-----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, Bl1iVk8X/olxmsfpOqj8X33YDzS69oqUalH2aq4QZkDPO36O5KULhsUCg7nDoDnV 6q/2QmIif5G3jOqzFOQMfA== 0000950123-96-000822.txt : 19960229 0000950123-96-000822.hdr.sgml : 19960229 ACCESSION NUMBER: 0000950123-96-000822 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960228 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: 96527566 BUSINESS ADDRESS: STREET 1: ONE TOWER SQ STREET 2: C/O TRAVELERS INSURANCE CO CITY: HARTFORD STATE: CT ZIP: 06183-2020 BUSINESS PHONE: 2032770111 MAIL ADDRESS: STREET 1: ONE TOWER SQUARE STREET 2: ATTN FINANCIAL SERVICES LEGAL DIVISION CITY: HARTFORD STATE: CT ZIP: 06183-2020 FORMER COMPANY: FORMER CONFORMED NAME: TRAVELERS FUND A FOR VARIABLE ANNUITIES DATE OF NAME CHANGE: 19851103 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES CENTRAL INDEX KEY: 0000099440 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 060566090 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-02571 FILM NUMBER: 96527567 BUSINESS ADDRESS: STREET 1: ONE TOWER SQ STREET 2: C/O TRAVELERS INSURANCE CO CITY: HARTFORD STATE: CT ZIP: 06183-2020 BUSINESS PHONE: 2032777379 MAIL ADDRESS: STREET 1: ONE TOWER SQUARE STREET 2: ATTN FINANCIAL SERVICES LEGAL DIVISION CITY: HARTFORD STATE: CT ZIP: 06183-2020 FORMER COMPANY: FORMER CONFORMED NAME: TRAVELERS FUND A-1 FOR VARIABLE ANNUITIES DATE OF NAME CHANGE: 19851103 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES CENTRAL INDEX KEY: 0000700871 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 060566090 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-03409 FILM NUMBER: 96527568 BUSINESS ADDRESS: STREET 1: ONE TOWER SQ STREET 2: C/O TRAVELERS INSURANCE CO CITY: HARTFORD STATE: CT ZIP: 06183 BUSINESS PHONE: 2032777379 MAIL ADDRESS: STREET 1: ONE TOWER SQUARE STREET 2: ATTN FINANCIAL SERVICES LEGAL DIVISION CITY: HARTFORD STATE: CT ZIP: 06183-2020 FORMER COMPANY: FORMER CONFORMED NAME: TRAVELERS FUND MM FOR VARIABLE ANNUITIES DATE OF NAME CHANGE: 19851103 N-30D 1 UNIVERSAL ANNUITY -- ANNUAL REPORTS 1 UNIVERSAL ANNUITY 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 DECEMBER 31, 1995 [LOGO] THE TRAVELERS INSURANCE COMPANY ONE TOWER SQUARE HARTFORD, CONNECTICUT 06183 2 [LOGO] The Travelers Investment Management Company ("TIMCO") provides equity management and advisory services for The Travelers Growth and Income Stock Account for Variable Annuities. [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 [LOGO] THE TRAVELERS VARIABLE PRODUCT SEPARATE ACCOUNTS INVESTMENT ADVISORY COMMENTARY AS OF DECEMBER 31, 1995 FINANCIAL MARKET REVIEW AND OUTLOOK Financial markets had a great year in 1995 with the Standard & Poors 500 Stock Index having its best year since 1958 (+37.6%) and the Lehman Government/Corporate Bond Index having its best performance since 1985 (+19.2%). Beyond Wall Street, however, signs of economic stress are becoming apparent. Consumer delinquencies and defaults are increasing. A number of corporate defaults have already occurred, causing some negative fallout in the high yield bond market. December retail sales came in even below already pessimistic expectations. Cyclical industries such as paper, steel, and autos are starting to see price declines, closing plants and laying off workers. In Washington, many government workers are on furlough as the two parties debate how much (not whether or not) the Federal deficit will be reduced. Against this backdrop, the Federal Reserve Board ("Fed") dropped short-term interest rates 25 basis points on December 19th, its first cut since July, 1995. Looking towards 1996, the slowdown in economic growth combined with few sources of upside surprises make lower money market rates our most confident forecast. Current economic weakness will keep the Fed in an easing mode even if budget talks remain in a stalemate. Theoretical policy rules for determining Federal Funds targets argue that short-term interest rates should be between 4% and 5%, not their current 5.5%. Unlike 1993, when growth had been slow for several years, there is no pent-up demand for housing, autos, or even capital goods that can cause an upside surprise in economic growth. The key question for the bond market is whether slow economic growth causes short rates to go significantly below 5%. We think they will because the economy continues to weaken and any backup in rates caused by the budget negotiations in Washington will further weaken the economy. We are focusing on intermediate maturities because the yield curve is likely to steepen. We also continue to be comfortable with an overweighting in corporate issues, although we need to be diligent to protect against credit surprises. We also continue to think that mortgaged-backed securities are cheap and have maintained our overweighting in that area. In the stock market, cyclical issues led by the railroad, aluminum, machinery, and semiconductor groups rallied early in the third quarter on strong earnings momentum, rising analyst estimates, and expectations for a rebound in economic growth. Mergers in the banking, utility, and media industries also gave an optimistic tone to the market. However by early September, investors turned less optimistic about prospects for economic growth, earnings momentum, and profit margins in late 1995 and 1996. During the fourth quarter, investors continued to rotate out of cyclical and into defensive groups, such as drugs, food, and beverages, which were expected to produce the best relative earnings and gains in 1996. In the energy sector, rising prices for oil and natural gas, as well as attractive relative yields, supported higher valuations. Technology stocks declined dramatically on signs of weakening demand for personal computers and softer prices for semiconductors and other PC components. The performance of the stock market in 1996 will be driven by corporate earnings. The impetus for much of last year's advance to new record highs was generated by positive earnings surprises. The weaker economic environment that exists now makes it unlikely that the stock market will repeat its performance. Generally, the U.S. stock market is fairly valued given the current level of interest rates and should be able to muddle through with a "normal" 10% year as long as we avoid a recession. If the economy does worsen, the extent of the equity market decline will be a function of how quickly companies can adjust their cost structure to changes in revenues. Judged by the ability of most companies to sustain earnings growth even in the face of weakening demand in 1995, we think that the most negative "bears" on the outlook for the stock market are too pessimistic, especially given the valuation support that will be provided by lower interest rates. -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 .. 28
-2- 5 THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES For the twelve months ending December 31, 1995, the Travelers Growth and Income Stock Account achieved a total return of 37.7% before fees and expenses, slightly outperforming the S&P 500 return of 37.6%. Net of fees and expenses, the portfolio's total return of 35.4% for the same period was well ahead of the 31.2% average total return for variable annuity stock accounts in the Lipper Growth & Income category. During the second half of 1995, the strongest contributions to relative performance were achieved in the consumer discretionary, consumer staples and finance sectors. In the consumer discretionary sector, performance was bolstered in particular by our holdings in Nike (+66%) and Safeway (+36%). In the consumer staples sector, the portfolio benefited from overweighted positions in PepsiCo (+24%), Philip Morris (+21%) and Ralston-Purina (+21%). Stock selection in the financial sector also contributed positively, through holdings in NationsBank (+29%) and Chase Manhattan Bank (+27%). On the other hand, performance in the technology sector was somewhat disappointing, penalized by our holdings in Silicon Graphics (-32%), which experienced slower than expected sales growth because of product transition problems, and by our exposure to the weak semiconductor group, including Texas Instruments (-23%) and Cypress Semiconductor (-24%). Looking ahead, in light of the equity market's record-setting advance in 1995 and signs of an impending economic slowdown, we have placed increased emphasis on diversifying our stock holdings, especially within sectors that are likely to exhibit above-average cyclical earnings volatility. In the technology sector, we have focused on stocks that are likely to maintain positive earnings visibility in 1996, including 3Com in the enterprise networking group and Oracle Systems in the software group. In the health care sector, we have emphasized Johnson & Johnson and Medtronic in the medical devices group. In the consumer discretionary sector, our major overweights include Nike and Safeway. In the finance sector, we are emphasizing Green Tree Financial, Citicorp and NationsBank. -3- 6 THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES
