N-CSRS 1 c29021_n-csrs.txt ------------------------ OMB APPROVAL OMB Number: 3235-0570 Expires: Nov. 30, 2005 Estimated average burden hours per response: 5.0 ------------------------ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-01539 811-02571 811-03409 Travelers Growth and Income Stock Account For Variable Annuities Travelers Quality Bond Account For Variable Annuities Travelers Money Market Account For Variable Annuities (Exact name of registrant as specified in charter) One Cityplace, Hartford, CT 06103 (Address of principal executive offices) (Zip code) Kathleen A. McGah One Cityplace Hartford, CT 06103 (Name and address of agent for service) Registrant's telephone number, including area code: (860) 308-6202 Date of fiscal year end: December 31 Date of reporting period: June 30, 2003 ITEM 1. REPORT(S) TO STOCKHOLDERS. The Semi-annual Report to stockholders is filed herewith. UNIVERSAL ANNUITY SEMI-ANNUAL REPORTS JUNE 30, 2003 THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES Travelers Life & Annuity [LOGO] The Travelers Insurance Company The Travelers Life and Annuity Company One Cityplace Hartford, CT 06103 [LOGO OF TAMIC] Travelers Asset Management International Company, LLC ("TAMIC") provides fixed income management and advisory services for the following Travelers Variable Products Separate Accounts contained in this report: The Travelers Growth and Income Stock Account for Variable Annuities, The Travelers Quality Bond Account for Variable Annuities and The Travelers Money Market Account for Variable Annuities. [LOGO OF TIMCO] The Travelers Investment Management Company ("TIMCO") A member of provides equity management and subadvisory services for citigroup [LOGO] The Travelers Growth and Income Stock Account for Variable Annuities. TABLE OF CONTENTS PAGE -------------------------------------------------------------------------------- CHAIRMAN'S LETTER........................................................... 1 THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES...................................................... 2 THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES................... 14 THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES................... 25 BOARD OF MANAGERS AND OFFICERS.............................................. 32 LETTER FROM THE CHAIRMAN DEAR ACCOUNTHOLDER, The philosopher Bertrand Russell famously remarked that, "Change is one thing, progress is another." You will notice in the following pages that we have begun to implement some changes to your shareholder report and we will be reflecting other changes in future reports. Our aim is to make meaningful improvements in reporting on the management of your Account and its performance, not just to enact change for change's sake. Please bear with us during this transition period. I INVITE YOU TO READ THIS REPORT IN FULL. PLEASE TAKE THE OPPORTUNITY TO TALK TO YOUR FINANCIAL ADVISER ABOUT THIS REPORT OR ANY OTHER QUESTIONS OR CONCERNS YOU HAVE ABOUT YOUR ACCOUNT AND YOUR FINANCIAL FUTURE. AS ALWAYS, THANK YOU FOR ENTRUSTING YOUR ASSETS TO US. WE LOOK FORWARD TO HELPING YOU CONTINUE TO MEET YOUR FINANCIAL GOALS. Sincerely, R. Jay Gerken, CFA Chairman, President and Chief Executive Officer July 21, 2003 -1- THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) JUNE 30, 2003 ASSETS: Investment securities, at fair value (cost $487,473,960) ... $470,474,327 Cash ....................................................... 1,506,187 Receivables: Dividends ................................................ 587,356 Purchase payments and transfers from other funding options 124,461 Other assets ............................................... 2,453 ------------ Total Assets ........................................... 472,694,784 ------------ LIABILITIES: Payables: Contract surrenders and transfers to other funding options 191,062 Investment management and advisory fees .................. 25,285 Insurance charges ........................................ 45,860 Accrued liabilities ........................................ 6,451 ------------ Total Liabilities ...................................... 268,658 ------------ NET ASSETS: $472,426,126 ============ See Notes to Financial Statements -2- THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 2003 INVESTMENT INCOME: Dividends ......................................................... $ 3,715,989 Interest .......................................................... 84,098 ------------- Total income .................................................... $ 3,800,087 EXPENSES: Investment management and advisory fees ........................... 1,440,929 Insurance charges ................................................. 2,613,116 ------------- Total expenses .................................................. 4,054,045 ------------ Net investment income (loss) .................................. (253,958) ------------ REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES: Realized gain (loss) from investment security transactions: Proceeds from investment securities sold ........................ 231,295,830 Cost of investment securities sold .............................. 254,062,034 ------------- Net realized gain (loss) ...................................... (22,766,204) Change in unrealized gain (loss) on investment securities: Unrealized gain (loss) at June 30, 2003 ......................... (16,999,633) Unrealized gain (loss) at December 31, 2002 ..................... (83,876,989) ------------- Net change in unrealized gain (loss) for the period .......... 66,877,356 ------------ Net realized gain (loss) and change in unrealized gain (loss) 44,111,152 ------------ Net increase (decrease) in net assets resulting from operations ..... $ 43,857,194 ============
See Notes to Financial Statements -3- THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, 2003 2002 ------------- ------------- (UNAUDITED) OPERATIONS: Net investment income (loss) ........................................... $ (253,958) $ (1,724,159) Net realized gain (loss) from investment security transactions ......... (22,766,204) (44,074,095) Net change in unrealized gain (loss) on investment securities .......... 66,877,356 (92,142,794) ------------- ------------- Net increase (decrease) in net assets resulting from operations ...... 43,857,194 (137,941,048) ------------- ------------- UNIT TRANSACTIONS: Participant purchase payments (applicable to 745,946 and 1,672,473 units, respectively) ............ 10,222,878 25,669,656 Participant transfers from other funding options (applicable to 389,676 and 688,693 units, respectively) .............. 5,480,758 10,328,582 Administrative charges (applicable to 15,631 and 36,141 units, respectively) ................ (232,785) (517,226) Contract surrenders (applicable to 1,856,375 and 3,628,838 units, respectively) .......... (25,776,557) (55,346,598) Participant transfers to other funding options (applicable to 1,016,032 and 3,238,862 units, respectively) .......... (13,845,161) (47,526,395) Other payments to participants (applicable to 97,387 and 157,894 units, respectively) ............... (1,361,235) (2,436,118) ------------- ------------- Net increase (decrease) in net assets resulting from unit transactions (25,512,102) (69,828,099) ------------- ------------- Net increase (decrease) in net assets .............................. 18,345,092 (207,769,147) NET ASSETS: Beginning of period .................................................... 454,081,034 661,850,181 ------------- ------------- End of period .......................................................... $ 472,426,126 $ 454,081,034 ============= =============
See Notes to Financial Statements -4- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. SIGNIFICANT ACCOUNTING POLICIES The Travelers Growth and Income Stock Account for Variable Annuities ("Account GIS") is a separate account of The Travelers Insurance Company ("The Company"), an indirect wholly owned subsidiary of Citigroup Inc., and is available for funding Universal Annuity contracts issued by The Company. Account GIS is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. The following is a summary of significant accounting policies consistently followed by Account GIS in the preparation of its financial statements. SECURITY VALUATION. Investments in securities traded on a national securities exchange are valued at the 4:00 p.m. Eastern Standard Time price of such exchanges; securities traded on the over-the-counter market and listed securities with no reported sales are valued at the mean between the last reported bid and asked prices or on the basis of quotations received from a reputable broker or other recognized source. Short-term investments are reported at fair value based on quoted market prices. Short-term investments, for which there is no reliable quoted market price, are recorded at amortized cost which approximates fair value. SECURITY TRANSACTIONS. Security transactions are accounted for on the trade date. Dividend income is recorded on the ex-dividend date. Interest income is recorded on the accrual basis. Premiums and discounts are amortized to interest income utilizing the constant yield method. FUTURES CONTRACTS. Account GIS may use stock index futures contracts as a substitute for the purchase or sale of individual securities. When Account GIS enters into a futures contract, it agrees to buy or sell a specified index of stocks at a future time for a fixed price, unless the contract is closed prior to expiration. Account GIS is obligated to deposit with a broker an "initial margin" equivalent to a percentage of the face, or notional value of the contract. It is Account GIS's practice to hold cash and cash equivalents in an amount at least equal to the notional value of outstanding purchased futures contracts, less the initial margin. Cash and cash equivalents include cash