-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, not56mCb1lLTz5f23fN27DQ0RfhJWo+P19pOT6unNJAHSdjzR6vJ9raMLieZ3gNA 1/VMDO/ViTtbkn4mSla4Ew== 0000908812-95-000057.txt : 19950421 0000908812-95-000057.hdr.sgml : 19950421 ACCESSION NUMBER: 0000908812-95-000057 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19950420 EFFECTIVENESS DATE: 19950420 SROS: NONE 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: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 002-79359 FILM NUMBER: 95529829 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-03568 FILM NUMBER: 95529830 BUSINESS ADDRESS: STREET 1: ONE TOWER SQ CITY: HARTFORD STATE: CT ZIP: 06183 BUSINESS PHONE: 6173383200 485BPOS 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Post-Effective Amendment No. 18 and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 17 MANAGED ASSETS TRUST (Exact name of Registrant) ONE TOWER SQUARE, HARTFORD, CONNECTICUT 06183 (Address of Principal Executive Offices) Registrant's Telephone Number, including Area Code: (203) 277-0111 ERNEST J. WRIGHT Secretary to the Board of Trustees Managed Assets Trust One Tower Square Hartford, Connecticut 06183 (Name and Address of Agent for Service) Approximate Date of Proposed Public Offering: ____________________ It is proposed that this filing will become effective (check appropriate box): ____ immediately upon filing pursuant to paragraph (b) X on May 1, 1995 pursuant to paragraph (b) ____ ____ 60 days after filing pursuant to paragraph (a)(i) ____ on ___________ pursuant to paragraph (a)(i) ____ 75 days after filing pursuant to paragraph (a)(ii) ____ on ___________ pursuant to paragraph (a)(ii) of Rule 485. If appropriate, check the following box: ____ this Post-Effective Amendment designates a new effective date for a previously filed post-effective amendment. AN INDEFINITE NUMBER OF SHARES OF BENEFICIAL INTEREST OF THE REGISTRANT WERE REGISTERED PURSUANT TO RULE 24f-2 OF THE INVESTMENT COMPANY ACT OF 1940. A RULE 24f-2 NOTICE FOR REGISTRANT'S FISCAL YEAR ENDED DECEMBER 31, 1994 WAS FILED ON FEBRUARY 27, 1995. MANAGED ASSETS TRUST Cross-Reference Sheet pursuant to Rule 495 under the Securities Act of 1933 ITEM NO. CAPTION IN PROSPECTUS - ---- --------------------- 1. Cover Page Cover Page 2. Synopsis Not Applicable 3. Condensed Financial Information Financial Highlights 4. General Description of Registrant Cover Page; Fund Description; Investment Objective and Policies 5. Management of the Fund Board of Trustees; Investment Advisers; Portfolio Turnover and Expenses; Additional Information 6. Capital Stock and Other Securities Fund Description; Dividends and Taxes; Fund Shares; Pricing Shares 7. Purchase of Securities Being Offered How to Buy Shares 8. Redemption or Repurchase How to Redeem Shares 9. Legal Proceedings Legal Proceedings CAPTION IN STATEMENT OF ADDITIONAL INFORMATION ---------------------------------- 10. Cover Page Cover Page 11. Table of Contents Table of Contents 12. General Information and History Not Applicable 13. Investment Objectives and Policies Investment Objectives and Policies; Investment Restrictions; Appendix 14. Management of the Registrant Trustees and Officers 15. Control Persons and Principal Additional Information Holders of Securities 16. Investment Advisory and Investment Advisory Services; Other Services Additional Information 17. Brokerage Allocation Brokerage 18. Capital Stock and Other Securities Declaration of Trust 19. Purchase, Redemption and Pricing Valuation of Securities of Securities Being Offered 20. Tax Status Distributions and Tax Status 21. Underwriters Not Applicable 22. Calculation of Performance Data Not Applicable 23. Financial Statements Financial Statements PART A INFORMATION REQUIRED IN A PROSPECTUS MANAGED ASSETS TRUST ONE TOWER SQUARE HARTFORD, CONNECTICUT 06183 TELEPHONE 1-800-842-0125 Managed Assets Trust (the "Fund") is a diversified open-end management investment company (mutual fund) whose goal is high total investment return through a fully managed investment policy. The Fund has a fully managed investment policy and invests in common stocks, corporate bonds and money market instruments. Shares of the Fund are currently offered without a sales charge only to The Travelers Fund U for Variable Annuities ("Fund U") and The Travelers Fund UL for Variable Life Insurance ("Fund UL"), separate accounts of The Travelers Insurance Company (the "Company" or "Travelers Insurance"). The Fund serves as one of the investment vehicles for the variable annuity and variable life insurance contracts issued by the Company. Funds U and UL invest in shares of the Fund in accordance with allocation instructions received from owners of the variable annuity and variable life insurance contracts. Such allocation rights are described further in the accompanying prospectuses for Funds U and UL. The rights of Funds U and UL as shareholders should be distinguished from the rights of owners of the variable annuity and variable life insurance contracts. The term "shareholder" as used herein refers to Funds U and UL or to any other insurance company separate account that may use shares of the Fund as an investment vehicle in the future. This Prospectus concisely sets forth the information about the Fund that you should know before investing. Please read it and retain it for future reference. Additional information about the Fund is contained in a Statement of Additional Information dated May 1, 1995 which has been filed with the Securities and Exchange Commission and is incorporated by reference into this Prospectus. A copy may be obtained, without charge, by writing to Travelers Insurance, Annuity Services 5 SHS, One Tower Square, Hartford, Connecticut 06183-5030, or by calling 1-800-842-0125. THIS PROSPECTUS MUST BE ACCOMPANIED BY A CURRENT PROSPECTUS FOR VARIABLE ANNUITY OR VARIABLE LIFE INSURANCE CONTRACTS ISSUED BY TRAVELERS INSURANCE AND ITS SEPARATE ACCOUNTS. BOTH THIS PROSPECTUS AND THE CONTRACT PROSPECTUS SHOULD BE READ CAREFULLY AND RETAINED FOR FUTURE REFERENCE. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE DATE OF THIS PROSPECTUS IS MAY 1, 1995. THIS PAGE INTENTIONALLY LEFT BLANK. TABLE OF CONTENTS FINANCIAL HIGHLIGHTS .............................3 FUND DESCRIPTION .................................4 INVESTMENT OBJECTIVE AND POLICIES ................4 INVESTMENT RESTRICTIONS ..........................4 INVESTOR CONSIDERATIONS AND RISK FACTORS .........5 BOARD OF TRUSTEES ................................5 INVESTMENT ADVISERS ..............................5 TAMIC .........................................5 Advisory Fees ..............................6 Portfolio Manager ..........................6 TIMCO .........................................6 Sub-Advisory Fees ..........................6 Portfolio Manager ..........................6 SECURITIES TRANSACTIONS .......................6 PORTFOLIO TURNOVER ...............................7 FUND EXPENSES ....................................7 TRANSFER AGENT ...................................7 FUND SHARES ......................................7 HOW TO BUY SHARES ................................7 PRICING SHARES ...................................8 HOW TO REDEEM SHARES .............................8 DIVIDENDS AND TAX STATUS .........................8 LEGAL PROCEEDINGS ................................8 ADDITIONAL INFORMATION ...........................8 EXHIBIT A ........................................9
MAT-2 FINANCIAL HIGHLIGHTS MANAGED ASSETS TRUST PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR The following information on per share data for the five years ended December 31, 1994, has been audited by Coopers & Lybrand L.L.P, Independent Accountants. All other periods presented have been audited by the Fund's prior auditors. Coopers & Lybrand L.L.P.'s report on the per share data for each of the five years in the period ended December 31, 1994 is contained in the 1994 Annual Report to Shareholders. The Annual Report, which contains additional performance information, is incorporated by reference into the Statement of Additional Information. A copy of the Annual Report can be obtained without charge by writing to or calling the Company at the address and telephone number listed on the cover of this Prospectus. The following information should be read in conjunction with the financial statements contained in the 1994 Annual Report.
DECEMBER 1, to YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, NOVEMBER 30, 1994 1993 1992 1991 +1990 1989 1988 1987 1986 1986 1985 -------- -------- -------- -------- ------- ------- -------- -------- ------- ------- ------- PER SHARE DATA Net asset value, beginning of year...$ 14.21 $ 14.02 $ 14.78 $ 12.77 $ 13.03 $ 10.25 $ 9.89 $ 11.03 $ 12.07 $ 9.97 $ 8.24 Income from operations Net investment income ............ 0.46 0.51 0.64 0.74 0.65 0.52 0.48 0.40 0.04 0.42 0.44 Net gains or losses on securities (realized and unrealized) ....... (0.73) 0.72 0.01 1.91 (0.37) 2.26 0.43 (0.16) (0.23) 2.13 1.55 -------- -------- -------- -------- ------- ------- -------- -------- ------- ------- ------- Total from investment operations..... (0.27) 1.23 0.65 2.65 0.28 2.78 0.91 0.24 (0.19) 2.55 1.99 Less distributions Distributions from net investment income and short-term realized gains..... (0.67) (0.85) (1.04) (0.64) (0.54) -- (0.55) (0.38) (0.32) (0.45) (0.26) Distributions from long-term realized gains..... (0.42) (0.19) (0.37) -- -- -- -- (1.00) (0.53) -- -- -------- -------- -------- -------- ------- ------- -------- -------- ------- ------- ------- Total distributions.. (1.09) (1.04) (1.41) (0.64) (0.54) -- (0.55) (1.38) (0.85) (0.45) (0.26) Net asset value, end of year .......$ 12.85 $ 14.21 $ 14.02 $ 14.78 $ 12.77 $ 13.03 $ 10.25 $ 9.89 $ 11.03 $ 12.07 $ 9.97 ======== ======== ======== ======== ======= ======= ======== ======== ======= ======= ======= TOTAL RETURN* (2.24)% 9.33% 5.14% 21.70% 2.47% 27.12% 9.18% 1.92% 19.05%***19.05%***26.80%*** RATIOS/SUPPLEMENTAL DATA Net assets, end of year (thousands) ........$140,887 $156,767 $148,971 $126,021 $92,464 $84,223 $115,111 $119,866 $72,791 $69,291 $33,919 Ratio of expenses to average net assets ............ 0.61%** 0.56%** 0.56%** 0.56%** 0.59%** 0.71% 0.66% 0.67% 0.78%** 0.78% 0.85% Ratio of net investment income to average net assets ............. 3.59% 3.65% 4.97% 5.49% 5.17% 4.41% 4.55% 3.23% 4.07%*** 3.68% 4.93% Portfolio turnover rate**** .......... 97% 86% 112% 141% 123% 56% 105% 140% 3% 88% 101% * Total return is determined by dividing the increase (decrease) in value of a share during the year, after reflecting the reinvestment of dividends declared during the year, by the beginning of year share price. Shares in Fund MA are only sold to Travelers Insurance separate accounts in connection with the issuance of variable annuity and variable life insurance contracts. The above return does not reflect the deduction of any contract charges or fees assessed by Travelers Insurance separate accounts. ** The ratios of expenses to average net assets for 1990 and later years reflect an expense reimbursement by Travelers Insurance in connection with the voluntary expense limitations. Without the expense reimbursement, the ratios of operating expenses to average net assets would have been 0.60%, 0.63%, 0.69% and 0.74% for the years ended December 31, 1993, 1992, 1991 and 1990 respectively. For the year ended December 31, 1994, there was no expense reimbursement by Travelers Insurance in connection with the voluntary expense limitations. *** Annualized. **** Portfolio turnover rate for periods ending on or after November 30, 1985 includes certain U.S. Government obligations. + On May 1, 1990, TAMIC replaced Keystone Custodian Funds, Inc. as the investment adviser for the Fund.
MAT-3 FUND DESCRIPTION Managed Assets Trust (the "Fund") is registered with the Securities and Exchange Commission as a diversified open-end management investment company, commonly known as a mutual fund. The Fund was created under Massachusetts law as a Massachusetts business trust on August 6, 1982. INVESTMENT OBJECTIVE AND POLICIES The Fund's investment objective is to provide shareholders with a high total investment return through a fully managed investment policy. To do this, the Fund adjusts its overall exposure to risk by shifting its investment emphasis among investments providing alternatives for capital growth, capital stability and income as market and economic trends change. This fully managed investment policy makes use of equity, debt, convertible and money market securities. The Fund expects that over longer periods a larger portion of the Fund's portfolio will consist of equity securities. The Fund's investment philosophy is based on the belief that, as in the past, the structure of the United States economy and its securities markets will undergo continuous change. Thus, the fully managed approach puts maximum emphasis on flexibility. Because of the flexibility emphasized in the Fund's management approach, the Fund may have a high rate of turnover in its portfolio securities and thus higher costs of securities transactions and brokerage. Accordingly, the Fund would expect to have turnover in the range of 100% to 300%. The Fund expects that the portfolio turnover rate will be approximately 50% for debt securities, and 200% to 300% for equity securities. A higher turnover rate should not be interpreted as indicating variation from the stated investment policy of high total return. Portfolio turnover is expected to result when the Fund makes a change in its investments from one investment sector (such as the equity market) to another investment sector (such as the bond market), as well as in response to redemptions, when the Fund realizes capital gains, and in response to market conditions. Increased cost to the Fund may result if the Fund makes a change in the investment sector in which the greatest proportion of its assets is invested at a time when subsequent market conditions are unfavorable. The Fund may invest a limited portion of its assets in bonds which are rated lower than Baa by Moody's Investors Service, Inc. (Moody's) or BBB by Standard & Poor's Corporation (S&P) or which, if unrated, are deemed to be of comparable quality by the Fund's investment adviser. The Fund may not purchase any debt securities rated B or lower by either service or their equivalent. Bonds which are rated Baa by Moody's are considered to be medium grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal 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. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Debt rated BBB by S&P is regarded as having an adequate capacity to pay interest and repay principal. While it normally exhibits 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 debt in this category than in higher rated categories. Bonds which are rated lower than Baa by Moody's or BBB by S&P, but above B by either service, 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 good and bad times over the future. Uncertainty of position characterizes bonds in this class. TAMIC expects that securities rated below Baa by Moody's or below BBB by S&P will be primarily subordinated convertible securities of issuers whose senior debt is rated Baa or higher by Moody's, BBB or higher by S&P or, in the absence of such ratings, are deemed to be of comparable quality by TAMIC. The Fund may invest in money market instruments which mature within one year of their purchase, and which consist of U.S. government securities; instruments of banks insured by the Federal Deposit Insurance Corporation which have assets of at least $1 billion, including U.S. branches of foreign banks and foreign branches of U.S. banks, such as certificates of deposit, demand and time deposits and bankers' acceptances; prime commercial paper, including master demand notes; and repurchase agreements secured by U.S. government securities. For further information about the types of investments and investment techniques available to the Fund, including the associated investment risks, see Exhibit A to this Prospectus. INVESTMENT RESTRICTIONS The Fund has adopted the following fundamental investment restrictions which may not be changed without a vote of a majority of the outstanding voting securities of the Fund, as defined in the Investment Company Act of 1940, as MAT-4 amended. These restrictions and certain other fundamental restrictions are set forth in the Statement of Additional Information. Unless otherwise stated, all references to the Fund's assets are in terms of current market value. The Fund will not: (1) invest more than 25% of its assets in the securities of a single issuer; (2) borrow money, except that the Fund may borrow money from banks for temporary or emergency purposes in amounts of up to 10% of its assets; (3) pledge more than the lesser of the dollar amounts borrowed or 10% of its assets; (4) invest more than 25% of its assets in the securities of issuers in the same industry; and (5) invest more than 10% of its assets in securities for which market quotations are not readily available, including restricted securities. In addition, a policy which may be changed without shareholder approval permits the Fund to invest up to 25% of its assets in the securities of foreign issuers. The Fund has undertaken to a state insurance authority that so long as the state authority requires and shares of the Fund are offered for sale to fund variable life insurance policies in that state, the Fund will comply with certain foreign security diversification guidelines. These guidelines provide that: (1) as the percentage of the Fund's net asset value invested in foreign securities increases, a corresponding increase will be made in the number of countries in whose securities the Fund invests; and (2) the Fund will invest no more than 20% of its net asset value in the securities of issuers located in any one country (other than the United States). Notwithstanding the above, the guidelines permit the Fund to invest any amount in the securities of issuers located in the United States, and to invest an additional 15% of its net asset value in the securities of issuers located in Australia, Canada, France, Japan, the United Kingdom or Germany. The guidelines also require that American Depository Receipts be treated as if they were foreign securities. This undertaking is not a fundamental investment restriction or policy and may be changed without a vote of shareholders. INVESTOR CONSIDERATIONS AND RISK FACTORS The risk inherent in investing in the Fund is that the net asset value will fluctuate in response to changes in economic conditions, interest rates and the market's perception of the underlying portfolio securities of the Fund. There can, of course, be no assurance that the Fund will achieve its investment objective since there is uncertainty in every investment. The investment experience of equity investments over time will tend to reflect levels of stock market prices and dividend payouts. Both are affected by diverse factors, including not only business conditions and investor confidence in the economy, but current conditions in a particular industry or company. The yield on a common stock is not contractually determined. Equity securities are subject to financial risks relating to the earning stability and overall financial soundness of an issue. They are also subject to market risks relating to the effect of general changes in the securities market on the price of a security. The yield on debt instruments over a period of time should reflect prevailing interest rates, which depend on a number of factors, including government action in the capital markets, government fiscal and monetary policy, needs of businesses for capital goods for expansion, and investor expectations as to future inflation. The yield on a particular debt instrument is also affected by the risk that the issuer will be unable to pay principal and interest. BOARD OF TRUSTEES Under Massachusetts law, the Fund's Board of Trustees has absolute and exclusive control over the management and disposition of all assets of the Fund. Subject to the provisions of the Declaration of Trust, the business and affairs of the Fund shall be managed by the Trustees or other parties so designated by the Trustees. Information relating to the Board of Trustees, including its members and their compensation, is contained in the Statement of Additional Information. INVESTMENT ADVISERS As described above, the Board of Trustees monitors the activities of those entities which provide investment advisory services to the Fund. Travelers Asset Management International Corporation (TAMIC) provides investment advice and, in general, supervises the management and investment program of the Fund. The Travelers Investment Management Company (TIMCO) provides sub-advisory services to the Fund with respect to the Fund's common stock investments, subject to the supervision of the Board of Trustees and TAMIC. TAMIC TAMIC is a registered investment adviser which has provided investment advisory services since its incorporation in 1978. TAMIC is an indirect wholly owned subsidiary of Travelers Group Inc., and its principal offices are located at One Tower Square, Hartford, Connecticut 06183. In addition to providing investment advice to the Fund, TAMIC also MAT-5 acts as investment adviser for other investment companies used to fund variable products, including The Travelers Timed Bond Account for Variable Annuities, The Travelers Money Market Account for Variable Annuities, The Travelers Quality Bond Account for Variable Annuities, Cash Income Trust, High Yield Bond Trust and the U.S. Government Securities Portfolio of The Travelers Series Trust. TAMIC also provides investment advice to individual and pooled pension and profit-sharing accounts, offshore insurance companies affiliated with Travelers Insurance, and non-affiliated insurance companies, both domestic and offshore. ADVISORY FEES Under its Advisory Agreement with the Fund, TAMIC is paid an amount equivalent on an annual basis to 0.50% of the average daily net assets of the Fund. The fee is computed daily and paid weekly. PORTFOLIO MANAGER The fixed income investments of the Fund are managed by David A. Tyson, Ph.D. and CFA, since February 1994. Mr. Tyson is currently Vice President and the head of the Company's Portfolio Management Group. He directly manages The Travelers Annuity, Life Surplus and Convertible portfolios. His previous responsibilities have included managing The Travelers Derivatives, Mortgage-Backed and Quantitative Investment Groups. Mr. Tyson joined Travelers Insurance in 1985 and TAMIC in 1994. He previously spent seven years with the Equitable Investment Management Corporation where he was responsible for quantitative equity research and new product development. TIMCO As stated briefly above, TIMCO has been employed by TAMIC as the Fund's sub-adviser with respect to the management of the Fund's common stock investments. TIMCO is a registered investment adviser which has provided investment advisory services since its incorporation in 1967. TIMCO is an indirect wholly owned subsidiary of Travelers Group Inc. with principal offices located at One Tower Square, Hartford, Connecticut 06183. In addition to serving as sub-adviser to the Fund, TIMCO also acts as investment adviser for other investment companies used to fund variable products, including The Travelers Growth and Income Stock Account for Variable Annuities, The Travelers Timed Growth and Income Stock Account for Variable Annuities, The Travelers Timed Short-Term Bond Account for Variable Annuities, The Travelers Timed Aggressive Stock Account for Variable Annuities and Capital Appreciation Fund. TIMCO also provides investment advice to individual and pooled pension and profit-sharing accounts, and affiliated companies of Travelers Insurance. SUB-ADVISORY FEES For its services under the Sub-Advisory Agreement, TIMCO receives from TAMIC 50% of the investment advisory fees earned by TAMIC. PORTFOLIO MANAGER The common stock investments of the Fund are managed by a team of TIMCO's investment professionals. TIMCO uses a disciplined stock selection process to review a broad universe of equity securities and identify those that appear most attractive in terms of relative valuation and earnings momentum. A group of experienced investment professionals work as a team to select specific holdings and manage the portfolio according to specific diversification guidelines. Effective December 30, 1994, Kent A. Kelley, CFA, became Chief Executive Officer of TIMCO. Mr. Kelley is responsible for the day-to-day management of the common stock investments of the Fund, and is responsible for directing the activities of TIMCO's portfolio management team. Prior to this, Mr. Kelley was appointed President of TIMCO in November 1992, at which time he became responsible for management of the Fund. Prior to this appointment as President, Mr. Kelley was the Executive Vice President in charge of the risk management group in TIMCO, which managed index funds and other structured investment strategies. SECURITIES TRANSACTIONS Under policies established by the Board of Trustees, TAMIC and TIMCO will select broker-dealers to execute transactions for the Fund subject to the receipt of best execution. When selecting broker-dealers to execute portfolio transactions for the Fund, TAMIC and TIMCO may follow a policy of considering as a factor the number of shares of the Fund sold by such broker-dealers. In addition, broker-dealers may from time to time be affiliated with the Fund, TAMIC, TIMCO or their affiliates. MAT-6 The Fund may pay higher commissions to broker-dealers which provide research services. TAMIC and TIMCO may use these services in advising the Fund, as well as in advising other clients for which they acts as investment adviser. PORTFOLIO TURNOVER The Fund's portfolio turnover rates for the fiscal years ended December 31, 1992, 1993 and 1994 were 112%, 86% and 97%, respectively. High portfolio turnover may involve correspondingly greater brokerage commissions and other transaction costs, which would be borne directly by the Fund, as well as additional realized gains and/or losses to shareholders. FUND EXPENSES In addition to the investment advisory fees discussed above, the other principal expenses of the Fund include the charges and expenses of the transfer agent, the custodian, the independent auditors, and any outside legal counsel employed by either the Fund or the Board of Trustees; the compensation for the disinterested members of the Board of Trustees; the costs of printing and mailing the Fund's prospectuses, proxy solicitation materials, and annual, semi-annual and periodic reports; brokerage commissions, interest charges and taxes; and any registration, filing and other fees payable to government agencies in connection with the registration of the Fund and its shares under federal and state securities laws. Pursuant to a Management Agreement dated May 1, 1993 between the Fund and the Company, the Company has agreed to reimburse the Fund for the amount by which the Fund's aggregate annual expenses, including investment advisory fees but excluding brokerage commissions, interest charges and taxes, exceed 1.25% of the Fund's average net assets for any fiscal year. For the fiscal year ended December 31, 1994, the Fund paid .61% of its average net assets in expenses. TRANSFER AGENT Travelers Insurance, One Tower Square, Hartford, Connecticut 06183, serves as the Fund's transfer agent and dividend disbursing agent. FUND SHARES The Fund currently issues one class of shares which participate equally in dividends and distributions and have equal voting, liquidation and other rights. When issued and paid for, the shares will be fully paid and nonassessable by the Fund and will have no preference, conversion, exchange or preemptive rights. Shareholders are entitled to one vote for each full share owned and fractional votes for fractional shares. Shares are redeemable, transferable and freely assignable as collateral. There are no sinking fund provisions. (See the accompanying separate account prospectus for a discussion of voting rights applicable to purchasers of variable annuity and variable life insurance contracts.) Under Massachusetts law it is possible that a Fund shareholder may be held personally liable for the Fund's obligations. However, the Fund's Declaration of Trust provides that shareholders shall not be subject to any personal liability for the Fund's obligations and provides indemnification from Fund assets for any shareholder held personally liable for the Fund's obligations. Disclaimers of such liability are included in each Fund agreement. HOW TO BUY SHARES Shares of the Fund are currently sold only to The Travelers Fund U for Variable Annuities and The Travelers Fund UL for Variable Life Insurance in connection with variable annuity and variable life insurance contracts issued by the Company. Shares of the Fund are not sold to the general public. Fund shares are sold on a continuing basis, without a sales charge, at the net asset value next computed after payment is made by the insurance company to the Fund's custodian. However, the separate accounts to which shares are sold may impose sales and other charges, as described in the appropriate contract prospectus. Although the Fund is not currently aware of any disadvantages to contract owners of either variable annuity or variable life insurance contracts because the Fund's shares are available with respect to both products, an irreconcilable material conflict may conceivably arise between contract owners of different separate accounts investing in the Fund due MAT-7 to differences in tax treatment, management of the Fund's investments, or other considerations. The Fund's Board of Trustees will monitor events in order to identify any material conflicts between variable annuity contract owners and variable life insurance policy owners, and will determine what action, if any, should be taken in the event of such a conflict. PRICING SHARES The net asset value of a Fund share is computed as of the close of trading on each day on which the New York Stock Exchange is open, except on days when changes in the value of the Fund's securities do not affect the current net asset value of its shares. The New York Stock Exchange is currently closed on weekends, New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset value per share of the Fund is arrived at by determining the value of the Fund's assets, subtracting its liabilities, and dividing the result by the number of