unrealized gain (loss) on investments........................ 383,788 (5,676)
------------ --------
Net increase (decrease) in assets resulting from operations............ 2,604,735 (573)
------------ --------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 73,159,622 and 206,161 units, respectively)............. 84,108,261 209,126
Participant transfers from other Travelers accounts
(applicable to 13,871,733 units)....................................... 15,376,307 -
Administrative charges
(applicable to 1,417 units)............................................ (1,661) -
Contract surrenders
(applicable to 326,138 units).......................................... (373,590) -
Participant transfers to other Travelers accounts
(applicable to 10,447,164 units)....................................... (11,129,316) -
Other payments to participants
(applicable to 73,556 units)........................................... (77,886) -
----------- --------
Net increase in net assets resulting from unit transactions......... 87,902,115 209,126
----------- --------
Net increase in net assets...................................... 90,506,850 208,553
NET ASSETS:
Beginning of period........................................................ 208,553 -
---------- --------
End of period.............................................................. $ 90,715,403 $208,553
============ ========
</TABLE>
See Notes to Financial Statements
-3-
<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, 1997, 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, Equity Income Portfolio and Mid Cap
Disciplined Equity Fund of The Travelers Series Trust; and Diversified Strategic
Income Portfolio and Appreciation Portfolio of Greenwich Street Series Fund
(formerly Smith Barney Series Fund). 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. Not all
funds may be available in all states or to all contract owners.
The following is a summary of significant accounting policies consistently
followed by Fund 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.
SECURITY TRANSACTIONS. Security transactions are accounted for on the trade
date. Dividend income is recorded on the ex-dividend date.
FEDERAL INCOME TAXES. The operations of Fund 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.
2. INVESTMENTS
The aggregate costs of purchases and proceeds from sales of investments were
$94,996,245 and $5,521,881, respectively, for the year ended December 31, 1997.
Realized gains and losses from investment transactions are reported on an
identified cost basis. The cost of investments in eligible funds was $89,867,750
at December 31, 1997. Gross unrealized appreciation for all investments at
December 31, 1997 was $1,299,218. Gross unrealized depreciation for all
investments at December 31, 1997 was $921,106.
-4-
<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. Contract surrender payments include $1,794 of
contingent deferred sales charges for the year ended December 31, 1997. No
deductions were taken for the period December 16, 1996 (date operations
commenced) to December 31, 1996.
4. NET CONTRACT OWNERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-------------------------------------------------------------------------
ACCUMULATION UNIT NET
UNITS VALUE ASSETS
----- ----- ------
<S> <C> <C> <C>
Capital Appreciation Fund............................. 6,344,051 $ 1.283 $ 8,141,319
Cash Income Trust..................................... 5,369,177 1.033 5,545,186
The Travelers Series Fund Inc.
