<PAGE> 1
ANNUAL REPORT
DECEMBER 31, 1998
THE TRAVELERS FUND BD II
FOR VARIABLE ANNUITIES
[TRAVELERS 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, 1998
<TABLE>
<S> <C> <C>
ASSETS:
Investments in eligible funds at market value:
Dreyfus Variable Investment Fund, 31,072 shares (cost $1,606,531) ................. $ 1,675,105
Greenwich Street Series Fund, 5,519,769 shares (cost $92,000,041) ................. 96,871,945
Salomon Brothers Variable Series Funds Inc., 195,839 shares (cost $1,986,865) ..... 2,105,158
Smith Barney Concert Allocation Series Inc., 2,419,958 shares (cost $27,210,048) .. 29,482,462
The Travelers Series Trust, 4,408,720 shares (cost $54,515,873) ................... 68,487,889
Travelers Series Fund Inc., 106,554,765 shares (cost $801,769,855) ................ 937,186,040
--------------
Total Investments (cost $979,089,213) ........................................... $1,135,808,599
Receivables:
Dividends ......................................................................... 180,955
Purchase payments and transfers from other Travelers accounts ..................... 1,693,374
Other assets ........................................................................ 748
--------------
Total Assets .................................................................... 1,137,683,676
--------------
LIABILITIES:
Payables:
Contract surrenders and transfers to other Travelers accounts ..................... 1,130,256
Insurance charges ................................................................. 260,708
Administrative fees ............................................................... 36,686
--------------
Total Liabilities ............................................................... 1,427,650
--------------
NET ASSETS: ........................................................................... $1,136,256,026
==============
</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, 1998
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends ................................................................. $ 37,385,822
EXPENSES:
Insurance charges ......................................................... $ 9,566,234
Administrative fees ....................................................... 1,346,728
------------
Total expenses .......................................................... 10,912,962
------------
Net investment income ................................................. 26,472,860
------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold .......................................... 638,666,522
Cost of investments sold ................................................ 632,379,285
------------
Net realized gain (loss) .............................................. 6,287,237
Change in unrealized gain (loss) on investments:
Unrealized gain at December 31, 1997 .................................... 73,480,229
Unrealized gain at December 31, 1998 .................................... 156,719,386
------------
Net change in unrealized gain (loss) for the year ..................... 83,239,157
------------
Net realized gain (loss) and change in unrealized gain (loss) ....... 89,526,394
------------
Net increase in net assets resulting from operations ...................... $115,999,254
============
</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 YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
OPERATIONS:
Net investment income (loss) ........................................ $ 26,472,860 $ (541,858)
Net realized gain (loss) from investment transactions ............... 6,287,237 3,736,250
Net change in unrealized gain (loss) on investments ................. 83,239,157 59,599,423
--------------- ---------------
Net increase in net assets resulting from operations .............. 115,999,254 62,793,815
--------------- ---------------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 176,982,164 and 212,510,724 units, respectively) ... 281,104,022 305,552,932
Participant transfers from other Travelers accounts
(applicable to 687,354,867 and 304,613,637 units, respectively) ... 867,501,168 370,995,750
Administrative and asset allocation charges
(applicable to 112,857 and 49,225 units, respectively) ............ (175,802) (76,062)
Contract surrenders
(applicable to 17,990,366 and 7,258,742 units, respectively) ...... (29,495,629) (10,937,049)
Participant transfers to other Travelers accounts
(applicable to 613,483,189 and 285,276,584 units, respectively) ... (749,605,940) (331,281,698)
Other payments to participants
(applicable to 6,957,789 and 2,772,990 units, respectively) ....... (11,571,122) (3,790,797)
--------------- ---------------
Net increase in net assets resulting from unit transactions ......... 357,756,697 330,463,076
--------------- ---------------
Net increase in net assets ........................................ 473,755,951 393,256,891
NET ASSETS:
Beginning of year ................................................... 662,500,075 269,243,184
--------------- ---------------
End of year ......................................................... $ 1,136,256,026 $ 662,500,075
=============== ===============
</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 Citigroup Inc. (formerly
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, 1998, the eligible funds available under Fund BD
II 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 II in the preparation of its financial statements.
SECURITY VALUATION. Investments are valued daily at the net asset values per
share of the underlying funds.
SECURITY TRANSACTIONS. Security transactions are accounted for on the trade
date. Dividend income is recorded on the ex-dividend date.
FEDERAL INCOME TAXES. The operations of 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.
-4-
<PAGE> 6
NOTES TO FINANCIAL STATEMENTS - CONTINUED
2. INVESTMENTS
The aggregate costs of purchases and proceeds from sales of investments were
$1,023,263,288 and $638,666,522, 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 $979,089,213 at December 31, 1998. Gross unrealized appreciation
for all investments at December 31, 1998 was $158,561,936. Gross unrealized
depreciation for all investments at December 31, 1998 was $1,842,550.
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
$686,636 and $217,306 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 ...................... 1,712,698 -- $0.852 $ 1,459,896
Enhanced Death Benefit ...................... 252,461 -- 0.851 214,802
Greenwich Street Series Fund
Total Return Portfolio
Standard Death Benefit ...................... 42,829,917 -- 1.857 79,541,868
Enhanced Death Benefit ...................... 9,424,781 13,859 1.836 17,328,793
Salomon Brothers Variable Series Funds Inc.
Salomon Brothers Variable Total Return Fund
Standard Death Benefit ...................... 761,112 -- 0.997 759,197
Enhanced Death Benefit ...................... 127,726 -- 0.996 127,171
Salomon Brothers Variable Investors Fund
Standard Death Benefit ...................... 1,024,070 -- 1.014 1,038,393
Enhanced Death Benefit ...................... 199,078 -- 1.012 201,487
Smith Barney Concert Allocation Series Inc.
