<PAGE> 1
ANNUAL REPORT
DECEMBER 31, 1998
THE TRAVELERS SEPARATE ACCOUNT PF 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 SEPARATE ACCOUNT PF II
FOR VARIABLE ANNUITIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C> <C>
ASSETS:
Investments in eligible funds at market value:
Greenwich Street Series Fund, 1,748,730 shares (cost $33,821,388) ................... $ 37,003,126
Smith Barney Concert Allocation Series Inc., 8,955,450 shares (cost $101,397,788).... 108,690,916
The Travelers Series Trust, 2,318,389 shares (cost $21,481,004) ..................... 24,213,953
Travelers Series Fund Inc., 12,312,656 shares (cost $53,962,907) .................... 56,479,789
------------
Total Investments (cost $210,663,087) ............................................. $226,387,784
Receivables:
Dividends ........................................................................... 45,039
Purchase payments and transfers from other Travelers accounts ....................... 2,271,463
------------
Total Assets ...................................................................... 228,704,286
------------
LIABILITIES:
Payables:
Contract surrenders and transfers to other Travelers accounts ....................... 3,734
Insurance charges ................................................................... 59,652
Administrative fees ................................................................. 7,158
Accrued liabilities .................................................................. 1,508
------------
Total Liabilities ..................................................................... 72,052
------------
NET ASSETS: ........................................................................... $228,632,234
============
</TABLE>
See Notes to Financial Statements
-1-
<PAGE> 3
THE TRAVELERS SEPARATE ACCOUNT PF II
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS
FOR THE PERIOD JUNE 24, 1998 (DATE OPERATIONS COMMENCED) TO
DECEMBER 31, 1998
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends .................................................... $ 190,250
EXPENSES: .....................................................
Insurance charges ............................................ $ 589,511
Administrative fees .......................................... 69,316
------------
Total expenses ............................................. 658,827
------------
Net investment loss ....................................... (468,577)
------------
REALIZED GAIN (LOSS) AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions: ...........
Proceeds from investments sold .............................. 3,768,072
Cost of investments sold .................................... 3,868,691
------------
Net realized gain (loss) .................................. (100,619)
Unrealized gain (loss) on investments: .......................
Unrealized gain at December 31, 1998 ........................ 15,724,697
------------
Net realized gain (loss) and unrealized gain (loss) ...... 15,624,078
------------
Net increase in net assets resulting from operations ......... $ 15,155,501
============
</TABLE>
See Notes to Financial Statements
-2-
<PAGE> 4
THE TRAVELERS SEPARATE ACCOUNT PF II
FOR VARIABLE ANNUITIES
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD JUNE 24, 1998 (DATE OPERATIONS COMMENCED) TO
DECEMBER 31, 1998
<TABLE>
<S> <C>
OPERATIONS:
Net investment loss .......................................... $ (468,577)
Net realized gain (loss) from investment transactions ........ (100,619)
Unrealized gain (loss) on investments ........................ 15,724,697
-------------
Net increase in net assets resulting from operations ........ 15,155,501
-------------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 229,328,581 units) ........................... 215,425,708
Participant transfers from other Travelers accounts
(applicable to 5,426,668 units) ............................. 5,227,125
Administrative charges
(applicable to 2,412 units) ................................. (2,136)
Contract surrenders
(applicable to 2,118,018 units) ............................. (1,980,525)
Participant transfers to other Travelers accounts
(applicable to 5,290,519 units) ............................. (5,193,439)
-------------
Net increase in net assets resulting from unit transactions .. 213,476,733
-------------
Net increase in net assets .................................. 228,632,234
NET ASSETS:
Beginning of period .......................................... --
-------------
End of period ................................................ $ 228,632,234
=============
</TABLE>
See Notes to Financial Statements
-3-
<PAGE> 5
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Separate Account PF II for Variable Annuities ("Separate
Account PF 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 Citigroup Inc. (formerly Travelers Group Inc.), and is
available for funding certain variable annuity contracts issued by
Travelers Life. Separate Account PF II is registered under the Investment
Company Act of 1940, as amended, as a unit investment trust.
