-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, V5nB2yh8yVJcYm7IAdnagpAhUNZ6E7sethFaH7bNHtT9wpuYzj8oeJAbb+4t/pBY /W2MrBceu7A7wmAltDQwkg== 0000950123-95-002470.txt : 19950830 0000950123-95-002470.hdr.sgml : 19950830 ACCESSION NUMBER: 0000950123-95-002470 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950829 SROS: NONE 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: 1940 Act SEC FILE NUMBER: 811-01539 FILM NUMBER: 95568084 BUSINESS ADDRESS: STREET 1: ONE TOWER SQ CITY: HARTFORD STATE: CT ZIP: 06183 BUSINESS PHONE: 2032770111 MAIL ADDRESS: STREET 1: ONE TOWER SQUARE CITY: HARTFORD STATE: CT ZIP: 06183 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: 1940 Act SEC FILE NUMBER: 811-02571 FILM NUMBER: 95568085 BUSINESS ADDRESS: STREET 1: ONE TOWER SQ CITY: HARTFORD STATE: CT ZIP: 06183 BUSINESS PHONE: 2032770111 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: 1940 Act SEC FILE NUMBER: 811-03409 FILM NUMBER: 95568086 BUSINESS ADDRESS: STREET 1: ONE TOWER SQ CITY: HARTFORD STATE: CT ZIP: 06183 BUSINESS PHONE: 2032770111 FORMER COMPANY: FORMER CONFORMED NAME: TRAVELERS FUND MM FOR VARIABLE ANNUITIES DATE OF NAME CHANGE: 19851103 N-30D 1 THE TRAVELERS INSURANCE CO. 1 UNIVERSAL ANNUITY SEMI-ANNUAL REPORTS 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 JUNE 30, 1995 [TRAVELERS INSURANCE LOGO] THE TRAVELERS INSURANCE COMPANY ONE TOWER SQUARE HARTFORD, CONNECTICUT 06183 2 [TIMCO LOGO] The Travelers Investment Management Company ("TIMCO") provides equity management and advisory services for The Travelers Growth and Income Stock Account for Variable Annuities. [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 Quality Bond Account for Variable Annuities and The Travelers Money Market Account for Variable Annuities. 3 THE TRAVELERS VARIABLE PRODUCTS SEPARATE ACCOUNTS INVESTMENT ADVISORY COMMENTARY AS OF JUNE 30, 1995 ECONOMIC REVIEW AND OUTLOOK While the economy has slowed more than we expected at the beginning of the year, the magnitude and duration of this slowdown is still unclear. The slowing that has occurred already has enabled the ten-year U.S. Treasury Bond rate to decrease 1.5% this year. Because of this at least some of the stimulative effect of the Federal Reserve Board ("Fed") reducing rates has been set in motion already. A reduction of the Federal Funds rate, (a sensitive indicator of the direction of interest rates), to a 5.50% or perhaps 5.00% level is possible but may not add much more to economic growth since a decrease in rates has already been priced into the bond market. The question remains how weak is the economy and how long will the weakness persist. We lean towards the scenario of a modest slowdown, much like the modest recovery, with growth resuming by the end of this year. The decline in interest rates that has already occurred along with the improved export competitiveness brought on by the weak dollar should help growth to pick up. In addition, last year's strong growth did not bring on typical late cycle excesses (business borrowings for leverage or new plants, excessive inventory buildups, or significant wage pressure increases). Therefore, we think this is a mid-cycle growth slowdown in a longer recovery and the second half of the recovery will see more confidence build up and allow some of the previous excesses to reappear. Capacity utilization and unemployment have not yet fallen that far below the historic inflation triggers that they reached last year, so that if growth picks up by late this year or in the first half of next year, the Fed will have to resume their bias towards tightening. This view implies rising short-term and intermediate-term rates next year with the yield curve flattening, assuming the market stays comfortable with the Fed's anti-inflation resolve. On the bullish side, the market has rallied so strongly because there is a significant risk that 1994's growth was an aberration in a longer term disinflationary cycle. With diminished consumer spending, the decline in interest rates may have only a minor impact on consumer behavior. Foreign economies may weaken in tandem with the United States, reducing the impact of the weakness in the dollar to boost our exports. The global trend towards tight fiscal and monetary policy continues. The U.S. budget cuts that are currently being considered may cut 0.5% from 1996's growth rate in addition to allowing the bond market to lower long-term inflation expectations. If numbers continue to come in weak and the economy does not respond to the reduction in bond rates seen so far, the Fed will get much more aggressive about cutting rates. If this happens, the Fed Funds rate could be in the 4-5% range by early next year with the yield curve steepening as the long end lags the decline. Because of the uncertainty that exists right now, we are vigilantly watching key economic variables to give us a clue as to which view is right. First, consumer spending on housing and autos should pick up if the decline in interest rates is of any value in boosting the economy. Numbers released in late June and early July have started to show some pick up. Second, we have been concerned about the sharp drop-off in growth in Europe and what looks like another recession in Japan. We will be monitoring developments overseas closely to see what impact they will have on the United States. Argentina and Mexico are not completely out of the woods as their economies will be going through a high stress period in the second half of the year. We think they will make it through, but there remains a significant risk of more problems developing that could hurt all emerging economies as they did at the turn of this year. Finally, we will be watching the behavior of the stock market. It has not shown signs of recession yet and has been boosted by technology stocks which have been the major beneficiaries of the strong growth in the investment sector of the economy. To date, this has supported our view of a modest slowdown but we will be watching this closely for any changes. -1- 4 FIXED-INCOME MARKET COMMENTARY After a negative year in 1994, the bond market bounced back during the first half of the year as represented by the Lehman Government/Corporate Bond Index, a broad based bond market index. This index was up 11.8% for the six months ending June 30, 1995, following a loss of 3.5% in 1994. The month of May had the most impressive performance, as payroll employment figures turned negative in April and May, the first back-to-back reduction for non-farm payroll numbers since January of 1992. The month of May was the best month in the bond market since February 1986. Market expectations shifted from expecting continued Fed tightening at the beginning of the year to expectations of the Fed reducing interest rates. By the end of June, the market had already anticipated a Fed rate cut of .5% to .75 % by year end. Numerous economists are expecting second quarter gross domestic product to come in close to zero, with growth forecasts for the rest of the year not much better. Inflation still seems to be relatively well contained, with our expectations of year-over-year Consumer Price Index ("CPI"), a broad based indicator of inflation, to remain in the 3.0-3.5% range. Within the U.S. bond market, the tax exempt bond market sector was by far the worst-performing sector as it was hurt with concerns about the flat tax in April and then individual investors suffered "sticker shock" at the low yields implied by the U.S. Treasury bond market rally in May. Corporate and asset-backed securities outperformed U.S. Treasuries while mortgage-backed securities lagged due to the sharp decline in interest rates. The high yield market also lagged, particularly the B quality sector whose spreads widened in May and June. The yield curve steepened with the two-year to thirty-year spread widening to 82 basis points from 18 at the beginning of the year. Until we develop more conviction about when economic growth is bottoming, we are staying close to our duration targets. We have been balancing a slightly long duration position with an underweighting on the one- to three-year maturity range. The two-year U.S. Treasury Bond has had a tremendous rally this year due to the shift in expectations about Fed tightening. When the economy bottoms and expectation for further rate cuts are dampened, we think the two year will perform poorly. In terms of sector strategy, the areas of the corporate bond market that tend to be more recession proof are being favored in asset selection. Relative spreads in the investment grade corporate market are not compensating you for any recession risk. We are using the recent corporate spread widening to selectively buy media, utility, and consumer product names that should still show solid earnings in the event of a slowdown. In the mortgage-backed market, the recent increase in volatility and the decline in rates has caused this sector to widen. We are selectively looking for well structured securities to add as corporate proxies, as well as sufficiently seasoned high coupon collateral