-----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, B19PdIivG538lTAxgsi3MOsf3hUvIfo5mAFe6M95F3Wz2vB6ycLxnjZJ6f2yJfFn 2Wc7lyeAaR5KNTFPgV+d+w== 0000091155-00-000185.txt : 20000309 0000091155-00-000185.hdr.sgml : 20000309 ACCESSION NUMBER: 0000091155-00-000185 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000308 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MANAGED ASSETS TRUST CENTRAL INDEX KEY: 0000706453 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 046480345 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-03568 FILM NUMBER: 563282 BUSINESS ADDRESS: STREET 1: ONE TOWER SQ STREET 2: ATTN FINANCIAL SERVICES LEGAL DIVISION CITY: HARTFORD STATE: CT ZIP: 06183-2020 BUSINESS PHONE: 2032777379 MAIL ADDRESS: STREET 1: ONE TOWER SQUARE STREET 2: ATTN FINANCIAL SERVICES LEGAL DIVISION CITY: HARTFORD STATE: CT ZIP: 06183-2020 N-30D 1 THE TRAVELERS VARIABLE PRODUCTS FUNDS ANNUAL REPORTS DECEMBER 31, 1999 [TRAVELERS GRAPHIC] MANAGED ASSETS TRUST HIGH YIELD BOND TRUST CAPITAL APPRECIATION FUND MONEY MARKET PORTFOLIO THE TRAVELERS SERIES TRUST: U.S. GOVERNMENT SECURITIES PORTFOLIO SOCIAL AWARENESS STOCK PORTFOLIO UTILITIES PORTFOLIO [TRAVELERSLIFE & ANNUITY LOGO] The Travelers Insurance Company The Travelers Life and Annuity Company One Tower Square Hartford, CT 06183 ANNUAL REPORT FOR THE TRAVELERS VARIABLE PRODUCT FUNDS - -------------------------------------------------------------------------------- DEAR SHAREHOLDER: We are pleased to provide the annual report for the Travelers Variable Product Funds -- Managed Assets Trust, High Yield Bond Trust, Capital Appreciation Fund, Money Market Portfolio ("Trust" or "Fund") and the Travelers Series Trust -- U.S. Government Securities, Social Awareness Stock and Utilities Portfolio ("Portfolios") for the year ended December 31, 1999. This letter briefly discusses general economic and market conditions. A detailed comparison showing the growth of a hypothetical $10,000 invested in each Portfolio since inception can be found in this report. Please note that all total return figures given in this report, both cumulative and average annualized, exclude the effect of sales charges. Past performance is not indicative of future results. A detailed summary of performance and current holdings for each individual Portfolio can be found in the appropriate sections that follow. We hope you find this report to be useful and informative.
The Performance of the Travelers Series Trust(1) (12/31/98-12/31/99) - --------------------------------------------------------------------- Managed Assets Trust........................................ 14.22% High Yield Bond Trust....................................... 4.42 Capital Appreciation Fund................................... 53.52 U.S. Government Securities.................................. (4.23) Social Awareness Stock...................................... 15.84 Utilities Portfolio......................................... (0.08)
MARKET SCHEDULE OF SUBACCOUNT COMMENTARY INVESTMENTS ---------- ---------- ----------- Managed Assets Trust................................... 2 7 High Yield Bond Trust.................................. 3 16 Capital Appreciation Fund.............................. 4 22 Money Market Portfolio................................. 4 24 U.S. Government Securities Portfolio................... 37 41 Social Awareness Stock Portfolio....................... 37 42 Utilities Portfolio.................................... 38 46
MARKET AND ECONOMIC OVERVIEW The year began on a volatile note for global financial markets as a potential new threat emerged in Latin America. The devaluation of Brazil's currency, the real, affected many U.S. corporations and investors with exposure to the Latin American markets and negatively impacted the performance of the U.S. stock market. Concerns regarding the future direction of interest rates were prevalent throughout 1999. Despite low inflation, the Federal Reserve Board ("Fed") opted to raise interest rates three times during the year, effectively "taking back" the interest-rate cuts imposed following the global economic crisis in 1998. The Fed's change in monetary policy did not significantly deter the remarkable growth of the U.S. economy. In fact, throughout the year, the U.S. Gross Domestic Product ("GDP"), which represents the total output of goods and services, continued to exceed expectations. Despite the rise in interest rates, the U.S. stock market continued its stellar performance. Evidence of stronger-than-expected economic growth prompted hopes of a meaningful earnings recovery and at the same time, triggered concerns regarding future rate hikes. These factors led to a rally in small cap and value stocks. (Value stocks are securities of companies that are believed to be undervalued in the market.) However, the trend of investing in small cap and value stocks soon changed, as many investors took the view that a proactive monetary policy by the Fed would preempt inflationary pressures. - --------------- (1) Please note that data represents past performance, which is not indicative of future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. 1 ANNUAL REPORT FOR THE TRAVELERS VARIABLE PRODUCT FUNDS - -------------------------------------------------------------------------------- By the end of the year, nevertheless, the small cap sector, as measured by the Russell 2000 Index,(2) which returned 21.26% for the year, outperformed the large cap sector, as measured by the Standard & Poor's 500 Index(3) ("S&P 500") which returned 21.03%. As a result of investors' focus on the direction of interest rates, the stock and bond markets were characterized by higher levels of volatility. Investors became increasingly concerned, especially toward the end of the year about not only the direction of interest rates but also about future earnings growth and the high market valuations of many stocks. In addition, the strength of the overseas markets attracted U.S. capital, which had a somewhat negative impact on the performance of the U.S. stock market through the third quarter of 1999. By the end of the year however, the U.S. stock market rose sharply largely due to the incredible performance of the technology sector. Y2K concerns decreased, with the market's assessment of the risks associated with potential Year 2000 glitches proving to be correct. The bond markets did not react positively to the actions of the Fed in 1999 and experienced their worst year since 1994. The overall bond market recorded losses in 1999 in response to the Fed's interest rate increases and concerns regarding inflation. Bond market losses increased with the length of maturities. The yield on the bellwether 30-year government bond increased 1.39 percentage points in 1999 to 6.48%. At the end of 1998, the 30-year bond yielded 5.09%. In our view, the strength of the U.S. economy should continue, prompting the Fed to raise interest rates in 2000.(4) In addition, overseas economies, many of which are in the early stages of recovery, should continue to expand. This global economic recovery should benefit the manufacturing sector of the U.S. market in 2000. We predict that earnings should continue its double-digit growth through the first quarter of 2000. It is our belief that the recent performance of technology and telecommunications stocks is not sustainable. However, we are confident that most stocks are appropriately valued. Over the longer term, we think that the fundamentals for both stocks and bonds remains favorable. MANAGED ASSETS TRUST Managed Assets Trust ("Trust") seeks to provide a high total investment return through a fully managed investment policy. For the year ended December 31, 1999, the Trust returned 14.22%. In comparison, the Lehman Government/Corporate Index returned a negative 2.15% and the S&P 500 returned 21.03% for the same time period. (Past performance is not indicative of future results. Please note that Portfolio holdings are as of December 31, 1999 and are subject to change. The Lehman Government/Corporate Index is a broad measure of the performance of government and corporate fixed-rate debt issues.) During 1999, the performance of the technology sector largely contributed to the historic returns of the major U.S. stock market indexes. The markets were also characterized by the better performance of growth stocks versus value stocks. The Trust's holdings in the technology, consumer discretionary and utilities sectors contributed positively to its performance during the period. Investments in the producer durables and materials and processing industries negatively impacted its performance. As a general rule, the managers seek out companies with good earnings prospects at reasonable valuations. This investment approach led them to an overweight position in Sun Microsystems, a leading software company, which outperformed the overall market due to continual earnings estimates upgrades by Wall Street analysts. Oracle, a leading software company, and QUALCOMM, the wireless communications company, rallied due in large part to investors' positive outlook on those stocks with higher price/earnings ("P/E") ratios. (A P/E ratio is the price of a stock divided by its earnings per share.) The Trust also benefited from the fact that QUALCOMM and Yahoo! Inc., a global internet company, were purchased prior to their - --------------- (2) The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index. (3) The S&P 500 is market capitalization-weighted measure of 500 widely held common stocks. (4) On February 2, 2000, the Federal Reserve Board raised interest rates 0.25% to 5.25% after this letter was written. 2 ANNUAL REPORT FOR THE TRAVELERS VARIABLE PRODUCT FUNDS - -------------------------------------------------------------------------------- inclusion in the S&P 500 Index. In addition, America Online performed well in 1999. The Fund's managers' were fortunate to have avoided two of the bigger disappointments in the sector: Xerox and Unisys. Semiconductor equipment stocks such as Applied Materials and Teradyne surged in expectation of a revival in the capital spending cycle. In the utilities sector, the managers' emphasis on faster growing telecommunications companies (such as Nextel Communications and Sprint PCS Group) at the expense of electric utilities and gas distribution companies continued to help performance. A position in AES Corp, a global leader in electric power generation, which moved up in price as it completed a successful Y2K rollover, also contributed positively to performance. In the consumer discretionary sector, a number of our positions in the media and broadcasting groups performed well. The New York Times Co. and Gannett outperformed the overall newspaper sector and AMFM Inc. and Times Mirror Co. continued to perform well due to the strength of the U.S. economy. The managers' holdings in the household products group, most notably, Kimberly-Clark and Cendant, a consumer services company who rose sharply on the heels of a $400 million investment by Liberty Media, produced good results in 1999. Sears, J.C. Penney and Tandy, three companies not held in the Trust, continued to go down and, therefore, contributed to relative performance. In the consumer discretionary sector, performance was aided by underweight positions in Avon, Gillette and Sears. Avon and Gillette frustrated investors with lower-than-expected revenue growth. As a result, Avon was down 55.2% and Gillette lost 17.2% for the quarter. Sears announced in early September that it would not meet third quarter earnings and suffered a 29.6% decline for the quarter. Strong earnings growth in the third and fourth quarters suggests that the earnings recovery of 1999 is well underway so far in 2000. However, the constant presence of the Fed and investors' enthusiasm for technology stocks may prevent a broad-based market rally from taking place in the near term. HIGH YIELD BOND TRUST The High Yield Bond Trust ("Trust") seeks generous income. The assets of the Trust will be invested in bonds which, as a class, sell at discounts from par value and are typically higher-risk securities. For the year ended December 31, 1999, the High Yield Bond Trust had a total return of 4.42%. In comparison, the Lehman Aggregate Bond Index posted a total return of a negative 0.82% for the same period. (Past performance is not indicative of future results. Please note that Portfolio holdings are as of December 31, 1999 and are subject to change. The Lehman Aggregate Bond Index is a broad measure of the performance of taxable bonds in the U.S. market with maturities of at least one year.) During 1999, the overall bond market weakened due to the Fed's decision to raise interest rates three times as an inflationary precaution. Within the U.S. bond markets, spreads (i.e., the difference between yields on securities but the same quality but different maturities) have tightened in from the wider levels. Spreads remain wider than the market is used to seeing so the managers expect them to narrow approximately another 20 to 25 basis points over the next year. (A basis point is .01% or one-one hundredth of a percent of yield.) However, in the managers' opinion, the best opportunities in the bond market may be found through careful assessment of the issuer rather than attempting to predict the change in spreads. High-yield bond issuance was approximately $100 billion in 1999, down almost 50% from the previous year. The managers anticipate that supply will continue to be down in most areas of the bond market for the foreseeable future. During the reporting period, the Trust benefited from the remarkable performance of the telecommunications and media sectors, through its holdings in Pegasus Communications and Chancellor Media. In the view of the managers, heightened market volatility should continue and the Fed most likely will continue to raise interest rates in 2000. Despite turbulent conditions in both the stock and the bond markets, they are committed to their investment strategy of identifying what they believe to be attractive long-term opportunities. 3 ANNUAL REPORT FOR THE TRAVELERS VARIABLE PRODUCT FUNDS - -------------------------------------------------------------------------------- CAPITAL APPRECIATION FUND The Capital Appreciation Fund ("Fund") seeks growth of capital through the use of common stocks. Income is not an objective. The Fund invests principally in common stocks of small to large companies that are expected to experience wide fluctuations in price. For the year ended December 31, 1999, the Fund returned 53.52%. In comparison, the S&P 500 returned 21.03% for the same time period. (Past performance is not indicative of future results. Please note that Portfolio holdings are as of December 31, 1999 and are subject to change.) The Fund's holdings in wireless communications companies, such as Nokia and Sprint PCS, gained significant ground during the period largely due to investor enthusiasm, companies that stand to benefit from wireless data transmission. The Fund's holdings in Internet infrastructure companies such as Cisco Systems and EMC Corp. also moved higher. Strong showings from the Fund's retail and media holdings also positively contributed to its performance during the period. Meanwhile, the Fund's holdings in the pharmaceutical sector continued to disappoint. The sector remains under pressure from potential governmental drug price regulation as well as speculation that the health care industry may once again emerge as a favorite target for political candidates in next year's election. Fortunately, the Capital Appreciation Fund's exposure to pharmaceutical companies has been fairly limited since the early summer. In the opinion of the Fund's managers, the Fed will probably elect to raise interest rates in the coming year and higher market volatility should continue. Nevertheless and although no guarantees can be made, the managers are optimistic about the long-term prospects of the Fund's holdings. MONEY MARKET PORTFOLIO The Money Market Portfolio ("Portfolio") seeks to provide shareholders with high current income from short-term money market instruments while emphasizing preservation of capital and maintaining a high degree of liquidity. The Portfolio pursues this objective by investing in securities maturing in one year or less. For the 12-month period ended December 31, 1999, Money Market Portfolio had a 6.07% yield to maturity and an average maturity of 47 days. Money Market Portfolio continues to invest primarily in U.S. Treasuries and government agency securities. This investment strategy has provided Money Market Portfolio shareholders with relative safety, liquidity and stability. You should be aware that your investment in the Money Market Portfolio is neither insured nor guaranteed by the U.S. Government. Moreover, no assurance can be given that the Fund will be able to maintain a stable net asset value of $1.00 per share. In closing, we would like to thank you for your investment in the Travelers Funds. Sincerely, /s/ HEATH B. MCLENDON Heath B. McLendon Chairman January 20, 2000 4 - -------------------------------------------------------------------------------- PERFORMANCE COMPARISON -- MANAGED ASSETS TRUST AS OF 12/31/99 (UNAUDITED)
AVERAGE ANNUAL TOTAL RETURNS ---------------------------- Year Ended 12/31/99 14.22% Five Years Ended 12/31/99 19.47% Ten Years Ended 12/31/99 13.05% CUMULATIVE TOTAL RETURN ----------------------------- 4/8/83* through 12/31/99 490.37% * Commencement of operations
This chart assumes an initial investment of $10,000 made on December 31, 1989, assuming reinvestment of dividends, through December 31, 1999. The Lehman Government/Corporate Bond Index is a weighted composite of the Lehman Government Bond Index, which is a broad-based index of all public debt obligations of the U.S. Government and its agencies and has an average maturity of nine years and the Lehman Corporate Bond Index, which is comprised of all public fixed-rate non-convertible investment-grade domestic corporate debt, excluding collateralized mortgage obligations. The Consumer Price Index is a measure of the average change in prices over time in a fixed market basket of goods and services. The Standard & Poor's 500 Index is an unmanaged index composed of 500 widely held common stocks listed on the New York Stock Exchange, American Stock Exchange and over-the-counter market.
MANAGED ASSETS LEHMAN CONSUMER PRICE INDEX TRUST GOVERNMENT/CORPORATE -------------------- STANDARD & POOR'S -------------- BOND INDEX 500 INDEX -------------------- ----------------- 12/89 10000 10000 10000 10000 12/90 10247 10829 10610 9690 12/91 12471 12575 10935 12636 12/92 13112 13529 11252 13598 12/93 14336 15021 11561 14964 12/94 14014 14493 11871 15161 12/95 17814 17282 12172 18485 12/96 20269 17783 12576 22727 12/97 24588 19518 12789 30309 12/98 29861 21367 12994 39019 12/99 34107 20431 13382 47227
- -------------------------------------------------------------------------------- PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Average annual total returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of dividends. The returns do not reflect expenses associated with the subaccount such as administrative fees, account charges and surrender charges which, if reflected, would reduce the performance shown. - -------------------------------------------------------------------------------- PERFORMANCE COMPARISON -- HIGH YIELD BOND TRUST AS OF 12/31/99 (UNAUDITED)
AVERAGE ANNUAL TOTAL RETURNS ---------------------------- Year Ended 12/31/99 4.42% Five Years Ended 12/31/99 11.69% Ten Years Ended 12/31/99 9.76% CUMULATIVE TOTAL RETURN ----------------------------- 3/19/82* through 12/31/99 430.38% * Commencement of operations
This chart assumes an initial investment of $10,000 made on December 31, 1989, assuming reinvestment of dividends, through December 31, 1999. The Lehman Aggregate Bond Index, an unmanaged index, is composed of the Lehman Intermediate Government/Corporate Bond Index and the Mortgage Backed Securities Index and includes treasury issues, agency issues, corporate bond issues and mortgage- backed securities. The Consumer Price Index is a measure of the average change in prices over time in a fixed market basket of goods and services. The First Boston High Yield Index Top Tier is a broad-based market measure of high yield bonds, commonly known as "junk bonds."
LEHMAN AGGREGATE FIRST BOSTON HIGH HIGH YIELD BOND TRUST BOND INDEX CONSUMER PRICE INDEX YIELD INDEX TOP TIER --------------------- ---------------- -------------------- -------------------- 12/89 10000 10000 10000 10000 12/90 9088 10896 10610 10093 12/91 11460 12640 10935 12402 12/92 12967 13574 11252 13485 12/93 14784 14898 11561 15591 12/94 14597 14463 11871 15562 12/95 16855 17135 12172 18469 12/96 19560 17757 12576 20449 12/97 22800 19470 12789 23031 12/98 24295 21162 12994 23098 12/99 25369 20989 13382 24125
- -------------------------------------------------------------------------------- PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Average annual total returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of dividends. The returns do not reflect expenses associated with the subaccount such as administrative fees, account charges and surrender charges which, if reflected, would reduce the performance shown. 5 - -------------------------------------------------------------------------------- PERFORMANCE COMPARISON -- CAPITAL APPRECIATION FUND AS OF 12/31/99 (UNAUDITED)
AVERAGE ANNUAL TOTAL RETURNS ---------------------------- Year Ended 12.31/99 53.52% Five Years Ended 12/31/99 40.48% Ten Years Ended 12/31/99 24.49% CUMULATIVE TOTAL RETURN --------------------------- 3/19/82* through 12/31/99 2,567.50% * Commencement of operations
This chart assumes an initial investment of $10,000 made on December 31, 1989, assuming reinvestment of dividends, through December 31, 1999. The Standard & Poor's 500 Index is an unmanaged index composed of 500 widely held common stocks listed on the New York Stock Exchange, American Stock Exchange and over-the-counter market. The Russell 2000 Index is a capitalization weighted total return index which is comprised of 2,000 of the smallest capitaled U.S. domiciled companies with less than average growth orientation whose common stock is traded in the United States of the New York Stock Exchange, American Stock Exchange and NASDAQ. The Consumer Price Index is a measure of the average change in prices over time in a fixed market basket of goods and services.
