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OMB APPROVAL
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OMB Number: 3235-0570
Expires: September 31, 2007
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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) 308-6894
Date of fiscal year end: December 31, 2005
Date of reporting period: June 30, 2005
ITEM 1. REPORT(S) TO STOCKHOLDERS.
SEMI-ANNUAL REPORTS
JUNE 30, 2005
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
THE TRAVELERS MONEY MARKET ACCOUNT
FOR VARIABLE ANNUITIES
The Travelers Insurance Company
The Travelers Life and Annuity Company
One Cityplace
Hartford, CT 06103
[TAMIC LOGO] 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.
[TIMCO LOGO] The Travelers Investment Management Company ("TIMCO")
provides equity management and subadvisory services for The
Travelers Growth and Income Stock Account for Variable
Annuities.
TABLE OF CONTENTS
PAGE
- --------------------------------------------------------------------------------
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES ..................................................... 1
THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES .................. 17
THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES .................. 32
FACTORS CONSIDERED BY THE INDEPENDENT MANAGERS IN APPROVING
THE INVESTMENT ADVISORY AND THE SUB-ADVISORY AGREEMENTS .................... 42
RESULTS FROM THE COMBINED SPECIAL MEETINGS ................................. 46
BOARD OF MANAGERS AND OFFICERS ............................................. 47
This page intentionally left blank
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 2005
ASSETS:
Investment securities, at fair value (cost $430,396,608) ........ $483,975,581
Cash ............................................................ 6,803
Receivables:
Dividends ..................................................... 594,204
Investment securities sold .................................... 1,565,486
Purchase payments and transfers from other funding options .... 70,218
Other assets .................................................... 25,238
------------
Total Assets ............................................... 486,237,530
------------
LIABILITIES:
Payables:
Contract surrenders and transfers to other funding options .... 99,630
Investment management and advisory fees ....................... 52,125
Insurance charges ............................................. 94,624
Accrued liabilities ............................................. 1,432
------------
Total Liabilities .......................................... 247,811
------------
NET ASSETS: ....................................................... $485,989,719
============
See Notes to Financial Statements
-1-
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2005
INVESTMENT INCOME:
Dividends .................................................................... $ 4,133,950
Interest ..................................................................... 77,262
-------------
Total income ............................................................... $ 4,211,212
EXPENSES:
Investment management and advisory fees ...................................... 1,607,952
Insurance charges ............................................................ 2,924,202
-------------
Total expenses ............................................................. 4,532,154
-------------
Net investment income (loss) ............................................ (320,942)
-------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES:
Realized gain (loss) from investment security transactions:
Proceeds from investment securities sold ................................... 87,066,445
Cost of investment securities sold ......................................... 80,795,392
-------------
Net Realized gain (loss) ................................................ 6,271,053
Change in unrealized gain (loss) on investment securities:
Unrealized gain (loss) at June 30, 2005 .................................... 53,578,973
Unrealized gain (loss) at December 31, 2004 ................................ 68,011,790
-------------
Net change in unrealized gain (loss) for the period ..................... (14,432,817)
-------------
Net realized gain (loss) and change in unrealized gain (loss) ...... (8,161,764)
-------------
Net increase (decrease) in net assets resulting from operations .............. $ (8,482,706)
=============
See Notes to Financial Statements
-2-
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
2005 2004
---- ----
(UNAUDITED)
OPERATIONS:
Net investment income (loss) ..................................................... $ (320,942) $ 249,422
Net realized gain (loss) from investment security transactions ................... 6,271,053 24,967,584
Net change in unrealized gain (loss) on investment securities .................... (14,432,817) 28,522,721
------------- -------------
Net increase (decrease) in net assets resulting from operations ................. (8,482,706) 53,739,727
------------- -------------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 425,752 and 902,159 units, respectively) ........................ 7,611,155 15,767,591
Participant transfers from other funding options
(applicable to 176,276 and 468,530 units, respectively) ........................ 3,270,359 8,184,838
Administrative charges
(applicable to 10,205 and 22,684 units, respectively) .......................... (189,740) (412,112)
Contract surrenders
(applicable to 1,547,611 and 2,787,531 units, respectively) .................... (29,005,867) (49,336,289)
Participant transfers to other funding options
(applicable to 628,983 and 976,561 units, respectively) ........................ (11,693,192) (17,069,498)
Other payments to participants
(applicable to 55,663 and 183,493 units, respectively) ......................... (1,070,666) (3,341,401)
------------- -------------
Net increase (decrease) in net assets resulting from unit transactions ........... (31,077,951) (46,206,871)
------------- -------------
Net increase (decrease) in net assets .......................................... (39,560,657) 7,532,856
NET ASSETS:
Beginning of period .............................................................. 525,550,376 518,017,520
------------- -------------
End of period .................................................................... $ 485,989,719 $ 525,550,376
============= =============
See Notes to Financial Statements
-3-
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Growth and Income Stock Account for Variable Annuities
("Account GIS") is a separate account of The Travelers Insurance Company
("The Company"), an indirect wholly owned subsidiary of Citigroup Inc., and
is available for funding Universal Annuity, 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 at June 30, 2005.
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 at June 30, 2005.
-4-
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
1. SIGNIFICANT ACCOUNTING POLICIES (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 $63,951,905 and $87,224,617,
respectively; the costs of purchases and proceeds from sales of direct and
indirect U.S. government securities were $1,142,607 and $2,300,000,
respectively, for the six months ended June 30, 2005. Realized gains and
losses from investment security transactions are reported on an identified
cost basis.
At June 30, 2005, Account GIS held no open futures contracts.
Net realized gains (losses) resulting from futures contracts were $158,172
and $601,653 for the six months ended June 30, 2005 and the year ended
December 31, 2004, respectively. These gains (losses) are included in the
net realized gain (loss) from investment security transactions on both the
Statement of Operations and the Statement of Changes in Net Assets.
3. CONTRACT CHARGES
Investment management and advisory fees are calculated daily at annual rates
which start at 0.65% and decrease, as net assets increase, to 0.40% of
Account GIS"s average net assets. These fees are paid to Travelers Asset
Management International Company, LLC ("TAMIC"), an indirect wholly owned
subsidiary of Citigroup Inc. Pursuant to a subadvisory agreement between
TAMIC and The Travelers Investment Management Company ("TIMCO"), an indirect
wholly owned subsidiary of Citigroup Inc., TAMIC pays TIMCO a subadvisory
fee calculated daily at annual rates which start at 0.45% and decrease, as
net assets increase, to 0.20% of Account GIS"s average net assets.
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 (UNAUDITED) - CONTINUED
3. CONTRACT CHARGES (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------------
TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
Asset-based Charges
Total M&E and Rider Charges (1) Dth Optional Feature 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 $6,604 and $7,727 for the six months ended June 30,
2005 and the year ended December 31, 2004, 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
$97,506 and $221,650 for the six months ended June 30, 2005 and the year
ended December 31, 2004, respectively.
4. NET ASSETS HELD ON BEHALF OF AN AFFILIATE
Approximately $12,092,000 and $13,321,000 of the net assets of Account GIS
were held on behalf of an affiliate of The Company as of June 30, 2005 and
December 31, 2004, respectively. Transactions with this affiliate during the
six months ended June 30, 2005 and the year ended December 31, 2004, were
comprised of participant purchase payments of approximately $3,000 and
$3,000 and contract surrenders of approximately $1,030,000 and $438,000,
respectively.
-6-
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
5. NET CONTRACT OWNERS" EQUITY
JUNE 30, 2005
------------------------------------
UNIT
UNITS VALUE NET ASSETS
---------- --------- -------------
Total M&E and Rider Charges 1.00%, 3.5% AIR 6,978,395 $ 19.650 $ 137,131,516
Total M&E and Rider Charges 1.25%, 3.5% AIR 18,757,047 18.597 348,841,113
Total M&E and Rider Charges 1.40%, 3.5% AIR 19 1.063 20
Total M&E and Rider Charges 1.65%, 3.5% AIR 75 1.061 80
Total M&E and Rider Charges 1.25%, 3.0% AIR 14,667 1.069 15,679
Total M&E and Rider Charges 1.40%, 3.0% AIR 277 1.068 296
Total M&E and Rider Charges 1.65%, 3.0% AIR 953 1.066 1,015
-------------
Net Contract Owners' Equity $ 485,989,719
=============
Assumed Interest Rate (AIR) is only applicable to contracts in the payout phase.
-7-
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
6. SUPPLEMENTARY INFORMATION
(Selected data for a unit outstanding throughout each period.)
SIX
MONTHS
Total M&E and Rider Charges 1.00%, 3.5% AIR ENDED FOR THE YEARS ENDED DECEMBER 31,
JUNE 30, (DERIVED FROM AUDITED FINANCIAL INFORMATION)
-------- ----------------------------------------------------
2005 2004 2003 2002 2001 2000
---- ---- ---- ---- ---- ----
SELECTED PER UNIT DATA:
Total investment income ...................................... $ .165 $ .348 $ .264 $ .240 $ .266 $ .242
Operating expenses ........................................... 160 .303 .256 .261 .311 .376
------- ------- ------- ------- ------- -------
Net investment income (loss) ................................. .005 .045 .008 (.021) (.045) (.134)
Unit value at beginning of period ............................ 19.949 17.926 14.172 18.064 21.418 24.427
Net realized and change in unrealized gains (losses) ......... (.304) 1.978 3.746 (3.871) (3.309) (2.875)
------- ------- ------- ------- ------- -------
Unit value at end of period .................................. $19.650 $19.949 $17.926 $14.172 $18.064 $21.418
======= ======= ======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value ........................ $ (.30) $ 2.02 $ 3.75 $ (3.89) $ (3.35) $ (3.01)
Ratio of operating expenses to average net assets ............ 1.65%* 1.65% 1.65% 1.64% 1.63% 1.60%
Ratio of net investment income (loss) to average net assets .. 0.04%* 0.23% 0.06% (0.12) (0.24) (0.57)
Number of units outstanding at end of period (thousands) ..... 6,978 7,413 8,139 9,088 10,329 11,413
Portfolio turnover rate ...................................... 13% 43% 68% 54% 32% 52%
SIX
MONTHS
Total M&E and Rider Charges 1.25%, 3.5% AIR ENDED FOR THE YEARS ENDED DECEMBER 31,
JUNE 30, (DERIVED FROM AUDITED FINANCIAL INFORMATION)
-------- ----------------------------------------------------
2005 2004 2003 2002 2001 2000
---- ---- ---- ---- ---- ----
SELECTED PER UNIT DATA:
Total investment income ...................................... $ .156 $ .330 $ .251 $ .229 $ .254 $ .232
Operating expenses ........................................... 174 .331 .281 .287 .343 .416
------- ------- ------- ------- ------- -------
Net investment income (loss) ................................. (.018) (.001) (.030) (.058) (.089) (.184)
Unit value at beginning of period ............................ 18.903 17.028 13.496 17.245 20.498 23.436
Net realized and change in unrealized gains (losses) ......... (.288) 1.876 3.562 (3.691) (3.164) (2.754)
------- ------- ------- ------- ------- -------
Unit value at end of period .................................. $18.597 $18.903 $17.028 $13.496 $17.245 $20.498
======= ======= ======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value ........................ $ (.31) $ 1.88 $ 3.53 $ (3.75) $ (3.25) $ (2.94)
Ratio of operating expenses to average net assets ............ 1.90%* 1.90% 1.90% 1.89% 1.88% 1.84%
Ratio of net investment income (loss) to average net assets .. (0.20)%* (0.02)% (0.19)% (0.37)% (0.49)% (0.82)%
Number of units outstanding at end of period (thousands) ..... 18,757 19,978 21,853 24,100 27,559 29,879
Portfolio turnover rate ...................................... 13% 43% 68% 54% 32% 59%
* Annualized
-8-
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
6. SUPPLEMENTARY INFORMATION (CONTINUED)
(Selected data for a unit outstanding throughout each period.)
