<PAGE> 1
ANNUAL REPORT
DECEMBER 31, 1997
THE TRAVELERS FUND ABD
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
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, 23,749 shares (cost $1,102,482) .. $ 1,100,033
Cash Income Trust, 356,422 shares (cost $356,422) ........... 356,422
Travelers Series Fund Inc, 137,854 shares (cost $2,454,442) . 2,547,818
The Travelers Series Trust, 379,582 shares (cost $4,751,711) 4,692,816
Greenwich Street Series Fund, 99,306 shares (cost $1,367,507) 1,312,004
-----------
Total Investments (cost $10,032,564) .................... $10,009,093
Receivables:
Dividends ................................................... 620
Purchase payments and transfers from other Travelers accounts 121,068
Other assets .................................................. 73
-----------
Total Assets .............................................. 10,130,854
-----------
LIABILITIES:
Accrued liabilities ........................................... 766
-----------
Total Liabilities ......................................... 766
-----------
NET ASSETS: $10,130,088
===========
</TABLE>
See Notes to Financial Statements
-1-
<PAGE> 3
THE TRAVELERS FUND ABD
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS
FOR THE PERIOD APRIL 28, 1997 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1997
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends .......................................... $ 252,426
EXPENSES:
Insurance charges .................................. $ 27,812
Administrative charges ............................. 3,062
-----------
Total expenses ................................... 30,874
-----------
Net investment income .......................... 221,552
-----------
REALIZED GAIN AND UNREALIZED LOSS ON
INVESTMENTS:
Realized gain from investment transactions:
Proceeds from investments sold ................... 1,370,896
Cost of investments sold ......................... 1,344,561
-----------
Net realized gain .............................. 26,335
Unrealized loss on investments:
December 31, 1997 ................................ (23,471)
-----------
Net realized gain and unrealized loss ........ 2,864
-----------
Net increase in net assets resulting from operations $ 224,416
===========
</TABLE>
See Notes to Financial Statements
-2-
<PAGE> 4
THE TRAVELERS FUND ABD
FOR VARIABLE ANNUITIES
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD APRIL 28, 1997 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1997
<TABLE>
<CAPTION>
1997
------------
<S> <C>
OPERATIONS:
Net investment income ......................................... $ 221,552
Net realized gain from investment transactions ................ 26,335
Unrealized loss on investments ................................ (23,471)
------------
Net increase in net assets resulting from operations ........ 224,416
------------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 7,859,757 units) ............................. 9,113,419
Participant transfers from other Travelers accounts
(applicable to 1,186,983 units) ............................. 1,366,418
Administrative charges
(applicable to 48 units) .................................... (57)
Contract surrenders
(applicable to 17,616 units) ................................ (17,700)
Participant transfers to other Travelers accounts
(applicable to 513,616 units) ............................... (556,408)
------------
Net increase in net assets resulting from unit transactions 9,905,672
------------
Net increase in net assets .............................. 10,130,088
NET ASSETS:
Beginning of period ........................................... --
------------
End of period ................................................. $ 10,130,088
============
</TABLE>
See Notes to Financial Statements
-3-
<PAGE> 5
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Fund ABD for Variable Annuities ("Fund ABD") is a separate
account 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 The Travelers. Fund ABD
is registered under the Investment Company Act of 1940, as amended, as a
unit investment trust.
Participant purchase payments applied to Fund ABD 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
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 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 form a part of the total
operations of The Travelers and are not taxed separately. The Travelers 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. Fund ABD 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
$11,377,125 and $1,370,896, respectively, for the period 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
$10,032,564 at December 31, 1997. Gross unrealized appreciation for all
investments at December 31, 1997 was $100,353. Gross unrealized depreciation
for all investments at December 31, 1997 was $123,824.
-4-
<PAGE> 6
NOTES TO FINANCIAL STATEMENTS - continued
3. CONTRACT CHARGES
Insurance charges are paid for the mortality and expense risks assumed by
The Travelers. These charges are equivalent to 1.25% of the average net
assets of Fund ABD on an annual basis.
Administrative fees are paid for administrative expenses incurred by The
Travelers. This charge is equivalent to 0.15% of the average net assets of
Fund ABD 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 The Travelers to cover
contract administrative charges.
No sales charge is deducted from participant purchase payments when they are
received. However, The Travelers generally assesses a contingent deferred
sales charge of up to 6% if a participant's purchase payment is surrendered
within seven years of its payment date. No contingent deferred sales charges
were assessed for the period April 28, 1997 (date operations commenced) to
December 31, 1997.
