<PAGE> 1
UNIVERSAL ANNUITY
---------------------------------------------------------------------------
SEMI-ANNUAL REPORTS
---------------------------------------------------------------------------
THE TRAVELERS TIMED GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT FOR VARIABLE ANNUITIES
THE TRAVELERS TIMED AGGRESSIVE STOCK ACCOUNT FOR VARIABLE ANNUITIES
THE TRAVELERS TIMED BOND ACCOUNT FOR VARIABLE ANNUITIES
---------------------------------------------------------------------------
JUNE 30, 1996
---------------------------------------------------------------------------
[TRAVELERS LOGO]
THE TRAVELERS INSURANCE COMPANY
ONE TOWER SQUARE
HARTFORD, CONNECTICUT 06183
<PAGE> 2
[TIMCO LOGO]
The Travelers Investment Management Company ("TIMCO") provides equity management
and advisory services for the following Travelers Variable Products Separate
Accounts contained in this report: The Travelers Timed Growth and Income Stock
Account for Variable Annuities. The Travelers Timed Short-Term Bond Account for
Variable Annuities and The Travelers Timed Aggressive Stock Account for
Variable Annuities.
[TAMIC LOGO]
Travelers Asset Management International Corporation ("TAMIC") provides fixed
income management and advisory services for The Travelers Timed Bond Account for
Variable Annuities.
<PAGE> 3
[TRAVELERS LOGO]
THE TRAVELERS VARIABLE PRODUCT SEPARATE ACCOUNTS
INVESTMENT ADVISORY COMMENTARY AS OF JUNE 30, 1996
ECONOMIC REVIEW AND OUTLOOK
The economy finished the first half of the year on a strong note. The broadest
measure of the rate of growth for the U.S. economy, the Gross Domestic Product
("GDP"), is expected to be a robust 4% to 4.5% for the second quarter. This
follows a stronger than expected first quarter GDP of 2.2%. Numerous economic
reports released in the second quarter pointed to an accelerating trend. Most
notably, consumer spending increased 5.2% during the first half of the year,
despite high levels of personal debt. This appears to have been the key factor
in the economy's good first half performance. Sales in both the housing and
auto sectors were surprisingly strong. Employment growth continued, and
unemployment declined to 5.3%. Business investment also remained strong, with
first quarter capital spending increasing by approximately 14%. Furthermore,
companies maintained low inventories, leaving room for future growth as
inventories are rebuilt to normal levels. Finally, renewed growth was observed
in major overseas economies, creating an improved outlook for the export sector
of the U.S. economy.
This picture of solid economic momentum increases the probability that the
Federal Reserve Board ("Fed") will shift to a tighter monetary policy and raise
short-term interest rates before the end of the year. In order to maintain
wage and price stability, Fed policy is focused on constraining economic
growth. For investors, the key issue is whether fears of future Fed tightening
will drive long-term yields toward levels reached during 1994. It appears to
be a foregone conclusion among private analysts that current levels of
unemployment will cause wage pressures to increase. The question remains
whether corporations will be able to pass these increases into consumer prices
and if so, what impact it will have on inflationary expectations. On the plus
side, other sources of inflation have been under control. Commodity prices have
been weak lately and the dollar has been strong. Short-term interest rates are
more than 2% over the Consumer Price Index ("CPI"), keeping downward pressure
on inventories. Inflation expectations in the consumer sentiment surveys are
still below 3%, compared to 4% in 1994.
With the steep rise in long bond yields during the first half of the year, we
expect housing and auto sales to slow in the second half. If demand in these
sectors does not slow in the second half, we doubt that the Fed will have any
choice but to raise short-term interest rates aggressively. Interest rates for
both long and short maturities are unlikely to have a sustained decline until
the Fed is judged to have placed an effective damper on the cyclical build-up
in wage and inflation pressures.
FIXED INCOME COMMENTARY
Surprisingly strong consumer spending and employment growth in the first half
of the year banished the slow growth expectations that dominated the bond
market at year end. Interest rates rose sharply during the first half of the
year, resulting in generally poor performance for bonds. The Lehman
Government/Corporate Bond Index, a broad based bond index, declined 1.9% for
the first six months. The bond market finally stabilized late in the second
quarter, with most bond indices posting a positive price return in June.
Corporate bonds returned a negative 2.1% and lagged the Treasury sector for the
first six months. The best performing issuer sectors were tobacco, airlines,
Canadians and sovereigns. A favorable decision in the Castano case enabled the
tobacco issues to rally as yields declined relative to Treasuries. Airlines
continue to post strong earnings and are buying back their debt with excess
cashflow. Against the backdrop of favorable international developments,
including an upgrade in Italy's credit rating, sovereign bonds also increased
in price. Issuer sectors that lagged were cable, gaming, autos and banks.
Credit downgrades in the media sector and new issuance in the auto sector put
pressure on yield spreads in those sectors. As the market began to anticipate
the need for the Fed to increase short-term interest rates, finance and bank
issues declined in price. Despite recent underperformance, yields on
investment grade corporate bonds remain below the normal range relative to
Treasuries.
-1-
<PAGE> 4
In the mortgage backed sector, fears of consumer refinancing vanished as
interest rates rose. With yield volatility reduced, mortgage backed securities
outperformed similar Treasury securities. Moreover, narrow corporate yield
spreads relative to Treasuries prompted a shift of investor interest to this
sector. During the first half, the Lehman Mortgage Index returned 0.4%. Over
the same period, the high yield market also performed relatively well. The
First Boston High-Yield Index reported a return of 3.8%. The last two years
have seen heavy issuance of high-yield debt, in the midst of a hot initial
public offering market for equities, and active competition by banks for loan
syndication. It is uncertain how well high yield securities will weather the
next downturn in the credit cycle if these other sources of financing are shut
down. If the stock market were to unravel, more speculative financings may
find themselves in trouble. In the second quarter, municipal bonds performed
relatively well as tax exempt yields continued to decline relative to
Treasuries. Municipal bonds with maturities shorter than 10 years, still
relatively cheap at year end, rallied in price and now trade at more normal
yield spreads.
EQUITY COMMENTARY
Better than expected corporate earnings gains and unprecedented inflows into
equity mutual funds helped stock prices to move broadly higher during the first
six months of 1996. For the six-month period ending June 30, the Standard and
Poor's 500 Stock Index ("S&P 500"), a broad based stock market index, recorded
a total return (including dividends) of 10.1%. The Russell 2000 Stock Index, a
measure of performance for the small cap sector, provided a total return of
10.4% over the same period. Against the inclement backdrop of rising interest
rates and diminishing earnings momentum, liquidity factors - record mutual fund
inflows and corporate stock buybacks - appeared to provide the critical
catalyst for the market advance.
As signs of the economy's strength emerged early in the year, investor focus
shifted away from stable growth stocks and towards consumer cyclical stocks,
particularly those in the department store, airline and auto groups. In the
energy sector, the drilling equipment and oil field service stocks rose on
strong earnings gains and expectations for increased capital spending by major
global energy companies. Technology stocks rebounded somewhat after their late
1995 decline, but weaker earnings momentum continued to dampen valuations in
most technology related groups. While more than half of all companies
announced positive earnings surprises for the first quarter, the 6% average
gain in operating earnings was the most sluggish year-over-year rate of profit
growth observed during the current business expansion.
Early in the second quarter, however, equity investors reversed course and
began to rotate back into more defensive, growth-oriented sectors on the
expectation that higher interest rates would translate into slower economic
growth by year end. In the staples sector, beverage stocks performed well in
response to solid revenue gains. In the consumer sector, improving sales
fueled a rally in the retail and apparel groups. Energy exploration, pipeline
and distribution stocks benefited from strong natural gas pricing. However,
basic material stocks continued to weaken on declining prices for many
industrial commodities and concern over the possibility of an economic
slowdown. Within the technology sector, performance was mixed. While most of
the stocks in the semiconductor group continued to trade lower, the networking
and software groups were strong, reflecting continued order growth from
corporate customers.
We are currently somewhat cautious towards the equity market. The bear case is
built upon a valuation argument that points to price-to-book and
price-to-dividend ratios in excess of historical norms. There is also a
growing concern that the Fed may tighten monetary policy in the near term if
employment and economic reports show continued strength. Clearly, Fed action in
the direction of higher interest rates will curtail the supply of liquidity
that has been so important for recent stock market performance. On the other
hand, optimists hold that slower economic growth, while perhaps placing
earnings temporarily at risk, would forestall aggressive tightening by the Fed
and eventually set the stage for lower interest rates. They also point to the
fact that stocks do not appear expensive if consensus earnings forecasts are
evaluated relative to interest rates and observed inflation. The second
quarter earnings reports probably hold the key to short-term equity
performance. If the majority of earnings announcements meet or exceed analyst
estimates, the downside risk of holding stocks should be limited.
-2-
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
- ----------------------------------------------------------------------------------------------------------
<S> <C>
THE TRAVELERS TIMED GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT FOR VARIABLE ANNUITIES . . . . . . . . . . . . . . . . . . 14
THE TRAVELERS TIMED AGGRESSIVE STOCK ACCOUNT FOR VARIABLE ANNUITIES . . . . . . . . . . . . . . . . . . 22
THE TRAVELERS TIMED BOND ACCOUNT FOR VARIABLE ANNUITIES . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
-3-
<PAGE> 6
THE TRAVELERS
TIMED GROWTH AND INCOME
STOCK ACCOUNT
FOR VARIABLE ANNUITIES
The Travelers Timed Growth and Income Stock Account for Variable Annuities
("Account TGIS") is managed by the The Travelers Investment Management Company
("TIMCO"). TIMCO's approach to equity management is designed to provide
diversified exposure to the large capitalization segment of the U.S. equity
market, while at all times maintaining a highly marketable portfolio of common
stocks and related financial instruments in order to accommodate cash flows
connected with market-timing moves. TIMCO selects stocks with a primarily
quantitative screening process that seeks attractive relative value and
earnings growth. In order to achieve consistent relative performance, TIMCO
manages Account TGIS to mirror the overall risk, sector weightings and
growth/value style characteristics of the Standard & Poor's 500 Stock Index
("S&P 500").
For the first six months of 1996, Account TGIS achieved a total return of
11.0%, before fees and expenses, outperforming the S&P 500 total return of
10.1%. Net of fees and expenses, Account TGIS's year-to-date return of 9.5%
compared favorably to the 8.9% average total return for variable annuity
accounts in the Lipper Growth & Income category.
During the first half of 1996, stock selection in the consumer discretionary,
staples and finance sectors made the strongest positive contribution to our
performance. In the consumer discretionary sector, the portfolio benefited
from exposure to a number of retailing and apparel stocks, including The GAP,
Price/Costco, Sears and Nike, that moved sharply higher in response to
improving sales trends. Stock selection also proved to be successful in the
staples sector, with the help of positions in Coca-Cola Co. and PepsiCo, which
benefited from the general market rotation into stable growth issues. In the
finance sector, stock selection in the consumer finance and bank groups
contributed positively, most notably from positions in Green Tree Financial,
Household International and Citicorp. In the technology sector, we largely
stepped around a minefield of earnings disappointments in the semiconductor
group and achieved a positive contribution to portfolio performance through
holdings in Andrew Corp., Western Digital and Sun Microsystems.
The equity market has been under selling pressure thus far in the third
quarter. We expect the equity market to be volatile until investors work
through a number of factors felt to be bearish for stocks, including the fear
of an imminent Federal Reserve Board's tightening, a handful of highly visible
second quarter earnings disappointments, a sharp selloff in the technology
group and diminishing mutual fund inflows. However, we do not see the levels
of overvaluation that in the past have preceded major bear markets, and
therefore believe that the current pullback in the equity market is likely to
be limited. Consistent with our disciplined approach to stock selection, we
continue to focus on stocks that exhibit improving fundamentals (primarily
gauged through analysts' earnings estimate revisions and earnings surprise
trends), but which also trade at a reasonable price to earnings ratio relative
to expected earnings growth rates.