FROM JUNE 3, 2005
Total M&E and Rider Charges 1.40%, 3.5% AIR (INCEPTION DATE) TO
JUNE 30,
-------------------
2005
----
SELECTED PER UNIT DATA:
Total investment income ........................................ $ .001
Operating expenses ............................................. .001
------
Net investment income (loss) ................................... 0.00
Unit value at beginning of period .............................. 1.065
Net realized and change in unrealized gains (losses) ........... (.002)
------
Unit value at end of period .................................... $1.063
======
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value .......................... $ (.00)
Ratio of operating expenses to average net assets .............. 2.05%*
Ratio of net investment income (loss) to average net assets .... (0.68)%*
Number of units outstanding at end of period (thousands) ....... --**
Portfolio turnover rate ........................................ 13%
FROM MARCH 15,
2005 (INCEPTION DATE)
Total M&E and Rider Charges 1.65%, 3.5% AIR TO
JUNE 30,
---------------------
2005
----
SELECTED PER UNIT DATA:
Total investment income ........................................ $ .005
Operating expenses ............................................. .007
------
Net investment income (loss) ................................... (.002)
Unit value at beginning of period .............................. 1.067
Net realized and change in unrealized gains (losses) ........... (.004)
------
Unit value at end of period .................................... $1.061
======
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value .......................... $ (.01)
Ratio of operating expenses to average net assets .............. 2.30%*
Ratio of net investment income (loss) to average net assets .... (0.77)%*
Number of units outstanding at end of period (thousands) ....... --**
Portfolio turnover rate ........................................ 13%
* Annualized
** Unit Balance rounds to less than 1,000 units.
-9-
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
6. SUPPLEMENTARY INFORMATION (CONTINUED)
(Selected data for a unit outstanding throughout each period.)
FROM DECEMBER 10, 2004
SIX MONTHS (INCEPTION DATE) TO
Total M&E and Rider Charges 1.25%, 3.0% AIR ENDED DECEMBER 31,
JUNE 30, (DERIVED FROM AUDITED FINANCIAL INFORMATION)
----------- --------------------------------------------
2005 2004
---- ----
SELECTED PER UNIT DATA:
Total investment income .................................... $ .009 $ .001
Operating expenses ......................................... .010 .001
----------- -----------
Net investment income (loss) ............................... (.001) --
Unit value at beginning of period .......................... 1.087 1.066
Net realized and change in unrealized gains (losses) ....... (.017) .021
----------- -----------
Unit value at end of period ................................ $ 1.069 $ 1.087
=========== ===========
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value ...................... $ (.02) $ .02
Ratio of operating expenses to average net assets .......... 1.90% 1.90%
Ratio of net investment income (loss) to average net assets (0.20)%* 0.49%
Number of units outstanding at end of period (thousands) ... 15 --**
Portfolio turnover rate .................................... 13% 43%
FROM MARCH 4, 2005
Total M&E and Rider Charges 1.40%, 3.0% AIR (INCEPTION DATE) TO
JUNE 30,
-------------------
2005
----
SELECTED PER UNIT DATA:
Total investment income
$ .005
Operating expenses ......................................... .007
---------
Net investment income (loss) ............................... (.002)
Unit value at beginning of period .......................... 1.094
Net realized and change in unrealized gains (losses) ....... (.024)
---------
Unit value at end of period ................................ $ 1.068
=========
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value ...................... $ (.03)
Ratio of operating expenses to average net assets .......... 2.05%*
Ratio of net investment income (loss) to average net assets (0.49)%*
Number of units outstanding at end of period (thousands) ... --**
Portfolio turnover rate .................................... 13%
* Annualized
** Unit Balance rounds to less than 1,000 units.
-10-
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
6. SUPPLEMENTARY INFORMATION (CONTINUED)
(Selected data for a unit outstanding throughout each period.)
FROM FEBUARY 24,
2005 (INCEPTION DATE)
Total M&E and Rider Charges 1.65%, 3.0% AIR TO
JUNE 30,
---------------------
2005
----
SELECTED PER UNIT DATA:
Total investment income .................................... $ .006
Operating expenses ......................................... .008
---------
Net investment income (loss) ............................... (.002)
Unit value at beginning of period .......................... 1.072
Net realized and change in unrealized gains (losses) ....... (.004)
---------
Unit value at end of period ................................ $ 1.066
=========
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value ...................... $ (.01)
Ratio of operating expenses to average net assets .......... 2.30%*
Ratio of net investment income (loss) to average net assets (0.59)%*
Number of units outstanding at end of period (thousands) ... 1
Portfolio turnover rate .................................... 13%
* Annualized
7. SUBSEQUENT EVENTS
On June 24, 2005, Citigroup Inc. ("Citigroup") announced that it had signed
a definitive agreement, effective July 1, 2005, under which Citigroup will
sell substantially all of its worldwide asset management business to Legg
Mason, Inc. ("Legg Mason"). As part of this transaction, Account GIS's
subadviser, TIMCO, currently an indirect wholly owned subsidiary of
Citigroup, would become an indirect wholly owned subsidiary of Legg Mason.
The transaction is subject to certain regulatory approvals, as well as other
customary conditions to closing. Subject to such approvals and the
satisfaction of the other conditions, Citigroup expects the transaction to
be completed later in 2005.
On July 1, 2005, MetLife, Inc., a Delaware corporation ("MetLife"), acquired
all of the outstanding shares of capital stock of certain indirect
subsidiaries held by Citigroup, Inc. ("Citigroup") including The Company,
The Travelers Life and Annuity Company, a wholly owned subsidiary of The
Company and certain other domestic insurance companies of Citigroup and
substantially all of the Citigroup"s international businesses for $11.8
billion.
TIC filed a Form 8-K Current Report with The United States Securities and
Exchange Commission on July 8, 2005, with additional information about the
transaction.
-11-
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
SUMMARY OF HOLDINGS (UNAUDITED)
JUNE 30, 2005
% of net
assets
------------
COMMON STOCK
Technology 14.8
Banking 8.1
Pharmaceuticals 7.6
Insurance 6.2
Retail 5.9
Integrated Energy 5.5
Conglomerates 5.3
Consumer 4.7
Telecommunications 3.9
Brokerage 3.3
Healthcare 2.7
Food 2.6
Medical Supplies 2.1
Finance 2.0
Multimedia 2.0
Oil Companies 1.9
Beverage 1.8
Electric Utilities 1.7
Utilities 1.7
Transportation Services 1.4
Tobacco 1.2
Independent Energy 1.1
United States Agency Securities 1.1
Automotive 1.0
Capital Goods 1.0
Entertainment 1.0
Metals 1.0
Aerospace 0.9
Services 0.9
Chemicals 0.8
Defense 0.8
Home Construction 0.7
Paper 0.7
Lodging 0.6
Media Non-Cable 0.5
Machinery 0.4
Biotechnology 0.3
Building Materials 0.2
------
TOTAL COMMON STOCK 99.4
------
SHORT-TERM INVESTMENTS
Commercial Paper 0.1
United States Treasury 0.1
------
TOTAL SHORT-TERM 0.2
------
TOTAL INVESTMENTS 99.6
------
OTHER ASSETS AND LIABILITIES 0.4
------
TOTAL NET ASSETS 100.0
======
-12-
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS (UNAUDITED)
JUNE 30, 2005
NO. OF FAIR
SHARES VALUE
---------- -----------
COMMON STOCK (99.4%)
AEROSPACE (0.9%)
Boeing Co. 27,258 $ 1,799,028
General Dynamics Corp. 24,458 2,679,129
-----------
4,478,157
-----------
AUTOMOTIVE (1.0%)
General Motors Corp. 25,599 870,366
Harley-Davidson 13,348 662,061
Oshkosh Truck 12,467 975,917
PACCAR Inc. 32,842 2,232,599
-----------
4,740,943
-----------
BANKING (8.1%)
Bank of America Corp. 217,845 9,935,910
Capital One Financial Corp. 39,783 3,183,038
Comerica, Inc. 29,659 1,714,290
First Horizon National 186 7,849
JP Morgan Chase & Co. 208,409 7,361,006
KeyCorp 20,039 664,293
Marshall & Ilsley Corp. 17,134 761,606
MBNA Corp. 18,974 496,360
National City Corp. 62,124 2,119,671
Providian Financial Corp. 58,360 1,028,887
U.S. Bancorp 64,725 1,889,970
Wachovia Corp. 101,223 5,020,661
Washington Mutual, Inc. 12,447 506,468
Wells Fargo & Co. 77,391 4,765,738
-----------
39,455,747
-----------
BEVERAGE (1.8%)
Coca-Cola Co. 76,759 3,204,688
Coca-Cola Enterprises Inc. 69,137 1,521,705
PepsiCo, Inc. 74,247 4,004,141
-----------
8,730,534
-----------
BIOTECHNOLOGY (0.3%)
Genetech Inc. (A) 18,811 1,510,147
-----------
BROKERAGE (3.3%)
Bear Stearns Companies 33,815 3,514,731
Franklin Resources, Inc. 13,361 1,028,530
Goldman Sachs Group Inc. 31,891 3,253,520
Lehman Brothers Holdings Inc. 28,138 2,793,541
Merrill Lynch & Co. Inc. 44,535 2,449,870
Morgan Stanley 56,000 2,938,320
-----------
15,978,512
-----------
BUILDING MATERIALS (0.2%)
Masco Corp. 33,585 1,066,660
-----------
CAPITAL GOODS (1.0%)
Danaher Corp. 41,656 $ 2,180,275
Deere & Co. 33,186 2,173,351
Eaton Corp. 9,256 554,434
-----------
4,908,060
-----------
CHEMICALS (0.8%)
Dow Chemical 52,840 2,352,965
