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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number
811-01539
811-02571
811-03409
Travelers Growth and Income Stock Account For Variable Annuities
Travelers Quality Bond Account For Variable Annuities
Travelers Money Market Account For Variable Annuities
(Exact name of registrant as specified in charter)
One Cityplace, Hartford, CT 06103
(Address of principal executive offices) (Zip code)
Kathleen A. McGah
One Cityplace
Hartford, CT 06103
(Name and address of agent for service)
Registrant's telephone number, including area code:
(860) 308-6202
Date of fiscal year end: December 31
Date of reporting period: June 30, 2003
ITEM 1. REPORT(S) TO STOCKHOLDERS.
The Semi-annual Report to stockholders is filed herewith.
UNIVERSAL ANNUITY
SEMI-ANNUAL REPORTS
JUNE 30, 2003
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
THE TRAVELERS MONEY MARKET ACCOUNT
FOR VARIABLE ANNUITIES
Travelers Life & Annuity [LOGO]
The Travelers Insurance Company
The Travelers Life and Annuity Company
One Cityplace
Hartford, CT 06103
[LOGO OF TAMIC] Travelers Asset Management International Company, LLC
("TAMIC") provides fixed income management and advisory
services for the following Travelers Variable Products
Separate Accounts contained in this report: The
Travelers Growth and Income Stock Account for Variable
Annuities, The Travelers Quality Bond Account for
Variable Annuities and The Travelers Money Market
Account for Variable Annuities.
[LOGO OF TIMCO] The Travelers Investment Management Company ("TIMCO")
A member of provides equity management and subadvisory services for
citigroup [LOGO] The Travelers Growth and Income Stock Account for
Variable Annuities.
TABLE OF CONTENTS
PAGE
- --------------------------------------------------------------------------------
CHAIRMAN'S LETTER........................................................... 1
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES...................................................... 2
THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES................... 14
THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES................... 25
BOARD OF MANAGERS AND OFFICERS.............................................. 32
LETTER FROM THE CHAIRMAN
DEAR ACCOUNTHOLDER,
The philosopher Bertrand Russell famously remarked that, "Change is one thing,
progress is another." You will notice in the following pages that we have begun
to implement some changes to your shareholder report and we will be reflecting
other changes in future reports. Our aim is to make meaningful improvements in
reporting on the management of your Account and its performance, not just to
enact change for change's sake. Please bear with us during this transition
period.
I INVITE YOU TO READ THIS REPORT IN FULL. PLEASE TAKE THE OPPORTUNITY TO TALK TO
YOUR FINANCIAL ADVISER ABOUT THIS REPORT OR ANY OTHER QUESTIONS OR CONCERNS YOU
HAVE ABOUT YOUR ACCOUNT AND YOUR FINANCIAL FUTURE. AS ALWAYS, THANK YOU FOR
ENTRUSTING YOUR ASSETS TO US. WE LOOK FORWARD TO HELPING YOU CONTINUE TO MEET
YOUR FINANCIAL GOALS.
Sincerely,
R. Jay Gerken, CFA
Chairman, President and Chief Executive Officer
July 21, 2003
-1-
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 2003
ASSETS:
Investment securities, at fair value (cost $487,473,960) ... $470,474,327
Cash ....................................................... 1,506,187
Receivables:
Dividends ................................................ 587,356
Purchase payments and transfers from other funding options 124,461
Other assets ............................................... 2,453
------------
Total Assets ........................................... 472,694,784
------------
LIABILITIES:
Payables:
Contract surrenders and transfers to other funding options 191,062
Investment management and advisory fees .................. 25,285
Insurance charges ........................................ 45,860
Accrued liabilities ........................................ 6,451
------------
Total Liabilities ...................................... 268,658
------------
NET ASSETS: $472,426,126
============
See Notes to Financial Statements
-2-
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2003
INVESTMENT INCOME:
Dividends ......................................................... $ 3,715,989
Interest .......................................................... 84,098
-------------
Total income .................................................... $ 3,800,087
EXPENSES:
Investment management and advisory fees ........................... 1,440,929
Insurance charges ................................................. 2,613,116
-------------
Total expenses .................................................. 4,054,045
------------
Net investment income (loss) .................................. (253,958)
------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES:
Realized gain (loss) from investment security transactions:
Proceeds from investment securities sold ........................ 231,295,830
Cost of investment securities sold .............................. 254,062,034
-------------
Net realized gain (loss) ...................................... (22,766,204)
Change in unrealized gain (loss) on investment securities:
Unrealized gain (loss) at June 30, 2003 ......................... (16,999,633)
Unrealized gain (loss) at December 31, 2002 ..................... (83,876,989)
-------------
Net change in unrealized gain (loss) for the period .......... 66,877,356
------------
Net realized gain (loss) and change in unrealized gain (loss) 44,111,152
------------
Net increase (decrease) in net assets resulting from operations ..... $ 43,857,194
============
See Notes to Financial Statements
-3-
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
2003 2002
------------- -------------
(UNAUDITED)
OPERATIONS:
Net investment income (loss) ........................................... $ (253,958) $ (1,724,159)
Net realized gain (loss) from investment security transactions ......... (22,766,204) (44,074,095)
Net change in unrealized gain (loss) on investment securities .......... 66,877,356 (92,142,794)
------------- -------------
Net increase (decrease) in net assets resulting from operations ...... 43,857,194 (137,941,048)
------------- -------------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 745,946 and 1,672,473 units, respectively) ............ 10,222,878 25,669,656
Participant transfers from other funding options
(applicable to 389,676 and 688,693 units, respectively) .............. 5,480,758 10,328,582
Administrative charges
(applicable to 15,631 and 36,141 units, respectively) ................ (232,785) (517,226)
Contract surrenders
(applicable to 1,856,375 and 3,628,838 units, respectively) .......... (25,776,557) (55,346,598)
Participant transfers to other funding options
(applicable to 1,016,032 and 3,238,862 units, respectively) .......... (13,845,161) (47,526,395)
Other payments to participants
(applicable to 97,387 and 157,894 units, respectively) ............... (1,361,235) (2,436,118)
------------- -------------
Net increase (decrease) in net assets resulting from unit transactions (25,512,102) (69,828,099)
------------- -------------
Net increase (decrease) in net assets .............................. 18,345,092 (207,769,147)
NET ASSETS:
Beginning of period .................................................... 454,081,034 661,850,181
------------- -------------
End of period .......................................................... $ 472,426,126 $ 454,081,034
============= =============
See Notes to Financial Statements
-4-
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Growth and Income Stock Account for Variable Annuities
("Account GIS") is a separate account of The Travelers Insurance Company
("The Company"), an indirect wholly owned subsidiary of Citigroup Inc.,
and is available for funding Universal Annuity contracts issued by The
Company. Account GIS is registered under the Investment Company Act of
1940, as amended, as a diversified, open-end management investment
company.
The following is a summary of significant accounting policies consistently
followed by Account GIS in the preparation of its financial statements.
SECURITY VALUATION. Investments in securities traded on a national
securities exchange are valued at the 4:00 p.m. Eastern Standard Time
price of such exchanges; securities traded on the over-the-counter market
and listed securities with no reported sales are valued at the mean
between the last reported bid and asked prices or on the basis of
quotations received from a reputable broker or other recognized source.
Short-term investments are reported at fair value based on quoted market
prices. Short-term investments, for which there is no reliable quoted
market price, are recorded at amortized cost which approximates fair
value.
SECURITY TRANSACTIONS. Security transactions are accounted for on the
trade date. Dividend income is recorded on the ex-dividend date. Interest
income is recorded on the accrual basis. Premiums and discounts are
amortized to interest income utilizing the constant yield method.
FUTURES CONTRACTS. Account GIS may use stock index futures contracts as a
substitute for the purchase or sale of individual securities. When Account
GIS enters into a futures contract, it agrees to buy or sell a specified
index of stocks at a future time for a fixed price, unless the contract is
closed prior to expiration. Account GIS is obligated to deposit with a
broker an "initial margin" equivalent to a percentage of the face, or
notional value of the contract.
It is Account GIS's practice to hold cash and cash equivalents in an
amount at least equal to the notional value of outstanding purchased
futures contracts, less the initial margin. Cash and cash equivalents
include cash on hand, securities segregated under federal and brokerage
regulations, and short-term highly liquid investments with maturities
generally three months or less when purchased. Generally, futures
contracts are closed prior to expiration.
Futures contracts purchased by Account GIS are priced and settled daily;
accordingly, changes in daily prices are recorded as realized gains or
losses and no asset is recorded in the Statement of Investments.
Therefore, when Account GIS holds open futures contracts, it assumes a
market risk generally equivalent to the underlying market risk of change
in the value of the specified indexes associated with the futures
contract.
OPTIONS. Account GIS may purchase index or individual equity put or call
options, thereby obtaining the right to sell or buy a fixed number of
shares of the underlying asset at the stated price on or before the stated
expiration date. Account GIS may sell the options before expiration.
Options held by Account GIS are listed on either national securities
exchanges or on over-the-counter markets and are short-term contracts with
a duration of less than nine months. The market value of the options will
be based on the 4:00 p.m. Eastern Standard Time price of the respective
exchange, or in the absence of such price, the latest bid quotation.
REPURCHASE AGREEMENTS. When Account GIS enters into a repurchase agreement
(a purchase of securities whereby the seller agrees to repurchase the
securities at a mutually agreed upon date and price), the repurchase price
of the securities will generally equal the amount paid by Account GIS plus
a negotiated interest amount. The seller under the repurchase agreement
will be required to provide to Account GIS securities (collateral) whose
market value, including accrued interest, will be at least equal to 102%
of the repurchase price. Account GIS monitors the value of collateral on a
daily basis. Repurchase agreements will be limited to transactions with
national banks and reporting broker dealers believed to present minimal
credit risks. Account GIS's custodian will take actual or constructive
receipt of all securities underlying repurchase agreements until such
agreements expire.