on hand, securities segregated under federal and brokerage regulations, and short-term highly liquid investments with maturities generally three months or less when purchased. Generally, futures contracts are closed prior to expiration. Futures contracts purchased by Account GIS are priced and settled daily; accordingly, changes in daily prices are recorded as realized gains or losses and no asset is recorded in the Statement of Investments. Therefore, when Account GIS holds open futures contracts, it assumes a market risk generally equivalent to the underlying market risk of change in the value of the specified indexes associated with the futures contract. OPTIONS. Account GIS may purchase index or individual equity put or call options, thereby obtaining the right to sell or buy a fixed number of shares of the underlying asset at the stated price on or before the stated expiration date. Account GIS may sell the options before expiration. Options held by Account GIS are listed on either national securities exchanges or on over-the-counter markets and are short-term contracts with a duration of less than nine months. The market value of the options will be based on the 4:00 p.m. Eastern Standard Time price of the respective exchange, or in the absence of such price, the latest bid quotation. REPURCHASE AGREEMENTS. When Account GIS enters into a repurchase agreement (a purchase of securities whereby the seller agrees to repurchase the securities at a mutually agreed upon date and price), the repurchase price of the securities will generally equal the amount paid by Account GIS plus a negotiated interest amount. The seller under the repurchase agreement will be required to provide to Account GIS securities (collateral) whose market value, including accrued interest, will be at least equal to 102% of the repurchase price. Account GIS monitors the value of collateral on a daily basis. Repurchase agreements will be limited to transactions with national banks and reporting broker dealers believed to present minimal credit risks. Account GIS's custodian will take actual or constructive receipt of all securities underlying repurchase agreements until such agreements expire. -5- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED FEDERAL INCOME TAXES. The operations of Account GIS form a part of the total operations of The Company and are not taxed separately. The Company is taxed as a life insurance company under the Internal Revenue Code of 1986, as amended (the "Code"). Under existing federal income tax law, no taxes are payable on the investment income and capital gains of Account GIS. Account GIS is not taxed as a "regulated investment company" under Subchapter M of the Code. OTHER. The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. INVESTMENTS The aggregate costs of purchases and proceeds from sales of investments (other than short-term securities), were $177,563,295 and $224,551,038, respectively; the costs of purchases and proceeds from sales of direct and indirect U.S. government securities were $24,429,440 and $24,239,629, respectively, for the six months ended June 30, 2003. Realized gains and losses from investment security transactions are reported on an identified cost basis. At June 30, 2003, Account GIS held 110 open S&P 500 Stock Index futures contracts expiring in September, 2003. The underlying face value, or notional value, of these contracts at June 30, 2003 amounted to $26,765,750. In connection with these contracts, short-term investments with a par value of $1,900,000 had been pledged as margin deposits. Net realized gains (losses) resulting from futures contracts were $772,710 and ($1,116,889) for the six months ended June 30, 2003 and the year ended December 31, 2002, respectively. These gains (losses) are included in the net realized gain (loss) from investment security transactions on both the Statement of Operations and the Statement of Changes in Net Assets. 3. CONTRACT CHARGES Investment management and advisory fees are calculated daily at annual rates which start at 0.65% and decrease, as net assets increase, to 0.40% of Account GIS's average net assets. These fees are paid to Travelers Asset Management International Company, LLC ("TAMIC"), an indirect wholly owned subsidiary of Citigroup Inc. Pursuant to a subadvisory agreement between TAMIC and The Travelers Investment Management Company ("TIMCO"), an indirect wholly owned subsidiary of Citigroup Inc., TAMIC pays TIMCO a subadvisory fee calculated daily at annual rates which start at 0.45% and decrease, as net assets increase, to 0.20% of Account GIS's average net assets. Insurance charges are paid for the mortality and expense risks assumed by The Company. Each business day, The Company deducts a mortality and expense risk charge which is reflected in the calculation of accumulation and annuity unit values. This charge equals, on an annual basis, 1.0017% for contracts issued prior to May 16, 1983 and 1.25% on an annual basis for contracts issued on or after May 16, 1983. For certain contracts in the accumulation phase, a semi-annual charge of $15 (prorated for partial years) is deducted from participant account balances and paid to The Company to cover administrative charges. On contracts issued prior to May 16, 1983, The Company retained from Account GIS sales charges of $8,506 and $12,734 for the six months ended June 30, 2003 and the year ended December 31, 2002, respectively. The Company generally assesses a 5% contingent deferred sales charge if a participant's purchase payment is surrendered within five years of its payment date. Contract surrender payments are net of contingent deferred sales charges of $206,199 and $375,583 for the six months ended June 30, 2003 and the year ended December 31, 2002, respectively. -6- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED 4. NET ASSETS HELD ON BEHALF OF AN AFFILIATE Approximately $11,182,000 and $10,255,000 of the net assets of Account GIS were held on behalf of an affiliate of The Company as of June 30, 2003 and December 31, 2002, respectively. Transactions with this affiliate during the six months ended June 30, 2003 and the year ended December 31, 2002, were comprised of participant purchase payments of approximately $27,000 and $70,000 and contract surrenders of approximately $138,000 and $1,045,000, respectively. 5. NET CONTRACT OWNERS' EQUITY
JUNE 30, 2003 ------------------------------------- UNIT NET UNITS VALUE ASSETS ----- ----- ------ Accumulation phase of contracts issued prior to May 16, 1983 .. 8,452,217 $15.628 $132,092,440 Annuity phase of contracts issued prior to May 16, 1983 ....... 198,769 15.628 3,106,389 Accumulation phase of contracts issued on or after May 16, 1983 22,620,058 14.864 336,230,971 Annuity phase of contracts issued on or after May 16, 1983 .... 67,028 14.864 996,326 ------------ Net Contract Owners' Equity .............................................................. $472,426,126 ============
-7- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED 6. SUPPLEMENTARY INFORMATION (Selected data for a unit outstanding throughout each period.)
Contracts issued prior to May 16, 1983 SIX MONTHS ENDED FOR THE YEARS ENDED DECEMBER 31, JUNE 30, (DERIVED FROM AUDITED FINANCIAL INFORMATION) -------- -------------------------------------------------------- 2003 2002 2001 2000 1999 1998 -------- -------- -------- -------- -------- -------- SELECTED PER UNIT DATA: Total investment income ................................... $ .125 $ .240 $ .266 $ .242 $ .267 $ .243 Operating expenses ........................................ .119 .261 .311 .376 .347 .272 -------- -------- -------- -------- -------- -------- Net investment income (loss) .............................. .006 (.021) (.045) (.134) (.080) (.029) Unit value at beginning of period ......................... 14.172 18.064 21.418 24.427 20.017 15.510 Net realized and change in unrealized gains (losses) ...... 1.450 (3.871) (3.309) (2.875) 4.490 4.536 -------- -------- -------- -------- -------- -------- Unit value at end of period ............................... $ 15.628 $ 14.172 $ 18.064 $ 21.418 $ 24.427 $ 20.017 ======== ======== ======== ======== ======== ======== SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase (decrease) in unit value ..................... $ 1.46 $ (3.89) $ (3.35) $ (3.01) $ 4.41 $ 4.51 Ratio of operating expenses to average net assets ......... 1.65%* 1.64% 1.63% 1.60% 1.60% 1.56% Ratio of net investment income (loss) to average net assets .10%* (.12)% (.24)% (.57)% (.37)% (.16)% Number of units outstanding at end of period (thousands) .. 8,651 9,088 10,329 11,413 12,646 13,894 Portfolio turnover rate ................................... 41% 54% 32% 52% 47% 50% Contracts issued on or after May 16, 1983 SIX MONTHS ENDED FOR THE YEARS ENDED DECEMBER 31, JUNE 30, (DERIVED FROM AUDITED FINANCIAL INFORMATION) -------- -------------------------------------------------------- 2003 2002 2001 2000 1999 1998 -------- -------- -------- -------- -------- -------- SELECTED PER UNIT DATA: Total investment income ................................... $ .118 $ .229 $ .254 $ .232 $ .256 $ .234 Operating expenses ........................................ .130 .287 .343 .416 .385 .303 -------- -------- -------- -------- -------- -------- Net investment income (loss) .............................. (.012) (.058) (.089) (.184) (.129) (.069) Unit value at beginning of period ......................... 13.496 17.245 20.498 23.436 19.253 14.955 Net realized and change in unrealized gains (losses) ...... 1.380 (3.691) (3.164) (2.754) 4.312 4.367 -------- -------- -------- -------- -------- -------- Unit value at end of period ............................... $ 14.864 $ 13.496 $ 17.245 $ 20.498 $ 23.436 $ 19.253 ======== ======== ======== ======== ======== ======== SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase (decrease) in unit value ..................... $ 1.37 $ (3.75) $ (3.25) $ (2.94) $ 4.18 $ 4.30 Ratio of operating expenses to average net assets ......... 1.90%* 1.89% 1.88% 1.85% 1.85% 1.81% Ratio of net investment income (loss) to average net assets (.15)* (.37)% (.49)% (.82)% (.62)% (.41)% Number of units outstanding at end of period (thousands) .. 22,687 24,100 27,559 29,879 32,648 32,051 Portfolio turnover rate ................................... 41% 54% 32% 52% 47% 50%