Select Balanced Portfolio
Standard Death Benefit ...................... 7,215,935 -- 1.183 8,537,652
Enhanced Death Benefit ...................... 2,594,418 -- 1.177 3,054,098
Select Conservative Portfolio
Standard Death Benefit ...................... 1,423,960 -- 1.162 1,654,902
Enhanced Death Benefit ...................... 304,706 -- 1.156 352,372
Select Growth Portfolio
Standard Death Benefit ...................... 5,355,940 -- 1.238 6,630,284
Enhanced Death Benefit ...................... 2,329,431 -- 1.232 2,869,093
Select High Growth Portfolio
Standard Death Benefit ...................... 3,434,814 -- 1.242 4,267,377
Enhanced Death Benefit ...................... 622,357 -- 1.236 769,301
Select Income Portfolio
Standard Death Benefit ...................... 1,101,830 -- 1.154 1,271,512
Enhanced Death Benefit ...................... 75,509 -- 1.148 86,707
</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 ............... 29,936,769 -- $1.599 $ 47,857,898
Enhanced Death Benefit ............... 7,521,739 -- 1.589 11,951,770
MFS Research Portfolio
Standard Death Benefit ............... 3,295,301 -- 1.037 3,415,956
Enhanced Death Benefit ............... 1,243,396 -- 1.035 1,286,538
Strategic Stock Portfolio
Standard Death Benefit ............... 3,336,318 -- 0.936 3,121,396
Enhanced Death Benefit ............... 43,842 -- 0.934 40,943
Convertible Bond Portfolio
Standard Death Benefit ............... 418,194 -- 1.001 418,689
Enhanced Death Benefit ............... 22,352 -- 0.999 22,337
Disciplined Mid Cap Stock Portfolio
Standard Death Benefit ............... 550,487 -- 1.064 585,915
Enhanced Death Benefit ............... 28,077 -- 1.063 29,832
Disciplined Small Cap Stock Portfolio
Standard Death Benefit ............... 364,850 -- 0.896 326,762
Enhanced Death Benefit ............... 17,249 -- 0.894 15,420
Travelers Series Fund Inc
AIM Capital Appreciation Portfolio
Standard Death Benefit ............... 59,823,732 -- 1.397 83,581,861
Enhanced Death Benefit ............... 11,522,469 -- 1.385 15,953,672
Alliance Growth Portfolio
Standard Death Benefit ............... 67,639,943 -- 2.903 196,377,735
Enhanced Death Benefit ............... 13,083,045 -- 2.867 37,504,610
GT Global Strategic Income Portfolio
Standard Death Benefit ............... 5,481,141 -- 1.359 7,450,260
Enhanced Death Benefit ............... 973,254 -- 1.342 1,306,231
MFS Total Return Portfolio
Standard Death Benefit ............... 58,653,278 -- 1.819 106,691,511
Enhanced Death Benefit ............... 11,645,845 13,732 1.796 20,941,841
Putnam Diversified Income Portfolio
Standard Death Benefit ............... 29,566,111 -- 1.326 39,192,328
Enhanced Death Benefit ............... 7,312,474 17,799 1.309 9,594,234
</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 ............................. 38,529,419 -- $1.305 $ 50,298,227
Enhanced Death Benefit ............................. 6,198,702 19,578 1.289 8,015,194
Smith Barney Money Market Portfolio
Standard Death Benefit ............................. 41,370,187 -- 1.184 48,973,184
Enhanced Death Benefit ............................. 6,023,674 -- 1.169 7,040,715
Smith Barney High Income Portfolio
Standard Death Benefit ............................. 31,054,135 -- 1.452 45,090,287
Enhanced Death Benefit ............................. 4,739,592 16,392 1.434 6,818,510
Smith Barney Large Capitalization Growth Portfolio
Standard Death Benefit ............................. 12,176,408 -- 1.237 15,057,822
Enhanced Death Benefit ............................. 1,447,309 -- 1.234 1,786,517
Smith Barney Large Cap Value Portfolio
Standard Death Benefit ............................. 40,967,323 -- 2.076 85,047,609
Enhanced Death Benefit ............................. 8,248,925 12,608 2.050 16,934,479
Smith Barney Pacific Basin Portfolio
Standard Death Benefit ............................. 5,082,810 -- 0.742 3,771,642
Enhanced Death Benefit ............................. 1,022,864 -- 0.733 749,430
TBC Managed Income Portfolio
Standard Death Benefit ............................. 11,544,261 -- 1.309 15,114,521
Enhanced Death Benefit ............................. 2,823,113 17,693 1.293 3,672,727
Van Kampen Enterprise Portfolio
Standard Death Benefit ............................. 35,643,545 -- 2.601 92,711,500
Enhanced Death Benefit ............................. 6,741,005 10,971 2.568 17,341,018
--------------
Net Contract Owners' Equity ............................ $1,136,256,026
==============
</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 $1,606,531) 31,072 $ 1,675,105
----------- --------------
GREENWICH STREET SERIES FUND (8.5%)
Total Return Portfolio
Total (Cost $92,000,041) 5,519,769 96,871,945
----------- --------------
SALOMON BROTHERS VARIABLE SERIES FUNDS INC. (0.2%)
Salomon Brothers Variable Total Return Fund (Cost $851,982) 83,652 869,982
Salomon Brothers Variable Investors Fund (Cost $1,134,883) 112,187 1,235,176
----------- --------------
Total (Cost $1,986,865) 195,839 2,105,158
----------- --------------
SMITH BARNEY CONCERT ALLOCATION SERIES INC. (2.6%)
Select Balanced Portfolio (Cost $10,911,750) 971,909 11,594,873
Select Conservative Portfolio (Cost $1,935,627) 172,640 2,007,807
Select Growth Portfolio (Cost $8,614,468) 759,549 9,501,962
Select High Growth Portfolio (Cost $4,437,169) 400,158 5,037,991
Select Income Portfolio (Cost $1,311,034) 115,702 1,339,829
----------- --------------
Total (Cost $27,210,048) 2,419,958 29,482,462
----------- --------------
THE TRAVELERS SERIES TRUST (6.0%)
MFS Emerging Growth Portfolio (Cost $45,950,577) 3,520,748 59,395,014
MFS Research Portfolio (Cost $4,341,376) 443,899 4,687,578
Strategic Stock Portfolio (Cost $2,962,536) 318,964 3,017,401
Convertible Bond Portfolio (Cost $422,893) 43,685 430,733
Disciplined Mid Cap Stock Portfolio (Cost $525,472) 42,950 615,896
Disciplined Small Cap Stock Portfolio (Cost $313,019) 38,474 341,267
----------- --------------
Total (Cost $54,515,873) 4,408,720 68,487,889
----------- --------------
TRAVELERS SERIES FUND INC. (82.6%)
AIM Capital Appreciation Portfolio (Cost $80,185,337) 6,874,869 99,548,097
Alliance Growth Portfolio (Cost $173,280,271) 8,868,612 233,333,174
G.T. Global Strategic Income Portfolio (Cost $9,538,145) 776,092 8,762,076
MFS Total Return Portfolio (Cost $113,258,170) 7,488,843 127,534,998