NON-TIMED 12/95 1 YEAR 3 YEAR 5 YEAR - --------------- ------ ------ ------ The Travelers Growth and Income Stock Account 35.44 12.92 13.16 Lipper Growth and Income Category Average 31.18 12.27 14.68
This is a comparison of The Travelers Growth and Income Stock Account versus Lipper Analytical Services' variable annuity composite index, which provides the average performance of variable annuity funds with similar objectives as of December 31, 1995. Lipper Analytical Services is a leading independent Variable Insurance Product Performance Analysis Service. The performance of the composite is net of all asset based fees such as mortality and expense charges and portfolio management fees. Performance reflects the charges associated with Universal Annuity, which became available on May 16, 1983. Contracts issued prior to May 16, 1983, have different contract charges that result in different performance than presented above. Universal Annuity fund performance information is net of: 1) the 1.25% annual mortality and expense risk charge, and 2) portfolio management fees. The deduction of the $15 semi-annual administrative charge and the contingent deferred sales charge (5% maximum) is not reflected. The deduction of those charges would reduce any percentage increase or make greater any percentage decrease. Performance data quoted represents past performance. Investment return and principal value of an investment will fluctuate so that an investor's units, when redeemed, may be worth more or less than their original cost. The following is the performance data required by SEC rules governing uniform performance reporting: one year 30.08%, five year 12.20% and ten year 10.75%. This performance is based on a $1,000 hypothetical investment and reflects deductions of all fees and charges including the semi-annual administrative charge and deferred sales charge. -4- 7 THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1995 ASSETS: Investment securities, at market value (identified cost $335,934,204) $420,557,596 Cash................................................................. 425,287 Receivables: Dividends........................................................... 804,793 Interest............................................................ 4,493 Investment securities sold.......................................... 4,606,975 Purchase payments and transfers from other Travelers accounts....... 208,254 Variation on futures margin......................................... 2,100 Other assets......................................................... 20,396 ------------ Total Assets....................................................... 426,629,894 ------------ LIABILITIES: Payables: Investment securities purchased..................................... 3,049,304 Contract surrenders and transfers to other Travelers accounts....... 372,754 Investment management and advisory fees............................. 26,012 Accrued liabilities.................................................. 71,571 ------------ Total Liabilities.................................................. 3,519,641 ------------ NET ASSETS............................................................ $423,110,253 ============
See Notes to Financial Statements -5- 8 THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1995 INVESTMENT INCOME: Dividends........................................... $ 8,691,154 Interest ........................................... 639,038 ----------- Total income....................................... $ 9,330,192 EXPENSES: Investment management and advisory fees............. 1,700,124 Insurance charges................................... 4,324,809 ----------- Total expenses..................................... 6,024,933 ------------ Net investment income............................. 3,305,259 ------------ REALIZED GAIN AND CHANGE IN UNREALIZED GAIN ON INVESTMENT SECURITIES: Realized gain from investment security transactions: Proceeds from investment securities sold........... 387,628,072 Cost of investment securities sold................. 349,676,213 ----------- Net realized gain................................. 37,951,859 Change in unrealized gain on investment securities: Unrealized gain at December 31, 1994............... 12,899,180 Unrealized gain at December 31, 1995............... 84,623,392 ----------- Net change in unrealized gain for the year........ 71,724,212 ------------ Net realized gain and change in unrealized gain.. 109,676,071 ------------ Net increase in net assets resulting from operations $112,981,330 ============
See Notes to Financial Statements -6- 9 THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
1995 1994 ------------ ------------ OPERATIONS: Net investment income........................................... $ 3,305,259 $ 3,903,113 Net realized gain from investment security transactions......... 37,951,859 9,768,357 Net change in unrealized gain on investment securities.......... 71,724,212 (17,759,208) ------------ ------------ Net increase (decrease) in net assets resulting from operations 112,981,330 (4,087,738) ------------ ------------ UNIT TRANSACTIONS: Participant purchase payments (applicable to 2,505,561 and 3,287,872 units, respectively).... 20,576,327 22,820,587 Participant transfers from other Travelers accounts (applicable to 2,758,216 and 2,395,050 units, respectively).... 23,120,885 16,585,884 Administrative charges (applicable to 39,010 and 52,573 units, respectively).......... (345,103) (356,909) Contract surrenders (applicable to 3,134,685 and 3,654,777 units, respectively).... (26,235,475) (25,688,114) Participant transfers to other Travelers accounts (applicable to 3,616,329 and 5,819,195 units, respectively).... (29,697,410) (40,465,786) Other payments to participants (applicable to 138,390 and 245,574 units, respectively)........ (1,142,807) (1,752,347) ------------ ------------ Net decrease in net assets resulting from unit transactions.... (13,723,583) (28,856,685) ------------ ------------ Net increase (decrease) in net assets......................... 99,257,747 (32,944,423) NET ASSETS: Beginning of year............................................... 323,852,506 356,796,929 ------------ ------------ End of year..................................................... $423,110,253 $323,852,506 ============ ============
See Notes to Financial Statements -7- 10 NOTES TO FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES The Travelers Growth and Income Stock Account for Variable Annuities ("Account GIS") is a separate account of The Travelers Insurance Company ("The Travelers"), an indirect wholly owned subsidiary of 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 year; securities traded on the over-the-counter market and listed securities with no reported sales are valued at the mean between the last reported bid and asked prices or on the basis of quotations received from a reputable broker or other recognized source. When market quotations are not considered to be readily available for long-term corporate bonds and notes, such investments are generally stated at fair value on the basis of valuations furnished by a pricing service. These valuations are determined for normal institutional-size trading units of such securities using methods based on market transactions for comparable securities and various relationships between securities which are generally recognized by institutional traders. Securities, including restricted securities, for which pricing services are not readily available are valued by management at prices which it deems in good faith to be fair. Short-term investments for which a quoted market price is available are valued at market. Short-term investments for which there is no reliable quoted market price are valued 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 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 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. -8- 11 NOTES TO FINANCIAL STATEMENTS - CONTINUED 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. 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. 