as cushion paper that should provide incremental return. We remain cautious on the municipal market because pressure from flat tax concerns will put a lid on the sector's relative performance. -2- 5 EQUITY MARKET COMMENTARY Lower interest rates and better-than-expected corporate profits propelled broad stock market averages to a series of new highs during the first half of 1995. Including dividends, the S&P 500 Stock Index recorded a gain of 20.2% over the six-month period ended June 30, 1995. Small cap stocks continued to lag somewhat, with the Russell 2000 up 14.4% through the same period. Technology stocks led the market during this record-setting advance. The technology sector rose in market value by 40%, driven by unprecedented levels of business spending for semiconductors, computer systems and telecommunications equipment. When evidence of a rapid slowdown in economic growth surfaced in May, bond yields fell sharply; and the yield curve steepened in anticipation of Fed's easing of interest rates. Stocks in the financial sector rallied strongly, paced by money center banks, mortgage lenders and brokerage firms. Lower interest rates also benefited economically sensitive groups such as home-builders and stocks in the materials sector, including paper, forest products, chemicals and containers. Reflecting a lackluster retail environment, consumer oriented groups such as food, apparel and household products lagged the overall market. The weakness in the consumer sector culminated in a late June sell-off of consumer cyclicals, following a series of preannounced earnings disappointments for the second quarter. The weaker-than-expected earnings were attributed to soft consumer demand and margin pressure created by higher materials prices. Consequently, earnings estimates in the consumer durables area have plunged 10% in the past month. The surprise in the first half was the strength of reported earnings, despite low income growth, sluggish consumer spending and tight monetary policy. Actual earnings in the fourth quarter of 1994 and the first quarter of 1995 dramatically exceeded expectations. Earnings estimates continue to rise, especially in the technology, commodities and energy sectors. Concerns remain, however, that earnings disappointments lie ahead as an inevitable fallout of slowing economic growth. Although capital spending has been the key driver of this business expansion, it is reasonable to ask whether the industrial sector can continue a high rate of investment spending in the face of falling final demand? On the plus side, the recent Fed decision to cut interest rates has given the financial markets confidence. Since the odds favor continued easing by the Fed over the next year, lower interest rates should provide ongoing support to equity price to earnings ratios. In addition, the accelerated pace of merger and acquisition activity seen recently in the technology, health care and financial sectors seems likely to continue, and provide an upward bias to stock prices. -3- 6 TABLE OF CONTENTS
PAGE - -------------------------------------------------------------------------------------------------- THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES....................................................................... 5 THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES....................................................................... 16 THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES....................................................................... 26
-4- 7 THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES During the first six months of 1995, the Travelers Growth and Income Stock Account achieved a total return of 21.2% before fees and expenses, outperforming the Standard & Poor's 500 Stock Index ("S&P 500") total return of 20.2%. Net of fees and expenses, the portfolio's total return of 20.3% was well ahead of the 16.1% average total return for variable annuity stock accounts in the Lipper Growth & Income category. Stock selection in the Technology sector contributed importantly to portfolio performance, in particular from positions in Texas Instruments (+82%) and, in the semiconductor equipment group, in both KLA Instruments (+61%) and Applied Materials (+115%). In the Producer Durables sector, the portfolio benefited from overweighted positions in McDonnell Douglas (+61%), Boeing (+34%), Parker-Hannifin (+20%) and Deere (+29%). Another key factor to the portfolio's favorable relative performance was stock selection in the Financial sector, through holdings in Citibank (+39%), Chase Manhattan Bank (+36%), Bank of New York (+37%) and Lehman Brothers (+48%). Given the 22% advance by the S&P 500 since November and the likelihood of slower economic growth through the remainder of the year, we believe that careful stock selection is critical at this stage of the market cycle. In the Technology sector, we have focused on stocks that exhibit improving fundamentals, but which still trade at a reasonable multiple of their expected growth rates, including 3COM and Cabletron Systems in the networking group, Oracle Systems in the software group and KLA Instruments in the semiconductor equipment group. In the Materials sector, we have emphasized Dow Chemical and Praxair. In the Consumer sector, our major overweights include Nike and Procter & Gamble. In the Finance sector, we have emphasized Citibank, Jefferson Pilot and Transamerica for relative value and earnings momentum. -5- 8 THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) JUNE 30, 1995 ASSETS: Investment securities, at market value (identified cost $311,674,422)...................... $ 372,914,689 Cash....................................................................................... 79,714 Receivables: Dividends............................................................................... 782,480 Interest................................................................................ 38,122 Investment securities sold.............................................................. 17,306,405 Purchase payments and transfers from other Travelers accounts........................... 416,228 Other assets............................................................................... 20,786 -------------- Total Assets........................................................................ 391,558,424 -------------- LIABILITIES: Payables: Investment securities purchased......................................................... 9,121,922 Contract surrenders and transfers to other Travelers accounts........................... 139,742 Investment management and advisory fees................................................. 18,803 Variation on futures margin............................................................. 33,913 Accrued liabilities........................................................................ 52,157 -------------- Total Liabilities.................................................................... 9,366,537 -------------- NET ASSETS:.................................................................................. $ 382,191,887 ==============
See Notes to Financial Statements -6- 9 THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 1995 INVESTMENT INCOME: Dividends......................................................... $ 4,221,752 Interest.......................................................... 477,519 ---------------- Total income................................................. $ 4,699,271 EXPENSES: Investment management and advisory fees........................... 781,617 Insurance charges................................................. 1,985,613 ---------------- Total expenses............................................... 2,767,230 --------------- Net investment income..................................... 1,932,041 --------------- REALIZED GAIN AND CHANGE IN UNREALIZED GAIN ON INVESTMENT SECURITIES: Realized gain from investment security transactions: Proceeds from investment securities sold..................... 181,550,033 Cost of investment securities sold........................... 166,948,674 ---------------- Net realized gain......................................... 14,601,359 Change in unrealized gain on investment securities: Unrealized gain at December 31, 1994......................... 12,899,180 Unrealized gain at June 30, 1995............................. 61,240,267 ---------------- Net change in unrealized gain for the period.............. 48,341,087 --------------- Net realized gain and change in unrealized gain........ 62,942,446 --------------- Net increase in net assets resulting from operations.............. $ 64,874,487 ===============
