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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
One Cityplace, Hartford, CT 06103
Kathleen A. McGah
One Cityplace
Hartford, CT 06103
(860) 308-6202
Date of fiscal year end: December 31, 2004
Date of reporting period: December 31, 2004
ITEM 1. REPORT(S) TO STOCKHOLDERS.
The Annual Report to stockholders is filed herewith.
ANNUAL REPORTS
DECEMBER 31, 2004
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.
The Travelers Investment Management Company ("TIMCO")
[LOGO OF TIMCO] provides equity management and subadvisory services for
A member of citigroup 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.....................16
THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES.....................31
BOARD OF MANAGERS AND OFFICERS................................................42
[This Page Intentionally Left Blank]
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2004
ASSETS:
Investment securities, at fair value (cost $457,118,648) ..... $525,130,438
Cash ......................................................... 20,777
Receivables:
Dividends .................................................. 644,961
Purchase payments and transfers from other funding options . 182,930
Other assets ................................................. 25,572
------------
Total Assets ............................................. 526,004,678
------------
LIABILITIES:
Payables:
Contract surrenders and transfers to other funding options . 236,020
Investment management and advisory fees .................... 74,160
Variation on futures margin ................................ 7,500
Insurance charges .......................................... 135,669
Accrued liabilities .......................................... 953
------------
Total Liabilities ........................................ 454,302
------------
NET ASSETS: $525,550,376
============
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, 2004
INVESTMENT INCOME:
Dividends ...................................................................... $ 9,393,239
Interest ....................................................................... 173,741
-------------
Total income ................................................................. $ 9,566,980
EXPENSES:
Investment management and advisory fees ........................................ 3,301,527
Insurance charges .............................................................. 6,016,031
-------------
Total expenses ............................................................... 9,317,558
------------
Net investment income (loss) ............................................... 249,422
------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES:
Realized gain (loss) from investment security transactions:
Proceeds from investment securities sold ..................................... 265,720,698
Cost of investment securities sold ........................................... 240,753,114
-------------
Net realized gain (loss) ................................................... 24,967,584
Change in unrealized gain (loss) on investment securities:
Unrealized gain (loss) at December 31, 2004 .................................. 68,011,790
Unrealized gain (loss) at December 31, 2003 .................................. 39,489,069
-------------
Net change in unrealized gain (loss) for the year .......................... 28,522,721
------------
Net realized gain (loss) and change in unrealized gain (loss) ............ 53,490,305
------------
Net increase (decrease) in net assets resulting from operations ................ $ 53,739,727
============
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, 2004 AND 2003
2004 2003
---- ----
OPERATIONS:
Net investment income (loss) ....................................... $ 249,422 $ (633,004)
Net realized gain (loss) from investment security transactions ..... 24,967,584 (11,393,690)
Net change in unrealized gain (loss) on investment securities ...... 28,522,721 123,366,058
------------- -------------
Net increase (decrease) in net assets resulting from operations .. 53,739,727 111,339,364
------------- -------------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 902,159 and 1,271,619 units, respectively) ........ 15,767,591 18,530,423
Participant transfers from other funding options
(applicable to 468,530 and 754,088 units, respectively) .......... 8,184,838 11,209,365
Administrative charges
(applicable to 22,684 and 29,037 units, respectively) ............ (412,112) (458,191)
Contract surrenders
(applicable to 2,787,531 and 3,418,518 units, respectively) ...... (49,336,289) (50,866,631)
Participant transfers to other funding options
(applicable to 976,561 and 1,576,742 units, respectively) ........ (17,069,498) (22,824,923)
Other payments to participants
(applicable to 183,493 and 197,838 units, respectively) .......... (3,341,401) (2,992,921)
------------- -------------
Net increase (decrease) in net assets resulting from unit transactions (46,206,871) (47,402,878)
------------- -------------
Net increase (decrease) in net assets ............................ 7,532,856 63,936,486
NET ASSETS:
Beginning of year .................................................. 518,017,520 454,081,034
------------- -------------
End of year ........................................................ $ 525,550,376 $ 518,017,520
============= =============
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, Universal Select Annuity, and Universal Annuity
Advantage 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 2004.
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 2004.
-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 $211,052,487 and $252,443,434, respectively;
the costs of purchases and proceeds from sales of direct and indirect U.S.
government securities were $6,878,499 and $7,401,970, respectively, for the year
ended December 31, 2004. Realized gains and losses from investment security
transactions are reported on an identified cost basis.
At December 31, 2004, Account GIS held 30 open S&P 500 Stock Index futures
contracts expiring in March, 2005. The underlying face value, or notional value,
of these contracts at December 31, 2004 amounted to $9,102,750. In connection
with these contracts, short-term investments with a par value of $1,400,000 had
been pledged as margin deposits.
Net realized gains (losses) resulting from futures contracts were $601,653 and
$3,542,973 for the years ended December 31, 2004 and 2003, 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, 2004 is shown on the
Statement of Assets and Liabilities as a payable 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.
The asset-based charges listed below are deducted, as appropriate, each business
day and are assessed through the calculation of accumulation and annuity unit
values;
- Mortality and Expense Risks assumed by The Company (M&E)
- Administrative fees paid for administrative expenses (ADM)
- Guaranteed Minimum Withdrawal Benefit, if elected by the contract
owner (GMWB)
Below is a table displaying total M&E and rider charges with their associated
products offered in this Separate Account. The table displays Standard (S) and
Annual Step-Up (SU) death-benefit designations.
-5-
NOTES TO FINANCIAL STATEMENTS - CONTINUED
3. CONTRACT CHARGES (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
Asset-based Charges
--------------------------------------
----------------
Optional Feature
Total M&E and Rider Charges (1) Dth ---------------- Total
(as identified in Note 4) Ben Product M&E GMWB Charge
- ------------------------------------------------------------------------------------------------------------------------------------
Total M&E and Rider Charges 1.00%, 3.5% AIR S Universal Annuity (1) 1.00% 1.00%
Total M&E and Rider Charges 1.25%, 3.0% AIR S Universal Select Annuity 1.25% 1.25%
Total M&E and Rider Charges 1.25%, 3.5% AIR S Universal Annuity (2) 1.25% 1.25%
S Universal Annuity Advantage 1.25% 1.25%
Total M&E and Rider Charges 1.40%, 3.0% AIR SU Universal Select Annuity 1.40% 1.40%
Total M&E and Rider Charges 1.40%, 3.5% AIR SU Universal Annuity Advantage 1.40% 1.40%
Total M&E and Rider Charges 1.65%, 3.0% AIR S Universal Select Annuity 1.25% 0.40% 1.65%
Total M&E and Rider Charges 1.65%, 3.5% AIR S Universal Annuity Advantage 1.25% 0.40% 1.65%
Total M&E and Rider Charges 1.80%, 3.0% AIR SU Universal Select Annuity 1.40% 0.40% 1.80%
Total M&E and Rider Charges 1.80%, 3.5% AIR SU Universal Annuity Advantage 1.40% 0.40% 1.80%
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Contracts issued prior to May 16, 1983
(2) 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 $7,727 and $12,494 for the years ended December 31, 2004 and
2003, 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 $221,650 and $406,883 for the years ended December 31,
2004 and 2003, respectively.
4. NET ASSETS HELD ON BEHALF OF AN AFFILIATE
Approximately $13,321,000 and $12,382,000 of the net assets of Account GIS were
held on behalf of an affiliate of The Company as of December 31, 2004 and 2003,
respectively. Transactions with this affiliate during the years ended December
31, 2004 and 2003, were comprised of participant purchase payments of
approximately $3,000 and $32,000 and contract surrenders of approximately
$438,000 and $534,000, respectively.
-6-
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. NET CONTRACT OWNERS' EQUITY
DECEMBER 31, 2004
--------------------------------------
UNIT
UNITS VALUE NET ASSETS
---------- -------- -------------
Total M&E and Rider Charges 1.00%, 3.5% AIR ..... 7,413,174 $ 19.949 $ 147,887,397
Total M&E and Rider Charges 1.25%, 3.5% AIR ..... 19,978,415 18.903 377,662,677
Total M&E and Rider Charges 1.25%, 3.0% AIR ..... 278 1.087 302
-------------
Net Contract Owners' Equity .............................................. $ 525,550,376
=============
-7-
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SUPPLEMENTARY INFORMATION
(Selected data for a unit outstanding throughout each year.)
Total M&E and Rider Charges 1.00%, 3.5% AIR
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------------------------
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
SELECTED PER UNIT DATA:
Total investment income ................................... $ .348 $ .264 $ .240 $ .266 $ .242
Operating expenses ........................................ .303 .256 .261 .311 .376
------- ------- ------- ------- -------
Net investment income (loss) .............................. .045 .008 (.021) (.045) (.134)
Unit value at beginning of year ........................... 17.926 14.172 18.064 21.418 24.427
Net realized and change in unrealized gains (losses) ...... 1.978 3.746 (3.871) (3.309) (2.875)
------- ------- ------- ------- -------
Unit value at end of year ................................. $19.949 $17.926 $14.172 $18.064 $21.418
======= ======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value ..................... $ 2.02 $ 3.75 $ (3.89) $ (3.35) $ (3.01)
Ratio of operating expenses to average net assets ......... 1.65% 1.65% 1.64% 1.63% 1.60%
Ratio of net investment income (loss) to average net assets 0.23% 0.06% (0.12)% (0.24)% (0.57)%
Number of units outstanding at end of year (thousands) .... 7,413 8,139 9,088 10,329 11,413
Portfolio turnover rate ................................... 43% 68% 54% 32% 52%
Total M&E and Rider Charges 1.25%, 3.5% AIR
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------------------------
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
SELECTED PER UNIT DATA:
Total investment income ................................... $ .330 $ .251 $ .229 $ .254 $ .232
Operating expenses ........................................ .331 .281 .287 .343 .416
------- ------- ------- ------- -------
Net investment income (loss) .............................. (.001) (.030) (.058) (.089) (.184)
Unit value at beginning of year ........................... 17.028 13.496 17.245 20.498 23.436
Net realized and change in unrealized gains (losses) ...... 1.876 3.562 (3.691) (3.164) (2.754)
------- ------- ------- ------- -------
Unit value at end of year ................................. $18.903 $17.028 $13.496 $17.245 $20.498
======= ======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value ..................... $ 1.88 $ 3.53 $ (3.75) $ (3.25) $ (2.94)
Ratio of operating expenses to average net assets ......... 1.90% 1.90% 1.89% 1.88% 1.84%
Ratio of net investment income (loss) to average net assets (0.02)% (0.19)% (0.37)% (0.49)% (0.82)%
Number of units outstanding at end of year (thousands) .... 19,978 21,853 24,100 27,559 29,879
Portfolio turnover rate ................................... 43% 68% 54% 32% 59%
-8-
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SUPPLEMENTARY INFORMATION (CONTINUED)
(Selected data for a unit outstanding throughout each period.)