* Annualized -8- THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF INVESTMENTS (UNAUDITED) JUNE 30, 2003 NO. OF FAIR SHARES VALUE ------ ----------- COMMON STOCK (93.4%) AEROSPACE (0.7%) Boeing Co. 95,564 $ 3,279,756 Goodrich Corp. 9,162 192,402 ----------- 3,472,158 ----------- AUTOMOTIVE (1.1%) Dana Corp. 13,322 154,002 Eaton Corp. 22,355 1,757,326 Ford Motor Co. 78,738 865,331 General Motors Corp. 65,657 2,363,652 ----------- 5,140,311 ----------- BANKING (8.2%) Bank of America 96,167 7,600,078 BANK ONE Corp. 18,810 699,356 BB&T Corp. 35,419 1,214,872 Capital One Financial Corp. 23,974 1,179,041 Commerce Bancorp 16,340 606,214 First Tennessee National 202 8,870 FleetBoston Financial 67,453 2,004,029 Golden West Financial Corp. 26,536 2,123,145 HSBC Holdings ADS 25,207 1,489,986 J.P. Morgan Chase & Co. 79,954 2,732,828 Marshall & Ilsley 11,245 343,872 MBNA Corp. 112,064 2,335,414 National City Corp. 50,911 1,665,299 Regions Financial Corp. 12,650 427,317 U.S. Bancorp 74,295 1,820,227 Wachovia Corp. 107,077 4,278,797 Washington Mutual, Inc 51,773 2,138,225 Wells Fargo & Co. 103,793 5,231,167 Zions Bancorp 10,509 532,491 ----------- 38,431,228 ----------- BEVERAGE (2.5%) Anheuser-Busch Cos 57,179 2,918,988 Coca-Cola Co. 88,930 4,127,241 Coca-Cola Enterprises Inc. 22,982 417,123 PepsiCo Inc. 98,843 4,398,514 ----------- 11,861,866 ----------- BROKERAGE (2.3%) Bear Stearns Cos 11,990 868,316 Charles Schwab Corp. 117,396 1,184,526 Goldman Sachs Group, Inc. 30,269 2,535,029 Merrill Lynch & Co. 76,015 3,548,380 Morgan Stanley 67,455 2,883,701 ----------- 11,019,952 ----------- BUILDING MATERIALS (0.3%) Masco Corp. 36,201 863,394 ----------- CAPITAL GOODS (0.2%) Deere & Co. 18,366 839,326 Nucor Corp . 6,527 318,844 ----------- 1,158,170 ----------- CHEMICALS (1.2%) Air Products & Chemical, 11,024 458,598 Inc Dow Chemical Co. 43,246 1,338,896 E.I. Dupont de Nemours & Co. 47,039 1,958,704 Eastman Chemical Co. 10,874 344,380 Monsanto Co. 10,381 224,645 PPG Industries 8,683 440,575 Praxair, Inc. 7,682 461,688 Rohm & Haas Co. 10,087 313,000 ----------- 5,540,486 ----------- CONGLOMERATES (5.3%) Emerson Electric Co. 13,469 688,266 Fortune Brands 38,466 2,007,925 General Electric Co. 517,059 14,829,252 3M Co. 17,261 2,226,324 Tyco International Ltd. 102,734 1,949,891 United Technologies Corp. 45,108 3,195,000 ----------- 24,896,658 ----------- CONSTRUCTION MACHINERY (0.3%) Ingersoll-Rand Co. 28,262 1,337,358 ----------- CONSUMER (3.4%) Alberto-Culver 13,615 695,727 Avery Dennison Corp. 13,154 660,331 Ball Corp. 11,092 504,797 Black & Decker Corp. 14,316 622,030 Colgate-Palmolive Co. 46,394 2,688,532 Gillette Co. 4,491 143,083 Hasbro Inc. 72,105 1,261,116 Kimberly Clark Corp. 44,572 2,323,984 Procter & Gamble Co. 73,838 6,584,873 Reebok International (A) 8,077 271,630 Sealed Air (A) 6,689 318,798 ----------- 16,074,901 ----------- DEFENSE (0.8%) Lockheed Martin Corp. 30,543 1,452,931 Northrop Grumman Corp. 2,133 184,057 Raytheon Co. 63,591 2,088,328 ----------- 3,725,316 ----------- -9- STATEMENT OF INVESTMENTS (UNAUDITED) - CONTINUED NO. OF FAIR SHARES VALUE ------- ----------- ENTERTAINMENT (1.6%) Electronic Arts (A) 7,023 $ 518,719 Fox Entertainment Group (A) 57,731 1,661,498 Viacom, Inc. (A) 107,329 4,685,984 Walt Disney Co. 33,118 654,081 ----------- 7,520,282 ----------- FINANCE (2.3%) American Express Co. 108,739 4,546,377 Countrywide Financial 29,505 2,052,663 Mellon Financial 20,334 564,269 MetLife Inc. 19,186 543,348 Principal Financial Group 50,414 1,625,851 Providian Financial (A) 62,905 582,500 Total System Services 34,222 763,151 ----------- 10,678,159 ----------- FOOD (1.7%) Dean Foods (A) 13,780 434,070 General Mills 52,343 2,481,582 International Flavors & Fragrances 50,555 1,614,221 Kellogg Co. 36,220 1,244,881 McCormick & Co. 18,204 495,149 McDonald's Corp. 88,165 1,944,920 ----------- 8,214,823 ----------- GAMING (0.1%) International Game Technology (A) 4,419 452,196 ----------- HEALTHCARE (2.4%) Abbott Laboratories 43,229 1,891,701 Anthem Inc. (A) 22,785 1,757,863 Bausch & Lomb Inc. 44,440 1,666,500 Becton, Dickinson 44,466 1,727,504 Quintiles Transnational (A) 63,421 899,627 St. Jude Medical (A) 36,228 2,083,110 UnitedHealth Group, Inc. 15,472 777,468 Wellpoint Health Networks (A) 7,108 599,204 ----------- 11,402,977 ----------- HOME CONSTRUCTION (0.1%) K.B. HOME 4,600 285,108 Pulte Homes 4,467 275,435 ----------- 560,543 ----------- INDEPENDENT ENERGY (0.9%) Apache Corp. 9,206 598,942 Burlington Resources 21,521 1,163,640 Devon Energy 8,043 429,496 Entergy Corp. 40,281 2,126,031 ----------- 4,318,109 ----------- INSURANCE (5.2%) Aetna Inc. 41,458 2,495,772 AFLAC Inc. 26,299 808,694 Allstate Corp. 72,930 2,599,955 Ambac Financial Group 34,886 2,311,198 American International Group 118,767 6,553,563 Chubb Corp. 32,666 1,959,960 CIGNA Corp. 35,553 1,668,858 MBIA Inc. 18,345 894,319 MGIC Investment 18,213 849,454 Progressive Corp. Ohio 26,380 1,928,378 Prudential Financial 29,459 991,295 SAFECO Corp. 6,571 231,463 Torchmark Corp. 30,085 1,120,666 ----------- 24,413,575 ----------- INTEGRATED ENERGY (4.4%) Amerada Hess Corp. 5,277 259,523 Anadarko Petroleum 14,827 659,357 ChevronTexaco Corp. 52,939 3,822,196 ConocoPhillips 34,378 1,883,914 Exxon Mobil Corp. 344,456 12,369,415 Marathon Oil Corp. 17,893 471,481 Occidental Petroleum 19,319 648,152 Unocal Corp. 20,688 593,539 ----------- 20,707,577 ----------- LODGING (0.2%) Marriott International 26,097 1,002,647 ----------- MEDIA (2.7%) AOL Time Warner (A) 222,537 3,580,620 Comcast Corp. (Class A) (A) 70,381 2,121,987 Comcast Corp. (Class A - Special) (A) 71,941 2,076,577 Emmis Communications (A) 38,818 891,455 Gannett Co. 3,957 303,937 InteractiveCorp. (A) 30,155 1,192,932 Meredith Corp. 9,763 429,572 Tribune Co. 46,948 2,267,588 ----------- 12,864,668 ----------- METALS (0.2%) Alcoa, Inc. 42,773 1,090,712 ----------- NATURAL GAS DISTRIBUTORS (0.5%) National Fuel Gas 47,101 1,226,981 Questar Corp. 37,388 1,251,376 ----------- 2,478,357 ----------- -10- STATEMENT OF INVESTMENTS (UNAUDITED) - CONTINUED NO. OF FAIR SHARES VALUE ------- ----------- OIL FIELD (0.7%) Baker Hughes, Inc. 17,309 $ 581,063 Halliburton Co. 51,442 1,183,166 Schlumberger Ltd. 25,935 1,233,728 Transocean, Inc. (A) 22,014 483,648 ----------- 3,481,605 ----------- PAPER (0.2%) Georgia-Pacific Corp. 18,214 345,155 Weyerhaeuser Co. 10,266 554,364 ----------- 899,519 ----------- PHARMACEUTICALS (10.1%) Amgen, Inc. (A) 89,819 6,016,526 Bristol-Myers Squibb Co. 92,303 2,506,026 Chiron Corp. (A) 29,989 1,313,218 Eli Lilly & Co. 43,843 3,023,852 Genzyme Corp. (A) 28,838 1,199,228 Johnson & Johnson 151,532 7,834,204 MedImmune Inc. (A) 37,349 1,358,757 Merck & Co., Inc. 115,029 6,965,006 Pfizer, Inc. 403,517 13,780,106 Schering-Plough Corp. 44,140 821,004 Wyeth 55,883 2,545,471 ----------- 47,363,398 ----------- RAILROADS (0.4%) Burlington Northern Santa Fe 18,410 523,580 Norfolk Southern 58,777 1,128,518 ----------- 1,652,098 ----------- REAL ESTATE (0.2%) Equity Office Properties Trust 24,160 652,562 Equity Residential 17,440 452,568 ----------- 1,105,130 ----------- REFINING (0.1%) Newmont Mining Corp. 20,154 654,199 ----------- RETAILERS (6.3%) Best Buy (A) 31,843 1,398,545 Dollar General 72,067 1,315,943 Gap Inc. 134,336 2,520,143 Home Depot, Inc. 151,791 5,027,318 J.C. Penney 18,820 317,117 Jones Apparel Group (A) 7,259 212,398 Kohl's Corp. (A) 18,253 937,839 Liz Claiborne 25,433 896,513 Lowe's Cos 19,546 839,501 Sears, Roebuck 33,483 1,126,368 Staples Inc. (A) 103,238 1,893,385 Target Corp. 40,494 1,532,293 Wal-Mart Stores 219,177 11,763,230 ----------- 29,780,593 ----------- SERVICES (2.8%) Biogen Inc. (A) 28,059 1,065,681 Boston Scientific Corp. (A) 53,892 3,292,801 Cendant Corp. (A) 53,666 983,161 eBay Inc. (A) 29,123 3,034,325 KLA-Tencor Corp. (A) 30,926 1,437,440 Medtronic, Inc. 31,309 1,501,893 Paychex Inc. 17,394 509,905 Yahoo Inc. (A) 37,419 1,240,066 ----------- 13,065,272 ----------- TECHNOLOGY (15.4%) Altera Corp. (A) 57,440 946,037 American Power Conversion (A) 53,246 827,709 Analog Devices, Inc. (A) 50,440 1,756,321 Applied Micro Circuits (A) 258,572 1,563,068 Avaya Inc. (A) 254,465 1,643,844 Cisco Systems, Inc. (A) 414,118 6,857,794 Citrix Systems (A) 61,703 1,256,582 Computer Associates International 76,044 1,694,260 Comverse Technology (A) 85,093 1,279,373 Dell Computer Corp. (A) 146,156 4,671,877 EMC Corp. (A) 64,839 678,864 Hewlett-Packard Co. 150,497 3,205,586 Intel Corp. 284,702 5,920,378 International Business Machines Corp. 84,827 6,998,228 Intuit Inc. (A) 10,519 467,307 ITT Industries 4,966 325,074 Linear Technology Corp. 16,352 527,025 Mattel, Inc. 70,348 1,330,984 Micron Technology (A) 104,973 1,220,836 Microsoft 532,950 13,651,514 Molex Inc. 43,833 1,183,272 Motorola, Inc. 178,708 1,685,216 National Semiconductor (A) 43,626 860,305 Nvidia Corp. (A) 60,495 1,391,687 Oracle Corp. (A) 232,747 2,796,455 PerkinElmer Inc. 45,172 623,825 QLogic Corp. (A) 11,531 555,218 QUALCOMM Inc. 53,256 1,908,429 Scientific-Atlanta, Inc. 51,534 1,228,571 Sun Microsystems, Inc. (A) 235,155 1,080,537 Texas Instruments, Inc. 65,508 1,152,941 Thomas & Betts (A) 16,685 241,098 Xerox Corp. (A) 66,359 702,742 ----------- 72,232,957 ----------- -11- STATEMENT OF INVESTMENTS (UNAUDITED) - CONTINUED NO. OF FAIR SHARES VALUE ------- ----------- TELECOMMUNICATIONS (3.1%) AT&T Corp. 119,190 $ 2,294,408 AT&T Wireless Services (A) 234,417 1,924,564 BellSouth Corp. 33,069 880,627 CenturyTel Inc. 56,789 1,979,097 