-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OUIWVYm/HIy0eNZHoKQpv/tuvJG42Hz+xO9r9+kz9hlgH3d0XwO8hBv39eAYONVy oCHTVrf1JXt7JhPjwa2iaQ== 0000950123-00-001711.txt : 20000229 0000950123-00-001711.hdr.sgml : 20000229 ACCESSION NUMBER: 0000950123-00-001711 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000228 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRAVELERS GROWTH & INCOME STOCK ACCT FOR VARIABLE ANNUITIES CENTRAL INDEX KEY: 0000099444 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 060566090 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-01539 FILM NUMBER: 555642 BUSINESS ADDRESS: STREET 1: ONE TOWER SQ STREET 2: C/O TRAVELERS INSURANCE CO CITY: HARTFORD STATE: CT ZIP: 06183-2020 BUSINESS PHONE: 2032770111 MAIL ADDRESS: STREET 1: ONE TOWER SQUARE STREET 2: ATTN FINANCIAL SERVICES LEGAL DIVISION CITY: HARTFORD STATE: CT ZIP: 06183-2020 FORMER COMPANY: FORMER CONFORMED NAME: TRAVELERS FUND A FOR VARIABLE ANNUITIES DATE OF NAME CHANGE: 19851103 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES CENTRAL INDEX KEY: 0000099440 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 060566090 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-02571 FILM NUMBER: 555643 BUSINESS ADDRESS: STREET 1: ONE TOWER SQ STREET 2: C/O TRAVELERS INSURANCE CO CITY: HARTFORD STATE: CT ZIP: 06183-2020 BUSINESS PHONE: 2032777379 MAIL ADDRESS: STREET 1: ONE TOWER SQUARE STREET 2: ATTN FINANCIAL SERVICES LEGAL DIVISION CITY: HARTFORD STATE: CT ZIP: 06183-2020 FORMER COMPANY: FORMER CONFORMED NAME: TRAVELERS FUND A-1 FOR VARIABLE ANNUITIES DATE OF NAME CHANGE: 19851103 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES CENTRAL INDEX KEY: 0000700871 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 060566090 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-03409 FILM NUMBER: 555644 BUSINESS ADDRESS: STREET 1: ONE TOWER SQ STREET 2: C/O TRAVELERS INSURANCE CO CITY: HARTFORD STATE: CT ZIP: 06183 BUSINESS PHONE: 2032777379 MAIL ADDRESS: STREET 1: ONE TOWER SQUARE STREET 2: ATTN FINANCIAL SERVICES LEGAL DIVISION CITY: HARTFORD STATE: CT ZIP: 06183-2020 FORMER COMPANY: FORMER CONFORMED NAME: TRAVELERS FUND MM FOR VARIABLE ANNUITIES DATE OF NAME CHANGE: 19851103 N-30D 1 FORM N-30D 1 UNIVERSAL ANNUITY ANNUAL REPORTS DECEMBER 31, 1999 [ARTWORK] THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES [TRAVELERSLIFE & ANNUITY LOGO] The Travelers Insurance Company The Travelers Life and Annuity Company One Tower Square Hartford, CT 06183 2 [TAMIC LOGO] Travelers Asset Management International Corporation ("TAMIC") provides fixed income management and advisory services for the following Travelers Variable Products Separate Accounts contained in this report: The Travelers Growth and Income Stock Account for Variable Annuities, The Travelers Quality Bond Account for Variable Annuities and The Travelers Money Market Account for Variable Annuities. [TIMCO LOGO] The Travelers Investment Management Company ("TIMCO") provides equity management and subadvisory services for The Travelers Growth and Income Stock Account for Variable Annuities. 3 [TRAVELERSLIFE & ANNUITY LOGO] THE TRAVELERS VARIABLE PRODUCT SEPARATE ACCOUNTS INVESTMENT ADVISORY COMMENTARY AS OF DECEMBER 31, 1999 MARKET AND ECONOMIC OVERVIEW The year began on a volatile note for global financial markets as a potential new threat emerged in Latin America. The devaluation of Brazil's currency, the Real, affected many U.S. corporations and investors with exposure to the Latin American markets and negatively impacted the performance of the U.S. stock market. Concerns regarding the future direction of interest rates were prevalent throughout 1999. Despite low inflation, the Federal Reserve Board ("Fed") opted to raise interest rates three times during the year, effectively "taking back" the interest-rate cuts imposed following the global economic crisis in 1998. The Fed's change in monetary policy did not significantly deter the remarkable growth of the U.S. economy. In fact, throughout the year, the U.S. Gross Domestic Product ("GDP"), which represents the total output of goods and services, continued to exceed expectations. Despite the rise in interest rates, the U.S. stock market continued its stellar performance. Evidence of stronger-than-expected economic growth prompted hopes of a meaningful earnings recovery and at the same time, triggered concerns regarding future rate hikes. These factors led to a rally in small cap and value stocks. (Value stocks are securities of companies that are believed to be undervalued in the market.) However, the trend of investing in small cap and value stocks soon changed, as many investors took the view that a proactive monetary policy by the Fed would preempt inflationary pressures. Nevertheless, the small cap sector, as measured by the Russell 2000 Index,* which returned 21.26% for the year, outperformed the large cap sector, as measured by the Standard & Poor's 500 Index** ("S&P 500") which returned 21.03%. As a result of investors' focus on the direction of interest rates, the stock and bond markets were characterized by higher levels of volatility. Investors became increasingly concerned, especially toward the end of the year, about not only the direction of interest rates but also about future earnings growth and the high market valuations of many stocks. In addition, the strength of the overseas markets attracted U.S. capital, which had a somewhat negative impact on the performance of the U.S. stock market through the third quarter of 1999. By the end of the year however, the U.S. stock market rose sharply largely due to the incredible performance of the technology sector. Y2K concerns decreased, with the market's assessment of the risks associated with potential Year 2000 glitches proving to be correct. The bond markets did not react positively to the actions of the Fed in 1999 and experienced their worst year since 1994. The overall bond market recorded losses in 1999 in response to the Fed's interest rate increases and concerns regarding inflation. Bond market losses increased with the length of maturities. The yield on the bellwether 30-year government bond increased 1.39 percentage points in 1999 to 6.48%. At the end of 1998, the 30-year Treasury Bond yielded 5.09%. -1- 4 In our view, the strength of the U.S. economy should continue, prompting the Fed to raise interest rates in 2000.+ In addition, overseas economies, many of which are in the early stages of recovery, should continue to expand. This global economic recovery should benefit the manufacturing sector of the U.S. market in 2000. We predict that earnings should continue double-digit growth through the first quarter of 2000. It is our belief that the recent performance of technology and telecommunications stocks is not sustainable. However, we are confident that most stocks are appropriately valued. Over the longer term, we think that the fundamentals for both stocks and bonds remains favorable. *The Russell 2000 measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index. **The S&P 500 Index is market capitalization-weighted measure of 500 widely held common stocks. +On February 2, 2000, after this letter was written, the Federal Reserve Board raised interest rates 0.25% to 5.25%. DAVID A. TYSON, CFA, PRESIDENT & CHIEF INVESTMENT OFFICER, TRAVELERS ASSET MANAGEMENT INTERNATIONAL CORPORATION SANDIP A. BHAGAT, CFA, PRESIDENT & CHIEF INVESTMENT OFFICER, THE TRAVELERS INVESTMENT MANAGEMENT COMPANY -2- 5 TABLE OF CONTENTS
PAGE - ---------------------------------------------------------------------- THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES..............................................4 THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES..........................................................19 THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES..........................................................30
-3- 6 THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES The Travelers Growth and Income Stock Account for Variable Annuities ("Account GIS") is managed by the Travelers Asset Management International Corporation ("TAMIC") with The Travelers Investment Management Company ("TIMCO") serving as subadvisor. Account GIS is managed to provide diversified exposure to the large-company segment of the U.S. equity market. Stock selection is based on a quantitative screening process favoring companies that achieve earnings growth above consensus expectations and whose shares offer attractive relative value. In order to achieve consistent relative performance, we manage Account GIS to mirror the overall risk, sector weightings and growth/value style characteristics of the Standard & Poor's 500 Stock Index ("S&P 500"). The S&P 500 is a value-weighted equity index comprised primarily of large-company stocks. For the twelve months ending December 31, 1999, net of fees and expenses, Account GIS's total return of 21.7% was well ahead of the 13.1% average return for variable annuity stock accounts in the Lipper Growth & Income Category. A discussion of portfolio performance in 1999 is presented next with a closer look at the third and fourth quarters. The Technology sector was red-hot in 1999 and growth stocks handily outperformed value stocks. Our stock selection was most favorable in the Technology, Consumer Discretionary and Utilities sectors for most of the year and slightly adverse in the other sectors. During the third quarter, stock selection was favorable in every sector except Producer Durables and Materials and Processing. The Technology and Consumer Discretionary sectors provided the best stock selection. In the Technology sector, our emphasis on good earnings prospects at reasonable valuations lead to an overweight position in Sun Microsystems, Inc. which gained from a steady stream of upward estimate revisions. The quarter also saw strong rallies in Oracle Corp. and QUALCOMM, Inc., which benefited the portfolio. In the Consumer Discretionary sector, performance was aided by underweights in Avon, Gillette Co. and Sears. Avon and Gillette Co. frustrated investors with lower than expected revenue growth. As a result, Avon was down 55.2% and Gillette lost 17.2% for the quarter. Sears announced in early September that it would not meet third quarter earnings and suffered a 29.6% decline for the quarter. During the fourth quarter, stock selection was favorable in most sectors and particularly positive in the Technology, Utilities and Consumer Discretionary sectors. In the Technology sector, most of our stock picks performed well. Our positions in Sun Microsystems, Inc. and Oracle Corp. as a result of upward earnings revisions paid off as investors rewarded those stocks with a higher price-to-earnings multiple. Semiconductor equipment stocks such as Applied Materials Inc. and Teradyne, Inc. surged in expectation of a revival in the capital spending cycle. We benefited from adding QUALCOMM, Inc. and Yahoo, Inc. to our portfolios in advance of their inclusion in the S&P 500 index. Our pure play on the Internet, America Online, Inc., enjoyed another strong quarter and, finally, we avoided two of the bigger disappointments in the sector, Xerox and Unisys. -4- 7 In the Utilities sector, our emphasis on faster growing telecommunications companies at the expense of electric utilities and gas distribution companies continued to help performance. Our big winners here included Nextel Communications, Inc. and Sprint Corp.-PCS Group. We also benefited from our position in AES Corp., a global leader in electric power generation, which moved up in price as it completed a successful Y2K rollover. In the Consumer Discretionary sector, a number of our positions in the Media and Broadcasting groups performed well. New York Times Co. and Gannett Company, Inc. outperformed the Newspaper group while AMFM, Inc. and Times Mirror Co. enjoyed the benefits of a strong U.S. economy. Kimberly Clark Corp. outperformed the Household Products group while Cendant Corp., a consumer services company, rose sharply on the heels of a $400 million investment by Liberty Media. Sears, J.C. Penney and Tandy, which we did not own, continued to go down and, therefore, contributed to relative performance. Strong earnings growth in the third and fourth quarters suggests that the earnings recovery of 1999 is well underway. However, the constant presence of the Federal Reserve Board and the current love affair with Technology stocks may prevent a broad-based market rally from materializing in the near future. In our disciplined approach to stock selection, we continue to screen our research universe of over 1,000 large cap securities for companies that offer improving earnings fundamentals at discounted stock valuations. PORTFOLIO MANAGER: SANDIP A. BHAGAT, CFA [TAMIC LOGO] [TIMCO LOGO] -5- 8 THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES [BAR GRAPH]