Putnam Diversified Income Portfolio (Cost $48,865,074) 4,057,220 48,686,639
Smith Barney International Equity Portfolio (Cost $54,319,863) 4,243,986 58,312,363
Smith Barney Money Market Portfolio (Cost $56,980,749) 56,980,749 56,980,749
Smith Barney High Income Portfolio (Cost $52,803,271) 4,100,729 51,915,224
Smith Barney Large Capitalization Growth Portfolio (Cost $14,207,616) 1,368,172 16,760,109
Smith Barney Large Cap Value Portfolio (Cost $89,545,266) 5,046,735 101,994,514
Smith Barney Pacific Basin Portfolio (Cost $3,957,519) 591,206 4,522,728
TBC Managed Income Portfolio (Cost $18,511,633) 1,597,602 18,803,773
Van Kampen Enterprise Portfolio (Cost $86,316,941) 4,559,950 110,031,596
----------- --------------
Total (Cost $801,769,855) 106,554,765 937,186,040
----------- --------------
TOTAL INVESTMENT OPTIONS (100%)
(COST $979,089,213) $1,135,808,599
==============
</TABLE>
-9-
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF FUND BD II OPERATIONS AND CHANGES IN NET ASSETS
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> <C>
INVESTMENT INCOME:
Dividends ............................................... $ 16,394 $ -- $ 4,630,483 $ 2,819,309 $ 15,309 $ --
---------- ---- ----------- ----------- --------- ----
EXPENSES:
Insurance charges ....................................... 4,856 -- 929,344 503,712 3,719 --
Administrative fees ..................................... 682 -- 130,535 71,448 527 --
---------- ---- ----------- ----------- --------- ----
Net investment income (loss) ........................ 10,856 -- 3,570,604 2,244,149 11,063 --
---------- ---- ----------- ----------- --------- ----
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment
transactions:
Proceeds from investments sold ........................ 29,905 -- 5,569,201 501,439 195,786 --
Cost of investments sold .............................. 45,027 -- 4,435,408 396,281 199,208 --
---------- ---- ----------- ----------- --------- ----
Net realized gain (loss) ............................ (15,122) -- 1,133,793 105,158 (3,422) --
---------- ---- ----------- ----------- --------- ----
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .............. -- -- 6,850,155 2,319,470 -- --
Unrealized gain (loss) end of year .................... 68,574 -- 4,871,904 6,850,155 18,000 --
---------- ---- ----------- ----------- --------- ----
Net change in unrealized gain (loss) for the year ... 68,574 -- (1,978,251) 4,530,685 18,000 --
---------- ---- ----------- ----------- --------- ----
Net increase (decrease) in net assets
resulting from operations ........................... 64,308 -- 2,726,146 6,879,992 25,641 --
---------- ---- ----------- ----------- --------- ----
UNIT TRANSACTIONS:
Participant purchase payments ........................... 1,085,114 -- 19,297,039 29,547,521 785,337 --
Participant transfers from other Travelers accounts ..... 554,843 -- 15,416,792 11,320,000 307,521 --
Administrative and asset allocation charges ............. (37) -- (17,925) (8,180) (28) --
Contract surrenders ..................................... (1,682) -- (2,558,282) (1,002,438) (4,004) --
Participant transfers to other Travelers accounts ....... (27,848) -- (7,895,368) (1,698,306) (228,099) --
Other payments to participants .......................... -- -- (1,006,451) (409,568) -- --
---------- ---- ----------- ----------- --------- ----
Net increase (decrease) in net assets
resulting from unit transactions .................... 1,610,390 -- 23,235,805 37,749,029 860,727 --
---------- ---- ----------- ----------- --------- ----
Net increase (decrease) in net assets ............... 1,674,698 -- 25,961,951 44,629,021 886,368 --
NET ASSETS:
Beginning of year ..................................... -- -- 70,908,710 26,279,689 -- --
---------- ---- ----------- ----------- --------- ----
End of year ........................................... $1,674,698 $ -- $96,870,661 $70,908,710 $ 886,368 $ --
========== ==== =========== =========== ========= ====
</TABLE>
-10-
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
SALOMON BROTHERS VARIABLE
INVESTORS FUND SELECT BALANCED PORTFOLIO SELECT CONSERVATIVE PORTFOLIO SELECT GROWTH PORTFOLIO
- ----------------------- ----------------------------- ----------------------------- -----------------------------
1998 1997 1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
$ 5,048 $ -- $ 293,039 $ -- $ 40,576 $ -- $ 157,884 $ --
------------ ----- ------------ ------------ ------------ ------------ ------------ ------------
4,192 -- 107,208 26,874 17,334 3,516 84,405 17,499
599 -- 14,686 3,580 2,450 499 11,510 2,398
------------ ----- ------------ ------------ ------------ ------------ ------------ ------------
257 -- 171,145 (30,454) 20,792 (4,015) 61,969 (19,897)
------------ ----- ------------ ------------ ------------ ------------ ------------ ------------
148,089 -- 845,810 288,850 156,029 136,242 605,873 119,596
153,256 -- 728,104 277,252 142,096 131,428 512,867 105,666
------------ ----- ------------ ------------ ------------ ------------ ------------ ------------
(5,167) -- 117,706 11,598 13,933 4,814 93,006 13,930
------------ ----- ------------ ------------ ------------ ------------ ------------ ------------
-- -- 252,648 -- 35,641 -- 127,547 --
100,293 -- 683,123 252,648 72,180 35,641 887,494 127,547
------------ ----- ------------ ------------ ------------ ------------ ------------ ------------
100,293 -- 430,475 252,648 36,539 35,641 759,947 127,547
------------ ----- ------------ ------------ ------------ ------------ ------------ ------------
95,383 -- 719,326 233,792 71,264 36,440 914,922 121,580
------------ ----- ------------ ------------ ------------ ------------ ------------ ------------
872,280 -- 3,710,667 5,194,754 585,526 881,469 1,537,757 4,140,789
415,098 -- 1,572,169 1,371,868 420,977 299,232 3,050,730 937,045
(39) -- (1,568) (156) (271) (25) (1,747) (227)
(5,515) -- (166,605) (20,071) (13,994) (13,817) (283,894) (10,285)
(137,327) -- (491,046) (295,224) (110,470) (131,155) (693,899) (149,701)
-- -- (236,156) -- (17,902) -- (63,693) --
------------ ----- ------------ ------------ ------------ ------------ ------------ ------------
1,144,497 -- 4,387,461 6,251,171 863,866 1,035,704 3,545,254 4,917,621
------------ ----- ------------ ------------ ------------ ------------ ------------ ------------
