<PAGE> 1
VINTAGE ANNUITY
ANNUAL REPORT
December 31, 1996
The Travelers Fund BD II
for Variable Annuities
TravelersLife and Annuity
A Member of TravelersGroup[LOGO]
The Travelers Insurance Company
The Travelers Life and Annuity Company
One Tower Square
Hartford, CT 06183
<PAGE> 2
THE TRAVELERS FUND BD II
FOR VARIABLE ANNUITIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<S> <C> <C>
ASSETS:
Investments in eligible funds at market value:
Travelers Series Fund Inc.:
Alliance Growth Portfolio, 2,918,162 shares (cost $44,405,174)............................. $ 48,966,764
Van Kampen American Capital Enterprise Portfolio, 1,343,721 shares (cost $19,453,154)...... 21,244,226
TBC Managed Income Portfolio, 309,691 shares (cost $3,335,308)............................. 3,313,698
G.T. Global Strategic Income Portfolio, 253,089 shares (cost $2,972,864)................... 3,006,700
Smith Barney High Income Portfolio, 942,925 shares (cost $11,026,143)...................... 11,164,229
Smith Barney International Equity Portfolio, 1,807,787 shares (cost $21,951,774)........... 22,705,810
Smith Barney Income and Growth Portfolio, 1,358,832 shares (cost $19,155,043).............. 20,464,013
Smith Barney Money Market Portfolio, 27,673,051 shares (cost $27,673,051).................. 27,673,051
Putnam Diversified Income Portfolio, 1,277,767 shares (cost $14,771,881)................... 14,783,770
Smith Barney Pacific Basin Portfolio, 315,107 shares (cost $3,109,988)..................... 3,163,679
MFS Total Return Portfolio, 1,915,813 shares (cost $24,158,789)............................ 25,231,256
AIM Capital Appreciation Portfolio, 3,301,416 shares (cost $34,463,713).................... 36,414,613
The Travelers Series Trust:
MFS Emerging Growth Portfolio, 275,528 shares (cost $3,000,407)............................ 2,906,816
Smith Barney Series Fund:
Total Return Portfolio, 1,652,878 shares (cost $23,680,295)................................ 25,999,765
-----------------
Total Investments (cost $253,157,584)..................................................... $ 267,038,390
RECEIVABLES:
Dividends................................................................................... 56,333
Purchase payments and transfers from other Travelers accounts............................... 2,370,836
Other assets................................................................................. 4,851
-------------------
Total Assets............................................................................... 269,470,410
-------------------
LIABILITIES:
Payable for contract surrenders and transfers to other Travelers accounts.................... 191,971
Accrued liabilities.......................................................................... 35,255
-------------------
Total Liabilities.......................................................................... 227,226
-------------------
NET ASSETS: $ 269,243,184
===================
</TABLE>
See Notes to Financial Statements
-1-
<PAGE> 3
THE TRAVELERS FUND BD II
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends.................................................................................... $ 6,107,224
EXPENSES:
Insurance charges............................................................................ $ 1,333,944
Administrative charges....................................................................... 189,960
-----------------
Total expenses.............................................................................. 1,523,904
-------------------
Net investment income...................................................................... 4,583,320
-------------------
REALIZED GAIN AND CHANGE IN UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Realized gain from investment transactions:
Proceeds from investments sold.............................................................. 36,697,606
Cost of investments sold.................................................................... 36,099,281
-----------------
Net realized gain.......................................................................... 598,325
Change in unrealized gain (loss) on investments:
Unrealized loss at December 31, 1995........................................................ (125,174)
Unrealized gain at December 31, 1996........................................................ 13,880,806
-----------------
Net change in unrealized gain (loss) for the year.......................................... 14,005,980
-------------------
Net realized gain and change in unrealized gain (loss).................................... 14,604,305
-------------------
Net increase in net assets resulting from operations......................................... $ 19,187,625
===================
</TABLE>
See Notes to Financial Statements
-2-
<PAGE> 4
THE TRAVELERS FUND BD II
FOR VARIABLE ANNUITIES
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
THE PERIOD NOVEMBER 8, 1995 (DATE OPERATIONS COMMENCED)
TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
OPERATIONS:
Net investment income........................................................................ $ 4,583,320 $ 245,834
Net realized gain (loss) from investment transactions........................................ 598,325 (509)
Net change in unrealized gain (loss) on investments.......................................... 14,005,980 (125,174)
----------------- -------------------
Net increase in net assets resulting from operations........................................ 19,187,625 120,151
----------------- -------------------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 182,948,181 and 14,991,745 units, respectively).............................. 226,873,244 17,056,576
Participant transfers from other Travelers accounts
(applicable to 55,121,934 and 321,920 units, respectively).................................. 65,242,361 372,855
Administrative charges
(applicable to 15,382 units)................................................................ (18,946) -
Contract surrenders
(applicable to 1,897,753 and 1,879 units, respectively)..................................... (2,337,255) (2,206)
Participant transfers to other Travelers accounts
(applicable to 50,981,143 and 229,855 units, respectively).................................. (55,932,256) (260,930)
Other payments to participants
(applicable to 810,905 units)............................................................... (1,058,035) -
----------------- -------------------
Net increase in net assets resulting from unit transactions................................ 232,769,113 17,166,295
----------------- -------------------
Net increase in net assets................................................................ 251,956,738 17,286,446
NET ASSETS:
Beginning of period.......................................................................... 17,286,446 -
----------------- -------------------
End of period................................................................................ $ 269,243,184 $ 17,286,446
================= ===================
</TABLE>
See Notes to Financial Statements
-3-
<PAGE> 5
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Fund BD II for Variable Annuities ("Fund BD 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 Travelers
Group Inc., and is available for funding certain variable annuity contracts
issued by Travelers Life. Fund BD II is registered under the Investment
Company Act of 1940, as amended, as a unit investment trust.
