-----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, IfShHtOFE0LXF4RwKQg1H3v1VOCMt9XvPIQAINdq6F9GGQPTGOGwhoy3XoQbCpcu HdG9yI7aqnUC4iQFSQk2nA== 0000950123-01-505359.txt : 20010813 0000950123-01-505359.hdr.sgml : 20010813 ACCESSION NUMBER: 0000950123-01-505359 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010810 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRAVELERS GROWTH & INCOME STOCK ACCT FOR VARIABLE ANNUITIES CENTRAL INDEX KEY: 0000099444 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 060566090 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-01539 FILM NUMBER: 1704757 BUSINESS ADDRESS: STREET 1: ONE TOWER SQ STREET 2: C/O TRAVELERS INSURANCE CO CITY: HARTFORD STATE: CT ZIP: 06183-2020 BUSINESS PHONE: 8602770111 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 MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES CENTRAL INDEX KEY: 0000700871 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 060566090 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-03409 FILM NUMBER: 1704758 BUSINESS ADDRESS: STREET 1: ONE TOWER SQ STREET 2: C/O TRAVELERS INSURANCE CO CITY: HARTFORD STATE: CT ZIP: 06183 BUSINESS PHONE: 8602770111 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 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES CENTRAL INDEX KEY: 0000099440 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 060566090 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-02571 FILM NUMBER: 1704760 BUSINESS ADDRESS: STREET 1: ONE TOWER SQ STREET 2: C/O TRAVELERS INSURANCE CO CITY: HARTFORD STATE: CT ZIP: 06183-2020 BUSINESS PHONE: 8602770111 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 N-30D 1 y52132n-30d.txt SEMI-ANNUAL REPORTS 1 UNIVERSAL ANNUITY SEMI-ANNUAL REPORTS JUNE 30, 2001 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 [TRAVELERS LOGO] The Travelers Insurance Company The Travelers Life and Annuity Company One Tower Square Hartford, CT 06183 2 [TAMIC LOGO] Travelers Asset Management International Company, LLC ("TAMIC") provides fixed income management and advisory services for the following Travelers Variable Product 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] Travelers Investment Management Company ("TIMCO") provides equity management and subadvisory services for The Travelers Growth and Income Stock Account for Variable Annuities. 3 [TRAVELERS LOGO] THE TRAVELERS VARIABLE PRODUCT SEPARATE ACCOUNTS INVESTMENT ADVISORY COMMENTARY AS OF JUNE 30, 2001 MARKET AND ECONOMIC OVERVIEW The start of 2001 was rough for the U.S. stock market, which experienced its worst first-quarter performance in 40 years. In the midst of continued deterioration in corporate earnings and other signs of a slowing U.S. economy, the Standard & Poor's 500 Stock Index ("S&P 500")(1) fell 6.69% for the six months ended June 30, 2001. The U.S. Federal Reserve Board (the "Fed") responded by aggressively lowering short-term interest rates, cutting the federal funds rate(2) six times during the first half of the year, for a total decrease of 2.75%. In response to the Fed's rate cuts, bonds on the shorter end of the yield curve(3) experienced a rally that extended through June 2001. (Typically, as interest rates fall, the prices of existing bonds increase.) Total returns for bonds across the board were positive, with the exception of the high yield sector, which suffered from an increase in default rates. Equity markets initially responded well to the Fed's interest rate cuts. After a brief rally, however, a wave of deteriorating economic data, negative earnings preannouncements and fears of a Japanese financial crisis overwhelmed investor confidence. At the time of this report, stock markets lay battered and well below even end-of-2000 levels, and measures of consumer and business confidence eroded significantly. It is our view that the U.S. economy is following the script of a classic boom-bust cycle, which is characterized by the excess capacity and inventory-building that often occur after periods of very strong cyclical demand. In such circumstances, lower interest rates may not provide an instant cure for the ailing stock markets. Time and patience may be required to absorb or shut down excess capacity, and to work down or write off excess inventory. Looking forward, we expect the economy to start to show signs of improvement as the beneficial effects of the Fed's interest rate cuts begin to materialize. Because inflation has remained in check, the Fed appears to be in a good position to further reduce interest rates if necessary. We expect the Fed to enact at least one more interest rate cut before the end of 2001. As a result, we expect to see the stock market working its way to higher levels in the months and quarters ahead. Any further reduction in interest rates between now and year-end 2001 should bolster investment returns for fixed income securities as well. DAVID A. TYSON, CFA, PRESIDENT & CHIEF INVESTMENT OFFICER, TRAVELERS ASSET MANAGEMENT INTERNATIONAL COMPANY, LLC SANDIP A. BHAGAT, CFA, PRESIDENT AND CHIEF INVESTMENT OFFICER, TRAVELERS INVESTMENT MANAGEMENT COMPANY - -------- (1) The Standard & Poor's 500 Index ("S&P 500") is a market capitalization-weighted index of 500 widely held common stocks. Please note that an investor cannot invest in an index. (2) The federal funds rate is the interest rate that banks with excess reserves at a Federal Reserve district bank charge other banks that need overnight loans. The fed funds rate often points to the direction of U.S. interest rates. (3) The yield curve is the graphical depiction of the relationship between the yield on bonds of the same credit quality but different maturities. -1- 4 TABLE OF CONTENTS
PAGE - -------------------------------------------------------------------------------- THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES...................................................... 3 THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES...................16 THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES...................25
-2- 5 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 Company, LLC ("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 are able to grow earnings above consensus expectations and offer attractive relative value. In order to achieve consistent relative performance, we manage the portfolio to mirror the overall risk, sector weightings and growth/value style characteristics of the Standard & Poors 500 Stock Index ("S&P 500"). The S&P 500 is a value-weighted equity index comprised primarily of large-company stocks. For the six months ending June 30, 2001, Account GIS declined 7.8%, before fees and expenses, underperforming the S&P 500 loss of 6.7%. Net of fees and expenses, Account GIS's total loss of 8.7% for the first half of 2001 was comparable to the loss of 8.1% median return for variable annuity stock accounts in the Lipper Large Cap Core category. On a trailing twelve month basis as of June 30, 2001, Account GIS had a total loss of 19.2%, net of fees and expenses, slightly higher than the Large Cap Core median loss of 17.0%. A discussion of portfolio performance in each of the first two quarters of 2001 is presented next. Our stock selection models produced mixed results in the first two quarters of 2001. Stocks rated well by our models based on rising earnings expectations and price momentum did not perform well. Our valuation signals did produce good relative performance. Our underperformance was largely attributable to an incremental growth bias where our earnings-related signals create a marginal overweight position in higher earnings growth stocks. Higher growth stocks underperformed early in 2001 as investors forced valuation multiples on such stocks lower. Our performance attribution analysis for the first quarter indicates that stock selection was unfavorable in the Technology sector, modestly below benchmark in the Health Care and Utilities Technology sectors and neutral in the other sectors. The Technology sector performed poorly as the parade of earnings disappointments continued. Our overweight positions in Sun Microsystems, Inc., Sanmina Corp. and TranSwitch Corp. suffered in the first quarter as the steep slowdown in demand and pricing continued to lead earnings estimates lower. We were helped somewhat by underweight positions in Computer Sciences, as the company pre-announced a negative quarter, and Yahoo, which was weak on concerns of the demise of dot.com advertising industry. In the Health Care sector, we were negatively impacted by our overweight position in Applera Corp.-Applied Biosystems Group after the company warned that its earnings would be lower on delayed shipments and weaker foreign currencies. Winners from the preceding year such as Trigon Healthcare fell prey to profit-taking early in the first quarter. In the Utilities sector, our positions in higher growth wireless companies such as Sprint Corp.-PCS Group and Nextel Communications, Inc. underperformed as investors revised their valuations downwards in the face of a weaker economy. During the second quarter of 2001, stock selection was favorable in the Health Care and Consumer Discretionary sectors but adverse in the Financial Services sector. In the Health Care sector, our positions in relatively stable growth companies such as Trigon Healthcare and Tenet Healthcare were rewarded with higher valuations. Johnson & Johnson acquired Alza, a research-based pharmaceuticals company that we had emphasized, in a stock swap towards the end of June. In the Consumer Discretionary sector, consumer cyclical stocks such as Best Buy, Circuit City Stores and Tiffany & Co. moved higher on hopes of an economic recovery and helped portfolio performance. -3- 6 In the Financial Services sector, anticipated earnings shortfalls at J.P. Morgan & Company, Inc., CIGNA Corp., Bank of New York and Knight Trading Group hurt relative performance. Our underweight position in Citigroup, one of the few bright lights within the sector and a stock we are restricted from owning, adversely affected performance. The U.S. stock market continues to experience a high level of volatility as hopes of a recovery based on monetary and fiscal stimulus clash with ongoing evidence of weak corporate profits and lack of earnings visibility in the intermediate term. In our disciplined approach to stock selection, we screen our research universe of over 1,000 large cap securities for companies that offer improving earnings fundamentals at discounted stock valuations. We continue to focus on this dual theme of low valuations and improving earnings outlook as the basis of our stock selection. PORTFOLIO MANAGER: SANDIP A. BHAGAT, CFA [TAMIC LOGO] [TIMCO LOGO] -4- 7 THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) JUNE 30, 2001