PORTFOLIO MANAGERS: SANDIP A. BHAGAT, CFA - JACOB E. HURWITZ, CFA - KENT A.
KELLEY, CFA
[TIMCO LOGO]
-4-
<PAGE> 7
THE TRAVELERS TIMED GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1996
<TABLE>
<S> <C>
ASSETS:
Investment securities, at market value (identified cost $166,740,699) . . . . . . . . $ 191,716,742
Receivables:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 249,115
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 328,614
Investment securities sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . 704,686
Purchase payments and transfers from other Travelers accounts . . . . . . . . . . 23,270
Variation on futures margin . . . . . . . . . . . . . . . . . . . . . . . . . . . 258,610
------------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193,281,037
------------------
LIABILITIES:
Cash overdraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78,537
Payables:
Investment securities purchased . . . . . . . . . . . . . . . . . . . . . . . . . 880,213
Contract surrenders and transfers to other Travelers accounts . . . . . . . . . . 34,963
Investment management and advisory fees . . . . . . . . . . . . . . . . . . . . . 10,207
Market timing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,661
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,624
------------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,065,205
------------------
NET ASSETS:
(Applicable to 77,602,547 units outstanding at $2.477 per unit) . . . . . . . . . . . $ 192,215,832
==================
</TABLE>
See Notes to Financial Statements
-5-
<PAGE> 8
THE TRAVELERS TIMED GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,514,860
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,749,010
----------------
Total income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,263,870
EXPENSES:
Market timing fees . . . . . . . . . . . . . . . . . . . . . . . . 1,316,286
Investment management and advisory fees . . . . . . . . . . . . . . 342,699
Insurance charges . . . . . . . . . . . . . . . . . . . . . . . . . 1,316,286
----------------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . 2,975,271
-----------------
Net investment income . . . . . . . . . . . . . . . . . . . 288,599
-----------------
REALIZED GAIN AND CHANGE IN UNREALIZED GAIN ON
INVESTMENT SECURITIES:
Realized gain from investment security transactions:
Proceeds from investment securities sold . . . . . . . . . . . . 117,688,565
Cost of investment securities sold . . . . . . . . . . . . . . . 107,244,844
----------------
Net realized gain . . . . . . . . . . . . . . . . . . . . . 10,443,721
Change in unrealized gain on investment securities:
Unrealized gain at December 31, 1995 . . . . . . . . . . . . . . 16,638,946
Unrealized gain at June 30, 1996 . . . . . . . . . . . . . . . . 24,976,043
----------------
Net change in unrealized gain for the period . . . . . . . . 8,337,097
-----------------
Net realized gain and change in unrealized gain . . . . . 18,780,818
-----------------
Net increase in net assets resulting from operations . . . . . . . $ 19,069,417
=================
</TABLE>
See Notes to Financial Statements
-6-
<PAGE> 9
THE TRAVELERS TIMED GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1996 1995
---- ----
(UNAUDITED)
<S> <C> <C>
OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . $ 288,599 $ 1,892,738
Net realized gain from investment security transactions . . . . . . . 10,443,721 18,882,897
Net change in unrealized gain on investment securities . . . . . . . 8,337,097 16,455,717
Net increase in net assets resulting from operations . . . . . . . 19,069,417 37,231,352
------------------ ----------------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 2,466,007 and 4,557,812 units, respectively) . . . 5,841,282 9,246,578
Participant transfers from other Travelers accounts
(applicable to 405,278 and 263,610 units, respectively) . . . . . 948,898 530,000
Market timing transfers from other Travelers timed accounts
(applicable to 91,018,707 units) . . . . . . . . . . . . . . . . . - 182,133,693
Administrative charges
(applicable to 57,927 and 150,735 units, respectively) . . . . . . (142,070) (325,636)
Contract surrenders
(applicable to 3,487,541 and 6,210,191 units, respectively) . . . (8,275,999) (12,733,388)
Participant transfers to other Travelers accounts
(applicable to 6,404,910 and 13,985,712 units, respectively) . . . (15,171,671) (28,338,250)
Market timing transfers to other Travelers timed accounts
(applicable to 20,232,871 units) . . . . . . . . . . . . . . . . . (47,518,456) -
Other payments to participants
(applicable to 129,127 and 141,806 units, respectively) . . . . . (303,442) (290,911)
------------------ ----------------
Net increase (decrease) in net assets resulting from unit Transactions (64,621,458) 150,222,086
------------------ ----------------
Net increase (decrease) in net assets . . . . . . . . . . . . (45,552,041) 187,453,438
NET ASSETS:
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . 237,767,873 50,314,435
------------------ ----------------
End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 192,215,832 $ 237,767,873
================== ================
</TABLE>
See Notes to Financial Statements
-7-
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Timed Growth and Income Stock Account for Variable Annuities
("Account TGIS") 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 TGIS is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end management
investment company. Participants in Account TGIS have entered into market
timing service agreements with an affiliate of The Travelers, which provide
for the transfer of participants' funds to certain other timed accounts of
The Travelers, at the discretion of the market timer.
The following is a summary of significant accounting policies consistently
followed by Account TGIS in the preparation of its financial statements.
SECURITY VALUATION. Investments in securities traded on a national
securities exchange are valued at the last-reported sale price as of the
close of business of the New York Stock Exchange on the last business day
of the period; securities traded on the over-the-counter market and listed
securities with no reported sales are valued at the mean between the
last-reported bid and asked prices or on the basis of quotations received
from a reputable broker or other recognized source.
When market quotations are not considered to be readily available for
long-term corporate bonds and notes, such investments are generally stated
at fair value on the basis of valuations furnished by a pricing service.
These valuations are determined for normal institutional-size trading units
of such securities using methods based on market transactions for
comparable securities and various relationships between securities which
are generally recognized by institutional traders. Securities, including
restricted securities, for which pricing services are not readily available
are valued by management at prices which it deems in good faith to be fair.
Short-term investments for which a quoted market price is available are
valued at market. Short-term investments for which there is no reliable
quoted market price are valued by computing a market value based upon
quotations from dealers or issuers for securities of a similar type,
quality and maturity.
FUTURES CONTRACTS. Account TGIS uses stock index futures contracts, and
may also use interest rate futures contracts, as a substitute for the
purchase or sale of individual securities. When Account TGIS enters into a
futures contract, it agrees to buy or sell a specified index of stocks or
debt securities at a future time for a fixed price, unless the contract is
closed prior to expiration. Account TGIS 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 TGIS'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 TGIS 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 TGIS 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 TGIS 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 TGIS may sell the options before expiration.
Options held by Account TGIS 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 at the close of the New York Stock Exchange, or in
the absence of such sale, the latest bid quotation.
-8-
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
REPURCHASE AGREEMENTS. When Account TGIS 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
TGIS plus a negotiated interest amount. The seller under the repurchase
agreement will be required to provide to Account TGIS securities
(collateral) whose market value, including accrued interest, will be at
least equal to 102% of the repurchase price. Account TGIS 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 TGIS'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 TGIS 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 the existing federal income
tax law no taxes are payable on the investment income and capital gains of
Account TGIS. Account TGIS is not taxed as "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 $53,595,338 and $53,702,894, respectively, for the six months
ended June 30, 1996. Realized gains and losses from security transactions
are reported on an identified cost basis.
Account TGIS placed a portion of its security transactions with brokerage
firms which are affiliates of The Travelers. The commissions paid to these
affiliated firms were $15,017 and $13,231 for the six months ended June 30,
1996 and the year ended December 31, 1995, respectively.
At June 30, 1996, Account TGIS held 115 open S&P 500 Stock Index futures
contracts with a maturity date of September 20, 1996. The underlying face
value, or notional value, of these contracts at June 30, 1996 amounted to
$38,916,000. In connection with these contracts, short-term investments
with a par value of $4,500,000 had been pledged as margin deposits.
Net realized gains resulting from futures contracts were $4,713,790 and
$16,007,920 for the six months ended June 30, 1996 and the year ended
December 31, 1995, respectively. These gains are included in the net
realized gain from investment security transactions on both the Statement
of Operations and the Statement of Changes in Net Assets. The cash
settlement for June 30, 1996, 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 0.3233% of Account TGIS's average net assets. These fees are paid
to The Travelers Investment Management Company, an indirect wholly owned
subsidiary of Travelers Group Inc.
-9-
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
A market timing fee equivalent on an annual basis to 1.25% of the net
assets of Account TGIS is deducted for market timing services. The
Travelers deducts the fee daily and, in turn, pays the fee to Copeland
Financial Services, Inc., a registered investment adviser and an affiliate
of The Travelers which provides market timing services to subscribing
participants in Account TGIS.
Insurance charges are paid to The Travelers for the mortality and expense
risks assumed by The Travelers. These charges are equivalent to 1.25% of
the average net assets of Account TGIS on an annual basis. Additionally,
for 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 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 $71,222 and $143,108 in satisfaction of
contingent deferred sales charges for the six months ended June 30, 1996
and the year ended December 31, 1995, respectively.
4. SUPPLEMENTARY INFORMATION
(Selected data for a unit outstanding throughout each period.)
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED FOR THE YEARS ENDED DECEMBER 31,
JUNE 30, (DERIVED FROM AUDITED FINANCIAL INFORMATION)
--------- ---------------------------------------------------------
1996 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER UNIT DATA:
Total investment income . . . . . . . . . . . . . . . . $ .036 $ .083 $ .064 $ .043 $ .046 $ .045
Operating expenses . . . . . . . . . . . . . . . . . . .033 .057 .041 .042 .045 .045
-------- -------- -------- -------- --------- --------
Net investment income . . . . . . . . . . . . . . . . . .003 .026 .023 .001 .001 -
Unit value at beginning of period . . . . . . . . . . . 2.263 1.695 1.776 1.689 1.643 1.391
Net realized and change in unrealized gains (losses) . . .211 .542 (.104) .086 .045 .252
-------- -------- -------- -------- --------- --------
Unit value at end of period . . . . . . . . . . . . . . $ 2.477 $ 2.263 $ 1.695 $ 1.776 $ 1.689 $ 1.643
======== ======== ======== ======== ========= ========
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value . . . . . . . . . $ .21 $ .57 $ (.08) $ .09 $ .05 $ .25
Ratio of operating expenses to average net assets* . . . 2.82 % 2.82 % 2.82 % 2.82 % 2.82 % 2.82 %
Ratio of net investment income to average net assets* . .24 % 1.37 % 1.58 % .08 % .78 % 1.33 %
Number of units outstanding at end of period (thousands) 77,603 105,044 29,692 - 217,428 -
Portfolio turnover rate . . . . . . . . . . . . . . . . 36 % 79 % 19 % 70 % 119 % 489 %
Average commission rate paid+ . . . . . . . . . . . . . $ .0430 - - - - -
</TABLE>
* Annualized.
+ Calculated by dividing the total dollar amount of commissions paid for
equity securities by the total number of shares purchased and sold during
the period.
5. SUBSEQUENT EVENT
On July 8, 1996, $46,317,758 of the net assets of The Travelers Timed Growth
and Income Stock Account for Variable Annuities were transferred to The
Travelers Timed Short-Term Bond Account for Variable Annuities as a result
of a transfer order made by a market timer on behalf of subscribing
participants.
