-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GNB5a+pJX6O97qDn47m7QrX1getZCvM/tXHYoNZuQ92LzoLMUOFZmX8UrmGd7ZuK AsM9PZHMYuBVRJl1ht8BbA== 0000930413-05-001232.txt : 20050225 0000930413-05-001232.hdr.sgml : 20050225 20050225171219 ACCESSION NUMBER: 0000930413-05-001232 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20041231 FILED AS OF DATE: 20050225 DATE AS OF CHANGE: 20050225 EFFECTIVENESS DATE: 20050225 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES CENTRAL INDEX KEY: 0000099440 IRS NUMBER: 060566090 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-02571 FILM NUMBER: 05642264 BUSINESS ADDRESS: STREET 1: ONE TOWER SQ STREET 2: C/O TRAVELERS INSURANCE CO CITY: HARTFORD STATE: CT ZIP: 06183-2020 BUSINESS PHONE: 8602770111 MAIL ADDRESS: STREET 1: ONE TOWER SQUARE STREET 2: ATTN FINANCIAL SERVICES LEGAL DIVISION CITY: HARTFORD STATE: CT ZIP: 06183-2020 FORMER COMPANY: FORMER CONFORMED NAME: TRAVELERS FUND A-1 FOR VARIABLE ANNUITIES DATE OF NAME CHANGE: 19851103 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRAVELERS GROWTH & INCOME STOCK ACCT FOR VARIABLE ANNUITIES CENTRAL INDEX KEY: 0000099444 IRS NUMBER: 060566090 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-01539 FILM NUMBER: 05642263 BUSINESS ADDRESS: STREET 1: ONE TOWER SQ STREET 2: C/O TRAVELERS INSURANCE CO CITY: HARTFORD STATE: CT ZIP: 06183-2020 BUSINESS PHONE: 8602770111 MAIL ADDRESS: STREET 1: ONE TOWER SQUARE STREET 2: ATTN FINANCIAL SERVICES LEGAL DIVISION CITY: HARTFORD STATE: CT ZIP: 06183-2020 FORMER COMPANY: FORMER CONFORMED NAME: TRAVELERS FUND A FOR VARIABLE ANNUITIES DATE OF NAME CHANGE: 19851103 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES CENTRAL INDEX KEY: 0000700871 IRS NUMBER: 060566090 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-03409 FILM NUMBER: 05642262 BUSINESS ADDRESS: STREET 1: ONE TOWER SQ STREET 2: C/O TRAVELERS INSURANCE CO CITY: HARTFORD STATE: CT ZIP: 06183 BUSINESS PHONE: 8602770111 MAIL ADDRESS: STREET 1: ONE TOWER SQUARE STREET 2: ATTN FINANCIAL SERVICES LEGAL DIVISION CITY: HARTFORD STATE: CT ZIP: 06183-2020 FORMER COMPANY: FORMER CONFORMED NAME: TRAVELERS FUND MM FOR VARIABLE ANNUITIES DATE OF NAME CHANGE: 19851103 N-CSR 1 c35633_ncsr.txt --------------------------- OMB APPROVAL --------------------------- OMB Number: 3235-0570 Expires: September 31, 2007 Estimated average burden hours per response: 19.4 --------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-01539 811-02571 811-03409 Travelers Growth and Income Stock Account For Variable Annuities Travelers Quality Bond Account For Variable Annuities Travelers Money Market Account For Variable Annuities One Cityplace, Hartford, CT 06103 Kathleen A. McGah One Cityplace Hartford, CT 06103 (860) 308-6202 Date of fiscal year end: December 31, 2004 Date of reporting period: December 31, 2004 ITEM 1. REPORT(S) TO STOCKHOLDERS. The Annual Report to stockholders is filed herewith. ANNUAL REPORTS DECEMBER 31, 2004 THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES [TRAVELERS LOGO] The Travelers Insurance Company The Travelers Life and Annuity Company One Cityplace Hartford, CT 06103 [LOGO OF TAMIC] Travelers Asset Management International Company, LLC ("TAMIC") provides fixed income management and advisory services for the following Travelers Life & Annuity Variable Products Separate Accounts ("Accounts") contained in this report: The Travelers Growth and Income Stock Account for Variable Annuities, The Travelers Quality Bond Account for Variable Annuities and The Travelers Money Market Account for Variable Annuities. The Travelers Investment Management Company ("TIMCO") [LOGO OF TIMCO] provides equity management and subadvisory services for A member of citigroup The Travelers Growth and Income Stock Account for Variable Annuities. TABLE OF CONTENTS PAGE - -------------------------------------------------------------------------------- THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES.........................................................1 THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES.....................16 THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES.....................31 BOARD OF MANAGERS AND OFFICERS................................................42 [This Page Intentionally Left Blank] THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2004 ASSETS: Investment securities, at fair value (cost $457,118,648) ..... $525,130,438 Cash ......................................................... 20,777 Receivables: Dividends .................................................. 644,961 Purchase payments and transfers from other funding options . 182,930 Other assets ................................................. 25,572 ------------ Total Assets ............................................. 526,004,678 ------------ LIABILITIES: Payables: Contract surrenders and transfers to other funding options . 236,020 Investment management and advisory fees .................... 74,160 Variation on futures margin ................................ 7,500 Insurance charges .......................................... 135,669 Accrued liabilities .......................................... 953 ------------ Total Liabilities ........................................ 454,302 ------------ NET ASSETS: $525,550,376 ============ See Notes to Financial Statements -1- THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2004 INVESTMENT INCOME: Dividends ...................................................................... $ 9,393,239 Interest ....................................................................... 173,741 ------------- Total income ................................................................. $ 9,566,980 EXPENSES: Investment management and advisory fees ........................................ 3,301,527 Insurance charges .............................................................. 6,016,031 ------------- Total expenses ............................................................... 9,317,558 ------------ Net investment income (loss) ............................................... 249,422 ------------ REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES: Realized gain (loss) from investment security transactions: Proceeds from investment securities sold ..................................... 265,720,698 Cost of investment securities sold ........................................... 240,753,114 ------------- Net realized gain (loss) ................................................... 24,967,584 Change in unrealized gain (loss) on investment securities: Unrealized gain (loss) at December 31, 2004 .................................. 68,011,790 Unrealized gain (loss) at December 31, 2003 .................................. 39,489,069 ------------- Net change in unrealized gain (loss) for the year .......................... 28,522,721 ------------ Net realized gain (loss) and change in unrealized gain (loss) ............ 53,490,305 ------------ Net increase (decrease) in net assets resulting from operations ................ $ 53,739,727 ============
See Notes to Financial Statements -2- THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
2004 2003 ---- ---- OPERATIONS: Net investment income (loss) ....................................... $ 249,422 $ (633,004) Net realized gain (loss) from investment security transactions ..... 24,967,584 (11,393,690) Net change in unrealized gain (loss) on investment securities ...... 28,522,721 123,366,058 ------------- ------------- Net increase (decrease) in net assets resulting from operations .. 53,739,727 111,339,364 ------------- ------------- UNIT TRANSACTIONS: Participant purchase payments (applicable to 902,159 and 1,271,619 units, respectively) ........ 15,767,591 18,530,423 Participant transfers from other funding options (applicable to 468,530 and 754,088 units, respectively) .......... 8,184,838 11,209,365 Administrative charges (applicable to 22,684 and 29,037 units, respectively) ............ (412,112) (458,191) Contract surrenders (applicable to 2,787,531 and 3,418,518 units, respectively) ...... (49,336,289) (50,866,631) Participant transfers to other funding options (applicable to 976,561 and 1,576,742 units, respectively) ........ (17,069,498) (22,824,923) Other payments to participants (applicable to 183,493 and 197,838 units, respectively) .......... (3,341,401) (2,992,921) ------------- ------------- Net increase (decrease) in net assets resulting from unit transactions (46,206,871) (47,402,878) ------------- ------------- Net increase (decrease) in net assets ............................ 7,532,856 63,936,486 NET ASSETS: Beginning of year .................................................. 518,017,520 454,081,034 ------------- ------------- End of year ........................................................ $ 525,550,376 $ 518,017,520 ============= =============
See Notes to Financial Statements -3- NOTES TO FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES The Travelers Growth and Income Stock Account for Variable Annuities ("Account GIS") is a separate account of The Travelers Insurance Company ("The Company"), an indirect wholly owned subsidiary of Citigroup Inc., and is available for funding Universal Annuity, Universal Select Annuity, and Universal Annuity Advantage contracts issued by The Company. Account GIS is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. The following is a summary of significant accounting policies consistently followed by Account GIS in the preparation of its financial statements. SECURITY VALUATION. Investments in securities traded on a national securities exchange are valued at the 4:00 p.m. Eastern Standard Time price of such exchanges; securities traded on the over-the-counter market and listed securities with no reported sales are valued at the mean between the last reported bid and asked prices or on the basis of quotations received from a reputable broker or other recognized source. Short-term investments are reported at fair value based on quoted market prices. Short-term investments, for which there is no reliable quoted market price, are recorded at amortized cost which approximates fair value. SECURITY TRANSACTIONS. Security transactions are accounted for on the trade date. Dividend income is recorded on the ex-dividend date. Interest income is recorded on the accrual basis. Premiums and discounts are amortized to interest income utilizing the constant yield method. FUTURES CONTRACTS. Account GIS may use stock index futures contracts as a substitute for the purchase or sale of individual securities. When Account GIS enters into a futures contract, it agrees to buy or sell a specified index of stocks at a future time for a fixed price, unless the contract is closed prior to expiration. Account GIS is obligated to deposit with a broker an "initial margin" equivalent to a percentage of the face, or notional value of the contract. It is Account GIS's practice to hold cash and cash equivalents in an amount at least equal to the notional value of outstanding purchased futures contracts, less the initial margin. Cash and cash equivalents include cash on hand, securities segregated under federal and brokerage regulations, and short-term highly liquid investments with maturities generally three months or less when purchased. Generally, futures contracts are closed prior to expiration. Futures contracts purchased by Account GIS are priced and settled daily; accordingly, changes in daily prices are recorded as realized gains or losses and no asset is recorded in the Statement of Investments. Therefore, when Account GIS holds open futures contracts, it assumes a market risk generally equivalent to the underlying market risk of change in the value of the specified indexes associated with the futures contract. OPTIONS. Account GIS may purchase index or individual equity put or call options, thereby obtaining the right to sell or buy a fixed number of shares of the underlying asset at the stated price on or before the stated expiration date. Account GIS may sell the options before expiration. Options held by Account GIS are listed on either national securities exchanges or on over-the-counter markets and are short-term contracts with a duration of less than nine months. The market value of the options will be based on the 4:00 p.m. Eastern Standard Time price of the respective exchange, or in the absence of such price, the latest bid quotation. There were no put or call options in Account GIS in 2004. REPURCHASE AGREEMENTS. When Account GIS enters into a repurchase agreement (a purchase of securities whereby the seller agrees to repurchase the securities at a mutually agreed upon date and price), the repurchase price of the securities will generally equal the amount paid by Account GIS plus a negotiated interest amount. The seller under the repurchase agreement will be required to provide to Account GIS securities (collateral) whose market value, including accrued interest, will be at least equal to 102% of the repurchase price. Account GIS monitors the value of collateral on a daily basis. Repurchase agreements will be limited to transactions with national banks and reporting broker dealers believed to present minimal credit risks. Account GIS's custodian will take actual or constructive receipt of all securities underlying repurchase agreements until such agreements expire. There were no repurchase agreements in Account GIS in 2004. -4- NOTES TO FINANCIAL STATEMENTS - CONTINUED FEDERAL INCOME TAXES. The operations of Account GIS form a part of the total operations of The Company and are not taxed separately. The Company is taxed as a life insurance company under the Internal Revenue Code of 1986, as amended (the "Code"). Under existing federal income tax law, no taxes are payable on the investment income and capital gains of Account GIS. Account GIS is not taxed as a "regulated investment company" under Subchapter M of the Code. OTHER. The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. INVESTMENTS The aggregate costs of purchases and proceeds from sales of investments (other than short-term securities), were $211,052,487 and $252,443,434, respectively; the costs of purchases and proceeds from sales of direct and indirect U.S. government securities were $6,878,499 and $7,401,970, respectively, for the year ended December 31, 2004. Realized gains and losses from investment security transactions are reported on an identified cost basis. At December 31, 2004, Account GIS held 30 open S&P 500 Stock Index futures contracts expiring in March, 2005. The underlying face value, or notional value, of these contracts at December 31, 2004 amounted to $9,102,750. In connection with these contracts, short-term investments with a par value of $1,400,000 had been pledged as margin deposits. Net realized gains (losses) resulting from futures contracts were $601,653 and $3,542,973 for the years ended December 31, 2004 and 2003, respectively. These gains (losses) are included in the net realized gain (loss) from investment security transactions on both the Statement of Operations and the Statement of Changes in Net Assets. The cash settlement for December 31, 2004 is shown on the Statement of Assets and Liabilities as a payable for variation on futures margin. 3. CONTRACT CHARGES Investment management and advisory fees are calculated daily at annual rates which start at 0.65% and decrease, as net assets increase, to 0.40% of Account GIS's average net assets. These fees are paid to Travelers Asset Management International Company, LLC ("TAMIC"), an indirect wholly owned subsidiary of Citigroup Inc. Pursuant to a subadvisory agreement between TAMIC and The Travelers Investment Management Company ("TIMCO"), an indirect wholly owned subsidiary of Citigroup Inc., TAMIC pays TIMCO a subadvisory fee calculated daily at annual rates which start at 0.45% and decrease, as net assets increase, to 0.20% of Account GIS's average net assets. The asset-based charges listed below are deducted, as appropriate, each business day and are assessed through the calculation of accumulation and annuity unit values; - Mortality and Expense Risks assumed by The Company (M&E) - Administrative fees paid for administrative expenses (ADM) - Guaranteed Minimum Withdrawal Benefit, if elected by the contract owner (GMWB) Below is a table displaying total M&E and rider charges with their associated products offered in this Separate Account. The table displays Standard (S) and Annual Step-Up (SU) death-benefit designations. -5- NOTES TO FINANCIAL STATEMENTS - CONTINUED 3. CONTRACT CHARGES (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------ TRAVELERS GROWTH AND INCOME STOCK ACCOUNT - ------------------------------------------------------------------------------------------------------------------------------------ Asset-based Charges -------------------------------------- ---------------- Optional Feature Total M&E and Rider Charges (1) Dth ---------------- Total (as identified in Note 4) Ben Product M&E GMWB Charge - ------------------------------------------------------------------------------------------------------------------------------------ Total M&E and Rider Charges 1.00%, 3.5% AIR S Universal Annuity (1) 1.00% 1.00% Total M&E and Rider Charges 1.25%, 3.0% AIR S Universal Select Annuity 1.25% 1.25% Total M&E and Rider Charges 1.25%, 3.5% AIR S Universal Annuity (2) 1.25% 1.25% S Universal Annuity Advantage 1.25% 1.25% Total M&E and Rider Charges 1.40%, 3.0% AIR SU Universal Select Annuity 1.40% 1.40% Total M&E and Rider Charges 1.40%, 3.5% AIR SU Universal Annuity Advantage 1.40% 1.40% Total M&E and Rider Charges 1.65%, 3.0% AIR S Universal Select Annuity 1.25% 0.40% 1.65% Total M&E and Rider Charges 1.65%, 3.5% AIR S Universal Annuity Advantage 1.25% 0.40% 1.65% Total M&E and Rider Charges 1.80%, 3.0% AIR SU Universal Select Annuity 1.40% 0.40% 1.80% Total M&E and Rider Charges 1.80%, 3.5% AIR SU Universal Annuity Advantage 1.40% 0.40% 1.80% - ------------------------------------------------------------------------------------------------------------------------------------
