<PAGE> 1
ANNUAL REPORT
DECEMBER 31, 1998
THE TRAVELERS FUND BD
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
FOR VARIABLE ANNUITIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C> <C>
ASSETS:
Investments in eligible funds at market value:
Dreyfus Variable Investment Fund, 16,989 shares (cost $855,948) ................ $ 915,902
Greenwich Street Series Fund, 8,996,184 shares (cost $133,117,474) ............. 157,883,027
Salomon Brothers Variable Series Funds Inc., 115,599 shares (cost $1,187,665) .. 1,245,880
Smith Barney Concert Allocation Series Inc., 1,367,295 shares (cost $15,362,377) 16,583,567
The Travelers Series Trust, 3,353,735 shares (cost $41,294,115) ................ 54,086,487
Travelers Series Fund Inc., 151,640,369 shares (cost $1,207,987,094) ........... 1,630,475,410
--------------
Total Investments (cost $1,399,804,673) ...................................... $1,861,190,273
Receivables:
Dividends ...................................................................... 151,514
Purchase payments and transfers from other Travelers accounts .................. 532,720
Other assets ..................................................................... 1,106
--------------
Total Assets ................................................................. 1,861,875,613
--------------
LIABILITIES:
Payables:
Contract surrenders and transfers to other Travelers accounts ................ 466,850
Insurance charges ............................................................ 429,626
Administrative fees .......................................................... 60,399
Accrued liabilities ............................................................ 1,135
--------------
Total Liabilities ........................................................ 958,010
--------------
NET ASSETS: $1,860,917,603
==============
</TABLE>
See Notes to Financial Statements
-1-
<PAGE> 3
THE TRAVELERS FUND BD
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends ............................................................. $ 75,307,318
EXPENSES:
Insurance charges ..................................................... $ 18,339,569
Administrative fees ................................................... 2,577,151
------------
Total expenses ...................................................... 20,916,720
------------
Net investment income ............................................. 54,390,598
------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ...................................... 232,678,282
Cost of investments sold ............................................ 177,991,805
------------
Net realized gain (loss) .......................................... 54,686,477
Change in unrealized gain (loss) on investments:
Unrealized gain at December 31, 1997 .................................. 350,653,206
Unrealized gain at December 31, 1998 .................................. 461,385,600
------------
Net change in unrealized gain (loss) for the year ................... 110,732,394
------------
Net realized gain (loss) and change in unrealized gain (loss) ..... 165,418,871
------------
Net increase in net assets resulting from operations .................... $219,809,469
============
</TABLE>
See Notes to Financial Statements
-2-
<PAGE> 4
THE TRAVELERS FUND BD
FOR VARIABLE ANNUITIES
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
--------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) .................................... $ 54,390,598 $ (6,957,107)
Net realized gain (loss) from investment transactions ........... 54,686,477 16,496,228
Net change in unrealized gain (loss) on investments ............. 110,732,394 200,946,726
--------------- ---------------
Net increase in net assets resulting from operations .......... 219,809,469 210,485,847
--------------- ---------------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 56,725,826 and 173,653,228 units, respectively) 91,748,802 247,618,592
Participant transfers from other Travelers accounts
(applicable to 232,669,083 and 197,508,694 units, respectively) 315,863,814 271,785,612
Administrative and asset allocation charges
(applicable to 193,844 and 161,299 units, respectively) ....... (306,364) (255,069)
Contract surrenders
(applicable to 51,996,335 and 30,642,711 units, respectively) . (87,811,788) (46,085,851)
Participant transfers to other Travelers accounts
(applicable to 189,007,732 and 166,674,925 units, respectively) (257,452,335) (209,625,801)
Other payments to participants
(applicable to 13,666,838 and 8,039,959 units, respectively) .. (22,546,614) (12,044,229)
--------------- ---------------
Net increase in net assets resulting from unit transactions ..... 39,495,515 251,393,254
--------------- ---------------
Net increase in net assets .................................... 259,304,984 461,879,101
NET ASSETS:
Beginning of year ............................................... 1,601,612,619 1,139,733,518
--------------- ---------------
End of year ..................................................... $ 1,860,917,603 $ 1,601,612,619
=============== ===============
</TABLE>
See Notes to Financial Statements
-3-
<PAGE> 5
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Fund BD for Variable Annuities ("Fund BD") is a separate account
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 The Travelers. Fund BD
is registered under the Investment Company Act of 1940, as amended, as a unit
investment trust.
Participant purchase payments applied to Fund BD 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 were: Alliance
Growth Portfolio, Van Kampen Enterprise Portfolio (formerly Van Kampen American
Capital Enterprise Portfolio), TBC Managed Income Portfolio, G.T. Global
Strategic Income Portfolio, Smith Barney High Income Portfolio, Smith Barney
International Equity Portfolio, Smith Barney Large Cap Value Portfolio (formerly
Smith Barney Income and Growth Portfolio), Smith Barney Money Market Portfolio,
Putnam Diversified Income Portfolio, Smith Barney Pacific Basin Portfolio, MFS
Total Return Portfolio, AIM Capital Appreciation Portfolio and Smith Barney
Large Capitalization Growth Portfolio of Travelers Series Fund Inc.; MFS
Emerging Growth Portfolio, Disciplined Mid Cap Stock Portfolio, Convertible Bond
Portfolio, Disciplined Small Cap Stock Portfolio, MFS Research Portfolio and
Strategic Stock Portfolio of The Travelers Series Trust; Total Return Portfolio
of Greenwich Street Series Fund; Select High Growth Portfolio, Select Growth
Portfolio, Select Balanced Portfolio, Select Conservative Portfolio and Select
Income Portfolio of Smith Barney Concert Allocation Series Inc.; Small Cap
Portfolio of Dreyfus Variable Investment Fund and Salomon Brothers Variable
Investors Fund and Salomon Brothers Variable Total Return Fund of Salomon
Brothers Variable Series Funds Inc. Travelers Series Fund Inc., Smith Barney
Concert Allocation Series Inc. and Salomon Brothers Variable Series Funds Inc.
are incorporated under Maryland law. The Travelers Series Trust, Greenwich
Street Series Fund and Dreyfus Variable Investment Fund are registered as
Massachusetts business trusts. All eligible trusts except Dreyfus Variable
Investment Fund 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 BD 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 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. Fund BD 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
$327,009,906 and $232,678,282, 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
$1,399,804,673 at December 31, 1998. Gross unrealized appreciation for all
investments at December 31, 1998 was $461,938,561. Gross unrealized depreciation
for all investments at December 31, 1998 was $552,961.
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 1.02% of the average net assets of Fund BD on an annual basis.
For contracts with an enhanced death benefit provision, these charges are
equivalent to 1.30% of the average net assets of Fund BD 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 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 six
years of its payment date. Contract surrender payments include $1,787,676 and
$1,016,421 of contingent deferred sales charges for the years ended December 31,
1998 and 1997, respectively.
-5-
<PAGE> 7
NOTES TO FINANCIAL STATEMENTS - CONTINUED
4. NET CONTRACT OWNERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------------------------------------------------
ACCUMULATION ANNUITY UNIT NET
UNITS UNITS VALUE ASSETS
----- ----- ----- ------
<S> <C> <C> <C> <C>
Dreyfus Variable Investment Fund
Small Cap Portfolio
Standard Death Benefit .................. 1,024,905 -- $0.852 $ 873,624
Enhanced Death Benefit .................. 49,426 -- 0.851 42,053
Greenwich Street Series Fund
Total Return Portfolio
Standard Death Benefit .................. 73,467,726 -- 1.857 136,440,879
Enhanced Death Benefit .................. 11,653,902 -- 1.836 21,395,853
Salomon Brothers Variable Series Funds Inc.