Nextel Communications (A) 49,828 897,901 SBC Communications, Inc. 97,892 2,501,141 Verizon Communications 101,163 3,990,880 ----------- 14,468,618 ----------- TEXTILE (0.2%) NIKE, Inc. 13,333 713,182 ----------- TOBACCO (1.0%) Altria Group 104,948 4,768,837 ----------- TRANSPORTATION SERVICES (0.9%) PACCAR Inc. 8,135 547,892 United Parcel 55,322 3,524,011 ----------- 4,071,903 ----------- U.S. AGENCY (1.6%) Federal Association National Mortgage 22,152 1,124,657 Federal Home Loan Mortgage Corp 66,503 4,484,962 SLM Corp. 54,129 2,120,233 ----------- 7,729,852 ----------- UTILITIES (1.8%) Centerpoint Energy, Inc. 43,120 351,428 Dominion Resources, Inc. 27,967 1,797,439 Edison International (A) 48,464 796,264 Exelon Corp. 43,743 2,616,269 Public Service Enterprises 42,924 1,813,539 Southern Co. 28,459 886,782 ----------- 8,261,721 ----------- TOTAL COMMON STOCKS (COST $456,473,379) 439,475,307 ----------- PRINCIPAL FAIR AMOUNT VALUE ----------- ----------- SHORT-TERM INVESTMENTS (6.6%) COMMERCIAL PAPER (6.2%) Asset Securitization Cooperation Corp., 1.02% August 8, 2003 $ 4,000,000 $ 3,995,472 Clipper Receivables Corp., 1.02% due July 22, 2003 1,474,000 1,473,023 Gannett Co., 1.06% due July 11, 2003 2,101,000 2,100,300 General Electric Capital Corp., 1.16% due July 11, 2003 4,750,000 4,748,418 General Electric Capital Corp., 1.07% due July 22, 2003 1,900,000 1,898,740 Sheffield Resources Corp., 1.07% due July 15, 2003 5,000,000 4,997,730 Toyota Motor Credit Corp., 0.95% due July 29, 2003 5,397,000 5,392,299 UBS Financial Inc., 1.33% due July 1, 2003 499,000 499,000 Volkswagen of America Inc., 1.07% due August 6, 2003 4,000,000 3,995,588 ----------- 29,100,570 ----------- U.S. TREASURY (0.4%) United States of America Treasury, 1.03% due August 7, 2003 (B) 1,900,000 1,898,450 ----------- TOTAL SHORT-TERM INVESTMENTS (COST $31,000,581) 30,999,020 ----------- NOTIONAL VALUE ------------ ------------ FUTURES CONTRACTS (0.0%) S&P 500 Stock Index, Exp. September, 2003 (C) $ 26,765,750 -- ------------ TOTAL INVESTMENTS (100%) ------------ (COST $487,473,960) (D) $470,474,327 ============ -12- STATEMENT OF INVESTMENTS (UNAUDITED) - CONTINUED NOTES (A) Non-income Producing Security. (B) Par value of $1,900,000 pledged to cover margin deposits on futures contracts. (C) As more fully discussed in Note 1 to the financial statements, it is Account GIS's practice to hold cash and cash equivalents (including short-term investments) at least equal to the underlying face value, or notional value, of outstanding purchased futures contracts, less the initial margin. Account GIS uses futures contracts as a substitute for holding individual securities. (D) At June 30, 2003, net unrealized depreciation for all securities was $16,999,633. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of fair value over cost of $41,156,962 and aggregate gross unrealized depreciation for all securities in which there was an excess of cost over fair value of $58,156,595. See Notes to Financial Statements -13- THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) JUNE 30, 2003 ASSETS: Investment securities, at fair value (cost $115,411,552) ..... $113,204,659 Cash ......................................................... 2,782,952 Receivables: Interest ................................................... 1,507,278 Purchase payments and transfers from other funding options . 31,984 Other assets ................................................. 1,452 ------------ Total Assets ............................................. 117,528,325 ------------ LIABILITIES: Payables: Contract surrenders and transfers to other funding options . 93,523 Investment management and advisory fees .................... 3,124 Insurance charges .......................................... 11,125 Accured liabilities .......................................... 8,076 ------------ Total Liabilities ........................................ 115,848 ------------ NET ASSETS: $117,412,477 ============ See Notes to Financial Statements -14- THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 2003 INVESTMENT INCOME: Interest .......................................................... $2,982,567 EXPENSES: Investment management and advisory fees ........................... $ 183,634 Insurance charges ................................................. 670,698 ---------- Total expenses .................................................. 854,332 ---------- Net investment income (loss) .................................. 2,128,235 ---------- REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES: Realized gain (loss) from investment security transactions: Proceeds from investment securities sold ........................ 61,386,363 Cost of investment securities sold .............................. 59,714,539 ---------- Net realized gain (loss) ...................................... 1,671,824 Change in unrealized gain (loss) on investment securities: Unrealized gain (loss) at June 30, 2003 ......................... (2,206,893) Unrealized gain (loss) at December 31, 2002 ..................... (6,836,289) ---------- Change in unrealized gain (loss) for the period ............... 4,629,396 ---------- Net realized gain (loss) and change in unrealized gain (loss) 6,301,220 ---------- Net increase (decrease) in net assets resulting from operations ... $8,429,455 ==========
See Notes to Financial Statements -15- THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, 2003 2002 ------------- ------------- (UNAUDITED) OPERATIONS: Net investment income (loss) ........................................... $ 2,128,235 $ 5,164,126 Net realized gain (loss) from investment security transactions ......... 1,671,824 (3,108,098) Net change in unrealized gain (loss) on investment securities .......... 4,629,396 (1,649,238) ------------- ------------- Net increase (decrease) in net assets resulting from operations ...... 8,429,455 406,790 ------------- ------------- UNIT TRANSACTIONS: Participant purchase payments (applicable to 397,822 and 970,567 units, respectively) .............. 2,634,410 6,020,842 Participant transfers from other funding options (applicable to 1,238,295 and 1,840,387 units, respectively) .......... 8,226,926 11,390,851 Administrative charges (applicable to 6,673 and 15,036 units, respectively) ................. (45,788) (93,554) Contract surrenders (applicable to 1,025,105 and 2,477,747 units, respectively) .......... (6,793,893) (15,412,418) Participant transfers to other funding options (applicable to 1,002,140 and 3,053,338 units, respectively) .......... (6,648,707) (18,818,812) Other payments to participants (applicable to 83,557 and 157,757 units, respectively) ............... (577,619) (993,160) ------------- ------------- Net increase (decrease) in net assets resulting from unit transactions (3,204,671) (17,906,251) ------------- ------------- Net increase (decrease) in net assets .............................. 5,224,784 (17,499,461) NET ASSETS: Beginning of period .................................................... 112,187,693 129,687,154 ------------- ------------- End of period .......................................................... $ 117,412,477 $ 112,187,693 ============= =============
See Notes to Financial Statements -16- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. SIGNIFICANT ACCOUNTING POLICIES The Travelers Quality Bond Account for Variable Annuities ("Account QB") is a separate account of The Travelers Insurance Company ("The Company"), an indirect wholly owned subsidiary of Citigroup Inc., and is available for funding Universal Annuity contracts issued by The Company. Account QB is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. The following is a summary of significant accounting policies consistently followed by Account QB in the preparation of its financial statements. SECURITY VALUATION. Investments in securities traded on a national securities exchange are valued at the 4:00 p.m. Eastern Standard Time price of such exchanges; securities traded on the over-the-counter market and listed securities with no reported sales are valued at the mean between the last-reported bid and asked prices or on the basis of quotations received from a reputable broker or other recognized source. When market quotations are not considered to be readily available for long-term corporate bonds and notes, such investments are generally stated at fair value on the basis of valuations furnished by a pricing service. These valuations are determined for normal institutional-size trading units of such securities using methods based on market transactions for comparable securities and various relationships between securities, which are generally recognized by institutional traders. Securities, including restricted securities, for which pricing services are not readily available, are valued by management at prices which it deems, in good faith, to be fair value. Short-term investments are reported at fair value based on quoted market prices. Short-term investments, for which there is no reliable quoted market price, are recorded at amortized cost, which approximates fair value. SECURITY TRANSACTIONS. Security transactions are accounted for on the trade date. Interest income is recorded on the accrual basis. Premiums and discounts are amortized to interest income utilizing the constant yield method. FUTURES CONTRACTS. Account QB may use interest rate futures contracts as a substitute for the purchase or sale of individual securities. When Account QB enters into a futures contract, it agrees to buy or sell specified debt securities at a future time for a fixed price, unless the contract is closed prior to expiration. Account QB is obligated to deposit with a broker an "initial margin" equivalent to a percentage of the face, or notional value of the contract. It is Account QB's practice to hold cash and cash equivalents in an amount at least