CAPITAL APPRECIATION STANDARD & POOR'S FUND 500 INDEX RUSSELL 2000 INDEX CONSUMER PRICE INDEX -------------------- ----------------- ------------------ -------------------- 12/89 10000 10000 10000 10000 12/90 9376 9690 8052 10610 12/91 12673 12636 11760 10935 12/92 14904 13598 13924 11252 12/93 17153 14964 16553 11561 12/94 16336 15161 6869 11871 12/95 22277 18485 8823 12172 12/96 28560 22727 10279 12576 12/97 36027 30329 12578 12789 12/98 58229 39045 12258 12994 12/99 89390 47258 14863 13382
- -------------------------------------------------------------------------------- PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Average annual total returns are historical in nature and measure net investment income and capital gains or losses from portfolio investments assuming reinvestments of dividends. The returns do not reflect expenses associated with the subaccount such as administrative fees, account charges and surrender charges which, if reflected, would reduce the performance shown. 6 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS DECEMBER 31, 1999 MANAGED ASSETS TRUST
SHARES SECURITY VALUE - ----------------------------------------------------------------------------------------------------- COMMON STOCK -- 63.4% - ----------------------------------------------------------------------------------------------------- CONSUMER CYCLICALS -- 6.4% 9,900 Bed Bath & Beyond Inc. (a).................................. $ 344,025 2,600 Black & Decker Corp. ....................................... 135,850 9,400 Circuit City Stores......................................... 423,587 7,384 Colgate-Palmolive Co. ...................................... 479,960 12,800 Comcast Corp., Class A Shares............................... 643,200 6,400 Costco Cos., Inc. (a)....................................... 584,000 12,727 CVS Corp. .................................................. 508,284 4,800 Eastman Kodak Co. .......................................... 318,000 11,200 Federated Department Stores Inc. (a)........................ 566,300 11,562 Gap Inc. ................................................... 531,875 11,846 Gillette Co. ............................................... 487,907 39,795 Home Depot Inc. ............................................ 2,728,444 10,600 Interpublic Group of Cos. Inc. ............................. 611,487 12,264 Kimberly-Clark Corp. ....................................... 800,226 14,568 Kroger Co. (a).............................................. 274,971 10,100 Lowe's Cos. Inc. ........................................... 603,475 6,121 Maytag Corp. ............................................... 293,808 21,922 McDonald's Corp. ........................................... 883,730 11,961 The New York Times Co., Class A Shares...................... 587,584 9,200 Nike Inc., Class B Shares................................... 455,975 17,542 Proctor & Gamble Co. ....................................... 1,921,945 8,700 Rohm & Haas Co. ............................................ 353,981 14,362 Safeway Inc. (a)............................................ 510,748 6,758 Times Mirror Co., Class A Shares............................ 452,786 14,865 TJX Cos., Inc. ............................................. 303,803 6,400 Tricon Global Restaurants (a)............................... 247,200 7,475 Unilever NV................................................. 406,920 74,160 Wal-Mart Corp. ............................................. 5,126,310 - ----------------------------------------------------------------------------------------------------- 21,586,381 - ----------------------------------------------------------------------------------------------------- CONSUMER STAPLES -- 2.4% 12,627 Anheuser-Busch Co., Inc. ................................... 894,938 9,408 Clorox Co. ................................................. 473,928 41,105 Coca-Cola Co. .............................................. 2,394,366 13,500 General Mills Inc. ......................................... 482,625 9,269 H.J. Heinz Co. ............................................. 369,022 11,260 Kellogg Co. ................................................ 346,948 2,815 Loews Corp. ................................................ 170,835 24,280 PepsiCo Inc. ............................................... 855,870 45,515 Philip Morris Co. .......................................... 1,055,379 21,926 Sara Lee Corp. ............................................. 483,742 13,800 Seagram Co. Ltd. ........................................... 620,137 - ----------------------------------------------------------------------------------------------------- 8,147,790 - ----------------------------------------------------------------------------------------------------- ENTERTAINMENT/MEDIA -- 2.3% 5,300 AMFM Inc. (a)............................................... 414,725 9,700 Carnival Corp. ............................................. 463,781
SEE NOTES TO FINANCIAL STATEMENTS. 7 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1999 MANAGED ASSETS TRUST
SHARES SECURITY VALUE - ----------------------------------------------------------------------------------------------------- ENTERTAINMENT/MEDIA -- 2.3% (CONTINUED) 13,348 CBS Corp. (a)............................................... $ 853,437 5,642 Clear Channel Communications, Inc. (a)...................... 503,548 8,611 Gannett Co. ................................................ 702,334 12,577 MediaOne Group, Inc. (a).................................... 966,070 8,354 Meredith Corp. ............................................. 348,257 24,322 Time Warner, Inc. .......................................... 1,761,824 7,870 Viacom Inc. Non-Voting, Class B Shares (a).................. 475,643 48,995 The Walt Disney Co. ........................................ 1,433,103 - ----------------------------------------------------------------------------------------------------- 7,922,722 - ----------------------------------------------------------------------------------------------------- FINANCIAL SERVICES -- 8.5% 6,481 Ambac Financial Group Inc. ................................. 338,227 11,683 American Express Co. ....................................... 1,942,298 4,400 American General Corp. ..................................... 333,850 29,030 American International Group Inc. .......................... 3,138,868 27,500 Amsouth Bancorporation...................................... 531,093 25,876 Bank of America Corp. ...................................... 1,298,651 19,400 The Bank of New York Co., Inc. ............................. 776,000 24,821 Bank One Corp. ............................................. 795,823 9,508 Capital One Financial Co. .................................. 458,166 31,100 Cendant Corp. (a)........................................... 826,093 14,900 Charles Schwab Corp. ....................................... 571,787 19,668 Chase Manhattan Corp. ...................................... 1,527,957 5,197 Comerica Inc. .............................................. 242,634 8,434 Countrywide Credit Industries, Inc. ........................ 212,958 21,252 Fannie Mae.................................................. 1,326,921 5,100 Fifth Third Bancorp......................................... 374,212 24,192 First Union Corp. of North Carolina......................... 793,800 21,900 Firstar Corp. .............................................. 462,637 23,423 Fleet Financial Group, Inc. ................................ 815,418 16,850 Freddie Mac................................................. 793,003 6,604 Hartford Financial Services Group Inc. ..................... 312,864 16,700 Household International Inc. ............................... 622,075 2,813 J.P. Morgan & Co. .......................................... 356,196 10,881 Lehman Brothers Holdings, Inc. ............................. 921,484 8,200 MBIA Inc. .................................................. 433,062 28,000 MBNA Corp. ................................................. 763,000 15,075 Merrill Lynch & Co., Inc. .................................. 1,258,762 16,941 Morgan Stanley Dean Witter & Co. ........................... 2,418,327 15,500 National City Corp. ........................................ 367,156 7,700 Providian Financial Corp. .................................. 701,181 12,000 Southtrust Corp. ........................................... 453,750 5,748 State Street Corp. ......................................... 419,963 8,938 Summit Bancorp.............................................. 273,726 7,611 SunTrust Banks, Inc. ....................................... 523,731 14,646 Washington Mutual, Inc. .................................... 380,796 29,100 Wells Fargo & Co. .......................................... 1,176,731 - ----------------------------------------------------------------------------------------------------- 28,943,200 - -----------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 8 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1999 MANAGED ASSETS TRUST
SHARES SECURITY VALUE - ----------------------------------------------------------------------------------------------------- HEALTH CARE -- 5.6% 18,846 Abbott Laboratories......................................... $ 684,345 5,600 Aetna, Inc. ................................................ 312,550 12,800 Allergan, Inc. ............................................. 636,800 16,213 American Home Products Corp. ............................... 639,400 25,140 Amgen, Inc. (a)............................................. 1,509,971 12,300 Baxter International, Inc. ................................. 772,593 29,196 Bristol Myers Squibb Co. ................................... 1,874,018 6,400 Cardinal Health, Inc. ...................................... 306,400 21,700 Columbia HCA Healthcare Corp. .............................. 636,081 21 Crescendo Pharmaceutical Corp. (a).......................... 383 14,104 Eli Lilly & Co. ............................................ 937,916 27,711 Johnson & Johnson........................................... 2,580,586 20,366 Medtronic Inc. ............................................. 742,086 40,538 Merck & Co. ................................................ 2,718,579 14,759 PerkinElmer, Inc. .......................................... 615,265 54,097 Pfizer Inc. ................................................ 1,754,771 4,421 Pharmacia & Upjohn Inc. .................................... 198,945 16,468 Schering-Plough Corp. ...................................... 694,743 13,407 Warner Lambert Co. ......................................... 1,098,536 2,800 Wellpoint Health Networks Inc. (a).......................... 184,625 - ----------------------------------------------------------------------------------------------------- 18,898,593 - ----------------------------------------------------------------------------------------------------- INSURANCE -- 0.4% 25,754 The Allstate Corp. ......................................... 618,096 6,409 Everest Reinsurance Holdings, Inc. ......................... 143,000 7,500 Jefferson-Pilot Corp. ...................................... 511,875 7,579 20th Century Industries..................................... 146,369 - ----------------------------------------------------------------------------------------------------- 1,419,340 - ----------------------------------------------------------------------------------------------------- MATERIALS & PROCESSING -- 2.4% 9,370 Alcoa, Inc. ................................................ 777,710 14,500 Barrick Gold Corp. ......................................... 256,468 8,200 Briggs & Stratton Corp. .................................... 439,725 5,400 Corning Inc. ............................................... 696,262 12,727 Dayton-Hudson Corp. ........................................ 934,639 19,322 E.I. Du Pont de Nemours & Co. .............................. 1,272,836 9,884 Georgia-Pacific Corp. ...................................... 501,613 9,802 International Paper Co. .................................... 553,200 31,200 Lockheed Martin Corp. ...................................... 682,500 14,865 Masco Corp. ................................................ 377,199 6,106 Mead Corp. ................................................. 265,229 15,508 Monsanto Co. ............................................... 552,472 3,200 Nucor Corp. ................................................ 175,400 14,800 Pall Corp. ................................................. 319,125 7,663 Raytheon Co., Class B Shares................................ 203,548 2,235 Weyerhauser Co. ............................................ 160,500 - ----------------------------------------------------------------------------------------------------- 8,168,426 - -----------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 9 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1999 MANAGED ASSETS TRUST
SHARES SECURITY VALUE - ----------------------------------------------------------------------------------------------------- OIL/ENERGY -- 3.9% 7,800 Apache Corp. ............................................... $ 288,112 7,190 Atlantic Richfield Co. ..................................... 621,935 6,400 Baker Hughes Inc. .......................................... 134,800 1 BP Amoco PLC ADR............................................ 7 11,284 Chevron Corp. .............................................. 977,476 11,762 Conoco Inc., Class B Shares................................. 292,579 5,344 El Paso Energy Corp. ....................................... 207,414 15,588 Enron Corp. ................................................ 691,717 59,846 Exxon Corp. ................................................ 4,821,394 7,510 Halliburton Co. ............................................ 302,277 9,900 Kerr-McGee Corp. ........................................... 613,800 14,800 Peco Energy Inc. ........................................... 514,300 35,134 Royal Dutch Petroleum Co. ADR............................... 2,123,411 9,038 Schlumberger Ltd. .......................................... 508,387 9,400 Texaco Inc. ................................................ 510,537 5,300 Tosco Corp. ................................................ 144,093 1,749 Transocean Sedco Forex Inc. ................................ 58,944 9,754 Williams Cos., Inc. ........................................ 298,106 - ----------------------------------------------------------------------------------------------------- 13,109,289 - ----------------------------------------------------------------------------------------------------- PRODUCER DURABLES -- 4.2% 22,743 Boeing Co. ................................................. 945,255 4,567 Caterpillar Inc. ........................................... 214,934 5,019 Dow Chemical Co. ........................................... 670,663 4,954 Emerson Electric Co. ....................................... 284,235 6,125 General Dynamics Corp. ..................................... 323,093 56,734 General Electric Co. ....................................... 8,779,586 19,236 Honeywell Inc. ............................................. 1,109,691 8,159 Ingersoll-Rand Co. ......................................... 449,254 9,900 Lear Corp. (a).............................................. 316,800 4,300 Minnesota Mining & Manufacturing Co. ....................... 420,862 5,000 Phelps Dodge Corp. ......................................... 335,625 22,700 W.R. Grace & Co. (a)........................................ 314,962 - ----------------------------------------------------------------------------------------------------- 14,164,960 - ----------------------------------------------------------------------------------------------------- TECHNOLOGY -- 20.1% 43,236 America Online Inc. (a)..................................... 3,261,615 6,400 Analog Devices Inc. (a)..................................... 595,200 10,063 Applied Materials Inc. (a).................................. 1,274,856 8,200 Automatic Data Processing, Inc. ............................ 441,775 10,500 BMC Software, Inc. (a)...................................... 839,343 55,964 Cisco Systems Inc. (a)...................................... 5,995,143 27,682 Compaq Computer Corp. ...................................... 749,144 9,000 Computer Associates International, Inc. .................... 629,437 17,834 Compuware Corp. ............................................ 664,316 38,884 Dell Computer Corp. (a)..................................... 1,983,084 11,800 Electronic Data Systems Corp. .............................. 789,862 14,758 EMC Corp. (a)............................................... 1,612,311
SEE NOTES TO FINANCIAL STATEMENTS. 10 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1999 MANAGED ASSETS TRUST
SHARES SECURITY VALUE - ----------------------------------------------------------------------------------------------------- TECHNOLOGY -- 20.1% (CONTINUED) 4,084 Gateway Inc. (a)............................................ $ 294,303 13,600 Global Crossing Ltd. (a).................................... 680,000 18,200 Hewlett Packard Co. ........................................ 2,073,662 59,786 Intel Corp. ................................................ 4,921,135 31,388 International Business Machines Corp. ...................... 3,389,904 6,100 Lexmark International Group, Inc. (a)....................... 552,050 53,945 Lucent Technologies Inc. ................................... 4,035,760 90,934 Microsoft Corp. (a)......................................... 10,616,544 5,900 Micron Technology Inc. (a).................................. 458,725 11,890 Motorola, Inc. ............................................. 1,750,802 22,000 Nortel Networks Corp. ...................................... 2,222,000 29,215 Oracle Corp. (a)............................................ 3,273,905 14,800 QUALCOMM Inc. (a)........................................... 2,608,500 2,600 SafeGuard Scientifics, Inc. (a)............................. 421,362 8,900 Seagate Technology Inc. (a)................................. 414,406 5,100 Solectron Corp. ............................................ 485,137 32,800 Sun Microsystems Inc. (a)................................... 2,539,950 15,544 Sysco Corp. ................................................ 614,959 4,858 Tellabs Inc. (a)............................................ 311,822 9,700 Teradyne Inc. (a)........................................... 640,200 15,034 Texas Instruments Inc. ..................................... 1,456,418 10,300 3com Corp. (a).............................................. 484,100 49,346 Tyco International Ltd. .................................... 1,918,325 7,922 United Technologies Corp. .................................. 514,930 10,800 Xilinx Inc. (a)............................................. 491,062 4,755 Yahoo! Inc. (a)............................................. 2,057,429 - ----------------------------------------------------------------------------------------------------- 68,063,476 - ----------------------------------------------------------------------------------------------------- TRANSPORTATION -- 1.3% 2,274 AMR Corp. (a)............................................... 152,358 6,900 Delta Airlines Inc. ........................................ 343,706 10,100 FDX Corp. (a)............................................... 413,468 19,917 Ford Motor Co. ............................................. 1,064,314 15,342 General Motors Corp. ....................................... 1,115,171 9,823 Navistar International Corp. ............................... 465,364 9,500 TRW Inc. ................................................... 493,406 7,529 Union Pacific Corp. ........................................ 328,452 - ----------------------------------------------------------------------------------------------------- 4,376,239 - ----------------------------------------------------------------------------------------------------- UTILITIES -- 5.9% 7,700 AES Corp. (a)............................................... 575,575 7,869 Alltell Corp. .............................................. 650,667 55,245 AT&T Corp. ................................................. 2,803,683 20,314 Bell Atlantic Corp. ........................................ 1,250,580 19,318 BellSouth Corp. ............................................ 904,323 14,863 Central & South West Corp. ................................. 297,260 16,400 CenturyTel Inc. ............................................ 776,950 17,488 Edison International........................................ 457,967
SEE NOTES TO FINANCIAL STATEMENTS. 11 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1999 MANAGED ASSETS TRUST
SHARES SECURITY VALUE - ----------------------------------------------------------------------------------------------------- UTILITIES -- 5.9% (CONTINUED) 8,325 FPL Group Inc. ............................................. $ 356,414 11,273 GTE Corp. .................................................. 795,451 51,952 MCI WorldCom, Inc. (a)...................................... 2,756,729 13,000 Nextel Communications, Inc. (a)............................. 1,340,625 3,100 Praxair Inc. ............................................... 155,969 59,546 SBC Communications Inc. .................................... 2,902,870 7,773 Southern Co. ............................................... 182,665 21,106 Sprint Corp. ............................................... 1,420,697 14,076 Sprint Corp. (PCS Group) (a)................................ 1,442,862 10,881 Texas Utilities Co. ........................................ 386,955 9,223 U.S. West Communications Group.............................. 664,060 - ----------------------------------------------------------------------------------------------------- 20,122,302 - ----------------------------------------------------------------------------------------------------- TOTAL COMMON STOCK (Cost -- $145,209,909)................... 214,922,718 - ----------------------------------------------------------------------------------------------------- CONVERTIBLE PREFERRED STOCK -- 1.6% - ----------------------------------------------------------------------------------------------------- FINANCIAL -- 1.0% 6,000 AES Trust III, 6.750%....................................... 369,750 6,000 Calpine Capital Trust, 5.750%............................... 393,750 2,000 Canadian National Railway, 5.250%........................... 84,000 6,000 Equity Office Properties Trust, 5.250%...................... 237,000 8,000 Equity Residential Properties Trust, 2.150%................. 208,500 18,564 Equity Residential Properties Trust, 7.250%................. 363,158 2,000 Finova Finance Trust, 5.500%................................ 100,000 12,000 General Growth Properties, 7.250%........................... 240,000 8,000 National Australia Bank Ltd., 7.787%........................ 221,000 5,924 New Field Financial Trust, 6.500%........................... 276,947 3,220 New Plan Excel Realty Insurance, 8.500%..................... 68,425 6,000 Newell Financial Trust, 5.250%.............................. 228,750 9,000 Reckson Associates Realty Services, 7.625%.................. 178,875 5,000 Tosco Financial Trust, 5.750%............................... 238,125 2,245 Union Pacific Capital Trust, 6.250%......................... 93,448 - ----------------------------------------------------------------------------------------------------- 3,301,728 - ----------------------------------------------------------------------------------------------------- INDUSTRIAL -- 0.6% 4,000 Amcor Ltd., 7.250%.......................................... 172,000 10,000 CalEnergy Capital II, 6.250%................................ 415,000 5,977 El Paso Energy Capital, 4.750%.............................. 301,091 8,123 News Corp. Ltd., 5.000%..................................... 1,162,605 - ----------------------------------------------------------------------------------------------------- 2,050,696 - ----------------------------------------------------------------------------------------------------- TOTAL CONVERTIBLE PREFERRED STOCK (Cost -- $5,246,667)...... 5,352,424 - -----------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 12 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1999 MANAGED ASSETS TRUST
FACE AMOUNT RATING+ SECURITY VALUE - ------------------------------------------------------------------------------------------------------------------ CORPORATE BONDS -- 11.4% - ------------------------------------------------------------------------------------------------------------------ FINANCIAL -- 7.0% $ 5,000,000 Aa3* Bank One Corp., Notes, 5.625% due 2/17/04................... $ 4,693,750 5,000,000 A2* Caterpillar Financial Services Corp., 6.875% due 8/1/04..... 4,925,000 5,000,000 A1* Ford Motor Credit Co., 5.750% due 2/23/04................... 4,731,250 5,000,000 Baa2* Nationwide Health Properties, Inc., Notes, 6.900% due 10/31/37.................................................... 4,431,250 2,500,000 Baa1* Simon Debartolo, Company Guaranteed, 6.750% due 7/15/04..... 2,343,750 2,500,000 Baa2* Spieker Properties Inc., Notes, 8.000% due 7/19/05.......... 2,478,125 - ------------------------------------------------------------------------------------------------------------------ 23,603,125 - ------------------------------------------------------------------------------------------------------------------ INDUSTRIAL -- 2.1% 2,500,000 Baa* Prologics Trust, Sr. Notes, 7.050% due 7/15/06.............. 2,318,750 5,000,000 A Xerox Corp., Notes, 6.250% due 11/15/26..................... 4,837,500 - ------------------------------------------------------------------------------------------------------------------ 7,156,250 - ------------------------------------------------------------------------------------------------------------------ TELEPHONE -- 1.4% 5,000,000 AAA BellSouth Capital Funding, Debentures, 6.040% due 11/15/26.................................................... 4,956,250 - ------------------------------------------------------------------------------------------------------------------ TRANSPORTATION -- 0.9% 3,000,000 Baa2* CSX Corp., Debentures, 6.950% due 5/1/27.................... 2,992,500 - ------------------------------------------------------------------------------------------------------------------ TOTAL CORPORATE BONDS (Cost -- $40,120,813)................. 38,708,125 - ------------------------------------------------------------------------------------------------------------------ CONVERTIBLE CORPORATE BONDS -- 1.6% - ------------------------------------------------------------------------------------------------------------------ FINANCIAL -- 0.5% Bell Atlantic Corp., Bonds: 297,000 A+ 5.750% due 4/1/03........................................... 312,592 500,000 A1* 4.250% due 9/15/05.......................................... 615,025 400,000 BBB- Elan International Finance Ltd., Company Guaranteed, zero coupon due 12/14/18.................................... 212,000 300,000 BBB Hellenic Finance, 2.000% due 7/15/03........................ 300,750 300,000 Baa* Security Capital U.S. Realty, Bonds, 2.000% due 5/22/03..... 222,938 - ------------------------------------------------------------------------------------------------------------------ 1,663,305 - ------------------------------------------------------------------------------------------------------------------ INDUSTRIAL -- 0.9% 146,000 BBB- Athena Neurosciences Inc., Notes, 4.750% due 11/15/04....... 148,920 100,000 NR BEA Systems Inc., 4.000% due 12/15/06....................... 117,125 150,000 NR Clear Channel Communications, Inc., 1.500% due 12/1/02...... 154,125 201,000 A- Diamond Offshore Drilling Inc., Sub. Notes, 3.750% due 2/15/07..................................................... 204,015 300,000 Aa2* GVC Corp. Ltd., Bonds, zero coupon due 5/21/02 (b).......... 338,250 23,000 BBB- Inco Ltd., Debentures, 7.750% due 3/15/16................... 20,844 300,000 AA- Indian Petrochemicals Corp. Ltd., Bonds, 2.500% due 3/11/02 (b)......................................................... 312,000 300,000 BB+ Interim Services Inc., Sub. Notes, 4.500% due 6/1/05........ 265,500 121,000 NR Interpublic Group of Cos., Inc., Sub. Notes, 1.870% due 6/1/06...................................................... 137,486 570,000 A- Koninklijke Ahold, Sub. Notes, 3.000% due 9/30/03........... 293,737 431,000 BBB- Lennar Corp., Debenture, zero coupon due 7/29/18............ 170,784 150,000 Baa3* Liberty Media, 4.000% due 11/15/29.......................... 189,000 500,000 BBB Scholastic Corp., Sub. Notes, 5.000% due 8/15/05............ 495,000
