-----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, VMrxOBkahQ4IaVzcS8uS2jThuTQQzcaDI8MjknH8nsnmVztG+VFL16ucYzy9tgSq atMf4i/VXBZ+iHBxWJpDSQ== 0000930413-06-001595.txt : 20060301 0000930413-06-001595.hdr.sgml : 20060301 20060301124858 ACCESSION NUMBER: 0000930413-06-001595 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20051231 FILED AS OF DATE: 20060301 DATE AS OF CHANGE: 20060301 EFFECTIVENESS DATE: 20060301 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: 06654183 BUSINESS ADDRESS: STREET 1: METLIFE, 501 BOYLSTON STREET STREET 2: ATTN LEGAL DEPT CITY: BOSTON STATE: MA ZIP: 02116-3700 BUSINESS PHONE: 617-578-2000 X4152 MAIL ADDRESS: STREET 1: METLIFE, 501 BOYLSTON STREET STREET 2: ATTN LEGAL DEPT CITY: BOSTON STATE: MA ZIP: 02116-3700 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: 06654184 BUSINESS ADDRESS: STREET 1: METLIFE, 501 BOYLSTON STREET STREET 2: ATTN LEGAL DEPT CITY: BOSTON STATE: MA ZIP: 02116-3700 BUSINESS PHONE: 617-578-2000 X4152 MAIL ADDRESS: STREET 1: METLIFE, 501 BOYLSTON STREET STREET 2: ATTN LEGAL DEPT CITY: BOSTON STATE: MA ZIP: 02116-3700 FORMER COMPANY: FORMER CONFORMED NAME: TRAVELERS FUND MM FOR VARIABLE ANNUITIES DATE OF NAME CHANGE: 19851103 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: 06654185 BUSINESS ADDRESS: STREET 1: METLIFE, 501 BOYLSTON STREET STREET 2: ATTN LEGAL DEPT CITY: BOSTON STATE: MA ZIP: 02116-3700 BUSINESS PHONE: 617-578-2000 X4152 MAIL ADDRESS: STREET 1: METLIFE, 501 BOYLSTON STREET STREET 2: ATTN LEGAL DEPT CITY: BOSTON STATE: MA ZIP: 02116-3700 FORMER COMPANY: FORMER CONFORMED NAME: TRAVELERS FUND A-1 FOR VARIABLE ANNUITIES DATE OF NAME CHANGE: 19851103 0000099440 S000005356 TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES C000014598 Universal Annuity C000014599 Individual Variable Annuity Contracts C000014600 Group Variable Annuity Contracts C000014601 Universal Select Annuity C000014602 Universal Annuity Advantage 0000099444 S000005272 TRAVELERS GROWTH & INCOME STOCK ACCT FOR VARIABLE ANNUITIES C000014398 Universal Annuity C000014399 Individual Variable Annuity Contracts C000014400 Group Variable Annuity Contracts C000014401 Group Variable Annuity Contracts (TIC Ed) C000014402 Universal Select Annuity C000014403 Universal Advantage Annuity 0000700871 S000005319 TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES C000014510 Universal Annuity C000014511 Universal Select Annuity C000014512 Universal Annuity Advantage N-CSR 1 c41223_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 Marie Swift Metropolitan Life Insurance Company 501 Boylston Street Boston, MA 02116 (617) 578-2857 Date of fiscal year end: December 31 Date of reporting period: December 31, 2005 ITEM 1. REPORT(S) TO STOCKHOLDERS. The Annual Report to stockholders is filed herewith. ANNUAL REPORTS DECEMBER 31, 2005 THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES EACH AN ACCOUNT OF THE TRAVELERS INSURANCE COMPANY The Travelers Insurance Company One Cityplace Hartford, CT 06103 TABLE OF CONTENTS PAGE - -------------------------------------------------------------------------------- THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES ........................................................1 THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES ....................19 THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES ....................35 FACTORS CONSIDERED BY THE BOARDS OF MANAGERS IN APPROVING THE INVESTMENT ADVISORY AND THE SUB-ADVISORY AGREEMENT ...........................48 BOARD OF MANAGERS AND OFFICERS ...............................................51 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Managers and the Owners of Variable Contracts of The Travelers Growth and Income Stock Account for Variable Annuities We have audited the accompanying statement of assets and liabilities of The Travelers Growth and Income Stock Account for Variable Annuities (the "Fund"), including the statement of investments, as of December 31, 2005, and the related statement of operations and the statement of changes in net assets for the year then ended. These financial statements are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2005, by correspondence with the custodian. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Travelers Growth and Income Stock Account for Variable Annuities as of December 31, 2005, and the results of its operations and the changes in its net assets for the year then ended, in conformity with accounting principles generally accepted in the United States of America. /s/ DELOITTE & TOUCHE LLP Tampa, Florida February 21, 2006 -1- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Managers and the Owners of Variable Annuity Contracts of The Travelers Growth and Income Stock Account for Variable Annuities: We have audited the statement of changes in net assets of The Travelers Growth and Income Stock Account for Variable Annuities as of December 31, 2004, and the selected per unit data and ratios for each of the years in the four-year period then ended. The statement of changes in net assets and selected per unit data and ratios are the responsibility of the Company's management. Our responsibility is to express an opinion on the statement of changes in net assets and selected per unit data and ratios based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and selected per unit data and ratios are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and selected per unit data and ratios. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with custodians and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the statement of changes in net assets and selected per unit data and ratios referred to above of The Travelers Growth and Income Stock Account for Variable Annuities as of December 31, 2004 present fairly, in all material respects, the changes in its net assets for the year then ended, and the selected per unit data and ratios for each of the years in the four-year period then ended, in conformity with U.S. generally accepted accounting principles. /s/ KPMG LLP Hartford, Connecticut February 17, 2005 -2- THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2005 ASSETS: Investment securities, at fair value (cost $418,273,602) ..... $487,856,970 Cash ......................................................... 6,811 Receivables: Dividends .................................................. 713,153 Purchase payments and transfers from other funding options . 24,585 Other assets ................................................. 36,695 ------------ Total Assets ............................................. 488,638,214 ------------ LIABILITIES: Payables: Investment securities purchased ............................ 988,198 Contract surrenders and transfers to other funding options . 270,360 Investment management and advisory fees .................... 70,251 Insurance charges .......................................... 127,493 Accrued liabilities .......................................... 89 ------------ Total Liabilities ........................................ 1,456,391 ------------ NET ASSETS: $487,181,823 ============ See Notes to Financial Statements -3- THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2005 INVESTMENT INCOME: Dividends ......................................................... $ 8,442,326 Interest .......................................................... 167,666 ------------ Total income .................................................... $ 8,609,992 EXPENSES: Investment management and advisory fees ........................... 3,211,948 Insurance charges ................................................. 5,835,324 ------------ Total expenses .................................................. 9,047,272 ------------ Net investment income (loss) .................................. (437,280) ------------ REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES: Realized gain (loss) from investment security transactions: Proceeds from investment securities sold ........................ 166,074,600 Cost of investment securities sold .............................. 145,942,981 ------------ Net realized gain (loss) ...................................... 20,131,619 Change in unrealized gain (loss) on investment securities: Unrealized gain (loss) at December 31, 2005 ..................... 69,583,368 Unrealized gain (loss) at December 31, 2004 ..................... 68,011,790 ------------ Net change in unrealized gain (loss) for the year ............. 1,571,578 ------------ Net realized gain (loss) and change in unrealized gain (loss) 21,703,197 ------------ Net increase (decrease) in net assets resulting from operations ..... $ 21,265,917 ============
See Notes to Financial Statements -4- THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
2005 2004 ---- ---- OPERATIONS: Net investment income (loss) ......................................... $ (437,280) $ 249,422 Net realized gain (loss) from investment security transactions ....... 20,131,619 24,967,584 Net change in unrealized gain (loss) on investment securities ........ 1,571,578 28,522,721 ------------- ------------- Net increase (decrease) in net assets resulting from operations .... 21,265,917 53,739,727 ------------- ------------- UNIT TRANSACTIONS: Participant purchase payments (applicable to 770,857 and 902,159 units, respectively) ............ 13,977,653 15,767,591 Participant transfers from other funding options (applicable to 319,960 and 468,530 units, respectively) ............ 6,048,157 8,184,838 Administrative charges (applicable to 19,140 and 22,684 units, respectively) .............. (367,484) (412,112) Contract surrenders (applicable to 2,910,219 and 2,787,531 units, respectively) ........ (55,637,389) (49,336,289) Participant transfers to other funding options (applicable to 1,095,900 and 976,561 units, respectively) .......... (20,710,284) (17,069,498) Other payments to participants (applicable to 149,429 and 183,493 units, respectively) ............ (2,945,123) (3,341,401) ------------- ------------- Net increase (decrease) in net assets resulting from unit transactions (59,634,470) (46,206,871) ------------- ------------- Net increase (decrease) in net assets .............................. (38,368,553) 7,532,856 NET ASSETS: Beginning of year .................................................... 525,550,376 518,017,520 ------------- ------------- End of year .......................................................... $ 487,181,823 $ 525,550,376 ============= =============
See Notes to Financial Statements -5- NOTES TO FINANCIAL STATEMENTS 1. BUSINESS On July 1, 2005, MetLife, Inc., a Delaware corporation ("MetLife"), acquired all of the outstanding shares of capital stock of certain indirect subsidiaries held by Citigroup, Inc. ("Citigroup") including The Travelers Insurance Company, The Travelers Life and Annuity Company, certain other domestic insurance companies of Citigroup and substantially all of Citigroup's international insurance businesses. On December 1, 2005, Citigroup Inc. completed the sale of substantially all of its asset management business, Citigroup Asset Management, including, but not limited to, the Travelers Investment Management Company ("TIMCO") to Legg Mason, Inc. TIMCO provides equity management and sub-advisory services for the The Travelers Growth and Income Stock Account for Variable Annuities ("Account GIS"). Based upon the recommendation of the Audit Committee for Account GIS, the Board of Managers determined not to retain KPMG LLP ("KPMG") as Account GIS's independent auditor, and voted to appoint Deloitte & Touche LLP as Account GIS's independent auditor for the fiscal year ended December 31, 2005, effective July 1, 2005. During the two most recent fiscal years and through June 30, 2005, the date that the Board of Managers notified KPMG of their decision not to retain them as Account GIS's auditor, KPMG's audit reports contained no adverse opinion or disclaimer of opinion: nor were their reports qualified as to uncertainty, audit scope or accounting principles. Further, there were no disagreements between Account GIS and KPMG on the accounting principles, financial statements disclosure or audit scope, which, if not resolved to the satisfaction of KPMG, would have caused them to make reference to the disagreement in their reports. Account GIS is a separate account of The Travelers Insurance Company ("The Company"), a wholly owned subsidiary of MetLife, and is available for funding Universal Annuity, Universal Select Annuity, and Universal Annuity Advantage contracts issued by The Company. Account GIS, established on September 22, 1967, is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. Travelers Asset Management International Company, LLC ("TAMIC"), an indirect wholly owned subsidiary of The Company, provides fixed income management and advisory services for Account GIS. This report is prepared for the general information of contract owners and is not an offer of units of Account GIS or shares of Account GIS's underlying holdings. It should not be used in connection with any offer except in conjunction with the Prospectus for Account GIS's product(s) offered by The Company. 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by Account GIS in the preparation of its financial statements. Investments in securities traded on a national securities exchange are valued at the 4:00 p.m. Eastern Standard Time price of such exchanges; securities traded on the over-the-counter market and listed securities with no reported sales are valued at the mean between the last reported bid and asked prices or on the basis of quotations received from a reputable broker or other recognized source. Short-term investments are reported at fair value based on quoted market prices. Short-term investments, for which there is no reliable quoted market price, are recorded at amortized cost which approximates fair value. Security transactions are accounted for on the trade date. Dividend income is recorded on the ex-dividend date. Interest income is recorded on the accrual basis. Premiums and discounts are amortized to interest income utilizing the constant yield method. Account GIS may use stock index futures contracts as a substitute for the purchase or sale of individual securities. When Account GIS enters into a futures contract, it agrees to buy or sell a specified index of stocks at a future time for a fixed price, unless the contract is closed prior to expiration. Account GIS is obligated to deposit with a broker an "initial margin" equivalent to a percentage of the face, or notional value of the contract. -6- NOTES TO FINANCIAL STATEMENTS - CONTINUED 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) It is Account GIS's practice to hold cash and cash equivalents in an amount at least equal to the notional value of outstanding purchased futures contracts, less the initial margin. Cash and cash equivalents include cash on hand, securities segregated under federal and brokerage regulations, and short-term highly liquid investments with maturities generally three months or less when purchased. Generally, futures contracts are closed prior to expiration. Futures contracts purchased by Account GIS are priced and settled daily; accordingly, changes in daily prices are recorded as realized gains or losses and no asset is recorded in the Statement of Investments. Therefore, when Account GIS holds open futures contracts, it assumes a market risk generally equivalent to the underlying market risk of change in the value of the specified indexes associated with the futures contract. Account GIS may purchase index or individual equity put or call options, thereby obtaining the right to sell or buy a fixed number of shares of the underlying asset at the stated price on or before the stated expiration date. Account GIS may sell the options before expiration. Options held by Account GIS are listed on either national securities exchanges or on over-the-counter markets and are short-term contracts with a duration of less than nine months. The market value of the options will be based on the 4:00 p.m. Eastern Standard Time price of the respective exchange, or in the absence of such price, the latest bid quotation. There were no put or call options in Account GIS at December 31, 2005. When Account GIS enters into a repurchase agreement (a purchase of securities whereby the seller agrees to repurchase the securities at a mutually agreed upon date and price), the repurchase price of the securities will generally equal the amount paid by Account GIS plus a negotiated interest amount. The seller under the repurchase agreement will be required to provide to Account GIS securities (collateral) whose market value, including accrued interest, will be at least equal to 102% of the repurchase price. Account GIS monitors the value of collateral on a daily basis. Repurchase agreements will be limited to transactions with national banks and reporting broker dealers believed to present minimal credit risks. Account GIS's custodian will take actual or constructive receipt of all securities underlying repurchase agreements until such agreements expire. There were no repurchase agreements in Account GIS at December 31, 2005. The operations of Account GIS form a part of the total operations of The Company and are not taxed separately. The Company is taxed as a life insurance company under the Internal Revenue Code of 1986, as amended (the "Code"). Under existing federal income tax law, no taxes are payable on the investment income and capital gains of Account GIS. Account GIS is not taxed as a "regulated investment company" under Subchapter M of the Code. The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Realized gains and losses from investment security transactions are reported on an identified cost basis. 3. INVESTMENTS The aggregate costs of purchases and proceeds from sales of investments (other than short-term securities), were $106,859,907 and $158,668,990, respectively; the costs of purchases and proceeds from sales of direct and indirect U.S. government securities were $1,142,607 and $2,550,000, respectively, for the year ended December 31, 2005. Realized gains and losses from investment security transactions are reported on an identified cost basis. Net realized gains (losses) resulting from futures contracts were $158,172 and $601,653 for the years ended December 31, 2005 and 2004, respectively. These gains (losses) are included in the net realized gain (loss) from investment security transactions on both the Statement of Operations and the Statement of Changes in Net Assets. -7- NOTES TO FINANCIAL STATEMENTS - CONTINUED 4. CONTRACT CHARGES Investment management and advisory fees are paid to TAMIC, an indirect wholly owned subsidiary of MetLife Inc., and calculated daily at annual rates which start at 0.65% and decrease, as net assets increase, to 0.40% of Account GIS's average net assets. Pursuant to a sub-advisory agreement between TAMIC and TIMCO, TAMIC pays TIMCO a sub-advisory fee calculated daily at annual rates which start at 0.45% and decrease, as net assets increase, to 0.20% of Account GIS's average net assets. The asset-based charges listed below are deducted, as appropriate, each business day and are assessed through the calculation of accumulation and annuity unit values; - Mortality and Expense Risks assumed by The Company (M&E) - Administrative fees paid for administrative expenses (ADM) - Guaranteed Minimum Withdrawal Benefit, if elected by the contract owner (GMWB) Below is a table displaying total M&E and rider charges with their associated products offered in this Separate Account. The table displays Standard (S) and Annual Step-Up (SU) death-benefit designations.