shares outstanding. Current values for the Fund's portfolio securities are determined as follows. Securities that are traded on a national securities exchange or the over-the-counter National Market System (NMS) are valued on the basis of the last sales price on the exchange where primarily traded or on the NMS prior to the time of the valuation, provided that a sale has occurred and that this price reflects current market value according to procedures established by the Board of Trustees. Securities traded in the over-the-counter market, other than NMS, are valued at the mean of the bid and asked prices at the time of valuation. Short-term instruments with maturities of sixty days or less (including all master demand notes) are valued at amortized cost (original purchase cost as adjusted for amortization of premium or accretion of discount) which, when combined with accrued interest receivable or amortized discount, approximates market. Short-term instruments with maturities of more than sixty days, for which market quotations are readily available, are valued at current market value. The following are valued at prices deemed in good faith to be fair under procedures established by the Board of Trustees: (a) securities, including restricted securities, for which complete quotations are not readily available; (b) listed securities or those on NMS if, in the Fund's opinion, the last sales price does not reflect a current market value or if no sale occurred; and (c) other assets. HOW TO REDEEM SHARES Shareholders may redeem Fund shares at the redemption value next determined after receipt by the Fund of a proper redemption request. The redemption value is the net asset value adjusted for fractions of a cent and may be more or less than the shareholder's cost depending upon changes in the value of the Fund's portfolio securities between purchase and redemption. The Fund computes the redemption value at the close of the New York Stock Exchange at the end of the day on which it has received all proper documentation from the shareholder. Redemption proceeds are normally wired or mailed either the same or the next business day, but in no event later than seven days thereafter. The Fund may temporarily suspend the right to redeem its shares when (1) the New York Stock Exchange is closed, other than customary weekend and holiday closings; (2) trading on the Exchange is restricted; (3) an emergency exists as determined by the Securities and Exchange Commission so that disposal of the Fund's investments or determination of its net asset value is not reasonably practicable; or (4) the Securities and Exchange Commission, for the protection of shareholders, so orders. DIVIDENDS AND TAX STATUS The Fund has qualified and intends to qualify in the future as a regulated investment company under Subchapter M of the Internal Revenue Code. The Fund qualifies if, among other things, it distributes to its shareholders at least 90% of its net investment income for each fiscal year. Capital gains and dividends are distributed in cash or reinvested in additional shares of the Fund, without a sales charge. Although purchasers of variable contracts are not subject to federal income taxes on distributions by the Fund, they may be subject to state and local taxes and should review the accompanying contract prospectus for a discussion of the tax treatment applicable to purchasers of variable annuity and variable life insurance contracts. LEGAL PROCEEDINGS There are no pending material legal proceedings affecting the Fund. ADDITIONAL INFORMATION Except as otherwise stated in this Prospectus or as required by law, the Fund reserves the right to change the terms of the offer stated in this Prospectus without shareholder approval, including the right to impose or change fees for services provided. MAT-8 EXHIBIT A DESCRIPTION OF CERTAIN TYPES OF INVESTMENTS AND INVESTMENT TECHNIQUES AVAILABLE TO THE FUND OBLIGATIONS OF FOREIGN BRANCHES OF UNITED STATES BANKS The obligations of foreign branches of United States banks may be general obligations of the parent bank in addition to the issuing branch, or may be limited by the terms of a specific obligation and by government regulation. Payment of interest and principal upon these obligations may also be affected by governmental action in the country of domicile of the branch (generally referred to as sovereign risk). In addition, evidences of ownership of such securities may be held outside the United States and the Fund may be subject to the risks associated with the holding of such property overseas. Various provisions of federal law governing domestic branches do not apply to foreign branches of domestic banks. OBLIGATIONS OF UNITED STATES BRANCHES OF FOREIGN BANKS Obligations of United States branches of foreign banks may be general obligations of the parent bank in addition to the issuing branch, or may be limited by the terms of a specific obligation and by federal and state regulation, as well as by governmental action in the country in which the foreign bank has its head office. In addition, there may be less publicly available information about a United States branch of a foreign bank than about a domestic bank. MASTER DEMAND NOTES Master demand notes are unsecured obligations that permit the investment of fluctuating amounts by the Fund at varying rates of interest pursuant to direct arrangements between the Fund as lender and the issuer as borrower. The Fund has the right to increase the amount under the note at any time up to the full amount provided by the note agreement, or to decrease the amount, and the borrower may repay up to the full amount of the note without penalty. Notes purchased by the Fund permit the Fund to demand payment of principal and accrued interest at any time (on not more than seven days notice). Notes acquired by the Fund may have maturities of more than one year, provided that (i) the Fund is entitled to payment of principal and accrued interest upon not more than seven days notice, and (ii) the rate of interest on such notes is adjusted automatically at periodic intervals which normally will not exceed 31 days but may extend up to one year. The notes will be deemed to have a maturity equal to the longer of the period remaining to the next interest rate adjustment or the demand notice period. Because these types of notes are direct lending arrangements between the lender and the borrower, such instruments are not normally traded and there is no secondary market for these notes, although they are redeemable and thus repayable by the borrower at face value plus accrued interest at any time. Accordingly, the Fund's right to redeem is dependent on the ability of the borrower to pay principal and interest on demand. In connection with master demand notes, TAMIC considers, under standards established by the Board of Trustees, earning power, cash flow and other liquidity ratios of the borrower and will monitor the ability of the borrower to pay principal and interest on demand. These notes are not typically rated by credit rating agencies. Unless rated, the Fund will invest in them only if the issuer meets the criteria established for commercial paper. REPURCHASE AGREEMENTS Interim cash balances may be invested from time to time in repurchase agreements with approved counterparties. Approved counterparties are limited to national banks or reporting broker-dealers meeting the Advisor's credit quality standards as presenting minimal risk of default. All repurchase transactions must be collateralized by U.S. Government securities with market value no less than 102% of the amount of the transaction, including accrued interest. Repurchase transactions generally mature the next business day but, in the event of a transaction of longer maturity, collateral will be marked to market daily and, when required, additional cash or qualifying collateral will be required from the counterparty. In executing a repurchase agreement, a portfolio purchases eligible securities subject to the seller's simultaneous agreement to repurchase them on a mutually agreed upon date and at a mutually agreed upon price. The purchase and resale prices are negotiated with the counterparty on the basis of current short-term interest rates, which may be more or less than the rate on the securities collateralizing the transaction. Physical delivery or, in the case of "book-entry" securities, segregation in the counterparty's account at the Federal Reserve for the benefit of the Portfolio is required to establish a perfected claim to the collateral for the term of the agreement in the event the counterparty fails to fulfill its obligation. MAT-9 As the securities collateralizing a repurchase transaction are generally of longer maturity than the term of the transaction, in the event of default by the counterparty on its obligation, the Portfolio would bear the risks of delay, adverse market fluctuation and transaction costs in disposing of the collateral. FOREIGN SECURITIES The Fund may invest in securities principally traded in securities markets outside the United States. While investment in foreign securities is intended to reduce risk by providing further diversification, such investments involve sovereign risk in addition to the credit and market risks normally associated with domestic securities. Foreign investments may be affected favorably or unfavorably by changes in currency rates and exchange control regulations. There may be less publicly available information about a foreign company than about a U.S. company, and foreign companies may not be subject to accounting, auditing and financial reporting standards and requirements comparable to those applicable to U.S. companies. Securities of some foreign companies are less liquid or more volatile than securities of U.S. companies, and foreign brokerage commissions and custodian fees are generally higher than in the United States. Investments in foreign securities may also be subject to other risks different from those affecting U.S. investments, including political or economic developments, expropriation or nationalization of assets, imposition of withholding taxes on dividend or interest payments and currency blockage (which would prevent cash from being brought back to the United States). These risks are carefully considered by the investment adviser prior to the purchase of these securities. WHEN-ISSUED SECURITIES The Fund may, from time to time, purchase new-issue Government or Agency securities on a "when-issued" or "to be announced" ("TBA") basis ("when-issued securities"). The prices of such securities will be fixed at the time the commitment to purchase is made, and may be expressed in either dollar price or yield maintenance terms. Delivery and payment may be at a future date beyond customary settlement time. It is the customary practice of the Fund to make when-issued or TBA purchases for settlement no more than 90 days beyond the commitment date. The commitment to purchase a when-issued security may be viewed as a senior security, and will be marked to market and reflected in the Fund's net asset value daily from the commitment date. While it is TAMIC's intention to take physical delivery of these securities, offsetting transactions may be made prior to settlement, if it is advantageous to do so. The Fund does not make payment or begin to accrue interest on these securities until settlement date. In order to invest its assets pending settlement, the Fund will normally invest in short-term money market instruments and other securities maturing no later than the scheduled settlement date. The Fund does not intend to purchase when-issued securities for speculative or "leverage" purposes. Consistent with Section 18 of the Investment Company Act of 1940 and the General Policy Statement of the SEC thereunder, when the Fund commits to purchase a when-issued security, it will identify and place in a segregated account high-grade money market instruments and other liquid securities equal in value to the purchase cost of the when-issued securities. TAMIC believes that purchasing when-issued securities in this manner will be advantageous to the Fund. However, this practice does entail certain additional risks, namely the default of the counterparty on its obligations to deliver the security as scheduled. In this event, the Fund would endure a loss (gain) equal to the price appreciation (depreciation) in value from the commitment date. TAMIC employs a rigorous credit quality procedure in determining the counterparties with which it will deal in when-issued securities, and in some circumstances, will require the counterparty to post cash or some other form of security as margin to protect the value of its delivery obligation pending settlement. FUTURES CONTRACTS The Fund may use exchange-traded financial futures contracts as a hedge to protect against anticipated changes in interest rates or stock prices. Financial futures contracts consist of stock index futures contracts and futures contracts on debt securities ("interest rate futures"). A stock index futures contract is a contractual obligation to buy or sell a specified index of stocks at a future date for a fixed price. Unlike most other financial futures, stock index futures require cash settlement on a daily basis. An interest rate futures contract is a contract to buy or sell specified debt securities at a future time for a fixed price. Stock index futures may be used, to a limited extent, to hedge specific common stocks with respect to market (systematic) risk (involving the market's assessment of overall economic prospects) as distinguished from stock-specific risk (involving the market's evaluation of the merits of the issuer of a particular security). Gains and losses on futures contracts employed as hedges for specific securities will normally be offset by losses or gains, respectively, on the hedged security. MAT-10 Hedging by use of interest rate futures seeks to establish, with more certainty than would otherwise be possible, the effective rate of return on portfolio securities. When hedging is successful, any depreciation in the value of portfolio securities will substantially be offset by appreciation in the value of the futures position. Conversely, any appreciation in the value of the portfolio securities will substantially be offset by depreciation in the value of the futures position. At no time will the Fund's transactions in such financial futures be employed for speculative purposes. When a futures contract is purchased, the Fund will set aside, in an identifiable manner, an amount of cash and cash equivalents equal to the total market value of the futures contract, less the amount of the initial margin. Positions taken in the futures market are not normally held to maturity, but instead are liquidated through offsetting transactions which may result in a profit or a loss. Closing out an open futures contract sale or purchase is effected by entering into an offsetting futures contract purchase or sale, respectively, for the same aggregate amount of the stock index or security and the same delivery date. If the offsetting purchase price is less than the original sale price, the Fund realizes a gain; if it is more, the Fund realizes a loss. Conversely, if the offsetting sale price is more than the original purchase price, the Fund realizes a gain; if less, a loss. While futures positions taken by the Fund will usually be liquidated in this manner, the Fund may instead make or take delivery of the underlying securities whenever it appears economically advantageous for it to do so. In determining gain or loss, transaction costs must be taken into account. There can be no assurance that the Fund will be able to enter into an offsetting transaction with respect to a particular contract at a particular time. All stock index and interest rate futures contracts will be traded on exchanges that are licensed and regulated by the Commodity Futures Trading Commission ("CFTC"). The Fund will not purchase or sell futures contracts for which the aggregate initial margin exceeds five percent (5%) of the fair market value of its assets, after taking into account unrealized profits and unrealized losses on any such contracts it has entered into. To ensure that its futures transactions meet CFTC standards, the Fund will enter into futures contracts for hedging purposes only, i.e., for the purposes or with the intent specified in CFTC regulations and interpretations, subject to the requirements of the SEC. The Fund will further seek to assure that fluctuations in the price of any futures contracts that it uses for hedging purposes will be substantially related to fluctuations in the price of the securities held by it or which it expects to purchase, or for other risk reduction strategies, though there can be no assurance the expected result will always be achieved. As evidence of its hedging intent, the Fund expects that on seventy-five percent (75%) or more of the occasions on which it purchases a long futures contract, it will effect the purchase of securities in the cash market or take delivery as it closes out a futures position. In particular cases, however, when it is economically advantageous, a long futures position may be terminated without the corresponding purchase of securities. SPECIAL RISKS RELATING TO FUTURES CONTRACTS While certain futures contracts may be purchased and sold to reduce certain risks, these transactions may entail other risks. Thus, while the Fund may benefit from the use of such futures, unanticipated changes in stock price movements or interest rates may result in a poorer overall performance for the Fund than if it had not entered into such futures contracts. Moreover, in the event of an imperfect correlation between the futures position and the portfolio position which is intended to be protected, the desired protection may not be obtained and the Fund may be exposed to risk of loss. TAMIC will attempt to reduce this risk by engaging in futures transactions, to the extent possible, where, in its judgment, there is a significant correlation between changes in the prices of the futures contracts and the prices of any portfolio securities sought to be hedged. Successful use of futures contracts for hedging purposes is also subject to TAMIC's ability to predict correctly movements in the direction of the market. BUYING PUT AND CALL OPTIONS The Fund may purchase put options on securities held, or on futures contracts whose price volatility is expected to closely match that of securities held, as a defensive measure to preserve shareholders' capital when market conditions warrant. The Fund may purchase call options on specific securities, or on futures contracts whose price volatility is expected to closely match that of securities eligible for purchase by the Fund, in anticipation of or as a substitute for the purchase of the securities themselves. These options may be listed on a national exchange or executed "over-the-counter" with a broker-dealer as the counterparty. While TIMCO anticipates that the majority of option purchases and sales will be executed on a national exchange, put or call options on specific securities or for non-standard terms are likely to be executed directly with a broker-dealer when it is advantageous to do so. Option contracts will be short-term in nature, generally less than nine months in duration. MAT-11 The Fund will pay a premium in exchange for the right to purchase (call) or sell (put) a specific number of shares of an equity security or futures contract at a specified price (the strike price) on or before the expiration date of the option contract. In either case, the Fund's risk is limited to the option premium paid. The Fund may sell the put and call options prior to their expiration and thereby realize a gain or loss. A call option will expire worthless if the price of the related security is below the contract strike price at the time of expiration; a put option will expire worthless if the price of the related security is above the contract strike price at the time of expiration. Put and call options will be employed for bona fide hedging purposes only. Liquid securities sufficient to fulfill the call option delivery obligation will be identified and segregated in an account; deliverable securities sufficient to fulfill the put option obligation will be similarly identified and segregated. In the case of put options on futures contracts, portfolio securities whose price volatility is expected to match that of the underlying futures contract will be identified and segregated. WRITING COVERED CALL OPTIONS The Fund may write or sell covered call options. By writing a call option, the Fund becomes obligated during the term of the option to deliver the securities underlying the option upon payment of the exercise price. The Fund may only write "covered" options. This means that as long as the Fund is obligated as the writer of a call option, it will own the underlying securities subject to the option or in the case of call options on U.S. Treasury bills, the Fund might own substantially similar U.S. Treasury bills. The principal reason for writing call options is to obtain, through a receipt of premiums, a greater current return than would be realized on the underlying securities alone. The Fund receives a premium from writing a call option which it retains whether or not the option is exercised. By writing a call option, the Fund might lose the potential for gain on the underlying security while the option is open. Options on some securities are relatively new and it is impossible to predict the amount of trading interest that will exist in such options. There can be no assurance that viable markets will develop or continue. The failure of such markets to develop or continue could significantly impair the Fund's ability to use such options to achieve its investment objectives. COMMERCIAL PAPER RATINGS The Fund's investments in commercial paper are limited to those rated A-1 by Standard & Poor's Corporation or Prime-1 by Moody's Investors Service, Inc. These ratings and other money market instruments are described as follows. Commercial paper rated A-1 by S&P has the following characteristics: Liquidity ratios are adequate to meet cash requirements. The issuer's long-term senior debt is rated "A" or better although in some cases "BBB" credits may be allowed. The issuer has access to at least two additional channels of borrowing. Basic earnings and cash flow have an upward trend with allowance made for unusual circumstances. Typically, the issuer's industry is well established and the issuer has a strong position within the industry. The rating Prime-1 is the highest commercial paper rating assigned by Moody's. Among the factors considered by Moody's in assigning ratings are the following: (1) evaluation of the management of the issuer; (2) economic evaluation of the issuer's industry or industries and an appraisal of speculative-type risks which may be inherent in certain areas; (3) evaluation of the issuer's products in relation to competition and customer acceptance; (4) liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over a period of ten years; (7) financial strength of a parent company and the relationships which exist with the issuer; and (8) recognition by the management of obligations which may be present or which may arise as a result of public preparations to meet such obligations. Relative strength or weakness of the above factors determines how the issuer's commercial paper is rated within various categories. UNITED STATES GOVERNMENT SECURITIES Securities issued or guaranteed by the United States Government include a variety of Treasury securities that differ only in their interest rates, maturities and dates of issuance. Treasury bills have maturities of one year or less; Treasury notes have maturities of one to ten years; and Treasury bonds generally have maturities of greater than ten years at the date of issuance. Securities issued or guaranteed by the United States Government or its agencies or instrumentalities include direct obligations of the United States Treasury and securities issued or guaranteed by the Federal Housing Administration, Farmers Home Administration, Export-Import Bank of the United States, Small Business Administration, Government National Mortgage Association, General Services Administration, Central Bank for Cooperatives, Federal Home Loan MAT-12 Banks, Federal Loan Mortgage Corporation, Federal Intermediate Credit Banks, Federal Land Banks, Maritime Administration, The Tennessee Valley Authority, District of Columbia Armory Board and Federal National Mortgage Association. Some obligations of United States Government agencies and instrumentalities, such as Treasury bills and Government National Mortgage Association pass-through certificates, are supported by the full faith and credit of the United States; others, such as securities of Federal Home Loan Banks, are supported by the right of the issuer to borrow from the Treasury; still others, such as bonds issued by the Federal National Mortgage Association, a private corporation, are supported only by the credit of the instrumentality. Because the United States Government is not obligated by law to provide support to an instrumentality which it sponsors, the Fund will invest in the securities issued by such an instrumentality only when TAMIC determines that the credit risk with respect to the instrumentality does not make its securities unsuitable investments. United States Government securities will not include international agencies or instrumentalities in which the United States Government, its agencies or instrumentalities participate, such as the World Bank, the Asian Development Bank or the Inter-American Development Bank, or issues insured by the Federal Deposit Insurance Corporation. CERTIFICATES OF DEPOSIT Certificates of deposit are receipts issued by a bank in exchange for the deposit of funds. The issuer agrees to pay the amount deposited plus interest to the bearer of the receipt on the date specified on the certificate. The certificate can usually be traded in the secondary market prior to maturity. Certificates of deposit will be limited to U.S. dollar-denominated certificates of United States banks which have at least $1 billion in deposits as of the date of their most recently published financial statements (including foreign branches of U.S. banks, U.S. branches of foreign banks which are members of the Federal Reserve System or the Federal Deposit Insurance Corporation, and savings and loan associations which are insured by the Federal Deposit Insurance Corporation). The Fund will not acquire time deposits or obligations issued by the International Bank for Reconstruction and Development, the Asian Development Bank or the Inter-American Development Bank. Additionally, the Fund does not currently intend to purchase such foreign securities (except to the extent that certificates of deposit of foreign branches of U.S. banks may be deemed foreign securities) or purchase certificates of deposit, bankers' acceptances or other similar obligations issued by foreign banks. BANKERS' ACCEPTANCES Bankers' acceptances typically arise from short-term credit arrangements designed to enable businesses to obtain funds to finance commercial transactions. Generally, an acceptance is a time draft drawn on a bank by an exporter or an importer to obtain a stated amount of funds to pay for specific merchandise. The draft is then "accepted" by the bank which, in effect, unconditionally guarantees to pay the face value of the instrument on its maturity date. The acceptance may then be held by the accepting bank as an earning asset or it may be sold in the secondary market at the going rate of discount for a specific maturity. Although maturities for acceptances can be as long as 270 days, most acceptances have maturities of six months or less. Bankers' acceptances acquired by the Fund must have been accepted by U.S. commercial banks, including foreign branches of U.S. commercial banks, having total deposits at the time of purchase in excess of $1 billion and must be payable in U.S. dollars. MAT-13 THIS PAGE INTENTIONALLY LEFT BLANK. MANAGED ASSETS TRUST PROSPECTUS TIC Ed. 5-95 L-11172 Printed in U.S.A. PART B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION STATEMENT OF ADDITIONAL INFORMATION MANAGED ASSETS TRUST MAY 1, 1995 This Statement of Additional Information is not a prospectus but relates to, and should be read in conjunction with, the Fund's prospectus dated May 1, 1995. A copy of the Prospectus is available from the office of the Fund at The Travelers Insurance Company, Annuity Services, 5 SHS, One Tower Square, Hartford, Connecticut 06183-5030. TABLE OF CONTENTS
PAGE INVESTMENT OBJECTIVE AND POLICIES...................................1 INVESTMENT RESTRICTIONS.............................................1 VALUATION OF SECURITIES.............................................2 DISTRIBUTIONS AND TAXES.............................................2 TRUSTEES AND OFFICERS...............................................3 DECLARATION OF TRUST................................................4 INVESTMENT ADVISORY SERVICES........................................5 The Investment Adviser......................................5 Advisory Fees...............................................5 The Sub-Adviser.............................................5 REDEMPTIONS IN KIND.................................................5 BROKERAGE...........................................................6 ADDITIONAL INFORMATION..............................................6 FINANCIAL STATEMENTS................................................7 APPENDIX............................................................8