-5-
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
FEDERAL INCOME TAXES. The operations of Account GIS form a part of the
total operations of The Company and are not taxed separately. The Company
is taxed as a life insurance company under the Internal Revenue Code of
1986, as amended (the "Code"). Under existing federal income tax law, no
taxes are payable on the investment income and capital gains of Account
GIS. Account GIS is not taxed as a "regulated investment company" under
Subchapter M of the Code.
OTHER. The preparation of financial statements in conformity with
generally accepted accounting principles in the United States of America,
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. INVESTMENTS
The aggregate costs of purchases and proceeds from sales of investments
(other than short-term securities), were $177,563,295 and $224,551,038,
respectively; the costs of purchases and proceeds from sales of direct and
indirect U.S. government securities were $24,429,440 and $24,239,629,
respectively, for the six months ended June 30, 2003. Realized gains and
losses from investment security transactions are reported on an identified
cost basis.
At June 30, 2003, Account GIS held 110 open S&P 500 Stock Index futures
contracts expiring in September, 2003. The underlying face value, or
notional value, of these contracts at June 30, 2003 amounted to
$26,765,750. In connection with these contracts, short-term investments
with a par value of $1,900,000 had been pledged as margin deposits.
Net realized gains (losses) resulting from futures contracts were $772,710
and ($1,116,889) for the six months ended June 30, 2003 and the year ended
December 31, 2002, respectively. These gains (losses) are included in the
net realized gain (loss) from investment security transactions on both the
Statement of Operations and the Statement of Changes in Net Assets.
3. CONTRACT CHARGES
Investment management and advisory fees are calculated daily at annual
rates which start at 0.65% and decrease, as net assets increase, to 0.40%
of Account GIS's average net assets. These fees are paid to Travelers
Asset Management International Company, LLC ("TAMIC"), an indirect wholly
owned subsidiary of Citigroup Inc. Pursuant to a subadvisory agreement
between TAMIC and The Travelers Investment Management Company ("TIMCO"),
an indirect wholly owned subsidiary of Citigroup Inc., TAMIC pays TIMCO a
subadvisory fee calculated daily at annual rates which start at 0.45% and
decrease, as net assets increase, to 0.20% of Account GIS's average net
assets.
Insurance charges are paid for the mortality and expense risks assumed by
The Company. Each business day, The Company deducts a mortality and
expense risk charge which is reflected in the calculation of accumulation
and annuity unit values. This charge equals, on an annual basis, 1.0017%
for contracts issued prior to May 16, 1983 and 1.25% on an annual basis
for contracts issued on or after May 16, 1983.
For certain contracts in the accumulation phase, a semi-annual charge of
$15 (prorated for partial years) is deducted from participant account
balances and paid to The Company to cover administrative charges.
On contracts issued prior to May 16, 1983, The Company retained from
Account GIS sales charges of $8,506 and $12,734 for the six months ended
June 30, 2003 and the year ended December 31, 2002, respectively. The
Company 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 net of contingent deferred
sales charges of $206,199 and $375,583 for the six months ended June 30,
2003 and the year ended December 31, 2002, respectively.
-6-
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
4. NET ASSETS HELD ON BEHALF OF AN AFFILIATE
Approximately $11,182,000 and $10,255,000 of the net assets of Account GIS
were held on behalf of an affiliate of The Company as of June 30, 2003 and
December 31, 2002, respectively. Transactions with this affiliate during
the six months ended June 30, 2003 and the year ended December 31, 2002,
were comprised of participant purchase payments of approximately $27,000
and $70,000 and contract surrenders of approximately $138,000 and
$1,045,000, respectively.
5. NET CONTRACT OWNERS' EQUITY
JUNE 30, 2003
-------------------------------------
UNIT NET
UNITS VALUE ASSETS
----- ----- ------
Accumulation phase of contracts issued prior to May 16, 1983 .. 8,452,217 $15.628 $132,092,440
Annuity phase of contracts issued prior to May 16, 1983 ....... 198,769 15.628 3,106,389
Accumulation phase of contracts issued on or after May 16, 1983 22,620,058 14.864 336,230,971
Annuity phase of contracts issued on or after May 16, 1983 .... 67,028 14.864 996,326
------------
Net Contract Owners' Equity .............................................................. $472,426,126
============
-7-
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
6. SUPPLEMENTARY INFORMATION
(Selected data for a unit outstanding throughout each period.)
Contracts issued prior to May 16, 1983 SIX
MONTHS
ENDED FOR THE YEARS ENDED DECEMBER 31,
JUNE 30, (DERIVED FROM AUDITED FINANCIAL INFORMATION)
-------- --------------------------------------------------------
2003 2002 2001 2000 1999 1998
-------- -------- -------- -------- -------- --------
SELECTED PER UNIT DATA:
Total investment income ................................... $ .125 $ .240 $ .266 $ .242 $ .267 $ .243
Operating expenses ........................................ .119 .261 .311 .376 .347 .272
-------- -------- -------- -------- -------- --------
Net investment income (loss) .............................. .006 (.021) (.045) (.134) (.080) (.029)
Unit value at beginning of period ......................... 14.172 18.064 21.418 24.427 20.017 15.510
Net realized and change in unrealized gains (losses) ...... 1.450 (3.871) (3.309) (2.875) 4.490 4.536
-------- -------- -------- -------- -------- --------
Unit value at end of period ............................... $ 15.628 $ 14.172 $ 18.064 $ 21.418 $ 24.427 $ 20.017
======== ======== ======== ======== ======== ========
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value ..................... $ 1.46 $ (3.89) $ (3.35) $ (3.01) $ 4.41 $ 4.51
Ratio of operating expenses to average net assets ......... 1.65%* 1.64% 1.63% 1.60% 1.60% 1.56%
Ratio of net investment income (loss) to average net assets .10%* (.12)% (.24)% (.57)% (.37)% (.16)%
Number of units outstanding at end of period (thousands) .. 8,651 9,088 10,329 11,413 12,646 13,894
Portfolio turnover rate ................................... 41% 54% 32% 52% 47% 50%
Contracts issued on or after May 16, 1983 SIX
MONTHS
ENDED FOR THE YEARS ENDED DECEMBER 31,
JUNE 30, (DERIVED FROM AUDITED FINANCIAL INFORMATION)
-------- --------------------------------------------------------
2003 2002 2001 2000 1999 1998
-------- -------- -------- -------- -------- --------
SELECTED PER UNIT DATA:
Total investment income ................................... $ .118 $ .229 $ .254 $ .232 $ .256 $ .234
Operating expenses ........................................ .130 .287 .343 .416 .385 .303
-------- -------- -------- -------- -------- --------
Net investment income (loss) .............................. (.012) (.058) (.089) (.184) (.129) (.069)
Unit value at beginning of period ......................... 13.496 17.245 20.498 23.436 19.253 14.955
Net realized and change in unrealized gains (losses) ...... 1.380 (3.691) (3.164) (2.754) 4.312 4.367
-------- -------- -------- -------- -------- --------
Unit value at end of period ............................... $ 14.864 $ 13.496 $ 17.245 $ 20.498 $ 23.436 $ 19.253
======== ======== ======== ======== ======== ========
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value ..................... $ 1.37 $ (3.75) $ (3.25) $ (2.94) $ 4.18 $ 4.30
Ratio of operating expenses to average net assets ......... 1.90%* 1.89% 1.88% 1.85% 1.85% 1.81%
Ratio of net investment income (loss) to average net assets (.15)* (.37)% (.49)% (.82)% (.62)% (.41)%
Number of units outstanding at end of period (thousands) .. 22,687 24,100 27,559 29,879 32,648 32,051
Portfolio turnover rate ................................... 41% 54% 32% 52% 47% 50%
* Annualized
-8-
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS (UNAUDITED)
JUNE 30, 2003
NO. OF FAIR
SHARES VALUE
------ -----------
COMMON STOCK (93.4%)
AEROSPACE (0.7%)
Boeing Co. 95,564 $ 3,279,756
Goodrich Corp. 9,162 192,402
-----------
3,472,158
-----------
AUTOMOTIVE (1.1%)
Dana Corp. 13,322 154,002
Eaton Corp. 22,355 1,757,326
Ford Motor Co. 78,738 865,331
General Motors Corp. 65,657 2,363,652
-----------
5,140,311
-----------
BANKING (8.2%)
Bank of America 96,167 7,600,078
BANK ONE Corp. 18,810 699,356
BB&T Corp. 35,419 1,214,872
Capital One Financial Corp. 23,974 1,179,041
Commerce Bancorp 16,340 606,214
First Tennessee National 202 8,870
FleetBoston Financial 67,453 2,004,029
Golden West Financial Corp. 26,536 2,123,145
HSBC Holdings ADS 25,207 1,489,986
J.P. Morgan Chase & Co. 79,954 2,732,828