Salomon Brothers Variable Total Return Fund
Standard Death Benefit .................. 397,259 -- 0.997 396,260
Enhanced Death Benefit .................. 69,952 -- 0.996 69,648
Salomon Brothers Variable Investors Fund
Standard Death Benefit .................. 704,294 -- 1.014 714,144
Enhanced Death Benefit .................. 75,864 -- 1.012 76,782
Smith Barney Concert Allocation Series Inc.
Select Balanced Portfolio
Standard Death Benefit .................. 4,046,998 47,552 1.183 4,844,534
Enhanced Death Benefit .................. 1,086,882 -- 1.177 1,279,456
Select Conservative Portfolio
Standard Death Benefit .................. 1,465,765 -- 1.162 1,703,488
Enhanced Death Benefit .................. 183,923 -- 1.156 212,695
Select Growth Portfolio
Standard Death Benefit .................. 3,135,267 -- 1.238 3,881,245
Enhanced Death Benefit .................. 1,838,554 -- 1.232 2,264,495
Select High Growth Portfolio
Standard Death Benefit .................. 723,814 -- 1.242 899,259
Enhanced Death Benefit .................. 325,871 -- 1.236 402,812
Select Income Portfolio
Standard Death Benefit .................. 752,508 -- 1.154 868,395
Enhanced Death Benefit .................. 184,502 -- 1.148 211,864
</TABLE>
-6-
<PAGE> 8
NOTES TO FINANCIAL STATEMENTS - CONTINUED
4. NET CONTRACT OWNERS' EQUITY (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------------------------------------------------
ACCUMULATION ANNUITY UNIT NET
UNITS UNITS VALUE ASSETS
----- ----- ----- ------
<S> <C> <C> <C> <C>
The Travelers Series Trust
MFS Emerging Growth Portfolio
Standard Death Benefit ............. 25,199,790 -- $1.599 $ 40,285,208
Enhanced Death Benefit ............. 6,078,936 -- 1.589 9,659,209
MFS Research Portfolio
Standard Death Benefit ............. 1,353,759 -- 1.037 1,403,326
Enhanced Death Benefit ............. 1,038,696 -- 1.035 1,074,735
Strategic Stock Portfolio
Standard Death Benefit ............. 539,593 -- 0.936 504,833
Enhanced Death Benefit ............. 121,387 -- 0.934 113,360
Convertible Bond Portfolio
Standard Death Benefit ............. 248,991 -- 1.001 249,285
Enhanced Death Benefit ............. 24,086 -- 0.999 24,071
Disciplined Mid Cap Stock Portfolio
Standard Death Benefit ............. 397,554 -- 1.064 423,140
Enhanced Death Benefit ............. 54,397 -- 1.063 57,797
Disciplined Small Cap Stock Portfolio
Standard Death Benefit ............. 299,084 -- 0.896 267,862
Enhanced Death Benefit ............. 3,901 -- 0.894 3,487
Travelers Series Fund Inc.
AIM Capital Appreciation Portfolio
Standard Death Benefit ............. 90,905,019 -- 1.397 127,006,619
Enhanced Death Benefit ............. 15,792,402 -- 1.385 21,865,692
Alliance Growth Portfolio
Standard Death Benefit ............. 142,801,580 13,226 2.903 414,631,457
Enhanced Death Benefit ............. 28,709,572 -- 2.867 82,300,514
G.T. Global Strategic Income Portfolio
Standard Death Benefit ............. 11,299,081 6,914 1.359 15,367,712
Enhanced Death Benefit ............. 2,624,158 -- 1.342 3,521,954
MFS Total Return Portfolio
Standard Death Benefit ............. 86,949,854 17,368 1.819 158,195,161
Enhanced Death Benefit ............. 18,458,912 -- 1.796 33,154,173
Putnam Diversified Income Portfolio
Standard Death Benefit ............. 53,053,274 17,019 1.326 70,349,069
Enhanced Death Benefit ............. 12,925,220 10,683 1.309 16,931,167
</TABLE>
-7-
<PAGE> 9
NOTES TO FINANCIAL STATEMENTS - CONTINUED
4. NET CONTRACT OWNERS' EQUITY (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-------------------------------------------------------------
ACCUMULATION ANNUITY UNIT NET
UNITS UNITS VALUE ASSETS
----- ----- ----- ------
<S> <C> <C> <C> <C>
Travelers Series Fund Inc. (continued)
Smith Barney International Equity Portfolio
Standard Death Benefit ......................... 82,330,241 24,588 $1.305 $ 107,509,306
Enhanced Death Benefit ......................... 17,670,056 -- 1.289 22,776,052
Smith Barney Money Market Portfolio
Standard Death Benefit ......................... 47,120,777 -- 1.184 55,780,616
Enhanced Death Benefit ......................... 8,253,674 8,937 1.169 9,657,675
Smith Barney High Income Portfolio
Standard Death Benefit ......................... 44,406,204 -- 1.452 64,477,356
Enhanced Death Benefit ......................... 9,311,914 11,620 1.434 13,366,869
Smith Barney Large Capitalization Growth Portfolio
Standard Death Benefit ......................... 12,224,352 -- 1.237 15,117,111
Enhanced Death Benefit ......................... 1,022,328 -- 1.234 1,261,934
Smith Barney Large Cap Value Portfolio
Standard Death Benefit ......................... 71,417,242 -- 2.076 148,261,307
Enhanced Death Benefit ......................... 14,890,673 -- 2.050 30,522,896
Smith Barney Pacific Basin Portfolio
Standard Death Benefit ......................... 8,930,321 10,441 0.742 6,634,404
Enhanced Death Benefit ......................... 2,803,037 -- 0.733 2,053,726
TBC Managed Income Portfolio
Standard Death Benefit ......................... 20,492,138 -- 1.309 26,829,680
Enhanced Death Benefit ......................... 3,895,003 -- 1.293 5,035,643
Van Kampen Enterprise Portfolio
Standard Death Benefit ......................... 55,902,505 -- 2.601 145,406,541
Enhanced Death Benefit ......................... 12,560,574 -- 2.568 32,259,170
--------------
Net Contract Owners' Equity ......................................................................... $1,860,917,603
==============
</TABLE>
-8-
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. STATEMENT OF INVESTMENTS
<TABLE>
<CAPTION>
INVESTMENT OPTIONS NO. OF MARKET
SHARES VALUE
------ -----
<S> <C> <C>
DREYFUS VARIABLE INVESTMENT FUND (0.1%)
Small Cap Portfolio
Total (Cost $855,948) 16,989 $ 915,902
-------------- --------------
GREENWICH STREET SERIES FUND (8.4%)
Total Return Portfolio
Total (Cost $133,117,474) 8,996,184 157,883,027
-------------- --------------
SALOMON BROTHERS VARIABLE SERIES FUNDS INC (0.1%)
Salomon Brothers Variable Total Return Fund (Cost $449,620) 44,036 457,971
Salomon Brothers Variable Investors Fund (Cost $738,045) 71,563 787,909
-------------- --------------
Total (Cost $1,187,665) 115,599 1,245,880
-------------- --------------
SMITH BARNEY CONCERT ALLOCATION SERIES INC. (0.9%)
Select Balanced Portfolio (Cost $5,753,405) 513,517 6,126,260
Select Conservative Portfolio (Cost $1,867,807) 164,805 1,916,679
Select Growth Portfolio (Cost $5,524,051) 491,401 6,147,432
Select High Growth Portfolio (Cost $1,167,308) 104,260 1,312,639
Select Income Portfolio (Cost $1,049,806) 93,312 1,080,557
-------------- --------------
Total (Cost $15,362,377) 1,367,295 16,583,567
-------------- --------------
THE TRAVELERS SERIES TRUST (2.9%)
MFS Emerging Growth Portfolio (Cost $37,431,687) 2,961,299 49,957,109
MFS Research Portfolio (Cost $2,299,680) 236,727 2,499,838
Strategic Stock Portfolio (Cost $610,881) 64,576 610,890
Convertible Bond Portfolio (Cost $266,488) 27,077 266,976
Disciplined Mid Cap Stock Portfolio (Cost $426,207) 33,546 481,054