(1) Contracts issued prior to May 16, 1983 (2) Contracts issued on or after May 16, 1983 For certain contracts in the accumulation phase, a semi-annual charge of $15 (prorated for partial years) is deducted from participant account balances and paid to The Company to cover administrative charges. On contracts issued prior to May 16, 1983, The Company retained from Account GIS sales charges of $7,727 and $12,494 for the years ended December 31, 2004 and 2003, respectively. The Company generally assesses a 5% contingent deferred sales charge if a participant's purchase payment is surrendered within five years of its payment date. Contract surrender payments are net of contingent deferred sales charges of $221,650 and $406,883 for the years ended December 31, 2004 and 2003, respectively. 4. NET ASSETS HELD ON BEHALF OF AN AFFILIATE Approximately $13,321,000 and $12,382,000 of the net assets of Account GIS were held on behalf of an affiliate of The Company as of December 31, 2004 and 2003, respectively. Transactions with this affiliate during the years ended December 31, 2004 and 2003, were comprised of participant purchase payments of approximately $3,000 and $32,000 and contract surrenders of approximately $438,000 and $534,000, respectively. -6- NOTES TO FINANCIAL STATEMENTS - CONTINUED 5. NET CONTRACT OWNERS' EQUITY
DECEMBER 31, 2004 -------------------------------------- UNIT UNITS VALUE NET ASSETS ---------- -------- ------------- Total M&E and Rider Charges 1.00%, 3.5% AIR ..... 7,413,174 $ 19.949 $ 147,887,397 Total M&E and Rider Charges 1.25%, 3.5% AIR ..... 19,978,415 18.903 377,662,677 Total M&E and Rider Charges 1.25%, 3.0% AIR ..... 278 1.087 302 ------------- Net Contract Owners' Equity .............................................. $ 525,550,376 =============
-7- NOTES TO FINANCIAL STATEMENTS - CONTINUED 6. SUPPLEMENTARY INFORMATION (Selected data for a unit outstanding throughout each year.) Total M&E and Rider Charges 1.00%, 3.5% AIR
FOR THE YEARS ENDED DECEMBER 31, -------------------------------------------------------------- 2004 2003 2002 2001 2000 ---- ---- ---- ---- ---- SELECTED PER UNIT DATA: Total investment income ................................... $ .348 $ .264 $ .240 $ .266 $ .242 Operating expenses ........................................ .303 .256 .261 .311 .376 ------- ------- ------- ------- ------- Net investment income (loss) .............................. .045 .008 (.021) (.045) (.134) Unit value at beginning of year ........................... 17.926 14.172 18.064 21.418 24.427 Net realized and change in unrealized gains (losses) ...... 1.978 3.746 (3.871) (3.309) (2.875) ------- ------- ------- ------- ------- Unit value at end of year ................................. $19.949 $17.926 $14.172 $18.064 $21.418 ======= ======= ======= ======= ======= SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase (decrease) in unit value ..................... $ 2.02 $ 3.75 $ (3.89) $ (3.35) $ (3.01) Ratio of operating expenses to average net assets ......... 1.65% 1.65% 1.64% 1.63% 1.60% Ratio of net investment income (loss) to average net assets 0.23% 0.06% (0.12)% (0.24)% (0.57)% Number of units outstanding at end of year (thousands) .... 7,413 8,139 9,088 10,329 11,413 Portfolio turnover rate ................................... 43% 68% 54% 32% 52%
Total M&E and Rider Charges 1.25%, 3.5% AIR
FOR THE YEARS ENDED DECEMBER 31, -------------------------------------------------------------- 2004 2003 2002 2001 2000 ---- ---- ---- ---- ---- SELECTED PER UNIT DATA: Total investment income ................................... $ .330 $ .251 $ .229 $ .254 $ .232 Operating expenses ........................................ .331 .281 .287 .343 .416 ------- ------- ------- ------- ------- Net investment income (loss) .............................. (.001) (.030) (.058) (.089) (.184) Unit value at beginning of year ........................... 17.028 13.496 17.245 20.498 23.436 Net realized and change in unrealized gains (losses) ...... 1.876 3.562 (3.691) (3.164) (2.754) ------- ------- ------- ------- ------- Unit value at end of year ................................. $18.903 $17.028 $13.496 $17.245 $20.498 ======= ======= ======= ======= ======= SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase (decrease) in unit value ..................... $ 1.88 $ 3.53 $ (3.75) $ (3.25) $ (2.94) Ratio of operating expenses to average net assets ......... 1.90% 1.90% 1.89% 1.88% 1.84% Ratio of net investment income (loss) to average net assets (0.02)% (0.19)% (0.37)% (0.49)% (0.82)% Number of units outstanding at end of year (thousands) .... 19,978 21,853 24,100 27,559 29,879 Portfolio turnover rate ................................... 43% 68% 54% 32% 59%
-8- NOTES TO FINANCIAL STATEMENTS - CONTINUED 6. SUPPLEMENTARY INFORMATION (CONTINUED) (Selected data for a unit outstanding throughout each period.)
FROM DECEMBER 10, 2004 Total M&E and Rider Charges 1.25%, 3.0% AIR (INCEPTION DATE) TO DECEMBER 31, 2004 --------- SELECTED PER UNIT DATA: Total investment income .................................... $ .001 Operating expenses ......................................... .001 --------- Net investment income (loss) ............................... -- Unit value at beginning of period .......................... 1.066 Net realized and change in unrealized gains (losses) ....... .021 --------- Unit value at end of year .................................. $ 1.087 ========= SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase (decrease) in unit value ...................... $ .02 Ratio of operating expenses to average net assets* ......... 1.90% Ratio of net investment income (loss) to average net assets* (0.49)% Number of units outstanding at end of year (thousands)** ... -- Portfolio turnover rate .................................... 43%
* Annualized ** Unit Balance rounds to less than 1,000 units 7. SUBSEQUENT EVENT On January 31, 2005, Citigroup Inc. ("Citigroup") announced that it had agreed to sell The Travelers Insurance Company ("TIC"), The Travelers Life and Annuity Company, Citicorp Life Insurance Company, First Citicorp Life Insurance Company, Citicorp International Life Insurance Company, The Travelers Life and Annuity Reinsurance Company, and certain other domestic and international insurance businesses (the "Life Insurance and Annuity Businesses") to MetLife, Inc. ("MetLife") pursuant to an Acquisition Agreement (the "Agreement"). The transaction is subject to certain regulatory approvals, as well as other customary conditions to closing. Citigroup currently anticipates that the intended sale would be closed this summer. The proposed sale would also include TIC's affiliated investment advisory companies, Travelers Asset Management International Company LLC, which serves as the investment advisor for certain of the variable product separate accounts. The transaction contemplates that TIC's Primerica Life segment and certain other assets will remain with Citigroup. Accordingly, prior to the closing, TIC will distribute to its parent company by way of dividend (i) all of the outstanding shares of common stock of the Company's 100% owned subsidiary, Primerica Life Insurance Company ("Primerica Life"), (ii) all shares of Citigroup's Series YYY and Series YY preferred stock held by the Company and (iii) certain other assets, including certain assets and liabilities related to the Company's share of the non-qualified pension plan, and post retirement benefits related to inactive employees of the former Travelers Insurance entities, assumed during Citigroup's 2002 spin-off of the Travelers Property Casualty operations (collectively, the "Dispositions"). The Dispositions require certain regulatory approvals. Subject to closing adjustments described in the Agreement, the contemplated sale price would be $11.5 billion. In connection with the consummation of the sale of the Life Insurance and Annuity Business, Citigroup and MetLife will also enter into multi-year distribution agreements. TIC filed a Form 8-K Current Report with The United States Securities and Exchange Commission on February 2, 2005, with additional information about the transaction. -9- THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES SUMMARY OF HOLDINGS DECEMBER 31, 2004 % of net assets -------- COMMON STOCK Technology 14.5 Banking 8.1 Pharmaceuticals 7.7 Retailers 6.3 Insurance 6.1 Conglomerates 5.9 Integrated Energy 4.7 Telecommunications 4.2 Consumers 3.9 Brokerage 3.1 Multimedia 2.4 Beverage 2.2 Entertainment 2.2 Medical Supplies 2.1 Automotive 1.8 Food 1.8 Finance 1.7 Utilities 1.7 Chemicals 1.5 Electric Utilities 1.4 Healthcare 1.4 Oil Companies 1.4 Services 1.4 Capital Goods 1.3 United States Agency Securities 1.3 Tobacco 1.1 Transportation Services 1.0 Metals 0.9 Aerospace 0.8 Defense 0.7 Paper 0.7 Independent Energy 0.6 Lodging 0.5 Machinery 0.4 Home Construction 0.3 Biotechnology 0.2 Building Materials 0.2 Media Cable 0.2 Restaurants 0.2 -------- TOTAL COMMON STOCK 97.9 -------- SHORT-TERM INVESTMENTS Commercial Paper 1.7 U.S. Treasury 0.3 -------- SHORT-TERM INVESTMENTS 2.0 -------- TOTAL INVESTMENTS 99.9 -------- Other Assets and Liabilities 0.1 -------- TOTAL NET ASSETS 100.0 ======== -10- THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF INVESTMENTS - CONTINUED DECEMBER 31, 2004
NO. OF FAIR SHARES VALUE -------- ------------ COMMON STOCK (97.9%) AEROSPACE (0.8%) Boeing Co. 28,246 $ 1,462,295 General Dynamics Corp. 25,345 2,651,087 ------------ 4,113,382 ------------ AUTOMOTIVE (1.8%) Ford Motor Co. 154,802 2,266,301 General Motors Corp. 63,120 2,528,587 Harley-Davidson 29,269 1,778,092 PACCAR Inc. 34,033 2,741,188 ------------ 9,314,168 ------------ BANKING (8.1%) Bank of America Corp. 251,896 11,836,593 Capital One Financial Corp. 41,225 3,471,557 First Horizon National 194 8,363 JP Morgan Chase & Co. 215,959 8,424,561 KeyCorp 20,766 703,967 Marshall & Ilsley Corp. 17,756 784,815 MBNA Corp. 19,662 554,272 National City Corp. 64,375 2,417,281 Providian Financial Corp. 60,475 996,023 U.S. Bancorp 49,664 1,555,476 Wachovia Corp. 102,940 5,414,644 Washington Mutual, Inc. 12,899 545,370 Wells Fargo & Co. 95,736 5,949,992 ------------ 42,662,914 ------------ BEVERAGE (2.2%) Anheuser-Busch Companies, Inc. 10,621 538,803 Coca-Cola Co. 137,596 5,728,121 Coca-Cola Enterprises Inc. 21,135 440,665 PepsiCo, Inc. 95,024 4,960,253 ------------ 11,667,842 ------------ BIOTECHNOLOGY (0.2%) Genetech Inc. (A) 19,494 1,061,253 ------------ BROKERAGE (3.1%) Bear Stearns Companies 35,041 3,585,045 Goldman Sachs Group Inc. 39,880 4,149,115 Lehman Brothers Holdings Inc. 29,158 2,550,742 Merrill Lynch & Co. Inc. 37,104 2,217,706 Morgan Stanley 64,849 3,600,416 ------------ 16,103,024 ------------ BUILDING MATERIALS (0.2%) Masco Corp. 34,802 1,271,317 ------------ CAPITAL GOODS (1.3%) Danaher Corp. 43,166 2,478,160 Deere & Co. 34,389 2,558,542 Eaton Corp. 9,593 694,149 Waters Corp. (A) 28,148 1,317,045 ------------ 7,047,896 ------------ CHEMICALS (1.5%) Dow Chemical 54,755 2,710,920 E.I. du Pont de Nemours & Co. 20,432 1,002,190 Ecolab Inc. 35,126 1,233,976 Monsanto Co. 53,651 2,980,313 ------------ 7,927,399 ------------ CONGLOMERATES (5.9%) Dover Corp. 37,305 1,564,572 General Electric Co. 460,123 16,794,490 Honeywell International, Inc. 39,585 1,401,705 ITT Industries, Inc. 16,129 1,362,094 Parker-Hannifin 22,419 1,698,015 3M Co. 25,087 2,058,890 Tyco International Ltd. 98,765 3,529,861 United Technologies Corp. 23,814 2,461,177 ------------ 30,870,804 ------------ CONSUMERS (3.9%) Avery Dennison Corp. 12,646 758,381 Ball Corp. 21,326 937,917 Black & Decker Corp. 3,991 352,525 Colgate-Palmolive Co. 15,893 813,086 Eastman Kodak 45,135 1,455,604 Fortune Brands 26,616 2,054,223 Gillette Co. 23,251 1,041,180 NIKE, Inc. (Class B) 38,492 3,490,839 Pactiv Corp. (A) 49,646 1,255,547 Procter & Gamble Co. 123,140 6,782,551 Sealed Air Corp. (A) 26,426 1,407,713 ------------ 20,349,566 ------------ DEFENSE (0.7%) Lockheed Martin Corp. 29,363 1,631,115 Northrop Grumman Corp. 38,210 2,077,096 ------------ 3,708,211 ------------ ELECTRIC UTILITIES (1.4%) American Electric Power 62,542 2,147,692 Edison International 46,592 1,492,342 FirstEnergy Corp. 53,191 2,101,576 Public Service Enterprise Group 13,294 688,230 Southern Co. 27,360 917,107 ------------ 7,346,947 ------------
-11- THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF INVESTMENTS - CONTINUED DECEMBER 31, 2004
NO. OF FAIR SHARES VALUE -------- ------------ ENTERTAINMENT (2.2%) Carnival Corp. 28,628 $ 1,649,832 Electronic Arts (A) 10,135 625,431 Fox Entertainment Group (Class A) (A) 55,501 1,734,961 The Walt Disney Co. 162,229 4,509,966 Viacom, Inc. (Class B) 80,233 2,919,679 ------------ 11,439,869 ------------ FINANCE (1.7%) American Express Co. 85,707 4,831,304 Countrywide Financial 80,244 2,969,830 Principal Financial Group 29,244 1,197,249 ------------ 8,998,383 ------------ FOOD (1.8%) Archer-Daniels-Midland Co. 114,841 2,562,103 Hormel Foods Corp. 16,653 522,072 Kellogg Co. 9,815 438,338 McDonald's Corp. 97,575 3,128,255 Sara Lee Corp. 99,935 2,412,431 Yum! Brands 13,000 613,340 ------------ 9,676,539 ------------ HEALTHCARE (1.4%) Aetna Inc. 7,335 915,041 Caremark Rx, Inc. (A) 29,914 1,179,509 Medco Health Solutions (A) 13,336 554,778 UnitedHealth Group, Inc. 51,524 4,535,658 ------------ 7,184,986 ------------ HOME CONSTRUCTION (0.3%) Pulte Homes, Inc. 22,895 1,460,701 ------------ INDEPENDENT ENERGY (0.6%) Anadarko Petroleum Corp. 14,254 923,802 Burlington Resources 41,380 1,800,030 Devon Energy Corp. 15,464 601,859 ------------ 3,325,691 ------------ INSURANCE (6.1%) ACE Limited 13,961 596,833 AFLAC Inc. 25,283 1,007,275 Allstate Corp. 22,459 1,161,579 Ambac Financial Group 27,267 2,239,439 American International Group, 123,922 8,137,958 Inc. Aon Corp. 14,413 343,894 Chubb Corp. 30,449 2,341,528 CIGNA Corp. 18,183 1,483,187 Hartford Financial Services Group, Inc. 10,080 698,645 Humana Inc. (A) 60,360 1,792,088 Jefferson-Pilot Corp. 6,889 357,952 Lincoln Financial Corp. 9,198 429,363 Marsh & McLennan Cos., Inc. 24,652 811,051 MetLife Inc. 34,595 1,401,443 MGIC Investment Corp. 17,509 1,206,545 Prudential Financial, Inc. 79,956 4,394,382 The Progressive Corp. 26,874 2,279,990 Wellpoint Inc. (A) 13,160 1,513,400 ------------ 32,196,552 ------------ INTEGRATED ENERGY (4.7%) ChevronTexaco Corp. 101,398 5,324,409 ConocoPhillips 33,050 2,869,732 Exxon Mobil Corp. 304,077 15,586,987 Marathon Oil 30,723 1,155,492 ------------ 24,936,620 ------------ LODGING (0.5%) Marriott International (Class A) 35,493 2,235,349 Starwood Hotels & Resorts 8,357 488,049 ------------ 2,723,398 ------------ MACHINERY (0.4%) Ingersoll-Rand Co. (Class A) 28,807 2,313,202 ------------ MEDIA CABLE (0.2%) Univision Communications (A) 44,785 1,310,857 ------------ MEDICAL SUPPLIES (2.1%) Abbott Laboratories 72,380 3,376,527 Becton, Dickinson and Company 11,617 659,846 Boston Scientific (A) 39,349 1,398,857 Cardinal Health 8,009 465,723 Hospira, Inc. (A) 4,155 139,193 Medtronic, Inc. 56,514 2,807,050 Zimmer Holdings, Inc. (A) 24,398 1,954,768 ------------ 10,801,964 ------------ METALS (0.9%) Alcoa Inc. 103,917 3,265,072 Newmont Mining Corp. 19,375 860,444 Nucor Corp. 12,550 656,867 ------------ 4,782,383 ------------ MULTIMEDIA (2.4%) Brown-Forman Corp. (Class B) 12,247 596,184 Comcast Corp. (Class A) 107,389 3,574,443 Gannett Co., Inc. 22,262 1,818,805 Lamar Advertising (A) 22,751 972,036 News Corp. 84,091 1,569,138 Time Warner Inc. (A) 210,873 4,099,371 ------------ 12,629,977 ------------