1,239,880 -- 5,106,787 6,484,963 935,130 1,072,144 4,460,176 5,039,201
-- -- 6,484,963 -- 1,072,144 -- 5,039,201 --
------------ ----- ------------ ------------ ------------ ------------ ------------ ------------
$ 1,239,880 $ -- $ 11,591,750 $ 6,484,963 $ 2,007,274 $ 1,072,144 $ 9,499,377 $ 5,039,201
============ ===== ============ ============ ============ ============ ============ ============
</TABLE>
-11-
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF FUND BD II OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 (CONTINUED)
<TABLE>
<CAPTION>
SELECT HIGH GROWTH MFS EMERGING GROWTH
PORTFOLIO SELECT INCOME PORTFOLIO PORTFOLIO
----------------------- ----------------------- -------------------------
1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends .......................................... $ 43,929 $ -- $ 20,869 $ -- $ -- $ 439,667
---------- ---------- ---------- ---------- ----------- -----------
EXPENSES:
Insurance charges .................................. 47,174 15,141 10,890 821 448,892 141,590
Administrative fees ................................ 6,670 2,177 1,580 117 62,560 20,232
---------- ---------- ---------- ---------- ----------- -----------
Net investment income (loss) ................... (9,915) (17,318) 8,399 (938) (511,452) 277,845
---------- ---------- ---------- ---------- ----------- -----------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ................... 339,553 11,871 137,271 43,599 3,362,483 684,958
Cost of investments sold ......................... 309,873 10,454 128,490 42,285 2,671,014 633,928
---------- ---------- ---------- ---------- ----------- -----------
Net realized gain (loss) ....................... 29,680 1,417 8,781 1,314 691,469 51,030
---------- ---------- ---------- ---------- ----------- -----------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year ......... 107,199 -- 6,863 1,705,372 (93,591)
Unrealized gain (loss) end of year ............... 600,822 107,199 28,795 6,863 13,444,437 1,705,372
---------- ---------- ---------- ---------- ----------- -----------
Net change in unrealized gain (loss) for the
year ......................................... 493,623 107,199 21,932 6,863 11,739,065 1,798,963
---------- ---------- ---------- ---------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations ...................... 513,388 91,298 39,112 7,239 11,919,082 2,127,838
---------- ---------- ---------- ---------- ----------- -----------
UNIT TRANSACTIONS:
Participant purchase payments ...................... 743,836 1,961,168 541,045 368,257 16,687,370 16,234,637
Participant transfers from other Travelers accounts 801,633 1,271,640 501,765 84,462 11,582,826 6,184,899
Administrative and asset allocation charges ........ (914) (82) (180) (7) (8,737) (1,929)
Contract surrenders ................................ (58,952) (3,734) (33,981) (11,377) (848,584) (167,796)
Participant transfers to other Travelers accounts .. (282,603) -- (101,704) (18,312) (5,159,790) (1,315,407)
Other payments to participants ..................... -- -- (18,100) -- (297,165) (114,744)
---------- ---------- ---------- ---------- ----------- -----------
Net increase (decrease) in net assets
resulting from unit transactions ............... 1,203,000 3,228,992 888,845 423,023 21,955,920 20,819,660
---------- ---------- ---------- ---------- ----------- -----------
Net increase (decrease) in net assets .......... 1,716,388 3,320,290 927,957 430,262 33,875,002 22,947,498
NET ASSETS:
Beginning of year ................................ 3,320,290 -- 430,262 -- 25,934,666 2,987,168
---------- ---------- ---------- ---------- ----------- -----------
End of year ...................................... $5,036,678 $3,320,290 $1,358,219 $ 430,262 $59,809,668 $25,934,666
========== ========== ========== ========== =========== ===========
</TABLE>
-12-
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
STRATEGIC STOCK CONVERTIBLE BOND DISCIPLINED MID CAP
MFS RESEARCH PORTFOLIO PORTFOLIO PORTFOLIO STOCK PORTFOLIO
- ---------------------- --------------------- --------------------- ---------------------
1998 1997 1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
$ 7,324 $ -- $ 36,872 $ -- $ 10,406 $ -- $ 404 $ --
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
14,961 -- 8,866 -- 1,083 -- 1,131 --
2,019 -- 1,300 -- 157 -- 162 --
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
(9,656) -- 26,706 -- 9,166 -- (889) --
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
826,352 -- 188,500 -- 14,335 -- 38,205 --
819,872 -- 207,858 -- 15,123 -- 42,630 --
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
6,480 -- (19,358) -- (788) -- (4,425) --
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
-- -- -- -- -- -- -- --
346,202 -- 54,865 -- 7,840 -- 90,424 --
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
346,202 -- 54,865 -- 7,840 -- 90,424 --
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
343,026 -- 62,213 -- 16,218 -- 85,110 --
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
3,215,369 -- 2,501,332 -- 284,595 -- 365,542 --
2,190,409 -- 659,886 -- 148,423 -- 195,953 --
(103) -- (107) -- (6) -- (19) --
(27,653) -- (9,686) -- (205) -- (647) --
(1,018,554) -- (51,299) -- (7,999) -- (26,234) --
-- -- -- -- -- -- (3,958) --
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
4,359,468 -- 3,100,126 -- 424,808 -- 530,637 --
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
4,702,494 -- 3,162,339 -- 441,026 -- 615,747 --
-- -- -- -- -- -- -- --
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
$ 4,702,494 $ -- $ 3,162,339 $ -- $ 441,026 $ -- $ 615,747 $ --
=========== ===== =========== ===== =========== ===== =========== =====
</TABLE>
-13-
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF FUND BD II 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
PORTFOLIO PORTFOLIO ALLIANCE GROWTH PORTFOLIO
----------------- --------------------------- -----------------------------
1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ......................................... $ 1,000 $ -- $ 117,554 $ -- $ 11,136,395 $ --
--------- ----- ------------ ------------ ------------- -------------
EXPENSES:
Insurance charges ................................. 904 -- 886,690 565,729 1,882,382 881,791