Disciplined Small Cap Stock Portfolio (Cost $259,172) 30,510 270,620
-------------- --------------
Total (Cost $41,294,115) 3,353,735 54,086,487
-------------- --------------
TRAVELERS SERIES FUND INC. (87.6%)
AIM Capital Appreciation Portfolio (Cost $111,983,347) 10,283,374 148,903,257
Alliance Growth Portfolio (Cost $295,185,460) 18,894,672 497,118,816
G.T. Global Strategic Income Portfolio (Cost $19,473,139) 1,675,835 18,920,178
MFS Total Return Portfolio (Cost $144,085,518) 11,239,479 191,408,324
Putnam Diversified Income Portfolio (Cost $84,188,124) 7,276,694 87,320,325
Smith Barney International Equity Portfolio (Cost $115,715,893) 9,483,913 130,308,969
Smith Barney Money Market Portfolio (Cost $65,249,245) 65,249,245 65,249,245
Smith Barney High Income Portfolio (Cost $73,481,291) 6,147,337 77,825,282
Smith Barney Large Capitalization Growth Portfolio (Cost $13,340,147) 1,332,552 16,323,757
Smith Barney Large Cap Value Portfolio (Cost $131,095,631) 8,848,063 178,819,361
Smith Barney Pacific Basin Portfolio (Cost $8,203,706) 1,136,395 8,693,419
TBC Managed Income Portfolio (Cost $30,331,255) 2,708,126 31,874,641
Van Kampen Enterprise Portfolio (Cost $115,654,338) 7,364,684 177,709,836
-------------- --------------
Total (Cost $1,207,987,094) 151,640,369 1,630,475,410
-------------- --------------
TOTAL INVESTMENT OPTIONS (100%)
(Cost $1,399,804,673) $1,861,190,273
==============
</TABLE>
-9-
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF FUND BD OPERATIONS AND CHANGES IN NET ASSETS FOR THE YEARS
ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
SALOMON
SMALL CAP TOTAL RETURN BROTHERS VARIABLE
PORTFOLIO PORTFOLIO TOTAL RETURN FUND
----------------- ----------------------- -------------------
1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ........................................... $ 6,547 $ -- $ 8,511,210 $ 6,288,870 $ 8,059 $ --
--------- ----- ------------- ------------- --------- -----
EXPENSES:
Insurance charges ................................... 2,567 -- 1,694,319 1,403,023 1,809 --
Administrative fees ................................. 371 -- 240,238 199,128 261 --
--------- ----- ------------- ------------- --------- -----
Net investment income (loss) .................... 3,609 -- 6,576,653 4,686,719 5,989 --
--------- ----- ------------- ------------- --------- -----
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold .................... 34,526 -- 15,348,251 3,961,754 122,840 --
Cost of investments sold .......................... 46,463 -- 10,486,499 2,459,594 126,662 --
--------- ----- ------------- ------------- --------- -----
Net realized gain (loss) ........................ (11,937) -- 4,861,752 1,502,160 (3,822) --
--------- ----- ------------- ------------- --------- -----
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .......... -- -- 30,892,161 17,936,448 -- --
Unrealized gain (loss) end of year ................ 59,954 -- 24,765,553 30,892,161 8,351 --
--------- ----- ------------- ------------- --------- -----
Net change in unrealized gain (loss)
for the year................................... 59,954 -- (6,126,608) 12,955,713 8,351 --
--------- ----- ------------- ------------- --------- -----
Net increase (decrease) in net assets
resulting from operations ....................... 51,626 -- 5,311,797 19,144,592 10,518 --
--------- ----- ------------- ------------- --------- -----
UNIT TRANSACTIONS:
Participant purchase payments ....................... 204,363 -- 6,424,581 26,802,207 446,004 --
Participant transfers from other Travelers accounts.. 703,052 -- 9,782,005 16,802,164 157,934 --
Administrative and asset allocation charges ......... (57) -- (31,574) (25,728) (24) --
Contract surrenders ................................. (1,122) -- (6,750,338) (3,519,412) (3,001) --
Participant transfers to other Travelers accounts ... (42,185) -- (11,474,046) (6,823,606) (145,523) --
Other payments to participants ...................... -- -- (2,177,703) (1,058,712) -- --
--------- ----- ------------- ------------- --------- -----
Net increase (decrease) in net assets
resulting from unit transactions ................ 864,051 -- (4,227,075) 32,176,913 455,390 --
--------- ----- ------------- ------------- --------- -----
Net increase (decrease) in net assets ........... 915,677 -- 1,084,722 51,321,505 465,908 --
NET ASSETS:
Beginning of year ................................. -- -- 156,752,010 105,430,505 -- --
--------- ----- ------------- ------------- --------- -----
End of year ....................................... $ 915,677 $ -- $ 157,836,732 $ 156,752,010 $ 465,908 $ --
========= ===== ============= ============= ========= =====
</TABLE>
-10-
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
SALOMON BROTHERS VARIABLE SELECT CONSERVATIVE
INVESTORS FUND SELECT BALANCED PORTFOLIO PORTFOLIO SELECT GROWTH PORTFOLIO
- ----------------------- ----------------------------- --------------------------- -----------------------------
1998 1997 1998 1997 1998 1997 1998 1997
- --------- ------- ----------- ----------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 3,220 $ -- $ 154,995 $ -- $ 38,574 $ -- $ 104,912 $ --
- --------- ------- ----------- ----------- ----------- --------- ----------- -----------
2,523 -- 58,360 14,156 15,472 3,354 58,652 17,133
367 -- 8,163 2,005 2,211 470 7,815 2,332
- --------- ------- ----------- ----------- ----------- --------- ----------- -----------
330 -- 88,472 (16,171) 20,891 (3,824) 38,445 (19,465)
- --------- ------- ----------- ----------- ----------- --------- ----------- -----------
46,571 -- 1,018,355 98,074 321,586 66,504 493,076 139,882
49,232 -- 908,895 93,403 297,635 63,317 418,109 131,787
- --------- ------- ----------- ----------- ----------- --------- ----------- -----------
(2,661) -- 109,460 4,671 23,951 3,187 74,967 8,095
- --------- ------- ----------- ----------- ----------- --------- ----------- -----------
-- -- 146,252 -- 30,222 -- 117,391 --
49,864 -- 372,855 146,252 48,872 30,222 623,381 117,391
- --------- ------- ----------- ----------- ----------- --------- ----------- -----------
49,864 -- 226,603 146,252 18,650 30,222 505,990 117,391
- --------- ------- ----------- ----------- ----------- --------- ----------- -----------
47,533 -- 424,535 134,752 63,492 29,585 619,402 106,021
- --------- ------- ----------- ----------- ----------- --------- ----------- -----------
268,878 -- 769,125 3,168,219 484,392 646,740 403,248 3,062,980
527,834 -- 1,636,677 1,085,724 832,252 317,835 1,603,664 1,039,939
(30) -- (1,370) (162) (253) (41) (1,378) (332)
(10,377) -- (50,863) (6,000) (109,753) (491) (176,401) (10,129)
(42,912) -- (801,597) (129,496) (271,204) (76,371) (325,181) (173,173)
-- -- (105,554) -- -- -- (2,920) --
- --------- ------- ----------- ----------- ----------- --------- ----------- -----------
743,393 -- 1,446,418 4,118,285 935,434 887,672 1,501,032 3,919,285
- --------- ------- ----------- ----------- ----------- --------- ----------- -----------
