<PAGE> 1
UNIVERSAL ANNUITY
ANNUAL REPORT
DECEMBER 31, 1997
[TRAVELERS INSURANCE LOGO]
THE TRAVELERS FUND U
FOR VARIABLE ANNUITIES
TRAVELERS LIFE AND ANNUITY
A MEMBER OF TRAVELERS GROUP[LOGO]
The Travelers Insurance Company
The Travelers Life and Annuity Company
One Tower Square
Hartford, CT 06183
<PAGE> 2
THE TRAVELERS FUND U
FOR VARIABLE ANNUITIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<S> <C> <C>
ASSETS:
Investments in eligible funds at market value:
Managed Assets Trust, 12,519,488 shares (cost $170,795,825) ......................... $ 220,968,959
High Yield Bond Trust, 2,522,128 shares (cost $22,249,162) .......................... 24,943,850
Capital Appreciation Fund, 7,695,447 shares (cost $263,485,645) ..................... 356,453,082
The Travelers Series Trust, 5,306,244 shares (cost $66,483,512) ..................... 75,540,797
Templeton Variable Products Series Fund, 30,097,302 shares (cost $550,048,504) ...... 672,435,817
Fidelity's Variable Insurance Products Fund, 45,215,857 shares (cost $899,613,678) .. 1,238,863,499
Fidelity's Variable Insurance Products Fund II, 25,072,481 shares (cost $369,657,426) 451,555,380
Dreyfus Stock Index Fund, 10,226,754 shares (cost $204,832,982) ..................... 263,338,909
American Odyssey Funds, Inc., 85,849,155 shares (cost $1,043,257,107) ............... 1,228,379,883
Travelers Series Fund Inc., 5,922,802 shares (cost $89,515,534) ..................... 103,821,907
--------------
Total Investments (cost $3,679,939,375) ......................................... $4,636,302,083
Receivables:
Dividends ........................................................................... 33,184,259
Purchase payments and transfers from other Travelers accounts ....................... 5,310,165
Other assets .......................................................................... 12,490
--------------
Total Assets .................................................................... 4,674,808,997
--------------
LIABILITIES:
Payable for contract surrenders and transfers to other Travelers accounts ............. 3,992,877
Accrued liabilities ................................................................... 342,569
--------------
Total Liabilities ............................................................... 4,335,446
--------------
NET ASSETS: .............................................................................. $4,670,473,551
==============
</TABLE>
See Notes to Financial Statements
-1-
<PAGE> 3
THE TRAVELERS FUND U
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends ........................................... $213,321,547
EXPENSES:
Insurance charges ................................... 51,390,740
------------
Net investment income ........................... 161,930,807
------------
REALIZED GAIN AND CHANGE IN UNREALIZED GAIN ON
INVESTMENTS:
Realized gain from investment transactions:
Proceeds from investments sold .................... $263,520,765
Cost of investments sold .......................... 191,113,109
------------
Net realized gain ............................... 72,407,656
Change in unrealized gain on investments:
Unrealized gain at December 31, 1996 .............. 521,188,596
Unrealized gain at December 31, 1997 .............. 956,362,708
------------
Net change in unrealized gain for the year ...... 435,174,112
------------
Net realized gain and change in unrealized gain 507,581,768
------------
Net increase in net assets resulting from operations $669,512,575
============
</TABLE>
See Notes to Financial Statements
-2-
<PAGE> 4
THE TRAVELERS FUND U
FOR VARIABLE ANNUITIES
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
OPERATIONS:
Net investment income ........................................... $ 161,930,807 $ 178,811,254
Net realized gain from investment transactions .................. 72,407,656 48,856,009
Net change in unrealized gain on investments .................... 435,174,112 146,787,472
--------------- ---------------
Net increase in net assets resulting from operations .......... 669,512,575 374,454,735
--------------- ---------------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 395,816,541 and 414,155,184 units, respectively) 732,814,435 651,103,231
Participant transfers from other Travelers accounts
(applicable to 397,904,050 and 405,484,901 units, respectively) 771,742,729 642,203,572
Administrative and asset allocation charges
(applicable to 10,568,739 and 9,168,469 units, respectively) .. (17,242,427) (13,265,920)
Contract surrenders
(applicable to 121,741,746 and 111,350,118 units, respectively) (231,169,965) (177,909,388)
Participant transfers to other Travelers accounts
(applicable to 364,257,359 and 337,562,426 units, respectively) (687,667,857) (532,180,418)
Other payments to participants
(applicable to 3,523,791 and 2,743,276 units, respectively) ... (6,638,728) (4,497,399)
--------------- ---------------
Net increase in net assets resulting from unit transactions . 561,838,187 565,453,678
--------------- ---------------
Net increase in net assets ................................ 1,231,350,762 939,908,413
NET ASSETS:
Beginning of year ............................................... 3,439,122,789 2,499,214,376
--------------- ---------------
End of year ..................................................... $ 4,670,473,551 $ 3,439,122,789
=============== ===============
</TABLE>
See Notes to Financial Statements
-3-
<PAGE> 5
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Fund U for Variable Annuities ("Fund U") 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. Fund U
is registered under the Investment Company Act of 1940, as amended, as a
unit investment trust.
Participant purchase payments applied to Fund U are invested in one or more
eligible funds in accordance with the selection made by the contract owner.
As of December 31, 1997, the eligible funds available under Fund U are:
Managed Assets Trust; High Yield Bond Trust; Capital Appreciation Fund;
U.S. Government Securities Portfolio, Social Awareness Stock Portfolio and
Utilities Portfolio of The Travelers Series Trust; American Odyssey Core
Equity Fund, American Odyssey Emerging Opportunities Fund, American Odyssey
International Equity Fund, American Odyssey Long-Term Bond Fund, American
Odyssey Intermediate-Term Bond Fund and American Odyssey Short-Term Bond
Fund of American Odyssey Funds, Inc.; Alliance Growth Portfolio, Smith
Barney High Income Portfolio, Smith Barney International Equity Portfolio,
Smith Barney Income and Growth Portfolio, Putnam Diversified Income
Portfolio and MFS Total Return Portfolio of Travelers Series Fund Inc. (all
of which are managed by affiliates of The Travelers); Templeton Bond Fund
(Class 1 shares), Templeton Stock Fund (Class 1 shares) and Templeton Asset
Allocation Fund (Class 1 shares) of Templeton Variable Products Series
Fund; High Income Portfolio, Growth Portfolio and Equity-Income Portfolio
of Fidelity's Variable Insurance Products Fund; Asset Manager Portfolio of
Fidelity's Variable Insurance Products Fund II; and Dreyfus Stock Index
Fund. All of the funds are Massachusetts business trusts, except for
American Odyssey Funds, Inc., Dreyfus Stock Index Fund and Travelers Series
Fund Inc. which are incorporated under Maryland law. Not all funds may be
available in all states or to all contract owners.
Effective May 1, 1996, G.T. Global Strategic Income Portfolio of Travelers
Series Fund Inc. was no longer available to new contract owners under Fund
U.
The following is a summary of significant accounting policies consistently
followed by Fund U in the preparation of its financial statements.
SECURITY VALUATION. Investments are valued daily at the net asset values
per share of the underlying funds.