Participant purchase payments applied to Fund BD II are invested in one or
more eligible funds in accordance with the selection made by the contract
owner. As of December 31, 1996, the eligible funds available under Fund BD
II are: Alliance Growth Portfolio, Van Kampen American Capital Enterprise
Portfolio (formerly 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
Income and Growth Portfolio, Smith Barney Money Market Portfolio, Putnam
Diversified Income Portfolio, Smith Barney Pacific Basin Portfolio, MFS
Total Return Portfolio, and AIM Capital Appreciation Portfolio of Travelers
Series Fund Inc. (formerly Smith Barney/Travelers Series Fund Inc.); MFS
Emerging Growth Portfolio of The Travelers Series Trust; and Total Return
Portfolio of Smith Barney Series Fund. Travelers Series Fund Inc. is
incorporated under Maryland law. Smith Barney Series Fund and The
Travelers Series Trust are registered as Massachusetts business trusts.
All eligible funds are managed by affiliates of The Travelers.
The following is a summary of significant accounting policies consistently
followed by Fund BD 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.
FEDERAL INCOME TAXES. The operations of Fund BD 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 Fund BD II. Fund BD 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.
Security transactions are accounted for on the trade date. Dividend income
is recorded on the ex-dividend date.
2. INVESTMENTS
Purchases and sales of investments aggregated $273,450,623 and $36,697,606,
respectively, for the year ended December 31, 1996. Realized gains and
losses from investment transactions are reported on an identified cost
basis. The cost of investments in eligible funds was $253,157,584 at
December 31, 1996. Gross unrealized appreciation for all investments at
December 31, 1996 was $13,996,007. Gross unrealized depreciation for all
investments at December 31, 1996 was $115,201.
-4-
<PAGE> 6
NOTES TO FINANCIAL STATEMENTS - CONTINUED
3. CONTRACT CHARGES
Insurance charges are paid for the mortality and expense risks assumed by
Travelers Life. For contracts with a standard death benefit provision,
these charges are equivalent to 1.02% of the average net assets of Fund BD
II 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 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 Fund BD II 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 Travelers Life to cover
contract administrative charges.
No sales charge is deducted from participant purchase payments when they
are received. However, Travelers Life generally assesses a contingent
deferred sales charge of up to 6% if a participant's purchase payment is
surrendered within six years of its payment date. Contract surrender
payments include $26,151 of contingent deferred sales charges for the year
ended December 31, 1996. No deductions were taken for the period November
8, 1995 (date operations commenced) to December 31, 1995.
-5-
<PAGE> 7
NOTES TO FINANCIAL STATEMENTS - CONTINUED
4. NET CONTRACT OWNERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------------------------------------
ACCUMULATION UNIT NET
UNITS VALUE ASSETS
----- ------ ------
<S> <C> <C> <C>
Travelers Series Fund Inc.