1 Year 3 Years 5 Years ------ ------- ------- The Travelers Growth and Income Stock for Variable Annuities 21.73% 27.26% 27.62% Lipper Growth and Income Category Averages 13.03% 17.32% 20.41%
This is a comparison of The Travelers Growth and Income Stock Account for Variable Annuities ("Account GIS") versus Lipper Analytical Services' variable annuity composite index, which provides the average performance of variable annuity funds with similar objectives as of December 31, 1999. Lipper Analytical Services is a leading independent Variable Insurance Product Performance Analysis Service. The performance of the composite is net of all asset based fees such as mortality and expense charges and investment management fees. Performance reflects the charges associated with Universal Annuity, which became available on May 16, 1983. Contracts issued prior to May 16, 1983 have different contract charges that result in different performance than presented above. Account GIS performance information is net of: 1) the 1.25% annual mortality and expense risk charge, and 2) investment management fees. The deduction of the $15 semi-annual administrative charge and the contingent deferred sales charge (5% maximum) is not reflected. The deduction of those charges would reduce any percentage increase or make greater any percentage decrease. Performance data quoted represents past performance. Investment return and principal value of an investment will fluctuate so that an investor's units, when redeemed, may be worth more or less than their original cost. The following is the performance data required by SEC rules governing uniform performance reporting: one year 16.54%, five year 27.06% and ten year 15.63%. This performance is based on a $1,000 hypothetical investment and reflects deductions of all fees and charges including the semi-annual administrative charge and the maximum deferred sales charge of 5%. The Lipper Growth and Income Category 5 year average return for fiscal years ending 1998 and 1997 were misstated in previous reports. The actual 5 year average for 1998 was 18.08% and 16.65% for 1997. -6- 9 THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1999 ASSETS: Investment securities, at market value (cost $747,130,849) .......................... $ 1,076,626,784 Receivables: Dividends ......................................................................... 971,373 Investment securities sold ........................................................ 28,110 Purchase payments and transfers from other Travelers accounts ..................... 303,882 Variation on futures margin ....................................................... 85,000 Other assets ........................................................................ 67,941 ---------------- Total Assets .................................................................... 1,078,083,090 ---------------- LIABILITIES: Cash overdraft ...................................................................... 477,421 Payables: Investment securities purchased ................................................... 1,905,493 Contract surrenders and transfers to other Travelers accounts ..................... 1,115,259 Investment management and advisory fees ........................................... 155,707 Insurance charges ................................................................. 308,827 Accrued liabilities ................................................................. 62,535 ---------------- Total Liabilities ............................................................... 4,025,242 ---------------- NET ASSETS: $ 1,074,057,848 ================
See Notes to Financial Statements -7- 10 THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999 INVESTMENT INCOME: Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,327,579 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 640,493 -------------------- Total income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,968,072 EXPENSES: Investment management and advisory fees . . . . . . . . . . . . . . . . . . . 5,840,016 Insurance charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,420,141 -------------------- Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,260,157 ---------------------- Net investment loss . . . . . . . . . . . . . . . . . . . . . . . . . . (5,292,085) ---------------------- REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES: Realized gain (loss) from investment security transactions: Proceeds from investment securities sold . . . . . . . . . . . . . . . . . 556,397,281 Cost of investment securities sold . . . . . . . . . . . . . . . . . . . . 372,968,391 -------------------- Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . 183,428,890 Change in unrealized gain (loss) on investment securities: Unrealized gain at December 31, 1998 . . . . . . . . . . . . . . . . . . . 313,449,599 Unrealized gain at December 31, 1999 . . . . . . . . . . . . . . . . . . . 329,495,935 -------------------- Net change in unrealized gain (loss) for the year . . . . . . . . . . . 16,046,336 ---------------------- Net realized gain (loss) and change in unrealized gain (loss) . . . 199,475,226 ---------------------- Net increase in net assets resulting from operations . . . . . . . . . . . . $ 194,183,141 ======================
See Notes to Financial Statements -8- 11 THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998 ---- ---- OPERATIONS: Net investment loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (5,292,085) $ (2,586,058) Net realized gain (loss) from investment security transactions . . . . . . . 183,428,890 95,655,131 Net change in unrealized gain (loss) on investment securities . . . . . . . . 16,046,336 105,075,282 ----------------------- ----------------------- Net increase in net assets resulting from operations . . . . . . . . . . . 194,183,141 198,144,355 ----------------------- ----------------------- UNIT TRANSACTIONS: Participant purchase payments (applicable to 2,777,936 and 3,313,169 units, respectively) . . . . . . . . 57,722,048 55,597,200 Participant transfers from other Travelers accounts (applicable to 4,293,186 and 5,422,153 units, respectively) . . . . . . . . 88,841,951 90,631,767 Administrative charges (applicable to 28,450 and 29,915 units, respectively) . . . . . . . . . . . (620,057) (549,312) Contract surrenders (applicable to 3,595,965 and 3,114,020 units, respectively) . . . . . . . . (75,854,139) (53,155,177) Participant transfers to other Travelers accounts (applicable to 3,893,858 and 4,220,307 units, respectively) . . . . . . . . (80,968,008) (70,289,825) Other payments to participants (applicable to 203,710 and 164,728 units, respectively) . . . . . . . . . . (4,323,110) (2,822,777) ----------------------- ----------------------- Net increase (decrease) in net assets resulting from unit transactions. . . (15,201,315) 19,411,876 ----------------------- ----------------------- Net increase in net assets . . . . . . . . . . . . . . . . . . . . . . 178,981,826 217,556,231 NET ASSETS: Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 895,076,022 677,519,791 ----------------------- ----------------------- End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,074,057,848 $ 895,076,022 ======================= =======================
See Notes to Financial Statements -9- 12 NOTES TO FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES The Travelers Growth and Income Stock Account for Variable Annuities ("Account GIS") is a separate account of The Travelers Insurance Company ("The Travelers"), an indirect wholly owned subsidiary of Citigroup Inc., and is available for funding certain variable annuity contracts issued by The Travelers. Account GIS is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. The following is a summary of significant accounting policies consistently followed by Account GIS in the preparation of its financial statements. SECURITY VALUATION. Investments in securities traded on a national securities exchange are valued at the 4:00 p.m. Eastern Standard Time price of the New York Stock Exchange on the last business day of the year; securities traded on the over-the-counter market and listed securities with no reported sales are valued at the mean between the last reported bid and asked prices or on the basis of quotations received from a reputable broker or other recognized source. Short-term investments for which a quoted market price is available are valued at market. Short-term investments for which there is no reliable quoted market price are valued at amortized cost which approximates market. SECURITY TRANSACTIONS. Security transactions are accounted for on the trade date. Dividend income is recorded on the ex-dividend date. Interest income is recorded on the accrual basis. Premiums and discounts are amortized to interest income utilizing the constant yield method. FUTURES CONTRACTS. Account GIS may use stock index futures contracts as a substitute for the purchase or sale of individual securities. When Account GIS enters into a futures contract, it agrees to buy or sell a specified index of stocks at a future time for a fixed price, unless the contract is closed prior to expiration. Account GIS is obligated to deposit with a broker an "initial margin" equivalent to a percentage of the face, or notional value of the contract. It is Account GIS's practice to hold cash and cash equivalents in an amount at least equal to the notional value of outstanding purchased futures contracts, less the initial margin. Cash and cash equivalents include cash on hand, securities segregated under federal and brokerage regulations, and short-term highly liquid investments with maturities generally three months or less when purchased. Generally, futures contracts are closed prior to expiration. Futures contracts purchased by Account GIS are priced and settled daily; accordingly, changes in daily prices are recorded as realized gains or losses and no asset is recorded in the Statement of Investments. However, when Account GIS holds open futures contracts, it assumes a market risk generally equivalent to the underlying market risk of change in the value of the specified indexes associated with the futures contract. OPTIONS. Account GIS may purchase index or individual equity put or call options, thereby obtaining the right to sell or buy a fixed number of shares of the underlying asset at the stated price on or before the stated expiration date. Account GIS may sell the options before expiration. Options held by Account GIS are listed on either national securities exchanges or on over-the-counter markets and are short-term contracts with a duration of less than nine months. The market value of the options will be based on the 4:00 p.m. Eastern Standard Time price of the New York Stock Exchange, or in the absence of such price, the latest bid quotation. REPURCHASE AGREEMENTS. When Account GIS enters into a repurchase agreement (a purchase of securities whereby the seller agrees to repurchase the securities at a mutually agreed upon date and price), the repurchase price of the securities will generally equal the amount paid by Account GIS plus a negotiated interest amount. The seller under the repurchase agreement will be required to provide to Account GIS securities (collateral) whose market value, including accrued interest, will be at least equal to 102% of the repurchase price. Account GIS monitors the value of collateral on a daily basis. Repurchase agreements will be limited to transactions with national banks and reporting broker dealers believed to present minimal credit risks. Account GIS's custodian will take actual or constructive receipt of all securities underlying repurchase agreements until such agreements expire. -10- 13 NOTES TO FINANCIAL STATEMENTS - CONTINUED FEDERAL INCOME TAXES. The operations of Account GIS form a part of the total operations of The Travelers and are not taxed separately. The Travelers is taxed as a life insurance company under the Internal Revenue Code of 1986, as amended (the "Code"). Under existing federal income tax law, no taxes are payable on the investment income and capital gains of Account GIS. Account GIS 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 year. Actual results could differ from those estimates. 