SECURITY TRANSACTIONS. Security transactions are accounted for on the trade
date. Dividend income is recorded on the ex-dividend date.
FEDERAL INCOME TAXES. The operations of Fund U 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 of Fund U. Fund U is not taxed as a
"regulated investment company" under Subchapter M of the Code.
OTHER. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
2. INVESTMENTS
The aggregate costs of purchases and proceeds from sales of investments
were $1,038,839,237 and $263,520,765 respectively, for the year ended
December 31, 1997. Realized gains and losses from investment transactions
are reported on an identified cost basis. The cost of investments in
eligible funds was $3,679,939,375 at December 31, 1997. Gross unrealized
appreciation for all investments at December 31, 1997 was $956,976,434.
Gross unrealized depreciation for all investments at December 31, 1997 was
$613,726.
-4-
<PAGE> 6
NOTES TO FINANCIAL STATEMENTS - CONTINUED
3. CONTRACT CHARGES
Insurance charges are paid for the mortality and expense risks assumed by
The Travelers. These charges are equivalent to 1.25% of the average net
assets of Fund U 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.
No sales charge is deducted from participant purchase payments when they
are received. However, The Travelers assesses a 5% contingent deferred
sales charge if a participant's purchase payment is surrendered within five
years of its payment date. Contract surrender payments include $3,008,227
and $1,952,467 of contingent deferred sales charges for the years ended
December 31, 1997 and 1996, respectively.
Participants in American Odyssey Funds, Inc. (the "Funds"), may elect to
enter into a separate asset allocation advisory agreement with Copeland
Financial Services, Inc. ("Copeland"), an affiliate of The Travelers. Under
this arrangement, Copeland provides asset allocation advice and charges
participants an annual fee, plus a one-time set-up fee of $30. The annual
fee, which decreases as a participant's assets in the Funds increase, is
equivalent to an amount of up to 1.50% of the participant's assets in the
Funds. These fees totaled $11,010,765 and $8,243,048, for the years ended
December 31, 1997 and 1996, respectively.
4. NET ASSETS HELD ON BEHALF OF AN AFFILIATE
Approximately $25,260,000 and $16,836,000 of the net assets of Fund U were
held on behalf of an affiliate of The Travelers as of December 31, 1997 and
1996, respectively. Transactions with this affiliate during the years ended
December 31, 1997 and 1996, comprised participant purchase payments of
approximately $5,887,000 and $12,908,000 and contract surrenders of
approximately $1,691,000 and $2,570,000, respectively.
-5-
<PAGE> 7
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. NET CONTRACT OWNERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31, 1997
------------------------------------------------------------------
ACCUMULATION ANNUITY UNIT NET
UNITS UNITS VALUE ASSETS
----- ----- ----- ------
<S> <C> <C> <C> <C>
Managed Assets Trust
Qualified ................................... 53,734,737 105,875 $ 3.720 $ 200,282,631
Non-Qualified ............................... 5,111,270 52,677 4.004 20,676,296
High Yield Bond Trust
Qualified ................................... 6,673,442 -- 3.261 21,765,132
Non-Qualified ............................... 963,438 9,867 3.295 3,207,385
Capital Appreciation Fund
Qualified ................................... 84,231,666 18,280 3.779 318,415,210
Non-Qualified ............................... 9,740,312 50,307 3.920 38,374,453
The Travelers Series Trust
U.S. Government Securities Portfolio ........ 22,805,167 3,869 1.472 33,573,906
Social Awareness Stock Portfolio ............ 9,539,133 -- 2.176 20,753,381
Utilities Portfolio ......................... 12,539,047 -- 1.686 21,140,783
Templeton Variable Products Series Fund
Templeton Bond Fund ......................... 10,493,668 7,911 1.367 14,359,073
Templeton Stock Fund ........................ 180,810,568 65,419 2.211 399,877,351
Templeton Asset Allocation Fund ............. 124,524,565 78,540 2.070 257,989,468
Fidelity's Variable Insurance Products Fund
High Income Portfolio ....................... 48,826,631 68,490 2.052 100,325,843
Growth Portfolio ............................ 288,933,651 68,316 2.201 636,215,866
Equity-Income Portfolio ..................... 236,781,372 268,176 2.118 502,123,371
Fidelity's Variable Insurance Products Fund II
Asset Manager Portfolio ..................... 239,878,345 185,525 1.879 451,184,383
Dreyfus Stock Index Fund ......................... 109,249,076 67,899 2.456 268,488,544
American Odyssey Funds, Inc. .....................
American Odyssey Core Equity Fund ........... 185,889,574 5,712 2.143 398,309,648
American Odyssey Emerging Opportunities Fund 162,141,912 4,065 1.541 249,897,611
American Odyssey International Equity Fund .. 143,955,539 3,654 1.592 229,115,896
American Odyssey Long-Term Bond Fund ........ 159,720,674 7,358 1.352 215,896,247
American Odyssey Intermediate-Term Bond Fund 86,909,430 4,605 1.229 106,812,625
American Odyssey Short-Term Bond Fund ....... 48,925,705 3,126 1.183 57,891,961
Travelers Series Fund Inc. .......................