Participant purchase payments applied to Separate Account PF II 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 Separate Account PF II were: Smith Barney High Income
Portfolio, Smith Barney International Equity Portfolio, Smith Barney Large
Cap Value Portfolio, Smith Barney Money Market Portfolio and MFS Total
Return Portfolio of Travelers Series Fund Inc.; MFS Mid Cap Growth
Portfolio and MFS Research Portfolio of The Travelers Series Trust;
Appreciation Portfolio of Greenwich Street Series Fund and Select High
Growth Portfolio, Select Growth Portfolio, Select Balanced Portfolio,
Select Conservative Portfolio and Select Income Portfolio of Smith Barney
Concert Allocation Series Inc. Travelers Series Fund Inc. and Smith Barney
Concert Allocation Series Inc. are incorporated under Maryland law. The
Travelers Series Trust and Greenwich Street Series Fund are registered as
Massachusetts business trusts. 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 Separate Account PF 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 Separate Account PF 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 Separate
Account PF II. Separate Account PF 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.
-4-
<PAGE> 6
NOTES TO FINANCIAL STATEMENTS - CONTINUED
2. INVESTMENTS
The aggregate costs of purchases and proceeds from sales of investments
were $214,531,778 and $3,768,072, respectively, for the period 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 $210,663,087 at December 31, 1998. Gross unrealized
appreciation for all investments at December 31, 1998 was $15,724,697.
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 Separate Account PF 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 Separate Account PF II on an annual basis.
For contracts in the accumulation phase, 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 8% if a participant's purchase payment is
surrendered within eight years of its payment date. Contract surrender
payments include $16,888 of contingent deferred sales charges for the
period ended December 31, 1998.
-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>
Greenwich Street Series Fund
Appreciation Portfolio ....................... 36,108,910 $ 1.032 $37,269,078
Smith Barney Concert Allocation Series Inc.
Select Balanced Portfolio .................... 37,964,992 1.010 38,336,736
Select Conservative Portfolio ................ 14,254,579 1.006 14,344,719
Select Growth Portfolio ...................... 30,475,847 1.028 31,336,472
Select High Growth Portfolio ................. 18,718,704 1.007 18,857,052
Select Income Portfolio ...................... 6,835,035 1.005 6,868,179
The Travelers Series Trust
MFS Mid Cap Growth Portfolio ................. 5,280,045 1.008 5,322,206
MFS Research Portfolio ....................... 18,932,328 1.009 19,108,564
Travelers Series Fund Inc.
MFS Total Return Portfolio ................... 11,901,259 1.011 12,036,380
Smith Barney International Equity Portfolio... 8,642,970 0.889 7,683,936
Smith Barney Money Market Portfolio .......... 9,365,841 1.016 9,520,367
Smith Barney High Income Portfolio ........... 7,250,612 0.958 6,943,892
Smith Barney Large Cap Value Portfolio ....... 21,613,178 0.972 21,004,653
-------------
Net Contract Owners' Equity .................................................... $ 228,632,234
=============
</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>
GREENWICH STREET SERIES FUND (16.3%)
Appreciation Portfolio
Total (Cost $33,821,388) 1,748,730 $ 37,003,126
------------ ------------
SMITH BARNEY CONCERT ALLOCATION SERIES INC. (48.0%)
Select Balanced Portfolio (Cost $36,264,954) 3,188,969 38,044,404
Select Conservative Portfolio (Cost $13,591,310) 1,204,523 14,008,608
Select Growth Portfolio (Cost $28,271,697) 2,483,252 31,065,484
Select High Growth Portfolio (Cost $16,558,456) 1,486,136 18,710,456
Select Income Portfolio (Cost $6,711,371) 592,570 6,861,964
------------ ------------
Total (Cost $101,397,788) 8,955,450 108,690,916
------------ ------------
THE TRAVELERS SERIES TRUST (10.7%)
MFS Mid Cap Growth Portfolio (Cost $4,595,880) 525,966 5,285,962
MFS Research Portfolio (Cost $16,885,124) 1,792,423 18,927,991
------------ ------------
Total (Cost $21,481,004) 2,318,389 24,213,953
------------ ------------
TRAVELERS SERIES FUND INC. (25.0%)
MFS Total Return Portfolio (Cost $11,360,616) 701,947 11,954,153
Smith Barney International Equity Portfolio (Cost $7,113,149) 549,349 7,548,057