See Notes to Financial Statements -7- 10 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, 1995 1994 ---- ---- (UNAUDITED) OPERATIONS: Net investment income................................................. $ 1,932,041 $ 3,903,113 Net realized gain from investment security transactions............... 14,601,359 9,768,357 Net change in unrealized gain on investment securities................ 48,341,087 (17,759,208) ---------------- ----------------- Net increase (decrease) in net assets resulting from operations.... 64,874,487 (4,087,738) ---------------- ----------------- UNIT TRANSACTIONS: Participant purchase payments (applicable to 1,347,272 and 3,287,872 units, respectively)........ 10,268,854 22,820,587 Participant transfers from other Travelers accounts (applicable to 1,212,264 and 2,395,050 units, respectively)........ 9,308,130 16,585,884 Administrative charges (applicable to 20,461 and 52,573 units, respectively).............. (172,035) (356,909) Contract surrenders (applicable to 1,483,742 and 3,654,777 units, respectively)........ (11,349,400) (25,688,114) Participant transfers to other Travelers accounts (applicable to 1,861,397 and 5,819,195 units, respectively)........ (13,988,736) (40,465,786) Other payments to participants (applicable to 78,645 and 245,574 units, respectively)............. (601,919) (1,752,347) ---------------- ---------------- Net decrease in net assets resulting from unit transactions........ (6,535,106) (28,856,685) ---------------- ---------------- Net increase (decrease) in net assets........................... 58,339,381 (32,944,423) NET ASSETS: Beginning of period................................................... 323,852,506 356,796,929 ---------------- ---------------- End of period......................................................... $ 382,191,887 $ 323,852,506 ================ ================
See Notes to Financial Statements -8- 11 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 Travelers Group 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 last-reported sale price as of the close of business of the New York Stock Exchange on the last business day of the period; 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 by computing a market value based upon quotations from dealers or issuers for securities of a similar type, quality and maturity. 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 (including short-term investments) in an amount at least equal to the notional value of outstanding purchased futures contracts, less the initial margin. 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 the latest sale price as of the close of business of the New York Stock Exchange, or in the absence of such sale, 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. -9- 12 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. 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. 2. INVESTMENTS Purchases and sales of securities other than short-term investments aggregated $168,802,871 and $156,845,659, respectively, for the six months ended June 30, 1995. Realized gains and losses from security transactions are reported on an identified cost basis. At June 30, 1995, Account GIS held 34 open S&P 500 Stock Index futures contracts with a maturity date of September 15, 1995. The underlying face value, or notional value, of these contracts at June 30, 1995, amounted to $9,301,550. In connection with these contracts, short-term investments with a par value of $790,000 had been pledged as margin deposits. Net realized gains (losses) resulting from futures contracts were $2,280,340 and ($190,085) for the six months ended June 30, 1995 and the year ended December 31, 1994, respectively. These gains (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, 1995 is shown on the Statement of Assets and Liabilities as a payable for variation on futures margin. 3. CONTRACT CHARGES Investment management and advisory fees are calculated daily at an annual rate of 0.45% of Account GIS's average net assets. These fees are paid to The Travelers Investment Management Company, an indirect wholly owned subsidiary of Travelers Group Inc. Insurance charges are paid to The Travelers for the mortality and expense risks assumed by The Travelers. On contracts issued prior to May 16, 1983, these charges are equivalent to 1.0017% of the average net assets of Account GIS on an annual basis. On contracts issued on or after May 16, 1983, the charges for mortality and expense risks are equivalent to 1.25% of the average net assets of Account GIS on an annual basis. Additionally, for certain contracts in the accumulation phase, a semi-annual charge of $15 (prorated for partial periods and the level of participation in other separate accounts of The Travelers) 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 $25,590 and $54,101 for the six months ended June 30, 1995 and the year ended December 31, 1994, 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 are stated prior to the deduction of $92,820 and $146,421 of contingent deferred sales charges for the six months ended June 30, 1995 and the year ended December 31, 1994, respectively. -10- 13 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED 4. NET ASSETS HELD BY AFFILIATE Approximately $10,263,000 and $8,001,000 of the net assets of Account GIS were held on behalf of an affiliate of The Travelers as of June 30, 1995 and December 31, 1994, respectively. Transactions with this affiliate during the six months ended June 30, 1995 and the year ended December 31, 1994, were comprised of participant purchase payments of approximately $423,000 and $356,000 and contract surrenders of approximately $122,000 and $653,000, respectively. 5. NET CONTRACT OWNERS' EQUITY
JUNE 30, 1995 ------------------------------------------------- UNIT NET UNITS VALUE ASSETS ----- ----- ------ Contracts issued prior to May 16, 1983..................... 18,410,431 $ 8.573 $ 157,846,219 Annuity Contracts issued prior to May 16, 1983............. 451,891 8.573 3,874,397 Contracts issued on or after May 16, 1983.................. 26,436,604 8.318 219,925,117 Annuity Contracts issued on or after May 16, 1983.......... 65,652 8.318 546,154 --------------- Net Contract Owners' Equity................................ $ 382,191,887 ===============
-11- 14 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) -------- -------------------------------------------------------- 1995 1994 1993 1992 1991 1990 ---- ---- ---- ---- ---- ---- SELECTED PER UNIT DATA: Total investment income........................ $ .104 $ .192 $ .189 $ .192 $ .201 $ .199 Operating expenses............................. .056 .100 .092 .085 .077 .069 -------- ------- ------- ------- ------- ------- Net investment income.......................... .048 .092 .097 .107 .124 .130 Unit value at beginning of period.............. 7.120 7.194 6.664 6.587 5.145 5.383 Net realized and change in unrealized gains (losses)..................................... 1.405 (.166) .433 (.030) 1.318 (.368) -------- ------- ------- ------- ------- ------- Unit value at end of period.................... $ 8.573 $ 7.120 $ 7.194 $ 6.664 $ 6.587 $ 5.145 ======== ======= ======= ======= ======= ======= SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase (decrease) in unit value.......... 1.45 (.07) .53 .08 1.44 (.24) Ratio of operating expenses to average net assets....................................... 1.45%# 1.41% 1.33% 1.33% 1.33% 1.33% Ratio of net investment income to average net assets....................................... 1.25%# 1.30% 1.40% 1.67% 2.11% 2.50% Units outstanding at end of period (thousands) 18,862 19,557 21,841 22,516 24,868 28,053 Portfolio turnover rate........................ 47% 103% 81% 189% 319% 54%
Contracts issued on or after May 16, 1983 SIX MONTHS ENDED FOR THE YEARS ENDED DECEMBER 31, JUNE 30, (DERIVED FROM AUDITED FINANCIAL INFORMATION) -------- -------------------------------------------------------- 1995 1994 1993 1992 1991 1990 ---- ---- ---- ---- ---- ---- SELECTED PER UNIT DATA: Total investment income........................ $ .102 $ .189 $ .184 $ .188 $ .198 $ .192 Operating expenses............................. .064 .115 .106 .098 .091 .079 -------- -------- -------- -------- -------- --------- Net investment income.......................... .038 .074 .078 .090 .107 .113 Unit value at beginning of period.............. 6.917 7.007 6.507 6.447 5.048 5.295 Net realized and change in unrealized gains (losses)..................................... 1.363 (.164) .422 (.030) 1.292 (.360) -------- -------- -------- -------- -------- --------- Unit value at end of period.................... $ 8.318 $ 6.917 $ 7.007 $ 6.507 $ 6.447 $ 5.048 ========= ======== ======== ======== ======== ========= SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase (decrease) in unit value.......... 1.40 (.09) .50 .06 1.40 (.25) Ratio of operating expenses to average net assets....................................... 1.70%# 1.65% 1.57% 1.58% 1.58% 1.57% Ratio of net investment income to average net assets....................................... 1.00%# 1.05% 1.15% 1.43% 1.86% 2.25% Units outstanding at end of period (thousands) 26,502 26,692 28,497 29,661 26,235 19,634 Portfolio turnover rate........................ 47% 103% 81% 189% 319% 54%