790,926 -- 1,870,953 4,253,037 998,926 917,257 2,120,434 4,025,306
-- -- 4,253,037 -- 917,257 -- 4,025,306 --
- --------- ------- ----------- ----------- ----------- --------- ----------- -----------
$ 790,926 $ -- $6,123,990 $ 4,253,037 $ 1,916,183 $ 917,257 $ 6,145,740 $ 4,025,306
========= ======= =========== =========== =========== ========= =========== ===========
</TABLE>
-11-
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF FUND BD OPERATIONS AND CHANGES IN NET ASSETS FOR THE YEARS
ENDED DECEMBER 31, 1998 AND 1997 (CONTINUED)
<TABLE>
<CAPTION>
SELECT HIGH GROWTH SELECT INCOME MFS EMERGING GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
--------------------- ------------------- -----------------------
1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.......................... $ 11,281 $ -- $ 17,619 $ -- $ -- $ 489,750
----------- --------- ----------- --------- ------------ ------------
EXPENSES:
Insurance charges................. 13,030 4,141 9,959 2,750 409,405 178,870
Administrative fees............... 1,771 559 1,372 359 57,109 25,074
----------- --------- ----------- --------- ------------ ------------
Net investment income (loss) (3,520) (4,700) 6,288 (3,109) (466,514) 285,806
----------- --------- ----------- --------- ------------ ------------
REALIZED GAIN (LOSS) AND CHANGE IN
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment
transactions:
Proceeds from investments sold.... 162,586 73,246 387,607 49,846 4,521,481 871,766
Cost of investments sold.......... 136,227 65,080 358,920 47,869 3,524,757 799,941
----------- --------- ----------- --------- ------------ ------------
Net realized gain (loss)..... 26,359 8,166 28,687 1,977 996,724 71,825
----------- --------- ----------- --------- ------------ ------------
Change in unrealized gain (loss)
on investments:
Unrealized gain (loss) beginning of year .. 17,323 -- 28,026 -- 2,024,828 (165,409)
Unrealized gain (loss) end of year......... 145,331 17,323 30,751 28,026 12,525,422 2,024,828
----------- --------- ----------- --------- ------------ ------------
Net change in unrealized gain (loss)
for the year......................... 128,008 17,323 2,725 28,026 10,500,594 2,190,237
----------- --------- ----------- --------- ------------ ------------
Net increase (decrease) in net assets
resulting from operations............... 150,847 20,789 37,700 26,894 11,030,804 2,547,868
----------- --------- ----------- --------- ------------ ------------
UNIT TRANSACTIONS:
Participant purchase payments............... 156,818 615,483 132,829 481,126 5,388,813 13,027,745
Participant transfers from other
Travelers accounts........................ 248,976 353,681 562,990 337,991 12,666,900 10,087,450
Administrative and asset allocation charges. (428) (101) (141) (12) (7,555) (2,765)
Contract surrenders......................... (5,858) (29,404) (133,477) (6,388) (998,099) (307,580)
Participant transfers to other
Travelers accounts........................ (156,268) (52,464) (298,372) (60,881) (6,408,939) (2,296,339)
Other payments to participants.............. -- -- -- -- (328,260) (54,962)
----------- --------- ----------- --------- ------------ ------------
Net increase (decrease) in net assets
resulting from unit transactions........ 243,240 887,195 263,829 751,836 10,312,860 20,453,549
----------- --------- ----------- --------- ------------ ------------
Net increase (decrease) in net assets....... 394,087 907,984 301,529 778,730 21,343,664 23,001,417
NET ASSETS:
Beginning of year......................... 907,984 -- 778,730 -- 28,600,753 5,599,336
----------- --------- ----------- --------- ------------ ------------
End of year............................... $ 1,302,071 $ 907,984 $ 1,080,259 $ 778,730 $ 49,944,417 $ 28,600,753
=========== ========= =========== ========= ============ ============
</TABLE>
-12-
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
DISCIPLINED MID CAP
MFS RESEARCH PORTFOLIO STRATEGIC STOCK PORTFOLIO CONVERTIBLE BOND PORTFOLIO STOCK PORTFOLIO
- ----------------------------- ---------------------------- ---------------------------- ----------------------------
1998 1997 1998 1997 1998 1997 1998 1997
- ----------- ------------ --------- ------------ --------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 3,906 $ -- $ 7,465 $ -- $ 6,450 $ -- $ 1,227 $ --
- ----------- ------------ --------- ------------ --------- ------------ --------- ------------
7,489 -- 1,545 -- 473 -- 1,290 --
987 -- 209 -- 69 -- 182 --
- ----------- ------------ --------- ------------ --------- ------------ --------- ------------
(4,570) -- 5,711 -- 5,908 -- (245) --
- ----------- ------------ --------- ------------ --------- ------------ --------- ------------
722,701 -- 1,946 -- 26,507 -- 4,340 --
734,353 -- 2,097 -- 28,560 -- 4,607 --
- ----------- ------------ --------- ------------ --------- ------------ --------- ------------
(11,652) -- (151) -- (2,053) -- (267) --
- ----------- ------------ --------- ------------ --------- ------------ --------- ------------
-- -- -- -- -- -- -- --
200,158 -- 9 -- 488 -- 54,847 --
- ----------- ------------ --------- ------------ --------- ------------ --------- ------------
200,158 -- 9 -- 488 -- 54,847 --
- ----------- ------------ --------- ------------ --------- ------------ --------- ------------
183,936 -- 5,569 -- 4,343 -- 54,335 --
- ----------- ------------ --------- ------------ --------- ------------ --------- ------------
512,483 -- 319,500 -- 32,299 -- 230,506 --
2,614,829 -- 293,859 -- 238,500 -- 214,291 --
(91) -- (2) -- (2) -- (17) --
(91,425) -- (733) -- (1,729) -- -- --
(741,671) -- -- -- (55) -- (18,178) --
-- -- -- -- -- -- -- --
- ----------- ------------ --------- ------------ --------- ------------ --------- ------------
2,294,125 -- 612,624 -- 269,013 -- 426,602 --
- ----------- ------------ --------- ------------ --------- ------------ --------- ------------
2,478,061 -- 618,193 -- 273,356 -- 480,937 --
-- -- -- -- -- -- -- --
- ----------- ------------ --------- ------------ --------- ------------ --------- ------------
$ 2,478,061 $ -- $ 618,193 $ -- $ 273,356 $ -- $ 480,937 $ --
=========== ============ ========= ============ ========= ============ ========= ============
</TABLE>
-13-
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF FUND BD OPERATIONS AND CHANGES IN NET ASSETS FOR THE YEARS
ENDED DECEMBER 31, 1998 AND 1997 (CONTINUED)
<TABLE>
<CAPTION>
DISCIPLINED
SMALL CAP STOCK AIM CAPITAL APPRECIATION ALLIANCE GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
----------------- ----------------------------- -----------------------------
1998 1997 1998 1997 1998 1997
--------- ----- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ................................... $ 793 $ -- $ 191,734 $ -- $ 27,199,370 $ --
--------- ----- ------------- ------------- ------------- -------------
EXPENSES:
Insurance charges ........................... 836 -- 1,439,695 1,230,949 4,628,074 3,484,456