Alliance Growth Portfolio ................... 19,530,513 4,720 2.091 40,838,604
G.T. Global Strategic Income Portfolio ...... 222,251 -- 1.487 330,549
Smith Barney High Income Portfolio .......... 1,306,786 -- 1.412 1,844,843
Smith Barney International Equity Portfolio . 7,634,378 -- 1.339 10,222,222
Smith Barney Income and Growth Portfolio .... 10,851,531 19,634 1.843 20,037,005
Putnam Diversified Income Portfolio ......... 5,170,756 -- 1.282 6,631,238
MFS Total Return Portfolio .................. 14,655,213 -- 1.630 23,892,026
--------------
Net Contract Owners' Equity ...................... $4,670,473,551
==============
</TABLE>
-6-
<PAGE> 8
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. STATEMENT OF INVESTMENTS
<TABLE>
<CAPTION>
NO. OF MARKET
INVESTMENT OPTIONS SHARES VALUE
-------------- --------------
<S> <C> <C>
MANAGED ASSETS TRUST (4.8%)
Total (Cost $170,795,825) 12,519,488 $ 220,968,959
-------------- --------------
HIGH YIELD BOND TRUST (0.5%)
Total (Cost $22,249,162) 2,522,128 24,943,850
-------------- --------------
CAPITAL APPRECIATION FUND (7.7%)
Total (Cost $263,485,645) 7,695,447 356,453,082
-------------- --------------
THE TRAVELERS SERIES TRUST (1.6%)
U.S. Government Securities Portfolio (Cost $32,444,902) 2,889,720 33,665,243
Social Awareness Stock Portfolio (Cost $16,499,293) 1,032,894 20,719,846
Utilities Portfolio (Cost $17,539,317) 1,383,630 21,155,708
-------------- --------------
Total (Cost $66,483,512) 5,306,244 75,540,797
-------------- --------------
TEMPLETON VARIABLE PRODUCTS SERIES FUND (14.5%)
Templeton Bond Fund (Cost $14,430,622) 1,304,131 14,423,686
Templeton Stock Fund (Cost $336,004,451) 17,243,762 399,882,838
Templeton Asset Allocation Fund (Cost $199,613,431) 11,549,409 258,129,293
-------------- --------------
Total (Cost $550,048,504) 30,097,302 672,435,817
-------------- --------------
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND (26.7%)
High Income Portfolio (Cost $86,205,044) 7,380,262 100,223,955
Growth Portfolio (Cost $438,753,491) 17,160,008 636,636,282
Equity-Income Portfolio (Cost $374,655,143) 20,675,587 502,003,262
-------------- --------------
Total (Cost $899,613,678) 45,215,857 1,238,863,499
-------------- --------------
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND II (9.7%)
Asset Manager Portfolio
Total (Cost $369,657,426) 25,072,481 451,555,380
-------------- --------------
DREYFUS STOCK INDEX FUND (5.7%)
Total (Cost $204,832,982) 10,226,754 263,338,909
-------------- --------------
AMERICAN ODYSSEY FUNDS, INC. (26.5%)
American Odyssey Core Equity Fund (Cost $261,907,902) 19,726,605 393,151,229
American Odyssey Emerging Opportunities Fund (Cost $237,590,792) 17,424,290 249,690,078
American Odyssey International Equity Fund (Cost $192,455,047) 14,562,061 225,420,703
American Odyssey Long-Term Bond Fund (Cost $195,325,615) 19,008,515 204,151,450
American Odyssey Intermediate-Term Bond Fund (Cost $100,808,680) 9,799,411 101,031,925
American Odyssey Short-Term Bond Fund (Cost $55,169,071) 5,328,273 54,934,498
-------------- --------------
Total (Cost $1,043,257,107) 85,849,155 1,228,379,883
-------------- --------------
TRAVELERS SERIES FUND INC. (2.3%)
Alliance Growth Portfolio (Cost $33,716,744) 1,891,156 40,943,524
G.T. Global Strategic Income Portfolio (Cost $323,821) 25,924 330,796
Smith Barney High Income Portfolio (Cost $1,703,760) 133,610 1,801,065
Smith Barney International Equity Portfolio (Cost $10,710,262) 801,399 10,338,045
Smith Barney Income and Growth Portfolio (Cost $16,531,761) 1,047,338 19,972,734
Putnam Diversified Income Portfolio (Cost $6,243,981) 530,664 6,612,068
MFS Total Return Portfolio (Cost $20,285,205) 1,492,711 23,823,675
-------------- --------------
Total (Cost $89,515,534) 5,922,802 103,821,907
-------------- --------------
TOTAL INVESTMENT OPTIONS (100%)
(COST $3,679,939,375) $4,636,302,083
==============
</TABLE>
-7-
<PAGE> 9
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF FUND U OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
MANAGED ASSETS TRUST HIGH YIELD BOND TRUST
------------------------------- --------------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ............................................. $ 6,205,545 $ 27,954,200 $ 15,556 $ 2,919,012
------------- ------------- ------------- -------------
EXPENSES:
Insurance charges ..................................... 2,562,979 2,202,996 260,229 181,420
------------- ------------- ------------- -------------
Net investment income (loss) .................... 3,642,566 25,751,204 (244,673) 2,737,592
------------- ------------- ------------- -------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold .................... 12,128,997 12,832,936 2,578,842 2,894,773
Cost of investments sold .......................... 8,044,626 8,871,286 2,421,860 2,809,988
------------- ------------- ------------- -------------
Net realized gain (loss) ........................ 4,084,371 3,961,650 156,982 84,785
------------- ------------- ------------- -------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .......... 21,106,864 30,109,740 (294,882) 567,770
Unrealized gain (loss) end of year ................ 50,173,134 21,106,864 2,694,688 (294,882)
------------- ------------- ------------- -------------
Net change in unrealized gain (loss) for the year 29,066,270 (9,002,876) 2,989,570 (862,652)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations ....................... 36,793,207 20,709,978 2,901,879 1,959,725
------------- ------------- ------------- -------------
UNIT TRANSACTIONS:
Participant purchase payments ......................... 13,354,087 15,980,014 3,005,673 1,850,766
Participant transfers from other Travelers accounts ... 9,386,195 4,619,779 7,899,649 5,594,597
Administrative and asset allocation charges ........... (199,651) (206,854) (23,482) (18,805)
Contract surrenders ................................... (13,291,153) (10,950,759) (1,421,335) (1,114,404)
Participant transfers to other Travelers accounts ..... (11,464,116) (12,961,561) (4,345,577) (3,785,886)
Other payments to participants ........................ (519,445) (351,162) (3,332) (149,278)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from unit transactions .......................... (2,734,083) (3,870,543) 5,111,596 2,376,990
------------- ------------- ------------- -------------
Net increase (decrease) in net assets ........... 34,059,124 16,839,435 8,013,475 4,336,715
NET ASSETS:
Beginning of year ................................. 186,899,803 170,060,368 16,959,042 12,622,327
------------- ------------- ------------- -------------
End of year ....................................... $ 220,958,927 $ 186,899,803 $ 24,972,517 $ 16,959,042
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
CAPITAL APPRECIATION FUND
-------------------------------
1997 1996
---- ----
<S> <C> <C>
INVESTMENT INCOME:
Dividends ............................................. $ 2,303 $ 24,372,149
------------- -------------
EXPENSES:
Insurance charges ..................................... 3,750,873 2,070,864
------------- -------------
Net investment income (loss) .................... (3,748,570) 22,301,285
------------- -------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold .................... 20,574,412 10,128,794
Cost of investments sold .......................... 11,695,390 6,771,613
------------- -------------
Net realized gain (loss) ........................ 8,879,022 3,357,181
------------- -------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .......... 38,122,844 26,739,948
Unrealized gain (loss) end of year ................ 92,967,437 38,122,844
------------- -------------
Net change in unrealized gain (loss) for the year 54,844,593 11,382,896
------------- -------------
Net increase (decrease) in net assets
resulting from operations ....................... 59,975,045 37,041,362
------------- -------------
UNIT TRANSACTIONS:
Participant purchase payments ......................... 61,332,506 37,351,082