Administrative fees ............................... 130 -- 124,887 80,459 265,187 124,597
--------- ----- ------------ ------------ ------------- -------------
Net investment income (loss) .................. (34) -- (894,023) (646,188) 8,988,826 (1,006,388)
--------- ----- ------------ ------------ ------------- -------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold .................. 26,578 -- 4,140,986 796,430 6,171,002 732,086
Cost of investments sold ........................ 31,600 -- 3,224,210 669,177 3,984,852 553,312
--------- ----- ------------ ------------ ------------- -------------
Net realized gain (loss) ...................... (5,022) -- 916,776 127,253 2,186,150 178,774
--------- ----- ------------ ------------ ------------- -------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year ........ -- -- 6,861,140 1,950,900 26,592,251 4,561,590
Unrealized gain (loss) end of year .............. 28,248 -- 19,362,760 6,861,140 60,052,903 26,592,251
--------- ----- ------------ ------------ ------------- -------------
Net change in unrealized gain (loss) for the
year ........................................ 28,248 -- 12,501,620 4,910,240 33,460,652 22,030,661
--------- ----- ------------ ------------ ------------- -------------
Net increase (decrease) in net assets
resulting from operations ..................... 23,192 -- 12,524,373 4,391,305 44,635,628 21,203,047
--------- ----- ------------ ------------ ------------- -------------
UNIT TRANSACTIONS:
Participant purchase payments ..................... 217,711 -- 16,639,377 24,085,122 49,359,571 47,077,956
Participant transfers from other Travelers accounts 127,325 -- 11,270,899 9,106,236 33,744,376 18,767,525
Administrative and asset allocation charges ....... (12) -- (20,631) (13,062) (38,006) (16,453)
Contract surrenders ............................... (129) -- (2,447,800) (1,468,796) (5,783,287) (1,971,086)
Participant transfers to other Travelers accounts . (25,905) -- (7,003,898) (2,435,679) (14,018,045) (5,373,999)
Other payments to participants .................... -- -- (1,048,620) (696,990) (2,244,825) (755,258)
--------- ----- ------------ ------------ ------------- -------------
Net increase (decrease) in net assets
resulting from unit transactions .............. 318,990 -- 17,389,327 28,576,831 61,019,784 57,728,685
--------- ----- ------------ ------------ ------------- -------------
Net increase (decrease) in net assets ......... 342,182 -- 29,913,700 32,968,136 105,655,412 78,931,732
NET ASSETS:
Beginning of year ............................... -- -- 69,621,833 36,653,697 128,226,933 49,295,201
--------- ----- ------------ ------------ ------------- -------------
End of year ..................................... $ 342,182 $ -- $ 99,535,533 $ 69,621,833 $ 233,882,345 $ 128,226,933
========= ===== ============ ============ ============= =============
</TABLE>
-14-
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
G.T. GLOBAL STRATEGIC INCOME PUTNAM DIVERSIFIED INCOME SMITH BARNEY INTERNATIONAL
PORTFOLIO MFS TOTAL RETURN PORTFOLIO PORTFOLIO EQUITY PORTFOLIO
- ----------------------------- ------------------------------ ------------------------------ ------------------------------
1998 1997 1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
$ 964,835 $ -- $ 4,519,417 $ -- $ 1,797,250 $ -- $ -- $ --
- ------------ ------------- ------------- ------------- ------------- ------------- ------------- -------------
95,709 60,882 1,061,279 449,112 441,269 227,383 580,838 306,167
13,467 8,670 149,339 63,766 61,597 32,184 82,311 54,224
- ------------ ------------- ------------- ------------- ------------- ------------- ------------- -------------
855,659 (69,552) 3,308,799 (512,878) 1,294,384 (259,567) (663,149) (360,391)
- ------------ ------------- ------------- ------------- ------------- ------------- ------------- -------------
1,550,891 250,620 2,996,328 1,195,009 2,276,601 454,711 264,579,558 74,413,842
1,516,824 218,454 2,265,808 991,043 2,130,513 450,698 266,592,695 70,693,976
- ------------ ------------- ------------- ------------- ------------- ------------- ------------- -------------
34,067 32,166 730,520 203,966 146,088 4,013 (2,013,137) 3,719,866
- ------------ ------------- ------------- ------------- ------------- ------------- ------------- -------------
416,223 33,836 8,794,710 1,072,467 1,683,521 11,889 (2,438,068) 754,036
(776,069) 416,223 14,276,828 8,794,710 (178,435) 1,683,521 3,992,500 (2,438,068)
- ------------ ------------- ------------- ------------- ------------- ------------- ------------- -------------
(1,192,292) 382,387 5,482,118 7,722,243 (1,861,956) 1,671,632 6,430,568 (3,192,104)
- ------------ ------------- ------------- ------------- ------------- ------------- ------------- -------------
(302,566) 345,001 9,521,437 7,413,331 (421,484) 1,416,078 3,754,282 167,371
- ------------ ------------- ------------- ------------- ------------- ------------- ------------- -------------
1,444,980 4,062,420 36,360,884 29,292,210 12,778,268 13,450,688 10,293,289 16,944,027
1,175,985 1,319,922 25,020,238 9,887,470 10,538,715 3,933,503 295,219,809 104,954,168
(1,377) (653) (18,249) (6,249) (8,100) (3,655) (11,295) (6,694)
(424,995) (120,207) (3,460,449) (1,064,999) (1,523,216) (514,487) (1,781,717) (641,705)
(1,225,167) (215,137) (6,313,567) (3,008,984) (3,118,802) (1,811,753) (293,326,178) (99,450,511)
(235,798) (82,404) (1,061,539) (312,103) (658,437) (134,175) (652,379) (182,508)
- ------------ ------------- ------------- ------------- ------------- ------------- ------------- -------------
733,628 4,963,941 50,527,318 34,787,345 18,008,428 14,920,121 9,741,529 21,616,777
- ------------ ------------- ------------- ------------- ------------- ------------- ------------- -------------
431,062 5,308,942 60,048,755 42,200,676 17,586,944 16,336,199 13,495,811 21,784,148
8,325,429 3,016,487 67,584,597 25,383,921 31,199,618 14,863,419 44,817,610 23,033,462
- ------------ ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 8,756,491 $ 8,325,429 $ 127,633,352 $ 67,584,597 $ 48,786,562 $ 31,199,618 $ 58,313,421 $ 44,817,610
============ ============= ============= ============= ============= ============= ============= =============
</TABLE>
-15-
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF FUND BD II OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 (CONTINUED)