Administrative fees ......................... 122 -- 203,484 174,100 650,550 489,067
--------- ----- ------------- ------------- ------------- -------------
Net investment income (loss) .............. (165) -- (1,451,445) (1,405,049) 21,920,746 (3,973,523)
--------- ----- ------------- ------------- ------------- -------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment
transactions:
Proceeds from investments sold ............ 21,319 -- 11,824,205 5,073,047 34,356,047 9,474,065
Cost of investments sold .................. 24,815 -- 9,376,473 4,185,282 16,113,266 5,149,051
--------- ----- ------------- ------------- ------------- -------------
Net realized gain (loss) ................ (3,496) -- 2,447,732 887,765 18,242,781 4,325,014
--------- ----- ------------- ------------- ------------- -------------
Change in unrealized gain (loss) on
investments:
Unrealized gain (loss) beginning of year .. -- -- 17,982,354 6,615,457 135,788,123 55,466,067
Unrealized gain (loss) end of year ........ 11,448 -- 36,919,910 17,982,354 201,933,356 135,788,123
--------- ----- ------------- ------------- ------------- -------------
Net change in unrealized gain (loss) for
the year ............................ 11,448 -- 18,937,556 11,366,897 66,145,233 80,322,056
--------- ----- ------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations ............... 7,787 -- 19,933,843 10,849,613 106,308,760 80,673,547
--------- ----- ------------- ------------- ------------- -------------
UNIT TRANSACTIONS:
Participant purchase payments ............... 67,311 -- 7,665,650 20,554,804 18,241,849 40,562,814
Participant transfers from other Travelers
accounts ................................ 230,928 -- 12,669,332 22,728,970 39,225,426 43,204,274
Administrative and asset allocation charges . (5) -- (33,060) (30,567) (75,238) (61,775)
Contract surrenders ......................... (779) -- (5,013,668) (4,442,013) (22,572,760) (10,464,529)
Participant transfers to other Travelers
accounts ................................ (33,893) -- (13,485,603) (11,556,968) (35,730,022) (23,241,706)
Other payments to participants .............. -- -- (1,571,690) (674,175) (4,690,657) (2,805,494)
--------- ----- ------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from unit transactions ........ 263,562 -- 230,961 26,580,051 (5,601,402) 47,193,584
--------- ----- ------------- ------------- ------------- -------------
Net increase (decrease) in net assets ....... 271,349 -- 20,164,804 37,429,664 100,707,358 127,867,131
NET ASSETS:
Beginning of year ......................... -- -- 128,707,507 91,277,843 396,224,613 268,357,482
--------- ----- ------------- ------------- ------------- -------------
End of year ............................... $ 271,349 $ -- $ 148,872,311 $ 128,707,507 $ 496,931,971 $ 396,224,613
========= ===== ============= ============= ============= =============
</TABLE>
-14-
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
G.T. GLOBAL STRATEGIC PUTNAM DIVERSIFIED INCOME SMITH BARNEY INTERNATIONAL
INCOME PORTFOLIO MFS TOTAL RETURN PORTFOLIO PORTFOLIO EQUITY PORTFOLIO
- ---------------------------- ------------------------------ ---------------------------- ------------------------------
1998 1997 1998 1997 1998 1997 1998 1997
- ------------ ------------ ------------- ------------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 2,169,320 $ -- $ 8,215,729 $ -- $ 3,873,767 $ -- $ -- $ --
- ------------ ------------ ------------- ------------- ------------ ------------ ------------- -------------
225,492 221,824 1,921,968 1,509,146 944,253 832,481 1,451,100 1,403,546
31,535 31,000 269,862 211,891 131,859 115,895 203,676 197,028
- ------------ ------------ ------------- ------------- ------------ ------------ ------------- -------------
1,912,293 (252,824) 6,023,899 (1,721,037) 2,797,655 (948,376) (1,654,776) (1,600,574)
- ------------ ------------ ------------- ------------- ------------ ------------ ------------- -------------
4,025,313 2,546,069 8,798,623 3,016,017 7,686,371 3,837,800 37,006,758 11,259,771
3,351,084 2,087,531 5,417,782 2,078,055 6,391,493 3,295,001 27,025,008 8,709,043
- ------------ ------------ ------------- ------------- ------------ ------------ ------------- -------------
674,229 458,538 3,380,841 937,962 1,294,878 542,799 9,981,750 2,550,728
- ------------ ------------ ------------- ------------- ------------ ------------ ------------- -------------
2,626,151 1,652,102 39,222,148 13,391,534 7,748,982 2,471,090 16,528,151 16,240,626
(552,961) 2,626,151 47,322,806 39,222,148 3,132,201 7,748,982 14,593,076 16,528,151
- ------------ ------------ ------------- ------------- ------------ ------------ ------------- -------------
(3,179,112) 974,049 8,100,658 25,830,614 (4,616,781) 5,277,892 (1,935,075) 287,525
- ------------ ------------ ------------- ------------- ------------ ------------ ------------- -------------
(592,590) 1,179,763 17,505,398 25,047,539 (524,248) 4,872,315 6,391,899 1,237,679
- ------------ ------------ ------------- ------------- ------------ ------------ ------------- -------------
549,329 3,488,404 9,906,341 21,944,124 3,998,242 9,218,127 3,711,411 13,876,805
1,529,222 2,136,289 16,078,924 17,997,178 10,839,976 11,219,304 35,024,690 24,134,536
(3,295) (3,389) (32,238) (25,333) (14,091) (12,205) (27,444) (26,800)
(1,271,788) (895,332) (8,563,079) (4,151,503) (4,674,934) (2,731,671) (6,091,403) (4,180,951)
(2,905,908) (2,567,154) (8,338,782) (6,868,175) (6,689,779) (5,338,309) (38,514,640) (17,621,021)
(329,938) (214,379) (1,721,578) (1,390,904) (1,409,797) (1,068,600) (1,626,307) (980,736)
- ------------ ------------ ------------- ------------- ------------ ------------ ------------- -------------
(2,432,378) 1,944,439 7,329,588 27,505,387 2,049,617 11,286,646 (7,523,693) 15,201,833
- ------------ ------------ ------------- ------------- ------------ ------------ ------------- -------------
(3,024,968) 3,124,202 24,834,986 52,552,926 1,525,369 16,158,961 (1,131,794) 16,439,512
21,914,634 18,790,432 166,514,348 113,961,422 85,754,867 69,595,906 131,417,152 114,977,640
- ------------ ------------ ------------- ------------- ------------ ------------ ------------- -------------
$ 18,889,666 $ 21,914,634 $ 191,349,334 $ 166,514,348 $ 87,280,236 $ 85,754,867 $ 130,285,358 $ 131,417,152
============ ============ ============= ============= ============ ============ ============= =============
</TABLE>
-15-
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF FUND BD OPERATIONS AND CHANGES IN NET ASSETS FOR THE YEARS
ENDED DECEMBER 31, 1998 AND 1997 (CONTINUED)
<TABLE>
<CAPTION>
SMITH BARNEY LARGE
SMITH BARNEY MONEY SMITH BARNEY HIGH CAPITALIZATION
MARKET PORTFOLIO INCOME PORTFOLIO GROWTH PORTFOLIO
----------------------------- --------------------------- -------------------
1998 1997 1998 1997 1998 1997
------------- ------------- ------------ ------------ ------------ ----
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ................................... $ 2,796,668 $ 3,213,162 $ 5,261,141 $ -- $ 9,461 $ --