Participant transfers from other Travelers accounts ... 105,427,417 75,856,393
Administrative and asset allocation charges ........... (418,474) (236,896)
Contract surrenders ................................... (14,568,400) (8,658,569)
Participant transfers to other Travelers accounts ..... (74,419,737) (42,532,367)
Other payments to participants ........................ (445,397) (202,959)
------------- -------------
Net increase (decrease) in net assets resulting
from unit transactions .......................... 76,907,915 61,576,684
------------- -------------
Net increase (decrease) in net assets ........... 136,882,960 98,618,046
NET ASSETS:
Beginning of year ................................. 219,906,703 121,288,657
------------- -------------
End of year ....................................... $ 356,789,663 $ 219,906,703
============= =============
</TABLE>
-8-
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
U.S. GOVERNMENT SOCIAL AWARENESS
SECURITIES PORTFOLIO STOCK PORTFOLIO UTILITIES PORTFOLIO TEMPLETON BOND FUND
- ----------------------------- ----------------------------- ----------------------------- ------------------------------
1997 1996 1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1,615,375 $ 3,901,076 $ -- $ 757,032 $ 27,055 $ 2,067,241 $ 1,005,721 $ 1,360,095
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
333,628 329,950 199,138 111,545 222,475 216,033 177,975 163,191
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
1,281,747 3,571,126 (199,138) 645,487 (195,420) 1,851,208 827,746 1,196,904
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
5,298,145 9,246,199 2,405,937 2,433,322 5,569,359 5,883,901 1,993,943 2,178,436
5,276,990 9,753,525 1,536,523 1,884,337 4,633,398 4,727,491 2,193,935 2,319,495
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
21,155 (507,326) 869,414 548,985 935,961 1,156,410 (199,992) (141,059)
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
(410,466) 2,746,779 1,538,479 1,248,264 434,813 2,392,412 434,185 467,625
1,220,341 (410,466) 4,220,553 1,538,479 3,616,391 434,813 (6,936) 434,185
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
1,630,807 (3,157,245) 2,682,074 290,215 3,181,578 (1,957,599) (441,121) (33,440)
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
2,933,709 (93,445) 3,352,350 1,484,687 3,922,119 1,050,019 186,633 1,022,405
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
2,406,952 3,312,661 4,741,486 2,775,977 2,367,935 4,102,407 1,962,402 1,710,597
11,976,942 6,741,836 6,270,168 3,309,505 5,149,882 8,402,214 2,532,910 1,954,471
(30,564) (28,786) (37,243) (20,122) (20,910) (21,234) (12,870) (12,912)
(2,904,036) (2,212,259) (740,129) (1,885,418) (1,110,018) (656,083) (1,146,266) (804,933)
(5,724,252) (10,663,436) (3,826,457) (1,737,042) (7,198,624) (10,026,851) (2,968,811) (3,145,773)
(299,040) (26,833) (5,922) -- (34,926) (86,212) (52,933) (32,397)
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
5,426,002 (2,876,817) 6,401,903 2,442,900 (846,661) 1,714,241 314,432 (330,947)
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
8,359,711 (2,970,262) 9,754,253 3,927,587 3,075,458 2,764,260 501,065 691,458
25,214,195 28,184,457 10,999,128 7,071,541 18,065,325 15,301,065 13,858,008 13,166,550
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 33,573,906 $ 25,214,195 $ 20,753,381 $ 10,999,128 $ 21,140,783 $ 18,065,325 $ 14,359,073 $ 13,858,008
============ ============ ============ ============ ============ ============ ============ ============
</TABLE>
-9-
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF FUND U OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 (CONTINUED)
<TABLE>
<CAPTION>
TEMPLETON ASSET
TEMPLETON STOCK FUND ALLOCATION FUND
------------------------------- -------------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends .............................................. $ 31,921,343 $ 22,552,572 $ 18,290,587 $ 9,092,507
------------- ------------- ------------- -------------
EXPENSES:
Insurance charges ...................................... 4,753,477 3,148,933 3,062,408 2,290,727
------------- ------------- ------------- -------------
Net investment income (loss) .................... 27,167,866 19,403,639 15,228,179 6,801,780
------------- ------------- ------------- -------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ..................... 15,642,843 5,605,956 6,959,543 8,429,607
Cost of investments sold ........................... 9,428,086 3,592,013 4,323,827 5,857,719
------------- ------------- ------------- -------------
Net realized gain (loss) ......................... 6,214,757 2,013,943 2,635,716 2,571,888
------------- ------------- ------------- -------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year ........... 63,671,755 36,051,204 46,716,039 26,284,798
Unrealized gain (loss) end of year ................. 63,878,387 63,671,755 58,515,862 46,716,039
------------- ------------- ------------- -------------
Net change in unrealized gain (loss) for the year 206,632 27,620,551 11,799,823 20,431,241
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations ........................ 33,589,255 49,038,133 29,663,718 29,804,909
------------- ------------- ------------- -------------
UNIT TRANSACTIONS:
Participant purchase payments .......................... 64,146,771 51,348,631 29,819,461 25,525,166
Participant transfers from other Travelers accounts .... 69,490,662 46,997,174 27,405,717 14,558,621
Administrative and asset allocation charges ............ (444,821) (350,295) (232,938) (200,176)
Contract surrenders .................................... (17,629,008) (12,621,786) (13,059,121) (11,393,990)
Participant transfers to other Travelers accounts ...... (58,163,799) (28,144,892) (21,734,497) (17,509,384)
Other payments to participants ......................... (473,316) (396,825) (416,000) (386,932)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from unit transactions ........................... 56,926,489 56,832,007 21,782,622 10,593,305
------------- ------------- ------------- -------------
Net increase (decrease) in net assets ............ 90,515,744 105,870,140 51,446,340 40,398,214
NET ASSETS:
Beginning of year .................................. 309,361,607 203,491,467 206,543,128 166,144,914
------------- ------------- ------------- -------------
End of year ........................................ $ 399,877,351 $ 309,361,607 $ 257,989,468 $ 206,543,128
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
FIDELITY'S HIGH
INCOME PORTFOLIO
-------------------------------
1997 1996
---- ----
<S> <C> <C>
INVESTMENT INCOME:
Dividends .............................................. $ 5,890,375 $ 4,685,541
------------- -------------
EXPENSES:
Insurance charges ...................................... 1,049,495 765,304
------------- -------------
Net investment income (loss) .................... 4,840,880 3,920,237
------------- -------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ..................... 7,602,544 11,271,440
Cost of investments sold ........................... 7,111,302 11,299,150
------------- -------------
Net realized gain (loss) ......................... 491,242 (27,710)
------------- -------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year ........... 6,850,898 3,613,712
Unrealized gain (loss) end of year ................. 14,018,911 6,850,898
------------- -------------
Net change in unrealized gain (loss) for the year 7,168,013 3,237,186
------------- -------------
Net increase (decrease) in net assets
resulting from operations ........................ 12,500,135 7,129,713
------------- -------------
UNIT TRANSACTIONS:
Participant purchase payments .......................... 14,091,057 14,323,674
Participant transfers from other Travelers accounts .... 28,094,443 23,502,774
Administrative and asset allocation charges ............ (97,833) (77,538)
Contract surrenders .................................... (4,651,218) (3,554,402)