E.I. du Pont de Nemours & Co. 19,717 848,028
Monsanto Co. 11,686 734,699
-----------
3,935,692
-----------
CONGLOMERATES (5.3%)
3M Co. 24,209 1,750,311
General Electric Co. 467,008 16,181,827
Honeywell International, Inc. 38,200 1,399,266
Parker-Hannifin 21,634 1,341,524
Tyco International Ltd. 95,312 2,783,110
United Technologies Corp. 45,962 2,360,149
-----------
25,816,187
-----------
CONSUMER (4.7%)
Ball Corp. 20,579 740,021
Black & Decker Corp. 3,850 345,922
Colgate-Palmolive Co. 15,336 765,420
Eastman Kodak 43,556 1,169,479
Energizer Holdings, Inc. (A) 12,162 756,112
Fortune Brands 25,685 2,280,828
Gillette Co. 22,437 1,135,985
Mattel, Inc. 58,133 1,063,834
Miller Herman, Inc. 31,809 981,149
Molson Coors Brewing Co. (Class B) 16,134 1,000,308
NIKE, Inc. (Class B) 37,145 3,216,757
Pactiv Corp. (A) 47,910 1,033,898
Procter & Gamble Co. 112,982 5,959,800
Reebok International 27,844 1,164,715
Sealed Air Corp. (A) 25,501 1,269,695
-----------
22,883,923
-----------
DEFENSE (0.8%)
Lockheed Martin Corp. 28,336 1,838,156
Northrop Grumman Corp. 36,874 2,037,288
-----------
3,875,444
-----------
ELECTRIC UTILITIES (1.7%)
American Electric Power 60,355 2,225,289
Edison International 44,962 1,823,209
FirstEnergy Corp. 51,330 2,469,486
Public Service Enterprise Group 12,828 780,199
Southern Co. 26,402 915,357
-----------
8,213,540
-----------
-13-
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS (UNAUDITED) - CONTINUED
JUNE 30, 2005
NO. OF FAIR
SHARES VALUE
---------- -----------
ENTERTAINMENT (1.0%)
The Walt Disney Co. 140,456 $ 3,536,682
Viacom, Inc. (Class B) 36,799 1,178,304
-----------
4,714,986
-----------
FINANCE (2.0%)
American Express Co. 68,087 3,624,271
CIT Group Holdings, Inc. 39,646 1,703,589
Countrywide Financial 50,768 1,960,152
E*Trade Financial Corp. (A) 87,610 1,225,664
Principal Financial Group 28,221 1,182,460
-----------
9,696,136
-----------
FOOD (2.6%)
Applebee's International, Inc. 36,321 960,327
Archer-Daniels Midland Co. 110,826 2,369,460
General Mills, Inc. 35,975 1,683,270
Hormel Foods Corp. 16,069 471,304
Kellogg Co. 9,471 420,891
McDonald's Corp. 94,164 2,613,051
Sara Lee Corp. 35,337 700,026
Smithfield Foods (A) 69,649 1,899,328
Starbucks Corp. (A) 17,631 910,377
Yum! Brands 12,545 653,344
-----------
2,681,378
-----------
HEALTHCARE (2.7%)
Aetna Inc. 23,790 1,970,288
Caremark Rx, Inc. (A) 28,868 1,285,203
Humana, Inc. (A) 58,249 2,314,815
Medco Health Solutions (A) 12,869 686,690
UnitedHealth Group, Inc. 99,444 5,185,010
Wellpoint, Inc. (A) 25,398 1,768,717
-----------
3,210,723
-----------
HOME CONSTRUCTION (0.7%)
K.B. HOME 20,413 1,556,083
Pulte Homes, Inc. 22,094 1,861,419
-----------
3,417,502
-----------
INDEPENDENT ENERGY (1.1%)
Anadarko Petroleum Corp. 13,754 1,129,891
Burlington Resources 39,933 2,205,899
Devon Energy Corp. 14,922 756,247
Kerr-McGee Corp. 18,638 1,422,266
-----------
5,514,303
-----------
INSURANCE (6.2%)
ACE Limited 13,472 604,219
AFLAC Inc. 24,399 1,055,989
Allstate Corp. 61,684 3,685,619
Ambac Financial Group 26,313 1,835,595
American International Group, Inc. 123,846 7,195,453
Aon Corp. 13,909 348,281
Chubb Corp. 29,384 $ 2,515,564
CIGNA Corp. 17,547 1,878,055
Hartford Financial Services Group, Inc. 9,727 727,385
Jefferson-Pilot Corp. 6,647 335,142
Lincoln National Corp. 8,875 416,415
Marsh & McLennan Cos., Inc. 23,789 658,955
MGIC Investment Corp. 16,896 1,101,957
Prudential Financial, Inc. 77,160 5,066,326
The Progressive Corp. 25,934 2,562,539
-----------
29,987,494
-----------
INTEGRATED ENERGY (5.5%)
Chevron Corp. 90,070 5,036,714
ConocoPhillips 63,788 3,667,172
Exxon Mobil Corp. 288,311 16,569,233
Marathon Oil 29,648 1,582,314
-----------
26,855,433
-----------
LODGING (0.6%)
Marriott International (Class A) 34,251 2,336,603
Starwood Hotels & Resorts 8,064 472,308
-----------
2,808,911
-----------
MACHINERY (0.4%)
Ingersoll-Rand Co. (Class A) 27,799 1,983,459
-----------
MEDIA NON-CABLE (0.5%)
News Corp. Limited 81,150 1,313,007
Pixar, Inc. (A) 20,666 1,033,817
-----------
2,346,824
-----------
MEDICAL SUPPLIES (2.1%)
Abbott Laboratories 69,849 3,423,299
Becton, Dickinson and Company 11,209 588,136
Boston Scientific (A) 37,973 1,025,271
Cardinal Health 7,728 444,978
Hospira, Inc. (A) 4,008 156,312
Medtronic, Inc. 54,538 2,824,523
Zimmer Holdings, Inc. (A) 23,544 1,793,346
-----------
10,255,865
-----------
METALS (1.0%)
Allegheny Technologies, Inc. 47,933 1,057,402
Newmont Mining Corp. 18,697 729,744
Nucor Corp. 30,127 1,374,394
Phelp's Dodge Corp. 15,837 1,464,923
-----------
4,626,463
-----------
-14-
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS (UNAUDITED) - CONTINUED
JUNE 30, 2005
NO. OF FAIR
SHARES VALUE
---------- -----------
MULTIMEDIA (2.0%)
Brown-Forman Corp. (Class B) 11,818 $ 714,516
Comcast Corp. (Class A) 96,863 2,971,273
Gannett Co., Inc. 21,483 1,528,086
Time Warner Inc. (A) 276,749 4,624,476
-----------
9,838,351
-----------
OIL COMPANIES (1.9%)
Baker Hughes Inc. 22,355 1,143,682
Halliburton Co. 18,874 902,555
Occidental Petroleum Corp. 17,923 1,378,816
Schlumberger Ltd. 31,058 2,358,545
Sunoco Inc. 7,409 842,255
Transocean, Inc. 20,423 1,102,229
Valero Energy Corp. 17,544 1,387,906
-----------
9,115,988
-----------
PAPER (0.7%)
Georgia-Pacific Corp. 16,897 537,325
International Paper 22,754 687,398
Kimberly Clark Corp. 22,967 1,437,505
Weyerhaeuser Co. 9,523 606,139
-----------
3,268,367
-----------
PHARMACEUTICALS (7.6%)
AmerisourceBergen Corp. 16,014 1,107,368
Amgen, Inc. 59,304 3,585,223
Biogen Idec Inc. (A) 29,934 1,029,730
Bristol-Myers Squibb 86,001 2,148,305
Eli Lilly & Co. 40,675 2,266,004
Gilead Sciences (A) 47,504 2,089,938
IVAX Corp. 46,376 997,084
Johnson & Johnson 132,817 8,633,105
Merck & Co., Inc. 98,412 3,031,090
Pfizer Inc. 332,612 9,173,439
Schering-Plough Corp. 65,364 1,245,838
Wyeth 42,310 1,882,795
-----------
37,189,919
-----------
RETAIL (5.9%)
Autozone, Inc. (A) 5,494 507,975
Borders Group 44,240 1,119,714
Costco Wholesale Corp. 20,855 932,948
CVS Corp. 62,052 1,803,852
Federated Department Stores, Inc. 11,956 876,136
GameStop Corp. (Class A) (A) 14,716 440,008
Home Depot, Inc. 97,600 3,796,640
Jones Apparel Group, Inc. 6,734 209,023
Limited Brands 44,761 958,781
Lowe's Cos. 18,268 $ 1,063,563
Nordstrom, Inc. 22,138 1,504,720
Office Depot, Inc. (A) 55,294 1,262,915
Staples Inc. 34,030 724,658
Supervalu, Inc. 36,506 1,190,461
Target Corp. 12,926 703,304
Toys R Us, Inc. (A) 68,354 1,810,014
Walgreen Co. 53,026 2,438,666
Wal-Mart Stores, Inc. 151,010 7,278,682
-----------
28,622,060
-----------
SERVICES (0.9%)
Cendant Corp. 49,788 1,113,758
eBay Inc. (A) 39,708 1,311,754
Yahoo! Inc. (A) 59,689 2,067,925
-----------
4,493,437
-----------
TECHNOLOGY (14.8%)
Adobe Systems 63,363 1,810,281
Advanced Micro Devices (A) 81,002 1,404,575
Analog Devices, Inc. 17,304 645,612
Apple Computer (A) 49,254 1,811,316
Autodesk, Inc. 64,257 2,208,192
Cisco Systems, Inc. (A) 304,197 5,808,642
Comverse Technology Inc. (A) 78,946 1,865,099
Corning Inc. 90,691 1,507,284
Dell Inc. (A) 112,593 4,441,231
EMC Corp. (A) 111,492 1,528,555
Fiserv Inc. (A) 11,777 505,292
Hewlett Packard Co. 137,035 3,221,693
Intel Corp. 290,880 7,570,152
International Business Machine 80,687 5,986,975
Jabil Circuit (A) 44,049 1,353,626
KLA-Tencor Corp. 9,143 399,412
Lexmark International (Class A) (A) 5,825 377,635
Maxim Intergrated Products 14,330 547,191
Micron Technology, Inc. 96,377 984,009
Microsoft Corp. 426,737 10,593,746
Motorola, Inc. 199,409 3,641,208
NCR Corp. (A) 49,793 1,748,730
Oracle Corp. (A) 224,611 2,965,988
Scientific-Atlanta, Inc. 47,811 1,590,672
Sun Microsystems, Inc. (A) 158,542 587,398
Sybase, Inc. (A) 49,877 915,243
Texas Instruments Inc. 90,528 2,541,121
Thomas & Betts Corp. 41,654 1,176,309
VERITAS Software (A) 52,031 1,269,817
Waters Corp. (A) 27,164 1,009,686
-----------
72,016,690
-----------
-15-
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS (UNAUDITED) - CONTINUED
JUNE 30, 2005
NO. OF FAIR
SHARES VALUE
---------- ------------
TELECOMMUNICATIONS (3.9%)
AT&T Corp. 143,285 $ 2,728,146
BellSouth Corp. 71,766 1,906,823
Capital Receivables Corp. 184,615 4,384,606
CenturyTel, Inc. 52,301 1,811,184
NEXTEL Communications (Class A) (A) 28,711 927,509
Polycom, Inc. (A) 47,445 707,642
QUALCOMM, Inc. 66,861 2,207,416
Verizon Communications 122,389 4,228,540
------------
18,901,866
------------
TOBACCO (1.2%)
Altria Group 92,199 5,961,587
------------
TRANSPORTATION SERVICES (1.4%)
Burlington Northern Santa Fe 37,346 1,758,250
CSX Corp. 34,293 1,462,939
United Parcel Service (Class B) 51,324 3,549,568
------------
6,770,757
------------
UNITED STATES AGENCY SECURITIES (1.1%)
Federal Home Loan Mortgage Corp. 33,629 2,193,620
Federal Association National Mortgage 51,346 2,998,606
------------
5,192,226
------------
UTILITIES (1.7%)
AES Corp. (A) 122,460 2,005,895
Constellation Energy Group 45,192 2,607,126
Exelon Corp. 54,443 2,794,559
Kinder Morgan 6,118 509,018
National Fuel Gas Co. 11,814 341,543
------------
8,258,141
------------
TOTAL COMMON STOCKS
(COST $429,743,416) 483,322,412
PRINCIPAL
AMOUNT
SHORT-TERM INVESTMENTS (0.2%)
COMMERCIAL PAPER (0.1%)
UBS AG,
3.44% due July 1, 2005 $ 404,000 404,000
------------
UNITED STATES TREASURY (0.1%)
United States of America Treasury,
2.89% due August 11, 2005 $ 250,000 $ 249,169
------------
TOTAL SHORT-TERM
INVESTMENTS (COST $653,192) 653,169
------------
TOTAL INVESTMENTS (99.6%)
(COST $430,396,608) (B) 483,975,581
------------
OTHER ASSETS AND LIABILITIES (0.4%) 2,014,138
TOTAL NET ASSETS (100.0%) $485,989,719
============
NOTES
(A) Non-income Producing Security.