FROM DECEMBER 10, 2004
Total M&E and Rider Charges 1.25%, 3.0% AIR (INCEPTION DATE) TO
DECEMBER 31,
2004
---------
SELECTED PER UNIT DATA:
Total investment income .................................... $ .001
Operating expenses ......................................... .001
---------
Net investment income (loss) ............................... --
Unit value at beginning of period .......................... 1.066
Net realized and change in unrealized gains (losses) ....... .021
---------
Unit value at end of year .................................. $ 1.087
=========
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value ...................... $ .02
Ratio of operating expenses to average net assets* ......... 1.90%
Ratio of net investment income (loss) to average net assets* (0.49)%
Number of units outstanding at end of year (thousands)** ... --
Portfolio turnover rate .................................... 43%
* Annualized
** Unit Balance rounds to less than 1,000 units
7. SUBSEQUENT EVENT
On January 31, 2005, Citigroup Inc. ("Citigroup") announced that it had agreed
to sell The Travelers Insurance Company ("TIC"), The Travelers Life and Annuity
Company, Citicorp Life Insurance Company, First Citicorp Life Insurance Company,
Citicorp International Life Insurance Company, The Travelers Life and Annuity
Reinsurance Company, and certain other domestic and international insurance
businesses (the "Life Insurance and Annuity Businesses") to MetLife, Inc.
("MetLife") pursuant to an Acquisition Agreement (the "Agreement"). The
transaction is subject to certain regulatory approvals, as well as other
customary conditions to closing. Citigroup currently anticipates that the
intended sale would be closed this summer.
The proposed sale would also include TIC's affiliated investment advisory
companies, Travelers Asset Management International Company LLC, which serves as
the investment advisor for certain of the variable product separate accounts.
The transaction contemplates that TIC's Primerica Life segment and certain other
assets will remain with Citigroup. Accordingly, prior to the closing, TIC will
distribute to its parent company by way of dividend (i) all of the outstanding
shares of common stock of the Company's 100% owned subsidiary, Primerica Life
Insurance Company ("Primerica Life"), (ii) all shares of Citigroup's Series YYY
and Series YY preferred stock held by the Company and (iii) certain other
assets, including certain assets and liabilities related to the Company's share
of the non-qualified pension plan, and post retirement benefits related to
inactive employees of the former Travelers Insurance entities, assumed during
Citigroup's 2002 spin-off of the Travelers Property Casualty operations
(collectively, the "Dispositions"). The Dispositions require certain regulatory
approvals.
Subject to closing adjustments described in the Agreement, the contemplated sale
price would be $11.5 billion. In connection with the consummation of the sale of
the Life Insurance and Annuity Business, Citigroup and MetLife will also enter
into multi-year distribution agreements.
TIC filed a Form 8-K Current Report with The United States Securities and
Exchange Commission on February 2, 2005, with additional information about the
transaction.
-9-
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
SUMMARY OF HOLDINGS
DECEMBER 31, 2004
% of net
assets
--------
COMMON STOCK
Technology 14.5
Banking 8.1
Pharmaceuticals 7.7
Retailers 6.3
Insurance 6.1
Conglomerates 5.9
Integrated Energy 4.7
Telecommunications 4.2
Consumers 3.9
Brokerage 3.1
Multimedia 2.4
Beverage 2.2
Entertainment 2.2
Medical Supplies 2.1
Automotive 1.8
Food 1.8
Finance 1.7
Utilities 1.7
Chemicals 1.5
Electric Utilities 1.4
Healthcare 1.4
Oil Companies 1.4
Services 1.4
Capital Goods 1.3
United States Agency Securities 1.3
Tobacco 1.1
Transportation Services 1.0
Metals 0.9
Aerospace 0.8
Defense 0.7
Paper 0.7
Independent Energy 0.6
Lodging 0.5
Machinery 0.4
Home Construction 0.3
Biotechnology 0.2
Building Materials 0.2
Media Cable 0.2
Restaurants 0.2
--------
TOTAL COMMON STOCK 97.9
--------
SHORT-TERM INVESTMENTS
Commercial Paper 1.7
U.S. Treasury 0.3
--------
SHORT-TERM INVESTMENTS 2.0
--------
TOTAL INVESTMENTS 99.9
--------
Other Assets and Liabilities 0.1
--------
TOTAL NET ASSETS 100.0
========
-10-
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS - CONTINUED
DECEMBER 31, 2004
NO. OF FAIR
SHARES VALUE
-------- ------------
COMMON STOCK (97.9%)
AEROSPACE (0.8%)
Boeing Co. 28,246 $ 1,462,295
General Dynamics Corp. 25,345 2,651,087
------------
4,113,382
------------
AUTOMOTIVE (1.8%)
Ford Motor Co. 154,802 2,266,301
General Motors Corp. 63,120 2,528,587
Harley-Davidson 29,269 1,778,092
PACCAR Inc. 34,033 2,741,188
------------
9,314,168
------------
BANKING (8.1%)
Bank of America Corp. 251,896 11,836,593
Capital One Financial Corp. 41,225 3,471,557
First Horizon National 194 8,363
JP Morgan Chase & Co. 215,959 8,424,561
KeyCorp 20,766 703,967
Marshall & Ilsley Corp. 17,756 784,815
MBNA Corp. 19,662 554,272
National City Corp. 64,375 2,417,281
Providian Financial Corp. 60,475 996,023
U.S. Bancorp 49,664 1,555,476
Wachovia Corp. 102,940 5,414,644
Washington Mutual, Inc. 12,899 545,370
Wells Fargo & Co. 95,736 5,949,992
------------
42,662,914
------------
BEVERAGE (2.2%)
Anheuser-Busch Companies, Inc. 10,621 538,803
Coca-Cola Co. 137,596 5,728,121
Coca-Cola Enterprises Inc. 21,135 440,665
PepsiCo, Inc. 95,024 4,960,253
------------
11,667,842
------------
BIOTECHNOLOGY (0.2%)
Genetech Inc. (A) 19,494 1,061,253
------------
BROKERAGE (3.1%)
Bear Stearns Companies 35,041 3,585,045
Goldman Sachs Group Inc. 39,880 4,149,115
Lehman Brothers Holdings Inc. 29,158 2,550,742
Merrill Lynch & Co. Inc. 37,104 2,217,706
Morgan Stanley 64,849 3,600,416
------------
16,103,024
------------
BUILDING MATERIALS (0.2%)
Masco Corp. 34,802 1,271,317
------------
CAPITAL GOODS (1.3%)
Danaher Corp. 43,166 2,478,160
Deere & Co. 34,389 2,558,542
Eaton Corp. 9,593 694,149
Waters Corp. (A) 28,148 1,317,045
------------
7,047,896
------------
CHEMICALS (1.5%)
Dow Chemical 54,755 2,710,920
E.I. du Pont de Nemours & Co. 20,432 1,002,190
Ecolab Inc. 35,126 1,233,976
Monsanto Co. 53,651 2,980,313
------------
7,927,399
------------
CONGLOMERATES (5.9%)
Dover Corp. 37,305 1,564,572
General Electric Co. 460,123 16,794,490
Honeywell International, Inc. 39,585 1,401,705
ITT Industries, Inc. 16,129 1,362,094
Parker-Hannifin 22,419 1,698,015
3M Co. 25,087 2,058,890
Tyco International Ltd. 98,765 3,529,861
United Technologies Corp. 23,814 2,461,177
------------
30,870,804
------------
CONSUMERS (3.9%)
Avery Dennison Corp. 12,646 758,381
Ball Corp. 21,326 937,917
Black & Decker Corp. 3,991 352,525
Colgate-Palmolive Co. 15,893 813,086
Eastman Kodak 45,135 1,455,604
Fortune Brands 26,616 2,054,223
Gillette Co. 23,251 1,041,180
NIKE, Inc. (Class B) 38,492 3,490,839
Pactiv Corp. (A) 49,646 1,255,547
Procter & Gamble Co. 123,140 6,782,551
Sealed Air Corp. (A) 26,426 1,407,713
------------
20,349,566
------------
DEFENSE (0.7%)
Lockheed Martin Corp. 29,363 1,631,115
Northrop Grumman Corp. 38,210 2,077,096
------------
3,708,211
------------
ELECTRIC UTILITIES (1.4%)
American Electric Power 62,542 2,147,692
Edison International 46,592 1,492,342
FirstEnergy Corp. 53,191 2,101,576
Public Service Enterprise Group 13,294 688,230
Southern Co. 27,360 917,107
------------
7,346,947
------------
-11-
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS - CONTINUED
DECEMBER 31, 2004
NO. OF FAIR
SHARES VALUE
-------- ------------
ENTERTAINMENT (2.2%)
Carnival Corp. 28,628 $ 1,649,832
Electronic Arts (A) 10,135 625,431
Fox Entertainment Group (Class A) (A) 55,501 1,734,961
The Walt Disney Co. 162,229 4,509,966
Viacom, Inc. (Class B) 80,233 2,919,679
------------
11,439,869
------------
FINANCE (1.7%)
American Express Co. 85,707 4,831,304
Countrywide Financial 80,244 2,969,830
Principal Financial Group 29,244 1,197,249
------------
8,998,383
------------
FOOD (1.8%)
Archer-Daniels-Midland Co. 114,841 2,562,103
Hormel Foods Corp. 16,653 522,072
Kellogg Co. 9,815 438,338
McDonald's Corp. 97,575 3,128,255
Sara Lee Corp. 99,935 2,412,431
Yum! Brands 13,000 613,340
------------
9,676,539
------------
HEALTHCARE (1.4%)
Aetna Inc. 7,335 915,041
Caremark Rx, Inc. (A) 29,914 1,179,509
Medco Health Solutions (A) 13,336 554,778
UnitedHealth Group, Inc. 51,524 4,535,658
------------
7,184,986
------------
HOME CONSTRUCTION (0.3%)
Pulte Homes, Inc. 22,895 1,460,701
------------
INDEPENDENT ENERGY (0.6%)
Anadarko Petroleum Corp. 14,254 923,802
Burlington Resources 41,380 1,800,030
Devon Energy Corp. 15,464 601,859
------------
3,325,691
------------
INSURANCE (6.1%)
ACE Limited 13,961 596,833
AFLAC Inc. 25,283 1,007,275
Allstate Corp. 22,459 1,161,579
Ambac Financial Group 27,267 2,239,439
American International Group, 123,922 8,137,958
Inc.
