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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
Marie Swift
Metropolitan Life Insurance Company
501 Boylston Street
Boston, MA 02116
(617) 578-2857
Date of fiscal year end: December 31
Date of reporting period: December 31, 2005
ITEM 1. REPORT(S) TO STOCKHOLDERS.
The Annual Report to stockholders is filed herewith.
ANNUAL REPORTS
DECEMBER 31, 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
EACH AN ACCOUNT OF
THE TRAVELERS INSURANCE COMPANY
The Travelers Insurance Company
One Cityplace
Hartford, CT 06103
TABLE OF CONTENTS
PAGE
- --------------------------------------------------------------------------------
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES ........................................................1
THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES ....................19
THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES ....................35
FACTORS CONSIDERED BY THE BOARDS OF MANAGERS IN APPROVING THE
INVESTMENT ADVISORY AND THE SUB-ADVISORY AGREEMENT ...........................48
BOARD OF MANAGERS AND OFFICERS ...............................................51
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Managers and the Owners of Variable Contracts of
The Travelers Growth and Income Stock Account for Variable Annuities
We have audited the accompanying statement of assets and liabilities of The
Travelers Growth and Income Stock Account for Variable Annuities (the "Fund"),
including the statement of investments, as of December 31, 2005, and the related
statement of operations and the statement of changes in net assets for the year
then ended. These financial statements are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Fund is not required to have,
nor were we engaged to perform, an audit of its internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. Our procedures included confirmation of securities owned as of
December 31, 2005, by correspondence with the custodian. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Travelers Growth and Income
Stock Account for Variable Annuities as of December 31, 2005, and the results of
its operations and the changes in its net assets for the year then ended, in
conformity with accounting principles generally accepted in the United States of
America.
/s/ DELOITTE & TOUCHE LLP
Tampa, Florida
February 21, 2006
-1-
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Managers and the Owners of Variable Annuity Contracts of
The Travelers Growth and Income Stock Account for Variable Annuities:
We have audited the statement of changes in net assets of The Travelers Growth
and Income Stock Account for Variable Annuities as of December 31, 2004, and the
selected per unit data and ratios for each of the years in the four-year period
then ended. The statement of changes in net assets and selected per unit data
and ratios are the responsibility of the Company's management. Our
responsibility is to express an opinion on the statement of changes in net
assets and selected per unit data and ratios based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and selected per unit data and ratios are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements and selected per unit
data and ratios. Our procedures included confirmation of securities owned as of
December 31, 2004, by correspondence with custodians and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the statement of changes in net assets and selected per unit
data and ratios referred to above of The Travelers Growth and Income Stock
Account for Variable Annuities as of December 31, 2004 present fairly, in all
material respects, the changes in its net assets for the year then ended, and
the selected per unit data and ratios for each of the years in the four-year
period then ended, in conformity with U.S. generally accepted accounting
principles.
/s/ KPMG LLP
Hartford, Connecticut
February 17, 2005
-2-
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2005
ASSETS:
Investment securities, at fair value (cost $418,273,602) ..... $487,856,970
Cash ......................................................... 6,811
Receivables:
Dividends .................................................. 713,153
Purchase payments and transfers from other funding options . 24,585
Other assets ................................................. 36,695
------------
Total Assets ............................................. 488,638,214
------------
LIABILITIES:
Payables:
Investment securities purchased ............................ 988,198
Contract surrenders and transfers to other funding options . 270,360
Investment management and advisory fees .................... 70,251
Insurance charges .......................................... 127,493
Accrued liabilities .......................................... 89
------------
Total Liabilities ........................................ 1,456,391
------------
NET ASSETS: $487,181,823
============
See Notes to Financial Statements
-3-
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2005
INVESTMENT INCOME:
Dividends ......................................................... $ 8,442,326
Interest .......................................................... 167,666
------------
Total income .................................................... $ 8,609,992
EXPENSES:
Investment management and advisory fees ........................... 3,211,948
Insurance charges ................................................. 5,835,324
------------
Total expenses .................................................. 9,047,272
------------
Net investment income (loss) .................................. (437,280)
------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES:
Realized gain (loss) from investment security transactions:
Proceeds from investment securities sold ........................ 166,074,600
Cost of investment securities sold .............................. 145,942,981
------------
Net realized gain (loss) ...................................... 20,131,619
Change in unrealized gain (loss) on investment securities:
Unrealized gain (loss) at December 31, 2005 ..................... 69,583,368
Unrealized gain (loss) at December 31, 2004 ..................... 68,011,790
------------
Net change in unrealized gain (loss) for the year ............. 1,571,578
------------
Net realized gain (loss) and change in unrealized gain (loss) 21,703,197
------------
Net increase (decrease) in net assets resulting from operations ..... $ 21,265,917
============
See Notes to Financial Statements
-4-
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
2005 2004
---- ----
OPERATIONS:
Net investment income (loss) ......................................... $ (437,280) $ 249,422
Net realized gain (loss) from investment security transactions ....... 20,131,619 24,967,584
Net change in unrealized gain (loss) on investment securities ........ 1,571,578 28,522,721
------------- -------------
Net increase (decrease) in net assets resulting from operations .... 21,265,917 53,739,727
------------- -------------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 770,857 and 902,159 units, respectively) ............ 13,977,653 15,767,591
Participant transfers from other funding options
(applicable to 319,960 and 468,530 units, respectively) ............ 6,048,157 8,184,838
Administrative charges
(applicable to 19,140 and 22,684 units, respectively) .............. (367,484) (412,112)
Contract surrenders
(applicable to 2,910,219 and 2,787,531 units, respectively) ........ (55,637,389) (49,336,289)
Participant transfers to other funding options
(applicable to 1,095,900 and 976,561 units, respectively) .......... (20,710,284) (17,069,498)
Other payments to participants
(applicable to 149,429 and 183,493 units, respectively) ............ (2,945,123) (3,341,401)
------------- -------------
Net increase (decrease) in net assets resulting from unit transactions (59,634,470) (46,206,871)
------------- -------------
Net increase (decrease) in net assets .............................. (38,368,553) 7,532,856
NET ASSETS:
Beginning of year .................................................... 525,550,376 518,017,520
------------- -------------
End of year .......................................................... $ 487,181,823 $ 525,550,376
============= =============
See Notes to Financial Statements
-5-
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS
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
Travelers Insurance Company, The Travelers Life and Annuity Company,
certain other domestic insurance companies of Citigroup and substantially
all of Citigroup's international insurance businesses.
On December 1, 2005, Citigroup Inc. completed the sale of substantially
all of its asset management business, Citigroup Asset Management,
including, but not limited to, the Travelers Investment Management Company
("TIMCO") to Legg Mason, Inc. TIMCO provides equity management and
sub-advisory services for the The Travelers Growth and Income Stock
Account for Variable Annuities ("Account GIS").
Based upon the recommendation of the Audit Committee for Account GIS, the
Board of Managers determined not to retain KPMG LLP ("KPMG") as Account
GIS's independent auditor, and voted to appoint Deloitte & Touche LLP as
Account GIS's independent auditor for the fiscal year ended December 31,
2005, effective July 1, 2005. During the two most recent fiscal years and
through June 30, 2005, the date that the Board of Managers notified KPMG
of their decision not to retain them as Account GIS's auditor, KPMG's
audit reports contained no adverse opinion or disclaimer of opinion: nor
were their reports qualified as to uncertainty, audit scope or accounting
principles. Further, there were no disagreements between Account GIS and
KPMG on the accounting principles, financial statements disclosure or
audit scope, which, if not resolved to the satisfaction of KPMG, would
have caused them to make reference to the disagreement in their reports.
Account GIS is a separate account of The Travelers Insurance Company ("The
Company"), a wholly owned subsidiary of MetLife, and is available for
funding Universal Annuity, Universal Select Annuity, and Universal Annuity
Advantage contracts issued by The Company. Account GIS, established on
September 22, 1967, is registered under the Investment Company Act of
1940, as amended, as a diversified, open-end management investment
company.
Travelers Asset Management International Company, LLC ("TAMIC"), an
indirect wholly owned subsidiary of The Company, provides fixed income
management and advisory services for Account GIS.
This report is prepared for the general information of contract owners and
is not an offer of units of Account GIS or shares of Account GIS's
underlying holdings. It should not be used in connection with any offer
except in conjunction with the Prospectus for Account GIS's product(s)
offered by The Company.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by Account GIS in the preparation of its financial statements.
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 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.
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.
-6-
NOTES TO FINANCIAL STATEMENTS - CONTINUED
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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 December 31, 2005.
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 December 31,
2005.
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.
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. Realized gains and losses from
investment security transactions are reported on an identified cost basis.
3. INVESTMENTS
The aggregate costs of purchases and proceeds from sales of investments
(other than short-term securities), were $106,859,907 and $158,668,990,
respectively; the costs of purchases and proceeds from sales of direct and
indirect U.S. government securities were $1,142,607 and $2,550,000,
respectively, for the year ended December 31, 2005. Realized gains and
losses from investment security transactions are reported on an identified
cost basis.
Net realized gains (losses) resulting from futures contracts were $158,172
and $601,653 for the years ended December 31, 2005 and 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.
-7-
NOTES TO FINANCIAL STATEMENTS - CONTINUED
4. CONTRACT CHARGES
Investment management and advisory fees are paid to TAMIC, an indirect
wholly owned subsidiary of MetLife Inc., and 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. Pursuant to a sub-advisory agreement
between TAMIC and TIMCO, TAMIC pays TIMCO a sub-advisory 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.
- -------------------------------------------------------------------------------------------------------------------------------
TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
- -------------------------------------------------------------------------------------------------------------------------------
Asset-based Charges
---------------------------------------
Total M&E and Rider Charges Optional Feature
Dth ---------------- Total
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.
5. NET ASSETS HELD ON BEHALF OF AN AFFILIATE
Approximately $12,757,000 and $13,321,000 of the net assets of Account GIS
were held on behalf of an affiliate of The Company as of December 31, 2005
and 2004, respectively. Transactions with this affiliate during the years
ended December 31, 2005 and 2004, were comprised of participant purchase
payments of approximately $5,000 and $3,000 and contract surrenders of
approximately $1,133,000 and $438,000, respectively.
-8-
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. NET CONTRACT OWNERS' EQUITY
DECEMBER 31, 2005
-------------------------------------------
UNIT
UNITS VALUE NET ASSETS
---------- -------- -------------
Total M&E and Rider Charges 1.00%, 3.5% AIR .................. 6,607,822 $ 20.901 $ 138,100,307
Total M&E and Rider Charges 1.25%, 3.5% AIR .................. 17,668,710 19.756 349,045,802
Total M&E and Rider Charges 1.40%, 3.5% AIR .................. 133 1.128 150
Total M&E and Rider Charges 1.65%, 3.5% AIR .................. 184 1.125 207
Total M&E and Rider Charges 1.25%, 3.0% AIR .................. 29,106 1.136 33,051
Total M&E and Rider Charges 1.65%, 3.0% AIR .................. 2,041 1.130 2,306
-------------
Net Contract Owners' Equity .................................. $ 487,181,823
=============
Assumed Interest Rate (AIR) is only applicable to contracts in the payout phase.
-9-
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SUPPLEMENTARY INFORMATION
(Selected data for a unit outstanding throughout each year.)