# Annualized. -12- 15 THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF INVESTMENTS (UNAUDITED) JUNE 30, 1995
NO. OF MARKET SHARES VALUE ------------------ -------------- COMMON STOCKS (98.9%) AMUSEMENTS (1.2%) Mirage Resorts, Inc. (A) 32,600 $ 998,375 Walt Disney Co. 61,000 3,393,125 ------------- 4,391,500 ------------- BANKING (4.5%) Banc One Corp. 74,137 2,390,918 Bank of Boston Corp. 9,600 360,000 BankAmerica Corp. 13,400 705,175 Barnett Banks, Inc. 13,500 691,875 Chase Manhattan Corp. 14,300 672,100 Citicorp 55,900 3,235,212 First Interstate Bancorp 9,300 746,325 First Union Corp. 13,600 615,400 J.P. Morgan & Co. 16,900 1,185,113 Mellon Bank Corp. 12,800 532,800 NationsBank Corp. 42,400 2,273,700 Norwest Corp. 62,400 1,794,000 U.S. Bancorp 38,600 928,812 Wells Fargo & Co. 4,500 811,125 ------------- 16,942,555 ------------- CHEMICALS, PHARMACEUTICALS AND ALLIED PRODUCTS (13.1%) Abbott Laboratories 66,700 2,701,350 American Home Products Corp. 29,100 2,251,612 Amgen (A) 11,900 956,462 Bristol-Myers Squibb Co. 68,300 4,652,937 Dow Chemical Co. 48,700 3,500,312 E.I. Dupont de Nemours & Co. 60,100 4,131,875 Eastman Chemical Company 17,100 1,017,450 Eli Lilly & Co. 25,900 2,033,150 Forest Labs, Inc. (A) 23,600 1,047,250 Geon Co. 41,700 1,198,875 International Flavors & Fragrances 40,700 2,024,825 Johnson & Johnson 74,200 5,017,775 Merck & Co., Inc. 87,100 4,267,900 Mylan Labs, Inc. 12,100 372,075 Pfizer, Inc. 29,600 2,734,300 Praxair, Inc. 74,700 1,867,500 Procter & Gamble Co. 71,900 5,167,813 Schering-Plough Corp. 43,200 1,906,200 Union Carbide Corp. 46,800 1,561,950 W.R. Grace & Co. 7,800 478,725 ------------- 48,890,336 ------------- COMMUNICATION (10.1%) Ameritech Corp. 60,800 2,675,200 AT&T Corp. 168,000 8,925,000 Bell Atlantic Corp. 44,100 2,469,600 Bellsouth Corp. 53,800 3,416,300 Capital Cities ABC, Inc. 20,500 2,214,000 CBS, Inc. 13,465 902,155 GTE Corp. 82,200 2,805,075 MCI Communications Corp. 58,300 1,278,956 NYNEX Corp. 62,700 2,523,675 Pacific Telesis Group 20,000 535,000 Sprint Corp. 33,500 1,126,438 SBC Communications, Inc. 81,100 3,862,388 Tele-Communications, Inc. (A) 61,000 1,429,687 U.S. West, Inc. 18,000 749,250 Viacom International, Inc. Cl. B (A) 55,700 2,583,088 ------------- 37,495,812 ------------- CONTRACTORS (0.7%) Fluor Corp. 25,700 1,336,400 Halliburton Co. 33,800 1,208,350 ------------- 2,544,750 ------------- ELECTRICAL AND ELECTRONIC MACHINERY (6.6%) Amphenol Corp. (A) 58,100 1,692,162 Andrew Corp. (A) 15,200 879,700 General Electric Co. 164,000 9,245,500 Intel Corp. (A) 70,200 4,444,537 Maxim Integrated Products (A) 16,700 851,700 Micron Technology 18,000 987,750 Motorola, Inc. 43,700 2,933,363 Scientific-Atlanta, Inc. 45,400 998,800 Texas Instruments, Inc. 18,000 2,409,750 ------------- 24,443,262 ------------- FINANCE (4.2%) American Express Co. 43,300 1,520,912 Dean Witter Discover & Co. 39,200 1,842,400 Federal Home Loan Corp. 37,100 2,550,625 Federal National Mortgage Assoc. 33,900 3,199,313 Green Tree Financial Corp. 21,400 949,625 Household International 19,300 955,350 ITT Corp. 26,400 3,102,000 Lehman Brothers Holding, Inc. 78,600 1,719,375 ------------- 15,839,600 ------------- FOOD (9.2%) Archer-Daniels Midland Co. 103,200 1,922,100 Campbell Soup Co. 20,900 1,024,100 Coca-Cola Co. 134,400 8,568,000 CONAGRA, Inc. 57,500 2,005,312 CPC International, Inc. 13,300 821,275 H.J. Heinz Co. 22,400 994,000 Kellogg Co. 7,800 556,725 McDonalds Corp. 82,200 3,216,075 PepsiCo, Inc. 72,400 3,303,250 Philip Morris, Inc. 80,700 6,002,063 Ralston-Purina Group 30,700 1,565,700 Sara Lee Corp. 45,500 1,296,750 Seagram Co. Ltd. 31,100 1,076,838 Unilever NV 13,400 1,743,675 ------------- 34,095,863 ------------- FURNITURE AND FIXTURES (0.2%) Masco Corp. 24,600 664,200 -------------
-13- 16 STATEMENT OF INVESTMENTS (UNAUDITED) - CONTINUED
NO. OF MARKET SHARES VALUE ------------ ----------- INSURANCE (3.2%) Aetna Life & Casualty Co. 10,400 $ 653,900 American International Group 34,900 3,978,600 Chubb Corp. 23,300 1,866,912 CIGNA Corp. 6,800 527,850 General Reinsurance Corp. 3,700 495,338 Jefferson Pilot Corp. 28,500 1,560,375 Lincoln National Corp. 9,100 398,125 Saint Paul Companies 26,500 1,305,125 Transamerica Corp. 22,300 1,298,975 ------------- 12,085,200 ------------- LUMBER AND WOOD PRODUCTS (0.6%) Georgia-Pacific Corp. 9,300 806,775 Weyerhaeuser Co. 32,500 1,531,563 ------------- 2,338,338 ------------- MACHINERY (6.7%) Apple Computers, Inc. 11,000 511,500 Black & Decker Corp. 35,500 1,096,062 Cabletron System, Inc. (A) 32,500 1,730,625 Caterpillar, Inc. 32,700 2,100,975 Cisco Systems, Inc. (A) 25,300 1,279,231 Compaq Computer Corp. (A) 13,800 626,175 Deere & Co. 13,000 1,113,125 Dell Computer Corp. (A) 20,800 1,251,900 Digital Equipment Corp. (A) 28,500 1,161,375 Harnischfeger Industries 29,400 1,017,975 Hewlett Packard Co. 48,800 3,635,600 International Business Machines Corp. 45,000 4,320,000 Silicon Graphics, Inc. (A) 40,800 1,626,900 Stewart & Stevenson Services, Inc. 100 3,606 Tenneco, Inc. 17,800 818,800 3Com Corp. (A) 16,900 1,132,300 Varity Corp. (A) 39,200 1,724,800 ------------- 25,150,949 ------------- METAL PRODUCTS (2.4%) Ball Corp. 37,800 1,318,275 Gillette Co. 65,800 2,936,325 Nucor Corp. 8,000 428,000 Parker-Hannifin Corp. 28,200 1,022,250 Phelps Dodge Corp. 22,500 1,327,500 Reynolds Metals Co. 21,600 1,117,800 USX-U.S. Steel Group 25,800 886,875 ------------- 9,037,025 ------------- MINING (0.5%) Barrick Gold Corp. 31,200 787,800 Placer Dome, Inc. 41,500 1,084,188 ------------- 1,871,988 ------------- MISCELLANEOUS MANUFACTURING (3.1%) Becton Dickinson & Co. 25,900 1,508,675 Biomet, Inc. (A) 6,800 104,975 Eastman Kodak Co. 31,700 1,921,812 Emerson Electric Co. 18,300 1,308,450 Honeywell, Inc. 12,300 530,438 KLA Instruments Corp. (A) 27,200 2,104,600 Medtronics, Inc. 25,000 1,928,125 Raytheon Co. 11,300 877,163 Xerox Corp. 9,900 1,160,775 ------------- 11,445,013 ------------- OIL & GAS (0.5%) Anadarko Petroleum 15,300 659,812 Schlumberger Ltd. 16,600 1,031,275 ------------- 1,691,087 ------------- PAPER AND ALLIED PRODUCTS (0.9%) Champion International Corp. 9,100 474,337 International Paper Co. 12,500 1,071,875 Stone Container Corp. (A) 51,600 1,096,500 Temple Inland, Inc. 19,400 923,925 ------------- 3,566,637 ------------- PETROLEUM REFINING AND RELATED INDUSTRIES (8.6%) Amoco Corp. 65,000 4,330,625 Ashland Oil, Inc. 5,000 175,625 Atlantic Richfield, Inc. 25,000 2,743,750 Chevron Corp. 62,200 2,900,075 Exxon Corp. 124,600 8,799,875 Mobil Corp. 45,400 4,358,400 Phillips Petroleum Co. 24,500 817,688 Royal Dutch Petroleum Co. 58,700 7,154,063 Texaco, Inc. 10,700 702,188 ------------- 31,982,289 ------------- PRINTING, PUBLISHING AND ALLIED INDUSTRIES (0.5%) A.H. Belo 2,500 76,562 Franklin Quest Co. (A) 16,100 386,400 Time Warner Inc. 29,400 1,209,075 Times Mirror Co. 8,900 212,488 ------------- 1,884,525 ------------- RETAIL (5.3%) Albertsons, Inc. 62,100 1,847,475 Circuit City Stores, Inc. 45,500 1,438,937 Darden Restaurants, Inc. (A) 10,000 108,750 Dayton Hudson Corp. 23,300 1,671,775 Dillard Department Stores 17,400 511,125 Home Depot, Inc. 23,366 949,244 J.C. Penney Co. 21,200 1,017,600 Kmart Corp. 20,000 292,500 Limited, Inc. 29,600 651,200 May Department Stores 24,000 999,000 Safeway, Inc. (A) 29,200 1,091,350 Sears Roebuck & Co. 34,600 2,071,675 Tandy Corp. 13,600 705,500 The GAP, Inc. 17,700 617,288 Toys R Us (A) 34,913 1,021,205 Wal-Mart Stores, Inc. 180,900 4,839,075 ------------- 19,833,699 ------------- RUBBER AND PLASTIC PRODUCTS (0.5%) Nike, Inc. 20,200 1,696,800 ------------- SERVICES (3.5%) Columbia/HCA Healthcare Corp. 56,900 2,460,925 Computer Associates International 13,400 907,850 CUC International, Inc. (A) 17,600 739,200 Healthcare & Retirement CP (A) 33,600 982,800 Microsoft (A) 52,100 4,711,794 Novell, Inc. (A) 13,500 269,156 Oracle Systems Corp. (A) 81,350 3,137,059 ------------- 13,208,784 -------------
-14- 17 STATEMENT OF INVESTMENTS (UNAUDITED) - CONTINUED
NO. OF MARKET SHARES VALUE ------------ ----------- STONE, CLAY, GLASS, AND CONCRETE PRODUCTS (0.6%) Minnesota Mining & Manufacturing Co. 36,300 $ 2,078,175 Owens Corning Fiberglass (A) 6,800 250,750 ------------- 2,328,925 ------------- TOBACCO MANUFACTURERS (0.7%) RJR Nabisco Holding Corp. 92,400 2,575,650 ------------- TRANSPORTATION (1.9%) AMR, Inc. (A) 23,000 1,716,375 Conrail, Inc. 24,900 1,385,062 CSX Corp. 10,000 751,250 Norfolk Southern Corp. 27,000 1,819,125 Pittston Co. 61,900 1,485,600 ------------- 7,157,412 ------------- TRANSPORTATION MANUFACTURING (4.7%) Boeing Co. 52,400 3,281,550 Chrysler Corp. 46,400 2,221,400 Eaton Corp. 6,100 354,563 Echlin, Inc. 5,400 187,650 Ford Motor Co. 111,100 3,305,225 General Motors Corp. 50,700 2,376,563 Martin-Marietta Corp. 24,939 1,574,274 McDonnell Douglas Corp. 33,900 2,601,825 United Technologies Corp. 19,200 1,500,000 ------------- 17,403,050 ------------- UTILITIES (4.0%) Baltimore Gas & Electric Co. 29,400 735,000 Carolina Power & Light Co. 23,000 695,750 Central & Southwest Corp. 42,400 1,113,000 Cinergy Corp. 25,900 679,875 Dominion Resources, Inc. 17,100 624,150 Enron Corp. 20,500 720,063 Florida Power & Light Co. 35,200 1,359,600 NIPSCO Industries, Inc. 31,800 1,081,200 Pacific Enterprises 22,200 543,900 Panhandle Eastern Corp. 56,800 1,384,500 PECO Energy Co. 63,800 1,762,475 Public Service Co. of Colorado 31,800 1,033,500 Public Service Enterprises Group 34,500 957,375 Southern Co. 93,700 2,096,538 ------------- 14,786,926 ------------- WHOLESALE TRADE (0.9%) Alco Standard Corp. 19,000 1,517,625 Arrow Electronics (A) 24,700 1,228,825 Cardinal Health, Inc. 13,000 614,250 ------------- 3,360,700 ------------- TOTAL COMMON STOCKS (COST $307,473,653) 368,712,875 -------------