Aon Corp. 14,413 343,894
Chubb Corp. 30,449 2,341,528
CIGNA Corp. 18,183 1,483,187
Hartford Financial Services Group, Inc. 10,080 698,645
Humana Inc. (A) 60,360 1,792,088
Jefferson-Pilot Corp. 6,889 357,952
Lincoln Financial Corp. 9,198 429,363
Marsh & McLennan Cos., Inc. 24,652 811,051
MetLife Inc. 34,595 1,401,443
MGIC Investment Corp. 17,509 1,206,545
Prudential Financial, Inc. 79,956 4,394,382
The Progressive Corp. 26,874 2,279,990
Wellpoint Inc. (A) 13,160 1,513,400
------------
32,196,552
------------
INTEGRATED ENERGY (4.7%)
ChevronTexaco Corp. 101,398 5,324,409
ConocoPhillips 33,050 2,869,732
Exxon Mobil Corp. 304,077 15,586,987
Marathon Oil 30,723 1,155,492
------------
24,936,620
------------
LODGING (0.5%)
Marriott International (Class A) 35,493 2,235,349
Starwood Hotels & Resorts 8,357 488,049
------------
2,723,398
------------
MACHINERY (0.4%)
Ingersoll-Rand Co. (Class A) 28,807 2,313,202
------------
MEDIA CABLE (0.2%)
Univision Communications (A) 44,785 1,310,857
------------
MEDICAL SUPPLIES (2.1%)
Abbott Laboratories 72,380 3,376,527
Becton, Dickinson and Company 11,617 659,846
Boston Scientific (A) 39,349 1,398,857
Cardinal Health 8,009 465,723
Hospira, Inc. (A) 4,155 139,193
Medtronic, Inc. 56,514 2,807,050
Zimmer Holdings, Inc. (A) 24,398 1,954,768
------------
10,801,964
------------
METALS (0.9%)
Alcoa Inc. 103,917 3,265,072
Newmont Mining Corp. 19,375 860,444
Nucor Corp. 12,550 656,867
------------
4,782,383
------------
MULTIMEDIA (2.4%)
Brown-Forman Corp. (Class B) 12,247 596,184
Comcast Corp. (Class A) 107,389 3,574,443
Gannett Co., Inc. 22,262 1,818,805
Lamar Advertising (A) 22,751 972,036
News Corp. 84,091 1,569,138
Time Warner Inc. (A) 210,873 4,099,371
------------
12,629,977
------------
-12-
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS - CONTINUED
DECEMBER 31, 2004
NO. OF FAIR
SHARES VALUE
-------- ------------
OIL COMPANIES (1.4%)
Baker Hughes Inc. 23,166 $ 988,493
Halliburton Co. 19,559 767,495
Occidental Petroleum Corp. 18,573 1,083,920
Schlumberger Ltd. 32,183 2,154,652
Sunoco Inc. 7,678 627,369
Transocean, Inc. 21,164 897,142
Valero Energy Corp. 18,180 825,372
------------
7,344,443
------------
PAPER (0.7%)
Georgia-Pacific Corp. 17,510 656,275
International Paper 23,579 990,318
Kimberly Clark Corp. 23,800 1,566,278
Weyerhaeuser Co. 9,869 663,394
------------
3,876,265
------------
PHARMACEUTICALS (7.7%)
AmerisourceBergen Corp. 16,595 973,795
Amgen, Inc. (A) 61,453 3,942,517
Biogen Idec Inc. (A) 31,020 2,066,397
Bristol-Myers Squibb 89,117 2,283,178
Eli Lilly & Co. 42,149 2,391,956
Forest Laboratories (Class A) (A) 33,159 1,487,513
Gilead Sciences, Inc. (A) 49,226 1,722,664
IVAX Corp. 48,057 760,262
Johnson & Johnson 137,629 8,728,431
Merck & Co., Inc. 101,977 3,277,541
Pfizer Inc. 352,440 9,477,112
Schering-Plough Corp. 67,733 1,414,265
Wyeth 43,843 1,867,273
------------
40,392,904
------------
RESTAURANTS (0.2%)
Starbucks Corp. (A) 18,271 1,139,471
------------
RETAILERS (6.3%)
Autozone, Inc. (A) 5,694 519,919
Best Buy Co. Inc. 30,613 1,819,024
Borders Group 45,843 1,164,412
Costco Wholesale Corp. 21,611 1,046,945
Federated Department Stores, Inc. 12,390 716,018
GameStop Corp. (Class A) (A) 15,251 341,775
Home Depot, Inc. 159,742 6,827,373
Jones Apparel Group, Inc. 6,979 255,222
Limited Brands 46,384 1,067,760
Lowe's Cos. 18,931 1,090,236
Staples Inc. 78,821 2,657,450
Target Corp. 13,395 695,602
The Gap, Inc. 41,488 876,227
Toys R Us, Inc. (A) 70,831 1,449,911
Walgreen Co. 54,947 2,108,316
Wal-Mart Stores, Inc. 199,075 10,515,142
------------
33,151,332
------------
SERVICES (1.4%)
Cendant Corp. 51,593 1,206,244
eBay Inc. (A) 30,784 3,580,333
Yahoo! Inc. (A) 61,852 2,332,130
------------
7,118,707
------------
TECHNOLOGY (14.5%)
Adobe Systems 32,830 2,060,575
Advanced Micro Devices (A) 83,937 1,848,293
Analog Devices, Inc. 17,932 662,049
Apple Computer (A) 17,952 1,155,750
Autodesk, Inc. 66,586 2,531,933
Cisco Systems, Inc. (A) 315,216 6,080,517
Comverse Technology Inc. (A) 81,806 1,999,748
Corning Inc. 62,978 741,251
Dell Inc. (A) 116,672 4,917,141
EMC Corp. (A) 115,531 1,717,946
Fiserv Inc. (A) 12,204 490,540
Hewlett Packard Co. 142,000 2,977,740
Intel Corp. 301,416 7,057,656
International Business Machine 83,610 8,242,274
Jabil Circuit (A) 45,645 1,167,599
KLA-Tencor Corp. (A) 9,475 441,298
Lexmark International (A) 6,037 513,145
Maxim Integrated Products 14,850 629,417
Micron Technology, Inc. 99,869 1,233,382
Microsoft Corp. 502,687 13,429,283
Motorola, Inc. 206,633 3,554,088
NCR Corp. (A) 25,799 1,786,065
Oracle Corp. (A) 232,747 3,194,453
Scientific-Atlanta, Inc. 49,543 1,635,414
Sun Microsystems Inc. (A) 164,286 884,680
Texas Instruments Inc. 93,808 2,309,553
Thomas & Betts Corp. 43,164 1,327,293
VERITAS Software (A) 53,916 1,537,145
------------
76,126,228
------------
TELECOMMUNICATIONS (4.2%)
BellSouth Corp. 124,064 3,447,739
CenturyTel, Inc. 12,604 447,064
Nextel Partners (Class A) (A) 77,050 1,503,631
Polycom, Inc. (A) 49,165 1,145,545
QUALCOMM, Inc. 69,284 2,941,106
SBC Communications Inc. 153,659 3,959,793
Sprint Corp. 68,845 1,710,798
Verizon Communications 165,031 6,685,405
------------
21,841,081
------------
-13-
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS - CONTINUED
DECEMBER 31, 2004
NO. OF FAIR
SHARES VALUE
-------- ------------
TOBACCO (1.1%)
Altria Group 95,539 $ 5,837,433
------------
TRANSPORTATION SERVICES (1.0%)
Norfolk Southern Corp. 16,776 607,123
United Parcel Service (Class B) 53,185 4,545,190
------------
5,152,313
------------
UNITED STATES AGENCY SECURITIES (1.3%)
Federal Association National Mortgage 59,606 4,244,543
Federal Home Loan Mortgage Corp. 31,633 2,331,352
------------
6,575,895
------------
UTILITIES (1.7%)
AES Corp. (A) 126,897 1,734,682
Constellation Energy Group 46,830 2,046,939
Exelon Corp. 56,416 2,486,253
Kinder Morgan 30,116 2,202,383
National Fuel Gas Co. 12,243 346,967
------------
8,817,224
------------
TOTAL COMMON STOCKS
(COST $446,586,904) 514,599,141
------------
PRINCIPAL
AMOUNT
-----------
SHORT-TERM INVESTMENTS (2.0%)
COMMERCIAL PAPER (1.7%)
Bryant Park Funding LLC,
2.29% due January 6, 2005 $ 1,316,000 1,315,496
Bryant Park Funding LLC,
2.32% due January 11, 2005 3,000,000 2,997,891
Gemini Securitization Corp.,
2.33% due January 12, 2005 1,710,000 1,708,689
UBS AG,
2.26% due January 3, 2005 513,000 512,902
Windmill Funding Corp.,
2.3% due January 11, 2005 2,601,000 2,599,171
------------
9,134,149
------------
U.S. TREASURY (0.3%)
United States of America Treasury,
1.99% due February 10, 2005 (B) 1,400,000 $ 1,397,148
------------
NOTIONAL
VALUE
-----------
TOTAL SHORT-TERM
INVESTMENTS (COST $10,531,744) 10,531,297
------------
FUTURES CONTRACTS (0.0%)
S&P 500 Stock Index,
Exp. March, 2005 (C) $ 9,102,750 --
------------
TOTAL INVESTMENTS (99.9%)
(COST $457,118,648) (D) 525,130,438
------------
OTHER ASSETS AND LIABILITIES (0.1%) 419,938
------------
TOTAL NET ASSETS (100.0%) $525,550,376
============
NOTES
(A) Non-income Producing Security.