SEE NOTES TO FINANCIAL STATEMENTS. 13 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1999 MANAGED ASSETS TRUST
FACE AMOUNT RATING+ SECURITY VALUE - ------------------------------------------------------------------------------------------------------------------ INDUSTRIAL -- 0.9% (CONTINUED) $ 100,000 A- Thermo Electron Corp., Sub. Debenture, 4.250% due 1/1/03.... $ 85,000 100,000 A- Thermo Instruments Inc., Company Guaranteed, 4.000% due 1/15/05..................................................... 79,125 - ------------------------------------------------------------------------------------------------------------------ 3,010,911 - ------------------------------------------------------------------------------------------------------------------ UTILITY - ELECTRIC -- 0.2% 600,000 A- Potomac Electric Power, 5.000% due 9/1/02................... 586,500 - ------------------------------------------------------------------------------------------------------------------ TOTAL CONVERTIBLE CORPORATE BONDS (Cost -- $5,123,785)...... 5,260,716 - ------------------------------------------------------------------------------------------------------------------ COLLATERALIZED MORTGAGE OBLIGATIONS -- 1.7% 5,000,000 PP&L, Inc., 7.050% due 6/25/09.............................. 4,995,125 787,543 Wilmington Trust 9.250% due 1/2/07.......................... 788,977 - ------------------------------------------------------------------------------------------------------------------ TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost -- $5,787,038)........................................ 5,784,102 - ------------------------------------------------------------------------------------------------------------------ U.S. GOVERNMENT OBLIGATIONS -- 16.2% 15,616,050 U.S. Treasury Notes, 3.625% due 1/15/08..................... 14,875,538 3,100,000 U.S. Treasury Bonds, 7.125% due 2/15/23..................... 3,227,317 25,000,000 U.S. Treasury Strips, 0.000% due 5/15/21.................... 5,941,000 53,000,000 U.S. Treasury Strips, 0.000% due 8/15/25.................... 9,993,150 6,239,280 U.S. Treasury Inflation Index Bonds, 3.625% due 4/15/28..... 5,581,785 16,369,600 U.S. Treasury Inflation Index Bonds, 3.875% due 4/15/29..... 15,293,790 - ------------------------------------------------------------------------------------------------------------------ TOTAL U.S. GOVERNMENT OBLIGATIONS (Cost -- $56,901,114)..... 54,912,580 - ------------------------------------------------------------------------------------------------------------------ U.S. GOVERNMENT AGENCIES -- 3.4% Federal Home Loan Mortgage Corp.: 85,489 8.500% due 9/1/02........................................... 87,386 1,809,601 8.000% due 9/1/04........................................... 1,846,915 Federal National Mortgage Association: 79,066 15 Year Convertible, 8.500% due 3/1/05...................... 81,587 918,111 6.500% due 12/1/27.......................................... 865,605 1,011,313 6.000% due 3/1/28........................................... 925,980 160,218 6.000% due 4/1/28........................................... 146,699 130,393 5.500% due 5/1/28........................................... 115,399 476,904 6.000% due 5/1/28........................................... 436,663 900,584 5.500% due 6/1/28........................................... 797,017 420,841 6.000% due 6/1/28........................................... 385,332 445,735 6.000% due 7/1/28........................................... 408,125 1,093,204 5.500% due 8/1/28........................................... 967,486 1,169,303 6.000% due 8/1/28........................................... 1,070,639 2,925,876 Dwarf, 6.000% due 1/1/13.................................... 2,778,646 Government National Mortgage Association: 129,743 9.000% due 12/15/16......................................... 135,865 78,302 9.500% due 1/15/20.......................................... 83,441 100,043 9.500% due 3/15/20.......................................... 106,608 167,905 7.500% due 5/15/23.......................................... 166,121 - ------------------------------------------------------------------------------------------------------------------ TOTAL U.S. GOVERNMENT AGENCIES (Cost -- $11,964,839)........ 11,405,514 - ------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 14 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1999 MANAGED ASSETS TRUST
FACE AMOUNT SECURITY VALUE - ------------------------------------------------------------------------------------------------------------------ SHORT TERM U.S. GOVERNMENT INSTRUMENTS -- 0.3% $ 1,150,000 U.S. Treasury Bills, 5.200% due 1/3/00 (Cost -- $1,137,541)........................................ $ 1,137,541 - ------------------------------------------------------------------------------------------------------------------ SUB-TOTAL INVESTMENTS (Cost -- $271,491,706)................ 337,483,720 - ------------------------------------------------------------------------------------------------------------------ REPURCHASE AGREEMENT -- 0.4% 1,275,000 Morgan Stanley Dean Witter & Co., 2.470% due 1/3/00; Proceeds at maturity -- $1,275,262; (Fully collateralized by U.S. Treasury Notes, 11.750% due 11/15/14; Market value -- $1,300,710) (Cost -- $1,275,000)................... 1,275,000 - ------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS -- 100%(Cost -- $272,766,706**)........... $338,758,720 - ------------------------------------------------------------------------------------------------------------------
(a) Non-income producing security. (b) Security is exempt from registration under rule 144A of the Securities Act of 1933. This security may be sold in transactions that are exempt from registration, normally to qualified institutional buyers. + All ratings are by Standard & Poor's Ratings Service, except those identified by an asterisk (*) which are rated by Moody's Investors Service Inc. ** Aggregate cost for Federal income tax purposes is substantially the same. See page 21 for definition of bond ratings. SEE NOTES TO FINANCIAL STATEMENTS. 15 - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS (CONTINUED) DECEMBER 31, 1999 HIGH YIELD BOND TRUST
FACE AMOUNT RATING+ SECURITY VALUE - --------------------------------------------------------------------------------------------------- CORPORATE BONDS AND NOTES -- 75.4% - --------------------------------------------------------------------------------------------------- AEROSPACE/DEFENSE -- 0.7% BE Aerospace Inc., Sr. Sub. Notes: $ 125,000 B 8.000% due 3/1/08........................................... $ 108,438 100,000 B 9.500% due 11/1/08.......................................... 94,000 - --------------------------------------------------------------------------------------------------- 202,438 - --------------------------------------------------------------------------------------------------- CHEMICALS -- 0.9% 150,000 B+ Borden Chemical and Plastics Ltd., 9.500% due 5/1/05........ 139,500 125,000 B+ Lyondell Chemical Co., Sr. Sub. Notes, 10.875% due 5/1/09... 130,000 - --------------------------------------------------------------------------------------------------- 269,500 - --------------------------------------------------------------------------------------------------- ELECTRONICS -- 0.5% 150,000 B+ Flextronics International Ltd., Sr. Sub. Notes, 8.750% due 10/15/07.................................................. 147,000 - --------------------------------------------------------------------------------------------------- ENERGY -- 2.3% 250,000 BB Pride International Inc., Sr. Notes, 10.000% due 6/1/09..... 255,625 175,000 BBB- PSEG Energy Holdings Inc., Sr. Notes, 10.000% due 10/1/09 (a)....................................................... 178,500 250,000 BB+ Tuscon Electric Power Co., Collateral Trust, 7.500% due 8/1/08.................................................... 235,625 - --------------------------------------------------------------------------------------------------- 669,750 - --------------------------------------------------------------------------------------------------- FIBER OPTICS -- 1.5% 300,000 B+ Metromedia Fiber Network, Inc., Sr. Notes, 10.000% due 12/15/09.................................................. 309,000 125,000 BB- Williams Communications Group, Inc., Sr. Notes, 10.875% due 10/1/09................................................... 131,250 - --------------------------------------------------------------------------------------------------- 440,250 - --------------------------------------------------------------------------------------------------- FOOD AND DRUG -- 2.5% 375,000 B Archibald Candy Corp., Company Guaranteed, 10.250% due 7/1/04.................................................... 364,688 385,000 B- Duane Reade Inc., Company Guaranteed, 9.250% due 2/15/08.... 377,300 - --------------------------------------------------------------------------------------------------- 741,988 - --------------------------------------------------------------------------------------------------- FORESTRY -- 0.8% 250,000 B+ Millar Western Forest Products, Sr. Notes, 9.875% due 5/15/08................................................... 250,000 - --------------------------------------------------------------------------------------------------- GAMING/LEISURE -- 6.0% Bally Total Fitness Holding Corp., Sr. Sub. Notes: 330,000 B- Series B, 9.875% due 10/15/07............................... 320,925 170,000 B- Series D, 9.875% due 10/15/07............................... 165,325 250,000 BB+ Harrah's Operating Co. Inc., Company Guaranteed, 7.875% due 12/15/05.................................................. 241,250 225,000 B Isle of Capri Casinos, Inc., Company Guaranteed, 8.750% due 4/15/09................................................... 208,125 330,000 BB+ Park Place Entertainment Corp., Sr. Sub. Notes, 7.875% due 12/15/05.................................................. 316,800 175,000 B+ Prime Hospitality Corp., Sr. Sub. Notes, 9.750% due 4/1/07.................................................... 170,625 360,000 B+ Station Casinos, Inc., Sr. Sub. Notes, 10.125% due 3/15/06................................................... 369,000 - --------------------------------------------------------------------------------------------------- 1,792,050 - --------------------------------------------------------------------------------------------------- HEALTH CARE -- 0.4% 125,000 B- Unilab Corp., Sr. Sub. Notes, 12.750% due 10/1/09 (a)....... 130,625 - ---------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 16 - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS (CONTINUED) DECEMBER 31, 1999 HIGH YIELD BOND TRUST
FACE AMOUNT RATING+ SECURITY VALUE - --------------------------------------------------------------------------------------------------- HOUSING -- 3.0% $ 175,000 B Atrium Companies Inc., Company Guaranteed, 10.500% due 5/1/09.................................................... $ 171,500 400,000 B+ Beazer Homes USA Inc., Company Guaranteed, 8.875% due 4/1/08.................................................... 376,000 475,000 B- Falcon Building Corp., Company Guaranteed, step bond to yield 10.500% due 6/15/07....................................... 356,250 - --------------------------------------------------------------------------------------------------- 903,750 - --------------------------------------------------------------------------------------------------- INDUSTRIAL -- 0.4% 125,000 B- International Utility Structures Inc., Sr. Sub. Notes, 10.750% due 2/1/08........................................ 104,375 - --------------------------------------------------------------------------------------------------- INFORMATION/TECHNOLOGY -- 2.2% 275,000 B- Anteon Corp., 12.000% due 5/15/09........................... 259,187 160,000 BB+ Unisys Corp., Sr. Notes, 12.000% due 4/15/03................ 171,200 125,000 B- Verio Inc., Sr. Notes, 10.625% due 11/15/09 (a)............. 128,438 175,000 B- Viasystems Group Inc., Sr. Sub. Notes, 9.750% due 6/1/07.... 96,250 - --------------------------------------------------------------------------------------------------- 655,075 - --------------------------------------------------------------------------------------------------- MANUFACTURING -- 6.4% 390,000 B Advanced Glass Fiber Yarn, Sr. Sub. Notes, 9.875% due 1/15/09................................................... 366,600 175,000 B American Axle & Manufacturing Holdings, Inc., 9.750% due 3/1/09.................................................... 176,750 350,000 B BGF Industries, Inc., Sr. Sub. Notes, 10.250% due 1/15/09... 313,250 425,000 NR Cherokee International, Sr. Sub. Notes, 10.500% due 5/1/09.................................................... 374,000 125,000 B- Fisher Scientific International Inc., Sr. Sub. Notes, 9.000% due 2/1/08................................................ 120,313 325,000 B- Roller Bearing Co., Company Guaranteed, 9.625% due 6/15/07................................................... 299,000 300,000 B- Transdigm Inc., Company Guaranteed, 10.375% due 12/1/08..... 267,000 - --------------------------------------------------------------------------------------------------- 1,916,913 - --------------------------------------------------------------------------------------------------- MEDIA/ENTERTAINMENT -- 11.0% 50,900 NR AMFM Inc., Debentures, 12.625% due 10/31/06................. 58,535 Chancellor Media Corp., Sr. Sub. Notes: 400,000 B 9.000% due 10/1/08.......................................... 417,000 150,000 B+ 8.000% due 11/1/08.......................................... 150,750 250,000 BB- Imax Corp., Sr. Notes, 7.875% due 12/1/05................... 235,000 175,000 CCC+ Paxson Communications Corp., Sr. Sub. Notes, 11.625% due 10/1/02................................................... 182,656 100,000 CCC+ Pegasus Communications Corp., Sr. Notes, 9.625% due 10/15/05.................................................. 101,500 500,000 CCC+ Pegasus Media & Communications, Sr. Sub. Notes, 12.500% due 7/1/05.................................................... 537,500 385,000 B- Phoenix Color Corp., Company Guaranteed, 10.375% due 2/1/09.................................................... 371,525 350,000 B- Production Resource Group, Sr. Sub. Notes, 11.500% due 1/15/08................................................... 312,375 175,000 B- SFX Entertainment Inc., Company Guaranteed, 9.125% due 2/1/08.................................................... 165,813 325,000 B- T/SF Communications Corp., Company Guaranteed, 10.375% due 11/1/07................................................... 313,625 650,000 B- United International Holdings Inc., step bond to yield 10.750% due 2/15/08....................................... 416,000 - --------------------------------------------------------------------------------------------------- 3,262,279 - --------------------------------------------------------------------------------------------------- METALS/MINERALS -- 2.4% 500,000 B- Diamond Holdings PLC, Company Guaranteed, 9.125% due 2/1/08.................................................... 497,500 225,000 B+ National Steel Corp., First Mortgage, 9.875% due 3/1/09..... 231,188 - --------------------------------------------------------------------------------------------------- 728,688 - ---------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 17 - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS (CONTINUED) DECEMBER 31, 1999 HIGH YIELD BOND TRUST
FACE AMOUNT RATING+ SECURITY VALUE - --------------------------------------------------------------------------------------------------- RETAIL -- 6.1% $ 475,000 B- Advance Stores Co. Inc., Company Guaranteed, 10.250% due 4/15/08................................................... $ 413,250 450,000 B+ Ames Department Stores, Inc., Sr. Notes, 10.000% due 4/15/06................................................... 445,500 525,000 CCC+ J. Crew Operating Corp., Sr. Sub. Notes, 10.375% due 10/15/07.................................................. 448,875 500,000 BB+ Kmart Corp., Medium Term Notes, 7.900% due 12/14/00......... 500,625 - --------------------------------------------------------------------------------------------------- 1,808,250 - --------------------------------------------------------------------------------------------------- SERVICES -- 3.8% 250,000 B- Advance Holding Corp., Debentures, step bond to yield 12.875% due 4/15/09....................................... 130,000 530,000 B AFC Enterprises, Sr. Sub. Notes, 10.250% due 5/15/07........ 535,300 236,896 B FRD Acquisition, Sr. Notes, 12.500% due 7/15/04............. 120,817 350,000 B- Williams Scotsman Inc., Company Guaranteed, 9.875% due 6/1/07.................................................... 339,500 - --------------------------------------------------------------------------------------------------- 1,125,617 - --------------------------------------------------------------------------------------------------- TELECOMMUNICATIONS -- 15.1% 375,000 B+ Bresnan Communications, Sr. Discount Notes, step bond to yield 9.250% due 2/1/09......................................... 260,625 100,000 B CapRock Communications Corp., Sr. Notes, 11.500% due 5/1/09.................................................... 103,000 225,000 B- Centennial Cellular Corp., Sr. Sub. Notes, 10.750% due 12/15/08.................................................. 242,437 950,000 B+ Charter Communications Holdings, Inc., Sr. Discount Notes, step bond to yield 9.920% due 4/1/11...................... 560,500 105,000 B- Classic Cable Inc., Company Guaranteed, 9.375% due 8/1/09... 103,950 250,000 B- Classic Communications, Inc., Sr. Discount Notes, step bond to yield 13.250% due 8/1/09............................... 173,750 150,000 B- Exodus Communications, Inc., Sr. Notes, 10.750% due 12/15/09 (a)....................................................... 152,625 Intermedia Communications Inc.: 225,000 CCC+ Sr. Discount Notes, step bond to yield, 12.250% due 3/1/09.................................................... 136,125 150,000 B Sr. Notes, 9.500% due 3/1/09................................ 145,125 275,000 B Level 3 Communications, Inc., Sr. Notes, 9.125% due 5/1/08.................................................... 259,875 275,000 B+ McLeodUSA Inc., Sr. Notes, 8.125% due 2/15/09............... 257,125 450,000 B- NTL Inc., step bond to yield 9.750% due 4/1/08.............. 313,875 Primus Telecom Group, Inc., Sr. Notes: 175,000 B- 11.250% due 1/15/09....................................... 169,312 175,000 B- 12.750% due 10/15/09 (a).................................. 181,562 250,000 B- PSINet Inc., Sr. Notes, 10.500% due 12/1/06 (a)............. 253,750 300,000 BB+ Qwest Communication Corp., step bond to yield 8.290% due 2/1/08.................................................... 229,500 Telewest Communications PLC: 425,000 B+ Step bond to yield 11.000% due 10/1/07.................... 397,375 225,000 B+ Step bond to yield 9.250% due 4/15/09 (a)................. 143,156 125,000 B- Turkcell Iletisim, Sr. Notes, 12.750% due 8/1/05 (a)........ 129,375 275,000 B- Viatel Inc., Sr. Notes, 11.500% due 3/15/09................. 275,687 - --------------------------------------------------------------------------------------------------- 4,488,729 - ---------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 18 - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS (CONTINUED) DECEMBER 31, 1999 HIGH YIELD BOND TRUST
FACE AMOUNT RATING+ SECURITY VALUE - --------------------------------------------------------------------------------------------------- TEXTILES -- 6.1% $ 550,000 B+ Avondale Mills Inc., Company Guaranteed, 10.250% due 5/1/06.................................................... $ 495,000 125,000 B+ Delta Mills Inc., Company Guaranteed, 9.625% due 9/1/07..... 87,500 225,000 B Norton, Company Guaranteed, 12.500% due 6/1/05.............. 192,375 300,000 B- Panolam Industries International, Sr. Sub. Notes, 11.500% due 2/15/09 (a)........................................... 308,250 275,000 B- Supreme International Corp., Company Guaranteed, 12.250% due 4/1/06.................................................... 275,688 475,000 B- Tropical Sportswear International Corp., Company Guaranteed, 11.000% due 6/15/08....................................... 457,187 - --------------------------------------------------------------------------------------------------- 1,816,000 - --------------------------------------------------------------------------------------------------- TRANSPORTATION -- 3.3% 325,000 B- Atlas Air Inc., Sr. Notes, 10.750% due 8/1/05............... 333,125 225,000 BB- Continental Airlines Inc., Sr. Notes, 9.500% due 12/15/01... 228,375 400,000 B- Pacer International Inc., Company Guaranteed, 11.750% due 6/1/07.................................................... 410,000 - --------------------------------------------------------------------------------------------------- 971,500 - --------------------------------------------------------------------------------------------------- TOTAL CORPORATE BONDS AND NOTES (Cost -- $23,260,430)....... 22,424,777 - --------------------------------------------------------------------------------------------------- SHARES SECURITY VALUE - --------------------------------------------------------------------------------------------------- PREFERRED STOCK -- 3.5% - --------------------------------------------------------------------------------------------------- ENERGY -- 0.8% 2,148 R&B Falcon Corp., 13.875%................................... 226,649 - --------------------------------------------------------------------------------------------------- INDUSTRIAL -- 0.7% 4,500 Eagle-Picher Industries, 11.750% Exchangeable 3/1/08........ 207,000 - --------------------------------------------------------------------------------------------------- MEDIA/ENTERTAINMENT -- 0.0% 1 Paxson Communications Corp., Preferred, 12.500% Exchangeable 10/31/06.................................................. 109 - --------------------------------------------------------------------------------------------------- TECHNOLOGY -- 0.2% 9,242 Viasystems Group, Inc., 8.000%.............................. 69,318 - --------------------------------------------------------------------------------------------------- TELECOMMUNICATIONS -- 1.8% 5,500 Global Crossing Holding Ltd., 10.500% (a)................... 552,062 - --------------------------------------------------------------------------------------------------- TOTAL PREFERRED STOCK (Cost -- $1,114,943).................. 1,055,138 - --------------------------------------------------------------------------------------------------- COMMON STOCK -- 0.2% - --------------------------------------------------------------------------------------------------- HOTELS -- 0.1% 2,250 Prime Hospitality Corp. .................................... 19,828 - --------------------------------------------------------------------------------------------------- MEDIA/ENTERTAINMENT -- 0.1% 750 Classic Communications, Inc................................. 27,422 - --------------------------------------------------------------------------------------------------- TOTAL COMMON STOCK (Cost -- $19,140)........................ 47,250 - --------------------------------------------------------------------------------------------------- WARRANTS(b) -- 0.2% 2,000 R&B Falcon Corp., Expires 5/1/09 (a) (Cost -- $18,868)...... 50,000 - --------------------------------------------------------------------------------------------------- SUB-TOTAL INVESTMENTS (Cost -- $24,413,381)................. 23,577,165 - ---------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 19 - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS (CONTINUED) DECEMBER 31, 1999 HIGH YIELD BOND TRUST
FACE AMOUNT SECURITY VALUE - -------------------------------------------------------------------------------------------------- REPURCHASE AGREEMENT -- 20.7% $6,167,000 CS First Boston Corp., 2.650% due 1/3/00; Proceeds at maturity -- $6,168,362; (Fully collateralized by U.S. Treasury Bills, zero coupon due 6/1/00; Market value -- $6,290,546) (Cost -- $6,167,000)............ $ 6,167,000 - -------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100% (Cost -- $30,580,381**)........... $29,744,165 - --------------------------------------------------------------------------------------------------
+ All ratings are by Standard & Poor's Ratings Service, except those identified by an asterisk (*) which are rated by Moody's Investors Service Inc. (a) Security is exempt from registration under rule 144A of the Securities Act of 1933. This security may be sold in transactions that are exempt from registration, normally to qualified institutional buyers. (b) Non-income producing security. ** Aggregate cost for Federal income tax purposes is substantially the same. See page 21 for definition of bond ratings. SUMMARY OF BONDS BY COMBINED RATINGS
STANDARD & % OF TOTAL CORPORATE MOODY'S AND/OR POOR'S BONDS & NOTES - ------------------------------------------------- Baa BBB 0.8% Ba BB 11.4 B B 79.6 Caa CCC 6.3 NR NR 1.9 - ------------------------------------------------- 100.0% - -------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 20 - -------------------------------------------------------------------------------- BOND RATINGS (UNAUDITED) The definitions of the applicable rating symbols are set forth below: Standard & Poor's Ratings Service ("Standard & Poor's") -- Ratings from "AA" to "C" may be modified by the addition of a plus (+) or a minus (-) sign to show relative standings within the major rating categories. AAA -- Bonds rated "AAA" has the highest rating assigned by Standard & Poor's. Capacity to pay interest and repay principal is extremely strong. AA -- Bonds rated "AA" has a very strong capacity to pay interest and repay principal and differs from the highest rated issue only in a small degree. A -- Bonds rated "A" has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. BBB -- Bonds rated "BBB" are regarded as having an adequate capacity to pay interest and repay principal. Whereas they normally exhibit adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for bonds in this category than for bonds in higher rated categories. BB, B -- Bonds rated "BB" and "B" are regarded, on balance, as and CCC predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. "BB" represents a lower degree of speculation than "B", and "CCC" the highest degree of speculation. While such bonds will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions. C -- The rating "C" is reserved for income bonds on which no interest is being paid. D -- Bonds rated "D" are in default, and payment of interest and/or repayment of principal is in arrears.