PRINCIPAL MARKET AMOUNT VALUE ------------ ----------- SHORT-TERM INVESTMENTS (1.1%) COMMERCIAL PAPER (0.8%) UBS Financial, Inc., 6.20% due July 5, 1995 $3,200,000 $ 3,197,241 ------------- U.S. GOVERNMENT SECURITIES (0.3%) United States of America Treasury, 6.04% due September 21, 1995 (C) 355,000 336,661 United States of America Treasury, 6.05% due September 21, 1995 (C) 500,000 474,216 United States of America Treasury, 6.20% due September 21, 1995 200,000 193,696 ------------- 1,004,573 ------------- TOTAL SHORT-TERM INVESTMENTS (COST $4,200,769) 4,201,814 -------------
NOTIONAL VALUE ---------- FUTURES CONTRACTS (0.0%) S&P 500 Stock Index, Exp. September, 1995 (D) $9,301,550 - ------------- TOTAL INVESTMENTS (100%) (COST $311,674,422) (B) $ 372,914,689 =============
NOTES (A) Non-income Producing Security. (B) At June 30, 1995, net unrealized appreciation for all securities was $61,240,267. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of market value over cost of $63,009,745 and aggregate gross unrealized depreciation for all securities in which there was an excess of cost over market value of $1,769,478. (C) Par value of $790,000 pledged to cover margin deposits on futures contracts. (D) 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. See Notes to Financial Statements -15- 18 THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES The bond market recovered from 1994's negative total return with the Lehman Government/Corporate Index up in the first half. May had the most impressive performance, as payroll employment figures turned negative in April and May, the first back to back reduction in non-farm payroll numbers since January of 1992. The month of May was the best month in the bond market since February 1986. Market expectations have shifted from expecting continued Federal Reserve Board ("Fed") tightening at the beginning of the year to expectations of Fed easing. The fund's performance was helped by its overweighting in corporates and strong performance from issues like Sears Roebuck & Co. and Delta Airlines, whose spreads have narrowed significantly. The portfolio's underweighting in the one- to three-year maturity sector hurt the fund's performance, offsetting the advantage of a slightly long duration mismatch. While the economy has slowed more than we expected at the beginning of the year, the magnitude and duration of this slowdown are still unclear. The slowing that has occurred already has enabled the ten-year U.S. Treasury Bond rate to decrease over 1.5% this year. A reduction of the Fed Funds rate to a 5.50% or perhaps 5.00% level is possible but may not add much more to economic growth since a decrease in rates has already been priced into the bond market. The question remains how weak is the economy and how long will the weakness persist. We lean towards the scenario of a modest slowdown, much like the modest recovery, with growth resuming by the end of this year. Capacity utilization and unemployment have not yet fallen that far below the historic inflation triggers that they reached last year, so that if growth picks up by late this year or in the first half of next year, the Fed will have to resume their bias towards tightening. This view implies rising short-term and intermediate-term rates next year with the curve flattening, assuming the market remains comfortable with the Fed's anti-inflation resolve. The key question is from what level do rates start increasing again. We are staying close to our duration targets until we develop more conviction that the slowdown has ended. We are underweighting the two-year maturity range because we think this is the most vulnerable part of the yield curve after growth resumes. We are offsetting this by overweighting five-year maturities. In terms of sector strategy, the areas of the corporate bond market that tend to be more recession proof are being favored in asset selection. Relative spreads are not compensating investors for any recession risk. We are using the recent corporate spread widening to selectively buy media, utility, and consumer product names that should still show solid earnings in the event of a slowdown. Our portfolios are emphasizing securities that enjoy attractive roll-downs in the four-year and eight-year part of the yield curve. In the mortgage market, the recent increase in volatility and the decline in interest rates has caused this sector to widen. We are selectively looking for well structured securities to add as corporate proxies, as well as sufficiently seasoned high coupon collateral as cushion paper that should provide incremental return. -16- 19 THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) JUNE 30, 1995 ASSETS: Investment securities, at market value (identified cost $171,501,775)........... $175,307,677 Cash............................................................................ 220,109 Receivables: Interest...................................................................... 2,375,279 Purchase payments and transfers from other Travelers accounts................. 264,411 Other assets.................................................................... 1,033 ------------ Total Assets.............................................................. 178,168,509 ------------ LIABILITIES: Payables: Investment securities purchased............................................... 10,568,639 Contract surrenders and transfers to other Travelers accounts................. 88,951 Investment management and advisory fees....................................... 5,964 Accrued liabilities............................................................. 22,620 ------------ Total Liabilities......................................................... 10,686,174 ------------ NET ASSETS:........................................................................ $167,482,335 ============
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, 1995 INVESTMENT INCOME: Interest....................................................... $ 5,799,976 EXPENSES: Investment management and advisory fees........................ $ 264,560 Insurance charges.............................................. 960,108 ------------ Total expenses.............................................. 1,224,668 --------------- Net investment income.................................... 4,575,308 --------------- REALIZED LOSS AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES: Realized loss from investment security transactions: Proceeds from investment securities sold.................... 38,244,713 Cost of investment securities sold.......................... 38,770,622 ------------ Net realized loss........................................ (525,909) Change in unrealized gain (loss) on investment securities: Unrealized loss at December 31, 1994........................ (6,629,315) Unrealized gain at June 30, 1995............................ 3,805,902 ------------ Net change in unrealized gain (loss) for the period...... 10,435,217 -------------- Net realized loss and change in unrealized gain (loss)............................................. 9,909,308 -------------- Net increase in net assets resulting from operations........... $ 14,484,616 ==============
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, 1995 1994 ---- ---- (UNAUDITED) OPERATIONS: Net investment income ................................................. $ 4,575,308 $ 10,078,150 Net realized loss from investment security transactions................ (525,909) (1,194,328) Net change in unrealized gain (loss) on investment securities.......... 10,435,217 (13,194,301) ------------- -------------- Net increase (decrease) in net assets resulting from operations..... 14,484,616 (4,310,479) ------------- -------------- UNIT TRANSACTIONS: Participant purchase payments (applicable to 1,469,540 and 6,301,055 units, respectively)......... 6,596,813 27,333,447 Participant transfers from other Travelers accounts (applicable to 1,445,560 and 5,749,483 units, respectively)......... 6,495,481 24,892,067 Administrative charges (applicable to 15,665 and 36,754 units, respectively)............... (73,722) (157,847) Contract surrenders (applicable to 1,918,032 and 4,071,409 units, respectively)......... (8,624,220) (17,682,850) Participant transfers to other Travelers accounts (applicable to 3,101,576 and 11,082,480 units, respectively)........ (13,867,146) (47,893,070) Other payments to participants (applicable to 54,065 and 93,315 units, respectively)............... (248,278) (408,660) ------------- -------------- Net decrease in net assets resulting from unit transactions......... (9,721,072) (13,916,913) ------------- -------------- Net increase (decrease) in net assets............................. 4,763,544 (18,227,392) NET ASSETS: Beginning of period.................................................... 162,718,791 180,946,183 ------------- -------------- End of period.......................................................... $ 167,482,335 $ 162,718,791 ============= ==============