Marshall & Ilsley 11,245 343,872
MBNA Corp. 112,064 2,335,414
National City Corp. 50,911 1,665,299
Regions Financial Corp. 12,650 427,317
U.S. Bancorp 74,295 1,820,227
Wachovia Corp. 107,077 4,278,797
Washington Mutual, Inc 51,773 2,138,225
Wells Fargo & Co. 103,793 5,231,167
Zions Bancorp 10,509 532,491
-----------
38,431,228
-----------
BEVERAGE (2.5%)
Anheuser-Busch Cos 57,179 2,918,988
Coca-Cola Co. 88,930 4,127,241
Coca-Cola Enterprises Inc. 22,982 417,123
PepsiCo Inc. 98,843 4,398,514
-----------
11,861,866
-----------
BROKERAGE (2.3%)
Bear Stearns Cos 11,990 868,316
Charles Schwab Corp. 117,396 1,184,526
Goldman Sachs Group, Inc. 30,269 2,535,029
Merrill Lynch & Co. 76,015 3,548,380
Morgan Stanley 67,455 2,883,701
-----------
11,019,952
-----------
BUILDING MATERIALS (0.3%)
Masco Corp. 36,201 863,394
-----------
CAPITAL GOODS (0.2%)
Deere & Co. 18,366 839,326
Nucor Corp . 6,527 318,844
-----------
1,158,170
-----------
CHEMICALS (1.2%)
Air Products & Chemical, 11,024 458,598
Inc
Dow Chemical Co. 43,246 1,338,896
E.I. Dupont de Nemours & Co. 47,039 1,958,704
Eastman Chemical Co. 10,874 344,380
Monsanto Co. 10,381 224,645
PPG Industries 8,683 440,575
Praxair, Inc. 7,682 461,688
Rohm & Haas Co. 10,087 313,000
-----------
5,540,486
-----------
CONGLOMERATES (5.3%)
Emerson Electric Co. 13,469 688,266
Fortune Brands 38,466 2,007,925
General Electric Co. 517,059 14,829,252
3M Co. 17,261 2,226,324
Tyco International Ltd. 102,734 1,949,891
United Technologies Corp. 45,108 3,195,000
-----------
24,896,658
-----------
CONSTRUCTION MACHINERY (0.3%)
Ingersoll-Rand Co. 28,262 1,337,358
-----------
CONSUMER (3.4%)
Alberto-Culver 13,615 695,727
Avery Dennison Corp. 13,154 660,331
Ball Corp. 11,092 504,797
Black & Decker Corp. 14,316 622,030
Colgate-Palmolive Co. 46,394 2,688,532
Gillette Co. 4,491 143,083
Hasbro Inc. 72,105 1,261,116
Kimberly Clark Corp. 44,572 2,323,984
Procter & Gamble Co. 73,838 6,584,873
Reebok International (A) 8,077 271,630
Sealed Air (A) 6,689 318,798
-----------
16,074,901
-----------
DEFENSE (0.8%)
Lockheed Martin Corp. 30,543 1,452,931
Northrop Grumman Corp. 2,133 184,057
Raytheon Co. 63,591 2,088,328
-----------
3,725,316
-----------
-9-
STATEMENT OF INVESTMENTS (UNAUDITED) - CONTINUED
NO. OF FAIR
SHARES VALUE
------- -----------
ENTERTAINMENT (1.6%)
Electronic Arts (A) 7,023 $ 518,719
Fox Entertainment Group (A) 57,731 1,661,498
Viacom, Inc. (A) 107,329 4,685,984
Walt Disney Co. 33,118 654,081
-----------
7,520,282
-----------
FINANCE (2.3%)
American Express Co. 108,739 4,546,377
Countrywide Financial 29,505 2,052,663
Mellon Financial 20,334 564,269
MetLife Inc. 19,186 543,348
Principal Financial Group 50,414 1,625,851
Providian Financial (A) 62,905 582,500
Total System Services 34,222 763,151
-----------
10,678,159
-----------
FOOD (1.7%)
Dean Foods (A) 13,780 434,070
General Mills 52,343 2,481,582
International Flavors & Fragrances 50,555 1,614,221
Kellogg Co. 36,220 1,244,881
McCormick & Co. 18,204 495,149
McDonald's Corp. 88,165 1,944,920
-----------
8,214,823
-----------
GAMING (0.1%)
International Game Technology (A) 4,419 452,196
-----------
HEALTHCARE (2.4%)
Abbott Laboratories 43,229 1,891,701
Anthem Inc. (A) 22,785 1,757,863
Bausch & Lomb Inc. 44,440 1,666,500
Becton, Dickinson 44,466 1,727,504
Quintiles Transnational (A) 63,421 899,627
St. Jude Medical (A) 36,228 2,083,110
UnitedHealth Group, Inc. 15,472 777,468
Wellpoint Health Networks (A) 7,108 599,204
-----------
11,402,977
-----------
HOME CONSTRUCTION (0.1%)
K.B. HOME 4,600 285,108
Pulte Homes 4,467 275,435
-----------
560,543
-----------
INDEPENDENT ENERGY (0.9%)
Apache Corp. 9,206 598,942
Burlington Resources 21,521 1,163,640
Devon Energy 8,043 429,496
Entergy Corp. 40,281 2,126,031
-----------
4,318,109
-----------
INSURANCE (5.2%)
Aetna Inc. 41,458 2,495,772
AFLAC Inc. 26,299 808,694
Allstate Corp. 72,930 2,599,955
Ambac Financial Group 34,886 2,311,198
American International Group 118,767 6,553,563
Chubb Corp. 32,666 1,959,960
CIGNA Corp. 35,553 1,668,858
MBIA Inc. 18,345 894,319
MGIC Investment 18,213 849,454
Progressive Corp. Ohio 26,380 1,928,378
Prudential Financial 29,459 991,295
SAFECO Corp. 6,571 231,463
Torchmark Corp. 30,085 1,120,666
-----------
24,413,575
-----------
INTEGRATED ENERGY (4.4%)
Amerada Hess Corp. 5,277 259,523
Anadarko Petroleum 14,827 659,357
ChevronTexaco Corp. 52,939 3,822,196
ConocoPhillips 34,378 1,883,914
Exxon Mobil Corp. 344,456 12,369,415
Marathon Oil Corp. 17,893 471,481
Occidental Petroleum 19,319 648,152
Unocal Corp. 20,688 593,539
-----------
20,707,577
-----------
LODGING (0.2%)
Marriott International 26,097 1,002,647
-----------
MEDIA (2.7%)
AOL Time Warner (A) 222,537 3,580,620
Comcast Corp. (Class A) (A) 70,381 2,121,987
Comcast Corp. (Class A - Special) (A) 71,941 2,076,577
Emmis Communications (A) 38,818 891,455
Gannett Co. 3,957 303,937
InteractiveCorp. (A) 30,155 1,192,932
Meredith Corp. 9,763 429,572
Tribune Co. 46,948 2,267,588
-----------
12,864,668
-----------
METALS (0.2%)
Alcoa, Inc. 42,773 1,090,712
-----------
NATURAL GAS DISTRIBUTORS (0.5%)
National Fuel Gas 47,101 1,226,981
Questar Corp. 37,388 1,251,376
-----------
2,478,357
-----------
-10-
STATEMENT OF INVESTMENTS (UNAUDITED) - CONTINUED
NO. OF FAIR
SHARES VALUE
------- -----------
OIL FIELD (0.7%)
Baker Hughes, Inc. 17,309 $ 581,063
Halliburton Co. 51,442 1,183,166
Schlumberger Ltd. 25,935 1,233,728
Transocean, Inc. (A) 22,014 483,648
-----------
3,481,605
-----------
PAPER (0.2%)
Georgia-Pacific Corp. 18,214 345,155
Weyerhaeuser Co. 10,266 554,364
-----------
899,519
-----------
PHARMACEUTICALS (10.1%)
Amgen, Inc. (A) 89,819 6,016,526
Bristol-Myers Squibb Co. 92,303 2,506,026
Chiron Corp. (A) 29,989 1,313,218
Eli Lilly & Co. 43,843 3,023,852
Genzyme Corp. (A) 28,838 1,199,228
Johnson & Johnson 151,532 7,834,204
MedImmune Inc. (A) 37,349 1,358,757
Merck & Co., Inc. 115,029 6,965,006
Pfizer, Inc. 403,517 13,780,106
Schering-Plough Corp. 44,140 821,004
Wyeth 55,883 2,545,471
-----------
47,363,398
-----------
RAILROADS (0.4%)
Burlington Northern Santa Fe 18,410 523,580
Norfolk Southern 58,777 1,128,518
-----------
1,652,098
-----------
REAL ESTATE (0.2%)
Equity Office Properties Trust 24,160 652,562
Equity Residential 17,440 452,568
-----------
1,105,130
-----------
REFINING (0.1%)
Newmont Mining Corp. 20,154 654,199
-----------
RETAILERS (6.3%)
Best Buy (A) 31,843 1,398,545
Dollar General 72,067 1,315,943
Gap Inc. 134,336 2,520,143
Home Depot, Inc. 151,791 5,027,318
J.C. Penney 18,820 317,117
Jones Apparel Group (A) 7,259 212,398
Kohl's Corp. (A) 18,253 937,839
Liz Claiborne 25,433 896,513
Lowe's Cos 19,546 839,501
Sears, Roebuck 33,483 1,126,368
Staples Inc. (A) 103,238 1,893,385
Target Corp. 40,494 1,532,293
Wal-Mart Stores 219,177 11,763,230
-----------
29,780,593
-----------
SERVICES (2.8%)
Biogen Inc. (A) 28,059 1,065,681
Boston Scientific Corp. (A) 53,892 3,292,801
Cendant Corp. (A) 53,666 983,161
eBay Inc. (A) 29,123 3,034,325
KLA-Tencor Corp. (A) 30,926 1,437,440
Medtronic, Inc. 31,309 1,501,893
Paychex Inc. 17,394 509,905
Yahoo Inc. (A) 37,419 1,240,066
-----------
13,065,272
-----------
TECHNOLOGY (15.4%)
Altera Corp. (A) 57,440 946,037
American Power Conversion (A) 53,246 827,709
Analog Devices, Inc. (A) 50,440 1,756,321
Applied Micro Circuits (A) 258,572 1,563,068
Avaya Inc. (A) 254,465 1,643,844
Cisco Systems, Inc. (A) 414,118 6,857,794
Citrix Systems (A) 61,703 1,256,582
Computer Associates International 76,044 1,694,260
Comverse Technology (A) 85,093 1,279,373
Dell Computer Corp. (A) 146,156 4,671,877
EMC Corp. (A) 64,839 678,864
Hewlett-Packard Co. 150,497 3,205,586
Intel Corp. 284,702 5,920,378
International Business Machines Corp. 84,827 6,998,228
Intuit Inc. (A) 10,519 467,307
ITT Industries 4,966 325,074
Linear Technology Corp. 16,352 527,025
Mattel, Inc. 70,348 1,330,984
Micron Technology (A) 104,973 1,220,836
Microsoft 532,950 13,651,514
Molex Inc. 43,833 1,183,272
Motorola, Inc. 178,708 1,685,216
National Semiconductor (A) 43,626 860,305
Nvidia Corp. (A) 60,495 1,391,687
Oracle Corp. (A) 232,747 2,796,455
PerkinElmer Inc. 45,172 623,825
QLogic Corp. (A) 11,531 555,218
QUALCOMM Inc. 53,256 1,908,429
Scientific-Atlanta, Inc. 51,534 1,228,571
Sun Microsystems, Inc. (A) 235,155 1,080,537
Texas Instruments, Inc. 65,508 1,152,941
Thomas & Betts (A) 16,685 241,098
Xerox Corp. (A) 66,359 702,742
-----------
72,232,957
-----------
-11-
STATEMENT OF INVESTMENTS (UNAUDITED) - CONTINUED
NO. OF FAIR
SHARES VALUE
------- -----------
TELECOMMUNICATIONS (3.1%)
AT&T Corp. 119,190 $ 2,294,408
AT&T Wireless Services (A) 234,417 1,924,564
BellSouth Corp. 33,069 880,627
CenturyTel Inc. 56,789 1,979,097
Nextel Communications (A) 49,828 897,901
SBC Communications, Inc. 97,892 2,501,141
Verizon Communications 101,163 3,990,880
-----------
14,468,618
-----------
TEXTILE (0.2%)
NIKE, Inc. 13,333 713,182
-----------
TOBACCO (1.0%)
Altria Group 104,948 4,768,837
-----------
TRANSPORTATION SERVICES (0.9%)
PACCAR Inc. 8,135 547,892