Alliance Growth Portfolio........................ 8,259,362 1.319 10,896,262
Putnam Diversified Income Portfolio.............. 1,132,608 1.070 1,211,730
MFS Total Return Portfolio....................... 9,959,634 1.183 11,786,936
The Travelers Series Trust
Travelers Quality Bond Portfolio................. 3,137,736 1.057 3,318,005
Lazard International Stock Portfolio............. 5,694,288 1.095 6,235,924
MFS Emerging Growth Portfolio.................... 4,218,974 1.198 5,055,922
Federated Stock Portfolio........................ 3,816,999 1.285 4,904,031
Federated High Yield Portfolio................... 4,566,993 1.140 5,205,229
Large Cap Portfolio.............................. 4,815,858 1.245 5,996,866
Equity Income Portfolio.......................... 6,719,150 1.339 8,994,737
Mid Cap Disciplined Equity Fund.................. 1,668,733 1.195 1,993,685
Greenwich Street Series Fund
Diversified Strategic Income Portfolio........... 5,444,154 1.048 5,706,564
Appreciation Portfolio........................... 5,241,524 1.092 5,723,007
-----------------
Net Contract Owners' Equity.....................................................................$ 90,715,403
=================
</TABLE>
-5-
<PAGE> 7
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. STATEMENT OF INVESTMENTS
<TABLE>
<CAPTION>
INVESTMENT OPTIONS NO. OF MARKET
SHARES VALUE
------------- -------------
<S> <C> <C> <C>
CAPITAL APPRECIATION FUND (9.0%)
Total (Cost $7,981,600) 174,659 $ 8,090,183
------------- -------------
CASH INCOME TRUST (5.5%)
Total (Cost $4,975,084) 4,975,084 4,975,084
------------- -------------
TRAVELERS SERIES FUND INC. (26.3%)
Alliance Growth Portfolio (Cost $10,294,250) 499,720 10,818,929
Putnam Diversified Income Portfolio (Cost $1,170,303) 97,257 1,211,823
MFS Total Return Portfolio (Cost $11,331,375) 736,111 11,748,326
------------- -------------
Total (Cost $22,795,928) 1,333,088 23,779,078
------------- -------------
THE TRAVELERS SERIES TRUST (46.6%)
Travelers Quality Bond Portfolio (Cost $3,474,498) 330,060 3,419,422
Lazard International Stock Portfolio (Cost $6,792,111) 579,039 6,699,483
MFS Emerging Growth Portfolio (Cost $4,995,936) 397,733 4,995,527
Federated Stock Portfolio (Cost $4,940,535) 351,909 4,866,899
Federated High Yield Portfolio (Cost $5,333,182) 459,050 5,205,626
Large Cap Portfolio (Cost $5,824,651) 438,291 5,916,932
Equity Income Portfolio (Cost $8,807,040) 641,427 8,922,244
Mid Cap Disciplined Equity Fund (Cost $2,034,457) 159,891 1,993,835
------------- -------------
Total (Cost $42,202,410) 3,357,400 42,019,968
------------- -------------
GREENWICH STREET SERIES FUND (12.6%)
Diversified Strategic Income Portfolio (Cost $6,051,497) 522,062 5,685,256
Appreciation Portfolio (Cost $5,861,231) 304,127 5,696,293
------------- ------------
Total (Cost $11,912,728) 826,189 11,381,549
------------- ------------
TOTAL INVESTMENT OPTIONS (100%)
(COST $89,867,750) $ 90,245,862
============
</TABLE>
-6-
<PAGE> 8
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF FUND ABD II OPERATIONS AND CHANGES IN NET ASSETS FOR THE YEAR
ENDED DECEMBER 31, 1997 AND THE PERIOD DECEMBER 16, 1996 (DATE OPERATIONS
COMMENCED) TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
CAPITAL APPRECIATION FUND CASH INCOME TRUST
------------------------- -----------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 49 $ 2,151 $ 56,170 $ -
---------- ------- ---------- ------
EXPENSES:
Insurance charges 28,465 13 13,682 -
Administrative fees 3,415 2 1,641 -
---------- ------- ---------- ------
Net investment income (loss) (31,831) 2,136 40,847 -
---------- ------- ---------- ------
REALIZED GAIN AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain from investment transactions:
Proceeds from investments sold 264,057 -- 3,133,177 -
Cost of investments sold 229,849 -- 3,133,177 -
---------- ------- ---------- ------
Net realized gain 34,208 -- -- -
---------- ------- ---------- ------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of period (2,274) -- -- -
Unrealized gain (loss) end of period 108,583 (2,274) -- -
---------- ------- ---------- ------