Moody's Investors Service Inc. ("Moody's") -- Numerical modifiers 1, 2, and 3 may be applied to each generic rating from "Aa" to "C", where 1 is the highest and 3 the lowest rating within its generic category. Aaa -- Bonds rated "Aaa" are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa -- Bonds rated "Aa" are judged to be of high quality by all standards. Together with the "Aaa" group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in "Aaa" securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in "Aaa" securities. A -- Bonds rated "A" possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment some time in the future. Baa -- Bonds rated "Baa" are considered to be medium grade obligations; that is, they are neither highly protected nor poorly secured. Interest payment and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. These bonds lack outstanding investment characteristics and may have speculative characteristics as well. Ba -- Bonds rated "Ba" are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B -- Bonds rated "B" generally lack characteristics of desirable investments. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa -- Bonds rated "Caa" are of poor standing. These issues may be in default, or present elements of danger may exist with respect to principal or interest. Ca -- Bonds rated "Ca" represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings. C -- Bonds rated "C" are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. NR -- Indicates that the bond is not rated by Standard & Poor's or Moody's.
21 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1999 CAPITAL APPRECIATION FUND
SHARES SECURITY VALUE - ------------------------------------------------------------------------------------------- COMMON STOCK -- 87.9% - ------------------------------------------------------------------------------------------- BEVERAGE -- 1.3% 413,920 Coca-Cola Co. .............................................. $ 24,110,840 - ------------------------------------------------------------------------------------------- COMPUTERS -- 17.0% 707,095 Apple Computer Inc. (a)..................................... 72,698,205 1,358,010 Dell Computer Corp. (a)..................................... 69,258,510 1,285,140 VERITAS Software Corp. (a).................................. 183,935,663 - ------------------------------------------------------------------------------------------- 325,892,378 - ------------------------------------------------------------------------------------------- COMMUNICATIONS -- 1.6% 300,000 Nextel Communications Inc., Class A Shares (a).............. 30,937,500 - ------------------------------------------------------------------------------------------- DIVERSIFIED OPERATIONS -- 7.6% 438,250 General Electric Co. ....................................... 67,819,187 1,080,580 Time Warner Inc. ........................................... 78,274,514 - ------------------------------------------------------------------------------------------- 146,093,701 - ------------------------------------------------------------------------------------------- DRUGS AND HEALTH CARE -- 3.6% 238,700 MedImmune, Inc. (a)......................................... 39,594,363 897,475 Pfizer Inc. ................................................ 29,111,845 - ------------------------------------------------------------------------------------------- 68,706,208 - ------------------------------------------------------------------------------------------- ELECTRONICS -- 6.8% 281,295 EMC Corp. (a)............................................... 30,731,479 1,018,260 Texas Instruments Inc. ..................................... 98,643,937 - ------------------------------------------------------------------------------------------- 129,375,416 - ------------------------------------------------------------------------------------------- ENTERTAINMENT -- 0.0% 84 Acclaim Entertainment, Inc. (a)............................. 170 - ------------------------------------------------------------------------------------------- FINANCIAL SERVICES -- 9.0% 1,447,840 The Charles Schwab Corp. ................................... 55,560,860 265,520 Fannie Mae.................................................. 16,578,405 700,000 Morgan Stanley Dean Witter & Co. ........................... 99,925,000 - ------------------------------------------------------------------------------------------- 172,064,265 - ------------------------------------------------------------------------------------------- INSURANCE -- 2.8% 504,866 American International Group................................ 54,588,663 - ------------------------------------------------------------------------------------------- RETAIL -- 4.9% 400,000 Amazon.com, Inc. (a)........................................ 30,450,000 181,880 Costco Wholesale Corp. (a).................................. 16,596,550 689,197 The Home Depot, Inc. ....................................... 47,253,104 - ------------------------------------------------------------------------------------------- 94,299,654 - -------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 22 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1999 CAPITAL APPRECIATION FUND
SHARES SECURITY VALUE - ------------------------------------------------------------------------------------------- SOFTWARE -- 18.2% 1,857,200 America Online, Inc. (a).................................... $ 140,102,525 1,016,490 Cisco Systems, Inc. (a)..................................... 108,891,491 312,870 Intuit Inc. (a)............................................. 18,752,646 691,600 Microsoft Corp. (a)......................................... 80,744,300 - ------------------------------------------------------------------------------------------- 348,490,962 - ------------------------------------------------------------------------------------------- TELECOMMUNICATIONS -- 15.1% 295,600 Level 3 Communications, Inc. (a)............................ 24,202,250 739,040 Nokia Corp. ADR............................................. 140,417,600 746,150 Sprint Corp. (PCS Group) (a)................................ 76,480,375 988,275 Vodafone Software Corp. .................................... 48,919,612 - ------------------------------------------------------------------------------------------- 290,019,837 - ------------------------------------------------------------------------------------------- TOTAL COMMON STOCK (Cost -- $779,627,099)................... 1,684,579,594 - ------------------------------------------------------------------------------------------- FOREIGN STOCK -- 0.6% UNITED KINGDOM -- 0.6% 2,251,260 Vodafone AirTouch PLC (Cost -- $10,306,623)................. 11,093,487 - ------------------------------------------------------------------------------------------- SUB-TOTAL INVESTMENTS (Cost -- $789,933,722)................ 1,695,673,081 - ------------------------------------------------------------------------------------------- FACE AMOUNT SECURITY VALUE - ------------------------------------------------------------------------------------------- REPURCHASE AGREEMENT -- 11.5% $220,003,000 Morgan Stanley Dean Witter & Co., 2.470% due 1/3/00; Proceeds at maturity -- $220,048,284; (Fully collateralized by U.S. Treasury Notes, 8.750% due 5/15/17; Market value -- $241,320,000) (Cost -- $220,003,000)............... 220,003,000 - ------------------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100% (Cost -- $1,009,936,722*)......... $1,915,676,081 - -------------------------------------------------------------------------------------------
(a) Non-income producing security. * Aggregate cost for Federal income tax purposes is substantially the same. SEE NOTES TO FINANCIAL STATEMENTS. 23 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1999 MONEY MARKET PORTFOLIO
FACE ANNUALIZED AMOUNT SECURITY YIELD VALUE - ------------------------------------------------------------------------------------------------------------------- COMMERCIAL PAPER -- 83.9% $4,500,000 Allied Signal Inc. mature 1/27/00 to 2/15/00................ 5.95% to 6.26% $ 4,477,336 4,700,000 American Home Products Corp. matures 1/24/00................ 5.27 4,684,235 4,000,000 AT&T Corp. matures 1/21/00.................................. 6.33 3,986,000 4,000,000 Bell Atlantic Financial Corp. matures 1/20/00............... 5.95 3,987,544 4,000,000 BHF Finance Corp. matures 1/06/00........................... 6.37 3,996,483 3,900,000 Caisse Des Depots matures 2/28/00........................... 6.01 3,862,740 3,900,000 Deere & Co. matures 1/13/00................................. 5.99 3,892,265 1,500,000 DE Funding Corp. matures 1/20/00............................ 6.00 1,495,290 3,500,000 Equitable Life Assurance Society matures 2/10/00............ 5.91 3,477,522 4,400,000 Ford Motor Credit Corp. matures 2/3/00...................... 5.61 4,377,494 3,525,000 General Dynamic Corp. matures 2/29/00....................... 6.10 3,490,511 4,400,000 General Electric Capital Corp. matures 3/21/00.............. 5.83 4,343,778 3,500,000 General Motors Acceptance Corp. matures 2/22/00............. 6.02 3,469,919 4,500,000 Goldman Sachs & Co. matures 1/31/00......................... 6.55 4,475,625 4,400,000 Harvard University matures 1/6/00........................... 5.36 4,396,731 4,500,000 Hewlett-Packard Co. matures 1/10/00......................... 6.37 4,492,856 4,000,000 Marsh & McLennan Co. Inc. matures 1/12/00................... 6.53 3,992,056 4,000,000 Merrill Lynch & Co. matures 1/31/00......................... 6.06 3,980,166 3,100,000 Morgan Stanley Dean Witter & Co. matures 2/24/00............ 6.04 3,072,519 3,500,000 Newell Co. matures 1/28/00.................................. 5.96 3,484,513 4,700,000 Paccar Financial Corp. matures 1/27/00...................... 5.17 4,682,519 3,000,000 Potomac Electric Power Co. matures 2/10/00.................. 5.88 2,980,833 4,000,000 Providian Master Trust matures 1/18/00...................... 6.64 3,987,533 4,000,000 Prudential Funding Corp. matures 2/15/00.................... 6.12 3,969,700 4,400,000 Textron Inc. mature 1/5/00 to 1/14/00....................... 5.94 to 5.96 4,391,948 3,500,000 Transamerica Finance Corp. matures 2/7/00................... 6.01 3,478,597 - ------------------------------------------------------------------------------------------------------------------- TOTAL COMMERCIAL PAPER (Cost -- $100,926,713)............... 100,926,713 - ------------------------------------------------------------------------------------------------------------------- REPURCHASE AGREEMENT -- 16.1% 19,350,000 Merrill Lynch & Co., 2.47% due 1/3/00; Proceeds at maturity -- $19,353,981; (Fully collateralized by U.S. Treasury Notes, 6.00% due 2/15/26; Market value -- $19,737,000) (Cost -- $19,350,000)................. 19,350,000 - ------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100% (Cost -- $120,276,713*)........... $120,276,713 - -------------------------------------------------------------------------------------------------------------------
* Aggregate cost for Federal income tax purposes is substantially the same. SEE NOTES TO FINANCIAL STATEMENTS. 24 - -------------------------------------------------------------------------------- STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 1999
MANAGED HIGH YIELD CAPITAL MONEY ASSETS BOND APPRECIATION MARKET TRUST TRUST FUND PORTFOLIO - ------------------------------------------------------------------------------------------------------------- ASSETS: Investments, at cost........................... $271,491,706 $24,413,381 $ 789,933,722 $100,926,713 Repurchase agreements, at cost................. 1,275,000 6,167,000 220,003,000 19,350,000 - ------------------------------------------------------------------------------------------------------------- Investments, at value.......................... $337,483,720 $23,577,165 $1,695,673,081 $100,926,713 Repurchase agreements, at value................ 1,275,000 6,167,000 220,003,000 19,350,000 Cash........................................... 511 285 725 241 Dividends and interest receivable.............. 1,684,094 547,123 374,795 794 Receivable for Fund shares sold................ -- 75,585 414,571 -- Receivable from affiliate...................... -- -- -- 24,174 - ------------------------------------------------------------------------------------------------------------- TOTAL ASSETS................................... 340,443,325 30,367,158 1,916,466,172 120,301,922 - ------------------------------------------------------------------------------------------------------------- LIABILITIES: Investment advisory fees payable............... 141,090 12,851 1,154,525 49,921 Payable for securities purchased............... 397,377 -- -- -- Payable for Fund shares purchased.............. 353,992 21,964 -- -- Payable to broker -- variation margin.......... 29,750 -- -- -- Administration fees payable.................... 16,931 1,542 91,885 5,230 Dividends payable.............................. -- -- -- 254,987 Accrued expenses............................... 66,231 14,209 58,591 21,900 - ------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES.............................. 1,005,371 50,566 1,305,001 332,038 - ------------------------------------------------------------------------------------------------------------- TOTAL NET ASSETS................................. $339,437,954 $30,316,592 $1,915,161,171 $119,969,884 - ------------------------------------------------------------------------------------------------------------- NET ASSETS: Paid-in capital................................ $226,041,766 $29,927,371 $ 942,600,893 $119,969,884 Undistributed net investment income............ 6,657,380 2,577,214 752,718 -- Accumulated net realized gain (loss) from security transactions, futures contracts and foreign currencies.......................... 41,188,231 (1,351,777) 66,058,697 -- Net unrealized appreciation (depreciation) of investments, futures contracts and foreign currencies.................................. 65,550,577 (836,216) 905,748,863 -- - ------------------------------------------------------------------------------------------------------------- TOTAL NET ASSETS................................. $339,437,954 $30,316,592 $1,915,161,171 $119,969,884 - ------------------------------------------------------------------------------------------------------------- SHARES OUTSTANDING............................... 16,072,930 3,201,194 17,602,914 119,969,884 - ------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, PER SHARE....................... $21.12 $9.47 $108.80 $1.00 - -------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 25 - -------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999
MANAGED HIGH YIELD CAPITAL MONEY ASSETS BOND APPRECIATION MARKET TRUST TRUST FUND PORTFOLIO - ------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME: Interest............................................ $ 5,886,779 $ 2,751,558 $ 8,307,630 $3,470,117 Dividends........................................... 2,609,044 68,899 3,283,595 -- Less: Foreign withholding tax....................... (30,410) -- (69,723) -- - ------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME............................. 8,465,413 2,820,457 11,521,502 3,470,117 - ------------------------------------------------------------------------------------------------------------- EXPENSES: Investment advisory fees (Note 3)................... 1,529,826 146,012 9,612,677 209,527 Administration fees (Note 3)........................ 183,579 17,521 769,014 39,063 Audit and legal..................................... 36,500 28,519 33,000 27,375 Shareholder communications.......................... 32,000 9,868 124,000 18,400 Custody............................................. 19,511 7,755 46,000 9,800 Shareholder and system servicing fees............... 13,000 12,704 13,000 14,200 Pricing fees........................................ 6,000 8,204 -- -- Trustees' fees...................................... 4,000 3,875 4,000 3,849 Other............................................... 4,072 968 4,065 3,363 - ------------------------------------------------------------------------------------------------------------- TOTAL EXPENSES...................................... 1,828,488 235,426 10,605,756 325,577 Less: Expense reimbursement......................... -- -- -- (85,612) - ------------------------------------------------------------------------------------------------------------- NET EXPENSES........................................ 1,828,488 235,426 10,605,756 239,965 - ------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME................................. 6,636,925 2,585,031 915,746 3,230,152 - ------------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCIES (NOTES 4 AND 6): Realized Gain (Loss) From: Security transactions (excluding short-term securities*)................................... 41,694,154 (471,819) 66,070,067 (256) Futures contracts................................ (1,221,587) -- -- -- Foreign currency transactions.................... -- 433 (29,515) -- - ------------------------------------------------------------------------------------------------------------- NET REALIZED GAIN (LOSS)............................ 40,472,567 (471,386) 66,040,552 (256) - ------------------------------------------------------------------------------------------------------------- Change in Net Unrealized Appreciation (Depreciation) of Investments, Futures Contracts and Foreign Currencies:......................................... -- Beginning of year................................ 71,272,240 48,086 365,205,909 -- End of year...................................... 65,550,577 (836,216) 905,748,863 -- - ------------------------------------------------------------------------------------------------------------- CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION)...................................... (5,721,663) (884,302) 540,542,954 -- - ------------------------------------------------------------------------------------------------------------- NET GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCIES.................................. 34,750,904 (1,355,688) 606,583,506 (256) - ------------------------------------------------------------------------------------------------------------- INCREASE IN NET ASSETS FROM OPERATIONS................ $41,387,829 $ 1,229,343 $607,499,252 $3,229,896 - -------------------------------------------------------------------------------------------------------------
* Except for Money Market Portfolio where the net realized losses are only from the sale of short-term securities. SEE NOTES TO FINANCIAL STATEMENTS. 26 - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED DECEMBER 31, 1999
MANAGED HIGH YIELD CAPITAL MONEY ASSETS BOND APPRECIATION MARKET TRUST TRUST FUND PORTFOLIO - ------------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income.......................... $ 6,636,925 $ 2,585,031 $ 915,746 $ 3,230,152 Net realized gain (loss)....................... 40,472,567 (471,386) 66,040,552 (256) Change in net unrealized appreciation (depreciation).............................. (5,721,663) (884,302) 540,542,954 -- - ------------------------------------------------------------------------------------------------------------- INCREASE IN NET ASSETS FROM OPERATIONS......... 41,387,829 1,229,343 607,499,252 3,229,896 - ------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 2): Net investment income.......................... (5,732,184) (2,318,362) (1,059,153) (3,229,896) Net realized gains............................. (17,063,313) -- (30,268,189) -- - ------------------------------------------------------------------------------------------------------------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS................................ (22,795,497) (2,318,362) (31,327,342) (3,229,896) - ------------------------------------------------------------------------------------------------------------- FUND SHARE TRANSACTIONS (NOTE 11): Net proceeds from sale of shares............... 33,514,225 7,595,331 470,330,702 388,474,577 Net asset value of shares issued for reinvestment of dividends................... 22,795,497 2,318,362 31,327,342 3,049,209 Cost of shares reacquired...................... (11,645,774) (6,596,523) (53,529,706) (313,623,231) - ------------------------------------------------------------------------------------------------------------- INCREASE IN NET ASSETS FROM FUND SHARE TRANSACTIONS................................ 44,663,948 3,317,170 448,128,338 77,900,555 - ------------------------------------------------------------------------------------------------------------- INCREASE IN NET ASSETS........................... 63,256,280 2,228,151 1,024,300,248 77,900,555 NET ASSETS: Beginning of year.............................. 276,181,674 28,088,441 890,860,923 42,069,329 - ------------------------------------------------------------------------------------------------------------- END OF YEAR*................................... $339,437,954 $30,316,592 $1,915,161,171 $119,969,884 - ------------------------------------------------------------------------------------------------------------- * Includes undistributed net investment income of:............................................ $6,657,380 $2,577,214 $752,718 -- - -------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 27 - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 1998