ASSETS: Investment securities, at market value (cost $713,417,185) ......................... $ 753,765,555 Cash ............................................................................... 250,364 Receivables: Dividends ........................................................................ 666,373 Investment securities sold ....................................................... 4,502 Purchase payments and transfers from other Travelers accounts .................... 142,384 Variation on futures margin ...................................................... 4,700 Other assets ....................................................................... 34,938 --------------- Total Assets ................................................................... 754,868,816 --------------- LIABILITIES: Payables: Contract surrenders and transfers to other Travelers accounts .................... 323,361 Investment management and advisory fees .......................................... 101,731 Insurance charges ................................................................ 194,608 Accrued liabilities ................................................................ 313 --------------- Total Liabilities .............................................................. 620,013 --------------- NET ASSETS: $ 754,248,803 ===============
See Notes to Financial Statements -5- 8 THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 2001
INVESTMENT INCOME: Dividends ....................................................................... $ 4,936,045 Interest ........................................................................ 543,305 --------------- Total income .................................................................. $ 5,479,350 EXPENSES: Investment management and advisory fees ......................................... 2,405,699 Insurance charges ............................................................... 4,626,223 --------------- Total expenses ................................................................ 7,031,922 --------------- Net investment loss ......................................................... (1,552,572) --------------- REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES: Realized gain (loss) from investment security transactions: Proceeds from investment securities sold ...................................... 133,181,282 Cost of investment securities sold ............................................ 129,797,877 --------------- Net realized gain ........................................................... 3,383,405 Change in unrealized gain (loss) on investment securities: Unrealized gain at December 31, 2000 .......................................... 115,949,841 Unrealized gain at June 30, 2001 .............................................. 40,348,370 --------------- Net change in unrealized gain (loss) for the period ......................... (75,601,471) --------------- Net realized gain and change in unrealized gain (loss) .................... (72,218,066) --------------- Net decrease in net assets resulting from operations ............................ $ (73,770,638) ===============
See Notes to Financial Statements -6- 9 THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, 2001 2000 ---- ---- (UNAUDITED) OPERATIONS: Net investment loss ......................................................... $ (1,552,572) $ (7,422,457) Net realized gain from investment security transactions ..................... 3,383,405 95,598,581 Net change in unrealized gain (loss) on investment securities ............... (75,601,471) (213,546,094) --------------- ----------------- Net decrease in net assets resulting from operations ...................... (73,770,638) (125,369,970) --------------- ----------------- UNIT TRANSACTIONS: Participant purchase payments (applicable to 1,079,340 and 2,293,907 units, respectively) ............... 20,777,959 51,808,532 Participant transfers from other Travelers accounts (applicable to 533,009 and 2,584,078 units, respectively) ................. 10,307,072 58,719,406 Administrative charges (applicable to 16,042 and 28,955 units, respectively) ..................... (300,924) (624,356) Contract surrenders (applicable to 1,576,024 and 4,123,931 units, respectively) ............... (30,741,569) (93,828,914) Participant transfers to other Travelers accounts (applicable to 1,423,830 and 4,594,066 units, respectively) ............... (27,104,870) (104,885,805) Other payments to participants (applicable to 89,304 and 133,611 units, respectively) .................... (1,810,296) (2,984,672) --------------- ----------------- Net decrease in net assets resulting from unit transactions ............... (28,872,628) (91,795,809) --------------- ----------------- Net decrease in net assets .............................................. (102,643,266) (217,165,779) NET ASSETS: Beginning of period ......................................................... 856,892,069 1,074,057,848 --------------- ----------------- End of period ............................................................... $ 754,248,803 $ 856,892,069 =============== =================
See Notes to Financial Statements -7- 10 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 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 such exchanges; 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 respective 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. -8- 11 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - 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 period. 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 $88,398,918 and $108,864,115, respectively; the costs of purchases and proceeds from sales of direct and indirect U.S. government securities were $2,707,584 and $2,298,927, respectively, for the six months ended June 30, 2001. 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 was $109,359 for the year ended December 31, 2000 and there were no commissions paid to these affiliated firms for the six months ended June 30, 2001. At June 30, 2001, Account GIS held 4 open S&P 500 Stock Index futures contracts expiring in September, 2001. The underlying face value, or notional value, of these contracts at June 30, 2001 amounted to $1,231,700. In connection with these contracts, short-term investments with a par value of $700,000 had been pledged as margin deposits. Net realized losses resulting from futures contracts were $3,045,200 and $2,620,825 for the six months ended June 30, 2001 and the year ended December 31, 2000, respectively. These losses 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 June 30, 2001 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 Company, LLC ("TAMIC"), an indirect wholly owned subsidiary of Citigroup Inc. Pursuant to a subadvisory agreement between TAMIC and 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 $8,508 and $21,993 for the six months ended June 30, 2001 and the year ended December 31, 2000, 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 $208,799 and $539,334 of contingent deferred sales charges for the six months ended June 30, 2001 and the year ended December 31, 2000, respectively. -9- 12 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED 4. NET ASSETS HELD ON BEHALF OF AN AFFILIATE Approximately $17,033,000 and $18,869,000 of the net assets of Account GIS were held on behalf of an affiliate of The Travelers as of June 30, 2001 and December 31, 2000, respectively. Transactions with this affiliate during the six months ended June 30, 2001 and the year ended December 31, 2000, were comprised of participant purchase payments of approximately $75,000 and $230,000 and contract surrenders of approximately $282,000 and $1,554,000, respectively. 5. NET CONTRACT OWNERS' EQUITY
JUNE 30, 2001 ---------------------------------------------------- UNIT NET UNITS VALUE ASSETS ----- ----- ------ Accumulation phase of contracts issued prior to May 16, 1983 ............ 10,720,936 $ 19.578 $ 209,881,710 Annuity phase of contracts issued prior to May 16, 1983 ................. 272,267 19.578 5,330,116 Accumulation phase of contracts issued on or after May 16, 1983 ......... 28,728,440 18.714 537,593,288 Annuity phase of contracts issued on or after May 16, 1983 .............. 77,149 18.714 1,443,689 --------------- Net Contract Owners' Equity ............................................................................... $ 754,248,803 ===============
-10- 13 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED 6. SUPPLEMENTARY INFORMATION (Selected data for a unit outstanding throughout each period.)
