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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, 2003
Date of reporting period: December 31, 2003
ITEM 1. REPORT(S) TO STOCKHOLDERS.
The Annual Report to stockholders is filed herewith.
UNIVERSAL ANNUITY
ANNUAL REPORTS [GRAPHIC OMITTED]
DECEMBER 31, 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 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 Life
& Annuity Variable Products Separate Accounts
("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
A member of citigroup [LOGO] ("TIMCO") provides equity management and
subadvisory services for The Travelers Growth and
Income Stock Account for Variable Annuities.
TABLE OF CONTENTS
PAGE
- --------------------------------------------------------------------------------
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES.........................................................1
THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES.....................15
THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES.....................27
BOARD OF MANAGERS AND OFFICERS................................................35
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2003
ASSETS:
Investment securities, at fair value (cost $477,113,251) ..... $516,602,320
Cash ......................................................... 6,986
Receivables:
Dividends .................................................. 668,156
Investment securities sold ................................. 1,007,703
Purchase payments and transfers from other funding options . 70,405
Variation on futures margin ................................ 29,045
Other assets ................................................. 50,090
------------
Total Assets ............................................. 518,434,705
------------
LIABILITIES:
Payables:
Contract surrenders and transfers to other funding options . 199,015
Investment management and advisory fees .................... 48,106
Insurance charges .......................................... 87,843
Accrued liabilities .......................................... 82,221
------------
Total Liabilities ........................................ 417,185
------------
NET ASSETS: $518,017,520
============
See Notes to Financial Statements
-1-
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2003
INVESTMENT INCOME:
Dividends ....................................................... $ 7,739,346
Interest ........................................................ 215,999
-------------
Total income .................................................. $ 7,955,345
EXPENSES:
Investment management and advisory fees ......................... 3,051,333
Insurance charges ............................................... 5,537,016
-------------
Total expenses ................................................ 8,588,349
-------------
Net investment income (loss) ................................ (633,004)
-------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES:
Realized gain (loss) from investment security transactions:
Proceeds from investment securities sold ...................... 366,781,125
Cost of investment securities sold ............................ 378,174,815
-------------
Net realized gain (loss) .................................... (11,393,690)
Change in unrealized gain (loss) on investment securities:
Unrealized gain (loss) at December 31, 2003 ..................... 39,489,069
Unrealized gain (loss) at December 31, 2002 ..................... (83,876,989)
-------------
Net change in unrealized gain (loss) for the year ............. 123,366,058
-------------
Net realized gain (loss) and change in unrealized gain (loss) 111,972,368
-------------
Net increase (decrease) in net assets resulting from operations ... $ 111,339,364
=============
See Notes to Financial Statements
-2-
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
2003 2002
---- ----
OPERATIONS:
Net investment income (loss) ........................................... $ (633,004) $ (1,724,159)
Net realized gain (loss) from investment security transactions ......... (11,393,690) (44,074,095)
Net change in unrealized gain (loss) on investment securities .......... 123,366,058 (92,142,794)
------------- -------------
Net increase (decrease) in net assets resulting from operations ...... 111,339,364 (137,941,048)
------------- -------------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 1,271,619 and 1,672,473 units, respectively) .......... 18,530,423 25,669,656
Participant transfers from other funding options
(applicable to 754,088 and 688,693 units, respectively) .............. 11,209,365 10,328,582
Administrative charges
(applicable to 29,037 and 36,141 units, respectively) ................ (458,191) (517,226)
Contract surrenders
(applicable to 3,418,518 and 3,628,838 units, respectively) .......... (50,866,631) (55,346,598)
Participant transfers to other funding options
(applicable to 1,576,742 and 3,238,862 units, respectively) .......... (22,824,923) (47,526,395)
Other payments to participants
(applicable to 197,838 and 157,894 units, respectively) .............. (2,992,921) (2,436,118)
------------- -------------
Net increase (decrease) in net assets resulting from unit transactions (47,402,878) (69,828,099)
------------- -------------
Net increase (decrease) in net assets .............................. 63,936,486 (207,769,147)
NET ASSETS:
Beginning of year ...................................................... 454,081,034 661,850,181
------------- -------------
End of year ............................................................ $ 518,017,520 $ 454,081,034
============= =============
See Notes to Financial Statements
-3-
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Growth and Income Stock Account for Variable Annuities
("Account GIS") is a separate account of The Travelers Insurance Company
("The 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. There
were no put or call options in Account GIS in 2003.
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. There were no repurchase agreements in Account GIS in
2003.
-4-
NOTES TO FINANCIAL STATEMENTS - 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 $304,215,544 and $352,667,061,
respectively; the costs of purchases and proceeds from sales of direct and
indirect U.S. government securities were $28,228,079 and $28,049,629,
respectively, for the year ended December 31, 2003. Realized gains and
losses from investment security transactions are reported on an identified
cost basis.
At December 31, 2003, Account GIS held 45 open S&P 500 Stock Index futures
contracts expiring in March, 2004. The underlying face value, or notional
value, of these contracts at December 31, 2003 amounted to $12,494,250. 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
$3,542,973 and ($1,116,889) for the years ended December 31, 2003 and
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. The cash settlement
for December 31, 2003 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 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 $12,494 and $12,734 for the years ended
December 31, 2003 and 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 $406,883 and
$375,583 for the years ended December 31, 2003 and 2002, respectively.
-5-
NOTES TO FINANCIAL STATEMENTS - CONTINUED
4. NET ASSETS HELD ON BEHALF OF AN AFFILIATE
Approximately $12,382,000 and $10,255,000 of the net assets of Account GIS
were held on behalf of an affiliate of The Company as of December 31, 2003
and 2002, respectively. Transactions with this affiliate during the years
ended December 31, 2003 and 2002, were comprised of participant purchase
payments of approximately $32,000 and $70,000 and contract surrenders of
approximately $534,000 and $1,045,000, respectively.
5. NET CONTRACT OWNERS' EQUITY
DECEMBER 31, 2003
----------------------------------------------
UNIT NET
UNITS VALUE ASSETS
----- ----- ------
Accumulation phase of contracts issued prior to May 16, 1983 .............. 7,955,829 $ 17.926 $ 142,616,970
Annuity phase of contracts issued prior to May 16, 1983 ................... 182,741 17.926 3,275,837
Accumulation phase of contracts issued on or after May 16, 1983 ........... 21,788,686 17.028 371,031,633
Annuity phase of contracts issued on or after May 16, 1983 ................ 64,191 17.028 1,093,080
-------------
Net Contract Owners' Equity .............................................................................. $ 518,017,520
=============
-6-
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SUPPLEMENTARY INFORMATION
(Selected data for a unit outstanding throughout each year.)
