<PAGE> 1
ANNUAL REPORT
DECEMBER 31, 1998
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, 1998
<TABLE>
<S> <C> <C>
ASSETS:
Investments in eligible funds at market value:
BT Insurance Funds Trust, 641,720 shares (cost $6,676,444) ............... $6,563,470
Greenwich Street Series Fund, 4,705,031 shares (cost $124,736,506) ....... 141,009,787
Money Market Portfolio, 848,411 shares (cost $848,411) ................... 848,411
------------
Total Investments (cost $132,261,361)................................. $148,421,668
Receivables:
Dividends ................................................................ 1,608
Purchase payments and transfers from other Travelers accounts ............ 440,090
Other assets ............................................................... 3,064
-------------
Total Assets ......................................................... 148,866,430
-------------
LIABILITIES:
Payables:
Insurance charges ........................................................ 41,833
Administrative fees ...................................................... 4,811
Equity protection fees ................................................... 37,962
-------------
Total Liabilities .................................................... 84,606
-------------
NET ASSETS: $ 148,781,824
=============
</TABLE>
See Notes to Financial Statements
-1-
<PAGE> 3
THE TRAVELERS FUND BD IV
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends .................................................................... $ 761,076
EXPENSES:
Insurance charges ............................................................ $ 893,502
Administrative fees .......................................................... 102,471
Equity protection fees ....................................................... 744,521
-----------
Total expenses ............................................................. 1,740,494
------------
Net investment loss .................................................... (979,418)
------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ............................................. 5,035,433
Cost of investments sold ................................................... 4,737,380
-----------
Net realized gain (loss) .............................................. 298,053
Change in unrealized gain (loss) on investments:
Unrealized loss at December 31, 1997 ....................................... (11,222)
Unrealized gain at December 31, 1998 ....................................... 16,160,307
-----------
Net change in unrealized gain (loss) for the year ...................... 16,171,529
------------
Net realized gain (loss) and change in unrealized gain (loss) ..... 16,469,582
------------
Net increase in net assets resulting from operations ......................... $ 15,490,164
============
</TABLE>
See Notes to Financial Statements
-2-
<PAGE> 4
THE TRAVELERS FUND BD IV
FOR VARIABLE ANNUITIES
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
THE PERIOD SEPTEMBER 12, 1997 (DATE OPERATIONS COMMENCED)
TO DECEMBER 31, 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
OPERATIONS:
<S> <C> <C>
Net investment income (loss) ........................................... $ (979,418) $ 210,028
Net realized gain (loss) from investment transactions .................. 298,053 (90)
Net change in unrealized gain (loss) on investments .................... 16,171,529 (11,222)
------------ -----------
Net increase in net assets resulting from operations.................. 15,490,164 198,716
------------ -----------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 110,695,098 and 11,822,395 units, respectively) ...... 124,285,134 12,035,841
Participant transfers from other Travelers accounts
(applicable to 3,224,235 and 486,227 units, respectively) ........... 3,308,122 486,715
Administrative charges
(applicable to 6,544 units) ......................................... (6,961) -
Contract surrenders
(applicable to 2,905,308 and 437 units, respectively) ............... (3,367,984) (440)
Participant transfers to other Travelers accounts
(applicable to 2,723,425 and 38,786 units, respectively) ............ (2,885,898) (38,268)
Other payments to participants
(applicable to 655,386 units) ....................................... (723,317) -
------------ -----------
Net increase in net assets resulting from unit transactions ............ 120,609,096 12,483,848
------------ -----------
Net increase in net assets ........................................... 136,099,260 12,682,564
NET ASSETS:
Beginning of period .................................................... 12,682,564 -
------------ -----------
End of period .......................................................... $148,781,824 $12,682,564
============ ===========
</TABLE>
See Notes to Financial Statements
-3-
<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 Citigroup Inc. (formerly 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, 1998, the eligible funds available under Fund BD IV were:
Money Market Portfolio (formerly 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
$124,395,580 and $5,035,433 respectively, for the year ended December 31, 1998.