Contracts issued prior to May 16, 1983 SIX MONTHS ENDED FOR THE YEARS ENDED DECEMBER 31, JUNE 30, (DERIVED FROM AUDITED FINANCIAL INFORMATION) ------------ -------------------------------------------------------- 2001 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- ---- SELECTED PER UNIT DATA: Total investment income .................................. $ .141 $ .242 $ .267 $ .243 $ .233 $ .216 Operating expenses ....................................... .163 .376 .347 .272 .201 .154 --------- --------- --------- --------- --------- --------- Net investment income (loss) ............................. (.022) (.134) (.080) (.029) .032 .062 Unit value at beginning of period ........................ 21.418 24.427 20.017 15.510 11.763 9.668 Net realized and change in unrealized gains (losses) ..... (1.818) (2.875) 4.490 4.536 3.715 2.033 --------- --------- --------- --------- --------- --------- Unit value at end of period .............................. $ 19.578 $ 21.418 $ 24.427 $ 20.017 $ 15.510 $ 11.763 ========= ========= ========= ========= ========= ========= SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase (decrease) in unit value .................... $ (1.84) $ (3.01) $ 4.41 $ 4.51 $ 3.75 $ 2.10 Ratio of operating expenses to average net assets ........ 1.60% * 1.60% 1.60% 1.56% 1.45% 1.45% Ratio of net investment income (loss) to average net assets ............................................. (.23)% * (.57)% (.37) (.16) .24% .60% Number of units outstanding at end of period (thousands) . 10,993 11,413 12,646 13,894 15,194 16,554 Portfolio turnover rate 11% 52% 47% 50% 64% 85% Contracts issued prior to May 16, 1983 SIX MONTHS ENDED FOR THE YEARS ENDED DECEMBER 31, JUNE 30, (DERIVED FROM AUDITED FINANCIAL INFORMATION) ------------ -------------------------------------------------------- 2001 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- ---- SELECTED PER UNIT DATA: Total investment income .................................. $ .134 $ .232 $ .256 $ .234 $ .228 $ .212 Operating expenses ....................................... .179 .416 .385 .303 .228 .175 --------- --------- --------- --------- --------- --------- Net investment income (loss) ............................. (.045) (.184) (.129) (.069) -- .037 Unit value at beginning of period ........................ 20.498 23.436 19.253 14.955 11.371 9.369 Net realized and change in unrealized gains (losses) ..... (1.739) (2.754) 4.312 4.367 3.584 1.965 --------- --------- --------- --------- --------- --------- Unit value at end of period .............................. $ 18.714 $ 20.498 $ 23.436 $ 19.253 $ 14.955 $ 11.371 ========= ========= ========= ========= ========= ========= SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase (decrease) in unit value .................... $ (1.78) $ (2.94) $ 4.18 $ 4.30 $ 3.58 $ 2.00 Ratio of operating expenses to average net assets ........ 1.85% * 1.85% 1.85% 1.81% 1.70% 1.70% Ratio of net investment income (loss) to average net assets ............................................. (.48)% * (.82)% (.62)% (.41)% -- .36% Number of units outstanding at end of period (thousands) . 28,806 29,879 32,648 32,051 29,545 27,578 Portfolio turnover rate .................................. 11% 52% 47% 50% 64% 85%
* Annualized -11- 14 THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF INVESTMENTS (UNAUDITED) JUNE 30, 2001
NO. OF MARKET SHARES VALUE ------------ ------------ COMMON STOCK (99.8%) AEROSPACE (0.7%) Boeing Co. 89,530 $ 4,977,868 -------------- AUTOMOTIVE (0.7%) Ford Motor Co. 105,087 2,579,886 General Motors Corp. 39,400 2,535,390 -------------- 5,115,276 -------------- BANKING (6.6%) Bank of America Corp. 92,924 5,578,228 Bank of New York 89,900 4,315,200 Bank One Corp. 126,464 4,527,411 Capital One Financial Corp. 33,700 2,022,000 Fifth Third BanCorp 42,200 2,534,321 FleetBoston Financial Corp. 135,622 5,350,288 J.P. Morgan & Company, Inc. 157,206 7,011,388 MBNA Corp. 99,700 3,285,115 National City Corp. 115,100 3,542,778 State Street Corp. 41,000 2,029,090 U.S. Bancorp 154,300 3,516,497 Wells Fargo & Co. 137,030 6,362,303 -------------- 50,074,619 -------------- BEVERAGE (2.4%) Adolph Coors Co. 25,800 1,294,644 Anheuser-Busch Cos. 89,700 3,695,640 Coca-Cola Co. 180,000 8,100,000 PepsiCo, Inc. 104,500 4,618,900 -------------- 17,709,184 -------------- BROKERAGE (3.0%) Bear Stearns Cos., Inc. 31,300 1,845,761 Charles Schwab Corp. 80,250 1,227,825 Lehman Brothers Holding, Inc. 62,800 4,882,700 Merrill Lynch & Co. 110,200 6,529,350 Morgan Stanley Dean Witter & Co. 123,150 7,909,924 -------------- 22,395,560 -------------- BUILDING MATERIALS (0.4%) Centex Corp. 38,800 1,581,100 Masco Corp. 53,200 1,327,872 -------------- 2,908,972 -------------- CAPITAL GOODS (0.8%) Applied Materials, Inc. (A) 55,600 2,762,764 Nucor Corp. 11,600 567,124 Parker-Hannifin 41,200 1,748,528 Tellabs, Inc. (A) 28,900 552,424 -------------- 5,630,840 --------------
NO. OF MARKET SHARES VALUE ------------ ------------ CHEMICALS (1.2%) Air Products & Chemicals, Inc. 34,100 $ 1,560,075 Dow Chemical Co. 61,354 2,040,021 E.I. Dupont de Nemours & Co. 69,156 3,336,085 Eastman Chemical Co. 16,000 762,080 Praxair, Inc. 11,200 526,400 Rohm & Haas Co. 31,400 1,033,060 -------------- 9,257,721 -------------- CONGLOMERATES (6.4%) General Electric Co. 696,100 33,934,875 Honeywell International, Inc. (A) 56,700 1,983,933 Minnesota Mining & Manufacturing Co. 16,200 1,848,420 Tyco International Ltd. 148,000 8,066,000 United Technologies Corp. 35,300 2,586,078 -------------- 48,419,306 -------------- CONSUMER (1.7%) Alberto-Culver 43,500 1,828,740 Black & Decker Corp. 18,000 710,280 Colgate-Palmolive Co. 62,100 3,663,279 Kimberly Clark Corp. 37,360 2,088,424 Procter & Gamble Co. 69,170 4,413,046 -------------- 12,703,769 -------------- DEFENSE (0.4%) Lockheed Martin Corp. 89,300 3,308,565 -------------- ENTERTAINMENT (1.9%) Carnival Corp. 74,800 2,296,360 Harrah's Entertainment (A) 55,700 1,966,210 Viacom, Inc. (A) 111,376 5,763,708 Walt Disney Co. 141,065 4,075,368 -------------- 14,101,646 -------------- FINANCE (1.6%) American Express Co. 147,500 5,723,000 Household Finance Corp. 59,600 3,975,320 Knight Trading Group, Inc. (A) 66,500 709,888 Providian Financial Corp. 33,600 1,989,120 -------------- 12,397,328 -------------- FOOD (1.3%) General Mills, Inc. 50,000 2,189,000 Hershey Foods 29,600 1,826,616 Sysco Corp. 133,300 3,619,095 Tricon Global Restaurants (A) 53,900 2,366,210 -------------- 10,000,921 -------------- HEALTHCARE (2.6%) Abbott Laboratories 67,300 3,231,073 Appelera Corp-Applied Biosystems Group 32,900 880,075 Cardinal Health, Inc. 66,300 4,574,700 HCA-The Healthcare Company 70,300 3,176,857 Tenet Healthcare (A) 55,800 2,878,722 Trigon Healthcare (A) 36,100 2,341,085 UnitedHealth Group, Inc. 46,200 2,852,850 -------------- 19,935,362 --------------
-12- 15 STATEMENT OF INVESTMENTS (UNAUDITED) - CONTINUED