MANAGED HIGH YIELD CAPITAL MONEY ASSETS BOND APPRECIATION MARKET TRUST TRUST FUND PORTFOLIO - ------------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income............................ $ 5,681,892 $ 2,382,367 $ 1,062,648 $ 1,460,011 Net realized gain (loss)......................... 18,004,909 443,848 31,704,572 (215) Increase (decrease) in net unrealized appreciation.................................. 24,712,837 (1,095,487) 268,745,690 -- - ------------------------------------------------------------------------------------------------------------- INCREASE IN NET ASSETS FROM OPERATIONS........... 48,399,638 1,730,728 301,512,910 1,459,796 - ------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 2): Net investment income............................ (6,031,526) (1,906,452) (1,757,481) (1,459,796) Net realized gains............................... (11,032,250) -- (15,276,070) -- - ------------------------------------------------------------------------------------------------------------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS................. (17,063,776) (1,906,452) (17,033,551) (1,459,796) - ------------------------------------------------------------------------------------------------------------- FUND SHARE TRANSACTIONS (NOTE 11): Net proceeds from sale of shares................. 17,716,235 7,689,311 206,554,463 103,475,184 Net asset value of shares issued for reinvestment of dividends.................................. 17,063,776 1,906,452 17,033,551 1,409,254 Cost of shares reacquired........................ (13,804,479) (6,603,776) (24,907,667) (76,308,910) - ------------------------------------------------------------------------------------------------------------- INCREASE IN NET ASSETS FROM FUND SHARE TRANSACTIONS.................................. 20,975,532 2,991,987 198,680,347 28,575,528 - ------------------------------------------------------------------------------------------------------------- INCREASE IN NET ASSETS............................. 52,311,394 2,816,263 483,159,706 28,575,528 NET ASSETS: Beginning of year................................ 223,870,280 25,272,178 407,701,217 13,493,801 - ------------------------------------------------------------------------------------------------------------- END OF YEAR*..................................... $276,181,674 $28,088,441 $890,860,923 $ 42,069,329 - ------------------------------------------------------------------------------------------------------------- * Includes undistributed net investment income of:.............................................. $5,732,244 $2,318,362 $1,059,153 -- - -------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 28 - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES The Managed Assets Trust, High Yield Bond Trust, Capital Appreciation Fund and Money Market Portfolio (collectively, "Fund(s)") are each a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment companies. Shares of the Funds are offered only to insurance company separate accounts that fund certain variable annuity and variable life insurance contracts. The significant accounting policies consistently followed by the Funds are: (a) security transactions are accounted for on trade date; (b) securities traded on national securities markets are valued at the closing prices on such markets; securities for which no sales price were reported and U.S. government and agency obligations are valued at the mean between the last reported bid and asked prices or on the basis of quotations received from reputable brokers or other recognized sources; (c) securities for which market quotations are not available will be valued in good faith at fair value by or under the direction of the Board of Trustees; (d) securities maturing within 60 days are valued at cost plus accreted discount, or minus amortized premium, which approximates value; (e) securities, other than U.S. government agencies and obligations, that have a maturity of 60 days or more are valued at prices based on market quotations for securities of similar type, yield and maturity; (f) interest income, adjusted for amortization of premium and accretion of discount, is recorded on the accrual basis and dividend income is recorded on the ex-dividend date; foreign dividends are recorded on the ex-dividend date or as soon as practical after the Fund determines the existence of a dividend declaration after exercising reasonable due diligence; (g) gains or losses on the sale of securities are calculated by using the specific identification method; (h) dividends and distributions to shareholders are recorded on the ex-dividend date; (i) the accounting records of the Fund are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies are translated into U.S. dollars on the date of valuation. Purchases and sales of securities and income and expenses are translated at the rate of exchange quoted on the respective date that such transactions are recorded. Differences between income and expense amounts recorded and collected or paid are adjusted when reported by the custodian; (j) the character of income and gains to be distributed are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. At December 31, 1999, reclassifications were made to the capital accounts of the Managed Assets Trust, High Yield Bond Trust and Capital Appreciation Fund to reflect permanent book/tax differences and income and gains available for distributions under income tax regulations. Accordingly, for the High Yield Bond Trust, a portion of accumulated net realized loss amounting to $748,206 was reclassified to paid-in capital. Net investment income, net realized gains and net assets were not affected by this change; (k) the Funds intend to comply with the requirements of the Internal Revenue Code of 1986, as amended, pertaining to regulated investment companies and to make distributions of taxable income sufficient to relieve it from substantially all Federal income and excise taxes; and (l) estimates and assumptions are required to be made regarding assets, liabilities and changes in net assets resulting from operations when financial statements are prepared. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ. 2. DIVIDENDS Money Market Portfolio declares and records a dividend of substantially all of its net investment income on each business day. Such dividends are paid or reinvested on the payable date. 3. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS Travelers Asset Management International Corporation ("TAMIC"), an indirect wholly owned subsidiary of Citigroup, Inc., acts as investment manager and advisor to the Managed Assets Trust ("MAT"), High Yield Bond Trust ("HYBT"), Capital Appreciation Fund ("CAF") and Money Market Portfolio ("MMP"). MAT, CAF and MMP pay TAMIC an investment management and advisory fee calculated at the annual rate of 0.50%, 0.75% and 0.3233%, respectively of its average daily net assets. HYBT pays TAMIC an investment management and advisory fee calculated at an annual rate of 0.50% on the first $50,000,000, 0.40% on the next $100,000,000, 0.30% on the next $100,000,000 and 0.25% on the amount over $250,000,000 of its average daily net assets. This fee is calculated daily and paid monthly. TAMIC has a sub-advisory agreement with The Travelers Investment Management Company, Inc. ("TIMCO"), an indirect wholly owned subsidiary of Citigroup, Inc. Pursuant to the sub-advisory agreement, TIMCO is responsible for the day-to-day portfolio operations and investment decisions for MAT. As a result, TAMIC pays TIMCO, as sub-advisor, 0.25% of the average daily net assets of MAT. 29 - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) TAMIC also has a sub-advisory agreement with Janus Capital Corporation ("Janus"). Pursuant to the sub-advisory agreement, Janus is responsible for the day-to-day portfolio operations and investment decisions for CAF. As a result, TAMIC pays Janus, as sub-advisor, 0.55% of the average daily net assets of CAF. Travelers Insurance Company ("Travelers Insurance") acts as administrator to the Funds. The Funds pay Travelers Insurance an administration fee calculated at an annual rate of 0.06% of its average daily net assets. Travelers Insurance has entered into a sub-administrative services agreement with SSB Citi Fund Management LLC ("SSBC"), formerly known as SSBC Fund Management Inc., a subsidiary of Salomon Smith Barney Holdings Inc. ("SSBH"). Travelers Insurance pays SSBC, as sub-administrator, a fee calculated at an annual rate of 0.06% for the average daily net assets of each Fund. This fee is calculated daily and paid monthly. Effective October 1999, Smith Barney Private Trust Company ("Private Trust"), another subsidiary of Citigroup, became the Trust's transfer agent and PFPC Global Fund Services ("PFPC") became the Trust's sub-transfer agent. Private Trust receives account fees and asset-based fees that vary according to the account size and type of account. PFPC is responsible for shareholder recordkeeping and financial processing for all shareholder accounts and is paid by Private Trust. During the period October 1, 1999 through December 31, 1999, MAT, HYBT, CAF and MMP each paid transfer agent fees of $1,250 to Private Trust. Brokerage commissions of $11,797 were received from affiliated brokers. One Trustee and all officers of the Funds are employees of Citigroup, Inc., or its subsidiaries. 4. INVESTMENTS During the year ended December 31, 1999, the aggregate cost of purchases and proceeds from sales of investments (including maturities, but excluding short-term securities) were as follows:
MANAGED HIGH CAPITAL ASSETS YIELD BOND APPRECIATION TRUST TRUST FUND - ------------------------------------------------------------------------------------------------------- Purchases................................................... $178,872,424 $29,315,601 $710,021,790 - ------------------------------------------------------------------------------------------------------- Sales....................................................... 149,297,456 30,074,602 418,229,757 - -------------------------------------------------------------------------------------------------------
At December 31, 1999, the aggregate gross unrealized appreciation and depreciation of investments for Federal income tax purposes were substantially as follows:
MANAGED HIGH CAPITAL ASSETS YIELD BOND APPRECIATION TRUST TRUST FUND - ------------------------------------------------------------------------------------------------------- Gross unrealized appreciation............................... $ 77,470,903 $ 369,766 $909,337,079 Gross unrealized depreciation............................... (11,478,889) (1,205,982) (3,597,720) - ------------------------------------------------------------------------------------------------------- Net unrealized appreciation (depreciation).................. $ 65,992,014 $ (836,216) $905,739,359 - -------------------------------------------------------------------------------------------------------
5. REPURCHASE AGREEMENTS The Funds purchase (and its custodian takes possession of) U.S. Government securities from banks and securities dealers subject to agreements to resell the securities to the sellers at a future date (generally, the next business day) at an agreed-upon higher repurchase price. The Funds require continual maintenance of the market value of the collateral in amounts at least equal to the repurchase price. 6. FUTURES CONTRACTS Initial margin deposits made upon entering into futures contracts are recognized as assets. The initial margin is segregated by the custodian and is noted in the schedule of investments. During the period the futures contract is open, changes in the value of the contract are recognized as unrealized gains or losses by "marking-to-market" on a daily basis to reflect the market value of the contract at the end of each day's trading. Variation margin payments are made or received and recognized as assets due from or liabilities due to broker, depending upon whether unrealized gains or losses are incurred. 30 - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) When the contract is closed, the Funds record a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transactions and the Funds' basis in the contract. The Funds enter into such contracts to hedge portions of their respective portfolios. The Funds bear the market risk that arises from changes in the value of the financial instruments and securities indices (futures contracts). At December 31, 1999, MAT had sold one financial futures contract on the Standard & Poor's 500 Index expiring in March 2000. The basis value of the contract was $12,545,313. The market value of the contract on December 31, 1999, was $12,986,750, resulting in an unrealized loss of $441,437. 7. OPTIONS CONTRACTS Premiums paid when put or call options are purchased by the Funds, represent investments, which are "marked-to-market" daily. When a purchased option expires, the Funds realize a loss in the amount of the premium paid. When the Funds enter into closing sales transactions, the Funds realize a gain or loss depending on whether the proceeds from the closing sales transaction are greater or less than the premium paid for the option. When the Funds exercise a put option, it will realize a gain or loss from the sale of the underlying security and the proceeds from such sale will be decreased by the premium originally paid. When the Funds exercise a call option, the cost of the security which the Funds purchase upon exercise will be increased by the premium originally paid. At December 31, 1999, the Funds had no open purchased call or put options contracts. 8. SECURITIES TRADED ON A TO-BE-ANNOUNCED BASIS The Funds may trade securities on a "to-be-announced" ("TBA") basis. In a TBA transaction, the Funds commit to purchasing or selling securities for which specific information is not yet known at the time of the trade, particularly the face amount and maturity date in GNMA/FNMA transactions. Securities purchased on a TBA basis are not settled until they are delivered to the Funds, normally 15 to 45 days later. These transactions are subject to market fluctuations and their current value is determined in the same manner as for other securities. At December 31, 1999, the Funds held no TBA securities. 9. CAPITAL LOSS CARRYFORWARD At December 31, 1999, HYBT had, for Federal income tax purposes, approximately $705,000 of capital loss carryforwards available to offset future capital gains. To the extent that these carryforward losses can be used to offset realized capital gains, it is probable that such gains will not be distributed. The amount and expiration of the carryforwards are indicated below. Expiration occurs on December 31 of the year indicated:
2000 2001 2002 2004 2007 - -------------------------------------------------------------------------------------------------------- Carryforward Amounts.......................... $48,000 $135,000 $38,000 $342,000 $142,000 - --------------------------------------------------------------------------------------------------------
10. FOREIGN SECURITIES Investing in securities of foreign companies and foreign governments involves special risks and considerations not typically associated with investing in U.S. companies and the U.S. Government. These risks include revaluation of currencies and future adverse political and economic developments. Moreover, securities of many foreign companies and foreign governments and their markets may be less liquid and their prices more volatile than those of securities of comparable U.S. companies and the U.S. Government. 31 - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) 11. SHARES OF BENEFICIAL INTEREST The Declaration of Trust authorizes the issuance of an unlimited number of shares of beneficial interest without par value. Transactions in shares of each Fund were as follows:
YEAR ENDED YEAR ENDED DECEMBER 31, 1999 DECEMBER 31, 1998 - --------------------------------------------------------------------------------------------------- MANAGED ASSETS TRUST Shares sold................................................. 1,654,617 955,576 Shares issued on reinvestment............................... 1,187,265 921,867 Shares reacquired........................................... (581,353) (747,496) - --------------------------------------------------------------------------------------------------- Net Increase................................................ 2,260,529 1,129,947 - --------------------------------------------------------------------------------------------------- HIGH YIELD BOND TRUST Shares sold................................................. 776,247 772,815 Shares issued on reinvestment............................... 245,327 196,339 Shares reacquired........................................... (671,120) (673,313) - --------------------------------------------------------------------------------------------------- Net Increase................................................ 350,454 295,841 - --------------------------------------------------------------------------------------------------- CAPITAL APPRECIATION FUND Shares sold................................................. 5,582,389 3,602,035 Shares issued on reinvestment............................... 400,399 292,021 Shares reacquired........................................... (626,790) (448,218) - --------------------------------------------------------------------------------------------------- Net Increase................................................ 5,355,998 3,445,838 - --------------------------------------------------------------------------------------------------- MONEY MARKET PORTFOLIO Shares sold................................................. 388,474,577 103,475,184 Shares issued on reinvestment............................... 3,049,209 1,409,254 Shares reacquired........................................... (313,623,231) (76,308,910) - --------------------------------------------------------------------------------------------------- Net Increase................................................ 77,900,555 28,575,528 - ---------------------------------------------------------------------------------------------------
32 - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS For a share of beneficial interest outstanding throughout each year ended December 31:
MANAGED ASSETS TRUST 1999 1998 1997 1996 1995 - --------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF YEAR............. $19.99 $17.65 $14.98 $15.50 $12.85 - --------------------------------------------------------------------------------------------------------------- INCOME FROM OPERATIONS: Net investment income........................ 0.39 0.41 0.48 0.46 0.49 Net realized and unrealized gain............. 2.30 3.27 2.70 1.50 2.83 - --------------------------------------------------------------------------------------------------------------- Total Income From Operations................... 2.69 3.68 3.18 1.96 3.32 - --------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS FROM(1): Net investment income........................ (0.39) (0.47) (0.12) (0.89) (0.50) Net realized gains........................... (1.17) (0.87) (0.39) (1.59) (0.17) - --------------------------------------------------------------------------------------------------------------- Total Distributions............................ (1.56) (1.34) (0.51) (2.48) (0.67) - --------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF YEAR................... $21.12 $19.99 $17.65 $14.98 $15.50 - --------------------------------------------------------------------------------------------------------------- TOTAL RETURN................................... 14.22% 21.44% 21.31% 13.78% 27.12% - --------------------------------------------------------------------------------------------------------------- NET ASSETS, END OF YEAR (000'S)................ $339,438 $276,182 $223,870 $188,610 $171,276 - --------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: Expenses(2).................................. 0.60% 0.60% 0.63% 0.58% 0.58% Net investment income........................ 2.17 2.30 2.91 3.51 3.49 - --------------------------------------------------------------------------------------------------------------- PORTFOLIO TURNOVER RATE........................ 51% 74% 90% 108% 110% - ---------------------------------------------------------------------------------------------------------------