Net change in unrealized gain (loss) for the period 110,857 (2,274) -- -
---------- ------- ---------- ------
Net increase (decrease) in net assets
resulting from operations 113,234 (138) 40,847 -
---------- ------- ---------- ------
UNIT TRANSACTIONS:
Participant purchase payments 7,461,215 30,910 7,368,061 -
Participant transfers from other Travelers accounts 780,564 -- 3,834,960 -
Administrative charges (254) -- (17) -
Contract surrenders (24,673) -- (34,525) -
Participant transfers to other Travelers accounts (219,539) -- (5,606,057) -
Other payments to participants -- -- (58,083) -
---------- ------- ---------- ------
Net increase in net assets resulting
from unit transactions 7,997,313 30,910 5,504,339 -
---------- ------- ---------- ------
Net increase in net assets 8,110,547 30,772 5,545,186 -
NET ASSETS:
Beginning of period 30,772 -- -- -
---------- ------- ---------- ------
End of period $8,141,319 $30,772 $5,545,186 $ -
========== ======= ========== ======
</TABLE>
<TABLE>
<CAPTION>
ALLIANCE GROWTH PORTFOLIO
-------------------------
1997 1996
---- ----
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ -- $ 86
----------- ------
EXPENSES:
Insurance charges 31,193 1
Administrative fees 3,746 --
----------- ------
Net investment income (loss) (34,939) 85
----------- ------
REALIZED GAIN AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain from investment transactions:
Proceeds from investments sold 210,160 --
Cost of investments sold 166,527 --
----------- ------
Net realized gain 43,633 --
----------- ------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of period (2) --
Unrealized gain (loss) end of period 524,679 (2)
----------- ------
Net change in unrealized gain (loss) for the period 524,681 (2)
----------- ------
Net increase (decrease) in net assets
resulting from operations 533,375 83
----------- ------
UNIT TRANSACTIONS:
Participant purchase payments 9,788,986 2,250
Participant transfers from other Travelers accounts 853,627 --
Administrative charges (141) --
Contract surrenders (34,970) --
Participant transfers to other Travelers accounts (246,948) --
Other payments to participants -- --
----------- ------
Net increase in net assets resulting
from unit transactions 10,360,554 2,250
----------- ------
Net increase in net assets 10,893,929 2,333
NET ASSETS:
Beginning of period 2,333 --
----------- ------
End of period $10,896,262 $2,333
=========== ======
</TABLE>
-7-
<PAGE> 9
<TABLE>
<CAPTION>
PUTNAM
DIVERSIFIED INCOME PORTFOLIO MFS TOTAL RETURN PORTFOLIO
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C>
$ - $ 177 $ - $ -
- ------------- --------- --------------- -------
5,638 2 31,301 -
677 - 3,757 -
- ------------ --------- --------------- -------
(6,315) 175 (35,058) -
- ------------ --------- --------------- -------
4,956 - 78,777 -
4,869 - 73,905 -
- ------------- --------- --------------- -------
87 - 4,872 -
- ------------- --------- --------------- -------
(152) - - -
41,520 (152) 416,951 -
- ------------- --------- --------------- -------
41,672 (152) 416,951 -
- ------------- --------- --------------- -------
35,444 23 386,765 -
- ------------- --------- --------------- -------
1,088,326 3,300 10,338,758 -
88,094 - 1,163,196 -
(71) - (198) -
(2,684) - (45,021) -
(702) - (48,649) -
- - (7,915) -
- ------------- --------- --------------- -------
1,172,963 3,300 11,400,171 -
- ------------- --------- --------------- -------
1,208,407 3,323 11,786,936 -
3,323 - - -
- ------------- --------- --------------- -------
$ 1,211,730 $ 3,323 $ 11,786,936 $ -
============= ========= =============== =======
</TABLE>
<TABLE>
<CAPTION>
TRAVELERS LAZARD INTERNATIONAL
QUALITY BOND PORTFOLIO STOCK PORTFOLIO
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C>
$ 138,598 $ 2,347 $ 50,707 $ -
- ------------ ---------- -------------- ---------
12,826 4 26,204 3
1,539 - 3,144 -
- ------------ ---------- -------------- ---------
124,233 2,343 21,359 (3)
- ------------ ---------- -------------- ---------
160,989 - 1,043,493 -
158,517 - 1,003,736 -
- ------------ ---------- -------------- ---------