4. NET CONTRACT OWNERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31, 1997
---------------------------------------
ACCUMULATION UNIT NET
UNITS VALUE ASSETS
------------ ---------- -----------
<S> <C> <C> <C>
Capital Appreciation Fund ............... 870,525 $ 1.283 $ 1,117,147
Cash Income Trust ....................... 345,682 1.033 357,014
The Travelers Series Fund Inc
Alliance Growth Portfolio ............ 1,062,634 1.319 1,401,894
Putnam Diversified Income Portfolio .. 51,659 1.070 55,268
MFS Total Return Portfolio ........... 962,287 1.183 1,138,838
The Travelers Series Trust
Travelers Quality Bond Portfolio ..... 378,758 1.057 400,520
Lazard International Stock Portfolio . 849,629 1.095 930,449
MFS Emerging Growth Portfolio ........ 528,553 1.198 633,416
Federated Stock Portfolio ............ 352,550 1.285 452,941
Federated High Yield Portfolio ....... 620,667 1.140 707,404
Large Cap Portfolio .................. 491,869 1.245 612,492
Equity Income Portfolio .............. 639,656 1.339 856,295
Mid Cap Disciplined Equity Fund ...... 120,880 1.195 144,422
Greenwich Street Series Fund
Diversified Strategic Income Portfolio 733,829 1.048 769,200
Appreciation Portfolio ............... 506,282 1.092 552,788
-----------
Net Contract Owners' Equity ............. $10,130,088
===========
</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>
CAPITAL APPRECIATION FUND (11.0%)
Total (Cost $1,102,482) 23,749 $ 1,100,033
----------- -----------
CASH INCOME TRUST (3.6%)
Total (Cost $356,422) 356,422 356,422
----------- -----------
TRAVELERS SERIES FUND INC. (25.4%)
Alliance Growth Portfolio (Cost $1,322,168) 63,830 1,381,914
Putnam Diversified Income Portfolio (Cost $53,852) 4,436 55,272
MFS Total Return Portfolio (Cost $1,078,422) 69,588 1,110,632
----------- -----------
Total (Cost $2,454,442) 137,854 2,547,818
----------- -----------
THE TRAVELERS SERIES TRUST (46.9%)
Travelers Quality Bond Portfolio (Cost $413,233) 38,663 400,550
Lazard International Stock Portfolio (Cost $944,550) 80,425 930,520
MFS Emerging Growth Portfolio (Cost $633,909) 49,639 623,462
Federated Stock Portfolio (Cost $454,363) 32,030 442,975
Federated High Yield Portfolio (Cost $703,997) 61,039 692,183
Large Cap Portfolio (Cost $609,507) 45,373 612,538
Equity Income Portfolio (Cost $842,198) 60,830 846,144
Mid Cap Disciplined Equity Fund (Cost $149,954) 11,583 144,444
----------- -----------
Total (Cost $4,751,711) 379,582 4,692,816
----------- -----------
GREENWICH STREET SERIES FUND (13.1%)
Diversified Strategic Income Portfolio (Cost $805,206) 69,897 761,174
Appreciation Portfolio (Cost $562,301) 29,409 550,830
----------- -----------
Total (Cost $1,367,507) 99,306 1,312,004
----------- -----------
TOTAL INVESTMENT OPTIONS (100%)
(COST $10,032,564) $10,009,093
===========
</TABLE>
-6-
<PAGE> 8
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF FUND ABD OPERATIONS AND CHANGES IN NET ASSETS FOR THE PERIOD
APRIL 28, 1997 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1997
<TABLE>
<CAPTION>
PUTNAM
CAPITAL ALLIANCE DIVERSIFIED MFS TOTAL
APPRECIATION CASH GROWTH INCOME RETURN
FUND INCOME TRUST PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ......................................... $ 7 $ 5,361 $ -- $ -- $ --
----------- ----------- ----------- ----------- -----------
EXPENSES:
Insurance charges ................................. 2,852 1,279 2,865 186 2,403
Administrative fees ............................... 328 159 333 23 288
----------- ----------- ----------- ----------- -----------
Net investment income (loss) ................ (3,173) 3,923 (3,198) (209) (2,691)
----------- ----------- ----------- ----------- -----------
REALIZED GAIN AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain from investment transactions:
Proceeds from investments sold ................ 40,269 374,664 749,839 117 10,193
Cost of investments sold ...................... 35,457 374,664 745,650 113 9,308
----------- ----------- ----------- ----------- -----------
Net realized gain ........................... 4,812 -- 4,189 4 885
----------- ----------- ----------- ----------- -----------
Unrealized gain (loss) on investments:
End of period ................................. (2,449) -- 59,746 1,420 32,210
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations ................... (810) 3,923 60,737 1,215 30,404
----------- ----------- ----------- ----------- -----------
UNIT TRANSACTIONS:
Participant purchase payments ..................... 1,021,535 668,068 1,238,242 51,783 940,526
Participant transfers from other Travelers accounts 122,922 75,838 133,061 2,270 172,906