HIGH YIELD BOND TRUST 1999 1998 1997 1996 1995 - --------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF YEAR.............. $9.85 $9.89 $8.49 $9.00 $8.49 - --------------------------------------------------------------------------------------------------------------- INCOME (LOSS) FROM OPERATIONS: Net investment income......................... 0.81 0.77 0.76 0.91 0.80 Net realized and unrealized gain (loss)....... (0.38) (0.13) 0.65 0.41 0.41 - --------------------------------------------------------------------------------------------------------------- Total Income From Operations.................... 0.43 0.64 1.41 1.32 1.21 - --------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS FROM(1): Net investment income......................... (0.81) (0.68) (0.01) (1.83) (0.70) - --------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF YEAR.................... $9.47 $9.85 $9.89 $8.49 $9.00 - --------------------------------------------------------------------------------------------------------------- TOTAL RETURN.................................... 4.42% 6.56% 16.56% 16.05% 15.47% - --------------------------------------------------------------------------------------------------------------- NET ASSETS, END OF YEAR (000'S)................. $30,317 $28,088 $25,272 $17,291 $12,902 - --------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: Expenses(2)(3)................................ 0.81% 0.82% 0.84% 0.97% 1.25% Net investment income......................... 8.85 8.42 9.04 11.01 9.37 - --------------------------------------------------------------------------------------------------------------- PORTFOLIO TURNOVER RATE......................... 112% 147% 137% 84% 222% - ---------------------------------------------------------------------------------------------------------------
(1) Distributions from realized gains include both net realized short-term and long-term capital gains. Prior to 1996 net realized short-term capital gains were included in distributions from net investment income. (2) As a result of voluntary expense limitations, the ratio of expenses to average net assets will not exceed 1.25%. (3) The ratio of expenses to average net assets reflects an expense reimbursement by The Travelers in connection with voluntary expense limitations. Without the expense reimbursement, the ratio of expenses to average net assets would have been 1.28% for the year ended December 31, 1995. 33 - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (CONTINUED) For a share of beneficial interest outstanding throughout each year ended December 31:
CAPITAL APPRECIATION FUND 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF YEAR............ $72.74 $46.32 $36.72 $33.18 $24.50 - ------------------------------------------------------------------------------------------------------------------ INCOME FROM OPERATIONS: Net investment income....................... 0.04 0.06 0.19 0.23 0.24 Net realized and unrealized gain............ 38.08 28.07 9.41 8.49 8.61 - ------------------------------------------------------------------------------------------------------------------ Total Income From Operations.................. 38.12 28.13 9.60 8.72 8.85 - ------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS FROM(1): Net investment income....................... (0.07) (0.18) -- (0.41) (0.17) Net realized gains.......................... (1.99) (1.53) (0.00)* (4.77) -- - ------------------------------------------------------------------------------------------------------------------ Total Distributions........................... (2.06) (1.71) (0.00)* (5.18) (0.17) - ------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, END OF YEAR.................. $108.80 $72.74 $46.32 $36.72 $33.18 - ------------------------------------------------------------------------------------------------------------------ TOTAL RETURN.................................. 53.52% 61.63% 26.14% 28.21% 36.37% - ------------------------------------------------------------------------------------------------------------------ NET ASSETS, END OF YEAR (000'S)............... $1,915,161 $890,861 $407,701 $224,132 $122,155 - ------------------------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS: Expenses(2)................................. 0.83% 0.85% 0.84% 0.83% 0.85% Net investment income....................... 0.07 0.18 0.54 0.69 0.84 - ------------------------------------------------------------------------------------------------------------------ PORTFOLIO TURNOVER RATE....................... 37% 53% 89% 84% 124% - ------------------------------------------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF YEAR............ $1.00 $1.00 $1.00 $1.00 $1.00 - ------------------------------------------------------------------------------------------------------------------ Net investment income(3).................... 0.049 0.049 0.049 0.0412 0.0417 Distributions from net investment income.... (0.049) (0.049) (0.049) (0.0412) (0.0417) - ------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, END OF YEAR.................. $1.00 $1.00 $1.00 $1.00 $1.00 - ------------------------------------------------------------------------------------------------------------------ TOTAL RETURN.................................. 4.96% 5.08% 5.03% 4.20% 4.17% - ------------------------------------------------------------------------------------------------------------------ NET ASSETS, END OF YEAR (000'S)............... $119,970 $42,069 $13,494 $3,543 $1,417 - ------------------------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS: Expenses(2)(3)(4)........................... 0.37% 0.65% 0.57% 0.78% 1.25% Net investment income....................... 4.96 5.37 5.03 3.72 -- - ------------------------------------------------------------------------------------------------------------------
(1) Distributions from realized gains include both net realized short-term and long-term capital gains. Prior to 1996 net realized short-term capital gains were included in distributions from net investment income. (2) As a result of voluntary expense limitations, the ratio of expenses to average net assets will not exceed 1.25% and 0.40% for Capital Appreciation Fund and Money Market Portfolio, respectively. (3) Travelers Insurance reimbursed Money Market Portfolio for $85,612, $31,300 and $43,376 in expenses for the years ended December 31, 1999, 1997 and 1996, respectively. If expenses were not reimbursed, the per share decreases of net investment income would have been $0.001, $0.002 and $0.02, respectively, and the actual expense ratios would have been 0.50%, 1.39% and 1.71%, respectively. (4) The ratio of expenses to average net assets for 1995 reflects an expense reimbursement by The Travelers in connection with voluntary expense limitations. Without the expense reimbursement, the ratio of expenses to average net assets would have been 7.37% for the year ended December 31, 1995. * Amount represents less than $0.01 per share. 34 - -------------------------------------------------------------------------------- INDEPENDENT AUDITORS' REPORT THE SHAREHOLDERS AND BOARD OF TRUSTEES OF MANAGED ASSETS TRUST, HIGH YIELD BOND TRUST, CAPITAL APPRECIATION FUND AND MONEY MARKET PORTFOLIO: We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Managed Assets Trust, High Yield Bond Trust, Capital Appreciation Fund and Money Market Portfolio as of December 31, 1999, and the related statements of operations for the year then ended, statements of changes in net assets for each of the years in the two-year period then ended, and financial highlights for each of the years in the three-year period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the years in the two-year period ended December 31, 1996 were audited by other auditors whose report thereon, dated February 24, 1997, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1999, by correspondence with the custodian. As to securities purchased but not yet received, we performed other appropriate auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial positions of Managed Assets Trust, High Yield Bond Trust, Capital Appreciation Fund and Money Market Portfolio as of December 31, 1999, their results of their operations for the year then ended, changes in their net assets for each of the years in the two-year period then ended, and their financial highlights for each of the years in the three-year period then ended, in conformity with generally accepted accounting principles. [KPMG Peat Marwick LLP Signature] New York, New York February 11, 2000 35 - -------------------------------------------------------------------------------- TAX INFORMATION (UNAUDITED) For Federal tax purposes the Trust or Fund hereby designates for the fiscal year ended December 31, 1999: - Percentages of ordinary dividends paid as qualifying for the corporate dividends received deduction: Managed Assets Trust.............................. 32.10% High Yield Bond Trust............................. 2.01 Capital Appreciation Fund......................... 100.00
- Total long-term capital gain distributions paid: Managed Assets Trust.............................. $15,558,157 Capital Appreciation Fund......................... 30,268,189
A total of 17.05% of the ordinary dividends paid by the Managed Assets Trust from net investment income are derived from Federal obligations and may be exempt from taxation at the state level. 36 ANNUAL REPORT FOR THE TRAVELERS SERIES TRUST - -------------------------------------------------------------------------------- U.S. GOVERNMENT SECURITIES PORTFOLIO The U.S. Government Securities Portfolio ("Portfolio") seeks to select investments from the point of view of an investor concerned primarily with highest credit quality, current income and total return. The assets of the Portfolio will be invested in direct obligations of the United States, its agencies and instrumentalities. For the year ended December 31, 1999, the Portfolio had a return of a negative 4.23%. In comparison, the Lehman Government Bond Index returned a negative 2.23% for the same time period. (Past performance is not indicative of future results. The Lehman Government Bond Index is a broad measure of the performance of U.S. government bonds.) 1999 was a year that saw sustained economic growth at home and recovery abroad. Following the events surrounding the Russian debt default in August of 1998 -- which included a decline in bond yields and a 0.75% fall in the federal funds rate -- yields have risen. Investor optimism, however, was tempered by concerns about inflation and continued economic growth. Yet both Russia and Argentina remain economic hot spots and deserve close monitoring. Moreover, the reconstruction of Kosovo and peacekeeping efforts in that war-torn country will also be an ongoing challenge. The period was marked by continued strong U.S. economic growth, historically low inflation and low unemployment. Diminishing liquidity in the bond market was precipitated by the global financial crisis that reached its climax in October 1998. Meanwhile, the Fed reversed its three short-term interest rate movements, with 25-basis-point (i.e., 100 basis points are equal to one percent) increases implemented on June 30, August 24 and November 16, 1999, respectively. A robust U.S. economy and three Fed interest rate hikes negatively impacted bond investors in 1999, the worst year for fixed income investing since 1994. The 30-year U.S. Treasury bond suffered its worst decline in total return on record. In the view of the Portfolio's manager, this poor performance from U.S. Treasuries reflected the reversal of the "flight to quality" that developed during the global financial turmoil at the end of 1998. In the manager's view, the worst may be over. Many bond investment professionals expect that yields for 30-year U.S. Treasuries should trade between 6% and 6.7% in the next 12 months. These yields can provide investors with a comfortable cushion against declines in the bonds' prices. Of course, inflation is what actually drives bond market returns. Concerns persist over the acceleration in inflation in the Consumer Price Index ("CPI"), which climbed in 1999 as oil prices doubled. During the period, the Portfolio's income orientation helped returns due to emphasis on mortgage-backed securities and U.S. Treasury strips throughout the year. This strategy was implemented in an attempt to mirror the 5-10-year U.S. Treasury benchmark. In addition, a duration of 5.25 - 5.375 years in the Portfolio has been maintained. Within the U.S. Government Securities Portfolio, the manager has sought to maximize income during the period through mortgage-backed securities, buying coupon at or near par and avoiding any potential prepayment risk. (Coupon is the periodic interest payment made to the bondholders during the life of the bond. Prepayment risk refers to payments made in excess of scheduled mortgage principal repayments.) During the period under review, the Portfolio's strategy included slowly buying U.S. Treasuries and extending maturities as interest rates rose. In the manager's view, yields over the near term have already seen their highs, and in the coming months he plans to increase the Portfolio's U.S. Treasury exposure and reduce its mortgage-backed securities holdings because of expectations that rates should continue to decline. In the opinion of the manager, the trend of lower interest rates has not ended but periods of lower rates from current levels may be less frequent and shorter in duration. Income most likely will be the primary component of Portfolio performance going forward. The manager's efforts will be on focusing on minimizing price volatility and maximizing income opportunities and maintaining liquidity. SOCIAL AWARENESS STOCK PORTFOLIO The Social Awareness Stock Portfolio ("Portfolio") seeks long-term capital appreciation by selecting investments, primarily common stocks, that meet the social criteria established for the Portfolio. The Portfolio's social criteria currently excludes companies that derive a significant portion of their revenues from the production of tobacco, tobacco products, alcohol, or 37 ANNUAL REPORT FOR THE TRAVELERS SERIES TRUST - -------------------------------------------------------------------------------- military defense related services or gambling services. For the year ended December 31, 1999, the Portfolio returned 15.84%, underperforming the S&P 500, which posted a total return of 21.03%. (Past performance is not indicative of future results.) Consistent with its investment objective, the Portfolio began the reporting period with holdings in the technology, consumer products, financial services, healthcare, communications and energy sectors. At this time, the Portfolio also had approximately 6% in liquid reserves. As of December 31, 1999, the Portfolio consisted of 86 individual investments. The Portfolio is overweighted versus its benchmark in basic materials, consumer cyclical, transportation and utilities. Moreover, the Portfolio was slightly underweight in the capital goods, communication services, energy and technology sectors. The manager remains optimistic regarding the future of the U.S. economy and several of its major corporations over the long term. UTILITIES PORTFOLIO The Utilities Portfolio ("Portfolio") seeks to provide current income by investing in equity and debt securities of companies in the utility industries. For the year ended December 31, 1999, the Portfolio returned a negative 0.08%. In comparison, the Standard & Poor's Utility Index ("S&P Utility Index") returned a negative 8.88% for the same time period. In a difficult market for both utilities stocks and bonds, the Utilities Portfolio continued to generate competitive performance. (Past performance is not indicative of future results. Please note that Portfolio holdings as of December 31, 1999 and are subject to change.) The Utilities Portfolio began the reporting period with total assets of $32.9 million and ended the year with $31.4 million in assets under management. As of December 31, 1999, the Portfolio had 57% of its investments in electric utilities, approximately 24% in telecommunications related companies and 14% in natural gas utilities. The Portfolio's holdings in NEXTLINK Communications, MediaOne Group, Calpine Corp., The Montana Power Co., Sprint, Qwest Communications and MCI Worldcom largely contributed to the Portfolio's relative positive performance. Holdings in the traditional electric and gas utilities sectors adversely affected the Portfolio during 1999. Thank you for your investment in The Travelers Series Trust. We look forward to continuing to help you pursue your financial goals in the new century. Sincerely, /s/ HEATH B. MCLENDON Heath B. McLendon Chairman January 20, 2000 38 - -------------------------------------------------------------------------------- PERFORMANCE COMPARISON -- U.S. GOVERNMENT SECURITIES PORTFOLIO AS OF 12/31/99 (UNAUDITED)
AVERAGE ANNUAL TOTAL RETURNS ---------------------------- Year Ended 12/31/99 (4.23)% Five Years Ended 12/31/99 8.45% 1/24/92* through 12/31/99 6.69% CUMULATIVE TOTAL RETURN 1/24/92* through 12/31/99 67.24% * Commencement of operations
This chart assumes an initial investment of $10,000 made on January 24, 1992, assuming reinvestment of dividends, through December 31, 1999. The Lehman Government Bond Index is a broad-based Index of all public debt obligations of the U.S. Government and its agencies and has an average maturity of nine years. The Consumer Price Index is a measure of the average change in prices over time in a fixed market basket of goods and services.
U.S. GOVERNMENT SECURITIES PORTFOLIO LEHMAN GOV'T BOND INDEX CONSUMER PRICE INDEX -------------------------- ----------------------- -------------------- 1/24/92 10000 10000 10000 12/92 10790 10723 10275 12/93 11813 11866 10557 12/94 11147 11464 10840 12/95 13869 13567 11115 12/96 14077 13943 11484 12/97 15846 15280 11679 12/98 17463 16785 11866 12/99 16739 16411 12220
- -------------------------------------------------------------------------------- PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Average annual total returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestments of dividends. The returns do not reflect expenses associated with the subaccount such as administrative fees, account charges and surrender charges which, if reflected, would reduce the performance shown. - -------------------------------------------------------------------------------- PERFORMANCE COMPARISON -- SOCIAL AWARENESS STOCK PORTFOLIO AS OF 12/31/99 (UNAUDITED)
AVERAGE ANNUAL TOTAL RETURNS ---------------------------- Year Ended 12/31/99 15.84% Five Years Ended 12/31/99 25.56% 5/1/92* through 12/31/99 18.07% CUMULATIVE TOTAL RETURN 5/1/92* through 12/31/99 257.65% * Commencement of operations
This chart assumes an initial investment of $10,000 made on May 1, 1992, assuming reinvestment of dividends, through December 31, 1999. The Standard & Poor's 500 Index is an unmanaged index composed of 500 widely held common stocks listed on the New York Stock Exchange, American Stock Exchange and the over-the-counter market. The Consumer Price Index is a measure of the average change in prices over time in a fixed market basket of goods and services.
STANDARD & POOR'S 500 SOCIAL AWARENESS PORTFOLIO INDEX CONSUMER PRICE INDEX -------------------------- --------------------- -------------------- 5/1/92 10000 10000 10000 12/92 10950 10673 10157 12/93 11777 11745 10436 12/94 11461 11900 10716 12/95 15285 14509 10988 12/96 18339 17838 11353 12/97 23343 23789 11545 12/98 30875 30626 11731 12/99 35765 37067 12080
- -------------------------------------------------------------------------------- PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Average annual total returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestments of dividends. The returns do not reflect expenses associated with the subaccount such as administrative fees, account charges and surrender charges which, if reflected, would reduce the performance shown. 39 - -------------------------------------------------------------------------------- PERFORMANCE COMPARISON -- UTILITIES PORTFOLIO AS OF 12/31/99 (UNAUDITED)
AVERAGE ANNUAL TOTAL RETURNS ---------------------------- Year Ended 12/31/99 (0.08)% Five Years Ended 12/31/99 16.33% 2/4/94* through 12/31/99 13.98% CUMULATIVE TOTAL RETURN ---------------------------- 2/4/94* through 12/31/99 116.62% * Commencement of operations
This chart assumes an initial investment of $10,000 made on February 4, 1994, assuming reinvestment of dividends, through December 31, 1999. Standard & Poor's 500 Index is an unmanaged index composed of 500 widely held common stocks listed on the New York Stock Exchange, American Stock Exchange and over-the-counter market. The Consumer Price Index is a measure of the average change in prices over time in a fixed market basket of goods and services.