Total M&E and Rider Charges 1.00%, 3.5% AIR FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------------------------
2005 2004 2003 2002 2001
---- ---- ---- ---- ----
SELECTED PER UNIT DATA:
Total investment income ................................... $ .348 $ .348 $ .264 $ .240 $ .266
Operating expenses ........................................ .328 .303 .256 .261 .311
------- ------- ------- ------- -------
Net investment income (loss) .............................. .020 .045 .008 (.021) (.045)
Unit value at beginning of year ........................... 19.949 17.926 14.172 18.064 21.418
Net realized and change in unrealized gains (losses) ...... .932 1.978 3.746 (3.871) (3.309)
------- ------- ------- ------- -------
Unit value at end of year ................................. $20.901 $19.949 $17.926 $14.172 $18.064
======= ======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value ..................... $ .95 $ 2.02 $ 3.75 $ (3.89) $ (3.35)
Ratio of operating expenses to average net assets ......... 1.65% 1.65% 1.65% 1.64% 1.63%
Ratio of net investment income (loss) to average net assets 0.09% 0.23% 0.06% (0.12)% (0.24)%
Number of units outstanding at end of year (thousands) .... 6,608 7,413 8,139 9,088 10,329
Portfolio turnover rate ................................... 22% 43% 68% 54% 32%
Total M&E and Rider Charges 1.25%, 3.5% AIR FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------------------------
2005 2004 2003 2002 2001
---- ---- ---- ---- ----
SELECTED PER UNIT DATA:
Total investment income ................................... $ .329 $ .330 $ .251 $ .229 $ .254
Operating expenses ........................................ .357 .331 .281 .287 .343
------- ------- ------- ------- -------
Net investment income (loss) .............................. (.028) (.001) (.030) (.058) (.089)
Unit value at beginning of year ........................... 18.903 17.028 13.496 17.245 20.498
Net realized and change in unrealized gains (losses) ...... .881 1.876 3.562 (3.691) (3.164)
------- ------- ------- ------- -------
Unit value at end of year ................................. $19.756 $18.903 $17.028 $13.496 $17.245
======= ======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value ..................... $ .85 $ 1.88 $ 3.53 $ (3.75) $ (3.25)
Ratio of operating expenses to average net assets ......... 1.89% 1.90% 1.90% 1.89% 1.88%
Ratio of net investment income (loss) to average net assets (0.15)% (0.02)% (0.19)% (0.37)% (0.49)%
Number of units outstanding at end of year (thousands) .... 17,669 19,978 21,853 24,100 27,559
Portfolio turnover rate ................................... 22% 43% 68% 54% 32%
-10-
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. 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
DECEMBER 31, 2005
-------------------
SELECTED PER UNIT DATA:
Total investment income .................................... $ .011
Operating expenses ......................................... .013
-------------------
Net investment income (loss) ............................... (.002)
Unit value at beginning of period .......................... 1.065
Net realized and change in unrealized gains (losses) ....... .065
-------------------
Unit value at end of year .................................. $ 1.128
===================
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value ...................... $ .06
Ratio of operating expenses to average net assets* ......... 2.04%
Ratio of net investment income (loss) to average net assets* (0.31)%
Number of units outstanding at end of year (thousands)** ... --
Portfolio turnover rate .................................... 22%
FROM MARCH 15, 2005
Total M&E and Rider Charges 1.65%, 3.5% AIR (INCEPTION DATE) TO
DECEMBER 31, 2005
-------------------
SELECTED PER UNIT DATA:
Total investment income .................................... $ .015
Operating expenses ......................................... .020
-------------------
Net investment income (loss) ............................... (.005)
Unit value at beginning of period .......................... 1.067
Net realized and change in unrealized gains (losses) ....... .063
-------------------
Unit value at end of year .................................. $ 1.125
===================
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value ...................... $ .06
Ratio of operating expenses to average net assets* ......... 2.29%
Ratio of net investment income (loss) to average net assets* (0.60)%
Number of units outstanding at end of year (thousands)** ... --
Portfolio turnover rate .................................... 22%
* Annualized
** Unit Balance rounds to less than 1,000 units.
-11-
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SUPPLEMENTARY INFORMATION (CONTINUED)
(Selected data for a unit outstanding throughout each period.)
FROM DECEMBER 10, 2004
Total M&E and Rider Charges 1.25%, 3.0% AIR FOR THE YEAR ENDED (INCEPTION DATE) TO
DECEMBER 31, DECEMBER 31, 2004
------------------ ----------------------
2005
----
SELECTED PER UNIT DATA:
Total investment income ................................... $ .019 $ .001
Operating expenses ........................................ .021 .001
---------- ----------
Net investment income (loss) .............................. (.002) --
Unit value at beginning of period ......................... 1.087 1.066
Net realized and change in unrealized gains (losses) ...... .051 .021
---------- ----------
Unit value at end of year ................................. $ 1.136 $ 1.087
========== ==========
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value ..................... $ .05 $ .02
Ratio of operating expenses to average net assets ......... 1.89% 1.90% *
Ratio of net investment income (loss) to average net assets (0.15)% (0.49)*
Number of units outstanding at end of year (thousands) .... 29 -- **
Portfolio turnover rate ................................... 22% 43%
FROM FEBRUARY 24, 2005
Total M&E and Rider Charges 1.65%, 3.0% AIR (INCEPTION DATE) TO
DECEMBER 31, 2005
----------------------
SELECTED PER UNIT DATA:
Total investment income .................................... $ .016
Operating expenses ......................................... .021
-------------------
Net investment income (loss) ............................... (.005)
Unit value at beginning of period .......................... 1.072
Net realized and change in unrealized gains (losses) ....... .063
-------------------
Unit value at end of year .................................. $ 1.130
===================
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value ...................... $ .06
Ratio of operating expenses to average net assets* ......... 2.29%
Ratio of net investment income (loss) to average net assets* (0.54)%
Number of units outstanding at end of year (thousands) ..... 2
Portfolio turnover rate .................................... 22%
* Annualized
** Unit Balance rounds to less than 1,000 units.
-12-
NOTES TO FINANCIAL STATEMENTS - CONTINUED
8. SUBSEQUENT EVENT
The Company filed a combined prospectus and proxy statement on Form N-14
with the Securities and Exchange Commission on January 30, 2006, regarding
Account GIS. If the proxy vote is favorable, Account GIS will be
reorganized and restructured as a sub-account of The Travelers Fund U for
Variable Annuities which will invest in the Batterymarch Growth and Income
Stock Portfolio of the Met Investors Series Trust.
-13-
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
SUMMARY OF HOLDINGS
DECEMBER 31, 2005
% of net
assets
----------
COMMON STOCK
Technology.......................................................... 14.5
Banking ............................................................ 9.1
Pharmaceuticals..................................................... 6.9
Retail.............................................................. 6.3
Insurance........................................................... 5.9
Integrated Energy................................................... 5.5
Conglomerates....................................................... 5.2
Brokerage........................................................... 3.8
Telecommunications.................................................. 3.6
Consumer............................................................ 3.3
Healthcare.......................................................... 3.1
Oil Companies....................................................... 2.6
Multimedia.......................................................... 2.6
Food................................................................ 2.4
Finance............................................................. 2.2
Beverage............................................................ 2.2
Medical Supplies.................................................... 2.0
Transportation Services............................................. 1.7
Electric Utilities.................................................. 1.5
Tobacco............................................................. 1.4
Metals.............................................................. 1.4
Utilities........................................................... 1.2
Independent Energy.................................................. 1.2
Services............................................................ 1.1
Aerospace........................................................... 1.0
Biotechnology....................................................... 0.9
Automotive.......................................................... 0.9
Defense............................................................. 0.8
Chemicals........................................................... 0.8
United States Agency Securities..................................... 0.6
Paper............................................................... 0.6
Lodging............................................................. 0.6
Capital Goods....................................................... 0.6
Machinery........................................................... 0.5
Home Construction................................................... 0.5
Media Non-Cable..................................................... 0.4
Entertainment....................................................... 0.4
Building Materials.................................................. 0.1
-------
TOTAL COMMON STOCK.................................................. 99.4
-------
SHORT-TERM INVESTMENTS
Commercial Paper.................................................... 0.7
-------
TOTAL SHORT-TERM INVESTMENTS........................................ 0.7
-------
TOTAL INVETSMENTS................................................... 100.1
-------
Other Assets and Liabilities........................................ (0.1)
-------
TOTAL NET ASSETS (100.0%)........................................... 100.0
=======
-14-
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS
DECEMBER 31, 2005
NO. OF FAIR
SHARES VALUE
---------- ------------
COMMON STOCK (99.4%)
AEROSPACE (1.0%)
Boeing Co. 27,258 $ 1,914,602
General Dynamics Corp. 24,458 2,789,435
------------
4,704,037
------------
AUTOMOTIVE (0.9%)
Ford Motor Co. 46,363 357,922
Harley-Davidson 13,348 687,288
Oshkosh Truck 24,934 1,111,807
PACCAR Inc. 32,842 2,273,652
------------
4,430,669
------------
BANKING (9.1%)
Bank of America Corp. 217,845 10,053,547
Bank of New York Co., Inc. (A) 33,228 1,058,312
Capital One Financial Corp. 27,854 2,406,586
Comerica, Inc. (A) 29,659 1,683,445
JP Morgan Chase & Co. 187,690 7,449,416
KeyCorp 20,039 659,884
Marshall & Ilsley Corp. 17,134 737,447
MBNA Corp. 18,974 515,334
National City Corp. 62,124 2,085,503
PNC Financial Services Group 19,158 1,184,539
State Street Corp. 21,259 1,178,599
Suntrust Banks, Inc. (A) 44,643 3,248,225
U.S. Bancorp 64,725 1,934,630
Wachovia Corp. 101,223 5,350,648
Wells Fargo & Co. 77,391 4,862,476
------------
44,408,591
------------
BEVERAGE (2.2%)
Coca-Cola Co. 76,759 3,094,155
Coca-Cola Enterprises Inc. 69,137 1,325,356
Constellation Brands Inc. (A) 36,508 2,102,861
PepsiCo, Inc. 74,247 4,386,513
------------
10,908,885
------------
BIOTECHNOLOGY (0.9%)
Genetech Inc. (A) 18,811 1,740,017
Gilead Sciences, Inc. 47,504 2,500,135
------------
4,240,152
------------
BROKERAGE (3.8%)
Amerprise Financial, Inc. 13,617 558,297
Bear Stearns Companies 24,745 2,858,790
Franklin Resources, Inc. 13,361 1,256,068
Goldman Sachs Group Inc. 31,891 4,072,800
Lehman Brothers Holdings Inc. (A) 28,138 3,606,447
Merrill Lynch & Co. 44,535 3,016,355