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 $362,287,474 and $348,166,551 respectively, for the year ended December 31, 1995. Realized gains and losses from security transactions are reported on an identified cost basis. At December 31, 1995, Account GIS held 6 open S&P 500 Stock Index futures contracts with a maturity date of March 15, 1996. The underlying face value, or notional value, of these contracts at December 31, 1995, amounted to $1,855,350. In connection with these contracts, short-term investments with a par value of $200,000 had been pledged as margin deposits. Net realized gains (losses) resulting from futures contracts were $2,884,399 and ($190,085) for the years ended December 31, 1995 and 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 December 31, 1995 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 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) 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 $40,106 and $54,101 for the years ended December 31, 1995 and 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 $189,214 and $146,421 of contingent deferred sales charges for the years ended December 31, 1995 and 1994, respectively. -9- 12 NOTES TO FINANCIAL STATEMENTS - CONTINUED 4. NET ASSETS HELD BY AFFILIATE Approximately $10,733,000 and $8,001,000 of the net assets of Account GIS were held on behalf of an affiliate of The Travelers as of December 31, 1995 and 1994, respectively. Transactions with this affiliate during the years ended December 31, 1995 and 1994, were comprised of participant purchase payments of approximately $427,000 and $356,000 and contract surrenders of approximately $560,000 and $653,000, respectively. 5. NET CONTRACT OWNERS' EQUITY
DECEMBER 31, 1995 --------------------------------------------------------------- UNIT NET UNITS VALUE ASSETS ----- ----- ------ Contracts issued prior to May 16, 1983.............. 17,463,591 $ 9.668 $ 168,855,951 Annuity Contracts issued prior to May 16, 1983...... 432,651 9.668 4,183,314 Contracts issued on or after May 16, 1983........... 26,625,318 9.369 249,479,832 Annuity Contracts issued on or after May 16, 1983... 63,090 9.369 591,156 -------------- Net Contract Owners' Equity............................................................ $ 423,110,253 ==============
-10- 13 NOTES TO FINANCIAL STATEMENTS - CONTINUED 6. SUPPLEMENTARY INFORMATION (Selected data for a unit outstanding throughout each year.) Contracts issued prior to May 16, 1983
FOR THE YEARS ENDED DECEMBER 31, -------------------------------------------------------------- 1995 1994 1993 1992 1991 ------ ------ ------ ------ ------ SELECTED PER UNIT DATA: Total investment income............................... $ .208 $ .192 $ .189 $ .192 $ .201 Operating expenses.................................... .123 .100 .092 .085 .077 ------ ------ ------ ------ ------ Net investment income................................. .085 .092 .097 .107 .124 Unit value at beginning of year....................... 7.120 7.194 6.664 6.587 5.145 Net realized and change in unrealized gains (losses).. 2.463 (.166) .433 (.030) 1.318 ------ ------ ------ ------ ------ Unit value at end of year............................. $9.668 $7.120 $7.194 $6.664 $6.587 ====== ====== ====== ====== ====== SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase (decrease) in unit value................. 2.55 (.07) .53 .08 1.44 Ratio of operating expenses to average net assets..... 1.45% 1.41% 1.33% 1.33% 1.33% Ratio of net investment income to average net assets.. 1.02% 1.30% 1.40% 1.67% 2.11% Number of units outstanding at end of year (thousands) 17,896 19,557 21,841 22,516 24,868 Portfolio turnover rate............................... 96% 103% 81% 189% 319%
Contracts issued on or after May 16, 1983
FOR THE YEARS ENDED DECEMBER 31, -------------------------------------------------------------- 1995 1994 1993 1992 1991 ------ ------ ------ ------ ------ SELECTED PER UNIT DATA: Total investment income............................... $ .205 $ .189 $ .184 $ .188 $ .198 Operating expenses.................................... .140 .115 .106 .098 .091 ------ ------ ------ ------ ------ Net investment income................................. .065 .074 .078 .090 .107 Unit value at beginning of year....................... 6.917 7.007 6.507 6.447 5.048 Net realized and change in unrealized gains (losses).. 2.387 (.164) .422 (.030) 1.292 ------ ------ ------ ------ ------ Unit value at end of year............................. $9.369 $6.917 $7.007 $6.507 $6.447 ====== ====== ====== ====== ====== SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase (decrease) in unit value................. 2.45 (.09) .50 .06 1.40 Ratio of operating expenses to average net assets..... 1.70% 1.65% 1.57% 1.58% 1.58% Ratio of net investment income to average net assets.. .79% 1.05% 1.15% 1.43% 1.86% Number of units outstanding at end of year (thousands) 26,688 26,692 28,497 29,661 26,235 Portfolio turnover rate............................... 96% 103% 81% 189% 319%
-11- 14 THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF INVESTMENTS DECEMBER 31, 1995
NO. OF MARKET SHARES VALUE ------- ----------- COMMON STOCKS (99.2%) AMUSEMENTS (1.3%) Harrah's Entertainment, Inc. 60,000 $ 1,455,000 Walt Disney Co. 69,900 4,124,100 ----------- 5,579,100 ----------- BANKING (6.5%) Banc One Corp. 69,537 2,625,022 Bank of Boston Corp. 10,500 485,625 Bank of New York, Inc. 17,000 828,750 BankAmerica Corp. 59,800 3,872,050 Barnett Banks, Inc. 29,500 1,740,500 Chase Manhattan Corp. 16,700 1,012,437 Chemical Banking Corp. 23,300 1,368,875 Citicorp 66,800 4,492,300 First Interstate Bancorp 7,300 996,450 First Union Corp. 16,300 906,688 Golden West Financial Corp. 23,200 1,281,800 Mellon Bank Corp. 11,900 639,625 NationsBank Corp. 52,500 3,655,312 Norwest Corp. 58,000 1,914,000 SunTrust Banks, Inc. 10,400 712,400 Wells Fargo & Co. 4,200 907,200 ----------- 27,439,034 ----------- CHEMICALS, PHARMACEUTICALS AND ALLIED PRODUCTS (14.4%) Abbott Laboratories 91,900 3,836,825 Air Products & Chemicals, Inc. 38,700 2,041,425 American Home Products Corp. 27,100 2,628,700 Amgen (A) 48,800 2,894,450 Bristol-Myers Squibb Co. 30,300 2,602,013 Cabot Corp. 11,800 635,725 Clorox Co. 22,100 1,582,912 Colgate-Palmolive Co. 13,100 920,275 Dow Chemical Co. 24,500 1,724,188 E.I. Dupont de Nemours & Co. 49,700 3,472,787 Eastman Chemical Company 25,300 1,584,413 Eli Lilly & Co. 48,200 2,711,250 International Flavors & Fragrances 34,100 1,636,800 Johnson & Johnson 59,700 5,111,812 Merck & Co., Inc. 111,200 7,311,400 Monsanto Co. 10,800 1,323,000 Morton International, Inc. 47,400 1,700,475 Pfizer, Inc. 81,700 5,147,100 Pharmacia & Upjohn, Inc. (A) 46,400 1,798,000 Procter & Gamble Co. 79,400 6,590,200 Schering-Plough Corp. 57,800 3,164,550 ----------- 60,418,300 -----------
NO. OF MARKET SHARES VALUE ------- ----------- COMMUNICATION (10.0%) Ameritech Corp. 56,600 $ 3,339,400 AT&T Corp. 172,700 11,182,325 Bell Atlantic Corp. 41,000 2,741,875 Bellsouth Corp. 100,000 4,350,000 Capital Cities ABC, Inc. 14,600 1,801,275 GTE Corp. 76,500 3,366,000 ITT Industries, Inc. (A) 24,500 588,000 MCI Communications Corp. 55,700 1,458,644 NYNEX Corp. 58,300 3,148,200 Sprint Corp. 31,200 1,244,100 SBC Communications., Inc. 75,400 4,335,500 Tele-Communications, Inc. (A) 29,400 586,163 U S West Communications Group 16,800 600,600 U S West Media Group(A) 17,100 324,900 Viacom International, Inc. (A) 62,600 2,965,675 ----------- 42,032,657 ----------- CONSTRUCTION (0.3%) Pulte Corp. 34,600 1,163,425 ----------- CONTRACTORS (0.5%) Fluor Corp. 30,200 1,993,200 ----------- ELECTRICAL AND ELECTRONIC MACHINERY (6.2%) Alliance Semiconductor (A) 11,400 131,100 Amphenol Corp. (A) 85,500 2,073,375 Andrew Corp. (A) 41,500 1,602,938 Cypress Semiconductor (A) 110,700 1,411,425 General Electric Co. 151,800 10,929,600 Intel Corp. 64,600 3,670,087 LSI Logic Corp. (A) 12,000 393,000 Micron Technology 35,100 1,390,838 Motorola, Inc. 40,700 2,319,900 Tellabs, Inc. (A) 10,500 389,812 Texas Instruments, Inc. 16,000 828,000 Time Warner, Inc. 27,300 1,033,988 ----------- 26,174,063 ----------- FINANCE (3.6%) American Express Co. 44,800 1,853,600 Dean Witter Discover & Co. 39,800 1,870,600 Federal Home Loan Corp. 17,200 1,436,200 Federal National Mortgage Assoc. 25,000 3,103,125 Green Tree Financial Corp. 67,300 1,775,037 Household International 28,500 1,685,063 Lehman Brothers Holding, Inc. 44,600 947,750 Merrill Lynch & Co., Inc. 38,800 1,978,800 Morgan Stanley Group, Inc. 7,300 588,562 ----------- 15,238,737 -----------
-12- 15 STATEMENT OF INVESTMENTS - CONTINUED