Administrative charges ............................ (7) -- (1) -- (5)
Contract surrenders ............................... -- (1,993) -- -- (520)
Participant transfers to other Travelers accounts . (26,493) (388,822) (30,145) -- (4,473)
----------- ----------- ----------- ----------- -----------
Net increase in net assets resulting
from unit transactions ...................... 1,117,957 353,091 1,341,157 54,053 1,108,434
----------- ----------- ----------- ----------- -----------
Net increase in net assets .................. 1,117,147 357,014 1,401,894 55,268 1,138,838
NET ASSETS:
Beginning of period ........................... -- -- -- -- --
----------- ----------- ----------- ----------- -----------
End of period ................................. $ 1,117,147 $ 357,014 $ 1,401,894 $ 55,268 $ 1,138,838
=========== =========== =========== =========== ===========
</TABLE>
-7-
<PAGE> 9
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
LAZARD
TRAVELERS INTERNATIONAL MFS EMERGING FEDERATED FEDERATED
QUALITY BOND STOCK GROWTH STOCK HIGH YIELD LARGE CAP EQUITY INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
$ 16,972 $ 7,546 $ 10,056 $ 29,138 $ 38,000 $ 10,830 $ 36,350
--------- --------- --------- --------- --------- --------- ---------
636 4,280 1,509 1,299 2,421 1,303 2,837
76 320 156 155 288 156 298
--------- --------- --------- --------- --------- --------- ---------
16,260 2,946 8,391 27,684 35,291 9,371 33,215
--------- --------- --------- --------- --------- --------- ---------
1,454 29,137 49,211 37,541 2,962 13,262 50,308
1,389 28,239 42,869 34,726 2,762 12,688 45,269
--------- --------- --------- --------- --------- --------- ---------
65 898 6,342 2,815 200 574 5,039
--------- --------- --------- --------- --------- --------- ---------
(12,683) (14,030) (10,447) (11,388) (11,814) 3,031 3,946
--------- --------- --------- --------- --------- --------- ---------
3,642 (10,186) 4,286 19,111 23,677 12,976 42,200
--------- --------- --------- --------- --------- --------- ---------
355,224 762,470 592,343 422,565 672,841 544,424 722,562
42,653 180,078 47,324 36,084 34,082 55,094 144,783
(3) (12) (3) (10) -- (2) (8)
(996) (1,901) -- (537) (6,345) -- (3,758)
-- -- (10,534) (24,272) (16,851) -- (49,484)
--------- --------- --------- --------- --------- --------- ---------
396,878 940,635 629,130 433,830 683,727 599,516 814,095
--------- --------- --------- --------- --------- --------- ---------
400,520 930,449 633,416 452,941 707,404 612,492 856,295
-- -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
$ 400,520 $ 930,449 $ 633,416 $ 452,941 $ 707,404 $ 612,492 $ 856,295
========= ========= ========= ========= ========= ========= =========
</TABLE>
-8-
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF FUND ABD OPERATIONS AND CHANGES IN NET ASSETS FOR THE PERIOD
APRIL 28, 1997 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1997 (CONTINUED)
<TABLE>
<CAPTION>
MID CAP DIVERSIFIED
DISCIPLINED STRATEGIC FUND APPRECIATION
EQUITY FUND PORTFOLIO PORTFOLIO COMBINED
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ......................................... $ 9,833 $ 56,410 $ 31,923 $ 252,426
------------ ------------ ------------ ------------
EXPENSES:
Insurance charges ................................. 308 1,862 1,772 27,812
Administrative fees ............................... 39 221 222 3,062
------------ ------------ ------------ ------------
Net investment income (loss) ................ 9,486 54,327 29,929 221,552
------------ ------------ ------------ ------------
REALIZED GAIN AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain from investment transactions:
Proceeds from investments sold ................ 433 3,584 7,922 1,370,896
Cost of investments sold ...................... 375 3,447 7,605 1,344,561
------------ ------------ ------------ ------------
Net realized gain ........................... 58 137 317 26,335
------------ ------------ ------------ ------------
Unrealized gain (loss) on investments:
End of period ................................. (5,510) (44,032) (11,471) (23,471)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations ................... 4,034 10,432 18,775 224,416
------------ ------------ ------------ ------------
UNIT TRANSACTIONS:
Participant premium payments ...................... 123,893 498,149 498,794 9,113,419
Participant transfers from other Travelers accounts 16,702 262,819 39,802 1,366,418
Administrative charges ............................ (3) -- (3) (57)
Contract surrenders ............................... -- -- (1,650) (17,700)