(B) Par value of $1,400,000 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, 2004, net unrealized appreciation for all securities was
$68,011,790. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of fair value over cost of
$102,990,863 and aggregate gross unrealized depreciation for all
securities in which there was an excess of cost over fair value of
$34,979,073.
See Notes to Financial Statements
-14-
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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, 2004, 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 the standards of the Public Company
Accounting Oversight Board (United States). 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, 2004, 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, 2004, 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, 2005
-15-
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2004
ASSETS:
Investment securities, at fair value (cost $97,997,715) ...... $ 99,598,533
Cash ......................................................... 416
Receivables:
Interest ................................................... 1,079,968
Investment securities sold ................................. 505,819
Purchase payments and transfers from other funding options . 19,530
Other assets ................................................. 2,248
------------
Total Assets ............................................. 101,206,514
------------
LIABILITIES:
Payables:
Contract surrenders and transfers to other funding options . 28,423
Investment management and advisory fees .................... 7,169
Insurance charges .......................................... 25,903
Accrued liabilities .......................................... 14
------------
Total Liabilities ........................................ 61,509
------------
NET ASSETS: $101,145,005
============
See Notes to Financial Statements
-16-
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2004
INVESTMENT INCOME:
Interest ....................................................................... $ 4,626,947
EXPENSES:
Investment management and advisory fees ........................................ $ 343,616
Insurance charges .............................................................. 1,255,965
-------------
Total expenses ............................................................... 1,599,581
------------
Net investment income (loss) ............................................... 3,027,366
------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES:
Realized gain (loss) from investment security transactions:
Proceeds from investment securities sold ..................................... 109,243,942
Cost of investment securities sold ........................................... 108,554,368
-------------
Net Realized gain (loss) ................................................... 689,574
Change in unrealized gain (loss) on investment securities:
Unrealized gain (loss) at December 31, 2004 .................................. 1,600,818
Unrealized gain (loss) at December 31, 2003 .................................. 2,333,354
-------------
Net change in unrealized gain (loss) for the year .......................... (732,536)
------------
Net realized gain (loss) and change in unrealized gain (loss) ............ (42,962)
------------
Net increase (decrease) in net assets resulting from operations ................ $ 2,984,404
===========
See Notes to Financial Statements
-17-
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
2004 2003
---- ----
OPERATIONS:
Net investment income (loss) ....................................... $ 3,027,366 $ 3,870,307
Net realized gain (loss) from investment security transactions ..... 689,574 (3,387,271)
Net change in unrealized gain (loss) on investment securities ...... (732,536) 9,169,643
------------- -------------
Net increase (decrease) in net assets resulting from operations .. 2,984,404 9,652,679
------------- -------------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 662,081 and 747,578 units, respectively) .......... 4,637,014 5,016,359
Participant transfers from other funding options
(applicable to 469,738 and 2,091,858 units, respectively) ........ 3,286,010 14,023,583
Administrative charges
(applicable to 10,969 and 12,788 units, respectively) ............ (77,235) (88,426)
Contract surrenders
(applicable to 1,792,547 and 2,007,854 units, respectively) ...... (12,709,265) (13,546,840)
Participant transfers to other funding options
(applicable to 1,092,374 and 2,177,370 units, respectively) ...... (7,636,339) (14,621,732)
Other payments to participants
(applicable to 111,228 and 169,426 units, respectively) .......... (793,229) (1,169,671)
------------- -------------
Net increase (decrease) in net assets resulting from unit transactions (13,293,044) (10,386,727)
------------- -------------
Net increase (decrease) in net assets ............................ (10,308,640) (734,048)
NET ASSETS:
Beginning of year .................................................. 111,453,645 112,187,693
------------- -------------
End of year ........................................................ $ 101,145,005 $ 111,453,645
============= =============
See Notes to Financial Statements
-18-
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, Universal Select Annuity, and Universal Annuity Advantage
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 2004.
-19-
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 $42,438,180 and $43,554,698, respectively; the
costs of purchases and proceeds from sales of direct and indirect U.S.
government securities were $55,003,629 and $65,689,245, respectively, for the
year ended December 31, 2004. 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.
The asset-based charges listed below are deducted, as appropriate, each business
day and are assessed through the calculation of accumulation and annuity unit
values;
- Mortality and Expense Risks assumed by The Company (M&E)
- Administrative fees paid for administrative expenses (ADM)
- Guaranteed Minimum Withdrawal Benefit, if elected by the contract
owner (GMWB)
Below is a table displaying total M&E and rider charges with their associated
products offered in this Separate Account. The table displays Standard (S) and
Annual Step-Up (SU) death-benefit designations.
- ------------------------------------------------------------------------------------------------------------------------------------
TRAVELERS QUALITY BOND ACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
Asset-based Charges
-----------------
Optional Feature
Total M&E and Rider Charges (1) Dth ----------------- Total
(as identified in Note 4) Ben Product M&E GMWB Charge
- ------------------------------------------------------------------------------------------------------------------------------------
Total M&E and Rider Charges 1.00%, 3.5% AIR S Universal Annuity (1) 1.00% 1.00%
Total M&E and Rider Charges 1.25%, 3.0% AIR S Universal Select Annuity 1.25% 1.25%
Total M&E and Rider Charges 1.25%, 3.5% AIR S Universal Annuity (2) 1.25% 1.25%
S Universal Annuity Advantage 1.25% 1.25%
Total M&E and Rider Charges 1.40%, 3.0% AIR SU Universal Select Annuity 1.40% 1.40%
Total M&E and Rider Charges 1.40%, 3.5% AIR SU Universal Annuity Advantage 1.40% 1.40%
Total M&E and Rider Charges 1.65%, 3.0% AIR S Universal Select Annuity 1.25% 0.40% 1.65%
Total M&E and Rider Charges 1.65%, 3.5% AIR S Universal Annuity Advantage 1.25% 0.40% 1.65%
Total M&E and Rider Charges 1.80%, 3.0% AIR SU Universal Select Annuity 1.40% 0.40% 1.80%
Total M&E and Rider Charges 1.80%, 3.5% AIR SU Universal Annuity Advantage 1.40% 0.40% 1.80%
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Contracts issued prior to May 16, 1983
(2) Contracts issued on or after May 16,1983
-20-
NOTES TO FINANCIAL STATEMENTS - CONTINUED
3. CONTRACT CHARGES (CONTINUED)
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 $3,280 and $4,296 for the years ended December 31, 2004 and
2003, 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 $45,877 and $58,765 for the years ended December 31,
2004 and 2003, respectively.
4. NET ASSETS HELD ON BEHALF OF AN AFFILIATE
Approximately $105,000 and $115,000 of the net assets of Account QB were held on
behalf of an affiliate of The Company as of December 31, 2004 and 2003,
respectively. Transactions with this affiliate during the years ended December
31, 2004 and 2003, were comprised of participant purchase payments of
approximately $4,000 and $71,000 and contract surrenders of approximately
$18,000 and $98,000, respectively.
5. NET CONTRACT OWNERS' EQUITY
DECEMBER 31, 2004
-------------------------------------
UNIT
UNITS VALUE NET ASSETS
---------- -------- -----------
Total M&E and Rider Charges 1.00%, 3.5% AIR ....... 3,717,225 $ 7.507 $ 27,904,255
Total M&E and Rider Charges 1.25%, 3.5% AIR ....... 10,296,306 7.113 73,240,750
------------
Net Contract Owners' Equity ............................................... $101,145,005
============
-21-
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SUPPLEMENTARY INFORMATION
(Selected data for a unit outstanding throughout each year.)