-10-
<PAGE> 13
THE TRAVELERS TIMED GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996
<TABLE>
<CAPTION>
NO. OF MARKET
SHARES VALUE
---------- --------------
<S> <C> <C>
COMMON STOCKS (79.7%)
AMUSEMENTS (1.3%)
Mirage Resorts, Inc. (A) 13,600 $ 734,400
Walt Disney Co. 29,141 1,832,240
-----------------
2,566,640
-----------------
BANKING (5.2%)
Banc One Corp. 11,820 401,880
Bank of Boston Corp. 3,500 173,250
Bank of New York Co., Inc. 5,600 287,000
BankAmerica Corp. 11,400 863,550
Barnett Banks, Inc. 2,900 176,900
Chase Manhattan Corp. 20,724 1,463,632
Citicorp 22,300 1,842,537
Golden West Financial Corp. 7,800 436,800
Mellon Bank Corp. 3,900 222,300
NationsBank Corp. 13,600 1,123,700
Norwest Corp. 31,200 1,088,100
Star Banc Corp. 7,600 512,050
SunTrust Banks, Inc. 19,200 710,400
Wells Fargo & Co. 3,000 716,625
-----------------
10,018,724
-----------------
CHEMICALS, PHARMACEUTICALS AND ALLIED
PRODUCTS (10.8%)
Abbott Laboratories 23,800 1,035,300
American Home Products Corp. 14,000 841,750
Amgen Inc. (A) 8,300 447,163
Bristol-Myers Squibb Co. 20,300 1,827,000
Cabot Corp. 5,400 132,300
Dow Chemical Co. 8,200 623,200
E.I. Dupont de Nemours & Co. 16,700 1,321,388
Eastman Chemical Co. 8,400 511,350
Eli Lilly & Co. 16,900 1,098,500
Hercules, Inc. 11,000 607,750
Johnson & Johnson 51,200 2,534,400
Merck & Co., Inc. 37,100 2,397,588
Monsanto Co. 18,000 585,000
Morton International, Inc. 15,900 592,275
Pfizer, Inc. 19,000 1,356,125
Pharmacia & Upjohn, Inc. 15,500 687,812
Procter & Gamble Co. 26,400 2,392,500
Schering-Plough Corp. 21,000 1,317,750
Warner-Lambert Co. 7,800 429,000
-----------------
20,738,151
-----------------
COMMUNICATION (6.5%)
Ameritech Corp. 16,900 1,003,438
AT&T Corp. 57,700 3,577,400
Bell Atlantic Corp. 13,600 867,000
BellSouth Corp. 30,700 1,300,912
GTE Corp. 25,600 1,145,600
MCI Communications Corp. 18,700 478,019
NYNEX Corp. 19,400 921,500
Pacific Telesis Group 10,600 357,750
Sprint Corp. 10,400 436,800
SBC Communications, Inc. 25,300 1,246,025
360 Communications Company (A) 3,466 83,184
Tele-Communications, Int'l (A) 9,500 171,594
U S West Communications Group 5,500 175,313
U S West Media Group (A) 14,600 266,450
Viacom International, Inc. (A) 11,500 447,062
-----------------
12,478,047
-----------------
CONSTRUCTION (0.2%)
Toll Brothers, Inc. (A) 26,100 427,387
CONTRACTORS (0.7%)
Fluor Corp. 10,000 653,750
Halliburton Co. 11,100 616,050
-----------------
1,269,800
-----------------
ELECTRICAL AND
ELECTRONIC MACHINERY (5.5%)
Amphenol Corp. (A) 23,200 533,600
Andrew Corp. (A) 10,050 543,956
General Electric Corp. 50,500 4,368,250
Intel Corp. 24,500 1,799,219
KEMET Corp. (A) 16,600 334,075
LSI Logic Corp. (A) 20,300 527,800
Micron Technology, Inc. 6,600 170,775
Motorola, Inc. 13,400 842,525
Raychem Corp. 9,400 675,625
Tellabs, Inc. (A) 2,600 173,875
Texas Instruments, Inc. 5,300 264,337
Time Warner, Inc. 9,200 361,100
-----------------
10,595,137
-----------------
FINANCE (3.2%)
Advanta Corp. 9,400 477,637
American Express Co. 14,900 664,912
Dean Witter Discover & Co. 8,900 509,525
Federal Home Loan Mortgage Corp. 5,700 487,350
Federal National Mortgage Association 33,600 1,125,600
Green Tree Financial Co. 34,900 1,090,625
Household International 9,500 722,000
Merrill Lynch & Co., Inc. 5,000 325,625
Morgan Stanley Group, Inc. 4,800 235,800
Student Loan Marketing Association 7,800 577,200
-----------------
6,216,274
-----------------
FOOD (6.6%)
Campbell Soup Co. 6,600 465,300
Coca-Cola Co. 73,100 3,572,763
ConAgra, Inc. 17,900 812,212
CPC International, Inc. 10,500 756,000
General Mills, Inc. 4,900 267,050
Kellogg Co. 5,400 395,550
PepsiCo, Inc. 75,200 2,660,200
Philip Morris, Inc. 26,900 2,797,600
Seagram Co. Ltd. 9,800 329,525
Unilever N.V. 4,200 609,525
-----------------
12,665,725
-----------------
HOTELS & LODGING (0.7%)
Hilton Hotels Corp. 5,800 652,500
ITT Corp. (A) 10,500 695,625
-----------------
1,348,125
-----------------
</TABLE>
-11-
<PAGE> 14
STATEMENT OF INVESTMENTS (UNAUDITED) - CONTINUED
<TABLE>
<CAPTION>
NO. OF MARKET
SHARES VALUE
---------- ---------------
<S> <C> <C>
INSURANCE (2.7%)
Aetna Life & Casualty Co. 3,200 $ 228,800
Allstate Corp. 10,738 489,921
American International Group 14,350 1,415,269
Chubb Corp. 11,200 558,600
General Reinsurance Corp. 7,900 1,202,775
ITT Hartford Group, Inc. 18,600 990,450
U.S. HealthCare, Inc. 700 38,457
United Healthcare Corp. 5,200 262,600
---------------
5,186,872
---------------
LUMBER AND WOOD PRODUCTS (0.4%)
Georgia-Pacific Corp. 7,900 560,900
Weyerhaeuser Co. 6,100 259,250
---------------
820,150
---------------
MACHINERY (4.3%)
Apple Computer, Inc. 3,500 73,281
Black & Decker Corp. 11,000 424,875
Caterpillar, Inc. 6,100 413,275
Cisco Systems, Inc. (A) 24,200 1,371,838
Deere & Co. 18,600 744,000
Digital Equipment Corp. (A) 6,000 270,000
Harnischfeger Corp. 14,800 492,100
Hewlett Packard Co. 15,200 1,514,300
International Business Machines Corp. 13,900 1,376,100
Silicon Graphics, Inc. (A) 20,600 494,400
Sun Microsystems (A) 12,900 759,487
Tenneco, Inc. 5,100 260,738
---------------
8,194,394
---------------
METAL PRODUCTS (0.9%)
Bethlehem Steel Corp. (A) 32,700 388,313
Nucor Corp. 2,700 136,687
Phelps Dodge Corp. 6,600 411,675
Reynolds Metals Co. 9,500 495,187
USX-U.S. Steel Group 8,300 235,513
---------------
1,667,375
---------------
MINING (0.4%)
Freeport-McMoRan Copper & Gold 8,500 270,938
Homestake Mining Co. 29,300 501,763
---------------
772,701
---------------
MISCELLANEOUS MANUFACTURING (2.8%)
Boston Scientific Corp. (A) 19,520 878,400
Eastman Kodak Co. 9,900 769,725
Emerson Electric Co. 12,200 1,102,575
Honeywell, Inc. 12,800 697,600
Mattel, Inc. 26,125 747,828
Medtronics, Inc. 12,600 705,600
Xerox Corp. 9,300 497,550
---------------
5,399,278
---------------
OIL & GAS (0.7%)
Anadarko Petroleum Corp. 10,900 632,200
Schlumberger Ltd. 7,500 631,875
---------------
1,264,075
---------------
PAPER AND ALLIED PRODUCTS (1.2%)
Champion International Corp. 13,500 563,625
Kimberly Clark Corp. 15,010 1,159,522
Mead Corp. 1,800 93,375
Willamette Industries, Inc. 9,500 564,063
---------------
2,380,585
---------------
PETROLEUM REFINING AND
RELATED INDUSTRIES (6.1%)
Amoco Corp. 20,200 1,461,975
Atlantic Richfield Co. 4,800 568,800
Chevron Corp. 12,100 713,900
Exxon Corp. 36,700 3,188,313
Kerr McGee Corp. 13,000 791,375
Mobil Corp. 19,400 2,175,225
Phillips Petroleum Co. 7,700 322,437
Royal Dutch Petroleum Co. 11,400 1,752,750
Texaco, Inc. 7,900 662,613
---------------
11,637,388
---------------
PRINTING, PUBLISHING AND
ALLIED INDUSTRIES (0.7%)
Gannet Co. 10,600 749,950
New York Times Co. 20,700 675,337
---------------
1,425,287
---------------
RETAIL (5.2%)
Federated Department Stores, Inc. (A) 25,800 880,425
General Nutrition Cos., Inc. (A) 35,300 615,544
Home Depot, Inc. 15,200 820,800
May Department Stores Co. 17,200 752,500
McDonalds Corp. 19,100 892,925
OfficeMax, Inc. (A) 31,600 754,450
Payless ShoeSource, Inc. (A) 2,752 87,376
Price/Costco, Inc. (A) 40,900 879,350
Safeway Inc. (A) 9,000 297,000
Sears Roebuck & Co. 28,300 1,376,087
The GAP, Inc. 25,300 812,763
Vons Cos. (A) 12,000 448,500
Wal-Mart Stores, Inc. 52,700 1,337,262
---------------
9,954,982
---------------
RUBBER AND PLASTIC PRODUCTS (0.5%)
Nike, Inc. 9,500 976,125
---------------
SERVICES (3.3%)
America Online, Inc. (A) 13,000 567,125
Automatic Data Processing 9,400 363,075
Columbia/HCA Healthcare Corp. 13,400 715,225
Computer Associates International 11,600 826,500
Equifax, Inc. 3,600 94,500
First Data Corp. 6,700 533,488
Microsoft Corp. (A) 18,000 2,161,125
Omnicom Group, Inc. 7,700 358,050
Oracle Corp. (A) 19,500 769,031
---------------
6,388,119
---------------
STONE, CLAY, GLASS, AND
CONCRETE PRODUCTS (0.5%)
Minnesota Mining & Manufacturing Co. 12,700 876,300
---------------
TRANSPORTATION (1.1%)
AMR Corp. 7,100 646,100
Burlington Northern Santa Fe 7,500 606,562
Norfolk Southern Corp. 3,900 330,525
Union Pacific Corp. 6,400 447,200
---------------
2,030,387
---------------
</TABLE>
-12-
<PAGE> 15
STATEMENT OF INVESTMENTS (UNAUDITED) - CONTINUED
<TABLE>
<CAPTION>
NO. OF MARKET
SHARES VALUE
---------- ---------------
<S> <C> <C>
TRANSPORTATION MANUFACTURING (4.0%)
Boeing Co. 16,000 $ 1,394,000
Chrysler Corp. 14,500 899,000
Eaton Corp. 8,400 492,450
Ford Motor Co. 35,900 1,162,263
General Motors Corp. 21,000 1,099,875
ITT Industries, Inc. 8,200 206,025
Lockheed Martin Corp. 6,100 512,400
McDonnell Douglas Corp. 15,600 756,600
United Technologies Corp. 9,400 1,081,000
---------------
7,603,613
---------------
UTILITIES (3.6%)
Baltimore Gas & Electric Co. 28,300 803,013
Browning-Ferris Industries 6,700 194,300
Consolidated Natural Gas Co. 20,500 1,071,125
Duke Power Co. 6,100 312,625
Duquesne Light Co. 22,300 613,250
Florida Power & Light Co. 20,900 961,400
Houston Industries, Inc. 8,000 197,000
Pacific Enterprises 6,800 201,450
Southern Co. 44,300 1,090,887
Texas Utilities Co. 21,800 931,950
WMX Technologies, Inc. 14,800 484,700
---------------
6,861,700
---------------
WHOLESALE TRADE (0.6%)
Crane Co. 12,500 512,500
Enron Corp. 14,800 604,950
---------------
1,117,450
---------------
TOTAL COMMON STOCKS
(COST $127,900,926) 152,880,791
---------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
---------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (20.3%)
COMMERCIAL PAPER (17.9%)
Bankers Trust NY Corp.,
5.48% due November 12, 1996 $ 4,500,000 4,374,890
Knight-Ridder, Inc.,
5.32% due July 26, 1996 4,000,000 3,965,174
Morgan Stanley Group, Inc.,
5.39% due July 24, 1996 4,500,000 4,477,191
PACCAR Financial Corp.,
5.90% due September 20, 1996 4,500,000 4,497,412
Pearson, Inc.,
5.40% due July 24, 1996 1,400,000 1,393,942
PHH Corp.,
5.33% due July 8, 1996 4,000,000 3,977,568
Tampa Electric Co.,
5.33% due July 11, 1996 4,500,000 4,475,400
Weyerhaeuser Co.,
5.33% due August 5, 1996 4,500,000 4,446,206
Xerox Corp.,
5.33% due July 18, 1996 2,606,000 2,589,800
---------------
34,197,583
---------------
U.S. GOVERNMENT SECURITIES (2.2%)
United States of America Treasury,
5.50% due September 19, 1996 (B) 4,500,000 4,264,368
---------------
REPURCHASE AGREEMENTS (0.2%)
Merrill Lynch Government
Securities, Inc., 5.25% Repurchase
Agreement dated June 28,
1996 due July 1, 1996,
collateralized by: United States of
America Treasury, $385,000,
7.50% due November 15, 2001 374,000 374,000
---------------
TOTAL SHORT-TERM
INVESTMENTS
(COST $38,839,773) 38,835,951
---------------
</TABLE>
<TABLE>
<CAPTION>
NOTIONAL
VALUE
--------------
<S> <C> <C>
FUTURES CONTRACTS (0.0%)
S&P 500 Stock Index,
Exp. September, 1996 (C) $38,916,000 -
---------------
TOTAL INVESTMENTS (100%)
(COST $166,740,699) (D) $ 191,716,742
===============
</TABLE>
NOTES
(A) Non-income Producing Security.