Morgan Stanley 56,000 3,177,440
------------
18,546,197
------------
BUILDING MATERIALS (0.1%)
Masco Corp. 18,493 558,304
------------
CAPITAL GOODS (0.6%)
Danaher Corp. 10,135 565,330
Deere & Co. (A) 25,302 1,723,319
Eaton Corp. (A) 9,256 620,985
------------
2,909,634
------------
CHEMICALS (0.8%)
Dow Chemical 52,840 2,315,449
E.I. du Pont de Nemours & Co. 19,717 837,972
Monsanto Co. 11,686 906,016
------------
4,059,437
------------
CONGLOMERATES (5.2%)
3M Co. 24,209 1,876,197
General Electric Co. 467,008 16,368,630
Honeywell International, Inc. 38,200 1,422,950
Parker-Hannifin 5,427 357,965
Tyco International Ltd. 95,312 2,750,704
United Technologies Corp. 45,962 2,569,735
------------
25,346,181
------------
CONSUMER (3.3%)
ACCO Brands Corp. (A) 6,036 147,882
Ball Corp. 20,579 817,398
Black & Decker Corp. 12,179 1,059,086
Colgate-Palmolive Co. (A) 15,336 841,180
Energizer Holdings, Inc. 12,162 605,546
Fortune Brands 25,685 2,003,944
Molson Coors Brewing Co. 16,134 1,080,817
NIKE, Inc. (Class B) 5,734 497,654
Procter & Gamble Co. 134,858 7,805,582
Sealed Air Corp. (A) 25,501 1,432,391
------------
16,291,480
------------
DEFENSE (0.8%)
Lockheed Martin Corp. 28,336 1,803,020
Northrop Grumman Corp. 36,874 2,216,496
------------
4,019,516
------------
ELECTRIC UTILITIES (1.5%)
American Electric Power 60,355 2,238,567
Edison International 44,962 1,960,793
FirstEnergy Corp. (A) 46,988 2,301,942
Public Service Enterprise Group 12,828 833,435
------------
7,334,737
------------
-15-
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS - CONTINUED
DECEMBER 31, 2005
NO. OF FAIR
SHARES VALUE
---------- ------------
ENTERTAINMENT (0.4%)
Viacom, Inc. (Class B) 57,885 $ 1,887,051
------------
FINANCE (2.2%)
American Express 68,087 3,503,757
CIT Group Holdings, Inc. 39,646 2,052,870
Countrywide Financial 50,768 1,735,758
E*Trade Financial Corp. (A) 87,610 1,827,545
Principal Financial Group 28,221 1,338,522
------------
10,458,452
------------
FOOD (2.4%)
Archer-Daniels Midland Co. 72,515 1,788,220
Darden Restaurants, Inc. 36,042 1,401,313
General Mills, Inc. 30,667 1,512,496
Hormel Foods Corp. (A) 16,069 525,135
Kellogg Co. 9,471 409,337
McDonald's Corp. 90,411 3,048,659
Sara Lee Corp. 35,337 667,869
Smithfield Foods 53,120 1,625,472
Yum! Brands 12,545 588,110
------------
11,566,611
------------
HEALTHCARE (3.1%)
Aetna Inc. 23,790 2,243,635
Caremark Rx, Inc. (A) 28,868 1,495,074
Humana, Inc. 46,491 2,525,856
Medco Health Solutions 12,869 718,090
UnitedHealth Group, Inc. 99,444 6,179,450
Wellpoint, Inc. (A) 25,398 2,026,506
------------
15,188,611
------------
HOME CONSTRUCTION (0.5%)
K.B. HOME 13,654 992,100
Pulte Homes, Inc. 32,682 1,286,363
------------
2,278,463
------------
INDEPENDENT ENERGY (1.2%)
Anadarko Petroleum Corp. 13,754 1,303,191
Burlington Resources 39,933 3,442,225
Devon Energy Corp. 20,226 1,264,934
------------
6,010,350
------------
INSURANCE (5.9%)
ACE Limited 13,472 719,944
AFLAC Inc. 24,399 1,132,602
Allstate Corp. 30,920 1,671,844
Ambac Financial Group 26,313 2,027,680
American International Group 123,846 $8,450,013
Aon Corp. 13,909 500,029
Chubb Corp. 29,384 2,869,348
CIGNA Corp. 17,547 1,960,000
First Horizon National 186 7,150
Hartford Financial Services
Group, Inc. 9,727 835,452
Jefferson-Pilot Corp. 6,647 378,414
Lincoln National Corp. 8,875 470,641
Marsh & McLennan Cos., Inc. 23,789 755,539
MGIC Investment Corp. (A) 16,896 1,112,095
Progressive Corp. 20,547 2,399,479
Prudential Financial, Inc. 44,810 3,279,644
------------
28,569,874
------------
INTEGRATED ENERGY (5.5%)
Chevron Corp. 98,703 5,603,369
ConocoPhillips 63,788 3,711,186
Exxon Mobil Corp. 279,822 15,717,602
Marathon Oil 29,648 1,807,639
------------
26,839,796
------------
LODGING (0.6%)
Marriott International, Inc. 34,251 2,293,789
Starwood Hotels & Resorts 8,064 514,967
------------
2,808,756
------------
MACHINERY (0.5%)
Ingersoll-Rand Co. (Class A) 55,598 2,244,491
------------
MEDIA NON-CABLE (0.4%)
News Corp. Limited 113,833 1,770,103
------------
MEDICAL SUPPLIES (2.0%)
Abbott Laboratories 50,066 1,974,102
Becton, Dickinson and Company 11,209 673,437
Boston Scientific (A) 37,973 929,959
Cardinal Health 7,728 531,300
Herman Miller Inc. 31,809 896,696
Hospira, Inc. (A) 4,008 171,462
Medtronic, Inc. 54,538 3,139,753
Zimmer Holdings, Inc. (A) 23,544 1,587,807
------------
9,904,516
------------
METALS (1.4%)
Allegheny Technologies, Inc. 47,933 1,729,423
Newmont Mining Corp. 18,697 998,420
Nucor Corp. 30,127 2,010,073
Phelp's Dodge Corp. (A) 15,837 2,278,469
------------
7,016,385
------------
-16-
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS - CONTINUED
DECEMBER 31, 2005
NO. OF FAIR
SHARES VALUE
---------- ------------
MULTIMEDIA (2.6%)
Brown-Forman Corp. (Class B) 11,818 $ 819,224
Comcast Corp. (Class A) 96,152 2,496,106
Gannett Co., Inc. (A) 21,483 1,301,225
Mcgraw-Hill Companies, Inc. (A) 16,263 839,659
Time Warner Inc. 276,749 4,826,503
Walt Disney Co. 106,372 2,549,737
------------
12,832,454
------------
OIL COMPANIES (2.6%)
Baker Hughes Inc. 22,355 1,358,737
Halliburton Co. 18,874 1,169,433
Occidental Petroleum Corp. (A) 34,303 2,740,124
Schlumberger Ltd. 31,058 3,017,285
Sunoco Inc. 14,818 1,161,435
Transocean, Inc. (A) 20,423 1,423,279
Valero Energy Corp. 35,088 1,810,541
------------
12,680,834
------------
PAPER (0.6%)
International Paper (A) 22,754 764,762
Kimberly Clark Corp. 22,967 1,369,982
Weyerhaeuser Co. 9,523 631,756
------------
2,766,500
------------
PHARMACEUTICALS (6.9%)
AmerisourceBergen Corp. 32,028 1,325,959
Amgen, Inc. (A) 59,304 4,676,713
Biogen Idec Inc. (A) 29,934 1,356,908
Bristol-Myers Squibb 86,001 1,976,303
Eli Lilly & Co. (A) 40,675 2,301,798
Johnson & Johnson 132,817 7,982,302
Merck & Co., Inc. 98,412 3,130,486
Pfizer Inc. 332,612 7,756,512
Schering-Plough Corp. 65,364 1,362,839
Wyeth 42,310 1,949,222
------------
33,819,042
------------
RETAIL (6.3%)
Abercrombie & Fitch Co. 16,577 1,080,489
Albertsons, Inc. (A) 46,758 998,283
American Eagle Outfitters 25,683 590,195
Autozone, Inc. (A) 12,484 1,145,407
Best Buy Co. Inc. 24,978 1,086,043
Costco Wholesale Corp. 20,855 1,031,697
CVS Corp. 62,052 1,639,414
Federated Department Stores, Inc. 11,956 793,041
Gamestop Corp. 14,716 425,292
Home Depot, Inc. 86,155 3,487,554
Jones Apparel Group, Inc. 5,054 155,259
Kohl's Corp. 31,967 1,553,596
Lowe's Cos. 44,208 2,946,905
Nordstrom, Inc. 44,276 1,655,922
Office Depot, Inc. (A) 13,681 429,583
Staples Inc. 34,030 772,810
Supervalu, Inc. 36,506 1,185,715
Target Corp. 55,426 3,046,767
The Gap, Inc. 24,939 439,924
Walgreen Co. 23,053 1,020,326
Wal-Mart Stores, Inc. 108,474 5,076,583
------------
30,560,805
------------
SERVICES (1.1%)
Cendant Corp. 49,788 858,843
eBay Inc. 51,462 2,225,731
Yahoo! Inc. (A) 59,689 2,338,615
------------
5,423,189
------------
TECHNOLOGY (14.5%)
Advanced Micro Devices (A) 39,497 1,208,608
Analog Devices, Inc. 17,304 620,694
Apple Computer (A) 49,254 3,540,870
Autodesk, Inc. 10,017 430,230
Cisco Systems, Inc. (A) 304,197 5,207,853
Comverse Technology Inc. 78,946 2,099,174
Corning Inc. 62,748 1,233,626
Dell Inc. 112,593 3,376,664
EMC Corp. (A) 111,492 1,518,521
Fiserv Inc. 11,777 509,591
Hewlett Packard Co. 137,035 3,923,312
Intel Corp. 290,880 7,260,365
International Business Machine 80,687 6,632,471
Jabil Circuit 44,049 1,633,777
KLA-Tencor Corp. (A) 9,143 451,024
Lexmark International (Class A) 5,825 261,135
Maxim Intergrated Products 14,330 519,319
Micron Technology, Inc. 96,377 1,282,778
Microsoft Corp. 426,737 11,159,172
Motorola, Inc. 105,853 2,391,219
Oracle Corp. 224,611 2,742,500
Scientific-Atlanta, Inc. (A) 47,811 2,059,220
Sun Microsystems, Inc. (A) 158,542 664,291
Sybase, Inc. (A) 49,877 1,090,311
Symantec Corp. (A) 58,493 1,023,627
Texas Instruments Inc. 90,528 2,903,233
Thomas & Betts Corp. (A) 41,654 1,747,802
Waters Corp. (A) 27,164 1,026,799
Xerox Corp. (A) 148,248 2,171,833
------------
70,690,019
------------
-17-
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS - CONTINUED
DECEMBER 31, 2005
NO. OF FAIR
SHARES VALUE
---------- ------------
TELECOMMUNICATIONS (3.6%)
AT&T, Inc. 170,577 $ 4,177,431
BellSouth Corp. 71,766 1,944,859
CenturyTel, Inc. 52,301 1,734,301
QUALCOMM, Inc. 66,861 2,880,372
Sprint Corp. 126,022 2,943,874
Verizon Communications 122,389 3,686,357
------------
17,367,194
------------
TOBACCO (1.4%)
Altria Group 92,199 6,889,109
------------
TRANSPORTATION SERVICES (1.7%)
Burlington Northern Santa Fe 37,346 2,644,844
CSX Corp. 34,293 1,741,056
United Parcel Service (Class B) 51,324 3,856,999
------------
8,242,899
------------
UNITED STATES AGENCY SECURITIES (0.6%)
Fannie Mae 51,346 2,506,198
Freddie Mac (A) 9,578 625,922
------------
3,132,120
------------
UTILITIES (1.2%)
AES Corp. (A) 122,460 1,938,542
Exelon Corp. 18,473 981,655
National Fuel Gas Co. 11,814 368,479
The Southern Co. 26,402 911,661
TXU Corp. 34,744 1,743,801
------------
5,944,138
------------
TOTAL COMMON STOCKS
(COST $415,067,353) 484,649,582
------------
PRINCIPAL
AMOUNT
----------
SHORT-TERM INVESTMENTS (0.7%)
COMMERCIAL PAPER (0.7%)
Chesham FNC
4.40% Due January 5, 2006 $2,500,000 2,499,388
UBS AG
4.25% Due January 3, 2006 708,000 708,000
------------
TOTAL SHORT-TERM
INVESTMENTS (COST $3,206,249) $ 3,207,388
------------
TOTAL INVESTMENTS (100.1%)
(COST $418,273,602) (B) 487,856,970
------------
Other Assets and Liabilities (-0.1%) (675,147)
------------
TOTAL NET ASSETS (100.0%) $487,181,823
============
NOTES
(A) Non-income Producing Security.
(B) At December 31, 2005 net unrealized appreciation for all securities was
$69,583,368. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of fair value over cost of
$109,455,570 and aggregate gross unrealized depreciation for all
securities in which there was an excess of cost over fair value of
$39,872,202.
See Notes to Financial Statements
-18-
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Managers and the Owners of Variable Contracts of
The Travelers Quality Bond Account for Variable Annuities
We have audited the accompanying statement of assets and liabilities of The
Travelers Quality Bond Account for Variable Annuities (the "Fund"), including
the statement of investments, as of December 31, 2005, and the related statement
of operations and the statement of changes in net assets for the year then
ended. These financial statements are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Fund is not required to have,
nor were we engaged to perform, an audit of its internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. Our procedures included confirmation of securities owned as of
December 31, 2005, by correspondence with the custodian. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Travelers Quality Bond
Stock Account for Variable Annuities as of December 31, 2005, and the results of
its operations and the changes in its net assets for the year then ended, in
conformity with accounting principles generally accepted in the United States of
America.
/s/ DELOITTE & TOUCHE LLP
Tampa, Florida
February 21, 2006
-19-
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Managers and the Owners of Variable Annuity Contracts of
The Travelers Quality Bond Account for Variable Annuities:
We have audited the statement of changes in net assets of The Travelers Quality
Bond Account for Variable Annuities as of December 31, 2004, and the selected
per unit data and ratios for each of the years in the four-year period then
ended. The statement of changes in net assets and selected per unit data and
ratios are the responsibility of the Company's management. Our responsibility is
to express an opinion on the statement of changes in net assets and selected per
unit data and ratios based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and selected per unit data and ratios are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements and selected per unit
data and ratios. Our procedures included confirmation of securities owned as of
December 31, 2004, by correspondence with custodians and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the statement of changes in net assets and selected per unit
data and ratios referred to above of The Travelers Quality Bond Account for
Variable Annuities as of December 31, 2004 present fairly, in all material
respects, the financial position of the changes in its net assets for the year
then ended, and the selected per unit data and ratios for each of the years in
the four-year period then ended, in conformity with U.S. generally accepted
accounting principles.