Realized gains and losses from investment transactions are reported on an
identified cost basis. The cost of investments in eligible funds was
$132,261,361 at December 31, 1998. Gross unrealized appreciation for all
investments at December 31, 1998 was $16,324,314. Gross unrealized
depreciation for all investments at December 31, 1998 was $164,007.
-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. 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.
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.
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. Contract surrender payments include
$28,216 of withdrawal fees and contingent deferred sales charges for the year
ended December 31, 1998. No withdrawal fees or contingent deferred sales
charges were assessed for the period September 12, 1997 (date operations
commenced) to December 31, 1997.
-5-
<PAGE> 7
NOTES TO FINANCIAL STATEMENTS - CONTINUED
4. NET CONTRACT OWNERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------------------------------------
ACCUMULATION UNIT NET
UNITS VALUE ASSETS
----- ----- ------
<S> <C> <C> <C>
BT Insurance Funds Trust
EAFE Equity Index Fund
Standard Death Benefit .............. 786,358 $ 1.166 $ 917,069
Enhanced Death Benefit .............. 135,896 1.163 158,108
Small Cap Index Fund
Standard Death Benefit .............. 2,147,107 0.911 1,956,450
Enhanced Death Benefit .............. 3,882,023 0.909 3,528,580
Greenwich Street Series Fund
Equity Index Portfolio
Standard Death Benefit
0.00% Principal Protection Fee ...... 6,591,030 1.327 8,748,391
0.80% Principal Protection Fee ...... 208,150 1.314 273,423
0.85% Principal Protection Fee ...... 422,929 1.100 465,422
0.95% Principal Protection Fee ...... 950,940 1.314 1,249,351
1.00% Principal Protection Fee ...... 533,038 1.194 636,432
1.10% Principal Protection Fee ...... 6,730,772 1.308 8,807,005
1.35% Principal Protection Fee ...... 21,883,580 1.309 28,639,081
1.45% Principal Protection Fee ...... 16,643,685 1.095 18,227,678
1.50% Principal Protection Fee ...... 27,872,471 1.302 36,281,480
1.90% Principal Protection Fee ...... 159,531 1.302 207,664
2.00% Principal Protection Fee ...... 1,238,057 1.208 1,495,446
Enhanced Death Benefit
0.00% Principal Protection Fee ...... 5,435,838 1.324 7,196,380
0.85% Principal Protection Fee ...... 49,914 1.099 54,849
0.95% Principal Protection Fee ...... 172,533 1.311 226,236
1.00% Principal Protection Fee ...... 102,873 1.193 122,743
1.10% Principal Protection Fee ...... 3,412,468 1.305 4,453,513
1.35% Principal Protection Fee ...... 4,436,276 1.306 5,794,463
1.45% Principal Protection Fee ...... 6,481,921 1.094 7,090,728
1.50% Principal Protection Fee ...... 8,321,419 1.298 10,803,706
1.90% Principal Protection Fee ...... 142,785 1.299 185,502
2.00% Principal Protection Fee ...... 341,977 1.206 412,321
Money Market Portfolio
Standard Death Benefit .............. 728,039 1.044 759,791
Enhanced Death Benefit .............. 86,459 1.041 90,012
--------------
Net Contract Owners' Equity ...................................................... $ 148,781,824
==============
</TABLE>
-6-
<PAGE> 8
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. STATEMENT OF INVESTMENTS
<TABLE>
<CAPTION>
INVESTMENT OPTIONS NO. OF MARKET
SHARES VALUE
------------------- --------------------
<S> <C> <C>
BT INSURANCE FUNDS TRUST (4.4%)
EAFE Equity Index Fund (Cost $1,024,663) 96,216 $ 1,075,696
Small Cap Index Fund (Cost $5,651,781) 545,504 5,487,774
------------------- --------------------
Total (Cost $6,676,444) 641,720 6,563,470
------------------- --------------------
GREENWICH STREET SERIES FUND (95.0%)
Equity Index Portfolio
Total (Cost $124,736,506) 4,705,031 141,009,787
------------------- --------------------
MONEY MARKET PORTFOLIO (0.6%)
Total (Cost $848,411) 848,411 848,411
------------------- --------------------
TOTAL INVESTMENT OPTIONS (100%)
(COST $132,261,361) $ 148,421,668
====================
</TABLE>
-7-
<PAGE> 9
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. SCHEDULE OF FUND BD IV OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 AND THE PERIOD SEPTEMBER 12, 1997
(DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1997
<TABLE>
<CAPTION>
EAFE EQUITY INDEX FUND SMALL CAP INDEX FUND
---------------------------- ----------------------------
1998 1997 1998 1997
------------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends .................................... $ 13,140 $ - $ 96,423 $ -