- ------------------------------------------------------------------------------------------------------------------------------- TRAVELERS GROWTH AND INCOME STOCK ACCOUNT - ------------------------------------------------------------------------------------------------------------------------------- Asset-based Charges --------------------------------------- Total M&E and Rider Charges Optional Feature Dth ---------------- Total Ben Product M&E GMWB Charge - ------------------------------------------------------------------------------------------------------------------------------- Total M&E and Rider Charges 1.00%, 3.5% AIR S Universal Annuity (1) 1.00% 1.00% Total M&E and Rider Charges 1.25%, 3.0% AIR S Universal Select Annuity 1.25% 1.25% Total M&E and Rider Charges 1.25%, 3.5% AIR S Universal Annuity (2) 1.25% 1.25% S Universal Annuity Advantage 1.25% 1.25% Total M&E and Rider Charges 1.40%, 3.0% AIR SU Universal Select Annuity 1.40% 1.40% Total M&E and Rider Charges 1.40%, 3.5% AIR SU Universal Annuity Advantage 1.40% 1.40% Total M&E and Rider Charges 1.65%, 3.0% AIR S Universal Select Annuity 1.25% 0.40% 1.65% Total M&E and Rider Charges 1.65%, 3.5% AIR S Universal Annuity Advantage 1.25% 0.40% 1.65% Total M&E and Rider Charges 1.80%, 3.0% AIR SU Universal Select Annuity 1.40% 0.40% 1.80% Total M&E and Rider Charges 1.80%, 3.5% AIR SU Universal Annuity Advantage 1.40% 0.40% 1.80% - -------------------------------------------------------------------------------------------------------------------------------
(1) Contracts issued prior to May 16, 1983 (2) Contracts issued on or after May 16, 1983 For certain contracts in the accumulation phase, a semi-annual charge of $15 (prorated for partial years) is deducted from participant account balances and paid to The Company to cover administrative charges. 5. NET ASSETS HELD ON BEHALF OF AN AFFILIATE Approximately $12,757,000 and $13,321,000 of the net assets of Account GIS were held on behalf of an affiliate of The Company as of December 31, 2005 and 2004, respectively. Transactions with this affiliate during the years ended December 31, 2005 and 2004, were comprised of participant purchase payments of approximately $5,000 and $3,000 and contract surrenders of approximately $1,133,000 and $438,000, respectively. -8- NOTES TO FINANCIAL STATEMENTS - CONTINUED 6. NET CONTRACT OWNERS' EQUITY
DECEMBER 31, 2005 ------------------------------------------- UNIT UNITS VALUE NET ASSETS ---------- -------- ------------- Total M&E and Rider Charges 1.00%, 3.5% AIR .................. 6,607,822 $ 20.901 $ 138,100,307 Total M&E and Rider Charges 1.25%, 3.5% AIR .................. 17,668,710 19.756 349,045,802 Total M&E and Rider Charges 1.40%, 3.5% AIR .................. 133 1.128 150 Total M&E and Rider Charges 1.65%, 3.5% AIR .................. 184 1.125 207 Total M&E and Rider Charges 1.25%, 3.0% AIR .................. 29,106 1.136 33,051 Total M&E and Rider Charges 1.65%, 3.0% AIR .................. 2,041 1.130 2,306 ------------- Net Contract Owners' Equity .................................. $ 487,181,823 =============
Assumed Interest Rate (AIR) is only applicable to contracts in the payout phase. -9- NOTES TO FINANCIAL STATEMENTS - CONTINUED 7. SUPPLEMENTARY INFORMATION (Selected data for a unit outstanding throughout each year.)
Total M&E and Rider Charges 1.00%, 3.5% AIR FOR THE YEARS ENDED DECEMBER 31, ---------------------------------------------------------------- 2005 2004 2003 2002 2001 ---- ---- ---- ---- ---- SELECTED PER UNIT DATA: Total investment income ................................... $ .348 $ .348 $ .264 $ .240 $ .266 Operating expenses ........................................ .328 .303 .256 .261 .311 ------- ------- ------- ------- ------- Net investment income (loss) .............................. .020 .045 .008 (.021) (.045) Unit value at beginning of year ........................... 19.949 17.926 14.172 18.064 21.418 Net realized and change in unrealized gains (losses) ...... .932 1.978 3.746 (3.871) (3.309) ------- ------- ------- ------- ------- Unit value at end of year ................................. $20.901 $19.949 $17.926 $14.172 $18.064 ======= ======= ======= ======= ======= SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase (decrease) in unit value ..................... $ .95 $ 2.02 $ 3.75 $ (3.89) $ (3.35) Ratio of operating expenses to average net assets ......... 1.65% 1.65% 1.65% 1.64% 1.63% Ratio of net investment income (loss) to average net assets 0.09% 0.23% 0.06% (0.12)% (0.24)% Number of units outstanding at end of year (thousands) .... 6,608 7,413 8,139 9,088 10,329 Portfolio turnover rate ................................... 22% 43% 68% 54% 32%
Total M&E and Rider Charges 1.25%, 3.5% AIR FOR THE YEARS ENDED DECEMBER 31, ---------------------------------------------------------------- 2005 2004 2003 2002 2001 ---- ---- ---- ---- ---- SELECTED PER UNIT DATA: Total investment income ................................... $ .329 $ .330 $ .251 $ .229 $ .254 Operating expenses ........................................ .357 .331 .281 .287 .343 ------- ------- ------- ------- ------- Net investment income (loss) .............................. (.028) (.001) (.030) (.058) (.089) Unit value at beginning of year ........................... 18.903 17.028 13.496 17.245 20.498 Net realized and change in unrealized gains (losses) ...... .881 1.876 3.562 (3.691) (3.164) ------- ------- ------- ------- ------- Unit value at end of year ................................. $19.756 $18.903 $17.028 $13.496 $17.245 ======= ======= ======= ======= ======= SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase (decrease) in unit value ..................... $ .85 $ 1.88 $ 3.53 $ (3.75) $ (3.25) Ratio of operating expenses to average net assets ......... 1.89% 1.90% 1.90% 1.89% 1.88% Ratio of net investment income (loss) to average net assets (0.15)% (0.02)% (0.19)% (0.37)% (0.49)% Number of units outstanding at end of year (thousands) .... 17,669 19,978 21,853 24,100 27,559 Portfolio turnover rate ................................... 22% 43% 68% 54% 32%
-10- NOTES TO FINANCIAL STATEMENTS - CONTINUED 7. SUPPLEMENTARY INFORMATION (CONTINUED) (Selected data for a unit outstanding throughout each period.)
FROM JUNE 3, 2005 Total M&E and Rider Charges 1.40%, 3.5% AIR (INCEPTION DATE) TO DECEMBER 31, 2005 ------------------- SELECTED PER UNIT DATA: Total investment income .................................... $ .011 Operating expenses ......................................... .013 ------------------- Net investment income (loss) ............................... (.002) Unit value at beginning of period .......................... 1.065 Net realized and change in unrealized gains (losses) ....... .065 ------------------- Unit value at end of year .................................. $ 1.128 =================== SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase (decrease) in unit value ...................... $ .06 Ratio of operating expenses to average net assets* ......... 2.04% Ratio of net investment income (loss) to average net assets* (0.31)% Number of units outstanding at end of year (thousands)** ... -- Portfolio turnover rate .................................... 22%
FROM MARCH 15, 2005 Total M&E and Rider Charges 1.65%, 3.5% AIR (INCEPTION DATE) TO DECEMBER 31, 2005 ------------------- SELECTED PER UNIT DATA: Total investment income .................................... $ .015 Operating expenses ......................................... .020 ------------------- Net investment income (loss) ............................... (.005) Unit value at beginning of period .......................... 1.067 Net realized and change in unrealized gains (losses) ....... .063 ------------------- Unit value at end of year .................................. $ 1.125 =================== SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase (decrease) in unit value ...................... $ .06 Ratio of operating expenses to average net assets* ......... 2.29% Ratio of net investment income (loss) to average net assets* (0.60)% Number of units outstanding at end of year (thousands)** ... -- Portfolio turnover rate .................................... 22%
* Annualized ** Unit Balance rounds to less than 1,000 units. -11- NOTES TO FINANCIAL STATEMENTS - CONTINUED 7. SUPPLEMENTARY INFORMATION (CONTINUED) (Selected data for a unit outstanding throughout each period.)
FROM DECEMBER 10, 2004 Total M&E and Rider Charges 1.25%, 3.0% AIR FOR THE YEAR ENDED (INCEPTION DATE) TO DECEMBER 31, DECEMBER 31, 2004 ------------------ ---------------------- 2005 ---- SELECTED PER UNIT DATA: Total investment income ................................... $ .019 $ .001 Operating expenses ........................................ .021 .001 ---------- ---------- Net investment income (loss) .............................. (.002) -- Unit value at beginning of period ......................... 1.087 1.066 Net realized and change in unrealized gains (losses) ...... .051 .021 ---------- ---------- Unit value at end of year ................................. $ 1.136 $ 1.087 ========== ========== SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase (decrease) in unit value ..................... $ .05 $ .02 Ratio of operating expenses to average net assets ......... 1.89% 1.90% * Ratio of net investment income (loss) to average net assets (0.15)% (0.49)* Number of units outstanding at end of year (thousands) .... 29 -- ** Portfolio turnover rate ................................... 22% 43%
FROM FEBRUARY 24, 2005 Total M&E and Rider Charges 1.65%, 3.0% AIR (INCEPTION DATE) TO DECEMBER 31, 2005 ---------------------- SELECTED PER UNIT DATA: Total investment income .................................... $ .016 Operating expenses ......................................... .021 ------------------- Net investment income (loss) ............................... (.005) Unit value at beginning of period .......................... 1.072 Net realized and change in unrealized gains (losses) ....... .063 ------------------- Unit value at end of year .................................. $ 1.130 =================== SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase (decrease) in unit value ...................... $ .06 Ratio of operating expenses to average net assets* ......... 2.29% Ratio of net investment income (loss) to average net assets* (0.54)% Number of units outstanding at end of year (thousands) ..... 2 Portfolio turnover rate .................................... 22%
* Annualized ** Unit Balance rounds to less than 1,000 units. -12- NOTES TO FINANCIAL STATEMENTS - CONTINUED 8. SUBSEQUENT EVENT The Company filed a combined prospectus and proxy statement on Form N-14 with the Securities and Exchange Commission on January 30, 2006, regarding Account GIS. If the proxy vote is favorable, Account GIS will be reorganized and restructured as a sub-account of The Travelers Fund U for Variable Annuities which will invest in the Batterymarch Growth and Income Stock Portfolio of the Met Investors Series Trust. -13- THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES SUMMARY OF HOLDINGS DECEMBER 31, 2005 % of net assets ---------- COMMON STOCK Technology.......................................................... 14.5 Banking ............................................................ 9.1 Pharmaceuticals..................................................... 6.9 Retail.............................................................. 6.3 Insurance........................................................... 5.9 Integrated Energy................................................... 5.5 Conglomerates....................................................... 5.2 Brokerage........................................................... 3.8 Telecommunications.................................................. 3.6 Consumer............................................................ 3.3 Healthcare.......................................................... 3.1 Oil Companies....................................................... 2.6 Multimedia.......................................................... 2.6 Food................................................................ 2.4 Finance............................................................. 2.2 Beverage............................................................ 2.2 Medical Supplies.................................................... 2.0 Transportation Services............................................. 1.7 Electric Utilities.................................................. 1.5 Tobacco............................................................. 1.4 Metals.............................................................. 1.4 Utilities........................................................... 1.2 Independent Energy.................................................. 1.2 Services............................................................ 1.1 Aerospace........................................................... 1.0 Biotechnology....................................................... 0.9 Automotive.......................................................... 0.9 Defense............................................................. 0.8 Chemicals........................................................... 0.8 United States Agency Securities..................................... 0.6 Paper............................................................... 0.6 Lodging............................................................. 0.6 Capital Goods....................................................... 0.6 Machinery........................................................... 0.5 Home Construction................................................... 0.5 Media Non-Cable..................................................... 0.4 Entertainment....................................................... 0.4 Building Materials.................................................. 0.1 ------- TOTAL COMMON STOCK.................................................. 99.4 ------- SHORT-TERM INVESTMENTS Commercial Paper.................................................... 0.7 ------- TOTAL SHORT-TERM INVESTMENTS........................................ 0.7 ------- TOTAL INVETSMENTS................................................... 100.1 ------- Other Assets and Liabilities........................................ (0.1) ------- TOTAL NET ASSETS (100.0%)........................................... 100.0 ======= -14- THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF INVESTMENTS DECEMBER 31, 2005 NO. OF FAIR SHARES VALUE ---------- ------------ COMMON STOCK (99.4%) AEROSPACE (1.0%) Boeing Co. 27,258 $ 1,914,602 General Dynamics Corp. 24,458 2,789,435 ------------ 4,704,037 ------------ AUTOMOTIVE (0.9%) Ford Motor Co. 46,363 357,922 Harley-Davidson 13,348 687,288 Oshkosh Truck 24,934 1,111,807 PACCAR Inc. 32,842 2,273,652 ------------ 4,430,669 ------------ BANKING (9.1%) Bank of America Corp. 217,845 10,053,547 Bank of New York Co., Inc. (A) 33,228 1,058,312 Capital One Financial Corp. 27,854 2,406,586 Comerica, Inc. (A) 29,659 1,683,445 JP Morgan Chase & Co. 187,690 7,449,416 KeyCorp 20,039 659,884 Marshall & Ilsley Corp. 17,134 737,447 MBNA Corp. 18,974 515,334 National City Corp. 62,124 2,085,503 PNC Financial Services Group 19,158 1,184,539 State Street Corp. 21,259 1,178,599 Suntrust Banks, Inc. (A) 44,643 3,248,225 U.S. Bancorp 64,725 1,934,630 Wachovia Corp. 101,223 5,350,648 Wells Fargo & Co. 77,391 4,862,476 ------------ 44,408,591 ------------ BEVERAGE (2.2%) Coca-Cola Co. 76,759 3,094,155 Coca-Cola Enterprises Inc. 69,137 1,325,356 Constellation Brands Inc. (A) 36,508 2,102,861 PepsiCo, Inc. 74,247 4,386,513 ------------ 10,908,885 ------------ BIOTECHNOLOGY (0.9%) Genetech Inc. (A) 18,811 1,740,017 Gilead Sciences, Inc. 47,504 2,500,135 ------------ 4,240,152 ------------ BROKERAGE (3.8%) Amerprise Financial, Inc. 13,617 558,297 Bear Stearns Companies 24,745 2,858,790 Franklin Resources, Inc. 13,361 1,256,068 Goldman Sachs Group Inc. 31,891 4,072,800 Lehman Brothers Holdings Inc. (A) 28,138 3,606,447 Merrill Lynch & Co. 44,535 3,016,355 Morgan Stanley 56,000 3,177,440 ------------ 18,546,197 ------------ BUILDING MATERIALS (0.1%) Masco Corp. 18,493 558,304 ------------ CAPITAL GOODS (0.6%) Danaher Corp. 10,135 565,330 Deere & Co. (A) 25,302 1,723,319 Eaton Corp. (A) 9,256 620,985 ------------ 2,909,634 ------------ CHEMICALS (0.8%) Dow Chemical 52,840 2,315,449 E.I. du Pont de Nemours & Co. 19,717 837,972 Monsanto Co. 11,686 906,016 ------------ 4,059,437 ------------ CONGLOMERATES (5.2%) 3M Co. 24,209 1,876,197 General Electric Co. 467,008 16,368,630 Honeywell International, Inc. 38,200 1,422,950 Parker-Hannifin 5,427 357,965 Tyco International Ltd. 95,312 2,750,704 United Technologies Corp. 45,962 2,569,735 ------------ 25,346,181 ------------ CONSUMER (3.3%) ACCO Brands Corp. (A) 6,036 147,882 Ball Corp. 20,579 817,398 Black & Decker Corp. 12,179 1,059,086 Colgate-Palmolive Co. (A) 15,336 841,180 Energizer Holdings, Inc. 12,162 605,546 Fortune Brands 25,685 2,003,944 Molson Coors Brewing Co. 16,134 1,080,817 NIKE, Inc. (Class B) 5,734 497,654 Procter & Gamble Co. 134,858 7,805,582 Sealed Air Corp. (A) 25,501 1,432,391 ------------ 16,291,480 ------------ DEFENSE (0.8%) Lockheed Martin Corp. 28,336 1,803,020 Northrop Grumman Corp. 36,874 2,216,496 ------------ 4,019,516 ------------ ELECTRIC UTILITIES (1.5%) American Electric Power 60,355 2,238,567 Edison International 44,962 1,960,793 FirstEnergy Corp. (A) 46,988 2,301,942 Public Service Enterprise Group 12,828 833,435 ------------ 7,334,737 ------------ -15- THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF INVESTMENTS - CONTINUED DECEMBER 31, 2005 NO. OF FAIR SHARES VALUE ---------- ------------ ENTERTAINMENT (0.4%) Viacom, Inc. (Class B) 57,885 $ 1,887,051 ------------ FINANCE (2.2%) American Express 68,087 3,503,757 CIT Group Holdings, Inc. 39,646 2,052,870 Countrywide Financial 50,768 1,735,758 E*Trade Financial Corp. (A) 87,610 1,827,545 Principal Financial Group 28,221 1,338,522 ------------ 10,458,452 ------------ FOOD (2.4%) Archer-Daniels Midland Co. 72,515 1,788,220 Darden Restaurants, Inc. 36,042 1,401,313 General Mills, Inc. 30,667 1,512,496 Hormel Foods Corp. (A) 16,069 525,135 Kellogg Co. 9,471 409,337 McDonald's Corp. 90,411 3,048,659 Sara Lee Corp. 35,337 667,869 Smithfield Foods 53,120 1,625,472 Yum! Brands 12,545 588,110 ------------ 11,566,611 ------------ HEALTHCARE (3.1%) Aetna Inc. 23,790 2,243,635 Caremark Rx, Inc. (A) 28,868 1,495,074 Humana, Inc. 46,491 2,525,856 Medco Health Solutions 12,869 718,090 UnitedHealth Group, Inc. 99,444 6,179,450 Wellpoint, Inc. (A) 25,398 2,026,506 ------------ 15,188,611 ------------ HOME CONSTRUCTION (0.5%) K.B. HOME 13,654 992,100 Pulte Homes, Inc. 32,682 1,286,363 ------------ 2,278,463 ------------ INDEPENDENT ENERGY (1.2%) Anadarko Petroleum Corp. 13,754 1,303,191 Burlington Resources 39,933 3,442,225 Devon Energy Corp. 20,226 1,264,934 ------------ 6,010,350 ------------ INSURANCE (5.9%) ACE Limited 13,472 719,944 AFLAC Inc. 24,399 1,132,602 Allstate Corp. 30,920 1,671,844 Ambac Financial Group 26,313 2,027,680 American International Group 123,846 $8,450,013 Aon Corp. 13,909 500,029 Chubb Corp. 29,384 2,869,348 CIGNA Corp. 17,547 1,960,000 First Horizon National 186 7,150 Hartford Financial Services Group, Inc. 9,727 835,452 Jefferson-Pilot Corp. 6,647 378,414 Lincoln National Corp. 8,875 470,641 Marsh & McLennan Cos., Inc. 23,789 755,539 MGIC Investment Corp. (A) 16,896 