Contracts issued prior to May 16, 1983
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------------------------
2003 2002 2001 2000 1999
---- ---- ---- ---- ----
SELECTED PER UNIT DATA:
Total investment income ................................... $ .264 $ .240 $ .266 $ .242 $ .267
Operating expenses ........................................ .256 .261 .311 .376 .347
------- ------- ------- ------- -------
Net investment income (loss) .............................. .008 (.021) (.045) (.134) (.080)
Unit value at beginning of year ........................... 14.172 18.064 21.418 24.427 20.017
Net realized and change in unrealized gains (losses) ...... 3.746 (3.871) (3.309) (2.875) 4.490
------- ------- ------- ------- -------
Unit value at end of year ................................. $17.926 $14.172 $18.064 $21.418 $24.427
======= ======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value ..................... $ 3.75 $ (3.89) $ (3.35) $ (3.01) $ 4.41
Ratio of operating expenses to average net assets ......... 1.65% 1.64% 1.63% 1.60% 1.60%
Ratio of net investment income (loss) to average net assets 0.06% (0.12)% (0.24)% (0.57)% (0.37)%
Number of units outstanding at end of year (thousands) .... 8,139 9,088 10,329 11,413 12,646
Portfolio turnover rate ................................... 68% 54% 32% 52% 47%
Contracts issued on or after May 16, 1983
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------------------------
2003 2002 2001 2000 1999
---- ---- ---- ---- ----
SELECTED PER UNIT DATA:
Total investment income ................................... $ .251 $ .229 $ .254 $ .232 $ .256
Operating expenses ........................................ .281 .287 .343 .416 .385
------- ------- ------- ------- -------
Net investment income (loss) .............................. (.030) (.058) (.089) (.184) (.129)
Unit value at beginning of year ........................... 13.496 17.245 20.498 23.436 19.253
Net realized and change in unrealized gains (losses) ...... 3.562 (3.691) (3.164) (2.754) 4.312
------- ------- ------- ------- -------
Unit value at end of year ................................. $17.028 $13.496 $17.245 $20.498 $23.436
======= ======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value ..................... $ 3.53 $ (3.75) $ (3.25) $ (2.94) $ 4.18
Ratio of operating expenses to average net assets ......... 1.90% 1.89% 1.88% 1.85% 1.85%
Ratio of net investment income (loss) to average net assets (0.19)% (0.37)% (0.49)% (0.82)% (0.62)%
Number of units outstanding at end of period (thousands) .. 21,853 24,100 27,559 29,879 32,648
Portfolio turnover rate ................................... 68% 54% 32% 52% 47%
-7-
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS
DECEMBER 31, 2003
NO. OF FAIR
SHARES VALUE
-------------- --------------
COMMON STOCK (97.3%)
AEROSPACE (0.5%)
Boeing Co. 60,105 $ 2,532,825
--------------
AUTOMOTIVE (1.8%)
Dana Corp. 13,322 244,459
Eaton Corp. 4,989 538,712
Ford Motor Co. 100,366 1,605,856
General Motors Corp. 65,657 3,506,084
Gentex Corp. 11,978 528,829
Harley-Davidson 49,066 2,332,107
Johnson Controls, Inc. 5,471 635,293
--------------
9,391,340
--------------
BANKING (8.8%)
Bank of America Corp. 96,167 7,734,712
BANK ONE Corp. 32,802 1,495,443
BB&T Corp. 35,419 1,368,590
Capital One Financial Corp. 15,266 935,653
First Tennessee National 202 8,908
FleetBoston Financial 58,568 2,556,493
HSBC Holdings ADS 25,207 1,986,816
J.P. Morgan Chase & Co. 117,630 4,320,550
KeyCorp. 21,601 633,341
Marshall & Ilsley Corp. 18,470 706,477
MBNA Corp. 112,064 2,784,790
National City Corp. 66,962 2,272,690
PNC Financial Services Group 30,951 1,693,948
Regions Financial Corp. 29,722 1,105,658
SunTrust Banks 7,213 515,729
U. S. Bancorp 51,660 1,538,435
United Bankshares, Inc. 12,544 390,683
Wachovia Corp. 107,077 4,988,717
Washington Mutual, Inc. 51,773 2,077,133
Wells Fargo & Co. 103,793 6,112,370
--------------
45,227,136
--------------
BEVERAGE (2.9%)
Anheuser-Busch Cos. 57,179 $ 3,012,190
Coca-Cola Co. 120,349 6,107,712
Coca-Cola Enterprises Inc. 66,238 1,448,625
PepsiCo, Inc. 98,843 4,608,061
--------------
15,176,588
--------------
BROKERAGE (2.5%)
Bear Stearns Cos 11,990 958,600
Charles Schwab Corp. 117,396 1,389,969
Goldman Sachs Group, Inc. 30,269 2,988,458
Lehman Brothers Holding, Inc. 16,335 1,261,389
Merrill Lynch & Co. 38,595 2,263,597
Morgan Stanley 67,455 3,903,621
--------------
12,765,634
--------------
BUILDING MATERIALS (0.2%)
Masco Corp. 36,201 992,269
--------------
CAPITAL GOODS (0.2%)
Deere & Co. 13,582 883,509
Nucor Corp. 6,527 365,512
--------------
1,249,021
--------------
CHEMICALS (1.5%)
Dow Chemical Co. 56,955 2,367,619
E.I. duPont de Nemours & Co. 21,253 975,300
Ecolab Inc. 36,538 1,000,045
Monsanto Co. 71,835 2,067,411
Mylan Labs 48,526 1,225,767
--------------
7,636,142
--------------
CONGLOMERATES (5.3%)
Crane Co. 28,728 883,099
Emerson Electric Co. 29,798 1,929,420
General Electric Co. 489,945 15,178,496
Honeywell International, Inc. 74,942 2,505,311
3M Co. 23,964 2,037,659
Tyco International Ltd. 102,734 2,722,451
United Technologies Corp. 23,828 2,258,180
--------------
27,514,616
--------------
CONSTRUCTION MACHINERY (0.4%)
Ingersoll-Rand Co. 28,262 1,918,425
--------------
-8-
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS - CONTINUED
DECEMBER 31, 2003
NO. OF FAIR
SHARES VALUE
-------------- --------------
CONSUMER (3.3%)
Avery Dennison Corp. 13,154 $ 736,887
Ball Corp. 11,092 660,750
Black & Decker Corp. 14,316 706,065
Colgate-Palmolive Co. 46,394 2,322,020
Furniture Brands International 25,399 744,953
Hasbro Inc. 72,105 1,534,394
Kimberly Clark Corp. 24,756 1,462,832
Newell Rubbermaid Inc. 29,830 679,229
Procter & Gamble Co. 64,044 6,396,715
Reebok International 8,077 317,588
Sealed Air (A) 27,488 1,488,200
--------------
17,049,633
--------------
DEFENSE (0.7%)
Lockheed Martin Corp. 30,543 1,569,910
Northrop Grumman Corp. 2,133 203,915
Raytheon Co. 63,591 1,910,274
--------------
3,684,099
--------------
ENTERTAINMENT (1.7%)
Electronic Arts (A) 40,086 1,916,311
Fox Entertainment Group (A) 57,731 1,682,859
Viacom, Inc. 94,281 4,184,191
Walt Disney Co. 33,118 772,643
--------------
8,556,004
--------------
FINANCE (2.5%)
American Express Co. 89,151 4,299,753
American Financial Group 48,204 1,275,478
Annaly Mortgage Management 20,317 373,833
Countrywide Financial 39,340 2,983,939
Mellon Financial 20,334 652,925
Principal Financial Group 50,414 1,667,191
Providian Financial (A) 62,905 732,214
Total System Services 34,222 1,065,331
--------------
13,050,664
--------------
FOOD (2.0%)
Archer-Daniels-Midland Co. 38,535 586,503
Darden Restaurants 79,866 1,680,381
Del Monte Foods (A) 82,843 861,567
General Mills 10,682 483,895
Hershey Foods Corp. 10,631 818,481
Hormel Foods 17,322 447,081
International Flavors & Fragrances 29,941 1,045,540
Kellogg Co. 36,220 1,379,258
McDonald's Corp. 88,165 2,189,137
Sysco Corp. 28,692 1,068,203
--------------
10,560,046
--------------
HEALTHCARE (2.5%)
Abbott Laboratories 43,229 2,014,471
Aetna Inc. 26,031 1,759,175
Anthem Inc. (A) 5,887 441,525
Apogent Technologies (A) 55,044 1,268,214
Becton, Dickinson 44,466 1,829,331
Guidant Corp. 35,536 2,139,267
Medco Health Solutions (A) 13,872 471,509
St. Jude Medical (A) 8,411 516,015
UnitedHealth Group, Inc. 30,944 1,800,322
Wellpoint Health Networks (A) 7,108 689,405
--------------
12,929,234
--------------
HOME CONSTRUCTION (0.1%)
K. B. HOME 4,600 333,592
Pulte Homes 4,467 418,201
--------------
751,793
--------------
INDEPENDENT ENERGY (0.8%)
Burlington Resources 21,521 1,191,833
Devon Energy 8,043 460,542
Entergy Corp. 40,281 2,301,254
--------------
3,953,629
--------------
-9-
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS - CONTINUED
DECEMBER 31, 2003
NO. OF FAIR
SHARES VALUE
-------------- --------------
INSURANCE (5.8%)
Ace Limited 14,522 $ 601,501
AFLAC Inc. 26,299 951,498