NO. OF MARKET SHARES VALUE ------------ ------------ INDEPENDENT ENERGY (0.6%) Apache Corp. 27,500 $ 1,395,625 Burlington Resources 31,700 1,266,415 Entergy Corp. 50,500 1,938,695 -------------- 4,600,735 -------------- INSURANCE (4.5%) Allstate Corp. 85,300 3,752,347 Ambac Financial Group, Inc. 34,600 2,013,720 American General Corp. 31,800 1,477,110 Chubb Corp. 35,700 2,764,251 CIGNA Corp. 19,100 1,830,162 International Lease Finance Corp. 155,788 13,397,768 Lincoln National Corp. 52,900 2,737,575 MBIA, Inc. 43,650 2,430,432 MGIC Investment 48,100 3,493,984 -------------- 33,897,349 -------------- INTEGRATED ENERGY (5.9%) Anadarko Petroleum 21,800 1,177,854 Chevron Corp. 46,400 4,199,200 Conoco, Inc. 41,804 1,208,136 Exxon Mobil Corp. 241,998 21,138,525 Kerr-Mcgee Corp. 7,900 523,533 Occidental Petroleum 28,500 757,815 Phillips Petroleum Co. 18,200 1,037,400 Royal Dutch Petroleum Co. 143,900 8,385,053 Texaco, Inc. 36,600 2,437,560 Unocal Corp. 30,400 1,038,160 USX-Marathon Group 21,400 631,514 Williams Cos. 51,300 1,690,335 -------------- 44,225,085 -------------- LODGING (0.4%) Marriott International, Inc. 56,000 2,651,040 -------------- MEDIA (1.9%) Clear Channel Communications, Inc. (A) 40,930 2,566,311 Comcast Corp. (A) 96,800 4,196,280 Gannett Company, Inc. 30,700 2,023,130 Knight-Ridder, Inc. 31,100 1,844,230 McGraw-Hill Companies 41,300 2,731,995 Tribune Co. 19,700 788,197 -------------- 14,150,143 -------------- METALS (0.6%) Alcan Aluminum Ltd. 13,700 575,674 Alcoa, Inc. 62,844 2,476,054 Barrick Gold Corp. 51,800 784,770 Phelps Dodge Corp. 18,100 751,150 -------------- 4,587,648 -------------- NATURAL GAS PIPELINE (0.7%) Dynegy, Inc. 22,900 1,064,850 Enron Corp. 87,000 4,263,000 -------------- 5,327,850 -------------- OIL FIELD (0.6%) Baker Hughes, Inc. 23,100 773,850 Halliburton Co. 32,800 1,167,680 Schlumberger Ltd. 38,000 2,000,700 Transocean Sedco Forex, Inc. 20,382 840,758 -------------- 4,782,988 --------------
NO. OF MARKET SHARES VALUE ------------ ------------ PAPER (0.7%) Avery Dennison Corp. 19,300 $ 985,265 Georgia-Pacific Group 25,600 866,560 International Paper Co. 56,900 2,031,330 Mead Corp. 21,850 593,009 Weyerhaeuser Co. 15,100 830,047 -------------- 5,306,211 -------------- PHARMACEUTICALS (10.3%) Allergan, Inc. 26,400 2,257,200 American Home Products Corp. 83,400 4,873,896 Amgen, Inc. (A) 82,300 5,032,645 Baxter International, Inc. 42,200 2,067,800 Biomet, Inc. 45,700 2,194,514 Bristol-Myers Squibb Co. 120,200 6,286,460 Eli Lilly & Co. 56,400 4,173,600 Forest Laboratories , Inc. (A) 38,600 2,740,600 Johnson & Johnson 286,178 14,308,900 MedImmune, Inc. (A) 13,900 659,138 Merck & Co., Inc. 154,700 9,886,877 Pfizer, Inc. 409,265 16,391,063 Pharmacia Corp. 86,648 3,981,476 Schering-Plough Corp. 68,000 2,464,320 -------------- 77,318,489 -------------- RAILROADS (0.4%) Burlington Northern Santa Fe 46,600 1,405,922 Union Pacific 26,000 1,427,660 -------------- 2,833,582 -------------- REFINING (0.1%) Tosco Corp. 18,900 832,545 -------------- RETAILERS (6.4%) Bed Bath & Beyond, Inc. (A) 70,800 2,141,346 Best Buy Company, Inc. (A) 31,400 1,994,528 CDW Computer Centers (A) 27,400 1,089,287 Circuit City Stores 87,400 1,573,200 CVS Corp. 26,900 1,038,340 Federated Department Stores (A) 53,500 2,273,750 Gap Inc. 66,300 1,922,700 Home Depot, Inc. 201,947 9,400,633 Kohl's Corp. (A) 73,300 4,598,109 Sears Roebuck & Co. 64,900 2,745,919 Tiffany & Co. 86,800 3,143,896 Walgreen Co. 69,000 2,356,350 Wal-Mart Stores, Inc. 290,500 14,176,400 -------------- 48,454,458 -------------- SERVICES (5.8%) Biogen, Inc. (A) 11,700 635,661 Cendant Corp. (A) 97,900 1,909,050 Manpower, Inc. 47,500 1,420,250 Medtronic, Inc. 60,300 2,774,403 Microsoft (A) 362,000 25,960,830 Oracle Corp. (A) 451,648 8,664,867 Paychex, Inc. 68,000 2,719,660 -------------- 44,084,721 -------------- SUPERMARKETS (0.6%) Kroger Co. (A) 59,600 1,490,000 Safeway, Inc. (A) 68,230 3,275,040 -------------- 4,765,040 --------------
-13- 16 STATEMENT OF INVESTMENTS (UNAUDITED) - CONTINUED
NO. OF MARKET SHARES VALUE ------------ ------------ TECHNOLOGY (16.9%) Adobe Systems, Inc. 41,100 $ 1,934,782 Agilent Technologies, Inc. (A) 33,900 1,101,750 Altera Corp. (A) 52,300 1,528,206 AOL Time Warner (A) 326,350 17,296,550 Applied Micro Circuits (A) 68,000 1,177,760 Automatic Data Process 31,100 1,545,670 Cisco Systems, Inc. (A) 521,300 9,482,447 Compaq Computer Corp. 118,668 1,838,167 Computer Associates International 50,500 1,818,000 Comverse Technology, Inc. (A) 31,300 1,795,524 Corning, Inc. 91,900 1,535,649 Dell Computer Corp. (A) 151,400 3,970,465 Electronic Data Systems 60,700 3,793,750 EMC Corp. (A) 132,900 3,860,745 First Data Corp. 55,700 3,578,725 Hewlett Packard Co. 89,300 2,553,980 Intel Corp. 479,610 14,088,544 International Business Machines Corp. 121,700 13,752,100 ITT Industries 66,100 2,924,925 JDS Uniphase Corp. (A) 93,000 1,182,030 Lam Research (A) 51,000 1,508,325 Linear Technologies 34,200 1,520,532 LSI Logic Corp. (A) 70,800 1,331,040 Lucent Technologies 172,498 1,069,488 Mercury Interactive Co. (A) 10,700 637,880 Micron Technologies, Inc. (A) 89,000 3,657,900 Motorola, Inc. 103,400 1,712,304 Network Appliance Corp. (A) 23,800 318,920 PerkinElmer, Inc. 31,400 864,442 Pitney Bowes 48,600 2,047,032 QUALCOMM, Inc. (A) 55,600 3,225,634 Sanmina Corp. (A) 79,200 1,871,496 Scientific-Atlanta, Inc. 58,700 2,383,220 Siebel Systems, Inc. (A) 36,100 1,698,144 Sun Microsystems, Inc. (A) 309,200 4,916,280 Texas Instruments, Inc. 152,600 4,806,900 TranSwitch Corp. (A) 87,900 966,460 VERITAS Software Corp. (A) 22,700 1,503,761 Xilinx, Inc. (A) 20,500 838,860 -------------- 127,638,387 --------------
NO. OF MARKET SHARES VALUE ------------ ------------ TELECOMMUNICATIONS (6.0%) ALLTEL Corp. 28,300 $ 1,733,658 AT&T Wireless Group 236,000 5,192,000 BellSouth Corp. 104,200 4,196,134 Broadcom Corp. (A) 16,300 692,750 Global Crossing Ltd. (A) 48,500 419,040 Nextel Communications, Inc. (A) 131,200 2,284,848 Nortel Networks Corp. 166,000 1,508,940 Qwest Communications International 127,075 4,049,880 SBC Communications, Inc. 248,318 9,947,619 Sprint Corp. - PCS Group 142,706 3,446,350 Verizon Global Funding Corp. 163,098 8,725,743 WorldCom, Inc. (A) 214,726 3,110,306 -------------- 45,307,268 -------------- TOBACCO (1.4%) Philip Morris Cos. 198,600 10,078,950 -------------- U.S. AGENCY (1.4%) Federal Home Loan Mortgage Corp. 60,100 4,207,000 Federal Association National Mortgage 75,600 6,437,340 -------------- 10,644,340 -------------- UTILITIES (2.9%) AES Corp. (A) 63,500 2,733,675 Calpine Corp. (A) 54,700 2,067,660 Dominion Resources, Inc. 46,800 2,814,084 Exelon Corp. 54,600 3,500,952 FirstEnergy Corp. 87,200 2,804,352 FPL Group, Inc. 51,500 3,100,815 Mirant Corp. (A) 11,848 407,571 Montana Power Co. (A) 30,200 350,320 Southern Co. 29,800 692,850 TXU Corp 66,100 3,185,359 -------------- 21,657,638 -------------- TOTAL COMMON STOCKS (COST $711,734,630) 752,081,404 --------------
-14- 17 STATEMENT OF INVESTMENTS (UNAUDITED) - CONTINUED
PRINCIPAL MARKET AMOUNT VALUE ------------ -------------- SHORT-TERM INVESTMENTS (0.2%) U.S. TREASURY (0.2%) United States of America Treasury, 4.00% due October 4, 2001 (B) $ 1,700,000 $ 1,684,151 -------------- TOTAL SHORT-TERM INVESTMENTS (COST $1,682,555) 1,684,151 -------------- NOTIONAL VALUE ------------ FUTURES CONTRACTS (0.0%) S&P 500 Stock Index, Exp. September, 2001 (C) $ 1,231,700 - -------------- TOTAL INVESTMENTS (100%) (COST $713,417,185) (D) $ 753,765,555 ==============