-12- THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF INVESTMENTS - CONTINUED DECEMBER 31, 2004
NO. OF FAIR SHARES VALUE -------- ------------ OIL COMPANIES (1.4%) Baker Hughes Inc. 23,166 $ 988,493 Halliburton Co. 19,559 767,495 Occidental Petroleum Corp. 18,573 1,083,920 Schlumberger Ltd. 32,183 2,154,652 Sunoco Inc. 7,678 627,369 Transocean, Inc. 21,164 897,142 Valero Energy Corp. 18,180 825,372 ------------ 7,344,443 ------------ PAPER (0.7%) Georgia-Pacific Corp. 17,510 656,275 International Paper 23,579 990,318 Kimberly Clark Corp. 23,800 1,566,278 Weyerhaeuser Co. 9,869 663,394 ------------ 3,876,265 ------------ PHARMACEUTICALS (7.7%) AmerisourceBergen Corp. 16,595 973,795 Amgen, Inc. (A) 61,453 3,942,517 Biogen Idec Inc. (A) 31,020 2,066,397 Bristol-Myers Squibb 89,117 2,283,178 Eli Lilly & Co. 42,149 2,391,956 Forest Laboratories (Class A) (A) 33,159 1,487,513 Gilead Sciences, Inc. (A) 49,226 1,722,664 IVAX Corp. 48,057 760,262 Johnson & Johnson 137,629 8,728,431 Merck & Co., Inc. 101,977 3,277,541 Pfizer Inc. 352,440 9,477,112 Schering-Plough Corp. 67,733 1,414,265 Wyeth 43,843 1,867,273 ------------ 40,392,904 ------------ RESTAURANTS (0.2%) Starbucks Corp. (A) 18,271 1,139,471 ------------ RETAILERS (6.3%) Autozone, Inc. (A) 5,694 519,919 Best Buy Co. Inc. 30,613 1,819,024 Borders Group 45,843 1,164,412 Costco Wholesale Corp. 21,611 1,046,945 Federated Department Stores, Inc. 12,390 716,018 GameStop Corp. (Class A) (A) 15,251 341,775 Home Depot, Inc. 159,742 6,827,373 Jones Apparel Group, Inc. 6,979 255,222 Limited Brands 46,384 1,067,760 Lowe's Cos. 18,931 1,090,236 Staples Inc. 78,821 2,657,450 Target Corp. 13,395 695,602 The Gap, Inc. 41,488 876,227 Toys R Us, Inc. (A) 70,831 1,449,911 Walgreen Co. 54,947 2,108,316 Wal-Mart Stores, Inc. 199,075 10,515,142 ------------ 33,151,332 ------------ SERVICES (1.4%) Cendant Corp. 51,593 1,206,244 eBay Inc. (A) 30,784 3,580,333 Yahoo! Inc. (A) 61,852 2,332,130 ------------ 7,118,707 ------------ TECHNOLOGY (14.5%) Adobe Systems 32,830 2,060,575 Advanced Micro Devices (A) 83,937 1,848,293 Analog Devices, Inc. 17,932 662,049 Apple Computer (A) 17,952 1,155,750 Autodesk, Inc. 66,586 2,531,933 Cisco Systems, Inc. (A) 315,216 6,080,517 Comverse Technology Inc. (A) 81,806 1,999,748 Corning Inc. 62,978 741,251 Dell Inc. (A) 116,672 4,917,141 EMC Corp. (A) 115,531 1,717,946 Fiserv Inc. (A) 12,204 490,540 Hewlett Packard Co. 142,000 2,977,740 Intel Corp. 301,416 7,057,656 International Business Machine 83,610 8,242,274 Jabil Circuit (A) 45,645 1,167,599 KLA-Tencor Corp. (A) 9,475 441,298 Lexmark International (A) 6,037 513,145 Maxim Integrated Products 14,850 629,417 Micron Technology, Inc. 99,869 1,233,382 Microsoft Corp. 502,687 13,429,283 Motorola, Inc. 206,633 3,554,088 NCR Corp. (A) 25,799 1,786,065 Oracle Corp. (A) 232,747 3,194,453 Scientific-Atlanta, Inc. 49,543 1,635,414 Sun Microsystems Inc. (A) 164,286 884,680 Texas Instruments Inc. 93,808 2,309,553 Thomas & Betts Corp. 43,164 1,327,293 VERITAS Software (A) 53,916 1,537,145 ------------ 76,126,228 ------------ TELECOMMUNICATIONS (4.2%) BellSouth Corp. 124,064 3,447,739 CenturyTel, Inc. 12,604 447,064 Nextel Partners (Class A) (A) 77,050 1,503,631 Polycom, Inc. (A) 49,165 1,145,545 QUALCOMM, Inc. 69,284 2,941,106 SBC Communications Inc. 153,659 3,959,793 Sprint Corp. 68,845 1,710,798 Verizon Communications 165,031 6,685,405 ------------ 21,841,081 ------------
-13- THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF INVESTMENTS - CONTINUED DECEMBER 31, 2004
NO. OF FAIR SHARES VALUE -------- ------------ TOBACCO (1.1%) Altria Group 95,539 $ 5,837,433 ------------ TRANSPORTATION SERVICES (1.0%) Norfolk Southern Corp. 16,776 607,123 United Parcel Service (Class B) 53,185 4,545,190 ------------ 5,152,313 ------------ UNITED STATES AGENCY SECURITIES (1.3%) Federal Association National Mortgage 59,606 4,244,543 Federal Home Loan Mortgage Corp. 31,633 2,331,352 ------------ 6,575,895 ------------ UTILITIES (1.7%) AES Corp. (A) 126,897 1,734,682 Constellation Energy Group 46,830 2,046,939 Exelon Corp. 56,416 2,486,253 Kinder Morgan 30,116 2,202,383 National Fuel Gas Co. 12,243 346,967 ------------ 8,817,224 ------------ TOTAL COMMON STOCKS (COST $446,586,904) 514,599,141 ------------ PRINCIPAL AMOUNT ----------- SHORT-TERM INVESTMENTS (2.0%) COMMERCIAL PAPER (1.7%) Bryant Park Funding LLC, 2.29% due January 6, 2005 $ 1,316,000 1,315,496 Bryant Park Funding LLC, 2.32% due January 11, 2005 3,000,000 2,997,891 Gemini Securitization Corp., 2.33% due January 12, 2005 1,710,000 1,708,689 UBS AG, 2.26% due January 3, 2005 513,000 512,902 Windmill Funding Corp., 2.3% due January 11, 2005 2,601,000 2,599,171 ------------ 9,134,149 ------------ U.S. TREASURY (0.3%) United States of America Treasury, 1.99% due February 10, 2005 (B) 1,400,000 $ 1,397,148 ------------ NOTIONAL VALUE ----------- TOTAL SHORT-TERM INVESTMENTS (COST $10,531,744) 10,531,297 ------------ FUTURES CONTRACTS (0.0%) S&P 500 Stock Index, Exp. March, 2005 (C) $ 9,102,750 -- ------------ TOTAL INVESTMENTS (99.9%) (COST $457,118,648) (D) 525,130,438 ------------ OTHER ASSETS AND LIABILITIES (0.1%) 419,938 ------------ TOTAL NET ASSETS (100.0%) $525,550,376 ============
NOTES (A) Non-income Producing Security. (B) Par value of $1,400,000 pledged to cover margin deposits on futures contracts. (C) As more fully discussed in Note 1 to the financial statements, it is Account GIS's practice to hold cash and cash equivalents (including short-term investments) at least equal to the underlying face value, or notional value, of outstanding purchased futures contracts, less the initial margin. Account GIS uses futures contracts as a substitute for holding individual securities. (D) At December 31, 2004, net unrealized appreciation for all securities was $68,011,790. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of fair value over cost of $102,990,863 and aggregate gross unrealized depreciation for all securities in which there was an excess of cost over fair value of $34,979,073. See Notes to Financial Statements -14- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Managers and the Owners of Variable Annuity Contracts of The Travelers Growth and Income Stock Account for Variable Annuities: We have audited the accompanying statement of assets and liabilities of The Travelers Growth and Income Stock Account for Variable Annuities, including the statement of investments, as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the selected per unit data and ratios for each of the years in the five-year period then ended. These financial statements and selected per unit data and ratios are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and selected per unit data and ratios based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and selected per unit data and ratios are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and selected per unit data and ratios. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with custodians and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and selected per unit data and ratios referred to above present fairly, in all material respects, the financial position of The Travelers Growth and Income Stock Account for Variable Annuities as of December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the selected per unit data and ratios for each of the years in the five-year period then ended, in conformity with accounting principles generally accepted in the United States of America. /s/ KPMG LLP Hartford, Connecticut February 17, 2005 -15- THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2004 ASSETS: Investment securities, at fair value (cost $97,997,715) ...... $ 99,598,533 Cash ......................................................... 416 Receivables: Interest ................................................... 1,079,968 Investment securities sold ................................. 505,819 Purchase payments and transfers from other funding options . 19,530 Other assets ................................................. 2,248 ------------ Total Assets ............................................. 101,206,514 ------------ LIABILITIES: Payables: Contract surrenders and transfers to other funding options . 28,423 Investment management and advisory fees .................... 7,169 Insurance charges .......................................... 25,903 Accrued liabilities .......................................... 14 ------------ Total Liabilities ........................................ 61,509 ------------ NET ASSETS: $101,145,005 ============ See Notes to Financial Statements -16- THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2004 INVESTMENT INCOME: Interest ....................................................................... $ 4,626,947 EXPENSES: Investment management and advisory fees ........................................ $ 343,616 Insurance charges .............................................................. 1,255,965 ------------- Total expenses ............................................................... 1,599,581 ------------ Net investment income (loss) ............................................... 3,027,366 ------------ REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES: Realized gain (loss) from investment security transactions: Proceeds from investment securities sold ..................................... 109,243,942 Cost of investment securities sold ........................................... 108,554,368 ------------- Net Realized gain (loss) ................................................... 689,574 Change in unrealized gain (loss) on investment securities: Unrealized gain (loss) at December 31, 2004 .................................. 1,600,818 Unrealized gain (loss) at December 31, 2003 .................................. 2,333,354 ------------- Net change in unrealized gain (loss) for the year .......................... (732,536) ------------ Net realized gain (loss) and change in unrealized gain (loss) ............ (42,962) ------------ Net increase (decrease) in net assets resulting from operations ................ $ 2,984,404 ===========
See Notes to Financial Statements -17- THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
2004 2003 ---- ---- OPERATIONS: Net investment income (loss) ....................................... $ 3,027,366 $ 3,870,307 Net realized gain (loss) from investment security transactions ..... 689,574 (3,387,271) Net change in unrealized gain (loss) on investment securities ...... (732,536) 9,169,643 ------------- ------------- Net increase (decrease) in net assets resulting from operations .. 2,984,404 9,652,679 ------------- ------------- UNIT TRANSACTIONS: Participant purchase payments (applicable to 662,081 and 747,578 units, respectively) .......... 4,637,014 5,016,359 Participant transfers from other funding options (applicable to 469,738 and 2,091,858 units, respectively) ........ 3,286,010 14,023,583 Administrative charges (applicable to 10,969 and 12,788 units, respectively) ............ (77,235) (88,426) Contract surrenders (applicable to 1,792,547 and 2,007,854 units, respectively) ...... (12,709,265) (13,546,840) Participant transfers to other funding options (applicable to 1,092,374 and 2,177,370 units, respectively) ...... (7,636,339) (14,621,732) Other payments to participants (applicable to 111,228 and 169,426 units, respectively) .......... (793,229) (1,169,671) ------------- ------------- Net increase (decrease) in net assets resulting from unit transactions (13,293,044) (10,386,727) ------------- ------------- Net increase (decrease) in net assets ............................ (10,308,640) (734,048) NET ASSETS: Beginning of year .................................................. 111,453,645 112,187,693 ------------- ------------- End of year ........................................................ $ 101,145,005 $ 111,453,645 ============= =============
See Notes to Financial Statements -18- NOTES TO FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES The Travelers Quality Bond Account for Variable Annuities ("Account QB") is a separate account of The Travelers Insurance Company ("The Company"), an indirect wholly owned subsidiary of Citigroup Inc., and is available for funding Universal Annuity, Universal Select Annuity, and Universal Annuity Advantage contracts issued by The Company. Account QB is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. The following is a summary of significant accounting policies consistently followed by Account QB in the preparation of its financial statements. SECURITY VALUATION. Investments in securities traded on a national securities exchange are valued at the 4:00 p.m. Eastern Standard Time price of such exchanges; securities traded on the over-the-counter market and listed securities with no reported sales are valued at the mean between the last-reported bid and asked prices or on the basis of quotations received from a reputable broker or other recognized source. When market quotations are not considered to be readily available for long-term corporate bonds and notes, such investments are generally stated at fair value on the basis of valuations furnished by a pricing service. These valuations are determined for normal institutional-size trading units of such securities using methods based on market transactions for comparable securities and various relationships between securities, which are generally recognized by institutional traders. Securities, including restricted securities, for which pricing services are not readily available, are valued by management at prices which it deems, in good faith, to be fair value. Short-term investments are reported at fair value based on quoted market prices. Short-term investments, for which there is no reliable quoted market price, are recorded at amortized cost, which approximates fair value. SECURITY TRANSACTIONS. Security transactions are accounted for on the trade date. Interest income is recorded on the accrual basis. Premiums and discounts are amortized to interest income utilizing the constant yield method. FUTURES CONTRACTS. Account QB may use interest rate futures contracts as a substitute for the purchase or sale of individual securities. When Account QB enters into a futures contract, it agrees to buy or sell specified debt securities at a future time for a fixed price, unless the contract is closed prior to expiration. Account QB is obligated to deposit with a broker an "initial margin" equivalent to a percentage of the face, or notional value of the contract. It is Account QB's practice to hold cash and cash equivalents in an amount at least equal to the notional value of outstanding purchased futures contracts, less the initial margin. Cash and cash equivalents include cash on hand, securities segregated under federal and brokerage regulations, and short-term highly liquid investments with maturities generally three months or less when purchased. Generally, futures contracts are closed prior to expiration. Futures contracts purchased by Account QB are priced and settled daily; accordingly, changes in daily prices are recorded as realized gains or losses and no asset is recorded in the Statement of Investments. Therefore, when Account QB holds open futures contracts, it assumes a market risk generally equivalent to the underlying market risk of change in the value of the debt securities associated with the futures contract. REPURCHASE AGREEMENTS. When Account QB enters into a repurchase agreement (a purchase of securities whereby the seller agrees to repurchase the securities at a mutually agreed upon date and price), the repurchase price of the securities will generally equal the amount paid by Account QB plus a negotiated interest amount. The seller under the repurchase agreement will be required to provide to Account QB securities (collateral) whose market value, including accrued interest, will be at least equal to 102% of the repurchase price. Account QB monitors the value of collateral on a daily basis. Repurchase agreements will be limited to transactions with national banks and reporting broker dealers believed to present minimal credit risks. Account QB's custodian will take actual or constructive receipt of all securities underlying repurchase agreements until such agreements expire. There were no repurchase agreements in Account QB in 2004. -19- NOTES TO FINANCIAL STATEMENTS - CONTINUED FEDERAL INCOME TAXES. The operations of Account QB form a part of the total operations of The Company and are not taxed separately. The Company is taxed as a life insurance company under the Internal Revenue Code of 1986, as amended (the "Code"). Under existing federal income tax law, no taxes are payable on the investment income and capital gains of Account QB. Account QB is not taxed as a "regulated investment company" under Subchapter M of the Code. OTHER. The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. INVESTMENTS The aggregate costs of purchases and proceeds from sales of investments (other than short-term securities) were $42,438,180 and $43,554,698, respectively; the costs of purchases and proceeds from sales of direct and indirect U.S. government securities were $55,003,629 and $65,689,245, respectively, for the year ended December 31, 2004. Realized gains and losses from investment security transactions are reported on an identified cost basis. 