United Parcel 55,322 3,524,011
-----------
4,071,903
-----------
U.S. AGENCY (1.6%)
Federal Association National
Mortgage 22,152 1,124,657
Federal Home Loan Mortgage
Corp 66,503 4,484,962
SLM Corp. 54,129 2,120,233
-----------
7,729,852
-----------
UTILITIES (1.8%)
Centerpoint Energy, Inc. 43,120 351,428
Dominion Resources, Inc. 27,967 1,797,439
Edison International (A) 48,464 796,264
Exelon Corp. 43,743 2,616,269
Public Service Enterprises 42,924 1,813,539
Southern Co. 28,459 886,782
-----------
8,261,721
-----------
TOTAL COMMON STOCKS
(COST $456,473,379) 439,475,307
-----------
PRINCIPAL FAIR
AMOUNT VALUE
----------- -----------
SHORT-TERM INVESTMENTS (6.6%)
COMMERCIAL PAPER (6.2%)
Asset Securitization
Cooperation Corp.,
1.02% August 8, 2003 $ 4,000,000 $ 3,995,472
Clipper Receivables Corp.,
1.02% due July 22, 2003 1,474,000 1,473,023
Gannett Co.,
1.06% due July 11, 2003 2,101,000 2,100,300
General Electric Capital
Corp.,
1.16% due July 11, 2003 4,750,000 4,748,418
General Electric Capital
Corp.,
1.07% due July 22, 2003 1,900,000 1,898,740
Sheffield Resources
Corp.,
1.07% due July 15, 2003 5,000,000 4,997,730
Toyota Motor Credit
Corp.,
0.95% due July 29, 2003 5,397,000 5,392,299
UBS Financial Inc.,
1.33% due July 1, 2003 499,000 499,000
Volkswagen of America
Inc.,
1.07% due August 6, 2003 4,000,000 3,995,588
-----------
29,100,570
-----------
U.S. TREASURY (0.4%)
United States of America
Treasury,
1.03% due August 7, 2003 (B) 1,900,000 1,898,450
-----------
TOTAL SHORT-TERM
INVESTMENTS (COST $31,000,581) 30,999,020
-----------
NOTIONAL
VALUE
------------ ------------
FUTURES CONTRACTS (0.0%)
S&P 500 Stock Index,
Exp. September, 2003 (C) $ 26,765,750 --
------------
TOTAL INVESTMENTS (100%)
------------
(COST $487,473,960) (D) $470,474,327
============
-12-
STATEMENT OF INVESTMENTS (UNAUDITED) - CONTINUED
NOTES
(A) Non-income Producing Security.
(B) Par value of $1,900,000 pledged to cover margin deposits on futures
contracts.
(C) As more fully discussed in Note 1 to the financial statements, it is
Account GIS's practice to hold cash and cash equivalents (including
short-term investments) at least equal to the underlying face value, or
notional value, of outstanding purchased futures contracts, less the
initial margin. Account GIS uses futures contracts as a substitute for
holding individual securities.
(D) At June 30, 2003, net unrealized depreciation for all securities was
$16,999,633. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of fair value over cost of
$41,156,962 and aggregate gross unrealized depreciation for all securities
in which there was an excess of cost over fair value of $58,156,595.
See Notes to Financial Statements
-13-
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 2003
ASSETS:
Investment securities, at fair value (cost $115,411,552) ..... $113,204,659
Cash ......................................................... 2,782,952
Receivables:
Interest ................................................... 1,507,278
Purchase payments and transfers from other funding options . 31,984
Other assets ................................................. 1,452
------------
Total Assets ............................................. 117,528,325
------------
LIABILITIES:
Payables:
Contract surrenders and transfers to other funding options . 93,523
Investment management and advisory fees .................... 3,124
Insurance charges .......................................... 11,125
Accured liabilities .......................................... 8,076
------------
Total Liabilities ........................................ 115,848
------------
NET ASSETS: $117,412,477
============
See Notes to Financial Statements
-14-
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2003
INVESTMENT INCOME:
Interest .......................................................... $2,982,567
EXPENSES:
Investment management and advisory fees ........................... $ 183,634
Insurance charges ................................................. 670,698
----------
Total expenses .................................................. 854,332
----------
Net investment income (loss) .................................. 2,128,235
----------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES:
Realized gain (loss) from investment security transactions:
Proceeds from investment securities sold ........................ 61,386,363
Cost of investment securities sold .............................. 59,714,539
----------
Net realized gain (loss) ...................................... 1,671,824
Change in unrealized gain (loss) on investment securities:
Unrealized gain (loss) at June 30, 2003 ......................... (2,206,893)
Unrealized gain (loss) at December 31, 2002 ..................... (6,836,289)
----------
Change in unrealized gain (loss) for the period ............... 4,629,396
----------
Net realized gain (loss) and change in unrealized gain (loss) 6,301,220
----------
Net increase (decrease) in net assets resulting from operations ... $8,429,455
==========
See Notes to Financial Statements
-15-
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
2003 2002
------------- -------------
(UNAUDITED)
OPERATIONS:
Net investment income (loss) ........................................... $ 2,128,235 $ 5,164,126
Net realized gain (loss) from investment security transactions ......... 1,671,824 (3,108,098)
Net change in unrealized gain (loss) on investment securities .......... 4,629,396 (1,649,238)
------------- -------------
Net increase (decrease) in net assets resulting from operations ...... 8,429,455 406,790
------------- -------------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 397,822 and 970,567 units, respectively) .............. 2,634,410 6,020,842
Participant transfers from other funding options
(applicable to 1,238,295 and 1,840,387 units, respectively) .......... 8,226,926 11,390,851
Administrative charges
(applicable to 6,673 and 15,036 units, respectively) ................. (45,788) (93,554)
Contract surrenders
(applicable to 1,025,105 and 2,477,747 units, respectively) .......... (6,793,893) (15,412,418)
Participant transfers to other funding options
(applicable to 1,002,140 and 3,053,338 units, respectively) .......... (6,648,707) (18,818,812)
Other payments to participants
(applicable to 83,557 and 157,757 units, respectively) ............... (577,619) (993,160)
------------- -------------
Net increase (decrease) in net assets resulting from unit transactions (3,204,671) (17,906,251)
------------- -------------
Net increase (decrease) in net assets .............................. 5,224,784 (17,499,461)
NET ASSETS:
Beginning of period .................................................... 112,187,693 129,687,154
------------- -------------
End of period .......................................................... $ 117,412,477 $ 112,187,693
============= =============
See Notes to Financial Statements
-16-
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Quality Bond Account for Variable Annuities ("Account QB")
is a separate account of The Travelers Insurance Company ("The Company"),
an indirect wholly owned subsidiary of Citigroup Inc., and is available
for funding Universal Annuity contracts issued by The Company. Account QB
is registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company.
The following is a summary of significant accounting policies consistently
followed by Account QB in the preparation of its financial statements.
SECURITY VALUATION. Investments in securities traded on a national
securities exchange are valued at the 4:00 p.m. Eastern Standard Time
price of such exchanges; securities traded on the over-the-counter market
and listed securities with no reported sales are valued at the mean
between the last-reported bid and asked prices or on the basis of
quotations received from a reputable broker or other recognized source.
When market quotations are not considered to be readily available for
long-term corporate bonds and notes, such investments are generally stated
at fair value on the basis of valuations furnished by a pricing service.
These valuations are determined for normal institutional-size trading
units of such securities using methods based on market transactions for
comparable securities and various relationships between securities, which
are generally recognized by institutional traders. Securities, including
restricted securities, for which pricing services are not readily
available, are valued by management at prices which it deems, in good
faith, to be fair value.
Short-term investments are reported at fair value based on quoted market
prices. Short-term investments, for which there is no reliable quoted
market price, are recorded at amortized cost, which approximates fair
value.
SECURITY TRANSACTIONS. Security transactions are accounted for on the
trade date. Interest income is recorded on the accrual basis. Premiums and
discounts are amortized to interest income utilizing the constant yield
method.