------------- ----------- ------------- -------------
EXPENSES:
Insurance charges................................. 6,818 224 50,486 895
Administrative fees............................... 809 27 5,412 106
Equity protection fees............................ - - - -
------------- ----------- ------------- -------------
Net investment income (loss).................. 5,513 (251) 40,525 (1,001)
------------- ----------- ------------- -------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold.................. 339,861 483 529,765 10,057
Cost of investments sold........................ 314,784 494 603,589 10,664
------------- ----------- ------------- -------------
Net realized gain (loss)...................... 25,077 (11) (73,824) (607)
------------- ----------- ------------- -------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of period...... 426 - 1,367 -
Unrealized gain (loss) end of period............ 51,033 426 (164,007) 1,367
------------- ----------- ------------- -------------
Net change in unrealized gain (loss) for
the period................................. 50,607 426 (165,374) 1,367
------------- ----------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations....................... 81,197 164 (198,673) (241)
------------- ----------- ------------- -------------
UNIT TRANSACTIONS:
Participant purchase payments..................... 848,877 98,391 4,415,025 999,929
Participant transfers from other Travelers accounts 97,126 52,209 707,953 35,116
Administrative charges............................ (83) - (116) -
Contract surrenders............................... (5,687) - (26,556) -
Participant transfers to other Travelers accounts. (97,017) - (437,993) (9,414)
Other payments to participants.................... - - - -
------------- ----------- ------------- -------------
Net increase (decrease) in net assets
resulting from unit transactions.............. 843,216 150,600 4,658,313 1,025,631
------------- ----------- ------------- -------------
Net increase (decrease) in net assets....... 924,413 150,764 4,459,640 1,025,390
NET ASSETS:
Beginning of period............................. 150,764 - 1,025,390 -
------------- ----------- ------------- -------------
End of period................................... $ 1,075,177 $ 150,764 $ 5,485,030 $ 1,025,390
============= =========== ============= =============
<CAPTION>
EQUITY INDEX PORTFOLIO
------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends .................................... $ 632,895 $ 238,995
-------------- --------------
EXPENSES:
Insurance charges................................. 831,225 15,226
Administrative fees............................... 95,678 1,685
Equity protection fees............................ 744,521 11,168
-------------- --------------
Net investment income (loss).................. (1,038,529) 210,916
-------------- --------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold.................. 3,024,406 21,487
Cost of investments sold........................ 2,677,606 20,959
-------------- --------------
Net realized gain (loss)...................... 346,800 528
-------------- --------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of period...... (13,015) -
Unrealized gain (loss) end of period............ 16,273,281 (13,015)
-------------- --------------
Net change in unrealized gain (loss) for
the period................................. 16,286,296 (13,015)
-------------- --------------
Net increase (decrease) in net assets
resulting from operations....................... 15,594,567 198,429
-------------- --------------
UNIT TRANSACTIONS:
Participant purchase payments..................... 118,283,454 10,891,182
Participant transfers from other Travelers accounts 1,359,066 379,999
Administrative charges............................ (6,694) -
Contract surrenders............................... (3,334,964) (440)
Participant transfers to other Travelers accounts. (1,260,126) (9,342)
Other payments to participants.................... (723,317) -
-------------- --------------
Net increase (decrease) in net assets
resulting from unit transactions.............. 114,317,419 11,261,399
-------------- --------------
Net increase (decrease) in net assets....... 129,911,986 11,459,828
NET ASSETS:
Beginning of period............................. 11,459,828 -
-------------- --------------