NOTES (A) Non-income Producing Security. (B) Par value of $700,000 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 June 30, 2001, net unrealized appreciation for all securities was $40,348,370. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of market value over cost of $125,563,937 and aggregate gross unrealized depreciation for all securities in which there was an excess of cost over market value of $85,215,567. See Notes to Financial Statements -15- 18 THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES The Travelers Quality Bond Account for Variable Annuities returned 5.56% before fees and expenses versus the Lehman Intermediate Government/Corporate Bond Index that returned 4.08%, an outperformance of 148 basis points. This outperformance was mainly due to our overweight in corporates, specifically in the telecommunication sector. The Treasury curve steepened significantly during the first half of 2001. Starting off the second half of the year we have taken a more conservative approach, reducing our corporate exposure and slightly over weighting our treasury position. We are currently taking a wait and see approach to the economy to see if the Federal Reserve Board's ("Fed") rate cuts and tax relief will start to stimulate the economy. We feel historically that credit products are still cheap and as the economy shows some sign of a turnaround, we will look to increase our credit exposure. OUTLOOK We continue to anticipate slower growth than the market expects over the next 12 months, however a recession in the overall economy is unlikely. Continued Fed rate easing and proposed tax reductions should stimulate the economy. To date, while manufacturing sector contracted, the consumer side of the economy continued to grow, albeit at a slower pace. However, the consumer sector could be hurt by a rising unemployment rate and a weak stock market. On the other hand, lower oil prices should stimulate consumer spending. The strength in consumer confidence is a key to the outcome of the economy. Given the continued downside economic risks, the Fed could lower rates even further than the market expects. We are expecting another 25 basis points cut at the Federal Open Market Committee meeting in August. Longer term rates, which have risen while the Fed has been cutting short term rates, are likely to stay in a trading range. Corporate bond product has continued to grind tighter versus treasuries as the market looks past the current economic malaise to better times ahead. The steepness of the treasury curve also entices investors to see additional yield in spread products. PORTFOLIO MANAGER: F. DENNEY VOSS [TAMIC LOGO] -16- 19 THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) JUNE 30, 2001
ASSETS: Investment securities, at market value (cost $126,786,869) ............ $ 125,159,286 Cash .................................................................. 3,770 Receivables: Interest ............................................................ 2,240,391 Purchase payments and transfers from other Travelers accounts ....... 14,267 Other assets .......................................................... 1,474 ---------------- Total Assets ...................................................... 127,419,188 ---------------- LIABILITIES: Payables: Contract surrenders and transfers to other Travelers accounts ....... 246,803 Investment management and advisory fees ............................. 9,081 Insurance charges ................................................... 32,841 Accrued liabilities ................................................... 7,084 ---------------- Total Liabilities ................................................. 295,809 ---------------- NET ASSETS: $ 127,123,379 ================
See Notes to Financial Statements -17- 20 THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 2001
INVESTMENT INCOME: Interest ................................................................. $ 4,280,024 EXPENSES: Investment management and advisory fees .................................. $ 200,490 Insurance charges ........................................................ 731,158 ---------------- Total expenses ......................................................... 931,648 --------------- Net investment income ................................................ 3,348,376 --------------- REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES: Realized gain (loss) from investment security transactions: Proceeds from investment securities sold ............................... 127,113,614 Cost of investment securities sold ..................................... 124,676,934 ---------------- Net realized gain .................................................... 2,436,680 Change in unrealized gain (loss) on investment securities: Unrealized loss at December 31, 2000 ................................... (1,544,807) Unrealized loss at June 30, 2001 ....................................... (1,627,583) ---------------- Net change in unrealized gain (loss) for the period .................. (82,776) --------------- Net realized gain and change in unrealized gain (loss) ............. 2,353,904 --------------- Net increase in net assets resulting from operations ..................... $ 5,702,280 ===============
See Notes to Financial Statements -18- 21 THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, 2001 2000 ---- ---- (UNAUDITED) OPERATIONS: Net investment income ........................................................... $ 3,348,376 $ 7,280,698 Net realized gain (loss) from investment security transactions .................. 2,436,680 (3,538,841) Net change in unrealized gain (loss) on investment securities ................... (82,776) 1,649,407 -------------- --------------- Net increase in net assets resulting from operations .......................... 5,702,280 5,391,264 -------------- --------------- UNIT TRANSACTIONS: Participant purchase payments (applicable to 375,636 and 870,546 units, respectively) ....................... 2,362,530 5,124,858 Participant transfers from other Travelers accounts (applicable to 1,771,831 and 1,512,101 units, respectively) ................... 11,186,319 8,893,845 Administrative charges (applicable to 6,452 and 13,123 units, respectively) .......................... (41,481) (78,856) Contract surrenders (applicable to 923,873 and 2,821,093 units, respectively) ..................... (5,827,859) (16,759,298) Participant transfers to other Travelers accounts (applicable to 922,861 and 3,490,801 units, respectively) ..................... (5,788,718) (20,514,038) Other payments to participants (applicable to 69,760 and 157,807 units, respectively) ........................ (444,714) (949,077) -------------- --------------- Net increase (decrease) in net assets resulting from unit transactions ........ 1,446,077 (24,282,566) -------------- --------------- Net increase (decrease) in net assets ....................................... 7,148,357 (18,891,302) NET ASSETS: Beginning of period ............................................................. 119,975,022 138,866,324 -------------- --------------- End of period ................................................................... $ 127,123,379 $ 119,975,022 ============== ===============