1,112,095 Progressive Corp. 20,547 2,399,479 Prudential Financial, Inc. 44,810 3,279,644 ------------ 28,569,874 ------------ INTEGRATED ENERGY (5.5%) Chevron Corp. 98,703 5,603,369 ConocoPhillips 63,788 3,711,186 Exxon Mobil Corp. 279,822 15,717,602 Marathon Oil 29,648 1,807,639 ------------ 26,839,796 ------------ LODGING (0.6%) Marriott International, Inc. 34,251 2,293,789 Starwood Hotels & Resorts 8,064 514,967 ------------ 2,808,756 ------------ MACHINERY (0.5%) Ingersoll-Rand Co. (Class A) 55,598 2,244,491 ------------ MEDIA NON-CABLE (0.4%) News Corp. Limited 113,833 1,770,103 ------------ MEDICAL SUPPLIES (2.0%) Abbott Laboratories 50,066 1,974,102 Becton, Dickinson and Company 11,209 673,437 Boston Scientific (A) 37,973 929,959 Cardinal Health 7,728 531,300 Herman Miller Inc. 31,809 896,696 Hospira, Inc. (A) 4,008 171,462 Medtronic, Inc. 54,538 3,139,753 Zimmer Holdings, Inc. (A) 23,544 1,587,807 ------------ 9,904,516 ------------ METALS (1.4%) Allegheny Technologies, Inc. 47,933 1,729,423 Newmont Mining Corp. 18,697 998,420 Nucor Corp. 30,127 2,010,073 Phelp's Dodge Corp. (A) 15,837 2,278,469 ------------ 7,016,385 ------------ -16- THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF INVESTMENTS - CONTINUED DECEMBER 31, 2005 NO. OF FAIR SHARES VALUE ---------- ------------ MULTIMEDIA (2.6%) Brown-Forman Corp. (Class B) 11,818 $ 819,224 Comcast Corp. (Class A) 96,152 2,496,106 Gannett Co., Inc. (A) 21,483 1,301,225 Mcgraw-Hill Companies, Inc. (A) 16,263 839,659 Time Warner Inc. 276,749 4,826,503 Walt Disney Co. 106,372 2,549,737 ------------ 12,832,454 ------------ OIL COMPANIES (2.6%) Baker Hughes Inc. 22,355 1,358,737 Halliburton Co. 18,874 1,169,433 Occidental Petroleum Corp. (A) 34,303 2,740,124 Schlumberger Ltd. 31,058 3,017,285 Sunoco Inc. 14,818 1,161,435 Transocean, Inc. (A) 20,423 1,423,279 Valero Energy Corp. 35,088 1,810,541 ------------ 12,680,834 ------------ PAPER (0.6%) International Paper (A) 22,754 764,762 Kimberly Clark Corp. 22,967 1,369,982 Weyerhaeuser Co. 9,523 631,756 ------------ 2,766,500 ------------ PHARMACEUTICALS (6.9%) AmerisourceBergen Corp. 32,028 1,325,959 Amgen, Inc. (A) 59,304 4,676,713 Biogen Idec Inc. (A) 29,934 1,356,908 Bristol-Myers Squibb 86,001 1,976,303 Eli Lilly & Co. (A) 40,675 2,301,798 Johnson & Johnson 132,817 7,982,302 Merck & Co., Inc. 98,412 3,130,486 Pfizer Inc. 332,612 7,756,512 Schering-Plough Corp. 65,364 1,362,839 Wyeth 42,310 1,949,222 ------------ 33,819,042 ------------ RETAIL (6.3%) Abercrombie & Fitch Co. 16,577 1,080,489 Albertsons, Inc. (A) 46,758 998,283 American Eagle Outfitters 25,683 590,195 Autozone, Inc. (A) 12,484 1,145,407 Best Buy Co. Inc. 24,978 1,086,043 Costco Wholesale Corp. 20,855 1,031,697 CVS Corp. 62,052 1,639,414 Federated Department Stores, Inc. 11,956 793,041 Gamestop Corp. 14,716 425,292 Home Depot, Inc. 86,155 3,487,554 Jones Apparel Group, Inc. 5,054 155,259 Kohl's Corp. 31,967 1,553,596 Lowe's Cos. 44,208 2,946,905 Nordstrom, Inc. 44,276 1,655,922 Office Depot, Inc. (A) 13,681 429,583 Staples Inc. 34,030 772,810 Supervalu, Inc. 36,506 1,185,715 Target Corp. 55,426 3,046,767 The Gap, Inc. 24,939 439,924 Walgreen Co. 23,053 1,020,326 Wal-Mart Stores, Inc. 108,474 5,076,583 ------------ 30,560,805 ------------ SERVICES (1.1%) Cendant Corp. 49,788 858,843 eBay Inc. 51,462 2,225,731 Yahoo! Inc. (A) 59,689 2,338,615 ------------ 5,423,189 ------------ TECHNOLOGY (14.5%) Advanced Micro Devices (A) 39,497 1,208,608 Analog Devices, Inc. 17,304 620,694 Apple Computer (A) 49,254 3,540,870 Autodesk, Inc. 10,017 430,230 Cisco Systems, Inc. (A) 304,197 5,207,853 Comverse Technology Inc. 78,946 2,099,174 Corning Inc. 62,748 1,233,626 Dell Inc. 112,593 3,376,664 EMC Corp. (A) 111,492 1,518,521 Fiserv Inc. 11,777 509,591 Hewlett Packard Co. 137,035 3,923,312 Intel Corp. 290,880 7,260,365 International Business Machine 80,687 6,632,471 Jabil Circuit 44,049 1,633,777 KLA-Tencor Corp. (A) 9,143 451,024 Lexmark International (Class A) 5,825 261,135 Maxim Intergrated Products 14,330 519,319 Micron Technology, Inc. 96,377 1,282,778 Microsoft Corp. 426,737 11,159,172 Motorola, Inc. 105,853 2,391,219 Oracle Corp. 224,611 2,742,500 Scientific-Atlanta, Inc. (A) 47,811 2,059,220 Sun Microsystems, Inc. (A) 158,542 664,291 Sybase, Inc. (A) 49,877 1,090,311 Symantec Corp. (A) 58,493 1,023,627 Texas Instruments Inc. 90,528 2,903,233 Thomas & Betts Corp. (A) 41,654 1,747,802 Waters Corp. (A) 27,164 1,026,799 Xerox Corp. (A) 148,248 2,171,833 ------------ 70,690,019 ------------ -17- THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF INVESTMENTS - CONTINUED DECEMBER 31, 2005 NO. OF FAIR SHARES VALUE ---------- ------------ TELECOMMUNICATIONS (3.6%) AT&T, Inc. 170,577 $ 4,177,431 BellSouth Corp. 71,766 1,944,859 CenturyTel, Inc. 52,301 1,734,301 QUALCOMM, Inc. 66,861 2,880,372 Sprint Corp. 126,022 2,943,874 Verizon Communications 122,389 3,686,357 ------------ 17,367,194 ------------ TOBACCO (1.4%) Altria Group 92,199 6,889,109 ------------ TRANSPORTATION SERVICES (1.7%) Burlington Northern Santa Fe 37,346 2,644,844 CSX Corp. 34,293 1,741,056 United Parcel Service (Class B) 51,324 3,856,999 ------------ 8,242,899 ------------ UNITED STATES AGENCY SECURITIES (0.6%) Fannie Mae 51,346 2,506,198 Freddie Mac (A) 9,578 625,922 ------------ 3,132,120 ------------ UTILITIES (1.2%) AES Corp. (A) 122,460 1,938,542 Exelon Corp. 18,473 981,655 National Fuel Gas Co. 11,814 368,479 The Southern Co. 26,402 911,661 TXU Corp. 34,744 1,743,801 ------------ 5,944,138 ------------ TOTAL COMMON STOCKS (COST $415,067,353) 484,649,582 ------------ PRINCIPAL AMOUNT ---------- SHORT-TERM INVESTMENTS (0.7%) COMMERCIAL PAPER (0.7%) Chesham FNC 4.40% Due January 5, 2006 $2,500,000 2,499,388 UBS AG 4.25% Due January 3, 2006 708,000 708,000 ------------ TOTAL SHORT-TERM INVESTMENTS (COST $3,206,249) $ 3,207,388 ------------ TOTAL INVESTMENTS (100.1%) (COST $418,273,602) (B) 487,856,970 ------------ Other Assets and Liabilities (-0.1%) (675,147) ------------ TOTAL NET ASSETS (100.0%) $487,181,823 ============ NOTES (A) Non-income Producing Security. (B) At December 31, 2005 net unrealized appreciation for all securities was $69,583,368. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of fair value over cost of $109,455,570 and aggregate gross unrealized depreciation for all securities in which there was an excess of cost over fair value of $39,872,202. See Notes to Financial Statements -18- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Managers and the Owners of Variable Contracts of The Travelers Quality Bond Account for Variable Annuities We have audited the accompanying statement of assets and liabilities of The Travelers Quality Bond Account for Variable Annuities (the "Fund"), including the statement of investments, as of December 31, 2005, and the related statement of operations and the statement of changes in net assets for the year then ended. These financial statements are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2005, by correspondence with the custodian. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Travelers Quality Bond Stock Account for Variable Annuities as of December 31, 2005, and the results of its operations and the changes in its net assets for the year then ended, in conformity with accounting principles generally accepted in the United States of America. /s/ DELOITTE & TOUCHE LLP Tampa, Florida February 21, 2006 -19- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Managers and the Owners of Variable Annuity Contracts of The Travelers Quality Bond Account for Variable Annuities: We have audited the statement of changes in net assets of The Travelers Quality Bond Account for Variable Annuities as of December 31, 2004, and the selected per unit data and ratios for each of the years in the four-year period then ended. The statement of changes in net assets and selected per unit data and ratios are the responsibility of the Company's management. Our responsibility is to express an opinion on the statement of changes in net assets and selected per unit data and ratios based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and selected per unit data and ratios are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and selected per unit data and ratios. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with custodians and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the statement of changes in net assets and selected per unit data and ratios referred to above of The Travelers Quality Bond Account for Variable Annuities as of December 31, 2004 present fairly, in all material respects, the financial position of the changes in its net assets for the year then ended, and the selected per unit data and ratios for each of the years in the four-year period then ended, in conformity with U.S. generally accepted accounting principles. /s/ KPMG LLP Hartford, Connecticut February 17, 2005 -20- THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2005 ASSETS: Investment securities, at fair value (cost $88,560,810) ...... $ 87,876,148 Cash ......................................................... 1,148 Receivables: Interest ................................................... 1,026,291 Investment securities sold ................................. 458,187 Purchase payments and transfers from other funding options . 13,383 Other ...................................................... 13,168 ------------ Total Assets ............................................. 89,388,325 ------------ LIABILITIES: Payables: Contract surrenders and transfers to other funding options . 48,815 Investment management and advisory fees .................... 6,338 Insurance charges .......................................... 23,104 Accrued liabilities .......................................... 230 ------------ Total Liabilities ........................................ 78,487 ------------ NET ASSETS: $ 89,309,838 ============ See Notes to Financial Statements -21- THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2005 INVESTMENT INCOME: Interest .......................................................... $ 4,132,299 EXPENSES: Investment management and advisory fees ........................... $ 304,936 Insurance charges ................................................. 1,112,436 ------------ Total expenses .................................................. 1,417,372 ------------ Net investment income (loss) .................................. 2,714,927 ------------ REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES: Realized gain (loss) from investment security transactions: Proceeds from investment securities sold ........................ 64,172,164 Cost of investment securities sold .............................. 63,495,627 ------------ Net realized gain (loss) ...................................... 676,537 Change in unrealized gain (loss) on investment securities: Unrealized gain (loss) at December 31, 2005 ..................... (684,662) Unrealized gain (loss) at December 31, 2004 ..................... 1,600,818 ------------ Net change in unrealized gain (loss) for the year ............. (2,285,480) ------------ Net realized gain (loss) and change in unrealized gain (loss) (1,608,943) ------------ Net increase (decrease) in net assets resulting from operations ..... $ 1,105,984 ============
See Notes to Financial Statements -22- THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
2005 2004 ---- ---- OPERATIONS: Net investment income (loss) ......................................... $ 2,714,927 $ 3,027,366 Net realized gain (loss) from investment security transactions ....... 676,537 689,574 Net change in unrealized gain (loss) on investment securities ........ (2,285,480) (732,536) ------------- ------------- Net increase (decrease) in net assets resulting from operations .... 1,105,984 2,984,404 ------------- ------------- UNIT TRANSACTIONS: Participant purchase payments (applicable to 549,821 and 662,081 units, respectively) ............ 3,891,190 4,637,014 Participant transfers from other funding options (applicable to 344,183 and 469,738 units, respectively) ............ 2,460,450 3,286,010 Administrative charges (applicable to 9,531 and 10,969 units, respectively) ............... (68,911) (77,235) Contract surrenders (applicable to 1,974,337 and 1,792,547 units, respectively) ........ (14,229,493) (12,709,265) Participant transfers to other funding options (applicable to 626,782 and 1,092,374 units, respectively) .......... (4,482,036) (7,636,339) Other payments to participants (applicable to 70,419 and 111,228 units, respectively) ............. (512,351) (793,229) ------------- ------------- Net increase (decrease) in net assets resulting from unit transactions (12,941,151) (13,293,044) ------------- ------------- Net increase (decrease) in net assets .............................. (11,835,167) (10,308,640) NET ASSETS: Beginning of year .................................................... 101,145,005 111,453,645 ------------- ------------- End of year .......................................................... $ 89,309,838 $ 101,145,005 ============= =============
See Notes to Financial Statements -23- NOTES TO FINANCIAL STATEMENTS 1. BUSINESS On July 1, 2005, MetLife, Inc., a Delaware corporation ("MetLife"), acquired all of the outstanding shares of capital stock of certain indirect subsidiaries held by Citigroup Inc. ("Citigroup") including The Travelers Insurance Company, The Travelers Life and Annuity Company, certain other domestic insurance companies of Citigroup and substantially all of Citigroup's international insurance businesses. Based upon the recommendation of the Audit Committee for The Travelers Quality Bond Account for Variable Annuities ("Account QB"), the Board of Managers determined not to retain KPMG LLP ("KPMG") as Account QB's independent auditor, and voted to appoint Deloitte & Touche LLP as Account QB's independent auditor for the fiscal year ended December 31, 2005, effective July 1, 2005. During the two most recent fiscal years and through June 30, 2005, the date that the Board of Managers notified KPMG of their decision not to retain them as Account QB's auditor, KPMG's audit reports contained no adverse opinion or disclaimer of opinion: nor were their reports qualified as to uncertainty, audit scope or accounting principles. Further, there were no disagreements between Account QB and KPMG on the accounting principles, financial statements disclosure or audit scope, which, if not resolved to the satisfaction of KPMG, would have caused them to make reference to the disagreement in their reports. The Travelers Quality Bond Account for Variable Annuities ("Account QB") is a separate account of The Travelers Insurance Company ("The Company"), a wholly owned subsidiary of MetLife, and is available for funding Universal Annuity, Universal Select Annuity, and Universal Annuity Advantage contracts issued by The Company. Account QB, established on July 29, 1974, is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. The Travelers Asset Management International Company, LLC ("TAMIC"), an indirect wholly owned subsidiary of The Company, provides fixed income management and advisory services for Account QB. This report is prepared for the general information of contract owners and is not an offer of units of Account QB or shares of Account QB's underlying holdings. It should not be used in connection with any offer except in conjunction with the Prospectus for Account QB's product(s) offered by The Company. 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by Account QB in the preparation of its financial statements. Investments in securities traded on a national securities exchange are valued at the 4:00 p.m. Eastern Standard Time price of such exchanges; securities traded on the over-the-counter market and listed securities with no reported sales are valued at the mean between the last-reported bid and asked prices or on the basis of quotations received from a reputable broker or other recognized source. When market quotations are not considered to be readily available for long-term corporate bonds and notes, such investments are generally stated at fair value on the basis of valuations furnished by a pricing service. These valuations are determined for normal institutional-size trading units of such securities using methods based on market transactions for comparable securities and various relationships between securities, which are generally recognized by institutional traders. Securities, including restricted securities, for which pricing services are not readily available, are valued by management at prices which it deems, in good faith, to be fair value. Short-term investments are reported at fair value based on quoted market prices. Short-term investments, for which there is no reliable quoted market price, are recorded at amortized cost, which approximates fair value. Security transactions are accounted for on the trade date. Interest income is recorded on the accrual basis. Premiums and discounts are amortized to interest income utilizing the constant yield method. Account QB may use interest rate futures contracts as a substitute for the purchase or sale of individual securities. When Account QB enters into a futures contract, it agrees to buy or sell specified debt securities at a future time for a fixed price, unless the contract is closed prior to expiration. Account QB is obligated to deposit with a broker an "initial margin" equivalent to a percentage of the face, or notional value of the contract. -24- NOTES TO FINANCIAL STATEMENTS - CONTINUED 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) It is Account QB's practice to hold cash and cash equivalents in an amount at least equal to the notional value of outstanding purchased futures contracts, less the initial margin. Cash and cash equivalents include cash on hand, securities segregated under federal and brokerage regulations, and short-term highly liquid investments with maturities generally three months or less when purchased. Generally, futures contracts are closed prior to expiration. Futures contracts purchased by Account QB are priced and settled daily; accordingly, changes in daily prices are recorded as realized gains or losses and no asset is recorded in the Statement of Investments. Therefore, when Account QB holds open futures contracts, it assumes a market risk generally equivalent to the underlying market risk of change in the value of the debt securities associated with the futures contract. When Account QB enters into a repurchase agreement (a purchase of securities whereby the seller agrees to repurchase the securities at a mutually agreed upon date and price), the repurchase price of the securities will generally equal the amount paid by Account QB plus a negotiated interest amount. The seller under the repurchase agreement will be required to provide to Account QB securities (collateral) whose market value, including accrued interest, will be at least equal to 102% of the repurchase price. Account QB monitors the value of collateral on a daily basis. Repurchase agreements will be limited to transactions with national banks and reporting broker dealers believed to present minimal credit risks. Account QB's custodian will take actual or constructive receipt of all securities underlying repurchase agreements until such agreements expire. There were no repurchase agreements in Account QB at December 31, 2005. The operations of Account QB form a part of the total operations of The Company and are not taxed separately. The Company is taxed as a life insurance company under the Internal Revenue Code of 1986, as amended (the "Code"). Under existing federal income tax law, no taxes are payable on the investment income and capital gains of Account QB. Account QB is not taxed as a "regulated investment company" under Subchapter M of the Code. The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 3. INVESTMENTS The aggregate costs of purchases and proceeds from sales of investments (other than short-term securities) were $21,410,090 and $38,394,674, respectively; the costs of purchases and proceeds from sales of direct and indirect U.S. government securities were $37,734,572 and $27,066,059, respectively, for the year ended December 31, 2005. Realized gains and losses from investment security transactions are reported on an identified cost basis. 4. CONTRACT CHARGES Investment management and advisory fees are calculated daily at an annual rate of 0.3233% of Account QB's average net assets. These fees are paid to TAMIC, an indirect wholly owned subsidiary of MetLife Inc. Pursuant to a sub-advisory agreement between TAMIC and Salomon Brothers Asset Management INC. ("SaBAM"), TAMIC pays SaBAM a sub-advisory fee calculated daily at an annual rate of 0.20% of Account QB's average net assets. The asset-based charges listed below are deducted, as appropriate, each business day and are assessed through the calculation of accumulation and annuity unit values; - Mortality and Expense Risks assumed by The Company (M&E) - Administrative fees paid for administrative expenses (ADM) - Guaranteed Minimum Withdrawal Benefit, if elected by the contract owner (GMWB) -25- NOTES TO FINANCIAL STATEMENTS - CONTINUED 4. CONTRACT CHARGES (CONTINUED) Below is a table displaying total M&E and rider charges with their associated products offered in this Separate Account. The table displays Standard (S) and Annual Step-Up (SU) death-benefit designations.