Alliance Growth Portfolio
Standard.............................................. 24,031,009 $ 1.785 $ 42,891,960
Enhanced.............................................. 3,613,086 1.772 6,403,241
Van Kampen American Capital Enterprise Portfolio
Standard.............................................. 11,360,286 1.655 18,797,963
Enhanced.............................................. 1,644,330 1.643 2,701,654
TBC Managed Income Portfolio
Standard.............................................. 2,635,535 1.163 3,063,848
Enhanced.............................................. 265,598 1.154 306,598
G.T. Global Strategic Income Portfolio
Standard.............................................. 1,832,502 1.316 2,411,175
Enhanced.............................................. 463,308 1.306 605,312
Smith Barney High Income Portfolio
Standard.............................................. 7,719,068 1.300 10,032,935
Enhanced.............................................. 970,188 1.291 1,252,088
Smith Barney International Equity Portfolio
Standard.............................................. 16,854,894 1.222 20,594,877
Enhanced.............................................. 2,009,974 1.213 2,438,585
Smith Barney Income and Growth Portfolio
Standard.............................................. 11,905,953 1.528 18,193,877
Enhanced.............................................. 1,606,074 1.517 2,436,913
Smith Barney Money Market Portfolio
Standard.............................................. 22,961,508 1.098 25,204,164
Enhanced.............................................. 2,362,442 1.090 2,574,838
Putnam Diversified Income Portfolio
Standard.............................................. 10,424,494 1.252 13,047,868
Enhanced.............................................. 1,460,865 1.243 1,815,551
Smith Barney Pacific Basin Portfolio
Standard.............................................. 2,754,609 0.983 2,709,112
Enhanced.............................................. 467,106 0.977 456,150
MFS Total Return Portfolio
Standard.............................................. 16,650,570 1.376 22,910,883
Enhanced.............................................. 1,810,076 1.366 2,473,038
AIM Capital Appreciation Portfolio
Standard.............................................. 29,460,488 1.088 32,050,014
Enhanced.............................................. 4,246,308 1.084 4,603,683
The Travelers Series Trust
MFS Emerging Growth Portfolio
Standard.............................................. 2,505,629 1.005 2,518,893
Enhanced.............................................. 466,025 1.005 468,275
Smith Barney Series Fund
Total Return Portfolio
Standard.............................................. 14,921,227 1.550 23,130,231
Enhanced.............................................. 2,043,711 1.541 3,149,458
-----------------
Net Contract Owners' Equity............................................................... $ 269,243,184
=================
</TABLE>
-6-
<PAGE> 8
This page intentionally left blank.
-7-
<PAGE> 9
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. SCHEDULE OF FUND BD II OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE PERIOD NOVEMBER 8, 1995
(DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
VAN KAMPEN
AMERICAN CAPITAL
ALLIANCE GROWTH PORTFOLIO ENTERPRISE PORTFOLIO
-------------------------------- -------------------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends................................................. $ 1,749,884 $ 71,580 $ 65,661 $ 38,960
------------- ----------------- ------------------- -----------------
EXPENSES:
Insurance charges......................................... 239,371 2,554 107,644 1,306
Administrative fees....................................... 33,611 275 15,377 135
------------- ----------------- ------------------- -----------------
Net investment income (loss)........................ 1,476,902 68,751 (57,360) 37,519
------------- ----------------- ------------------- -----------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold........................ 115,510 55,534 179,400 155
Cost of investments sold.............................. 97,909 56,573 156,110 158
------------- ----------------- ------------------- -----------------
Net realized gain (loss)............................ 17,601 (1,039) 23,290 (3)
------------- ----------------- ------------------- -----------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of period............ (42,615) - (18,558) -
Unrealized gain (loss) end of period.................. 4,561,590 (42,615) 1,791,072 (18,558)
------------- ----------------- ------------------- -----------------
Net change in unrealized gain (loss) for the period. 4,604,205 (42,615) 1,809,630 (18,558)
------------- ----------------- ------------------- -----------------
Net increase (decrease) in net assets
resulting from operations........................... 6,098,708 25,097 1,775,560 18,958
------------- ----------------- ------------------- -----------------
UNIT TRANSACTIONS:
Participant purchase payments............................. 34,649,407 2,815,148 16,501,913 1,430,843
Participant transfers from other Travelers accounts....... 7,299,315 67,993 2,552,870 37,768
Administrative charges.................................... (3,897) - (1,313) -
Contract surrenders....................................... (387,974) (503) (141,838) -
Participant transfers to other Travelers accounts......... (1,038,182) (82,106) (587,799) -
Other payments to participants............................ (147,805) - (87,345) -
------------- ----------------- ------------------- -----------------
Net increase in net assets resulting
from unit transactions.............................. 40,370,864 2,800,532 18,236,488 1,468,611
------------- ----------------- ------------------- -----------------