FUTURES CONTRACTS. Account QB may use interest rate futures contracts as a
substitute for the purchase or sale of individual securities. When Account
QB enters into a futures contract, it agrees to buy or sell specified debt
securities at a future time for a fixed price, unless the contract is
closed prior to expiration. Account QB is obligated to deposit with a
broker an "initial margin" equivalent to a percentage of the face, or
notional value of the contract.
It is Account QB's practice to hold cash and cash equivalents in an amount
at least equal to the notional value of outstanding purchased futures
contracts, less the initial margin. Cash and cash equivalents include cash
on hand, securities segregated under federal and brokerage regulations,
and short-term highly liquid investments with maturities generally three
months or less when purchased. Generally, futures contracts are closed
prior to expiration.
Futures contracts purchased by Account QB are priced and settled daily;
accordingly, changes in daily prices are recorded as realized gains or
losses and no asset is recorded in the Statement of Investments.
Therefore, when Account QB holds open futures contracts, it assumes a
market risk generally equivalent to the underlying market risk of change
in the value of the debt securities associated with the futures contract.
REPURCHASE AGREEMENTS. When Account QB enters into a repurchase agreement
(a purchase of securities whereby the seller agrees to repurchase the
securities at a mutually agreed upon date and price), the repurchase price
of the securities will generally equal the amount paid by Account QB plus
a negotiated interest amount. The seller under the repurchase agreement
will be required to provide to Account QB securities (collateral) whose
market value, including accrued interest, will be at least equal to 102%
of the repurchase price. Account QB monitors the value of collateral on a
daily basis. Repurchase agreements will be limited to transactions with
national banks and reporting broker dealers believed to present minimal
credit risks. Account QB's custodian will take actual or constructive
receipt of all securities underlying repurchase agreements until such
agreements expire.
-17-
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
FEDERAL INCOME TAXES. The operations of Account QB form a part of the
total operations of The Company and are not taxed separately. The Company
is taxed as a life insurance company under the Internal Revenue Code of
1986, as amended (the "Code"). Under existing federal income tax law, no
taxes are payable on the investment income and capital gains of Account
QB. Account QB is not taxed as a "regulated investment company" under
Subchapter M of the Code.
OTHER. The preparation of financial statements in conformity with
generally accepted accounting principles in the United States of America,
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. INVESTMENTS
The aggregate costs of purchases and proceeds from sales of investments
(other than short-term securities) were $28,827,495 and $24,891,207,
respectively; the costs of purchases and proceeds from sales of direct and
indirect U.S. government securities were $38,899,935 and $46,245,793,
respectively, for the six months ended June 30, 2003. Realized gains and
losses from investment security transactions are reported on an identified
cost basis.
3. CONTRACT CHARGES
Investment management and advisory fees are calculated daily at an annual
rate of 0.3233% of Account QB's average net assets. These fees are paid to
Travelers Asset Management International Company, LLC, an indirect wholly
owned subsidiary of Citigroup Inc.
Insurance charges are paid for the mortality and expense risks assumed by
The Company. Each business day, The Company deducts a mortality and
expense risk charge which is reflected in the calculation of accumulation
and annuity unit values. This charge equals, on an annual basis, 1.0017%
for contracts issued prior to May 16, 1983 and 1.25% on an annual basis
for contracts issued on or after May 16, 1983.
For certain contracts in the accumulation phase, a semi-annual charge of
$15 (prorated for partial years) is deducted from participant account
balances and paid to The Company to cover administrative charges.
On contracts issued prior to May 16, 1983, The Company retained from
Account QB sales charges of $2,196 and $4,708 for the six months ended
June 30, 2003 and the year ended December 31, 2002, respectively. The
Company 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 net of contingent deferred
sales charges of $25,037 and $78,280 for the six months ended June 30,
2003 and the year ended December 31, 2002, respectively.
-18-
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
4. NET ASSETS HELD ON BEHALF OF AN AFFILIATE
Approximately $154,000 and $131,000 of the net assets of Account QB were
held on behalf of an affiliate of The Company as of June 30, 2003 and
December 31, 2002, respectively. Transactions with this affiliate during
the six months ended June 30, 2003 and the year ended December 31, 2002,
were comprised of participant purchase payments of approximately $59,000
and $80,000 and contract surrenders of approximately $47,000 and $152,000,
respectively.
5. NET CONTRACT OWNERS' EQUITY
JUNE 30, 2003
------------------------------------
UNIT NET
UNITS VALUE ASSETS
----- ----- ------
Accumulation phase of contracts issued prior to May 16, 1983 .. 4,398,542 $7.188 $ 31,634,229
Annuity phase of contracts issued prior to May 16, 1983 ....... 53,845 7.188 387,251
Accumulation phase of contracts issued on or after May 16, 1983 12,475,508 6.837 85,339,154
Annuity phase of contracts issued on or after May 16, 1983 .... 7,579 6.837 51,843
------------
Net Contract Owners' Equity ............................................................. $117,412,477
============
-19-
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
6. SUPPLEMENTARY INFORMATION
(Selected data for a unit outstanding throughout each period.)
Contracts issued prior to May 16, 1983 SIX
MONTHS
ENDED FOR THE YEARS ENDED DECEMBER 31,
JUNE 30, (DERIVED FROM AUDITED FINANCIAL INFORMATION)
-------- ----------------------------------------------------
2003 2002 2001 2000 1999 1998
-------- -------- -------- -------- -------- --------
SELECTED PER UNIT DATA:
Total investment income ................................... $ .180 $ .381 $ .421 $ .446 $ .393 $ .363
Operating expenses ........................................ .046 .086 .089 .081 .080 .076
-------- -------- -------- -------- -------- --------
Net investment income (loss) .............................. .134 .295 .332 .365 .313 .287
Unit value at beginning of period ......................... 6.674 6.608 6.335 6.055 5.994 5.593
Net realized and change in unrealized gains (losses) ...... .380 (.229) (.059) (.085) (.252) .114
-------- -------- -------- -------- -------- --------
Unit value at end of period ............................... $ 7.188 $ 6.674 $ 6.608 $ 6.335 $ 6.055 $ 5.994
======== ======== ======== ======== ======== ========
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value ..................... $ .51 $ .07 $ .27 $ .28 $ .06 $ .40
Ratio of operating expenses to average net assets ......... 1.33%* 1.33% 1.33% 1.33% 1.33% 1.33%
Ratio of net investment income (loss) to average net assets 3.92%* 4.56% 4.99% 5.93% 5.22% 4.96%
Number of units outstanding at end of period (thousands) .. 4,452 4,684 5,194 5,491 6,224 6,880
Portfolio turnover rate ................................... 71% 113% 166% 105% 340% 438%
Contracts issued on or after May 16, 1983 SIX
MONTHS
ENDED FOR THE YEARS ENDED DECEMBER 31,
JUNE 30, (DERIVED FROM AUDITED FINANCIAL INFORMATION)
-------- ----------------------------------------------------
2003 2002 2001 2000 1999 1998
-------- -------- -------- -------- -------- --------
SELECTED PER UNIT DATA:
Total investment income ................................... $ .171 $ .363 $ .402 $ .427 $ .378 $ .350
Operating expenses ........................................ .051 .097 .101 .092 .091 .088
-------- -------- -------- -------- -------- --------
Net investment income (loss) .............................. .120 .266 .301 .335 .287 .262
Unit value at beginning of period ......................... 6.356 6.309 6.063 5.810 5.765 5.393
Net realized and change in unrealized gains (losses) ...... .361 (.219) (.055) (.082) (.242) .110
-------- -------- -------- -------- -------- --------
Unit value at end of period ............................... $ 6.837 $ 6.356 $ 6.309 $ 6.063 $ 5.810 $ 5.765
======== ======== ======== ======== ======== ========
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value ..................... $ .48 $ .05 $ .25 $ .25 $ .04 $ .37
Ratio of operating expenses to average net assets ......... 1.57%* 1.57% 1.57% 1.57% 1.57% 1.57%
Ratio of net investment income to average net assets ...... 3.67%* 4.31% 4.74% 5.69% 4.97% 4.71%
Number of units outstanding at end of period (thousands) .. 12,483 12,733 15,116 14,045 17,412 21,251
Portfolio turnover rate ................................... 71% 113% 166% 105% 340% 438%
* Annualized
-20-
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS (UNAUDITED)
JUNE 30, 2003
PRINCIPAL FAIR
AMOUNT VALUE
---------- ----------
BONDS (72.0%)
AIRLINES (0.5%)
Delta Airlines Inc., 9.25% Debentures, 2007 ............ $ 889,913 $ 578,443
----------
ASSET BACKED SECURITIES (6.0%)
CA Infrastructure, 6.42% Debentures, 2008 .............. 1,100,000 1,192,485
Daimler Chrysler Auto, 4.63% Debentures, 2006 .......... 1,500,000 1,569,432
Discover Card Mt, 6.05% Debentures, 2008 ............... 1,100,000 1,213,715
Ford Credit Auto Owner Trust, 4.75% Debentures, 2006 ... 1,400,000 1,483,686
Metris MT, 1.32% Debentures, 2007 ...................... 100,000 98,418
Toyota Auto Recovery Owner Trust, 2.65% Debentures, 2006 1,200,000 1,219,415
----------
6,777,151
----------
AUTOMOTIVE (2.2%)
Daimler Chrysler NA Holdings, 4.05% Debentures, 2008 ... 2,500,000 2,478,518
----------
BANKING (2.3%)
Fleet Financial Group, 7.13% Debentures, 2006 .......... 1,250,000 1,402,460