Participant transfers to other Travelers accounts ...... (20,517,566) (21,225,249)
Other payments to participants ......................... (264,286) (94,323)
------------- -------------
Net increase (decrease) in net assets resulting
from unit transactions ........................... 16,654,597 12,874,936
------------- -------------
Net increase (decrease) in net assets ............ 29,154,732 20,004,649
NET ASSETS:
Beginning of year .................................. 71,171,111 51,166,462
------------- -------------
End of year ........................................ $ 100,325,843 $ 71,171,111
============= =============
</TABLE>
-10-
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
Fidelity's Equity- Fidelity's Asset
Fidelity's Growth Portfolio Income Portfolio Manager Portfolio Dreyfus Stock Index Fund
--------------------------- ---------------- ----------------- ------------------------
1997 1996 1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
$ 18,425,361 $ 26,609,907 $ 36,205,951 $ 11,007,124 $ 47,759,578 $ 24,249,566 $ 10,714,171 $ 3,928,238
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
7,146,619 5,494,318 5,331,099 3,650,704 5,305,939 4,731,985 2,476,800 1,141,925
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
11,278,742 21,115,589 30,874,852 7,356,420 42,453,639 19,517,581 8,237,371 2,786,313
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
24,444,197 15,033,976 10,920,493 8,901,856 32,100,976 43,154,403 17,192,210 4,411,866
13,454,359 8,761,312 7,824,612 7,112,993 26,194,585 36,465,300 11,339,403 3,662,881
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
10,989,838 6,272,664 3,095,881 1,788,863 5,906,391 6,689,103 5,852,807 748,985
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
109,388,267 84,221,007 63,108,308 36,609,662 56,292,058 35,524,654 23,075,429 8,941,622
197,882,791 109,388,267 127,348,119 63,108,308 81,897,954 56,292,058 58,505,927 23,075,429
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
88,494,524 25,167,260 64,239,811 26,498,646 25,605,896 20,767,404 35,430,498 14,133,807
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
110,763,104 52,555,513 98,210,544 35,643,929 73,965,926 46,974,088 49,520,676 17,669,105
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
88,418,316 98,813,647 73,087,953 80,531,063 39,588,152 47,983,080 58,093,375 27,715,679
60,466,620 77,877,606 60,443,386 65,473,564 17,071,727 15,854,663 115,423,432 34,290,381
(822,318) (756,932) (607,813) (507,452) (477,687) (518,763) (366,845) (166,923)
(32,703,324) (28,271,491) (24,170,321) (17,465,306) (30,895,086) (30,635,034) (9,085,710) (5,352,753)
(85,247,732) (68,957,439) (48,152,884) (46,894,521) (40,149,202) (63,750,905) (68,604,399) (17,263,458)
(887,690) (450,758) (962,104) (283,199) (748,322) (761,969) (115,024) (110,049)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
29,223,872 78,254,633 59,638,217 80,854,149 (15,610,418) (31,828,928) 95,344,829 39,112,877
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
139,986,976 130,810,146 157,848,761 116,498,078 58,355,508 15,145,160 144,865,505 56,781,982
496,228,890 365,418,744 344,274,610 227,776,532 392,828,875 377,683,715 123,623,039 66,841,057
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 636,215,866 $ 496,228,890 $ 502,123,371 $ 344,274,610 $ 451,184,383 $ 392,828,875 $ 268,488,544 $ 123,623,039
============= ============= ============= ============= ============= ============= ============= =============
</TABLE>
-11-
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS - continued
7. Schedule of Fund U Operations and Changes in Net Assets
for the years ended December 31, 1997 and 1996 (continued)
<TABLE>
<CAPTION>
American Odyssey
American Odyssey Emerging Opportunities
Core Equity Fund Fund
---------------- ----
1997 1996 1997 1996
---- ---- ---- ----
Investment Income:
<S> <C> <C> <C> <C>
Dividends ............................................. $ 8,890,605 $ 15,730,732 $ -- $ 13,878,014
------------- ------------- ------------- -------------
Expenses:
Insurance charges ..................................... 4,324,513 2,901,469 2,631,943 2,363,467
------------- ------------- ------------- -------------
Net investment income (loss) .................... 4,566,092 12,829,263 (2,631,943) 11,514,547
------------- ------------- ------------- -------------
Realized Gain (Loss) and Change in Unrealized
Gain (Loss) on Investments:
Realized gain (loss) from investment transactions:
Proceeds from investments sold .................... 33,809,653 17,543,045 9,117,630 40,044,484
Cost of investments sold .......................... 18,900,898 12,076,602 7,875,469 27,095,237
------------- ------------- ------------- -------------
Net realized gain (loss) ........................ 14,908,755 5,466,443 1,242,161 12,949,247
------------- ------------- ------------- -------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .......... 61,748,969 33,550,801 (2,810,922) 31,168,692
Unrealized gain (loss) end of year ................ 131,243,327 61,748,969 12,099,286 (2,810,922)
------------- ------------- ------------- -------------
Net change in unrealized gain (loss) for the year 69,494,358 28,198,168 14,910,208 (33,979,614)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations ....................... 88,969,205 46,493,874 13,520,426 (9,515,820)
------------- ------------- ------------- -------------
Unit Transactions:
Participant purchase payments ......................... 72,351,602 60,901,768 53,062,153 57,671,673
Participant transfers from other Travelers accounts ... 39,457,117 35,168,297 59,831,562 54,039,978
Administrative and asset allocation charges ........... (4,157,185) (2,982,289) (2,270,384) (2,085,416)
Contract surrenders ................................... (18,618,898) (11,983,268) (11,252,387) (9,168,189)
Participant transfers to other Travelers accounts ..... (60,229,334) (32,355,405) (42,177,386) (69,756,650)
Other payments to participants ........................ (370,330) (318,650) (171,002) (267,635)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from unit transactions .......................... 28,432,972 48,430,453 57,022,556 30,433,761
------------- ------------- ------------- -------------
Net increase (decrease) in net assets ........... 117,402,177 94,924,327 70,542,982 20,917,941
Net Assets:
Beginning of year ................................. 280,907,471 185,983,144 179,354,629 158,436,688
------------- ------------- ------------- -------------
End of year ....................................... $ 398,309,648 $ 280,907,471 $ 249,897,611 $ 179,354,629
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
American Odyssey
International Equity
Fund
----
1997 1996
---- ----
<S> <C> <C>
Dividends ............................................. $ 5,135,358 $ 4,538,026
------------- -------------
Expenses:
Insurance charges ..................................... 2,640,266 1,550,119
------------- -------------
Net investment income (loss) .................... 2,495,092 2,987,907
------------- -------------
Realized Gain (Loss) and Change in Unrealized
Gain (Loss) on Investments:
Realized gain (loss) from investment transactions:
Proceeds from investments sold .................... 8,016,768 1,656,337
Cost of investments sold .......................... 5,087,628 1,162,459
------------- -------------
Net realized gain (loss) ........................ 2,929,140 493,878
------------- -------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .......... 31,222,016 9,163,943
Unrealized gain (loss) end of year ................ 32,965,656 31,222,016
------------- -------------
Net change in unrealized gain (loss) for the year 1,743,640 22,058,073
------------- -------------
Net increase (decrease) in net assets
resulting from operations ....................... 7,167,872 25,539,858
------------- -------------
Unit Transactions:
Participant purchase payments ......................... 49,655,210 34,480,536