Allstate Corp. 72,930 3,137,449
Ambac Financial Group 28,363 1,968,109
American International Group 128,902 8,543,625
Aon Corp. 25,692 615,066
Chubb Corp. 32,666 2,224,555
Fidelity National Financial 19,346 750,238
Hartford Financial Services Group 5,585 329,683
Jefferson-Pilot Corp. 21,456 1,086,746
LIncoln National Corp. 9,568 386,260
Marsh & McLennan Co. 47,621 2,280,570
MBIA Inc. 43,153 2,555,952
MGIC Investment Corp. 18,213 1,037,048
PMI Group 24,753 921,554
Progressive Corp. 4,028 336,701
Prudential Financial 29,459 1,230,502
SAFECO Corp. 6,571 255,940
St. Paul Co. 23,205 920,078
--------------
30,133,075
--------------
INTEGRATED ENERGY (3.7%)
Anadarko Petroleum 14,827 756,325
ChevronTexaco Corp. 37,520 3,241,353
ConocoPhillips 34,378 2,254,165
Exxon Mobil Corp. 293,834 12,047,194
Occidental Petroleum 19,319 816,035
--------------
19,115,072
--------------
LODGING (0.5%)
Marriott International 47,668 2,202,262
Starwood Hotels & Resorts 8,693 312,687
--------------
2,514,949
--------------
MEDIA (1.9%)
Comcast Corp. (Class A) (A) 70,381 2,312,368
Comcast Corp. (Class A - Special) (A) 71,941 2,249,235
Scholastic Corp. (A) 26,634 904,357
Time Warner Inc. (A) 160,468 2,886,819
Tribune Co. 25,157 1,298,101
--------------
9,650,880
--------------
METALS (1.0%)
Alcoa, Inc. 108,093 4,107,534
Pactiv Corp. (A) 50,929 1,217,203
--------------
5,324,737
--------------
NATURAL GAS DISTRIBUTORS (0.2%)
National Fuel Gas 47,101 1,151,148
--------------
OIL FIELD (0.5%)
Baker Hughes, Inc. 9,112 293,042
Halliburton Co. 20,345 528,970
Schlumberger Ltd. 25,935 1,419,163
Transocean, Inc. (A) 22,014 528,556
--------------
2,769,731
--------------
PAPER (0.2%)
Georgia-Pacific Corp. 18,214 558,623
Weyerhaeuser Co. 10,266 657,024
--------------
1,215,647
--------------
PHARMACEUTICALS (8.2%)
AmerisourceBergen Corp. 25,216 1,415,878
Amgen, Inc. (A) 80,863 4,997,333
Bristol-Myers Squibb Co. 52,380 1,498,068
Cephalon Inc. (A) 9,961 480,618
Chiron Corp. (A) 2,869 163,117
Eli Lilly & Co. 43,843 3,083,478
Johnson & Johnson 151,532 7,828,143
MedImmune Inc. (A) 37,349 949,412
Merck & Co., Inc. 115,029 5,314,340
Pfizer, Inc. 385,411 13,616,571
Schering-Plough Corp. 44,140 767,595
Wyeth 55,883 2,372,233
--------------
42,486,786
--------------
REFINING (0.2%)
Newmont Mining Corp. 20,154 979,686
--------------
-10-
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS - CONTINUED
DECEMBER 31, 2003
NO. OF FAIR
SHARES VALUE
-------------- --------------
RETAILERS (7.7%)
AutoZone, Inc. (A) 13,255 $ 1,129,459
Best Buy 31,843 1,663,478
Big Lots (A) 94,396 1,341,367
Costco Wholesale (A) 22,479 836,444
CVS Corp. 23,320 842,318
Dollar General 100,791 2,115,603
Dollar Tree Stores (A) 20,193 605,891
Federated Department Stores, Inc. 12,888 607,411
Gap Inc. 34,597 802,996
Home Depot, Inc. 151,791 5,387,063
J.C. Penney 18,820 494,590
Jones Apparel Group 7,259 255,735
Liz Claiborne Inc. 48,598 1,723,285
Lowe's Cos. 56,669 3,138,896
PETsMART Inc. 53,516 1,272,343
Pier 1 Imports 37,362 816,733
Staples Inc. (A) 103,238 2,817,881
Target Corp. 40,494 1,554,970
Toys R Us (A) 73,677 931,277
Wal-Mart Stores 212,950 11,296,998
--------------
39,634,738
--------------
SERVICES (3.2%)
AutoNation Inc. (A) 15,519 285,084
Biogen Inc. (A) 32,267 1,186,942
Boston Scientific Corp. (A) 84,394 3,102,323
Cendant Corp. (A) 53,666 1,195,142
eBay, Inc. 47,494 3,068,825
KLA-Tencor Corp. (A) 30,926 1,814,892
Lincare Holdings, Inc. (A) 40,444 1,216,758
Medtronic, Inc. 44,316 2,154,201
Paychex Inc. 5,408 201,205
Weight Watchers International (A) 17,614 675,849
Yahoo Inc. (A) 37,419 1,690,403
--------------
16,591,624
--------------
TECHNOLOGY (17.1%)
American Tower Corp. (A) 120,111 1,299,601
Analog Devices, Inc. 54,040 2,466,926
Autodesk 53,291 1,307,495
Avnet Inc. (A) 39,912 864,494
BMC Software Inc. (A) 36,091 673,097
Cisco Systems, Inc. (A) 414,118 10,063,067
Computer Associates International 76,044 2,079,043
Comverse Technology (A) 85,093 1,497,211
Cooper Industries Ltd. 8,915 516,446
Corning Inc. (A) 69,275 722,538
Dell Inc. (A) 94,114 3,195,170
EMC Corp. (A) 64,839 837,720
Hewlett Packard Co. 150,497 3,456,916
Ingram Micro Inc. (A) 78,708 1,251,457
Intel Corp. 284,702 9,126,123
International Business Machines Corp. 79,911 7,406,151
Intuit Inc. (A) 10,519 556,876
ITT Industries 16,777 1,245,021
L-3 Communications Holdings Inc. (A) 6,609 339,438
Lam Research (A) 22,994 741,901
Mattel, Inc. 21,437 413,091
Maxim Integrated Products 17,857 888,832
McDATA Corp. (A) 130,533 1,247,895
Mettler-Toledo International (A) 7,565 319,319
Micron Technology, Inc. (A) 38,581 519,686
Microsoft 532,950 14,664,119
National Instruments Corp. 10,377 471,220
Nvidia Corp. (A) 60,769 1,414,702
Oracle Corp. (A) 232,747 3,073,424
Pentair, Inc. 26,898 1,229,239
QUALCOMM, Inc. 53,256 2,870,498
Scientific-Atlanta, Inc. 51,534 1,406,878
Teleflex Inc. 17,764 858,534
Teradyne Inc. (A) 78,415 1,995,662
Texas Instruments, Inc. 125,247 3,679,757
Thomas & Betts Corp. 28,649 655,776
VERITAS Software Corp. (A) 56,083 2,083,483
Xerox Corp. (A) 66,359 915,754
--------------
88,354,560
--------------
-11-
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS - CONTINUED
DECEMBER 31, 2003
NO. OF FAIR
SHARES VALUE
------------- --------------
TELECOMMUNICATIONS (2.9%)
ALLTEL Corp. 15,297 $ 712,534
AT&T Wireless Services (A) 234,417 1,872,992
BellSouth Corp. 44,103 1,248,115
CenturyTel, Inc. 56,789 1,852,457
Citizens Communications (A) 117,034 1,453,562
NEXTEL Communications (A) 49,828 1,396,181
SBC Communications, Inc. 94,477 2,463,015
Sprint Corp. - PCS Group 18,626 305,839
Verizon Communications 101,163 3,548,798
--------------
14,853,493
--------------
TEXTILE (0.2%)
NIKE, Inc. 11,411 781,197
--------------
TOBACCO (1.6%)
Altria Group 99,378 5,408,151
Fortune Brands 38,466 2,749,934
--------------
8,158,085
--------------
TRANSPORTATION SERVICES (0.9%)
PACCAR Inc. 8,135 692,695
United Parcel 55,322 4,124,255
--------------
4,816,950
--------------
U.S. AGENCY (1.2%)
Federal Association National Mortgage 41,868 3,142,612
Federal Home Loan Mortgage Corp. 37,206 2,169,854
SLM Corp. 21,616 814,491
--------------
6,126,957
--------------
UTILITIES (2.6%)
Alliant Energy Corp. 50,414 1,255,309
Ameren Corp. 35,159 1,617,314
CMS Energy Corp. (A) 51,942 442,546
Constellation Energy Group 40,849 1,599,647
Duke Energy 106,522 2,178,375
Edison International (A) 48,464 1,062,816
Exelon Corp. 43,743 2,902,785
Public Service Enterprise 36,134 1,582,669
Southern Co. 28,459 860,885
--------------
13,502,346
--------------
TOTAL COMMON STOCKS
(COST $463,611,849) 503,100,759
--------------
PRINCIPAL FAIR
AMOUNT VALUE
-------------- --------------
SHORT-TERM INVESTMENTS (2.7%)
COMMERCIAL PAPER (2.3%)
American Express Credit Corp.,
1.08% due January 14, 2004 $ 5,100,000 $ 5,097,940
Morgan Stanley Dean Witter & Co.,
1.10% due January 8, 2004 5,000,000 4,998,845
Toyota Motor Credit Corp.,
1.08% due January 22, 2004 1,134,000 1,133,279
UBS Financial Inc.,
0.95% due January 2, 2004 373,000 372,990
--------------
11,603,054
--------------
U.S. TREASURY (0.4%)
United States of America Treasury,
1.03% due February 5, 2004 (B) 1,900,000 1,898,507
--------------
TOTAL SHORT-TERM
INVESTMENTS (COST $13,501,402) 13,501,561
--------------
NOTIONAL
VALUE
-------------
FUTURES CONTRACTS (0.0%)
S&P 500 Stock Index,
Exp. March, 2004 (C) $ 12,494,250 --
--------------
TOTAL INVESTMENTS (100%)
(COST $477,113,251) (D) $ 516,602,320
==============
-12-
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS - CONTINUED
DECEMBER 31, 2003
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 December 31, 2003, net unrealized appreciation for all securities was
$39,489,069. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of fair value over cost of
$69,999,672 and aggregate gross unrealized depreciation for all securities
in which there was an excess of cost over fair value of $30,510,603.