INVESTMENT OBJECTIVE AND POLICIES The investment objective of the Managed Assets Trust (the "Fund") is to provide shareholders with a high total investment return. To do this, the Fund adjusts its overall exposure to risk by shifting its investment emphasis among investments providing alternatives for capital growth, capital stability and income as market and economic trends change. INVESTMENT RESTRICTIONS None of the restrictions enumerated in this paragraph may be changed without a vote of a majority of the Fund's outstanding shares, as defined in the Investment Company Act of 1940 (the "1940 Act"). The Fund will not: (1) purchase any securities which are rated lower than BBB by S&P, Baa by Moody's or, if unrated by such services, are, in TAMIC'S opinion, of equivalent quality, if as a result more than 10% of the Fund's assets which are invested in debt securities would be invested in such securities; or purchase any debt securities rated B or lower by either service or their equivalent; (2) purchase any securities (other than securities issued by the United States Government, its agencies or instrumentalities or securities which are backed by the full faith and credit of the United States) of any issuer if as a result more than 5% of its total assets would be invested in the securities of the issuer, except that up to 25% of its total assets may be invested without regard to this 5% limitation; (3) invest in securities of a single issuer if, as a result, the Fund owns more than 10% of the outstanding voting securities of such issuer; (4) borrow money, except from banks as a temporary measure in an amount not to exceed 10% of its total assets to facilitate redemptions or for emergency or extraordinary purposes, and any such borrowings will be repaid before additional investments are made; (5) pledge assets, except to secure indebtedness permitted by restriction (4) above and in amounts not in excess of the lesser of the dollar amounts borrowed or 10% of the Fund's total assets; (6) underwrite securities of other issuers, except that the Fund may purchase securities from the issuer thereof or others and dispose of such securities in a manner consistent with its investment objective and policies; (7) purchase or sell real estate, except that the Fund may invest in securities secured by real estate or interests therein or issued by companies, including real estate investment trusts, which invest in real estate or interests therein; (8) purchase or sell commodities or commodity contracts, except transactions involving financial futures contracts in order to limit transaction and borrowing costs and for hedging purposes; (9) invest for the purpose of control or management; (10) purchase securities on margin, except that the Fund may obtain such short term credits as may be necessary for the clearance of purchases and sales of securities and place up to 5% of the value of its net assets in total margin deposits for positions in futures contracts; (11) make short sales of securities or maintain short positions; (12) make loans, except that the Fund may purchase or hold debt obligations and repurchase agreements in a manner consistent with its investment objective and restrictions; (13) purchase any security if as a result more than 25% of its total assets would be invested in a single industry; (14) purchase securities of other investment companies, except in the open market and at customary brokerage rates and in no event more than 3% of the voting securities of any investment company or in connection with a merger, consolidation, purchase of assets or similar transaction approved by the Fund's shareholders; (15) invest more than 10% of its total assets in "restricted securities" which may not be publicly sold without registration under the Securities Act of 1933 (the "1933 Act"). If and when the Fund sells restricted securities, registration under the 1933 Act may be required. In determining securities subject to the 10% restriction, the Fund will include, in addition to restricted securities, other securities not having readily available market quotations. -1- Additional investment restrictions adopted by the Fund, which may be changed by the Board of Trustees, provide that the Fund may not: (1) invest in securities of foreign issuers if at the time of acquisition more than 25% of its total assets, taken at market value, would be invested in such securities; (2) purchase or sell interests in oil, gas or other mineral exploration or development programs; (3) invest in warrants if at the time of acquisition more than 5% of its total assets would be invested in warrants (for the purposes of this restriction, warrants acquired by the Fund in units or attached to securities will be deemed to be without value); (4) invest more than 5% of its total assets in securities of companies having a record, together with predecessors, of less than three years of continuous operation, and securities of issuers that are not readily marketable; and (5) purchase or retain securities of an issuer if, to the knowledge of the Fund, officers, Trustees or Directors of the Fund or Travelers Asset Management International Corporation (TAMIC), each owning beneficially more than 0.5% of the securities of such issuer, own in the aggregate more than 5% of the securities of such issuer, or such persons or management personnel of the Fund or TAMIC have a substantial beneficial interest in the securities of such issuer. Portfolio securities of the Fund may not be purchased from or sold or loaned to TAMIC or any affiliate thereof or any of its Directors, officers or employees. The Fund has undertaken to a state insurance authority that, so long as the state authority requires and shares of the Fund are offered for sale to fund variable life insurance policies in that state, the Fund will comply with certain foreign security diversification guidelines. These guidelines provide that (1) as the percentage of the Fund's net asset value invested in foreign securities increases, a corresponding increase will be made in the number of countries in whose securities the Fund invests; and (2) the Fund will invest no more than 20% of its net asset value in securities of issuers located in any one country (other than the United States). Notwithstanding the above, these guidelines permit the Fund to invest any amount in securities of issuers located in the United States, and an additional 15% of its net asset value in securities of issuers located in Australia, Canada, France, Japan, the United Kingdom or Germany. These guidelines require that American Depository Receipts be treated as if they were foreign securities. This undertaking is not a fundamental investment restriction or policy and may be changed without a vote of shareholders. VALUATION OF SECURITIES Current value for the Fund's portfolio securities is determined as follows: Securities that are traded on an established exchange are valued on the basis of the last sales price on the exchange where primarily traded prior to the time of valuation. Securities traded in the over-the-counter market, for which complete quotations are readily available, are valued at the mean of the bid and asked prices at the time of valuation. Short term money market instruments having maturities of sixty days or less are valued at amortized cost (original purchase price as adjusted for amortization of premium or accretion of discount) which, when combined with accrued interest, approximates market. Short term money market instruments having maturities of more than sixty days, for which complete quotations are readily available, are valued at current market value. The Board of Trustees of the Fund values the following at prices it deems in good faith to be fair: (1) securities, including restricted securities, for which complete quotations are not readily available, (2) listed securities if in the Board's opinion the last sales price does not reflect a current market value or if no sale occurred, and (3) other assets. The Fund believes that reliable market quotations generally are not readily available for purposes of valuing fixed income securities. As a result, depending on the particular securities owned by the Fund, it is likely that most of the valuations for such securities will be based upon their fair value determined under procedures which have been approved by the Trustees. The Board of Trustees has authorized the use of a pricing service to determine the fair value of its fixed income securities and certain other securities. Securities for which market quotations are readily available are valued on a consistent basis at that price quoted which, in the opinion of the Trustees or the person designated by the Trustees to make the determination, most nearly represents the market value of the particular security. Any securities for which market quotations are not readily available or other assets are valued on a consistent basis at fair value as determined in good faith using methods prescribed by the Trustees. DISTRIBUTIONS AND TAXES It is the Fund's intention to distribute dividends from net investment income and all net realized capital gains annually in shares or, at the option of the shareholder, in cash. When the Fund makes a distribution, it intends to distribute only its net capital gains and such income as has been predetermined to the best of the Fund's ability to be taxable as ordinary income. Therefore, net investment income distributions will not be made on the basis of distributable income as computed on the Fund's books, but will be made on a federal taxation basis. -2- If the Fund qualifies as a regulated investment company, shareholders will not be subject to federal income taxes on distributions by the Fund but may be subject to state and local taxes. See the accompanying separate account prospectus for a discussion of the tax treatment applicable to purchasers of variable annuity and variable life insurance contracts. TRUSTEES AND OFFICERS Name Present Position and Principal Occupation During Last Five Years - ---- ---------------------------------------------------------------- *Heath B. McLendon Chairman and Member 388 Greenwich Street New York, New York Age 61 Managing Director (1993-present), Smith Barney Inc. (Smith Barney); Chairman (1993-present), Smith Barney Strategy Advisors, Inc.; President (1994-present), Smith Barney Mutual Funds Management Inc.; Chairman and/or Director and President of thirty investment companies associated with Smith Barney; Chairman, Board of Trustees, Drew University; Trustees, The East New York Savings Bank; Advisory Director, First Empire State Corporation; Chairman, Board of Managers, seven Variable Annuity Separate Accounts of The Travelers Insurance Company+; Chairman, Board of Trustees, five Mutual Funds sponsored by The Travelers Insurance Company.++ Knight Edwards Member 2700 Hospital Trust Tower Providence, Rhode Island Age 71 Of Counsel (1988-present), Partner (1956-1988), Edwards & Angell, Attorneys; Member, Advisory Board, (1973-1994) thirty-one mutual funds sponsored by Keystone Group, Inc.; Member, Board of Managers, seven Variable Annuity Separate Accounts of The Travelers Insurance Company+; Trustee, five Mutual Funds sponsored by The Travelers Insurance Company.++ Robert E. McGill, III Member One Elm Street Windsor Locks, Connecticut Age 63 Director (1983-present), Executive Vice President (1989-1994), Senior Vice President, Finance and Administration (1983-1989), The Dexter Corporation (manufacturer of specialty chemicals and materials); Vice Chairman (1990-1992), Director (1983-present), Life Technologies, Inc. (life science/present products); Director (1993-present), Analytical Technology, Inc. (manufacturer of measurement instruments); Director (1994-present), The Connecticut Surety Corporation (insurance); Member, Board of Managers, seven Variable Annuity Separate Accounts of The Travelers Insurance Company+; Trustee, five Mutual Funds sponsored by The Travelers Insurance Company.++ Lewis Mandell Member 368 Fairfield Road, U41F Storrs, Connecticut Age 52 Professor of Finance (1980-present) and Associate Dean (1993-present), School of Business Administration, and Director, Center for Research and Development in Financial Services (1980-present), University of Connecticut; Director (1992-present), GZA Geoenvironmental Tech, Inc. (engineering services); Member, Board of Managers, seven Variable Annuity Separate Accounts of The Travelers Insurance Company+; Trustee, five Mutual Funds sponsored by The Travelers Insurance Company.++ Frances M. Hawk Member 222 Berkeley Street Boston, Massachusetts Age 47 Portfolio Manager (1992-present), HLM Management Company, Inc. (investment management); Assistant Treasurer, Pensions and Benefits Management (1989-1992), United Technologies Corporation (broad-based designer and manufacturer of high technology products); Member, Board of Managers, seven Variable Annuity Separate Accounts of The Travelers Insurance Company+; Trustee, five Mutual Funds sponsored by The Travelers Insurance Company.++ Ernest J. Wright Secretary to the Board One Tower Square Hartford, Connecticut Age 54 Assistant Secretary (1994-present), Counsel (1987-present), The Travelers Insurance Company; Secretary, Board of Managers, seven Variable Annuity Separate Accounts of The Travelers Insurance Company+; Secretary, Board of Trustees, five Mutual Funds sponsored by The Travelers Insurance Company.++ -3- Ian R. Stuart Treasurer One Tower Square Hartford, Connecticut Age 38 Vice President and Financial Officer, Financial Services Department (1994-present), Second Vice President and Financial Officer, Financial Services Department (1991-1994), The Travelers Insurance Company; Senior Manager (1986-1991), Price Waterhouse; Treasurer, Board of Trustees, five Mutual Funds sponsored by The Travelers Insurance Company.++ + These seven Variable Annuity Separate Accounts are: The Travelers Growth and Income Stock Account for Variable Annuities, The Travelers Quality Bond Account for Variable Annuities, The Travelers Money Market Account for Variable Annuities, The Travelers Timed Growth and Income Stock Account for Variable Annuities, The Travelers Timed Short-Term Bond Account for Variable Annuities, The Travelers Timed Aggressive Stock Account for Variable Annuities and The Travelers Timed Bond Account for Variable Annuities. ++ These five Mutual Funds are: Capital Appreciation Fund, Cash Income Trust, High Yield Bond Trust, Managed Assets Trust and The Travelers Series Trust. * Mr. McLendon is an "interested person" within the meaning of the 1940 Act by virtue of his position as director of TIMCO which serves as sub-adviser to the Fund. Mr. McLendon also owns shares and options to purchase shares of Travelers Group Inc., the indirect parent of The Travelers Insurance Company. The Dexter Corporation, of which Mr. McGill is a director, entered into contracts with The Travelers Insurance Company to provide short-term disability and life insurance benefits to employees of The Dexter Corporation, and to administer the health and dental benefits programs for employees of The Dexter Corporation. Members of the Board of Trustees who are also officers or employees of Travelers Group Inc. or its subsidiaries are not entitled to any fee. Members of the Board of Trustees who are not affiliated as employees of Travelers Group Inc. or its subsidiaries receive an aggregate annual retainer of $10,000 for service on the Boards of the five Mutual Funds sponsored by The Travelers Insurance Company and the seven Variable Annuity Separate Accounts established by The Travelers Insurance Company. They also receive an aggregate annual fee of $1,800 for each meeting of such Boards attended. DECLARATION OF TRUST The Fund is organized as a Massachusetts business trust. Pursuant to certain decisions of the Supreme Judicial Court of Massachusetts, shareholders of such a trust may, under certain circumstances, be held personally liable as partners for the obligations of the trust. However, even if the Fund were held to be a partnership, the possibility of its shareholders incurring financial loss for that reason appears remote because the Fund's Declaration of Trust contains an express disclaimer of shareholder liability for obligations of the Fund and requires that notice of such disclaimer be given in each agreement, obligation or instrument entered into or executed by the Fund or the Trustees, and because the Declaration of Trust provides for indemnification out of Fund property for any shareholder held personally liable for the obligations of the Fund. The Declaration of Trust provides that a Trustee shall be liable only for his own willful defaults and, if reasonable care has been exercised in the selection of officers, agents, employees or investment advisers, a Trustee shall not be liable for the neglect or wrongdoing of any such person; provided, however, that nothing in the Declaration of Trust shall protect a Trustee against any liability for his willful misfeasance, bad faith, gross negligence or the reckless disregard of his duties. Shareholders first elected Trustees at a meeting held on April 23, 1984, and most recently elected Trustees on April 23, 1993. No further meetings of shareholders for the purpose of electing Trustees will be held, unless required by law, and unless and until such time as less than a majority of the Trustees holding office have been elected by shareholders, at which time the Trustees then in office will call a shareholders' meeting for the election of Trustees. Except as set forth above, the Trustees shall continue to hold office indefinitely, unless otherwise required by law and may appoint successor Trustees. Trustees may voluntarily resign from office, or a Trustee may be removed from office (1) at any time by two-thirds vote of the Trustees; (2) by a majority vote of Trustees where any Trustee becomes mentally or physically incapacitated; and (3) either by declaration in writing or at a meeting called for such purpose by the holders of not less than two-thirds of the outstanding shares or other voting interests of the Fund. The Trustees are required to call a meeting for the purpose of considering the removal of a person serving as trustee, if requested in writing to do so by the holders of not less than 10% of the outstanding shares or other voting interests of the Fund. The Fund is required to assist in Shareholders' communications. In accordance with current laws, insurance companies using the Fund as an underlying investment option within their variable contract will request voting instructions from contract owners participating in such contracts, and will vote shares of the Fund in the same proportion as the voting instructions received. -4- Voting rights are not cumulative, so that the holders of more than 50% of the shares voting on the election of Trustees can, if they choose to do so, elect all of the Trustees of the Fund, in which event the holders of the remaining shares will be unable to elect any person as a Trustee. No amendment may be made to the Declaration of Trust without a "vote of a majority of the outstanding voting securities" of the Fund (as defined in the 1940 Act). INVESTMENT ADVISORY SERVICES THE INVESTMENT ADVISER Travelers Asset Management International Corporation (TAMIC), an indirect wholly-owned subsidiary of Travelers Group Inc., furnishes investment management and advisory services to the Fund in accordance with the terms of an Investment Advisory Agreement which was approved by shareholders on April 23, 1993. As required by the 1940 Act, the Advisory Agreement will continue in effect for a period more than two years from the date of its execution only so long as its continuance is specifically approved at least annually (i) by a vote of a majority of the Board of Trustees, or (ii) by a vote of a majority of the outstanding voting securities of the Fund. In addition, and in either event, the terms of the Advisory Agreement must be approved annually by a vote of a majority of the Board of Trustees who are not parties to, or interested persons of any party to, the Advisory Agreement, cast in person at a meeting called for the purpose of voting on such approval and at which the Board of Trustees is furnished such information as may be reasonably necessary to evaluate the terms of the Advisory Agreement. The Advisory Agreement further provides that it will terminate automatically upon assignment; may be amended only with prior approval of a majority of the outstanding voting securities of the Fund; may be terminated without the payment of any penalty at any time upon sixty days' notice by the Board of Trustees or by a vote of a majority of the outstanding voting securities of the Fund; and may not be terminated by TAMIC without prior approval of a new investment advisory agreement by a vote of a majority of the outstanding voting securities of the Fund. Under the terms of the Advisory Agreement, TAMIC shall: (1) obtain and evaluate pertinent economic, statistical and financial data and other information relevant to the investment policy of the Fund, affecting the economy generally and individual companies or industries, the securities of which are included in the Fund's portfolio or are under consideration for inclusion therein; (2) be authorized to purchase supplemental research and other services from brokers at an additional cost to the Fund; (3) regularly furnish recommendations to the Board of Trustees with respect to an investment program for approval, modification or rejection by the Board of Trustees; (4) take such steps as are necessary to implement the investment program approved by the Board of Trustees; and (5) regularly report to the Board of Trustees with respect to implementation of the approved investment program and any other activities in connection with the administration of the assets of the Fund. ADVISORY FEES For furnishing investment management and advisory services to the Fund, TAMIC is paid an amount equivalent on an annual basis to 0.50% of the average daily net assets of the Fund. The fee is computed daily and paid monthly. For the three years ended December 31, 1992, 1993 and 1994 the advisory fees were $679,671, $790,843 and $738,883, respectively. THE SUB-ADVISER The Travelers Investment Management Company (TIMCO), an indirect wholly owned subsidiary of Travelers Group Inc., serves as sub-adviser to the Fund with respect to its common stock investments pursuant to the terms of a Sub-Advisory Agreement between TAMIC and TIMCO. The Sub-Advisory Agreement, which was approved by shareholders of the Fund at a meeting held on April 23, 1993, provides that TIMCO will receive from TAMIC a fee equal to 50% of the advisory fee earned by TAMIC for its services as sub-adviser. For the fiscal years ended December 31, 1993 and 1994, TIMCO received $395,537 and $369,442, respectively, in advisory fees. REDEMPTIONS IN KIND If conditions arise that would make it undesirable for the Fund to pay for all redemptions in cash, the Fund may authorize payment to be made in portfolio securities or other property. -5- However, the Fund has obligated itself under the 1940 Act to redeem for cash all shares presented for redemption by any one shareholder up to $250,000, or 1% of the Fund's net assets if that is less, in any 90-day period. Securities delivered in payment of redemptions would be valued at the same value assigned to them in computing the net asset value per share. Shareholders receiving such securities would incur brokerage costs when these securities are sold. BROKERAGE Subject to approval of the Board of Trustees, it is the policy of TAMIC and TIMCO, in executing transactions in portfolio securities, to seek best execution of orders at the most favorable prices. The determination of what may constitute best execution and price in the execution of a securities transaction by a broker involves a number of considerations, including, without limitation, the overall direct net economic result to the Fund, involving both price paid or received and any commissions and other cost paid, the efficiency with which the transaction is effected, the ability to effect the transaction at all where a large block is involved, the availability of the broker to stand ready to execute potentially difficult transactions in the future, and the financial strength and stability of the broker. Such considerations are judgmental and are weighed by management in determining the overall reasonableness of brokerage commissions paid. Subject to the foregoing, a factor in the selection of brokers is the receipt of research services, analyses and reports concerning issuers, industries, securities, economic factors and trends, and other statistical and factual information. Any such research and other statistical and factual information provided by brokers, TAMIC or TIMCO is considered to be in addition to and not in lieu of services required to be performed by TAMIC under its Investment Advisory Agreement, or by TIMCO under the Sub-Advisory Agreement with TAMIC. The cost, value and specific application of such information are indeterminable and hence are not practicably allocable among the Fund and other clients of TAMIC or TIMCO who may indirectly benefit from the availability of such information. Similarly, the Fund may indirectly benefit from information made available as a result of transactions for such clients. Purchases and sales of bonds and money market instruments will usually be principal transactions and will normally be purchased directly from the issuer or from the underwriter or market maker for the securities. There usually will be no brokerage commissions paid for such purchases. Purchases from the underwriters will include the underwriting commission or concession, and purchases from dealers serving as market makers will include the spread between the bid and asked prices. Where transactions are made in the over-the-counter market, the Fund will deal with primary market makers unless more favorable prices are otherwise obtainable. Brokerage fees will be incurred in connection with futures transactions, and the Fund will be required to deposit and maintain funds with brokers as margin to guarantee performance of future obligations. TAMIC and TIMCO may follow a policy of considering the sale of shares of the Fund a factor in the selection of broker-dealers to execute portfolio transactions, subject to the requirements of best execution described above. The policy of TAMIC and TIMCO with respect to brokerage is and will be reviewed by the Board of Trustees periodically. Because of the possibility of further regulatory developments affecting the securities exchanges and brokerage practices generally, the foregoing practices may be changed, modified or eliminated. The total brokerage commissions paid by the Fund for the fiscal years ended December 31, 1992, 1993 and 1994 were $450,890, $330,394 and $374,918, respectively. For the fiscal year ended December 31, 1994, portfolio transactions in the amount of $177,929,724 were placed with certain brokers because of research services, of which $252,121 was paid in commissions with respect to such services. No formula was used in placing such transactions and no specific amount of transactions was allocated for research services. No brokerage business was placed with any brokers affiliated with TAMIC or TIMCO during the past three fiscal years. ADDITIONAL INFORMATION The Travelers Insurance Company (the "Company") acts as transfer agent and dividend disbursing agent for the Fund. The Company is a stock insurance company chartered in 1864 in Connecticut and continuously engaged in the insurance business since that time. The Company is a wholly owned subsidiary of The Travelers Insurance Group Inc., which is indirectly owned, through a wholly owned subsidiary, by Travelers Group Inc. On April 1, 1995, the Company owned 100% of the Fund's outstanding shares. The Company's Home Office is located at One Tower Square, Hartford, Connecticut 06183, telephone (203) 277-0111. Chase Manhattan Bank, N.A., Chase MetroTech Center, Brooklyn, New York, New York 11245, is the custodian of all securities and cash of the Fund. Coopers & Lybrand L.L.P., Independent Accountants, 100 Pearl Street, Hartford, Connecticut, are the independent auditors for the Fund. The services provided to the Fund include primarily the examination of the Fund's financial statements. -6- The financial statements included or incorporated by reference in the Prospectus, Statement of Additional Information and Registration Statement have been audited by Coopers & Lybrand L.L.P., as indicated in their report thereon, and are incorporated herein by reference in reliance upon the authority of said firm as experts in accounting and auditing. Except as otherwise stated in its prospectus or as required by law, the Fund reserves the right to change the terms of the offer stated in its prospectus without shareholder approval, including the right to impose or change fees for services provided. No dealer, salesman or other person is authorized to give any information or to make any representation not contained in the Fund's prospectus, this Statement of Additional Information or any supplemental sales literature issued by the Fund, and no person is entitled to rely on any information or representation not contained therein. The Fund's prospectus and this Statement of Additional Information omit certain information contained in the Fund's registration statement filed with the Securities and Exchange Commission which may be obtained from the Commission's principal office in Washington, D.C. upon payment of the fee prescribed by the Rules and Regulations promulgated by the Commission. FINANCIAL STATEMENTS The financial statements contained in the Fund's December 31, 1994 Annual Report to Shareholders are incorporated herein by reference. A copy may be obtained by writing to The Travelers Insurance Company, Annuity Services -- 5 SHS, One Tower Square, Hartford, Connecticut 06183-5030, or by calling 1-800-842-0125. -7- APPENDIX COMMON AND PREFERRED STOCK RATINGS MOODY'S COMMON STOCK RATINGS Moody's Investors Service, Inc. (Moody's) presents a concise statement of the important characteristics of a company and an evaluation of the grade (quality) of its common stock. Data presented includes: (a) capsule stock information which reveals short and long term growth and yield afforded by the indicated dividend, based on a recent price; (b) a long term price chart which shows patterns of monthly stock price movements and monthly trading volumes; (c) a breakdown of a company's capital account which aids in determining the degree of conservatism or financial leverage in a company's balance sheet; (d) interim earnings for the current year to date, plus three previous years; (e) dividend information; (f) company background; (g) recent corporate developments; (h) prospects for a company in the immediate future and the next few years; and (i) a ten year comparative statistical analysis. This information provides investors with information on what a company does, how it has performed in the past, how it is performing currently and what its future performance prospects appear to be. These characteristics are then evaluated and result in a grading, or indication of quality. The grade is based on an analysis of each company's financial strength, stability of earnings and record of dividend payments. Other considerations include conservativeness of capitalization, depth and caliber of management, accounting practices, technological capabilities and industry position. Evaluation is represented by the following grades: (1) High Grade (2) Investment Grade (3) Medium Grade (4) Speculative Grade MOODY'S PREFERRED STOCK RATINGS Preferred stock ratings and their definitions are as follows: 1. aaa: An issue which is rated "aaa" is considered to be a top-quality preferred stock. This rating indicates good asset protection and the least risk of dividend impairment within the universe of preferred stocks. 