- ---------------------------------------------------------------------------------------------------------------------------- TRAVELERS QUALITY BOND ACCOUNT - ---------------------------------------------------------------------------------------------------------------------------- Asset-based Charges ---------------------------------- Optional Feature Total M&E and Rider Charges Dth ---------------- Total Ben Product M&E GMWB Charge - ---------------------------------------------------------------------------------------------------------------------------- Total M&E and Rider Charges 1.00%, 3.5% AIR S Universal Annuity (1) 1.00% 1.00% Total M&E and Rider Charges 1.25%, 3.0% AIR S Universal Select Annuity 1.25% 1.25% Total M&E and Rider Charges 1.25%, 3.5% AIR S Universal Annuity (2) 1.25% 1.25% S Universal Annuity Advantage 1.25% 1.25% Total M&E and Rider Charges 1.40%, 3.0% AIR SU Universal Select Annuity 1.40% 1.40% Total M&E and Rider Charges 1.40%, 3.5% AIR SU Universal Annuity Advantage 1.40% 1.40% Total M&E and Rider Charges 1.65%, 3.0% AIR S Universal Select Annuity 1.25% 0.40% 1.65% Total M&E and Rider Charges 1.65%, 3.5% AIR S Universal Annuity Advantage 1.25% 0.40% 1.65% Total M&E and Rider Charges 1.80%, 3.0% AIR SU Universal Select Annuity 1.40% 0.40% 1.80% Total M&E and Rider Charges 1.80%, 3.5% AIR SU Universal Annuity Advantage 1.40% 0.40% 1.80% - ----------------------------------------------------------------------------------------------------------------------------
(1) Contracts issued prior to May 16, 1983 (2) Contracts issued on or after May 16, 1983 For certain contracts in the accumulation phase, a semi-annual charge of $15 (prorated for partial years) is deducted from participant account balances and paid to The Company to cover administrative charges. 5. NET ASSETS HELD ON BEHALF OF AN AFFILIATE Approximately $98,000 and $105,000 of the net assets of Account QB were held on behalf of an affiliate of The Company as of December 31, 2005 and 2004, respectively. Transactions with this affiliate during the years ended December 31, 2005 and 2004, were comprised of participant purchase payments of approximately $0 and $4,000 and contract surrenders of approximately $8,000 and $18,000, for the years ended December 31, 2005 and 2004, respectively. 6. NET CONTRACT OWNERS' EQUITY
DECEMBER 31, 2005 ------------------------------------------ UNIT UNITS VALUE NET ASSETS --------- -------- ------------ Total M&E and Rider Charges 1.00%, 3.5% AIR .................... 3,377,642 $ 7.610 $ 25,702,792 Total M&E and Rider Charges 1.25%, 3.5% AIR .................... 8,841,896 7.193 63,599,982 Total M&E and Rider Charges 1.25%, 3.0% AIR .................... 6,928 1.020 7,064 ------------ Net Contract Owners' Equity .................................... $ 89,309,838 ============
Assumed Interest Rate (AIR) is only applicable to contracts in the payout phase. -26- NOTES TO FINANCIAL STATEMENTS - CONTINUED 7. SUPPLEMENTARY INFORMATION (Selected data for a unit outstanding throughout each year.)
Total M&E and Rider Charges 1.00%, 3.5% AIR FOR THE YEARS ENDED DECEMBER 31, ---------------------------------------------------------------- 2005 2004 2003 2002 2001 ---- ---- ---- ---- ---- SELECTED PER UNIT DATA: Total investment income ................................... $ .331 $ .321 $ .345 $ .381 $ .421 Operating expenses ........................................ .100 .097 .093 .086 .089 ------- ------- ------- ------- ------- Net investment income (loss) .............................. .231 .224 .252 .295 .332 Unit value at beginning of year ........................... 7.507 7.281 6.674 6.608 6.335 Net realized and change in unrealized gains (losses) ...... (.128) .002 .355 (.229) (.059) ------- ------- ------- ------- ------- Unit value at end of year ................................. $ 7.610 $ 7.507 $ 7.281 $ 6.674 $ 6.608 ======= ======= ======= ======= ======= SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase (decrease) in unit value ..................... $ .10 $ .23 $ .61 $ .07 $ .27 Ratio of operating expenses to average net assets ......... 1.33% 1.33% 1.33% 1.33% 1.33% Ratio of net investment income (loss) to average net assets 3.07% 3.03% 3.58% 4.56% 4.99% Number of units outstanding at end of year (thousands) .... 3,378 3,717 4,207 4,684 5,194 Portfolio turnover rate ................................... 70% 98% 139% 113% 166%
Total M&E and Rider Charges 1.25%, 3.5% AIR FOR THE YEARS ENDED DECEMBER 31, ---------------------------------------------------------------- 2005 2004 2003 2002 2001 ---- ---- ---- ---- ---- SELECTED PER UNIT DATA: Total investment income ................................... $ .313 $ .304 $ .328 $ .363 $ .402 Operating expenses ........................................ .112 .110 .105 .097 .101 ------- ------- ------- ------- ------- Net investment income (loss) .............................. .201 .194 .223 .266 .301 Unit value at beginning of year ........................... 7.113 6.917 6.356 6.309 6.063 Net realized and change in unrealized gains (losses) ...... (.121) .002 .338 (.219) (.055) ------- ------- ------- ------- ------- Unit value at end of year ................................. $ 7.193 $ 7.113 $ 6.917 $ 6.356 $ 6.309 ======= ======= ======= ======= ======= SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase (decrease) in unit value ..................... $ .08 $ .20 $ .56 $ .05 $ .25 Ratio of operating expenses to average net assets ......... 1.57% 1.57% 1.57% 1.57% 1.57% Ratio of net investment income (loss) to average net assets 2.82% 2.78% 3.33% 4.31% 4.74% Number of units outstanding at end of year (thousands) .... 8,842 10,296 11,682 12,733 15,116 Portfolio turnover rate ................................... 70% 98% 139% 113% 166%
-27- NOTES TO FINANCIAL STATEMENTS - CONTINUED 7. SUPPLEMENTARY INFORMATION (CONTINUED) (Selected data for a unit outstanding throughout each period.)
FROM APRIL 1, 2005 Total M&E and Rider Charges 1.25%, 3.0% AIR (INCEPTION DATE) TO DECEMBER 31, 2005 ------------------- SELECTED PER UNIT DATA: Total investment income .................................... $ .034 Operating expenses ......................................... .012 ------------------- Net investment income (loss) ............................... .022 Unit value at beginning of period .......................... 1.003 Net realized and change in unrealized gains (losses) ....... (.005) ------------------- Unit value at end of year .................................. $ 1.020 =================== SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase (decrease) in unit value ...................... $ .02 Ratio of operating expenses to average net assets* ......... 1.57% Ratio of net investment income (loss) to average net assets* 2.88% Number of units outstanding at end of year (thousands) ..... 7 Portfolio turnover rate .................................... 70%
* Annualized 8. SUBSEQUENT EVENT The Company filed a combined prospectus and proxy statement on Form N-14 with the Securities and Exchange Commission on January 18, 2006, regarding Account QB. If the proxy vote is favorable, Account QB will be reorganized and restructured as a sub-account of The Travelers Fund U for Variable Annuities which will invest in the BlackRock Bond Income Portfolio of the Metropolitan Series Fund, Inc. -28- THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES SUMMARY OF HOLDINGS DECEMBER 31, 2005 % of net assets ------------ BONDS Collateralized Mortgage Obligations............................... 9.7 Banking........................................................... 7.5 Finance........................................................... 7.0 Utilities......................................................... 4.3 Real Estate....................................................... 4.2 Brokerage......................................................... 4.0 United States Agency Securities................................... 3.8 Conglomerates..................................................... 3.3 Multimedia........................................................ 2.9 Asset Backed Securities........................................... 2.6 Media Cable....................................................... 2.2 Telecommunications................................................ 1.9 Pharmaceuticals................................................... 1.3 Food.............................................................. 1.2 Beverage.......................................................... 1.2 Supermarkets...................................................... 1.1 Insurance......................................................... 1.1 Independent Energy................................................ 1.1 Tobacco........................................................... 1.0 Electric Utilities................................................ 1.0 Technology........................................................ 0.9 Natural Gas Distribution.......................................... 0.9 Automotive........................................................ 0.9 Defense........................................................... 0.8 Healthcare........................................................ 0.5 Metals............................................................ 0.4 Building Materials................................................ 0.4 Paper............................................................. 0.2 Natural Gas Pipeline.............................................. 0.2 Machinery......................................................... 0.2 --------- TOTAL BONDS....................................................... 67.8 --------- UNITED STATES GOVERNMENT SECURITIES United States Government Securities............................... 25.8 --------- SHORT TERM INVESTMENTS Commercial Paper.................................................. 4.8 --------- TOTAL INVESTMENTS................................................... 98.4 --------- Other Assets and liabilities...................................... 1.6 --------- TOTAL NET ASSETS.................................................... 100.0 ========= -29- THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF INVESTMENTS DECEMBER 31, 2005
PRINCIPAL FAIR AMOUNT VALUE ---------- ------------ BONDS (67.8%) ASSET BACKED SECURITIES (2.6%) CA Infrastructure, 6.42% Debentures, 2008................................................. $ 228,892 $ 230,767 Chase Funding Mortgage Loan Asset Backed Security Certificate, 5.83% Debentures, 2032..... 500,000 504,022 Chase Issuance Trust, 4.23% Debentures, 2013.............................................. 500,000 488,694 Discover Card Mt, 6.05% Debentures, 2008.................................................. 1,100,000 1,102,579 ------------ 2,326,062 ------------ AUTOMOTIVE (0.9%) Daimler Chrysler NA Holdings, 7.30% Debentures, 2012...................................... 700,000 756,228 Ford Motor Co., 7.45% Debentures, 2031.................................................... 100,000 68,500 ------------ 824,728 ------------ BANKING (7.5%) ABN AMRO Holdings ADS, 4.39% Debentures, 2007............................................. 920,000 920,928 Bank of America Corp., 5.38% Debentures, 2007............................................. 600,000 610,934 Capital One Bank, 5.00% Debentures, 2009.................................................. 620,000 617,834 Capital One Bank, 5.50% Debentures, 2015.................................................. 200,000 199,191 HSBC Bank USA, 5.88% Debentures, 2034..................................................... 400,000 404,982 Huntington National Bank, 4.65% Debentures, 2009.......................................... 400,000 397,646 JP Morgan Chase & Co., 5.25% Debentures, 2015............................................. 200,000 199,280 Royal Bank of Scotland Capital Trust, 4.71% Debentures, Perpetual......................... 300,000 285,573 Royal Bank of Scotland PLC, 5.05% Debentures, 2015........................................ 400,000 397,821 U.S. Bancorp NA MN, 2.87% Debentures, 2007................................................ 1,000,000 978,723 U.S. Bancorp NA MN, 4.95% Debentures, 2014................................................ 200,000 198,248 Wachovia Corp. NA, 4.64% Debentures, 2014................................................. 700,000 707,433 Wachovia Corp. NA, 4.80% Debentures, 2014................................................. 300,000 291,677 Washington Mutual Bank, 5.13% Debentures, 2015............................................ 500,000 489,395 ------------ 6,699,665 ------------ BEVERAGE (1.2%) Pepsi Bottling Group, 4.63% Debentures, 2012.............................................. 400,000 394,949 PepsiAmericas, Inc., 4.88% Debentures, 2015............................................... 700,000 691,359 ------------ 1,086,308 ------------ BROKERAGE (4.0%) Goldman Sachs Group Inc., 5.25% Debentures, 2013.......................................... 1,100,000 1,101,474 Lehman Brothers Holdings Inc., 4.80% Debentures, 2014..................................... 700,000 684,617 Merrill Lynch & Co. Inc., 4.13% Debentures, 2009.......................................... 400,000 388,444 Merrill Lynch & Co. Inc., 4.25% Debentures, 2010.......................................... 400,000 389,450 Merrill Lynch & Co. Inc., 5.00% Debentures, 2015.......................................... 400,000 394,700 Morgan Stanley, 5.05% Debentures, 2011.................................................... 600,000 600,840 ------------ 3,559,525 ------------ BUILDING MATERIALS (0.4%) D.R. Horton, 5.25% Debentures, 2015....................................................... 400,000 376,456 ------------
-30- THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF INVESTMENTS - CONTINUED DECEMBER 31, 2005
PRINCIPAL FAIR AMOUNT VALUE ---------- ------------ COLLATERALIZED MORTGAGE OBLIGATIONS (9.7%) Bank of America Commercial Mortgage Inc. , 4.87% Debentures, 2042.......................... $1,400,000 $ 1,359,264 Commercial Martgage Pass, 5.17% Debentures, 2044........................................... 750,000 748,403 Credit Suisse First Boston Commercial Mortgage Corp., 4.89% Debentures, 2037............... 220,000 213,671 Credit Suisse First Boston Corp., 3.88% Debentures, 2009................................... 500,000 485,717 Credit Suisse First Boston Corp., 6.13% Debentures, 2011................................... 300,000 315,310 JP Morgan Chase & Co. Commercial Mortgage, 4.78% Debentures, 2042.......................... 3,000,000 2,906,481 JP Morgan Chase & Co. Commercial Mortgage, 4.92% Debentures, 2042.......................... 1,600,000 1,557,710 JP Morgan Chase & Co. Commercial Mortgage, 5.00% Debentures, 2042.......................... 500,000 492,176 JP Morgan Chase & Co. Commercial Mortgage, 5.00% Debentures, 2042.......................... 580,000 569,222 ------------ 8,647,954 ------------ CONGLOMERATES (3.3%) Berskshire Hathaway, Inc., 4.40% Debentures, 2008.......................................... 200,000 200,152 Berskshire Hathaway, Inc., 4.75% Debentures, 2012.......................................... 400,000 395,953 General Electric Co., 5.00% Debentures, 2013............................................... 1,300,000 1,301,242 Tyco International Ltd., 6.13% Debentures, 2008............................................ 1,000,000 1,021,431 ------------ 2,918,778 ------------ DEFENSE (0.8%) Northrop Grumman Corp., 4.08% Debentures, 2006............................................. 600,000 595,490 Northrop Grumman Corp., 7.13% Debentures, 2011............................................. 100,000 109,087 ------------ 704,577 ------------ ELECTRIC UTILITIES (1.0%) Dominion Resources Inc., 5.25% Debentures, 2033............................................ 400,000 392,879 PSEG Energy Holdings, 8.63% Debentures, 2008............................................... 450,000 470,250 ------------ 863,129 ------------ FINANCE (7.0%) AIG SunAmerica Global Financials, 5.85% Debentures, 2008 (A)............................... 500,000 510,819 American General Financial Corp., 3.88% Debentures, 2009................................... 900,000 862,738 Caterpillar Financial Services Corp., 4.70% Debentures, 2012............................... 800,000 793,266 Countrywide Financial Corp., 4.50% Debentures, 2010........................................ 400,000 388,658 Countrywide Home Loan, 4.00% Debentures, 2011.............................................. 710,000 668,838 Ford Motor Credit Co., 5.70% Debentures, 2010.............................................. 100,000 85,079 Ford Motor Credit Co., 6.88% Debentures, 2006.............................................. 1,000,000 997,869 Glencore Funding LLC, 6.00% Debentures, 2014 (A)........................................... 300,000 282,612 Household Financial Corp., 6.38% Debentures, 2011.......................................... 1,400,000 1,481,696 Rabobank Capital Fund Trust III, 5.25% Debentures, Perpetual (A)........................... 200,000 196,504 ------------ 6,268,079 ------------ FOOD (1.2%) Fred Meyer Inc., 7.45% Debentures, 2008.................................................... 1,000,000 1,042,498 ------------ HEALTHCARE (0.5%) Wellpoint, Inc., 6.80% Debentures, 2012.................................................... 400,000 436,985 ------------ INDEPENDENT ENERGY (1.1%) Anadarko Financial Co., 6.75% Debentures, 2011............................................. 400,000 433,259 Devon Energy Corp., 6.88% Debentures, 2011................................................. 500,000 547,570 ------------ 980,829 ------------ INSURANCE (1.1%) GE Global Insurnace, 7.00% Debentures, 2026................................................ 100,000 112,733 Massmutual Global Funding, 2.55% Debentures, 2008 (A)...................................... 900,000 850,259 ------------ 962,992 ------------