NO. OF MARKET SHARES VALUE ------- ---------- FOOD (9.0%) Anheuser-Busch Cos. 12,400 $ 829,250 Campbell Soup Co. 19,400 1,164,000 Coca-Cola Co. 112,400 8,345,700 CONAGRA, Inc. 53,500 2,206,875 CPC International, Inc. 24,800 1,701,900 General Mills, Inc. 14,800 854,700 H.J. Heinz Co. 69,150 2,290,594 IBP, Inc. 13,600 686,800 Kellogg Co. 21,200 1,637,700 PepsiCo, Inc. 94,500 5,280,188 Philip Morris, Inc. 90,300 8,172,150 Ralston-Purina Group 28,700 1,790,162 Seagram Co. Ltd. 28,900 1,000,663 Unilever NV 12,400 1,745,300 ----------- 37,705,982 ----------- INSURANCE (3.7%) Aetna Life & Casualty Co. 9,700 671,725 Allstate Corp. 29,875 1,228,609 American International Group 54,450 5,036,625 Chubb Corp. 16,700 1,615,725 General Reinsurance Corp. 14,200 2,201,000 HealthCare COMPARE (A) 32,300 1,411,106 ITT Corp. (A) 24,500 1,298,500 ITT Hartford Group, Inc. (A) 24,500 1,185,187 United Healthcare Corp. 16,100 1,054,550 ----------- 15,703,027 ----------- LUMBER AND WOOD PRODUCTS (0.1%) Georgia-Pacific Corp. 8,600 590,175 ----------- MACHINERY (5.5%) Apple Computer, Inc. 10,200 324,487 Applied Materials (A) 44,900 1,765,131 Baker Hughes, Inc. 66,000 1,608,750 Black & Decker Corp. 33,000 1,163,250 Cabletron Systems, Inc. (A) 7,100 575,100 Caterpillar, Inc. 18,400 1,081,000 Cisco Systems, Inc. (A) 27,100 2,024,031 Compaq Computer Corp. (A) 12,800 614,400 Duriron, Inc. 13,600 314,500 Harnischfeger Industries 44,900 1,492,925 Hewlett Packard Co. 45,400 3,802,250 International Business Machines Corp. 41,900 3,844,325 Silicon Graphics, Inc. (A) 61,900 1,702,250 Sun Microsystems (A) 19,200 877,200 3Com Corp. (A) 44,300 2,068,256 ----------- 23,257,855 ----------- METAL PRODUCTS (2.0%) Ball Corp. 35,200 968,000 Danaher Corp. 40,600 1,289,050 Gillette Co. 25,500 1,329,188 Inland Steel Industries, Inc. 31,300 786,413 Parker-Hannifin Corp. 41,900 1,435,075 Phelps Dodge Corp. 19,800 1,232,550 Reynolds Metals Co. 20,100 1,138,162 ----------- 8,178,438 ----------- MINING (0.5%) Freeport-McMoRan Copper & Gold 25,500 717,188 Homestake Mining Co. 88,100 1,376,562 ----------- 2,093,750 -----------
NO. OF MARKET SHARES VALUE ------- ---------- MISCELLANEOUS MANUFACTURING (3.6%) Baxter International, Inc. 10,600 $ 443,875 Eastman Kodak Co. 29,500 1,976,500 Emerson Electric Co. 37,000 3,024,750 Heart Technology, Inc. (A) 42,600 1,392,488 Honeywell, Inc. 38,300 1,862,337 Mattel, Inc. 58,900 1,811,175 Medtronic, Inc. 60,000 3,352,500 Xerox Corp. 9,200 1,260,400 ----------- 15,124,025 ----------- OIL & GAS (0.6%) Anadarko Petroleum 14,200 768,575 Schlumberger Ltd. 22,500 1,558,125 ----------- 2,326,700 ----------- PAPER AND ALLIED PRODUCTS (1.0%) Bowater, Inc. 23,700 841,350 Champion International Corp. 30,400 1,276,800 International Paper Co. 22,500 852,188 Kimberly Clark Corp. 10,530 871,357 ----------- 3,841,695 ----------- PETROLEUM REFINING AND RELATED INDUSTRIES (7.9%) Amoco Corp. 60,500 4,348,437 Atlantic Richfield, Inc. 14,800 1,639,100 Chevron Corp. 57,800 3,034,500 Exxon Corp. 110,000 8,813,750 Mobil Corp. 48,100 5,387,200 Phillips Petroleum Co. 22,700 774,638 Royal Dutch Petroleum Co. 58,800 8,298,150 Texaco, Inc. 10,000 785,000 ----------- 33,080,775 ----------- PRINTING, PUBLISHING AND ALLIED INDUSTRIES (0.8%) Gannett Co. 32,100 1,970,138 New York Times Co. 50,800 1,504,950 ----------- 3,475,088 ----------- RETAIL (5.7%) Federated Department Stores, Inc. (A) 64,000 1,760,000 General Nutrition Cos., Inc. (A) 2,900 64,525 Home Depot, Inc. 75,166 3,598,572 J.C. Penney Co. 46,000 2,190,750 May Department Stores 51,600 2,180,100 McDonalds Corp. 57,000 2,572,125 OfficeMax, Inc. (A) 56,000 1,253,000 Price/Costco, Inc. (A) 92,100 1,416,037 Safeway, Inc. (A) 30,000 1,545,000 Tandy Corp. 29,300 1,215,950 The GAP, Inc. 13,500 567,000 Wal-Mart Stores, Inc. 158,500 3,546,438 Walgreen Co. 65,100 1,944,862 ----------- 23,854,359 ----------- RUBBER AND PLASTIC PRODUCTS (0.6%) Nike, Inc. 38,000 2,645,750 ----------- SERVICES (2.7%) Autodesk, Inc. 28,000 959,000 Columbia/HCA Healthcare Corp. 40,300 2,045,225 Computer Associates International 18,650 1,060,719 Microsoft (A) 48,400 4,250,125 Oracle Systems Corp. (A) 75,450 3,197,193 ----------- 11,512,262 -----------
-13- 16 STATEMENT OF INVESTMENTS-CONTINUED
NO. OF MARKET SHARES VALUE ---------- ------------ STONE, CLAY, GLASS AND CONCRETE PRODUCTS (0.6%) Minnesota Mining & Manufacturing Co. 38,200 $ 2,530,750 ------------ TRANSPORTATION (1.7%) AMR, Inc. (A) 21,400 1,588,950 Conrail, Inc. 23,100 1,617,000 CSX Corp. 43,800 1,998,375 Norfolk Southern Corp. 25,100 1,992,313 ------------ 7,196,638 ------------ TRANSPORTATION MANUFACTURING (4.8%) Boeing Co. 48,100 3,769,837 Chrysler Corp. 43,100 2,386,663 Eaton Corp. 25,100 1,345,987 Ford Motor Co. 103,300 2,995,700 General Motors Corp. 62,800 3,320,550 Lockheed Martin Corp. 18,039 1,425,081 McDonnell Douglas Corp. 23,600 2,171,200 United Technologies Corp. 17,800 1,688,775 Varity Corp. (A) 32,000 1,188,000 ------------ 20,291,793 ------------ UTILITIES (4.7%) Baltimore Gas & Electric Co. 69,600 1,983,600 Browning-Ferris Industries. 52,300 1,542,850 Duquesne Light Co. 51,300 1,577,475 Florida Power & Light Co. 53,100 2,462,513 Houston Industries 80,200 1,944,850 Pacific Enterprises 20,700 584,775 Panhandle Eastern Corp. 52,800 1,471,800 Public Service Enterprises Group 66,200 2,027,375 Southern Co. 113,700 2,799,862 Texas Utilities Co. 53,900 2,216,638 WMX Technologies, Inc. 44,500 1,329,437 ------------ 19,941,175 ------------ WHOLESALE TRADE (0.9%) Crane Co. 39,700 1,463,938 Enron Corp. 56,500 2,154,063 ------------ 3,618,001 ------------ TOTAL COMMON STOCKS (COST $332,383,742) 417,006,754 ------------
PRINCIPAL MARKET AMOUNT VALUE ---------- ----------- SHORT-TERM INVESTMENTS (0.8%) U.S. GOVERNMENT SECURITIES (0.0%) United States of America Treasury, 5.49% due September 19, 1996 (C) $50,000 $47,462 United States of America Treasury, 5.51% due September 19, 1996 (C) 150,000 142,380 ------------ 189,842 ------------ REPURCHASE AGREEMENTS (0.8%) Merrill Lynch Government Securities, Inc., 5.50% Repurchase Agreement dated December 29, 1995, due January 2, 1996, collateralized by: United States of America Treasury, $3,375,000, 5.63% due October 31, 1997 3,361,000 3,361,000 ------------ TOTAL SHORT-TERM INVESTMENTS (COST $3,550,462) 3,550,842 ------------ NOTIONAL VALUE ---------- FUTURES CONTRACTS (0.0%) S&P 500 Stock Index, Exp. March, 1996 (D) $1,855,350 - ------------ TOTAL INVESTMENTS (100%) (COST $335,934,204) (B) $420,557,596 ------------ ------------
NOTES (A) Non-income Producing Security. (B) At December 31, 1995, net unrealized appreciation for all securities was $84,623,392. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of market value over cost of $90,547,890 and aggregate gross unrealized depreciation for all securities in which there was an excess of cost over market value of $5,924,498. (C) Par value of $200,000 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 -14- 17 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Managers and Owners of Variable Annuity Contracts of The Travelers Growth and Income Stock Account for Variable Annuities: We have audited the accompanying statement of assets and liabilities of The Travelers Growth and Income Stock Account for Variable Annuities including the statement of investments as of December 31, 1995, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the per unit data for each of the five years in the period then ended. These financial statements and per unit data are the responsibility of management. Our responsibility is to express an opinion on these financial statements and per unit data based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and per unit data are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1995, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and per unit data referred to above present fairly, in all material respects, the financial position of The Travelers Growth and Income Stock Account for Variable Annuities as of December 31, 1995, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the per unit data for each of the five years in the period then ended, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Hartford, Connecticut February 16, 1996 -15- 18 THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES Bond markets rallied significantly in 1995 with yields falling 254 basis points in the two year treasury to 193 for the thirty year. The Federal Reserve Board ("Fed") punctuated this with their second cut in Funds to 5.50% in December. In 1995, the fund had a gross return of 16.17% versus 15.31% for the Lehman Intermediate Government/Corporate Index. This quarter's outperformance in the portfolio can be attributed to a slightly longer duration than the index and item selection that avoided sectors that widened significantly. Retailers (the fund had no exposure here), for instance, were generally wider on continued poor retail sales numbers and the potential for a bankruptcy filing by Kmart. The curve exposure for the portfolio is generally neutral to our Lehman benchmark except for a slight over-weighting in the five year area. We also maintain an over allocation to corporate product as we expect spreads to slightly tighten in the first quarter as investors seek spread product. An effort has also been made to consolidate the portfolio's corporate positions to enhance the liquidity and help improve performance going forward. As the new year unfolds we expect the Fed to continue to reduce short term rates as sluggish growth persists. We will stay flat to slightly long our benchmark until we perceive either economic rebound or inflationary pressures developing. Vigilance will be maintained with respect to corporates yet we expect to maintain our long-run strategy to overweight this area. At this juncture we are emphasizing the media and utility sectors. -16- 19 THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES
NON-TIMED 12/95 1 YEAR 3 YEAR 5 YEAR - --------------- ------ ------ ------ The Travelers Quality Bond Account 14.49 6.5 7.83 Lipper Short Intermediate Investment Grade Debt Categ 12.8 5.45 6.95
This is a comparison of The Travelers Quality Bond Account versus Lipper Analytical Services' variable annuity composite index, which provides the average performance of variable annuity funds with similar objectives as of December 31, 1995. Lipper Analytical Services is a leading independent Variable Insurance Product Performance Analysis Service. The performance of the composite is net of all asset based fees such as mortality and expense charges and portfolio management fees. Performance reflects the charges associated with Universal Annuity, which became available on May 16, 1983. Contracts issued prior to May 16, 1983, have different contract charges that result in different performance than presented above. Universal Annuity fund performance information is net of: 1) the 1.25% annual mortality and expense risk charge, and 2) portfolio management fees. The deduction of the $15 semi-annual administrative charge and the contingent deferred sales charge (5% maximum) is not reflected. The deduction of those charges would reduce any percentage increase or make greater any percentage decrease. Performance data quoted represents past performance. Investment return and principal value of an investment will fluctuate so that an investor's units, when redeemed, may be worth more or less than their original cost. The following is the performance data required by SEC rules governing uniform performance reporting: one year 9.17%, five year 6.74% and ten year 7.19%. This performance is based on a $1,000 hypothetical investment and reflects deductions of all fees and charges including the semi-annual administrative charge and deferred sales charge. -17- 20 THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1995 ASSETS: Investment securities, at market value (identified cost $171,465,906) $177,553,579 Cash................................................................. 37,260 Receivables: Interest............................................................ 2,005,670 Purchase payments and transfers from other Travelers accounts....... 95,800 Other assets......................................................... 732 ------------ Total Assets....................................................... 179,693,041 ------------ LIABILITIES: Payables: Contract surrenders and transfers to other Travelers accounts....... 53,512 Investment management and advisory fees............................. 7,967 Accrued liabilities.................................................. 30,012 ------------ Total Liabilities.................................................. 91,491 ------------ NET ASSETS............................................................ $179,601,550 ============
See Notes to Financial Statements -18- 21 THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1995 INVESTMENT INCOME: Interest.................................................. $11,561,622 EXPENSES: Investment management and advisory fees................... $ 547,715 Insurance charges......................................... 1,990,477 ----------- Total expenses........................................... 2,538,192 ----------- Net investment income................................... 9,023,430 ----------- REALIZED GAIN AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES: Realized gain from investment security transactions: Proceeds from investment securities sold................. 239,670,130 Cost of investment securities sold....................... 238,650,952 ----------- Net realized gain....................................... 1,019,178 Change in unrealized gain (loss) on investment securities: Unrealized loss at December 31, 1994..................... (6,629,315) Unrealized gain at December 31, 1995.................... 6,087,673 ----------- Net change in unrealized gain (loss) for the year....... 12,716,988 ----------- Net realized gain and change in unrealized gain (loss). 13,736,166 ----------- Net increase in net assets resulting from operations...... $22,759,596 ===========
See Notes to Financial Statements -19- 22 THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
1995 1994 ---- ---- OPERATIONS: Net investment income........................................... $ 9,023,430 $ 10,078,150 Net realized gain (loss) from investment security transactions.. 1,019,178 (1,194,328) Net change in unrealized gain (loss) on investment securities... 12,716,988 (13,194,301) ------------ ------------ Net increase (decrease) in net assets resulting from operations 22,759,596 (4,310,479) ------------ ------------ UNIT TRANSACTIONS: Participant purchase payments (applicable to 3,283,550 and 6,301,055 units, respectively).... 15,219,291 27,333,447 Participant transfers from other Travelers accounts (applicable to 4,374,714 and 5,749,483 units, respectively).... 20,342,504 24,892,067 Administrative charges (applicable to 30,577 and 36,754 units, respectively).......... (146,591) (157,847) Contract surrenders (applicable to 3,514,833 and 4,071,409 units, respectively).... (16,280,761) (17,682,850) Participant transfers to other Travelers accounts (applicable to 5,302,454 and 11,082,480 units, respectively)... (24,324,600) (47,893,070) Other payments to participants (applicable to 146,460 and 93,315 units, respectively)......... (686,680) (408,660) ------------ ------------ Net decrease in net assets resulting from unit transactions.... (5,876,837) (13,916,913) ------------ ------------ Net increase (decrease) in net assets......................... 16,882,759 (18,227,392) NET ASSETS: Beginning of year............................................... 162,718,791 180,946,183 ------------ ------------ End of year..................................................... $179,601,550 $162,718,791 ============ ============
See Notes to Financial Statements -20- 23 NOTES TO FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES The Travelers Quality Bond Account for Variable Annuities ("Account QB") is a separate account of The Travelers Insurance Company ("The Travelers"), an indirect wholly owned subsidiary of 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 year; securities traded on the over-the-counter market and listed securities with no reported sales are valued at the mean between the last-reported bid and asked prices or on the basis of quotations received from a reputable broker or other recognized source. When market quotations are not considered to be readily available for long-term corporate bonds and notes, such investments are generally stated at fair value on the basis of valuations furnished by a pricing service. These valuations are determined for normal institutional-size trading units of such securities using methods based on market transactions for comparable securities and various relationships between securities which are generally recognized by institutional traders. Securities, including restricted securities, for which pricing services are not readily available, are valued by management at prices which it deems in good faith to be fair. Short-term investments for which a quoted market price is available are valued at market. Short-term investments for which there is no reliable quoted market price are valued 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 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. -21- 24 NOTES TO FINANCIAL STATEMENTS - CONTINUED FEDERAL INCOME TAXES. The operations of Account QB form a part of the total operations of The Travelers and are not taxed separately. The Travelers is taxed as a life insurance company under the Internal Revenue Code of 1986, as amended (the "Code"). Under existing federal income tax law, no taxes are payable on the investment income and capital gains of Account QB. Account QB is not taxed as a "regulated investment company" under Subchapter M of the Code. OTHER. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Security transactions are accounted for on the trade date. Interest income is recorded on the accrual basis. 2. INVESTMENTS Purchases and sales of securities other than short-term investments aggregated $226,088,270 and $214,619,503, respectively, for the year ended December 31, 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 $20,292 and $30,136 for the years ended December 31, 1995 and 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 $108,615 and $67,230 of contingent deferred sales charges for the years ended December 31, 1995 and 1994, respectively. -22- 25 NOTES TO FINANCIAL STATEMENTS - CONTINUED 4. NET ASSETS HELD BY AFFILIATE Approximately $755,000 and $722,000 of the net assets of Account QB were held on behalf of an affiliate of The Travelers as of December 31, 1995 and 1994, respectively. Transactions with this affiliate during the years ended December 31, 1995 and 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