Participant transfers from other Travelers accounts ... 34,564,644 59,574,232
Administrative and asset allocation charges ........... (2,561,423) (1,577,472)
Contract surrenders ................................... (10,872,958) (5,590,669)
Participant transfers to other Travelers accounts ..... (35,630,438) (15,004,067)
Other payments to participants ........................ (169,216) (124,915)
------------- -------------
Net increase (decrease) in net assets resulting
from unit transactions .......................... 34,985,819 71,757,645
------------- -------------
Net increase (decrease) in net assets ........... 42,153,691 97,297,503
Net Assets:
Beginning of year ................................. 186,962,205 89,664,702
------------- -------------
End of year ....................................... $ 229,115,896 $ 186,962,205
============= =============
</TABLE>
-12-
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
American Odyssey
American Odyssey Intermediate-Term American Odyssey
Long-Term Bond Fund Bond Fund Short-Term Bond Fund Alliance Growth Portfolio
------------------- --------- -------------------- -------------------------
1997 1996 1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
$ 11,895,892 $ 8,108,556 $ 6,362,517 4,934,855 $ 2,958,254 $ 1,722,808 $ -- $ 643,699
- ------------- ------------- ------------- ------------ ------------ ------------ ------------ ------------
2,337,838 1,790,795 1,219,677 1,102,439 667,260 400,364 349,477 113,551
- ------------- ------------- ------------- ------------ ------------ ------------ ------------ ------------
9,558,054 6,317,761 5,142,840 3,832,416 2,290,994 1,322,444 (349,477) 530,148
- ------------- ------------- ------------- ------------ ------------ ------------ ------------ ------------
3,220,247 1,884,305 3,205,114 11,330,595 4,614,750 2,327,448 7,627,872 2,718,788
3,176,907 1,891,896 3,200,127 10,936,197 4,459,522 2,274,702 6,038,843 2,442,119
- ------------- ------------- ------------- ------------ ------------ ------------ ------------ ------------
43,340 (7,591) 4,987 394,398 155,228 52,746 1,589,029 276,669
- ------------- ------------- ------------- ------------ ------------ ------------ ------------ ------------
(1,239,032) 3,345,434 (528,747) 1,159,603 (325,577) 210,538 1,556,758 11,435
8,825,835 (1,239,032) 223,245 (528,747) (234,573) (325,577) 7,226,780 1,556,758
- ------------- ------------- ------------- ------------ ------------ ------------ ------------ ------------
10,064,867 (4,584,466) 751,992 (1,688,350) 91,004 (536,115) 5,670,022 1,545,323
- ------------- ------------- ------------- ------------ ------------ ------------ ------------ ------------
19,666,261 1,725,704 5,899,819 2,538,464 2,537,226 839,075 6,909,574 2,352,140
- ------------- ------------- ------------- ------------ ------------ ------------ ------------ ------------
43,961,028 41,094,788 20,362,793 21,980,548 9,944,329 6,059,827 10,180,634 4,657,066
17,572,634 28,020,989 11,369,417 15,338,356 10,615,108 24,607,920 23,132,744 13,282,595
(2,500,236) (1,961,471) (1,193,329) (1,103,958) (632,821) (378,576) (56,348) (19,842)
(9,654,059) (6,849,650) (5,682,281) (5,124,477) (4,318,250) (2,766,214) (1,191,443) (244,573)
(20,429,789) (18,236,052) (14,300,408) (20,649,675) (9,902,383) (5,406,419) (15,845,145) (5,494,797)
(152,034) (133,220) (172,098) (124,864) (113,177) (87,092) (17,930) (12,735)
- ------------- ------------- ------------- ------------ ------------ ------------ ------------ ------------
28,797,544 41,935,384 10,384,094 10,315,930 5,592,806 22,029,446 16,202,512 12,167,714
- ------------- ------------- ------------- ------------ ------------ ------------ ------------ ------------
48,463,805 43,661,088 16,283,913 12,854,394 8,130,032 22,868,521 23,112,086 14,519,854
167,432,442 123,771,354 90,528,712 77,674,318 49,761,929 26,893,408 17,726,518 3,206,664
- ------------- ------------- ------------- ------------ ------------ ------------ ------------ ------------
$ 215,896,247 $ 167,432,442 $ 106,812,625 $ 90,528,712 $ 57,891,961 $ 49,761,929 $ 40,838,604 $ 17,726,518
============= ============= ============= ============ ============ ============ ============ ============
</TABLE>
-13-
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS - continued
7. Schedule of Fund U Operations and Changes in Net Assets
for the years ended December 31, 1997 and 1996 (continued)
<TABLE>
<CAPTION>
G.T. Global Strategic Smith Barney High
Income Portfolio Income Portfolio
---------------- ----------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ............................................. $ -- $ 24,604 $ -- $ 37,827
----------- ----------- ----------- -----------
EXPENSES:
Insurance charges ..................................... 3,965 3,282 15,519 4,845
----------- ----------- ----------- -----------
Net investment income (loss) .................... (3,965) 21,322 (15,519) 32,982
----------- ----------- ----------- -----------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold .................... 1,067,860 1,667,070 1,583,102 1,072,586
Cost of investments sold .......................... 1,070,343 1,621,700 1,523,489 1,053,325
----------- ----------- ----------- -----------
Net realized gain (loss) ........................ (2,483) 45,370 59,613 19,261
----------- ----------- ----------- -----------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .......... (17,848) 3,386 (2,005) 1,184
Unrealized gain (loss) end of year ................ 6,975 (17,848) 97,305 (2,005)
----------- ----------- ----------- -----------
Net change in unrealized gain (loss) for the year 24,823 (21,234) 99,310 (3,189)
----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations ....................... 18,375 45,458 143,404 49,054
----------- ----------- ----------- -----------
UNIT TRANSACTIONS:
Participant purchase payments ......................... 123,067 54,432 505,322 226,871
Participant transfers from other Travelers accounts ... 941,113 1,756,446 2,184,323 1,655,656
Administrative and asset allocation charges ........... (410) (412) (3,054) (1,354)
Contract surrenders ................................... (5,913) (7,171) (113,936) (51,914)
Participant transfers to other Travelers accounts ..... (1,085,386) (1,702,483) (1,565,040) (1,339,254)
Other payments to participants ........................ -- -- -- --
----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting
from unit transactions .......................... (27,529) 100,812 1,007,615 490,005
----------- ----------- ----------- -----------
Net increase (decrease) in net assets ........... (9,154) 146,270 1,151,019 539,059
NET ASSETS:
Beginning of year ................................. 339,703 193,433 693,824 154,765
----------- ----------- ----------- -----------
End of year ....................................... $ 330,549 $ 339,703 $ 1,844,843 $ 693,824
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Smith Barney
International Equity Portfolio
------------------------------
1997 1996
<S> <C> <C>
INVESTMENT INCOME:
Dividends ............................................. $ -- $ 7,696
------------ ------------
EXPENSES:
Insurance charges ..................................... 117,740 53,797
------------ ------------
Net investment income (loss) .................... (117,740) (46,101)
------------ ------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold .................... 22,681,375 6,766,183
Cost of investments sold .......................... 21,755,857 6,469,035
------------ ------------
Net realized gain (loss) ........................ 925,518 297,148
------------ ------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .......... 232,286 12,644
Unrealized gain (loss) end of year ................ (372,217) 232,286
------------ ------------
Net change in unrealized gain (loss) for the year (604,503) 219,642
------------ ------------
Net increase (decrease) in net assets
resulting from operations ....................... 203,275 470,689
------------ ------------