(B) At June 30, 2005 net unrealized appreciation for all securities was
$53,578,973. This consisted of aggregate gross unrealized appreciation
for all securities in which there was an excess of fair value over cost
of $92,223,194 and aggregate gross unrealized depreciation for all
securities in which there was an excess of cost over fair value of
$38,644,221.
See Notes to Financial Statements
-16-
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 2005
ASSETS:
Investment securities, at fair value (cost $92,960,086) ........ $94,012,950
Cash ........................................................... 13,407
Receivables:
Interest ..................................................... 860,684
Purchase payments and transfers from other funding options ... 19,621
Other assets ................................................... 1,409
-----------
Total Assets .............................................. 94,908,071
-----------
LIABILITIES:
Payables:
Contract surrenders and transfers to other funding options ... 4,393
Investment management and advisory fees ...................... 5,051
Insurance charges ............................................ 18,127
Accrued liabilities ............................................ 5
-----------
Total Liabilities ......................................... 27,576
-----------
NET ASSETS: ...................................................... $94,880,495
===========
See Notes to Financial Statements
-17-
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2005
INVESTMENT INCOME:
Interest ............................................................. $ 2,042,134
EXPENSES:
Investment management and advisory fees .............................. $ 155,087
Insurance charges .................................................... 566,169
------------
Total expenses ..................................................... 721,256
------------
Net investment income (loss) .................................... 1,320,878
------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES:
Realized gain (loss) from investment security transactions:
Proceeds from investment securities sold ........................... 47,040,361
Cost of investment securities sold ................................. 46,314,699
------------
Net Realized gain (loss) ........................................ 725,662
Change in unrealized gain (loss) on investment securities:
Unrealized gain (loss) at June 30, 2005 ............................ 1,052,864
Unrealized gain (loss) at December 31, 2004 ........................ 1,600,818
------------
Net change in unrealized gain (loss) for the period ............. (547,954)
------------
Net realized gain (loss) and change in unrealized gain (loss) 177,708
------------
Net increase (decrease) in net assets resulting from operations ...... $ 1,498,586
============
See Notes to Financial Statements
-18-
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
2005 2004
---- ----
(UNAUDITED)
OPERATIONS:
Net investment income (loss) ....................................................... $ 1,320,878 $ 3,027,366
Net realized gain (loss) from investment security transactions ..................... 725,662 689,574
Net change in unrealized gain (loss) on investment securities ...................... (547,954) (732,536)
------------- -------------
Net increase (decrease) in net assets resulting from operations ................. 1,498,586 2,984,404
------------- -------------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 308,352 and 662,081 units, respectively) .......................... 2,191,456 4,637,014
Participant transfers from other funding options
(applicable to 190,865 and 469,738 units, respectively) .......................... 1,363,162 3,286,010
Administrative charges
(applicable to 4,956 and 10,969 units, respectively) ............................. (35,961) (77,235)
Contract surrenders
(applicable to 1,193,414 and 1,792,547 units, respectively) ...................... (8,585,152) (12,709,265)
Participant transfers to other funding options
(applicable to 341,053 and 1,092,374 units, respectively) ........................ (2,431,377) (7,636,339)
Other payments to participants
(applicable to 36,799 and 111,228 units, respectively) ........................... (265,224) (793,229)
------------- -------------
Net increase (decrease) in net assets resulting from unit transactions ............. (7,763,096) (13,293,044)
------------- -------------
Net increase (decrease) in net assets ............................................ (6,264,510) (10,308,640)
NET ASSETS:
Beginning of period ................................................................ 101,145,005 111,453,645
------------- -------------
End of period ...................................................................... $ 94,880,495 $ 101,145,005
============= =============
See Notes to Financial Statements
-19-
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Quality Bond Account for Variable Annuities ("Account QB") is
a separate account of The Travelers Insurance Company ("The Company"), an
indirect wholly owned subsidiary of Citigroup Inc., and is available for
funding Universal Annuity, 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 at June 30, 2005.
-20-
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
1. SIGNIFICANT ACCOUNTING POLICIES (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 $16,735,329 and $31,619,586,
respectively; the costs of purchases and proceeds from sales of direct and
indirect U.S. government securities were $16,692,277 and $15,420,775,
respectively, for the six months ended June 30, 2005. 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
- ------------------------------------------------------------------------------------------------------------------------------------
Total M&E and Rider Charges (1) Dth Optional Feature 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
-21-
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - 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 $1,755 and $3,280 for the six months ended June 30, 2005
and the year ended December 31, 2004, 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 $26,346
and $45,877 for the six months ended June 30, 2005 and the year ended
December 31, 2004, respectively.
4. NET ASSETS HELD ON BEHALF OF AN AFFILIATE
Approximately $101,000 and $105,000 of the net assets of Account QB were
held on behalf of an affiliate of The Company as of June 30, 2005 and
December 31, 2004, respectively. Transactions with this affiliate were
comprised of participant purchase payments of approximately $4,000 for the
year ended December 31, 2004 and contract surrenders of approximately $5,000
and $18,000, for the six months ended June 30, 2005 and the year ended
December 31, 2004, respectively.
5. NET CONTRACT OWNERS" EQUITY
Assumed Interest Rate (AIR) is only applicable to contracts in the payout
phase.
JUNE 30, 2005
------------------------------------
UNIT
UNITS VALUE NET ASSETS
--------- ---------- ------------
Total M&E and Rider Charges 1.00%, 3.5% AIR .... 3,532,201 $ 7.631 $ 26,959,429
Total M&E and Rider Charges 1.25%, 3.5% AIR .... 9,402,472 7.223 67,919,169
Total M&E and Rider Charges 1.25%, 3.0% AIR .... 1,853 1.024 1,897
------------
Net Contract Owners' Equity .................... $ 94,880,495
============
Assumed Interest Rate (AIR) is only applicable to contracts in the payout phase.
-22-
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
6. SUPPLEMENTARY INFORMATION
(Selected data for a unit outstanding throughout each period.)
SIX
MONTHS
Total M&E and Rider Charges 1.00%, 3.5% AIR ENDED FOR THE YEARS ENDED DECEMBER 31,
JUNE 30, (DERIVED FROM AUDITED FINANCIAL INFORMATION)
-------- ---------------------------------------------
2005 2004 2003 2002 2001 2000
---- ---- ---- ---- ---- ----
SELECTED PER UNIT DATA:
Total investment income ......................... $ .158 $ .321 $ .345 $ .381 $ .421 $ .446
Operating expenses .............................. .050 .097 .093 .086 .089 .081
------ ------ ------ ------ ------ ------
Net investment income (loss) .................... .108 .224 .252 .295 .332 .365
Unit value at beginning of period ............... 7.507 7.281 6.674 6.608 6.335 6.055
Net realized and change in
unrealized gains (losses) ..................... .016 .002 .355 (.229) (.059) (.085)
------ ------ ------ ------ ------ ------
Unit value at end of period ..................... $7.631 $7.507 $7.281 $6.674 $6.608 $6.335
====== ====== ====== ====== ====== ======
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value ........... $ .12 $ .23 $ .61 $ .07 $ .27 $ .28
Ratio of operating expenses to
average net assets ............................ 1.33%* 1.33% 1.33% 1.33% 1.33% 1.33%
Ratio of net investment income
(loss) to average net assets .................. 2.92%* 3.03% 3.58% 4.56% 4.99% 5.93%
Number of units outstanding at end
of period (thousands) ......................... 3,532 3,717 4,207 4,684 5,194 5,491
Portfolio turnover rate ......................... 40% 98% 139% 113% 166% 105%
SIX
MONTHS
Total M&E and Rider Charges 1.25%, 3.5% AIR ENDED FOR THE YEARS ENDED DECEMBER 31,
JUNE 30, (DERIVED FROM AUDITED FINANCIAL INFORMATION)
-------- ---------------------------------------------
2005 2004 2003 2002 2001 2000
---- ---- ---- ---- ---- ----
SELECTED PER UNIT DATA:
Total investment income ......................... $ .151 $ .304 $ .328 $ .363 $ .402 $ .427
Operating expenses .............................. .056 .110 .105 .097 .101 .092
------ ------- ------- ------- ------ ------
Net investment income (loss) .................... .095 .194 .223 .266 .301 .335
Unit value at beginning of period ............... 7.113 6.917 6.356 6.309 6.063 5.810
Net realized and change in
unrealized gains (losses) ..................... .015 .002 .338 (.219) (.055) (.082)
------ ------- ------- ------- ------ ------
Unit value at end of period ..................... $7.223 $ 7.113 $ 6.917 $ 6.356 $6.309 $6.063
====== ======= ======= ======= ====== ======
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value ........... $ .11 $ .20 $ .56 $ .05 $ .25 $ .25
Ratio of operating expenses to
average net assets ............................ 1.57%* 1.57% 1.57% 1.57% 1.57% 1.57%
Ratio of net investment income
(loss) to average net assets .................. 2.67%* 2.78% 3.33% 4.31% 4.74% 5.69%
Number of units outstanding at end
of period (thousands) ......................... 9,402 10,296 11,682 12,733 15,116 14,045
Portfolio turnover rate ......................... 40% 98% 139% 113% 166% 105%
* Annualized
-23-
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
6. SUPPLEMENTARY INFORMATION (CONTINUED)
(Selected data for a unit outstanding throughout each period.)
FROM APRIL 1, 2005
Total M&E and Rider Charges 1.25%, 3.0% AIR (INCEPTION DATE) TO
JUNE 30,
-------------------
2005
----
SELECTED PER UNIT DATA:
Total investment income ....................................... $ .011
Operating expenses ............................................ 004
--------
Net investment income (loss) .................................. 007
Unit value at beginning of period ............................. 1.003
Net realized and change in unrealized gains (losses) .......... 014
--------
Unit value at end of period ................................... $ 1.024
========
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value ......................... $ .02
Ratio of operating expenses to average net assets ............. 1.57%*
Ratio of net investment income (loss) to average net assets ... 2.65%*
Number of units outstanding at end of period (thousands) ...... 2
Portfolio turnover rate ....................................... 40%
* Annualized
-24-
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
7. SUBSEQUENT EVENTS
On July 1, 2005, MetLife, Inc., a Delaware corporation ("MetLife"), acquired
all of the outstanding shares of capital stock of certain indirect
subsidiaries held by Citigroup, Inc. ("Citigroup") including The Company,
The Travelers Life and Annuity Company, a wholly owned subsidiary of The
Company and certain other domestic insurance companies of Citigroup and
substantially all of the Citigroup"s international businesses for $11.8
billion.
TIC filed a Form 8-K Current Report with The United States Securities and
Exchange Commission on July 8, 2005, with additional information about the
transaction.
Effective July 1, 2005, Salomon Brothers Asset Management Inc. entered into
a subadvisory agreement with TAMIC to provide asset management services for
Account QB.