DECEMBER 31, 1995 --------------------------------- UNIT NET UNITS VALUE ASSETS ---------- ------- ------------ Contracts issued prior to May 16, 1983.............. 9,267,182 $5.050 $ 46,812,722 Annuity Contracts issued prior to May 16, 1983...... 58,236 5.050 294,175 Contracts issued on or after May 16, 1983........... 27,057,043 4.894 132,451,179 Annuity Contracts issued on or after May 16, 1983... 8,881 4.894 43,474 ------------ Net Contract Owners' Equity.............................................. $179,601,550 ============
-23- 26 NOTES TO FINANCIAL STATEMENTS - CONTINUED 6. SUPPLEMENTARY INFORMATION (Selected data for a unit outstanding throughout each year.) Contracts issued prior to May 16, 1983
FOR THE YEARS ENDED DECEMBER 31, ------------------------------------------------------------------- 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- SELECTED PER UNIT DATA: Total investment income............................... $ .328 $ .318 $ .306 $ .317 $ .304 Operating expenses.................................... .063 .059 .058 .050 .048 ------- ------- ------- ------- ------- Net investment income................................. .265 .259 .248 .267 .256 Unit value at beginning of year....................... 4.400 4.498 4.150 3.880 3.421 Net realized and change in unrealized gains (losses).. .385 (.357) .100 .003 .203 ------- ------- ------- ------- ------- Unit value at end of year............................. $ 5.050 $ 4.400 $ 4.498 $ 4.150 $ 3.880 ======= ======= ======= ======= ======= SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase (decrease) in unit value................. .65 (.10) .35 .27 .46 Ratio of operating expenses to average net assets..... 1.33% 1.33% 1.33% 1.33% 1.33% Ratio of net investment income to average net assets.. 5.54% 5.87% 5.66% 6.61% 7.09% Number of units outstanding at end of year (thousands) 9,325 10,694 12,489 13,416 14,629 Portfolio turnover rate............................... 138% 27% 24% 23% 21%
Contracts issued on or after May 16, 1983
FOR THE YEARS ENDED DECEMBER 31, ------------------------------------------------------------------- 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- SELECTED PER UNIT DATA: Total investment income............................... $ .319 $ .310 $ .299 $ .311 $ .299 Operating expenses.................................... .073 .069 .067 .061 .056 ------- ------- ------- ------- ------- Net investment income................................. .246 .241 .232 .250 .243 Unit value at beginning of year....................... 4.274 4.381 4.052 3.799 3.357 Net realized and change in unrealized gains (losses).. .374 (.348) .097 .003 .199 ------- ------- ------- ------- ------- Unit value at end of year............................. $ 4.894 $ 4.274 $ 4.381 $ 4.052 $ 3.799 ======= ======= ======= ======= ======= SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase (decrease) in unit value................. .62 (.11) .33 .25 .44 Ratio of operating expenses to average net assets..... 1.57% 1.57% 1.57% 1.58% 1.57% Ratio of net investment income to average net assets.. 5.29% 5.62% 5.41% 6.38% 6.84% Number of units outstanding at end of year (thousands) 27,066 27,033 28,472 20,250 17,211 Portfolio turnover rate............................... 138% 27% 24% 23% 21%
-24- 27 THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF INVESTMENTS DECEMBER 31, 1995
PRINCIPAL MARKET AMOUNT VALUE ----------- ----------- BONDS (85.9%) AMUSEMENTS (8.3%) ITT Corp., 6.25% Notes, 2000 $ 7,100,000 $ 7,146,683 Six Flags Entertainment, 0.00% Notes, 1999 7,000,000 5,302,500 Time Warner Entertainment, Inc., 9.625% Notes, 2002 2,000,000 2,317,932 ----------- 14,767,115 ----------- AUTO RECEIVABLES (1.1%) Premier Auto Trust 1995-3, 6.25% Pass Through, 2001 2,000,000 2,035,998 ----------- BANKING (9.4%) Banponce Financial Corp., 6.69% Notes, 2000 6,500,000 6,658,535 Fleet Financial Group, 9.90% Notes, 2001 7,000,000 8,239,217 J.P. Morgan & Co., 0.00% Notes, 1998 2,000,000 1,761,712 ----------- 16,659,464 ----------- COMMUNICATION (4.8%) Tele-Communications, Inc., 7.31% Notes, 2001 6,500,000 6,763,913 Tele-Communications, Inc., 9.65% Debentures, 2003 1,500,000 1,696,141 ----------- 8,460,054 ----------- COLLATERALIZED MORTGAGE OBLIGATIONS (13.7%) American Southwest Financial Corp., 9.00% Pass Through, 2018 683,033 706,693 CFAT,1995-A Certificates, 6.45% Pass Through, 1998 3,000,000 3,027,180 FNMA Remic Trust 1993-13, 6.50% Pass Through, 2000 2,403,238 2,391,291 FNMA Remic Trust 1994-39, 6.35% Pass Through, 2023 2,000,000 2,001,418 FNMA Remic Trust 1994-42, 5.75% Pass Through, 2018 2,500,000 2,472,173 GNMA Backed Trust II, 8.50% Pass Through, 2018 692,607 716,757 Grand Met Investment Corp., 0.00% Notes, 2004 10,000,000 6,175,560 GS Trust 3D, 8.00% Pass Through, 2014 308,187 313,848 Kidder Peabody Mortgage Assets Trust 23, 9.88% Pass Through, 2019 816,216 837,543 Oxford Acceptance Corp., 9.70% Pass Through, 2017 227,192 234,589 PB CMO Trust II, 9.20% Pass Through, 2018 537,394 551,699 Prudential Home Mortgage 1992-17, 8.00% Pass Through, 2007 2,000,000 2,053,278 Residential Funding Mortgage Securities 1993-MZ3, 6.97% Pass Through, 2023 (A) 2,367,301 2,312,379 Ryland Acceptance Corp., 9.00% Pass Through, 2015 561,206 578,372 ----------- 24,372,780 -----------
PRINCIPAL MARKET AMOUNT VALUE ----------- ----------- CREDIT CARD RECEIVABLES (6.0%) Chase Manhattan Credit Card Master Trust, 8.75% Pass Through, 1996 $ 2,100,000 $ 2,129,335 First Chicago Master Trust II, 6.25% Pass Through, 1999 1,650,000 1,670,177 Household Private Label CC MT 1994-2 B Certificate, 8.00% Pass Through, 2003 3,500,000 3,736,387 MBNA Master Credit Card Trust, 1992-1, 7.25% Pass Through, 1997 1,000,000 1,024,909 Signet Credit Card Master Trust,1993-4 B, 5.80% Pass Through, 1999 2,000,000 2,004,218 ----------- 10,565,026 ----------- FINANCE (10.7%) AT&T Capital Corp., 6.10% Notes, 1998 7,200,000 7,283,124 Equitable Life, 6.95% Notes, 2005 5,000,000 5,062,500 General Motors Acceptance Corp., 6.625% Notes, 2002 3,500,000 3,604,261 General Motors Acceptance Corp., 7.75% Notes, 1999 2,000,000 2,112,354 Xerox Credit Corp., 10.125% Notes, 1999 1,000,000 1,010,575 ----------- 19,072,814 ----------- FOOD (2.0%) Bacardi Martini, 5.75% Notes, 1998 3,620,000 3,615,475 ----------- MISCELLANEOUS MANUFACTURING (2.2%) Becton Dickinson & Co., 8.80% Notes, 2001 3,500,000 3,947,528 ----------- PAPER AND ALLIED PRODUCTS (3.2%) Champion International Corp., 9.875% Debentures, 2000 5,000,000 5,757,395 ----------- PETROLEUM REFINING AND RELATED INDUSTRIES (4.4%) Hydro Quebec, 8.625% Notes, 2002 3,100,000 3,464,250 Hydro Quebec, 7.375% Debentures, 2003 4,000,000 4,272,436 ----------- 7,736,686 ----------- SERVICES (1.8%) Electronic Data System, 7.125% Notes, 2005 3,000,000 3,200,190 ----------- TRANSPORTATION (2.3%) American Airlines, Inc. 1993-A4, 6.50% Notes, 1997 1,896,000 1,909,949 Delta Airlines, Inc., 9.25% Sinking Fund, 2007 (A) 1,910,243 2,125,755 ----------- 4,035,704 -----------
-25- 28 STATEMENT OF INVESTMENTS - CONTINUED
PRINCIPAL MARKET AMOUNT VALUE ---------- ------------- TRANSPORTATION MANUFACTURING (1.6%) Ford Motor Co., 6.27% Notes, 2000 $ 2,863,011 $ 2,863,944 ------------ UTILITIES (14.4%) Boston Edison Co., 5.95% Debentures, 1998 1,000,000 995,370 DQU II Funding, 7.23% Bonds, 1999 8,272,000 8,543,644 Florida Gas Transmission, 7.75% Notes, 1997 2,500,000 2,586,025 Long Island Lighting Co., 8.75% Bonds, 1996 1,500,000 1,511,963 NIPSCO Capital Market, Inc., 0.00% Bonds, 1997 4,500,000 4,045,338 Transco Energy Co., 9.125% Notes, 1998 4,000,000 4,295,216 United Illuminating Company., 7.375% Debentures, 1998 3,500,000 3,581,788 ------------ 25,559,344 ------------ TOTAL BONDS (COST $147,038,183) 152,649,517 ------------ U.S. GOVERNMENT AGENCY SECURITIES (11.2%) Federal Home Loan Mortgage Corp., G24 ZC, 5.15% Pass Through, 2012 4,452,013 4,347,387 Federal National Mortgage Association, 7.55% Notes, 2004 2,500,000 2,611,428 FNMA 30yr Conventional Long Term, 7.50% Pass Through, 2025 10,670,307 10,943,734 GNMA 30yr Single Family Issue, 7.50% Pass Through, 2023 1,960,001 2,017,576 ------------ TOTAL U.S. GOVERNMENT AGENCY SECURITIES (COST $19,521,129) 19,920,125 ------------