Net increase in net assets.......................... 46,469,572 2,825,629 20,012,048 1,487,569
NET ASSETS:
Beginning of period................................... 2,825,629 - 1,487,569 -
------------- ----------------- ------------------- -----------------
End of period......................................... $ 49,295,201 $ 2,825,629 $ 21,499,617 $ 1,487,569
============= ================= =================== =================
</TABLE>
<TABLE>
<CAPTION>
TBC MANAGED
INCOME PORTFOLIO
------------------------------------
1996 1995
---- ----
<S> <C> <C>
INVESTMENT INCOME:
Dividends................................................. $ 144,329 $ 18,181
----------------- ------------------
EXPENSES:
Insurance charges......................................... 20,601 252
Administrative fees....................................... 2,972 35
----------------- ------------------
Net investment income (loss)........................ 120,756 17,894
----------------- ------------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold........................ 443,906 60
Cost of investments sold.............................. 463,432 60
----------------- ------------------
Net realized gain (loss)............................ (19,526) -
----------------- ------------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of period............ (13,530) -
Unrealized gain (loss) end of period.................. (21,610) (13,530)
----------------- ------------------
Net change in unrealized gain (loss) for the period. (8,080) (13,530)
----------------- ------------------
Net increase (decrease) in net assets
resulting from operations........................... 93,150 4,364
----------------- ------------------
UNIT TRANSACTIONS:
Participant purchase payments............................. 3,072,427 275,352
Participant transfers from other Travelers accounts....... 349,692 80,000
Administrative charges.................................... (212) -
Contract surrenders....................................... (12,989) -
Participant transfers to other Travelers accounts......... (491,338) -
Other payments to participants............................ - -
----------------- ------------------
Net increase in net assets resulting
from unit transactions............................. 2,917,580 355,352
----------------- ------------------
Net increase in net assets.......................... 3,010,730 359,716
NET ASSETS:
Beginning of period................................... 359,716 -
----------------- ------------------
End of period......................................... $ 3,370,446 $ 359,716
================= ==================
</TABLE>
-8-
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
G.T. GLOBAL STRATEGIC SMITH BARNEY
INCOME PORTFOLIO HIGH INCOME PORTFOLIO
--------------------------------- -----------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.................................................
$ 239,292 $ 4,427 $ 625,383 $ 27,093
---------------- ---------------- ------------- ---------------
EXPENSES:
Insurance charges......................................... 14,195 102 54,325 283
Administrative fees....................................... 1,970 12 7,674 39
---------------- ---------------- ------------- ---------------
Net investment income (loss)........................ 223,127 4,313 563,384 26,771
---------------- ---------------- ------------- ---------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold........................ 12,114 64 118,732 142
Cost of investments sold.............................. 11,608 63 118,637 144
---------------- ---------------- ------------- ---------------
Net realized gain (loss)............................ 506 1 95 (2)
---------------- ---------------- ------------- ---------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of period............ (1,453) - (21,008) -
Unrealized gain (loss) end of period.................. 33,836 (1,453) 138,086 (21,008)
---------------- ---------------- ------------- ---------------
Net change in unrealized gain (loss) for the period. 35,289 (1,453) 159,094 (21,008)
---------------- ---------------- ------------- ---------------
Net increase (decrease) in net assets
resulting from operations........................... 258,922 2,861 722,573 5,761
---------------- ---------------- ------------- ---------------
UNIT TRANSACTIONS:
Participant purchase payments............................. 2,320,799 122,591 9,279,640 659,877
Participant transfers from other Travelers accounts....... 331,095 - 1,222,919 -
Administrative charges.................................... (164) - (580) -
Contract surrenders....................................... (13,081) - (76,933) -
Participant transfers to other Travelers accounts......... (6,536) - (462,926) -
Other payments to participants............................ - - (65,308) -
---------------- ---------------- ------------- ---------------
Net increase in net assets resulting
from unit transactions.............................. 2,632,113 122,591 9,896,812 659,877
---------------- ---------------- ------------- ---------------
Net increase in net assets.......................... 2,891,035 125,452 10,619,385 665,638
NET ASSETS:
Beginning of period................................... 125,452 - 665,638 -
---------------- ---------------- ------------- ---------------
End of period......................................... $ 3,016,487 $ 125,452 $ 11,285,023 $ 665,638
================ ================ ============= ===============
</TABLE>
<TABLE>
<CAPTION>
SMITH BARNEY SMITH BARNEY INCOME
INTERNATIONAL EQUITY PORTFOLIO AND GROWTH PORTFOLIO
------------------------------- --------------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.................................................