2. INVESTMENTS The aggregate costs of purchases and proceeds from sales of investments (other than short-term securities), were $448,158,682 and $508,559,481, respectively; the costs of purchases and proceeds from sales of direct and indirect U.S. government securities were $4,991,875 and $4,087,252, respectively, for the year ended December 31, 1999. Realized gains and losses from investment security transactions are reported on an identified cost basis. Account GIS placed a portion of its security transactions with brokerage firms which are affiliates of The Travelers. The commissions paid to these affiliated firms were $58,130 and $97,735 for the years ended December 31, 1999 and 1998, respectively. At December 31, 1999, Account GIS held 100 open S&P 500 Stock Index futures contracts expiring in March, 2000. The underlying face value, or notional value, of these contracts at December 31, 1999 amounted to $37,105,000. In connection with these contracts, short-term investments with a par value of $2,085,000 had been pledged as margin deposits. Net realized gains resulting from futures contracts were $3,444,687 and $2,690,651 for the years ended December 31, 1999 and 1998, respectively. These gains are included in the net realized gain from investment security transactions on both the Statement of Operations and the Statement of Changes in Net Assets. The cash settlement for December 31, 1999 is shown on the Statement of Assets and Liabilities as a receivable for variation on futures margin. 3. CONTRACT CHARGES Investment management and advisory fees are calculated daily at annual rates which start at 0.65% and decrease, as net assets increase, to 0.40% of Account GIS's average net assets. These fees are paid to Travelers Asset Management International Corporation ("TAMIC"), an indirect wholly owned subsidiary of Citigroup Inc. Pursuant to a subadvisory agreement between TAMIC and The Travelers Investment Management Company ("TIMCO"), an indirect wholly owned subsidiary of Citigroup Inc., TAMIC pays TIMCO a subadvisory fee calculated daily at annual rates which start at 0.45% and decrease, as net assets increase, to 0.20% of Account GIS's average net assets. Insurance charges are paid for the mortality and expense risks assumed by The Travelers. Each business day, The Travelers deducts a mortality and expense risk charge which is reflected in our calculation of accumulation and annuity unit values. This charge equals, on an annual basis, 1.0017% for contracts issued prior to May 16, 1983 and 1.25% on an annual basis for contracts issued on or after May 16, 1983. Additionally, for certain contracts in the accumulation phase, a semi-annual charge of $15 (prorated for partial years) is deducted from participant account balances and paid to The Travelers to cover administrative charges. On contracts issued prior to May 16, 1983, The Travelers retained from Account GIS sales charges of $25,099 and $24,080 for the years ended December 31, 1999 and 1998, respectively. The Travelers generally assesses a 5% contingent deferred sales charge if a participant's purchase payment is surrendered within five years of its payment date. Contract surrender payments include $296,975 and $246,946 of contingent deferred sales charges for the years ended December 31, 1999 and 1998, respectively. -11- 14 NOTES TO FINANCIAL STATEMENTS - CONTINUED 4. NET ASSETS HELD ON BEHALF OF AN AFFILIATE Approximately $22,919,000 and $21,175,000 of the net assets of Account GIS were held on behalf of an affiliate of The Travelers as of December 31, 1999 and 1998, respectively. Transactions with this affiliate during the years ended December 31, 1999 and 1998, were comprised of participant purchase payments of approximately $761,000 and $675,000 and contract surrenders of approximately $2,546,000 and $1,930,000, respectively. 5. NET CONTRACT OWNERS' EQUITY
DECEMBER 31, 1999 -------------------------------------------- UNIT NET UNITS VALUE ASSETS ----- ----- ------ Accumulation phase of contracts issued prior to May 16, 1983 . . . . . 12,336,655 $ 24.427 $ 301,351,437 Annuity phase of contracts issued prior to May 16, 1983 . . . . . . . . 309,288 24.427 7,555,070 Accumulation phase of contracts issued on or after May 16, 1983 . . . . 32,564,037 23.436 763,177,055 Annuity phase of contracts issued on or after May 16, 1983 . . . . . . 84,241 23.436 1,974,286 ------------------ Net Contract Owners' Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,074,057,848 ==================
-12- 15 NOTES TO FINANCIAL STATEMENTS - CONTINUED 6. SUPPLEMENTARY INFORMATION (Selected data for a unit outstanding throughout each year.) Contracts issued prior to May 16, 1983
FOR THE YEARS ENDED DECEMBER 31, -------------------------------------------------- 1999 1998 1997 1996 1995 ---- ---- ---- ---- ---- SELECTED PER UNIT DATA: Total investment income . . . . . . . . . . . . . . . . . . . . . $ .267 $ .243 $ .233 $ .216 $ .208 Operating expenses . . . . . . . . . . . . . . . . . . . . . . . .347 .272 .201 .154 .123 --------- --------- --------- --------- ---------- Net investment income (loss) . . . . . . . . . . . . . . . . . . (.080) (.029) .032 .062 .085 Unit value at beginning of year . . . . . . . . . . . . . . . . . 20.017 15.510 11.763 9.668 7.120 Net realized and change in unrealized gains . . . . . . . . . . . 4.490 4.536 3.715 2.033 2.463 --------- --------- --------- --------- ---------- Unit value at end of year . . . . . . . . . . . . . . . . . . . . $24.427 $20.017 $15.510 $11.763 $ 9.668 ========= ========= ========= ========= ========== SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase in unit value . . . . . . . . . . . . . . . . . . . $ 4.41 $ 4.51 $ 3.75 $ 2.10 $ 2.55 Ratio of operating expenses to average net assets . . . . . . . . 1.60% 1.56% 1.45% 1.45% 1.45% Ratio of net investment income (loss) to average net assets . . . (.37)% (.16)% .24% .60% 1.02% Number of units outstanding at end of year (thousands) . . . . . 12,646 13,894 15,194 16,554 17,896 Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . . 47% 50% 64% 85% 96% Contracts issued on or after May 16, 1983 FOR THE YEARS ENDED DECEMBER 31, -------------------------------------------------- 1999 1998 1997 1996 1995 ---- ---- ---- ---- ---- SELECTED PER UNIT DATA: Total investment income . . . . . . . . . . . . . . . . . . . . . $ .256 $ .234 $ .228 $ .212 $ .205 Operating expenses . . . . . . . . . . . . . . . . . . . . . . . .385 .303 .228 .175 .140 --------- --------- --------- --------- ---------- Net investment income (loss) . . . . . . . . . . . . . . . . . . (.129) (.069) .000 .037 .065 Unit value at beginning of year . . . . . . . . . . . . . . . . . 19.253 14.955 11.371 9.369 6.917 Net realized and change in unrealized gains . . . . . . . . . . . 4.312 4.367 3.584 1.965 2.387 --------- --------- --------- --------- ---------- Unit value at end of year . . . . . . . . . . . . . . . . . . . . $23.436 $19.253 $14.955 $11.371 $ 9.369 ========= ========= ========= ========= ========== SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase in unit value . . . . . . . . . . . . . . . . . . . $ 4.18 $ 4.30 $ 3.58 $ 2.00 $ 2.45 Ratio of operating expenses to average net assets . . . . . . . . 1.85% 1.81% 1.70% 1.70% 1.70% Ratio of net investment income (loss) to average net assets . . . (.62)% (.41)% .00% .36% .79% Number of units outstanding at end of year (thousands) . . . . . 32,648 32,051 29,545 27,578 26,688 Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . . 47% 50% 64% 85% 96%
-13- 16 THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF INVESTMENTS DECEMBER 31, 1999
NO. OF MARKET SHARES VALUE ------------ ------------ COMMON STOCKS (95.4%) AEROSPACE (0.6%) Boeing Co. 108,430 $ 4,506,622 General Dynamics Corp. 30,400 1,603,600 -------------- 6,110,222 -------------- AIRLINES (0.2%) AMR Corp. (A) 10,980 735,660 Delta Airlines, Inc. 33,200 1,653,775 -------------- 2,389,435 -------------- AUTOMOTIVE (1.3%) Ford Motor Co. 95,300 5,092,594 General Motors Corp. 73,000 5,306,187 Lear Corporation (A) 46,800 1,497,600 Navistar International Corp. (A) 46,900 2,221,888 -------------- 14,118,269 -------------- BANKING (5.7%) AmSouth Bancorporation 131,400 2,537,663 Bank of America Corp. 124,224 6,234,492 Bank of New York 93,000 3,720,000 Bank One Corp. 118,664 3,804,664 Capital One Financial Corp. 45,300 2,182,894 Chase Manhattan Corp. 93,804 7,287,398 Comerica, Inc. 25,150 1,174,191 Fifth Third BanCorp. 24,600 1,804,257 First Union Corp. 115,700 3,796,406 Firstar Corp. 105,000 2,218,125 FleetBoston Financial Corp. 110,822 3,857,991 J.P. Morgan & Company, Inc. 14,200 1,798,075 MBNA Corp. 133,300 3,632,425 National City Corp. 73,600 1,743,400 SouthTrust Corp. 57,500 2,172,425 State Street Corp. 27,300 1,994,606 Summit BanCorp 42,600 1,304,625 SunTrust Banks, Inc. 36,100 2,484,131 Washington Mutual 70,000 1,820,000 Wells Fargo & Co. 139,230 5,630,113 -------------- 61,197,881 -------------- BEVERAGE (1.8%) Anheuser-Busch Cos. 60,100 4,259,588 Coca-Cola Co. 185,800 10,822,850 PepsiCo, Inc. 115,700 4,078,425 -------------- 19,160,863 -------------- BROKERAGE (2.3%) Charles Schwab Corp. 71,600 2,747,650 Lehman Brothers Holdings, Inc. 51,900 4,395,281 Merrill Lynch & Co. 71,800 5,995,300 Morgan Stanley Dean Witter & Co. 80,925 11,552,044 -------------- 24,690,275 -------------- BUILDING MATERIALS (0.2%) Masco Corp. 70,800 1,796,550 -------------- CAPITAL GOODS (1.5%) Applied Materials, Inc. (A) 48,100 6,092,168 Honeywell International, Inc. 91,812 5,296,405 Nucor Corp. 15,500 849,594 Tellabs, Inc. (A) 23,400 1,501,257 TRW, Inc. 45,200 2,347,575 -------------- 16,086,999 -------------- CHEMICALS (1.3%) Dow Chemical Co. 23,900 3,193,637 E.I Dupont de Nemours & Co. 92,456 6,090,539 Monsanto Co. 73,700 2,625,562 Praxair, Inc. 15,000 754,688 Rohm & Haas Co. 41,900 1,704,806 -------------- 14,369,232 -------------- CONGLOMERATES (5.3%) Emerson Electric Co. 24,000 1,377,000 General Electric Co. 271,600 42,030,100 Minnesota Mining & Manufacturing Co. 21,600 2,114,100 Tyco International Ltd. 235,700 9,162,838 United Technologies Corp. 37,900 2,463,500 -------------- 57,147,538 -------------- CONSTRUCTION MACHINE (0.5%) Briggs & Stratton Corp. 38,900 2,086,013 Caterpillar, Inc. 22,300 1,049,494 Ingersoll-Rand Co. 39,300 2,163,956 -------------- 5,299,463 -------------- CONSUMER (2.3%) Black & Decker Corp. 12,200 637,450 Clorox Co. 44,000 2,216,500 Colgate-Palmolive Co. 35,100 2,281,500 Gillette Co. 56,184 2,314,079 Kimberly Clark Corp. 58,660 3,827,565 Maytag Corp. 29,200 1,401,600 Pall Corp. 70,700 1,524,469 Procter & Gamble Co. 84,000 9,203,250 Unilever N V 36,721 1,998,999 -------------- 25,405,412 -------------- DEFENSE (0.4%) Lockheed Martin Corp. 149,300 3,265,937 Raytheon Co. 36,300 964,219 -------------- 4,230,156 -------------- ENTERTAINMENT (1.3%) Carnival Corp. 46,300 2,213,719 Seagram Co. Ltd. 66,700 2,997,331 Viacom, Inc. (A) 40,426 2,443,246 Walt Disney Co. 234,265 6,852,251 -------------- 14,506,547 --------------