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 Travelers Group 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 last-reported sale price as of the close of business of the New York Stock Exchange on the last business day of the period; 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 by computing a market value based upon quotations from dealers or issuers for securities of a similar type, quality and maturity. 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 (including short-term investments) in an amount at least equal to the notional value of outstanding purchased futures contracts, less the initial margin. 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. 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. Security transactions are accounted for on the trade date. Interest income is recorded on the accrual basis. -20- 23 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED 2. INVESTMENTS Purchases and sales of securities other than short-term investments aggregated $40,247,429 and $30,810,480, respectively, for the six months ended June 30, 1995. Realized gains and losses from security transactions are reported on an identified cost basis. Net realized losses resulting from futures contracts were $132,050 for the year ended December 31, 1994. These losses are included in the net realized loss from investment security transactions on the Statement of Changes in Net Assets. 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 Travelers Group Inc. Insurance charges are paid to The Travelers for the mortality and expense risks assumed by The Travelers. On contracts issued prior to May 16, 1983, these charges are equivalent to 1.0017% of the average net assets of Account QB on an annual basis. On contracts issued on or after May 16, 1983, the charges for mortality and expense risks are equivalent to 1.25% of the average net assets of Account QB on an annual basis. Additionally, for certain contracts in the accumulation phase, a semi-annual charge of $15 (prorated for partial periods and level of participation in other separate accounts of The Travelers) 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 $12,944 and $30,136 for the six months ended June 30, 1995 and the year ended December 31, 1994, 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 are stated prior to the deduction of $56,589 and $67,230 of contingent deferred sales charges for the six months ended June 30, 1995 and the year ended December 31, 1994, respectively. 4. NET ASSETS HELD BY AFFILIATE Approximately $719,000 and $722,000 of the net assets of Account QB were held on behalf of an affiliate of The Travelers as of June 30, 1995 and December 31, 1994, respectively. Transactions with this affiliate during the six months ended June 30, 1995 and the year ended December 31, 1994, were comprised of participant purchase payments of approximately $17,000 and $50,000, and contract surrenders of approximately $86,000 and $115,000, respectively. 5. NET CONTRACT OWNERS' EQUITY
JUNE 30, 1995 ----------------------------------------------- UNIT NET UNITS VALUE ASSETS ----- ----- ------ Contracts issued prior to May 16, 1983................. 9,836,573 $ 4.814 $ 47,352,981 Annuity Contracts issued prior to May 16, 1983......... 60,886 4.814 293,105 Contracts issued on or after May 16, 1983.............. 25,646,524 4.671 119,793,363 Annuity Contracts issued on or after May 16, 1983...... 9,181 4.671 42,886 --------------- Net Contract Owners' Equity.............................................................. $ 167,482,335 ===============
-21- 24 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) -------- -------------------------------------------------------------- 1995 1994 1993 1992 1991 1990 ---- ---- ---- ---- ---- ---- SELECTED PER UNIT DATA: Total investment income.............. $ .166 $ .318 $ .306 $ .317 $ .304 $ .281 Operating expenses................... .030 .059 .058 .050 .048 .040 --------- --------- --------- --------- --------- -------- Net investment income................ .136 .259 .248 .267 .256 .241 Unit value at beginning of period.... 4.400 4.498 4.150 3.880 3.421 3.181 Net realized and change in unrealized gains (losses)..................... .278 (.357) .100 .003 .203 (.001) --------- --------- --------- --------- --------- -------- Unit value at end of period.......... $ 4.814 $ 4.400 $ 4.498 $ 4.150 $ 3.880 $ 3.421 ========= ========= ========= ========= ========= ========= SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase (decrease) in unit value .41 (.10) .35 .27 .46 .24 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................. 5.80%# 5.87% 5.66% 6.61% 7.09% 7.31% Units outstanding at end of period (thousands)........................ 9,897 10,694 12,489 13,416 14,629 16,341 Portfolio turnover rate.............. 20% 27% 24% 23% 21% 41%
Contracts issued on or after May 16, 1983 SIX MONTHS ENDED FOR THE YEARS ENDED DECEMBER 31, JUNE 30, (DERIVED FROM AUDITED FINANCIAL INFORMATION) -------- ------------------------------------------------------------- 1995 1994 1993 1992 1991 1990 ---- ---- ---- ---- ---- ---- SELECTED PER UNIT DATA: Total investment income............... $ .162 $ .310 $ .299 $ .311 $ .299 $ .277 Operating expenses.................... .035 .069 .067 .061 .056 .048 -------- ------- -------- -------- -------- -------- Net investment income................. .127 .241 .232 .250 .243 .229 Unit value at beginning of period..... 4.274 4.381 4.052 3.799 3.357 3.129 Net realized and change in unrealized gains (losses)....................... .270 (.348) .097 .003 .199 (.001) -------- ------- -------- -------- -------- -------- Unit value at end of period............ $ 4.671 $ 4.274 $ 4.381 $ 4.052 $ 3.799 $ 3.357 ======== ======== ======== ======== ======== ======== SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase (decrease) in unit value .40 (.11) .33 .25 .44 .23 Ratio of operating expenses to average net assets........................... 1.57%# 1.57% 1.57% 1.58% 1.57% 1.57% Ratio of net investment income to average net assets................... 5.56%# 5.62% 5.41% 6.38% 6.84% 7.06% Units outstanding at end of period (thousands)........................... 25,656 27,033 28,472 20,250 17,211 14,245 Portfolio turnover rate................ 20% 27% 24% 23% 21% 41%
# Annualized. -22- 25 THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF INVESTMENTS (UNAUDITED) JUNE 30, 1995
PRINCIPAL MARKET AMOUNT VALUE --------- ----------- BONDS (80.2%) AMUSEMENTS (1.3%) Time Warner Inc., 9.625% Notes, 2002 $2,000,000 $2,247,694 AUTO RECEIVABLES (2.2%) Premier Auto Trust 1993-6, 4.65% Pass Through, 1999 810,062 795,002 Premier Auto Trust 1994-4, 6.65% Pass Through, 1998 1,000,000 1,006,866 Premier Auto Trust 1995-3, 6.25% Pass Through, 1999 (A) 2,000,000 1,998,760 ----------- 3,800,628 ----------- BANKING (3.8%) Bank of New York, 6.41% Notes, 1996 (A) 3,000,000 3,000,000 J.P. Morgan & Co., 0.00% Notes, 1998 2,000,000 1,686,912 Star Bank NA, 6.375% Notes, 2004 2,000,000 1,918,306 ----------- 6,605,218 ----------- COLLATERALIZED MORTGAGE OBLIGATIONS (17.4%) American Southwest Financial Corp., 9.00% Pass Through, 2018 796,858 826,603 FNMA Remic Trust 1994-22, 5.00% Pass Through, 2023 2,775,000 2,423,238 FNMA Remic Trust 1994-39, 6.35% Pass Through, 2023 2,000,000 1,916,478 FNMA Remic Trust 1994-42, 5.75% Pass Through, 2018 2,500,000 2,415,148 FNMA Remic Trust 1993-13, 6.50% Pass Through, 2000 2,326,593 2,245,951 GNMA Backed Trust II, 8.50% Pass Through, 2018 811,507 840,924 GNMA Notification, 9.50% Pass Through, 2017 8,004,557 8,487,328 GS Trust 3, 8.00% Pass Through, 2014 386,086 393,781 Kidder Peabody Mortgage Assets Trust 23, 9.88% Pass Through, 2019 1,041,306 1,076,127 Oxford Acceptance Corp., 9.70% Pass Through, 2017 302,596 314,067 PB CMO Trust II, 9.20% Pass Through, 2018 608,441 628,732 Prudential Home Mortgage 1992-17, 8.00% Pass Through, 2007 2,000,000 2,043,758 Puget Power GT.,1995-1, 6.45% Pass Through, 2005 (A) 3,000,000 3,000,000 Residential Funding Mortgage Securities 1993-MZ3, 6.97% Pass Through, 2023 (A) 2,394,104 2,310,765 Ryland Acceptance Corp., 9.00% Pass Through, 2015 666,716 688,984 Vendee Mortgage Trust 1992-1, 2J 7.75% Pass Through, 2005 950,000 981,766 ----------- 30,593,650 ----------- COMMUNICATION (4.0%) AT&T Corp., 6.00% Debentures, 2000 1,400,000 1,371,142 Cox Communications, Inc., 6.875% Notes, 2005 4,000,000 3,942,840 Tele-Communications, Inc., 9.65% Debentures, 2003 1,500,000 1,654,392 ----------- 6,968,374 ----------- CREDIT CARD RECEIVABLES (10.0%) Chase Manhattan Credit Card Master Trust, 8.75% Pass Through, 1996 2,100,000 2,153,254 First Chicago Master Trust II, 6.25% Pass Through, 1999 1,650,000 1,654,569 First Chicago Master Trust II, 8.40% Pass Through, 1996 2,000,000 2,044,318 Household Private Label CC MT, 1994-2 B Ctf 8.00% Pass Through, 2003 3,500,000 3,682,942 MBNA Master Credit Card Trust 1997-1, 7.25% Pass Through, 1999 1,000,000 1,020,899 Signet Credit Card Master Trust, 1993-4 B, 5.80% Pass Through, 1999 (A) 2,000,000 1,953,136 Standard Credit Card MT 1992-3 B, 5.688% Pass Through, 1998 (A) 2,000,000 2,016,876 Standard Credit Card MT, 1991-6 A, 7.875% Pass Through, 2000 2,950,000 3,088,057 ----------- 17,614,051 ----------- FINANCE (8.5%) Abbey National, 6.40%, Certificate of Deposit, 1996 (A) 3,000,000 3,000,000 Associates Corp. of North America, 9.125% Notes, 2000 2,500,000 2,740,007 Banponce Financial Corp., 6.00% Notes, 1997 2,000,000 1,977,820 Ford Motor Credit Co., 6.25% Bonds, 1998 2,000,000 1,998,282 General Motors Acceptance Corp., 8.75% Notes, 1996 2,000,000 2,028,312 General Motors Acceptance Corp., 7.75% Notes, 1999 2,000,000 2,074,690 Xerox Credit Corp., 10.125% Notes, 1999 1,000,000 1,028,179 ----------- 14,847,290 -----------