$ 22,493 $ 836 $ 455,102 $ 15,676
--------------- --------------- -------------- -----------------
EXPENSES:
Insurance charges......................................... 107,608 751 97,155 759
Administrative fees....................................... 16,122 83 13,920 98
--------------- --------------- -------------- -----------------
Net investment income (loss)........................ (101,237) 2 344,027 14,819
--------------- --------------- -------------- -----------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold........................ 4,446,920 35,908 82,485 396
Cost of investments sold.............................. 3,960,097 35,387 69,287 385
--------------- --------------- -------------- -----------------
Net realized gain (loss)............................ 486,823 521 13,198 11
--------------- --------------- -------------- -----------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of period............ 20,347 - 1,435 -
Unrealized gain (loss) end of period.................. 754,036 20,347 1,308,970 1,435
--------------- --------------- -------------- -----------------
Net change in unrealized gain (loss) for the period. 733,689 20,347 1,307,535 1,435
--------------- --------------- -------------- -----------------
Net increase (decrease) in net assets
resulting from operations........................... 1,119,275 20,870 1,664,760 16,265
--------------- --------------- -------------- -----------------
UNIT TRANSACTIONS:
Participant purchase payments............................. 17,392,360 760,996 15,205,943 911,643
Participant transfers from other Travelers accounts....... 10,287,941 12,389 3,567,741 29,913
Administrative charges.................................... (1,790) - (1,280) -
Contract surrenders....................................... (168,200) (75) (178,977) -
Participant transfers to other Travelers accounts......... (6,285,736) - (444,378) -
Other payments to participants............................ (104,568) - (140,840) -
--------------- --------------- -------------- -----------------
Net increase in net assets resulting
from unit transactions.............................. 21,120,007 773,310 18,008,209 941,556
--------------- --------------- -------------- -----------------
Net increase in net assets.......................... 22,239,282 794,180 19,672,969 957,821
NET ASSETS:
Beginning of period................................... 794,180 - 957,821 -
--------------- --------------- -------------- -----------------
End of period......................................... $ 23,033,462 $ 794,180 $ 20,630,790 $ 957,821
=============== =============== ============== =================
</TABLE>
-9-
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. SCHEDULE OF FUND BD II OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE PERIOD NOVEMBER 8, 1995
(DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
SMITH BARNEY PUTNAM
MONEY MARKET PORTFOLIO DIVERSIFIED INCOME PORTFOLIO
----------------------------- -----------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.................................................. $ 734,489 $ 8,627 $ 775,071 $ 44,601
------------- ------------- ------------- -------------
EXPENSES:
Insurance charges.......................................... 161,431 2,031 77,461 704
Administrative fees........................................ 22,917 275 11,041 100
------------- ------------- ------------- -------------
Net investment income (loss)......................... 550,141 6,321 686,569 43,797
------------- ------------- ------------- -------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold......................... 22,760,375 44,352 361,079 21
Cost of investments sold............................... 22,760,375 44,352 356,390 21
------------- ------------- ------------- -------------
Net realized gain (loss)............................. - - 4,689 -
------------- ------------- ------------- -------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of period............. - - (29,630) -
Unrealized gain (loss) end of period................... - - 11,889 (29,630)
------------- ------------- ------------- -------------
Net change in unrealized gain (loss) for the period.. - - 41,519 (29,630)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations............................ 550,141 6,321 732,777 14,167
------------- ------------- ------------- -------------
UNIT TRANSACTIONS:
Participant purchase payments.............................. 44,038,947 3,527,872 12,719,514 1,086,983
Participant transfers from other Travelers accounts........ 16,886,657 8,446 1,427,681 15,623
Administrative charges..................................... (945) - (1,014) -
Contract surrenders........................................ (461,230) - (283,811) -
Participant transfers to other Travelers accounts.......... (36,332,462) (166,900) (827,078) (5,584)
Other payments to participants............................. (277,845) - (15,839) -
------------- ------------- ------------- -------------
Net increase in net assets resulting
from unit transactions............................... 23,853,122 3,369,418 13,019,453 1,097,022
------------- ------------- ------------- -------------
Net increase in net assets........................... 24,403,263 3,375,739 13,752,230 1,111,189
NET ASSETS:
Beginning of period.................................... 3,375,739 - 1,111,189 -
------------- ------------- ------------- -------------
End of period.......................................... $ 27,779,002 $ 3,375,739 $ 14,863,419 $ 1,111,189
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
SMITH BARNEY
PACIFIC BASIN PORTFOLIO
-----------------------------
1996 1995
---- ----
<S> <C> <C>
INVESTMENT INCOME:
Dividends.................................................. $ 19,513 $ 149