/s/ KPMG LLP
Hartford, Connecticut
February 17, 2005
-20-
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2005
ASSETS:
Investment securities, at fair value (cost $88,560,810) ...... $ 87,876,148
Cash ......................................................... 1,148
Receivables:
Interest ................................................... 1,026,291
Investment securities sold ................................. 458,187
Purchase payments and transfers from other funding options . 13,383
Other ...................................................... 13,168
------------
Total Assets ............................................. 89,388,325
------------
LIABILITIES:
Payables:
Contract surrenders and transfers to other funding options . 48,815
Investment management and advisory fees .................... 6,338
Insurance charges .......................................... 23,104
Accrued liabilities .......................................... 230
------------
Total Liabilities ........................................ 78,487
------------
NET ASSETS: $ 89,309,838
============
See Notes to Financial Statements
-21-
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2005
INVESTMENT INCOME:
Interest .......................................................... $ 4,132,299
EXPENSES:
Investment management and advisory fees ........................... $ 304,936
Insurance charges ................................................. 1,112,436
------------
Total expenses .................................................. 1,417,372
------------
Net investment income (loss) .................................. 2,714,927
------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES:
Realized gain (loss) from investment security transactions:
Proceeds from investment securities sold ........................ 64,172,164
Cost of investment securities sold .............................. 63,495,627
------------
Net realized gain (loss) ...................................... 676,537
Change in unrealized gain (loss) on investment securities:
Unrealized gain (loss) at December 31, 2005 ..................... (684,662)
Unrealized gain (loss) at December 31, 2004 ..................... 1,600,818
------------
Net change in unrealized gain (loss) for the year ............. (2,285,480)
------------
Net realized gain (loss) and change in unrealized gain (loss) (1,608,943)
------------
Net increase (decrease) in net assets resulting from operations ..... $ 1,105,984
============
See Notes to Financial Statements
-22-
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
2005 2004
---- ----
OPERATIONS:
Net investment income (loss) ......................................... $ 2,714,927 $ 3,027,366
Net realized gain (loss) from investment security transactions ....... 676,537 689,574
Net change in unrealized gain (loss) on investment securities ........ (2,285,480) (732,536)
------------- -------------
Net increase (decrease) in net assets resulting from operations .... 1,105,984 2,984,404
------------- -------------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 549,821 and 662,081 units, respectively) ............ 3,891,190 4,637,014
Participant transfers from other funding options
(applicable to 344,183 and 469,738 units, respectively) ............ 2,460,450 3,286,010
Administrative charges
(applicable to 9,531 and 10,969 units, respectively) ............... (68,911) (77,235)
Contract surrenders
(applicable to 1,974,337 and 1,792,547 units, respectively) ........ (14,229,493) (12,709,265)
Participant transfers to other funding options
(applicable to 626,782 and 1,092,374 units, respectively) .......... (4,482,036) (7,636,339)
Other payments to participants
(applicable to 70,419 and 111,228 units, respectively) ............. (512,351) (793,229)
------------- -------------
Net increase (decrease) in net assets resulting from unit transactions (12,941,151) (13,293,044)
------------- -------------
Net increase (decrease) in net assets .............................. (11,835,167) (10,308,640)
NET ASSETS:
Beginning of year .................................................... 101,145,005 111,453,645
------------- -------------
End of year .......................................................... $ 89,309,838 $ 101,145,005
============= =============
See Notes to Financial Statements
-23-
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS
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
Travelers Insurance Company, The Travelers Life and Annuity Company,
certain other domestic insurance companies of Citigroup and substantially
all of Citigroup's international insurance businesses.
Based upon the recommendation of the Audit Committee for The Travelers
Quality Bond Account for Variable Annuities ("Account QB"), the Board of
Managers determined not to retain KPMG LLP ("KPMG") as Account QB's
independent auditor, and voted to appoint Deloitte & Touche LLP as Account
QB's independent auditor for the fiscal year ended December 31, 2005,
effective July 1, 2005. During the two most recent fiscal years and
through June 30, 2005, the date that the Board of Managers notified KPMG
of their decision not to retain them as Account QB's auditor, KPMG's audit
reports contained no adverse opinion or disclaimer of opinion: nor were
their reports qualified as to uncertainty, audit scope or accounting
principles. Further, there were no disagreements between Account QB and
KPMG on the accounting principles, financial statements disclosure or
audit scope, which, if not resolved to the satisfaction of KPMG, would
have caused them to make reference to the disagreement in their reports.
The Travelers Quality Bond Account for Variable Annuities ("Account QB")
is a separate account of The Travelers Insurance Company ("The Company"),
a wholly owned subsidiary of MetLife, and is available for funding
Universal Annuity, Universal Select Annuity, and Universal Annuity
Advantage contracts issued by The Company. Account QB, established on July
29, 1974, is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company.
The Travelers Asset Management International Company, LLC ("TAMIC"), an
indirect wholly owned subsidiary of The Company, provides fixed income
management and advisory services for Account QB.
This report is prepared for the general information of contract owners and
is not an offer of units of Account QB or shares of Account QB's
underlying holdings. It should not be used in connection with any offer
except in conjunction with the Prospectus for Account QB's product(s)
offered by The Company.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by Account QB in the preparation of its financial statements.
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 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.
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.
-24-
NOTES TO FINANCIAL STATEMENTS - CONTINUED
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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 December 31,
2005.
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.
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.
3. INVESTMENTS
The aggregate costs of purchases and proceeds from sales of investments
(other than short-term securities) were $21,410,090 and $38,394,674,
respectively; the costs of purchases and proceeds from sales of direct and
indirect U.S. government securities were $37,734,572 and $27,066,059,
respectively, for the year ended December 31, 2005. Realized gains and
losses from investment security transactions are reported on an identified
cost basis.
4. 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
TAMIC, an indirect wholly owned subsidiary of MetLife Inc. Pursuant to a
sub-advisory agreement between TAMIC and Salomon Brothers Asset Management
INC. ("SaBAM"), TAMIC pays SaBAM a sub-advisory fee calculated daily at an
annual rate of 0.20% of Account QB'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)
-25-
NOTES TO FINANCIAL STATEMENTS - CONTINUED
4. CONTRACT CHARGES (CONTINUED)
Below is a table displaying total M&E and rider charges with their
associated products offered in this Separate Account. The table displays
Standard (S) and Annual Step-Up (SU) death-benefit designations.
- ----------------------------------------------------------------------------------------------------------------------------
TRAVELERS QUALITY BOND ACCOUNT
- ----------------------------------------------------------------------------------------------------------------------------
Asset-based Charges
----------------------------------
Optional Feature
Total M&E and Rider Charges Dth ---------------- Total
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.
5. NET ASSETS HELD ON BEHALF OF AN AFFILIATE
Approximately $98,000 and $105,000 of the net assets of Account QB were
held on behalf of an affiliate of The Company as of December 31, 2005 and
2004, respectively. Transactions with this affiliate during the years
ended December 31, 2005 and 2004, were comprised of participant purchase
payments of approximately $0 and $4,000 and contract surrenders of
approximately $8,000 and $18,000, for the years ended December 31, 2005
and 2004, respectively.
6. NET CONTRACT OWNERS' EQUITY
DECEMBER 31, 2005
------------------------------------------
UNIT
UNITS VALUE NET ASSETS
--------- -------- ------------
Total M&E and Rider Charges 1.00%, 3.5% AIR .................... 3,377,642 $ 7.610 $ 25,702,792
Total M&E and Rider Charges 1.25%, 3.5% AIR .................... 8,841,896 7.193 63,599,982
Total M&E and Rider Charges 1.25%, 3.0% AIR .................... 6,928 1.020 7,064
------------
Net Contract Owners' Equity .................................... $ 89,309,838
============
Assumed Interest Rate (AIR) is only applicable to contracts in the payout
phase.
-26-
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SUPPLEMENTARY INFORMATION
(Selected data for a unit outstanding throughout each year.)
Total M&E and Rider Charges 1.00%, 3.5% AIR FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------------------------
2005 2004 2003 2002 2001
---- ---- ---- ---- ----
SELECTED PER UNIT DATA:
Total investment income ................................... $ .331 $ .321 $ .345 $ .381 $ .421
Operating expenses ........................................ .100 .097 .093 .086 .089
------- ------- ------- ------- -------
Net investment income (loss) .............................. .231 .224 .252 .295 .332
Unit value at beginning of year ........................... 7.507 7.281 6.674 6.608 6.335
Net realized and change in unrealized gains (losses) ...... (.128) .002 .355 (.229) (.059)
------- ------- ------- ------- -------
Unit value at end of year ................................. $ 7.610 $ 7.507 $ 7.281 $ 6.674 $ 6.608
======= ======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value ..................... $ .10 $ .23 $ .61 $ .07 $ .27
Ratio of operating expenses to average net assets ......... 1.33% 1.33% 1.33% 1.33% 1.33%
Ratio of net investment income (loss) to average net assets 3.07% 3.03% 3.58% 4.56% 4.99%
Number of units outstanding at end of year (thousands) .... 3,378 3,717 4,207 4,684 5,194
Portfolio turnover rate ................................... 70% 98% 139% 113% 166%
Total M&E and Rider Charges 1.25%, 3.5% AIR FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------------------------
2005 2004 2003 2002 2001
---- ---- ---- ---- ----
SELECTED PER UNIT DATA:
Total investment income ................................... $ .313 $ .304 $ .328 $ .363 $ .402
Operating expenses ........................................ .112 .110 .105 .097 .101
------- ------- ------- ------- -------
Net investment income (loss) .............................. .201 .194 .223 .266 .301
Unit value at beginning of year ........................... 7.113 6.917 6.356 6.309 6.063
Net realized and change in unrealized gains (losses) ...... (.121) .002 .338 (.219) (.055)
------- ------- ------- ------- -------
Unit value at end of year ................................. $ 7.193 $ 7.113 $ 6.917 $ 6.356 $ 6.309
======= ======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value ..................... $ .08 $ .20 $ .56 $ .05 $ .25
Ratio of operating expenses to average net assets ......... 1.57% 1.57% 1.57% 1.57% 1.57%
Ratio of net investment income (loss) to average net assets 2.82% 2.78% 3.33% 4.31% 4.74%
Number of units outstanding at end of year (thousands) .... 8,842 10,296 11,682 12,733 15,116
Portfolio turnover rate ................................... 70% 98% 139% 113% 166%
-27-
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. 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
DECEMBER 31, 2005
-------------------
SELECTED PER UNIT DATA:
Total investment income .................................... $ .034
Operating expenses ......................................... .012
-------------------
Net investment income (loss) ............................... .022
Unit value at beginning of period .......................... 1.003
Net realized and change in unrealized gains (losses) ....... (.005)
-------------------
Unit value at end of year .................................. $ 1.020
===================
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* 2.88%
Number of units outstanding at end of year (thousands) ..... 7
Portfolio turnover rate .................................... 70%
* Annualized
8. SUBSEQUENT EVENT
The Company filed a combined prospectus and proxy statement on Form N-14
with the Securities and Exchange Commission on January 18, 2006, regarding
Account QB. If the proxy vote is favorable, Account QB will be reorganized
and restructured as a sub-account of The Travelers Fund U for Variable
Annuities which will invest in the BlackRock Bond Income Portfolio of the
Metropolitan Series Fund, Inc.