Total M&E and Rider Charges 1.00%, 3.5% AIR FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
SELECTED PER UNIT DATA:
Total investment income ................................... $ .321 $ .345 $ .381 $ .421 $ .446
Operating expenses ........................................ .097 .093 .086 .089 .081
-------- -------- -------- -------- --------
Net investment income (loss) .............................. .224 .252 .295 .332 .365
Unit value at beginning of year ........................... 7.281 6.674 6.608 6.335 6.055
Net realized and change in unrealized gains (losses) ...... .002 .355 (.229) (.059) (.085)
-------- -------- -------- -------- --------
Unit value at end of year ................................. $ 7.507 $ 7.281 $ 6.674 $ 6.608 $ 6.335
======== ======== ======== ======== ========
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value ..................... $ .23 $ .61 $ .07 $ .27 $ .28
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 3.03% 3.58% 4.56% 4.99% 5.93%
Number of units outstanding at end of year (thousands) .... 3,717 4,207 4,684 5,194 5,491
Portfolio turnover rate ................................... 98% 139% 113% 166% 105%
Total M&E and Rider Charges 1.25%, 3.5% AIR FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
SELECTED PER UNIT DATA:
Total investment income ................................... $ .304 $ .328 $ .363 $ .402 $ .427
Operating expenses ........................................ .110 .105 .097 .101 .092
-------- -------- -------- -------- --------
Net investment income (loss) .............................. .194 .223 .266 .301 .335
Unit value at beginning of year ........................... 6.917 6.356 6.309 6.063 5.810
Net realized and change in unrealized gains (losses) ...... .002 .338 (.219) (.055) (.082)
-------- -------- -------- -------- --------
Unit value at end of year ................................. $ 7.113 $ 6.917 $ 6.356 $ 6.309 $ 6.063
======== ======== ======== ======== ========
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value ..................... $ .20 $ .56 $ .05 $ .25 $ .25
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 2.78% 3.33% 4.31% 4.74% 5.69%
Number of units outstanding at end of year (thousands) .... 10,296 11,682 12,733 15,116 14,045
Portfolio turnover rate ................................... 98% 139% 113% 166% 105%
-22-
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SUBSEQUENT EVENT
On January 31, 2005, Citigroup Inc. ("Citigroup") announced that it had agreed
to sell The Travelers Insurance Company ("TIC"), The Travelers Life and Annuity
Company, Citicorp Life Insurance Company, First Citicorp Life Insurance Company,
Citicorp International Life Insurance Company, The Travelers Life and Annuity
Reinsurance Company, and certain other domestic and international insurance
businesses (the "Life Insurance and Annuity Businesses") to MetLife, Inc.
("MetLife") pursuant to an Acquisition Agreement (the "Agreement"). The
transaction is subject to certain regulatory approvals, as well as other
customary conditions to closing. Citigroup currently anticipates that the
intended sale would be closed this summer.
The proposed sale would also include TIC's affiliated investment advisory
companies, Travelers Asset Management International Company LLC, which serves as
the investment advisor for certain of the variable product separate accounts.
The transaction contemplates that TIC's Primerica Life segment and certain other
assets will remain with Citigroup. Accordingly, prior to the closing, TIC will
distribute to its parent company by way of dividend (i) all of the outstanding
shares of common stock of the Company's 100% owned subsidiary, Primerica Life
Insurance Company ("Primerica Life"), (ii) all shares of Citigroup's Series YYY
and Series YY preferred stock held by the Company and (iii) certain other
assets, including certain assets and liabilities related to the Company's share
of the non-qualified pension plan, and post retirement benefits related to
inactive employees of the former Travelers Insurance entities, assumed during
Citigroup's 2002 spin-off of the Travelers Property Casualty operations
(collectively, the "Dispositions"). The Dispositions require certain regulatory
approvals.
Subject to closing adjustments described in the Agreement, the contemplated sale
price would be $11.5 billion. In connection with the consummation of the sale of
the Life Insurance and Annuity Business, Citigroup and MetLife will also enter
into multi-year distribution agreements.
TIC filed a Form 8-K Current Report with The United States Securities and
Exchange Commission on February 2, 2005, with additional information about the
transaction.
-23-
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
SUMMARY OF HOLDINGS
DECEMBER 31, 2004
of net
% assets
--------
BONDS
Real Estate 9.0
Banking 7.1
Collateralized Mortgage Obligations 6.7
Finance 6.0
Media Cable 6.0
Asset Backed Securities 4.9
Telecommunications 4.4
Utilities 4.3
Natural Gas Distribution 3.9
Brokerage 3.5
United States Agency Securities 3.3
Multimedia 2.7
Conglomerates 2.4
Electric Utilities 1.9
Insurance 1.9
Automotive 1.6
Pharmaceuticals 1.2
Food 1.1
Independent Energy 1.0
Tobacco 0.9
Supermarkets 0.8
Defense 0.6
Technology 0.6
Airlines 0.5
Home Construction 0.5
Beverage 0.4
Healthcare 0.4
Metals 0.4
Machinery 0.2
Paper 0.2
------
TOTAL BONDS 78.4
------
United States Government Securities 12.5
------
SHORT-TERM INVESTMENTS
Commercial Paper 7.6
------
TOTAL SHORT-TERM INVESTMENTS 7.6
------
TOTAL INVESTMENTS 98.5
------
Other Assets and liabilities 1.5
------
TOTAL NET ASSETS 100.0
======
-24-
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS
DECEMBER 31, 2004
PRINCIPAL FAIR
AMOUNT VALUE
------------ -------------
BONDS (78.4%)
AIRLINES (0.5%)
Delta Air Lines, Inc., 9.25% Debentures, 2007 (A)................................ $ 675,233 $ 465,911
-------------
ASSET BACKED SECURITIES (4.9%)
CA Infrastructure, 3.05% Debentures, 2008........................................ 597,379 615,752
Chase Funding Mortgage Loan Asset Backed Security Certificate, 4.44% Debentures, 500,000 520,407
2032.............................................................................
Daimler Chrysler Auto, 2.63% Debentures, 2006.................................... 811,736 816,196
Discover Card Mt, 2.94% Debentures, 2008......................................... 1,100,000 1,135,416
Ford Credit Auto Owner Trust, 2.67% Debentures, 2006............................. 1,400,000 1,411,705
Toyota Auto Recovery Owner Trust, 2.67% Debentures, 2006......................... 477,162 477,145
-------------
4,976,621
-------------
AUTOMOTIVE (1.6%)
Daimler Chrysler NA Holdings, 5.09% Debentures, 2012............................. 700,000 795,786
Ford Motor Credit Co., 7.66% Debentures, 2031.................................... 200,000 201,729
Lear Corp., 2.35% Debentures, 2005............................................... 600,000 609,636
-------------
1,607,151
-------------
BANKING (7.1%)
ABN AMRO Holdings ADS, 2.33% Debentures, 2007.................................... 920,000 920,886
Bank of America Corp., 4.75% Debentures, 2014.................................... 600,000 627,304
Capital One Bank, 4.66% Debentures, 2009......................................... 620,000 639,051
Credit Suisse First Boston Corp., 4.86% Debentures, 2011......................... 300,000 327,604
Credit Suisse First Boston Corp., 4.93% Debentures, 2015......................... 700,000 692,682
HSBC Bank USA, 5.91% Debentures, 2034............................................ 400,000 406,470
Huntington National Bank, 4.68% Debentures, 2009................................. 400,000 408,048
J.P. Morgan Chase & Co., 4.94% Debentures, 2015.................................. 500,000 506,668
Royal Bank of Scotland PLC, 5.05% Debentures, 2015............................... 600,000 607,625
U.S. Bancorp NA MN, 2.89% Debentures, 2007....................................... 1,000,000 991,838
U.S. Bancorp NA MN, 4.95% Debentures, 2014....................................... 200,000 201,116
Wachovia Bank NA, 4.87% Debentures, 2014......................................... 300,000 298,697
Washington Mutual Inc., 5.71% Debentures, 2014................................... 500,000 518,152
-------------
7,146,141
-------------
BEVERAGE (0.4%)
Pepsi Bottling Group, 4.34% Debentures, 2012..................................... 400,000 406,911
-------------
BROKERAGE (3.5%)
Goldman Sachs Group Inc., 4.95% Debentures, 2013................................. 1,100,000 1,127,380
Lehman Brothers Holdings Inc., 4.85% Debentures, 2014............................ 700,000 691,723
Merrill Lynch & Co. Inc., 4.2% Debentures, 2009.................................. 800,000 800,297
Merrill Lynch & Co. Inc., 5.09% Debentures, 2015................................. 400,000 399,210
Morgan Stanley, 5.31% Debentures, 2012........................................... 500,000 558,471
-------------
3,577,081
-------------
COLLATERALIZED MORTGAGE OBLIGATIONS (6.7%)
Banc of America Commercial Mortgage Securities, 4.87% Debentures, 2042........... 1,400,000 1,396,227
Credit Suisse First Boston Corp., 4.86% Debentures, 2036......................... 1,000,000 1,010,467
Credit Suisse First Boston Corp., 4.88% Debentures, 2037......................... 220,000 219,720
J.P. Morgan Chase Commercial Mortgage Securities, 4.92% Debentures, 2042......... 1,600,000 1,597,808
LB UBS Commercial Mortgage Trust, 4.17% Debentures, 2027......................... 1,000,000 975,400
LB UBS Commercial Mortgage Trust, 4.74% Debentures, 2031......................... 670,000 682,985
Wachovia Bank Commercial Mortgage, 4.44% Debentures, 2035........................ 900,000 925,983
-------------
6,808,590
-------------
-25-