-25-
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
SUMMARY OF HOLDINGS (UNAUDITED)
JUNE 30, 2005
% of net
assets
--------
BONDS
Collateralized Mortgage Obligations 9.0
Banking 8.1
Finance 6.8
Utilities 4.2
Real Estate 4.1
Asset Backed Securities 3.5
United States Agency Securities 3.5
Brokerage 3.2
Conglomerates 3.2
Multimedia 2.8
Media Cable 2.2
Telecommunications 1.6
Electric Utilities 1.4
Natural Gas Distribution 1.4
Pharmaceuticals 1.3
Beverage 1.2
Food 1.1
Independent Energy 1.1
Supermarkets 1.1
Automotive 1.0
Insurance 1.0
Tobacco 1.0
Technology 0.8
Defense 0.6
Healthcare 0.5
Building Materials 0.4
Home Construction 0.4
Metals 0.4
Airlines 0.3
Machinery 0.2
Natural Gas Pipeline 0.2
Paper 0.2
-----
TOTAL BONDS 67.8
-----
UNITED STATES GOVERNMENT SECURITIES
United States Government Securities 14.6
-----
SHORT TERM INVESTMENTS
Commercial Paper 16.7
-----
TOTAL INVESTMENTS 99.1
-----
Other Assets and liabilities 0.9
-----
TOTAL NET ASSETS 100.0
=====
-26-
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS (UNAUDITED)
JUNE 30, 2005
PRINCIPAL FAIR
AMOUNT VALUE
---------- ----------
BONDS (67.8%)
AIRLINES (0.3%)
Delta Air Lines, Inc., 9.25% Debentures, 2007 (A) ....................................... $ 439,660 $ 255,003
----------
ASSET BACKED SECURITIES (3.5%)
CA Infrastructure, 3.05% Debentures, 2008 ............................................... 418,016 425,465
Chase Funding Mortgage Loan Asset Backed Security Certificate, 4.36% Debentures, 2032 ... 500,000 514,099
Daimler Chrysler Auto, 2.67% Debentures, 2006 ........................................... 414,191 414,525
Discover Card Mt, 2.94% Debentures, 2008 ................................................ 1,100,000 1,115,598
Ford Credit Auto Owner Trust, 2.70% Debentures, 2006 .................................... 722,843 724,601
Toyota Auto Recovery Owner Trust, 2.67% Debentures, 2006 ................................ 153,479 153,408
----------
3,347,696
----------
AUTOMOTIVE (1.0%)
Daimler Chrysler NA Holdings, 5.09% Debentures, 2012 .................................... 700,000 783,231
Ford Motor Co., 7.66% Debentures, 2031 .................................................. 200,000 167,390
----------
950,621
----------
BANKING (8.1%)
ABN AMRO Holdings ADS, 3.31% Debentures, 2007 ........................................... 920,000 921,300
Bank of America Corp., 4.75% Debentures, 2014 ........................................... 600,000 638,660
Capital One Bank, 4.66% Debentures, 2009 ................................................ 620,000 634,058
Capital One Bank, 5.51% Debentures, 2015 ................................................ 200,000 204,997
Credit Suisse First Boston Corp., 4.50% Debentures, 2009 ................................ 500,000 494,525
Credit Suisse First Boston Corp., 4.86% Debentures, 2011 ................................ 300,000 326,764
HSBC Bank USA, 5.91% Debentures, 2034 ................................................... 400,000 437,481
Huntington National Bank, 4.68% Debentures, 2009 ........................................ 400,000 404,853
JP Morgan Chase & Co., 4.94% Debentures, 2015 ........................................... 200,000 207,073
Royal Bank of Scotland Capital Trust, 4.87% Debentures, 2013 ............................ 300,000 296,462
Royal Bank of Scotland PLC, 5.05% Debentures, 2015 ...................................... 400,000 414,317
U.S. Bancorp NA MN, 2.89% Debentures, 2007 .............................................. 1,000,000 984,252
U.S. Bancorp NA MN, 4.95% Debentures, 2014 .............................................. 200,000 205,931
Wachovia Corp. NA, 3.53% Debentures, 2014 ............................................... 700,000 708,780
Wachovia Corp. NA, 4.87% Debentures, 2014 ............................................... 300,000 304,069
Washington Mutual Bank, 5.36% Debentures, 2015 .......................................... 500,000 508,833
----------
7,692,355
----------
BEVERAGE (1.2%)
Pepsi Bottling Group, 4.34% Debentures, 2012 ............................................ 400,000 406,642
PepsiAmericas, Inc., 4.91% Debentures, 2015 ............................................. 700,000 714,336
----------
1,120,978
----------
BROKERAGE (3.2%)
Goldman Sachs Group Inc., 4.95% Debentures, 2013 ........................................ 1,100,000 1,136,993
Lehman Brothers Holdings Inc., 4.85% Debentures, 2014 ................................... 700,000 708,581
Merrill Lynch & Co. Inc., 4.20% Debentures, 2009 ........................................ 400,000 398,681
Merrill Lynch & Co. Inc., 4.68% Debentures, 2010 ........................................ 400,000 399,419
Merrill Lynch & Co. Inc., 5.09% Debentures, 2015 ........................................ 400,000 410,346
----------
3,054,020
----------
-27-
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS (UNAUDITED) - CONTINUED
JUNE 30, 2005
PRINCIPAL FAIR
AMOUNT VALUE
---------- ----------
BUILDING MATERIALS (0.4%)
D.R. Horton, 5.41% Debentures, 2015 ....................................................... $ 400,000 $ 389,258
----------
COLLATERALIZED MORTGAGE OBLIGATIONS (9.0%)
Bank of America Commercial Mortgage Inc. , 4.84% Debentures, 2042 ......................... 1,400,000 1,423,528
Credit Suisse First Boston Commercial Mortgage Corp., 4.85% Debentures, 2037 .............. 220,000 224,002
JP Morgan Chase & Co. Commercial Mortgage, 4.78% Debentures, 2042 ......................... 3,000,000 3,034,077
JP Morgan Chase & Co. Commercial Mortgage, 4.88% Debentures, 2042 ......................... 1,600,000 1,631,904
JP Morgan Chase & Co. Commercial Mortgage, 5.00% Debentures, 2046 ......................... 775,000 803,025
LB UBS Commercial Mortgage Trust, 4.74% Debentures, 2031 .................................. 670,000 685,986
Morgan Stanley Capital, 4.61% Debentures, 2056 ............................................ 700,000 705,963
----------
8,508,485
----------
CONGLOMERATES (3.2%)
Berskshire Hathaway, Inc., 3.33% Debentures, 2008 (B) ..................................... 200,000 200,071
Berskshire Hathaway, Inc., 4.81% Debentures, 2012 ......................................... 400,000 404,238
General Electric Co., 4.66% Debentures, 2013 .............................................. 1,300,000 1,344,370
Tyco International Ltd., 4.28% Debentures, 2008 ........................................... 1,000,000 1,059,650
----------
3,008,329
----------
DEFENSE (0.6%)
Northrop Grumman Corp., 3.41% Debentures, 2006 ............................................ 600,000 598,463
----------
ELECTRIC UTILITIES (1.4%)
Dominion Resources Inc., 5.22% Debentures, 2033 ........................................... 400,000 410,400
PSEG Energy Holdings, 21.80% Debentures, 2008 ............................................. 450,000 480,375
TransAlta Corp., 5.22% Debentures, 2013 ................................................... 400,000 421,312
----------
1,312,087
----------
FINANCE (6.8%)
AIG SunAmerica Global Financials, 3.55% Debentures, 2008 (B) .............................. 500,000 521,594
American General Financial Corp., 3.98% Debentures, 2009 .................................. 900,000 879,878
Caterpillar Financial Services Corp., 4.72% Debentures, 2012 .............................. 800,000 815,864
Countrywide Financial Corp., 4.54% Debentures, 2010 ....................................... 400,000 399,944
Countrywide Home Loan, 4.44% Debentures, 2011 ............................................. 710,000 685,603
Ford Motor Credit Co., 5.75% Debentures, 2010 ............................................. 100,000 92,324
Ford Motor Credit Co., 6.56% Debentures, 2006 ............................................. 1,000,000 1,010,135
Glencore Funding LLC, 6.70% Debentures, 2014 (B) .......................................... 300,000 288,150
Household Financial Corp., 4.70% Debentures, 2011 ......................................... 1,400,000 1,532,665
Rabobank Capital Funding Trust III, 5.25% Debentures, 2016 (B) ............................ 200,000 205,584
----------
6,431,741
----------
FOOD (1.1%)
Fred Meyer Inc., 4.83% Debentures, 2008 ................................................... 1,000,000 1,076,328
----------
HEALTHCARE (0.5%)
Anthem Inc., 4.86% Debentures, 2012 ....................................................... 400,000 451,997
----------
HOME CONSTRUCTION (0.4%)
Pulte Homes Inc., 5.59% Debentures, 2015 .................................................. 400,000 396,405
----------
-28-
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS (UNAUDITED) - CONTINUED
JUNE 30, 2005
PRINCIPAL FAIR
AMOUNT VALUE
---------- ----------
INDEPENDENT ENERGY (1.1%)
Anadarko Financial Co., 4.88% Debentures, 2011 .................................... $ 400,000 $ 444,983
Devon Energy Corp., 5.42% Debentures, 2011 ........................................ 500,000 560,201
----------
1,005,184
----------
INSURANCE (1.0%)
GE Global Insurnace, 6.18% Debentures, 2026 ....................................... 100,000 107,478
Massmutual Global Funding, 2.58% Debentures, 2008 (B) ............................. 900,000 859,615
----------
967,093
----------
MACHINERY (0.2%)
Cooper Cameron Corp. , 2.67% Debentures, 2007 ..................................... 200,000 194,118
----------
MEDIA CABLE (2.2%)
Comcast Cable Communications, 8.70% Debentures, 2027 .............................. 500,000 672,410
Cox Communications Inc., 4.98% Debentures, 2012 ................................... 800,000 898,424
Liberty Media Corp., 5.15% Debentures, 2006 ....................................... 484,000 487,102
----------
2,057,936
----------
METALS (0.4%)
Phelps Dodge Corp., 5.31% Debentures, 2011 ........................................ 300,000 363,150
----------
MULTIMEDIA (2.8%)
Clear Channel Communications Inc., 4.72% Debentures, 2011 ......................... 200,000 188,265
Time Warner Inc., 9.66% Debentures, 2007 .......................................... 2,400,000 2,484,394
----------
2,672,659
----------
NATURAL GAS DISTRIBUTION (1.4%)
Duke Capital LLC, 3.77% Debentures, 2006 .......................................... 400,000 400,666
Duke Energy Field Service, 5.68% Debentures, 2005 ................................. 500,000 501,979
Southern California Gas Co., 4.38% Debentures, 2011 ............................... 400,000 400,151
----------
1,302,796
----------
NATURAL GAS PIPELINE (0.2%)
Cons Natural Gas Co., 5.04% Debentures, 2014 ...................................... 200,000 202,702
----------
PAPER (0.2%)
International Paper, 5.38% Debentures, 2015 ....................................... 200,000 200,965
----------
PHARMACEUTICALS (1.3%)
Wyeth, 5.52% Debentures, 2014 ..................................................... 1,200,000 1,266,600
----------
REAL ESTATE (4.1%)
Avalonbay Communties, Inc., 5.00% Debentures, 2013 ................................ 100,000 100,920
Colonial Realty LP, 4.75% Debentures, 2010 ........................................ 200,000 198,631
Health Retirement Properties, 6.39% Debentures, 2016 .............................. 300,000 325,474
iStar Financial, 6.03% Debentures, 2010 ........................................... 440,000 458,192
Kimco Reality, 3.41% Debentures, 2006 ............................................. 100,000 100,131
Nationwide Health Properties Inc., 6.90% Debentures, 2037 ......................... 2,100,000 2,359,308
Simon Property Group, Inc., 4.63% Debentures, 2010 (B) ............................ 200,000 200,330
Simon Property Group, Inc., 5.10% Debentures, 2015 (B) ............................ 200,000 200,279
----------
3,943,265
----------
-29-
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS (UNAUDITED) " CONTINUED
JUNE 30, 2005
PRINCIPAL FAIR
AMOUNT VALUE
----------- ----------
SUPERMARKETS (1.1%)
Delhaize America, Inc., 7.37% Debentures, 2031 ...................................... $ 200,000 $ 250,696
-----------
Safeway Inc., 4.96% Debentures, 2011 ................................................ 700,000 757,471
1,008,167
-----------
TECHNOLOGY (0.8%)
Computer Associates International, 4.72% Debentures, 2009 (B) ....................... 800,000 798,238
-----------
TELECOMMUNICATIONS (1.6%)
Deutsche Telecomm International Financial, 6.10% Debentures, 2030 ................... 200,000 271,637
SBC Communications, Inc., 5.89% Debentures, 2034 .................................... 400,000 451,293
Sprint Capital Corp., 4.90% Debentures, 2008 ........................................ 720,000 759,095
-----------
1,482,025
-----------
TOBACCO (1.0%)