------------- ------------- ------------ ------------ ------------ ----
EXPENSES:
Insurance charges ........................... 607,236 691,553 836,082 686,729 29,555 --
Administrative fees ......................... 85,438 97,140 117,420 96,473 4,249 --
------------- ------------- ------------ ------------ ------------ ----
Net investment income (loss) ............. 2,103,994 2,424,469 4,307,639 (783,202) (24,343) --
------------- ------------- ------------ ------------ ------------ ----
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment
transactions:
Proceeds from investments sold ............ 56,795,277 65,523,745 6,376,606 2,222,703 356,307 --
Cost of investments sold .................. 56,795,277 65,523,745 5,068,937 1,757,816 330,203 --
------------- ------------- ------------ ------------ ------------ ----
Net realized gain (loss) ................ -- -- 1,307,669 464,887 26,104 --
------------- ------------- ------------ ------------ ------------ ----
Change in unrealized gain (loss) on
investments:
Unrealized gain (loss) beginning of year .. -- -- 10,680,290 2,832,124 -- --
Unrealized gain (loss) end of year ........ -- -- 4,343,991 10,680,290 2,983,610 --
------------- ------------- ------------ ------------ ------------ ----
Net change in unrealized gain (loss)
for the year ....................... -- -- (6,336,299) 7,848,166 2,983,610 --
------------- ------------- ------------ ------------ ------------ ----
Net increase (decrease) in net assets
resulting from operations ............... 2,103,994 2,424,469 (720,991) 7,529,851 2,985,371 --
------------- ------------- ------------ ------------ ------------ ----
UNIT TRANSACTIONS:
Participant purchase payments ............... 6,201,122 30,762,234 5,440,719 14,060,749 2,406,103 --
Participant transfers from other
Travelers accounts ...................... 102,018,496 62,016,267 8,644,276 9,013,865 11,544,465 --
Administrative and asset allocation charges . (7,866) (8,922) (11,638) (9,461) (216) --
Contract surrenders ......................... (7,564,787) (3,893,620) (4,697,572) (2,497,808) (312,427) --
Participant transfers to other
Travelers accounts ...................... (87,589,041) (102,784,067) (5,646,124) (4,280,069) (244,251) --
Other payments to participants .............. (2,889,672) (965,090) (932,368) (845,148) -- --
------------- ------------- ------------ ------------ ------------ ----
Net increase (decrease) in net assets
resulting from unit transactions ........ 10,168,252 (14,873,198) 2,797,293 15,442,128 13,393,674 --
------------- ------------- ------------ ------------ ------------ ----
Net increase (decrease) in net assets ... 12,272,246 (12,448,729) 2,076,302 22,971,979 16,379,045 --
NET ASSETS:
Beginning of year ......................... 53,166,045 65,614,774 75,767,923 52,795,944 -- --
------------- ------------- ------------ ------------ ------------ ----
End of year ............................... $ 65,438,291 $ 53,166,045 $ 77,844,225 $ 75,767,923 $ 16,379,045 $ --
============= ============= ============ ============ ============ ====
</TABLE>
-16-
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
SMITH BARNEY LARGE CAP SMITH BARNEY PACIFIC TBC MANAGED VAN KAMPEN
VALUE PORTFOLIO BASIN PORTFOLIO INCOME PORTFOLIO ENTERPRISE PORTFOLIO
- ------------------------------ ---------------------------- ---------------------------- ------------------------------
1998 1997 1998 1997 1998 1997 1998 1997
- ------------- ------------- ------------ ------------ ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 6,517,427 $ -- $ 113,534 $ -- $ 1,250,787 $ -- $ 8,832,122 $ --
- ------------- ------------- ------------ ------------ ------------ ------------ ------------- -------------
1,865,241 1,469,919 94,786 149,387 303,133 250,737 1,715,225 1,307,064
261,908 206,252 13,109 20,631 42,774 35,401 240,040 182,856
- ------------- ------------- ------------ ------------ ------------ ------------ ------------- -------------
4,390,278 (1,676,171) 5,639 (170,018) 904,880 (286,138) 6,876,857 (1,489,920)
- ------------- ------------- ------------ ------------ ------------ ------------ ------------- -------------
15,888,076 4,461,821 8,197,845 5,466,908 4,120,395 3,174,260 14,012,767 4,920,636
8,463,175 2,571,412 11,684,562 5,196,218 3,661,651 2,802,179 7,165,063 2,725,362
- ------------- ------------- ------------ ------------ ------------ ------------ ------------- -------------
7,424,901 1,890,409 (3,486,717) 270,690 458,744 372,081 6,847,704 2,195,274
- ------------- ------------- ------------ ------------ ------------ ------------ ------------- -------------
46,302,750 16,956,550 (3,462,017) 730,895 1,893,861 19,488 42,086,210 15,559,508
47,723,730 46,302,750 489,713 (3,462,017) 1,543,386 1,893,861 62,055,498 42,086,210
- ------------- ------------- ------------ ------------ ------------ ------------ ------------- -------------
1,420,980 29,346,200 3,951,730 (4,192,912) (350,475) 1,874,373 19,969,288 26,526,702
- ------------- ------------- ------------ ------------ ------------ ------------ ------------- -------------
13,236,159 29,560,438 470,652 (4,092,240) 1,013,149 1,960,316 33,693,849 27,232,056
- ------------- ------------- ------------ ------------ ------------ ------------ ------------- -------------
9,884,322 22,844,428 211,423 1,098,434 1,379,122 2,963,399 6,312,019 18,439,770
14,959,448 19,144,090 7,269,240 6,138,143 8,780,610 4,845,290 14,965,018 19,182,622
(26,645) (20,833) (1,840) (2,611) (3,668) (3,244) (26,198) (20,788)
(8,327,086) (4,621,117) (538,936) (391,352) (1,657,034) (858,530) (8,192,359) (3,078,021)
(14,538,487) (7,103,621) (8,231,572) (6,687,514) (3,563,263) (3,106,909) (11,214,839) (8,857,958)
(1,611,080) (896,987) (131,853) (167,008) (492,882) (154,410) (2,524,355) (767,624)
- ------------- ------------- ------------ ------------ ------------ ------------ ------------- -------------
340,472 29,345,960 (1,423,538) (11,908) 4,442,885 3,685,596 (680,714) 24,898,001
- ------------- ------------- ------------ ------------ ------------ ------------ ------------- -------------
13,576,631 58,906,398 (952,886) (4,104,148) 5,456,034 5,645,912 33,013,135 52,130,057
165,207,572 106,301,174 9,641,016 13,745,164 26,409,289 20,763,377 144,652,576 92,522,519
- ------------- ------------- ------------ ------------ ------------ ------------ ------------- -------------
$ 178,784,203 $ 165,207,572 $ 8,688,130 $ 9,641,016 $ 31,865,323 $ 26,409,289 $ 177,665,711 $ 144,652,576
============= ============= ============ ============ ============ ============ ============= =============
</TABLE>
-17-
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF FUND BD OPERATIONS AND CHANGES IN NET ASSETS FOR THE YEARS
ENDED DECEMBER 31, 1998 AND 1997 (CONTINUED)
<TABLE>
<CAPTION>
COMBINED
---------------------------------------
1998 1997
--------- ----------
<S> <C> <C>
INVESTMENT INCOME:
Dividends .................................................. $ 75,307,318 $ 9,991,782