-28-
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
SUMMARY OF HOLDINGS
DECEMBER 31, 2005
% of net
assets
------------
BONDS
Collateralized Mortgage Obligations............................... 9.7
Banking........................................................... 7.5
Finance........................................................... 7.0
Utilities......................................................... 4.3
Real Estate....................................................... 4.2
Brokerage......................................................... 4.0
United States Agency Securities................................... 3.8
Conglomerates..................................................... 3.3
Multimedia........................................................ 2.9
Asset Backed Securities........................................... 2.6
Media Cable....................................................... 2.2
Telecommunications................................................ 1.9
Pharmaceuticals................................................... 1.3
Food.............................................................. 1.2
Beverage.......................................................... 1.2
Supermarkets...................................................... 1.1
Insurance......................................................... 1.1
Independent Energy................................................ 1.1
Tobacco........................................................... 1.0
Electric Utilities................................................ 1.0
Technology........................................................ 0.9
Natural Gas Distribution.......................................... 0.9
Automotive........................................................ 0.9
Defense........................................................... 0.8
Healthcare........................................................ 0.5
Metals............................................................ 0.4
Building Materials................................................ 0.4
Paper............................................................. 0.2
Natural Gas Pipeline.............................................. 0.2
Machinery......................................................... 0.2
---------
TOTAL BONDS....................................................... 67.8
---------
UNITED STATES GOVERNMENT SECURITIES
United States Government Securities............................... 25.8
---------
SHORT TERM INVESTMENTS
Commercial Paper.................................................. 4.8
---------
TOTAL INVESTMENTS................................................... 98.4
---------
Other Assets and liabilities...................................... 1.6
---------
TOTAL NET ASSETS.................................................... 100.0
=========
-29-
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS
DECEMBER 31, 2005
PRINCIPAL FAIR
AMOUNT VALUE
---------- ------------
BONDS (67.8%)
ASSET BACKED SECURITIES (2.6%)
CA Infrastructure, 6.42% Debentures, 2008................................................. $ 228,892 $ 230,767
Chase Funding Mortgage Loan Asset Backed Security Certificate, 5.83% Debentures, 2032..... 500,000 504,022
Chase Issuance Trust, 4.23% Debentures, 2013.............................................. 500,000 488,694
Discover Card Mt, 6.05% Debentures, 2008.................................................. 1,100,000 1,102,579
------------
2,326,062
------------
AUTOMOTIVE (0.9%)
Daimler Chrysler NA Holdings, 7.30% Debentures, 2012...................................... 700,000 756,228
Ford Motor Co., 7.45% Debentures, 2031.................................................... 100,000 68,500
------------
824,728
------------
BANKING (7.5%)
ABN AMRO Holdings ADS, 4.39% Debentures, 2007............................................. 920,000 920,928
Bank of America Corp., 5.38% Debentures, 2007............................................. 600,000 610,934
Capital One Bank, 5.00% Debentures, 2009.................................................. 620,000 617,834
Capital One Bank, 5.50% Debentures, 2015.................................................. 200,000 199,191
HSBC Bank USA, 5.88% Debentures, 2034..................................................... 400,000 404,982
Huntington National Bank, 4.65% Debentures, 2009.......................................... 400,000 397,646
JP Morgan Chase & Co., 5.25% Debentures, 2015............................................. 200,000 199,280
Royal Bank of Scotland Capital Trust, 4.71% Debentures, Perpetual......................... 300,000 285,573
Royal Bank of Scotland PLC, 5.05% Debentures, 2015........................................ 400,000 397,821
U.S. Bancorp NA MN, 2.87% Debentures, 2007................................................ 1,000,000 978,723
U.S. Bancorp NA MN, 4.95% Debentures, 2014................................................ 200,000 198,248
Wachovia Corp. NA, 4.64% Debentures, 2014................................................. 700,000 707,433
Wachovia Corp. NA, 4.80% Debentures, 2014................................................. 300,000 291,677
Washington Mutual Bank, 5.13% Debentures, 2015............................................ 500,000 489,395
------------
6,699,665
------------
BEVERAGE (1.2%)
Pepsi Bottling Group, 4.63% Debentures, 2012.............................................. 400,000 394,949
PepsiAmericas, Inc., 4.88% Debentures, 2015............................................... 700,000 691,359
------------
1,086,308
------------
BROKERAGE (4.0%)
Goldman Sachs Group Inc., 5.25% Debentures, 2013.......................................... 1,100,000 1,101,474
Lehman Brothers Holdings Inc., 4.80% Debentures, 2014..................................... 700,000 684,617
Merrill Lynch & Co. Inc., 4.13% Debentures, 2009.......................................... 400,000 388,444
Merrill Lynch & Co. Inc., 4.25% Debentures, 2010.......................................... 400,000 389,450
Merrill Lynch & Co. Inc., 5.00% Debentures, 2015.......................................... 400,000 394,700
Morgan Stanley, 5.05% Debentures, 2011.................................................... 600,000 600,840
------------
3,559,525
------------
BUILDING MATERIALS (0.4%)
D.R. Horton, 5.25% Debentures, 2015....................................................... 400,000 376,456
------------
-30-
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS - CONTINUED
DECEMBER 31, 2005
PRINCIPAL FAIR
AMOUNT VALUE
---------- ------------
COLLATERALIZED MORTGAGE OBLIGATIONS (9.7%)
Bank of America Commercial Mortgage Inc. , 4.87% Debentures, 2042.......................... $1,400,000 $ 1,359,264
Commercial Martgage Pass, 5.17% Debentures, 2044........................................... 750,000 748,403
Credit Suisse First Boston Commercial Mortgage Corp., 4.89% Debentures, 2037............... 220,000 213,671
Credit Suisse First Boston Corp., 3.88% Debentures, 2009................................... 500,000 485,717
Credit Suisse First Boston Corp., 6.13% Debentures, 2011................................... 300,000 315,310
JP Morgan Chase & Co. Commercial Mortgage, 4.78% Debentures, 2042.......................... 3,000,000 2,906,481
JP Morgan Chase & Co. Commercial Mortgage, 4.92% Debentures, 2042.......................... 1,600,000 1,557,710
JP Morgan Chase & Co. Commercial Mortgage, 5.00% Debentures, 2042.......................... 500,000 492,176
JP Morgan Chase & Co. Commercial Mortgage, 5.00% Debentures, 2042.......................... 580,000 569,222
------------
8,647,954
------------
CONGLOMERATES (3.3%)
Berskshire Hathaway, Inc., 4.40% Debentures, 2008.......................................... 200,000 200,152
Berskshire Hathaway, Inc., 4.75% Debentures, 2012.......................................... 400,000 395,953
General Electric Co., 5.00% Debentures, 2013............................................... 1,300,000 1,301,242
Tyco International Ltd., 6.13% Debentures, 2008............................................ 1,000,000 1,021,431
------------
2,918,778
------------
DEFENSE (0.8%)
Northrop Grumman Corp., 4.08% Debentures, 2006............................................. 600,000 595,490
Northrop Grumman Corp., 7.13% Debentures, 2011............................................. 100,000 109,087
------------
704,577
------------
ELECTRIC UTILITIES (1.0%)
Dominion Resources Inc., 5.25% Debentures, 2033............................................ 400,000 392,879
PSEG Energy Holdings, 8.63% Debentures, 2008............................................... 450,000 470,250
------------
863,129
------------
FINANCE (7.0%)
AIG SunAmerica Global Financials, 5.85% Debentures, 2008 (A)............................... 500,000 510,819
American General Financial Corp., 3.88% Debentures, 2009................................... 900,000 862,738
Caterpillar Financial Services Corp., 4.70% Debentures, 2012............................... 800,000 793,266
Countrywide Financial Corp., 4.50% Debentures, 2010........................................ 400,000 388,658
Countrywide Home Loan, 4.00% Debentures, 2011.............................................. 710,000 668,838
Ford Motor Credit Co., 5.70% Debentures, 2010.............................................. 100,000 85,079
Ford Motor Credit Co., 6.88% Debentures, 2006.............................................. 1,000,000 997,869
Glencore Funding LLC, 6.00% Debentures, 2014 (A)........................................... 300,000 282,612
Household Financial Corp., 6.38% Debentures, 2011.......................................... 1,400,000 1,481,696
Rabobank Capital Fund Trust III, 5.25% Debentures, Perpetual (A)........................... 200,000 196,504
------------
6,268,079
------------
FOOD (1.2%)
Fred Meyer Inc., 7.45% Debentures, 2008.................................................... 1,000,000 1,042,498
------------
HEALTHCARE (0.5%)
Wellpoint, Inc., 6.80% Debentures, 2012.................................................... 400,000 436,985
------------
INDEPENDENT ENERGY (1.1%)
Anadarko Financial Co., 6.75% Debentures, 2011............................................. 400,000 433,259
Devon Energy Corp., 6.88% Debentures, 2011................................................. 500,000 547,570
------------
980,829
------------
INSURANCE (1.1%)
GE Global Insurnace, 7.00% Debentures, 2026................................................ 100,000 112,733
Massmutual Global Funding, 2.55% Debentures, 2008 (A)...................................... 900,000 850,259
------------
962,992
------------
-31-
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS - CONTINUED
DECEMBER 31, 2005
PRINCIPAL FAIR
AMOUNT VALUE
---------- ------------
MACHINERY (0.2%)
Cooper Cameron Corp. , 2.65% Debentures, 2007.............................................. $ 200,000 $ 193,432
------------
MEDIA CABLE (2.2%)
Comcast Cable Communications, 8.50% Debentures, 2027....................................... 500,000 615,037
Cox Communications Inc., 7.13% Debentures, 2012............................................ 800,000 858,331
Liberty Media Corp., 5.99% Debentures, 2006................................................ 484,000 487,417
------------
1,960,785
------------
METALS (0.4%)
Phelps Dodge Corp., 8.75% Debentures, 2011................................................. 300,000 345,325
------------
MULTIMEDIA (2.9%)
Clear Channel Communications Inc., 4.40% Debentures, 2011.................................. 200,000 186,265
Time Warner Inc., 6.15% Debentures, 2007................................................... 2,400,000 2,430,547
------------
2,616,812
------------
NATURAL GAS DISTRIBUTION (0.9%)
Duke Capital LLC, 4.33% Debentures, 2006................................................... 400,000 397,298
Southern California Gas Co., 4.38% Debentures, 2011........................................ 400,000 389,659
------------
786,957
------------
NATURAL GAS PIPELINE (0.2%)
Consolidated Natural Gas Co., 5.00% Debentures, 2014....................................... 200,000 194,379
------------
PAPER (0.2%)
International Paper, 5.30% Debentures, 2015................................................ 200,000 192,975
------------
PHARMACEUTICALS (1.3%)
Wyeth, 5.50% Debentures, 2014.............................................................. 1,200,000 1,217,510
------------
REAL ESTATE (4.2%)
Health Retirement Properties, 6.25% Debentures, 2016....................................... 300,000 306,301
iStar Financial, 6.00% Debentures, 2010.................................................... 440,000 447,264
Kimco Reality, 4.45% Debentures, 2006...................................................... 100,000 100,106
Nationwide Health Properties Inc., 6.90% Debentures, 2037.................................. 2,100,000 2,248,487
Simon Property Group, Inc., 4.60% Debentures, 2010......................................... 200,000 195,164
Simon Property Group, Inc., 5.10% Debentures, 2015......................................... 200,000 193,788
Avalonbay Communties, Inc., 4.95% Debentures, 2013......................................... 100,000 98,028
Colonial Realty LP, 4.75% Debentures, 2010................................................. 200,000 194,989
------------
3,784,127
------------
SUPERMARKETS (1.1%)
Delhaize America, Inc., 9.00% Debentures, 2031............................................. 200,000 236,124
Safeway Inc., 6.50% Debentures, 2011....................................................... 700,000 725,645
------------
961,769
------------
TECHNOLOGY (0.9%)
Computer Associates International, 5.00% Debentures, 2009 (A).............................. 800,000 780,778
------------
TELECOMMUNICATIONS (1.9%)
AT&T Inc., 6.45% Debentures, 2034.......................................................... 400,000 417,611
Deutsche Telecomm International Financial, 8.25% Debentures, 2030.......................... 200,000 255,133
Sprint Capital Corp., 6.13% Debentures, 2008............................................... 720,000 740,867
Telecom Italia S.p.A., 4.00% Debentures, 2010.............................................. 300,000 285,995
------------
1,699,606
------------
-32-
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS - CONTINUED
DECEMBER 31, 2005
PRINCIPAL FAIR
AMOUNT VALUE
---------- ------------
TOBACCO (1.0%)
Altria Group, 5.63% Debentures, 2008....................................................... $ 900,000 $ 912,921
------------
UNITED STATES AGENCY SECURITIES (3.8%)
Fannie Mae, 1.75% Debentures, 2006......................................................... 1,300,000 1,283,658
Fannie Mae, 4.00% Debentures, 2007......................................................... 1,400,000 1,388,814
Freddie Mac, 2.90% Debentures, 2019........................................................ 700,000 697,910
------------
3,370,382
------------
UTILITIES (4.3%)
Kinder Morgan , 5.13% Debentures, 2014..................................................... 200,000 195,947
Pepco Holdings, 5.50% Debentures, 2007..................................................... 1,600,000 1,610,298
SP Powerassets Ltd., 5.00% Debentures, 2013 (A)............................................ 900,000 900,739
Xcel Energy Inc., 3.40% Debentures, 2008................................................... 1,200,000 1,157,155
------------
3,864,139
------------
TOTAL BONDS
(COST $61,069,487)......................................................................... 60,580,462
------------
UNITED STATES GOVERNMENT SECURITIES (25.8%)
United States of America Treasury, 2.75% Debentures, 2007.................................. 2,400,000 2,338,690
United States of America Treasury, 2.88% Debentures, 2006.................................. 3,000,000 2,959,338
United States of America Treasury, 3.88% Debentures, 2010.................................. 100,000 98,137
United States of America Treasury, 4.00% Debentures, 2007.................................. 8,000,000 7,949,376
United States of America Treasury, 4.13% Debentures, 2008.................................. 7,500,000 7,461,038
United States of America Treasury, 4.25% Debentures, 2015.................................. 300,000 296,215
United States of America Treasury, 4.50% Debentures, 2015.................................. 1,800,000 1,815,329
United States of America Treasury, 5.25% Debentures, 2029.................................. 100,000 109,152
------------
TOTAL UNITED STATES GOVERNMENT SECURITIES
(COST $23,224,407)......................................................................... 23,027,275
------------
SHORT TERM INVESTMENTS (4.8%)
COMMERCIAL PAPER (4.8%)
Amsterdam Funding Corp.
4.43% due January 10, 2006............................................................... 3,000,000 2,997,411
Chesham FNC
4.31% due January 3, 2006................................................................ 1,271,000 1,271,000
------------
TOTAL SHORT-TERM INVESTMENTS
(COST $4,266,916) ......................................................................... 4,268,411
------------
TOTAL INVESTMENTS (98.4%)
(COST $88,560,810) (B)..................................................................... 87,876,148
------------
Other Assets and liabilities (1.6%) ....................................................... 1,433,690
------------
TOTAL NET ASSETS (100.0%) ................................................................. $ 89,309,838
============
-33-
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS - CONTINUED
DECEMBER 31, 2005
NOTES
(A) Security is not registered under the Securities Act of 1933. These
securities may be resold in transactions in accordance with Rule 144A
under that Act, to qualified institutional buyers. As of December 31,
2005, The Travelers Quality Bond Account for Variable Annuities held 3.9of
its net assets, with a current market value of $3,521,711, in securities
restricted as to resale.
(B) At December 31, 2005 net unrealized depreciation for all securities was
$684,662. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of fair value over cost of
$638,766 and aggregate gross unrealized depreciation for all securities in
which there was an excess of cost over fair value of $1,323,428.