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS - CONTINUED
DECEMBER 31, 2004
PRINCIPAL FAIR
AMOUNT VALUE
------------ -------------
CONGLOMERATES (2.4%)
General Electric Co., 4.66% Debentures, 2013..................................... $ 1,300,000 $ 1,335,959
Tyco International Ltd., 4.28% Debentures, 2008.................................. 1,000,000 1,078,319
-------------
2,414,278
-------------
DEFENSE (0.6%)
Northrop Grumman Corp., 3.41% Debentures, 2006................................... 600,000 606,334
-------------
ELECTRIC UTILITIES (1.9%)
PSEG Energy Holdings, 21.8% Debentures, 2008..................................... 450,000 496,125
SCANA Corp., 2.74% Debentures, 2006.............................................. 1,000,000 1,002,750
TransAlta Corp., 5.22% Debentures, 2013.......................................... 400,000 412,618
-------------
1,911,493
-------------
FINANCE (6.0%)
AIG SunAmerica Global Financials, 3.55% Debentures, 2008 (B)..................... 500,000 533,069
American General Financial Corp., 3.98% Debentures, 2009......................... 900,000 886,561
Countrywide Home Loan, 4.07% Debentures, 2011.................................... 610,000 593,884
Ford Motor Credit Co., 5.75% Debentures, 2010.................................... 100,000 101,020
Ford Motor Credit Co., 6.56% Debentures, 2006.................................... 1,000,000 1,030,466
General Motors Acceptance Corp., 6.06% Debentures, 2011.......................... 200,000 205,232
General Motors Acceptance Corp., 6.65% Debentures, 2011.......................... 650,000 681,368
Glencore Funding LLC, 6.7% Debentures, 2014 (B).................................. 300,000 290,751
Household Financial Corp., 5.78% Debentures, 2012................................ 1,400,000 1,549,261
Rabobank Capital Funding Trust III, 5.25% Debentures, 2016 (B)................... 200,000 199,346
-------------
6,070,958
-------------
FOOD (1.1%)
Fred Meyer Inc., 4.83% Debentures, 2008.......................................... 1,000,000 1,103,316
-------------
HEALTHCARE (0.4%)
Anthem Inc., 4.86% Debentures, 2012.............................................. 400,000 453,511
-------------
HOME CONSTRUCTION (0.5%)
M.D.C. Holdings, Inc., 5.47% Debentures, 2013 500,000 508,503
-------------
INDEPENDENT ENERGY (1.0%)
Anadarko Financial Co., 4.88% Debentures, 2011................................... 400,000 451,074
Devon Energy Corp., 5.42% Debentures, 2011....................................... 500,000 567,053
-------------
1,018,127
-------------
INSURANCE (1.9%)
Massmutual Global Funding, 2.58% Debentures, 2008 (B)............................ 900,000 864,439
New York Life Global Funding, 5.42% Debentures, 2013 (B)......................... 1,000,000 1,042,327
-------------
1,906,766
-------------
MACHINERY (0.2%)
Cooper Cameron Corp., 2.67% Debentures, 2007 .................................... 200,000 194,871
-------------
MEDIA CABLE (6.0%)
Comcast Cable Communications, 8.7% Debentures, 2027.............................. 500,000 665,504
Cox Enterprises Inc., 7.25% Debentures, 2010 (B)................................. 3,800,000 4,283,531
Liberty Media Corp., 4.22% Debentures, 2006...................................... 1,100,000 1,113,761
-------------
6,062,796
-------------
METALS (0.4%)
Phelps Dodge Corp., 5.31% Debentures, 2011....................................... 300,000 366,246
-------------
-26-
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS - CONTINUED
DECEMBER 31, 2004
PRINCIPAL FAIR
AMOUNT VALUE
------------ -------------
MULTIMEDIA (2.7%)
Clear Channel Communications Inc., 4.72% Debentures, 2011........................ $ 200,000 $ 194,453
Time Warner Inc., 9.66% Debentures, 2007......................................... 2,400,000 2,540,472
-------------
2,734,925
-------------
NATURAL GAS DISTRIBUTION (3.9%)
Cons Natural Gas Co., 5.04% Debentures, 2014..................................... 200,000 200,580
Duke Capital LLC, 3.77% Debentures, 2006......................................... 400,000 405,199
Duke Energy Field Service, 5.68% Debentures, 2005................................ 500,000 513,288
Southern California Gas Co., 4.38% Debentures, 2011.............................. 400,000 401,742
Transcontinental Gas Pipeline, Corp., 10.33% Debentures, 2005.................... 2,400,000 2,400,000
-------------
3,920,809
-------------
PAPER (0.2%)
International Paper, 5.38% Debentures, 2015...................................... 200,000 202,744
-------------
PHARMACEUTICALS (1.2%)
Wyeth, 5.52% Debentures, 2014.................................................... 1,200,000 1,243,717
-------------
REAL ESTATE (9.0%)
Canadian Mortgage and Home Corp., 3.43% Debentures, 2008......................... 1,000,000 989,907
Health Retirement Properties, 6.39% Debentures, 2016............................. 300,000 317,096
iStar Financial, 6.32% Debentures, 2010.......................................... 240,000 253,474
Kimco Realty, 2.36% Debentures, 2006............................................. 100,000 100,028
Nationwide Health Properties Inc., 6.9% Debentures, 2037......................... 4,500,000 4,867,114
Post Apartment Homes LP, 4.05% Debentures, 2005.................................. 2,510,000 2,522,342
-------------
9,049,961
-------------
SUPERMARKETS (0.8%)
Safeway Inc., 4.96% Debentures, 2011............................................. 700,000 767,607
-------------
TECHNOLOGY (0.6%)
Computer Associates International, 4.78% Debentures, 2009 (B).................... 600,000 605,046
-------------
TELECOMMUNICATIONS (4.4%)
BellSouth Corp., 4.79% Debentures, 2012.......................................... 200,000 201,556
Deutsche Telekom ADS, 2.31% Debentures, 2005..................................... 1,100,000 1,125,759
SBC Communications Inc., 5.04% Debentures, 2014.................................. 400,000 404,485
Sprint Capital Corp., 4.9% Debentures, 2008...................................... 720,000 772,810
Telecom Italia S.p.A., 4.06% Debentures, 2010 (B)................................ 100,000 98,159
Telecom Italia S.p.A., 5.28% Debentures, 2013 (B)................................ 1,500,000 1,518,769
Verizon NY Inc., 5.01% Debentures, 2012.......................................... 300,000 337,230
-------------
4,458,768
-------------
TOBACCO (0.9%)
Altria Group, 5.74% Debentures, 2008 900,000 936,155
-------------
UNITED STATES AGENCY SECURITIES (3.3%)
Federal Association National Mortgage, 2.13% Debentures, 2006.................... 1,300,000 1,275,228
Federal Association National Mortgage, 3% Debentures, 2007....................... 1,400,000 1,393,965
Federal Home Loan Mortgage Corp., 2.9% Debentures, 2019.......................... 700,000 695,057
-------------
3,364,250
-------------
-27-
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS - CONTINUED
DECEMBER 31, 2004
PRINCIPAL FAIR
AMOUNT VALUE
------------ -------------
UTILITIES (4.3%)
Dominion Resources, 5.22% Debentures, 2033....................................... $ 400,000 $ 401,530
Kinder Morgan, 5.14% Debentures, 2014............................................ 200,000 199,985
Pepco Holdings Inc., 5.15% Debentures, 2007...................................... 1,600,000 1,664,875
SP Powerassets Ltd., 5.08% Debentures, 2013...................................... 900,000 914,862
Xcel Energy Inc., 3.44% Debentures, 2008 (B)..................................... 1,200,000 1,177,454
-------------
4,358,706
-------------
TOTAL BONDS
(COST $77,521,872) 79,248,293
-------------
UNITED STATES GOVERNMENT SECURITIES (12.5%)
United States of America Treasury, 1.50% Debentures, 2005........................ 6,060,000 6,223,105
United States of America Treasury, 2.14% Debentures, 2006........................ 3,075,000 3,101,909
United States of America Treasury, 3.01% Debentures, 2007........................ 2,400,000 2,374,406
United States of America Treasury, 3.57% Debentures, 2009........................ 500,000 497,813
United States of America Treasury, 4.82% Debentures, 2031........................ 400,000 432,656
TOTAL UNITED STATES GOVERNMENT SECURITIES
(COST $12,754,987)............................................................... 12,629,889
-------------
SHORT TERM INVESTMENTS (7.6%)
COMMERCIAL PAPER (7.6%)
Galleon Capital Corp, 2.28% Debentures, 2005..................................... 3,150,000 3,149,395
Paradigm Funding LLC, 2.35% Debentures, 2005..................................... 3,000,000 2,998,659
Spintab AB, 2.28% Debentures, 2005............................................... 1,573,000 1,572,297
TOTAL SHORT-TERM INVESTMENTS
(COST $7,720,856)............................................................... 7,720,351
-------------
TOTAL INVESTMENTS (98.5%)
COST ( $97,997,715) (C)......................................................... 99,598,533
-------------
OTHER ASSETS AND LIABILITIES (1.5%) 1,546,472
-------------
TOTAL NET ASSETS (100.0%)......................................................... $ 101,145,005
=============
-28-
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS - CONTINUED
DECEMBER 31, 2004
NOTES
(A) Restricted Security.
(B) Security is not registered under the Securities Act of 1933. These
securities may be resold in transactions in accordance with Rule 144A
under that Act, to qualified institutional buyers. As of December 31,
2004, The Travelers Quality Bond Account for Variable Annuities held 10.5%
of its net assets, with a current market value of $10,612,892, in
securities restricted as to resale.
(C) At December 31, 2004 net unrealized appreciation for all securities was
$1,600,818. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of fair value over cost of
$2,142,841 and aggregate gross unrealized depreciation for all securities
in which there was an excess of cost over fair value of $542,023.