-14- 17 STATEMENT OF INVESTMENTS - CONTINUED
NO. OF MARKET SHARES VALUE ------------ ------------ FINANCE (1.5%) American Express Co. 55,800 $ 9,276,750 Countrywide Credit 40,200 1,015,050 Household International 79,700 2,968,825 Providian Financial Corp. 36,500 3,323,781 -------------- 16,584,406 -------------- FOOD (1.5%) General Mills, Inc. 64,300 2,298,725 H.J. Heinz Co. 45,400 1,807,487 Kellogg Co. 53,300 1,642,306 McDonalds Corp. 105,000 4,232,813 Sara Lee Corp. 105,000 2,316,563 Sysco Corp. 74,600 2,951,363 Tricon Global Restaurants (A) 31,000 1,197,375 -------------- 16,446,632 -------------- HEALTHCARE (0.8%) Abbott Laboratories 90,000 3,268,125 Cardinal Health, Inc. 30,900 1,479,338 Columbia/HCA Healthcare Corp. 103,800 3,042,637 Wellpoint Health Networks Inc. (A) 14,500 956,094 -------------- 8,746,194 -------------- INDEPENDENT ENERGY (0.1%) Apache Corp 36,900 1,362,994 -------------- INSURANCE (2.8%) Aetna, Inc. 26,600 1,484,613 Allstate Corp. 122,950 2,950,800 Ambac Financial Group, Inc. 31,000 1,617,812 American General Corp. 21,200 1,608,550 American International Group, Inc. 138,792 15,006,885 Everest Reinsurance Holdings 31,000 691,688 Hartford Financial Services Group 32,400 1,534,950 Jefferson Pilot Corp. 35,800 2,443,350 MBIA, Inc. 38,900 2,054,406 20th Century Industries 35,200 679,800 -------------- 30,072,854 -------------- INTEGRATED ENERGY (4.4%) Atlantic Richfield Co. 35,300 3,053,450 Chevron Corp. 53,700 4,651,762 Conoco, Inc. 55,904 1,390,612 Exxon Mobil Corp. 286,198 23,056,826 Kerr Mcgee Corp. 46,900 2,907,800 Royal Dutch Petroleum Co. 167,700 10,135,369 Texaco, Inc. 44,700 2,427,769 -------------- 47,623,588 -------------- MEDIA (3.1%) AMFM, Inc. (A) 25,500 1,995,375 CBS Corp. (A) 63,800 4,079,212 Clear Channel Communications, Inc. (A) 26,730 2,385,653 Comcast Corp. 61,200 3,092,516 Gannett Company, Inc. 40,500 3,303,281 Interpublic Group Companies, Inc. 50,600 2,918,987 Meredith Corp. 40,300 1,680,006 New York Times Co. 57,500 2,824,688 Time Warner, Inc. 118,400 8,576,600 Times Mirror Co. 32,600 2,184,200 -------------- 33,040,518 -------------- METALS (0.7%) Alcoa, Inc. 41,972 3,483,676 Barrick Gold Corp. 69,200 1,223,975 Phelps Dodge Corp. 24,200 1,624,425 W.R. Grace & Co. (A) 108,200 1,501,275 -------------- 7,833,351 -------------- NATURAL GAS PIPELINE (0.5%) El Paso Energy Corp. 25,800 1,001,362 Enron Corp. 74,500 3,305,938 Williams Cos. 46,400 1,418,100 -------------- 5,725,400 -------------- OIL FIELD (0.4%) Baker Hughes Inc. 31,000 652,938 Halliburton Co. 35,900 1,444,975 Schlumberger Ltd. 43,300 2,435,625 -------------- 4,533,538 -------------- PAPER (0.7%) Georgia-Pacific Group 47,400 2,405,550 International Paper Co. 46,700 2,635,631 Mead Corp. 29,150 1,266,203 Weyerhaeuser Co. 10,800 775,575 -------------- 7,082,959 -------------- PHARMACEUTICALS (7.1%) Allergan, Inc. 62,000 3,084,500 American Home Products Corp. 77,400 3,052,463 Amgen, Inc. (A) 122,500 7,353,834 Baxter International, Inc. 58,700 3,687,094 Bristol-Myers Squibb Co. 139,900 8,979,831 CVS Corp. 61,100 2,440,181 Eli Lilly & Co. 67,700 4,502,050 Johnson & Johnson 132,500 12,339,062 Merck & Co, Inc. 193,100 12,949,769 Pfizer, Inc. 258,490 8,384,769 Pharmacia & Upjohn, Inc. 21,300 958,500 Schering-Plough Corp. 78,900 3,328,594 Warner-Lambert Co. 63,800 5,227,612 -------------- 76,288,259 -------------- RAILROADS (0.1%) Union Pacific Corp. 35,800 1,561,775 -------------- REFINING (0.1%) Tosco Corp. 25,400 690,563 -------------- RETAILERS (5.4%) Bed Bath & Beyond, Inc. (A) 47,200 1,635,777 Circuit City Stores, Inc. 44,600 2,009,787 Costco Wholesale Corp. (A) 29,500 2,690,955 Dayton Hudson Corp. 61,300 4,501,719 Federated Department Stores, Inc. (A) 53,200 2,689,925 Gap, Inc. 53,350 2,454,100 Home Depot, Inc. 190,047 13,030,097 Lowe's Cos., Inc. 48,000 2,868,000 TJX Companies Inc. 70,900 1,449,019 Wal-Mart Stores, Inc. 354,200 24,484,075 -------------- 57,813,454 --------------
-15- 18 STATEMENT OF INVESTMENTS - CONTINUED
NO. OF MARKET SHARES VALUE ------------ ------------- SERVICES (6.9%) Cendant Corp. (A) 148,500 $ 3,944,531 Medtronic, Inc. 97,300 3,545,369 Microsoft (A) 435,000 50,772,678 Oracle Corp. (A) 139,987 15,682,926 -------------- 73,945,504 -------------- SUPERMARKETS (0.4%) Kroger Co. (A) 70,300 1,326,912 Safeway, Inc. (A) 68,830 2,447,767 -------------- 3,774,679 -------------- TECHNOLOGY (19.7%) America Online, Inc. (A) 207,200 15,630,650 Analog Devices, Inc. (A) 30,800 2,864,400 Automatic Data Processing 41,400 2,230,425 BMC Software, Inc. (A) 50,300 4,019,287 Cisco Systems, Inc. (A) 267,650 28,663,656 Compaq Computer Corp. 131,868 3,568,678 Computer Associates International 42,800 2,993,325 Compuware Corp. (A) 85,100 3,167,320 Corning, Inc. 26,500 3,416,844 Dell Computer Corp. (A) 185,320 9,445,538 Eastman Kodak Co. 23,400 1,550,250 Electronic Data Systems Corp. 56,200 3,761,888 EMC Corp. (A) 70,600 7,713,050 Gateway Inc. (A) 19,800 1,426,837 Hewlett Packard Co. 87,200 9,935,350 Intel Corp. 285,720 23,509,413 International Business Machines Corp. 150,000 16,200,000 Lexmark International Group, Inc. (A) 28,900 2,615,450 Micron Technologies, Inc. (A) 27,800 2,161,450 Motorola, Inc. 57,100 8,407,975 PerkinElmer, Inc. 70,400 2,934,800 QUALCOMM, Inc. (A) 70,000 12,326,566 Safeguard Scientifics, Inc. 12,800 2,074,400 Seagate Technology, Inc. (A) 44,800 2,086,000 Solectron Corp. (A) 24,500 2,330,562 Sun Microsystems, Inc. (A) 156,800 12,137,308 Teradyne, Inc. (A) 46,300 3,055,800 Texas Instruments, Inc. 71,500 6,926,562 3Com Corp. (A) 49,400 2,320,259 Xilinx, Inc. (A) 53,000 2,409,846 Yahoo, Inc. (A) 22,720 9,831,371 -------------- 211,715,260 -------------- TELECOMMUNICATIONS (11.4%) ALLTEL Corp. 37,800 3,125,588 AT&T Corp. 266,545 13,527,159 Bell Atlantic Corp. 103,858 6,393,758 BellSouth Corp. 92,700 4,339,519 CenturyTel, Inc. 78,250 3,707,094 Global Crossing, Ltd. 64,800 3,237,978 GTE Corp. 54,000 3,810,375 Lucent Technologies, Inc. 258,098 19,308,957 MCI Worldcom, Inc. (A) 248,627 13,184,986 MediaOne Group, Inc. (A) 56,900 4,370,631 Nextel Communications, Inc. (A) 61,500 6,340,269 Nortel Networks Corp. 105,300 10,635,300 SBC Communications, Inc. 284,718 13,880,003 Sprint Corp. - Fon Group 101,012 6,799,370 Sprint Corp. - PCS Group (A) 67,553 6,924,182 US West, Inc. 43,870 3,158,640 -------------- 122,743,809 -------------- TEXTILE (0.2%) Nike Inc. 44,100 2,185,706 -------------- TOBACCO (0.5%) Loews Corp. 13,800 837,487 Philip Morris Cos. 217,300 5,038,644 -------------- 5,876,131 -------------- TRANSPORTATION SERVICES (0.2%) FDX Corp. (A) 48,300 1,977,281 -------------- U.S. AGENCY (1.0%) Federal Home Loan Mortgage Corp. 80,400 3,783,825 Federal National Mortgage Association 101,100 6,312,431 -------------- 10,096,256 -------------- UTILITIES (1.2%) AES Corp. (A) 36,500 2,728,375 Central & South West Corp. 71,200 1,424,000 Edison International 83,600 2,189,275 FPL Group, Inc. 40,200 1,721,062 Peco Energy Co. 70,500 2,449,875 Southern Co. 37,100 871,850 Texas Utilities Co. 51,800 1,842,138 -------------- 13,226,575 -------------- TOTAL COMMON STOCK (COST $697,976,696) 1,027,456,528 --------------
-16- 19 STATEMENT OF INVESTMENTS - CONTINUED
PRINCIPAL MARKET AMOUNT VALUE ------------ ------------ SHORT-TERM INVESTMENTS (4.6%) COMMERCIAL PAPER (4.4%) Ford Motor Credit Co., 6.73% due January 13, 2000 $ 15,000,000 $ 14,969,985 G.E. Capital Corp., 6.53% due February 2, 2000 15,750,000 15,669,313 Harvard University, 5.07% due January 4, 2000 2,500,000 2,498,472 Household Financial Corp., 4.06% due January 3, 2000 2,309,000 2,308,487 Morgan Stanley Dean Witter & Co., 6.41% due February 28, 2000 10,000,000 9,906,580 Tampa Electric Co., 6.36% due January 18, 2000 1,730,000 1,725,194 -------------- 47,078,031 -------------- U.S. TREASURY (0.2%) United States of America Treasury, 5.40% due March 16, 2000 (B) 650,000 642,105 United States of America Treasury, 4.83% due April 27, 2000 (B) 1,475,000 1,450,120 -------------- 2,092,225 -------------- TOTAL SHORT-TERM INVESTMENTS (COST $49,154,153) 49,170,256 -------------- NOTIONAL VALUE ------------ FUTURES CONTRACTS (0.0%) S&P 500 Stock Index, Exp. March, 2000 (C) $ 37,105,000 - --------------- TOTAL INVESTMENTS (100%) (COST $747,130,849) (D) $1,076,626,784 ==============
NOTES (A) Non-income Producing Security. (B) Par value of $2,085,000 pledged to cover margin deposits on futures contracts. (C) As more fully discussed in Note 1 to the financial statements, it is Account GIS's practice to hold cash and cash equivalents (including short-term investments) at least equal to the underlying face value, or notional value, of outstanding purchased futures contracts, less the initial margin. Account GIS uses futures contracts as a substitute for holding individual securities. (D) At December 31, 1999, net unrealized appreciation for all securities was $329,495,935. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of market value over cost of $362,297,427 and aggregate gross unrealized depreciation for all securities in which there was an excess of cost over market value of $32,801,492. See Notes to Financial Statements -17- 20 INDEPENDENT AUDITORS' REPORT To the Board of Managers and the Owners of Variable Annuity Contracts of The Travelers Growth and Income Stock Account for Variable Annuities: We have audited the accompanying statement of assets and liabilities of The Travelers Growth and Income Stock Account for Variable Annuities, including the statement of investments, as of December 31, 1999, and the related statements of operations, changes in net assets and the selected per unit data and ratios for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. The accompanying statement of changes in net assets for the year ended December 31, 1998 and selected per unit data and ratios for each of the years in the four-year period ended December 31, 1998 were audited by other auditors whose report thereon dated February 15, 1999, expressed an unqualified opinion on that statement of changes in net assets and those selected per unit data and ratios. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of investment securities owned as of December 31, 1999, by correspondence with the custodian and brokers. 