PRINCIPAL MARKET AMOUNT VALUE ---------- ------------- U.S. GOVERNMENT SECURITIES (2.6%) United States of America Treasury, 5.50% Notes, 1999 $ 4,500,000 $ 4,530,937 ------------ TOTAL U.S. GOVERNMENT SECURITIES (COST $4,453,594) 4,530,937 ------------ SHORT-TERM INVESTMENTS (0.3%) REPURCHASE AGREEMENTS (0.3%) Merrill Lynch Government Securities, Inc., 5.50% Repurchase Agreement dated December 29, 1995 due January 2, 1996, collateralized by: United States of America Treasury, $455,000, 5.63% due October 31, 1997 453,000 453,000 ------------ TOTAL SHORT-TERM INVESTMENTS (COST $ 453,000) 453,000 ------------ TOTAL INVESTMENTS (100%) (COST $171,465,906) (B) $177,553,579 ============
NOTES (A) Management Priced Security. (B) At December 31, 1995, net unrealized appreciation for all securities was $6,087,673. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of market value over cost of $6,300,641 and aggregate gross unrealized depreciation for all securities in which there was an excess of cost over market value of $212,968. See Notes to Financial Statements -26- 29 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Managers and Owners of Variable Annuity Contracts of The Travelers Quality Bond Account for Variable Annuities: We have audited the accompanying statement of assets and liabilities of The Travelers Quality Bond Account for Variable Annuities including the statement of investments as of December 31, 1995, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the per unit data for each of the five years in the period then ended. These financial statements and per unit data are the responsibility of management. Our responsibility is to express an opinion on these financial statements and per unit data based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and per unit data are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1995, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and per unit data referred to above present fairly, in all material respects, the financial position of The Travelers Quality Bond Account for Variable Annuities as of December 31, 1995, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the per unit data for each of the five years in the period then ended, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Hartford, Connecticut February 16, 1996 -27- 30 THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES At the outset of 1995, The Federal Reserve's economic theme was declining inflation and moderate economic growth. Despite no net change in The Federal Reserve's policy there was a dramatic improvement in market sentiment. The steady flow of favorable economic data, shifted Federal Reserve policy nearly 180 degrees. Fears of an overheating economy along with an aggressive Federal Reserve tightening strategy turned into an easing of monetary policy due to muted price pressures and subdued growth. The Federal Reserve did manage to stay on course with its policy of moderate growth and low inflation. The fourth quarter was marked by a 25 basis point reduction in the Federal funds rate to 5.50%. The Federal Reserve still has more latitude to lower short-term rates, but the pace of easing will be relatively cautious. Management's priority is diversification, protection of principal, and liquidity. Given this objective, we found 30 day maturities provided the best returns for the Money Market account versus the 45 to 60 day alternatives. Throughout 1995, the Money Market Account's asset size remained stable at approximately $76 million with a slight decrease from $83 million at year-end 1994. The average life of the portfolio assets increased slightly from 1994 to 26 days. Election year 1996 and the possible re-appointment of the current Federal Reserve Chairman Alan Greenspan should provide the market with some intangibles. We do maintain that low inflation and moderate growth will be the cornerstone for a stable and growing economy in 1996. -28- 31 THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES
NON-TIMED 12/95 1 YEAR 3 YEAR 5 YEAR - --------------- ------ ------ ------ The Travelers Money Market Account 4.44 2.96 3.18 Lipper Money Market Category Average 4.35 2.82 3.14
This is a comparison of The Travelers Money Market Account versus Lipper Analytical Services' variable annuity composite index, which provides the average performance of variable annuity funds with similar objectives as of December 31, 1995. Lipper Analytical Services is a leading independent Variable Insurance Product Performance Analysis Service. The performance of the composite is net of all asset based fees such as mortality and expense charges and portfolio management fees. Performance reflects the charges associated with Universal Annuity, which became available on May 16, 1983. Contracts issued prior to May 16, 1983, have different contract charges that result in different performance than presented above. Universal Annuity fund performance information is net of: 1) the 1.25% annual mortality and expense risk charge, and 2) portfolio management fees. The deduction of the $15 semi-annual administrative charge and the contingent deferred sales charge (5% maximum) is not reflected. The deduction of those charges would reduce any percentage increase or make greater any percentage decrease. Performance data quoted represents past performance. Investment return and principal value of an investment will fluctuate so that an investor's units, when redeemed, may be worth more or less than their original cost. An investment in The Travelers Money Market Account is neither insured nor guaranteed by the U.S. Government. The following is the performance data required by SEC rules governing uniform performance reporting: one year -0.86%, five year 1.95% and ten year 4.44%. This performance is based on a $1,000 hypothetical investment and reflects deductions of all fees and charges including the semi-annual administrative charge and deferred sales charge. -29- 32 THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1995 ASSETS: Investment securities, at market value (identified cost $78,016,334) $78,010,508 Receivables: Interest........................................................... 506,982 Purchase payments and transfers from other Travelers accounts...... 287,249 Other assets........................................................ 222 ----------- Total Assets...................................................... 78,804,961 ----------- LIABILITIES: Cash overdraft...................................................... 289,043 Payables: Contract surrenders and transfers to other Travelers accounts...... 247,635 Investment management and advisory fees............................ 3,483 Accrued liabilities................................................. 13,389 ----------- Total Liabilities................................................. 553,550 ----------- NET ASSETS........................................................... $78,251,411 ===========
See Notes to Financial Statements -30- 33 THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1995 INVESTMENT INCOME: Interest............................................ $4,662,482 EXPENSES: Investment management and advisory fees............. $254,985 Insurance charges................................... 980,050 -------- Total expenses..................................... 1,235,035 ---------- Net investment income............................. 3,427,447 ---------- Net increase in net assets resulting from operations $3,427,447 ==========
See Notes to Financial Statements -31- 34 THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