2. aa: An issue which is rated "aa" is considered a high-grade preferred stock. This rating indicates that there is a reasonable assurance that earnings and asset protection will remain relatively well maintained in the foreseeable future. 3. a: An issue which is rated "a" is considered to be an upper-medium grade preferred stock. While risks are judged to be somewhat greater than in the "aaa" and "aa" classification, earnings and asset protection are, nevertheless, expected to be maintained at adequate levels. 4. baa: An issue which is rated "baa" is considered to be a medium-grade preferred stock, neither highly protected nor poorly secured. Earnings and asset protection appear adequate at present but may be questionable over any great length of time. 5. ba: An issue which is rated "ba" is considered to have speculative elements and its future cannot be considered well assured. Earnings and asset protection may be very moderate and not well safeguarded during adverse periods. Uncertainty of position characterizes preferred stocks in this class. 6. b: An issue which is rated "b" generally lacks the characteristics of a desirable investment. Assurance of dividend payments and maintenance of other terms of the issue over any long period of time may be small. 7. caa: An issue which is rated "caa" is likely to be in arrears on dividend payments. This rating designation does not purport to indicate the future status of payments. 8. ca: An issue which is rated "ca" is speculative in a high degree and is likely to be in arrears on dividends with little likelihood of eventual payments. 9. c: This is the lowest rated class of preferred or preference stock. Issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. Moody's applies numerical modifiers 1, 2 and 3 in each rating classification: the modifier 1 indicates that the security ranks in the higher end of its generic rating category, the modifier 2 indicates a midrange ranking, and the modifier 3 indicates that the issue ranks in the lower end of its generic rating category. -8- CORPORATE BOND RATINGS S&P CORPORATE BOND RATINGS A Standard & Poor's Corporation (S&P) corporate bond rating is a current assessment of the creditworthiness of an obligor, including obligors outside the United States, with respect to a specific obligation. This assessment may take into consideration obligors such as guarantors, insurers, or lessees. Ratings of foreign obligors do not take into account currency exchange and related uncertainties. The ratings are based on current information furnished by the issuer or obtained by S&P from other sources it considers reliable. The ratings are based, in varying degrees, on the following considerations: a. Likelihood of default capacity and willingness of the obligor as to the timely payment of interest and repayment of principal in accordance with the terms of the obligation; b. Nature of and provisions of the obligation; and c. Protection afforded by and relative position of the obligation in the event of bankruptcy, reorganization or other arrangement under the laws of bankruptcy and other laws affecting creditors' rights. PLUS (+) OR MINUS (-): To provide more detailed indications of credit quality, ratings from "AA" to "A" may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories. Bond ratings are as follows: 1. AAA - Debt rated AAA has the highest rating assigned by S&P. Capacity to pay interest and repay principal is extremely strong. 2. AA - Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the higher rated issues only in small degree. 3. A - Debt 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. 4. BBB - Debt rated BBB is regarded as having an adequate capacity to pay interest and repay principal. Although it normally exhibits 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 debt in this category than in higher rated categories. 5. BB, B, CCC, CC and C - Debt rated BB, B, CCC, CC and C is regarded, on balance, as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. BB indicates the lowest degree of speculation, and C the highest degree of speculation. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions. MOODY'S CORPORATE BOND RATINGS Moody's ratings are as follows: 1. Aaa - Bonds which are 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 not likely to impair the fundamentally strong position of such issues. 2. Aa - Bonds which are 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, 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. 3. A - Bonds which are 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 sometime in the future. 4. Baa - Bonds which are rated Baa are considered as medium grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments 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. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. 5. Ba - Bonds which are 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. -9- 6. B - Bonds which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating classification from Aa through B in its corporate bond rating system. The modifier 1 indicates that the security ranks in the higher end of its generic rating category; the modifier 2 indicates a midrange ranking; and the modifier 3 indicates that the issue ranks in the lower end of its generic rating category. -10- MANAGED ASSETS TRUST STATEMENT OF ADDITIONAL INFORMATION L-11172S TIC Ed.5-95 Printed in U.S.A. COPY OF ANNUAL REPORT DATED DECEMBER 31, 1994 TO WHICH THE REGISTRANT'S FINANCIAL STATEMENTS ARE INCORPORATED IN THE PROSPECTUS/STATEMENT OF ADDITIONAL INFORMATION BY REFERENCE TO THIS FILING. THE TRAVELERS VARIABLE PRODUCTS MUTUAL FUNDS ANNUAL REPORT MANAGED ASSETS TRUST DECEMBER 31, 1994 THETRAVELERS (logo with umbrella) THE TRAVELERS INSURANCE COMPANY ONE TOWER SQUARE HARTFORD, CONNECTICUT 06183 TIMCO (logo with globe) A COMPANY OF THETRAVELERS (logo with umbrella) The Travelers Investment Management Company ("TIMCO") provides equity management and advisory services for the following Travelers Variable Product Mutual Funds contained in this report: The Capital Appreciation Fund and the Social Awareness Stock Portfolio. Additionally, TIMCO is the sub-adviser for Managed Assets Trust. TAMIC (logo with globe and lines) TRAVELERS ASSET MANAGEMENT INTERNATIONAL CORPORATION Travelers Asset Management International Corporation ("TAMIC") provides fixed income management and advisory services for the following Travelers Variable Product Mutual Funds contained in this report: U.S. Government Securities Portfolio, High Yield Bond Trust , Managed Assets Trust and Cash Income Trust. JANUS CAPITAL CORPORATION (logo with two faces) Janus Capital Corporation ("Janus") is the sub-adviser for Capital Appreciation Fund. As sub-adviser, Janus is responsible for the daily management of Capital Appreciation Fund. SMITH BARNEY (logo) An asset management group of Smith Barney, Greenwich Street Advisors provides management services for the Utilities Portfolio. THETRAVELERS (logo with umbrella) THE TRAVELERS VARIABLE PRODUCTS MUTUAL FUNDS INVESTMENT ADVISORY COMMENTARY AS OF DECEMBER 31, 1994 ECONOMIC REVIEW AND OUTLOOK Economic growth kicked into high gear in 1994, and the economy used up any excess capacity in product and labor markets. The fitful recovery of the previous three years was replaced by a broad-based expansion. Unemployment fell to 5.4% at year-end, from 7.0% at the end of 1993. This robust economic activity was accompanied by few signs of higher inflation. The Consumer Price Index rose just 2.7% during 1994, the same as during the prior year. However, certain commodity prices showed large gains, and there was evidence by year-end of a modest acceleration in wage gains. The Federal Reserve ("Fed") started a tightening policy in February, while there still appeared to be slack in the economy. Fed actions served to push 3-month T-bill rates up from 3.1% at the start of the year to 5.7% at year-end. The yield curve rose and flattened significantly during the year. Yields on one-year Treasury bills rose by over 350 basis points, while yields on the 30-year bond were up over 150 basis points. At year-end, there was little evidence that Fed tightening had started to slow growth. In the fourth quarter, the economy grew at an annual rate of 4.5%, well above the 2.0-2.5% pace that many economists think is compatible with price stability. There is normally a lag of 6-12 months between Federal Reserve actions and the resulting impact on the economy. Coming into 1994, Fed policy was very accommodative of economic growth, with real money market interest rates (adjusted for inflation) close to zero. Monetary policy became truly restrictive only with the last 2 or 3 rates hikes. With unemployment at levels that many economists view as inflationary, we expect the Fed to push money market interest rates somewhat higher in 1995. We think that the Federal Reserve will succeed in slowing economic growth, and that inflation will stay below 4% during 1995 and into 1996. However, convincing evidence of the slowdown may take a while longer to emerge. FIXED-INCOME MARKET COMMENTARY Like a neutron bomb, which kills people but leaves buildings intact, rising interest rates in 1994 decimated complicated strategies much more than it hurt broad market averages. During the fourth quarter, Orange County and emerging markets investors were added to the casualty list, joining the hedge funds and various corporate users of derivatives that were hurt earlier in the year. While derivatives and mortgage backed securities have taken much of the blame for these incidents, the rise in short-term interest rates hurt any strategy that was based on leverage or benefited from the prior three years of low short-term rates. For the year, cash was the best performing asset, while stocks treaded water and bonds had their worst year in recent history. The Lehman Long Treasuries index showed a negative return of 7.6% for the full year 1994. The long end of the yield curve stabilized late in the year, allowing long Treasuries to outperform cash during the fourth quarter. For the year as a whole, mortgage backed securities and corporates outperformed similar duration Treasuries. Late in the year, corporate spreads widened modestly with growing concerns over the 1995 economic outlook; as a result, long corporates underperformed similar duration Treasuries in the fourth quarter. We have been concerned by tight spreads on corporate issues throughout 1994. We expect issuance of new corporates to be light in the first half of 1995; this will help to support prices of corporate issues. Corporates are still likely to underperform Treasuries if a significant economic slowdown develops. We think inflation will stay below 4% in 1995. We also expect stable to modestly lower yields on Treasuries with maturities of 5 years or longer. If we are correct, bond investors will enjoy real returns, after inflation, of 4-7% in 1995. If the Federal Reserve is successful in containing economic growth and inflation, lower interest rates (stronger bond prices) are likely in 1996. EQUITY MARKET COMMENTARY Despite increased pressure by the Federal Reserve Board and a string of potentially dangerous financial crises, the U.S. stock market managed to achieve a broad-based gain in the second half of 1994. Surprisingly strong corporate earnings offset the negative effect of higher interest rates on equity valuations. During the final six months of 1994, the S&P 500 Stock Index provided a total return of 4.9%, including dividends. The stocks of small and medium sized companies provided comparable returns over that period, but with considerably higher volatility. Technology stocks led the market during the second half. The office and business equipment group was up over 25%, owing to continued booming sales of personal computers and a sharp rebound in networking stocks. Semi conductor stocks advanced in concert, reflecting strong demand for memory chips and microprocessors. Investors also returned to many defensive and recently out-of-favor "growth" groups in the second half. In the consumer staples sector, for example, beverage stocks rose 24% on earnings surprising and improving international growth prospects. In the health care sector, drug and medical product stocks rebounded over 20%. On the negative side, rising interest rates and fears of an impending economic slowdown hurt many interest sensitive and early cycle groups. Airline, trucking and railroad stocks were down over 10%. Auto stocks were off 8%. Regional banks declined 12%. In the energy sector, independent producers and drilling companies were down 12%, due to weaker oil and gas prices and the poor outlook for new production. We remain constructive, but cautious, in our outlook for stocks in 1995. With the S&P 500 Stock Index trading at only 14.5 times operating earnings, the equity market starts the year with reasonable valuation support. A more stable interest rate environment could even help to reverse the broad-based market price to earnings ratio contraction that has occurred over the past year. Where we think the stock market is most likely to run into problems is on the earnings front. Corporate earnings are expected to grow 8-10% in 1995, but most of that growth is expected to occur in the first half of the year. By the third quarter, we expect a noticeable deceleration in earnings growth. With equity indices near their all-time highs, the stock market is probably more vulnerable than the bond market to negative surprises, given the relative performance of the two asset classes over the past year. TIMCO (logo of globe) TAMIC (logo globe with lines) A COMPANY OF THETRAVELERS(logo TRAVELERS ASSET MANAGEMENT with umbrella) INTERNATIONAL CORPORATION MANAGED ASSETS TRUST Cash was the best performing asset in 1994, returning 4.6% for the year. The S&P 500 Stock Index also managed a positive return of 1.3% for the year though smaller stock indexes had negative returns. Stocks were helped by a 40% increase in reported earnings. Bonds were the worst performing asset class, with the Lehman Government/Corporate Index having a negative return of 3.5%. The yield curve flattened significantly during the year with most of the flattening occurring in the fourth quarter. The spread between the 30-year and 2-year Treasury yields narrowed from 212 basis points at the beginning of the year to only 19 basis points at the end of 1994. This caused intermediate maturity bonds to perform poorly on a relative basis. The Lehman Intermediate Government/Corporate Index was down 1.9%. Managed Assets Trust enters 1995 with an overweighting in bonds and a 10% underweighting in stocks. We feel that current yields in the bond market are attractive relative to our inflation expectations and to our view of how high the Federal Reserve will need to raise interest rates before the economy begins to slow. Equity valuations have been supported by the sharp rise in earnings. In 1995, we expect earnings growth to moderate, leaving the stock market more vulnerable than the bond market to surprises like increases in short term rates over 7%, a recession, or a general move by investors (particularly mutual fund owners) to reduce their risk profile. The fixed-income portfolio benefited from the flattening in the yield curve because of its underweighted position in intermediate maturities. With the bulk of the flattening behind us, we have shifted more of the portfolio's exposure into 1 to 5 year maturities. Yield spreads over Treasuries for corporate and mortgage-backed securities are relatively tight. We are reducing the portfolio's exposure to longer maturity corporates because, as the possibility of recession increases, investors will demand more of a yield spread to own corporates, hurting their relative performance. Within the stock market, no consistent leadership developed in 1994 as different sectors moved into and then quickly out of favor. In the fourth quarter, consumer-oriented companies began to outperform cyclically oriented companies on worries about the impact of continued Federal Reserve tightening. Managed Asset Trust's equity portfolio continues to emphasize undervalued individual stocks, while maintaining roughly neutral sector weightings and portfolio beta versus the S&P 500 Stock Index. (Line chart representing the following table of numbers)
Managed Assets S&P 500 Index Lehman Brothers Consumer Price Trust Gov't/Corporate Bond Index Index Initial Investment 10000 10000 10000 10000 12/85 12680 13203 12130 10379 12/86 15096 15652 14025 10503 12/87 15385 16469 14346 10967 12/88 16798 19239 15435 11450 12/89 21353 25305 17631 11982 12/90 21881 24501 19093 12731 12/91 26629 31991 22172 13110 12/92 27998 34451 23853 13501 12/93 30610 37892 26491 13870 12/94 29924 38381 25561 14251 Average Annual Total Returns Ended December 31, 1994: 1 year -2.24% 5 years 6.97% 10 years 11.58%
This chart assumes an initial investment of $10,000 made on December 31, 1984. Returns include the reinvestment of all distributions at Net Asset Value and the change in share price for the stated period, but exclude insurance and administration charges assessed by Travelers Insurance separate accounts. 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. MANAGED ASSETS TRUST STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1994 ASSETS: Investment securities, at market value (identified cost $138,954,376) $ 137,658,521 Recievables: Dividends 207,775 Interest 1,021,660 Investment securities sold 6,096,369 Variation on futures margin 69,875 ------------- Total assets $ 145,054,200 ------------- LIABILITIES: Cash overdraft 4,124 Payables: Investment securities purchased 4,129,560 Investment management and advisory fees 7,746 Accrued expenses 25,862 ------------- Total Liabilities 4,167,292 ------------- NET ASSETS $ 140,886,908 ------------- ------------- NET ASSETS REPRESENTED BY: Paid-in capital $ 135,473,729 Undistributed net investment income 5,313,706 Accumulated net realized gains (losses) on investment security transactions 1,395,328 Net unrealized depreciation on investment securities (1,295,855) ------------- Total net assets (applicable to 10,960,700 shares outstanding at $12.85 per share) $ 140,886,908 ------------- ------------- See Notes to Financial Statements
MANAGED ASSETS TRUST STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1994 INVESTMENT INCOME: Dividends $ 2,413,670 Interest 3,793,587 ------------- Total income $ 6,207,257 EXPENSES: Investment management and advisory fees 738,883 Accounting and audit fees 101,533 Custodian fees 24,800 Printing and postage 19,800 Trustees' fees 5,733 Registration fees 2,802 Total expenses ------------- 893,551 -------------- Net investment income 5,313,706 -------------- REALIZED AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES: Realized gain from investment security transactions: Proceeds from investment securities sold: 158,092,123 Cost of investment securities sold 156,184,429 ------------- Net realized gain 1,907,694 Change in unrealized gain (loss) on investment securities: Unrealized gain at December 31, 1993 9,307,531 Unrealized loss at December 31, 1994 (1,295,855) ------------- Net change in unrealized gain (loss) for the year (10,603,386) -------------- Net realized and change in unrealized gain (loss) (8,695,692) -------------- Net decrease in net assets resulting from operations $ (3,381,986) -------------- -------------- See Notes to Financial Statements
MANAGED ASSETS TRUST STATEMENT OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
1994 1993 ---- ---- OPERATIONS: Net investment income $ 5,313,706 $ 5,769,935 Net realized gain from investment security transactions 1,907,694 5,655,477 Net change in unrealized gain (loss) on investment securities (10,603,386) 2,635,930 --------------- -------------- Net increase (decrease) in net assets resulting from operations (3,381,986) 14,061,342 --------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income and net short-term realized gains from investment security transactions (7,278,778) (9,092,309) Net long-term realized gains from investment security transactions (4,589,354) (2,022,741) --------------- -------------- Total distributions to shareholders (11,868,132) (11,115,050) --------------- -------------- CAPITAL SHARE TRANSACTIONS: Proceeds from shares sold 4,758,206 10,437,104 Dividend reinvestment 11,868,132 11,115,050 Payment for shares redeemed (17,256,475) (16,702,234) --------------- -------------- Net increase (decrease) in net assets resulting from capital share transactions (630,137) 4,849,920 --------------- -------------- Net increase (decrease) in net assets (15,880,255) 7,796,212 NET ASSETS: Beginning of year 156,767,163 148,970,951 --------------- -------------- End of year (including undistributed net investment income as follows: December, 1994 $5,313,706 and December, 1993 $5,769,935) $ 140,886,908 $ 156,767,163 -------------- --------------- -------------- --------------- -------------- See Notes to Financial Statements
NOTES TO FINANCIAL STATEMENTS 1.SIGNIFICANT ACCOUNTING POLICIES Managed Assets Trust ("Fund MA") is a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. Shares of Fund MA are currently offered, without a sales charge, to separate accounts of The Travelers Insurance Company ("Travelers Insurance"), an indirect wholly owned subsidiary of The Travelers Inc., in connection with the issuance of certain variable annuity and variable life insurance contracts. The following is a summary of significant accounting policies consistently followed by Fund MA in the preparation of its financial statements. SECURITY VALUATION. Investments in securities traded on a national securities exchange are valued at the last-reported sale price as of the close of business of the New York Stock Exchange on the last business day of the year; securities traded on the over-the-counter market and listed securities with no reported sales are valued at the mean between the last-reported bid and asked prices or on the basis of quotations received from a reputable broker or other recognized source. When market quotations are not considered to be readily available for long-term corporate bonds and notes, such investments are generally stated at fair value on the basis of valuations furnished by a pricing service. These valuations are determined for normal institutional-size trading units of such securities using methods based on market transactions for comparable securities and various relationships between securities which are generally recognized by institutional traders. Securities, including restricted securities, for which pricing services are not readily available are valued by management at prices which it deems in good faith to be fair. Short-term investments for which a quoted market price is available are valued at market. Short-term investments for which there is no reliable quoted market price are valued by computing a market value based upon quotations from dealers or issuers for securities of a similar type, quality and maturity. FUTURES CONTRACTS. Fund MA uses stock index futures contracts, and may also use interest rate futures contracts, as a substitute for the purchase or sale of individual securities. When Fund MA enters into a futures contract, it agrees to buy or sell a specified index of stocks or debt securities at a future time for a fixed price, unless the contract is closed prior to expiration. Fund MA is obligated to deposit with a broker an "initial margin" equivalent to a percentage of the face, or notional value of the contract. It is Fund MA's practice to hold short-term investments in an amount at least equal to the notional value of outstanding purchased futures contracts. Generally, futures contracts are closed prior to expiration. Futures contracts purchased by Fund MA are priced and settled daily; accordingly, changes in daily prices are recorded as realized gains or losses and no asset is recorded in the Statement of Investments. However, when Fund MA holds open futures contracts, it assumes a market risk generally equivalent to the underlying market risk of changes in the value of the specified indexes associated with the futures contract. OPTIONS. Fund MA may purchase index or individual equity put or call options, thereby obtaining the right to sell or buy a fixed number of shares of the underlying asset at the stated price on or before the stated expiration date. Fund MA may sell the options before expiration. Options held by Fund MA are listed on either national securities exchanges or on over-the-counter markets, and are short-term contracts with a duration of less than nine months. The market value of the options will be the latest sale price at the close of the New York Stock Exchange, or, in the absence of such sale, the latest bid quotation. NOTES TO FINANCIAL STATEMENTS--CONTINUED REPURCHASE AGREEMENTS. When Fund MA enters into a repurchase agreement (a purchase of securities whereby the seller agrees to repurchase the securities at a mutually agreed upon date and price), the repurchase price of the securities will generally equal the amount paid by Fund MA plus a negotiated interest amount. The seller under the repurchase agreement will be required to provide to Fund MA securities (collateral) whose market value, including accrued interest, will be at least equal to 102% of the repurchase price. Fund MA monitors the value of collateral on a daily basis. Repurchase agreements will be limited to transactions with national banks and reporting broker dealers believed to present minimal credit risks. Fund MA's custodian will take actual or constructive receipt of all securities underlying repurchase agreements until such agreements expire. TAXES. Fund MA has qualified, and intends to continue to qualify each year, as a "regulated investment company" under Subchapter M of the Internal Revenue Code of 1986, as amended. As a regulated investment company, Fund MA is relieved of any federal income tax liability by distributing all of its net taxable investment income and net taxable capital gains, if any, to its shareholders. Fund MA further intends to avoid excise tax liability by distributing substantially all of its investment income. Therefore, no federal income tax provision has been made by Fund MA in its financial statements. OTHER. Security transactions are accounted for on the trade date. Interest income is recorded on the accrual basis and dividend income is recorded on the ex-dividend date. Distributions to shareholders are recorded at the close of business on the record date. 2.INVESTMENTS Purchases and sales of securities other than short-term investments aggregated $134,909,223 and $135,660,871, respectively for the year ended December 31, 1994. Realized gains and losses from security transactions are reported on an identified-cost basis. At December 31, 1994, Fund MA held 43 open S&P 500 Stock Index futures contracts with a maturity date of March 17, 1995. The face value, or notional value, of these contracts at December 31, 1994, amounted to $9,919,025. In connection with these contracts, short-term investments with a par value of $590,000 had been pledged as margin deposits. Net realized gains (losses) resulting from futures contracts were ($471,650) and $456,739 for the years ended December 31, 1994 and 1993, respectively. These gains (losses) are included in the net realized gain from investment securities transactions in both the Statement of Operations and the Statement of Changes in Net Assets. The cash settlement for December 31, 1994 is shown on the Statement of Assets and Liabilities as a receivable for variation on futures margin. 3.FUND CHARGES Investment management and advisory fees are calculated daily at an annual rate of 0.50% of Fund MA's average net asset value. These fees are paid to Travelers Asset Management International Corporation ("TAMIC"), an indirect wholly owned subsidiary of The Travelers Inc. Pursuant to a sub-advisory agreement between The Travelers Investment Management Company ("TIMCO"), an indirect wholly owned subsidiary of The Travelers Inc., and TAMIC, 50% of the investment management and advisory fees earned by TAMIC are paid to TIMCO for investment management and advisory services relating to the common stock investments of Fund MA. Travelers Insurance has agreed to reimburse Fund MA for the amount by which all of Fund MA's aggregate annualized operating expenses, excluding brokerage commissions and any interest charges and taxes, exceed 1.25% of Fund MA's average net assets. Trustees and officers of Fund MA who are also officers and employees of The Travelers Inc., or its subsidiaries, receive no compensation directly from Fund MA. NOTES TO FINANCIAL STATEMENTS -- CONTINUED 4. 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 Fund MA were as follows: FOR THE YEARS ENDED DECEMBER 31, --------------------------------------- 1994 1993 ---- ---- Shares sold 365,254 769,440 Shares redeemed (1,321,839) (1,198,639) Shares issued in reinvestment of distributions: from net investment income and net short-term realized gains 542,808 687,727 from net long-term realized gains 340,238 153,666 -------- ------------ Net (73,539) 412,194 -------- ------------ -------- ------------
As of December 31, 1994, all outstanding shares of beneficial interest were owned by The Travelers Fund U for Variable Annuities and The Travelers Fund UL for Variable Life Insurance, both of which are separate accounts of Travelers Insurance. 5. SUBSEQUENT EVENT On January 27, 1995, the Board of Trustees declared a distribution of net investment income of $0.50 per share and a distribution from net long-term realized gains of $0.17 per share, payable on January 30, 1995, to shareholders of record as of January 27, 1995. These distributions are not reflected in the accompanying financial statements. NOTES TO FINANCIAL STATEMENTS -- CONTINUED 6. FINANCIAL HIGHLIGHTS* (Per share data for a share outstanding throughout each year.)