-34-
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Managers and the Owners of Variable Contracts of
The Travelers Money Market Account for Variable Annuities
We have audited the accompanying statement of assets and liabilities of The
Travelers Money Market Account for Variable Annuities (the "Fund"), including
the statement of investments, as of December 31, 2005, and the related statement
of operations and the statement of changes in net assets for the year then
ended. These financial statements are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and based on our audit.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Fund is not required to have,
nor were we engaged to perform, an audit of its internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. Our procedures included confirmation of securities owned as of
December 31, 2005, by correspondence with the custodian. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Travelers Money Market
Account for Variable Annuities as of December 31, 2005, and the results of its
operations and the changes in its net assets for the year then ended, in
conformity with accounting principles generally accepted in the United States of
America.
/s/ DELOITTE & TOUCHE LLP
Tampa, Florida
February 21, 2006
-35-
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Managers and the Owners of Variable Annuity Contracts of
The Travelers Money Market Account for Variable Annuities:
We have audited the statement of changes in net assets of The Travelers Money
Market Account for Variable Annuities as of December 31, 2004, and the selected
per unit data and ratios for each of the years in the four-year period then
ended. The statement of changes in net assets and selected per unit data and
ratios are the responsibility of the Company's management. Our responsibility is
to express an opinion on the statement of changes in net assets and selected per
unit data and ratios based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and selected per unit data and ratios are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements and selected per unit
data and ratios. Our procedures included confirmation of securities owned as of
December 31, 2004, by correspondence with custodians and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the statement of changes in net assets and selected per unit
data and ratios referred to above of The Travelers Money Market Account for
Variable Annuities as of December 31, 2004 present fairly, in all material
respects, the changes in its net assets for the year then ended, and the
selected per unit data and ratios for each of the years in the four-year period
then ended, in conformity with U.S. generally accepted accounting principles.
/s/ KPMG LLP
Hartford, Connecticut
February 17, 2005
-36-
THE TRAVELERS MONEY MARKET ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2005
ASSETS:
Investment securities, at fair value (cost $62,899,267) ...... $ 62,920,420
Interest ................................................... 10,811
Purchase payments and transfers from other funding options . 85,442
Other assets ................................................. 538
------------
Total Assets ............................................. 63,017,211
------------
LIABILITIES:
Cash overdraft ............................................... 10,081
Payables:
Contract surrenders and transfers to other funding options . 200,567
Investment management and advisory fees .................... 4,457
Insurance charges .......................................... 17,230
Accrued liabilities .......................................... 81
------------
Total Liabilities ........................................ 232,416
------------
NET ASSETS: $ 62,784,795
============
See Notes to Financial Statements
-37-
THE TRAVELERS MONEY MARKET ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2005
INVESTMENT INCOME:
Interest ........................................................ $ 2,153,924
EXPENSES:
Investment management and advisory fees ........................... $ 212,576
Insurance charges ................................................. 821,744
------------
Total expenses .................................................. 1,034,320
------------
Net investment income (loss) .................................. 1,119,604
------------
Net increase (decrease) in net assets resulting from operations . $ 1,119,604
============
See Notes to Financial Statements
-38-
THE TRAVELERS MONEY MARKET ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
2005 2004
---- ----
OPERATIONS:
Net investment income (loss) ........................................... $ 1,119,604 $ (160,977)
------------- -------------
Net increase (decrease) in net assets resulting from operations ...... 1,119,604 (160,977)
------------- -------------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 2,798,716 and 2,876,976 units, respectively) .......... 7,482,539 7,848,289
Participant transfers from other funding options
(applicable to 10,197,608 and 15,177,654 units, respectively) ........ 27,975,725 41,410,773
Administrative charges
(applicable to 32,130 and 36,552 units, respectively) ................ (87,375) (99,678)
Contract surrenders
(applicable to 5,454,662 and 7,406,612 units, respectively) .......... (14,979,137) (20,205,133)
Participant transfers to other funding options
(applicable to 9,209,129 and 18,609,573 units, respectively) ......... (25,274,908) (50,776,513)
Other payments to participants
(applicable to 119,424 and 89,026 units, respectively) ............... (328,813) (244,258)
------------- -------------
Net increase (decrease) in net assets resulting from unit transactions . (5,211,969) (22,066,520)
------------- -------------
Net increase (decrease) in net assets ................................ (4,092,365) (22,227,497)
NET ASSETS:
Beginning of year ...................................................... 66,877,160 89,104,657
------------- -------------
End of year ............................................................ $ 62,784,795 $ 66,877,160
============= =============
See Notes to Financial Statements
-39-
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS
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
Travelers Insurance Company, The Travelers Life and Annuity Company,
certain other domestic insurance companies of Citigroup and substantially
all of Citigroup's international insurance businesses.
Based upon the recommendation of the Audit Committee for The Travelers
Money Market Account for Variable Annuities ("Account MM"), the Board of
Managers determined not to retain KPMG LLP ("KPMG") as Account MM's
independent auditor, and voted to appoint Deloitte & Touche LLP as Account
MM's independent auditor for the fiscal year ended December 31, 2005,
effective July 1, 2005. During the two most recent fiscal years and
through June 30, 2005, the date that the Board of Managers notified KPMG
of their decision not to retain them as Account MM's auditor, KPMG's audit
reports contained no adverse opinion or disclaimer of opinion: nor were
their reports qualified as to uncertainty, audit scope or accounting
principles. Further, there were no disagreements between Account MM and
KPMG on the accounting principles, financial statements disclosure or
audit scope, which, if not resolved to the satisfaction of KPMG, would
have caused them to make reference to the disagreement in their reports.
Account MM is a separate account of The Travelers Insurance Company ("The
Company"), a wholly owned subsidiary of MetLife, and is available for
funding Universal Annuity, Universal Select Annuity, and Universal Annuity
Advantage contracts issued by The Company. Account MM, established on
December 29, 1981, is registered under the Investment Company Act of 1940,
as amended, as a diversified, open-end management investment company.
The Travelers Asset Management International Company, LLC ("TAMIC"), an
indirect wholly owned subsidiary of The Company, provides fixed income
management and advisory services for Account MM.
This report is prepared for the general information of contract owners and
is not an offer of units of Account MM or shares of Account MM's
underlying holdings. It should not be used in connection with any offer
except in conjunction with the Prospectus for Account MM's product(s)
offered by The Company.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by Account MM in the preparation of its financial statements.
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 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.
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 December 31,
2005.
-40-
NOTES TO FINANCIAL STATEMENTS - CONTINUED
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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.
3. 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
TAMIC, an indirect wholly owned subsidiary of MetLife Inc. Pursuant to a
sub-advisory agreement between TAMIC and Salomon Brothers Asset Management
Inc. ("SaBAM"), TAMIC pays SaBAM a sub-advisory fee calculated daily at
annual rates which start at 0.15% and decrease, as net assets increase, to
0.075% of Account MM'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.
- -----------------------------------------------------------------------------------------------------------------------------
TRAVELERS MONEY MARKET ACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------
Asset-based Charges
---------------------------------
Optional Feature
Total M&E and Rider Charges Dth ---------------- Total
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
-41-
NOTES TO FINANCIAL STATEMENTS - CONTINUED
3. CONTRACT CHARGES (CONTINUED)
For certain contracts in the accumulation phase, a semi-annual charge of
$15 (prorated for partial years) is deducted from participant account
balances and paid to The Company to cover administrative charges.
The Company assesses a 5% contingent deferred sales charge if a
participant's purchase payment is surrendered within five years of its
payment date.
4. NET ASSETS HELD ON BEHALF OF AN AFFILIATE
Approximately $392,000 and $1,060,000 of the net assets of Account MM were
held on behalf of an affiliate of The Company as of December 31, 2005 and
2004, respectively. Transactions with this affiliate during the years
ended December 31, 2005 and 2004, were comprised of participant purchase
payments of approximately $69,000 and $515,000 and contract surrenders of
approximately $745,000 and $638,000, respectively.
5. NET CONTRACT OWNERS' EQUITY
DECEMBER 31, 2005
-----------------------------------------
UNIT
UNITS VALUE NET ASSETS
---------- -------- ------------
Total M&E and Rider Charges 1.00%, 3.5% AIR ............... 20,033 $ 2.936 $ 58,818
Total M&E and Rider Charges 1.25%, 3.5% AIR ............... 22,559,275 2.776 62,611,094
Total M&E and Rider Charges 1.40%, 3.5% AIR ............... 8,738 1.017 8,883
Total M&E and Rider Charges 1.25%, 3.0% AIR ............... 103,128 1.019 105,036
Total M&E and Rider Charges 1.40%, 3.0% AIR ............... 948 1.017 964
------------
Net Contract Owners' Equity ............................... $ 62,784,795
============
Assumed Interest Rate (AIR) is only applicable to contracts in the payout
phase.
-42-
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SUPPLEMENTARY INFORMATION
(Selected data for a unit outstanding throughout each year.)
Total M&E and Rider Charges 1.00%, 3.5% AIR FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------------------------
2005 2004 2003 2002 2001
---- ---- ---- ---- ----
SELECTED PER UNIT DATA:
Total investment income ................................... $ .095 $ .040 $ .033 $ .051 $ .120
Operating expenses ........................................ .038 .038 .038 .038 .037
------- ------- ------- ------- -------
Net investment income (loss) .............................. .057 .002 (.005) .013 .083
Unit value at beginning of year ........................... 2.879 2.877 2.882 2.869 2.786
------- ------- ------- ------- -------
Unit value at end of year ................................. $ 2.936 $ 2.879 $ 2.877 $ 2.882 $ 2.869
======= ======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value ..................... $ .06 $ .00 $ (.01) $ .01 $ .08
Ratio of operating expenses to average net assets ......... 1.33% 1.33% 1.33% 1.33% 1.33%
Ratio of net investment income (loss) to average net assets 1.93% 0.07% (0.16)% 0.46% 2.89%
Number of units outstanding at end of year (thousands) .... 20 26 39 49 60
Total M&E and Rider Charges 1.25%, 3.5% AIR FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------------------------
2005 2004 2003 2002 2001
---- ---- ---- ---- ----
SELECTED PER UNIT DATA:
Total investment income ................................... $ .090 $ .038 $ .032 $ .048 $ .114
Operating expenses ........................................ .042 .043 .043 .043 .042
------- ------- ------- ------- -------
Net investment income (loss) .............................. .048 (.005) (.011) .005 .072
Unit value at beginning of year ........................... 2.728 2.733 2.744 2.739 2.667
------- ------- ------- ------- -------
Unit value at end of year ................................. $ 2.776 $ 2.728 $ 2.733 $ 2.744 $ 2.739
======= ======= ======= ======= =======
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value ..................... $ .05 $ (.01) $ (.01) $ .01 $ .07
Ratio of operating expenses to average net assets ......... 1.57% 1.57% 1.57% 1.57% 1.57%
Ratio of net investment income (loss) to average net assets 1.68% (0.18)% (0.41)% 0.21% 2.64%
Number of units outstanding at end of year (thousands) .... 22,559 24,485 32,559 50,702 63,430
-43-
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SUPPLEMENTARY INFORMATION (CONTINUED)
(Selected data for a unit outstanding throughout each period.)
FROM OCTOBER 24, 2005
Total M&E and Rider Charges 1.40%, 3.5% AIR (INCEPTION DATE) TO
DECEMBER 31, 2005
---------------------
SELECTED PER UNIT DATA:
Total investment income .................................... $ .008
Operating expenses ......................................... .003
-------------------
Net investment income (loss) ............................... .005
Unit value at beginning of period .......................... 1.012
-------------------
Unit value at end of year .................................. $ 1.017
===================
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value ...................... $ .01
Ratio of operating expenses to average net assets* ......... 1.72%
Ratio of net investment income (loss) to average net assets* 2.41%
Number of units outstanding at end of year (thousands) ..... 9
FROM DECEMBER 28, 2004
FOR THE YEAR ENDED (INCEPTION DATE) TO
Total M&E and Rider Charges 1.25%, 3.0% AIR DECEMBER 31, DECEMBER 31, 2004
------------------ ----------------------
2005
SELECTED PER UNIT DATA:
Total investment income .................................... $ .033 $ --
Operating expenses ......................................... .015 --
------------- -------------
Net investment income (loss) ............................... .018 --
Unit value at beginning of period .......................... 1.001 1.001
Unit value at end of year .................................. $ 1.019 $ 1.001
============= =============
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value ...................... $ .02 $ --
Ratio of operating expenses to average net assets .......... 1.57% 1.57% *
Ratio of net investment income (loss) to average net assets* 1.68% 0.74% *
Number of units outstanding at end of year (thousands) ..... 103 -- **
* Annualized
** Unit Balance rounds to less than 1,000 Units
-44-
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SUPPLEMENTARY INFORMATION (CONTINUED)
(Selected data for a unit outstanding throughout each period.)