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 Growth and Income Stock Account for Variable Annuities as of December 31, 1999, and the results of its operations, changes in net assets and the selected per unit data and ratios for the year then ended, in conformity with generally accepted accounting principles. /s/ KPMG LLP Hartford, Connecticut February 18, 2000 -18- 21 THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES The Travelers Quality Bond Account for Variable Annuities ("Account QB") returned 0.78% for the year versus 0.39% for The Lehman Intermediate Government/Corporate Bond Index (The Lehman Intermediate Government/Corporate Bond Index is a combination of publicly issued intermediate and long-term U.S. government bonds and corporate bonds). Account QB outperformed it's benchmark by 39 basis points for the year. In the U.S., the decade closed out with peace and prosperity. Rolling 12-month core inflation and unemployment both hit 30-year lows, while consumer confidence hit a 30-year high and productivity a 7-year high. Housing and auto activity broke records, but both contributed to some small inflationary signs and began to taper as interest rates had some minor impact. Consumers continued to drive the economy by spending. The savings rate dropped to negative territory, as compared to income, but this is justified in consumers' minds by enormous wealth creation powered by the stock market. Spending as a fraction of assets is actually low. The budget surplus and trade deficit both widened, while the dollar hit euro parity. The year pulled the U.S. economic expansion to within two months of shattering an all-time longevity record. In the process, it brought the Treasury curve higher by 179 basis points at the 10-year level to 6.44% and surged equities once again, the Standard & Poor's 500 Stock Index exceeding a 20% total return for the fifth year in a row. The Federal Open Market Committee which has responded to the worldwide spread of an Asian economic crisis in 1998 with three decreases in the overnight lending rate, reversed those moves with three 25 basis point tightenings in 1999, as economies recovered from 1998's downturn and no longer put outside pressure on the U. S.'s safe dollar investments. Thus, while rates rose substantially throughout this past year, much of it was a cancellation of a temporary loose-money policy from the prior year that was driven by international, not domestic, forces. Prior to the Asian crisis, the Federal Reserve Board ("Fed") already had a tightening bias due to America's own high speed economy. The bond market is therefore bearish, having priced in 75 more points of Fed tightening in the first six months of the year. Higher rates are not drawing as much attention to bonds as they normally would, given the type of equity returns seen recently. This complacency indicates that rate-increase anticipation is warranted. We are therefore of a slightly short-duration mindset, remaining very close to neutral due to the negative sentiment that has already been priced in. The risk to an upward rate surprise lies in the potential for the market to view the Fed as being behind the curve in the control of inflation. Additionally, a weakening of the dollar would also contribute to rising rates. Spreads have tightened since their wide levels last summer but remain historically high and therefore could continue to tighten 20-25 basis points in the next 6-12 months. Dealer appetite bouncing back after position-reductions following 1998's crisis and Y2K should push this trend. An opposing spread force remains the fact that government debt will probably continue to decrease, thereby lowering treasury yields. We maintain our overweight position in spread product, as the above-normal spread advantage should outweigh any spread volatility. PORTFOLIO MANAGER: F. DENNEY VOSS [TAMIC LOGO] -19- 22 THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES [BAR GRAPH]
1 Year 3 Years 5 Years ------ ------- ------- The Travelers Quality Bond Account for Variable Annuities 0.78% 4.72% 6.33% Lipper Short Intermediate Investment Grade Debt Category Average 0.53% 3.49% 4.67%
This is a comparison of The Travelers Quality Bond Account for Variable Annuities ("Account QB") versus Lipper Analytical Services' variable annuity composite index, which provides the average performance of variable annuity funds with similar objectives as of December 31, 1999. Lipper Analytical Services is a leading independent Variable Insurance Product Performance Analysis Service. The performance of the composite is net of all asset based fees such as mortality and expense charges and investment management fees. Performance reflects the charges associated with Universal Annuity, which became available on May 16, 1983. Contracts issued prior to May 16, 1983 have different contract charges that result in different performance than presented above. Account QB performance information is net of: 1) the 1.25% annual mortality and expense risk charge, and 2) investment management fees. The deduction of the $15 semi-annual administrative charge and the contingent deferred sales charge (5% maximum) is not reflected. The deduction of those charges would reduce any percentage increase or make greater any percentage decrease. Performance data quoted represents past performance. Investment return and principal value of an investment will fluctuate so that an investor's units, when redeemed, may be worth more or less than their original cost. The following is the performance data required by SEC rules governing uniform performance reporting: one year -4.39%, five year 5.36% and ten year 5.84%. This performance is based on a $1,000 hypothetical investment and reflects deductions of all fees and charges including the semi-annual administrative charge and the maximum deferred sales charge of 5%. -20- 23 THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1999 ASSETS: Investment securities, at market value (cost $139,481,975) . . . . . . . . . . . . . . . . . . . $ 136,287,761 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203,921 Receivables: Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,557,887 Purchase payments and transfers from other Travelers accounts . . . . . . . . . . . . . . . . 115,240 Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,842 -------------------- Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139,166,651 -------------------- LIABILITIES: Payables: Contract surrenders and transfers to other Travelers accounts . . . . . . . . . . . . . . . . 247,964 Investment management and advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,106 Insurance charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,319 Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 938 -------------------- Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300,327 -------------------- NET ASSETS: $ 138,866,324 ====================
See Notes to Financial Statements -21- 24 THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999 INVESTMENT INCOME: Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,993,418 EXPENSES: Investment management and advisory fees . . . . . . . . . . . . . . . . . . . . . . . . $ 495,204 Insurance charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,815,678 ----------------- Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,310,882 ----------------- Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,682,536 ----------------- REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES: Realized gain (loss) from investment security transactions: Proceeds from investment securities sold . . . . . . . . . . . . . . . . . . . . . . 522,959,789 Cost of investment securities sold . . . . . . . . . . . . . . . . . . . . . . . . . 526,224,337 ----------------- Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,264,548) Change in unrealized gain (loss) on investment securities: Unrealized loss at December 31, 1998 . . . . . . . . . . . . . . . . . . . . . . . . (6,261) Unrealized loss at December 31, 1999 . . . . . . . . . . . . . . . . . . . . . . . . (3,194,214) ----------------- Net change in unrealized gain (loss) for the year . . . . . . . . . . . . . . . . . (3,187,953) ----------------- Net realized gain (loss) and change in unrealized gain (loss) . . . . . . . (6,452,501) ----------------- Net increase in net assets resulting from operations . . . . . . . . . . . . . . . . . $ 1,230,035 =================
See Notes to Financial Statements -22- 25 THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998 ---- ---- OPERATIONS: Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,682,536 $ 7,612,761 Net realized gain (loss) from investment security transactions . . . . . (3,264,548) 4,823,305 Net change in unrealized gain (loss) on investment securities . . . . . . (3,187,953) (1,701,374) ----------------------- ----------------------- Net increase in net assets resulting from operations . . . . . . . . . 1,230,035 10,734,692 ----------------------- ----------------------- UNIT TRANSACTIONS: Participant purchase payments (applicable to 1,784,107 and 2,278,275 units, respectively) . . . . . 10,308,965 12,701,859 Participant transfers from other Travelers accounts (applicable to 2,515,938 and 3,679,128 units, respectively) . . . . . 14,547,000 20,644,939 Administrative charges (applicable to 15,591 and 17,717 units, respectively) . . . . . . . . . (90,289) (100,331) Contract surrenders (applicable to 3,295,199 and 2,743,477 units, respectively) . . . . . . (19,155,386) (15,435,681) Participant transfers to other Travelers accounts (applicable to 5,288,415 and 4,063,248 units, respectively) . . . . . . (30,584,506) (22,650,450) Other payments to participants (applicable to 194,998 and 206,656 units, respectively) . . . . . . . (1,142,207) (1,173,615) ----------------------- ----------------------- Net decrease in net assets resulting from unit transactions . . . . . . (26,116,423) (6,013,279) ----------------------- ----------------------- Net increase (decrease) in net assets . . . . . . . . . . . . . . . (24,886,388) 4,721,413 NET ASSETS: Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163,752,712 159,031,299 ----------------------- ----------------------- End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 138,866,324 $ 163,752,712 ======================= =======================
See Notes to Financial Statements -23- 26 NOTES TO FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES The Travelers Quality Bond Account for Variable Annuities ("Account QB") is a separate account of The Travelers Insurance Company ("The Travelers"), an indirect wholly owned subsidiary of Citigroup Inc., and is available for funding certain variable annuity contracts issued by The Travelers. Account QB is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. The following is a summary of significant accounting policies consistently followed by Account QB in the preparation of its financial statements. SECURITY VALUATION. Investments in securities traded on a national securities exchange are valued at the 4:00 p.m. Eastern Standard Time price of the New York Stock Exchange on the last business day of the year; securities traded on the over-the-counter market and listed securities with no reported sales are valued at the mean between the last-reported bid and asked prices or on the basis of quotations received from a reputable broker or other recognized source. When market quotations are not considered to be readily available for long-term corporate bonds and notes, such investments are generally stated at fair value on the basis of valuations furnished by a pricing service. These valuations are determined for normal institutional-size trading units of such securities using methods based on market transactions for comparable securities and various relationships between securities which are generally recognized by institutional traders. Securities, including restricted securities, for which pricing services are not readily available, are valued by management at prices which it deems in good faith to be fair. Short-term investments for which a quoted market price is available are valued at market. Short-term investments for which there is no reliable quoted market price are valued at amortized cost which approximates market. SECURITY TRANSACTIONS. Security transactions are accounted for on the trade date. Interest income is recorded on the accrual basis. Premiums and discounts are amortized to interest income utilizing the constant yield method. FUTURES CONTRACTS. Account QB may use interest rate futures contracts as a substitute for the purchase or sale of individual securities. When Account QB enters into a futures contract, it agrees to buy or sell specified debt securities at a future time for a fixed price, unless the contract is closed prior to expiration. Account QB is obligated to deposit with a broker an "initial margin" equivalent to a percentage of the face, or notional value of the contract. It is Account QB's practice to hold cash and cash equivalents in an amount at least equal to the notional value of outstanding purchased futures contracts, less the initial margin. Cash and cash equivalents include cash on hand, securities segregated under federal and brokerage regulations, and short-term highly liquid investments with maturities generally three months or less when purchased. Generally, futures contracts are closed prior to expiration. Futures contracts purchased by Account QB are priced and settled daily; accordingly, changes in daily prices are recorded as realized gains or losses and no asset is recorded in the Statement of Investments. However, when Account QB holds open futures contracts, it assumes a market risk generally equivalent to the underlying market risk of change in the value of the debt securities associated with the futures contract. REPURCHASE AGREEMENTS. When Account QB enters into a repurchase agreement (a purchase of securities whereby the seller agrees to repurchase the securities at a mutually agreed upon date and price), the repurchase price of the securities will generally equal the amount paid by Account QB plus a negotiated interest amount. The seller under the repurchase agreement will be required to provide to Account QB securities (collateral) whose market value, including accrued interest, will be at least equal to 102% of the repurchase price. Account QB monitors the value of collateral on a daily basis. Repurchase agreements will be limited to transactions with national banks and reporting broker dealers believed to present minimal credit risks. Account QB's custodian will take actual or constructive receipt of all securities underlying repurchase agreements until such agreements expire. -24- 27 NOTES TO FINANCIAL STATEMENTS - CONTINUED FEDERAL INCOME TAXES. The operations of Account QB form a part of the total operations of The Travelers and are not taxed separately. The Travelers is taxed as a life insurance company under the Internal Revenue Code of 1986, as amended (the "Code"). Under existing federal income tax law, no taxes are payable on the investment income and capital gains of Account QB. Account QB 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 year. Actual results could differ from those estimates. 