STANDARD & POOR'S 500 UTILITIES PORTFOLIO INDEX CONSUMER PRICE INDEX ------------------- --------------------- -------------------- 2/4/94 10000 10000 10000 12/94 10170 10072 10205 12/95 13149 13852 10464 12/96 14638 17031 10811 12/97 18340 22712 10995 12/98 21680 29240 11171 12/99 21662 35390 11504
- -------------------------------------------------------------------------------- PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Average annual total returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestments of dividends. The returns do not reflect expenses associated with the subaccount such as administrative fees, account charges and surrender charges which, if reflected, would reduce the performance shown. 40 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS DECEMBER 31, 1999 U.S. GOVERNMENT SECURITIES PORTFOLIO
FACE AMOUNT SECURITY VALUE - ---------------------------------------------------------------------------------------- U.S. GOVERNMENT OBLIGATIONS -- 35.5% U.S. Treasury Notes: $6,000,000 6.875% due 5/15/06.......................................... $ 6,105,720 2,000,000 5.500% due 5/15/09.......................................... 1,865,140 2,000,000 6.125% due 8/15/29.......................................... 1,906,820 7,000,000 U.S. Treasury Bonds, 7.250% due 5/15/16....................... 7,321,440 9,000,000 U.S. REFCO Strips, zero coupon due 10/15/13................... 3,435,750 1,023,630 U.S. Treasury Inflation Index Bonds, 3.875% due 4/15/29....... 956,357 - ---------------------------------------------------------------------------------------- TOTAL U.S. GOVERNMENT OBLIGATIONS (Cost -- $22,833,854)....... 21,591,227 - ---------------------------------------------------------------------------------------- U.S. GOVERNMENT AGENCIES -- 63.2% Federal Home Loan Mortgage Corp. Certificates: 3,000,000 5.705% due 3/2/09........................................... 2,730,780 7,223,094 6.500% due 3/15/28 @........................................ 6,781,745 3,000,000 Gold Certificates, 8.000% due 10/1/29......................... 3,030,930 Federal National Mortgage Association Certificates: 2,730,892 7.000% due 6/1/24 @......................................... 2,641,263 2,754,336 6.500% due 8/1/29 @......................................... 2,596,815 Government National Mortgage Association Certificates: 1,652,887 9.000% due 9/15/09 @........................................ 1,730,870 617,346 8.500% due 7/15/18 @........................................ 635,286 1,967,042 6.500% due 12/15/28......................................... 1,847,780 8,157,222 6.000% due 2/20/29 @........................................ 6,443,506 3,364,126 7.000% due 5/15/29 @........................................ 3,250,587 2,992,161 7.500% due 9/15/29.......................................... 2,960,354 2,000,000 TBA Certificates, 6.500% due 12/17/28......................... 1,877,500 2,000,000 Tennessee Valley Authority Debenture, 6.250% due 12/15/17..... 1,808,300 - ---------------------------------------------------------------------------------------- TOTAL U.S. GOVERNMENT AGENCIES(Cost -- $40,352,180)........... 38,335,716 - ---------------------------------------------------------------------------------------- REPURCHASE AGREEMENT -- 1.3% 762,000 CS First Boston, 2.650% due 1/3/00; Proceeds at maturity -- $762,166; (Fully collateralized by U.S. Treasury Notes, 5.430% due 6/1/00; Market value -- $778,010) (Cost -- $762,000).......................................... 762,000 - -------------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100%(Cost -- $63,948,034*)............. $60,688,943 - --------------------------------------------------------------------------------------
@ Date shown represents the last in range of maturity dates of mortgage certificates owned. * Aggregate cost for federal income tax purpose is substantially the same. SEE NOTES TO FINANCIAL STATEMENTS. 41 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1999 SOCIAL AWARENESS STOCK PORTFOLIO
SHARES SECURITY VALUE - ----------------------------------------------------------------------------------------- COMMON STOCK -- 92.5% - ----------------------------------------------------------------------------------------- BASIC MATERIALS -- 5.8% 19,000 Alcoa Inc. ................................................. $ 1,577,000 25,000 Engelhard Corp. ............................................ 471,875 20,000 Nucor Corp. ................................................ 1,096,250 16,000 Praxair, Inc. .............................................. 805,000 - ----------------------------------------------------------------------------------------- 3,950,125 - ----------------------------------------------------------------------------------------- CAPITAL GOODS -- 3.0% 24,500 Anixter International Inc. (a).............................. 505,313 25,500 Deere & Co. ................................................ 1,106,062 9,800 Pitney Bowes, Inc. ......................................... 473,463 - ----------------------------------------------------------------------------------------- 2,084,838 - ----------------------------------------------------------------------------------------- COMMUNICATION -- 4.6% 13,800 AT&T Corp. ................................................. 700,350 20,500 Bell Atlantic Corp. ........................................ 1,262,030 17,754 MCI WorldCom, Inc. (a)...................................... 942,072 5,000 Time Warner Telecom Inc. (a)................................ 249,688 - ----------------------------------------------------------------------------------------- 3,154,140 - ----------------------------------------------------------------------------------------- CONSUMER CYCLICALS -- 20.5% 19,200 Black & Decker Corp. ....................................... 1,003,200 16,991 Dollar General Corp. ....................................... 386,545 4,900 eTOYS Inc. (a).............................................. 128,625 28,200 Home Depot, Inc. ........................................... 1,933,462 50,000 Interface, Inc. ............................................ 287,500 31,000 Kaufman & Broad Home Corp. ................................. 749,813 8,632 Koninklijke Philips Electronics N.V. -- ADR................. 1,165,320 27,500 Liz Claiborne, Inc. ........................................ 1,034,687 20,100 Lowe's Cos., Inc. .......................................... 1,200,974 24,500 May Department Stores Co. .................................. 790,125 33,000 Office Depot, Inc. (a)...................................... 360,938 31,200 Reader's Digest Association, Inc. .......................... 912,600 20,000 Ross Stores, Inc. .......................................... 358,750 37,600 Staples, Inc. (a)........................................... 780,200 22,200 Tribune Co. ................................................ 1,222,387 25,000 Wal-Mart Stores, Inc. ...................................... 1,728,124 - ----------------------------------------------------------------------------------------- 14,043,250 - -----------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 42 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1999 SOCIAL AWARENESS STOCK PORTFOLIO
SHARES SECURITY VALUE - ----------------------------------------------------------------------------------------- CONSUMER STAPLES -- 7.7% 5,922 Albertson's, Inc. .......................................... $ 190,985 18,000 Brinker International, Inc. (a)............................. 432,000 18,000 Kimberly-Clark Corp. ....................................... 1,174,500 27,400 Kroger Co. (a).............................................. 517,175 14,800 Newell Co. ................................................. 429,200 25,000 Pepsi Bottling Group, Inc. ................................. 414,063 4,800 PepsiCo, Inc. .............................................. 169,200 22,700 Sysco Corp. ................................................ 898,069 7,480 Tricon Global Restaurants, Inc. (a)......................... 288,915 7,142 Unilever N.V. -- ADR........................................ 388,793 18,000 Wendy's International, Inc. ................................ 371,250 - ----------------------------------------------------------------------------------------- 5,274,150 - ----------------------------------------------------------------------------------------- ENERGY -- 2.8% 6,600 Anadarko Petroleum Corp. ................................... 225,225 22,826 BP Amoco PLC -- ADR......................................... 1,353,866 5,000 Royal Dutch Petro -- ADR.................................... 302,188 - ----------------------------------------------------------------------------------------- 1,881,279 - ----------------------------------------------------------------------------------------- FINANCIALS -- 12.4% 26,700 ACE, Ltd. .................................................. 445,556 4,333 Aegon N.V. -- ADR........................................... 413,806 17,200 Allstate Corp. ............................................. 412,800 4,000 American Express Co. ....................................... 665,000 7,640 American International Group Inc. .......................... 826,075 14,400 Associates First Capital Corp. ............................. 395,100 9,962 Bank of America Corp. ...................................... 499,968 13,300 Chase Manhattan Corp. ...................................... 1,033,243 450 DLJdirect (a)............................................... 6,103 6,395 Fleet Boston Financial Corp. ............................... 222,626 9,400 Freddie Mac................................................. 442,388 10,000 Hartford Financial Services Group, Inc. .................... 473,750 14,000 Lincoln National Corp. ..................................... 560,000 5,000 Marsh & Mclennan Cos. ...................................... 478,438 15,000 PNC Bank Corp. ............................................. 667,500 13,300 St. Paul Cos., Inc. ........................................ 448,044 6,800 State Street Corp. ......................................... 496,825 - ----------------------------------------------------------------------------------------- 8,487,222 - -----------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 43 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1999 SOCIAL AWARENESS STOCK PORTFOLIO
SHARES SECURITY VALUE - ----------------------------------------------------------------------------------------- HEALTH CARE -- 9.7% 32,800 Amgen Inc. (a).............................................. $ 1,970,050 11,400 C. R. Bard, Inc. ........................................... 604,200 12,000 DENTSPLY International, Inc. ............................... 283,500 20,000 HEALTHSOUTH Corp. (a)....................................... 107,500 12,700 Johnson & Johnson........................................... 1,182,688 11,600 Merck & Co., Inc. .......................................... 777,925 17,700 Schering-Plough Corp. ...................................... 746,719 7,200 Stryker Corp. .............................................. 501,300 20,000 Tenet Healthcare Corp. (a).................................. 470,000 - ----------------------------------------------------------------------------------------- 6,643,882 - ----------------------------------------------------------------------------------------- TECHNOLOGY -- 18.7% 12,000 America Online Inc. (a)..................................... 905,250 17,200 Automatic Data Processing, Inc. ............................ 926,650 12,000 Cisco Systems Inc. (a)...................................... 1,285,500 19,000 Compaq Computer Corp. ...................................... 514,188 15,000 Electronic Data Systems Corp. .............................. 1,004,063 23,000 EMC Corp. (a)............................................... 2,512,750 10,400 Intel Corp. ................................................ 856,050 8,800 International Business Machines Corp. ...................... 950,400 14,400 Lucent Technologies Corp. .................................. 1,077,300 10,000 N2H2 Inc. (a)............................................... 235,000 10,000 Oracle Corp. (a)............................................ 1,120,625 12,400 Sun Microsystems Inc. (a)................................... 960,225 19,800 Xerox Corp. ................................................ 449,213 - ----------------------------------------------------------------------------------------- 12,797,214 - ----------------------------------------------------------------------------------------- TRANSPORTATION -- 2.6% 26,187 Southwest Airlines.......................................... 423,902 2,100 United Parcel Services -- Class B Shares.................... 144,900 25,000 USFreightways Corp. ........................................ 1,196,874 - ----------------------------------------------------------------------------------------- 1,765,676 - ----------------------------------------------------------------------------------------- UTILITIES -- 4.7% 17,100 AES Corp. (a)............................................... 1,278,225 27,000 Enron Corp. ................................................ 1,198,125 24,200 Williams Cos., Inc. ........................................ 739,613 - ----------------------------------------------------------------------------------------- 3,215,963 - ----------------------------------------------------------------------------------------- TOTAL COMMON STOCK (Cost -- $43,977,464).................... 63,297,739 - -----------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 44 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1999 SOCIAL AWARENESS STOCK PORTFOLIO
FACE AMOUNT SECURITY VALUE - ----------------------------------------------------------------------------------------- REPURCHASE AGREEMENT -- 7.5% $5,123,000 CS First Boston Corp., 2.650% due 1/3/00; Proceeds at maturity -- $5,124,131; (Fully collateralized by U.S. Treasury Bills, 5.325% due 6/1/00; Market value -- $5,226,158) (Cost -- $5,123,000)................... 5,123,000 - ----------------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100% (Cost -- $49,100,464*)............ $68,420,739 - -----------------------------------------------------------------------------------------
(a) Non-income producing security. * Aggregate cost for Federal income tax purposes is substantially the same. SEE NOTES TO FINANCIAL STATEMENTS. 45 - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS DECEMBER 31, 1999 UTILITIES PORTFOLIO
SHARES SECURITY VALUE - --------------------------------------------------------------------------------------- COMMON STOCK -- 98.7% - --------------------------------------------------------------------------------------- BROADCASTING & CABLE -- 4.9% 20,000 MediaOne Group, Inc.+....................................... $ 1,536,250 - --------------------------------------------------------------------------------------- ELECTRIC - UTILITY -- 56.6% 20,000 Allengheny Energy, Inc. .................................... 538,750 15,000 Calpine Corp.+.............................................. 960,000 15,000 Cinergy Corp. .............................................. 361,875 25,000 CMS Energy Corp. ........................................... 779,688 30,000 DQE, Inc. .................................................. 1,038,750 11,000 Duke Energy Corp. .......................................... 551,375 21,800 Edison International........................................ 570,887 25,000 El Paso Energy, Corp. ...................................... 970,312 20,000 Energy East Corp. .......................................... 416,250 29,000 FirstEnergy Group........................................... 657,938 20,000 Florida Progress Corp. ..................................... 846,250 10,000 FPL Group, Inc. ............................................ 428,125 20,000 GPU, Inc. .................................................. 598,750 20,000 Illinova Corp. ............................................. 695,000 30,000 Montana Power Co. .......................................... 1,081,875 11,000 New Century Energies, Inc. ................................. 334,125 53,000 Niagara Mohawk Power Co.+................................... 738,688 20,000 Nisource, Inc. ............................................. 357,500 30,000 Northeast Utilities......................................... 616,875 20,000 Northern States Power Co. .................................. 390,000 14,766 NSTAR....................................................... 598,023 21,000 PECO Energy Co. ............................................ 729,750 25,000 Pinnacle West Capital Corp. ................................ 764,062 10,000 Public Service Enterprise Group, Inc. ...................... 348,125 15,000 SCANA Corp. ................................................ 403,125 36,000 Sierra Pacific Resources.................................... 623,250 10,000 Texas Utilities Co. ........................................ 355,625 30,000 Unicom Corp. ............................................... 1,005,000 - --------------------------------------------------------------------------------------- 17,759,973 - --------------------------------------------------------------------------------------- NATURAL GAS -- 13.6% 16,000 Coastal Corp. .............................................. 567,000 10,000 Consolidated Natural Gas Co. ............................... 649,375 22,000 Energen Corp. .............................................. 397,375 15,000 MCN Energy Group, Inc. ..................................... 356,250 15,000 National Fuel Gas Co. ...................................... 697,500 20,000 Sempra Energy............................................... 347,500 20,000 Southwest Gas Corp. ........................................ 460,000 26,000 The Williams Cos., Inc. .................................... 794,625 - --------------------------------------------------------------------------------------- 4,269,625 - ---------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 46 - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS (CONTINUED) DECEMBER 31, 1999 UTILITIES PORTFOLIO
SHARES SECURITY VALUE - --------------------------------------------------------------------------------------- TELEPHONE -- 23.6% 9,450 AT&T Corp. ................................................. $ 479,587 10,000 Bell Atlantic Corp. ........................................ 615,625 4,650 Covad Communications+....................................... 260,109 10,000 GTE Corp. .................................................. 705,625 30,000 MCI Worldcom, Inc.+......................................... 1,591,875 16,000 NEXTLINK Communications Inc.+............................... 1,329,000 12,000 Qwest Communications International Inc.+.................... 516,000 20,000 SBC Communications Inc. .................................... 975,000 14,000 Sprint Corp. (FON Group).................................... 942,375 - --------------------------------------------------------------------------------------- 7,415,196 - --------------------------------------------------------------------------------------- TOTAL COMMON STOCK (Cost -- $25,030,185).................... 30,981,044 - ---------------------------------------------------------------------------------------
FACE AMOUNT RATING(a) SECURITY VALUE - ------------------------------------------------------------------------------------------------------ CORPORATE BONDS -- 1.3% - ------------------------------------------------------------------------------------------------------ ELECTRIC - UTILITY -- 0.6% $200,000 A- Arizona Public Service Co., 7.250% due 8/1/23............... 178,750 - ------------------------------------------------------------------------------------------------------ TELEPHONE -- 0.7% 230,000 A- MCI Communication Corp. 7.750% due 3/23/25.................. 218,213 - ------------------------------------------------------------------------------------------------------ TOTAL CORPORATE BONDS (Cost -- $404,980).................... 396,963 - ------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS -- 100%(Cost -- $25,435,165**)............ $31,378,007 - ------------------------------------------------------------------------------------------------------
+ Non-income producing security. (a) All ratings are by Standard & Poor's Ratings Service, except those identified by an asterisk (*) which are rated by Moody's Investors Service Inc. ** Aggregate cost for federal income tax purposes is substantially the same. See page 48 for definitions of ratings. SEE NOTES TO FINANCIAL STATEMENTS. 47 - -------------------------------------------------------------------------------- BOND RATINGS (UNAUDITED) The definitions of the applicable rating symbols are set forth below: Standard & Poor's Ratings Service ("Standard & Poor's") -- Ratings from "AA" to "C" may be modified by the addition of a plus (+) or a minus (-) sign to show relative standings within the major rating categories. AAA -- Bonds rated "AAA" has the highest rating assigned by Standard & Poor's. Capacity to pay interest and repay principal is extremely strong. AA -- Bonds rated "AA" has a very strong capacity to pay interest and repay principal and differs from the highest rated issue only in a small degree. A -- Bonds rated "A" has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. BBB -- Bonds rated "BBB" are regarded as having an adequate capacity to pay interest and repay principal. Whereas they normally exhibit adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for bonds in this category than for bonds in higher rated categories. BB, B -- Bonds rated "BB" and "B" are regarded, on balance, as and CCC predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. "BB" represents a lower degree of speculation than "B", and "CCC" the highest degree of speculation. While such bonds will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions. C -- The rating "C" is reserved for income bonds on which no interest is being paid. D -- Bonds rated "D" are in default, and payment of interest and/or repayment of principal is in arrears.
Moody's Investors Service Inc. ("Moody's") -- Numerical modifiers 1, 2 and 3 may be applied to each generic rating from "Aa" to "C", where 1 is the highest and 3 the lowest rating within its generic category. Aaa -- Bonds rated "Aaa" are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa -- Bonds rated "Aa" are judged to be of high quality by all standards. Together with the "Aaa" group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in "Aaa" securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in "Aaa" securities. A -- Bonds rated "A" possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment some time in the future. Baa -- Bonds rated "Baa" are considered to be medium grade obligations; that is, they are neither highly protected nor poorly secured. Interest payment and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. These bonds lack outstanding investment characteristics and may have speculative characteristics as well. Ba -- Bonds rated "Ba" are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B -- Bonds rated "B" generally lack characteristics of desirable investments. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa -- Bonds rated "Caa" are of poor standing. These issues may be in default, or present elements of danger may exist with respect to principal or interest. Ca -- Bonds rated "Ca" represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings. C -- Bonds rated "C" are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. NR -- Indicates that the bond is not rated by Standard & Poor's or Moody's.
48 - -------------------------------------------------------------------------------- STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 1999
U.S. GOVERNMENT SOCIAL AWARENESS SECURITIES STOCK UTILITIES PORTFOLIO PORTFOLIO PORTFOLIO - ------------------------------------------------------------------------------------------------------------- ASSETS: Investments, at value (Cost -- $63,948,034 $49,100,464, and $25,435,165, respectively)....... $60,688,943 $68,420,739 $31,378,007 Cash................................................. 448,215 408 -- Dividends and interest receivable.................... 531,355 43,466 83,004 Receivable for securities sold....................... -- 222,221 269,579 Receivable for Fund shares sold...................... -- -- 14,323 - ------------------------------------------------------------------------------------------------------------- TOTAL ASSETS......................................... 61,668,513 68,686,834 31,744,913 - ------------------------------------------------------------------------------------------------------------- LIABILITIES: Investment advisory fees payable..................... 17,453 42,546 17,460 Administration fees payable.......................... 3,171 10,337 1,612 Payable to bank...................................... -- -- 283,578 Payable for Fund shares purchased.................... 15,721 45,276 -- Payable for securities purchased..................... -- 327,045 -- Accrued expenses..................................... 9,477 22,913 29,183 - ------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES.................................... 45,822 448,117 331,833 - ------------------------------------------------------------------------------------------------------------- TOTAL NET ASSETS....................................... $61,622,691 $68,238,717 $31,413,080 - ------------------------------------------------------------------------------------------------------------- NET ASSETS: Paid-in capital...................................... $64,156,331 $47,783,697 $24,677,585 Undistributed net investment income.................. 3,702,189 378,042 823,546 Accumulated net realized gain (loss) from security transactions...................................... (2,976,738) 756,703 (30,893) Net unrealized appreciation (depreciation) of investments....................................... (3,259,091) 19,320,275 5,942,842 - ------------------------------------------------------------------------------------------------------------- TOTAL NET ASSETS....................................... $61,622,691 $68,238,717 $31,413,080 - ------------------------------------------------------------------------------------------------------------- SHARES OUTSTANDING..................................... 5,451,398 2,319,103 1,974,463 - ------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, PER SHARE............................. $11.30 $29.42 $15.91 - -------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 49 - -------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999
U.S. GOVERNMENT SOCIAL AWARENESS SECURITIES STOCK UTILITIES PORTFOLIO PORTFOLIO PORTFOLIO - ------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME: Interest................................................ $ 4,068,794 $ 271,084 $ 108,892 Dividends............................................... -- 566,041 1,015,481 Less: Foreign withholding tax........................... -- (18,941) -- - ------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME................................. 4,068,794 818,184 1,124,373 - ------------------------------------------------------------------------------------------------------------- EXPENSES: Investment advisory fees (Note 2)....................... 205,660 348,890 222,001 Administration fees (Note 2)............................ 37,886 32,806 20,492 Audit and legal......................................... 26,000 29,500 29,469 Shareholder and system servicing fees................... 15,000 13,000 13,000 Shareholder communications.............................. 6,000 5,500 7,196 Custody................................................. 4,300 3,516 3,000 Trustees' fees.......................................... 4,000 4,000 4,000 Pricing service fees.................................... 800 -- 500 Other................................................... 2,500 1,006 990 - ------------------------------------------------------------------------------------------------------------- TOTAL EXPENSES.......................................... 302,146 438,218 300,648 - ------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME..................................... 3,766,648 379,966 823,725 - ------------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 3): Realized Gain (Loss) From Security Transactions (excluding short-term securities): Proceeds from sales.................................. 98,750,626 6,690,168 3,331,237 Cost of securities sold.............................. 101,447,550 5,924,447 3,362,130 - ------------------------------------------------------------------------------------------------------------- NET REALIZED GAIN (LOSS)................................ (2,696,924) 765,721 (30,893) - ------------------------------------------------------------------------------------------------------------- Change in Net Unrealized Appreciation (Depreciation) of Investments: Beginning of year.................................... 471,702 12,473,196 6,697,308 End of year.......................................... (3,259,091) 19,320,275 5,942,842 - ------------------------------------------------------------------------------------------------------------- CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION).... (3,730,793) 6,847,079 (754,466) - ------------------------------------------------------------------------------------------------------------- NET GAIN (LOSS) ON INVESTMENTS............................ (6,427,717) 7,612,800 (785,359) - ------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS......... $ (2,661,069) $ 7,992,766 $ 38,366 - -------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 50 - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED DECEMBER 31, 1999