-23- 26 STATEMENT OF INVESTMENTS (UNAUDITED) - CONTINUED
PRINCIPAL MARKET AMOUNT VALUE --------- ------ FOOD (1.3%) Bacardi Martini, 5.75% Notes, 1998 (A) $2,250,000 $ 2,212,335 ------------- FOREIGN GOVERNMENT NON-NATIONAL (2.1%) Province of Ontario, 8.0%, Bonds, 2001 3,500,000 3,755,427 ------------- MISCELLANEOUS MANUFACTURING (1.9%) Becton Dickinson & Co., 8.80% Notes, 2001 3,000,000 3,326,529 ------------- PAPER AND ALLIED PRODUCTS (0.6%) Champion International Corp., 7.70% Notes, 1999 1,000,000 1,040,176 ------------- PETROLEUM REFINING AND RELATED INDUSTRIES (1.9%) Hydro Quebec, 8.625% Notes, 2002 3,100,000 3,363,810 ------------- RETAIL (4.8%) Dayton-Hudson Corp., 9.65% Notes, 2000 1,900,000 2,129,615 Sears Roebuck & Co., 8.55% Notes, 1996 2,500,000 2,564,097 Sears Roebuck & Co., 8.98% Notes, 1996 1,500,000 1,541,295 Sears Roebuck & Co., 9.38% Notes, 1998 550,000 591,653 Sears Roebuck & Co., 9.23% Notes, 1998 1,500,000 1,618,359 ------------- 8,445,019 ------------- SERVICES (1.8%) Electronic Data System, 7.125% Notes, 2005 (A) 3,000,000 3,115,170 ------------- TOBACCO MANUFACTURERS (1.7%) Philip Morris Companies, Inc., 9.80% Notes, 1998 3,000,000 3,052,773 ------------- TRANSPORTATION (3.3%) American Airlines, Inc., 1993-A4, 6.50% Notes, 1997 1,896,000 1,890,672 Delta Airlines, Inc., 8.27% Sinking Fund, 2007 1,800,054 1,855,404 Delta Airlines, Inc., 9.25% Sinking Fund, 2007 (A) 1,910,242 2,066,232 ------------- 5,812,308 ------------- TRANSPORTATION MANUFACTURING (2.7%) Ford Motor Co., 6.27% Notes, 2000 3,724,735 3,710,342 General Motors Acceptance Corp., 8.00% Notes, 1997 1,000,000 1,026,690 ------------- 4,737,032 ------------- UTILITIES (10.9%) Baltimore Gas & Electric Co., 9.125% Bonds, 1995 1,750,000 1,763,837 Boston Edison Co., 5.95% Debentures, 1998 1,000,000 977,543 DQU II Funding, 7.23% Bonds, 1999 1,772,000 1,782,568 Florida Gas Transmission, 7.75% Notes, 1997 2,500,000 2,593,750 Long Island Lighting Co., 8.75% Bonds, 1996 1,500,000 1,525,017 NIPSCO Capital Market, Inc., 0.00% Bonds, 1997 4,500,000 3,809,880 System Energy Resources, Inc., 6.12% Bonds, 1995 2,000,000 1,995,206 Transco Energy Co., 9.125% Notes, 1998 1,000,000 1,069,787 United Illuminating Company, 7.375% Debentures, 1998 3,500,000 3,537,737 19,055,325 ------------- TOTAL BONDS (COST $136,326,623) 140,592,809 ------------- U.S. GOVERNMENT SECURITIES (17.5%) United States of America Treasury, 5.625% Notes, 1997 175,000 174,289 United States of America Treasury, 8.50% Notes, 1997 1,500,000 1,576,875 United States of America Treasury, 9.125% Notes, 1999 2,000,000 2,216,250 United States of America Treasury, 6.875% Notes, 1999 1,500,000 1,548,750 United States of America Treasury, 4.25% Notes, 1995 2,000,000 1,986,872 United States of America Treasury, 4.75% Notes, 1998 2,000,000 1,932,500 United States of America Treasury, 5.75% Notes, 2003 2,000,000 1,941,250 United States of America Treasury, 6.25% Notes, 2003 8,660,000 8,681,650 United States of America Treasury, 7.875% Notes, 2004 6,000,000 6,680,616 United States of America Treasury, 5.875% Notes, 2004 4,000,000 3,910,000 ------------- TOTAL U.S. GOVERNMENT SECURITIES (COST $31,109,274) 30,649,052 -------------
-24- 27 STATEMENT OF INVESTMENTS (UNAUDITED) - CONTINUED
PRINCIPAL MARKET AMOUNT VALUE --------- ------ SHORT-TERM INVESTMENTS (2.3%) Commercial Paper (2.3%) Generale Bank, 6.10% due July 28, 1995 $4,130,000 $ 4,065,816 --------------- TOTAL SHORT-TERM INVESTMENTS (COST $4,065,878) 4,065,816 --------------- TOTAL INVESTMENTS (100%) (COST $171,501,775) (B) $ 175,307,677 ===============
NOTES (A) Management Priced Security. (B) At June 30, 1995, net unrealized appreciation for all securities was $3,805,902. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of market value over cost of $5,533,832 and aggregate gross unrealized depreciation for all securities in which there was an excess of cost over market value of $1,727,930. See Notes to Financial Statements -25- 28 THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES The first half of 1995 was for the most part uneventful with the Federal Reserve Board ("Fed") taking a wait and see attitude towards the economy. The Fed had been on hold as it assessed the results of its prior tightenings. The second quarter was quite sluggish in comparison to the first quarter, as the Fed was moving the economy into a "soft landing". It was evident that inflation did not cause a problem, but there is some serious concern that the Fed's moderate growth policy will need some adjustments for the second half of the year. The strategy in management of the Travelers Money Market Account's short-term assets did not change in the second quarter as we continued to invest in the 30- to 60-day maturity range. Short-term rates were most attractive in this part of the short-term curve. At quarter end the short-term assets remained stable with a slight increase over the prior quarter and the portfolio's average life remained at 21 days, unchanged from the prior quarter. With rates remaining attractive in the 30- to 60-day maturity range the management of the Travelers Money Market Account's short-term assets will continue to be invested in this part of the curve. Because of an inverted yield curve in commercial paper beginning 60- to 90-days, and the economy showing signs of a much greater slowdown than expected, we will continue to invest in the 30- to 60-day maturity range. This should bring greater returns and higher yields to the Travelers Money Market Account's participants. Diversification, protection of principal, and liquidity remain the top priority of management. -26- 29 THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF ASSETS AND LIABILITIES (Unaudited) June 30, 1995 ASSETS: Investment securities, at market value (identified cost $77,879,029). . . . . . . . . . . . . . $ 77,873,774 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,077 Receivables: Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229,474 Purchase payments and transfers from other Travelers accounts . . . . . . . . . . . . . . . . 743,862 Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 399 -------------- Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78,880,586 -------------- LIABILITIES: Payables: Contract surrenders and transfers to other Travelers accounts . . . . . . . . . . . . . . . . 605,377 Investment management and advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,787 Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,714 -------------- Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 618,878 -------------- NET ASSETS: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 78,261,708 ==============
See Notes to Financial Statements -27- 30 THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 1995 INVESTMENT INCOME: Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,362,883 EXPENSES: Investment management and advisory fees . . . . . . . . . . . . . . . . . . . . . . . . $ 127,180 Insurance charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 489,025 ----------- Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 616,205 ------------- Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,746,678 ------------- Net increase in net assets resulting from operations . . . . . . . . . . . . . . . . . $ 1,746,678 =============