See Notes to Financial Statements -19- 22 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 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 such exchanges; 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. -20- 23 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - 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 period. 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 $54,757,475 and $77,144,300, respectively; the costs of purchases and proceeds from sales of direct and indirect U.S. government securities were $80,942,723 and $50,780,779, respectively, for the six months ended June 30, 2001. 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 Company, LLC, 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 $3,614 and $5,639 for the six months ended June 30, 2001 and the year ended December 31, 2000, 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 $32,106 and $83,540 of contingent deferred sales charges for the six months ended June 30, 2001 and the year ended December 31, 2000, respectively. -21- 24 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED 4. NET ASSETS HELD ON BEHALF OF AN AFFILIATE Approximately $291,000 and $341,000 of the net assets of Account QB were held on behalf of an affiliate of The Travelers as of June 30, 2001 and December 31, 2000, respectively. Transactions with this affiliate during the six months ended June 30, 2001 and the year ended December 31, 2000, were comprised of participant purchase payments of approximately $63,000 and $46,000 and contract surrenders of approximately $129,000 and $28,000, respectively. 5. NET CONTRACT OWNERS' EQUITY
JUNE 30, 2001 --------------------------------------------------- UNIT NET UNITS VALUE ASSETS ----- ----- ------ Accumulation phase of contracts issued prior to May 16, 1983 ........... 5,335,643 $ 6.644 $ 35,460,070 Annuity phase of contracts issued prior to May 16, 1983 ................ 85,738 6.644 569,808 Accumulation phase of contracts issued on or after May 16, 1983 ........ 14,332,169 6.350 91,046,736 Annuity phase of contracts issued on or after May 16, 1983 ............. 7,362 6.350 46,765 --------------- Net Contract Owners' Equity ............................................................................. $ 127,123,379 ===============
-22- 25 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED 6. SUPPLEMENTARY INFORMATION (Selected data for a unit outstanding throughout each period.)
Contracts issued prior to May 16, 1983 SIX MONTHS ENDED FOR THE YEARS ENDED DECEMBER 31, JUNE 30, (DERIVED FROM AUDITED FINANCIAL INFORMATION) ------------ -------------------------------------------------------- 2001 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- ---- SELECTED PER UNIT DATA: Total investment income .................................. $ .225 $ .446 $ .393 $ .363 $ .353 $ .379 Operating expenses ....................................... .043 .081 .080 .076 .071 .067 -------- -------- -------- -------- -------- -------- Net investment income .................................... .182 .365 .313 .287 .282 .312 Unit value at beginning of period ........................ 6.335 6.055 5.994 5.593 5.234 5.050 Net realized and change in unrealized gains (losses) ..... .127 (.085) (.252) .114 .077 (.128) -------- -------- -------- -------- -------- -------- Unit value at end of period .............................. $ 6.644 $ 6.335 $ 6.055 $ 5.994 $ 5.593 $ 5.234 ======== ======== ======== ======== ======== ======== SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase in unit value ............................... $ .31 $ .28 $ .06 $ .40 $ .36 $ .18 Ratio of operating expenses to average net assets ........ 1.33% * 1.33% 1.33% 1.33% 1.33% 1.33% Ratio of net investment income to average net assets ..... 5.58% * 5.93% 5.22% 4.96% 5.25% 6.12% Number of units outstanding at end of period (thousands) . 5,421 5,491 6,224 6,880 7,683 8,549 Portfolio turnover rate .................................. 106% 105% 340% 438% 196% 176% Contracts issued prior to May 16, 1983 SIX MONTHS ENDED FOR THE YEARS ENDED DECEMBER 31, JUNE 30, (DERIVED FROM AUDITED FINANCIAL INFORMATION) ------------ -------------------------------------------------------- 2001 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- ---- SELECTED PER UNIT DATA: Total investment income .................................. $ .215 $ .427 $ .378 $ .350 $ .342 $ .368 Operating expenses ....................................... .049 .092 .091 .088 .082 .078 -------- -------- -------- -------- -------- -------- Net investment income .................................... .166 .335 .287 .262 .260 .290 Unit value at beginning of period ........................ 6.063 5.810 5.765 5.393 5.060 4.894 Net realized and change in unrealized gains (losses) ..... .121 (.082) (.242) .110 .073 (.124) -------- -------- -------- -------- -------- -------- Unit value at end of period .............................. $ 6.350 $ 6.063 $ 5.810 $ 5.765 $ 5.393 $ 5.060 ======== ======== ======== ======== ======== ======== SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase in unit value ............................... $ .29 $ .25 $ .04 $ .37 $ .33 $ .17 Ratio of operating expenses to average net assets ........ 1.57% * 1.57% 1.57% 1.57% 1.57% 1.57% Ratio of net investment income to average net assets ..... 5.33% * 5.69% 4.97% 4.71% 5.00% 5.87% Number of units outstanding at end of period (thousands) . 14,340 14,045 17,412 21,251 21,521 24,804 Portfolio turnover rate .................................. 106% 105% 340% 438% 196% 176%
(*)Annualized -23- 26 THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF INVESTMENTS (UNAUDITED) JUNE 30, 2001
PRINCIPAL MARKET AMOUNT VALUE ------------ ------------ BONDS (70.3%) AIRLINES (1.0%) Delta Airlines, Inc., 9.25% Debentures, 2007 $ 1,264,121 $ 1,266,081 -------------- AUTOMOTIVE (2.1%) ERAC USA Finance Enterprise, 8.00% Debentures, 2011 2,500,000 2,560,208 -------------- FINANCE (9.3%) Comdisco, Inc., 7.25% Debentures, 2001 6,800,000 5,202,000 Osprey Holdings, Inc., 8.31% Debentures, 2003 (A) 6,300,000 6,480,079 -------------- 11,682,079 -------------- FOOD (6.3%) Nabisco, Inc., 6.70% Debentures, 2002 7,800,000 7,915,705 -------------- GAMING (5.8%) Park Place Entertainment, 7.95% Debentures, 2003 7,000,000 7,215,236 -------------- HEALTHCARE (4.0%) Columbia\HCA Healthcare Corp., 6.87% Debentures, 2003 5,000,000 5,014,760 -------------- MEDIA (3.1%) Cox Enterprises, Inc., 7.88% Debentures, 2010 3,800,000 3,929,485 -------------- REAL ESTATE (5.3%) Nationwide Health Properties, Inc., 6.90% Debentures, 2037 7,000,000 6,656,643 -------------- TELECOMMUNICATIONS (24.6%) AT&T Corp.-Wireless Group, 5.63% Debentures, 2004 6,000,000 5,985,042 KPN Quest NV, 7.50% Debentures, 2005 5,200,000 5,123,523 Sprint Capital Corp., 7.63% Debentures, 2002 6,000,000 6,165,294 Telecom New Zealand Finance Corp., 6.25% Debentures, 2003 7,500,000 7,524,113 WorldCom, Inc., 6.50% Debentures, 2004 3,000,000 3,007,476 WorldCom, Inc., 7.50% Debentures, 2011 3,000,000 2,925,945 -------------- 30,731,393 --------------
PRINCIPAL MARKET AMOUNT VALUE ------------ ------------ UTILITIES (8.8%) CMS Energy Corp., 7.63% Debentures, 2004 $ 1,750,000 $ 1,735,284 CMS Energy Corp., 6.75% Debentures, 2004 3,000,000 2,920,287 UtiliCorp United, Inc., 6.88% Debentures, 2004 6,300,000 6,334,140 -------------- 10,989,711 -------------- TOTAL BONDS (COST $89,075,856) 87,961,301 -------------- U.S. GOVERNMENT SECURITIES (29.3%) United States of America Treasury, 6.63% Notes, 2007 23,600,000 25,361,716 United States of America Treasury, 5.00% Notes, 2011 11,700,000 11,356,324 -------------- TOTAL U.S. GOVERNMENT SECURITIES (COST $37,231,068) 36,718,040 -------------- SHORT-TERM INVESTMENTS (0.4%) COMMERCIAL PAPER (0.4%) Household Finance Corp., 4.20% Debentures, 2001 480,000 479,945 -------------- TOTAL SHORT-TERM INVESTMENTS (COST $479,945) 479,945 -------------- TOTAL INVESTMENTS (100%) (COST $126,786,869) (B) $ 125,159,286 ==============