(B) Par value of $4,500,000 is pledged to cover margin deposits on futures
contracts.
(C) As more fully discussed in Note 1 to the financial statements, it is
Account TGIS'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 TGIS uses futures contracts as a substitute for
holding individual securities.
(D) At June 30, 1996, net unrealized appreciation for all securities was
$24,976,043. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over cost of
$26,494,401 and aggregate gross unrealized depreciation for all securities
in which there was an excess of cost over market value of $1,518,358.
See Notes to Financial Statements
-13-
<PAGE> 16
THE TRAVELERS
TIMED SHORT-TERM
BOND ACCOUNT
FOR VARIABLE ANNUITIES
The unexpected payroll numbers in the first quarter, primarily February and
March, turned out to be a revelation and not an aberration. The U.S. economy,
which many economists believed was headed into a severe slowdown, has gained
momentum and has accelerated at a growth rate of 4% to 5%. Approximately
239,000 non-farm payroll jobs were created in the month of June, and upward
revisions to April and May data brought the average monthly gain for the year
to a staggering 232,000 jobs. The trend growth had been between 150,000 to
155,000 jobs in 1994. Average hourly earnings spiked up to 0.8% in June after
a downward revision in May from 0.3% to 0.1%. The unemployment rate fell to
5.3% breaking through a range bound of 5.4% to 5.8%. Inflation has not
accelerated and continues to be extremely favorable, despite recent increases
in food and energy prices. However, recent wage increases should start to
filter through the pipeline translating into a higher Producer Price Index and
Consumer Price Index.
The Federal Reserve Board will probably look to stifle any potential increase
in inflation. Recent data has shown that a hike in the federal funds rate
appears eminent. The Federal Reserve Board will probably act cautiously and
increase the federal funds rate to 5.5% at the August meeting.
The strategy in management of the account's short-term assets has been to
invest in 30 to 40 day maturities given the rise in short-term rates. The
account should benefit from higher rates, and maximize any potential increase
in the federal funds rate. The asset size of the portfolio remained stable
throughout the second quarter with an average life of 36 days.
PORTFOLIO MANAGER: EMIL J. MOLINARO JR.
[TIMCO LOGO]
-14-
<PAGE> 17
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1996
<TABLE>
<S> <C>
ASSETS:
Investment securities, at market value (identified cost $78,063,367) . . . . . . . . $ 78,054,675
Receivables:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 287,060
Purchase payments and transfers from other Travelers accounts . . . . . . . . . . 13,672
-----------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78,355,407
-----------------
LIABILITIES:
Cash overdraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,577
Payables:
Contract surrenders and transfers to other Travelers accounts . . . . . . . . . . 8,716
Investment management and advisory fees . . . . . . . . . . . . . . . . . . . . . 4,179
Market timing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,040
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,289
-----------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,801
-----------------
NET ASSETS:
(Applicable to 58,273,350 units outstanding at $1.343 per unit) . . . . . . . . . . . $ 78,283,606
=================
</TABLE>
See Notes to Financial Statements
-15-
<PAGE> 18
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,225,619
EXPENSES:
Market timing fees . . . . . . . . . . . . . . . . . . . . . . . . $ 285,309
Investment management and advisory fees . . . . . . . . . . . . . . 74,313
Insurance charges . . . . . . . . . . . . . . . . . . . . . . . . . 285,309
----------------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . 644,931
----------------
Net investment income . . . . . . . . . . . . . . . . . . . 580,688
----------------
REALIZED GAIN AND CHANGE IN UNREALIZED LOSS ON
INVESTMENT SECURITIES:
Realized gain from investment security transactions:
Proceeds from investment securities sold . . . . . . . . . . . . 2,999,127
Cost of investment securities sold . . . . . . . . . . . . . . . 2,999,116
----------------
Net realized gain . . . . . . . . . . . . . . . . . . . . . 11
Change in unrealized loss on investment securities:
Unrealized loss at December 31, 1995 . . . . . . . . . . . . . . -
Unrealized loss at June 30, 1996 . . . . . . . . . . . . . . . . (8,692)
----------------
Net change in unrealized loss for the period . . . . . . . . (8,692)
----------------
Net realized gain and change in unrealized loss . . . . . (8,681)
----------------
Net increase in net assets resulting from operations . . . . . . . $ 572,007
================
</TABLE>
See Notes to Financial Statements
-16-
<PAGE> 19
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1996 1995
---- ----
(UNAUDITED)
<S> <C> <C>
OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 580,688 $ 4,324,539
Net realized gain from investment security transactions . . . . . . . . . . 11 66,052
Net change in unrealized loss on investment securities . . . . . . . . . . (8,692) 255,618
----------------- ----------------
Net increase in net assets resulting from operations . . . . . . . . . . 572,007 4,646,209
----------------- ----------------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 1,276,382 and 10,737,861 units, respectively) . . . . . . 1,707,958 14,027,260
Participant transfers from other Travelers accounts
(applicable to 150,416 and 837,920 units, respectively) . . . . . . . . 201,005 1,093,151
Market timing transfers from other Travelers timed accounts
(applicable to 61,274,554 and 12,166,043 units, respectively) . . . . . 81,727,446 16,038,495
Administrative charges
(applicable to 44,825 and 101,958 units, respectively) . . . . . . . . . (60,147) (133,957)
Contract surrenders
(applicable to 1,067,938 and 8,137,104 units, respectively) . . . . . . (1,428,941) (10,638,375)
Participant transfers to other Travelers accounts
(applicable to 3,287,562 and 25,776,691 units, respectively) . . . . . . (4,398,718) (33,660,474)
Market timing transfers to other Travelers timed accounts
(applicable to 206,198,047 units) . . . . . . . . . . . . . . . . . . . - (271,166,611)
Other payments to participants
(applicable to 27,677 and 241,181 units, respectively) . . . . . . . . . (37,004) (315,041)
----------------- ----------------
Net increase (decrease) in net assets resulting from unit transactions . 77,711,599 (284,755,552)
----------------- ----------------
Net increase (decrease) in net assets . . . . . . . . . . . . . . . 78,283,606 (280,109,343)
NET ASSETS:
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 280,109,343
----------------- ----------------
End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 78,283,606 $ -
================= ================
</TABLE>
See Notes to Financial Statements
-17-
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Timed Short-Term Bond Account for Variable Annuities ("Account
TSB"), 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 TSB is registered under the Investment Company Act
of 1940, as amended, as a diversified, open-end management investment
company. Participants in Account TSB have entered into market timing
service agreements with an affiliate of The Travelers, which provide for the
transfer of participants' funds to certain other timed accounts of The
Travelers, at the discretion of the market timers.
The following is a summary of significant accounting policies consistently
followed by Account TSB in the preparation of its financial statements.
SECURITY VALUATION. Investments in securities traded on a national
securities exchange are valued at the last-reported sale price as of the
close of business of the New York Stock Exchange on the last business day of
the period; securities traded on the over-the-counter market and listed
securities with no reported sales are valued at the mean between the
last-reported bid and asked prices or on the basis of quotations received
from a reputable broker or other recognized source.
When market quotations are not considered to be readily available for
long-term corporate bonds and notes, such investments are generally stated
at fair value on the basis of valuations furnished by a pricing service.
These valuations are determined for normal institutional-size trading units
of such securities, using methods based on market transactions for
comparable securities and various relationships between securities which are
generally recognized by institutional traders. Securities, including
restricted securities, for which pricing services are not readily available,
are valued by management at prices which it deems in good faith to be fair.
Short-term investments for which a quoted market price is available are
valued at market. Short-term investments for which there is no reliable
quoted market price are valued by computing a market value based upon
quotations from dealers or issuers for securities of a similar type, quality
and maturity.
REPURCHASE AGREEMENTS. When Account TSB 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 TSB plus a
negotiated interest amount. The seller under the repurchase agreement will
be required to provide to Account TSB securities (collateral) whose market
value, including accrued interest, will be at least equal to 102% of the
repurchase price. Account TSB 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 TSB'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 TSB 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 TSB. Account TSB 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
Realized gains and losses from security transactions are reported on an
identified-cost basis.
-18-
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
3. CONTRACT CHARGES
Investment management and advisory fees are calculated daily at an annual
rate of 0.3233% of Account TSB's average net assets. These fees are paid to
The Travelers Investment Management Company, an indirect wholly owned
subsidiary of Travelers Group Inc.
A market timing fee equivalent on an annual basis to 1.25% of the net assets
of Account TSB is deducted for market timing services. The Travelers
deducts the fee daily and, in turn, pays the fee to Copeland Financial
Services, Inc., a registered investment adviser and an affiliate of The
Travelers which provides market timing services to subscribing participants
in Account TSB.
Insurance charges are paid to The Travelers for the mortality and expense
risks assumed by The Travelers. These charges are equivalent to 1.25% of
the average net assets of Account TSB on an annual basis. Additionally, for
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 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 $17,905 and $143,893 of contingent deferred
sales charges for six months ended June 30, 1996 and the year ended December
31, 1995, respectively.
-19-
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
4. SUPPLEMENTARY INFORMATION
(Selected data for a unit outstanding throughout each period)
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED FOR THE YEARS ENDED DECEMBER 31,
JUNE 30, (DERIVED FROM AUDITED FINANCIAL INFORMATION)
------------ -------------------------------------------------------
1996 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER UNIT DATA:
Total investment income . . . . . . . . . . . . . . . . . . $ .021 $ .074 $ .055 $ .041 $ .054 $ .076
Operating expenses . . . . . . . . . . . . . . . . . . . . .011 .035 .036 .037 .041 .036
------- ------- -------- -------- -------- --------
Net investment income . . . . . . . . . . . . . . . . . . . .010 .039 .019 .004 .013 .040
Unit value at beginning of period . . . . . . . . . . . . . 1.333 1.292 1.275 1.271 1.258 1.218
Net realized and change in unrealized gains (losses)* . . . - .002 (.002) - - -
------- ------- -------- -------- -------- --------
Unit value at end of period . . . . . . . . . . . . . . . . $ 1.343 $ 1.333 $ 1.292 $ 1.275 $ 1.271 $ 1.258
======= ======= ======== ======== ======== ========
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase in unit value . . . . . . . . . . . . . . . . $ .01 $ .04 $ .02 - $ .01 $ .04
Ratio of operating expenses to average net assets** . . . . 2.82% 2.82% 2.82% 2.82% 2.82% 2.82%
Ratio of net investment income to average net assets** . . 2.55% 3.17% 1.45% .39% 1.12% 3.07%
Number of units outstanding at end of period (thousands) . 58,273 - 216,713 353,374 173,359 439,527
</TABLE>
* Effective May 2, 1994, Account TSB was authorized to invest in securities
with a maturity of greater than one year. As a result, net realized and
change in unrealized gains (losses) are no longer included in total
investment income.