2. INVESTMENTS The aggregate costs of purchases and proceeds from sales of investments (other than short-term securities) were $237,492,487 and $212,423,379, respectively; the costs of purchases and proceeds from sales of direct and indirect U.S. government securities were $239,438,684 and $268,866,956, respectively, for the year ended December 31, 1999. Realized gains and losses from investment security transactions are reported on an identified cost basis. 3. CONTRACT CHARGES Investment management and advisory fees are calculated daily at an annual rate of 0.3233% of Account QB's average net assets. These fees are paid to Travelers Asset Management International Corporation, an indirect wholly owned subsidiary of Citigroup Inc. Insurance charges are paid for the mortality and expense risks assumed by The Travelers. Each business day, The Travelers deducts a mortality and expense risk charge which is reflected in our calculation of accumulation and annuity unit values. This charge equals, on an annual basis, 1.0017% for contracts issued prior to May 16, 1983 and 1.25% on an annual basis for contracts issued on or after May 16, 1983. Additionally, for certain contracts in the accumulation phase, a semi-annual charge of $15 (prorated for partial years) is deducted from participant account balances and paid to The Travelers to cover administrative charges. On contracts issued prior to May 16, 1983, The Travelers retained from Account QB sales charges of $7,024 and $8,940 for the years ended December 31, 1999 and 1998, respectively. The Travelers generally assesses a 5% contingent deferred sales charge if a participant's purchase payment is surrendered within five years of its payment date. Contract surrender payments include $85,184 and $70,717 of contingent deferred sales charges for the years ended December 31, 1999 and 1998, respectively. -25- 28 NOTES TO FINANCIAL STATEMENTS - CONTINUED 4. NET ASSETS HELD ON BEHALF OF AN AFFILIATE Approximately $310,000 and $457,000 of the net assets of Account QB were held on behalf of an affiliate of The Travelers as of December 31, 1999 and 1998, respectively. Transactions with this affiliate during the years ended December 31, 1999 and 1998, were comprised of participant purchase payments of approximately $105,000 and $112,000 and contract surrenders of approximately $249,000 and $74,000, respectively. 5. NET CONTRACT OWNERS' EQUITY
DECEMBER 31, 1999 ---------------------------------------------------- UNIT NET UNITS VALUE ASSETS ----- ----- ------ Accumulation phase of contracts issued prior to May 16, 1983 . . . . . . . 6,108,924 $ 6.055 $ 36,996,241 Annuity phase of contracts issued prior to May 16, 1983 . . . . . . . . . . 115,366 6.055 698,668 Accumulation phase of contracts issued on or after May 16, 1983 . . . . . . 17,404,205 5.810 101,124,507 Annuity phase of contracts issued on or after May 16, 1983 . . . . . . . . 8,073 5.810 46,908 -------------------- Net Contract Owners' Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 138,866,324 ====================
-26- 29 NOTES TO FINANCIAL STATEMENTS - CONTINUED 6. SUPPLEMENTARY INFORMATION (Selected data for a unit outstanding throughout each year.)
Contracts issued prior to May 16, 1983 FOR THE YEARS ENDED DECEMBER 31, -------------------------------------------------- 1999 1998 1997 1996 1995 ---- ---- ---- ---- ---- SELECTED PER UNIT DATA: Total investment income . . . . . . . . . . . . . . . . . . . . . $ .393 $ .363 $ .353 $ .379 $ .328 Operating expenses . . . . . . . . . . . . . . . . . . . . . . . .080 .076 .071 .067 .063 --------- --------- --------- --------- ---------- Net investment income . . . . . . . . . . . . . . . . . . . . . . .313 .287 .282 .312 .265 Unit value at beginning of year . . . . . . . . . . . . . . . . . 5.994 5.593 5.234 5.050 4.400 Net realized and change in unrealized gains (losses) . . . . . . (.252) .114 .077 (.128) .385 --------- --------- --------- --------- ---------- Unit value at end of year . . . . . . . . . . . . . . . . . . . . $ 6.055 $ 5.994 $ 5.593 $ 5.234 $ 5.050 ========= ========= ========= ========= ========== SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase in unit value . . . . . . . . . . . . . . . . . . . $ .06 $ .40 $ .36 $ .18 $ .65 Ratio of operating expenses to average net assets . . . . . . . . 1.33% 1.33% 1.33% 1.33% 1.33% Ratio of net investment income to average net assets . . . . . . 5.22% 4.96% 5.25% 6.12% 5.54% Number of units outstanding at end of year (thousands) . . . . . 6,224 6,880 7,683 8,549 9,325 Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . . 340% 438% 196% 176% 138% Contracts issued on or after May 16, 1983 FOR THE YEARS ENDED DECEMBER 31, -------------------------------------------------- 1999 1998 1997 1996 1995 ---- ---- ---- ---- ---- SELECTED PER UNIT DATA: Total investment income . . . . . . . . . . . . . . . . . . . . . $ .378 $ .350 $ .342 $ .368 $ .319 Operating expenses . . . . . . . . . . . . . . . . . . . . . . . .091 .088 .082 .078 .073 --------- --------- --------- --------- ---------- Net investment income . . . . . . . . . . . . . . . . . . . . . . .287 .262 .260 .290 .246 Unit value at beginning of year . . . . . . . . . . . . . . . . . 5.765 5.393 5.060 4.894 4.274 Net realized and change in unrealized gains (losses) . . . . . . (.242) .110 .073 (.124) .374 --------- --------- --------- --------- ---------- Unit value at end of year . . . . . . . . . . . . . . . . . . . . $ 5.810 $ 5.765 $ 5.393 $ 5.060 $ 4.894 ========= ========= ========= ========= ========== SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase in unit value . . . . . . . . . . . . . . . . . . . $ .04 $ .37 $ .33 $ .17 $ .62 Ratio of operating expenses to average net assets . . . . . . . . 1.57% 1.57% 1.57% 1.57% 1.57% Ratio of net investment income to average net assets . . . . . . 4.97% 4.71% 5.00% 5.87% 5.29% Number of units outstanding at end of year (thousands) . . . . . 17,412 21,251 21,521 24,804 27,066 Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . . 340% 438% 196% 176% 138%
-27- 30 THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF INVESTMENTS DECEMBER 31, 1999
PRINCIPAL MARKET AMOUNT VALUE ------------ ------------ BONDS (86.7%) AIRLINES (1.2%) Delta Airlines, Inc., 9.25% Sinking Fund, 2007 $ 1,575,087 $ 1,577,955 -------------- BANKING (4.1%) Banponce Financial Corp., 7.30% Debentures, 2002 4,100,000 4,094,293 MBNA American Bank NA, 6.00% Debentures, 2000 1,500,000 1,482,259 -------------- 5,576,552 -------------- FINANCE (19.2%) Comdisco, Inc., 7.25% Debentures, 2001 6,800,000 6,755,752 FINOVA Capital Corp., 6.25% Debentures, 2002 7,500,000 7,288,845 Orix Credit Alliance, 6.78% Debentures, 2001 5,900,000 5,843,431 Osprey Holdings, Inc., 8.31% Debentures, 2003 6,300,000 6,259,548 -------------- 26,147,576 -------------- FOOD (5.6%) Nabisco, Inc., 6.70% Debentures, 2002 7,800,000 7,647,377 -------------- GAMING (5.1%) Park Place Entertainment, 7.95% Debentures, 2003 7,000,000 6,937,658 -------------- HEALTHCARE (3.4%) Columbia/HCA Healthcare Corp., 6.87% Debentures, 2003 5,000,000 4,655,915 -------------- INSURANCE (3.4%) USAA Capital Corp., 7.05 Debentures, 2006 4,700,000 4,601,897 -------------- INTEGRATED ENERGY (5.3%) Noram Energy Corp., 7.50% Debentures, 2000 7,250,000 7,282,321 -------------- LODGING (4.9%) Marriott International, Inc., 7.88% Debentures, 2009 6,800,000 6,689,650 -------------- RAILROADS (1.3%) Union Pacific Corp., 6.80% Debentures, 2000 1,700,000 1,722,110 -------------- REAL ESTATE (8.3%) CarrAmerica Realty Corp., 6.63% Debentures, 2000 5,200,000 5,167,120 Nationwide Health Properties, Inc. 6.90% Debentures, 2037 7,000,000 6,204,023 -------------- 11,371,143 -------------- RETAILERS (5.5%) Dayton Hudson Corp., 6.80% Debentures, 2001 1,800,000 1,799,224 Saks, Inc., 7.25% Debentures, 2004 4,000,000 3,811,628 Saks, Inc., 7.50% Debentures, 2010 2,000,000 1,827,946 -------------- 7,438,798 -------------- TELECOMMUNICATIONS (9.9%) AT&T Capital Corp., 6.25% Debentures, 2001 6,250,000 6,186,438 Telecom New Zealand Financial Corp., 6.25% Debentures, 2003 7,500,000 7,347,173 -------------- 13,533,611 -------------- UTILITIES (9.5%) CilCorp, Inc., 9.38% Debentures, 2029 3,300,000 3,415,764 CMS Energy Corp., 7.63% Debentures, 2004 1,750,000 1,658,279 CMS Energy Corp., 6.75% Debentures, 2004 2,000,000 1,855,730 UtiliCorp United, Inc., 6.88% Debentures, 2004 6,300,000 6,054,917 -------------- 12,984,690 -------------- TOTAL BONDS (COST $121,015,474) 118,167,253 -------------- U.S. GOVERNMENT SECURITIES (13.3%) United States of America Treasury, 11.25% Notes, 2015 5,300,000 7,491,221 United States of America Treasury 6.00% Notes, 2009 5,300,000 5,136,034 United States of America Treasury 5.88% Notes, 2004 5,600,000 5,493,253 -------------- TOTAL U.S. GOVERNMENT SECURITIES (COST $18,466,501) 18,120,508 -------------- TOTAL INVESTMENTS (100%) (COST $139,481,975) (A) $ 136,287,761 ==============