------------- -------------
EXPENSES:
Insurance charges.......................................... 17,947 48
Administrative fees........................................ 2,375 6
------------- -------------
Net investment income (loss)......................... (809) 95
------------- -------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold......................... 7,758,018 19
Cost of investments sold............................... 7,712,954 18
------------- -------------
Net realized gain (loss)............................. 45,064 1
------------- -------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of period............. 1,836 -
Unrealized gain (loss) end of period................... 53,691 1,836
------------- -------------
Net change in unrealized gain (loss) for the period.. 51,855 1,836
------------- -------------
Net increase (decrease) in net assets
resulting from operations............................ 96,110 1,932
------------- -------------
UNIT TRANSACTIONS:
Participant purchase payments.............................. 2,993,075 49,035
Participant transfers from other Travelers accounts........ 8,020,835 673
Administrative charges..................................... (370) -
Contract surrenders........................................ (11,727) -
Participant transfers to other Travelers accounts.......... (7,984,301) -
Other payments to participants............................. - -
------------- -------------
Net increase in net assets resulting
from unit transactions............................... 3,017,512 49,708
------------- -------------
Net increase in net assets........................... 3,113,622 51,640
NET ASSETS:
Beginning of period.................................... 51,640 -
------------- -------------
End of period.......................................... $ 3,165,262 $ 51,640
============= =============
</TABLE>
-10-
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
AIM CAPITAL
MFS TOTAL RETURN PORTFOLIO APPRECIATION PORTFOLIO
----------------------------- -----------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.................................................. $ 832,634 $ 26,481 $ 35,100 $ 3,038
------------- ------------- ------------- -------------
EXPENSES:
Insurance charges.......................................... 121,785 857 197,164 4,240
Administrative fees........................................ 17,434 127 27,944 313
------------- ------------- ------------- -------------
Net investment income (loss)......................... 693,415 25,497 (190,008) (1,515)
------------- ------------- ------------- -------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold......................... 122,229 62 189,761 90
Cost of investments sold............................... 113,231 61 187,142 93
------------- ------------- ------------- -------------
Net realized gain (loss)............................. 8,998 1 2,619 (3)
------------- ------------- ------------- -------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of period............. 140 - (25,475) -
Unrealized gain (loss) end of period................... 1,072,467 140 1,950,900 (25,475)
------------- ------------- ------------- -------------
Net change in unrealized gain (loss) for the period.. 1,072,327 140 1,976,375 (25,475)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations............................ 1,774,740 25,638 1,788,986 (26,993)
------------- ------------- ------------- -------------
UNIT TRANSACTIONS:
Participant purchase payments.............................. 19,949,329 1,186,910 27,035,886 3,256,149
Participant transfers from other Travelers accounts........ 3,146,849 22,680 5,567,585 72,615
Administrative charges..................................... (1,570) - (4,115) -
Contract surrenders........................................ (144,598) (627) (343,921) (500)
Participant transfers to other Travelers accounts.......... (517,750) (2,120) (636,435) (2,115)
Other payments to participants............................. (55,560) - (53,445) -
------------- ------------- ------------- -------------
Net increase in net assets resulting
from unit transactions............................... 22,376,700 1,206,843 31,565,555 3,326,149
------------- ------------- ------------- -------------
Net increase in net assets........................... 24,151,440 1,232,481 33,354,541 3,299,156
NET ASSETS:
Beginning of period.................................... 1,232,481 - 3,299,156 -
------------- ------------- ------------- -------------
End of period.......................................... $ 25,383,921 $ 1,232,481 $ 36,653,697 $ 3,299,156
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
MFS EMERGING
GROWTH PORTFOLIO TOTAL RETURN PORTFOLIO
----------------------------- -----------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.................................................. $ 13,776 $ - $ 394,497 $ 2,394
------------- ------------- ------------- -------------
EXPENSES:
Insurance charges.......................................... 2,585 - 114,672 733
Administrative fees........................................ 351 - 16,252 91
------------- ------------- ------------- -------------
Net investment income (loss)......................... 10,840 - 263,573 1,570
------------- ------------- ------------- -------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold......................... - - 107,077 135
Cost of investments sold............................... - - 92,109 132
------------- ------------- ------------- -------------
Net realized gain (loss)............................. - - 14,968 3
------------- ------------- ------------- -------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of period............. - - 3,337 -
Unrealized gain (loss) end of period................... (93,591) - 2,319,470 3,337