-31- THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF INVESTMENTS - CONTINUED DECEMBER 31, 2005
PRINCIPAL FAIR AMOUNT VALUE ---------- ------------ MACHINERY (0.2%) Cooper Cameron Corp. , 2.65% Debentures, 2007.............................................. $ 200,000 $ 193,432 ------------ MEDIA CABLE (2.2%) Comcast Cable Communications, 8.50% Debentures, 2027....................................... 500,000 615,037 Cox Communications Inc., 7.13% Debentures, 2012............................................ 800,000 858,331 Liberty Media Corp., 5.99% Debentures, 2006................................................ 484,000 487,417 ------------ 1,960,785 ------------ METALS (0.4%) Phelps Dodge Corp., 8.75% Debentures, 2011................................................. 300,000 345,325 ------------ MULTIMEDIA (2.9%) Clear Channel Communications Inc., 4.40% Debentures, 2011.................................. 200,000 186,265 Time Warner Inc., 6.15% Debentures, 2007................................................... 2,400,000 2,430,547 ------------ 2,616,812 ------------ NATURAL GAS DISTRIBUTION (0.9%) Duke Capital LLC, 4.33% Debentures, 2006................................................... 400,000 397,298 Southern California Gas Co., 4.38% Debentures, 2011........................................ 400,000 389,659 ------------ 786,957 ------------ NATURAL GAS PIPELINE (0.2%) Consolidated Natural Gas Co., 5.00% Debentures, 2014....................................... 200,000 194,379 ------------ PAPER (0.2%) International Paper, 5.30% Debentures, 2015................................................ 200,000 192,975 ------------ PHARMACEUTICALS (1.3%) Wyeth, 5.50% Debentures, 2014.............................................................. 1,200,000 1,217,510 ------------ REAL ESTATE (4.2%) Health Retirement Properties, 6.25% Debentures, 2016....................................... 300,000 306,301 iStar Financial, 6.00% Debentures, 2010.................................................... 440,000 447,264 Kimco Reality, 4.45% Debentures, 2006...................................................... 100,000 100,106 Nationwide Health Properties Inc., 6.90% Debentures, 2037.................................. 2,100,000 2,248,487 Simon Property Group, Inc., 4.60% Debentures, 2010......................................... 200,000 195,164 Simon Property Group, Inc., 5.10% Debentures, 2015......................................... 200,000 193,788 Avalonbay Communties, Inc., 4.95% Debentures, 2013......................................... 100,000 98,028 Colonial Realty LP, 4.75% Debentures, 2010................................................. 200,000 194,989 ------------ 3,784,127 ------------ SUPERMARKETS (1.1%) Delhaize America, Inc., 9.00% Debentures, 2031............................................. 200,000 236,124 Safeway Inc., 6.50% Debentures, 2011....................................................... 700,000 725,645 ------------ 961,769 ------------ TECHNOLOGY (0.9%) Computer Associates International, 5.00% Debentures, 2009 (A).............................. 800,000 780,778 ------------ TELECOMMUNICATIONS (1.9%) AT&T Inc., 6.45% Debentures, 2034.......................................................... 400,000 417,611 Deutsche Telecomm International Financial, 8.25% Debentures, 2030.......................... 200,000 255,133 Sprint Capital Corp., 6.13% Debentures, 2008............................................... 720,000 740,867 Telecom Italia S.p.A., 4.00% Debentures, 2010.............................................. 300,000 285,995 ------------ 1,699,606 ------------
-32- THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF INVESTMENTS - CONTINUED DECEMBER 31, 2005
PRINCIPAL FAIR AMOUNT VALUE ---------- ------------ TOBACCO (1.0%) Altria Group, 5.63% Debentures, 2008....................................................... $ 900,000 $ 912,921 ------------ UNITED STATES AGENCY SECURITIES (3.8%) Fannie Mae, 1.75% Debentures, 2006......................................................... 1,300,000 1,283,658 Fannie Mae, 4.00% Debentures, 2007......................................................... 1,400,000 1,388,814 Freddie Mac, 2.90% Debentures, 2019........................................................ 700,000 697,910 ------------ 3,370,382 ------------ UTILITIES (4.3%) Kinder Morgan , 5.13% Debentures, 2014..................................................... 200,000 195,947 Pepco Holdings, 5.50% Debentures, 2007..................................................... 1,600,000 1,610,298 SP Powerassets Ltd., 5.00% Debentures, 2013 (A)............................................ 900,000 900,739 Xcel Energy Inc., 3.40% Debentures, 2008................................................... 1,200,000 1,157,155 ------------ 3,864,139 ------------ TOTAL BONDS (COST $61,069,487)......................................................................... 60,580,462 ------------ UNITED STATES GOVERNMENT SECURITIES (25.8%) United States of America Treasury, 2.75% Debentures, 2007.................................. 2,400,000 2,338,690 United States of America Treasury, 2.88% Debentures, 2006.................................. 3,000,000 2,959,338 United States of America Treasury, 3.88% Debentures, 2010.................................. 100,000 98,137 United States of America Treasury, 4.00% Debentures, 2007.................................. 8,000,000 7,949,376 United States of America Treasury, 4.13% Debentures, 2008.................................. 7,500,000 7,461,038 United States of America Treasury, 4.25% Debentures, 2015.................................. 300,000 296,215 United States of America Treasury, 4.50% Debentures, 2015.................................. 1,800,000 1,815,329 United States of America Treasury, 5.25% Debentures, 2029.................................. 100,000 109,152 ------------ TOTAL UNITED STATES GOVERNMENT SECURITIES (COST $23,224,407)......................................................................... 23,027,275 ------------ SHORT TERM INVESTMENTS (4.8%) COMMERCIAL PAPER (4.8%) Amsterdam Funding Corp. 4.43% due January 10, 2006............................................................... 3,000,000 2,997,411 Chesham FNC 4.31% due January 3, 2006................................................................ 1,271,000 1,271,000 ------------ TOTAL SHORT-TERM INVESTMENTS (COST $4,266,916) ......................................................................... 4,268,411 ------------ TOTAL INVESTMENTS (98.4%) (COST $88,560,810) (B)..................................................................... 87,876,148 ------------ Other Assets and liabilities (1.6%) ....................................................... 1,433,690 ------------ TOTAL NET ASSETS (100.0%) ................................................................. $ 89,309,838 ============
-33- THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF INVESTMENTS - CONTINUED DECEMBER 31, 2005 NOTES (A) Security is not registered under the Securities Act of 1933. These securities may be resold in transactions in accordance with Rule 144A under that Act, to qualified institutional buyers. As of December 31, 2005, The Travelers Quality Bond Account for Variable Annuities held 3.9of its net assets, with a current market value of $3,521,711, in securities restricted as to resale. (B) At December 31, 2005 net unrealized depreciation for all securities was $684,662. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of fair value over cost of $638,766 and aggregate gross unrealized depreciation for all securities in which there was an excess of cost over fair value of $1,323,428. -34- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Managers and the Owners of Variable Contracts of The Travelers Money Market Account for Variable Annuities We have audited the accompanying statement of assets and liabilities of The Travelers Money Market Account for Variable Annuities (the "Fund"), including the statement of investments, as of December 31, 2005, and the related statement of operations and the statement of changes in net assets for the year then ended. These financial statements are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and based on our audit. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2005, by correspondence with the custodian. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Travelers Money Market Account for Variable Annuities as of December 31, 2005, and the results of its operations and the changes in its net assets for the year then ended, in conformity with accounting principles generally accepted in the United States of America. /s/ DELOITTE & TOUCHE LLP Tampa, Florida February 21, 2006 -35- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Managers and the Owners of Variable Annuity Contracts of The Travelers Money Market Account for Variable Annuities: We have audited the statement of changes in net assets of The Travelers Money Market Account for Variable Annuities as of December 31, 2004, and the selected per unit data and ratios for each of the years in the four-year period then ended. The statement of changes in net assets and selected per unit data and ratios are the responsibility of the Company's management. Our responsibility is to express an opinion on the statement of changes in net assets and selected per unit data and ratios based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and selected per unit data and ratios are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and selected per unit data and ratios. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with custodians and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the statement of changes in net assets and selected per unit data and ratios referred to above of The Travelers Money Market Account for Variable Annuities as of December 31, 2004 present fairly, in all material respects, the changes in its net assets for the year then ended, and the selected per unit data and ratios for each of the years in the four-year period then ended, in conformity with U.S. generally accepted accounting principles. /s/ KPMG LLP Hartford, Connecticut February 17, 2005 -36- THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2005 ASSETS: Investment securities, at fair value (cost $62,899,267) ...... $ 62,920,420 Interest ................................................... 10,811 Purchase payments and transfers from other funding options . 85,442 Other assets ................................................. 538 ------------ Total Assets ............................................. 63,017,211 ------------ LIABILITIES: Cash overdraft ............................................... 10,081 Payables: Contract surrenders and transfers to other funding options . 200,567 Investment management and advisory fees .................... 4,457 Insurance charges .......................................... 17,230 Accrued liabilities .......................................... 81 ------------ Total Liabilities ........................................ 232,416 ------------ NET ASSETS: $ 62,784,795 ============ See Notes to Financial Statements -37- THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2005 INVESTMENT INCOME: Interest ........................................................ $ 2,153,924 EXPENSES: Investment management and advisory fees ........................... $ 212,576 Insurance charges ................................................. 821,744 ------------ Total expenses .................................................. 1,034,320 ------------ Net investment income (loss) .................................. 1,119,604 ------------ Net increase (decrease) in net assets resulting from operations . $ 1,119,604 ============
See Notes to Financial Statements -38- THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
2005 2004 ---- ---- OPERATIONS: Net investment income (loss) ........................................... $ 1,119,604 $ (160,977) ------------- ------------- Net increase (decrease) in net assets resulting from operations ...... 1,119,604 (160,977) ------------- ------------- UNIT TRANSACTIONS: Participant purchase payments (applicable to 2,798,716 and 2,876,976 units, respectively) .......... 7,482,539 7,848,289 Participant transfers from other funding options (applicable to 10,197,608 and 15,177,654 units, respectively) ........ 27,975,725 41,410,773 Administrative charges (applicable to 32,130 and 36,552 units, respectively) ................ (87,375) (99,678) Contract surrenders (applicable to 5,454,662 and 7,406,612 units, respectively) .......... (14,979,137) (20,205,133) Participant transfers to other funding options (applicable to 9,209,129 and 18,609,573 units, respectively) ......... (25,274,908) (50,776,513) Other payments to participants (applicable to 119,424 and 89,026 units, respectively) ............... (328,813) (244,258) ------------- ------------- Net increase (decrease) in net assets resulting from unit transactions . (5,211,969) (22,066,520) ------------- ------------- Net increase (decrease) in net assets ................................ (4,092,365) (22,227,497) NET ASSETS: Beginning of year ...................................................... 66,877,160 89,104,657 ------------- ------------- End of year ............................................................ $ 62,784,795 $ 66,877,160 ============= =============
See Notes to Financial Statements -39- NOTES TO FINANCIAL STATEMENTS 1. BUSINESS On July 1, 2005, MetLife, Inc., a Delaware corporation ("MetLife"), acquired all of the outstanding shares of capital stock of certain indirect subsidiaries held by Citigroup Inc. ("Citigroup") including The Travelers Insurance Company, The Travelers Life and Annuity Company, certain other domestic insurance companies of Citigroup and substantially all of Citigroup's international insurance businesses. Based upon the recommendation of the Audit Committee for The Travelers Money Market Account for Variable Annuities ("Account MM"), the Board of Managers determined not to retain KPMG LLP ("KPMG") as Account MM's independent auditor, and voted to appoint Deloitte & Touche LLP as Account MM's independent auditor for the fiscal year ended December 31, 2005, effective July 1, 2005. During the two most recent fiscal years and through June 30, 2005, the date that the Board of Managers notified KPMG of their decision not to retain them as Account MM's auditor, KPMG's audit reports contained no adverse opinion or disclaimer of opinion: nor were their reports qualified as to uncertainty, audit scope or accounting principles. Further, there were no disagreements between Account MM and KPMG on the accounting principles, financial statements disclosure or audit scope, which, if not resolved to the satisfaction of KPMG, would have caused them to make reference to the disagreement in their reports. Account MM is a separate account of The Travelers Insurance Company ("The Company"), a wholly owned subsidiary of MetLife, and is available for funding Universal Annuity, Universal Select Annuity, and Universal Annuity Advantage contracts issued by The Company. Account MM, established on December 29, 1981, is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. The Travelers Asset Management International Company, LLC ("TAMIC"), an indirect wholly owned subsidiary of The Company, provides fixed income management and advisory services for Account MM. This report is prepared for the general information of contract owners and is not an offer of units of Account MM or shares of Account MM's underlying holdings. It should not be used in connection with any offer except in conjunction with the Prospectus for Account MM's product(s) offered by The Company. 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by Account MM in the preparation of its financial statements. Investments in securities traded on a national securities exchange are valued at the 4:00 p.m. Eastern Standard Time price of such exchanges; securities traded on the over-the-counter market and listed securities with no reported sales are valued at the mean between the last reported bid and asked prices or on the basis of quotations received from a reputable broker or other recognized source. Short-term investments are reported at fair value based on quoted market prices. Short-term investments, for which there is no reliable quoted market price, are recorded at amortized cost which approximates fair value. Security transactions are accounted for on the trade date. Interest income is recorded on the accrual basis. Premiums and discounts are amortized to interest income utilizing the constant yield method. When Account MM enters into a repurchase agreement (a purchase of securities whereby the seller agrees to repurchase the securities at a mutually agreed upon date and price), the repurchase price of the securities will generally equal the amount paid by Account MM plus a negotiated interest amount. The seller under the repurchase agreement will be required to provide to Account MM securities (collateral) whose market value, including accrued interest, will be at least equal to 102% of the repurchase price. Account MM monitors the value of collateral on a daily basis. Repurchase agreements will be limited to transactions with national banks and reporting broker dealers believed to present minimal credit risks. Account MM's custodian will take actual or constructive receipt of all securities underlying repurchase agreements until such agreements expire. There were no repurchase agreements in Account MM at December 31, 2005. -40- NOTES TO FINANCIAL STATEMENTS - CONTINUED 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The operations of Account MM form a part of the total operations of The Company and are not taxed separately. The Company is taxed as a life insurance company under the Internal Revenue Code of 1986, as amended (the "Code"). Under existing federal income tax law, no taxes are payable on the investment income and capital gains of Account MM. Account MM is not taxed as a "regulated investment company" under Subchapter M of the Code. The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 3. CONTRACT CHARGES Investment management and advisory fees are calculated daily at an annual rate of 0.3233% of Account MM's average net assets. These fees are paid to TAMIC, an indirect wholly owned subsidiary of MetLife Inc. Pursuant to a sub-advisory agreement between TAMIC and Salomon Brothers Asset Management Inc. ("SaBAM"), TAMIC pays SaBAM a sub-advisory fee calculated daily at annual rates which start at 0.15% and decrease, as net assets increase, to 0.075% of Account MM's average net assets. The asset-based charges listed below are deducted, as appropriate, each business day and are assessed through the calculation of accumulation and annuity unit values; - Mortality and Expense Risks assumed by The Company (M&E) - Administrative fees paid for administrative expenses (ADM) - Guaranteed Minimum Withdrawal Benefit, if elected by the contract owner (GMWB) Below is a table displaying Total M&E and Rider Charges with their associated products offered in this Separate Account . The table displays Standard (S) and Annual Step-Up (SU) death-benefit designations.