FOR THE YEARS ENDED DECEMBER 31, -------------------------------------------- 1994 1993 1992 --------- ---------- ---------- PER SHARE DATA: - ---------------- Net asset value, beginning of year $14.21 $14.02 $14.78 Income from operations ----------------------- Net investment income 0.46 0.51 0.64 Net gains or losses on securities (realized and unrealized) (0.73) 0.72 0.01 ----- ----- ----- Total from investment operations (0.27) 1.23 0.65 Less distributions ------------------ Distributions from net investment income and short-term realized gains (0.67) (0.85) (1.04) Distributions from long-term realized gains (0.42) (0.19) (0.37) ---------- ---------- ---------- Total distributions (1.09) (1.04) (1.41) Net asset value, end of year $ 12.85 $ 14.21 $ 14.02 ---------- ---------- ---------- ---------- ---------- ---------- TOTAL RETURN*** (2.24)% 9.33% 5.14% RATIOS/SUPPLEMENTAL DATA - ------------------------- Net assets, end of year (thousands) $ 140,887 $ 156,767 $ 148,971 Ratio of expenses to average net assets 0.61%** 0.56%** 0.56%** Ratio of net investment income to average net assets 3.59% 3.65% 4.97% Portfolio turnover rate 97% 86% 112% FOR THE YEARS ENDED DECEMBER 31, -------------------------------- 1991 1990# --------- --------- PER SHARE DATA: - ---------------- Net asset value, beginning of year $12.77 $13.03 Income from operations ----------------------- Net investment income 0.74 0.65 Net gains or losses on securities (realized and unrealized) 1.91 (0.37) ---------- ---------- Total from investment operations 2.65 0.28 Less distributions ------------------ Distributions from net investment income and short-term realized gains (0.64) (0.54) -- -- Distributions from long-term realized gains ---------- ---------- Total distributions (0.64) (0.54) (0.54) Net asset value, end of year $14.78 $12.77 ---------- ---------- ---------- ---------- TOTAL RETURN*** 21.70% 2.47% RATIOS/SUPPLEMENTAL DATA - ------------------------- Net assets, end of year (thousands) $ 126,021 $ 92,464 Ratio of expenses to average net assets 0.56%** 0.59%** Ratio of net investment income to average net assets 5.49% 5.17% Portfolio turnover rate 141% 123%
*The information set forth in Note 6 replaces the data presented in prior years as supplementary information. **The ratio of expenses to average net assets for the years 1990-1993 reflects an expense reimbursement by Travelers Insurance in connection with voluntary expense limitations. Without the expense reimbursement, the ratios of operating expenses to average net assets would have been 0.60%, 0.63%, 0.69% and 0.74% for the years ended December 31, 1993, 1992, 1991 and 1990, respectively. For the year ended December 31, 1994, there was no expense reimbursement by Travelers Insurance in connection with the voluntary expense limitations described in Note 3. ***Total return is determined by dividing the increase (decrease) in value of a share during the year, after reflecting the reinvestment of dividends declared during the year, by the beginning of year share price. As described in Note 1, shares in Fund MA are only sold to Travelers Insurance separate accounts in connection with the issuance of variable annuity and variable life insurance contracts. The total return does not reflect the deduction of any contract charges or fees assessed by Travelers Insurance separate accounts. #On May 1, 1990, TAMIC replaced Keystone Custodian Funds, Inc. as the investment adviser for Fund MA. MANAGED ASSETS TRUST STATEMENT OF INVESTMENTS DECEMBER 31, 1994
NO. OF SHARES MARKET VALUE ---------- ----------- COMMON STOCKS (57.4%) AMUSEMENTS (0.8%) Promus Cos. (A) 12,300 $ 381,300 Walt Disney Co. 16,400 756,450 ----------- 1,137,750 ----------- BANKING (2.8%) Banc One Corp. 14,072 357,077 Bank of Boston Corp. 11,100 287,213 Barnett Banks, Inc. 3,600 138,150 Chase Manhattan Corp. 4,700 161,563 Citicorp 15,500 641,312 First Interstate Bancorp 2,400 162,300 First Union Corp. 16,800 695,100 Mellon Bank Corp. 12,400 379,750 NationsBank Corp. 14,500 654,312 Norwest Corp. 15,400 359,975 ----------- 3,836,752 ----------- CHEMICALS, PHARMACEUTICALS AND ALLIED PRODUCTS (7.2%) Abbott Laboratories 10,500 342,563 Bristol-Myers Squibb Co. 22,300 1,290,612 Clorox Co. 1,400 82,425 Dow Chemical Co. 13,000 874,250 E.I. Dupont de Nemours & Co. 10,600 596,250 Eastman Chemical Company 4,500 227,250 Eli Lilly & Co. 6,900 452,812 Georgia Gulf Corp. (A) 7,300 283,788 Great Lakes Chemical Corp. 4,300 245,100 Johnson & Johnson 16,500 903,375 Merck & Co., Inc. 17,000 648,125 Morton International. Inc. 15,500 441,750 Pfizer, Inc. 8,500 656,625 Praxair, Inc. 12,500 256,250 Procter & Gamble Co. 22,000 1,364,000 Schering-Plough Corp. 12,700 939,800 Union Carbide Corp. 12,400 364,250 ----------- 9,969,225 ----------- COMMUNICATION (6.2%) Ameritech Corp. 18,800 759,050 AT&T Corp. 45,100 2,266,275 Bell Atlantic Corp. 11,600 577,100 Bellsouth Corp. 6,100 330,163 Capital Cities ABC, Inc. 5,700 485,925 CBS, Inc. 5,235 289,888 GTE Corp. 19,500 592,312 MCI Communications Corp. 31,900 588,140 Pacific Telesis Group 5,700 162,450 NO. OF SHARES MARKET VALUE -------------- ------------- COMMUNICATION (CONTINUED) Southwestern Bell Corp. 21,700 $ 876,137 Sprint Corp. 19,500 538,688 Tele-Communications. Inc. (A) 22,000 479,864 U.S. West, Inc. 9,700 345,563 Viacom International, Inc. (A) 640 26,640 Viacom International, Inc. Warrant (A) 8,000 9,000 Viacom International, Inc. Cl. B (A) 4,549 184,803 ---------- 8,511,998 ---------- CONTRACTORS (0.2%) Fluor Corp. 6,900 297,562 ---------- ELECTRICAL AND ELECTRONIC MACHINERY (4.7%) Advanced Micro Device (A) 10,600 263,675 American Power Conversion (A) 6,900 112,553 General Electric Co. 50,100 2,555,100 General Instrument Corp. (A) 8,900 267,000 Intel Corp. 12,700 809,625 Micron Technology 7,000 308,875 Motorola, Inc. 15,400 891,275 Texas Instruments, Inc. 12,800 958,400 Varian Associates, Inc. 3,200 112,000 Whirlpool Corp. 3,100 155,775 ---------- 6,434,278 ---------- FINANCE (2.6%) American Express Co. 6,700 197,650 Beneficial Corp. 6,000 234,000 Dean Witter Discover & Co. 8,100 274,387 Federal Home Loan Corp. 9,800 494,900 Federal National Mortgage Association 9,000 655,875 Green Tree Financial Corp. 8,900 270,338 ITT Corp. 8,600 762,175 Lehman Brothers Holding, Inc. 15,400 227,150 Merrill Lynch & Co., Inc. 5,500 196,625 Transamerica Corp. 5,300 263,675 ---------- 3,576,775 ---------- FOOD (4.2%) Coca-Cola Co. 27,400 1,411,100 Conagra, Inc. 16,400 512,500 IBP, Inc. 15,100 456,775 Kellogg Co. 2,000 116,250 PepsiCo, Inc. 19,300 699,625 Philip Morris, Inc. 21,500 1,236,250 Quaker Oats Co. 3,200 98,400 Sara Lee Corp. 32,400 818,100 Seagram Co, Ltd. 8,300 244,850 Unilever N.V. 2,200 256,300 ---------- 5,850,150 ----------
STATEMENT OF INVESTMENTS - CONTINUED
NO. OF SHARES MARKET VALUE ------------ ------------ INSURANCE (1.3%) American International Group, Inc. 5,100 $ 499,800 Chubb Corp. 5,200 402,350 General Reinsurance Corp. 1,000 123,750 Health Systems International, Inc. (A) 7,700 233,888 U.S. Healthcare, Inc. 5,250 215,906 United Healthcare Corp. 7,700 347,462 ---------- 1,823,156 ---------- LUMBER AND WOOD PRODUCTS (0.3%) Georgia-Pacific Corp. 2,400 171,600 Weyerhaeuser Co. 6,100 228,750 ---------- 400,350 ---------- MACHINERY (3.3%) Applied Materials (A) 13,500 567,000 Briggs & Stratton Corp. 5,600 183,400 Caterpillar, Inc. 5,000 275,625 Cisco Systems, Inc. (A) 6,600 231,409 Clark Equipment Co. (A) 4,900 265,825 Compaq Computer Corp. (A) 16,100 635,950 Deere & Co. 3,700 245,125 Dover Corp. 7,800 402,675 Hewlett Packard Co. 5,900 589,262 International Business Machines Corp. 13,500 992,250 Varity Corp. (A) 5,000 181,250 ---------- 4,569,771 ---------- METAL PRODUCTS (1.2%) Aluminum Company of America 4,100 355,162 Alumax, Inc. (A) 5,900 167,413 Gillette Co. 5,600 418,600 Nucor Corp. 7,800 432,900 USX - U.S. Steel Group 6,900 244,950 ---------- 1,619,025 ---------- MINING (0.5%) American Barrick Resources Corp. 17,800 396,050 Placer Dome, Inc. 11,100 241,425 ---------- 637,475 ---------- MISCELLANEOUS MANUFACTURING (1.5%) Callaway Golf Co. 12,300 407,438 Eastman Kodak Co. 8,500 405,875 Emerson Electric Co. 4,900 306,250 Medtronic, Inc. 7,500 417,187 Thermo Electronics Corp. (A) 7,400 332,075 Xerox Corp. 2,600 257,400 ---------- 2,126,225 ---------- NO. OF SHARES MARKET VALUE --------------- --------------- OIL & GAS (0.7%) Anadarko Petroleum 7,100 $ 273,350 Enron Oil & Gas Co. 10,000 187,500 Freeport-McMoRan Copper & Gold, Inc. 7,500 159,375 Schlumberger, Ltd. 6,200 312,325 ---------- 932,550 ---------- PAPER AND ALLIED PRODUCTS (1.1%) Champion International Corp. 6,700 244,550 International Paper Co. 3,300 248,737 Kimberly Clark Corp. 8,100 409,050 Mead Corp. 1,900 92,388 Stone Container Corp. (A) 28,300 488,175 ---------- 1,482,900 ---------- PETROLEUM REFINING AND RELATED INDUSTRIES (5.0%) Amoco Corp. 11,900 703,587 Atlantic Richfield, Inc. 4,219 429,283 Chevron Corp. 4,100 182,963 Exxon Corp. 32,500 1,974,375 Kerr McGee Corp. 5,300 243,800 Mobil Corp. 14,300 1,204,775 Royal Dutch Petroleum Co. 13,700 1,472,750 Sun Co., Inc. 8,800 253,000 Tosco Corp. 13,700 399,013 ---------- 6,863,546 ---------- PRINTING, PUBLISHING AND ALLIED INDUSTRIES (0.6%) Central Newspapers, Inc. 5,800 163,125 Dow Jones & Co., Inc. 10,600 328,600 Time Warner, Inc. 7,700 270,463 ---------- 762,188 ---------- RETAIL (2.9%) Dayton Hudson Corp. 2,000 141,500 Home Depot, Inc. 7,700 354,200 J.C. Penney Co. 6,000 267,750 Kmart Corp. 9,000 117,000 Kroger Co. (A) 16,200 390,825 Lowe's Co.'s, Inc. 4,700 163,325 May Department Stores 6,900 232,875 McDonalds Corp. 17,000 497,250 Sears Roebuck & Co. 9,000 414,000 The GAP, Inc. 4,700 143,350 Toys R Us (A) 3,400 103,700 Wal-Mart Stores, Inc. 56,800 1,207,000 ---------- 4,032,775 ---------- STATEMENT OF INVESTMENTS - CONTINUED NO. OF SHARES MARKET VALUE --------------- --------------- RUBBER AND PLASTIC PRODUCTS (0.6%) Armstrong World Industries 10,500 $ 404,250 Premark International, Inc. 8,100 362,475 ---------- 766,725 ---------- SERVICES (1.8%) Columbia/HCA Healthcare Corp. 23,100 843,150 Computer Associates International 5,400 261,900 Microsoft (A) 15,200 931,000 Omnicom Group, Inc. 4,900 253,575 Oracle Systems Corp. (A) 5,400 238,950 ---------- 2,528,575 ---------- STONE, CLAY, GLASS AND CONCRETE PRODUCTS (0.2%) Minnesota Mining & Manufacturing Co. 5,800 309,575 ---------- TEXTILE MILL PRODUCTS (0.2%) VF Corp. 4,700 228,538 ---------- TOBACCO MANUFACTURERS(0.7%) RJR Nabisco Holding Corp. (A) 182,900 1,005,950 ---------- TRANSPORTATION (1.0%) Burlington Northern Railroad 7,400 356,125 Conrail, Inc. 6,600 333,300 Delta Airlines, Inc. 1,800 90,900 Federal Express Corp. (A) 3,900 234,975 Illinois Central Corp. 7,900 242,925 Southwestern Airlines 7,400 123,950 ---------- 1,382,175 ---------- TRANSPORTATION MANUFACTURING (3.6%) Boeing Co. 4,300 201,025 Chrysler Corp. 15,400 754,600 Echlin, Inc. 9,900 297,000 Ford Motor Co. 38,600 1,080,800 General Dynamics Corp. 8,900 387,150 General Motors Corp. 13,500 570,375 General Motors Corp., Cl. H 3,400 118,575 Lockheed Corp. 6,000 435,750 McDonnell Douglas Corp. 3,000 426,000 Rockwell International Corp. 10,600 378,950 Superior Industries 2,800 73,850 Textron, Inc. 4,900 246,837 ---------- 4,970,912 ---------- UTILITIES (2.0%) Baltimore Gas & Electric Co. 7,000 154,875 Carolina Power & Light Co. 6,100 162,413 Central & Southwest Corp. 11,300 255,662 NO. OF SHARES MARKET VALUE --------------- --------------- UTILITIES (CONTINUED) Florida Power & Light Co. 9,400 $ 330,175 NIPSCO Industries, Inc. 8,500 252,875 Pacific Enterprises 5,800 123,250 PECO Energy Co. 17,000 416,500 Public Service Co. of Colorado 8,500 249,688 Public Service Enterprises Group 9,200 243,800 Southern Co. 25,000 500,000 ---------- 2,689,238 ----------- WHOLESALE TRADE (0.2%) Alco Standard Corp. 3,400 213,350 ---------- TOTAL COMMON STOCKS (COST $77,233,775) 78,959,489 ---------- PREFERRED STOCKS (1.8%) BANKING (0.6%) Ahmanson (HF) & Co. 20,000 805,000 ---------- MANUFACTURING (0.6%) Cooper Industries, Inc. 38,675 792,838 ---------- OIL AND GAS (0.6%) Occidental Petroleum Corp. 19,000 926,250 ---------- TOTAL PREFERRED STOCKS (COST $2,973,499) 2,524,088 ---------- PRINCIPAL AMOUNT ---------------- BONDS (12.5%) BANKING (1.0%) Bank of New York Co., Inc., 6.50%, Notes, 2003 $1,000,000 865,600 Great Western Financial Corp., 6.375% Notes, 2000 500,000 451,500 ---------- 1,317,100 ---------- CHEMICALS AND ALLIED PRODUCTS (3.3%) Eastman Chemical Company, 7.25% Debentures, 2024 2,500,000 2,061,775 Mallinckrodt Group, Inc., 7.00% Debentures, 2013 3,000,000 2,521,140 ---------- 4,582,915 ---------- FINANCE (2.5%) General Motors Acceptance Corp., 8.375% Bonds,1997 3,440,000 3,434,015 ----------
STATEMENT OF INVESTMENTS - CONTINUED
PRINCIPAL AMOUNT MARKET VALUE ---------------- ---------------- FOREIGN GOVERNMENT NON-NATIONAL (0.4%) Ontario Province, 11.75% Debentures, 2013 $ 500,000 $ 566,440 ---------- FOREIGN NATIONAL GOVERNMENT (1.2%) United Mexican States, 8.50% Notes, 2002 2,000,000 1,602,520 ---------- PHARMACEUTICAL AND HEALTH CARE PRODUCTS (1.5%) Becton Dickinson & Co., 8.80%, Sinking Fund, 2001 2,000,000 2,046,420 ---------- TRANSPORTATION (1.3%) Delta Airlines, Inc., 9.25% Sinking Fund, 2007 (E) 973,828 913,032 Delta Airlines, Inc., 8.27% Sinking Fund, 2007 927,473 820,247 ---------- 1,733,279 ---------- TRANSPORTATION MANUFACTURING (0.7%) Arvin Industries, Inc., 10.00% Debentures, 2000 1,000,000 1,031,420 ---------- WHOLESALE TRADE (0.6%) Supervalu, Inc., 7.25% Notes, 1999 1,000,000 959,690 ---------- TOTAL BONDS (COST $19,010,619) 17,273,799 ---------- U.S. GOVERNMENT AGENCY SECURITIES (2.5%) Federal Home Loan Mortgage Corp., 8.50% Pass Through, 2002 889,778 879,990 FNMA Pool, 8.50% Pass Through,2005 185,266 185,093 FNMA Pool, 8.50% Pass Through, 2005 393,631 393,265 GNMA Pool, 7.50% Pass Through, 2007 81,096 75,293 GNMA Pool, 7.50% Pass Through, 2007 419,864 389,818 GNMA Pool, 9.00% Pass Through, 2016 247,691 250,168 GNMA Pool, 9.00% Pass Through, 2019 346,912 350,382 GNMA Pool, 9.50% Pass Through, 2020 670,954 693,390 GNMA Pool, 9.50% Pass Through,2020 275,342 284,550 ---------- TOTAL U.S. GOVERNMENT AGENCY SECURITIES (COST $3,408,183) 3,501,949 ----------
STATEMENT OF INVESTMENTS - CONTINUED
PRINCIPAL AMOUNT MARKET VALUE ---------------- ---------------- U.S. GOVERNMENT SECURITIES (21.6%) United States of America Treasury, 8.50% Bonds, 2020 $ 2,500,000 $ 2,632,825 United States of America Treasury, 5.875% Bonds, 2004 2,000,000 1,745,000 United States of America Treasury, 7.875% Bonds, 2021 7,300,000 7,204,224 United States of America Treasury, 0.00% Bonds, 2016 5,325,000 999,715 United States of America Treasury, 6.50% Notes, 1999 8,000,000 7,607,520 United States of America Treasury, 6.875% Notes, 1999 3,000,000 2,889,390 United States of America Treasury, 7.25% Notes, 2004 6,900,000 6,628,347 ------------- TOTAL U.S. GOVERNMENT SECURITIES (COST $ 30,633,592) 29,707,021 ------------- SHORT-TERM INVESTMENTS (4.2%) COMMERCIAL PAPER (3.7%) Commerzbank U.S. Finance, Inc., 6.00% due January 3, 1995 2,076,000 2,074,632 General Electric Capital Corp., 5.87% due January 23, 1995 3,000,000 2,984,407 ------------- 5,059,039 ------------- U.S. GOVERNMENT SECURITIES (0.5%) United States of America Treasury, 4.50% due March 9, 1995 (C) 50,000 47,974 United States of America Treasury, 5.87% due September 21, 1995 (C) 75,000 70,576 United States of America Treasury, 6.04% due September 21, 1995 (C) 100,000 94,271 United States of America Treasury, 6.22% due September 21, 1995 (C) 445,000 420,315 ----------- 633,136 ----------- TOTAL SHORT-TERM INVESTMENTS (COST $ 5,694,708) 5,629,175 ----------- NOTIONAL VALUE ---------------- FUTURES CONTRACTS (0.0%) S&P 500 Stock Index, Exp. March, 1995 (D) $9,919,025 -- ----------- TOTAL INVESTMENTS (100%) (COST $138,954,376) (B)(F) $137,658,521 ------------ ------------ STATEMENT OF INVESTMENTS - CONTINUED NOTES (A) Non-income Producing Security. (B) At December 31,1994, net unrealized depreciation for all securities was $1,295,855. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of market value over cost of $5,625,569 and aggregate gross unrealized depreciation for all securities in which there was an excess of cost over market value of $6,921,424. (C) Par value of $590,000 is pledged to cover margin deposits on futures contracts. (D) As more fully discussed in Note 1 to the financial statements, it is Fund MA's practice to hold short-term investments in an amount at least equal to the underlying face value, or notional value, of outstanding purchased futures contracts. Fund MA uses futures contracts as a substitute for holding individual securities. (E) Management Priced Security. (F) The cost of investments for federal income tax purposes amounted to $139,470,800. Gross unrealized appreciation and depreciation of investments, based on identified tax cost, at December 31, 1994 were as follows: Gross unrealized appreciation $ 5,504,281 Gross unrealized depreciation (7,316,560) ------------- Net unrealized depreciation $(1,812,279) ------------- ------------- See Notes to Financial Statements
REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Trustees and Shareholders of Managed Assets Trust: We have audited the accompanying statement of assets and liabilities of MANAGED ASSETS TRUST including the statement of investments, as of December 31, 1994, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. 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, 1994, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Managed Assets Trust as of December 31, 1994, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Hartford, Connecticut February 15, 1995 This page intentionally left blank. Investment Advisers ------------------------ (CAPITAL APPRECIATION FUND AND SOCIAL AWARENESS STOCK PORTFOLIO) THE TRAVELERS INVESTMENT MANAGEMENT COMPANY Hartford, Connecticut (MANAGED ASSETS TRUST, HIGH YIELD BOND TRUST, CASH INCOME TRUST AND U.S. GOVERNMENT SECURITIES PORTFOLIO) TRAVELERS ASSET MANAGEMENT INTERNATIONAL CORPORATION Hartford, Connecticut (UTILITIES PORTFOLIO) GREENWICH STREET ADVISORS New York, New York Independent Accountants ------------------------ COOPERS & LYBRAND L.L.P. Hartford, Connecticut Custodian ------------------------ SHAWMUT BANK CONNECTICUT, N.A. Hartford, Connecticut 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, Cash Income 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 and the Prospectuses of the underlying mutual funds, which collectively contain all pertinent information, including the applicable selling commissions. VG-181 (Annual) (12-94) Printed in U.S.A. PART C OTHER INFORMATION Item 24. Financial Statements and Exhibits (a) The financial statements of the Registrant and the Report of Independent Accountants are contained in the December 31, 1994 Annual Report to Shareholders and are incorporated by reference in the Statement of Additional Information. The Registrant's financial statements include: Statement of Assets and Liabilities as of December 31, 1994 Statement of Operations for the year ended December 31, 1994 Statement of Changes in Net Assets for the years ended December 31, 1994 and 1993 Statement of Investments as of December 31, 1994 Notes to Financial Statements (b) Exhibits *1. Declaration of Trust. (Incorporated herein by reference to Exhibit 1(b)(1) to the Registration Statement on Form N-1 filed on September 15, 1982.) *2. By-Laws of Managed Assets Trust. (Incorporated herein by reference to Exhibit 1(b)(2) to the Registration Statement on Form N-1 filed on September 15, 1982.) Amendments to the Registrant's By-Laws are also incorporated herein by reference to Exhibits 24(b)(2) to Post-Effective Amendment Nos. 5, 11 and 13 to the Registration Statement on Form N-1A.) *5(A). Investment Advisory Agreement between the Registrant and Travelers Asset Management International Corporation. (Incorporated herein by reference to Exhibit 24(b)(5)(A) to Post-Effective Amendment No. 15 to the Registration Statement on Form N-1A filed on February 17, 1993.) *5(B). Sub-Advisory Agreement between Travelers Asset Management International Corporation and The Travelers Investment Management Company. (Incorporated herein by reference to Exhibit 24(b)(5)(B) to Post- Effective Amendment No. 15 to the Registration Statement on Form N-1A filed on February 17, 1993.) 8. Custody Agreement dated February 1, 1995 between the Registrant and Chase Manhattan Bank, N.A., of Brooklyn, New York. *9. Transfer and Recordkeeping Agreement between the Registrant and The Travelers Insurance Company. (Incorporated herein by reference to Exhibit 24(b)(9) to Post-Effective Amendment No. 14 to the Registration Statement on Form N-1A filed on April 14, 1992.) *10. An Opinion and Consent of counsel as to the legality of the securities registered by the Registrant. (Incorporated herein by reference to the Registrant's most recent 24f-2 Notice filed on February 27, 1995.) 11(A). Consent of Coopers & Lybrand L.L.P., Independent Accountants, to the use of their name and opinion in Part A and Part B of this Form N-1A and to the incorporation by reference of their report. 11(B). Powers of Attorney authorizing Ernest J. Wright as signatory for Heath B. McLendon, Knight Edwards, Robert E. McGill, III, Lewis Mandell, Frances M. Hawk and Ian R. Stuart. * Previously filed and incorporated herein by reference. Item 25. Persons Controlled By or Under Common Control With the Registrant Not Applicable. Item 26. Number of Holders of Securities Number of Record Holders Title of Class as of February 17, 1995 -------------- ------------------------- Shares of beneficial interest, Two (2) without par value Item 27. Indemnification Provisions for the indemnification of the Fund's Trustees and officers are contained in the Fund's Declaration of Trust which was filed with Pre-Effective Amendment No. 1 to the Fund's Registration Statement as Exhibit 1(b)(1) and is incorporated by reference herein. Item 28. Business and Other Connections of Investment Adviser Officers and Directors of Travelers Asset Management International Corporation (TAMIC), the Fund's Investment Adviser, are set forth in the following table: Name Position with TAMIC Other Business - ---- ------------------- --------------- Marc P. Weill Director, Chairman and Senior Vice President** President David A. Tyson Director and Senior Vice Senior Vice President* President David Amaral Vice President Fixed Income Trader** John R. Calcagni Vice President Second Vice President* Gene Collins Vice President Investment Officer** Eric Dobbin Vice President Investment Officer** Phillip A. Duncan Vice President Investment Officer** Emil Molinaro Vice President Vice President** F. Denney Voss Vice President Senior Vice President** William H. White Treasurer Vice President and Treasurer* Charles B. Chamberlain Assistant Treasurer Assistant Treasurer* George C. Quaggin Assistant Treasurer Assistant Treasurer* John R. Britt Secretary Assistant Secretary* Marla A. Berman Assistant Secretary Assistant General Counsel** Paul M. Danie Compliance Officer Assistant Director* Frank J. Fazzina Controller Director* * Positions are held with The Travelers Insurance Company, One Tower Square, Hartford, Connecticut. ** Positions held with Travelers Group Inc., 388 Greenwich Street, New York, New York. Officers and Directors of The Travelers Investment Management Company (TIMCO), the Fund's Sub-Adviser, are set forth in the following table: Name Position with TIMCO Other Business - ---- -------------------- --------------- Jeffrey B. Lane Director and Chairman Vice Chairman Smith Barney Inc.** Kent A. Kelley Director and Chief Not Applicable Executive Officer* Sandip A. Bhagat Director and President* Not Applicable Heath B. McLendon Director Managing Director Smith Barney Inc.** Jacob E. Hurwitz Vice President* Not Applicable Emil Molinaro Vice President Vice President Travelers Group Inc.** Daniel Willey Vice President* Not Applicable Gloria G. Williams Assistant Vice President* Not Applicable James W. Churm Corporate Secretary Senior Vice President Smith Barney Inc.** Michael Day Treasurer Managing Director Smith Barney Inc.** * Address: One Tower Square, Hartford, Connecticut 06183 ** Address: Smith Barney Inc., 388 Greenwich Street, New York, New York 10013 Item 29. Principal Underwriter Not Applicable. Item 30. Location of Accounts and Records (1) The Travelers Insurance Company One Tower Square Hartford, Connecticut 06183 (2) Chase Manhattan Bank, N.A. Chase MetroTech Center Brooklyn, New York Item 31. Management Services Not Applicable. Item 32. Undertakings The undersigned Registrant hereby undertakes to provide to each person to whom a prospectus is delivered a copy of the Registrant's latest annual report to shareholders, upon request and without charge. SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant, Managed Assets Trust, certifies that it meets all of the requirements for effectiveness of this post-effective amendment to this Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933 and that it has duly caused this amendment to this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Hartford, State of Connecticut, on April 19, 1995. MANAGED ASSETS TRUST (Registrant) By: *HEATH B. McLENDON __________________ Heath B. McLendon Chairman, Board of Trustees Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities indicated on April 19, 1995. *HEATH B. McLENDON Chairman of the Board - --------------------- (Heath B. McLendon) *KNIGHT EDWARDS Trustee - --------------------- (Knight Edwards) *ROBERT E. McGILL, III Trustee - ---------------------- (Robert E. McGill, III) *LEWIS MANDELL Trustee - ---------------------- (Lewis Mandell) *FRANCES M. HAWK Trustee - ---------------------- (Frances M. Hawk *IAN R. STUART Treasurer and Chief Accounting Officer - ---------------------- (Ian R. Stuart) *By: /s/ Ernest J. Wright ------------------------------ Ernest J. Wright, Attorney-in-Fact Secretary, Board of Trustees EXHIBIT INDEX Exhibit No. Description Method of Filing - ------- ------------ ---------------- 1. Declaration of Trust. (Incorporated herein by reference to Exhibit 1(b)(1) to the Registration Statement on Form N-1 filed on September 15, 1982.) 2. By-Laws of Managed Assets Trust. (Incorporated herein by reference to Exhibit 1(b)(2) to the Registration Statement on Form N-1 filed on September 15, 1982.) Amendments to the Registrant's By-Laws are also incorporated herein by reference to Exhibits 24(b)(2) to Post-Effective Amendment Nos. 5, 11 and 13 to the Registration Statement on Form N-1A.) 5(A). Investment Advisory Agreement between the Registrant and Travelers Asset Management International Corporation. (Incorporated herein by reference to Exhibit 24(b)(5)(A) to Post-Effective Amendment No. 15 to the Registration Statement on Form N-1A filed on February 17, 1993.) 5(B). Sub-Advisory Agreement between Travelers Asset Management International Corporation and The Travelers Investment Management Company. (Incorporated herein by reference to Exhibit 24(b)(5)(B) to Post-Effective Amendment No. 15 to the Registration Statement on Form N-1A filed on February 17, 1993.) 8. Custody Agreement dated February 1, 1995 Electronically between the Registrant and Chase Manhattan Bank, N.A., of Brooklyn, New York. 9. Transfer and Recordkeeping Agreement between the Registrant and The Travelers Insurance Company. (Incorporated herein by reference to Exhibit 24(b)(9) to Post-Effective Amendment No. 14 to the Registration Statement on Form N-1A filed on April 14, 1992.) 10. An Opinion and Consent of counsel as to the legality of the securities registered by the Registrant. (Incorporated herein by reference to the Registrant's most recent 24f-2 Notice filed on February 27, 1995.) 11(A). Consent of Coopers & Lybrand L.L.P., Electronically Independent Accountants, to the use of their name and opinion in Part A and Part B of this Form N-1A and to the incorporation by reference of their report. 11(B). Powers of Attorney authorizing Ernest J. Wright Electronically as signatory for Heath B. McLendon, Knight Edwards, Robert E. McGill, III, Lewis Mandell, Frances M. Hawk and Ian R. Stuart. Exhibit 8 CUSTODY AGREEMENT Agreement made as of the 1st day of February, 1995 between each of the registered management investment companies of The Travelers Insurance Company listed below, and such others as may be added from time to time on Schedule A attached hereto (each individually hereinafter called the "Customer"), and The Chase Manhattan Bank, N.A., (hereinafter called the "Bank"), whereby the Customer appoints the Bank, and the Bank hereby agrees to act, as Custodian of the cash and securities ("Assets") of the Customer, subject to the terms of this Agreement. 