equal to the notional value of outstanding purchased futures contracts, less the initial margin. Cash and cash equivalents include cash on hand, securities segregated under federal and brokerage regulations, and short-term highly liquid investments with maturities generally three months or less when purchased. Generally, futures contracts are closed prior to expiration. Futures contracts purchased by Account QB are priced and settled daily; accordingly, changes in daily prices are recorded as realized gains or losses and no asset is recorded in the Statement of Investments. Therefore, when Account QB holds open futures contracts, it assumes a market risk generally equivalent to the underlying market risk of change in the value of the debt securities associated with the futures contract. REPURCHASE AGREEMENTS. When Account QB enters into a repurchase agreement (a purchase of securities whereby the seller agrees to repurchase the securities at a mutually agreed upon date and price), the repurchase price of the securities will generally equal the amount paid by Account QB plus a negotiated interest amount. The seller under the repurchase agreement will be required to provide to Account QB securities (collateral) whose market value, including accrued interest, will be at least equal to 102% of the repurchase price. Account QB monitors the value of collateral on a daily basis. Repurchase agreements will be limited to transactions with national banks and reporting broker dealers believed to present minimal credit risks. Account QB's custodian will take actual or constructive receipt of all securities underlying repurchase agreements until such agreements expire. -17- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED FEDERAL INCOME TAXES. The operations of Account QB form a part of the total operations of The Company and are not taxed separately. The Company is taxed as a life insurance company under the Internal Revenue Code of 1986, as amended (the "Code"). Under existing federal income tax law, no taxes are payable on the investment income and capital gains of Account QB. Account QB is not taxed as a "regulated investment company" under Subchapter M of the Code. OTHER. The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. INVESTMENTS The aggregate costs of purchases and proceeds from sales of investments (other than short-term securities) were $28,827,495 and $24,891,207, respectively; the costs of purchases and proceeds from sales of direct and indirect U.S. government securities were $38,899,935 and $46,245,793, respectively, for the six months ended June 30, 2003. Realized gains and losses from investment security transactions are reported on an identified cost basis. 3. CONTRACT CHARGES Investment management and advisory fees are calculated daily at an annual rate of 0.3233% of Account QB's average net assets. These fees are paid to Travelers Asset Management International Company, LLC, an indirect wholly owned subsidiary of Citigroup Inc. Insurance charges are paid for the mortality and expense risks assumed by The Company. Each business day, The Company deducts a mortality and expense risk charge which is reflected in the calculation of accumulation and annuity unit values. This charge equals, on an annual basis, 1.0017% for contracts issued prior to May 16, 1983 and 1.25% on an annual basis for contracts issued on or after May 16, 1983. For certain contracts in the accumulation phase, a semi-annual charge of $15 (prorated for partial years) is deducted from participant account balances and paid to The Company to cover administrative charges. On contracts issued prior to May 16, 1983, The Company retained from Account QB sales charges of $2,196 and $4,708 for the six months ended June 30, 2003 and the year ended December 31, 2002, respectively. The Company generally assesses a 5% contingent deferred sales charge if a participant's purchase payment is surrendered within five years of its payment date. Contract surrender payments are net of contingent deferred sales charges of $25,037 and $78,280 for the six months ended June 30, 2003 and the year ended December 31, 2002, respectively. -18- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED 4. NET ASSETS HELD ON BEHALF OF AN AFFILIATE Approximately $154,000 and $131,000 of the net assets of Account QB were held on behalf of an affiliate of The Company as of June 30, 2003 and December 31, 2002, respectively. Transactions with this affiliate during the six months ended June 30, 2003 and the year ended December 31, 2002, were comprised of participant purchase payments of approximately $59,000 and $80,000 and contract surrenders of approximately $47,000 and $152,000, respectively. 5. NET CONTRACT OWNERS' EQUITY
JUNE 30, 2003 ------------------------------------ UNIT NET UNITS VALUE ASSETS ----- ----- ------ Accumulation phase of contracts issued prior to May 16, 1983 .. 4,398,542 $7.188 $ 31,634,229 Annuity phase of contracts issued prior to May 16, 1983 ....... 53,845 7.188 387,251 Accumulation phase of contracts issued on or after May 16, 1983 12,475,508 6.837 85,339,154 Annuity phase of contracts issued on or after May 16, 1983 .... 7,579 6.837 51,843 ------------ Net Contract Owners' Equity ............................................................. $117,412,477 ============
-19- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED 6. SUPPLEMENTARY INFORMATION (Selected data for a unit outstanding throughout each period.)
Contracts issued prior to May 16, 1983 SIX MONTHS ENDED FOR THE YEARS ENDED DECEMBER 31, JUNE 30, (DERIVED FROM AUDITED FINANCIAL INFORMATION) -------- ---------------------------------------------------- 2003 2002 2001 2000 1999 1998 -------- -------- -------- -------- -------- -------- SELECTED PER UNIT DATA: Total investment income ................................... $ .180 $ .381 $ .421 $ .446 $ .393 $ .363 Operating expenses ........................................ .046 .086 .089 .081 .080 .076 -------- -------- -------- -------- -------- -------- Net investment income (loss) .............................. .134 .295 .332 .365 .313 .287 Unit value at beginning of period ......................... 6.674 6.608 6.335 6.055 5.994 5.593 Net realized and change in unrealized gains (losses) ...... .380 (.229) (.059) (.085) (.252) .114 -------- -------- -------- -------- -------- -------- Unit value at end of period ............................... $ 7.188 $ 6.674 $ 6.608 $ 6.335 $ 6.055 $ 5.994 ======== ======== ======== ======== ======== ======== SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase (decrease) in unit value ..................... $ .51 $ .07 $ .27 $ .28 $ .06 $ .40 Ratio of operating expenses to average net assets ......... 1.33%* 1.33% 1.33% 1.33% 1.33% 1.33% Ratio of net investment income (loss) to average net assets 3.92%* 4.56% 4.99% 5.93% 5.22% 4.96% Number of units outstanding at end of period (thousands) .. 4,452 4,684 5,194 5,491 6,224 6,880 Portfolio turnover rate ................................... 71% 113% 166% 105% 340% 438% Contracts issued on or after May 16, 1983 SIX MONTHS ENDED FOR THE YEARS ENDED DECEMBER 31, JUNE 30, (DERIVED FROM AUDITED FINANCIAL INFORMATION) -------- ---------------------------------------------------- 2003 2002 2001 2000 1999 1998 -------- -------- -------- -------- -------- -------- SELECTED PER UNIT DATA: Total investment income ................................... $ .171 $ .363 $ .402 $ .427 $ .378 $ .350 Operating expenses ........................................ .051 .097 .101 .092 .091 .088 -------- -------- -------- -------- -------- -------- Net investment income (loss) .............................. .120 .266 .301 .335 .287 .262 Unit value at beginning of period ......................... 6.356 6.309 6.063 5.810 5.765 5.393 Net realized and change in unrealized gains (losses) ...... .361 (.219) (.055) (.082) (.242) .110 -------- -------- -------- -------- -------- -------- Unit value at end of period ............................... $ 6.837 $ 6.356 $ 6.309 $ 6.063 $ 5.810 $ 5.765 ======== ======== ======== ======== ======== ======== SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase (decrease) in unit value ..................... $ .48 $ .05 $ .25 $ .25 $ .04 $ .37 Ratio of operating expenses to average net assets ......... 1.57%* 1.57% 1.57% 1.57% 1.57% 1.57% Ratio of net investment income to average net assets ...... 3.67%* 4.31% 4.74% 5.69% 4.97% 4.71% Number of units outstanding at end of period (thousands) .. 12,483 12,733 15,116 14,045 17,412 21,251 Portfolio turnover rate ................................... 71% 113% 166% 105% 340% 438%
* Annualized -20- THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF INVESTMENTS (UNAUDITED) JUNE 30, 2003
PRINCIPAL FAIR AMOUNT VALUE ---------- ---------- BONDS (72.0%) AIRLINES (0.5%) Delta Airlines Inc., 9.25% Debentures, 2007 ............ $ 889,913 $ 578,443 ---------- ASSET BACKED SECURITIES (6.0%) CA Infrastructure, 6.42% Debentures, 2008 .............. 1,100,000 1,192,485 Daimler Chrysler Auto, 4.63% Debentures, 2006 .......... 1,500,000 1,569,432 Discover Card Mt, 6.05% Debentures, 2008 ............... 1,100,000 1,213,715 Ford Credit Auto Owner Trust, 4.75% Debentures, 2006 ... 1,400,000 1,483,686 Metris MT, 1.32% Debentures, 2007 ...................... 100,000 98,418 Toyota Auto Recovery Owner Trust, 2.65% Debentures, 2006 1,200,000 1,219,415 ---------- 6,777,151 ---------- AUTOMOTIVE (2.2%) Daimler Chrysler NA Holdings, 4.05% Debentures, 2008 ... 2,500,000 2,478,518 ---------- BANKING (2.3%) Fleet Financial Group, 7.13% Debentures, 2006 .......... 1,250,000 1,402,460 J.P. Morgan Chase & Co., 5.75% Debentures, 2013 ........ 1,100,000 1,204,833 ---------- 2,607,293 ---------- BROKERAGE (2.4%) Morgan Stanley Dean Witter & Co., 4.25% Debentures, 2010 1,200,000 1,236,982 Morgan Stanley Dean Witter & Co., 5.30% Debentures, 2013 1,400,000 1,490,804 ---------- 2,727,786 ---------- CONGLOMERATES (1.0%) General Electric Capital Corp., 5.45% Debentures, 2013 . 1,000,000 1,085,171 ---------- COLLATERALIZED MORTGAGE OBLIGATIONS (1.5%) Credit Suisse First Boston Corp., 6.38% Debentures, 2035 900,000 1,040,274 LB UBS Commercial Mortgage Trust, 4.85% Debentures, 2031 670,000 708,087 ---------- 1,748,361 ---------- DEFENSE (3.7%) Northrop Grumman Corp., 8.63% Debentures, 2004 ........ 2,000,000 2,165,444 Raytheon Co., 5.70% Debentures, 2003 ................... 1,995,000 2,013,053 ---------- 4,178,497 ---------- FINANCE (4.2%) Ford Motor Credit Co., 6.88% Debentures, 2006 .......... 1,000,000 1,061,227 General Motors Acceptance Corp., 7.25% Debentures, 2011 1,400,000 1,438,643 Household Financial Corp., 6.38% Debentures, 2012 ...... 1,400,000 1,597,653 Washington Mutual Inc., 4.38% Debentures, 2008 ......... 600,000 635,607 ---------- 4,733,130 ---------- FOOD (2.1%) General Mills Inc., 6.00% Debentures, 2012 ............. 2,100,000 2,374,867 ----------