Smith Barney Money Market Portfolio (Cost $9,498,220) 9,498,220 9,498,220
Smith Barney High Income Portfolio (Cost $6,814,265) 544,596 6,894,590
Smith Barney Large Cap Value Portfolio (Cost $19,176,657) 1,018,544 20,584,769
------------ ------------
Total (Cost $53,962,907) 12,312,656 56,479,789
------------ ------------
TOTAL INVESTMENT OPTIONS (100%)
(Cost $210,663,087) $226,387,784
============
</TABLE>
-7-
<PAGE> 9
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF SEPARATE ACCOUNT PF II OPERATIONS AND CHANGES IN NET ASSETS FOR
THE PERIOD JUNE 24, 1998 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
SELECT
APPRECIATION SELECT BALANCED CONSERVATIVE SELECT GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ --------------- ------------ -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ............................................ $ 23,882 $ 23,373 $ 7,840 $ 15,073
------------ ------------ ------------ ------------
EXPENSES:
Insurance charges .................................... 95,877 100,848 33,313 82,855
Administrative fees .................................. 10,860 12,102 3,998 9,160
------------ ------------ ------------ ------------
Net investment income (loss) .................... (82,855) (89,577) (29,471) (76,942)
------------ ------------ ------------ ------------
REALIZED GAIN (LOSS) AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ..................... -- 96,895 80,689 42
Cost of investments sold ........................... -- 101,006 84,605 41
------------ ------------ ------------ ------------
Net realized gain (loss) .......................... -- (4,111) (3,916) 1
------------ ------------ ------------ ------------
Unrealized gain (loss) on investments:
End of period ....................................... 3,181,738 1,779,450 417,298 2,793,787
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations ....................... 3,098,883 1,685,762 383,911 2,716,846
------------ ------------ ------------ ------------
UNIT TRANSACTIONS:
Participant purchase payments ........................ 33,875,982 35,896,896 13,964,837 28,553,318
Participant transfers from other Travelers accounts .. 613,652 1,111,468 105,139 405,100
Administrative charges ............................... (396) (223) (73) (293)
Contract surrenders .................................. (225,799) (307,397) (81,811) (266,491)
Participant transfers to other Travelers accounts .... (93,244) (49,770) (27,284) (72,008)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from unit transactions ................ 34,170,195 36,650,974 13,960,808 28,619,626
------------ ------------ ------------ ------------
Net increase (decrease) in net assets ........... 37,269,078 38,336,736 14,344,719 31,336,472
NET ASSETS:
Beginning of period ................................ -- -- -- --
------------ ------------ ------------ ------------
End of period ...................................... $ 37,269,078 $ 38,336,736 $ 14,344,719 $ 31,336,472
============ ============ ============ ============
<CAPTION>
SELECT HIGH
GROWTH PORTFOLIO
----------------
<S> <C>
Investment Income:
Dividends ............................................ $ 9,765
------------
EXPENSES:
Insurance charges .................................... 47,540
Administrative fees .................................. 5,705
------------
Net investment income (loss) .................... (43,480)
------------
REALIZED GAIN (LOSS) AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ..................... 84,677
Cost of investments sold ........................... 105,864
------------
Net realized gain (loss) .......................... (21,187)
------------
Unrealized gain (loss) on investments:
End of period ....................................... 2,152,000
------------
Net increase (decrease) in net assets
resulting from operations ....................... 2,087,333
------------
UNIT TRANSACTIONS:
Participant purchase payments ........................ 16,963,444
Participant transfers from other Travelers accounts .. 312,733
Administrative charges ............................... (227)
Contract surrenders .................................. (467,000)
Participant transfers to other Travelers accounts .... (39,231)
------------
Net increase (decrease) in net assets
resulting from unit transactions ................ 16,769,719
------------
Net increase (decrease) in net assets ........... 18,857,052
NET ASSETS:
Beginning of period ................................ --