3. CONTRACT CHARGES Investment management and advisory fees are calculated daily at an annual rate of 0.3233% of Account QB's average net assets. These fees are paid to Travelers Asset Management International Company, LLC, an indirect wholly owned subsidiary of Citigroup Inc. The asset-based charges listed below are deducted, as appropriate, each business day and are assessed through the calculation of accumulation and annuity unit values; - Mortality and Expense Risks assumed by The Company (M&E) - Administrative fees paid for administrative expenses (ADM) - Guaranteed Minimum Withdrawal Benefit, if elected by the contract owner (GMWB) Below is a table displaying total M&E and rider charges with their associated products offered in this Separate Account. The table displays Standard (S) and Annual Step-Up (SU) death-benefit designations.
- ------------------------------------------------------------------------------------------------------------------------------------ TRAVELERS QUALITY BOND ACCOUNT - ------------------------------------------------------------------------------------------------------------------------------------ Asset-based Charges ----------------- Optional Feature Total M&E and Rider Charges (1) Dth ----------------- Total (as identified in Note 4) Ben Product M&E GMWB Charge - ------------------------------------------------------------------------------------------------------------------------------------ Total M&E and Rider Charges 1.00%, 3.5% AIR S Universal Annuity (1) 1.00% 1.00% Total M&E and Rider Charges 1.25%, 3.0% AIR S Universal Select Annuity 1.25% 1.25% Total M&E and Rider Charges 1.25%, 3.5% AIR S Universal Annuity (2) 1.25% 1.25% S Universal Annuity Advantage 1.25% 1.25% Total M&E and Rider Charges 1.40%, 3.0% AIR SU Universal Select Annuity 1.40% 1.40% Total M&E and Rider Charges 1.40%, 3.5% AIR SU Universal Annuity Advantage 1.40% 1.40% Total M&E and Rider Charges 1.65%, 3.0% AIR S Universal Select Annuity 1.25% 0.40% 1.65% Total M&E and Rider Charges 1.65%, 3.5% AIR S Universal Annuity Advantage 1.25% 0.40% 1.65% Total M&E and Rider Charges 1.80%, 3.0% AIR SU Universal Select Annuity 1.40% 0.40% 1.80% Total M&E and Rider Charges 1.80%, 3.5% AIR SU Universal Annuity Advantage 1.40% 0.40% 1.80% - ------------------------------------------------------------------------------------------------------------------------------------
(1) Contracts issued prior to May 16, 1983 (2) Contracts issued on or after May 16,1983 -20- NOTES TO FINANCIAL STATEMENTS - CONTINUED 3. CONTRACT CHARGES (CONTINUED) For certain contracts in the accumulation phase, a semi-annual charge of $15 (prorated for partial years) is deducted from participant account balances and paid to The Company to cover administrative charges. On contracts issued prior to May 16, 1983, The Company retained from Account QB sales charges of $3,280 and $4,296 for the years ended December 31, 2004 and 2003, respectively. The Company generally assesses a 5% contingent deferred sales charge if a participant's purchase payment is surrendered within five years of its payment date. Contract surrender payments are net of contingent deferred sales charges of $45,877 and $58,765 for the years ended December 31, 2004 and 2003, respectively. 4. NET ASSETS HELD ON BEHALF OF AN AFFILIATE Approximately $105,000 and $115,000 of the net assets of Account QB were held on behalf of an affiliate of The Company as of December 31, 2004 and 2003, respectively. Transactions with this affiliate during the years ended December 31, 2004 and 2003, were comprised of participant purchase payments of approximately $4,000 and $71,000 and contract surrenders of approximately $18,000 and $98,000, respectively. 5. NET CONTRACT OWNERS' EQUITY
DECEMBER 31, 2004 ------------------------------------- UNIT UNITS VALUE NET ASSETS ---------- -------- ----------- Total M&E and Rider Charges 1.00%, 3.5% AIR ....... 3,717,225 $ 7.507 $ 27,904,255 Total M&E and Rider Charges 1.25%, 3.5% AIR ....... 10,296,306 7.113 73,240,750 ------------ Net Contract Owners' Equity ............................................... $101,145,005 ============
-21- NOTES TO FINANCIAL STATEMENTS - CONTINUED 6. SUPPLEMENTARY INFORMATION (Selected data for a unit outstanding throughout each year.)
Total M&E and Rider Charges 1.00%, 3.5% AIR FOR THE YEARS ENDED DECEMBER 31, ----------------------------------------------------------------- 2004 2003 2002 2001 2000 ---- ---- ---- ---- ---- SELECTED PER UNIT DATA: Total investment income ................................... $ .321 $ .345 $ .381 $ .421 $ .446 Operating expenses ........................................ .097 .093 .086 .089 .081 -------- -------- -------- -------- -------- Net investment income (loss) .............................. .224 .252 .295 .332 .365 Unit value at beginning of year ........................... 7.281 6.674 6.608 6.335 6.055 Net realized and change in unrealized gains (losses) ...... .002 .355 (.229) (.059) (.085) -------- -------- -------- -------- -------- Unit value at end of year ................................. $ 7.507 $ 7.281 $ 6.674 $ 6.608 $ 6.335 ======== ======== ======== ======== ======== SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase (decrease) in unit value ..................... $ .23 $ .61 $ .07 $ .27 $ .28 Ratio of operating expenses to average net assets ......... 1.33% 1.33% 1.33% 1.33% 1.33% Ratio of net investment income (loss) to average net assets 3.03% 3.58% 4.56% 4.99% 5.93% Number of units outstanding at end of year (thousands) .... 3,717 4,207 4,684 5,194 5,491 Portfolio turnover rate ................................... 98% 139% 113% 166% 105%
Total M&E and Rider Charges 1.25%, 3.5% AIR FOR THE YEARS ENDED DECEMBER 31, ----------------------------------------------------------------- 2004 2003 2002 2001 2000 ---- ---- ---- ---- ---- SELECTED PER UNIT DATA: Total investment income ................................... $ .304 $ .328 $ .363 $ .402 $ .427 Operating expenses ........................................ .110 .105 .097 .101 .092 -------- -------- -------- -------- -------- Net investment income (loss) .............................. .194 .223 .266 .301 .335 Unit value at beginning of year ........................... 6.917 6.356 6.309 6.063 5.810 Net realized and change in unrealized gains (losses) ...... .002 .338 (.219) (.055) (.082) -------- -------- -------- -------- -------- Unit value at end of year ................................. $ 7.113 $ 6.917 $ 6.356 $ 6.309 $ 6.063 ======== ======== ======== ======== ======== SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase (decrease) in unit value ..................... $ .20 $ .56 $ .05 $ .25 $ .25 Ratio of operating expenses to average net assets ......... 1.57% 1.57% 1.57% 1.57% 1.57% Ratio of net investment income (loss) to average net assets 2.78% 3.33% 4.31% 4.74% 5.69% Number of units outstanding at end of year (thousands) .... 10,296 11,682 12,733 15,116 14,045 Portfolio turnover rate ................................... 98% 139% 113% 166% 105%
-22- NOTES TO FINANCIAL STATEMENTS - CONTINUED 7. SUBSEQUENT EVENT On January 31, 2005, Citigroup Inc. ("Citigroup") announced that it had agreed to sell The Travelers Insurance Company ("TIC"), The Travelers Life and Annuity Company, Citicorp Life Insurance Company, First Citicorp Life Insurance Company, Citicorp International Life Insurance Company, The Travelers Life and Annuity Reinsurance Company, and certain other domestic and international insurance businesses (the "Life Insurance and Annuity Businesses") to MetLife, Inc. ("MetLife") pursuant to an Acquisition Agreement (the "Agreement"). The transaction is subject to certain regulatory approvals, as well as other customary conditions to closing. Citigroup currently anticipates that the intended sale would be closed this summer. The proposed sale would also include TIC's affiliated investment advisory companies, Travelers Asset Management International Company LLC, which serves as the investment advisor for certain of the variable product separate accounts. The transaction contemplates that TIC's Primerica Life segment and certain other assets will remain with Citigroup. Accordingly, prior to the closing, TIC will distribute to its parent company by way of dividend (i) all of the outstanding shares of common stock of the Company's 100% owned subsidiary, Primerica Life Insurance Company ("Primerica Life"), (ii) all shares of Citigroup's Series YYY and Series YY preferred stock held by the Company and (iii) certain other assets, including certain assets and liabilities related to the Company's share of the non-qualified pension plan, and post retirement benefits related to inactive employees of the former Travelers Insurance entities, assumed during Citigroup's 2002 spin-off of the Travelers Property Casualty operations (collectively, the "Dispositions"). The Dispositions require certain regulatory approvals. Subject to closing adjustments described in the Agreement, the contemplated sale price would be $11.5 billion. In connection with the consummation of the sale of the Life Insurance and Annuity Business, Citigroup and MetLife will also enter into multi-year distribution agreements. TIC filed a Form 8-K Current Report with The United States Securities and Exchange Commission on February 2, 2005, with additional information about the transaction. -23- THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES SUMMARY OF HOLDINGS DECEMBER 31, 2004 of net % assets -------- BONDS Real Estate 9.0 Banking 7.1 Collateralized Mortgage Obligations 6.7 Finance 6.0 Media Cable 6.0 Asset Backed Securities 4.9 Telecommunications 4.4 Utilities 4.3 Natural Gas Distribution 3.9 Brokerage 3.5 United States Agency Securities 3.3 Multimedia 2.7 Conglomerates 2.4 Electric Utilities 1.9 Insurance 1.9 Automotive 1.6 Pharmaceuticals 1.2 Food 1.1 Independent Energy 1.0 Tobacco 0.9 Supermarkets 0.8 Defense 0.6 Technology 0.6 Airlines 0.5 Home Construction 0.5 Beverage 0.4 Healthcare 0.4 Metals 0.4 Machinery 0.2 Paper 0.2 ------ TOTAL BONDS 78.4 ------ United States Government Securities 12.5 ------ SHORT-TERM INVESTMENTS Commercial Paper 7.6 ------ TOTAL SHORT-TERM INVESTMENTS 7.6 ------ TOTAL INVESTMENTS 98.5 ------ Other Assets and liabilities 1.5 ------ TOTAL NET ASSETS 100.0 ====== -24- THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF INVESTMENTS DECEMBER 31, 2004
PRINCIPAL FAIR AMOUNT VALUE ------------ ------------- BONDS (78.4%) AIRLINES (0.5%) Delta Air Lines, Inc., 9.25% Debentures, 2007 (A)................................ $ 675,233 $ 465,911 ------------- ASSET BACKED SECURITIES (4.9%) CA Infrastructure, 3.05% Debentures, 2008........................................ 597,379 615,752 Chase Funding Mortgage Loan Asset Backed Security Certificate, 4.44% Debentures, 500,000 520,407 2032............................................................................. Daimler Chrysler Auto, 2.63% Debentures, 2006.................................... 811,736 816,196 Discover Card Mt, 2.94% Debentures, 2008......................................... 1,100,000 1,135,416 Ford Credit Auto Owner Trust, 2.67% Debentures, 2006............................. 1,400,000 1,411,705 Toyota Auto Recovery Owner Trust, 2.67% Debentures, 2006......................... 477,162 477,145 ------------- 4,976,621 ------------- AUTOMOTIVE (1.6%) Daimler Chrysler NA Holdings, 5.09% Debentures, 2012............................. 700,000 795,786 Ford Motor Credit Co., 7.66% Debentures, 2031.................................... 200,000 201,729 Lear Corp., 2.35% Debentures, 2005............................................... 600,000 609,636 ------------- 1,607,151 ------------- BANKING (7.1%) ABN AMRO Holdings ADS, 2.33% Debentures, 2007.................................... 920,000 920,886 Bank of America Corp., 4.75% Debentures, 2014.................................... 600,000 627,304 Capital One Bank, 4.66% Debentures, 2009......................................... 620,000 639,051 Credit Suisse First Boston Corp., 4.86% Debentures, 2011......................... 300,000 327,604 Credit Suisse First Boston Corp., 4.93% Debentures, 2015......................... 700,000 692,682 HSBC Bank USA, 5.91% Debentures, 2034............................................ 400,000 406,470 Huntington National Bank, 4.68% Debentures, 2009................................. 400,000 408,048 J.P. Morgan Chase & Co., 4.94% Debentures, 2015.................................. 500,000 506,668 Royal Bank of Scotland PLC, 5.05% Debentures, 2015............................... 600,000 607,625 U.S. Bancorp NA MN, 2.89% Debentures, 2007....................................... 1,000,000 991,838 U.S. Bancorp NA MN, 4.95% Debentures, 2014....................................... 200,000 201,116 Wachovia Bank NA, 4.87% Debentures, 2014......................................... 300,000 298,697 Washington Mutual Inc., 5.71% Debentures, 2014................................... 500,000 518,152 ------------- 7,146,141 ------------- BEVERAGE (0.4%) Pepsi Bottling Group, 4.34% Debentures, 2012..................................... 400,000 406,911 ------------- BROKERAGE (3.5%) Goldman Sachs Group Inc., 4.95% Debentures, 2013................................. 1,100,000 1,127,380 Lehman Brothers Holdings Inc., 4.85% Debentures, 2014............................ 700,000 691,723 Merrill Lynch & Co. Inc., 4.2% Debentures, 2009.................................. 800,000 800,297 Merrill Lynch & Co. Inc., 5.09% Debentures, 2015................................. 400,000 399,210 Morgan Stanley, 5.31% Debentures, 2012........................................... 500,000 558,471 ------------- 3,577,081 ------------- COLLATERALIZED MORTGAGE OBLIGATIONS (6.7%) Banc of America Commercial Mortgage Securities, 4.87% Debentures, 2042........... 1,400,000 1,396,227 Credit Suisse First Boston Corp., 4.86% Debentures, 2036......................... 1,000,000 1,010,467 Credit Suisse First Boston Corp., 4.88% Debentures, 2037......................... 220,000 219,720 J.P. Morgan Chase Commercial Mortgage Securities, 4.92% Debentures, 2042......... 1,600,000 1,597,808 LB UBS Commercial Mortgage Trust, 4.17% Debentures, 2027......................... 1,000,000 975,400 LB UBS Commercial Mortgage Trust, 4.74% Debentures, 2031......................... 670,000 682,985 Wachovia Bank Commercial Mortgage, 4.44% Debentures, 2035........................ 900,000 925,983 ------------- 6,808,590 -------------