- ----------------------------------------------------------------------------------------------------------------------------- TRAVELERS MONEY MARKET ACCOUNT - ----------------------------------------------------------------------------------------------------------------------------- Asset-based Charges --------------------------------- Optional Feature Total M&E and Rider Charges Dth ---------------- Total Ben Product M&E GMWB Charge - ----------------------------------------------------------------------------------------------------------------------------- Total M&E and Rider Charges 1.00%, 3.5% AIR S Universal Annuity (1) 1.00% 1.00% Total M&E and Rider Charges 1.25%, 3.0% AIR S Universal Select Annuity 1.25% 1.25% Total M&E and Rider Charges 1.25%, 3.5% AIR S Universal Annuity (2) 1.25% 1.25% S Universal Annuity Advantage 1.25% 1.25% Total M&E and Rider Charges 1.40%, 3.0% AIR SU Universal Select Annuity 1.40% 1.40% Total M&E and Rider Charges 1.40%, 3.5% AIR SU Universal Annuity Advantage 1.40% 1.40% Total M&E and Rider Charges 1.65%, 3.0% AIR S Universal Select Annuity 1.25% 0.40% 1.65% Total M&E and Rider Charges 1.65%, 3.5% AIR S Universal Annuity Advantage 1.25% 0.40% 1.65% Total M&E and Rider Charges 1.80%, 3.0% AIR SU Universal Select Annuity 1.40% 0.40% 1.80% Total M&E and Rider Charges 1.80%, 3.5% AIR SU Universal Annuity Advantage 1.40% 0.40% 1.80% - -----------------------------------------------------------------------------------------------------------------------------
(1) Contracts issued prior to May 16, 1983 (2) Contracts issued on or after May 16, 1983 -41- NOTES TO FINANCIAL STATEMENTS - CONTINUED 3. CONTRACT CHARGES (CONTINUED) For certain contracts in the accumulation phase, a semi-annual charge of $15 (prorated for partial years) is deducted from participant account balances and paid to The Company to cover administrative charges. The Company assesses a 5% contingent deferred sales charge if a participant's purchase payment is surrendered within five years of its payment date. 4. NET ASSETS HELD ON BEHALF OF AN AFFILIATE Approximately $392,000 and $1,060,000 of the net assets of Account MM were held on behalf of an affiliate of The Company as of December 31, 2005 and 2004, respectively. Transactions with this affiliate during the years ended December 31, 2005 and 2004, were comprised of participant purchase payments of approximately $69,000 and $515,000 and contract surrenders of approximately $745,000 and $638,000, respectively. 5. NET CONTRACT OWNERS' EQUITY
DECEMBER 31, 2005 ----------------------------------------- UNIT UNITS VALUE NET ASSETS ---------- -------- ------------ Total M&E and Rider Charges 1.00%, 3.5% AIR ............... 20,033 $ 2.936 $ 58,818 Total M&E and Rider Charges 1.25%, 3.5% AIR ............... 22,559,275 2.776 62,611,094 Total M&E and Rider Charges 1.40%, 3.5% AIR ............... 8,738 1.017 8,883 Total M&E and Rider Charges 1.25%, 3.0% AIR ............... 103,128 1.019 105,036 Total M&E and Rider Charges 1.40%, 3.0% AIR ............... 948 1.017 964 ------------ Net Contract Owners' Equity ............................... $ 62,784,795 ============
Assumed Interest Rate (AIR) is only applicable to contracts in the payout phase. -42- NOTES TO FINANCIAL STATEMENTS - CONTINUED 6. SUPPLEMENTARY INFORMATION (Selected data for a unit outstanding throughout each year.)
Total M&E and Rider Charges 1.00%, 3.5% AIR FOR THE YEARS ENDED DECEMBER 31, ---------------------------------------------------------------- 2005 2004 2003 2002 2001 ---- ---- ---- ---- ---- SELECTED PER UNIT DATA: Total investment income ................................... $ .095 $ .040 $ .033 $ .051 $ .120 Operating expenses ........................................ .038 .038 .038 .038 .037 ------- ------- ------- ------- ------- Net investment income (loss) .............................. .057 .002 (.005) .013 .083 Unit value at beginning of year ........................... 2.879 2.877 2.882 2.869 2.786 ------- ------- ------- ------- ------- Unit value at end of year ................................. $ 2.936 $ 2.879 $ 2.877 $ 2.882 $ 2.869 ======= ======= ======= ======= ======= SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase (decrease) in unit value ..................... $ .06 $ .00 $ (.01) $ .01 $ .08 Ratio of operating expenses to average net assets ......... 1.33% 1.33% 1.33% 1.33% 1.33% Ratio of net investment income (loss) to average net assets 1.93% 0.07% (0.16)% 0.46% 2.89% Number of units outstanding at end of year (thousands) .... 20 26 39 49 60
Total M&E and Rider Charges 1.25%, 3.5% AIR FOR THE YEARS ENDED DECEMBER 31, ---------------------------------------------------------------- 2005 2004 2003 2002 2001 ---- ---- ---- ---- ---- SELECTED PER UNIT DATA: Total investment income ................................... $ .090 $ .038 $ .032 $ .048 $ .114 Operating expenses ........................................ .042 .043 .043 .043 .042 ------- ------- ------- ------- ------- Net investment income (loss) .............................. .048 (.005) (.011) .005 .072 Unit value at beginning of year ........................... 2.728 2.733 2.744 2.739 2.667 ------- ------- ------- ------- ------- Unit value at end of year ................................. $ 2.776 $ 2.728 $ 2.733 $ 2.744 $ 2.739 ======= ======= ======= ======= ======= SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase (decrease) in unit value ..................... $ .05 $ (.01) $ (.01) $ .01 $ .07 Ratio of operating expenses to average net assets ......... 1.57% 1.57% 1.57% 1.57% 1.57% Ratio of net investment income (loss) to average net assets 1.68% (0.18)% (0.41)% 0.21% 2.64% Number of units outstanding at end of year (thousands) .... 22,559 24,485 32,559 50,702 63,430
-43- NOTES TO FINANCIAL STATEMENTS - CONTINUED 6. SUPPLEMENTARY INFORMATION (CONTINUED) (Selected data for a unit outstanding throughout each period.)
FROM OCTOBER 24, 2005 Total M&E and Rider Charges 1.40%, 3.5% AIR (INCEPTION DATE) TO DECEMBER 31, 2005 --------------------- SELECTED PER UNIT DATA: Total investment income .................................... $ .008 Operating expenses ......................................... .003 ------------------- Net investment income (loss) ............................... .005 Unit value at beginning of period .......................... 1.012 ------------------- Unit value at end of year .................................. $ 1.017 =================== SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase (decrease) in unit value ...................... $ .01 Ratio of operating expenses to average net assets* ......... 1.72% Ratio of net investment income (loss) to average net assets* 2.41% Number of units outstanding at end of year (thousands) ..... 9
FROM DECEMBER 28, 2004 FOR THE YEAR ENDED (INCEPTION DATE) TO Total M&E and Rider Charges 1.25%, 3.0% AIR DECEMBER 31, DECEMBER 31, 2004 ------------------ ---------------------- 2005 SELECTED PER UNIT DATA: Total investment income .................................... $ .033 $ -- Operating expenses ......................................... .015 -- ------------- ------------- Net investment income (loss) ............................... .018 -- Unit value at beginning of period .......................... 1.001 1.001 Unit value at end of year .................................. $ 1.019 $ 1.001 ============= ============= SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase (decrease) in unit value ...................... $ .02 $ -- Ratio of operating expenses to average net assets .......... 1.57% 1.57% * Ratio of net investment income (loss) to average net assets* 1.68% 0.74% * Number of units outstanding at end of year (thousands) ..... 103 -- **
* Annualized ** Unit Balance rounds to less than 1,000 Units -44- NOTES TO FINANCIAL STATEMENTS - CONTINUED 6. SUPPLEMENTARY INFORMATION (CONTINUED) (Selected data for a unit outstanding throughout each period.)
FROM DECEMBER 20, 2005 Total M&E and Rider Charges 1.40%, 3.0% AIR (INCEPTION DATE) TO DECEMBER 31, 2005 ---------------------- SELECTED PER UNIT DATA: Total investment income .................................... $ .002 Operating expenses ......................................... -- ------------------- Net investment income (loss) ............................... .002 Unit value at beginning of period .......................... 1.015 ------------------- Unit value at end of year .................................. $ 1.017 =================== SIGNIFICANT RATIOS AND ADDITIONAL DATA: Net increase (decrease) in unit value ...................... $ .00 Ratio of operating expenses to average net assets* ......... 1.72% Ratio of net investment income (loss) to average net assets* 2.62% Number of units outstanding at end of year (thousands) ..... 1
* Annualized 7. SUBSEQUENT EVENT The Company filed a combined prospectus and proxy statement on Form N-14 with the Securities and Exchange Commission on January 18, 2006, regarding Account MM. If the proxy vote is favorable, Account MM will be reorganized and restructured as a sub-account of The Travelers Fund U for Variable Annuities which will invest in the BlackRock Money Market Portfolio of the Metropolitan Series Fund, Inc. -45- THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES SUMMARY OF HOLDINGS DECEMBER 31, 2005 % OF NET ASSETS --------------- SHORT-TERM INVESTMENTS Commercial Paper............................................. 100.2 --------------- TOTAL SHORT-TERM INVESTMENTS................................... 100.2 --------------- TOTAL INVESTMENTS.............................................. 100.2 --------------- --------------- Other Assets and Liabilities................................. (0.2) --------------- TOTAL NET ASSETS............................................... 100.0 =============== -46- THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES STATEMENT OF INVESTMENTS DECEMBER 31, 2005
PRINCIPAL FAIR AMOUNT VALUE ------------ ------------ SHORT-TERM INVESTMENTS (100.2%) COMMERCIAL PAPER (100.2%) Abbey National North America, 4.33% Due January 4, 2006....................... $ 3,000,000 $ 2,999,637 American Express Credit Corp., 4.34% Due January 25, 2006..................... 3,000,000 2,992,098 Atlass Commercial Paper, 4.40% Due January 31, 2006........................... 2,365,000 2,356,961 BDX Commercial Paper, 4.33% Due January 23, 2006.............................. 2,000,000 1,995,208 DRS Financial, 4.37% Due January 9, 2006...................................... 3,000,000 2,997,825 Gannett Co Inc, 4.33% Due January 18, 2006.................................... 3,000,000 2,994,600 General Electric Capital , 4.32% Due January 13, 2006......................... 3,000,000 2,996,409 Goldman Sachs Group, Inc., 4.34% Due January 9, 2006.......................... 3,000,000 2,997,825 Govcir, 4.35% Due January 18, 2006............................................ 3,000,000 2,994,600 Hannover Funding Co LLC, 4.42% Due January 30, 2006........................... 3,000,000 2,990,124 HSBC Finance Corperation, 4.44% Due February 2, 2006.......................... 3,000,000 2,989,224 KFWPP, 4.33% Due January 26, 2006............................................. 3,000,000 2,991,798 Kochi Commercial Paper, 4.34% Due January 27, 2006............................ 3,000,000 2,991,381 Oldline Commercial Paper, 4.35% Due January 17, 2006.......................... 3,000,000 2,994,876 Ormllc, 4.40% Due January 19, 2006............................................ 3,000,000 2,994,153 PHPP Commercial Paper, 4.34% Due January 10, 2006............................. 2,928,000 2,925,523 Rabobank USA Financial Corp., 4.34% Due January 5, 2006....................... 3,000,000 2,999,280 Societe Generale , 4.34% Due January 10, 2006................................. 3,000,000 2,997,480 TDH USA, 4.35% Due January 23, 2006........................................... 3,000,000 2,992,863 Ticonderoga Funding, 4.37% Due January 6, 2006................................ 3,000,000 2,998,899 Toyota Motor Credit Corp., 4.37% Due February 1, 2006......................... 3,000,000 2,989,656 UBS AG, 4.25% Due January 3, 2006............................................. 1,740,000 1,740,000 ------------ TOTAL INVESTMENTS (100.2%) (COST $62,899,267)............................................................ 62,920,420 ------------ Other Assets and Liabilities (-0.2%).......................................... (135,625) ------------ TOTAL NET ASSETS (100.0%)....................................................... $ 62,784,795 ============