<TABLE>
<CAPTION>
SMITH BARNEY LARGE
SMITH BARNEY MONEY MARKET SMITH BARNEY HIGH INCOME CAPITALIZATION
PORTFOLIO PORTFOLIO GROWTH PORTFOLIO
----------------------------- ------------------------- -------------------
1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ......................................... $ 2,017,269 $ 1,460,052 $ 3,075,417 $ -- $ 9,714 $ --
------------- ------------- ----------- ----------- ------------ ----
EXPENSES:
Insurance charges ................................. 431,705 309,270 480,113 213,529 32,872 --
Administrative fees ............................... 61,745 44,027 68,189 30,465 4,656 --
------------- ------------- ----------- ----------- ------------ ----
Net investment income (loss) .................. 1,523,819 1,106,755 2,527,115 (243,994) (27,814) --
------------- ------------- ----------- ----------- ------------ ----
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold .................. 300,946,604 129,557,007 3,834,210 377,090 91,843 --
Cost of investments sold ........................ 300,946,604 129,557,007 3,443,039 344,965 89,852 --
------------- ------------- ----------- ----------- ------------ ----
Net realized gain (loss) ...................... -- -- 391,171 32,125 1,991 --
------------- ------------- ----------- ----------- ------------ ----
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year ........ -- -- 2,670,671 138,086 -- --
Unrealized gain (loss) end of year .............. -- -- (888,047) 2,670,671 2,552,493 --
------------- ------------- ----------- ----------- ------------ ----
Net change in unrealized gain (loss) for the
year ........................................ -- -- (3,558,718) 2,532,585 2,552,493 --
------------- ------------- ----------- ----------- ------------ ----
Net increase (decrease) in net assets
resulting from operations ..................... 1,523,819 1,106,755 (640,432) 2,320,716 2,526,670 --
------------- ------------- ----------- ----------- ------------ ----
UNIT TRANSACTIONS:
Participant purchase payments ..................... 21,445,937 37,218,989 14,996,860 19,554,203 8,438,816 --
Participant transfers from other Travelers accounts 358,708,002 144,063,574 11,848,781 3,746,308 6,504,236 --
Administrative and asset allocation charges ....... (3,745) (2,414) (7,138) (2,715) (308) --
Contract surrenders ............................... (2,355,637) (918,683) (1,578,007) (506,524) (74,054) --
Participant transfers to other Travelers accounts . (354,956,853) (176,681,199) (6,838,393) (1,479,106) (551,021) --
Other payments to participants .................... (333,353) (580,295) (723,059) (67,720) -- --
------------- ------------- ----------- ----------- ------------ ----
Net increase (decrease) in net assets
resulting from unit transactions .............. 22,504,351 3,099,972 17,699,044 21,244,446 14,317,669 --
------------- ------------- ----------- ----------- ------------ ----
Net increase (decrease) in net assets ......... 24,028,170 4,206,727 17,058,612 23,565,162 16,844,339 --
NET ASSETS:
Beginning of year ............................... 31,985,729 27,779,002 34,850,185 11,285,023 -- --
------------- ------------- ----------- ----------- ------------ ----
End of year ..................................... $ 56,013,899 $ 31,985,729 $51,908,797 $34,850,185 $ 16,844,339 $ --
============= ============= =========== =========== ============ ====
</TABLE>
-16-
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
SMITH BARNEY LARGE CAP VALUE SMITH BARNEY PACIFIC BASIN TBC MANAGED INCOME VAN KAMPEN ENTERPRISE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ----------------------------- ------------------------------ ------------------------------ ------------------------------
1998 1997 1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
$ 3,151,979 $ -- $ 58,199 $ -- $ 540,590 $ -- $ 4,717,666 $ --
- ------------ ------------- ------------- ------------- ------------- ------------- ------------- -------------
900,154 401,449 46,605 158 134,186 49,769 907,473 417,556
126,694 56,935 6,584 6,618 18,699 7,098 127,806 59,444
- ------------ ------------- ------------- ------------- ------------- ------------- ------------- -------------
2,125,131 (458,384) 5,010 (6,776) 387,705 (56,867) 3,682,387 (477,000)
- ------------ ------------- ------------- ------------- ------------- ------------- ------------- -------------
3,406,709 542,887 31,497,782 26,053,417 1,295,854 420,772 3,394,184 232,006
2,453,068 399,665 31,922,287 27,025,264 1,168,760 413,801 2,198,347 161,526
- ------------ ------------- ------------- ------------- ------------- ------------- ------------- -------------
953,641 143,222 (424,505) (971,847) 127,094 6,971 1,195,837 70,480
- ------------ ------------- ------------- ------------- ------------- ------------- ------------- -------------
9,376,827 1,308,970 (275,942) 53,691 433,886 (21,610) 10,279,585 1,791,072
12,449,248 9,376,827 565,209 (275,942) 292,140 433,886 23,714,655 10,279,585
- ------------ ------------- ------------- ------------- ------------- ------------- ------------- -------------
3,072,421 8,067,857 841,151 (329,633) (141,746) 455,496 13,435,070 8,488,513
- ------------ ------------- ------------- ------------- ------------- ------------- ------------- -------------
6,151,193 7,752,695 421,656 (1,308,256) 373,053 405,600 18,313,294 8,081,993
- ------------ ------------- ------------- ------------- ------------- ------------- ------------- -------------
26,757,535 25,405,607 480,535 2,205,368 5,725,970 2,833,792 23,951,480 25,093,955
20,371,216 10,329,030 29,773,194 33,843,799 7,951,464 925,966 17,427,903 8,649,103
(16,207) (5,831) (972) (954) (1,723) (719) (16,358) (6,057)
(3,029,261) (1,199,451) (187,199) (79,311) (377,694) (94,062) (2,458,500) (1,128,220)
(7,657,455) (2,080,124) (30,040,862) (33,605,393) (1,556,754) (486,399) (6,740,800) (1,045,309)
(1,255,380) (172,269) (107,389) (38,406) (235,942) (45,750) (1,370,976) (198,607)
- ------------ ------------- ------------- ------------- ------------- ------------- ------------- -------------
35,170,448 32,276,962 (82,693) 2,325,103 11,505,321 3,132,828 30,792,749 31,364,865
- ------------ ------------- ------------- ------------- ------------- ------------- ------------- -------------
