<PAGE> 1
ANNUAL REPORT
DECEMBER 31, 1997
THE TRAVELERS FUND BD IV
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 BD IV
FOR VARIABLE ANNUITIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<S> <C> <C>
ASSETS:
Investments in eligible funds at market value:
Cash Income Trust, 65,989 shares (cost $65,989) ....................... $ 65,989
Greenwich Street Series Fund:
Equity Index Portfolio, 482,355 shares (cost $11,372,485) ........... 11,359,470
BT Insurance Funds Trust:
Small Cap Index Fund, 96,642 shares (cost $1,014,337) ............... 1,015,704
EAFE(R) Equity Index Fund, 16,143 shares (cost $150,349) ............ 150,775
-----------
Total Investments (cost $12,603,160) .............................. $12,591,938
Receivables:
Dividends ............................................................. 123
Purchase payments and transfers from other Travelers accounts ......... 111,568
-----------
Total Assets ........................................................ 12,703,629
-----------
LIABILITIES:
Payable for contract surrenders and transfers to other Travelers accounts 19,512
Accrued liabilities ..................................................... 1,553
-----------
Total Liabilities ................................................... 21,065
-----------
NET ASSETS: $12,682,564
===========
</TABLE>
See Notes to Financial Statements
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<PAGE> 3
THE TRAVELERS FUND BD IV
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS
FOR THE PERIOD SEPTEMBER 12, 1997 (DATE OPERATIONS COMMENCED)
TO DECEMBER 31, 1997
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends ........................................... $ 239,505
EXPENSES:
Insurance charges ................................... $ 16,476
Equity protection fees .............................. 11,168
Administrative fees ................................. 1,833
---------
Total expenses .................................... 29,477
---------
Net investment income ........................... 210,028
---------
REALIZED AND UNREALIZED LOSS ON
INVESTMENTS:
Realized loss from investment transactions:
Proceeds from investments sold .................... 32,148
Cost of investments sold .......................... 32,238
---------
Net realized loss ............................... (90)
Unrealized loss on investments:
December 31, 1997 ................................. (11,222)
---------
Net realized and unrealized loss ............. (11,312)
---------
Net increase in net assets resulting from operations $ 198,716
=========
</TABLE>
See Notes to Financial Statements
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<PAGE> 4
THE TRAVELERS FUND BD IV
FOR VARIABLE ANNUITIES
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD SEPTEMBER 12, 1997 (DATE OPERATIONS COMMENCED)
TO DECEMBER 31, 1997
<TABLE>
<S> <C>
OPERATIONS:
Net investment income .......................................... $ 210,028
Net realized loss from investment transactions ................. (90)
Net unrealized loss on investments ............................. (11,222)
------------
Net increase in net assets resulting from operations ......... 198,716
------------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 11,822,395 units) ............................. 12,035,841
Participant transfers from other Travelers accounts
(applicable to 486,227 units) ............................... 486,715
Contract surrenders
(applicable to 437 units) .................................... (440)
Participant transfers to other Travelers accounts
(applicable to 38,786 units) ................................ (38,268)
------------
Net increase in net assets resulting from unit transactions 12,483,848
------------
Net increase in net assets ............................... 12,682,564
NET ASSETS:
Beginning of period ............................................ --
------------
End of period .................................................. $ 12,682,564
============
</TABLE>
See Notes to Financial Statements
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<PAGE> 5
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Fund BD IV for Variable Annuities ("Fund BD IV") 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 BD IV is registered under the Investment Company Act of
1940, as amended, as a unit investment trust.
Participant purchase payments applied to Fund BD IV 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 BD
IV are: Cash Income Trust; Equity Index Portfolio of Greenwich Street Series
Fund (both of which are managed by affiliates of The Travelers); Small Cap
Index Fund and EAFE(R) Equity Index Fund of BT Insurance Funds Trust. All of
the funds are Massachusetts business trusts. 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 BD IV 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 BD IV form a part of the total
operations of Travelers Life and are not taxed separately. Travelers Life is
taxed as a life insurance company under the Internal Revenue Code of 1986,
as amended (the "Code"). Under existing federal income tax law, no taxes are
payable on the investment income of Fund BD IV. Fund BD IV 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
$12,635,398 and $32,148 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
$12,603,160 at December 31, 1997. Gross unrealized appreciation for all
investments at December 31, 1997 was $1,793. Gross unrealized depreciation
for all investments at December 31, 1997 was $13,015.
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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. For contracts with a standard death benefit provision, these
charges are equivalent to 1.25% of the average net assets of Fund BD IV on
an annual basis. For contracts with an enhanced death benefit provision,
these charges are equivalent to 1.45% of the average net assets of Fund BD
IV 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 BD IV on an annual basis.
For contracts in the accumulation phase with a contract value less than
$50,000, 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 eight years of its payment date. No contingent deferred sales charges
were assessed for the period September 12, 1997 (date operations commenced)
to December 31, 1997.
Participants in the Equity Index Portfolio may elect, at the time of
purchase, to obtain a Principal Protection Feature. Under this feature,
Travelers Life will guarantee that the value of the contract after eight
years will be at least equal to 115%, 100% or 90% of the purchase payment.
The annual fee, which depends on the level of protection that is chosen as
well as market conditions, is equivalent to an amount of up to 2.00% of the
participant's contract value. Additionally, participants who withdraw from
this feature before the end of the eighth contact year will be subject to a
withdrawal fee of up to 4% of the original purchase payment withdrawn.
Travelers Life received no withdrawal fees for the period ended December 31,
1997.