See Notes to Financial Statements
-13-
INDEPENDENT AUDITORS' REPORT
The Board of Managers and the Owners of Variable Annuity Contracts of
The Travelers Growth and Income Stock Account for Variable Annuities:
We have audited the accompanying statement of assets and liabilities of The
Travelers Growth and Income Stock Account for Variable Annuities, including the
statement of investments, as of December 31, 2003, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the years in the two-year period then ended, and the selected per unit
data and ratios for each of the years in the five-year period then ended. These
financial statements and selected per unit data and ratios are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and selected per unit data and ratios
based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and selected per unit data and ratios are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements and selected per unit
data and ratios. Our procedures included confirmation of securities owned as of
December 31, 2003, by correspondence with custodians and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and selected per unit data and ratios
referred to above present fairly, in all material respects, the financial
position of The Travelers Growth and Income Stock Account for Variable Annuities
as of December 31, 2003, the results of its operations for the year then ended,
the changes in its net assets for each of the years in the two-year period then
ended, and the selected per unit data and ratios for each of the years in the
five-year period then ended, in conformity with accounting principles generally
accepted in the United States of America.
/s/ KPMG LLP
Hartford, Connecticut
February 17, 2004
-14-
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2003
ASSETS:
Investment securities, at fair value (cost $107,918,019) ..... $110,251,373
Cash ......................................................... 883
Receivables:
Interest ................................................... 1,205,664
Purchase payments and transfers from other funding options . 41,258
Other assets ................................................. 1,439
------------
Total Assets ............................................. 111,500,617
------------
LIABILITIES:
Payables:
Contract surrenders and transfers to other funding options . 20,472
Investment management and advisory fees .................... 4,951
Insurance charges .......................................... 17,796
Accrued liabilities .......................................... 3,753
------------
Total Liabilities ........................................ 46,972
------------
NET ASSETS: $111,453,645
============
See Notes to Financial Statements
-15-
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2003
INVESTMENT INCOME:
Interest .......................................................... $ 5,582,521
EXPENSES:
Investment management and advisory fees ........................... $ 367,941
Insurance charges ................................................. 1,344,273
-----------
Total expenses .................................................. 1,712,214
-----------
Net investment income (loss) .................................. 3,870,307
-----------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES:
Realized gain (loss) from investment security transactions:
Proceeds from investment securities sold ........................ 114,071,037
Cost of investment securities sold .............................. 117,458,308
-----------
Net realized gain (loss) ...................................... (3,387,271)
Change in unrealized gain (loss) on investment securities:
Unrealized gain (loss) at December 31, 2003 ..................... 2,333,354
Unrealized gain (loss) at December 31, 2002 ..................... (6,836,289)
-----------
Net change in unrealized gain (loss) for the year ............. 9,169,643
-----------
Net realized gain (loss) and change in unrealized gain (loss) 5,782,372
-----------
Net increase (decrease) in net assets resulting from operations ..... $ 9,652,679
===========
See Notes to Financial Statements
-16-
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
2003 2002
---- ----
OPERATIONS:
Net investment income (loss) ........................................... $ 3,870,307 $ 5,164,126
Net realized gain (loss) from investment security transactions ......... (3,387,271) (3,108,098)
Net change in unrealized gain (loss) on investment securities .......... 9,169,643 (1,649,238)
------------- -------------
Net increase (decrease) in net assets resulting from operations ...... 9,652,679 406,790
------------- -------------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 747,578 and 970,567 units, respectively) .............. 5,016,359 6,020,842
Participant transfers from other funding options
(applicable to 2,091,858 and 1,840,387 units, respectively) .......... 14,023,583 11,390,851
Administrative charges
(applicable to 12,788 and 15,036 units, respectively) ................ (88,426) (93,554)
Contract surrenders
(applicable to 2,007,854 and 2,477,747 units, respectively) .......... (13,546,840) (15,412,418)
Participant transfers to other funding options
(applicable to 2,177,370 and 3,053,338 units, respectively) .......... (14,621,732) (18,818,812)
Other payments to participants
(applicable to 169,426 and 157,757 units, respectively) .............. (1,169,671) (993,160)
------------- -------------
Net increase (decrease) in net assets resulting from unit transactions (10,386,727) (17,906,251)
------------- -------------
Net increase (decrease) in net assets .............................. (734,048) (17,499,461)
NET ASSETS:
Beginning of year ...................................................... 112,187,693 129,687,154
------------- -------------
End of year ............................................................ $ 111,453,645 $ 112,187,693
============= =============
See Notes to Financial Statements
-17-
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Quality Bond Account for Variable Annuities ("Account QB")
is a separate account of The Travelers Insurance Company ("The 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. There were no repurchase agreements in Account QB in
2003.
-18-
NOTES TO FINANCIAL STATEMENTS - 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 $61,919,522 and $61,946,945,
respectively; the costs of purchases and proceeds from sales of direct and
indirect U.S. government securities were $77,469,373 and $72,433,416,
respectively, for the year ended December 31, 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 $4,296 and $4,708 for the years ended December
31, 2003 and 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 $58,765 and
$78,280 for the years ended December 31, 2003 and 2002, respectively.
-19-
NOTES TO FINANCIAL STATEMENTS - CONTINUED
4. NET ASSETS HELD ON BEHALF OF AN AFFILIATE
Approximately $115,000 and $131,000 of the net assets of Account QB were
held on behalf of an affiliate of The Company as of December 31, 2003 and
2002, respectively. Transactions with this affiliate during the years
ended December 31, 2003 and 2002, were comprised of participant purchase
payments of approximately $71,000 and $80,000 and contract surrenders of
approximately $98,000 and $152,000, respectively.
5. NET CONTRACT OWNERS' EQUITY
DECEMBER 31, 2003
----------------------------------------------
UNIT NET
UNITS VALUE ASSETS
----- ----- ------
Accumulation phase of contracts issued prior to May 16, 1983 ............... 4,161,300 $ 7.281 $ 30,305,128
Annuity phase of contracts issued prior to May 16, 1983 .................... 45,619 7.281 332,229
Accumulation phase of contracts issued on or after May 16, 1983 ............ 11,674,715 6.917 80,766,504
Annuity phase of contracts issued on or after May 16, 1983 ................. 7,196 6.917 49,784
-------------
Net Contract Owners' Equity .............................................................................. $ 111,453,645
=============
-20-
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SUPPLEMENTARY INFORMATION
(Selected data for a unit outstanding throughout each year.)