1. CUSTOMER ACCOUNTS. The Bank agrees to establish and maintain the following accounts ("Accounts"): (a) A custody account in the name of the Customer ("Custody Account") for any and all stocks, shares, bonds, debentures, notes, mortgages or other obligations for the payment of money, bullion, coin and any certificates, receipts, warrants or other instruments representing rights to receive, purchase or subscribe for the same or evidencing or representing any other rights or interests therein and other similar property whether certificated or uncertificated as may be received by the Bank for the account of the Customer ("Securities"); and (b) A deposit account in the name of the Customer ("Deposit Account") for any and all cash in any currency received by the Bank for the account of the Customer, which cash shall not be subject to withdrawal by draft or check. The Customer warrants its authority to: 1) deposit the cash and Securities (Assets) received in the Accounts and 2) give instructions (as defined in Section 9) concerning the Accounts. Upon written agreement between the Bank and the Customer, additional Accounts may be established and separately accounted for as additional Accounts under the terms of this Agreement. 2. MAINTENANCE OF SECURITIES AND CASH AT BANK. Unless instructions (as defined in Section 9) specifically require another location acceptable to the Bank: (a) Securities will be held in the country or other jurisdiction in which the principal trading market for such Securities is located, where such Securities are to be presented for payment or where such Securities are acquired; and (b) Cash will be credited to an account in a country or other jurisdiction in which such cash may be legally deposited or it is the legal currency for the payment of public or private debts. Cash may be held pursuant to Instructions (as defined in Section 9) in either interest or non-interest bearing accounts as may be available for the particular currency. To the extent Instructions are issued and the Bank can comply with such Instructions, the Bank is authorized to maintain cash balances on deposit for the Customer with itself or one of its affiliates at such reasonable rates of interest as may from time to time be paid on such accounts, or in non-interest bearing accounts as the Customer may direct, if acceptable to the Bank. 3. DEPOSIT ACCOUNT TRANSACTIONS. (a) The Bank will make payments from the Deposit Account upon receipt of Instructions which include all information required by the Bank. (b) In the event that any payment to be made under this Section 3 exceeds the funds available in the Deposit Account, the Bank, in its discretion, may advance the Customer such excess amount which shall be deemed a loan payable on demand, bearing interest at the rate customarily charged by the Bank on similar loans. (c) If the Bank credits the Deposit Account on a payable date, or at any time prior to actual collection and reconciliation to the Deposit Account, with interest, dividends, redemptions or any other amount due, the Customer will promptly return any such amount upon oral or written notification: (i) that such amount has not been received in the ordinary course of business or (ii) that such amount was incorrectly credited. If the Customer does not promptly return any amount upon such notification, the Bank shall be entitled, upon oral or written notification to the Customer, to reverse such credit by debiting the Deposit Account for the amount previously credited. The Bank shall have no duty or obligation to institute legal proceedings, file a claim or a proof of claim in any insolvency proceeding or take any other action with respect to the collection of such amount, but may act for the Customer upon Instructions after consultation with the Customer. 4. CUSTODY ACCOUNT TRANSACTIONS. (a) Securities will be transferred, exchanged or delivered by the Bank upon receipt by the Bank of Instructions which include all information required by the Bank. Settlement and payment for Securities received for, and delivery of Securities out of, the Custody Account may be made in accordance with the customary or established securities trading or securities processing practices and procedures in the jurisdiction or market in which the transaction occurs, including, without limitation, delivery of Securities to a purchaser, dealer or their agents against a receipt with the expectation of receiving later payment and free delivery. Delivery of Securities out of the Custody Account may also be made in any manner specifically required by Instructions acceptable to the Bank. (b) The Bank, in its discretion, may credit or debit the Accounts on a contractual settlement date with cash or Securities with respect to any sale, exchange or purchase of Securities. Otherwise, such transactions will be credited or debited to the Accounts on the date cash or Securities are actually received by the Bank and reconciled to the Account. (i) The Bank may reverse credits or debits made to the Accounts in its discretion if the related transaction fails to settle within a reasonable period, determined by the Bank in its discretion, after the contractual settlement date for the related transaction. (ii) If any Securities delivered pursuant to this Section 4 are returned by the recipient thereof, the Bank may reverse the credits and debits of the particular transaction at any time. 5. ACTIONS OF THE BANK. The Bank shall follow Instructions received regarding assets held in the Accounts. However, until it receives Instructions to the contrary, the Bank will: (a) Present for payment any Securities which are called, redeemed or retired or otherwise become payable and all coupons and other income items which call for payment upon presentation, to the extent that the Bank is actually aware of such opportunities. (b) Execute in the name of the Customer such ownership and other certificates as may be required to obtain payments in respect of Securities. (c) Exchange interim receipts or temporary Securities for definitive Securities. (d) Appoint brokers and agents for any transaction involving the Securities, including, without limitation, affiliates of the Bank. (e) Issue statements to the Customer, at times mutually agreed upon, identifying the Assets in the Accounts. The Bank will send the Customer an advice or notification of any transfers of Assets to or from the Accounts. Such statements, advices or notifications shall indicate the identity of the entity having custody of the Assets. Unless the Customer sends the Bank a written exception or objection to any Bank statement within sixty (60) days of receipt, the Customer shall be deemed to have approved such statement. In such event, or where the Customer has otherwise approved any such statement, the Bank shall, to the extent permitted by law, be released, relieved and discharged with respect to all matters set forth in such statement or reasonably implied therefrom as though it had been settled by the decree of a court of competent jurisdiction in an action where the Customer and all persons having or claiming an interest in the Customer or the Customer's Accounts were parties. All collections of funds or other property paid or distributed in respect of Securities in the Custody Account shall be made at the risk of the Customer. The Bank shall have no liability for any loss occasioned by delay in the actual receipt of notice by the Bank of any payment, redemption or other transaction regarding Securities in the Custody Account in respect of which the Bank has agreed to take any action under this Agreement. 6. CORPORATE ACTIONS; PROXIES. Whenever the Bank receives information concerning the Securities which requires discretionary action by the beneficial owner of the Securities (other than a proxy), such as subscription rights, bonus issues, stock repurchase plans and rights offerings, or legal notices or other material intended to be transmitted to securities holders ("Corporate Actions"), the Bank will give the Customer notice of such Corporate Actions to the extent that the Bank's central corporate actions department has actual knowledge of a Corporate Action in time to notify its customers. When a rights entitlement or a fractional interest resulting from a rights issue, stock dividend, stock split or similar Corporate Action is received which bears an expiration date, the Bank will endeavor to obtain Instructions from the Customer or its Authorized Person, but if Instructions are not received in time for the Bank to take timely action, or actual notice of such Corporate Action was received too late to seek Instructions, the Bank is authorized to sell such rights entitlement or fractional interest and to credit the Deposit Account with the proceeds or take any other action it deems in good faith, to be appropriate in which case it shall be held harmless for any such action. The Bank will deliver proxies to the Customer or its designated agent pursuant to special arrangements which may have been agreed to in writing. Such proxies shall be executed in the appropriate nominee name relating to Securities in the Custody Account registered in the name of such nominee but without indicating the manner in which such proxies are to be voted; and where bearer Securities are involved, proxies will be delivered in accordance with Instructions. 7. NOMINIEES. Securities which are ordinarily held in registered form may be registered in a nominee name of the Bank or securities depository, as the case may be. The Bank may without notice to the Customer cause any such Securities to cease to be registered in the name of any such nominee and to be registered in the name of the Customer. In the event that any Securities registered in a nominee name are called for partial redemption by the issuer, the Bank may allot the called portion to the respective beneficial holders of such class of security in any manner the Bank deems to be fair and equitable. The Customer agrees to hold the Bank and their respective nominees harmless from any liability arising directly or indirectly from their status as a mere record holder of Securities in the Custody Account. All securities accepted by the Bank on behalf of the Customer under the terms of this Agreement shall be in "street name" or other good delivery from. 8. AUTHORIZED PERSONS. As used in this Agreement, the term "Authorized Person" means employees or agents including investment managers as have been designated by written notice from the Customer or its designated agent to act on behalf of the Customer under this Agreement. Such persons shall continue to be Authorized Persons until such time as the Bank receives Instructions from the Customer or its designated agent that any such employee or agent is no longer an Authorized Person. 9. INSTRUCTIONS. The term "Instructions" means instructions of any Authorized Person received by the Bank, via telephone, tested telex, TWX, facsimile transmission, bank wire or other teleprocess or electronic instruction or trade information system acceptable to the Bank which the Bank believes in good faith to have been given by Authorized Persons or which are transmitted with proper testing pursuant to terms and conditions which the Bank may specify. Unless otherwise expressly provided, all Instructions shall continue in full force and effect until canceled or superseded. Any instructions delivered to the Bank by telephone shall promptly thereafter be confirmed in writing by an Authorized Person (which confirmation may bear the facsimile signature of such Person), but the Customer will hold the Bank harmless for the failure of an Authorized Person to send such confirmation in writing, the failure of such confirmation to conform to the telephone instructions received or the Bank's failure to produce such confirmation at any subsequent time. The Bank may electronically record any Instructions given by telephone, and any other telephone discussions with respect to the Custody Account or transactions pursuant to the Agreement. The Customer shall be responsible from safeguarding any testkeys, identification codes or other security devices which the Bank shall make available to the Customer or its Authorized Persons. The Bank agrees to safeguard and maintain the confidentiality of all passwords or numbers and to limit access to this information for the purpose of acting pursuant to this agreement. 10. STANDARD OF CARE; LIABILITIES. (a) The Bank shall be responsible for the performance of only such duties as are set forth in this Agreement or expressly contained in Instructions which are consistent with the provisions of this Agreement as follows: (i) The Bank will use reasonable care with respect to its obligations under this Agreement and the safekeeping of Assets. In the event of any loss to the Customer by reason of the failure of the Bank to utilize reasonable care, the Bank shall be liable to the Customer only to the extent of the Customer's direct damages, to be determined based on the market value of the property which is the subject of the loss at the date of discovery of such loss and without reference to any special conditions or circumstances. (ii) The Bank will not be responsible for any act, omission, default or for the solvency of any broker or agent which it appoints unless such appointment was made negligently or in bad faith. (iii) The bank shall be indemnified by, and without liability to the Customer for any action taken or omitted by the Bank whether pursuant to Instructions or otherwise within the scope of this Agreement if such act or omission was in good faith, without negligence. In performing its obligations under this Agreement, the Bank may rely on the genuineness of any document which it believes in good faith to have been validly executed. (iv) The Customer agrees to pay for and hold the Bank harmless from any liability or loss resulting from the imposition or assessment of any taxes or other governmental charges, and any related expenses with respect to income from or Assets in the Accounts. (v) The Bank will use its best efforts to maintain, during the term of this Agreement, insurance coverage comparable to the types, amounts and limits set forth below:
Standard Limit Per Form No. 24 Loss Aggregate ___________ _________ _________ * Insuring Agreements $75,000,000 $75,000,000 ABC-Basic Coverages * Insuring Agreement 75,000,000 75,000,000 D-Forgery or Alteration * Insuring Agreement 75,000,000 75,000,000 E-Securities (1) * Extortion Coverage (2) A. Threat to Persons 20,000,000 20,000,000 B. Threat to Property 20,000,000 20,000,000 * Computer Systems 75,000,000 75,000,000 Coverage (3) * Deductible Amount 2,500,000 Notes: _____ (1) An additional $125,000,000 insurance coverage for securities located at custodian's head office or at The Chase Manhattan Bank, N.A., Chase MetroTech Center, Brooklyn, New York 11245, Attention: Global Custody Division. (2) No deductible (separate policy). (3) This coverage is for electronic funds transfer systems. There is additional coverage for all EDP equipment and Media under Commercial Property Insurance. The limits of this coverage are $583,000,000. (vi) Without limiting the foregoing, the Bank shall not be liable for any loss which results from: 1) the general risk of investing, or 2) investing or holding Assets in a particular country including, but not limited to, losses resulting from nationalization, expropriation or other governmental actions; regulation of the banking or securities industry; currency restrictions, devaluations or fluctuations; and market conditions which prevent the orderly execution of securities transactions or affect the value of Assets. (vii) Neither party shall be liable to the other for any loss due to forces beyond their control including, but not limited to strikes or work stoppages, acts of war or terrorism, insurrection, revolution, nuclear fusion, fission or radiation, or acts of God. (b) Consistent with and without limiting the first paragraph of this Section 10, it is specifically acknowledged that the Bank shall have no duty or responsibility to: (i) question Instructions or make any suggestions to the Customer or an Authorized Person regarding such Instructions; (ii) supervise or make recommendations with respect to investments or the retention of Securities; (iii) advise the Customer or an Authorized Person regarding any default in the payment of principal or income of any security other than as provided in Section 3(c) of this Agreement; (iv) evaluate or report to the Customer or an Authorized Person regarding the financial condition of any broker, agent or other party to which Securities are delivered or payments are made pursuant to this Agreement: (v) review or reconcile trade confirmations received from brokers. The Customer or its Authorized Persons (as defined in Section 8) issuing Instructions shall bear any responsibility to review such confirmations against Instructions issued to and statements issued by the Bank. (c) The Customer authorizes the Bank to act under this Agreement notwithstanding that the Bank or any of its divisions or affiliates may have a material interest in a transaction, or circumstances are such that the Bank may have a potential conflict of duty or interest including the fact that the Bank or any of its affiliates may provide brokerage services to other customers, act as financial advisor to the issuer of Securities, act as a lender to the issuer of Securities, act in the same transaction as agent for more than one customer, have a material interest in the issue of Securities, or earn profits from any of the activities listed herein. 11. FEES AND EXPENSES. The Customer agrees to pay to the Bank for its services under this Agreement such amount as may be agreed upon in writing, together with the Bank's reasonable out-of-pocket expenses. 12. MISCELLANEOUS. (a) Certification of Residency, etc. The Customer certifies that it is a resident of the United States with its principal place of business in the State of Connecticut and agrees to notify the Bank of any changes in residency. The Bank may rely upon this certification or the certification of such other facts as may be required to administer the Bank's obligations under this Agreement. The Customer will indemnify the Bank against all losses, liability, claims or demands arising directly or indirectly from any such certifications. (b) Access to Records. The Bank shall allow the Customer's independent public accountant reasonable access to the records of the Bank relating to the Assets as is required in connection with their examination of books and records pertaining to the Customer's affairs. (c) Periodic Statements, Books and Records. The Bank shall notify the Customer of each transaction involving securities in the Account and will render a statement of transactions with respect to the Account on a regular basis. Periodic statements shall be rendered as the Customer may reasonably require, but not less frequently than monthly. The Bank shall at all times maintain proper books and records that shall separately identify the securities. Books and records of the Bank (and of any agent or depository) relating to the Account shall at all times during regular business hours of the Bank (or of any agent or depository) be available for inspection by duly authorized officers, employees or agents of Customer, or by legally authorized regulatory officers who are then in the process of reviewing the Customer's financial affairs upon adequate proof to the Bank of such official status. The Bank agrees to maintain such records as may be sufficient to determine and verify information concerning the custodied securities which must be included in the Annual and Semi-Annual Reports of the Customer, or any other report required by applicable law. (d) Books and Records Are Property of Customer. The Bank hereby acknowledges that all books and records relating to the services provided to Customer hereunder are the property of the Customer and subject to its control; provided, however, that during the term of the Agreement, the Customer shall not exercise such control so as to interfere with the performance of the Bank's duties hereunder. (e) Governing Law; Successors and Assigns. This Agreement shall be governed by the laws of the State of New York. (f) Entire Agreement; Applicable Riders. Customer represents that the Assets deposited in the Accounts are (Check one): ___ Employee Benefit Plan or other assets subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"); _X_ Investment company assets subject to certain Securities and Exchange Commission ("SEC") rules and regulations; ___ Neither of the above. This Agreement consists exclusively of this document together with Schedule A and Exhibit 1. There are no other provisions of this Agreement and this Agreement supersedes any other agreements, whether written or oral, between the parties. Any amendment to this Agreement must be in writing, executed by both parties. (g) Severability. In the event that one or more provisions of this Agreement are held invalid, illegal or enforceable in any respect on the basis of any particular circumstances or in any jurisdiction, the validity, legality and enforceability of such provision or provisions under other circumstances or in other jurisdictions and of the remaining provisions will not in any way be affected or impaired. (h) Waiver. Except as otherwise provided in this Agreement, no failure or delay on the part of either party in exercising any power or right under this Agreement operates as a waiver, nor does any single or partial exercise of any power or right preclude any other or further exercise, or the exercise of any other power or right. No waiver by a party of any provision of this Agreement, or waiver of any breach or default, is effective unless in writing and signed by the party against whom the waiver is to be enforced. (i) Notices. All notices under this Agreement shall be effective when actually received. Any notices or other communications which may be required under this Agreement are to be sent to the parties at the following addresses or such other addresses as may subsequently be given to the other party in writing: Bank: The Chase Manhattan Bank, N.A. Chase MetroTech Center Brooklyn, New York 11245 Attention: Global Custody Division Customer: The Travelers Insurance Company One Tower Square Hartford, Connecticut 06183-2030 Attention: Securities Department, Cashier Division 13. CONFIDENTIALITY OF RECORDS. The Bank agrees to treat all records and other information relating to the Customer or the Custody Account as confidential, except that it may disclose such information after prior notification to and prior approval of the Customer, which will not be unreasonably withheld. Nothing in this paragraph shall prevent the Bank from divulging information to civil, criminal, bank, or securities regulatory authorities or where the Bank may be exposed to civil or criminal proceedings or penalties for failure to comply. 14. RELIANCE UPON DATA. The Bank may rely on the accuracy of all data received by it through electronic means and initiated by any person authorized by the Customer. Every person who uses the correct passwords to obtain information by electronic means or to make permissible transactions shall be presumed to have the Customer's authority unless the Customer can prove that: (a) a person using a correct password was not authorized to have access to this information; (b) the person using the password obtained it through or as a result of the Bank's disclosure (whether direct or indirect); and (c) the disclosure by the Bank was not authorized by the Customer prior to its unauthorized use. 15. OPTION GUARANTEE LETTERS OR ESCROW RECEIPTS. The Customer covenants and agrees that in the event that the Bank shall at any time at the Customer's request enter into an "Option Guarantee Letter" or execute an "SD Option Clearing Corporation Escrow Receipt" at the request of the Customer covering securities deposited with the Bank pursuant to the Agreement, the Customer will hold the Bank harmless from any and all loss, cost, or damage which the Bank may suffer by reason of being requested to deliver securities or other property under such Option Guarantee Letters or Escrow Receipts which securities and/or other property were not in fact delivered to the Bank or to the Bank's agent for transmittal to the Bank. 16. SUBROGATION OF RIGHTS. At the election of the Customer, the Customer shall be entitled to be subrogated to the rights of the Bank, with respect to any claim against any other person or institution which the Bank may have, as a consequence of any loss or damage to custodied securities. In such event, the Customer shall consult with the Bank concerning selection of counsel and management of any litigation to cover for such loss. 17. RESOLUTION OF DISPUTES. In the event of any loss of or damage to custodied securities or dispute between the Bank and the Customer concerning the Account, the Bank and the Customer agree to attempt to resolve the dispute through negotiation or a method of alternative dispute resolution. No litigation shall be commenced without a certification by an authorized officer, employee, or agent of either party that the dispute cannot be resolved by negotiation or alternative dispute resolution provided in writing at least 10 days before commencing legal action. 18. TRUSTEES AND SHAREHOLDERS OF MUTUAL FUNDS NOT PERSONALLY LIABLE. To the extent this Agreement is made on behalf of the mutual funds (the "Funds"), it shall be made by an officer of the Fund, not individually, but solely as an officer or Trustee of the Fund under its Declaration of Trust, and the obligations under this Agreement are not binding upon, nor shall any resort be had to the private property of, any of the Trustees, shareholders, officers, employees or agents of the Funds personally, but shall bind only the Funds' property. 19. INFORMATION TO CALIFORNIA COMMISSIONER OF INSURANCE. The Bank agrees that it shall furnish to the California Commissioner of Insurance, at the Customer's expense, any information or reports concerning the funds as the Commissioner, in the performance of his or her duties, may request. 20. DEPOSIT OF SECURITIES IN SECURITIES SYSTEM. If the Customer wishes to deposit securities with the Bank to be held in the Bank's account with one or more depositories or clearinghouses or in the book-entry system authorized by the U.S. Department of the Treasury or other federal agency (collectively referred to as "Securities Systems") pursuant to an arrangement which is approved by the Customer, then the Bank will do the following: (a) The Bank's official records shall separately identify the securities owned by the customer which are held in the account and indicate the location of the securities. (b) All registered securities held by the Bank pursuant to the agreement shall be registered in the name of the Customer or its nominee, the Bank or its nominee, or a Securities System or its nominee. (c) The Bank will send to the Customer a confirmation of the transfer of securities held for the Customer and furnish regular reports of holdings of securities in the account. (d) Upon written instructions from an authorized officer of the Customer, any representative of the Connecticut Insurance Department shall be entitled to examine, on the Bank's premises, the Bank's records relating to the securities held in the account. (e) The Bank shall maintain records sufficient to determine and verify information relating to securities held in the account that may be reported in the Annual and Semi-Annual Reports of the Customer, as filed with regulatory authorities. (f) The Bank shall be responsible for any loss of the securities held in the account caused by the negligence of the Bank or its agents. (g) In the event of loss of any of the securities held in the account, the Bank shall promptly replace the securities or the value thereof and the value of any loss of rights or privileges resulting from said loss or securities. (h) The Bank will hold the securities in the account subject to the instructions of the Customer and will permit withdrawal thereof upon the demand of the Customer. (i) The Bank shall send to the Customer all (i) reports which it receives from the Securities System on its systems of internal accounting control and (ii) reports prepared by outside auditors with respect to the Bank's systems of internal accounting control pertaining to custodian recordkeeping, promptly upon the Bank's receipt of such reports. (j) Securities in the account may be held only in Connecticut or in reciprocal states under the Insurers Supervision, Rehabilitation and Liquidation Model Act or a similar act (the Model Act). (k) If a reciprocal state under the Model Act repeals or modifies the Model Act so as to impair the Connecticut Insurance Commissioner's authority over the assets of an insolvent insurer, any securities held in the account and located in that state will be relocated to another reciprocal state or Connecticut prior to the effective date of said repeal or modification, unless the Connecticut Insurance Commissioner deems the repeal or modification acceptable. (l) The Bank may only deposit the securities in a nonproprietary account with the Securities System that includes only assets held for the Bank's customers. (m) Should a Securities System cease to act on behalf of the Bank, then the securities in the account shall be promptly transferred to the Bank or another Securities System approved by the Customer. 