Participant transfers to other Travelers accounts . (204) (2,200) (2,930) (556,408)
------------ ------------ ------------ ------------
Net increase in net assets resulting
from unit transactions ...................... 140,388 758,768 534,013 9,905,672
------------ ------------ ------------ ------------
Net increase in net assets .................. 144,422 769,200 552,788 10,130,088
NET ASSETS:
Beginning of period ........................... -- -- -- --
------------ ------------ ------------ ------------
End of period ................................. $ 144,422 $ 769,200 $ 552,788 $ 10,130,088
============ ============ ============ ============
</TABLE>
-9-
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF ACCUMULATION UNITS FOR FUND ABD FOR THE PERIOD APRIL 28, 1997
(DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1997
<TABLE>
<CAPTION>
PUTNAM
CAPITAL ALLIANCE DIVERSIFIED
APPRECIATION CASH GROWTH INCOME
FUND INCOME TRUST PORTFOLIO PORTFOLIO
------------ ------------ ------------- ----------
<S> <C> <C> <C> <C>
Accumulation units beginning of period ..... -- -- -- --
Accumulation units purchased and
transferred from other Travelers accounts 892,145 727,250 1,086,570 51,659
Accumulation units redeemed and
transferred to other Travelers accounts . (21,620) (381,568) (23,936) --
------------ ------------ ------------- ----------
Accumulation units end of period ........... 870,525 345,682 1,062,634 51,659
============ ============ ============= ==========
<CAPTION>
LAZARD
MFS TOTAL TRAVELERS INTERNATIONAL MFS EMERGING
RETURN QUALITY BOND STOCK GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------- ----------
<S> <C> <C> <C> <C>
Accumulation units beginning of period ..... -- -- -- --
Accumulation units purchased and
transferred from other Travelers accounts 966,589 379,710 851,367 537,885
Accumulation units redeemed and
transferred to other Travelers accounts . (4,302) (952) (1,738) (9,332)
------------ ------------ ------------- ----------
Accumulation units end of period ........... 962,287 378,758 849,629 528,553
============ ============ ============= ==========
<CAPTION>
FEDERATED FEDERATED
STOCK HIGH YIELD LARGE CAP EQUITY INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------- ----------
<S> <C> <C> <C> <C>
Accumulation units beginning of period ..... -- -- -- --
Accumulation units purchased and
transferred from other Travelers accounts 372,640 641,291 491,871 680,203
Accumulation units redeemed and
transferred to other Travelers accounts . (20,090) (20,624) (2) (40,547)
------------ ------------ ------------- ----------
Accumulation units end of period ........... 352,550 620,667 491,869 639,656
============ ============ ============= ==========
<CAPTION>
DIVERSIFIED
MID CAP STRATEGIC
DISCIPLINED INCOME APPRECIATION
EQUITY FUND PORTFOLIO PORTFOLIO COMBINED
------------ ------------- ------------- ----------
<S> <C> <C> <C> <C>
Accumulation units beginning of period ..... -- -- -- --
Accumulation units purchased and
transferred from other Travelers accounts 121,060 735,943 510,557 9,046,740
Accumulation units redeemed and
transferred to other Travelers accounts . (180) (2,114) (4,275) (531,280)
------------ ------------ ------------- ----------
Accumulation units end of period ........... 120,880 733,829 506,282 8,515,460
============ ============ ============= ==========
</TABLE>
-10-
<PAGE> 12
REPORT OF INDEPENDENT ACCOUNTANTS
To the Owners of Variable Annuity Contracts of
The Travelers Fund ABD for Variable Annuities:
We have audited the accompanying statement of assets and liabilities of The
Travelers Fund ABD for Variable Annuities as of December 31, 1997, and the
related statement of operations and changes in net assets for the period April
28, 1997 (date operations commenced) to December 31, 1997. 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, 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 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 for
Variable Annuities as of December 31, 1997, the results of its operations and
the changes in its net assets for the period April 28, 1997 (date operations
commenced) to December 31, 1997, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 19, 1998
-11-
<PAGE> 13
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 for Variable Annuities or Fund
ABD'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 Insurance Company and the Prospectuses of the
underlying funds, which collectively contain all pertinent information,
including the applicable sales commissions.
FNDABD (Annual) (12-97) Printed in U.S.A.