See Notes to Financial Statement
-29-
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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, 2004, 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 the standards of the Public Company
Accounting Oversight Board (United States). 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, 2004, 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, 2004, 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, 2005
-30-
THE TRAVELERS MONEY MARKET ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2004
ASSETS:
Investment securities, at fair value (cost $66,877,485) ....... $66,872,292
Cash .......................................................... 576
Receivables:
Purchase payments and transfers from other funding options .. 70,506
Other assets .................................................. 410
-----------
Total Assets .............................................. 66,943,784
-----------
LIABILITIES:
Payables:
Contract surrenders and transfers to other funding options .. 43,320
Investment management and advisory fees ..................... 4,790
Insurance charges ........................................... 18,514
-----------
Total Liabilities ......................................... 66,624
-----------
NET ASSETS: $66,877,160
===========
See Notes to Financial Statements
-31-
THE TRAVELERS MONEY MARKET ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2004
INVESTMENT INCOME:
Interest ....................................................................... $ 1,058,991
EXPENSES:
Investment management and advisory fees ........................................ $ 250,743
Insurance charges .............................................................. 969,225
-------------
Total expenses ............................................................... 1,219,968
------------
Net investment income (loss) ............................................... (160,977)
------------
Net increase (decrease) in net assets resulting from operations ................ $ (160,977)
============
See Notes to Financial Statements
-32-
THE TRAVELERS MONEY MARKET ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
2004 2003
---- ----
OPERATIONS:
Net investment income (loss) ....................................... $ (160,977) $ (453,301)
------------- -------------
Net increase (decrease) in net assets resulting from operations .. (160,977) (453,301)
------------- -------------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 2,876,976 and 3,738,508 units, respectively) ...... 7,848,289 10,242,509
Participant transfers from other funding options
(applicable to 15,177,654 and 37,539,587 units, respectively) .... 41,410,773 102,847,832
Administrative charges
(applicable to 36,552 and 47,013 units, respectively) ............ (99,678) (128,680)
Contract surrenders
(applicable to 7,406,612 and 10,956,438 units, respectively) ..... (20,205,133) (30,017,360)
Participant transfers to other funding options
(applicable to 18,609,573 and 48,091,621 units, respectively) .... (50,776,513) (131,747,666)
Other payments to participants
(applicable to 89,026 and 335,989 units, respectively) ........... (244,258) (922,085)
------------- -------------
Net increase (decrease) in net assets resulting from unit transactions (22,066,520) (49,725,450)
------------- -------------
Net increase (decrease) in net assets ............................ (22,227,497) (50,178,751)
NET ASSETS:
Beginning of year .................................................. 89,104,657 139,283,408
------------- -------------
End of year ........................................................ $ 66,877,160 $ 89,104,657
============= =============
See Notes to Financial Statements
-33-
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, Universal Select Annuity, and Universal Annuity Advantage
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 2004.
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.
-34-
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.
The asset-based charges listed below are deducted, as appropriate, each business
day and are assessed through the calculation of accumulation and annuity unit
values;
- Mortality and Expense Risks assumed by The Company (M&E)
- Administrative fees paid for administrative expenses (ADM)
- Guaranteed Minimum Withdrawal Benefit, if elected by the contract
owner (GMWB)
Below is a table displaying Total M&E and Rider Charges with their associated
products offered in this Separate Account . The table displays Standard (S) and
Annual Step-Up (SU) death-benefit designations.
- ----------------------------------------------------------------------------------------------------------------------------------
TRAVELERS MONEY MARKET ACCOUNT
- ----------------------------------------------------------------------------------------------------------------------------------
Asset-based Charges
----------------------------------
----------------
Optional Feature
Total M&E and Rider Charges (1) Dth ---------------- Total
(as identified in Note 4) Ben Product M&E GMWB Charge
- ----------------------------------------------------------------------------------------------------------------------------------
Total M&E and Rider Charges 1.00%, 3.5% AIR S Universal Annuity (1) 1.00% 1.00%
Total M&E and Rider Charges 1.25%, 3.0% AIR S Universal Select Annuity 1.25% 1.25%
Total M&E and Rider Charges 1.25%, 3.5% AIR S Universal Annuity (2) 1.25% 1.25%
S Universal Annuity Advantage 1.25% 1.25%
Total M&E and Rider Charges 1.40%, 3.0% AIR SU Universal Select Annuity 1.40% 1.40%
Total M&E and Rider Charges 1.40%, 3.5% AIR SU Universal Annuity Advantage 1.40% 1.40%
Total M&E and Rider Charges 1.65%, 3.0% AIR S Universal Select Annuity 1.25% 0.40% 1.65%
Total M&E and Rider Charges 1.65%, 3.5% AIR S Universal Annuity Advantage 1.25% 0.40% 1.65%
Total M&E and Rider Charges 1.80%, 3.0% AIR SU Universal Select Annuity 1.40% 0.40% 1.80%
Total M&E and Rider Charges 1.80%, 3.5% AIR SU Universal Annuity Advantage 1.40% 0.40% 1.80%
- ----------------------------------------------------------------------------------------------------------------------------------
(1) Contracts issued prior to May 16, 1983
(2) 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 $148,520 and $243,226
for the years ended December 31, 2004 and 2003, respectively.
3. NET ASSETS HELD ON BEHALF OF AN AFFILIATE
Approximately $1,060,000 and $1,185,000 of the net assets of Account MM were
held on behalf of an affiliate of The Company as of December 31, 2004 and 2003,
respectively. Transactions with this affiliate during the years ended December
31, 2004 and 2003, were comprised of participant purchase payments of
approximately $515,000 and $523,000 and contract surrenders of approximately
$638,000 and $1,541,000, respectively.
-35-
NOTES TO FINANCIAL STATEMENTS - CONTINUED
4. NET CONTRACT OWNERS' EQUITY
DECEMBER 31, 2004
-------------------------------------
UNIT
UNITS VALUE NET ASSETS
---------- -------- ------------
Total M&E and Rider Charges 1.00%, 3.5% AIR ..... 26,096 $ 2.879 $ 75,132
Total M&E and Rider Charges 1.25%, 3.5% AIR ..... 24,484,897 2.728 66,801,878
Total M&E and Rider Charges 1.25%, 3.0% AIR ..... 150 1.001 150
------------
Net Contract Owners' Equity .............................................. $ 66,877,160
============
-36-
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. SUPPLEMENTARY INFORMATION
(Selected data for a unit outstanding throughout each year.)
Total M&E and Rider Charges 1.00%, 3.5% AIR FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
SELECTED PER UNIT DATA:
Total investment income ................................... $ .040 $ .033 $ .051 $ .120 $ .174
Operating expenses ........................................ .038 .038 .038 .037 .037
-------- -------- -------- -------- --------
Net investment income (loss) .............................. .002 (.005) .013 .083 .137
Unit value at beginning of year ........................... 2.877 2.882 2.869 2.786 2.649
-------- -------- -------- -------- --------
Unit value at end of year ................................. $ 2.879 $ 2.877 $ 2.882 $ 2.869 $ 2.786
======== ======== ======== ======== ========
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value ..................... $ .00 $ (.01) $ .01 $ .08 $ .14
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 0.07% (0.16)% 0.46% 2.89% 5.09%
Number of units outstanding at end of year (thousands) .... 26 39 49 60 70
Total M&E and Rider Charges 1.25%, 3.5% AIR FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
SELECTED PER UNIT DATA:
Total investment income ................................... $ .038 $ .032 $ .048 $ .114 $ .167
Operating expenses ........................................ .043 .043 .043 .042 .041
-------- -------- -------- -------- --------
Net investment income (loss) .............................. (.005) (.011) .005 .072 .126
Unit value at beginning of year ........................... 2.733 2.744 2.739 2.667 2.541
-------- -------- -------- -------- --------
Unit value at end of year ................................. $ 2.728 $ 2.733 $ 2.744 $ 2.739 $ 2.667
======== ======== ======== ======== ========
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value ..................... $ (.01) $ (.01) $ .01 $ .07 $ .13
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 (0.18)% (0.41)% 0.21% 2.64% 4.84%
Number of units outstanding at end of year (thousands) .... 24,485 32,559 50,702 63,430 55,477
-37-
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. SUPPLEMENTARY INFORMATION (CONTINUED)
(Selected data for a unit outstanding throughout each period.)
FROM DECEMBER 28, 2004
Total M&E and Rider Charges 1.25%, 3.0% AIR (INCEPTION DATE) TO
DECEMBER 31,
2004
---------
SELECTED PER UNIT DATA:
Total investment income ..................................... $ --
Operating expenses .......................................... --
---------
Net investment income (loss) ................................ --
Unit value at beginning of period ........................... 1.001
---------
Unit value at end of year ................................... $ 1.001
=========
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value ....................... $ --
Ratio of operating expenses to average net assets* .......... 1.57%
Ratio of net investment income (loss) to average net assets* 0.74%
Number of units outstanding at end of year (thousands)** .... --
* Annualized
** Unit Balance rounds to less than 1,000 units
6. SUBSEQUENT EVENT
On January 31, 2005, Citigroup Inc. ("Citigroup") announced that it had agreed
to sell The Travelers Insurance Company ("TIC"), The Travelers Life and Annuity
Company, Citicorp Life Insurance Company, First Citicorp Life Insurance Company,
Citicorp International Life Insurance Company, The Travelers Life and Annuity
Reinsurance Company, and certain other domestic and international insurance
businesses (the "Life Insurance and Annuity Businesses") to MetLife, Inc.
("MetLife") pursuant to an Acquisition Agreement (the "Agreement"). The
transaction is subject to certain regulatory approvals, as well as other
customary conditions to closing. Citigroup currently anticipates that the
intended sale would be closed this summer.
The proposed sale would also include TIC's affiliated investment advisory
companies, Travelers Asset Management International Company LLC, which serves as
the investment advisor for certain of the variable product separate accounts.
The transaction contemplates that TIC's Primerica Life segment and certain other
assets will remain with Citigroup. Accordingly, prior to the closing, TIC will
distribute to its parent company by way of dividend (i) all of the outstanding
shares of common stock of the Company's 100% owned subsidiary, Primerica Life
Insurance Company ("Primerica Life"), (ii) all shares of Citigroup's Series YYY
and Series YY preferred stock held by the Company and (iii) certain other
assets, including certain assets and liabilities related to the Company's share
of the non-qualified pension plan, and post retirement benefits related to
inactive employees of the former Travelers Insurance entities, assumed during
Citigroup's 2002 spin-off of the Travelers Property Casualty operations
(collectively, the "Dispositions"). The Dispositions require certain regulatory
approvals.
Subject to closing adjustments described in the Agreement, the contemplated sale
price would be $11.5 billion. In connection with the consummation of the sale of
the Life Insurance and Annuity Business, Citigroup and MetLife will also enter
into multi-year distribution agreements.
TIC filed a Form 8-K Current Report with The United States Securities and
Exchange Commission on February 2, 2005, with additional information about the
transaction.