-25- THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF INVESTMENTS - CONTINUED DECEMBER 31, 2004
PRINCIPAL FAIR AMOUNT VALUE ------------ ------------- CONGLOMERATES (2.4%) General Electric Co., 4.66% Debentures, 2013..................................... $ 1,300,000 $ 1,335,959 Tyco International Ltd., 4.28% Debentures, 2008.................................. 1,000,000 1,078,319 ------------- 2,414,278 ------------- DEFENSE (0.6%) Northrop Grumman Corp., 3.41% Debentures, 2006................................... 600,000 606,334 ------------- ELECTRIC UTILITIES (1.9%) PSEG Energy Holdings, 21.8% Debentures, 2008..................................... 450,000 496,125 SCANA Corp., 2.74% Debentures, 2006.............................................. 1,000,000 1,002,750 TransAlta Corp., 5.22% Debentures, 2013.......................................... 400,000 412,618 ------------- 1,911,493 ------------- FINANCE (6.0%) AIG SunAmerica Global Financials, 3.55% Debentures, 2008 (B)..................... 500,000 533,069 American General Financial Corp., 3.98% Debentures, 2009......................... 900,000 886,561 Countrywide Home Loan, 4.07% Debentures, 2011.................................... 610,000 593,884 Ford Motor Credit Co., 5.75% Debentures, 2010.................................... 100,000 101,020 Ford Motor Credit Co., 6.56% Debentures, 2006.................................... 1,000,000 1,030,466 General Motors Acceptance Corp., 6.06% Debentures, 2011.......................... 200,000 205,232 General Motors Acceptance Corp., 6.65% Debentures, 2011.......................... 650,000 681,368 Glencore Funding LLC, 6.7% Debentures, 2014 (B).................................. 300,000 290,751 Household Financial Corp., 5.78% Debentures, 2012................................ 1,400,000 1,549,261 Rabobank Capital Funding Trust III, 5.25% Debentures, 2016 (B)................... 200,000 199,346 ------------- 6,070,958 ------------- FOOD (1.1%) Fred Meyer Inc., 4.83% Debentures, 2008.......................................... 1,000,000 1,103,316 ------------- HEALTHCARE (0.4%) Anthem Inc., 4.86% Debentures, 2012.............................................. 400,000 453,511 ------------- HOME CONSTRUCTION (0.5%) M.D.C. Holdings, Inc., 5.47% Debentures, 2013 500,000 508,503 ------------- INDEPENDENT ENERGY (1.0%) Anadarko Financial Co., 4.88% Debentures, 2011................................... 400,000 451,074 Devon Energy Corp., 5.42% Debentures, 2011....................................... 500,000 567,053 ------------- 1,018,127 ------------- INSURANCE (1.9%) Massmutual Global Funding, 2.58% Debentures, 2008 (B)............................ 900,000 864,439 New York Life Global Funding, 5.42% Debentures, 2013 (B)......................... 1,000,000 1,042,327 ------------- 1,906,766 ------------- MACHINERY (0.2%) Cooper Cameron Corp., 2.67% Debentures, 2007 .................................... 200,000 194,871 ------------- MEDIA CABLE (6.0%) Comcast Cable Communications, 8.7% Debentures, 2027.............................. 500,000 665,504 Cox Enterprises Inc., 7.25% Debentures, 2010 (B)................................. 3,800,000 4,283,531 Liberty Media Corp., 4.22% Debentures, 2006...................................... 1,100,000 1,113,761 ------------- 6,062,796 ------------- METALS (0.4%) Phelps Dodge Corp., 5.31% Debentures, 2011....................................... 300,000 366,246 -------------
-26- THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF INVESTMENTS - CONTINUED DECEMBER 31, 2004
PRINCIPAL FAIR AMOUNT VALUE ------------ ------------- MULTIMEDIA (2.7%) Clear Channel Communications Inc., 4.72% Debentures, 2011........................ $ 200,000 $ 194,453 Time Warner Inc., 9.66% Debentures, 2007......................................... 2,400,000 2,540,472 ------------- 2,734,925 ------------- NATURAL GAS DISTRIBUTION (3.9%) Cons Natural Gas Co., 5.04% Debentures, 2014..................................... 200,000 200,580 Duke Capital LLC, 3.77% Debentures, 2006......................................... 400,000 405,199 Duke Energy Field Service, 5.68% Debentures, 2005................................ 500,000 513,288 Southern California Gas Co., 4.38% Debentures, 2011.............................. 400,000 401,742 Transcontinental Gas Pipeline, Corp., 10.33% Debentures, 2005.................... 2,400,000 2,400,000 ------------- 3,920,809 ------------- PAPER (0.2%) International Paper, 5.38% Debentures, 2015...................................... 200,000 202,744 ------------- PHARMACEUTICALS (1.2%) Wyeth, 5.52% Debentures, 2014.................................................... 1,200,000 1,243,717 ------------- REAL ESTATE (9.0%) Canadian Mortgage and Home Corp., 3.43% Debentures, 2008......................... 1,000,000 989,907 Health Retirement Properties, 6.39% Debentures, 2016............................. 300,000 317,096 iStar Financial, 6.32% Debentures, 2010.......................................... 240,000 253,474 Kimco Realty, 2.36% Debentures, 2006............................................. 100,000 100,028 Nationwide Health Properties Inc., 6.9% Debentures, 2037......................... 4,500,000 4,867,114 Post Apartment Homes LP, 4.05% Debentures, 2005.................................. 2,510,000 2,522,342 ------------- 9,049,961 ------------- SUPERMARKETS (0.8%) Safeway Inc., 4.96% Debentures, 2011............................................. 700,000 767,607 ------------- TECHNOLOGY (0.6%) Computer Associates International, 4.78% Debentures, 2009 (B).................... 600,000 605,046 ------------- TELECOMMUNICATIONS (4.4%) BellSouth Corp., 4.79% Debentures, 2012.......................................... 200,000 201,556 Deutsche Telekom ADS, 2.31% Debentures, 2005..................................... 1,100,000 1,125,759 SBC Communications Inc., 5.04% Debentures, 2014.................................. 400,000 404,485 Sprint Capital Corp., 4.9% Debentures, 2008...................................... 720,000 772,810 Telecom Italia S.p.A., 4.06% Debentures, 2010 (B)................................ 100,000 98,159 Telecom Italia S.p.A., 5.28% Debentures, 2013 (B)................................ 1,500,000 1,518,769 Verizon NY Inc., 5.01% Debentures, 2012.......................................... 300,000 337,230 ------------- 4,458,768 ------------- TOBACCO (0.9%) Altria Group, 5.74% Debentures, 2008 900,000 936,155 ------------- UNITED STATES AGENCY SECURITIES (3.3%) Federal Association National Mortgage, 2.13% Debentures, 2006.................... 1,300,000 1,275,228 Federal Association National Mortgage, 3% Debentures, 2007....................... 1,400,000 1,393,965 Federal Home Loan Mortgage Corp., 2.9% Debentures, 2019.......................... 700,000 695,057 ------------- 3,364,250 -------------
-27- THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF INVESTMENTS - CONTINUED DECEMBER 31, 2004
PRINCIPAL FAIR AMOUNT VALUE ------------ ------------- UTILITIES (4.3%) Dominion Resources, 5.22% Debentures, 2033....................................... $ 400,000 $ 401,530 Kinder Morgan, 5.14% Debentures, 2014............................................ 200,000 199,985 Pepco Holdings Inc., 5.15% Debentures, 2007...................................... 1,600,000 1,664,875 SP Powerassets Ltd., 5.08% Debentures, 2013...................................... 900,000 914,862 Xcel Energy Inc., 3.44% Debentures, 2008 (B)..................................... 1,200,000 1,177,454 ------------- 4,358,706 ------------- TOTAL BONDS (COST $77,521,872) 79,248,293 ------------- UNITED STATES GOVERNMENT SECURITIES (12.5%) United States of America Treasury, 1.50% Debentures, 2005........................ 6,060,000 6,223,105 United States of America Treasury, 2.14% Debentures, 2006........................ 3,075,000 3,101,909 United States of America Treasury, 3.01% Debentures, 2007........................ 2,400,000 2,374,406 United States of America Treasury, 3.57% Debentures, 2009........................ 500,000 497,813 United States of America Treasury, 4.82% Debentures, 2031........................ 400,000 432,656 TOTAL UNITED STATES GOVERNMENT SECURITIES (COST $12,754,987)............................................................... 12,629,889 ------------- SHORT TERM INVESTMENTS (7.6%) COMMERCIAL PAPER (7.6%) Galleon Capital Corp, 2.28% Debentures, 2005..................................... 3,150,000 3,149,395 Paradigm Funding LLC, 2.35% Debentures, 2005..................................... 3,000,000 2,998,659 Spintab AB, 2.28% Debentures, 2005............................................... 1,573,000 1,572,297 TOTAL SHORT-TERM INVESTMENTS (COST $7,720,856)............................................................... 7,720,351 ------------- TOTAL INVESTMENTS (98.5%) COST ( $97,997,715) (C)......................................................... 99,598,533 ------------- OTHER ASSETS AND LIABILITIES (1.5%) 1,546,472 ------------- TOTAL NET ASSETS (100.0%)......................................................... $ 101,145,005 =============
-28- THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF INVESTMENTS - CONTINUED DECEMBER 31, 2004 NOTES (A) Restricted Security. (B) Security is not registered under the Securities Act of 1933. These securities may be resold in transactions in accordance with Rule 144A under that Act, to qualified institutional buyers. As of December 31, 2004, The Travelers Quality Bond Account for Variable Annuities held 10.5% of its net assets, with a current market value of $10,612,892, in securities restricted as to resale. (C) At December 31, 2004 net unrealized appreciation for all securities was $1,600,818. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of fair value over cost of $2,142,841 and aggregate gross unrealized depreciation for all securities in which there was an excess of cost over fair value of $542,023. See Notes to Financial Statement -29- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Managers and the Owners of Variable Annuity Contracts of The Travelers Quality Bond Account for Variable Annuities: We have audited the accompanying statement of assets and liabilities of The Travelers Quality Bond Account for Variable Annuities, including the statement of investments, as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the selected per unit data and ratios for each of the years in the five-year period then ended. These financial statements and selected per unit data and ratios are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and selected per unit data and ratios based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and selected per unit data and ratios are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and selected per unit data and ratios. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with custodians and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and selected per unit data and ratios referred to above present fairly, in all material respects, the financial position of The Travelers Quality Bond Account for Variable Annuities as of December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the selected per unit data and ratios for each of the years in the five-year period then ended, in conformity with accounting principles generally accepted in the United States of America. /s/ KPMG LLP Hartford, Connecticut February 17, 2005 -30- THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2004 ASSETS: Investment securities, at fair value (cost $66,877,485) ....... $66,872,292 Cash .......................................................... 576 Receivables: Purchase payments and transfers from other funding options .. 70,506 Other assets .................................................. 410 ----------- Total Assets .............................................. 66,943,784 ----------- LIABILITIES: Payables: Contract surrenders and transfers to other funding options .. 43,320 Investment management and advisory fees ..................... 4,790 Insurance charges ........................................... 18,514 ----------- Total Liabilities ......................................... 66,624 ----------- NET ASSETS: $66,877,160 =========== See Notes to Financial Statements -31- THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2004 INVESTMENT INCOME: Interest ....................................................................... $ 1,058,991 EXPENSES: Investment management and advisory fees ........................................ $ 250,743 Insurance charges .............................................................. 969,225 ------------- Total expenses ............................................................... 1,219,968 ------------ Net investment income (loss) ............................................... (160,977) ------------ Net increase (decrease) in net assets resulting from operations ................ $ (160,977) ============
See Notes to Financial Statements -32- THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
2004 2003 ---- ---- OPERATIONS: Net investment income (loss) ....................................... $ (160,977) $ (453,301) ------------- ------------- Net increase (decrease) in net assets resulting from operations .. (160,977) (453,301) ------------- ------------- UNIT TRANSACTIONS: Participant purchase payments (applicable to 2,876,976 and 3,738,508 units, respectively) ...... 7,848,289 10,242,509 Participant transfers from other funding options (applicable to 15,177,654 and 37,539,587 units, respectively) .... 41,410,773 102,847,832 Administrative charges (applicable to 36,552 and 47,013 units, respectively) ............ (99,678) (128,680) Contract surrenders (applicable to 7,406,612 and 10,956,438 units, respectively) ..... (20,205,133) (30,017,360) Participant transfers to other funding options (applicable to 18,609,573 and 48,091,621 units, respectively) .... (50,776,513) (131,747,666) Other payments to participants (applicable to 89,026 and 335,989 units, respectively) ........... (244,258) (922,085) ------------- ------------- Net increase (decrease) in net assets resulting from unit transactions (22,066,520) (49,725,450) ------------- ------------- Net increase (decrease) in net assets ............................ (22,227,497) (50,178,751) NET ASSETS: Beginning of year .................................................. 89,104,657 139,283,408 ------------- ------------- End of year ........................................................ $ 66,877,160 $ 89,104,657 ============= =============