--------------- ---------------
EXPENSES:
Insurance charges .......................................... 18,339,569 14,861,228
Administrative fees ........................................ 2,577,151 2,087,661
--------------- ---------------
Net investment income (loss) ........................... 54,390,598 (6,957,107)
--------------- ---------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ........................... 232,678,282 126,237,914
Cost of investments sold ................................. 177,991,805 109,741,686
--------------- ---------------
Net realized gain (loss) ............................... 54,686,477 16,496,228
--------------- ---------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year ................. 350,653,206 149,706,485
Unrealized gain (loss) end of year ....................... 461,385,600 350,653,206
--------------- ---------------
Net change in unrealized gain (loss) for the year....... 110,732,394 200,946,726
--------------- ---------------
Net increase (decrease) in net assets
resulting from operations .............................. 219,809,469 210,485,847
--------------- ---------------
UNIT TRANSACTIONS:
Participant purchase payments .............................. 91,748,802 247,618,592
Participant transfers from other Travelers accounts......... 315,863,814 271,785,612
Administrative and asset allocation charges ................ (306,364) (255,069)
Contract surrenders ........................................ (87,811,788) (46,085,851)
Participant transfers to other Travelers accounts........... (257,452,335) (209,625,801)
Other payments to participants ............................. (22,546,614) (12,044,229)
--------------- ---------------
Net increase (decrease) in net assets
resulting from unit transactions ...................... 39,495,515 251,393,254
--------------- ---------------
Net increase (decrease) in net assets .................. 259,304,984 461,879,101
NET ASSETS:
Beginning of year ........................................ 1,601,612,619 1,139,733,518
--------------- ---------------
End of year .............................................. $ 1,860,917,603 $ 1,601,612,619
=============== ===============
</TABLE>
-18-
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF ACCUMULATION AND ANNUITY UNITS FOR FUND BD FOR THE YEARS ENDED
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
SALOMON BROTHERS VARIABLE
SMALL CAP PORTFOLIO TOTAL RETURN PORTFOLIO TOTAL RETURN FUND
-------------------------- ------------------------- ------------------------
1998 1997 1998 1997 1998 1997
---------- ------------ ----------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C>
Accumulation and annuity units
beginning of year ........................... -- -- 87,664,212 68,066,825 -- --
Accumulation units purchased and
transferred from other Travelers accounts ... 1,133,536 -- 8,875,033 26,427,090 625,345 --
Accumulation units redeemed and
transferred to other Travelers accounts ..... (59,205) -- (11,417,617) (6,829,703) (158,134) --
Annuity units ............................... -- -- -- -- -- --
---------- ------------ ----------- ----------- -------- ------------
Accumulation and annuity units
end of year ................................. 1,074,331 -- 85,121,628 87,664,212 467,211 --
========== ============ =========== =========== ======== ============
</TABLE>
<TABLE>
<CAPTION>
SALOMON
BROTHERS VARIABLE SELECT SELECT
INVESTORS FUND BALANCED PORTFOLIO CONSERVATIVE PORTFOLIO
------------------ -------------------------- ------------------------
1998 1997 1998 1997 1998 1997
-------- ---- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Accumulation and annuity units
beginning of year ....................... -- -- 3,892,706 -- 828,521 --
Accumulation units purchased and
transferred from other Travelers accounts 837,180 -- 2,142,198 4,022,149 1,159,940 901,166
Accumulation units redeemed and
transferred to other Travelers accounts . (57,022) -- (852,059) (129,443) (338,773) (72,645)
Annuity units ............................. -- -- (1,413) -- -- --
-------- ---- ---------- ---------- ---------- --------
Accumulation and annuity units
end of year ............................. 780,158 -- 5,181,432 3,892,706 1,649,688 828,521
======== ==== ========== ========== ========== ========
</TABLE>
<TABLE>
<CAPTION>
SELECT GROWTH SELECT HIGH GROWTH SELECT INCOME
PORTFOLIO PORTFOLIO PORTFOLIO
-------------------------- ------------------------ ----------------------
1998 1997 1998 1997 1998 1997
---------- ---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Accumulation and annuity units
beginning of year ....................... 3,665,222 -- 833,880 -- 704,736 --
Accumulation units purchased and
transferred from other Travelers accounts 1,761,182 3,840,022 357,072 908,116 615,981 768,659
Accumulation units redeemed and
transferred to other Travelers accounts . (452,583) (174,800) (141,267) (74,236) (383,707) (63,923)
Annuity units ............................. -- -- -- -- -- --
---------- ---------- ---------- -------- -------- --------
Accumulation and annuity units
end of year ............................. 4,973,821 3,665,222 1,049,685 833,880 937,010 704,736
========== ========== ========== ======== ======== ========
</TABLE>
-19-
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF ACCUMULATION AND ANNUITY UNITS FOR FUND BD FOR THE YEARS ENDED
DECEMBER 31, 1998 AND 1997 (CONTINUED)
<TABLE>
<CAPTION>
MFS EMERGING MFS RESEARCH STRATEGIC STOCK
GROWTH PORTFOLIO PORTFOLIO PORTFOLIO
---------------------------- -------------------- ------------------
1998 1997 1998 1997 1998 1997
----------- ----------- ---------- ---- -------- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation and annuity units
beginning of year ....................... 23,766,030 5,570,213 -- -- -- --
Accumulation units purchased and
transferred from other Travelers accounts 13,295,820 20,562,526 3,242,969 -- 661,788 --
Accumulation units redeemed and
transferred to other Travelers accounts . (5,783,124) (2,366,709) (850,514) -- (808) --
Annuity units ............................. -- -- -- -- -- --
----------- ----------- ---------- ---- -------- ----
Accumulation and annuity units
end of year ............................. 31,278,726 23,766,030 2,392,455 -- 660,980 --
=========== =========== ========== ==== ======== ====
</TABLE>
<TABLE>
<CAPTION>
CONVERTIBLE BOND DISCIPLINED MID CAP DISCIPLINED SMALL CAP
PORTFOLIO STOCK PORTFOLIO STOCK PORTFOLIO
------------------- ------------------- -------------------
1998 1997 1998 1997 1998 1997
-------- ---- -------- ---- -------- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation and annuity units
beginning of year ....................... -- -- -- -- -- --
Accumulation units purchased and
transferred from other Travelers accounts 274,846 -- 470,940 -- 344,552 --
Accumulation units redeemed and
transferred to other Travelers accounts . (1,769) -- (18,989) -- (41,567) --
Annuity units ............................. -- -- -- -- -- --