-47- FACTORS CONSIDERED BY THE BOARDS OF MANAGERS IN APPROVING THE INVESTMENT ADVISORY AND THE SUB-ADVISORY AGREEMENTS At an in person meeting on July 20, 2005, the Boards of Managers, including the Non-Interested Managers (together, the "Board") of The Travelers Growth and Income Stock Account for Variable Annuities ("GIS"), The Travelers Quality Bond Account for Variable Annuities ("QB"), and The Travelers Money Market Account for Variable Annuities ("MM" and, collectively, the "Accounts") approved the investment advisory agreements (the "Agreements") between Travelers Asset Management International Company LLC ("TAMIC") and each Account. In addition, the Board, at the in person meeting on July 20, 2005, approved the investment sub-advisory agreements ("Sub-advisory Agreements") between TAMIC and TIMCO Asset Management Inc. ("TIMCO") for GIS and between TAMIC and Salomon Brothers Asset Management Inc. ("SaBAM") for QB and MM. In voting to approve the Agreements and the Sub-advisory Agreements, the Board considered whether the approval of the Agreements and the Sub-advisory Agreements would be in the best interests of the Accounts and those contract owners who have amounts invested in the Accounts (the "contract owners"), an evaluation largely based on the nature and quality of the services provided under the Agreements and the Sub-advisory Agreements and the overall fairness of the Agreement and the Sub-advisory Agreements to the contract owners. As part of the process, legal counsel to the Accounts requested certain information from TAMIC and from TIMCO and SaBAM (the "sub-advisors"), and in response such parties provided certain written and oral information to the Board in its consideration of the Agreements and Sub-advisory Agreements. The Board did not identify any one factor, piece of information or written document as all important or controlling, and each Board Member attributed different weight to different factors. Prior to voting, the Board reviewed the proposed continuance of the Agreements and the Sub-advisory Agreements with management and with experienced independent and fund counsel and received materials from counsel discussing the legal standards for their consideration of the proposed continuation of the Agreements and the Sub-advisory Agreements. The Non-Interested Managers also reviewed the proposed continuation of the Agreements and the Sub-advisory Agreements in private sessions alone and with their independent counsel at which no representatives of management were present. Based on an evaluation of all material factors including those described below, the Board concluded that the Agreements and the Sub-advisory Agreements were reasonable and fair and in the best interest of the Accounts and the contract owners. Specifically, the Board considered, among other factors: (a) the nature, extent and quality of the services to be provided by TAMIC and the sub-advisors under the Agreements and the Sub-advisory Agreements; (b) the investment performance of the Accounts; (c) the cost of services to be provided and the profit realized by TAMIC and its affiliates; (d) the extent to which TAMIC and the sub-advisors realize economies of scale as each Account grows; and (e) whether the fee levels reflect these economies of scale for the benefit of the contract owners. CONSIDERATIONS RELEVANT TO ALL ACCOUNTS With respect to the nature, scope and quality of the services to be provided by TAMIC, the Board considered, and expressed its satisfaction with, the level and depth of knowledge of TAMIC, including the professional experience and qualifications of its personnel as well as current staffing levels and overall resources. The Board also noted that TAMIC had been acquired by MetLife, Inc. ("MetLife"), effective on July 1, 2005, and took into account the information that the Board had received at earlier meetings in connection with its consideration of this change in control of TAMIC. The Board also noted the responsibilities that TAMIC has to the Accounts, including oversight of the sub-advisors' compliance with Account policies and objectives, oversight of general Account compliance with federal and state laws, and the implementation of Board directives as they relate to the Accounts. Based on its consideration and review of the foregoing information, the Board determined that the Accounts were likely to benefit from the nature and quality of these services, as well as TAMIC's ability to render such services based on its experience, operations and resources. With respect to the nature, scope and quality of the services to be provided by the sub-advisors, the Board considered the level and depth of knowledge of each sub-advisor, including the professional experience and qualifications of their personnel as well as current staffing levels and overall resources. The Board also considered each sub-advisor's management style and performance record; the sub-advisor's financial condition; the sub-advisor's compliance systems and any disciplinary history. Based on its consideration and review of the foregoing information, the Board determined that the Accounts were likely to benefit from the nature and quality of these services, as well as the sub-advisors' ability to render such services based on their experience, operations and resources. -48- CONSIDERATIONS RELEVANT TO ALL ACCOUNTS (CONTINUED) The Board also examined the fees paid by each Account in light of fees paid to other investment managers by comparable funds and the method of computing each Account's advisory and sub-advisory fee. The Board also noted the Mortality and Expense Risk ("M&E") charges paid by each Account to The Travelers Insurance Company ("TIC"), an affiliate of TAMIC, and TIC's agreement to provide or arrange for the provision of all administrative services for each Account out of such M&E charges. The Board noted that, as a result, the Accounts normally do not pay any expenses other than advisory fees and M&E charges. Further, the Board noted that TAMIC's revenues, and its resulting profitability, from each Account is the difference between the amount TAMIC receives from the Account and what it pays to the sub-advisor for that Account and to cover other Account expenses. After comparing the fees with those of comparable funds as described below and in light of the quality and extent of services to be provided, the costs to be incurred by TAMIC and the sub-advisors, and the other factors considered, the Board concluded that the level of the fees paid to TAMIC and to each sub-advisor with respect to each Account was fair and reasonable. The Board reviewed the Accounts' performance records and TAMIC's and the sub-advisors' management styles and the long-term performance records of the Accounts. The Board noted that it reviews on a quarterly basis information about the Accounts' performance results and investment strategies. The Board also reviewed various comparative performance data provided to it in connection with its consideration of the renewal of the Agreements and Sub-advisory Agreements, including, among other information, a comparison of each Account's total return with its respective Lipper index. In terms of the profits realized by TAMIC from its relationship with the Accounts, the Board noted that it was satisfied that TAMIC's profits had not been excessive in the past, and that it was not possible to predict how the recent acquisition of TAMIC by MetLife would affect its future profitability. Because the fees paid to the sub-advisors are paid by TAMIC and not directly by the Accounts, the Board determined that the profitability of the sub-advisors was not material to the consideration of the Sub-advisory Agreements. For similar reasons, while the Board did consider whether sub-advisory fee breakpoints were in place for each Account, the Board did not consider the potential economies of scale in the sub-advisors' management of the Accounts to be a substantial factor in its considerations. The Board also considered the effect of the Accounts' size and growth on their performance and fees. The Board considered the effective fees under the Agreement for each Account as a percentage of assets at different asset levels and possible economies of scale that may be realized if the assets of the Account grow. Specifically, the Board noted that if the Accounts' assets increase over time, the Accounts may realize economies of scale if assets increase proportionally more than certain expenses. The Board also considered the fact that TAMIC pays sub-advisory fees out of the advisory fees it receives from the Accounts. Finally, the Board noted the uncommon structure of the Accounts as directly-managed separate accounts, as compared to separate accounts organized as unit investment trusts ("UITs") that invest all of their assets in shares of underlying mutual fund portfolios, and requested that management of TIC and TAMIC consider whether conversion to the more common UIT/underlying fund structure would be appropriate. The Board considered, among other data, the specific factors and related conclusions set forth below with respect to each Account. THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES The Board noted that the Account's performance has been good compared to similar funds, and that the Account's advisory and sub-advisory fees appeared to be extremely competitive compared to similar funds. In addition, the Board noted that the advisory and sub-advisory fees included breakpoints reducing such fees at higher asset levels that appeared to be appropriate in light of the economies of scale that would be involved in managing the Account at various asset levels. The Board requested, however, that TAMIC monitor whether personnel changes at TIMCO relating to its pending acquisition by Legg Mason might harm the Account. THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES The Board noted that the performance of the Account had been very good compared to similar funds over both short-term and long-term periods. The Board noted that the portfolio managers of the Account had not changed, even though the Account had been managed by TAMIC directly prior to its acquisition by MetLife, and was now managed by SaBAM as sub-advisor. The Board requested, however, that TAMIC monitor whether personnel changes at SaBAM relating to its pending acquisition by Legg Mason might harm the Account. The Board also concluded that the Account's advisory and sub-advisory fees appeared to be less than those of many similar funds. In addition, the Board noted that the advisory and sub-advisory fees did not include breakpoints reducing such fees at higher asset levels, but concluded that breakpoints were not imperative in light of the low advisory fee. -49- THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES The Board noted that the performance of the Account had generally been above average compared to similar funds. The Board noted that the portfolio managers of the Account had not changed, even though the Account had been managed by TAMIC directly prior to its acquisition by MetLife, and was now managed by SaBAM as sub-advisor. The Board requested, however, that TAMIC monitor whether personnel changes at SaBAM relating to its pending acquisition by Legg Mason might harm the Account. The Board also noted that the Account's advisory and sub-advisory fees appeared to be less than those of many comparable funds. In addition, the Board noted that the advisory fees did not include breakpoints reducing such fees at higher asset levels, but noted that economies of scale may be less pronounced as fund assets increase, and therefore that breakpoints may be less common, for money market funds than for other types of funds. CERTAIN MATTERS RELATING TO SABAM AND TIMCO On June 23, 2005, Citigroup Inc., the parent company of both SaBAM and TIMCO, agreed to sell substantially all of its asset management business, including SaBAM and TIMCO, to Legg Mason Inc. ("Legg Mason"). SaBAM is the sub-advisor to MM and QB while TIMCO is the sub-advisor to GIS (the "Accounts"). The consummation of the aforementioned transaction would result in a change of control of SaBAM and TIMCO and the automatic termination of the Accounts' sub-advisory agreements. In connection with the anticipated change of control of SaBAM and TIMCO, the Board approved new sub-advisory agreements between TAMIC and SaBAM and TIMCO for the Accounts at a special meeting of the Board held on November 10, 2005. In considering the new sub-advisory agreements for the Accounts, the Board met with a representative from SaBAM and TIMCO and received information regarding: the proposed transaction, Legg Mason and its asset management affiliates, and Legg Mason's plans for SaBAM and TIMCO after the closing of the transaction. In approving the new sub-advisory agreements, the Board also took into consideration the factors they considered at a meeting held on July 20, 2005, where the Board approved the previous sub-advisory agreements with SaBAM and TIMCO, with respect to the Accounts. In addition to these factors, the Board also considered: o that the new sub-advisory agreements are substantially similar to the Accounts' previous sub-advisory agreements; and o the business, experience and reputation of Legg Mason and its asset management affiliates and the prominence of the Legg Mason name in the marketplace for investment advice. Based on their evaluation of all factors that they deemed to be material, including those factors described above, and assisted by the advice of independent counsel, the Board of Managers, including the Independent Managers, unanimously voted to approve the new sub-advisory agreements between TAMIC and SaBAM and TIMCO for the Accounts. -50- OFFICERS AND INTERESTED MANAGERS
NUMBER OF PORTFOLIOS OTHER TERM OF IN ACCOUNT DIRECTORSHIPS POSITION(S) OFFICE AND COMPLEX OF PUBLIC HELD WITH LENGTH OF OVERSEEN BY COMPANIES HELD NAME, ADDRESS AND AGE ACCOUNTS TIME SERVED PRINCIPAL OCCUPATION DURING LAST FIVE YEARS MANAGER BY MANAGER - --------------------- ----------- ----------- ------------------------------------------- ----------- -------------- *Elizabeth Forget Chairman of Since July President, Met Investors Advisory LLC 66 None 260 Madison Avenue the Board of 2005 (2000 to present); Executive Vice 11th Floor Managers, President (2000 to present) and Chief New York, NY 10016 Chief Marketing Officer (2003 to present), Age 38 Executive MetLife Investors Group, Inc; Officer and President, TAMIC (July 2005 - present); President Senior Vice President, Equitable Distributors, Inc. and Vice President, Equitable Life Assurance Society of the United States (1996 to 2000). Paul Cellupica Secretary and Since July Chief Counsel, Securities Products and N/A N/A MetLife, Inc. Chief Legal 2005 Regulation, MetLife Inc. (2004 - One MetLife Plaza Officer present); Vice President and Chief 27-01 Queens Plaza North Legal Officer, TAMIC (July 2005 - Long Island City, NY 11101 present); Assistant Director, Division Age 41 of Investment Management, U.S. Securities and Exchange Commission (2001-2004), Senior Special Counsel, Division of Investment Management, Securities and Exchange Commission (2000-2001). Alan C. Leland, Jr. Principal Since July Treasurer and Chief Financial Officer; N/A N/A MetLife Advisers LLC Accounting 2005 MetLife Advisers, LLC and Vice 501 Boylston Street Officer President, MetLife, Inc. (1993 - Boston, MA 02116 present); Assistant Treasurer, TAMIC Age 53 (July 2005 - present) Jeffrey P. Halperin Interim Chief Since Assistant Vice President, Corporate N/A N/A Metropolitan Life Compliance November Ethics and Compliance Department, Insurance Company Officer 2005 MetLife, Inc. (October 2002-present); One MetLife Plaza Interim Chief Compliance Officer of 27-01 Queens Plaza North funds sponsored by Metlife and its Long Island City, NY 11101 affiliates (November 2005-present; Age 37 Associate, Goldman Sachs & Co.(May 2000-July 2001).