End of period................................... $ 141,371,814 $ 11,459,828
============== ==============
</TABLE>
-8-
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO COMBINED
- ---------------------------- -----------------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C>
$ 18,618 $ 510 $ 761,076 $ 239,505
- ----------- ---------- --------------- --------------
4,973 131 893,502 16,476
572 15 102,471 1,833
- - 744,521 11,168
- ----------- ---------- --------------- --------------
13,073 364 (979,418) 210,028
- ----------- ---------- --------------- --------------
1,141,401 121 5,035,433 32,148
1,141,401 121 4,737,380 32,238
- ----------- ---------- --------------- --------------
- - 298,053 (90)
- ----------- ---------- --------------- --------------
(11,222) -
- - 16,160,307 (11,222)
- ----------- ---------- --------------- --------------
- - 16,171,529 (11,222)
- ----------- ---------- --------------- --------------
13,073 364 15,490,164 198,716
- ----------- ---------- --------------- --------------
737,778 46,339 124,285,134 12,035,841
1,143,977 19,391 3,308,122 486,715
(68) (6,961) -
(777) - (3,367,984) (440)
(1,090,762) (19,512) (2,885,898) (38,268)
(723,317)
- ----------- ---------- --------------- --------------
790,148 46,218 120,609,096 12,483,848
- ----------- ---------- --------------- --------------
803,221 46,582 136,099,260 12,682,564
46,582 - 12,682,564 -
- ----------- ---------- --------------- --------------
$ 849,803 $ 46,582 $ 148,781,824 $ 12,682,564
=========== ========== =============== ==============
</TABLE>
-9-
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF ACCUMULATION UNITS FOR FUND BD IV
FOR THE YEAR ENDED DECEMBER 31, 1998 AND THE PERIOD SEPTEMBER 12, 1997
(DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1997
<TABLE>
<CAPTION>
EAFE EQUITY INDEX FUND SMALL CAP INDEX FUND EQUITY INDEX PORTFOLIO
---------------------- -------------------------- ---------------------------
1998 1997 1998 1997 1998 1997
---------- ---------- ----------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Accumulation units beginning of period...... 155,046 - 1,085,774 - 10,982,342 -
Accumulation units purchased and
transferred from other Travelers accounts. 869,019 155,046 5,514,171 1,095,774 105,708,437 10,992,190
Accumulation units redeemed and
transferred to other Travelers accounts... (101,811) - (570,815) (10,000) (4,558,592) (9,848)
---------- ---------- ----------- ------------ ------------- ------------
Accumulation units end of period............ 922,254 155,046 6,029,130 1,085,774 112,132,187 10,982,342
========== ========== =========== ============ ============= ============
</TABLE>
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO COMBINED
------------------------------ ------------------------------------
1998 1997 1998 1997
-------------- --------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Accumulation units beginning of period...... 46,237 - 12,269,399 -
Accumulation units purchased and
transferred from other Travelers accounts. 1,827,706 65,612 113,919,333 12,308,622
Accumulation units redeemed and
transferred to other Travelers accounts... (1,059,445) (19,375) (6,290,663) (39,223)
-------------- --------------- ------------------ -----------------
Accumulation units end of period............ 814,498 46,237 119,898,069 12,269,399
============== =============== ================== =================
</TABLE>
-10-
<PAGE> 12
INDEPENDENT AUDITORS' REPORT
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, 1998, 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, 1998 and 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 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, 1998, 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 BD IV for
Variable Annuities as of December 31, 1998, the results of its operations for
the year then ended and the changes in its net assets for the year ended
December 31, 1998 and the period September 12, 1997 (date operations commenced)
to December 31, 1997, in conformity with generally accepted accounting
principles.
KPMG LLP
Hartford, Connecticut
February 17, 1999
<PAGE> 13
Independent Auditors
KPMG LLP
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 Prospectus for The Travelers Fund BD IV
for Variable Annuities product(s) 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) (12-98) Printed in U.S.A.