2,472 - 39,757 -
- ------------ ---------- -------------- ---------
(2,661) - 160 -
(55,076) (2,661) (92,628) 160
- ------------ ---------- -------------- ---------
(52,415) (2,661) (92,788) 160
- ------------ ---------- -------------- ---------
74,290 (318) (31,672) 157
- ------------ ---------- -------------- ---------
3,060,715 95,608 5,996,268 5,700
571,068 - 4,048,439 -
(43) - (196) -
(6,040) - (15,452) -
(473,262) - (3,767,320) -
(4,013) - - -
- ------------ ---------- -------------- ---------
3,148,425 95,608 6,261,739 5,700
- ------------ ---------- -------------- ---------
3,222,715 95,290 6,230,067 5,857
95,290 - 5,857 -
- ------------ ---------- -------------- ---------
$ 3,318,005 $ 95,290 $ 6,235,924 $ 5,857
============ ========== ============== =========
</TABLE>
-8-
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF FUND ABD II OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997 AND THE PERIOD DECEMBER 16, 1996
(DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1996 (CONTINUED)
<TABLE>
<CAPTION>
MFS EMERGING
GROWTH PORTFOLIO FEDERATED STOCK PORTFOLIO
------------------------------ -----------------------------------
1997 1996 1997 1996
---- ---- ---- ----
INVESTMENT INCOME:
<S> <C> <C> <C> <C>
Dividends ............................................... $ 83,370 $ 151 $ 314,094 $ --
----------- -------- ----------- -------------
EXPENSES:
Insurance charges ....................................... 17,941 14 16,560 --
Administrative fees ..................................... 2,154 1 1,988 --
----------- -------- ----------- -------------
Net investment income (loss) ...................... 63,275 136 295,546 --
----------- -------- ----------- -------------
REALIZED GAIN AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain from investment transactions:
Proceeds from investments sold ...................... 193,453 -- 73,527 --
Cost of investments sold ............................ 174,443 -- 62,166 --
----------- -------- ----------- -------------
Net realized gain ................................. 19,010 -- 11,361 --
----------- -------- ----------- -------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of period .......... (764) -- -- --
Unrealized gain (loss) end of period ................ (409) (764) (73,636) --
----------- -------- ----------- -------------
Net change in unrealized gain (loss) for the period 355 (764) (73,636) --
----------- -------- ----------- -------------
Net increase (decrease) in net assets
resulting from operations ......................... 82,640 (628) 233,271 --
----------- -------- ----------- -------------
UNIT TRANSACTIONS:
Participant purchase payments ........................... 4,540,338 32,647 4,420,238 --
Participant transfers from other Travelers accounts ..... 553,724 -- 344,776 --
Administrative charges .................................. (111) -- (51) --
Contract surrenders ..................................... (7,543) -- (26,282) --
Participant transfers to other Travelers accounts ....... (145,145) -- (67,921) --
Other payments to participants .......................... -- -- -- --
----------- -------- ----------- -------------
Net increase in net assets resulting
from unit transactions ............................ 4,941,263 32,647 4,670,760 --
----------- -------- ----------- -------------
Net increase in net assets ........................ 5,023,903 32,019 4,904,031 --
NET ASSETS:
Beginning of period ................................. 32,019 -- -- --
----------- -------- ----------- -------------
End of period ....................................... $ 5,055,922 $ 32,019 $ 4,904,031 $ --
=========== ======== =========== =============
</TABLE>
<TABLE>
<CAPTION>
FEDERATED HIGH YIELD PORTFOLIO
------------------------------
1997 1996
---- ----
<S> <C> <C>
INVESTMENT INCOME:
Dividends ............................................... $ 284,031 $ --
----------- -------------
EXPENSES:
Insurance charges ....................................... 14,757 --
Administrative fees ..................................... 1,769 --
----------- -------------