Contracts issued prior to May 16, 1983
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------
2003 2002 2001 2000 1999
---- ---- ---- ---- ----
SELECTED PER UNIT DATA:
Total investment income ................................... $ .345 $ .381 $ .421 $ .446 $ .393
Operating expenses ........................................ .093 .086 .089 .081 .080
------- ------- ------- ------- -------
Net investment income (loss) .............................. .252 .295 .332 .365 .313
Unit value at beginning of year ........................... 6.674 6.608 6.335 6.055 5.994
Net realized and change in unrealized gains (losses) ...... .355 (.229) (.059) (.085) (.252)
------- ------- ------- ------- -------
Unit value at end of year ................................. $ 7.281 $ 6.674 $ 6.608 $ 6.335 $ 6.055
======= ======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value ..................... $ .61 $ .07 $ .27 $ .28 $ .06
Ratio of operating expenses to average net assets ......... 1.33% 1.33% 1.33% 1.33% 1.33%
Ratio of net investment income (loss) to average net assets 3.58% 4.56% 4.99% 5.93% 5.22%
Number of units outstanding at end of year (thousands) .... 4,207 4,684 5,194 5,491 6,224
Portfolio turnover rate ................................... 139% 113% 166% 105% 340%
Contracts issued on or after May 16, 1983
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------
2003 2002 2001 2000 1999
---- ---- ---- ---- ----
SELECTED PER UNIT DATA:
Total investment income ................................... $ .328 $ .363 $ .402 $ .427 $ .378
Operating expenses ........................................ .105 .097 .101 .092 .091
------- ------- ------- ------- -------
Net investment income (loss) .............................. .223 .266 .301 .335 .287
Unit value at beginning of year ........................... 6.356 6.309 6.063 5.810 5.765
Net realized and change in unrealized gains (losses) ...... .338 (.219) (.055) (.082) (.242)
------- ------- ------- ------- -------
Unit value at end of year ................................. $ 6.917 $ 6.356 $ 6.309 $ 6.063 $ 5.810
======= ======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value ..................... $ .56 $ .05 $ .25 $ .25 $ .04
Ratio of operating expenses to average net assets ......... 1.57% 1.57% 1.57% 1.57% 1.57%
Ratio of net investment income (loss) to average net assets 3.33% 4.31% 4.74% 5.69% 4.97%
Number of units outstanding at end of year (thousands) .... 11,682 12,733 15,116 14,045 17,412
Portfolio turnover rate ................................... 139% 113% 166% 105% 340%
-21-
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS
DECEMBER 31, 2003
PRINCIPAL FAIR
AMOUNT VALUE
------------ -------------
BONDS (70.2%)
AEROSPACE (0.1%)
Bombardier Inc., 6.75% Debentures, 2012 (A)...................................... $ 100,000 $ 109,750
-------------
AIRLINES (0.6%)
Delta Airlines Inc., 9.25% Debentures, 2007..................................... 889,913 654,086
-------------
ASSET BACKED SECURITIES (6.4%)
CA Infrastructure, 6.42% Debentures, 2008....................................... 965,866 1,027,920
Chase Funding Mortgage Loan Asset Backed Certificate, 5.83% Debentures, 2032 500,000 525,576
Daimler Chrysler Auto, 4.63% Debentures, 2006................................... 1,500,000 1,542,888
Discover Card Mt, 6.05% Debentures, 2008........................................ 1,100,000 1,183,976
Ford Credit Auto Owner Trust, 4.75% Debentures, 2006............................ 1,400,000 1,454,411
Metris MT, 1.37% Debentures, 2007............................................... 100,000 100,061
Toyota Auto Recovery Owner Trust, 2.65% Debentures, 2006........................ 1,200,000 1,211,531
-------------
7,046,363
-------------
AUTOMOTIVE (1.0%)
Daimler Chrysler NA Holdings, 4.05% Debentures, 2008............................ 1,130,000 1,123,429
-------------
BANKING (3.5%)
Credit Suisse First Boston Corp., 6.13% Debentures, 2011........................ 300,000 327,133
Fleet Financial Group, 7.13% Debentures, 2006................................... 1,250,000 1,378,176
J.P. Morgan Chase & Co., 5.75% Debentures, 2013................................. 1,100,000 1,161,976
U.S. Bancorp NA MN, 2.85% Debentures, 2006...................................... 1,000,000 1,005,524
-------------
3,872,809
-------------
BROKERAGE (3.1%)
Goldman Sachs Group Inc., 4.75% Debentures, 2013................................ 1,100,000 1,074,054
Merrill Lynch & Co. Inc., 3.38% Debentures, 2007................................ 700,000 709,654
Morgan Stanley Dean Witter & Co., 6.60% Debentures, 2012........................ 1,400,000 1,566,093
-------------
3,349,801
-------------
COLLATERALIZED MORTGAGE OBLIGATIONS (3.3%)
Credit Suisse First Boston Corp., 4.90% Debentures, 2036........................ 1,000,000 1,002,495
J.P. Morgan Chase & Co., 4.88% Debentures, 2038................................. 1,000,000 1,001,455
LB UBS Commercial Mortgage Trust, 4.85% Debentures, 2031........................ 670,000 678,122
Wachovia Bank Commercial Mortgage, 4.96% Debentures, 2035....................... 900,000 926,717
-------------
3,608,789
-------------
-22-
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS - CONTINUED
DECEMBER 31, 2003
PRINCIPAL FAIR
AMOUNT VALUE
------------ -------------
CONGLOMERATES (1.9%)
General Electric Capital Corp., 5.45% Debentures, 2013.......................... $ 1,000,000 $ 1,042,179
Hutchinson Whampoa Ltd., 6.25% Debentures, 2014 (A)............................. 1,000,000 1,017,642
-------------
2,059,821
-------------
CONSUMER (1.2%)
Diageo Plc., 3.00% Debentures, 2006............................................. 1,000,000 1,005,934
Sealed Air., 5.63% Debentures, 2013 (A)......................................... 300,000 307,551
-------------
1,313,485
-------------
DEFENSE (2.1%)
Northrop Grumman Corp., 8.63% Debentures, 2004.................................. 2,000,000 2,107,304
Raytheon Co., 5.38% Debentures, 2013............................................ 200,000 200,705
-------------
2,308,009
-------------
FINANCE (4.4%)
Ford Motor Credit Co., 6.88% Debentures, 2006................................... 1,000,000 1,067,825
Ford Motor Credit Co., 7.00% Debentures, 2013................................... 700,000 739,583
General Motors Acceptance Corp., 7.25% Debentures, 2011......................... 1,400,000 1,538,114
Household Financial Corp., 6.38% Debentures, 2012............................... 1,400,000 1,538,510
-------------
4,884,032
-------------
HOME CONSTRUCTION (0.5%)
M.D.C. Holdings, 5.50% Debentures, 2013......................................... 500,000 501,958
-------------
INDEPENDENT ENERGY (0.4%)
Anadarko Petroleum 6.75% Debentures, 2011....................................... 400,000 454,118
-------------
INSURANCE (1.7%)
Massachusetts Mutual Life, 2.55% Debentures, 2008 (A)........................... 900,000 861,675
New York Life, 5.38% Debentures, 2013 (A)....................................... 1,000,000 1,033,617
-------------
1,895,292
-------------
MEDIA CABLE (7.0%)
AOL Time Warner Inc., 6.15% Debentures, 2007................................... 2,400,000 2,613,650
Comcast Cable Communications, 8.50% Debentures, 2027............................ 500,000 642,820
Cox Enterprises Inc., 7.88% Debentures, 2010 (A)................................ 3,800,000 4,506,291
-------------
7,762,761
-------------
MEDIA NON-CABLE (1.0%)
Liberty Media Corp., 2.67% Debentures, 2006..................................... 1,100,000 1,112,825
-------------
NATURAL GAS PIPELINE (7.1%)
Duke Energy Field Service, 7.50% Debentures, 2005............................... 500,000 537,478
El Paso Corp., 6.95% Debentures, 2007........................................... 2,500,000 2,415,625
Gemstone Investments Ltd., 7.71% Debentures, 2004 (A)........................... 2,000,000 2,030,000
Southern California Gas Co., 4.38% Debentures, 2011............................. 400,000 400,511
Transcontinental Gas Pipeline, 6.13% Debentures, 2005.......................... 2,400,000 2,451,000
-------------
7,834,614
-------------
-23-
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS - CONTINUED
DECEMBER 31, 2003
PRINCIPAL FAIR
AMOUNT VALUE
------------ -------------
PHARMACEUTICALS (1.1%)
Wyeth, 5.50% Debentures, 2014................................................... $ 1,200,000 $ 1,216,030
-------------
REAL ESTATE (8.4%)
Canada Mortgage & Housing Corp., 3.38% Debentures, 2008......................... 2,000,000 1,995,478
Nationwide Health Properties Inc., 6.90% Debentures, 2037....................... 4,500,000 4,601,538
Post Apartment Homes LP, 6.85% Debentures, 2005................................. 2,510,000 2,612,907
-------------
9,209,923
-------------
RETAIL (2.2%)
Wal-Mart Stores Inc., 4.55% Debentures, 2013.................................... 2,500,000 2,473,975
-------------
SUPERMARKETS (1.0%)
Fred Meyer Inc., 7.45% Debentures, 2008......................................... 1,000,000 1,139,963
-------------
TELECOMMUNICATIONS (4.0%)
Deutsche Telekom, 8.25% Debentures, 2005........................................ 1,100,000 1,193,723
NY Tel Co., 7.00% Debentures, 2025.............................................. 1,700,000 1,735,952