41,321,641 40,029,657 338,963 1,016,847 11,878,374 3,538,428 49,106,043 39,446,858
60,660,447 20,630,790 4,182,109 3,165,262 6,908,874 3,370,446 60,946,475 21,499,617
- ------------ ------------- ------------- ------------- ------------- ------------- ------------- -------------
$101,982,088 $ 60,660,447 $ 4,521,072 $ 4,182,109 $ 18,787,248 $ 6,908,874 $ 110,052,518 $ 60,946,475
============ ============= ============= ============= ============= ============= ============= =============
</TABLE>
-17-
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF FUND BD II 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 ............................................... $ 37,385,822 $ 4,719,028
--------------- ---------------
EXPENSES:
Insurance charges ....................................... 9,566,234 4,591,948
Administrative fees ..................................... 1,346,728 668,938
--------------- ---------------
Net investment income (loss) ........................ 26,472,860 (541,858)
--------------- ---------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ........................ 638,666,522 236,812,432
Cost of investments sold .............................. 632,379,285 233,076,182
--------------- ---------------
Net realized gain (loss) ............................ 6,287,237 3,736,250
--------------- ---------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .............. 73,480,229 13,880,806
Unrealized gain (loss) end of year .................... 156,719,386 73,480,229
--------------- ---------------
Net change in unrealized gain (loss) for the year ... 83,239,157 59,599,423
--------------- ---------------
Net increase (decrease) in net assets
resulting from operations ........................... 115,999,254 62,793,815
--------------- ---------------
UNIT TRANSACTIONS:
Participant purchase payments ........................... 281,104,022 305,552,932
Participant transfers from other Travelers accounts ..... 867,501,168 370,995,750
Administrative and asset allocation charges ............. (175,802) (76,062)
Contract surrenders ..................................... (29,495,629) (10,937,049)
Participant transfers to other Travelers accounts ....... (749,605,940) (331,281,697)
Other payments to participants .......................... (11,571,122) (3,790,797)
--------------- ---------------
Net increase (decrease) in net assets
resulting from unit transactions .................... 357,756,697 330,463,076
--------------- ---------------
Net increase (decrease) in net assets ............... 473,755,951 393,256,891
NET ASSETS:
Beginning of year ..................................... 662,500,075 269,243,184
--------------- ---------------
End of year ........................................... $ 1,136,256,026 $ 662,500,075
=============== ===============
</TABLE>
-18-
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF ACCUMULATION AND ANNUITY UNITS FOR FUND BD II
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> <C>
Accumulation and annuity units
beginning of year ........................... -- -- 39,661,235 16,964,938 -- --
Accumulation units purchased and
transferred from other Travelers accounts ... 2,009,376 -- 19,027,357 24,576,075 1,128,729 --
Accumulation units redeemed and
transferred to other Travelers accounts ..... (44,217) -- (6,433,894) (1,879,778) (239,891) --
Annuity units ................................. -- -- 13,859 -- -- --
----------- ---- ----------- ----------- ----------- ----
Accumulation and annuity units
end of year ................................. 1,965,159 -- 52,268,557 39,661,235 888,838 --
=========== ==== =========== =========== =========== ====
</TABLE>
<TABLE>
<CAPTION>
SALOMON BROTHERS
VARIABLE SELECT CONSERVATIVE
INVESTORS FUND SELECT BALANCED PORTFOLIO PORTFOLIO
------------------ ------------------------ -------------------------
1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation and annuity units
beginning of year ........................... -- -- 5,936,901 -- 968,176 --
Accumulation units purchased and
transferred from other Travelers accounts ... 1,373,269 -- 4,661,426 6,244,028 889,003 1,108,928
Accumulation units redeemed and
transferred to other Travelers accounts ..... (150,121) -- (787,974) (307,127) (128,513) (140,752)
Annuity units ................................. -- -- -- -- -- --
--------- ---- --------- ---------- ---------- ----------
Accumulation and annuity units
end of year ................................. 1,223,148 -- 9,810,353 5,936,901 1,728,666 968,176
========= ==== ========= ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
SELECT GROWTH SELECT HIGH GROWTH
PORTFOLIO PORTFOLIO SELECT INCOME PORTFOLIO
---------------------- ----------------------- ------------------------
1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation and annuity units
beginning of year ........................... 4,587,140 -- 3,048,275 -- 389,101 --
Accumulation units purchased and
transferred from other Travelers accounts ... 3,985,489 4,733,409 1,336,968 3,051,712 923,029 416,501
Accumulation units redeemed and
transferred to other Travelers accounts ..... (887,258) (146,269) (328,072) (3,437) (134,791) (27,400)
Annuity units ................................. -- -- -- -- -- --
--------- --------- --------- ---------- ---------- ----------
Accumulation and annuity units
end of year ................................. 7,685,371 4,587,140 4,057,171 3,048,275 1,177,339 389,101
========= ========= ========= ========== ========== ==========
</TABLE>
-19-
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF ACCUMULATION AND ANNUITY UNITS FOR FUND BD II
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 (CONTINUED)
<TABLE>
<CAPTION>
MFS EMERGING GROWTH MFS RESEARCH STRATEGIC STOCK
PORTFOLIO PORTFOLIO PORTFOLIO
--------------------------- -------------------- --------------------
1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation and annuity units
beginning of year ........................... 21,550,926 2,971,654 -- -- -- --
Accumulation units purchased and
transferred from other Travelers accounts ... 20,689,579 20,021,481 5,613,771 -- 3,447,134 --
Accumulation units redeemed and
transferred to other Travelers accounts ..... (4,781,997) (1,442,209) (1,075,074) -- (66,974) --
Annuity units ................................. -- -- -- -- -- --