------------- ------------- ------------- -------------
Net change in unrealized gain (loss) for the period.. (93,591) - 2,316,133 3,337
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations............................ (82,751) - 2,594,674 4,910
------------- ------------- ------------- -------------
UNIT TRANSACTIONS:
Participant purchase payments.............................. 2,458,877 - 19,255,127 973,177
Participant transfers from other Travelers accounts........ 622,001 - 3,959,180 24,755
Administrative charges..................................... - - (1,696) -
Contract surrenders........................................ (647) - (111,329) (501)
Participant transfers to other Travelers accounts.......... (10,312) - (307,023) (2,105)
Other payments to participants............................. - - (109,480) -
------------- ------------- ------------- -------------
Net increase in net assets resulting
from unit transactions............................... 3,069,919 - 22,684,779 995,326
------------- ------------- ------------- -------------
Net increase in net assets........................... 2,987,168 - 25,279,453 1,000,236
NET ASSETS:
Beginning of period.................................... - - 1,000,236 -
------------- ------------- ------------- -------------
End of period.......................................... $ 2,987,168 $ - $ 26,279,689 $ 1,000,236
============= ============= ============= =============
</TABLE>
-11-
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. SCHEDULE OF FUND BD II OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE PERIOD NOVEMBER 8, 1995
(DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
COMBINED
----------------------------------
1996 1995
---- ----
<S> <C> <C>
INVESTMENT INCOME:
Dividends................................................. $ 6,107,224 $ 262,043
------------------ ---------------
EXPENSES:
Insurance charges......................................... 1,333,944 14,620
Administrative fees....................................... 189,960 1,589
------------------ ---------------
Net investment income (loss)........................ 4,583,320 245,834
------------------ ---------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold........................ 36,697,606 136,938
Cost of investments sold.............................. 36,099,281 137,447
------------------ ---------------
Net realized gain (loss)............................ 598,325 (509)
------------------ ---------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of period............ (125,174) -
Unrealized gain (loss) end of period.................. 13,880,806 (125,174)
------------------ ---------------
Net change in unrealized gain (loss) for the period. 14,005,980 (125,174)
------------------ ---------------
Net increase (decrease) in net assets
resulting from operations........................... 19,187,625 120,151
------------------ ---------------
UNIT TRANSACTIONS:
Participant purchase payments............................. 226,873,244 17,056,576
Participant transfers from other Travelers accounts....... 65,242,361 372,855
Administrative charges.................................... (18,946) -
Contract surrenders....................................... (2,337,255) (2,206)
Participant transfers to other Travelers accounts......... (55,932,256) (260,930)
Other payments to participants............................ (1,058,035) -
------------------ ---------------
Net increase in net assets resulting
from unit transacions............................... 232,769,113 17,166,295
------------------ ---------------
Net increase in net assets.......................... 251,956,738 17,286,446
NET ASSETS:
Beginning of period................................... 17,286,446 -
------------------ ---------------
End of period......................................... $ 269,243,184 $ 17,286,446
================== ===============
</TABLE>
-12-
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF ACCUMULATION UNITS FOR FUND BD II
FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE PERIOD NOVEMBER 8, 1995
(DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
VAN KAMPEN
AMERICAN CAPITAL
ALLIANCE GROWTH PORTFOLIO ENTERPRISE PORTFOLIO
--------------------------------- -----------------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Accumulation units beginning of period................ 2,026,405 - 1,093,664 -
Accumulation units purchased and
transferred from other Travelers accounts.......... 26,601,698 2,088,195 12,436,976 1,093,664
Accumulation units redeemed and
transferred to other Travelers accounts............ (984,008) (61,790) (526,024) -
-------------- --------------- --------------- --------------
Accumulation units end of period...................... 27,644,095 2,026,405 13,004,616 1,093,664
============== =============== =============== ==============
</TABLE>
<TABLE>
<CAPTION>
TBC MANAGED
INCOME PORTFOLIO
------------------------------------
1996 1995
---- ----
<S> <C> <C>
Accumulation units beginning of period................ 315,445 -
Accumulation units purchased and
transferred from other Travelers accounts.......... 3,034,567 315,445
Accumulation units redeemed and
transferred to other Travelers accounts............ (448,879) -
---------------- -----------------
Accumulation units end of period...................... 2,901,133 315,445
================ =================
</TABLE>
<TABLE>
<CAPTION>
G.T. GLOBAL STRATEGIC SMITH BARNEY
INCOME PORTFOLIO HIGH INCOME PORTFOLIO
--------------------------------- -----------------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Accumulation units beginning of period................ 112,291 - 574,114 -
Accumulation units purchased and
transferred from other Travelers accounts.......... 2,200,023 112,291 8,612,189 574,114