NOTES (A) At December 31, 1999, net unrealized depreciation for all securities was $3,194,214. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of market value over cost of $127,012 and aggregate gross unrealized depreciation for all securities in which there was an excess of cost over market value of $3,321,226. See Notes to Financial Statements -28- 31 INDEPENDENT AUDITORS' REPORT To the Board of Managers and the Owners of Variable Annuity Contracts of The Travelers Quality Bond Account for Variable Annuities: We have audited the accompanying statement of assets and liabilities of The Travelers Quality Bond Account for Variable Annuities, including the statement of investments, as of December 31, 1999, and the related statements of operations, changes in net assets and the selected per unit data and ratios for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. The accompanying statement of changes in net assets for the year ended December 31, 1998 and selected per unit data and ratios for each of the years in the four-year period ended December 31, 1998 were audited by other auditors whose report thereon dated February 15, 1999, expressed an unqualified opinion on that statement of changes in net assets and those selected per unit data and ratios. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of investment securities owned as of December 31, 1999, by correspondence with the custodian and brokers. 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 Quality Bond Account for Variable Annuities as of December 31, 1999, and the results of its operations, changes in net assets and the selected per unit data and ratios for the year then ended, in conformity with generally accepted accounting principles. /s/ KPMG LLP Hartford, Connecticut February 18, 2000 -29- 32 THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES The year 1999 began with little signs of softening in business activity, as the U.S. economy embarked on its ninth year of business expansion. As the year concluded, the robust economy continued with stronger than expected retail sales and industrial production. Unemployment remained low at 4.1% in December and it is estimated that real Gross Domestic Product growth for the fourth quarter will be 5.0%. The year ended with the 30-year Treasury Bond yield at 6.48% and the federal funds rate at 5.50%. The 30-year Treasury Bond yield was up 42 basis points from the September 30 level of 6.05% and 139 basis points from the December 31, 1998 level of 5.09%. During the fourth quarter, the Federal Open Market Committee ("FOMC") increased the federal funds rate by 25 basis points to 5.50%. This brought the total increase for the year to 75 basis points. Currently, the FOMC is expected to tighten 25 basis points on February 2 and possibly another 25 basis points on March 21. Beyond the first quarter, further tightening seems unlikely assuming inflation remains tame. The strategy in management of The Travelers Money Market Account for Variable Annuities will be to reduce maturities from the current average life of 47 days, to approximately 35 to 40 days. At December 31, 1999 the asset size of the portfolio was $181.2 million, with an average yield of 5.99%. PORTFOLIO MANAGER: EMIL J. MOLINARO JR. [TAMIC LOGO] -30- 33 THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES [BAR GRAPH]
1 Year 3 Years 5 Years ------ ------- ------- The Travelers Money Market Account for Variable Annuities 3.72% 3.95% 4.04% Lipper Money Market Category Average 3.58% 3.86% 3.98%
This is a comparison of The Travelers Money Market Account for Variable Annuities ("Account MM") versus Lipper Analytical Services' variable annuity composite index, which provides the average performance of variable annuity funds with similar objectives as of December 31, 1999. Lipper Analytical Services is a leading independent Variable Insurance Product Performance Analysis Service. The performance of the composite is net of all asset based fees such as mortality and expense charges and investment management fees. Performance reflects the charges associated with Universal Annuity, which became available on May 16, 1983. Contracts issued prior to May 16, 1983 have different contract charges that result in different performance than presented above. Account MM performance information is net of: 1) the 1.25% annual mortality and expense risk charge, and 2) investment management fees. The deduction of the $15 semi-annual administrative charge and the contingent deferred sales charge (5% maximum) is not reflected. The deduction of those charges would reduce any percentage increase or make greater any percentage decrease. Performance data quoted represents past performance. Investment return and principal value of an investment will fluctuate so that an investor's units, when redeemed, may be worth more or less than their original cost. The following is the performance data required by SEC rules governing uniform performance reporting: one year -1.46%, five year 3.00% and ten year 3.24%. This performance is based on a $1,000 hypothetical investment and reflects deductions of all fees and charges including the semi-annual administrative charge and the maximum deferred sales charge of 5%. -31- 34 THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1999 ASSETS: Investment securities, at market value (cost $181,233,157) . . . . . . . . . . . . . . . . . . $ 181,259,014 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,109 Receivables: Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168,933 Purchase payments and transfers from other Travelers accounts . . . . . . . . . . . . . . . . 784,905 Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250 --------------------- Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182,215,211 --------------------- LIABILITIES: Payables: Contract surrenders and transfers to other Travelers accounts . . . . . . . . . . . . . . . . 2,614,344 Investment management and advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,237 Insurance charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,030 Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,079 --------------------- Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,684,690 --------------------- NET ASSETS: $ 179,530,521 =====================
See Notes to Financial Statements -32- 35 THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999 INVESTMENT INCOME: Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,655,238 EXPENSES: Investment management and advisory fees . . . . . . . . . . . . . . . . . $ 407,307 Insurance charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,574,244 ------------------- Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,981,551 ----------------- Net investment income . . . . . . . . . . . . . . . . . . . . . . . 4,673,687 ----------------- Net increase in net assets resulting from operations . . . . . . . . . . $ 4,673,687 =================
See Notes to Financial Statements -33- 36 THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998 ---- ---- OPERATIONS: Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,673,687 $ 3,950,167 ----------------------- ----------------------- Net increase in net assets resulting from operations . . . . . . . . . . 4,673,687 3,950,167 ----------------------- ----------------------- UNIT TRANSACTIONS: Participant purchase payments (applicable to 7,727,238 and 6,095,251 units, respectively) . . . . . 19,296,081 14,649,623 Participant transfers from other Travelers accounts (applicable to 137,148,554 and 118,152,715 units, respectively) . . . . 342,447,640 284,523,651 Administrative charges (applicable to 44,123 and 37,011 units, respectively) . . . . . . . . . (111,002) (89,783) Contract surrenders (applicable to 11,795,197 and 8,681,249 units, respectively) . . . . . (29,442,632) (20,899,693) Participant transfers to other Travelers accounts (applicable to 103,863,953 and 109,964,438 units, respectively) . . . (258,947,037) (265,042,626) Other payments to participants (applicable to 207,463 and 143,957 units, respectively) . . . . . . . . (521,752) (346,736) ----------------------- ----------------------- Net increase in net assets resulting from unit transactions . . . . . . 72,721,298 12,794,436 ----------------------- ----------------------- Net increase in net assets . . . . . . . . . . . . . . . . . . . . 77,394,985 16,744,603 NET ASSETS: Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102,135,536 85,390,933 ----------------------- ----------------------- End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 179,530,521 $ 102,135,536 ======================= =======================
See Notes to Financial Statements -34- 37 NOTES TO FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES The Travelers Money Market Account for Variable Annuities ("Account MM") is a separate account of The Travelers Insurance Company ("The Travelers"), an indirect wholly owned subsidiary of Citigroup Inc., and is available for funding certain variable annuity contracts issued by The Travelers. Account MM is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. The following is a summary of significant accounting policies consistently followed by Account MM in the preparation of its financial statements. SECURITY VALUATION. Short-term investments for which a quoted market price is available are valued at market. Short-term investments for which there is no reliable quoted market price are valued at amortized cost which approximates market. SECURITY TRANSACTIONS. Security transactions are accounted for on the trade date. Interest income is recorded on the accrual basis. Premiums and discounts are amortized to interest income utilizing the constant yield method. REPURCHASE AGREEMENTS. When Account MM enters into a repurchase agreement (a purchase of securities whereby the seller agrees to repurchase the securities at a mutually agreed upon date and price), the repurchase price of the securities will generally equal the amount paid by Account MM plus a negotiated interest amount. The seller under the repurchase agreement will be required to provide to Account MM securities (collateral) whose market value, including accrued interest, will be at least equal to 102% of the repurchase price. Account MM monitors the value of collateral on a daily basis. Repurchase agreements will be limited to transactions with national banks and reporting broker dealers believed to present minimal credit risks. Account MM's custodian will take actual or constructive receipt of all securities underlying repurchase agreements until such agreements expire. FEDERAL INCOME TAXES. The operations of Account MM form a part of the total operations of The Travelers and are not taxed separately. The Travelers is taxed as a life insurance company under the Internal Revenue Code of 1986, as amended (the "Code"). Under existing federal income tax law, no taxes are payable on the investment income and capital gains of Account MM. Account MM 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 year. Actual results could differ from those estimates. 2. CONTRACT CHARGES Investment management and advisory fees are calculated daily at an annual rate of 0.3233% of Account MM's average net assets. These fees are paid to Travelers Asset Management International Corporation, an indirect wholly owned subsidiary of Citigroup Inc. Insurance charges are paid for the mortality and expense risks assumed by The Travelers. Each business day, The Travelers deducts a mortality and expense risk charge which is reflected in our calculation of accumulation and annuity unit values. This charge equals, on an annual basis, 1.0017% for contracts issued prior to May 16, 1983 and 1.25% on an annual basis for contracts issued on or after May 16, 1983. Additionally, for certain contracts in the accumulation phase, a semi-annual charge of $15 (prorated for partial years) is deducted from participant account balances and paid to The Travelers to cover administrative charges. The Travelers assesses a 5% contingent deferred sales charge if a participant's purchase payment is surrendered within five years of its payment date. Contract surrender payments include $191,288 and $153,043 of contingent deferred sales charges for the years ended December 31, 1999 and 1998, respectively. -35- 38 NOTES TO FINANCIAL STATEMENTS - CONTINUED 3. NET ASSETS HELD ON BEHALF OF AN AFFILIATE Approximately $3,431,000 and $3,434,000 of the net assets of Account MM were held on behalf of an affiliate of The Travelers as of December 31, 1999 and 1998, respectively. Transactions with this affiliate during the years ended December 31, 1999 and 1998, were comprised of participant purchase payments of approximately $2,249,000 and $2,874,000 and contract surrenders of approximately $2,377,000 and $2,269,000, respectively. 4. NET CONTRACT OWNERS' EQUITY
DECEMBER 31, 1999 ----------------------------------------------------- UNIT NET UNITS VALUE ASSETS ----- ----- ------ Accumulation phase of contracts issued prior to May 16, 1983 . . . . 24,211 $ 2.649 $ 64,141 Annuity phase of contracts issued prior to May 16, 1983 . . . . . . . 56,054 2.649 148,502 Accumulation phase of contracts issued on or after May 16, 1983 . . . 70,434,197 2.541 179,035,248 Annuity phase of contracts issued on or after May 16, 1983 . . . . . 111,189 2.541 282,630 ----------------- Net Contract Owners' Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 179,530,521 =================
-36- 39 NOTES TO FINANCIAL STATEMENTS - CONTINUED 5. SUPPLEMENTARY INFORMATION (Selected data for a unit outstanding throughout each year.)