----------- ----------- ----------- ---- ----------- ----
Accumulation and annuity units
end of year ................................. 37,458,508 21,550,926 4,538,697 -- 3,380,160 --
=========== =========== =========== ==== =========== ====
</TABLE>
<TABLE>
<CAPTION>
DISCIPLINED DISCIPLINED
CONVERTIBLE BOND MID CAP 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 ... 449,233 -- 613,019 -- 414,538 --
Accumulation units redeemed and
transferred to other Travelers accounts ..... (8,687) -- (34,455) -- (32,439) --
Annuity units ................................. -- -- -- -- -- --
-------- ---- -------- ---- -------- ----
Accumulation and annuity units
end of year ................................. 440,546 -- 578,564 -- 382,099 --
======== ==== ======== ==== ======== ====
</TABLE>
<TABLE>
<CAPTION>
AIM CAPITAL APPRECIATION G.T. GLOBAL STRATEGIC
PORTFOLIO ALLIANCE GROWTH PORTFOLIO INCOME PORTFOLIO
------------------------ ------------------------- -----------------------
1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation and annuity units
beginning of year ........................... 57,787,169 33,706,796 56,417,647 27,644,095 5,969,617 2,295,810
Accumulation units purchased and
transferred from other Travelers accounts ... 22,217,787 28,053,552 33,471,642 32,819,155 1,878,273 3,980,326
Accumulation units redeemed and
transferred to other Travelers accounts ..... (8,658,755) (3,973,179) (9,166,301) (4,045,603) (1,393,495) (306,519)
Annuity units ................................. -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------
Accumulation and annuity units
end of year ................................. 71,346,201 57,787,169 80,722,988 56,417,647 6,454,395 5,969,617
========== ========== ========== ========== ========== =========
</TABLE>
-20-
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF ACCUMULATION AND ANNUITY UNITS FOR FUND BD II
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 (CONTINUED)
<TABLE>
<CAPTION>
MFS TOTAL RETURN PUTNAM DIVERSIFIED SMITH BARNEY INTERNATIONAL
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 ........................... 41,066,792 18,460,646 23,457,375 11,885,359 36,182,945 18,864,868
Accumulation units purchased and
transferred from other Travelers accounts ... 35,565,885 25,519,291 17,421,700 13,499,883 231,937,728 94,826,692
Accumulation units redeemed and
transferred to other Travelers accounts ..... (6,333,554) (2,913,145) (4,000,490) (1,927,867) (223,392,552) (77,508,615)
Annuity units ................................. 13,732 -- 17,799 -- 19,578 --
---------- ---------- ---------- ---------- ------------ -----------
Accumulation and annuity units
end of year ................................. 70,312,855 41,066,792 36,896,384 23,457,375 44,747,699 36,182,945
========== ========== ========== ========== ============ ===========
</TABLE>
<TABLE>
<CAPTION>
SMITH BARNEY LARGE
SMITH BARNEY MONEY MARKET SMITH BARNEY HIGH INCOME CAPITALIZATION
PORTFOLIO PORTFOLIO GROWTH PORTFOLIO
--------------------------- ------------------------- ------------------
1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation and annuity units
beginning of year ........................... 28,077,883 25,323,950 23,853,145 8,689,256 -- --
Accumulation units purchased and
transferred from other Travelers accounts ... 327,092,440 161,814,352 18,226,399 16,642,827 14,230,722 --
Accumulation units redeemed and
transferred to other Travelers accounts ..... (307,776,462) (159,060,419) (6,285,817) (1,478,938) (607,005) --
Annuity units ................................. -- -- 16,392 -- -- --
------------ ------------ ----------- ----------- ----------- ----
Accumulation and annuity units
end of year ................................. 47,393,861 28,077,883 35,810,119 23,853,145 13,623,717 --
============ ============ =========== =========== =========== ====
</TABLE>
<TABLE>
<CAPTION>
SMITH BARNEY LARGE CAP SMITH BARNEY PACIFIC TBC MANAGED INCOME
VALUE PORTFOLIO BASIN PORTFOLIO PORTFOLIO
------------------------ ------------------------- -----------------------
1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation and annuity units
beginning of year ........................... 31,762,755 13,512,027 5,986,528 3,221,715 5,489,797 2,901,133
Accumulation units purchased and
transferred from other Travelers accounts ... 23,614,325 20,180,381 43,412,299 39,296,051 10,565,765 3,113,712
Accumulation units redeemed and
transferred to other Travelers accounts ..... (6,160,832) (1,929,653) (43,293,153) (36,531,238) (1,688,188) (525,048)
Annuity units ................................. 12,608 -- -- -- 17,693 --
---------- ----------- ----------- ----------- ---------- ----------
Accumulation and annuity units
end of year ................................. 49,228,856 31,762,755 6,105,674 5,986,528 14,385,067 5,489,797
========== =========== =========== =========== ========== ==========
</TABLE>
-21-
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF ACCUMULATION AND ANNUITY UNITS FOR FUND BD II
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 ........................... 29,020,276 13,004,616 421,213,683 199,446,863
Accumulation units purchased and
transferred from other Travelers accounts ... 18,140,146 17,226,005 864,337,031 517,124,361
Accumulation units redeemed and
transferred to other Travelers accounts ..... (4,775,872) (1,210,345) (638,666,833) (295,357,541)
Annuity units ................................. 10,971 -- 122,632 --
------------ ------------ ------------ ------------
Accumulation and annuity units
end of year ................................. 42,395,521 29,020,276 647,006,513 421,213,683
============ ============ ============ ============
</TABLE>
-22-
<PAGE> 24
INDEPENDENT AUDITORS' REPORT
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, 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 II 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
-23-
<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 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 Prospectus for The Travelers Fund BD II for
Variable Annuities product(s) offered by The Travelers Life and Annuity Company
and the Prospectuses of the underlying funds, which collectively contain all
pertinent information, including the applicable sales commissions.
FNDBDII (Annual) (12-98) Printed in U.S.A.