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<PAGE> 7
NOTES TO FINANCIAL STATEMENTS - CONTINUED
4. NET CONTRACT OWNERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31, 1997
------------------------------------------------------
ACCUMULATION UNIT NET
UNITS VALUE ASSETS
----- ----- ------
<S> <C> <C> <C>
CASH INCOME TRUST
Standard Death Benefit ....................................... 46,237 $ 1.007 $ 46,582
GREENWICH STREET SERIES FUND
EQUITY INDEX PORTFOLIO
Standard Death Benefit
0.00% Principal Protection Fee ............................. 934,805 1.047 978,441
0.80% Principal Protection Fee ............................. 208,174 1.044 217,369
1.10% Principal Protection Fee ............................. 5,313,886 1.043 5,543,581
1.50% Principal Protection Fee ............................. 358,499 1.042 373,545
Enhanced Death Benefit
0.00% Principal Protection Fee ............................. 737,335 1.046 771,293
1.10% Principal Protection Fee ............................. 3,330,600 1.043 3,472,462
1.50% Principal Protection Fee ............................. 99,043 1.041 103,137
BT INSURANCE FUNDS TRUST
SMALL CAP INDEX FUND
Standard Death Benefit ....................................... 441,762 0.945 417,310
Enhanced Death Benefit ....................................... 644,012 0.944 608,080
EAFE(R) EQUITY INDEX FUND
Standard Death Benefit ....................................... 144,516 0.972 140,529
Enhanced Death Benefit ....................................... 10,530 0.972 10,235
-----------
Net Contract Owners' Equity .............................................................................. $12,682,564
===========
</TABLE>
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<PAGE> 8
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. SCHEDULE OF FUND BD IV OPERATIONS AND CHANGES IN NET ASSETS
FOR THE PERIOD SEPTEMBER 12, 1997 (DATE OPERATIONS COMMENCED) TO DECEMBER
31, 1997
<TABLE>
<CAPTION>
CASH EQUITY SMALL CAP EAFE(R) EQUITY
INCOME TRUST INDEX PORTFOLIO INDEX FUND INDEX FUND COMBINED
------------- --------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ........................................... $ 510 $ 238,995 $ -- $ -- $ 239,505
-------- ------------ ----------- --------- ------------
EXPENSES:
Insurance charges ................................... 131 15,226 895 224 16,476
Equity protection fees .............................. -- 11,168 -- -- 11,168
Administrative fees ................................. 15 1,685 106 27 1,833
-------- ------------ ----------- --------- ------------
Net investment income (loss) .................. 364 210,916 (1,001) (251) 210,028
-------- ------------ ----------- --------- ------------
REALIZED GAIN (LOSS) AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold .................. 121 21,487 10,057 483 32,148
Cost of investments sold ........................ 121 20,959 10,664 494 32,238
-------- ------------ ----------- --------- ------------
Net realized gain (loss) ..................... -- 528 (607) (11) (90)
-------- ------------ ----------- --------- ------------
Unrealized gain (loss) on investments:
End of period ................................... -- (13,015) 1,367 426 (11,222)
-------- ------------ ----------- --------- ------------
Net increase (decrease) in net assets
resulting from operations ..................... 364 198,429 (241) 164 198,716
-------- ------------ ----------- --------- ------------
UNIT TRANSACTIONS:
Participant purchase payments ....................... 46,339 10,891,182 999,929 98,391 12,035,841
Participant transfers from other Travelers accounts . 19,391 379,999 35,116 52,209 486,715
Contract surrenders ................................. -- (440) -- -- (440)
Participant transfers to other Travelers accounts ... (19,512) (9,342) (9,414) -- (38,268)
-------- ------------ ----------- --------- ------------
Net increase in net assets resulting
from unit transactions ........................ 46,218 11,261,399 1,025,631 150,600 12,483,848
-------- ------------ ----------- --------- ------------
Net increase in net assets .................... 46,582 11,459,828 1,025,390 150,764 12,682,564
NET ASSETS:
Beginning of period ............................. -- -- -- -- --
-------- ------------ ----------- --------- ------------
End of period ................................... $ 46,582 $ 11,459,828 $ 1,025,390 $ 150,764 $ 12,682,564
======== ============ =========== ========= ============
</TABLE>
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<PAGE> 9
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF ACCUMULATION UNITS FOR FUND BD IV
FOR THE PERIOD SEPTEMBER 12, 1997 (DATE OPERATIONS COMMENCED) TO
DECEMBER 31, 1997
<TABLE>
<CAPTION>
CASH EQUITY SMALL CAP EAFE(R) EQUITY
INCOME TRUST INDEX FUND INDEX FUND INDEX FUND COMBINED
------------ ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
Accumulation units beginning of period ....... -- -- -- -- --
Accumulation units purchased and
transferred from other Travelers accounts . 65,612 10,992,190 1,095,774 155,046 12,308,622
Accumulation units redeemed and
transferred to other Travelers accounts ... (19,375) (9,848) (10,000) -- (39,223)
------- ---------- --------- ------- ----------
Accumulation unit end of period .............. 46,237 10,982,342 1,085,774 155,046 12,269,399
======= ========== ========= ======= ==========
</TABLE>
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<PAGE> 10
REPORT OF INDEPENDENT ACCOUNTANTS
To the Owners of Variable Annuity Contracts of The Travelers Fund BD IV for
Variable Annuities:
We have audited the accompanying statement of assets and liabilities of The
Travelers Fund BD IV for Variable Annuities as of December 31, 1997, and the
related statement of operations and changes in net assets for the period
September 12, 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 BD IV for
Variable Annuities as of December 31, 1997, the results of its operations and
the changes in its net assets for the period September 12, 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
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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 BD IV for Variable Annuities or
Fund BD IV'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.
FNDBDIV (Annual) (12-97) Printed in U.S.A.