Telecom Italia S.p.A., 5.25% Debentures, 2013 (A)............................... 1,500,000 1,506,431
-------------
4,436,106
-------------
TOBACCO (0.8%)
Altria Group, 5.63% Debentures, 2008............................................ 900,000 924,224
-------------
UTILITIES (7.4%)
PSEG Energy Holdings, 8.63% Debentures, 2008.................................... 450,000 493,312
Pepco Holdings Inc., 5.50% Debentures, 2007..................................... 1,600,000 1,712,944
Progress Energy Inc., 6.05% Debentures, 2007.................................... 2,700,000 2,901,169
SP Powerassets Ltd., 5.00% Debentures, 2013..................................... 900,000 906,870
SCANA Corp., 1.62% Debentures, 2006............................................. 1,000,000 1,000,399
Xcel Energy Inc., 3.40% Debentures, 2008 (A).................................... 1,200,000 1,173,097
-------------
8,187,791
-------------
TOTAL BONDS
(COST $75,146,851).............................................................. 77,479,954
-------------
-24-
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS - CONTINUED
DECEMBER 31, 2003
PRINCIPAL FAIR
AMOUNT VALUE
------------ -------------
UNITED STATES GOVERNMENT SECURITIES (24.4%)
United States of America Treasury, 1.63% due October 2005....................... $ 9,000,000 $ 8,988,759
United States of America Treasury, 3.50% due November 2006...................... 3,075,000 3,179,384
United States of America Treasury, 3.13% due September 2008..................... 4,500,000 4,498,772
United States of America Treasury, 3.38% due November 2008...................... 2,630,000 2,651,679
United States of America Treasury, 4.75% due November 2008...................... 975,000 1,044,089
United States of America Treasury, 6.50% due February 2010...................... 1,100,000 1,278,578
United States of America Treasury, 5.00% due August 2011........................ 1,250,000 1,338,086
United States of America Treasury, 4.25% due November 2013...................... 3,882,000 3,878,968
-------------
TOTAL UNITED STATES GOVERNMENT SECURITIES
(COST $26,857,970)............................................................... 26,858,315
-------------
SHORT-TERM INVESTMENTS (5.4%)
COMMERCIAL PAPER (5.4%)
Comcast Cable Communications, 8.13% due May, 2004............................... 200,000 203,943
Beethoven Funding Corp., 1.02% due January, 2004................................ 3,609,000 3,608,899
Sears Roebuck Acceptance Corp., 4.10% due January, 2004......................... 2,100,000 2,100,262
-------------
TOTAL SHORT-TERM INVESTMENTS (COST $5,913,198).................................... 5,913,104
-------------
TOTAL INVESTMENTS (100%)
(COST $107,918,019) (B).......................................................... $ 110,251,373
=============
NOTES
(A) Restricted Security.
(B) At December 31, 2003 net unrealized appreciation for all securities was
$2,333,354. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of fair value over cost of
$2,808,418 and aggregate gross unrealized depreciation for all securities
in which there was an excess of cost over fair value of $475,064.
See Notes to Financial Statement
-25-
INDEPENDENT AUDITORS' REPORT
The Board of Managers and the Owners of Variable Annuity Contracts of
The Travelers Quality Bond Account for Variable Annuities:
We have audited the accompanying statement of assets and liabilities of The
Travelers Quality Bond Account for Variable Annuities, including the statement
of investments, as of December 31, 2003, and the related statement of operations
for the year then ended, the statements of changes in net assets for each of the
years in the two-year period then ended, and the selected per unit data and
ratios for each of the years in the five-year period then ended. These financial
statements and selected per unit data and ratios are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and selected per unit data and ratios based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and selected per unit data and ratios are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements and selected per unit
data and ratios. Our procedures included confirmation of securities owned as of
December 31, 2003, by correspondence with custodians and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and selected per unit data and ratios
referred to above present fairly, in all material respects, the financial
position of The Travelers Quality Bond Account for Variable Annuities as of
December 31, 2003, the results of its operations for the year then ended, the
changes in its net assets for each of the years in the two-year period then
ended, and the selected per unit data and ratios for each of the years in the
five-year period then ended, in conformity with accounting principles generally
accepted in the United States of America.
/s/ KPMG LLP
Hartford, Connecticut
February 17, 2004
-26-
THE TRAVELERS MONEY MARKET ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2003
Investment securities, at fair value (cost $88,800,747) ....... $88,799,574
Cash .......................................................... 447,502
Receivables:
Interest .................................................... 10,650
Purchase payments and transfers from other funding options .. 42,600
Other assets .................................................. 316
-----------
Total Assets .............................................. 89,300,642
-----------
LIABILITIES:
Payables:
Contract surrenders and transfers to other funding options .. 176,712
Investment management and advisory fees ..................... 3,961
Insurance charges ........................................... 15,312
-----------
Total Liabilities ......................................... 195,985
-----------
NET ASSETS: $89,104,657
===========
See Notes to Financial Statements
-27-
THE TRAVELERS MONEY MARKET ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2003
INVESTMENT INCOME:
Interest ...................................................... $ 1,356,472
EXPENSES:
Investment management and advisory fees ....................... $ 371,959
Insurance charges ............................................. 1,437,814
----------
Total expenses .............................................. 1,809,773
-----------
Net investment income (loss) .............................. (453,301)
-----------
Net increase (decrease) in net assets resulting from operations $ (453,301)
===========
See Notes to Financial Statements
-28-
THE TRAVELERS MONEY MARKET ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
2003 2002
---- ----
OPERATIONS:
Net investment income (loss) ........................................... $ (453,301) $ 299,502
------------- -------------
Net increase (decrease) in net assets resulting from operations ...... (453,301) 299,502
------------- -------------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 3,738,508 and 5,858,558 units, respectively) .......... 10,242,509 16,062,122
Participant transfers from other funding options
(applicable to 37,539,587 and 64,672,611 units, respectively) ........ 102,847,832 177,339,495
Administrative charges
(applicable to 47,013 and 54,859 units, respectively) ................ (128,680) (150,505)
Contract surrenders
(applicable to 10,956,438 and 13,961,585 units, respectively) ........ (30,017,360) (38,286,908)
Participant transfers to other funding options
(applicable to 48,091,621 and 68,317,728 units, respectively) ........ (131,747,666) (187,327,842)
Other payments to participants
(applicable to 335,989 and 935,674 units, respectively) .............. (922,085) (2,566,662)
------------- -------------
Net increase (decrease) in net assets resulting from unit transactions (49,725,450) (34,930,300)
------------- -------------
Net increase (decrease) in net assets .............................. (50,178,751) (34,630,798)
NET ASSETS:
Beginning of year ...................................................... 139,283,408 173,914,206
------------- -------------
End of year ............................................................ $ 89,104,657 $ 139,283,408
============= =============
See Notes to Financial Statements
-29-
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Money Market Account for Variable Annuities ("Account MM")
is a separate account of The Travelers Insurance Company ("The 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. There were no repurchase agreements in Account MM for
2003.
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.
-30-
NOTES TO FINANCIAL STATEMENTS - 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 $243,226 and $361,097 for the years ended December 31, 2003 and
2002, respectively.
3. NET ASSETS HELD ON BEHALF OF AN AFFILIATE
Approximately $1,185,000 and $2,208,000 of the net assets of Account MM
were held on behalf of an affiliate of The Company as of December 31, 2003
and 2002, respectively. Transactions with this affiliate during the years
ended December 31, 2003 and 2002, were comprised of participant purchase
payments of approximately $523,000 and $813,000 and contract surrenders of
approximately $1,541,000 and $885,000, respectively.