------------
End of period ...................................... $ 18,857,052
============
</TABLE>
-8-
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
SMITH BARNEY SMITH BARNEY SMITH BARNEY
SELECT INCOME MFS MID CAP MFS RESEARCH MFS TOTAL INTERNATIONAL MONEY MARKET HIGH INCOME
PORTFOLIO GROWTH PORTFOLIO PORTFOLIO RETURN PORTFOLIO EQUITY PORTFOLIO PORTFOLIO PORTFOLIO
- ----------- ---------------- -------------- ---------------- ---------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
$ 2,742 $ -- $ 29,575 $ -- $ -- $ 78,000 $ --
- ------------ ------------ ------------ ------------ ------------ ------------ ------------
15,877 13,090 51,679 31,934 22,123 20,747 19,155
1,905 1,571 6,202 3,832 2,655 2,490 2,299
- ------------ ------------ ------------ ------------ ------------ ------------ ------------
(15,040) (14,661) (28,306) (35,766) (24,778) 54,763 (21,454)
- ------------ ------------ ------------ ------------ ------------ ------------ ------------
269,391 9,266 422,890 97,491 10,785 2,429,201 244,818
275,645 10,624 447,926 98,157 12,696 2,429,201 262,377
- ------------ ------------ ------------ ------------ ------------ ------------ ------------
(6,254) (1,358) (25,036) (666) (1,911) -- (17,559)
- ------------ ------------ ------------ ------------ ------------ ------------ ------------
150,593 690,082 2,042,867 593,537 434,908 -- 80,325
- ------------ ------------ ------------ ------------ ------------ ------------ ------------
129,299 674,063 1,989,525 557,105 408,219 54,763 41,312
- ------------ ------------ ------------ ------------ ------------ ------------ ------------
7,016,846 4,631,285 17,529,605 11,116,443 7,277,934 12,412,686 6,878,007
190,316 67,557 387,204 445,918 71,577 502,963 431,937
(20) (67) (262) (140) (108) (27) (79)
(48,279) (34,788) (91,883) (75,519) (55,089) (72,422) (60,485)
(419,983) (15,844) (705,625) (7,427) (18,597) (3,377,596) (346,800)
- ------------ ------------ ------------ ------------ ------------ ------------ ------------
6,738,880 4,648,143 17,119,039 11,479,275 7,275,717 9,465,604 6,902,580
- ------------ ------------ ------------ ------------ ------------ ------------ ------------
6,868,179 5,322,206 19,108,564 12,036,380 7,683,936 9,520,367 6,943,892
-- -- -- -- -- -- --
- ------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 6,868,179 $ 5,322,206 $ 19,108,564 $ 12,036,380 $ 7,683,936 $ 9,520,367 $ 6,943,892
============ ============ ============ ============ ============ ============ ============
<CAPTION>
SMITH BARNEY
LARGE CAP VALUE
PORTFOLIO
---------------
<S> <C>
$ --
------------
54,473
6,537
------------
(61,010)
------------
21,927
40,549
------------
(18,622)
------------
1,408,112
------------
1,328,480
------------
19,308,425
581,561
(221)
(193,562)
(20,030)
------------
19,676,173
------------
21,004,653
--
------------
$ 21,004,653
============
</TABLE>
-9-
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF SEPARATE ACCOUNT PF II OPERATIONS AND CHANGES IN NET ASSETS FOR
THE PERIOD JUNE 24, 1998 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1998
(CONTINUED)
<TABLE>
<CAPTION>
COMBINED
---------------
<S> <C>
INVESTMENT INCOME:
Dividends ............................................ $ 190,250
-------------
EXPENSES:
Insurance charges .................................... 589,511
Administrative fees .................................. 69,316
-------------
Net investment income (loss) .................... (468,577)
-------------
REALIZED GAIN (LOSS) AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ..................... 3,768,072
Cost of investments sold ........................... 3,868,691
-------------
Net realized gain (loss) ........................ (100,619)
-------------
Unrealized gain (loss) on investments:
End of period ...................................... 15,724,697
-------------
Net increase (decrease) in net assets
resulting from operations ....................... 15,155,501
-------------
UNIT TRANSACTIONS:
Participant purchase payments ........................ 215,425,708
Participant transfers from other Travelers accounts .. 5,227,125
Administrative charges ............................... (2,136)
Contract surrenders .................................. (1,980,525)
Participant transfers to other Travelers accounts .... (5,193,439)
-------------
Net increase (decrease) in net assets
resulting from unit transactions ................ 213,476,733
-------------