** Annualized.
5. SUBSEQUENT EVENTS
On July 3, 1996, $12,358,265 of the net assets of The Travelers Timed
Short-Term Bond Account for Variable Annuities were transferred to The
Travelers Timed Bond Account for Variable Annuities as a result of transfer
orders made by a market timer on behalf of subscribing participants.
On July 8, 1996, $46,317,758 of the net assets of The Travelers Timed Growth
and Income Stock Account for Variable Annuities and $19,763,486 of the net
assets of The Travelers Timed Aggressive Stock Account for Variable Annuities
were transferred to The Travelers Timed Short-Term Bond Account for Variable
Annuities as a result of transfer orders made by a market timer on behalf of
subscribing participants.
On July 10, 1996, $12,170,974 of the net assets of The Travelers Timed Bond
Account for Variable Annuities were transferred to The Travelers Timed
Short-Term Bond Account for Variable Annuities as a result of a transfer
order made by a market timer on behalf of subscribing participants.
On August 6, 1996, $11,762,959 of the net assets of The Travelers Timed
Short-Term Bond Account for Variable Annuities were transferred to The
Travelers Timed Bond Account for Variable Annuities as a result of a transfer
order made by a market timer on behalf of subscribing participants.
-20-
<PAGE> 23
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
------------- ---------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (100%)
COMMERCIAL PAPER (92.2%)
Bankers Trust NY Corp.,
5.48% due November 12, 1996 $ 5,000,000 $ 4,860,989
Ciesco LP,
5.32% due July 30, 1996 5,500,000 5,444,002
Dakota Ctfs. Program,
5.39% due July 15, 1996 5,500,000 5,473,774
Knight-Ridder, Inc.,
5.35% due July 19, 1996 5,500,000 5,476,275
Morgan Stanley Group, Inc.,
5.39% due July 24, 1996 5,500,000 5,472,123
Northern In. Public Service Co.,
5.51% due July 25, 1996 1,500,000 1,500,900
Penney JC Funding Corp.,
5.36% due July 23, 1996 5,500,000 5,462,444
PACCAR Financial Corp.,
5.34% due August 23, 1996 5,500,000 5,424,708
PHH Corp.,
5.33% due July 8, 1996 5,000,000 4,971,960
PPG Inds., Inc.,
5.35% due July 17, 1996 7,500,000 7,466,554
Seagram Joseph E & Sons, Inc.,
5.42% due July 30, 1996 2,500,000 2,487,688
Tampa Electric Co.,
5.38% due July 24, 1996 2,500,000 2,489,190
Wachovia Bank of NC,
5.49% due January 3, 1997 5,000,000 4,996,225
Weyerhaeuser Co.,
5.33% due August 6, 1996 5,000,000 4,939,462
Xerox Corp.,
5.34% due July 18, 1996 5,500,000 5,463,381
---------------
71,929,675
---------------
REPURCHASE AGREEMENTS (7.8%)
Merrill Lynch Government Securities, Inc.,
5.25% Repurchase Agreement
dated June 28, 1996 due July 1, 1996,
collateralized by: United States of
America Treasury, $5,935,000,
7.50% due November 15, 2001 6,125,000 6,125,000
---------------
TOTAL INVESTMENTS (100%)
(COST $78,063,367) $ 78,054,675
===============
</TABLE>
See Notes to Financial Statements
-21-
<PAGE> 24
THE TRAVELERS
TIMED AGGRESSIVE
STOCK ACCOUNT
FOR VARIABLE ANNUITIES
The Travelers Timed Aggressive Stock Account for Variable Annuities ("Account
TAS") is managed to provide diversified exposure to the mid and small
capitalization sector of the U.S. equity market, while at all times maintaining
a highly marketable portfolio of common stocks and related financial
instruments in order to accommodate cash flows connected with market-timing
moves. The Travelers Investment Management Company ("TIMCO") selects stocks
with a primarily quantitative screening process that seeks attractive relative
value and earnings growth. In order to achieve consistent relative
performance, TIMCO manages the portfolio to mirror the overall risk, sector
weightings and growth/value style characteristics of the Standard & Poor's 400
MidCap Stock Index ("S&P 400").
For the first six months of 1996, Account TAS achieved a total return of
10.3%, before fees and expenses, comparing favorably to the 9.2% total return
of the S&P 400. Net of fees and expenses (but before deduction of timing
fees), Account TAS's year-to-date return of 9.5% modestly lagged the 10.1%
average return achieved by variable annuity funds in the Lipper Capital
Appreciation Category.
During the first half, the strongest contributions to relative performance were
achieved through stock selection in the consumer discretionary, staples and
health care sectors. In the consumer discretionary sector, the portfolio
benefited from overweighted positions in specialty retailers such as Lands' End
and Tiffany; and from holdings in consumer product companies with strong brands
such as Callaway Golf and Nike. We were also helped by Clear Channel
Communications and HFS, both of which have aggressively broadened their
franchises through well executed acquisitions. Another factor in the
portfolio's favorable relative performance was stock selection in the consumer
staples sector, including positions in Coca-Cola Enterprises and Dole Food .
In the health care sector, our biggest relative performance gains came about
chiefly by avoiding earnings disasters in stocks such as Healthsource, IVAX and
PacifiCare Health Systems.
The equity market has been under selling pressure thus far in the third
quarter. We expect the equity market to be volatile until investors work
through a number of factors felt to be bearish for stocks, including the fear
of an imminent Federal Reserve Board's tightening, a handful of highly visible
second quarter earnings disappointments, a sharp selloff in the technology
group and diminishing mutual fund inflows. However, we do not see the levels
of overvaluation that in the past have preceded major bear markets, and
therefore believe that the current pullback in the equity market is likely to
be limited. Consistent with our disciplined approach to stock selection, we
continue to focus on stocks that exhibit improving fundamentals (primarily
gauged through analysts'earnings estimate revisions and earnings surprise
trends), but which also trade at a reasonable price to earnings ratio relative
to expected earnings growth rates.
PORTFOLIO MANAGERS: SANDIP A. BHAGAT, CFA - JACOB E. HURWITZ, CFA - KENT A.
KELLEY, CFA
[TIMCO LOGO]
-22-
<PAGE> 25
THE TRAVELERS TIMED AGGRESSIVE STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1996
<TABLE>
<S> <C>
ASSETS:
Investment securities, at market value (identified cost $71,687,260) . . . . . . . . $ 82,038,875
Receivables:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94,395
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,674
Investment securities sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,227
Purchase payments and transfers from other Travelers accounts . . . . . . . . . . 27,544
Variation on futures margin . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,700
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148
----------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,290,563
----------------
LIABILITIES:
Cash overdraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,433
Payables:
Investment securities purchased . . . . . . . . . . . . . . . . . . . . . . . . . 329,812
Contract surrenders and transfers to other Travelers accounts . . . . . . . . . . 1,483
Investment management and advisory fees . . . . . . . . . . . . . . . . . . . . . 4,652
Market timing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,297
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,614
----------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 369,291
----------------
NET ASSETS:
(Applicable to 33,413,180 units outstanding at $2.452 per unit) . . . . . . . . . . . $ 81,921,272
================
</TABLE>
See Notes to Financial Statements
-23-
<PAGE> 26
THE TRAVELERS TIMED AGGRESSIVE STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 573,839
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 267,822
---------------
Total Income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 841,661
EXPENSES:
Market timing fees . . . . . . . . . . . . . . . . . . . . . . . . 568,267
Investment management and advisory fees . . . . . . . . . . . . . . 143,850
Insurance charges . . . . . . . . . . . . . . . . . . . . . . . . . 568,267
---------------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . 1,280,384
---------------
Net investment loss . . . . . . . . . . . . . . . . . . . . (438,723)
---------------
REALIZED GAIN AND CHANGE IN UNREALIZED GAIN ON
INVESTMENT SECURITIES:
Realized gain from investment security transactions:
Proceeds from investment securities sold . . . . . . . . . . . . 60,689,897
Cost of investment securities sold . . . . . . . . . . . . . . . 53,028,944
---------------
Net realized gain . . . . . . . . . . . . . . . . . . . . . 7,660,953
Change in unrealized gain on investment securities:
Unrealized gain at December 31, 1995 . . . . . . . . . . . . . . 9,705,884
Unrealized gain at June 30, 1996 . . . . . . . . . . . . . . . . 10,351,615
---------------
Net change in unrealized gain for the period . . . . . . . . 645,731
---------------
Net realized gain and change in unrealized gain . . . . . 8,306,684
---------------
Net increase in net assets resulting from operations . . . . . . . $ 7,867,961
===============
</TABLE>
See Notes to Financial Statements
-24-
<PAGE> 27
THE TRAVELERS TIMED AGGRESSIVE STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1996 1995
---- ----
(UNAUDITED)
<S> <C> <C>
OPERATIONS:
Net investment loss . . . . . . . . . . . . . . . . . . . . . . . . . $ (438,723) $ (493,951)
Net realized gain from investment security transactions . . . . . . . 7,660,953 8,400,359
Net change in unrealized gain on investment securities . . . . . . . 645,731 8,751,047
---------------- ---------------
Net increase in net assets resulting from operations . . . . . . . 7,867,961 16,657,455
---------------- ---------------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 2,023,306 and 4,530,704 units, respectively) . . . 4,781,057 9,157,753
Participant transfers from other Travelers accounts
(applicable to 210,273 and 352,561 units, respectively) . . . . . 501,146 701,109
Market timing transfers from other Travelers timed accounts
(applicable to 27,252,603 units) . . . . . . . . . . . . . . . . . - 57,070,717
Administrative charges
(applicable to 29,474 and 80,867 units, respectively) . . . . . . (72,893) (173,519)
Contract surrenders
(applicable to 1,136,002 and 1,614,811 units, respectively) . . . (2,690,083) (3,295,917)
Participant transfers to other Travelers accounts
(applicable to 4,422,466 and 9,931,060 units, respectively) . . . (10,471,252) (20,145,243)
Market timing transfers to other Travelers timed accounts
(applicable to 8,777,141 units) . . . . . . . . . . . . . . . . . (20,640,931) -
Other payments to participants
(applicable to 30,585 and 43,168 units, respectively) . . . . . . (73,182) (82,155)
---------------- ---------------
Net increase (decrease) in net assets resulting from unit transactions (28,666,138) 43,232,745
---------------- ---------------
Net increase (decrease) in net assets . . . . . . . . . . . . (20,798,177) 59,890,200
NET ASSETS:
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . 102,719,449 42,829,249
---------------- ---------------
End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 81,921,272 $ 102,719,449
================ ===============
</TABLE>
See Notes to Financial Statements
-25-
<PAGE> 28
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Timed Aggressive Stock Account for Variable Annuities
("Account TAS") 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 TAS is registered under the Investment Company Act
of 1940, as amended, as a diversified, open-end management investment
company. Participants in Account TAS have entered into market timing service
agreements with an affiliate of The Travelers, which provide for the transfer
of participants' funds to certain other timed accounts of The Travelers, at
the discretion of the market timers.
The following is a summary of significant accounting policies
consistently followed by Account TAS in the preparation of its financial
statements.
SECURITY VALUATION. Investments in securities traded on a national
securities exchange are valued at the last-reported sale price as of the
close of business of the New York Stock Exchange on the last business day of
the period; securities traded on the over-the-counter market and listed
securities with no reported sales are valued at the mean between the
last-reported bid and asked prices or on the basis of quotations received
from a reputable broker or other recognized source.