21. EFFECTIVE PERIOD, TERMINATION, ASSIGNMENT AND AMENDMENT. This Agreement shall become effective as of the effective date named herein, shall continue in full force and effect until terminated as hereinafter provided, may be amended at any time by mutual agreement of the parties hereto, and may be terminated by either party by an instrument in writing delivered or mailed, postage prepaid to the other party, such termination to take effect not sooner than thirty (30) days after the date of such delivery or mailing; provided, however, that the Bank shall not act under paragraph 20 hereof in the absence of receipt of an initial certificate of the Secretary that the board of the Customer has approved the initial use of a particular Securities System and the receipt of an annual certificate of the Secretary that the Board has reviewed the use by the Customer of such Securities System, as required in each case by Rule 17f-4 under the Investment Company Act of 1940, as amended, and provided further, however, that the Customer shall not amend or terminate this Agreement in contravention of any applicable federal or state regulations, or any provision of its Rules and Regulations or by-laws and further provided, that the Customer may at any time by action of its Board (a) substitute another bank or trust company for the Bank by giving notice as described above to the Bank, or (b) immediately terminate this Agreement in the event of the appointment of a conservator or receiver for the Bank by the Comptroller of the Currency or upon the happening of a like event at the direction of an appropriate regulatory agency or court of competent jurisdiction. Upon termination of the Agreement, the Customer shall pay the Bank such compensation as may be due as of the date of such termination and shall likewise reimburse the Bank for its costs, expenses and disbursements. This Agreement may not be assigned by the Bank without the consent of the Customer, authorized or approved by a resolution of its Board (The Board of Managers of the Variable Annuity Accounts or the Board of Trustees of the Mutual Funds). Additional Investment Company Separate Accounts or mutual funds may be added to this Agreement upon the execution by the Bank and any additional party of an amended "Schedule A" to be attached to this Agreement, which shall list such additional Separate Accounts or mutual funds. 22. INDEMNIFICATION AND HOLD HARMLESS. The Customer agrees to indemnify and hold harmless the Bank and its nominees from all taxes, charges, expenses, assessments, claims and liabilities (including counsel fees) incurred or assessed against it or its nominees in Connecticut with the performance of this Agreement in good faith, except such as may arise from the Bank's or its nominee's own negligent action, negligent failure to act or willful misconduct. IN WITNESS WHEREOF, the Customer and the Bank have each executed this Custody Agreement as of the 1st day of February, 1995, by their duly authorized representatives. THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES THE TRAVELERS TIMED GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT FOR VARIABLE ANNUITIES THE TRAVELERS TIMED AGGRESSIVE STOCK ACCOUNT FOR VARIABLE ANNUITIES THE TRAVELERS TIMED BOND ACCOUNT FOR VARIABLE ANNUITIES By: /s/Heath B. McLendon ____________________ Chairman Board of Managers CAPITAL APPRECIATION FUND CASH INCOME TRUST HIGH YIELD BOND TRUST MANAGED ASSETS TRUST THE TRAVELERS SERIES TRUST U.S. GOVERNMENT SECURITIES PORTFOLIO SOCIAL AWARENESS STOCK PORTFOLIO UTILITIES PORTFOLIO By: /s/Heath B. McLendon ____________________ Chairman Board of Trustees THE CHASE MANHATTAN BANK, N.A. By: /s/George S. Snyder Title: Vice President EXHIBIT I _________ MUTUAL FUND RIDER TO GLOBAL CUSTODY AGREEMENT BETWEEN THE TRAVELERS INSURANCE COMPANY AND THE CHASE MANHATTAN BANK N.A. EFFECTIVE FEBRUARY 1, 1995 Customer represents that the Assets being placed in the Bank's custody are subject to the Investment Company Act of 1940 (the "1940 Act"), as the same may be amended from time to time. Except to the extent that the Bank has specifically agreed to comply with a condition of a rule, regulation, interpretation promulgated by or under the authority of the Securities and Exchange Commission ("SEC") or the Exemptive Order applicable to accounts of this nature issued to the Bank (Investment Company Act of 1940, Release No. 12053, November 20, 1981), as amended, or unless the Bank has otherwise specifically agreed, the Customer shall be solely responsible to assure that the maintenance of Assets under this Agreement complies with such rules, regulations, interpretations or exemptive order promulgated by or under the authority of the SEC. The following modifications are made to the Agreement: Section 9. Instructions. Add the following language to the end of Section 9: Deposit Account Payments and Custody Account Transactions made pursuant to Section 3 and 4 of this Agreement may be made only for the purposes listed below. Instructions must specify the purpose for which any transaction is to be made and Customer shall be solely responsible to assure that Instructions are in accord with any limitations or restrictions applicable to the Customer by law or as may be set forth in its prospectus. (a) In connection with the purchase or sale of Securities at prices as confirmed by Instructions; (b) When Securities are called, redeemed or retired, or otherwise become payable; (c) In exchange for or upon conversion into other securities alone or other securities and cash pursuant to any plan or merger, consolidation, reorganization, recapitalization or readjustment; (d) Upon conversion of Securities pursuant to their terms into other securities; (e) Upon exercise of subscription, purchase or other similar rights represented by Securities; (f) For the payment of interest, taxes, management or supervisory fees, distributions or operating expenses; (g) In connection with any borrowings by the Customer requiring a pledge of Securities, but only against receipt of amounts borrowed; (h) In connection with any loans, but only against receipt of adequate collateral as specified in Instructions which shall reflect any restrictions applicable to the Customer; (i) For the purpose of redeeming shares of the capital stock of the Customer and the delivery to, or the crediting to the account of the Bank or the Customer's transfer agent, such shares to be purchased or redeemed; (j) For the purpose of redeeming in kind shares of the Customer against delivery to the Bank or the Customer's transfer agent of such shares to be so redeemed; (k) For delivery in accordance with the provisions of any agreement among the Customer, the Bank and a broker-dealer registered under the Securities Exchange Act of 1934 and a member of The National Association of Securities Dealers, Inc., relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange, or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Customer; (l) For release of Securities to designated brokers under covered call options, provided, however, that such Securities shall be released only upon payment to the Bank of monies for the premium due and a receipt for the Securities which are to be held in escrow. Upon exercise of the option, or at expiration, the Bank will received from brokers the Securities previously deposited. The Bank will act strictly in accordance with Instructions in the delivery of Securities to be held in escrow and will have no responsibility or liability for any such Securities which are not returned promptly when due other than to make proper request for such return; (m) For spot or forward foreign exchange transactions to facilitate security trading, receipt of income from Securities or related transactions; (n) For other proper purposes as may be specified in Instructions issued by an officer of the Customer which shall include a statement of the purpose for which the delivery or payment is to be made, the amount of the payment or specific Securities to be delivered, the name of the person or persons to whom delivery or payment is to be made, and a certification that the purpose is a proper purpose under the instruments governing the Customer; and (o) Upon the termination of this Agreement as set forth in Section 21. Section 10. Standard of Care; Liabilities. Add the following subsection (c) to Section 10: (c) The Bank hereby warrants to the Customer that in its opinion, after due inquiry, the established procedures to be followed by each of its branches, each branch of a qualified U.S. bank, holding the Customer's Securities, pursuant to this Agreement afford protection for such Securities at least equal to that afforded by the Bank's established procedures with respect to similar securities held by the Bank and its securities depositories in New York. Section 12. Access to Records. Add the following language to the end of Section 12(b): Upon reasonable request from the Customer, the Bank shall furnish the Customer such reports (or portions thereof) of the Bank's system of internal account controls applicable to the Bank's duties under this Agreement. SCHEDULE A __________
Short Name Long Name __________ _________ VTM The Travelers Timed Short-Term Bond Account for Variable Annuities VTA The Travelers Timed Growth and Income Stock Account for Variable Annuities VA1 The Travelers Quality Bond Account for Variable Annuities VAA The Travelers Growth and Income Stock Account for Variable Annuities VM The Travelers Money Market Account for Variable Annuities MAT Managed Assets Trust AST Capital Appreciation Fund HYBT High Yield Bond Trust CIT Cash Income Trust USGF US Government Securities Portfolio SOAP Social Awareness Stock Portfolio VTAS The Travelers Timed Aggressive Stock Account for Variable Annuities VTB The Travelers Timed Bond Account for Variable Annuities GRUF Utilities Portfolio
EX-8 2 Exhibit 8 CUSTODY AGREEMENT Agreement made as of the 1st day of February, 1995 between each of the registered management investment companies of The Travelers Insurance Company listed below, and such others as may be added from time to time on Schedule A attached hereto (each individually hereinafter called the "Customer"), and The Chase Manhattan Bank, N.A., (hereinafter called the "Bank"), whereby the Customer appoints the Bank, and the Bank hereby agrees to act, as Custodian of the cash and securities ("Assets") of the Customer, subject to the terms of this Agreement. 1. CUSTOMER ACCOUNTS. The Bank agrees to establish and maintain the following accounts ("Accounts"): (a) A custody account in the name of the Customer ("Custody Account") for any and all stocks, shares, bonds, debentures, notes, mortgages or other obligations for the payment of money, bullion, coin and any certificates, receipts, warrants or other instruments representing rights to receive, purchase or subscribe for the same or evidencing or representing any other rights or interests therein and other similar property whether certificated or uncertificated as may be received by the Bank for the account of the Customer ("Securities"); and (b) A deposit account in the name of the Customer ("Deposit Account") for any and all cash in any currency received by the Bank for the account of the Customer, which cash shall not be subject to withdrawal by draft or check. The Customer warrants its authority to: 1) deposit the cash and Securities (Assets) received in the Accounts and 2) give instructions (as defined in Section 9) concerning the Accounts. Upon written agreement between the Bank and the Customer, additional Accounts may be established and separately accounted for as additional Accounts under the terms of this Agreement. 2. MAINTENANCE OF SECURITIES AND CASH AT BANK. Unless instructions (as defined in Section 9) specifically require another location acceptable to the Bank: (a) Securities will be held in the country or other jurisdiction in which the principal trading market for such Securities is located, where such Securities are to be presented for payment or where such Securities are acquired; and (b) Cash will be credited to an account in a country or other jurisdiction in which such cash may be legally deposited or it is the legal currency for the payment of public or private debts. Cash may be held pursuant to Instructions (as defined in Section 9) in either interest or non-interest bearing accounts as may be available for the particular currency. To the extent Instructions are issued and the Bank can comply with such Instructions, the Bank is authorized to maintain cash balances on deposit for the Customer with itself or one of its affiliates at such reasonable rates of interest as may from time to time be paid on such accounts, or in non-interest bearing accounts as the Customer may direct, if acceptable to the Bank. 3. DEPOSIT ACCOUNT TRANSACTIONS. (a) The Bank will make payments from the Deposit Account upon receipt of Instructions which include all information required by the Bank. (b) In the event that any payment to be made under this Section 3 exceeds the funds available in the Deposit Account, the Bank, in its discretion, may advance the Customer such excess amount which shall be deemed a loan payable on demand, bearing interest at the rate customarily charged by the Bank on similar loans. (c) If the Bank credits the Deposit Account on a payable date, or at any time prior to actual collection and reconciliation to the Deposit Account, with interest, dividends, redemptions or any other amount due, the Customer will promptly return any such amount upon oral or written notification: (i) that such amount has not been received in the ordinary course of business or (ii) that such amount was incorrectly credited. If the Customer does not promptly return any amount upon such notification, the Bank shall be entitled, upon oral or written notification to the Customer, to reverse such credit by debiting the Deposit Account for the amount previously credited. The Bank shall have no duty or obligation to institute legal proceedings, file a claim or a proof of claim in any insolvency proceeding or take any other action with respect to the collection of such amount, but may act for the Customer upon Instructions after consultation with the Customer. 4. CUSTODY ACCOUNT TRANSACTIONS. (a) Securities will be transferred, exchanged or delivered by the Bank upon receipt by the Bank of Instructions which include all information required by the Bank. Settlement and payment for Securities received for, and delivery of Securities out of, the Custody Account may be made in accordance with the customary or established securities trading or securities processing practices and procedures in the jurisdiction or market in which the transaction occurs, including, without limitation, delivery of Securities to a purchaser, dealer or their agents against a receipt with the expectation of receiving later payment and free delivery. Delivery of Securities out of the Custody Account may also be made in any manner specifically required by Instructions acceptable to the Bank. (b) The Bank, in its discretion, may credit or debit the Accounts on a contractual settlement date with cash or Securities with respect to any sale, exchange or purchase of Securities. Otherwise, such transactions will be credited or debited to the Accounts on the date cash or Securities are actually received by the Bank and reconciled to the Account. (i) The Bank may reverse credits or debits made to the Accounts in its discretion if the related transaction fails to settle within a reasonable period, determined by the Bank in its discretion, after the contractual settlement date for the related transaction. (ii) If any Securities delivered pursuant to this Section 4 are returned by the recipient thereof, the Bank may reverse the credits and debits of the particular transaction at any time. 5. ACTIONS OF THE BANK. The Bank shall follow Instructions received regarding assets held in the Accounts. However, until it receives Instructions to the contrary, the Bank will: (a) Present for payment any Securities which are called, redeemed or retired or otherwise become payable and all coupons and other income items which call for payment upon presentation, to the extent that the Bank is actually aware of such opportunities. (b) Execute in the name of the Customer such ownership and other certificates as may be required to obtain payments in respect of Securities. (c) Exchange interim receipts or temporary Securities for definitive Securities. (d) Appoint brokers and agents for any transaction involving the Securities, including, without limitation, affiliates of the Bank. (e) Issue statements to the Customer, at times mutually agreed upon, identifying the Assets in the Accounts. The Bank will send the Customer an advice or notification of any transfers of Assets to or from the Accounts. Such statements, advices or notifications shall indicate the identity of the entity having custody of the Assets. Unless the Customer sends the Bank a written exception or objection to any Bank statement within sixty (60) days of receipt, the Customer shall be deemed to have approved such statement. In such event, or where the Customer has otherwise approved any such statement, the Bank shall, to the extent permitted by law, be released, relieved and discharged with respect to all matters set forth in such statement or reasonably implied therefrom as though it had been settled by the decree of a court of competent jurisdiction in an action where the Customer and all persons having or claiming an interest in the Customer or the Customer's Accounts were parties. All collections of funds or other property paid or distributed in respect of Securities in the Custody Account shall be made at the risk of the Customer. The Bank shall have no liability for any loss occasioned by delay in the actual receipt of notice by the Bank of any payment, redemption or other transaction regarding Securities in the Custody Account in respect of which the Bank has agreed to take any action under this Agreement. 6. CORPORATE ACTIONS; PROXIES. Whenever the Bank receives information concerning the Securities which requires discretionary action by the beneficial owner of the Securities (other than a proxy), such as subscription rights, bonus issues, stock repurchase plans and rights offerings, or legal notices or other material intended to be transmitted to securities holders ("Corporate Actions"), the Bank will give the Customer notice of such Corporate Actions to the extent that the Bank's central corporate actions department has actual knowledge of a Corporate Action in time to notify its customers. When a rights entitlement or a fractional interest resulting from a rights issue, stock dividend, stock split or similar Corporate Action is received which bears an expiration date, the Bank will endeavor to obtain Instructions from the Customer or its Authorized Person, but if Instructions are not received in time for the Bank to take timely action, or actual notice of such Corporate Action was received too late to seek Instructions, the Bank is authorized to sell such rights entitlement or fractional interest and to credit the Deposit Account with the proceeds or take any other action it deems in good faith, to be appropriate in which case it shall be held harmless for any such action. The Bank will deliver proxies to the Customer or its designated agent pursuant to special arrangements which may have been agreed to in writing. Such proxies shall be executed in the appropriate nominee name relating to Securities in the Custody Account registered in the name of such nominee but without indicating the manner in which such proxies are to be voted; and where bearer Securities are involved, proxies will be delivered in accordance with Instructions. 7. NOMINIEES. Securities which are ordinarily held in registered form may be registered in a nominee name of the Bank or securities depository, as the case may be. The Bank may without notice to the Customer cause any such Securities to cease to be registered in the name of any such nominee and to be registered in the name of the Customer. In the event that any Securities registered in a nominee name are called for partial redemption by the issuer, the Bank may allot the called portion to the respective beneficial holders of such class of security in any manner the Bank deems to be fair and equitable. The Customer agrees to hold the Bank and their respective nominees harmless from any liability arising directly or indirectly from their status as a mere record holder of Securities in the Custody Account. All securities accepted by the Bank on behalf of the Customer under the terms of this Agreement shall be in "street name" or other good delivery from. 8. AUTHORIZED PERSONS. As used in this Agreement, the term "Authorized Person" means employees or agents including investment managers as have been designated by written notice from the Customer or its designated agent to act on behalf of the Customer under this Agreement. Such persons shall continue to be Authorized Persons until such time as the Bank receives Instructions from the Customer or its designated agent that any such employee or agent is no longer an Authorized Person. 9. INSTRUCTIONS. The term "Instructions" means instructions of any Authorized Person received by the Bank, via telephone, tested telex, TWX, facsimile transmission, bank wire or other teleprocess or electronic instruction or trade information system acceptable to the Bank which the Bank believes in good faith to have been given by Authorized Persons or which are transmitted with proper testing pursuant to terms and conditions which the Bank may specify. Unless otherwise expressly provided, all Instructions shall continue in full force and effect until canceled or superseded. Any instructions delivered to the Bank by telephone shall promptly thereafter be confirmed in writing by an Authorized Person (which confirmation may bear the facsimile signature of such Person), but the Customer will hold the Bank harmless for the failure of an Authorized Person to send such confirmation in writing, the failure of such confirmation to conform to the telephone instructions received or the Bank's failure to produce such confirmation at any subsequent time. The Bank may electronically record any Instructions given by telephone, and any other telephone discussions with respect to the Custody Account or transactions pursuant to the Agreement. The Customer shall be responsible from safeguarding any testkeys, identification codes or other security devices which the Bank shall make available to the Customer or its Authorized Persons. The Bank agrees to safeguard and maintain the confidentiality of all passwords or numbers and to limit access to this information for the purpose of acting pursuant to this agreement. 10. STANDARD OF CARE; LIABILITIES. (a) The Bank shall be responsible for the performance of only such duties as are set forth in this Agreement or expressly contained in Instructions which are consistent with the provisions of this Agreement as follows: (i) The Bank will use reasonable care with respect to its obligations under this Agreement and the safekeeping of Assets. In the event of any loss to the Customer by reason of the failure of the Bank to utilize reasonable care, the Bank shall be liable to the Customer only to the extent of the Customer's direct damages, to be determined based on the market value of the property which is the subject of the loss at the date of discovery of such loss and without reference to any special conditions or circumstances. (ii) The Bank will not be responsible for any act, omission, default or for the solvency of any broker or agent which it appoints unless such appointment was made negligently or in bad faith. (iii) The bank shall be indemnified by, and without liability to the Customer for any action taken or omitted by the Bank whether pursuant to Instructions or otherwise within the scope of this Agreement if such act or omission was in good faith, without negligence. In performing its obligations under this Agreement, the Bank may rely on the genuineness of any document which it believes in good faith to have been validly executed. (iv) The Customer agrees to pay for and hold the Bank harmless from any liability or loss resulting from the imposition or assessment of any taxes or other governmental charges, and any related expenses with respect to income from or Assets in the Accounts. (v) The Bank will use its best efforts to maintain, during the term of this Agreement, insurance coverage comparable to the types, amounts and limits set forth below:
Standard Limit Per Form No. 24 Loss Aggregate ___________ _________ _________ * Insuring Agreements $75,000,000 $75,000,000 ABC-Basic Coverages * Insuring Agreement 75,000,000 75,000,000 D-Forgery or Alteration * Insuring Agreement 75,000,000 75,000,000 E-Securities (1) * Extortion Coverage (2) A. Threat to Persons 20,000,000 20,000,000 B. Threat to Property 20,000,000 20,000,000 * Computer Systems 75,000,000 75,000,000 Coverage (3) * Deductible Amount 2,500,000 Notes: _____ (1) An additional $125,000,000 insurance coverage for securities located at custodian's head office or at The Chase Manhattan Bank, N.A., Chase MetroTech Center, Brooklyn, New York 11245, Attention: Global Custody Division. (2) No deductible (separate policy). (3) This coverage is for electronic funds transfer systems. There is additional coverage for all EDP equipment and Media under Commercial Property Insurance. The limits of this coverage are $583,000,000. (vi) Without limiting the foregoing, the Bank shall not be liable for any loss which results from: 1) the general risk of investing, or 2) investing or holding Assets in a particular country including, but not limited to, losses resulting from nationalization, expropriation or other governmental actions; regulation of the banking or securities industry; currency restrictions, devaluations or fluctuations; and market conditions which prevent the orderly execution of securities transactions or affect the value of Assets. (vii) Neither party shall be liable to the other for any loss due to forces beyond their control including, but not limited to strikes or work stoppages, acts of war or terrorism, insurrection, revolution, nuclear fusion, fission or radiation, or acts of God. (b) Consistent with and without limiting the first paragraph of this Section 10, it is specifically acknowledged that the Bank shall have no duty or responsibility to: (i) question Instructions or make any suggestions to the Customer or an Authorized Person regarding such Instructions; (ii) supervise or make recommendations with respect to investments or the retention of Securities; (iii) advise the Customer or an Authorized Person regarding any default in the payment of principal or income of any security other than as provided in Section 3(c) of this Agreement; (iv) evaluate or report to the Customer or an Authorized Person regarding the financial condition of any broker, agent or other party to which Securities are delivered or payments are made pursuant to this Agreement: (v) review or reconcile trade confirmations received from brokers. The Customer or its Authorized Persons (as defined in Section 8) issuing Instructions shall bear any responsibility to review such confirmations against Instructions issued to and statements issued by the Bank. (c) The Customer authorizes the Bank to act under this Agreement notwithstanding that the Bank or any of its divisions or affiliates may have a material interest in a transaction, or circumstances are such that the Bank may have a potential conflict of duty or interest including the fact that the Bank or any of its affiliates may provide brokerage services to other customers, act as financial advisor to the issuer of Securities, act as a lender to the issuer of Securities, act in the same transaction as agent for more than one customer, have a material interest in the issue of Securities, or earn profits from any of the activities listed herein. 11. FEES AND EXPENSES. The Customer agrees to pay to the Bank for its services under this Agreement such amount as may be agreed upon in writing, together with the Bank's reasonable out-of-pocket expenses. 12. MISCELLANEOUS. (a) Certification of Residency, etc. The Customer certifies that it is a resident of the United States with its principal place of business in the State of Connecticut and agrees to notify the Bank of any changes in residency. The Bank may rely upon this certification or the certification of such other facts as may be required to administer the Bank's obligations under this Agreement. The Customer will indemnify the Bank against all losses, liability, claims or demands arising directly or indirectly from any such certifications. (b) Access to Records. The Bank shall allow the Customer's independent public accountant reasonable access to the records of the Bank relating to the Assets as is required in connection with their examination of books and records pertaining to the Customer's affairs. (c) Periodic Statements, Books and Records. The Bank shall notify the Customer of each transaction involving securities in the Account and will render a statement of transactions with respect to the Account on a regular basis. Periodic statements shall be rendered as the Customer may reasonably require, but not less frequently than monthly. The Bank shall at all times maintain proper books and records that shall separately identify the securities. Books and records of the Bank (and of any agent or depository) relating to the Account shall at all times during regular business hours of the Bank (or of any agent or depository) be available for inspection by duly authorized officers, employees or agents of Customer, or by legally authorized regulatory officers who are then in the process of reviewing the Customer's financial affairs upon adequate proof to the Bank of such official status. The Bank agrees to maintain such records as may be sufficient to determine and verify information concerning the custodied securities which must be included in the Annual and Semi-Annual Reports of the Customer, or any other report required by applicable law. (d) Books and Records Are Property of Customer. The Bank hereby acknowledges that all books and records relating to the services provided to Customer hereunder are the property of the Customer and subject to its control; provided, however, that during the term of the Agreement, the Customer shall not exercise such control so as to interfere with the performance of the Bank's duties hereunder. (e) Governing Law; Successors and Assigns. This Agreement shall be governed by the laws of the State of New York. (f) Entire Agreement; Applicable Riders. Customer represents that the Assets deposited in the Accounts are (Check one): ___ Employee Benefit Plan or other assets subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"); _X_ Investment company assets subject to certain Securities and Exchange Commission ("SEC") rules and regulations; ___ Neither of the above. This Agreement consists exclusively of this document together with Schedule A and Exhibit 1. There are no other provisions of this Agreement and this Agreement supersedes any other agreements, whether written or oral, between the parties. Any amendment to this Agreement must be in writing, executed by both parties. (g) Severability. In the event that one or more provisions of this Agreement are held invalid, illegal or enforceable in any respect on the basis of any particular circumstances or in any jurisdiction, the validity, legality and enforceability of such provision or provisions under other circumstances or in other jurisdictions and of the remaining provisions will not in any way be affected or impaired. (h) Waiver. Except as otherwise provided in this Agreement, no failure or delay on the part of either party in exercising any power or right under this Agreement operates as a waiver, nor does any single or partial exercise of any power or right preclude any other or further exercise, or the exercise of any other power or right. No waiver by a party of any provision of this Agreement, or waiver of any breach or default, is effective unless in writing and signed by the party against whom the waiver is to be enforced. (i) Notices. All notices under this Agreement shall be effective when actually received. Any notices or other communications which may be required under this Agreement are to be sent to the parties at the following addresses or such other addresses as may subsequently be given to the other party in writing: Bank: The Chase Manhattan Bank, N.A. Chase MetroTech Center Brooklyn, New York 11245 Attention: Global Custody Division Customer: The Travelers Insurance Company One Tower Square Hartford, Connecticut 06183-2030 Attention: Securities Department, Cashier Division 13. CONFIDENTIALITY OF RECORDS. The Bank agrees to treat all records and other information relating to the Customer or the Custody Account as confidential, except that it may disclose such information after prior notification to and prior approval of the Customer, which will not be unreasonably withheld. Nothing in this paragraph shall prevent the Bank from divulging information to civil, criminal, bank, or securities regulatory authorities or where the Bank may be exposed to civil or criminal proceedings or penalties for failure to comply. 14. RELIANCE UPON DATA. The Bank may rely on the accuracy of all data received by it through electronic means and initiated by any person authorized by the Customer. Every person who uses the correct passwords to obtain information by electronic means or to make permissible transactions shall be presumed to have the Customer's authority unless the Customer can prove that: (a) a person using a correct password was not authorized to have access to this information; (b) the person using the password obtained it through or as a result of the Bank's disclosure (whether direct or indirect); and (c) the disclosure by the Bank was not authorized by the Customer prior to its unauthorized use. 15. OPTION GUARANTEE LETTERS OR ESCROW RECEIPTS. The Customer covenants and agrees that in the event that the Bank shall at any time at the Customer's request enter into an "Option Guarantee Letter" or execute an "SD Option Clearing Corporation Escrow Receipt" at the request of the Customer covering securities deposited with the Bank pursuant to the Agreement, the Customer will hold the Bank harmless from any and all loss, cost, or damage which the Bank may suffer by reason of being requested to deliver securities or other property under such Option Guarantee Letters or Escrow Receipts which securities and/or other property were not in fact delivered to the Bank or to the Bank's agent for transmittal to the Bank. 16. SUBROGATION OF RIGHTS. At the election of the Customer, the Customer shall be entitled to be subrogated to the rights of the Bank, with respect to any claim against any other person or institution which the Bank may have, as a consequence of any loss or damage to custodied securities. In such event, the Customer shall consult with the Bank concerning selection of counsel and management of any litigation to cover for such loss. 17. RESOLUTION OF DISPUTES. In the event of any loss of or damage to custodied securities or dispute between the Bank and the Customer concerning the Account, the Bank and the Customer agree to attempt to resolve the dispute through negotiation or a method of alternative dispute resolution. No litigation shall be commenced without a certification by an authorized officer, employee, or agent of either party that the dispute cannot be resolved by negotiation or alternative dispute resolution provided in writing at least 10 days before commencing legal action. 18. TRUSTEES AND SHAREHOLDERS OF MUTUAL FUNDS NOT PERSONALLY LIABLE. To the extent this Agreement is made on behalf of the mutual funds (the "Funds"), it shall be made by an officer of the Fund, not individually, but solely as an officer or Trustee of the Fund under its Declaration of Trust, and the obligations under this Agreement are not binding upon, nor shall any resort be had to the private property of, any of the Trustees, shareholders, officers, employees or agents of the Funds personally, but shall bind only the Funds' property. 19. INFORMATION TO CALIFORNIA COMMISSIONER OF INSURANCE. The Bank agrees that it shall furnish to the California Commissioner of Insurance, at the Customer's expense, any information or reports concerning the funds as the Commissioner, in the performance of his or her duties, may request. 20. DEPOSIT OF SECURITIES IN SECURITIES SYSTEM. If the Customer wishes to deposit securities with the Bank to be held in the Bank's account with one or more depositories or clearinghouses or in the book-entry system authorized by the U.S. Department of the Treasury or other federal agency (collectively referred to as "Securities Systems") pursuant to an arrangement which is approved by the Customer, then the Bank will do the following: (a) The Bank's official records shall separately identify the securities owned by the customer which are held in the account and indicate the location of the securities. (b) All registered securities held by the Bank pursuant to the agreement shall be registered in the name of the Customer or its nominee, the Bank or its nominee, or a Securities System or its nominee. (c) The Bank will send to the Customer a confirmation of the transfer of securities held for the Customer and furnish regular reports of holdings of securities in the account. (d) Upon written instructions from an authorized officer of the Customer, any representative of the Connecticut Insurance Department shall be entitled to examine, on the Bank's premises, the Bank's records relating to the securities held in the account. (e) The Bank shall maintain records sufficient to determine and verify information relating to securities held in the account that may be reported in the Annual and Semi-Annual Reports of the Customer, as filed with regulatory authorities. (f) The Bank shall be responsible for any loss of the securities held in the account caused by the negligence of the Bank or its agents. (g) In the event of loss of any of the securities held in the account, the Bank shall promptly replace the securities or the value thereof and the value of any loss of rights or privileges resulting from said loss or securities. (h) The Bank will hold the securities in the account subject to the instructions of the Customer and will permit withdrawal thereof upon the demand of the Customer. (i) The Bank shall send to the Customer all (i) reports which it receives from the Securities System on its systems of internal accounting control and (ii) reports prepared by outside auditors with respect to the Bank's systems of internal accounting control pertaining to custodian recordkeeping, promptly upon the Bank's receipt of such reports. (j) Securities in the account may be held only in Connecticut or in reciprocal states under the Insurers Supervision, Rehabilitation and Liquidation Model Act or a similar act (the Model Act). (k) If a reciprocal state under the Model Act repeals or modifies the Model Act so as to impair the Connecticut Insurance Commissioner's authority over the assets of an insolvent insurer, any securities held in the account and located in that state will be relocated to another reciprocal state or Connecticut prior to the effective date of said repeal or modification, unless the Connecticut Insurance Commissioner deems the repeal or modification acceptable. (l) The Bank may only deposit the securities in a nonproprietary account with the Securities System that includes only assets held for the Bank's customers. (m) Should a Securities System cease to act on behalf of the Bank, then the securities in the account shall be promptly transferred to the Bank or another Securities System approved by the Customer. 21. EFFECTIVE PERIOD, TERMINATION, ASSIGNMENT AND AMENDMENT. This Agreement shall become effective as of the effective date named herein, shall continue in full force and effect until terminated as hereinafter provided, may be amended at any time by mutual agreement of the parties hereto, and may be terminated by either party by an instrument in writing delivered or mailed, postage prepaid to the other party, such termination to take effect not sooner than thirty (30) days after the date of such delivery or mailing; provided, however, that the Bank shall not act under paragraph 20 hereof in the absence of receipt of an initial certificate of the Secretary that the board of the Customer has approved the initial use of a particular Securities System and the receipt of an annual certificate of the Secretary that the Board has reviewed the use by the Customer of such Securities System, as required in each case by Rule 17f-4 under the Investment Company Act of 1940, as amended, and provided further, however, that the Customer shall not amend or terminate this Agreement in contravention of any applicable federal or state regulations, or any provision of its Rules and Regulations or by-laws and further provided, that the Customer may at any time by action of its Board (a) substitute another bank or trust company for the Bank by giving notice as described above to the Bank, or (b) immediately terminate this Agreement in the event of the appointment of a conservator or receiver for the Bank by the Comptroller of the Currency or upon the happening of a like event at the direction of an appropriate regulatory agency or court of competent jurisdiction. Upon termination of the Agreement, the Customer shall pay the Bank such compensation as may be due as of the date of such termination and shall likewise reimburse the Bank for its costs, expenses and disbursements. This Agreement may not be assigned by the Bank without the consent of the Customer, authorized or approved by a resolution of its Board (The Board of Managers of the Variable Annuity Accounts or the Board of Trustees of the Mutual Funds). Additional Investment Company Separate Accounts or mutual funds may be added to this Agreement upon the execution by the Bank and any additional party of an amended "Schedule A" to be attached to this Agreement, which shall list such additional Separate Accounts or mutual funds. 22. INDEMNIFICATION AND HOLD HARMLESS. The Customer agrees to indemnify and hold harmless the Bank and its nominees from all taxes, charges, expenses, assessments, claims and liabilities (including counsel fees) incurred or assessed against it or its nominees in Connecticut with the performance of this Agreement in good faith, except such as may arise from the Bank's or its nominee's own negligent action, negligent failure to act or willful misconduct. IN WITNESS WHEREOF, the Customer and the Bank have each executed this Custody Agreement as of the 1st day of February, 1995, by their duly authorized representatives. THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES THE TRAVELERS TIMED GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT FOR VARIABLE ANNUITIES THE TRAVELERS TIMED AGGRESSIVE STOCK ACCOUNT FOR VARIABLE ANNUITIES THE TRAVELERS TIMED BOND ACCOUNT FOR VARIABLE ANNUITIES By: /s/Heath B. McLendon ____________________ Chairman Board of Managers CAPITAL APPRECIATION FUND CASH INCOME TRUST HIGH YIELD BOND TRUST MANAGED ASSETS TRUST THE TRAVELERS SERIES TRUST U.S. GOVERNMENT SECURITIES PORTFOLIO SOCIAL AWARENESS STOCK PORTFOLIO UTILITIES PORTFOLIO By: /s/Heath B. McLendon ____________________ Chairman Board of Trustees THE CHASE MANHATTAN BANK, N.A. By: /s/George S. Snyder Title: Vice President EXHIBIT I _________ MUTUAL FUND RIDER TO GLOBAL CUSTODY AGREEMENT BETWEEN THE TRAVELERS INSURANCE COMPANY AND THE CHASE MANHATTAN BANK N.A. EFFECTIVE FEBRUARY 1, 1995 Customer represents that the Assets being placed in the Bank's custody are subject to the Investment Company Act of 1940 (the "1940 Act"), as the same may be amended from time to time. Except to the extent that the Bank has specifically agreed to comply with a condition of a rule, regulation, interpretation promulgated by or under the authority of the Securities and Exchange Commission ("SEC") or the Exemptive Order applicable to accounts of this nature issued to the Bank (Investment Company Act of 1940, Release No. 12053, November 20, 1981), as amended, or unless the Bank has otherwise specifically agreed, the Customer shall be solely responsible to assure that the maintenance of Assets under this Agreement complies with such rules, regulations, interpretations or exemptive order promulgated by or under the authority of the SEC. The following modifications are made to the Agreement: Section 9. Instructions. Add the following language to the end of Section 9: Deposit Account Payments and Custody Account Transactions made pursuant to Section 3 and 4 of this Agreement may be made only for the purposes listed below. Instructions must specify the purpose for which any transaction is to be made and Customer shall be solely responsible to assure that Instructions are in accord with any limitations or restrictions applicable to the Customer by law or as may be set forth in its prospectus. (a) In connection with the purchase or sale of Securities at prices as confirmed by Instructions; (b) When Securities are called, redeemed or retired, or otherwise become payable; (c) In exchange for or upon conversion into other securities alone or other securities and cash pursuant to any plan or merger, consolidation, reorganization, recapitalization or readjustment; (d) Upon conversion of Securities pursuant to their terms into other securities; (e) Upon exercise of subscription, purchase or other similar rights represented by Securities; (f) For the payment of interest, taxes, management or supervisory fees, distributions or operating expenses; (g) In connection with any borrowings by the Customer requiring a pledge of Securities, but only against receipt of amounts borrowed; (h) In connection with any loans, but only against receipt of adequate collateral as specified in Instructions which shall reflect any restrictions applicable to the Customer; (i) For the purpose of redeeming shares of the capital stock of the Customer and the delivery to, or the crediting to the account of the Bank or the Customer's transfer agent, such shares to be purchased or redeemed; (j) For the purpose of redeeming in kind shares of the Customer against delivery to the Bank or the Customer's transfer agent of such shares to be so redeemed; (k) For delivery in accordance with the provisions of any agreement among the Customer, the Bank and a broker-dealer registered under the Securities Exchange Act of 1934 and a member of The National Association of Securities Dealers, Inc., relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange, or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Customer; (l) For release of Securities to designated brokers under covered call options, provided, however, that such Securities shall be released only upon payment to the Bank of monies for the premium due and a receipt for the Securities which are to be held in escrow. Upon exercise of the option, or at expiration, the Bank will received from brokers the Securities previously deposited. The Bank will act strictly in accordance with Instructions in the delivery of Securities to be held in escrow and will have no responsibility or liability for any such Securities which are not returned promptly when due other than to make proper request for such return; (m) For spot or forward foreign exchange transactions to facilitate security trading, receipt of income from Securities or related transactions; (n) For other proper purposes as may be specified in Instructions issued by an officer of the Customer which shall include a statement of the purpose for which the delivery or payment is to be made, the amount of the payment or specific Securities to be delivered, the name of the person or persons to whom delivery or payment is to be made, and a certification that the purpose is a proper purpose under the instruments governing the Customer; and (o) Upon the termination of this Agreement as set forth in Section 21. Section 10. Standard of Care; Liabilities. Add the following subsection (c) to Section 10: (c) The Bank hereby warrants to the Customer that in its opinion, after due inquiry, the established procedures to be followed by each of its branches, each branch of a qualified U.S. bank, holding the Customer's Securities, pursuant to this Agreement afford protection for such Securities at least equal to that afforded by the Bank's established procedures with respect to similar securities held by the Bank and its securities depositories in New York. Section 12. Access to Records. Add the following language to the end of Section 12(b): Upon reasonable request from the Customer, the Bank shall furnish the Customer such reports (or portions thereof) of the Bank's system of internal account controls applicable to the Bank's duties under this Agreement. SCHEDULE A __________
Short Name Long Name __________ _________ VTM The Travelers Timed Short-Term Bond Account for Variable Annuities VTA The Travelers Timed Growth and Income Stock Account for Variable Annuities VA1 The Travelers Quality Bond Account for Variable Annuities VAA The Travelers Growth and Income Stock Account for Variable Annuities VM The Travelers Money Market Account for Variable Annuities MAT Managed Assets Trust AST Capital Appreciation Fund HYBT High Yield Bond Trust CIT Cash Income Trust USGF US Government Securities Portfolio SOAP Social Awareness Stock Portfolio VTAS The Travelers Timed Aggressive Stock Account for Variable Annuities VTB The Travelers Timed Bond Account for Variable Annuities GRUF Utilities Portfolio
EX-11 3 Coopers Coopers & Lybrand L.L.P. & Lybrand a professional services firm EXHIBIT 11(A) CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in this Post-Effective Amendment No. 18 of this Registration Statement on Form N-1A of our report dated February 15, 1995, on our audits of the financial statements and financial highlights of Managed Assets Trust. We also consent to the reference to our Firm as experts under the caption "Additional Information". /s/ Coopers & Lybrand L.L.P. COOPERS & LYBRAND L.L.P. Hartford, Connecticut April 18, 1995 EX-11 4 Exhibit 11(B) MANAGED ASSETS TRUST ____________________ POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: That I, Heath B. McLendon of Summit, New Jersey, Chairman of the Board of Trustees of Managed Assets Trust, do hereby make, constitute and appoint ERNEST J. WRIGHT, Secretary of said Trust, and KATHLEEN A. McGAH, Assistant Secretary of said Trust, either one of them acting alone, my true and lawful attorney-in-fact, for me, and in my name, place and stead, to sign registration statements of said Trust on Form N1-1A or other applicable form under the Securities Act of 1933 for the registration of shares of Beneficial Interest of Managed Assets Trust and to sign any and all amendments, including post-effec- tive amendments thereto, that may be filed. IN WITNESS WHEREOF I have hereunto set my hand this 28th day of February, 1995. /s/Heath B. McLendon Chairman of the Board of Trustees Managed Assets Trust Exhibit 11(B) MANAGED ASSETS TRUST ____________________ POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: That I, Knight Edwards of Providence, Rhode Island, a member of the Board of Trustees of Managed Assets Trust, do hereby make, constitute and appoint ERNEST J. WRIGHT, Secretary of said Trust, and SARA CHAMBERLAIN, Assistant Secretary of said Trust, either one of them acting alone, my true and lawful attorney-in-fact, for me, and in my name, place and stead, to sign registration statements of said Trust on Form N1-1A or other applicable form under the Securities Act of 1933 for the registration of shares of Beneficial Interest of Managed Assets Trust and to sign any and all amendments, including post-effec- tive amendments thereto, that may be filed. IN WITNESS WHEREOF I have hereunto set my hand this 21st day of October, 1994. /s/Knight Edwards Member of the Board of Trustees Managed Assets Trust Exhibit 11(B) MANAGED ASSETS TRUST ____________________ POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: That I, Robert E. McGill, III of Williamstown, Massa- chusetts, a member of the Board of Trustees of Managed Assets Trust, do hereby make, constitute and appoint ERNEST J. WRIGHT, Secretary of said Trust, and SARA CHAMBERLAIN, Assistant Secre- tary of said Trust, either one of them acting alone, my true and lawful attorney-in-fact, for me, and in my name, place and stead, to sign registration statements of said Trust on Form N1-1A or other applicable form under the Securities Act of 1933 for the registration of shares of Beneficial Interest of Managed Assets Trust and to sign any and all amendments, including post-effective amendments thereto, that may be filed. IN WITNESS WHEREOF I have hereunto set my hand this 21st day of October, 1994. /s/Robert E. McGill, III Member of the Board of Trustees Managed Assets Trust Exhibit 11(B) MANAGED ASSETS TRUST ____________________ POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: That I, Lewis Mandell of Storrs, Connecticut, a member of the Board of Trustees of Managed Assets Trust, do hereby make, constitute and appoint ERNEST J. WRIGHT, Secretary of said Trust, and SARA CHAMBERLAIN, Assistant Secretary of said Trust, either one of them acting alone, my true and lawful attorney- - -in-fact, for me, and in my name, place and stead, to sign registration statements of said Trust on Form N1-1A or other applicable form under the Securities Act of 1933 for the registration of shares of Beneficial Interest of Managed Assets Trust and to sign any and all amendments, including post-effec- tive amendments thereto, that may be filed. IN WITNESS WHEREOF I have hereunto set my hand this 21st day of October, 1994. /s/Lewis Mandell Member of the Board of Trustees Managed Assets Trust Exhibit 11(B) MANAGED ASSETS TRUST ____________________ POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: That I, Frances M. Hawk of Sherborn, Massachusetts, a member of the Board of Trustees of Managed Assets Trust, do hereby make, constitute and appoint ERNEST J. WRIGHT, Secretary of said Trust, and SARA CHAMBERLAIN, Assistant Secretary of said Trust, either one of them acting alone, my true and lawful attorney-in-fact, for me, and in my name, place and stead, to sign registration statements of said Trust on Form N1-1A or other applicable form under the Securities Act of 1933 for the registration of shares of Beneficial Interest of Managed Assets Trust and to sign any and all amendments, including post-effec- tive amendments thereto, that may be filed. IN WITNESS WHEREOF I have hereunto set my hand this 21st day of October, 1994. /s/Frances M. Hawk Member of the Board of Trustees Managed Assets Trust Exhibit 11(B) MANAGED ASSETS TRUST ____________________ POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: That I, Ian R. Stuart of East Hampton, Connecticut, Treasurer of Trustees of Managed Assets Trust, do hereby make, constitute and appoint ERNEST J. WRIGHT, Secretary of said Trust, and SARA CHAMBERLAIN, Assistant Secretary of said Trust, either one of them acting alone, my true and lawful attorney- - -in-fact, for me, and in my name, place and stead, to sign registration statements of said Trust on Form N1-1A or other applicable form under the Securities Act of 1933 for the regis- tration of shares of Beneficial Interest of Managed Assets Trust and to sign any and all amendments, including post-effective amendments thereto, that may be filed. IN WITNESS WHEREOF I have hereunto set my hand this 21st day of October, 1994. /s/Ian R. Stuart Treasurer, Managed Assets Trust -----END PRIVACY-ENHANCED MESSAGE-----