J.P. Morgan Chase & Co., 5.75% Debentures, 2013 ........ 1,100,000 1,204,833
----------
2,607,293
----------
BROKERAGE (2.4%)
Morgan Stanley Dean Witter & Co., 4.25% Debentures, 2010 1,200,000 1,236,982
Morgan Stanley Dean Witter & Co., 5.30% Debentures, 2013 1,400,000 1,490,804
----------
2,727,786
----------
CONGLOMERATES (1.0%)
General Electric Capital Corp., 5.45% Debentures, 2013 . 1,000,000 1,085,171
----------
COLLATERALIZED MORTGAGE OBLIGATIONS (1.5%)
Credit Suisse First Boston Corp., 6.38% Debentures, 2035 900,000 1,040,274
LB UBS Commercial Mortgage Trust, 4.85% Debentures, 2031 670,000 708,087
----------
1,748,361
----------
DEFENSE (3.7%)
Northrop Grumman Corp., 8.63% Debentures, 2004 ........ 2,000,000 2,165,444
Raytheon Co., 5.70% Debentures, 2003 ................... 1,995,000 2,013,053
----------
4,178,497
----------
FINANCE (4.2%)
Ford Motor Credit Co., 6.88% Debentures, 2006 .......... 1,000,000 1,061,227
General Motors Acceptance Corp., 7.25% Debentures, 2011 1,400,000 1,438,643
Household Financial Corp., 6.38% Debentures, 2012 ...... 1,400,000 1,597,653
Washington Mutual Inc., 4.38% Debentures, 2008 ......... 600,000 635,607
----------
4,733,130
----------
FOOD (2.1%)
General Mills Inc., 6.00% Debentures, 2012 ............. 2,100,000 2,374,867
----------
-21-
STATEMENT OF INVESTMENTS (UNAUDITED) - CONTINUED
PRINCIPAL FAIR
AMOUNT VALUE
---------- ----------
INSURANCE (1.0%)
Massachusetts Mutual Life, 2.55% Debentures, 2008 (A) ... $ 900,000 $ 886,531
SAFECO Corp., 7.25% Debentures, 2012 .................... 200,000 240,849
----------
1,127,380
----------
MEDIA CABLE (7.0%)
AOL Time Warner Inc., 6.15% Debentures, 2007 ............ 2,400,000 2,702,626
Comcast Cable Communications, 8.50% Debentures, 2027 .... 500,000 646,849
Cox Enterprises Inc., 7.88% Debentures, 2010 (A) ........ 3,800,000 4,625,364
----------
7,974,839
----------
MEDIA NON-CABLE (1.2%)
Clear Channel Communications Inc., 7.25% Debentures, 2003 1,300,000 1,313,026
----------
NATURAL GAS PIPELINE (6.9%)
Duke Energy Field Service, 7.50% Debentures, 2005 ....... 500,000 547,077
El Paso Corp,. 6.95% Debentures, 2007 ................... 2,500,000 2,350,000
Gemstone Investments Ltd., 7.71% Debentures, 2004 (A) ... 2,000,000 2,000,000
Osprey 8.31% Debentures, 2049 (A)(B) .................... 3,700,000 518,000
Transcontinental Gas Pipeline, 6.13% Debentures, 2005 ... 2,400,000 2,412,000
----------
7,827,077
----------
REAL ESTATE (6.8%)
EOP Operating LP, 8.10% Debentures, 2010 ................ 300,000 367,460
Nationwide Health Properties Inc., 6.90% Debentures, 2037 4,500,000 4,733,244
Post Apartment Homes LP, 6.85% Debentures, 2005 ......... 2,510,000 2,656,802
----------
7,757,506
----------
RETAIL (2.3%)
Wal-Mart Stores Inc., 4.55% Debentures, 2013 ............ 2,500,000 2,605,820
----------
SUPERMARKETS (1.0%)
Fred Meyer Inc., 7.45% Debentures, 2008 ................. 1,000,000 1,166,350
----------
TECHNOLOGY (2.5%)
Pitney Bowes Inc., 4.63% Debentures, 2012 ............... 2,700,000 2,828,123
----------
-22-
STATEMENT OF INVESTMENTS (UNAUDITED) - CONTINUED
PRINCIPAL FAIR
AMOUNT VALUE
----------- -----------
TELECOMMUNICATIONS (5.0%)
NY Telephone Co., 7.00% Debentures, 2025 .................. $ 1,700,000 $ 1,747,090
Qwest Capital Funding, 7.00% Debentures, 2009 ............. 3,000,000 2,482,500
Sprint Capital Corp., 8.38% Debentures, 2012 .............. 500,000 599,810
WorldCom Inc., 6.50% Debentures, 2004 (B) ................. 1,000,000 297,500
WorldCom Inc., 7.50% Debentures, 2011 (B) ................. 1,700,000 505,750
-----------
5,632,650
-----------
UTILITIES (12.4%)
Cleveland Electric Illumination Co., 9.00% Debentures, 2023 1,600,000 1,680,385
PSEG Energy Holdings, 8.63% Debentures, 2008 .............. 450,000 484,305
Pepco Holdings Inc., 5.50% Debentures, 2007 ............... 1,600,000 1,725,363
Progress Energy Inc., 6.05% Debentures, 2007 .............. 2,700,000 2,982,639
Utilicorp United Inc., 6.88% Debentures, 2004 ............. 6,300,000 5,929,875
Xcel Energy Inc., 3.40% Debentures, 2008 (A) .............. 1,200,000 1,193,073
-----------
13,995,640
-----------
TOTAL BONDS
(COST $83,937,089) ......................................................... 81,517,628
-----------
U.S. GOVERNMENT SECURITIES (13.3%)
United States of America Treasury, 3.50% due November 2006 3,075,000 3,242,326
United States of America Treasury, 4.75% due November, 2008 1,875,000 2,079,127
United States of America Treasury, 5.00% due February, 2011 1,250,000 1,403,468
United States of America Treasury, 4.00% due November 2012 900,000 936,809
United States of America Treasury, 3.88% due February 2013 7,000,000 7,205,352
United States of America Treasury, 5.38% due February, 2031 200,000 225,274
-----------
TOTAL U.S. GOVERNMENT SECURITIES
(COST $14,905,116) ....................................................... 15,092,356
-----------
-23-
STATEMENT OF INVESTMENTS (UNAUDITED) - CONTINUED
PRINCIPAL FAIR
AMOUNT VALUE
------------ ------------
SHORT-TERM INVESTMENTS (14.7%)
COMMERCIAL PAPER (14.7%)
CalEnergy Co Inc., 6.96% due September, 2003 ............... $ 920,000 $ 930,033
Clear Channel Communications Inc., 7.25% due September, 2003 990,000 999,920
Clipper Receivables Corp., 1.01% due July, 2003 ............ 1,984,000 1,982,685
General Electric Capital Corp., 1.05% due July, 2003 ....... 2,678,000 2,676,623
Jupiter Securitization Corp., 1.07% due July, 2003 ......... 4,173,000 4,170,233
Sears Roebuck Acceptance Corp., 4.23% due January, 2004 .... 2,100,000 2,119,473
Toyota Motor Credit Corp., 1.07% due July, 2003 ............ 2,514,000 2,512,708
UBS Financial Inc., 1.33% due July, 2003 ................... 1,203,000 1,203,000
------------
TOTAL SHORT-TERM INVESTMENTS (COST $16,569,347) .............................. 16,594,675
------------
TOTAL INVESTMENTS (100%)
(COST $115,411,552) (C) .................................................... $113,204,659
============
NOTES
(A) Restricted Security.
(B) Security is currently in default.
(C) At June 30, 2003 net unrealized depreciation for all securities was
$2,206,893. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of fair value over cost of
$4,198,679 and aggregate gross unrealized depreciation for all securities
in which there was an excess of cost over fair value of $6,405,572.
See Notes to Financial Statement
-24-
THE TRAVELERS MONEY MARKET ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 2003
ASSETS:
Investment securities, at fair value (cost $115,303,432) ..... $115,300,895
Cash ......................................................... 451
Receivables:
Purchase payments and transfers from other funding options . 107,801
Other assets ................................................. 341
------------
Total Assets ............................................. 115,409,488
------------
LIABILITIES:
Payables:
Contract surrenders and transfers to other funding options . 48,240
Investment management and advisory fees .................... 3,064
Insurance charges .......................................... 11,842
Accrued liabilities .......................................... 2,401
------------
Total Liabilities ........................................ 65,547
------------
NET ASSETS: $115,343,941
============
See Notes to Financial Statements
-25-
THE TRAVELERS MONEY MARKET ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2003
INVESTMENT INCOME:
Interest ............................................................... $ 805,814
EXPENSES:
Investment management and advisory fees ................................ $ 205,159
Insurance charges ...................................................... 793,054
---------
Total expenses ....................................................... 998,213
----------
Net investment income (loss) ....................................... (192,399)
----------
Net increase (decrease) in net assets resulting from operations ........ $ (192,399)
==========
See Notes to Financial Statements
-26-
THE TRAVELERS MONEY MARKET ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
2003 2002
------------- -------------
(UNAUDITED)
OPERATIONS:
Net investment income (loss) ........................................... $ (192,399) $ 299,502
------------- -------------
Net increase (decrease) in net assets resulting from operations ...... (192,399) 299,502
------------- -------------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 2,087,144 and 5,858,558 units, respectively) .......... 5,723,662 16,062,122
Participant transfers from other funding options
(applicable to 19,432,823 and 64,672,611 units, respectively) ........ 53,291,968 177,339,495
Administrative charges
(applicable to 25,266 and 54,859 units, respectively) ................ (69,239) (150,505)
Contract surrenders
(applicable to 5,953,227 and 13,961,585 units, respectively) ......... (16,325,570) (38,286,908)
Participant transfers to other funding options
(applicable to 24,006,849 and 68,317,728 units, respectively) ........ (65,834,150) (187,327,842)
Other payments to participants
(applicable to 194,365 and 935,674 units, respectively) .............. (533,739) (2,566,662)
------------- -------------
Net increase (decrease) in net assets resulting from unit transactions (23,747,068) (34,930,300)
------------- -------------
Net increase (decrease) in net assets .............................. (23,939,467) (34,630,798)
NET ASSETS:
Beginning of period .................................................... 139,283,408 173,914,206
------------- -------------
End of period .......................................................... $ 115,343,941 $ 139,283,408
============= =============
See Notes to Financial Statements
-27-
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Money Market Account for Variable Annuities ("Account MM")
is a separate account of The Travelers Insurance Company ("The Company"),
an indirect wholly owned subsidiary of Citigroup Inc., and is available
for funding Universal Annuity contracts issued by The Company. Account MM
is registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company.