When market quotations are not considered to be readily available for
long-term corporate bonds and notes, such investments are generally stated at
fair value on the basis of valuations furnished by a pricing service. These
valuations are determined for normal institutional-size trading units of such
securities using methods based on market transactions for comparable
securities and various relationships between securities which are generally
recognized by institutional traders. Securities, including restricted
securities, for which pricing services are not readily available are valued
by management at prices which it deems in good faith to be fair.
Short-term investments for which a quoted market price is available are
valued at market. Short-term investments for which there is no reliable
quoted market price are valued by computing a market value based upon
quotations from dealers or issuers for securities of a similar type, quality
and maturity.
FUTURES CONTRACTS. Account TAS uses stock index futures contracts, and
may also use interest rate futures contracts, as a substitute for the
purchase or sale of individual securities. When Account TAS enters into a
futures contract, it agrees to buy or sell a specified index of stocks, or
debt securities, at a future time for a fixed price, unless the contract is
closed prior to expiration. Account TAS 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 TAS'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 TAS 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 TAS 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 or debt securities associated with the futures contract.
OPTIONS. Account TAS 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 TAS may sell the options before expiration.
Options held by Account TAS 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 at the close of the New York Stock Exchange, or, in the
absence of such sale, the latest bid quotation.
-26-
<PAGE> 29
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
REPURCHASE AGREEMENTS. When Account TAS 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 TAS
plus a negotiated interest amount. The seller under the repurchase agreement
will be required to provide to Account TAS securities (collateral) whose
market value, including accrued interest, will be at least equal to 102% of
the repurchase price. Account TAS 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 TAS'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 TAS 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 TAS. Account TAS 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 $39,966,170 and $48,379,803, respectively, for the six months
ended June 30, 1996. Realized gains and losses from investment transactions
are reported on an identified-cost basis.
Account TAS placed a portion of its security transactions with brokerage
firms which are affiliates of The Travelers. The commissions paid to these
affiliated firms were $10,420 and $8,758 for the six months ended June 30,
1996 and the year ended December 31, 1995, respectively.
At June 30, 1996, Account TAS held 19 open S&P 400 MidCap Index futures
contracts with a maturity date of September 20, 1996. The underlying face
value, or notional value, of these contracts at June 30, 1996, amounted to
$2,250,550. In connection with these contracts, short-term investments with
a par value of $550,000 had been pledged as margin deposits.
Net realized gains resulting from futures contracts were $828,434 and
$1,364,329 for the six months ended June 30, 1996 and the year ended December
31, 1995, respectively. These gains are included in the net realized gain
from investment security transactions on both the Statement of Operations and
the Statement of Changes in Net Assets. The cash settlement for June 30,
1996, is shown on the Statement of Assets and Liabilities as a receivable for
variation on futures margin.
3. CONTRACT CHARGES
Effective May 1, 1996, investment management and advisory fees are
calculated daily at an annual rate of 0.35% of Account TAS's average net
assets. Prior to May 1, 1996, investment management and advisory fees were
calculated daily at annual rates which started at 0.50% and decreased, as net
assets increased, to 0.15% of Account TAS's average net assets. These fees
are paid to The Travelers Investment Management Company, an indirect wholly
owned subsidiary of Travelers Group Inc.
-27-
<PAGE> 30
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
A market timing fee equivalent on an annual basis to 1.25% of the net
assets of Account TAS is deducted for market timing services. The Travelers
deducts the fee daily and, in turn, pays the fee to Copeland Financial
Services, Inc., a registered investment adviser and an affiliate of The
Travelers which provides market timing services to subscribing participants
in Account TAS.
Insurance charges are paid to The Travelers for the mortality and
expense risks assumed by The Travelers. These charges are equivalent to
1.25% of the average net assets of Account TAS on an annual basis.
Additionally, for 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 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 $51,559 and $80,832 of contingent deferred
sales charges for the six months ended June 30, 1996 and the year ended
December 31, 1995, respectively.
4. SUPPLEMENTARY INFORMATION
(Selected data for a unit outstanding throughout each period.)
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED FOR THE YEARS ENDED DECEMBER 31,
JUNE 30, (DERIVED FROM AUDITED FINANCIAL INFORMATION)
----------- ------------------------------------------------------
1996 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER UNIT DATA:
Total investment income . . . . . . . . . . . . . . . . . . . . $ .022 $ .042 $ .036 $ .037 $ .041 $ .044
Operating expenses . . . . . . . . . . . . . . . . . . . . . . .033 .057 .049 .048 .043 .039
------- ------- ------- ------- ------- -------
Net investment income (loss) . . . . . . . . . . . . . . . . . (.011) (.015) (.013) (.011) (.002) .005
Unit value at beginning of period . . . . . . . . . . . . . . . 2.253 1.706 1.838 1.624 1.495 1.136
Net realized and change in unrealized gains (losses) . . . . . .210 .562 (.119) .225 .131 .354
------- ------- ------- ------- ------- -------
Unit value at end of period . . . . . . . . . . . . . . . . . . $ 2.452 $ 2.253 $ 1.706 $ 1.838 $ 1.624 $ 1.495
======= ======= ======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value . . . . . . . . . . . . . $ .20 $ .55 $ (.13) $ .21 $ .13 $ .36
Ratio of operating expenses to average net assets* . . . . . . 2.83% 2.83% 2.80% 2.82% 2.93% 2.99%
Ratio of net investment (loss) income to average net assets* . (.99)% (.74)% (.72)% (.80)% (.12)% .37%
Number of units outstanding at end of period (thousands) . . . 33,413 45,575 25,109 43,059 20,225 19,565
Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . 49% 113% 142% 71% 269% 261%
Average commission rate paid+ . . . . . . . . . . . . . . . . . $ .0450 - - - - -
</TABLE>
* Annualized.
+ Calculated by dividing the total dollar amount of commissions paid for
equity securities by the total number of shares purchased and sold during
the period.
5. SUBSEQUENT EVENT
On July 8, 1996, $19,763,486 of the net assets of The Travelers Timed
Aggressive Stock Account for Variable Annuities were transferred to The
Travelers Timed Short-Term Bond Account for Variable Annuities as a result of
a transfer order made by a market timer on behalf of subscribing
participants.
-28-
<PAGE> 31
THE TRAVELERS TIMED AGGRESSIVE STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996
<TABLE>
<CAPTION>
NO. OF MARKET
SHARES VALUE
---------- -------------
<S> <C> <C>
COMMON STOCKS (96.3%)
AGRICULTURE (0.9%)
Dole Food Co, Inc. 16,500 $ 709,500
-------------
AMUSEMENTS (1.9%)
Circus Circus Enterprises, Inc. (A) 11,300 463,300
Mirage Resorts, Inc. (A) 20,400 1,101,600
-------------
1,564,900
-------------
BANKING (6.7%)
Crestar Financial Corp. 5,700 304,238
First of America Bank Corp. 8,200 366,950
First Tennesse National Corp. 16,700 510,393
Marshall & Ilsley Corp. 10,900 303,156
Mercantile Bancorp 4,700 209,150
Mercantile Bankshares 12,700 324,644
Northern Trust Corp. 13,000 752,375
Signet Banking Corp. 7,800 181,350
SouthTrust Corp. 12,500 353,125
Star Banc Corp. 4,100 276,237
State Street Boston Corp. 10,800 550,800
Summit Bancorp. 11,700 410,962
UnionBanCal Corp. 5,300 279,575
Union Planters Corp. (A) 8,300 252,113
Wilmington Trust Corp. 12,300 399,750
-------------
5,474,818
-------------
CHEMICALS, PHARMACEUTICALS AND
ALLIED PRODUCTS (6.8%)
Biogen, Inc. (A) 2,200 120,313
Cabot Corp. 13,000 318,500
Centocor, Inc. (A) 16,300 487,981
Chiron Corp. (A) 4,967 486,145
Eastman Chemical 3,100 188,712
Forest Labs, Inc. (A) 10,400 401,700
Genzyme Corp. (A) 7,100 357,662
Georgia Gulf Corp. 3,500 102,375
Interprov Steel & Pipeline Light (A) 19,400 213,400
IMC Global, Inc. 7,600 285,950
IVAX Corp. 6,400 101,600
Loctite Corp. 4,400 204,600
Lubrizol Corp. 7,800 236,925
Morton International, Inc. 7,400 275,650
Mylan Labs, Inc. 16,100 277,725
Olin Corp. 3,300 294,525
Praxair, Inc. 9,600 405,600
Rexene Corp. 11,300 111,588
Watson Pharmaceuticals, Inc. (A) 12,700 481,012
Witco Chemical Corp. 6,800 233,750
-------------
5,585,713
-------------
COMMUNICATION (4.5%)
Century Telephone Enterprises 14,200 452,625
Comsat Corp. 5,500 143,000
Frontier Corp. 21,100 646,188
Infinity Broadcasting (A) 16,950 508,500
Lin Television Corp. (A) 7,300 260,975
COMMUNICATION (CONTINUED)
Lincoln Telecommications 10,900 177,806
NEXTEL Communications (A) 25,900 493,719
Southern New England Telephone 7,100 298,200
Telephone & Data Systems, Inc. 5,300 238,500
WorldCom, Inc. (A) 8,900 492,281
-------------
3,711,794
-------------
CONTRACTORS (0.7%)
Fluor Corp. 4,900 320,337
Halliburton Co. 4,200 233,100
-------------
553,437
-------------
ELECTRICAL AND
ELECTRONIC MACHINERY (6.6%)
Altera Corp. (A) 3,800 144,162
American Power Conversion (A) 23,800 246,925
Amphenol Corp. (A) 9,800 225,400
Analog Devices, Inc. (A) 14,875 379,312
Andrew Corp. (A) 6,150 332,869
Atmel Corp. (A) 18,700 564,506
ADC Telecommunications, Inc. (A) 7,700 344,575
Cypress Semiconductor (A) 11,300 135,600
Emcor Group, Inc. (A)(B)(C) 154 0
International Rectifier Corp. (A) 12,100 195,112
KEMET Corp. (A) 13,700 275,713
Linear Technology Corp. 4,000 119,750
Maxim Integrated Products (A) 17,900 488,894
Molex, Inc. 5,700 182,400
Raychem Corp. 4,300 309,062
Sensormatic Electronics Corp. 7,200 117,900
StrataCom, Inc. (A) 4,400 248,325
U.S. Robotics, Inc. 10,800 922,050