-21- STATEMENT OF INVESTMENTS (UNAUDITED) - CONTINUED
PRINCIPAL FAIR AMOUNT VALUE ---------- ---------- INSURANCE (1.0%) Massachusetts Mutual Life, 2.55% Debentures, 2008 (A) ... $ 900,000 $ 886,531 SAFECO Corp., 7.25% Debentures, 2012 .................... 200,000 240,849 ---------- 1,127,380 ---------- MEDIA CABLE (7.0%) AOL Time Warner Inc., 6.15% Debentures, 2007 ............ 2,400,000 2,702,626 Comcast Cable Communications, 8.50% Debentures, 2027 .... 500,000 646,849 Cox Enterprises Inc., 7.88% Debentures, 2010 (A) ........ 3,800,000 4,625,364 ---------- 7,974,839 ---------- MEDIA NON-CABLE (1.2%) Clear Channel Communications Inc., 7.25% Debentures, 2003 1,300,000 1,313,026 ---------- NATURAL GAS PIPELINE (6.9%) Duke Energy Field Service, 7.50% Debentures, 2005 ....... 500,000 547,077 El Paso Corp,. 6.95% Debentures, 2007 ................... 2,500,000 2,350,000 Gemstone Investments Ltd., 7.71% Debentures, 2004 (A) ... 2,000,000 2,000,000 Osprey 8.31% Debentures, 2049 (A)(B) .................... 3,700,000 518,000 Transcontinental Gas Pipeline, 6.13% Debentures, 2005 ... 2,400,000 2,412,000 ---------- 7,827,077 ---------- REAL ESTATE (6.8%) EOP Operating LP, 8.10% Debentures, 2010 ................ 300,000 367,460 Nationwide Health Properties Inc., 6.90% Debentures, 2037 4,500,000 4,733,244 Post Apartment Homes LP, 6.85% Debentures, 2005 ......... 2,510,000 2,656,802 ---------- 7,757,506 ---------- RETAIL (2.3%) Wal-Mart Stores Inc., 4.55% Debentures, 2013 ............ 2,500,000 2,605,820 ---------- SUPERMARKETS (1.0%) Fred Meyer Inc., 7.45% Debentures, 2008 ................. 1,000,000 1,166,350 ---------- TECHNOLOGY (2.5%) Pitney Bowes Inc., 4.63% Debentures, 2012 ............... 2,700,000 2,828,123 ----------
-22- STATEMENT OF INVESTMENTS (UNAUDITED) - CONTINUED
PRINCIPAL FAIR AMOUNT VALUE ----------- ----------- TELECOMMUNICATIONS (5.0%) NY Telephone Co., 7.00% Debentures, 2025 .................. $ 1,700,000 $ 1,747,090 Qwest Capital Funding, 7.00% Debentures, 2009 ............. 3,000,000 2,482,500 Sprint Capital Corp., 8.38% Debentures, 2012 .............. 500,000 599,810 WorldCom Inc., 6.50% Debentures, 2004 (B) ................. 1,000,000 297,500 WorldCom Inc., 7.50% Debentures, 2011 (B) ................. 1,700,000 505,750 ----------- 5,632,650 ----------- UTILITIES (12.4%) Cleveland Electric Illumination Co., 9.00% Debentures, 2023 1,600,000 1,680,385 PSEG Energy Holdings, 8.63% Debentures, 2008 .............. 450,000 484,305 Pepco Holdings Inc., 5.50% Debentures, 2007 ............... 1,600,000 1,725,363 Progress Energy Inc., 6.05% Debentures, 2007 .............. 2,700,000 2,982,639 Utilicorp United Inc., 6.88% Debentures, 2004 ............. 6,300,000 5,929,875 Xcel Energy Inc., 3.40% Debentures, 2008 (A) .............. 1,200,000 1,193,073 ----------- 13,995,640 ----------- TOTAL BONDS (COST $83,937,089) ......................................................... 81,517,628 ----------- U.S. GOVERNMENT SECURITIES (13.3%) United States of America Treasury, 3.50% due November 2006 3,075,000 3,242,326 United States of America Treasury, 4.75% due November, 2008 1,875,000 2,079,127 United States of America Treasury, 5.00% due February, 2011 1,250,000 1,403,468 United States of America Treasury, 4.00% due November 2012 900,000 936,809 United States of America Treasury, 3.88% due February 2013 7,000,000 7,205,352 United States of America Treasury, 5.38% due February, 2031 200,000 225,274 ----------- TOTAL U.S. GOVERNMENT SECURITIES (COST $14,905,116) ....................................................... 15,092,356 -----------
-23- STATEMENT OF INVESTMENTS (UNAUDITED) - CONTINUED
PRINCIPAL FAIR AMOUNT VALUE ------------ ------------ SHORT-TERM INVESTMENTS (14.7%) COMMERCIAL PAPER (14.7%) CalEnergy Co Inc., 6.96% due September, 2003 ............... $ 920,000 $ 930,033 Clear Channel Communications Inc., 7.25% due September, 2003 990,000 999,920 Clipper Receivables Corp., 1.01% due July, 2003 ............ 1,984,000 1,982,685 General Electric Capital Corp., 1.05% due July, 2003 ....... 2,678,000 2,676,623 Jupiter Securitization Corp., 1.07% due July, 2003 ......... 4,173,000 4,170,233 Sears Roebuck Acceptance Corp., 4.23% due January, 2004 .... 2,100,000 2,119,473 Toyota Motor Credit Corp., 1.07% due July, 2003 ............ 2,514,000 2,512,708 UBS Financial Inc., 1.33% due July, 2003 ................... 1,203,000 1,203,000 ------------ TOTAL SHORT-TERM INVESTMENTS (COST $16,569,347) .............................. 16,594,675 ------------ TOTAL INVESTMENTS (100%) (COST $115,411,552) (C) .................................................... $113,204,659 ============
NOTES (A) Restricted Security. (B) Security is currently in default. (C) At June 30, 2003 net unrealized depreciation for all securities was $2,206,893. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of fair value over cost of $4,198,679 and aggregate gross unrealized depreciation for all securities in which there was an excess of cost over fair value of $6,405,572. See Notes to Financial Statement -24- THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) JUNE 30, 2003 ASSETS: Investment securities, at fair value (cost $115,303,432) ..... $115,300,895 Cash ......................................................... 451 Receivables: Purchase payments and transfers from other funding options . 107,801 Other assets ................................................. 341 ------------ Total Assets ............................................. 115,409,488 ------------ LIABILITIES: Payables: Contract surrenders and transfers to other funding options . 48,240 Investment management and advisory fees .................... 3,064 Insurance charges .......................................... 11,842 Accrued liabilities .......................................... 2,401 ------------ Total Liabilities ........................................ 65,547 ------------ NET ASSETS: $115,343,941 ============ See Notes to Financial Statements -25- THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 2003 INVESTMENT INCOME: Interest ............................................................... $ 805,814 EXPENSES: Investment management and advisory fees ................................ $ 205,159 Insurance charges ...................................................... 793,054 --------- Total expenses ....................................................... 998,213 ---------- Net investment income (loss) ....................................... (192,399) ---------- Net increase (decrease) in net assets resulting from operations ........ $ (192,399) ==========
See Notes to Financial Statements -26- THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, 2003 2002 ------------- ------------- (UNAUDITED) OPERATIONS: Net investment income (loss) ........................................... $ (192,399) $ 299,502 ------------- ------------- Net increase (decrease) in net assets resulting from operations ...... (192,399) 299,502 ------------- ------------- UNIT TRANSACTIONS: Participant purchase payments (applicable to 2,087,144 and 5,858,558 units, respectively) .......... 5,723,662 16,062,122 Participant transfers from other funding options (applicable to 19,432,823 and 64,672,611 units, respectively) ........ 53,291,968 177,339,495 Administrative charges (applicable to 25,266 and 54,859 units, respectively) ................ (69,239) (150,505) Contract surrenders (applicable to 5,953,227 and 13,961,585 units, respectively) ......... (16,325,570) (38,286,908) Participant transfers to other funding options (applicable to 24,006,849 and 68,317,728 units, respectively) ........ (65,834,150) (187,327,842) Other payments to participants (applicable to 194,365 and 935,674 units, respectively) .............. (533,739) (2,566,662) ------------- ------------- Net increase (decrease) in net assets resulting from unit transactions (23,747,068) (34,930,300) ------------- ------------- Net increase (decrease) in net assets .............................. (23,939,467) (34,630,798) NET ASSETS: Beginning of period .................................................... 139,283,408 173,914,206 ------------- ------------- End of period .......................................................... $ 115,343,941 $ 139,283,408 ============= =============