The following is a summary of significant accounting policies consistently
followed by Account MM in the preparation of its financial statements.
SECURITY VALUATION. Investments in securities traded on a national
securities exchange are valued at the 4:00 p.m. Eastern Standard Time
price of such exchanges; securities traded on the over-the-counter market
and listed securities with no reported sales are valued at the mean
between the last reported bid and asked prices or on the basis of
quotations received from a reputable broker or other recognized source.
Short-term investments are reported at fair value based on quoted market
prices. Short-term investments, for which there is no reliable quoted
market price, are recorded at amortized cost which approximates fair
value.
SECURITY TRANSACTIONS. Security transactions are accounted for on the
trade date. Interest income is recorded on the accrual basis. Premiums and
discounts are amortized to interest income utilizing the constant yield
method.
REPURCHASE AGREEMENTS. When Account MM enters into a repurchase agreement
(a purchase of securities whereby the seller agrees to repurchase the
securities at a mutually agreed upon date and price), the repurchase price
of the securities will generally equal the amount paid by Account MM plus
a negotiated interest amount. The seller under the repurchase agreement
will be required to provide to Account MM securities (collateral) whose
market value, including accrued interest, will be at least equal to 102%
of the repurchase price. Account MM monitors the value of collateral on a
daily basis. Repurchase agreements will be limited to transactions with
national banks and reporting broker dealers believed to present minimal
credit risks. Account MM's custodian will take actual or constructive
receipt of all securities underlying repurchase agreements until such
agreements expire.
FEDERAL INCOME TAXES. The operations of Account MM form a part of the
total operations of The Company and are not taxed separately. The Company
is taxed as a life insurance company under the Internal Revenue Code of
1986, as amended (the "Code"). Under existing federal income tax law, no
taxes are payable on the investment income and capital gains of Account
MM. Account MM is not taxed as a "regulated investment company" under
Subchapter M of the Code.
OTHER. The preparation of financial statements in conformity with
generally accepted accounting principles in the United States of America,
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.
-28-
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
2. CONTRACT CHARGES
Investment management and advisory fees are calculated daily at an annual
rate of 0.3233% of Account MM's average net assets. These fees are paid to
Travelers Asset Management International Company, LLC, an indirect wholly
owned subsidiary of Citigroup Inc.
Insurance charges are paid for the mortality and expense risks assumed by
The Company. Each business day, The Company deducts a mortality and
expense risk charge which is reflected in the calculation of accumulation
and annuity unit values. This charge equals, on an annual basis, 1.0017%
for contracts issued prior to May 16, 1983 and 1.25% on an annual basis
for contracts issued on or after May 16, 1983.
For certain contracts in the accumulation phase, a semi-annual charge of
$15 (prorated for partial years) is deducted from participant account
balances and paid to The Company to cover administrative charges.
The Company 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 net of contingent sales
charges of $158,793 and $361,097 for the six months ended June 30, 2003
and the year ended December 31, 2002, respectively.
3. NET ASSETS HELD ON BEHALF OF AN AFFILIATE
Approximately $1,617,000 and $2,208,000 of the net assets of Account MM
were held on behalf of an affiliate of The Company as of June 30, 2003 and
December 31, 2002, respectively. Transactions with this affiliate during
the six months ended June 30, 2003 and the year ended December 31, 2002,
were comprised of participant purchase payments of approximately $281,000
and $813,000 and contract surrenders of approximately $870,000 and
$885,000, respectively.
4. NET CONTRACT OWNERS' EQUITY
JUNE 30, 2003
----------------------------------------
UNIT NET
UNITS VALUE ASSETS
----- ----- ------
Accumulation phase of contracts issued prior to May 16, 1983 ............ 24,243 $ 2.881 $ 69,840
Annuity phase of contracts issued prior to May 16, 1983 ................. 20,156 2.881 58,066
Accumulation phase of contracts issued on or after May 16, 1983 ......... 41,963,951 2.740 114,988,186
Annuity phase of contracts issued on or after May 16, 1983 .............. 83,152 2.740 227,849
-------------
Net Contract Owners' Equity ...................................................................... $ 115,343,941
=============
-29-
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
5. SUPPLEMENTARY INFORMATION
(Selected data for a unit outstanding throughout each period.)
Contracts issued prior to May 16, 1983 SIX
MONTHS
ENDED FOR THE YEARS ENDED DECEMBER 31,
JUNE 30, (DERIVED FROM AUDITED FINANCIAL INFORMATION)
-------- ---------------------------------------------------
2003 2002 2001 2000 1999 1998
------- ------- ------- ------- ------- -------
SELECTED PER UNIT DATA:
Total investment income ................................... $ .018 $ .051 $ .120 $ .174 $ .135 $ .138
Operating expenses ........................................ .019 .038 .037 .037 .034 .033
------- ------- ------- ------- ------- -------
Net investment income (loss) .............................. (.001) .013 .083 .137 .101 .105
Unit value at beginning of period ......................... 2.882 2.869 2.786 2.649 2.548 2.443
------- ------- ------- ------- ------- -------
Unit value at end of period ............................... $ 2.881 $ 2.882 $ 2.869 $ 2.786 $ 2.649 $ 2.548
======= ======= ======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value ..................... $ .00 $ .01 $ .08 $ .14 $ .10 $ .11
Ratio of operating expenses to average net assets ......... 1.33%* 1.33% 1.33% 1.33% 1.33% 1.33%
Ratio of net investment income (loss) to average net assets (0.06)* 0.46% 2.89% 5.09% 3.87% 4.20%
Number of units outstanding at end of period (thousands) .. 44 49 60 70 80 91
Contracts issued on or after May 16, 1983 SIX
MONTHS
ENDED FOR THE YEARS ENDED DECEMBER 31,
JUNE 30, (DERIVED FROM AUDITED FINANCIAL INFORMATION)
-------- ---------------------------------------------------
2003 2002 2001 2000 1999 1998
------- ------- ------- ------- ------- -------
SELECTED PER UNIT DATA:
Total investment income ................................... $ .017 $ .048 $ .114 $ .167 $ .130 $ .133
Operating expenses ........................................ .021 .043 .042 .041 .039 .038
------- ------- ------- ------- ------- -------
Net investment income (loss) .............................. (.004) .005 .072 .126 .091 .095
Unit value at beginning of period ......................... 2.744 2.739 2.667 2.541 2.450 2.355
------- ------- ------- ------- ------- -------
Unit value at end of period ............................... $ 2.740 $ 2.744 $ 2.739 $ 2.667 $ 2.541 $ 2.450
======= ======= ======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value ..................... $ .00 $ .01 $ .07 $ .13 $ .09 $ .10
Ratio of operating expenses to average net assets ......... 1.57%* 1.57% 1.57% 1.57% 1.57% 1.57%
Ratio of net investment income (loss) to average net assets (0.30)* 0.21% 2.64% 4.84% 3.62% 3.95%
Number of units outstanding at end of period (thousands) .. 42,047 50,702 63,430 55,477 70,545 41,570
* Annualized
-30-
THE TRAVELERS MONEY MARKET ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS (UNAUDITED)
JUNE 30, 2003
PRINCIPAL FAIR
AMOUNT VALUE
------------- -------------
SHORT-TERM INVESTMENTS (100%)
COMMERCIAL PAPER (81.5%)
American Honda Financial Corp., 1.20% due July 9, 2003.............. $ 1,200,000 $ 1,199,674
American Honda Financial Corp., 1.24% due July 10, 2003............. 1,216,000 1,215,632
American Honda Financial Corp., 1.24% due August 5, 2003............ 3,500,000 3,496,241
American Express Credit Corp., 1.04% due August 7, 2003............. 4,540,000 4,534,861
Blueridge Asset Funding Corp., 1.19% due August 5, 2003............. 5,737,000 5,730,838
BMW United States Capital Corp., 1.03% due July 17, 2003............ 1,415,000 1,414,273
Coca-Cola Enterprises Inc., 0.93% due August 5, 2003................ 5,821,000 5,814,748
Crown Point Capital Co. LLC, 1.17% due July 7, 2003................. 4,000,000 3,999,152
DE Funding Corp., 1.07% due July 16, 2003........................... 5,800,000 5,797,193
E.I. Dupont de Nemours & Co., 1.03% due July 14, 2003............... 5,800,000 5,797,541
Goldman Sachs Group Inc., 1.29% due July 18, 2003................... 5,000,000 4,997,280
Marsh & McLennan Cos., 1.13% due July 28, 2003...................... 5,859,000 5,854,073
Montauk Funding Corp., 1.24% due July 17, 2003...................... 3,620,000 3,618,139
Nordea North America Inc., 0.95% due July 22, 2003.................. 5,000,000 4,996,685
Old Line Funding Corp., 1.23% due July 28, 2003..................... 1,700,000 1,698,570
Schering-Plough Corp., 1.25% due July 8, 2003....................... 1,750,000 1,749,576
Sheffield Resources Corp., 1.24% due July 22, 2003.................. 4,954,000 4,950,715
Shell Finance (UK) PLC, 1.02% due August 11, 2003................... 2,978,000 2,974,289
Societe Generale North America, 1.05% due September 10, 2003........ 5,000,000 4,989,500
Starfish Global Funding LLC, 1.24% due July 9, 2003................. 2,394,000 2,393,349
Toyota Motor Credit Corp., 0.95% due July 29, 2003.................. 2,631,000 2,628,708
Toyota Motor Credit Corp., 0.93% due September 15, 2003............. 3,190,000 3,182,835