UNIT TRANSACTIONS:
Participant purchase payments ......................... 3,079,005 2,033,617
Participant transfers from other Travelers accounts ... 27,489,522 14,188,397
Administrative and asset allocation charges ........... (17,994) (8,206)
Contract surrenders ................................... (367,146) (164,473)
Participant transfers to other Travelers accounts ..... (27,796,673) (9,560,859)
Other payments to participants ........................ (853) --
------------ ------------
Net increase (decrease) in net assets resulting
from unit transactions .......................... 2,385,861 6,488,476
------------ ------------
Net increase (decrease) in net assets ........... 2,589,136 6,959,165
NET ASSETS:
Beginning of year ................................. 7,633,086 673,921
------------ ------------
End of year ....................................... $ 10,222,222 $ 7,633,086
============ ============
</TABLE>
-14-
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Smith Barney Income Putnam Diversified
and Growth Portfolio Income Portfolio MFS Total Return Portfolio Combined
-------------------- ---------------- -------------------------- --------
1997 1996 1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
$ -- $ 202,899 $ -- $ 148,080 $ -- $ 330,935 $ 213,321,547 $ 215,764,991
- ------------ ----------- ----------- ----------- ------------ ----------- --------------- ---------------
188,264 61,744 61,932 20,990 199,212 86,980 51,390,740 36,953,737
- ------------ ----------- ----------- ----------- ------------ ----------- --------------- ---------------
(188,264) 141,155 (61,932) 127,090 (199,212) 243,955 161,930,807 178,811,254
- ------------ ----------- ----------- ----------- ------------ ----------- --------------- ---------------
1,921,937 1,807,050 537,067 156,529 704,949 506,096 263,520,765 231,887,981
1,472,268 1,546,203 512,314 151,221 560,548 422,173 191,113,109 183,031,972
- ------------ ----------- ----------- ----------- ------------ ----------- --------------- ---------------
449,669 260,847 24,753 5,308 144,401 83,923 72,407,656 48,856,009
- ------------ ----------- ----------- ----------- ------------ ----------- --------------- ---------------
569,228 112,139 7,763 (1,010) 741,116 143,138 521,188,596 374,401,124
3,440,973 569,228 368,087 7,763 3,538,470 741,116 956,362,708 521,188,596
- ------------ ----------- ----------- ----------- ------------ ----------- --------------- ---------------
2,871,745 457,089 360,324 8,773 2,797,354 597,978 435,174,112 146,787,472
- ------------ ----------- ----------- ----------- ------------ ----------- --------------- ---------------
3,133,150 859,091 323,145 141,171 2,742,543 925,856 669,512,575 374,454,735
- ------------ ----------- ----------- ----------- ------------ ----------- --------------- ---------------
4,588,711 3,859,529 1,600,107 1,118,393 6,984,348 3,639,739 732,814,435 651,103,231
7,844,069 5,070,905 2,933,717 1,048,706 6,767,609 3,417,517 771,742,729 642,203,572
(24,015) (8,599) (7,150) (3,570) (24,629) (11,067) (17,242,427) (13,265,920)
(646,268) (120,112) (227,392) (46,626) (843,909) (214,865) (231,169,965) (177,909,388)
(3,883,801) (2,722,274) (847,287) (268,052) (1,457,134) (1,085,667) (687,667,857) (532,180,418)
(13,752) (76,042) (7,393) -- (223,206) (19,350) (6,638,728) (4,497,399)
- ------------ ----------- ----------- ----------- ------------ ----------- --------------- ---------------
7,864,944 6,003,407 3,444,602 1,848,851 11,203,079 5,726,307 561,838,187 565,453,678
- ------------ ----------- ----------- ----------- ------------ ----------- --------------- ---------------
10,998,094 6,862,498 3,767,747 1,990,022 13,945,622 6,652,163 1,231,350,762 939,908,413
9,038,911 2,176,413 2,863,491 873,469 9,946,404 3,294,241 3,439,122,789 2,499,214,376
- ------------ ----------- ----------- ----------- ------------ ----------- --------------- ---------------
$ 20,037,005 $ 9,038,911 $ 6,631,238 $ 2,863,491 $ 23,892,026 $ 9,946,404 $ 4,670,473,551 $ 3,439,122,789
============ =========== =========== =========== ============ =========== =============== ===============
</TABLE>
-15-
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS - continued
8. Schedule of Accumulation and Annuity Units for Fund U
for the years ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
Managed Assets Trust High Yield Bond Trust Capital Appreciation Fund
-------------------- --------------------- -------------------------
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation and annuity units
beginning of year ......................... 59,836,913 61,226,466 5,979,031 5,100,869 72,194,703 50,454,082
Accumulation units purchased and
transferred from other Travelers accounts . 6,534,335 7,056,977 3,557,047 2,773,552 47,297,634 40,496,725
Accumulation units redeemed and
transferred to other Travelers accounts ... (7,357,445) (8,435,960) (1,888,669) (1,894,695) (25,446,797) (18,749,972)
Annuity units ................................ (9,244) (10,570) (662) (695) (4,975) (6,132)
----------- ----------- ---------- ---------- ----------- -----------
Accumulation and annuity units
end of year ............................... 59,004,559 59,836,913 7,646,747 5,979,031 94,040,565 72,194,703
=========== =========== ========== ========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
U.S. Government Social Awareness
Securities Portfolio Stock Portfolio Utilities Portfolio
-------------------- --------------- -------------------
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation and annuity units
beginning of year ......................... 19,054,429 21,338,806 6,355,111 4,840,885 13,258,249 11,917,700
Accumulation units purchased and
transferred from other Travelers accounts . 10,234,153 7,912,084 5,536,731 3,822,555 5,140,992 9,642,313
Accumulation units redeemed and
transferred to other Travelers accounts ... (6,476,699) (10,194,741) (2,352,709) (2,308,329) (5,860,194) (8,301,764)
Annuity units ................................ (2,847) (1,720) -- -- -- --
----------- ----------- ---------- ---------- ----------- -----------
Accumulation and annuity units
end of year ............................... 22,809,036 19,054,429 9,539,133 6,355,111 12,539,047 13,258,249
=========== =========== ========== ========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Templeton Asset
Templeton Bond Fund Templeton Stock Fund Allocation Fund
------------------- -------------------- ---------------
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation and annuity units
beginning of year ....................... 10,260,252 10,536,435 154,614,154 122,960,800 113,808,987 107,468,938
Accumulation units purchased and
transferred from other Travelers accounts 3,345,768 2,880,562 60,857,537 54,933,900 28,216,450 24,240,105
Accumulation units redeemed and
transferred to other Travelers accounts . (3,103,811) (3,156,084) (34,571,726) (23,264,671) (17,416,553) (17,896,444)
Annuity units .............................. (630) (661) (23,978) (15,875) (5,779) (3,612)
----------- ----------- ------------ ------------ ------------ ------------
Accumulation and annuity units
end of year ............................. 10,501,579 10,260,252 180,875,987 154,614,154 124,603,105 113,808,987
=========== =========== ============ ============ ============ ============
</TABLE>
-16-
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS - continued
8. Schedule of Accumulation and Annuity Units for Fund U
for the years ended December 31, 1997 and 1996 (continued)
<TABLE>
<CAPTION>
Fidelity's High Fidelity's Growth Fidelity's Equity-
Income Portfolio Portfolio Income Portfolio
---------------- --------- ----------------
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation and annuity units
beginning of year ....................... 40,308,612 32,634,690 274,892,066 229,298,932 205,636,010 153,542,685
Accumulation units purchased and
transferred from other Travelers accounts 22,127,341 22,738,765 73,683,743 103,421,584 70,273,387 93,862,876