Net investment income (loss) ...................... 267,505 --
----------- -------------
REALIZED GAIN AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain from investment transactions:
Proceeds from investments sold ...................... 44,238 --
Cost of investments sold ............................ 40,363 --
----------- -------------
Net realized gain ................................. 3,875 --
----------- -------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of period .......... -- --
Unrealized gain (loss) end of period ................ (127,556) --
----------- -------------
Net change in unrealized gain (loss) for the period (127,556) --
----------- -------------
Net increase (decrease) in net assets
resulting from operations ......................... 143,824 --
----------- -------------
UNIT TRANSACTIONS:
Participant purchase payments ........................... 4,721,314 --
Participant transfers from other Travelers accounts ..... 543,294 --
Administrative charges .................................. (116) --
Contract surrenders ..................................... (17,687) --
Participant transfers to other Travelers accounts ....... (181,429) --
Other payments to participants .......................... (3,971) --
----------- -------------
Net increase in net assets resulting
from unit transactions ............................ 5,061,405 --
----------- -------------
Net increase in net assets ........................ 5,205,229 --
NET ASSETS:
Beginning of period ................................. -- --
----------- -------------
End of period ....................................... $ 5,205,229 $ --
=========== =============
</TABLE>
-9-
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
MID CAP DIVERSIFIED
LARGE CAP PORTFOLIO EQUITY INCOME PORTFOLIO DISCIPLINED EQUITY FUND STRATEGIC INCOME PORTFOLIO
------------------- ------------------------- ------------------------- ---------------------------
1997 1996 1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
$ 101,749 $ 28 $ 389,670 $ 222 $ 137,538 $ -- $ 439,628 $ --
- ----------- ------ ----------- -------- ----------- -------------- ----------- --------------
18,299 4 29,011 13 5,399 -- 11,064 --
2,194 -- 3,480 2 648 -- 1,327 --
- ----------- ------ ----------- -------- ----------- -------------- ----------- --------------
81,256 24 357,179 207 131,491 -- 427,237 --
- ----------- ------ ----------- -------- ----------- -------------- ----------- --------------
98,160 -- 26,960 -- 24,428 -- 20,045 --
88,795 -- 24,206 -- 20,833 -- 19,105 --
- ----------- ------ ----------- -------- ----------- -------------- ----------- --------------
9,365 -- 2,754 -- 3,595 -- 940 --
- ----------- ------ ----------- -------- ----------- -------------- ----------- --------------
155 -- (138) -- -- -- -- --
92,281 155 115,204 (138) (40,622) -- (366,241) --
- ----------- ------ ----------- -------- ----------- -------------- ----------- --------------
92,126 155 115,342 (138) (40,622) -- (366,241) --
- ----------- ------ ----------- -------- ----------- -------------- ----------- --------------
182,747 179 475,275 69 94,464 -- 61,936 --
- ----------- ------ ----------- -------- ----------- -------------- ----------- --------------
5,388,734 7,800 7,881,660 30,911 1,510,278 -- 5,145,299 --
676,048 -- 721,854 -- 421,291 -- 558,757 --
(129) -- (290) -- (10) -- (10) --
(15,178) -- (35,717) -- (7,241) -- (48,830) --
(243,335) -- (75,121) -- (25,097) -- (10,588) --
-- -- (3,904) -- -- -- -- --
- ----------- ------ ----------- -------- ----------- -------------- ----------- --------------
5,806,140 7,800 8,488,482 30,911 1,899,221 -- 5,644,628 --
- ----------- ------ ----------- -------- ----------- -------------- ----------- --------------
5,988,887 7,979 8,963,757 30,980 1,993,685 -- 5,706,564 --
7,979 -- 30,980 -- -- -- -- --
- ----------- ------ ----------- -------- ----------- -------------- ----------- --------------
$ 5,996,866 $7,979 $ 8,994,737 $ 30,980 $ 1,993,685 $ -- $ 5,706,564 $ --
=========== ====== =========== ======== =========== ============== =========== ==============
</TABLE>