Vishay Intertechnology, Inc. (A) 7,770 183,566
-------------
5,416,121
-------------
FINANCE (4.9%)
Advanta Corp. 4,900 248,981
Bear Stearns Cos., Inc. 7,035 166,202
Charles Schwab Corp. 15,600 382,200
Franklin Resources, Inc. 4,900 298,900
Green Tree Financial Co. 16,300 509,375
HFS, Inc. (A) 17,000 1,190,000
Household International 3,600 273,600
Lehman Brothers Holding, Inc. 16,500 408,375
Paine Webber Group 10,800 256,500
Student Loan Marketing Association 4,300 318,200
-------------
4,052,333
-------------
FOOD (2.1%)
Coca-Cola Enterprises, Inc. 22,500 779,063
IBP, Inc. 11,400 314,925
Robert Mondavi Corp. (A) 10,300 327,025
Tyson Foods, Inc. 11,300 308,631
-------------
1,729,644
-------------
FURNITURE AND FIXTURES (1.0%)
Lear Corp. (A) 7,700 271,425
Leggett & Platt, Inc. 10,500 291,375
Miller (Herman), Inc. 9,900 302,569
-------------
865,369
-------------
HOTELS & LODGING (0.4%)
Hilton Hotels Corp. 3,100 348,750
-------------
</TABLE>
-29-
<PAGE> 32
STATEMENT OF INVESTMENTS (UNAUDITED) - CONTINUED
<TABLE>
<CAPTION>
NO. OF MARKET
SHARES VALUE
---------- -------------
<S> <C> <C>
INSURANCE (3.6%)
American Financial Group, Inc. 7,700 $ 231,963
AFLAC, Inc. 12,350 368,956
Foundation Health Corp. (A) 6,300 226,013
HealthCare COMPARE (A) 10,100 491,744
Healthsource, Inc. (A) 6,100 106,750
Progressive Corp., Ohio 3,300 152,625
SunAmerica, Inc. 12,100 683,650
Transatlantic Holdings, Inc. 7,500 525,937
Zurich Reinsurance Centre Holdings 6,300 198,450
-------------
2,986,088
-------------
LUMBER AND WOOD PRODUCTS (0.3%)
Clayton Homes, Inc. 10,900 218,000
-------------
MACHINERY (3.9%)
Baker Hughes, Inc. 9,300 305,737
Bay Networks, Inc. (A) 5,291 136,243
Cabletron System, Inc. (A) 3,800 260,775
Cirrus Logic, Inc. (A) 7,400 129,038
Dell Computer Corp. (A) 11,900 604,669
Gateway 2000, Inc. (A) 5,600 190,050
Harnischfeger Corp. 7,000 232,750
Lam Research Corp. (A) 2,900 75,219
Seagate Technology (A) 12,200 549,000
Stewart & Stevenson Services, Inc. 10,300 231,750
Sun Microsystems (A) 4,900 288,487
York International, Inc. 4,900 253,575
-------------
3,257,293
-------------
METAL PRODUCTS (1.7%)
Bethlehem Steel Corp. (A) 13,800 163,875
Danaher Corp. 15,200 661,200
Reynolds Metals Co. 6,900 359,662
USX-U.S. Steel Group 7,200 204,300
-------------
1,389,037
-------------
MINING (0.3%)
Homestake Mining Co. 12,700 217,488
-------------
MISCELLANEOUS MANUFACTURING (5.0%)
Boston Scientific Corp. (A) 11,437 514,665
Callaway Golf Co. 15,000 498,750
Honeywell, Inc. 4,500 245,250
International Game Technology 16,300 275,062
Litton Industries (A) 6,200 269,700
Mattel, Inc. 8,475 242,597
Measurex Corp. 11,800 345,150
Millipore Corp. 7,400 309,875
Stryker Corp. 12,000 272,250
Tencor Instruments (A) 7,200 135,000
Teradyne, Inc. (A) 11,700 201,825
Thermo Electronics Corp. 13,875 577,547
U.S. Surgical Corp. 7,400 229,400
-------------
4,117,071
-------------
OIL & GAS (2.0%)
Anadarko Petroleum 13,500 783,000
Apache Corp. 20,800 683,800
Weatherford Enterra, Inc. (A) 6,300 189,000
-------------
1,655,800
-------------
PAPER AND ALLIED PRODUCTS (1.8%)
Avery Dennison Corp. 4,400 241,450
Boise Cascade Corp. 5,100 186,788
Bowater, Inc. 5,100 191,888
Champion Inernational Corp. 6,000 250,500
James River Corp. 5,900 155,613
Mead Corp. 4,300 223,062
Potlatch Corp. 5,300 207,362
-------------
1,456,663
-------------
PETROLEUM REFINING AND
RELATED INDUSTRIES (1.2%)
Kerr McGee Corp. 6,100 371,337
Lyondell Petrochemical 4,700 113,388
Sun Co., Inc. 7,683 233,371
Valero Energy Corp. 9,600 240,000
-------------
958,096
-------------
PRINTING, PUBLISHING AND
ALLIED INDUSTRIES (1.6%)
A.H. Belo Corp. 11,700 435,825
Scholastic Corp. (A) 5,900 367,275
Washington Post Co. 1,500 486,000
-------------
1,289,100
-------------
RETAIL (8.3%)
Apple South, Inc. 15,000 401,250
AutoZone, Inc. (A) 8,500 295,375
Boston Chicken, Inc. (A) 9,700 314,644
Dayton Hudson Corp. 2,600 268,125
Dollar General Corp. 9,500 277,875
Eckherd Jack Corp. (A) 11,200 253,400
Federated Department Stores, Inc. (A) 9,800 334,425
General Nutrition Cos., Inc. (A) 19,000 331,312
Kohl's Corp. (A) 18,400 673,900
Lands End, Inc. (A) 19,600 485,100
Met Financial Corp. (A) 975 5,119
Micro Warehouse, Inc. (A) 10,700 211,325
Office Depot, Inc. (A) 17,400 354,525
OfficeMax, Inc. (A) 10,200 243,525
Outback Steakhouse, Inc. (A) 5,200 178,750
Revco D.S., Inc. (A) 8,200 195,775
Ruby Tuesday 1,950 44,119
Safeway Inc. (A) 4,900 161,700
Staples, Inc. (A) 33,675 654,558
Tiffany & Co. 5,900 430,700
Viking Office Products, Inc. (A) 10,800 338,175
Vons Cos. (A) 8,900 332,637
-------------
6,786,314
-------------
RUBBER AND PLASTIC PRODUCTS (1.4%)
Cooper Tire & Rubber 10,400 232,700
Nike, Inc. 2,700 277,425
Premark International, Inc. 4,100 75,850
Sealed Air Corp. (A) 11,700 393,412
Tupperware Corp. (A) 4,100 173,225
-------------
1,152,612
-------------
</TABLE>
-30-
<PAGE> 33
STATEMENT OF INVESTMENTS (UNAUDITED) - CONTINUED
<TABLE>
<CAPTION>
NO. OF MARKET
SHARES VALUE
---------- -------------
<S> <C> <C>
SERVICES (10.3%)
Adobe Systems, Inc. 11,100 $ 396,131
American Online, Inc. (A) 17,800 776,525
Apria Healthcare Grp, Inc. (A) 6,100 191,387
Autodesk, Inc. 4,200 125,213
BMC Software, Inc. (A) 6,300 375,637
Cadence Design System, Inc. (A) 21,825 736,594
Castle & Cooke, Inc. (A) 4,466 71,456
Equifax, Inc. 10,800 283,500
Flightsafety International, Inc. 3,900 211,575
FHP International Corp. (A) 5,200 143,000
Health Management Association, Inc. (A) 15,300 309,825
HBO & Co. 6,600 446,325
HEALTHSOUTH Rehabilitation (A) 12,500 450,000
Informix Corp. (A) 15,600 350,025
Manpower, Inc. 9,600 376,800
Marine Harvest International, Inc. (A) 1,300 18,200
Medaphis Corp. (A) 7,900 313,531
Olsten Corp. 8,100 237,938
Omnicom Group, Inc. 7,200 334,800
OrNda Healthcorp (A) 14,400 345,600
Parametric Technology Co. (A) 23,600 1,022,175
Paychex, Inc. 6,750 324,422
Structural Dynamic Resouces (A) 13,100 286,563
Vencor, Inc. (A) 9,600 292,800
-------------
8,420,022
-------------
STONE, CLAY, GLASS, AND
CONCRETE PRODUCTS (0.4%)
Owens-Corning Fiberglass (A) 6,900 296,700
-------------
TEXTILE MILL PRODUCTS (0.5%)
Shaw Industries, Inc. 13,700 179,813
Unifi, Inc. 7,600 213,750
-------------
393,563
-------------
TRANSPORTATION (1.5%)
Illinois Central Corp. 7,900 224,162
Kansas City Southern Industries, Inc. 5,300 227,238
Northwest Airlines Corp. (A) 5,500 216,906
Tidewater, Inc. 13,700 601,088
-------------
1,269,394
-------------
TRANSPORTATION MANUFACTURING (1.8%)
Harley-Davidson, Inc. 8,600 353,675
McDonnell Douglas Corp. 6,800 329,800
Sundstrand Corp. 13,400 490,775
Trinity Industries 9,800 333,200
-------------
1,507,450
-------------
UTILITIES (12.7%)
Allegheny Power Systems, Inc. 14,600 450,775
AES Corp. (A) 9,700 272,813
Baltimore Gas & Electric Co. 10,200 289,425
Brooklyn Union Gas Co. 14,500 395,125
Consolidated Natural Gas Co. 11,300 590,425
CMS Energy Corp. 18,700 577,364
Delmarva Power & Light 24,100 506,100
Florida Progress Corp. 20,100 698,475
Illinova Corp. 22,000 632,500
Louisville Gas & Electric Co. 10,700 244,763
UTILITIES (CONTINUED)
National Fuel Gas Co. 18,200 655,200
NIPSCO Industries, Inc. 17,500 704,375
Pinnacle West Capital Corp. 19,200 583,200
Portland General Electric Corp. 19,200 592,800
Public Service Co. Of Colorado 15,000 551,250
Rochester Gas & Electric Corp. 9,200 197,800
SCANA Corp. 28,900 812,812
Texas Utilities Co. 5,800 247,950
TECO Energy, Inc. 23,800 600,950
USA Waste Services (A) 6,800 201,450
Wisconsin Energy 21,400 617,925
-------------
10,423,477
-------------
WHOLESALE TRADE (1.5%)
Arrow Electronics (A) 10,200 439,875
Avnet, Inc. 4,200 176,925
Cardinal Health, Inc. 8,100 584,213
-------------
1,201,013
-------------
TOTAL COMMON STOCKS
(COST $68,656,038) 79,007,560
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
---------
<S> <C>
SHORT-TERM INVESTMENTS (3.7%)
COMMERCIAL PAPER (0.6%)
Tampa Electric Co.,
5.38% due July 24, 1996 $ 500,000 497,837
-------------
U.S. GOVERNMENT SECURITIES (0.6%)
United States of America Treasury,
5.33% due September 19, 1996 (D) 500,000 480,096
United States of America Treasury,
5.51% due September 19, 1996 (D) 50,000 47,382
-------------
527,478
-------------
</TABLE>
<PAGE> 34
<TABLE>
<S> <C> <C>
REPURCHASE AGREEMENTS (2.5%)
Merrill Lynch Government Securities, Inc.,
5.25% Repurchase Agreement
dated June 28, 1996 due July 1, 1996,
collateralized by: United States of
America Treasury, $1,945,000,
7.50% due November 15, 2001 2,006,000 2,006,000
-------------
TOTAL SHORT-TERM
INVESTMENTS (COST $3,031,222) 3,031,315
-------------
</TABLE>
<TABLE>
<CAPTION>
NOTIONAL
VALUE
------------
<S> <C> <C>
FUTURES CONTRACTS (0.0%)
S&P 400 MidCap Index,
Exp. September, 1996 (E) $ 2,250,550 -
-------------
TOTAL INVESTMENTS (100%)
(COST $71,687,260) (F) $ 82,038,875
=============
</TABLE>
-31-
<PAGE> 35
STATEMENT OF INVESTMENTS (UNAUDITED) - CONTINUED
NOTES
(A) Non-income Producing Security.
(B) Management Priced Security.
(C) Bankrupt Security.
(D) Par value of $550,000 is pledged to cover margin deposits on futures
contracts.
(E) As more fully discussed in Note 1 to the financial statements, it is
Account TAS'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 TAS uses futures contracts as a substitute for
holding individual securities.
(F) At June 30, 1996, net unrealized appreciation for all securities was
$10,351,615. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over cost of
$13,730,378 and aggregate gross unrealized depreciation for all securities
in which there was an excess of cost over market value of $3,378,763.
See Notes to Financial Statements
-32-
<PAGE> 36
THE TRAVELERS
TIMED BOND ACCOUNT
FOR VARIABLE ANNUITIES
For a long maturity government fund, the first half of 1996 was not kind. The
yield on the 30-year Treasury rose 100 basis points, causing it to post a
negative 9.1% return. The mortgage-backed securities market fared moderately
better, benefiting from the elimination of the refinancing incentive as rates
rose, enabling this sector to outperform duration adjusted Treasuries by 21
basis points for the half. The spread from the 2-year Treasury to the 30-year
Treasury was as wide as 134 basis points in the third week of February, and was
as flat as 70 basis points before ending the first quarter in the mid 80 basis
points range. The best performing mortgages were the high coupon securities
which had cheapened up substantially in the rally of 1995 as investors began to
fear the refinancing waves of 1992 and 1993 again. Shorter mortgages, of the
15-year and balloon variety posted the best nominal return as they were well
bid for by the commercial banks.