Accumulation units redeemed and
transferred to other Travelers accounts . (13,536,496) (15,061,159) (59,552,587) (57,792,628) (38,828,756) (41,787,112)
Annuity units .............................. (4,336) (3,684) (21,255) (35,822) (31,093) 17,561
----------- ----------- ------------ ------------ ------------ ------------
Accumulation and annuity units
end of year ............................. 48,895,121 40,308,612 289,001,967 274,892,066 237,049,548 205,636,010
=========== =========== ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Fidelity's Asset Dreyfus Stock American Odyssey
Manager Portfolio Index Fund Core Equity Fund
----------------- ---------- ----------------
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation and annuity units
beginning of year ....................... 249,049,606 271,006,817 66,097,845 43,246,729 170,552,375 137,330,147
Accumulation units purchased and
transferred from other Travelers accounts 32,778,964 43,678,827 78,601,880 36,409,694 58,428,972 65,146,447
Accumulation units redeemed and
transferred to other Travelers accounts . (41,750,923) (65,621,659) (35,378,941) (13,557,720) (43,086,005) (31,924,219)
Annuity units .............................. (13,777) (14,379) (3,809) (858) (56) --
------------ ------------ ------------ ----------- ------------ ------------
Accumulation and annuity units
end of year ............................. 240,063,870 249,049,606 109,316,975 66,097,845 185,895,286 170,552,375
============ ============ ============ =========== ============ ============
</TABLE>
<TABLE>
<CAPTION>
American Odyssey
Emerging Opportunities American Odyssey American Odyssey
Fund International Equity Fund Long-Term Bond Fund
---- ------------------------- -------------------
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation and annuity units
beginning of year ....................... 122,877,399 103,824,182 121,895,846 70,364,454 137,075,188 101,376,422
Accumulation units purchased and
transferred from other Travelers accounts 77,727,787 71,642,585 52,973,318 67,664,318 48,535,075 58,583,635
Accumulation units redeemed and
transferred to other Travelers accounts . (38,452,393) (52,589,368) (30,909,935) (16,132,926) (25,882,158) (22,884,869)
Annuity units .............................. (6,816) -- (36) -- (73) --
------------ ------------ ------------ ------------ ------------ ------------
Accumulation and annuity units
end of year ............................. 162,145,977 122,877,399 143,959,193 121,895,846 159,728,032 137,075,188
============ ============ ============ ============ ============ ============
</TABLE>
-17-
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS - continued
8. Schedule of Accumulation and Annuity Units for Fund U
for the years ended December 31, 1997 and 1996 (continued)
<TABLE>
<CAPTION>
American Odyssey American Odyssey
Intermediate-Term Bond Fund Short-Term Bond Fund Alliance Growth Portfolio
--------------------------- -------------------- -------------------------
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation and annuity units
beginning of year ....................... 78,210,833 68,877,506 44,076,761 24,416,215 10,808,561 2,498,303
Accumulation units purchased and
transferred from other Travelers accounts 26,651,019 33,097,050 17,830,368 27,440,823 18,359,347 12,300,233
Accumulation units redeemed and
transferred to other Travelers accounts . (17,947,773) (23,763,723) (12,978,267) (7,780,277) (9,632,343) (3,989,840)
Annuity units .............................. (44) -- (31) -- (332) (135)
----------- ----------- ----------- ----------- ----------- -----------
Accumulation and annuity units
end of year ............................. 86,914,035 78,210,833 48,928,831 44,076,761 19,535,233 10,808,561
=========== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
G.T. Global Strategic Smith Barney Smith Barney International
Income Portfolio High Income Portfolio Equity Portfolio
---------------- --------------------- ----------------
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation and annuity units
beginning of year ....................... 242,281 161,842 552,595 137,755 5,777,413 592,682
Accumulation units purchased and
transferred from other Travelers accounts 745,987 1,420,493 2,031,576 1,608,495 22,030,896 12,822,567
Accumulation units redeemed and
transferred to other Travelers accounts . (766,017) (1,340,054) (1,277,385) (1,193,655) (20,173,931) (7,637,836)
Annuity units .............................. -- -- -- -- -- --
-------- ---------- ---------- ---------- ----------- -----------
Accumulation and annuity units
end of year ............................. 222,251 242,281 1,306,786 552,595 7,634,378 5,777,413
======== ========== ========== ========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Smith Barney Income Putnam Diversified
and Growth Portfolio Income Portfolio MFS Total Return Portfolio
-------------------- ---------------- --------------------------
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation and annuity units
beginning of year ....................... 6,133,368 1,747,342 2,374,774 774,330 7,302,057 2,733,609
Accumulation units purchased and
transferred from other Travelers accounts 7,474,458 6,548,012 3,681,522 1,877,455 9,064,304 5,617,453
Accumulation units redeemed and
transferred to other Travelers accounts . (2,735,572) (2,161,665) (885,540) (277,011) (1,711,148) (1,049,005)
Annuity units .............................. (1,089) (321) -- -- -- --
----------- ---------- ---------- ---------- ----------- ----------
Accumulation and annuity units
end of year ............................. 10,871,165 6,133,368 5,170,756 2,374,774 14,655,213 7,302,057
=========== ========== ========== ========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
Combined
--------
1997 1996
---- ----
<S> <C> <C>
Accumulation and annuity units
beginning of year ....................... 1,999,225,419 1,640,409,623
Accumulation units purchased and
transferred from other Travelers accounts 793,720,591 819,640,085
Accumulation units redeemed and
transferred to other Travelers accounts . (499,960,773) (460,747,386)
Annuity units .............................. (130,862) (76,903)
-------------- --------------
Accumulation and annuity units
end of year ............................. 2,292,854,375 1,999,225,419
============== ==============
</TABLE>
-18-
<PAGE> 20
REPORT OF INDEPENDENT ACCOUNTANTS
To the Owners of Variable Annuity Contracts of
The Travelers Fund U for Variable Annuities:
We have audited the accompanying statement of assets and liabilities of The
Travelers Fund U for Variable Annuities as of December 31, 1997, and the related
statement of operations for the year then ended and the statement of changes in
net assets for each of the two years in the period then ended. These financial
statements are the responsibility of management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of shares owned as of December 31, 1997, by correspondence with the
underlying funds. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Travelers Fund U for
Variable Annuities as of December 31, 1997, the results of its operations for
the year then ended and the changes in its net assets for each of the two years
in the period then ended, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 19, 1998
-19-
<PAGE> 21
Independent Accountants
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
This report is prepared for the general information of contract owners and is
not an offer of shares of The Travelers Fund U for Variable Annuities or Fund
U's underlying funds. It should not be used in connection with any offer except
in conjunction with the Prospectuses for the Variable Annuity products offered
by The Travelers Insurance Company and the Prospectuses for the underlying
funds, which collectively contain all pertinent information, including the
applicable sales commissions.
VG-FNDU (Annual) (12-97) Printed in U.S.A.