-38-
THE TRAVELERS MONEY MARKET ACCOUNT
FOR VARIABLE ANNUITIES
SUMMARY OF HOLDINGS
DECEMBER 31, 2004
% of net
assets
--------
SHORT-TERM INVESTMENTS
Commercial Paper .......................................... 99.9
-----
TOTAL SHORT-TERM INVESTMENTS ................................ 99.9
-----
TOTAL INVESTMENTS ........................................... 99.9
-----
-----
Other Assets and Liabilities ................................ 0.1
-----
TOTAL NET ASSETS ............................................ 100.0
=====
-39-
THE TRAVELERS MONEY MARKET ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS
DECEMBER 31, 2004
PRINCIPAL FAIR
AMOUNT VALUE
-------------- -------------
SHORT-TERM INVESTMENTS (99.9%)
COMMERCIAL PAPER (99.9%)
ABN AMRO North America Financial, 2.31% due January 10, 2005............... $ 3,380,000 $ 3,377,840
AIG Funding Inc., 2.34% due January 14, 2005............................... 3,060,000 3,057,264
Atomium Funding Corp., 2.27% due January 18, 2005.......................... 2,900,000 2,896,665
Bryant Park Funding LLC, 2.32% due January 11, 2005........................ 3,400,000 3,397,610
Coca-Cola Co., 2.3% due January 19, 2005................................... 3,386,000 3,381,889
Coca-Cola Enterprises Inc. , 2.31% due January 31, 2005.................... 3,380,000 3,373,304
Gannett Co., Inc., 2.23% due January 14, 2005.............................. 1,919,000 1,917,284
General Electric Capital Corp., 2.24% due January 18, 2005................. 3,500,000 3,495,975
Giro Balanced Funding Corp., 2.27% due January 14, 2005.................... 3,513,000 3,509,859
Household Financial Corp., 2.3% due January 12, 2005....................... 3,400,000 3,397,392
ING U.S. Funding LLC, 2.26% due January 5, 2005............................ 2,200,000 2,199,298
International Business Machine, 2.28% due January 12, 2005................. 1,000,000 999,233
Knight-Ridder, Inc, 2.29% due January 13, 2005............................. 3,386,000 3,383,187
Morgan Stanley, 2.36% due January 20, 2005................................. 3,390,000 3,385,668
Nestle Capital Corp., 2.26% due January 11, 2005........................... 3,039,000 3,036,864
Nieuw Amsterdam Receivables Corp., 2.36% due January 18, 2005.............. 3,000,000 2,996,550
Norddeutsche Landesbank Luxembourg S.A., 2.36% due January 19, 2005........ 3,400,000 3,395,872
Quebec Providence of Canada, 2.29% due January 12, 2005.................... 1,685,000 1,683,708
Royal Bank of Scotland PLC, 2.25% due January 6, 2005...................... 3,488,000 3,486,664
Siemens Capital Corp., 2.29% due February 1 ,2005.......................... 2,923,000 2,917,017
Toyota Motor Credit Corp., 2.25% due January 21, 2005...................... 3,463,000 3,458,353
UBS Financial Inc., 2.26% due January 3, 2005.............................. 525,000 524,899
Victory Receivables Corp., 2.39% due January 19, 2005...................... 3,300,000 3,295,994
Yorktown Capital LLC, 2.37% due January 5, 2005............................ 304,000 303,903
-------------
66,872,292
-------------
TOTAL INVESTMENTS (99.9%)
(COST $66,877,485)......................................................... 66,872,292
-------------
OTHER ASSETS AND LIABILITIES (0.1%).......................................... 4,868
-------------
TOTAL NET ASSETS (100.0%).................................................... $ 66,877,160
==============
-40-
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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, 2004, 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 the standards of the Public Company
Accounting Oversight Board (United States). 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, 2004, 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, 2004, 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, 2005
-41-
THE BOARD OF MANAGERS AND OFFICERS
The investments and administration of each of the Accounts are under the
direction of the Board of Managers, listed below. Members of the Board of
Managers of Accounts GIS, QB, and MM are elected annually by those Contract
Owners participating in the Accounts. A majority of the members of the Board of
Managers are persons who are not affiliated with The Travelers Insurance
Company, TIMCO, TAMIC or their affiliates.
- ------------------------------------------------------------------------------------------------------------------------------
NAME, ADDRESS AND POSITION(S) TERM OF PRINCIPAL OCCUPATION DURING LAST NUMBER OF OTHER DIRECTORSHIPS
AGE HELD WITH FUND OFFICE FIVE YEARS PORTFOLIOS IN HELD BY DIRECTOR
AND FUND COMPLEX
LENGTH OVERSEEN BY
OF TIME DIRECTOR
SERVED
- ------------------------------------------------------------------------------------------------------------------------------
*R. Jay Gerken Manager Since Managing Director (1989 to present) 11 Managing Director of
399 Park Avenue 2002 of Citigroup Global Markets Inc. CGM
New York, NY ("CGM"); Chairman, President and
Age 53 CEO 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 Vice President and Secretary 11 N/A
One Cityplace the Board 1994 (1996-present), Assistant Secretary
Hartford, CT (1994-1996), Counsel
Age 64 (1987-present), 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 Deputy General Counsel (1999 - 11 N/A
One Cityplace Secretary to 1995 present); Assistant Secretary
Hartford, CT The Board (1995-present), The Travelers
Age 54 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 Vice President and Controller (1999 6 N/A
One Cityplace Accounting 1998 - present); Second Vice President
Hartford, CT Officer (1996-1999), The Travelers
Age 43 Insurance Company; Principal
Accounting Officer (1998-present),
six Variable Annuity Separate
Accounts of The Travelers Insurance
Company.+
- ------------------------------------------------------------------------------------------------------------------------------
William D. Wilcox Chief AML Since Counsel and Chief Compliance 11 N/A
One Cityplace Compliance 2002 Officer (1999 - present); The
Hartford, CT Officer, Chief Travelers Insurance Company; Chief
Age 40 Compliance AML Compliance (2002-present), six
Officer Variable Annuity Separate Accounts
of The Travelers Insurance
Company.+; Chief Compliance Officer
(2004-present), five Mutual Funds
sponsored by The Travelers
Insurance Company. ++
- ------------------------------------------------------------------------------------------------------------------------------
-42-
INDEPENDENT MANAGERS**
- --------------------------------------------------------------------------------------------------------------------------------
NAME, ADDRESS AND AGE POSITION(S) TERM OF PRINCIPAL OCCUPATION DURING LAST NUMBER OF OTHER DIRECTORSHIPS
HELD WITH OFFICE AND FIVE YEARS PORTFOLIOS IN HELD BY DIRECTOR
FUND LENGTH OF FUND COMPLEX
TIME SERVED OVERSEEN BY
DIRECTOR
- --------------------------------------------------------------------------------------------------------------------------------
Robert E. McGill, Manager Since 1974 Retired manufacturing executive. 11 None
III Director (1983-1995), Executive
295 Hancock Street Vice President (1989-1994) and
Williamstown, MA Senior Vice President, Finance and
Age 73 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 North Corp.
Age 61 Management (1998-2001), University (hospitality business)
at Buffalo; Dean, College of
Business Administration
(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.
Downingtown, PA (investment management); Assistant
Age 56 Treasurer, 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.++
- --------------------------------------------------------------------------------------------------------------------------------
-43-
+ These 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, Tactical Growth and Income Stock Account for Variable
Annuities, Tactical Short-Term Bond Account for Variable Annuities and
Tactical Aggressive Stock Account for Variable Annuities.
++ These 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.
-44-
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.
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
Each Account files its complete schedule of portfolio holdings with the SEC for
the first and third quarters of each fiscal year on Form N-Q. You may find these
forms on the Securities and Exchange Commission's website at HTTP://WWW.SEC.GOV.
These forms may also be reviewed and copied at the SEC's Public Reference Room
in Washington, D.C. Information on the operation of the Public Reference Room
may be obtained by calling (toll free) 1-800-SEC-0330. Contract owners can also
call the Account at 1-800-842-9406 to obtain information on Form N-Q.
A description of the policies and procedures that the Accounts use to determine
how to vote proxies and information on how the Accounts voted proxies relating
to portfolio securities during the 12-month period ended June 30, 2004 is
currently available. You may obtain these materials upon request and without
charge by calling the Accounts (toll-free) at 1-800-842-9406, by visiting the
Accounts' website at HTTP://WWW.CITIGROUPAM.COM, or by visiting the Securities
and Exchange Commission's website at HTTP://WWW.SEC.GOV.
VG-137 (Annual) (12-04) 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, a member 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 the "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 $59,500 for the year ended December 31,
2003 and $58,575 for the year ended December 31, 2004. These fees are
paid by Travelers Life & Annuity, as sponsor of each registrant.
(b) None.
(c) None.
(d) None.
(e)(1) 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.
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) No fee incurred on behalf of the accounts.
(f) Not applicable.
(g) None.
(h) Yes.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS
Please see the schedule of investments contained in the report to shareholders
included under item 1 of this form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED END
MANAGEMENT INVESTMENTCOMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the registrant's Board of Managers since the accounts last
provided disclosure in response to this item.
ITEM 11. 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 (the "1940 Act")) are effective as of a date
within 90 days of the filing date of this report that includes the
disclosure required by this paragraph, based on their evaluation of the
disclosure controls and procedures required by Rule 30a-3(b) under the
1940 Act and 15d-15(b) under the Securities Exchange Act of 1934 as of
a date within 90 days of the filing date of this document.
(b) There were no changes in the registrant's internal control over
financials reporting (as defined in Rule 30a-3(d) under the 1940 Act)
that occurred during the registrant's last fiscal half-year (the
registrant's second fiscal half-year in the case of an annual report)
that have materially affected, or are likely to materially affect the
registrant's internal control over financial reporting.
ITEM 12. 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 24, 2005
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 24, 2005
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 24, 2005