UBS Financial, Inc., 1.33% due July 1, 2003......................... 1,204,000 1,204,000
Unilever Capital Corp., 1.23% due July 2, 2003...................... 4,155,000 4,154,747
Yorktown Capital LLC, 1.09% due July 21, 2003....................... 2,500,000 2,498,418
Yorktown Capital LLC, 1.00% due August 1, 2003...................... 3,041,000 3,038,087
-------------
93,929,124
-------------
UNITED STATES AGENCY (18.5%)
Federal Home Loan Mortgage Corp., 1.07% due August 14, 2003......... 3,450,000 3,445,953
Federal Home Loan Mortgage Corp., 1.14% due September 3, 2003....... 3,000,000 2,994,879
Federal National Mortgage Association, 1.20% due July 9, 2003....... 8,340,000 8,338,240
Federal National Mortgage Association, 0.89% due July 24, 2003...... 2,753,000 2,751,329
Federal National Mortgage Association, 0.95% due July 25, 2003...... 1,245,000 1,244,212
Federal National Mortgage Association, 0.91% due August 11, 2003.... 2,600,000 2,597,158
-------------
21,371,771
-------------
TOTAL INVESTMENTS (100%)
(COST $115,303,432)......................................................................... $ 115,300,895
=============
See Notes to Financial Statements
-31-
BOARD OF MANAGERS AND OFFICERS
Name and Position
With the Fund Principal Occupation During Last Five Years
- ----------------- -------------------------------------------
*R. Jay Gerken Managing Director (1989 to present) of Salomon Smith Barney Inc. ("SSB");
Manager Chairman, President and CEO of Smith Barney Fund Management LLC; Travelers
399 Park Avenue Investment Adviser, Inc. and CitiFund Management Inc. Chairman, Chief Executive
New York, NY Officer and President, Board of Managers (2002-present), six Variable Annuity
Age 52 Separate Accounts of The Travelers Insurance Company+; Chairman, Chief Executive
Officer and President, Board of Trustees (2002-present), five Mutual Funds
sponsored by The Travelers Insurance Company.++
Robert E. McGill, III Retired manufacturing executive. Director (1983-1995), Executive Vice President
Manager (1989-1994) and Senior Vice President, Finance and Administration (1983-1989),
295 Hancock Street The Dexter Corporation (manufacturer of specialty chemicals and materials); Vice
Williamstown, MA Chairman (1990-1992), Director (1983-1995), Life Technologies, Inc. (life
Age 72 science/biotechnology products); Director, (1994-1999), The Connecticut Surety
Corporation (insurance); Director (1995-2000), Chemfab Corporation (specialty
materials manufacturer); Director (1999-2001), Ravenwood Winery, Inc.; Director
(1999-present), Lydall Inc. (manufacturer of fiber materials); Member, Board of
Managers (1974-present), six Variable Annuity Separate Accounts of The Travelers
Insurance Company+; Trustee (1990-present), five Mutual Funds sponsored by The
Travelers Insurance Company.++
Lewis Mandell Professor of Finance and Managerial Economics, University at Buffalo since
Manager 1998. Dean, School of Management (1998-2001), University at Buffalo; Dean,
160 Jacobs Hall College of Business Administration (1995-1998), Marquette University; Professor
Buffalo, NY of Finance (1980-1995) and Associate Dean (1993-1995), School of Business
Age 60 Administration, and Director, Center for Research and Development in Financial
Services (1980-1995), University of Connecticut; Director (2000-present),
Delaware North Corp. (hospitality business); Member, Board of Managers
(1990-present), six Variable Annuity Separate Accounts of The Travelers
Insurance Company+; Trustee (1990-present), five Mutual Funds sponsored by The
Travelers Insurance Company.++
Frances M. Hawk, Private Investor, (1997-present); Portfolio Manager (1992-1997, HLM Management
CFA, CFP Company, Inc. (investment management); Assistant Treasurer, Pensions and
Manager Benefits. Management (1989-1992), United Technologies Corporation (broad-based
423 Vineyard Lane designer and manufacturer of high technology products); Member, Board of
Downingtown, PA Managers (1991-present), six Variable Annuity Separate Accounts of The Travelers
Age 55 Insurance Company+; Trustee (1991-present), five Mutual Funds sponsored by The
Travelers Insurance Company.++
Ernest J. Wright Vice President and Secretary (1996-present), Assistant Secretary (1994-1996),
Secretary to the Board Counsel (1987-present), The Travelers Insurance Company; Secretary
One CityPlace (1994-present), six Variable Annuity Separate Accounts of The Travelers
Hartford, Connecticut Insurance Company+; Secretary (1994-present), five Mutual Funds sponsored by The
Age 63 Travelers Insurance Company.++
-32-
Name and Position
With the Fund Principal Occupation During Last Five Years
----------------- -------------------------------------------
Kathleen A. McGah Deputy General Counsel (1999-present); Assistant Secretary (1995-present), The
Assistant Secretary to Travelers Insurance Company; Assistant Secretary (1995-present), six Variable
The Board Annuity Separate Accounts of The Travelers Insurance Company+; Assistant
One CityPlace Secretary, (1995-present), five Mutual Funds sponsored by The Travelers
Hartford, Connecticut Insurance Company.++ Prior to January 1995, Counsel, ITT Hartford Life
Age 52 Insurance Company.
David A. Golino Vice President and Controller (1999-present), Second Vice President (1996-1999),
Principal Accounting Officer The Travelers Insurance Company; Principal Accounting Officer (1998-present),
One CityPlace six Variable Annuity Separate Accounts of The Travelers Insurance Company.+
Hartford, Connecticut Prior to May 1996, Senior Manager (1985-1996), Deloitte & Touche LLP.
Age 41
+ The six Variable Annuity Separate Accounts are: The Travelers Growth and
Income Stock Account for Variable Annuities, The Travelers Quality Bond
Account for Variable Annuities, The Travelers Money Market Account for
Variable Annuities, 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.
++ The five Mutual Funds are: Capital Appreciation Fund, Money Market
Portfolio, High Yield Bond Trust, Managed Assets Trust and The Travelers
Series Trust.
* Mr. Gerken is an "interested person" within the meaning of the 1940 Act by
virtue of his position as Managing Director of Salomon Smith Barney, Inc.,
an indirect wholly owned subsidiary of Citigroup Inc., and his ownership
of shares and options to purchase shares of Citigroup Inc., the indirect
parent of The Travelers Insurance Company.
-33-
INVESTMENT ADVISER
------------------
TRAVELERS ASSET MANAGEMENT INTERNATIONAL COMPANY, LLC
Hartford, Connecticut
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES
THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES
THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES
INVESTMENT SUB-ADVISER
----------------------
THE TRAVELERS INVESTMENT MANAGEMENT COMPANY
Stamford, Connecticut
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES
INDEPENDENT ACCOUNTANTS
-----------------------
KPMG LLP
Hartford, Connecticut
CUSTODIAN
---------
JPMorgan Chase Bank
New York, New York
The financial information included herein has been taken from the records of The
Travelers Growth and Income Stock Account for Variable Annuities, The Travelers
Quality Bond Account for Variable Annuities and The Travelers Money Market
Account for Variable Annuities. This financial information has not been audited
by the Accounts' independent accountants, who therefore express no opinion
concerning its accuracy. However, it is management's opinion that all proper
adjustments have been made.
This report is prepared for the general information of contract owners and is
not an offer of units of The Travelers Growth and Income Stock Account for
Variable Annuities, The Travelers Quality Bond Account for Variable Annuities or
The Travelers Money Market Account for Variable Annuities. It should not be used
in connection with any offer except in conjunction with the Universal Annuity
Prospectus which contains all pertinent information, including the applicable
sales commissions.
VG-137 (Semi-Annual) (6-03) Printed in U.S.A.
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal
financial officer have concluded that the registrant's
disclosure controls and procedures (as defined in Rule 30a - 3
(c) under the Investment Company Act of 1940, as amended) are
effective based on their evaluation of the disclosure controls
and procedures as of a date within 90 days of the filing date of
this document.
(b) There have been no significant changes to the registrant's
internal control over financial reporting that occurred during
the registrant's last fiscal half-year that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 10. EXHIBITS.
(a)(2) Certifications pursuant to section 302 of the Sarbanes-Oxley Act
of 2002 are attached hereto as Exhibit 99.CERT.
(b) Certifications pursuant to section 906 of the Sarbanes-Oxley Act
of 2002 are furnished as Exhibit 99.906CERT
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
Travelers Growth and Income Stock Account For Variable Annuities
Travelers Quality Bond Account For Variable Annuities
Travelers Money Market Account For Variable Annuities
By: /s/ R. Jay Gerken
R. Jay Gerken
Chairman of the Board
Chief Executive Officer
Travelers Growth and Income Stock Account For Variable Annuities
Travelers Quality Bond Account For Variable Annuities
Travelers Money Market Account For Variable Annuities
Date September 4, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ R. Jay Gerken
R. Jay Gerken
Chairman of the Board
Chief Executive Officer
Travelers Growth and Income Stock Account For Variable Annuities
Travelers Quality Bond Account For Variable Annuities
Travelers Money Market Account For Variable Annuities
Date September 4, 2003
By: /s/ David A. Golino
David A. Golino
Principal Accounting Officer
Travelers Growth and Income Stock Account For Variable Annuities
Travelers Quality Bond Account For Variable Annuities
Travelers Money Market Account For Variable Annuities
Date September 4, 2003