1995 1994 ----------- ----------- OPERATIONS: Net investment income.................................................. $ 3,427,447 $ 2,248,581 ----------- ----------- Net increase in net assets resulting from operations.................. 3,427,447 2,248,581 ----------- ----------- UNIT TRANSACTIONS: Participant purchase payments (applicable to 6,970,794 and 14,485,166 units, respectively).......... 14,864,399 29,698,901 Participant transfers from other Travelers accounts (applicable to 39,907,908 and 45,192,925 units, respectively)......... 85,226,642 92,615,492 Administrative charges (applicable to 44,021 and 49,034 units, respectively)................. (94,696) (101,345) Contract surrenders (applicable to 5,220,626 and 5,130,779 units, respectively)........... (11,137,360) (10,532,362) Participant transfers to other Travelers accounts (applicable to 45,205,495 and 48,771,566 units, respectively)......... (96,405,902) (100,065,788) Other payments to participants (applicable to 363,303 and 290,664 units, respectively)............... (782,623) (598,655) ----------- ----------- Net increase (decrease) in net assets resulting from unit transactions (8,329,540) 11,016,243 ----------- ----------- Net increase (decrease) in net assets................................ (4,902,093) 13,264,824 NET ASSETS: Beginning of year...................................................... 83,153,504 69,888,680 ----------- ----------- End of year............................................................ $78,251,411 $83,153,504 =========== ===========
See Notes to Financial Statements -32- 35 NOTES TO FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES The Travelers Money Market Account for Variable Annuities ("Account MM") is a separate account of The Travelers Insurance Company ("The Travelers"), an indirect wholly owned subsidiary of 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. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Security transactions are accounted for on the trade date. 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) 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 $142,783 and $98,960 of contingent deferred sales charges for the years ended December, 31 1995 and 1994, respectively. -33- 36 NOTES TO FINANCIAL STATEMENTS - CONTINUED 3. NET ASSETS HELD BY AFFILIATE Approximately $1,816,000 and $485,000 of the net assets of Account MM were held on behalf of an affiliate of The Travelers as of December 31, 1995 and 1994, respectively. Transactions with this affiliate during the years ended December 31, 1995 and 1994, were comprised of contract surrenders of approximately $72,000 and $800,000, respectively. Participant purchase payments were approximately $965,000 for the year ended December 31, 1995. 4. NET CONTRACT OWNERS' EQUITY
DECEMBER 31, 1995 ----------------------------------------- NET UNITS UNIT VALUE ASSETS ----- ---------- ------ Contracts issued prior to May 16, 1983........... 205,781 $2.246 $ 462,401 Contracts issued on or after May 16, 1983........ 35,666,813 2.177 77,671,585 Annuity Contracts issued on or after May 16, 1983 53,922 2.177 117,425 ------------- Net Contract Owners' Equity.............................................. $ 78,251,411 =============
-34- 37 NOTES TO FINANCIAL STATEMENTS - CONTINUED 5. SUPPLEMENTARY INFORMATION (Selected data for a unit outstanding throughout each year.) Contracts issued prior to May 16, 1983
FOR THE YEARS ENDED DECEMBER 31, -------------------------------------------------------------- 1995 1994 1993 1992 1991 ------ ------ ------ ------ ------ SELECTED PER UNIT DATA: Total investment income............................... $.130 $.091 $.067 $.079 $.120 Operating expenses.................................... .030 .028 .027 .027 .026 ------ ------ ------ ------ ------ Net investment income................................. .100 .063 .040 .052 .094 Unit value at beginning of year....................... 2.146 2.083 2.043 1.991 1.897 ------ ------ ------ ------ ------ Unit value at end of year............................. $2.246 $2.146 $2.083 $2.043 $1.991 ====== ====== ====== ====== ====== SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase in unit value............................ .10 .06 .04 .05 .09 Ratio of operating expenses to average net assets..... 1.33 % 1.33 % 1.33 % 1.33 % 1.33 % Ratio of net investment income to average net assets.. 4.61 % 2.98 % 1.93 % 2.58 % 4.90 % Number of units outstanding at end of year (thousands) 206 206 218 227 262
Contracts issued on or after May 16, 1983
FOR THE YEARS ENDED DECEMBER 31, -------------------------------------------------------------- 1995 1994 1993 1992 1991 ------ ------ ------ ------ ------ SELECTED PER UNIT DATA: Total investment income............................... $.127 $.087 $.065 $.077 $.118 Operating expenses.................................... .034 .032 .031 .031 .030 ------ ------ ------ ------ ------ Net investment income................................. .093 .055 .034 .046 .088 Unit value at beginning of year....................... 2.084 2.029 1.995 1.949 1.861 ------ ------ ------ ------ ------ Unit value at end of year............................. $2.177 $2.084 $2.029 $1.995 $1.949 ====== ====== ====== ====== ====== SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase in unit value............................ .09 .06 .03 .05 .09 Ratio of operating expenses to average net assets..... 1.57 % 1.57 % 1.57 % 1.57 % 1.57 % Ratio of net investment income to average net assets.. 4.36 % 2.72 % 1.68 % 2.33 % 4.66 % Number of units outstanding at end of year (thousands) 35,721 39,675 34,227 42,115 55,013
-35- 38 THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF INVESTMENTS DECEMBER 31, 1995
PRINCIPAL MARKET AMOUNT VALUE ---------- ----------- SHORT-TERM INVESTMENTS (100%) COMMERCIAL PAPER (97.6%) ABN AMRO Holdings NV, 5.55% due April 30, 1996 $ 3,000,000 $ 2,999,542 Associates Corp. of North America, 5.87% due February 15, 1996 3,000,000 2,995,647 Bank of Montreal, 5.70% due March 22, 1996 3,000,000 2,948,256 Ciesco LP, 5.61% due February 27, 1996 3,500,000 3,461,480 CIT Group Holdings, Inc., 5.68% due June 15, 1996 2,000,000 2,029,353 Corp. Receives Corp., 5.78% due January 17, 1996 3,500,000 3,453,693 Daimler Benz North America Corp., 5.76% due February 2, 1996 3,500,000 3,464,527 Dresdner U.S. Financial, Inc., 5.80% due January 22, 1996 3,500,000 3,449,583 General Electric Capital Corp., 5.54% due May 3, 1996 3,500,000 3,421,583 Hanson PLC, 6.52% due January 15, 1996 3,500,000 3,499,671 J.P. Morgan & Co. Inc., 5.80% due January 8, 1996 3,500,000 3,481,868 Kingdom of Sweden, 5.71% due March 8, 1996 3,500,000 3,445,737 Morgan Stanley Group, Inc., 5.81% due January 24, 1996 3,500,000 3,449,482 National Rural Utilities Cooperative Financial Corp., 5.72% due February 9,1996 3,500,000 3,462,297 PACCAR Financial Corp., 5.90% due September 20, 1996 3,500,000 3,497,987 Pearson, Inc., 5.79% due January 17, 1996 3,600,000 3,579,616 Pitney Bowes Credit Corp., 5.70% due February 7, 1996 3,500,000 3,463,495 Potomac Electric Power Co., 5.78% due January 11, 1996 875,000 870,747 Progress Capital Holdings, Inc., 5.84% due January 18, 1996 3,500,000 3,476,715 PHH Corp., 5.78% due January 19, 1996 3,900,000 3,871,084 Siemens Corp., 5.74% due January 22, 1996 1,500,000 1,489,138 Southern California Edison Co., 5.44% due May 31, 1996 3,500,000 3,417,922 Teco Financial, Inc., 5.81% due February 9, 1996 3,500,000 3,442,670 Wachovia Bank of North Carolina NA, 5.83% due May 13, 1996 3,500,000 3,503,415 ----------- 76,175,508 ----------- PRINCIPAL MARKET AMOUNT VALUE ---------- ----------- REPURCHASE AGREEMENTS (2.4%) Merrill Lynch Government Securities, Inc., 5.50% Repurchase Agreement dated December 29, 1995 due January 2, 1996, collateralized by: United States of America Treasury, $1,845,000, 5.63% due October 31, 1997 $ 1,835,000 $ 1,835,000 ----------- TOTAL INVESTMENTS (100%) $78,010,508 (COST $78,016,334) ===========
See Notes to Financial Statements -36- 39 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Managers and Owners of Variable Annuity Contracts of The Travelers Money Market Account for Variable Annuities: We have audited the accompanying statement of assets and liabilities of The Travelers Money Market Account for Variable Annuities including the statement of investments as of December 31, 1995, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the per unit data for each of the five years in the period then ended. These financial statements and per unit data are the responsibility of management. Our responsibility is to express an opinion on these financial statements and per unit data based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and per unit data are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1995, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and per unit data referred to above present fairly, in all material respects, the financial position of The Travelers Money Market Account for Variable Annuities as of December 31, 1995, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the per unit data for each of the five years in the period then ended, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Hartford, Connecticut February 16, 1996 -37- 40 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 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 sales commissions. VG-137 (Annual) (12-95) Printed in U.S.A. -----END PRIVACY-ENHANCED MESSAGE-----