4. NET CONTRACT OWNERS' EQUITY
DECEMBER 31, 2003
----------------------------------------------
UNIT NET
UNITS VALUE ASSETS
----- ----- ------
Accumulation phase of contracts issued prior to May 16, 1983 ............. 24,218 $ 2.877 $ 69,678
Annuity phase of contracts issued prior to May 16, 1983 .................. 15,368 2.877 44,215
Accumulation phase of contracts issued on or after May 16, 1983 .......... 32,479,138 2.733 88,773,330
Annuity phase of contracts issued on or after May 16, 1983 ............... 79,552 2.733 217,434
------------
Net Contract Owners' Equity .............................................................................. $ 89,104,657
============
-31-
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. SUPPLEMENTARY INFORMATION
(Selected data for a unit outstanding throughout each year.)
Contracts issued prior to May 16, 1983
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------
2003 2002 2001 2000 1999
---- ---- ---- ---- ----
SELECTED PER UNIT DATA:
Total investment income ................................... $ .033 $ .051 $ .120 $ .174 $ .135
Operating expenses ........................................ .038 .038 .037 .037 .034
------- ------- ------- ------- -------
Net investment income (loss) .............................. (.005) .013 .083 .137 .101
Unit value at beginning of year ........................... 2.882 2.869 2.786 2.649 2.548
------- ------- ------- ------- -------
Unit value at end of year ................................. $ 2.877 $ 2.882 $ 2.869 $ 2.786 $ 2.649
======= ======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value ..................... $ (.01) $ .01 $ .08 $ .14 $ .10
Ratio of operating expenses to average net assets ......... 1.33% 1.33% 1.33% 1.33% 1.33%
Ratio of net investment income (loss) to average net assets (0.16)% 0.46% 2.89% 5.09% 3.87%
Number of units outstanding at end of year (thousands) .... 39 49 60 70 80
Contracts issued on or after May 16, 1983
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------------
2003 2002 2001 2000 1999
---- ---- ---- ---- ----
SELECTED PER UNIT DATA:
Total investment income ................................... $ .032 $ .048 $ .114 $ .167 $ .130
Operating expenses ........................................ .043 .043 .042 .041 .039
------- ------- ------- ------- -------
Net investment income (loss) .............................. (.011) .005 .072 .126 .091
Unit value at beginning of year ........................... 2.744 2.739 2.667 2.541 2.450
------- ------- ------- ------- -------
Unit value at end of year ................................. $ 2.733 $ 2.744 $ 2.739 $ 2.667 $ 2.541
======= ======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value ..................... $ (.01) $ .01 $ .07 $ .13 $ .09
Ratio of operating expenses to average net assets ......... 1.57% 1.57% 1.57% 1.57% 1.57%
Ratio of net investment income (loss) to average net assets (0.41)% 0.21% 2.64% 4.84% 3.62%
Number of units outstanding at end of period (thousands) .. 32,559 50,702 63,430 55,477 70,545
-32-
THE TRAVELERS MONEY MARKET ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS
DECEMBER 31, 2003
PRINCIPAL FAIR
AMOUNT VALUE
------------- -------------
SHORT-TERM INVESTMENTS (100%)
COMMERCIAL PAPER (95.5%)
Aegon Funding Corp., 1.11% due January 13, 2004............................. $ 4,500,000 $ 4,498,308
American Express Credit Corp., 1.07% due January 14, 2004................... 4,400,000 4,398,222
American General Financial Corp., 1.08 % due February 18, 2004.............. 4,500,000 4,493,506
American Honda Financial Corp., 1.07 % due January 28, 2004................. 4,500,000 4,496,360
Beethoven Funding Corp., 1.16% due January 27,2004.......................... 4,300,000 4,296,452
Bryant Park Funding LLC, 1.13% due January 30, 2004......................... 4,100,000 4,096,329
Crown Point Capital Co LLC, 1.15% due January 12, 2004...................... 4,300,000 4,298,512
E.I. duPont de Nemours & Co., 1.06% due January 28, 2004.................... 4,200,000 4,196,602
General Electric Capital Corp., 1.09% due January 7, 2004................... 4,200,000 4,199,152
Hannover Funding Co LLC, 1.14% due January 21, 2004......................... 4,300,000 4,297,320
Household Financial Corp., 1.10% due January 22, 2004....................... 4,267,000 4,264,286
Morgan Stanley Dean Witter & Co., 1.10% due January 16, 2004................ 4,200,000 4,198,060
Nestle Capital Corp., 1.06% due February 3, 2004............................ 4,500,000 4,495,496
Nordea North America Inc., 1.10% due January 20, 2004....................... 4,500,000 4,497,399
Pfizer Inc., 1.05% due January 23, 2004..................................... 4,500,000 4,497,012
Toronto Dominion Bank, 1.10% due March 24, 2004............................. 4,144,000 4,144,033
Toyota Motor Credit Corp., 1.07% due February 24, 2004...................... 4,200,000 4,193,200
UBS Financial Inc., 0.95% due January 2, 2004............................... 2,096,000 2,095,945
Volkswagen of America Inc., 1.08% due January 22, 2004...................... 4,449,000 4,446,170
Wells Fargo Bank NA, 1.04% due January 15, 2004............................. 4,700,000 4,699,958
-------------
84,802,322
-------------
UNITED STATES AGENCY SECURITIES (4.5%)
Federal Home Loan Mortgage Corp., 1.03% due January 27, 2004............... 4,000,000 3,997,252
-------------
TOTAL INVESTMENTS (100%)
(COST $88,800,747)......................................................... $ 88,799,574
=============
-33-
INDEPENDENT AUDITORS' REPORT
The Board of Managers and the Owners of Variable Annuity Contracts of
The Travelers Money Market Account for Variable Annuities:
We have audited the accompanying statement of assets and liabilities of The
Travelers Money Market Account for Variable Annuities, including the statement
of investments, as of December 31, 2003, and the related statement of operations
for the year then ended, the statements of changes in net assets for each of the
years in the two-year period then ended, and the selected per unit data and
ratios for each of the years in the five-year period then ended. These financial
statements and selected per unit data and ratios are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and selected per unit data and ratios based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and selected per unit data and ratios are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements and selected per unit
data and ratios. Our procedures included confirmation of securities owned as of
December 31, 2003, by correspondence with custodians and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and selected per unit data and ratios
referred to above present fairly, in all material respects, the financial
position of The Travelers Money Market Account for Variable Annuities as of
December 31, 2003, the results of its operations for the year then ended, the
changes in its net assets for each of the years in the two-year period then
ended, and the selected per unit data and ratios for each of the years in the
five-year period then ended, in conformity with accounting principles generally
accepted in the United States of America.
/s/ KPMG LLP
Hartford, Connecticut
February 17, 2004
-34-
BOARD OF MANAGERS AND OFFICERS
- -------------------------------------------------------------------------------------------------------------------------
NAME, ADDRESS AND AGE POSITION(S) TERM OF PRINCIPAL OCCUPATION DURING LAST NUMBER OF OTHER
HELD WITH OFFICE# AND FIVE YEARS PORTFOLIOS DIRECTORSHIPS
FUND LENGTH OF IN FUND HELD BY
TIME SERVED COMPLEX DIRECTOR
OVERSEEN BY
DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
*R. Jay Gerken Manager Since 2002 Managing Director (1989 to present) 11 Managing
399 Park Avenue of Citigroup Global Markets Inc. Director of
New York, NY ("CGM"); Chairman, President and CEO CGM
Age 52 of Smith Barney Fund Management LLC;
Travelers Investment Adviser, Inc.
and CitiFund Management Inc.