Among Treasuries, the best performer was the bond, after controlling for
duration differences, it benefited from a tightening in the repurchase
agreement market as it was used as a liquid hedge in a falling market. The
shorter maturities of the bond futures deliverable basket fared poorly, as the
bond futures also lead on the way down, pulling the cheapest-to-deliver
securities with it. The high coupon callables in the index were adversely
affected by the flattening of the yield curve from the 10-year Treasury to the
30-year Treasury. This spread began the year at 38 basis points, got as wide
as 47 basis points in February, then flattened to 18 basis points in June.
When a "Buy" is in place, this fund invests primarily in long government
securities and in agency mortgage-backed securities. To maintain liquidity in
the event of a market timing move, four different mortgage assets were held in
the first quarter. The mortgages held were the middle range coupons, mostly
7.0% and 7.5% coupons which did well in the rate back-up, but not as well as
the higher coupons. During April 1996 a "Sell" signal was received from a
market timer reversing the "Buy" signal. All assets in the fund were made
available for transfer to The Travelers Timed Short-Term Bond Account for
Variable Annuities. There were no securities held in the Account as of June
30, 1996.
PORTFOLIO MANAGER: JOSEPH M. MULLALLY
[TAMIC LOGO]
-33-
<PAGE> 37
THE TRAVELERS TIMED BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 278,124
EXPENSES:
Market timing fees . . . . . . . . . . . . . . . . . . . . . . . . 51,899
Investment management and advisory fees . . . . . . . . . . . . . . 20,721
Insurance charges . . . . . . . . . . . . . . . . . . . . . . . . . 51,899
----------------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . 124,519
----------------
Net investment income . . . . . . . . . . . . . . . . . . . 153,605
----------------
REALIZED LOSS AND CHANGE IN UNREALIZED GAIN ON
INVESTMENT SECURITIES:
Realized loss from investment security transactions:
Proceeds from investment securities sold . . . . . . . . . . . . 13,792,098
Cost of investment securities sold . . . . . . . . . . . . . . . 14,272,638
----------------
Net realized loss . . . . . . . . . . . . . . . . . . . . . (480,540)
Change in unrealized gain on investment securities:
Unrealized gain at December 31, 1995 . . . . . . . . . . . . . . 698,966
Unrealized gain at June 30, 1996 . . . . . . . . . . . . . . . . -
----------------
Net change in unrealized gain for the period . . . . . . . . (698,966)
----------------
Net realized loss and change in unrealized gain . . . . . (1,179,506)
----------------
Net decrease in net assets resulting from operations . . . . . . . $ (1,025,901)
================
</TABLE>
See Notes to Financial Statements
-34-
<PAGE> 38
THE TRAVELERS TIMED BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1996 1995
---- ----
(Unaudited)
<S> <C> <C>
OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 153,605 $ 501,286
Net realized gain (loss) from investment security transactions . . . . . . (480,540) 901,740
Net change in unrealized gain on investment securities . . . . . . . . . . (698,966) 698,966
---------------- ---------------
Net increase (decrease) in net assets resulting from operations . . . . (1,025,901) 2,101,992
---------------- ---------------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 194,714 and 796,980 units, respectively) . . . . . . . . 262,899 1,033,094
Participant transfers from other Travelers accounts
(applicable to 16,913 and 55,290 units, respectively) . . . . . . . . . 23,452 68,142
Market timing transfers from other Travelers timed accounts
(applicable to 25,376,865 units) . . . . . . . . . . . . . . . . . . . . - 31,962,202
Administrative charges
(applicable to 64 and 16,869 units, respectively) . . . . . . . . . . . (84) (22,828)
Contract surrenders
(applicable to 273,145 and 614,080 units, respectively) . . . . . . . . (371,431) (802,989)
Participant transfers to other Travelers accounts
(applicable to 879,980 and 1,869,809 units, respectively) . . . . . . . (1,184,462) (2,437,532)
Market timing transfers to other Travelers timed accounts
(applicable to 10,524,744 and 12,262,071 units, respectively) . . . . . (13,568,059) (16,038,495)
---------------- ---------------
Net increase (decrease) in net assets resulting from unit transactions . (14,837,685) 13,761,594
---------------- ---------------
Net increase (decrease) in net assets . . . . . . . . . . . . . . . (15,863,586) 15,863,586
NET ASSETS:
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,863,586 -
---------------- ---------------
End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ - $ 15,863,586
================ ===============
</TABLE>
See Notes to Financial Statements
-35-
<PAGE> 39
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Timed Bond Account for Variable Annuities ("Account TB")
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 TB is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company.
Participants in Account TB have entered into market timing service agreements
with an affiliate of The Travelers, which provide for the transfer of
participants' funds to certain other timed accounts of The Travelers, at the
discretion of the market timer.
The following is a summary of significant accounting policies
consistently followed by Account TB in the preparation of its financial
statements.
SECURITY VALUATION. Investments in securities traded on a national
securities exchange are valued at the last-reported sale price as of the
close of business of the New York Stock Exchange on the last business day of
the period; securities traded on the over-the-counter market and listed
securities with no reported sales are valued at the mean between the
last-reported bid and asked prices or on the basis of quotations received
from a reputable broker or other recognized source.
When market quotations are not considered to be readily available for
long-term corporate bonds and notes, such investments are generally stated at
fair value on the basis of valuations furnished by a pricing service. These
valuations are determined for normal institutional-size trading units of such
securities using methods based on market transactions for comparable
securities and various relationships between securities which are generally
recognized by institutional traders. Securities, including restricted
securities, for which pricing services are not readily available are valued
by management at prices which it deems in good faith to be fair.
Short-term investments for which a quoted market price is available are
valued at market. Short-term investments for which there is no reliable
quoted market price are valued by computing a market value based upon
quotations from dealers or issuers for securities of a similar type, quality
and maturity.
FUTURES CONTRACTS. Account TB may use interest rate futures contracts
as a substitute for the purchase or sale of individual securities. When
Account TB 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 TB 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 TB's practice to hold cash and cash equivalents in an
amount at least equal to the notional value of outstanding purchased futures
contracts. 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 TB 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 TB holds open futures contracts, it assumes a market risk generally
equivalent to the underlying market risk of change in the value of the
specified debt securities associated with the futures contract.
-36-
<PAGE> 40
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
REPURCHASE AGREEMENTS. When Account TB 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 TB
plus a negotiated interest amount. The seller under the repurchase agreement
will be required to provide to Account TB securities (collateral) whose
market value, including accrued interest, will be at least equal to 102% of
the repurchase price. Account TB 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 TB'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 TB 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 TB. Account TB 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
Sales of investment securities, excluding short-term investments,
aggregated $345,447 for bonds, and sales of direct and indirect U.S.
government obligations were $13,446,651 for the six months ended June 30,
1996. There were no purchases of securities, other than short-term
investments, for the six months ended June 30, 1996. Realized gains and
losses from investment transactions are reported on an identified-cost basis.
3. CONTRACT CHARGES
Investment management and advisory fees are calculated daily at annual
rates which start at 0.50% and decrease, as net assets increase, to 0.25% of
Account TB's average net assets. These fees are paid to Travelers Asset
Management International Corporation, an indirect wholly owned subsidiary of
Travelers Group Inc.
A market timing fee equivalent on an annual basis to 1.25% of the net
assets of Account TB is deducted for market timing services. The Travelers
deducts the fee daily and, in turn, pays the fee to Copeland Financial
Services, Inc., a registered investment adviser and an affiliate of The
Travelers which provides market timing services to subscribing participants
in Account TB.
Insurance charges are paid to The Travelers for the mortality and
expense risks assumed by The Travelers. These charges are equivalent to
1.25% of the average net assets of Account TB on an annual basis.
Additionally, for 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 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 $8,160 and $21,911 of contingent deferred
sales charges for the six months ended June 30, 1996 and the year ended
December 31, 1995, respectively.
-37-
<PAGE> 41
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
4. SUPPLEMENTARY INFORMATION
(Selected data for a unit outstanding throughout each period.)
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED FOR THE YEARS ENDED DECEMBER 31,
JUNE 30, (DERIVED FROM AUDITED FINANCIAL INFORMATION)
---------- ----------------------------------------------------
1996 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER UNIT DATA:
Total investment income . . . . . . . . . . . . . . . . . . $ .025 $ .071 $ .007 $ .054 $ .051 $ .052
Operating expenses . . . . . . . . . . . . . . . . . . . . .011 .031 .006 .036 .032 .031
------- ------- ------- ------- ------- -------
Net investment income . . . . . . . . . . . . . . . . . . . .014 .040 .001 .018 .019 .021
Unit value at beginning of period . . . . . . . . . . . . . 1.383 1.215 1.234 1.132 1.087 .994
Net realized and change in unrealized gains (losses) . . . (.108) .128 (.020) .084 .026 .072
------- ------- ------- ------- ------- -------
Unit value at end of period . . . . . . . . . . . . . . . . $ 1.289 $ 1.383 $ 1.215 $ 1.234 $ 1.132 $ 1.087
======= ======= ======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value . . . . . . . . . . . $ (.09) $ .17 $ (.02) $ .10 $ .05 $ .09
Ratio of operating expenses to average net assets* . . . . 3.00% 3.00% 3.00% 3.00% 2.99% 3.00%
Ratio of net investment income to average net assets* . . . 3.72% 3.98% 1.02% 1.48% 1.71% 3.07%
Number of units outstanding at end of period (thousands) . - 11,466 - 20,207 21,868 19,521
Portfolio turnover rate . . . . . . . . . . . . . . . . . . - 117% - 190% 505% 627%
</TABLE>
*Annualized.
5. SUBSEQUENT EVENTS
On July 3, 1996, $12,358,265 of the net assets of The Travelers Timed
Short-Term Bond Account for Variable Annuities were transferred to The
Travelers Timed Bond Account for Variable Annuities as a result of a transfer
order made by a market timer on behalf of subscribing participants.
On July 10, 1996, $12,170,974 of the net assets of The Travelers Timed
Bond Account for Variable Annuities were transferred to The Travelers Timed
Short-Term Bond Account for Variable Annuities as a result of a transfer
order made by a market timer on behalf of subscribing participants.
On August 6, 1996, $11,762,959 of the net assets of The Travelers Timed
Short-Term Bond Account for Variable Annuities were transferred to The
Travelers Timed Bond Account for Variable Annuities as a result of a transfer
order made by a market timer on behalf of subscribing participants.
-38-
<PAGE> 42
Investment Advisers
THE TRAVELERS TIMED GROWTH AND INCOME STOCK, TIMED SHORT-TERM BOND
AND TIMED AGGRESSIVE STOCK ACCOUNTS
THE TRAVELERS INVESTMENT MANAGEMENT COMPANY
Hartford, Connecticut
THE TRAVELERS TIMED BOND ACCOUNT
TRAVELERS ASSET MANAGEMENT INTERNATIONAL CORPORATION
Hartford, Connecticut
Independent Accountants
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
Custodian
THE CHASE MANHATTAN BANK, N.A.
New York, New York
The financial information included herein has been taken from the records of
The Travelers Timed Growth and Income Stock, Timed Short-Term Bond, Timed
Aggressive Stock and Timed Bond Accounts. This financial information has not
been audited by the Accounts' independent accountants, who therefore express no
opinion concerning its accuracy. However, it is management's opinion that all
proper adjustments have been made.
This report is prepared for the general information of contract owners and is
not an offer of shares of The Travelers Timed Growth and Income Stock, Timed
Short-Term Bond, Timed Aggressive Stock and Timed Bond Accounts. 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 which contain all pertinent information, including the
applicable sales commissions.
VG-182 (S/A) (6-96) Printed in U.S.A.