NOTES (A) Restricted Security. (B) At June 30, 2001, net unrealized depreciation for all securities was $1,627,583. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of market value over cost of $1,029,381 and aggregate gross unrealized depreciation for all securities in which there was an excess of cost over market value of $2,656,964. See Notes to Financial Statements -24- 27 THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES The growth rate of the economy continued to slow throughout the first half of 2001 as it has done since late 2000. Gross Domestic Product growth for the second quarter is expected to be 0.6%, down from 1.2% in the first quarter. This continues the slowing growth first evidenced by the 1% growth of the fourth quarter. The economy isn't expected to pick up until very late this year, but perhaps as late as the second half of 2002. The unemployment rate rose again during the quarter to a 4.5% rate at the end of June, up from 4.3% at the end of March and up 0.5% for the first half of 2001. The yield on the long bond ended June at 5.76%, up from 5.46% at year-end. The Federal Open Market Committee reduced the Federal Reserve Board ("Fed") Funds target rate during the half from 6.00% to 3.75%, down 225 basis points from December's level. The Fed's bias remains towards economic weakness, signifying it is greatly concerned by the degree and pace of the economic slowing. Most estimates are for further rate reductions of 25 to 50 basis points by the end of the year. The strategy in management of The Travelers Money Market Account for Variable Annuities short-term assets will be to take advantage of attractive rates ahead of expected Fed Funds rate cutes, while maintaining the average life and quality of the portfolio. As of June 30 the asset size of the portfolio was $169 million, an increase of $23 million from year-end, with an average yield of 3.97% and an average life of 37 days. PORTFOLIO MANAGER: EMIL J. MOLINARO JR. [TAMIC LOGO] -25- 28 THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) JUNE 30, 2001
ASSETS: Investment securities, at market value (cost $169,287,577) ............ $ 169,301,208 Cash 6,306 Receivables: Interest ............................................................ 203,583 Purchase payments and transfers from other Travelers accounts ....... 1,676,800 Other assets .......................................................... 415 ---------------- Total Assets ...................................................... 171,188,312 ---------------- LIABILITIES: Payables: Contract surrenders and transfers to other Travelers accounts ....... 156,160 Investment management and advisory fees ............................. 12,234 Insurance charges ................................................... 47,293 Accrued liabilities ................................................... 35 ---------------- Total Liabilities ................................................. 215,722 ---------------- NET ASSETS: $ 170,972,590 ================
See Notes to Financial Statements -26- 29 THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 2001 INVESTMENT INCOME: Interest ............................................................... $ 4,342,564 EXPENSES: Investment management and advisory fees ................................ $ 265,836 Insurance charges ...................................................... 1,027,588 --------------- Total expenses ....................................................... 1,293,424 -------------- Net investment income .............................................. 3,049,140 -------------- Net increase in net assets resulting from operations ................... $ 3,049,140 ==============
See Notes to Financial Statements -27- 30 THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, 2001 2000 ---- ---- (UNAUDITED) OPERATIONS: Net investment income ........................................................... $ 3,049,140 $ 7,383,526 --------------- --------------- Net increase in net assets resulting from operations .......................... 3,049,140 7,383,526 --------------- --------------- UNIT TRANSACTIONS: Participant purchase payments (applicable to 2,715,053 and 6,517,217 units, respectively) ................... 7,320,074 16,959,975 Participant transfers from other Travelers accounts (applicable to 74,497,555 and 140,316,362 units, respectively) ................ 200,760,297 364,361,900 Administrative charges (applicable to 26,192 and 44,838 units, respectively) ......................... (71,143) (117,933) Contract surrenders (applicable to 6,020,144 and 16,614,816 units, respectively) .................. (16,226,892) (43,155,068) Participant transfers to other Travelers accounts (applicable to 63,707,471 and 144,513,406 units, respectively) ................ (171,776,648) (374,859,447) Other payments to participants (applicable to 93,154 and 739,703 units, respectively) ........................ (251,835) (1,933,877) --------------- --------------- Net increase (decrease) in net assets resulting from unit transactions ........ 19,753,853 (38,744,450) --------------- --------------- Net increase (decrease) in net assets ....................................... 22,802,993 (31,360,924) NET ASSETS: Beginning of period ............................................................. 148,169,597 179,530,521 --------------- --------------- End of period ................................................................... $ 170,972,590 $ 148,169,597 =============== ===============
See Notes to Financial Statements -28- 31 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 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 period. 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 Company, LLC, 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 $71,714 and $257,414 of contingent deferred sales charges for the six months ended June 30, 2001 and the year ended December 31, 2000, respectively. -29- 32 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED 3. NET ASSETS HELD ON BEHALF OF AN AFFILIATE Approximately $4,227,000 and $3,923,000 of the net assets of Account MM were held on behalf of an affiliate of The Travelers as of June 30, 2001 and December 31, 2000, respectively. Transactions with this affiliate during the six months ended June 30, 2001 and the year ended December 31, 2000, were comprised of participant purchase payments of approximately $653,000 and $1,258,000 and contract surrenders of approximately $425,000 and $937,000, respectively. 4. NET CONTRACT OWNERS' EQUITY
JUNE 30, 2001 --------------------------------------------------- UNIT NET UNITS VALUE ASSETS ----- ----- ------ Accumulation phase of contracts issued prior to May 16, 1983 ............. 24,708 $ 2.843 $ 70,242 Annuity phase of contracts issued prior to May 16, 1983 .................. 40,145 2.843 114,125 Accumulation phase of contracts issued on or after May 16, 1983 .......... 62,748,705 2.717 170,520,396 Annuity phase of contracts issued on or after May 16, 1983 ............... 98,556 2.717 267,827 -------------- Net Contract Owners' Equity .............................................................................. $ 170,972,590 ==============
-30- 33 NOTES TO FINANCIAL STATEMENTS - CONTINUED 5. SUPPLEMENTARY INFORMATION (Selected data for a unit outstanding throughout each period.)