See Notes to Financial Statements -28- 31 THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, 1995 1994 ---- ---- (UNAUDITED) OPERATIONS: Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,746,678 $ 2,248,581 ------------- ------------- Net increase in net assets resulting from operations . . . . . . . . . . . . . . . 1,746,678 2,248,581 ------------- ------------- UNIT TRANSACTIONS: Participant purchase payments (applicable to 3,400,982 and 14,485,166 units, respectively) . . . . . . . . . . 7,167,874 29,698,901 Participant transfers from other Travelers accounts (applicable to 16,673,599 and 45,192,925 units, respectively) . . . . . . . . . . 35,181,847 92,615,492 Administrative charges (applicable to 22,832 and 49,034 units, respectively). . . . . . . . . . . . . . (48,609) (101,345) Contract surrenders (applicable to 2,422,136 and 5,130,779 units, respectively) . . . . . . . . . . . (5,110,635) (10,532,362) Participant transfers to other Travelers accounts (applicable to 20,778,969 and 48,771,566 units, respectively). . . . . . . . . . . (43,789,279) (100,065,788) Other payments to participants (applicable to 18,785 and 290,664 units, respectively). . . . . . . . . . . . . . (39,672) (598,655) ------------- ------------- Net increase (decrease) in net assets resulting from unit transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,638,474) 11,016,243 ------------- ------------- Net increase (decrease) in net assets . . . . . . . . . . . . . . . . . . . . (4,891,796) 13,264,824 NET ASSETS: Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83,153,504 69,888,680 ------------- ------------- End of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 78,261,708 $ 83,153,504 ============= =============
See Notes to Financial Statements -29- 32 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED 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 Travelers Group 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 by computing a market value based upon quotations from dealers or issuers for securities of a similar type, quality and maturity. 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. Security transactions are accounted for on the trade date. Interest income is recorded on the accrual basis. 2. CONTRACT CHARGES Investment management and advisory fees are calculated daily at an annual rate of 0.3233% of Account MM's net assets. These fees are paid to Travelers Asset Management International Corporation, an indirect wholly owned subsidiary of Travelers Group Inc. Insurance charges are paid to The Travelers for the mortality and expense risks assumed by The Travelers. On contracts issued prior to May 16, 1983, these charges are equivalent to 1.0017% of the average net assets of Account MM on an annual basis. On contracts issued on or after May 16, 1983, the charges for mortality and expense risks are equivalent to 1.25% of the average net assets of Account MM on an annual basis. Additionally, for certain contracts in the accumulation phase, a semi-annual charge of $15 (prorated for partial periods and the level of participation in other separate accounts of The Travelers) 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 are stated prior to the deduction of $60,786 and $98,960 of contingent deferred sales charges for the six months ended June 30, 1995 and the year ended December 31, 1994, respectively. 3. NET ASSETS HELD BY AFFILIATE Approximately $1,794,000 and $862,000 of the net assets of Account MM were held on behalf of an affiliate of The Travelers as of June 30, 1995 and December 31, 1994, respectively. Transactions with this affiliate during the six months ended June 30, 1995 and the year ended December 31, 1994, were comprised of contract surrenders of approximately $62,000 and $800,000, respectively. Participant purchase payments were approximately $965,000 for the six months ended June 30, 1995. -30- 33 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED 4. NET CONTRACT OWNERS' EQUITY
JUNE 30, 1995 ------------------------------------------ UNIT NET UNITS VALUE ASSETS ----- ----- ------ Contracts issued prior to May 16, 1983 . . . . . . . . . . . . . . . . 205,856 $ 2.196 $ 452,162 Contracts issued on or after May 16, 1983. . . . . . . . . . . . . . . 36,451,287 2.131 77,690,244 Annuity Contracts issued on or after May 16, 1983. . . . . . . . . . . 55,975 2.131 119,302 ------------- Net Contract Owners' Equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 78,261,708 =============
-31- 34 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - 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) -------- ---------------------------------------------------------------- 1995 1994 1993 1992 1991 1990 ---- ---- ---- ---- ---- ---- SELECTED PER UNIT DATA: Total investment income . . . . . . . . . . . $ .065 $ .091 $ .067 $ .079 $ .120 $ .151 Operating expenses . . . . . . . . . . . . . .015 .028 .027 .027 .026 .024 ------- ------- ------- ------- ------- ------- Net investment income . . . . . . . . . . . . .050 .063 .040 .052 .094 .127 Unit value at beginning of period . . . . . . 2.146 2.083 2.043 1.991 1.897 1.770 ------- ------- ------- ------- ------- ------- Unit value at end of period . . . . . . . . . $ 2.196 $ 2.146 $ 2.083 $ 2.043 $ 1.991 $ 1.897 ======= ======= ======= ======= ======= ======= SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase in unit value. . . . . . . . . . .05 .06 .04 .05 .09 .13 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 . . . . . . . . . . . . . . . . . . 4.71%# 2.98% 1.93% 2.58% 4.90% 6.93% Units outstanding at end of period (thousands). . . . . . . . . . . . . 206 206 218 227 262 326
Contracts issued on or after May 16, 1983
SIX MONTHS ENDED FOR THE YEARS ENDED DECEMBER 31, JUNE 30, (DERIVED FROM AUDITED FINANCIAL INFORMATION) -------- -------------------------------------------------------------- 1995 1994 1993 1992 1991 1990 ---- ---- ---- ---- ---- ---- SELECTED PER UNIT DATA: Total investment income . . . . . . . . . . . $ .063 $ .087 $ .065 $ .077 $ .118 $ .149 Operating expenses . . . . . . . . . . . . . .016 .032 .031 .031 .030 .029 -------- -------- ------- ------- ------- ------- Net investment income . . . . . . . . . . . . .047 .055 .034 .046 .088 .120 Unit value at beginning of period . . . . . . 2.084 2.029 1.995 1.949 1.861 1.741 -------- -------- ------- ------- ------- ------- Unit value at end of period . . . . . . . . . $ 2.131 $ 2.084 $ 2.029 $ 1.995 $ 1.949 $ 1.861 ======== ======== ======= ======= ======= ======= SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase in unit value. . . . . . . . . . .05 .06 .03 .05 .09 .12 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 . . . . . . . . . . . . . . . . . . 4.46%# 2.72% 1.68% 2.33% 4.66% 6.68% Units outstanding at end of period (thousands). . . . . . . . . . . . . 36,507 39,675 34,227 42,115 55,013 67,343
# Annualized. -32- 35 THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF INVESTMENTS (UNAUDITED) JUNE 30, 1995
PRINCIPAL MARKET AMOUNT VALUE --------- ------ SHORT-TERM INVESTMENTS (100%) BANKERS ACCEPTANCES (7.9%) Chemical Bank, 5.92% due July 6, 1995 $3,000,000 $ 2,985,729 Rabobank Nederland NV, 5.97% due July 21, 1995 3,200,000 3,186,813 ------------ 6,172,542 ------------ COMMERCIAL PAPER (92.1%) Abbey National North America, Inc., 6.02% due July 14, 1995 3,000,000 2,991,280 Amexs Co., 5.88% due July 10, 1995 3,000,000 2,981,212 Asset Securitization Coop. Corp., 6.09% due August 1, 1995 3,500,000 3,447,530 Bausch & Lomb, Inc., 5.74% due September 1, 1995 3,000,000 2,956,922 Ciesco LP, 5.89% due July 18, 1995 3,000,000 2,978,783 CIT Group Holdings, Inc., 5.99% due August 11, 1995 3,000,000 2,978,047 Daimler Benz North America Corp., 5.96% due July 10, 1995 3,000,000 2,991,383 Deutsche Bank Financial, Inc., 5.87% due July 5, 1995 3,000,000 2,985,255 Dillard Investment Co., Inc., 5.98% due July 7, 1995 3,000,000 2,995,405 Duke Power Co., 5.94% due July 12, 1995 3,500,000 3,484,736 Export Development Corp., 5.96% due July 12, 1995 3,500,000 3,490,477 Glaxo Holdings PLC, 5.97% due September 6, 1995 3,000,000 2,966,231 GE Capital Corp., 5.97% due July 18, 1995 3,000,000 2,989,474 H.J. Heinz Co., 5.96% due July 11, 1995 3,500,000 3,472,677 J.C. Penney Funding Corp., 5.95% due August 25, 1995 3,000,000 2,971,071 Kimberly Clark Corp., 5.98% due July 12, 1995 3,000,000 2,971,585 Eli Lilly & Co., 6.12% due September 1, 1995 3,000,000 2,939,707 Panasonic Financial, Inc., 6.19% due August 8, 1995 1,000,000 980,020 Potomac Electric Power Co., 6.00% due July 28, 1995 3,500,000 3,483,008 Procter & Gamble Co., 5.97% due July 20, 1995 3,000,000 2,988,469 Tampa Electric Co., 5.98% due July 25, 1995 3,600,000 3,580,173 Toys R Us, Inc., 5.97% due July 13, 1995 1,800,000 1,790,925 UBS Financial, Inc., 6.20% due July 5, 1995 2,800,000 2,797,586 Weyerhaeuser Co., 5.95% due July 14, 1995 3,500,000 3,489,276 ------------ 71,701,232 ------------ TOTAL INVESTMENTS (100%) (COST $77,879,029) $ 77,873,774 ============
See Notes to Financial Statements -33- 36 Investment Advisers ------------------- (THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT) THE TRAVELERS INVESTMENT MANAGEMENT COMPANY Hartford, Connecticut (THE TRAVELERS QUALITY BOND AND MONEY MARKET ACCOUNTS) TRAVELERS ASSET MANAGEMENT INTERNATIONAL CORPORATION Hartford, Connecticut Independent Accountants ----------------------- COOPERS & LYBRAND, L.L.P. 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, Quality Bond, and Money Market Accounts. 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 shares of The Travelers Growth and Income Stock, Quality Bond and Money Market Accounts. 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 selling commissions. VG-137 (S/A) (6/95) Printed in U.S.A.
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