-10-
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF FUND ABD II OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997 AND THE PERIOD DECEMBER 16, 1996
(DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1996 (CONTINUED)
<TABLE>
<CAPTION>
APPRECIATION PORTFOLIO COMBINED
------------------------------ -----------------------------
1997 1996 1997 1996
---- ---- ---- ----
INVESTMENT INCOME:
<S> <C> <C> <C> <C>
Dividends ............................................... $ 355,854 $ -- $ 2,351,458 $ 5,162
----------- -------------- ------------ ---------
EXPENSES:
Insurance charges ....................................... 18,249 -- 280,589 54
Administrative fees ..................................... 2,191 -- 33,670 5
----------- -------------- ------------ ---------
Net investment income (loss) ...................... 335,414 -- 2,037,199 5,103
----------- -------------- ------------ ---------
REALIZED GAIN AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain from investment transactions:
Proceeds from investments sold ...................... 145,461 -- 5,521,881 --
Cost of investments sold ............................ 137,642 -- 5,338,133 --
----------- -------------- ------------ ---------
Net realized gain ................................. 7,819 -- 183,748 --
----------- -------------- ------------ ---------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of period .......... -- -- (5,676) --
Unrealized gain (loss) end of period ................ (164,938) -- 378,112 (5,676)
----------- -------------- ------------ ---------
Net change in unrealized gain (loss) for the period (164,938) -- 383,788 (5,676)
----------- -------------- ------------ ---------
Net increase (decrease) in net assets
resulting from operations ......................... 178,295 -- 2,604,735 (573)
----------- -------------- ------------ ---------
UNIT TRANSACTIONS:
Participant purchase payments ........................... 5,398,071 -- 84,108,261 209,126
Participant transfers from other Travelers accounts ..... 216,615 -- 15,376,307 --
Administrative charges .................................. (24) -- (1,661) --
Contract surrenders ..................................... (51,747) -- (373,590) --
Participant transfers to other Travelers accounts ....... (18,203) -- (11,129,316) --
Other payments to participants .......................... -- -- (77,886) --
----------- -------------- ------------ ---------
Net increase in net assets resulting
from unit transactions ............................ 5,544,712 -- 87,902,115 209,126
----------- -------------- ------------ ---------
Net increase in net assets ........................ 5,723,007 -- 90,506,850 208,553
NET ASSETS:
Beginning of period ................................. -- -- 208,553 --
----------- -------------- ------------ ---------
End of period ....................................... $ 5,723,007 $ -- $ 90,715,403 $ 208,553
=========== ============== ============ =========
</TABLE>
-11-
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF ACCUMULATION UNITS FOR FUND ABD II
FOR THE YEAR ENDED DECEMBER 31, 1997 AND THE PERIOD DECEMBER 16, 1996
(DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
CAPITAL APPRECIATION FUND CASH INCOME TRUST ALLIANCE GROWTH PORTFOLIO
------------------------- ------------------------- -------------------------
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation units beginning of period ..... 29,824 -- -- -- 2,250 --
Accumulation units purchased and
transferred from other Travelers accounts 6,511,656 29,824 10,919,884 -- 8,477,800 2,250
Accumulation units redeemed and
transferred to other Travelers accounts . (197,429) -- (5,550,707) -- (220,688) --
---------- ------ ----------- ---- ---------- -----
Accumulation units end of period ........... 6,344,051 29,824 5,369,177 -- 8,259,362 2,250
========== ====== =========== ==== ========== =====
</TABLE>
<TABLE>
<CAPTION>
PUTNAM TRAVELERS
DIVERSIFIED INCOME PORTFOLIO MFS TOTAL RETURN PORTFOLIO QUALITY BOND PORTFOLIO
---------------------------- -------------------------- ----------------------