See Notes to Financial Statements -27- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. SIGNIFICANT ACCOUNTING POLICIES The Travelers Money Market Account for Variable Annuities ("Account MM") is a separate account of The Travelers Insurance Company ("The Company"), an indirect wholly owned subsidiary of Citigroup Inc., and is available for funding Universal Annuity contracts issued by The Company. Account MM is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. The following is a summary of significant accounting policies consistently followed by Account MM in the preparation of its financial statements. SECURITY VALUATION. Investments in securities traded on a national securities exchange are valued at the 4:00 p.m. Eastern Standard Time price of such exchanges; securities traded on the over-the-counter market and listed securities with no reported sales are valued at the mean between the last reported bid and asked prices or on the basis of quotations received from a reputable broker or other recognized source. Short-term investments are reported at fair value based on quoted market prices. Short-term investments, for which there is no reliable quoted market price, are recorded at amortized cost which approximates fair value. SECURITY TRANSACTIONS. Security transactions are accounted for on the trade date. Interest income is recorded on the accrual basis. Premiums and discounts are amortized to interest income utilizing the constant yield method. REPURCHASE AGREEMENTS. When Account MM enters into a repurchase agreement (a purchase of securities whereby the seller agrees to repurchase the securities at a mutually agreed upon date and price), the repurchase price of the securities will generally equal the amount paid by Account MM plus a negotiated interest amount. The seller under the repurchase agreement will be required to provide to Account MM securities (collateral) whose market value, including accrued interest, will be at least equal to 102% of the repurchase price. Account MM monitors the value of collateral on a daily basis. Repurchase agreements will be limited to transactions with national banks and reporting broker dealers believed to present minimal credit risks. Account MM's custodian will take actual or constructive receipt of all securities underlying repurchase agreements until such agreements expire. FEDERAL INCOME TAXES. The operations of Account MM form a part of the total operations of The Company and are not taxed separately. The Company is taxed as a life insurance company under the Internal Revenue Code of 1986, as amended (the "Code"). Under existing federal income tax law, no taxes are payable on the investment income and capital gains of Account MM. Account MM is not taxed as a "regulated investment company" under Subchapter M of the Code. OTHER. The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. -28- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED 2. CONTRACT CHARGES Investment management and advisory fees are calculated daily at an annual rate of 0.3233% of Account MM's average net assets. These fees are paid to Travelers Asset Management International Company, LLC, an indirect wholly owned subsidiary of Citigroup Inc. Insurance charges are paid for the mortality and expense risks assumed by The Company. Each business day, The Company deducts a mortality and expense risk charge which is reflected in the calculation of accumulation and annuity unit values. This charge equals, on an annual basis, 1.0017% for contracts issued prior to May 16, 1983 and 1.25% on an annual basis for contracts issued on or after May 16, 1983. For certain contracts in the accumulation phase, a semi-annual charge of $15 (prorated for partial years) is deducted from participant account balances and paid to The Company to cover administrative charges. The Company assesses a 5% contingent deferred sales charge if a participant's purchase payment is surrendered within five years of its payment date. Contract surrender payments are net of contingent sales charges of $158,793 and $361,097 for the six months ended June 30, 2003 and the year ended December 31, 2002, respectively. 3. NET ASSETS HELD ON BEHALF OF AN AFFILIATE Approximately $1,617,000 and $2,208,000 of the net assets of Account MM were held on behalf of an affiliate of The Company as of June 30, 2003 and December 31, 2002, respectively. Transactions with this affiliate during the six months ended June 30, 2003 and the year ended December 31, 2002, were comprised of participant purchase payments of approximately $281,000 and $813,000 and contract surrenders of approximately $870,000 and $885,000, respectively. 4. NET CONTRACT OWNERS' EQUITY
JUNE 30, 2003 ---------------------------------------- UNIT NET UNITS VALUE ASSETS ----- ----- ------ Accumulation phase of contracts issued prior to May 16, 1983 ............ 24,243 $ 2.881 $ 69,840 Annuity phase of contracts issued prior to May 16, 1983 ................. 20,156 2.881 58,066 Accumulation phase of contracts issued on or after May 16, 1983 ......... 41,963,951 2.740 114,988,186 Annuity phase of contracts issued on or after May 16, 1983 .............. 83,152 2.740 227,849 ------------- Net Contract Owners' Equity ...................................................................... $ 115,343,941 =============
-29- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED 5. SUPPLEMENTARY INFORMATION (Selected data for a unit outstanding throughout each period.)
Contracts issued prior to May 16, 1983 SIX MONTHS ENDED FOR THE YEARS ENDED DECEMBER 31, JUNE 30, (DERIVED FROM AUDITED FINANCIAL INFORMATION) -------- --------------------------------------------------- 2003 2002 2001 2000 1999 1998 ------- ------- ------- ------- ------- ------- SELECTED PER UNIT DATA: Total investment income ................................... $ .018 $ .051 $ .120 $ .174 $ .135 $ .138 Operating expenses ........................................ .019 .038 .037 .037 .034 .033 ------- ------- ------- ------- ------- ------- Net investment income (loss) .............................. (.001) .013 .083 .137 .101 .105 Unit value at beginning of period ......................... 2.882 2.869 2.786 2.649 2.548 2.443 ------- ------- ------- ------- ------- ------- Unit value at end of period ............................... $ 2.881 $ 2.882 $ 2.869 $ 2.786 $ 2.649 $ 2.548 ======= ======= ======= ======= ======= ======= SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase (decrease) in unit value ..................... $ .00 $ .01 $ .08 $ .14 $ .10 $ .11 Ratio of operating expenses to average net assets ......... 1.33%* 1.33% 1.33% 1.33% 1.33% 1.33% Ratio of net investment income (loss) to average net assets (0.06)* 0.46% 2.89% 5.09% 3.87% 4.20% Number of units outstanding at end of period (thousands) .. 44 49 60 70 80 91 Contracts issued on or after May 16, 1983 SIX MONTHS ENDED FOR THE YEARS ENDED DECEMBER 31, JUNE 30, (DERIVED FROM AUDITED FINANCIAL INFORMATION) -------- --------------------------------------------------- 2003 2002 2001 2000 1999 1998 ------- ------- ------- ------- ------- ------- SELECTED PER UNIT DATA: Total investment income ................................... $ .017 $ .048 $ .114 $ .167 $ .130 $ .133 Operating expenses ........................................ .021 .043 .042 .041 .039 .038 ------- ------- ------- ------- ------- ------- Net investment income (loss) .............................. (.004) .005 .072 .126 .091 .095 Unit value at beginning of period ......................... 2.744 2.739 2.667 2.541 2.450 2.355 ------- ------- ------- ------- ------- ------- Unit value at end of period ............................... $ 2.740 $ 2.744 $ 2.739 $ 2.667 $ 2.541 $ 2.450 ======= ======= ======= ======= ======= ======= SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase (decrease) in unit value ..................... $ .00 $ .01 $ .07 $ .13 $ .09 $ .10 Ratio of operating expenses to average net assets ......... 1.57%* 1.57% 1.57% 1.57% 1.57% 1.57% Ratio of net investment income (loss) to average net assets (0.30)* 0.21% 2.64% 4.84% 3.62% 3.95% Number of units outstanding at end of period (thousands) .. 42,047 50,702 63,430 55,477 70,545 41,570
* Annualized -30- THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF INVESTMENTS (UNAUDITED) JUNE 30, 2003
PRINCIPAL FAIR AMOUNT VALUE ------------- ------------- SHORT-TERM INVESTMENTS (100%) COMMERCIAL PAPER (81.5%) American Honda Financial Corp., 1.20% due July 9, 2003.............. $ 1,200,000 $ 1,199,674 American Honda Financial Corp., 1.24% due July 10, 2003............. 1,216,000 1,215,632 American Honda Financial Corp., 1.24% due August 5, 2003............ 3,500,000 3,496,241 American Express Credit Corp., 1.04% due August 7, 2003............. 4,540,000 4,534,861 Blueridge Asset Funding Corp., 1.19% due August 5, 2003............. 5,737,000 5,730,838 BMW United States Capital Corp., 1.03% due July 17, 2003............ 1,415,000 1,414,273 Coca-Cola Enterprises Inc., 0.93% due August 5, 2003................ 5,821,000 5,814,748 Crown Point Capital Co. LLC, 1.17% due July 7, 2003................. 4,000,000 3,999,152 DE Funding Corp., 1.07% due July 16, 2003........................... 5,800,000 5,797,193 E.I. Dupont de Nemours & Co., 1.03% due July 14, 2003............... 5,800,000 5,797,541 Goldman Sachs Group Inc., 1.29% due July 18, 2003................... 5,000,000 4,997,280 Marsh & McLennan Cos., 1.13% due July 28, 2003...................... 5,859,000 5,854,073 Montauk Funding Corp., 1.24% due July 17, 2003...................... 3,620,000 3,618,139 Nordea North America Inc., 0.95% due July 22, 2003.................. 5,000,000 4,996,685 Old Line Funding Corp., 1.23% due July 28, 2003..................... 1,700,000 1,698,570 Schering-Plough Corp., 1.25% due July 8, 2003....................... 1,750,000 1,749,576 Sheffield Resources Corp., 1.24% due July 22, 2003.................. 4,954,000 4,950,715 Shell Finance (UK) PLC, 1.02% due August 11, 2003................... 2,978,000 2,974,289 Societe Generale North America, 1.05% due September 10, 2003........ 5,000,000 4,989,500 Starfish Global Funding LLC, 1.24% due July 9, 2003................. 2,394,000 2,393,349 Toyota Motor Credit Corp., 0.95% due July 29, 2003.................. 2,631,000 2,628,708 Toyota Motor Credit Corp., 0.93% due September 15, 2003............. 3,190,000 3,182,835 UBS Financial, Inc., 1.33% due July 1, 2003......................... 1,204,000 1,204,000 Unilever Capital Corp., 1.23% due July 2, 2003...................... 4,155,000 4,154,747 Yorktown Capital LLC, 1.09% due July 21, 2003....................... 2,500,000 2,498,418 Yorktown Capital LLC, 1.00% due August 1, 2003...................... 3,041,000 3,038,087 ------------- 93,929,124 ------------- UNITED STATES AGENCY (18.5%) Federal Home Loan Mortgage Corp., 1.07% due August 14, 2003......... 3,450,000 3,445,953 Federal Home Loan Mortgage Corp., 1.14% due September 3, 2003....... 3,000,000 2,994,879 Federal National Mortgage Association, 1.20% due July 9, 2003....... 8,340,000 8,338,240 Federal National Mortgage Association, 0.89% due July 24, 2003...... 2,753,000 2,751,329 Federal National Mortgage Association, 0.95% due July 25, 2003...... 1,245,000 1,244,212 Federal National Mortgage Association, 0.91% due August 11, 2003.... 2,600,000 2,597,158 ------------- 21,371,771 ------------- TOTAL INVESTMENTS (100%) (COST $115,303,432)......................................................................... $ 115,300,895 =============