Accumulation units redeemed and
transferred to other Travelers accounts............ (16,504) - (497,047) -
-------------- --------------- --------------- --------------
Accumulation units end of period...................... 2,295,810 112,291 8,689,256 574,114
============== =============== =============== ==============
</TABLE>
<TABLE>
<CAPTION>
SMITH BARNEY INTERNATIONAL
EQUITY PORTFOLIO
-------------------------------------
1996 1995
---- ----
<S> <C> <C>
Accumulation units beginning of period................ 757,069 -
Accumulation units purchased and
transferred from other Travelers accounts.......... 23,544,001 757,142
Accumulation units redeemed and
transferred to other Travelers accounts............ (5,436,202) (73)
---------------- -----------------
Accumulation units end of period...................... 18,864,868 757,069
================ =================
</TABLE>
<TABLE>
<CAPTION>
SMITH BARNEY INCOME SMITH BARNEY
AND GROWTH PORTFOLIO MONEY MARKET PORTFOLIO
--------------------------------- -----------------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Accumulation units beginning of period................ 742,670 - 3,193,779 -
Accumulation units purchased and
transferred from other Travelers accounts.......... 13,297,626 742,670 56,287,533 3,351,749
Accumulation units redeemed and
transferred to other Travelers accounts............ (528,269) - (34,157,362) (157,970)
-------------- --------------- --------------- --------------
Accumulation units end of period...................... 13,512,027 742,670 25,323,950 3,193,779
============== =============== =============== ==============
</TABLE>
<TABLE>
<CAPTION>
PUTNAM DIVERSIFIED
INCOME PORTFOLIO
-------------------------------------
1996 1995
---- ----
<S> <C> <C>
Accumulation units beginning of period................ 950,243 -
Accumulation units purchased and
transferred from other Travelers accounts.......... 11,872,273 955,065
Accumulation units redeemed and
transferred to other Travelers accounts............ (937,157) (4,822)
---------------- -----------------
Accumulation units end of period...................... 11,885,359 950,243
================ =================
</TABLE>
-13-
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF ACCUMULATION UNITS FOR FUND BD II
FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE PERIOD NOVEMBER 8, 1995
(DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
SMITH BARNEY MFS
PACIFIC BASIN PORTFOLIO TOTAL RETURN PORTFOLIO
----------------------------------- ---------------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Accumulation units beginning of period............ 56,822 - 1,014,097 -
Accumulation units purchased and
transferred from other Travelers accounts...... 11,406,814 56,822 17,996,071 1,016,359
Accumulation units redeemed and
transferred to other Travelers accounts........ (8,241,921) - (549,522) (2,262)
--------------- ---------------- ---------------- -------------
Accumulation units end of period.................. 3,221,715 56,822 18,460,646 1,014,097
=============== ================ ================ =============
</TABLE>
<TABLE>
<CAPTION>
AIM CAPITAL
APPRECIATION PORTFOLIO
--------------------------------------
1996 1995
---- ----
<S> <C> <C>
Accumulation units beginning of period............ 3,444,998 -
Accumulation units purchased and
transferred from other Travelers accounts...... 31,258,008 3,447,731
Accumulation units redeemed and
transferred to other Travelers accounts........ (996,210) (2,733)
-------------- ------------------
Accumulation units end of period.................. 33,706,796 3,444,998
============== ===================
</TABLE>
<TABLE>
<CAPTION>
MFS EMERGING TOTAL RETURN
GROWTH PORTFOLIO PORTFOLIO
----------------------------------- ---------------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Accumulation units beginning of period............ - - 800,334 -
Accumulation units purchased and
transferred from other Travelers accounts...... 2,982,336 - 16,540,000 802,418
Accumulation units redeemed and
transferred to other Travelers accounts........ (10,682) - (375,396) (2,084)
--------------- ---------------- ---------------- --------------
Accumulation units end of period.................. 2,971,654 - 16,964,938 800,334
=============== ================ ================ ==============
</TABLE>
-14-
<PAGE> 16
REPORT OF INDEPENDENT ACCOUNTANTS
To the Owners of Variable Annuity Contracts of
The Travelers Fund BD II for Variable Annuities:
We have audited the accompanying statement of assets and liabilities of The
Travelers Fund BD II for Variable Annuities as of December 31, 1996, and the
related statement of operations for the year then ended and the statement of
changes in net assets for each of the applicable periods ended December 31,
1996 and 1995. 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 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, 1996, 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 II for
Variable Annuities as of December 31, 1996, the results of its operations for
the year then ended, and the changes in its net assets for each of the
applicable periods ended December 31, 1996 and 1995, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 7, 1997
-15-
<PAGE> 17
This page intentionally left blank.
<PAGE> 18
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 II for Variable Annuities or
Fund BD II's underlying funds. It should not be used in connection with any
offer except in conjunction with the Prospectuses for the Variable Annuity
products offered by The Travelers Life and Annuity Company and the Prospectuses
of the underlying funds, which collectively contain all pertinent information,
including the applicable sales commissions.
FNDBDII (Annual) (12-96) Printed in U.S.A.