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation units beginning of period ..... 3,300 -- -- -- 95,203 --
Accumulation units purchased and
transferred from other Travelers accounts 1,132,613 3,300 10,047,483 -- 3,506,875 95,203
Accumulation units redeemed and
transferred to other Travelers accounts . (3,305) -- (87,849) -- (464,342) --
---------- ----- ----------- -- ---------- ------
Accumulation units end of period ........... 1,132,608 3,300 9,959,634 -- 3,137,736 95,203
========== ===== =========== == ========== ======
</TABLE>
<TABLE>
<CAPTION>
LAZARD INTERNATIONAL MFS EMERGING
STOCK PORTFOLIO GROWTH PORTFOLIO FEDERATED STOCK PORTFOLIO
--------------------- ---------------------- -------------------------
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation units beginning of period ..... 5,702 -- 31,886 -- -- --
Accumulation units purchased and
transferred from other Travelers accounts 9,158,729 5,702 4,324,494 31,886 3,893,039 --
Accumulation units redeemed and
transferred to other Travelers accounts . (3,470,143) -- (137,406) -- (76,040) --
---------- ----- ---------- ------ ---------- ----
Accumulation units end of period ........... 5,694,288 5,702 4,218,974 31,886 3,816,999 --
========== ===== ========== ====== ========== ====
</TABLE>
-12-
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF ACCUMULATION UNITS FOR FUND ABD II
FOR THE YEAR ENDED DECEMBER 31, 1997 AND THE PERIOD DECEMBER 16, 1996
(DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
FEDERATED HIGH YIELD PORTFOLIO LARGE CAP PORTFOLIO EQUITY INCOME PORTFOLIO
------------------------------ ------------------- -----------------------
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation units beginning of period ..... -- -- 7,800 -- 30,196 --
Accumulation units purchased and
transferred from other Travelers accounts 4,749,195 -- 5,023,099 7,800 6,782,186 30,196
Accumulation units redeemed and
transferred to other Travelers accounts . (182,202) -- (215,041) -- (93,232) --
---------- ---- ---------- ----- ---------- ------
Accumulation units end of period ........... 4,566,993 -- 4,815,858 7,800 6,719,150 30,196
========== ==== ========== ===== ========== ======
</TABLE>
<TABLE>
<CAPTION>
MID CAP DIVERSIFIED
DISCIPLINED EQUITY FUND STRATEGIC INCOME PORTFOLIO APPRECIATION PORTFOLIO
----------------------- -------------------------- ----------------------
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation units beginning of period ..... -- -- -- -- -- --
Accumulation units purchased and
transferred from other Travelers accounts 1,696,027 -- 5,501,153 -- 5,307,122 --
Accumulation units redeemed and
transferred to other Travelers accounts . (27,294) -- (56,999) -- (65,598) --
---------- ---- ---------- ---- ---------- ----
Accumulation units end of period ........... 1,668,733 -- 5,444,154 -- 5,241,524 --
========== ==== ========== ==== ========== ====
</TABLE>
<TABLE>
<CAPTION>
COMBINED
-------------------------
1997 1996
<S> <C> <C>
Accumulation units beginning of period ..... 206,161 --
Accumulation units purchased and
transferred from other Travelers accounts 87,031,355 206,161
Accumulation units redeemed and
transferred to other Travelers accounts . (10,848,275) --
----------- -------
Accumulation units end of period ........... 76,389,241 206,161
=========== =======
</TABLE>
-13-
<PAGE> 15
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, 1997, and the
related statement of operations for the year then ended and the statements of
changes in net assets for the year ended December 31, 1997 and 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of shares owned as of December 31, 1997, by correspondence with the
underlying funds. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Travelers Fund ABD II for
Variable Annuities as of December 31, 1997, the results of its operations for
the year then ended and the changes in its net assets for the year ended
December 31, 1997 and 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 19, 1998
-14-
<PAGE> 16
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) (12-97) Printed in U.S.A.