See Notes to Financial Statements -31- BOARD OF MANAGERS AND OFFICERS
Name and Position With the Fund Principal Occupation During Last Five Years ----------------- ------------------------------------------- *R. Jay Gerken Managing Director (1989 to present) of Salomon Smith Barney Inc. ("SSB"); Manager Chairman, President and CEO of Smith Barney Fund Management LLC; Travelers 399 Park Avenue Investment Adviser, Inc. and CitiFund Management Inc. Chairman, Chief Executive New York, NY Officer and President, Board of Managers (2002-present), six Variable Annuity Age 52 Separate Accounts of The Travelers Insurance Company+; Chairman, Chief Executive Officer and President, Board of Trustees (2002-present), five Mutual Funds sponsored by The Travelers Insurance Company.++ Robert E. McGill, III Retired manufacturing executive. Director (1983-1995), Executive Vice President Manager (1989-1994) and Senior Vice President, Finance and Administration (1983-1989), 295 Hancock Street The Dexter Corporation (manufacturer of specialty chemicals and materials); Vice Williamstown, MA Chairman (1990-1992), Director (1983-1995), Life Technologies, Inc. (life Age 72 science/biotechnology products); Director, (1994-1999), The Connecticut Surety Corporation (insurance); Director (1995-2000), Chemfab Corporation (specialty materials manufacturer); Director (1999-2001), Ravenwood Winery, Inc.; Director (1999-present), Lydall Inc. (manufacturer of fiber materials); Member, Board of Managers (1974-present), six Variable Annuity Separate Accounts of The Travelers Insurance Company+; Trustee (1990-present), five Mutual Funds sponsored by The Travelers Insurance Company.++ Lewis Mandell Professor of Finance and Managerial Economics, University at Buffalo since Manager 1998. Dean, School of Management (1998-2001), University at Buffalo; Dean, 160 Jacobs Hall College of Business Administration (1995-1998), Marquette University; Professor Buffalo, NY of Finance (1980-1995) and Associate Dean (1993-1995), School of Business Age 60 Administration, and Director, Center for Research and Development in Financial Services (1980-1995), University of Connecticut; Director (2000-present), Delaware North Corp. (hospitality business); Member, Board of Managers (1990-present), six Variable Annuity Separate Accounts of The Travelers Insurance Company+; Trustee (1990-present), five Mutual Funds sponsored by The Travelers Insurance Company.++ Frances M. Hawk, Private Investor, (1997-present); Portfolio Manager (1992-1997, HLM Management CFA, CFP Company, Inc. (investment management); Assistant Treasurer, Pensions and Manager Benefits. Management (1989-1992), United Technologies Corporation (broad-based 423 Vineyard Lane designer and manufacturer of high technology products); Member, Board of Downingtown, PA Managers (1991-present), six Variable Annuity Separate Accounts of The Travelers Age 55 Insurance Company+; Trustee (1991-present), five Mutual Funds sponsored by The Travelers Insurance Company.++ Ernest J. Wright Vice President and Secretary (1996-present), Assistant Secretary (1994-1996), Secretary to the Board Counsel (1987-present), The Travelers Insurance Company; Secretary One CityPlace (1994-present), six Variable Annuity Separate Accounts of The Travelers Hartford, Connecticut Insurance Company+; Secretary (1994-present), five Mutual Funds sponsored by The Age 63 Travelers Insurance Company.++
-32-
Name and Position With the Fund Principal Occupation During Last Five Years ----------------- ------------------------------------------- Kathleen A. McGah Deputy General Counsel (1999-present); Assistant Secretary (1995-present), The Assistant Secretary to Travelers Insurance Company; Assistant Secretary (1995-present), six Variable The Board Annuity Separate Accounts of The Travelers Insurance Company+; Assistant One CityPlace Secretary, (1995-present), five Mutual Funds sponsored by The Travelers Hartford, Connecticut Insurance Company.++ Prior to January 1995, Counsel, ITT Hartford Life Age 52 Insurance Company. David A. Golino Vice President and Controller (1999-present), Second Vice President (1996-1999), Principal Accounting Officer The Travelers Insurance Company; Principal Accounting Officer (1998-present), One CityPlace six Variable Annuity Separate Accounts of The Travelers Insurance Company.+ Hartford, Connecticut Prior to May 1996, Senior Manager (1985-1996), Deloitte & Touche LLP. Age 41
+ The six Variable Annuity Separate Accounts are: The Travelers Growth and Income Stock Account for Variable Annuities, The Travelers Quality Bond Account for Variable Annuities, The Travelers Money Market Account for Variable Annuities, The Travelers Timed Growth and Income Stock Account for Variable Annuities, The Travelers Timed Short-Term Bond Account for Variable Annuities and The Travelers Timed Aggressive Stock Account for Variable Annuities. ++ The five Mutual Funds are: Capital Appreciation Fund, Money Market Portfolio, High Yield Bond Trust, Managed Assets Trust and The Travelers Series Trust. * Mr. Gerken is an "interested person" within the meaning of the 1940 Act by virtue of his position as Managing Director of Salomon Smith Barney, Inc., an indirect wholly owned subsidiary of Citigroup Inc., and his ownership of shares and options to purchase shares of Citigroup Inc., the indirect parent of The Travelers Insurance Company. -33- INVESTMENT ADVISER ------------------ TRAVELERS ASSET MANAGEMENT INTERNATIONAL COMPANY, LLC Hartford, Connecticut THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES INVESTMENT SUB-ADVISER ---------------------- THE TRAVELERS INVESTMENT MANAGEMENT COMPANY Stamford, Connecticut THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES INDEPENDENT ACCOUNTANTS ----------------------- KPMG LLP Hartford, Connecticut CUSTODIAN --------- JPMorgan Chase Bank New York, New York The financial information included herein has been taken from the records of The Travelers Growth and Income Stock Account for Variable Annuities, The Travelers Quality Bond Account for Variable Annuities and The Travelers Money Market Account for Variable Annuities. This financial information has not been audited by the Accounts' independent accountants, who therefore express no opinion concerning its accuracy. However, it is management's opinion that all proper adjustments have been made. This report is prepared for the general information of contract owners and is not an offer of units of The Travelers Growth and Income Stock Account for Variable Annuities, The Travelers Quality Bond Account for Variable Annuities or The Travelers Money Market Account for Variable Annuities. It should not be used in connection with any offer except in conjunction with the Universal Annuity Prospectus which contains all pertinent information, including the applicable sales commissions. VG-137 (Semi-Annual) (6-03) Printed in U.S.A. ITEM 2. CODE OF ETHICS. Not applicable. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. [RESERVED] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. [RESERVED] ITEM 9. CONTROLS AND PROCEDURES. (a) The registrant's principal executive officer and principal financial officer have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a - 3 (c) under the Investment Company Act of 1940, as amended) are effective based on their evaluation of the disclosure controls and procedures as of a date within 90 days of the filing date of this document. (b) There have been no significant changes to the registrant's internal control over financial reporting that occurred during the registrant's last fiscal half-year that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 10. EXHIBITS. (a)(2) Certifications pursuant to section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto as Exhibit 99.CERT. (b) Certifications pursuant to section 906 of the Sarbanes-Oxley Act of 2002 are furnished as Exhibit 99.906CERT SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Travelers Growth and Income Stock Account For Variable Annuities Travelers Quality Bond Account For Variable Annuities Travelers Money Market Account For Variable Annuities By: /s/ R. Jay Gerken R. Jay Gerken Chairman of the Board Chief Executive Officer Travelers Growth and Income Stock Account For Variable Annuities Travelers Quality Bond Account For Variable Annuities Travelers Money Market Account For Variable Annuities Date September 4, 2003 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ R. Jay Gerken R. Jay Gerken Chairman of the Board Chief Executive Officer Travelers Growth and Income Stock Account For Variable Annuities Travelers Quality Bond Account For Variable Annuities Travelers Money Market Account For Variable Annuities Date September 4, 2003 By: /s/ David A. Golino David A. Golino Principal Accounting Officer Travelers Growth and Income Stock Account For Variable Annuities Travelers Quality Bond Account For Variable Annuities Travelers Money Market Account For Variable Annuities Date September 4, 2003