Altria Group, 5.74% Debentures, 2008 ................................................ 900,000 934,405
-----------
UNITED STATES AGENCY SECURITIES (3.5%)
Federal Association National Mortgage, 2.13% Debentures, 2006 ....................... 1,300,000 1,275,793
Federal Association National Mortgage, 3.00% Debentures, 2007 ....................... 1,400,000 1,397,829
Federal Home Loan Mortgage Corp., 2.90% Debentures, 2019 ............................ 700,000 696,158
-----------
3,369,780
-----------
UTILITIES (4.2%)
Kinder Morgan , 5.14% Debentures, 2014 .............................................. 200,000 202,658
Pepco Holdings, 5.15% Debentures, 2007 .............................................. 1,600,000 1,636,283
SP Powerassets Ltd., 5.08% Debentures, 2013 ......................................... 900,000 934,340
Xcel Energy Inc., 3.44% Debentures, 2008 (B) ........................................ 1,200,000 1,170,259
-----------
3,943,540
-----------
TOTAL BONDS
(COST $63,204,832) .................................................................. 64,306,389
-----------
UNITED STATES GOVERNMENT SECURITIES (14.6%)
United States of America Treasury, 1.50% Debentures, 2005 ........................... 6,060,000 6,118,237
United States of America Treasury, 3.65% Debentures, 2006 ........................... 3,000,000 2,970,354
United States of America Treasury, 3.01% Debentures, 2007 ........................... 2,400,000 2,356,502
United States of America Treasury, 3.74% Debentures, 2010 ........................... 100,000 100,602
United States of America Treasury, 3.75% Debentures, 2010 ........................... 100,000 99,594
United States of America Treasury, 4.04% Debentures, 2015 ........................... 2,200,000 2,232,828
-----------
TOTAL UNITED STATES GOVERNMENT SECURITIES
(COST $13,925,543) .................................................................. 13,878,117
-----------
-30-
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS (UNAUDITED) - CONTINUED
JUNE 30, 2005
PRINCIPAL FAIR
AMOUNT VALUE
----------- ----------
SHORT TERM INVESTMENTS (16.7%)
COMMERCIAL PAPER (16.7%)
Beethoven Funding Corp., 3.35% Debentures, 2012 (B) ............................. $ 2,400,000 $ 2,397,367
Credit Suisse First Boston NY, 3.30% Debentures, 2005 ........................... 1,321,000 1,320,396
Galleon Capital Corp., 3.43% Debentures, 2005 ................................... 2,282,000 2,282,000
MICA Funding LLC, 3.30% Debentures, 2005 (B) .................................... 1,892,000 1,890,789
Polonius Inc., 3.35% Debentures, 2005 (B) ....................................... 1,670,000 1,668,322
Scaldis Capital LLC, 3.35% Debentures, 2005 ..................................... 2,425,000 2,422,563
Sheffield Receivable Corp., 3.35% Debentures, 2005 .............................. 1,450,000 1,448,543
Tasman Funding, Inc., 3.25% Debentures, 2005 (B) ................................ 2,400,000 2,398,464
-----------
TOTAL SHORT-TERM INVESTMENTS
(COST $15,829,711) .............................................................. 15,828,444
-----------
TOTAL INVESTMENTS (99.1%)
(COST $92,960,086) (C) .......................................................... 94,012,950
-----------
OTHER ASSETS AND LIABILITIES (0.9%) .............................................. 867,545
-----------
TOTAL NET ASSETS (100.0%) ........................................................ $94,880,495
===========
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 June 30, 2005,
The Travelers Quality Bond Account for Variable Annuities held 13.5% of
its net assets, with a current market value of $12,799,063, in securities
restricted as to resale.
(C) At June 30, 2005 net unrealized appreciation for all securities was
$1,052,864. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of fair value over cost of
$1,571,120 and aggregate gross unrealized depreciation for all securities
in which there was an excess of cost over fair value of $518,256.
-31-
THE TRAVELERS MONEY MARKET ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 2005
ASSETS:
Investment securities, at fair value (cost $64,501,230) ........ $64,493,332
Cash ........................................................... 1,161
Receivables:
Interest ..................................................... 6,386
Purchase payments and transfers from other funding options ... 123,791
Other assets ................................................... 437
-----------
Total Assets .............................................. 64,625,107
-----------
LIABILITIES:
Payables:
Contract surrenders and transfers to other funding options ... 10,160
Investment management and advisory fees ...................... 3,426
Insurance charges ............................................ 13,245
-----------
Total Liabilities ......................................... 26,831
-----------
NET ASSETS: ...................................................... $64,598,276
===========
See Notes to Financial Statements
-32-
THE TRAVELERS MONEY MARKET ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2005
INVESTMENT INCOME:
Interest ......................................................... $ 900,050
EXPENSES:
Investment management and advisory fees .......................... $ 106,521
Insurance charges ................................................ 411,765
----------
Total expenses ................................................. 518,286
---------
Net investment income (loss) ................................ 381,764
---------
Net increase (decrease) in net assets resulting from operations .. $ 381,764
=========
See Notes to Financial Statements
-33-
THE TRAVELERS MONEY MARKET ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31
2005 2004
---- ----
(UNAUDITED)
OPERATIONS:
Net investment income (loss) ......................................... $ 381,764 $ (160,977)
----------- ------------
Net increase (decrease) in net assets resulting from operations ...... 381,764 (160,977)
----------- ------------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 1,294,049 and 2,876,976 units, respectively) ........ 3,486,365 7,848,289
Participant transfers from other funding options
(applicable to 5,309,944 and 15,177,654 units, respectively) ....... 14,514,808 41,410,773
Administrative charges
(applicable to 16,620 and 36,552 units, respectively) .............. (45,199) (99,678)
Contract surrenders
(applicable to 2,544,195 and 7,406,612 units, respectively) ........ (6,956,171) (20,205,133)
Participant transfers to other funding options
(applicable to 4,916,561 and 18,609,573 units, respectively) ....... 13,442,634) (50,776,513)
Other payments to participants
(applicable to 79,310 and 89,026 units, respectively) .............. (217,817) (244,258)
----------- ------------
Net increase (decrease) in net assets resulting from unit transactions (2,660,648) (22,066,520)
----------- ------------
Net increase (decrease) in net assets .............................. (2,278,884) (22,227,497)
NET ASSETS:
Beginning of period .................................................. 66,877,160 89,104,657
----------- ------------
End of period ........................................................ $64,598,276 $ 66,877,160
=========== ============
See Notes to Financial Statements
-34-
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Money Market Account for Variable Annuities ("Account MM") is
a separate account of The Travelers Insurance Company ("The Company"), an
indirect wholly owned subsidiary of Citigroup Inc., and is available for
funding Universal Annuity, 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 at June 30, 2005.
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.
-35-
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
2. CONTRACT CHARGES
Investment management and advisory fees are calculated daily at an annual
rate of 0.3233% of Account MM"s average net assets. These fees are paid to
Travelers Asset Management International Company, LLC, an indirect wholly
owned subsidiary of Citigroup Inc.
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
- ------------------------------------------------------------------------------------------------------------------------------------
Total M&E and Rider Charges (1) Dth Optional Feature 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 $32,895 and $148,520 for the six months ended June 30, 2005 and
the year ended December 31, 2004, respectively.
3. NET ASSETS HELD ON BEHALF OF AN AFFILIATE
Approximately $436,000 and $1,060,000 of the net assets of Account MM were
held on behalf of an affiliate of The Company as of June 30, 2005 and
December 31, 2004, respectively. Transactions with this affiliate during the
six months ended June 30, 2005 and the year ended December 31, 2004, were
comprised of participant purchase payments of approximately $69,000 and
$515,000 and contract surrenders of approximately $697,000 and $638,000,
respectively.
-36-
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
4. NET CONTRACT OWNERS" EQUITY
JUNE 30, 2005
--------------------------------------
UNIT
UNITS VALUE NET ASSETS
---------- -------- ------------
Total M&E and Rider Charges 1.00%, 3.5% AIR ......... 21,541 $ 2.899 $ 62,454
Total M&E and Rider Charges 1.25%, 3.5% AIR ......... 23,507,608 2.744 64,506,316
Total M&E and Rider Charges 1.25%, 3.0% AIR ......... 29,301 1.007 29,506
------------
Net Contract Owners' Equity ......................... $ 64,598,276
============
Assumed Interest Rate (AIR) is only applicable to contracts in the payout phase.
-37-
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
5. SUPPLEMENTARY INFORMATION
(Selected data for a unit outstanding throughout each period.)
SIX
Total M&E and Rider Charges 1.00%, 3.5% AIR MONTHS
ENDED FOR THE YEARS ENDED DECEMBER 31,
JUNE 30, (DERIVED FROM AUDITED FINANCIAL INFORMATION)
--------- -----------------------------------------------------
2005 2004 2003 2002 2001 2000
---- ---- ---- ---- ---- ----
SELECTED PER UNIT DATA:
Total investment income ................................... $ .039 $ .040 $ .033 $ .051 $ .120 $ .174
Operating expenses ........................................ .019 .038 .038 .038 .037 .037
--------- -------- --------- --------- -------- --------
Net investment income (loss) .............................. .020 .002 (.005) .013 .083 .137
Unit value at beginning of period ......................... 2.879 2.877 2.882 2.869 2.786 2.649
--------- -------- --------- --------- -------- --------
Unit value at end of period ............................... $ 2.899 $ 2.879 $ 2.877 $ 2.882 $ 2.869 $ 2.786
========= ======== ========= ========= ======== ========
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value ..................... $ .02 $ .00 $ (.01) $ .01 $ .08 $ .14
Ratio of operating expenses to average net assets ......... 1.33%* 1.33% 1.33% 1.33% 1.33% 1.33%
Ratio of net investment income (loss) to average net assets 1.41%* 0.07% (0.16)% 0.46% 2.89% 5.09%
Number of units outstanding at end of period (thousands) .. 22 26 39 49 60 70
SIX
Total M&E and Rider Charges 1.25%, 3.5% AIR MONTHS
ENDED FOR THE YEARS ENDED DECEMBER 31,
JUNE 30, (DERIVED FROM AUDITED FINANCIAL INFORMATION)
--------- -----------------------------------------------------
2005 2004 2003 2002 2001 2000
---- ---- ---- ---- ---- ----
SELECTED PER UNIT DATA:
Total investment income ................................... $ .037 $ .038 $ .032 $ .048 $ .114 $ .167
Operating expenses ........................................ .021 .043 .043 .043 .042 .041
-------- -------- -------- -------- -------- --------
Net investment income (loss) .............................. .016 (.005) (.011) .005 .072 .126
Unit value at beginning of period ......................... 2.728 2.733 2.744 2.739 2.667 2.541
-------- -------- -------- -------- -------- --------
Unit value at end of period ............................... $ 2.744 $ 2.728 $ 2.733 $ 2.744 $ 2.739 $ 2.667
======== ======== ======== ======== ======== ========
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value ..................... $ .02 $ (.01) $ (.01) $ .01 $ .07 $ .13
Ratio of operating expenses to average net assets ......... 1.57%* 1.57% 1.57% 1.57% 1.57% 1.57%
Ratio of net investment income (loss) to average net assets 1.17%* (0.18)% (0.41)% 0.21% 2.64% 4.84%
Number of units outstanding at end of period (thousands) .. 23,508 24,485 32,559 50,702 63,430 55,477
* Annualized
-38-
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
5. SUPPLEMENTARY INFORMATION (CONTINUED)
(Selected data for a unit outstanding throughout each period.)