Contracts issued prior to May 16, 1983 SIX MONTHS ENDED FOR THE YEARS ENDED DECEMBER 31, JUNE 30, (DERIVED FROM AUDITED FINANCIAL INFORMATION) ------------ -------------------------------------------------------- 2001 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- ---- SELECTED PER UNIT DATA: Total investment income .................................. $ .07 $ .174 $ .135 $ .138 $ .134 $ .125 Operating expenses ....................................... .01 .037 .034 .033 .032 .030 -------- -------- -------- -------- -------- -------- Net investment income .................................... .05 .137 .101 .105 .102 .095 Unit value at beginning of period ........................ 2.78 2.649 2.548 2.443 2.341 2.246 -------- -------- -------- -------- -------- -------- Unit value at end of period .............................. $ 2.84 $ 2.786 $ 2.649 $ 2.548 $ 2.443 $ 2.341 ======== ======== ======== ======== ======== ======== SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase in unit value ............................... $ .06 $ .14 $ .10 $ .11 $ .10 $ .10 Ratio of operating expenses to average net assets ........ 1.33% * 1.33% 1.33% 1.33% 1.33% 1.33% Ratio of net investment income to average net assets ..... 3.97% * 5.09% 3.87% 4.20% 4.27% 4.10% Number of units outstanding at end of period (thousands) . 65 70 80 91 105 112 Contracts issued prior to May 16, 1983 SIX MONTHS ENDED FOR THE YEARS ENDED DECEMBER 31, JUNE 30, (DERIVED FROM AUDITED FINANCIAL INFORMATION) ------------ -------------------------------------------------------- 2001 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- ---- SELECTED PER UNIT DATA: Total investment income .................................. $ .07 $ .167 $ .130 $ .133 $ .128 $ .121 Operating expenses ....................................... .02 .041 .039 .038 .036 .035 -------- -------- -------- -------- -------- -------- Net investment income .................................... .05 .126 .091 .095 .092 .086 Unit value at beginning of period ........................ 2.66 2.541 2.450 2.355 2.263 2.177 -------- -------- -------- -------- -------- -------- Unit value at end of period .............................. $ 2.71 $ 2.667 $ 2.541 $ 2.450 $ 2.355 $ 2.263 ======== ======== ======== ======== ======== ======== SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase in unit value ............................... $ .05 $ .13 $ .09 $ .10 $ .09 $ .09 Ratio of operating expenses to average net assets ........ 1.57% * 1.57% 1.57% 1.57% 1.57% 1.57% Ratio of net investment income to average net assets ..... 3.72% * 4.84% 3.62% 3.95% 4.02% 3.84% Number of units outstanding at end of period (thousands) . 62,847 55,477 70,545 41,570 36,134 38,044
(*)Annualized -31- 34 THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF INVESTMENTS (UNAUDITED) JUNE 30, 2001
PRINCIPAL MARKET AMOUNT VALUE ------------ ------------ SHORT-TERM INVESTMENTS (100%) COMMERCIAL PAPER (100%) Abbey National North American Inc., 3.67% due September 17, 2001 $ 6,275,000 $ 6,223,694 Air Liquide US LLC, 4.03% due July 10, 2001 3,528,000 3,523,784 American Express Credit Corp., 4.03% due July 5, 2001 7,500,000 7,495,012 Asset Securitization Corp., 4.08% due July 6, 2001 7,500,000 7,494,210 Bayer Corp., 3.96% due July 13, 2001 7,500,000 7,488,720 Blueridge Asset Funding Corp., 3.86% due July 18, 2001 7,000,000 6,985,853 CIT Group Holdings, Inc., 3.72% due August 20, 2001 7,500,000 7,459,537 Coca-Cola Co., 3.73% due July 30, 2001 7,500,000 7,475,655 DE Funding Corp., 4.03% due July 18, 2001 7,500,000 7,484,842 Deere & Co., 4.00% due July 2, 2001 7,500,000 7,497,480 Emerald Program, 3.96% due August 2, 2001 7,500,000 7,473,338 Emerson Electronic Co., 4.04% due July 10, 2001 7,500,000 7,491,038 Ford Motor Credit Co., 3.96% due July 12, 2001 7,500,000 7,489,485 GE Capital Corp., 3.71% due August 01, 2001 7,500,000 7,474,110 GM Acceptance Corp., 4.31% due July 27, 2001 5,000,000 5,001,470 Household Finance Corp., 4.20% due July 2, 2001 810,000 809,907
PRINCIPAL MARKET AMOUNT VALUE ------------ ------------ COMMERCIAL PAPER (CONTINUED) Lehman Brothers Holding, Inc., 4.79% due July 19, 2001 $ 6,000,000 $ 5,987,250 McDonald's Corp., 4.81% due March 7, 2002 5,000,000 5,020,135 Merck & Co. Inc., 5.10% due February 22, 2002 3,000,000 3,019,623 Merrill Lynch & Co. Inc., 4.01% due September 13, 2001 5,000,000 5,000,251 Preferred Resources Funding Corp., 3.90% due July 23, 2001 7,500,000 7,480,988 Sheffield Resources Corp., 3.78% due July 25, 2001 5,500,000 5,484,936 Texaco Inc., 3.74% due August 15, 2001 7,500,000 7,463,347 Tribune Co., 3.98% due July 26, 2001 7,500,000 7,478,700 Unilever Capital Corp., 3.99% due September 07, 2001 5,000,000 5,000,720 Verizon Global Funding Corp., 3.92% due July 15, 2002 5,000,000 5,000,875 Windmill Funding Corp., 4.21% due July 3, 2001 7,500,000 7,496,648 -------------- TOTAL INVESTMENTS (100%) (COST $169,287,577) $ 169,301,208 ==============
See Notes to Financial Statements -32- 35 Investment Adviser ------------------ TRAVELERS ASSET MANAGEMENT INTERNATIONAL COMPANY, LLC 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 ---------------------- TRAVELERS INVESTMENT MANAGEMENT COMPANY Stamford, 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 The financial information included herein has been taken from the records of 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. This financial information has not been audited by the Accounts' independent accountants, who therefore express no opinion concerning its accuracy. However, it is management's opinion that all proper adjustments have been made. 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 (Semi-Annual) (6-01) Printed in U.S.A. -----END PRIVACY-ENHANCED MESSAGE-----