-51- NON-INTERESTED MANAGERS
NUMBER OF PORTFOLIOS OTHER TERM OF IN ACCOUNT DIRECTORSHIPS POSITION(S) OFFICE AND COMPLEX OF PUBLIC HELD WITH LENGTH OF OVERSEEN BY COMPANIES HELD NAME, ADDRESS AND AGE ACCOUNTS TIME SERVED PRINCIPAL OCCUPATION DURING LAST FIVE YEARS MANAGER BY MANAGER - --------------------- ----------- ----------- ------------------------------------------- ----------- -------------- Robert E. McGill, III Manager Since 1974 Retired manufacturing executive. Director 39 None 295 Hancock Street (1995-2000), Chemfab Corporation (specialty Williamstown, MA materials manufacturer); Director Age 74 (1999-2001), Ravenwood Winery, Inc.; Director (1999-2003), Lydall Inc. (manufacturer of fiber materials); Member, Board of Managers (1974-present), six Variable Annuity Separate Accounts of The Travelers Insurance Company+; Trustee (1990-present), five mutual funds sponsored by The Travelers Insurance Company.++ Lewis Mandell Manager Since 1990 Professor of Finance and Managerial 39 Director Manager Economics, University at Buffalo since (2000- 160 Jacobs Hall 1998. Dean, School of Management present), Buffalo, NY (1998-2001), University at Buffalo; Member, Delaware North Age 62 Board of Managers (1990-present), six Corp. Variable Annuity Separate Accounts of The (hospitality Travelers Insurance Company+; Trustee business) (1990-present), five mutual funds sponsored by The Travelers Insurance Company.++ Frances M. Hawk, Manager Since 1991 Private Investor (1997-present). Member, 39 None CFA, CFP Board of Managers (1991-present), six Manager Variable Annuity Separate Accounts of The 108 Oxford Hill Lane Travelers Insurance Company+; Trustee Downingtown, PA (1991-present), five mutual funds sponsored Age 57 by The Travelers Insurance Company.++
- ---------- *Ms. Forget is an "interested person" by virtue of her position as President of TAMIC. +In addition to the Accounts, the other three Variable Annuity Separate Accounts are: The Travelers Growth and Income Stock Account for Variable Annuities, The Travelers Quality Bond Account for Variable Annuities, and The Travelers Money Market Account for Variable Annuities. ++ The five Mutual Funds are: Capital Appreciation Fund, Money Market Portfolio, High Yield Bond Trust, Managed Assets Trust and The Travelers Series Trust. -52- INVESTMENT ADVISER TRAVELERS ASSET MANAGEMENT INTERNATIONAL COMPANY, LLC Hartford, Connecticut THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES INVESTMENT SUB-ADVISER TIMCO ASSET MANAGEMENT INC. Stamford, Connecticut THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES CUSTODIAN STATE STREET BANK & TRUST CO(1) Boston, Massachusetts All figures represent past performance and the information provided is not intended to be a forecast of future events, a guarantee of future results or investment advice. Principal value and investment returns will fluctuate and investors' units may be worth more or less than their original cost Each Account files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. You may find these forms on the Securities and Exchange Commission's website at HTTP://WWW.SEC.GOV. These forms may also be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling (toll free) 1-800-SEC-0330. Contract owners can also call the Account at 1-800-842-9406 to obtain information on Form N-Q. A description of the policies and procedures that the Accounts use to determine how to vote proxies and information on how the Accounts voted proxies relating to portfolio securities during the 12-month period ended December 31, 2005 is currently available. You may obtain these materials upon request and without charge by calling the Accounts (toll-free) at 1-800-842-9406. (1) Effective December 1, 2005, State Street Bank & Trust Co. replaced JP Morgan Chase as custodian. VG-137 (Annual) (12-05) Printed in U.S.A. ITEM 2. CODE OF ETHICS. The registrant has adopted a code of ethics that applies to the Registrant's Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer or controller. Please see exhibit (a)(1). ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The Board of Managers of the registrant has determined that Robert F. McGill III, a member of the Board's Audit Committee, possesses the technical attributes identified in Instruction 2(b) of item 3 to Form N-CSR to qualify as the "Audit Committee financial expert," and has designated Mr. McGill as the Audit Committee's financial expert. Mr. McGill is an "independent" Director pursuant to paragraph (a)(2) of item 3 to Form N-CSR. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. (a) KPMG LLP, were the auditors for the registrant through June 30, 2005. On July 1, 2005, Deloitte & Touche LLP, assumed responsibility for the audit of the registrant's annual financial statements. The aggregate fees billed by KPMG LLP for the fiscal year ended December 31, 2004 for professional services rendered in connection with the audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements were $58,575. No bills for comparable services for the year ended December 31, 2005 were received. These fees are paid by Travelers Life & Annuity, as sponsor of each registrant. (b) None. (c) None. (d) None. (e) (1) The Audit Committee ("Committee") has adopted policies and procedures to, among other purposes, approve all audit and non-audit services provided to the Registrant and certain other persons by the Registrant's independent auditors. The policies and procedures require the Committee to approve (a) all audit and permissible non-audit services to be provided to the Registrant and (b) all permissible non-audit services to be provided by the Fund's independent auditors to the Adviser and any Covered Service Providers if the engagement relates directly to the operations and financial reporting of the Registrant. In carrying out this responsibility, the Committee shall seek periodically from the Adviser and from the independent auditors a list of audit and permissible non-audit services that can be expected to be rendered to the Registrant, the Adviser or any Covered Service Providers by the Registrant's independent auditors, and an estimate of the fees sought to be paid in connection with such services. The Committee may delegate its responsibility to approve any such audit and permissible non-audit services to a sub-committee consisting of the Chairperson of the Committee (the "Chairperson") and at least one other member of the Committee as the Chairperson, from time to time, may determine and appoint, and such sub-committee shall report to the Committee, at its next meeting after the sub-committee's meeting, its decision(s). From year to year, and at such other times as the Committee deems appropriate, the Committee shall report to the Board whether this system of approval has been effective and efficient or whether this Charter should be amended to allow for pre-approval pursuant to such policies. Pre-approval by the Committee of any permissible non-audit services is not required so long as: (i) the aggregate amount of all such permissible non-audit services provided to the Fund, the Adviser and any service providers controlling, controlled by or under common control with the Adviser that provide ongoing services to the Fund ("Covered Service Providers") constitutes not more than 5% of the total amount of revenues paid to the independent auditors during the fiscal year in which the permissible non-audit services are provided by (a) the Fund, (b) the Adviser and (c) any entity controlling, controlled by or under common control with the Adviser that provides ongoing services to the Fund during the fiscal year in which the services are provided that would have to be approved by the Committee; (ii) the permissible non-audit services were not recognized by the Fund at the time of the engagement to be non-audit services; and (iii) such services are promptly brought to the attention of the Committee and approved by the Committee (or its delegate(s)) prior to the completion of the audit. (e) (2) No fee incurred on behalf of the accounts. (f) Not applicable. (g) None. (h) Yes. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS Please see the schedule of investments contained in the report to shareholders included under item 1 of this form N-CSR. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED END MANAGEMENT INVESTMENTCOMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant's Board of Managers since the accounts last provided disclosure in response to this item. ITEM 11. CONTROLS AND PROCEDURES. (a) The registrant's principal executive officer and principal financial officer have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a - 3 (c) under the Investment Company Act of 1940, as amended (the "1940 Act")) are effective as of a date within 90 days of the filing date of this report that includes the disclosure required by this paragraph, based on their evaluation of the disclosure controls and procedures required by Rule 30a-3(b) under the 1940 Act and 15d-15(b) under the Securities Exchange Act of 1934 as of a date within 90 days of the filing date of this document. (b) There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the registrant's second fiscal quarter of the period covered by this report that have materially affected, or are likely to materially affect the registrant's internal control over financial reporting. ITEM 12. EXHIBITS. (a)(1) The code of ethics pursuant to item 2 is attached as EX-99.CODE ETH (a)(2) Certifications pursuant to section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto as Exhibit 99.CERT (a)(3) Not applicable (b) Certifications pursuant to section 906 of the Sarbanes-Oxley Act of 2002 are furnished as Exhibit 99.906CERT SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Travelers Growth and Income Stock Account For Variable Annuities Travelers Quality Bond Account For Variable Annuities Travelers Money Market Account For Variable Annuities By: /s/ Elizabeth M. Forget Elizabeth M. Forget Chairman of the Board Chief Executive Officer Travelers Growth and Income Stock Account For Variable Annuities Travelers Quality Bond Account For Variable Annuities Travelers Money Market Account For Variable Annuities Date Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ Elizabeth M. Forget Elizabeth M. Forget Chairman of the Board Chief Executive Officer Travelers Growth and Income Stock Account For Variable Annuities Travelers Quality Bond Account For Variable Annuities Travelers Money Market Account For Variable Annuities Date By: /s/ Alan C. Leland Jr. Alan C. Leland Jr. Principal Accounting Officer Travelers Growth and Income Stock Account For Variable Annuities Travelers Quality Bond Account For Variable Annuities Travelers Money Market Account For Variable Annuities Date EX-99.CODE ETH 2 c41223_ex99-codeeth.txt TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES CODE OF ETHICS PURSUANT TO SECTION 406 OF THE SARBANES-OXLEY ACT OF 2002 FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS I. COVERED OFFICERS/PURPOSE OF THE CODE This Code of Ethics (this "Code") pursuant to Section 406 of the Sarbanes-Oxley Act of 2002 has been adopted by Account(1) and applies to the Account's Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer or persons performing similar functions (the "Covered Officers," as set forth in EXHIBIT A) 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 Account files with, or submits to, the Securities and Exchange Commission (the "SEC") and in other public communications made by the Account; 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 conflicts of interest. II. COVERED OFFICERS SHOULD HANDLE ETHICALLY CONFLICTS OF INTEREST OVERVIEW. A "conflict of interest" occurs when a Covered Officer's private interest interferes with the interests of, or his or her service to, the Account. For example, a conflict of interest would arise if a Covered Officer, or a member of the Covered Officer's family, receives improper personal benefits as a result of the Covered Officer's position with the Account. Certain conflicts of interest arise out of the relationships between Covered Officers and the Account and already are subject to conflict of interest provisions in the Investment Company Act of 1940 (including the regulations thereunder, the "1940 Act") and the Investment Advisers Act of 1940 (including the regulations thereunder, the "Investment Advisers Act"). For example, - ---------------------- (1) References herein to the "Account" shall refer to the Travelers Growth and Income Stock Account for Variable Annuities, the Travelers Money Market Account for Variable Annuities, the Travelers Quality Bond Account for Variable Annuities, as relevant given the context. Covered Officers may not engage in certain transactions (such as the purchase or sale of portfolio securities or other property) with the Account because of their status as "affiliated persons" of the Account. The compliance programs and procedures of the Account and its investment advisers and subadvisers (the "Service Providers"; each of the investment advisers and subadvisers shall be referred to herein as the "Affiliated Service Providers") 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 also Section V of this Code. Although typically not presenting an opportunity for improper personal benefit, conflicts may arise from, or as a result of, the contractual relationship between the Account and companies in the MetLife enterprise. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether for the Account or for an Affiliated Service Provider, or for both), be involved in establishing policies and implementing decisions that will have different effects on the Affiliated Service Providers and the Account. The participation of the Covered Officers in such activities is inherent in the contractual relationships between the Account and its Affiliated Service Providers and is consistent with the performance by the Covered Officers of their duties as officers of the Account. Thus, if performed in conformity with the provisions of the 1940 Act and the Investment Advisers Act, other applicable laws and the Account's organizational documents, such activities will be deemed to have been handled ethically and not to have involved any violation of this Code. In addition, it is recognized by the Account's Boards of Managers (the "Board") that the Covered Officers may also be directors, officers or employees of one or more other investment companies covered by this or other codes and that such service, by itself, does not give rise to a conflict of interest or to a violation of this Code. Other conflicts of interest are covered by the Code, even if such conflicts of interest are not the subject of provisions of the 1940 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 Account. Each Covered Officer must not: o use his or her personal influence or personal relationships to influence investment decisions or financial reporting by the Account whereby the Covered Officer would benefit personally to the detriment of the Account and its unitholders; o use his or her position with the Account for private economic gain to himself or herself, his or her family or any other person, or in a manner detrimental to the interests of the Account and its unitholders; o exercise inappropriate influence in connection with his or her official duties that causes the Account to violate applicable laws, rules and regulations; o cause the Account to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit of the Account; or -2- o retaliate against any other Covered Officer or any employee of the Account or its Service Providers or other entities doing business with the Account for reports of potential violations of this Code or applicable laws that are made in good faith. There are some relationships that should always be disclosed to the Secretary of the Account (the "Code Officer"). These relationships are listed below: o any ownership interest in, or any consulting or employment relationship with, any entities doing business with the Account, other than an Affiliated Service Provider or an affiliate of an Affiliated Service Provider. This disclosure requirement shall not apply to or otherwise limit the ownership of publicly traded securities so long as the Covered Officer's ownership does not exceed more than 1% of the outstanding securities of the relevant class. o a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Account for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment with an Affiliated Service Provider or its affiliates. This disclosure requirement shall not apply to or otherwise limit (i) the ownership of publicly traded securities so long as the Covered Officer's ownership does not exceed more than 1% of the particular class of security outstanding or (ii) the receipt by an Affiliated Service Provider or its affiliate of research or other benefits in exchange for "soft dollars." III. DISCLOSURE AND COMPLIANCE o Each Covered Officer should familiarize himself or herself with the disclosure requirements generally applicable to the Account; o each Covered Officer should not knowingly misrepresent, or cause others to misrepresent, facts about the Account to others, whether within or outside the Account, including to the Board and auditors, and to governmental regulators and self-regulatory organizations; o each Covered Officer should, to the extent appropriate within his or her area of responsibility, consult with other officers and employees of the Account, the Service Providers or their affiliates, auditors, other entities doing business with the Account or with counsel to the Account with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Account files with, or submits to, the SEC (which for the sake of clarity, does not include any sales literature, omitting prospectuses or "tombstone" advertising prepared by the Account's principal underwriter) and in other public communications made by the Account; and o it is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations by (i) adhering personally to such standards and restrictions and (ii) encouraging and -3- counseling other persons involved with the Account to adhere to such standards and restrictions. IV. 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 Account that he or she has received, read, and understands the Code; o annually thereafter affirm to the Account that he or she has complied with the requirements of the Code; o provide full and fair responses to all questions asked in any Director and Officer Questionnaire as well as with respect to any supplemental request for information; and o notify the Code Officer promptly if he or she knows of any material violation of this Code. Failure to do so is itself a violation of this Code. The Code Officer is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation. The Code Officer may consult with internal or external counsel or accountants or members of the MetLife Compliance Department to assist with the application and interpretation of this Code. Requests for waivers from the Code shall be submitted in writing to the Code Officer. The Audit Committee of the Board of Managers shall be authorized to grant waivers, as it deems appropriate. Any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. The Account will follow these procedures in investigating and enforcing this Code: o the Code Officer will take all appropriate action to investigate any potential material violations reported to him or her, which may include the use of internal or external counsel, accountants or other personnel, including members of the MetLife Compliance Department; o if, after such investigation, the Code Officer believes that no material violation has occurred, the Code Officer is not required to take any further action; o any matter that the Code Officer believes is a material violation will be reported to the President (if the violation is by someone other than the President), the MetLife Compliance Department and Audit Committee of the Board of Managers (the "Committee"); -4- o if the Committee concurs that a material 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 an Affiliated Service Provider or its board; and/or disciplinary action (which may include the dismissal of the Covered Officer as an officer or employee of the Account); V. OTHER POLICIES AND PROCEDURES This Code shall be the sole code of ethics adopted by the Account for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. The Account and its Service Providers' codes of ethics under Rule 17j-1 under the 1940 Act and the Service Providers' more detailed compliance policies and procedures are separate requirements applying to the Covered Officers and others, and are not part of this Code. VI. AMENDMENTS Any amendments to this Code, other than amendments to EXHIBIT A, must be approved or ratified by a majority vote of the Board. VII. INTERNAL USE The Code is intended solely for internal use by the Account and does not constitute an admission, by or on behalf of the Account, as to any fact, circumstance, or legal conclusion. -5- EXHIBIT A Persons Covered by this Code of Ethics - --------------------------------------
- --------------------------------------------------------------------------------------------------------------- ACCOUNT PRINCIPAL EXECUTIVE OFFICER PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER - --------------------------------------------------------------------------------------------------------------- Travelers Growth and Income Elizabeth M. Forget, Chief Al Leland, Chief Financial Officer Stock Account for Variable Executive Officer Annuities - --------------------------------------------------------------------------------------------------------------- Travelers Money Market Account Elizabeth M. Forget, Chief Al Leland, Chief Financial Officer for Variable Annuities Executive Officer - --------------------------------------------------------------------------------------------------------------- Travelers Quality Bond Account Elizabeth M. Forget, Chief Al Leland, Chief Financial Officer for Variable Annuities Executive Officer - ---------------------------------------------------------------------------------------------------------------
-6- EX-99.CERT 3 c41223_ex99-cert.txt CERTIFICATIONS I, Elizabeth Forget, 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 statement 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 schedules of investments included in this report fairly present in all material respects the investments of the registrant as of the end of the fiscal quarter for which the report is filed; 4. The registrant's other certifying officer(s) 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) and internal control over financial reporting (as defined in Rule 30a-3(d) 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 second fiscal quarter of the period covered by this 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, 2006 /S/ ELIZABETH FORGET ---------------------------- Chairman of the Board Chief Executive Officer CERTIFICATIONS I, Alan C. Leland Jr., 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 statement 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 schedules of investments included in this report fairly present in all material respects the investments of the registrant as of the end of the fiscal quarter for which the report is filed; 4. The registrant's other certifying officer(s) 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) and internal control over financial reporting (as defined in Rule 30a-3(d) 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 second fiscal quarter of the period covered by this 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, 2006 /S/ ALAN C. LELAND JR. ---------------------------- Principal Accounting Officer CERTIFICATIONS I, Elizabeth Forget, 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 statement 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 schedules of investments included in this report fairly present in all material respects the investments of the registrant as of the end of the fiscal quarter for which the report is filed; 4. The registrant's other certifying officer(s) 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) and internal control over financial reporting (as defined in Rule 30a-3(d) 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 second fiscal quarter of the period covered by this 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, 2006 /S/ ELIZABETH FORGET ---------------------------- Chairman of the Board Chief Executive Officer CERTIFICATIONS I, Alan C. Leland Jr., 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 statement 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 schedules of investments included in this report fairly present in all material respects the investments of the registrant as of the end of the fiscal quarter for which the report is filed; 4. The registrant's other certifying officer(s) 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) and internal control over financial reporting (as defined in Rule 30a-3(d) 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 second fiscal quarter of the period covered by this 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, 2006 /S/ ALAN C. LELAND JR. ---------------------------- Principal Accounting Officer CERTIFICATIONS I, Elizabeth Forget, 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 statement 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 schedules of investments included in this report fairly present in all material respects the investments of the registrant as of the end of the fiscal quarter for which the report is filed; 4. The registrant's other certifying officer(s) 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) and internal control over financial reporting (as defined in Rule 30a-3(d) 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 second fiscal quarter of the period covered by this 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, 2006 /S/ ELIZABETH FORGET ---------------------------- Chairman of the Board Chief Executive Officer CERTIFICATIONS I, Alan C. Leland Jr., 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 statement 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 schedules of investments included in this report fairly present in all material respects the investments of the registrant as of the end of the fiscal quarter for which the report is filed; 4. The registrant's other certifying officer(s) 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) and internal control over financial reporting (as defined in Rule 30a-3(d) 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 second fiscal quarter of the period covered by this report 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, 2006 /S/ ALAN C. LELAND JR. ---------------------------- Principal Accounting Officer EX-99.906CERT 4 c41223_ex99-906cert.txt CERTIFICATION Elizabeth M. Forget, Chairman of the Board and Chief Executive Officer, and Alan C. Leland Jr., 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, 2005 (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 For Variable Annuities For Variable Annuities /S/ ELIZABETH M. FORGET /S/ ALAN C. LELAND JR. - ----------------------- ---------------------- Elizabeth M. Forget Alan C. Leland Jr. Date: February 24, 2006 Date: February 24, 2006 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 Elizabeth M. Forget, Chairman of the Board and Chief Executive Officer, and Alan C. Leland Jr., 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, 2005 (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/ ELIZABETH M. FORGET /S/ ALAN C. LELAND JR. - ----------------------- ---------------------- Elizabeth M. Forget Alan C. Leland Jr. Date: February 24, 2006 Date: February 24, 2006 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 Elizabeth M. Forget, Chairman of the Board and Chief Executive Officer, and Alan C. Leland Jr., 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, 2005 (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/ ELIZABETH M. FORGET /S/ ALAN C. LELAND JR. - ----------------------- ---------------------- Elizabeth M. Forget Alan C. Leland Jr. Date: February 24, 2006 Date: February 24, 2006 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-----