Chairman, Chief Executive Officer
and President, Board of Managers
(2002-present), six Variable Annuity
Separate Accounts of The Travelers
Insurance Company+; Chairman, Board
of Trustees (2002-present), five
Mutual Funds sponsored by The
Travelers Insurance Company.++
- -------------------------------------------------------------------------------------------------------------------------
Ernest J. Wright Secretary to Since 1994 Vice President and Secretary 11 N/A
One Cityplace the Board (1996-present), Assistant Secretary
Hartford, CT (1994-1996), Counsel (1987-present),
Age 63 The Travelers Insurance Company;
Secretary (1994-present), six
Variable Annuity Separate Accounts
of The Travelers Insurance Company+;
Secretary (1994-present), five
Mutual Funds sponsored by The
Travelers Insurance Company.++
- -------------------------------------------------------------------------------------------------------------------------
Kathleen A. McGah Assistant Since 1995 Deputy General Counsel (1999 - 11 N/A
One Cityplace Secretary to present); Assistant Secretary
Hartford, CT The Board (1995-present), The Travelers
Age 53 Insurance Company; Assistant
Secretary (1995-present), six
Variable Annuity Separate Accounts
of The Travelers Insurance Company+;
Assistant Secretary, (1995-present),
five Mutual Funds sponsored by The
Travelers Insurance Company.++
- -------------------------------------------------------------------------------------------------------------------------
David A. Golino Principal Since 1998 Vice President and Controller (1999 6 N/A
One Cityplace Accounting - present); Second Vice President
Hartford, CT Officer (1996-1999), The Travelers Insurance
Age 42 Company; Principal Accounting
Officer (1998-present), six Variable
Annuity Separate Accounts of The
Travelers Insurance Company.+
- -------------------------------------------------------------------------------------------------------------------------
William D. Wilcox Chief AML Since 2002 Counsel and Chief AML Compliance 6 N/A
One Cityplace Compliance Officer (1999 - present); The
Hartford, CT Officer Travelers Insurance Company;
Age 39 Chief AML Compliance (2002 -
present), Six Variable Annuity
Separate Accounts of the
Travelers Insurance Company. +
- -------------------------------------------------------------------------------------------------------------------------
-35-
INDEPENDENT MANAGERS**
- -------------------------------------------------------------------------------------------------------------------------
NAME, ADDRESS AND AGE POSITION(S) TERM OF PRINCIPAL OCCUPATION DURING LAST NUMBER OF OTHER
HELD WITH OFFICE# AND FIVE YEARS PORTFOLIOS DIRECTORSHIPS
FUND LENGTH OF IN FUND HELD BY
TIME SERVED COMPLEX DIRECTOR
OVERSEEN BY
DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
Robert E. McGill, III Manager Since 1974 Retired manufacturing executive. 11 None
295 Hancock Street Director (1983-1995), Executive Vice
Williamstown, MA President (1989-1994) and Senior
Age 72 Vice President, Finance and
Administration (1983-1989), The
Dexter Corporation (manufacturer of
specialty chemicals and materials);
Vice Chairman (1990-1992), Director
(1983-1995), Life Technologies, Inc.
(life 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 (1999-2003), 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 Manager Since 1990 Professor of Finance and Managerial 11 Director
160 Jacobs Halls Economics, University at Buffalo (2000-present),
Buffalo, NY since 1998. Dean, School of Delaware
Age 60 Management (1998-2001), University North Corp.
at Buffalo; Dean, College of (hospitality
Business Administration business)
(1995-1998), Marquette University;
Professor of Finance (1980-1995) and
Associate Dean (1993-1995), School
of Business Administration, and
Director, Center for Research and
Development in Financial Services
(1980-1995), University of
Connecticut; 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, Manager Since 1991 Private Investor, (1997-present); 11 None
CFA, CFP Portfolio Manager (1992-1997), HLM
108 Oxford Hill Lane Management Company, Inc. (investment
Downingtown, PA management); Assistant Treasurer,
Age 55 Pensions and Benefits. Management
(1989-1992), United Technologies
Corporation (broad-based designer
and manufacturer of high technology
products); Member, Board of Managers
(1991-present), six Variable Annuity
Separate Accounts of The Travelers
Insurance Company+; Trustee
(1991-present), five Mutual Funds
sponsored by The Travelers Insurance
Company.++
- -------------------------------------------------------------------------------------------------------------------------
-36-
+ 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.
** Mr. Knight Edwards is an Emeritus Manager. An Emeritus Manager is
permitted to attend meetings, but has no voting power.
# Each Manager and officer serves until his or her respective successor has
been duly elected and qualified.
"The Statement of Additional Information for Universal Annuity" contains
additional information about the Trustees and Officers, and is available
without charge, upon request, by calling 1-800-842-9406.
-37-
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 AUDITORS
KPMG LLP
Hartford, Connecticut
CUSTODIAN
JPMORGAN CHASE BANK
New York, New York
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 additional
information on charges and expenses.
All figures represent past performance and the information provided is not
intended to be a forecast of future events, a guarantee of future results or
investment advice. Principal value and investment returns will fluctuate and
investors' units may be worth more or less than their original cost
VG-137 (Annual) (12-03) Printed in U.S.A.
ITEM 2. CODE OF ETHICS.
The registrant has adopted a code of ethics that applies to the
Registrant's prinicipal executive officer, principal financial
officer, Principal accounting officer or controller. Please see
exhibit (a)(1).
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Board of Managers of the registrant has determined that Robert
F. McGill III of the Board's Audit Committee, possesses the
technical attributes identified in Instruction 2(b) of item 3 to
Form N-CSR to qualify as an "Audit Committee financial expert," and
has designated Mr. McGill as the Audit Committee's financial expert.
Mr. McGill is an "independent" Director pursuant to paragraph (a)(2)
of item 3 to Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) The aggregate fees billed by registrant's independent public
accountants, KPMG LLP, for each of the last two fiscal years
for professional services rendered in connection with the
audit of the registrant's annual financial statements or
services that are normally provided by the accountant in
connection with statutory and regulatory filings or
engagements were $56,500 for the year ended December 31,
2002 and $59,500 for the year ended December 31, 2003.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
(e)(1) Audit Committee Pre-Approval Policies and Procedures
The Audit Committee ("Committee") has adopted policies and
procedures to, among other purposes, approve all audit and
non-audit services provided to the Registrant and certain
other persons by the Registrant's independent auditors.
The policies and procedures require the Committee to approve
(a) all audit and permissible non-audit services to be
provided to the Registrant and (b) all permissible non-audit
services to be provided by the Fund's independent auditors
to the Adviser and any Covered Service Providers if the
engagement relates directly to the operations and financial
reporting of the Registrant. In carrying out this
responsibility, the Committee shall seek periodically from
the Adviser and from the independent auditors a list of
audit and permissible non-audit services that can be
expected to be rendered to the Registrant, the Adviser or
any Covered Service Providers by the Registrant's
independent auditors, and an estimate of the fees sought to
be paid in connection with such services. The Committee may
delegate its responsibility to approve any such audit and
permissible non-audit services to a sub-committee consisting
of the Chairperson of the Committee (the "Chairperson") and
at least one other member of the Committee, as the
Chairperson, from time to time, may determine and appoint,
and such sub-committee shall report to the Committee, at its
next meeting after the sub-committee's meeting, its
decision(s). From year to year, and at such other times as
the Committee deems appropriate, the Committee shall report
to the Board whether this system of approval has been
effective and efficient or whether this Charter should be
amended to allow for pre-approval pursuant to such policies
and procedures as the Committee shall approve, including the
delegation of some or all of the Committee's per-approval
responsibilities to other persons (other than the Adviser or
the Fund's officers).
Pre-approval by the Committee of any permissible non-audit
services is not required so long as: (i) the aggregate
amount of all such permissible non-audit services provided
to the Fund, the Adviser and any service providers
controlling, controlled by or under common control with the
Adviser that provide ongoing services to the Fund ("Covered
Service Providers") constitutes not more than 5% of the
total amount of revenues paid to the independent auditors
during the fiscal year in which the permissible non-audit
services are provided by (a) the Fund, (b) the Adviser and
(c) any entity controlling, controlled by or under common
control with the Adviser that provides ongoing services to
the Fund during the fiscal year in which the services are
provided that would have to be approved by the Committee;
(ii) the permissible non-audit services were not recognized
by the Fund at the time of the engagement to be non-audit
services; and (iii) such services are promptly brought to
the attention of the Committee and approved by the Committee
(or its delegate(s)) prior to the completion of the audit.
(e) (2) Not applicable.
(g) Not applicable.
(h) 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 INVESTMENTCOMPANIES.
Not applicable.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 10. 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) In the last 90 days, there have been no significant changes
in the registrant's internal controls or in other factors
that could significantly affect these controls.
ITEM 11. EXHIBITS.
(a)(1) The code of ethics pursuant to item 2 is attached as
EX-99.CODE ETH
(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: February 27, 2004
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: February 27, 2004
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: February 27, 2004