SIX FROM DECEMBER 28, 2004
MONTHS (INCEPTION DATE) TO
Total M&E and Rider Charges 1.25%, 3.0% AIR ENDED DECEMBER 31,
JUNE 30, (DERIVED FROM AUDITED FINANCIAL INFORMATION)
-------- ---------------------------------------------
2005 2004
---- ----
SELECTED PER UNIT DATA:
Total investment income $ .014 $ --
Operating expenses .008 --
------ -------
Net investment income (loss) .006 --
Unit value at beginning of period 1.001 1.001
------ -------
Unit value at end of period $1.007 $ 1.001
====== =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value $ .01 $ --
Ratio of operating expenses to average net assets 1.57%* 1.57%
Ratio of net investment income (loss) to average net assets 1.17%* 0.74%
Number of units outstanding at end of period (thousands) 29 --**
* Annualized
** Unit balance rounds to less than 1,000 units.
6. SUBSEQUENT EVENTS
On July 1, 2005, MetLife, Inc., a Delaware corporation ("MetLife"), acquired
all of the outstanding shares of capital stock of certain indirect
subsidiaries held by Citigroup, Inc. ("Citigroup") including The Company,
The Travelers Life and Annuity Company, a wholly owned subsidiary of The
Company and certain other domestic insurance companies of Citigroup and
substantially all of the Citigroup"s international businesses for $11.8
billion.
TIC filed a Form 8-K Current Report with The United States Securities and
Exchange Commission on July 8, 2005, with additional information about the
transaction.
Effective July 1, 2005, Salomon Brothers Asset Management Inc. entered into
a subadvisory agreement with TAMIC to provide asset management services for
Account MM.
-39-
THE TRAVELERS MONEY MARKET ACCOUNT
FOR VARIABLE ANNUITIES
SUMMARY OF HOLDINGS (UNAUDITED)
JUNE 30, 2005
% OF NET
ASSETS
---------
SHORT-TERM INVESTMENTS
Commercial Paper 99.8
-----
TOTAL SHORT-TERM INVESTMENTS 99.8
-----
TOTAL INVESTMENTS 99.8
-----
Other Assets and Liabilities 0.2
-----
TOTAL NET ASSETS 100.0
=====
-40-
THE TRAVELERS MONEY MARKET ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS (UNAUDITED)
JUNE 30, 2005
PRINCIPAL FAIR
AMOUNT VALUE
----------- -----------
SHORT-TERM INVESTMENTS (99.8%)
COMMERCIAL PAPER (99.8%)
Atlantic Asset Security Corp., 3.36% due July 7, 2005 ............................... $ 1,252,000 $ 1,251,199
Becton Dickinson & Co., 3.29% due July 25, 2005 ..................................... 3,174,000 3,166,748
Bryant Park Funding LLC, 3.23% due July 15, 2005 .................................... 3,204,000 3,199,607
Canadian Imperial Bank of Commerce, 3.13% due July 13, 2005 ......................... 3,100,000 3,096,317
General Electric Capital Corp., 3.09% due July 8, 2005 .............................. 3,124,000 3,121,716
Goldman Sachs Group Inc., 3.15% due July 14, 2005 ................................... 3,100,000 3,096,035
HSBC Finance Corp., 3.16% due July 13, 2005 ......................................... 3,207,000 3,203,190
ING U.S. Funding LLC, 3.31% due July 27, 2005 ....................................... 3,176,000 3,168,165
Merrill Lynch & Co. Inc., 3.28% due July 5, 2005 .................................... 3,167,000 3,165,553
Morgan Stanley, 3.34% due July 26, 2005 ............................................. 3,175,000 3,167,456
Nestle Capital Corp., 3.23% due July 20, 2005 ....................................... 3,179,000 3,173,189
Park Avenue Receivables Corp., 3.15% due July 11, 2005 .............................. 3,202,000 3,198,782
Regency Markets, LLC, 3.15% due July 7, 2005 ........................................ 3,196,000 3,193,955
Royal Bank of Scotland PLC, 3.18% due July 18, 2005 ................................. 3,200,000 3,194,736
Sheffield Resources Corp., 3.25% due July 19, 2005 .................................. 3,210,000 3,204,428
Societe Generale North America, 3.19% due July 15, 2005 ............................. 3,204,000 3,199,607
Toronto Dominion Holdings USA, Inc., 3.09% due July 6, 2005 ......................... 3,200,000 3,198,246
Toyota Motor Credit Corp., 3.09% due July 7, 2005 ................................... 3,231,000 3,228,932
UBS AG, 3.44% due July 1, 2005 ...................................................... 3,001,000 3,001,000
USAA Capital Corp., 3.27% due July 8, 2005 .......................................... 3,167,000 3,164,685
Well Fargo Bank NA, 3.09% due July 12, 2005 ......................................... 3,100,000 3,099,786
-----------
TOTAL INVESTMENTS (99.8%)
(COST $64,501,230) .................................................................. 64,493,332
-----------
OTHER ASSETS AND LIABILITIES (0.2%) .................................................. 104,944
-----------
TOTAL NET ASSETS (100.0%) ............................................................ $64,598,276
===========
-41-
FACTORS CONSIDERED BY THE INDEPENDENT MANAGERS IN APPROVING THE INVESTMENT
ADVISORY AGREEMENTS AND THE SUBADVISORY AGREEMENTS FOR THE TRAVELERS GROWTH AND
INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES, THE TRAVELERS MONEY MARKET ACCOUNT
FOR VARIABLE ANNUITIES AND THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE
ANNUITIES
Beginning at a telephonic meeting on March 17, 2005 and in person meetings on
March 29 and 30, 2005, the Independent Managers for The Travelers Growth and
Income Stock Account for Variable Annuities, The Travelers Money Market Account
for Variable Annuities, and the Travelers Quality Bond Account for Variable
Annuities (the "Accounts") approved the investment advisory agreements (the
"Agreements") between TAMIC and the Accounts. In addition, at the in person
meetings on March 29 and 30, 2005 and April 27 and 28, 2005, the Independent
Managers approved the investment advisory agreements (the "Subadvisory
Agreements") for The Travelers Money Market Account for Variable Annuities ("MM
Account") and The Travelers Quality Bond Account for Variable Annuities ("QB
Account") between TAMIC and Salomon Brothers Asset Management Inc. ("Salomon")
and approved the Subadvisory Agreement for The Travelers Growth and Income Stock
Account for Variable Annuities ("GIS Account") between TAMIC and TIMCO. In
voting to approve the Agreements and the Subadvisory Agreements, the Independent
Managers considered whether the approval of the Agreements and the Subadvisory
Agreements would be in the best interests of the Accounts and their contract
owners, an evaluation largely based on the nature and quality of the services
provided under the Agreements and the Subadvisory Agreements and the overall
fairness of the Agreements and the Subadvisory Agreements to the contract
owners.
The Independent Managers did not identify any one factor, piece of information
or written document as all important or controlling, and each Independent
Manager attributed different weight to different factors. Prior to voting, the
Independent Managers reviewed the proposed continuance of the Agreements and the
Subadvisory Agreements with management and with experienced independent and fund
counsel and received materials from counsel discussing the legal standards for
their consideration of the proposed continuation of the Agreements and the
Subadvisory Agreements. The Independent Managers also reviewed the proposed
continuation of the Agreements and the Subdvisory Agreements in private sessions
alone and with their independent counsel at which no representatives of
management were present. Based on an evaluation of all material factors
including those described below, the Independent Managers concluded that the
Agreements and the Subadvisory Agreements were reasonable and fair and in the
best interest of the Accounts and their contract owners.
As background, MetLife Inc. ("MetLife") and Citigroup Inc. ("Citigroup")
announced an agreement for the sale of TIC and certain affiliates by Citigroup
to MetLife (the "MetLife Transaction"). The MetLife Transaction included the
acquisition of the TIC subsidiary TAMIC, the investment adviser to the Accounts,
by MetLife. The MetLife Transaction closed on July 1, 2005. The approval of the
Agreements and the TIMCO Subadvisory Agreement was necessary under the 1940
Act, because the change in control of TAMIC resulted in the termination of
TAMIC's investment advisory agreements for the Accounts and the subadvisory
agreement for GIS Account on the closing of the MetLife Transaction. The
approval of the Salomon Subadvisory Agreements was necessary because there were
no subadvisory agreements in place for the QB and MM Accounts prior to the
closing of the MetLife Transaction. The Agreements and the Subadvisory
Agreements for the Accounts were approved by the Independent Managers and the
Agreements were submitted to a vote of the contract owners.
The Independent Managers met in executive session and considered: (a) the
nature, extent and quality of the services to be provided by TAMIC, TIMCO, and
Salomon under the Agreements and the Subadvisory Agreements;(b) the investment
performance of each Account, TAMIC, TIMCO, and Salomon for the Accounts; (c) the
cost of services to be provided and the profit realized by TAMIC, TIMCO and
Salomon, and their affiliates, which information was to be reviewed in depth at
the July, 2005 Board meeting; (d) the extent to which TAMIC realizes economies
of scale as each Account grows; and (e) whether the fee levels reflect these
economies of scale for the benefit of the contract owners.
THE AGREEMENTS
As part of the process, legal counsel to the Accounts requested certain
information from MetLife and in response MetLife provided certain written and
oral information that addressed certain factors designed to inform the
Independent Managers regarding their consideration of the Agreements. In making
their determination, the Independent Managers were provided with information
about MetLife and its purchase of The Travelers Insurance Company from
Citigroup. At the various meetings, MetLife representatives discussed MetLife's
intentions regarding the preservation and strengthening of TAMIC's business and
MetLife's intentions regarding staffing changes and executive leadership changes
at TAMIC. The MetLife representatives also discussed and provided certain
written information on MetLife's business and products, including MetLife's
advisory subsidiaries and their experience in overseeing subadvised mutual
funds. The Independent Managers also discussed the plans and anticipated role
and responsibilities of certain employees and officers after the closing of the
MetLife Transaction.
-42-
THE AGREEMENTS (CONTINUED)
With respect to the nature, scope and quality of the services to be provided by
TAMIC after the MetLife Transaction, the Board considered the experience of
MetLife's advisory subsidiaries and MetLife's efforts to build and maintain a
strong investment team in TAMIC. The Board also considered the level and depth
of knowledge of TAMIC, including the professional experience and qualifications
of its personnel as well as current staffing levels.
The Independent Managers also considered:
o The ability of TAMIC to continue the oversight of both the
investment and compliance operations of TIMCO and Salomon after the
MetLife transaction,
o The intention of MetLife to integrate The Travelers Insurance
Company and its affiliates, including TAMIC, into MetLife's current
businesses to create a single business operation,
o MetLife's compliance with certain conditions set forth in Section
15(f) of the 1940 Act regarding placing unfair burdens on the
Accounts,
o Anticipated changes to back office operations to the Accounts,
including the provision of administrative and transfer agency
services, after the MetLife Transaction, and
o The fact that the Agreements including the investment advisory fees
would be identical to the current agreements, except for the
inception date and the express authority for TAMIC to retain
subadvisers.