U.S. GOVERNMENT SOCIAL AWARENESS SECURITIES STOCK UTILITIES PORTFOLIO PORTFOLIO PORTFOLIO - ------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income............................ $ 3,766,648 $ 379,966 $ 823,725 Net realized gain (loss)......................... (2,696,924) 765,721 (30,893) Change in net unrealized appreciation (depreciation)................................ (3,730,793) 6,847,079 (754,466) - ------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS.................................... (2,661,069) 7,992,766 38,366 - ------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income............................ (5,416) (185,510) (791,288) Net realized gains............................... -- (952,059) (1,799,094) - ------------------------------------------------------------------------------------------------------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS.................................. (5,416) (1,137,569) (2,590,382) - ------------------------------------------------------------------------------------------------------- FUND SHARE TRANSACTIONS (NOTE 8): Net proceeds from sale of shares................. 14,321,630 22,265,700 6,945,662 Net asset value of shares issued for reinvestment of dividends.................................. 5,416 1,137,569 2,590,382 Cost of shares reacquired........................ (16,491,880) (1,502,002) (8,479,998) - ------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM FUND SHARE TRANSACTIONS....................... (2,164,834) 21,901,267 1,056,046 - ------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS.................. (4,831,319) 28,756,464 (1,495,970) NET ASSETS: Beginning of year................................ 66,454,010 39,482,253 32,909,050 - ------------------------------------------------------------------------------------------------------- END OF YEAR*..................................... $ 61,622,691 $68,238,717 $31,413,080 - ------------------------------------------------------------------------------------------------------- * Includes undistributed net investment income of:........................................... $3,702,189 $378,042 $823,546 - -------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 51 - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 1998
U.S. GOVERNMENT SOCIAL AWARENESS SECURITIES STOCK UTILITIES PORTFOLIO PORTFOLIO PORTFOLIO - ------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income............................ $ 2,553,087 $ 185,510 $ 793,468 Net realized gain................................ 3,015,324 952,131 1,796,917 Increase (decrease) in net unrealized appreciation.................................. (1,235,350) 7,147,456 1,908,703 - ------------------------------------------------------------------------------------------------------- INCREASE IN NET ASSETS FROM OPERATIONS........... 4,333,061 8,285,097 4,499,088 - ------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income............................ (2,585,952) (156,005) (643,885) Net realized gains............................... (2,807,849) (535,723) (609,017) - ------------------------------------------------------------------------------------------------------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS.................................. (5,393,801) (691,728) (1,252,902) - ------------------------------------------------------------------------------------------------------- FUND SHARE TRANSACTIONS (NOTE 8): Net proceeds from sale of shares................. 37,655,108 12,345,818 10,648,592 Net asset value of shares issued for reinvestment of dividends.................................. 5,393,801 691,728 1,252,902 Cost of shares reacquired........................ (10,813,602) (2,161,874) (3,651,686) - ------------------------------------------------------------------------------------------------------- INCREASE IN NET ASSETS FROM FUND SHARE TRANSACTIONS.................................. 32,235,307 10,875,672 8,249,808 - ------------------------------------------------------------------------------------------------------- INCREASE IN NET ASSETS............................. 31,174,567 18,469,041 11,495,994 NET ASSETS: Beginning of year................................ 35,279,443 21,013,212 21,413,056 - ------------------------------------------------------------------------------------------------------- END OF YEAR*..................................... $ 66,454,010 $39,482,253 $32,909,050 - ------------------------------------------------------------------------------------------------------- * Includes undistributed net investment income of:........................................... $5,474 $185,510 $791,288 - -------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 52 - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES The U.S. Government Securities, Social Awareness Stock and Utilities Portfolios (collectively, "Portfolio(s)") are separate investment portfolios of The Travelers Series Trust ("Trust"). The Trust is a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company and consists of these portfolios and 17 other separate investment portfolios: Travelers Quality Bond, Lazard International Stock, MFS Emerging Growth, Federated High Yield, Federated Stock, Large Cap, Equity Income, Disciplined Mid Cap Stock, Convertible Bond, Strategic Stock, Disciplined Small Cap Stock, MFS Mid Cap Growth, MFS Research, NWQ Large Cap, Jurika & Vogles Core Equity, Zero Coupon Bond Fund Portfolio Series 2000 and Zero Coupon Bond Fund Portfolio Series 2005 Portfolios. Shares of the Trust are offered only to insurance company separate accounts that fund certain variable annuity and variable life insurance contracts. The financial statements and financial highlights for the other portfolios are presented in separate shareholder reports. The significant accounting policies consistently followed by the Portfolios are: (a) security transactions are accounted for on trade date; (b) securities traded on national securities markets are valued at the closing prices on such markets; securities for which no sales prices were reported and U.S. Government and Agency obligations are valued at the mean between the last reported bid and asked prices or on the basis of quotations received from reputable brokers or other recognized sources; (c) securities for which market quotations are not available will be valued in good faith at fair value by or under the direction of the Board of Trustees; (d) securities maturing within 60 days are valued at cost plus accreted discount, or minus amortized premium, which approximates value; (e) securities, other than U.S. government agencies and obligations, that have a maturity of 60 days or more are valued at prices based on market quotations for securities of similar type, yield and maturity; (f) interest income, adjusted for amortization of premium and accretion of discount, is recorded on the accrual basis and dividend income is recorded on the ex-dividend date; (g) gains or losses on the sale of securities are calculated by using the specific identification method; (h) dividends and distributions to shareholders are recorded on the ex-dividend date; (i) the Portfolios intend to comply with the requirements of the Internal Revenue Code of 1986, as amended, pertaining to regulated investment companies and to make distributions of taxable income sufficient to relieve it from substantially all Federal income and excise taxes; (j) the character of income and gains to be distributed are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. At December 31, 1999, reclassifications were made to the capital accounts of the U.S. Government Securities Portfolio, Social Awareness Stock Portfolio and Utilities Portfolio to reflect permanent book/tax differences and income and gains available for distribution under income tax regulations. Accordingly, for the Utilities Portfolio, a portion of undistributed net investment income amounting to $173 and accumulated net realized losses amounting to $3 was reclassified to paid-in capital. In addition, for the U.S. Government Securities a portion of undistributed net investment income amounting to $58 was reclassed to paid in capital. Net investment income, net realized gains and net assets for each Portfolio were not affected by these changes; and (k) estimates and assumptions are required to be made regarding assets, liabilities and changes in net assets resulting from operations when financial statements are prepared. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ. 2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS Travelers Asset Management International Corporation ("TAMIC"), an indirect wholly owned subsidiary of Citigroup, Inc., acts as investment manager and advisor to the U.S. Government Securities Portfolio ("USGS"). USGS pays TAMIC an investment management and advisory fee calculated at the annual rate of 0.3233% of its average daily net assets. This fee is calculated daily and paid monthly. SSB Citi Fund Management LLC ("SSBC"), formerly known as SSBC Fund Management Inc., a subsidiary of Salomon Smith Barney Holdings Inc. ("SSBH") and an indirect wholly owned subsidiary of Citigroup, Inc., acts as investment manager and advisor to the Social Awareness Stock ("SAS") and Utilities ("Utilities") Portfolios. SAS pays SSBC an investment management and advisory fee calculated at an annual rate of: 0.65% on the first $50 million, 0.55% on the next $50 million, 0.45% on the next $100 million and 0.40% on amounts over $200 million of the average daily net assets. Utilities pays SSBC investment management and advisory fees calculated at an annual rate of 0.65% of the average daily net assets. These fees are calculated daily and paid monthly. 53 - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) Travelers Insurance Company ("Travelers Insurance") acts as administrator to the Portfolios. The Portfolios pay Travelers Insurance an administration fee calculated at an annual rate of 0.06% of the average daily net assets. Travelers Insurance has entered into a sub-administrative services agreement with SSBC. Travelers Insurance pays SSBC, as sub-administrator, a fee calculated at an annual rate of 0.06% of the average daily net assets of each Portfolio. This fee is calculated daily and paid monthly. Effective October 1999, Smith Barney Private Trust Company ("Private Trust"), another subsidiary of Citigroup, became the Fund's transfer agent and PFPC Global Fund Services ("PFPC") became the sub-transfer agent. Private Trust receives account fees and asset-based fees that vary according to the size and type of account. PFPC is responsible for shareholder recordkeeping and financial processing for all shareholder accounts and is paid by Private Trust. During the period October 1, 1999 through December 31, 1999, USGS, SAS, and Utilities, the Fund each paid transfer agent fees of $1,250 to Private Trust. One Trustee and all officers of the Trust are employees of Citigroup, Inc., or its subsidiaries. 3. INVESTMENTS During the year ended December 31, 1999, the aggregate cost of purchases and proceeds from sales of investments (including maturities, but excluding short-term securities) were as follows:
USGS SAS UTILITIES - ----------------------------------------------------------------------------------------------------- Purchases................................................... $110,985,481 $25,321,676 $4,641,969 - ----------------------------------------------------------------------------------------------------- Sales....................................................... 98,750,626 6,690,168 3,331,237 - -----------------------------------------------------------------------------------------------------
At December 31, 1999, aggregate gross unrealized appreciation and depreciation of investments for Federal income tax purposes were substantially as follows:
USGS SAS UTILITIES - ----------------------------------------------------------------------------------------------------- Gross unrealized appreciation............................... $ 82,220 $22,104,593 $ 7,857,308 Gross unrealized depreciation............................... (3,341,311) (2,784,318) (1,914,466) - ----------------------------------------------------------------------------------------------------- Net unrealized appreciation (depreciation).................. $(3,259,091) $19,320,275 $ 5,942,842 - -----------------------------------------------------------------------------------------------------
4. REPURCHASE AGREEMENTS The Portfolios purchase (and their custodian takes possession of) U.S. Government securities from banks and securities dealers subject to agreements to resell the securities to the sellers at a future date (generally, the next business day) at an agreed-upon higher repurchase price. The Portfolios require continual maintenance of the market value of the collateral in amounts at least equal to the repurchase price. 5. FUTURES CONTRACTS Initial margin deposits made upon entering into futures contracts are recognized as assets. The initial margin is segregated by the custodian and is noted in the schedule of investments. During the period the futures contract is open, changes in the value of the contract are recognized as unrealized gains or losses by "marking-to-market" on a daily basis to reflect the market value of the contract at the end of each day's trading. Variation margin payments are made or received and recognized as assets due from or liabilities due to broker, depending upon whether unrealized gains or losses are incurred. When the contract is closed, the Portfolios record a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transactions and the Portfolio's basis in the contract. The Portfolios enter into such contracts to hedge portions of their respective portfolios. The Portfolios bear the market risk that arises from changes in the value of the financial instruments and securities indices (futures contracts). At December 31, 1999, the Portfolios had no open futures contracts. 54 - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) 6. OPTIONS CONTRACTS Premiums paid when put or call options are purchased by the Portfolios, represent investments, which are "marked-to-market" daily. When a purchased option expires, the Portfolios will realize a loss in the amount of the premium paid. When the Portfolios enter into closing sales transactions, the Portfolios will realize a gain or loss depending on whether the proceeds from the closing sales transactions are greater or less than the premium paid for the option. When the Portfolios exercise a put option, they will realize a gain or loss from the sale of the underlying security and the proceeds from such sale will be decreased by the premium originally paid. When the Portfolios exercise a call option, the cost of the security which the Portfolios purchase upon exercise will be increased by the premium originally paid. At December 31, 1999, the Portfolios had no open purchased call or put options contracts. 7. SECURITIES TRADED ON A TO-BE-ANNOUNCED BASIS The Portfolios may trade securities on a "to-be-announced" ("TBA") basis. In a TBA transaction, the Portfolios commit to purchasing or selling securities for which specific information is not yet known at the time of the trade, particularly the face amount and maturity date in GNMA/FNMA transactions. Securities purchased on a TBA basis are not settled until they are delivered to the Portfolios, normally 15 to 45 days later. These transactions are subject to market fluctuations and their current value is determined in the same manner as for other securities. As of December 31, 1999, USGS had purchased a TBA security with total cost of $1,919,163, respectively. 8. SHARES OF BENEFICIAL INTEREST The Declaration of Trust authorizes the issuance of an unlimited number of shares of beneficial interest without par value. Transactions in shares of each Portfolio were as follows:
YEAR ENDED YEAR ENDED DECEMBER 31, 1999 DECEMBER 31, 1998 - --------------------------------------------------------------------------------------------------- U.S. GOVERNMENT SECURITIES PORTFOLIO Shares sold................................................. 1,246,566 3,036,112 Shares issued on reinvestment............................... 484 457,035 Shares reacquired........................................... (1,427,742) (888,165) - ---------------------------------------------------------------------------------------------------- Net Increase (Decrease)..................................... (180,692) 2,604,982 - ---------------------------------------------------------------------------------------------------- SOCIAL AWARENESS STOCK PORTFOLIO Shares sold................................................. 808,161 542,975 Shares issued on reinvestment............................... 40,998 29,867 Shares reacquired........................................... (53,531) (96,777) - ---------------------------------------------------------------------------------------------------- Net Increase................................................ 795,628 476,065 - ---------------------------------------------------------------------------------------------------- UTILITIES PORTFOLIO Shares sold................................................. 414,864 663,583 Shares issued on reinvestment............................... 154,823 80,676 Shares reacquired........................................... (510,525) (229,307) - ---------------------------------------------------------------------------------------------------- Net Increase................................................ 59,162 514,952 - ----------------------------------------------------------------------------------------------------
9. CAPITAL LOSS CARRYFORWARDS At December 31, 1999, the USGS had, for Federal income tax purposes, capital loss carryforwards available to offset future realized gains. To the extent that these carryforward losses can be used to offset net realized capital gains, such gains, if any, will not be distributed. The amount of $2,847,000 expires December 31, 2007. 55 - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS For a share of beneficial interest outstanding throughout each year ended December 31:
U.S. GOVERNMENT SECURITIES PORTFOLIO 1999(1) 1998 1997 1996 1995 - ----------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF YEAR.................. $11.80 $11.65 $10.86 $12.43 $10.58 - ----------------------------------------------------------------------------------------------------------------- INCOME (LOSS) FROM OPERATIONS: Net investment income............................. 0.68 0.49 0.58 0.68 0.65 Net realized and unrealized gain (loss)........... (1.18) 0.70 0.79 (0.52) 1.80 - ----------------------------------------------------------------------------------------------------------------- Total Income (Loss) From Operations................. (0.50) 1.19 1.37 0.16 2.45 - ----------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS FROM(2): Net investment income............................. (0.00)* (0.50) (0.58) (1.55) (0.60) Net realized gains................................ -- (0.54) -- (0.18) -- - ----------------------------------------------------------------------------------------------------------------- Total Distributions................................. -- (1.04) (0.58) (1.73) (0.60) - ----------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF YEAR........................ $11.30 $11.80 $11.65 $10.86 $12.43 - ----------------------------------------------------------------------------------------------------------------- TOTAL RETURN........................................ (4.23)% 10.20% 12.62% 1.46% 24.42% - ----------------------------------------------------------------------------------------------------------------- NET ASSETS, END OF YEAR (000'S)..................... $61,623 $66,454 $35,279 $26,009 $28,192 - ----------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: Expenses(3)....................................... 0.48% 0.45% 0.49% 0.62% 0.56% Net investment income............................. 5.97 5.31 6.10 5.68 5.80 - ----------------------------------------------------------------------------------------------------------------- PORTFOLIO TURNOVER RATE............................. 164% 349% 208% 501% 214% - -----------------------------------------------------------------------------------------------------------------
SOCIAL AWARENESS STOCK PORTFOLIO 1999(1) 1998 1997 1996 1995 - ----------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF YEAR.................. $25.92 $20.06 $15.76 $14.32 $11.05 - ----------------------------------------------------------------------------------------------------------------- INCOME FROM OPERATIONS: Net investment income(4).......................... 0.13 0.10 0.15 0.31 0.12 Net realized and unrealized gain.................. 3.93 6.30 4.15 2.42 3.47 - ----------------------------------------------------------------------------------------------------------------- Total Income From Operations........................ 4.06 6.40 4.30 2.73 3.59 - ----------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS FROM(2): Net investment income............................. (0.09) (0.12) -- (0.43) (0.14) Net realized gains................................ (0.47) (0.42) -- (0.86) (0.18) - ----------------------------------------------------------------------------------------------------------------- Total Distributions................................. (0.56) (0.54) -- (1.29) (0.32) - ----------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF YEAR........................ $29.42 $25.92 $20.06 $15.76 $14.32 - ----------------------------------------------------------------------------------------------------------------- TOTAL RETURN........................................ 15.84% 32.27% 27.28% 19.98% 33.37% - ----------------------------------------------------------------------------------------------------------------- NET ASSETS, END OF YEAR (000'S)..................... $68,239 $39,482 $21,013 $11,040 $7,055 - ----------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: Expenses(4)(5).................................... 0.80% 0.84% 0.98% 1.25% 1.25% Net investment income............................. 0.69 0.63 0.97 0.43 0.99 - ----------------------------------------------------------------------------------------------------------------- PORTFOLIO TURNOVER RATE............................. 12% 14% 19% 26% 73% - -----------------------------------------------------------------------------------------------------------------
(1) Per share amounts have been calculated using the monthly average shares method. (2) Distributions from realized gains include both net realized short-term and long-term capital gains. Prior to 1996 net realized short-term capital gains were included in distributions from net investment income. (3) As a result of voluntary expense limitations, the ratio of expenses to average net assets will not exceed 1.25%. (4) For the year ended December 31, 1996, The Travelers reimbursed the Social Awareness Stock Portfolio for $25,093 in expenses. If such fees were not waived and expenses not reimbursed, the per share decrease of net investment income would have been $0.06 and the actual expense ratio would have been 1.69%. (5) The ratio of expenses to average net assets for the year ended December 31, 1995 reflects an expense reimbursement by The Travelers in connection with voluntary expense limitations. Without the expense reimbursement, the ratio of expenses to average net assets would have been 1.75%. * Amount represents less than $0.01 per share. 56 - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (CONTINUED) For a share of beneficial interest outstanding throughout each year ended December 31:
UTILITIES PORTFOLIO 1999(1) 1998 1997 1996 1995 - ----------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF YEAR.................. $17.18 $15.29 $12.22 $12.85 $10.17 - ----------------------------------------------------------------------------------------------------------------- INCOME (LOSS) FROM OPERATIONS: Net investment income............................. 0.41 0.37 0.46 0.47 0.48 Net realized and unrealized gain (loss)........... (0.36) 2.33 2.63 0.47 2.44 - ----------------------------------------------------------------------------------------------------------------- Total Income From Operations........................ 0.05 2.70 3.09 0.94 2.92 - ----------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS FROM(2): Net investment income............................. (0.40) (0.42) (0.01) (0.84) (0.24) Net realized gains................................ (0.92) (0.39) (0.01) (0.73) -- - ----------------------------------------------------------------------------------------------------------------- Total Distributions................................. (1.32) (0.81) (0.02) (1.57) (0.24) - ----------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF YEAR........................ $15.91 $17.18 $15.29 $12.22 $12.85 - ----------------------------------------------------------------------------------------------------------------- TOTAL RETURN........................................ (0.08)% 18.21% 25.29% 7.47% 29.29% - ----------------------------------------------------------------------------------------------------------------- NET ASSETS, END OF YEAR (000'S)..................... $31,413 $32,909 $21,413 $18,214 $15,340 - ----------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: Expenses(3)....................................... 0.88% 0.80% 1.06% 1.07% 1.25% Net investment income............................. 2.41 3.06 3.58 3.88 4.29 - ----------------------------------------------------------------------------------------------------------------- PORTFOLIO TURNOVER RATE............................. 10% 51% 68% 39% 25% - -----------------------------------------------------------------------------------------------------------------
(1) Per share amounts have been calculated using the monthly average shares method. (2) Distributions from realized gains include both net realized short-term and long-term capital gains. Prior to 1996 net realized short-term capital gains were included in distributions from net investment income. (3) The ratio of expenses to average net assets for the year ended December 31, 1995 reflects expense reimbursements by The Travelers in connection with voluntary expense limitations. Without the expense reimbursement, the ratio of expenses to average net assets would have been 1.27%. 57 - -------------------------------------------------------------------------------- INDEPENDENT AUDITORS' REPORT THE SHAREHOLDERS AND BOARD OF TRUSTEES OF THE TRAVELERS SERIES TRUST: We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of the U.S. Government Securities Portfolio, Social Awareness Stock Portfolio and Utilities Portfolio of The Travelers Series Trust as of December 31, 1999, and the related statements of operations for the year then ended, statements of changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the three-year period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the years in the two-year period ended December 31, 1996, were audited by other auditors whose report thereon, dated February 24, 1997, expressed an unqualified opinion on those financial statements and financial highlights. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1999, by correspondence with the custodian. As to securities purchased or sold but not yet received or delivered, we performed other appropriate auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial positions of the U.S. Government Securities Portfolio, Social Awareness Stock Portfolio and Utilities Portfolio of The Travelers Series Trust as of December 31, 1999, the results of their operations for the year then ended, changes in their net assets for each of the years in the two-year period then ended and their financial highlights for the each of the years in the three-year period then ended, in conformity with generally accepted accounting principles. [KPMG Peat Marwick LLP Signature] New York, New York February 11, 2000 58 - -------------------------------------------------------------------------------- TAX INFORMATION (UNAUDITED) For Federal tax purposes the Trust hereby designates for the fiscal year ended December 31, 1999: - Percentages of ordinary dividends paid as qualifying for the corporate dividends received deduction: Social Awareness Stock Portfolio.................. 90.38% Utilities Portfolio............................... 67.85
- Total long-term capital gain distributions paid: Social Awareness Stock Portfolio.................. $ 826,008 Utilities Portfolio............................... 1,355,703
The following percentages of ordinary dividends paid from net investment income are derived from Federal obligations and may be exempt from taxation at the state level. Utilities Portfolio.................................... 2.02% U.S. Government Securities Portfolio................... 33.53
59 (This page intentionally left blank) Investment Advisers -------------------- MANAGED ASSETS TRUST, HIGH YIELD BOND TRUST, CAPITAL APPRECIATION FUND, MONEY MARKET PORTFOLIO AND THE TRAVELERS SERIES TRUST: U.S. GOVERNMENT SECURITIES PORTFOLIO TRAVELERS ASSET MANAGEMENT INTERNATIONAL CORPORATION Hartford, Connecticut THE TRAVELERS SERIES TRUST: SOCIAL AWARENESS STOCK PORTFOLIO AND UTILITIES PORTFOLIO SSB CITI FUND MANAGEMENT LLC New York, New York Independent Auditors --------------------- KPMG LLP New York, New York Custodian ---------- PNC BANK, N.A. This report is prepared for the general information of contract owners and is not an offer of shares of Managed Assets Trust, High Yield Bond Trust, Capital Appreciation Fund, Money Market Portfolio, The Travelers Series Trust: U.S. Government Securities Portfolio, Social Awareness Stock Portfolio or Utilities Portfolio. It should not be used in connection with any offer except in conjunction with the Prospectuses for the Variable Annuity and Variable Universal Life Insurance products offered by The Travelers Insurance Company or Travelers Life & Annuity Company and the Prospectuses for the underlying funds, which collectively contain all pertinent information, including the applicable sales commissions. Printed in U.S.A. VG-181 (Annual)(2-00) -----END PRIVACY-ENHANCED MESSAGE-----