FROM DECEMBER 20, 2005
Total M&E and Rider Charges 1.40%, 3.0% AIR (INCEPTION DATE) TO
DECEMBER 31, 2005
----------------------
SELECTED PER UNIT DATA:
Total investment income .................................... $ .002
Operating expenses ......................................... --
-------------------
Net investment income (loss) ............................... .002
Unit value at beginning of period .......................... 1.015
-------------------
Unit value at end of year .................................. $ 1.017
===================
SIGNIFICANT RATIOS AND ADDITIONAL DATA:
Net increase (decrease) in unit value ...................... $ .00
Ratio of operating expenses to average net assets* ......... 1.72%
Ratio of net investment income (loss) to average net assets* 2.62%
Number of units outstanding at end of year (thousands) ..... 1
* Annualized
7. SUBSEQUENT EVENT
The Company filed a combined prospectus and proxy statement on Form N-14
with the Securities and Exchange Commission on January 18, 2006, regarding
Account MM. If the proxy vote is favorable, Account MM will be reorganized
and restructured as a sub-account of The Travelers Fund U for Variable
Annuities which will invest in the BlackRock Money Market Portfolio of the
Metropolitan Series Fund, Inc.
-45-
THE TRAVELERS MONEY MARKET ACCOUNT
FOR VARIABLE ANNUITIES
SUMMARY OF HOLDINGS
DECEMBER 31, 2005
% OF NET
ASSETS
---------------
SHORT-TERM INVESTMENTS
Commercial Paper............................................. 100.2
---------------
TOTAL SHORT-TERM INVESTMENTS................................... 100.2
---------------
TOTAL INVESTMENTS.............................................. 100.2
---------------
---------------
Other Assets and Liabilities................................. (0.2)
---------------
TOTAL NET ASSETS............................................... 100.0
===============
-46-
THE TRAVELERS MONEY MARKET ACCOUNT
FOR VARIABLE ANNUITIES
STATEMENT OF INVESTMENTS
DECEMBER 31, 2005
PRINCIPAL FAIR
AMOUNT VALUE
------------ ------------
SHORT-TERM INVESTMENTS (100.2%)
COMMERCIAL PAPER (100.2%)
Abbey National North America, 4.33% Due January 4, 2006....................... $ 3,000,000 $ 2,999,637
American Express Credit Corp., 4.34% Due January 25, 2006..................... 3,000,000 2,992,098
Atlass Commercial Paper, 4.40% Due January 31, 2006........................... 2,365,000 2,356,961
BDX Commercial Paper, 4.33% Due January 23, 2006.............................. 2,000,000 1,995,208
DRS Financial, 4.37% Due January 9, 2006...................................... 3,000,000 2,997,825
Gannett Co Inc, 4.33% Due January 18, 2006.................................... 3,000,000 2,994,600
General Electric Capital , 4.32% Due January 13, 2006......................... 3,000,000 2,996,409
Goldman Sachs Group, Inc., 4.34% Due January 9, 2006.......................... 3,000,000 2,997,825
Govcir, 4.35% Due January 18, 2006............................................ 3,000,000 2,994,600
Hannover Funding Co LLC, 4.42% Due January 30, 2006........................... 3,000,000 2,990,124
HSBC Finance Corperation, 4.44% Due February 2, 2006.......................... 3,000,000 2,989,224
KFWPP, 4.33% Due January 26, 2006............................................. 3,000,000 2,991,798
Kochi Commercial Paper, 4.34% Due January 27, 2006............................ 3,000,000 2,991,381
Oldline Commercial Paper, 4.35% Due January 17, 2006.......................... 3,000,000 2,994,876
Ormllc, 4.40% Due January 19, 2006............................................ 3,000,000 2,994,153
PHPP Commercial Paper, 4.34% Due January 10, 2006............................. 2,928,000 2,925,523
Rabobank USA Financial Corp., 4.34% Due January 5, 2006....................... 3,000,000 2,999,280
Societe Generale , 4.34% Due January 10, 2006................................. 3,000,000 2,997,480
TDH USA, 4.35% Due January 23, 2006........................................... 3,000,000 2,992,863
Ticonderoga Funding, 4.37% Due January 6, 2006................................ 3,000,000 2,998,899
Toyota Motor Credit Corp., 4.37% Due February 1, 2006......................... 3,000,000 2,989,656
UBS AG, 4.25% Due January 3, 2006............................................. 1,740,000 1,740,000
------------
TOTAL INVESTMENTS (100.2%)
(COST $62,899,267)............................................................ 62,920,420
------------
Other Assets and Liabilities (-0.2%).......................................... (135,625)
------------
TOTAL NET ASSETS (100.0%)....................................................... $ 62,784,795
============
-47-
FACTORS CONSIDERED BY THE BOARDS OF MANAGERS IN APPROVING THE INVESTMENT
ADVISORY AND THE SUB-ADVISORY AGREEMENTS
At an in person meeting on July 20, 2005, the Boards of Managers, including the
Non-Interested Managers (together, the "Board") of The Travelers Growth and
Income Stock Account for Variable Annuities ("GIS"), The Travelers Quality Bond
Account for Variable Annuities ("QB"), and The Travelers Money Market Account
for Variable Annuities ("MM" and, collectively, the "Accounts") approved the
investment advisory agreements (the "Agreements") between Travelers Asset
Management International Company LLC ("TAMIC") and each Account. In addition,
the Board, at the in person meeting on July 20, 2005, approved the investment
sub-advisory agreements ("Sub-advisory Agreements") between TAMIC and TIMCO
Asset Management Inc. ("TIMCO") for GIS and between TAMIC and Salomon Brothers
Asset Management Inc. ("SaBAM") for QB and MM. In voting to approve the
Agreements and the Sub-advisory Agreements, the Board considered whether the
approval of the Agreements and the Sub-advisory Agreements would be in the best
interests of the Accounts and those contract owners who have amounts invested in
the Accounts (the "contract owners"), an evaluation largely based on the nature
and quality of the services provided under the Agreements and the Sub-advisory
Agreements and the overall fairness of the Agreement and the Sub-advisory
Agreements to the contract owners.
As part of the process, legal counsel to the Accounts requested certain
information from TAMIC and from TIMCO and SaBAM (the "sub-advisors"), and in
response such parties provided certain written and oral information to the Board
in its consideration of the Agreements and Sub-advisory Agreements. The Board
did not identify any one factor, piece of information or written document as all
important or controlling, and each Board Member attributed different weight to
different factors. Prior to voting, the Board reviewed the proposed continuance
of the Agreements and the Sub-advisory 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 Sub-advisory Agreements. The
Non-Interested Managers also reviewed the proposed continuation of the
Agreements and the Sub-advisory 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 Board concluded that the Agreements and the Sub-advisory
Agreements were reasonable and fair and in the best interest of the Accounts and
the contract owners.
Specifically, the Board considered, among other factors: (a) the nature, extent
and quality of the services to be provided by TAMIC and the sub-advisors under
the Agreements and the Sub-advisory Agreements; (b) the investment performance
of the Accounts; (c) the cost of services to be provided and the profit realized
by TAMIC and its affiliates; (d) the extent to which TAMIC and the sub-advisors
realize 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.
CONSIDERATIONS RELEVANT TO ALL ACCOUNTS
With respect to the nature, scope and quality of the services to be provided by
TAMIC, the Board considered, and expressed its satisfaction with, the level and
depth of knowledge of TAMIC, including the professional experience and
qualifications of its personnel as well as current staffing levels and overall
resources. The Board also noted that TAMIC had been acquired by MetLife, Inc.
("MetLife"), effective on July 1, 2005, and took into account the information
that the Board had received at earlier meetings in connection with its
consideration of this change in control of TAMIC. The Board also noted the
responsibilities that TAMIC has to the Accounts, including oversight of the
sub-advisors' compliance with Account policies and objectives, oversight of
general Account compliance with federal and state laws, and the implementation
of Board directives as they relate to the Accounts. Based on its consideration
and review of the foregoing information, the Board determined that the Accounts
were likely to benefit from the nature and quality of these services, as well as
TAMIC's ability to render such services based on its experience, operations and
resources.
With respect to the nature, scope and quality of the services to be provided by
the sub-advisors, the Board considered the level and depth of knowledge of each
sub-advisor, including the professional experience and qualifications of their
personnel as well as current staffing levels and overall resources. The Board
also considered each sub-advisor's management style and performance record; the
sub-advisor's financial condition; the sub-advisor's compliance systems and any
disciplinary history. Based on its consideration and review of the foregoing
information, the Board determined that the Accounts were likely to benefit from
the nature and quality of these services, as well as the sub-advisors' ability
to render such services based on their experience, operations and resources.
-48-
CONSIDERATIONS RELEVANT TO ALL ACCOUNTS (CONTINUED)
The Board also examined the fees paid by each Account in light of fees paid to
other investment managers by comparable funds and the method of computing each
Account's advisory and sub-advisory fee. The Board also noted the Mortality and
Expense Risk ("M&E") charges paid by each Account to The Travelers Insurance
Company ("TIC"), an affiliate of TAMIC, and TIC's agreement to provide or
arrange for the provision of all administrative services for each Account out of
such M&E charges. The Board noted that, as a result, the Accounts normally do
not pay any expenses other than advisory fees and M&E charges. Further, the
Board noted that TAMIC's revenues, and its resulting profitability, from each
Account is the difference between the amount TAMIC receives from the Account and
what it pays to the sub-advisor for that Account and to cover other Account
expenses. After comparing the fees with those of comparable funds as described
below and in light of the quality and extent of services to be provided, the
costs to be incurred by TAMIC and the sub-advisors, and the other factors
considered, the Board concluded that the level of the fees paid to TAMIC and to
each sub-advisor with respect to each Account was fair and reasonable.
The Board reviewed the Accounts' performance records and TAMIC's and the
sub-advisors' management styles and the long-term performance records of the
Accounts. The Board noted that it reviews on a quarterly basis information about
the Accounts' performance results and investment strategies. The Board also
reviewed various comparative performance data provided to it in connection with
its consideration of the renewal of the Agreements and Sub-advisory Agreements,
including, among other information, a comparison of each Account's total return
with its respective Lipper index.
In terms of the profits realized by TAMIC from its relationship with the
Accounts, the Board noted that it was satisfied that TAMIC's profits had not
been excessive in the past, and that it was not possible to predict how the
recent acquisition of TAMIC by MetLife would affect its future profitability.
Because the fees paid to the sub-advisors are paid by TAMIC and not directly by
the Accounts, the Board determined that the profitability of the sub-advisors
was not material to the consideration of the Sub-advisory Agreements. For
similar reasons, while the Board did consider whether sub-advisory fee
breakpoints were in place for each Account, the Board did not consider the
potential economies of scale in the sub-advisors' management of the Accounts to
be a substantial factor in its considerations.
The Board also considered the effect of the Accounts' size and growth on their
performance and fees. The Board considered the effective fees under the
Agreement for each Account as a percentage of assets at different asset levels
and possible economies of scale that may be realized if the assets of the
Account grow. Specifically, the Board noted that if the Accounts' assets
increase over time, the Accounts may realize economies of scale if assets
increase proportionally more than certain expenses. The Board also considered
the fact that TAMIC pays sub-advisory fees out of the advisory fees it receives
from the Accounts. Finally, the Board noted the uncommon structure of the
Accounts as directly-managed separate accounts, as compared to separate accounts
organized as unit investment trusts ("UITs") that invest all of their assets in
shares of underlying mutual fund portfolios, and requested that management of
TIC and TAMIC consider whether conversion to the more common UIT/underlying fund
structure would be appropriate.
The Board considered, among other data, the specific factors and related
conclusions set forth below with respect to each Account.
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES
The Board noted that the Account's performance has been good compared to similar
funds, and that the Account's advisory and sub-advisory fees appeared to be
extremely competitive compared to similar funds. In addition, the Board noted
that the advisory and sub-advisory fees included breakpoints reducing such fees
at higher asset levels that appeared to be appropriate in light of the economies
of scale that would be involved in managing the Account at various asset levels.
The Board requested, however, that TAMIC monitor whether personnel changes at
TIMCO relating to its pending acquisition by Legg Mason might harm the Account.
THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES
The Board noted that the performance of the Account had been very good compared
to similar funds over both short-term and long-term periods. The Board noted
that the portfolio managers of the Account had not changed, even though the
Account had been managed by TAMIC directly prior to its acquisition by MetLife,
and was now managed by SaBAM as sub-advisor. The Board requested, however, that
TAMIC monitor whether personnel changes at SaBAM relating to its pending
acquisition by Legg Mason might harm the Account. The Board also concluded that
the Account's advisory and sub-advisory fees appeared to be less than those of
many similar funds. In addition, the Board noted that the advisory and
sub-advisory fees did not include breakpoints reducing such fees at higher asset
levels, but concluded that breakpoints were not imperative in light of the low
advisory fee.