Contracts issued prior to May 16, 1983 FOR THE YEARS ENDED DECEMBER 31, -------------------------------------------------- 1999 1998 1997 1996 1995 ---- ---- ---- ---- ---- SELECTED PER UNIT DATA: Total investment income . . . . . . . . . . . . . . . . . . . $ .135 $ .138 $ .134 $ .125 $ .130 Operating expenses . . . . . . . . . . . . . . . . . . . . . .034 .033 .032 .030 .030 --------- --------- --------- --------- ---------- Net investment income . . . . . . . . . . . . . . . . . . . . .101 .105 .102 .095 .100 Unit value at beginning of year . . . . . . . . . . . . . . . 2.548 2.443 2.341 2.246 2.146 --------- --------- --------- --------- ---------- Unit value at end of year . . . . . . . . . . . . . . . . . . $ 2.649 $ 2.548 $ 2.443 $ 2.341 $ 2.246 ========= ========= ========= ========= ========== SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase in unit value . . . . . . . . . . . . . . . . . $ .10 $ .11 $ .10 $ .10 $ .10 Ratio of operating expenses to average net assets . . . . . . 1.33% 1.33% 1.33% 1.33% 1.33% Ratio of net investment income to average net assets . . . . 3.87% 4.20% 4.27% 4.10% 4.61% Number of units outstanding at end of year (thousands) . . . 80 91 105 112 206 Contracts issued on or after May 16, 1983 FOR THE YEARS ENDED DECEMBER 31, -------------------------------------------------- 1999 1998 1997 1996 1995 ---- ---- ---- ---- ---- SELECTED PER UNIT DATA: Total investment income . . . . . . . . . . . . . . . . . . . $ .130 $ .133 $ .128 $ .121 $ .127 Operating expenses . . . . . . . . . . . . . . . . . . . . . .039 .038 .036 .035 .034 --------- --------- --------- --------- ---------- Net investment income . . . . . . . . . . . . . . . . . . . . .091 .095 .092 .086 .093 Unit value at beginning of year . . . . . . . . . . . . . . . 2.450 2.355 2.263 2.177 2.084 --------- --------- --------- --------- ---------- Unit value at end of year . . . . . . . . . . . . . . . . . . $ 2.541 $ 2.450 $ 2.355 $ 2.263 $ 2.177 ========= ========= ========= ========= ========== SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase in unit value . . . . . . . . . . . . . . . . . $ .09 $ .10 $ .09 $ .09 $ .09 Ratio of operating expenses to average net assets . . . . . . 1.57% 1.57% 1.57% 1.57% 1.57% Ratio of net investment income to average net assets . . . . 3.62% 3.95% 4.02% 3.84% 4.36% Number of units outstanding at end of year (thousands) . . . 70,545 41,570 36,134 38,044 35,721
-37- 40 THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF INVESTMENTS DECEMBER 31, 1999
PRINCIPAL MARKET AMOUNT VALUE ------------ ------------ SHORT-TERM INVESTMENTS (100%) COMMERCIAL PAPER (100%) Albertsons, Inc., 6.57% due July 14, 2000 $ 5,000,000 $ 4,998,924 Alcoa Inc., 6.11% due January 31, 2000 3,100,000 3,085,104 AlliedSignal, Inc., 6.07% due February 28, 2000 4,570,000 4,537,781 American Home Products Corp., 6.43% due January 28, 2000 1,000,000 995,664 American Honda Financial, 6.08% due February 17, 2000 7,000,000 6,947,234 Asset Securitization Corp., 6.07% due January 28, 2000 5,000,000 4,979,100 Asset Securitization Corp., 6.09% due February 28, 2000 3,000,000 2,971,974 AT&T Corp., 6.20% due July 13, 2000 5,000,000 4,996,920 Bell Atlantic Financial Services, Inc. 6.03% due January 20, 2000 8,230,000 8,204,578 BHF Finance, Inc., 6.46% due January 7, 2000 1,500,000 1,498,392 BHF Finance, Inc., 6.00% due February 24, 2000 6,750,000 6,691,390 Coca-Cola Co., 6.14% due March 3, 2000 6,500,000 6,435,020 DE Funding Corp., 6.14% due February 4, 2000 2,000,000 1,989,116 DE Funding Corp., 6.05% due February 22, 2000 6,200,000 6,148,205 Deere & Co., 6.07% due January 31, 2000 6,300,000 6,287,394 Equitable Life Assurance, 5.99% due February 10, 2000 6,500,000 6,458,374 Federal Home Loan Bank, 5.77% due February 2, 2000 8,475,000 8,437,922 Federal National Mortgage 5.74% due January 14, 2000 7,525,000 7,509,656 Ford Motor Credit Co., 5.62% due February 3, 2000 2,000,000 1,989,434 General Dynamics Corp., 6.18% due February 29, 2000 5,975,000 5,918,202 General Motors Acceptance, 5.17% due April 17, 2000 3,500,000 3,508,438 Goldman Sachs Group LP, 6.64% due January 31, 2000 2,500,000 2,487,987 Goldman Sachs Group LP, 6.11% due March 1, 2000 5,000,000 5,000,000 Household Financial Corp., 4.06% due January 3, 2000 3,688,000 3,687,180 J.P. Morgan & Company, 6.19% due February 8, 2000 4,900,000 4,870,193 J.P. Morgan & Company, 6.11% due February 28, 2000 1,000,000 990,658 Merrill Lynch & Co., Inc., 6.11% due February 29, 2000 7,000,000 6,933,458 Morgan Stanley Dean Witter & Co. 6.11% due January 19, 2000 7,000,000 6,979,462 Motorola, Inc., 6.22% due March 30, 2000 5,000,000 4,927,535 National Rural Utilities Coop Financial Corp., 5.91% due January 26, 2000 2,300,000 2,290,745 PG&E Corp., 6.15% due February 3, 2000 8,000,000 7,957,736 PacifiCorp., 5.99% due February 7, 2000 5,250,000 5,218,910 Pfizer, Inc., 5.86% due February 2, 2000 2,917,000 2,902,056 Preferred Resources Funding Corp., 6.28% due January 20, 2000 4,300,000 4,286,717 Preferred Resources Funding Corp., 6.24% due January 27, 2000 3,700,000 3,684,534 Providian Master Trust, 6.73% due January 18, 2000 7,500,000 7,479,165 Riverwood Funding, 6.62% due January 11, 2000 5,000,000 4,991,550 Transamerica Financial Corp., 6.40% due February 25, 2000 2,000,000 1,982,306 -------------- TOTAL INVESTMENTS (100%) (COST $181,233,157) $ 181,259,014 ==============
See Notes to Financial Statements -38- 41 INDEPENDENT AUDITORS' REPORT To the Board of Managers and the Owners of Variable Annuity Contracts of The Travelers Money Market Account for Variable Annuities: We have audited the accompanying statement of assets and liabilities of The Travelers Money Market Account for Variable Annuities, including the statement of investments, as of December 31, 1999, and the related statements of operations, changes in net assets and the selected per unit data and ratios for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. The accompanying statement of changes in net assets for the year ended December 31, 1998 and selected per unit data and ratios for each of the years in the four-year period ended December 31, 1998 were audited by other auditors whose report thereon dated February 15, 1999, expressed an unqualified opinion on that statement of changes in net assets and those selected per unit data and ratios. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of investment securities owned as of December 31, 1999, by correspondence with the custodian and brokers. 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 Money Market Account for Variable Annuities as of December 31, 1999, and the results of its operations, changes in net assets and the selected per unit data and ratios for the year then ended, in conformity with generally accepted accounting principles. /s/ KPMG LLP Hartford, Connecticut February 18, 2000 -39- 42 This page intentionally left blank. 43 Investment Adviser ------------------ TRAVELERS ASSET MANAGEMENT INTERNATIONAL CORPORATION Hartford, Connecticut THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES Investment Sub-Adviser ---------------------- THE TRAVELERS INVESTMENT MANAGEMENT COMPANY Hartford, Connecticut THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES Independent Accountants ----------------------- KPMG LLP Hartford, Connecticut Custodian --------- THE CHASE MANHATTAN BANK, N.A. New York, New York This report is prepared for the general information of contract owners and is not an offer of units of The Travelers Growth and Income Stock Account for Variable Annuities, The Travelers Quality Bond Account for Variable Annuities or The Travelers Money Market Account for Variable Annuities. It should not be used in connection with any offer except in conjunction with the Universal Annuity Prospectus which contains all pertinent information, including the applicable sales commissions. VG-137 (Annual) (12-99) Printed in U.S.A. -----END PRIVACY-ENHANCED MESSAGE-----