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ANNUAL REPORT
DECEMBER 31, 1997
THE TRAVELERS FUND BD III
FOR VARIABLE ANNUITIES
[TRAVELERS LIFE & ANNUITY LOGO]
A MEMBER OF THE TRAVELERS GROUP
THE TRAVELERS INSURANCE COMPANY
THE TRAVELERS LIFE AND ANNUITY COMPANY
ONE TOWER SQUARE
HARTFORD, CT 06183
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THE TRAVELERS FUND BD III
FOR VARIABLE ANNUITIES
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in eligible funds at market value:
Greenwich Street Series Fund
Equity Index Portfolio, 8,266 shares (cost $197,469) .... $194,663
--------
Total Assets ............................................ 194,663
--------
LIABILITIES:
Accrued liabilities ......................................... 27
--------
Total Liabilities ....................................... 27
--------
NET ASSETS: $194,636
========
</TABLE>
See Notes to Financial Statements
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THE TRAVELERS FUND BD III
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS
For the period December 10, 1997 (date operations commenced)
to December 31, 1997
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INVESTMENT INCOME:
Dividends $ 4,500
EXPENSES:
Insurance charges $ 106
Equity protection fees 90
Administrative fees 12
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Total expenses 208
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Net investment income 4,292
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REALIZED AND UNREALIZED LOSS ON
INVESTMENTS:
Realized loss from investment transactions:
Proceeds from investments sold 111
Cost of investments sold 116
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Net realized loss (5)
Unrealized loss on investments:
December 31, 1997 (2,806)
Net realized and unrealized loss (2,811)
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Net increase in net assets resulting from operations $ 1,481
=======
</TABLE>
See Notes to Financial Statements
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THE TRAVELERS FUND BD III
FOR VARIABLE ANNUITIES
STATEMENT OF CHANGES IN NET ASSETS
For the period December 10, 1997 (date operations commenced) to
December 31, 1997
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OPERATIONS:
Net investment income $ 4,292
Net realized loss from investment transactions (5)
Net unrealized loss on investments (2,806)
---------
Net increase in net assets resulting from operations 1,481
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UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 186,609 units) 193,155
---------
Net increase in net assets resulting from unit transactions 193,155
---------
Net increase in net assets 194,636
NET ASSETS:
Beginning of period --
---------
End of period $ 194,636
=========
</TABLE>
See Notes to Financial Statements
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NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Fund BD III for Variable Annuities ("Fund BD III") 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 BD III is registered under the Investment Company Act
of 1940, as amended, as a unit investment trust.
Participant purchase payments applied to Fund BD III 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 III 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 III 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 III 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
BD III. Fund BD III 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 $197,585 and $111 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 $197,469 at December 31, 1997. Gross unrealized
depreciation for all investments at December 31, 1997 was $2,806.
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NOTES TO FINANCIAL STATEMENTS - CONTINUED
3. CONTRACT CHARGES
Insurance charges are paid for the mortality and expense risks assumed
by The Travelers. For contracts with a standard death benefit
provision, these charges are equivalent to 1.25% of the average net
assets of Fund BD III 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 III 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 BD III 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 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 eight years of its payment date.
No contingent deferred sales charges were assessed for the period
December 10, 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,
The Travelers 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. The Travelers received no
withdrawal fees for the period ended December 31, 1997.
4. NET CONTRACT OWNERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31, 1997
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ACCUMULATION UNIT NET
UNITS VALUE ASSETS
------------ ----- ------
<S> <C> <C> <C>
GREENWICH STREET SERIES FUND
EQUITY INDEX PORTFOLIO
Standard Death Benefit
1.10% Principal Protection Fee .. 143,274 $ 1.043 $ 149,467
Enhanced Death Benefit
1.10% Principal Protection Fee .. 33,723 1.043 35,160
1.50% Principal Protection Fee .. 9,612 1.041 10,009
---------
Net Contract Owners' Equity .......... $ 194,636
=========
</TABLE>
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Owners of Variable Annuity Contracts of
The Travelers Fund BD III for Variable Annuities:
We have audited the accompanying statement of assets and liabilities of The
Travelers Fund BD III for Variable Annuities as of December 31, 1997, and the
related statement of operations and changes in net assets for the period
December 10, 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 III for
Variable Annuities as of December 31, 1997, the results of its operations and
the changes in its net assets for the period December 10, 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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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 III for Variable Annuities or
Fund BD III'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.
FNDBDIII (Annual) (12-97) Printed in U.S.A.