-------- ---- -------- ---- -------- ----
Accumulation and annuity units
end of year ............................. 273,077 -- 451,951 -- 302,985 --
======== ==== ======== ==== ======== ====
</TABLE>
<TABLE>
<CAPTION>
AIM CAPITAL ALLIANCE G.T. GLOBAL STRATEGIC
APPRECIATION PORTFOLIO GROWTH PORTFOLIO INCOME PORTFOLIO
--------------------------- --------------------------- -------------------------
1998 1997 1998 1997 1998 1997
------------ ------------ ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Accumulation and annuity units
beginning of year ....................... 106,824,450 83,947,101 174,370,022 150,544,940 15,717,210 14,300,516
Accumulation units purchased and
transferred from other Travelers accounts 16,195,561 37,010,944 23,261,680 42,358,182 1,492,057 4,165,404
Accumulation units redeemed and
transferred to other Travelers accounts . (16,322,590) (14,133,595) (26,106,633) (18,532,586) (3,278,754) (2,748,441)
Annuity units ............................. -- -- (691) (514) (360) (269)
------------ ------------ ------------ ------------ ----------- -----------
Accumulation and annuity units
end of year ............................. 106,697,421 106,824,450 171,524,378 174,370,022 13,930,153 15,717,210
============ ============ ============ ============ =========== ===========
</TABLE>
-20-
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF ACCUMULATION AND ANNUITY UNITS FOR FUND BD FOR THE YEARS ENDED
DECEMBER 31, 1998 AND 1997 (CONTINUED)
<TABLE>
<CAPTION>
MFS TOTAL PUTNAM DIVERSIFIED SMITH BARNEY INTERNATIONAL
RETURN PORTFOLIO INCOME PORTFOLIO EQUITY PORTFOLIO
--------------------------- ------------------------- ---------------------------
1998 1997 1998 1997 1998 1997
------------ ------------ ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Accumulation and annuity units
beginning of year ....................... 101,202,125 82,925,658 64,492,939 55,686,585 106,141,321 94,215,932
Accumulation units purchased and
transferred from other Travelers accounts 15,061,570 26,536,279 11,131,135 16,004,365 29,462,543 29,649,820
Accumulation units redeemed and
transferred to other Travelers accounts . (10,836,655) (8,259,138) (9,616,648) (7,196,409) (35,577,696) (17,723,476)
Annuity units ............................. (906) (674) (1,230) (1,602) (1,283) (955)
------------ ------------ ----------- ----------- ------------ ------------
Accumulation and annuity units
end of year ............................. 105,426,134 101,202,125 66,006,196 64,492,939 100,024,885 106,141,321
============ ============ =========== =========== ============ ============
</TABLE>
<TABLE>
<CAPTION>
SMITH BARNEY
SMITH BARNEY SMITH BARNEY HIGH LARGE CAPITALIZATION
MONEY MARKET PORTFOLIO INCOME PORTFOLIO GROWTH PORTFOLIO
--------------------------- --------------------------- --------------------
1998 1997 1998 1997 1998 1997
----------- ----------- ----------- ----------- ----------- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation and annuity units
beginning of year ....................... 46,715,815 59,848,388 51,890,620 40,668,816 -- --
Accumulation units purchased and
transferred from other Travelers accounts 93,090,982 83,235,342 9,570,858 16,761,800 13,777,024 --
Accumulation units redeemed and
transferred to other Travelers accounts . (84,423,123) (96,367,128) (7,731,368) (5,538,973) (530,344) --
Annuity units ............................. (286) (787) (372) (1,023) -- --
----------- ----------- ----------- ----------- ----------- ----
Accumulation and annuity units
end of year ............................. 55,383,388 46,715,815 53,729,738 51,890,620 13,246,680 --
=========== =========== =========== =========== =========== ====
</TABLE>
<TABLE>
<CAPTION>
SMITH BARNEY LARGE SMITH BARNEY PACIFIC TBC MANAGED
CAP VALUE PORTFOLIO BASIN PORTFOLIO INCOME PORTFOLIO
-------------------------- -------------------------- --------------------------
1998 1997 1998 1997 1998 1997
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Accumulation and annuity units
beginning of year ....................... 86,532,165 69,649,025 13,812,646 14,000,600 20,977,642 17,878,278
Accumulation units purchased and
transferred from other Travelers accounts 12,376,065 24,091,442 11,035,048 7,773,179 7,828,765 6,498,071
Accumulation units redeemed and
transferred to other Travelers accounts (12,600,315) (7,208,302) (13,103,349) (7,960,727) (4,419,266) (3,398,707)
Annuity units ........................... -- -- (546) (406) -- --
----------- ----------- ----------- ----------- ----------- -----------
Accumulation and annuity units
end of year ........................... 86,307,915 86,532,165 11,743,799 13,812,646 24,387,141 20,977,642
=========== =========== =========== =========== =========== ===========
</TABLE>
-21-
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF ACCUMULATION AND ANNUITY UNITS FOR FUND BD FOR THE YEARS ENDED
DECEMBER 31, 1998 AND 1997 (CONTINUED)
<TABLE>
<CAPTION>
VAN KAMPEN ENTERPRISE PORTFOLIO COMBINED
---------------------------- --------------------------------
1998 1997 1998 1997
----------- ----------- -------------- ------------
<S> <C> <C> <C> <C>
Accumulation and annuity units
beginning of year ....................... 68,903,623 55,989,980 978,935,885 813,292,857
Accumulation units purchased and
transferred from other Travelers accounts 9,313,239 19,647,366 289,394,909 371,161,922
Accumulation units redeemed and
transferred to other Travelers accounts . (9,753,783) (6,733,723) (254,857,662) (205,512,664)
Annuity units ............................. -- -- (7,087) (6,230)
----------- ----------- -------------- ------------
Accumulation and annuity units
end of year ............................. 68,463,079 68,903,623 1,013,466,045 978,935,885
=========== =========== ============== ============
</TABLE>
-22-
<PAGE> 24
INDEPENDENT AUDITORS' REPORT
To the Owners of Variable Annuity Contracts of
The Travelers Fund BD for Variable Annuities:
We have audited the accompanying statement of assets and liabilities of The
Travelers Fund BD for Variable Annuities as of December 31, 1998, and the
related statement of operations for the year then ended and the statement of
changes in net assets for each of the two years in the period then ended. 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 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 each of the two years
in the period then ended, in conformity with generally accepted accounting
principles.
KPMG LLP
Hartford, Connecticut
February 17, 1999
<PAGE> 25
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 for Variable Annuities or Fund
BD's underlying funds. It should not be used in connection with any offer except
in conjunction with the Prospectus for The Travelers Fund BD for Variable
Annuities product(s) offered by The Travelers Insurance Company and the
Prospectuses of the underlying funds, which collectively contain all pertinent
information, including the applicable sales commissions.