-49-
THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES
The Board noted that the performance of the Account had generally been above
average compared to similar funds. The Board noted that the portfolio managers
of the Account had not changed, even though the Account had been managed by
TAMIC directly prior to its acquisition by MetLife, and was now managed by SaBAM
as sub-advisor. The Board requested, however, that TAMIC monitor whether
personnel changes at SaBAM relating to its pending acquisition by Legg Mason
might harm the Account. The Board also noted that the Account's advisory and
sub-advisory fees appeared to be less than those of many comparable funds. In
addition, the Board noted that the advisory fees did not include breakpoints
reducing such fees at higher asset levels, but noted that economies of scale may
be less pronounced as fund assets increase, and therefore that breakpoints may
be less common, for money market funds than for other types of funds.
CERTAIN MATTERS RELATING TO SABAM AND TIMCO
On June 23, 2005, Citigroup Inc., the parent company of both SaBAM and TIMCO,
agreed to sell substantially all of its asset management business, including
SaBAM and TIMCO, to Legg Mason Inc. ("Legg Mason"). SaBAM is the sub-advisor to
MM and QB while TIMCO is the sub-advisor to GIS (the "Accounts"). The
consummation of the aforementioned transaction would result in a change of
control of SaBAM and TIMCO and the automatic termination of the Accounts'
sub-advisory agreements. In connection with the anticipated change of control of
SaBAM and TIMCO, the Board approved new sub-advisory agreements between TAMIC
and SaBAM and TIMCO for the Accounts at a special meeting of the Board held on
November 10, 2005. In considering the new sub-advisory agreements for the
Accounts, the Board met with a representative from SaBAM and TIMCO and received
information regarding: the proposed transaction, Legg Mason and its asset
management affiliates, and Legg Mason's plans for SaBAM and TIMCO after the
closing of the transaction. In approving the new sub-advisory agreements, the
Board also took into consideration the factors they considered at a meeting held
on July 20, 2005, where the Board approved the previous sub-advisory agreements
with SaBAM and TIMCO, with respect to the Accounts. In addition to these
factors, the Board also considered:
o that the new sub-advisory agreements are substantially similar to
the Accounts' previous sub-advisory agreements; and
o the business, experience and reputation of Legg Mason and its asset
management affiliates and the prominence of the Legg Mason name in
the marketplace for investment advice.
Based on their evaluation of all factors that they deemed to be material,
including those factors described above, and assisted by the advice of
independent counsel, the Board of Managers, including the Independent Managers,
unanimously voted to approve the new sub-advisory agreements between TAMIC and
SaBAM and TIMCO for the Accounts.
-50-
OFFICERS AND INTERESTED MANAGERS
NUMBER OF
PORTFOLIOS OTHER
TERM OF IN ACCOUNT DIRECTORSHIPS
POSITION(S) OFFICE AND COMPLEX OF PUBLIC
HELD WITH LENGTH OF OVERSEEN BY COMPANIES HELD
NAME, ADDRESS AND AGE ACCOUNTS TIME SERVED PRINCIPAL OCCUPATION DURING LAST FIVE YEARS MANAGER BY MANAGER
- --------------------- ----------- ----------- ------------------------------------------- ----------- --------------
*Elizabeth Forget Chairman of Since July President, Met Investors Advisory LLC 66 None
260 Madison Avenue the Board of 2005 (2000 to present); Executive Vice
11th Floor Managers, President (2000 to present) and Chief
New York, NY 10016 Chief Marketing Officer (2003 to present),
Age 38 Executive MetLife Investors Group, Inc;
Officer and President, TAMIC (July 2005 - present);
President Senior Vice President, Equitable
Distributors, Inc. and Vice President,
Equitable Life Assurance Society of the
United States (1996 to 2000).
Paul Cellupica Secretary and Since July Chief Counsel, Securities Products and N/A N/A
MetLife, Inc. Chief Legal 2005 Regulation, MetLife Inc. (2004 -
One MetLife Plaza Officer present); Vice President and Chief
27-01 Queens Plaza North Legal Officer, TAMIC (July 2005 -
Long Island City, NY 11101 present); Assistant Director, Division
Age 41 of Investment Management, U.S.
Securities and Exchange Commission
(2001-2004), Senior Special Counsel,
Division of Investment Management,
Securities and Exchange Commission
(2000-2001).
Alan C. Leland, Jr. Principal Since July Treasurer and Chief Financial Officer; N/A N/A
MetLife Advisers LLC Accounting 2005 MetLife Advisers, LLC and Vice
501 Boylston Street Officer President, MetLife, Inc. (1993 -
Boston, MA 02116 present); Assistant Treasurer, TAMIC
Age 53 (July 2005 - present)
Jeffrey P. Halperin Interim Chief Since Assistant Vice President, Corporate N/A N/A
Metropolitan Life Compliance November Ethics and Compliance Department,
Insurance Company Officer 2005 MetLife, Inc. (October 2002-present);
One MetLife Plaza Interim Chief Compliance Officer of
27-01 Queens Plaza North funds sponsored by Metlife and its
Long Island City, NY 11101 affiliates (November 2005-present;
Age 37 Associate, Goldman Sachs & Co.(May
2000-July 2001).
-51-
NON-INTERESTED MANAGERS
NUMBER OF
PORTFOLIOS OTHER
TERM OF IN ACCOUNT DIRECTORSHIPS
POSITION(S) OFFICE AND COMPLEX OF PUBLIC
HELD WITH LENGTH OF OVERSEEN BY COMPANIES HELD
NAME, ADDRESS AND AGE ACCOUNTS TIME SERVED PRINCIPAL OCCUPATION DURING LAST FIVE YEARS MANAGER BY MANAGER
- --------------------- ----------- ----------- ------------------------------------------- ----------- --------------
Robert E. McGill, III Manager Since 1974 Retired manufacturing executive. Director 39 None
295 Hancock Street (1995-2000), Chemfab Corporation (specialty
Williamstown, MA materials manufacturer); Director
Age 74 (1999-2001), Ravenwood Winery, Inc.;
Director (1999-2003), Lydall Inc.
(manufacturer of fiber materials); Member,
Board of Managers (1974-present), six
Variable Annuity Separate Accounts of The
Travelers Insurance Company+; Trustee
(1990-present), five mutual funds sponsored
by The Travelers Insurance Company.++
Lewis Mandell Manager Since 1990 Professor of Finance and Managerial 39 Director
Manager Economics, University at Buffalo since (2000-
160 Jacobs Hall 1998. Dean, School of Management present),
Buffalo, NY (1998-2001), University at Buffalo; Member, Delaware North
Age 62 Board of Managers (1990-present), six Corp.
Variable Annuity Separate Accounts of The (hospitality
Travelers Insurance Company+; Trustee business)
(1990-present), five mutual funds sponsored
by The Travelers Insurance Company.++
Frances M. Hawk, Manager Since 1991 Private Investor (1997-present). Member, 39 None
CFA, CFP Board of Managers (1991-present), six
Manager Variable Annuity Separate Accounts of The
108 Oxford Hill Lane Travelers Insurance Company+; Trustee
Downingtown, PA (1991-present), five mutual funds sponsored
Age 57 by The Travelers Insurance Company.++
- ----------
*Ms. Forget is an "interested person" by virtue of her position as President of
TAMIC.
+In addition to the Accounts, the other three Variable Annuity Separate Accounts
are: The Travelers Growth and Income Stock Account for Variable Annuities, The
Travelers Quality Bond Account for Variable Annuities, and The Travelers Money
Market Account for Variable Annuities.
++ The five Mutual Funds are: Capital Appreciation Fund, Money Market Portfolio,
High Yield Bond Trust, Managed Assets Trust and The Travelers Series Trust.
-52-
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
TIMCO ASSET MANAGEMENT INC.
Stamford, Connecticut
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES
CUSTODIAN
STATE STREET BANK & TRUST CO(1)
Boston, Massachusetts
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 December 31, 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.
(1) Effective December 1, 2005, State Street Bank & Trust Co. replaced JP
Morgan Chase as custodian.
VG-137 (Annual) (12-05) Printed in U.S.A.
ITEM 2. CODE OF ETHICS.
The registrant has adopted a code of ethics that applies to the Registrant's
Principal Executive Officer, Principal Financial Officer, Principal Accounting
Officer or controller. Please see exhibit (a)(1).
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Board of Managers of the registrant has determined that Robert F. McGill
III, a member of the Board's Audit Committee, possesses the technical attributes
identified in Instruction 2(b) of item 3 to Form N-CSR to qualify as the "Audit
Committee financial expert," and has designated Mr. McGill as the Audit
Committee's financial expert. Mr. McGill is an "independent" Director pursuant
to paragraph (a)(2) of item 3 to Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) KPMG LLP, were the auditors for the registrant through June 30, 2005. On
July 1, 2005, Deloitte & Touche LLP, assumed responsibility for the audit
of the registrant's annual financial statements. The aggregate fees billed
by KPMG LLP for the fiscal year ended December 31, 2004 for professional
services rendered in connection with the audit of the registrant's annual
financial statements or services that are normally provided by the
accountant in connection with statutory and regulatory filings or
engagements were $58,575. No bills for comparable services for the year
ended December 31, 2005 were received. These fees are paid by Travelers
Life & Annuity, as sponsor of each registrant.
(b) None.
(c) None.
(d) None.
(e) (1) The Audit Committee ("Committee") has adopted policies and procedures
to, among other purposes, approve all audit and non-audit services
provided to the Registrant and certain other persons by the Registrant's
independent auditors.
The policies and procedures require the Committee to approve (a) all
audit and permissible non-audit services to be provided to the
Registrant and (b) all permissible non-audit services to be provided by
the Fund's independent auditors to the Adviser and any Covered Service
Providers if the engagement relates directly to the operations and
financial reporting of the Registrant. In carrying out this
responsibility, the Committee shall seek periodically from the Adviser
and from the independent auditors a list of audit and permissible
non-audit services
that can be expected to be rendered to the Registrant, the Adviser or
any Covered Service Providers by the Registrant's independent auditors,
and an estimate of the fees sought to be paid in connection with such
services. The Committee may delegate its responsibility to approve any
such audit and permissible non-audit services to a sub-committee
consisting of the Chairperson of the Committee (the "Chairperson") and
at least one other member of the Committee as the Chairperson, from time
to time, may determine and appoint, and such sub-committee shall report
to the Committee, at its next meeting after the sub-committee's meeting,
its decision(s).
From year to year, and at such other times as the Committee deems
appropriate, the Committee shall report to the Board whether this system
of approval has been effective and efficient or whether this Charter
should be amended to allow for pre-approval pursuant to such policies.
Pre-approval by the Committee of any permissible non-audit services is
not required so long as: (i) the aggregate amount of all such
permissible non-audit services provided to the Fund, the Adviser and any
service providers controlling, controlled by or under common control
with the Adviser that provide ongoing services to the Fund ("Covered
Service Providers") constitutes not more than 5% of the total amount of
revenues paid to the independent auditors during the fiscal year in
which the permissible non-audit services are provided by (a) the Fund,
(b) the Adviser and (c) any entity controlling, controlled by or under
common control with the Adviser that provides ongoing services to the
Fund during the fiscal year in which the services are provided that
would have to be approved by the Committee; (ii) the permissible
non-audit services were not recognized by the Fund at the time of the
engagement to be non-audit services; and (iii) such services are
promptly brought to the attention of the Committee and approved by the
Committee (or its delegate(s)) prior to the completion of the audit.
(e) (2) No fee incurred on behalf of the accounts.
(f) Not applicable.
(g) None.
(h) Yes.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS
Please see the schedule of investments contained in the report to shareholders
included under item 1 of this form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED END
MANAGEMENT INVESTMENTCOMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the registrant's Board of Managers since the accounts last
provided disclosure in response to this item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial
officer have concluded that the registrant's disclosure controls and
procedures (as defined in Rule 30a - 3 (c) under the Investment Company
Act of 1940, as amended (the "1940 Act")) are effective as of a date
within 90 days of the filing date of this report that includes the
disclosure required by this paragraph, based on their evaluation of the
disclosure controls and procedures required by Rule 30a-3(b) under the
1940 Act and 15d-15(b) under the Securities Exchange Act of 1934 as of a
date within 90 days of the filing date of this document.
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred
during the registrant's second fiscal quarter of the period covered by
this report that have materially affected, or are likely to materially
affect the registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) The code of ethics pursuant to item 2 is attached as EX-99.CODE ETH
(a)(2) Certifications pursuant to section 302 of the Sarbanes-Oxley Act of 2002
are attached hereto as Exhibit 99.CERT
(a)(3) Not applicable
(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
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
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