Net increase (decrease) in net assets ........... 228,632,234
NET ASSETS:
Beginning of period ................................ -
-------------
End of period ...................................... $ 228,632,234
=============
</TABLE>
-10-
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF ACCUMULATION UNITS FOR SEPARATE ACCOUNT PF II FOR THE PERIOD
JUNE 24, 1998 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
SELECT SELECT HIGH
APPRECIATION SELECT BALANCED CONSERVATIVE SELECT GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ --------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Accumulation units beginning of period ...... -- -- -- -- --
Accumulation units purchased and
transferred from other Travelers accounts .. 36,447,286 38,330,624 14,365,616 30,831,002 19,291,390
Accumulation units redeemed and
transferred to other Travelers accounts .... (338,376) (365,632) (111,037) (355,155) (572,686)
----------- ----------- ----------- ----------- -----------
Accumulation units end of period ............ 36,108,910 37,964,992 14,254,579 30,475,847 18,718,704
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
SELECT INCOME
PORTFOLIO
-------------
<S> <C>
Accumulation units beginning of period ...... --
Accumulation units purchased and
transferred from other Travelers accounts .. 7,311,353
Accumulation units redeemed and
transferred to other Travelers accounts .... (476,318)
-----------
Accumulation units end of period ............ 6,835,035
===========
<CAPTION>
SMITH BARNEY SMITH BARNEY
MFS MID CAP MFS RESEARCH MFS TOTAL INTERNATIONAL MONEY MARKET
GROWTH PORTFOLIO PORTFOLIO RETURN PORTFOLIO EQUITY PORTFOLIO PORTFOLIO
---------------- ------------- --------------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
Accumulation units beginning of period ...... -- -- -- -- --
Accumulation units purchased and
transferred from other Travelers accounts .. 5,335,470 19,814,742 11,988,394 8,731,506 12,772,783
Accumulation units redeemed and
transferred to other Travelers accounts .... (55,425) (882,414) (87,135) (88,536) (3,406,942)
----------- ----------- ----------- ----------- -----------
Accumulation units end of period ............ 5,280,045 18,932,328 11,901,259 8,642,970 9,365,841
=========== =========== =========== =========== ===========
<CAPTION>
SMITH BARNEY
HIGH INCOME
PORTFOLIO
-------------
<S> <C>
Accumulation units beginning of period ...... --
Accumulation units purchased and
transferred from other Travelers accounts .. 7,686,754
Accumulation units redeemed and
transferred to other Travelers accounts .... (436,142)
-----------
Accumulation units end of period ............ 7,250,612
===========
</TABLE>
<TABLE>
<CAPTION>
SMITH BARNEY
LARGE CAP VALUE
PORTFOLIO COMBINED
--------------- ------------
<S> <C> <C>
Accumulation units beginning of period ...... -- --
Accumulation units purchased and
transferred from other Travelers accounts .. 21,848,329 234,755,249
Accumulation units redeemed and
transferred to other Travelers accounts .... (235,151) (7,410,949)
----------- -----------
Accumulation units end of period ............ 21,613,178 227,344,300
=========== ===========
</TABLE>
-11-
<PAGE> 13
INDEPENDENT AUDITORS' REPORT
To the Owners of Variable Annuity Contracts of
The Travelers Separate Account PF II for Variable Annuities:
We have audited the accompanying statement of assets and liabilities of The
Travelers Separate Account PF II for Variable Annuities as of December 31,
1998, and the related statement of operations and changes in net assets for the
period June 24, 1998 (date operations commenced) to December 31, 1998. 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, 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 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 Separate Account
PF II for Variable Annuities as of December 31, 1998, the results of its
operations and the changes in its net assets for the period June 24, 1998 (date
operations commenced) to December 31, 1998, in conformity with generally
accepted accounting principles.
KPMG LLP
Hartford, Connecticut
February 17, 1999
<PAGE> 14
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 Separate Account PF II for Variable
Annuities or Separate Account PF II's underlying funds. It should not be used
in connection with any offer except in conjunction with the Prospectus for The
Travelers Separate Account PF II 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.
SepPF II (Annual) (12-98) Printed in U.S.A.