See Notes to Financial Statements -33- NOTES TO FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES The Travelers Money Market Account for Variable Annuities ("Account MM") is a separate account of The Travelers Insurance Company ("The Company"), an indirect wholly owned subsidiary of Citigroup Inc., and is available for funding Universal Annuity, Universal Select Annuity, and Universal Annuity Advantage contracts issued by The Company. Account MM is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. The following is a summary of significant accounting policies consistently followed by Account MM in the preparation of its financial statements. SECURITY VALUATION. Investments in securities traded on a national securities exchange are valued at the 4:00 p.m. Eastern Standard Time price of such exchanges; securities traded on the over-the-counter market and listed securities with no reported sales are valued at the mean between the last reported bid and asked prices or on the basis of quotations received from a reputable broker or other recognized source. Short-term investments are reported at fair value based on quoted market prices. Short-term investments, for which there is no reliable quoted market price, are recorded at amortized cost which approximates fair value. SECURITY TRANSACTIONS. Security transactions are accounted for on the trade date. Interest income is recorded on the accrual basis. Premiums and discounts are amortized to interest income utilizing the constant yield method. REPURCHASE AGREEMENTS. When Account MM enters into a repurchase agreement (a purchase of securities whereby the seller agrees to repurchase the securities at a mutually agreed upon date and price), the repurchase price of the securities will generally equal the amount paid by Account MM plus a negotiated interest amount. The seller under the repurchase agreement will be required to provide to Account MM securities (collateral) whose market value, including accrued interest, will be at least equal to 102% of the repurchase price. Account MM monitors the value of collateral on a daily basis. Repurchase agreements will be limited to transactions with national banks and reporting broker dealers believed to present minimal credit risks. Account MM's custodian will take actual or constructive receipt of all securities underlying repurchase agreements until such agreements expire. There were no repurchase agreements in Account MM for 2004. FEDERAL INCOME TAXES. The operations of Account MM form a part of the total operations of The Company and are not taxed separately. The Company is taxed as a life insurance company under the Internal Revenue Code of 1986, as amended (the "Code"). Under existing federal income tax law, no taxes are payable on the investment income and capital gains of Account MM. Account MM is not taxed as a "regulated investment company" under Subchapter M of the Code. OTHER. The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. -34- NOTES TO FINANCIAL STATEMENTS - CONTINUED 2. CONTRACT CHARGES Investment management and advisory fees are calculated daily at an annual rate of 0.3233% of Account MM's average net assets. These fees are paid to Travelers Asset Management International Company, LLC, an indirect wholly owned subsidiary of Citigroup Inc. The asset-based charges listed below are deducted, as appropriate, each business day and are assessed through the calculation of accumulation and annuity unit values; - Mortality and Expense Risks assumed by The Company (M&E) - Administrative fees paid for administrative expenses (ADM) - Guaranteed Minimum Withdrawal Benefit, if elected by the contract owner (GMWB) Below is a table displaying Total M&E and Rider Charges with their associated products offered in this Separate Account . The table displays Standard (S) and Annual Step-Up (SU) death-benefit designations.
- ---------------------------------------------------------------------------------------------------------------------------------- TRAVELERS MONEY MARKET ACCOUNT - ---------------------------------------------------------------------------------------------------------------------------------- Asset-based Charges ---------------------------------- ---------------- Optional Feature Total M&E and Rider Charges (1) Dth ---------------- Total (as identified in Note 4) Ben Product M&E GMWB Charge - ---------------------------------------------------------------------------------------------------------------------------------- Total M&E and Rider Charges 1.00%, 3.5% AIR S Universal Annuity (1) 1.00% 1.00% Total M&E and Rider Charges 1.25%, 3.0% AIR S Universal Select Annuity 1.25% 1.25% Total M&E and Rider Charges 1.25%, 3.5% AIR S Universal Annuity (2) 1.25% 1.25% S Universal Annuity Advantage 1.25% 1.25% Total M&E and Rider Charges 1.40%, 3.0% AIR SU Universal Select Annuity 1.40% 1.40% Total M&E and Rider Charges 1.40%, 3.5% AIR SU Universal Annuity Advantage 1.40% 1.40% Total M&E and Rider Charges 1.65%, 3.0% AIR S Universal Select Annuity 1.25% 0.40% 1.65% Total M&E and Rider Charges 1.65%, 3.5% AIR S Universal Annuity Advantage 1.25% 0.40% 1.65% Total M&E and Rider Charges 1.80%, 3.0% AIR SU Universal Select Annuity 1.40% 0.40% 1.80% Total M&E and Rider Charges 1.80%, 3.5% AIR SU Universal Annuity Advantage 1.40% 0.40% 1.80% - ----------------------------------------------------------------------------------------------------------------------------------
(1) Contracts issued prior to May 16, 1983 (2) Contracts issued on or after May 16, 1983 For certain contracts in the accumulation phase, a semi-annual charge of $15 (prorated for partial years) is deducted from participant account balances and paid to The Company to cover administrative charges. The Company assesses a 5% contingent deferred sales charge if a participant's purchase payment is surrendered within five years of its payment date. Contract surrender payments are net of contingent sales charges of $148,520 and $243,226 for the years ended December 31, 2004 and 2003, respectively. 3. NET ASSETS HELD ON BEHALF OF AN AFFILIATE Approximately $1,060,000 and $1,185,000 of the net assets of Account MM were held on behalf of an affiliate of The Company as of December 31, 2004 and 2003, respectively. Transactions with this affiliate during the years ended December 31, 2004 and 2003, were comprised of participant purchase payments of approximately $515,000 and $523,000 and contract surrenders of approximately $638,000 and $1,541,000, respectively. -35- NOTES TO FINANCIAL STATEMENTS - CONTINUED 4. NET CONTRACT OWNERS' EQUITY
DECEMBER 31, 2004 ------------------------------------- UNIT UNITS VALUE NET ASSETS ---------- -------- ------------ Total M&E and Rider Charges 1.00%, 3.5% AIR ..... 26,096 $ 2.879 $ 75,132 Total M&E and Rider Charges 1.25%, 3.5% AIR ..... 24,484,897 2.728 66,801,878 Total M&E and Rider Charges 1.25%, 3.0% AIR ..... 150 1.001 150 ------------ Net Contract Owners' Equity .............................................. $ 66,877,160 ============
-36- NOTES TO FINANCIAL STATEMENTS - CONTINUED 5. SUPPLEMENTARY INFORMATION (Selected data for a unit outstanding throughout each year.)
Total M&E and Rider Charges 1.00%, 3.5% AIR FOR THE YEARS ENDED DECEMBER 31, ----------------------------------------------------------------- 2004 2003 2002 2001 2000 ---- ---- ---- ---- ---- SELECTED PER UNIT DATA: Total investment income ................................... $ .040 $ .033 $ .051 $ .120 $ .174 Operating expenses ........................................ .038 .038 .038 .037 .037 -------- -------- -------- -------- -------- Net investment income (loss) .............................. .002 (.005) .013 .083 .137 Unit value at beginning of year ........................... 2.877 2.882 2.869 2.786 2.649 -------- -------- -------- -------- -------- Unit value at end of year ................................. $ 2.879 $ 2.877 $ 2.882 $ 2.869 $ 2.786 ======== ======== ======== ======== ======== SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase (decrease) in unit value ..................... $ .00 $ (.01) $ .01 $ .08 $ .14 Ratio of operating expenses to average net assets ......... 1.33% 1.33% 1.33% 1.33% 1.33% Ratio of net investment income (loss) to average net assets 0.07% (0.16)% 0.46% 2.89% 5.09% Number of units outstanding at end of year (thousands) .... 26 39 49 60 70
Total M&E and Rider Charges 1.25%, 3.5% AIR FOR THE YEARS ENDED DECEMBER 31, ----------------------------------------------------------------- 2004 2003 2002 2001 2000 ---- ---- ---- ---- ---- SELECTED PER UNIT DATA: Total investment income ................................... $ .038 $ .032 $ .048 $ .114 $ .167 Operating expenses ........................................ .043 .043 .043 .042 .041 -------- -------- -------- -------- -------- Net investment income (loss) .............................. (.005) (.011) .005 .072 .126 Unit value at beginning of year ........................... 2.733 2.744 2.739 2.667 2.541 -------- -------- -------- -------- -------- Unit value at end of year ................................. $ 2.728 $ 2.733 $ 2.744 $ 2.739 $ 2.667 ======== ======== ======== ======== ======== SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase (decrease) in unit value ..................... $ (.01) $ (.01) $ .01 $ .07 $ .13 Ratio of operating expenses to average net assets ......... 1.57% 1.57% 1.57% 1.57% 1.57% Ratio of net investment income (loss) to average net assets (0.18)% (0.41)% 0.21% 2.64% 4.84% Number of units outstanding at end of year (thousands) .... 24,485 32,559 50,702 63,430 55,477
-37- NOTES TO FINANCIAL STATEMENTS - CONTINUED 5. SUPPLEMENTARY INFORMATION (CONTINUED) (Selected data for a unit outstanding throughout each period.)
FROM DECEMBER 28, 2004 Total M&E and Rider Charges 1.25%, 3.0% AIR (INCEPTION DATE) TO DECEMBER 31, 2004 --------- SELECTED PER UNIT DATA: Total investment income ..................................... $ -- Operating expenses .......................................... -- --------- Net investment income (loss) ................................ -- Unit value at beginning of period ........................... 1.001 --------- Unit value at end of year ................................... $ 1.001 ========= SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase (decrease) in unit value ....................... $ -- Ratio of operating expenses to average net assets* .......... 1.57% Ratio of net investment income (loss) to average net assets* 0.74% Number of units outstanding at end of year (thousands)** .... --
* Annualized ** Unit Balance rounds to less than 1,000 units 6. SUBSEQUENT EVENT On January 31, 2005, Citigroup Inc. ("Citigroup") announced that it had agreed to sell The Travelers Insurance Company ("TIC"), The Travelers Life and Annuity Company, Citicorp Life Insurance Company, First Citicorp Life Insurance Company, Citicorp International Life Insurance Company, The Travelers Life and Annuity Reinsurance Company, and certain other domestic and international insurance businesses (the "Life Insurance and Annuity Businesses") to MetLife, Inc. ("MetLife") pursuant to an Acquisition Agreement (the "Agreement"). The transaction is subject to certain regulatory approvals, as well as other customary conditions to closing. Citigroup currently anticipates that the intended sale would be closed this summer. The proposed sale would also include TIC's affiliated investment advisory companies, Travelers Asset Management International Company LLC, which serves as the investment advisor for certain of the variable product separate accounts. The transaction contemplates that TIC's Primerica Life segment and certain other assets will remain with Citigroup. Accordingly, prior to the closing, TIC will distribute to its parent company by way of dividend (i) all of the outstanding shares of common stock of the Company's 100% owned subsidiary, Primerica Life Insurance Company ("Primerica Life"), (ii) all shares of Citigroup's Series YYY and Series YY preferred stock held by the Company and (iii) certain other assets, including certain assets and liabilities related to the Company's share of the non-qualified pension plan, and post retirement benefits related to inactive employees of the former Travelers Insurance entities, assumed during Citigroup's 2002 spin-off of the Travelers Property Casualty operations (collectively, the "Dispositions"). The Dispositions require certain regulatory approvals. Subject to closing adjustments described in the Agreement, the contemplated sale price would be $11.5 billion. In connection with the consummation of the sale of the Life Insurance and Annuity Business, Citigroup and MetLife will also enter into multi-year distribution agreements. TIC filed a Form 8-K Current Report with The United States Securities and Exchange Commission on February 2, 2005, with additional information about the transaction. -38- THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES SUMMARY OF HOLDINGS DECEMBER 31, 2004 % of net assets -------- SHORT-TERM INVESTMENTS Commercial Paper .......................................... 99.9 ----- TOTAL SHORT-TERM INVESTMENTS ................................ 99.9 ----- TOTAL INVESTMENTS ........................................... 99.9 ----- ----- Other Assets and Liabilities ................................ 0.1 ----- TOTAL NET ASSETS ............................................ 100.0 ===== -39- THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF INVESTMENTS DECEMBER 31, 2004
PRINCIPAL FAIR AMOUNT VALUE -------------- ------------- SHORT-TERM INVESTMENTS (99.9%) COMMERCIAL PAPER (99.9%) ABN AMRO North America Financial, 2.31% due January 10, 2005............... $ 3,380,000 $ 3,377,840 AIG Funding Inc., 2.34% due January 14, 2005............................... 3,060,000 3,057,264 Atomium Funding Corp., 2.27% due January 18, 2005.......................... 2,900,000 2,896,665 Bryant Park Funding LLC, 2.32% due January 11, 2005........................ 3,400,000 3,397,610 Coca-Cola Co., 2.3% due January 19, 2005................................... 3,386,000 3,381,889 Coca-Cola Enterprises Inc. , 2.31% due January 31, 2005.................... 3,380,000 3,373,304 Gannett Co., Inc., 2.23% due January 14, 2005.............................. 1,919,000 1,917,284 General Electric Capital Corp., 2.24% due January 18, 2005................. 3,500,000 3,495,975 Giro Balanced Funding Corp., 2.27% due January 14, 2005.................... 3,513,000 3,509,859 Household Financial Corp., 2.3% due January 12, 2005....................... 3,400,000 3,397,392 ING U.S. Funding LLC, 2.26% due January 5, 2005............................ 2,200,000 2,199,298 International Business Machine, 2.28% due January 12, 2005................. 1,000,000 999,233 Knight-Ridder, Inc, 2.29% due January 13, 2005............................. 3,386,000 3,383,187 Morgan Stanley, 2.36% due January 20, 2005................................. 3,390,000 3,385,668 Nestle Capital Corp., 2.26% due January 11, 2005........................... 3,039,000 3,036,864 Nieuw Amsterdam Receivables Corp., 2.36% due January 18, 2005.............. 3,000,000 2,996,550 Norddeutsche Landesbank Luxembourg S.A., 2.36% due January 19, 2005........ 3,400,000 3,395,872 Quebec Providence of Canada, 2.29% due January 12, 2005.................... 1,685,000 1,683,708 Royal Bank of Scotland PLC, 2.25% due January 6, 2005...................... 3,488,000 3,486,664 Siemens Capital Corp., 2.29% due February 1 ,2005.......................... 2,923,000 2,917,017 Toyota Motor Credit Corp., 2.25% due January 21, 2005...................... 3,463,000 3,458,353 UBS Financial Inc., 2.26% due January 3, 2005.............................. 525,000 524,899 Victory Receivables Corp., 2.39% due January 19, 2005...................... 3,300,000 3,295,994 Yorktown Capital LLC, 2.37% due January 5, 2005............................ 304,000 303,903 ------------- 66,872,292 ------------- TOTAL INVESTMENTS (99.9%) (COST $66,877,485)......................................................... 66,872,292 ------------- OTHER ASSETS AND LIABILITIES (0.1%).......................................... 4,868 ------------- TOTAL NET ASSETS (100.0%).................................................... $ 66,877,160 ==============
-40- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Managers and the Owners of Variable Annuity Contracts of The Travelers Money Market Account for Variable Annuities: We have audited the accompanying statement of assets and liabilities of The Travelers Money Market Account for Variable Annuities, including the statement of investments, as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the selected per unit data and ratios for each of the years in the five-year period then ended. These financial statements and selected per unit data and ratios are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and selected per unit data and ratios based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and selected per unit data and ratios are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and selected per unit data and ratios. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with custodians and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and selected per unit data and ratios referred to above present fairly, in all material respects, the financial position of The Travelers Money Market Account for Variable Annuities as of December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the selected per unit data and ratios for each of the years in the five-year period then ended, in conformity with accounting principles generally accepted in the United States of America. /s/ KPMG LLP Hartford, Connecticut February 17, 2005 -41- THE BOARD OF MANAGERS AND OFFICERS The investments and administration of each of the Accounts are under the direction of the Board of Managers, listed below. Members of the Board of Managers of Accounts GIS, QB, and MM are elected annually by those Contract Owners participating in the Accounts. A majority of the members of the Board of Managers are persons who are not affiliated with The Travelers Insurance Company, TIMCO, TAMIC or their affiliates.