In addition, the Independent Managers noted that the performance of the
Accounts, which the Independent Managers receive and review on a quarterly
basis, had generally been satisfactory. As to the profits realized by TAMIC from
its relationship with the Accounts, the Board noted that it was satisfied that
TAMIC's profits were not excessive in the past, and that it was not possible to
predict how the MetLife Transaction would affect such profits at this time, but
would reconsider this factor at its annual review of the agreements under
Section 15(c) of the 1940 Act in July 2005. As to whether economies of scale
would be realized as the Accounts grow and whether fee levels reflect any such
economies of scale, the Board noted that the investment advisory fee rates for
the GIS Account included breakpoints that reduced the fees payable at higher
asset levels, and noted its intention to explore the possibility of instituting
breakpoints for the QB and MM Accounts where they were not currently in place.
Finally, the Independent Managers considered the level of service expected to be
provided by TAMIC after the closing of the MetLife Transaction.
The Independent Managers considered its plans to perform the annual review of
the Agreements pursuant to Section 15(c) of the 1940 Act at its regularly
scheduled Board meeting which was scheduled to occur three weeks after the
closing of the MetLife Transaction. In light of the continuity of investment
management under the Agreements, the short period between the effective date of
those Agreements and the upcoming annual review, the information provided by
MetLife, and MetLife's plans to conduct a search for a subadvisor for the
Accounts for which Salomon would serve as subadviser, the Board considered the
information provided to it sufficient for its consideration of the Agreements at
this time.
Finally, in the event that the contract owners of an Account had not approved
the Agreement for their Account by the closing of the MetLife Transaction, the
Independent Managers approved an interim advisory agreement for that Account
pursuant to Rule 15a-4 under the 1940 Act, which would take effect immediately
following the closing of the MetLife Transaction. The interim advisory agreement
for an Account would be in substantially the form of the proposed advisory
agreement for the Account but also would include certain provisions required by
Rule 15a-4. In fact, an interim advisory agreement with Salomon as the
investment adviser was in effect for the MM Account from July 1, 2005 until July
18, 2005 when the Agreement for the MM Account with TAMIC as the investment
adviser was approved by the contract owners. The Independent Managers considered
the same factors with respect to the interim advisory agreement as they had
considered regarding the Salomon Subadvisory Agreements, as discussed below.
-43-
THE SUBADVISORY AGREEMENTS
MetLife recommended and the Independent Managers approved the retention of
Salomon which was an affiliate of TAMIC before the MetLife Transaction, as a
subadviser for the QB and MM Accounts that had been managed directly by TAMIC
without a subadviser, effective on or about the closing of the MetLife
Transaction. The portfolio managers employed by Salomon were also employees of
TAMIC and the then current portfolio managers of the Accounts. For these
Accounts, there would be no change in the day-to-day portfolio management. The
Independent Managers noted that MetLife might in the future recommend to the
Independent Managers such additional changes to any Accounts, including changes
to the investment objectives, policies and restrictions of the Accounts or
merging one or more Accounts into other MetLife-sponsored funds, as it
determines are appropriate and as permitted by applicable law.
As part of the process, legal counsel to the Accounts requested certain
information from Salomon and in response Salomon provided certain written and
oral information that addressed certain factors designed to inform the
Independent Managers regarding their consideration of the Subadvisory
Agreements. With respect to the nature, scope and quality of the services to be
provided by Salomon after the MetLife Transaction, the Board considered the
experience and commitment of Salomon's personnel, which included the same
portfolio managers prior the closing of the MetLife Transaction, and the nature
and quality of its investment process. The Independent Managers noted that the
performance of the QB and MM Accounts, which the Independent Managers review on
a quarterly basis, had generally been satisfactory. In determining whether the
terms of the Subadvisory Agreements are reasonable and fair the Board considered
the terms and structure of the Subadvisory Agreement. The Board reviewed
information about the fee schedule for the Subadvisory Agreements for the QB and
MM Accounts. The Board noted that the subadvisory fees would be paid by TAMIC
out of its investment advisory fees and so the cost of services to be provided
by Salomon and its profitability with regard to the QB and MM Accounts along
with the economies of scale in its management of the Accounts were not material
factors in the Independent Trustees consideration of the QB and MM Subadvisory
Agreements. The Independent Managers also noted that the overall investment
advisory fee was not changing.
The Independent Managers considered its plans to perform an annual review of the
Subadvisory Agreements pursuant to Section 15(c) of the 1940 Act at its
regularly scheduled Board meeting which was scheduled to occur three weeks after
the closing of the MetLife Transaction. In light of the continuity of portfolio
management under the Subadvisory Agreements, the short period between the
effective date of those Agreements and the upcoming annual review, the
information provided by Salomon, and MetLife's plans to conduct a search for a
subadvisor for the Accounts for which Salomon would serve as subadviser, the
Board considered the information provided to it sufficient for its consideration
of the Subadvisory Agreements at this time.
Also, MetLife recommended and the Independent Managers reapproved the
subadvisory agreement for the GIS Account between TAMIC and TIMCO. As discussed
above, a change in control of TAMIC resulted in the termination of TAMIC's
subadvisory agreement with TIMCO for Account GIS on the closing of the MetLife
Transaction. With respect to the nature, scope and quality of the services to be
provided by TIMCO after the MetLife Transaction, the Board considered that they
would remain the same after the MetLife Transaction. The Independent Managers
noted that the subadvisory fee, which was paid by TAMIC from its investment
advisory fees, was not changing. Because the subadvisory fees were being paid
out of TAMIC's advisory fees, the cost of services to be provided by TIMCO and
its profitability with regard to the GIS Account, along with the economies of
scale in its management of the GIS Account, were not material factors in the
Independent Trustees consideration of the GIS Subadvisory Agreement. The
Independent Managers considered its plans to perform the annual review of the
Subadvisory Agreements pursuant to Section 15(c) of the 1940 Act at its
regularly scheduled Board meeting which was scheduled to occur three weeks after
the closing of the MetLife Transaction. The Board also considered that it had
received quarterly performance information regarding the GIS Account. In light
of the continuity of portfolio management under the Subadvisory Agreement, the
performance of the GIS Account, the economies of scale at the advisory level and
the short period between the effective date of those Agreements and the upcoming
annual review, the Board considered the information provided to it sufficient
for its consideration of the Subadvisory Agreement at this time.
OTHER BUSINESS RELATIONSHIPS
The Independent Directors considered other business relationships that MetLife
and TAMIC would enter into with Citigroup, including its affiliate Salomon. In
connection with the closing of the MetLife Transaction, MetLife, Citigroup and
certain of their affiliates entered into a Distribution Agreement under which
Citigroup-affiliated broker-dealers will continue to offer certain TIC and
MetLife insurance contracts until July 1, 2015. In addition, MetLife, Citigroup
and certain of their affiliates entered into an Investment Products Agreement
under which certain TIC and MetLife insurance products will include certain
Citigroup-sponsored funds as investment options including Salomon advised mutual
funds until July 1, 2010.
-44-
CONCLUSION
Based on the deliberations of the Independent Managers and their evaluation of
the information described above, the Independent Managers unanimously concluded
that (a) the terms of the Agreements and the Subadvisory Agreements are fair and
reasonable; (b) the fees are reasonable in light of the services TAMIC, TIMCO
and Salomon provided to the Accounts and its contract owners; (d) TAMIC, TIMCO
and Salomon possess the capabilities to perform the duties required of them
under the Agreements and the Subadvisory Agreements; (e) the investment
performance of the Accounts are satisfactory; and (f) the Agreements and the
Subadvisory Agreements are approved.
-45-
RESULTS FROM THE COMBINED SPECIAL MEETINGS OF THE GIS, QB, AND MM ACCOUNTS
Combined Special Meetings of the GIS, QB and MM Accounts were held on June 23,
2005 and adjourned to June 30, 2005. The Special Meeting for the MM Account was
further adjourned until July 18, 2005.
There were three proposals submitted to contract owners. Proposal 1 was the
approval of the investment advisory contracts between the Accounts and TAMIC.
The agreements terminated as a matter of law at the closing of the MetLife
Transaction. Proposal 2 was the approval of future subadvisory agreements
without a contract owner vote. Proposal 3 was the election of a new member of
the Board of Managers, Elizabeth Forget, who is affiliated with MetLife.
The contract owners approved all proposals.
The following table sets forth the number of contract owner units voted for,
against and withheld as to each Proposal.
PROPOSAL 1
GIS Account For 11,291,066
Against 954,275
Withhold 1,021,494
QB Account For 5,848,216
Against 443,149
Withhold 364,747
MM Account For 8,113,310
Against 864,258
Withhold 1,049,214
PROPOSAL 2
GIS Account For 9,938,444
Against 2,225,593
Withhold 1,102,798
QB Account For 5,244,318
Against 966,597
Withhold 445,198
MM Account For 7,018,882
Against 2,086,801
Withhold 921,099
PROPOSAL 3
GIS Account For 12,213,351
Withhold 1,053,484
QB Account For 6,251,739
Withhold 404,374
MM Account For 8,792,126
Withhold 1,234,656
-46-
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, MM, TGIS, TSB and TAS 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.
BOARD OF MANAGERS(1)
R. Jay Gerken, CFA(2)(3)
CHAIRMAN
Frances M. Hawk, CFA, CFP
Lewis Mandell Robert E. McGill, III
OFFICERS
R. Jay Gerken, CFA
CHIEF EXECUTIVE OFFICER AND PRESIDENT
Kathleen A. McGah
SECRETARY TO THE BOARD
David A. Golino(3)
PRINCIPAL ACCOUNTING OFFICER
William D. Wilcox
CHIEF ANTI-MONEY LAUNDERING COMPLIANCE OFFICER
CHIEF COMPLIANCE OFFICER
- --------------------------------------------------------------------------------
(1) Mr. Knight Edwards is an Emeritus Manager. An Emeritus Manager is permitted
to attend meetings, but has no voting power.
(2) 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.
(3) Effective July 1, 2005, Elizabeth M. Forget replaced Mr. Gerkin as Chairman.
(4) Effective July 1, 2005, Alan C. Leland Jr. replaced Mr. Golino as Principal
Accounting Officer.
Each Manager and Officer serves until his or her respective successor has
been duly elected and qualified.
- --------------------------------------------------------------------------------
The Statement of Additional Information for Universal Annuity, Universal Select
Annuity, and Universal Annuity Advantage contains additional information about
the Trustees and Officers, and is available without charge, upon request, by
calling 1-800-842-9406.
-47-
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
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, 2005 is
currently available. You may obtain these materials upon request and without
charge by calling the Accounts (toll-free) at 1-800-842-9406.
The Semi-Annual Report to stockholders is filed herewith.
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. 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 financial reporting (as defined in Rule 30a-3(d) under
the 1940 Act) that occurred during the registrant's last
fiscal quarter that have materially affected, or are likely to
materially affect the registrant's internal control over
financial reporting.
ITEM 12. EXHIBITS.
(a)(2) Certifications pursuant to section 302 of the Sarbanes-Oxley
Act of 2002 are attached hereto as Exhibit 99.CERT
(b) Certifications pursuant to section 906 of the Sarbanes-Oxley
Act of 2002 are furnished as Exhibit 99.906CERT
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
Travelers Growth and Income Stock Account For Variable Annuities
Travelers Quality Bond Account For Variable Annuities
Travelers Money Market Account For Variable Annuities
By: /s/ Elizabeth M. Forget
Elizabeth M. Forget
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 August 26, 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/ Elizabeth M. Forget
Elizabeth M. Forget
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 August 26, 2005
By: /s/ Alan C. Leland Jr.
Alan C. Leland Jr.
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 August 26, 2005