- ------------------------------------------------------------------------------------------------------------------------------ NAME, ADDRESS AND POSITION(S) TERM OF PRINCIPAL OCCUPATION DURING LAST NUMBER OF OTHER DIRECTORSHIPS AGE HELD WITH FUND OFFICE FIVE YEARS PORTFOLIOS IN HELD BY DIRECTOR AND FUND COMPLEX LENGTH OVERSEEN BY OF TIME DIRECTOR SERVED - ------------------------------------------------------------------------------------------------------------------------------ *R. Jay Gerken Manager Since Managing Director (1989 to present) 11 Managing Director of 399 Park Avenue 2002 of Citigroup Global Markets Inc. CGM New York, NY ("CGM"); Chairman, President and Age 53 CEO of Smith Barney Fund Management LLC; Travelers Investment Adviser, Inc. and CitiFund Management Inc. Chairman, Chief Executive Officer and President, Board of Managers (2002-present), six Variable Annuity Separate Accounts of The Travelers Insurance Company+; Chairman, Board of Trustees (2002-present), five Mutual Funds sponsored by The Travelers Insurance Company.++ - ------------------------------------------------------------------------------------------------------------------------------ Ernest J. Wright Secretary to Since Vice President and Secretary 11 N/A One Cityplace the Board 1994 (1996-present), Assistant Secretary Hartford, CT (1994-1996), Counsel Age 64 (1987-present), The Travelers Insurance Company; Secretary (1994-present), six Variable Annuity Separate Accounts of The Travelers Insurance Company+; Secretary (1994-present), five Mutual Funds sponsored by The Travelers Insurance Company.++ - ------------------------------------------------------------------------------------------------------------------------------ Kathleen A. McGah Assistant Since Deputy General Counsel (1999 - 11 N/A One Cityplace Secretary to 1995 present); Assistant Secretary Hartford, CT The Board (1995-present), The Travelers Age 54 Insurance Company; Assistant Secretary (1995-present), six Variable Annuity Separate Accounts of The Travelers Insurance Company+; Assistant Secretary, (1995-present), five Mutual Funds sponsored by The Travelers Insurance Company.++ - ------------------------------------------------------------------------------------------------------------------------------ David A. Golino Principal Since Vice President and Controller (1999 6 N/A One Cityplace Accounting 1998 - present); Second Vice President Hartford, CT Officer (1996-1999), The Travelers Age 43 Insurance Company; Principal Accounting Officer (1998-present), six Variable Annuity Separate Accounts of The Travelers Insurance Company.+ - ------------------------------------------------------------------------------------------------------------------------------ William D. Wilcox Chief AML Since Counsel and Chief Compliance 11 N/A One Cityplace Compliance 2002 Officer (1999 - present); The Hartford, CT Officer, Chief Travelers Insurance Company; Chief Age 40 Compliance AML Compliance (2002-present), six Officer Variable Annuity Separate Accounts of The Travelers Insurance Company.+; Chief Compliance Officer (2004-present), five Mutual Funds sponsored by The Travelers Insurance Company. ++ - ------------------------------------------------------------------------------------------------------------------------------
-42- INDEPENDENT MANAGERS**
- -------------------------------------------------------------------------------------------------------------------------------- NAME, ADDRESS AND AGE POSITION(S) TERM OF PRINCIPAL OCCUPATION DURING LAST NUMBER OF OTHER DIRECTORSHIPS HELD WITH OFFICE AND FIVE YEARS PORTFOLIOS IN HELD BY DIRECTOR FUND LENGTH OF FUND COMPLEX TIME SERVED OVERSEEN BY DIRECTOR - -------------------------------------------------------------------------------------------------------------------------------- Robert E. McGill, Manager Since 1974 Retired manufacturing executive. 11 None III Director (1983-1995), Executive 295 Hancock Street Vice President (1989-1994) and Williamstown, MA Senior Vice President, Finance and Age 73 Administration (1983-1989), The Dexter Corporation (manufacturer of specialty chemicals and materials); Vice Chairman (1990-1992), Director (1983-1995), Life Technologies, Inc. (life science/biotechnology products); Director, (1994-1999), The Connecticut Surety Corporation (insurance); Director (1995-2000), Chemfab Corporation (specialty materials manufacturer); Director (1999-2001), Ravenwood Winery, Inc.; Director (1999-2003), Lydall Inc. (manufacturer of fiber materials); Member, Board of Managers (1974-present), six Variable Annuity Separate Accounts of The Travelers Insurance Company+; Trustee (1990-present), five Mutual Funds sponsored by The Travelers Insurance Company.++ - -------------------------------------------------------------------------------------------------------------------------------- Lewis Mandell Manager Since 1990 Professor of Finance and Managerial 11 Director 160 Jacobs Halls Economics, University at Buffalo (2000-present), Buffalo, NY since 1998. Dean, School of Delaware North Corp. Age 61 Management (1998-2001), University (hospitality business) at Buffalo; Dean, College of Business Administration (1995-1998), Marquette University; Professor of Finance (1980-1995) and Associate Dean (1993-1995), School of Business Administration, and Director, Center for Research and Development in Financial Services (1980-1995), University of Connecticut; Member, Board of Managers (1990-present), six Variable Annuity Separate Accounts of The Travelers Insurance Company+; Trustee (1990-present), five Mutual Funds sponsored by The Travelers Insurance Company.++ - -------------------------------------------------------------------------------------------------------------------------------- Frances M. Hawk, Manager Since 1991 Private Investor, (1997-present); 11 None CFA, CFP Portfolio Manager (1992-1997), HLM 108 Oxford Hill Lane Management Company, Inc. Downingtown, PA (investment management); Assistant Age 56 Treasurer, Pensions and Benefits. Management (1989-1992), United Technologies Corporation (broad-based designer and manufacturer of high technology products); Member, Board of Managers (1991-present), six Variable Annuity Separate Accounts of The Travelers Insurance Company+; Trustee (1991-present), five Mutual Funds sponsored by The Travelers Insurance Company.++ - --------------------------------------------------------------------------------------------------------------------------------
-43- + These six Variable Annuity Separate Accounts are: The Travelers Growth and Income Stock Account for Variable Annuities, The Travelers Quality Bond Account for Variable Annuities, The Travelers Money Market Account for Variable Annuities, Tactical Growth and Income Stock Account for Variable Annuities, Tactical Short-Term Bond Account for Variable Annuities and Tactical Aggressive Stock Account for Variable Annuities. ++ These five Mutual Funds are: Capital Appreciation Fund, Money Market Portfolio, High Yield Bond Trust, Managed Assets Trust and The Travelers Series Trust. * Mr. Gerken is an "interested person" within the meaning of the 1940 Act by virtue of his position as Managing Director of Salomon Smith Barney Inc., an indirect wholly owned subsidiary of Citigroup Inc. and his ownership of shares and options to purchase shares of Citigroup Inc., the indirect parent of The Travelers Insurance Company. ** Mr. Knight Edwards is an Emeritus Manager. An Emeritus Manager is permitted to attend meetings, but has no voting power. # Each Manager and officer serves until his or her respective successor has been duly elected and qualified. -44- INVESTMENT ADVISER ------------------ TRAVELERS ASSET MANAGEMENT INTERNATIONAL COMPANY, LLC Hartford, Connecticut THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES INVESTMENT SUB-ADVISER ---------------------- THE TRAVELERS INVESTMENT MANAGEMENT COMPANY Stamford, Connecticut THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES INDEPENDENT AUDITORS -------------------- KPMG LLP Hartford, Connecticut CUSTODIAN --------- JPMORGAN CHASE BANK New York, New York This report is prepared for the general information of contract owners and is not an offer of units of The Travelers Growth and Income Stock Account for Variable Annuities, The Travelers Quality Bond Account for Variable Annuities or The Travelers Money Market Account for Variable Annuities. All figures represent past performance and the information provided is not intended to be a forecast of future events, a guarantee of future results or investment advice. Principal value and investment returns will fluctuate and investors' units may be worth more or less than their original cost Each Account files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. You may find these forms on the Securities and Exchange Commission's website at HTTP://WWW.SEC.GOV. These forms may also be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling (toll free) 1-800-SEC-0330. Contract owners can also call the Account at 1-800-842-9406 to obtain information on Form N-Q. A description of the policies and procedures that the Accounts use to determine how to vote proxies and information on how the Accounts voted proxies relating to portfolio securities during the 12-month period ended June 30, 2004 is currently available. You may obtain these materials upon request and without charge by calling the Accounts (toll-free) at 1-800-842-9406, by visiting the Accounts' website at HTTP://WWW.CITIGROUPAM.COM, or by visiting the Securities and Exchange Commission's website at HTTP://WWW.SEC.GOV. VG-137 (Annual) (12-04) Printed in U.S.A. ITEM 2. CODE OF ETHICS. The registrant has adopted a code of ethics that applies to the Registrant's prinicipal executive officer, principal financial officer, Principal accounting officer or controller. Please see exhibit (a)(1). ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The Board of Managers of the registrant has determined that Robert F. McGill III, a member of the Board's Audit Committee, possesses the technical attributes identified in Instruction 2(b) of item 3 to Form N-CSR to qualify as the "Audit Committee financial expert," and has designated Mr. McGill as the Audit Committee's financial expert. Mr. McGill is an "independent" Director pursuant to paragraph (a)(2) of item 3 to Form N-CSR. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. (a) The aggregate fees billed by registrant's independent public accountants, KPMG LLP, for each of the last two fiscal years for professional services rendered in connection with the audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements were $59,500 for the year ended December 31, 2003 and $58,575 for the year ended December 31, 2004. These fees are paid by Travelers Life & Annuity, as sponsor of each registrant. (b) None. (c) None. (d) None. (e)(1) The Audit Committee ("Committee") has adopted policies and procedures to, among other purposes, approve all audit and non-audit services provided to the Registrant and certain other persons by the Registrant's independent auditors. The policies and procedures require the Committee to approve (a) all audit and permissible non-audit services to be provided to the Registrant and (b) all permissible non-audit services to be provided by the Fund's independent auditors to the Adviser and any Covered Service Providers if the engagement relates directly to the operations and financial reporting of the Registrant. In carrying out this responsibility, the Committee shall seek periodically from the Adviser and from the independent auditors a list of audit and permissible non-audit services that can be expected to be rendered to the Registrant, the Adviser or any Covered Service Providers by the Registrant's independent auditors, and an estimate of the fees sought to be paid in connection with such services. The Committee may delegate its responsibility to approve any such audit and permissible non-audit services to a sub-committee consisting of the Chairperson of the Committee (the "Chairperson") and at least one other member of the Committee as the Chairperson, from time to time, may determine and appoint, and such sub-committee shall report to the Committee, at its next meeting after the sub-committee's meeting, its decision(s). From year to year, and at such other times as the Committee deems appropriate, the Committee shall report to the Board whether this system of approval has been effective and efficient or whether this Charter should be amended to allow for pre-approval pursuant to such policies. Pre-approval by the Committee of any permissible non-audit services is not required so long as: (i) the aggregate amount of all such permissible non-audit services provided to the Fund, the Adviser and any service providers controlling, controlled by or under common control with the Adviser that provide ongoing services to the Fund ("Covered Service Providers") constitutes not more than 5% of the total amount of revenues paid to the independent auditors during the fiscal year in which the permissible non-audit services are provided by (a) the Fund, (b) the Adviser and (c) any entity controlling, controlled by or under common control with the Adviser that provides ongoing services to the Fund during the fiscal year in which the services are provided that would have to be approved by the Committee; (ii) the permissible non-audit services were not recognized by the Fund at the time of the engagement to be non-audit services; and (iii) such services are promptly brought to the attention of the Committee and approved by the Committee (or its delegate(s)) prior to the completion of the audit. (e)(2) No fee incurred on behalf of the accounts. (f) Not applicable. (g) None. (h) Yes. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS Please see the schedule of investments contained in the report to shareholders included under item 1 of this form N-CSR. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED END MANAGEMENT INVESTMENTCOMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant's Board of Managers since the accounts last provided disclosure in response to this item. ITEM 11. CONTROLS AND PROCEDURES. (a) The registrant's principal executive officer and principal financial officer have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a - 3 (c) under the Investment Company Act of 1940, as amended (the "1940 Act")) are effective as of a date within 90 days of the filing date of this report that includes the disclosure required by this paragraph, based on their evaluation of the disclosure controls and procedures required by Rule 30a-3(b) under the 1940 Act and 15d-15(b) under the Securities Exchange Act of 1934 as of a date within 90 days of the filing date of this document. (b) There were no changes in the registrant's internal control over financials reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the registrant's last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that have materially affected, or are likely to materially affect the registrant's internal control over financial reporting. ITEM 12. EXHIBITS. (a)(1) The code of ethics pursuant to item 2 is attached as EX-99.CODE ETH (a)(2) Certifications pursuant to section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto as Exhibit 99.CERT (b) Certifications pursuant to section 906 of the Sarbanes-Oxley Act of 2002 are furnished as Exhibit 99.906CERT SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Travelers Growth and Income Stock Account For Variable Annuities Travelers Quality Bond Account For Variable Annuities Travelers Money Market Account For Variable Annuities By: /s/ R. Jay Gerken R. Jay Gerken Chairman of the Board Chief Executive Officer Travelers Growth and Income Stock Account For Variable Annuities Travelers Quality Bond Account For Variable Annuities Travelers Money Market Account For Variable Annuities Date February 24, 2005 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ R. Jay Gerken R. Jay Gerken Chairman of the Board Chief Executive Officer Travelers Growth and Income Stock Account For Variable Annuities Travelers Quality Bond Account For Variable Annuities Travelers Money Market Account For Variable Annuities Date February 24, 2005 By: /s/ David A. Golino David A. Golino Principal Accounting Officer Travelers Growth and Income Stock Account For Variable Annuities Travelers Quality Bond Account For Variable Annuities Travelers Money Market Account For Variable Annuities Date February 24, 2005 EX-99.CODE ETH 2 c35633_ex99-codeeth.txt EX 99.CODE ETH SARBANES-OXLEY ACT CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS OF CAM/U.S. REGISTERED INVESTMENT COMPANIES I. COVERED OFFICERS/PURPOSE OF THE CODE This code of ethics (the "Code") for Citigroup Asset Management's ("CAM's") U. S. registered proprietary investment companies (collectively, "Funds" and each a, "Company") applies to each Company's Chief Executive Officer, Chief Administrative Officer, Chief Financial Officer and Controller (the "Covered Officers") for the purpose of promoting: o honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; o full, fair, accurate, timely and understandable disclosure in reports and documents that the Company files with, or submits to, the Securities and Exchange Commission ("SEC") and in other public communications made by the Company; o compliance with applicable laws and governmental rules and regulations; o the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and o accountability for adherence to the Code. Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest. II. ADMINISTRATION OF CODE The Regional Director of CAM Compliance, North America ("Compliance Officer") is responsible for administration of this Code, including granting pre-approvals (see Section III below) and waivers (as described in Section VI below), applying this Code in specific situations in which questions are presented under it and interpreting this Code in any particular situation. III. COVERED OFFICERS SHOULD ETHICALLY HANDLE ACTUAL AND APPARENT CONFLICTS OF INTEREST OVERVIEW. A "conflict of interest" occurs when a Covered Officer's private interest interferes with the interests of, or his service to, the Company. For example, a conflict of interest would arise if a Covered Officer, or a member of his family, receives improper personal benefits as a result of his position with the Company. Certain conflicts of interest arise out of the relationships between Covered Officers and the Company and already are subject to conflict of interest provisions in the Investment Company Act of 1940 ("Investment Company Act") and the Investment Advisers Act of 1940 ("Investment Advisers Act"). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Company because of their status as "affiliated persons" of the Company. The compliance programs and procedures of the Company and its investment adviser are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code (see Section VII below). Although typically not presenting an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationship between a Company and the investment adviser of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for a Company or for the adviser, or for both), be involved in establishing policies and implementing decisions that will have different effects on the adviser and a Company. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Company and the adviser and is consistent with the performance by the Covered Officers of their duties as officers of a Company. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. In addition, it is recognized by the Funds' Boards of Directors\Trustees ("Boards") that the Covered Officers may also be officers or employees of one or more other investment companies covered by this or other codes. Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Company. * * * * Each Covered Officer must: o not use his personal influence or personal relationships improperly to influence investment decisions or financial reporting ( e.g. through fraudulent accounting practices) by the Company whereby the Covered Officer(1) would benefit personally to the detriment of the Company; or o not cause the Company to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than for the benefit of the Company; and o not use material non-public knowledge of portfolio transactions made or contemplated for the Company to trade personally or cause others to trade personally in contemplation of the market affect of such transactions. o There are some potential conflict of interest situations that should always be discussed with the Compliance Officer, if material. Examples are as follows: (1) service as a director on the board of any public or private company; (2) any ownership interest in, or any consulting or employment relationship with, any of the Company's service providers, other than its investment adviser, (3) a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Company for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment, such as compensation or equity ownership; and 4) the receipt of any gifts or the conveyance of any value (including entertainment ) from any company with which the Company has current or prospective business dealings, except: (a) any non-cash gifts of nominal value (nominal value is less than $100); and (b) customary and reasonable meals and entertainment at which the giver is present, such as the occasional business meal or sporting event. IV. DISCLOSURE AND COMPLIANCE Each Covered Officer: o should be familiar with his or her responsibilities in connection with the disclosure requirements generally applicable to the Company; - ---------- (1) Any activity or relationship that would present a conflict for a Covered Officer would also present a conflict for the Covered Officer if a member of a Covered Officer's family (spouse, minor children and any account over which a Covered Officer is deemed to have beneficial interest) engages in such an activity or has such a relationship. o should not knowingly misrepresent, or knowingly cause others to misrepresent, facts about the Company to others, whether within or outside the Company, including to the Company's directors and auditors, and to governmental regulators and self-regulatory organizations; o should, to the extent appropriate within his or her area of responsibility, consult with other officers and employees of the Funds and the investment adviser with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Funds file with, or submit to, the SEC and in other public communications made by the Funds; and o is responsible to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. V. REPORTING AND ACCOUNTABILITY Each Covered Officer must: o upon adoption of the Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Board that the Covered Officer has received, read, and understands the Code; o annually thereafter affirm to the Board that he or she has complied with the requirements of the Code; o annually disclose affiliations and other relationships related to conflicts of interest; o not retaliate against any other Covered Officer or any employee of the Funds or their affiliated persons for reports of potential violations that are made in good faith; and o notify the Compliance Officer promptly if he knows of any violation of this Code (failure to do so is itself a violation of this Code). In rendering decisions and interpretations and in conducting investigations of potential violations under the Code, the Compliance Officer may, at his discretion, consult with such persons as he determines to be appropriate, including, but not limited to, a senior legal officer of the Company or its investment adviser or its affiliates, independent auditors or other consultants, subject to any requirement to seek pre-approval from the Company's audit committee for the retention of independent auditors to perform permissible non-audit services. The Funds will follow these procedures in investigating and enforcing the Code: o the compliance Officer will take all appropriate action to investigate any potential violation of which he becomes aware; o if, after investigation the Compliance Officer believes that no violation has occurred, the Compliance Officer is not required to take any further action; o any matter that the Compliance Officer believes is a violation will be reported to the Directors of the Fund who are not "interested persons" as defined in the Investment Company Act the ("Non-interested Directors") o if the Non-interested Directors of the Board concur that a violation has occurred, it will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the investment adviser or its board; or a recommendation to dismiss the Covered Officer; and o any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules The Compliance Officer shall submit an annual report to the Board describing any waivers granted. VI. WAIVERS(2) A Covered Officer may request a waiver of any of the provisions of the Code by submitting a written request for such waiver to the Compliance Officer, setting forth the basis of such request and explaining how the waiver would be consistent with the standards of conduct described herein. The Compliance Officer shall review such request and make a determination thereon in writing, which shall be binding. In determining whether to waive any provisions of this Code, the Compliance Officer shall consider whether the proposed waiver is consistent with honest and ethical conduct and other purposes of this Code. VII. OTHER POLICIES AND PROCEDURES This Code shall be the sole code of ethics adopted by the Funds for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Funds, the Funds' investment advisers, principal underwriters, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The codes of ethics of the funds and the investment advisers and principal underwriters under Rule 17j-1 of the Investment Company Act and the Citigroup Code of Conduct and Citigroup Statement of Business Practices as well as other policies of the Fund's investment advisers or their affiliates are separate requirements applying to the Covered Officers and others, and are not part of this Code. - ---------- (2) For purposes of this Code, Item 2 of Form N-CSR defines "waiver" as "the approval by a Company of a material departure from a provision of the Code" and includes an"implicit waiver," which means a Company's failure to take action within a reasonable period of time regarding a material departure from a provision of the Code that has been made known to an executive officer of the Company. VIII. AMENDMENTS Any amendments to this Code, other than amendments to Exhibits A, B and C must be approved or ratified by a majority vote of the Board, including a majority of Non-interested Directors. IX. CONFIDENTIALITY All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the appropriate Board and Company and their respective counsel, counsel to the non-Interested Directors or independent auditors or other consultants referred to in Section V above. X. INTERNAL USE The Code is intended solely for the internal use by the Funds and does not constitute an admission, by or on behalf of any Company, as to any fact, circumstance, or legal conclusion. EX-99.CERT 3 c35633_ex99-cert.txt CERTIFICATIONS I, R. Jay Gerken, certify that: 1. I have reviewed this report on Form N-CSR of The Travelers Growth and Income Stock Account for Variable Annuities; 2. Based on my knowledge, this report does not contain any untrue statements of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting: and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 24, 2005 /s/ R. Jay Gerken ----------------------------- Chairman of the Board Chief Executive Officer CERTIFICATIONS I, David A. Golino, certify that: 1. I have reviewed this report on Form N-CSR of The Travelers Growth and Income Stock Account for Variable Annuities; 2. Based on my knowledge, this report does not contain any untrue statements of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting: and; 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: February 24, 2005 /s/ David A. Golino ----------------------------- Principal Accounting Officer CERTIFICATIONS I, R. Jay Gerken, certify that: 1. I have reviewed this report on Form N-CSR of The Travelers Quality Bond Account for Variable Annuities; 2. Based on my knowledge, this report does not contain any untrue statements of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting: and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 24, 2005 /s/ R. Jay Gerken ----------------------------- Chairman of the Board Chief Executive Officer CERTIFICATIONS I, David A. Golino, certify that: 1. I have reviewed this report on Form N-CSR of The Travelers Quality Bond Account for Variable Annuities; 2. Based on my knowledge, this report does not contain any untrue statements of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting: and; 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: February 24, 2005 /s/ David A. Golino ----------------------------- Principal Accounting Officer CERTIFICATIONS I, R. Jay Gerken, certify that: 1. I have reviewed this report on Form N-CSR of The Travelers Money Market Account for Variable Annuities; 2. Based on my knowledge, this report does not contain any untrue statements of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting: and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 24, 2005 /s/ R. Jay Gerken ----------------------------- Chairman of the Board Chief Executive Officer CERTIFICATIONS I, David A. Golino, certify that: 1. I have reviewed this report on Form N-CSR of The Travelers Money Market Account for Variable Annuities; 2. Based on my knowledge, this report does not contain any untrue statements of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting: and; 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: February 24, 2005 /s/ David A. Golino ----------------------------- Principal Accounting Officer EX-99.906 4 c35633_ex99-906.txt CERTIFICATION R. Jay Gerken, Chairman of the Board and Chief Executive Officer, and David A. Golino, Principal Accounting Officer of the Travelers Growth and Income Stock Account for Variable Annuities, each certify to the best of his knowledge that: 1. The Registrant's periodic report on Form N-CSR for the period ended December 31, 2004 (the "Form N-CSR") fully complies with the requirements of section 13 (a) or 15(d) as applicable of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Chairman of the Board Chief Executive Officer Principal Accounting Officer Travelers Growth and Income Stock Travelers Growth and Income Stock Account Account For Variable Annuities For Variable Annuities /s/ R. Jay Gerken /s/ David A. Golino - --------------------------------- ----------------------------------- R. Jay Gerken David A. Golino Date: February 24, 2005 Date: February 24, 2005 A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Travelers Growth and Income Stock Account for Variable Annuities and will be retained by the Travelers Growth and Income Stock Account for Variable Annuities and furnished to the Securities and Exchange Commission or its staff upon request. This certification is being furnished to the Commission solely pursuant to 18 U.S.C. (s) 1350 and is not being filed as part of the Form N-CSR with the Commission. CERTIFICATION R. Jay Gerken, Chairman of the Board and Chief Executive Officer, and David A. Golino, Principal Accounting Officer of the Travelers Quality Bond Account for Variable Annuities, each certify to the best of his knowledge that: 1. The Registrant's periodic report on Form N-CSR for the period ended December 31, 2004 (the "Form N-CSR") fully complies with the requirements of section 13 (a) or 15(d) as applicable of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Chairman of the Board Chief Executive Officer Principal Accounting Officer Travelers Quality Bond Stock Account Travelers Quality Bond Stock Account For Variable Annuities For Variable Annuities /s/ R. Jay Gerken /s/ David A. Golino - --------------------------------- ------------------------------------ R. Jay Gerken David A. Golino Date: February 24, 2005 Date: February 24, 2005 A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Travelers Quality Bond Account for Variable Annuities and will be retained by the Travelers Quality Bond Account for Variable Annuities and furnished to the Securities and Exchange Commission or its staff upon request. This certification is being furnished to the Commission solely pursuant to 18 U.S.C. (s) 1350 and is not being filed as part of the Form N-CSR with the Commission. CERTIFICATION R. Jay Gerken, Chairman of the Board and Chief Executive Officer, and David A. Golino, Principal Accounting Officer of the Travelers Money Market Account for Variable Annuities, each certify to the best of his knowledge that: 1. The Registrant's periodic report on Form N-CSR for the period ended December 31, 2004 (the "Form N-CSR") fully complies with the requirements of section 13 (a) or 15(d) as applicable of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Chairman of the Board Chief Executive Officer Principal Accounting Officer Travelers Money Market Account Travelers Money Market Account For Variable Annuities For Variable Annuities /s/ R. Jay Gerken /s/ David A. Golino - --------------------------------- ----------------------------------- R. Jay Gerken David A. Golino Date: February 24, 2005 Date: February 24, 2005 A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Travelers Money Market Account for Variable Annuities and will be retained by the Travelers Money Market Account for Variable Annuities and furnished to the Securities and Exchange Commission or its staff upon request. This certification is being furnished to the Commission solely pursuant to 18 U.S.C. (s) 1350 and is not being filed as part of the Form N-CSR with the Commission. -----END PRIVACY-ENHANCED MESSAGE-----